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 telecommunications. 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, participated in advisory panels for the congressional Office of Technology

Assessment and the Federal Trade Commission, and was subcommittee 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.
i 

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 

June 2002 

Prepared for the Appalachian Regional Commission 

under a competitively awarded contract CO-12884N 
ii 

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
iii

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 
iv 

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
v 

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). 
vi 

• 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 especially the more rural areas 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. 
vii 

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 percapita 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. 
viii

• In the manufacturing sectors, branch plants largely relied on parent companies to provide 

ICT access and training, while small- and medium-sized companies have been at a clear 

disadvantage. 

• In the service sector, there is growing awareness that innovative use of computer and 

Internet technologies is becoming central for marketing and sales, especially for small 

businesses and entrepreneurs in sectors such as tourism and leisure, local crafts, and 

specialty agriculture. 

• In the health-care sector in rural communities, limited ICT access and use was found to be 

a particular problem. 

• Case studies demonstrate that effective local leadership has strongly driven improvements 

in IT access to businesses and public sector institutions. 

To enhance opportunities in the less populous, more remote areas that are unlikely candidates for 

the operation of robust market forces, ARC has several policy options available: 

• Expand and scale up technical assistance to small- and medium-sized firms in rural 

communities. 

• Aggressively support the formation of user groups in rural communities. 

• Assist states and localities in applying for E-Rate and Rural Health assistance under 

Federal Universal Service Funds. 

• Support the expansion of public institutions’ role in offering broadband access. 

• Support demand-aggregation strategies to enhance infrastructure and access in 

underserved regions. These strategies improve the bargaining power of communities with 

incumbents and other telecommunications providers. 

• Identify and disseminate information on model programs. 

• Monitor state regulatory efforts to leverage improvements in infrastructure and service. 

• Support demonstration projects with alternative technology providers. 

• Continue to monitor broadband deployment and work with organizations attempting to 

initiate national or statewide deployment policies. 
1 

I. INTRODUCTION 

There is a growing consensus that information, computing, and telecommunications industries 

(typically labeled ICT industries) have become critical drivers of the U.S. economy. These 

industries have had a dominant influence on recent growth performance due to their direct 

contribution to output and employment and through their pervasive impacts on industries and 

households that use ICT products and services (U.S. Department of Commerce, 2000). 

Several studies emphasize the potential benefits that the new technologies could bring to rural 

or distressed areas by reducing the importance of market proximity and transportation costs in 

business location (Williams, 1991; Parker et al., 1989, 1995). 

However, like earlier keystone technologies, the integrated architecture of computing and 

telecommunications exhibits a clear pattern of uneven proliferation. There are two crucial 

barriers affecting the ability of households and businesses to exploit new ICT technologies. 

One barrier is securing access to computers, software applications and advanced 

telecommunications services. The second is the gap that arises once the hardware and 

software is turned on—the lack of knowledge and ability to use the technologies effectively to 

improve individual capacities or business performance. 

Population density, income, educational attainment, and the initial presence of innovative 

producers are the main factors that influence access and capacity to use the new technologies 

(National Telecommunications and Information Administration 1999, 2000; U.S. Department 

of Agriculture, 2000). The Federal Communication Commission’s (FCC) recent Report on the 

Availability of High-Speed and Advanced Telecommunications Services notes in particular 

that high-speed services are not readily available in rural and low-income areas (FCC, 

2000a).1

 The socioeconomic factors associated with the "two barriers" suggest that lower 

income communities and rural regions actually risk falling further behind as the new ICT 

technologies proliferate and become more central to household earning capacity and business 

performance. 

Uneven access to information technologies and varied capacities to use these technologies 

represent the primary challenges the Appalachian region faces in exploiting ICT to spur 

economic development. The region must secure cost- and quality-competitive access to 

advanced telecommunication services while rapidly building local expertise, training and 

service capacities to improve local workforce capabilities and business performance. 

This report seeks to provide a comprehensive map of current telecommunication infrastructure 

and user patterns, and assess the possible effects of access and use barriers on businesses and 

economic development processes in the region. Furthermore, this report seeks to document 

successful efforts in Appalachian communities to bridge the digital divide. Specifically, the 

report has the following objectives: 

• To provide an understanding of the importance of ICT producer and user industries for the 

Appalachian region as a whole and for urban and rural counties within the region. 
2 

• To provide an up-to-date inventory of the telecommunications infrastructure across the 

Appalachian region. 

• To provide a profile and analysis of state policies and programs, as well as federally 

supported investments and incentives, to expand telecommunication access and use in the 

13 Appalachian states. 

• To investigate in detail the access, adoption and implementation barriers currently 

affecting rural communities and highlight successful efforts to overcome these barriers. 

The report is organized into six major sections to address these issues. In the first section we 

define the set of technologies and related industries that are driving the so-called digital 

economy, and specify how these technologies are shaping current and future economic 

development opportunities. We delineate the complex decision making process that firms and 

public institutions must undertake to select and effectively implement ICT technologies and 

emphasize that both access and capacity barriers represent significant economic development 

challenges in rural and low-income areas. A strong argument for specific types of public 

sector involvement and innovative partnerships follows from distinct market failures that limit 

access and effective adoption of ICT in rural and low-income communities. 

In the second section we analyze the results of an economic base study of the ARC region to 

gauge how the region participated in the dramatic growth of ICT industries over the 1990s and 

how industries that are heavy users of the new technologies fared. Data are summarized for 

four sets of industries: 1) producers of manufactured telecommunication products and 

providers of telecommunication services; 2) industries that use telecommunication products 

and services as key inputs to their business operations; 3) Transportation equipment 

manufacturing industries that are increasingly adopting ICT in their operations and 4) NonStore Retail sectors where much consumer-oriented Internet commence is conducted. 

Different geographic areas within the ARC region are designated for analysis to discern 

industry structure and growth patterns among urban and rural counties. 

In the third part we analyze a number of measures of telecommunications access and network 

infrastructure in the Appalachian Region. Beginning with basic adoption 

characteristicsphone, personal computer and Internet penetrationwe show the wide 

variation in household use across states in the ARC region. We then look at so-called "middle 

mile" characteristics of the regional infrastructure, focusing on fiber backbone points of 

presence (or POPs, the nodes where phone/data traffic converge and are switched to other 

carriers) in the ARC region.2

 The availability of Digital Subscriber Line (DSL) and Cable 

Modem service, two key technologies providing high speed Internet access to households and 

small businesses, is analyzed at the county level for the region. We further develop measures 

of the number of high-speed subscribers of all broadband technologies in state and sub-state 

areas in the ARC region. Finally, we look at evidence of local competition between local 

telecommunication providers to ascertain if competitive market conditions are contributing to 

the availability of advanced services across the region. 

The fourth section of the report focuses on the role of state regulatory policies and programs 

in the deployment of telecommunications services. The 13 states within the ARC region are 

represented by a number of telecommunications companies, state-level regulatory authorities 
3 

and attendant regulatory philosophies. We inventory the regulations and projects pertinent to 

telecommunications infrastructure developments in the 13 target states. The report focuses on 

key elements of state policy including: deregulation legislation over the past five years; statelevel competitive assessments or “competition reports” that include data bearing on “last 

mile” infrastructure; agreements to extend service to communities or state and local 

governments in exchange for state-level approval of telecommunication company mergers; 

and special state initiatives, including public-private initiatives as well as state networks, that 

influence the infrastructure (particularly broadband) serving rural areas in particular. 

In the fifth section, we focus upon federal universal service support and other national 

programs to improve ICT access and use. Surveys of secondary data sources and phone 

interviews with federal and state officials responsible for implementing telecommunication 

development programs in the ARC region delineated the size and distribution of federal 

assistance in the region. We look at funding distribution across the region and the importance 

of these federal programs in improving capacity at the local level. 

In the sixth and final major section of the report we provide a concrete, “on the ground” 

perspective of ICT access and use challenges through case studies of four rural ARC counties. 

The counties examined include: Scott County, Virginia; Washington County, Virginia; 

Monroe County, Mississippi; and Noxubee County, Mississippi. This analysis provides a 

deeper understanding of the specific challenges and opportunities new ICT technologies 

present to rural regions and how these communities are responding. The case study analysis 

also highlights successful initiatives that are improving access and effective use of ICT 

technologies at the community and firm level. 

In a concluding section we summarize the results of this research effort and provide a series of 

conclusions and recommendations. We emphasize that affordable access to current ICT, 

especially advanced telecommunications services, is a problem in many parts of Appalachia. 

The ability to understand, select and effectively implement ICT technology in private and 

public sector organizations is a serious additional barrier in many rural communities across 

the ARC region. Together these access and capacity barriers to ICT adoption may act as a 

drag on future economic development. We argue for a mix of supply-side strategies to open 

up access to advanced services and demand-side policies that would stimulate use of advanced 

ICT by small and medium- sized businesses to improve their competitiveness and market 

reach. 
4 

II. THE ROLE OF INFORMATION AND TELECOMMUNICATIONS 

TECHNOLOGIES IN ECONOMIC DEVELOPMENT 

Computers, software, and telecommunications products and services are becoming 

increasingly integrated, constituting a powerful new infrastructure for generating, organizing, 

analyzing and communicating information. The set of technologies constituting ICT evolved 

in new and profound ways over the past decade and will continue to change in the future. The 

advances in digital technologies in the 1990s involved the networking of software, computers 

and telecommunications systems, and a vast increase in interconnectivity between end users. 

Increased networking involved the growing integration of subsystems (computers, software, 

servers, browsers, wire-line and wireless telecommunications), and interconnectivity was 

accelerated through open networks and standards such as the Internet and World Wide Web. 

Under labels such as the digital economy or the new information economy, the rapid 

development of this new infrastructure and related technologies was an important factor in 

economic growth over the 1990s. 

Defining Contemporary Information and Telecommunications Technologies 

Since there are a number of different and often overlapping definitions of advanced 

telecommunications and/or information technology, it is important to delineate some basic 

definitions and distinctions. There are four major components in the contemporary 

telecommunication/IT infrastructure (Choi and Whinston, 2000; Kling and Lamb, 2000; U.S. 

Department of Commerce, 1997): 

• End user computer hardware and appliances that store, process, receive and 

transmit information include personal and mainframe computers, hand held 

devices, modems, and computerized manufacturing and office systems; 

• Software applications that allow the hardware to operate and perform myriad 

operations include common applications (word processing, spreadsheets), network 

applications (emailing, teleconferencing, electronic data transfer and payment) and 

special integrated applications (supply chain or process management, CAD/CAM 

software, remote banking, online shopping); 

• Network applications that manage efficient data, graphic and video transfer and 

support content on networks include hardware such as servers and routers and 

software such web browsers, HTML and http protocols, Java and Web authoring 

software; 

• The telecommunications equipment, networks and services used to transfer 

information between various end users of hardware and software includes wire 

line, wireless and satellite communications networks, which are the means for 

telecommunications providers to supply basic and advanced telecommunications, 

including Internet services. 

Advanced telecommunications has a more specific definition. This relates to the speed and 

quality of voice, data, graphic and video transmission between end users. We rely upon the 
5 

basic definition embodied in Section 706(b) of the Telecommunications Act of 1996 as, "high 

speed, switched, broadband telecommunications capability than enables users to originate and 

receive high quality voice, data, graphics and video telecommunications using any 

technology" (U.S. Congress, February 1996). The FCC has further specified advanced 

telecommunications as having the capability of supporting, in both the provider-to-customer 

(downstream) and the customer-to-provider (upstream) directions, a speed in excess of 200 

kilobits per second (kbps) in the last mile (FCC, 2000). 

There is a strong focus in this report on advanced telecommunications access because 

broadband represents a leading edge in information transfer, processing and networking 

capabilities. However when we refer to ICT, or ICT industries, in this report we are referring 

to all four layers of the advanced telecommunications and information technology 

infrastructure detailed above, not simply advanced transmission capability. A prominent 

feature of this ensemble of technologies and applications is that they are highly dynamic, with 

new simple and complex devices, applications and forms of connectivity emerging and older 

devices and applications fading away. Despite the current slowdown in high technology 

investment, these complementary ICT technologies will continue to evolve and become 

increasingly integrated into private commerce, social and community activities, education,

and entertainment and leisure (Business Week, 2001). 

The Potential Influence of ICT on Economic Development 

The advance of digital technology and applications strongly shapes economic development 

through the contribution that fast growing ICT industries make to employment and output and 

through the improvements in economic performance stemming from the utilization of new 

technologies in commercial and public sector activities. 

Industries that produce information and communications products and services were a crucial 

factor in the U.S. economy’s sustained and rapid growth during the 1990s. There is a common 

group of Standard Industrial Classification code industries that, together, represent the sectors 

that produce (ICT) goods and services (See Appendix #1)3. These industries accounted for 

less then 10 percent of U.S. output during 1995-1999, but contributed close to 30 percent of 

the country’s real GDP growth over this period (U.S. Department of Commerce, 2000). 

Employment in these industries grew from 3.9 million in 1992 to 5.2 million in 1998, a 33 

percent increase (U.S. Department of Commerce, 2000) Our analysis of more recent data 

suggests a rapid acceleration of employment growth in ICT producing industries in the 1990s. 

We estimate that national employment in ICT producing industries grew from 4.408 million 

in 1996 to nearly 6.756 million by 2000, a 53.3 percent increase over the period. The ARC 

region shared in the late 1990s boom in these industries with employment growing from 

200,569 in 1996 to 291,980 by 2000, a 45.6 percent increase (The Brandow Company, 2001). 

Even as dynamic ICT producing industries added to economic growth, the more profound 

economic development impacts stemmed from the application of new information and 

telecommunication technologies to business, non-profit and government sector operations. A 

central measure of the proliferation of new technologies is investment in ICT technology, 

which nearly doubled, from $243 billion in 1995 to $510 billion in 1999 (U.S. Department of 

Commerce, 2000). Telecommunications infrastructure is a critical component in these 

indicators. The presence of and ability to use computers, particularly in a networked 
6 

environment, and access to appropriate software applications, as well as access to fast 

communications networks for rapid information flow, are critical to extracting the benefits of 

information technology. Cronin et al. (1993) found, for example, that telecommunications 

investment rises with economic growth, while economic growth likewise rises with 

investment in telecommunications. Parker has reported similar results (1995), as have 

Dholakia and Harlam (1993). 

But how exactly does the new and evolving infrastructure of networked computing and 

telecommunications translate into enhanced economic performance? The ensemble of 

technologies delineated above can, if implemented effectively, spur growth and development 

through four main channels: increased innovation; improvement in product or service quality; 

increased productivity; and expansion of markets. 

Innovation: In terms of new product and process innovation, networked computing and 

communication offer firms continuous access to external sources of information from research 

centers, laboratories and even competitors. (Orlikowski and Iacano, 2000). Real time 

interactivity offered by proprietary and open networks allows more rapid acquisition and 

transfer of knowledge, problem solving, and joint collaboration within and between 

innovating organizations. Rapid access to information, the ability of ICT technology to screen 

and correlate information, and the high level of interactivity offered by contemporary 

networks also allow innovating firms to reduce the time between prototyping and testing a 

new product and getting it to the market. The "paperless" design process characterizing the 

rapid development cycle of the Boeing 777 is seen as an example of how new ICT 

applications can speed the innovation process (Tapscott, 1996). A more recent example is 

Ford Motor Company's Web based collaboration with internal and external designers to 

improve fuel efficiency. Through this real time collaboration, the effect of proposed design 

changes on productivity are instantly analyzed and amended by the team as vehicle designs 

unfold (Business Week, 2001). 

Product and Service Quality Improvement: The embedding of microprocessors in numerous 

products and services including automobiles, household appliances, communications devices 

and ATMs has improved quality, speed, reliability and usability (Cohen et al., 2000). 

Improved forms of communication combined with computer based quality control and 

delivery systems can improve quality and speed of product or service delivery (Porter and 

Millar, 1985). Computerized and interactive ordering and supply systems, together with the 

open architecture of the Internet, allow companies to offer and rapidly deliver products and 

services customized to the demands of individual customers. Dell Computer focuses on 

allowing customers to configure their own computer systems while ensuring fast delivery of 

the product. The company intensively utilizes ICT to coordinate its highly efficient “just in 

time” supply system to provide the components, produce the computer and deliver it to the 

final customer in a week’s time (Choi and Whinston, 2000) 

Productivity Gains: Utilization of ICT technology can lead to increases in output given a 

certain quantity of labor and capital inputs. Computerization of manufacturing processes took 

off in the 1970s and 1980s, while the automation of management, accounting and other office 

services accelerated with the introduction of personal computers in the 1980s. This earlier 

phase of ICT implementation was associated with a so-called “productivity paradox.” In the 

1980s a number of studies demonstrated that ICT investments could lead to significant 
7 

productivity gains for individual firms and industries, but adoption of the new technologies 

did not appear to stimulate increases in aggregate productivity growth. By the mid-1990s ICT 

investment grew to be a major share of capital investment and there was evidence that ICT 

investment was providing some boost to aggregate productivity growth (Sichel, 1997; U.S. 

Department of Commerce, 2000). There are numerous examples of ICT utilization increasing 

productivity at the firm level. An example from the ARC region is Eastman Chemical in 

Kingsport, Tennessee. Eastman is implementing, with its major suppliers and customers, a 

web based collaborative planning, forecasting and replenishing system. According to the 

company, use of the Internet has improved revenues per employee by an average of 9 percent 

in each of the past five years (Business Week, 2001). 

Expanding Market Reach: Electronic connections and ordering systems with suppliers and 

customers have been used for over two decades in the form of electronic data interchange 

(EDI). However, EDI systems were typically private secure networks run over secure leased 

lines and were, due to high costs, available primarily to large corporations and their major 

suppliers. The Internet offers major advantages over closed proprietary networks; entry and 

exit are relatively cheap and the open standards of the Internet create a potentially huge 

marketplace for buyers and sellers. Cheaper networking opportunities allow organizations to 

move outside established supply channels to purchase more generic inputs. United 

Technologies and General Electric are now buying 15 to 20 percent of their supplies on emarketplaces and report significant cost savings (Ibid, 2001; The Economist, 2001). Many 

firms have moved to the Internet to reach beyond their traditional or local customer bases. 

Computer and software firms now lead the way with companies such as Dell and Cisco 

garnering over half of their sales via the Internet. Banks and real estate companies are also 

dramatically increasing their sales and services via the Internet (Business Week, 2001). The 

availability of advanced telecommunication service allows more complex data, graphic and 

video transactions opening up new markets for video- and music-on-demand, and other 

content rich automatic ordering and processing services. Also smaller enterprises in travel and 

leisure industries, specialized retail and wholesale and manufacturing can also expand their 

market reach via the new ICT technologies. 

Actualizing the Economic Development Potential: Access and Capacity to 

Use ICT 

The new technologies unquestionably have great potential to spur growth and development. 

However, the transformative power of contemporary ICT is being felt very unevenly across 

regions, industries and public sector institutions. Indeed the current slowdown and shakeout in 

information and telecommunications technology has deflated more extravagant claims about 

the immediate revolutionary effects of these new technologies on business and household 

behaviors. As noted, there are significant barriers and frictions to the proliferation and 

successful adoption of the new technologies across regions and institutions. 

Access: Like earlier fundamental technologies such as electricity and telephony, computing 

and advanced telecommunications technologies originate and grow first in high-income urban 

regions, only reaching poorer and/or less urbanized areas after considerable delay. As will be 

shown in Section IV of this report, many parts of the Appalachian region have lower 

penetration rates of home computers, Internet access and even basic telephone than the 

national average. In terms of advanced telecommunication services, only two-thirds of the 
8 

U.S. population has access to DSL, an attractive lower-cost broadband technology that can be 

used by small and medium sized business and much of local loops’ cooper wire is not 

adaptable to DSL (Price Waterhouse Coopers, 2000, p. 346). DSL-capable lines are not 

currently available over broad swaths of rural Appalachia. Also, in some rural communities 

basic Internet access still requires a toll call generating large local service bills for businesses 

and households (Strover, 1999). More advanced fiber optic network access and use is quite 

concentrated with about 86 percent of the total network growth in the U.S. in the 20 largest 

cities. One estimate is that only 5 percent of buildings in the U.S. have direct access to fiber 

networks (Price Waterhouse Coopers, 2000). 

Subsequent parts of this report will demonstrate that access to advanced telecommunications 

at prices affordable to local businesses is a significant barrier in parts of the ARC region. 

While personal computers and Internet access are proliferating quite rapidly and gaps in 

access to broadband telecommunications may close somewhat over the next five years, 

important access gaps exist today that disfavor certain areas and regions. (Schement and 

Forbes, 2000; Thierer, 2000; Price Waterhouse Coopers, 2000). Moreover, because new 

innovations and applications are constantly emerging, as gaps close in older technologies new 

gaps appear with new technologies and applications. So, for example, as more households and 

businesses adopt "narrow-band" Internet, advanced users in higher income urban regions are 

turning to broadband (Van Dijk, 2001). 

Capacity to use: Access to the new technologies must, however, be seen as a necessary but 

far from sufficient condition for the successful utilization of the new technologies to sustain or 

improve economic performance. The second barrier is the capacity in business and public 

organizations to effectively use the technologies to actually improve their performance. For 

organizations to add value through ICT investments they must understand technological 

options, select the appropriate set of technologies, and reorganize their operations to 

competitively exploit new technical opportunities. As many have noted, fulfilling the 

promises of the new technologies seems in reality much more challenging than proponents 

and futurists have suggested (Orlikowski and Iacono, 2000). 

The architecture of new information and advanced telecommunication is complex and rapidly 

changing, making it considerably more difficult for the end user to understand and adopt than 

earlier fundamental technologies such as electricity and telephony (van Dijk, 2001). 

Implementing ICT involves choices and knowledge about such things as line or wireless 

options, computers and other devices, complex software, and Internet service options. 

Selecting the specific set of ICT technologies that can best complement the activities of a 

particular organization may be even more challenging. The costs of selecting the appropriate 

package of computers, software and telecommunication services, developing the know-how to 

effectively implement technologies in a business plan, training personnel, and acquiring 

specialized services to support and upgrade technologies may cost up to ten times the 

acquisition and service costs for personal computers and Internet access (David, 2000). 

The effective implementation of new ICT technologies in private or public organizations can 

be seen to involve the following five steps: 

• Obtaining information about alternative technologies including their direct and indirect 

costs and performance characteristics; 
9 

• Understanding how various technology options relate to specific requirements of the 

organization and how they will be integrated into revised business plans; 

• Selecting the appropriate mix of technologies and associated workforce training to 

ensure that the new technologies can be implemented effectively; 

• Making the organizational changes required to fully leverage the technologies; 

• Securing the capacities to maintain, adapt and upgrade the technologies to obtain a 

high return on ICT investments. 

Organizations everywhere are challenged in moving through these steps to implement ICT 

technology in ways that realize economic and social value. The information, knowledge and 

experience to make the proper technology choices and changes in organizational practices 

come from within firms or public sector institutions or from outside experts or consultants. 

Larger firms in industries that are significant users of ICT typically have an information 

technology (IT) group or administrative unit that informs the firm's leadership about strategic 

technology choices and have major responsibility for implementing, maintaining and updating 

ICT. The relationship between the group responsible for technology implementation and other 

divisions of the firm is crucial, as effective ICT implementation requires more than providing 

new tools or technology systems to an organization. Getting strong returns from ICT 

investments often requires major changes in organizational practices, work norms, and 

incentives. Strong buy-in from upper management and close collaboration between the IT 

group and other units is critical to foster the organizational changes necessary to effectively 

implement ICT (Kling and Lamb, 2000; Tallon et al., 1999). Small to medium-size firms may 

be severely disadvantaged because they often do not have individuals and groups dedicated to 

evaluating and implementing ICT. Smaller companies typically lack the resources, and 

leading personnel often lack the time to build the requisite set of competencies for effective 

adoption. 

On the other hand, many sources of know-how for successful technology adoption are 

external to the firm. External sources are central even in the case of larger companies with 

large internal IT groups (Grant and Huston, 2000). Information about technology choices, for 

example, often comes from competitive vendors who provide characteristics of their systems, 

comparisons to other sellers and demonstrate the usefulness of the technology to customers. 

Internet service providers and telecommunication companies in areas where there is 

meaningful competition provide information and in many cases support services for firms 

moving into Internet commerce and related applications (Greenstein, 2000). Industry 

associations are an additional source of information, and in some cases technical support, for 

technology adoption. Learning by observing competitor or supplier firms is another important 

means to assess and evaluate technology needs and requirements. Finally, outside consulting 

services are commonly used to help inform management about choices, to supplement the ICT 

capacities of the firm, to train personnel and to maintain and update technologies (Grant and 

Huston, 2000). The same set of external sources and institutions (vendors, competitors, 

suppliers, trade groups, and service firms) are also important to effective ICT adoption by 

government and non-profit organizations. 
10 

Access to the external sources of know-how essential for successful ICT adoption is strongly 

related to where firms or government institutions are located. The above discussion suggests 

that making the right technology choices and effectively implementing ICT in the context of a 

compelling business strategy requires exposure to emergent technologies and relationships 

with vendors or advanced users (Barr and Riis, 2000). Such exposure and experience is much 

less costly to acquire in innovating urban regions with many competitive vendors, technology 

users, and trade and industry associations (Gaspar & Glaeser, 1998). Research clearly shows 

that production and use of new devices and software, and use of high-speed broadband 

networks is a function of population density (urbanity), income, education, and initial 

presence of innovative producers (NTIA, 1999; Silverstein, 2000; USDA, 2000). The 

strongest correlates of these factors occur in large metro areas with high tech industrial bases. 

Other Economic Development Challenges: A third barrier, especially in many rural 

communities, is the prominence of other economic development challenges. Even if there is 

substantial evidence that new ICT applications are having measurable impacts on aggregate 

growth and on the performance of specific industries and firms, this should not obscure the 

importance of other more conventional factors associated with economic development. Basic 

infrastructure including power, roads, water and wastewater, as well as workforce quality and 

proximity to markets, remain as or more important in shaping economic development 

prospects as access and adoption of ICT. To date, the competitive advantages offered by more 

rapid and systematic ICT adoption are not clear to many local businesses and development 

practitioners. The struggle to improve basic conditions for economic development may indeed 

be seen as a more important priority than focusing scarce resources on major efforts to 

upgrade ICT capacities. Unfortunately, this potentially rational weighting of economic 

development priorities makes it difficult to generate the necessary focus on technology issues 

needed to make the substantial progress needed in many rural communities. 

The risk for economic development, especially in rural Appalachia, is the emergence of 

another vicious cycle. Service providers continue to skip areas with limited demand, firms 

spurn communities with poor ICT access and weak technical capacities, and the stimuli to 

improve local access and know-how fail to emerge because people do not have the level of 

exposure to the new technologies at work or at home as their urban counterparts. In rural 

communities a very keen focus on ICT access and adoption challenges by local public and 

private organizations is needed to overcome severe initial disadvantages. 

In this context, government supported initiatives to promote universal service and accelerate 

training, innovative regulatory approaches, and public-private partnerships to provide 

technical assistance must be seen as critical in closing the digital divide. As will be shown in 

more detail below, public investments in education, and health care have led to improvements 

in ICT literacy and skills and have in some cases acted as a market pull to bring in new 

services and providers. But many challenges remain in ensuring that information and 

telecommunications capacities of small and medium-sized businesses in rural communities 

are significantly enhanced. State and local institutions must make focused efforts to ensure 

access to advanced services affordable in rural and low-income areas. In addition, overcoming 

the hurdles to successful adoption of ICT by local firms will require much more extensive 

efforts to fill the severe information and service gaps present in many rural communities. 
11 

III. PROFILE OF THE INFORMATION AND 

TELECOMMUNICATIONS INDUSTRY COMPLEX IN THE 

APPALACHIAN REGION 

This section of the report develops detailed evidence about the recent growth of ICT and 

related industries across ARC counties. The aim is to detail what is known about the relative 

strength and future prospects of leading ICT manufacturing and service producer industries in 

Appalachia. We further profile growth in industries that rely heavily on ICT technologies to 

develop, produce and market their products to better understand the broader implications of 

the new digital technologies for regional development. In addition, this study analyzes four 

geographic levels to discern industry structure and growth patterns: an aggregate region 

incorporating all 406 ARC counties; counties within MSA areas in the ARC region (that may 

include select counties outside the region); metro-adjacent counties including rural counties 

that share some border with MSA counties (either in or adjacent to the ARC region); and core 

rural counties defined as counties that do not border any MSA counties in, or adjacent to, the 

ARC region. 

This analysis provides more specific evidence about how the ARC region participated in the 

boom in ICT industries over the 1990s. In addition, profiling the recent growth and current 

strength of ICT producer and user industries provides an important benchmark for measuring 

how the ARC region has fared in keeping pace with the growth of the digital economy in the 

1990s. Finally, as access and capacity to use the new technologies are likely to be associated 

with the density and vibrancy of producing and using firms, these data may serve as an 

additional proxy indicator of ICT adoption capacity across the region. 

Definitions and Methods 

Industry Categories: The following ICT industry analysis drew upon two key data sources to 

determine the growth in employment and business establishments in the selected industries 

from 1988-2000 in each of four geographic regions (defined below). Data are summarized for 

four related sets of industries in the ARC region: 1) core industries producing 

telecommunication and information technology products and services (producing industries); 

2) a diverse set of industries identified as heavy users of telecommunications and information 

technologies in their business operations (user industries); 3) transportation equipment 

industries identified as important users of telecommunications and information technologies 

and as an important component of the ARC manufacturing sector; 4) non-store retail 

industries that rely heavily upon telecommunications capabilities to market and sell their 

products. 

 

Several sources were used to delineate the above industry categories. The primary source used 

to specify telecommunications and information technology producing industries was the 1999 

U.S. Department of Commerce report, The Emerging Digital Economy II (U.S. Department of 

Commerce, June 1999). For a full list of ICT producer industries see Appendix #1. 

The delineation of industries as heavy users of telecommunication and information 

technologies drew upon three major sources: the Input-Output Accounts of the United States 
12 

from 1996 published by the Bureau of Economic Analysis (BEA,1996); the U.S. Department 

of Commerce, 1998 Capital Expenditure Survey (U.S. Department of Commerce, Business 

Investment Branch, 2000) and the new E-Stats survey series ( U.S. Department of Commerce, 

2001). An industry was classified as a "user" industry if: 1) direct industry purchases from 

telecommunication/information technology producer industries as a share of total direct 

industry purchases were greater than the average for all industries; or 2) if investment 

spending for computers and peripheral equipment, communications equipment, and 

instruments and software were greater than mean investment purchases by all industries. 

Applying the above criteria yielded 166 four digit SIC industries in addition to the ICT 

producer industries that are that heavy users of ICT products or services. For a full list of ICT 

user industries see Appendix #1. 

It is important to note that many of the industries that have highest levels of purchases or 

investment in ICT products or service are the ICT producing industries themselves. 

Telecommunications services, Computers and Office equipment, and Radio-T.V. 

Broadcasters, for example, rely heavily on the products and services of the ICT producing 

industries category in their own operations. Our broad category of user industries excludes 

these sectors that are considered separately as producing industries. 

Transportation equipment manufacturing industries did not stand out as a “user” industry 

according to the above criteria. However, there is strong evidence that the use of 

telecommunications and information technology has been growing in these sectors in recent 

years. Aircraft and automotive-related manufacturers are increasingly deploying 

telecommunication and information technology for procurement, logistics management and 

sales (Mandel and Hof, 2001). While overall ICT investment in the transportation equipment 

sector was not among the leaders in 2000, a 2001 Department of Commerce survey indicates 

that Transportation Equipment accounted for the largest share of e-commerce shipments in 

manufacturing. Industries in this sector accounted for $140 billion or 29 percent of 

manufacturing e-commerce shipments (both sales between producers and suppliers and 

between producers and consumers) (U.S. Department of Commerce, 2001). Furthermore, the 

ARC has identified the Transportation Equipment sector as an important element of the 

regional manufacturing base, especially in non-metro counties (see Appendix #1). 

Contrary to certain popular and media perceptions, the retail sector has not been a leader in 

the deployment of new telecommunication and information technologies (Department of 

Commerce, 1999). Recent surveys suggest that non-store retailers, including catalog and mailorder businesses and retail sites selling primarily over the Internet accounted for 77 percent of 

retail e-commerce sales (U.S. Department of Commerce, 2001). We therefore look at industry 

presence and growth across the Region in two retail sectors, Catalog and Mail Order Houses 

and Direct Selling Establishments (see Appendix #1). 

Geographic Areas: Four geographic categories were established to determine aggregate 

employment and establishment growth in telecommunication and IT sectors in the ARC 

region and patterns of growth between metro, metro adjacent and rural counties. 

• The Aggregate Region: Includes all 406 ARC counties. Industry data in all four industry 

categories detailed above is aggregated into a single region to analyze industry structure 

and dynamics in the region as a whole. 
13 

• Metro Counties: Includes 110 counties included in 41 metro areas (MSA's or PMSAs) in 

the ARC region. If one or more ARC counties were part of a metro area, all counties in the 

metro area were included in this class. For example, while only three counties in the 

Atlanta CMSA are in the ARC region, all Atlanta CMSA counties are included in the 

metro county analysis group. 

• Metro-Adjacent Counties: Includes 148 ARC counties that share some border with a 

metro county in the ARC region or outside the ARC region. If a ARC county borders on a 

metro county that is not in the ARC region this county is classified as a metro adjacent 

county. 

• Rural Core Counties : Includes 156 counties in the ARC region that are neither in, nor 

adjacent to, a metro area. 

Two distinct databases were used to generate detailed industry employment and business 

establishment data for the region. The first database combined Regional Economic 

Information System (REIS) and County Business Patterns data from 1988 and 1996 to 

determine employment growth in selected industries in each of four geographic regions 

detailed above. To overcome data suppression problems in County Business Patterns data we 

used the CLEANCBP model that provides estimates of industry employment at the four digit 

SIC code level for all industries.4

 The second source was a proprietary database on detailed 

industry employment provided by The Brandow Company. This source provided estimates of 

industry employment for 1996 and 2000 at the four-digit SIC code level based primarily on 

upon credit reporting databases. The Brandow Company amalgamates databases from 

different sources, identifies and codes firm information, and aggregates them by address and 

SIC industry codes. 

Because each of these databases uses very different methods to estimate industry employment 

and number of establishments and to classify firms in SIC industries, they are not fully 

consistent. We cannot, therefore, combine the two databases to look at industry change over 

the entire 1988-2000 period. Despite significant differences, the two databases do have a 

degree of comparability, with relatively high correlations across the main industry categories 

of the common year, 1996 (see Appendix #2). In the following discussion of results we will 

focus on the results over the last five years 1996-2000 using The Brandow Company database. 

For each of the four "region" classifications and each of the four industry groups, the 

following results were derived: 1) establishment and employment growth over the 1996-2000 

period; 2) location quotients measuring industry presence or specialization in each "region";5

and 3) Shift share components used to analyze industry growth in the region relative to 

industry growth in the nation6

. In the sub-sections that follow we report and analyze the 

structure of ICT and related industries and change in these industries over time. Also, the 

regional analysis tools detailed above will be used to better understand the position and 

performance of these industries in Appalachia relative to national trends. 
14 

ICT Related Industries in the Aggregate Region 

 

Analysis of industry data indicates that ICT producer and various categories of user industries 

experienced healthy growth in the ARC region in the latter half of the 1990s. As Table 1 

below indicates, the region added a large number of business establishments in producer 

industries, with establishment growth approaching a remarkable 65 percent over the period. 

Business formation was also strong in various categories of ICT using industries. Most 

notable was the very rapid growth in the number of non-store retail establishments, the sector 

where much business to consumer e-commence takes place. 

Employment growth in all ICT related categories during the period 1996-2000 was greater 

than overall region employment growth for all industries. The ARC region clearly benefited 

from the boom in ICT producing industries, adding over 91,000 jobs over the period for a 45.6 

percent increase over 1996 levels (Table 2). The results of this data analysis, therefore, 

provide some good news; ICT producer industries in the region constituted an emerging 

growth sector in the 1990s. Further, the user industries that rely heavily on ICT outputs in 

their business operations accounted for 24 percent of total ARC private sector employment in 

1996 and continued to experience growth over the late 1990s. The region also increased its 

share of user industry employment over the period 1996-2000 indicating that the region 

maintained a healthy competitive position in this large segment of the economy. 

Table 1: Aggregate Region, Growth in Business Establishments - ICT Sectors 

Industry Group Number of 

Establishments 

1996 

Number of 

Establishments 

2000 

Change 

1996-2000 

Percent Change 

ICT Producer Industries 11,302 18,616 7,314 64.7% 

ICT User Industries 151,055 178,080 27,025 17.9% 

Trans. Equipment Industries 

962 1,198 

 

 236 24.5% 

Non-Store Retail 1,141 2,006 865 75.8% 

Source: The Brandow Company database 

Table 2: Aggregate Region, Growth in Employment - ICT Sectors 

Industry Group ARC Region Jobs 

1996 

ARC Region Jobs 

2000 

Change 1996-

2000 

Percent Change 

ICT Producer Industries 

 

 200,569 

 

 291,980 

 

 91,411 45.6% 

ICT User Industries 1,868,410 2,379,017 510,607 27.3% 

Trans. Equipment Industries 85,585

 

 107,323 21,238 25.4% 

Non-Store Retail 14,254 18,615 4,361 30.6% 

 

Total Private Employment 7,913,697 9,870,167 1,956,470 24.7% 

Source: The Brandow Company database 
15 

Closer examination of the data, however, reveals both troubling and encouraging signs. Most 

troubling for economic development prospects is the relatively weak presence of ICT 

producer industries in the region. Employment growth in ICT producing industries in the 

region was significantly less than national employment growth in these sectors, especially in 

the period 1996-2000. This suggests a regional loss in market share in these key industries. 

Figure 1: Growth in ICT Industry Employment 1988-2000 

Table 3 below breaks out these trends in shift-share components, underscoring the fact that 

ICT producing industries lost share, growing slightly slower than the corresponding national 

growth in the industries (job loss due to Regional Shift). Moreover, the growth in the 

producing industry category experienced over the late 1990s came off a relatively small base. 

In 2000 the ARC region accounted for just 6.6 percent of total U.S. ICT producer jobs, while 

accounting for 7.3 of total U.S. private non-farm employment (The Brandow Company). 

13.7

21.6

53.3

19.5

45.6

23

0 10 20 30 40 50 60

1988-1996

1996-2000

Percentage growth

ARC Region ICT Industry Job

Growth

U.S. ICT Industry Job Growth

U.S. Total Job Growth
16 

Table 3 Employment Change 1996-2000: Shift-Share Components

Industry Group 1996 ARC 

Region Jobs 

2000 ARC 

Region Jobs 

Job Change 

1996-2000 

National 

Growth 

Effect 

Industry Mix 

Effect 

Regional 

Shift Effect 

ICT Producer 

Industries 

 

 200,569 

 

 291,980 

 

 91,411 

 

 46,213 

 

 49,978 

 

 -4,780 

ICT User 

Industries 1,868,410 2,379,017 510,607 430,501 -53,428 133,534 

Trans. Equipment 

Industries 85,585 107,323 21,738 19,720 -210 2,229 

Non Store Retail 14,254 18,615 4,361 3,284 1,895 -819 

Source: The Brandow Company database 

As Table 4 below indicates, the region appeared to be a net importer in 30 of 35 ICT producer 

industries in 2000. Those industries where the region appeared to be a net exporter—

Electronic capacitors and connectors, Process control instruments, and Radio broadcasting 

stations—are not in high-tech ICT segments. In system and software industries and core 

telecommunications services segments, the region generally exhibits weak measures of 

specialization, indicating that the area is a net importer in these higher-end industries. While 

location quotients are a very rough indicator of specialization or export/import characteristics 

of industries, the relatively low location quotient values for most core ICT industries suggests 

that the ARC region cannot be considered a center of ICT production. This evidence shows 

that despite healthy growth in ICT sectors, the region still lags other parts of the nation in the 

larger and more dynamic segments of ICT production and service. 

More encouraging was the healthy expansion in the ICT user industries and Transportation 

Equipment industry categories. The ARC region gained competitive share in both areas over 

the period 1996-2000, even though these industries exhibited slightly slower growth than 

national aggregate private sector employment (Job loss due to Industry Mix, see above). The 

region experienced strongest growth in user industries in the Finance, Insurance and Real 

Estate (FIRE) sectors, health-related sectors, and business services. 
17 

Table 4: Export Posture ICT Producing Industries - 2000 

ICT Producing Industries with Export Specialization 

 

SIC Industry Location 

Code Quotient 

3675 Electronic capacitors 4.98 

3678 Electronic connectors 1.46 

3823 Process control instruments 1.10 

4832 Radio broadcasting stations 1.18 

7376 Computer facilities management 1.08 

 

ICT Producing Industries with Weak Regional Specialization 

 

SIC Industry Location 

Code Quotient 

3571 Electronic computers 0.96 

3572 Computer storage devices 0.08 

3575 Computer terminals 0.23 

3577 Computer peripheral equipment, nec 0.62 

3651 Household audio and video equipment 0.81 

3661 Telephone and telegraph apparatus 0.46 

3663 Radio and t.v. communications equipment 0.74 

3672 Printed circuit boards 0.69 

3674 Semiconductors and related devices 0.11 

3676 Electronic resistors 0.80 

3677 Electronic coils and transformers 0.52 

3679 Electronic components, nec 0.76 

3695 Magnetic and optical recording media 0.66 

3825 Instruments to measure electricity 0.46 

3826 Analytical instruments 0.36 

4812 Radiotelephone communication 0.59 

4813 Telephone communication, except radio 0.54 

4822 Telegraph and other communications 0.18 

4833 Television broadcasting stations 0.69 

4841 Cable and other pay television services 0.79 

4899 Communication services, nec 0.32 

5045 Computers, peripherals, and software 0.63 

5734 Computer and software stores 0.73 

7371 Custom computer programming services 0.40 

7372 Prepackaged software 0.39 

7373 Computer integrated systems design 0.59 

7374 Data processing and preparation 0.60 

7375 Information retrieval services 0.28 

7377 Computer rental and leasing 0.28 

7378 Computer maintenance and repair 0.82 

7379 Computer related services, n.e.c. 0.55
18 

In the non-store retail industries, the region experienced a net loss in share suggesting that 

businesses lost some competitive advantage in these Internet intensive retail segments. In 

addition, the region had location quotients significantly less than one in the two industries in 

non-store retail (not shown above), suggesting little specialization in retail Internet commerce. 

It should be noted that non-store retail does include much on-line catalogue activity, but most 

call center type activities are not in this category. Many call centers are classified in the fourdigit product category of the industry they are associated with. For example, a credit card call 

or banking service center would likely be classified in a financial service industry. It is hence 

difficult to break out general service or call center activity in the SIC classification system 

The Regional Distribution of ICT Industries in the Appalachian Region 

Examining employment patterns in the three sub-regional categories allows for a comparison 

between urban and rural areas in ICT industry development. The three categories include: 

counties within metropolitan regions; rural counties adjacent to metro counties; and rural 

counties not adjacent to any metro county. These geographic classifications allow for the 

testing of certain propositions concerning uneven economic and industrial development. The 

expectation, based upon existing studies of the regional distribution of ICT industries, is that 

these high technology industries strongly favor urban or ex-urban locations (Lentz and Oden 

2001; Parker, 2000; DeVos, 1999). While more isolated rural counties (the rural core) may 

have had modest success attracting branch plant manufacturing facilities, they have not had 

success attracting high technology industries in the ICT producing sectors (Jensen, 1998; 

Glasmeier and Howland, 1999). These findings contradict predictions of some commentators 

who have stressed that ICT technologies should act as a boon to rural development in general 

by reducing the importance of market proximity and transportation costs for firm location 

decisions (Williams, 1991; Gilder, 2000). 

Table 5: Sub-Region Shares of ICT-Related Employment in Producer and User 

Industries, 2000 

Regional 

Category 

Region Share 

of Total ARC 

Employment 

Total 

Employment 

Telecom 

Producer 

Industries 

Sub-Region 

Share of Telecom 

Producer 

Industries 

Total Employment 

Telecom 

User Industries 

Sub-Region 

Share of Telecom 

User Industries 

 Metro Counties 63.8% 231,604 79.3% 1,657,374 69.7% 

Rural Adj. To Metro 21.0% 33,531 11.5% 430,398 18.1% 

Rural, Not Adjacent 15.2% 26,845 9.2% 291,245 12.2% 

 

Total 100% 291,980 100% 2,379,017 100% 

 Source: The Brandow Company Database 

Our analysis shows that employment in the core ICT producing industries is highly 

concentrated in the metro counties in the ARC region. Nearly 80 percent of ICT producer 

employment was in metro counties in 2000. Only 9.2 percent of producer industry jobs were 

located in the core rural counties of the region, a considerably lower share than the total 
19 

employment share of these core rural counties. Although all rural counties (metro adjacent 

and non-adjacent) accounted for over 36 percent of total regional private employment, only 

20.7 percent of ICT producer industry employment was located outside urban counties (Table 

5). Moreover, growth in ICT producing industries over the period 1996-2000 was 52.9 percent 

in metro counties, but only 23 percent in rural metro adjacent and 20.9 percent in core rural 

counties. This indicates that non-metro counties are losing out in the intra-regional growth of 

ICT producing sector jobs. 

