Links to the Future - Home - Appalachian Regional Commission PDF
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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 i 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 ii 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 iii 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 iv 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). v • 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 servicesat prices affordable to local businesses and public organizationsis 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 Regionespecially its rural areasis 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 twoNew York and Pennsylvaniathe Bell Operating Companies have been approved to offer long-distance services. vi 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. vii
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