The Feasibility and Value of Broadband

Communications in Rural Areas: A

Preliminary Evaluation

April 1976

NTIS order #PB-258095
NOTE

Additional copies of this staff report, prepared originally

as a working paper for use of the Senate Committee on Agriculture

and Forestry, have been published in order to facilitate further

discussions of this topic.

ii
PREFACE

In a letter dated June 25, 1974 to the Director of the Office of

Technology Assessment, Senator Herman Talmadge, Chairman of the Senate

Committee on Agriculture and Forestry asked “if OTA would consider a

project to determine the feasibility and value of experimental efforts

to develop public service for rural areas through the use of broadband

communications techniques.” Senator Talmadge further expressed his interest in the contribution broadband communications might make to the broad

objective of “rural community development.”

Although communications technology has not been designated by the

Technology Assessment Board as one of the principal areas for analysis

during OTA’s early years of operation, it is of central importance to

the functioning of our society and is an area that the Board could designate

for formal assessment activities in the future. For these reasons, and

to provide a basis for response by the Board to Senator Talmadge’s

specific inquiry, a long-term exploratory study was undertaken by OTA

staff. The study had the twin objectives of exploring the relationship

.

between broadband communications and rural development, and identifying

what further activities, if any, OTA might undertake in this area. This

report is the product of that effort.

At its 13 April 1976 meeting the Technology Assessment Board elected

to transmit this report to the Committee on Agriculture and Forestry.

Although the report is a specific response to Senator Talmadge’s request,

i i i
it is only a first step and falls short of a full assessment. An

approach for additional activities, if desired by the Committee, is

outlined at the end of Chapter I.

An earlier draft of this report was reviewed by a number of knowledgeable individuals who contributed many helpful comments and suggestions.

These individuals, for whose help the

Dr. Calvin Beale

Economic Research Service

U. S. Department of Agriculture

Washington, D.C.

Dr. Charles Brownstein

Program Manager, Division of

Advanced Productivity,

Research and Technology

National Science Foundation

Washington, D.C.

The Honorable John W. Davis

Former Congressman (Seventh

District -- Georgia)

Washington, D.C.

Dr. Ruth Davis

Director, Institute for Computer

Science and Technology

National Bureau of Standards

U.S. Department of Commerce

Washington, D.C.

Dr. Peter C. Goldmark

President, Goldmark Communications, Inc.

One Communications Plaza

Stamford, Connecticut

Dr. Martin Greenberger

Manager, Energy Systems

Modeling Program

Electric Power Research

Institute

3412 Hillview Avenue

Palo Alto, California

Board is indebted, are as follows:

Dr. Walter A. Guntharp .

Administrator, Rural

Development Service

U.S. Department of Agriculture

Washington, D.C.

Mr. Tom Hoy

National Rural Electric

Cooperative Association

2000 Florida Avenue, N.W.

Washington, D.C.

Ms. Peg Kay

Consultant

2100 M Street, N.W.

Washington, D.C.

Mr. Ira Kaye

Consultant

Congressional Rural Caucus

5529 Uppingham Street

Chevy Chase, Maryland

Mr. Steven R. Rivkin

Attorney at Law

910 17th Street, N.W.

Washington, D.C.

Dr. Maxine Rockoff

Health Scientist Administrator

National Center for Health Services

Research

U.S. Department of Health, Education

and Welfare

Rockville, Maryland

Mr. Shelby E. Southard

Director of Public Affairs

The Cooperative League of the U.S.A.

1828 L Street, N.W.

Washington, D.C.
This study was conducted by William Mills, Gretchen Kolsrud, and

Lucia Turnbull of the Office of Technology Assessment. Consulting assistance

was provided by Robert Spongberg of the Denver Research Institute. In

addition, many individuals gave freely of their time and knowledge and

their assistance is appreciated. These individuals are listed in

Appendix B.

v
INTRODUCTION

The letter from

raised two questions

America.

Senator Talmadge which led to this OTA staff study

that are of profound importance to the future of rural

The first has to do with overcoming the problems of low population

density and geographic isolation through innovative uses of existing

broadband communications technologies. (These are combinations of cable

television with two-way capability, ground or satellite based microwave

links and/or automatic broadcast repeater stations.) Broadband systems

provide a means to link doctor and patient, teacher and pupils, police

sub-station and headquarters; in other words, to substitute communications

for travel in the delivery of public and commercial services. For these

applications, the question raised by the Senate Committee on Agriculture

and Forestry is one of feasibility and value -- can such systems be economically feasible in outlying rural areas and, if so, what would be

their worth?

The second major question raised by the Committee takes the implications

of such uses a step further and asks what contribution their adoption might

make to the broad goals of rural development as spelled out in recent

legislation. Can broadband systems contribute to the economic development

of these regions? How might their widespread adoption affect the balance

between rural and urban areas? Might they increase the attractiveness of

rural areas as places in which to live?

vii
.

What gives these inquiries special timeliness are recent events of

perhaps historic proportions. For the first time in this century, the

exodus from rural areas to cities has been halted. Since 1970, both

population and economic growth have been greater in rural than in urban

areas. While it cannot be known how long these trends will persist, there

currently is momentum for change and new-found prosperity in some rural

sections of the country. If these trends are further reinforced by

circumventing fundamental rural problems of geographic isolation and low

population density through the expanded use of communications, the opportunity might be at hand to help reach the national goal of more balanced

growth.

Over the past decade and more, much has been written about the use

of communications to decentralize industry to rural areas and in so doing

transform the nature of our society. Similarly, a good deal of federallysupported experimentation has been conducted into means for delivering

health care , education and other public services through the medium of

television and other forms of communication.

In view of the high promise of such innovations, the reality of their

actual use has been the more disappointing. To date, almost none of these

non-entertainment broadband services have been incorporated into operating

cable systems. A 1975 survey by the National Cable Television Association

revealed only 31 of 644 operators leasing channels for non-entertainment

purposes. Concerning education specifically, in only 5 percent of the

systems surveyed was use extensive enough to warrant the exclusive assignment of a channel for this purpose. As of now, not one system exists which

viii
offers to outlying rural areas the full range of broadband services

that could be supplied.

Relating this experience to the prospects for rural broadband

systems, the outlook at first glance is discouraging. Unlike systems in

more densely populated urban settings, those in sparsely settled rural

areas are not likely to pay their own way if confined to conventional

television. In fact, the major barrier to extension of systems beyond

town limits has been this reliance upon entertainment services as a

principal source of revenue. Where population density of potential

subscribers willing to pay $7 or $10 a month for entertainment falls

below 30 to 40 per mile, cable extension typically is not economically

feasible. However, there may be cause for a more optimistic outlook if

public service and commercial uses of broadband are used as additional

sources of revenue and combined with subscriber fees from conventional

network television.

A cause for optimism in thinking that rural operators might succeed

in assembling combinations Of SerViCeS derives from the potential savings

to be realized in a rural setting. Because distances and thereby transportation costs are higher, potential savings from reducing student travel

might make a given broadband service economically attractive in a farm

area where it might not be in a city. Also, because of low population

density, a doctor in a rural area might greatly magnify his effectiveness —

and income -- through a broadband link to remote clinics, where this is

less likely to be so with a city doctor whose patients live close by.
Nonetheless, development of broadband systems in rural areas which

exploit all potential uses and revenue sources is a task of considerable

magnitude. Regulators and industry alike have tended to be preoccupied

with the uses of broadband in densely populated urban areas. The FCC,

seeking to encourage the non-entertainment uses of cable, has endorsed

the concept that channels should be available for non-entertainment

purposes free-of-charge. While this might make sense in a large urban system

that can make a profit solely from revenues received from entertainment,

it is of little help to a rural system that might depend upon revenue

from non-entertainment services as a crucial source of income.

However, despite the apparent logic of a full-service system in

which revenue is derived from public services, commercial users and subscriber-based entertainment fees, the concept has not been tested. A

limited

natural

cations

demonstration program to test this concept would seem to be a

next step from single service applications of broadband communiwhich have been so frequent in the past decade. Unlike experimental studies, which have emphasized and demonstrated technical capability

to meet public service needs, the objective of the demonstration would be

to determine how several services might be combined into an economically

viable system. Services would be drawn from the broad classes of subscriberbased entertainment, public service and commercial use as these are

needed by the particular community in which the demonstration takes place.

The demonstration program outlined in this study may be contrasted

with the approaches outlined in recent studies and in a number of legislative initiatives. These alternate approaches fall into two groups. On

the one hand are those which suggest that a large-scale government program,

modeled on the Rural Electrification Act of 1934, should be undertaken

x
to make low cost loans available for rural broadband systems. Such programs

might be premature when the best way to produce economically viable broadband systems in rural areas has yet to be determined, Alternately, other

legislative initiatives have proposed the need for demonstration programs

to evaluate public service applications of broadband communications.

However, these bills are not directed at rural areas, and the projects

would probably not take place in such areas because the funds are for

studies on existing systems. Systems with significant channel capacity

and two-way capability are generally located in urban areas. The unique

needs of rural areas, and the fact that economic viability may rest on

differently weighted factors in rural and urban areas, suggest the need

for demonstration programs specifically directed at meeting rural needs.

As a final note, this study had its origins in a request for information

on the feasibility and value of employing broadband communications to deliver

public services and contribute to the objectives of rural development.

Having found that these subjects are relatively unexplored, the study does

not resolve these questions but instead describes an approach for seeking

out the answers. Additionally, it gives one view of the role of broadband communications in rural development as well as of the steps that might

be taken to further their deployment. What action might be taken in connection with the latter, of course, will depend upon broader considerations

of federal policy towards rural development.

xi
TABLE OF CONTENTS

CHAPTER I - SUMMARY ... ... ... ... .. .. . . . . . . . . . . . . . . . . . . .

CHAPTER 11 - PUBLIC SERVICE AND COMMERCIAL USES

OF BROADBAND COMMUNICATIONS IN RURAL AREAS . . . . . . . . .

Public Service Applications . . . . . . . . . . . . . . . . . . . . . . . ●

Health . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Law Enforcement .. . . . . . . . . . . . . . . . . . . . . . . . .

Governmental Administrative Uses . . . . . . . . . . . . . .

Commercial Applications ● ...... . . . . . . . . . .

Security Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Information Services . . . . . . . . . . . . . . . . . . . . . . . . . .

Data Transmission . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Pay Television . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Summary And Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CHAPTER III- RURAL DEVELOPMENT AND BROADBAND

COMMUNICATIONS .... . . . . . . . . ....... . . . . . . . . . . . .

Rural-Urban Population Distribution And

1-1

11-1

II-2

II-2

11-30

II-46

II-52

II-52

II-54

II-61

II-66

II-75

II-79

111-1

Migration Patterns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III-2

Factors Underlying Rural Development . . . . . . . . . . . . . . III-8

Decentralization Of Manufacturing . . . . . . . ● . . . . III-8

Decentralization Of The Service Sector

Of The Economy. ... . . .. . . ...111-11

Residential Preference . . . . . . . . . . . . . . . . . . . . . . . 111-14

xiii
Rural Needs And Broadband Communications. . . . . . . ...111-18

Turnaround Acceleration Counties . . . . . . . . . . ...111-18

Turnaround Reversal Counties. . . . . . . . . . . . . . ...111-28

Declining Counties . . . . . . . . . . . . . . . . . . . . . . . . . . . III-33

summary And Discussion Of Findings. . . . . . . . ...111-47

CHAPTER IV- A SYSTEM APPROACH TO DEVELOPING AND

ASSESSING RURAL BROADBAND COMMUNICATIONS. . ........111-1

What Is Meant By A System Approach . . . . . . . . . . . . . . . . IV-1

Case Studies ● *...*. ● ...*..* . . . . . . . . . . . . . . . . . . . . . . . IV-3

Trempealeau County, Wisconsin Project . . . . . . . . IV-4

Spartanburg, South Carolina Project . . . . . . . . . . IV-19

Constraints To Wider Application Of

Broadband Communications In Rural Areas . . . . . . . . . . . IV-32

Technology . . . . . . . . . . . . . . . . . . . . . . . ..**.... . . . . IV-32

Regulation ● ......* . . . . . . . . . . . . . . . . . . . . . . . . . . . IV-35

Economic Constraints . . . . . . . . . . . . . . . . . . . . . . . . . IV-47

Summary Of Findings . . . . . . . . . . . . . . . ...***.. . . . . . . . . IV-52

The Need For System Demonstrations. . . . . . . . . . . . . . . . IV-55

An Approach To Implementation Of

System Demonstrations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV-58

,

Responsible Agencies . . . . . . . . . . . . . . . . . . . . . . . . . IV-61

Funding Mechanisms . . . . . . . . . . . . . . . ......** ● . . . IV-63

Identification Of Potential Sites And

Dissemination Of The System Demonstration

Concept . . . . . . . ..... ● . . . . . . . . . . . . . . . . . . . . . . IV-68

Types Of Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV-69

Investigation Of The Impacts Of Widespread

Implementation Of Telecommunications In

Rural Areas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV-70

A Future Course Of Action If System

Demonstrations Prove Successful . . . . . . . . . . . . . . . . . . . IV-73

Previous Legislative Initiatives And Findings

From Other Studies . . . . . . . ● . . . . . . . ...*.,.. . . . . . . . . . IV-76

Whitehead Report . . . . . . . . . . . . . . . ...0..., . . . . . . IV-79

xiv
s.1219, H.R. 5319, H.R. 244. . . . . . . . . . . . . . . . . . IV-80

Cable Television: Promise Vs.

Regulatory Performance. . . . . . . . . . . . . . . . . . . . . . . IV-81

H.R. 4564, S. 1257, H.R. 9630. . . . . . . . . . . . . . . . IV-83

Telecommunications Technology

Act of 1975 (H.R. 9289) . . . . . . . . . . . . . . . . . . . . . . IV-84

A Preliminary Review Of Current Practices

And Trends In Rural Telecommunications:

A Report .... . . . . . . . .... . ...* IV-85

summary ● . . . . . . . . ● . ● . . . . . . . . . . . . ● . . . , , . ● . . . . ● IV-88

Policy Alternatives For Applications Of

Broadband Telecommunications To Rural Areas . . . . . . . IV-90

Continue Status Quo . . . . . . . . . . . . . . . ...... . . . IV-90

Fund A Limited Number Of System

Demonstration Projects . . . . . . . . . . . . . . . . . . . . . . . IV-93

Create A Federal Mechanism To Facilitate

Wide Dissemination Of Broadband Services

In Rural Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV-95

Future OTA Role . . . . . . . . . . . . . . . . . . . . . . . ...0.. IV-97

APPENDIX A . . . . . . . . . . . . . . . ...... ...... . . . . . . . . . . . . . . . . A-1

APPENDIX B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1

APPENDIX C . . . . . . . . . . . . . . . . . . . . . . . ... . . . . . . . c-1

APPENDIX D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-1

xv
CHAPTER I

SUMMARY

This staff study was undertaken by the Office of Technology Assessment

in response to a request from Senator Talmadge of the U.S. Senate Committee

on Agriculture and Forestry. Senator Talmadge expressed his concern for

“equity for rural people” and asked that OTA consider undertaking a technology assessment to determine the feasibility and value of using broadband

communications to provide public services for rural areas. Senator Talmadge

further indicated his interest in the contribution broadband communications

might make to the broad objectives of “rural community development”.

In the course of this staff review, the following tasks were undertaken:

● identify rural needs and make a preliminary evaluation

of actual and potential applications of broadband communications to meet those needs;

● determine the present status of rural growth so that

the role broadband communications might play could be defined; and,

● identify constraints to, and an approach for, bringing broadband

communications to rural areas,

Each of these topics is dealt with in Chapters II, III, and IV, respectively.

Chapter IV also identifies policy alternatives and describes an approach for

further OTA assessment activities if such are considered desirable by the

OTA Board or by the Senate Committee on Agriculture and Forestry or

by other committees of the Congress.

I-1

75-605 0 - 76 - 2
This Chapter begins by defining the scope of the study in terms of

the types of communications technologies included. The meanings of the

terms “rural” and “urban” are also described. Major findings concerning

each of the tasks identified above are then summarized.

Definitions And Scope

“Broadband” communications refers to transmission of many television,

voice and/or data signals through a single system. The transmission may

be through the atmosphere or through wires or glass fibers. There is-no

clear point of separation between broad and narrowband. For the purposes

of this study, the term “broadband” indicates a communications system

employing one or more of the following technologies: coaxial cable,

translators, ground or satellite-based microwave relays, and fiber optics.

Technologies outside the scope of this study include conventional two-way

telephone, radio and TV broadcasting stations and mobile radio. In

general, the term broadband as used in this report implies two-way interaction with video, as well as voice and/or data in at least one direction.

There are a number of definitions of “rural” and “urban” (see

Chapter III, page 3). Because available data on population trends are

organized by counties which are classified as “nonmetropolitan” and

“metropolitan”, these terms are used rather than rural and urban when

discussing population trends. When the discussion is more general, the

term rural rather than nonmetropolitan is frequently used. A metropolitan county is defined as one in which there is an urban nucleus

of at least 50,000 people. Adjacent counties are included if 30%

or more of the population commute to the urban core. If less than

I-2
30% but more than 15% of the workers commute, the adjacent county

is still considered metro if it meets two out of three subsidiary

criteria considered characteristic of metro areas. These criteria

refer to density, degree of urbanization and rate of growth. Other

areas are classified as nonmetropolitan.

Previous Applications Of

Broadband Communications

Applications of broadband communications to rural areas can be

divided into two categories: 1) public services (including health,

education, law enforcement, and governmental/administrative services) ;

and, 2) commercial uses (including security systems, information transmission,

data transmission and pay-TV). For each application, the following were

reviewed: 1) rural needs; 2) experiments conducted in providing the

service; and

The analysis

3) potential rural uses, including their feasibility and value.

suggested the following major findings.

Public Service Applications

In both health and education, rural needs derive from shortages

and inadequacies of facilities and personnel as well as from many factors

that make access difficult, such as distances to be travelled. Financial

resources, that is, lower incomes than in urban areas, the fact that fewer

residents are insured for health care, and the generally smaller tax base

available to support facilities also contribute to the reduced oppor-

.

tunity for health care and education in rural areas.

I-3
In health, a vigorous experimental program conducted over the last

twelve years has demonstrated the feasibility of using broadband communications to meet rural needs in five basic areas of health care; namely,

consultation, supervision, direct patient care, administration and management, and education and training. Patient acceptance is high and it has

been demonstrated that telemedicine can increase the adequacy of health

care by providing access to services which were not available before or

which were only minimally available. Health services personnel cite

some problems, especially concern with privacy and confidentiality,

but generally, their attitudes towards telemedicine are favorable.

Unknowns requiring further research include the costs and benefits

of video compared to non-video systems and methods to combine manpower and technology into total health care delivery systems that

can be self-sustaining financially.

Fewer experiments using two-way communications have been conducted

in the field of education, especially in rural areas. Nonetheless,

the technical feasibility of meeting many of the educational needs of

rural areas has been demonstrated. There is, however, a lack of information concerning which kinds of hardware and software best support

educational uses, as well as concerning the relative effectiveness

of education using broadband communications as compared to the traditional classroom. Educational programs adapted to, broadband use and/or

guidelines for their development are also needed. Generally, very little

hard data are available on the cost-effectiveness of using broadband

communications for education.

I-4
Rural needs in law enforcement derive from the long distances

involved and the time consumed in travel to and from the central station,

thus reducing the time available for assigned duties. Broadband communications could be used to televise roll calls and briefing sessions, transmit

fingerprints and related documents and aid

arraignments.

Governmental and administrative uses

in the conduct of pre–trial

are also potential areas of

application. For example, where processing of applications requires more

than one agency, broadband communications could reduce requirements for

travel and time for processing, thereby reducing costs to local governments and serving clients more efficiently.

Hard data on the economic tradeoffs of using broadband communications

to meet needs in law enforcement and governmental/administrative activities

are not available for any setting, urban or rural. However, at least

one experiment is underway in each of these applications which should

provide some data on their feasibility and value.

Commercial Applications

Potential security services include detection of fire and of

unlawful entry, both of which are sources of major economic 1oSS in rural

areas. Broadband systems could be used to reduce! these losses by permitting continuous monitoring of isolated buildings from a central

I-5
location. Such systems are presently being installed in some new

communities, but the economic viability of these systems in rural areas

remains to be tested.

In the area of information, services are available which provide

stock and commodities prices, round-the-clock news and other information.

If the necessary market exists, these could be readily delivered by

rural broadband systems.

As for business uses of broadband systems, the potential of high

volume data transmission and of automatic meter reading were examined.

A working system in New York City uses the excess channels of a local

cable television system for transmitting massive amounts of information

between a central bank office and many branches. The bank pays a fee

to the cable company for its use of the system.

The potential for automatic meter reading arises from the fact that

manual reading of meters for water, gas and electricity is especially

costly in rural areas because of the distances between houses. A recent

study indicates that the cost of manual meter reading will exceed that of

automatic meter reading via cable by the end of the decade.

The final commercial application reviewed was pay-TV, for which

subscribers pay a fee to obtain special programs and sports events.

The economic viability of these commercial uses in rural areas

has yet to be proved. However, they represent potential sources of

revenue which could be used to support a rural broadband system.

I-6
Discussion

A major purpose of many broadband communications experiments in

public services has been to demonstrate technical capability. Economic

feasibility and the design of economically viable systems have received

less attention. When cost-effectiveness has been considered, it has been

limited to the use of technology to provide a single service. As

will be discussed later, detailed consideration of a system approach

to broadband communications in which costs are shared and revenues are

generated by public users, commercial users and subscriber-supported

entertainment fees has not been attempted. However, such a system

approach may be the key to an economically viable broadband system which

could serve an entire rural community.

All of the public service and commercial uses indicated previously

and more fully described in Chapter II have potential for inclusion

in a rural broadband communications system. Selection of applications

for a particular community should be based on a comprehensive needs

analysis. The particular public services and commercial uses will vary

according to the characteristics of each rural area.

Rural Development And Broadband Communications

In approaching the task of examining the contribution broadband

communications can make to rural development, it first was necessary

to examine the present nature of change in rural America.

The 1970’s has seen a reversal of the historic migration of Americans

from rural to urban areas, with a net 1.6 million persons moving from

urban to rural areas. This growth is not distributed evenly among all

I-7
rural areas, nor was it found to be explainable in terms of simple

proximity to metropolitan areas: the largest quantitative increase in

net immigration occurred in counties adjacent to metropolitan areas, but

the sharpest turnaround in migration developed in the more distant

rural counties.

This change, however, has not altered the sizable differences that

exist among rural areas. In parallel with the finding that there is

no simple way to describe rural America is this study’s proposition that

broadband communications systems will succeed or fail to the degree that

their characteristics match the varying needs and economic conditions

of each rural area in which they are located.

In trying to make sense of the great diversity of needs and conditions

in rural America, this study first identified the major forces underlying

present change and then projected the future course of development and needs

that are likely to emerge as a result of these forces.

The three principle forces identified in this study were:

● decentralization of manufacturing;

● decentralization of the service sector of the economy; and

● residential preference.

These forces and proximity to metropolitan areas can be related to the

two major categories of growing rural counties. These are (see Chapter

III):

● “Turnaround Acceleration” -- counties in which growth

began in the 1950’s and “accelerated” in the 1960's; generally

adjacent to metropolitan areas and characterized by growth in

service industries,

I-8
● “Turnaround Reversal” --

“reversed” their decline

counties which have only recently

and generally began to grow in the

1960’s; generally not adjacent to metropolitan areas and

characterized by growth in manufacturing industries.

The third force, residential preference, has contributed to growth in

both categories of counties.

The following summary observations outline the implications of the

varying course of rural development for the feasibility and role of rural

broadband systems. Also highlighted is the contribution that broadband

might make in resolving future needs in the two categories of growing

counties plus, for completeness, a third category of rural counties that

are declining. (“County” is used as the unit of analysis because most

statistics are gathered on this basis. In practice, broadband systems

could encompass several counties of varying character.)

● In any rural county, an area-coverage broadband system will

require the fullest development of every possible service (entertainment, public, as well as commercial) as sources of revenue if

such systems are to be feasible. Leaving aside entertainment as a

common denominator in all systems, the principal additional source

of revenue will vary according to the type of rural area:

1) in the fastest growing rural counties (those dominated

by growth in the service sector of the economy), business

and commercial services are likely to offer the greatest

potential sources of revenue.

I-9
2 ) in growing rural counties characterized by growth in

manufacturing employment, public services are likely

to constitute the best additional source for revenue.

● Broadband systems in growing rural counties could:

1) enable greater dispersal of service-type industries than

is presently the case in some of the fastest growing

counties. This could permit more equal sharing in the fruits

of growth by all sections of a county and make more likely

the continued viability of smaller rural communities.

2) help forestall continuing erosion of business functions

in those small towns located in areas of manufacturing

growth, and provide the communications network necessary for

later growth in the service sector, should economic conditions

permit.

● Broadband systems in declining rural counties could:

1) contribute to the cost-effective functioning of federal

and state programs designed to upgrade medical, educational

and other community services.

2) help to attract new industries by serving as a vehicle for

delivery of upgraded community services.

● Implications for government policy are:

1) in growing rural counties, broadband systems have the potential

for becoming self-supporting; assistance required in their

1-10
2)

development is likely to be in the areas of technical aid

and securing of financing.

in declining rural counties the economic base is likely to be

inadequate to support broadband systems. However, to the extent

that government subsidies might be made available to upgrade

functions might be

and appropriate

latter revenues, in

schools and community facilities, some

performed through the use of broadband

reimbursement made to the system. The

turn, might be sufficient to make the system financially

self-supporting. The value of broadband in providing public

services is likely to depend upon the extent to which these services mesh with and contribute to government assistance programs,

as well as upon the degree to which rural development policy emphasizes area-wide, coordinated delivery of community services.

● Despite the evident promise of broadband communications systems,

there can be no assurance that they will evolve in the manner

suggested above. Before entrepreneurs, local ‘business leaders,

or governmental officials can seriously entertain organizing and

deploying such systems, much more has to be known about the

practical aspects of their financing and operation. This will

be examined next.

Constraints To Rural

Applications Of Broadband Communications

Given the high potential of broadband to meet rural needs, it is noteworthy that there have been so few applications providing services other

than conventional television. Three categories of potential constraints

were examined: technology, FCC regulations and cost. Technology is not

1-11
limiting. FCC regulations do provide some constraint. For example,

relaxation of restrictions on translators, so that they could rebroadcast

signals received from ground or satellite-based microwave relays, would

encourage wider use of this technology.

While FCC regulations do not directly inhibit use of cable for

public services, the regulation that public service channels should be provided free of charge in some rural areas adjacent to metro areas could have the

effect of eliminating a vital and necessary source of revenue for rural

systems. The free channel regulation may also have inhibited using public

services as a source of revenue even in those rural areas where the regulation

does not apply. Therefore, although the FCC has sought to encourage development

of nonentertainment uses with free channels, the regulations may have had the

opposite effect and made it impossible for rural areas to afford either

broadband systems or new services.

While regulatory constraints can be removed simply by changing the

regulations in question, the third constraint, cost, is a more fundamental

barrier. However, it is unclear whether this constraint is actual or

perceived. For example , while the low density of rural populations makes

use of broadband to provide conventional television economically less attractive

than in urban areas, the same low density could well favor it for public

service and institutional use. If these nonentertainment uses have value,

appropriate fees could be charged which would increase the economic base

of the broadband system. However, this approach has not been explored.

1-12
A System Approach To Developing And

Assessing Rural Broadband Communications

By a rural broadband “system” is meant an area-wide communications

network accessible to all residents and institutions. The system may be used

to meet health, education and other social service needs, facilitate

government and administrative transactions, and serve commercial enterprises

as well as provide network TV and entertainment. Thus a package of services

would be provided and it is suggested that the combination as a whole may be

economically viable, where an individual service by itself may not be.

A project being initiated in Trempealeau County illustrates the

system approach. A county-wide cable and microwave system available to

all residents has been planned. An institution. the schools, will also use

the system with the objectives of improving the quality of education,

reducing teacher costs and saving funds now spent to transport pupils

among schools. While an early feasibility study showed that a conventional

individual subscriber supported cable system would not be economically

feasible, the addition of revenues from the school users ($9000/year from each

of eight schools) sufficiently improved the financial outlook so as to make

the system possible.

At the present time, a massive government program to support rural

broadband systems might be premature. While planning is well underway

for such a system in Trempealeau County, Wisconsin, no full-service

area-coverage system presently exists anywhere in the United States.

It thus does not appear that enough is known about the detailed nature,

feasibility, and value of such systems to encourage their present widespread deployment by means of routine and standard operating programs.

1-13
Instead of a large-scale government program, the logical next step

would seem to be a series of system demonstrations in which broadband

services are tailored to meet the specific and different needs of

individual rural localities. Different services will have different

cost-effectiveness ratios depending on the demographic, socioeconomic and

institutional characteristics of the community. System demonstrations

can provide data on what works, where, and under what conditions.

Assuming that a decision might be made to provide federal assistance

for these demonstrations, the following basic steps would need to be taken:

● designation of a Federal agency (or agencies) to administer

the program, collect data and evaluate results;

● provision of a funding mechanism(s); and

● identification of potential demonstration sites.

Responsible Agencies

In considering agencies that might be assigned responsibilities

for system demonstrations, the need for an effective planning organization

at the local level should not be overlooked. In some areas, such as Trempealeau County, cooperatives may be so pervasive that they can unite most of

the population and the local government in the organizational effort necessary

to plan for and implement a broadband system. In others, something akin

to the multi-county planning districts being established in several states

might provide technical assistance and direction.

1-14
At the Federal level, it is clear that a great deal of attention will

have to be given to devising an effective means of direction and coordination.

Listing only a few of the possible institutional mechanisms, an inter-agency

task force could be appointed to oversee Federal participation in demonstrations.

Or, a policy board comprised of representatives from executive agencies and

rural and industry interest groups could be designated to design and supervise

demonstrations in accordance with broad legislative guidelines.

It is beyond the purview of this study to examine fully these and other

alternatives. The approach taken here is to outline one simplified alternative in which oversight is provided by existing Congressional committees

(possibly with the assistance of OTA, as described in Chapter IV),

Many agencies have been involved in telecommunications research, including

NASA and HEW. However, there are three, for the reasons described below,

that might be initially considered for major roles in the demonstration

phase. These are: 1) the National Science Foundation (NSF); 2) the Department

of Commerce; and, 3) the Department of Agriculture.

The National Science Foundation has taken the lead in “systematic

experimentation” with its Phase I design and Phase 11 implementation studies

of public services via broadband communications and might be considered

for the lead role in conducting system demonstrations as a natural

follow-on to these efforts. NSF could also be primarily responsible for

collection of data on one of the three major areas to be included in every

system demonstration. These three areas are: 1) public service; 2) business

and commercial use; and 3) impact on rural life. While as lead agency

NSF might coordinate the administration, data collection and evaluation

1-15
of the overall program, it could also be primarily responsible for the first

of the areas enumerated; that is, the public service sector of the demonstrations.

Potential business and commercial use of a broadband system seems

to fall within the province of the Department of Commerce. The Economic

Development Administration of that Department recently funded a study

to help “in determining national policy regarding the future course

of telecommunications research and development as related to rural ecomomic

development”. Thus, the Department of Commerce appears to have the interest,

as well as the mandate, to contribute to business and commercial uses in

system demonstrations.

The Department of Agriculture is presently a source of loans and

loan guarantees (under the Rural Development Act of 1972) for broadband

projects and is an authoritative source of detailed knowledge on rural

development in general and potential demonstration sites in particular.

A significant part of system demonstrations must be evaluation of the impact of

expanded telecommunications services on rural growth and on the distinctive

characteristics of life (both positive and negative) in rural areas.

The Economic Research Service , which was a major source of information

for Chapter III, could contribute to development of rural impact data.

In addition, the Department of Agriculture, through its Extension

Service, might play a significant role in making known the system demonstration concept to potential rural sites.

1-16
Funding Mechanisms

There are two aspects of funding which should be considered:

1) capital resources for construction of systems; and, 2) funds which can

be used for identifying demonstration sites; developing software and materials

for public service, commercial and other system demonstration uses; operating

and maintaining the system; and conducting evaluations.

For capital construction of telecommunications plant, an existing

source of funds is Community Facilities loans under Title I of the Rural

Development Act of 1972. (Another possible source, as suggested by some, might

be the Rural Electrification Administration.) The second category of funds

which are primarily to be used for conducting and evaluating the actual

system demonstrations could be provided through the lead agency, either

as outright grants or loans. Calculations of the potential costs to support

four system demonstrations were made. Assuming loans for construction and

grants for other costs, per year costs for a five-Year Program were estimated

at roughly $1.8 million.

Candidate Sites

Only one criterion might be universally applied to all candidate rural

areas which might wish to serve as a system demonstration site. That is,

there must be a high degree of community support for the system.

Institutional and public service use of broadband is novel and unfamiliar.

As shown in Trempealeau County, individuals within the community in question

will have to work together to define common needs which can be best met through

broadband services. They will also have to be capable of recognizing the

economic value of these services and support the system accordingly,

(e.g., tax monies used to support schools might be used for broadband

1-17

75-605 () - 76 - 3
educational services). Several types of sites for system demonstrations were

identified in the course of this study and are discussed in the body of this

report.

Investigation Of The Impacts Of Widespread Implementation

Of Telecommunications In Rural Areas

Widespread implementation of telecommunications systems with the

characteristics described in this report could have major consequences not

only for rural areas but also for urban areas. Changes brought to rural

areas through broadband might be positive or negative. Thus, definition

of impact areas, and development of a plan for evaluation of the potential

positive and negative consequences of widespread telecommunications systems,

should be an integral part of any system demonstration program. While

detailed consideration of this topic is beyond the scope of this staff study,

a representative listing of the impact areas that might be pertinent was

developed. These fall into the six major categories of population balance,

economic impacts, social impacts, institutional impacts, transportationtelecommunications tradeoffs, and longer term impact areas.

A Future Course Of Action If System

Demonstrations Prove Successful

If system demonstrations prove the feasibility of community-wide

broadband systems to meet a variety of rural needs and if it is judged

that the positive and negative impacts of such systems are, on balance,

favorable for national growth and development, then funding services for

1-18
implementing such systems on a broad scale might be sought. One solution

might be to establish a Federal program modeled on the Rural Electrification

Administration which brought electricity and telephone to rural areas through

low cost loans. However, in the case of rural broadband systems, a more

flexible approach involving several different funding mechanisms appropriate

to the different economic characteristics of rural America might be con–

sidered (and evaluated further during the system demonstration phase).

This funding could be related to the Turnaround Acceleration,

Turnaround Reversal and Declining county categories cited earlier as a

framework for analysis. (It should be noted again that the “county” is

the unit of analysis because most statistics are gathered on a county

basis. In practice, broadband systems could encompass several counties

of varying characters.) Because of the differing attractiveness of these

types of rural counties to private entrepreneurs, the system operator might

also be expected to vary. For example, funding mechanisms and owner/

operators might vary with the category of rural county as indicated below:

Federal Financing System —

County Type Mechanism Owner/Operator

Turnaround Acceleration Guaranteed Loan Private Industry

Turnaround Reversal Direct Loan Rural Cooperative

Declining Government Subsidy Private Industry/

Local Government

Sources of funds include the Business and Industrial Division of the

Department of Agriculture for guaranteed loans , and Community Facilities

loans under Title I of the Rural Development Act of 1972 which are direct

loans. Both of these sources have already been used to support rural broadband systems. In this connection, however, it is important to note that a

letter sent to OTA by the Department of Agriculture stated that “...we

do not anticipate this type of loan becoming a significant part of our

community facility loan program.”

I-19
Previous Legislative Initiatives

And Findings From Other Studies

A number of bills and studies were reviewed. These may be divided into”

three groups depending on their treatment of the problem of bringing

broadband communications to rural areas.

The Whitehead Report exemplifies the class of national cable policy

studies. Within this class, rural cable is treated more as a monitoring

problem than as a problem requiring action. Thus, it is not surprising that

no specific course is outlined nor is a funding mechanism proposed for bringing

cable to rural areas.

The second group of bills and studies includes S. 1219, H.R. 5319,

H.R. 244, the Interstate and Foreign Commerce Subcommittee report on cable and

the Booker T. Washington/Cablecommunications Resource Center report on rural

telecommunications. This group of bills and studies suggests that telecommunications should be brought to rural areas now and suggests low-cost, long-term

loans as the funding mechanism. The implication is that the major

constraint on rural telecommunications is lack of risk capital and that

the problem can be solved in a manner paralleling the Rural Electrification

Act of 1934 which enabled the spread of electricity and telephone service

to rural areas. However, the parallel between these two situations may

not be as exact as it appears. For cable, content is all important

whereas the consumer supplies the uses for electricity or the content

carried by telephones. Whether enough is presently known about program

content to ensure success of rural broadband systems is unclear.

1-20
The third group of bills includes H.R. 4564, S. 1257 and H.R. 9630.

This group specifically addresses the problem of providing

new services, such as public service applications, via telecommunications

and proposes demonstration programs which would enable evaluation of such

services. Unlike the second group, these bills are not directed at rural

areas and projects probably would not take place in rural areas. This is

because the funds, when specified, are to be used for studying methods for

bringing in the service. Existing systems would be used in the demonstrations and those with significant capacity -- as for two-way use -- are

located in urban areas.

This report combines and extends the concepts in all these groups

of bills and studies in that it proposes a limited demonstration program,

specifically for rural areas, aimed at investigating the feasibility and

value of combinations of public services, commercial uses and entertainment.

Policy Alternatives For Applications

Of Broadband Telecommunications To Rural Areas

Three policy alternatives were developed during the study. These

are:

●

●

●

continue the status quo;

fund a limited number of system demonstration projects; and

create a Federal mechanism to facilitate wide dissemination of

broadband services to rural areas.

The pros and cons of each of the policy alternatives are described in Chapter

IV of this report.

1-21
Future OTA Role

As stated in the Preface, the objective of this staff study was

to provide a basis upon which the Technology Assessment Board might

decide what contribution, if any, OTA could make in assisting the Senate

Committee on Agriculture and Forestry to evaluate the feasibility and

value of rural broadband communications.

In the course of the study, the subject of rural broadband

communications was found to be relatively unexplored. In particular, no

analyses were found which considered the utility of broadband in relation

to the fundamental factors underlying the sudden reversal of growth trends

in rural America depicted in most recent Census statistics. Therefore,

in order to gain some clear understanding of what OTA might do in connection with the subject, it first was necessary to originate a means of

relating broadband to the forces underlying this change. Subsequently,

it was necessary to consider how and whether such systems could actually

be deployed and their value assessed.

Because of these somewhat unique circumstances, this study does not

constitute a simple reply to Senator Talmadge’s query as to how OTA can

be of assistance. Instead, what is reflected in this staff study is a

possible course of action- which the Senate Agriculture Committee might

weigh. OTA’s future role and the specific form its assistance might take,

therefore, will depend upon the Committee’s judgment as to how many of the

three tasks spelled out herein, if any, it might wish OTA to pursue.

With these qualifications in mind, the following is a three-task

approach to OTA’s participation that the Senate Committee might consider:

I-22
First as an adjunct to hearings the Committee might wish to conduct,

OTA could help the Committee to assemble a panel

or refute the findings

could include:

● the present and

described in this report.

probable future trends in

● the impact of broadband

trends;

communications on

(s) to examine

Topics to be

rural growth;

probable growth

and verify

covered

● constraints to wider application of broadband communications

in rural areas;

● the need for system demonstrations and the number and type

of system demonstrations which should be conducted, including

criteria for site selection;

● consideration of the possible need for, and best form of,

Federal involvement in rural broadband applications in the

system demonstration phase as well as in subsequent programs; and

● consideration of the possible role of OTA in helping the

Committee to assess and

above.

Second, OTA might begin a

monitor the programs suggested

continuing assessment program to help the

committee monitor: 1) telecommunications experiments in or applicable

to rural areas; and, 2) the progress of the Trempealeau County project

and any system demonstrations undertaken. With regard to the second

task, a critical feature would be assessing the impact of telecommunications

1-2 3
on the characteristics of life in rural areas affected. (Assessing

whether these impacts might be desirable is outside the scope of OTA

activities. The purpose of this monitoring effort would be to provide

the committee with data from which a judgment could be made.)

Third, on an as-needed basis, small assessments involving either panels

or other mechanisms could be conducted to integrate the data of the monitoring efforts with

study.

Because any

is proposed here

other data, including the preliminary findings of this

system demonstration will require several years, what

is a long-term, relatively low-cost activity. An estimated

level of effort and cost is as follows:

●

●

●

●

●

1⁄2 manyear/year of senior staff

1⁄2 manyear/year of support staff

1/3 manyear/year of secretarial support

average yearly cost of panels, small

contracts, etc.

contingencies including staff travel

\

= $17,000

= 9,000

= 5,000

= 30,000

= 4,000

$65,000/year

It is anticipated that OTA’s participation in the project would be

reviewed by the Technology Assessment Board at least biyearly. At these

times, both the progress and the adequacy of OTA’s effort would be subjects

of evaluation.

I-24
CHAPTER II

PUBLIC SERVICE AND COMMERCIAL USES OF

BROADBAND COMMUNICATIONS IN RURAL AREAS

This Chapter examines the potential of broadband communications for

responding to rural needs, both in the public service sector and as they

relate to rural economics. Each application is considered individually,

with a view towards determining whether current experiments are grounded

in a realistic appreciation of rural needs and, secondly, whether they

are designed to produce the kind of data necessary to determine their

ultimate feasibility in functioning rural systems. Later chapters will

describe how these services might be combined to support a rural broadband

system which could contribute to the broad goals of rural development.

The following categories of broadband applications are addressed:

. public service (health, education, law enforcement,

governmental/administrative uses); and

. commercial (security systems, information services,

data transmission, pay-TV).

Each of these categories is examined in terms of:

. rural needs for the service tested;

. representative experiments conducted; and

II-1
. Potential rural applications including the feasibility

and value of the service in meeting rural needs.

It should be noted that several recent studies, notably

those by Peg Kay, Social Services and Cable TV (1)1

and by the

Cablecommunications Resource Center, A Preliminary Review of

Current Practices And Trends In Rural Telecommunications Development

And Recommendations For Future Development (2), have reviewed experiments for the applications considered in this Chapter. No attempt

is made here to duplicate these efforts and the reader is referred

to them for additional information.

Public Service Applications

Health

Major studies analyzing rural health needs and relating these

to existing and potential broadband applications have not been done.

As part of this study, a preliminary analysis of these needs was attempted

and is summarized below. However, the results are not definitive and

additional research is required.

Rural needs. Appendix C contains an analysis of health conditions,

health manpower and facilities resources, utilization of resources

by rural populations and Federal initiatives in delivering rural

health needs, The following brief summary is drawn from Appendix C.

1 References are numbered consecutively in the order of their first

appearance in the text. The first number is the reference. The

number after the dash is the page number in the reference.

II-2
Significant health care problems exist in rural populations.

Comparative analysis of the health of rural vs. urban populations

shows higher infant and maternal mortality rates and greater incidence

of chronic illness in rural populations.

Another indicator of rural health is the rejection rate for military

service from physical and mental conditions. The rate for rural residents

is at least twice that for metro residents and residents of small cities

and towns.

As for injuries, rural nonfarm residents show higher injury rates than

metro residents. However farm residents show a lower incidence of injuries.

Thus, medical care requirements for injuries in rural as compared to urban

areas are not clearcut.

There is a shortage of physicians, especially specialists, in rural

areas. The combined ratio of general practitioners, specialists and hospital-based physicians per 100,000 population is 69.0 for nonmetro areas

and 145.7 for metro areas. For specialists alone per 100,000 population,

the ratio is 30.3 for nonmetro areas and 81.5 for metro areas. Dentists,

pharmacists and registered nurses are also in very short supply in nonmetro

compared to metro

medical personnel

remaining current

areas. Contributing factors to the rural shortage of

include isolation from peers, and the difficulty in

in professional specialties due to lack of ready access

to facilities equipped with the latest instruments and technology, as

well as to specialists for referral and consultation. Also of significance is the greater workload associated with attending a larger group

of people who are also widely distributed.

II-3
As for health facilities, statistics show that there is a greater

number of community and psychiatric hospital beds per capita for rural

populations compared to urban populations. However, the accessibility

of these facilities in terms of location, available transportation systems

and costs for utilizing them present severe problems for many individuals

residing in rural areas. In addition to having lower income levels, the

percentage of persons covered by hospital and surgical insurance is also

lower in rural areas than in urban areas.

Studies of the utilization of health services by rural residents

show that the latter tend to visit physicians, specialists and dentists

with less frequency than urban residents. Because hospitalization rates

for rural nonfarm residents and rural farm residents over 65 are proportionately higher than for metropolitan populations, it is unlikely that

this lower utilization of health services reflects better health of rural

residents but is more likely a function of access and a tendency to allow

conditions to become more serious before medical attention is sought.

A related problem is availability of emergency medical services.

Difficulties arising from health manpower shortages, distance to health

facilities and access to transportation suggest inadequacy of emergency

medical services.

In summary, available information on health conditions, resources

and services points to inadequacies of health care delivery systems in rural

areas. The needs of rural populations in health care delivery systems include:

● need for increased primary health and dental services

based on evidence of fewer physicians per capita,

11-4
higher hospitalization rates, greater incidence of

infant and maternal mortality, and higher incidence of

medical disqualification for military duty;

● need for less expensive medical care and improved physical

accessibility to medical facilities and services due to maldistribution of facilities and physicians, the distances rural

people must travel, inadequate transportation services or alternatives, and low membership in health insurance plans as well as

relatively lower income levels as compared to urban areas;

● need for emergency medical services due to chronic illness

conditions, injury rates, and distances to facilities; and

● need for continuing medical education for physicians, specialists

and allied health manpower because of physician isolation,

physician (specialist) shortages, and difficulty of access for

consultations and referrals.