Telecom user industry employment is also somewhat disproportionately concentrated in urban 

areas, with nearly 70 percent of total employment in metro counties. However, user industry 

activity was more important for both metro adjacent and core rural counties, constituting 20.7 

and 19.5 percent of total sub-region employment respectively in each category. In addition, 

job growth in ICT user industries was slightly higher in metro adjacent counties 1996-2000 

(30.2 percent) than in metro counties (27 percent). The core rural counties also registered 

strong employment growth in user industries (24.9 percent), but a slightly lower rate than in 

metro and metro adjacent counties. 

Transportation equipment sectors are a small but relatively important growth area for rural 

counties. Metro adjacent and core rural counties retain more proportionate shares of 

employment in transport equipment industries and have gained relative to metro counties in 

these sectors (Table 6). The dominant industry in this segment in the ARC region is Motor 

Vehicle Parts and Accessories, accounting for 55 percent of regional employment in the 

category. Ex-urban and rural counties have benefited as firms in this and other industries in 

the Transportation equipment category have been migrating to lower cost "greenfield" sites 

outside major urban areas. 

Table 6: Sub-Region Shares of ICT-Related Employment: 

Transportation Equipment and Non-Store Retail Industries, 2000

Regional Category Sub-Regional 

Share 

Of Total ARC 

Employment 

Total 

Employment 

Transportation 

Equipment 

Industries 

Sub-Regional 

Share of 

 Transportation 

Equipment 

Industries 

Total 

Employment 

Non-Store 

Retail 

Industries 

Sub-Regional 

Share of 

Non-Store 

Retail 

Industries 

Metro Counties 63.8% 67,043 62.5% 13,355 71.8% 

Rural Adj. To Metro 21.0% 24,549 22.9% 4,105 22.1% 

Rural, Not Adjacent 15.2% 15,751 14.7% 1,141 6.1% 

 

Total 100% 107,323 100% 18,601 100% 

Source: The Brandow Company Database 

Some have suggested that rural regions can potentially benefit from mail order and Internet 

retail opportunities. Selling by mail or over the Internet in a rural setting might be feasible 
20 

since proximity to customers is less crucial to retail success. However, the analysis of industry 

data provides only weak evidence of a growing advantage for rural counties. 

Table 6 shows that non-store retail jobs are very concentrated in urban and metro adjacent 

counties. There was a significant rate of job growth in non-store retail employment in core 

rural counties over the 1996-2000 period (from 702 jobs 1996 to 1,141 in 2000). However, 

this growth was off a small 1996 employment base. Moreover, our analysis of the data 

showed that the location quotients in the two industries that comprise non-store retail are 

considerably less than 1 for the region as a whole and for the core rural counties, suggesting 

weak specialization in Internet based retail. 

Table 7: Sub-Region Shift Share Component of Employment Change in ICT-Related 

Industries 1996-2000 

Metro Counties Shift Share 1996 Metro 

Region Jobs 

2000 Metro 

Region Jobs 

Job Change 

1996-2000 

National 

Growth 

Effect 

Industry 

Mix 

Effect 

Regional 

Shift 

Effect 

Telecom Producer Industries 151,433 231,604 80,171 34,892 38,612 6,668 

Telecom User Industries 1,304,915 1,657,374 352,459 300,666 -22,387 73,821 

Trans. Equipment Industries 54,531 67,043 12,512 12,564 964 -1,016 

Non-Store Retail Industries 10,307 13,355 3,048 2,375 1,377 -704 

 

Metro Adjacent, Rural 

Counties Shift Share 

1996 Metro 

Adjacent 

Region Jobs 

2000 Metro 

Adjacent 

Region Jobs 

Job Change 

1996-2000 

National 

Growth 

Effect 

Industry 

Mix 

Effect 

Regional 

Shift 

Effect 

Telecom Producer Industries 

 

 26,940 

 

 33,531 

 

 6,591 

 

 6,207 

 

 6,735 -6,352 

Telecom User Industries 330,470 430,398 99,928 76,144 -17,423 41,207 

Trans. Equipment Industries 18,517 24,529 6,012 4,267 -517 2,263 

Non-Store Retail Industries 3,240 4,105 865 747 422 -304 

 

Core Rural Counties Shift 

Share 

1996 Core 

Rural 

Region Jobs 

2000 Core 

Rural 

Region Jobs 

Job Change 

1996-2000 

National 

Growth 

Effect 

Industry 

Mix 

Effect 

Regional 

Shift 

Effect 

Telecom Producer Industries 22,196 26,845 4,649 5,114 4,631 -5,096 

Telecom User Industries 233,025 291,245 58,220 53,691 -13,618 18,146 

Trans. Equipment Industries 12,537 15,751 3,214 2,889 -657 982 

Non-Store Retail Industries 702 1,141 439 162 95 182 

 

Source: The Brandow Company Database 

The intra-regional dynamics of the four main categories of ICT producing and using industries 

can be further delineated through an analysis of the shift-share components of employment 

change. Table 7, above details the components of 1996-2000 employment change, showing 
21 

first that there was an intra-regional shift in activity in ICT producer industry jobs from nonmetro counties to the urban centers of the ARC region. This tends to support the proposition 

that these industries draw distinct location advantages from cities. 

Shift-share trends in ICT user industries and in Transportation Equipment industries are more 

encouraging for non-metro areas of the region. While these industries did not experience the 

strong growth of the producer industries overall, the ARC region as a whole gained share in 

these sectors. Moreover, both the metro-adjacent rural counties and the core rural counties 

gained share in both user and transport equipment categories. It is further noteworthy that 

these segments are crucial to both metro adjacent and core rural counties in terms of their 

contribution to total employment and growth. The shift share components show some growth 

in rural counties in non-store retail, but again this comes off a very small base. 

Implications of Industry Trends for Regional Development Prospects 

On balance the trends in ICT-related industry activity puts into relief both troubling and 

surprisingly positive developments. The weak presence and low growth in ICT producing 

industries is a cause for concern for future economic prospects. The region essentially relies 

upon other regions of the country to supply a significant share of ICT products and services. 

There is further evidence that the region is becoming more dependent on external suppliers of 

ICT products and services, especially in higher technology segments. The region did not fully 

share the growth and innovation generated by these industries over the 1990s. While these 

industries may be in the doldrums for the next two to three years, it is likely that they will 

continue to generate above average growth over the long term. 

Perhaps more importantly, the weak presence of more advanced producer industries may have 

wider implications for long-term growth in the region. The absence of leading edge producer 

firms might negatively affect the size and capacity of the regional ICT user community—

firms, public institutions, and households. Personnel in producing industries are exposed to 

the technologies, often gaining know-how and becoming early adopters in emerging 

technologies. Hence, initial concentration and subsequent growth of producer industries can 

play a role in creating and attracting specialized labor with superior skills in exploiting 

advanced technologies (Castells, 1996; Egan, 1995). New technologies are often deployed and 

tested in their home region, which fosters the development of sophisticated end users 

(Marceau, 1994). Regional concentration, furthermore, fosters the growth of firms and 

individuals offering specialized support services for ICT that increase the effectiveness of 

local firms deploying new technology. Greater exposure and readily available support services 

expand the general use of new technologies through producer and user relationships. 

The good news is that this industry analysis provides no evidence that the weak presence of 

leading producers has negatively affected user industry performance to date. Indeed, the 

region as a whole and all sub-regions have experienced healthy growth in user industries and, 

with the exception of metro areas, in the Transportation Equipment segment as well. Only in 

the small Non-store retail area does it appear that the region is losing ground in industries that 

rely on the new technologies. 

However, these results should not make regional development leaders and practitioners 

sanguine about the future. While there may be a pause in the proliferation of new ICT 
22 

technologies in the current downturn, the long-term effects will likely pose continuing 

challenges for the region. For the critical user-industries in rural regions, competition from 

networked firms in urban areas offering an array of advanced services over the Internet will 

likely represent a growing challenge. Local establishments in the tourist and leisure industries, 

banking and financial services, and producer services (accounting, design, engineering, 

advertising, etc) are already feeling this competition. Attracting back office service centers 

and on-line catalogue is a popular economic development strategy in some rural areas. But 

increasingly as such activities move to the Internet, they require high levels of connectivity 

with high capacity, redundant broadband connections that are often not available in rural 

counties. 

Even in such locally based industries as government and health care, access to information 

and services from distant centers may divert local demand. Firms in urban centers that are 

ahead in exploiting advanced telecommunication capacities will continue to represent a threat 

to the rural industries that are heavy users of ICT services—crucial sectors in many rural 

economies. 
23 

IV. TELECOMMUNICATIONS INFRASTRUCTURE IN THE ARC 

REGION 

This section reviews aspects of the telecommunications infrastructure in the Appalachian 

region. Wherever possible, data specific to the ARC counties are presented. However, 

telecommunications data are not typically organized or aggregated at the county unit; some of 

the data presented below is gathered at the zip code level, the wire center level (the 

geographical boundary commonly used within the telecommunications industry), or even the 

state level. First some basic telecommunications statistics for each state are presented, 

including telephone penetration, and computer and Internet use. This is followed by an 

examination of Internet backbone nodes in the region, and then by a breakdown of high-speed 

services subscribership as well as cable modem and DSL presence in the region. Finally, the 

extent to which competition has developed in the region is investigated. 

Certain sub-areas within the Appalachian states have particularly poor telecommunications 

infrastructure, while other areas may have excellent capabilities. For example, while North 

Carolina boasts the Research Triangle with its advanced facilities, it also has five counties that 

lack any access to high-speed Internet lines (N.C. Department of Commerce, 2000), and one 

quarter of its telephone central offices are in rural counties considered to be economically 

distressed.7 Tennessee reports that its own “digital divide” far exceeds the national average 

(Tennessee Regulatory Authority, 2000). Our research shows that some rural and 

economically distressed areas do indeed have Internet connectivity and even access to highspeed services. However, the poorest regions of Appalachia seem to lack alternatives, and 

may pay more for Internet connectivity than their urban counterparts. Table 8 illustrates the 

state-by-state disparities, and the huge growth rates of the past few years. 

Interviews in October, 2001 with the National Telephone Cooperative Association (NTCA) as 

well as the Organization for the Protection and Advancement of Small Telephone Companies 

(OPASTCO), both industry professional associations, indicate that nearly all small 

cooperative or privately owned telephone companies provide local dial-up ISP services to 

their subscribers. Those companies face limited competition for their ISP services. The 

larger incumbents including the Bell Operating Companies typically do not offer ISP services 

but have begun to offer DSL in certain areas. They too face very limited competition in all 

but the metropolitan areas for high-speed services provision. At this time, we find very 

limited evidence that cable operators are offering high-speed services in the rural regions of 

the ARC. Nonetheless, that small rural phone companies are offering dial-up access is a 

positive development in rural areas’ infrastructure picture. 

Table 8 shows that the ARC states joined the national trends toward higher computer 

penetration and rates of Internet access. Virginia and Maryland stand out with the high 

penetration rates for both measures, which probably reflects the intense business development 

in the Washington D.C. area. In 1998, Mississippi and West Virginia had the lowest computer 

penetration, although both made huge gains from 1990 to 2000 (they still retain the lowest 

rates among the ARC states even in 2000). Mississippi, West Virginia and North Carolina all 

had rather low Internet access rates in 1998, but those too increased considerably by 2000, 

with Mississippi and West Virginia nearly doubling their penetration. However, the high rate 
24 

of growth was off a very low base, leaving Mississippi with the lowest overall Internet 

penetration rates, followed closely by South Carolina and West Virginia. 

Table 8: Computer, Internet Access, and Telephones 

Telecommunications Infrastructure and Networks 

When it comes to the underlying services—the infrastructure—that facilitate access, a picture 

of very spotty networks and end-user facilities emerges. For example, Figure 2 offers a plot of 

the locations of fiber backbone points of presence (or POPs) in the Appalachian region. A 

point of presence is the node at which telecommunications traffic is handed off to another 

carrier to be routed to its ultimate destinations. Traffic may have to go through several POPs, 

but the critical feature with respect to Internet traffic concerns the distance from a local 

Internet Service Provider (ISP) to an Internet Backbone Provider. The latter maintain POPs or 

nodes at locations that are generally proximate to metropolitan areas. Distances to the Internet 

Backbone Providers translate into costs for the ISP, since the provider must pay distancesensitive prices to get traffic to those locations. 

Traffic in Mississippi and Kentucky faces clear disadvantages since there are few POPs within 

the ARC regions of those states. In Mississippi, for example, data traffic must be hauled either 

to Tupelo (the location of the marked POP) or south to Jackson (not in the Appalachian 

region) or even further north to Tennessee, incurring additional costs. Locations with more 

POPs correspond to metropolitan areas as well as to counties along major highways (as is the 

case in Virginia). 

Percent of Households with Computers

Percent of Households with Internet 

Access Percent of Households with Telephone

1998 2000 % Change 1998 2000 % Change 1998 2000 % Change

AL 34.3 44.2 28.9 21.6 35.5 64.4 93.3 91.9 -1.5

GA 35.8 47.1 31.6 23.9 38.3 60.3 91.4 91.1 -0.3

KY 35.9 46.2 28.7 21.1 36.6 73.5 93.3 93.3 0.0

MD 46.3 53.7 16.0 31.0 43.8 41.3 96.5 95.0 -1.6

MS 25.7 37.2 44.7 13.6 26.3 93.4 89.5 89.2 -0.3

NY 37.3 48.7 30.6 23.7 39.8 67.9 94.8 95.1 0.3

NC 35.0 45.3 29.4 19.9 35.3 77.4 93.1 93.9 0.9

OH 40.7 49.5 21.6 24.6 40.7 65.4 95.6 94.8 -0.8

PA 39.3 48.4 23.2 24.9 40.1 61.0 96.8 96.6 -0.2

SC 35.7 43.3 21.3 21.4 32.0 49.5 92.9 93.2 0.3

TN 37.5 45.7 21.9 21.3 36.3 70.4 94.6 95.5 1.0

VA 46.4 53.9 16.2 27.9 44.3 58.8 93.9 95.4 1.6

WV 28.3 42.8 51.2 17.6 34.3 94.9 93.8 94.0 0.2

U.S. 42.1 51.0 21.1 26.2 41.5 58.4 94.1 94.4 0.3

RED: above national average

Sources: NTIA. (July 1999). Falling Through the Net: Defining the Digital Divide; NTIA. (October 2000). Fall ing Through the Net: Toward Digital Inclusio

FCC. Telephone Subscribership in the US (February 1999 and March 2001).
25 

Figure 2: Broadband POPs in the ARC Region 

Source: Authors' telephone conversations with backbone network providers; Boardwatch Magazine's Directory 

of Internet Service Providers, 13th Edition. (2001). 

The National Exchange Carrier Association recently reported on the costs of “middle mile” 

facilities in order to gauge the costs facing rural carriers that haul Internet traffic to the 

backbone (NECA, 2001). They conclude that a high percentage of carriers serving rural areas 

are extremely disadvantaged by the relatively great distances their transmissions must travel 

in order to reach backbone facilities. In rural regions, this can mean that a cross-town email 

might have to travel hundreds of miles to reach its intended recipient one mile away. Some of 

the Multi-Service Access Point (MSAP) ideas discussed later in this report are particularly 

pertinent to this problem. MSAPs encourage local peering so that traffic does not have to 

travel great distances, thereby reducing costs for Internet Service Providers. The principle is 

that ISPs can “peer” at each others’ destination addresses, and remove traffic that is destined 

to stay within the region, instead of sending it to a distant node where it will simply be sent 

back to the region again. Peering introduces network efficiencies, and saves data transport 

costs. In any case, the backbone nodes of rural Appalachia are sufficiently distant from most 

rural regions that the transport cost issue is significant, particularly to smaller companies. 

NECA points out that even as market penetration rises, transport cost per customer 

predictably will fall; however, that relationship levels off at higher market penetration. The 
26 

telephone companies with fewer than 5000 lines have the worst operating margins for 

hypothetical DSL service, while those within 40 miles of an Internet backbone node and 

25,000 lines have positive operating margins with just 5% DSL penetration (NECA, 2001, p. 

31). The map above underscores the relatively larger distances of Appalachian facilities from 

the nodes and the consequent higher costs that might be incurred for providing broadband 

services. 

Types of Internet Access 

Technologies linking the end user to a provider can vary. This report focuses on cable modem 

and DSL (digital subscriber line) services, the two broadband technologies currently being 

deployed widely to residential and small-to-medium business customers. Cable modem 

services typically deliver transmission speeds of about several hundred kilobits per second 

(Kbps) up to 1.5 megabits per second. This compares favorably with the fastest dial-up 

modem speeds of 56 kilobits per second – it is up to about 30 times faster. In order to offer 

cable modem services, cable operators must upgrade their plants to digital technology. One 

disadvantage of cable modem services is that since they operate on a shared network, more 

people using the services means that the speed slows. 

DSL speeds are lower than those of cable modem services. The most common DSL service is 

ADSL or Asymmetric DSL, in which uploading speeds are slower than downloading speeds. 

Many ADSL speeds operate at about 200 Kbps downstream, with a slower speed for upstream 

traffic. An advantage of DSL service is that it operates on an ordinary phone line that has 

been “conditioned” for this application. From the consumer perspective, the same phone line 

can be used simultaneously for voice and computer transmissions. The telecommunications 

company’s local central office also must be equipped with the appropriate technology in order 

to offer DSL to its neighborhood. DSL services are limited to about 18,000 feet from a 

central office location. 

Another high bandwidth service, the T1 line, provides a dedicated circuit of 1.544 megabits 

per second bandwidth. Its cost is generally distance sensitive, with large pricing variation 

from state to state, and its most common users are medium and large size businesses. 

Fractional T1’s are available at varying speeds. Because they are dedicated circuits, T1 lines 

offer security and control over transmissions. 

When the penetration levels of cable modem and DSL services are examined, we see evidence 

that these technologies are underrepresented in the Appalachian region compared to national 

averages. Figure 3 illustrates the locations of cable modem service, although the map is 

misleading in that it displays the counties where there is cable modem service even though we 

do not mean to imply that the entire county is actually served in these cases. Cable modem 

service typically is available only within towns, not in rural areas. The Appalachian region is 

sparsely served by this technology, which is confirmed in additional FCC data presented 

below. 

DSL, the other major broadband service, is not broadly available to subscribers in the ARC 

region. Kentucky, Ohio, Virginia and West Virginia are light in DSL-equipped central offices. 

The other ARC states illustrate much broader penetration of DSL-equipped central offices, 

suggesting deployment is proceeding well. However, our field visits to Mississippi and 
27 

Virginia demonstrated that the presence of a DSL-ready central office does not necessarily 

translate into actual DSL service for the region. For example, the Mississippi counties we 

visited did not have operational DSL even though Bell South, the dominant local exchange 

company, said its central offices either were or would shortly be equipped for the service and 

those offices appear in public documentation as so equipped. 

Figure 3: Cable Modem Service in the ARC Region 

Sources: CableDataCom News. (2001, March 7). Commercial Cable Modem Launches 

in North America. [Online]. Available: http://www.cabledatacomnews.com/cmic/cmic7.html; Cable Modem 

Deployment Update. (2000, March). Communications, Engineering and Design (CED) 

Magazine. M, cited in National Telecommunications and Information Administration & Rural Utilities Service. 

(2000, April). Advanced Telecommunications in Rural America: The Challenge of Bringing Broadband Service 

to All Americans. pp. 46-59. [Online]. Available: http://www.ntia.doc.gov/reports/ruralbb42600.pdf

We find a statistically significant relationship between the economic vitality of a region (as 

classified by the ARC as either distressed, transitional, competitive, or in attainment) and 

numbers of DSL-ready central offices: the more economically vital the county, the greater the 

presence of DSL. This is not too surprising since population size also is correlated with both 

indicators as well. Among the 114 distressed counties, 81 percent have no DSL-ready central 

offices, compared to 63 percent of the transitional counties and 27 percent of the competitive 

counties.8
28 

Figure 4: DSL equipped offices in the ARC Region 

Sources: Authors' search in the Central Office Finder database at DSL Reports web site. [Online]. Available: 

http://www.dslreports.com/coinfo; National Telecommunications and Information Administration & Rural 

Utilities Service. (2000, April). Advanced Telecommunications in Rural America: The Challenge of Bringing 

BroadbandService to All Americans, pp. 60-72. [Online]. Available: 

http://www.ntia.doc.gov/reports/ruralbb42600.pdf

The FCC’s data from Form 477 categorize high-speed providers as any service providing at 

least 200 kbps in at least one direction (user-to-provider or provider-to-user). Their data are 

somewhat misleading in that the high speed provider is indicated through the existence of any 

provider serving in a zip code; the type of service the customer receives is not specified. 

Therefore, the high speed service could be a T1 line to a company, or it could be residential 

cable modem service to a community. Moreover, the FCC aggregates its data at the low end, 
29 

grouping 1 to 3 services providers in one single category. Thus, the data cannot comment on 

competition or choice among high speed services in much of the U.S. These data generally 

illustrate that the more populous regions of Appalachia have obtained high-speed services, but 

many other regions have none.9

 

In fact, we find that 47 percent of the Appalachian region’s zip codes have one or more highspeed service subscribers, compared to the nationwide average of 59 percent, a statistically 

significant difference. However, the availability of high-speed service can be extremely 

misleading as an indicator of regional connectivity. In our fieldwork we saw that even in 

economically distressed counties, the largest businesses had T1 connectivity or better, but that 

fact said nothing about broader connections and capabilities in the county or zip code. Again, 

a T-1 line registers in the FCC database simply as a “1-3” subscribership entry in a zip code. 

Figure 5: High-speed Providers 

Source: The Federal Communications Commission. (2000, August). Deployment of 

advanced telecommunications capability: Second report. [Online]. Available: 

http://www.fcc.gov/broadband/ . 
30 

Competition in the Local Exchange 

Basic line quality and switching features vary tremendously across the Appalachian region, as 

in other parts of the country. With the passing of the 1996 Telecommunications Act, 

Congress envisioned that incumbent telephone companies would make their physical facilities 

such as switches and lines available to would-be competitors on a leased basis. In this way, 

competitive services would grow without the initial, large expense of building entirely new 

facilities. The basic approach resembles the way equal access for large distance carriers was 

handled in the 1980s. After the 1996 Act, telecommunications companies and the FCC 

decided which equipment at a central office was to be “unbundled” and made available to 

competitors. Competing local exchange companies or CLECs challenge incumbent local 

exchange companies (ILECs) in providing local services, although most studies report that 

CLECs target businesses rather than residential users. The dominant ILECs are the Bell 

Operating Companies (BOCs), including Verizon (the product of Bell Atlantic’s merger with 

GTE), but they also may be small rural telephone companies. CLEC activity is an index of 

competition in a market, and an indicator of service alternatives. We examine competition in 

the Appalachian region in order to understand the extent to which these communities must 

rely wholly on incumbent service providers. 

For the most part, competitive pressures are relatively low in the Appalachian sub-regions, as 

demonstrated in Table 9. For example, most of the states with counties in the Appalachian 

region have fairly low numbers of competing local exchange companies (CLECs), although in 

three, New York, Georgia and Pennsylvania, the Bell Operating Companies have been 

approved to offer long distance services; the latter is granted when regulators ascertain that 

sufficient competition exists in a market.10 

Table 9 End user lines (as of December 1, 2000) 

STATE Incumbent 

Local 

Exchange 

Carriers 

Competing 

Local 

Exchange 

Carriers 

Total Lines CLEC Share 

(percent) 

BOC Share 

(percent, 

1999) 

Other Pricecap 

companies 

(percent, 

1999) 

AL 2,351,704 191,299 2,543,000 8 79.3 12.8 

GA 4,820,788 551,316 5,372,104 10 83.3 0.6 

KY 2,122,021 56,392 2,178,413 3 56.6 34.7 

MD 3,802,622 165,502 3,968,124 4 99.8 0.0 

MS 1,304,145 68,891 1,373,036 5 93.4 0.4 

NY 10,962,969 2,769,814 13,732,783 20 89.5 8.3 

NC 5,071,853 286,436 5,358,289 5 50 35.9 

OH 6,935,139 264,461 7,199,600 4 59 33.5 

PA 8,017,391 870,618 8,888,009 10 77.1 13.1 

SC 2,260,645 108,233 2,368,878 5 64.5 13.8 

TN 3,291,602 296,281 3,587,883 8 79.6 10.3 

VA 4,317,626 414,432 4,732,058 9 76.2 21.3 

WV 927,432 -- -- -- 83.7 14.8 

Source: FCC, Common Carrier Bureau statistics, 2001. Dashes indicate data that were withheld by the FCC to 

protect firm confidentiality. 

Table 9 illustrates that New York has the highest CLEC presence among Appalachian statesindeed, the highest in the country—followed by Georgia and Pennsylvania, both with 10% of 
31 

their end user lines serviced by CLECs. The final column in Table 9 presents data for other 

non-BOC telecommunications companies providing local services that have elected for a 

“price cap” method of regulation, in which prices are capped for certain services in exchange 

for those companies having flexibility on pricing (or no regulatory oversight) for other 

services. 

It is probably safe to predict that the Appalachian sub-regions in even these states have lower 

CLEC activity than that enjoyed by other portions of the state since there are few cities in 

those areas. Figure 6 below illustrates these locations for Georgia. The map demonstrates the 

relative paucity of CLEC switches in the ARC region of the state and in other rural counties in 

Georgia. Similar maps of other 12 Appalachian States are available from the Appalachian 

Regional Commission, and show a similar pattern. CLECs generally locate in metropolitan 

regions. This means the benefits of competition are not present in the more rural portions of 

the states, which generally overlap the Appalachian region. 

Figure 6: Georgia ILEC and CLEC switch locations 
32 

Looking at the telephone infrastructure from a telephone switch standpoint, we also notice 

that the Appalachian portions of our 13 target states have low levels of CLEC activities 

compared to the rest of their respective states (Table 10). Competitive telephone activity is 

lower in those regions in all states except South Carolina. 

Table 10 CLEC and ILEC Switches in ARC and Non-ARC 

State ARC region Non-ARC region 

ILEC 

Switches 

CLEC 

Switches 

CLEC 

Switches 

(percent) 

ILEC 

Switches 

CLEC 

Switches 

CLEC 

Switches 

(percent) 

Alabama 218 74 25.3% 170 60 26.1% 

Georgia 107 19 15.1% 365 169 31.6% 

Kentucky 140 4 2.8% 268 70 20.7% 

Maryland 28 6 17.6% 218 139 38.9% 

Mississippi 66 23 25.8% 218 128 37.0% 

New York 195 24 11.0% 808 335 29.3% 

North Carolina 127 27 17.5% 412 231 35.9% 

Ohio 230 6 2.5% 711 183 20.5% 

Pennsylvania 628 134 17.6% 267 164 38.1% 

South Carolina 55 39 41.5% 262 70 21.1% 

Tennessee 192 48 20.0% 222 92 29.3% 

Virginia 115 5 4.2% 391 158 28.8% 

West Virginia 258 32 11.0% NA NA NA 

 

Average 16.3% 29.8% 

Source: FCC Common Carrier Bureau, 2001 

One of the goals of this research was not only to assess competition but also to assess line 

quality and upgrade activity in the ARC region. The statistics and maps presented above 

already point to certain deficiencies in the local and regional networks. The actual cost of 

providing services in the Appalachian states is important insofar as longer loop lengths (to 

serve rural areas, for example) and low population densities mean that those regions should 

receive more support in order to maintain universal service. (Universal service is the name of 

a handful of programs that try to equalize the cost and quality of phone service across the 

nation.) Data from the FCC in Table 11 show that five of the 13 states in the Appalachian 

region have loop costs either at or below the U.S. average of $239 (for 2001). Longer loop 

lengths also suggest practical difficulties in offering DSL since that service has distance 

limitations from the central office, as noted earlier. 

Alabama, North Carolina, Tennessee, Kentucky, Georgia, South Carolina, West Virginia and 

Mississippi all have an average loop costs that exceed the national average cost, and this 

results in their receiving certain types of universal service support (detailed later). The loop 

costs plus the low population densities in those states indicate that telecommunications 
33 

infrastructure faces some market barriers. Although these data cannot be broken out for the 

Appalachian regions of the states, it is likely that those sub-regions would have somewhat 

lower population densities and probably longer loop lengths as well. 

Table 11: States’ Universal Service Fund Loops and Loop Costs 

STATE USF Loops USF Cost per Loop Persons per 

square mile 

Maryland 3,840,931 193.58 541.9 

Ohio 7,005,959 200.03 277.3 

Pennsylvania 8,468,821 215.41 274.0 

New York 12,818,544 220.00 401.9 

Virginia 4,762,112 239.54 178.8 

National Average 239.86 80.0 

Alabama 2,521,633 272.31 87.6 

North Carolina 5,093,322 278.71 165.2 

Tennessee 3,447,390 278.78 138.0 

Kentucky 2,191,588 298.09 101.7 

Georgia 5,208,825 304.10 141.4 

South Carolina 2,329,487 318.00 133.2 

West Virginia 1,014,109 335.81 75.1 

Mississippi 1,420,042 352.68 60.6 

 

Source: NECA’s Overview of Universal Service Funds (October, 2000) 

The FCC recognizes 1301 rural local exchange companies, which serve approximately 6 

percent of U.S. households and cover 35 percent of the country’s landmass, excluding Alaska. 

These companies typically have longer loops and consequently higher loop costs than 

companies serving metropolitan regions. They receive routinely receive Universal Service 

funds. However, larger companies, including the BOCs, which are not considered primarily 

rural telephone companies, also serve numerous rural households. Bell South, for example, 

serves most of Mississippi’s households. Determining the appropriate amount of support 

companies serving high cost regions should have in order to maintain the goals of universal 

service has been a topic of considerable study and lobbying. The FCC adopted a formula for 

universal service support first for non-rural areas in October 1, 1999.11 The impact of 

universal service support will be examined below. 

Wireless Services 

Many hope that wireless technologies will solve some of the connectivity problems in rural 

areas. Currently, some satellite services in the region advertise wireless Internet connectivity, 

however, their services are often unreliable or require telephone upstream communications. 

Some vendors are offering fixed wireless broadband on a terrestrial basis, as compiled in 

Table 12. However, services are spotty. It does not appear that the wireless opportunities 

available in Appalachia present any notable competition to wireline facilities.12
34 

Table 12: Wireless broadband providers in the Appalachian Region 

State County City Network Name Ownership 

Type 

Service 

Launch 

Upload/ 

Download 

(bits per second) 

Description 

GA Gwinnett Norcross AccessNowTM Private 2001-1 above 

2M/above2M 

Wireless broadband ISP 

based in Boca Raton, 

Florida. The company 

provides broadband 

wireless services in South 

Florida, Denver, Charlotte, 

Orland, Rochester, 

Toronto, and Latin 

America. Connection speed 

varies between 500Kbps 

and 155Mbps. 

KY Madison Richmond Firecracker Private unknown up to 2M/up to 

2M 

Wireless broadband ISP 

serving the Richmond area. 

Connection speed up to 

1.4M (both ways). 

NC Buncombe 

Polk 

Greenville 

(South Carolina) 

Asheville 

(Buncombe 

County) 

Tryon 

(Polk 

County) 

SKYRunner Private 1997/1998 up to 2M/up to 

2M 

Wireless broadband ISP 

serving five locations: 

Asheville (Buncombe 

County), Tryon (Polk 

County), and two other 

non-Appalachian locations, 

as well as Greenville 

County in South Carolina. 

NC Cherokee Not specified CommTech 

Wireless 

Private unknown unknown Wireless broadband ISP 

NC Rutherford Bluestreak Wireless 

Internet Service 

Private 6/1/2001 up to 2M/up to 

2M 

Wireless broadband ISP 

NY Otsego 

Chenango 

Unadilla 

(Otsego Co) 

Bainbridge 

and Afton 

(Chenango 

County) 

RealEthernet 

Wireless Service 

Private unknown up to 2M/up to 

2M 

Wireless broadband ISP 

serving the Tri-County 

Area in the Susquehanna 

Valley. 

NY Tri-county area, 

NY 

Not specified Servinet Private unknown unknown Wireless broadband ISP 

OH Laurence 

(Ironton) 

Ironton Southern Ohio Private 1/1/2000 above 

2M/above2M 

Wireless access, VoIP 

services, and T1 to OC12 

access to business and 

residential customers. 

Technologies: copper, 

fiber, satellite, wireless, etc. 

PA counties in 

Central PA 

Not specified PA Wireless 

wireless network 

Private 7/25/2000 above 

2M/above2M 

The company provides 

broadband Internet access 

and data WANs to 

customers in underserved 

areas. 
35 

PA Elk Not specified Wireless Internet 

access 

n/a 7/15/2000 above 

2M/above2M 

New and existing 

communication towers to 

transmit internet data to 

remote areas. 

PA Schuylkill Not specified Farber Technology 

wDSL 

Private 8/15/2000 up to 2M/up to 

2M 

Provides high speed 

wireless service to rural 

areas, and in areas where 

phone service is simply to 

poor to allow reliable 

Internet access. 

SC Cherokee Gaffney Bluestreak Wireless 

Internet Service 

Private unknown up to 2M/up to 

2M 

Wireless broadband ISP 

SC Greenville Not specified SKYRunner Private unknown up to 2M/up to 

2M 

Wireless broadband ISP 

TN Coffee Manchester, 

Tullahoma 

Wireless Broad 

Band 

Communications 

Private 2/14/1999 up to 2M/up to 

2M 

WBBC will provide 

wireless broad band 

Internet access 

infrastructure to rural 

communities for existing 

local communications 

companies, industrial and 

commercial businesses, and 

other medium to large 

business type clientele. 

TN SmithPutnam 

(planned)Macon 

(planned)Dekal

b (planned) 

Carthage, 

Gordonsville, 

and 

surrounding 

areas. 

Cookeville 

(planned)Laf

ayette 

(planned)Smi

thville 

(planned) 

Micro Wise 

Solutions 

Private 5/20/2000 above 

2M/above2M 

Wireless broadband ISP 

serving businesses and 

homes in both urban and 

rural areas. 

WV Ohio Wheeling WVWireless.Net Private unknown unknown unknown 

WV Wood Parkersburg WireFire Wireless 

Internet 

Private unknown unknown unknown 

Source: National Regulatory Research Institute. (2001). Community Broadband 

Deployment Database. [Online]. Available: 

http://www.nrri.ohio-state.edu/programs/telcom/broadbandquery.php

The distribution of wireless alternatives has limited potential to solve the problems presented 

by the absence of other broadband services. 

In summary, small business and residential broadband alternatives such as DSL and cable 

modem services are deployed far less widely in the ARC region than in the rest of the country, 

and less widely than in other portions of the Appalachian states. While the available data on 

the presence of broadband subscribers in zip codes may imply less demand for those services 

in Appalachian counties, it also could illustrate the non-availability of those services. Our 

fieldwork (see Section VII) suggests that deployment patterns and local vendor efforts to 
36 

market advanced telecommunications services are highly dependent on both population 

density and local leadership. To the extent that more remote regions of Appalachia lack both, 

the potential for telecommunications infrastructure to receive much attention by ILECs or 

CLECs is low. Some state policies have begun to address such issues with demand 

aggregation strategies and with the use of state-supported networks to leverage the state’s own 

presence as an anchor tenant on a network. With the prospect of substantially altering 

population densities being unlikely, new ways of tackling telecommunications infrastructure 

problems must be found. Some possible models are discussed in Sections Five and Six. 
37 

V. FEDERAL INITIATIVES IN THE ARC REGION: UNIVERSAL 

SERVICE AND OTHER PROGRAMS 

Under the deregulation framework set forth in the Telecommunications Act of 1996, the 

Federal government recognized the need to address access gaps typically dubbed the digital 

divide. There are two general channels of federal support for ICT access and capacity 

building: programs under the Universal Service Fund (USF); and a set of related federal 

programs launched in the 1990s intended to improve ICT capacities of rural and low-income 

communities. In this section we examine the federal support programs under universal 

service: the high cost support fund; the E-Rate Program; and the smaller programs related to 

rural health. We also examine those federal programs aimed at providing resources and 

assistance to enhance ICT capacities in low income and rural communities such as 

Community Technology Centers (through the Department of Education) and the Technology 

Opportunity Program (through the National Telecommunications and Information 

Administration). 

One critical issue we address is whether the resources allocated under these programs are 

reaching their target communities across the ARC region. Although the results appear mixed in 

general, it is difficult to make assessments that distinguish rural from urban outcomes simply 

because certain programs are directed to entire states rather than to specific regions within a 

state. A second issue we attempt to address is whether these universal service and other 

programs are meeting critical needs in term of improving access and capacity to use advanced 

ICT technologies in rural and low-income communities. 

Federal Universal Service Programs 

While the concept of universal service dates back to the early 1900s with the deployment of 

electricity and the telephone, its meaning and mechanisms have undergone several changes.13

Today, federal universal service refers to a series of FCC rules intended to make various 

classes of telecommunications services available at just, reasonable, and affordable rates 

throughout the county, as mandated by Section 254 of the Telecommunications Act of 1996. 

Current federal universal service policy can be best described as an evolving process, a 

mixture of funding mechanisms, formalized regulations, interim regulations, and ongoing 

debates and proceedings. As such, a thorough description of each component of federal 

universal service support is beyond the scope of this paper.14 Instead, we summarize the three 

key components of federal universal service support—the high-cost program, E-Rate program 

and the rural health program—and discuss their implications for the particular 

telecommunications needs of the Appalachian region.15 
38 

Table 13: Federal Universal Service Components 

Component Policy Goals Mechanism Implications for 

Appalachia 

High-Cost 

Program 

• To prevent the extra cost 

of providing services to 

high-cost areas from being 

reflected in the rates of 

these areas. 

• To create a competitive 

environment by 

subsidizing the carriers 

who serve high-cost areas. 

• To transform the historical 

method of universal 

service (i.e., implicit crosssubsidies of residential 

local service by longdistance, business, and 

non-basic services) to an 

explicit method in which 

long-distance, business, 

and non-basic rates will 

reflect truer costs. 

• All telecommunications 

companies in the country 

make contributions to the 

federal Universal Service 

Fund according to the 

contribution factor 

(percentage of end-user 

revenues), which is 

decided quarterly by the 

FCC. Carriers may or may 

not transfer the burden of 

contribution to rate payers. 

• A portion of the Universal 

Service Fund is disbursed 

to eligible non-rural

carriers that serve highcost areas. The Fund 

offsets the cost for the 

portion that exceeds 135% 

of national average cost. 

• The Fund also supports 

rural providers 

• Affordable 

telecommunications 

services in remote 

communities that have 

geographic (e.g., 

mountains) and economic 

(e.g., small demands) 

disadvantages. 

• Greater incentives for 

carriers to enter markets 

(e.g., rural markets) where 

service provision is cost 

prohibitive in the absence of 

universal service support. 

E-Rate • To provide access to basic 

and advanced 

telecommunications to 

schools and libraries 

across the country. 

• Each school or library that 

applies to the program 

receives discounts for 

connection (e.g., telephone 

line, T1, Internet access) 

and inside wiring. 

• The level of discounts 

ranges from 20% to 90% 

depending of the economic 

needs (the number of 

students eligible for the 

National Free Lunch 

Program) and location 

(i.e., rural or urban). 

• Affordable access to 

advanced services (e.g., T1) 

in the areas where such 

services are costly. 

• Make public access 

terminals with sufficient 

bandwidth available to rural 

and low income residents 

who lack access at home. 

• Greater incentives for 

carriers to upgrade lines and 

switches for advanced 

services (e.g., ATM) 

because infrastructure 

upgrades can be partially 

and indirectly subsidized by 

the E-Rate when the school 

or library in one area makes 

service request for such 

services. (See the State 

Network section for detail.) 

Rural 

Health 

• To provide reduced rates 

to rural Health Care 

Providers (HCPs) for 

telecommunications 

related services related to 

the use of telemedicine 

and telehealth. 

• Support is available to 

HCPs for long distance 

charges for accessing the 

Internet. Can be for 

existing or upgraded 

service. Available only to 

public, nonprofit of rural 

health clinics. 

• More affordable access to 

Internet and broadband 

crucial for many rural 

medical facilities. Subsidy 

may not be adequate to 

make access affordable to 

many rural clinics. 

 Sources: Federal Communications Commission. 2000, http://www.fcc.gov/ccb/stats .Universal Service 

Administrative Company. (2001). 2000 Annual Report: Reaching and Connecting Americans. Washington D.C.: 

Universal Service Administrative Company. Universal Service Administrative Company. (2001) http://www.sl.universalservice.org/. 
39 

Table 13 summarizes the major components of these programs. Although the 1996 Act does 

not explicitly state it, the high-cost program goes hand in hand with rate reductions in nonbasic services (including long-distance service) so that prices can move toward real costs. 

Such rate reductions essentially eliminate implicit cross-subsidies between non-basic and 

basic services, one of the main goals in the 1996 Act’s reformulation of universal service. 

In FY2000, the Universal Service Administrative Company distributed $4.4 billion to eligible 

recipients across the county (Universal Service Administrative Company, 2001). The highcost program (with five separate components) received the largest share of the federal 

Universal Service Fund (USF), with the amount of disbursement reaching $2.2 billion in 

FY2000. The E-rate program received the next highest share of the fund with a little over $2 

billion. The rural health component varies from year to year, but in FY2000 about $7.8 

million in rural health grants were made. 

The High-Cost Program: The High Cost Program provides funds directly to carriers serving 

rural or high cost regions in a state. A precise measurement of the distribution of the High 

Cost funds intra-regionally is virtually impossible because of the way the federal USF is 

disbursed to eligible companies.16 This is problematic for our purpose because except for 

West Virginia, all Appalachian states contain areas (i.e., counties) that are not designated as 

part of the Appalachia region. For this reason, we use statewide data. 

Table 14: Distribution of The Federal High-Cost Program In Appalachia, 2000 

State Rural Telcos1 Non-Rural Telcos2 Total 

Alabama $27,833,107 $60,203,436 $88,036,543 

Georgia $73,429,979 $5,919,045 $79,349,024 

Kentucky $18,839,297 $10,608,807 $29,448,104 

Maryland $552,276 $1,852,272 $2,404,548 

Mississippi $23,442,921 $109,658,352 $133,101,273 

New York $43,566,507 $9,015,372 $52,581,879 

North Carolina $24,432,168 $9,638,988 $34,071,156 

Ohio $15,579,591 $3,908,757 $19,488,348 

Pennsylvania $27,296,823 $1,459,563 $28,756,386 

South Carolina $37,895,032 $11,613,882 $49,508,914 

Tennessee $29,524,563 $4,487,319 $34,011,882 

Virginia $10,656,944 $26,516,103 $37,173,047 

West Virginia $25,761,273 $37,249,836 $63,011,109 

 

Total $358,810,481 $292,131,732 $650,942,213 

Source: Universal Service Administrative Company. (2001). 2000 Annual Report: Reaching and connecting 

Americans, Appendix B. Washington D.C.: Universal Service Administrative Company. 

1 "Rural" carriers for the purpose of federal universal service are local exchange carriers that either serve 

study areas with fewer than 100,000 access lines or have less than 15 percent of their access lines in 

communities of more than 50,000 in 1996. 

2 "Non-rural" carriers are local exchange carriers that do not meet the criteria for "rural" carrier designation. 

Of the $2.2 billion High-Cost portion of the federal USF, about 30 percent or $650 million 

was distributed to the 13 Appalachian states (Table 14: Distribution of The Federal High-Cost 
40 

Program In Appalachia, 2000). We can further evaluate the federal USF by analyzing the 

relative importance of the federal high-cost program in each of the 13 states. 

Table 15 aggregates the amount of per capita federal high-cost support for all programs for 

each of the 13 Appalachian states and compares them with the national average. Because of 

the problem of disaggregating the High Cost program to the county level, these numbers 

represent funding for the entire state. 

