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Digital Beat Newsletter

1995 - 1997

From: Kevin Taglang <kevint@BENTON.ORG>
Subject: The Digital Beat -- Digital Divide Summit Issue
Comments: To: upforgrabs-l@cdinet.com
To: BENTON-COMPOLICY@CDINET.COM

Some 500 people are expected to gather today at the Department of Commerce for a half-day summit focusing on closing the growing gap know as the digital divide. U.S. Secretary of Commerce William Daley will give the keynote address and is expected to announce several new Administration initiatives to bring Internet access to underserved populations. See the NTIA home page (http://www.ntia.doc.gov/) for a Webcast of the morning's events.

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The Digital Beat -- vol. 1, no. 20

DEMAND AGGREGATION AND THE DIGITAL DIVIDE
by Jamal Le Blanc

Introduction: The State of the Divide
Demand Aggregation
A Grassroots Model
Conclusion: Next Steps

I. Introduction: The State of the Divide

The low-hanging fruit of the retail computer market has been picked.
Computer penetration in college-educated households earning $75,000+ in urban areas has exceeded 80%. The growth of personal computer sales and adoption of the Internet are increasing at a much slower rate than this time
last year (1). Computer manufacturers, software developers, ISP's, and content providers will now have to work to reach a new market. As these groups develop new markets, communities have the opportunity to shape an economic relationship that improves the fortunes of low-income homes and communities by directly influencing in-home computer ownership.

In recent months, the digital divide has occupied the front burner of policy discussions in state capitals, industry boardrooms, and community organizations. Through these discussions and the media attention they have
generated, our society is becoming increasingly aware of the pernicious effects of not having access to the Internet for e-commerce, civic engagement, and the like. Organizations have announced or stepped up initiatives to address the digital divide. These efforts are often sweeping
collaborative exercises between nonprofits and industry members. Many of these efforts, such as the Steve and Jean Case Foundation's PowerUp and the Bill and Melinda Gates Foundation's Millennium Scholarship program, have
increased the visibility of the digital divide in relationship to youth, libraries and minority populations. These efforts are, more often than not, broad collaborations among nonprofits, educational institutions, and industry, to name just a few partners.

These cross-sector collaborations of foundations, for-profit organizations and local nonprofits often promote public awareness and creative solutions, but these initiatives may need to be stepped-up to address the more complex
issues of infrastructure, home access and community economic development. In _Losing Ground Bit by Bit: Low-Income Communities in the Information Age_
(http://www.benton.org/Library/Low-Income/), the Benton Foundation reported "the same neighborhoods that lack infrastructure are comprised of households that are far less likely to have the tools of the Information Age." The report notes further that the overlap of the two are not coincidental.
Low-income communities lack the economic base that would make them more attractive to profit-driven interests. The effect on the community is felt in the home. A lack of connectivity can increase the difficulty of finding and participating in employment, services or civic organizations. What is more, a growing body of qualitative and quantitative data suggests that home computer access may enhance children's in-school performance.

II. Demand Aggregation

The principles of cooperatives are taking on new meaning for demand aggregation for Internet connections and hardware. Online commercial "buyers' clubs" are filling the role of the grassroots co-op by providing fixed pricing on computer hardware and Internet service to any customer that
wishes to add his or her "weight" to the numbers of online purchasers. Mercata.com, for example, offers group purchase opportunities for limited periods on brand name products. Mercata.com acts as a co-ops in its approach to price negotiation. The benefits of participation are limited, however, to price savings for the consumer and increased sales for the producers. A similar commercial effort, PeoplePC, also uses demand aggregation language to promote its services. For a three-year, $800 loan at 11% interest, PeoplePC allows "members" to purchase a Toshiba brand computer with an Internet connection. Membership also results in free in-home service and discounts at major online retailers. This effort works like a buying co-op by aggregating both the demand and supply sides of the economic model. The demand is used to leverage a palatable buying option for the "club" members and the computer manufacturer and online retailers are provided a customer-base.