In light of these needs, it is important to evaluate existing

communications experiments as a health service delivery tool for rural

populations.

Experiments. Representative telemedicine experiments of likely

application in rural areas are listed in Table 1, which summarizes

the funding source, location of the project (that is, urban or rural),

operational status, technological characteristics and medical services

provided in the sixteen telemedicine experiments evaluated.

II-5
As shown in the table, most projects have been supported by the

Federal government. The Department of Health, Education and Welfare

has been a major

National Science

exception is the

supporter of telemedicine projects and NASA and the

Foundation have also provided funds. A noteworthy

Blue Hill project (the ninth project in Table 1) which

involves a broadband link between a hospital in Blue Hill, Maine, and a

nurse practitioner in the isolated community of Deer Isle. This project was

originally funded by the Maine Regional Medical Program but increasingly

support is being provided by the community of Deer Isle.

Some experiments analyzed are

emphasis in this study is on rural

been included to provide a broader

telemedicine efforts.

located in urban areas. Although the

applications, urban experiments have

data base for assessing the value of

The table also shows that a variety of technologies have

and combined in various ways. Picturephones have been used.

been used

Black and

white or color television terminals have been connected by cable and/or

microwave and/or satellite. The common denominator of the technologies

used is that they have permitted two-way (interactive) exchange of information between sender and receiver, generally in both audio and visual modes.

Of particular interest are the health services provided in the experiments, which are indicated in the last column of the table. Following

Rockoff (3-22), these services can be classified in five categories:

consultation, supervision, direct patient care, administration and management, and education and training. The table lists services in terms

of these five categories. Additional descriptive terms have also

been used (such as lab tests, prescription and record transmission, etc.)

to provide more detail on the specific services provided. As can be seen,

II-6
TABLE I

TELEMEDICINE PROJECTS

Experiments Funded by Location

Massachusetts HEW Urban

General/Logan Veterans

Airport/Bedford Admin.

Veterans Hospital

(4-108ff,

205ff.)

Operational Technology Services

Status

Bedford still Microwave, cable, Diagnosis and consultation,

operational black and white, therapy, specialists consultation,

Logan operational telemetry (ECG’s, Lab tests, in-hospital patient

to a minimal EEG’s), lectronic observation, prescription and

extent stethoscope, inter- record transmission, administration

active audio-visual public health education, continuing

capability medical education, (emergency

consultation)

Lakeview Clinic HEW Semi- Not operational Cable, portable Diagnosis and consultation,

(4-101ff, 220ff.) rural video-carts, black therapy, specialist consultation,

(3-22), (5-59) and white, electronic In-hospital patient monitoring

(13) stethoscope, interactive audio-visual

capability

Mt. Sinai HEW Urban Not operational Cable, black and Diagnosis and consultation,

(4-119ff. ) white, electronic therapy, specialist consultation

(3-22) (5-75ff.) stethoscope, public health education, medical

interactive audio- education

New York visual capability

Bethany/ HEW Urban Will be Picturephone, cable, Diagnosis and consultation,

Garfield terminated video-discs, black therapy, specialist consultation

(4-69ff.) shortly and white, interactive lab tests, prescription and record

(3-21) (5-21ff.) audio-visual transmission, supervision of

capability pharmacist technician

Illinois

I
TABLE I

TELEMEDICINE PROJECTS

Experiments Funded by Location Operational Technology Services

Status

Case Western HEW Urban Operational Laser, cable, one-way Diagnosis and consultation

(4-69ff.) (3- color, one-way black specialist consultation: in-hospital

21ff.) (5-53ff.) and white, remote con- patient monitoring, prescription

trols, interactive or record transmission, supervision

audio-visual of nurse anesthetists, intensive

capability> data care monitoring, newborn nursing

Ohio transmission observation, (training)

Illinois Mental HEW Urban Not Picturephone Diagnosis and consultation,

Health Operational therapy, administration, medical

(4ff, 218ff)

 (3-21) (5-53ff.)

education

Cambridge HEW Urban Not Microwave, black Diagnosis and consultation,

(4-76ff. , Operational and white interactive therapy

212ff.) audio-visual capability

(3-21ff.)

(5-31ff. )

Vermont/New HEW Rural Operational Microwave, Diagnosis and consultation

Hampshire telemetry, one way therapy, specialist consultation,

INTERACT color, one way black in-hospital patient observation,

(4-129ff. , and white, interactive public health education, medical

235ff.)

(3-21ff.)

audio-visual capability education

(5-87ff.)

Blue Hill, Maine Rural Operational Microwave, black Diagnosis and consultation,

Maine (4-73ff. , Regional and white, inter- therapy, administration, public

211) (6) Medical active audio-visual health education, supervision

Program capability
TABLE I

TELEMEDICINE PROJECTS

Experiments Funded by Location Operational Technology Services

Status

Rural Health OEO/HEW Rural Operational Microwave, black Diagnosis and consultation,

Associates and white, inter- therapy, lab tests, radiology,

(4-135ff., active audio-visual administration, supervision

240ff.) (7) capability

STARPAHC NASA Rural Operational Microwave, land/ Diagnosis and consultation,

(4-150– (13) Lockheed mobile units, inter- therapy, specialists consultation,

HEW active audio-visual lab tests, radiology, prescription

capability, computer and record transmission, administraArizona data link tion, medical education

H Alaska ATS NASA/HEW Rural Not ATS-6, ATS-1 Diagnosis and consultation,

(4-149) (lo- Operational satellites, inter- administration, public health

2ff.) (13) active audio-visual education, medical education,

capability (4 sites), supervision (emergency care)

one-way Video/two-way audio

(1 site), black and white

Miami-Dade NSF Urban Not Slow-Scan, electronic Diagnosis and consultation,

(4-144ff.) Operational stethoscope; microwave therapy, prescription and record

(8) (9) (19) (Research exper- black and white; micro- transmission supervision

iments completed) wave-color; interactive

Evaluation still audio-visual capability

Florida being conducted

Ohio Valley ARC Rural Operational Microwave, color Diagnosis and consultation,

(4-145ff.) interactive audio- education, training, supervision

(14) visual two-way capa- conferences

bility (3 sites), audiovisual one-way (1 site)
TABLE I

TELEMEDICINE PROJECTS

Experiments Funded by Location Operational Technology Services

Status

Boston City NSF Urban Operational Narrowband Diagnosis and consultation,

Hospital (augmented) facsmile administration, specialists

(11) (12) consultation, prescription or

record transmission

Washington, HEW Rural Not ATS-6, ATS-1, Medical education,

Alaska, Montana, Operational audio-visual diagnosis and consultation

Idaho (WAMI) capability inter-

(4-149ff.) active (2 sites),

(10-2ff.) (13) one way audio-visual

I capability
the communications systems usually provided more than one of the five

types of services and in some cases all five.

For the purposes of this study, there are

of questions to be answered with regard to the

which have been conducted. These are:

basically three groups

telemedicine experiments

● Was the technology adequate to provide the service? (Included

in this question is the issue of whether the technology used

is excessive -- e.g., were both audio and visual interaction

necessary or would audio have been sufficient?)

● Were the services provided related to the needs of the population

served?

● Were the economics of meeting health care needs by broadband

communications considered? (This question includes not only the

economic viability of the system but also analysis of the costs

and benefits of meeting health care needs by some method other

than broadband communications.)

To assist in considering these questions, Table 2 was prepared. It

summarizes the objectives and results of the same sixteen experiments

described in Table 1. The last column (labelled Comments) provides

additional information on the issues raised above.

11-11
TABLE II

TELEMEDICINE PROJECTS

Project Objectives Results Comments

Massachusetts

General, Logan

Airport

Bedford, Veterans

Administration

Hospital

(4-108ff.)

(205ff.)

To determine clinical applications Project proved technical

of technologies; to determine feasibility and clinical

manpower/technology combinations; applications; records showed

to develop ways in which provider health care provided was of

/consumers can adapt to technolo- sufficient quality. System

gies; to develop cost-effective at Logan was not cost-effecmodels. tive partially because of the

presence of physicians at

Airport site and because

system was not fully utilized.

High level of patient acceptance, provider acceptance

was also apparent.

Systems have not been used to a maximum

extent. Some problem with technical

systems due to atmospheric conditions

or human error.

*These two projects are placed together

because they are connected to a central

link (Mass. Gen.). The Logan Airport

link originated because the principal

investigator initially saw the potential

of the technology for providing emergency

medical care to accident victims. The

Bedford link was initially established

Lakeview Clinic To test clinical applications

(4-101ff, 220ff.) of technology in consultation,

(3-22)(5-59)(13) emergency care, patient

monitoring; to determine

provider/consumer attitudes;

to determine technical

benefits (save time, etc.)

and feasibility in contrast

to telephone; to determine if

physician availability is

increased; to determine if

more personal relationships

are established

to provide specialty consultation

(psychiatric and neurological) to Bedford

which is a long term health care facility

(4-25ff.)

Easier access to consulting Peak-utilization was less than 2%, system

physician; patient anxiety not used to full capacity; legal issues

reduced; more continuity did not arise. Technical problems with

in care, greater under- availability, set-up time, reliability,

standing of diagnosis and operational complexity, and maintenance;

treatment. Consumer attitudes No significant economic advantages seen

favorable; technical system for physician. Security and confidentiality

provided versatility; physician of patients did not arise as an issue,

practice did not increase; sys- however doctors used telephone for most

tern made specialist more confidential situations.

available.
TABLE II

TELEMEDICINE PROJECTS

Project Objectives Results Comments

Mt. Sinai To determine patient/provider The system allowed for availa- Some technical difficulties with

(4-119ff.) acceptance of technology; to bility of specialists when there audio-video quality due to poor

(3-22) (5-75ff.) determine effectiveness of had previously been none; ex- studio conditions; difficulty with

system for health care delivery panded role of mid-level practi- facsimile reproductions; some “down

in lieu of “in-person” contact; tioner; allowed for improved time”; some technical problems due

to determine cost-benefit. emergency care; reduced physician to human error.

time; cost-effectiveness was

identified as slightly lower

than direct patient care.

Bethany/ To assess impact of tech- System demonstrated more rapid

Garfield nology on basis of access to geographically

contributions to health care dispersed internal resources;

and costs. demonstrated technical

21ff.) feasibility; high acceptance by

provider; allowed greater

utilization of specialist

services; greater use in

emergency care.

Picturephone designed for face to

face communication and proved

inadequate for document transmission.

Picturephones relocated during

project to reflect increased knowledge

of developers on need. Project

originally used broadband, but was

discontinued after brief period.

Case Western To evaluate viability of using

(4-69ff.) two-way broadband audio-visual

(3-21ff.) and data communications to

(5-39ff.) remedy shortage and maldistribution of anesthesiologists; to determine

manpower/technology combinations;

to determine if quality health

care could be provided.

Demonstrated effectiveness and

viability of using technology for

providing improved health service

in anesthesiology; demonstrated

effectiveness of supervision of

mid-level practitioners by

specialists; provided better

emergency care; provided

consultation where it wasn’t

previously available; provided

training; and generated closer

teamwork.

Mid-level prefer direct contact;

cost systems not identified; some

procedural problems such as

scheduling and simultaneous

monitoring have not been resolved.

This system has expanded to include

connections with a community-hospital

in a low-income area. Changes in

the training of personnel for that

hospital and the quality of care

have resulted.
TABLE II

TELEMEDICINE PROJECTS

Project Objectives Results— .——— Comments.

—

Illinois To determine the extent to System increased communication and Problem occurred with installing

Mental Health which the technology could information exchange of providers; systems in most effective sites;

(4-92ff. 218ff.) enhance mental health delivery; diminished need for patient/ technical deficiency for transmitting

(3-21) to determine specific applica- provider travel. financial and medical data. Due to

(5-39ff.) tions of technology. lack of effective planning and

subsequent reorganization of technology to better sites, firm

conclusions on video benefits

could not be made.

Cambridge To test manpower/technology

(4-76ff. 212ff.) combinations; to test

(3-31ff.) consultative applications

 (5-31ff.) and to determine if there

H

I would be reduction of referrals and improvement

in quality of treatment;

to test consumer/provider

acceptance. Project compared telephone and

television consultations.

Project demonstrated similar Problems with accessibility of video

referral rates for TV and consulting rooms for physician,

telephone although consultation rigidity of experimental design.

time was substantially longer for System was not utilized to full

television, in part, due to set extent.

up time and also because TV

tended to enrich personal

contact; demonstrated good

technical quality; increased

amount of information available;

provided on-going education.

Physicians had major problems

due to location of technology.

Vermont/ To explore technical Speech therapy was highly ac- Minimal technical problems. Speech

New Hampshire feasibility and provider/ cepted by provider and consumer; therapy now self-supporting. Project

INTERACT consumer acceptance of provided means for training mid- personnel are now trying to determine

(4-129ff. , speech therapy and level persons; increased usage of ways to make system cost-effective.

235ff.) dermatology delivered via

(3-21ff.)

referral services; provided

technology. services not otherwise avail-

(5-87ff.) able; promoted inter-staff

communications; reduced transportation time/costs; use of color

for dermatology not significant.
TABLE II

TELEMEDICINE PROJECTS

Project Objectives Results Comments

Blue Hill To use technology as the

Maine mechanism for providing mid-

(4-73ff,211) level practitioner with

(6) necessary support thereby

enabling her to provide

primary health care to

island population.

Based on community needs.

Rural Health

Assoc.

(4-135ff. ,

240ff.) (7)

H

To establish a comprehensive

health care delivery system

to serve West Central Maine

by developing a group practice

of doctors and mid-level

practitioners; to provide and

increase health care for a

dispersed population; to find

payment mechanisms for lowincome families and to

determine if prepayment for

health care in rural areas

is a viable mechanism.

Based on community needs.

System gave nurse practitioner Because the mid-level practitioner was

assistance in emergency care, only health care provider on the isconsultation over primary health land, system proved useful. The idea

care problems. Showed the of using system originated because

validity of using mid-level island built a clinic but could not

practitioner to provide primary keep a physician. The Project Direchealth care. tor stated that the system had to be

coordinated with an institution.

Community now paying for great portion

of system’s usage.

RHA used technology as a

mechanism for providing service.

Project proved the validity of

using mid-level practitioners

for health care delivery.

Feasibility of using the

technical system was demonstrated

although questions regarding its

necessity remain. Technical systems were exceptional for peergroup interaction among health

care providers and for administrative functions. Also the

intangible benefits of the

doctor-patient/doctor-practitioner relationships appear

positive, though not adequately

evaluated. Satellite clinics

have to be partially subsidized

by main clinics.

STARPAHC To provide data for developing

(4-150) (13) health care for future manned

Project based on health needs of

community. Technical problems due

to poor system planning and installation; some problems also due

to weather conditions. These were

overcome. The technology was not

a primary purpose of the project.

(17-3) spacecraft by testing physician/ Data has not yet

paramedic link; testing technology; been obtained.

identifying technology advancement

needs areas; improving the delivery

of health care to remote areas.
TABLE II

TELEMEDICINE PROJECTS

Project Objectives Results

Alaska ATS-6 To explore the potential of

(4-149) satellite video consultation to

(10-2ff.) improve health care to a highly

(13)(18) remote area, to provide

education and training to health

care providers to the public;

to provide health information

system; to determine feasibility

of using health care proivders

(mid-level) for health

delivery to rural areas.

Satellite communication can

reliably provide signals of

sufficient quality to be useful

for health service delivery for

rural areas; useful consultations

for a variety of medical problems

could be conducted; satellite

video consultation can be

successfully carried out by health

care providers at all levels

of training; the unique features

of video transmission may be

critical in 5 to 10% of cases

selected for video transmission>

otherwise there is little

measurable difference between

audio vs. video consultation;

Health care providers involved

felt video consultations improved

health care system capability,

but questioned whether it was

worth the costs - providers placed

stronger emphasis on audio as manComments

Experiment designed as a means for

potentially reducing rural health

delivery problems;-

some sites in experiments were almost

inaccessible by land, and had no

audio communication prior to

satellite.

datory for health care delivery in rural areas.

Miami Dade The objective of the tele- There was no difference in quality Research experiments are completed;

(4-144ff.) medicine phase was to determine of care given by on-site physicians evaluation of project is still being

(8)(9) (19- cost/benefits of telemedicine compared to care given over teleme- conducted. This experiment was

143ff.) using nurse practitioners; dicine. Nurse primary practitioners conducted in two stages: baseline which

to gather data on the relative provided medical care equal to that introduced medical record system and

merits of different types of of physicians. Telemedicine links

video communications which can not cost-effective when compared

be used in telemedicine systems. to cost of care administered by

[The total project (Phase I nurse practitioner; telemedicine

and II) looked at organi- was equal in cost to care provided

zational structure of by on-site physician.

delivery systems, manpower

possibilities, and technologies as a part of health

care delivery systems.]

extensive use of nurse practitioners;

and telemedicine which introduced

technology. Principal investigators have

stated that telemedicine may prove

cost effective in settings where

transportation is a major problem, and

where costs of physician time .

are equivalent to those of physicians

in nonacademic settings. The physicians

used in this experiment were from

academic environments and as such,

have generally lower salaries.
TABLE II

TELEMEDICINE PROJECTS

Project Objectives Results Comments

Ohio Valley To use technology for Evaluation and results not System became operational in 1975.

(4-145ff.) providing primary health yet available because of Project was not developed as intended.

(14) care and diagnosis. relative newness of the system. System has been used more for education/grand rounds and medical

conferences.

Boston City

Hospital

(11)

(12)

To demnostrate and test

feasibility of using distributed health and delivery

system for nursing home

populations by using nurse

practitioners; to test

quality of care rendered

by NP’s; and to determine

comparative costs, benefits

of NP vs. traditional physician visits system.

Project is being continued. Technology

Use of NP’s proved beneficial. demonstration (telephone and some

80% of NP work did not require facsimile equipment) was not a

physician consult; frequency purpose. Technologies were chosen

of care was better than tradi- because they were inexpensive and

tional system; quality of care provided necessary backup to NP.

slightly better than traditional Key factor of any health care system

system. using technology is the function and

organization of the people. Problem

in financing Medicare through NP due

to state law.

Washington, To demonstrate feasibility Experiment demonstrated the

Alaska, Montana, of satellite technology as feasibility of using satellite

Idaho (WAMI) a support for program in for teaching, administration,

(4-149ff.) decentralized medical and patient care. Broadened

(10-2ff. ) education. potential of medical education

(13) alternatives for relieving maldistribution and shortage of

physicians for rural areas.

This project was originally designed

to provide a new system of medical

education to three states who did not/

could not build a medical school.

When satellite became available it

was used to increase ability of system

to provide educational service.

Some malfunctions in technology

occurred due to design flaws, arrangement of equipment, weather

conditions.
Adequacy of technology. A useful framework for reviewing

developments in telemedicine over the last decade is that proposed by

Bashshur.1 He divides the development of telemedicine in the U.S. into

three stages:

● 1964-1969: experimental efforts by independent medical

practitioners to test the applicability of the technology

to clinical needs. The general objective during this period

was testing the feasibility of two-way communications for

diagnosis and clinical use (20-6).

● 1969-1973: continuation of the first stage but with Federal

support for research and development in telemedicine (20-3).

HEW, NSF, OEO and NASA participated in programs to establish

the technical capability of communications techniques for various

clinical uses (20-6).

● 1973- present: treatment of telemedicine as a method for delivering

health care. Program objectives shifted to assessing whether telemedicine could be self-supporting or economically viable and to

assessing the quality of care relative to other methods (20-4).

1 Bashshur, Rashid and Armstrong, Patricia. “A Review of Telemedicine

as a New Mode for the Delivery of Health Care.” (In press: quoted

with permission of Inquiry.)

11-18
As can be seen in Tables I and II, telemedicine experiments have

largely been concerned with testing the technology and clinical applications

using the technologies. Most experiments were initiated during one or the

other of the first two stages. However several experiments implemented

during the third stage described by Bashshur, have been designed to

address questions of economic viability and the adequacy of health care

provided by various technology/manpower combination alternatives (Boston

City Hospital and Miami-Dade projects). In addition, subsequent evaluations

of several projects conducted in the first and second stages of telemedicine

have shown important findings regarding economic viability and alternative

technology/manpower combinations.

As is apparent from Table “II, a variety of technical problems were

encountered during the telemedicine experiments; however, most of these

problems were overcome. Such difficulties included large amounts of “down

time” when systems were not operational; noise interference with the use of

certain equipment; and difficulties in focusing and placing the cameras.

In addition, adverse weather conditions affected the operation of equipment

in certain locations, and lack of an adequate power source held up usage

in some instances. Nevertheless, most technical difficulties and problems

were solved in the course of the experiments. In general, it can be said

that (20-11):

“By the end of the second stage, the capabilities of

telemedicine equipment had advanced to a level where technological difficulties were no longer an important determinant

in its effectiveness, and initial observations about the clinical

applicability of telecommunications to specified diagnostic problems

were made” (20-11).

11-19
Although technical feasibility was demonstrated, an important

issue raised by telemedicine experiments is the level of technology

necessary to meet health care requirements. In other words, while twoway interaction is clearly required for most functions in health care

delivery, are both audio (voice and data) and visual interaction necessary,

or is audio sufficient?l The question is important because audio-only

systems are less expensive and can be served by conventional telephone

rather than more expensive technologies.

One study evaluating the manpower/technology combinations for rural

health care delivery systems states that an augmented narrow-band network

used to link professional with mid-level practitioners is a viable means

for providing effective health services to rural populations (74). Concurrently,

the Boston City Hospital Nursing Home project also demonstrated the feasibility and value of using augmented narrowband technologies for providing

health care.

In contrast, other telemedicine experiments using broadband technologies

have shown advantages of the visual modes provided by such technologies.

A specific experiment funded by the Department of Health, Education and

Welfare (Cambridge Hospital Project) tested two-way audio-visual vs.

standard telephone for consultation between three low-income neighborhood

health stations and the Cambridge Hospital (5-31 ff.). The health service

stations were staffed by nurses who consulted with physicians at the

hospital using the two different techniques. It was found that: ●

1 Considering the increased capability of telephone lines for transmitting data, it has been suggested that more creative use of telephone systems (“augmented narrowband”) may be an option for use in

health care delivery systems.

11-20
“there were significant referral pattern differences between

television and telephone. This is of key importance in the rural

setting where the economic, physical, and emotional penalty

suffered by the consumer may be lessened with the utilization of

television. Regarding the desirability of the two, both consumers

and providers (physicians and nurse practitioners) expressed a

slightly higher degree of satisfaction for television than telephone consultations” (5-32).

Also of significance is the fact that the television consultations took

longer than the telephone consultations and that more information was

transferred using television. As a result, “more than twice as many

telephone consultations resulted in immediate hospital referral than with

television. The television made it possible to handle a significantly

greater proportion of the referrals to physicians entirely within the

neighborhood health center, by reducing the need for immediate referrals

to the hospital” (5-37). This is of critical significance to rural applications where access to hospitals may be difficult and the economic penalty

of hospitalization tends to be greater than for the average urban resident

because of lower average income levels and lower rates of health insurance.

To summarize, the technical feasibility of using broadband or

augmented narrowband communications technologies to provide health

services has been demonstrated. With the telemedicine experience of the

last ten years, technical problems have been resolved. As regards audiovisual vs. voice only, what now needs to be provided is hard and more

detailed data on the value of adding the visual mode. Bashshur points out that:

“To obtain quantified answers concerning the visual contribution to specific benefits and problems in terms of the quality

of care, access, and cost of health care delivery systems will

require additional well-focused research” (5-7).

11-21
Relationship between the experiments conducted and rural needs.

This is the second question raised earlier. There are at least four

aspects to be considered. One is the degree to which telemedicine

can serve the range of rural health needs identified at the beginning of

the Chapter. A second is the adequacy of health care provided. A third

is the acceptability of telemedicine to both patient and the health care

professionals. Finally, one may ask whether telemedicine experiments

have been based upon an analysis of the particular needs of a given rural

area which might be best served by telecommunications.

As previously indicated, telemedicine experiments have been successfully conducted in various aspects of each of the five categories of health

services identified by Rockoff (3-22). Telemedicine has been successfully

used for consultation, supervision, direct patient care, administration and

management, and education and training. It appears that telemedicine has

the potential for contributing to each of the four areas of specific rural

needs identified at the beginning of this Chapter. This is because of the

demonstrated feasibility of using midlevel practitioners for primary health

care. Thus, by linking a nurse-practitioner or physician-assistant in

remote areas to physicians and specialists, telemedicine can help fill the

need for increased primary health and specialist care. One exception is that

dental service experiments appear not to have been done. (However,

it is possible to visualize diagnostic dental service via telemedicine.)

Generally, telemedicine can increase accessibility of rural residents

to health care personnel and reduce the need for travel to remote hospitals

and clinics unless such travel is necessary. Similarly, telemedicine can

increase access to emergency medical services. It can also provide for

II-22
continuing education of remote health personnel, reduce feelings of isolation

and provide access for medical peer consultation and referrals. Thus,

telemedicine could help attract or retain medical personnel in rural areas.

Coupled with the stated preference of the majority of the population at

large (which presumably includes some medical personnel) for nonurban living

as described in Chapter III, telemedicine could be a significant inducement

to medical personnel to locate in rural areas. Unfortunately, data from

rural telemedicine experiments are not adequate to evaluate this potential.

Experiments have demonstrated that telemedicine can increase the

adequacy of health care by providing access to services to underserved

populations which were not available before or were only available to a

minimal extent. Significant data on this point comes from the seven

exploratory two-way audiovisual telemedicine projects supported by the

Department of Health, Education, and Welfare beginning in 1972 (these are

experiments 2-8 listed in Tables I and II). The projects took place in

both rural and urban settings and involved a variety of health care

services. As stated in a review of the benefits and problems associated

with the seven experiments:

"...New services were provided to the patient by the telemedicine system that were not available before its introduction.

Patients accept the recommendations of their doctors and rely on

their judgment. As such, no appreciable patient dissatisfaction

with telemedicine care was detected or registered. It would

appear that from all projects the patient received increased

quality of care in one form or another (e.g., received emergency

treatment sooner, received physician supervision of non-physician,

and received specialist consultation where it wasn’t available

previously)" (5-19).

Aside from quality of care, acceptability of telemedicine by both

patients and health care personnel are important facts to be known.

As indicated in the last quote, patients appear to find telemedicine

acceptable. There also seems to be a change in attitudes before and

II-23
after exposure to telemedicine. Just one exposure to telemedicine

appears to bring about this change in attitude. Data on this point

were collected by survey in the Rural Health Associates project. Even

those exposed to telemedicine for the first time seemed quite satisfied

as shown below:

“When asked, ‘compared to seeing a doctor in person, how

satisfactory did you find seeing a doctor over TV?’ about seven

in every ten (71%) checked that it was the ‘same as seeing a

doctor in person’. Only about one in six (16%) thought it less

satisfactory than seeing a doctor in his office. It will be

remembered that over four out of every five (78%) of the

general population , almost all of whom had not received any

medical care over TV, felt that seeing a doctor over TV would

be less satisfactory than seeing him in person. What is more,

although only about a third (32%), of the persons who had not

received medical care over TV thought that it would be about as

easy or more easy to explain medical problems over TV, about four

in every five (79%) of those who had received TV care indicated

they found that it was ‘no different’, that it was about as easy to

explain their medical problems over TV as it was in person”l (21-8).

Patient acceptability of telemedicine is further shown by data from the

same

- project when patients were asked whether they would rather wait to

see a doctor in person rather than having more rapid access through TV.

Thus:

“The fact that these persons have had pleasant medical

experiences over TV probably explains why almost four in every

five (75%) felt that they would rather wait only one day for

an appointment to see a doctor on TV than to wait either three

days to see a doctor in person or two days for an apointment

to see a nurse-practitioner or physician-assistant.”1 (21-10).

The three quotes above suggest that patient acceptability to telemedicine is high and that positive benefits in the way of access to

increased health services accrue. In addition, patients appear to have

minimal problems with the equipment (5-19).

1 Weeks, H. Ashley, “Changing Attitudes toward’ Telemedicine”. Preliminary

Survey results presented in paper at the Second Telemedicine Workshop,

Tucson, Arizona, December 4-6, 1975. (Unpublished, quoted with permission.)

II-24
While health professional note benefits associated with telemedicine

(such as increased access to patients, reduction of the need for their

physical presence, consultative support, etc.) they also cite problems.

For physicians, privacy, confidentiality and other legal issues were raised

in nearly all seven of the HEW project (5-8; 5-18). Ease of access to

television facilities is also an important aspect of physician acceptance.

For nonphysician medical personnel , many favored direct face-to-face interaction. There is also a “Big Brother” syndrome associated with a physician

monitoring a nurse or physician assistant via TV. However, these problems

were generally overcome. Proper location of television facilities is also

important in facilitating acceptance among nonphysician medical personnel

(5-18).

Thus, acceptance of telemedicine on the part of health care personnel

is somewhat less than for patients. Another problem relates to the resolution of legal issues. Aside from general issues of privacy and confidentiality, some laws will require change if maximum benefits are to accrue

from telemedicine. An example is drawn from the Bethany-Garfield experiment

(see Tables 1 and 2):

" ...the State of Illinois requires one pharmacist to personally

supervise one pharmacist assistant.When considering the shortage

of pharmacists and evening and weekend coverage requirements, the

one-to-one state requirement and personal supervision are formidable

obstacles in a community hospital complex such as Bethany-Garfield,

which would like to use its Picturephone system to supervise

apprentices by remote control” (5-8).

A second legal issue arises from Medicaid reimbursement. As far

as is known, it has not been established that reimbursement can be made

under the circumstances surrounding health care provided by telemedicine.

Also to be considered uncertain and open to further analysis is the degree

to which the experiments have been based upon actual needs analysis and

detailed attention to those needs which could be best met by tele11-25

75-605 0- 76 - 5
communicant ions. In general, this level of sophistication of application

is only beginning to be addressed. However, in both the Blue Hill and

Rural Health Associates projects, the central purpose of the experiments

was providing care to meet the health needs of the communities served.

Economic considerations. Turning to the economics of meeting

health care needs by broadband communications, two aspects must be considered: 1) the economic viability of the service; and 2) the costs and

benefits associated with use of telemedicine vs. some other method.

These are issues which fall into Bashshur’s third stage in the development

of telemedicine; concern with questions of this sort date from about 1973.

Several recent evaluations of telemedicine experiments have been designed

to determine the costs and benefits of using different technologies and

manpower combinations. One cost analysis study suggested that field trials

should be directed to use voice and data transmission without video. However,

it should be noted that the authors of that study also state that “consideration of alternative technologies from the standpoint of the patient may point

to broadband” (i.e., video as well as voice) (22-87). Several studies which

have evaluated costs of telemedicine have generally found that the costs of

using such systems with mid-level practitioners are marginally lower than the

costs of having a physicians services (Miami-Dade and Mt. Sinai projects).

However, others feel that the case for telemedicine has yet to be proved in

view of the short periods of time over which most research and demonstration

programs are conducted. Thus, “none of the programs operated optimally at

peak patient loads to warrant a true test of cost effectiveness (20-11).

II-26
The difficulty of drawing conclusions from government field trials

conducted to date has been considered by Elton. As summarized by

Bashshur (20-ll) , Elton, identified two major problems:

“(l) the length of time involved in these projects and (2) the

problem of uncertainty. Field trials are conducted for a

specified period of time-- usually one to two years. Hence,

the time constraints tend to influence the course of the trial,

that is, the results may or may not occur when the time constraint is absent. A program could be termed unsuccessful when the

actual problem may have been lack of an appropriate time period

to develop the program. Field trials are set up to reduce uncertainty by developing and conducting a Program and then evaluating

it. The problem is that the evaluation is tacked onto the trial

rather than included as an intregral stage during the process of the

trial. Thus, the issues to be evaluated are not clearly separated,

and it is difficult to determine exactly what issues are being

effected, and in turn are effecting the outcomes. The trial

often is not successful in reducing uncertainty, or does so only

partially. Elton suggested that the field trial is a necessary

form of research, but, to be meaningful, the evaluation process

must be clearly defined for the field trial.”

Rockoff clearly states the need for additional data:

“Although the exploratory experiments have yielded ‘clinical

impressions’ about areas where this technology (i.e. , visual

telecommunications) is likely to be quite beneficial, such

as scheduled specialty teleclinics, careful research and experimentation will be required to clarify and quantify the

benefits and the associate costs in order for health-care

system planners to have the information they need to decide

on visual telecommunication in the face of the other options

available” (3-28).

Potential rural applications. A review of the experience with telemedicine has shown that meeting many rural health needs by broadband

communications is technically feasible. In addition, patient acceptance

of telemedicine is high and the potential of broadband communications to

improve quality of care by increasing patient access to services previously

unavailable to them has been demonstrated. While ensuring privacy and confidentiality remain problems for physicians, these have not prevented

II-27
application of telemedicine so far. However, broader application will

probably require resolution of these issues. In addition, some laws

constrain reaching the full potential of broadband communications for improving health care. As for nurse-practitioners and physician assistants,

benefits in terms of access of consultation have been demonstrated but there

have been some

have generally

While the

problems such as a feeling of too close supervision. These

been overcome.

use of telemedicine has been demonstrated in a number of

experiments, many demonstrations have not been economically viable and

have been discontinued when Federal funds were no longer available. In

part, this may be based on lack of adequate needs analysis of the particular community before the project was undertaken. An interesting

exception is the Blue Hill project, which was specifically oriented to

meeting health care needs of the community. The isolated community of

Deer Isle first attempted to attract and retain a doctor with a community

clinic. When this failed, attention was turned to telemedicine with a

midlevel practitioner and microwave connection to the Blue Hill Memorial

Hospital. This proved successful. While the project has been supported

by the Maine Regional Medical Program, community support is now the

primary financial base for the system (6).

While telemedicine appears to be a feasible way to bring health

care to rural areas, data are inadequate to assess its value and benefits

in cost-effectiveness terms. However, for rural applications in particular, cost-effectiveness may not be the only criterion. This is because

alternatives to telemedicine are limited or perhaps even nonexistent in

II-28
some rural areas. For example, one alternative is to build more hospitals.

However, this alternative has already tried and rejected. “Small hospitals

of 50 beds of less were built in rural areas under the Hill-Burton Program

to provide specialized services to rural physicians. However, this program

has been discontinued because the facilities have proven to be uneconomical

in operation and the volume of work has not permitted adequate quality

control of professional activities or laboratory studies” (Harrell in 23-14).

As another example, if physicians find remote areas unattractive, the

alternative of improving health care by increasing the health manpower in

the area is not likely to be successful. Thus, telemedicine could be the

only alternative for improving health care in some areas. Paradoxically,

by enabling physicians to consult with their peers, have access to specialists,

and continue their education, telemedicine could also remove many of

the reasons physicians do not locate in rural areas. Thus, a redistribution of health manpower could occur just because of the solution

imposed to meet a manpower shortage. This, however, remains speculative

at the present time.

As a further note on costs, it seems unrealistic to suggest that

a broadband system would be built solely for its use in providing

health services. Others have noted that to encourage telemedicine

system to become “self-supporting”, sharing of communications links with

other social services should be considered (20-17) and some calculations

have even been made on the effects of cost-sharing in which 50% of broadband system costs are picked up by other services (23-16). However, if

a broadband system is viewed as a means for making a variety of services,

including subscriber-supported

telemedicine might be required

system cost. This approach is

entertainment, available to a community,

to support considerably less than 50% of

pursued further in Chapter IV.

II-29
In summary, it appears that there is considerable potential for

telemedicine to contribute to rural health needs. Lack of adequate

data on value and costs suggests the need for further study. However,

it is suggested that the keynote for such study should be evaluation of

economic viability. An approach is outlined in Chapter IV of this report.

Education

Equal access to education has been a goal in the United States for

the past two decades. However, statistics on educational resources and

grades of education completed suggest that rural residents are at a disadvantage with regard to educational opportunities compared to their urban

counterparts. This section examines rural education needs, experimental

efforts to provide education via broadband communications and the potential

of broadband communications to supply educational services to rural areas.

Rural needs. Opportunity for education depends upon adequacy of

educational resources and services at each level of education sought

(primary school through adult education), and accessibility to these services

by students. Unfortunately, lack of data limits the following analysis to a

description of general differences in nonmetro as compared to metro areas.

Further, as discussed in the next Chapter, rural areas differ significantly from

each other in population and socioeconomic characteristics. Thus, while some

aggregate differences between metro and non-metro areas can be shown, the

characteristics of particular rural areas may differ from the general description provided here.

11-30
Major factors which influence quality and access to rural education

are:

● economic characteristics of the community; and

● organizational structure of educational systems.

The importance of economic characteristics lies in the fact that

major financial support for education comes from the local community.

In 1971-1972, on a national basis, financial support for public elementary

and secondary schools were derived from the following sources (24-47) :

● 53% from local funds;

● 38% from state funds; and,

● 9% from Federal funds.

Analysis of financial resources for rural areas showed that, in

1973, 45% of the revenue for local school systems in nonmetropolitan

areas was from property taxes (25).

Concerning the availability of financial resources, rural communities

generally are found to have lower per capita income and a greater percentage of people living below the poverty level. In 1974, the Census

Bureau reported that the median income for metropolitan residents was

$12,844 compared to $10,327 for nonmetropolitan residents (26-98). In

addition, 9.7% of metropolitan populations were below the poverty level

compared to 14% of nonmetroplitan populations (26-16). Although the median

income and poverty level of nonmetropolitan areas varies greatly among states,

the statistics indicate that rural populations generally have a smaller

economic base for tax revenues. The significance of the reduced

11-31
economic base for nonmetro areas is that educational resources are likely

to suffer. Educational programs will be more limited, facilities and equipment will be reduced and teachers will receive lower salaries and possibly

have lower qualifications than in urban areas.

In addition to the funds available for rural education, the organizational structure of educational systems also influences the quality and

accessibility of rural education. By organizational structure is meant

the degree to which schools are consolidated , which is reflected in the

number of one-teacher schools and the number of pupils enrolled in each

school. Previously many rural populations had one-teacher schools as the

main education resource in the community. In 1960 there were 40,500 school

districts and 20,000 one-teacher schools within those school districts.

Considerable consolidation occurred in subsequent years and in 1974 there

were approximately 16,700 school districts and 1,365 one-teacher schools.

Of the 16,700 school districts, 16,300 were operating schools within their

districts and the other 300 were providing for their students by other means,

i.e., transferring them to nearby operating districts (27-6; 28-53).

Consolidation increases the enrollment in each school which in turn influences the services and resources for a given school system. However,

4,723 school systems in this country (28.9% of the total) have enrollments

of fewer than 300 students (24-55). These may be compared to a HEW Report

which concluded that “a system should serve at least 500 students in order

to offer what is now considered a full program” (24-55).

In considering the densities and distribution of rural populations, it

appears that many of the schools with fewer than 300 pupils are located in

rural areas. Consolidation of school systems can increase the diversity of

II-32
educational programs by reducing per pupil costs. According to one report

“the most important single factor causing high per pupil costs in rural

schools is a relatively high ratio of professionals to students” (29-2).

While consolidation of schools has aided in alleviating costs incurred

by high teacher-student ratios, in some rural areas it may have increased

the financial burden of transporting students greater distances. According

to Thomas, “on the average, school districts in rural areas pay high per

pupil costs for transportation. A large proportion of pupils in rural

areas are transported, and costs per pupil mile are also relatively high...

where state aid does not cover the full costs of transportation, rural school

districts must pay the difference in costs from funds that would otherwise

be available for instruction” (29-6).

In light of the population density and distribution, the economics

of rural populations, the financial resources for rural education and the

organizational structure of school systems, it appears that many rural

communities have fewer economic resources available to finance their educational systems, reduced accessibility of schools to students and teachers,

and a need for a wider array of educational services than are presently

provided. While consolidation and financial reform in education may be

steps toward resolving the problem or providing equal educational opportunity, the economic and demographic characteristics of rural areas today

still hinder the abililty of rural communities to deliver quality education

which is both accessible and cost-effective.

Another indication of equality of educational opportunity is the

enrollment of students at different levels of education. Relevant data are:

II-33
● proportionately fewer nonmetro residents attend institutions for

higher learning. For those 18 to 34 years old, 17% of metro residents were enrolled in colleges compared to 11% for nonmetro residents

● the Department of Health, Education and Welfare estimates that

about 54 million adults have not received a high school diploma (33).

Of adults over age 25, 13.9% from nonmetro areas received no

more than an eighth grade education compared to 10.1% from metro

areas (26-10).

● particularly startling are the differences in participation in

adult education courses. Of the 822,000 participants in federally

sponsored adult education courses, only 13% of those enrolled lived

in nonmetro areas (31-7).

The above data indicate that nonmetro residents receive less education

than their metro counterparts. Exact reasons are unclear. On the one

hand, it may be hypothesized that educational opportunities are there but

simply are not used. On the other hand, it may be hypothesized that the

lower quality of and/or reduced access to educational resources accounts

for the lower educational levels achieved by rural residents. Support for

the latter hypothesis is provided by a 1969 survey of 32,000 Appalachian

teachers. This survey of a predominantly rural area indicated that teachers

in locations with few inhabitants generally had less opportunity for in-service training, received smaller salaries and were teaching in schools with

less than adequate facilities (32).

II-34
In summary, although direct data are sparse, it appears that

rural areas are not equal to metro areas in educational opportunity.

The following appear to be the major areas of need:

●

●

●

●

greater diversity of educational programs including

improved resources and services;

increased accessibility to education;

increased opportunities for adult education; and

increased opportunities for continuing education of

rural teachers.

The following discussion covers communications experiments in

education and the potential for broadband communications to meet rural

education needs.

Experiments. Table 3 summarizes ten experiments using two-way

communications techniques for educational purposes. (It should be noted

that there have been many one-way applications, including conventional

educational television. These are not considered here.) The funding

sources, location of the experiment (urban or rural), operational status,

technology used and services provided are indicated.

Several comparisons can be made between the education experiments

and those which have been conducted in health (Table 1). As in health,

the major funding source for education experiments has been the Department

of Health, Education and Welfare. Fewer experiments

in education than in health. Only one semirural and

applications were found. The technology used in the

II-35

have been conducted

three rural education

educational
TABLE 111

EDUCATION PROJECTS

Experiments Funded By Location Operational Technology

Status

“Cable Tele- Tulsa School Urban

vision Project” System

Tulsa School

Systems

(34)

Oklahoma

H

Services

Operational Cable; color

one-way audio-visual

capability, one-way

visual with two-way

audio-capability;

two-way audio-visual.

System interconnects

four schools with Educational Center at

school system administration offices.

Provided a number of courses

to elementary and secondary

students, some of which were not

previously available. Provided

teachers and students with opportunity to plan and produce educational programs. Provided in-service training and conferences

between school administrators

and teachers.

Program for Bureau of

Homebound Education for

Handicapped the Handicapped (funding

Amherst, N.Y. for two years

at totals

(35) (36) (40) $738,404)

Expected to

secure funds

from other

sources once

BEH grants

have expired

However, Federal funds end

in FY 75.

Whether other

sources will be

found iS

questionable.

Urban Operational Cable used to transmit Currently provides 26 homebound

time-shared, interactive students with individualized

computer controlled in- instruction. Scheduled to

formation television serve up to 100 students. System

(TICCIT); - the TICCIT provides for library requests.

systems modifies material

for television format.

Interactive digital response unit.
TABLE III

EDUCATION PROJECTS

Experiments Funded By Location Operational Technology

Handicapped Bureau of

Project Education for

the Handicapped

University of

Kentucky funding for two

(35) (38) years, total =

$286,965

—

Handicapped Bureau of

Project Education for

H the Handicapped

funded for two

years Total =

$598,240

Status

Urban Operational Telephone lines used

to send computer signals

to homes with individualized teaching units;

All BEH projects two-way audio; tactile

expected to secure response capability

funds from other

sources once

Services

Provide specialized/individual

education to 18 homebound mentally retarded children (O-6

years old) with zero behavior

skills

BEH grants

have expired

However, Fed- Cable television used to Provides specialized instruction

eral funds end transmit instructional for handicapped students at

in N 75. programming, video-taped five community centers.

Whether other programs and computerized

sources will be programs; digital response

found is unit.

-questionable

Urban Operational

Appalachian HEW

Education HEW funded

Satellite programs NASA

Project satellite

(41-106 ff.) Satellite in

India; no

money to

continue.

Rural Not ATS-6, ATS-3 satellites

Operational black and white, ground

receiving units-telephone transmission for

some ground functions;

one-way audio-visual

capability, two-way

audio capability Also

used computers for information storage and

retrieval.

Provided graduate (continuing

education) courses during summer

in career education and elementary reading for rural teachers;

provided in-service training in

career education and reading

during academic year; produced

video software for programs which

can be reused elsewhere; serve

1200 teachers initially.
Experiments Funded By

TABLE III

EDUCATION PROJECTS

Location Operational Technology

Status

Services

Federation HEW (Educaof Rocky tional ProMountain gramming

States portion)

Satellite NASA (satellite)

$11,000,000 rough

(40-100 ff.) cost to HEW: $11

(43-21) million

Rural Not ATS-6, ATS-3, oneOperational way video; two-way

audio capability

cable, translators

Provided career education

courses to junior high students

in 56 rural communities; provided materials distribution

systems for teachers; provided

continuing education courses

for adults on topics such as

health care, problems of aging,

land use, etc. Provided teacher

in-service training.