Table 15: Per capita federal high-cost support in Appalachia in 2000 

State 2000 

Appalachian 

Population 

Persons per 

square 

 mile 

Total high-cost 

support 

Per capita highcost support 

Mississippi 2,844,658 60.6 $133,101,273 $46.79 

West Virginia 1,808,344 75.1 $63,011,109 $34.84 

Alabama 4,447,100 87.6 $88,036,543 $19.80 

South Carolina 4,012,012 133.2 $49,508,914 $12.34 

Georgia 8,186,453 141.4 $79,349,024 $9.69 

Kentucky 4,041,769 101.7 $29,448,104 $7.29 

Tennessee 5,689,283 138.0 $34,011,882 $5.98 

Virginia 7,078,515 178.8 $37,173,047 $5.25 

North Carolina 8,049,313 165.2 $34,071,156 $4.23 

New York 18,976,457 401.9 $52,581,879 $2.77 

Pennsylvania 12,281,054 274.0 $28,756,386 $2.34 

Ohio 11,353,140 277.3 $19,488,348 $1.72 

Maryland 5,296,486 541.9 $2,404,548 $0.45 

 

Appalachian avg. 

Nation 

7,235,737 

281,421,906 

198.0 

80.0 

$50,072,478 

$2,241,237,733 

$12.00 

$7.96 

Source: U.S. Census Bureau (2001); Universal Service Administrative Company (2001). 

The amount of per capita high-cost support roughly represents the relative ease of providing 

basic telecommunications at a rate that is affordable and of a quality comparable to urban 

areas. There is clearly an inverse relationship between population density (i.e., persons per 

square mile) and per capita high-cost support. The amount of per capita high-cost support 

decreases as the population density increases. In six states—Alabama, Georgia, Kentucky, 

Mississippi, South Carolina, and West Virginia—per capita high-cost support either exceeds 

or is approximately equal to the national average. These six states are the primary 

beneficiaries of the federal High-Cost program among the 13 Appalachian states. However, 

receiving a large amount of universal service distribution does not necessarily translate into a 

positive net inflow of USF funding, or the balance between a state’s receipt of USF 

distribution and the USF contribution made by the state’s telecommunication consumers (see 

below and Table 17 for further discussion). 

E-rate and Rural Health: Unlike the federal High-Cost program, E-rate and Rural Health 

funds are dispersed directly to institutions. As a result, it is possible to detail funding at the 

county level and to specifically examine funding levels in ARC and non-ARC parts of each 

state separately. Data on these categories of universal service funding indicate that ARC 

counties taken together have received a per-capita allocation of funds significantly lower than 

that of the nation as a whole. As Table 16 shows, funding for these program on a region-wide 
41 

basis was over $291 million during the period 1998-2000 or $12.76 Per Capita—significantly 

below the national average of $20.32 per capita. This is a surprisingly low level of funding 

given the number of rural and economically distressed counties in the region.

Until recently, however, many eligible institutions found application procedures for the E-rate 

and Rural Health programs to be complicated, which probably prevented many communities 

from applying. A recent evaluation of E-Rate noted that larger school districts and library 

systems are more likely to apply for E-Rate funding (Urban Institute, 2000). This report also 

noted that in the first year of the E-Rate program, application rates of the most impoverished 

public school districts were significant lower than those of all program applicants (Urban 

Institute, 2000). States that provided assistance to individual E-Rate applicants are likely to 

have greater success rates securing support. For instance, two states that do have state-level 

groups assisting applicants, Kentucky and Mississippi, have higher than average per-capita 

funding rates. In addition, some states such as Pennsylvania and Maryland may have more 

counties with higher income levels and hence may not receive the same level of E-Rate 

subsidy. Nevertheless the relatively low per-capita funding level in most states is an issue that 

state policy makers should examine. 

Table 16: E-Rate and Rural Health Funding 1998-2000: Distribution to ARC Counties 

in the 13 States 

Source: U.S. Census Bureau (2001); Universal Service Administrative Company. (2001) 

 

Balance of USF Funding Within States: The current federal USF is designed to create a 

national pool of funds to which the nation's telecommunications providers make contributions 

according to the rules set by the FCC. Once contributions are collected, the USF is distributed 

to eligible telecommunications carriers (ETCs) to support the four universal service programs 

(i.e., high-cost, E-Rate, low-income, and rural health care programs) without regard to the 

parity of each ETC's inbound (contribution) and outbound (distribution) flows. In other words, 

some ETCs contribute more than they receive, while others receive more than they contribute. 

There are some states that are net contributors and states that are net recipients. 

Appalachian State-Portion Appalachian/US 

Population 

E-rate and Rural 

Health Funding 

Per-Capita 

Alabama 2,837,224 $53,986,836 $19.03 

Georgia 2,207,531 $11,892,948 $5.39 

Kentucky 1,112,422 $55,372,473 $49.78 

Maryland 236,699 $1,839,379 $7.77 

Mississippi 568,989 $12,748,523 $22.41 

New York 1,072,786 $13,621,793 $12.70 

N. Carolina 1,526,207 $10,304,230 $6.75 

Ohio 1,455,313 $11,824,669 $8.13 

Pennsylvania 5,819,800 $57,356,315 $9.86 

S. Carolina 1,028,656 $4,520,636 $4.39 

Tennessee 2,479,317 $25,973,903 $10.48 

Virginia 665,177 $7,707,561 $11.59 

West Virginia 1,808,344 $23,950,996 $13.24 

 

TOTAL: ARC Counties 22,818,465 $291,100,261 $12.76 

TOTAL: National Funding 281,421,906 $5,719,775,769 $20.32 
42 

Table 17 below aggregates all categories of the USF, showing the balance between USF 

payments to carriers (inflow) and USF contributions (outflow). A positive number in the net 

flow of funds for a state means that the state's ETCs receive a greater amount of USF 

payments than USF contributions made by the telecommunications carriers in the state. That 

is, those states with positive net flows can be seen as the true beneficiaries of the federal highcost support program. Among the 13 Appalachian states, six states exhibit positive net flows 

of USF payments and contributions. These states—Alabama, Georgia, Kentucky, Mississippi, 

South Carolina, and West Virginia—correspond to the six states that indicate heavy reliance 

on the high-cost program in Table 15, above. 

Table 17: Flow of USF Disbursement and Contribution in Appalachia, 2000 (in dollars) 

State USF Payments to carriers Contribution to USF Net flow of funds 

Mississippi $133,052,000 $18,872,000 $114,180,000 

Alabama 87,650,000 30,116,000 57,535,000 

West Virginia 63,061,000 12,557,000 50,503,000 

South Carolina 50,342,000 32,031,000 18,312,000 

Georgia 79,527,000 72,344,000 7,184,000 

Kentucky 29,606,000 27,969,000 1,637,000 

Tennessee 34,352,000 42,882,000 -8,530,000 

Virginia 37,126,000 66,613,000 -29,487,000 

North Carolina 34,304,000 65,174,000 -30,870,000 

Maryland 2,394,000 48,742,000 -46,348,000 

Ohio 19,587,000 76,213,000 -56,626,000 

Pennsylvania 28,812,000 92,096,000 -63,285,000 

New York 53,021,000 159,102,000 -106,081,000 

Source: The Federal Communications Commission. (April 2001). State-by-state telephone revenues and 

universal service data. [Online]. Available: http://www.fcc.gov/Bureaus/Common_Carrier/Reports/FCCState_Link/lec.html Note: The figures for the payments from USF to carriers are slightly different from the 

comparable figures in the total high-cost support column of Table 6 because the figures in Table 7 are rounded 

up and the two tables are compiled from different source materials. However, the two sets of figures are close 

enough for the purpose of our analysis. 

Large discrepancies exist among different Appalachian states in terms of both the amount of 

support flowing into these states and the degree to which they rely on the federal support in 

maintaining rates that are affordable and comparable to urban areas. Indeed, one ARC state, 

Mississippi, is the country's biggest net recipient of the federal high-cost support while 

another ARC state, New York, is the country's third highest contributor to the federal USF. 

Strictly speaking, those states that make larger contributions than they receive back are not 

benefiting from the federal high-cost program. On the other hand, the federal high-cost 

support program already has generated positive results among net recipient states.17 

When considering "net gain states" it is important to consider that local service is more costly 

to provide when there are fewer ratepayers and when the ratepayers are geographically 

dispersed. Indeed, this observation corresponds to the universal service policy goal of the 

Telecommunications Act of 1996, which underpins federal universal service rules. The Act 

has attempted to introduce competition to all aspects of telecommunications services, 

particularly to the local telephone market without sacrificing the affordability of services. 
43 

Absent universal service support for carriers that serve high-cost areas, rural telephone 

markets are not likely to see local telephone competition. 

Other Federal Programs to Improve ICT Capacity 

There are three significant federal program initiatives to improve connectivity and ICT 

capacity outside of the Universal Service Fund category: the Technology Opportunities 

Program; the Community Technology Centers initiative; and the Neighborhood Networks 

Program. Each of these programs and their utilization in the ARC region is described below. 

Technology Opportunities Program: The Technology Opportunities Program (TOP) is 

managed by the Department of Commerce. TOP is a merit-based grant program that promotes 

the availability and use of advanced telecommunications technologies in the public and nonprofit sectors. As part of the Department's National Telecommunications and Information 

Administration (NTIA), TOP gives grants for projects that demonstrate innovative uses of 

network technology. TOP evaluates and shares the lessons learned from such projects to 

ensure that benefits are broadly distributed across the nation, particularly in rural and underserved communities (U.S. Department of Commerce; 2001). 

Table 18: TOP Funding 1994-2000: Distribution to ARC Counties in the 13 States 

State Total ARC County Pop. TOP Funding Per Capita 

Alabama 2,837,224 $1,070,040 $0.38 

Georgia 2,207,531 $ 0 $ 0 

Kentucky 1,112,422 $4,618,398 $4.15 

Mississippi 569,989 $347,349 $0.61 

New York 1,072,786 $2,149,655 $2.00 

North Carolina 1,526,207 $5,963,446 $3.91 

Ohio 1,455,313 $1,017,719 $0.70 

Pennsylvania 5,819,800 $5,589,092 $0.96 

South Carolina 1,028,656 $392,272 $0.38 

Tennessee 2,479,317 $2,875,949 $1.16 

Virginia 665,177 $1,167,237 $1.75 

West Virginia 1,808,344 $6,057,077 $3.35 

Source: U.S. Department of Commerce, National Technical Information Administration, 

http://ntiaotiant2.ntia.doc.gov/top/index.cfm, 2001. 

Started in 1994, TOP has provided matching funds to state, local and tribal governments, 

health care providers, schools, libraries, police departments, and community-based non-profit 

organizations. The goal of the TOP program is to demonstrate how the use of computers and 

networked communications can improve the performance of educational programs, 

organizations involved in public safety and health care, and other community organizations. 

(U.S. Department of Commerce, 2001). TOP projects are designed to serve as models that can 

be replicated in similar communities across the country, thereby extending project benefits 

beyond the communities in which they take place. The majority of TOP recipients are 

educational institutions including K-12 and community colleges, followed by heath care 

organizations and non-profit community groups (U.S. Department of Commerce, 1996). 
44 

Most TOP projects focus on providing information and training opportunities via the Internet 

and establishing access sites in communities that are under-served (U.S. Department of 

Commerce, 1996). 

By the end of 2000, the TOP program had awarded a total of 456 grants in all 50 states. Total 

funding amounted to $149.7 million and according to agency sponsors, the program leveraged 

$221 million in matching funds from public and private sector partners (U.S. Department of 

Commerce, 2001). Congress appropriated $42.5 million for grants for FY2001. There are 35 

sites/recipients in the ARC region, with many in rural counties. Table 18 shows the 

distribution of TOP funding in the period 1994-2000 to ARC counties by state. 

Community Technology Centers: A second, smaller scale ICT support program is the 

Community Technology Centers (CTC) initiative of the Department of Education. This 

program, started in 1999, funds projects that provide access to computers and technology, 

particularly educational technology, to adults and children in low-income communities who 

otherwise would lack such access (U.S. Department of Education, 2001). Applicants under the 

program are encouraged to propose an array of services and activities that provide access to 

computers and information technology for local community residents, such as: 

• After-school activities for children of all ages to use software that provides 

homework help and academic enrichment, exploration of the Internet, and 

multimedia activities, including web page design and creation; 

• Adult education and family literacy, including GED, English as a second 

Language, and adult basic education classes or programs, introduction to 

computers, intergenerational activities, and lifelong learning opportunities through 

technology and the Internet; 

• Career development and job preparation, such as computer skills training (basic 

and advanced), resume writing workshops, and access to databases of employment 

opportunities, career information, and other online materials; 

• Small business activities, such as computer-based training for basic entrepreneurial 

skills and electronic commerce, as well as access to information on business startup programs; 

• Home access to computers and technology, such as assistance and services to 

promote the acquisition, installation, and use of information technology in the 

home through web-based television, network PCs, or other computer technology. 

In its early stages, the CTC program has been highly competitive, funding 40 projects out of 

750 applications in 1999. In the ARC region, there were only four CTC recipients in 1999 and 

2001. These grantees received approximately $2.1 million for multiyear projects in these two 

cycles (U.S. Department of Education, 2001). 

Neighborhood Networks Program: The third federal program supporting ICT capacity 

building is the Department of Housing and Urban Development's (HUD) Neighborhood 

Networks Program. This program helps people in public and assisted housing learn computer 
45 

and Internet related skills. Neighborhood Networks Centers are private/public partnerships 

that establish computer-based, multi-service centers to help people in public and assisted 

housing learn computer skills related jobs (HUD, 2001). HUD facilitates technical assistance 

and provides space in housing projects but does not provide direct funding for the Centers. 

The agency encourages local businesses, other non-profits, educational institutions, faithbased organizations, and other civic organizations to form partnerships and make actual or inkind contributions to the Centers. The strategy emphasizes housing officials partnering with 

computer hardware, software, Internet and technical companies. Residents take classes, work 

on homework, and learn computer skills. Some centers have mentoring arrangements with 

partners such as Americorps, local boys and girls clubs, community colleges and universities. 

The majority of Neighborhood Networks Centers are in urban areas where most public and 

non-profit housing projects are located. There were approximately 108 Neighborhood 

Networks Centers in Appalachian region counties as of 2001. Table 19 lists the number of 

local ICT initiatives supported by federal programs in NTIA- Department of Commerce, the 

Department of Education, or HUD programs for each ARC state. 

Table 19: Number of Technology Opportunity Project, Community Technology Centers, 

and Neighborhood Network Project Sites in Appalachia 

State Number of Projects 

or Centers 

Pennsylvania 47 

Alabama 25 

West Virginia 14 

Tennessee 13 

North Carolina 12 

Kentucky 11 

New York 9 

South Carolina 8 

Ohio 5 

Mississippi 3 

Georgia 2 

Maryland 2 

Virginia 1 

 

Sources: The Neighborhood Network page, HUD web site: http://www.hud.gov/nnw/nnwindex.html; the TOP 

database in the NTIA web site: http://www.ntia.doc.gov/otiahome/top/grants/search.htm; the CTC database in 

the Community Technology Center's Network web site: http://www2.ctcnet.org/ctc.asp 

Results of Federal Funding Initiatives in the ARC Region 

In aggregate terms, Universal Service Funds seem to be meeting essential policy aims, with 

combined USF support going disproportionately to lower income and more rural states. An 

important caveat to this conclusion is that we could not break out High Cost funding at the 

county level and hence could not determine specific distribution to ARC counties in the 13 

states. In the case of E-Rate there was evidence that ARC school districts and library systems 

in ARC counties in a number of states had poor capture rates of available funding. Because ERate funding requires each institution or jurisdiction to devise a plan and apply for funds, 

some poorer or more rural districts may have been left out due to weak capacity for creating 
46 

strategic technology plans and applying for assistance. In addition, procedures and aid from 

state agencies in completing E-rate applications vary from state to state. However, the 

situation may be improving as the application process has been simplified and more states are 

offering assistance to local applicants (Urban Institute, 2000). In terms of the other non-USF 

programs, ARC counties are participating but the levels of funding across the 13 states are 

very uneven. With the TOP program for example, Kentucky and West Virginia have been 

very active in securing TOP support while ARC counties in Georgia and Mississippi have not 

accessed this program at all. 

An additional question is if this array of federal programs is improving access and ICT 

capacity in areas disadvantaged under recent deregulation. We draw upon national evaluations 

of the E-Rate and TOP programs, as well as our case study work in four ARC counties to 

provide some insights on the effectiveness of these programs. 

The two large USF programs, High Cost and E-Rate, have the scale and scope to significantly 

improve telecommunications access and quality in rural communities. In our case study work, 

we did find evidence that local telecommunications providers were using high cost funds to 

improve basic service through upgrading antiquated lines and switches. Because the quality 

and reliability of basic service was identified as a significant problem in three of our four case 

study counties, high cost funding for these upgrades is important for economic development. 

In addition, high cost funding seemed to be accelerating the deployment of DSL-capable 

central office infrastructure in the Mississippi case study counties, although DSL deployment 

was not occurring at the time of our fieldwork (August 2001). 

National evaluations of E-Rate suggest that the program is leading to substantive 

improvements in access and connectivity in K-12 schools and libraries. In a 2000 evaluation it 

was estimated that through 1999 about 84 percent of E-Rate funding went to public schools, 

with the balance going to libraries and private schools (Urban Institute, 2000). This study 

found that 58 percent of E-rate funding supported the acquisition of equipment and services 

for internal building connections. Due to older buildings and infrastructure in many rural 

schools, installing quality internal connections is an essential step in supporting the 

development and active use of internal computer networks and access to external 

telecommunications services. The remaining share of funding went to secure 

telecommunications services (34 percent) and pay for the cost of Internet access (8 percent) 

(Ibid, 2000). 

A recent study of the effects of E-Rate funding on ICT capacity in four urban school districts 

argues that the program has played a crucial role in allowing the districts to create high quality 

networks and upgrade ICT training and curriculum for their students (Carvin, 2000). The 

impact of E-Rate can be credited not only to the resources provided, but also to the planning 

and implementation associated with the program and the fact that the program encouraged 

district administrators to leverage complementary state and local funds (Carvin, 2000). This 

report emphasizes that securing the maximum benefits of E-Rate requires that state and local 

governments make complementary investments in computer hardware (not funded by E-Rate) 

and in intensive training of teachers and school personnel in the use of computer, software and 

Internet tools (Carvin, 2000). The report warns, however, that the growth of computer and 

Internet use and work over networks will generate growing costs. Meeting these costs and 
47 

continuing to upgrade capacities will require a steady stream of E-Rate discounts in future 

years. 

Another report from the Federal Reserve Bank of Kansas examines the unequal per capita Erate funding characterizing several rural states (Federal Reserve Bank, July 2001). They 

observe that differences across (and within) states may be due to (1) unequal infrastructure—

some places have newer schools and require less refurbishing than other sites with very old 

wiring and walls; (2) local geography and topography that affects the cost of a T-1 line 

necessary to connect schools and libraries to the Internet; and (3) school districts in one state 

may be more aggressive than those in another state in pursuing E-rate funding. On the latter 

point, states that have centralized processing for E-rate requests may be more efficient at 

obtaining funding than states that leave the matter entirely up to individual schools. An Urban 

Institute report (Puma et al., 2000) likewise finds large variations in states’ applications rates 

and funding levels of E-rate. They note that state differences are related to poverty and rural 

location in concluding that on a per capita basis the big E-rate “winners” include Alaska, 

Kentucky, Puerto Rico, Mississippi, New Mexico and the District of Columbia. Furthermore, 

this report notes that schools and libraries in larger districts are more likely to apply for E-rate 

discounts, suggesting that larger institutions have the social capital to both apply for and 

effectively use the program’s funding (Puma et al, 2000). 

The impacts of E-Rate on ICT access and capacity in schools and libraries in our four case 

study counties were dramatic. We discuss these findings in more detail in the case study 

section below. However, in all of the case study counties, E-Rate funding allowed the 

development of local and wide area networks and connected schools and libraries to powerful 

state networks and data systems. The level of exposure to and classroom use of computers and 

network resources had expanded significantly over the last four years, due to E-Rate 

investments and related support by state and local governments. In three of our counties, high 

level computer based curricula had been developed. For example, in Monroe County, 

Mississippi, the school district partnered with Cisco to provide students the opportunity to 

take classes to obtain the Cisco Advanced Networking certification. In general we found that 

E-Rate was helping to significantly improve ICT literacy and stimulating training in more 

advanced skills in districts that had previously lagged. 

 

The other relatively large Federal program affecting ICT capacity in rural regions is the 

Technology Opportunities Program. With the first grantees receiving funding in 1995, the 

NTIA/U.S Department of Commerce has carried out several evaluations of TOP project 

characteristics and outcomes (Frechtling et. al, 2000; Johnson and Johnson Associates, 2001). 

As noted in the previous section, TOP grants fund a range of ICT equipment acquisition and 

training activities in low income and rural areas. Over 74 percent of the projects evaluated 

reported serving end users in rural areas. A survey of 36 TOP demonstration and access 

projects launched in 1996 found that: 

• 94 percent of projects sought to improve ICT training opportunities in their communities 

with over 67 percent exceeding their expectations. 

• 75 percent of the projects sought to enhance long term telecommunications access in their 

communities, with over 96 percent of these meeting or exceeding their expectations. 
48 

• 72 percent of the projects aimed to coordinate community-wide communications services 

with 50 percent exceeding their program goals. 

• About 64 percent of projects evaluated were attempting to enhance community 

development outcomes, with 43.5 percent of these exceeding their expectations. 

(Frechtling et al, 2000) 

While we did not have any TOP programs in our case study counties, as we noted above there 

are 35 TOP projects across the ARC region. Given the flexible character and generally 

positive evaluations of this program, TOP should be viewed as an important tool to improve 

access and to foster the better utilization of ICT resources to meet the needs of rural and lowincome populations. 

Of the remaining federal program areas, there were no evaluations of the CTC initiative of the 

Department of Education or the HUD Neighborhood Networks program. We did visit a 

Neighborhood Networks site. This project was located at the Southview Apartments, a 90-unit 

affordable housing complex in Aberdeen, Mississippi. In this complex only about a third of 

the residents were fully employed. The Neighborhood Networks Center has a computer lab, 

funded through crime prevention grants, that contains seven networked computers and a 56K 

Internet connection. The Center also has a printer, tutoring software, a television, and a VCR. 

The Center's staff partnered with the East Mississippi Community College to host Microsoft 

Office training classes. Although relatively small in scale, the Center provides crucial “at 

home” access to school ages youth and seeks to expand services to adults attempting to 

acquire better jobs. 

On balance this set of federal programs provide critical resources to help overcome access and 

capacity barriers in rural and lower income communities. Most of the evidence from national 

evaluations and from our case studies indicates that these programs are making a difference, 

especially in increasing Internet access and training in ICT applications for K-12 students. 

However three issues should be considered to better understand and exploit these programs. 

First, many of these programs replace resources that were previously available under old 

universal service requirements; cross subsidies to under-served users are being replaced with 

the direct subsidies offered through these programs. Second, if this array of programs is going 

to continue to overcome access and capacity barriers, the commitment must be durable and 

program funding must be continued and perhaps increased. If changes in the political 

environment cause major program restructuring and loss of funding, the progress achieved 

through these mechanisms could be quickly reversed. Third, many of these programs are 

based on a fairly complex application process to receive grants or subsidies. It is crucial that 

eligible institutions across the ARC region are made aware of these resources and receive 

assistance with grant applications and with planning and implementation. Counties throughout 

the region should be aggressively accessing and leveraging these critical resources to improve 

their ICT infrastructures and skills. 
49 

VI. STATE POLICIES AND PROGRAMS 

States vary tremendously in how they have addressed telecommunications regulation and 

telecommunications infrastructure. Every state in the Appalachian region has initiated some 

program designed to use telecommunications more effectively or to broaden capabilities. 

Some use state programs such as state universal service funds or special initiatives – often 

under the aegis of Governors’ Commissions or Task Forces, while others, such as Mississippi, 

have benefited from the federal universal service program. Each state has a unique context in 

terms of its telecommunications regulatory systems, relationships with dominant incumbents 

(typically the Bells or Verizon), and existing infrastructure. 

This section examines state deregulation activity, particularly legislation or regulatory 

commission actions, in order to understand how each region has dealt with the goal of 

extending broadband capabilities. We examine state universal service funds, how states are 

using their statewide networks to extend services to various constituencies, how they have 

dealt with the question of allowing utilities to offer telecommunications services, and other 

special circumstances or events, including merger approval and over-earnings cases, that have 

influenced how states are able to provide for improved telecommunications infrastructure. 

There is a broad policy and regulatory landscape behind the supply and demand features of 

providing infrastructure, one that encompasses actions on the local, state and federal levels. A 

“pure” market situation, devoid of constraints as well as incentives devised by policymakers, 

will not characterize the growing availability of broadband in the US – even as no purely 

market-driven deployment environment characterizes broadband in other countries. At this 

writing, there are two major bills before the Congress that would enhance the supply-side 

economics for providing broadband throughout the country – including more rural, less 

populous regions. A number of vendor companies are proposing broadband policies or 

offering White Papers that justify government interventions that would (they believe) 

accelerate deployment (Pultz and Girard, 2001). As will become apparent, some of the states 

in the Appalachian region likewise have adopted explicit broadband policies as well, although 

there are perhaps stronger models in non-ARC states such as Michigan and Oregon. 

 Legislative and Regulatory Commission Actions on Deregulation 

Several states in the region implemented deregulation in advance of the 1996 

Telecommunications Act. New York’s aggressive pro-competition activities are broadly 

taken as models for several other states around the country, although the size and expertise of 

its regulatory staff are not duplicated in any other state. New York was one of the first states 

to adopt incentive regulation, whereby a carrier would meet certain performance thresholds in 

one realm and have an incentive to undertake (or to price) other activities without regulatory 

policies or tariffs defining them; prices for the latter would be set at “market rates” rather than 

rates determined within a utility commission’s hearings. New York’s policies attempted to 

ease competition into an environment in order to create a level playing field for new entrants. 

Ohio joined several other states grappling with a competitive push from the dominant 

exchange companies. It deregulated in 1995, and revisited its rules in 1999 in order to make 

adjustments for a competitive process that seemed to be working for businesses but not for 

residential users. Pennsylvania also has had numerous hearings and regulatory actions around 
50 

deregulating telecommunications within the state. There was so much strife around the issue 

of fair network unbundling that at one time the commission there recommended that Verizon 

be separated into two companies, one to provide voice services and the other to provide 

advanced services. The fundamental complaint heard in Pennsylvania and in many other 

states was that the Bell Operating Companies were unfairly slow in making their networks 

available to competitors. 

West Virginia’s attempt to creatively use state rights of way ran into trouble with large 

carriers that worried about the state’s ability to unfairly leverage its control over rights of way. 

This development is interesting in that several other states have followed this same practice 

with no objections or legal disputes. 

 

Table 20: Selected Telecommunications Deregulation Initiatives 

STATE ACTION COMMENTS 

 

Alabama Price cap regulation in 1995 

Kentucky Order in the Matter of Review of 

BellSouth’s Price Regulation Plan 

Rate rebalancing plan with 

broadband upgrade requirement 

Maryland 

Mississippi Approved BellSouth for Section 271 

compliance 

Many considered this approval 

premature, and the BOC never 

followed through with the FCC filing 

that would enable it to offer long 

distance in the state. 

New York “Competition II” (1994), or 

formally Cases 94-C-0095 and 95-C0095. 

Adopted a regulatory framework to 

transition to a competitive 

framework, and created incentive 

regulation for NYNEX (now 

Verizon) and Rochester Telephone 

North Carolina HB 161: An Act to provide the 

Public with Access to Low-Cost 

Telecommunications Service in a 

Changing Competitive Environment 

(1995) 

Facilitate competition in the state 

Ohio *Local Competition proceeding, Case 

No. 95-845-TP-COI (concluded 

1996); 

* Telecommunications Rule Reform, 

Case No. 99-998-TP-COI (1999) and 

99-563-TP-COI 

Created local competition for local 

exchange services 

*Telecommunications rule reforms to 

enhance competition in the local 

exchange 

Pennsylvania Ordered a structural split of Verizon 

(March, 2001); this was later 

rescinded 

West Virginia Attempted a plan to trade state right 

of way access for installation and 

maintenance of a statewide 

telecommunications system (2000) 

This initiative failed after objections 

from dominant incumbent local 

exchange carriers. 

Source: Authors’ survey of state legislation and commission hearings 
51 

Much of the late 1980s and early 1990s have been periods for regulatory commissions to 

gradually adjust to more aggressive deregulatory pushes from their large, incumbent carriers. 

Often, improved infrastructure deployment in rural areas was held out as a carrot to states in 

return for a lighter regulatory hand. Table 20 summarizes a few highlights of these 

initiatives. 

Assessing Infrastructure 

Several state governments or Commissions have considered undertaking an inventory of 

telecommunications facilities. Such inventories are baseline assessments of capabilities that 

allow states to more objectively determine deficits in services and capabilities. These 

assessments also play an economic development role in certain states by identifying locations 

of needed resources for businesses considering the location advantages of alternative sites. 

Some telecommunications companies resist such assessments because they fear competitors 

will obtain information bearing on competitive advantage. However, the nationwide trend 

appears to be toward offering such information to the general public with the goal of 

inculcating more business and community awareness of infrastructure possibilities and 

alternatives. 

Ohio, Maryland and North Carolina join the efforts of several other states in the country in 

attempting to assess telecommunications infrastructure in the state in order to evaluate 

economic development potentials. For example, the Ecom-Ohio effort, conducted by the 

Technology Policy Group within the Ohio Supercomputer Center “is now in its third year of 

measuring Ohio businesses' and citizens' ability to deploy the new tools of electronic 

commerce. ECom-Ohio uses benchmarks based on those developed by the Computer Systems 

Policy Project in 1998” (Ecom-Ohio web site at http://www.ecom-ohio.org/). This endeavor 

is based on evaluating the connections of various institutions against a four-step framework 

that aims to assess the state’s overall “readiness” for e-commerce. The project has spawned 

several detailed maps of county-level telecommunications capabilities and activity as gauged 

by amounts of data traffic (Ecom-Ohio, unpublished paper, 2001 and website at 

http://www.ecom-ohio.org/). The same group performed a similar assessment for Maryland. 

(The Ecom-Ohio maps are based on more current data than were available for the current 

report with respect to cable modem coverage.) 

North Carolina took an even more detailed approach as it assessed telecommunications 

infrastructure at the wire exchange level of detail for each county in the state. This became 

the basis for a state program attempting to insure that every county has flat-rate dial-up 

modem access to the Internet. In its second phase, the program will attempt to insure that 

each county has broadband access to the Internet through its Rural Internet Access Initiative 

(created through SB 1343, An Act to Create the North Carolina Rural Internet Access 

Authority and to Direct the Regional Partnerships, with the Assistance of the North Carolina 

Rural Economic Development Center, to Study and Report on the Information Technology 

Infrastructure and Information Technology Needs of the State, passed in August, 2000). The 

state’s Rural Internet Access Authority is supposed to enable local dial-up Internet access in 

every telephone exchange by the close of 2001, make high speed Internet access available to 

each NC citizen within three years, and establish two Telework Centers in the state’s most 

distressed areas (http://www.ncruralcenter.org/internet/). 
52 

Georgia Tech has mapped some of that state’s telecommunications infrastructure (available at 

http://maps.gis.gatech.edu/telecomweb/index.html) as an impetus for economic development. 

The team compiling the information persuaded telecommunications providers within the state 

that a combined look at the location of POPs and fiber trunk lines would help businesses 

evaluate their options in the state. 

Pennsylvania has maintained web-accessible maps of telecommunications infrastructure for 

many years. This effort was initiated as the state attempted to rationalize its investments in 

educational telecommunications infrastructure. The Link-to-Learn program sponsored the 

maps initially. Pennsylvania’s maps are available at http://www.oit.state.pa.us/atlas/. 

Pennsylvania’s Rural Development Council recently decided to fund research that will 

document that state’s telecommunications services and profile the difficulties faced by rural 

regions in particular (personal communication, Dr. Amy Glasmeier). 

These mapping endeavors are a first step in assessing the difficulties and opportunities 

regarding broadband capabilities in a state. In the cases noted here, some of the mapping 

endeavors were the product of university-government partnership efforts. In all cases, 

economic development was a primary goal behind the drive to map infrastructure. 

State Universal Service 

The Telecommunications Act of 1996 allows individual states to implement appropriate 

support mechanisms for carriers and telephone subscribers to preserve and advance universal 

service in states.18 It must be noted that neither the Act nor any other federal laws and 

regulations require states to create intrastate universal service funds. Therefore, each state 

must make its own decision as to whether it is appropriate to create an intrastate USF and 

what is the right size of its USF should be. Such discretion given to individual states has 

resulted in heterogeneous activities among the 13 Appalachian states (and the rest of the 

country) in devising and implementing intrastate universal service mechanisms. States opted 

to establish USF programs largely to respond to industry claims for recovering revenue lost 

due to reduced access rates (and other deregulation initiatives). In other words, the federal 

reform of universal service that was mandated under the 1996 Telecommunications Act would 

result in lower federal universal service funding going to carriers serving rural areas. It was 

expected that the states would come up with sufficient funds to ensure that universal service 

goals could still be met. In this sense, their USF programs have had little to do with direct 

responses to citizen needs although in certain states (e.g., North Carolina) some citizens have 

tried to persuade legislatures to allow community networks to receive universal service funds. 

Implementing complicated regulatory mandates demands a tremendous amount of resources, 

time, and expertise on the part of state regulators. Formulating a universal service policy 

requires that regulators assemble a complex mix of interventions with complicated cost 

calculations, associated changes in intrastate and interstate tariffs, consistency with the federal 

universal service policy, and the requirement to achieve affordable telecommunications rates 

and competition all at the same time (see Allen et al., 1999, for a brief review). Quite 

predictably, there is no uniformity in creating state USFs among the 13 jurisdictions in 

Appalachia, as shown in the Table 21. 
53 

Table 21: Public utilities commission actions for the creation of state USFs in Appalachia 

(as of August, 2001) 

State USF created or 

planned1

Amount State USF created 

or planned1

Amount 

Alabama No Ohio No 

Georgia Yes $40m Pennsylvania Yes $32m 

Kentucky Yes South Carolina Yes $41m 

Maryland Partial 

Mississippi No Tennessee Yes 

New York Yes Virginia No 

North Carolina No West Virginia No 

Source: Personal interviews with state public utilities commission staff; the authors' survey of public utilities commissions 

web sites, the FCC web sites, and general publications. "Planned" means that the state public utilities commission at least has

entered an order defining procedural rules toward the creation of a state USF. “Partial” in Maryland’s case refers to its 

actions to facilitate discounted lines for schools and libraries. 

About half of the 13 states have created or will create in the near term state USFs in one form 

or another. Recalling the six states that are net beneficiaries of the federal high-cost universal 

service program (Alabama, Georgia, Kentucky, Mississippi, South Carolina, and West 

Virginia), there seems to be no relationship between a state's status in federal funding and its 

commitment to intrastate support.19 

The universal service policies in four states (Georgia, New York, South Carolina, and 

Tennessee) were produced through state legislation. Universal service bills (or 

telecommunications reform bills that contained universal service requirement) typically define 

the general policy goals as well as some aspects of implementation procedures for state USFs. 

In all four states, state PUCs carried out the actual implementation of USFs. In contrast to 

these four states, Kentucky and Pennsylvania's universal service policies were instituted by 

PUCs and are not codified into their state statutes. 

South Carolina presents an interesting case regarding how fund sizes and provisions are 

established. Many of the rates set by the PSC in that state were established as long ago as the 

early 1970s. Since then the cost of service has generally declined, and many companies also 

have broadened the range of services they offer, but many rates are unchanged. The 

Consumer Advocate for the State requested that the PSC examine the financial condition of 

every local telephone company that was subject to rate of return regulation in order to 

establish what each company was currently earning and then use that data to size the USF. 

Telephone companies objected to this request, and the Consumer Advocate’s arguments were 

dismissed by the state PSC in early 2001, meaning that its state USF size would have little 

reference to what companies were actually earning and consequently little reference to actual 

financial needs. 

In addition to these six states, the possibility of creating state USFs has been discussed at one 

point or another by the PUCs in six more states (Maryland, Mississippi, New Carolina, Ohio, 

Virginia, and West Virginia), but none had initiated specific proceedings for setting 

procedures and guidelines as of fall, 2001. Some have proceeded piecemeal nonetheless. For 

example, Maryland’s PSC approved intrastate discounts for schools and libraries, and West 
54 

Virginia’s PSC issued an emergency rule allowing schools and libraries to apply for federal 

funds. 

Types and Nature of Universal Service Support 

The types of universal service support funded by state USFs are varied (Table 22). 

Table 22: USF-supported services in Appalachia 

State High-cost Low-income1 Schools/Libraries Telephone Relay 

System2

Georgia 9 

Kentucky 9 

New York 9 9

Pennsylvania 9 9 

South Carolina 9 9 

Tennessee 9 9 9 9

Source: Personal interviews with state public utilities commissions’ staff; the authors' survey of public utilities commissions

web sites, the FCC web sites, and general publications. 

Note: All 13 Appalachian states but Ohio provide low-income support at a state level, but those states that are not listed on 

the table have not created explicit USFs. 

1 Low-income support includes Lifeline and/or Linkup, and the state low-income support supplements the federal lowincome universal service support. 

2 Telephone relay system is a service for people with a hearing disability. 

The pattern among the universal service policies among the six states is an emphasis on lowincome support and high cost support. Each has a unique combination of USF-supported 

services, but high-cost support and low-income support are the most popular types of 

intrastate USF support. The high-cost component is the most prominent aspect of a state USF 

from a regulatory perspective because low-income support by states is a relatively passive

policy measure supporting demand side dynamics, while the high-cost component of state 

USFs is an active policy measure supporting the supply side. We can understand this 

difference by considering the relationship between the federal and state USFs. 

The Lifeline portion of the low-income customer USF support has a three-part design. The 

federal USF provides a baseline assistance of $6.1/monhth/line to all 51 states. States then 

decide whether to provide additional support (up to $3.5/month/line). For those states that 

provide additional Lifeline assistance, the federal USF provides matching support (1/2 of the 

amount of state-level support). 

 In contrast, there is no regulatory mechanism or requirement to coordinate state and federal 

high-cost support. The creation of a state USF with a high-cost component is completely a 

discretionary activity of each state. In this respect, the four states with their own high-cost 

programs (Georgia, Pennsylvania, South Carolina, and Tennessee) are arguably the most 

active states in Appalachia in terms of universal service policy. 

 

A state’s decision to create a USF may not be directly contingent on the size of its federal 

USF distribution and may, in fact, reflect different local policy priorities. For example, 

Pennsylvania, whose federal high-cost support for non-rural carriers is considerably smaller 

than the support the state's rural carriers receive, excludes Verizon, a non-rural carrier, from 

its list of state-USF eligible carriers. Pennsylvania's state USF is not designed to compensate 
55 

for the shortage of federal support to non-rural carriers (an historical nod to revenue lost from 

the move toward reduced access fees), but rather its goal is simply to increase the support for 

rural carriers. 

State Networks 

Ever since AT&T’s divestiture became effective in 1984, state legislatures and their utilities 

commissions have had much more responsibility for monitoring and regulating 

telecommunications activities in their boundaries. Each of the Appalachian states has chosen 

distinctive paths to handle its regulatory responsibilities. Some appear to have much closer 

relationships to large, incumbent companies than others; some have considerable staff 

resources and expertise to help establish policy, while others, such as Mississippi with its two 

telecommunications staff people, have very limited resources. 

In this section we briefly review the range of state programs used to enhance the delivery of 

telecommunications services. Some mechanisms include using state networks to extend nonstate communications opportunities, using utility commission approval over mergers or 

network unbundling20 proceedings to leverage concessions from carriers, establishing special 

programs targeting rural digital inequities, and establishing unique joint ventures with carriers 

in order to achieve improved statewide infrastructure. Certain cities and towns also have 

initiated telecommunications projects to enhance local connectivity and opportunities for 

economic development. Here we discuss on how states develop their own state networks to 

help develop telecommunications capabilities more broadly across their regions. 

So far we have examined the status of telecommunications infrastructures in the Appalachian 

region as developed primarily by private telecommunications companies. However, the state 

governments of the 13 Appalachian states have developed numerous infrastructure and 

connectivity projects over the years. These projects have broad goals ranging from simply 

making state telecommunications bills cheaper to upgrading public telecommunications 

infrastructure throughout the state for the benefit of state government, business users, and the 

general public. Accordingly, the technological underpinnings and mechanisms of state 

telecommunications networks vary from one state to another. Our observation of different 

state networks in Appalachian states illuminates some features common to several state 

networks. In this section, we offer a typology of state telecommunications networks in the 13 

Appalachian states, and make an assessment of the impacts of each network type on the 

overall connectivity and access to advanced telecommunications technologies in these states. 

Table 23 summarizes our observations of state telecommunications networks in the 13 states. 

We have identified three major types of networks that are not necessarily mutually exclusive: 

the demand aggregation model, the resource sharing model, and the anchor tenancy model. 
56 

Table 23: Typology of State Telecommunications Networks 

Goals Mechanism Adopted in 

a. Demand 

Aggregation 

• To lower 

telecommunications 

costs for the state 

and other 

government users. 

The state government receives 

volume discounts from telcos by 

consolidating telecommunications 

service demands of various state 

government agencies and offices into 

a single large purchasing unit. 

• Virginia 

b. ResourceSharing 

• To lower 

telecommunicatio

ns costs for the 

sate and other 

government users. 

• To maximize the 

efficiency of 

existing and new 

telecommunicatio

ns infrastructures 

in key routes. 

The state government and a telco 

barter free access to the state’s 

highway rights of way and free 

telecommunications services to the 

state government and/or 

telecommunications infrastructure 

ownership. The state government 

and the vendor usually make a 

commitment to a long-term 

partnership that may last for several 

decades. 

• Maryland 

• New York 

• South Carolina 

c. Anchor 

Tenancy 

• To lower 

telecommunication

s costs for the sate 

and other 

government users 

• To upgrade public 

telecommunication

s infrastructure in 

all parts of the 

state. 

The state government and a telco or 

telcos contract to make advanced 

telecommunications available to the 

state government. 

Telecommunications service to the 

state government is provided through 

public telecommunications networks, 

which would receive switching and 

transport capability upgrading as 

specified in the contract. Such an 

infrastructure improvement benefits 

all telecommunications users in the 

state (i.e., businesses and residents) 

because all types of users use public 

telecommunications networks. 

• Alabama 

• Georgia 

• Kentucky 

• Mississippi 

• New York 

• North Carolina 

• Ohio 

• Pennsylvania 

• Tennessee 

• West Virginia 

 Demand Aggregation 

A state telecommunication network under the demand aggregation model creates a single 

large telecommunications customer by consolidating telecommunications service purchases of 

state agencies and other eligible users (e.g., public schools and libraries, local governments, 

universities and colleges, etc). The advantage of the demand aggregation strategy resides in 

the cheaper telecommunications services for participating users. The model leverages the 

state government to negotiate services prices that individual users could not receive. 

The Commonwealth of Virginia Network (COVANET) exemplifies the demand aggregation 

strategy. COVANET, like many other state telecommunications networks, is built upon the 

public telecommunications infrastructure, owned and operated by a private 

telecommunications company (MCI Worldcom). Prior to the COVANET contract in 2000, at 
57 

least five separate state-funded telecommunications systems had existed in Virginia. The 

principal goal of COVANET was to consolidate the voice, data, and video transmission 

requirements interspersed among existing, separate networks into a unified system. As a 

result of the network and demand consolidation, COVANET succeeded in substantially 

lowering various telecommunications rates for the public sector users, including schools and 

local government.21

One problem created by demand aggregation strategies occurs in their effect of removing 

business from potential private carriers. This is a trade off many government-provided 

services must face when private sector vendors offer services similar to those offered by the 

public sector. Evaluating the utility of demand aggregation therefore would require careful 

consideration of its possible downsides even as it requires fiduciary responsibility to 

maximize returns on public investments. 

Resource Sharing 

State governments maintain relatively few assets at their disposal that they can turn into 

economic gains to the state governments. However, states can potentially gain desired 

outcomes for economic development strategy and meet their own telecommunications needs 

by taking advantage of their ownership and control of highway rights-of-way (ROW). 

