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Thursday, Nov 26, 2009
Why President Clinton's new initiative to bring low-income households online could help Silicon Valley's bottom line more than it helps the poor.
Feb 2, 2000 | What would politics be without its déjà vu delights? An initiative hinted at in President Clinton's State of the Union speech last week, and unveiled more fully this week, proposes a classic sleight of hand. The concept involves a five-year federal subsidy to help the nation's poor get online. Dubbed "ClickStart," it's supposed to solve a problem that has almost become a cliché: the growing "digital divide" between rich and poor, most pronounced between whites and nonwhites. But this has the feel of one of those well-meaning partnerships with industry in which the government gives away the store.
The initial sum is paltry enough -- $50 million, a mere asterisk in the budget of the Commerce Department, which would administer ClickStart. But the program is likely to grow substantially. Its backers hope to eventually reach all 9 million households on the food-stamp rolls. This first $50 million will cover only 300,000 of them.
What's soft-headed in the deal becomes clear in its details, which have so far been reported in remarkably foggy fashion. Here's how it works: Commerce issues monthly vouchers, worth $10 apiece, to qualifying households -- that is, any families that certain community groups have identified as being on food stamps, without computers and with children in the public schools. The families add a monthly $5 of their own, which gets them a simplified version of a full-service computer and Internet access. Payments cease after three years.
The catch is in where this money goes, and what it buys. During his speech, Clinton said, "I thank the high-tech companies that are already doing so much." For whom? The families' and the government's monthly $15 goes solely to the companies that are "donating" the computers. After three years, those contributions come to $540 for each system. That's precisely what these computers are expected to be worth on the open market. Indeed, one of ClickStart's lead architects, Garrett Gruener, a Silicon Valley venture capitalist and the founder of Ask Jeeves, admitted that one company -- Be Inc., in Menlo Park, Calif., -- is planning to build a computer specifically for this market, and will happily fulfill every order.
No wonder. During the five years envisioned for the initiative, the price of computers is expected to drop precipitously, which means that Be and any other firm shrewd enough to cash in on the deal may do quite nicely. Gruener hopes that as prices drop, the program will compensate -- by giving away more computers, or by dropping the contribution requirements. But there's nothing in the ClickStart business plan spelling that out. And doing so will take some very aggressive oversight, for which the feds do not have a particularly stellar record.
Most telling, perhaps, is that the plan isn't even supposed to be philanthropic. "I don't have any problem with these companies' making money," said Gruener, who happens to sit on Be's board. "You can argue that this is self-serving," said Eric Schmidt, chief executive of software development at Novell and another mover behind ClickStart. "But our feeling is that while this is good for us, it's also good for the world."
Not if it proceeds as planned. Curiously, the support anchoring ClickStart is being left almost entirely to community groups. Yet they're not slated to receive a nickel. This is no small matter.