Tager System Private phil- Urban Operational Microwave; one way Provides 70-80 three credit

H anthropy pro- video, two-way audio hour graduate and undergraduate

vialed some

(42)

capability; black courses to students at nine

original and white. universities and eight infunding for dustrial firms.

technology.

Texas Annual operating budget

$225,000 schools

and institutions

support system

through enrollments.
Experiments Funded By

Northern

Virginia

Community

College and

Manicopa

Count y

Community

College

(Phoenix)

(40)

NSF

TABLE 111

EDUCATION PROJECTS

Location Operational Technology

Status

Operational

Services

Urban TICCIT (Time shared, Provides courses in English

Interactive Computer- composition and mathematics

Controlled Information to community college students.

Television)

I

NSF Urban Operational Cable. Adult education; Adult education. Training of

South Carolina ($1,106,566) one-way video with push- daycare personnel. (Also other

(44,45,46, button response. Daycare noneducational services.)

47, 48) education: two-way audiovisual.

Alaska ATS HEW: Rural Not ATS-6, ATS-l; two-way Programs broadcast to 17 remote

Experiment (education Operational audio, one-way video communities in instruction of

programs) basic oral language development,

and receiving health, education, and instations service training; community

NASA: information broadcasts

(Satellite)
applications was more diverse with various combinations of cable, translators, satellite, microwave and computers. It will be noted that two-way

capability was generally more

discussed earlier (where both

able in both directions). In

cally involved both audio and

limited than in the health applications

audio and visual modes were typically availthe education experiments, transmission typivisual, but response was generally limited

to voice and/or data (e.g., digital response by pushbutton). This

difference in response mode derives from the nature of the use made of

communications for education: typically teaching of courses to a group

of students. Whether such teaching is done by a teacher or by a computer,

the responses required can be accomplished with voice or pushbuttons.

For some purposes, pushbutton responses are more useful than voice. This

is because digital responses can be analyzed for a group of students as

they occur permitting the teacher to keep track of student understanding

as material is presented.

A further difference between health and education is that more progress

has been made in applying communication technologies to health needs than

to educational needs. As has been shown the technical feasibility of using

communications to meet a variety of health care needs has been demonstrated

and experimental efforts are now moving into such areas as the best ways

of combining manpower and technology into total health care delivery

systems, with increasing emphasis being laid on cost-effectiveness studies.

By comparison, educational efforts appear to be less well-organized,

with less clearcut objectives and with more work needed on how best to use

available technology for educational purposes. However, there does

11-40
seem to be increasing recognition of these deficiencies and efforts are

underway to remedy them. Noteworthy in this connection are the plans

and studies of the Rehabilitation Services Administration (RSA) of the

Department of Health, Education and Welfare, which should go far to

consolidate findings and provide a structure for vocational rehabilitation

and education uses of communications. Current RSA efforts include

assessment of available software and hardware; assessment of legislative,

regulatory and attitudinal aspects of using communications technology for

education; and methods for coordinating programs between RSA agencies (49).

Potential rural applications. To assist in considering potential

rural applications Table 4 was prepared. It summarizes the objectives

and results of the educational experiments listed in Table 3.

Though some problems have occurred (such as adverse effects from

weather conditions in the Alaskan satellite experiment), the technical

feasibility of using broadband communications to meet rural education needs

has been demonstrated. Thus, the ATS satellite experiments have demonstrated that broadband communications can be used to increase the diversity

of and access to educational programs, increase opportunities for adult/

community education and provide in-service teacher training. However,

a number of areas require further work.

First, the effectiveness of the technology as a tool for improving the

quality of education remains to be demonstrated. It is unclear whether students learn as much over television with response capabilities as they do

in a classroom, and the way to maximize the effectiveness of communications

techniques for education remains to be worked out. Evaluation programs

should be an integral part of future experimental efforts.

11-41

75-605 0 - 76 - 6
TABLE IV

EDUCATION PROJECTS

Project Objectives Results Comments

Tulsa School Phase I & II designed to demon- Feasibility of technology was

Systems strate feasibility of adequately demonstrated, but

using technical systems

(34)

some problems still need

with different capabilities; correction. New courses were

to determine educational provided, two-way interactive

applications and student transmissions were generally

reaction; to learn whether preferred. Other potential

students would interact uses for system were recognized

over systems; to demon- particularly administrative,

strate that supplementary community outreach, adult eduenrichment,not previously cation, special education, seavailable, could be provided; curity, staff development.

to test feasibility of expanding computer-assisted

instruction.

H —. —

I

Amherst, To demonstrate the effec- Evaluation and results are not

New York tiveness of computer-based yet available, however results

instruction delivered via

(35,36,40)

will be based on frequency

closed-circuit television of use. System appears to have

to severely multi-handi- a positive impact on families

capped students, to demon- as well as students.

strate use in metropolitan

areas with already established cable television

capabilities.

University To develop an electronically Evaluation and results are not

of Kentucky programmed environment for yet available since project is

preschool children with severe still in operational phase.

(35,37) mental retardation and attendant multiple handicaps.

Project has been conducted in different phases with different objectives.

It was designed to be used continuously. Technical problems with

visual imagery and sound occurred.

Idea for project originated in Tulsa;

channels donated by Tulsa cable television as a part of fulfilling FCC

regulations. Project originally

planned to also aid in improving race/

relations and was a part of Tulsa’s

school integration plan. Services

cannot be expanded to other schools

due to lack of funds for equipment

installation.

Project now operational. Technical

problems have occured. System has

not yet been used to full capacity

although it has component to determine the extent to which it will

be used. No cost analysis written

into original plans, although project

personnel are working on it. Planning

involved agency and hospital referrals of students.

Project now operational. Computer

system is a modified version of the

clinical physiology. System allows

for highly individualized instruction,

as well as analysis of responses at

the end of each teaching session.

No cost analysis included.
TABLE IV

EDUCATION PROJECTS

Project Objectives Results Comments

New York City To determine how and the extent

to which telecommunications can

(35, 38) aid in the development of

severely emotionally disturbed

children; to develop learning

modules and to test technology

feasibility.

Appalachian The educational objectives were

Education to improve the effectiveness of

Satellite classroom teacher by upgrading

Project skills in career education and

reading.

(39,41-106 ff.)

Satellite To demonstrate feasibility

Project of using satellite technoFederation of logy for delivery of eduRocky Moun- cational services to rural

tain States areas; to test and evaluate

user acceptance and the cost

(41-100 ff.) of various delivery modes.

(43-21)

Evaluation of results not Some technical problems have

currently available because pro- occurred (i.e., digital

gram is still operational. response units not strong

One major thrust of the program enough to handle students with

has been to develop the software major motor skills handicaps) .

(educational) programs for handi- Cost analysis was not included

capped. Evaluation will look at in project.

student progress.

Generally viewed as successful

project. Explored and demonstrated feasibility of using satellites to link up with terrestrial

sites to provide educational programs; demonstrated positive

response of participants; used

trans-state structure to deliver

educational services; developed

procedures for software development; demonstrated feasibility

of central computer system for information delivery via satellite

Conducted needs analysis in

planning phase in order to determine greatest needs; technical

problems were minimal. Delivery

of courses via satellite excluding

satellite costs, appears to be potentially cost effective; greater

understanding of rural education

problems evolved.

Minimal technical problems. Project

covered four year period including

planning implementation, evaluation

from 1971-1975. Based on needs of

system’s potential users. There

were numerous problems with conflicts in federal, regional, state

and local objectives.
TABLE IV

EDUCATION PROJECTS

Project Objectives Results Comments

Tager System To provide courses needed Highly successful; technology

by educational institutions used extensively; students

(2,42) and industry by sharing do not hesitate to use interresources and using tech- active audio capability; 99%

nology. efficiency in the technology

(Industry does not originate

courses)

System has been operational

since 1966. TAGER was originally

established as interconnection

and sharing of resources among

institutions. Sponsoring participants realized that technology

could save time and make courses

more accessible; system is now

self-supporting, flexible and

allows versatility and freedom

in educational policy for participating schools and industries;

System designed to be used

continuously.

Northern

community

College and

Maricopa

County

Community

College

(Phoenix)

(40)

To determine if

computer assisted

instruction (CAI)

could be made a more

viable, cost-effective method of

instruction to test

the value of instruction provided

by computer technology.

Evaluation not yet Prior to TICCIT, computer assisted

available. instruction had been used as an

adjunct to traditional classroom

instruction. This project is

aimed at determining the effectiveness of using computers as

the main form of, instruction with

proctor and/or teacher support.

The technology systems has proved

99% reliability. Acceptance

has generally been good although

evaluations are still underway.
TABLE IV

EDUCATION PROJECTS

Project Objectives Results Comments

Spartanburg, To test the use of broadband Not yet available Selection of public services for

South Carolina communications to provide the experiments was based on a

adult education, training

(44,45,46,47,48)

careful analysis of community needs

of day care personnel and and consideration of how broadband

other noneducational public communications could help meet these

services; careful evalu- needs.

ation of broadband compared

to alternatives; cost-benefit

analyses.

Alaska ATS To explore uses of technology Based on need, Services were provided

Experiment for providing educational in- to teachers, citizens and students

struction to highly remote pop- in very remote regions which are often

(41) ulations of Eskimos, Indians, inaccessible; language barriers preetc. to assess program ef- sent problems to students, teachers

festiveness and acceptance; and, are isolated.

to determine the value of

operational techniques
A related problem is the need for a data bank on educational programs

or at least guidelines on how to effectively use interactive communications

techniques for educational purposes. This would assist rural communities

wishing to use broadband techniques for educational purposes to make

effective use of them.

A third area of concern is the need for cost-effectiveness data.

Some cost data were developed for the Appalachian experiments. Additional

analyses are anticipated from the Spartanburg experiments (see also Chapter

IV for discussion of the Spartanburg project). However, the

project is located in an urban setting.

Overall, it seems that inadequate consideration has been

Spartanburg

given to the

economic viability of education uses of broadband communications.

Further attention is given to this topic in Chapter IV.

Law Enforcement

Rural needs. Rural area law enforcement authorities face similar problems

and utilize similar operating procedures to those found in large municipalities.

Many of the same administrative procedures are in use. Police officers

attend roll calls and training sessions, and receive much of the same kind

of administrative information, including wanted and missing persons

circulars. They are also expected to prepare, submit and receive similar

forms and reports.1

1 Interviews with Captain William McCaa, Communications Department,

Boulder County Sheriff’s Department, Boulder, Colorado, and A. J. Anderson,

Division of Communications, State of Colorado, Denver, Colorado. Although

the analysis in this section is based upon rural law enforcement operations

in the State of Colorado, these operations vary sufficiently in different

parts of Colorado as to provide a broad sampling of conditions of operation.

II-46
A major difference between rural and urban law enforcement officers

is the distance separating the officer from the central station. The rural

officer must travel long distances just to interact with fellow officers,

attend training sessions, and/or process arrested persons, As a result, he

is away from his patrol area for long periods of time. It has been reported

that in one area of Colorado, police officers typically spent up to one–

quarter of their working time traveling to and from the central station.

The larger distances in rural areas have forced law enforcement

officers to rely more heavily on telecommunications. Present day telecommunication networks in county sheriff departments now range from complex

integrated systems employing leased telephone lines, multi-channel radio

and microwave links down to simple single channel radio systems. These

networks provide communications with the central station, sub-stations,

vehicles, and individual officers at home or in the field. They further

provide intercommunication, through the central station , with city police

in counties with large municipalities, with state police and investigative

agencies, and with fire and medical units.

Concerning the needs of rural law enforcement authorities, it is

clear that communications are already being used extensively to overcome

problems caused by distance. The issue thus seems to be whether cable might

be a lower cost alternative to such means as microwave and leased telephone

lines, or whether cable might offer features not now available that could

further reduce unproductive travel time.

As one example, it has been estimated that the use of cable is generally

less costly than microwave for distances up to 10 miles (50-95). Over 10 miles,

II-47
it might be possible in some instances for law enforcement departments

to install dedicated microwave links or share existing microwave links

between town clusters in rural broadband systems.

Anticipating the next section’s discussion of the Philadelphia

Police Department’s use of broadband communications, it has been demonstrated that broadband can be effectively used for televising roll calls

and briefing sessions, transmitting fingerprints and other related documents and conducting administrative pre-trial arraignments. Whether volume

or present travel costs might make the widespread provision of those services

by broadband economically attractive will depend upon the characteristics of the individual rural area in question.

Experiments. In the terminology used in this Chapter, home burglar

alarm services -- on the assumption that they are not likely to be paid for

by the local government -- are included in a later section under commercial

applications. Because programs designed to educate the public in such subjects as self defense and crime prevention are not revenue-generating, they

also are not covered.

According to a recent NSF survey, only three tests of law enforcement

broadband applications have been conducted in recent years. None could

be classified as experiments in the conventional sense, and two of these,

now discontinued, involved only the use of closed circuit for simple surveillance purposes (l-33).

The third of these, involving the conversion to broadband delivery of

a number of important functions at a major U.S. police department (Philadelphia, Pennsylvania), stands alone in terms of magnitude and significance.

II-48
The Philadelphia system is comprised of two coaxial cables each with

a capacity of 64 channels. One cable is being used for downstream service,

the other for upstream. When the system is completed in the spring of 1976,

it will connect the city hall, main police headquarters, nine division

headquarters, and 22 district stations at an overall estimated cost of

approximately $3.5 million (51).

The project began in 1969 with a study conducted by the Franklin

Institute Research Laboratories. The objectives were to:

1) determine what police communications functions could be

better and more economically performed on closed circuit

television;

2) establish an appropriate systems configuration; and

3) develop and install a pilot system to demonstrate the capabilities of cable television to perform the tasks assigned (51).

The Franklin Institute study not only determined that existing communications

functions could be done more economically, it also identified a number of

new procedures which are now in the process of being implemented.

The functions involved, together with the benefits anticipated through the

use of broadband, are as follows:

FUNCTION

1. Video conference calls between

high-level police personnel.

2. Television addresses to policemen

at roll call by top command.

3. Dissemination of television

training material to the divisions served.

BENEFIT

Elimination of travel time to some

meetings, more frequent and effective

communication resulting in better

understanding , unity, and smoother

operation.

Better understanding of policies and

situations at all levels, improved

morale.

Reminders to policemen of safety,

legal and administrative procedures,

etc.

II-49
4.

5.

6.

7.

Facsimile transmission of messages

and bulletins between the Police

Administration Building (PAB) and

divisions served.

Van mobile unit with microwave

permitting recording and monitoring special events throughout

the City.

Decentralized photographing and

fingerprinting of arrestees with

transmission of fingerprint images

by high-resolution facsimile.

Release-on-own-recognizance

Faster and more economical dissemination of written and photographic

material.

Provides concrete evidence of events

for police or court review and a

limited means for police to centrally

monitor live certain events of a

highly critical nature.

Expedite the identification process,

reduce crowding at the PAB.

Eliminate the need to transport

interviews and preliminary prisoners to the PAB (thereby saving

arraignments conducted over time and money and reducing the

closed circuit television between chance of prisoner escape) and reduce

divisions and PAB. the time an arrestee is detained

unless he is committed to jail.

Other future possible functions for the system, listed briefly, include

videotaping and transmitting lineups, regular live monitoring of special events

throughout the City, monitoring traffic, surveillance of potential trouble

spots (business districts and stores), and making videotapes of arrestees

for an identification record (52-7).

The major monetary savings estimated at this time are related to the

elimination of the need for transporting arrestees from the nine division

headquarters to the main headquarters for fingerprinting and preliminary

arraignment procedures.1 At the present time, that step, which requires one

1 These procedures have raised legal and other objections. The

public defender originally contended that the required “in-person

appearance before a judge” was not being met by the use of cable TV

(51). The promise of a reduction in process time helped to overcome

this objection. The use of a telephone overcame the second objection

of not being able to talk to the defendant in person privately. The

other objection from the public defender’s office dealt with the less

Problems dealing with bail, e.g., the desirability of having the

divisional or district police stations collecting money, have been

resolved by allowing persons paying bail to pay at police headquarters, following which release documents are transmitted to the

division stations by facsimile (56).

11-50
●

wagon and two officers in each instance, is estimated to cost $750,000

a year, Other advantages anticipated are: decentralization of the

arresting process and allowing the person to be arraigned in his own

neighborhood; reduction in backlog; and freeing-up of police officers

for other duties (53-4).

Potential rural applications. At the time of this writing, no funding

source had been located by the Philadelphia Police Department to conduct a

cost-effectiveness study of the conversion of the described functions to

broadband delivery (53). This is especially regrettable because this law

enforcement application is the only one of its kind and conceivably might

have a major effect in streamlining procedures and saving money in urban

as well as rural departments. Without a cost-effectiveness study, there is

no way of determining the net savings resulting from the use of the system

or arrestee processing and pre-trial arraignment procedures; all that is

known is that the previous procedures cost the Police Department $750,000

annually, There is also no hard data on the net savings that have resulted

from the use of the system for training, teleconferencing, roll calls, facsimile transmission, and other functions described earlier. It might be

noted that the Federal government, through the Law Enforcement Assistance

Administration grant, already has a sizable stake in this project. The

additional observation might be made that funding of a cost-effectiveness

follow-up study could be relatively inexpensive compared to its potential

worth in assessing the value of this unique effort and its possible use

elsewhere.

11-51
Pending the availability of such information, this use of broadband

can only be considered of potential application in rural areas. From

what is known about the project generally, however, it might be one which

could be profitably explored in connection with the suggested system

demonstration program described in Chapter IV.

Governmental/Administrative Uses

One likely application of broadband systems is use by government in

processing citizen claims and applications when more than one agency and

more than one location is involved. Especially when the poor are involved,

as in welfare applications, the costs to the government for transportation

between agencies can be substantial. One experiment bearing upon this use

of broadband communications was identified during the

That experiment, involving inter-agency processing in

Carolina, is discussed in Chapter IV.

course of this survey.

Spartanburg, South

Commercial Applications

There are four broad classes of auxiliary services which could utilize

the capabilities of broadband communications systems and which have profitmaking or commercial potential. These four classes are identified and

briefly described below.

1) Security Systems. Included in this group are: 24-hour smoke

and fire surveillance, intrusion surveillance, police call,

medical request, and emergency alert services. These services

are generally paid

of, or in addition

for by the home or business subscriber as part

to, their standard cable television service.

II-52
2)

3)

4)

Information Services. By information services is

information-on-demand such as stock and commodity

sports information, and educational information.

for these services and paid by a home or business

meant updated

market reports,

A fee is charged

subscriber.

Data Transmission Services. These services are used where large

amounts of information must be transferred among various offices.

Potential users are banks, government agencies, and public utility

companies. Dedicated channels leased by a business subscriber

for computer-to-computer, computer-to-terminal or terminal-tocomputer data communications are used to provide these services.

Pay-Television. Pay-TV provides entertainment services which subscribers are willing to pay for beyond the traditional network

programming supplied to all subscribers. Services include:

first run and other current movies, live sports events, live theatre,

and other special events.

Each of the above classes of commercial and business services will

be examined to give some insight into their current status and applicability

to rural applications. As will be subsequently discussed in Chapter IV,

these services are important in that they can be a source of revenue that

can help defray the installation and operating costs of broadband systems.

It is important to note that some of these types of service require that the

system have bidirectional capability. This may rule out consideration of

such services for the older established one-way systems generally found in

rural towns. As a further note, since research in each of these areas is

II-53
privately funded, it can be anticipated that in the future detailed cost

and revenue information might not be available for competitive reasons.

This could make it difficult to forecast their application in rural areas

with any degree of precision.

Security Services

Financial losses from fires on farms rank with those from weather,

plant and animal disease, and insects. In addition, recent crime statistics

indicate that the unlawful entry in rural areas is increasing rapidly. This

section provides some background on rural needs dealing with fire and crime

problems, discusses how telecommunications systems are being used for fire

and smoke detection and crime surveillance and outlines how such systems

may be applicable to rural and farm communities.

Rural needs. Fire and lightning strike about two of every 100 farms

each year. According to the Insurance Information Institute, fire losses

on the nation’s farms in 1970 were $242 million almost twice the $131

million loss estimated for 1950 (54). Losses are increasing at a rate of

10-12 percent per year. In 1971 the insurance premiums paid by farmers to

cover fire and wind damage totaled $441 million (55). When fire occurs on

rural property, damage iS typically three to SiX times greater than on

properties located in urban areas (56). Factors contributing to higher rural

damages include the high value of major farms, isolation, lack of firefighting facilities and less rigid wiring, heating, and construction standards.

Up to now, minimizing losses from fires in rural communities where

households are isolated from modern fire departments have depended on the

following traditional approaches:

II-54
1) Preventing the fire in the first place by learning

to recognize and correct potential fire hazards.

2) Constructing buildings so as to reduce the chances

of a fire starting and spreading.

3) Training residents in fire fighting techniques to

prevent the spread of fires once started.

Schools, fire departments and insurance companies are continually disseminating information to aid in identifying fire hazards. Newer rural

buildings are being constructed to minimize fire hazards. Metal or aS

bestos roofing materials are being used instead of wood shingles; approved

central heating systems are being installed in place of kerosene space

heaters; and approved permanent electric wiring is being used instead

of temporary, easily overloaded extensions. In open areas, farm buildings

are being equipped with lightning rods to minimize lightning-caused fires.

Fire extinguishers are now standard equipment in many rural homes and some

homes are being equipped with smoke detectors. Volunteer fire departments

are also better equipped and better trained. In spite of these

however, fire is still a major concern in isolated rural areas,

in older structures, and especially when the residents are away

homes.

efforts,

especially

from their

Concerning crime, one category in particular -- unlawful entry -- has

been increasing in rural areas at a rate nearly double that in cities and

four times that in Standard Metropolitan Statistical Areas.

II-55
Unlawful Entry Crime Rate (per 100,000 population)

SMSA* Other Cities Rural

1970 1311 730 437

1973 1411 842 564

% Average Increase

per year ‘70-’73 2.5 5.1 9.7

* SMSA - Standard Metropolitan Statistical Areas (54)

As to action being taken to combat crime, rural departments in recent

years have received better equipment and training. In the section on

public services the telecommunications capabilities of rural police

authorities were discussed. Nonetheless, one of the weakest links in

these systems continues to be the inability of the law officer to provide

surveillance of isolated properties at sufficiently frequent intervals to

deter unlawful entry.

Technologies presently exist which allow continuous monitoring

of isolated buildings from central locations for both fire and crime

detection. These technologies and their principal uses to date are

described below.

Remote security monitoring. The burglar alarm industry has foreseen

the need for providing continuous 24 hour security service. However, manual

on-site surveillance costs have restricted the market to larger commercial

and industrial clients.

It is now possible to provide security surveillance service over

existing telephone lines, or through special leased lines which will function

even if normal telephone service is interrupted. Installation charges using

II-56
the existing telephone system are approximately $30 with a $2 per month

charge for the required protective coupler. Special leased lines typically

cost $6 per mile installed. Installation costs to residential subscribers

are typically $300-500 for fire detection systems and $500 and higher for

burglar alarm systems. Monthly fees are approximately $20-60 for each

service (57). Household or business establishments can be surveyed from

a central private station or from the local fire and/or police station.

Systems are computerized and can provide an immediate printout of the

location and time a problem has been detected.

At the beginning of this decade, many within the cable television

industry actively considered using their systems for security services.

It was anticipated that these services might have high potential for

generating additional revenues. Services most discussed were home protection

services such as smoke detection, heat sensing and intrusion (unlawful entry)

detection. The systems were conceived as having a centrally located

computer and a switching system capable of “polling” sensors in the

subscriber households at regular intervals, usually in a matter of

seconds.

In spite of this widespread industry interest, there apparently

are only two firms active in the area of security services: TOCOM and

Intech Laboratories. TOCOM, Inc., of Irving, Texas, has developed working

and commercially available security systems. The firm is prepared to supply,

operate, and maintain a complete system which is comprised of the following:

central interrogator, memory bank, complete cable system, subscriber converters, subscriber-identified digital transmitters, smoke and fire

II-57

75-605 O - 76 - 7
detectors, and manually operated police and/or medical call stations. The

TOCOM systems also have the capacity to provide such optional services as

perimeter intrusion detection (e.g., wired windows), pay television, opinion

polling, and meter reading. The TOCOM system is made up to two sub-systems

-- a central data system and a remote transceiver which is located at

each of the subscriber households. The central data system controls the

whole system, supervises overall communications and interprets information. 1

The remote transceiver performs the function of decoding communications

information intended for that transceiver and executing subsequent commands

as instructed by the central data system. The central data system and the

transceivers are interconnected with a bidirectional cable network (58).

TOCOM’s primary markets have been new communities where systems are

installed during the construction phase. At the present time TOCOM is working with

six communities, the largest being a projected 50,000 unit community called

“The Woodlands” located 25 miles north of Houston. The company installs,

operates, and maintains all parts of the cable system. Woodland CATV, Inc.,

a subsidiary of TOCOM, is paying for the cable distribution plant and the

home builders are paying for the home wiring, including

of the security devices. Plant construction and wiring

costs at the Woodlands development. According to TOCOM

costs are similar for all TOCOM systems (58).

the installation

are both component

officials, these

1 Remote monitoring raises issues of privacy and confidentiality.

For a discussion of these issues the reader is referred to Kay,

Peg. Social Services and Cable TV. Final report submitted by

the Cable Television Information Center to the National Science

Foundation under contract No. APR 75-18714, February 1976.

II-58
TOCOM Systems Component Costs (in dollars)

Cable Distribution System

Head-end plus central data system $150,000-175,000

Distribution system per mile of cable $5,000-10,000

Subscriber Location Costs

Wiring (usually paid by builder) $400-600

Two-way terminal (transceiver) $250

optional intrusion system (wired windows, etc.) $150

Monthly Subscriber Fees

CATV only $7

CATV plus basic security services $12

To date 97.7 percent of the 500 occupied homes in the Woodlands complex

have elected to subscribe to the combined CATV/Security service. As

an added incentive to encourage the homeowner to purchase the security

services, a homeowner insurance policy premium discount of almost 20 percent

is available to the two-way subscribers having a fire detector and a manually

operated police call system. This discount, applied to the homeowner policy

on a $30,000 frame home, is about five dollars per month; applied to a

$65,000 brick veneer home, it is about nine dollars per month. An additional

10 percent discount, beyond the 20 percent described above, is provided to

those homeowners who have the perimeter intrusion system. The system

discussed has already demonstrated its effectiveness by averting actual

fire damage in the home of one of the subscribers in the Woodlands area (58).

The other company which is currently active in the security systems field

is Intech Laboratories, Inc., located in Ronkonkoma, New York. Intech is presently

II-59
developing a system under contract to Manhattan Cable to be used in the

Roosevelt Island Project in Manhattan. The system being developed will

be a modification of their automatic multipoint CATV analyzer/monitor

subsystem. The central processing unit will be capable of addressing

and reading four sensors in each of 1000 apartments every second. The

location of a trouble signal, along with any special instructions regarding

the specific resident, will be printed out on a cathode ray tube terminal

at a central guard station.

The cost to wire each apartment in the Roosevelt Island project

will be approximately $150. The central processing unit is expected to

cost $20,000. Manhattan Cable is installing the cable network during

construction of the buildings.

Rural applications. Both telephone

for monitoring buildings in rural areas

and cable television systems could be used

for fire and unlawful entry. Each system

uses techniques and system components with basically similar functions. Each,

however, has its own advantages or disadvantages depending on the characteristics of the specific area in which it is to be employed. Hybrid systems

consisting of both telephone lines and cable are conceivable for servicing

communities where households are separated by distances too great to justify

a cable-only system.

Probably the greatest merit of remote surveillance of isolated rural

buildings is that such surveillance can be done even while the residents

are not on location. A second advantage is that non-residential buildings,

such as barns, can be monitored even while the owners are asleep in their

homes. An immediate phone call to a sleeping owner could be sufficient to

prevent a fire from getting out of control.

11-60
While home terminal and operating costs for supplying security services

would likely be paid for by the individual subscriber through monthly fees,

it is possible that the central processing console and installation costs

might be paid for in part by local law enforcement and fire fighting

agencies. In light of the precedent set by the insurance company serving

the Woodlands project discussed above, it should be noted that lower

insurance premiums might offset a large part of the costs to the subscribers.

Concerning the economic feasibility of these services as provided

by means of a rural broadband system, it is important to recognize that

Woodland’s costs to subscribers assume that the substantial costs entailed

in wiring the homes ($400-600) are paid for by the builder. Whether these

services might pay their own way and yield some net revenue to a broadband

system in rural areas will depend upon this and many other variables which

are beyond the purview of this study.

Information Services

Rural needs. Newspapers, news letters, business periodicals, and

radio have long been used by rural residents to keep abreast of day-to-day

fluctuations in the stock markets and commodities exchanges, as well as

for business and other professional information. The paper media, although ‘

not suitable for constant updating of information, have had the advantage

of being able to provide such information in very detailed form. The much

faster broadcast media, in turn, have the disadvantage of not being able

to provide more than a superficial review of happenings in the marketplace.

In short, for both rural and urban residents, there has existed a need

11-61
for a service with the capability of conveying as much business information

as cost effectively as the newspaper at the speeds one takes for granted

with the broadcast media.

In this instance, it does not appear that the needs of the rural

businessman are greater than those of his urban counterpart, except that

to the extent that improved information services are available in urban

areas, he might suffer in competitive terms. Ultimately, with the advent

of extremely high volume technologies such as fiber optics, the ability

to “call up” business documents and correspondence might enable increasing

numbers of people to work at home or in remote areas, thereby contributing

to the trend of business decentralization to the countryside. For the moment,

however, the kind of information services described below, while useful

and representing a possible source of revenue to rural broadband systems,

will not have revolutionary effects.

News wire services. Reuters, Ltd., the international news wire service, now

provides a major information service available for transmission via cable television.

Reuters’ primary product for cable television is a two-channel package called

“News-View” which supplies general news around-the-clock, financial news

during the day and sports news at night. Until now, because of a lack of

a reliable filter, or trap, to prevent non-paying viewers from using the

service, cable television operators have been generally providing the

11-62
Reuters’ service free of charge. Recently, however, the Long Island

Cable Communications Development Corporation installed a microwave receiver

at their cable system head-end, located on the roof of the Nassau County

Medical Center, to receive such Reuters’ services as updated stock market

prices and race results. The added subscriber’s fee for receiving this

information is $3 per month (59).

To be able to offer this service, the cable operator must buy or

lease a character generator from Reuters and then pay a monthly, or weekly,

fee for the updated information. Reuters News-View rates are displayed

in the following table:

Reuters-News-View Rates

News Fee Schedule

Size of System

Number of Subscribers

Under 1,500

1,500-3,500

3,500-6,000

6,000-10,000

10,000-20,000

20,000-30,000

30,000-40,000

40,000-50,000

50,000 and more subscribers shall be at the

month for each subscriber in excess of that

Equipment Costs

Type of Equipment Sale Price

Black and White

Character Generator $1,500

Color Character

Generator 5,000

Multi-Signal Input

Character Generator 9,300

Local Crawl Input 2,400

Rate per Week

$ 50

60

75

90

110

125

150

175

rate of four cents

number.

per

Lease Price

$95 per month

55 per week

75 per week

25 per week

II-63
Reuters transmits and updates the information provided to cable operators

over leased common-carrier microwave channels. The service can also be

provided with an optional “crawl” feature which allows the cable operator

to insert locally generated information such as agricultural commodities

data.

In addition to its News-View service, Reuters also supplies specialized

information to professional clients such as commodities dealers, stock

brokers, and bankers. Reuters calls this service “The Reuter Monitor” and

clients can obtain such information categories as:

Grains/Oilseeds Index

Livestock Index

Coffee/Cocoa/Sugar Index

Financial Index

Metals Index

In these cases the client has a terminal by which he can select desired

“pages” of information. In New York these services are transmitted via

Manhattan Cable’s CATV system. The fees for the Reuters professional services will range from $300 to $1500 per month,

service purchased.

Late in 1976, Reuters plans to distribute

depending on the type of

the professional and “News-View”

service to cable operators throughout the United States by satellite.

Traps, now being used by the cable industry for entertainment pay-TV

service, can make it possible to restrict these services to paying

clients.

II-64
Reuters estimates annual growth revenues for these services to be in

the $20 to $40 million range within five years. Half of the revenue is

expected from sales of their professional services, the other half from

their News-View services.

Over-the-air information services. Systems are now being tested in

Great Britain which are capable of supplying information, similar to that

being supplied by Reuters, by broadcast. Encoded signals, sent during

the vertical blanking interval (the interval when the television beam

returns to the top of the screen to begin a new trace), are decoded and

printed out on the subscriber’s television screen (60). Neither of the

“Teletext” systems will have the page capacity of the Reuters service.

They will however, offer an over-the-air alternative to cable television

delivered information systems.

Rural applications. In contrast to the public and commercial services

considered thus far, the above applications do not require two-way broadband capability for their operation and could be used, if profitable, on

any cable system with unused channel capacity. Together with pay television

to be considered later in this Chapter, these services exist in a

“canned” form and thus do not differ in kind from the news and entertainment services offered on conventional cable systems. Beyond the

necessity that they be geared to generate sufficient revenue in the

market served, no particular effort, as contrasted to the other services

considered in this Chapter, has to be taken to develop or tailor the content

of the services to be offered to the specific audience and set of institutions to be served.

II-65
Data Transmission

Rural needs. According to a recent NSF study, much of the research

on business uses of telecommunications (especially as they might

serve as a substitute for travel) has concentrated on the conduct of

management operations (61-32).

While such research is essential, it seems likely that decentralization

to rural areas of the so-called “information industry” (insurance companies

and the like) is not going to occur until the capabilities for, and economic

advantages of, the use of telecommunications by clerical and middle

management workers have been demonstrated. Involved in the latter would be

high-speed, high volume -- and routine -- handling of great quantities of

information.

Because a great deal of literature already exists

similar broadband services appropriate to the needs of

(61-17 ff.), no attempt will be made here to duplicate

on “teleconferencing”

management personnel

such analyses. Instead,

this section will be limited to a state-of-the-art survey of high-volume data

transmission technologies, and their use in two-way cable systems,

and will conclude with a description of the only known application to date

in which an operating broadband system is being used for these purposes

by a major commercial institution (Bankers Trust Company of New York). A

section on automatic meter reading will also be added in view of the potential this service offers for providing revenues and helping to underwrite

the costs of broadband systems in low density rural areas.

Data transmission services. Until a decade ago , most remote data processing

.

could be handled by low-speed teletype circuits. While technological advance in the

II-66
computer industry have kept pace with the enormous growth that has

taken place in the demand for data and information, the traditional

telephone network, in spite of significant improvements in its data handling

capability, has been hard-pressed to keep pace. While it is now possible

to achieve processing rates of 9600 bits per second (bps) on leased

telephone lines, throughput capabilities of the data processing equipment

that originate the information to be transmitted have achieved levels

of a million bits per second.

Thus, alternatives modes of data transmission are under study.

The Bell System has been investigating developments in fiber optics

where cables assembled with thousands of hair-sized “light pipes” will be

used to carry voice and data communications (62). Throughput capacities

will be orders of magnitude greater than any other system in use today.

Another approach has been to set up a separate network, using microwave

paths as the transmission media , which are dedicated exclusively the

data transmission in digital form. Such systems provide up to 48,000

bps transmission rate. Still another approach has been to use coaxial

cables. By using cable, it is conceivable that immediate and near-future

data transmission demands could be met. A single half-inch diameter cable,

for example, has a throughput capacity equivalent to 30,000 full duplex

telephone wire pairs.

There are a number of large industrial activities presently using

two-way cable networks for internal communications. These include plants

of General Motors, American Motors, Dow Chemical, and Kellog Cereal.

II-67
The systems are used to carry multi-channel closed-circuit-television,

digital data and voice communications.

Recently , the Bankers Trust Company of New York began using the

excess capacity of a cable television system operated by Manhattan

Cable Television. The bank found the cable system to be a practical

medium for transmitting the massive amounts of data that must be interchanged between their central office and their many branch offices.

Both the Chase Manhattan Bank and the First National City Bank

in New York also are seriously exploring the Manhattan Cable network for

transmitting data. To date, however, Bankers Trust appears to be the only

business activity using an existing cable television network for data

transmission. It is being used to update savings, demand-deposit and

installment loan accounts; transmit data between the data center and

the operations center; and transmit documents via high-speed facsimile

equipment. Manhattan Cable has arranged a fee schedule for this service

which is dependent on the amount of data that is transmitted rather than the

the distance over which it is transmitted.

Rural applications. Rural banks must also convey large volumes of

information to their branches and to other banks. Thus, this application

is potentially attractive in rural areas. In addition, it should be noted

that the approach reflected in the Bankers Trust application, that is using

the full capabilities of a system to generate revenue, is precisely what is

needed if broadband systems are to be economically feasible in low density

rural areas. As with some of the other services discussed earlier, this

application may be a good candidate for consideration in the system

approach described in Chapter IV.

II-68
7

Automatic meter reading: rural needs..

gas and electric utilities have depended on

Since their inception water,

manual meter reading to determine the consumption of their customers. This has been especially difficult and costly in rural communities because of the great distances

between households and the large areas to cover. Automatic remote meter

reading, long discussed but never implemented by utility companies, is

being looked at anew because of the sharply increasing costs of manual

reading as illustrated in the chart Further impetus comes from

the recent and growing interest in management of electrical demand as a

means of conserving energy and resources. Such management will require

far more frequent reading of meters than is possible by manual methods.

TRENDS IN MANUAL METER READING COSTS

YEARS

II-69
Traditional on-site measurement systems have a number of

disadvantages that have continued to plague the utilities. These

include:

● Skipped readings - when no one is at home to allow

access to the meter(s);

● Adverse weather conditions;

● Need for a large fleet of vehicles;

● Vicious dog problems;

● Need for a large, attrition-prone work-force;

● Reading inaccuracies;

● Need to estimate billing because of skips and reading

errors; and

● Effects of company holidays on reading and billing cycles (65).

For these reasons, consideration has been given to remote and

automatic meter reading techniques using:

● Telephone distribution networks and automatic interrogation

during off-peak hours;

● Cable television distribution networks and automatic interrogation,

but not necessarily during off-peak hours;

11-70
● Electric power lines as a transmission medium; and

● Completely different schemes such as having the measurement

instrument radiate signals which can be picked up by a

utility truck passing by the house.

Potential benefits of using

●

●

●

●

●

●

●

●

•

Load studies -- to assure

are maintained within the

automatic systems include:

that pressure levels and voltages

prescribed standards;

Detection of service failures -- to determine

of service outages after storms, earthquakes,

Continuous operation -- readings can be taken

the location

etc.;

7 days per week,

automatically addressing the problem of company holidays on

reading and billing cycles;

Elimination of skipped readings -- covering problems related to

lack of access, adverse weather, viscious dogs, etc.;

Fewer vehicles -- size of fleets could be substantially reduced;

Reduced personnel problems -- related to hiring, training, and

terminating personnel;

Fixed costs -- automatic

inflationary pressures;

systems should be less sensitive to

Increased reading accuracies -- reduction of questionable readings,

skips, errors, etc.; and

Other utility services -- such as turn-on and turn-off of

valves, switches, etc. (65).

11-71
Over the years, a number of tests have been conducted using the

telephone network for automatic meter reading; none of these resulted

in an operational system. Today one of the most active companies promoting

automatic meter reading via telephone is Darco Telemetering Systems,

Omaha, Nebraska. In 1973 Darco, together with United Telecommunications

and Iowa Power and Light Company conducted field tests in Avoca, Iowa.

Those results prompted the Omaha Public Power District, People’s Natural

Gas Company and the Lincoln Telephone and Telegraph Company to initiate

large scale tests, using the Darco system, in Ashland, Nebraska. One

thousand houses will be wired to provide automatic and remote reading

of electric, gas and water meters. Modification costs and telephone

charges are tabulated below.

Cost Elements, Ashland Test. (In dollars)

Costs/Household Total (1000 Households)

Equipment Costs:

Remote Unit

Conversion Kit

(3/house @ 1.50

Control Console

Total Equipment

Labor Costs:

84.

ea.) 4.50

3.82 (prorated)

costs 92.32

84,000

4,500

3,824

92,324

30.43

122.75

30,430

122,754

Installation and

equipment costs

shared by three

utilities @ $40,918

each.

TOTAL

Telephone Charges:

Per Reading/Location .025 25

Lease Line Charges 2.25/month

Central Office Charges 14/month

II-72
In conjunction with the Ashland test it should be noted that (73):

● Special rates were developed by the telephone company

for this service;

● Lines were connected to those houses that have no

telephone service to provide 100 percent penetration;

● No protective coupler was used to interconnect to

the telephone lines;

. The electric utility is collecting all of the data

and transferring gas and water information to the

respective utilities for billing

● The gas company has a control console which they

use to interrogate industrial accounts;

● Present manual meter reading costs are between $4.25

and $4.60/meter/year; and

● Savings of 53.7 percent for residential accounts, and close

to 100 percent for industrial accounts, are anticipated.

Although the DARCO tests used telephone lines for transmission,

the use of cable for this purpose has been the subject of some examination.

The Mitre Corporation study (65) compares costs of manual and automatic

meter reading via telephone and cable. The study indicates that manual

meter reading costs will double from early in 1970 to late in the same

II-73

75-605 0- 76 - 8
decade, primarily because of labor costs , whereas automatic meter reading

costs will remain essentially the same. The study further indicates that

using the telephone will be approximately twice as costly as using cable

and that manual costs will be higher than automatic meter reading via

cable by the end of the decade.

Tests of automatic meter reading were to be undertaken in 1974 on

systems in Orlando, Florida and Irving, Texas, in conjunction with tests

of two-way cable systems in general. Although the principals still express

interest, lack of interest among potential subscribers and lack of adequate

funding has forced the discontinuance of both of these tests.

The Darco system discussed earlier is adaptable to cable transmission

systems. A primary concern of utility companies with regard to automatic

meter reading and cable television distribution systems is the

level of penetration. Unless close to 100 percent penetration can be

achieved, cost savings and other benefits will be minimal.

The growing interest in energy conservation, and the potential of

load management as a conservation technique, may prompt renewed interest in

automatic meter reading. Effective load management programs may require

“time-of-day” metering, demand metering, interruptable monitoring, and

automatic usage control. Time-of-day metering would allow a rate structure

which would vary according to varying energy demands and thereby

encourage consumers to adjust usage schedules. Hourly measurements

may be needed to effectively control such a rate system. A Canadian

firm, Delta-Benco-Cascade, Ltd., of Rexdale, Ontario, has submitted a

proposal to the U.S. Energy Research and Development Administration

concerning the use of coaxial cable for these purposes.

II-74
Rural applications. Concerning the specific application of these

systems in low density rural areas, it is unlikely that coaxial cable,

installed solely for this purpose, could be cost competitive with existing

telephone lines. Whether the charges for this service by a full service

broadband system with a broad revenue base might be sufficiently low as

to be economically attractive cannot be known in the absence of hard

financial data, but it does seem that this possibility warrants further

consideration.

Pay Television

Rural needs. In spite of the ubiquity of television, there are still

many households in the United States which are beyond the reach of broadband

reception -- either directly from the originating stations or relayed through

the medium of translators or cable systems. More than one million households

do not have access to any service; nearly six million do not receive adequate

service on at least three channels and approximately 22 million do not

receive adequate service on at least five channels. Most of these households

are scattered among farms, ranches and small communities in rural America (71).

While there first has to be an existing broadband system before pay

television can have any relevance to the above communities, still, as will

be discussed below under the heading “Rural Applications", it is possible

that pay television -- as a revenue source in broadband systems in low density

rural areas -- might permit the opening up of some of these areas to television

entertainment, as well as to the public service applications and commercial

uses described earlier.

II-75
Pay-TV services. Since the beginning of television, the potential

of supplying special program material on a pay-per-program basis has

been the dream of entrepreneurs. Subscription television, or PayTV, was first seriously proposed in 1950 by the Zenith Corporation, whose

first over-the-air pay-TV system, called Phonevision, was tested in Chicago

in 1951. Opponents, however initiated a series of court battles which lasted

into the early 1970’s (72-8).

Recently, interest in pay-TV has been rekindled. Among the reasons

are the now sizable and still growing television audience and

the motion picture industry’s search for new markets for its productions.

Technology is available either to distribute pay-TV programming

over-the-air or by cable television systems. One of the proponents

of over-the-air pay-TV has been Blonder-Tongue Laboratories, Inc.,

Old Bridge, New Jersey. Blonder-Tongue is a major manufacturer of components

and systems for the television industry. In the late 1960’s the company

introduced a system which would allow broadcasters to provide over-the-air

pay-per-program television. The system employs an encoder (“scrambler”) which

suppresses the horizontal and alters the vertical synchronization pulses

causing the picture to appear seriously distorted. The sound is also interrupted. When the home subscriber desires a specific program he activates

a decoder (“descrambler”). The home subscriber can purchase the decoder for

$130 and then pays a specified amount for each program (68). The company

has also developed a system for flat rate payment by the month. In this case

the home decoder costs the subscriber $70, with the monthly rate to be determined by the broadcaster. To date, however, over-the-air pay-TV has attracted only limited interest.

