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The Closing of the American Internet

A sizeable portion of the unwired simply have no interest in what the Internet has to offer

By John Sparks
Newsweek International

May 8, 2006 - When the U.S. Census Bureau proclaimed the American frontier closed in 1890, it signaled the end of the boom-and-bust era and the beginning of a more stately pace of growth. Now that the dotcom bubble has come and gone, is the same thing about to happen to that other American frontier, the Internet?

It may be, according to recent studies. In the past decade, the number of U.S. households with Internet access has risen nearly sixfold, to 64 percent, says Dallas-based technology consultants Parks Associates. That certainly sounds like a boom. But from here on out, things will be different. Internet penetration is expected to rise only 1 percent in 2006, with similarly tepid growth after that—topping out well below the 75 percent penetration predicted a few years ago. As the Internet transforms many aspects of society, 70 million Americans are choosing to sit it out.

And it really is a choice. John Barrett, author of the Parks study, points out that although vast rural areas of the U.S. remain underserved, only 2 percent of netless folks express a strong desire to get hooked up. It's not that they're particularly poor or old. Surveys show that few among them are deterred by the price of Internet service. "It's not just your grandmother who's off-line," he says.

Neither are they technophobes: TV ownership is nearly universal in America, 83 percent of all households have DVD players, and more than three in four Americans have a cell phone. Research suggests that a sizable portion of the unwired simply have no interest in what the Internet offers.

In the face of this indifference, should the government promote universal access? Experience suggests that can have a big effect. During Vice President Al Gore's two terms, from 1992 to 2000, when he was calling for making universal Web access a priority, access increased by 373 percent; in the past five years under President Bush, who hasn't taken up the cause, it grew 23 percent. Meanwhile, other countries have picked up where Gore left off. Germany, Canada and Australia, whose governments all promote Web access, continue to add new Internet users at rates that far surpass the United States. The European Union has freed up money to increase Internet access and is removing regulatory barriers. Laggards like France and Spain, where telecom monopolies delayed mass Web usage, are posting double-digit growth.

Even in developed Asian households, which are virtually saturated with the Internet, the boom is proceeding apace—with the help of government loans and incentives. Even though nearly 90 percent of households in South Korea are online, telecommunications firms are using $926 million in government loans to wire the remaining 10 percent and upgrade to faster connections. Five years ago Japan adopted regulatory reforms, tax breaks and subisidies that have gotten most consumers onto high-speed connections for less than $40 a month.

In recent years, the United States has slipped from the fourth most wired nation to eleventh. A recent Brookings Institution study claims the shortfall could cost America $1 trillion in lost economic growth over the next decade; another study suggests job losses of 1.2 million. Other experts don't think it's an issue of competitiveness. "We're much more imperiled by our attitude toward education," says Internet expert Esther Dyson. While America lets its Internet frontier close, Asia and Europe forge ahead.

© 2006 Newsweek, Inc