The example of commercial computer purchasing co-ops provides a model for not-for-profit, grassroots efforts. Urban demand aggregation, however, comes with its own problems. Urban areas generally offer more consumer choice than rural areas and this perception of choice is a disincentive to organizing efforts. Co-ops also have been most successful when they are demonstrated to be the best economic alternative. Falling computer prices and diverse means of connecting to the Internet also act as disincentives to organization. Aggregation for computer purchasing may also suggest, to some, an aggregation of supply (rather than demand), and so, a lower quality machine. Computers, so often marketed on their speed and/or computing power, are sold much like cars -- based on individual customer preference and choice.

A final hurdle is the high level of planning and organization needed to organize a cooperative movement. Co-ops require great organization ability on the parts of the governing structure. Any community organization seeking to develop a buying club must offer the best choice within a presumably wide range of choices. These clubs must offer some compelling value-addeD component to the potential members of the club. The combination of these factors is daunting.

III. A Grassroots Model

At the October forum "Resolving the Digital Divide"
(http://www.benton.org/DigitalBeat/db111299.html) convened by the Joint Center for Political and Economic Studies, Larry Irving, president of the Irving Information Group, offered an innovative "what if" to the forum participants. He advanced the concept of a national cooperative to address the digital divide. Irving, the former Director of the National Telecommunications and Information Agency , was responsible for the series of Falling Through the Net reports. The third and latest of these door-to-door census surveys, "Defining the Digital Divide" helped to put a face on the digital divide by expanding the research on who had computer and Internet access.

In his initial presentation, Mr. Irving outlined a vision of churches, recreation centers and other organizations banding together to negotiate Internet infrastructure and access. Since that time, Mr. Irving has made available a document further defining what a national cooperative could look like, using the working title the "No Divide Coalition Initiative." The plan
has many market-based elements as well as others currently being discussed in the nonprofit area. The national coalition model is based on an Australian effort which is in its infancy.

Specifically, an American initiative would seek to put computers in the homes of low-income, rural, urban and underserved and minority areas. A family would, through the aggregated demand of a local community organization, purchase a personal computer at $20/month over a fixed period of time. Because of the aggregated demand, a family would also receive for that $20 an Internet connection, technical support and a choice of content filters. Additionally, each member would receive ongoing computer and
Internet training sponsored by a local community organization. The vision is accomplished through a partnership of faith-based organizations, unions, colleges and universities, tribal councils, rural and agricultural organizations and other similar community-based organizations working in concert with hardware and software manufacturers, Internet service providers and content filtering companies. These community organizations would aggregate the purchasing power of their constituencies by acting as trusted providers.

By targeting community organizations, Irving estimates the initiative could reach millions of Americans who are currently without computers and home Internet access. Community participation is key to establishing trust for these first-time computer buyers. Rather than a commercial third party
offering computer discounts, the churches, colleges, and unions would act as trusted parties in providing the computers, Internet access and training to their constituents. These organizations could potentially add a small
surcharge to the $20 monthly fee to support their training programs and Internet connection costs. Community organizations could also create content for their constituencies -- elevating the community-fostering aspects of the Internet and online technologies.

Industry partners would play a vital role, providing current technologies at discounted prices, maintaining technical support networks, developing appropriate hardware and software for the communities and facilitating training on the local level by either training trainers or providing community consultants. These partners would benefit from lower advertising and marketing costs.

Existing computer technology centers are key potential partners as well. The stores of knowledge and lessons learned in training, curriculum development, evaluation of infrastructure requirements and cross-collaboration by these
centers is invaluable to other community organizations as they seek to meet the needs and make best use of the abilities and resources of their communities.