Different states have different policies in authorizing the use of highway ROW; some states 

grant private telecommunications companies the right to lay telephone and fiber lines on 

highway ROW free of charge, while others demand monetary compensation from 

telecommunications companies. Under a resource-sharing arrangement, the state government 

and a telecommunications company "barter" the company's free access to highway ROW and 

the state government's access to and/or ownership of a portion of telecommunications 

facilities developed under the resource-sharing arrangement. The primary benefit of the 

resource-sharing model to states is that the state government gains access to new (typically 

fiber optic) infrastructure without using any public money. The model also allows the state 

government to create incentives for infrastructure expansion to its partner (i.e., the 

telecommunications company under the contract). A resource-sharing agreement is typically 

a long-term contract that extends over a few decades. Thus, the telecommunications company 

under the contract is assured of the predictability and stability. The downside of the resourcesharing model is the problem of technological obsolescence. Because the contract locks the 

state into the types of technologies and services specified in the contract, the state may not be 

able to adopt future new technologies without bearing additional costs. In addition, the model 

is discriminatory by its nature, limiting the contract's economic opportunities to one or a small 

number of select companies. 

Several states in Appalachia have adopted the resource-sharing strategy to develop their state 

telecommunications networks.22 Maryland is one example, with its innovative approach in 

linking the resource-sharing model to the development of a statewide telecommunications 

network. Unlike many other states, Maryland has designed its state network, 

Net.Work.Maryland, on newly constructed infrastructure. In order to alleviate the enormous 

costs associated with such a ground-up project, the state government entered into three 

resource-sharing contacts with private telecommunications companies. 

Net.Work.Maryland—currently being built in several phases with a schedule of first service 

delivery in October, 2001 in limited areas—is envisioned as a network to provide state of the 
58 

art telecommunications service to Maryland's state agencies, local governments, educational 

institutions, health care facilities, and notably, private businesses.23 

Maryland has entered three separate resource-sharing contracts with four telecommunications 

companies. 

1 A 40-year contract with MCI Worldcom and Teleport Communication Group. The 

companies provide 75 miles of fiber optics and the services required to activate the fiber 

along the Baltimore/Washington corridor. The state receives free bandwidth service (OC48). The estimated value of the contract is $32.8 million. 

2 A 40-year contract with Level 3 Communications. Level 3 would provide 330 miles of 

fiber optics from the southern portion of the state to the central, east, and west portions. 

The estimated value of the contract to the state is $222.8 million. 

3 A 10-year contract with Williams Communication. The company provides fiber lines and 

related equipment in the Baltimore area. The estimated value of the contract to the state is 

$9.4 million (Association of Telecommunications Professionals in State Government, 

2000). 

Together, these resource-sharing contracts form a 13-node high-capacity (10 Gbps) fiber 

optic backbone connecting all four Local Access Transport Areas (LATAs) in the state. Each 

county will have at least one POP (at least 45 Mbps), which will be supplemented by 133 

fiber "drops" at various highway intersections for future connections. Maryland anticipates 

leasing state advanced capabilities to private providers in underserved regions where no 

broadband capability exists (Lee, 2001). 

Anchor Tenancy 

The third model of state telecommunications network strategy is the anchor tenancy model, 

and this model has been most widely adopted by the states in the Appalachian region.24 Like 

the demand aggregation model, the anchor tenancy model is characterized by the reliance on 

public telecommunications infrastructure owned by private telecommunications companies. 

Indeed, the difference between the two models is small, yet explicit. In the anchor tenancy 

model, the state government becomes the principal (anchor) tenant of a private 

telecommunications company's public network, guaranteeing a certain level of service will be 

purchased. In turn, its contract with a provider requires the telecommunications company to 

make a commitment to infrastructure upgrading and service deployment as requested by the 

state government. The key to understanding the benefit of the state network is the use of 

public telecommunications infrastructure. The state makes the request to the 

telecommunications company under the contract to make infrastructure upgrades to meet the 

telecommunications needs of the state government (and other eligible users). However, since 

the state network is built upon leased public telecommunications infrastructure, the 

improvement in the technological capabilities in the public system benefits all 

telecommunications users who share the same system. 

The experience of Mississippi illustrates the anchor tenancy model mechanisms. Started as a 

frame relay network in 1995, the State of Mississippi revamped its network in 2000 and 

converted it into the Statewide Asynchronous Transfer Mode (ATM) Backbone Network. 

The Statewide network consists of seven ATM nodes or "clouds" located in Jackson, 

Greenwood, Tupelo, Meridian, and Hattiesburg within the state's primary LATA, and in 

Memphis and Gulfport to serve the Northwest Mississippi LATA and the South Mississippi 
59 

LATA. (LATAs, or Local Access and Transport Areas are the geographic boundaries that 

define the service territories of local versus long distance services.) Although all but one of 

these nodes are located outside the Appalachian portion of Mississippi, the contract explicitly 

requires the contractor (BellSouth) to make necessary upgrades in all the state's counties 

including the 22 Appalachian counties in order to bring ATM access to all counties. Each 

user of the Statewide Network is responsible for furnishing the "last-mile" (typically a T1 

connection) connection between the user site and the nearest BellSouth telephone central 

office, but the contract requires the connection to be a non-mileage sensitive rate that is 

uniform across the state. The Statewide Network is open to state agencies, universities, 

community colleges, K-12 schools, public libraries, and local governments. 

Mississippi's telecommunications infrastructure has lagged behind the nation for years in part 

because of the rural nature of the state.25 The anchor tenancy model adopted by Mississippi 

envisions radically changing the infrastructure capabilities of Mississippi's public 

telecommunications infrastructure since the Statewide Network project requires the 

contracting telecommunications company to convert most of wire centers into digital systems 

to transport data to ATM nodes. Such improvement at the wire center level benefits 

businesses and other telecommunications users because wire center facilities contain a lot of 

shared equipment that equally benefit the Statewide Network users and other users. Thus, the 

anchor tenancy model in Mississippi is designed to bring technologies and services to areas 

that would otherwise be considered "uneconomical" markets that do not justify upgrading. 

North Carolina’s model is similar. After passing the Information Highway Bill in 1994, the 

general assembly directed the Secretary of Commerce to implement a statewide broadband 

network that would service state, county and local public agencies, educational institutions, 

health care facilities, and research entities. GTE (now Verizon), Sprint, BellSouth and AT&T 

built that network, but balked when state legislators were interested in amending state law so 

that the network would be made available to businesses and the general public. 

Kentucky’s Information Highway is a public-private initiative to create a statewide backbone 

with access points in all 120 counties. The usual public sector agencies are eligible to use the 

network, as well as any entity that has been approved for economic development purposes. 

This language opens the possibilities of exploiting the anchor tenancy model for development 

purposes in the state’s Appalachian region. 

Utility Commission Authority 

Of all the Appalachian states, New York has sought most aggressively an orderly and 

monitored deregulation program. It began deregulating its local exchange companies in 1985, 

well before the 1996 Telecommunications Act was passed. In 1995 it opened local exchange 

markets to competition, and undertook a variety of price controls, gradually lifted, in order to 

grow competition in the state. Its Public Service Commission required Bell-Atlantic to 

commit to a one billion dollar infrastructure upgrade program in 1997 as part of its approval 

of that company’s merger with Nynex, and the commission was one of the first to initiate a 

rigorous review of Verizon as it sought approval under the Section 271 requirements. 

Ohio and Pennsylvania also have taken advantage of occasions requiring merger approval to 

stipulate new or improved services from telephone companies. In approving the Bell-
60 

Atlantic-GTE (Verizon) merger in 1999, the Pennsylvania PUC required that the new 

company provide broadband capability to 50% of the state by 2004 and to the rest of the state 

by 2015, with the proviso that deployment be balanced across urban, suburban and rural areas. 

In addition to its active role taken in the Bell-Atlantic-GTE merger proceeding, the 

Pennsylvania PUC stands out by having attempted to restructure its dominant Bell provider. 

In March 2001, the Pennsylvania PUC entered an order demanding the functional structural 

separation of Verizon into retail and wholesale units.26 The goal of the structural separation 

of Bell companies was to remove barriers for local telephone competition by "structurally" 

preventing Bell companies from favoring their own local telephone services over those of 

competing local exchange carriers who lease Bell local facilities. Although the functional 

separation order was rescinded, this effort indicates Pennsylvania's active commitment to the 

creation of competitive telecommunications markets. Ohio also required the newly merged 

Ameritech-SBC to deploy DSL in both rural and urban areas in its 1999 merger approval. It 

also required a $2.25 million fund to assist rural and low-income areas in accessing advanced 

telecommunications technology (SBC-Ameritech Merger Proceeding, Case No. 98-1082-TPAMT, 1999). When Bell Atlantic merged with GTE to create Verizon some additional 

requirements likewise were imposed on the companies, including that all central offices in the 

state would have at least 56K line connection capability within three years (Case No. 98-

1398-TP-AMY, 2000). Virginia also established several conditions for approving the BellAtlantic-GTE merger in 1999, including infrastructure and service upgrade requirements. 

Utility Companies and Telecommunications Services 

The states in the Appalachian region vary in how they address the provision of 

telecommunications services by utility companies. On the face of it, these companies can 

play a useful role in extending services to various constituencies: utility companies own 

rights-of-way; they have established billing practices; they have a great deal of dark fiber in 

the ground already; they use telecommunications for load management already, and have 

expertise in establishing networks. 

However, state policy is mixed on whether or not utilities should be allowed to offer 

telecommunications services. Municipally-owned utilities are a sticking point in particular, 

since private telecommunications companies object to public institutions competing with them 

in providing services. 

Table 24 provides a snapshot of the most notable Appalachian states’ policies regarding 

utilities providing telecommunications services. 

Some states see utilities as sound alternatives for providing broadband services, and others are 

convinced that doing so is anti-competitive. Virginia is a particularly interesting case. Its 

current proceeding around the City of Bristol’s municipally owned fiber network may 

catalyze a reversal of the state’s prohibitions on utility involvement in telecommunications. 

Interestingly, that state does have a provision allowing municipalities, industrial development 

authorities, and economic development authorities the ability to lease dark fiber to local 

exchange companies and non-profit educational and health institutions, upon case-by-case 

approval from the State Corporation Commission. 
61 

Table 24: Utility Provisions for Telecommunications 

STATE PROVISIONS COMMENTS 

Alabama Utilities may offer 

telecommunications services 

Georgia Municipal governments can provide 

telecommunications services (1995) 

Kentucky Municipal government may provide 

telecommunications services. 

Barbourville, Knox County, provides 

cable and Internet services. 

Kentucky Revised Statutes 96.531, 

amended Jun, 2000 

North Carolina Electric membership corporations can 

acquire and operate subsidiaries that 

provide telecommunications and 

other utility services 

HB 476: An Act Concerning the 

Grant of Powers to Electric 

Membership Corporations Regarding 

Subsidiary Organizations (1999) 

South Carolina Approved municipal utilities offering 

telecommunications 

Tennessee Approved Municipal utilities offering 

telecommunications (1997) 

Virginia Forbids municipally owned utilities 

from providing telecommunications 

services, excepting Abingdon (VA 

Code Section 15.2-1500) 

Under court review in 2001-2002 

West Virginia Approved utilities offering 

telecommunications services 

 Special Programs or Initiatives 

Georgia stands out as a state that enabled municipal governments to be eligible for local 

exchange carrier licenses as early as 1995. The Governor of Georgia announced a rural 

broadband initiative in May 2000, which promised to bring broadband infrastructure to rural 

regions. The network will support download speeds of 1.5Mbps. Another more modest 

project in collaboration with BellSouth will connect all K-12 school districts to the Internet 

with a T1 connection; all of Georgia’s Appalachian counties are scheduled to receive these 

connections. As of summer, 2001, the state approved a novel non-profit consortium of 31 

towns and cities and one county to offer broadband telecommunications services in a wide 

variety of locations (GeorgiaPublicWeb, 2001). 

Maryland, dominated by Verizon, has several programs to encourage e-commerce and an 

overall statewide information technology program. In 1998 it instituted a property tax credit 

(HB 477) that awards commercial and residential tax credits for renovations to accommodate 

advanced computer and telecommunications systems. Additionally, there are two investment 

funds to support innovative technology efforts in the state. Its key architecture, however, is its 

statewide network plan to have a point of presence in all three Appalachian counties and to 

link communities via high-speed fiber. EMaryland is the cornerstone of its contemporary 

digital initiatives (framed in HB 276, passed in 2000), and this program positions the 

statewide fiber backbone as its core resource (see http://www.techmd.state.md.us/ for more 

information). The network is administered by the Task Force on High Speed Network 

Development (created in 1998 under HB 847). Maryland’s site is positioned for e-commerce 

as well, and publicizes state work available for bid. 

Virginia has a unique resource in the form of Virginia Tech University, which has purchased 

four wireless spectrum licenses in the rural western portion of the state in order to experiment 
62 

with alternative broadband services. This University also has spearheaded several “electronic 

village” initiatives. Its best known Electronic Village in Blacksburg continues to spearhead 

novel methods of providing telecommunications services. Its latest innovation is the creation 

of a regional MultiService Access point (MSAP), a local peering point that several local ISPs 

have joined to reduce data transport costs (Blacksburg Electronic Village, 1999). 

Tennessee is one of the seven Appalachian states that approved municipally owned utilities 

providing telecommunications services (in 1997). The others include Kentucky, North 

Carolina, Alabama, South Carolina, West Virginia and Georgia. The Electric Power board of 

Chattanooga was the first municipal utility to be certificated for telecommunications services 

under that law, and it serves five counties in the Appalachian region. Utility companies are 

predictably quiet about their roles in providing telecommunications, but under the right 

circumstances they can be viable alternative vendors. 

In addition to sponsoring a statewide network that is available to non-government users, North 

Carolina’s 2000 bill to create a new state agency charged with overseeing rural economic 

development and information technology infrastructure in the state is innovative. The Rural 

Internet Access Authority serves as a rural Internet access planning body, and appears to be 

meeting many of its goals for extending Internet access. A companion program, called 

Connect NC, was an educational campaign operating from 1996-1999 to educate public and 

private sector leaders in the western portion of the state regarding telecommunications’ 

relationship to economic competitiveness. In the Appalachian region, some outcomes of the 

Connect NC campaign include Caldwell and Alexander Counties establishing wide area 

networks to connect certain public sites together for Internet access purposes. 

Some states have used over-earnings cases to leverage additional technology commitments 

from telecommunications providers. For example, in Ohio, a Public Utility Company 

settlement in 1994 forced Ameritech into two major concessions (Case No. 93-487-TP-ALT; 

Case No. 93-57Z-TP-CSS). The company had to contribute to SchoolNet Telecommunity 

initiatives over six years, and it paid $2.2 million to fund 14 community computer centers in 

low income neighborhoods in seven Ohio cities. One of those centers was in Washington 

County’s Marietta location in the Appalachian region. Similarly, a regulatory settlement 

before the New York State Public Service Commission in 1995 resulted in an agreement from 

the incumbent carrier to commit $50 million to develop and deploy broadband 

telecommunications services in economically depressed communities. This money was used 

to fund proposals from 22 public sector organizations to offer telecommunications services in 

low income zip code areas (Venkatesh, 2001). 

Pennsylvania used its approval of the Bell-Atlantic-GTE merger to obtain concessions on 

broadband infrastructure deployment that specified that 20% of lines would have access to 

broadband by 1998, 50% by 2004, and 100% by 2015. Ohio did likewise, and established a 

$2.25 million funds to assure that rural and low-income areas in Ohio have access to advanced 

telecommunications technology as part of its merger approval dealings. 

West Virginia, Mississippi, South Carolina and Alabama stand out as a handful of states that 

have sponsored or pursued few initiatives to aggressively enhance their telecommunications 

infrastructure. Incumbents BellSouth and Verizon have been very effective in guiding state 

policies there. Nevertheless, Alabama has initiated three technology-related programs under 
63 

its Science, Technology and Energy Division of the Alabama Department of Economic and 

Community Affairs to generate a strategic plan for telecommunications, to undertake a 

telecommunications demonstration project and to initiate a technology assistance program. 

Furthermore, E-Bama legislation created an Office of Information Technology to undertake a 

comprehensive plan for information technology infrastructure for state government and public 

schools. 

Conclusion 

This review of state policies underscores the highly variable nature of the ways states view 

their roles in facilitating broader deployment of infrastructure. Some generalizations include: 

1) Many states are looking at their statewide networks as ways to enhance Internet 

connectivity for educational, library, and health facilities. Some states have extended their 

network capabilities further and make them available to business users or to regions that lack 

broadband access. 

2) Mergers and over-earnings cases have provided occasions to extract improvements in 

infrastructure from the affected companies. 

3) About half of the Appalachian states have authorized utilities to provide 

telecommunications services. These providers, while not generally perceived as aggressive 

competitors to conventional telecommunications companies, could muster several advantages 

to provide broadband access. 

4) Several states have initiated programs to map statewide telecommunications infrastructure. 

Such maps are intended to help local economic development efforts, and possibly to help state 

planning and program efforts, as in the case of North Carolina. 
64 

VII. THE LOCAL VIEW OF TELECOMMUNICATIONS 

One component of our study investigated two counties in rural western Virginia and two in 

rural Mississippi using extensive in-depth interviews with businesses, elected officials, 

community leaders, school and library workers, and members of local economic development 

efforts (including Extension agents). These interviews were important checks on the 

secondary information and statistical data we had gathered, and they underscored features of 

the relationship between telecommunications and economic development that are difficult to 

glean from reports. Our visits highlighted the significance of political leadership and the local 

leadership of community organizations that seek to develop ICT capabilities to improve 

community and economic conditions. These case studies also shed light on the local dynamics 

that competitive telecommunication vendors can introduce into an area. The powerful position 

of regional ILECs Sprint, Verizon, and Bell South in this process comes into relief in the 

cases. Our interviews pointed out the crucial role of having access to local expertise when it 

comes to integrating and effectively using information and telecommunications technologies. 

In addition, the case studies portrayed the very different circumstances facing small and large 

businesses, as well as locally owned ventures in comparison to branch plants. The studies 

capture the perspectives and actions of ICT users in the communities as they confront “first 

mile” connectivity problems—why and how to connect with advanced services and how this 

access can be effectively used to improve business capabilities and economic development 

performance. 

The following case studies of the counties in Mississippi and Virginia illustrate these points. 

Case Selection and Study Methods 

The selection of study counties was based on four criteria. We first focused on a subset of 

ARC counties defined as rural distressed or transitional according to the ARC classification 

system (ARC, 2001). The evidence and literature strongly suggest that such counties, with 

lower income and higher rates of poverty and unemployment, are where connectivity and ICT 

adoption challenges are likely to be most severe. From this category we selected two sets of 

companion or neighboring counties that are adjacent or in close proximity in the same state: 

Noxubee and Monroe counties in Mississippi, and Washington and Scott counties in Virginia 

(see Figure7). This approach allowed us to control to some degree for regional differences and 

differences in state telecommunication policies, which, as shown above, exhibit significant 

variation. While the two Virginia counties are formally in metropolitan regions, they are on 

the edge of the Tri-Cities MSA and retain a decidedly rural character. A final criteria 

involved ensuring at least one case in each pair with documented evidence of significant 

community-wide initiatives to improve telecommunication connectivity and ICT capacity and 

one case with less evidence of significant community-wide action to address access and 

adoption problems. Deriving this classification included examining the presence of ICT 

producer and user firms, the number of local Internet service providers, per-capita capture of 

universal service funds, and presence of innovative local programs such as Neighborhood 

Networks, Community Technology Centers or “Electronic Village” type initiatives. 
65 

Within these matched communities, we investigate critical factors that enter into supply and 

demand for ICT technology, especially advanced telecommunications infrastructure. The 

cases analyze the relative significance of: (1) economic structure and private sector demand 

for ICT services; (2) the character, quality and cost of local telecommunication service 

provision, especially broadband services access; (3) the quality of information and support 

services related to new ICT applications; and (4) the emphasis local leaders and economic 

development practitioners place upon ICT access and adoption in local economic 

development strategies. In addition, we profile specific initiatives and programs that are 

improving local capacities to exploit advanced ICT technologies to build better economic 

futures in the study communities. 

Figure 7: Scott and Washington County locations in Virginia, Noxubee and Monroe 

County locations in Mississippi 
66 

The Mississippi Regional Context 

The two Mississippi cases, Monroe and Noxubee counties, are rural counties in northwestern 

Mississippi classified by the ARC as distressed counties. The economic deficits of the region 

reflect a range of problems, including low educational attainment and per capita income and a 

business climate that offers limited institutional support for entrepreneurship. The area’s 

economy, its social setting—including educational, library, economic development and other 

resources—and the local telecommunications capabilities all interact. A steady wave of 

industry departures over the past decade, particularly in the textile and furniture businesses, 

have depressed the local economy and caused local officials to actively seek out jobproducing replacement industries. Monroe County has not fared as badly as Noxubee. It is 

home to several chemical-manufacturing plants whose better paying jobs provide an economic 

haven in the rather poor region. Noxubee’s major industries are food processing and light 

manufacturing connected to a local resource base of timber and aquaculture. For both 

counties, local leaders and development practitioners did not see ICT access and use as central 

factors shaping current or future economic development. 

These two cases must be considered in the context of important infrastructure characteristics 

and policy variables at the state level. Bell South is the dominant incumbent local exchange 

company throughout Mississippi with about 1.3 million access lines. By contrast, 

independents serve only about 100,000 access lines. Compared to the other nine Bell South 

states, Mississippi has a larger territory, and there are high loop costs for its local 

infrastructure. Bell South is on a price cap plan with the state regulators. 

The state received a large Universal Service Fund grant in 2000 amounting to $98 million in 

new money and $113.6 million total—the largest any state received that year. Their priority 

expenditures have been infrastructure upgrades and the removal of subsidies. The regulatory 

focus of Mississippi State policy was on spreading the benefits of the universal service 

funding broadly, consequently they emphasized reduced costs for residential services. 

Infrastructure improvements are also being funded with USF resources, which may be adding 

some push to the slow deployment of DSL. Beyond this, it is not clear that state polices have 

reduced costs or extended key aspects of advanced service to businesses. For example, the T1 

service that is perhaps the most important current option for businesses, especially fractional 

T1 for smaller businesses, has a mileage sensitive tariff that is generally perceived as rather 

expensive in Mississippi. 

Telecommunications competition is not flourishing in Mississippi; Bell South remains the 

dominant local exchange company. Although over 100 companies are certificated, only about 

50 are operating and the majority of them are prepaid local calling companies, serving people 

who have been disconnected for one reason or another. Interexchange companies with 

regional points of presence include AT&T in Tupelo, and MCI Worldcom and Sprint in the 

town of Columbus. 
67 

Monroe County, Mississippi 

Socio-Economic Background 

Monroe County with a 2000 population of 38,014 is lodged between two larger, more 

populous counties: Lowndes County to the south and Lee County to the northeast. The County 

is relatively proximate to major market areas such as Memphis and Birmingham and is 

connected to the Gulf of Mexico by the river/canal system of the Tombigbee Waterway. 

These advantages have helped stimulate a relatively diverse manufacturing base with major 

establishments in the chemical, furniture, apparel, sports equipment, and boat manufacturing 

industries. However, the County's reliance on branch manufacturing has limited economic and 

population growth and exposed residents to cyclical shifts and restructuring in basic 

manufacturing industries. 

County population and economic activity is concentrated in two small cities, Aberdeen in the 

southern end and Amory in the north. The current industrial structure of the county 

underscores the crucial importance of the manufacturing economy, with nearly 30 percent of 

employed residents working in the manufacturing sector (U.S. Department of Commerce, 

Regional Economic Information System (REIS), 2001). The northern reaches of the County 

have been hard hit by plant closures in the textile and apparel and furniture industries over the 

1990s. Population grew at a slow 3.9 percent rate over the 1990s and full and part-time 

employment in the County actually fell over the period. The County unemployment rate has 

increased between 1990 and 2000. At 10.3 percent in 2000, it was nearly twice the average for 

Mississippi. High poverty rates combined with low rates of educational attainment point to the 

profound challenges of diversifying the economy toward higher skill, higher wage activities 

(see Appendix Four for socioeconomic indicators). Most available jobs in the Monroe County 

manufacturing sector tend to require relatively low skill levels. Accordingly, wages also tend 

to be low. Most jobs are operator/factory laborer positions and, according to Syracuse 

University’s Transactional Records Access Clearinghouse (TRAC), in 1990 Monroe County 

ranked 30th among the top 50 U.S. counties with the highest percent of persons employed as 

laborers or operators27. 

Service and retail, the other major employment pillars of the local economy, are somewhat 

underrepresented (relative to the State). A significant number of Monroe County residents 

commute outside the county to work, as evidenced by a relatively low employment/population 

ratio. With an employment/population ratio of 43.4 percent, compared to about 53 percent for 

the state of Mississippi, it is likely that a number of local residents commute to Columbus 

(from the southern end of the county) and Tupelo area (northern parts) to work (see Appendix 

Four). On a somewhat brighter note, the over-65 share of the population is decreasing and is 

only marginally higher than the State (U.S. Census, American Factfinder, 2001) suggesting 

that the area is not seeing a significant out-migration of young individuals or households. The 

manufacturing economy appears to provide decent employment opportunities for these 

younger residents. 
68 

Telecommunication Services and Connectivity in Monroe County 

Bell South’s ILEC status is unbroken throughout the county except for a small pocket in the 

north-central portion, where Smithville Telephone, a 6-employee, privately owned company, 

serves a small area. Smithville’s customer base encompasses approximately 33 square miles 

and they currently serve about 2,000 customers with entirely buried plant (i.e., they do not use 

overhead wires throughout their system). There are no active CLECs in the county, and basic 

local service to residents and most businesses are from these two providers. ISDN is not 

available in the region, and must be ordered from Columbus, adding to its overall cost. 

Population densities and household income have acted as major constraints on the provision 

of advanced telecommunication services. A number of business managers complained that 

Bell South was not highly responsive to requests for maintenance or to extend lines or 

services. These kinds of service problems are likely related to the relatively small number of 

demanding customers in the region and Bell South’s limited deployment of personnel and 

resources to service this relatively small market. Interestingly, the Smithville Telephone 

customers interviewed expressed a high degree of satisfaction with this company’s service.28

There is currently no DSL or cable modem service in the Monroe area. However, Bell South 

was expected to roll out DSL service in the Aberdeen area in October of 2001, and Bell South 

personnel did state that this service would soon be available in Aberdeen and nearby areas. 

However, it was less clear when DSL service would be available in Amory and northern areas 

of the County. There were no current plans to extend cable modem services in the County. 

There did seem to be a somewhat higher adoption rate of dial-up Internet services in Monroe 

County (in comparison to the Noxubee case, below). For example, locally based Smithville 

Telephone began providing dialup Internet service in 1997 and currently charges $19.95 a 

month for that service for commercial and residential customers. They now have 800 Internet 

subscribers and service around 1,200 access lines out of a customer base of 2,000. 

There are a number of ISPs, both local and regional, serving Monroe County. Smithville 

Telephone provides a variety of ISP services, including Web hosting and technical support, 

but they operate more as a wholesale dial-up access provider. MidSouth Computers is a 6-

employee company located in Amory that offers dialup Internet access, dedicated frame relay 

service, e-mail service, Web design and hosting. MidSouth currently has approximately 

21,000 customers in the broader eastern Mississippi region and hosts web sites of about 40-45 

companies in the Amory area. In addition, several local businesses surveyed got ISP service 

from a number of regional or national ISP providers from outside the County. 

Both of the local ISPs underscored the difficulty that smaller players had in extending their 

services. The “backhaul” costs or the cost of reaching a POP on the Internet backbone are 

significant. MidSouth, for example, must buy its trunk lines from a major provider (in this 

case UUnet via Bell South lines). This cost can be considerable, especially when spread over a 

fairly small customer base. The cost of backhaul is not a problem for the major providers who 

do not have to factor tariff rates for backhaul facilities into their service costs. This cost 

structure presents a major impediment to small local ISPs in extending Internet services to 

their customer base or moving into DSL provision. Yet, it is such locally based ISPs that often 

provide better information and more hands-on assistance to rural businesses. 
69 

Businesses in the County complained primarily about basic service problems from the major 

service provider. However, there was general satisfaction with ISP services available locally. 

One informant emphasized that there were two or three “good” local ISPs and a number of 

“poor” providers who could not deliver on their promises to customers. One problem, 

according to this informant, is that “business customers don't know the difference, and the 

choice of a poor ISP service can be very costly and time consuming.” 

 Table 25: Telecommunications Connectivity among Monroe County Businesses 

Type of Business Employment Ownership Dial-up Dedicated 

Data 

Connection 

Remarks 

Chemical Manufacturer 140 International 

Branch 

 

√

T1, Internal IT 

Health Clinic 25-30 Local √ Problems with 

dial up transfer 

of records 

Boat Manufacturer 150 Local No Internet, 

access options 

not clear to 

owner 

Bank 7 Local √ Shares T1 line 

Auto Parts Manufacturer 120 National 

Branch 

√ T1 Line, parent 

ICT support 

Furniture Manufacturer 200 National 

Branch 

√ Minimal ICT 

Hospital Over 500 Local √ Major barriers 

getting broadband access 

Newspaper 5 Local √ Broadband too 

expensive 

Chemical Plant 530 National 

Branch 

√ T1, Strong ICT 

support from 

parent 

Bank 19 National 

Branch 

√ T1, ICT support 

from parent 

Computer Service Firm 11 National 

Branch 

√ T1, T-2 high 

connectivity 

Computer Store/ISP 6 Local √ A local ISP 

provider with 

T1 Links to 

backbone 
70 

Larger externally owned firms in manufacturing, banking and business services use T1 

connections to secure high-speed access, as shown in Table 25. Larger branch facilities of 

national companies can secure the ICT capability and telecommunication service that they 

need through support provided by their parent corporations. The main complaints from larger 

users were the costs of T1, and getting prompt installation and service from the major 

provider. In terms of dial-up and advanced Internet services, the options for small business 

and residential customers were quite limited. It is noteworthy, however, that none of the firms 

interviewed identified telecommunication service problems as a local barrier that would force 

them to consider re-locating. 

Public sector institutions in Monroe County have not benefited from more comprehensive 

efforts to upgrade ICT capacities such as the Electronic Village and Virginia Link programs in 

Virginia. As a result, connectivity between public institutions was in some cases lacking and 

the use of the Internet as a clearinghouse for community events and regional marketing is not 

as developed in Monroe County as in the Virginia cases outlined below. However, E-rate and 

state and local programs have led to laudable advances in computer training and connectivity 

in K-12 schools and libraries across the county. 

Business Adoption of ICT and Broadband Services in Monroe County 

We interviewed 12 private firms in Monroe County. The sample focused more on 

telecommunication user industries and larger employers. The sample was a good 

representation of user firms in the manufacturing, financial service and health care segments, 

with the retail sector being poorly represented. We queried companies on five areas of ICT 

adoption and use: 1) their use of computers and software in a range of business functions; 2) 

their use of basic telephone services; 3) their level of connectivity (Internet or intranet, dialup, advanced services); 4) their use of network services in a range of business functions (i.e., 

obtaining general information, email, interactive web sites); 5) Access and quality of ICT 

support services (especially if they were provided within or outside the company). 

 Computer and Software Use: All firms used personal computers in their business 

activities. All firms reported that computers and software were important (9) or somewhat 

important (3) in basic functions including accounting, word processing and record keeping. 

Seven of the 12 companies could be classified as at least “intermediate” users. These 

companies classified their use of computers and software for desktop publishing, email 

communications and the Internet as important or somewhat important to their business 

operations. Finally, four of the companies could be classified as intensive users of computers 

and software. The basic and intermediate functions were important, but these firms used 

computing for product design or process control, CAD/CAM applications, employee training 

or direct sales and marketing. 

 Basic Telecom Services: All firms interviewed were users of basic telecommunication 

services including voice, voice mail, fax, and call forwarding. Six of the companies reported 

using wireless calling in their daily operations. In terms of broadband, one business reported 

that because ISDN is not available in his area (near Aberdeen) they must import that line from 

Columbus, paying $300/month because it is priced as a “distance sensitive” service. 

Businesses in Aberdeen pay about $2,500 for dedicated T1 service, a rather high rate. 
71 

 Use of Network Services: The interviews in Monroe County revealed major 

differences in the use of network services among the firms sampled. As noted above, one firm 

did not utilize network services to any extent. One of the 11 connected firms used the Internet 

for obtaining general information about business or markets and for internal or external email. 

Two of the companies reported intermediate use that included using the Internet to obtain 

price information and to place orders from suppliers or advertising through a basic web page. 

Eight companies reported more intensive uses of network services as being important to their 

operations. More intensive uses included marketing through an interactive web site (3 firms), 

processing orders, billing and arranging delivery (5 firms), ordering from suppliers linked to 

internal inventory and accounting (4 firms), communication and data transfer from other units 

of the company (5 firms), and transfer of data or graphics with suppliers or customers (4 

firms). 

On balance the companies interviewed relied heavily on computers, software and basic 

telephone services. The use of external networks either within or outside the company was 

also crucial to the majority of firms. Heavy use of ICT technology and network capacities was 

common in segments of manufacturing and among banks. However, the major hospital in the 

region expressed frustration in the quality and cost of local broadband access and the 

availability of local support services. They were pushing to expand telemedicine applications 

and more intensive connections with remote rural health service providers but felt constrained 

by weak local capacities. 

The location of the interviewed firms in the Monroe County area was not seen to be an 

advantage for their ability to access and use computer and Internet technology. Five firms 

reported that their location gave them about the same ability to access and use computer and 

Internet technology as firms in other regions, while six reported that their location made it 

more difficult to access and use these technologies. There were three main complaints about 

the region. The first was the quality and service delivery record of the major 

telecommunication provider. Second, registered by smaller and locally owned medium-sized 

companies, were the difficulties in learning about the appropriate mix of ICT for their 

businesses and how new technologies could be utilized to improve business performance. 

Third, for a significant minority of firms (4) finding service companies or consultants who 

could provide reliable support services for their ICT activities and finding employees with the 

skills needed to effectively utilize ICT technologies was seen as an important barrier. One 

firm reported that it was easy to find people with basic skills but harder to find and retain 

someone with more advanced skills such as network administration. 

The Role of ICT Adoption and Use in Local Economic Development Initiatives in Monroe 

County 

A number of local and regional entities are involved in Monroe County economic 

development. We interviewed six city and county government leaders at economic 

development authorities or programs. With a few exceptions, the local economic development 

community seemed to share the view that economic growth depended mainly upon retaining 

and attracting larger manufacturing and service firms to the region. Although ICT adoption 

and use were recognized as potentially important for growth and development, these issues 

did not appear as a major priority in local economic development plans. 
72 

The Monroe County Chamber of Commerce is one of the County’s more active local 

economic development entities. Current Chamber efforts include encouraging the 

development of a Monroe County industrial park and working with County officials to 

possibly build speculative industrial buildings. The Chamber is also involved in promotional 

efforts and supports local small businesses through their promotion of Main Street programs. 

The skill and educational level of the workforce was seen as an important challenge in 

attracting firms to the region. As noted above, educational attainment levels are quite low in 

the County and opinions were mixed about the quality of the K-12 systems in the County. Our 

interviews did reveal energetic efforts to improve computer literacy and train more students in 

advanced computer and software skills in the local schools and through the libraries. The 

Aberdeen School District includes seven school sites and about 2,200 students.29 All of the 

sites are connected through an ATM backbone, each classroom has at least one computer and 

larger computer labs are present in high schools. The District is responding to the Mississippi 

governor’s initiative to make each student computer literate by the time they reach the 8th 

grade and ensure that high school students must have at least one computer credit or 

demonstrate computer literacy in order to graduate. They are conducting intensive teacher 

training on computers and are offering a mobile lab that includes laptops with wireless cards 

to “take the technology to the kids.” The school district partners with Cisco to provide 

students the opportunity to take the Cisco Advanced Networking class. At the end of the foursemester program, students are able to take exams that, if they pass, will certify them as Cisco 

network engineers. Supplementing school district efforts, East Mississippi Community 

College (EMCC) and Itawamba Community College provide training and support to both 

private and public entities in Monroe County. The community colleges have also worked with 

local industries to provide courses that focus on skills needed in the workplace. EMCC 

representatives also work with Tombigbee Library System staff to teach basic computer skills 

and teach GED courses. 

Economic development actions to stimulate and support indigenous business growth and 

development are more limited in the County. The Chamber of Commerce offers basic 

information and assistance, but there are no business incubator or assistance efforts targeted to 

small businesses. Nearby Mississippi State University (MSU) offers assistance targeted to 

small businesses ICT applications and web page design. However, none of the Monroe firms 

interviewed were involved in this program. Aside from this, ICT support for small businesses 

is confined to assistance from ISPs. In general small business assistance is an underdeveloped 

component of economic development strategy in the County. 

Economic development in the region continues to concentrate on retaining and attracting 

branch plant manufacturing. This research revealed that large externally owned companies can 

typically manage their own ICT needs. A few local business and civic leaders pointed to the 

need for a greater focus on locally owned companies and small businesses in service or nontraditional sectors. Access and adoption of ICT technologies would likely be a more important 

component of an economic development strategy keyed more to this type of internally 

generated growth. 
73 

Noxubee County, Mississippi 

Socio-Economic Background 

Noxubee County, with a population of 12,548 in 2000, is further from the metro areas of 

eastern Mississippi and has a more rural economy than Monroe. Timber harvesting and 

milling and catfish farming are among the leading economic activities in the county, followed 

by row crop farming such as corn, soybean, and cotton and a few beef cattle, dairy, and swine 

farms. Due to difficult conditions in traditional farming sectors much of the County’s 

farmland has been converted into catfish ponds over the last fifteen years. The County had 

about 15,000 acres in catfish ponds as of 2001 and aquaculture has supplanted crop farming in 

the local economy. Many other economic sectors in Noxubee County have some links to the 

area's agricultural and resource base. 

The County has a handful of businesses that employ 50 or more individuals, including several 

establishments in food processing, timber and wood products, and light manufacturing. Major 

manufacturing and food processing employers employ low- to semi-skilled labor in assembly 

line settings and all pay roughly equivalent starting wages of $7-8 per hour. Naturally, the 

need for specialized training is rare in these jobs and opportunities for professional 

advancement are generally limited 

The County's economic foundation of resource based industries and low wage manufacturing 

has failed to generate economic growth. The County experienced a small loss of population 

over the 1990s, and suffers from extremely high unemployment and poverty rates. Per-capita 

income was $16,700 in 1999 compared to $20,700 in the state, while child poverty rates were 

35.5%, compared to 24.5% statewide (see Appendix Four). Moreover, educational attainment 

levels are far below the averages for Mississippi. The most dramatic statistic underscoring 

human capital deficits is that 67 percent of adults in the County over 25 had less than a high 

school education in 1990. As in Monroe County, the share of the population over 65 was close 

to the state average in 2000 and had fallen slightly over the 1990s (see Appendix Four). This 

suggests that the county has been able to retain a share of young workers and families 

although it has suffered from some out-migration in recent years. 

Telecommunications Services and Connectivity in Noxubee County 

Bell South provides local exchange telecommunications services throughout Noxubee 

County, and most local businesses commented that the services are adequate but costly. There 

appears to be minimal interaction between the businesses and the dominant 

telecommunications company, and no other local telecommunications vendors were 

mentioned in any of the interviews we conducted, save for those businesses whose parent 

companies arranged their telecommunications systems. A Bell South manager indicated that 

he knew of no CLECs operating in Noxubee. 

Distances between central offices are even greater in Noxubee County than in Monroe, and 

those distances translate into higher costs for that region. Moreover, since Noxubee has lower 

population densities, Bell South sees little incentive to offer new services or to prioritize 

deployment of advanced infrastructure. One Bell South representative noted that they improve 

infrastructure based on demand, and Noxubee County’s demand is too thin to warrant the 
74 

deployment of advanced services. There is no fiber in the local loop in Noxubee, and no plans 

to deploy DSL there. 

Several private and public sector institutions mentioned the lack of adequate advice for their 

telecommunications needs. As the mayor of Macon put it, “We need help and don’t know 

what we need.” Many businesses noted the difficulty of finding skilled support people or 

service companies to help with ICT maintenance and with telecommunications. The hospital 

has a service contract with IBM because “local expertise doesn’t exist.” The businesses 

profiled in Table 26 below illustrate the patterns observed throughout this area. The branch 

plants of national companies obtain the expertise, planning and ICT deployment that they 

need through their parents. 

Table 26: Telecommunications connectivity among Noxubee County businesses 

Types of Business Employment Ownership Dial-up Dedicated 

Data 

Connection 

Remarks 

Hospitals and 

Medical Clinic 

100-250 Local √ √ IBM service 

contract 

Bank 100 Local √ IT outsourced 

but also in-house 

staff of three 

Outdoor Furniture 

and Fence 

Manufacturer 

100-250 National 

Branch 

√ √ IT support from 

corporate 

headquarters; 

Web outsourced; 

orders primarily 

taken by FAX 

Trailer 

Manufacturer 

25-100 Local √

Catfish Farming 

and Processing 

100-250 Local √ Orders primarily 

taken by FAX, 

phone 

Lumber Mill Less than 25 Local √ √ orders primarily 

taken by FAX; 

T1 from AT&T 

Newspaper Less than 25 Local √ 

Chicken 

Processing 

250 or more National 

Branch 

√ √ IT support from 

corporate 

headquarters 

Lillie Draper’s 

shirt business 

N/A Local √ 
75 

Locally owned businesses use few advanced services; some have internal networks and dial 

up Internet service, but many simply use 1-800 numbers for ordering. The fax machine 

remains the workhorse telecommunications technology for many Noxubee businesses. 

Schools and the Macon library do have decent Internet connectivity largely because of the Erate program. The district is extensively using classroom information technology and 

telecommunications access: every classroom in the district has at least three computers, and 

each facility (including the vocational school) has a computer lab with between 12-25 

computers. All computers are networked and have Internet access. Each school has its own 

hub and is connected via T1 line to the Mississippi Statewide ATM Backbone Network. Erate funds the district’s connections at the 90% level. The district now adds 5-6 computers per 

school per year. The county’s main library (in Macon) currently has a T1 connection to the 

Internet acquired with E-Rate support and other electronic resources via the Mississippi 

Statewide ATM Backbone Network.30 Two branch locations also participate in the E-rate 

program, but their telecommunications connections are limited to dedicated 56K lines. 

All of the ISPs providing connectivity for local businesses are based outside of the County 

most commonly in Columbus or Starkville (Oktibbeha County). However, one of the benefits 

of BellSouth’s rate restructuring was flattening zone calling rates so that the costs of calling 

distant ISPs are fairly small (i.e., no per-minute or long distance charges). Because regional 

calling is relatively inexpensive, ISPs in these cities can extend their services to rural counties 

like Noxubee and provide more choices to inhabitants who under other circumstances would 

have no local ISP access. In sum, options for ICT access and capacity building are quite 

limited in the County. Those firms that utilize advanced services must connect through pricey 

T-1 lines and acquire expertise and support services from parent units or service providers 

from outside the area. 

Business Adoption of ICT and Broadband Services in Noxubee County 

Advanced telecommunications does not play a major role in the majority of manufacturing 

and service firms in the county. Several representatives we spoke with noted, however, that 

they do have Internet access and use the Internet to search for information relevant to their 

operation: for commodities prices for catfish, for example, techniques their competition is 

using, and general background information regarding equipment and so forth. Again, we 

queried companies on five areas of ICT adoption and use: 1) their use of computers and 

software; 2) their use of basic telephone services; 3) their level of connectivity; 4) their use of 

network services in a range of business functions; and 5) access and quality of ICT support 

services. 

 

Computer and Software use: Most firms reported that computers and software were 

important in basic functions including accounting, word processing and record keeping. 

Several larger firms have internal networks and their applications generally entail email, 

payroll, and off-the-shelf inventory management and order processing software. However 

getting advice and service support for computer and software applications was a clear problem 

for Noxubee companies. One small business, the Macon local newspaper, remarked that their 

approach to maintenance is to simply buy a new computer since they lack the ability to fix 

anything on their machines. When they require trained people to help with a computer or 

telecommunications problem, they generally have to send someone away for training. The 
76 

bank uses a software company headquartered in Dallas (Peerless), to support their 

telecommunications needs. 

 Basic Telecommunications Services: Several larger local firms rely heavily on basic 

telecommunication services such as fax and voice mail. For example, an outdoor furniture 

company, a lumber company, a trailer company, and a catfish processing plant all rely 

primarily on faxed orders. Wireless service is available in one town in the county 

(Shuqualak), leaving the remaining towns (including the county seat) entirely without wireless 

connections. The larger businesses that need dedicated lines, such as the bank, commented 

that the T1s they use are fairly expensive. 