II-76
Within the cable television industry there also has been a continuing

interest in finding away of exploiting the profit potential of pay-TV. Of

all of the broadband services discussed in this Chapter, pay-TV is seen

by those in the cable television industry as having the greatest immediate

potential of generating additional revenue.

Although pay-TV by cable did not achieve rapid growth until late in 1972,

the demand has already far exceeded the expectation of the industry and almost exceeded its ability to supply such services (69-9). Today nearly 400,000

subscribers have paid $10 to have the necessary equipment installed and are

paying a monthly fee of $6-9 to receive this service. The needed equipment is essentially a filtering device which will allow the transmission of

the pay-TV programming when activated and “trap” the signals when deactivated. In most cases the hardware is installed in the subscriber household,

but in some cases it is located externally where the subscriber drop is tapped

into the feeder cable.

On September 30, 1975 Home Box Office (HBO), a subsidiary of Time

Incorporated, began its service of delivering pay television programming by

satellite with live coverage of the Ali-Frazier fight from Manila. The fight

was seen in 25,000 homes via cable television. Receive-only earth stations

are now available for approximately $65,000-75,000, making it possible for

most of the larger cable operators to become part of the pay-TV network

and receive special events programming .

It has been predicted that there will be 2 million subscribers for

pay-TV in 1980 (69-9). At the present time, the operator is expected to

purchase the earth receiving station and in addition to pay HBO approximately 50 percent of the revenue collected from subscribers. HBO

prepares the programming and is responsible for transmitting the program

II-77
material via satellite. Although the subscriber now pays a flat monthly

fee, it is anticipated that programming will ultimately be sold on a

per-program basis.

Rural applications. Providing pay-TV to rural areas may require

different approaches than in more densely settled areas. For example,

the cost of an earth station, not out of reach for the cable operator who

has subscribers numbering in the tens of thousands, may be out of the

question for a system with subscribers numbering in the hundreds. It

has been suggested in the literature that smaller operators could form

“cooperatives” to share the costs of the earth station among a number

of cable systems (70-20). The concept of cable systems working together

financially and technically is not a new one. Many existing community

antenna relay installations are jointly owned but used by separate operators (71-33 ff.).

Other modes of supplying pay-TV in smaller rural areas are also

available. Tapes might be leased by the cable system operator and played

on a video tape recorder over the system. Another option is to lease

channel space to and provide collection service for a pay-TV company for

agreed upon rates. Finally, pay-TV might be distributed over-the-air using

translators. 1

——————

1 Because translators broadcast signals over the air, the signals can

be picked up by any set. To ensure payment, either the community

can designate a special taxing district or the signal can be scrambled and individual subscribers pay for use of decoding equipment.

However, the last technique would require changing FCC regulations (72).

[I-78
Since pay-TV, like the information services discussed earlier,

delivers “canned programs”, the only barrier to its adoption by rural

systems of the type contemplated in this report is one of economics (sufficient market and revenue when related to costs). Unlike the rest of

broadband services discussed in this Chapter, no effort is required on

the part of the system operator or his consultants to devise program

content and tailor it to the customers intended. Pay-TV represents the

older, “conventional” purposes to which broadband might be put. However,

pay–TV might serve the further function of providing sufficient additional

revenue to help make a rural system economically feasible.

Summary And Discussion

Actual and potential uses of broadband communications to meet rural

needs in the public service areas of health , education, law enforcement and

government/administration were examined in this Chapter. Potential

commercial uses of broadband systems for security, information services,

data transmission and pay-TV were also reviewed.

Public Service Applications

In both health and education, rural needs derive from shortages and

inadequacies of facilities and personnel , as well as from the many factors

that make access difficult, such as distances to be travelled. Principal factors contributing to shortages and inadequacy of personnel in the

health area include isolation from peers, from specialists and from health

care facilities. In both the health and education areas, it is difficult

for remotely located personnel to maintain currency in their fields and to

continue their training. Financial resources, that is, lower incomes than

in urban areas, the fact that fewer rural residents are insured for health

II-79
care, and the generally smaller tax base available to support facilities

also contribute to the reduced opportunity for health care and education

in rural areas.

In health, a vigorous experimental program conducted over the last twelve

years has demonstrated the feasibility of using broadband communications

to meet rural needs in five basic areas of health care; namely, consultation, supervision, direct patient care, administration and management,

and education and training. Patient acceptance is high and it has been

demonstrated that telemedicine can increase the adequacy of health care

by providing access to services which were not available before or which

were available only to a minimal extent. For health manpower personnel,

some problems remain such as ensuring privacy and confidentiality in the

doctor-patient relationship, the possibility of increased workloads,

and a feeling that supervision of nurse practitioners and physician

assistants is sometimes excessive. Otherwise, attitudes of medical presonnel involved generally have been found to be favorable. However, if

these services are to be widely used, change in some state laws will be

required.

Major unknowns requiring further research include comparisons

between the relative costs of video vs. non-video systems, and the best

ways to combine manpower and technology for total health care delivery

systems that can be self-supporting financially.

Fewer experiments using two-way communications have been conducted

in education, especially in rural areas. Nevertheless the technical feasibility of meeting many educational needs of rural areas has been demonstrated. There is, however, a lack of information concerning the particular

technical capabilities needed to support educational uses, as well as

11-80
concerning the relative effectiveness of education using communications

when compared- to the traditional classroom. Educational programs

adapted to broadband use and/or guidelines for their development are also

needed. Generally, little hard data are available on the cost-effectiveness

of using broadband communications for education.

For both health and education, it should be noted that cost-effectiveness should not be considered as the sole criterion for use of broadband

communications. This is because use of broadband may be the only alternative available. Nevertheless, further experiments should include evaluation of effectiveness, collection of cost data, and alternatives analysis

as an intergral part of the study design.

Rural needs in law enforcement derive from the large distances involved

and the time consumed in travel to and from the central station, which

reduces the time available for assigned duties. In some rural areas, it is

estimated that up to one-fourth of the working day of a law enforcement officer

is devoted solely to traveling back and forth to central headquarters. In

this connection, broadband communications could be used to televise roll

calls and briefing sessions, transmit fingerprints and related documents,

and conduct some pre-trial arraignment procedures. An innovative experiment in the city of Philadelphia will test some of these concepts, which

might be of value in some rural areas.

Government and administrative uses are also potential areas of application. For example, where processing of claims and applications requires

more than one agency, broadband communications might reduce requirements

for travel and processing time, thereby reducing costs to local governments.

An experiment underway in Spartanburg, South Carolina, will provide data

on the effectiveness and costs of using broadband communications for this

purpose.

II-81
Commercial Applications

Four classes of potential commercial applications were examined.

These were: security systems, information services, data transmission,

and pay-television.

Rural needs for security services include detection of fire and unlawful entry. Fire losses on farms in 1970 totaled $242 million and insurance premiums paid by farmers to cover fire and wind damage totaled

$441 million. As for crime, one category in particular, unlawful entry,

has increased in rural areas at a rate nearly double that in cities and

four times that in Standard Metropolitan Statistical Areas.

A rural broadband system could assist in reducing these losses

by permitting continuous monitoring of isolated building from a central

location. The firm of TOCOM, Inc. of Irving, Texas, has developed such a

system, and it is commercially available. In addition to centrallymonitored smoke, fire and intrusion detectors, the TOCOM system can also

be used for opinion polling and meter reading. So far, the primary market

for TOCOM’s system has been new communities where wiring and installation of

detection devices is accomplished during construction

the builder. The homeowner pays a monthly subscriber

as a result of the features of this system, insurance

and paid for by

fee; however,

companies have

offered discounts that offset much of the amount of the subscriber’s

fees. Although the economic viability of these systems in rural areas

remains to be tested, they represent a potential component of rural

broadband systems.

II-82
In the area of information, services are available which provide stock

and commodities’ prices, round-the-clock news and other business data.

These services are presently available, if the necessary market exists,

and could be readily provided on rural broadband systems.

In the area of business uses of broadband systems, the following

applications were considered: 1) high volume data transmission; and

2) automatic meter reading. Communications of large amounts of data

between headquarters and branch offices is required by many institutions

and can be accomplished by transmission on a broadband system. One

example is the Bankers Trust Company on New York which uses the

excess channels of a local cable television system for transmitting

the massive amounts of information that must be interchanged between the

central office and their many branches. The system is used to update

savings, demand-deposit and installment loan accounts; transmit data between

the data center and operations center; and transmit documents via highspeed facsimile equipment. The bank pays a fee to the cable company for

use of the system. Although this service has not been tested in a rural

area, it shows how a broadband system can be employed to generate revenue

from institutional users.

The potential for automatic meter reading arises from the fact that

manual reading of meters for water, gas and electricity is especially costly

in rural areas because of the long distances involved. Estimated costs

for manual meter reading are projected to approximately double between 1975

and 1980, primarily due to increased labor costs. While meter reading does

not require a broadband system and can be accomplished over telephone

lines, a recent study indicates that using telephone will be

about twice as costly as using cable and that manual costs will be higher

II-83
than automatic meter reading via cable by the end of the decade. In

addition, automatic meter reading, since it can be done as often as

necessary, permits management of electricity load, which is a potential

energy management technique. These factors suggest that utilities might

find automatic meter reading attractive in rural areas, thereby providing

additional revenue to support a community broadband system.

The final commercial application reviewed was pay-TV for which subscribers

pay a fee to obtain special programs and sports events. This service,

increasingly available in urban areas, could also be made available in rural

areas. In the context of this report, the value of pay-TV lies in its

potential for generating additional revenues to support a multiservice

broadband communication system.

Discussion

This Chapter has shown that there are many areas where broadband

communications could be used to meet rural needs. A variety of public

services can be provided and there are a number of uses which are potentially attractive to commercial institutions.

A major characteristic of many experiments in the public service

sector is that they have been directed at demonstrating technical capability. Economic feasibility and the design of economically viable

systems have received less attention. When cost-effectiveness has been

considered, it has been limited to the use of technology to provide a

single service. Detailed consideration of a system approach to broadband communications in which costs are shared by public service users,

II-84
commercial users and subscriber-supported entertainment fees, has not

been attempted. However, such a systems approach may be the key to a

broadband system serving an entire rural community.

All the public service and commercial uses described in this Chapter

have potential for inclusion in a rural broadband communications system.

The particular public service and commercial uses included will vary

according to the characteristics of each rural area. Selection for a

specific rural community should be based on a comprehensive needs analysis.

II-85
CHAPTER 11

References

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

Kay, Peg, Social Services and Cable TV, Final Report submitted by the

Cable Television Information Center to the National Science Foundation

under Contract No. APR. 75-18714, February, 1976.

Booker T. Washington Foundation/Cablecommunications Resource Center,

A Preliminary Review of Current Practices and Trends in Rural

Development and Recommendations for Future Development: prepared for

the Economic Development Administration, Office of Economic Research,

U.S. Department of Commerce, August 1975.

Rockoff, Maxine L., “An Overview of Some Technological/Health Care

System Implications of Seven Exploratory Broadband Communications

Experiments,” (Institute of Electrical and Electronics Engineers, Inc.),

1975.

Park, Ben, Introduction to Telemedicine: report funded by the

Rockefeller Foundation, (New York: Alternate Media Center, New York

University), June 1974.

O’Neill, J. J. , Nocerino, J. T. and Walcoff, P., Benefits and Problems

of Seven Exploratory Telemedicine Projects: prepared for the Department of Health, Education, and Welfare under Contract #HRS-106-162,

(Mitre Corporation), February 1975.

Brownlow, Dr. Bradlee, Blue Hill-Deer Isle Project, personal interview

on March 1976.

Dixon, David, Rural Health Associates, personal interview, 3 and 19 March

1976.

Sasmor, L. and Hastings, G., The Primary Nurse Practitioner and Telemedicine in Prison Health Care: An Evaluation: draft report prepared

for the National Science Foundation, Grant #GI-39471, 1976.

Sasmor, L., personal interview on 27 February 1976.

, ATS-6 Health Experiment Phase 11: Operations: prepared

for Lister Hill National Center for Biomedical Communications/National

Library of Medicine, Cortract #NIH-cG-73-2003, (University of

Washington Project Office), December 1975.

Mark, Roger, Boston City Hospital, personal interview on 3 March 1976.

, Nursing Home Telemedicine Project: Interim Status Report:

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Productivity, Research and Technology, 15 June 1975.

Brady, Charles, Indian Health Service, personal interview on 18 March 1976.

II-86
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Beacham, Bill, Appalachian Regional Commission, personal interview

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O’Nei.11, Jack, Mitre Corporation, personal interview on 5 March 1976.

, Space Technolo~ y in Remote Health Care, (National

Aeronautics and Space Administration, Lyndon B. Johnson Space Center,

J.S.C.-O9161), August 1974.

Foote, D., Parker, E., and Hudson, H., Telemedicine in Alaska: The

ATS-6 Satellite Biomedical Demonstration Final Report: sponsored by

the Lister Hill Center for Biomedical Communication and Library of

Medicine

, 2nd Interim Technical Report: An Evaluation of the Impact

of Communications Technology and Improved Medical Protocol on Health

Care Delivery in Penal Institutions: prepared by Westinghouse Health

Systems for the National Science Foundation, Grant //61-39471, August 1975.

Bashshur, R. and Armstrong, P., “A Review of Telemedicine as a New

Mode for the Delivery of Health Care:” paper to be published in

Inquiry Journal, 1976.

Weeks, H. A., “Changing Attitudes toward Telemedicine:” draft of

paper presented at the Second Annual l’elemedicine Workshop, Tucson,

Arizona, 4-6 December 1975.

Doermann, A. C., Goldstein, S. N., MacArthur, D. L., and Walcoff, p.,

Selected Approaches to Enhancing the Retention of Primary Care

Physicians in Rural Practice: draft report prepared for the Department of Health, Education and Welfare, Contract #HEA-106-74-182,

(Mitre Corporation), October 1975.

Dillon, H., and Bennett, A. M., A Cost-Performance Analysis of

Alternative Manpower Technology Combinations for Delivery Primary

Health Care: draft report prepared for the Department of Health,

Education and Welfare, Contract #HRS-106-74-182, (Mitre Corporation),

October 1975.

, The Condition of Education: ’75 Edition: National Center

for Education Statistics, (Washington, D.C.: U.S. Government Printing

Office, NCES 76-142), 1975.

, Statistics of Local Public School Systems: National Center

for Education Statistics, a prepublication release, 12 March 1976.

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and Nonmetropolitan Population: 1974 and 1970,” in Current Populations Reports, Series P-23, No. 55, September 1975.

II-87
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U.S. Government Printing Office, NCES 76-143), 1975.

, Digest of Educational Statistics: National Center for

Education Statistics, (Washington, D.C.: U.S. Government Printing

Office, NCES 75-310), 1975.

Thomas, J. Alan, Financing Rural Education, (National Education

Laboratories, Inc.), 1974.

9 “School Enrollment - Social and Economic Characteristics

of Students: October 1974.” Current Population Reports, Series P-20,

No. 386, November 1975.

Osso, Nicholas, Adult Basic and Secondary Level Program Statistics:

National Center for Education Statistics, (Washington, D.C.: U.S.

Government Printing Office), 1975.

“Teachers in Appalachia:” prepared for Appalachian

Regional C~mmission, (Arthur D. Little, Inc., Research Report No. 12),

August 1970.

Jones, Sharon, Division of Adult Education, Department of Health,

Education and Welfare, personal interview on 14 January 1976.

McCharen, K. M., Director of Instructional Media, Tulsa School System,

personal interview on 17 February 1976.

Wilson, Ed, Bureau of Education for the Handicapped, Department of

Health, Education and Welfare, personal interview on 25 February 1976.

Simches, Rapheal, Regents of the State University of New York,

personal interview on 26 February 1976.

Tawney, James, University of Kentucky, personal interview on 25 February

1976.

Stallino, Paul, City University of New York, personal interview on

26 February 1976.

Goldstein, Dennis, Harold Morse, Robert Schuman, Appalachian Regional

Commission, personal interview 23 January 1976 and 1 March 1976.

Volk, John, “Tailor Made Teaching through TICCIT,” Mitre Corporation,

Volume 8, No. 4, 1975.

Grayson, Lawrence P., “Educational Satellites: the ATS-6 Experiments,”

in Journal of Educational Technology Systems, Volume 3 (2), Fall 1974.

Peavey, Ross, Tager System, Dallas, Texas, personal interview on

23 March 1975.

II-88
43.

44.

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submitted to NSF 74-8 Phase II, Rand Corporation, January 1975.

Lucas, William, Spartanburg, South Carolina, personal interview on

3, 4 February 1976.

Lucas, W. A., Two-Way Cable Communications and the Spartanburg Experiments, (Rand Corporation), August 1975.

Bazemore, Judith, Spartanburg, South Carolina, personal interview on

February 1976.

3, 4

Herring, Cordon, Spartanburg, South Carolina, personal interview on

3, 4 February 1976.

Colligan, Lita, Rehabilitation Services Administration, personal

interview in January and March 1976.

Bortz, P., Spongberg, R., and Vendetti, F., Broadband Communications

in Rural Areas: final report to the Executive Office of the President,

Office of Telecommunications Policy, (Denver: Denver Research Institute),

November 1973.

Paglia, Joseph, Administrative Analysis Division,

Philadelphia, Pennsylvania, personal interview on

Philadelphia Police Department, “Application for

CCTV Project,” 1973-74.

Police Department,

1 March 1976.

Subgrant Phase 3 of

“A Study of the Practicality of Closed Circuit TV for

Preliminar~ Arraignment,” Court Administrator’s Office, City of

Philadelphia, Pennsylvania, 1 July 1975.

, Statistical Abstracts: 95th Edition, (Washington, D.C.:

Department of Commerce), 1974.

Larson, Donald K., Agricultural Economist, Economic Research Service,

U.S. Department of Agriculture, Washington, D.C., personal interview.

Insurance Information Institute, New York, personal interviews with

analysts in February 1976.

Security/Systems Companies, including ADT Security Systems, personal

interviews in February 1976.

Belcher, Brian and Charles Lowe, TOCOM, Inc., Irving, Texas, personal

interview.

Blair, Michael, Rueters Ltd., New York, New York, personal interview.

II-89

75-60,5 ()- 76 - C!
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61.

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and Implications, (Denver: Denver Research Institute).

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Development of Policy on the Telecommunications-Transportation

Tradeoff: Supported by the National Science Foundation, Grant

#39019.

Spectrum Magazine, (Institute of Electrical and Electronic Engineers,

Inc.), April 1975.

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Marks, Raymond J., Public Service Company, Denver, Colorado,

personal interview.

Eldridge, Frank, Automatic Meter Reading Via Cable, (Mitre Corporation,

Report #M72-67), June 1972.

Bortz, P. and Spongberg, R., Improving Television Service in Rural

Areas: paper given at the Na~ional Telecommunications Conference,

1-3 December, 1975.

Kaman, Ira, Questions and Answers about Pay -TV, (Indianapolis: Howard

W. Sams and Co., Inc.), 1973.

Blonder, Issac S., Blonder-Tongue Laboratories, Inc., Old Bridge, New

Jersey, personal interview.

9 Barron’s Magazine, 19 May 1975.

“The Way We Will Be, ..Technology Advances that Will Affect

CATV,” CAT; Magazine, October 1975.

Woods, Norman, “Microwave Cooperatives Form Basis for Expanded Program

Services,” CATV, December 1975.

FCC Rules and Regulations.

Ashford, Frank, Darco Telemetering System9, personal interview on

4 March 1976.

Walcoff, Philip, The Economic Impact of Adding a Non-Physician

Primary Care Provider Staffed Satellite Facility to a Rural

Medical Practice, draft report prepared for the Department of

Health, Education, and Welfare, (Mitre Corporation) October,

1975.

11-90
CHAPTER III

RURAL DEVELOPMENT AND BROADBAND COMMUNICATIONS

Although communications has been commonly portrayed as an agent

of possibly revolutionary change in American life, the aim here is limited

to considering the contribution that broadband might make to the specific

goals of rural development as spelled out in recent legislation on the

subject.

In the last decade there has been increasing concern about the tendency

of the United States population to concentrate in urban areas. The attendant

congestion, pollution, strain on public services, increase in crime and

similar characteristics of urban living have suggested that the present

and projected scale of urbanization in the United States may not be desirable. Concern was greatly exacerbated by the riots in Watts, in Detroit,

and in other urban areas (l-3; 2-3).1 As a result, beginning in 1970, the

concept of a national growth policy was developed which had as its premise

the need to redress the balance of population between urban and rural areas.

This policy was described in such legislation as the Housing and Urban

Development Act of 1970 and the Agricultural Act of 1970, and was the subject

of recommendations by the Citizen’s Advisory Committee on Environmental

Quality of 1971 (3-3). Congress also gave explicit consideration to how

such change was to be accomplished. For example, the Rural Development Act of

1972 aimed to improve the quality of life as well as employment opportunities in rural areas and thereby increase their attractiveness compared

to urban areas, Concerning the priority to be accorded rural development

Title IX of the Agriculture Act of 1970 specified that:

1 References are numbered consecutively in the order of their first

appearance in the text. The first number is the reference. The

number after the dash is the page number in that reference.

III-1
“The Congress commits itself to a sound balance

between rural and urban America. The Congress considers

this balance so essential to the peace, prosperity, and

welfare of all of our citizens that the highest priority

must be given to the revitalization and development of

rural areas.”

Although the legislation cited is of recent vintage, Federal programs

for the last forty years have had a great impact upon rural America in such

areas as agriculture, transportation, electrification, and social welfare.

Because of the long duration and complexity of change in rural America,

the approach taken in the Chapter is to try to identify those key economic

and social forces that seem to underlie the major alterations now underway.

Subsequently, an attempt is made to show how broadband systems of varying

configurations might meet the future needs created by the continued

operation of these economic and social forces. Future needs are addressed

because the establishment of area coverage rural broadband systems also

lies in the future; none presently exists.

Rural-Urban Population Distribution

And Migration Patterns

This section explores distribution of population in rural and urban

areas and recent patterns of migration between these two areas. There

are two reasons for doing this. First, one objective of rural development

is to affect the balance between rural and urban population size and, in this

study, we are interested in the role broadband communications might play

in such an alteration. Therefore, it is important to identify current

trends so that it can be seen whether the objective towards which such systems

might contribute would be helping to initiate a shift in population towards

rural areas or helping to facilitate (or constrain) a shift which is already

III-2
occurring. Second, the characteristics of populations in rural areas will

determine the types of broadband services which can best meet the needs of

rural people. For example, a high proportion of youngsters implies a

need for educational service. Medical services are especially important

to an area with a high proportion of older residents.

Our investigation in this area resolved itself into a series of

questions. The material in this section has been organized around

these questions. As will be seen, not all questions have satisfactory

answers,

complete

or where answers are provided, the data are sometimes less

than desired.

Definitions

There are a number of definitions of rural and urban. For example,

the Department of Agriculture by statute uses several different definitions,

ranging from open country and places of 1,500 people up to all cities of

less than 50,000 population. The U.S. Bureau of the Census defines rural as

“open country residents and people in towns of up to 2,500 inhabitants”

(4-669). The diversity of definitions has caused the Rural Caucus to request

a survey of definitions of “rural” from the Library of Congress.1

In this section, the terms “metropolitan” and “nonmetropolitan” will

be used rather than “urban” and “rural”. The reason is that the available data

on recent population trends are organized in these terms. (In overall totals,

the differences between “rural” and “nonmetropolitan” are not large: 53.9

1 Definitions of rural and urban are necessary not only to explore

population trends but for purposes of identifying the applicability

of various sources of Federal funds to support rural applications of

telecommunications. This is discussed in Chapter IV of this report.

III-3
million were classified as rural in the 1970 census; 54.3 million as

nonmetropolitan.)

The metropolitan area is a county in which there is an urban

nucleus of at least 50,000 people. Adjacent counties are included if

30% or more of the population commute to the urban core. If less than

30% but more than 15% of the workers commute, the adjacent county is still

considered metro if it meets two out of three subsidiary criteria considered

characteristic of metro areas. These criteria refer to density, degree of

urbanization and rate of growth. Other areas are classified as nonmetropolitan

(4-669; 5).

In The Recent Past And Today, How Many People Live In Metro Areas And

How Many Live In Nonmetro Areas?

While the overall U.S. population increased from 1950 to 1974, the

percentage of those in nonmetro areas has declined from 33% to 27%. A

closer examination shows, however, that the tendency for the population to

concentrate in metro areas is decreasing. From 1950 to 1960, the percentage

of population in nonmetro areas fell from 33.3% to 29.0%, a drop of

4.3 percent. From 1960 to 1970, the nonmetro proportion continued to drop,

but at a lesser rate of 2.3 percent. Thus, in 1970, 26.7% of the population

lived in nonmetro areas. Finally, in the period 1970-74, the trend reversed

itself, with nonmetro areas showing a net gain to 27 percent ‘f ‘he country’s

population, (1950 and 1960 based on data in 6-21; 1970 and 1974 based on

data in 7-2).

What Are The Recent Trends In U.S. Population Growth? How DO Metro And

Nonmetro Growth Rates Differ?

The rate of U.S. population growth is decreasing. Growth in the 1960-1970

decade was less than in the 1950-1960 decade. The 1970-1974 figures suggest

that the 1970-1980 decade will show even less growth.

III-4
When U.S. population growth is subdivided into metro and nonmetro

growth, it is clear that growth in metro areas in the last 25 years has

declined more precipitously than that of the U.S. population as a whole.

Between 1970 - 1974, U.S. population grew by 4.0 percent whereas metro

areas grew by only 3.4 percent. Nonmetro areas, on the other hand, grew

by 5.6 percent during the same period (7-l). This is the first time

in the twentieth century that nonmetropolitan growth has exceeded

metropolitan growth (2-6). (1950, 1960, 1970 based on data in 6-21;

1974 based on data in 7-2.)

One Factor Which Could Cause A Shift In Population Between Metro And

Nonmetro Areas Is Migration. (Another Is Different Birthrates.) How

Have Nonmetro Migration Patterns Changed Over The Last 25 Years?

Between 1950 and 1960, migration from nonmetro areas exceeded emigration

by more than 6 million persons or more than 12% of the 1950 based population

of 50.4 million persons. In the 1960-1970 decade, nonmetro areas still

lost more population than they gained but by half the rate of the preceding

decade.

The 1970’s have seen an actual reversal of previous nonmetro losses.

Over the last four years, a net of 1.6 million persons moved into nonmetro

areas, a 3% increase over the 1970 base population of 54.3 million persons.

(1950, 1960, and 1970 based on data in 6-21; 1974 based on data in 7-2.)

How Has The Birthrate In Metro And Nonmetro Areas Affected Population

Growth?

Between 1971 and 1974, a higher birthrate in nonmetro areas appears

to have contributed to a higher population growth in nonmetro areas as

compared to metro areas. During this period, the largest metropolitan

areas of the country showed the greatest decline in birthrates. While

III-5
fertility rates of metro and nonmetro areas converged from 1940 to 1970,

during the period cited there appears to have been a divergence, with

higher rates in nonmetro areas (2-13 ff.). However, higher birthrates are

not the major explanation of nonmetro growth. Changes in migration

patterns have played a predominant role as described above.

Does The Shift In Population Towards Nonmetro Areas Represent Suburban

Sprawl? Is It Simply Migration To Rural Areas Adjacent To Metro Areas?

Migration from metro to nonmetro areas does not simply reflect

expansion of existing urban areas. Of the 1.6 million persons moving into

nonmetro counties in the period 1970-74, 62% moved into counties adjacent 1

to metro areas. However, 38% moved into counties not adjacent to metro

counties. These changes are particularly dramatic when compared to migration

movements in the preceding decade, in which non-adjacent rural counties lost

2.3 million people. (Based on data in 7-2.)

What Proportion of Nonmetro Counties Are Expanding In Population?

The U.S. is made up of 3100 counties or county equivalents (5-2).

Of these, 630 are metro and 2470 are nonmetro. Somewhat more than half

(1461) of the nonmetro counties are not adjacent to metro counties. These

are the most rural counties.

The 1970’s were characterized by a large increase in the proportion

of nonmetro counties which are growing, especially nonmetro counties not

adjacent to metro areas. For example, 84% of nonmetro adjacent counties

were growing in the 1970-1973 period compared to only 60% in the 1960-1970

decade. For nonmetro counties not adjacent to metro counties, the change

1 Counties classified as adjacent are characterized not only by geographic

proximity but also because at least 1% of this force commuted to the

metro central county for work (6-12).

III-6
in the proportion of growing counties is greater. In 1970-73 period,

70 percent were growing, whereas in 1960-1970, only 39 percent were

growing (6-23). .

Migration patterns are playing a major role in growth. There has

been a sharp increase in the 70’s in the proportion of nonmetro counties

growing by net immigration (6-23).

Is Most Of The Migration Into Nonmetro Areas To The Most Densely

Populated Places?

In absolute numbers, more than half this migration has been to rural

counties adjacent to metropolitan areas, which are on the average most

densely populated. However, the sharpest increase in migration has occurred

in the less densely populated areas. Additionally, within counties of

both categories, growth has tended to be greatest outside the corporate

limits of towns (6-22).

Is Nonmetro Growth Limited To Certain Sections Of The Country?

No. As stated in Reference 2 (pg. 7): “As measured by migration

trends, all states but three (Alaska, Connecticut and New Jersey) show

it (increased retention of population in nonmetro areas) and two of the

three exceptions are controlled by events in military base counties.

Nonadjacent (to metro areas) counties have had some net immigration in

every major geographic region.”

III-7
Factors Underlying Rural Development

As has been shown, there is reason for believing that the long-term

decline of many rural areas of this country is presently in the process

of reversal.

The object of this section will be to survey some of the major

explanations that have been advanced for this development. The third and

final section of the Chapter will bring these theories to bear in an

attempt to understand the changes now underway in three principal

categories of nonmetropolitan counties; to identify the indicated

future needs of the rural areas in question; and, finally, to consider

the role that broadband communications might play in addressing

these needs.

Decentralization Of Manufacturing

In the decade of the 1960’s, the principal engine of economic change

in rural America was the growth of manufacturing. As farm employment

continued its decline, nonfarm jobs took up the slack and grew at a faster

rate than in urban areas. Manufacturing dominated this growth in rural

nonfarm jobs and increased at an annual rate of 4.6 percent during the

decade. This growth occurred at the expense of urban areas; by the end of

the decade 25 percent of all U.S. manufacturing was located in rural areas,

up three percent from 1960 (8-l),

1 While it is not the purpose of this study to attempt to break any new

ground in understanding the factors underlying rural development,

existing literature on the subject is unsatisfactory in that it does

not provide comprehensive theories of development that can account for

recent data on rural population changes, In this section, the subject

is approached in the form of a critical commentary upon several of the

prominent theories of rural development. In view of the limited scope

of this study, this analysis is not definitive; rather, it represents a

useful way to “think about” the subject of rural development.

III-8
This growth in rural manufacturing -- as well as the recent reversal

of migration from rural areas -- seems to undermine the hypothesis of many

scholars that there will be ever-increasing urban dominance. However, this

hypothesis is still influential. To accommodate and explain such departures

from the historical trend of rural decline, it has been suggested that growth

of manufacturing in rural areas involves dying industries which migrate

to rural areas in search of cheap labor or land. According to this view,

nothing is really changed by such relocation: urban areas will continue

to take the lead in inventing and developing products; the rural areas will

remain the temporary lodging places of dead-end and low paying enterprises

that do little to develop further their economic base. Wilbur Thompson

describes the process as follows:

“In national perspective, industries filter

down through the system of cities, from places of

greater to lesser industrial sophistication. Most

often, the highest skill requirements decline

steadily as the production process is rationalized

and routinized with experience. As the industry

slides down the learning curve, the high wage

rates of the more industrially sophisticated innovating areas become superfluous. The aging industry

seeks out industrial backwaters where the cheaper

labor is now up to the lesser demands of the

simplified process” (9-8).

One team of researchers, after analyzing industrialization in 24 rural

counties, concluded that rural areas might be permanently condemned to a

position of inferiority compared to the rest of the economy:

“This type of firm (likely to relocate to rural

areas) faces serious problems whenever the national

economy goes through a period of below-normal growth.

Because of the highly competitive nature of their

industries, and because these firms do not usually

have large cash reserves, they are especially vulnerable in periods of tight money, or low consumer

demand. . .

III-9
It may be even more important to note that

those industries normally contributing the most to

rural growth are also the industries that tend to

grow more slowly than the national economy even in

a period of national prosperity. As the economy

becomes more affluent, the service industries grow

more rapidly than do the manufacturing sectors,

while within manufacturing itself the ‘light’

industries most important in rural manufacturing,

such as textiles, food, and lumber and wood

products, tend to lag behind their ‘heavy’ counterparts. Thus, in general, rural industrialization

can never yield the same long-run growth rates as

the national economy" (10-60). (Italics added)

If these analysts are right, and if this kind of industrialization

for rural America is in some way preordained, then it follows that

there is little that broadband communications or any other technology

can do to alter the pattern.

The evidence, however, does not completely support this theory.

While employment in apparel and other low technology industries has

accounted for much of the sharp increase in rural manufacturing employment,

an analysis by Claude C. Haren of the U.S. Department of Agriculture of

nationwide rural industrialization in the 1960’s reveals a far more

diverse and growth-oriented picture. Haren states that:

“Undoubtedly the greatest increment in rural

areas was in products that found direct or fairly

direct outlets in consumer channels. But, notably

within and on the margins of the Great Lakes

Industrial Belt and in parts of the Upper Southeast,

many items manufactured by new plant additions or

expansions were primarily for the industrial market. . .

Added or enlarged were firms producing not

only farm fertilizers, but pharmaceuticals and a broad

range of industrial chemicals. In addition to

plants turning out farm machinery and equipment,

a far greater and increasing number were manufacturing industrial machinery, control equipment,

transformers, electric generators, motor vehicles

and parts, and aircraft and aircraft components.

Blast furnaces, reduction plants, and rolling mills

were installed at strategic small cities and towns,

111-10
notably along the Ohio and Mississippi Rivers. Even

more numerous and varied were expansions in metalworking facilities for the production of such

industrial hardware as dies, machine tools, structural

metal, stampings, piping, and tubing” (11-433).

A second development undercutting the theory that rural industrialization

inevitably is limited to low technology industries is the demonstrated

growth in rural areas of precisely that ‘service” sector of the economy

that has been the hallmark of urban dominance. This will be discussed next.

Decentralization Of The Service Sector Of The Economy

Of all the economic developments that might lessen the past trend

of urban centralization in our society, none would be of greater long-range

significance than the relative growth in rural areas of the non-goods

producing service sector of the economy.

The characteristics of the service sector and the reasons why it has

been of central importance in understanding the heretofore dominant

influence of urban areas were eloquently described by Wilbur Thompson as

follows:

“The true economic base of the great city-region

(lies in ) the creativity of its universities and

research parks, the sophistication of its engineering

firms and financial institutions, the persuasiveness

of its public relations and advertising agencies,

the flexibility of its transportation networks and

utility systems, and all the other dimensions of

infrastructure that facilitate the quick and orderly

transfer from old dying bases to new growing ones.

A diversified set of current exports -- breadth --

softens the shock of exogenous change, while a rich

infrastructure -- depth -- facilitates the adjustment

to change by providing the socioeconomic institutions

and physical facilities needed to initiate new

enterprises, transfer capital from old to new forms,

and retrain labor.

111-11
Large places are also better based to adapt

to innovations originating elsewhere. With a wider

assortment of educational institutions and more

professional counseling, local workers may be more

quickly retrained from declining to expanding

occupations. Reemployment can often be achieved

within the same local labor market, eliminating

the very difficult residential relocation

characteristic of smaller places” (9-8).

Although metropolitan counties continued to lead in the growth

of the service sector through the 1960’s, there is now evidence that this

historic trend as well, may be in the process of reversal. In a November,

1975, statement before the House Post Office and Civil Service Committee,

Calvin Beale, of the U.S. Department of Agriculture said:

“Since 1970, employment in all major industry

groups has grown at a faster rate in nonmetropolitan

than in metropolitan areas with the exception of

government jobs. In other words, the pace of

employment growth in trade, services, construction,

transportation and utilities, finance, and real

estate has followed the lead set by manufacturing

in the 2960’s, and is more rapid in the rural and

small town areas than in the metro cities and their

suburbs. This growth was interrupted by the current

business recession, but since the Spring of 1975 it

appears that the nonmetropolitan areas are recovering

from the recession faster than the metropolitan

areas are” (7-3). (Italics added)

Despite this recent evidence, however, there are still those who contend

that this rural resurgence is more apparent than real. In their view, what

is being reflected in these statistics is simply urban expansion in another

guise, with cities extending their physical limits-- and presumably the

location of their service industries -- by incorporating adjacent rural areas.

Commenting upon increased rural growth rates in the Upper Midwest,

Neil C. Gustafson of the Upper Midwest Council said recently:

111-12
“Recent interpretations of these trends have led

many people to believe that urban expansion has been

abruptly halted or even reversed. Closer investigation

of these data, especially as they related to the

Upper Midwest, indicate that such conclusions require

clarification. Most of the population growth in

the Upper Midwest has been and continues to be urban

expansion, but the range of urban growth has extended

far into the countryside and to the small towns within

commuting range of the employment centers. The

largest volumes of recent population growth in the

Upper Midwest remain near and related to major urban

areas” (12-15).

As it happens, there is another group of experts who have analyzed

the same outward movement of population and service industry from urban

cores and has found evidence not of simple urban expansion, but rather of

the evolution of a new kind of rural-urban hybrid which they label

“urban fields”. These they define as being “a fusion of metropolitan

areas and nonmetropolitan peripheral areas into core areas each with

a minimum population of 300,000 persons and extending outward for approximately one hundred miles, that is, a driving distance of about two hours”

(13-13).

Concerning the specific characteristics of these amalgams of cities

and the fastest growing rural counties, Niles Hansen found them typically

to rank high in the following kind of service industries: wholesale and

retail trade, transportation, finance, insurance, and real estate (13-39).

The Federal government, although not using the term “urban field”,

has in recent years incorporated such hybrids into their adjacent metropolitan areas. According to Claude Haren, 83 metro fringe counties, including

“a strong representation of essentially rural and partly rural units were

added in the past several years to the Indianapolis, Columbus, and other

III-13
SMSA’s, primarily on the strength of having specified percentages of

their work forces commuting to the core counties in which those and other

SMSA central cities are located” (8-8).

It cannot now be known with certainty how or whether rural areas can

share in this growth of the service sector of the economy and still maintain

their identity. Alternatively, they might wind up being submerged either

in urban sprawl or in the more scattershot, but still potentially as anonymous,

character of life in urban fields. The third section of this Chapter will

address the role broadband communications might play in helping to foster

a less dislocating, and more

Residential Preference

A third factor that has

rural-centered, form of development.

had a sizable influence upon the relative

growth of rural areas in recent years has been the growing preference of a

majority of the U.S. population to live in rural areas or small towns.

In 1970 Louis Harris and Associates reported that while 68 percent of

the population lived in cities, only 48 percent expressed a desire to continue living there (3-17). Subsequent polls refined this stated preference

to being one for living in nearly rural or small town areas. However,

Calvin Beale has pointed out that these polls also indicated that a more

remote rural or small town area was the expressed second choice of those

preferring to live in the country (2-16). Another survey cited by Beale

which dealt with the likelihood of persons actually moving on the basis

of their stated preferences, showed three-eighths indicating they were “very

likely” to move to rural areas within “the next few years” (which translates,

according to Beale, into 14 million potential movers) (2-17).

III-14
Clearly, whatever disagreement might exist over the fine points

of these analyses, a sizable fraction of the urban population would prefer

to live in rural areas.

Of course, unless there is also some realistic prospect that these

people can subsist in rural areas, such an expressed desire would remain

of academic interest. The prospect for such a move, however, has become

more realistic for an increasing fraction of the urban population.

First, as cited by Niles M. Hansen, jobs are increasingly

and land-tied. While this does not dictate a shift from urban

areas, it does permit vastly Increased mobility:

“It has been estimated that whereas less than

forty years ago nearly 30 percent of the labor force

needed to be located close to natural resources,

today only 7 percent are resource-bound. Thus, the

great preponderance of workers now are potentially

‘footloose’ or must locate in proximity to consumers

less resource

to rural

who themselves are relatively footloose, and economic

opportunity is associated less with land and natural

resources and more with the presence of capital

and human skill” (13-8).

Second, the combination of increased disposable income, governmental

programs such as the Interstate Highway network, early retirement, increased

vacation time, and changing lifestyles favoring outdoor recreation, has led

to and made possible increased population movement to rural areas. Although

some of the data cited below have probably changed due to the recent

recession, Hansen’s 1973 description of the many factors at work gives some

indication as to why more dissatisfied city dwellers have been able to

vote with their feet:

“In the past metropolitan growth has tended to

draw off productive population and investment capital

from hinterland areas, but in the future centrifugal

III-15

75-605 O - 76 - 10
forces will reverse this pattern. For one thing,

the hinterlands have space, scenery, and communities

that are increasingly attractive to metropolitan

populations. Demand for these resources is being

generated by rising real income, greater leisure,

and increasing mobility. Personal income in 1972

has been estimated at $920 billion, a gain of almost

50 percent in a five-year period. Over 40 million

Americans now work under employment conditions entitling

them to three-week vacations. Federal law now provides

five three-day weekends each year, and a trend toward

a four-day work week is clearly in evidence, with

about two thousand companies now following this procedure. Earlier retirement has been encouraged by

improved pension plans and high Social Security

benefits. Access to nonmetropolitan hinterlands has

been vastly improved; for example, when the Interstate

Highway System is complete an estimated 3.5 to 7.5

million acres will be opened for development.

Dollar sales of leisure equipment (an estimated

$105 billion in 1972) have increased by 52 percent

over the past five years, reflecting an accelerating

desire to ‘get back to nature’. A survey by the

Department of the Interior indicates that three quarters

of the American population nine years of age and older

is involved in some form of outdoor recreation. . .Moreover, about two million American families own second

homes used for vacationing, and the number is increasing

each year by from one hundred and fifty thousand to two

hundred thousand units. . . About one third of the total

mileage driven in private automobiles is devoted to

getting to and from vacation areas. Clearly, satisfying

leisure-time desires already represents a major opportunity for many nonmetropolitan areas, and growth

prospects in this regard have few parallels” (13-13).

The lengthy list of enabling factors just cited is the more impressive

because of its sweep and diversity. Should economic conditions, for

example, cause a downturn in outdoor leisure activities, other trends

less susceptible to short term economic fluctuations, such as the increased

use of rural areas as retirement locations, could help to sustain the longterm shift to these areas. In this connection -- and this might presently

be helping to counter the effect of downturns in other economic activities

affecting migration to rural areas -- it is relevant to note that so-called

111-16
rural “retirement” counties (net immigration of 15 percent or more of

persons aged 60 and over) have taken the lead as the most rapidly growing

class of nonmetro counties in the 1970’s (2-10). Further to this point,

Beale has distinguished 60 nonmetropolitan counties in which the number of

retirees receiving Social Security payments increased by more than 50

percent between 1970 and 1975 (7-4). In total, “retirement” counties in

rural areas now account for a population of 8.7 million in 377 separate

counties (2-11).

If it is likely that some sizable fraction of the urban population

will continue to prefer living in rural areas and small towns, and if the

evolution of the U.S. economy makes it increasingly possible for city-dwellers

to act upon their preferences, then the quality of public services and

the amenities offered in rural areas becomes especially important in affecting

the future course of this migration. Once some sizable fraction of the American

population is not required to live in a given area because of sheer economic

necessity -– and as soon as their movement is able to be more voluntary and

discretionary -- then relative attractiveness for daily living becomes an

important factor affecting rural growth. This development and the possible

utility of broadband communications in improving the quality of public services in rural areas will be further addressed in the next section of this

Chapter.1

1 It should be emphasized that this survey of the factors that underlie

the recent reversal of urban dominance in population growth has been

highly selective. Left out were such factors as the location of state

colleges and other state facilities, and the revival of such traditional

rural enterprises as mining operations, both of which have been identified

as causes for growth in rural counties not adjacent to metropolitan

areas (14-15). Also omitted in trying to distinguish the common

denominators of rural growth was a stated

111-17
recognition of the diverse nature of rural America. It is far from the

case, for example, that every rural county within two hours driving

time of core cities can be considered as part of an “urban field”.

Nor is it true, as another example, that decentralization of manufacturing has made its influence felt in all rural areas. As described

by Claude Haren, an equally large or larger number of nonmetropolitan

counties has not been affected by industrialization, especially in

the areas of the Great Plains, the Intermountain Region, and Alaska (8-12).

This selection of decentralization of manufacturing and decentralization

of the service sector of the economy, plus residential preference,

as the major forces underlying the recent population growth in rural

America does not reflect a conclusion that only these forces are of

significance. At the same time, it should be noted that decentralization

of manufacturing and of the service economy are the principal distinguishing characteristics, respectively, of those nonadjacent and

adjacent rural counties that have shown the greatest growth in recent

years. Residential preference, in turn, seems to have accounted for

that rural growth which is not strictly economic in origin.

●

111-17a
Rural Needs And Broadband Communications

The foregoing commentary addressed two basic questions:

● how is rural America changing?

● what are the forces underlying these changes?

It was suggested that the decentralization of manufacturing and of the

service economy, each with its unique implications for rural areas and

each roughly descriptive of the respective course of development in the

two major categories of growing rural counties, seemed to underlie the

growth in rural population. A third factor -- residential preference --

was introduced as a factor likely to be of importance in both categories

of growing rural counties.

