rural america at the crossroads: networking for the future

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Rural America at the Crossroads: Networking for the Future

April 1991

OTA-TCT-471

NTIS order #PB91-198135



Recommended Citation:

U.S. Congress, Office of Technology Assessment, Rural America at the Crossroads: Networking for the Future, OTA-TCT-471 (Washington, DC: U.S. Government PrintingOffice, April 1991).

For. sale by the Superintendent of DocumentsU.S. Government Printing Office, Washington, DC 20402-9325

(order form can be found in the back of this report)



Foreword

Rural America is at the proverbial crossroads. Many rural communities show signs thatraise concern for their future: loss of economic vitality, a relative decline in income, highunemployment, low workforce participation, and an exodus of talent. Advances incommunication and information technologies, however, hold promise for rural America, byreducing the barriers of distance and space that have disadvantaged rural areas. Ruralbusinesses can now link to other businesses or access major markets, even in other countries,

just as readily as those in urban areas, while still enjoying the many distinctive benefits of rural

living.

This study explores the role that communication technologies can play in securing ruralAmerica’s future. It develops several policy strategies and options to encourage suchdevelopment. The study was requested by the Joint Economic Committee of Congress andSenators Charles E. Grassley and Orrin G. Hatch.

OTA gratefully acknowledges the contribution of the advisory panel, workshopparticipants, contractors, reviewers, and many others who provided information, advice, andassistance. However, OTA bears sole responsibility for the contents of this report.

-D i r e c t o r



Rural America at the Crossroads: Networking for the FutureAdvisory Panel

George Connick, Chairman

President, University of Maine at Augusta

George CalhounSenior Vice PresidentInternational Mobile Machines Corp.

Lloyd CallihanSchool Bus Driver and Volunteer Ambulance

Driver and Fireman

Wapato, WADon DillmanDirectorSocial and Economic Sciences Research CenterWashington State University, Pullman

Wilbur HawkinsExecutive DirectorLower Mississippi Delta Commission

Ronald LehrFormer CommissionerColorado Public Utilities Commission

Karen Merrick Former MayorGutenberg, Iowa

Edwin ParkerPresidentParker Telecommunications

Joseph PeltonDirectorGraduate Telecommunications ProgramEngineering CenterUniversity of Colorado, Boulder

Everett RogersProfessor of CommunicationsAnnenberg School of CommunicationsUniversity of Southern California

William SchaphorstGeneral Attorney

U.S. West CommunicationsGail SchwartzCommissionerState of New York Public Services Commission

Sharon StroverAssistant ProfessorDepartment of Radio, TV, and FilmUniversity of Texas at Austin

Margaret TrevathanFormer DirectorCalloway County Library, Kentucky

Luther TweetenProfessor of EconomicsDepartment of Agricultural Economics and

Rural SociologyOhio State University

Keith N. WareManagerEmery County Telephone Co.

NOTE: OTA appreciates and is grateful for the valuable assistance and thoughtful critiques provided by the advisory panel membersThe panel does not, however, necessarily approve, disapprove, or endorse this report. OTA assumes full responsibility for thereport and the accuracy of its contents.



Rural America at the Crossroads: Networking for the FutureOTA Project Staff

John Andelin, Assistant Director, OTA

Science, Information, and Natural Resources Division

James W. Curlin, Telecommunication and Computing Technologies Program Manager

Linda Garcia, Project Director

Sherry Emery, Analyst

Fred Wood, Senior Associate

Mark Young, Research Analyst

Ritchie Chin, Contractor

Administrative Staff

Liz Emanuel, Office Administrator

Karolyn St. Clair, Secretary

JoAnne Price, Secretary



Contractors

Sanford BergProfessor

Public Utilities Research CenterUniversity of Florida, Gainesville

Ted K. BradshawAssociate Research SociologistInstitute of Government AffairsUniversity of California, Berkeley

George M. CalhounSenior Vice President

International Mobile Machines Corp.Philadelphia, PA

Joseph F. CoatesConsultantJ.F. Coates, Inc.Washington, DC

Larry DarbyConsultant

Darby AssociatesWashington, DC

Bruce L. EganAffiliated Research FellowCenter for Telecommunications and

Information StudiesColumbia University

Don Hadwiger

Professor of Political ScienceIowa State University

Dale HatfieldPresidentHatfield Associates, Inc.Boulder, CO

Heather HudsonDirector

Telecommunications Managementand Policy ProgramMcLaren College of BusinessUniversity of San Francisco

Abbe MowshowitzConsultantTechnology Impact Research Inc.

Joseph Pelton

DirectorGraduate Telecommunications ProgramEngineering CenterUniversity of Colorado, Boulder

Thomas Michael PowerConsulting EconomistEconomics DepartmentUniversity of Montana

Louis E. SwansonAssociate Professor of SociologyUniversity of Kentucky

Frederick WilliamsCenter for Research on Communication Technology

and SocietyCollege of CommunicationUniversity of Texas at Austin

Paul YarbroughDirectorRural Communication Research ProgramCornell University

w“



Contents

Chapter 1. Summary and Policy Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 2. The Challenge for Rural America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 3. Rural America and the Changing Communication Infrastructure . . . . . . . . . . . . . . . .

Chapter 4. Rural Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 5. Regulation and Rural Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 6. The Role of the Federal Government: Orchestrating Cooperation and Change . . .

Appendix. Field Journal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

List of Contributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . .

rage 3

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Chapter 1

Summary and Policy Conclusions



Contents

PageIntroduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Request for the Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .What Are the Stakes? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .,

The Stakes for Rural America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .The National Stakes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Key Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .The Diversity of Rural Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .New Ways of Thinking About Communications in Rural Areas. . . . . . . . . . . . . . . . . . . . . . . . . . . .Wider Technological Choice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Need for Greater Technological Expertise .....,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Enhanced Technology Requirements, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Joining Technology Policy to Economic Development Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . .The Role of Telecommunications Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Orchestrating Change: The Role of the Federal Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Criteria forsaking Policy Choices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A Vision, Together With Entrepreneurial Leadership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A Multidimensional, Integrated Notion of economic Development . . . . . . . . . . . . . . . . . . . . . . . . .Minimum Cost and the Effective Use of Existing Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Flexibility ToDeal With the Variety of Situations and Settings To Be Found inRural America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . .Flexible and Creative Thinking With Respect to Rural Network. Architectures . . . . . . . . . . . . . . .Policies That Incorporate a Technology Transfer and Educational Component . . . . . . . . . . . . . . .Reconciliation of Telecommunication Regulatory Policies and Economic Development

Goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Cooperation Among All Key Players . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Economic Viability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Allowance for Choice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Public Policies To Meet Development Criteria ...,..... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Providing Vision and National Leadership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Ways To Achieve Flexibility and Encourage Creativity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Taking Advantage of Existing Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Reconciling Economic Development and Regulatory Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Creating Incentives for Cooperation ‘, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

345567779

111114171718181818

181819

1919191919

1920222731

Boxes

Box Page

l-A. Telecommunications for Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

l-B. LANs, WANs, and MANs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9l-C. Electronic Data Interexchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12l-D. Technology and Health . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15l-E. Technology and Culture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16l-F. Big Sky Telegraph . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

FiguresFigure Page

l-1. Poverty Rates by Residence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

l-2. Nonmetropolitan Net Migration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3l-3. Employment of Rural Residents, 1988 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4l-4. Rural Area Network . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10l-5. Bandwidth Requirements in Industry ...,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13l-6. Organizational Chart of Agencies Involved With Rural Development . . . . . . . . . . . . . . . . . . . . . 24



Chapter 1

Summary and Policy Conclusions

Introduction

Rural communities have played a central role inAmerican life. Politically, they have served as thecenterpiece of American democratic thought. Eco-

nomically, they have provided the labor, food, andother natural resources that fueled and sustained theindustrial revolution. Now comprising 24 percent of the Nation’s population and 28 percent of its laborforce, rural areas continue to be a source of inspiration and sustenance. In the minds of many,these communities reflect and reinforce the tradi-tional American values of community and individu-alism. Increasingly, they are viewed as a haven from

the intractable problems caused by urban develop-ment.

Notwithstanding their basic strengths, many ruralareas today show signs and symptoms that raiseconcern for their futures. These include a loss of economic vitality, a relative decline in income, high

Rural areas are showing a loss of eco-nomic vitality, a relative decline in in-come, high unemployment, low work-force participation, and a high level of

outmigration.

unemployment, low workforce participation, and ahigh level of migration out of rural areas. Thus wefind that per-capita income in rural areas is muchlower than in urban areas, and that the communitiesconsidered to be the most rural are the worst off.Rural poverty rates, having been on an upswingsince the early 1970s, are also higher than urbanpoverty rates (see figures 1-1 and 1-2).

A number of forces underlie the problems that

now beset rural communities. These forces arestructural in nature, so they are unlikely to be easilyreversed. One of the most important forces is thedramatic shift in the economy away form theproduction of primary resources and manufacturedgoods towards the provision of services. Since ruralareas are more dependent on these declining sectors,

Figure l-l—Poverty Rates by Residence*

25 Percent poverty rates

2 0 -

15-

,0/

10 - “ - _ - - _ . ” ” - - - - - - = ” ” ’

5 - -–- Total Metro I

I I — Nonmetro

III L J I

o ~67 69 71 73 75 77 79 81 83 85

Year

“Metro and nonmetro for 1985 based on the Census of 19S0, for 1969 and1971 -830 on the 1970 Census, and for earlier years on the 1960 Census. No1984 data.

SOURCE: Bureau of the Census, Current Population Survey, as cited inU.S. Department of Agriculture, Rum/Economic Development in the 1980’s: Prospects for the Fufure Washington, DC: U.S.Department of Agriculture, 1988), p. 12. -

Figure l-2—Nonmetropolitan Net Migration*

Migration in thousands

200

0

-200-

-400-

-600-

-800-

-100080 /81 81 /82 82 /83 83 /84 85 /86 86 /87

Year

qFor 1980-83, nonmetropolitan counties are as defined in 1970; 1984definition Is used thereafter (nonlnstitutionalized population).

SOURCE: U.S. Bureau of the Census, as cited in U.S. Department ofAgriculture, Rural Economic Development in the 1980’s: Pros-

pects for the Future (Washington, DC: U.S. Department ofAgriculture, 1988), p. ix; U.S. Department of Commerce,

Geograhic Mobility: March 1986 to March 1987(Washlngton,DC: U.S. Bureau of the Census, 1989), serbs P-20, No. 430.



4 q Rural America at the crossroads: Networking for the Future

Advances in communication and infor-

mation technologies coincide with a shifttoward a more service-oriented econ-omy.

they are especially vulnerable to this shift (see figure1-3). With the emergence of a global economy, andthe rise of the newly industrialized countries, ruralareas are facing intense competition in resources andprimary manufacturing from abroad.

Not all trends are necessarily negative. Tremen-dous advances in communication and information

technologies, and radical changes in the way thesetechnologies can provide services have occurredalong with the shift toward a more service-orientedeconomy. Many people believe that these develop-ments hold promise for rural America, because

Figure 1-3-Employment of Rural Residents, 1988

Percent of rural jobs in each industry -1988

20.9

D S e r v i c e

~ Public Administration~ Manufactur ing

D Ag r icu l tu re

~ Construct ion

_ Mining, Forestry, Fishing

SOURCE: U.S. Department of Commerce, Rura/ and Rural Farm Popula- tion 1988 (Washington, DC: U.S. Bureau of the Census, 1989).

Photo credit:Mark G. Young

An uninhabited shack in a ranching community inrural Colorado.

communication technologies reduce the importanceof distance and space-two factors that disadvan-tage rural areas. Rural communities with moderncommunication technologies can more easily dealwith their problems. Using advanced communica-tion technologies, for example, a rural business canlink to other businesses, or access major markets,

just as easily as a business in an urban area.

Other observers are less sanguine about the

impact of technological developments on ruralAmerica, because communication networks work intwo directions-they could undermine rural econo-mies rather than bolster them. Skeptics warn againstbeing too fixated on technology, because technol-ogy, by itself, cannot bring about development.

Economic development requires the comingtogether of a wide array of people, skills, and

resources. How, and the extent to which, newcommunication technologies can be used to improvethe prospects for success depend on a number of factors. This study defines the role of communica-tion in the development process and developsseveral criteria for policy strategies and options thatencourage such development. Policy options thatmeet these criteria are outlined and discussed.

Request for the StudyThis study was requested by the Joint Economic

Committee of Congress and by Senators Charles E.Grassley and Orrin G. Hatch. Noting that thewidespread deployment of communication and in-formation technologies will inevitably bring majorchanges in the way all Americans live and work, the



Chapter 1Summary and Policy Conclusions q 5

Economic development requires the com-ing together of a wide array of people,

skills, and resources.

committee asked OTA to examine how these devel-

opments might affect economic conditions in ruralAmerica. The questions that the committee askedOTA to address are:

q

q

q

q

q

q

Will technological advances be available in atimely manner to rural America?Does information-age technology involve econ-omies of scale and scope that will enable ruralbusinesses and communities to adopt thesetechnologies?

What are the expected economic effects of information-age technologies in rural areas,particularly on employment (including jobcreation, training needs, and job displacement)and investment (including capital requirementsand public infrastructure)?Which rural areas are likely to have the greatestability to make use of these new technologies?What roles can the various levels of govern-ment play in fostering information-ageogy?

Can rural America expect to be competitive inserving national and international markets forthe goods and services of this new era?

What Are the Stakes?

The Stakes for Rural America

Although often isolated and remote, America’srural communities do not exist in a vacuum. Theywill inevitably change as the world around themchanges. As communication technologies extendrural ties and expand rural markets, these communi-ties will become increasingly vulnerable to nationaland global trends and events. For rural America, themost critical of these developments will be theadjustment to a highly competitive, service-based,global economy and the emergence of major,worldwide environmental concerns that will compelthem to reorient their economies. Since many ruralcommunities lack essential financial and humanresources, and often depend on a single industry forthe lion’s share of their wealth and vitality, theirability to adapt to these changes is limited. Without

Photo credit: Mark G. Young

A study in contrast: a new house with a satellite dish abutsan abandoned adobe hut in Garcia, Colorado.

If these technologies are to enhance theeconomic prospects of rural areas, then

policy makers must develop policies tocreate the most favorable conditions fortheir use to go along with policies thatpromote technology deployment.

some form of intervention, these communities areheaded for decline.

Advanced communication and information tech-nologies are certainly not “the” solution to themany problems confronting rural America. In fact,one needs only to look historically to see exampleswhere the deployment of these technologies has left

rural communities “worse off. However, in thecurrent economic environment, in which businessesare using these technologies strategically to gain acompetitive advantage, communities and businessesthat have limited access to them are unlikely tosurvive. While not a panacea, in a global, information-based economy, these technologies could help ruralcommunities overcome a number of the barriers thathave limited their economic well-being in the past.

Precisely because communication technology is amixed blessing and often functions as a double-edged sword, it is essential that decisionmakersclearly understand, and take into account, not onlythe benefits and costs associated with this technol-

ogy, but also -and perhaps more importantly-thesocioeconomic conditions under which the benefits



6 q Rural America at the Crossroads: Networking for the Future

Box l-A—Telecommunications for Business

Each of Edward D. Jones & Co.’s offices is a far cry from Wall Street-from the hustle and bustle, maybe,but not from the stocks and bonds. Jones & Co. is a full-service brokerage house specializing in low-risk securitiesserving mainly rural communities and towns with fewer than 20,000 people. The company uses advancedtelecommunications to deliver big-city financial services to smaller towns and rural communities.

When Jones & Co. initially branched out from its main office in Maryland Heights, MO in 1955, it relied onteletype machines to connect its separate one-person offices to the headquarters. By 1980, when the company hadcompletely switched over to computers, it had grown to some 300 retail branches. In the 10 years since, Jones &Co. has mushroomed to nearly 1,600 offices in 44 States, and has upgraded the computer hardware and softwareas growing demand has outpaced the capacity of the successive systems. With more retail offices than any otherfinancial services company in the United States, Edward D. Jones & Co. earned $249 million in revenues in 1989.

More recently, Jones & Co. invested $30 million in 1988 to install a private two-way satellite network to linkits dispersed and numerous offices that went online in 1990. With rising costs of local and long-distancecommunications services, which can be a particular problem in rural areas, the very small aperture terminal (VSAT)satellite system gives the company greater control of its telecommunications and stabilizes these costs. Jones &Co.’s computer network has links to banks to expedite crediting clients’ accounts, insurance companies, mutual fundfirms, and information services such as Standard & Poor’s MarketScope service. With VSAT’S video capacity,Jones & Co. is able to broadcast live product presentations or training sessions between sites. The VSAT technologyalso permits the company, which plans to expand to 3,000 offices by 1991, flexibility in adding or moving branchlocations.

SOURCE& Robert Cullen, “Trial by Fire,” Edward D. Jones & Co. press package; Edward D. Jones & Co., ‘Satellite Technology Brings WallStreet to Main Street,” press release, undated; Edward D. Jones & Co., “Edward D. Jones&Co. Sees Technology As Key to RapidGrowth,” press release, undated; as cited in MESA Consulting, “Telecommunications and Rural Economic Development,”prepared for United States Telephone Association, October 1990.

are most likely to be realized. If these technologies changing environment in which they find them-are to enhance the economic prospects of rural areas,then policymakers must develop policies to create

the most favorable conditions for their use to goalong with policies that promote technology deploy-ment.

Market as well as government decisions deter-mine how communication technologies will bedeployed in the future. Rural America clearly hastremendous stakes in the outcomes of these deci-sions. Certain courses of action can provide ruralcommunities an opportunity to gain greater control

over, and perhaps reverse, the direction in whichthey are headed. Other actions are likely to foreclosethis possibility.

The National Stakes

Whether rural communities experience develop-ment or decline is not merely a local concern. AllAmericans have a stake in how well rural communi-

ties cope with, and take advantage of, the rapidly

selves. The kinds of economic activity that occur inrural America can have a significant impact on the

Nation’s overall prosperity.Long-term economic development requires the

continual flowering of new centers of innovation. Aswe increasingly realize, such innovation takes placeprimarily in relatively small local enterprises.1 Most rural areas, however, have been forced to play asupportive role in this process. With their longdistance from commercial centers, and their sparsepopulations, the small communities in these areas

have generally been unable to assemble the skills,information, and capital required for development totake place. These barriers of distance and space arelikely to be much less formidable in the future. Bytaking advantage of advanced communication andinformation technologies, rural communities mayfind it easier to access and assemble the resourcesthat foster innovation and growth in city regions.

Equipped with communication and information

technology and the wherewithal to take advantage of

1 See for dkussions, J= Jacobs, Cities and the WeaZth ofNations (New York NY: The Vtig k.% 1985); M*1 J. ~Ore~ ~les F. S*LThe secomi Industrial Divi&: Possibilities for Pro~enty (F&w York NY: Basic Books, 1984); and David Osborne, Laboratories of D~~

@OStO~ MA: Harvard Business School Press, 1988).



Chapter 1-Summary and Policy Conclusions q 7

Economic development in rural areaswill not only affect national economicperformance, it will also help determinehow well the United States fares in anincreasingly competitive, global econ-omy.

it, rural communities can be viewed not as potentialproblems, but rather as untapped national resources(see box l-A).

Economic development in rural areas will notonly affect national economic performance, it willalso help determine how well the United States faresin an increasingly competitive, global economy.Since 1970, the U.S. trade position has steadilyworsened, while those of our major competitors

continue to improve. Much of the increased tradecompetition is in the area of primary goods andlow-technology industries-the industries in whichrural areas have traditionally specialized. Ruralareas can contribute to an improvement in the U.S.trade balance if economic development in theseareas leads to greater economic diversificationand/or a shift to those industries-such as servicesand high-tech manufacturing-that are growing in

demand worldwide.

Rural economic development can contribute notonly to the national economy, it can enhance theoverall quality of national life. If rural communitiesuse new technologies to diversify their economies,becoming less dependent on the production of primary resources, they may make less of a claim onthe Nation’s environmental resources. Communica-

tion technologies can also be used to substitute fortravel, thereby conserving energy and reducing airpollution.

The economic viability of rural communities willdetermine the extent to which these areas canprovide an amenable lifestyle and a counterbalanceto the pull of urban implosion. Many urban regionssuffer from problems of overdevelopment: conges-tion, pollution, crime, high costs of living, etc. Ruralareas might provide a means of escape if there weresufficient amenities, such as good schools, adequate

health care, and cultural activities. Many elderly aretaking advantage of the benefits of rural living by

moving to retirement communities established inthese areas.

Key Findings

The Diversity of Rural Areas

Although rural communities share a number of common problems, many of their individual charac-

teristics, and the local resources they can draw on toaddress their problems, are very different (seeappendix).

2One community’s strength may be

another’s weakness. Communities are often en-dowed differently with respect to their locations,landscapes, and natural and human resources, aswell as access to communication and informationtechnologies. For example, Kentucky’s location inthe center of the United States makes it attractive to

foreign capital; New Mexico’s Native American andHispanic populations lend support to a prosperingtourist trade; while the forests of Washington Stateand Maine supply raw materials for the Nation’stimber industry. Because of such differences, ruralcommunities will need to pursue a variety of development approaches.

New Ways of Thinking AboutCommunications in Rural Areas

Ironically, at the moment when communicationand information technologies are beginning to playa critical role in business, the regulatory structurethat once provided rural areas equal access to thesetechnologies is coming unraveled. Divestiture of theBell System and the shift towards deregulated

services, together with the emergence of large

Divestiture of the Bell System and theshift towards deregulated services, to-gether with the emergence of large pri-vate networks, are undermining thetraditional system of rate averaging and

subsidies for local telephone service.

~o capture this diversity, and to better understand its implications for Federal policy,O’Ill conducted field studies in four States-Kentucky, NewMexico, Washington and Maine.





El Morro, New Mexico.

private networks, are undermining the traditional

system of rate averaging and subsidies for localtelephone service. These developments have oc-curred at a time when rural economies are them-

selves becoming more fragile, and when—given the

trend towards a service-based global economy—their information and communication needs are now

more important than they have ever been.

If rural areas are not to experience further decline,

measures must be taken to assure that they haveaccess to the needed infrastructure. However, theprevious means for providing infrastructure to rural

areas is no longer sustainable, because of rapidtechnological change and a more competitive indus-

try environment. Thus, it is time to devise new waysof designing communication systems and deliveringcommunication services to rural areas.

A Rural Area Network would link up asmany users within a community aspossible-including among them busi-nesses, educational institutions, healthproviders, and local government offices.

The divestiture of the Bell System and recent

technological advances provide a number of newopportunities to do this. Most important is theunbundling of the communication infrastructure,

3

and the subsequent development of new network architectures and new technologies and technologi-cal applications.

With unbundling, users no longer must buyservices as a single unit. Now they can purchaseservices separately, on a piece-by-piece basis, con-

figuring them to meet their own particular needs.Many businesses are taking advantage of thiscapability to develop their own private communicati-on networks.

4Increasingly they are connecting

their various departments through local area net-works (LANs) and their offices through metro-politan area networks (MANs) or wide area net-works (WANs) (see box l-B). As the informationand communication needs of these businesses be-come more specialized, so too are their communi-cations systems. For example, banks and otherfinancial institutions have developed specializedcommunication services, such as the Society forWorldwide Interbank Financial Telecommunica-tions (SWIFT), and manufacturers have developedtheir own communications protocols, such as theManufacturing Automation Protocol (MAP). Evensystem integrators are beginning to specialize inproviding networking services.

5

Just as businesses are taking advantages of thesedevelopments to create their own customized com-munication networks, so too might rural communi-

3Unbund~g first a m in telec~uni~tiomwith the FCC’s Carterfone decision of 1%8, which allowed customers tO add equipment @ th~telephones as long as they did not adversely affect the operation of the telephone system or its sefidness to others. The development of open networkarchitecture (ONA) will lead to the further unbudling of the telephone network. If pursued far enou~ open architecture would allow independentproviders and others to pumhase the most elemental functions. They could also create their own products, reconfiguring and customizing these iilnctions

to meet their own needs.Ah ~ PM4 one ~l=o~~~on IMXSVOIJC e x i s t d to provide universal service to all USCXS. ‘rh.is arrangement- @@ sui~ble, ~ ~ ’ *

were very similar and the services that could be offered were relatively limited. Businesses used the telephone for voice communication in much thesame way that households did. ‘Rxlay, this is no longer the case. Different kinds of businesses increasingly have different kinda of business needs.

SFor a dis~ssio~ S= El i M. N o a q “ T h e Future o f the Public Network: From Star to the Mi311%” TeZecommun ications, March 1988, pp. 58-59,65, and 90.



Chapter I-Summary and Policy Conclusions q 9

Box 1-B—LANs, WANS, and MANs

Local Area Networks (LANs): LANs are data communication networks that are relatively limited in their reach.They generally cover the premises of a building or a campus. Like all networking technologies, LANs facilitatecommunication and sharing of information and computer resources by the members of a group. Within the businesscommunity, the number of LANs deployed has recently grown by leaps and bounds. Predictions are that in 1992the number of LANs deployed will surpass 5 million, and more than one-half of all PCs will be connected by LANs.

Wide Area Networks (WANs): Wide area networks are data communication networks that provide long-haulconnectivity among separate networks located in different geographic areas. Many businesses are using WANs toextend and restructure their operations on a national or worldwide basis, while at the same time gaining theeconomies of scale and scope that can be achieved by large-scale, shared networks.

WANs make use of a variety of transmission media, which can be provided on a leased or dial-up basis. WANscan also be privately owned. Recently, many businesses have chosen satellite networks, taking advantage of therecent development of relatively low-cost small aperture terminals to link their various offices to a headquartersfacility. General Motors is planning to build the largest network of this kind. Scheduled for operation in 1992, itwill consist of 9,700 very small aperture terminals that will connect GM locations nationwide.

Metropolitan Area Networks (MANs): Still in the field-testing stage, metropolitan area networks provideswitched data networking services at very high speeds (45 to 50 megabits per second) within a geographic area of at least 50 miles. MANs connect LANs to LANs, as well as LANs to WANs. As designed by Bellcore, MANs willprovide Switched Multimegabit Data Services (SMMDS), which will allow users to setup a virtual (or logical)private network and give them access to individual services on demand. These networks are designed for shared

usage.SOURCE: Office of Technology Assessment 1991.

ties. However, whereas many business networks are q RANs would induce communication providersestablished along functiona

l- lines, Rural Area Net-

works (RANs) would be configured, instead, aroundthe geographic boundaries and needs of an entire

community. Designed on the basis of a ring (orcampus-type) architecture, a RAN would link up asmany users within a community as possible-including among them businesses, educational insti-tutions, health providers, and local governmentoffices (see figure 1-4). Rural Area Networks couldbe linked statewide, perhaps by piggybacking on theState government and/or the State educational net-works.

Rural Area Networks have a number of potentialbenefits:

RANs could foster the deployment of advancedtechnology to rural areas in an economicallyviable manner. By pooling diverse users, theywould provide considerable economies of scaleand scope.

Built to meet shared needs, they could fostercooperation and community ties.

RANs would overcome the limitations of technological expertise in rural areas since theycould be designed by one systems integrator.

to be more responsive to the communicationneeds of rural communities. By joining forces,rural users will be able to exert greater leverage

in the marketplace.

Wider Technological Choice

In creating such networks, rural communities canchoose from a variety of technologies, particularlynew technologies such as digital radio and advancedsatellites as well as niche markets for old technolo-gies, each of which have special applications forremote, rural areas. Many of these technologies areradio-based so their cost depends more on totaldemand than on population density.

With digital radio, for example, cable is notrequired beyond the Radio Carrier Station; eachsubscriber has a radio transceiver that provides astandard phone service drop. Whereas it can cost onaverage about $10,000 per subscriber to provide

access lines via copper wire, the average cost todaywith digital radio is about $3,000 per subscriber.Digital radio systems capable of carrying four DS-3(each transmitting at 45 megabits per second) linesare expected to be available in the early 1990s.




Figure 1-4-Rural Area Network

Schools Hospitals Government

and clinics offices

a

Industries Businesses Residences

A Rural Area Network would be designed to foster the deployment of advanced technology to rural areas in an economically viable mannerby pooling the communication needs of the businesses, educational institutions, health providers,and local government off

SOURCE: Office of Assessment 1991.



Chapter l-Summary and Policy Conclusions q 11

If rural communities are to make use of

an assortment of technologies to createRural Area Networks, they must de-velop strategies to optimize the advan-tages of each and make them worktogether.

Advances in satellite technology also hold consid-erable promise for rural areas. Because satellite-based signals are broadcast over a wide area,virtually any user within the satellite’s ‘‘footprint’can easily access the network at the same cost. Themobile satellites being designed now for launch inthe early 1990s will have sufficient power to enablethe use of a large number of small, mobile terminalson the ground. Portable units will be self-containedand lightweight, capable of fitting on a company orfamily car. These terminals will allow the user toconnect with private networks or the public tele-phone network for a variety of services, includingvoice, data, facsimile transmission, and computer-to-computer communications. Most recently, Motorolais developing a global, satellite-based cellular net-work technology, called Iridium, that, once opera-tional, could greatly reduce the cost of delivering

communication services to rural areas.Technological advances have also reduced the

cost of deploying wireline communication servicesto rural areas. For example, the development of remote digital switching modules now permitscarriers to use fewer expensive host switches toprovide advanced intelligent services such as accessto 800-number databases. The cost savings can besubstantial. One host switch, such as the AT&T

5SEE, costs approximately $510 million, whereas aremote switching module will cost between $600,000and $700,000.

The Need for Greater Technological Expertise

If rural communities are to make use of anassortment of technologies to create Rural Area

Networks, they must develop strategies to optimizethe advantages of each and make them work together. These are by no means easy tasks. Nor doesthe average rural businessman or woman have theexperience, skills, and resources to do this.

Under the old Bell System, few subscribers wererequired, or even inclined, to explore their service

options. Thus, today, many are unprepared to sortout the many options available to them in an industryenvironment driven by rapid technological change.Taking the time out from normal business operationsto come to terms with information-age technologiesis also difficult. Most rural businesses are small; jobresponsibilities are not specialized enough so thatany one person could devote much time to becomea communication expert. As one rural businessman

said: “I run my business on a shoestring. I superviseoperations; keep the books; and even sweep thefloor. When would I ever have time to learn abouthow to use communication strategically?”

Nor are there many people to whom rural busi-nesses can turn for help. In a competitive environ-ment, many communication vendors are focusingtheir energies on the needs of the much morelucrative large business users. Among those who

have supported small rural businesses in the past—such as agricultural extension agents, economicdevelopment officials, or the local chambers of commerce-few recognize or understand the eco-nomic development opportunities that new technol-ogies offer. It is not surprising that when a ruralbusiness, or a rural community, has been successfulin deploying new technology effectively, there hasgenerally been a knowledgeable, energetic, andvisionary individual involved.

Enhanced Technology Requirements

In taking advantage of the new technologicalcapabilities, businesses are changing the way theyconduct business. More and more, they are usingtechnology to gain a competitive strategic advan-tage. For example, as in the case of electronic datainterexchange (EDI), communication technologiesare being used to gain competitive advantage overcompetitors (see box l-C). Within companies theyare being used to improve the efficiency andeffectiveness of business operations. In addition,they are being used as a basis for creating newproducts and services. For this reason, it is impera-tive that rural communities not be left behindtechnologically.

It is not clear, however, just what level of technological deployment is needed for rural areas tokeep pace. Many of the services that will likely berequired by an individual rural business could be




Box I-C—Electronic Data Interexchange

Electronic data interexchange (EDI) is a notable example of how information and communication technologiesare emerging as important strategic tools for efficient and effective business operations. EDI is essentially themodem, computer-based method by which companies order, invoice, and bill their products and services. Suchcommon transaction functions as invoices, shipping notices, and bills, which traditionally have entailed the transferand processing of paper documents, are replaced by electronic transfers between the businesses’ computers.

Electronic data interxchange improves the efficiency and effectiveness of operations by empoweringbusinesses to purchase supplies and to produce and distribute products precisely when and where they are needed.

The company’s computer system, for example, will initiate a purchase order and execute the purchasing transactionwhen an item is requested and removed from the inventory. The price, terms, and conditions of the contract are allstored in the computer. In addition to the considerable savings gained as inventory costs are reduced, EDI alsominimizes human clerical error and the considerable processing costs involved with paper transactions. By reducing

ting the prolonged and often error-plagued paper trail, large retailers and manufacturers are able to gainor eliminaa competitive advantage by streamlining transactions with their suppliers and buyers,

SOURCE: Office of Technology Assessment 1991.

Standardized

purchase order~ .

EDI \

‘r’)‘~) “#l ———-

Specifier

I

E x p e r t s y s t e m -

monitors inventory

and production,

and automatically

reorders inventory

Buyer

% t r a n s m i s s i o n s .

r’1 “ Automatic

order conf irmat ion

/ ~ ~ C o m p u t e r g e n e r a t e s

l ~ ~ n d a r d i z e d P . O . f o r m

- . -1

L--lreport

oInstant data to:

Sales

Manufacturing

Engineering

Automatic billing

.

SellerProduct delivery

How electronic data interexchange internally and externally expedites business transactions.

SOURCE: Reprinted from Datamation, Mar. 15, 1988 @ 1990 by Cahners/Ziff Publishing Associates, L.P.




provided with narrowband (64 kilobits per second to1.5 megabits per second) capacity (see figure 1-5).However, if rural businesses pool their communica-tion needs, they can benefit from the same kind of

efficiencies that large businesses enjoy by usingbroadband technology (1.5 to 45 megabits persecond).

In evaluating a rural community’s tech-

nological requirements, one must not

only consider a community’s own eco-

nomic activities, but also—and increas-

ingly—the activities of its competitors.

In an information-based economy, communica-tion needs are relative. In evaluating a rural commu-nity’s technological requirements, one must not onlyconsider a community’s own economic activities,but also-and increasingly-the activities of itscompetitors, whether they be businesses in urbanareas or in other countries. Estimating rural needs inrelationship to its competitors is, however, a very

complicated and uncertain task. There is currentlynot a consensus about the capabilities large businessusers need, and within what time frame. Nonethe-less, it is clear that the deployment of advancedtechnology in rural communities is likely to lag wellbehind that in urban areas. With few exceptions,communication vendors are focusing their develop-ment and marketing efforts on the large, lucrative

business customer, instead of bringing advancedtechnology to remote areas (see ch. 3).

Regulatory policy reinforces this situation. Regu-lators generally do not focus on promoting economicdevelopment, so they do not view rural needs inrelative terms. Instead, they tend to consider needsfor the present, evaluating them on an individualuser, service-by-service basis. Accordingly, they

contend that the needs of most rural businesses canbe met by deploying narrowband capabilities rang-ing from 64 kilobits to 1.5 megabits, which later canbe upgraded to broadband capabilities of 45 mega-bits. From the regulators’ point of view, infrastruc-ture modernization should focus on immediateproblems such as assuring that all subscribers havesingle-party lines, digital switching facilities, andtouch-tone dialing.

Figure 1-5-Bandwidth Requirements in Industry

High tech/

High aerospace

’ 99 ‘ e t & m &

U n i v e r s i t y m G o v e r n m e n t

g Medical InsuranceT1

q TravelAutomatic

‘I% h ao tq ““e rreach me

qPetroleum

Retail point-of-salepoint-of-sale

Low q

Close DispersedGeographic distribution

q Agent/distribution networks Backbone networks

Bandwidth requirements for different types of users.

SOURCE: Mary Johnston and James Herman, “Two Tracks to the Future of private Networks,” BusinessCommunications Review, April 1990, p. 18. Reprinted with permission of publisher, Business Communica-tions.





An example of the importance of information technologiesin rural areas: fax service in EspanolarNew Mexico.

This approach is inappropriate for the develop-ment of community-based Rural Area Networks.Networks that seek to pool business needs or that use

communication technologies to address social needsas well as business concerns will require broadbandcapacity. The State of Maine’s education network already uses three DS-3 lines, and this capacity willlikely not suffice for long. The State of Michiganalso plans to deploy a statewide broadband network.

In such situations, an evolutionary approach tonetwork modernization would be unwise. Broad-band technology is optimally designed for sharing.It provides new ways of organizing communicationnetworks, and is not a mere extension of narrowbandtechnology. Upgrading can be costly. The amount of capital available for network modernization is par-ticularly limited in rural areas, so care must be takento assure that investments made now do not precludethe timely installation of more advanced technolo-gies in the future.

Joining Technology Policy to Economic

Development Policy

Notwithstanding the many opportunities that newtechnologies afford, technology, in and of itself,cannot level the playing field for rural areas and theirurban and global competitors. The lack of effective

Many benefits can be lost when technol-

ogy deployment takes place in response

to market demand rather than as part of a comprehensive economic developmentprogram.

communication links is only one of a number of barriers to economic development. Other barriers—which in many cases are more crucial and immediate—include social problems such as low educationalattainment, extreme poverty, and poor health condi-tions, as well as inadequate physical infrastructureand a shortage of capital. If economic developmentin rural communities is to be self-sustainin g, these

problems must be addressed as well. What isrequired is a holistic approach to economic develop-ment that incorporates the idea of comprehensivecommunity development. In most cases, communi-cation technologies can foster and support such anapproach; they can be used to provide education,deliver health care, and strengthen local government(see box l-D). However, to make the most of newtechnologies, technology deployment and economic

development policy need to be joined.

Failure to link the deployment of communicationtechnology to a program for comprehensive eco-nomic development could actually harm rural com-munities. By all measures, whether they be povertyrates, income levels, or levels of educational attain-ment, rural areas begin from a disadvantaged posi-tion vis-d-vis urban areas. As the history of commu-

nication technology shows, under such circumstances,the mere deployment of technology may exposerural economies to urban competition and hencewiden the economic gap rather than narrow it (seebox l-E).

It is only by pooling public and privatedemand that advanced communication

systems can be economically deployed torural areas.

q

The impact of mass media on rural businessesprovides a good example. The explosive growth of popular magazines intensifed competition for ad-



Chupter Summary and Policy Conclusions q 15

Box l-D—Technology and Health

The health care crisis in America is an especially acute problem for rural communities. The closing of hospitalsand medical facilities and the rising costs of medical insurance pose a serious threat to rural communities and theireconomies. In Texas, for example, 73 hospitals have been forced to close since 1984; the majority of these servedrural communities. To overcome this potentially disastrous trend, Texas Tech University is designing andimplementing several telecommunications-based programs to help deliver medical services to rural hospitals,clinics, and practitioners. The University’s 4 campuses serve 108 counties and 135,000 square miles in westernTexas with a population of 2.5 million people.

The University’s Health Services Center launched the Kellogg-Affiliated Remote Environments Network (KARENET) in 1985 to afford doctors in rural west Texas access to vital support mechanisms. KARENET is an

online computer network that rural physicians and medical professionals can access by telephone and modem forsuch programs as recording and monitoring patient care information, consulting with up-to-date treatmentprocedures and protocols, health-care research, and continuing medical instruction. With $2.4 million funding fromthe W.K. Kellogg Foundation and with computer support from AT&T, KARENET creates a “medicaltelecommunity” that benefits the rural hospitals by retaining more patients and benefits the patients by reducingthe costs and problems associated with travel.

The Health Services Center also operates MEDNET, a 3-year project “to demonstrate the use of interactivetelecommunications systems to link rural hospitals, clinics, and practitioners, with the purpose of improving ruralhealth care by using technology to overcome professional isolation.” Funded by a $1.9 million grant from the U.S.Department of Health and Human Services, MEDNET involves several technologies that provide an array of

important medical services:. Two-way interactive video-along with voice, graphics and data-carried over digital T1 telephone lines

enables “ [t]he primary care physician in the rural hospital [to] communicate with physicians in largerhospitals or medical centers for consultation and diagnosis. ”

. Personal computers donated by AT&T and special modems (codecs) are used to transfer x-ray images andpathology slides as well as for other office functions such as word processing, spreadsheets, billing,appointments, and record keeping.

. A satellite-delivered continuing education curriculum gives physicians, nurses, and health-care profession-als programs that are specially tailored to address rural health concerns. The satellite broadcasts the video

program to the 22 participating rural hospitals while a telephone connection completes the two-way audioportion.. A telefacsimile network that supports 19 hospitals has been particularly useful in requesting and receiving

materials from the Health Service Center Libraries and for consulting.

Twelve sites were originally chosen to receive the satellite downlink and display equipment to take part in thecontinuing education program under the initial grant funding. Others have joined subsequently, and the satelliteeducation project can, according to Jeffrey Cowan, become self-sufficient. For other of MEDNET’s program, theexpense of the equipment is often a considerable burden for rural facilities, so that seed money and outside funding

will be an important determinate to success.

SOURCES: John M. Holden “Across the Phone Lines,” American Medical News, Jan. 27, 1989, p. 13. Executive summary, the Texas Tech

MEDNET demonstration Project Texas Tech University Health Services Center, School of Medicine, Lubbock TX. KARENETPamphlet. Personal correspondence, Jeffrey Cowan, Satellite Communication Specialist for the MEDNET project Jan.10, 1991.

vertising among segments of the publishing indus- positioned to run advertisements for nationallytry, and the winners in this competition matched theshifts in the Nation’s marketing system. The small,local retailers, who had once served their commu-

nities with little competition, suddenly faced asuccession of new challengers-department stores,mail-order firms, and chain stores. The metropolitanpress increasingly tied its fortunes to departmentstores and chains; and magazines were well-

marketed consumer goods that were sold through allkinds of outlets.

Many benefits can be lost when technology

deployment takes place in response to marketdemand rather than as part of a comprehensiveeconomic development program. It is only bypooling public and private demand that advancedcommunication systems can be economically de-




Box l-E—Technology and Culture

The Zuni Indian Reservation, some 150 miles due west of Albuquerque, lies in New Mexico’s dramaticallystark and strikingly wild country on the border of Arizona. It is a short way down the road from Gallup, the principaltrading center for the huge Navajo Indian Reservation. As on other reservations, unemployment and attendant socialproblems are severe. The primary source of commerce in Zuni is trade in traditional hand-crafted jewelry.

There is very little about the Zuni Middle School that sets it off from other rural schools. It is housed in a modestand modem one-story, red-brick building. The school children at the middle school wear name-brand sneakers andT-shirts emblazoned with the names of popular music stars-evidence, we are told, of the profound effect of HomeBox Office (HBO, the subscription movie broadcaster) and Music Television (h/lTV, the popular music videochannel). However, while the students are exposed to mainstream popular American culture through TV andsatellites, the middle school’s Language Literacy Center is creating a computer program to help teach the nativelanguage to the students, many of whom are only familiar with the language in spoken form and are unable to reador write it. The project is an example of the application of technology to preserve and reinforce culture.

Education is something of a mixed blessing: because the Reservation does not have the resources to satisfythose students who become interested in further education, they are thus inclined to leave and often relocate wherethe opportunities are commensurate with their ambition and ability. Yet the middle school’s Language LiteracyCenter, with the support of Apple Computers, is entering the Zuni language on HyperCard, a user-friendly

application that enables the student to quickly and easily switch between menus and topics as a way of cross-referencing material. The user learns to associate the pronunciations of words and sounds with the spelling.Several lessons, for example, are taught through short stories, and the student can look up an unfamiliar word byswitching to the program’s dictionary or alphabet.

SOURCE: Office of Technology Assessment site visit, 1990.

Zuni Language Literacy Center

e. :...:...-. . .* =$=!sA

“@’

12 3

Zuni Numbers Milo and

A sample menu from the Literacy Center’s computer program.

SOURCE: Language Literacy Center, Zuni Middle School.

w




Federal telecommunications policy isoften at odds with States’ economicdevelopment goals.

ployed to rural areas. Moreover, there area numberof positive synergisms to be gained from linkingtechnology deployment to development policy. Com-

munication vendors will learn more about economicdevelopment, while community leaders will gain agreater understanding of the technology. With suchcross-fertilization, new development approachesand innovative technological applications couldemerge. In addition, with the benefits of sharingcommunication resources, key individuals andgroups that have previously operated independentlywill find opportunities to cooperate on behalf of their

community’s development.

The Role of Telecommunications Policy

Successful rural economic development strate-gies require that communication regulatory policyhave parallel-if not consistent—goals and ap-proaches. For example, if economic developmentgoals include the provision of education and healthservices, then regulatory cost/benefit analysis mustinclude the social benefits of these services in theircalculations. This currently is not the case. In mostStates, those responsible for development and thoseresponsible for regulatory policies have little con-tact.

Orchestrating Change: The Role of

the Federal Government

To capitalize on the potential of communicationand information technologies for rural America,coordinated action is needed by many differentpersons, organizations, and institutions. The morebroadly economic development is defined, the morevaried and numerous are the participants needed forsuccessful rural economic development. Revitaliz-ing rural communities through communication tech-

nologies requires the cooperation and commitmentof:

1.

2.

3.

rural institutions such as schools, libraries, andmedical and health providers, and the local andregional development agencies;the communication providers such as the Belloperating companies, independent telephonecompanies, cable television and satellite com-

panies; andcatalysts for change, coming, for example,from colleges or universities serving ruralareas, local educational or community leaders,Federal, State, or local government, and pri-vate entrepreneurs.

If the cooperation needed for economicdevelopment is to take place, govern-ment must provide incentives for coop-eration, while making it costly for play-ers who fail to work together.

Federal telecommunications policy is often atodds with States’ economic development goals.Tension between regulatory and economic develop-ment goals was less apparent in the past becausecommunications was not considered a key compo-nent of economic development. This tension willbecome more serious as the intensity of interstateand global economic competition increases and ascommunication is used even more for competitiveadvantage. It is therefore necessary to reevaluatecommunication regulatory policies in light of broadereconomic development goals, and to establish mech-anisms for collaboration among players and poli-cymakers in both of these governmental functions.

OTA field studies6suggest that competition for

turf and economic rewards hinders the cooperationneeded for economic development and limits theefficient use of communication technologies in ruralareas. Many stakeholders have never dealt with oneanother before, and economic and political incen-tives are such that they are not inclined to do so now.

With the growing role of communication andinformation in society and their enhanced marketvalue, the stakes involved in providing these serv-ices are higher than ever before. Since only onenetwork may be economically feasible for a particu-lar rural area, stakeholders will be tempted to take

6See appendix.





The Purchase Training Center outside Paducah,Kentucky, for training barge operators for the

Mississippi River.

the lead in configuring and controlling the commu-nication infrastructure for their own benefit. If thecooperation needed for economic development is totake place, government must provide incentives forcooperation, while making it costly for players who

fail to work together.

Criteria for Making Policy Choices

OTA has identified a number of criteria that aneconomic development strategy must meet to in-crease its chance of success. Experience shows thatwhether communication technologies will be suc-cessful in promoting rural economic development

depends not just on their availability to ruralcommunities, but also on the social and economiccontext in which they are deployed and used. Thecriteria discussed below are the set of conditionsthat-taken together-increase the chance for SUC-

cess. These criteria are an interdependent, totalpackage. To the extent that policy, measures fail toaddress all of these criteria, the chance for successand the likelihood that technology will be deployed

to the benefit of rural areas will be diminished.

A Vision, Together With Entrepreneurial

Leadership

The notion of employing communication technol-ogies to foster rural development is unconventional

and relatively untried. To make it work requiresvision, imagination, ingenuity, and enlightened lead-ership.