IV. Conclusion: Next Steps

The concept of a national co-op is somewhat of a departure from current initiatives which focus on expanding computer access through public access points -- community technology centers, schools and libraries. While these centers have done much to provide a minimal level of connectivity in many
communities, the challenges of staffing and the insecurity of grant-funded operations make reliance on public access points precarious at best. Commercial and private philanthropic efforts also have focused on equipping libraries, wiring schools and building public awareness. While laudable, a gap in home access remains.

The first steps in implementing a national cooperative effort are significant. Coordination -- national and local -- and the diversity of stakeholders and potential collaborators requires that the dialog on such an effort must also be multi-leveled.

National-level Coordination
Open discussion among computer manufactures, software manufactures, local and national Internet service and content providers, telecommunications companies, and telecommunications manufactures must take place with the
leadership of religious and civic organizations, nonprofits, universities, unions and civil rights organizations. The Department of Commerce's Digital Divide Summit (http://www.ntia.doc.gov/), being held today, will provide
some industry players and nonprofit organizations an opportunity to engage in frank, open discussions of the issues at stake; yet a coordinated strategy needs to emerge that proceeds from a common vision.

Community-level Coordination
Each community's historic relationship with technology and the relevant aggregating organization will greatly affect its approaches to demand aggregation. Urban-based populations may rely more on churches, civic organizations and unions. Rural populations may turn to existing co-op
structures and state universities for support. Key to these approaches is the element of trust. Local organizations must not only be the most reasonable economic choice for a community; they must have a strong value-added component. Local organizations will also need to coordinate with
existing community organizations and businesses to develop the technology training portion of the program and potentially, the Internet service provision.

Multi-level Coordination
Discussions between national-level partners can be more complicated. Lessons learned from early U.S. Department of Commerce TIIAP grantees in the area of urban community building may lend some points of departure (2).

* Human networks must be built first. This crucial portion of the process can build upon the networks that already exist within communities.

* National-level discussions should take into account a continuum of technology awareness in communities. Communities must be approached as individual enterprises rather than cookie-cutter franchisees of a national plan. Outside organizations should view themselves as "the outsider," and capitalize on the strength of that position. It is often difficult for a community to evaluate its position in a larger framework. Outside organizations can provide perspective through data sets, modeling tools and experience.

* The issues of each community will be unique. The challenge within the community and among a multi-level discussion is to identify the issues and not the technology.

* Networking initiatives are social first and technical second. The histories of community technology centers, as well as the lessons learned by numerous TIIAP grant recipients, demonstrate that organizations of people will reach out to other people in their communities to draw upon existing
financial and human resources.

* Networking initiatives must have a strong educational component, both on the possibilities of technology and on the cost/benefits of being connected. Foundations, nonprofits and community leaders will have to coordinate education efforts to balance skills training with opportunity education

A decline in "less attractive" markets may instigate a market shift to target first-time computer buyers and underserved populations. However, market forces alone have not yet solved the issue of access for low-income, rural and historically underserved minority populations. Alternative
market-based efforts, including commercial co-op models, will become increasingly attractive to these populations as they see market attention shift to their buying potential.

Grassroots demand-aggregation efforts have the potential to extend the benefits of this attention beyond access toward the empowerment of communities while benefiting the market through audience consolidation. These efforts must be discussed at local, national and cross-levels to accomplish three necessary goals: the identification of community issues, a consideration of all stakeholders, and a creation of a basic awareness of the potentials and benefits of being online.

Notes
1. Michael Brick. "Computer Makers Look to Lower-Income Groups." New York Times.
Paul Davidson, "Report: Growth of New Web Users Sinks." USA Today, 12/02/99.

2. Parts of this discussion are drawn from the Panel Two, "Challenges and Solutions for All" of the October 19 Joint Center for Political and Economic Studies forum (http://www.jointcenter.org/pressrel/digital.htm). Additional
points adapted from "Assessing Telecommunications Technology as a Tool for Urban Community Building" by Teresa E. Anderson and Alan Melchior appearing in The Journal of Urban Technology, Volume 3, Number 1, 1995.
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(www.benton.org/cpphome.html).

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