It is now necessary to spell out the future problems that might be

created by the continued operation of these forces. Subsequently, broadband

communications will be considered in terms of the role it might play in

helping to resolve such problems and meet rural needs. In so doing, three

major categories of rural counties will be considered:

● Turnaround Acceleration (service sector decentralization)

● Turnaround Reversal (manufacturing decentralization)

● Declining

Turnaround Acceleration Counties

Hansen characterizes “turnaround acceleration” nonmetropolitan counties

as those which grew rapidly in the 1960’s after having gained some populations in the 1950’s (13-4). Typically, these counties are adjacent to or

near metropolitan areas (13-32). They are further distinguished by growth

in the non-goods producing, service sector of the economy.

111-18
Nature of change and its problems. On the surface, rapid growth and

association with urban centers has been beneficial to the residents of this

category of counties. Recently published analyses of the 1960’s by the

USDA’s Economic Research Service confirm what other studies have found:

economic “well-being” increases regularly as one moves from the most

rural to the most urban parts of the country (15-64), and growing

communities generally have “younger age structures, higher socioeconomic

status, and higher labor force participation rates that suggest greater

economic opportunity” (16-1).

It is not the purpose of this study to express judgment as to whether

increasing urbanization has been as beneficial to the people concerned as

these economic indicators might suggest. Nonetheless, assuming that a high

level of rural growth of this kind is desirable, it is possible to

distinguish associated developments that might hinder it in the future.

Among these are: (1) the overload on community services created by rapid

growth; and, (2) the heavy dependence of these areas upon the automobile

and their consequent vulnerability to restrictions upon its use. On the

other hand, if the assumption is made that rural development is desirable

only to the extent that it contributes to preserving some degree of autonomy

and independence, while still permitting rural people to share in the

material benefits enjoyed by the population at large, then there might

be some cause for concern about the basic and long-term effect of growth

in this class of rural counties.

Turning first to the heavy demand that might be placed on existing

community facilities, Beale believes that growth rates in a large number

of rural areas already are sufficiently high to cause concern (7-3).

111-19
Although natural increase still is the primary cause of population

growth in rural areas, 1970 Census statistics showed a direct relationship

between rate of growth and net immigration , with the most rapidly growing

counties typically receiving the highest percentage of newcomers (16-2).

Besides the added burden on community facilities created by new

residents, it also should be noted that the overall median age of population in growing rural counties is almost two years less than that of

declining counties (implying more families of child-rearing age, and a

greater requirement for schools) (16-8).

The second factor that might adversely affect further development

of this class of rapidly growing nonmetropolitan counties is their

heavy dependence upon unrestricted use of the automobile. Especially in

the case of rural counties that make up extended “urban fields”, gasoline

rationing or high gasoline prices could have a catastrophic effect upon

development and upon the lives of those already residing in the areas. The

following description shows how extensive this dependence upon the automobile

can be:

“Just as the compact nineteenth-century city

gave way to the metropolitan area, so today the

Standard Metropolitan Statistical Area (SMSA)

is giving way to urban fields which may include

whole regions within a two-hour driving radius

of the central cities. Increased incomes, leisure,

and accessibility have permitted a growing number

of persons to avail themselves of opportunities and

amenities throughout their respective urban

fields. Thus, many persons who work in SMSA’s

may reside in nonmetropolitan areas where residential amenities are more agreeable, and many

persons who live and work in SMSA’s regularly

go to nonmetropolitan areas for tourism, recreation,

second homes, and retirement ...Moreover, urban

fields need not be limited to areas contiguous

to SMSA’s. Areas with attractive recreation-tourismretirement-second-home features may expand because

of demand generated by metropolitan residents who

live well beyond commuting range” (13-160).

111-20
Finally, there remains the more speculative aspect of growth in

rural communities that are part of urban fields -- that is, the possibility

that the remaining independence and sense of community enjoyed by rural areas

might become further submerged in the urban-rural sprawl of widely separated

shopping malls and interstate highway-associated manufacturing plants.

Thompson’s description of the poverty pockets and social ills that have

been a by-product of the process of metropolitan expansion is indicative

of what might well occur in some rural sections of the geographically more

extended category of urban fields:

A growing population is accommodated, in part, by

horizontal expansion, sweeping over the surrounding

rural areas. Greater distances must then be traversed

if any semblance of economic and social unity are to

be preserved -- if, that is, the urban area is to be

more than a collection of urban villagers in accidental

proximity. . . The poor have nearly always lived on the

other side of the tracks, but the distances were short

and contacts frequent, as in the schoolrooms and town

halls. But the all-slum block becomes first the allshun school, next the all-slum community - - the ghetto --

and threatens now to become the all-slum municipality.

What was once, if not benign, at least digestible apartheid

at small scale portends on a larger scale unemployability, antisocial behavior, and, ultimately,

recourse to even more centralization of authority.

Slum schools that graduate unemployable and

political enclaves of the poor that lack the tax

base to support minimum public standards of health

and safety invite either state or federal intervention. ..We are learning the lesson that a social

structure, such as residential segregation by income,

which may be viable at small scale is not necessarily

viable at very large scale” (9-35/36). (Italics added)

While it cannot be predicted that urban fields will evolve in quite

the manner described, the process at work in the development of urban fields

bears some resemblance to that involved in metropolitan expansion, which

was described by Thompson as follows:

111-21
“New modes of transportation and communication

permitted great cities to dominate small cities and

other communities in their surrounding tributary

area. These outlying communities, heretofore

relatively autonomous, became subordinate to the

metropolis and integrated with it. Hence, not

cities in general, but metropolitan cities in

particular dominate contemporary American society”

(15-3).

The additional point to be made is that, however urban fields might

evolve, the physical location and relative influence of service centers --

once established – are likely to be permanent in nature and self-perpetuating.

As described by Thompson in explaining the historical dominance of cities,

“factories come and go... a commercial bank (or similar service enterprise)

that has efficiently served first a carriagemaker then an early automobile

firm and then an airframe manufacturer (survives them all)” (9-15). In

short, whatever inequalities come to be built into the evolution of the

service sector in urban fields -- and it was suggested that some rural sections

might be bypassed entirely -- they could become lasting.

Alternative course of development. Communication systems, as with any

other element of a community’s infrastructure, are likely to be functional

and viable to the extent that they mesh with the dominant needs and activities

of that community. In rapidly growing nonmetropolitan counties, as we have

seen, the dominant economic activity is that involving the growth of the

service sector. Thus, while this category of county might come to

experience the overload on community facilities which comes with rapid

growth, and could benefit from the related public broadband services described

in Chapter II, their future is likely to be most affected by the pattern

in which this service sector evolves. Therefore, the effect which commercial

broadband services might have upon this evolution is of most concern.

III-22
Nonetheless, it is not enough to know that the broadband services

most important to the development of these counties might be the commercial

services described in Chapter II. There also

of the purpose and function they might serve,

rapidly growing category, might be in helping

has to be some understanding

which, in the case of this

to preserve some of the

existing small towns and as well as helping to enable a more equal sharing

of the prosperity of the larger region. However, since we are dealing with

the future utility of broadband systems, it is necessary to have some idea

as to how such counties might counter the future dislocating effects of

growth in the urban field. Thus, in the case of these counties, as well

with the Turnaround Reversal and Declining categories to be considered later,

an alternative course of development will first be hypothesized and then

the contribution that broadband systems might make to furthering this course

of development will be considered.

It was earlier suggested that there might be an uneven sharing of

benefits in urban fields, with some rural areas bypassed and others becoming

isolated dumping grounds for the poor and untrained. At minimum, the

growth of large-scale regional shopping centers and service industries

widely separated and linked by high speed highways, could lead to the demise

of rural communities as surely as have the previous encroachment of subdivisions and the other elements of suburban sprawl.

Thompson suggests an alternative that is a compromise to the very

large-scale regionalization of the urban fields, one which “emulates” the

features of large metropolitan areas while still preserving the identity

and prosperity of the smaller places in it. Scaling down the size of

towns described by Thompson and substituting rural communities for the small

III-23
urban areas referred to, it does represent one alternative course of

development that could prove less dislocating and disruptive to the

inhabitants of this category of rapidly growing rural counties:

“The small urban area might, instead or in

addition, simulate greater scale. A number of

small- and medium-size urban areas, connected

by good highways and/or rail lines may form a

loose network of interrelated labor markets.

With widespread ownership of automobiles and

a well-developed bus system on expressways permiting average speeds of 50 miles an hour, the

effective local labor market would extend

radially for 25 to 30 miles around one of

the larger urban places. A couple of small cities

of, say, 25,000 population, with two or three

main industries each, plus a half-dozen small

one- or two-industry towns of half that size

add up to a 100,000 to 200,000 population.

The local labor market could then achieve

the scale necessary to offer the counseling and

teaching so critical in our rapidly changing economy.

Area industrial development efforts could be

coordinated, including common research and industrial

parks. In North Carolina, a state filled with

small- and medium-size urban areas, a research

and development triangle has been created in the

Chapel Hill-Durham-Raleigh area, which is 15 to

30 miles on a side and encloses about a quarter

of a million people.

In such complexes, both public and private

investments could be planned strategically. Instead

of many small, bare community halls sprinkled

across the area, one spacious, acoustically pleasing

auditorium could be built. In place of a couple of

two-year community colleges staffed as extensions

of the local high schools, a strong four-year

college could be supported. Nearby and inexpensive

higher education -- commuter colleges -- may be

critical in holding the area’s talented young

from middle- and low-income homes, and perhaps

in attracting those families in the first place.

Again, museums, professional athletic teams, complete

medical facilities, and other accoutrements of

modem urban life could be supported collectively. . .“

(9-27).

III-24
Role of broadband communications. Whether the availability of broadband

systems will enable greater decentralization of service industries and

more even growth within an urban field remains to be demonstrated. Leaving

to Chapter IV the discussion of how such systems in practice could be

developed, the task at hand will be to consider whether broadband systems

might enable the kind of decentralization contemplated in the model presented above.

On the general subject of decentralization, the National Academy of

Engineering (NAE) report on “Communications Technology for Urban Improvement,”

stated that “the viability of (rural decentralization) is enhanced by the

transition of the United States economy from a manufacturing to a service

economy. It is the service sector . ..which is expected to make the greatest

use of telecommunications” (17-171).

Also cited in the NAE report was a British government report on the

establishment of the “Green Belt” around London which concluded that

" ● . . the main factor deterring business and industrial decentralization has

been the reduced operating efficiency due to the absence of fully adequate

communications facilities” (17-173).

To some extent, the cited barrier of inadequate communications apparently

has already been breached, as shown by movement of corporate headquarters

from cities to suburbs:

“What began as a minor movement in the middle

1960’s has become, by 1971, a mass exodus whose

true dimensions are beginning to be visible in only

one central city, New York, where the concentration

of economic activities at the center is greatest.

In 1965, New York City was the home office for

more than 125 of top industrial companies in the

United States. By 1971, at least 24 of these companies

III-25
had decided to leave New York City for the surrounding

suburbs, mainly in New Jersey and Connecticut. Although

the decentralization of office employment seems most

advanced in New York, other cities such as Detroit,

St. Louis, Philadelphia, Baltimore, Houston, Atlanta,

and Los Angeles are beginning to experience corporate

moves to their suburban rings that rival the outward

movement of blue-collar employment in the 1950’s.

Private corporations are not the only example

of large national organizations that are electing

to leave the central city for the suburbs. In the

Washington, D.C. area, for example, where the Federal

Government is the largest employer, major government

offices have been moved out of the city in recent

years, and for much the same reasons that affect

private decision making in the area of location policy.

Among the agencies that have emigrated are the

National Bureau of Standards, the Atomic Energy

Commission, the Geological Survey, the Bureau of

the Census, the National Institutes of Health,

the Navy Department, the Central Intelligence Agency,

and the Weather Bureau” (18-463).

Neil Gold, in a research report for the U.S. Commission on Population

Growth and the American future, identified advances in communications

technologies as being one of the principle factors enabling this corporate

decentralization. According to Gold, “as the effects of this technology

began to be widely understood in the middle 1960’s, a segment of corporate

leadership concluded that the economic, social, and psychological benefits

that would result from relocating their headquarters in the suburbs were

an effective counterweight against the loss of physical proximity and

the daily visual contacts characteristic of doing business in the urban

core” (18-463).

The NAE report cited earlier takes Gold’s point a step further by

arguing that “the inventions have already been made to permit the design

of special communications systems which will allow these (service)

activities to be conducted. . .in small communities scattered throughout

the nation” (17-170). In the judgment of another British study group

III-26
cited in the NAE report, the specific usages of broadband communications

in linking widely separated operations are likely to include “graphic

display, rapid facsimile, computer and data access, conferencing. . . 11

(17-173).

Concerning the application of the innovations, the most definitive

experimental indication of feasibility is likely to come from the HUDfunded “New Rural Society” study now being conducted by Dr. Peter C. Goldmark.

While the New Rural Society project, when completed, could furnish

hard evidence on the practicality of decentralizing service sector

activities to rural areas, there is some question as to whether the rural

area of Connecticut being studied is comparable in terms of economic

characteristics to the rapidly growing nonmetropolitan counties considered

to be typical of the category of urban fields. In other words, it might

be that the New Rural Society project will be most useful in indicating

the role of broadband communications in rural areas just beginning their

turnaround from a state of decline (see below).

Summing up, based upon a theoretical understanding of the value of

broadband communications systems in facilitating the decentralization of the

service sector, broadband systems could contribute to rural development

and could enable greater dispersal of industries throughout an urban

field. Like the chicken and the egg, however, the broadband services

involved will not be offered until proved economic -- and they will not

be proven economic until integrated into an actual system. On the assumption

that knowledge as to value and feasibility might attract potential system

operators and break the chicken-egg cycle, Chapter IV will examine how

III-27
commercial broadband services might pay their own way in a full service,

area-coverage system.

Turnaround Reversal Counties

This section will address that category of nonmetropolitan counties

whose growth has been most associated with an increase in manufacturing

employment. Unlike the faster growing Turnaround Acceleration group just

discussed, counties in this category do not tend to be located in close

proximity to metropolitan areas. As the term implies, “Turnaround

Reversal” are counties in transition that have recently emerged from a

period of decline. Hansen includes in this group those

counties that gained population in the 1960’s after having lost population

in the 1950’s (13-4).

Nature of rural change and its problems. As outlined earlier, the view

is still common that the type of manufacturing plant likely to relocate

to rural areas will be of the slow growth, low technology sort that is

unlikely to stimulate further development or otherwise improve the economic

base of the host area. By contrast, it was shown that actual samplings

of new industry locations in rural areas reflected a far more diverse

industry mix than the “urban cast-off” theory might suggest. As described

by Claude Haren, many industries located in rural areas in the 1960’s

were of the kind previously associated with urban areas and included

a sizable number producing machinery and industrial components of all

kinds (11-433).

Although there were rural areas in the 1960’s, particularly in

Appalachia and the Ozarks, where employment grew primarily as a result of

III-28
the relocation of apparel and other low technology industries, there also

was evidence of relatively depressed rural areas moving up the ladder of

industrial diversification. Hansen described this process as follows:

"...the process of industrial filtering does

eventually lead to the upgrading of both manpower

qualifications, types of industry, and incomes.

These phenomena are clearly in evidence in the

South. The industrialization of the South was

initiated in large measure by the movement of

textile mills from New England and other northern

areas into the Piedmont region of the central Carolinas.

The textile mills in turn generated other activities.

For example, by 1970 there were 214 establishments

in the South producing machinery for the textile

industry. In addition, there were 65 chemical

plants involved in producing synthetic fibers;

the bulk of these plants were in the states

where substantial textile production has concentrated. Suppliers of dyes and other processing

chemicals were also stimulated by the movement

of the textile industry. The growth of manufacturing in the Carolinas, especially North Carolina,

was followed by similar expansion into Georgia.

Decentralization next spread to the Tennessee

Valley, which has managed to achieve a higher

degree of industrial diversification than either

the Carolinas or Georgia. More recently, the

states of Mississippi and Arkansas have entered

the lower rungs of the filtering process” (13-163).

Although detailed statistics do not exist for the specific class of

Turnaround Reversal counties being discussed here, it can be inferred

that growth in manufacturing employment probably has had a beneficial

effect. While some net outmigration is still taking place in some of these

counties, the headlong exodus that characterized earlier days has been

at least arrested. Referring to the USDA analysis cited earlier in the

discussion of Turnaround Acceleration counties, these counties are

likely to have shared in the general attributes of growing rural areas,

which were found to be favorable in terms of income, age distribution,

and labor force participation. In the meantime, these manufacturing-growth

III-29
related counties typically have not been burdened with a heavy influx of new

residents, despite the fact that new jobs in the 1970’s were being created

at a rate well above the national average.

In these counties, it is not the present, but rather the long-term

outlook that might be of concern. And it is the long-term ability of these

counties to share in the growth of the service sector that is coming to

dominate our national economy, that is open to question. Even granting

that life in these counties will remain attractive to the extent that

change is slow and the population stable, can these communities preserve

their relative share of the nation’s material goods while depending upon

manufacturing for employment? Or, must the ‘move in order to stand still’ :

i.e. , must there be some growth in service sector industries if they

are not to be confined to a constant share of the diminishing sector

that is manufacturing employment in this country?

To this point, Claude Haren, in a study of rural industrialization

in the 1960’s, offers evidence which suggests that growth in the service

sector has not necessarily accompanied or followed an increase in manufacturing employment:

“In accordance with national trends, changes in

the service-producing groups, particularly at the local

or small-area level, not only diverged from but often

ran counter to shifts in manufacturing and other goodsproducing industries. In some instances the lack of

a more substantive increase in nonbasic employment was

attributable to the well-developed system of shopping

facilities, hospitals, schools, and so on, already

available either in the immediate or adjoining community, or at a regional service center. The retention of

purchasing and related functions at corporate headquarters and similar trade leakages or complete or partial

tax abatement often seriously delayed the accumulation

111-30

75-605 O - 76 - 11
of investment capital and fiscal resources required to

underwrite much-needed improvements in community and

business services and facilities. All too typically,

a high proportion of increased payrolls went to

nonresidents, or added work opportunities resulted

in the substitution of local employment for jobs

formerly held outside the immediate area” (11-434),

(Italics added)

Beale, in another study of patterns of growth, found that “...the business

functions of many very small towns have diminished even though the housing

function has not” (20-35). Beale concluded that these small towns have

been sustained only through extensive commuting of their residents to those

larger centers that picked up the business and service facilities formerly

located in the small towns.

Alternative course of development. It was suggested earlier in the

discussion of Turnaround Acceleration counties that communications systems,

like any other element of a community’s infrastructure, are likely to

be functional and economic only to the extent that they mesh with the

dominant activity in that community.

Since the counties now being discussed are manufacturing-centered in

their growth and tend not to be located in close proximity to metropolitan

areas, it would be unrealistic to

communications systems, in and of

growth of service industries that

counties.

expect that the establishment of broadband

themselves, would lead to the burgeoning

was found in Turnaround Acceleration

Absent those other conditions that enable significant growth of the

service sector, among which is association with dynamic metropolitan

areas or the hybrid urban fields, the most that probably could be accomplished

for the present is to forestall further erosion of existing service industries

III-31
in these communities, enabling their subsequent expansion when economic

conditions permit.

Concerning the non-economic stimulus to development in those counties,

the potential seems clearer. Although attractiveness to the retired and

semi-retired will vary dependent upon geographic location, many counties

could capitalize upon the growing desire and ability of urban dwellers

to live in the country. To do so, however, it seems likely that these

counties would have to be able to offer a reasonable standard of community

amenities and facilities. As pointed out earlier, the possible stake

in attracting this segment of the urban population is sizable and growing:

so-called rural “retirement” counties have been the most rapidly growing

class of rural counties thus far in the 1970’s and now account for a total

population of 8.7 million in 377 separate counties.

Role of broadband communications. Although service sector need for

and use of broadband communications are not likely to form the leading

stimulus to the establishment of broadband systems in these manufacturing

growth-related counties, still, as will be discussed in Chapter IV,

any broadband system, if it is to be feasible for area-wide rural coverage,

presupposes its full use for both public and commercial services. While

dedicated commercial links are not likely in these counties and while the

use of cable channels will be less intensive than in their more rapidly

growing counterparts, the broadband system at least can be in place -- and

available for increased and more extensive business and commercial use

should the need arise. In the meantime, the basic system, in the manner to

III-32
be described in Chapter IV, could be built and paid for on the basis of

providing those entertainment and public service uses described in the

second chapter of this report. In the latter uses, these systems could

help to provide that improvement in public services necessary to retain

existing population as well as to help attract the retired and semi-retired.

Declining Counties

The reversal of migration from rural areas and the relative increase

in employment

areas.

Although

has decreased

in rural versus urban areas has not been shared by all rural

the number of nonmetropolitan counties losing population

from approximately 1,300 in the 1960’s to 600 in the period

1970-73, the 600 losing population represent 25 percent of all rural

counties and encompass sizable areas of the Great Plains western Corn

Belt, southern Appalachian coal areas, and the old Cotton Belt (21-30).

Nature of rural change and its problems. Declining counties tend to

be those in which gains in manufacturing and service employment have not

counter-balanced losses in the mining and agricultural sectors. Of

great importance to the future of these counties is the exodus of working

age residents and the steep increase in the proportion of the elderly

and the young: in 1970, the median age of the population in declining

counties was almost three years greater than that in growing counties (16-40),

and Beale has identified 80 declining counties in which the median age

has exceeded 40 years (20-24).

III-33
Decline, in many instances, has tended to feed upon itself. As pointed

out by Brown, the great majority of counties that lost population in the

1970-73 period also lost during the 1960’s (16-23). Beale describes

how the process of decline can be self-perpetuating:

“The important point is that any community reaching

this condition is certain to be characterized by an

unusually high degree of influence by the elderly on

community government, by disproportionate problems

of providing housing and services for the elderly,

and by a scarcity of young able-bodied labor force

or potential future labor force. The latter two

problems may be aggravated if the population density

is sparse and the typical government units are

small, as is commonly the case in the Plains. It

is not impossible to break the momentum of such a

trend, but the condition apparently tends to feed

on itself. What psychological support and incentive

does a young adult have to remain in a community

where the overwhelming majority of his peers and

siblings have left or are about to leave? There is

almost the force of a deus ex machina needed to

break the cycle” (20-24).

At the same time that the severity of these problems should be

understood, it should also be recognized that not all rural counties in

this category are experiencing the same rate of decline, and all are not

in the predicament described above. Concerning the rate of decline for

example, a majority of rural counties losing population in the 1960’s lost

less than 10 percent over the course of the decade (16-37).

As will be further discussed below, the range of population decline,

relative economic opportunity, and state of community facilities vary

greatly among counties in the declining category. As the needs of individual

counties vary, so too will the utility and configuration of the broadband

systems that might serve them.

III-34
Alternative course of development (modest change counties). In the

view of Hansen and Brown, some rural

adapt to a decline in population and

(13-17; 16-23). Others by contrast,

ation in community services that has

counties have been able to successfully

remain viable places in which to live

have experienced a degree of deteriorbeen as severe as their drop in population.

In considering the course of rural development and the possible role

of broadband communications in declining areas, therefore, some account

should be taken of the differing degrees of change that might be entailed

in reversing or arresting decline in these areas. To preserve some sort

of rough distinction in the discussion that follows, declining counties

will be grouped under the headings of “modest change” and “major change”.

Those in which development might entail a modest degree of change will be

considered first.

Hansen’s analysis of some rural counties of the Great Plains reveals

an apparent paradox: the same areas that generally experienced heavy

population losses for several decades also ranked first in the country

in terms of rate of increase in income, “... rising from an annual rate

of change of 2.9 percent in the 1950’s to 6.2 percent in the 1960’s (13-17).

Brown, in a USDA study of growing and declining counties, stated

that “ . . ● ne cannot conclude that . ..all declining areas are being bypassed

by the process of national economic growth.” Population decline, in Brown’s

view, may not only be transitory, but also “. . . may reflect a period of

adjustment in the manpower needs of agriculture, forestry, mining, and other

extractive industries” (16-23).

III-35
Does the evidence indicate that the residents remaining behind in some

declining areas can maintain a tolerable level of economic activity and

standard of living? Hansen thinks it does:

". . . it is difficult to compare the situation

in the Great Plains, the Upper Great Lakes, northern

New England and other relatively prosperous areas

having heavy outmigration with the situation in areas

such as central Appalachia, South Texas, the southern

Atlantic Coastal Plains, and the Mississippi Delta.

In the Great Plains, for example, outmigrants have

generally been well prepared to take advantage of

economic opportunities in other areas. Of course,

the population left behind has a relatively high proportion of older people and it is often difficult to

maintain essential services for a widely dispersed

population. On the other hand, agriculture is viable

and there is relatively little poverty. In addition

to savings and farm income there is considerable income

from the Federal government in the form of farm

subsidies and Social Security benefits. There also

are viable small towns, although they probably should

be developed as service centers for rural hinterlands

rather than as “growth centers” capable of halting

and even reversing outmigration. Economic theory

maintains that outmigration should raise the value of

the marginal product of the remaining labor force,

other things being equal. This is because each of

the remaining workers has more of the non-labor

resources of a given area with which to work. And,

in fact, the evidence indicates that population adjustments in the Great Plains reflect successful adaptations

not only for outmigrants but also for the people left

behind. The greatest acceleration of nonmetropolitan

income in the country has taken place in the Great

Plains, rising from an annual rate of change of 2.9

percent in the 1950’s to 6.2 percent in the 1960’s

(13-17).

Whether or not these areas of the Great Plains will ever achieve

rapid growth or industrialization -- and their geographic isolation from

urban areas suggests they may not -- it is important to note that population

decline apparently has tended to keep pace with the reduction in job

opportunities. This implies that some rough degree of equilibrium has been

III-36
struck. The population remaining behind apparently has been able

schools and other community facilities which, while slimmed-down,

to support

still

are of sufficient quality to prepare those who must someday depart for other

regions to find jobs -- and still provide a satisfactory level of public

services for those who stay.

At least as compared with the category of counties that will be

discussed next, the public services and educational systems in these areas

probably have not deteriorated to the point at which they are either

inadequate to their purpose or incapable of being supported at an

effective level by local taxpayers. If this apparent equilibrium between

community resources and jobs on the one hand and resident population on

the other, can be maintained, and if public facilities can be updated,

then these rural areas probably

live. To the extent that these

effectively integrated into the

will remain attractive places in which to

rural counties are also able to remain

agricultural sector of the economy that they

serve, they are likely to manifest a degree of stability and independence

that certainly is among the underlying objectives of rural development.

Role of broadband communications (modest change counties). In many

respects, the kind of broadband communications system that would be appropriate

to these “modest change” counties would be quite similar to that described

in the previous discussion of Turnaround Reversal counties.

Like Turnaround Reversal counties, these counties apparently possess

school systems and other community services that are functioning effectively

and that presumably are in a position to benefit from the kind of incremental

qualitative improvements that the addition of broadband services alone might

III-37
bring. Unlike the next category of declining counties to be discussed, there

are not likely to be more basic and higher priority needs to be first addressed,

such as replacing decrepit school buildings to house children or finding

the necessary funds to hire competent teachers. In other words, if Hansen

and others are correct in their description of the viability of this category

of declining counties, upgrading of community services need not first

require a basic rebuilding of facilities, and improvements are more likely

to be capable of being initiated without massive outside assistance and

financing. Further, these counties seem likely to have retained that sense

of community involvement and tradition of working together which makes it

more likely that they could on their own initiate and carry through to

fruition local broadband communications projects.

The kind of broadband system appropriate to the “equilibria” counties

being discussed in this section thus might be public services oriented and

capable of being underwritten in part by the school systems and local govern–

ments that would share in their use. Until population decline levels off

and these counties long-range economic prospects become reasonable clears,

however, it seems likely that the incentive for business and commercial use

of these systems would remain limited, except in those very active agriculture areas where such enterprises as grain elevators, commodity trading firms,

and livestock auctions might lease system time.

Alternative course of development (major change counties). This category

of declining rural counties represents those areas where need is the greatest

in every category of community service. In these areas, there is not a

balance between the community’s resources and the needs of those who

have remained. While tax revenues and resources of every kind have tended

III-38
to shrink, the need for them has not, and major deterioration of these

communities has been the result.

Recognition of the severity of such problems in rural areas and the

approach taken by Congress in helping to resolve these problems were

described as follows by Senator Humphrey in 1973:

“We know that the highest rates of unemployment

in America were in the countryside. We know that two-thirds

of all the substandard housing and half of the poverty

were out there in rural America. We also learned that

these people were not receiving a fair share of the

assistance provided by the Federal Government.

What we hoped to do through the Rural Development

Act was to provide economic opportunity -- jobs.

But we know that before industries and business can

spring up in small towns there has to be a certain

infrastructure -- a broad combination of community

facilities that all add up to improving the general

quality of life so that money will flow in and people

will stop moving out” (22-12). (Italics added)

By themselves? of course, improved community facilities are not

likely to be of sufficient weight to influence a firm to locate its plant

in a given rural area. In a USDA-funded study of 39 selected branch plants

established in rural areas of the Upper Great Lakes in the 1960’s, location

of raw materials, major markets, and relative distance to headquarters

and other branches were described to be of greatest importance in determining

general location of new plants.

Once general location of a new plant was determined, however, the

individual attributes of different areas did come into play. First in

order of attributed importance in the USDA-funded survey was the availability

of trainable labor:

III-39
“Officials of 24 companies discussed labor, most

emphasizing that a community must demonstrate that

it has an adequate supply of trainable labor in

the area, otherwise it has little chance of getting

a branch plant ...Four firms were strongly influenced

in their decisions by the presence of vocational

schools where the needed skills were being taught,

or training programs were being provided” (23-2).

An official of the Corning Glass Corporation, which decided in the

1960’s to locate most new plants in communities of 10,000-20,000 in

population, put the matter even more strongly:

“As you can imagine, the specifications for

the manufacturing of today’s products continue to

get tighter and tighter. This seems to be the

case whether you are making toys or computers.

Also, the technology to produce many of today’s

items means that a work force that is hired to

man today’s plants must be able to offer his

prospective employer either a greater degree of

educational background or a greater capability of

being trained than has been the case of his

predecessor. We, in our business, are no exception

to this situation. Personnel from our search teams

will, in nearly all cases, talk to employers in a

community and raise the question of the trainability

of the people available in the area” (24-7).

Although the Coming Glass official cited a broad range of community

facilities as being important in site selection, it is interesting to note

that the 39 companies interviewed in the USDA-funded project seemed to

give little weight to, or ignore, many categories of community services:

“Local police and fire protection seemed to be

taken for granted by companies moving into nonmetropolitan communities.

Very few company executives mentioned medical,

dental, and hospital services as influencing branch

location decisions.

Only when the establishment of the new plant

required the relocation of a number of supervisory

personnel or skilled workers were company officials

influenced by the availability and quality of schools,

churches, social and recreational activities” (23-3/4).

III-40
Taken at their face value, these comments seem to indicate that a rural

community can get by with very little in the way of community facilities

and still successfully compete for new industry. However , when it is

realized that an educated, trainable labor force implies the existence

of a functioning community, then the quality of the full range of

community facilities takes on a greater significance.

In the same connection, with only a few exceptions, the 39 corporations

interviewed in the USDA study stated that the successful communities had

sought them out, and all successful communities were found to have an active

Chamber of Commerce or industrial development group:

“The real selling job was done in a face-to-face

presentation by an action committee of the Chamber

of Commerce or by the industrial development corporation. They usually presented community statistics

and pertinent information applicable to the particular

prospect, probably a profile of the industrial park,

and photographs of what the community had to offer” (23-9).

Suffice to say, moribund rural areas, or those with little more than

a labor supply, are not likely to produce this kind of active community

involvement or initiative. Finally, it is important to note that plant

location usually is a competitive process among many communities. Whether

a community with serious deficiencies in the availability of medical services,

shipping facilities, school system, or fire and police protection, can

win out is at least open to doubt. That corporations, in the words of the

Corning Glass official, consider site selection to be a competitive process

seems clear:

“In the end, all the parts of the industrial

development effort must add up to make a given

community the most desirable when measured against

other like communities due to the competition for

new plants -- and there will be competition” (24-13).

III-41
Role of broadband communications (major change counties). In the

case of declining rural counties, the feasibility of broadband systems

is likely to be dependent upon the basic decision that is made by federal and

state government concerning the rebuilding of community facilities, including

the schools and health services. If a commitment is made to improve the

quality of these services

how the related broadband

useful and cost-effective

the benefits of broadband

major rebuilding programs

the broadband system.

If such a commitment

in a major way, then it is possible to visualize

services described in Chapter 11 might play a

role in their delivery. In this instance, should

so warrant, some of the funds provided for the

could be used to help underwrite the cost of

is not forthcoming, however, the outlook for

feasibility is poor. Unlike the growth areas discussed earlier, community

facilities in these counties are likely to have deteriorated to the point

at which the provision of the most basic services is in jeopardy. Caught

between shrinking tax revenues and an increased demand for assistance from the

elderly and the unemployable, these communities are unlikely to be able

to spend scarce tax dollars on the improvements that broadband services

might provide when, at the same time, they are struggling to maintain the

most minimal basic level of health, education, and other community services.

If, as will be discussed in Chapter IV, the economic feasibility of

rural broadband systems depends upon the fullest possible use of community

services as a revenue source, then it follows that the systems themselves are

not likely to be feasible until (1) the communities on their own somehow

become economically revitalized or (2) direct government subsidies are made

available for major community service rebuilding programs (and related

broadband delivery services).

III-42
In the laissez-faire alternative, broadband systems are likely to

come along, if at all, only when a rural area has somehow brought its

resources and population into balance along the lines of Hansen’s Great

Plains example or until it has moved up the ladder of industrial diversification as have many counties in the South.

When and if one of these stages have been reached, broadband communications, as discussed in the cases of Turnaround Acceleration and Turnaround Reversal counties, could perhaps assist in the growth and preservation

of service industries and they could improve the quality of community

facilities so as to attract such people as retirees. But in this instance

the development of broadband systems still would have to await the economic

evolution of the areas in question; broadband systems, in and of themselves,

would not have been an active agent of change.

In the second alternative of direct subsidies and other assistance

to upgrade community facilities, it is difficult to visualize a realistic

source of funds except that of federal and state government. If this is

the case, then the value as well as the feasibility of broadband systems

is likely to be dependent upon the extent to which they mesh with and

contribute to the objectives of such federal and state assistance programs.

In turn, concerning those objectives that the broadband services must mesh

with, it is necessary to consider the future course of rural development

policy generally.

As an example, should funds be simply allocated so as to preserve existing

community facilities in all areas at some minimum maintenance level, then

III-43
it is unlikely, for the reasons outlined above, that any will be able

to support the costs of broadband systems.

On the other hand, if governmental policy decisions are made to focus

resources in a more selective manner which would create growth centers, for

example, then it is somewhat easier to visualize how broadband communications

systems could make an active, and perhaps significant, contribution.

One of the features of the growth center approach is that it attempts

to work with, rather than against, the economic forces that determine the

viability of a rural community. The Council for Agricultural Science and

Technology offered the following observations in this regard:

“Some communities do not have the critical labor

supply, transportation, and opportunities for low-cost

provision of adequate services necessary to sustain

growth. They will require outmigration or commuting

to work in other communities. A rural development

program cannot be expected to save every rural community

in trouble. . .Resources for planning and implementation

of programs may be employed most effectively if they

are concentrated in those areas where the need is

greatest and where population, trading, commuting, and

infrastructure patterns provide a critical scale of

labor and other services needed to alleviate problems

and constitute a viable economic entity. . .

Voicing a similar view on the revitalization of rural areas, an official

of the Economic Development Administration has suggested that Federal

efforts be focused on developing at least one viable center in each state

“development district”. In so doing, a functional test was proposed in

which relative economic advantage, such as key transportation, trade and

service links to surrounding areas, would be given strong weight (26-61).

III-44
Taking this functional approach a step further in a study of historical

growth patterns in the United States, Hugh Denney found that areas approximately 64 miles in radius seem to be evolving as prime regional centers.

Applying this discovery to the state of Missouri, Denney found such centers

not only to be major trading centers but also increasingly central locations

for television broadcasting, junior college and higher education, as well

as medical facilities (27-27).

Relating this concept to the way in which governmental resources might

be allocated, Denney suggests that 64-mile radius centers be a focal point

for action:

“A national policy to raise the levels of

transportation, communications, health, and

education on the (64-mile radius) spatial pattern

would bring all parts of this country within one

hour of such services and create a healthier

environment for industrial dispersion” (27-107).

Specifically, Denney identified 296 such centers in the United States

which are

employees

below the national average in the ratio of community service

to population:

“It is in these communities that special efforts

are needed to improve services whenever the population

based will support them...

Most centers on (this) scale are devoting

their energies to securing industries; a commendable cause, but they are often giving inadequate

attention to making their communities good service

centers for the population they now have. Most

industries are looking for towns that have a high

level of services, thus these communities would do

well to raise their levels of service while continuing to work for improved industrial jobs” (27-116).

While Denney’s 64-mile radius growth centers are to be found in all

areas of the country, his theory offers one possible rationale for locating

government offices and allocating developmental efforts in declining rural

111-45
areas. It is of further and special interest that potential regional

growth centers of this size might represent good market sizes for broadband

communications: in 1968, 243 of 352 64-mile radius centers were found

to be served by cable television (27-56).

To briefly sum up this discussion of the role of broadband communica–

tions in furthering the development of declining rural areas, it can be

seen that the outlook for such systems is decidedly uncertain and dependent

upon the future course of government policy on rural development. Unlike

the situation in the growth counties considered earlier, broadband systems

in these counties cannot simply be incorporated into, or underwritten by,

existing community services. Although any or all of the public broadband

services described in Chapter 11 could be of substantial value in declining

counties, their feasibility will depend upon the ‘how, where, and how much’

of federal and state assistance efforts.

Should this investment be sufficient to result in a major improvement

in community services, broadband systems conceivably could be used to extend

health, education, and other governmental services to the majority of the

rural populations involved. In turn, revenue from the sponsoring government

agencies might make a critical difference in helping to underwrite the broad–

band systems themselves. If not, then the most hard-pressed of the declining

rural counties will probably have to await that uncertain day when growth

creates sufficient economic prosperity so as to enable the establishment of

strictly locally-supported and financed broadband systems.

111-46

75-605 O - 76 - 12
Summary And Discussion of Findings

In approaching the task of examining the contribution broadband

communications can make to rural development, it first was necessary to

examine the present nature of change in rural America.

The 1970’s has seen a reversal of the historic migration of Americans

from rural to urban areas, with a net 1.6 million persons moving from urban

to rural areas. In this period, overall rural growth (5.6%) exceeded that

in urban areas (4%). This growth was not distributed evenly among all rural

areas, nor was it found to be explainable simply in terms of proximity

to metropolitan areas: the largest quantitative increase in net

immigration occurred in counties adjacent to metropolitan areas, but the

sharpest turnaround in migration developed in the more distant rural counties.

This change, whatever else it might have done, has not altered

the sizable differences that exist among rural areas. parallel with the

finding that there is no simple way to describe rural America is this

study’s proposition that broadband communications systems will succeed

or fail to the degree that their characteristics match the particular needs

and economic conditions of each rural area in which they are located.

In trying to make sense of the great diversity of needs and conditions

in rural America, this study first identified the major forces underlying

present change and then projected the future course of development and

indicated needs that are likely to emerge as a result of these forces.

III-47
were

The three principal forces identified in this study were:

● decentralization of manufacturing

● decentralization of the service sector of the economy

● residential preference

Decentralization of the service sector of the economy and of manufacturing

found to be roughly descriptive of development, respectively, in two

major categories of growing rural counties: “Turnaround Acceleration”

(generally adjacent to metro areas) and “Turnaround Reversal” (generally not

adjacent to metro areas). A third major factor -- residential preference --

was found to be important in both. In the following summary of the points

that were made concerning these two categories of growing counties (plus,

for completeness, a third category of counties that are declining), future

needs are related to the contribution that broadband systems might make.

Turnaround Acceleration Counties

This group of counties grew rapidly in the 1960’s after having gained

some population in 1950’s. As a class, they are distinguished by their

proximity to metropolitan areas and their relative growth in the service

sector of the economy.

Two of the problems those counties might encounter in the future are:

● an overload on existing community facilities. 473 counties

grew by 10 percent or more between 1970-74, with some

achieving an annual growth rate of 22.5 percent or more;

the fastest growing were also characterized by an influx

of new residents and a higher proportion of families of

child-rearing age.

III-48
● effects of fuel shortages upon automobile use. Many of the

fastest growing counties are in hybrid urban-rural areas

that have evolved as a result of extensive long-distance

commuting (up to two-hour radii of travel). High gasoline

prices or rationing could have a catastrophic effect upon

continued growth in these counties.

A third problem this category of counties -- especially those located

in those sprawling hybrids called “urban fields” -- might encounter in the

future is uneven development and uneven sharing in the fruits of growth.

It was suggested that the ‘leap-frogging’ expansion process entailed in

the development of urban fields could leave isolated backwaters in which

“all slum municipalities” might become the successor to what were, in the

superseded small rural communities, all-slum blocks or neighborhoods.

Concerning the dominant growth activity in these counties -- which was found

to be in the non-goods producing, service sector of the economy -- the prospect

was offered of the centralization of such enterprises at a few key locations

along Interstate Highways and other high-speed arteries.

As an alternative to this very extensive, scattershot kind of regionalization, a smaller scale variant was discussed in which development might

be more evenly dispersed throughout the rural areas. In this alternative,

the rural region might “emulate” the extensive regionalization of the larger

urban field before the latter becomes firmly established.

In this regard, one of the contributions broadband communications might

make would be to enable such “emulation” by substituting communications for

that of travel by car. Specifically concerning the decentralization of

III-49
service activities, there is recent evidence of the key role played by

communications in making possible the decentralization of corporate headquarters. In addition, it has been shown that communications has enabled

the decentralization of precisely the kind of service activities that have

been found to dominate the development of urban fields. Because distance

is no barrier to communications once links are in place, broadband systems

might enable greater dispersal of service industries throughout a growing

rural region as has occurred between city and distant suburbs in the New

York metropolitan region. At the very least, the existence of broadband systems

in a rural area would mean that the ability of that area to share in the

subsequent development of the larger region would not be foreclosed.

As will be discussed in Chapter IV, broadband systems offering the

entertainment and public services described in Chapter 11 could be economically

feasible and could be established while an area was still predominantly

rural in character. Once in place, however, the system could be subsequently

expanded to provide those commercial broadband services that could enable

the more dispersed decentralization of economic activities suggested above.

Turnaround Reversal Counties

The dominant economic force in this category of counties is increase

in manufacturing employment. Unlike the faster-growing Turnaround Acceleration

group, counties in this category tend not to be located in close proximity

to metropolitan areas. As the term implies, “Turnaround Reversal” are counties

in transition, having emerged in the 1960’s from a lengthy period of decline.

For the present, the effect of the growth of manufacturing in this

category of counties probably has been beneficial to the inhabitants

involved:

111-50
● while some net outmigration is still occurring in some

of these counties, the major exodus and attendant

dislocation of earlier days has been arrested.

● new jobs have been created, but characteristically

there has tended not to have been a large influx of

new residents which might over-burden existing

community facilities.

● even if new manufacturing jobs have been created by

the establishment of slow-growth, low technology industry

(as discussed earlier, actual samplings show this not

necessarily to be the case in rural areas), there are

numerous examples, especially in the South, where low

technology industry has been succeeded by progressively

more growth-generating kinds of enterprises.

In these counties, it is the long-term economic outlook that could be

of the greatest concern: i.e., their ability to share in the growth of the

service sector that is coming to dominate our national economy. The operative

question is whether they can preserve their relative share of the nation’s

material goods while still relying for employment upon that diminishing

sector of the economy which is manufacturing in this country.

Studies of rural industrialization have shown that growth in the

service sector does not necessarily accompany or follow an increase in

manufacturing employment. In fact, it was found that in the 1960’s

manufacturing-induced growth frequently ran counter to growth in the

service sector. Concerning rural small towns, generally business activities

have tended to decline and become progressively centered in larger communities.

111-51
While broadband systems by themselves are not likely to be a factor

stimulating decentralization and growth in the service sector in the manner

in which they might in the case of Turnaround Acceleration counties, some

capability for service sector usage will be available in any two-way broadband

system that might be established. Although the feasibility of systems in

these Turnaround Reversal counties will be primarily dependent upon their

usage for entertainment and public services, the population of these counties

should be in a good position to be able to afford the latter. They are not

as likely to have had an increase in tax revenues resulting from new

industries counterbalanced by increased demands for services generated by

an influx of new residents. Thus, it might be likely that some portion of

system cost could be underwritten by public services users such as the

school system. Additionally, disposable income in these growing counties

is likely to be sufficiently high that many individual subscribers could

afford to pay for hook-up to the system.

Provided that broadband systems can be justified on the above grounds

(a matter dealt with in greater detail in Chapter IV), the additional

availability of the system for broadband commercial services could serve

the purpose of:

● helping to forestall the further erosion of the

existing service sector in these counties.

● providing the communities involved with the

communications infrastructure necessary for the

growth of the service sector, when the latter

occurs.

III-52
Declining Counties

Although the number of rural counties losing population decreased by

more than half in the early 1970’s, 25 percent of all rural counties in the

United States still remain in this category.

As a class, these counties are those in which gains in manufacturing and

service employment have not counterbalanced losses in agriculture and mining

jobs. In these counties, the departure of working age residents has led

to a steep increase in the proportion of the elderly and the young. The

need for public services, such as those described in Chapter II, has tended

to escalate as tax revenues have shrunk.