A Multidimensional, Integrated Notion of

Economic Development

Experience suggests that if sustainable economicdevelopment is to occur, economic developmentpolicies and programs must be conceived in aholistic fashion. Broad-based policies are especiallyuseful when integrating communication technolo-gies into the development process, because thesekinds of policies offer new ways for rural communi-ties to achieve economies of scale and scope, andhence economically just@ the deployment of tech-nology.

Minimum Cost and the Effective Use of Existing Resources

With current national budget concerns, it isunlikely that there will be substantial additionalresources available for promoting rural economicdevelopment, unless the value of technology deploy-ment can be convincingly demonstrated. Develop-ment strategies, therefore, must make efficient andeffective use of existing funds and institutional

resources.

Flexibility To Deal With the Variety of

Situations and Settings To Be Found in

Rural America

Rural communities are extremely diverse; hencedevelopment policies must address the individualneeds and appeal to the unique strengths of each

community. Any State or Federal programs must beflexible enough to allow this.

Flexible and Creative Thinking With Respect

to Rural Network Architectures

It generally takes longer to deploy technology inrural than in urban areas, so technological advancesthat affect rural and urban settings alike could make

rural areas worse off. To improve their competitivepositions, rural areas need technologies or technicalcapabilities that can reduce the urban advantage.Increasingly they must think about their communi-cation systems less in terms of past urban modelsand more in terms of the conditions found in ruralcommunities today.




Policies That Incorporate a Technology

Transfer and Educational Component

Many rural communities are unaware of thepotential of communication technologies to meettheir needs and aspirations. Moreover, they are oftenstymied in using technology by the higher transac-tion costs-such as the costs of putting systemstogether-caused by divestiture and the unbundlingof the national communication infrastructure. Na-tional development policies, therefore, must provide

technical assistance and education to users tofamiliarize them with communication technologyand assist them in planning and devising communication-based development strategies.

Reconciliation of Telecommunication

Regulatory Policies and Economic

Development Goals

There are a number of instances where economicdevelopment goals and telecommunication policygoals are in conflict. Ways must be found toreconcile these differences if communication tech-nologies are to play a major role in future develop-ment programs.

Cooperation Among All Key PlayersPolitical turf battles and intense economic compe-

tition have doomed many economic developmentprograms in the past. If such programs are to besuccessful in the future, they must include all of theplayers and seek solutions. Incentives for suchcooperation must be builtment strategies.

Economic

into economic develop-

Viability

The previous means of supporting rural communi-cation systems are becoming increasingly less suita-ble. New ways of achieving economies of scale andscope in rural areas are needed for the future.

Allowance for ChoiceNot all communities are interested in economic

development. Development programs must allowcommunities the choice to adopt them or to opt outin accordance to their wishes.

Public Policies To Meet

Development Criteria Providing Vision and National Leadership

If Federal policymakers are to provide the visionand leadership needed to promote the effective useof communication technologies for rural economicdevelopment, they must state this objective as amajor policy goal. Establishing a formal goal willsignal a commitment and provide a benchmark forweighing policy choices and evaluating policyactions. A statement of goals would also provide abasis for assigning and coordinating institutionalresponsibilities, and for determining the efficiencyand effectiveness of each program.

Failure to emphasize the potential that communi-cation and information technologies have to im-prove the prospects of rural development may result

in inadequate funding and a lack of institutional andhuman support. The Federal budget crisis makes thiseven more likely today. With the shrinking pie,beneficiaries of current Federal programs will lobbyintensely against efforts to rethink or redirectprogram priorities. Opposition will be less effectiveif there is a clear vision of the role that telecommuni-cation can play in promoting economic develop-ment.

Establishing formal goals is difficult. Goals focuson the question of how scarce resources should bedistributed among competing groups and organiza-tions. By not questioning goals, or by referring tothem in broad terms, decisionmakers can avoidaccountability to stakeholders who are losers in thegoal-setting process.

It will likely be difficult to set a goal for making

communication a priority in the economic develop-ment process. A consensus has not developed in theUnited States to support the notion of communica-tion as infrastructure. There is an unawareness of thepotential role of new communication technologies inthe development process, and skepticism about itseffectiveness. A few years ago, former Federalcommunications commission (FCC) ChairmanFowlerequated television sets with toasters, a comparison,

he said, implying that communication servicesshould be treated like any other commodity to bebought and sold in the marketplace. This narrowview is shared by many consumers, regulators, andeconomists.

20 R l A i t th C d N t ki f th F t




Being too cautious is a serious draw-back. Most successful programs thathave had a decidedly positive impact onrural America—such as the land-grantcollege system and agricultural exten-sion, or the Rural Electrification Admin-istration—have all been major nationalefforts, inspired by a larger vision.

things get done. People in rural areas, however, arelimited in their ability to creatively apply new

technologies to problems of development. They lack an adequate, low-cost communication infrastructureand the skills and experience required to optimallyuse it. This situation contrasts with urban areaswhere there is a “critical mass” of both technologyand sophisticated users, which stimulates new appli-cations and additional use. To create a “criticalmass ‘‘ in rural America will require a significantcommitment and the willingness to take substantial

risk.

Although the Federal rural economic develop-ment legislation enacted by the IOlst Congressacknowledges the importance of and provides aspecific role for communications in the developmentprocess, the bill takes a cautious approach. TheRural Economic Development Act of 1990 seeks toassure that modem communication technologies are

available in rural areas by making it easier for ruraltelephone providers to borrow money ii-em the RuralElectrification Administration (REA) and the RuralTelephone Bank to modernize their networks. It alsocalls for these borrowers to play a more active rolein rural economic development. The Act furtherenvisions the use of communication technology toachieve other economic development goals, such asimproving educational and medical resources.

7How-

ever, the Act does not provide a clear picture of therole of technology as a central force in the develop-ment process.

Being too cautious is a serious drawback. Mostsuccessful programs that have had a decidedlypositive impact on rural America-such as theland-grant college system and agricultural exten-sion, or the Rural Electrification Administration—

have all been major national efforts, inspired by alarger vision.

An overly conservative approach to communica-tion technologies could undermine the chance tomake a real difference. Where communicationtechnologies have been effective, it has often beenbecause they served not only as more efficient meansof providing basic services, but also as catalysts for

innovation-for actually changing the way that

Ways To Achieve Flexibility and

Encourage Creativity

Policies designed to allow flexibility and encour-age creativity are needed to accommodate ruralAmerica’s diversity and limited experience usingcommunication technologies to promote economic

development. If communication technologies are tobenefit rural communities, the 10 criteria listedabove must be met. Fulfilling these criteria willrequire strong national leadership. The challenge forpolicymakers is to strike a balance between flexibil-ity and forceful national leadership.

To achieve this balance, two different approacheshave been used in the past: 1) providing block grants

to the States with programmatic strings attached;and 2) establishing agencies at the State and locallevels charged with administering a federally basedprogram. The second of these two approaches is thepreferred as it applies to the goal of promotinginformation-age technology for rural economic de-velopment. Unless the Federal Government estab-lishes the guidelines for a technology-based pro-gram, many of the criteria needed for successful

development are unlikely to be met.

The Block-Grant Approach

Block grants have been used to distribute Federalfunds for health, education, and human services.This approach is increasingly being used for otherfunding, including rural economic developmentprograms. For example, the Rural Economic Devel-opment Act authorizes pilot testing of an institu-tional framework for distributing rural economic

7

For example, Subtitle B, Enhancing HumanResources, provides “incentives for local telephone exchange carriers, rural community facilities andrural residents to improve the quality of phone service, to provide access to advanced telecommunications services and computer networks, and toimprove rural opportunities.’

Chapter l-Summary and Policy Conclusions . 21



It is at the State level that many develop-

ment programs are coordinated andpriorities set.

development funding through State governments inup to five States. It establishes a new process todeliver grants and loans by creating State RuralEconomic Development Review Panels

8and/or

Rural Investment Partnerships.

9

These panels wouldrank applications for assistance according to Stateneeds, and allow flexibility to transfer certain ruraldevelopment funds from one program to another.

Although the Secretary of the U.S. Department of Agriculture need not accept the recommendations of the State Review Panels, the Secretary would haveto notify the Review Panel and the Chairmen of theSenate and House Agriculture Committee if fundingdecisions differed from those recommended.

State and local governments strongly favor adecentralized approach that would give them con-siderable control over the allocation of Federalfunds. Grants and loans to the States and localitiesprovide flexibility, allowing programs to be tailoredto the specific needs of a State or local area. Theyalso permit diversity, and the learning that comes

from experimenting with different approaches. In-volving State governments in the process also helpsassure their commitment to Federal programs. It isat the State level that many development programsare coordinated and priorities set. State support andleadership will be essential to promote unconven-tional and untried development programs that relyheavily on communication technologies. Moreover,State public utility commissions set most of the

regulatory policies affecting rural economic devel-opment. Therefore, it will be the State governmentsthat must reconcile economic development andregulatory policies and goals.

Although favorable to the States, block-grantprograms may not allow room for sufficient Federalleadership. As more responsibility is shifted to the

States, the Federal Government will find it moredifficult to assert leadership, guide programs, ormeet national priorities. Without strong Federal

leadership, many prerequisites for successful devel-opment will not be met.

For example, with a block-grant program, itwould be difficult to assure that States pursuedevelopment approaches based on the use of com-munication technologies. Established interests arewell-positioned at the State level to vie for Federal

funds. But there are few constituent groups to speak on behalf of using communication technologies as adevelopment tool. Nor are many State officialseither well versed in the use of technology or aware

of the development opportunities and choices that itoffers. In general, States will find it difficult toprovide the entrepreneurship or vision required toovercome entrenched interests and the traditionalways of doing things.

Block grants are unlikely to provideeither sufficient incentives to encourageholistic approaches to development orsanctions to discourage States from sim-ply “writing off” their most depressedcommunities.

Block grants are also unlikely to provide eithersufficient incentives to encourage holistic approachesto development or sanctions to discourage Statesfrom simply “writing off” their most depressedcommunities. Many States focus their developmentefforts exclusively on the business sector, and they

favor those regions in their States that offer the mostcommercial promise. This tendency is likely to bemore prevalent in the future as States compete evenmore intensely to attract new businesses and jobs.Communication technologies will be underutilized,serving only a narrow set of business interests, whileother important aspects of community developmentfounder.

8

The partnerships would provide Iocal revolving funds for rural development, with Federal seed money available to State local government andnonprofit public or private rural economic development agencies.9The “Rural Partnership Investment Board” would be composed of the Administrators“ of the Rural Electrification Administration Rural

Development Administration“ “ , and Extension Service plus two other members appointed by the President. The Board would provide Federal lines of credit local agencies administering“ “ the funds would make the investment decisions.




If the Federal Government is to pursue a develop-ment program based on block grants, it must assurethat States have the technical capacity to makeeducated decisions about the use of technology.Moreover, funding would need to be made condi-tional on its use for specific purposes.

A Federal Program Administered atthe State Level

One way to provide both Federal leadership andflexibility at the local level is to build on thesuccessful model of the Cooperative ExtensionService. Through this program the Federal Govern-ment played a major role in transferring industrialtechnology to agriculture. Cooperative Extensionwas successful because it relied on participative,self-help programs-farmers working together withexperts and officials to solve problems.

An equivalent program today would be a RuralDevelopment” Service, whose basic mission wouldbe to encourage the use of communication technolo-gies for development purposes. As in the case of itsagricultural model, administrative units would beestablished at the Federal, State, and local levels, butprogram activities would vary from State to Stateand within States. Decisions would be worked out

locally and flow upward through the system to theState level. Subject matter specialists, who might beemployed by land-grant institutions, would helplocal development officials incorporate communica-tions into their programs. Supervisors and Stateleaders would assist in program planning , budget-ing, and public relations. The Federal Governmentrole would be largely one of consultation andleadership, rather than of direct management or

control.This option would signal a true commitment to

promoting rural development throughage technologies. It is also a proven method fortechnology transfer, a major need for a successfulprogram. The previous success of this kind of aprogram suggests it is likely to have considerablepayoff.

States, however, may not favor this approach,especially if it is seen as an alternative to receivingblock grants. Many State leaders may not viewtelecommunications as a major priority. Others maysimply want to control funds spent within their

jurisdictions. One way to overcome such resistancewould be to separate out Federal funding for

Photo Mark G.

The farm bureau and cooperative in Page, VA.

telecommunications programs from other grants andto link these funds to State support and commitment.

This approach may be difficult to execute throughexisting organizations. Even within Federal agen-cies, there is little understanding of communicationtechnologies and their potential. Success will de-pend on how willing and able agency employees areto improve their technical knowledge or to hire thoseknowledgeable in this area. If new organizationalarrangements are required, the cost of pursuing thisoption will be greater.

Taking Advantage of Existing Organizations

A national program to encourage the use of

information technology for rural economic develop-ment will be less costly if existing organizations aregiven charge of its direction and implementation.There are a number of organizational candidates forthis task, including a wide variety of agencies andinstitutions involved in development activities at theFederal, State, and local levels. Each, however, is

Chapter l-Summary and Policy Conclusions q 23



p y y

generally responsible for only one piece of thedevelopment puzzle. Thus, the problem for poli-

cymakers is not to establish new institutionalarrangements, but to assign agencies tasks thatmatch their existing strengths and to assure thatcooperation and coordination among these agenciesprovides a holistic development approach.

There are at least three organizations that could beconsidered for major rural development roles (seefigure 1-6). These include the United States Depart-

ment of Agriculture, the Rural Electrification Ad-ministration, and the State land-grant colleges anduniversity systems.

The United States

The Department

Department of Agriculture

of Agriculture (USDA) is re-sponsible for coordinating rural policy, and chairs

the interagency committee on rural developmentthat operates under the auspices of the White HouseEconomic Policy Council. Over the last few years,it has made a concerted effort to expand its focusbeyond agriculture-related issues to include moregeneral economic development issues affecting ruralareas. Several USDA agencies now have importantrural development responsibilities-principally theFarmers Home Administration, the Rural Electrifi-

cation Administration, and the Cooperative Exten-sion Service, and-to a lesser extent—the ForestService, Soil Conservation Service, Economic Re-search Service, and the National Agricultural Li-brary.

If USDA is to play a commanding role in ruraldevelopment, even greater leadership and coordina-

tion is needed. Title XXIII of the Rural EconomicDevelopment Act of 1990 (Public Law 101-624)reorganizes the Department of Agriculture to do thisby creating the Rural Development Administrationalongside the Fanners Home Administration“ to bevested with primary responsibility for rural eco-nomic development policy.

Within USDA, the Economic Research Service

conducts research on rural areas, and its work hasidentified and explained the underlying causes of rural America’s recent decline. Further research,monitoring, and examining the role of communica-tion in the development process at the local level

If the Cooperative Extension Service is

to play an expanded role in introducinginformation-age technology to rural areas,it must be reenergize and developgreater technical expertise, especially atthe grassroots level.

could also be fruitful. Section 2349 of the RuralEconomic Development Act provides researchgrants for the purpose of further studying ruraldevelopment. In addition, it directs the NationalRural Information Center Clearinghouse operatedby the National Agriculture Library to maintain anddisseminate information on various leadership train-ing programs, as well as information on participantsinvolved in rural development. The listing is to

include information about rural electric coopera-tives; nonprofit business development companies;economic development districts serving rural areas;small business development centers; regional devel-opment organizations; vocational or technicalschools; and Federal, State, and local agency pro-grams.

The Cooperative Extension Service is part of theDepartment of Agriculture. This program is uniquely

suited to help introduce information-age technolo-gies to rural areas where unfamiliarity and lack of experience with communication technology is amajor barrier to its use. Knowledge is rarelytransferred passively. Moving innovations fromdevelopment to production is not a one-way process.The experience and understanding of potential usersis as important to the process as is expert knowledge.Thus, effective technology transfer requires out-

reach programs based on mutual trust and respect,similar to those administered by the CooperativeExtension Service.

However, while the Cooperative Extension Serv-ice has a rural development strategy at the nationallevel, at the grassroots level it is often not perceivedas a vital institution, with an important mission tofulfill. Instead, it is viewed as lacking creativity and

initiative, and focused on agriculture to the exclu-sion of other kinds of rural development problems.Federal Extension Service officials, now more awareof the potential role for communication technologiesin the development process, are developing an



24 q Rural America at the Crossroads: Net-working for the Future

Figure 1-6-Organizational Chart of Agencies Involved With Rural Development- - - - - - -

, / ’ ‘ . \ / \

/ \ / \

\

Us.\,I

C o n g r e s s ———--——————

’1

/

. 7 - 7 - . ” ” ’

I

I

I v

Other Federal agencies

- Extension Service

- Farmers Home Administration- Small Business Administration

Economicrnafin

-:eDevelopmentn-.,

, - c- m” . . !

- Rural Electrification Administration- W u l I U l I 1 1 -

- Forest ServiceAdministration

- Soil Conservation Service- Federal Communications

- Economic Research ServiceCommission

- National Agricultural Library- Department of Education

Rural Information Service

)

- Health and Human Services

- Department of Defense, etc.

I

w @ ( - J

The key players involved in rural development at the Federal, State, and local level, and how they relate to each other.

SOURCE: Office of Technology Assessment, 1991.

Chupter 1-Summary and Policy Conclusions q 25



overall information technology plan.10

But theknowledge gap at the local level is great. If the

Cooperative Extension Service is to play an ex-panded role in introducing information-age technol-ogy to rural areas, it must be reenergize anddevelop greater technical expertise, especially at thegrassroots level. It also must work more closely withother rural development agencies, such as the RuralElectrification Administration, the Economic De-velopment Administration, the Small Business Ad-ministration, and statewide university systems (see

ch. 6).The Rural Economic Development Act of 1990

takes steps to enhance the role of the CooperativeExtension Service. Section 2346 establishes a ruraleconomic and business development program withinthe Extension Service. Funds are provided for Stateand county-level Cooperative Extension Servicerural development specialists to:

Assist individuals in creating new businesses,including cooperatives, or assist existing businesses,and to assist such businesses regarding advancedtelecommunications, computer technologies, techni-cal or management assistance, business and financialplanning, and other related matters, and to assistcommunity leaders in community economic analysisand strategic planning.

Rural development specialists would provide:

Advanced telecommunications, business manage-ment, computer operations, and other technicalassistance to community leaders and private sectorentrepreneurs and cooperatives.

The Extension Service is also directed to coordi-nate and cooperate with any similar service providedby other Federal agencies or programs.

The Rural Electrification Administration (REA)

Like the Cooperative Extension Service, the REAhas a long and successful history serving ruralcommunities. Its basic charge was to foster technol-ogy deployment through a low-cost Federal loanprogram. Communication services in rural areaswould have lagged greatly had rural telecommunicat-ion providers not used REA loans.

Although the REA program has helped ruraltelephone providers make strides in upgrading therural communication infrastructure, there is still

REA could help rural communities anddevelopment agencies serving rural areassort out their communication needs andexplore new ways of meeting them.

much for REA to do. Many areas continue to havepoor-quality service. Many do not have single-partyaccess to the public switched network, equal accessto competitive long-distance carriers, access tovalue-added data networks, emergency 911 serviceor touch tone and customized calling services.Moreover, rural communication needs are likely toincrease greatly in the future due to the rapidadvance of technology and the importance of communication in modern life. Experience suggeststhat advanced technologies will not be quickly

deployed to rural areas without some form of government intervention.

There are also new roles that REA could play inthe post-divestiture communication environment.Most important, REA could help rural communitiesand development agencies serving rural areas sortout their communication needs and explore newways of meeting them. If rural areas are to benefitfrom new technologies, they must develop altern-

atives for organizing and financing their communica-tion networks. Fortunately, technological advancesand the unbundling of the communication infra-structure permit all users to develop customizedcommunication systems that meet their uniqueneeds.

With its successful lending experience and techni-cal expertise, REA could play a key role in helping

to launch such experimental approaches. The REAcould establish forums and discussion groups of community leaders, communication providers, andcommunication users to consider rural communica-tion needs, and explore how communication systemsmight be designed to meet these needs. In a moreproactive mode, REA might conduct research anddevelopment to investigate new and creative ways of deploying advanced communication and informa-

tion technologies to rural areas, and/or providefinancial support for demonstrations and trials of such strategies. The REA could serve as an honest

I @ or a discussion of thk pl~ = ch. 6.




broker between borrowers and potential users. Itcould also provide loans and technical assistance togroups of users and providers who undertake coop-

erative communication ventures.

The Rural Economic Development Act of 1990includes measures to expand REA’s role in severalof these respects. Section 2350 creates a new REAAssistant Administrator for Economic Developmentto carry out REA programs that involve rural electricand telephone systems in community and economicdevelopment. This section mandates REA to spend

10 to 20 percent of its annual budget on developmentactivities, and not less than 1 percentona‘‘technicalassistance unit” to provide advice and guidance toREA borrowers concerning community and eco-nomic development. Section 2345 provides the REAAdministrator with additional powers and assignsduties to provide advice and guidance, establish andadminister pilot projects and demonstrations, andact as an information clearinghouse for dual devel-

opment-related activities of REA borrowers. REA’stechnical assistance role is strengthened across theboard.

The Act reaffirms the continuing importance of the REA loan program, and calls on it to play an evengreater role. Public Law 101-624, for example, findsthat:

Making modern telecommunications technologyand services available in rural areas in the UnitedStates promotes economic development and im-proves the quality of life in rural areas, and theefficient operation of the Rural Telephone Bank andthe Rural Electrification Administration loan pro-gram is essential to the continued development of thetelecommunications infrastructure in rural areas.

The Act extends lending authority to advanced

telecommunication services; mandates the expedi-tious processing of loan applications and the use of available loan funds to the extent authorized by law;and prohibits, in the strongest possible terms, anyfurther attempts to dismantle or weaken REA andREA telephone programs. In addition, Section 2101of Title XXI establishes a technical assistance unitwithin REA to provide advice, guidance, andinformation to REA electric and telephone borrow-

ers concerning rural development programs, activi-ties, and projects. It also directs REA to “promotelocal partnerships and other coordination between

The REA is well-suited to assume lead-

ership in planning for, and supporting,rural communication networks for thefuture.

borrowers under this Act and community organiza-tions, States, counties, or other entities, to improverural development. ’

The REA is well-suited to assume leadership inplanning for, and supporting, rural communication

networks for the future. Moreover, the creation of aneconomic development office within the REA isconsistent with the criteria calling for a joining of economic development and technology policy. How-ever, REA is likely to be most effective whenfocusing on technology issues. As it now stands, ithas neither the staff nor the resources to play a majoreconomic development role. Thus, it maybe best notto recast REA into a full-blown rural developmentagency, for which it is ill equipped, but instead todirect REA to work closely with other agencies,focusing and providing expertise and advice on themany new and challenging technology issues emerg-ing in a post-divestiture environment.

Dispersed throughout rural areas, insti-tutions of higher education provide anideal hub, not only for rural communica-tion networks but also for bringingtogether the myriad of players neededfor economic development.

Community Colleges, Land-Grant Universities,and State University Systems

Although colleges and universities played acritical role in helping Americans adjust to the shiftfrom an agricultural to an industrial-based economy,they are sometimes overlooked as resources for-ruraleconomic development, In the Rural Economic

Development Act, educational institutions are hardlyreferred to at all, at most being called on to play acoordinating, research, and/or limited implementa-




tion role.11

This is a serious oversight. Dispersedthroughout rural areas, institutions of higher educa-tion provide an ideal hub, not only for rural

communication networks but also for bringingtogether the myriad of players needed for economicdevelopment.

Many colleges and universities already havecomputer/communication networks that are elec-tronically linked to other institutions, libraries anddatabases, and research centers throughout theUnited States and the world. The future development

of a high-speed national research and educationalnetwork (NREN) will provide universities even

Having established their own communi-cation networks and successfully usedthem to meet their educational goals,most educational institutions are knowl-

edgeable in the use of communicationtechnologies.

greater access to computing and transmission capac-ity, and information services. In addition, thenumber of educational institutions using communicationtechnologies to develop and share educational re-

sources and materials is growing at a steady pace.Many colleges now deliver at least some classesover the air or online to students at distant locations.

Having established their own communicationnetworks and successfully used them to meet theireducational goals, most educational institutions areknowledgeable in the use of communication tech-nologies. As large users of communication services-

often ranking second only to State government—they exert considerable market power. As in the caseof a large business, the demand of a statewideuniversity system can, by itself, justify the deploy-ment of advanced technology even to a relativelyremote area. Because of these strengths, educationalinstitutions can play a key role in assuring thesuccess of telecommunication-based developmentprograms. Not only could they provide expertise,

they could also leverage their market power to drawcommunication providers to rural areas (see boxl-F).

Colleges and universities also provide a locus formany of the key players involved in development.Businesses are now aligning themselves with educa-tional centers to promote education, training, andresearch. They are also taking advantage of univer-sity online library systems and the growing numberof applied research and development centers locatedat, or near, university centers. Similarly, many

organizations involved in development are eitherhoused at or near the university. For example, theSmall Business Administration’s (SBA) offices aregenerally located on university campuses. So too are

Federal regulatory policies that aim toguarantee rural areas equal access to

advanced technologies may founderbecause regulatory authority is dividedbetween the Federal Government andthe States.

many Extension Service’s offices. Universities arealso well connected to State governments, since

many are governed by State boards and funded bythe States.

Thus State colleges and university systems couldcontribute to the rural economic development proc-ess. Federal and State programs that do not includethem will lose a powerful resource.

Reconciling Economic Development and

Regulatory PoliciesIt is a mistake to use the regulatory system as the

primary means for achieving rural economic devel-opment. Regulators and economic developers havedifferent missions. They often view issues and judgepolicies in different terms. These differences areeven greater in the post-divestiture, competitiveenvironment. Regulators are committed to protect-ing individual consumers; economic developers to

llq’he ~tr~~ ~t~ys~te Rural Economic DevelopmentReviewP anels that may beestablishedinclude nonvotingrepresentatives from SChOOIS

or colleges of business, en@eering, and agriculture. Also, the Act establishes rural telecommunication access programs intended to improve the useof telecommunication and computer networks by rural students and teachers, among others. And education is to be included in rural development plansproposed for rural areas in participating States.




Box l-F—Big Sky Telegraph

In Cody, a remote town in northern Wyoming, stands an old log house. What was once a mid-ji!-es Holiday Inn coffee shop now encloses the Big Horn BBS [computer “bulletin board system”], a rather unlikely location for a telecommunications system with global capabilities.

l

Ever since the inception of the Big Sky Telegraph at Western Montana College introduced the idea of linking citizens and communities through modem telecommunications, there has been a proliferation of BBSsaround these Northern Mountain States, where people are spread over great distances.

Big Sky Telegraph, the inspiration and model for other bulletin board systems in Colorado, Wyoming,Idaho, and Nebraska, was first conceived as an electronic network to link Montana’s 114 one-room schools toeach other and to Western Montana College. With initial support from the M.J. Murdoch Charitable Trust andUS West, Big Sky started operating-’ ’went on line’—in January 1988. The Telegraph has gone beyond being“a resource support system and recertification program for teachers”

2and its mission has since grown into “a

rural educational, business, and individual telecommunications support service. ” About 100 community sites(including schools, libraries, county extension offices, chambers of commerce, women’s centers, and hospitals)will be equipped with a modem to connect their computers to Big Sky’s network. Circuit riders travel throughoutthe State to introduce people to the technology and familiarize them with its offerings, and local system operatorsare given training to help the community use the services.

The Big Sky Telegraph exemplifies how communication technologies serve to support humancommunication which ultimately and essentiallyserves to define and unite communities. Big Sky is ameans of sharing ideas and information amongcommunities with common circumstances and con-cerns and similar needs and opportunities-butwhich are separated by great distances. “The Big SkyTelegraph ‘virtual community of communities’ con-sists of frontierspeople from over 100 rural Montanancommunities and statewide dispersed organizations

working together to learn from each other survivaltechniques.

The Telegraph is a tool for enhancing education,for broadening and strengthening community, forfacilitating economic development, and for buildinggrass-roots democracy. For example, several stu-dents are being taught a class in Chaos Theory froma professor at the Massachusetts Institute of Technol-ogy over the Big Sky Telegraph. In addition, the

Telegraph will give subscribers to the system accessto a greater range of external and foreign informationsources such as national and international databasesand computer bulletin boards.

photo credit: Frank Odasz

Members of three tribes at work during Big Sky's recent project,the Native American Graphic workshop.

luster Santos, “me Conception and Development of the Big Horn COIUIINU@ Business BBS,” ~ubfish~Cowtig, and Rural Economic Development” prepared for united

October 1990.

Hughes, to Rural Global Trade Frontier: the

SOURCES: Big Guide to Community Frank University of Western

Montana College; David Hughes, “On the Trail to the Rural Trade Frontier: From theunpublished Lester Santos, “The Conception and Development of the Big Horn Community Business BBS,”unpublished MESA Consulting, and Rural Economic prepared for United States

October 1990.




Communication policies now being de-bated and decided will determine when,

and to what extent, rural areas haveaccess to modern communication tech-nologies.

fostering broader societal goals. Whereas regulatorstend to assess the need for deploying new communi-cation technologies on the basis of a demonstratedmarket demand; economic developers tend to evalu-ate the benefit in terms of technology’s potential toaddress a social problem.

Federal regulatory policies that aim to guaranteerural areas’ equal access to advanced technologies

may founder because regulatory authority is dividedbetween the Federal Government and the States.Even when the Federal Communications Commis-sion adopts policies to encourage the modernizationof the communication infrastructure-as in the caseof setting depreciation rates

12-States may not

follow suit. Recent court decisions have circum-scribed the FCC’s authority to preempt the States insuch instances.

Despite the problems entailed in relying onregulation, rural economic development must taketelecommunications policy and regulatory policygoals into account. Communication policies nowbeing debated and decided will determine when, andto what extent, rural areas have access to moderncommunication technologies. Thus, if communication-based rural economic development policies are tosucceed, the conflict between economic develop-ment and communication regulations must be recon-ciled. There is too little attention being paid to theseissues. The recently enacted Rural Economic Develop-ment Act, for example, does not address the poten-tial communication regulatory issues that the legis-lation might cause, nor does it suggest ways toresolve them.

Several steps might be taken to remedy this

situation:

1.

2.

3.

4.

5.


A view of the main street in Ritzville, Washington,

a community heavily dependent on agriculture.

establish institution W ways to improvecommunication between economic develop-ment policymakers and regulators,

take better advantage of the Federal/State jointboard (see below) to resolve differences ontechnology deployment,

give regulatory agencies authority to includedevelopment goals in their evaluations,

pursue technology deployment strategies thatare likely to work through-not against—market forces, and

set regulatory policies that distinguish ruralfrom urban areas.

Establish Institutionalized Ways To ImproveCommunication Between EconomicDevelopment Policymakers and Regulators

Regulators and policymakers involved in eco-nomic development would better understand eachother’s values and goals if they routinely met todiscuss overlapping issues. Atypical way of promot-

ing such discussion is to set up an interagency

12 Beginning in 1980, the FCC adopted a number of changes with respect to determiningdepreciation rates that were designed to take into accountadvances in technology. This step led, however, to conflicts with the State public utility commissions. The Supreme Court supported the States’ rightsto an independent position, ruling-in the case of Louisiana Public Service Commission v. Federal Comnunications Commission-that in-the 1934Communication Act, Congress did not want to preempt the States on depreciation issues generally.



Chapter 1-Summery and Policy Conclusions q 31



nology cost/benefits and may not include socialcosts and benefits. This makes it impossible to

account for economic development goals in regula-tory decisions. Even in cases where consumers maybenefit socially, regulators’ choices are limited.Some States—such as Michigan-have passed lawsauthorizing their State regulators to incorporatesocial goals in their analyses to avoid this obstacle.If rural economic development is considered a majornational goal, Congress could direct FCC to considersocial goals in its evaluations. The FCC is now

prohibited from actively supporting economic de-velopment. Congress has been reluctant to act oncommunication issues. If this reluctance continues,a change in FCC’s authority is unlikely.

Encourage Technology Deployment StrategiesThat Will Work Through—Not Against—Market Forces

Regulators do not disagree with social goals perse, but they generally oppose policies that circum-vent market forces or that distort market signals.They encourage modernization programs that aredriven by demand, rather than technology. Eco-nomic development strategies that create demandare consistent with regulatory policies. For example,strategies that combine users’ needs and create thedemand needed to financially justify the rapid

deployment of advanced communication technolo-gies will meet regulatory criteria.

Changes will require government intervention.Consumers act as individuals in the market, with noincentive to join together. Consumers may notrecognize their common interests in rural areaswhere communication expertise is limited. Govern-ment could provide incentives to assist consumers

through information sharing and/or loans and grants.The REA could play an important role in providingtechnical assistance.

Section 2334 of the Rural Economic Develop-ment Act encourages joint use and sharing of telecommunication transmission facilities throughgrants to end users. The Act also streamlines theprocess for granting telephone carrier loan requestsand requires grant applicants to work with local

telephone carriers. Section 2337 creates a loanprogram for business telecommunications partner-ships to help rural businesses and governments sharetelecommunications terminal equipment, comput-ers, and computer software.

Although consistent with regulators’ compulsionto work through the market, a cooperative approach

could still raise regulatory problems. A large andcoordinated group of users could establish its owncommunication system and bypass the public net-work.

Regulatory Policies That Distinguish RuralFrom Urban Areas

Conditions in rural areas are dramatically differ-ent from those in urban areas. This difference

requires different telecommunications strategies.Regulatory policies must be designed to reflect thesedifferences. Policies that pertain to lower Manhattanin New York City are not likely suitable to Aroos-took County, Maine. Whereas Manhattan can sus-tain three competing telephone companies, Aroos-took County barely sustains even one moderncommunication system. Rate-of-return regulation,depreciation policies, alternative regulatory frame-

works, cable/telco cross-ownership, telephone com-panies entry into information services, and LATAboundaries and exchange boundaries require specialtreatment for rural areas. To address these policies,Federal-State jurisdictional conflicts must be re-solved, and sensitivity to rural needs must benurtured among regulators.

Federal-State jurisdictional conflicts must

be resolved, and sensitivity to rural

needs must be nurtured among regula-

tors.

Creating Incentives for CooperationCommunication-based economic development

programs are likely to have substantial long-termbenefits. But some stakeholders may feel threatened.Agencies may try to protect their turfs or may lack the willingness to acquire the technical know-how.Telephone service providers might be concernedthat users bypass their communication systems.State development officials may resent loss of

control over development funding. local develop-ment groups may resist new programs seeking ashare of development funds. The cooperation neededfor rural success is unlikely in such a competitiveatmosphere. The Federal Government must promote




cooperation among stakeholders by using its lever-age through grants and loans.

Educators lead in developing this kind of coopera-tive approach. Under the Star School Program, forexample, $33.5 million (in the form of 2-yearcompetitive matching grants) is available to partner-ships for using telecommunications for long-distance learning.

18Taking advantage of a similar

opportunity, the University of Maine/Telecommuni-cations System used a 5-year, $4.4 million grantfrom the Department of Education under Title III of

the Higher Education Act, matched by the Stategovernment, to help telephone providers pay for theupfront costs of deploying a fiber network linkingState universities and community colleges.

A similar grantor loan program might be adminis-tered through the USDA’s Rural DevelopmentAdministration, which coordinates Federal activi-

Government must promote cooperation

among stakeholders by using its lever-

age through grants and loans.

ties in rural economic development. However, theinteragency working group that exists within USDA

should be expanded to include the Departments of the Interior and Defense and the FCC. Loans mightbe administered through the REA.

If effective, these grants could have a very high

payoff. Such grants could help establish self-

sustaining relationships that promote cooperation

and commitment among players. The Federal Gov-

ernment could guide the grant program through a

competitive process. The Federal Star School Pro-

gram identified the players that must be involved in

developing educational partnerships, and targeted

benefits for low-income groups; a rural grant pro-

gram could similarly require that certain criteria be

met.

Programs and partnerships developed under such

a grant or loan program could prove threatening to

rural communication providers, and cause some

tricky regulatory problems. There are bound to be

some failures with this unconventional approach.However, something can be learned from failure in

such high-risk programs, and the experience gained

can be built into later grants. Moreover, the rate of failure is likely to be less if this kind of program is

implemented in conjunction with the necessary

informational, technology transfer activities. Regu-

latory problems might also be resolved if Federal

plans are discussed regularly with State regulators.

Conflicts with local communication providers will

be avoided, if they are participants in the develop-

ment of any grant proposals, and thus have some-thing to gain by their acceptance.

ls~e S~ Schook legin~tion ~fles two fo~ts for the composition of eligible partnerships. In one, membership must include at east one Stite

educational agency, State higher education agency, or local education authority responsible for a significant number of poor or underserved students.Furthermore, this type of partnership is required to have at least two other institutions from a host of types, including universities, teacher tmininginstitutions, and public broadcasting entities. The other type of partnership must include a public agency or corporation already formed to operate ordevelop telecommunication networks to serve schools, teacher training centers, or other education providers. AU partnerships must be statewide ormultistate. These requirements were meant to create newpatbs to improve the educational system by fostering cooperation among institutions. For afurther discussion, see linking for Learning, OTA-SET-430 (Washingto~DC: U.S. Government Printing (Mice, November 1989), pp. 136-141.



Chapter 2

The Challenge for Rural America



ContentsPage

Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Defining Rural Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .The Evolution of Rural America in a HistoricaI Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .The Current Rural Situation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Key Trends Likely To Affect Rural America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Shift to an Information-Based Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .The Decline of the U.S. Competitive Position and the Emergence of a Global Economy . . . . . .A Growing Concern About the Environment, and the Environmental Tradeoffsin

Economic Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3535

36

3840454548

50

Boxes

Box Page

2-A. Forces Underlying The Global Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

Z-B. New Forms of Global Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 502-C. Maine’s Sea Urchin Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 512-D. Lake Cumberland, Kentucky . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .+ . . . . . . . . . . . . . . . . . . . . 532-E, Development v. the Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 542-F. Retraining Miners in Appalachia ...., . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

FiguresFigure Page

2-1. Number of Farms and Farmworkers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 372-2. Census Regions of the United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 372-3. Nonmetropolitan County Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 392-4. Poverty Rates and Unemployment by Residence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 432-5. Real Per-Capita Income ......,.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 442-6. Net Nonmetropolitan Migration by Education Level, 1985-86 . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

2-7. Structural Change and the Information Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

TableTable Page

2-1. ERS Classification of Nonmetropolitan Counties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38



Chapter 2

The Challenge for Rural America

Findings

Unless rural communities act decisively to re-verse present trends, their economies will becomemore fragile. Without intervention, unemployment,poverty, and out-migration will likely increase,exacerbating the structural problems typical of ruralareas. The growing importance of high-technologyservice industries within the economy and the highervalue placed on employment in these fields, as wellas greater environmental constraints, require thateconomic development strategies be broader-basedwhile focusing more on such technology-orientedbusinesses.

To attract firms in these growth industries, ruralareas will have a number of obstacles to overcome.Competition for such companies will be intense,coming from urban and other rural areas andincreasingly from other countries. Unlike routinemanufacturing industries that migrated to rural areasin search of lower production costs, today’s high-technology industries are attracted both by a highlyskilled workforce and communication networks to

other economic markets and information centers.These are precisely what rural areas lack.

With comparative disadvantages, it is clearthat one key component of a successfull developmentstrategy is upgrading the labor force. A secondcomponent is the improvement of the communica-tion infrastructures in rural areas.

Introduction

Although isolated and remote, rural communitiesdo not exist in a vacuum. They are linked to theworld surrounding them through a variety of trans-portation and communication networks and thecommodities that flow over them.

1Rural communi-

ties have, throughout American history, been shapedby advancements in transportation and communica-

tion technologies. By extending their ties andexpanding their markets, these technologies have

made rural communities more vulnerable to externaldevelopments and events.

2

Rural America continues to evolve in response toits changing environment. Today, rapid advances incommunication and information technologies arerestructuring and redefining rural communities andmarkets. In the past, these technologies brought ruralvillages and towns into a larger, national commu-nity; now they link communities on a worldwidebasis. As rural communities become even more

interdependent, their futures will be determined bytrends and developments far beyond their control.

Communication of James W. Carey , Time,

Communications: A Tribute to Harold James W. Carey (cd,), Communication Essays on Media and Society MA:Hyman, 1989).



Chapter 2 The Challenge for Rural America q 37



Chapter 2—The Challenge for Rural America q 37

Figure 2-l—Number of Farms and Farm Workers

6

4

2

0

/lillions of farms

1950 1960 1970 1980 1986

10

8

6

4

2

0

of workers

1950 1955 1960 1965 1970 1975 1980

SOURCE: Dorm Reimund and Mindy Petrulis, “Performance of the Agricultural Sector.” David L. Brown and Kenneth L. EconomicProspects Future DC: U.S. Department of Agriculture, 1988), pp. 81,891 “

Figure 2-2-Census Regions of the United States

!

I

SOURCE: U.S. Bureau of the Census, Census of and (Washington, DC: U.S. GovernmentPrinting Office, 1982), p. 52.



Photo credit: Post Wolcott

A sign along the road points the way to the telephone in Great Falls, MT, September 1941.

Many farmers suffered as a result. Fast growth inrural regions, resulting in part from easy credit

extended by Eastern financial institutions, left farm-ers overextended. Especially in the semi-arid Plains,farm communities experienced hardship due todrought, low commodity prices, high freight costs,and high interest rates.

21Moreover, in this new

commercial environment, farmers soon found them-selves competing with one another for the first time.Failure in this competition often entailed a loss of

social status, with many farm owners and operatorsbecoming tenant farmers or hired laborers. While the

income level of some farming families increased, sotoo did the income disparities within the agriculturalsector as a whole.

22Under such circumstances,

many displaced rural Americans gave up fanningand migrated to urban areas. At the same time, theproportion of the workforce employed in the agricul-tural sector fell from 72 percent in 1820 to 33 percentin 1910.23

of rides to availableand easy credit to those who would settle on farms and along their routes. During a period of post-Civil War prosperity, eastern had been eagerto loan money using farm land as collateral. With credit available, farmers purchased “improvements,” animals, and implements. Many newsettlers also bought land speculatively as values appreciated. Don F. “A History of Rural Economic Development andPolicy,” contractor report prepared for the of May 1990, p. 11.

of the Census, Population: 1988

1989).



13

11

9

7

5

Figure 2-5-Real Per-Capita Income

Thousands of dollars

__ , ’

I I I 1 I I I I

65 70 75 80 84Year

SOURCE: U.S. Department of Commerce, Bureau of Economic Analysis.

was $5,115 (in 1987 dollars). While wages had

increased in both nonmetropolitan and metropolitanareas between 1982 and 1987, they increased less innonmetropolitan areas, causing the early gap toincrease to $5,666 in 1987 (in 1987 dollars).

%

Per-capita income, which takes into account em-ployment, wages, and population size, reflects thesame discrepancy. Between 1985 and 1987, nonmet-ropolitan per-capita income was just over 72 percentof metropolitan income. Per-capita income statistics

also suggest that the most rural areas are the worstoff. Of those nonmetropolitan counties exhibitingpersistent poverty, 6 percent were towns of 2,500residents or fewer. These counties comprise 35percent of all nonmetropolitan counties

47(see figure

2-5).

levels of educational attainment in rural areas arealso lower than in urban areas. In 1980, the median

years of education completed by metropolitan resi-dents was 12.6, while the same figure was only 12.3for nonmetropolitan residents. The high schooldropout rate was also higher (16.9 percent in ruralareas as compared to 15 percent in urban areas),while the college graduate rate was lower (9.2percent as compared to 12.8 percent) .49 This gap in

1

0

-1

-2

-3

Figure 2-6-Net Nonmetropolitan Migration by

Education Level, 1985-86Percent

I

1

No high High Some College and

school school college beyond

SOURCE: Bureau of the Census, Current Population Survey, March 1986.

educational attainment is exacerbated by the out-migration of better educated people from nonmetro-politan areas. During 1985-86, nonmetropolitancounties experienced a net loss in college-educatedresidents

50(see figure 2-6).

Rural school districts also spend less on educationthan do urban districts. In the 1984-85 school year,

for example, urban States outspent rural States byalmost $800 per pupil.51

One reason for this discrep-

ancy is limited resources; as people leave rural areas,the local tax base shrinks, leaving less money tospend on public service for the people remaining.Rural areas may also have less incentive to invest ineducation, since graduating students are likely toleave home.

As in the case of other socioeconomic indicators,levels of education vary by region. With theexception of several predominantly white countiesin the Ozark region of Missouri, a few NativeAmerican counties in Arizona and New Mexico,three counties on the North Dakota/South Dakotaborder, and an Alaskan county, nonmetropolitan

Areas Lag Metro Earningsper Sara Mills (cd.), Rural Conditions and DC:spring 199’0), p. 12.

ROSS, op. cit., 43.

op. cit., footnote 28, p.

L. and Margaret A. Butler, Resource Base of Rural Economies,” op. cit., footnote 28, p. 165.

p. 170.

51Norman Reid, “Rural Areas in the 1990s: Prologue to the 21st paper presented at “Risky State Policy Reflect RuralDiversity,” the Policy and Planning Center Annual Louisville, KY, Dec. 4-5, 1988.




areas with the lowest level of education (the bottom10 percent in average years of education) lieexclusively in the Southern census region.

52In the

South, regions of particularly low educational attain-ment include the predominantly white AppalachianMountain region, much of the Mississippi Deltaregion, counties on the Virginia/North Carolinaborder, poor black areas of Georgia and Alabama,and Hispanic parts of southwestern Texas.

53

Key Trends Likely To AffectRural America

How well rural areas cope with their economicproblems depends not only on their present situationand resources, but also on future developments andevents. There are three major trends that will likelyaffect rural communities:

1.

2.

3.

the shift to an information-based economy andthe enhanced role of communication andinformation as a strategic weapon in business.the emergence of a global economy and hencethe growing need to compete on a worldwidebasis.a growing concern about the environment andthe environmental costs of economic develop-ment.

These trends are eroding the boundaries of ruralcommunities, making these communities more de-pendent on external events. Together, they define thecontext in which rural development choices will bemade.

The Shift to an Information-Based Economy

The increasing importance of information to the

economy is evident from the continued growth of theinformation sector, a trend that is occurring in allnations. It was to highlight this change that termssuch as the “information society” and the “infor-mation age’ were first employed.

54The information

sector now constitutes about 34 percent of the grossnational product, and accounts for approximately 41percent of the national labor force.

55

Figure 2-7-Structural Change and the Information

Economy

35

1

BasicHigh-tech

investmentindustrial

30] investment d

.\-/\ \ \ \/ \

\20- . \

15- \ \ \ -U10-

I I 1 I 1 I

1964 1968 1972 1976 1980 1984

55- Information‘ \

Production workers‘ .

workers \ \— /-- \

50- \ \ .——

=

\ \ ‘\

45- \

40 1 I I I 1 I I 1 1

1964 1968 1972 1976 1980 1984

SOURCE: Adapted from Information Management Review, vol. 1, No. 1, p.14, with permission of Aspen publishers, Inc., Copyrightsummer 1985.

The changing economic role of information isindicated by the rate and extent to which businesses

are deploying and using information technologies(see figure 2-7). Many are now applying computertechnology to all of their activities-horn recruitingto laying off workers, from ordering raw materials tomanufacturing products, from analyzing markets toperforming strategic planning, and from inventingnew technologies to designing applications and newproducts and services. These technologies can be

op. cit., footnote

was one of the to note these changes the information in his pioneering now a classic, entitled The Production and of Knowledge in the United States NJ: Princeton University 1%2).

