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Building A Bridge Over The Digital Divide

The gap between technology haves and the have-nots keeps growing wider. What can Puerto Rico do to get ahead of the pack?

By Jose Martinez

February 28, 2002
Copyright © 2002 CARIBBEAN BUSINESS. All Rights Reserved.

Divided we fall: Without a computer-literate workforce, Puerto Rico can't compete

Where would Puerto Rico be today if most of our people couldn't read or write? At the very least we could kiss our recent history of economic progress goodbye.

Where will Puerto Rico be tomorrow if most of our people cannot use computers and other digital technology?

That is a question Puerto Rico and every society must face in the 21st century. It is not an issue of technology, but of economic development.

The difference between the technology haves and have nots is referred to as the digital divide, the buzzword for the gap that separates individuals and societies who have mastered technology and those who have not. This gap must be closed to stay competitive in today’s high-tech world.

"The new digital economy is one based on knowledge," said Hewlett-Packard Co. Manufacturing Organization Operating Manager Lucy Crespo at a recent conference. "In an economy based on knowledge, there are three key elements: people, the most valuable resource; ideas or intellectual property, which will work as currency as it can attract investment capital, and the technology that is fundamental for every task."

For Puerto Rico, which lags in areas such as computer penetration in households (21% in Puerto Rico compared to 50% in the States) and telecom services, it is essential that we bring technology and the knowledge of how to use it to everyone so we can compete with other societies.

"Technology enriches and changes everything we do," said Ambrose Ramsahai, general manager for Microsoft Caribbean. "Puerto Rico is not in bad shape but there still is a lot that has to be done and we need all sectors, government, educational and private, to join in the effort."

"Puerto Rico is changing from a manufacturing-based economy to other types of industries. We no longer can compete with countries in which manufacturing is much cheaper. Between manufacturing and tourism we don’t generate enough economic momentum to survive. Technology is essential," said Miguel Soto, executive director for the Center for the New Economy. "We can’t keep trying to attract new businesses by offering cheap labor or incentives. We have to find new ways to compete with the other societies if we want to stay afloat. This is what countries, such as Ireland, have done in order to offset their high manufacturing cost while still attracting major companies."

"There are two types of industries: Those that want low operational costs and those into high-technology. It’s very difficult for Puerto Rico to compete in cheap labor costs with other countries in Latin America so the local government should concentrate on attracting companies involved in technology that look more at the quality of the workforce and business environment than costs," said Carlos Bofill, CEO of Centennial de Puerto Rico.

A study conducted last year by the American Electronic Association and Nasdaq found that Puerto Rico had approximately 21,000 jobs linked to technology and telecom, which is roughly 22% of the jobs in the private sector. The same study also found that the high-tech industry represented 15% of the Gross Domestic Product of Puerto Rico in 1998. And we are just on the tip of the iceberg in bringing in more hi-tech companies.

The same report mentioned that all States, except Puerto Rico and West Virginia, saw employment growth between 1999 and 2000 in the high-tech industry. The average national employment growth according to the report was 4.6%. This shrinking of the local technology job market can be attributed to a lot of factors but one that stands very clear is the declining number of people obtaining bachelor degrees in computer science and statistics/mathematics (see Chart B). This lack of people with the right skills creates a workforce deficit that doesn’t help in anyway to bring high-tech companies.

Even if we omit the local decline in hi-tech jobs and use the current national growth of 4.6% we are talking that by 2008 we could had more than 2,000 additional positions that we wont be able to fill because a lack of people with the right training. Of course, this entire deficit is dependent on how many companies decide to establish shop in Puerto Rico.

But this is not a problem exclusive to Puerto Rico. Another study found that for the year 2008 there could be up to 5.3 million unfilled jobs in the technology industry at the U.S. national level. In Latin America, the deficit of networking specialists is expected to hit 500,000 by the year 2004.

"There’s a demand for people with the right skills and it will grow even with the bubble burst and the economic slowdown. We can even export services like some countries did during the Y2K bug," said Soto.

Soto added that Puerto Rico has an advantage over other countries in high-tech industries that could give us an edge. "We still have a couple of things going for us, like political stability, reliable telecom infrastructure, good access to technology, and a U.S-based economy. We can leapfrog problems other countries encounter. But we need to get up to speed quickly," added Soto.

And we will have to do a lot of leapfrogging.

In the States alone, there are various examples of how to facilitate access to technology. In Georgia, all telecom companies are required to offer services in all areas not just those that are guaranteed to bring the most revenue. Plugged In, a community project that aims to bridge the digital divide in California, offers residents state-of-the-art computers and courses to build their literacy and computer skills or make money as Web designers. In Miami, a place mentioned by various sources as a serious competitor for Puerto Rico, main Internet access points–network access points–have been established, beating us in this area and marketing the city as the bridge to the Americas.

Outside the U.S., a good example is Ireland, a country that has invested more than $5 billion in educational programs and telecommunications infrastructure over several years. The results are overwhelming; a 9% economic growth every year for the past six years. This is six times the average of the European Union. Unemployment has also decreased from 16% in the 1990s to its current level of 3.8%, the lowest in all of Europe.