For the most seriously affected of these counties, it is open to serious

question whether broadband systems would be feasible unless subsidized in

their public service applications by federal or state government. This is

likely to be so, as will be discussed in Chapter IV, because the financial

viability of these systems in large part will depend upon community services,

such as the schools, an important source of revenue. If the communities

in question are hard-pressed, it is unlikely they will be able to spend

scarce dollars on the improvements that broadband services might bring

while at the same time they still might be struggling to maintain the most

minimal basic level of health, education, and other community services. On

the other hand, should a federal or state decision be made to improve

these community services in a major way, then their delivery by broadband

might be a cost-effective method and might warrant federal or state sharing

in their costs.

III-53
In the category of declining rural counties, therefore, the feasibility

of broadband systems is likely to be heavily dependent upon the timing

and nature of the revitalization of community services:

● if a rural community is largely left to its own

devices, the establishment of a broadband system

is likely to await its ‘evolution’ to a condition

of economic growth.

● alternatively, if substantial outmigration can occur

before community services deteriorate to the point of

no return, and if a community’s resources and population

remain in some sort of balance, then it is possible

to visualize the feasibility -- without substantial

outside assistance -- of a broadband system. Such

‘equilibrium’ rural communities (roughly equivalent

to the Turnaround Reversal category discussed earlier)

exist today in the Great Plains region.

The other alternative is direct subsidies and other assistance to

upgrade community facilities, in which case it is difficult to visualize

any realistic source of funds other than that of federal and state government.

In this instance, the feasibility and value of broadband systems is likely

to be further dependent upon the extent to which they mesh with and contribute

to the objectives of the government assistance programs.

For purposes of discussion -- and to lend some specificity to the “iffy”

role of broadband systems in contributing to rural development programs in

declining counties-- the example was considered of the so-called “64 mile radius”

III-54
regional centers that presently are evolving in this country, and that have

been offered by one scholar as focal points for organizing government assistance. Briefly, these centers were found to be the location of major

trading enterprises, junior colleges, medical facilities, and television

broadcasting for the surrounding areas. Of further interest, growth centers

of this size have apparently represented viable markets

communications: in 1968, 243 of the 352 64-mile radius

found to be served by cable television.

for broadband

centers studies were

Unless overall development efforts have some coherent and realistic purpose,

it does not seem that a broadband communications system will make little

difference to a declining rural area, even if entirely subsidized from

outside sources. As every rural hamlet cannot be the site of a general

hospital and a 4-year college -- which implies the necessity for devising

some sort of regional system for the delivery of such services -- so, too,

is it unlikely that each crossroads can be the center of its own broadband

system. To the degree that a larger rural area (the 64-mile radius area

is only one example) serves as a basis for coordinating the delivery of

medical, educational, or other community services to a region’s inhabitants,

broadband communications potentially could serve as a substitute for extensive

individual travel in realizing the benefit of these services and helping

to make the most of available resources.

summary Observations

● Any area-coverage rural broadband system will require

the fullest development of every possible service

(entertainment, public, as well as commercial) as

sources of revenue. Leaving aside entertainment

service as a common denominator in all systems, the

III-55
principal additional sources of revenue will vary

according to the type of rural area:

1) in the fastest growing rural counties (those

dominated by growth in the service sector

of the economy), business and commercial

broadband services are likely to offer the

greatest potential source for revenue.

2) in growing rural counties characterized by

growth in manufacturing employment, public

service uses are likely to represent the best

additional source for revenue.

● Broadband systems in growing rural counties could:

1)

2)

enable greater dispersal of service-type

industries than is presently the case in

some of the fastest growing counties. This

could permit more equal sharing in the fruits

of growth by all sections of a county and

make more likely the continued viability of

smaller rural communities.

help forestall continuing erosion of business

functions in those small towns located in areas

of manufacturing growth, and provide the communications network necessary for later growth in

the service sector, should economic conditions

permit.

III-56
● Broadband systems in declining rural counties could:

1) contribute to the cost-effective functioning of

federal and state programs designed to upgrade

medical, educational and other community

services.

2) help to attract new industries by serving as

a vehicle for delivery of upgraded community

services.

● Implications for government policy are:l

1) in growing rural counties, broadband systems have

the potential for becoming self-supporting; assistance

required is likely to be in the areas of technical

assistance and securing of financing.

2) in declining rural counties, the economic base is likely to

be inadequate to support broadband systems. However, to the

extent that government subsidies might be made available to

upgrade schools and other community facilities, some functions

might be performed through the use of broadband and appropriate reimbursement made to the system. The latter revenues,

venues, in turn, might be sufficient to make the system financially self-sustaining. The value of broadband systems

1 Because most statistical data is available on a county basis, the single

rural county has been used as the unit of analysis in this discussion.

This is not meant to imply that the individual county must be used as

a Planning basis for government policies affecting the establishment

of rural broadband systems. Indeed, in their full-service uses

contemplated in this study, rural broadband systems are more likely

to be coterminous with the boundaries of school districts and the

like, which increasingly are multi-county or sub-regional in nature.

For further discussion on this point, see Chapter IV.

III-57
in providing public services is likely to depend upon the

extent to which these services mesh with and contribute to these

government assistance programs, as well as upon the degree

to which rural development policy emphasizes area-wide,

coordinated delivery of community services.

● Despite the evident promise of broadband communications

systems, there can be no assurance that they will in fact

evolve in the manner suggested in this Chapter. Before

entrepreneurs, local business leaders, or governmental

officials can seriously entertain organizing and deploying

such systems, much more has to be known about the practical

aspects of their financing and operation. This will be the

subject of the next and final chapter.

III-58
CHAPTER III

References

1.

2.

3*

4.

5.

6.

7.

8.

9.

10.

11.

——

Sundquist, J. L., Dispersing Population: What America Can Learn

from Europe, (Washington, D.C.: The Brookings Institution), 1975.

Beale, C. L., The Revival of Population Growth in Nonmetropolitan

America: based on paper presented at the Conference on Population

Distribution, sponsored by the Center for Population Research,

National Institutes of Health, (Washington, D.C.: U.S. Department

of Comuerce, Economic Research Service, ERS-605), 29-31 January

1975.

U.S. Congress, Senate Committee on Agriculture and Forestry,

Subcommittee on Rural Development, City Size and Quality of Life:

An Analysis of the Policy Implications of Continued Population

Concentrations, (Washington D.C.: U.S. Government Printing Office,

Stanford Research Institute), 13 June 1975.

Beale, C. L., “Rural and Nonmetropolitan Population Trends of

Significance to National Population Policy,” in Commission on

Population Growth and the American Future Research Reports,

Volume V, Population Distribution and Policy, U.S. Government

Printing Office, 1972.

Beale, C. L., U.S. Department of Agriculture, Economic Research

Service, personal interview on 21 December 1975.

Beale, C. L. and Fuguitt, G. V., “The New Pattern of Nonmetropolitan

Population Change:” CDE Working Paper 75-22, presented at the

Conference on Social Demography, University of Wisconsin, Madison,

15-16 July 1975.

Beale, C. L., Renewal of Population Growth in Nonmetropolitan Areas of

the United States: statement before the Subcommittee on Census and

Population, House Committee on Post Office and Civil Service,

November, 1975.

Haren, Claude C., Current Spatial Organization of Industrial Production

and Distribution Activity, United States Department of Agriculture,

Economic Research Service, 11-13 July 1972.

Thompson, Wilbur R., “The Economic Base of Urban Problems” from Contemporary Economic Issues, (Homewood, Illinois: Richard D. Irwin, Inc.),

1973.

Lee, E. S., Bresee, J. C., Nelson K. P. and Patterson, D. A., An

Introduction to Urban Decentralization Research, (Oak Ridge, T=nessee:

Oak Ridge National Laboratory), June 1971.

Haren, Claude C., “Rural Industrial Growth in the 1960’s” from American

Journal of Agricultural Economics, Vol. 52, No. 3, August 1970.

III-59
12.

13.

14.

15.

16.

17.

18.

19.

20.

21.

22.

23.

24.

Gustafson, Neil C., “Don’t Jump to Conclusions About the ‘New’ Population

Trends:” quoted in draft State Responses to Growth and Change, 1976

Bicentennial Report on National Growth and Development, U.S. Department

of Housing and Urban Development, December 1975.

Hansen, Niles M., The Future of Nonmetropolitan America, (Lexington,

Massachusetts: Lexington Books, D.C. Heath and Company), 1975.

“State Responses to Growth and Change:” in draft report

1976 Bicen~ennial Report on National Growth and Development, U.S.

Department of HUD, December 1975.

Hines, Fred K., Brown, David L., and Zimmer, John M., Social and

Economic Characteristics Of The Population In Metro And Nonmetro

Counties, 1970, (Washington, D.C.: Economic Research Service,

U.S. Department of Agriculture).

Brown, David L., Socioeconomic Characteristics Of Growing and Declining

Nonmetropolitan Counties, 1970, (Washington, D.C.: Economic Research

Service, U.S. Department of Agriculture), August 1975.

“The Cities Of The Future:” Chapter IV in NAE report,

Communications Technology for Urban Improvement, National Academy

of Engineering, Washington, D.C.

Gold, Neil N., “The Mismatch of Jobs and Low-Income People in Metropolitan

Areas and Its Implications for the Central-City Poor,” Chapter 4, part III,

Commission on Population Growth and the American Future, Research Reports,

Volume V, Population Distribution and Policy.

Goldmark, Peter C., “The Need for a New Rural Society,” Michigan

Business Review, May 1974.

Beale, Calvin L., “Rural development: Population and Settlement Prospects,” from the Journal of Soil and Water Conservation, Volume 29,

Number 1, January - February 1974.

“Report on National Growth and Development,” draft in 1976

Bicentenni~l Report on National Growth and Development, U.S. Department

of HUD, December 1975.

U.S. Congress, Senate Committee on Agriculture and Forestry,

Subcommittee on Rural Development, Implementation of the Rural

Development Act of 1972, 29 June 1973.

Experience, Incorporated, Experiences, Opinions, And Attitudes Of

Company Officials And Community Leaders Related To Non-Metropolitan

Branch Plants, The Agri-business Program, Agriculture Research Service,

U.S. Department of Agriculture, Hyattsville, Maryland, undated.

Cooney, James L., Corning Glass Corporation, from speech given

conference sponsored by the Utah Valley Industrial Development

Association, 19 August 1967.

III-60

at a
—

25. , Rural Development, Report No. 35, Council for Agriculture

Science and Technology, Department of Agronomy, Iowa State University,

Ames, Iowa, 19 November 1974.

26. Wrigley, Robert L., Jr., “Small Cities Can Help to Revitalize Rural

Areas,” Annals of the American Academy of Political and Social Science,

January 1973.

27. Denney, Hugh, Decongesting Metropolitan America: It Can Be Done!,

(Columbia, Missouri: University of Missouri), 1972.

111-61
CHAPTER IV

A SYSTEM APPROACH TO DEVELOPING AND

ASSESSING RURAL BROADBAND COMMUNICATIONS

The preceding chapters have examined the potential of broadband

communications for responding to rural needs and contributing to the goals

of rural development. However, realization of this potential depends upon

demonstration that rural applications are economically viable. In this

Chapter, a system approach to developing economically viable systems is described

and two case studies illustrating some of the concepts involved in

approach are presented. Technological, regulatory and economic factors

as possible constraints to wider application of broadband communications

are then examined and it is shown that, for rural areas, the immediate

primary constraint has been economic. This finding is used in discussing

the need for rural demonstrations of broadband systems and an approach to

implementation of such a demonstration program is described. The approach

taken in this Chapter is then compared to other alternatives as suggested

in recent legislative initiatives and other studies. From that follows

a discussion of policy alternatives. The Chapter closes with a three-step

approach to future assistance which might be provided by the Office of

Technology Assessment for consideration by the Senate Committee on

Agriculture and Forestry.

What is Meant By A System Approach

As used here, a broadband communications system indicates specific

characteristics. With regard to service, the term “system” implies that

all persons in the community served by the system can hook up to it and that

community institutions will also have access to the system. Thus, the system

IV-1

75-605 0- 76 - 13
will provide an array of services. In addition to conventional news and

entertainment such services would include several public services and/or

commercial uses as described in Chapter II. By comparison, prior

applications (see Chapter II) have provided one service -- say, a health

service -- to one type of organization (such as hospitals and clinics) or

to a subpopulation of individuals (the sick or elderly). In the context

of the system concept, such an application would be a component or subsystem.

Several such subsystems combine to form a total broadband system.

Still on the topic of service, there is an important implication of the

system concept. This is that the system derives from and is based upon

community needs rather than the interests of a single business or group

of experimenters. The particular services to be provided may be health,

education, entertainment, meter reading, burglar and fire alarms, commodity

prices or others, depending upon the needs of the people and the capability

of the community to provide these services in other ways.

The system approach implies a positive cost-benefit ratio and that

other alternatives than broadband have been evaluated to determine whether

the same service might be provided through some other method at lower cost.

Thus, it might be cheaper to bus people to hospitals or hire more paramedics

than to use telemedicine. In making such an analysis, however, the total

service to be provided by the telecommunications system must also be considered. Provision of several services will reduce the cost of any single

service because all will use the same physical plant.

IV-2
Thus, an important reason for the system approach to rural telecommunications is economic. Besides the economies of scale achieved when a number

of services are provided, there is also benefit to the individual. School

systems, hospitals and community agencies might afford to pay respectable

sums for use of the system because of savings made in reduced salaries,

transportation costs and physical plant. This institutional support can

be used to offset some of the cost of providing network TV via cable to

the individual subscriber.

The system approach has technical implications as well. Combinations

of technology, such as both cable and translators , may be required to meet

the needs of the community economically. Thus, cable can be provided where

there is adequate density and several cable systems might be linked by

microwave relays to connect related institutions within a county. Translators can provide service to households in the most rural areas.

(Regulatory constraints to this approach will be discussed later). The

important point is the intent to provide broadband to everyone rather than

siphoning off households in the most dense, and thereby profitable, areas and

leaving outlying rural households with no access at all.

Service, economic and technological aspects will be dealt with in more

detail later. The purpose here has been to introduce the philosophical

concepts underlying the system approach.

Case Studies

The project which most clearly illustrates the system approach is being

undertaken in Trempealeau County, Wisconsin. However, some other projects,

such as the three National Science Foundation Phase II projects in Spartanburg,

North Carolina; Reading, Pennsylvania; and Rockford, Illinois show some

IV-3
characteristics of this approach. The Trempealeau County and Spartanburg

projects are described below. Besides illustrating what is meant by a

system approach, these projects also indicate some of the regulatory,

institutional and financial constraints to broadband applications. The

description of both projects follows a common framework:

● demographic and socioeconomic characteristics of the

area served by the broadband system;

● motivating forces behind the project;

● system description;

● financial considerations; Federal involvement;

● status of the system; and

● summary and significant findings.

Trempealeau County, Wisconsin Project

Trempealeau County, Wisconsin is a predominantly rural area with a

population of 23,172 persons. Those younger than 20 years of age, or over

65, make up about 39 percent of the population and this percentage is close

to the Wisconsin average. However, the over 65 age group is about 16 percent

of the county population, which exceeds the statewide averages by about

5 percent (1-5).1

Examination of migration patterns reveals greatly decreased migration

out of the county from 1960 to 1970, as compared to the previous decade.

While county population as a whole appears close to stabilization, there has

* References are numbered consecutively in the order of their first

appearance in the text. The first number is the reference. The

number after the dash is the page number on that reference.

Iv-4
been within county movement from rural farm to rural non-farm households.

The percentage of the population in incorporated areas in 1970 accounted for

47 percent of the population compared to 33 percent in 1940 and 21 percent

in 1900 (l-6). Persons classified as rural non-farm in 1970 accounted for

about 64 percent of the population, with rural farm making up the difference

(l-83).

County median income was $7,391. A large percentage of people depend

upon public assistance (13 percent of families) or social security (29 percent) . In 1970, 14 percent of families in Trempealeau County had incomes

below the poverty level (l-7).

Of the total population, 8,233 or 36 percent were in the labor force.

Agriculture and manufacturing predominate as sources of employment.

Agriculture employs 26 percent of the work force and manufacturing employs

22 percent (l-7).

There are several important implications to be drawn from the above

capsule summary of Trempealeau County characteristics. First, the relatively

high percentages of elderly and nonworking residents means that a significant

percentage of the population is home during the day and could use broadband

services during

television sets

compared to the

this time (l-9). Presently, 93 percent of households have

(l-9). Television usage figures in hours per day are high

national average despite good reception on only two channels

in most areas (1-13). Surveys indicate an interest in more choice of programs

as well as in local programming (1-14). Besides entertainment, the characteristics

of the area suggest a potential for health, education and other services

described in Chapter 11 of this report.
On the other hand, income for many residents is low. Consequently,

little is available for discretionary spending. Thus, any broadband

telecommunications services based on subscriber fees or fees otherwise

charged to the consumer must be very desirable if they are to be purchased. In addition, the low density of the area makes it unattractive to

broadband entrepreneurs. A cable system serving the county, including all

towns, would have less than 10 subscribers per mile of line (2-15). Cable

operators generally consider 30-40 households/mile a minimum (3-4).

Thus, while it appears

need in Trempealeau County,

system will fill that need.

that broadband communications could fill a

it also appears unlikely that a conventional

Given the situation, the project underway in

Trempealeau is of special interest.

Trempealeau County proposes to provide itself with broadband

communications by paralleling the

telephone service to rural areas.

project and they are indicated in

approach which brought electricity and

There are many unique features of this

the following discussion.

Role of Trempealeau County cooperatives. The motivating force behind

the Trempealeau County project stems from several cooperatives. Because of

the importance of cooperatives in many rural areas and because of their

potential for bringing broadband communications to other areas, the following

discussion briefly outlines the historical development of cooperatives, their

role in bringing electricity and telephone service to rural areas and the

current activity of cooperatives in the Trempealeau County project.

IV-6
The formation of cooperatives stems from the Capper-Volstead Act

of 1922 which allowed farmers, ranchers, dairymen and others engaged in

agricultural activities to form associations for the purposes of marketing

their products (4). The intent of the legislation was to permit agricultural workers to reduce competition among themselves and enable cooperative

members to realize the benefits which could accrue from processing, handling

and marketing their goods themselves.

Since the 1922 Act, cooperatives have become a way of life in many

rural areas and supply an array of services from insurance to schooling

for their members. Of notable significance to this assessment is the role

played by cooperatives in bringing electricity to the countryside. In the

1930’s, realizing that the utility companies saw no economic reason to bring

electricity and telephone service to rural America, rural residents organized their own electric cooperatives. Aided by the Rural Electrification Act of 1934 which made long-term, low-interest loans available, the

electric cooperatives were extremely successful in bringing telephone and

electric service to sparsely populated areas (5-13).

The situation today with regard to cable television in rural areas is

not dissimilar from the problem of getting telephone service and electricity

to the same areas a generation ago. As noted previously, low rural population densities are not economically attractive to the private cable operator. Cooperatives, on the other hand, exist for the benefit of their membership and are not constrained by considerations of profit as is private

industry.

Iv-7
In addition, as noted by Steven Rivkin writing in Rural Electrification

Magazine (May 1974, pg. 13):

“Rural cooperatives have special practical qualifications

for entering the field of broadband communications that go far

beyond a perception of historical nuances. First there are the

vital intangible ingredients to success of motivation -- the

commitment born of past struggles to put technology to work for

their members -- and the principles of area coverage that makes

special sense when success of a high-capacity communications

system is so dependent on opening access to all members of community. Moreover, there also may be available physical facilities

(i.e., utility poles, whose cost is

in stringing cable), services (such

and organizational mechanisms (such

itself).”

In Trempealeau County, cooperatives

interest in the broadband communications

Meistad, Manager of Trempealeau Electric

normally a significant factor

as billing and accounting)

as an existing cooperative

are numerous and active. Initial

project was sparked by Gordon

Cooperative, who became interested

in the potential of cable for rural areas. He decided that rural residents

would have to become actively involved if that potential was to be realized.

As stated by Mr. Meistad (Rural Electrification Magazine, May 1974,

pg. 16):

“’I’m not interested in cable to get a few commercial channels.

If that’s all we were working for I wouldn’t waste my time,'

Meistad says, ‘but we’re planning on building a total communications

system to serve the future communications needs of every resident

of the county. The real goal of the communications co-op is to

upgrade the quality of life for our rural members.'"

“Meistad firmly believes that cable communications offers more

for rural people than for city dwellers. ‘It can, if developed

to its full potential, revitalize rural life and keep young people

in the area with jobs and every social, cultural and economic advantage. It’s going to take hard work and we’ll have to do the -job

ourselves but we did it once with electricity. We should be able

to do it again with cable.’”

Others grew enthusiastic about the project. William Urban, Superintendent of Trempealeau Valley School Cooperative, sees two-way cable

●

as a way to improve the quality of primary and secondary education and

to save both teacher costs and student time. Interconnection of schools

IV-8
would permit special teachers at individual schools to make their

services available to all without the need to bus children between schools.

Cable would also permit bringing education to the handicapped, the elderly

and any other citizen who wished to increase his education.

The project obtained the support of the Trempealeau County Association

of Cooperatives and its president, Gerhard Nilsestuen.

The outcome is the Western Wisconsin Communications Cooperative.

WWCC is a consortium of 23 Trempealeau County cooperatives and seven

schools (2-14). One school in Jackson County is also involved (6-3).

A county-wide, multi-service broadband communications system. As

indicated in the quotes from Mr. Meistad and Mr. Rivkin, the Western

Wisconsin Communications Cooperative proposes to provide a broadband

communications network accessible to all 9,500 households in the county

(2-14). This in itself is unusual and a dramatic departure from the

economics governing most private cable operators. Densities of some areas

in Trempealeau County are at least as low as 3.5 households/cable mile

(2-15), far below commonly accepted figures for a profitable cable operation.

Nevertheless, provision of service to all members is a tenet of cooperatives.

The question is how such a system can be economically viable. Indeed,

an early feasibility study for Trempealeau Electric Cooperative (l-46)

showed that provision of cable service to Trempealeau County residents

would be marginal at best.

active involvement of local

system, a development which

earlier described.

What substantially altered the outlook was the

institutions in the use and support of the

reflected the principle of the system approach

IV-9
The key institution to be involved in the early phase of the project

is the schools. Linking of Trempealeau County schools will form the backbone of

reflect

savings

the initial system. The higher fees charged the schools will

institutional (as compared to individual) use and the contemplated

to be achieved by the county as a whole in education. The institutional rates will permit lower individual subscriber costs than would be

possible if individuals alone were supporting the system.

System description. The proposed system will combine cable and

microwave technology (6-1; 7-l). The system will be installed in three

phases at an estimated total cost of 5.5 to 6 million dollars (8-3).

In Phase I, the schools and homes in the larger communities will be

interconnected. Figure I on the following page shows major towns involved in Phase I. The eight schools are located in Arcadia, Blair, Elevastrum, Galesville, Independence, Osseo and Whitehall in Trempealeau

County and in Taylor in Jackson County (6-3). (One Jackson County school

is included because cooperative and educational system boundaries are not

always congruent with county boundaries.) Three private parochial schools

may also be included. The schools and nearby homes will be cabled and there

will be three microwave receivers to interconnect the cable systems and pick

up channels from distant cities. In the initial phase, 64 miles of transmission cables and 43 miles of distribution wires will be installed. The

system will be available to about 2300 private residences and 230 commercial

and educational organizations (9-lff.).

The Phase I system will use 6 channels directly, be immediately

expandable to 8 channels and be sufficiently flexible that additional

channels can be made operational (7-l). Initially, only the schools will

have two-way capability.

IV-10
Eleva

o

Osseo

o

Strum

o

Independence Whitehall

o

Blair

o

Arcadia

o

Ettrick

o

Galesville

Taylor

o

1 inch = about 6 miles

Figure 1. Location of communities in

Phase I (based on map in

6-2).

IV-11
Phases II and III will expand the system to the less densely populated

areas so that the facility becomes available to every resident and business.

The smaller villages will be connected in Phase II. The most isolated

farms will be connected in Phase III.

Initially, the system will provide individual subscribers with

network TV and the educational and single independent channel permitted

by the FCC. [A waiver will be sought to permit bringing in two independents (10).] Subsequently, however, the possibility of additional services

such as fire and burglar alarms, will be explored (10,11). The Cooperative

is also eager to provide service to institutional users other than the

schools. Preliminary conversations indicate an interest by the banks.

At present there are 11 independent banks with 42 branches. There appears

to be interest in use of a central computer by the banks and even in the

possibility of using the proposed system to eliminate the need for checks

(11).

Financial considerations; Federal involvement. The consulting

engineering firm of Ralph Evans and Associates retained by the Western

Wisconsin Communications Cooperative (WWCC) estimated the Phase I cost of the

system at $1,245,000 (7-10). In seeking outside financial assistance, the

Cooperative explored the possibility of a Rural Electrification Administration

(REA) loan. When receipt of an REA loan appeared unlikely, WWCC applied

in January 1974 for a Community Facility loan from the Farmers Home

Administration (FmHA) under the Rural Development Act of 1972. In two

subsequent letters (12, 13) the FmHA identified approximately 20 conditions

which must be met. After WWCC agreed to meet these conditions, the Wisconsin

FmHA State Director approved a $1,238,000 loan on August 28, 1974 and obligated

funds for it.

IV-12
This loan is unique in that it is the only Community Facilities loan

granted under Title I of the Rural Development Act of 1972 for the purpose

of establishing a broadband communications system. FmHA has approved a

direct loan with a 15 year repayment period at 5% interest with repayment

of principal deferred for 2 years (14). Of the conditions imposed by FmHA,

one posed a particular problem and is illustrative of some of the difficulties faced by projects such as this one. FmHA required that long-term

contracts between the eight schools and WWCC be established. However, the

schools are prohibited from participating in any agreement longer than 3

years without voter approval. Such approval for a 10 year contract has

been agreed to by the voters. In addition, a bill pending before

the Wisconsin legislature will permit schools to make such contractual

arrangements (11).

WWCC is concerned that private operators might skim off the more

profitable densely populated areas of the county. The difficulty

which WWCC experienced in promoting and financing their own system has

stimulated another bill now pending before the Wisconsin State Assembly.

This bill would allow intercommunity cable districts to organize and float

municipal bond issues to raise funds for intercommunity cable systems (2).

Arguments advanced in favor of the bill are that it will protect rural

areas from lack of cable service, prevent formation of “pockets” of

sparsely populated areas lacking broadband services and promote cable

system compatibility (10). The bill has been defeated once but is expected

to come up again.

IV-13
In the Trempealeau County system, financial support and loan repayment

will come from installation fees , membership fees and user charges. A

small amount of revenue from advertising is also anticipated. Individual

subscribers will be charged a $20 installation fee, $5 for membership in

the cooperative and about $7/month for access to the system. The eight

school districts will each pay a $1,000 installation fee and $9,000/year

for two-way use of the system (9-lff.).

Although the user charge to the schools may seem high, the potential

savings of the school system may be even higher. The broadband system will

permit the connected schools to share teachers. Students in special programs

will no longer have to be bused between schools. In-service teacher training

can also be done on the cable system.

Later the banks are likely candidates for use of the system. A

channel could be bought by several banks and used for in-service training,

computer access, etc. $7,000 has been cited as a reasonable figure for

rental of a channel per bank for one year (11).

Status of the system. As previously indicated, the

Facilities loan from FmHA was approved August 28, 1974.

struction of the system has not yet begun because of the

Community

However, conneed for a long

term contract commitment between the schools and WWCC. Although voter

approval of this commitment was obtained, state level action was also

necessary. Thus, progress has been delayed pending action by the Wisconsin

State Assembly on a bill approving entry into long term contracts by

the schools. The bill will probably come to a vote early in calendar

year 1976 (15).

IV-14
In addition, FmHA imposed a condition that WWCC obtain signed membership pledges from 1008 households as evidence that the system will be used

and bring in revenue in its first year (13). Early indications of subscriber interest suggest little difficulty in meeting this requirement.

The engineering consulting firm of Ralph Evans and Associates has

prepared the specifications for bid for a turnkey contract. The specifications will be released as soon as there is state level approval for the

school system contracts.

If the Wisconsin State Assembly acts favorably early in 1976, Phase I

construction can possibly be completed by late fall. If the Assembly does

not act until later in the year, a problem arises because of the increased

costs of installing the system under the climatic conditions which prevail

in Wisconsin during the winter. Possibly, Phase I will be delayed until

1977. If the Assembly disapproves the bill, the entire situation must

be re-examined.

Once implementation of Phase I is begun, about four years will be

required before the detailed benefits of the Phase I system to the schools

can be known. The first year will be devoted to construction and interconnection of the schools. During the first and second years, the schools will

be developing their approach to using the system. The third year will be

experimental and in the fourth year, the school system should be fully

operational. These plans are reflected in the projected school user charges.

The schools will not be charged for system use until the third year and

then at a 50 percent rate (i.e., $4500 per year). Full charges will go into

effect in the fourth year (14).

IV-15
During the four year period described above, other activities can

proceed in parallel. Thus, Phase II implementation, provision of additional

services to individual subscribers beyond network and ETV, and involvement

of other institutions such as the banks can be initiated. It is important

to note that long time periods will be required to install, develop,

and evaluate the innovative broadband uses such as contemplated in

Trempealeau County. Thus, data on the value of systems such as the one

proposed for Trempealeau County will not be available for a considerable

number of years, even if work begins now.

Summary and significant findings from the Trempealeau County case

study. The following summary discussion of the Trempealeau County project highlights

the most significant points of this case study as they bear upon the

future of rural broadband systems generally.

● the primary motivational force for the Trempealeau County project

lies in the cooperatives, -- nonprofit organizations oriented to

benefits for all members;

● within Trempealeau County cooperatives, a few key individuals

have played significant roles in attempting to make an idea a

reality;

● the underlying philosophy of the cooperative movement in rural

areas led naturally to the concept of an areawide service which

would serve all members even if their geographic location rated

them poorly in the equation of cable system economics. This philosophic viewpoint was augmented by the vision of a few key persons

concerning the full potential of cable in rural areas. At the same

time, these key persons foresaw the consequences of granting

IV-16
cable franchises for the most densely populated and profitable

areas alone. Such franchises would mean that the most isolated

residents would be left out of the cable system;

● feasibility study showed that provision of standard cable service

in terms of improved network TV and ETV would not be economically

viable -- a not surprising result given the low population density

of Trempealeau County;

● the key motivating persons foresaw more than a standard cable

system. Involvement of an institution, the schools, had many

advantages. It was hypothesized that educational costs could be

reduced while the quality of education was increased. Another

significant benefit was lower individual subscriber fees than would

be possible without institutional involvement. These economic

benefits could be augmented by potentially higher quality education

for all residents of the county;

● a Community Facilities loan under Title I of the Rural Development

Act of 1972 was obtained. This is a unique loan-- the only one

granted under Title I for a broadband system. Trempealeau County

was fortunate in the timing of its application, which occurred

shortly after Title I funds became available. Recently set priorities

for the granting of such loans (16) plus the increasing competition

for them indicates that this source of funding for broadband systems

is unlikely to be available in the future. Indeed, correspondence to

OTA from the FmHA Administrator states that “we do not anticipate this type

IV-17

75-605 O - 76 - 14
of loan (i. e., for broadband systems) becoming a significant

part of our community facilities loan program” (17);

● although FmHA provided assistance to Trempealeau County in the form

of a loan, FmHA assistance did not extend to helping develop the

rationale or justification for the system, nor did FmHA act as

coordinator with other appropriate Federal agencies, such as the

FCC. Trempealeau authorities were, and are, on their own in

devising, and organizing their system. If the latter had not been

possessed of a high degree of initiative and perseverance, it is

not likely that they would have progressed as far as they have;

● Trempealeau authorities do not have a clear idea of concrete

plans for service to be provided beyond community access to network and educational TV programs and use of the system by school

districts. Some assistance, Federal or otherwise, probably will be

necessary if the community is to realize such potential benefits

as using the system for commodity and cattle market information;

hospital and medical services; and fire and burglar detection.

Revenue from these additional services might be essential to the

economic viability of the expanded system now contemplated by

local authorities;

● in Trempealeau, and elsewhere , state laws can constitute a major

barrier to the development of community-based rural systems. The

lack of authority for Trempealeau County school districts to enter

into long term contracts has delayed implementation of the system;

IV-18
● the tendency of cable entrepreneurs to buy up cable franchises

in the most densely populated areas can isolate less densely

populated areas from receiving service because the most economically

attractive areas have been removed from the system;

● the desire to build an area-wide system is frustrated by the fact

that townships cannot grant cable franchises. Thus, those interested

in implementing an area-wide system are forced into the position of

acquiring franchises from municipalities with hopes that intervening

townships will join the system but with no guarantee that they will

do SO.

To summarize, the Trempealeau County project is a unique effort. It

is an attempt to provide broadband telecommunications services by following

the tradition of providing electricity and telephone service to rural areas

through the use of cooperatives. The success or failure of the project will

have significant implications for similar endeavors by other rural communities.

It should be noted that other projects of this type are not likely to

come to fruition under current conditions because of constraints on funds

and the lack of a Federal program supporting demonstrations with objectives

similar to those guiding the Trempealeau project.

Spartanburg, South Carolina Project

Unlike Trempealeau County, the Spartanburg, South Carolina project

is taking place in a small city and contiguous parts of Spartanburg County

rather than in a rural area. However, there are two reasons for including

Spartanburg as one of the two case studies of this Chapter. First, the Trempealeau

County project was initiated by cooperatives. For comparison, it is

IV-19
useful to examine an example in which the Federal government has taken the

initiative with the involvement of a consultant and private industry.

Second, while Spartanburg is not rural, the services being investigated

are applicable to rural areas. Aspects of the detailed cost analyses which

are part of the Spartanburg project, such as transportation and telecommunications tradeoffs, will be suggestive of the results that might be

obtained in rural areas.

The city of Spartanburg had a 1970 population of 44,546 persons. It

has its own radio and television stations, newspaper, Spartanburg Technical

College and other institutions. The black Community accounts for 33 percent

of Spartanburg’s population (18-11-1).

The table on the following page illustrates the demographic characteristics of the city and county of Spartanburg compared to South Carolina, the

South Atlantic States and the U.S. as a whole. Of particular note in the

table are the reduced educational and income levels in Spartanburg compared

to the U.S. as a whole. There is also a larger proportion of families

below the low-income line defined by the Bureau of the Census. Per capita

expenditures for local government services are about half those for the

U.S. average and are lower in the city than in the county. The reduced

staff and budget in the city reflect the responsibility of the county

for many public services, including education and health for both city

and county residents (18-11-3). The lack of responsibility of the city

for social services may be contrasted with the fact that only the city

can grant cable franchises (19).

IV-20
● National Science Foundation (NSF) - this agency is funding the

project as part of a comprehensive telecommunications research

program;

● The Rand Corporation - Rand is the contractor for the experimental

studies in Spartanburg;

● TeleCable Corporation of Norfolk, Virginia - TeleCable is the

owner/operator of the Spartanburg system, one of fifteen cable

systems owned by TeleCable;

● Jerrold Corporation - Jerrold installed the cable system under

a turnkey contract;

● state and local organizations - these are involved in the services

the system provides.

Each of the above groups is motivated to participate in the project

for different reasons. Thus, the state and local organizations are interested

in the services which the system can provide while the Jerrold Corporation

has used Spartanburg as a test-bed for its second generation of two-way

equipment, especially its unified amplifiers (19).

One of the factors leading to the initiation of this project involving

NSF, Rand and Telecable was the reassessment by the Federal Communications

Commission (FCC) of its position on two-way cable systems. In 1972 the FCC

ruled that all cable systems in the 100 largest markets must have two-way

capability by March 1977. However, such factors as less-than-expected

profitability of cable systems and inadequate evidence on the actual value

of return signals has led to postponement of the rule. Three National Science

IV-21
Foundation-projects, of which Spartanburg is one, are expected to provide data

to the FCC and others on the value of two-way cable systems (18-1-1; 21-1).

As a cable operator, TeleCable is interested in the revenue potential

of new services via two-way cable as well as the final outcome of the FCC

decision. TeleCable worked extensively with Rand in developing Rand’s

proposal to NSF. As stated by Mr. Rex Bradley, President of TeleCable

corporation in a letter to Dr. Leland Johnson of the Rand Corporation

(18-VII-18): “We feel the social service delivery projects selected by

Dr. William Lucas and his staff are meaningful experiments which will serve

well in determining the future usefulness of broadband communications over

cable television facilities for the delivery of social services.” It might

be noted that this is not the first time TeleCable has been involved in

social services. For example, at their Overland Park, Kansas installation,

cable was used for in-home education of two severely handicapped teenagers (21-2).

System description. The Spartanburg cable system is a high quality

state-of-the-art two-way system which has been relatively free of many

of the technical problems encountered by other systems. It provides twentyseven forward or “downstream” and four return or “upstream” video channels.

Twelve of the forward channels are used for major broadcast stations,

locally originated programs and automated programming, leaving fifteen

downstream channels available for other purposes. Three of the return

channels are available for experimental use (21-2ff.).

The system provides extensive coverage. As of late 1974, of 10,000

city dwellings, 8000 were within access of the cable, as were 6000 in the

county. Of the total with access, half, or 7000, had subscribed (21-2). Plans

for expansion will provide access to an additional 6000 homes in the city

and county (18-11-8).

Iv-22
Description of experiments. Actual needs of the area which might be

supplied by cable were established through meetings held with more than 60

agency departments and offices at local, district and state levels (18-11-6).

Persons interviewed were encouraged to define their problems and then consider

how telecommunications might help, rather than being presented with the

technology and asked to suggest ways to use it. There is some suggestion

that these two contrasting approaches produce different results (21-3) and

that where the technology is sufficiently flexible, as in Spartanburg,

more meaningful needs assessments can be obtained by concentrating on

needs rather than technology (19). Six months were spent

needs analysis (21-3). Three basic groups of experiments

in the areas of:

● adult education;

● training of day care workers; and

● communications between social service agencies.

in a careful

were identified

The education experiment attacks one of the major social service needs

in Spartanburg and South Carolina. South Carolina is 49th in the United

States in median years of education (10.5 years), and 62% of its adults

have not finished high school (18-111-2). According to the Rand proposal

“in the areas accessible to the Spartanburg cable system alone, there are

approximately 20,000 adults without a high school education; 10,000 of

these Spartanburg residents don’t have an eighth grade education” (18-111-2).

Despite past efforts to upgrade the educational level of area residents

by Spartanburg public schools and Spartanburg Technical College, much

remains to be done. Current programs reach only a small proportion of

those who could profit from them: in South Carolina, such programs have

enrolled 1% of adults lacking basic (less than high school) education

IV-23
and about 2% of those lacking a high school education (18-111-3). Of

those enrolled, only a small proportion complete the programs (18-111-3).

Significant reasons for dropout are

difficulty meeting child care needs

(18-III-3). These difficulties are

difficulty arranging transportation and

and related family responsibilities

equally or more applicable to residents

of rural areas, indicating the applicability of Spartanburg project to

rural as well as more urbanized areas.

Broadband communications, by bringing education to those needing it,

rather than requiring them to go to the source of education, might circumvent the barriers cited (see Chapter II for further discussion rural needs in

education) . What remains to be demonstrated in the Spartanburg experiment

is that quality education can be achieved through the use of broadband

communications.

The purpose of the project will assess telecommunications as a method

for providing second level basic adult education (grades 6-8) and high school

equivalency education (18-111-1). The following three techniques will be

tested: traditional classroom; one-way television; and two-way television

using pushbuttons alone or pushbuttons with return voice for student response (18-I-2; 19-4ff .).

Measures of effectiveness of the three methods are directed at asessing

both benefit and cost. Tests of educational progress such as the TABE (Test

of Adult Basic Education) and GED (General Educational Development) will

be used to measure student learning (18-III-17ff.). In addition, updated

measures of student progress will be available throughout the telecommunications experiments (19). With regard to cost, careful records of the cost

to maintain, operate , and administer the broadband system will be kept in

IV-24
these and other experiments (19). Specific costs associated with the

educational program which will be measured include direct instructional

costs and student travel costs (18-111-18). Perhaps the hardest to obtain --

yet the most significant -- measure of the benefit of this program is its

value to students who are reached by this system who wouldn’t be reached

otherwise (18-111-18). The latter are those students who couldn’t partake of the benefits of adult education if obtaining it requires going to

a classroom. While student questionnaires will enable an estimate to

be made of the proportion of these students and their response to the program (18-111-18), it is unfortunate that a better means of determining this

value is not available.

The second experimental application in the Spartanburg project is

use of broadband telecommunications to train day care personnel. As

stated by William Lucas of the Rand Corporation (21-6):

“The need for quality day care has grown substantially in recent years as the number of women in

the work force has grown. Child care in centers has

grown more sophisticated as more positions are filled

by well-trained personnel, but in-home and family

care is a continuing problem. In these situations,

the child either remains at home or is kept in the

home of the caregiver, typically a neighbor or relative who is often a mother with children of her own.

All too often this caregiver sees herself as little

more than a babysitter. Even if she would like training,

it is difficult to acquire because she is tied to her

home. In the day, she must usually care for several

children by herself, in the evenings and on weekends

she must tend her own family. Of course, some caregivers

are so motivated they attend occasional training workshops despite the inconvenience, but for the general

population of this type of caregiver, effective training

needs to reach into the home.”

Despite recognition of the need for training of day care personnel

(19-IV-8), the above quotation indicates the reasons such training is

difficult to implement. Some of these reasons are identical to those

IV-25
which make adult education difficult to provide -- the necessity to go-

—to a training center, which is prevented by conflicting demands on the

trainees time. As in adult education, broadband is a potential way to

resolve such problems in both rural and urban areas.

The day care training experiment uses a workshop approach with

training workshops conducted in the cable studio and in homes and day

care facilities in the field. According to the project prospectus,

“participants in homes and centers will be seen as they ask questions, show

techniques and exchange experiences with the professional leading the

workshop. The multipoint distribution capacity of the system will be

used to send the workshop and the associated dialogues [between the professional leading the workshop who may be located at the cable studio

or one of the home or day care facility sites and day care workers at

other locations] live over a closed channel to members of the day care

community throughout the system” (18-IV-1).

Day care training by three different methods will be compared. For

one group, five television cameras will be rotated among the studio and

homes or facilities so each has a chance to actively participate. By

switching the cameras on and off at the various locations, caregivers

at sites with cameras can see and hear each other. A second group of

caregivers will be able to watch the program but these people will not

be able to actively participate because they will have no return equipment and thus cannot be heard or seen. A third group will receive the

materials used in the workshop but will not have access to the cable system.

Videotapes of the workshop sessions will be saved, permitting

changes in caregiver skills to be later identified and analyzed (19).

IV-26
Cost-benefit analysis comparing one and two-way cable with actual

visits to the home or facility to provide training sessions also will be

conducted. Elements of this analysis will include cost of developing

the materials, travel to homes, the wages and salaries of visiting

training personnel, costs associated with use of the cable system, and

the number of caregivers reached (18-IV-36ff.).

The third set of experiments in the Spartanburg project involves use

of cable to facilitate inter-agency communications. One such application

is reduction of the time and costs associated with the processing of applicants for federal assistance programs which require processing by more than

one local agency. The specific program which is the subject of this experiment

is the Work Incentive or “WIN” program which is administered by the U.S.

Department of Labor and Health, Education and Welfare (18-V-7). Screening

and approval for this program involves two agencies and several client

visits. The associated problems of setting appointments, arranging and

paying for client travel, and inter-agency interactions means that approval

of the application requires considerable time -- an average of 77 days

in Spartanburg on the basis of a small sample (21-9). In this experiment,

cable will permit interviewing of the client and processing of papers

by both agencies with the client remaining in one location (21-9).

Elements to be evaluated include the time necessary to complete the

application process, with and without the cable system, and associated

costs (which will take account of the travel costs for the client, work

time lost, and child care costs) (18-TV-4). Another measure is the reduction

in the backlog of cases which the cable system may permit (18-V-16).

IV-27
Financial considerations; Federal involvement. The commitment of the

National Science Foundation to the three experiments in this project totals

$1,106,566, over a three-year period. The dollar value of TeleCable’s and

Spartanburg Technical College’s contribution in terms of system or personnel costs is not known.

Previous sections have described some of the specific analyses of

costs and benefits which will be undertaken in connection with the three

sets of experiments in adult education, day care training and interagency

communications. In a more general view, there are basically three types

of costs on which data are needed in order to establish the potential for

cable communications in providing social services. These are (19):

● the additional cost of two-way cable;

● the cost of the services themselves using the

cable system; and

● transportation/telecommunications cost trade-offs.

The proposal for this study submitted to NSF by the Rand Corporation

confined itself to providing data on the second of these categories of

cost. This is not surprising, given the difficulty of quantifying the

marginal costs of two-way cable and the tradeoffs between costs of transportation and telecommunications. Nevertheless, on their own initiative,

project personnel will attempt to provide data on these more difficult

costs. Despite the difficulty, other investigators should be encouraged

to provide similar data.

IV-28
The interagency communications experiment will provide data on two of

these cost categories: services costs and the tradeoffs between transportation and telecommunications. The day care experiment will be used to

estimate the marginal cost of two-way cable. The education experiment is

difficult to evaluate in terms of any of the above three categories of

costs because the bulk of the population served will be those who wouldn’t

have been reached otherwise.