The in the UnitedStates: NJ:

1986). This volume updates the work done by Fritz




The customers of the South Central Rural Telephone Cooperative in Glasgow, KY, are greeted

with this instructive sign on how to connect their own telephones.

agricultural output has increased in absolute terms,its share of total output continues to decline world-

wide. In developed countries, the share of agricul-ture in gross domestic product fell from 5.5 percentin 1965 to less than half of that by 1986. Dramaticshifts in the importance of agriculture have alsotaken place in the developing countries, particularlythose in Asia. Between 1965 and 1986, for example,the agricultural share of all developing countriestaken together fell from 28.4 to 15 percent. The shareof the developing countries in Asia dropped from

38.0 to 17.8 percent.

The decline in agriculture has freed up resourcesfor other kinds of economic activity. In developingcountries, there has been a shift to all other sectors .73Of particular concern for rural areas has been theoutstanding rate of growth in manufacturing activi-ties achieved by the developing economies of thePacific, such as the Republic of Korea, Hong Kong,

and Malaysia. Here, growth in manufacturing output

averaged over 10 percent between 1965 and 1986.This shift has been accompanied, moreover, by an

improvement in their trade positions. By 1987, all of the developing countries, collectively, accumulateda positive trade balance totaling over $53 billion.Rural areas in the United States, the developingcountries’ major competitors, appear to be the losers.

Other evidence supports this conclusion. Accord-ing to the United States Department of Agriculture,rural areas in the United States lost 11,000 jobs

between 1975 and 1982 due to imports. All in all,201 rural counties experienced severe unemploy-ment, having lost more than 10 percent of theirmanufacturing jobs. Some industries, and hencesome regions, were more sensitive to imports thanothers. The sharpest decline was in the textile andapparel industries. These labor intensive, low-wageindustries use simple production processes andrequire only modest labor skills so they are espe-

cially vulnerable to competition from less developed

1%5 to for the of output originating in the industrial, construction and servicein percentage terms from 23.3 to 30.6; from 16.9 to 20.7; and 42.8 to 48.7. Larry contractor report prepared for the of Assessment, Spring 1990.


Box 2-A—Forces Underlying The Global Box 2-B—New Forms of Global Competition



Economy

qThe growing similarity of countries, with respectto tastes as well as to infrastructure, distributionchannels, and marketing approaches.

qThe emergence of a global capital market aswitnessed by large flows of funds betweencountries.

. Declining tariff barriers and the establishment of regional trading agreements.

. Shifting opportunities for competitive advantagedue to technology restructuring.

qThe integrating role of advanced information andcommunication technologies.

Slow and uneven world economic growth thathas fanned the flames of international competi-tiveness.

. The emergence of new global competitors, prin-cipally from East Asia.

SOURCE: Michael E. Porter (cd.), Competition in Global Industries (Boston, MA: Harvard Business SchoolPress, 1986), p. 405.

- .in urban areas did not increase due to imports.

74

This heightened competition is reinforced by theemergence of a global economy (see box 2-A).Patterns of international trade now primarily reflectpatterns of international production. And specializa-

tion takes place on the basis of parts and specialcomponents, rather than on the exchange of finishedproducts. Today, for example, Japan provides ap-proximately 40 percent of U.S. component parts inelectronics and automobiles.

75

In this global economy, the multinational corpora-tion is becoming the norm. And, whereas in the pastmultinational corporations tried to exploit compara-

tive advantage by producing or selling in a singlecountry, today they seek more the advantage to begained by integrating all their activities on aworldwide basis76 (see box 2-B). In such an environ-ment, production, just like capital, can be movedfrom place to place throughout the world.

The operation of this new international division

of labor can best be illustrated by the processes used(initially) by Japanese consumer electronics firms.The first stage of production, involving the concep-tion, research and development of new products,requires highly trained and specialized technicalpersonnel of the type residing in Japan. Thislabor-intensive, initial stage is carried out domesti-cally. The second stage is more capital intensive,but requires highly skilled and specialized labor toproduce very sophisticated and highly technicalelectronic components. This phase is typicallycarried out in flexible, special-purpose plants athome. The third and final stage is again laborintensive, but requires a different kind of labor fromthat utilized in the first two stages. It is basically anassembly process, designed to be simple, andrequiring a disciplined, but not exceptionally skill-ful labor force.

SOURCE: For further discussion see, Nigel Grimwade, Interna-

tional Trade (hmdon: Rout.ledge, 1989).

counties. In contrast to rural areas, unemployment If rural communities are to survive, they too mustbe globally oriented. The global economy couldharm rural economies, if rural businesses (or busi-nesses that might otherwise have located in ruralareas) export jobs and capital to other parts of theworld. On the other hand, if they create the rightconditions-such as an educated workforce-ruralcommunities might attract foreign businesses andcapital to their communities. With access to a muchlarger and more diverse market, rural communitieswill also be able to produce on a small scale for nichemarkets (see box 2-C). To identify new markets andto sell worldwide, rural communities must haveupgraded communication infrastructures.

A Growing Concern About the Environment,

and the Environmental Tradeoffs in Economic Development

Environmental concerns about the potentiallynegative impacts of growth can be traced back to theearly sixties. Since that time, the public has become

TdHowever, hth the sectoral composition and regio~ location chang~ with “low-tech” industries in the North-t ~d Midwest los@employmul~ while “high-tech” industries in the South and West (and Vermont) offset those losses withincreased employment. Metropolitan reas inCalifo* ‘I&ma, and Florida gained over three-quartm of the new jobs. Ibid.

75A J=k B~ has pointedou t specialization has also taken place”. . . hased on different product characteristics; mass consumption versus highfashiom or low quality versus high quality, or generic versus trademarked goods.”Jack N. B e - In&strial Policies: International Restructun”ng

and Transnationals (hxingtoq MA: Lexington Books, 1984), p. 72.

76Mic~el E. po~er (~.), competition in GZohlI~~”es (BOStO~ MA: -tid BUS~HS SChool ~ss, 1986)) P. 45 .


Box 2-C—Maine’s Sea Urchin Industry



Sea urchin roe is a prized delicacy in Japan served on special occasions and holidays, and is found all over theworld-Chile, Alaska, California, North Korea, South Korea, and the Soviet Union. Until recently the sea urchinoff the coast of Maine was regarded by lobstermen as a pest that scavanged the bait from lobster pots. Within thelast few years, though, sea urchin has been discovered as a valuable resource, and a new industry has been born inMaine. Now merchants, lobstermen, and divers along the coast are claiming a portion of an industry that has becomeestimated at $100 million intemationally.

l

As few as 6 years ago, there were only two divers harvesting sea urchins in the State, according to LloydCovens, one of those two pioneers. Six years later, after Mr. Covens convinced a few Japanese merchants to takea risk on Maine’s product,

2Maine has become an important source of uni, as the sea urchin’s roe is called in Japan.

Last year, 74 merchants harvested an estimated 8.7 million pounds, worth about $3.5 million.3This year, about 10

million pounds of sea urchin will be harvested, of which about half will be by Lloyd Covens’ Portland-basedcompany, Urchin Merchant. Urchin Merchant, which employs about 300 divers and fishermen, is the largest suchfirm in the area, with an estimated payroll of $3 million.

4

The rise of this industry is greatly facilitated by transportation and communications. Virtually all of it isshipped to Japan (the roe that is consumed in Japanese restaurants in America comes from California), and becausethe urchin’s roe must be delivered while it is still alive, it requires fast and reliable communication andtransportation. In addition, the market for uni is very volatile, fluctuating greatly in such events as the death of astatesman or a natural disaster. Merchants, therefore, must be in constant contact with their customers in Japan.

In order to keep Urchin Merchant competitive in the international market and ahead of his regional rivals, Mr.

Covens keeps a computer database on each of the reefs off the Atlantic coast from Gloucester, MA, up into Canada.He explains that each reef’s family of urchin is be ready for harvesting at different times. By keeping this informationon a computer, he is able to direct his fishermen and divers to the optimal locations for harvesting, and thus ensurethe highest quality of product for his customers.

A second factor which gives Covens an edge is that he uses his computer to gather weather data in order totrack and predict the weather, which plays an important part in the harvesting of urchin. Success depends on theability to accurately anticipate the amount and the timeframe for delivering the product. The roe must be deliveredto Japan still alive and thus cannot be stored. (The roe is sent to be processed in Japan within hours after beingremoved from the ocean. After being processed, it will remain fresh for as long as a week.

5) His ability to compute

and analyze weather patterns gives him a distinct advantage over his smaller counterparts who do not have such

capabilities.The affect of this new source of commerce is a tremendous boon to Maine. Many lobster fishermen are out

of work once the demand for lobster wanes during the winter months. Many collect unemployment compensationor are forced to take up other menial jobs in fisheries, according to Covens. The rise of the sea urchin industry,though, provides a well-paying alternative for the lobstermen in the area in which they are skilled-operating theirboats and navigating the ocean. Maine’s sea urchin season, which runs from October to April, compliments Japan’sseason, which generally lasts through the summer months.

The harvesting of the sea urchin also requires high-skilled divers who pick the urchins off reefs along the coast.Divers generally earn between $600 to $1,200 a week, and up to as much as $2,500.

6Covens estimates that the

industry supports as many as 1,000 divers. Marine supply stores and dive shops, which in the past closed downduring the winter, also benefit from the robust and growing trade. Covens points out that whatever measure thisindustry has on the trade deficit-even if it is humble-is not nearly as important as the psychological effect of beingable to employ hundreds of Maine residents in well-paying jobs.

l~m Me- “Scorned at Home, Maine Sea Urchin Is a Star in Japan,” New York Times, Oct. 3, 1990, p. Cl.

Zpmsoti correspondence with Lloyd Clovens, Jan. 3, 1991.

3Joh Laidler, “For -e’s Urcti Industry, a Sometimes Prickly Roe tO Hoe,” The Washington Post, Jan. 4, 1990, p. A3.4pao~ ~m=pndence tifi Lloyd Clovens, Jan. 3, 1991.

5Dem ~em ~~scom~ at Home, ti e s= Urcti ~ a Sm in Jap~” New yor~ Tins, wt. 3, 1990, p. Cl.61bid.




Box 2-D—Lake Cumberland, Kentucky

Th d i f U i U d i J t KY h k d t itti



The proposed expansion of Union Underwear in Jamestown, KY, has sparked a controversy pitting

environmentalists and recreationalists against local developers and residents who depend on the company’s $45million annual payroll. The company proposes to construct a pipeline to divert treated wastewater-used in theprocess of dying fabnc—from Lily Creek directly into Lake Cumberland. Although the project potentially posesenvironmental harm, the town of Jamestown and the State find themselves in a bind. If opposition becomes too great,Union has stated its intention to move part or all of its operation to North Carolina.

For its part, Union Underwear sees the pipeline as a solution to environmental concerns: rather than emptyingthe wastewater into the smaller, but more convenient Lily Creek, the company would construct a pipeline that wouldcarry the wastewater into the larger body of water, Lake Cumberland, where the concentration of chloride-the saltused to bind color to the fabric used for Union’s undergarments—would be 250 parts per million, well below thestandards established to protect the Lake’s aquatic life.

Conservationists and local fishers fear that despite the regulatory guidelines to limit the concentrations of salt,copper, lead, arsenic, and other metals in Lake Cumberland, the government can actually do very little to protectthe environment once Union starts emptying the effluent. Environmentalists raise the issue of the cumulative effectsof the effluent from Union Underwear, as well as the wastewater that reaches Lake Cumberland from Jamestownand 30 other municipalities. They contend that overtime, Lake Cumberland will face the same consequences as didthe Great Lakes when they became industrial dumping grounds.

Union Underwear, its workers, and many in the community of Jamestown who depend on Union either directlyor indirectly for their livelihoods, view the arguments of the environmentalists-who come mostly from outsidethe community to enjoy the natural beauty and recreational opportunities at the Lake-with suspicion and some

resentment. They contend that Union’s presence is critical to the economic survival of Jamestown.

SOURCE: Bob llil~ “The Cumberland Flap,” The CourierJourna lMagazine, May 13, 1990, p. 4.

54 q Rural America at the Crossroads: Networking for the Future.- . .

Box 2-E—Development v. the Environment

Many rural communities increasingly depend on tourism to produce much-needed local income. As the



y g y p penvironmental movement gains momentum and legitimacy, however, conflicts over how such development willeffect an area’s environment-its resources, its people, and its history—are a growing impediment to suchdevelopment.

The conflict over the environment versus the economy is particularly complicated in Washington, where thebattle lines are already clearly, and often fiercely, drawn with regard to the issue of logging the State’s rich forests.As another manifestation of this conflict, the development of the Early Winters Resort in the Methow Valley, onthe other side of the Cascade Mountains from Seattle, has aroused considerable friction in the State for the pastseveral years. The contested development includes plans for a four season destination resort facility complete witha ski mountain, ranches, residences, golf courses, and a village. It typifies the tension between developers along withthose for whom development promises jobs, on the one hand, and environmentalists and those who caution that

development threatens to scar the area’s scenic splendor and rural quality and to interfere with traditional ways of life, on the other.

Tourist-based local development brings in new jobs and stimulates the local economy: Early Winters estimatesthat upon completion, the resort will generate 1,200 jobs in Okanogan County and add $80 million a year to thelocal economy and $100 million a year to the State’s economy. Before the project is even complete, the resort willproduce 200 to 300 full-time construction jobs a year, with a construction payroll of $11 million.

Because tourist-based development depends on the beauty and recreational offerings of the region, it is in theinterest of the developer to preserve the original character or charm. However, developers have often largelydisregarded the ecological problems associated with development. Wary of the changes that development mightbring and cautious about the environmental impacts of developing the Methow valley, citizen groups such as theMethow Valley Citizen’s Council and the Friends of the Methow Wiley have held up the project with administrativeproceedings. These groups contend that the development could harm the mule deer population, which is the largestin Washington State. Project opponents also fear that instream waterflows could be damaged by snowmakingactivities, sewage treatment, and increased domestic water uses.

Rather than dismissing the environmentalists concerns, the Early Winter’s development has undertakenextensive studies of the Valley’s environment and investigated ways for the development to exist as part of the localbeauty instead of exploiting the natural surroundings. For example, mule deer migration corridors and habitat areaswill be designed into the baseland resort. Water systems will be designed to store the spring run-off from wintersnows for irrigation and snowmaking purposes later in the year. Water used for sewage and indoor domestic uses

will be treated and returned to the aquifer. In addition, construction plans have been designed so the trees and naturallandscape will screen most buildings, roads, signs and other structures from view along Highway 20, which leadsinto the Wiley.

Compliments of: Early Winters Resort Associates

Artist’s rendition of Wilson Ranch, a part of the proposed plan.


Box 2-F—Retraining Miners in Appalachia

The Business and Industry Technical Assistance Center (BITAC) was formed as part of Kentucky’s Hazard



Community College in 1986 to redress high unemployment in the eight-county region due to the loss of jobs in thecoal industry. The Center’s main mission is to teach displaced miners and disadvantaged workers the entrepreneurialskills to start their own businesses, according to its director, Charley Simpson.

Hazard is located in t he heart of the Appalachian coal fields. Yet coal jobs, the mainstay of economic survivalfor generations of Eastern Kentuckians, have declined over 25 percent in 10 years. Real unemployment in somecounties approaches 50 percent.

1

BITAC was conceived of by Hazard Community College’s President, Dr. G. Edward Hughes, who has madeeconomic development a priority of the college, along with Professor Richard Crowe, whose Small BusinessInformation Center was BITAC’S predecessor. According to Dr. Hughes, “BITAC is an aggressive, activeeconomic and community development arm of the College. ”

2Its instructors-experienced local businessmen—

help others find niches that are not being served in the community or that are only being served at great distancesand start up and operate businesses to fill that demand in order to keep the dollars in the community.

The Center’s success is well known. With a staff of 6, including the director, a business liaison, and 2entrepreneurial instructors, the Center has helped to launch nearly 200 businesses since it was founded in 1986. Ithas won several awards in recognition of its positive impact on economic development in Appalachian Kentucky,including the American Association of Community and Junior Colleges ‘ “Putting America Back to Work Award. ”BITAC has been singled out by the National Association of Counties and by the U.S. Department of Commerce’sEconomic Development Admininstration. The State legislature is considering creating similar programs in the other14 community colleges and 6 regional State universities.

lNo ~S1o~ ~ @SSiblCJ~ COmni~, Technical, uti Junior College Jou~l, vol. ~. No . 4,Fe_mch IW .

21bid.

SOURCES: Fran Jeffries, “Heralded Hazard Training Program hunches Mountain of Entrepreneurs,” The Coun”er Journal, Imuisville, KY,Mar. 19, 1990. Steve BarorL “Through BI’E4C, College Creating Business, Jobs,” Communi-K, the University of Kentucky’sFaculty-Staff Newspaper, vol. 22, No. 11, Nov. 13, 1989. “No Mission Is Impossible” Community, Technical, andJunior College

Journul, vol. 60, No. 4, February/March 1990. Personal correspondence, Charley SimpsoP BITAC Coordinator, Jan. 8, 1991.



Chapter 3

Rural America and the Changing

Communication Infrastructure

ContentsPage



g

Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59The Impact of Communication Technologies on Rural Areas in the Past ... ... ..... . . . . . . . . 60

. . . . . . . .

Recent Regulatory, Marketplace, and Technological Developments Affecting the Evolutionof the Communication Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

Implications of a New Regulatory Framework for Rural America . . . . . . . . . . . . . . . 65The Rural Communication Infrastructure, . . . . . . .. . . ........

. . . . . . . . . . . . .. . . . . . . . . . . . . . . ..... .... 66

Information Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67Access and Transmission Technologies . . . . . . . . . . . . . . . . . . . .

q. . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . 68

Switching and Other Networking Technologies . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . 74

Implications and Opportunities for Rural Areas . . .. ........ . . . . . . . . . . . . . . . . . . . ......,.. 79Changing User Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

Boxes Box Page3-A. Computer-Aided Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 683-B.Fiberoptic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

3-C. Berks Community Television . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 713-D. .Digital Radio Service . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . ...... .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

3-E. VSAT Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 743-F. The Intelligent NetWork . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . ..,.... .... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

Figures Figures Page3-1.Evolution of VSAT Technolagy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 733-2. Regional Bell Operating Companies’ Centeral Offices: Present andProjected . . . . . ... ..,.. 753-3. Fast Packet Switching . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 763-4.NSFNET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . ....,.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +

783-5. LANs and MANs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 803-6. REA Central Office Switching Characteristics . . . . . . . . . . . . . . . . . . ., . ., .. ... ,,... .,., 813-7. Rural Area Network. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 833-8. Nucleus City for Nebrmh

. . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..,, 84

3-9. Sharing Schemes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86

Chapter 3

Rural America and the ChangingCommunication Infrastructure



Findings

If rural areas are not to experience further decline,measures will need to be taken to assure that theyhave access to the necessary infrastructure. Theprevious means and methods of providing access are

no longer viable. New ways need to be developed for

delivering communication services to rural areas.With divestiture and greater competition in thecommunication industry, urban models are no longervalid in rural areas. What are required are Rural AreaNetworks (RANs) that allow rural communities todevise new and creative ways of achieving econo-mies of scale and scope. Just as businesses are takingadvantage of advances in technology and the un-bundling of the network to develop local area

networks, wide area networks, and metropolitan areanetworks, rural areas will need to develop networksthat are customized to their own needs. To do so,they will need a far greater understanding of thepossibilities that new technologies afford, and of how these technologies can be used cooperatively byall rural citizens, allowing them to share in thebenefits of the information age.

IntroductionThe communication infrastructure that supports

the flow of communication in society is a criticalpart of the social structure. Its makeup and the rulesthat govern its use greatly affect all social interac-tion.

1The technical features of the infrastructure, for

example, determine the types of messages that canbe exchanged, the ease and speed of their delivery,

and their accuracy. Similarly, the infrastructure’sarchitecture-the way that facilities are arranged,distributed, and interconnected-determines who is

able to communicate, under what conditions, andhow effectively.

Rural areas characteristically have low populationdensities and are generally distant from urban areas.For them, one of the most critical aspects of thecommunication infrastructure is that related to the

costs associated with providing services to fewpeople over large areas. Thus, access in rural areasis likely to be affected most if technologicaladvances or regulatory decisions alter the distant-sensitive costs of providing these services. Becauseof this, innovative ways must be sought to shareresources and costs.

How rural communication systems are designedand the technologies that comprise them will alsoaffect rural areas. Communication technologies arenot equal. They give rise to different impacts. Somecommunication technologies and network architec-tures tend to reinforce community ties, whereasothers serve to undermine t h e m .

2

Rural communities must also maintain the qualityof their communication infrastructure (its capacity,reliability, interoperability) vis-a-vis communicat-

ion networks in urban areas. If modernization inrural areas lags behind that in urban areas and othercountries, rural residents may be unable to link toother critical communication facilities, such asprivate business networks. In order to interconnectefficiently, communication networks must be com-parable.

The form that the communication infrastructure

takes will be determined by decisions made in themarketplace and by government. These decisionsare greatly influenced by technological advances.

l~ e ~om~c~on ~m~c~e is ~~ ~eSt~ ~ and ~stains the ~ger soci~ system of which it is a part. FOr Cmnnunicatim is tie basis fOr

all human interaction and one of the means for establishing and organizing society. Communication is the process by which all social activity isconducte@ without it a society could not survive. It is the means by which group norms are establish~ expectations are voic~ individual roles areassigne~ change is enacted, social control is maintained, and activities are coordinated.

Communication also allows the individual to function in society. Only through interaction with others do individuals acquire the tools of languageand the shared sense of reality they need to establish intimate relations and to cooperate to achieve common goals. Through acts of communicatio~ peopledefine themselves-their sense of uniqueness as well as their self concepts-and negotiate and sustain a position and place for themselves in the world.

See for discussions, Martin Lawrence L&leur, Theories of Communication (New Yorlq NY: David McKay Co. Inc., 1970); LucianW. Pye (cd.),Commuru”cation andPoliticalDevelop~nt (Princeto~ NJ: Princeton University Fress, 1976); and 13udleyD.~ Jr., Communication in Interpersonal

Relations (Albany, NY: State University of New York Press, 1985).

~chaxdKielbowicz, “TheRole of Communication in Building Communities and Markets,” contractor report prepared for thefllce of lkchnologyAssessment, November 1987.

–59-




Rural experience with the telephone was notablydifferent, however. Although for businesses thetelephone continued to accentuate the effect of the

One should keep this lesson in mind in consider-ing how the new communication technologies willaffect the prospects of rural economic development,



telegraph, for individuals, it reinforced social inter-action at the local level. Between 1907 and 1927, theaverage person’s local point-to-point communication—letters, telegraphy, and telephony—increased pri-marily because of growing telephone use.

12This

reinforcement of social interaction at the local levelplayed “a part in the preservation and even in theenhancement of local patterns of attitude, habit andbehavior, and serve[d] as an inhibitor of the process

of cultural leveling which is so often assumed as anoutstanding and unopposed tendency of Americanlife.”

13

The value of telephony to rural communities andmarkets was reflected in penetration levels: someMidwestern States had more phones per-capita thanEastern States. The benefits of the telephone weremany: rural households used the phone to summondoctors, visit each other, obtain weather reports,learn about sales in towns, and follow prices foragricultural commodities in local or regional mar-kets.

14Not surprisingly, residents of rural areas

heralded the telephone’s potential to end theirisolation. While American Telephone and Telegraph(AT&T) promoted the development of the long-distance network, a number of towns and citieslaunched their own systems. Impatient with the slowdeployment of lines, some farmers even constructedcrude systems using barbed wire attached to fenceposts.

This brief look at how previous communicationtechnologies affected rural America reinforces thenotion that sorting out the effects of deploying newcommunication technologies is a complex andcomplicated business. Different technologies havedifferent impacts, depending on their capabilitiesand the circumstances under which they are de-ployed. While the telegraph generally underminedrural America’s independence and its influencevis-a-vis other areas, the telephone tended to rein-force it.

and in determining what, if anything, policymakersneed to do about their deployment. Without makingreference to the characteristics and capabilities of new technologies, or to the socioeconomic contextin which they are deployed, these technologies willlikely give rise to a number of unintended conse-quences. Thus, policymakers at all levels of govern-ment must try to determine the particular circum-stances under which rural areas-in all of their many

varieties-might gain a fair share of the economicbenefits afforded by information-age technologies.

The need to understand this issue is becomingincreasingly acute. Not only is the communicationinfrastructure being altered in response to technolog-ical advances and regulatory changes; the strategicvalue of having access to communication andinformation services is also greater than ever before.Because people living in rural areas are todayinextricably linked to external events and condi-tions, policymakers must consider how the evolu-tion of the communication infrastructure mightaffect them.

Recent Regulatory, Marketplace,and Technological Developments

Affecting the Evolution of theCommunication Infrastructure

The breakup of the Bell Telephone Systemradically altered the U.S. communication infrastruc-ture. This event has major consequences for ruralAmerica because it undermined the pricing structurethat traditionally supported rural communication

sevices. Divestiture also shifted a great deal of communication decisionmaking from the govern-ment policymaker to the business user. As a result,rural users’ needs and interests may not be takensufficiently into account. Rural users are not wellrepresented among large business users.

1% IW7, an avemge of 4.5 months elapsed between each toll telephone call but only 3 days between each local cdl. Malcoti Wiley ~d Stuart A.

Rice, Communication Agencies and Social Life (New Yorlq NY: McGrawHi~ 1935).131bid., pp. 153-154.

ld~ese ~fier ~. applic~ons Wme ~oW tie fewby which the telephone enbanced the competitive positionofs- Producers and m~~ . ‘ordiscussions of the impact of telephony on rural communities, see Wiley and Rice, op. cit., footnote 12; MichaelOlseQ “But It Won’t Milk the Cows:Farmers in Colfax County Debate the Merits of the ‘IHephone,” New Mm”co Historical Review, vol. 61, January 1986; and ItMel de Sola Pool,

Forecasting the Telephone: A Retrospective Technology Assessment of the Telephone (Norwo@ NJ: Ablex Publishing Co., 1983).




Shifting the burden of transaction costs to thecommunication-user raises questions of fairness. In

particular it is likely to disadvantage rural areas



particular, it is likely to disadvantage rural areas,where few businesses will be able to assume thesetransaction costs.

Aware of the problems that rural areas might facein a post-divestiture environment, the Federal andState governments took a number of actions toalleviate some of them. For example, within a yearof divestiture, the FCC initiated a targeted subsidy

program that waived all of the monthly $2 Federalsubscriber line charges if the State contributed atleast another $2 to reducing an eligible subscriber’smonthly bill. In addition, the Universal Service Fundwas established to reduce the impact of divestitureon high-cost subscribers. It allocated about $180million to high-cost areas in 1988. In April 1987, theFCC began the Link Up America program-usingfunds from charges on long-distance carriers to

contribute up to $30 towards installation fees. TheRural Electrification Administration also providesdirect subsidies to rural telephone companies in theform of low-interest loans. A number of States alsoprovide subsidies. For example, in 1983, Californiaadopted a Lifeline plan, according to which custom-ers with incomes below specified levels obtain a50 percent discount on basic local service plus otherbenefits.

31

While these measures may limit the negativeimpact of deregulation with respect to providingrural citizens ‘plain old telephone service,’ they areunlikely to deal with the problem of how newcapabilities are to be deployed throughout thenetwork in the future. To understand the magnitudeof this problem, one must look frost at the conditionof the rural communication infrastructure as it isevolving today.

The Rural Communication

Infrastructure

It is useful to subdivide information-age technol-ogy into information technologies, access and trans-

A sign marking the route of AT&T’s intercontinental cablethrough Bowling Green, KY.

mission technologies, and switching and networkingtechnologies. It is important to note, however, thatthe boundaries among them are not always clear cut,and are eroding in the face of technologicalchange.

32

Information technologies allow individuals tostore, process, and reorganize data into a more usefulform. Examples include computers, modems, fac-

simile machines, and answering machines. Accessand transmission technologies are the means bywhich individuals can transmit or receive informa-tion from other individuals or information systems.Some examples are cables, radio waves, and satel-lites. Network technologies are the means by whichtransmitted information can be managed, routed, and

Telephone Assistance Low-Income Households: A

CA: Rand 1988).

of it

increasingly to distinguish between the functions of switching and sion. See “The Evolution of Transmission Systemsfor the Next 10 Years,” Telecommunications, Aug. 10, 1987. Some noted by the author are statistical multiplexer, digitalsystems, concentrators, and switches with built-in optical interfaces such as DS3. See also, A.M.

Boundaries That Have Outlived Their Usefulness,”Telecommunications, June 1987, p. 8; and Richard Solomon, “Broadband Withthe Sum Is Always Greater Than the Parts,” Networks, vol. 5, No. 2, Sept. 5, 1987.




Box 3-A-Computer-Aided Design

Computer-aided design is becoming the norm forbusinesses to efficiently design and test products

and design and monitor the machines and factories

telephone; point-to-multipoint interconnection, as inthe case of radio and television; or multipoint-to-multipoint interconnection as in the case of bulletinboards, electronic mail systems, and local area

networks (LANs). These technologies can have



and design and monitor the machines and factoriesthat make and assemble the products. With the helpof computers, designs for buildings, machines,consumer products, semiconductor components,etc. are electronically simulated and tested. CAD/ CAM (computer-aided design/manufacturing) re-places the construction and testing of actual models.Because designs are stored in electronic form ratherthan on paper, they can be quickly and easilyupdated and transferred.

Integraph Corp. recently introduced a product,the CAD Conferencing Module, that permits peopleat as many as eight different locations to simultane-ously view and edit computerized blueprints anddesigns. Engineers and designers, for example, cansimultaneously and interactively work in real timeon a file with each other or with a client. Theelectronic blueprints are transmitted and loaded intoeach of the separate workstations so that they can be

called up during the networked conference to beviewed and edited. Modifications to the still-frameimage, such as zooming or highlighting features, byone person are registered at all the participatingworkstations. This conference arrangement expe-dites the design and engineering process by mini-mizing the encumbrance of mailing blueprints backand forth, and increasing the communication be-tween the firms’ various departments.

SOURCE: Charles Bruno, “Intergraph Ushers in CAD Confer-

encing ErA” Network World, Nov. 12, 1990, p. 37.

more user-friendly, the difficulties entailed in link-ing technologies and systems will likely continue todiscourage use.

Access and Transmission Technologies

Access and transmission technologies transportinformation among and between other users andnetworks. They may provide point~to-point inter-connection, as in the case of the telegraph and the

networks (LANs). These technologies can haveeither one-way or two-way capabilities.

Telephony

Telephony is by far the most important andubiquitous two-way medium for transmitting informa-tion. There are today, in the United States, over1,300 telephone companies and a total of 130million access lines. The top 25 companies account

for 90 percent of the access lines. The Bell telephonecompanies serve about 80 percent of the market withabout 50 percent of all central offices. The remainingcompanies are quite small by comparison.

A wide variety of new and more specializedservice providers have emerged since divestiture.For example, some providers, such as Telenet andTymnet, sell packet-switched data communicationservices .43 Other carriers specialize in high perform-ance, point-to-point T1 service.

44And others, such

as Teleport and Metropolitan Fiber Systems, providemetropolitan area networking (MAN) services. Manyprivate businesses have also taken advantage of theunbundling of the communication network and theavailability of a wide range of new, advancedproducts to develop their own communication sys-tems.

In rural areas, about one-half of all service isprovided by small independent telephone compa-nies, with the Bell operating companies (BOCs)providing 53 percent.

45Few, if any, Of the larger or

more specialized providers are trying to enter ordevelop rural markets. Given a highly competitive,post-divestiture environment, they are focusing theirefforts on the more lucrative business market,generally to be found in urban areas. The regional

Bell operating companies (RBOCs), for example,have been concentrating on the deployment of theirswitched multimegabit data service (SMDS)

46in an

effort to forestall bypass by alternative providers.

dsPacket-switching makes efficient use of a transms“ sion channel. It breaks messages up into small bundles, or packets, each of which carries withit its own address; then interleaves them on a channel, taking advantage of the “silences” present in the information strearq andf~y routes themthroughout the network to their destination where they are reassembled.

44T1 chits Owrateat 1.5Mmegabifi Wr second and consist of 64 kilobits persecondvoiceor daw plus aframing bit. For adetiption we , victo~A. Browq “T1 Networking and Open Systems,” Telecommunications, January 1989, p. 56.

45= Provid= fiv=~mt ~d f~cti data for over gOO @ telephone comp~es serving over 5 million customers in very thin markets. Thisdata is considered for the purposes of this report to be representative of “rural” subscribers.

*SMDS is a high-sp~ fast packet. switch~ service provided in a campus type arrangement SihMd Within a 5&tie mdius.



Chapter 3-Rural America and the Changing Communication Infrastructure . 71

to adopt fiber long before residential users, becausethey typically share network facilities among anumber of telephones. However, rural businesses

may be unable to drive demand because they aregenerally too small in size. To have such an impact,

Box 3-C—Berks Community Television

Berks Community Television (BCTV) was cre-

ated in 1977 as a nonprofit organization, supportedby the citizens of Berks County, PA, and its largest



g y pthey will need to pool their demand, either with otherbusinesses or other large users within a community.

Cable Television

Cable television is an important one-way commu-nication system serving rural areas. The CommunityAntenna Television Association (CATA) estimatesthat cable penetration (homes passed) in rural areasis higher than in urban and suburban areas [about 60]percent). However, while the actual subscription ratein nonmetropolitan counties may be higher than inmetropolitan counties, communities with fewer than3,000 residents had a subscription rate of only 46percent compared to 69 percent for more populousplaces in the same County.

60

Cable is valuable to rural households as a sourceof entertainment and access. Cable television can beaccessed using wire or satellite. In urban areas,access is almost exclusively through coaxial cableprovided by a cable company. In rural areas it isavailable primarily through coaxial cable, with10 percent of it provided by satellite. To gain access

via satellite, rural residents must buy a televisionreceive only (TVRO) satellite dish that costs be-tween $750 and $1,800.

61Ownership ranges from

6 percent in the open country to 11 percent in ruralmountain areas.

62

One-way communication systems, such as cableTV, are less important to rural businesses becausethey do not presently support the information

exchange required in most business communica-tions.63

They are, however, being used in the publicsector, especially in schools (see box 3-C).

y y gcity Reading (famous for the railroad to which itlent its name), to provide “to the community thebest possible educational and informational pro-grams. ” The programs are organized and producedby volunteers. Its programming is fed into the cablesystem and delivered as a regular subscriber chan-nel.

In contrast to larger regional or national formats,

BCTV uses television as a live, two-way, interac-tive medium that depends on audience participationand feedback. For example, BCTV, through a seriesof National Issues Forums raises relevant issues,such as the day-care dilemma and drug crisis, whilepermitting and encouraging home viewers and thestudio audience to actively take part in the discus-sion. In addition, community agencies, such as thechamber of commerce, county bar association, andhospitals and medical firms, use BCTV “to con-tinue their outreach, information, and referral serv-ices. ” Productions can be organized at two differentlocations and shown simultaneously on split screen.

SOURCE: Berks Community ‘Iklevisio~ Reading, PA.

Nonwireline Media

In remote areas, where the cost of providingwireline service is prohibitive, microwave, radio andsatellite technologies can be used to provide lessexpensive access to communication services. Withtechnological advances, these technologies provideservices that are increasingly comparable to wirelineservice.

Microwave has long been a mainstay in telecom-

munications network technology. Historically, itsprimary use was high-capacity, long-haul toll serv-

ice, and it will likely continue to be important in such

~ga op. cit., footnote 28, p. 57.

61 Joseph N. pelto~ “satelliteCommunication for Rural and Remote Appli~ons in the Unitd s~t~,” contractor report prepared for the Ofliceof Tkcbnology Assessment, December 1989, p. 13.

G~~rou@, op. cit., footnote 41, pp. 45-46.

Gs~e CO - cables used for CA~ tmnsmissions Cm h- t very wideband signals; this ac~ plus the fact that a majority of U.S. residences mpassed by CATV systems, has generated much interest iu the use of cable television technology to offer services beyond one+vay video progmmming,

includingtw~way switched voice and data. The attractiveness is clear: asidei-om the wide availability of CATV service, the cable medium is relativelyinexpensive, and electronic interface equipment for ubscrikr applications isalso inexpensive to design and produce.There are, however, a number of regulatory concerns surrounding the issue of CATV-based local exchange telephone service, and cable companies have been slow, if not reluctan~ tomove in these new directions. Dale llattiel~ “Information Age Technology and Rural Economic Development” contractor report prepared for theOffice of Technology Assessment, October 1989, p. 23.

72 . Rural America at the Crossroads: Networking for the Future

Box 3-D—Digital Radio Service

In the United States, the International Mobile Machine Corp. (IMM) has developed a wireless digital radio

service called Ultraphone, which is now being used to provide telephone access in a number of remote rural areas.As of the end of 1989, IMM had installed approximately 40 Ultraphone systems serving about 15,000, mainly rural,



.

L

customers.

A digital radio transceiver at the customer’s premises encodes the analog voice to digital format to betransmitted through the radio waves (rather than through the more traditional terrestrial copper or fiber-optic wires)to the Radio Carrier Station, where the signal is then routed to the central office switch and along the public-switchednetwork

Radio telephony is particularly advantageous for rural areas where the expense of extending wires to thecustomers—which may involve digging trenches, clearing rights of ways, or crossing difficult terrain-can becomeprohibitive. It is thus especially useful when extending service to only a few, widely dispersed customers. Anotherinherent advantage of wireless technology is that telephone companies have much greater flexibility in adding onadditional customers and reconfiguring their facilities than with conventional cable routes/kind lines.

Digital radio also has a number of advantages over analog radio:

. greater degree of security because of more complicated encoding schemes for the digital transmission,

. digital transmission is inherently better suited for handling data transmission,q greater ability to operate in the presence of interference,. higher capacity,. time division multiplexing conserves spectrum and reduces costs because less base-station hardware is

required to support a given subscriber population, and

. ultraphone is software-based and thus more open to further technological improvements.SOURCE: George M. CalhoU “Wireless Access and Rural Wlecommunications,” con@actor report prepared for the Ofllce of ‘Rdnology

Assessment 1990.

markets. Recent technological advances in micro- Like microwave, radio technology relies on thewave, as well as increases in the usable spectrum for electromagnetic spectrum and has long been used intelecommunications, have made it a popular tech- various forms for telecommunications and broad-

nology for high-capacity, short-haul applications. casting services. Its use in providing basic ruralMicrowave is used for both digital and analog service has only recently been approved by Federal

services. regulators, who must approve all private uses of thespectrum.

64This technology is sometimes referred

One of microwave’s advantages is its relativelylow construction costs for rural applications com-pared with other technologies. Unlike terrestrial

wireline technologies, it does not require placementof physical cable plant, usually the highest compo-nent of deployment costs. Rooftops, hills, andmountains can often provide an inexpensive base formicrowave towers. Unit costs of microwave serviceare also falling, as more high-powered systemsexpand the usable spectrum. Very small capacitysystems with only a handful of circuits are also nowavailable. One major disadvantage of microwave isthat it requires line-of-sight of the transmission path

and is subject to electromagnetic interference.

to as the “wireless loop,” and its immediateadvantages in terms of speed and ease of installationare clear since there is no requirement for placingphysical transmission plant. The term “radio” inthis case refers to certain frequencies assigned to the

service that are distinct from those assigned micro-wave toll service. As an over-the-air technology,radio service supports both analog and digitalapplications and has the same relative advantagesand disadvantages as microwave (see box 3-D).Unlike microwave, rural radio provides short-haultelecommunications, and requires different power,performance, transmission, and reception capabili-ties and devices. Digital radio systems capable of

carrying four DS3 lines-each with a capacity of

~D~~ents filed in FCC CC Docket #86-495 (BETRS) provide detailed information on this service.

Chapter 3-Rural America and the Changing Communication Infrastructure q 73

Figure 3-l—Evolution of VSAT Technology

First generation Second generation Third generationI I



Pre-1 980 1980 I 1983-84 1985 I 1987

The evolution of very small aperture terminal (VSAT) technology: three generations.

SOURCE: Art by permission of magazine.

45 megabits per second—are expected to be avail-

able in the early 1990s.

65

Clearly the most advantageous feature of radiotechnology is its low cost in rural service applica-tions. Unlike wireline service, its cost is based ontotal demand rather than on population density.Thus, whereas it can cost, on average, $10,000 persubscriber to provide access lines via copper wire,the average cost of digital radio is about $3,000 per

subscriber. According to present estimates, ruralradio service is now the most cost-effective optionfor serving about 900,000 remote subscribers whodo not have service at all, or whose service upgradesusing other technologies are not cost-effective.

66

The idea of using satellite systems to providelow-cost communication services to isolated areas isnot new.

67In the United States, the Alascom

Satellite operating through the Aurora satellitesystem has served to meet the communication,health, educational, and entertainment needs of thepeople of Alaska for two decades. In addition, over25 developing countries have leased capacity on theINTELSAT satellite system to meet their domesticcommunication needs. A number of countries—

including among them Brazil, India, Indonesia, and

Mexico-have deployed their own satellite systems.

Advances in satellite technology will lead to evengreater rural applications in the future. The develop-ment of very small aperture terminal (VSAT)technology has been particularly important in im-proving performance while reducing costs (seefigure 3-l). The mobile satellites being designednow for launch in the early 1990s will carry

sufficient power to enable the use of a large numberof small, mobile terminals on the ground.68

Portableunits will be self-contained and lightweight, capableof fitting on a company or family car. They willallow users to link up with private networks or thepublic telephone network to access a variety of services, including voice, data, facsimile transmis-sion, and computer-to-computer communications.

Many businesses are shifting from wireline toVSAT technology (see box 3-E). VSATs are particu-larly cost-effective when businesses need to commu-nicate with remote sites. Thus many major corpora-tions-e.g., Chrysler, Nissan, Toyota, K-Mart, ThriftyStores, and Frito-Lay-are using VSATs to developwide area networks (WANs). Hughes Network

Calhoun, “Digital Radio Technology and Rural Economic Development” contractor report prepared for the of TechnologyAssessment, October 1989.

a see Joseph “Satellite and Rural Economic Development,” contractor report prepared for the Office of Assessment, October 1989. See also, S.S. Kamal, “Advanced for Rural Applications, ” Communications,

October 1989, pp. 21-23.

“ ‘Third-Generation’ Technology Fuels Growth,” Telecommunications, September 1990, pp. 29-34.




Figure 3-3—Fast-Packet Switching (Hello Central)

In the fast-packet s y s t e m s , y o u d o n ’ t Fa x

have to ho ld the l ine open Data are



have to ho ld the l i ne open. Data areseparated into tiny packets, assigned machine

a sort of ZIP code and routedindividually via any number

I

Iof paths, then reassembled

at the receiving end.

Faxmachine

Personalcomputer

Modem

Telephone

Data PacketsLocal area

Inetwork

Video

n data -

SOURCE: Copyright 1990 by The New York Times Co. Reprinted by permission. l \

together with common channel signaling, the intelli-gent network allows network control functions to beseparated from network switching functions.

78This

capability permits the network to select the mostappropriate services and optimal routes, and tointroduce new value-added services via simplifiedand modularized software. Among the services thatthe intelligent network can provide are dynamic callrouting, call forwarding, call queuing, credit card

billing, reverse charging, control of calls based ondata held in a central database, wide area Centrex,and virtual private networks.

79A description of the

basic components comprising the intelligent net-work, and a discussion of how they are joined toprovide intelligent services, is provided in box 3-F.

Intelligent networking technologies are also beingused to create a wide variety of special purposecommunication networks. In the past, one telecom-munication network existed to provide universalservice to all users. This arrangement was quitesuitable, as users’ needs were very similar and theservices that could be offered were relatively lim-ited. Businesses, for example, used the telephone forvoice communication in much the same way as

households did.

Today, this is no longer the case.80

For manybusinesses, transmitting data now represents a moresignificant cost item than transmitting voice, andtheir data traffic is growing at a rate of 40 percent or

William “Multiplexing With Intelligence,’ February 1988, pp. 73-74 and79; see also E. “’he State of the Intelligent Art,” Telecommunications, February 1988, pp. 47,52, and 57.

op. cit., footnote 37, p.

pointed out: emergence of technological and operational alternatives undercut the economies of and scope once offeredby the centralized network. In the sharing a standardized solution was more acceptable to users because the consequential loss of choice was limitedand outweighed by the benefits of the of scale gained. As the significance of telecommunications grew, however, the costs of standardized solutions began to outweigh the benefits of economies of scale, providing the incentive nonpublic solutions. Furthermore, somebegan to employ a differentiation of telecommunication services as a business strategy to provide an advantage in their customer’s eye. Therefore they

sought a customized rather than a general communication solution.”Eli M. “The Future of the Public Network: From the Star toMatrix,’ March 1988, pp. 58-59, 65, and 90.


Box 3-F—The Intelligent Network

The intelligent network is comprised of four basic elements. These include:

a Service Control Point (SCP) which consists of a centralized database that uses algorithms and customer



. a Service Control Point (SCP), which consists of a centralized database that uses algorithms and customerinstructions to route messages;

a Common Channel Signaling System (CCS7) that provides out-of-band, packet-switched communicationsamong network elements;

. a Service Switching Point (SSP) that consists of local and tandem-switching nodes designed to carry outlow-level, high-volume fictions such as dial tone, announcements, and routing. The SSP performsfunctions as directed by the SCP; and

q an Operations Support System (0SS) that pro-vides for network planning, engineering, provision-ing, monitoring, maintenance, and repair.

How these elements relate to one another to provideservice can be seen in the figure below.

To envision how this network operates, consider whathappens with an 800 call. When an 800 number call isgenerated, it is sent to the SSP, which identifies its as an800 call. At this point, the SSP sends the number, togetherwith other information about the calling party, to the SCP

via the CCS7 signaling network and asks for furtherinstructions about how to treat the call. The SCP searchesits database, translates the received 800 number into astandard telephone number, and returns this telephone SSP: Service Switching Point

number together with a routing instruction to the SSP, CCS7: Common-Channel Signaling No. 7

which then routes the call to its correct destination. SCP: Service Control Point

0SS: Operations-Support Systems

SOURCE: Paul Bloom and Patrick Miller, “Intelligent Network@, ” SOURCE: Art reproduced by permission of TelecommunicstionsTelecommunications, June 1987, p. 58. magazine.

more. In addition, different kinds of businesses Specialized networking has also proliferated withinincreasingly have different kinds of business needs.Thus, businesses have been quick to take advantage

of the unbundling of the communication infrastruc-

ture and the availability of a wide range of new,advanced products to develop their own customizedcommunication systems. Banks and other financialinstitutions have developed specialized communica-

tion services such as the Society for WorldwideInterband Financial Telecommunications (SWIFT),while manufacturers have developed their own

communication protocols, such as manufacturingautomation protocol (MAP). Even ‘system integra-tors are beginning to differentiate themselves byproviding specialized networking services.

81

the scientific community. The first computer-basedmessage system, ARPANET, was set up in 1968 inthe Department of Defense by the Defense Ad-vanced Research Project (DARPA) to provide com-munication between computer terminals and hostcomputers (see figure 3-4).

82Today, members of the

education and scientific communities are pressing

for the development of a more advanced communi-cation network—the National Research EducationNetwork (NREN). Designed to link supercomputercenters, this network would operate at very highspeeds, in the gigabit range.

