Links to the Future - Home - Appalachian Regional Commission

177 Pages·2002·2.79 MB·English

by  Appalachian Regional Commission

Links to the Future
The Role of Information and Telecommunications
Technology in Appalachian Economic Development
By Michael Oden and Sharon Strover
With Nobuya Inagaki, Martha Arosemena,
Jeremy Gustafson, and Chris Lucas
University of Texas
Prepared for the Appalachian Regional Commission June 2002
About the Authors
Dr. Sharon Strover, associate professor in the College of
Communication at the University of Texas at Austin, teaches and
researches various topics related to communications and telecommu-
nications. She also directs the Telecommunications and Information
Policy Institute at the University of Texas, and chairs the Rural
Telecommunications Panel for the Rural Policy Research Institute, a
national, multi-university think tank devoted to rural issues. Dr. Strover
has worked with the Federal Communications Commission on technology
needs and state and local telecommunications applications, partici-
pated in advisory panels for the congressional Office of Technology
Assessment and the Federal Trade Commission, and was subcommit-
tee chair for the state of Texas’s investigation of the U.S.-Mexico Free
Trade Agreement and NAFTA. Dr. Strover co-directed a three-year
Ford Foundation study of telecommunications and rural areas, and
collaborated on the book Electronic Byways: State Policies for Rural
Development through Telecommunications. She also co-edited two
other books examining telecommunications in urban and rural areas.
Dr. Strover received her Ph.D. from Stanford University.
Dr. Michael Oden is assistant professor in the Community and
Regional Planning Program at the University of Texas at Austin.
Dr. Oden's teaching and research areas include local and regional
economic development, program evaluation methodologies, and
regional growth dynamics. Prior to joining the University of Texas, he
worked at the Project on Regional and Industrial Economics at
Rutgers University and at the Organization for Economic Cooperation
and Development in Paris, and was the senior economist on the
Appropriations Committee of the Michigan state senate. Over the last
decade, Dr. Oden has worked on a number of major projects and
publications on telecommunications access and use and economic
development, including “Digital Divide or Digital Opportunity in the
Mississippi Delta Region” (Telecommunications Policy, Spring 2001).
He currently serves on the Rural Telecommunications Panel of the
Rural Policy Research Institute. Dr. Oden received his Ph.D. in
economics from the New School for Social Research.
ARC’s Mission
Created by Congress in 1965, when Appalachia was considered
“a region apart” from the rest of the nation, the Appalachian Regional
Commission (ARC) is a unique federal-state partnership working to
bring all of Appalachia’s 23 million people into America’s economic
mainstream. ARC’s mission is to be an advocate for and partner with
the people of Appalachia to create opportunities for self-sustaining
economic development and improved quality of life.
The Appalachian Region includes all of West Virginia and counties in
12 other states: Alabama, Georgia, Kentucky, Maryland, Mississippi,
New York, North Carolina, Ohio, Pennsylvania, South Carolina,
Tennessee, and Virginia. The Region contains 410 counties with a
combined area of over 200,000 square miles.
Links to the Future:
The Role of Information and Telecommunications Technology in
Appalachian Economic Development