In Chile, not only are schools provided with free equipment and Internet access, but small and medium-size businesses also enjoy these government benefits. And in Singapore. every new home or building must meet government-issue standards that make every structure data-ready for plug-and-play setups that meet business or residential networking needs.

"In Puerto Rico, the digital divide issue is still in the early stages. Unlike other societies, we still have the opportunity to get on the technology bandwagon," said Soto. "But before attacking the digital divide issue head on, we need to address two problems that are essential to a solid foundation in which to develop a solution: infrastructure and education.

All sources agree that education and technology/telecommunications infrastructure are the key elements in the successful implementation of a plan to close the digital divide. They also agree that one issue has to go hand in hand with the other and needs to be addressed in conjunction.

"The key areas for policy makers are the promotion of educational programs that meet the needs of industry/commerce and encourage competition in the provision of telecom/Internet services," said John Stewart, deputy executive director of economic analysis and strategic planning for the Puerto Rico Industrial Development Company (Pridco).

Under the last administration, a program was created to equip teachers and schools with computers and Internet access. According to teachers interviewed some schools got the computers, some got the Internet connection, some got both, and some got none of the above. But still the biggest problem is not the equipment or the high-speed Internet connection. The main problem is educating people on how to use it.

"Having the equipment is not enough, you still need people with the technology know-how or what some of us call fluency in information technology," said Dr. Manuel Gomez, vice president of research and academic affairs for the University of Puerto Rico.

"You can have all the software/hardware in the world but if it’s not accessible and people don’t know how to use it its worthless," said Jon Slater, president and CEO of Puerto Rico Telephone (PRT).

Ramsahai of Microsoft added that most people don’t realize the significance of the digital divide to the future of Puerto Rico. "There are countries with far greater challenges, like little or no access to the technology, before they can close the digital divide. We need to take charge of this issue before it’s too late."


When we talk about the infrastructure that is needed to close the gap of the digital divide, we mean the hardware and services that provide access to information, the main one being a connection to the Internet. Luckily for Puerto Rico, the telecom infrastructure is well above the standards of most countries.

PRT, the local incumbent telephone company, has a full asynchronous transfer mode (ATM) high-speed network around the island that allows super-fast data transmissions and connects educational institutions and research & development, manufacturing plants, and companies. Last year, PRT also started the deployment of high-speed digital subscriber line (DSL) service in selected areas. With DSL, consumers can download information at speeds four times faster than with a regular modem connection, while still allowing for receiving calls.

PRT has also engaged in various projects to construct Internet community centers. "Through the Verizon Foundation and a partnership with IBM we have been able to fund three Internet Community Centers in the metro area, where people without a computer and/or phone in their home can have access to the Internet." said Slater

These centers are a good first step toward helping those without computers to get acquainted with technology and the information highway. "The implementation of public Internet access points needs to be done in conjunction with education, so users can extract the maximum from them. The points also need to be user-friendly or easy to use to increase the number of people that will use them as we have a large number of people with what I call ‘technophobia’," said Ivan Irizarry, manager for Latin America of TransNational TradeWays Inc.

Centennial also launched its third-generation (3G) wireless service which is one of the first nationwide. 3G services allow data to reach faster speeds over wireless connections allowing the use of data-intensive applications through cellular handsets or handheld computers. "This technology puts Puerto Rico at the forefront of wireless technology and can be used as an incentive to bring in high-tech companies that require a good, solid infrastructure in order to conduct their business," said Bofill of Centennial.

But we are still behind the U.S. mainland in number of telephone lines per 100 inhabitants (34 in Puerto Rico versus 68 for the national average) and the deployment of new broadband technologies, like DSL and Cable Modem, to speed up Internet access has been slow and cumbersome.

Nevertheless, PRT estimates that 74% of households have phones and currently 3,000 people have DSL service. "Most homes have a phone but in order to gain access to information you still need a computer and the number of computers right now is very low compared to the States," said Slater.

Various sources suggested that fully privatizing PRT could speed up the deployment of new technologies. According to a study by the Wharton Business School, countries with privatized telecommunication services had 49% more Internet connections for every 10,000 people than those with government controlled telecommunication companies.

"Whatever you want to do, you need good and solid telecom services. We won’t see any real progress on the infrastructure side as long as there is any government control in the PRT," said Soto.

At least, the current administration looks to be heading in this direction in respect to the ownership of PRT. Last month Verizon Communications Inc. and Popular Inc., parent company of Banco Popular, exercised an option to purchase from the government of Puerto Rico an additional 15% of the stock of Telecommunicaciones de Puerto Rico (Telpri), the holding company of Puerto Rico Telephone (PRT) and Verizon Wireless de Puerto Rico Inc., previously known as Celulares Telefonica, for $172 million.

This acquisition increases Verizon’s stake in PRT from 40% to 52%. Popular Inc. increased its stake from a 10% to 13% while government ownership is reduce from 43% to 28%. Telpri employees still retain 7% of the stocks.