83

This kind of networking offers a number of benefits. At a minimum it can provide electronic

of System Communication Week, Aug. 28, 1989, pp.

Packet. technology developed by other agencies developed specialized networks

communities and Meanwhile, other research-oriented networks, such as BITNET and were developed in parallelby academic and industry users who, not being grantees or contractors of Federal agencies, were not served by the agency-sponsored network. John S.

The Matrix: Computer Networks And Systems (Bedford, MA: Digital Press, 1990).

issues raised by “Networking the Nation: The National andEducation expected publication date, summer 1991.


Figure 3-4--NSFNET



BARRNet

T1 beckbone network

— T3 n e t w o r k

is the National Foundation’s high-speed network to mid-level regionalcomputer networks that support scientific research facilities throughout the By the end of 1991,all of the backbone sites will be to the T3 network.

SOURCE: Merit Network, Inc.

mail and news services. Networks can also provideremote processing, allowing any computer in thenetwork to access computer programs stored on anyother host. Network users can also gain remote

access to supercomputers to do advanced graphics,chip design (and remote fabrication), and scientificor economic computer simulation, and can accessremote databases. In addition, they can use thenetwork to collaborate with others or to participatein computer and/or video conferences. Perhaps themost important attribute of networks is that they cansort out people with similar interests and bring themtogether. Like the telephone and unlike the tele-

graph, they tend to reinforce community ties.Local area networks (LANs), wide area networks

(WANs), and-more recently-metropolitan areanetworks (MANs) are the building blocks of com-munication networks. LANs are relatively limited intheir reach. They generally cover the premises of abuilding or a campus. Within the business commu-nity, the number of LANs deployed has recentlygrown by leaps and bounds. Predictions are that, in

1992, the number of LANs shipped will reach5,228,945, and more than half of all PCs will beconnected by LANs.

WANs provide long-haul connectivity amongseparate networks located in different geographic

areas. Many businesses are using WANs to extendand restructure their operations on a national orworldwide basis, while at the same time gaining theeconomies of scale and scope that can be achieved

by large-scale, shared networks.

WANs make use of a wide variety of transmissionmedia, which can be provided on a leased or dial-upbasis. WANs can also be privately owned. Recently,many businesses have chosen satellite networks,taking advantage of the development of relativelylow-cost small aperture terminals to link theirvarious offices to their headquarters facilities. Gen-

eral Motors is planning to build the largest network of this kind. Scheduled for operation in 1992, it willconsist of 9,700 very small aperture terminals(VSATs) that will connect GM locations nation-wide.

Still in the field testing stage, MANs provideswitched data networking services at very highspeeds (40 to 50 megabits per second) within a

geographic area of at least 50 miles. MANs connectLANs to LANs as well as LANs to WANs. Asdesigned by Bellcore, MANs will provide switchedmultimegabit data services (SMDS), which willallow users to set up a virtual (or logical) privatenetwork, and give them access to individual services


on demand. These networks are optimally designedfor shared usage (see figure 3-5).

To take advantage of advances in networking,

rural areas will-at the very least—need digitalswitches.84

Unlike loop technologies, the cost of switching facilities is shared, so digital switching is

used more efficiently. For example, the developmentof remote digital switching modules (called TransferSwitching Points in the context of the IntelligentNetwork Architecture) now permits carriers to use

fewer expensive host switches to provide advancedintelligent services such as access to 800 numberdatabases The cost savings can be substantial One



g g glikely to be available in rural areas long before fibertechnology. According to one estimate, the total costof upgrading rural subscribers to digital centraloffice switches is about $2.5 billion, or $250 persubscriber.

85This is not beyond the financing capa-

bility of the average rural telephone company, even

at existing subscriber rate levels. Current REAcompany total annual cash flow is over $1 billion,and construction spending is also estimated at about$1 billion

86.

Figure 3-6 gives switching plant characteristicsfor REA companies. Interestingly, REA companies—while serving proportionately more of their sub-scribers with old step-by-step mechanical switching

—have a higher proportion of linestechnologies

served with advanced digital technology (45 per-cent) compared to Bell companies (30 percent) andthe 10 largest independents (61 percent). This hasimportant implications for network upgrade deci-sions. On average, Step-by-Step switches are mucholder than the stored program control IAESS andcross-bar electromechanical switches that servemany Bell access lines and therefore closer toeconomic retirement. Thus, small companies may

have an advantage over large telephone companieswho must consider the financial effects of earlyretirements of their embedded base of electrome-chanical analog and electromechanical switchingplant.

The per-subscriber costs of digital switching arealso likely to fall as the technology advances and is

databases. The cost savings can be substantial. Onehost switch, such as the AT&T 5ESS, costs approxi-mately $510 million, whereas a remote switchingmodule will cost between $600,000 to $700,000.

Implications and Opportunities for Rural Areas

Technology Requirements and the Pace of Technology Deployment

In an information-based economy, communica-tion needs are relative. In evaluating a rural commu-nity’s technological requirements, therefore, it isnecessary to look not only at a community’s own

economic activities, but also at its economic aspira-tions and, increasingly, at the activities of itscompetitors, whether they be businesses in urbanareas or in other countries.

Rural areas will be unable to compete if the paceof technology deployment lags greatly behind that inother areas. All indicators suggest, however, that thiswill be the case. The history of the telephone, for

one, points to such an outcome: first came majortrunks linking Northeastern cities, followed by linesto smaller towns in their immediate hinterlands, thenconnections to major Midwestern cities, and soforth-a sequence of connecting ever lower ordercities. Thus, although patented in 1876, it took 12years for the telephone to reach Chicago, andtranscontinental service was not inaugurated until

~Di@~ switches can provide users with~ my Of c~l- management capabilities including all waiting, call forwarding, and three-way calling, aswell as newer services including caller identifkatio~ cdl trace, distinctive ring, call block call rem and preferred call forwarding. Analog switchescan be upgraded to perform some, but not all, of the callmanagement functions that are possible with digital switches.

It should be noted that both analog and digital switches can provide touch-tone service. buch-tone service enables the caller to conduct telephonet ransac t ions w i th automated answering systems. These transactions rauge from banking to placing calls with a calling card to obtaining prerecordedtax information from the Internal Revenue Service.

85EgW op. ci~, foo~ote 28. ~s es~te ~mes 20 million rural subscribers with half already served by digiti cen~ offiw switches. A ~nt

study of switching upgrade costs for rural loops for U.S. West estimated average per subscriber digital upgrades at $300 to $500 per subscriber in oneState and $180 in another. This report also suggests that a reasonable near-term target is as low as $150 per subscriber. See Julio olina and E. Reed‘Runquist “Rural Network Modernization in U.S. West” draft, July 251989.

Wga op. cit., footnote 28, pp. 40-41.




Figure 3-6-REA Central Office Switching Characteristics

Average exchange size distribution

Frequency (borrowers)

180

4,000Average number of lines per central office



150

120

90

60

30

0 4 00 80 0 1 ,2 00 1, 60 0 2 ,0 00 2, 40 0 2 ,8 00

Average exchange size

3,000

2,000

1,000

0Common Step-by- Digital Other Total

control step

The figure on the left shows the distribution of the exchange sizes of the 900 independent telephone companies that borrow from REA.Nearly one-third of these providers operates small exchanges, serving between 200 and 600 subscribers. The figure on the right showsthe average number of lines that each type of central office supports for the REA borrowers.

SOURCE: Rural Electrification Administration.

There is considerable disagreement as to whether

such a deployment schedule can meet the needs of rural areas. For example, many regulators andvendors do not view rural needs in relative terms.

Instead, they look at needs in the present, evaluatingthem on an individual user, service-by-service basis.Accordingly, they contend that the needs of most

rural businesses can be met given the evolutionaldeployment of technology. From their point of view,

efforts to modernize the infrastructure should focuson immediate problems such as assuring that allparties have access to single-party lines, digital

switching facilities, and touch-tone dialing.

There are others, however, who believe this

assessment to be overly conservative. Citing thegrowing capacity requirements needed to supportfunctions such as office automation with multifunc-tion workstations, computer/aided design/com-puter aided manufacturing (CAD/CAM), and high-speed distributed data processing, they predict that

rural businesses, if they are to be competitive, will

need broadband capabilities within a much shorter

timeframe.

This debate is not likely to be easily resolved. At

present, there is not even a consensus about whatcapabilities large business users will need, and

within what timeframe.90 Trade-offs can be madebetween software capabilities and transmission ca-pabilities. For example, with advances in compres-

sion technology less transmission capacity will berequired. However, if new applications multiply

faster than the advances in compression technolo-gies (as might be the case, for example, with

supercomputing and multimedia technologies) band-

width requirements will be greater. Past estimates of future needs have been overly conservative, andvendors have been slow to anticipate future demand.

Up until now at least, users have generally foundways to make full use of the bandwidth available tothem.

91

Wor a discussion of the debate about broadbant see Martin C.J. Eltcq “Integrated Broadband Networks: Balancing the Risks,” COhmbiaUniversity, Center for lkleemnmunicationa, 1989.

91As ind~try observer~m Vdovic has noted,“Current applications should not Mused as a yardstick for future bandwidth requirements. Oth@se,it’s another variation of the ‘chick~egg’ question” the tmnsnus“ sion people won’t build the capacity unless the applications are thereto justify henL

and the applications people won’t develop new ones because the transmission capacity isn’t available. The real truth of the -called bandwidth argumentlies in something called Deboever’s Axiom: ‘Data will expand to fdl the bandwidth available’.” ‘lbm Vtlovic, “T1, T3, and tie Nev=End@Bandwidth ArgumenC” Telecommun ications, December 1988, p. 6.

82 q Rural America at the Crossroads: Networkng for the Future

New Ways of Configuring Rural Networks

Together, the trends towards unbundling anddecentralized intelligence will allow rural communi-

ties to have greater choice about, and control over,the configuration of their communication infrastruc-ture. This is an important advantage since communi-

ti t h l i d fi iti 92 B lti

pay for service. With the deployment of advanceddigital switches and fiber optics, for example,communication providers will be able to integrateservices, transmitting two-way voice, data, and

video on a joint basis. This prospect has particularrelevance in rural areas, where the cost of providingany one of these services alone can be prohibitive.

%



cation technologies define communities .92 By multi-plying and intensifying contacts among people,some communication technologies tend to reinforcelocal, geographically based communities while oth-ers do not.

93

Having more choice and control over their com-munication infrastructures is even more important asrural communities seek to use technology to com-pete more effectively with urban areas for businessesand jobs. It is not enough to improve the overallperformance/cost ratio of communication technolo-gies. Since it takes longer to deploy technology inrural than in urban areas, technological advancesthat affect everyone equally are likely to make ruralareas worse off. What rural areas need to actuallyimprove their situations are technologies or techni-cal capabilities that can reduce the urban advantage.Thus, they will need to think about their communica-tion systems less in terms of urban models and morewith reference to the specific set of conditions foundin rural areas.

One way of reducing the urban advantage is todeploy technologies, such as digital radio and

satellite, where costs are relatively insensitive todistance. Another is to finding new ways to achieveeconomies of scale and scope. The trends towardsthe convergence of media and developments innetworking provide rural communities a number of new opportunities in this regard.

The convergence of communication functions,media, and products and services will permit com-

munication providers to spread their costs morewidely, and thus to reduce the price that users must

New economies can also be generated throughnetworking. As noted above, networking allowslike-minded people not only to communicate withone another, but also to share common resources. Inso doing, they can benefit from significant econo-

mies of scale and scope. This kind of networkingcould be especially fruitful in rural settings, wherepeople and facilities are few and far between.

Just as businesses are taking advantages of thesedevelopments to create their own customized net-works, so too might rural communities. However,whereas many business networks are establishedalong functional lines, Rural Area Networks (RANs)would be configured, instead, around the geographic

boundaries and needs of an entire community.Designed on the basis of a ring, or campus type,architecture, a RAN would link up as many userswithin a community as possible-including amongthem businesses, educational institutions, healthproviders, and local government offices (see figure3-7). Rural Area Networks could be linked state-wide, perhaps by piggybacking on the State govern-ment and/or the State educational network.

Rural Area Networks have a number of advan-tages:

q

q

RANs would foster the deployment of ad-vanced technology to rural areas in an econom-ically viable manner. By pooling diverse users,they would provide considerable economies of scale and scope.

Built to meet shared needs, they could fostercooperation and community ties.

92A John~w has pointedOUg communities are defined and reinforced by their communication systems.Accord@ tohey , “Society not o~y

continues to exist by tmnamissioqbut it may fairly be said to exist in communication. There is more than a verbal tie between the words commomcxmrmmity, and cmmrmnication. Men live in a community by virtue of the things they have in commo~ and communication is the way in which theycome to possess things in common. ” John Dewey, Democracy andl?ducation (New YorE NY: Macmillan Co., 1915).

g3For a -si o~ see fielbowic~op. cit., fOOtnOte 2.

m -t tie m m@tions limit the extent to which carriers and service providers can take advantage of this opportunity. To preventmgdated

telephone companies from engaging in an anticompetitive bebavior, the Modified Final Judgmeng which gave rise to divestiture and the break up of

the Bell System, forbids themh providing “.. any product or service that is not a natural monopoly sewice actually regulated by tariff.” Stateregulations, which preclude intraLAZ4 competitio~ also serve to constrain the extent to which communi cation providers can take advantage of newtechnologies to create additional economies of scale and scope. lhese regulatory issues are discussed in some detail below, in ch. 5.

IChapter 3-Rural America and the Changing Communication Infrastructure q 83

Figure 3-7—Rural Area Networks —



Schools

Is-------. . . .-.Industries

w AIImmHospitals G ov er nm en t

and clinics offices

u @Businesses Residences I kc.1 ‘--l?-d

A Rural Area Network would be designed to foster the deployment of advanoed technology to rural areas In an eoonomioally viable mannerbpoolingthe~m~ni=tion needs ofaoommunity’s many users-espeoially the businesses, educational institutions, health providers,and iooai government offioes.

SOURCE: Offics of Technology Assessment, 1991.


Figure 3-8-Nucleus City for Nebraska



It will be economically infeasible for many rural communities to keep pace with the modernization oftelecommunications, and as a consequence many rural citizens will be further disadvantaged in securingfundamental services such as health and education. It will therefore be necessary to identify ways to give

rural people and businesses access to these critical information highways and the services they willsupport and deliver. According to this model of nucleus townships, small rural communities will be mosteffectively served by concentrating on upgrading the telecommunications services of certain towns andsmall cities that will “function as hubs for the surrounding immunities.”

SOURCE: Sufi University of Nebraska, and Development in Rural America:A Case for Nebraska,” contractor report prepared for the Office of Technology Assessment,1990.

. RANs would overcome the limitations of technological expertise in rural areas since they

could be designed by one systems integrator.. R A N s w o u l d i n d u c e communication providers

to be more responsive to the communicationneeds of rural communities. By joining forces,rural users will be able to exert greater leveragein the marketplace.

The ways of configuring rural networks are asdiverse as rural America itself. Experimentation is in

order. Sufi Nazem, for example, proposed the idea of creating nucleus cities, or hubs, throughout the Stateof Nebraska, each of which could serve communitieswithin a 30- to 40-mile radius (see figure 3-8). As hepoints out, while “it is inconceivable that all smallcommunities in Nebraska could be connected by thecostly network any time soon, it is not. . . inconceiv-able to install a high technology network forapproximately twenty-two townships. ’ ’

95

The Maine Research and Productivity Center, inPresque Isle, already serves as such a hub for small

businesses in the surrounding area.

9G

Among theservices that the Center provides are access tocomprehensive information services as well as ashared CAD/CAM system. According to WilliamForbes, the Center’s Executive Director, some smallbusiness owners and operators travel 50 miles to usethe jointly owned CAD/CAM system, which wouldbe much too costly to purchase on an individualbasis. Because the Center is linked by a fiber

network to the Canadian research facility in Freder-icton, New Brunswick, it can also provide localbusinesses access to the services of this prestigious,multimillion-dollar institution.

Bloomsburg, a business center in rural Pennsylva-nia, has also taken a proactive role in assuring thatits communication infrastructure can meet present-day business needs. Reassessing its communication

nd.

Maine and Center is a nonprofit corporation located on the campus of the University of Maine at Isle. Separatefrom the University it is funded by the Maine and Commission. Its primary task is to provide assistanceto Maine industry on a fee basis.

Chapter 3-Rural America and the Changing Communication Infrastructure . 85

infrastructure in the light of its changing economy,the town concluded that “Bloomsburg is in theposition of being a telecommunication ‘island’without an effective bridge to the outside. ”

97

Although businesses and institutions within Blooms-burg can obtain services such as local loop T1circuits for high-speed data, voice, and compressed

q distance working facilities,

. training and Education,

. telecommunication facilities, and

. village Hall facilities.98

In some locales, these telecottages-althoughthey were originally set up using outside funds—operate on a self sustaining basis In other places and



g p pvideo applications, the town concluded that ‘‘con-nections between Bloomsburg and the rest of theworld are not economical. ’ To address this problem,it developed-together with the Ben Franklin Part-nership and Bloomsburg University-a plan toconstruct and operate a high-capacity, digital ‘high-way’ to Harrisburg, the location of access points toall long distance telecommunication providers. Thiswill be a 45 megabit per second digital microwavelink with the capability of providing a broad range of telecommunication transmission services such ashigh-speed data, high-resolution graphics, com-pressed motion video, etc. Operated as a privatecarrier, it will resell capacity to users withinBloomsburg, providing them with gateway accessfor voice, video, and data communication services.The total cost of implementing the network includ-ing design and licensing, network construction, localinfrastructure enhancements, and project adminis-tration) is estimated at $800,000. The town consid-ers this price to be modest when weighed against thepotential long-term economic benefits. Once inplace, the network would provide a broad range of

public as well as private communication services.For example, some capacity will be used to providea two-way digital video and data link betweenBloomsburg University and the Harrisburg Univer-sity Center.

Creatively sharing communication and informa-tion systems and services can, of course, also bedone in a smaller community, or on a much moremodest scale. In many small rural Scandinavian

towns, for example, a number of telecottages havebeen established to help local residents prepare for,and access the benefits of, the information age.Among the kind of services provided are:

q information services,. data-processing services,q information technology consultancy,

operate on a self-sustaining basis. In other places andcommunities, they continue to be subsidized.

Where an adequate communication infrastructurealready exists, it is sometimes possible to piggyback new services on it at very little cost. For example,when two professors at the University of Kentucky,Louisville, wanted to link the small private collegesin the Appalachian region of Kentucky up to thenationwide university research network, BITNET,an agreement was reached allowing these twofaculty members to transmit BITNET via a portionof the television network’s vertical blanking inter-vals. The costs to the university were minimal

99(see

figure 3-9—for other sharing schemes).

Changing User Requirements

While the unbundling of communication technol-ogies and services now permits rural businesses andcommunities to design and deploy communicationsystems to meet their own particular situations andneeds, it also places on them the burden of doing so.These are by no means easy tasks. Nor does theaverage rural businessperson have the requisite

experience, skills, and resources to successfullyundertake them.

Under the old Bell System, few were required, oreven inclined, to explore their service options. Thus,today, many are unprepared to sort out the myriad of options available to them in an industry environmentdriven by rapid technological change. Taking thetime out from routine business operations to come to

terms with information age technologies is alsodifficult. Most rural businesses are quite small: jobresponsibilities are not specialized enough so thatany one person could devote much time to becominga communication expert. As one rural businessmanreported to the OTA project staff:

. . . I run my business on a shoestring. I superviseoperations; keep the books; and even sweep the

~see Dove~ Systems COrp., “’lklecommunicationsOpportunities forBloomsburg,” June 15, 1989.98Lars Qvortrup, “The Nordic Tklecottages:Community lkleservice Centers for Rural Regions,” Telecommu nz”cations Policy, March 1989, pp.

59-68. See also, H. Albrechtscxq “The ‘IUecottages in the Nordic Countries,” Telecommunications Journal, vol. 55, pp. 298.

~conver~tiom tith Professors Ken Kubota and Paul~ Department of Computer Science, University of Kentucb.


Figure 3-9-Sharing Schemes

Centrality Strategy Centrality StrategyENMR Telephone Cooperative is an excellent example of howrural areas can capitalize on the flow of telecommunicationsbetween metropolitan areas by acting as a switching point.



Though serving a remote and sparsely populated region ofeastern New Mexico, ENMR benefits from its location betweenmajor metropolitan areas. As an important switching point be-tween these cities, ENMR is able to attain advanced technologiesfor its customers, such as Signaling System 7 capabilities.

According to ENMR’s General Manager, the company’s techno-logical sophistication “has been aided by the fact that our

inoperative serves as a ‘golden highway,’ routing calls amongsuch cities as Denver, Albuquerque, Dallas, Lubbock, and

City

Piggyback Strategy

u s e r

Big telecommunications user

Amarillo.”

Piggyback Strategy

Because telecommmunications networks of many large corpora-tions often extend to remote rural areas, one sharing strategy is toresell the excess capacity of the private networks to these ruralcommunities, whose telecommunications needs are likely to berelatively small.

As an example of this strategy, EMRG, a software company inKearney, NE, which depends heavily on telecommications,uses the excess capacity of the POP (point of presence, ortelecommunications’ equivalent to an on/off ramp) installed on thepremises of Cabela’s, the large sportswear retailer.

Tap-in Strategy

In the last few years, the competing Iong-distance carriers haverapidly modernized their networks and have installed high-capacity fiber optic lines connecting the major metropolitan areas.

These lines by necessity crisscross “the land between the cities,”and many rural regions of the United States are “hookable” intothese networks with comparatively little cost.

Tap-in Strategy

SOURCE: Harmeet Sawhney, University of Texas at Austin, contractor material

City

prepared for the Office of Technology Assessment, January 1991.



Chapter 4



Chapter 4

Rural Development

ContentsPage

Findings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91What Do We Mean by Economic Development? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92Economic Development Is Not Just Jobs and Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92How Relevant Are Employment Levels to Economic Development? . . . . . . . . . . . . . . . . . . . . . . 92What Do Income Statistics Tell Us? . . . . . . . . . . . . . . . . . . . . . . . . . . . 93



What Do Income Statistics Tell Us?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93Holistic Economic Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......... 94

Setting Goals .. .. .+ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .. 4.. ... ...... 94The Basic Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95Employment and Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95Health and Wel1-Being . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

Stability With Vitality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97Prerequisites and Obstacles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98Structural Economic Obstacles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98Human Resource and Social Infrastructure Obstacles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100Social Infrastructure .. .. .. .. .. .. .. .. .., . . $ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102Other Obstacles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103

Strategies for Holistic Rural Economic Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103Strategy Classifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

Boxes Box Page

4-A. Alternative Measures of Economic Well-Being . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 954-B, Communications and Development The Other Edge of the Sword . . . . . . . . . . . . . . . . . . . . . . 97

Figures Figure Page

4-l. Employment Status of Nonmetro Poor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 964-2, Unemployment Rates: Metro and Nonmetro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98

4-3. Employment Change in Nonmetro Counties, 1976-86 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 994-4. Educational Attainment: Urban and Rura l.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1014-5. Percent of Population with Health Insurance-1984 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1014-6. The Community College of Maine... . . . . . . . . . . . . . . . . . . . . . . . . . . ....$.. . . . . . . . . . . . . . 111

TableTable Page

4-1. Differences in Selected Health Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101

Chapter 4

Rural Development

FindingsTelecommunications and information technolo-

gies can play a critical role in rural development. If th t i t t d i t h i d l

Introduction

Communications and information technologiesoffer rural areas the opportunity to overcome the



they are not integrated into a comprehensive devel-opment plan, however, these technologies could domore harm than good. For too long, economicdevelopment has meant industrial recruitment. In aglobal economy, where skilled labor and high

information content provides the competitive advan-tage, this strategy is outdated. If information tech-nologies are deployed for the sole purpose of attracting information-intensive jobs to rural com-munities, they will merely add a high-tech dimen-sion to the traditional smoke-stack chasing develop-ment strategies that have failed in the past.

For development to work, a multitude of factorsmust come together to create a self-sustainingprocess. Rural communities must improve theireducation, health care, and public administrationcapacities in addition to improving local employ-ment and income levels. A successful development

strategy will take inventory of a community’s assetsand weaknesses. When the health and educationlevels are so low that the community can only

accommodate marginal employment, a developmentstrategy must focus on raising the skills and level of health in the community. When human resources areadequate for development, but jobs are lacking, adevelopment strategy must address ways to increaselocal employment. Most often, these problemscannot be solved in isolation, but must be attackedin a comprehensive development strategy.

Communications technologies can augment thesevarious types of development efforts. When devel-opment is undertaken comprehensively, the role of telecommunications can be even more effectivebecause the technology can bring the many commu-nity development players together to share the risks,the benefits, and the costs.

offer rural areas the opportunity to overcome thetraditional barriers of time and space, to attracthigh-paying, high-technology, information-inten-sive jobs, and to access information that couldimprove health care, education, and local govern-ment. However, these technologies are not a pana-

cea. Rural economic development is a complexprocess that requires interaction among a multitudeof players and institutions. Communications andinformation technologies can enhance and evenmake this process possible. However, if they areconsidered a solution by themselves, they will notfulfill expectations and could work against theprospects for real economic development in ruralareas.

To make the most of communications and infor-mation technologies, a broad, holistic view of economic development is needed. Traditional eco-nomic development definitions, goals, and strategieshave taken a one-dimensioal approach, focusing onthe business sector of a society or community andmeasuring development progress with standard eco-nomic indicators. These approaches ignore the lessquantifiable factors, such as the quality of thelaborforce, and access to education and health care,that allow businesses and people to develop andprosper.

In contrast to this purely business approach arecommunity development approaches. They seek todevelop community well-being as a means of generating economic well-being. However, whenpursued along a single social dimension, they toohave failed. Just as economic activities need supportfrom community services, so does communityinfrastructure need economic energy to remainviable. Community development projects can stimu-ate the economic development process, but alone,they will be only partially successful.

1

IJme JWobs ~W ~ ~ f~=y of ~~ g Bats for~m~~ development proj~ts done to produce economic development: “The failure is btit

into the fact that they are loans, gmnts, and subsidies; those golden eggs, being only eggs, don’t hatch goslings.” The key to success is the presenceof innovative activity, which transfer payments could then invigorate. Jane Jacobs,Cities and the Wealth of Nations: Principles of Econonu”c Life (NewYom NY: Vintage Books, 1984), p. 110. See also, ‘l&i K. Bradshaw, “Economic Development in Rural America: The Hard Case,” Looking Ahead,VO1. 9, No. 2, 1986.

-91–


A narrow focus on technology can also lead

programs astray. Typically, policymakers see magicpowers in technology, or they use technology as adisguise or means to accomplish other narroweconomic objectives. Whether policymakers look for a solution in technology business or community



for a solution in technology, business, or communityinfrastructure, by seeking a tonic, they neglect toconsider the many factors that go into making andsustaining a successful development formula.

2

What Do We Mean by EconomicDevelopment?

In formulating strategies and policies for ruraleconomic development, it is critical to understandwhat economic development is and what it entails.Contemporary rural America presents a mosaic of socioeconomic and political conditions and variouslevels of development, so a narrow concept of

economic development is inappropriate. A workabledefinition of economic development must accom-modate the inherent differences between communi-ties, and allow for alternative approaches to theproblems.

The economy and the community are inextricablylinked, therefore, this report is based on the premisethat economic development encompasses commu-nity development. The linkages between the com-

munity and the economy in rural areas are critical.Due to the small population of a rural community,there is less social redundancy. Often, a fewbusinesses, or one large business, one school, andone hospital or health-care provider serve the entirecommunity. If a school or business closes, ruralcitizens cannot simply go to a different school, ormerchants cannot find other suppliers. Thus, if onecommunity link fails, the entire system is jeopard-ized.

Economic Development Is Not Just

Jobs and Income

Viewing community development as an integralpart of economic development requires measure-ments that focus on quality of life considerations,


Sign in a small town in rural Kentucky announcing aconstruction project funded by the Department of

Commerce’s Economic Development Administration.

such as health and social services and qualityeducational opportunities for children and adults.These factors are inputs, as well as products, of economic well-being. As such, these non-materialnecessities must be considered as ‘‘important condi-

tion[s] to meeting material needs. ”3

Standard economic indicators, such as employ-ment and income levels, are often used to measureeconomic well-being but do not account for theseimportant amenity factors. Too often, the measuresbecome ends unto themselves, and other less-quantifiable development goals are subordinated tothe economic goals embodied in these measure-

ments.

How Relevant Are Employment Levels to

Economic Development?

Development officials and policymakers, for ex-ample, typically use jobs and income as measures of economic well-being. In this case, economic devel-

2The industrial park strategies of the 1970s illustrate such an approach. In many cases, it was believed that industrial capacity-in terms of officeand warehouse space-would induce firms to locate in a region and thus provide jobs and then tax revenue to pay for social services and communityinfrastructure. As a result of this strategy, however, many industrial parks lay vacant and communities were disappointed or disillusioned because theycould not attract or nurture businesses, which also demanded an educated workforce and access to community services and health care for potentialemployees.

“A Approach to Economic Development,” Kenneth P. and Charles K. Directions in Economic Development (South Bend, IN: University of Notre Dame Press, 1979), p. 74.



Chapter 4-Rural Development q 95

Box 4-A—Alternative Measures of Economic Well-Being

No single measure will fully capture the array of

qualities and quantities that comprise economicwell-being. Rather than using one composite meas-ure as a guide to development strategies, developersmight consider using alternative economic indicesto create a more complete picture.

. access to biological and social necessities;

. stability in the local community; andq a thriving, vital local economy.

This list is consistent with the goals of ruraldevelopment policy defined by Kenneth Deavers,

19

which call for:

q improved rural income levels and employmentopportunities;



For example, quality-of-life indicators are in-creasingly used in the popular press to rate a city’s‘‘livability. ’ These indicators take account of characteristics such as the quality of schools,research facilities, cultural opportunities, climate,the availability of capital and skilled workers, andthe extent of union membership and the politicalclimate. Although useful for qualitative impres-sions, such measures are limited due to the arbitrar-iness of the included factors and their inherentsubjectivity.

Another attempt to measure development is the“Physical Quality of Life Index” (PQLI). ThePQLI is used primarily in the international develop-

ment community. This composite index uses indi-cators of infant mortality, life expectancy, and basicliteracy to measure results of development efforts inmeeting the most basic needs of a community. ThePQLI is useful in assessing the extent of seriouspoverty, but is limited in the extent to which it canmeasure the economic activity of a region.

SOURCES: Hazel Henderson, “Mutual Development: TowardsNew Criteria and Indicators,” Futures, December1989, pp. 571-584. Gerald M. Meier, badinglssues

in Economic Development (New York, NY: OxfordUniversity Press, 1989), p. 9.

rural communities must meet, but it is necessary toidentify objectives to guide development efforts.

The Basic Framework

Thomas Power suggests several goals for holistic

economic development18 that provide a flexibleframework for any community. These objectivesinclude:

. the availability of useful and satisfying work for community members;

q

q

opportunities;improved access by rural residents to adequatehousing and essential community facilities andservices; and

responsible use of rural resources and the rural

environment to preserve the rural quality of life.

Together, these sets of goals provide for thedevelopment of a rural environment that supportsthe health and well-being of people as well as thebusinesses they patronize, work at, and/or operate.By addressing both the human and the businessconditions in a community, they recognize the

fundamental linkages between these two aspects of community life.

Employment and Income

GOAL 1: The availability of employment oppor-tunities that are useful and satisfying, andwhich provide income levels consistent with

the income needs of the region.This goal must incorporate the quality of employ-

ment, including the challenge and the opportunityfor advancement, in addition to the income levelsassociated with such employment. Both aspects of employment are important to the individual and tothe community.

Rural workers need jobs, but they also need

employment that uses their skills and abilities andthat affords them a reasonable standard of living. Inaddition to compensation, employment gives work-ers an identity, personal satisfaction, status in thecommunity, and a stake in the sociopolitical system.By giving workers a place in their community,

lgpower, The Economic Pursuit of Quality, op. cit., footnote 6, pp. 169-174.

1%ermethDeavers, ‘Social Science C. ntributions to Rural Development Policy in the 1980’ s,’ American Jourmd ofAgriculturalEconomics 62(5),pp. 10-21. Cited in Gary P. Green and Kevin T.McN~ 1988, “Traditional and Nontraditional Opportunities and Alternatives for Local EconomicDevelopment” in Beaulieu, The Rural South in Crisis, op. cit., iootnote 4.




Box 4-B-Communications and Development: The Other Edge of the Sword

Since 1962, Wal-Mart stores have become staples in many small towns across the country, especially in theSouth. They have been a boon to rural consumers because of the wide variety of products they offer at discount

prices, consolidating the services of many stores into one discount center.Wal-Mart is often heralded as a triumph of technology. The discount retailer has staked its claim in rural

America by using sophisticated telecommunications technologies to transmit data and voice and video messagesthat allow the company to purchase and distribute a huge variety of consumer goods at prices far below the localcompetition. Using very small aperture terminals (WATS), Wal-Mart coordinates its purchasing at a national level

d th t k d t f th k t it j b i t f it i



and thus takes advantage of the market power it enjoys by virtue of its size.

Although these discount retail stores can be a great deal for rural America, communities are discovering thatsometimes stores like Wal-Mart are no bargain. In the wake of the Wal-Mart phenomenon lie the empty storefrontsof the many local businesses that could not compete. Businesses in surrounding communities often suffer as wellbecause of the magnet effect that a discount retailer creates in a region. People will drive longer distances to reachthe discount prices and one-stop shopping. While as consumers, r u r a l citizens are enjoying the cut-rate prices, asemployees and entrepreneurs, rural residents are suffering from the layoffs that result from the closing of localbusinesses. In many rural towns, the closing of even a few stores has a suffocating impact-as much on the psycheof the community as anything else.

In addition to suffering the losses of local businesses, rural economies can suffer because the revenues of national retail chains return to corporate headquarters, rather than circulate through the local economy as they mighthave with a locally owned business. Thus, if rural communities are not braced for the kinds of changes thattechnology could bring, economic development boons like Wal-Mart and other similar ventures could develop intoeconomic busts.

SOURCE: Lisa Bell@ “Wal-Mart is Closing, And ‘lkxas ‘lbwn Reels,” New York Times, Dec. 14, 1990, p. A-18.

qualities that are integral to maintaining community business that might relocate elsewhere as soon as it — —

welfare.

Stability With Vitality

GOAL 3: Local participation in the developmentof a stable and vital community.

Stability and a sense of local control go hand inhand as critical ingredients for establishing anenvironment where people and enterprises canflourish. local control vests decisions and planningfor the community’s future with those who stand tobenefit or lose in the process-the residents of the

community (see box 4-B). Jonathan Sher notes thattoo often in the past this has not been the case.Because development has been done “to ruralcommunities rather than by them,"

25the fruits of

rural development have not accrued to rural citizens.

The benefits of a development scheme couldeasily evaporate if it is based solely on an outside

became advantageous. Such is the case when foot-loose manufacturing firms uproot local operations tomove production overseas, where wages are lower.This pattern has repeated itself in many rural areasthroughout the 1980s.26

As Bradshaw points out, “rural developmentprograms throughout the country still seem to bedesigned to capture the benefits of outside firms andto neglect the development of local resources.”

27

For sustainable development, a measure of self-sufficiency is necessary. To be self-sustaining, ruralcommunities must avoid dependence on a singlefirm, industry, or outside government agency; theymust seek alternatives in which to participate asequals, rather than as pawns in the developmentgame.

Economic stability, however, does not implyinflexibility. To the contrary, communities that

~Sher, 1986, “Rural Development Worthy of t-he Name,” op. cit., footnote 16, p. 519. (Emphasis in text.)

~omas LysoQ “Economic Development in the Rural South: An Uneven Past-An Uncertain Future,“ in Beaulieu, The Rural South in Cn”sis, op.cit., footnote 4, p. 266.

z?I&I K. Bm&@w, “~onomic Development in Rural America: The Hard Case,” Op. Cit., footnote 1.




Figure 4-3—Employment Change in Nonmetro

All industries

Farming

Counties, 1976-86

Absolute employment change

+ 6.6%

and information, and support more specializedservices and occupations that create a cycle of

information creation.

36

This urban dynamic enablescities to adjust to changes more easily and providesthem with a competitive advantage over rural areasin attracting and retaining industries.

A mismatch between the needs of a structurally



Mining

Construction

Manufacturing

Services

I I I

-500 0 5 00 1 ,0 00 1 ,50 0 2 ,0 00

Thousands of jobs

The rise in service jobs accounts for the overall growth of jobsdespite employment losses in manufacturing, farming, and min-ing.

SOURCE: Edwin B. Parker et al., in Information Age: Telecommunications Policy for Rural Development MD: University Press of America, Inc., 1989), p. 18.

shift in the U.S. economy away from routinemanufacturing jobs toward more high-technologymanufacturing and services jobs. Urban areas arebetter able to adapt to this trend, thus such jobs aremost prevalent in urban areas.

35Add the farming

crisis and the industrialization of U.S. agriculture to

the decline of rural manufacturing, and the result hasbeen fundamental and permanent structural changesin much of the rural economy.

Such changes would wrench any economy, butrural areas were particularly hard hit because theyoften lacked access to information that would informthem better about how to react and adapt. Urbanareas, in contrast, are usually the locus of innovation

ychanged global economy and the ability of humanresources and physical capital in rural areas to adaptis at the root of the problem. Many rural areas canaccommodate 1960s style growth,’ which calls forindustrial parks and vocationally trained workers.The global marketplace, however, has redefinedwhat is now necessary for growth. A skilledworkforce and sophisticated communications havebecome primary ingredients for growth.

37Many

rural communities were never even “primed for1960s style growth,’ but they relied on the resourcesand traditional industries that had always supportedthem, such as farming and extraction.

A shortage of investment capital compounds thedifficulties that rural areas face in adapting to neweconomic conditions. Many argue that the financialderegulation of the 1980s reduced the amount of credit available to rural areas. The centralization of the American banking system, which resulted fromderegulation, tended to shift banks’ investmentdecisions from ‘‘locally owned community banks to

the main offices of state and regional banks. ”38

Ascredit markets became globalized, and investmentdecisions more detached from local communities,lenders increasingly turned away from rural invest-ments in favor of larger and more profitable invest-ments in the international credit market.

39

Most likely, those rural areas most in need of capital pose the greatest risk to creditors. Venture

pp. 5-6.

David observes,”. . towns and areas are generally the last to get new information. Not only do most innovations occurin urban settings, but even when the innovations are rural, information about them tends to flow first to urban places and then to other rural areas...

a larger volume of information and trade flows, larger communities have more specialized and occupations, and larger organizations witheconomies of scale.” David in USDA, op. cit., footnote 15, pp. 30-31.

A. Development in the Rural Beaulieu, op. cit., 4, 267.

p. Green and Kevin T. “Traditional and Nontraditional Opportunities and Alternatives for Local Economic Development,”op. cit., footnote 4, p. 290.

t. is uncertain it is

the impact of deregulation. Daniel L. Milkove and Patrick J. “Should Rural Communities Fear Bank Deregulation?” United StatesDepartment of Agriculture, Economic Research Service, Development Perspectives, February 1989. When community banks can coexist withbranches of larger, regional banks, customers a greater array of choices and available credit. Moreover, the larger regional banks could offeradvantages for rural areas. The and informational resources available to these larger, broad-based institutions enable them to extend credit toinnovative businesses, whose lines of business would not be familiar to small local bankers. The larger and more diversified portfolio of a regional bankcould allow it to on small businesses that would be poor risks for banks with Even if this hopeful scenario bears out, however,

exist in areas with relatively vibrant economies and promising investment opportunities.opportunities will p


neediest face the greatest obstacles in obtainingcredit. Part of the problem is the lack of knowledgewithin the community about how to deal with

financiers. 43 Business plans and financial informa-tion are standard parts of a loan application, but theycan be obstructions as well as screening devices.

Human Resource and Social



Human Resource and Social

Infrastructure Obstacles

Workforce Skills

A mismatch between the qualities of the rurallaborforce and the needs of a diversified andinformation-intensive economy constitutes an ob-stacle to holistic development. The skills of factoryworkers, farmers, and miners do not correspond tothe needs of the growing service sector or high-techmanufacturing.

44But retraining these workers for

jobs that do not exist does little good either.

One possible ‘‘advantage’ of the rural laborforceis the availability of an isolated, low-skill pool of workers in need of any kind of employment.Willingness to work for few, if any, benefits andminimal union activity are sought after features formarginal enterprises, which are unlikely to create thekind of jobs that improve economic and socialwell-being in the community. Education levelslargely determine the type of “advantage” a labor-force offers. Low educational a “attainment translatesto a low-skilled rural laborforce with a perverse“advantage’ relative to urban areas. The persistentdisparities between metro and nonmetro educationallevels suggest that should high-skill jobs be createdin rural areas, they would be difficult to fill (seefigure 4-4).

45

As more skills and greater sophistication and

adaptability are required from the global laborforce,populations that do not stack up will suffer. Duringthe 1980s, rural areas experienced the beginnings of the globalization trend. Rural areas must change thenature of their laborforce ‘‘advantage” in order to

and op. cit., footnote 38, p. 297.

S. Fisher explains, ‘‘the more rural sections of the US contribute relatively little to, and receive relatively little the venture funds.’Economic Committee, “Risk Capital and Rural Development,” Towards A Rural Development Policy for the 1990s, 1989, p. 137.

_ Systems Serving Rural

Their Current Structure and Future Prospects,” New Dimensions in Rural Policy, Joint Economic Committee, June 5, 1986, p. 406.op. cit.,

op. cit., footnote 33, p. 25.

Joint Economic Committee, Op. 23, p.


100

80

Figure 4-4-Educational Attainment:Urban and Rural

Percent

Table 4-l—Differences in Selected Health Indicators

Metro NonmetroInfant mortality

a. . . . . . . . . . . . . . . . . . . . . . . . . . 9.88 10.07

Chronic diseaseb. . . . . . . . . . . . . . . . . . . . . . . . 12.6%_ 14.9Y0

Overall healthc. . . . . . . . . . . . . . . . . . . . . . . . . . . 14.1 14.7

aDeaths 1,000 infants under age 1—1 987.bpercentof with activity limitation ions-

1988.



60

40

20

0Completed 1 or more Completed

years of college high school

SOURCE: U.S. Department of Agriculture, Rural Economic Development in the 1980’s: for Future (Washington, U.S.Department of Agriculture, 1988), p. 20.

attract challenging and skilled employment for itscitizens.

Health

A healthy population is necessary for economicdevelopment, but rural health care is facing a crisissituation. Access to health care in rural areas is morelimited than in urban areas, yet rural areas often have

greater needs for health services because the popula-tion has relatively more elderly and children thanurban areas. Remoteness and poverty, combinedwith a shortage of trained medical personnel, tech-nology, and transportation, make health care evenmore inaccessible to rural residents (see table 4-1).

46

In many ways, rural areas face a “Catch-22” inhealth-care provision. The lack of access to adequate

health care is an obstacle to economic and commu-nity development; yet, other development barriersalso limit access to health care. Low-income groupshave greater difficulty in obtaining health care, andpoverty aggravates both the problems of providinghealth care in rural areas and the state of health of therural population. For example, high infant mortalityin rural areas is associated with low incomes.

of restricted days per 987.

SOURCE: Office of Technology Assessment, Care in ~ OTA-H-434 (Washington, DC: U.S. Government PrintingOffice, September 1990), p. 44.

Figure 4-5—Percent of Population with HealthInsurance-1 984

. P e r c e n t

m

E

Private Medicare Public Military/ No

insurance assistance Veterans insurance

(Medicaid Admin.or other)

Nonmetro population has a higher percentage of people with noinsurance and a smaller percentage covered by private insurance.The higher percentage of Medicare reflects the larger proportionof elderly among the rural population.

SOURCE: Office of Technology Assessment, Care in OTA-H-434 (Washington, DC: U.S. Government Printing

Office, September 1990), p. 48.

Additionally, inadequate health insurance discour-

ages people from seeking preventative and primarycare until there is an emergency (see figure 4-5).

47

Rural socioeconomic factors work against ruralareas in attracting health-care professionals. Thisproblem results from two aspects of rurality: First,physicians tend to locate in urban areas, where thepopulation is larger and well-equipped hospitals and

L. Clarke and Michael K. Miller, “The Character and Prospects of Rural Community Health and Medical Care,” AmericanCommunities, and Louis E. Swanson (Boulder, CO: Westview 1990), p. 92.

pp. 90-92.




and resourceful. The key to successful developmentefforts often is access to information. Leaders needinformation from the community and from the largernational and global context. Information technolo-

gies, such as the telephone, allow informationexchange and can enhance a sense of community.

55

Regulations that make telephone calls and informa-tion services more expensive for rural citizensdiscourage access to much needed outside informa-tion

56

but are in danger of being excluded from the larger,national economy.

Urban-adjacent rural communities and those witha natural setting that can attract tourism or retirementcommunities have not fared as badly from theeconomic troubles of rural America.

60One reason

that urban-adjacent communities have more optionsis because they benefit from the economic diversityof the adjacent city. They also face lower prices for



tion.

Other Obstacles

Distance from urban centers and small, dispersedpopulations characterize rural areas. These qualitiesaccount for the ‘‘bucolic and bubonic visions’ of rural America.

57These visions, though hyperbolic,

illustrate that remoteness and small populations areoften considered amenities of rural life, but they arealso barriers to economic development. Distancefrom urban areas limits access to employment,goods, and services. This raises the transportation

costs involved in buying or selling products in ruralareas. At the same time, the small populations of rural areas diminish their ability to produce goods orservices cheaply because they typically cannotachieve the economies of scale that reduce the unitcost of production.

58

Remoteness and small populations also mean that“rural communities must choose between trying todo many things inefficiently or specializing in a

small number of areas and facing high access costsfor externally provided goods and services. ”

58The

industrialization of agriculture and the decline of rural manufacturing mean that many rural areas canno longer specialize, but do not have the resourcesto diversify. These communities, and the persis-tently poor rural communities, are not just experi-encing another cyclical downturn in the economy,

goods and services because the nearby urban areassupport enough population to do many thingsefficiently. Further, they face relatively lower access

costs for urban-produced goods and services thantheir more remote counterparts. Tourist and retire-ment communities benefit from the outside resources-both information and economic activity-to whichthey have access by virtue of the influx of people totheir communities.

Nonurban-adjacent communities or those withoutpotential for tourism typically are unable to developa diverse economic and social structure. Yet, social

and economic diversity are prerequisites to eco-nomic and community development,

61for they

permit access to resources that are fundamental to aself-perpetuating community. To attain this type of diversity, rural areas must reduce their isolationfrom the “resources and institutions of our essen-tially urban society. ’ ’

62

Strategies for Holistic RuralEconomic Development

Th e nature, the number, and the severity of theobstacles facing rural communities vary widely. Thediversity of the communities requires a variety of strategies for development. These strategies shouldaddress the underlying symptoms of distress andgenerate sustainable solutions.

SsRichard KielbolwicZ ‘‘me Role of comm~~tion in Building Communities and Markets:An Historical Werview,” contractor report pr~~

for the Office of lkchnology Assessment 1987.

56~pter 5 addresses Stite and F~er~ telecommunication re@ations that Conflict with mnOmic development goals.

sTJoint fionomic COrmnittee, Jonation Sher, “Rural Development Worthy of the Name,” New Dimensions in Rural Policy: Building Upon Our Heritage, 1989, p. 515.