 Use of Network Services: Six of the nine Noxubee firms studied had access to 

broadband services. These advanced services must be obtained from Bell South, the only 

prominent vendor in the area and the only one mentioned by our informants. Bell South 

provides T1s and any other specialized connection such as ISDN. 

Six of the nine firms could be classified as light users of network applications. They use the 

Internet primarily for obtaining information about markets or for internal or external email. A 

catfish processing business, for example, used the Internet to check on the catfish prices of 

one of its marketers. One firm uses Internet research to track market conditions and pricing, 

while another local firm uses basic email an essential marketing tool. 

Three firms could be classified as intermediate or heavy users. The outdoor furniture 

company’s parent, based in Illinois, told them which national telecommunications vendor to 

use and has sent design people to help them plan an Internet-based sales page. This 

company’s information technology director operates an internal network for the plant, and 

manages communications (via frame relay) with a warehouse facility in Sparks, Nevada. This 

type of B-to-B application of telecommunications was rare in Noxubee County. Perhaps a 

more typical application of telecommunications technologies was at a food processing branch 

plant that used data transmission to exchanges production, order, payroll, and accounting data 

with its corporate headquarters in Tennessee over a dedicated channel. The lumber firm 

linked its saw and finishing mills (separated by one mile) by fiber for always-on 

communication of production data. In addition, the company markets some timber through the 

TALPX business network, an electronic marketplace allowing members of the building 

product industry to procure and market products over the Internet. However, most of this 

company's sales proceed through traditional channels. 

In terms of capacity to select, use and maintain ICT technology to improve business 

operations, the largest companies in Noxubee are mostly branches of larger enterprises. They 

obtain advice and telecommunications expertise from their corporate parent. Computer service 

and maintenance for these larger businesses are outsourced. Smaller or “home grown” 

companies, however, often do not perceive particular advantages from advanced ICT use, and 

did not envision using the Internet for any essential operations. Major locally owned 

employers have not deployed current or more advanced Internet and e-commerce applications 

or integrated them systematically into business operations. 

Public sector agencies in the County seemed particularly uninformed about 

telecommunications services and potentials. Medical providers such as the Noxubee General 
77 

Hospital, for example, are computerized in only very basic ways. They use the Internet to get 

regulations and to process insurance claims for Medicare and Medicaid. Although they are 

interested in tele-radiological services, they do not have the expertise to launch that service. 

Similarly, although county agencies have computers and Internet connections, there is no 

concerted effort to use the Internet to provide information or services to residents or 

government customers. 

There is a miniscule level of Internet service entrepreneurship in Noxubee County. One small 

business owner in Macon attended a workshop in 2000 for small business opportunities. As a 

result of attending the workshop a college-educated family member of the informant is now 

designing and building web sites for other small businesses in the region. The same informant 

also uses the Internet as a member of the Mississippi Contract Procurement Center (MCPC), a 

private non-profit corporation established to promote economic development by assisting 

Mississippi businesses (particularly those in “Habitually Underutilized Zones”) to obtain and 

perform on federal, state, and local government contracts. MCPC and its clients initiate and 

track the procurement process on-line. 

In sum, small and medium sized local businesses are accessing and using the Internet, albeit in 

very limited ways. Small business operators and local entrepreneurs perceive the Internet as 

an opportunity, but not generally a business priority. Some are moving cautiously toward 

more advanced applications, but in some cases business owners may misperceive the nature of 

the opportunities presented by the Internet (or even the nature of the technology itself) in such 

a way that they are vulnerable to unreasonable expectations or unscrupulous practices. 

Difficulties in securing information, expertise and local support services are clearly 

constraints on more sophisticated and innovative utilization of ICT applications. 

The Role of ICT Adoption and Use in Local Economic Development in Noxubee County 

For Noxubee’s main local economic development entity, the Noxubee County Economic 

Development Agency (NCEDA), facilitating the development of telecommunication 

infrastructure or ICT capacity has not been a priority. Formidable social and educational 

problems loom as far more important factors in growing a good economy and creating 

meaningful jobs. In the wake of extensive job out-migration, Noxubee County is more 

focused on agricultural and forestry-based operations—particularly catfish farming—for 

expansion. Computers, the Internet, and telecommunications applications are seen as 

potentially important, but rather minor tools in this agribusiness development scheme. 

Economic development practitioners observe that industrial prospects to the region typically 

do not require advanced telecommunications services. Moreover, most existing industries in 

the county cluster around the Highway 45 corridor, a route well served by Bell South 

facilities. Local businesses have “made do” with T1 services from Bell South, and as noted 

above they use non-local dial-up ISPs for additional Internet services. The difficulties in 

finding trained ICT personnel were noted by some businesses, as were the difficulties in 

acquiring local expertise and services. However, there were few indications among local firms 

that the lack of advanced service availability constituted a major fetter to their operations. 

Another economic development institution, The Golden Triangle Planning and Development 

District (GTPDD) serves a seven-county region in East Mississippi, one of ten planning and 
78 

development districts in the state.31 In addition to helping counties apply for grants and loans 

for infrastructure projects, the GTPDD also provides business expansion assistance, computer 

training for government workers, childcare assistance, senior citizen programs, and solid 

waste management assistance, among others. In the telecommunications field, the GTPDD 

plays a unique role by providing connectivity to the region's public institutions. It maintains a 

leased frame relay network (provided by BellSouth) that serves the telecommunications and 

the Internet needs of Clay, Lowndes, Noxubee, and Oktibbeha counties, including some 

municipal government offices as well as the public libraries within these four counties. 

Providing telecommunication service to public entities in these counties fills an important 

access gap between costly commercial services and Mississippi's Statewide Frame 

Relay/ATM Backbone Network, whose main customers are educational institutions and state 

government offices. 

Many interviewees targeted the educational system of this region as a major economic 

development barrier. Despite the progress in making computers and network access widely 

available in schools and libraries, the general lack of skilled jobs in the region was seen to 

stymie improvements in educational outcomes. The school superintendent reported that many 

students are unmotivated, with little sense that a high school diploma has any value in their 

circumstances. Because there are very few high-skill, high-wage jobs in the county, he 

pointed out, most workers can enter the work force with a high school diploma or less. 

Education is seen as irrelevant in an environment without the promise of advancement. As the 

superintendent said, “Why get good grades if you can’t get out of the box?” 

Lacking any higher education system within the county boundary, Noxubee County relies on 

adjoining Lowndes and Oktibbeha counties to meet its higher education and workforce 

training needs. Among institutions in the region, the East Mississippi Community College 

(EMCC) offers important training programs as noted earlier. Two programs at EMCC are 

specifically designed for business and industry customers. The Skill/Tech One-Stop Career 

Centers provide fee-based worker training programs in such diverse fields as management 

skills, computer assisted design, electronics, welding, communication, and team building. The 

other targeted program is the Center for Manufacturing Technology Excellence (CMTE) that 

provides a multi-purpose facility for businesses to use as a high-tech 

manufacturing/service/training site. Ample power supply as well as broadband connectivity 

(multiple T1 lines) can accommodate large machinery (new production method testing) and 

bandwidth-intensive information technology training. More than 350 businesses in the region 

have participated in these two programs, although only one of our Noxubee interviewees (an 

outdoor furniture company) reported they had used the Skill/Tech program. 

While these educational and training resources certainly have benefited the broader region, 

their effect on the economic vitality of Noxubee County is difficult to assess. Many of the 

training programs offered at EMCC or CMTE focus on high-tech training and skills 

development that are not currently in high demand in the area. 

As a very poor county with a struggling economic base, adoption and use of advanced ICT 

remains a low priority for business development organizations and the businesses themselves 

in Noxubee County. This is due to the socioeconomic characteristics of the county and the 

region's focus on attracting external investment in agribusiness and basic manufacturing. 

Again, a bolder economic diversification strategy based on growing more local firms would 
79 

perhaps require more attention to more advanced workforce training and ICT access and 

capacity building. As Tim Heard, Computer System Analyst of the GTPDD noted, "the 

region's biggest telecommunications issue is not so much the lack of access but rather the 

relative lack of people's awareness of the capabilities of information technologies as 

commercial and administrative tools.” 

 

The Virginia Regional Context 

Washington and Scott counties in western Virginia offer very interesting contrasts in terms of 

economic development efforts, leadership, and existing economic base. Washington has far 

more developable land (i.e., it is less hilly and mountainous) than Scott County, and economic 

development endeavors evidence a well connected network of people, many of them 

convinced of telecommunications’ utility for the region’s growth. Scott County evidenced 

little of the same awareness of or belief in telecommunications as an economic multiplier. 

The two counties provide a striking contrast in development attitudes and ways 

telecommunications uses have penetrated various endeavors. 

An unusual feature of Virginia’s governance structure requires some comment. Virginia’s 

state constitution differentiates between cities, counties and other units of government. Cities 

are not parts of counties; rather they are organized units comparable to counties in jurisdiction 

and authority. From an economic development perspective, cities are important, independent 

stakeholders. In the Virginia region we focus on here, Bristol is a qualified City. Straddling 

the border between Tennessee and Virginia, Bristol is a particularly interesting city in terms of 

telecommunications since its municipal utility board invested in fiber optic facilities in the last 

five years and, as will be elaborated later, challenged a state law in so doing. With extensive 

telecommunications facilities and with its relatively larger population base, Bristol is a 

significant partner in some of Washington County’s economic development planning and 

efforts. 

The economic bases of the two counties differ. Located on the Virginia/Tennessee border, 

Scott County’s economic development is closely linked to the fortunes of the Tri-City 

Metropolitan Statistical Area (which includes Bristol, Virginia, Kingsport and Johnson City, 

Tennessee). Its hilly terrain and historic dependence on coal, small-scale agriculture, and 

branch plant manufacturing has constrained economic development within county borders. 

The population depends upon jobs and income provided by large employers across the border 

in Kingsport, Tennessee. The county's status as a mountainous rural hinterland has impeded 

efforts to upgrade physical and telecommunications infrastructure and develop a more diverse 

economic base. While the nation and the Commonwealth of Virginia overall experienced 

vibrant economic and population growth across the 1990s, population and economic growth in 

Scott County was very sluggish between 1990 and 2000. 

Washington County is also adjacent to the Tri-City MSS and like Scott County, Washington 

County is an economically challenged region. However, Washington County enjoys a 

relatively robust economy compared to its neighbors thanks to a diverse range of activity that 

includes major employment in the agricultural, public service, tourist, educational, and 

industrial sectors. Nonetheless, the economy is less vigorous than that of North and East 

Virginia. 
80 

The region’s telecommunications environment has several unusual characteristics. First, statelevel education policies have significantly contributed to the region’s ICT. In 1998 the 

Virginia Department of Education “Standards of Learning Technology Initiative” established 

standards for public schools requiring technological competencies in instructional workers, 

curriculum standards for computer and network skills, and a student-to-computer ratio of 5:1. 

The state also has established computerized standardized testing that requires a minimum 

level of connectivity and speed. These requirements have helped drive school districts’ 

adoption of technology. 

Second, Virginia Polytechnic Institute (Virginia Tech) has been influential not only in the 

broader state networking endeavors but also in encouraging and offering models to 

communities that wish to better manage and develop local telecommunications capabilities. 

For instance, the Electronic Village model that is being replicated through web pages in many 

of the state’s towns and cities was spawned at Virginia Tech. The Blacksburg Electronic 

Village, one of the country’s oldest community networks, was an initiative sponsored by 

Virginia Tech. 

Third, the entire state, particularly its rural regions, has benefited by various statewide 

networks that offer good connectivity at reasonable costs to public and more recently private 

organizations. Net.Work.Virginia, Virginia Link, and COVANET all provide connectivity to 

different types of users throughout the state.32 Most prominent of these, Net.Work.Virginia 

offers low cost, advanced broadband network capabilities to state agencies, local governments 

and educational and library institutions and, through its spin-off Virginia Link, businesses. 

Virginia Tech manages Net.Work.Virginia in association with Old Dominion University and 

Virginia Community College System; a consortium of telephone companies provides 

intraLATA services to the network, and Sprint provides interLATA (long distance) links. The 

service pricing is neither distance nor usage sensitive.33 The network has over 1000 sites and 

about 640 participants, and the capability of delivering simultaneous voice, data and video 

services. Eventually this network will support new Internet-based services such as IP 

videoconferencing and high definition TV. Its availability to public schools and libraries 

means that those public institutions are well connected and capable of delivering excellent 

services to students and individual citizens. 

Finally, local Congressional representative Rick Boucher is a strong supporter of 

telecommunications efforts and his influence can be seen in several institutional efforts to 

explore the capabilities telecommunications could bring to the region—both in terms of 

business as well as education and services. 

Many sectors that could form a foundation for healthier, more diverse economic growth in 

Washington and Scott counties increasingly will depend upon advanced ICT technologies to 

improve performance and expand market reach. Our interviews revealed that a number of 

firms in manufacturing, health services, and business services saw deficiencies in basic 

telecommunication services and the cost and limited access to advanced services as an 

important problem in their operations. It also seems clear from interviews with firm managers 

and economic development institutions that relatively poor access to telecommunication 

services might represent at least a minor barrier to attracting branch manufacturing and back 

office service facilities to the region. Finally, the growth of promising small business sectors 
81 

such as tourism and leisure, local crafts, and specialty agriculture increasingly will become 

linked to the innovative use of computer and Internet technologies in marketing and 

distribution. 

Scott County 

Socio-Economic Background 

Scott County’s population and employment growth over the 1990s has been marginal, 

particularly in contrast with robust growth in the state of Virginia. A significantly higher 

percentage of elderly in the population is an indirect indicator of that slow growth and related 

out-migration of younger individuals and households (see Appendix Four). Although the 

unemployment rate has fallen through the 1990s, it is still nearly twice the Virginia average. 

Decreasing unemployment, more significantly, seems to be related to residents finding work 

elsewhere rather than strong job growth within the County. In addition, relatively high 

poverty rates combined with low rates of educational attainment suggest that the area will 

continue to face structural challenges in diversifying the economy toward higher skill, higher 

wage activities (see Appendix Four). These data provide strong circumstantial evidence that 

the County is losing many of its younger, higher skilled workers to nearby and more distant 

urban growth centers. 

Agriculture still plays a significant role in the economy of Scott County. Over 24 percent of 

employed residents work full- or part-time in agriculture, with key products including 

tobacco, beef cattle and some niche crops such as vegetables. Interviews with local officials 

and agricultural extension agents indicated that most residents supplement income from 

agriculture with other full- or part-time work. There are few full-time farmers. The other 

sector that provides modest export employment is manufacturing. Manufacturing is centered 

in the Duffield industrial park, primarily represented by branch plant manufacturing in sectors 

such as industrial machinery (mining equipment), furniture (bedding) and wood products. 

Retail and service industries have the highest employment levels. However, they serve the 

local market only and have not experienced rapid growth. 

One striking statistic is the ratio of employment to county population. With a ratio of 32.6 

percent, compared to 61 percent of the state of Virginia, it is obvious that many residents 

commute outside Scott County to work (see Appendix Four). Since the decline of the mining 

economy some 40 years ago, the county has had very limited success in rebuilding a strong 

and stable economic base. Economic development has focused on attracting outside 

manufacturing establishments, but with limited success. Local informants noted considerable 

instability in branch manufacturing over the last two decades, with a number of textile and 

apparel establishments moving to the area but shortly thereafter closing down and moving 

production off-shore. Local leaders continue to pursue outside investment, but several view 

the local economic base as essentially based on activity from ex-urban residential settlements 

associated with Kingsport and the Tri-cities Metro region. 

Telecommunication Services and Connectivity in Scott County 

Low population density and income, combined with an industrial structure containing few 

ICT producing and using industries, has limited adoption of ICT technologies in Scott County. 
82 

There is no cable modem or DSL access, and business users reported T1 and ISDN rates are 

costly. A number of companies interviewed in the area complained about the quality of basic 

telecommunication services and the cost and limited access to advanced services. The spread 

of advanced telecommunications services in Scott County has been throttled by a basic gulf 

between the supply and demand sides of the market, characteristic of sparsely populated rural 

areas: telecom service providers in the County do not see the current market as large enough 

to justify the costly investments needed to provide advanced services to a small, widely 

dispersed customer base, while demand remains relatively weak among business and 

residential customers precisely because limited access has made it difficult evaluate the need 

for, or real value of, advanced services. 

Sprint and Scott County Telecommunications are the primary incumbent local exchange 

carriers in Scott County. The county’s only ISP, MountaiNet, is the only active CLECs in the 

county although several companies have CLEC licenses, according to one local informant. 

Sprint serves the most populous areas of the region, and Scott County Telecommunications 

(SCT) the less populous reaches. In the post-World War II era, large parts of the County still 

did not receive basic telephone and SCT was established as rural cooperative in 1955 to 

overcome access barriers to basic services. 

Terrain is another significant constraint on providing basic and advanced telecommunication 

services. Telephone lines serving mountainous parts of the county are in some cases 

antiquated and in need of costly service and upgrading. The terrain also severely limits 

wireless service, which is available in only a few sections of the county. Additionally, a small 

segment of the county is in a separate LATA and toll charges are often required to get dial-up 

Internet service in this area. 

ISP MountaiNet is a subsidiary of SCT serving 11,000 customers in Scott County and in 

Tennessee. They offer basic dial-up service primarily to residents and small businesses in 

Scott County. The firm offers a menu of ISP services including web hosting, web page design, 

and web page development. The company offers more advanced services to the Tri-City area, 

but not in Scott County. 

Businesses complained primarily about unreliable basic service from the two major service 

providers, with occasional outages and delays in getting installation and repair service. A 

number of local customers interviewed also complained about slow Internet dialup service 

from MountaiNet. The company reported that their reliability statistics are quite high and that 

problems with speed are often related to poorly conditioned switches and wires (in Scott 

County Telecommunications’ plant) rather than MountaiNet’s own connectivity capacity. 

Larger, externally owned firms in banking and manufacturing use T1 connections to secure 

high-speed access. ISDN is also available via Sprint and Verizon, but this technology is not 

widely deployed. Again the main complaints from larger users were the costs of T1, and 

service interruptions and service delays. One business owner in the Pioneer Center Business 

Incubator reported receiving a low flat rate T1 connection through VirginiaLink. Both major 

local service providers came in for criticism. As one company manager noted, “these 

companies are accustomed to dealing with people who don't demand much.” 
83 

State initiatives including the Electronic Village and VirginiaLink programs have stimulated 

some ICT adoption, including broadband services. The former program has assisted in the 

development of SCARLET, the Scott County Electronic Village, which provides a bounty of 

information on public events, meetings, school happenings, and promotional material on the 

County from links to its main web page. The network further serves as an educational site 

with local students creating and maintaining web sites and exchanging school and social 

information. 

In terms of dial-up and advanced Internet services, options for small business and residential 

customers are extremely limited in Scott County. A number of firms in manufacturing, health 

services, and business services saw deficiencies in basic telecommunication services and the 

cost and limited access to advanced services as an important problem in their operations. It 

also seemed clear from interviews with firm managers and economic development institutions 

that relatively poor access to telecommunication services might represent at least a minor 

barrier to attracting branch manufacturing and back office service facilities to the county. 

Nevertheless, despite specific complaints, none of the firms interviewed identified 

telecommunication service problems as a major local barrier that would force them to 

consider re-locating elsewhere. 

Business Adoption of ICT and Broadband Services in Scott County 

We interviewed ten private firms and several public sector organizations in our study of the 

County, including one that was a major employer of Scott County residents in the Kingsport 

area. While this was a heterogeneous group, it was roughly representative of manufacturing 

and service firms with only the retail sector not represented. 

Computer and Software Use: All firms used personal computers in their business activities. 

All firms reported that computers and software were important or somewhat important in 

basic functions including accounting, word processing and record keeping. Six of the ten 

companies could be classified as at least “intermediate” users, using computers and software 

for desktop publishing, email communications and the Internet. Finally, four of the companies 

could be classified as intensive users of computers and software. The basic and intermediate 

functions were important but these firms used computing for product design, CAD/CAM 

applications, and employee training or sales and marketing. 

Basic Telecom Services: All firms interviewed were users of basic telecommunication services 

including basic voice, voice mail, and fax, and call forwarding. The only unusual exception 

was that only two companies reported the frequent use of wireless services. One firm used 

wireless to communicate within a very large site, but most firms noted that wireless services 

were difficult in the region due to the limits posed by terrain and existing services. This 

evidence underscores the continuing importance of basic wireline telephony as essential to 

business performance across regions. 

Three firms allowed employees only to have connectivity and access to company networks 

and did not provide open access to the Internet including external email. Five of the firms 

interviewed used advanced broadband services; four had a dedicated T1 line and one a 

fractional T1 connection. Four of the five firms that had advanced services were branches of 

large externally owned companies. The one small locally owned company with a T1 
84 

connection produced software, and broadband access was critical to their business operations. 

The other locally owned companies used basic dial-up services. 

Table 27: Telecommunications Connectivity among Scott County Businesses

Type of Business Employment Ownership Dial-up Dedicated 

Data 

Connection 

Remarks 

Chemical Manufacturer 3,000 National 

Headquarters 

√ T1, Internal IT group 

Health Clinic 25-30 National 

Branch 

√ Problems with dial up 

transfer of records, want 

to expand telemedicine 

applications but T1 

access too expensive 

Health Clinic 10-15 Local √ Just acquired dial-up 

service, problems 

understanding network 

options, could benefit 

from better access, but 

too costly 

Hospital 100-150 Local √ Larger regional hospital, 

interested in connectivity with clinics and 

telemedicine, can't 

justify cost of T1 access. 

Mining Equipment 

Manufacturer 

200 National 

Branch 

√ T1, parent ICT support 

Newspaper 5 Local √ Broadband too 

expensive 

Wood Processing 

Manufacturer 

70 National 

Branch 

√ Dial-up services, some 

ICT support from parent 

Bank 15 National 

Branch 

√ T1, ICT support from 

parent 

Computer Software 5 Local √ T1, high connectivity 

Home Sales 2 Local √ Dial-up access, poor 

ISP Service hurts 

business 

Use of Network Services: The interviews in Scott County revealed significantly different 

levels of use of network services corresponding to the importance of the Internet and/or 

electronic data transfer to the day-to-day activities of each firm. Eight of the ten firms noted 
85 

that basic use of the Internet for obtaining general information about business or markets or 

for internal or external email were important to somewhat important. Six of the eight 

companies reported intermediate use that included using the Internet to obtain price 

information and to place orders from suppliers or advertising through a basic web page as 

being important or somewhat important. Four companies reported more intensive uses of 

network services as being important to their operations. More intensive uses included 

marketing through an interactive web site (two firms), processing orders, billing and arranging 

delivery (one firm), ordering from suppliers linked to internal inventory and accounting (two 

firms), communication and data transfer from other units of the company (three firms), and 

transfer of data or graphics with suppliers or customers (for example, telemedicine). 

On balance the companies interviewed relied heavily on computers and software and basic 

telephone services. The use of external networks either within or outside the company seemed 

less crucial to the majority of firms. However, four of the firms could be classified as 

advanced network users. All except one of these firms were larger, externally owned 

companies. Using network services is not seen as crucial in the current operations of smaller 

local firms and more traditional manufacturing establishments. Three firms reported that their 

location gave them about the same ability to access and use computer and Internet technology 

compared to other regions while six reported that their location made it more difficult to 

access and use these technologies, suggesting Scott County was somewhat negatively rated 

with respect to this infrastructure. 

There were two main complaints about the region. The first was the poor quality and high 

costs of local telecommunication and Internet services. The second, registered especially by 

smaller local companies without dedicated IT departments or personnel, were the difficulties 

in learning how new technologies could help their businesses and finding companies or 

consultants who could provide reliable support services for their ICT activities. Interestingly, 

finding personnel with the skills needed to effectively utilize ICT technologies was not seen 

as a major barrier. This again seems to be a testament to the excellent training in computer 

and Internet use provided by the local schools and libraries. 

The Role of ICT Adoption and Use in Local Economic Development Initiatives in Scott 

County 

A number of local, regional and state institutions are active in Scott County economic 

development. We interviewed nine individuals from city and county government and 

economic development authorities or programs. 

The local economic development community seems split over the fundamental vision and 

strategies needed to improve economic performance. Several actors point to a long and, in 

their minds, failed history of trying to attract large manufacturing or service firms from 

outside the region. This camp suggests that most future growth will occur from residential 

development spilling over from Kingsport and the broader Tri-Cities region. A large number 

of residents already commute to work outside the County and this trend is likely to continue. 

In this view, the County should provide high quality schools and other amenities and improve 

basic infrastructure to stimulate increased residential development, which in turn will bring 

new people and support the growth of local firms servicing a growing residential population. 
86 

The other view is that over-reliance on external growth is a risky strategy that will leave large 

parts of the County (northern and western) out of the development process. Leaders in this 

group note that many commuting residents depend on one firm, Eastman Chemical, for steady 

employment, which makes the County vulnerable to the shifting fortunes and investment 

decisions of this key employer. The County needs to build up its economic base through 

continued business attraction and by encouraging the increased growth and survival of small 

entrepreneurial businesses. 

The second strategy of attracting industries and developing small businesses informed more 

specific economic development initiatives. Three major entities are involved in industrial 

recruitment efforts. The LENOWISCO Planning District, that encompasses Lee, Scott, and 

Wise Counties and the city of Norton, focuses on basic infrastructure needs rather than on 

specific recruitment of new businesses and industries. The Virginia Coalfield Economic 

Development Authority focuses more directly on recruitment. This entity was established to 

help Buchanan, Dickenson, Lee, Russell, Scott, Tazewell, and Wise counties and the City of 

Norton enhance their economic base, attract diversified industries, and assist in the expansion 

of existing industries.34 Finally, the County’s Industrial Development Authority is the countylevel economic development entity reporting to the Scott County Board of Supervisors. 

Somewhat dormant in recent years, the Authority has recently hired a new director and is 

conducting a study to determine a possible location for a new industrial park site. 

Industrial recruitment efforts have focused on metal fabrication, automotive parts suppliers, 

lumber-related industries, independent power production facilities, and tele-services such as 

call centers. The main barriers to recruitment are problems of basic infrastructure, especially 

water and wastewater and limited available sites. 

Many of the facilities in Duffield Industrial Park, the main focus of development efforts, have 

T1 lines and utilize advanced telecommunications. However, each tenant’s corporate offices 

had set up these systems—the industrial park had not provided the services. Informants 

mentioned that industrial park’s phone lines are somewhat weak and that it is not uncommon 

to pick up the phone and not be able to get a dial tone. Nonetheless, economic development 

practitioners felt that offering improved basic and advanced services was a secondary factor in 

attracting new industry. Other, more basic locational factors remained more important. 

Several informants did suggest that access to very high performance advanced services was 

crucial to their targeting of telemarketing and call centers. There was also a general consensus 

that improved telecommunication services would likely become a more important element in 

future recruitment efforts. 

Economic development actions to stimulate and support indigenous business growth and 

development are concentrated around two programs: the Pioneer Center Business Incubator 

and the Small Business Development Center that operates out of Mountain Empire 

Community College. The Scott County Chamber of Commerce also offers advisory services 

to existing small businesses and organizes forums and meetings for the local business 

community.

. 

The Pioneer Center Business Incubator, established in 1999, is located in a former grocery 

store building adjacent to the Duffield Industrial Park site. The Center provides a variety of 

services, including phone, fax, and copying services, a receptionist, a library, and small 
87 

business counseling services. The incubator’s occupancy rate is only about 30-35 percent. The 

Center’s two primary tenants are CornerPost Software and Independence Unlimited, a nonprofit organization that recycles waste cloth into textile materials. The incubator has had one 

successful graduate, a farmers market wholesaling company that assembled produce from 

local farmers and distributed locally and throughout the Tri-City MSA. Two T1 lines serve the 

facility, one provided by MountaiNet and the other by CornerPost. 

Even though this incubator offers modern, flexible office space, high quality business support 

services including access to advanced telecommunication, and makes technical assistance 

available through the Small Business Development Center, they have had difficulty attracting 

start-ups to the facility. The managers of these two initiatives attribute these difficulties to 

start-up problems of the incubator (they have until recently had a part-time manager) and the 

absence of a strong entrepreneurial spirit in the region. They do point toward an increase in 

entrepreneurial training at the high school and community college level and believe that full 

time attention to marketing the Center will bring in new tenants. 

The heads of the Pioneer and Small Business Development Centers noted that information and 

support services to help small businesses and start-ups evaluate how ICT technologies might 

improve their performance were lacking. Other interviews with existing small businesses in 

the County underscored the information gap associated with new ICT applications 

emphasized throughout this report. Most use personal computers and basic business software 

and many may use dial up Internet services. However, few small firms in Scott County are 

expanding their use of the Internet beyond having a basic web presence, and they are not 

aggressively employing their ICT assets to expand markets or to integrate sales, billing and 

delivery. As one active small business owner noted, "many small business owners know the 

Internet is important but have a hard time figuring out what they need and are reluctant to 

devote time and resources make the changes and the investments without seeing a clear 

payoff.” 

Washington County 

Socio-Economic Background 

Professional jobs help secure Washington County’s employment against its geographic 

limitations, which are similar to those of Scott County. Education and other public service 

institutions are important to the county’s employment base. Beyond the public school system, 

the county has three private colleges, a community college, and the Southwest Virginia 

Higher Education Center. Abingdon, the County seat, is also home to a district court, the 

office of the Representative Boucher, and a regional hospital. As a result of these facilities and 

agencies, the County has a larger population of attorneys, professors, doctors, teachers, and 

other professionals than its neighboring Virginia counties, thus a generally higher standard of 

living, higher property prices, and more secure economic base. 

According to Virginia Employment Commission statistics, unemployment in the county was 

5.0% in mid-2001, higher than the statewide unemployment level of 3.1%.35 The median 

household income in Washington County was $31,387 in 1997, well below Virginia’s median 

income of $40,209; also, 20.4% of children lived below the poverty level, slightly more than 

the state average of 17%. 
88 

The county has several industries and enterprises employing more than 100 persons. The 

largest manufacturer in the county is Bristol Compressors, employing over 2000 people. Other 

major employers with workforce in the range of 100-500 persons include Universal Fiber 

Systems, a maker of synthetic fibers for the textile industry, K-VA-T Foods, owner of a 

grocery store chain and distributorship, Columbus McKinnon and Sandvik Tools, both makers 

of industrial tools and hoists, Strongwell and Twenty-first Century Containers, both producers 

of fiberglass and plastic parts, and HAPCO, a maker of aluminum poles. 

Coal mining remains an important aspect of the economy across Southwest Virginia. 

Although Washington County lies east of the coalfields, the presence of a major railroad line 

and later an interstate highway gave the county an economic boost and made Abingdon a 

regional center. Some sandstone, limestone, and gypsum are mined in the county, constituting 

an important input for several of the county’s manufacturers. 

Farming in the county is typically small-scale and owner-operated. Beef cattle is now the 

county’s major cash product, although tobacco has historically been the most significant 

agricultural output. Changing market conditions and the policy environment have eroded 

tobacco’s significance.The dairy industry also has declined significantly. Other minor 

agricultural products in the region include Christmas trees and organic vegetable farming. 

Land prices are high in Washington County relative to surrounding counties, making 

agriculture a high capital investment industry and a difficult business for incumbents to 

maintain or young people to enter. 

Tourism is also an important aspect of the county’s economy. The region is easily accessible 

from metropolitan areas in North and East Virginia as well as parts of North Carolina and 

Tennessee. The Barter Theatre and related Virginia Highlands Festival attract tens of 

thousands of tourists to Abingdon each year. Accordingly, lodging, shopping, and dining are 

an important part of the local economy and a significant portion of its tax base. Campers and 

hikers are a crucial component of the economy for outlying areas around South Holston Lake 

and the Mount Rogers Recreation Area. The town of Damascus is a center for eco-tourism 

and has several businesses oriented around traffic from the well-known hiking and biking 

trails that pass through it, including The Appalachian National Scenic Trail, the Virginia 

Creeper National Recreation Trail, the Transcontinental Bicycle Trail, the Iron Mountain 

Trail, and the Daniel Boone Trail. 

Telecommunications Services and Connectivity in Washington County 

Several telephone companies provide local, long-distance, and Internet services to the 

Washington County area. The ILEC is Sprint/United, the local telephone arm of long-distance 

giant Sprint. One CLEC, NTELOS, offers comparable services to the area's residents and 

businesses. The Town of Abingdon operates a high speed fiber line in the town, and nearby 

City of Bristol operates a high-capacity fiber ring. In fact, the presence of multiple 

telecommunications vendors and projects is creating an interesting telecommunications 

environment that is not common to the typical Appalachian community (except for a few 

large metropolitan areas such as Birmingham and Pittsburgh). In this section we detail aspects 

of Washington County’s ICT scenario that make its circumstances especially notable: the 

existence of competing backbone networks, the presence of Electronic Villages, the actions of 
89 

Bristol Virginia Utilities Board, very active ICT development in library and school systems, 

and the development of the Southwest Virginia Higher Education Center. 

Competing Backbone Networks: Since Sprint/United is part of Sprint, one of the nation's 

largest backbone network providers, the ILEC is served by its own backbone network. This 

situation not only provides necessary bandwidth to Sprint/United itself, but also creates a 

backbone distribution system from which other telephone companies and Internet service 

providers can purchase bandwidth for their own services. For example, NetAccess, an Internet 

service company of NTELOS, relies heavily on the backbone capacity of the Sprint fiber 

network for its Washington County operation. At the same time, these entities have 

competitive relationships to each other in end-user markets, such as DSL service. Sprint, in 

turn, can recoup its network construction/operation costs from transport customers (e.g., 

Internet service providers, non-facilities based telephone companies). 

As we have discussed earlier, the availability of backbone network POPs is limited in the 

Appalachian region, making many locales monopoly markets for the incumbent telephone 

companies for both end-user and transport markets. But in the Washington County area, the 

non-dominant telecommunications providers (including the ISPs) have more choices for their 

backbone needs. In many other markets where the local telephone service is a Bell monopoly, 

non-Bell telecommunications providers often have to negotiate separate contracts with a local 

facility owner (i.e., Bell) and with backbone providers (e.g., MCI Worldcom, Williams 

Communications). By purchasing the backbone distribution service from Sprint, Washington 

County telecommunications providers can avoid the transaction costs associated with dealing 

with multiple vendors. 

The backbone distribution system offered by Sprint is not free of downsides, however. Sprint's 

POP is currently the only direct ramp to national backbone networks in Washington County.36

If a customer (whether a telecommunications company or a private business) elects a third 

company as its backbone provider, it has to use Sprint facilities in order to reach the nearest 

POP of the alternative backbone provider. This means that until other backbone companies 

extend their networks to Washington County, the Sprint network will remain the bottleneck 

facility for the telecommunications users in the County. Several interviewees indeed 

expressed a concern over the area's dependency on Sprint and desired greater backbone 

capacities to the area. 

Electronic Villages: Access Damascus (ADAM), a project funded by the Appalachian 

Regional Commission, is a website and on-line community resource maintained by the Town 

of Damascus (www.damascus.org), similar to the dozens of content-based websites in the 

region dedicated to promoting and supporting particular communities (e.g., SCARLET in 

Scott County). ADAM primarily functions as a promotional tool for the town’s eco-tourism 

industry, but also contains contact information, schedules, and archives of town meeting 

minutes of use to citizens. 

The Electronic Village of Abingdon (EVA), initiated in 1996, refers to two related efforts 

undertaken by the Town of Abingdon. First, EVA (www.eva.org) is a website and on-line 

community for the Town of Abingdon, similar in form and structure to ADAM. Second, EVA 

is a fiber optic network built by the town to offer low-cost ($35-70 per month per computer) 

broadband Internet access to residences and businesses in central Abingdon. Expansions of 
90 

EVA since 1996 have extended the fiber loop from its initial connection to the Town Hall 

through Abingdon’s historic central district (a distance of approximately one mile). The 

network serves about 80 customers, principally small businesses, practices of doctors and 

lawyers, and various city and County offices. The Town has invested $40-50,000 in EVA per 

year and earns about $36,000 per year in subscription fees for what the staff characterized as a 

“breakeven” operation. 

EVA has been a boon for those residents and businesses in central Abingdon and may have 

attracted some small businesses to the area. The network has been a great aid to the municipal 

and County administration, the library, and the local hospital. However, the network as 

installed is limited in scope, limited in speed, and is quite expensive to install. Thus, 

expansion has been slow and the network still serves only a very small portion of the town, 

creating some resentment among town residents. Furthermore, EVA’s partnerships with 

Sprint and NetAccess may be unstable and probably require more formal arrangements if the 

system is to expand. In short, EVA effectively solved connectivity problems within downtown 

Abingdon in a time of need, but it may have reached a plateau as far as its long-term impact 

on the town’s telecommunication infrastructure. The network probably has had negligible 

financial impact on Washington County’s larger economic development issues, although its 

psychological impact may be huge. 

Bristol Virginia Utility Board: The Bristol Virginia Utilities Board (BVUB), the utilities 

service arm of the City of Bristol, provides water, sewer, electric power, and 

telecommunications services to Bristol and several nearby communities. The BVUB provides 

electric power service to the western half of Washington County. 

Bristol is a fairly insulated, small, and poor community. About 21 percent of the city’s 

population is below the poverty line. Economic development in Virginian cities like Bristol 

presents some unique challenges. For instance, it is very difficult for Bristol to expand its city 

limits (annexation) or expand its tax base because of the Virginia law that declares city 

government and taxation independent of county government and taxation. Such limitations 

have required creativity in the city’s economic development efforts, and BVUB has 

historically been a leader in such efforts. 

BVUB commenced a fiber optic network project in 1998 as a response to the lack of highspeed telecommunication in the area. BVUB recognized an absence of local 

telecommunications competition and foresaw need for bandwidth if Bristol were to advance 

economically. The first fiber hookup, a 17-mile loop, was installed in 1999 at a cost of $5 

million. BVUB was well positioned to tackle this ambitious project, thanks to an unexpected 

cash surplus. The system’s first users included Bristol’s city government offices, schools, 

libraries, and other public institutions. 

BVUB has since begun providing a range of telecommunications services to the community, 

including services to commercial customers and an ISP. In 2001, the utility launched a 

marketing campaign to sell their fiber optic services to the community, with a goal of quickly 

taking fiber-based services into private homes. BVUB plans to continue expanding its services 

to offer telephony, cable television, and data services. BVUB’s managers reported that the 

network has an “open access” policy, making the fiber network available for anyone who 

wants to resell services over BVUB’s facilities.37 
91 

The main economic development strategy in Bristol is to make the city into an attractive site 

for business re-location. BVUB and the Economic Development Authority hope their fiber 

system will draw industry and employment to Bristol. One theory that underlies this project is 

that chronic workforce shortages in urbanized parts of Virginia will force industries out of 

those areas and into southwest Virginia. This position seems to recognize that the existing 

market for BVUB’s fiber services is limited and the prospects for developing homegrown 

telecommunications-using industry are slim. 

Library and School Systems: Public Internet access in Abingdon is abundant. The Washington 

County Library System operates a Main Branch in Abingdon and four branches in the county. 

The library’s deployment of technology has accelerated over the last five years, a change that 

can be credited to significant changes in the town’s telecommunication environment. 

Foremost of these, in 1996 the Main Library was connected to EVA as one of the first 

institutions on the fiber network. The library’s website (www.wcpl.net) was one of the first on 

the EVA system and, according to NetAccess, became a popular local portal. Over the next 

five years, high-speed low-cost connectivity enabled the library to upgrade and integrate many 

of its administrative functions across the entire library system, including offering email to all 

employees, automating circulation management, and joining a regional consortium of libraries 

to share automated resources. 

Since 1996 the library has offered five “public access” terminals on the EVA network and a 

laptop connection station. In 1998 the Library System established a WAN to connect all 

branches with the Main Library via ISDN. The library recently received two important 

grants: One to employ a full time computer trainer and another to install an eleven-computer 

lab in the Main Branch and four new public access terminals at each branch. The library has 

also benefited from a close relationship with local ISP NetAccess, which subsidized the 

library’s Internet connection for a time. 

Currently, the Washington County School District has at least one networked computer in 

every classroom, as per the state requirement. There are also 35-40 labs in the system 

comprising approximately 1900 computers in total, with videoconferencing available in the 

high schools. The district built a countywide WAN using T1 leased lines, fiber-optic cables, 

and wireless technology and a DS3 line from Net.Work.Virginia provides connectivity. 

Southwest Virginia Higher Education Center: Washington County is home to several 

institutions of higher education, including Virginia Highlands Community College (VHCC), 

Emory and Henry College, and the Southwest Virginia Higher Education Center (SVHEC). 

Of these, SVHEC merits special attention as an innovative public service and economic 

development project featuring state-of-the-art ICT. The Center is an independent state agency 

that operates a facility located on the VHCC campus shared by six higher education 

institutions (University of Virginia, Virginia Polytechnic, Radford University, University of 

Virginia at Wise, Emory & Henry, and Old Dominion). SVHEC contributes to the region’s 

workforce and business development in three primary areas: academic degree programs and 

skills training, conference facilities, and an e-commerce development program. 

1. The education/training programs are affiliated with seven higher-education systems 

from throughout the state. These affiliated institutions offer weekend and evening 
92 

courses toward Bachelor's and Master's degrees in a variety of fields.38 These courses 

make an extensive use of information technologies, including videoconferencing, 

satellite downlink, and other interactive activities that use Net.Work.Virginia's fiber 

network. According to Jeff Webb, Director of Information Services, as much as 60 to 

70 percent of classes at the SVHEC are taught from remote locations via satellite or 

fiber links. 

2. SVHEC is also the area's only major conference facility, capable of accommodating 

trade shows and business meetings that require sophisticated communications and 

presentations. Conference halls and rooms have access to satellite downlink, 

videoconferencing equipment, Internet, numerous data ports, computer terminals, and 

other interactive media. SVHEC has hosted more than 130 conferences since 1998. 

3. SVHEC started an e-commerce assistance project in 2001. MerchantPoint is available 

at cost to both small and large businesses, and in this project SVHEC effectively 

functions as a comprehensive e-commerce consultant and offers a range of services 

such as infrastructure assessment, low-cost financing, software, e-commerce web 

design, and training. According to Webb, SVHEC envisioned 40 clients in the first 

year (2001), but it already has received more than 100 applications. 

While the activities at SVHEC primarily cater to existing businesses and workers in the area, 

other initiatives in Washington County target potential businesses and try to make the area 

more attractive in terms of telecommunications infrastructure. Washington County, in 

collaboration with the Town of Abingdon and the City of Bristol recently has developed its 

newest industrial park to house business incubators. During the planning, Washington County 

recognized telecommunications access would be as important as water, sewer, and electric 

power infrastructure in attracting businesses. Russell Owens, Chairman of the Washington 

County Industrial Development Authority, notes that planners have started to discuss 

telecommunications connection at an early stage of industrial park planning. Mr. Owens also 

reported that telecommunications companies are increasingly eager to string fiber optic 

lines—at their cost—to new industrial park sites because they anticipate heavy 

telecommunications use by the new businesses to these sites. 

Business Adoption of ICT and Broadband Services in Washington County 

Washington County and Bristol enjoy relatively abundant telecommunications resources—the 

fiber networks of the Electronic Village of Abingdon and the Bristol Virginia Utilities Board, 

DSL services from NetAccess and Sprint, and local POPs from Net.Work.Virginia, among 

others. In addition, the region is seeing the formation of IT support mechanisms, such as the 

presence of technology experts, political support, and state and local technology initiatives. As 

a result of such an agglomeration of technology resources (though in a smaller scale than in 

other traditional technology centers) some organizations and businesses have ventured into 

activities that require heavy use of advanced telecommunications technologies. At the same 

time, however, the region does not escape from the problem associated with any capitalintensive infrastructure development, that is, the limitations of geographically concentrated 

resources. For example, the benefits of the EVA fiber network reach only 150 feet from the 

fiber loop, which is itself only one mile long. And the DSL service offered in the region 
93 

likewise suffers from the common distance limitation (i.e., approximately three miles from a 

telephone central office). 

Table 28: Business Use of Telecommunications in Washington County 

Type of Business Employment Ownership Dial-up Dedicated 

Data 

Connection 

Remarks 

Computer Software Less than 25 Local √

Bank n/a Local √ Internal IT staff 

Printing Shop Less than 25 Local √ 

Newspaper 250+ National 

Branch 

√

Food Distribution 

Chain 

250+ Local √ VSAT; Internal 

IT staff 

City and County 

Government 

25-100 Local √ √ Internal crew 

Truck Parts 

Manufacturer 

25-100 National 

Branch 

√ Local IT crew; IT 

support from 

corporate parent. 