"We need to privatize PRT 100%, add resources and power to the Telecommunication Regulatory Board, lower or eliminate the cost of deploying high-speed fiber optic lines, and digitize the government. Then, we will have an environment ready for the deployment of a solid telecom infrastructure," said Soto.


You can give people the tools but if they don’t know how to use them it’s worthless. The local initiative to give students and teachers computers is considered minimal by some sources and insufficient compared to what other countries are doing.

Complicating the issue is the fact that the program was never finished as intended, and, most importantly, teacher/student training aimed at allowing these to get the most out of the equipment was basically nonexistent.

All sources also agreed that education at the university level is very important and that universities should have curriculums that reflect the needs of the technology job market.

A recent report by the National Bi-Partisan Web Based Education Commission said that schools need more than just computers with Internet access, they must have high-speed broadband Internet and computers that handle video, audio, and interactive presentations, as well as people trained in using this equipment.

"This is going to cost a lot of money, but we need to do it. It is possible to get the private sector involved in various ways," said Soto.

Soto mentioned Australia’s more than $2 billion investment in the educational fields of technology and science as an example. Japan has also invested billions to attract and retain people with the right technology skills, while Taiwan has attracted more than 50,000 scientists by expanding its graduate science programs. And all of this was all done in a couple of years.

"If you want companies to compete at a global level you need the people with the right skills. Investing in education will guarantee that Puerto Rico has an ample pool of people trained in the areas with the most demand. This, in turn, will attract information-technology companies to the island," said Ramsahai.

"We have to address the problem from elementary to graduate school, as access to information and knowing how to use it is the difference between being able to compete or not," said Gomez. "Internet access in schools is too elementary. It must be combined with training and has to include teachers."

As an example of things that can be done at the university level, Microsoft has opened its first research and development lab outside the continental U.S. at the University of Puerto Rico (UPR)-Mayaguez. Here, students will come into contact with the latest technology developments in software.

The Verizon International Foundation has awarded $5,000 scholarships to 10 computer-engineering students from UPR-Mayaguez.

"Verizon is committed to fostering education programs in the communities it serves," said Fares Salloum, president-international, the Americas for Verizon.

"In addition to providing financial support, the Verizon International Foundation scholarship program will offer students an opportunity to contribute to the future economic and technological growth of Puerto Rico."

The foundation's scholarship program was established to support the development of technical professionals in Puerto Rico. Scholarships will be renewable each year of the university's five-year undergraduate program in computer engineering. When combined with federal grants, the scholarships will pay for the full cost of the students' annual tuition, room & board, transportation, and textbooks. All in all, the foundation will grant 50 scholarships worth $1.25 million over nine years.

Hopefully these programs will address the decline of bachelors’ degrees awarded in the areas of computer science and mathematics, which have experienced a considerable drop since 1991 (See Chart B).

Last November, the government of Puerto Rico also issued $96.8 million in bonds known as qualified zone academy bonds. The money will be used to develop school curricula, infrastructure improvements, training for teachers and other personnel, and purchasing information technology equipment. It will benefit all 1,500 local public schools.

The federal government assigned these still unused funds as part of the Tax Payers Relief Act of 1997. One of the requirements for using the funds was garnering a private-sector contribution of no less than 10% of the bond total. Microsoft Corp. has donated the entire 10% to secure the funds.

All these initiatives and the development of the infrastructure help to create the environment to close the digital divide but the efforts must be coordinated between private, educational, and government sectors in order for the actions to be effective as soon as possible. Time is money and the longer we wait, the more we stand to lose.

Chart A:
Fixed telephone lines reported by carriers according to state

State? Total number of lines (In millions) Penetration (%) Number of ILEC-CLEC*
California 24.9 73.4% 22
Florida 12.0 75.5% 27
Mississippi 1.37 48.9% 10
Montana 0.53 58.7% 9
New York 13.7 72.5% 31
Puerto Rico 1.3 34.2% 2
Nationwide 193.8 67.9% 251

Source: FCC end-user lines served by LEC report (December 31,2000)
Nationwide numbers include Puerto Rico
Companies with less than 10,000 clients didn’t have to report
*ILEC = Incumbent Local Exchange Carrier
*CLEC = Competitive Local Exchange Carrier

Chart B:
Bachelor’s degrees awarded per population (age 20-24) in Puerto Rico as a percentage of comparable stateside statistics 1991-1997

Year? Computer Science Mathematics/Statistics
1991 89% 50%
1992 79% 28%
1993 73% 12%
1994 66% 13%
1995 59% 13%
1996 58% 18%
1997 41% 11%

Source: NSF Webcaspar

Chart C:
How Puerto Rico compares with leading tech countries

(Telecommunications benchmark 1999)

  Puerto Rico Ireland Singapore
Telephone lines per 100 people 34 48 48
Full time staff per 1,000 lines 5.9 (1997) 8.4 4.5
Percentage of households with cable TV 25.5 57 22.1
PCs per 100 inhabitants 10.3 40.5 43.7

Source: International Telecommunications Union (ITU) Yearbook of statistics 1990-1999 and local sources.

This Caribbean Business article appears courtesy of Casiano Communications.
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