SgJoint Economic Committee, David Freshwater, “A Synopsis of the Proceedings of the Rural Development $mposiwm” U.S. Co~sS, Sm.

101-50, Toward RuraZDevelop~nt poZicy for the 1990’S (Washington DC: Government Printing Office, 1989), p. 6.

S?lbid.

@J.F. coat=, Inc., op. Cit., fOObIOte **.

GIJacobs, op. cit., footnote 1.

62wmoW op. cit., foomote 28.




development is the fundamental building block fordevelopment. Absent human capacity, other effortsfail. Human resource development is a lastinginvestment that is transferable; if the rural economy

falters and rural people leave for opportunitieselsewhere, the migrants can take their skills andtraining with them.

Job training is important to overcoming theobstacle of a poorly or inappropriately skilled local



obstacle of a poorly or inappropriately skilled locallaborforce.

69Many Federal training efforts in this

arena are administered by the Department of Labor.70

Vocational education, work experience programs,and cooperative extension reinforce human resourcetraining in rural areas, targeting young workers inparticular. In addition to training, programs thatenable workers to leave the home to work are oftencrucial. Often workers lack personal resources suchas childcare, transportation, tools, or clothing neededto seek work.

71

There is a major role for telecommunications andinformation technologies in building human re-source skills. Experiments in distance learning haveproduced successful formats and innovative ap-proaches to engage students and achieve educationalgoals. Many of these programs began as efforts toserve isolated rural students. For example, classesbroadcast daily from Norton, VA over satellite andmicrowave channels enable students in Wise county,in the Appalachian regions of western Virginia, totake college preparatory classes that otherwisewould be unavailable in their school district due toits remoteness.

72

Beyond academic instruction, distance-learningtools could prove valuable for upgrading workerskills and familiarizing students with technology.

For example, as part of Mississippi’s Star Schools

program, Mississippi State University produces

teacher training courses in mathematics and science,

enabling teachers from rural and disadvantaged

communities to build their own skills.73

These

training techniques need not be limited to the

education profession. To reap the maximum benefit

from technologies in a human resources develop-ment strategy, these tools should also be used to

bring professional accreditation courses and the like

to improve the skills of the professionals in the

community.

Telecommunications and information technolo-

gies can also improve health-care delivery in rural

@U.S. Congress, Office of Technology Assessmen$ Worker Training: Competing in the New International Economy, OTA-ITE-457 (Washingto&DC: U.S. Government Printing OffIce, September,1990).

~egirming with the Manpower Development and Training Act of 1%2, to the Comprehensive Employment and Training Act (CETA) of 1973, andthe Job Training Partnership Act of 1983, these programs have focused on skill or specific-job tmining. The fmt programs focused on @airing displacedand unemployed workers, using Federal funds. Later programs have been decentralized, with State and local programs targeted to more particular needsand training goals, and forging fronger links with potential employers. See SarLevitan, ‘‘Helping People with Labor MarketRoblems: An Overviewof Key Policies, ” Policy Studies Revz”ew, vol. 6, No. 4, May 1987, pp. 712-721.

TITr~o~tionproblem ~ep~c~uly severe for poorp~om in remote rural communities. Work is often a low distance ffom home, ~d limit~

public transportation networks almost demand that a person have a car-a barrier to many of the poor.

~isaBerger, “Beaming bssons Across Appalac@” Appalachia, fall 1989, pp. 23-27. Currently, however, many distance-leaningprojects targetadvanced students. Those who lack basic skills might not find suitable curricula among the packaged programs.

73u.s. CO-M, ~m of ‘RzhIIoIogy AsKs~en~ Liti”ng for Learnz”ng: A New Course for Education, OW-SET-4S() (_wd3h @OXL m :

GovernmentRinting Office, November1989), p. 29.


development is the fundamental building block fordevelopment. Absent human capacity, other efforts

fail. Human resource development is a lastinginvestment that is transferable; if the rural economyfalters and rural people leave for opportunitieselsewhere, the migrants can take their skills andtraining with them.



Job training is important to overcoming theobstacle of a poorly or inappropriately skilled local

laborforce.

69

Many Federal training efforts in thisarena are administered by the Department of Labor.70

Vocational education, work experience programs,and cooperative extension reinforce human resourcetraining in rural areas, targeting young workers inparticular. In addition to training, programs thatenable workers to leave the home to work are oftencrucial. Often workers lack personal resources suchas childcare, transportation, tools, or clothing needed

to seek work.71

There is a major role for telecommunications andinformation technologies in building human re-source skills. Experiments in distance learning haveproduced successful formats and innovative ap-proaches to engage students and achieve educationalgoals. Many of these programs began as efforts to

serve isolated rural students. For example, classesbroadcast daily from Norton, VA over satellite andmicrowave channels enable students in Wise county,in the Appalachian regions of western Virginia, totake college preparatory classes that otherwisewould be unavailable in their school district due toits remoteness.

72

Beyond academic instruction, distance-learning

tools could prove valuable for upgrading workerskills and familiarizing students with technology.

For example, as part of Mississippi’s Star Schools

program, Mississippi State University produces

teacher training courses in mathematics and science,

enabling teachers from rural and disadvantaged

communities to build their own skills.73

These

training techniques need not be limited to theeducation profession. To reap the maximum benefitfrom technologies in a human resources develop-

ment strategy, these tools should also be used to

bring professional accreditation courses and the like

to improve the skills of the professionals in the

community.

Telecommunications and information technolo-gies can also improve health-care delivery in rural

Congress, Office of Technology Worker Training: Competing in the New International Economy, OTA-ITE-457 DC: U.S. Government Printing

with the Manpower Development and Training Act of 1%2, to the Comprehensive Employment and Training Act of 1973, andthe Job Training Partnership Act of 1983, these programs have focused on skill or specific-job The programs focused on displacedand unemployed workers, using Federal funds. Later programs have been decentralized, with State and local programs targeted to more particular needsand training goals, and forging links with potential employers. See Sar ‘‘Helping People with Labor Market An Overviewof Policies, ” Policy Studies vol. 6, No. 4, May 1987, pp. 712-721.

for in remote communities. Work is often a distancepublic transportation networks almost d that a person have a car-a barrier to many of the poor.

“Beaming Across Appalachia, fall 1989, pp. 23-27. Currently, however, many distance-leaningprojects targetadvanced students. Those who lack basic skills might not find suitable curricula among the packaged programs.

of for A New Course for Education,Government Office, November 1989), p. 29.




A Type IV strategy recognizes that rural organiza-tions must learn to build local economies based ontheir natural and human resources. A communitymust identify the public and private resources

available to it, and then invest in the missing parts.It must selectively focus on programs and projectsthat yield the highest return and ensure diversity inthe local economy.

Simultaneous development of economic and com-munity resources contrasts with conventional eco-

i d l t h i l

q

q

q

q

q

q

q

targeting benefits to communities and individu-als in need,mobilizing local initiative to address localpriorities,

taking a long-term approach to development,linking planning to implementation,linking complementary projects within a com-prehensive strategy,linking public and private sectors, andreinvesting resources in the community .95

Th d i i F d l f d f h



nomic development approaches in several ways:

q

q

q

instead of simply equating more businesses

with more jobs, the community should look forfirms that build quality jobs that fit the needsand skills of the population;instead of building on a single economic sector(e.g., agriculture or manufacturing), build setsof integrated economic activities that bridgeeconomic sectors;instead of focusing on physical assets, focus onthe quality of the environment that stems from

extensive community development activities;andinstead of focusing on available labor, focus onth e ability of the human resource base toexpand to meet the needs of growing andchanging industries.

94

This type of development strategy seeks a fitbetween the economy and the people of the commu-

nity. It requires community control and participationin the development process. This approach alsorequires local firms and agencies to participate aspartners in managing the community.

The Community Development Corps (CDCs) thatevolved from the War on Poverty provide a usefulmodel. They are locally rooted, with strong repre-sentation from the community. They are structuredfor a variety of activities, such as running for-profit

companies, making loans, and obtaining traininggrants. They pursue a broad agenda of communitydevelopment and economic growth. The variety of tasks the CDCs perform include:

q using private development techniques for pub-lic purposes,

The reduction in Federal funds for such programshas reduced the scope of CDCs, but neverthelesstheir functions are important as guides to a holisticstrategy. Even in a changed political environment,CDCs can pursue many effective programs andmarshal needed resources.

In addition to CDC development programs, TypeIV strategies can take advantage of many other vitalcommunity resources. For many communities, thelocal colleges, hospitals, and other public organiza-tions are the backbone of local employment. For the

most part, these organizations are not called on toplay an economic development role. Yet, theypossess a large and untapped reservoir of talent andresources that can benefit economic development.For example, hospitals have helped start nursinghomes, health and recreational facilities, and otherhealth maintenance activities. Hospitals or collegescould also share computer facilities, training facili-ties, and meeting rooms with local groups. This

could help defray some of the institutions’ costs andmake these resources available to the community.The most extensive involvement for these institu-tions is to actually become partners in privateventures that will create jobs in the local commu-nity.%

By taking an integrated approach to development,government programs can attack a larger set of

problems. For example, housing programs can belinked to occupational training programs in con-struction trades, and the county planning departmentcan stimulate development projects that producelocal jobs. Waste disposal agencies can establishrecycling or energy production projects that mightstimulate related industries. Several regional devel-

!)4B~ely, op. Cit., foo~ote 20. pp. 68-70-

fiB~nF. Roberts, Robert O. Zde@ and William E.Bivens ~, CO~na”ty Development Corporations and State Development Policy: Potential fm Partnership (Washingto~ DC: National Congress for Community Economic Development December 1980).

MS= ~ K. Bmds~w, Bfi My~, ~d ~ ~~wm ‘tcomm~~ Colleges ~ Job Cration ve~cles in S@ ~wns,” SmalZ Town, May-June,

1987, pp. 26-28.

Chapter 4-Rural Development .111

opment projects, such as the Tennessee ValleyAuthority and the Appalachian Regional Commis-

sion, provide examples of development integration.

Regardless of the institutional setting, an inte-grated approach must combine the interests andresources of several groups. This approach builds onthe best of the other strategies; it relies on trainedindividuals, whose basic needs are provided; itb ild i f i i

Figure 4-6-The Community College of Maine



builds strong economies from strong communitiesand ensures that the benefits accrue to the commu-

nity, instead of outsiders.The complexity of Type IV strategies is evidence

that there is no shortcut to rural development.Projects are often costly and time consuming,requiring sustained support in order to develop theleadership and the community roots necessary to putthe pieces together and generate local jobs. Theyrequire extensive planning, coordination, and coop-eration, and demand innovation and creative use of scarce resources to accomplish their ends. There-fore, local economic development projects are oftenat the center of political conflict.

Such strategies are largely unprecedented, soexamples of how technologies can be employed arescant. With its statewide university fiber opticnetwork for distance education, Maine’s effortsrepresent one of the frost steps in an integrated

development strategy .97 Recognizing that half of the jobs in the State would disappear by 2000, to bereplaced by jobs requiring higher levels of educa-tion, the University of Maine System saw the needto increase people’s access to education.

98As part of

this plan, the University of Maine at Augusta, witha grant from the U.S. Department of Education,provided the front capital that allowed New EnglandTelephone Co. to install fiber optics throughout the

State decades before this would have otherwise beeneconomically possible. The University broadcastscourses to remote campuses and high schools acrossthe State (see figure 4-6). The system also allows forspecial events programming and teleconferencing.For example, the Maine Department of Economicand Community Development uses the University’sfacilities to conduct monthly teleconferences be-tween Portland and Augusta, eliminating the need

for travel; Head Start has used the system to deliverinteractive programs on child care training; the

The backbone of the Community College of Maine’sInteractive Television System is the University of MaineSystem’s seven branch campuses that are linked by

high-capacity, fiber-optic, digitally switched lines. Speciallyequipped electronic classrooms permit interactive classes(both audio and video) at multiple sites. In addition, the 6technical colleges, 11 university centers, and about50highschools serve as receive sites for the transmission ofinteractive secondary and postsecondary courses. The liveclasses are transmitted throughout the State by micro-wave. Each receiver site is equipped with a television, aVHSNCR and cordless phone for students to communi-cate with the teacher and students in the other classrooms.In its first year in operation, 36 courses were transmitted tomore than 2,500 students at 47 locations.

SOURCE: The Community College of Maine, YearOffice of Distance learning, Universityof Maine at Augusta.

have plans for

University of Maine at Annual Report:


Maine Municipal Association broadcast a four-wayinteractive program that explained the changes inlaws affecting municipalities in 1990; and LottoAmerica broadcast presentations introducing lotteryagents to Lotto America, using 42 of the system’s

remote sites.99

The case of Maine illustrates how institutions canand must work together in order to orchestrate anintegrated development plan and to employ commu-

nications and information technologies as part of such a plan. Although the University administers the

system, there is a symbiotic relationship among themany uses and users of the system. This type of

relationship makes the system viable. Without theagglomeration of users, the deployment of DS-3100

capacity would be economically infeasible; yet it isthe broadband capacity that makes the system useful

for so many purposes.



%bid.

100DS.3 ties ~ve a ~aci~ of45 me~i~. ~S compares to the more common T-1 line, which has a capacity of 1.5 [email protected]. For more de~ed

information. see ch. 3.

Chapter 5

Regulation and Rural Development




ContentsPage

Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ., . . . . . . . . . . . . . . . . . . . . . . . . . 115

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . .

. . . . . .q

,,.... . . . . . . . . . . . . . 115Regulatory Implications for Economic Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115Technology Diffusion and Network Modernization . . . . . . . . . . . . . . . . . 115Rate-of-Return Regulation ..,.. . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116

Depreciation Practices and Modernization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118Alternatives to Rate-of-Return Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119Cable Television . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....... . .......... . . . . 120

Information Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122. . . . . . .... . . . . . . . .



Affordable Technologies Necessary for Economic Development. . . . . . . . . . . . . . . . . . . . . . . . . 123LATA Boundaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123

Extended Area Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... . . . . . . . . . . . 124Coordination of Users and Providers: Leveraging Demand and Supply .. ................ 126

Rural Area Networks: Coordinating Users . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127Rural Area Networks: Coordinating Providers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... 129

Boxes Box Page5-A. Experimenting With Price Caps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ., .. ., ... ... ...... 1205-B. Price Caps With Rural Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121

FiguresFigure Page5-1. National Local Access and Transport Area (LATA) Map ... ...... .. .. .. .. .., .+. . . . . . . . 1255-2. Rural Players .. .................... . . . . . . . . . . . . . . . . . . . . . . . . ... . . . . . . . . . . . . . . 1 2 7 7

5-3. Bloomsburg, PA Telecommunications Network Configuration .. .. .. . ................... 129.5-4. Iowa Network Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1305-5. Palmetto Network Configuration ..,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130

Chapter 5


FindingsTelecommunications regulation has greatly af-

fected the extent to which rural areas gained accessto telecommunications in the past. Despite deregula-tion, regulatory decisions will continue to determinewhether rural areas have access to advanced tele-communications and, hence, whether they can par-i i f ll i h l b l k l

communications networks and afford the costs of

interconnection, can adjust to and benefit from suchregulatory policy. In rural areas, however, this is notthe case. It is more costly to deploy technologies inremote areas, and there are fewer users to share thesecosts. Therefore, if the infrastructure evolves bymarket forces to meet the needs of dispersedindividuals in rural areas, it will be uneven and

2



ticipate fully in the global marketplace.

The small populations and large distances of ruralregions are incompatible with the economies of scale that characterize many aspects of telecommu-nications. As a result, market forces, absent regula-tory mandates and incentives, rarely work to benefitrural areas. Current regulatory approaches do notbridge the gap between market forces and thetechnology needs of rural areas.

Regulators must develop new regulatory ap-

proaches for rural areas. The communications infra-structure provides socioeconomic benefits that mustbe incorporated into their cost-benefit analyses.Similarly, the indirect costs of distance-sensitivepricing practices such as interLATA and inter-exchange toll charges, which make communicationsmore expensive for rural citizens, must be evaluatedin this context. Regulation must also encouragecommunities and telecommunications providers to

find new ways to create economies of scale andscope, making the deployment of advanced commu-nications technologies to rural areas financiallyfeasible.

Introduction

The conflicts between economic developmentgoals and regulatory goals stand out in rural areas.

From an economic development perspective, com-munications is a means to a larger end. The currentregulatory climate, however, views communicationsnarrowly, as a commodity to be bought and sold. Assuch, it is an end in itself. Urban areas, with manyindependent users who can create their own private

service quality will vary.2

It is important for policymakers to consider boththe commodity and infrastructure characteristics of communications technologies in determiningg theirrole in rural development. While focusing on com-munications as a commodity may lead to inadequateinfrastructure in rural areas, treating all infrastruc-ture development in a uniform manner could wasteresources.

Communications can help arrest the decline of rural areas, so it is imperative to balance ruraleconomic development and regulatory goals. Cur-rently, little is being done to achieve this. Regulatorsrarely consider multifaceted economic developmentgoals when making regulatory policy. On the otherhand, educators, health officials, and local govern-ment are often unaware of what is at stake for themin the regulatory process.

Regulatory Implications forEconomic Development

Technology Diffusion and Network

Modernization

Economic and technological trends are changingthe global economy and transforming rural econo-

mies, forcing them into the information age. Thespeed with which rural areas will gain access to theadvanced technologies, allowing them to participatein the information economy, will be determinedlargely by the regulation or deregulation of commu-nications and information.

IAIOW with the State legislators and the courts, who deta e the scope of regulators’ authority.

2A ~ev~y develo~ ~e~ofi ~ ~ve~ ~ ~ t ~liatiom, As he tec~ologi~ sop~tication of ~ public switched network in~~,

the potential for geographical disparity of service also incmwes.A danger is that the network will continue to evolve, but withditTerent standards of service depending on the power a region or community can leverage in the telecommunications marketplace. Even under the unified Bell yst~ thenetwork evolved unevenly. As aresul~ locations exist in rural areas where there is no telephone emice, while other remote locations that are able, likemost urban regions, to generate enough dmand or comman d public service comrnis sion attention have relatively sophisticated communications.

–115–

116 Rural America at the Crossroads: Networking for the Future

During the era of the Bell monopoly,3regulation

encouraged subsidized service to rural areas fromthe excess revenues earned in densely populatedareas. This is no longer the case. Nonetheless, thepartially competitive post-divestiture climate en-couraged alternative providers, such as digital radiocarriers, to enter the communications market withinnovative products that can improve service in ruralareas.

Rate regulation critically affects network modern-



Rate regulation critically affects network modernization and technology deployment in rural areas. In

many areas, rate-of-return regulation is giving wayto price-cap regulation and the impact on rural areasis uncertain. In addition, other forms of regulation,including depreciation rates and the cable/telcocross-ownership ban, also impact rural network modernization.

Rate-of-Return Regulation

Until recently, both National and State regulators

almost exclusively used rate-of-return regulation forthe telecommunications industry. Under rate of return, regulators determine the total revenue a firmrequires to provide service. This revenue require-

ment includes operating expenses, depreciation andtaxes, and a “fair” return on its rate base. The ratebase consists of the total of the firm’s investedcapital, including switching, transmission, and dis-tribution facilities.

A number of subtleties of rate-of-return regulationaffect the incentives to improve the network facili-ties and to extend service to rural areas. Thesefactors involve how regulation treats the fro’s costsand how these costs affect the consumers’ prices.First, regulators can allow or disallow moderniza-tion costs in the rate base. If these costs are allowed,the rate base increases and the firm must raise more

money from its subscribers through higher rates togenerate the prescribed rate of return. If the costs aredisallowed, then new equipment does not becomepart of the rate base and the company may not bewilling or able to invest in plant equipment for whichconsumers do not directly pay. In this case, modern-ization likely occurs more slowly. Regulators must


A “Slick-96” host-remote switch in Houlton, ME. Thisremote digital switching unit improves the quality of

transmission for rural residents because their calls nolonger necessarily have to travel the many miles, alongwhich the signals get attenuated, to the central office

switch in a larger town.

strike a balance between technological sophistica-tion and the cost to the consumer.

Regulators also determine how costs are splitbetween consumer groups, such as residential andbusiness. Businesses usually pay more than theirproportional share of the costs so that residentialconsumers can pay lower prices. Similarly, urbanareas historically have paid more than their share of

the costs to subsidize rural services.

Many inefficiencies are attributed to rate of returnregulation,

4but two problems are particularly rele-

vant to network modernization and technologydiffusion to rural areas. First, regulators must rely oncost forecasts and data provided by the firms theyregulate to determine the revenue requirement. Theallocation and justification of costs determine the

prices consumers are charged and affect the fro’srate of return. Hence, there are incentives to misre-port costs. Regulators must be wary that a firm couldreport cost estimates higher than its actual costs,charge customers higher prices, and thus earn ahigher return. However, regulators must also beconcerned about revenue short-falls caused by faulty

3& still allow for subsidies of

diminished since the divestiture of AT&T and the growth of a partially competitive telecommunications market. If the telecommunications industryevolves, as many believe it will, toward an even mom competitive structure, the system of subsidies that benefits communities could become furthereroded, either forcing the era to pay higher rates than their urban counterparts for comparable service, or implying that rural telephone companiesmight not be able to invest enough in their facilities to maintain adequate service---service comparable to that in urban areas.

R. and C. “Diversification Incentives Under ‘Price Caps’ and ‘Cost Based’ Rand Journal of Economics, vol. 20, No. 3, autumn 1989, p. 390.




and the extent to which they can enjoy advancedtechnologies. In some situations, rate-of-return regu-lation can reduce incentives for efficiency andinnovation, and result in higher costs than withalternative regulatory approaches. For example, why

should a firm undertake a risky modernizationprogram if consumers immediately benefit from anycost savings resulting from innovation, but investorsmust bear the risk of regulatory disallowances andlosses from unsuccessful innovations. Such asym-metric regulation can result in higher costs to the ratepayers, delay modernization of the country’s infra-structure, deny customers access to new and innova-

mation services or video courses, the communitysuffers in the short and long term. Similarly,regulators must also consider the value of the rangeof applications of information technologies within acommunity. Telecommunications access to state-of-

the-art medical technologies, international markets,and distance learning curricula is more valuable to acommunity than merely the ability to make routinetelephone calls. The effects of rate of return regula-tion could be very different if regulators calculatedthe costs and benefits of network modernization andtechnology for economic development.



structure, deny customers access to new and innovative services, and compromise the competitiveness

of regulated firms in the marketplace.

Regulators must be aware of potentially anticom-petitive practices by regulated fins. Well-heeledfirms could subsidize a competitively offered serv-ice long enough to force out their competition. Thiscould effectively foreclose unregulated providersfrom offering a competitive service, potentiallyslowing the rate at which rural areas could gainaccess to new technologies. Yet, excluding regu-lated firms from competitive markets could denyconsumers lower prices, and deny investors of opportunities to take advantage of new markets.

11

The effects of regulation on network moderniza-tion are complex and generalizations cannot bemade. Since incentives for innovation and network modernization are central to economic development,it is important that the implications of rate of return

regulation be considered in the context of economicdevelopment. When communications is viewed asan infrastructure, necessary for a variety of socialand economic functions, the regulator’s dilemma of allocating costs gains a different perspective.

Regulators must consider the costs to society andalso to the individual subscriber, if the communitycannot link up with the rest of the world. If the localhardware store cannot exchange data with the largernational franchise, it may not be able to remain inbusiness. If the school cannot access library infor-

Depreciation Practices and Modernization

The rate at which a company depreciates itscapital investments affects the rate at which it canmodernize its facilities .12 A long depreciation sched-ule can imply a slower modernization processbecause the cost of equipment must be spread overa long period of time. In this case, a firm could notafford to make new investments as quickly, butsubscribers rates could remain low. A short depreci-

ation schedule recovers the cost of an investmentover a short time, and the consumer absorbs this withhigher rates. Because the firm recovers the cost of the investment quickly, it can afford to make newinvestments sooner. In addition, the shorter pay-back period means that the company will pay lessinterest on the loan, and therefore the total cost of theequipment will be less. Thus, although the highercost is passed to consumers, they ultimately pay less

for that technology .13

Historically, rural independent telephone compa-nies have faced relatively long depreciation rates.Rather than replace their equipment with newtechnologies before the old equipment was fullydepreciated, most companies continued to use electro-mechanical switches while urban areas installedanalog electronic switches. Technology advanceshave occurred rapidly in recent years, so digitalelectronic switches have replaced analog electronicswitches as the preferred technology. At the same

llsome analysts call for “resid~ pricing” of core services, using revenues from new services with market-basedpriceS tO cover a pOfiOn of smed

costs. However, the share covered by new semices would not be based on some arbitrary ‘‘fully allocated cost,” but on what the market dictates.

lz~e MS ~Wem deprmiation practices and modernizah‘on are cle~ in theory, although quantitative studies are unavailable. One of the fewempirical studies in this area found that higher realized rates of return lead to greater investments in plantmodernhtion by AT&T in the 1%0s and1970s. B. Branch “Quality of Service and the Allowed Rate of Return: American ‘IiAephone and lklegraph,” Journul of Econom”cs andBusiness, vol.

32, 1979, pp. 86-98.

lss~cdy ~~, ~ i=orm ~ oppo~w cost t. tie Comuti of ~ ex~ roomy thq WW pay for a ~orter period of time. COIMumerS will

pay less for the technology assumingthat the telephone company armot emn a higher return on the extra amount of money it would be paying on theshorter depreciation schedule if it invested that money elsewhere and paid the utilityover a longer depreciation schedule.




Box 5-A—Experimenting With Price Caps

Several States and the Federal Communication Commission have begun to experiment with price-capregulation. At the State level, public utilities commissions (PUCs) have undertaken price-cap regulation as part of a technology deployment and economic development strategy. For example, in Vermont-a predominantly rural

State-the PUC granted greater pricing flexibility to the local exchange carrier (LECs) in exchange for acommitment from the telephone companies to upgrade their technology and provide a basic level of service to everycommunity. Kansas recently took a similar approach. Under the TeleKansas plan, Southwestern Bell agreed toinvest $160 million in network technology at a faster rate than it would have under the traditional rate of returnregulation. In exchange for Southwestern Bell’s commitment, the Kansas Corp. Commission agreed to moreflexible pricing regulation. A number of other States are also taking similar approaches.

At the Federal level, the local exchange carriers have received price caps with ambivalence. Although all sevenof the Bell operating companies face mandatory price-cap regulation, the majority of independent telephone

i h i ld h l i M i h i d d i i i



companies have yet to yield to the new regulatory regime. Meeting the required productivity increases appears to

have discouraged some of the smaller telephone companies.1

l{ ‘~dewnden~ Snub WICO fiw CaPs, “ Telephony, Nov. 16, 1990, p. 20. See also, “Price Caps? NO Thanks,” Co~nications Week,Nov. 12, 1990, p. 12.

areas vulnerable.18

Rural areas have traditionally they will be working with, the source of funds, andbeen among the last to get new technologiesprecisely because firms will maximize profits by

serving the least expensive, most lucrative, andeasiest-to-serve customers first. Analysts have littlehard evidence about how price caps would affectrural areas because these plans have not been ineffect until recently, or have been implemented onlyin limited cases, mostly for competitive long-distance service. If the regulatory flexibility of pricecaps promotes beneficial technical change, firmsand customers, including those in rural areas, could

realize substantial savings (see box 5-B).An analysis of the positive and negative incen-

tives of price caps would be incomplete if costs areviewed strictly as the cost of the firm’s investments.Communications technologies are much more thana commodity, especially for rural areas, so regulatorsshould treat investments in communications tech-nologies as investments in community infrastruc-

ture.

19

Price caps alone cannot accomplish this. Evenif regulators implement a social contract, mandatinginvestments that firms would not make otherwise asa condition of allowing price-cap regulation, regula-tors and firms must identify the costs and benefits

the-means to evaluate these investments. Will thecash flows come from cost savings induced by the

new regulatory incentives? Will the financial mar-kets view the new social contract as involving netbenefits to investors? Will prices in urban areas bekept artificially higher—providing subsidies forrural customers? Depending on the answers to suchquestions, rural areas could benefit or lose.

Interestingly, in those cases where States haveadopted price caps under the condition that the

telephone company make specific investments, thefunds for those investments do not come solely fromproductivity increases. Rather, urban consumers’ orbusiness rates are allowed to rise to compensate forthe increased investments in the network. Cross-subsidization between urban and rural areas, there-fore, persists.

Cable Television

The possibility of one company providing bothcable television and telephone service could havesignificant impact on the rate of network moderniza-

18Even urba areas and large business users can be vulnerable to some of the abuses that can arise from price<ap regukion. k markets without

effective competitio~ telecommunications companies will face greater incentives to maximize profits by not improving saice. This experience hasbeen the case inthe United Kingdom where price caps have been in place the longest. A Citibank executive notes, “for longer-hati long distan~ service,. . .price caps have kept rates down because of the fierce rivalry between British ‘lblecom plc and Mercury Communications Ltd.,” but for less

competitive markets, such as local service and medium-distance toll service, Citibank ‘‘has fac~ escalating rates.” I@Meen Killette, “Price CapsCriticized,” Communications Week, July 16, 1990, p. 12.

l~~ycm=, ~W~tom ~ecom~~~ statelaw~dco~pr~ents in the extent to which they cmcomidamnomic developm~t~ncems.



122 Rural America at the Crossroads: Networking for the Future

Under the 1984 Cable Communications PolicyAct,

23local telephone companies cannot provide

video programmingg within their service areas. By

prohibiting telephone companies from providingcable programmingg either directly (along their ownlines) or indirectly (along the lines of an affiliate orsubsidiary),

24the Cable Act effectively created

a

monopoly for the cable providers in each franchiseterritory. From a strict economic perspective, twoseparate transmission lines terminating at each homeor business is a wasteful solution.



One rationale for codifying the cable monopolywas to encourage technology diffusion. Policymakersreasoned that a monopoly would deploy technologyfaster than a competitive market. They feared that, if telephone companies could own cable televisionfacilities, they could discriminate against cableprogrammers and operators who were not in someway affiliated with the telephone company. More-over, the telephone company could undercut com-petitors’ prices and drive the competition out of themarket. As a result, technology would advance at aslower pace.

Although the cable monopoly persists, policy-makers continue to debate whether telephone com-panies should be banned from the cable industry.The focus of the debate has shifted from the questionof technology diffusion to that of market power.Some analysts believe that the cable industry has

abused its monopoly position and should be subjectto the discipline of a competitive market that wouldinclude telephone companies. Others contend thatthe telephone companies are already so large andpowerful that they could easily purchase existingcable systems and thwart any real competition.

In some rural areas, the cable-telephone cross-ownership debate has been resolved. The Cable Actincludes an exemption from the rules for towns withpopulations under 2,500. Congress is now consider-ing expanding the current Federal CommunicationsCommission (FCC) definition of rural area frompopulation of 2,500 to 20,000, so that many more


A cable company and telephone company in ruralWest Virginia share the same premises but maintain

separate transmission facilities and completelyseparate ownership structures.

rural locations would be exempt from cross-25 This action represents

a

ownership restrictions.frost step in recognizing the unique problems of ruralareas and addressing rural issues differently fromurban issues.

Information Services

The rationale for allowing telephone companiesto offer information services, such as videotex,electronic yellow-pages, dial-up video, and cabletelevision is similar to the rationale for allowingcable-telephone company cross-ownership. Such anarrangement could take advantage of economies of scope, by utilizing the same facilities for severaldifferent functions, and economies of scale, byattracting the demand of several different usergroups. The Bell operating companies (BOCs) arguethat such an increase in the demand for network

capacity would be necessary to justify rapid, high-capacity network modernization. Before this couldoccur, however, the provisions of the court-supervised Modified Final Judgment that prohibitsthe BOCs from offering information services would

(-b).

20, p. 21. Communications Act of 1984 prohibits a a

company, other than that of carrier-user. This means that the telephone company may provide the cable company with telephone service, but there can

be no other relationship, whereby the telephone company would provide capacity for the cable company to transmit its signals along. Additionally, therecan no affiliations between the two parties.

included of a to 20,000 Of a

cross-ownership waiver. this legislation did not pass, it is expected to in sessiona of Congress as an importantissue.



Chapter 5-Regulation and Rural Development q 125



\

- - - J .


cost might seem more feasible if local calling areaboundaries expand.

39

To establish the appropriate EAS boundaries,regulators must first determine the community of interest. Often, they will survey the calling patternsof prospective communities to assess how often theymight call a neighboring community. However, thesame problems that are involved in forecastingdemand for technology exist in forecasting demandfor EAS service. If, for example, consumers mustpay toll rates to call a nearby community, they mightcall less frequently and report on the survey fewlong-distance calls.

40

Regulators must balance the impact of EAS on therates of those who do not directly benefit from theservice compared to the cost savings for those whouse the service extensively .42 Standard cost-benefitanalyses, using economic cost data, are of limited

usefulness when many of the costs and benefits arenot characterized by physical entities or directsavings, but rather by social costs and benefits.These benefits may include positive externalitiesassociated with an increased calling volume.

43A

negative impact would be that consumers who donot make long-distance calls must pay higher rateswithout benefiting directly.



Regulators must also consider characteristics of the local communications market when reviewingEAS plans. Three features of the telecommunica-tions market are relevant to EAS.

41First, whether the

local telecommunications provider is a monopolistwill affect the ease with which EAS plans might beimplemented. If an EAS plan requires significantchanges in the technical facilities, regulators couldmore easily mandate such changes to a monopoly

supplier than to suppliers in a competitive telecom-munications marketplace. Second, the redefinitionof a local calling area could impact the sustainabilityof intraLATA toll competition. If competition existsfor the long-distance calls that occur within LATAboundaries, competitors might not be able to affordto offer service if their consumer base erodesbecause fewer calls are toll calls. Third, the extent towhich consumers use telecommunications could

affect the extent to which they would be willing topay the extra cost of EAS. Often, many customerswill make mostly local calls and accept paying apremium for infrequent toll calls. However, formany business customers, and increasingly hospi-tals, schools and individual subscribers, distance-sensitive rates translate to higher costs to reachextended markets or needed information. Theseadded costs are important for products with highly

elastic demand.

Local calling area boundaries are subject toregulatory approval. Hence, regulators effectivelydetermine market boundaries at the same time theydetermine local calling area boundaries. Therefore,regulators must be sensitive to economic develop-ment concerns and explore new approaches forcost-benefit analyses. As the role of telecommunica-tions and information technologies increases insociety, regulators’ decisions increasingly function

as de facto economic development policies. Ideally,these decisions would take place in conjunction withState and local economic development planning.

Coordination of Users and Providers:Leveraging Demand and Supply

Market forces often work against rural areas; thisis the case for telecommunications technologies and

services. The vast distances and sparse populationsthat characterize rural life do not generate theeconomies of scale and scope that make communica-tions technologies more affordable in urban areas.Many of the subsidies that provided telecommunica-tions to rural areas at prices less than the cost of service have disappeared since divestiture. Nowrural consumers must also absorb the costs of understanding and configuring telecommunications

services and technologies to fit their needs.44 In this

3?Ibid., p. 67.

%id., pp. 33-53.

411bid., p. 50.

d@fte~ a minori~ of Wbscribers will make the majority of the phone calls. These subscribers, however, are frecluently tie COIWUU@ I=dem ~d

volunteers, who are integral to the development process.

43~en Colomdo ~lement~ ~ MS pm CaII@ volume in the region increased by 500 pement. The hlrge incrme indica~ ti t -Y PPle

were now communicating because it becameaffor&ble. Moreover, increased communication tends to lead to even more communication. With such agrowth in calling potential withEM plans, regulators and local telephone companies must be prepared to make the necessary equipment upgrades to

handle the new traffic.44For a more detailed discussion see ch. 3.

Chapter 5-Regulation and Rural Development . 127

new environment, rural communities and businessesmust find creative ways to make the same market

forces that work to the advantage of corporationsalso work for them. However, communities willlikely encounter regulatory barriers that will inhibittheir efforts to exploit the market. In many cases, thesame regulations designed to protect small consum-ers from market abuses can impede their abilities tocompete.

Rural Area Networks: Coordinating Users

Figure 5-2—Rural Players

Residences Businesses

Governmentoffices

Industries Hospitals



Despite their disadvantages in the telecommuni-cations marketplace, rural areas can take advantageof market forces to gain access to advanced telecom-munications technologies and services. The notionof Rural Area Networks (RANs) illustrates a strat-egy that could enable rural communities to do justthat. However, the current regulatory environmentmight discourage or inhibit such demand agglomer-ation. In many cases regulation may not directly

prohibit shared usage arrangements, but to the extentthat such arrangements are unprecedented, commu-nities that try this type of strategy could firedthemselves in the midst of drawn out regulatoryproceedings.

Pricing

Pricing regulation could present an obstacle tousing telecommunications as part of a development

strategy if RANs utilize the public switched net-work.

45In most States, the local exchange carriers

(LECs) must file with the PUC for each differentrate, or tariff, they might offer to different customergroups-e. g., business, residential, or university—and for different services-e. g., voice, data, or videoservices.

%Thus, residential subscribers pay certain

rates for the use of the lines to their homes, whilebusinesses, hospitals, and colleges may pay different

rates for the lines terminating to their facilities.However, if the local community college were toshare broadband capacity with local businesses,extend a link to the community’s medical clinic, andconnect several other community agencies or busi-nesses with services or markets outside the commu-nity, the capacity would no longer be dedicated tothe sole use of any of the individual subscribers orfor any particular service (see figure 5-2).

Hospitals

and clinics

A Rural Area Network can include many different pIayers in a ruralcommunity, including small businesses, government offices,hospitals, schools, and community colleges or universities.


At minimum, an arrangement like the RANdescribed above would require that the community,the telephone company, and regulators agree on a

tariffing arrangement that treated these various usersas a defined group. Such agreements are common-place, but typically involve similar entities. Forexample, all the State colleges in Vermont aretreated as one users’ group and thus all face the samerates, which are lower than would be possible if eachwere treated as individual users. This system bene-fits both the colleges, with lower rates, and thetelephone company, by guaranteeing a sufficientvolume of traffic over their lines. Telephone compa-nies typically cannot define a users’ group andimplement anew rate without filing a tariff with thepublic utilities commission. Thus, even if a RANwere not controversial, it would likely require a ratehearing and substantial administrative proceedingbefore it was approved. Most likely, either the LECor the community would have to hire lawyers and

technology consultants in order to file for a regula-tory waiver. With a RAN, this process could take along time and a lot of energy and expense because somany different parties and types of services wouldbe involved.

This scenario also introduces new complicationsinto the cost-based, or de-averaged, pricing strate-gies that arose in the partially competitive post-

Concern for internal amounting purposes-since private

oversight.

is true for States with rate-of-return regulation. The extent to which the local exchange carriers must file tariffs with the will vary underalternative regulatory methods.



Chapter 5-Regulation and Rural Development q 129

Figure 5-3-Bloomsburg, PA TelecommunicationsNetwork Configuration

The logistical problems that the University of Maine and the town of Bloomsburg face in develop-ing their RANs will likely confront many ruralcommunities and community organizations as theybegin to explore using telecommunications as part of an economic development strategy. Because theregulatory system could not accommodate eco-nomic development concerns, Bloomsburg and theUniversity have few options but to bypass the publicnetwork. Although building a RAN--or part of aRAN--on privately owned facilities might be the



The Bloomsburg Telecommunications Network aggregates thetelecommunications demand of many local users, includingbusinesses and Bloomsburg University. This aggregated trafficthen travels along DS-3 lines to Harrisburg, where MCI, Sprint,and AT&T each have points of presence.

SOURCE: Dovetail Systems Corp., “Telecommunications Opportunitiesfor Bloomsburg,” Bethlehem, PA, June 1989.

boundary, so Bell of Pennsylvania cannot carry thetraffic. Finally, although the public switched net-work could technically accommodate many of theservices the town needs, town officials have sug-gested it is more economical for the town to build itsown system because of the way the regulatedservices are priced.

The University of Maine faced a similar situationwhen it was considering expanding its fiber opticdistance education network into the neighboringNew England States.

52Although the University

worked out an arrangement with New EnglandTelephone to deploy the fiber optic network withinMaine, the LEC could not offer its services acrossthe State’s border because interstate traffic is the

domain of the interexchange carriers (IXCs), such asAT&T, MCI, and Sprint, and is regulated by theFCC. The interstate tariffed rates for DS-3 lines wereso prohibitively expensive

53that it made more sense

for the university to build digital microwave linksacross the State borders to link up with the networksin the other States.

54

least expensive solution for the immediate future,the cost of many small networks will almost surelyexceed the cost of extending advanced technologyalong the public switched network to these commu-nities. Thus, there is a significant cost of failing toreconcile economic development and regulatorypolicies.

Rural Area Networks: Coordinating Providers

Consortia of telecommunications providers cantake advantage of market forces in much the sameway that coalitions of users can leverage marketpower to gain access to advanced telecommunica-tions services and technologies. By cooperating orentering joint ventures, telecommunications provid-ers can distribute the high costs and diminish someof the risk of investing in advanced telecommunica-

tions technology in rural areas. However, regulatoryrestrictions and anti-trust considerations often pre-vent or impede such arrangements from developing.In many cases, the regulations and laws that inhibitthe formation of a telecommunications consortiawere developed to protect consumers from marketabuses that typically occur when suppliers colludewith one another.

Iowa Network Services (INS) illustrates the

problems that could arise if telecommunicationsproviders ally to create RANs. INS is a consortiumof 128 of Iowa’s 150 independent telephone compa-nies that joined forces in 1984 to build a fiber opticnetwork providing centralized equal access to ruralcommunities across the State.

55Individually, none

of the independent companies could have afforded to

not yet

rate is so expensive because of the capacity required to t a video message, like those used for distance education orteleconferencing. Essentially, sending one video message is equivalent to sending thousands of streams.

for to to cost of the microwave

Hem, CA: MESA

1990).


Figure 5-4-lowa Network Services

\\\ I

Creston ‘

Figure 5-5-Palmetto Network Configuration



Mt. /’ I

u Central switch

Iowa Network Services is a consortium of independent telephonecompanies, who jointly invested in a fiber optic network and an

SS7 switch.

SOURCE: The /NS Moines, 1A: lowa Network Services, 1990).

provide such sophisticated services to their ruralcustomers. Organizing the consortium and findingfinancing for their venture proved to be only the firsthurdle these independent companies encountered inoffering advanced telecommunications capabilitiesto their customers. The BOC serving Iowa brought

an anti-trust suit against INS in an effort to block thenetwork. The suit failed, but it took 31/z years of Federal and State regulatory hearings and proceed-ings before INS could offer its services (see figure5-4).56

In contrast to the INS experience, a group of independent telephone companies in South Carolinaencountered few regulatory or legal obstacles when

they joined together to form a fiber optic network,called PalmettoNet. Each participating, independenttelephone company built, operates and maintains thesection of the network that passes through theirterritory. The consortia, PalmettoNet, then leasescapacity from the individual companies to create theunified network (see figure 5-5).

57

PalmettoNet is a consortium of independent telephone compa-nies in South Carolina, who jointly invested in a fiberoptic network.

SOURCE: Harmeet Sawhney, University of Texas at Austin p 1991.

Arrangements such as Iowa Network Services and

PalmettoNet take advantage of synergies to makemarket forces work to the advantage of ruralsubscribers. These approaches require strategic plan-ning at the regional level, rather than at the level of each independent telephone company .58 Thus far,such consortia are largely unprecedented. Therefore,their legality or feasibility remains untested in manymarkets. As the examples show, it is difficult topredict the extent to which companies will face

regulatory or legal obstacles. Where uncertaintiesexist, stakeholders who are opposed to the strategymight use the regulatory and legal system to haltprogress on such a project. Therefore, anti-trust suitswill be likely if the dominant carrier in a regionperceives such networks as a competitive threat.

Currently, regulatory and development policy inmost States and at the Federal level is unprepared to

deal with creative approaches, such as user coali-tions and provider consortia, to technology deploy-ment in rural areas. If rural areas are to accessadvanced communications technologies in an eco-nomical fashion, it is critical that policymakers at thelocal, State, and Federal levels think about and planfor such arrangements.

‘Ibid.

“Complementarily contractor document prepared for the Office of Assessment, November 1990.

“Rural A Cultural Hypothesis” (draft), doctoral dissertation, The University of at 1991.

Chapter 6

f



The Role of theFederal Government:Orchestrating Cooperation

and Change

ContentsPage

Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + . . . . . . . . .

From Farm Policy to Rural Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Past Federal Roles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Infrastructure Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Promoting Information Dissemination, Science, and Education . . . . . . . . . . . . . . . . . . . . . . . . . . .

Coordinating Federal Roles for Holistic Rural Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Federal Players . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Intragovernmental Coordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Federal Policy Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cooperating in Pursuit of Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The States as Agents of Development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Vision and Leadership at the Local Level . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

133133134

137137140144144144148149

149

151



Boxes

Box Page

6-A. Fro-m Spending and Rural Spending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134

6-B. Federal Roles in Rural Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146

6-C. Livermore, KY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152

Figure

Figure Page6-1. Organization Chart of Agencies Involved with Rural Development. . . . . . . . . . . . . . . . . . . . . . 145

Chapter 6

The Role of the Federal Government:Orchestrating Cooperation and Change

Findings

The Federal Government can play an importantrole in rural economic development. To do so, itmust exercise leadership and make rural develop-ment and the use of communications technologies in

the development process a national priority The



the development process a national priority. Thediversity of rural conditions across the Nation meansthat the development goals set by the FederalGovernment must be broad, allowing for morespecific goals and strategies to be formulated andexecuted at the State and local levels. In addition tovision, the Federal Government must provide acommitment of financial and technical support.

Many players at the Federal, State, and locallevels must be involved in a holistic rural develop-ment strategy. Competition for turf and economicrewards hinders the cooperation among playersnecessary for economic development and the effi-cient use of communication technologies in ruralareas. Many stakeholders have never had to dealwith one another before, and there are no incentivesto do so now. Given the important role of communi-

cation in society and the growing market value of communications systems, the stakes involved inproviding communication services are higher thanever before. As a result, stakeholders vie to take thelead in configuring and controlling the communica-tion infrastructure since often only one network iseconomically feasible given economies of scale andscope. With divestiture and the unbundling of thecommunication infrastructure, there are also many

new players competing for a piece of this highlylucrative communication market.

As part of its role, the Federal Government musthelp to orchestrate the kinds of changes and cooper-ation among Federal and local agencies needed foreconomic development to take place. Workingthrough existing organizations, such as the U.S.Department of Agriculture’s Rural Electrification

Administration, Rural Development Administrat-ion, and the Cooperative Extension Service, it mustincrease the incentives for cooperation at the locallevel, and make it more costly for those who fail towork together.

Photo credit: Russell Lee

The post office in Costilla, NM in 1939.

Introduction

The Federal Government has consistently takensteps to promote ruralAmerica’s well-being through-out American history. In the earliest years, govern-

ment policies were designed to encourage farmingand successful settlement. To link the rapidlyexpanding Nation, the Federal Government devel-oped a rural infrastructure, fostered a public educa-tion and library system, and promoted the dissemin-ation of public information and news. To meet theneeds of the industrial revolution, it promoted ruralelectrification and the transfer of industrial technol-ogy to rural applications.

The Federal Government set up a variety of organizations to implement its rural policies. Amongthese, for example, were the Postal Service, theDepartment of Agriculture and Cooperative Exten-sion Service, the system of public schools andland-grant colleges, and the Rural ElectrificationAdministration.