The use of advanced telecommunications services in the Washington County/Bristol region 

reflects this mixed environment. In fact, the region's largest industry—tourism—has not been 

able to take advantage of telecommunications simply because most tourist establishments, 

such as horse stables and craft shops, are located in places where advanced 

telecommunications services are not available. The following are snapshots of how the area's 

businesses are using telecommunications technologies. 

1. An injection molded plastic parts manufacturer for the trucking industry recently has 

made a $50,000 investment to integrate wireless scanning devices with the corporate 

network that links its Washington County facility to the company's corporate 

headquarters in Atlanta. The Washington County plant is strung with an ISDN 

connection, which is linked to the headquarters to exchange a variety of data including 

production information (time/day, production speed, shipping, tracking, etc.). The 

corporate headquarters soon will relocate to the Washington County site, and the 

company will build another plant in Washington State. The company is currently 

investigating the feasibility of linking these two sites with T1 lines. According to the 

company's information systems manager, this new system monitors every phase of 

production and is intended to improve quality control. However, the company had to 

make a substantial effort to implement the IT system because of limited technology 

resources in the area. 
94 

2. A large regional food distributor and retailer that maintains 86 stores in Virginia, 

Tennessee, and Kentucky is headquartered in Abingdon, and utilizes 

telecommunications technologies to coordinate its multi-store operation. The 

computerization of its operation started in the early 1980s, when scanning devices 

were introduced to stores. Since then, the company has adopted various information 

technologies, including store-level servers, direct store delivery coordination through 

modems, and the centralized server system at the corporate headquarters. The 

company currently uses a satellite uplink and downlink (Very Small Aperture 

Terminal) to exchange sales, inventory, and distribution data across the enterprise. The 

company's vice president in research and site development said that the motivation 

behind various information technology implementations was a belief that the 

company, which is relatively small compared to national grocery chains, can gain 

competitive advantage through the use of IT. The company has a plan to switch the 

telecommunications system from VSAT to frame relay by installing a T1 line at each 

store, but is concerned about service availability at some store locations. The vice 

president expressed the opinion that certain local telephone companies are resisting 

upgrades on switches to accommodate frame relay and other data transmission 

services. 

3. A local bank in Abingdon has more than 10 branch offices in Virginia, Tennessee, and 

North Carolina, linking these sites through a frame relay connection provided by 

Sprint. The main branch office in Abingdon leases a private T1 line from Sprint 

through a special arrangement through EVA. In exchange for allowing EVA to install 

facilities on the bank's property, the bank shares EVA's rights of way for its T1 

connection. Branch operations and the transactions at branch sites are centrally 

coordinated and recorded by the central server located in the main office in Abingdon. 

One bank executive reported that this arrangement tremendously cuts operations costs 

because the bank does not have to employ IT staff at each location. 

Role of ICT Adoption and Use in Local Economic Development Initiatives in Washington 

County 

Industrial park development comprises a major economic growth strategy for Washington 

County and the provision of advanced services to these facilities has become more crucial in 

recent years. Among the older, more-developed industrial parks in the county are BristolWashington County Industrial Park, with major tenants such as Bristol Compressors and 

Universal Fiber, and Oak Park, a largely undeveloped industrial park. 

More recently, Washington County has partnered with neighboring Smyth County and Sprint 

on the Glade Highlands Technology Park. This project received $1.3 million grant from the 

State and a $500,000 grant from Appalachian Regional Commission. Sprint will serve the 

Technology Park with high capacity fiber optic infrastructure, including ATM, ISDN, and 

Frame Relay services. Washington County, the City of Bristol, and the Town of Abingdon 

have also been jointly developing the Stone Mill Technology Park located adjacent to the 

Virginia Highlands Community College within the corporate limits of Abingdon. Stone Mill 

Technology Park will offer advanced telecommunication services, and BVUB, Sprint, and the 

EVA have all been suggested as providers. Washington County, the City of Bristol, and the 

Town of Abingdon have jointly developed a plan for a small business incubator to be sited at 
95 

the Stone Mill Technology Park, in a 40,000 square foot facility. The Mount Rogers Planning 

and Development Commission funded the initial stages of the incubator project and further 

funding has been sought from the Virginia Tobacco Commission. 

The current crop of economic development initiatives all contain some acknowledgement of 

the role of telecommunications for economic growth and for attracting the types of businesses 

that local leaders believe are most desirable for the region. Virginia Tech to the north of the 

county has been instrumental in inculcating local telecommunications leadership. Virginia 

Tech has been an important resources to the region through its shepherding of the Blacksburg 

Electronic Village project, its work in establishing Network.Virginia, its experimentation with 

wireless, and its recent efforts to establish local Multiple Services Access Points (MSAPs), 

and the regional peering points that can allow local communities to realize cost efficiencies in 

managing network traffic. 

Many business people mentioned attracting and maintaining technical personnel as an 

important barrier. At a minimum, this acknowledgement along with the shifting development 

strategy from “Industrial Parks” to “Technology Parks” suggests that local economic 

development leaders in the Washington County/Bristol area are increasingly conscious of the 

potential benefits of having access to advanced telecommunications services. The presence of 

a federal Congressional representative in the area may have contributed significantly to this 

changing dynamic. 

The actions of Rick Boucher, U.S. Representative from Virginia’s 9th district, have been 

decisive at key points for some of the region’s telecommunication developments, although 

linking those efforts to concrete economic development outcomes is difficult. Rep. Boucher 

makes his residence and keeps a district office in Abingdon. He has been a constant advocate 

for the region in both telecommunications and industrial development, with special concern 

for diversifying the region’s historical dependence on agriculture, coal, and timber. Beginning 

in the mid-1990s, he organized a series of meetings in Abingdon to discuss ways of improving 

the area’s Internet connectivity and telecommunication infrastructure. These meetings appear 

to have been instrumental in the creation of EVA and helped establish a presence for the ISP 

NetAccess. He filed an amicus brief on behalf of the BVUB’s efforts to build its fiber optic 

network. 

Rep. Boucher also sponsored the creation of the Southwest Virginia Technology Council 

(SWVTC) to promote regional cooperation and high-tech industrial development in 

Southwest Virginia. Recognizing that technology and telecommunications investments might 

be more properly considered as a regional economic development strategy, SWVTC was 

formed in 1999 as a 501(c) 6 institution to address high technology and telecommunication 

issues and industries in a 13-county region of Southwest Virginia and promote the region to 

other parts of the state. SWVTC is one of nine technology councils in Virginia. Because 

Southwest Virginia’s interests are closely tied with the Johnson City MSA in Tennessee, 

SWVTC is also partnered with the Northeast Tennessee Technology Council. According to 

Nichole Sikora, Director of the Council, “amplifying” regional initiatives is part of the 

Council’s mission.39 

Rep. Boucher works closely with Washington County and the regional industrial development 

marketing councils—Peaks of Virginia and Southwest Promise—to promote the region to 
96 

corporate America. These efforts include extending invitations to corporate leaders the 

Congressman meets in Washington D.C. and conducting a tour program “Showcasing 

Southwest Virginia.” It is difficult to assess the success of these tours. Nonetheless, these 

efforts may have helped increase the region’s visibility and Rep. Boucher has been a 

successful agent for creating public-private and private-private partnerships and an 

atmosphere conducive for technological and economic development in the region. 

The optimism of these key players is more than matched by significant development 

challenges. Local economic development leaders report that despite the relatively good 

telecommunications connectivity in the area, telecommunications technologies are 

underutilized because people fail to see new ways of using telecommunications beyond web 

browsing and email. Like many other Appalachian communities, the businesses and people in 

the area as a whole underestimate the economic potential of telecommunications technologies. 

Related to this perception issue is the fact that many young people from the area do not come 

back after receiving post-secondary education in outside regions, making it difficult to enrich 

the local technology base. One economic development leader expressed her concern over the 

local shortage of innovative ideas and brain drain from the area. Furthermore, the relatively 

low educational attainment in the county (7 percent of the county population have Bachelor's 

degrees, and 50 percent have high school degrees) adds another barrier to the creation of more 

high-tech businesses. 

The president of the Washington County Chamber of Commerce described education as one 

of the key challenges to the region, as it suffers from high illiteracy rates in the adult 

population and family legacies that undervalue higher education or even high school 

education. He was further concerned that the public high schools were chronically under 

funded and produce students ill prepared for either entering the workforce or post-secondary 

education. This is a formidable challenge considering the fact that Washington County is 

primarily an agricultural economy. In addition, the financial community in the area has not 

developed enough confidence in financing high-tech startups. One bank official from 

Washington County attributed the lack of confidence to the high bankruptcy rate of high-tech 

ventures and to the fact that many high-tech startups lack substantial assets that lenders can 

use as collateral. 

Thus, although we observed some important indications that telecommunications is becoming 

part of the economic development strategies in Washington County, social, economic, and 

educational barriers remain. 

Conclusion: The Role of ICT and Connectivity in Shaping the Economic Future 

of Four Counties 

The four Mississippi and Virginia counties reveal important barriers and opportunities 

associated with enhancing ICT infrastructures and capacities to improve economic 

development prospects. Considering similarities and differences between the study counties 

helps identify the structural and policy variables that have the strongest influence on ICT 

access and capacity building. Moreover, the cases highlight policies and initiatives that are 
97 

bringing new technologies and know-how into local businesses and public institutions and 

suggest new opportunities to accelerate appropriate ICT adoption. 

Socioeconomic conditions in each of the four counties clearly influence actual ICT adoption 

as well as attitudes about the importance of these technologies in economic development. In 

Noxubee and Scott counties, with lower population densities and thinner industrial structures 

based on basic processing and manufacturing, ICT adoption and connectivity are more limited 

and are not seen as priorities in ongoing economic development plans. Monroe County can be 

viewed as an intermediate case. While Monroe does not have the diverse service oriented 

industry structure or innovative initiatives of Washington County, the area does have more 

advanced business users and more apparent Internet connectivity than Scott or Noxubee 

counties. The higher level of broadband access and ICT adoption in Washington County is 

related to its larger, slightly more affluent population, more diverse industrial structure and its 

deeper links to the neighboring metro region. 

 

State policies in Mississippi and Virginia, including the ways each state invests 

telecommunications service funds, influenced deployment and use of ICT in the study 

counties. Mississippi’s receipt of High-Cost funds resulted in its regulatory commission 

working out arrangements with Bell South to expand the geographic range of local area 

calling, upgrade infrastructure and reduce loop lengths, all without raising rates (in fact, rates 

for some calling plans dropped). The high USF grant allowed some upgrading of basic 

service, and may serve to facilitate DSL deployment. High-Cost investments did not stand out 

as much in Virginia, but aggressive State and university initiatives to extend high capacity 

broadband networks to all state and local government institutions and even private firms has 

had measurable effects on ICT literacy and adoption. The more robust public networks in 

Virginia have improved public sector performance, and have increased engagement by youth 

and community groups via community web sites and networks and generated greater public 

awareness of the potential value and importance of ICT applications. A common success 

across the cases was the ability of school districts and libraries to leverage E-Rate and other 

federal and state programs to provide sophisticated high quality computer and Internet access 

and training to students and citizens. These efforts have significantly improved ICT literacy 

and skills in the emerging workforce, and this will facilitate more rapid business adoption. 

In looking at the level of ICT access and capacity among the four counties, the role of local 

leadership stands out as a crucial factor. Washington County, with a federal representative and 

local political and civic leaders focused on the development potential of ICT, presents a stark 

contrast to the other counties. In Washington County there is tremendous optimism regarding 

the potential for ICT, and a focus on the role of advanced telecommunications. The County 

has moved in comprehensive ways to ensure that training is available for ICT, and it has 

forged solid working relationships with providers (Sprint and NTELOS). Local businesses are 

using some advanced telecommunications services, and with the active marketing of the City 

of Bristol’s fiber project, it seems assured that additional service options will be introduced to 

the region. There are a few strong advocates in the private sector and in the school districts of 

the surrounding three counties, and civic and economic development leaders are aggressively 

pushing local telecommunication providers to expand services or making the adoption of new 

technologies a high profile local issue. 

Local initiative is also a factor in stimulating a competitive environment of service providers. 
98 

The efforts of local institutions in Washington County to build local broadband networks has 

brought in private providers (in the case of the Abingdon/NetAccess/Sprint partnership on 

EVA) or created a new local vendor (Bristol Virginia Utilities Board). The presence of 

multiple telecommunications vendors and projects improves access, reduces costs and pushes 

providers to market their services aggressively and provide better information to potential 

customers. 

Findings on business adoption of ICT were consistent on most levels across the four cases. 

Larger externally owned facilities in manufacturing, banking, and distribution were mostly 

advanced users of ICT that relied on their parent firms to secure network access and internal 

ICT expertise. While key branch plants do bring advanced ICT expertise to rural counties, this 

know-how does not spill over to local suppliers or other segments of the local economy. ICT 

use was generally quite limited in locally owned manufacturing firms and smaller local 

service sector firms. With the exception of Washington County, these firms could only gain 

broadband access through T-1 connections that were often cost prohibitive. Most locally 

owned establishments faced formidable barriers in understanding connectivity options or how 

to implement the new technology in amended business plans. Small and medium-sized 

businesses generally needed assistance in evaluating ICT options. 

How important is improving ICT access and capacity to future economic development in rural 

Appalachian counties? It is difficult to draw firm conclusions from the information gleaned 

from local economic development personnel. Washington County is the only case where ICT 

access and deployment was a major component of the local economic development strategy. 

In the other three counties, ICT and connectivity issues were not seen as major economic 

development priorities. In Monroe, Noxubee and Scott counties, economic development 

strategies centered on retaining and attracting external branch plant investment. Given the 

ability of larger firms to manage their ICT needs, local officials do not get strong feedback 

from the business community about potential problems or opportunities. Problems of basic 

infrastructure, education and job readiness stand out as more obvious and immediate needs. 

However, there were some indications that local development practitioners themselves did not 

fully understand the implications or opportunities associated with ICT. First, while 

inadequate and expensive access to broadband may not inhibit more basic manufacturing 

branches, it may limit opportunities to attract heavier users of ICT and broadband such as call 

and service centers. More significantly, if these counties wished to pursue economic 

development strategies based on growth of locally-based service firms or attraction of higher 

skilled manufacturing or service activities, current barriers to ICT access and adoption would 

need to be more energetically addressed. 

For small to medium sized local businesses in sectors such as health care, tourism,

entertainment and craft, and business services, the cost of broadband is a significant problem 

for expanding markets and improving productivity. With DSL services varying from $30-$50 

dollars per month versus ISDN or fractional T1 starting at $150 per month and typically 

costing $300-$500, expanded DSL service in the three underserved counties would remove a 

major cost hurdle for smaller local enterprises. In Washington County, with DSL widely 

available, many smaller businesses are pursuing telecommunications-based opportunities 
99 

Overcoming information and capacity deficits faced by locally owned firms would require 

more intensive, tightly targeted technical assistance. Two programs, one in Mississippi and 

one in Virginia serve as valuable prototypes. The ICT technical assistance program targeted to 

small businesses operated out of Mississippi State University trained county agricultural 

extension agents in small business ICT applications so that they could provide basic technical 

information to local farmers and businesses. The MSU extension center also offers specialized 

training and consulting to farmers and agricultural processing firms, bed and breakfast 

establishments and small retail firms. The Center also offers a web-site analysis service for 

small businesses. The technical assistance project at Southwest Virginia Higher Education 

Center in Washington County, offering small businesses expert help in understanding ebusiness applications and aiding in web page and web site design, also represents the kind of 

intensive assistance needed to accelerate small business adoption. 

One goal of such technical assistance might logically be to organize user groups in the regions 

so that smaller businesses can share experiences, help each other evaluate needs, and possibly 

combine their efforts to persuade vendors to present them with reasonably priced solutions to 

their problems. 

In sum, if the three counties with severe access and capacity problems want to avoid being 

limited to their current branch plant attraction strategies, more focused and durable efforts to 

overcome ICT access and capacity must be considered. One low cost way to start this process 

would be to encourage the formation of ICT user groups. The case findings show that there 

are number of advanced users (e.g, IT managers at branch plants and IT personnel in K-12 

and Community colleges). If these advanced users could be brought together into local groups 

they could spread important information about technology options, quality of various services, 

and could mentor smaller firms in ICT adoption. Such user groups could also provide a 

powerful collective voice to encourage service providers to improve and expand ICT services. 

User groups could also be a significant catalyst in counties with little history or expertise in 

evaluating ICT needs or options. 
100 

CONCLUSIONS 

This report leads to a number of conclusions regarding supply and demand for 

telecommunications services in the ARC region and the relationship between economic 

development options and communications infrastructure. Uneven access to information 

technologies and capacity barriers to exploiting these technologies for development purposes 

represent the primary digital challenges for Appalachia. This study has documented both the 

technology access gap and the capacity barriers facing many rural and low-income 

Appalachian communities. Despite these challenges, there are numerous examples and 

opportunities in Appalachia for utilizing information technologies to spur economic and 

community development. For example, several states have adopted programs that seek to 

expand broadband availabilities, and numerous communities have sought to expand their 

telecommunications options by investing in improved infrastructure. Certain business sectors 

perceive the utility of telecommunications to improve their efficiency, and they have the 

capability of and interest in drawing services to their regions. 

Furthermore there are numerous policy options that promise to improve the quality and 

breadth of infrastructure and access. These include demand aggregation strategies, regulatory 

leveraging, USF policies, technological developments and applications (particularly with 

wireless), and innovative ways of leveraging state network infrastructure. 

Key findings include the following.

First, the leading producers of ICT products and services have a relatively weak 

presence in the Appalachian region and experienced below average growth over the 

1990s. The region is becoming more dependent on external suppliers, especially in higher 

technology segments of producer industries, and did not fully share in the growth and 

innovation generated by these industries over the past decade. The absence of leading edge 

producer firms has likely had some dampening effect on the size and capacity of the region's 

user community and on demand for advanced services. Personnel in ICT producing industries 

are often the first to be exposed to new technologies, often becoming early adopters and 

advanced users. 

However, the ICT-producer industries did grow faster than the overall rate for the 

region as a whole. The ARC region shared in the late 1990s boom in IT producing industries 

with employment growing by over 45 percent. In addition, the growth in the number of 

business establishments in both producer and user sectors was healthy, and this may promise 

some potential future growth in employment. Robust investment in ICT producing and using 

industries can spur growth and development through four main channels: increased 

innovation; improvement in product or service quality; increased productivity; and expansion 

of markets. The current size and export posture of ICT industries in the ARC region suggests 

opportunities to produce higher-end ICT products locally to substitute for current imports. 

This could be fostered by either selective business attraction strategies or innovative efforts to 

support and assist emerging regional firms in these sectors. 

Substantial infrastructure deficiencies exist in more rural regions of ARC. While the 

metropolitan regions (e.g., Pittsburgh, areas surrounding Atlanta, and so forth) exhibit the 
101 

predictable patterns of more telecommunications options for high speed providers, other areas 

are generally left with only one service provider, the incumbent local exchange provider. The 

zip codes of the Appalachian region exhibit fewer high-speed service subscribers than zip 

codes outside of that region, according to FCC statistics. Many parts of the Appalachian 

region – especially the more rural areas – have lower penetration rates of home computers, 

Internet access and even basic telephone than the national average. DSL-capable lines are 

unavailable over wide swaths of the area. Cable modem is also not available in many areas 

and is not appealing for many businesses due to security concerns, and more advanced 

technologies are not on the immediate horizon for rural Appalachia. This report finds that 

access to advanced telecommunications at prices affordable to local businesses is a significant 

barrier in parts of the ARC region. 

Nevertheless, there have been substantial changes in infrastructure in the past few years. 

Computer and Internet penetration statistics have risen rapidly in many ARC states, with 

growth rates particularly strong in areas that had lagged behind. Most states have school 

and/or libraries programs that help these important social institutions to obtain e-rate funding, 

foundation funding (the Gates Foundation has been particularly helpful to many rural 

libraries), or preferred rates and service on their Internet connectivity. Even so, the states 

experiencing substantial, recent growth in technology use are still behind by a variety of 

access measures, suggesting that the technology gap across the 13 states is still substantial. 

Overall, the ARC region - particularly rural areas - is highly dependent on incumbent 

telephone companies for high-speed services as well as basic telecommunications 

infrastructure. Competitive pressures are relatively low in the Appalachian sub-regions. For 

example, most of the states with counties in the Appalachian region have fairly low numbers 

of competing local exchange companies, although New York’s, Georgia’s and Pennsylvania’s 

Bell Operating Companies have been approved to offer long distance services. Maps of 

CLEC locations illustrate their disproportionate clustering in urban areas. 

The presence of competitors, particularly competing local exchange companies or 

CLECs, can produce improved services at better prices. In urban areas where competition 

is more pervasive, there are alternative ways to obtain high quality basic as well as advanced 

services. Such competition exists only rarely in more rural regions. Washington County in 

Virginia presented a compelling illustration of how such competition can invigorate a 

community’s vision of its economic future. Competing vendors can have the effect of 

educating the business and broader user communities about the value of network capabilities 

and the range of services that are available. Without such competition, an incumbent provider 

has a reduced incentive to work with the community to ensure that businesses are getting what 

they need. This is particularly important for local businesses that lack a corporate parent; the 

latter use telecommunications professionals for telecommunications facilities throughout their 

corporate structure. 

The backbone providers’ trunk lines and nodes are not plentiful in much of the ARC 

territory. We note that the distance of many telecommunications service providers to 

Internet backbones, the so-called middle miles facilities, is great enough to be a concern to 

many would-be providers. Backhaul costs are not insignificant in data transmission services 

from more remote regions of the ARC states; the locations of points of presence for local 

companies to “hand off” their data traffic are typically in metro regions and often across 

LATA lines that invoke long distance traffic rates. The National Exchange Carrier’s 
102 

Association’s study of middle mile facilities concludes that “long distances to Internet 

backbone provider nodes and lack of market size are key factors that raise the cost of offering 

high speed DSL service in many rural areas above the going retail rate in urban areas” 

(NECA, 2001). Some of the smaller telecommunications providers with whom we spoke 

noted the same. 

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. This is one bright spot in the Appalachian region telecommunications 

landscape. Such public facilities are in unique positions to ease the digital divide between 

citizens that have their own computers and Internet connections and those that lack either 

computers or Internet links. There is some untapped potential for these sites to be used as 

gateways to more widespread familiarity with network-based technologies and applications 

through after-school programs in schools or through training programs at libraries. 

Another bright spot in high-speed infrastructure development is the creation of 

alternative networks under the auspices of communities or utilities. Virginia has several 

“electronic villages,” and although some are simply websites, other entail the creation of high 

capacity networks. Some utilities also are undertaking the construction of such networks in 

their service territories. Although some states prohibit or limit such developments, others 

encourage it. Such network efforts create healthy competition for telecommunications 

incumbents. Some federal and regional funding has gone toward the creation of community 

networking efforts in places such as Blacksburg, Virginia and LaGrange, Georgia. Those 

endeavors are at root economic and community development efforts in that they seek to bring 

telecommunications capabilities to broader constituencies for the purposes of improving the 

local quality of life; they may ultimately contribute to business improvements, as the sponsors 

of the Blacksburg Electronic Village at Virginia Tech have noted. Indeed, several Virginia 

leaders’ vision of community-controlled regional networks for telecommunications seems to 

combine the goals of community control with superior infrastructure capabilities with a view 

to attracting technology-related employers. 

Universal service funding of E-Rate and the Rural Health Programs indicate that ARC 

counties taken together have received a per-capita allocation of funds significantly lower 

than that of the nation as a whole. Funding for these programs on a region-wide basis was 

over $291 million during the period 1998-2000 or $12.76 per capita, significantly below the 

national average of $20.05 per capita. This is a surprisingly low level of funding given the 

number of rural and economically distressed counties in the region. Among the 13 

Appalachian states, six states exhibit positive net flows of USF overall payments and 

contributions. These states—Alabama, Georgia, Kentucky, Mississippi, South Carolina, and 

West Virginia—correspond to the six states most reliant on the high-cost program.

States in the Appalachian region have adopted a range of telecommunications 

infrastructure deployment policies with the aim of enhancing access in rural areas 

(among other goals). Overearnings cases, merger approvals, and deregulation legislation 

comprise some common policy occasions for negotiating broadband commitments with 

incumbent LECs. State USF programs, though still relatively young, may prove to be 

mechanisms to target the needs of rural regions. We noted that about half of the ARC states 

have created Universal Service Fund programs that may enhance services provided in the 
103 

target Appalachian regions. State USF funds offer opportunities to identify the neediest 

regions of a state and to channel support to those regions. Some states would benefit from 

understanding the range of USF plans other states have considered. 

States can usefully leverage their investments in statewide public networks. As illustrated 

in Virginia, Net.Work.Virginia was developed to provide an ATM network and Internet 

service statewide. NWV is the result of the collaboration among Virginia Tech, Old 

Dominion University, and the Virginia Community College System, and aims at providing 

universal access to advanced broadband communication in the state. On an entirely different 

front, Virginia sponsors “Electronic Villages” throughout the states, at minimum facilitating a 

web presence for towns and cities. Every state we examined has a statewide network used for 

agency transactions, but some networks are friendlier than others as far as extending 

broadband capabilities to other users is concerned. 

Many states have special initiatives, often organized out of Economic Development or a 

Governor’s offices, focused on the digital divide. Those initiatives sometimes simply studied 

the problem in their regions, but sometimes they went considerably further. Alabama, for 

example, undertook an investigation of the local digital divide, but it led to no specific 

programs of which we are aware. North Carolina, on the other hand, undertook a careful 

telecommunications infrastructure assessment, and implemented some major programs to 

insure Internet access in each county. 

Lack of information combined with access barriers limit the effective adoption of ICT 

and network services across Appalachia. Lack of access to affordable, quality 

telecommunications and broadband service cuts off many small-to medium sized locally 

owned enterprises from more advanced uses of leading edge ICT. However, these business 

segments encounter major difficulties when they do attempt to adopt new technologies and 

integrate them into their businesses. Locally based businesses have difficulty understanding 

and evaluating technology needs and choices, integrating new technology into amended 

business plans, and implementing new technologies in ways that improve competitiveness and 

market reach. 

These difficulties are related to the lack of service associated with the current conditions of 

ICT related markets in rural and low-income communities. 

Private sector production and dissemination of information regarding ICT hardware, 

software and connectivity integration options is under-supplied by the market, especially 

in rural areas. The lack of competitive vendors, noted above, reduces customer outreach and 

product and service information. Learning by observing competitor or supplier firms is also 

limited in areas with few leading producers or advanced users. Finally, access to competitive 

communities of ICT consulting firms and support service firms is limited, making it difficult 

for local firms to acquire quality information about technology choices or to maintain and 

upgrade ICT applications.

ICT access and capacity barriers disadvantage economic development in rural ARC 

counties. The case study research suggests that ICT barriers do not seem to be strongly 

influencing current investment and location decisions of large externally owned firms in rural 

counties. In large part, these firms have been able to secure the technologies, access and 
104 

expertise they need from parent organizations. However, in three of the case study counties 

large branch facilities voiced serious concerns about the quality of basic services and service 

delivery of the local provider. Additionally, it was clear that local non-profits and county and 

city governments could benefit from improved access to information and communication 

technologies, but access to consultant and advisors is scant or expensive. 

The poor quality of local services is a function of the absence of competition and service 

delivery in rural counties, but deficient general service could influence future location and 

consolidation decisions of larger multi-plant firms. Moreover, limited and expensive access to 

advanced services precludes attracting larger firms in ICT intensive segments such as call 

centers and back office service facilities 

Limited ICT access and use was found to be a particular problem for the health care 

sector in rural communities. The federal government and large insurance providers are 

increasingly demanding that health care organizations work through centralized databases for 

insurance and payment processing. Local heath facilities are also under pressure to secure the 

capacity to transfer records and patient information to retain membership in provider 

networks. Both larger hospitals and rural health clinics were having a difficult time securing 

the broadband access and implementing these more advanced data management and transfer 

applications increasingly being demanded in the sector. Moreover the exciting opportunities 

offered by more advanced telemedicine applications were not being widely exploited in the 

rural counties studied. 

ICT barriers in rural communities are having the most profound effect on the growth 

and diversification of locally based manufacturing, service and trade sectors. Some 

dampening of market opportunities in these sectors is obvious while in other cases losses are 

more hidden. Firms and entrepreneurs in small business sectors such as tourism and leisure, 

local crafts, and specialty agriculture are aware that the innovative use of computer and 

Internet technologies are becoming central in their marketing and sales. Other firms, such as 

local retailers or manufacturers, may not see ICT adoption and network capacity as crucial to 

their business but will quietly and increasingly lose sales to more advanced national firms 

marketing and selling aggressively over the Internet. 

DSL deployment in rural areas can be a very important factor in expanding advanced 

uses of ICT in the short to medium term. While DSL is an interim technology to extend 

broadband capability and eventually will be supplanted by fiber optic and wireless 

technologies, it constitutes the only option for low cost broadband for rural businesses over 

the next three to five years. With DSL services available in the $30-$60 range, versus ISDN 

or fractional T-1 lines starting at $150 per month and typically costing $300-$500, DSL 

service would eliminate a major cost hurdle for smaller firms. At the same time DSL offers 

the speed and capacity that most small to medium size firms currently require for data and 

graphic transfer. Policies and initiatives to accelerate the proliferation of DSL in smaller cities 

and towns in rural communities would be major advance in expanding broadband access and 

ICT adoption. 

 

Case studies underscored the significance of the broader economic and demographic 

context for the relationship between telecommunications and economic development. 
105 

The influence of statewide policies or infrastructure issues (ranging from state regulatory 

structure issues to universal service funds to prohibitions on municipal utilities providing 

telecommunications services) must be acknowledged. There is no “cookie cutter” approach 

that will work everywhere. 

Population density, wealth, and the presence of certain user industries do appear to explain 

different broadband development and adoption patterns. Against those structural features the 

strong role of leadership is apparent: it inculcates local visions for the telecommunications 

infrastructure that would bring economic aid. Local understandings and awareness of, and 

ability to exploit opportunities will condition the efficacy of any telecommunications 

deployment plan. Thus, whereas Washington County possesses local leadership and has been 

adept at growing local competitive telecommunications offerings, a county such as Noxubee 

has little chance of envisioning the types of economic opportunity that ICT could offer. 

Policy Options 

Policy options intersect the marketplace of telecommunications supply-and-demand at several 

points. Much of Appalachia does not offer the intrinsically lucrative market that will invite 

competition and plentiful supply of services. The goal of stimulating telecommunications 

competition in more rural regions of the country will always be elusive, and even the current 

federal proposals offer no guarantees that certain portions of the country will ever be served 

by more than a single incumbent telecommunications provider. The important consideration 

should be to identify policies which will enhance opportunities in the regions that are not 

intrinsically attractive to vendor - the less populous, more remote regions that are unlikely 

candidates for the operation of robust market forces. If alternative infrastructure is only 

sparsely developed - and current data certainly demonstrate that trend in the ARC counties - 

then economic development policies must locate creative ways to work with the incumbents 

or to stimulate the creation of alternatives; they also must work with the range of demand 

factors to which vendors will respond. Public initiatives to promote universal service and 

accelerate training, innovative regulatory approaches, and public-private partnerships to 

provide technical assistance must be seen as critical in closing the digital divide. 

Expand and scale-up technical assistance to small and medium sized firms in rural 

communities. Overcoming the severe information gaps depressing the adoption of advanced 

ICT by locally owned businesses requires much more extensive, focused and aggressive 

outreach and technical support efforts. The two initiatives that we profile in the case study 

section, the ICT technical assistance project operating out of the Extension Service at 

Mississippi State and the "Merchant Point" program being initiated at the Southwest Virginia 

Higher Education Center in Abingdon, are models of the intensive training and technical 

support services that can make a difference in rural ICT adoption. The case study research 

revealed that improved information and more intensive training were needed on numerous 

levels. 

As in conventional manufacturing extension, small rural firms in numerous sectors need 

assistance benchmarking their ICT and connectivity capacities to industry or "best practice 
106 

standards". They need additional assistance in understanding how ICT adoption relates to 

their current operations and how it could expand B2B and B2C opportunities. 

In addition, firms need quality information and assistance to aid in selecting specific 

technologies and vendors. Public sector initiatives and public-private partnerships to 

overcome these information gaps could not only accelerate adoption and make local firms 

more competitive, but also could stimulate demand and attract support service providers. 

Finally smaller firms need to be linked to an ongoing network of information sources and 

training opportunities to maintain and upgrade their systems as technologies change. Because 

small and medium size enterprises lack the internal know how and resources to secure these 

services, public sector support is necessary and warranted. There is an array of delivery 

mechanisms for this set of services, but the literature suggests that ongoing face-to-face and 

small group contact is needed to overcome psychological and know-how barriers and help 

transform smaller firms into sophisticated ICT users (Lasley et al., 2001). 

Aggressively support the formation of user groups in rural communities. A second and 

highly complementary means to improve information and learning about technology and 

adoption choices is the formation of user groups in rural counties. This report has emphasized 

that small communities of advanced ICT users exist even in poor, relatively underdeveloped 

rural counties. These users (like the IT administrators of larger firms and administrators of 

school and library networks) could be brought together into groups that meet and provide 

outreach on a regular basis under the auspices of local development organizations or 

Chambers of Commerce. Such an organization could be an effective, low cost vehicle to 

improve service, ICT information and adoption in rural areas. Advanced users meeting 

together can voice their needs, and identify local problems and opportunities, and could 

provide a powerful collective voice to pressure providers to improve the quality of existing 

services and expand service options. As these user groups become more institutionalized they 

could complement the forms of technical assistance suggested above, mentoring or assisting 

smaller firms in ICT adoption. Such groups could act as catalysts in conducting needs 

assessments, bringing people together, and increasing awareness about ICT related issues. 

Assist states and localities in applying for E-rate and Rural Health program funds under 

Universal Service. Eligible institutions across the ARC region should be made aware of the 

federal resources and receive assistance with grant applications as well as with planning and 

implementation. There is a varied rate of success with e-rate funding across the states. 

Certain techniques of applying for e-rate funds might be superior in some states, and it may be 

useful to understand the process by which e-rate funds are obtained in more detail from state 

to state. E-rate programs in particular have the potential to enhance the educational 

capabilities of areas that historically have not had equal access to information and training. 

Schools and libraries can be in the vanguard of information age services to rural regions. 

Support the expansion of public institutions’ roles in offering broadband access. Some 

schools and libraries participate in projects that allow their facilities to be used after hours, but 

programs like this could be more widespread, utilizing additional public facilities. Locating 

telecommunications access or facilities in public institutions expands the outreach potential of 

those sites. Non-profit and economic development organizations can take a leadership role in 

actually providing information and communication services to their regions. 
107 

Demand aggregation strategies should be supported. Such strategies improve the 

bargaining power of communities with incumbents and other telecommunications providers in 

order to enhance infrastructure and access in underserved regions. Creatively working with 

state networks in order to share resources and to use the state as an anchor tenant should be 

explored more thoroughly and encouraged where appropriate. Small businesses are 

sometimes left out of statewide demand aggregation strategies. Policies need to be crafted 

that will find ways to leverage improved services for these users as well as other public 

organizations and interests. Fragmenting local demand by removing large, public sector users 

from the demand pool should be avoided and instead replaced with policies that can extend 

services to multiple constituencies in economic ways. 

Identify and disseminate information on model programs. Some telecommunicationsrelated decision-makers (from utility commission staff to local economic development 

officials) in ARC states do not have the staff to research developments around the country, 

and many could use information about model programs, particularly if they note successes 

and failures. Insofar as every state’s authority and governance structure regarding 

telecommunications is different from those of other states, it is worthwhile to insure that as 

many people as possible have the best information available. Such information could include 

rates (For T-1s, for ISDN, etc.), facets of Section 271 compliance, types of broadband 

deployment programs being developed regionally and statewide, the range of statewide 

network projects, and universal service funding programs. Above all, the broad range of 

policymakers requires better information on their options, the costs and benefits of those 

options, and on how they can interact with the vendor community most effectively. 

Monitor state regulatory efforts to leverage improvements in infrastructure and service. 

Along with improved information sharing come ideas for adapting policies to other settings. 

Tracking what other states are doing can provide benchmarks as well as new ideas for 

improving infrastructure. 

Support demonstration projects with alternative technology providers. There are several 

projects and experiments in place currently. Some of the better-known ones, such as the 

Blacksburg Electronic Village in Virginia, represent creative use of technology that does not 

rely entirely on large incumbent LECs, which often seem reticent to work with rural and/or 

less populous communities. The potential for wireless broadband ISP services is under active 

scrutiny, and satellite-delivered broadband services likewise are in their formative stages. 

With some foresight and financial support, a new crop of experimental projects may 

demonstrate the potential for broadband in the Appalachian region in ways that are more 

definitive than those so far in evidence. We encourage ARC to build careful, longitudinal 

evaluation plans into such efforts so that outcomes can be measured with the appropriate level 

of insight and with robust data. 

Continue to monitor broadband deployment and work with organizations attempting to 

initiate national or statewide deployment policies. The year 2002 will be very significant 

for creating policy regarding broadband in the US. Providers and equipment manufacturers 

have a great deal at stake, and the business community recognizes that it too has a role in 

deciding where these technologies should be available, and at what cost – social, political and 

economic. Numerous consumer-oriented organizations are weighing in on the importance of 
108 

broadband, and many argue that broadband belongs in the definition of universal service. 

ARC could play an important role in keeping its regions informed about these debates and in 

organizing and channeling input from the regions that typically lack much voice in these 

debates. 

 
109 

REFERENCES 

Allen, J. and E. Koffler (August, 1999). The Telecommunications Act of 1996: Its 

Implementation in the U.S. South. Unpublished paper, Southern Rural Development 

Center. 

Barr, F. and Riis, A.M. (2000). "Tapping User Driven Innovation: A New Rationale for 

Universal Service," The Information Society, 16, 99-108. 

Belinfante, A. (1999, Feb.) Telephone Subscribership in the United States (Data through 

November 1998). Washington D.C.: Federal Communications Commission. 

Belinfante, A. (2001, March). Telephone Subscribership in the United States (Data 

through November 2000). Washington D.C.: Federal Communications Commission. 

Blacksburg Electronic Village (1999). Community Network Briefing Book. Blacksburg, 

VA: Virginia Polytechnic Institute and State University. 

Boardwatch Magazine. (2001) Boardwatch Magazine's Directory of Internet Service 

Providers. 

Bonnett, T. (2001). “Starting a Telecommunications Plan in Your Community.” Rural 

Research Report, 12 (8), Illinois Institute for Rural Affairs, Spring 2001. 

"E-Biz: Down But Hardly Out." (2000, March 26). Business Week, 130. 

CableDataCom News. (2001, March 7). Commercial Cable Modem Launches in North 

America. Retrieved from: http://www.cabledatacomnews.com/cmic/cmic7.html 

Carter, L. & Davidson, B. (2000, May 10). Covanet. Presentation. Customer Summit, 

Virginia Department of Information Technology." Retrieved from: 

http://www.dit.state.va.us/telco/covanet/ 

Carvin, A., (Ed.) (2000, February). The E-Rate in America: A Tale of Four Cities, 

Washington DC: The Benton Foundation. 

Cavazos, R. & Eisner, J. (2001). State-By-State Telephone Revenues and Universal 

Service Data. Retrieved from: 

http://www.fcc.gov/Bureaus/Common_Carrier/Reports/FCC-State_Link/lec.html 

Castells, M. (1996). The Rise of the Network Society. Oxford, UK: Blackwell. 

Choi, S. (2000). The Internet Economy: Technology and Practice, Austin Texas, 

SmartEcon.com. 
110 

City of Bristol, Virginia, etc., v. Mark L. Earley, Attorney General, et. al. (2001). 145 F. 

Supp. 2d 741; 2001 U.S. Dist. LEXIS 6325. 

Cohen, S., DeLong B., and Zysman, J. (2000). "Tools for Thought: What is New and 

Important about the E-Conomy," BRIE Working Paper #138. Berkeley, CA: University 

of California at Berkeley. 

Cronin, F., Colleran, e., Herbert, P. and Lewitzky, S. (1993). "Telecommunications and 

Growth". Telecommunications Policy. 

David, P. (1991). "Computer and Dynamo: The Productivity Paradox in a Not-TooDistant Mirror." Technology and Productivity: The Challenges for Economic Policy. 

Paris: OECD, 315-347. 

David P. (2000). "Understanding Digital Technology's Evolution and the Path of Measure 

Productivity Growth: Present and Future in the Mirror of the Past." in Brynjolfsson, E. 

and Kahin, B. Understanding the Digital Economy. Cambridge, MAs: MIT Press, 49-95. 

Dholaka, R. and Harlam, B. (1993). “Telecommunications and Economic Development: 

Econometric Analysis of the U.S. Experience.” Telecommunications Policy, 17. 

DeVol, R. (1999). America's High Tech Economy. Santa Monica, CA: Milken Institute. 

E-Con Ohio web site (2001). Available at http://www.ecom-ohio.org/. 

Egan, T. (1995). The Development and Location Patterns of the Software Industry in the 

U.S.. Unpublished doctoral dissertation. Berkeley, CA: University of California, 

Department of City and Regional Planning. 

Federal Communication Commission, (1999, December). Monitoring Report. CC Docket 

No. 99-202, Federal State Joint Board. 

Federal Communications Commission. (2000, June 6). FCC and States Jointly Develop a 

Nationwide Database of Broadband Deployment Activities. Press Release. Washington 

DC: Federal Communications Commission. 

Federal Communications Commission (2000, August). Deployment of Advanced 

Telecommunications Capability: Second Report. Washington DC: Federal 

Communications Commission. 

“The Success of the E-rate in Rural America.” (2001, July). The Main Street Economist. 

Kansas City: Federal Reserve Bank. 

Frechtling, J., Silverstein, G., Snow, K. and Somers, L. (2000, March). Technology 

Opportunities Program 1996 Projects. Washington DC: Westat/National 

Telecommunications and Information Administration. 
111 

Gaspar, J. and Glaeser, E. (1998). "Information Technology and the Future of Cities," 

Journal of Urban Economics, 43(1), 136-156. 

Gilder, G. (2000). Telecom: How Infinite Bandwidth Will Revolutionize Our World. New 

York: Free Press. 

Glasmeier, A. and Howland, M. (1999). From Combines to Computers: Rural Services in 

the Information Age. Boulder Colorado: Netlibrary Inc. 

GeorgiaPublicWeb. (2001, September 4). “Georgia Public Service Commission 

Approves High-Speed Connection to Rural Georgia.” Press Release. 

Governor’s e-Communities Task Force. (2001). Building a Digital Community: A 

Leadership Guidebook. Unpublished paper, Virginia Governor’s e-Communities Task 

Force, Roanoke, VA. 

Grant, R. and Huston, T. (2000). "Designing Organizations to Implement E-Commerce: 

Integrating Observation and Theory," Working Paper. Center for Research on 

Information Technology and Organizations, Graduate School for Management. Irvine, 

CA: University of California at Irvine. 

Greenstein, S. (2000). "The Evolving Structure of Commercial Internet Markets," in

Brynjolfsson, E. and Kahin, B. Understanding the Digital Economy. Cambridge, MA: 

MIT Press, 295-324. 

Johnson & Johnson Associates. (2001, June). Technology Opportunities Program 1996 

and 1997 Projects. Fairfax, Virginia: Johnson & Johnson Associates and National 

Telecommunications and Information Administration. 

Kling R. and Lamb, R. (2000). "IT and Organizational Change in Digital Economies: A 

Sociotechnical Approach." in Brynjolfsson, E. and Kahin, B. Understanding the Digital 

Economy. Cambridge, MA: MIT Press, 295-324. 

Lasley, P., Padgitt, S., and Hanson, M. (2001). Telecommunications Technology and Its 

Implications for Farmers and Extension Services," Technology in Society, 23, 109-120. 

Lee, C. (2001). State regulatory commission treatment of advanced services: Results of 

a survey. Unpublished paper, National Regulatory Research Institute. 

Lentz , R.G, and Oden, M. (2001)."Digital Divide of Digital Opportunity in Mississippi 

Delta Region: of the United States," Telecommunications Policy, 25, 291-313. 

Mandel, M. and Hof, R. (2001, March 26). "Rethinking the Internet." Business Week, 

117-122. 
112 

Marceau, J. (1994). “Clusters, Chains and Complexes: Three Approaches to Innovation 

with a Public Policy Perspectives.” in Dodgson, M. and Rothwell, R. (eds.) The 

Handbook of Industrial Innovation. Aldershot: Edward Elgar. 

