Key Findings
- While we are encouraged that the recently passed infrastructure law includes funds for broadband, we highlight through this report the importance of ensuring that broadband funds reach the smallest businesses, especially those in rural communities or owned by minorities. These businesses have had the least access during the pandemic to reliable broadband at the same time that they have needed to shift more of their work online. We encourage state and federal policymakers to ensure that the funds reach those that need it most.
- 72% of all business owners increased their reliance on broadband internet during the pandemic. The largest portion, 84%, was in Education, Healthcare, and Non-profits. 77% of all firms in Leisure and Hospitality increased their reliance on broadband.
- Many business owners lack access to reliable, affordable broadband internet: one in five owners report that their business has been negatively impacted by a lack of reliable affordable broadband. Additionally, there are large gaps in access across geographies. While 12% of owners in urban areas have been negatively impacted, nearly 40% of rural business owners are negatively impacted by unreliable broadband. This lack of access to high-speed internet has significantly impacted Native American or American Indian entrepreneurs. These business owners are more than twice as likely than a White business owner to lack access to broadband.
- Lack of broadband access has resulted in actual economic costs: among owners who report lacking broadband access, 86% say it has resulted in delays in business operations, 15% of owners have had to turn away customers because of connectivity issues, and 25% of business owners have had to close their business early due to issues with internet access.
The pandemic accelerated the pace at which individuals and businesses have relied on access to the internet to conduct their personal and professional lives. Almost overnight, students, workers, and business owners shifted their whole lives into virtual environments that require an internet connection. In doing so, these past 18 months have also widened the divide between those with access to these tools and those without. For instance, the Pew Research Center found that Black teenagers were twice as likely as White teens to have trouble completing homework due to an unreliable internet connection. Similarly, in our study of 1,001 female business owners, we find significant gaps exist among small business owners who have access to these crucial tools and those who do not.
Reliable, affordable internet is essential for households and businesses who have come to depend on e-commerce and other tools for their daily operations. In the years before the pandemic, research has found that expanding access to broadband helps small businesses find qualified workers for open positions, expand their customer base, and reduce the cost of supplies. As more of the economy has moved online during the pandemic, small businesses need reliable broadband more than ever to recruit new employees and expand their business.
The $1.2 trillion Bipartisan Infrastructure Bill, recently passed by Congress and signed by President Biden includes a $65 billion investment in the country’s broadband infrastructure. These funds include $42 billion in grants to states to improve broadband and $14 billion in internet subsidies to low-income households. The findings of this survey highlight the critical importance of getting this money out the door not only to families, but also to small businesses that need these tools to provide an equal footing that will help rural and minority-owned businesses compete through the end of this pandemic and beyond.
The Digital Transformation During COVID-19
High-speed internet has become an increasingly crucial tool businesses have relied on as they turn to online platforms to continue their operations during the past 18 months. Overall, 72% of owners reported increasing their reliance on broadband internet during the pandemic. Table 1 breaks down the portion of businesses that increased reliance on broadband by industry group — Personal Services, Professional Services, Community Services (Education, Non-Profits, and Healthcare) and Goods-Producing — revealing large portions of businesses across the economy have moved operations online during the pandemic. 84% of businesses in Community Services increased their reliance, as schools moved to virtual classes and healthcare offices moved to telemedicine; 77% of Personal Services firms rely more on the internet now, with the growth of e-commerce platforms; 76% of businesses in Professional Services firms increased reliance on internet, as remote work took hold; even 57%, over half of the companies in Goods-Producing sectors like manufacturing, which are the most dependent on in-person work, increased reliance on the internet to conduct business. These significant margins demonstrate the breadth and depth of our reliance on internet tools today — and they reveal that, across all sectors, businesses without access to these tools face a significant disadvantage in the current marketplace.