As rural communities continue to struggle for

their survival, the question is raised as to what rolethe Federal Government should play in assistingthem today. To provide an answer, it is necessary toconsider the traditional goals of Federal rural policy;how well it has been executed; what organizational




tariff reductions on materials. After 1850, it madelarge land grants to the States for the purpose of financing railroad construction. And in the 1860s,the Federal Government began to distribute landgrants for transcontinental roads as well.

The telegraph was another communications sys-tem inaugurated with Federal assistance. In 1834,Congress authorized funds for Samuel F.B. Morse tobuild a demonstration line between Washington, DCand Baltimore. But Congress refused to nationalizethe telegraph, as Morse requested, preferring that the

private sector finance and deploy it.



The Federal Government also played a criticalrole in assuring the deployment of electricity andtelephones to rural areas. Most urban citizens hadaccess to electric service by the turn of the century,but America’s farmers were not served until muchlater. Even by 1935, fewer than 12 percent of America’s farms had electricity .29 Private utilitieswere unwilling to provide service to rural areasbecause demand seemed low and the technicalproblems high. At first, the Federal Governmentsought to assist and encourage private industryrather than displace it. But President Roosevelt wasunimpressed by industry’s response, so he createdthe Rural Electrification Administration.

3OREA

bypassed the municipal and private utilities. Insteadof cooperating with them, it built its own network with “grass roots” support. REA’s goals wereambitious: universal, high-quality service, rapiddeployment, and low rates. It was quite successful inachieving them. Few rural cooperatives defaulted,since usage rose so quickly. By 1940, 30 percent of all farmers had electricity. By 1950,77 percent wereserved, and by 1959, 96 percent. Rural cooperativesalso played an important role in economic develop-ment, facilitating the movement of industrial, com-mercial, and nonfarm residents to rural areas.

31

Despite (or perhaps even because of) thesesuccesses, REA had its detractors. After 1950, theprivate utilities’ lobby sought to shut it down. They

Photo credit: Russell Lee

An old-fashioned telephone used for communication ina gold mine in Mogollon, NM, 1940.

claimed that REA was no longer needed because its job was virtually complete. To gain support for theirposition, they portrayed REA as “socialistic” andunfairly competitive. But REA had its own politicalsupport. The National Rural Electric CooperativesAssociation (NRECA) provided a powerful grass-roots voice. Moreover, REA was well situated in theprotective environment of the Department of Agri-culture. It was also a “favorite” of many ruralCongressmen.

Looking for a new mission, REA welcomed thetask of deploying telephones to rural areas, whichwere still largely unserved by telephones in the late1940s.

32Legislation permitting REA to play such a

the first quarter century, farmers had not pressed for electricity. Their main interest was in raising commodity prices. Nor apparently wasthe research-extension system troubled by the delay in tion caused by lack of rural electricity.

D. The Rural An Evaluation DC:

1963), pp. 4-5.

cooperative= aggressively recruited and served industrial, commercial, co which had the effect of increasingthe number of ers each year, from 5 million in 1960 to 12 million 1987. U.S. of Agriculture, Rural Administration

A Brief History of Rural Electric and Telephone Programs (Washington DC: 1989).

39 by (erg- neighborhood due dines,

this service was allowed to deteriorate, and by 1940 only 25 percent of farm residences had working telephones. U.S. Census, compiled by U.S. Congress,House Committee on Agriculture, 1949, p. 2.




today. REA is a particularly useful model, given its

past success in encouraging technology deploymentin rural areas. Recent analyses suggest that advancedtechnologies will not be quickly deployed to rural

areas without some form of government interven-

tion. REA could assume the role of helping tofinance and facilitate the development of Rural AreaNetworks, just as it took on the additional task of providing telephone service. Most important, R E Acould help rural communities and developmentagencies serving rural areas sort out their communi-cation needs and explore new ways of meeting them.

With its successful lending experience and techni-cal expertise, REA could play a key role in launchingexperimental approaches to deploying technology.REA ld t bli h f d di i

dispute. Most recently, the Reagan Administrationclaimed that REA has outlived its mandate, sinceuniversal service has been achieved and ruraltelephone companies are financially sound. ForREA to get a new mandate, therefore, may require

Congress to redefine the notion of universal servicein the context of an information age.

The Rural Economic Development Act of 1990includes measures to expand REA’s role in severalrespects. It creates a new REA Assistant Administra-or for Economic Development to carry out REAprograms that involve rural electric and telephonesystems in community and economic development.It provides the REA Administrator with additionalpowers and assigns duties to provide advice and

id bli h d d i i il j d



REA could establish forums and discussion groupsof community leaders, communication providers,and communication users to consider rural commu-cation needs, and explore how communicationsystems might be designed to meet these needs. In a

more proactive mode, REA might conduct researchand development to investigate new and creativeways of deploying advanced communication andinformation technologies to rural areas and/or pro-vide financial support for demonstrations and trialsof such strategies. REA could serve as an honestbroker between borrowers and potential users. Itcould also provide loans and technical assistance togroups of users and providers who undertake coop-erative ventures.

To play this kind of an expanded role, REA will

need much greater resources. The REA telephoneprogram staff has dropped from a high of 500 to 149employees. And the remaining staff has little famili-arity with rural development in general. So addi-tional staff and staff training are essential. REA willalso need greater political support if it is to besuccessful. REA’s very existence has often been in

guidance, establish and administer pilot projects anddemonstrations, and act as an information clearing-house for dual development-related activities of REA borrowers. REA’s technical assistance role isstrengthened across the board. Finally, the Actreaffirms the continuing importance of the REA loanprogram, and calls on it to play an even greater role.

Promoting Information Dissemination,

Science, and Education

Th e Federal Government’s role in promotinginformation dissemination, science and technology,

and education has its origins in the Constitution: theFirst Amendment guarantees freedom of speech and

press; Article I, section 8 authorizes the Federal

Government to grant intellectual property rights;and Article I, section 8, paragraph 7, permits theGovernment to build postal roads.

40The Federal

Government took advantage of the postal provisionsto subsidize the distribution of news in the late1700s.

41After the Civil War, the Federal Government

played a major role in the development of libraries42

We American attitude towards information dissemina tion differed radically from that in Europe, where the ruling monarchs regarded it withconsiderable alarm. However, building a Nation requid the establishment of communication links, the development of a iled marke~ the forgingof a common culture, and the building of a democratic policy. The widespread flow of information was essential to accomplish these tasks.

41s= Rickd B. fielbowiti, “Newsgathering by Printers’ Exchanges Before the Iklegrapk’ Journalism Hi~tOV, vol. 9, 5 ummer 1982, pp.4248;and Samuel Kemell, “The Early Nationalization of Political News in Ameri~” Studies in American Polifi”ca/ Development (New Have~ CT: YaleUniversity Press, 1986), pp. 255-278.

dz~ tie unit~ Stitti, libraries have always been regarded as popular educational institutions. Like the public schools, they derived their support fm~the public education and reform movements that developed after the Civil War. Traveling libraries were founded to bring news and reading materialsto rural areas where book deposit stations were set up in grange halls, neighborhood stores, ~e stations, and women’s clubs. In cities, libraries wereestablished not only to provide access to books but also-like the settlement houses-to provide a haven and adult education programs for a growing

number of working-class immigmnts. These libraries developed rapidly during the post-Civil War period, and even continued to thrive in the depressionyears. See V. H. Mathews, Libranesfor Toalzy and Tomorrow (Garden City, NY: 1976).




“demonstration farms,” on which farmers couldlearn by watching and doing, and “movableschools, ’ ‘ such as George Washington Carver’s

Tuskeegee mule-drawn wagons full of new seeds,farm machinery, and dairy equipment, as well as

boys’ and girls’ clubs through which it was hopedparents could be educated.

One promising and widely used idea was to

employ an “extension agent’ in each county towork directly with innovative farmers. The Smith-Lever Act of 1914 authorized partial Federal funding

for an extension service in all rural counties. Thecosts were to be shared by the States, the counties,d b i i f i i f



and by county organizations of innovative farmers,called farm bureaus. Comanaging this new agencywere the U.S. Department of Agriculture and theland-grant agricultural colleges. On the campuses,extension and experiment stations formed a partner-ship. Still another partnership developed betweenthe county extension agency and the county farm

bureaus; the county agent organized the farmbureaus, which in turn formed State and Nationalfarm organizations, thereafter becoming Exten-sion’s link with political supporters as well asfarmers. Later on, extension people helped startother farm organizations, called commodity organiza-tions. The experiment stations also formed linkswith the farm bureau and with the commodity groupsso they could better understand the research needs of

producers. Leadership for this public-private net-work was recruited from graduates of the agricul-tural colleges. Within a few decades, this elaboratenetwork of players had achieved its goal of modern-izing f arming. Moreover, the quality of farm life hadbeen improved through access to home economicsand other farmer information services.

Despite its many successes, the Extension Servicehas been criticized throughout its history for beingelitist, and catering to the most innovative farmers.Moreover, it has found it difficult to move from thegoal of agricultural efficiency to the broader goal of community development. Under President Roose-velt, for example, leaders in the Department of Agriculture tried to develop policies aimed at


The Page Co-op Farm Bureau endures even as the countyshifts away from agriculture.

multiple goals. But this initiative was opposed by thefarm bureau, which feared that the Extension Servicemight lose control at the grassroots level.

53And

State extension services found it hard to shift theirresources from agricultural to rural developmentbecause of the resistance of farm and commodityorganizations. Moreover, the partnership betweenscientists and extension, which was so successful inmodernizing agriculture, often opposed efforts to

renounce conventional agricultural practices thatmight endanger health or the environment.

54

As rural areas face the challenge of moving into

the information age, the Federal Government mustcontinue to play a major role in information dissem-ination, research and development, and educationand technology transfer. At present, there is littleFederal research being conducted that focuses on thecomplex relationship between communication tech-nologies and economic development. More is needed

to avoid the kind of mistakes made in the past whentrying to deploy technology to achieve social oreconomic ends.

55There is also a need for assistance

in transferring technology to economic developmentapplications and for providing up-to-date informa-tion about these technologies.

Social Scientists Politics in the Age MO: University of Pp.

USDA Research conducts research on the economy, including business, of

development. However, only a very small percentage (about 5 down from 10 percent a decade ago) of budget is allocated to rural topics,due to budget constraints and competing priorities (the bulk of research is on commodities, trade, and the like).could establish a research focus on rural telecommunication and information services or industries, and on the business, and financial

of a information economy.

Chapter 6--The Role of the Federal Government: Orchestrating Cooperation and Change q 143

Having successfully played these roles in the past,the C ooperat ive Ext ens ion Service ( C ES) appears

un ique ly su i t ed t o he lp in t roduce in f ormat ion- age

t echnologies t o rural areas . Know ledge i s rare ly

t r a n s f e r r e d p a s s i v e l y . M o v i n g i n n o v a t i o n s f r o m

development to production is not a one-way process.

The experience and understanding of potential users

is as important to the process as is expert knowledge.

Thus effective technology transfer requires outreach

programs based on mutual trust and respect, similar

to those administered by the Cooperative Extension

S e r v i c e .5 6

At present, CES provides education, information,

and technology transfer on numerous topics relevant

.



and technology transfer on numerous topics relevant

t o f a r m i ng and agr icu l t ure general ly . The scope

ext ends t o many t op ics re levant t o rural deve lop-

ment, and could be further broadened to specifically

i n c l u d e i n f o r m a t i o n t e c h n o l o g y a p p l i c a t i o n s f o r

rural deve lopment . C ES has t he advant age of an

ext ens ive S t at e and count y net w ork of land- grant

c o l l e g e s , e x t e n s i o n a g e n t s , a n d f i e l d e x p e r i m e n ts t at ions t hrough w hich t o d i s seminat e in f ormat ion

and education.

C ES has in t erpret ed i t s s t at u t ory mandat e as

extending to the general health of rural America, and

h a s n o w d e v e l o p e d i t s o w n r u r a l d e v e l o p m e n t

s t rat egy , in coord inat ion w i t h U .S . D epart ment of

A gr icu l t ure and government - w ide rural rev i t a l iza-

t i o n i n i t i a t i v e s .57

I n d e e d , t h e C E S r u r a l s t r a t e g y

predates these other initiatives. The CES approach to

rural deve lopment emphas izes t he import ance of

local leadership, the health of the local community,

a well-educated rural cit izenry, and strong coopera-

tion among governmental and private sector partici-

pant s in t he deve lopment process .58

CES is developing a communication and informa-

tion technologies strategy, to be completed by early

1991. The strategy could serve as a vehicle to focusU S D A a n d p e r h a p s g o v e r n m e n t - w i d e e f f o r t s f o r


The Penal Oreille County Library, led by its energetic andvisionary director, is a major information center for the

town of Newport, WA.

technology transfer in rural areas. CES is already

exper iment ing w i t h t he use of e lec t ron ic med ia—

inc lud ing on l ine dat abases , compact op t ica l d i sks ,

v ideod isks , v ideoconf erenc ing , and comput er net -

working-to carry out its education and information

d i s s e m i n a t i o n f i c t i o n s .

CES also cosponsors (with the National Agricul-tural Library) a Rural Information Center (RIC) that

provides information retrieval and rural information

briefs. Eventually, RIC will provide local follow-up

t h r o u g h c o u n t y e x t e n s i o n a g e n c i e s a n d d a t a b a s e

access in loca l o f f ices . R IC now inc ludes a R ural

Heal t h In f ormat ion C lear inghouse Service t hrough

an in t eragency agreement w i t h t he D epart ment of

Heal t h and Human Services . The concept i s be ingextended to other categories of rural information.

Moshowitz, “Cooperative Extension: A Functional Model for Transfer and Economic Development in Ruralcontractor report prepared for the of Technology Assessment May 1990.

for Extension Service, Rural A Cooperative

Response, November 1986; special issue on ‘ ‘Rural Revitalization,’ Extension Review, Winter 1987; and “Revitalizing Rural America: Critical Issues& Cooperative Extension System Response,” no date. Also see Northeast Regional Center for Development New

Development: Colloquium Proceedings, co-sponsored by USDA and the National Association of State Universities and Land Grant Colleges (UniversityPA: Northeast Center for Rural Development, Pennsylvania State University, February 1989); Northeast Regional Center for Rural Development,

Cooperative Extension and New Alliances for Rural Development: Five Case Studies, prepared in conjunction with the USDA Extension

Service (University PA: Northeast Regional Center for Development Pennsylvania State University, November 1989); and University of Missouri Extension Service, Extension Responds the Rural Crisis,prepared in conjunction with the university extension services of Iowa, Kansas,Mississippi, Missouri, North and Vermont (Columbia, MO: University of Missouri Extension Service, July 1990).

of groups and agencies. For example, has an interagency memorandum

Small Business “ “ for the exchange of information and expertise on rural business managers.


If CES is to be truly effective in carrying out thesetasks, it will need to upgrade its public image.Especially at the local level, it is still often thought

of as a “worn out” agency, focused on agriculture

t o t h e e x c l u s i o n o f o t h e r k i n d s o f d e v e l o p m e n t

p rob lems . Moreover , a l th ou gh Fed era l Exten s ion

Service officials are now more aware of the potential

r o l e f o r t e l e c o m m u n i c a t i o n t e c h n o l o g i e s i n t h e

development process, there is still a large knowledge

gap at the local level. Thus, if CES is to play an

expanded role in introducing information-age tech-

n ology in ru ra l areas , i t mu s t b e reen erg ize an d

develop greater technical expertise.

Th e Ru ral Econ omic Deve lop men t Act o f 1990

takes steps to enhance the role of the CooperativeExtension Service. Section 2346 establishes a rural

i d b i d l i hi

players. In fact, Federal coordination will facilitatelocal cooperation. Moreover, budgetary constraintsmake intragovernmental program coordination man-datory since money to create new agencies is scarce.

A holistic rural economic development strategy

requires that many Federal agencies and programsbe involved. Using communications technologies asa fundamental and uniting element of holistic ruraldevelopment means that Federal players who previ-ously had no reason to consider rural developmentmust now take part along side the vast array of players involved already.

Federal Players

Over the decades, Congress and the executivebranch have established hundreds of programs that



economic and business development program within

the Extension Service. Funds are provided for State

and county-level CES rural development specialists

to:

. . . assist individuals in creating new businesses,

including cooperatives, or assist existing businesses,

and to assist such businesses regarding advanced

telecommunications, computer technologies, techni-cal or management assistance, business and financial

planning, and other related matters, and to assist

community leaders in community economic analysis

and strategic planning.

Rural development specialists would:

. . . provide advanced telecommunications, business

management, computer operations, and other techni-

cal assistance to community leaders and private

sector entrepreneurs and cooperatives.

The Extension Service is also directed to coordinate

and cooperate with any similar service provided by

other Federal agencies or programs.

Coordinating Federal Roles forHolistic Rural Development

Just as cooperation among local participants iscritical to the success of a rural developmentprogram, so too is cooperation among Federal

p gcontribute to rural development. Many were de-signed to carry out broad national objectives—suchas retraining dislocated workers or rehabilitatingdeteriorated housing. They applied to all geographic

places—urban, suburban, and rural al ike. Other

p rograms , su ch as REA an d CES , were targe ted

primarily at rural concerns (see figure 6-l).

T h e c o m p l e x i t y a n d m a g n i t u d e o f F e d e r a l i n -

volvement in rural issues are illustrated by the U.S.

General Accounting Office’s effort to catalog Fed-

era l gran ts , loan s , an d d irec t p aymen ts to ru ra l

Amer ica ( s ee b ox 6 -B) .59

G A O i d e n t i f i e d h u n d r e d s

of programs, spread over the following categories:

. e c o n o m i c d e v e l o p m e n t ,

q agricultural/natural resources,

q infrastructure,

. h u man resou rces ,

q general entitlement, andq sp ec ia l en t i t l emen t .

Intragovernmental Coordination

Even this brief examination of Federal programsaffecting rural development reveals a complex web

of agencies and activities. There is no overarchingpolicy or clear direction to these efforts; eachprogram reflects a partial strategy.

aWith so many

different agencies and so many different programs

~.S. General Accounting Office, Rural Development: Federal Programs That Focus on Rural America andlts Econonu”c Development, briefing report to the Ranking Minority Member, Subcommittee on Conservation Credit, and Rural Development Committee on Agriculture, U.S. House of Representatives,GAO/IWED-89-56BR, January 1989.

60As ~c~d~ngetal. exp~ “~eex.istingc~~ination within the Federal Government among policies andprogramsaffectingrural development

is generally due more to chance than to intentions.” Richad W. Long, J. Norman Rei~ and Kenneth L.Deavers, Rural Policy Formulation in the United States (Washington DC: USDA Economic Research Service, Agriculture and Rural Bconomics Division, April 1987), p. 27. And USDA officials andadvisory groups concur that there is, at present, no coordinated govrnmentwide rural development policy.

Chapter 6-The Role of the Federal Government: Orchestrating Cooperation and Change q 145

Figure 6-l—Organizational Chart of Agencies Involved with Rural Development

/ ‘\

Us.Congress

~ - - i. # -

- Extension Service

- Farmers Home Administration- Small Business Administration

E i D l t



- Farmers Home Administration

- Rural Electrification Administration- Economic Development

- Forest Service

- Soil Conservation Service- Federal Communications

- Economic Research Service

- National Agricultural Library- Department of Education

Rural Information Service- Health and Human Services- Department of Defense, etc.

The key players involved in rural development at the Federal, State, and local level, and how they relate to each other.


146 q Rural America at the Crossroad: Networking for the Future

Box 6-B—Federal Roles in Rural Development

Using the functional categories provided by the General Accounting Office (GAO), it is illustrative to examine

the focus of each category and list important programs.

Economic Development

GAO identified 29 Federal programs directed at economic development. Rural regions received 18 percent of

the $4.2 billion of funding from these 29 programs. Many of the government’s economic development programs

focus on small business development.

The U.S. Department of Agriculture has been allocated the lead role in Federal rural development policy

because many USDA bureaus and programs serve rural America. Within USDA, the most active economic

development program is the Farmers Home Administration (FmHA). FmHA distributes assistance to rural areas

through business loans and industrial grant programs. It focuses on job creation, rather than on promoting particular

industries. FmHA also provides loans for community facilities and for farmers.lThe Department of Agriculture also

sponsors the Business and Industrial Loans program, which issues guaranteed loans.

The Department of Commerce’s (DOC) Small Business Administration (SBA) and Economic Development

Administration (EDA) each have numerous programs directed toward small business development in rural areas.

About half of EDA grants are awarded to rural areas (as defined by GAO--counties with under 20,000 population

outside metropolitan areas) EDA grants fund projects ranging local local revolving loan pools and industrial



outside metropolitan areas). EDA grants fund projects ranging local local revolving loan pools and industrial

infrastructure projects to grants for local planning activities. SBA provides loans to individual businesses, small

business investment and development companies, and State/local development companies; grants to small business

development centers; and technical assistance to disadvantaged small businesses. According to GAO, SBA

allocated about 17 percent of its resources to rural areas. The Department of Defense (DoD) also plays a role in rural

economic development through its grants for Procurement Technical Assistance for Business Firms.

Agriculture/Natural Resources

In addition to the extensive Federal programs aimed at agricultural commodities price supports, the FederalGovernment provides assistance to rural areas through its forestry and mining programs, which provided about $84

million in grants and payments in 1987. USDA administers the largest of the forestry projects. These programs

provide grants and direct payments to encourage forest resource management, increased timber production, and the

efficient use of wood and wood residues. The Department of the Interior (DOI) participates in rural development

through its program for regulating surface mining.

Infrastructure

GAO lists 30 Federal programs that provide aid for rural infrastructure development, which include programs

for community facilities, transportation, utilities, and public works. Nine agencies allocated $11.1 billion in grants,

payments, loans, and other expenditures for such projects. The Department of Housing and Urban Development

(HUD) administers several infrastructure programs, but it is unclear how much HUD funding goes specifically

toward rural areas. USDA, through its roads projects, water and resource conservation projects, REA, and Rural

Telephone Banks, participates extensively in rural infrastructure development. DOI, through its outdoor recreation

programs, and the Department of Education (DOE), through educational facilities and library construction projects,

also play significant roles in rural infrastructure development. Additionally, The Department of Transportation and

the Appalachian Regional Commission (ARC) each offer extensive highway construction and improvement

funding, which contribute to rural development. DoD participates in rural infrastructure development through its

Corps of Civil Engineers Work Programs.

Human Resources

Rural areas benefit from a variety of Federal programs for human resource development, most of which have

no specific rural orientation. GAO lists 36 programs, administered by 8 different Federal agencies, that provide

about $13.6 billion in aid to rural areas. The Department of Health and Human Services provides funding for several

national programs, such as community services projects, Head Start, and Migrant Health Centers. DOE offers rural

IEfi@ble ~o-~~ facfitiw include fi~es, schools, town halls, community centers (if not used p * y for r-don), hospi@

or medical clinics, and fue/emergency rescue stations. FmHA does not at present target or encourage funding for information technology, butcomputers and telecommunications equipment would be eligible if included as an integral part of community facilities. In certainases, suchas emergency, fwe, police, and medical systems, computer systems have been considered to be community facilities and funded directly.

Chapter 6-The Role of the Federal Government: Orchestrating Cooperation and Change . 147

assistance through vocational and general education grant, which are not rural-targeted. USDA’s Cooperative

Extension Service offers several grants for vocational education, but rural areas only receive about 6 percent of CES

funding for these purposes.2USDA also offers several housing assistance programs, which primarily benefit rural

communities.” The Department of Labor administers several worker training and retraining programs, along withits programs to assist dislocated workers. Given the changing nature of the rural economy, these programs will likely

have continuing and growing importance for rural America. ARC offers small health and education programs, andHUD provides property improvement loan insurance.

General and Special Entitlement Programs

To the extent that people living in rural areas are eligible for the Federal Government’s various entitlementsprograms, these programs affect rural development. None has a specific rural orientation. However, demographictrends would indicate that programs directed at the elderly, such as social security, Medicare, and retirementprograms, would have a proportionally larger impact on rural areas due to their greater proportion of elderly.Similarly, programs aimed at coal miners and Native Americans would tend to have a greater impact on rural areas.In addition to these programs, rural areas also benefit from the Federal Government’s public assistance programs,food stamps, Veterans assistance programs, and railroad workers programs.

Information Dissemination and the Promotion of Technological Applications

The Federal Depository Library Program is an important rural resource. Many of the 1,400 participating



libraries are located at colleges and universities in small towns surrounded by predominantly rural areas. The U.S.Postal Service is also an important source of information dissemination and increasingly promotes informationtechnology applications. More than half of all post offices are located in rural areas, and some now provide theircommunities with access to facsimile machines and electronic mail boxes.

New Players

If the Federal Government makes as a priority the use of communications technologies as a fundamental link in rural development, new governmental players must become involved in Federal efforts. As the national regulatorof telecommunications, the Federal Communications Commission (FCC) will have to consider how its variouspolicies affect rural development. FCC can also become involved in rural development issues through theFederal/State Joint Board. DOC’s National Telecommunications and Information Administration, as theAdministration’s telecommunications advisory body, must also take a broader approach to examiningtelecommunications issues, to include their impact on economic development in general and on rural developmentin particular.

2&cOrding to GAO, despiteCES’ rural charter, the majority of its funding does not go to ural Communities ~use Program funds ~

administered to the land-grant colleges, which are generally not in counties designated as rural. Although the colleges themselves are typically

not located in rural-classified counties, much extension work targets rural communities.SOURCE: U.S. General Accounting OfiIce, Rural Development: Federal Programs That Focus on Rural America and Its Economi”c

Development, briefing report to the Rankm“ g Minority Member, Subcommittee on Conservation Credi4 and Rural Development,Committee on Agriculture, U.S. House of Representatives, GAO/RCED-89-56BR, January 1989.

within each administering agency, both inter- and The Federal Government has attempted variousintra-agency program coordination is necessary. But degrees of policy coordination and integration.

63

it will not be easy, as ‘‘coordination is rarely Eisenhower’s Rural Development Program was oneneutral. ’

61To accomplish such coordination, a of the frost efforts to address rural development from

national strategy and statement of intent is essen- a multifaceted perspective. It was not until the Cartertial.

62

Administration’s Rural Development Policy Act of

611-Iarold Seidman explains, “to the extent that [cooperation] results in mutual agreement or a decision on some policy, course of actiou or inactiowinevitable it advances some interests at the expense of others or more than others. ” Harold Seidrna.q Politics, Position, and Power: The Dynamz”cs of

Federal Organization (New York NY: Oxford University Press, 1980).

62rbid. Seidman g ~ s on to ~p ~ t h a t ‘ ‘i f a g e n c i e s a r e t o work together harmoniously, they mUSt Sk at I-t Some Commtity of ~t~sts about

basic goals. Without such a community of interests and compatible objectives, problems cannot be resolved by coordination.”

63~w et al, op . cit., footnote 60; P. ‘i”


1980, however, that a comprehensive national ruralpolicy was formulated. The Carter policy set fourgoals:

1.

2.

3.

4.

meeting the basic human needs of rural Ameri-cans,

providing opportunities for rural people to befully and productively employed and provid-ing a favorable climate for business andeconomic development,

addressing the rural problems of distance andsize, and

promoting the responsible use and stewardshipof rural America’s natural resources and envi-

ronment while preserving the quality of rurallife.64

The Act included an Action Agenda with 200

Federal Policy Execution

If the Federal Government takes a holistic ap-proach to rural development, the problem of coordi-nation will need to be addressed from a fictional,rather than an agency, perspective. To date, most

rural development strategies have reflected themissions of various government agencies.

This division of responsibility along agency lineshelps account for the limited contact betweenFederal telecommunication regulators and agencyofficials involved in rural development. The REA,with its historical legacy of successful rural develop-ment and its technological orientation, could play animportant role in providing more cross-agencyfertilization. In addition to the increased responsibil-ities granted to REA in the Rural Economic Devel-

t A t f 1990 th REA ld b h d ith



The Act included an Action Agenda with 200specific programmatic actions, along with recom-mendations for strategies to develop the institutionalcapacity necessary for policy implementation. De-spite its well-studied and comprehensive approach,however, the Carter policy did not make a strongimpact on rural problems. Critics contended that it

was

q

q

q

q

ineffectual because, among other things, it:

did not increase resources for rural develop-ment;

did not rank in priority the 200 items on theAction Agenda;

merely free-tuned the existing system, insteadof making systemic changes; and

was highly dependent on the efforts of a fewkey individuals, failing to develop sufficientinfluence with political and budgetary decision-makers.

65

The Rural Development Act of 1980 is instructiveboth for its successes and its failures. Praising it forits comprehensiveness, observers view the Act as ‘abasis on which to build."

66Its shortcomings suggest

that nominal commitment is not enough. To besuccessful, a rural policy must be backed by thepolitical and financial will of the Federal Govern-ment.

opment Act of 1990, the REA could be charged withacquainting Federal telecommunication policymakerswith rural development concerns.

The Cooperative Extension Service could alsoplay a coordinating role. The need for technologytransfer and an educational component within a

development strategy underscores the importance of integrating technological applications into work-force education programs, vocational programs, andgeneral education programs. From its inception, theCES has provided technology transfer. With its tiesto educational institutions, CES could coordinate thetechnology and educational components of anyFederal rural strategy.

Bringing together all the various communitiesinvolved in rural development—horn health careand community services to local business develop-ment—will require a more broadly based coordinat-ing body, connecting the various Federal agencies aswell as State and local governing bodies andorganizations. The current Administration has takeninitial steps in this direction by formalizing itsWorking Group on Rural Development into aninteragency committee as part of the presidentialinitiative on rural development.

67With representa-

tives of all cabinet departments (except Defense andEnergy), the Small Business Administration, Office

aosbo~ op. cit., footnote 7, p. ~.

‘Ibid., p. 25.

fiRotid C . pOTVeIS ~d~wmdo. Moe, ‘~epohcyContext for Rural-OrientedResearc&> Don A. IMUman and Daryl J. Hobbs (CdS.), Rura/SOciety

in the LOu”ted States: ls.ruesjbr the 1980s (Boulder, CO: Westview Press, 1982), p. 14. Cited in Sandra Osbmuq ibid.

~~ono~cpolicy COUCS, WO&@ &OUp on R~Deve lopm~~Rura lEconom-c Development for the 90s:A PresidentialInitiative (W@bingto%

DC: The White House, January 1990).

Chapter &The Role of the Federal Government: Orchestrating Cooperation and Change q 149

of Management and Budget, Council of EconomicAdvisers, and various White House offices, thiscommittee has the potential to crosscut many ruraldevelopment issues. However, the committee em-phasizes the economic and business dimensions of

rural development, overlooking key human andsocial dimensions as well as the role of informationtechnologies. Nonetheless, its existence and breadthof representation signal much potential for policycoordination.

68Moreover, the committee has plans

to establish Rural Development Councils in eachState, starting with councils now being implementedin 8 pilot States, and eventually extending to all 50States if the experiments prove successful. The State

councils are intended to coordinate Federal activitiesat the State level, respond to State and local ruraldevelopment needs, and strengthen Federal/State/

organizations, small business, and a variety of industries relevant to the rural economy.

Finally, the USDA has been designed as the defacto lead agency for rural development, by virtue of the designation of the Secretary of Agriculture aschairman of the interagency coordinating committeeand the President’s Council. Many Federal agencieshave programs that affect rural America; but USDAhas by far the heaviest concentration of rural-relevant activities. USDA has appointed an Assist-ant Under Secretary for Rural Development, andsupported the establishment of a Rural DevelopmentAdministration within USDA.

Cooperating in Pursuit of ChangeUndertaking any new approach has the potential

f fli t It t il i i thi t i



local partnerships in rural revitalization. The coun-cils include representatives from all major Federalagencies providing rural development programs tothe States, and are staffed by a fall-time ruraldevelopment coordinator (who is a Federal em-ployee from one of the participating agencies).

The Rural Development Councils in turn willcoordinate a series of rural development demonstra-tion projects. These projects will target Federalresources into specific rural areas to meet definedneeds in ways that encourage more coordinated,synergistic, responsive Federal assistance. Theseprojects are intended to have both a local option andevaluation component. The purpose is to encourage

innovation but in ways that protect local flexibilityand choice, and ensure that the project results can bemeasured. Projects that work well can be replicatedor adapted in other rural areas.

Also, as part of the Presidential initiative, theRural Information Center, operated by the NationalAgricultural Library, is being upgraded to include awider range of information and technical assistanceon Federal rural assistance programs. And a Presi-dential Council on Rural America has been estab-lished to provide a high forum for rural developmentissues and a means to bring rural policy proposalsinto focus for the President and senior White Houseand agency officials. The Council has representationfrom State and local governments, not-for-profit

for conflict. It entails giving up some things to gainothers. Some individuals and groups will win; otherswill lose. New rural development approaches are noexception. Introducing information-age technolo-gies into the rural development process will beespecially difficult. These technologies have pro-

found effects. They serve not only as a more efficientmeans of providing traditional service but also as acatalyst for innovation-for actually changing theway that things get done. Communication andinformation technologies also have their own mys-tiques; they can be very intimidating to the uniniti-ated.

How well information-age technologies can beintegrated into economic development strategieswill depend on how they are perceived by the keyplayers. If the Federal Government is to successfullyencourage the use of these technologies, it will needa clear picture of who these key players are; theirrelationship to one another; and their needs andaspirations.

The States as Agents of Development

Not since the pre-Civil War days of Jefferson andJackson have the States been such important playersin economic development. Their enhanced rolestems both from the Federal Government’s with-drawal in this area as well as from the recognition byState governments that if they are to successfullycope with the crises in their economies, they need to

a~te HOW ~mors~p of tie interagenq COmmittee s iz that “rural development” is an important issue that deserves high-level exeCUtive

branch attentio~ stimulates Federal agencies to at least pay more attention to their roles in assisting xural developmen~ and (combined with relatedlegislative activity in Congress) gives visibility and support to rural development advocates in the executive agencies.



Chapter &The Role of the Federal Government: Orchestrating Cooperation and Change . 151

rural economic development. Thus, it will be Stategovernments that have to reconcile economic devel-opment and regulatory policies and goals. State

governments also help develop the States’ infra-structures. Increasingly, this set of activities iscoming to include communication networks. Asmajor users of telecommunication services, theStates can leverage their market power on behalf of rural development. In addition, they can lead the wayby using telecommunications to provide informationand social services. Bringing State governments intothe process will help assure their commitment to

Federal programs. Many States are now in theprocess of devising comprehensive statewide devel-opment plans.

78Acceptance of telecommunication-

b d h ill b lik l if h



based approaches will be more likely if they areincorporated early into these plans.

Gaining State support for a Federal program willrequire establishing appropriate Federal/State insti-tutional arrangements. The trend of late has been to

distribute Federal funds using block grants. Thisapproach is very popular with State governments. Itprovides maximum flexibility, allowing programs tobe tailored to the particular needs of a State. It alsoprovides for diversity, and the learning that comesfrom using different approaches.

There are, however, problems with this approach.The more that responsibility is shifted to the States,the more difficult it will be for the Federal Govern-

ment to mount a major campaign, assert programcontrol, or set national priorities. In particular, thisapproach would make it hard to assure a holisticdevelopment strategy that takes maximum advan-tage of new technological opportunities. OftenStates governments focus their development poli-cies exclusively on the business sector, and thus onthe regions of their States that offer the most promisein this regard. Moreover, officials in many States are

not well versed in the use of technology fordevelopment purposes, nor aware of the new opportu-nities and choices that it presents.

If Federal finds were distributed through Stategovernments or State economic developmentboards, it would be important to assure that they hadthe technical capacity to make educated decisionsabout its use. Moreover, some conditions might need


Hospitals, such as this one in Culpeper, VA, are importantresources for rural economic development.

to be set to assure that Federal goals were met. Forexample, it might be necessary to set aside a certainportion of funding for small, very isolated communi-ties.

An alternative way of achieving flexibility at theState and local levels is to work through theCooperative Extension Service. CES already has

administrative units in all jurisdictions. And pro-gram activities vary from State to State. Subject-matter specialists, who are usually employed by aland-grant institution, aid county agents in thedevelopment of technical information; supervisorsand State leaders assist in program planning, budget-ing, and public relations. The role of the FederalGovernment is largely one of consultation andleadership rather than direct management or control.

Vision and Leadership at the Local Level

The local community is key to the success of ruraldevelopment. Whatever the larger national interestin a strong rural America, the people directlyaffected are those living and working in rural areas.If rural education is to be strengthened, rural jobscreated, rural health care improved, these changeswill happen because rural citizens are motivated and

of and might include State economic development departments, State

State public utility commissions, and various statewide development councils and commissions. Ineffective State rural development planningoffice needs the support of the Governor, access to and cooperation relevant State agencies and the State legislature, good rapport with local ruralcommunities, and sensitivity to the need for leadership and implementation.


Box 6-C—Livermore, KY

The importance of energetic, visionary, and dedicated leadership is especially important for economic

development in rural areas. Without local leadership, the presence of good roads, sophisticated communications,and quality education can accomplish only so much. Even without such underpinning for a healthy economy,

inspired leadership can go a long way in surmounting such obstacles. Such is the case in Livermore, KY, where themayor has steered the community through the difficult years of a protracted recession.

Livermore is a small community of about 1,700 people in the western coalfield region of Kentucky. It lies onthe banks of the Green River and is even passed by fiber optic wires though, as yet, the community has not yet beenable to tap this resource. Livermore’s economy struggles because several miles of county roads separate the townfrom any significant transportation arteries. Like manystruggling rural areas, Livermore’s economic straitsare also related to its poor educational system, which

drives away those with high aspirations for their Ifamilies. Another problem is the difficulty in securingfinancing for small businesses.



Mayor Amber Henton is reknowned throughoutmuch of the State for her efforts on behalf of Livermore. “Firecracker” and “livewire” were twoadjectives used to describe her. She started out with theFederal Government during World War II beforemoving on to local politics, and this long experience as

a civil servant, along with her savvy, is perhapsLivermore’s most valuable asset. With her deepunderstanding of Federal and State bureaucracies,Mayor Henton musters all available financial andmaterial resources to secure important services for thetown. Among her accomplishments, Livermore hasconstructed housing for senior citizens and is buildinga 10-acre industrial park along with a lo-acre recrea-tional facility.


SOURCE: Office of Technology Assessment site visit, January

1990. Mayor Henton’s storefront office in Livermore.

have the skills and resources necessary to make rural resources to undertake a broad-gauged economicdevelopment succeed.

Local communities in most rural areas are notpresently equipped to provide leadership on compre-hensive rural development in general or informationtechnology in particular. Rural town and countygoverning bodies typically focus on meeting com-munity infrastructure needs such as roads, schools,fire/medical facilities, water, and sewage. Manyrural jurisdictions are hard pressed to meet eventhese basic needs, and do not have the staff or

development program. Many local governments arehindered by a piecemeal, narrow view of develop-ment, which is aggravated by competition overscarce resources and a general lack of awareness of the potential of information technology .79 In sharp

contrast, most urban and suburban jurisdictions havefully staffed and funded economic developmentdepartments.

To take advantage of information-age technolo-gies, rural communities need visionaries and activ-

the more affluent cities and suburban areas, economic development are robust to include local trade missions to foreigncountries, zoning and that ensure local and provision of child care, adult and recreationalprograms as important adjuncts to a healthy and economy. in metropolitan areas are usually heavy usersof information technology at least for automation and

management purposes, and have access to extensive technical expertise both inhouse andtelephone and cable companies, computer retailers, and systems integrators, among others, who are selling to the local market. And in the majormetropolitan areas, the to learn about telecommunications and are High schools, community colleges, localuniversities, vendors, and professional associations offer a potpourri of classes, seminars, and mini- to full-length educational programs on informationtechnologies.

Chapter 6-The Role of the Federal Government: Orchestrating Cooperation and Change q 153

ists. Visionaries can help local communities under-stand what telecommunications and computers cando and translate the technical possibilities into the

every day life of rural citizens. Leaders and activistsare necessary to implement these ideas

80(see box

6-C).

Visionaries come from many places. Institutionsof higher education provide one important source.Many colleges and universities already have computer/ communication networks that are electronicallylinked to other institutions, libraries, and databases,and research centers throughout the United Statesand even the world. The future development of ahigh-speed national research and educational net-work (NREN) will provide universities even greater


Owensboro Community College’s Resource LearningCenter in Kentucky OCC in conjunction with the local



( ) p gaccess to computing and transmission capacity, andinformation services. In addition, the number of educational institutions using communication tech-nologies to develop and share educational resourcesand materials is growing at a steady pace. Many

colleges now deliver at least some classes over theair or online to students at distant locations.81

Having established their own communicationnetworks, and successfully used them to meet theireducational goals, educational institutions are knowl-edgeable in the use of communication technologies.As large users of communication services-oftenranking second only to State government-theyexert considerable market power. As in the case of

a large business, the demand of a statewide univer-sity system can, by itself, justify the deployment of advanced technology even to a relatively remotearea. Because of these strengths, educational institu-tions can play a key role in assuring the success of telecommunication-based development programs.Not only could they provide expertise, they couldalso leverage their market power to draw communi-cation providers to rural areas.

Colleges and universities also provide a locus formany of the key players involved in development.

Center in Kentucky. OCC, in conjunction with the localgovernment, plans to employ telecommunications for a

variety of social, cultural, and economic functions.

Businesses are now aligning themselves with educa-tional centers to promote education, training, andresearch. They are also taking advantage of univer-

sity online library systems and the growing numberof applied research and development centers locatedat, or near, university centers. Similarly, manyorganizations involved in development are eitherhoused at or near the university. For example, theSmall Business Administration’s offices are gener-ally located on university campuses. So too are manyExtension Service offices. Universities and collegesare also well connected to State governments, since

many are governed by State boards and funded bythe States. Thus, State systems of higher educationcould provide an impetus to the rural economicdevelopment process. Federal and State programsthat do not provide a role for them will lose apowerful resource.

Another source of vision is the library commu-nity. Libraries are, by their very nature, in the

information business. The larger public libraries andmost college and university libraries already useinformation technology. It is not uncommon now for

requires a commitment to developing leadership. This means providing

to expand their horizons, acquire and about the opportunities and challenges presented by emerging informationtechnologies. This also means identifying persons with future leadership potential and providing experience and build leadershipcapacity. Community colleges, small town state universities, professional associations, and Federal/State extension programa, among others, can all help

courses, seminars, and workshops to local leaders. These training activities can run the gamut from community andcoalition-building to fund raising to effective use of telecommunications and computers.

81 gamut from sponsoring or se* on telecommunications and rural to adding

development focus to existing courses (e.g., in agriculture, forestry, and business), and to conducting research (perhaps with Federal, State, and privatesector funding) on rural development. Also, interested college and university faculty members are more likely to get involved in rural developmentprivate citizens and thus provide leadership in the community as well as the classroom. College and university students area still largelyuntapped Faculty can encourage student involvement in rural development issues by including site visita, user surveys,and the like as part of the curricula.


even small town college libraries to use both onlineand compact disk systems to search bibliographicdatabases. The library community as a whole is quitewell organized and aware of the opportunities andchallenges presented by electronic technologies.The challenge is to extend this energy and expertise

to libraries and library users in rural America. Thisis already happening in some college towns andcounty libraries. But most rural libraries do not, atpresent, have adequate resources to provide leader-ship.

82

Vision and leadership can also come from ruralbusiness communities. Businesses participate inlocal economic development programs through or-

ganizations such as their local chamber of commerceand their local Economic Development Administra-tion (EDA) office. The quality and resources of suchorganizations vary considerably from place to place,

ing. Although communication-based economic de-velopment programs are likely to have considerablelong-term benefits, many stakeholders will feelthreatened by such programs. Agency officials, at alllevels, may try to protect their turfs, or be unwillingto gain the expertise needed for effective program

implementation. Telephone service providers mightbe concerned that users, acting in concert, bypasstheir communication systems. State developmentofficials may resent loss of control over develop-ment funding. heal development groups may resistnewcomers seeking a share of development funding.An important role for the Federal Government,therefore, is to promote cooperation through incen-tives in the forms of grants and loans.

Educators have taken the lead in developing thiskind of an approach. Under the Star School Program,



as does their focus on telecommunications .83 Aslocal businesses become more dependent on com-munication technologies, they will likely be moreactive in promoting technology deployment. How-ever, when businesses view telecommunications asthe harbinger of greater competition, they are oftenopposed to change.

If rural communities are to use telecommunica-tions effectively, these visionaries cannot operatealone. They need to find common solutions to theirdiverse problems, given their limited size and scope.Such cooperation, however, may not be forthcom-

pp g ,for example, $33.5 million (in the form of 2-yeargrants) was provided on a competitive basis topartnerships set up to develop systems and programsfor long-distance learning.

84States must match the

grant by at least 25 percent. These programs are

intended to become self-sustaining. Taking advan-tage of a somewhat similar opportunity, the Univer-sity of Maine/Telecommunications System used a5-year, $4.4 million grant provided by the Depart-ment of Education under title III of the HigherEducation Act, and matched by the State govern-ment, to help telephone providers pay for the upfront

g~~e~~ds~tegove~ats canplayakeyrole here, through funding and technical assistance to rural libraries andyprovidingmlevant d~~s

directly to rural Anenca. Federal and State extension services and the Federal Depository Library Program are obvious candidates. Many governmentagencies already develop databases on research status and results, economic and demographic statistics, trade opportunities, and the like. The key is tofind ways to make these &tabases available to rural libraries and hence to the rural entrepreneurs and activists. Ultimately, if rural America is fully wired(or cabled or dished) for digital data transmission and switching, rural citizens will be able to access remote online databases directly fkom their homesand ofilces, and download to compactdisks or other storage media, just as many urban and suburban citizens are already doing.

gsFor e ~ p l e , SX IA I f i o~ t i on technology co n su l t i n g companies arebegianing to locate in rural areas. Atpmsen~ theSe cOmp@eS SW do most

of their business in metropolitan areas, but they are ready and able to serve rural needs as the rural market develops. Also, in someural regions, thesmall high-tech companies are banding together in consortia to share ideas, information market tips and the like. These high-tech consortia offer greatpotential to bring togetherresearch educational, entrepreneurial, and economic development interests focused on ural America.

~The sw Schools le~~tion spec~les two formats for the composition of eligible partnerships. In one, membership must ticlude at least one Sme

educational agency, State higher education agency, orocal education authority responsible for a significant number of poor or underserved students.Furthermore, this type of partnership is required to have at least two other institutions from a host of types, including universities, teacher tmininginstitutions, and public broadcasting entities. The other type of partnership must include a public agency or corporation already formed to operate ordevelop telecommunication networks to serve schools, teach training centers, or other education providers. All partnerships must be statewide ormultistate. These requirements were meant to create new paths to improve the educational system by fostering cooperation among institutiona. For furtherdiscussio~ see U.S. Congress, Ofilce of lkchnology Assessmen~ Linking for L.t?arning:A New CourseforEducafion OTA-SET-430 (Waahingto~ DC:

US Government Printing Oftice, November 1989), pp. 136-141.

Chapter 6-The Role of the Federal Government: Orchestrating Cooperation and Change . 155

costs of deploying a fiber network linking universi-ties and community colleges throughout the State.