McKnight, L., S. Gillett, S. Jackson . L. Kuechenmeister, and R. Linsenmayer. (2001). 

The Delta Technology Zone. A White Paper on Telecommunications and Economic 

Development for the Enterprise Corporation of the Delta. Unpublished Report. 

Mueller, M. (1997). Universal Service: Interconnection, Competition and Monopoly in 

the Making of American Telecommunications. Cambridge, MA: MIT Press. 

National Exchange Carrier Association (2001). NECA’s Middle Mile Broadband Cost 

Study. Washington, D.C.: NECA. 

National Exchange Carriers Association. (2000, October 2). NECA’s Overview of 

Universal Service Funds. Retrieved from: 

http://www.fcc.gov/Bureaus/Common_Carrier/Reports/FCC-State_Link/neca.html 

National Exchange Carriers Association. (2000). NECA Rural Broadband Cost Study: 

Summary of Results. Retrieved from: http://www.neca.org/broadban.asp. 

Association of Telecommunications Professionals in State Government. (2000). 

Networks: 2000-2001 State Reports. Lexington, KY: The Council of State Governments. 

National Telecommunications and Information Administration. (1999, July). Falling 

Through the Net: Defining the Digital Divide. Washington DC: U.S. Department of 

Commerce. 

National Telecommunications & Information Administration. (2000, October). Falling 

Through the Net: Toward Digital Inclusion. Washington, D.C.: National 

Telecommunications and Information Administration. 

National Telecommunications & Information Administration & Rural Utilities Service. 

(2000, April). Advanced Telecommunications in Rural America: The Challenge of 

Bringing Broadband Service to All Americans. Retrieved from: 

http://www.ntia.doc.gov/reports/ruralbb42600.pdf 

Neidigh, B. (n.d.). What Should Be the Public Role in the Development of Advanced 

Network Infrastructure? An Analysis of Commonwealth of Virginia Restrictions on 

Municipal Telecommunications. Working paper #1. Unpublished Paper. E-Corridors 

Project Virginia Tech University. 

Nicholas, K. (2000). Digital Arroyo and Imaginary Fences: Assessing the Impact of 

Public Policy, Communication Technologies and Commercial Investment on Internet 

Access in Rural Texas. Unpublished doctoral dissertation, University of Texas. 
113 

North Carolina Department of Commerce. Office of Information Technology Services, 

Telecommunications Services. (2000). Commercially Available High-Speed Internet 

Connectivity in North Carolina: Infrastructure and Prices. Unpublished report. . 

Orlikowski, W. and Iacono, S. (2000). "The Truth is Not Out There: An Enacted View of 

the Digital Economy," in Brynjolfsson, E. and Kahin, B. Understanding the Digital 

Economy. Cambridge, MA: MIT Press, 295-324. 

Parker, E., Hudson, H., Dillman, D. and Roscoe, A. (1989). Rural Development in the 

Information Age: Telecommunications Policy for Rural Development. Lanham, MD: 

University Press of America and the Aspen Institute. 

Parker, E., Hudson, H., Dillman, D., Strover, S. and Williams, F. (1995). Electronic 

Byways. (Second Edition). Boulder, CO: Westview Press. 

Parker, E.B. (2000). "Closing the Digital Divide in Rural America" Telecommunications 

Policy, 24(4), 281-290. 

Pennsylvania Public Utility Commission. (1999, Sep., 30). Global Telephone Order. 

Retrieved from: http://puc.paonline.com/Telephone/Global/Global_Telephone_Order.asp. 

Porter, M. and Millar, V.E. (2000). "How Information Gives You Competitive 

Advantage." Harvard Business Review, 63(4), 149-160. 

Price Waterhouse Coopers. (2000). Technology Forecast 2000. From Atoms to Systems: 

A Perspective on Technology. Menlo Park, CA: Price Waterhouse Coopers. 

Pultz, J., and J. Girard (November 30, 2001). Broadband Access: Think Portfolio. 

Gartner Research Note. Strategic Planning, SPA-14-8879. 

Puma, M., Chaplin, D. and Pape, A. (2000, September 21). E-Rate and the Digital 

Divide: A Preliminary Analysis from the Integrated Studies of Educational Technology. 

Washington, DC: The Urban Institute. 

Schement, J. and Forbes, S. (2000). "Identifying Temporary and Permanent Gaps in 

Universal Service," The Information Society, 16, 117-126. 

Sichel, D. (1997). The Computer Revolution: An Economic Perspective. Washington DC: 

Brookings Institution. 

Silverstein, S. (2000, April 29). Internet Economy's Boom Not Shared by All Regions. 

Los Angeles Times. 

Strover, S. (1999). Rural Internet Connectivity. Telecommunications Policy, 25,(5), 291-

313. 
114 

Strover, S., & Berquist, L. (2001). “Developing Telecommunications Infrastructure: State 

and Local Policy Collisions.” in Compaine, B. and Greenstein, S. (Eds.) Communications 

Policy in Transition. Cambridge, MA: MIT Press. 

Tallon, P., Kraemer, K. and Gurbaxani, V. (1999). "Fact or Fiction: The Reality Behind 

Executive Perceptions of IT Business Value." Working Paper: ITR-138. Center for 

Research on Information Technology and Organizations, Graduate School of 

management. Irvine, CA: University of California at Irvine. 

Task Force on High-Speed Networks. (1999, Dec. 31). Report to the Maryland General 

Assembly. Retrieved: http://www.techmd.state.md.us/Technology/TFHSN/leg-report.pdf. 

Tennessee Regulatory Authority. (2000). Tennessee’s Digital Divide. Retrieved: 

http://www.state.tn.us/tra. 

Thierer, A. (2000, April). “How Free Computers are Filling the Digital Divide.” Heritage 

Foundation Backgrounder, No. 1361, 1-21. 

Tapscott, D., (1996). The Digital Economy: Promise and Peril in the Age of Networked 

Intelligence. New York, NY: Mcgraw Hill. 

"While Welch Waited." (2001, March 19). The Economist. 75-76. 

Universal Service Administrative Company. (2001). 2000 Annual Report: Reaching and 

Connecting Americans. Washington, D.C.: Universal Service Administrative Company. 

The Urban Institute and U.S. Department of Education. (2000). E-Rate and the Digital 

Divide: A Preliminary Analysis from the Integrated Studies of Educational Technologies. 

Washington DC: The Urban Institute and U.S. Department of Education. 

U.S. Census Bureau (2000). State and County QuickFacts. Retrieved from: 

http://quickfacts.census.gov/qfd/ 

U.S. Department of Agriculture. (2000, April). Advanced Telecommunications in Rural 

America: The Challenge of Bringing Broadband Service to All Americans. Washington 

DC: U.S. Department of Agriculture. 

U.S. Department of Commerce. (1996). Technology Opportunities Program: Evaluation 

Report 1996 Programs. Washington DC: U.S. Department of Commerce, NTIA. 

U.S. Department of Commerce, (1997). The Emerging Digital Economy. Washington 

DC: U.S. Government Printing Office. 

U.S. Department of Commerce. (1999, June). The Emerging Digital Economy II. 

Washington DC: Economics and Statistics Administration. 
115 

U.S. Department of Commerce, (2000a, June). Digital Economy 2000, Washington, DC: 

U.S. Department of Commerce. 

U.S. Department of Commerce. (2000b). Technology Opportunities Program. Retrieved 

from: http:www.ntia.coc.gov/otiahope/top/index.html. 

U.S. Department of Commerce. (2001). E-Stats, Washington DC: Economic and 

Statistics Administration. Retrieved from: http://www.census.gov/estats. 

Van Dijk, J. (2001, November). "Divides in Succession: Possession, Skills and Use of the 

New Media for Participation" Conference Paper for Digital Divide Conference, 

University of Texas, Austin Texas. 

Venkatesh, M. (2001). Out of the loop: Problems in the Development of Next 

Generation Community Networks. Paper presented at the 2001 Telecommunications 

Policy Research Conference, Washington, D.C. 

Williams, F. (1991). Telecommunications and U.S. Rural Development: An Update. 

Aspen, Colorado: The Aspen Institute. 

 
116 

APPENDIX ONE: Information- and Telecommunications-Using and 

-Producing Industries: 

1. ICT Producing Industries 

Hardware 

3571 Electronic computers 

3572 Computer storage devices 

3575 Computer terminals 

3577 Computer peripheral equipment, n.e.c 

3695 Magnetic and optical recording media 

3672 Printed circuit boards 

3674 Semiconductors and related devices 

3675 Electronic capacitors 

3676 Electronic resistors 

3677 Electronic coils and transformers 

3678 Electronic connectors 

3679 Electronic components, n.e.c. 

3823 Process control instruments 

3825 Instruments to measure electricity 

3826 Analytical instruments 

Communications Equipment 

3651 Household audio and video equipment 

3661 Telephone and telegraph apparatus 

3663 Radio & TV communications 

equipment 

Software & Services 

5045 Computers, peripherals & software stores

7371 Computer programming services 

7372 Prepackaged software 

5734 Computer and software stores 

7373 Computer integrated systems design 

7374 Data processing and preparation 

7375 Information retrieval services 

7376 Computer facilities management 

7377 Computer rental & leasing 

7378 Computer maintenance & repair 

7379 Computer related services, n.e.c. 

Communications Services 

4812 Radiotelephone communications 

4813 Telephone communications, exc. radio 

4820 Telegraph & other communications 

4890 Communication services, n.e.c. 

4830 Radio and television broadcasting 

4840 Cable and other pay TV services 

2. ICT User Industries (in addition to those listed above) 

Manufacturing Industries: 

2752 Commercial printing, lithographic 

2754 Commercial printing, gravure 

2759 Commercial printing, nec 

2760 Manifold business forms 

3810 Search and navigation equipment 

3821 Laboratory apparatus and furniture 
117 

3822 Environmental controls 

3824 Fluid meters and counting devices 

3827 Optical instruments and lenses 

3829 Measuring & controlling devices, nec 

Transportation and Public Utilities 

4210 Trucking & courier services, ex. air 

4724 Travel agencies 

4725 Tour operators 

4729 Passenger transport arrangement, nec 

4730 Freight transportation arrangement 

4740 Rental of railroad cars 

4780 Miscellaneous transportation services 

4920 Gas Production and Distribution 

Wholesale Trade 

5012 Automobiles and other motor vehicles 

5013 Motor vehicle supplies and new parts 

5014 Tires and tubes 

5015 Motor vehicle parts, used 

5021 Furniture 

5023 Homefurnishings 

5031 Lumber, plywood, and millwork 

5032 Brick, stone, & related materials 

5033 Roofing, siding, & insulation 

5039 Construction materials, nec 

5043 Photographic equipment and supplies 

5044 Office equipment 

5046 Commercial equipment, nec 

5047 Medical and hospital equipment 

5048 Ophthalmic goods 

5049 Professional equipment, nec 

5051 Metals service centers and offices 

5052 Coal and other minerals and ores 

5063 Electrical apparatus and equipment 

5064 Electrical appliances, TV & radios 

5065 Electronic parts and equipment 

5072 Hardware 

5074 Plumbing & hydronic heating supplies 

5075 Warm air heating & air-conditioning 

5078 Refrigeration equipment and supplies 

5082 Construction and mining machinery 

5083 Farm and garden machinery 

5084 Industrial machinery and equipment 

5085 Industrial supplies 
118 

5087 Service establishment equipment 

5088 Transportation equipment & supplies 

5091 Sporting & recreational goods 

5092 Toys and hobby goods and supplies 

5093 Scrap and waste materials 

5094 Jewelry & precious stones 

5099 Durable goods, nec 

5111 Printing and writing paper 

5112 Stationery and office supplies 

5113 Industrial & personal service paper 

5120 Drugs, proprietaries, and sundries 

5131 Piece goods & notions 

5136 Men's and boys' clothing 

5137 Women's and children's clothing 

5139 Footwear 

5141 Groceries, general line 

5142 Packaged frozen foods 

5143 Dairy products, exc. dried or canned 

5144 Poultry and poultry products 

5145 Confectionery 

5146 Fish and seafoods 

5147 Meats and meat products 

5148 Fresh fruits and vegetables 

5149 Groceries and related products, nec 

5153 Grain and field beans 

5154 Livestock 

5159 Farm-product raw materials, nec 

5162 Plastics materials & basic shapes 

5169 Chemicals & allied products, nec 

5171 Petroleum bulk stations & terminals 

5172 Petroleum products, nec 

5181 Beer and ale 

5182 Wine and distilled beverages 

519\ Administrative and auxiliary 

5191 Farm supplies 

5192 Books, periodicals, & newspapers 

5193 Flowers & florists' supplies 

5194 Tobacco and tobacco products 

5198 Paints, varnishes, and supplies 

5199 Nondurable goods, nec 

Finance Insurance and Real Estate: 

6010 Central reserve depository 

6020 Commercial banks 

6030 Savings institutions 

6060 Credit unions 
119 

6080 Foreign bank & branches + agencies 

6090 Functions closely related to banking 

6110 Federal & Fed.-sponsored credit 

6140 Personal credit institutions 

6150 Business credit institutions 

6160 Mortgage bankers and brokers 

6210 Security brokers and dealers 

6220 Commodity contracts brokers, dealers 

6280 Security and commodity services 

6310 Life insurance 

6321 Accident and health insurance 

6324 Hospital and medical service plans 

6330 Fire, marine, and casualty insurance 

6350 Surety insurance 

6360 Title insurance 

6370 Pension, health, and welfare funds 

6390 Insurance carriers, nec 

Business Services: 

7311 Advertising agencies 

7322 Adjustment & collection services 

7323 Credit reporting services 

7331 Direct mail advertising services 

7334 Photocopying & duplicating services 

7335 Commercial photography 

7336 Commercial art and graphic design 

7381 Detective & armored car services 

7382 Security systems services 

7383 News syndicates 

7384 Photofinishing laboratories 

7389 Business services, nec 

7513 Truck rental and leasing, no drivers 

7514 Passenger car rental 

7515 Passenger car leasing 

Health Services: 

8010 Offices & clinics of medical doctors 

8020 Offices and clinics of dentists 

8030 Offices of osteopathic physicians 

8041 Offices and clinics of chiropractors 

8042 Offices and clinics of optometrists 

8043 Offices and clinics of podiatrists 

8049 Offices of health practitioners, nec 

8050 Nursing and personal care facilities 

8060 Hospitals 
120 

8071 Medical laboratories 

8072 Dental laboratories 

Engineering, Accounting, Research and Related Services 

8711 Engineering services 

8712 Architectural services 

8713 Surveying services 

8720 Accounting, auditing, & bookkeeping 

8731 Commercial physical research 

8732 Commercial nonphysical research 

8733 Noncommercial research organizations 

8734 Testing laboratories 

8741 Management services 

8742 Management consulting services 

8743 Public relations services 

8744 Facilities support services 

8748 Business consulting, nec 

3. Transportation Equipment Industries: 

3711 Motor vehicles and car bodies 

3713 Truck and bus bodies 

3714 Motor vehicle parts and accessories 

3715 Truck trailers 

3716 Motor homes 

3721 Aircraft 

3724 Aircraft engines and engine parts 

3728 Aircraft parts and equipment, nec 

3750 Motorcycles, bicycles, and parts 

3761 Guided missiles and space vehicles 

3764 Space propulsion units and parts 

3769 Space vehicle equipment, nec 

3792 Travel trailers and campers 

3795 Tanks and tank components 

3799 Transportation equipment, nec

4. Non-Store Retail Industries: 

 

5961 Catalog and mail-order houses 

 5963 Direct selling establishments 
121 

APPENDIX TWO: Compatibility of County Business Patterns and 

The Brandow Company Data 

We drew upon two databases to estimate employment composition and change in the 

various categories of ICT industries. The first database combined Regional Economic 

Information System (REIS) and County Business Patterns data from 1988 and 1996 to 

determine employment growth in selected industries in each of four geographic regions 

detailed above. The second source was a proprietary database on detailed industry 

employment provided by The Brandow Company. This source provided estimates of 

industry employment for 1996 and 2000 at the four-digit SIC code level based primarily 

on upon credit reporting databases. The Brandow Company amalgamates databases from 

different sources, identifies and codes firm information, and aggregates them by address 

and SIC industry codes. 

The detailed industry employment estimates of the two sources for three industry classes 

were compared for 1996 by regressing four digit SIC employment estimates from the 

CBP data base on the same estimates in Brandow data base. 

Although the correlation between the detailed industry estimates appeared strong we 

choose to report results separately for 1988-1996 using the CBP database and for 1996-

2000 using The Brandow Company database. We do believe that there is sufficient 

comparability to consider trends over these two periods as capturing trends in a very 

similar set of firms and industries. 

Table 1: Regression Results for County Business Patterns and The Brandow 

Company Industry Databases for 1996 

CBP 1996 Producer 

Industries 

CBP 1996 User 

Industries 

CBP 1996 Transport 

Equip. Industries 

Brandow 1996 Producer 

Industries 

R2 = .707 _ _ 

Brandow 1996 User 

Industries 

_ R2 = .984 _ 

Brandow 1996 Transport 

Equip. Industries 

_ _ R2 = .988 

 
122 

APPENDIX THREE: Incumbent Local Exchange Carriers in the ARC 

Region and Numbers of Switches 

STATE INCUMBENT LOCAL EXCHANGE CARRIERS 

NUMBER OF 

SWITCHES 

Alabama BELLSOUTH TELECOMM INC DBA SOUTH CENTRAL BELL TEL 154 

Alabama CONTEL OF THE SOUTH DBA GTE SOUTH 52 

Alabama GTE SOUTH INCORPORATED - AL 39 

Alabama PEOPLES TELEPHONE CO. INC. 11 

Alabama ALLTEL ALABAMA INC. 8 

Alabama FARMERS TELEPHONE COOPERATIVE INC. 7 

Alabama BELLSOUTH TELECOMM INC DBA SOUTHERN BELL TEL & TEL 5 

Alabama UNION SPRINGS TELEPHONE CO. INC. 4 

Alabama INTERSTATE TELEPHONE CO. 4 

Alabama NATIONAL TELEPHONE CO. OF ALABAMA 3 

Alabama NEW HOPE TELEPHONE COOPERATIVE 3 

Alabama ARDMORE TELEPHONE CO. INC. 3 

Alabama BRINDLEE MOUNTAIN TELEPHONE CO. 3 

Alabama BLOUNTSVILLE TELEPHONE CO. INC. 2 

Alabama HOPPER TELECOMMUNICATIONS COMPANY INC. 2 

Alabama FRONTIER COMMUNICATIONS OF LAMAR COUNTY INC. 2 

Alabama ROANOKE TELEPHONE CO. INC. 2 

Alabama MOUNDVILLE TELEPHONE CO. 1 

Alabama RAGLAND TELEPHONE CO. INC. 1 

Alabama VALLEY TELEPHONE CO. INC. 1 

Alabama OTELCO TELEPHONE LLC 1 

Georgia BELLSOUTH TELECOMM INC DBA SOUTHERN BELL TEL & TEL 198 

Georgia ALLTEL GEORGIA COMMUNICATION CORP. 74 

Georgia GEORGIA ALLTEL TELECOMM INC. 40 

Georgia ALLTEL GEORGIA INC. 21 

Georgia STANDARD TELEPHONE CO. 13 

Georgia BELLSOUTH TELECOMM INC DBA SOUTH CENTRAL BELL TEL 7 

Georgia ELLIJAY TELEPHONE CO. 4 

Georgia TRENTON TELEPHONE CO. 3 

Georgia NELSON - BALL GROUND TELEPHONE CO. 3 

Georgia BLUE RIDGE TELEPHONE CO. 3 

Georgia CHICKAMAUGA TELEPHONE CORP. 2 

Georgia FRONTIER COMMUNICATIONS OF FAIRMOUNT INC. 2 

Georgia HART TELEPHONE CO. 1 

Georgia RINGGOLD TELEPHONE CO. 1 

Kentucky BELLSOUTH TELECOMM INC DBA SOUTH CENTRAL BELL TEL 185 

Kentucky GTE SOUTH INCORPORATED - KY 60 

Kentucky GTE SOUTH INC. - KY (FORMERLY CONTEL) 42 

Kentucky FOOTHILLS RURAL TELEPHONE COOPERATIVE CORP. 8 

Kentucky LESLIE COUNTY TELEPHONE CO. 7 

Kentucky MOUNTAIN RURAL TELEPHONE COOPERATIVE 7 

Kentucky THACKER/GRIGSBY TELEPHONE CO. 6 

Kentucky PEOPLES RURAL TELEPHONE COOPERATIVE CORP. 4 

Kentucky DUO COUNTY TELEPHONE COOPERATIVE INC. 4 

Kentucky GEARHEART COMM. CO INC. DBA COALFIELDS TELEPHONE 3 
123 

Kentucky HIGHLAND TELEPHONE COOPERATIVE INC. - KY 2 

Mississippi BELLSOUTH TELECOMM INC DBA SOUTH CENTRAL BELL TEL 217 

Mississippi FRANKLIN TELEPHONE CO. INC. 10 

Mississippi DELTA TELEPHONE CO. INC. 7 

Mississippi BRUCE TELEPHONE CO. INC. 4 

Mississippi FULTON TELEPHONE CO. INC. 4 

Mississippi FRONTIER COMMUNICATIONS OF MISSISSIPPI INC. 4 

Mississippi CALHOUN CITY TELEPHONE CO. INC. 3 

Mississippi CENTURYTEL OF NORTH MISSISSIPPI INC. 3 

Mississippi MYRTLE TELEPHONE CO. INC. 1 

Mississippi NOXAPATER TELEPHONE CO. INC. 1 

Mississippi SMITHVILLE TELEPHONE CO. INC. 1 

Mississippi CENTURYTEL OF ADAMSVILLE INC. 1 

New York BELL ATLANTIC NEW YORK 575 

New York CITIZENS TELECOMM CO OF NEW YORK INC 127 

New York FRONTIER TELEPHONE OF ROCHESTER 49 

New York ALLTEL NEW YORK INC. - JAMESTOWN 15 

New York EMPIRE TELEPHONE CORP. 6 

New York CHAUTAUQUA & ERIE TELEPHONE CORP. 6 

New York DEPOSIT TELEPHONE CO. INC. 4 

New York FRONTIER COMMUNICATIONS OF SENECA GORHAM INC. 4 

New York TRUMANSBURG TELEPHONE CO. 3 

New York MIDDLEBURGH TELEPHONE CO. 3 

New York OGDEN TELEPHONE CO. NY 3 

New York MARGARETVILLE TELEPHONE CO. INC. 2 

New York CASSADAGA TELEPHONE CORP. 1 

New York HANCOCK TELEPHONE CO. NY 1 

New York DELHI TELEPHONE CO. 1 

New York DUNKIRK & FREDONIA TELEPHONE CO. 1 

North Carolina SPRINT MID ATLANTIC 158 

North Carolina BELLSOUTH TELECOMM INC DBA SOUTHERN BELL TEL & TEL 146 

North Carolina CENTRAL TELEPHONE CO. - NORTH CAROLINA 48 

North Carolina ALLTEL CAROLINA - NORTH INC. 32 

North Carolina GTE SOUTH INC. - NC (FORMERLY CONTEL) 27 

North Carolina SKYLINE TELEPHONE MEMBERSHIP CORP. 11 

North Carolina YADKIN VALLEY TELEPHONE MEMBERSHIP CORP. 10 

North Carolina SURRY TELEPHONE MEMBERSHIP CORP. 6 

North Carolina WILKES TELEPHONE MEMBERSHIP CORP. 4 

North Carolina BELLSOUTH TELECOMM INC DBA SOUTH CENTRAL BELL TEL 2 

North Carolina BARNARDSVILLE TELEPHONE CO. 1 

North Carolina SALUDA MOUNTAIN TELEPHONE CO. 1 

North Carolina CITIZENS TELEPHONE CO. 1 

Ohio AMERITECH OHIO 262 

Ohio GTE NORTH INCORPORATED - PH 256 

Ohio UNITED TELEPHONE CO. OF OHIO 179 

Ohio WESTERN RESERVE TELEPHONE CO. 45 

Ohio CINCINNATI BELL INC. 44 

Ohio CHILLICOTHE TELEPHONE CO. 11 

Ohio LITTLE MIAMI COMMUNICATIONS CORP. 2 

Ohio MINFORD TELEPHONE CO. 1 

Ohio PATTERSONVILLE TELEPHONE CO. 1 

Pennsylvania BELL ATLANTIC - PENNSYLVANIA INC. 407 
124 

Pennsylvania SPRINT/UNITED TELEPHONE OF PENNSYLVANIA 93 

Pennsylvania GTE NORTH INCORPORATED - PA 86 

Pennsylvania ALLTEL PENNSYLVANIA INC. 84 

Pennsylvania COMMONWEALTH TELEPHONE ENTERPRISES INC. 78 

Pennsylvania GTE NORTH INC. - PA (FORMERLY QUAKER STATE) 22 

Pennsylvania GTE NORTH INC. - PA (FORMERLY CONTEL) 15 

Pennsylvania NORTH PITTSBURG TELEPHONE CO. 9 

Pennsylvania NORTH EASTERN PENNSYLVANIA TELEPHONE CO. 8 

Pennsylvania FRONTIER COMMUNICATIONS OF BREEZEWOOD INC. 4 

Pennsylvania PALMERTON TELEPHONE CO. 4 

Pennsylvania BUFFALO VALLEY TELEPHONE CO. 4 

Pennsylvania MAHANOY & MAHANTONGO TELEPHONE CO. 3 

Pennsylvania NORTH PENN TELEPHONE CO. 3 

Pennsylvania FRONTIER COMMUNICATIONS OF OSWAYO RIVER INC. 3 

Pennsylvania CITIZENS TELECOMM CO OF NEW YORK INC 2 

Pennsylvania FRONTIER COMMUNICATIONS OF CANTON INC. 2 

Pennsylvania LAUREL HIGHLAND TELEPHONE CO. 2 

Pennsylvania MARIANNA - SCENERY HILL TELEPHONE CO. 2 

Pennsylvania SOUTH CANAAN TELEPHONE CO. 2 

Pennsylvania DEPOSIT TELEPHONE CO. INC. 1 

Pennsylvania HANCOCK TELEPHONE CO. NY 1 

Pennsylvania BENTLEYVILLE TELEPHONE CO. 1 

Pennsylvania HICKORY TELEPHONE CO. 1 

Pennsylvania LACKAWAXEN TELEPHONE CO. 1 

Pennsylvania FRONTIER COMMUNICATIONS OF LAKEWOOD INC. 1 

Pennsylvania ARMSTRONG TELEPHONE CO. OF PENNSYLVANIA 1 

Pennsylvania ARMSTRONG TELEPHONE CO. - NORTH 1 

Pennsylvania PENNSYLVANIA TELEPHONE CO. 1 

Pennsylvania PYMATUNING INDEPENDENT TELEPHONE CO. 1 

Pennsylvania SUGAR VALLEY TELEPHONE CO. 1 

Pennsylvania VENUS TELEPHONE CORP 1 

Pennsylvania YUKON - WALTZ TELEPHONE CO. 1 

Pennsylvania CITIZENS TELEPHONE CO. OF KECKSBURG 1 

South Carolina BELLSOUTH TELECOMM INC DBA SOUTHERN BELL TEL & TEL 125 

South Carolina GTE SOUTH INCORPORATED - SC 37 

South Carolina WEST CAROLINA RURAL TELEPHONE COOPERATIVE INC. 9 

South Carolina ALLTEL SOUTH CAROLINA INC. 9 

South Carolina PIEDMONT RURAL TELEPHONE COOPERATIVE INC. 6 

South Carolina GTE SOUTH INC. - SC (FORMERLY CONTEL) 5 

South Carolina CHESNEE TELEPHONE CO. 1 

Tennessee BELLSOUTH TELECOMM INC DBA SOUTH CENTRAL BELL TEL 210 

Tennessee UNITED INTER-MOUNTAIN TELEPHONE 26 

Tennessee BEN LOMAND RURAL TELEPHONE COOPERATIVE INC. 17 

Tennessee TWIN LAKES TELEPHONE COOPERATIVE CORP. 16 

Tennessee CITIZENS COMMUNICATIONS COMPANY - TN 15 

Tennessee TENNESSEE TELEPHONE CO. 14 

Tennessee NORTH CENTRAL TELEPHONE COOPERATIVE INC. - TN 10 

Tennessee TELLICO TELEPHONE CO. INC. 8 

Tennessee HIGHLAND TELEPHONE COOPERATIVE INC. - TN 8 

Tennessee UNITED TEL CO INC. 8 

Tennessee BLEDSOE TELEPHONE COOPERATIVE 5 

Tennessee CITIZENS TELECOMM CO OF THE VOLUNTEER STATE LLC 5 
125 

Tennessee CENTURYTEL OF COLTWEAH-COLLEGEDALE INC. 3 

Tennessee CENTURYTEL OF CLAIRBORNE INC. 2 

Tennessee SCOTT COUNTY TELEPHONE COOPERATIVE INC. 1 

Tennessee SKYLINE TELEPHONE MEMBERSHIP CORP. 1 

Tennessee CONCORD TELEPHONE EXCHANGE INC. 1 

Tennessee DEKALB TELEPHONE COOPERATIVE 1 

Virginia BELL ATLANTIC - VIRGINIA INC. 232 

Virginia GTE SOUTH INC. - VA (FORMERLY CONTEL) 97 

Virginia CENTRAL TELEPHONE CO. - VIRGINIA 63 

Virginia UNITED INTER-MOUNTAIN TELEPHONE 30 

Virginia GTE SOUTH INCORPORATED - VA 13 

Virginia SCOTT COUNTY TELEPHONE COOPERATIVE INC. 6 

Virginia CITIZENS TELELEPHONE COOPERATIVE 5 

Virginia MOUNTAIN GROVE - WILLIAMSVILLE TELEPHONE CO. 5 

Virginia ROANOKE & BOTETOURT TELEPHONE CO. 4 

Virginia CLIFTON FORGE WAYNESBORO TELEPHONE CO. 4 

Virginia HIGHLAND TELEPHONE COOPERATIVE 3 

Virginia PEMBROKE TELEPHONE COOPERATIVE 2 

Virginia NEW CASTLE TELEPHONE CO. 2 

Virginia BURKE S GARDEN TELEPHONE CO. INC. 1 

Virginia VIRGINIA TELEPHONE CO. 1 

West Virginia BELL ATLANTIC - WEST VIRGINIA INC. 155 

West Virginia CITIZENS TELECOMMUNICATIONS CO OF WEST VIRGINIA 75 

West Virginia ARMSTRONG TELEPHONE CO. 6 

West Virginia BELL ATLANTIC - MARYLAND INC. 3 

West Virginia WEST SIDE TELEPHONE CO. 3 

West Virginia CITIZENS COMMUNICATION COMPANY - WV 2 

West Virginia ARMSTRONG TELEPHONE CO. OF WEST VIRGINIA 1 

West Virginia HARDY TELEPHONE CO. 1 

West Virginia SPRUCE KNOB SENECA ROCKS TELEPHONE CO. 1 

West Virginia WAR ACQUISITION CORP. DBA WAR TELEPHONE COMPANY 1 
126 

APPENDIX FOUR: Socioeconomic Characteristics of the Four Case 

Study Counties 

Employment by Industry, 1999, Monroe County, Mississippi 

 

Monroe County Monroe County Mississippi Mississippi 

Employment Share of Total Employment Share of Total 

 

Total full- and part-time employment 15,825 100.0% 1,493,441 100.0% 

Farm employment 787 5.0% 55,203 3.7% 

Ag. Serv., forestry, fishing, and other 137 0.9% 19,256 1.3% 

Mining 167 1.1% 8,101 0.5% 

Construction 1,101 7.0% 84,954 5.7% 

Manufacturing 4,716 29.8% 250,824 16.8% 

Transportation and public utilities 658 4.2% 67,269 4.5% 

Wholesale trade 301 1.9% 51,052 3.4% 

Retail trade 2,385 15.1% 244,023 16.3% 

Finance, insurance, and real estate 502 3.2% 76,283 5.1% 

Services 3,003 19.0% 371,730 24.9% 

Government and government enterprise 2,068 13.1% 264,746 17.7% 

Total Employment/Population 43.3% 52.5% 

Source: U.S. Department of Commerce, Regional Economic Information System (REIS), 2000. 

 Employment by Industry, 1999, Noxubee County, Mississippi 

 

 Noxubee 

County 

Noxubee 

County Mississippi Mississippi 

 Employment Share of Total Employment Share of Total 

 

Total full- and part-time employment 5,613 100.0% 1,493,441 100.0% 

Farm employment 774 13.8% 55,203 3.4% 

Ag. Serv., forestry, fishing, and other na 0% 19,256 1.3% 

Mining na 0% 8,101 0.5% 

Construction 257 4.6% 84,954 5.7% 

Manufacturing 1873 33.4% 250,824 16.8% 

Transportation and public utilities 169 3.0% 67,269 4.5% 

Wholesale trade 85 1.5% 51,052 3.4% 

Retail trade 556 9.9% 244,023 16.3% 

Finance, insurance, and real estate 144 2.6% 76,283 5.1% 

Services 809 14.4% 371,730 24.9% 

Government and government enterprises 839 14.9% 264,746 17.7% 

Total Employment/Population 44.7% 52.5% 

Source: U.S. Department of Commerce, Regional Economic Information System (REIS), 2000. 
127 

 Monroe County, Mississippi Demographic 

 and Economic Data 

 

 

 

Population(a) 1990 2000 Change

Monroe County 36,582 38,014 3.9% 

Mississippi 2,573,216 2,844,658 10.5% 

 

Population Over 65/Total Population(a) 1990 2000 

Monroe County 14.4% 14.0% -2.4% 

Mississippi 12.5% 12.1% -3.3% 

 

Population by Race:Minority Share of Population(a) 1990 2000 

Monroe County: 30.6% 31.6% 3.4% 

Mississippi: 36.5% 38.6% 5.7% 

 

Total Employment(b) 1990 1999 

Monroe County 16,277 15,825 -2.8% 

Mississippi 1,210,136 1,493,441 23.4% 

 

Unemployment Rate (c) 1990 2000 

Monroe County 7.8% 10.3% 32.1% 

Mississippi 7.6% 5.7% -25.0% 

 

Poverty Rate (d) 1990 1999 

Monroe County 17.4% 14.9% -14.4% 

Mississippi 24.6% 17.6% -28.5% 

 

Educational Attainment (a) 1990 

Monroe County: 

% over 25 with bachelors degree 8.4% Na Na 

% over 25 with less than high school 44.4% Na Na 

Mississippi: 

% over 25 with bachelors degree 14.8% Na Na 

% over 25 with less than high school 35.7% Na Na 

 

Per capita Personal Income(b) 1990 1999 

Monroe County 12,161 17,623 44.9% 

Mississippi 13,164 20,686 57.1% 
128 

Noxubee County, Mississippi Demographic and 

Economic Data 

 

 

1990 2000 Change 

Population (a) 

Noxubee County 12,604 12,548 -0.44% 

Mississippi 2,573,216 2,844,658 10.55% 

Population Over 65/Share of Population(a) 

 

Noxubee County 13.34% 12.84% -3.8% 

Mississippi 12.49% 12.08% -3.3% 

Population by Race /Minority Share of Population(a) 

 

Noxubee County: 68.6% 70.5% 2.8% 

Mississippi: 36.5% 38.6% 5.7% 

Total Employment(b) 

 

Noxubee County 4,209 5,613 33.4% 

Mississippi 1,210,136 1,493,441 23.4% 

Unemployment Rate(c) 

 

Noxubee County 11.8% 11.7% -0.8% 

Mississippi 7.6% 5.7% -25.0% 

Poverty Rate 

 

Noxubee County (1990 & 1998) 39.7% 28.3% -28.7% 

Mississippi (1990 & 1999) 24.6% 17.6% -28.5% 

Educational Attainment 

 

Noxubee County: 

% over 25 with bachelors degree 7.9% na Na 

% over 25 with less than high school 50.4% na Na 

Mississippi: 

% over 25 with bachelors degree 14.8% na Na 

% over 25 with less than high school 35.7% na Na 

Percapita Personal Income(b) 

 

Noxubee County 9,697 16,717 72.4% 

Mississippi 13,164 20,686 57.1% 

(a) U.S. Bureau of the Census -- American Factfinder http://factfinder.census.gov/servlet/BasicFactsServlet 

(b)U.S. Departtment of Commerce, Bureau of Economic Analysis REIS 

http://fisher.lib.virginia.edu/reis/county.html

(c) U.S. Federal Deposit Insurance Corp. Regional Economic Conditions (in data collections in ECON 

DATANET) 

(d) U.S. Census Bureau , Small Area Income and Poverty Estimates1988-1998 

http://www.census.gov/hhes/www/saipe/estimatetoc.html
129 

Employment by Industry Sector: Scott County and State of Virginia 

Scott County 

Employment 

Scott County 

Share of 

Virginia 

Employment 

Virginia 

Share of 

 1999 Total 1999 Total 

 

Total full- and part-time employment 7,623 100.0% 4,324,199 100.0% 

Farm employment 1,856 24.3% 62,574 1.4% 

Ag. Serv., forestry, fishing, and other 143 1.9% 45,023 1.0% 

Mining 44 0.6% 12,391 0.3% 

Construction 340 4.5% 270,197 6.2% 

Manufacturing 493 6.5% 408,283 9.4% 

Transportation and public utilities 346 4.5% 205,562 4.8% 

Wholesale trade 129 1.7% 159,076 3.7% 

Retail trade 1,300 17.1% 696,795 16.1% 

Finance, insurance, and real estate 273 3.6% 319,697 7.4% 

Services 1,534 20.1% 1,352,924 31.3% 

Government and government enterprises 1,165 15.3% 791,677 18.3% 

Total Employment/Population* 32.6% 61.1% 

Source: U.S. Department of Commerce, Regional Economic Information System (REIS), 2000. 

Employment by Industry Sector: Washington County and State of Virginia 

Total Employment/Population* 62.8% 61.1 % 

 Source: U.S. Department of Commerce, Regional Economic Information System (REIS), 2000. 

Washington 

County 

Washington 

County Virginia Virginia 

 Employment Share of Employment Share of 

 1999 Total 1999 Total 

 

Total full- and part-time employment 42,998 100.0% 4,324,199 100.0% 

Farm employment 2,588 6.0% 62,574 1.4% 

Ag. Serv., forestry, fishing, and other na — 45,023 1.0% 

Mining na — 12,391 0.3% 

Construction 2,268 5.3% 270,197 6.2% 

Manufacturing 8,999 20.9% 408,283 9.4% 

Transportation and public utilities 1,381 3.2% 205,562 4.8% 

Wholesale trade 2,708 6.3% 159,076 3.7% 

Retail trade 8,313 19.3% 696,795 16.1% 

Finance, insurance, and real estate 1,980 4.6% 319,697 7.4% 

Services 9,601 22.3% 1,352,924 31.3% 

Government and government enterprises 4,784 11.1% 791,677 18.3% 
130 

Scott County, Virginia Demographic and Economic Data 

 

Population(a) 

 

 1990 

 

2000 

 Change 

Scott County 23,204 23,403 .09% 

Virginia 6,187,358 7,078,515 14.4% 

Population Over 65/Total Population(a) 1990 2000

Scott County 16.7% 17.8% 1.1% 

Virginia 10.7% 11.2% 0.5% 

Population by Race: Minority Share of Population(a) 1990 2000 

Scott County 0.7% 1.5% 0.7% 

Virginia 22.6% 27.7% 5.1% 

Total Employment(b) 1990 1999 

Scott County 7,478 7,623 1.9% 

Virginia 3,727,194 4,324,199 16.0% 

Unemployment Rate(c) 1990 2000 

Scott County 7.8% 4.0% -48.7% 

Virginia 4.4% 2.2% -50.0% 

Poverty Rate(d) 1990 1999 

Scott County (1990 & 1998) 22.3% 18.3% -17.9% 

Virginia (1990 & 1999) 10.5% 10.2% -2.9% 

Educational Attainment(a) 1990 

 

Scott County: 

% over 25 with bachelors degree 16.0% na na 

% over 25 with less than high school 48.8% na na 

Virginia: 

% over 25 with bachelors degree 24.6% na na 

% over 25 with less than high school 24.8% na na 

Per capita Personal Income(b) 1990 1999 

Scott County 12,193 16,882 38.5% 

Virginia 20,538 29,794 45.1% 
131 

Washington County, Virginia & Bristol City 

1990 2000 Change 

Population (a) 

Washington County & Bristol City 64,313 68,470 6.5% 

Virginia 6,187,358 7,078,515 14.4% 

Population Over 65/Total Population(a) 

 

Washington County & Bristol City 15.5% 16.6% 1.1% 

Virginia 10.7% 11.2% 0.5% 

Minority Share of Population 

 

Washington County & Bristol City 3.1% 3.7% 0.6% 

Virginia: 22.6% 27.7% 5.1% 

Total Employment* 

 

Washington County & Bristol City 38,445 42,998 11.8% 

Virginia 3,727,194 4,324,199 16.0% 

Unemployment Rate 

 

Washington County & Bristol City 7.9% 3.5% -55.4% 

Virginia 4.4% 2.2% -50.0% 

Poverty Rate 

 

Washington County& Bristol City (1990 & 1998) 16.7% 16.0% -4.3% 

Virginia (1990 & 1999) 10.5% 10.2% -2.9% 

 

Educational Attainment 

Washington County & Bristol City: 

% over 25 with bachelors degree 12.7% na na 

% over 25 with high school degree 39.6% na na 

Virginia: 

% over 25 with bachelors degree 24.6% na na 

% over 25 with high school degree 24.8% na na 

 

Per capita Personal Income* 

Washington County & Bristol City 14,579 22,385 53.5% 

Virginia 20,538 29,794 45.1% 

* Column with 2000 data is from 1999 data & Washington County data is combined with Bristol County 

(a) U.S. Bureau of the Census -- American Factfinder http://factfinder.census.gov/servlet/BasicFactsServlet

(b)U.S. Departtment of Commerce, Bureau of Economic Analysis REIS 

http://fisher.lib.virginia.edu/reis/county.html

(c) U.S. Federal Deposit Insurance Corp. Regional Economic Conditions (in data collections in ECON 

DATANET) 

(d) U.S. Census Bureau , Small Area Income and Poverty Estimates1988-1998 

http://www.census.gov/hhes/www/saipe/estimatetoc.htm
132 

APPENDIX FIVE: Interview Questionnaire 

Appendix Six - Interview Forms for Firms and Local Development 

Institutions 

An Analysis of the Telecommunications and Information Infrastructure and Services, and 

an Assessment of Gaps in Universal Service in the Appalachian Region 

University of Texas at Austin

Date of Interview ______________ 

Name of Firm 

__________________________________________________ 

Informant(s) 

______________________________ 

______________________________ 

______________________________ 

______________________________ 

Address 

____________________________________ 

____________________________________ 

Phone 

__________________ 

__________________ 

__________________ 

Email 

__________________ 

__________________ 

__________________ 

Confidentiality Requested 

YES 
133 

NO 

BUSINESS SURVEY 

Firm Characteristics and History

1. How long has your company been at your current address? 

2. How long have you been located in The Tri-Cities Area? 

3. Is your firm: 

a. Locally owned, single site? 

b. Locally headquartered, multi-site? 

c. A division of a firm headquartered elsewhere in U.S.? 

d. A division of a firm headquartered outside U.S.? 

 If you are a division of a larger enterprise, where is your headquarters located? 

3. What are the top three product lines at your local facilities and their approximate share 

of your total sales? 

4. What were the total sales at your local facility(ies) in 1997? In 2000? 

5. What was the total number of employees at your local facility(ies) in 1997? In 2000? 

6. Does your establishment produce: 

a. A final product? 

b. An intermediate product? 

c. A service? 

7. Roughly what percentage of your sales are made direct to: 

a. Retailers or wholesalers? 

b. Manufacturers? 

c. Other firms? 

d. Government? 

e. Direct to the general public? 

f. Others, please specify? 

8. Which of the following types of activities is located at your local facility/ies? 

a. Manufacturing? 

b. Research & Development (R & D)? 

c. Administration? 

d. Marketing/Sales/Distribution? 

e. Other? 
134 

9. [If R&D reported in #8] Do you conduct a significant amount of R&D at your local 

 facility(ies) -- What percentage of your budget went to R & D in 2000? 

10. What percentage of your customers are: 

a. Local (w/in 100 miles of your local facility)? 

b. In the U.S.? 

c. International? 

 

 

11. What percentage of your suppliers are? 

a. Local (w/in 100 miles of your local facility)? 

b. In the U.S.? 

c. International? 

