Does the Internet hold much appeal or promise to the poor, to inner-city residents, or to minorities?

Cato's Lukas and many other experts say yes. Lukas argues as follows:

The Internet is especially valuable to inner-city residents. Lower-income urban shoppers can go online to find goods and services not available in their own neighborhoods, which often aren't served by traditional stores. A recent study conducted by PricewaterhouseCoopers and the Initiative for a Competitive Inner City (ICIC) concludes that inner-city residents with access to computers and the Internet use the Web as often as, and sometimes more frequently than, does the general U.S. population. Catalog shopping has long been popular among inner-city residents; the Internet merely expands the mail-order option.

As Carl Steidtmann, chief retail economist at PricewaterhouseCoopers, notes, 'Bricks-and-mortar retailers have virtually ignored the inner cities, so it is natural that consumers there would look for other places to shop. The Internet opens doors for these people that they never saw before.'

Affluent households shop more online only because they are more likely to have access to a computer. The ICIC study found that 30 percent of inner-city shoppers have computers at home compared to 50 percent of the general population.

But that too is changing. As far back as 1996, a survey by Wirthlin Worldwide found that Internet use by people earning less than $15,000 per year had increased by as much as 160 percent. And this year the Commerce Department reported that from 1994 to 1998, computer ownership by whites increased 72 percent, while ownership by blacks increased 125 percent. Such trends have led Novell's Eric Schmidt to predict, 'At the current rate of growth every man, woman, and child on the earth will be connected to the Internet by 2007.'

Given that 98 percent of Americans have color televisions, and 88 percent have VCRs—technologies that once were prevalent only in upper-income households—Schmidt's prediction is almost certain to come true. Families that don't have computers now are going to have them soon, and they're going to use them for shopping.23