85

Developing a grant program of this kind has anumber of appeals. Ineffective, it would have a veryhigh pay off. Moreover, it can lead to self-sustainingarrangements, if it generates cooperation and agroup commitment among different players. TheFederal Government could also maintain a good dealof program control, because grants would be pro-vided on a competitive basis. Just as the Federal StarSchool Program stipulates the range of players thatneed to be involved in developing educationalpartnerships, and the amount of benefits to betargeted for low-income groups, so too a rural grantprogram could require that certain criteria be met. Itassures cooperation and a holistic developmentperspective by requiring that a broad range of

i i b i l d i d i i d i l

communities. In addition, it could foster a statewidecommitment by requiring a matching grant.

There are some problems with this approach.Many programs and partnerships developed undersuch a grantor loan program could prove threateningto rural communication providers and give rise to anumber of tricky regulatory problems. There are alsobound to be some failures with such an unconven-tional approach. The cost of failures can be reducedto the extent that something can be learned fromthem, and the experience gained can be built intosubsequent grants. Moreover, the rate of failure islikely to be less if this kind of program is imple-mented in conjunction with the informational tech-nology transfer approaches identified above. Someregulatory problems might also be avoided if plansare discussed regularly with State regulators. Con-fli i h l l i i id ill b



participants be involved in devising and implement-ing the development grant proposal.

86And it could

provide for equity and diversity, by setting aside agiven proportion of funds for different kinds of rural

flicts with local communication providers will beminimized, if they are participants in the develop-ment of any grant proposals, and thus also havesomething to gain by their acceptance.

s s m e De p ~ e n t a L S O SUp pOr t S n i n e r eg i od ed u ca t i o n a l laboratories, with 25 percent of each lab’s resources targeted specific~y tom~ education

(at congressional directio~ $14M total for FY87-90). Information technology is a strong theme running throughout many rural projects, and also in mathand science education projects directed at metropolitan as well as rural areas. The raral projects cover virtually every conceivable technology applicationfor curriculum development, classroom teaching, and school management. lkchnologies include microcomputers, distance le arning (via satellite,broadcas~ and terrestrial transmission), computer conferencing, electronic bulletin boards, videodisk s, and compact optical disks. In add i t i om th e r a r a l

projects include development and delivery of innovative courses on career preparation and planning for rural students, ranging from building business

entrepreneurial skills through hands-on “enterprise’ experiences, to learning how changes in the global economy and technology effect job prospects,to identifyin g viable career paths for those wh o wish to continu e to live in rural areas (or return to rural America after college ori t i tary service). SeeU.S. Department of Educatioq OffIce of Educational Research and hnprovemen~ “Thirty-One Rural Education Projects of Nine RegionalLaboratories,” no date. and Regional Educational Laboratory Request for Proposal, RFP-91-002, Apri l 1990.

sb~ormation technolo~ kvestments in rural schools pay off several times over because many schools serve multiple purposes ti the comm~ty.

Distance le arning and computer information systems used by students during the day maybe used for adult education and business development seminarsin the evening. Rural citizens generally view the K-12 school system as one of the best hopes for the future of their children and commuuity.

Appendix, Glossary, and

List of Contributors



Appendix

Field Journal

Background

One cannot undertake a study of rural developmentwithout attempting to understand the people, their cul-tures, their environments, their problems, and their hopesand aspirations. Americans pride themselves on theirindividuality, and the differences among the people of aState or a region are often as great as between the Statesthemselves. There are common values shared by many,but the ways that these values enter social and politicaldiscourse are often very different among communities.An outsider can only hope to sample this diversity; to

understand it, one must live it.The project staff chose four States to visit in the course

of the study: Kentucky, New Mexico, Washington, andMaine. These States were selected for geographic bal-

an important part in Maine’s economy. The FederalGovernment also contributes through military bases and

defense industries. Maine is placing great reliance ontelecommunications to deliver educational services tosmall communities and scattered institutions. Perhapsmore than any other State, Maine is depending ontelecommunications for its social and economic future.

During the course of the visits to these States, OTAstaff met with economic development professionals,telephone company representatives, politicians and activ-ists, educators and academics, business people, and“ordinary” citizens in a number of communities.

The sections that follow are narrative impressions of what OTA staff experienced in their visits to the fourStates, and are not analytical. Each successive section,K k h h M i b ild h i i d



g g pance, ethnic and economic diversity, and contrastingapproaches to the development of the telecommunica-tions infrastructure.

Kentucky is a Midsouth State that relies heavily on theinfusion of foreign investment for economic develop-

ment. Its educational system is undergoing substantialchanges, and State leadership is placing major emphasison telecommunications to bolster education. Parts of theState face an economic and social crisis; other areasprosper with the assistance of Japanese automobile andelectronic manufacturing.

New Mexico is a Southwestern State with a significantHispanic and Native American population. Its economyis based largely on natural resources, and the Federal

Government plays a major role in the economy throughthe operation of military and Federal research laborato-ries. Much of the undeveloped land is owned by theFederal Government. The populace largely lives apartfrom one another in enclaves of their own, with onlynominal contact among the various cultural groups.

Washington is a Northwestern State that shares acommon border with Canada-America’s largest tradingpartner-and is a gateway for exports to the Pacific Rim.

High-technology aerospace, nuclear, and computer-related firms contribute significantly to the economy of western sections of the State. Agriculture, forestry, andgrazing are staple economies for the eastern section.Urban areas of Washington are developing so rapidly thatdecentralization of business to rural areas has become adevelopment strategy.

Maine also borders on Canada, but has only one narrowcommon border with another State (New Hampshire). It

is the most sparsely populated New England State.Natural resources, particularly timber and fisheries, play

Kentucky through Maine, builds on the impressions andunderstanding gained in the previous States. Thus, this

journal is the sequential log of the experience gained byOTA staff as they encountered the views of those with themost at stake in revitalizing rural America.

Kentucky

The Commonwealth of Kentucky’s economic base,like many other rural States and communities, is intransition as agriculture production is consolidated andthe coal mining and tobacco industries are crippled bymounting national health and environmental concerns. Inaddition to representing the rural Midsouth, Kentuckyreflects aspects of Appalachia, the Ohio Valley, and theMidwest. Furthermore, Kentucky is an example of a State

with a history of unionization and with an economic basethat does not require high education levels.

We contacted a broad base of people to get a crosssection of opinions and perspectives-educators, electedand appointed officials, businesspeople, telephone exec-utives, regulators—across the State. Covering approxi-mately 600 miles in 6 days, we spoke with more than 60people in Paducah, Mayfield, Hopkinsville, Owensboro,Livermore, Bowling Green, Glasgow, Lexington,

Frankfort, and Louisville. However, we were unable tovisit some of the most depressed and isolated areas of Appalachia in eastern Kentucky (see figure 1).

A State of Crisis—From our discussion with a gather-ing at the Purchase Area Development District, ruralAmerica-not just western Kentucky-was characterizedas being desperate and in a state of crisis. ‘‘Do we wantrural America?” Charles Terrett, the Superintendent of the Fulton County School District, asked, ‘or do we want

urban America with a wasteland in between? FultonCounty Judge James Everett called measures to salvage

–159-


Figure l—Map of OTA’s Field Study in Kentucky

Time zone boundary

over 100,000Indiana

25,000-100,0005,000-25,000

qUnder 5,000

q State capital Louisville

I


rural America “a matter of survival. ” Rudy Weissingerprovocatively declared that rural America no longer existsat all.

The focus on education is based on the assumption thatby providing better education, Kentucky can draw well-paying skilled jobs and foster social and cultural ameni-ties, such as fine arts and health services, that will helpattract new companies.

Others are more cautious. We were told that theSupreme Court ruling presents a potential problem forhigher education, because funds that must be directed toredress the public school crisis will siphon funds fromcolleges and universities. The community colleges inparticular stand in peril. Despite soaring enrollment,community colleges receive only 64 percent of the fundsthey need to operate optimally, according to a formulaestablished by the Council on Higher Education. This

limitation strains faculty and staff.2 Kentucky ranksamong the bottom third States in Federal monies forhigher education, a circumstance possibly related to thefact that it is one of the few States that does not have a



Not everyone was as alarmist. The neighboring areadevelopment district boasted of 3

1 / 2- to 4-percent unem-

ployment; others were encouraged by the prospects of new industries locating in the State, assisted by the Stateand programs such as Certified Cities. A growing mutual

interest between Kentucky and Japan-such as the Statefloating bonds on the Japanese market and the attractionof Japanese electronic and automotive firms-bodes wellfor future development. And a humbly encouragingmilestone for Ohio County-a McDonald’s franchiserecently opened in Beaver Dam.

The Importance of Education for the State’s Develop- ment—The dominant theme throughout the Common-wealth was the importance of education (socially and

economically) for the State’s future. The State’s SupremeCourt recently declared the public secondary schoolsystem unconstitutional, and most of those we talked withregard this decision as positive, if embarrassing, and astep in the right direction.

1The decision seems to

punctuate a groundswell among the Commonwealth’scitizenry that an aggressive and innovative strategy forimproving the State’s education is critical to Kentucky'sfuture. This commitment to education is evident through-out. Examples of this include Kentucky Education

Television’s facility to deliver science and foreign lan-guage programs via satellite to secondary schools, andtele-education programs for community colleges fed fromuniversity courses.

Federal research center.

It was said by some that the clamor for education is asmokescreen, that the improvement of general educationendangers one of Kentucky’s major assets, a benign andpliable workforce. One of Kentucky’s salient attractions

for companies like Toyota is its proximity to Detroit, andits eager nonunion workers outside the coal regions.

The Marriage of Communications Technology WithEducation-Educators in particular see telecommunica-tions as an important tool to broadening and strengtheningcurricula. Almost to a person, education is seen as a keyfactor in any strategy for developing the State’s economicposition. Telecommunications is an integral part of theseplans, insofar as satellites, fiber optics, and microwave

facilities can deliver distance-learning programs toschools that lack the resources to draw able teachers andoffer diverse, well-grounded curricula.

The best example of distance-learning in the State isKentucky Educationa1 Television’s (KET) notable, highlyvisible, and well-funded operation that broadcasts coursesinside and outside the State. If KET’s service does not suita community’s needs, the land-grant colleges and theregional universities offer similar tele-education pro-

grams through one-way video and two-way telephonelines. For example, Murray State delivers third- andfourth-year courses over two-way interactive video tostudents at Paducah Community College.

visit, to which court explicitly attached the b lame for the failure to provide equitable affordable

education to all the State’s citizens, has acted vigorously to address this problem. It passed a substantial increase--$ 1.3 billion over 2 years-in orderto entirely revamp the organization and administration of the public schools. effect, greater efficiency and responsiveness will be accomplished byinstating a Commissioner of Education (in place of the Superintendent for Public Instruction) and streamlining“ “ Department of Education. TheEducation Reform Act stipulates that the State Board for and Secondary Education (to be created) will establish performan standards forboth schools and studenta, as well as a system of rewards to foster compliance. Principles and local schools districts will nevertheless be affordedconsiderable autonomy in dete how they will meet those standards.

Act of 1990, has allocated additional funds for higher educational that

operate with atleast 80 percent of the funds that the Council on Higher Education estimates are needed.

Appendix-Field Journalq 161

Figure 2—The Kentucky Library Network

.

* SchoolA

I

SOURCE: The Kentucky Library Network, March 1990.

Distance learning is, in some instances, becoming a bigbusiness. Large public and private grants are at stake fordistance leaming, as politicians ply a can’t-miss campaign

f b tt d ti D it mi i t t h


Overlooking Bowling Green, KY



for better education. Despite a promising start-such as

KET’ s net w ork- d is t ance learn ing i s s t i l l re lat ive ly

untested and may raise some treacherous political and

social issues, particularly with regard to the origination

and control of programming.

New technologies, particularly telecommunications,

have tremendous potential for contributing to education

through libraries. Western Kentucky University has a

facsimile network throughout its service area to expedite

the search and retrieval of materials, and the Lexington

Public Library is involved in a similar project (LEXNET)

to tap the resources of the University of Kentucky’s

libraries (see figure 2). The Kentucky Library Network

for example (with some 200 participating library branches),

plans to create an electronic card catalogue. Finally, new

technologies offer opportunities for libraries to expand

and streamline their resources through, for example,

CD/ROM and access to online information databases.

Better Jobs—Kentucky currently enjoys relatively

h igh employment , so t he goal o f deve lopment now

concentrates on bringing in better jobs. Signs of Ken-

tucky’s overall economic growth or recovery are evident

everywhere, and one of the most significant indicators is

the drop in the State’s unemployment rate, which, at 5.0

percent in July 1990, was below the national average.

Many of the new jobs are low-wage service industry jobs,

so the challenge now is to improve the quality and the

salaries of jobs.

Internecine Rivalry-on its State road map, Kentuckyproclaims itself “The Uncommon Wealth.” Presumably,this provocative pun refers to the State’s uniquelycontrasting topography and to the large number of counties, both of which contribute to the State’s uncom-mon political factionalism. There is open rivalry and asense of territorialism among universities and the land-grant colleges, each believing in its own superiority for

best serving the community. There is friction betweenKET and higher education institutions over the effective-ness of their distance-learning programs. Similarly, thedelicate issue of bypass sparked a discernible (andunderstandable) tension between the two major telecom-

munications players, South Central Bell and the KentuckyEmergency Warning System (KEWS). Finally, there is asurprising lack of communication among the various AreaDevelopment Districts with regard to mutual strategiesfor development and resource sharing. As a consequence,the factionalism of the State seems to draw attention andenergy away from a concerted statewide developmentstrategy and instead to focus on picayune turf battles.

There are, however, notable exceptions to this general

observation. In order to avoid (or at least blunt the effectsof) another severe recession, a group of citizens from thePurchase area in western Kentucky enthusiastically em-braces the potential for new technologies (particularlytelecommunications) to strengthen their economy byimproving education and job training, by providing new

jobs, and by making existing services more efficient. Onthe premise that rural communities must involve them-selves globally in order to survive, they stress that‘‘regional partnerships’ between private enterprises and

government are critical if rural communities are to affordadvanced technology since the marketplace tends todiscriminate against small customers.

Duplication of Services and Infrastructure-Ken- tucky has virtually two communications networks: thepublic communications network of the phone companiesand the Kentucky Emergency Warning System (KEWS),a State agency that handles official State communications,such as for police dispatches, and which ensures a back up

to the public network in emergencies.The Involvement of Japan—The foundation of the

State’s development strategy is to court new foreign

162 q Rural America at the Crossroad: Networking for the Future

industry and investment-primarily the Japanese. Thelocation of automobile manufacturing and electronicsplants, such as Toyota in Georgetown and Sumitomo inMorgantown, are triumphs for the towns and counties aswell as the State. Kentucky was the first State to issue

bonds on the Japanese bond market-further evidence of the Japanese mystique.

Technical and Technological Assistance and Stand- ards—Many of the people we talked with were informedabout and comfortable with modern technology, but thislevel of knowledge was likely and apparently notrepresentative. Jack Eversole, Executive Director of theBarren River Area Development District, quipped, “wedon’t know enough to be ignorant.” The need for

technical assistance to overcome the general fear ordistrust of technology was identified as an importantfactor for modernization. Development involving modemtechnology runs the risk that rural folks, less familiar withtechnology might be induced to invest in equipment that


Near Mayfield, KY

f i i f i b d i d i h S



technology, might be induced to invest in equipment thatwould soon be obsolete. In some instances, a systemexists, but the expertise to use it does not. Jenny Boyarski,Librarian at Paducah Community College, noted that“technology has brought the world to the people, but wedo not have the people to take it out.’

Apprehension That Development Implies Urbaniza-

tion-The notion of “development” is very trickybecause it is not obtained without a price. Communitiesknow that development is the only alternative when thestatus quo means doom, but most are cautious and wantto control development to avoid the negative effects thataccompany urbanization of rural areas. Chief among thefears is the urban blights that might afflict rural com-munities-principally pollution, higher incidence of crime,

divorce, juvenile delinquency, and teenage pregnancy.Ways must be found so that participation in the modemage can be achieved while preserving rural values and arural lifestyle.

Telecommunications Less as a Business Tool—Kentucky’s Certified Cities program enables communitiesto measure and publicize their capacity to host newindustry. The program has added telecommunications toits criteria, but the large industries that Kentucky targets

are not typically the information-intensive firms; andthose firms that do require advanced communicationsservices often install their own networks. The serviceindustry jobs that are expanding are not the high-technology or high-skill positions that need data services.

The mission of Kentucky’s Rural Economic Develop-ment Authority is to assist the “commonwealth’s de-pressed counties ‘‘ in attracting and accommodating newmanufacturing projects. The current administration has

identified telecommunications as a valuable resource forstrengthening and diversifing the economy. The Author-ity commissioned a study on the potential and procedure

for attracting information-based industries to the State.The Economic Development Cabinet, in conjunction withSouth Central Bell, has moved to incorporate telecommu-nications-related industries in State development strate-gies.

Triage-The issue of a strategy of triage for develop-ing rural America-where money and resources aretargeted to those communities able to survive andprosper-is sensitive because it runs counter to the senseof social welfare and justice. Although politically danger-ous, triage is a pragmatic strategy for dealing with ruralregions and communities that are in economic decline.

The profile of the community that can benefit fromtelecommunications is taking shape. Ironically, those

communities most in need of innovative developmentstrategies are least able to assess the role of telecommunica-tions in economic activity because other essential servicestake precedence. Healthy communities that could strengthentheir positions through advanced communications sys-tems and services are usually least interested in anythingthat might upset their successful balance. The communi-ties in the middle-those with the opportunity and theincentive for dealing with the impending crisis-are theones that cherish what telecommunications and new

technologies may bring.

New Mexico

New Mexico, with its cultural heterogeneity, itssubstantial nonmetropolitan population, and low stand-ings in most economic indicators is representative of theSouthwestern United States. Fifty-one percent of thepopulation lives in nonrnetropolitan areas (as compared tothe national average of 23 percent), Hispanics account for

33 percent of the State’s citizenry and Native Americansfor 7 percent. Its vast tracts of sparsely populated territoryare typical of the Southwest. Much of it is ruggedly

Appendix-Field Journal . 163

Figure 3—Map of OTA’s Field Study in New Mexico

I coI Costilla} 1 0

Alamogordo




Zuni Indian Reservation, NM

mountainous or arid, which creates difficult obstacles todevelopment and spawns a new set of communicationspriorities. New Mexico’s topography also creates uniqueopportunities for development.

We allotted 8 days to cover New Mexico, much of which we spent in Albuquerque and Santa Fe meetingwith government officials and representatives from theUniversity of New Mexico and the telephone and utilitycompanies. We visited a modest effort at indigenouseconomic development in Costilla, a stone’s throwbeneath the Colorado border. From Costilla, we went toGrants to see how a community faced with the decline inthe mining industry handles economic development, tothe Zuni Indian Reservation, and then to Gallup. We then

flew to Alamogordo, to learn about the State’s southernhalf as told in Mescalero and Las Cruces (see figure 3).

Traditional Society-New Mexico’s eternal problemis water. In a region where irrigation is at a premium, thecontrol of water and where it goes determines power andwealth. Such a political order begs the question of thepotential for development (economic and social) becauseof the entrenched and unidimensional hierarchy. Forexample, on the basis of our experience in New Mexico,

it is clear that the State retains a patriarchal social andpolitical order. The movement of women into business,academia, and politics is a relatively recent phenomenon,therefore women may be less prone to protect the status

O Pop. over 20,000~O 7 ,500 - 20 ,000

1

Under 1,000q State capital


quo and more likely to welcome development. Ourexperiences in New Mexico and Kentucky appear to bearthis out.

The history of New Mexico began long before itsstatehood in 1912. Originally inhabited by Hispanicranchers and Indians, these deep-rooted, land-basedpeoples are profoundly distrustful of outsiders andculturally predisposed against wholesale economic devel-opment. Earlier exploitation of Native Americans in thename of progress has made development anathema tomany Indian Nations. They fear that improvements ininfrastructure will destroy traditional tribal communities.“Economic development—for whom?” they ask.

For tribal peoples, the conventions of money and timeare of less significance than in general society. The ZuniIndians, for example, leave the marketing of their

jewelry-and a healthy portion of the profits—to outsid-ers, even on their pueblo. We were told repeatedly thatthey have a different sense of-even disregard for—time.

Not all tribes, however, are averse to entrepreneurshipand development. The Mescalero Apaches sit on spectac-ular land and are harnessing this resource for tourism. Oneleader of the Mescalero Apache tribe is purported to havesaid: “the Zunis make jewelry, the Navajos makeblankets, the Apaches make money. ”

Cultural Heterogeneity-The State is comprised pre-dominantly of three major cultures. New Mexico’sdiverse cultural base, with its profound distrust of

164 q Rural America at the crossroads: Networking for the Future

outsiders and the rivalries and misunderstandings amongthem, hinders economic development. The Angles, Hispan-ics, and Indians are settled in closed, autonomouscommunities with little movement among them. Forexample, the effect on education of the research facilitiesof Sandia or Los Alamos National Laboratories does notreach far beyond the enclaves themselves. Even amongthe Native Americans, we were told, there is littlecooperation. While the All Indian Pueblo Council servesas a political organization for the 19 pueblos, each triberetains and cultivates its autonomy on its own land.

Education and Development—In contrast to Ken-tucky, where education and economic development and

telecommunications and quality of life are tightly inter-woven, the importance of education in New Mexico foroverall quality of life-if not for economic development—is less obvious in development policy. As a strategy foreconomic development, Kentucky, for example, em-b d bl d d di ti t t th i d ti


Mural in Taos, NM

A t C i l T l i i i j



braces a redoubled dedication to strengthening educationas a means to attractor nurture high-technology, informa-tion-intensive industry by both providing an expertworkforce and an environment to satisfy it.

Despite one of the highest per-capita concentrations of Ph.D.s in the country as a result of defense researchfacilities, there is apparently little transfer of technologyto the State at large. There is no emphasis on highereducation needed to match high-technology jobs. (Cul-tural separation affects this, since the stress on educationcentered in the research enclaves has not permeated theother communities.) We heard repeated boasts that NewMexico’s labor force was highly skilled and highlymotivated. However, the industries that New Mexico

attracts require less skilled labor than those in Kentucky.

Infrastructure-In New Mexico, the potential foreconomic development is shaped largely by the State’stopographic and demographic characteristics. Becausemuch of the State is ruggedly arid and mountainous, thepopulation and infrastructure, including a modem tele-communications system of fiber optics and digital switch-ing, is concentrated along the fertile Rio Grande valley.While this imbalance promotes development along theriver, it creates problems for the flanks of the State, whichare less accessible for telecommunications, roads, water,and electricity. US West has a program to defray theexpense of installing telephones to remote rural commu-nities, but even so the small scale and rugged topographyslow modernization. Many of the independent telephonecompanies have modem equipment that equals or sur-passes US West’s digital and fiber network.

Access to Capital-Telecommunications is not a majorbarrier to development, but access to capital and marketsis. State Representative Nick Salazar pointed out that thelending history of agencies such as the Small BusinessAdministration discourage bankers from funding tele-

communications projects.

Politics as a Key Economic Bottleneck-Local com-munities depend heavily on political patronage andconnections for industry or government contracts. Politicsis a major factor in economic development in NewMexico. One development official noted: “Instead of governing, government provides jobs; instead of educat-ing, education provides jobs. ”

The development strategy for Grants, for example,once a prosperous uranium mining town, includes locat-ing a branch of the State’s highway department and bidsfor a large Federal penitentiary (the third such facility andsecond public one),

3a new State armory, and a new

convention center. Carlsbad, as well, was bidding for ahazardous waste disposal contract. Meanwhile, the north-ern town of Costilla had a hard time locating fundingbecause, as one of its leaders said, it lacked a politicalconnection.

State Awareness of Telecommunications-me Stateis aware of the potential for telecommunications toimprove economic development. The New Mexico Eco-nomic Development and Tourism Department namesinvestment in the public infrastructure as one of fourstrategies for economic development: “Telecommunica-tions should be considered a crucial infrastructure capabil-ity that can serve economic development and deliver

t. that describes the allure for New Mexico’s rural areas for the location of prisons, ‘ ‘Much of New Mexico’svast desert is unzoned, so prison entrepreneurs consider the state a prime location. other correctional companies have been scouting rural sitesthere.” A facility that Corrections Corp. of America plans to build in NM, “will employ 80, an annual payroll of $1 million.”Week, “As Prisons Go Private, The Neighbors Go Court,” June 11, 1990, p. 28.

Appendix-Field Journal q 16 5

educational and other public services. ” It has inaugurateda program called One-Stop Shop whereby small busi-nesses throughout New Mexico can access an onlinedatabase with information about the State and its commun-ities, such as maps, tax rates, licenses, and regulations.It is too early to know who the main users of this servicewill be: whether the small local firms will become awarehow (and if) One-Stop Shop may strengthen and expandtheir businesses, or whether it will be a tool for industrialrecruitment. TechNet, a telecommunications network thatthe State created in the early 1980s to link the State’smajor universities and Sandia Labs, receives mixedreviews.

Problem of Leakage-If technology benefits thosewho know how to use it, what happens to those who donot? Is it a neutral or negative factor? Or does the falloutof technology apply beneficially to everyone? Insofar asimproved communications can help locate new capital


Historic neighborhood in Las Cruces, NM



p p pand new markets, it has potential for small communitiesand small businesses. However, communications technol-ogies can also have negative effects due to financial andcultural ‘‘leakage’ as outsiders capitalize on thesetechnologies. The small entrepreneur in search of financ-ing is likely to be less able to use telecommunications tofind capital than the banker is able to use it to find bettermarkets outside the State to invest capital.

New communication technologies may breakdown theautonomy of the indigenous cultures. Children withaccess to better educational resources through distance-learning techniques may be induced to leave home tocomplete their education, thus removing them from theircultural heritage.

There are instances where technology may preserverather than erode culture. The Zuni Middle School, withthe support of Apple Computers, is creating a program toput its language on hypercard. While most of the Zunis arefamiliar with the spoken language, it is rare that they knowit in written form.

Industrial Insularity-An interesting hypothesis heardin New Mexico was that, unlike most other States, it isbuffered from national economic decline related tomanufacturing because by the time it was admitted as the47th State in 1912, the industrialization of America hadlong been under way and had largely passed by NewMexico. It is thought that because the State’s traditionalland-based cultures were largely undisturbed by industri-alization, it is less likely to follow current national trends,such as the crisis faced by many rural communities asmanufacturing moves overseas and farms are consoli-dated.

The Relation Between Poverty and Development—Eit is true that poverty is a state of mind as much as aneconomic and material condition, then one must ask “poverty by whose definition?” As Ted Jojola of the

University of New Mexico pointed out, the commonstatistical indices that categorize people as impoverishedare immaterial to those with different values and priori-ties. The Acoma Indian Tribe turned down a lucrative

movie opportunity that interfered with sacred religiousrituals. The Tribe’s attitude toward development showsthe priorities of people who choose to live in rural areasby design and not default.

Reinforcing what we learned from Kentucky, ourexperience in New Mexico suggests that those most ableto undertake economic development and use telecommu-nications and modem technology are those neither theworst nor the best off. For the depressed communities, the

basic need for electricity, water, and food takes prece-dence over planning for the future. These troubled areastypically are troubled because of a marketable naturalresource or, as is often the case in the rural Southwest, forlack of water. The infusion of new communicationstechnology can only accomplish so much in the face of such obstacles.

Who Else If Not the Phone Company ?—There is aconsensus among the people we visited in New Mexico

that restrictions on telephone companies from manufac-turing equipment, providing information services, andfrom delivery of broadcast video are stifling to ruralcommunities. Rural areas strain as they are unable togenerate economies of scale to warrant a broad range of efficient and modem services. The vertical integration of the utilities is considered the best chance for obtainingadequate service.

The prosperity of utility companies is tied to theprosperity of the areas they serve. It is clearly in their

interest to develop markets where they do not exist andstrengthen ones that do. Therefore, a major initiative fordevelopment in New Mexico is coming from US Westand Plains Electric. Plains Electric, for example, is


delivering satellite television to rural areas of the State notserved by a cable system to slow the trend of familiesmoving from farms. Plains plans to hire an economicdevelopment coordinator to supplement the State’s agency,

which, according to Plains, lacks adequate personnel andmoney to recruit industry. US West, meanwhile, provides$2 million per year to defray the costs of connection toremote customers as a result of a 1987 bargain with theNew Mexico Public Utility Commission. In addition, USWest is involved in hearings regarding a $20 million fiberoptic education network linking the 2-and 4-year collegesto be built beginning as early as 1991.

Public Utility Commission Policy—Economic devel-

opment is not a part of the statutory duty of the Stateregulatory commissions, but regulatory and pricing pol-icy directly impacts rural telecommunications infrastruc-ture and the possibilities for development. Universalservice is intended largely to benefit remote rural citizens,therefore it is a priority of the New Mexico Public Utility

Figure 4--Map of OTA’s Field Study in Washington


ton’s economy, which depends substantially on exports,is flourishing despite the decline of natural-resource-



therefore, it is a priority of the New Mexico Public UtilityCommission (PUC) to bargain with US West to leveragethe extension of telecommunications services to ruralcommunities for more generous pricing schedules inmetropolitan areas. The New Mexico PUC is elected, not

appointed, and therefore is directly accountable to thepopulace, so the cost of telephone service is a primaryissue for its constituents.

But, the current definition of universal service may notbe adequate for rural citizens to have comparable accessto information technologies as urban customers, espe-cially as deregulation and competition has introducedrapid modernization.

Postal Service: Early Communication Technology—While we presume the current and foreseeable state of telecommunications (fiber optics, digital switching, inte-grated broadband networks) we were surprised (andhumbled) to find that some rural areas lack even the mostbasic communication technology-postal service. Manyof the areas without an addressing system are barelyinhabitable and undevelopable, while some communitiesmay choose to preserve their rustic character. The expenseof an addressing system for outlying areas is a major

impediment to development.

Washington

The level of thinking in Washington at the State andlocal levels about the use of information technologies forrural economic development is well advanced. Thetension between rural and urban, characteristic of manyStates, is acute in Washington, where this dichotomyposes significant problems for State policymakers. The

educational level is a barometer of the citizenry’s abilityto make use of technology for development. Washing-ton’s high standard of education contrasts with otherStates where education has not been a priority. Washing-

based activities that contribute significantly to the State’seconomy.

A conscious effort was made to heed the perspectives

and concerns of the “ordinary” citizen in Washington, astrategy that flushed out previously muted issues. UsingSpokane as a hub for the first 2 days, we traveled south toPullman and Washington State University and north toNewport. We stopped in Othello for one planned andseveral impromptu conversations on the way to WhiteSwan, where we convened a meeting with interestedofficials and citizens from around the lower YakimaValley. We then traveled to Olympia to learn the issuesand objectives of the various players at the State level, and

finally to Seattle (see figure 4).

Prosperity-Over the past 5 years Washington Statehas enjoyed a robust economy, with opportunities foreconomic development. Washington as a whole benefitsfrom a diverse and balanced economic base, includingforestry and agriculture, as well as high-technologyindustries, such as aerospace and software development.The State is fast gaining a reputation as an eminent

wine-producing region, and vineyards are conspicuousalong the Columbia River. A very scenic State whoselandscape features the Cascade and Olympic Mountainsand the Pacific coast, Washington also features one of thefew deep-water ports on the west coast. As trade withJapan and the countries of the Pacific Rim increases,Seattle and the area surrounding Puget Sound arebooming. The State is also benefiting from the free tradepact with Canada The abundance of rainfall for much of the State and the system of dams to provide energy and

irrigation for the central plains makes this arid areafruitful. Other parts of the West have suffered fromdroughts for several years, but Washington’s agriculturehas thrived.


Nevertheless, there are pockets that do not equallyshare in the prosperity, particularly the rural and remoteareas whose economies are heavily or entirely based onnatural resources. The natural-resource-based industriesare on the whole in decline or stagnant. Washington’sapple industry, for which the State is famous, has beenunsettled in recent years by overproduction and the use of the pesticide Alar. In Penal Oreille County, the northeast-ern most county with borders on Idaho and Canada,agriculture, once significant in the region, is now reducedto hobby farming; in the meantime, the dominant timberindustry likewise declines.

Many agricultural- or timber-dependent communities

are seeking new ways to support their local economies.Tourism and retirement, both taking advantage of ruralWashington’s quality of life, are major elements in aneffort to attract diverse, small, balanced, and usually“clean’ enterprises. The town of Leavenworth in centralW hi i f l d l f i b d d l


Irrigating fields in White Swan, WA

G B th G d t d G th St t



Washington is a successful model of tourist-based devel-opment patterned after a Bavarian village. The Depart-ment of Community Development, meanwhile, is work-ing with the town of Forks on the Olympic peninsula tohelp it recover from a collapsing economy based ontimber. Plans for retirement communities, which helpstabilize the economy through steady income, are oftenhampered by inadequate health care in rural areas.

Development Philosophy—Policyrnakers in Washing-ton have developed a mature economic developmentphilosophy. In contrast to New Mexico where opportuni-ties are few by comparison, or to Kentucky whererecessions follow booms in fast succession, the prosperityhas permitted policymakers “the time to intellectualize,”

in the words of the Director of the Department of Economic Development. They have taken a holisticapproach to development, in which the recruitment of industries is part of a broader agenda that aims to createconditions to support and nurture a diverse, balanced, andstrong economic base. Washington is able to attract“clean” high-technology industries such as softwaredesign and biotechnology.

Rural Development as Seattle’s “Growth Manage-

merit” -Ironically, the problem facing Washington poli-cymakers is not so much the need for economic develop-ment, but rather the need for ‘‘growth management.Recently, Seattle has been recognized for its treasureswithout the problems usually found in big cities. How-ever, Seattle is developing its own problems as aconsequence of rapid growth-strains on highways andhousing for example-thus “growth management” is ahigh priority. The need to control growth has triggered anappreciation of how the State’s rural areas can share in the

State’s prosperity and contribute to its expansion. Ruraleconomic development is an important partofa‘‘growthmanagement” strategy for spreading Seattle’s prosperitythroughout the State.

Governor Booth Gardner created a Growth StrategyCommission to investigate “economic diversification”and ways to balance growth in the State, while thelegislature commissioned a report on the potential forurban companies to relocate parts of their operations torural areas. Telecommunications is seen as a vitalresource that would enable distant and small communitiesto share in the prosperity.

The studies concluded that telecommunications was anecessary part, but not sufficient on its own to fostereconomic growth in Washington’s outback. This conclu-sion is reached in other reports, such as ‘Telecommunica-tions and Rural Development” by the Partnership forRural Improvement of the Community College of Spokane, which notes that while communications per sewill not guarantee development, the absence of adequatecommunications reduces the possibilities for develop-ment. Small cities rather than remote or small villagesmost likely benefit from the relocation of businesses fromurban to rural areas with the help of telecommunications.

Washington’s rural easterners cautioned that becausethis recent awareness of urban-rural linkages is caused bythe overgrowth of Seattle, those promoting these linkages

may not be sensitive to the needs and desires fordevelopment in eastern Washington. Many of Washing-ton’s citizens east of the Cascade Mountains feel moreallied with the citizens of northern Idaho and westernMontana, than of western Washington. In some areas,such as Okanogan County in north-central Washington,economic development in most any form is welcome.Others, such as some residents of White Swan, a smallvillage on the Yakima Indian Reservation in the lowerYakima Valley, favor slow and controlled growth. Somewant no growth at all.

The State’s interest in rural development to solveSeattle’s growth problems does not always appeal to local


economic development professionals. The relocation of alarge firm (more than 50 employees) can threaten todominate an area and upset its balance. These localdevelopment “guerrillas’’ -as one describes herself and

her colleagues-are more sensitive to the needs anddesires of the community.

Sense of Community-Despite the east-west andrural-urban schisms, there is a remarkable degree of community throughout Washington and a sense that,despite some exceptions, the State functions as a unit: thiscontrasts to the insularity of New Mexico and thefactionalism of Kentucky. The common phrase ‘‘forgingsectoral linkages” reflects the notion that the State’s

economy is the sum of its parts: that the fortune of Seattledepends on and contributes to the fortune of Spokane,which depends on and contributes to the fortune of thenearby communities and towns. The word ‘‘networking”was often mentioned to describe the key to a community'ssuccess and one citizen noted that “everybody is facing


Cle Elum, WA



success, and one citizen noted that everybody is facingthe same problems, so everybody has to work together. ”Frequent and casual reference to the transformation of Eastern Europe showed an awareness and sophisticationthat indicated that their own communities must participatein the larger, global community.

Environment-Economic development in rural Wash-ington involves delicate environmental issues. Washing-ton State has a large and active environmental commu-nity. Recently, the tension between the environment and

jobs has been fought over the issue of the protection of theState’s ancient forests-the habitat of the spotted owl.Efforts to halt or interfere with logging threaten thecommunities that depend on the timber industry. Those

primarily concerned with development see the spottedowl as a symbol of how the concern for a bird is takingprecedence over people’s lives and livelihoods. In reac-tion to the tumultuous times for the timber industry, thePark Service has emerged as a new player in developmentby more actively promoting tourism in park facilities.

Financing Development—The difficulty of securingcapital, ’as elsewhere, is cited as a significant impedimentto development. Because the banks serving rural areas

typically are branch facilities of large banks, their interestin and knowledge of small rural businesses is limited.Small entrepreneurs in Washington face another financialburden. By State law, public credit cannot be extended forprivate use. Finally, communities that border Idaho mustcompete for businesses against a more generous taxstructure across the border.

Regulatory Policy-whiledevelopment advocates be-lieve in the “Field of Dreams” credo-”if you build it,

they will come”—the State Utilities and TransportationCommission (UTC) which regulates telecommunications,operates under the maxim: “if you build it, somebody hasto pay for it.” UTC, with its obligation to ensure that each

customer has an appropriate level of service at a fair cost,is cautious not to encourage (let alone mandate) thedeployment of technologies or services whose applica-tions have not been demonstrated. But market-orientation

may tend to shortchange rural areas. The experience inEurope, according to Bill Beyers, Professor of Geographyat the University of Washington, is that technologydeployment and development premised on market forcestends to work against rural areas.

The general consensus throughout the State seems to bethat the existing communications infrastructure is suffi-ciently sophisticated to handle most foreseeable applica-tions. Nevertheless, there are complaints about “dirty

lines” degrading service and interfering with data trans-fer. UTC has the goal of single-party, touch-tone serviceto a high proportion of multi-party lines in both rural andurban areas by the end of 1992. A major issue for ruraltelephony is the cost of service, especially when calls tothe local school or to a neighbor a few miles away ofteninvolve a toll charge, and when the rate for basic serviceis $30 or $40 per month. Extended area service (EAS) isa mechanism to redraw exchange boundaries to match thepatterns of regional commerce and reduce the cost for

rural communities to communicate with the town or cityon which it depends. However, the savings accrued torural customers and businesses is largely taken at theexpense of the small independent telephone companieswhose settlements from the pool of long-distance tolls isreduced at the same time the traffic on their networksincreases.

Education and Development—Like Kentucky, Wash-ington State is unequivocally committed to education for

future progress, and here too telecommunications servesan important function in strengthening educational oppor-tunities. The Satellite Telecommunications EducationalProg ramming (STEP) network, for example, adminis-



University of Idaho, in Moscow

tered by Educational Service District 101 in Spokane,id t ht b d t i ll t i d

Palouse Economic Development, with a $100,000 grantfrom the Department of Community Development, haslaunched a project to help local businesses market goodsabroad, a project for which telecommunications is indis-

pensable.

Maine

Maine aggressively embraces telecommunications asan important way to overcome its isolation, its size, andits low population density. Improving education state-wide through the use of telecommunications is thecenterpiece of the State’s development approach.

The largest of the New England States, Maine is themost sparsely populated State east of the Mississippi, withdensity ratios that match some large Midwestern States.In addition, nearly two-thirds of the State’s 1.2 millioncitizens live in nonmetropolitan areas, typically in one of its nearly 500 small towns and villages. Despite recent

h h S ’ i l i h i h



provides programs taught by educators specially trainedfor broadcasting to schools, both rural and urban, in 12States. With the unique visual capabilities of television,STEP is able to present course material in innovative

ways. A class in Japanese, for example, maybe presentedwith a Japanese music video to help students understandthe culture and its idiom. Although its curriculum islimited to six classes geared to college preparatorystudents-calculus, Japanese I and II, advanced English,and Spanish I and II-it also delivers inservice program-ming for teachers. Washington State University in Pull-man provides courses to branch campuses through itsWHETS facility, which links them by a two-way audioand video microwave system.

Although STEP targets rural schools with limitedfacilities and teachers there are barriers to the delivery of education to small and remote rural communities andschool districts, because of the expense of installing andsubscribing to the programming.

Demand for Information and Technology-The need

to effectively and efficiently communicate with distantand foreign markets is important because much of the

State’s products are exported. The awareness of thestrategic importance of information and telecommu-nicationsfor continued economic growth throughout theState is very high. As an example, Telephone Utilities of Washington, which operates 43 exchanges in the State,has joined a consortium of independent telephone compa-nies that will offer the advanced switching technology of common channel Signaling System 7, Several peoplenoted that the use and demand for cellular telephonywould be large in rural areas, especially among farmers.

Gonzaga University in Spokane recently received a $10million grant from the United States Department of Agriculture (USDA) to build a high-technology library toprovide information as a tool for agriculture. Finally, the

growth, the State’s economy is sluggish, with an averageper-capita income at $13,954 in 1987, compared to thenational average of $15,481.

Starting in the north, we visited Presque Isle and several

of the surrounding towns before traveling south throughHoulton and the small lumber town of Haynesville on theway to Orono and Bangor. The Telephone Association of Maine’s annual meeting in Rockport provided a uniqueopportunity to speak with many players in telecommuni-cations, with an emphasis on the perspectives of the localindependent telephone companies. Finally, the staff wentto Augusta to speak with the State officials and see theUniversity of Maine’s Interactive Television network inoperation, then onto Portland to meet with New EnglandTelephone and the governor’s advisor on communicationand economic development (see figure 5).

Economically Remote—Although geographically, cul-turally, and topographically opposites, Maine and NewMexico share several important characteristics withregard to economic development. Both are sparselypopulated and relatively large. Maine’s geographic isola-tion parallels New Mexico’s cultural isolation. Sharingmost of its border with Canada and the Atlantic Ocean, it

is the single State to border on only one other State (NewHampshire). Just as New Mexico is divided into pueblosand remote enclaves, Maine is organized into small townsand villages. Both States have been relatively unaffectedby larger, national economic trends and events.

But while many New Mexicans believe that the Stateis not yet ready to make full use of its resources,“Downeasters” welcome the change to participate on anational or global level. They are increasingly less content

to remain economically isolated, particularly as the freetrade agreement with Canada puts Maine at the crossroadsof an important connection between Quebec, the Mar-itimes, and the United States’ Northeastern cities.


Figure 5-Map of OTA’s Field Study in Maine

Fort

Isle

96

Orono



Orono

H


Rural Poverty-As in Washington, the economicgrowth that Maine has had in recent years is notdistributed evenly throughout the State. According to theDeputy Commissioner of the Department of CommunityDevelopment, the rich areas become richer, but the ruralareas remain poor. While Portland and southern Mainehave recently been successful in attracting service indus-tries such as advertising agencies and insurance compa-nies from around southern New England, northernMaine’s economy, dependent largely on timber andpotato farming, remains stagnant. Aroostook COunty, atMaine’s northern ‘crown,’ faces a health care crisis as itspopulation, many of whom are uninsured, can no longersupport the four regional hospitals serving a county thesize of the State of Connecticut.

Cooperative Development—The presence of LoringAir Force Base in Limestone, several miles north of

Presque Isle, greatly benefits Aroostook County’s econ-omy. The base, like others around the country, stabilizesthe regional economy and enables the community toafford educational facilities that would otherwise be


A church spire, Presque Isle, ME

beyond its reach. However, as residents realize thatclosing or descaling the base is a “when” not an “if”proposition, communities and business leaders are tryingto find and create their own opportunities for develop-ment. Eight communities around and including PresqueIsle qualified as one of the State’s four Job OpportunityZones. Although the Job Opportunity Zones are intendedto provide opportunities and incentives for growth, theincentive of State support led communities to evaluate

their resources and potential for development and tocooperate where they might ordinarily have not.

Local business and community leaders in Aroostook County have formed an ad hoc committee-LeadersEncouraging Aroostook Development (LEAD)-to tackledevelopment issues that they believe are not properlytreated by the Regional Planning Commission. Becausetransportation— including roads and highways, air access,and railroads-is such a vital element to development in

remote rural areas like northern Maine, LEAD is workingto reauthorize and release State funds to extend InterstateRoute 95 to Presque Isle. LEAD, along with the Univer-sity of Maine at Presque Isle, was instrumental in securing

Appendix-Field Journal q 171

a grant from the Maine Science and Technology Centerfor a CAD/CAM system to be installed in one of Maine’sfour Research and Productivity Centers on the campus of the University of Maine at Presque Isle.

Telecommunications and Development Sanctioned From the Top-The former chairman of the NationalGovernors Association’s Subcommittee on Telecommu-nications, Governor John McKernan has championed theimportance of telecommunications for the State’s futurewelfare, and his fervor paces the State’s economicdevelopment philosophy. In particular, his and others’commitment to telecommunications-assisted education isbecoming a reality, as Maine is in the process of buildinga community college system based on interactive televi-sion. In addition, Rich Silkman, the Governor’s advisorfor State Planning, similarly supports telecommunica-tions as a means of overcoming Maine’s isolation andsparse population. Communications provides a way torecapture “space-specific rents” in rural areas which


Mattawamkeag, ME

The Environment and the Role of the DEP—Aware



recapture space specific rents in rural areas, whichhave been declining as natural resources such as metal orwood are devalued.

Ken Gordon, the Chairman of the Public Utilities

Commission, explicitly stated his view of the fundamen-tal connection between communications regulation andeconomic development in an address before the Tele-phone Association of Maine. While pointing out that theState has a reasonably modem communications network with a high degree of digitization and fiber deployment,he noted that the State is hampered by high intrastate tollrates and by ‘‘rather modest marketing efforts’ on thepart of the telephone companies. In an effort to aligncommunications and economic development goals, Chair-man Gordon hopes to frame regulation to protect allparties-customers and small telephone companies in-cluded—without intrusive, detailed involvement by thePUC into the forces of the market.

On the other hand, the legislature, with the recent laborstrife in the paper companies and the telephone company,is more cautious about development and technology andprefers keeping regulation in place. Representative HerbAdams warned in a speech before the Telephone Associa-tion of Maine that “technology is not an endless friend,”citing the increasing incidence of junk fax and computer-ized telephone solicitations, and that often technologytakes on a life of its own and becomes unresponsive to theconsumer.

Overall, the support for the role of telecommunicationsin economic development among the State’s leaders andthe cooperation among these key policymakers seemsgreater in Maine than in any other State we visited. One

resident explained this in terms of the State’s smallpopulation. The State’s leadership is comprised of only200 people. They often socialize together and work outissues on an informal basis.

fthat the State can ill-afford the status quo, most of Maine’sresidents support economic development. However, thereis significant tension over the extent and nature of development, which appears largely over environmentalissues. As in Washington State, timber is perhaps the mostimportant resource for Maine’s northern communities(much of the land in the north is owned by papercompanies) and so pressure on logging industries tends toruffle the feathers of citizens whose livelihoods are at risk.