by
Michael Oden and Sharon Strover

With Nobuya Inagaki, Martha Arosemena,
and Jeremy Gustafson and Chris Lucas

University of Texas
April, 2002

Prepared for the Appalachian Regional Commission
under a competitively awarded contract CO-12884N
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EXECUTIVE SUMMARY v
I. INTRODUCTION.................................................................................................................1
II. THE ROLE OF INFORMATION AND TELECOMMUNICATIONS
TECHNOLOGIES IN ECONOMIC DEVELOPMENT......................................................4
Defining Contemporary Information and Telecommunications Technologies...................4
The Potential Influence of ICT on Economic Development..................................................5
Actualizing the Economic Development Potential: Access and Capacity to Use ICT........7
III. PROFILE OF THE INFORMATION AND TELECOMMUNICATIONS
INDUSTRY COMPLEX IN THE APPALACHIAN REGION..........................................11
Definitions and Methods.........................................................................................................11
ICT Related Industries in the Aggregate Region.................................................................14
The Regional Distribution of ICT Industries in the Appalachian Region.........................18
Implications of Industry Trends for Regional Development Prospects.............................21
IV. TELECOMMUNICATIONS INFRASTRUCTURE IN THE ARC REGION.....23
Telecommunications Infrastructure and Networks.............................................................24
Types of Internet Access.........................................................................................................26
Competition in the Local Exchange......................................................................................30
Wireless Services.....................................................................................................................33
V. FEDERAL INITIATIVES IN THE ARC REGION: UNIVERSAL SERVICE
AND OTHER PROGRAMS..................................................................................................37
Federal Universal Service Programs.....................................................................................37
Other Federal Programs to Improve ICT Capacity............................................................43
Results of Federal Funding Initiatives in the ARC Region.................................................45
VI. STATE POLICIES AND PROGRAMS.........................................................................49
Legislative and Regulatory Commission Actions on Deregulation....................................49
Assessing Infrastructure.........................................................................................................51
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State Universal Service...........................................................................................................52
Types and Nature of Universal Service Support...................................................................54
State networks.........................................................................................................................55
Demand Aggregation............................................................................................................56
Resource Sharing..................................................................................................................57
Anchor Tenancy....................................................................................................................58
Utility Commission Authority................................................................................................59
Utility Companies and Telecommunications Services.........................................................60
Special Programs or Initiatives..............................................................................................61
Conclusion...............................................................................................................................63
VII. THE LOCAL VIEW OF TELECOMMUNICATIONS.............................................64
Case Selection and Study Methods........................................................................................64
The Mississippi Regional Context.........................................................................................66
Monroe County, Mississippi..................................................................................................67
Socio-Economic Background...............................................................................................67
Telecommunication Services and Connectivity in Monroe County.....................................68
Business Adoption of ICT and Broadband Services in Monroe County..............................70
The Role of ICT Adoption and Use in Local Economic Development Initiatives in Monroe
County...................................................................................................................................71
Noxubee County, Mississippi.................................................................................................73
Socio-Economic Background...............................................................................................73
Telecommunications Services and Connectivity in Noxubee County..................................73
Business Adoption of ICT and Broadband Services in Noxubee County............................75
The Role of ICT Adoption and Use in Local Economic Development in Noxubee County77
The Virginia Regional Context..............................................................................................79
Scott County............................................................................................................................81
Socio-Economic Background...............................................................................................81
Telecommunication Services and Connectivity in Scott County.........................................81
The Role of ICT Adoption and Use in Local Economic Development Initiatives in Scott
County...................................................................................................................................85
Washington County................................................................................................................87
Socio-Economic Background...............................................................................................87
Telecommunications Services and Connectivity in Washington County.............................88
Business Adoption of ICT and Broadband Services in Washington County.......................92
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Conclusion: The Role of ICT and Connectivity in Shaping the Economic Future of Four
Counties...................................................................................................................................96
CONCLUSIONS...................................................................................................................100
Policy Options........................................................................................................................105
REFERENCES......................................................................................................................109
APPENDIX ONE: INFORMATION AND TELECOMMUNICATIONS USING AND
PRODUCING INDUSTRIES:.............................................................................................116
APPENDIX TWO: COMPATIBILITY OF COUNTY BUSINESS PATTERNS AND
THE BRANDOW COMPANY DATA................................................................................121
APPENDIX THREE: INCUMBENT LOCAL EXCHANGE CARRIERS IN THE ARC
REGION AND NUMBERS OF SWITCHES.....................................................................122
APPENDIX FOUR: SOCIOECONOMIC CHARACTERISTICS OF THE FOUR CASE
STUDY COUNTIES.............................................................................................................126
APPENDIX FIVE: INTERVIEW QUESTIONNAIRE...................................................132
APPENDIX SIX: INTERVIEWEES FOR CASE STUDIES..........................................147
APPENDIX SEVEN: GLOSSARY OF TERMS..............................................................158
NOTES...................................................................................................................................164

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Links to the Future:
The Role of Information and Telecommunications Technology
in Appalachian Economic Development

EXECUTIVE SUMMARY

Communities across the Appalachian Region, especially those in rural areas, face serious
challenges exploiting new information, computing, and telecommunications (ICT) technologies to
expand their economic development horizons. Access to advanced technologies is often uneven
and limited, while the capacities to use these technologies to improve performance in public and
private sector institutions are often not as developed as in wealthier urban centers. Despite serious
challenges, there are many examples and opportunities in Appalachia for using information
technologies to spur economic and community development. Numerous businesses and public
sector institutions in the Region have successfully leveraged advanced information and
communications technologies to improve productivity, the quality of their services, and their
market reach.

This report documents the status of ICT technologies in the Appalachian Region, assessing their
potential relationship to economic growth and the range of federal, state, and local policies that
influence their development. This work is based on in-depth field research and telephone
interviews; analysis of primary, archival, and secondary documents; and Web-based
investigations to gather and analyze data.