Another important consideration is the potential economic viability

of the system after NSF support is discontinued. NSF has indicated that

economic viability and consideration of ways to continue the services beyond

the period of NSF support was one of the criteria in the selection of contractors for this study (22). In addition, interviews with key project

personnel (19, 20, 23, 24) suggest that the long-term viability of the

system for providing public services is of considerable personal concern.

Funding for related projects is being sought, notably from HEW. Hopefully,

the experiments will also demonstrate the value of the services provided --

and the cost savings achievable -- to state and local authorities. Local

support of the system on the basis of demonstrated cost-benefit might then

be negotiated. Such an outcome, involving as it would, the provision of these

innovative services on a self-sustaining basis in a privately owned system,

would be both significant and important as a precedent within the industry.

Status of the system. The Spartanburg project started in September 1975

and is scheduled for completion in December 31, 1977. “The adult education

and day care experiments are well underway. Substantive reports on various

parts of the project will be prepared as data are available. For example,

a report on the social benefits of broadband telecommunications for the

IV-29
training of day care operators should be ready in the fall of 1976.

Significant data on transportation/telecommunications tradeoffs derived

from the interagency experiments should be available in early 1977.

Summary and significant findings from the Spartanburg Case Study.

This section draws together some of the points already made and summarizes

additional ones to highlight the relevance of the Spartanburg project to

the potential for broadband communications systems in rural areas.

● While Spartanburg is not a rural area, the project has

the potential for demonstrating the cost-effectiveness of

cable for providing a combination of several public service

uses. If so, the data may suggest that such services could

be economically feasible in rural areas as well;

● Despite the involvement of a private cable operator in

Spartanburg, many problems block the entry of the private

entrepreneur into similar enterprises. The difficulty of

interacting with a multitude of state, regional and

local agencies to put together the necessary combination

of public service uses, each of which, taken by itself,

might not warrant the costs involved in installing a

two-way system is significant. — There is a need to

demonstrate that a potential market exists. The Spartanburg

project is a step in that direction. In addition, the

possibility of encouraging the development of a new kind

of entrepreneur who is a “broker” for combining telecommunications services should be considered;

IV-30
● an important prelude to putting together a successful

combination of public services is a careful analysis

of community needs and the matching of those needs

with the capabilities and costs of cable;

● the Spartanburg project so far has generated a list

of some 40 additional applications which could be

served by the broadband system;

. better methods for quantifying benefits are needed. An

example is determining the benefits of making adult

education available to those who won’t or can’t come

to a specific classroom but who can partake of such

opportunity “on the cable”;

● unionization (or lack of it) has a significant effect

on system costs. In Spartanburg, studio costs are

about $25/hour for most programs and only one operator

is required. In unionized New York City, the same

program would require 3-5 people at much greater cost;

● as in Trempealeau County, success of the Spartanburg

project depends on the personal commitment and vision

of a few personnel, among whom are the Rand Corporation

Project Leader and Site Manager, the Dean of Continuing

Education at Spartanburg Technical College and Telecable

employees.

IV-31
Constraints To Wider Application Of

Broadband Communications In Rural Areas

In preceding sections of this Chapter, the system approach was defined,

and the Trempealeau County project, which most clearly illustrates the

system approach in a rural setting, was described. The experiments supported

by the National Science Foundation in Spartanburg, South Carolina, were

discussed to illustrate other uses of broadband communications to meet

public service needs. The latter experiments will also provide needed

data on transportation/telecommunications tradeoffs and the costs and

benefits of providing public services by broadband or alternate methods.

The following discussion addresses factors which constrain more widespread use of broadband communications to meet rural needs. This discussion

begins by identifying those technologies which were included in the study

as having potential for meeting rural needs beyond supplying news and

entertainment. The degree to which technology is a constraint is then

considered. Thereafter, regulations and economics as they apply to the

technologies and act as constraints to wider use of broadband communications in rural areas are discussed.

Technology

As requested by Senator Talmadge of the Committee on Agriculture and

Forestry, this study was concerned with the potential application of broadband communications to rural areas. “Broadband” communications refers to

transmission of many television voice and/or data signals through a single

system. The transmission may be through the atmosphere or through wires or

fibers. There is no clear point of separation between broadband and narrowband.

IV-32
For the purposes of this study, the term “broadband” indicates a communications

system employing one or more of the following technologies:

● coaxial cable “hardwired” - a solid substance (wires or

● fiber optics glass fibers is used for transmission

● translators transmissions are broadcast -- a solid

● microwave medium is not used

● satellite I

In general, broadband as used in this report implies two-way interaction

with video as well as voice and/or data in at least one direction. It

will be noted that of the above listed technologies, coaxial cable and fiber

optics can accommodate transmissions to and from individual users whereas

translators, microwave and satellite are generally used to transmit signals

in one direction only; namely, to the user. — Because of the potential value

of low-cost translators in rural areas, an additional technology, the

telephone, was included because it can be employed to provide return audio signals

as a response to audiovisual signals sent to users by means of the translator.

It is important to note the technologies excluded from this preliminary

assessment. Conventional telephone service except as previously noted was

not included. 1 Broadcast over the airwaves from a single station, whether

1 It should be noted that there are many potential uses for conventional

two-way telephone to provide public services in rural areas. However,

the requesting committee expressed its interest in broadband communications, and for this reason conventional telephone was not given major

attention in this preliminary study. Applications solely based on conventional two-way telephone were considered outside the scope of this

preliminary study.

IV-33

75-605 O- 76 - 15
audiovisual or audio only, was not included. Thus, network or independent

television stations broadcasting on a single frequency, and radio stations,

whether fixed or mobile, commercial, military or citizen’s band,l

were

not included. However, some consideration has been given (later in

this Chapter) to the implications for the telephone and broadcast television industries of increased usage of broadband telecommunications.

A more detailed description of the technologies is presented in

Appendix D. Technical characteristics of the technologies and costs

associated with their use are included as well.

For purposes here, of this discussion, it is sufficient to note that there are

a variety of technologies available which can be combined in various ways to meet

rural needs. For example, cable can be used where it is economically

feasible. Where density is very low there are two options. The uneconomic

areas can be subsidized by the denser areas. This is the essence of the

cooperative approach which is dedicated to providing full service to all

members. Alternately, low cost translators can be used to provide service to

less dense areas with response capability provided by telephone. However,

the latter service will be inferior to cable because video return by telephone is not within the state-of-the-art and response is thus limited to

voice or pushbuttons. Microwave or satellite can be used to link several

rural systems with distribution to individual users accomplished by cable

or translator. (It will be recalled that the Trempealeau County system

will use a combination of microwave and cable.) Fiber optics is a new

1 Citizen’s band radio has been in extensive use in rural areas for a

number of years and its obvious advantages of flexibility and low

cost could continue to make it a valuable supplement even after

a broadband system was established.

IV-34
technology which, while still experimental, is developing rapidly. Its

value lies in its potential lower cost than cable, as well as its vastly

increased channel capacity. A fiber optic cable of the same diameter as a

coaxial cable could carry one million times more information.

In general, it can be said that technology is not presently a limiting

factor in bringing broadband communications to rural areas. In the future,

if several two-way public services cannot be time-shared and must be

transmitted simultaneously, along with a number of conventional television

channels, then channel capacity of conventional cable would become

limiting. Meanwhile, existing technology is adequate to test the feasibility and value of public service and/or commercial use of broadband

communications in rural areas. If success in initial demonstrations

generates demand beyond present day technology, then fiber optics at that

time may well be available to meet additional demands for channel

capacity.

Since technology is not limiting, reasons for the failure of broadband

communications to penetrate farther into rural areas must be sought

elsewhere -- in regulatory or economic constraints. These are explored

further below.

Regulation

The following treatment of major regulatory issues affecting the

future of rural broadband systems treats the two main technologies for

local distribution of broadband service to rural areas: cable and translators. In addition, because of recent strides in the development of fiber

optics, some indication will be given of the consequences for rural systems

of the alternative ways in which future regulatory decisions concerning fiber

optics may be handled.

IV-35
In discussing these three technologies, first the regulatory

constraints will be outlined and then their implications for rural systems

described. At the end of the section will be a brief overview of the

principal issues.

Cable. Cable regulations vary with the location of the cable service

in relation to the top 100 television markets in the nation.1 However,

because some rural areas fall within television range of stations in these

markets, the full range of FCC regulations -- those concerning the “top 100”

as well as those pertaining to remote rural areas -- must be considered.

At the present time, FCC rules, based upon the Cable Television

Report and Order of 1972, provide that cable systems in the top 100

markets may import a limited number of distant signals (usually two or

three) and must provide:

● transmission of local broadcast stations;

● a channel for local educational programming,

least 5 years;

free for at

● a channel for use by local government, free for at

least 5 years;

● a free channel for use by the public on

first-served basis;

a first-come,

1 Market rank of major television cities is

of prime time viewers and ranges from the

largest number of viewers) to the 100th.

top 100 are not ranked.

determined from the number

first market (with the

Those falling outside the

IV-36
● at least one channel for local programming if there are

more than 3500 subscribers;

● channels which may be leased for other services.

The 1972 FCC rules also required that cable systems in major markets must

provide at least 20 channels by 1 March 1977 and that for each channel

carrying a broadcast signal, at least one channel must be available

for nonbroadcast use (27-16; 28-74; 29-6). Another rule promulgated in

1972, but without a specific date for compliance, was that cable systems

must be able to accommodate return signals from the subscriber to the

control center. Concerning the latter rule, in addition to the absence

of an effective date of implementation, it is significant to note that

neither video nor voice return capability are required, although both are

well within the state-of-the-art. Instead all that is required is a simple

response capability as can be accomplished by pushbutton.1

Concerning the above rules, the requirement for existing systems to

meet 20-channel capability has been indefinitely postponed because of adverse economic conditions facing the cable industry (27-16). In addition,

the requirement that cable systems with more than 3500 subscribers must

originate programming was stayed by the FCC during litigation.2

1 It should also be noted that cable systems existing prior to

March 1, 1972 are “grandfathered” and need only continue the

service they offered at that date (27-15). Thus, they are exempt

from the public access and other dedicated channel requirements

of the 1972 rules.

2 U.S. vs. Midwest Video Corp., 406 U.S. 649 (1972). Although the

Supreme Court upheld the rule, the stay was never vacated so the

rule is not in effect (32-9).

IV-37
As indicated, the above rules described pertain to cable operators

within the top 100 markets. Outside these areas, the FCC rules on channel

access for public, educational and government use do not apply.

There are three important implications of these rules for rural

cable applications as discussed in this report:

● First , without encouragement from the FCC to provide return

capability on cable systems, it is not surprising that most

do not provide such capability.1 The reasons advanced

against two-way are lack of demonstrated need and the uncertain

prospects for marketing such a capability for the benefit of

the cable operator and/or the community. On the other hand,

without an existing technical capability for two-way service, it is

impossible to explore its value and its potential for

economic viability. The result is a self-perpetuating

circular situation.

● Second, the FCC requirement that channels for educational,

government and public use be provided free of charge makes

sense only where such services cannot be used to generate

revenue. Applied in a blanket fashion to all systems, it

could bar the development of the rural systems contemplated

in this report. As will be recalled from the earlier

discussion, the feasibility of area-coverage rural systems

will depend upon the revenues to be received from the use

1 It should be noted that systems for major market areas now being

installed by some major multi-system operators do provide for

conversions to two-way. Anticipated conversion costs are about

$500 per mile (compared to basic installation costs of $4300/mile).
of excess channel capacity for public service and commercial

uses. Had Trempealeau County, for example, been located within

a top 100 market area (and subject to FCC requirement for

such markets), it is entirely possible that the project

would not have been attempted. Without revenue from the

school systems (and citizens might well have objected to

paying for channels that were meant to be free of charge),

low population density and other unfavorable characteristics

would have made the system economically unattractive. In this connection, it should be emphasized that payment for such institutional

use of channels should not necessarily represent a net increased

burden for the residents involved. As in the case of Trempealeau

County, savings from the use of the broadband system may offset

the costs. As a further comment on the difference between

the concept underlying the FCC “free of charge” rule and

that of the full-service rural systems discussed in this

report, it should be noted that the FCC concept implies the

use of broadband as a supplement to education while the usage

contemplated here is an integral element of the basic delivery

system for educational services.

● Third, the current debate over possible relaxation of cable regulations

has focused on such issues as the number of distant signals which

the cable operator may import (presently three in markets 1-50,

two in market 51-100 and one outside the top 100 markets) and

on the pro’s and con’s of restriction of cablecasting of

sports events and movies (31-160).

IV-39
over

This is a debate between the broadcasters and current cable operators

the areas in which they presently are in conflict: entertainment

and sports events. If the potential for full-service rural broadband

systems is not considered in this debate, it is possible that the dispute

may be resolved solely on merits of the cases as viewed from the urban

perspective -- when in fact, those also affected by the outcome will be rural

residents.

This is not the only example of the problems that might persist if

the interests of rural systems are not taken into account. On the one

hand, the FCC does not restrict nonentertainment uses of cable (which

could have the effect of permitting the development of the broadband

systems discussed in this report). But on the other hand, FCC regulations

on the importation of distant signals are most restrictive outside the

top 100 markets (27-55), which could have the unintended effect of frustrating

the development of the very systems that could provide the nonentertainment

services

range of

In other

that FCC has decided not to constrain. This is because a full

news and entertainment is necessary to capture subscriber interest.

words, rural systems cannot be solely supported by public service

and commercial use of which charges are levied. Full subscriber support is

also necessary.

Expansion of cable into the rural public service market has not been

directly restricted by FCC regulations. More important are: 1) the indirect

impact of regulations which have not been enforced (20-channel capacity and

response capability); and, 2) regulations which have been designed primarily

with the broadcaster in mind.

IV-40
With regard to the first, requirements for response capability and

20-channel capacity were not enforced because the cable industry was competing

with broadcast under adverse economic circumstances created in part by other

FCC regulations designed to protect broadcasters (restriction on distant

signal importation, limitation of cablecasting of sports and movies, etc.).

Although the impact has yet to be felt, failure to enforce the 20-channel

capacity and response capability requirements has led to the installation

of reduced capacity cable systems which ultimately will restrict cable

operators from providing exactly those multi-channel services which cable

can uniquely provide.

With regard to the second point, cable has been treated as ancillary

to broadcasting. As described in a recent House Subcommittee on Communications staff report:

. . . “it means that cable has no charter of its

own -- that is is largely regulated as an appendage

to conventional broadcasting. But cable television

has distinct characteristics, and merits the opportunity to develop on the basis of those differences” (27-29).

Translators.1 A number of regulations presently Constrain the

use of translators as a supplementary means of servicing remote households in

an area-coverage broadband system. In most instances cited below, these

restrictions could have the practical effect of preventing a broadband

system from integrating translators into their operation.

● Translators are restricted to rebroadcasting signals from

licensed broadcast stations with station approval for such

1 Translators are defined as broadcast stations “.. .operated for the

purpose of retransmitting the signals of a television broadcast station,

another television broadcast translator station, or a television translator relay station by means of direct frequency conversion and

amplification of the incoming signals. ..” (Federal Communications

Commission Rules and Regulations 74701).

IV-41
rebroadcast. Thus, an owner of a translator cannot originate

programs. This restriction also applies to advertising,

reducing the potential of this form of financial support.

More particularly, UHF translators are permitted 30 seconds

per hour of still picture and recorded audio advertising.

No advertising or other local origination is permitted on

VHF translators. These restrictions may be contrasted to

cable alone, where station approval for program transmission

is not required and where local origination of programs is

encouraged.

● importation of distant signals by microwave, whether land or

satellite based, is barred for translator stations (26).

Thus, the distance over which signals can be imported is

limited to the number of “hops” which can be made by translators before the signal degrades (a few hops at 50-80 miles

per hop) (3-5). Not only is distance limited but the cost

of distant signal importation is increased compared to the

cost if distant signals were obtained from land-based

microwave relays or satellites. Such restrictions do not

apply to cable systems. 1,2

1 It should also be noted that Nevada Radio-Television, Inc. has had

permission since December 1972 to use 7 and 13 gigahertz, subject

to several conditions, for a television relay and translator network.

The original reference is the FCC Memorandum Opinion and Order No.

FCC-72-lll0. The current reference is Nevada Radio-Television, Inc.

38 FCC 2nd 55525RR 2nd 1197.

IV-42
● Regulations prohibit scrambling of translator signals (26-318).

Thus, because these signals are broadcast over the air; they can

be picked up by any television set. This may be contrasted to

cable service where a fee can be charged for installation of

the cable and subsequent use of it. Because of the difficulty

of charging for translator use, entrepreneurs do not find installation and operation of translator stations economically attractive.

Instead translator stations are usually operated by broadcasters

wishing to reach locations outside their signal range, government

entities or nonprofit community organizations (3-5).

As is apparent from the above, translator stations are operated

primarily as extenders of broadcast systems, permitting wider signal

coverage, rather than as a technology with potential in its own right.

Exclusion of local origination and an inability to charge for service

is likely to lead to continuation of this situation.

In urban areas , where broadcast stations are located, there are strong arguments for restricting translators, the most cogent being protection of broadcasters.

On the other hand, it must be noted that the 1952 FCC frequency allocation

plan, deriving its justification from the Communications Act of 1934

which called for “a fair, efficient and equitable distribution” of communications service in the United States, envisaged 2,000 television stations

(27-l). In fact, today, there are less than 900 television broadcasters.

Those who are underserved by this scarcity of broadcast stations are the

inhabitants of rural areas (27-l).

IV-43
Fiber Optics. As discussed earlier in this Chapter and more fully in

Appendix D, the availability of fiber optic technology could be of great

importance to the development of rural broadband systems. Not only would

this technology vastly increase the number of channels that could be

carried on a given line, but it also holds the promise of being cheaper

than coaxial cable, which might have the effect of opening up those rural

areas that have too low a density to justify the expense of conventional

cable.

Here, as in connection with the above discussion of the dispute between

broadcasters and cable operators, the concern is that jurisdiction over the

uses of this technology might be decided without taking into account the

interests of rural broadband systems. As an example, the decision might be

framed largely in terms of the uses of fiber optics for long-distance

transmission, with an appropriate institution assigned on this basis to

have exclusive jurisdiction over its use. In turn, this could have the

practical, if inadvertent, result of denying its use for short distances in

low-density rural areas. .

Alternatively, this jurisdictional dispute could come down to a competition

between the telephone and urban cable operators -- with the same end result for

rural broadband systems. Competition between these two is not an immediate problem

because of the dissimilar capabilities of telephone and cable television systems.

If, however, optical technology provides the telephone company with broadband

capabilities and the cable companies begin to offer two-way services such

competition may occur.

IV-44
Already there are

industry will probably

indications that the leaders in the cable television

propose that there be two distinct services and two

cables brought into each household. One service, provided by the telephone utilities, would be a switched service with a universal two-way

voice and data capability. The other, operated by the cable industry,

would be a distribution only, non-switched service having the specific

function of carrying program material from a central point to the home.

If this were to occur, once again rural interests could be left out.

Present cable operators, interested largely in expanding their market for

entertainment and similar services -- which only entails one-way transmission -- understandably might be willing to retain this jurisdiction in

return for assigning two-way systems to the telephone companies. Left

out would be the interests of potential rural broadband system operators,

who conceivably could have their right to two-way capability almost inadvertently traded away.

Discussion

Broadcast television has not developed to the extent anticipated because

the economic base to support a broadcast station is larger than was expected

when the regulations were formulated. As a result, rural areas are underserved with conventional television. Cable operators , who could remedy this

deficiency, are restricted by regulations on the number of distant signals

they can import in order to protect the few broadcasters that are located

in rural areas. Translators, which could increase the coverage of independent

broadcasters, are sometimes not used because the independent broadcaster may

then be considered a network and the costs and benefits of possible unionization

must be weighed against the benefits accruing from increased coverage.

Iv-45
The FCC has attempted to foster development of the unique potential of

cable (especially two-way cable) by imposing a requirement for free channels

for educational, governmental and public access use for systems in major

market areas. Local authorities frequently levy similar requirements in

granting franchises. However, these attempts to encourage development

of unique services may have discouraged rather than encouraged the development

of cable. This is because cable operators tend to think of public services

as services to be provided without charge rather than as sources of revenue.

As a result, cable operators have not contributed to the development and

spread of public (or commercial) services via cable.

Because cable operators generally believe that economic viability

lies in conventional television programs, they have competed with broadcasters rather than emphasized the development of unique services. If it

can be shown that meeting public and commercial needs can generate revenue,

attitudes might change and the result could be the development of a new

type of cable entrepreneur, one who might “broker” a total system consisting

of a combination of services.

As for the impact on cable of possible future legislation, one further

area of current debate requires comment. At issue is whether cable should be

treated as a common carrier, as telephones are. The underlying concept,

as articulated in the Whitehead Report and elsewhere, is separation of the

medium -- the cable distribution system -- from the message -- the program

or information content. The cable operator would be similar to a telephone

company, a common carrier, in that he would provide a communications system

but would be barred from influencing the use made of his system. Separate

entities, such as the networks, private broadcasters or other groups desiring

to provide special services would rent or buy channels from the cable operator.

IV-46
Regulation of cable as a common carrier could constrain the system

concept as described in this report. This is because this concept assumes

a combination of services and accessibility to the system by all residents

(those living in relatively unpopulated regions as well as those living in

more densely populated rural towns). Economic viability is based on averaging

of costs across all residents so each pays the same and on the potential

reduction of costs to each individual subscriber because of higher fees for

institutional use which help to support the total system. If the cable

operator is restricted to distribution and excluded from content, his motivation to participate in developing a viable combination of services which

will support an area-wide cable plant in a low density area will be

greatly reduced.

As an overall comment on regulatory constraints upon the development

of broadband systems, it has been shown that these constraints, present and

likely in the future, seem to represent errors of omission rather than

commission. To the degree that the interests of rural broadband systems

are not brought to the attention of policy-makers, it is likely that important

issues will continue to be resolved as if only urban interests were involved.

In the latter instance, decisions might be made which could have the practical

effect of foreclosing the development of rural broadband systems before the

latter even have a fair test.

Economic Constraints

A prima facie case can be made that the principal constraint on the

deployment of rural broadband systems has been economic viability.1

The

1 It should be noted that in the long run it will be necessary to look

beyond economic constraints. To the extent that neighboring rural

communities, for whatever reason, refuse to work together or share

IV-47
common facilities such as broadband systems, economic unfeasibility

might be said to be grounded in social factors. A similar caveat

applies when jurisdictional disputes among state and local government

and community groups hamper such common enterprises as these systems --

except that in this instance the cause for non-adoption might be

labelled as political. While either or both of these factors could

have significant influence upon the ultimate degree to which broadband systems are adopted, they are not immediately relevant to the

task at hand -- which is attempting to understand why rural areas

which otherwise might be willing and able to support such systems have

been unable to develop them.

IV-47-a
necessary technology has long been available, present regulations are not

totally restrictive, but Trempealeau County remains the only rural area

in the United States where an area-coverage system is being seriously

attempted.

Data are inadequate to judge whether the belief that such systems are

not economically viable is valid -- or whether this belief is simply

“conventional wisdom.” What does seem clear is that conventional cable

systems, limited to news and entertainment and having as their sole source

of revenue the fees of individual subscribers , are not economic in low-density

rural areas. To the extent that potential entrepreneurs and system operators

continue to think strictly in terms of the traditional uses of broadband,

then their negative opinion -- or, “conventional wisdom” -- will continue to

be self-fulfilling in nature.

Hard data on the economic feasibility of area-wide multiservice systems

must be gathered before this predominant opinion of investors and operators

can be altered. Later in this Chapter an approach will be outlined by which

such data can be gathered. First, however, it is necessary to describe the

economic constraints to the development of rural systems as they exist and

are perceived today. There are two aspects of the problem: capital for system

construction and, capital for operating and maintenance costs.

Construction. Installation of a broadband communications system,

regardless of the technology used, is capital-intensive and requires

a large front-end investment. The costs of laying cable, providing

hardware at the head-end, erecting antennas and installing translators,

or constructing an earth station, are sizable. These costs can be

reduced somewhat in rural areas; for example cable undergrounding will

IV-48

75-605 0- 76 - 16
be cheaper in rural areas than in high density urban areas or may not be

required. But even under the best conditions a large investment will

always be required.

Unfortunately, sources of funds are extremely limited. Private

entrepreneurs will not put up the necessary capital or use their conventional loan sources for rural systems because such systems are believed

to be uneconomic. Two government sources which have been used to support

installation of rural systems were found, but, for the reasons outlined below, neither is likely to be of significant assistance in the future.

The first of these is USDA Farmer’s Home Administration Community

Facilities loans under Title I of the Rural Development Act of 1972. One

such loan has been made to a cooperative, the Western Wisconsin Communications Cooperative (WWCC), to fund the first phase of a county-wide cable

and microwave system. As has been described, WWCC was fortunate in the

timing of their loan application, having submitted it just after the Act

was passed. Today, there is more competition for these funds. A successful

applicant would have to justify a telecommunications system in terms of

recently issued loan priorities, which are (in descending order): 1) public

safety facilities; 2) health care facilities; 3) public service facilities;

4) recreation facilities; 5) new hospitals or expansion of existing hospitals;

and 6) other (33).

Given the present uncertainty as to the value of broadband communications

to rural areas, it is unlikely that such an application could successfully

compete today for funds. The validity of such an interpretation is shown

by a statement from the FmHA Administrator in correspondence to OTA: “we

Iv-49
do not anticipate this type of loan becoming a significant part of our

community facilities loan program” (17). In sum, this potential source

of capital for construction of new systems is probably now a dry well

in the shifting sands of uncertainty surrounding rural broadband

communications. In fact, it seems unlikely that additional

funding will be forthcoming for Phases II and III in Trempealeau

County, which must be completed if anything concrete is to be known

about the overall value of a community-based, area-coverage system.

The second government source of funds for capital construction of

rural telecommunications systems is the Business and Industrial (B and 1)

Division, also under the Farmer’s Home Administration of the USDA. Unlike

Community Facilities which grants direct loans, the B and I Division

guarantees loans from other lenders, such as banks. Whereas Community

Facilities can help a cooperative or other non-profit community organization, B and I is a useful guarantor of loans for the private entrepreneur.

One B and I guarantee for a telecommunications system was found. This

guarantee was approved on behalf of Windsor CableVision, which is installing

a cable system in parts of the contiguous counties of Windsor, Williamson

and Plymouth, North Carolina. Although the system will initially provide

commercial and educational television, the system operator, Bermey Stevens,

envisions far more. Under the right circumstances, this system could

evolve in the Trempealeau County direction -- but through the efforts of

private industry, rather than through the non-profit cooperative mechanism.

It remains to be seen whether circumstances will facilitate such evolution.

The outcome will depend greatly on the ability of this one person to

accomplish what no other private operator has achieved and to devise,

assemble, and sell a combination of non-entertainment services that can

be of economic value to his community and still pay for themselves. Before

IV-50
leaving this section, however, it should be noted that the B and I Division

of USDA could guarantee funds for other telecommunications operators.

Whether rural-based operators will take advantage of the opportunity in—

order to support systems which go beyond conventional television service

may be unlikely in view of the prevailing opinion in the industry about

the economics of these systems and such services.

Operations and Maintenance. Assuming that a broadband system exists

in a community, its economic viability will depend upon revenues in excess

of costs. Costs include retirement of capital debt, salaries and overhead

associated with operating the system, and maintenance requirements.

Until now, revenue to cover these costs has depended almost entirely

on fees from individual subscribers whether directly or indirectly collected. (An example of an

community tax districts to

return for subscriber fees

indirect collection method is the use of special

pay for translator service.) The service in

generally has been limited to network or

educational television, possibly supplemented by channels dedicated to

special use (e.g., public and government access) if required by FCC rules.

Fees are typically in the order of $5/month. Under these conditions, the

number of subscribers per unit area will determine the economic viability

of the system.

This economic picture, however, can change radically if revenue can be

derived from public or commercial services. The concept is best illustrated

by the proposed Trempealeau County project in which the schools will each

pay $9000/year to use the system. The benefit for the schools is expected

to be more effective use of teachers and reduced transportation costs. The

broadband system will be used to link teachers and students across schools

IV-51
for special classes, which will eliminate the extensive shuttling of students

from school to school which now takes place.

It is this aspect, of providing a cost-effective alternative to manpower

intensive and transportation intensive solutions to rural problems, which

has not been adequately explored. In fact, it is ironic that the FCC

requires free cable channels for government, educational and public access

use, in major market areas. If these were used effectively (they are not),

the community might well be willing to pay for value received.

Discussion. If the costs and revenues of a rural broadband system depend

solely upon conventional television programs in sparsely populated rural

regions, then a cautious stand toward economic viability is justified. What

remains to be tested is the value of broadband communications as a substitute

for manpower, transportation or other alternatives in providing health,

education, governmental and commercial services to rural areas. A fair

test must include revenues to the system based upon the value of these

services, in which case the fees to be charged might nearly equal the next

most costly alternative. If broadband communications then can provide a benefit

equal to or greater than that provided by alternatives, broadband would be

the technique of choice for providing the service. In turn, the fees paid

by institutions or the community might allow the fees charged to the individual

subscriber for news and entertainment services to be lowered and thus

affordable by most residents. Inquiries conducted in the course of this

study indicate that this test has not yet been made.

Summary Of Findings

In preceding sections of the Chapter, a broadband communications system

was defined, two illustrative case studies were described, and constraints

IV-52
to system applications in rural areas were identified. Findings are briefly

summarized below.

A rural broadband system is a community-wide communications network,

available to all residents and many institutions. The system may be used to

meet health, education and other social service needs, facilitate government and administrative transactions, and serve commercial enterprises as

well as provide network TV and entertainment. The particular services

are derived from an assessment of community needs in which it is determined

whether broadband is the most cost-effective method for filling those needs.

Significant fees are charged for public service and institutional use

of the system. These fees are justified by savings made elsewhere (e.g.,

the salary costs of hiring more teachers.) Institutional and public service

support of the system reduces installation and subscriber costs for individual

users. The combination of services leads to economic viability.

The Trempealeau County project most closely illustrates what is meant

by the system approach. A county-wide cable and microwave system available

to all residents is planned. An institution, the schools, will use the

system in hopes of improving the quality of education and saving dollars

associated with teacher salaries and transportation of pupils between

schools. While an early feasibility study showed that a conventional individual subscriber supported cable system would not be economically feasible,

the combination of individual subscribers and institutional use is expected

to result in economic viability. It should be noted that each school will

be charged a significant fee -- $1000 for installation and $9000 per year

for two-way use -- compared to a $20 installation fee and $5 yearly user

charge for individual subscribers.

IV-53
The Spartanburg, South Carolina experiment illustrates multiservice

use of a broadband system. Three experiments are being conducted with

Spartanburg’s two-way cable system. These are in adult education, training

of day care personnel and streamlining the processing of applicants for

multi-agency programs. The costs and benefits of two-way broadband vs.

one-way broadband, vs. meeting these needs by more conventional means are

being compared. Although Spartanburg is an urban rather than a rural community, these same services are needed in rural settings. National Science

Foundation support for the project will end when the experiments are over

in about three years. However, the potential is there for evolution into

a system demonstration. If broadband proves to be a cost-effective method

for providing these services, they could be continued by other funding

mechanisms.

Given the high potential of broadband to meet rural needs, it is

noteworthy that there have been so few applications providing services

other than conventional television. Technology is not limiting. FCC

regulations do provide some constraint. For example, relaxation of restrictions on translators, so that they could rebroadcast signals received

from ground or satellite-based microwave relays, would encourage wider use

of this technology. For cable alone, regulations restrict cable transmission of commercial television but do not inhibit use of cable for

public services or institutional use.

The primary constraint on wider use of broadband in rural areas is

economic. However, it is unclear whether this constraint is actual or

perceived. While the low density of rural populations makes use of broadband to provide conventional television economically less attractive than

in urban areas, the same low density could well favor it for public service

Iv-54
and institutional use. However, lack of knowledge on how to put together

an effective combination of services, inadequate data on their value which

makes it difficult to determine an

inadequate sources of capital have

The Need

appropriate charge for such uses, and

inhibited rural applications.

For System

Demonstrations

Tests of the system approach to broadband communications have not been

made in rural areas. What are now needed are demonstrations to see whether

this approach works. As has been pointed out (34-II-46):

“the argument developed in much of the literature --

that as systems become profitable they will naturally

develop public service programs -- simply has not held true.

Many profitable systems have never instituted such programs.

Other systems that have penetrations well above the

expected profit-generating point of 40 percent,

discontinued their programs (e.g., Wilmington, Delaware

at over 60 percent, Santa Rosa at over 80 percent).

It is clear that if natural experimentation in social

and/or public service delivery is to develop -- even in

a technologically limited mode -- it will have to be

developed by agencies other than cable systems.”

"...the development is not likely to come from

those municipalities where cable exists. In general,

they are not large enough to have the research or

technical capabilities necessary to establish a comprehensive delivery system.”

The system concept as developed in this report does not assume that the

public service aspects of broadband commmunications are economically unsound

and therefore require subsidy by more profitable entertainment programs.

Instead, the opposite hypothesis has been advanced. Public and commercial

services figure prominently in the economic base for the system. However,

as pointed out in the above quotation, broadband systems providing public

services as well as conventional television have not spontaneously evolved.

Iv-55
In view of past experience, they are not likely to evolve without Federally

assisted demonstration programs.

On the other hand, a massive government program to support rural broadband systems seems premature. Not enough is known about the detailed nature,

feasibility, and value of such systems to enable their widespread deployment

by means of routine and standard operating programs. Demonstration

programs are a necessary intermediate step.

Before describing an approach to implementing system demonstrations,

it is important to clarify what is meant by a demonstration and distinguish

it from an experiment.1 An “experiment ” implies careful selection of variables,

a rigorous evaluation protocol and a limited span of time over which the

experiment will operate. An experiment is generally superimposed on a

community. It is not intended to be self-supporting and generally is

heavily or entirely supported by Federal funds. Public service applications

of telecommunications have largely been experiments, not demonstrations.

The objective has usually been to determine whether it is possible to use

broadband to provide the service in question. There has been relatively

little emphasis on evaluating how effective broadband is compared to other

methods or whether it is less costly. When the experiment is over and

Federal funds are withdrawn, the community usually (but not always) cannot,

or does not provide funds to continue the service.

1 Definitions ‘f

“experiment” and “demonstration” vary among researchers

in different fields. It is recognized that these terms as used in

this report may be used differently by others.

IV-56
In contrast, the intent of a “demonstration”, as used here, is to

test whether entertainment, public service and commercial uses of broadband

communications can be combined so as to produce a system which is economically

viable and which meets the needs of a whole community rather than one or a

few subpopulations within it. The particular services must be tailored to

the specific and individual needs of each community because different

services will have different cost effectiveness ratios depending on the

demographic, socioeconomic and institutional characteristics of the community.

Associated with the concept of a demonstration as used in this Chapter,

is the consequence that a certain amount of experimental rigor may be

forfeited. For example, the ideal community for a demonstration is one

which has indicated a strong desire for the service as shown by its assembling

knowledgeable personnel, developing a preliminary system concept and perhaps

investigating some of the economics of the situation.

may not be the one which an experimenter would select

tion of all communities in which the experiment might

the success of a demonstration (as contrasted with an

likely to be related to a widespread community desire

to experimental needs.

It is important to distinguish this report’s use

However, the community

after careful considerable conducted. Nevertheless,

experiment) is more

for the service than

of the term “demonstration”

from another use sometimes made of it. Thus, demonstration sometimes refers

to construction of hardware to see if it will work or could be used in a

particular application. There have been many such demonstrations in the

field of broadband communications. However, under the definitions used

here, these would be hardware experiments, not demonstrations.

IV-57
It should not be assumed that a finding of this study is that there is

no further need for experimentation. However, such organizations as the

National Science Foundation and the Department of Health, Education and

Welfare are fulfilling this need. The need for demonstrations and the

means to bring them about has been less adequately explored and hence are

the subject of most of the rest of this Chapter.

An Approach To Implementation

Of System Demonstrations

As to what broadband services may be included in systems demonstration

any or all of those discussed in Chapter II might be candidates. In addition,

consideration might be given to comparison studies of transportation demonstrations such as the Rural Bus Program in rural counties with similar

characteristics to those which are the sites for broadband communications

demonstrations. ]

Turning to the specifics of designing system demonstrations, there

are financial, technical and institutional aspects which will vary with the

characteristics of the rural areas in which the demonstration is to take

place. A preliminary framework has been developed based upon the three types

2 In brief, it will be recalled of rural counties described in Chapter 111.

that these are:

1 The importance of these comparisons lies in the fact that there are

substantial funds for transportation demonstrations in rural communities. Rural communities may become prematurely committed to transportation options (such as shuttling students back and forth among schools

for special classes) when communications options might be more costeffective.

2 AS stated in Chapter III, the individual county has been used as the unit

of analysis because most statistics have been gathered on this basis.

In practice, a rural broadband system could take in the area of all

or parts of several counties, which could also mean that more than one

category of county might be included in a single system. Especially

IV-58
if these systems are to be underwritten in part by public service

users, such as schools, it is more likely that the boundaries of the

broadband system will be coterminous with the geographical boundaries

of these administrative districts, which in recent years have increasingly become regional rather than following county lines. This does

not invalidate the general point that has been made concerning the

necessity for matching a system to the characteristics of the

individual rural area being considered.

IV-58-a
● Turnaround Acceleration -- counties which

to metro counties, have accounted for 62%

are usually adjacent

of the net migration

gained by rural areas in the 1970’s and are characterized by

growth in the service sector of the economy.

. Turnaround Reversal -- counties which are usually not adjacent

to metro areas, have not grown as rapidly as Turnaround Acceleration

counties (but whose growth in the 1960’s and 1970’s is significant

because it followed decades of declining population) and are

characterized by growth in the manufacturing sector of the economy.

● Declining -- counties which account for 25% of all rural counties

and are generally not adjacent to metro counties, are still showing

net outmigration

or manufacturing

or mining jobs.

and in which employment opportunities in service

have not kept pace with losses in agricultural

Elderly and young people typically account for a

disproportionately high percentage of the population.

As indicated in Chapter II, revenue sources to support broadband

communications are likely to also vary with the individual community. In

general it can be said that:

● for the rapidly growing, service-oriented Turnaround Acceleration

counties, business and commercial services are a potential source

of revenue. Some of these counties are also characterized by a

high proportion of couples of child-bearing age, whereas others

contain a significant proportion of relatively well-off retirees.

Regardless of which (or both) of these populations are predominant,

IV-59
the educational attainment and relative well-being of these populations are likely to result in a demand for public services (in

such areas as education and health) together with a possible

willingness to pay for those public services that could be

supplied by broadband.

● for the less rapidly growing Turnaround Reversal counties, characterized by growth in manufacturing jobs, business and commercial

uses of telecommunications are less likely to be an important source

of system revenue. In these counties, as in the instance of Trempealeau County, non-subscriber revenue is likely to depend upon

fees paid by the local governments for use of the system for

health, education and similar public service purposes.

● in Declining counties, the economic base is likely to be too depressed

to enable paying for the incremental improvements broadband might

bring to health, education, and other public services. In these

counties, dependent on outside governmental assistance for

the upgrading of public services, selection of broadband

as a way to provide these services is more dependent on

Federal decision as to the cost-effectiveness of this

approach than in the other two types of counties.

Assuming that a decision might be made to provide Federal assistance

for these demonstrations, the following basic steps would need to be

taken:

1. designation of a Federal agency (or agencies) to administer

the program, collect data and evaluate results;

IV-60
2. provision of a funding mechanism(s);

3. dissemination of the system demonstration concept

and identification of potential demonstration sites.

Responsible Agencies

In considering agencies that might be assigned responsibilities for

system demonstrations, the need for an effective planning organization at

the local level should not be overlooked. In some areas, such as

Trempealeau County, cooperatives may be so pervasive that they can unite

most of the population and the local government in the organizational

effort necessary to plan for and implement a broadband system. In others,

something akin to the multi-county planning districts being established

in several states might provide technical assistance and direction. ’

At the Federal level, it is clear that a great deal of attention will

have to be given to devising an effective means of direction and coordination.

Listing only a few of the possible institutional mechanisms, an inter-agency

task force could be appointed to oversee federal participation in demonstrations.

Or, a policy board comprised of representatives from executive agencies and

rural and industry interest groups could be designated to design and supervise

demonstrations in accordance with broad legislative guidelines.

1 Although the concept of multi-county development districts in rural

areas is still relatively new, in some states they could be of direct

assistance to rural communities wishing to consider broadband systems

to meet public service needs. In South Dakota, for example, one

planning district indicated that it intended to look into alternative

ways of supplying county services in rural and sparsely settled areas.

In other states, these districts have provided technical assistance

and consultation in such areas as communications, law enforcement and

school district reorganization. For additional details see The Role

of Multi-county Development Districts in Rural Areas (U.S. Department

of Agriculture, August 1975, Washington, D.C.).

IV-61
It is beyond the purview of this study to examine fully these and

other alternatives. The approach taken here is to outline one simplified

alternative in which oversight is provided by existing Congressional

committees (possibly with the assistance of OTA, as described in the final

section of this Chapter).

Many agencies have been involved in telecommunications research,

including NASA and HEW. However, there are three, for the reasons

described below, that might be initially considered for major roles in

the demonstration phase. These are: 1) the National Science Foundation

(NSF); 2) the Department of Commerce; and 3) the Department of Agriculture.

In recent years, the National Science Foundation has taken the lead in

“systematic experimentation” (34-11-50) with its Phase I design and Phase II

implementation studies of public services and broadband communications.

Although these projects are not necessarily rural, conduct of system demonstrations could be a natural follow-on to these efforts. An appropriately

staffed project office within NSF might be established to head up the

coordination, data collection, and evaluation of the overall federal program.

Additionally, because of its specific experience in the Spartanburg project

and other experimental efforts with public service applications, NSF might

also be responsible for one of the three major elements to be included in

system demonstrations (public service applications; the other two are

business and commercial use, and impact on rural life).

Dissemination of “how to” information and collection of data on business

and commercial applications might be undertaken by the Department of Commerce.

In this connection, it should be noted that the Economic Development Administration,

within the Department of Commerce, recently funded a study to help “in determining

Iv-62
national policy regarding the future course of telecommunications research

and development as related to rural economic development” (35-l).

The Department of Agriculture is presently a source of loans and

loan guarantees (under the Rural Development Act of 1972) for broadband

projects as well as being an authoritative source of detailed knowledge

on rural development in general and potential demonstration sites in

particular. A significant part of this project must be evaluation of the

impact of expanded telecommunications services on rural growth and on the

distinctive characteristics of life (both positive and negative) in rural

areas. The Economic Research Service , which was a major source of information for Chapter III, might be considered for involvement in the project.

In addition, as described later, the Department of Agriculture,

through its Extension Service, might play a significant role in introducing

the system demonstration concept to potential rural sites.

Funding Mechanisms

There are two aspects of funding which must be considered: 1) capital

for broadband equipment plant; and 2) operations and maintenance resources

which are needed for identifying demonstration sites; developing software and

materials for public service, commercial and other system demonstration

uses; operating and maintaining the system; and conducting evaluations.

For capital construction of telecommunications plant, an existing

source of funds is Community Facilities

Development Act of 1972.1 As discussed

1 Steven R. Rivkin, formerly counsel

Communications, has suggested that

(REA) funds might also be used for

loans under Title I of the Rural

earlier in the Chapter, one such

to the Sloan Commission on Cable

Rural Electrification Administration

these purposes. IN Rivkin's view, a

1962 change to the REA act might be construed as providing sufficient

authority to this agency to grant loans to support rural cable service (5-12).

IV-63

75-605 0- 76 - 17
loan has been approved for installation of a cable/microwave system in

Trempealeau County, Wisconsin. However, as has also been pointed out,

loans for telecommunications systems are not expected to become a significant part of the Community Facilities loan program. Congressional action

will therefore be required if further assistance to broadband systems through

this program is to be possible. In this connection, it should be noted

that broadband systems providing public services might qualify under the

top three of the six recently issued priorities for Community Facility

loans as

1.

2.

3.

follows:

public safety facilities (if the system demonstration

includes fire and burglar alarm or law enforcement

administration);

health care facilities (if the system demonstration

includes health provision); and

public service facilities (if the system demonstration

provides or extends the services normally provided in

courthouses or community buildings).

Under the above priorities, the broadband equipment might become the

“facility” in lieu of a conventional building, ambulance or piece of

firefighting equipment. Because a properly designed system would provide

many different services rather than one, it could compete for funds under

several different categories of priorities rather than one and thus might

compete effectively with more conventional “community facilities” for loans.

Iv-64
The second category of funds required is for operations and maintenance

of system demonstrations, which has been broadly defined to include site

selection, technical assistance in setting up public service programs and

evaluation of results, as well as system operation and maintenance. These

funds should be provided under the aegis of the lead agency conducting the

system demonstrations -- the National Science Foundation. There are two

types of mechanisms to be considered: outright grants and loans.

In favor of outright grants, it can be argued that the system demonstration

concept is novel and unproved. Therefore, it is unlikely that there will be

applicants for loans, either direct loans or more especially loan guarantees.

In addition, the program might be considered to be in the national interest

and to ensure that it takes place, grants are both justified and necessary.

In any event, even if grants should be decided upon, a system demonstration>

if successful, should be transferred to a self-supporting basis. Concerning

the desirability of loans instead, it is possible that these might induce

a closer look at the economics of each candidate system demonstration site.

