America’s digital divide is hindering economic growth

Feb 09, 2021 | 6 min read

Q&A

America’s digital divide is hindering economic growth

The ongoing COVID pandemic has disproportionately battered jobs and businesses in communities with higher minority populations and among low-income wage earners. According to the U.S. Labor Department, the unemployment rate in September 2020 among Black workers was 9.9% and among Latino workers it was 9.3%. For white workers the unemployment rate stood at 6%.

Part of the problem is that at-risk communities have been left out of the nation’s robust digital economy. The culprit is America’s lingering, decades-old digital divide. As of 2018, some 18 million people in the U.S., about 5.6 percent of the population, still lacked access to high-speed broadband internet service, according to the Federal Communications Commission’s 2020 Broadband Deployment Report. Prior to the pandemic it was estimated that another 20 million to 30 million households did not have access to broadband connections because they could not afford it. The pandemic has exacerbated the economic damage to those on the wrong side of the divide, since it favors online businesses and those catering to the work-from-home crowd.

Economists and activists have long known that providing broadband access, along with skills training and access to capital, are crucial ways to support and encourage the growth of digital microbusinesses to these communities.

Among those pressing this case is Larry Irving. As former head of the National Telecommunications Infrastructure Administration (NTIA) in the Clinton administration, Irving helped prove the existence of a digital divide. His efforts informed some of the earliest internet policies around access, private investment and “light touch” regulation. Irving is now president and CEO of the Irving Group, a consultancy that provides strategic advice to telecommunications companies, foundations and nonprofits. He recently sat down to discuss how policymakers can help microbusinesses today.

Bridging America’s digital divide has been an important issue for a generation, but it has taken on new urgency among economists and policymakers. Why?

Our economy is now a digital economy. If you’re a businessperson and you don’t have access to the digital economy, it’s like using a horse after the motor car came into being. You’re behind. Not being connected to the way almost everybody on the planet is engaging in commerce is crippling. The revolution we’re seeing today is at least as dependent upon technology as the electricity revolution was in the 1930s. If you want to be a full participant, you’ve got to have access to the technology. You have to be on the grid. Then it was electricity. Today, it’s the internet, and specifically broadband internet. In fact, broadband access has become so important that we need to think not only about the digital divide, but what I call “digital poverty.”

That’s why this moment is so important. This pandemic has disproportionately impacted communities of color. It’s disproportionately impacted low-income wage earners. It’s caused a disproportionately high rate of closures of small businesses in low-income and rural communities, and of women-owned businesses. Broadband can revitalize these businesses, enabling them to expand their reach and to find creative new ways of competing. There’s a solid entrepreneurial core in these communities. Too few Americans spend time in these communities and see what these folks are doing. Whether they’re selling bean pies, cakes, embroideries or crafts, there are people in this country who earn low-income wages who, if they can expand their markets, can do amazing things.

Broadband alone won’t help microbusinesses in at-risk communities. What else do they need?

They need training. There’s a difference between running a brick-and-mortar business and running an online business. They need technical assistance to understand how to market online, and how to reach folks. What should a microbusiness website look like? What’s a URL? We need to give them the training, the tools and the terminology. The internet changes rapidly. Having resources to be able to help you stay current matters to these business owners. They’re smart. They’re hardworking. They embody the American value system. They just haven’t had this exposure.

You helped create some of the earliest internet policies around private investment and light-touch regulation. What policies are needed now to support microbusinesses?

They need access to capital. If you are Black or brown or a woman and you go to traditional markets, getting access to capital is always harder. If we had a digital opportunity fund that was actually helping microbusinesses, that would help. What’s the old line? Give a man a fish and he’ll eat for a day. Teach a man to fish and you feed him for a lifetime. How do we teach men and women in low-income communities to be digital fishermen and women?

Where will policymaking be most important and impactful?

I think it needs to be done at the federal level. I’m talking about something like a national commercial initiative. When I was at the NTIA in the 1990s, we initiated a program that evolved into the Broadband Telecommunications Opportunities Program, or BTOP. It would go on to create, under the American Recovery and Reinvestment Act of 2009, $4.7 billion in grants to provide broadband internet access for unserved and underserved areas.

Given the economic morass we’re in and given how long and how deeply we’ve cut into the economic opportunities for Americans because of this pandemic, finding a way to use the BTOP framework to bring people together and earmark money so folks have startup capital would be a glide path out. That would make a lot of sense.

What about access to capital for microbusinesses?

If they could get money from a bank, they’d go to a bank. But that’s not where you get money when you’re a brother in southeast Queens trying to start a microbusiness. Can we do a digital Paycheck Protection Program with loans to these microbusinesses? Are people thinking about that? We need to be.

States also need to understand how supporting microbusinesses helps communities. People fly to Santa Fe and spend thousands of dollars to buy Native American crafts from middlemen. What would happen if the craftsperson who created the necklace or bracelet could sell it directly online to the consumer? States like New Mexico, Arizona and Colorado have an opportunity to help these craftspeople figure out how to create their own online markets without having to go through middlemen and women.

You hit on something that Venture Forward, GoDaddy’s project to quantify the economic impact of its 20 million U.S. domain-name websites, found: Adding just one highly active microbusiness per 100 people in a community increases median household income for everyone by $408.

Right, because the money stays in the community. That $250 that you’re paying the middleman for a necklace is not moving to Santa Fe, or Taos, or Albuquerque. It’s staying in Santa Clarita or on the reservation. That’s real money to real people that matters. You’re going to hire people in the community. You’re going to use resources in the community. Your vendors and your supplies can be from the community. If you make a cake, you’ve got to buy flour, you’ve got to buy milk, you’ve got to buy eggs. It creates an ecosystem. The more you can empower these folks, the more commerce that happens in that community, the better for everybody in that community.

You served as vice president of global government affairs at Hewlett-Packard in the mid-2000s, where you built relationships between government officials, community leaders, NGOs and business partners that helped shape policy. What role can these entities play today?

They can be funders, educators, partners. The people within their organizations can teach others. One of the things we did at HP was to ask folks who were retiring, who had 20 or 30 years of expertise, to go into communities where there wasn’t a lot of technological expertise and be tutors, to explain how technology works.

I’ve got 27 years of online experience, but I couldn’t set up a website in a commercial space to promote my product. If you have 27 minutes of experience, if you’re a brand new entrepreneur on the internet, you have a high hill to climb. At the very least we need to get them access to broadband. And we need to give them training and tools.

These entrepreneurs are smart. They’re hardworking. They embody American values. Let’s get them the help they need to get online and launch or grow their businesses.