An analysis of industry trends shows that digital technology and applications are strongly
influencing national and regional economic development. Fast-growing ICT industries made
substantial contributions to employment and output growth over the 1990s. More importantly the
use of new ICT technologies in commercial and public sector organizations has increased
productivity growth and profoundly altered the ways in which numerous industries do business.

A detailed analysis of industry data revealed that use of ICT-related industries in the Appalachian
Region grew rapidly across the 1990s.

• The Appalachian Region shared in the late-1990s boom in ICT-producing industries.
Employment grew by 45.6 percent between 1996 and 2000, adding over 91,000 jobs.

• However, this robust growth was less than the 54 percent growth experienced nationally in
ICT-producing industries.

• The growth in the number of business establishments in the Appalachian Region in both
ICT-producer and -user sectors was above the national average for all business sectors
(ICT and non-ICT related).
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• However, leading producers of ICT products and services have a relatively weak presence
in the Appalachian Region. The Region is becoming more dependent on external
suppliers, especially in higher-technology segments of producer industries, and did not
share fully in the growth and innovation generated by these industries over the past
decade.

The telecommunications infrastructure in the Appalachian Region is less developed than that in
other parts of the country, and compares negatively to national averages on various broadband
indicators. Statistical analyses show that varying levels of access are directly associated with the
levels of economic activity: more distressed counties have less developed broadband
telecommunications infrastructure.

• Many parts of the Appalachian Region (cid:31)especially the more rural areas(cid:31) have lower
penetration rates of home computers, Internet access, and even basic telephone service
than the national average.

• DSL-capable lines, an attractive, lower-cost broadband technology that can be used by
small- and medium-sized businesses, are not currently available over broad swaths of rural
Appalachia. While many telecommunications provider central offices are DSL-ready, not
many are offering such services as yet.

• Cable modem services are very spotty throughout the Region. Furthermore, security
concerns make cable modems unappealing for many businesses. More advanced
technologies are not on the immediate horizon for rural Appalachia.

• The lack of advanced telecommunications servicesat prices affordable to local
businesses and public organizationsis a significant barrier to economic and social
development in parts of the Appalachian Region.

In-depth research on the cost and quality of telecommunications services in Appalachian states
and subregions traces access and cost barriers to frictions in recently deregulated markets for
these services.

• Alabama, North Carolina, Tennessee, Kentucky, Georgia, South Carolina, West Virginia,
and Mississippi all have average loop cost that exceeds the national average.

• The Appalachian Regionespecially its rural areasis highly dependent on incumbent
telephone companies for high-speed and basic telecommunications services. Competitive
pressures are relatively low in the Appalachian subregions.

• Absent universal service support for carriers that serve high-cost areas, rural telephone
markets are not likely to see local telephone competition.

• Most of the Appalachian states have fairly low numbers of competing local exchange
companies, although in twoNew York and Pennsylvaniathe Bell Operating
Companies have been approved to offer long-distance services.
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Federal, state, and local policies to mitigate the effects of deregulation have had important
positive outcomes as well as limitations.

• Federal E-Rate and various state programs, including state-sponsored data networks, have
enabled widespread high-speed connectivity among schools and libraries in the
Appalachian Region.

• Nonetheless, Federal Universal Service Funding of E-Rate and the Rural Health Programs
indicate that Appalachian counties taken together have received a significantly lower per-
capita allocation of funds than that of the nation as a whole.

• Federal Universal Service Support favors the most rural of the Appalachian states.
Mississippi, Alabama, West Virginia, South Carolina, Georgia, and Kentucky have a net
positive inflow of funds through the program, although the other Appalachian states have
made significant internal adjustments from larger, urban-serving companies to smaller,
rural companies.

• Several states have proactively initiated programs to enhance telecommunications
infrastructure. By using state telecommunications networks through resource sharing,
demand aggregation, or anchor tenancy programs, states are able to leverage their
considerable investment and offer benefits to other public sector users—and, in some
cases, even private sector users.

• While several state universal service programs have been developed--in part to ameliorate
the revenue losses local exchange companies attribute to deregulation (especially reduced
access rates)--the scope of such programs varies considerably.

• High-speed infrastructure development leads to the creation of alternative networks under
the auspices of communities or utilities.

• Coordination among state agencies appears to enhance state potentials for improved
telecommunications. By coordinating network design and use, state-funded infrastructure
can be used optimally.

• On balance, a more concerted focus on the economic development implications of IT
access, capacity, and training is needed across the Region.

Findings
A crucial report finding is that information failures operate with access barriers to limit the
effective adoption of ICT and network services in businesses across Appalachia. Other
findings include:

• ICT barriers in rural communities are having the most profound effect on the growth and
diversification of local manufacturing, service, and trade sectors.

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