This paper seeks to advance the debate on how to connect the next billion Internet users in two fundamental ways. First, it analyzes Internet diffusion patterns in Latin America based on the most recently available household surveys. Second, the paper examines the unconnected population through different lenses. It presents estimates on the demand gap — a concept that captures differences between Internet infrastructure coverage, subscriptions and individual use. Further, the paper examines the reasons for non-use, distinguishing between four types of barriers: affordability, skills, relevance and availability. By modelling the probability that non-users cite each of these factors, the paper provides a unique characterization of the non-user population that helps in the design of appropriate commercial and policy responses to connectivity challenges in the region. The findings offer many important lessons for policy makers. First, demand-side factors are found to be as important as supply-side factors in explaining non-adoption. Second, there is a large unmet demand for low-cost access services, particularly among households with school-age children. Third, gender gaps in Internet access remain significant. Fourth, language skills are an important obstacle for adoption, after controlling for other factors correlated with Internet adoption. Last, the presence of school-age children in the household has a strong spillover effect on Internet use by adults, though the effect on residential access is much weaker due to cost factors. Overall, the results suggest an opportunity to complement infrastructure-deployment initiatives and regulatory reforms with targeted programs aimed at addressing connectivity barriers related to demand factors. Such programs can be expected to lower access barriers, promote the acquisition of information and communications technology skills and have important spillover effects among the 250 million Latin Americans who remain off-line.