The villain, from this perspective, is the Department of Environmental Protection (DEP)--dubbed by one resi-dent “nature Nazis”—who have assumed the role of surrogate zoning board to monitor the sale and use of property in the absence of strong local governments. DEPhas become influential in economic development. Viewedby some as bureaucratically sleepy, the DEP is resentedby many in rural northern Maine, who feel squeezed byrules and regulations mandated from policymakers inAugusta.

However, the DEP’s efforts to preserve the State’senvironment spring largely because much of the neededinfrastructure-e. g., roads, bridges, and sewage treat-ment—is in disrepair and cannot support further develop-ment. In some cases, in order for a business to move,another one has to move out lest it exceed the capacity of the sewage plant. According to Jack Dexter, the Presidentof the Maine Chamber of Commerce and Industry,regulation and the exhaustive regulatory process make itexpensive to do business in Maine, especially for smallbusinesses.

Concerns for the State’s environment are likely to

provide strong incentives in the future for the deploymentof modem communications, according to Curt Sweet of the University of Southern Maine. As the condition of rivers and lakes in the State deteriorates and as logging


companies are slow to replace harvested forests, theimportance of an economy founded on nonpolluting,information-intensive industries is expected to become animportant priority. Furthermore, Maine, along with therest of the Northeast, is slowly losing industry to the west,where as we were told, public policy for the past decades

has focused on developing inexpensive power sources. Education, Telecommunications, and Economic De-

velopment—As in Kentucky, the low level of skillsamong Maine’s residents was cited as a significant barrierto development. However, the State has, until recently,been hamstrung in its ability to adequately educate andtrain its workforce because the community college systemhas only been operating 1 year. When the commitmentwas made to create the community college system 10years ago, an ambitious telecommunications-based sys-tem was seen as the most efficient and effective way toimprove education in the State. The Education ReformAct of 1984, recognizing the relationship of education anddevelopment, provided additional impetus for a telecommu-nications-based network.

communities realize its potential. For very distant orisolated communities, ITV opens up new avenues fordelivering education and other invaluable social services.There is some reluctance, though, among superintendentsand teachers who fear that the success of such a systemcould imperil their jobs.

Independent Telcos and Rural Development—In Maine, just as in Kentucky, New Mexico, and Washing-ton, the small independent telephone companies ingeneral have more advanced switching and transmissionequipment than the regional Bell affiliate, New EnglandTelephone. However, this potential advantage can rarelybe exploited because the small local telephone companies,for lack of the personnel and expertise, must rely on theirBell counterpart to set protocols and to popularize

services. They are also limited in offerings because manyof them are unable to afford the expense of filing serviceapplications before the State Public Utility Commission.With regard to involvement in local development, thesimple answer is that they lack the resources to markettheir communications wares and to help their customerstake advantage of the network There is also a built in



From the seven branch campuses of the University of Maine System which are connected by two-way, fullyinteractive video and audio, courses will eventually bebroadcast to more than 200 high schools, university

centers, and technical schools throughout the State-onewithin 12 miles of every resident. The system is intendedto be used for college, secondary, and elementary levelcoursework as well as for adult continuing education.

Though still in its infancy, the success of the Commu-nity College of Maine’s ITV network will in large partdepend on the efforts of local educators to help their

take advantage of the network. There is also a built-inincentive for local telephone companies to limit growth,because as their business customers expand, they becometargets for the larger phone companies to pick off.

The prominent issue for rural telephone companies inMaine involved the treatment of long-distance pricing andin particular the policy of extended area service. Becausethe independents rely heavily on the settlements from thepool of long-distance in order deflect the usually high costof providing local service, efforts to reduce toll ratesthreaten to cut into this important subsidy.

Glossary

Analog Communications: A communication format inwhich information is transmitted by modulating acontinuous signal, such as a radio wave. Voice andvideo messages originate in analog form since soundand light are wave-like functions; thus, they must beconverted into digital messages in order to communi-cate along digital communications formats or media.

Bandwidth: The range of frequencies that can betransmitted along a communications channel. Also, therange of frequencies required to transmit a communi-cations signal without undue distortion. The moreinformation a signal contains, the more bandwidth itrequires for transmission. For example, televisionsignals require a bandwidth of 3 million hertz (cycles

per second), whereas telephone conversations requireonly about 3,000 hertz. The higher the bandwidth thegreater the amount of information that can be trans-mitted in a given timeframe.

Basic Exchange Telecommunications Radio System(BETRS): An FCC classification for digital micro-

di t S Di it l R di

transmits audio, video, and data as bits of information(see Bit). Digital communications is particularly suitedto data communications, since computers communi-cate and function digitally. Digital technology alsoallows communications signals to be compressed formore efficient transmission. Codecs (abbreviation for‘‘coderdecoder’ are required for video and voicesignals to be transmitted in digital form, since videoand voice are analog messages.

Digital Radio (BETRS): Radio signals that transmitdigital signals. It has greater capacity and is moresecure than analog radio since messages must beencoded digitally for transmission. See Basic Ex-change Telecommunications Radio System.

Digitalization: The process of converting analog infor-mation, such as voice and video messages, into digitalsignals.

Divestiture: The break-up of the AT&T monopoly intothe 7 regional Bell operating companies, Bellcore, andthe 22 Bell operating companies. Divestiture resultedf th 1984 M difi d Fi l J d t hi h ttl d



wave radio systems. See Digital Radio.Bell Operating Companies (BOCs): As a result of

AT&T’s divestiture in 1984, the original Bell tele-phone system was divided into 22 local Bell operating

companies. These now provide local telephone serviceacross most of the country. These companies aremanaged by the seven ‘‘Baby Bells, ’ the RBOCs orregional holding companies for the BOCs.

Bit (Binary digiT): The smallest unit of information acomputer can use. A bit is represented as a “O’ or a“1“ (also “on” or “off”). A group of 8 bits is calleda byte. Bits are often used to measure the speed of digital transmission systems.

Kilobit: 1,000 bitsMegabit: 1 million bitsGigabit: 1 billion bits

Central Office: The telephone company facilities thathouse switching and related equipment, which servesthe immediate geographical area. The central office isthe most immediate point of interface between thetelephone company and customers.

Centrex: A service offered by telephone companies thatprovides business customers direct inward dialing to

their own lines allowing them to circumvent the publicportion of the switching facilities. Centrex allowscompanies to more directly manage their telecommu-nications

Compact Disc Read-Only Memory (CD/ROM): Anoptical storage system for computers that permits datato be randomly accessed from a disc. With read onlydiscs, new data cannot be stored nor can the disc beerased for reuse.

Digital Communications: A communications format

used with both electronic and light-based systems that

from the 1984 Modified Final Judgment, which settledthe government’s long-standing antitrust suit againstAT&T. See Modified Final Judgment.

DS3 Circuits: DS3 circuits-also called T3 circuits—operate at a capacity of 45 megabits per second(Mbps). See T1 Circuits, Kilobits Per Second.

Electronic Data Interexchange (EDI): The use of computers and telecommunications technologies toprocess common transaction functions, such as in-voices, shipping notices, and bills, that traditionallyhave entailed the transfer and processing of paperdocuments. With EDI, computers exchange informa-tion via telecommunications and process the informa-

tion without the delay typically entailed with papertransactions. EDI improves the efficiency and effec-tiveness of operations by empowering businesses topurchase supplies ‘and to produce and distributeproducts precisely when and where they are needed.

Fiber Optics: Hair thin, flexible glass rods that use lightto transmit audio, video, and data signals. Fiber opticsare particularly suitable for digital communicationssince light impulses go “on” and “off” to transmitmessages (see Digital Communications). Fiber optic

cable has much higher capacity than copper wire orcoaxial cable and is not as subject to interference ornoise.

Holistic: Related to or concerned with whole systems, asopposed to examining the constituent parts of asystem. A holistic approach to development treats theeconomy, its politics, and its human interactions asinterdependent.

Host-remote Switch: A device that can provide localswitching capabilities for communities located farfrom a telephone company central office (see Central

–173–

174q


Office). Host-remote switching can improve the qual-ity of service for remote communities since their localcalls do not have to travel the long distances, alongwhich signals can be attenuated, to the central office tobe switched. While the remote switch can performmost of the functions of a regular switch, it isdependent on a host switch typically found in a largercommunity.

Independent Telephone Company: A local exchangecarrier that is not part of the Bell System of Belloperating companies (BOCs) and regional Bell operat-ing companies (RBOCs). See Bell Operating Companies.

Integrated Services Digital Networks (ISDN): A proto-col for high-speed digital transmission. ISDN providessimultaneous voice and high-speed data transmissionalong a single conduit to the users’ premises. Two

ISDN protocols have been standardized: with Narrow-band ISDN, or 2B+D, two 64 kilobits per second(kbps) channels carry voice or data messages and one16 kbps channel is used for signaling-carryingaddressing and other call-related information; withBroadband ISDN, or 23B+D, 23 64 kbps channelscarry voice or data messages and one 64 kbps channel

central office may serve a local exchange. See CentralOffice.

Local Exchange Carrier (LEC): A telephone companythat carries local calls. In most exchanges the LEC isa Bell operating company, but hundreds of independ-ent telephone companies are LECs. State publicservice commissions regulate the monopoly services

of LECs. See Bell Operating Companies.Local Loop: The portion of the telecommunications

network between the customers’ premises and thetelephone company’s central office. See Central Office.

Metropolitan Area Networks (MANs): Still in thefield-testing stage, metropolitan area networks provideswitched data networking services at very high speeds(45 to 50 megabits per second) within a geographicarea of at least 50 miles. MANs connect LANs to

LANs, as well as LANs to WANs. These networks areoptimally designed for shared usage. See Area AreaNetworks, Wide Area Networks.

Microwave: High-frequency radio waves used for point-to-point and omnidirectional communication of audio,data, and video signals. Microwave frequencies re-quire direct line of sight between the sending station



y g pis used for signaling. See Kilobits Per Second.

Interexchange Carrier (IXC): A telephone company—such as AT&T, MCI, or Sprint-that carriers long-

distance calls. The IXCs are authorized by the FederalCommunications Commission (FCC) to carry inter-LATA interstate traffic, and can be authorized by theState public service commissions to carry interLATAintrastate traffic (see Local Access and Transport Area).

Kilobits Per Second (kbps): A unit of measurement forthe speed at which information travels. Also Mbps—Megabits per second, and Gbps--Gigabits per second.See Bit.

Local Access and Transport Area (LATA): LATAs

were developed as a result of the divestiture settlementto define geographic areas within which the Belloperating companies (BOCs) can provide telephoneservice. (See Bell Operating Companies.) The settle-ment allows the BOCS to provide intraLATA service,but it forbids them from providing interLATA tele-communications.

Local Area Networks (LANs): Data communicationnetworks that are relatively limited in their reach. Theygenerally cover the premises of a building or a campusand are private networks-thus the equipment is notowned by a telephone company. Like all networkingtechnologies, LANs facilitate communication andsharing of information and computer resources by themembers of a group.

Local Calling Area: The area within which a customermay make a call without incurring long-distancecharges.

I.meal Exchange: The geographic area in which there is

a uniform price for telephone service. More than one

qu e d ect e o s g t betwee t e se d g stat oand the receiving station to operate. Obstruction suchas trees or buildings distort the signal.

Modified Final Judgment (MFJ) : The 1984 agreement

between AT&T and the U.S. Justice Department,which settled the government’s long-standing antitrustsuit against AT&T and resulted in AT&T’s divestiture(see Divestiture). As a result of the MFJ, the Belloperating companies (BOCs) and regional Bell operat-ing companies (RBOCs) are prohibited from offeringinformation services and limited in the extent to whichthey can engage in manufacturing and designingequipment; BOCs cannot offer long-distance service;and RBOCs cannot offer local telephone service. In

1989, the court decided to let RBOCs provide gatewayservices in order to encourage the development of aninformation service industry.

Nontraffic Sensitive (NTS) Costs: The costs that a localtelephone company incurs in providing its subscriberswith a connection to the company’s central offices.The NT-S portion of the company’s plant is largelycomprised of the telephone lines-local loops—running from the subscribers’ premises to these centraloffices, and the switches located at the central offices.NTS costs depend primarily on the number of sub-scribers and the average length of the local loops. NTScosts do not vary with the amount of telephone trafficcarried over the loops. Thus, NTS costs are oftenreferred to as “fixed costs. ”

Open Network Architecture (ONA): A regulatoryconstruct which was a product of the Federal Communi-cations Commission’s Computer Inquiries. ONA is asystem in which the telephone companies allow

enhanced service providers equal access to their

Glossary q 175

network facilities. This equal access is referred to ascomparably efficient interconnection (CEI). Enhancedservices include such routine functions as call forward-ing and voice mail, but also include more sophisticateddatabase manipulations and other services not yetimagined. With CEI, enhanced service providers(ESPs) can purchase the unbundled components-orbasic service elements (BSEs)—such as switchingcapabilities or information processing capabilities, of the formerly unified public switched network to bringtheir services to customers. ONA is the FCC’s attemptto eliminate the structural separation requirements thatrequired the telephone companies to maintain separatesubsidiaries for competitively offered services. With-out such separations, competition would be fosteredand more products would become available to consumers.

Packet Switching: The process of transmitting digitalinformation by means of addressed packets-whichinclude data, call control signals, and error controlinformation-so that a channel is occupied only duringthe transmission of the packet. In contrast, data sentusing modems occupies a circuit for the entire durationof the transmission, even when no data is actually

portion of the cost of long-distance calls that use thelocal access plant. Prior to the divestiture of the BellSystem, prices for long-distance service were setartificially high and the extra revenues were used todefray some of the costs of local service and keep localrates low. The Federal Communications Commissionimplemented SLCs after divestiture, when this cross-

subsidization was no longer possible because long-distance service became competitive. SLCs range fromabout $2.50 to $6.00 per month.

Switch: A mechanical or solid-state device that opens orcloses circuits, changes operating parameters, or se-lects paths or circuits, either on a bandwidth or timedivision basis. Digital switches typically switch sig-nals by time division.

Switched Multimegabit Data Service (SMDS): SMDSis a high-speed, fast packet-switched service providedin a campus, or ring, type arrangement situated withina 50-mile radius.

T1 Circuits: T1 circuits have 24 channels-each carrying64 kilobits per second (kbps) of information andoperate at a capacity of 1.544 megabits per second(Mbps). T1 is a standard for transmission that is



traveling over the lines. Using packet switching, thevarious packets of information can travel along differ-ent routes on the network allowing the carrier to

optimize its network capacity.Private Branch Exchange (PBX): A small telephoneswitch that typically serves extensions in a business orcampus arrangement and also provides interconnectiv-ity with the public network. A PBX offers similarcapabilities as Centrex, except the equipment is ownedby the customer rather than leased from the telephonecompany. See Centrex.

Rural Area Networks (RANs): As conceptualized byOTA, RANs would be shared-usage networks, config-

ured to include a wide range of users in ruralcommunities. RANs would allow rural communities topool their demand for advanced telecommunicationsservices in order to justify and share the cost of sophisticated equipment that individual users couldnot otherwise afford or fully utilize. RANs would notbe isolated “technology islands,” but would connectrural areas with the rest of the world.

Signaling System Seven (SS7): A control system for thepublic telephone network, SS7 allows telephone com-

pany computers to communicate directly with eachother using specialized signaling circuits. The informa-tion traveling along these circuits is related to therouting of telephone calls. By using separate circuitsfor these purposes, the carriers do not have to usebandwidth on the voice circuits, and telephone callprocessing becomes more efficient and faster, enablingmore services to be made available to consumers.

Subscriber Line Charges (SLC): Subscriber line chargesare a convention adopted after divestiture to defray the

accepted in North America. See Kilobits Per Second.Universal Service: A policy associated with the Commu-

nications Act of 1934, which granted AT&T the

monopoly for telephone service in the United States, toprovide telephone service to all who want it at areasonable price.

Virtual Networks: Virtual networks establish logical,temporary connections as opposed to dedicated ones.From the users perspective they are similar to privatenetworks.

VSATS: Very small aperture terminals, satellite receivedishes, approximately 1.8 to 2.4 meters in diameter,that are capable of sending and receiving voice, data,

and/or video signals. VSATS can transmit over wideareas by relaying to satellites in geosynchronous orbit.

Wide Area Networks (WANs): Data communicationnetworks that provide long-haul connectivity amongseparate networks located in different geographicareas. WANs make use of a variety of transmissionmedia, which can be provided on a leased or dial-upbasis. WANs can also be privately owned.

SOURCES: Jack L. Dempsey, Telecom Basics (Chicago,lL: lklephonydivisiom I.ntertec Publishing, 1988); Jack L. Dempsey,Transmission Basics (Chicago, IL: lklephony divisio~I.ntertec Publishing, 1989); Jack L. Dempsey, Datacom

Basics (Chicago, IL: Tklephony divisiou Intertec Publish-ing, 1990); Graham Langley, Telephony’s Dictionary:Second Edition (Chicago, IL: lklephonyPublishing Corp.,1986); Raymond Lawtou Factors Affecting the Definition

of the Local Calling Area: An Assessment of Trends

(Columbus, OH: National Regulatory Research Institute)February, 199Q Offke of Tkehnology Assessment, Linking

for Learning:A New Course for Education, OTA-SET-430(WashingtoqDC: U.S. GovemmentPrinting Office,Novtxn-ber, 1989); and OftIce of ‘lkchnology Assessmen4 1991.

List of Contributors

Herman AgoyoAll Indian Pueblo Council, Inc.Albuquerque, NM

John Aragon

Director, Public RelationsUS West CommunicationsAlbuquerque, NM

David AtkinsonMayorOwensboro, KY

George BaldwinChair, Department of SociologyHenderson State UniversityArkadelphia, AR

Wayne BatesEngineer ManagerKentucky Public Service CommissionFrankfort, KY

William BeyersProfessor of GeographyUniversity of WashingtonSeattle, WA

Michael BinderDirector of the University LibraryWestern Kentucky UniversityBowling Green, KY

Jerome Block CommissionerNew Mexico State Corporation CommissionSanta Fe, NM

Shirley BloomfieldDirector of Government AffairsNational Telephone Cooperative AssociationWashington, DC

Gary BousquetApache Future, IncMescalero NM



Mary Lou BaylorBaylor AssociatesWashington, DC

Arlin BeehlerManagerPro Penal Oreille Economic Development AssociationNewport, WA

Al BellManager, Education Technology CenterEducational School District 101Spokane, WA

Fred BellottAssociate DeanCollege of EducationNew Mexico State UniversityLas Cruces, NM

Greg BensonDirector of Center for Learning TechnologyNew York State Department of Education

Albany, NY

Sanford BergProfessor, Public Utilities EconomicsUniversity of Florida, Gainesville, FL

Stan BesenProfessorGeorgetown University Law CenterWashington, DC

Mescalero, NM

Jenny BoyarskiPaducah Community College

Paducah, KY

Dan BozaIthDirector, Program DevelopmentPennyrile Area Development DistrictHopkinsville, KY

Ted K. BradshawProfessor of Rural SociologyUniversity of California, Berkeley, CA

Louis A. BransfordPublic Service Satellite ConsortiumWashington, DC

Dan BrennanNew England TelephonePortland, ME

Stuart Brotman

Brotman AssociatesBoston, MA

Joe BrowderBrowder AssociatesWashington, DC

Andy BrownNational Telephone Cooperative AdministrationWashington, DC

–176-

List of Contributors 177

Terry BrownExecutive DirectorWashington State Community CollegesSpokane, WA

Sam L. BurkeAssociate Director

South Kentucky Industrial Development AssociationHopkinsville, KY

Ellen BurtonDirector, Issues AnalysisUS WestWashington, DC

Lucy Greer BurtonDoctoral CandidateWashington State University

Pullman, WA

Alan BuzacottTCT ProgramOffice of Technology AssessmentWashington, DC

Lloyd Callahan

Bob Clark Office of Community & Developmentcaribou, ME

Dale L. CliffordHaynesville, ME

Joseph F. Coates

J.F. Coates, Inc.Washington, DC

Vary CoatesTCT ProgramOffice of Technology AssessmentWashington, DC

Jim ColemanExecutive DirectorEconomic Development CouncilLas Cruces, NM

Robert CollinsTelephone & Data SystemsNorthfield, VT

Douglas CormC f T l i i d I f i S di



Lloyd CallahanWapato, WA

Brian G. Campbell

Vancouver Public LibraryVancouver, BC

Tom CampbellDeputy Director, Business and Industry DivisionFarmers Home AdministrationU.S. Department of AgricultureWashington, DC

Chris Carson

LibrarianZuni Middle SchoolZuni Pueblo, NM

Richard CasadCommissionerWashington Utilities and Transportation CommissionOlympia, WA

Jim ChappellExternal Relations

Plains Electric CooperativeAlbuquerque, NM

John ChartersUS West CommunicationsSpokane, WA

Steve CislerLibrary EvangelistApple Computer

Cupertino, CA

Center for Telecommunications and Information StudiesColumbia UniversityNew York NY

Chuck ConnellLimestone Development FoundationLimestone, ME

Dick ConwayDick Conway & AssociatesSeattle, WA

Kurt DanisonHighlands Consulting

Okanogan, WAKenneth L. DeaversDirectorAgriculture and Rural Economy DivisionEconomic Research ServiceU.S. Department of AgricultureWashington, DC

Alison DeebResearch Associate

A.T. Kearney, Inc.Alexandria, VA

Mr. Gerald E. DepoTown AdministratorBloomsburg, PA

Jack DexterPresidentMaine Chamber of Commerce& IndustryAugusta, ME


Don DillmanProfessor of SociologyWashington State University, WA

Donald L. DittbernerDittberner Associates, Inc.Bethesda, MD

Al DixonTown ManagerFort Fairfield, ME

Helen DoroshowLevinson FoundationCostilla, NM

Leonard DowMaine Department of Economic &

Community Development

Augusta, ME

Gerald DubeComputing & Data Processing ServicesUniversity of Maine SystemOrono, ME

Joan Durrance

Lou FeldnerFeldner Telecom ConsultingWashington, DC

Richard FerryNew England TelephonePortland, ME

Francis Dummer FisherConsultantCambridge, MA

Don FlanneryCommunity Development OfficeFort Fairfield, ME

William ForbesMaine Research & Productivity Center

University of MainePresque Isle, ME

Hal FossumPolicy AnalystNorthwest Policy CenterUniversity of WashingtonS l WA



Joan DurranceProfessor of Library ScienceUniversity of Michigan

Ann Arbor, MIJane W. DycheCollege of AgricultureUniversity of KentuckyLexington, KY

Paul EakinProfessor of MathematicsUniversity of KentuckyLexington, KY

Bruce EganCenter for Telecommunications and

Information StudiesColumbia UniversityNew York NY

Martin EltonTisch School of the ArtsNew York UniversityNew York NY

Jon EricksonExecutive DirectorTelephone Utilities of WashingtonCheney, WA

Jack EversoleExecutive DirectorBarren River Area Development DistrictBowling Green, KY

Seattle, WA

Ginni Fox

Executive DirectorKentucky Educational TelevisionLexington, KY

David FreshwaterProfessorDepartment of Agricultural EconomicsUniversity of KentuckyLexington, KY

Joseph GeraceNew York State Office of Rural AffairsAlbany, NY

Debbie GibsonKentucky Chamber of CommerceFrankfort, KY

Kenneth GordonMaine Public Utility Commission

Augusta, MERobert GradyAssociate DirectorOffice of Management and BudgetWashington, DC

William GrahamAuburn ManufacturingMechanic Falls, ME

List of Contributors q 179

Alan A. GumbelPolicy AnalystLower Mississippi Delta Development CommissionMemphis, TN

Kristey GuthrieDirector of Special Programs

Kentucky Chamber of CommerceFrankfort, KY

Wayne GyulaiNew Mexico Research & Development InstituteSanta Fe, NM

Donald HamiltonNew Mexico State Corporation CommissionSanta Fe, NM

Donald HannaAssociate Vice ProvostExtended University ServiceWashington State UniversityPullman, WA

Amber HentonMayor

Link HoewingDirector, Federal RelationsBell AtlanticWashington, DC

Harry HoseyPresident

Early Winters Inc.Seattle, WA

G. Melvin HoveyPesidentMaine Public Service CompanyPresque Isle, ME

Doug HoytAssociate Director for ProgramsGreen River Area Development District

Owensboro, KY

Dave HughesColorado Springs, CO

Lois IrwinInstitute for Extended LearningCommunity Colleges of Spokane



ayLivermore, KY

John Hart

University Information ServicesMurray State UniversityMurray, KY

Milda HedblomProfessor of Politics and MediaAugsburg CollegeMinneapolis, MN

Ernest Heller

Washington Utilities and Transportation CommissionOlympia, WA

Carol HendersonDirectorAmerican Library AssociationWashington, DC

Mike HickeyDirector, Government AffairsNYNEX

Washington, DC

Walter E. HillAssociate Under Secretary of Agriculture for

Small Community and Rural DevelopmentU.S. Department of AgricultureWashington, DC

Henry HodgesExecutive DirectorPurchase Area Development District

Mayfield, KY

Community Colleges of SpokaneSpokane, WA

Ken Jacobson

Washington State LegislatureOlympia, WA

George JamesDevelopment & External AffairsUniversity of MainePresque Isle, ME

Jennifer JarrattJ. F. Coates, Inc.

Washington, DCRobert JohnsonOwensboro Community CollegeOwensboro, KY

Ted JojolaProfessorUniversity of New MexicoAlbuquerque, NM

Mary Gardiner JonesPresidentConsumer Interest Research InstituteWashington, DC

Maureen KennedyThe Aspen InstituteWashington, DC

Tom KneeshawPalouse Economic Development Council

Pomeroy, WA


Sue Kock Department of CommunicationUniversity of IndianaBloomington, IN

Marvin E. KonyhaExtension Service

U.S. Department of AgricultureWashington, DC

Ken KubotaProfessor of Mathematics and Computer ScienceUniversity of KentuckyLexington, KY

Ronald LaFayetteInstitute for Extended Learning

Community Colleges of SpokaneSpokane, WA

Michael LajkoSystems ManagerNorthland CableSandpoint, ID

Jim MaesDeputy SecretaryNew Mexico Economic Development &

Tourism DepartmentSanta Fe, NM

Shirley ManningPresidentLincolnville TelephoneLincolnville, ME

John MapleManagerBurrelle’s Press Clipping ServicePresque Isle, ME

Donna MarcoDirector

TriCounties Economic Development DistrictColville, WA

Dennis MatsonDeputy DirectorWashington Department of Trade&

Economic DevelopmentOl i A



Pat LanthamTechnology Planning

Pacific TelesisSan Francisco, CA

Fred LeeNational Telecommunications & Information

AdministrationU.S. Department of CommerceWashington, DC

Kathie LeonardAuburn ManufacturingMechanic Falls, ME

Scott J. LoftesnessSenior Vice PresidentFidelity InvestmentsBoston, MA

Bob Lovan

Natural Resources and Rural DevelopmentExtension ServiceU.S. Department of AgricultureWashington, DC

Pamela MacBrayneExecutive DirectorDistance EducationUniversity of MaineAugusta, ME

Olympia, WA

Elliot Maxwell

Assistant Vice PresidentPolicy Issues and ManagementPacific TelesisSan Francisco, CA

Susan McAdams

Washington Utilities and Transportation CommissionOlympia, WA

Mary McBride

Palouse Economic Development CouncilPomeroy, WA

Richard McBrideSuperintendent, Newport SchoolsNewport, WA

John McCatherinNew England TelephoneBangor, ME

David McIvorSuperintendentNewport Community HospitalNewport, WA

Steven McLellanWashington State Utilities and Transportation

CommissionOlympia, WA

List of Contributors . 181

Ruth McWilliamsCooperative ForestryForest ServiceU.S. Department of AgricultureWashington, DC

Joe Mefford

Director for Economic DevelopmentSouth Central BellFrankfort, KY

Viola P. MillerMurray State UniversityMurray, KY

Dick MoodyManager, Governmental Affairs

Educational Service District 101Spokane, WA

Allie MorganCommunication ConsultantPaducah, KY

Ronald W. Morgan

John NilesPresidentGlobal TelematicsSeattle, WA

Eli NoamCommissioner

New York State Public Utilities CommissionAlbany, NY

Jeff NoelKentucky Cabinet for Economic DevelopmentFrankfort, KY

Michael NellTelecommunications ConsultantStirling, NJ

Jon OchsPresidentEureka FarmsLaCrosse, WA

Frank OdaszAssistant Professor of Computer EducationWestern Montana CollegeDill MT



Branch ManagerDivision of Research& Planning

Kentucky Cabinet for Economic DevelopmentFrankfort, KY

Sufi NazemInternational Center for Telecommunications

ManagementUniversity of NebraskaLincoln, NE

Steve NeilsenUS West CommunicationsSeattle, WA

Jim NelsonCommissionerKentucy Library Network Frankfort, KY

Sharon NelsonChairWashington Utilities and Transportation Commission

Olympia, WA

W. Russell NeumanDirectorResearch Program on Communications PolicyMassachusetts Institute of TechnologyCambridge, MA

Mike NewmanAppalachian Regional Commission

Washington, DC

Dillon, MT

Ken Olson

Assistant DirectorSpokane Area Economic Development CouncilSpokane, WA

Sandra OsbournSpecialist in American National GovernmentCongressional Research ServiceLibrary of CongressWashington, DC

Patricia Otis

Consultant (Communication and Education)Austin, TX

A.J. “Bud” PardiniCommissionerWashington Utilities and Transportation CommissionOlympia, WA

James PattersonGould & Smithcaribou, ME

Bob PepperOffice of Plans and PolicyFederal Communications CommissionWashington, DC

Robert PetersAssistant Administrator for Telephone programsRural Electrification AdministrationU.S. Department of Agriculture

Washington, DC

182q


Sandra PeticolasDona Ana County ManagerLas Cruces, NM

Charles PixtonSenior Transportation AdvisorAppalachian Regional Commission

Washington, DC

Janet PoliDirectorCommunication, Information and TechnologyExtension ServiceU.S. Department of AgricultureWashington, DC

Larry Povich

Federal Communications CommissionWashington, DC

Ruth PritchardDirector of External RelationsAmerican Mobile Satellite ConsortiumWashington, DC

Rick RichardsonProfessor of Architecture and PlanningUniversity of New MexicoAlbuquerque, NM

Gerald J. RichterVice President, Video Communications

Dovetail Systems CorporationBen Franklin Technology CenterBethleham, PA

Peter RileyNew England TelephonePortland, ME

Jose RiveraDirectorSouthwest Hispanic Research Institute

University of New MexicoAlbuquerque, NM

Joseph M. RobbinsExecutive DirectorAccount ManagementBellSouth/BellcoreMorristown, NJ



Clinton QuenzerGeneral Manager

South Central Rural Telephone CooperativeGlasgow, KY

Joe QuintanaCostilla, NM

Roy ReedMayorNewport, WA

Janet & Christopher ReidProActive, Inc.Livermore, KY

Norman ReidDeputy DirectorRural Development, Agricultural and

Rural Economy DivisionEconomic Research ServiceU.S. Department of AgricultureWashington, DC

Dave RemingtonDirector, Penal Oreille County LibrariesNewport, WA

Lewis A. RhodesAssociate Executive DirectorInstructional Leadership and TechnologyAmerican Association of School AdministratorsWashington, DC

Carol RogersPurchase Area Development District

Mayfield, KY

Everett RogersProfessor of CommunicationsAnnenberg School of CommunicationsUniversity of Southern CaliforniaLos Angeles, CA

Terry RyanApache Future, IncMescalero, NM

Nick SalazarNew Mexico State LegislatureSanta Fe, NM

Daniel SanchezAll Indian Pueblo Council, Inc.Albuquerque, NM

Raymond SanchezSpeaker

New Mexico State LegislatureSanta Fe, NM

Jill SatranCommunity Development SpecialistDepartment of Community DevelopmentOlympia, WA

Arthur E. Schiller, Jr.Arthur D. LittleCambridge, MA

List of Contributors q 183

Gail Garfield SchwartzChairNew York State Public Service CommissionAlbany, NY

Noreen ScottEconomic Development Representative

New Mexico Economic Development &Tourism Department

Santa Fe, NM

Jim SharpeKentucky Public Service CommissionFrankfort, KY

Dick ShirleyContinental Divide ElectricGrants, NM

Roy ShortOthello, WA

Richard ShowalterNatural Resources, Energy, and ScienceOffice of Management and BudgetWashington, DC

Dean StearnsDirector, External AffairsNew England TelephonePortland, ME

Dodie SteinExecutive Director

Office of Business & TechnologyKentucky Cabinet for Economic DevelopmentFrankfort, KY

Christopher H. SterlingProfessor and DirectorTelecommunications programGeorge Washington UniversityWashington, DC

Larry SterrsContel of MaineDamariscotta, ME

Blaine D. Stockton, JrAssistant Administrator for ManagementRural Electrification AdministrationWashington, DC



William SiembiedaUniversity of New Mexico

Albuquerque, NM

Rich SilkmanMaine State Planning OfficePortland, ME

Marvin SirbuInformation Networking InstituteCarnegie Mellon UniversityPittsburgh, PA

Cathy SloanGovernment AffairsComptelWashington, DC

Susan SmithKentucky Public Service CommissionFrankfort, KY

Paul SommersResearch DirectorNorthwest Policy CenterUniversity of WashingtonSeattle, WA

Terence St. PeterCity Managercaribou, ME

Bill StallingsCommunication Consultant/Writer

Boston, MA

Louis SwansonProfessor of Rural SociologyUniversity of KentuckyFrankfort, KY

Dennis SweatmanDirector of Economic DevelopmentIllinois Commerce CommissionSpringfield, IL

Robert TaylorDean, School of Business

University of LouisvilleLouisville, KY

Charles Terrett

SuperintendentFulton County SchoolsHickman, KY

Paul TeskeAssociate Professor

Department of Political ScienceState University of New York at Stony Brook, NY

Margaret G. ThomasMidwest Research InstituteKansas City, MO

John ThompsonDirectorSpokane Falls Community CollegeSpokane, WA

184q

Rural America at the Crossroad: Networking for the Future

Lester TompkinsManagerInformation Technology Inc.Presque Isle, ME

Thomas VidovicTelecommunications Magazine

Boston, MAJohn A. VanceDeputy AdministratorNatural Resources and Rural DevelopmentExtension ServiceU.S. Department of AgricultureWashington, DC

Meg Van SchoorlWashington Department of Community Development

Olympia, WARoland R. VautourUnder Secretary for Small Community and

Rural DevelopmentU.S. Department of AgricultureWashington, DC

Dale Vincent

Paul WarneckeDirector, Division of TelecommunicationsDepartment for Facilities ManagementFrankfort, KY

David WarnesDepartment of CommunicationOttawa, Canada

Robert WarrenCollege of Urban Affairs and Public PolicyUniversity of DelawareNewark DE

Helen WeissingerPresidentMain Spring Center, Inc.Louisville, KY

Jean & Jerry WhiteEducatorsFrenchville, ME

Frederick WilliamsChair in CommunicationCollege of CommunicationUniversity of Texas



Director, Public AffairsUS West Communications

Seattle, WA

Jason VingelenVice President/General ManagerRXL CommunicationsSpokane, WA

Jutta von GuntardExecutive DirectorLevinson FoundationCostilla, NM

Tom WackerNational Telephone Cooperative AssociationWashington, DC

Jeri WaitDirector, Government & Education ServicesUS West CommunicationsPortland, OR

T.M. Walker

Director, Legislative AffairsUS West CommunicationsSeattle, WA

Austin, TX

Hugh WilliamsCommunity Development DirectorGallup, NM

Dan WillisUS West CommunicationsAlbuquerque, NM

John WohlstetterDirectorSpecial Projects and Technology Affairs

Contel CorporationWashington, DC

Steve WorthingtonSpokane Area Economic Development CouncilSpokane, WA

Mary YannNewport, WA

Mary Zimmerman

External RelationsPlains Electric CooperativeAlbuquerque, NM

Index



Index

Acoma Indian Tribe, 165Agriculture, 42,43,47,48,49Agriculture, industrialization of, 99, 103

Alarnogordo, NM, 162

Amenities, 92, 102

Appalachia, 159Apple Computers, 16, 165

Area Development District, 161

Aroostook County, ME, 31, 170

ARPANET, 77

Asymmetric regulation, 118

AT&T, 11, 15,62-64,79

Bangor, ME, 169

Bell of Pennsylvania, 129

Bell operating companies, 69, 122, 123, 130

Bell telephone system, 62-64,69

Ben Franklin Partnership, 128

Block grants, 20,28, 151

Bloomsburg, PA, 84-85

Bloomsburg University, 128

Boyarski, Jenny, 162

Broadband, 13, 14, 80

Bulletin board, 107

B f th C 36

Department of Agriculture, 21-24,49, 133, 134, 141, 143, 146,149, 169

Department of Commerce, 36Department of Defense, 146Department of Education, 111, 153

Department of Energy, 146Department of Health and Human Services, 146Department of Housing and Urban Development, 146-147Department of the Interior, 146Department of Labor, 105Depreciation, 118Deregulation, 80, 115Dexter, Jack, 171Digital radio, 9,72, 116Digital switching, 70,81Distance learning, 1 0 5 , 1 1 8

Distance-sensitive pricing, 115, 126Distribution of costs, 116Distribution of income, 94Diverse economy, 98Diversity of rural areas, 92,94, 103Divestiture, 7,62,65, 128DS-3 lines, 48,72

Early Winters Resort, 59



Bureau of the Census, 36

Bush administration, 136

Bypass, 65, 128

Cable Communication Policy Act of 1984, 122

Cable monopoly, 122

Cable television, 71, 120, 121

CAD-CAM, 67-68,81,84

Capital, access to, 48

Carter administration, 138, 147-148

Census regions of the U. S., 37.Certified Cities, 160, 162Chrysler, 73Civil War, 39, 140, 141, 149Community College of Spokane, 167Community development, 91,92,93, 108, 109, 110Community Development Corp., 110Comparative advantages, 36Comparative disadvantages, 35Competitive advantage, 48Comprehensive development, 91, 106Congress, 30Congress, 1Olst, 136

Cooperation among stakeholders, 19, 133Cooperative Extension Service, 23-25, 133, 142-144, 151Cost of living, 94Cost-benefit analyses, 126, 128Costilla, NM, 162Council of Economic Advisers, 134, 149Country Life Commission, 134, 141Credit, access to, 40Cross-ownership of cable and telephone companies, 122Cross-subsidization, 120

DARPA, 77

Early Winters Resort, 59Earnings gap, 43Economic Development Administration, 11, 12, 109, 146, 153Economic growth, 94Economic Research Service, 23, 38Economies of scale, 47, 115, 126Education, 19,50,55,91,96, 100, 104Educational attainment, 4 4 , 4 5Edward D. Jones & Co., 6Eisenhower administration, 134, 147Electricity, deployment to rural areas, 138-140Electronic data interexchange, 46,47Employment, 91

Employment levels, 92,93Employment, marginal, 91Employment, quality of, 9395Environment, 35,45,50,51,52,53,54, 168, 171Environmental impact statements, 52Everett, Judge James, 159Eversole, Jack, 162Extended area service, 124, 125, 168

Farm communities, 39,42Farm policy, 134-137

Farmers Home Administation, 1 0 9Farming, 36,38, 39,40Farming, commercialization of, 39,40,41,42Fast packet switching, 75Federal budget deficit, 102Federal Communications Commission , 19, 20, 30, 31, 63-66,

122, 123, 129Federal Depository Library Program, 147Federal Government, role in development, 17,21-22, 133-155Federal/State Joint Board, 147Fiber optics, 70-73

Financial deregulation, 99

–187–


First Amendment, 140Forbes, William, 84Foreign investment, 48Fowler, Chairman Mark, 19Frito-Lay, 73Fulton County, KY, 162

Garcia, CO, 5Gardner, Governor Booth, 170General Motors, 79Global economy, 7-8,45,50,91,98,99, 168Goals for rural America, 19, 137-138Gordon, Commissioner Ken, 171Grants, NM, 164Grassley, Senator Charles E., 4Great Society Program, 108

Hatch, Senator Orrin G., 4

Health care, 91, 96, 101, 104, 105, 106Health insurance, 101Henton, Mayor Amber, 152Higher Education Act, 32, 153Highway Trust Fund, 139Hispanics, 159, 162, 163-164Holistic development, 18,94, 100, 106, 144Hughes Network Systems, 73Human resources, 91, 105, 109, 110

Kentucky Early Warning System, 161Kentucky Educational Television, 160Kentucky Library Network, 161Kentucky Rural Economic Development Authority, 162K-Mart, 73

Labor skills, 49,91,95, 100, 101, 104Land-grant colleges, 1,33, 134, 138Large business users, 81LATA, 31, 123, 128hinders Encouraging Aroostook Development, 170Leadership, 102, 109Less urbanized counties, defined by Economic Research

Service, 38LEXNET, 161Lifeline, 66Link Up America program, 66Livermore, KY, 152

Local area network, 59,78,80Local control, 97Local exchange carriers, 117, 127, 129Local government, 102Local 1oop(s), 69,79Loop carrier system, 70

Maine, 52,84, 111, 150, 169-172Maine Department of Economic and Community

Development 111



Imported labor, 93

Independent telephone companies, 68-71,79,81, 118, 119Industrial Revolution, 39Inflation, 43Information economy, 115Information sector, 45Information services, 122, 123Information-intensive employment, 91Infrastructure, 7, 13,59-61,65-67Infrastructure, Federal role in development 137-140Integrated development, 110Intelligent network, 76-77

Intellectual property rights, 140INTELSAT, 73Interconnection, 115Interexchange carriers, 129Interexchange toll charges, 115InterLATA calling, 115, 123International trade, 50Intragovernmental coordination, 144-146IntraLATA, 125Investment capital, 99, 100, 106Iowa Network Services, 129, 130

ISDN, 69

Jackson, President Andrew, 137, 149Japan, 159, 160-162, 169Jefferson, Thomas, 39, 134-137, 149Job recruitment, 93Johnson administration, 134Joint Economic Committee, 4

Kennedy administration, 134Kentucky, 53,55, 159-162, l&l-165, 168, 172

Development, 111Maine Department of Environmental Protection, 171

Maine Research and Productivity Center, 84, 170Manhattan, 31Manufacturing, 8,35,41,42,46,49,98, 103ManufacturingAutomation Protocol, 77Manufacturing, high-tech, 100Market forces, 31Mass media, impact on rural areas, 14-15,61Mass production, 47MCI, 64MEDNET, 15Mescalero Apache Indian Tribe, 163

Mescalero, NM, 162Metropolitan area networks, 59,68,78, 80Metropolitan counties, defined by OMB, 36,38Metropolitan Fiber Systems, 68Michigan, 14, 150Microwave, 71Migration to urban areas, 40,41,44Minnesota, 150Mississippi State University, 105Modified Final Judgment, 64, 122, 124Motorola, 11Multimedia, 67

Narrowband, 23,80National Agricultural Library, 143, 149National Research Education Network, 27,77, 153National Rural Electric Cooperatives Association, 138National Telecommunications and Information

. .Administration, 147

Native Americans, 44, 134, 159, 162, 163-164Nebraska, 84Networking, 46,78

Index . 189

New Deal, 134New England Telephone Co., 111, 172New Jersey, 150New Mexico, 52, 107, 159, 162-166, 168, 169, 172New Mexico PUC, 166Niche markets, 52Nissan, 73Nixon Administration

, 1 5 0Nonmetropolitan counties, defined by OMB, 36,98Nontraffic-sensitive costs, 117Norton, VA, 105

Office of Management and Budget, 36,65, 149Okanogan County, WA, 167Olympia, WA, 166One-Stop Shop, 107, 165

Open network architecture, 123

Over-capitalization, 117Owensboro, KY, 153

Paducah Community College, 160PalmettoNet, 130Palouse Economic Development Council, 107, 169Per-capita income, 44,94Physical capital, 99Physical quality of life index, 95Pl i El i C i 165 166

Rural Information Center Clearinghouse, 23, 143, 149Rural Investment Partnerships, 29

Salazar, Representative Nick, 164Sandia Labs, 165Satellite Telecommunication Education Program, 168Satellites, 73

Seattle, WA, 167Seidman, Harold, 30Service sector, 100Signaling System 7, 169Sillman, Rich, 171Small Business Administration, 1 3 4 , 1 4 6 , 1 4 8Smith Lever Act of 1914, 142South Carolina, 130South Central Bell, 162Spokane, WA, 166Stability, 97

Star School Program, 154States, as agents of development, 21-22, 149-151

Step by step switch, 79

Structural economic changes, 43,47,98,99

Subsidies, 63,65-66, 116, 118,120

Sufi Nazem, 84

Sustainable development, 97, 106

Switched multimegabit data service, 9,68,80



Plains Electric Cooperative, 165-166Pooling demand, 13, 14

Portland, ME, 169, 170Postal service, 133, 140, 166Poverty, 35,43,98, 101, 104Poverty rates, 43Presque Isle, ME, 169-170Price-cap regulation, 119, 120, 121Private networks, 8Productivity index, 119Public Law 96-355, 147Public libraries, 153-154

Pullman, WA, 166

Quality of life, 92

Rate averaging, 63Rate base, 116, 117Rate regulation, 116Rate-of-return regulation, 116, 117, 118, 119Reagan administration, 134, 150Regional Bell operating companies, 68,74Remoteness, 35, 101, 103

Revenue requirement, 116Roosevelt administration, 134, 138, 141-142Rural Area Networks, 8-11, 14,20,59,82-83, 127, 128, 129Rural areas, defined by Bureau of the Census, 36,38Rural Development Administration , 3 0 , 3 2Rural Development Policy Act of 1980 (Public Law %-355),

147Rural Economic Development Act of 1990,20,24,26,31, 140,

144,148Rural Electrification Administration“ , 23-26,31,69,79,81, 84,

133, 138, 140, 144, 148

Rural Health Information Clearinghouse Service, 141

Technology transfer, 108

Telecommunications, as leverage for development, 4, 160, 164,

172

Telecommunications, needs for rural areas, 13

Telegraph, impact on rural areas, 62

TeleKansas, 120

Telephone Association of Maine, 169, 171

Telephone, impact on rural areas, 62

Telephone, rural access to, 68-69,81

Teleport, 68

Tennessee, 150

Terret, Charles, 159

Texas Tech University, 150Toyota, 73, 160, 162

Triage, 162

Unbundling, 68

Underemployment, 93,96, 106

Unemployment, 35,41, 106

Unemployment rates, 41,43,49,50

Unionization, 159

Universities, role in development, 26-27, 154

University of Maine/Telecommunication System, 111, 129,

154, 172urban areas, 59

Urban places, defined by Bureau of the Census, 36Urbanized areas, defined by Bureau of the Census, 36Urbanized counties, defined by Economic Research Service, 38US West, 164, 165-166Utah, 121

Vail, Theodo r e , 63Venture capital, 99, 100Vermont, 120, 127

Very small aperture terminals, 73-74


Vision, need for in development policy, 18-19, 152-155 Wide area networks, 8,9,59,73,78,80

Wal-Mart, 97Working Group on Rural Development, 148

War on Poverty, 110 Yakima Indian Reservation, 167Washington State, 59, 107, 159, 166-169, 172Washington State Department of Community Development, 169

Yakima Valley, WA, 166

Washington State University, 166, 169Washington State Utilities and Transportation Commission, 168 Zuni, 16, 163

WesternKen tucky University, 161 Zuni Middle School, 165White Swan, WA, 167



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