Organizational Practices 

13. Is your company ISO 9000/9001 2000 certified? 

14. Have you recently changed your inventory control process? 

15. Do you use Just in Time (JIT) delivery systems with your suppliers? 

16. Do you use Just in Time delivery systems with your customers? 

17. Does your workforce participate in training and re-training activities on a regular or 

ongoing basis? 

18. Does your management participate in training and re-training activities on a regular 

or ongoing basis? 

Use of Information and Telecommunications Technology

19. Do you use personal computers extensively in your operations ? 

 - Roughly how many PCs do have at your local facility 
135 

20. What functions do you use PCs for ? 

 Important Somewhat Not 

 Important Important 

 Accounting and Bookkeeping ________ ________ _________ 

 Word Processing ________ ________ _________ 

 Record keeping ________ ________ _________ 

 

 Desktop Publishing 

 (company&marketing materials) ________ ________ _________ 

 Product Design ________ ________ _________ 

 CAD/CAM Applications ________ ________ _________ 

 

 Training ________ ________ _________ 

 

 E-Mail Communications ________ ________ _________ 

 Internet Use ________ ________ _________ 

21. What sort of telephone-related services do you use 

 Frequently Occasionally Never 

 

 Basic voice communications _________ _________ ______ 

 Answering machine _________ _________ ______ 

 Voice mail _________ _________ ______ 

 Call waiting _________ _________ ______ 

 Wireless/Mobile phone 

 Communications ________ _________ ______ 

 Fax Machines ________ _________ ______ 

 Call Forwarding ________ _________ ______ 

 
136 

22. What sort of network services do you use (ex. email, Internet, Electronic data 

interchange) 

 Frequently Occasionally Never 

 E-mail communications 

 within the company ________ ________ ______ 

 E-mail communications 

 with customers or suppliers ________ ________ ______ 

 Electronic data interchange 

 within the company ________ ________ ______ 

 Electronic data interchange 

 with customers or supplier _______ ________ ______ 

 Internet service _______ ________ ______ 

23. For what functions or activities do you use the Internet 

 Important Somewhat Not 

 Important Important 

Obtaining general information 

about our business or markets ________ ________ _________ 

Basic marketing through web page ________ ________ _________ 

(providing basic information) 

Marketing through an interactive 

web site (allowing the customer 

to obtain additional product 

information, check availability 

and delivery options, place orders) ________ ________ _________ 

Processing orders, billing and 

arranging delivery (linked to 

internal accounting and inventory 

systems) ________ ________ _________ 

Obtaining price and availability 

information from suppliers ________ ________ _________ 

Placing orders with suppliers ________ ________ _________ 

CONTINUED NEXT PAGE 
137 

 Important Somewhat Not 

 Important Important 

Processing orders from suppliers 

ordering linked to internal 

accounting and inventory systems _______ ________ _________ 

Communications and data transfer with 

other units of the company _______ ________ _________ 

Transfer of data from customers 

or suppliers (ex. CAD files, product 

specifications, etc) _______ ________ _________ 

ICT Service and Support

24. Who assisted your company when you decided to install or upgrade your computer 

systems ? 

 An employee of the local facility (ex IT manger) 

 Company personnel from another location 

 A local consultant/ service provider 

 A consultant or service provider from outside the region 

 

 A consultant or service provider from the computer vendor 

25. What company(ies) providers your telephone service ? 

26. What kind of wireline services do you use 

 Basic telephone wireline 

 DSL (Digital Subscriber Line) 

 T-1, T-3 Lines 

 ISDN 

 Cable Modem (likely for home or very small businesses only) 
138 

27. What company provides your wireline service 

28. Who assisted you company when you decided to acquire your internet service 

 An employee of the local facility (ex IT manger) 

 Company personnel from another location 

 A local consultant/ ISP 

 A consultant or ISP from outside the region 

29. Who provides the following Internet applications and services for your local facility 

? 

 

 Internet Access 

 A service provided internally 

 An ISP 

 An ISP from outside the region 

 A telecom company 

 Another company 

 Web page design 

 An employee of the local facility (ex IT manager) 

 Company personnel from another location 

 A local consultant/ ISP 

 A consultant or ISP from outside the region 

 Interactive web systems design 

 An employee of the local facility (ex IT manger) 

 Company personnel from another location 

 A local consultant/ ISP 

 A consultant or ISP from outside the region 

 Hosting 

 A service provided internally 

 An ISP 

 An ISP from outside the region 

 Network administration 

 A service provided internally 

 A service provided by company personnel from other locations 

 A local computer service company or ISP 

 A computer service company from outside the region 
139 

30. How do you train employees in the use of computers, and computer and Internet 

applications. 

 

 Internal training by local personnel 

 Training by company personnel from other locations 

 Private training firms 

 Community colleges 

 Universities 

Perceptions about barriers and opportunities associated with ICT 

31. Do you think the effective use of computer and internet technology will be important 

for the competitiveness of you company over the next five years 

 Not Important 

 Somewhat Important 

 Very Important 

32. Do you think that your location in the Tri-Cities region influences your ability to 

access and use computer and internet technology in your business 

Location improves our ability to access and use computer and Internet technology 

compared to other regions 

Location gives us about the same ability to access and use computer and Internet 

technology compared to other regions 

Location makes it more difficult to access and use computer and Internet 

technology compared to other regions 

33. Is it difficult to find personnel with the needed computer, software and Internet skills 

from the local area ? 

 Very difficult 

 Somewhat difficult 

 Not difficult 

34. Is it difficult to find and provide the appropriate training for employees in 

computer, software and Internet applications ? 

 Very difficult 

 Somewhat difficult 

 Not difficult 
140 

35. Is it difficult to find cost effective service providers to assist your company with 

 computer, software and Internet applications ? 

 Very difficult 

 Somewhat difficult 

 Not difficult 

36. How do you gauge the choices you have in obtaining the telecommunications services 

you need (telephone or data and graphics transmission) ? 

 

 Enough choices 

 Too much dependence on the local phone company 

37. Have any programs or services provided by state or local government helped you 

improve your ability to use computers, software and Internet services in your 

business? 

38. Have difficulties in any of the above areas affected your company's decision to 

remain or expand in this area. 

39. If you think that your location in the TRI-Cities area hinders your ability to access 

and use computer and internet technology in your business, name some things that 

local government or the local business community could do to improve the situation. 

ECONOMIC DEVELOPMENT INSTITUTIONS 

Organization Characteristics and History

1. How long has your organization been active in the area? 

2. What are your main economic development- related activities 

 Marketing and promotion of the region 

 Organizing and providing forums for local businesses 

 Recruiting new businesses into the region 

 Providing support services for existing local businesses 

 Providing appropriate sites for new or expanding businesses 

 Offering tax incentives to bring new businesses into the region 

 Offering tax assistance to help local businesses retain employment or expand 

 Voicing the concerns of local business to government organizations 

 Targeted industrial development initiatives (ex tourism, specific manufacturing 

 Telecommunications initiatives 

 Employment and training initiatives 

 Other 

 Provide technical assistance to local firms 

 Operate a business incubator 

 Operate and industrial or business park 
141 

 

3. In your opinion what are the most important industries in _____ County ? 

4. Have these industries grown or declined over the last five years ? 

5. Are these industries likely to grow or decline over the next five years ? 

6. What new industries have emerged over the last five years ? 

7. Are these industries likely to grow or decline over the next five years ? 

8. In your opinion how will the economy of this region fare over the next five years ? 

 Will grow rapidly 

 Will grow modestly or stay the same 

 Will decline 

9. In your opinion what are the main assets in the local area that will contribute to 

 economic growth ? 

 Good K-12 education system 

 Attractive natural environment 

 Good higher education system 

 Attractive/friendly community 

 Strong competitive industries 

 Good transportation access to major markets 

 Skilled workers 

 Low costs of doing business (wages, taxes, utilities, land) 

 Access to technology (computers, telecommunications, skills) 
142 

10. In your opinion what are the main barriers in the local area that might constrain 

 economic growth 

Problems with K-12 education 

 Lack of higher education facilities 

 Loss of young people who migrate to other areas with greater opportunities 

 Not much for people to do 

 Large local industries in decline 

 Difficulty in obtaining skilled workers 

 High costs of doing business (wages, taxes, utilities, land) 

 

Poor access to technology (computers, telecommunications, skills) 

Access to and Use of Information and Telecommunications Technology 

11. Do you believe that most people in the local workforce have adequate computer 

literacy and computer skills given the needs of local companies ? 

 Local workforce has good computer skills 

 Local workforce has adequate computer skills 

 Local workforce has poor computer skills 

12. Do you believe the local area has good training resources to improve the computer 

skills of the local workforce ? (ex K-12, Community Colleges, Higher ed., Private 

training) 

 The local area has good training resources 

 The local area has adequate training resources 

 The local area has poor train resources 
143 

13. In your opinion, how important is access to and use of the Internet for local 

businesses 

 Use of the Internet is not important in the business operations of most local firms 

Use of the Internet is important in the business operations of a number of local 

firms 

 Use of the Internet is important in the business operations of most local firms 

14. In what industrial sectors does use of the Internet seem to be most important 

 Manufacturing 

 Wholesale and warehousing 

 Banking 

 Real estate 

 Health care 

 Travel and Tourism 

 Business Services 

 Education 

 Government 

15. In your opinion, do many businesses use broadband telecommunications services 

 (DSL, T-1 or T3, ISDN, cable modem, other) 

16. What industrial sectors seem to use broadband services the most 

 Manufacturing 

 Wholesale and warehousing 

 Banking 

 Real estate 

 Health care 

 Travel and Tourism 

 Business Services 

 Education 

 Government 

17. What are the local phone systems options? 

 

 Who is the local exchange carrier ? 

 Are there other local phone companies in the region ? 

 Who is the main provider of services ? 
144 

18. Have you heard any complaints from local businesses that they cannot get economical 

access to broadband services. 

 No complaints 

 Some complaints 

 Many complaints 

19. Have you heard any complaints from local companies that they have a difficult 

time finding local consultants or support services for their computer, software and 

Internet applications ? 

 

 No complaints 

 Some complaints 

 Many complaints 

20. If local companies have complained about the lack of support services, what areas 

have they mentioned 

Gaining information about the computer and Internet technology appropriate for 

the firm's needs 

 Internet access 

 Internet access with broadband capabilities 

 Web page design 

 Interactive web systems design 

 Network administration 

21. Have you heard any complaints from local companies that they have difficulties 

finding personnel with adequate computer, software and Internet applications ? 

 No complaints 

 Some complaints 

 Many complaints 

22. Have you heard any complaints from local companies that they have difficulties 

finding training for their personnel in computer, software and internet applications 

 No complaints 

 Some complaints 

 Many complaints 
145 

Perceptions about economic development barriers and opportunities in the 

region 

23. Do you think the effective use of computer and Internet technology is a key economic 

development challenge for your region ? 

24. Do you think that improving computer and internet technology will be important in 

 attracting and retaining businesses in your area ? 

 Very Important 

 Somewhat important 

 Not Important 

25. Discuss the importance of the following actions for future economic development I 

the region ? 

 Important Somewhat Not 

 Important Important 

Improve access to broadband services ________ ________ ________ 

Provide information and encouragement 

to local firms to adopt and use the Internet ________ _________ ________ 

Attract or support firms that provide 

computer and Internet services locally ________ _________ _________ 

Improve training in computer and Internet 

applications in K-12 ________ _________ _________ 

Improve training in computer and Internet 

applications in colleges or universities ________ _________ _________ 

Provide technical assistance to firms 

to help them adopt and use computer and 

Internet applications in their businesses ________ _________ _________ 

26. Have local telecommunications service been affected by any state government 

policies in your view ? How about Federal Policies ? (probe: the "Abingdon 

exception" and the Bristol case). 
146 

27. How has E-Rate (in schools, libraries, not for profit hospitals) influenced 

telecommunications and computer use in the community ? 

28. Are there any other government programs that have affected business access to, or 

use of telecommunications services ? 

29. Are there any computer /Internet training facilities that you can say have made a 

major contribution to businesses or the community ? 

30. Do any local businesses use Network Virginia ? 

31. Do any educational or non-profit institutions that you are aware of use Network 

Virginia or any other public supported network ? 

32. In your opinion, what are the local community's main economic development goals 

for the next five years ? 

33. Is there a telecommunications plan related to your economic development strategy ? 

 If yes, what is it, and what does it include? 
147 

APPENDIX SIX: Interviewees for Case Studies 

Washington County, Virginia

Mr. Dan Adams 

President 

Washington County Chamber of Commerce 

179 East Main Street 

Abingdon VA 24210 

Mr. Philip Blevins 

Agricultural Agent 

Virginia Extension Office 

434 West Valley Street #B 

Abingdon VA 24210 

Mr. Jerry Brown 

Director 

Office of Economic Development 

P.O. Box 16397 

Bristol VA 24209 

Ms. Becky Coleman 

Chief of Staff 

Office of Representative Rick Boucher 

188 East Main Street 

Abingdon VA 24212 

Ms. Julie Finney 

Jack Rabbit Printing 

101 Charwood Drive 

Abingdon VA 24210 

Mr. Steve Galyean 

Director 

Abingdon Convention and Visitors Bureau 

335 Cummings Avenue 

Abingdon VA 24210 

Mr. William Hall 

Publisher 

Bristol Herald Courier 

320 Bob Morrison Boulevard 

Bristol VA 24201 

Ms. Johnna Hernandez 

CEO 

Champion Systems 

510 Cumberland Street Suite 100 

Bristol VA 24201 

Mr. Ed Honaker 

Director of Sales and Marketing 

Net Access 

P.O. Box 2303 

Abingdon VA 24212 
148 

Mr. Marty Jessee 

Information Systems Manager 

21st Century Containers, Ltd. 

18259 Westinghouse Road 

Abingdon VA 24210 

Mr. Jim Kelley 

Director of Fiber Optic Services 

Bristol Virginia Utility Board 

P.O. Box 8100 

Bristol VA 24203 

Ms. Christine Leonard 

Customer Care Manager 

Sprint PCS 

134 Commerce Court 

Bristol VA 24201 

Mr. Jason Lester 

Director of Information Services 

Washington County Public Schools 

812 Thompson Drive 

Abingdon VA 24210 

Mr. Mathew Matt 

Director of Information Services 

Town of Abingdon 

P.O. Box 789 

Abingdon VA 24212 

Mr. Sam Neese 

Chief Executive Officer 

Highland Union Bank 

340 West Main Street 

Abingdon VA 24210 

Mr. Tom Nornhold 

Associate Regional Director 

Center for Innovative Technology 

One College Avenue Room 130 

Wise VA 24293 

Ms. Patricia Oldham 

Marketing Manager 

Net Access 

P.O. Box 2304 

Abingdon VA 24212 

Mr. Russell Owens 

Chairman 

Industrial Development Authority of Washington County 

179 East Main Street 

Abingdon VA 24210 

Ms. Christianne Parker 

Assistant County Administrator 
149 

County of Washington 

205 Academy Drive 

Abingdon VA 24210 

Ms. Charlotte Parsons 

Director 

Washington County Library System 

205 Oak Hill Street Northeast 

Abingdon VA 24210 

Mr. Tom Riffe 

Chief Operating Officer 

Highland Union Bank 

340 West Main Street 

Abingdon VA 24210 

Mr. Lou Scudere 

Vice-President 

K-VA-T Foods 

P.O. Box 1158 

Abingdon VA 24212 

Mr. Richard Settle 

Area Manager 

Verizon Wireless 

700 Virginia Avenue 

Norton VA 24273 

Ms. Nichole Sikora 

Executive Director 

Southwest Virginia Technology Council 

P.O. Box 2523 

Abingdon VA 24212 

Mr. Jeffery Webb 

Chief Information Officer 

Southwest Virginia Higher Education Ctr 

P.O. Box 1987 

Abingdon VA 24212 

Dr. David Wilkins 

President 

Virginia Highlands Community College 

140 Old Jonesboro Road 

Abingdon VA 24212 

Scott Country, Virginia

Charles Adams 

Chief Operations Officer 

Physician’s Access 

Highway 58 

Duffield, VA 24244 

Margie Blalock 

Principal 
150 

Rye Cove High School 

Route 649 

Clinchport, VA 

Tim Blankenbecler 

Director 

Small Business Development Center 

Mountain Empire Community College 

P.O. Box 700 

Big Stone Gap, VA 24219 

Jim Brackens 

Public Affairs Manager 

Sprint 

2444 Memorial Boulevard 

Kingsport, TN 37664 

Blane Clark 

Executive Director 

Scott County Telecom 

Woodland Avenue 

Gate City, VA 

Randy Cook 

Administrator 

Indian Path Hospital 

2000 Brookside Drive 

Kingsport, VA 

Danny Dixon 

Scott County School District 

261 East Jackson 

Duffield, VA 24244 

Charles Dougherty 

Mayor of Gate City 

158 East Jackson Street 

Gate City, VA 

Paul Elswick 

Chief Executive Officer 

Corner Post Software 

4907 Boone Trail Road 

Duffield, VA 24244 

Ron Flanary 

Executive Director 

LENOWISO Planning District 

6913 Duff-Patt Road 

Duffield, VA 24244 

Thomas Haynes 

Principal 

Scott County Vocational School 

150 Broadwater Avenue 

Gate City, VA 
151 

Keith Inman 

Manager 

Gilbert NS Lumber 

State Route 772 

Duffield, VA 24244 

Mike Kessel 

Scott County Extension Office 

Route 6, Box 542 

Gate City, VA 

Mike Lane 

Site Manager 

Joy Mining Machinery 

State Route 772 

Duffield, VA 24244 

Lisa McCarty 

Journalist 

Scott County Virginia Star 

103 East Jackson Street 

Gate City, VA 

Jim Scott 

Superintendent 

Scott County School District 

261 East Jackson 

Duffield, VA 24244 

Deborah Shepard 

Branch Manager 

Bank of America 

141 East Jackson Street 

Gate City, VA 

LaDonna Smith 

Office Manager 

Mt. Region Medicine 

Gate City, VA 

Michael Shull 

Chairman 

Scott County Development Authority 

104 East Jackson 

Gate City, VA 

Pat Tate 

President 

Scott County Chamber of Commerce 

4907 Boone Trail Road 

Duffield, VA 24244 

Noxubee County, Mississippi

Mrs. Dorothy Baker Hines 

Mayor 
152 

City of Macon 

105 West Pulaski 

Macon, MS 39341 

Mr. Mike Banks 

"Trailboss Trailers, Inc." 

15560 Highway 45 

Macon MS 39341 

Ms. Phylis Benson 

Project Analyst 

Golden Triangle Planning and Development District 

P.O. Box 828 

Starkville MS 39760 

Mr. Scott Boyd 

Publisher 

Macon Beacon 

403 South Jefferson Street 

Macon MS 39341 

Mr. Ike Brown and Ms. Dorothy Clanton 

Noxubee Democratic Party 

110 North Martin Luther King Drive 

Macon MS 39341 

Mr. George Crawford 

District Planner 

Golden Triangle Planning and Development District 

P.O. Box 829 

Starkville MS 39761 

Ms. Lillie Draper 

214 South Jefferson 

Macon MS 39341 

Ms. Beth Freshour 

Director 

Noxubee County Library System 

103 East King Street 

Macon MS 39341 

Ms. Susan Hadaway 

Outdoor Technologies, Inc. 

1576 Magnolia Drive 

Macon MS 39341 

Dr. Kevin Jones 

Superintendent 

Noxubee County School District 

P.O. Box 540 

Macon MS 39341 

Arthur Nester 

Administrator 

Noxubee General Hospital 

606 North Jefferson Street 
153 

Macon MS 39341 

Mr. Walter Norris 

President 

Pride of the South, Inc. 

HCO-1, Box 2 

Brooksville MS 39739 

Mr. William Oliver 

President 

Noxubee County Board of Supervisors 

County Courthouse 

Macon MS 39341 

Dr. Dennis Reginelli 

Agricultural Agent 

Noxubee County Extension Office 

107 East Adams Street 

Macon MS 39341 

Mr. Kirk Rushing 

Plant Manager 

Peco Foods 

P.O. Box 269 

Brooksville MS 39739 

Mr. C.D. Smith 

Regional Manager 

Bell South 

2310 7th Street 

Meridian MS 39301 

Mr. John Thomas 

Shuqualak Lumber 

Residence Street 

Shuqualak MS 39361 

Ms. Debbie White 

Executive Director 

Noxubee Coounty Economic Development Authority 

P.O. Box 308 

Macon MS 39341 

Mr. Jerry Wilson 

President 

Bank First 

110 South Jefferson Street 

Macon MS 39341 

Monroe County, Mississippi

Kathy Bailey 

Director 

Evans Memorial Library 

Aberdeen, MS 39730 
154 

Beth Bunch 

Editor 

Amory Advertiser 

Amory, MS 38821 

Frank Cockerham and Jim Pritchett 

Kerr-McGee 

Aberdeen, MS 39730 

John Clingan 

President 

Amory Federal 

Amory, MS 38821 

Sheila Crowley 

Marilyn Sumerford 

Smithville Medical Center 

Smithville, MS 38870 

Russ Davis 

Technology Coordinator 

Aberdeen School District 

Aberdeen, MS 39730 

Randle Gray 

Supervisor 

Monroe County Board of Supervisors 

P.O. Box 578 

Aberdeen, MS 39730 

Dianne Harris 

Southview Apartments 

(Neighborhood Networks site) 

Aberdeen, MS 39730 

Van Hoots 

Bauhaus, Inc. 

(a division of Laz-e-boy) 

Amory, MS 38821 

Robert Letson and Lee Frans 

Chief Executive Officer and Vice President 

Gilmore Memorial Hospital 

Amory, MS 38821 

John McCraney 

Information Systems 

BASF 

10930 Darracott Road 

Aberdeen, MS 39730 

Larry Pate 

President 

Aberdeen Branch 

Bankcorp South 

Aberdeen MS 39730 
155 

Bo Robinson 

Commissioner 

Public Services Commission 

Aberdeen, MS 39730 

Don Sherman 

Sprint Boats 

Amory, MS 38821 

Kent Stanford 

Amory Office 

Mid-South Computers 

208 North Main 

Amory, MS 38821 

Roger and Shellie Thompson 

President and Vice President 

Smithville Telephone 

63470 Highway 25 N 

Smithville, MS 38870 

William Tisdale 

Mayor 

City of Aberdeen 

125 W. Commerce 

Aberdeen, MS 39730 

Mary Helen Waggoner 

Regional Director 

Tombigbee Regional Library System 

Amory, MS 38821 

Tony Watson 

Accounting Manager 

Holley Auto Parts 

704 Highway 25 S. 

Aberdeen, MS 39730 

Brenda Wilson 

Director 

Amory Library 

Amory, MS 38821 

Mattie Wilson, Regional Director 

Laura Caruthers, Director 

Division of Economic Assistance 

Mississippi Department of Human Services 

Region 1, East 

P.O. Box 450 

Pontotoc, MS 38863 

Other Mississippi

Beth Duncan 

Small Business Specialist 

Box 9681 
156 

Mississippi State University Extension Office 

Mississippi State, MS 39762 

Mr. Charleigh Ford 

Executive Director 

Columbus-Lowndes Economic Development Association 

P.O. Box 1805 

Columbus MS 39703 

Mr. David Kilpatrick 

Supervisor of Information Systems 

Four County Electric Power 

P.O. Box 351 

Columbus MS 39703 

Gary Rawson 

Infrastructure Planning Coordinator 

Mississippi Department of 

Information Technology Services 

301 N. Lamar Street #508 

Jackson, MS 39201 

Randy Tew 

Communications Director 

Public Utilities Staff 

P.O. Box 1174 

Jackson, MS 39215 

Mike Walker 

Manager 

BellSouth Telecommunications 

P.O. Box 749 

Tupelo, MS 38802 

Dick Webster 

Rothe Computer Solutions 

Columbus, MS 39703 

Dr. Rick Young 

CEO 

East Mississippi Community College, Golden Triangle Campus 

P.O. Box 100 

Mayhew MS 39753 

 

 

 
158 

APPENDIX SEVEN: Glossary of Terms 

The terms below use definitions from various sources, including the FCC and a previous 

TIPI Telecommunications Review from 1998. 

1996 Telecommunications Act 

A major deregulation initiative that allows telephone companies and cable companies to 

compete with each other, and prescribes a procedure whereby local exchange companies 

can enter the long distance telephone business. It also reformulated aspects of universal 

service and established a new basis for computing the program’s assignments. The Act 

also established the “E-rate” program as part of universal service. 

Bandwidth 

A range of frequencies in the broadcast spectrum that is occupied by a signal (for 

example, a television signal may have a bandwidth of 6 MHz). The “necessary 

bandwidth” is the amount of spectrum required to transmit a signal without distortion or 

loss of information. In computer networks, bandwidth describes the capacity of network 

elements to carry and transmit data, measured in “Baud Rate”. High bandwidth networks 

are able to carry more types of data simultaneously than low bandwidth networks. 

Baud 

A measure of the speed at which data is transmitted, computed in number of elements 

changed per second. The “Baud Rate” is the speed at which a computer can transfer data 

through a modem using communication software. See also: “Kbps”, “Mbps”, etc. 

BIT (Binary Information Unit, Binary Digit) 

The smallest unit of digital information used in computing. A single-digit number in 

binary code (either a “0” or a “1”). Bandwidth in telecommunications and data networks 

is usually measured in “bits-per-second” (bps). Hence, a network facility with a 

bandwidth that allows the transmission of 1,000 bits-per-second is designated on the 

scale of “Kbps” (Kilobits per second), while a network facility with the capability of 

transmitting data at a rate of 1 million bits-per-second is designated on the scale of Mbps 

(Megabits per second). 

Bottleneck 

Any point in a network at which network traffic gets backed-up because of insufficient 

bandwidth. 

Broadband 

A descriptive term for evolving digital technologies offering consumers a single switched 

facility offering integrated access to voice, high-speed data services, video-demand 

services, and interactive information delivery services. Broadband also is used to define 

an analog transmission technique for data or video that provides multiple channels. A 

cable TV system, for example, employs broadband transmission facilities (both analog 

and digital). 
159 

Byte 

A set of “bits” that represent a single character. Usually, there are eight bits in a Byte. 

Cable Modem 

A device that allows a computer to send data via the cable TV network, where such 

service is available. Cable modems are capable of providing greatly increased bandwidth 

over dialup connections; however, the bandwidth available to each cable modem user is 

determined by the total number of users on the network at a given time. Typical 

downstream speeds can be up to 10-20 Mbps, while upstream speeds can be 

approximately 300 Kbps. 

Common Carrier 

The term used to describe a telephone company. It is a telecommunications company 

that is available for hire on a non-discriminatory basis to provide communication 

transmission services, such as telephone, to the public. See also: “Specialized Common 

Carrier” 

Competitive Local Exchange Carrier (CLEC) 

A telecommunications company which competes with the previously-existing telephone 

company to provide local service. 

Dedicated Line / Circuit 

A communications circuit of channel provided for the exclusive use of a particular 

subscriber. Dedicated lines are used for computers when large amounts of data need to 

be moved between points. See also: “Switched Line / Circuit” 

Dialup 

Using a computer, modem, and a standard telephone line to connect to another computer, 

network, or Internet Service Provider. Dialup provides “narrowband” data transfer rates. 

The fastest dialup modem offers a speed of 56Kbps, although line speeds may be slower 

than what a modem is capable of handling. 

Digital Subscriber Line (DSL) 

Broadband connection available to commercial or private subscribers, generally offered 

by local telephone companies. DSL typically refers to a connection offered on ordinary 

copper line that offers transmission speeds at about 6 Mbps downstream, bundling voice, 

data and Internet services on the same line. The term is sometimes used to refer to the 

“next generation” of network connections beyond ISDN. Sometimes, “xDSL” is used by 

a to refer to any of a number of emerging DSL technologies (symmetric, meaning same 

speeds up- and downstream, or asymmetric, referring to faster downstream speeds than 

upstream speeds). DSL services are limited with within about 12,000 feet of a telephone 

company’s central office. 

E-rate 

A federally funded program to provide subsidies to schools and libraries in economically 

depressed and rural areas. Subsidies are used to help pay for the development of 

information technology-related services (including ISP subscription, the development of 
160 

Local Area Networks, the provision of broadband connections, etc.) for qualified entities. 

E-rate subsidies are limited to use specifically for network connection and development 

needs (they cannot, for example, be used to purchase computers) and can provide 

between 20 and 90 percent of the total cost of obtaining such commercial services. E-rate 

subsidies are administered by the Universal Service Administrative Company. 

Ethernet 

A process that allows the transmission of data at a rate of 10 Mbps over copper wires. 

Ethernet is generally used only in Local Area Networks (LANs) for connecting 

computers that are separated by a short physical distance. A network that uses Ethernet 

may or may not be connected to the Internet; Ethernet links do not automatically imply 

Internet connection. 

Exchange 

The electronic switch in the local telephone company’s central office that routes traffic to 

and from individual phone lines. 

Fiber Optic (Fiber) 

A transmission technology in which light signals (sequenced to carry information in a 

digital format) are sent through compressed optical fibers. These fibers, made of glass, 

allow light to be transmitted without interference from other channels. 

Gbps 

Gigabits per second. A measure of transmission speed that in billions of bits per second, 

typically occurring in a digital transmission medium such as fiber. 

Hosting 

A “host” is a computer that houses data or software for another entity. For instance, the 

computer from which a web page is available is called the “host” or “web host” for that 

page. 

Incumbent Local Exchange Carrier (ILEC) 

A telecommunications company that provides local telephone service to a region or 

locality. ILECs generally are Regional Bell Operating Companies (RBOCs) – a member 

of the group of companies (“Baby Bells”) that were created in the 1984 divestiture of 

AT&T. 

Information Communication Technology (ICT) 

Any of the set of rapidly-evolving technologies that join computers and communications 

networks for the transmission of data. 

Integrated Services Digital Network (ISDN) 

Switched network providing end-to-end digital connection for simultaneous transmission 

of voice and/or data over multiple multiplexed communication channels and employing 
161 

transmission that that conforms to internationally-defined standards. ISDN is considered 

to be the basis for a “universal network” that can support almost any type of 

communications device or service. ISDN lines generally can provide broadband 

connectivity to subscribers. 

Internet Service Provider (ISP) 

A company that provides access to the Internet for companies and/or individuals. 

Kbps 

Kilobits per second. See “BIT”. Refers to a speed in thousands of bits per second. 

Local Area Network (LAN) 

A data network that is used to inter-connect a company’s computer and data facilities, 

usually within a single building or localized area. 

LATA 

Local access and transport area. These are geographical boundaries established to 

identify where local telephone service begins and ends. When a signal crosses a LATA 

line, it is considered an interLATA transmission, and as such falls under different rules 

(conventionally applied to “long distance carriers”). LATA lines originally were 

instrumental in determining where long distance carriers operated. 

Local Multipoint Distribution Services (LMDS) 

A point to multipoint service with two-way capability to transmit voice, data, and other 

video information. LMDS can offer innovative consumer services such as two-way 

interactive video, advanced teleconferencing, telemedicine, telecommuting, and highspeed data services. 

Location Quotient 

An economic indicator which can help to determine a region’s relative specialization in 

particular industries. Mathematically, it is a ratio of ratios. If the location quotient (LQ) 

result for an industry is greater than 1, this means that the region is more specialized in 

that industry than the national average and is likely to export some of the industry's 

product. If LQ is equal to 1, then the industry in the region and in the nation are 

equivalent in terms of specialization suggesting that the region is self-sufficient. If the 

location quotient is less than 1, then the industry is less specialized in the region than in 

the nation suggesting that the region is a net importer of the industry's products. 

Mbps 

Megabits per second. See “BIT”. Refers to a speed of 1,000,000 bits per second. 

Narrowband 

A term applied to telecommunications facilities capable of carrying only voice, facsimile 

images, slow-scan video images, and data transmissions at “kilobit” speeds. The term is 
162 

commonly applied to voice-grade analog facilities (dial-up) and to digital facilites 

operating at low speeds (less than 1.544 Mbps). 

Packet Switching 

When information is in digital form, it may be broken up into small portions, called 

“packets”. These packets may then be individually encoded so that they travel 

independently along a computer network or other communications channel. Transmitting 

information along a packet-switched network does not require that a single circuit be 

maintained throughout transmission. 

PoP 

Points of Presence or POPs are the physical connections where the local service provider 

joins a long distance carrier. Proximity to a POP can reduce mileage sensitive charges for 

accessing long distance service or data transmission. 

Specialized Common Carrier 

A company (other than the telephone company) that provides point-to-point 

communications service on a common carrier basis. For example, point-to-point services 

are used to connect points on the telephone network that normally cannot be connected 

using standard wire line or fiber optic due to terrain features. 

State Network 

A telecommunications network which, to some extent, is administered or owned by a 

state government. Many state networks are, in form, little more than a set of contracts 

held by the state with commercial telecommunications service providers to provide 

interconnection between broadband networks that can then be accessed by state agencies 

and other qualified entities in order to develop low-cost broadband data, voice, or video 

transmission capabilities. In function, State Networks allow “seamless” 

telecommunications between state and other public entities which have access to the 

network as though the state owned and operated the network facilities. 

Switched Line / Circuit 

A communications channel that is not permanent in nature, but is connected through a 

switching device of some kind. This allows multiple computers or users on a network to 

have access to the circuit when it is not being used elsewhere. 

T1 

T1 refers to a digital transmission service capable of transmitting 1.544 Mbps. It is the 

general term for a digital carrier available for high volume voice, data, or compressed 

video traffic. T1 is a standard for transmission that is accepted in North America. 

Telco

Telephone Company. Generally, this refers to the company providing local telephone 

service. See also: “CLEC”, “ILEC”. 
163 

Universal Service 

The financial support mechanisms that constitute a universal fund which helps to 

compensate telephone companies or other communications entities for providing access 

to telecommunications services at reasonable and affordable rates throughout the country, 

including rural, insular, and high cost areas, and to public institutions. Companies, not 

consumers, are required by law to contribute to the Universal Service Fund. The law does 

not prohibit companies from passing this charge on to customers. 

Universal Service Administrative Company (USAC) 

A private, not for profit corporation that is responsible for providing every state and 

territory in the United States with access to affordable telecommunications services 

through the Universal Service Fund under the direction of the Federal Communications 

Commission. USAC administers four programs: the High Cost Program, the Low 

Income Program, the Rural Health Care Program, and the Schools and Libraries Program. 

Wide Area Network (WAN) 

A data network that is used to interconnect a company’s remote data sites, or widelydispersed computer equipment. 
164 

NOTES 

 

1

 It concludes that those outside of population centers are particularly likely to “not be served by market 

forces” alone. 

2

 Points of Presence of POPs are the physical connections where the local service provider joins a long 

distance carrier. Proximity to a POP can reduce mileage sensitive charges for accessing long distance 

service or data transmission. 

3

 The Standard Industrial Classification (SIC) is the statistical classification standard developed by the U.S. 

Department of Commerce underlying most economic and statistical series. In this report we generally use 

four digit codes which classify industries at the product level. The SIC system is being replaced by the 

North American Industrial Classification System (NIACS). Since we were interested in industry trends 

over the 1990s we used the SIC system. 

4

 The CLEANCBP program is used primarily to estimate employment in sectors where total employment is 

not reported or suppressed in the County Business Patterns data. This model was developed by Andrew 

Isserman and Oleg Smirnoff, University of West Virginia. 

5 Location quotients are used as indicators of the region’s relative specialization in particular industries. 

Mathematically, it is a ratio of ratios: the ratio of specialization variables Xr and Xn (employment in 

industry X in the region and the nation, respectively) to reference variables Yr and Yn (eg., total 

employment in the region and nation, respectively). If the location quotient (LQ) result for an industry is 

greater than 1, this means that the region is more specialized in that industry than the nation and likely to 

export some of the industry's product. If equal to 1, then the industry in the region and in the nation are 

equivalent in terms of specialization suggesting that the region is self-sufficient. If the location quotient is 

less than 1, then the industry is less specialized in the region than in the nation suggesting that the region is 

a net importer of the industry's products. 6 Shift-share analysis calculates three “effects” of change in regional employment as follows (for example 

for 1988-1996): 

• National Growth Effect (N): the impact of total national employment change on the region in 

selected industry. For example for 1988-1996. 

 

N = RegionIndustryJobs88 * Growth rate of U.S. Jobs 88-96 

• Industrial Mix Effect (M): reflects the extent to which employment in the selected industry in the 

region is growing faster or slower than the same industry nationally. 

M = RegionIndustryJobs88 * 

((National growth rate of jobs in selected industry 88-96) – (Growth rate of U.S. Jobs 88-96)) 

• Regional Shares Effect (R): the impact of any changes in the region’s share of national employment in 

the selected industry. R = RegionIndustryJobs88 * 

((Regional growth rate of jobs in selected industry 88-96) – (National growth rate of jobs 

in selected industry 88-96)) 

7

 High-speed lines were defined very conservatively in this study as 128 kbps for residential service and 

256 kbps for business service. 

8

 Distressed counties have a 3-year average unemployment rate that is at least 1.5 times the U.S. average of 

4.9 percent; have a per capita market income that is less than two-third (67 percent) of the U.S. average of 

$21,141 and have a poverty rate that is at least 1.5 times the U.S. average of 13.1 percent or have two times 

the poverty rate and qualify on one other indicator. (Appalachian Regional Commission, County Economic 

Status in the Appalachian Region, FY 2001. ) 

9

 The FCC’s use of the “high-speed” designation is problematic because it does not identify whether the 

service is broadly available to the public, such as the affordable DSL service, or a more exclusive service, 

such as a single T1 line, but in the case of the Appalachian region is it easy to see that high-speed services 

are not pervasive. 
165 

 10 With FCC approval that a state has met Section 271 requirements (the competition checklist), the BOCs 

are allowed to enter into long distance voice and inter-LATA data transport services. 

11 High Cost Methodology Order, FCC 99-306. 

12 On a related note, our case study visits illustrated the typical problem with wireless phone services in 

rural regions: the license holders for rural service areas are under no obligation to provide service 

throughout their licensed area. Consequently, only the larger towns or cities in a county might have cell 

phone service, leaving other communities without the ability to even attract a provider since the license is 

already taken. 

13 Mueller, M. (1997). Universal service: Interconnection, competition and monopoly in the making of 

American telecommunications. Cambridge, MA: MIT Press. 14 We purposefully refer to USF programs in this section as “federal universal service” programs to avoid 

confusion with state-level universal service programs discussed in a later section. 

15 In addition to the high-cost and the E-Rate programs, the federal Universal Service Fund supports lowincome programs (i.e., Lifeline and Linkup) geared to increase access to basic telephone service. 16 The federal high-cost program disburses the USF to eligible local exchange carriers, but a large number 

of these eligible carriers have service territories ("study areas") spanning both Appalachian and nonAppalachian counties. Available data from the FCC do not allow us to identify the proportion of universal 

service support directed to Appalachian and non-Appalachian counties in each state. 

17 For example, BellSouth in Mississippi received a USF payment in excess of $100 million in 2000, and 

the company spent the money not only for rate-reduction purposes but also for various infrastructure 

upgrade projects. Subsequently, BellSouth's telecommunications infrastructure in Mississippi was 

improved enough to allow the state government (the Mississippi Department of Information Technology 

Services) to build a statewide ATM network, which would benefit the state network users (i.e., the state 

government agencies, local governments, schools, libraries, and universities) by offering greater bandwidth 

and lower telecommunications costs. Personal interviews with Gary Rawson (the Mississippi Department 

of Information Technology Services), Aug. 3, 2001; Randy Tew (the Mississippi Public Utilities Staff), 

Aug. 3, 2001. 18 1996 Telecommunications Act § 254(f). 

19 All of these states do receive some high cost funding and support for low-income programs, but these 

six states are the ones with positive net inflows of funding. 

20 These are often called Section 271 proceedings, referring to the portion of the Telecommunications Act 

that establishes the procedures for ascertaining the attainment of a competitive threshold in the state. 

21 COVANET reduces voice long-distance service by 32-52 percent, T1 Frame Relay by 20-28 percent in 

comparison to pre-2000. COVANET also reduces ATM rates by 15 percent from the rates the state 

government received under the Net.Work.Virginia. deal. (Net.Work.Virgini. is a consortium lead by 

Verizon and Sprint and provides advanced telecommunications services at discount prices to Virginia's 

public and private entities. Since the creation of COVANET, the state government encouraged state 

agencies and schools to switch from Net.Work.Virginia. to COVANET.) See, Carter, L. & Davidson, B. 

(2000, May 10). Covanet. Presentation given at the Customer Summit, Virginia Department of Information 

Technology. [Online]. Available: http://www.dit.state.va.us/telco/covanet/ 22 Maryland, New York, South Carolina, and West Virginia. 

23 A legal ambiguity remains with regard to the access to Net.Work.Maryland by private businesses. The 

Task Force on High Speed Networks strongly recommends such access. See, Task Force on High Speed 

Networks. (1999, December 31). Report to the Maryland General Assembly. [Online]. Available: 

http://www.techmd.state.md.us/Technology/TFHSN/leg-report.pdf 

24 These three models should not be considered mutually exclusive. The State of New York, for example, 

employs both resource sharing and anchor tenancy models for the creation of its state telecommunications 

network. 

25 In 2000, the Mississippi's federal high-cost support was the highest in the nation. 

26 The PUC originally sought a full structural separation of Verizon into two independent companies. See, 

Global Telephone Order (1999, September 30). 

27 http://tracs.syr.edu/tracfbi/findings/geoData/tables/topoper90.html. Nearby Itawamba County ranked 6th 

with 41.6 percent. Noxubee was not on this list. 

28 Amory Federal Manager John Clingan (who lives in Smithville) called the company an “asset to the 

community.” 
166 

 29 A majority of these students are Black and are poor; approximately 87 percent are on the school lunch 

program. 

30 The T1 connection costs $667 per month at the main library, but the library pays only 10% of the cost, or 

$67, to the provider (BellSouth). 

31 The GTPDD serves Choctaw, Clay, Lowndes, Noxubee, Oktibbeha, Webster, and Winston counties. 

32 COVANET is modeled after Net.Work.Virginia, and aims at reducing telecommunications cost by 

aggregating demand. The connectivity ranges between 56 kpbs (dial-up access) to 622 Mbps (OC-12). As a 

state network, COVANET's eligible users are limited to state and local governments, public schools, state 

universities and colleges, and other public entities. 

33 The local loop portion of the network service also uses non-distance sensitive pricing, making the service 

affordable to users who are distant from telephone central offices. Installation and annual running costs for 

different connection speeds as of 2001 are as follows: DS-1 (1.5 Mbps), $500/$12,000; DS-3 (45 Mbps), 

$1,000/$53,124; and OC-3 (155 Mbps), $2,000/$133,716. 

34For more information, visit http://www.dba.state.va.us/financing/crd/program.asp?PROGRAM_ID=68 35 Virginia Employment Commission, Local Area Unemployment Statistics, June 2001. 

<http://www.vec.state.va.us/pdf/lausclf.pdf> 

36 Users in the City of Bristol, which is an independent city and does not officially belong to Washington 

County, have access to the backbone network of American Electric Power. 37 BVUB has several potential competitors to provide advanced telecommunications in the region, 

including Sprint, and two CLECs, KMC and Adelphia. Mr. Brown reported that the project has already 

generated competition. Adelphia currently leases fiber capacity from BVUB and recently finished a 

construction of its own $17 million fiber system that runs through northeast Tennessee and southwest and 

central Virginia. Mr. Brown also said that cable providers Charter Communications and Comcast are 

expanding cable modem services into Bristol. BVUB currently operates 9 POPs throughout its OC-12 (622 

Mbps) fiber loops. The utility’s headquarters will be relocated shortly to a site where a MultimediaServices Access Point (MSAP) has been installed. BVUB is also building an environmentally controlled 

Network Operations Center in the new facility. However, BVUB has stopped further backbone expansion 

because of a pending lawsuit. 

38 The University of Virginia's College at Wise, Emory & Henry Collage, Old Dominion University, 

Radford University, University of Virginia, George Mason University, Virginia Polytechnic Institute and 

State University, and College for Older Adults. 

39 SWVTC’s membership numbers over 100 large and small businesses, educational institutions, local 

governments, and individuals. It has one part-time employee, and a 21-seat board of directors with 

representatives from many technology using or producing firms. Its principal fundraising event is an annual 

Technology Expo, described as a regional “power summit” on technology and economic development 

issues. 
Appalachian Regional Commission

1666 Connecticut Avenue, NW

Suite 700

Washington, D.C. 20009-1068

e-mail: crea@arc.gov

www.arc.gov