Dead End Ahead?: Income may be the real barrier to the Internet on-ramp.

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By 2005, household income - not ethnicity or age - will become the key contributing factor to the widening of the so-called "digital divide" that separates those with Internet access from those without. A new Jupiter Communications survey reveals that, contrary to the findings of last year's Commerce Department report, "Falling Through the Net," the gap between ethnic groups will narrow in the next five years.

According to the study, entitled "Assessing the Digital Divide," only 21 percent of households with incomes under $15,000 will have Internet access by the end of 2000, compared with the 78 percent of households with incomes of $75,000 or more. By 2005, 45 percent, or 9 million, of the lower income households will be wired, compared with a near-universal 93 percent, or 19.8 million, of the higher income households.

And while there are still significant gaps in Internet adoption rates between various ethnic groups, penetration among all ethnic households will reach a more equal plane in the coming years, according to Jupiter's projections. In fact, 64 percent of all African American households will have Internet access by 2005, up from the 36 percent projected by the end of this year. The Latino household Internet penetration rate will jump from 41 percent to 68 percent, the Caucasian household rate from 54 percent to 76 percent, and the Asian American household rate from 69 percent to 84 percent.

The report emphasizes that although low-income Latino and African American segments will continue to lag the overall projected U.S. household penetration rate of 51 percent at the end of 2000, these groups have nevertheless already reached the critical-mass inflection point from which rapid business growth can develop. Thus, while higher levels of usage are necessary among all consumer segments if the Internet is to become a true mass medium, enough people within these under-served communities are already online to support content and services that target them, says David Card, senior analyst with Jupiter.

A third key factor contributing to the divide, according to Jupiter, is age. At the end of 2000, young adults (aged 19 to 35) are projected to have the highest rate of online access, at 57 percent, compared with 32 percent of kids (aged 2 to 12), 41 percent of older adults (aged 50 to 64), and 16 percent of seniors (65 and older). This gap will narrow significantly by 2005, with young adults' penetration rate increasing to 80 percent, kids expected to reach 62 percent, older adults to 66 percent, and seniors to 48 percent. One important fact to keep in mind, however, is that although adults 50 and over currently lag the general population in online usage, they will comprise a group of 23 million consumers by the end of 2000, making them a larger market than any one youth segment. At the end of 2000 there will be 14 million kids online, along with 13 million teens (aged 13 to 18).

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