Table 1: Increased Reliance on Broadband, by Industry Group
| Industry Group | % Increased Reliance |
| Personal Services | 77% |
| Professional Services | 76% |
| Education, Healthcare, Nonprofits | 84% |
| Goods-Producing | 57% |
The Small Business Digital Divide
Even as this pandemic laid bare the extent to which fast, reliable internet has become a necessity in the modern economy, many businesses still lack access to this basic tool. When asked, “Has your business been negatively impacted by a lack of reliable and/or affordable broadband?” 17% of owners responded that it had. There are, however, large disparities in who can access reliable, affordable internet. Table 2 presents results among businesses located in urban, suburban, or rural areas. While 12% of business owners in urban areas have been negatively impacted, nearly four in 10 owners in rural areas (38%) reported that their business was negatively affected due to a lack of affordable, reliable high-speed internet.
Table 2: Businesses Lacking Broadband, by Geographic Area
| Geographic Area | % Negatively Impacted by a Lack of Broadband Internet |
| Urban | 12% |
| Suburban | 15% |
| Rural | 38% |
Looking by region, as shown in Table 3, small business owners in the Northeast face the highest rate of owners lacking access to broadband, where 21% of owners reported they were negatively impacted by lack of access to broadband. Looking just within rural areas, where access is particularly low nationwide, we find that in the Western United States fully 44% of business owners report a lack of access to high-speed, reliable internet.
Table 3: Businesses Lacking Broadband, by Region and Geographic Area
| Region | All Areas | Rural Areas |
| Northeast | 21% | 35% |
| Midwest | 15% | 35% |
| South | 15% | 36% |
| West | 19% | 44% |
Similarly, there are wide divides in access to the internet across business owners of different races and ethnicities, as shown in Table 4. White, Black or African American, and Hispanic business owners report similar rates of lacking access to broadband of 16%, 17%, and 15%, respectively. In comparison, 22% of Asian American or Pacific Islander business owners and 33% of Native American or American Indian owners lack internet. While the internet needs of Native American households and students have been documented, this study provides the first picture of the digital gap facing Native American or American Indian small business owners.
Table 4: Businesses Lacking Broadband, by Race/Ethnicity
| Race/Ethnicity | % Lacking Broadband |
| White | 16% |
| Black or African American | 17% |
| Hispanic | 15% |
| Native American or American Indian | 33% |
| Asian American Pacific Islander | 22% |
This digital divide creates real economic costs for business owners, who struggle to stay connected to employees and customers, as presented in Table 5. Among owners who report lacking access to broadband, 86% say it has resulted in delays in business operations, 15% of owners have had to turn away customers because of connectivity issues, and 25% of business owners have had to close their business early due to issues with internet access.
Table 5: Has lack of reliable, affordable broadband impacted your business in the following ways?
| Delays in general business operations | 86% |
| Had to turn away customers because of connectivity issues | 15% |
| Had to close early because of connectivity issues | 25% |
Source: Gusto-NAWBO Survey of Business Owners.
Policy Solutions
The results of this survey highlight the extent to which business owners increased their reliance on the internet during the pandemic and the divide that still exists — a geographic and racial divide — between business owners with access to this important resource and those that do not. The $65 billion investment in broadband access will facilitate great progress in facilitating broadband access to all who still need it, but it is imperative that those funds are used as quickly as possible.
Moreover, while the recently enacted infrastructure bill allots $14 billion in subsidies to ensure households have access to affordable, reliable broadband, it is also important to ensure entrepreneurs have access to the technological infrastructure tools they need to compete in the post-pandemic economy: states should use allotted funds to ensure that all small businesses in rural areas and underserved communities have broadband access. One-third of Native American or American Indian business owners are negatively impacted by a lack of reliable, affordable broadband today. These divides in access to a necessary resource perpetuate geographic and racial gaps in business growth — and these gaps will only widen unless policymakers use the opportunity presented now to address them.
Appendix: Methodology
This study surveyed 1,001 members of NAWBO about their businesses and their experiences over the past year. Responses were collected from September 16, 2021 through November 3, 2021.