One possibility which might be considered, if the loan approach is selected,

is

of

to

in

to use FmHA B and I Division loans for the business and commercial parts

each demonstration.

The above listing is intended only as a brief indication of

be considered in deciding between loan and grant mechanisms.

any event, clearly would be of lesser priority than the basic

the factors

This decision,

issue as to

whether the government should encourage and assist system demonstrations.

The level of resources required to fund both capital construction and

operations and maintenance for system demonstrations is difficult to estimate.

IV-65
Factors such as whether loans are direct or only guaranteed, whether an

existing broadband plant might be used or whether one must be built, will

produce large differences in program cost. However, in order to provide

a rough indication as to possible costs, the following assumptions have

been made:

● Assume that four system demonstrations will be funded -- two

each in Turnaround-Acceleration and Turnaround-Reversal

counties. (Initially, demonstrations might not be practical

in Declining counties. The state of public services in these

counties might be such as to require basic rehabilitation

before broadband use could provide any measurable benefit.

In any event, the funds and level of effort required would

exceed the resources contemplated to be available for the

kind of system demonstrations here discussed).

● Assume that four systems require funds for capital

construction and that these will be direct loans. The

estimated cost of the Trempealeau County system is 5.5 to

6 million dollars (8-3) and is taken as the estimate of

the capital cost for each system. Thus, capital costs

for four systems, not including debt service costs, may be

estimated at $24 million.

● Assume that operations and maintenance costs will be covered

by grants. The Spartanburg project will cost slightly more

than $1 million over a period of three years or $300,000/year.

However, Spartanburg is a phased demonstration. Had it not been

Iv-66
phased, costs could have been considerably higher. For these

reasons, projected costs for each system demonstration have

been doubled to roughly $600,000/year. Assume that each

system demonstration will run for three years. Thus, for

four demonstrations: 3 X 4 X $600,000 = $7,200,000.

● Assume that costs for preliminary studies to select system

demonstration sites and plan all four demonstrations will

total about $2 million.

● Thus, for a five-year program (two years for preparation

plus three years for implementation and analysis), the

following costs might be incurred:

Capital construction $24 Million (loans)

Operations and Maintenance

and Evaluation $7.2 Million (grants)

Preparation $2.0 Million (grants)

Per year grant costs: $1.8 Million

For purposes of comparison, it is interesting to note that Federal

expenditures for telecommunications research based on spending levels by

major agencies over the past year is $12.6 million annually. This iS shown

in the table on the following page.

If system demonstration construction costs are funded through loans,

it can be seen that the per year costs of the program ($1.8 million) are

not greatly different in magnitude to that amount presently spent by each

of the major Federal agencies in recent years.

IV-67
TRENDS IN FEDERALLY CONTRACTED TELECOMMUNICATIONS RESEARCH*

(reproduced from Reference 35, pg. 76)

National Institute of Education . . . . . . . . . . . . . . . . . . . . . . $ 5,000,000

Health Resources Administration. . . . . . . . . . . . . . . . . . . . . . 500,000

National Library of Medicine/Lister Hill. . . . . . . . . . . . . 2,000,000

Department of Commerce/Office of Telecommunications. . . 1,700,000

Housing and Urban Development. . . . . . . . . . . . . . . . . . . . . . . . . 400,000

Federal Communications Commission . . . . . . . . . . . . . . . . . . . . . 1,000,000

Office of Telecommunications Policy . . . . . . . . . . . . . . . . . . . 1,000,000

National Science Foundation. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000

Department of Defense . . . . . . . . . . . . . . . . . . . . . .. ... ... ... .(not available)

TOTAL .. .. .. .. .. .. .. ...$12,600,000

* These figures reflect approximate funding trends for yearly

expenditures by these agencies over the past three years.

Identification Of Potential Sites And Dissemination Of The System

Demonstration Concept

Only one criterion might be universally applied to all candidate

rural areas which might wish to serve as a system demonstration site.

That is, that there must be a high degree of community support for the

system. Institutional and public service use of broadband is novel and

unfamilar. Individuals within the community in question will have to work

together, as they have in Trempealeau County, to define those collective

needs which can be best met through broadband services. They will also

have to be capable of recognizing the economic value of these services and

support the system accordingly, (e.g., tax monies used to support schools

Iv-68
can also be used for educational services offered through broadband communications). Without such commitment, it is unlikely that a system demonstration will work.

A way to expose communities to the program is required. One mechanism

is the trade press through magazines such as Rural Electrification. A more

organized mechanism is use of rural extension agents, who form a wide

network under the Department of Agriculture’s Extension Service. These

agents could play a key role in describing the program to communities and

assisting in the identification of potential demonstration sites.

pes of Sites

Demonstrations should be conducted at more than one kind of site.

As a conclusion to this section, note is made of two potential types of

demonstration sites. One type illustrates cooperative ownership and two

examples of potential sites are described. The other is that of the private

operator and one example is provided. These examples have been included

to provide specificity in what would otherwise be an abstract discussion

rather than to suggest that these sites must be selected for system demonstrations.

The Trempealeau County project, investigation of which gave rise to

development of the system demonstration concept, illustrates many facets

of a system demonstration especially as it may be conducted under the aegis

of a cooperative. Phases II and 111 of the Trempealeau project remain to

be completed.

A second example of the cooperative type of demonstration is a project

investigated by the Blue Ridge Electric Membership Corporation for Lenoir,

IV-69
North Carolina. Blue Ridge Electric undertook a study of providing cable

TV as a cooperative member service in 1973. A very careful feasibility

study (36, 37) indicated that cable television costs compared to subscriber

interest showed that the project was not justified. However, the project

was oriented to conventional TV and it will be recalled that a similar

study at an early stage in Trempealeau County also indicated that simply

providing conventional TV was not economic in that county. The institutional

involvement of the schools was required to move the Trempealeau project

towards economic viability. So far, use of public services to support

a system in Lenoir has not been investigated.

The efforts of Windsor Cablevision to bring cable to three rural towns

(Windsor, Plymouth and Williamson) in three North Carolina counties, which

has been briefly described elsewhere, illustrates a second type of demonstration project. This example differs in motivating force from Trempealeau

(private operator rather than cooperative) and is a long way from being a

system demonstration. However, the cable operator is interested in providing

a system which is much more than a medium for conventional television. It

will also be recalled that a Department of Agriculture B and I loan guarantee

has been approved for this project.

Investigation Of The Impacts Of Widespread Implementation

Of Telecommunications In Rural Areas

Changes brought to rural areas through broadband might be positive

or negative, depending on the attitudes and preconceptions of an observer.

Increased migration (without improved services from broadband) has already

strained the resources of some rural communities. Whether broadband communications, if it exacerbates this trend, is an overall good is an area

deserving considerable attention. Thus, definition of impact areas, and

IV-70
development of a plan for evaluation of the potential positive and negative

consequences of widespread rural telecommunications systems, should be an

integral part of any system demonstration program. While detailed consideration of this topic is beyond the scope of this study, the following

is a representative listing of the impact areas that are pertinent. It will

be noted that some of these impacts, being national in scope, could be largely

hypothetical unless broadband systems were deployed in large numbers.

Population balance

● change in the proportion of people living in metro and

nonmetro areas.

● shift from current situation in which greatest nonmetro

growth is occurring in counties adjacent to metro areas

to one in which rapid growth occurs in more remote

rural counties.

● change in distribution of age groups and socioeconomic

characteristics in metro areas and in the three types

of nonmetro areas (Turnaround Acceleration, Turnaround

Reversal and Declining).

Economic

● change in number, type and level of employment opportunities

in nonmetro as compared to metro areas.

● movement of corporation headquarters or branches to nonmetro

areas -- effect on metro economic base.

IV-71
● market aggregation based on criteria other than geographic

location or transportation access -- for example, availability

of broadband communications system.

Social

● quality of education in metro and nonmetro areas.

● quality of health in metro and nonmetro areas.

● overall quality of life in metro and nonmetro areas.

Institutional

● effect on network, commercial, public broadcast and educational TV.

● effect of a possible change from a single nationwide communications

network based on the telephone to a two-tier broadband network -- a

national network and a community-based local network.

Transportation - Telecommunications Tradeoffs

● impact on

● impact on

Longer Term

●

petroleum usage.

automobile and other transportation industries.

Impact Areas

changes in work patterns (work at home will affect office building

construction and commuting; teleconferencing will affect the

convention hotel industry, etc.)

IV-72
A Future Course Of Action If System

Demonstrations Prove Successful

If system demonstrations prove the feasibility of community-wide

broadband systems to meet a variety of rural needs and if it is judged

that the positive and negative impacts of such systems are, on balance,

favorable for national growth and development, then funding services for

implementing such systems on a broad scale might be sought. One solution

might be to establish a Federal program modelled on the Rural Electrification Administration which brought electricity and telephone to rural areas

through low cost loans. However, in the case of rural telecommunications

systems, a more flexible approach involving several different funding

mechanisms might be considered (and evaluated further during the system

demonstration phase).

The reason why a more flexible approach might be called for lies in

the widely varying economic characteristics of rural America. Employing

the Turnaround Acceleration, Turnaround Reversal and Declining county

categories used earlier as a framework for analysis, it can be seen that

these three classes of counties might require different funding mechanisms

for system construction, as well as different levels of government involvement.

This concept has been discussed previously and is diagramed in the table below:

Federal Financing

County Type Mechanism

Turnaround Acceleration Guaranteed Loan

Turnaround Reversal Direct Loan

Declining Government Subsidy

IV-73
Turnaround Acceleration counties have a well-developed economic base,

opportunity for commercial and business uses of telecommunications, and

expanding need for educational, health and other services. Of the three

classes of counties, these should be the most attractive to private

entrepreneurs. Guaranteed loans, such as those available from the Business

and Industrial Division of USDA, could be an adequate funding mechanism to

induce development of broadband systems if their potential is shown in a

system demonstration program.

The less rapidly growing, manufacturing-oriented Turnaround Reversal

counties could be less attractive to the private entrepreneur. Business

and commercial uses of telecommunications are less likely in these remote

counties. While the need for public services may be substantial, the problem

of convincing the community of the value of meeting these needs via telecommunications is likely to be great. Capital will be harder to find, and

thus direct loans such as those for Community Facilities under Title I of

the Rural Development Act of 1972 could be needed to help fund these

installations.

For Declining counties, system revenues might not be sufficient to pay

back loans of either category. In these counties, improvement of public

services might require outright grants or subsidies. These services cannot

now be supported by the community and it is unlikely that broadband will be

very much more cost-effective than conventional methods. However, telecommunications could permit upgrading service where other methods fail. For

example, through broadband, the services of a doctor could be brought to

Declining counties where inducements to physically bring him there have

failed. In this way, the effectiveness of Federal funds spent in Declining

areas could be increased via broadband.

Iv-74
Turning from financial to institutional mechanisms, a similar matrix

can be constructed. As shown below, different types of owner/operators

may be appropriate for, or attracted to, developing systems in the three

types of counties.

System

County Type Owner/Operator

Turnaround Acceleration Private Industry

Turnaround Reversal Rural Cooperative

Declining Private Industry/Local

Government

Private industry, given a source of capital, should find Turnaround

Acceleration counties an attractive market, provided there is community

commitment to the system and services can be charged appropriately.

Turnaround Reversal counties, unlike Turnaround Acceleration counties,

are typically remote from metro areas, and truly rural. Many such counties

have active and vigorous rural cooperatives , oriented to non-profit membership

service. As described elsewhere, rural cooperatives played a crucial role

in bringing electricity to rural areas, a situation not without parallel

to bringing broadband to the same communities.

For Declining counties, the de facto owner/operator of a system might

be the Federal government. Although private industry or a local government

may “own and operate” the system, in these counties sizable Federal support

may be necessary.

The two tables already presented can be combined into a single table.

The Trempealeau County project would be located on the second line of this

table.

IV-75
Federal Financing System

County Type Mechanism Owner/Operator

Turnaround Acceleration Guaranteed Loan Private Industry

Turnaround Reversal Direct Loan Rural Cooperative

Declining Government Subsidy Private Industry/Local

Government

Trempealeau County illustrates the use of a direct loan by a rural

cooperative to facilitate installation of a broadband system. Unfortunately,

Trempealeau County is a unique project and it is not likely that additional

funds for broadband systems will be available under Title I of the 1972

Rural Development Act, absent Congressional action.

Trempealeau can be roughly categorized as a Turnaround Reversal county.

For Turnaround Acceleration demonstrations, the B and I Division of USDA

could be a source of funds. Specific Congressional direction might be

required, however, to earmark some of these funds for systems demonstrations.

For Declining counties, no Federal funding mechanism is readily apparent.

The criteria for USDA Community Facilities loans or Business and Industrial

loan guarantees would exclude such counties. A new Federal mechanism might

be required to support broadband systems installation in such areas.

Previous Legislative Initiatives And Findings

From Other Studies

Rural applications of telecommunications have interested executive

branch agencies and the Congress over the last several years. Treatment

of the problem has ranged from recognition that market forces may not be

sufficient to bring broadband communications to rural areas to suggestions

IV-76
that resources should be made available to fund rural projects on a broad

scale. The purpose of this section is to compare the system demonstration

approach

for this

approach

to other approaches which have been proposed. To

comparison, salient characteristics of the system

are summarized below:

set the framework

demonstration

● the approach is based on the finding that the benefits and

costs of using broadband systems to meet rural public service

needs and to provide commercial services have not been

adequately explored.

● ❉▼ is assumed that public service uses should “pay

their full share” based on value received. The cost of

providing these services by broadband may provide the

same or greater value at roughly the same cost as by

more conventional methods, or make possible services

which would simply not exist otherwise -- for example,

full medical services cannot be provided if no doctor

will locate in the area.

● it is assumed that public services in rural areas,

if paid for appropriate to value, will contribute to the

economic feasibility of a broadband system. Fees for

public services and for commercial use may make a

broadband system economically viable when such a system

would not be economically viable if income were based

solely on subscriber fees for conventional network and

educational television.

IV-77
● it is assumed that a broadband system providing public

and commercial services as well as the news and entertainment

of conventional broadcast could economically serve all

residents in a given community. However, the feasibility

of this approach must first be demonstrated. Not enough

is presently known about how to assemble such systems or

about what kinds of services should be provided in areas

of differing demographic and socioeconomic characteristics.

In the absence of such knowledge, large scale Federal

assistance programs making broadband services widely

available might be premature: a large number of systems

could be implemented which may not be economically

viable whereas, with more knowledge of likely costs and

revenues, such systems could be established on a sounder

footing.

● it is assumed that if the feasibility of broadband

systems which bring public and commercial services as well as

news and entertainment to rural areas is demonstrated, different

funding mechanisms might be used to bring these systems to

rural areas on a broad scale. Depending on the characteristics

of the rural community (e.g., Turnaround Acceleration,

Turnaround Reversal or Declining) the appropriate Federal

funding mechanism could vary from loan through guaranteed

loan to outright grant or subsidy.

IV-78
.

Several recent studies and legislative initiatives are summarized

below. The intent is to indicate the different types of approaches for

bringing broadband communications to rural areas, so that these may be

compared to the system demonstration concept. Thus, illustration of

similarities and differences rather than comprehensiveness is the objective

here.

Whitehead Report (28)

One of many recommendations for developing a national policy for

broadband communications contained in the Whitehead Report was that

broadband communications should be made available to rural residents and

the poor. To prevent the possible tendency of cable operators to limit

their services to affluent areas, the report suggests that franchising

authorities require that service be extended to all parts of a franchise

area.

The Whitehead Report notes that a number of services such as vocational

training and public health information could be provided by cable and

suggests that the Department of Health, Education and Welfare investigate

the feasibility and cost of using cable for these purposes. Commercial

uses of cable were not considered in the Whitehead Report nor is there

exploration of the relationships between public services, commercial

uses and conventional programming. The primary interest seems to be

on parity of programming and other information services with those

available in more urbanized areas. The report notes that “free market

incentives of cable operators may not be adequate to meet certain national

policy objectives, such as the widespread availability of information” (28-46).

IV-79

75-605 () - 76 - 18
Significantly, the Whitehead Report was concerned with outlining

a national broadband policv for the long-range future. rather than with the

problems of

Thus, it is

present-day

rural areas which might be met by broadband communications today.

not surprising that the Report does not consider the lack of

broadband services in rural areas a major problem. Instead,

the Report suggests that the situation should be monitored by the Secretary

of Housing and Urban Development and the Secretary of Agriculture. Then,

if the problem becomes significant in the future, “the Government should

take affirmative action to assure a basic level of broadband communications

service for residents of outlying rural areas” (28-46).

Finally, the Whitehead Report indicated a need for demonstration

programs and suggested that different services be aggregated and the costs

shared. Further detail was not provided. The Report stated (38-59):

"...there is a chicken and egg problem hampering

the development of many valuable services that might be

commercially viable. The demand for these services

depends heavily on their availability, yet few potential

suppliers are willing to accept the risk of developing

new services without significant evidence of a market

demand for them. Similarly, while each new cable

service would require relatively expensive special

facilities if offered alone, these services can be

aggregated and the requisite facilities can be combined

so that these costs can be shared, but no one has

emerged to lead and coordinate such a joint effort.”

S. 1219, H.R. 5319 and H.R. 244 (38, 39, 40)

These bills, introduced in 1972, 1973 and 1975, respectively, exemplify

the idea of making low interest loans available for the development of rural

cable systems. S. 1219 was introduced by Senators Ted Stevens and Mike Gravel

and proposed federal low-cost, long-term loans for low density areas. Co-ops

would also be authorized by

recently (14 January 1975),

such loans. H.R. 5319 was a similar bill. More

Representative Downing introduced H.R. 244,

IV-80
Like H.R. 5319, H.R. 244 provided for 35-year, four percent loans to

“eligible cable television systems” (40-2), which were defined as those

which “can reasonably be expected to pass less than a system average

of sixty potential consumers per linear mile during the first five years

of its operation” (40-2).

Cable Television: Promise Vs. Regulatory Performance

This report was prepared by the staff of the Subcommittee on Communications of the House Committee on Interstate and Foreign Commerce and was published in January 1976. It contains an analysis of the problem of providing

broadcast and cable services to rural areas (27-55ff.). The study notes

that present broadcast service in low density areas is inadequate compared to

that in more densely populated areas and that the threat of cable to local broadcasters in low density markets has not been proved (27-55, 56). Like the

bills above, the report suggests low cost loans (and technical assistance).

However, citing the Denver Research Institute study (3), the report notes

that cable cannot economically serve very low density areas and therefore

includes translators as well as cable in the loan program. The enabling

legislation would be called the Rural Telecommunications Act and it is proposed

that the Office of Telecommunications in the Department of Health, Education

and Welfare administer the program.

Long-term, low cost loans have also been proposed by others, notably

Rivkin (5-3) and the Cablecommunications Resource Center (35-95). The

last study is discussed in more detail later.

IV-81
Comment

Unlike the Whitehead Report, the bills and the study described on the

preceding pages assume that broadband communications should be brought to

rural areas today. They suggest that the problem can be solved in a manner

paralleling the Rural Electrification Act of 1934 which enabled the spread

of electricity and telephone service to rural areas. However, the parallel

between these two situations may not be as exact as it appears. For cable,

content is all important whereas the consumer supplies the uses for electricity

or the content carried by telephones. In other words, is it simply the

risks associated with bringing broadband services to rural areas which

have prevented the entry of private entrepreneurs into the rural market?

Or, as suggested in this study, is it their failure to understand the necessity for themselves becoming directly involved in arranging for content

to be provided by these systems (i.e., the full range of services

necessary to make rural systems economically practical)? In sum, simply

helping an operator to secure funding for a system might not be enough

to enable the system to have a fair chance of success.

Regardless of the answer to the last question, it should be noted that

the emphasis in these bills and the Subcommittee study is on increasing

the parity between rural areas with regard to network and public broadcasting,

rather than on bringing public services to rural areas. Thus, even if these

similar bills were implemented and broadband systems were successfully brought

to some rural areas (inclusion of translators would increase the likelihood

of success), it is doubtful whether public services would be provided

automatically without a specific program to accomplish this objective. As

was noted previously (see preceding section on system implementation),

IV-82
provision of public services does not tend to occur as cable systems become

profitable.

H.R. 4564, S. 1257 and H.R. 9630 (41, 42, 43)

The titles and dates of introduction of these bills are:

● H.R. 4564 - Telecommunications Facilities and Demonstration

Act of 1975 introduced March 10, 1975 by Mr. Staggers.

● S. 1257 - Telecommunications Facilities and Demonstration

Act of 1975 introduced March 20, 1975 by Senator Magnuson.

● H.R. 9630 - Educational Broadcasting Facilities and

Telecommunications Demonstration Act of 1976 introduced

January 21, 1976.

The first two bills are identical and the third elaborates on them. The

bills are of interest because they propose:

“To extend the Educational Broadcasting and

Facilities Program and to provide authority for the

support of demonstrations in telecommunications

technologies for the distribution of health,

education, and public or social service information

and for other purposes” (43-l).

In supporting the need for demonstrations and specifically identifying

public service applications, these bills relate directly to the findings of

this report. Referring to the most recent bill, H.R. 9630, $1 million

would be authorized for the remainder of FY 76 and $250 thousand for the

transition quarter ending September 30, 1976 to “demonstrate innovative

methods or techniques for utilizing nonbroadcast telecommunications equipment

or facilities” (43-7) for “transmission, distribution and delivery of

health, education, and public or social service information" (43-6).

The bill permits diverse “nonbroadcast” technologies (such as satellite,

cable and fiber optics) and is clearly oriented to serviec demonstrations

rather than hardware construction (44-8). The Committee Report on the bill

IV-83
states that “the demonstration program is intended to respond to local

and community initiatives in generating proposals” (44-8). The responsible

agency would be Health, Education and Welfare.

It should be noted, however, that these bills are not restricted to

rural areas. In fact, because the funds would be used for demonstrations

on existing systems, the sites for such projects would most likely be

urban areas. In addition, these bills are not system-oriented in that they

apply only to the public service aspect of telecommunications systems.

Telecommunications Technology Act of 1975 (H.R. 9289) (45)

This bill was introduced by Harley Staggers, Chairman of the House

Interstate and Foreign Commerce Committee. Like the preceding bills, it

was not specifically directed to rural areas, and it authorized demonstrations.

However, unlike the others, this bill did not limit demonstrations to

health, education and social service information but is broader in scope.

The bill cites the need to evaluate both feasibility and value of new

telecommunications technology. A specific agency is designated, the Department of Commerce, and it is suggested that a Bureau of Telecommunications

be established to conduct demonstration projects or support such projects

conducted by other agencies (35-71ff.).

One of the interesting aspects of the bill is its list of impediments

to full use of telecommunications technology. As abbreviated in Ref. 35,

pg. 73, these include:

IV-84
● “lack of adequate information about or understanding of

telecommunications technology among a significant number

of those in a position to hasten, deter, or regulate its

progress;

● lack of sufficiently detailed social, economic, and

technical information to enable sound selection from among

the many choices and options offered by telecommunications

technology;

● lack of national goals, priorities, policies, and plans

specific to telecommunications;

● lack of sufficient engineering and commercial standardization

for telecommunications; and

● lack of sufficient capital to finance production of

telecommunications technology products and services which

have not yet been demonstrated to be marketable.”

Report titled: A Preliminary Review of Current Practices and Trends

In Rural Telecommunications Development And Recommendations For Future

Development

This recent report was prepared by the Booker T. Washington Foundation/

Cablecommunications Resource Center (CRC) for the Department of Commerce.

To our knowledge, it is the only recent detailed study of the potential

for, and problems associated with, bringing telecommunications to rural areas.

IV-85
Some of the findings of the CRC study parallel those of this study.

The first five are as follows (35-90ff.):

"1. There has been a significant number of

projects designed to test the applicability of

telecommunications technology to various aspects of

community development. The majority of these

demonstrations have centered on the delivery of health

and educational services. While most of these experiments

can be termed “successful” in improving the ability of

telecommunications technology to deliver those services

effectively, few, if any, of the projects have focused

specifically on their application to rural areas of the

country. It is generally acknowledged that the

delivery of community development services to rural areas

poses particular sets of problems that have not been

addressed by most telecommunications demonstration

projects.

2. Several service areas falling under the general

categories of social services (i.e., employment, economic/

financial, political, etc.) and entertainment/recreation/

cultural services have not been the subjects of significant

demonstration programs in spite of: a) their recognized

role in determining the quality of rural living conditions;

b) the unique ability of telecommunications technologies

to serve these areas; and c) the understood potential of

these services (particularly entertainment) to play an

important part in improved community economic development.

3. Most demonstrations have been carefully structured

to prove the capability of telecommunications hardware.

The extremely important area of cost benefits resulting

from hardware installation and software program implementation has been largely unexplored on any substantive level.

The economic analysis section of this study defined a

major problem blocking the further development of effective

cost benefit analysis as being the lack of social accounting

system or measurement indicators incorporating quality

of life factors.

4. The development and implementation of telecommunications technologies for overall community

development as it applies to rural areas must be considered and evaluated on regional bases if the effect

of these programs is to be maximized. Programs developed

and coordinated on a regional level ultimately can

have more impact both economically and socially for

regional consideration and will impart economies of scale

to major demonstration programs which, in turn, will

work to defray the capital costs of both hardware and

software.

Iv-86
5. A significant number of demonstration programs

to date have neglected the importance of software

programming. It is essential to conduct research and

demonstrations that specifically address software

production based on articulated needs, systematized

needs assessments, impact measurement, and evaluation

of the development process. The production of effective

software is vital to any meaningful assessment of telecommunications to meet rural economic development needs,

both technologically and economically.”

However, the findings of this OTA staff study differ from those articulated

in the Cablecommunications Resource Center (CRC) report in several ways. Noteworthy among these are:

● the CRC Report recommends establishing low interest loans

for building rural telecommunications systems (35-95).

As discussed earlier, a large-scale low interest loan program

seems premature at the present time. Instead, the present

state of knowledge suggests the need for an intermediate

step -- system demonstrations.

● the CRC Report supports low interest loans but does not

consider other mechanisms. By contrast, this study has

proposed that if system demonstrations show the feasibility

and value of rural telecommunications systems, then

different funding mechanisms may be appropriate depending

upon the economic characteristics of each rural area. A

useful gross classification which may indicate which

funding mechanism might be appropriate is that of Turnaround

Acceleration, Turnaround Reversal and Declining counties.

Loan guarantees, low-cost loans or outright grants might be

used to fund telecommunications systems depending on the

economic strength of the community.

IV-87
● the concept of public services “paying their own way” and

making possible reduced costs for individual subscribers

receives considerable attention in this study but not

in the CRC report.

● commercial users of rural telecommunications systems

(e.g., banks) are considered important sources of

revenue in this report.

In summary, if the CRC report and this study are compared, it might be

said that this study both goes beyond, as well as steps backward, from

the CRC report. The system approach builds upon the kind of findings

presented in the CRC report. The need for an interim system demonstration

phase before funds are made available for widespread implementation of rural

telecommunications, on the other hand, might be interpreted as a step

backwards from the conclusions reached by CRC.

Summary

A number of bills and studies have been discussed. These may be

divided into three groups depending on their treatment of the problem

of bringing broadband communications to rural areas.

The Whitehead Report exemplifies the class of national cable policy

studies. Within this class of studies, rural cable is treated more as a

monitoring problem than as a problem requiring action. Thus, it is not

surprising that no specific course of action is outlined nor is a funding

mechanism proposed for bringing cable to rural areas.

Iv-88
The second group of bills and studies includes S. 1219, H.R. 5319,

H.R. 244 (38, 39, 40), the Interstate and Foreign Commerce Subcommittee

report on cable (27) and the Booker T. Washington/Cablecommunications

Resource Center report on rural telecommunications (35). This group

suggests that telecommunications should be brought to rural areas now

and suggests low-cost long-term loans as the funding mechanism. The

implication is that the major constraint on rural telecommunications

is lack of risk capital.

The third group of bills includes H.R. 4564, S. 1257 and H.R. 9630

(41, 42, 43, 44). This group specifically addresses the problem of

providing new services, such as public service applications, via telecommunications and proposes demonstration programs which would enable

evaluation of such services. Unlike the second group, these bills are

not directed at rural areas and probably projects would not take place

in rural areas. This is because the funds, when specified, are to be

used for studying methods for bringing in the service. Existing systems

would be used in the demonstrations and those with significant capacity --

as for two-way use –- are located in metro areas.

This report combines and extends the concepts in all these groups

of bills and studies. It proposes a limited demonstration program,

specifically for rural areas, aimed at investigating the feasibility and

value of combinations of public services, commercial uses and entertainment.

The concept of area-wide coverage and accessibility to the system by

residents of the most remote areas, as well as in the most densely populated

areas within a community, is emphasized. The program might be administered

IV-89
by NSF in conjunction with the Departments of Commerce and Agriculture.

If the feasibility and value of the system concept were then demonstrated,

different funding mechanisms might be matched to the economic characteristics

of different rural communities.

Policy Alternatives For Applications

Of Broadband Telecommunications To Rural Areas

Three policy alternatives are presented in the following discussion.

The pros and cons of each of these alternatives are briefly considered.

These policy alternatives are:

● continue the status quo;

● fund a limited number of system demonstrations projects; and

● create a Federal mechanism to facilitate wide dissemination of

broadband services in rural areas.

Continue Status Quo

The term “status quo” does not imply that Federal programs are presently

having no effect upon the development of rural broadband systems; rather,

it refers to the continuance of a particular set of Federal policies that

have not had the effect of promoting their widespread deployment at this time.

On the one hand, the Federal government has funded research into the uses

of broadband in both urban and rural areas. On the other, with the exception of the isolated instance in which the Farmers Home Administration

granted a loan to Trempealeau County, no Federal program presently exists

which can be of direct assistance in helping rural areas to translate

these potential broadband uses into actual system applications.

IV-90
“Status quo” as a Federal policy alternative is therefore defined

as continued Federal support for research into the general uses of

broadband communications, but relatively little emphasis on programs designed to assist in their actual deployment in rural systems. The key issue

to be addressed in considering this policy alternative is whether it is

desirable or necessary that the Federal government make an increased effort

to encourage and assist such deployment.

Pro. If telecommunications represents ‘the wave of the future’ and

if it is likely, as some contend, to transform the way in which we live

and work, then it is reasonable to assume that it will someday come to

rural America, first to those rural areas adjacent to metropolitan areas

and, subsequently, through the use of fiber optics or similar cost-cutting

breakthroughs, to more remote rural areas. In other words, under these

assumptions, telecommunications will eventually come to rural areas without

specific Federal assistance.

In the meantime, Federal programs are already in existence that might

provide more data on the value of new broadband services. The NSF Phase 11

experiments, in particular, could demonstrate the general value of these

services and may also interest system operators in the revenue-generating

potential of public service applications -- provided that communities also

perceive their value and are willing to expend funds for their use of the

system. Continuation of the “status quo” might also prevent rushing into

widespread rural applications of broadband communications before their

value -- and economic feasibility -- are demonstrated.

IV-91
Con. To the extent that the pace and nature of rural development

remain a primary concern of the Federal government, it would seem inconsistent that the introduction of broadband systems be left to proceed on

a “catch-as-catch-can” basis. While the value and feasibility of many broadband services have yet to be conclusively demonstrated, their potential

in contributing to the objectives of rural development, as outlined in

Chapter III , would seem too great for their implementation to be ignored.

Although the introduction of broadband systems into rural areas eventually

might occur unassisted, it could well bypass those rural areas most in

need of the benefits the systems could bring and, to the extent that introduction is delayed longer than need be, unnecessarily prolong their lack

of access. At minimum, it would seem consistent with other Federal efforts

in the area of rural development that this possible instrument of change

be given a fair opportunity to prove itself in actual system applications.

As to the need for assistance if such systems are to be deployed

in any significant number, there does not seem much question. At best,

the novelty and untested economics of the services to be provided, including their unknown costs and benefits as compared to alternative ways

of providing the same services, are likely to make financing difficult for

even the most carefully planned systems. If the multitude of tasks involved

in surveying community needs, designing revenue-producing broadband programs

to service these needs, securing community and

estimating hardware needs and costs, and so on

then the practical barriers for most potential

to be insurmountable.

local government support,

are added to these unknowns,

system operators are likely

IV-92
Additionally, to the extent that the interests and needs of rural

systems are not of major concern when decisions are made at the Federal

level concerning communications policy, then the future development of

such systems could be effectively foreclosed. To give only a few examples,

on the assumption that cable systems are not feasible in very low density

areas, a decision could be made to promote translator coverage of rural

America, with cable being limited to more densely populated rural towns.

This “skimming of the cream” by conventional cable systems and the relegation

of rural areas unprofitable for cable-like, two-way systems to coverage

by translators, could prematurely eliminate one of the main bases of

support for full-service, area-coverage systems. Alternatively, with the

advent of fiber optics, a decision might be made to assign their exclusive

use to a national communications network without taking into consideration

their possible use in individual rural-based systems.

Fund A Limited Number of System Demonstration Projects

This alternative has been thoroughly discussed in previous sections

of this Chapter. It has

projects for each of two

Acceleration, Turnaround

Pro. Current data

communications to rural

been suggested that a minimum of two demonstration

of the three types of rural counties (Turnaround

Reversal) be initiated.

are inadequate to evaluate the utility of broadband

areas. It is likely that the cost-effectiveness

of broadband will vary with the characteristics of rural communities receiving

the services. However, hard data on this point do not exist.

of

be

Simply making channels available for public service and institutional use

broadband communications will not guarantee that effective use will

made of them. The message rather than the medium is the economic

IV-93
commodity in a broadband system. A system demonstration program will help

develop hard data on the uses to which these systems can be put.

It appears that some types of broadband services in rural areas could

be attractive to potential operators. However, the components of an

effective systems package are not known.

Cable operators to date have seen little profit in channels dedicated

to public service and institutional use. If system demonstrations show

the economic value of such channels and indicate the

uses, these attitudes might change. Additionally, a

band operators, capable of putting together packages

develop. However, such development requires time --

fair price for these

new class of broadof services, could

and demonstration.

This practical emphasis upon real-world applications could have a

beneficial effect upon the rest of the Federal Government’s considerable

investment in broadband research. Experiments could be designed with their

eventual application in actual demonstrations in mind, and in turn the

results of demonstrations could be used in determining the further need

for experimentation.

A system demonstration program will enable the Federal Government

to evaluate whether broadband services to rural areas are economically

feasible -- before large sums of money are committed to such efforts.

Con. System demonstrations could be opposed on the grounds that

the consequences of providing health, education, and other services “by

remote control” are not sufficiently understood. This is an important issue and

will be taken up in connection with the next policy alternative . For now,

it is sufficient to note that the system

would be fixed both in time and number.

demonstrations here contemplated

If these innovative services prove

Iv-94
to be detrimental, it will be a relatively simple matter to terminate

them.

It also can be argued that demonstrations should not proceed until

there has been settlement of the broader issue of Federal policy toward

cable television generally. Even though the special requirements and

functions of rural systems seem not to have entered into the present

debate over FCC regulations, a decision at this time to authorize demonstrations could be criticized as a “backdoor” attempt to skirt the issue

in favor of the interests of these systems.

A system demonstration program might take as long as five years.

If system demonstrations are not really needed, services to the rural

populations not served by the demonstrations will have been unnecessarily

delayed.

Create A Federal Mechanism To Facilitate Wide

Dissemination Of Broadband Services in Rural Areas

The legislative approach most often suggested (e.g., see references 

5 and 27) consists of low-cost, long-term loans paralleling those made

available under the Rural Electrification Act of 1934. It is argued that

the hesitancy of private industry to enter the rural market with broadband

communications today is similar to the hesitancy of private industry forty

years ago to enter the rural market with telephones and electric service.

Thus, the mechanism which was effective then (largely because of the rural

cooperatives) should be effective now.

Pro. Implementation of broadband communications in rural areas could

begin as soon as legislation for an appropriate Federal mechanism was

passed by the Congress.

IV-95
If the parallel between broadband services and electricity/telephone

service is valid, further delay is unnecessary.

The Rural Electrification Act of 1934 created a relatively inexpensive

Federal program. Government expense consists of debt service on the loans

plus the cost of administering the program.

Con. The parallel with the Rural Electrification Act of 1934 may not

be valid. Effective use of broadband communications for education, health,

and commercial use requires development of program content and/or computer

software. Simply helping an operator to secure funding for a system might

not be enough to enable the system to have a fair chance of success.

Without specific encouragement to the contrary, the probable use

of new systems is likely to be limited to conventional news and entertainment television. Development of unique services specifically tailored

to rural needs would probably not occur because they would have no demonstrated

value and thus significant fees for these services could not be justified.

Without the economic base such services could provide, higher fees would

have to be charged individual subscribers to support the system, thus

restricting access to the more affluent members of the community. The

result might be a system providing limited service to a limited number of

viewers.

A fundamental objection that could be raised to this policy alternative as well as to any effort to promote the innovative public service

use of broadband, is that fascination with gadgetry and a desire to seem

up to date might lead communities to an uncritical acceptance of “standard”

broadband solutions to the problems of improving education and health

care. Even though these broadband services might have been tested in

IV-96
demonstrations they still could turn out to be inappropriate when applied

against the needs of the full range of all rural areas. If precautions

are not taken to avoid the latter contingency and if the quality of educational and health care deteriorates, the rural area in question still

might remain locked into delivery mechanisms in which all but the consumers

had a vested and continuing interest.

Future OTA Role

As stated in the Preface, the object of this staff study was to

provide a basis upon which the Technology Assessment Board might decide

what contribution, if any, OTA might make in assisting the Senate

Committee on Agriculture and Forestry to evaluate the feasibility and

value of rural broadband communications.

In the course of the staff study, the subject of rural broadband communications was found to be relatively unexplored. In particular, no

analyses were found which considered the utility of broadband in relation

to the fundamental factors underlying the sudden reversal of growth

trends in rural America depicted in most recent Census statistics. Therefore, in order to gain some clear understanding of what OTA might do in

connection with the subject, it first was necessary to originate a conceptual means of relating broadband to the forces underlying this change.

Subsequently, it was necessary to consider how and whether such systems

could actually be deployed and their value assessed.

Because of these somewhat unique circumstances, this study does not

constitute a simple reply to Senator Talmadge’s query as to how OTA can

be of assistance. Instead, what is reflected in this staff study is a

possible course of action the Senate Agriculture Committee might

IV-97
weigh. OTA’s future role and the specific form its assistance might

take, therefore, will depend upon the Committee’s judgment as to which of the

courses of action spelled out herein, if any, it might wish to explore

further.

With these qualifications in mind, the following is a three-part approach

to OTA’s participation that the Senate Committee might consider:

First as an adjunct to hearings the Committee might wish to conduct,

OTA could help the Committee to assemble a panel(s) to examine and verify

or refute the findings described in this report. Topics to be covered

could include:

● the present and probable future trends in rural growth;

● the impact of broadband communications on probable growth

trends;

● constraints to wider application of broadband communications in

rural areas;

● the need for system demonstration and the number and type

of system demonstrations which should be conducted, including

criteria for site selection;

● consideration of the possible need for, and best form of,

Federal involvement in rural broadband applications in the

system demonstration phase as well as in subsequent programs; and

IV-98
● consideration of the possible role of OTA in helping the

Committee to assess and monitor the programs suggested above.

Second, OTA might begin a continuing assessment program to help the

committee monitor: 1) telecommunications experiments in or applicable to

rural areas; and, 2) the progress of the Trempealeau County project and

any system demonstrations undertaken. With regard to the second task,

a critical feature would be assessing the impact of telecommunications on

the characteristics of life in rural areas affected. (Assessing whether

these impacts might be desirable is outside the scope of OTA activities.

The purpose of this monitoring effort would be to provide the committee

with data from which a judgment could be made.)

Third, on an as-needed basis, small assessments involving either

panels or other mechanisms could be conducted to integrate the data of

the monitoring efforts with other data, including the preliminary findings

of this study.

Because any system demonstration will require several years, what is

proposed here is a long-term relatively low-cost activity. An estimated

level of effort and cost is as follows:

● 1/2 manyear/year of senior staff =$17,000

● 1/2 manyear/year of support staff = 9,00 0

● 1/3 manyear/year of secretarial support = 5,00 0

● average yearly cost of panels, small

contracts, etc. = 30,000

● contingencies including staff travel = 4,000

$65,000/year

IV-99
It is anticipated that OTA’s participation in the project would be

reviewed by the Technology Assessment Board at least biyearly. At these

times, both the progress and the adequacy of OTA’s effort would be subjects

of evaluation.

IV-100
CHAPTER IV

References

1. Carroll, R. L. and Larson, T. L., Feasibility Study Report on a

County-wide Cable Television Service for Trempealeau County, Wisconsin:

(Arcadia, Wisconsin: prepared for the Trempealeau Electric Cooperative), 23 July 1973.

2. Hey, Tom, “Rural Communications Co-op: Of the People,” Rural

Electrification Magazine, May 1974.

3. Bortz, P., Spongberg, R. and Venditti, F., Broadband Communications

in Rural Areas: final report to the Executive Office of the President,

Office of Telecommunications Policy. (Denver: Denver Research

Institute), November 1973.

4. Wisconsin Cooperative, Government Summit Conference, 19-20 March 1975.

5. Rivkin, Steven R., “ANew Role for Cooperatives? Bringing Broadband

Communications to the Countyside,” Rural Electrification Magazine,

May 1974.

6. Sinder, Brian, “Educational Applications of Two-way Interactive Cable

Communications in the WWCC Service Area:”

.

prepared for Western Wisconsin

Communications Cooperative and the Eight Participating School Districts,

December 1974.

7. Ralph E. Evans Associates, “Budgetary Estimate: Western Wisconsin

Communications Cooperative,” Trempealeau County Interactive CATV

System, Phase 1, May 1974.

8. Western Wisconsin Communications Cooperative, Supplement to preapplication

for Federal assistance, FHA Form #AD621, 23 January 1974.

9. U.S. Congress, House, Committee on Agriculture, Briefing Statement

on Western Wisconsin Cable TV System, Trempealeau County, Wisconsin,

Community Facility Loan.

10. Meistad, Gordon, Stevens Point, Wisconsin, personal interview on

10 December 1975.

11. Kirkman, Dennis, Nilsestuen, Gerhard and Urban, Bill, Trempealeau,

Wisconsin, personal interview on 11 December 1975.

12. Capps, Willis W., State Director, Farmers Home Administration, Wisconsin,

Letter to Gerhard Nilsestuen, President, regarding the Western

Wisconsin Communications Cooperative Application for a Farmers Home

Administration Community Facilities Loan, 7 June 1974.

IV-101
130

140

15.

16.

17.

18.

19.

20.

21.

22.

23.

24.

25.

26.

27.

28.

29.

Capps, Willis W., State Director, Farmers Home Administration, Wisconsin,

Letter to Gerhard Nilsestuen, President, regarding the Western Wisconsin

Communications Cooperative, 22 July 1974.

Hurdin, Sam and Schneider, Robert, Stevens Point Wisconsin, personal

interview on 10 December 1975.

Guthrie, Paul, Madison, Wisconsin, personal interview on 12 December 1975.

FmHA AN No. 18(442), Priorities for Funding Community Facility Loan

Applications.

Elliott, Frank B., Administrator, Farmers Home Administration, Letter

to William Mills, Office of Technology Assessment, 23 December 1975.

The Rand Corporation, “Using Cable Television for Public Services in

Spartanburg:” Response to NSF 74-8, Phase II, submitted to the

National Science Foundation in response to NSF 74-8, Phase II,

January 1975.

Lucas, William, personal interview in Spartanburg, South Carolina,

3-4 February 1976.

Heatherly, Jocelle, personal interview in Spartanburg, South Carolina

on 4 February 1976.

Lucas, W. A., “Two-way Cable Communications and the Spartanburg

Experiments,” The Rand Corporation Paper Series, August 1975.

Schinn, Allen and Brownstein, Charles, personal interviews on

28 December 1975.

Bazemore, Judith, personal interview at Spartanburg, South Carolina,

3-4 February 1976.

Herring, Gordon, personal interview at Spartanburg, South Carolina,

3-4 February 1976.

Nicholson, V., “Rural Extension

FCC Rules and Regulations.

U.S. Congress, House, Committee

Subcommittee on Communications,

Techniques And Systems,” NCTA 74-105.

on Interstate and Foreign Commerce,

Cable Television: Promise versus

Regulatory Constraint, U.S. Government Printing Office, January 1976.

Cabinet Committee on Cable Communications, Cable, A Report To The

President, U.S. Government Printing Office, 1974.

Baer, W. S., Cable Television: A Handbook For Decisionmaking, (The

Rand Corporation, RS-1133-NSF), February 1973.

IV-102
30.

31.

32.

33.

34.

35.

36.

37.

38.

39.

40.

41.

42.

43.

44.

45.

Hallowell, M. L., cd., Cable Handbook 1975-1976, (Washington D.C.:

Communications Press, Inc.), 1975.

Cohen, R. E., “Regulatory Report/Broadcast, Cable Industries Face

Off on Cable Reform Plan,” National Journal, 7 February 1976.

Cable Television Information Center, The Uses of Cable Communications,

Washington, D.C., 1973.

Farmers Home Administration, Office of the Administrator, Priorities

for Funding Community Facility Loan Applications, 4 November 1975.

Kay, Peg, Social Services and Cable TV: draft report for the National

Science Foundation, obtained December 1975.

Booker T. Washington Foundation/Cablecommunications Resource Center,

A Preliminary Review of Current Practices One Trends in Rural

Telecommunications Development And Recommendations For Future Development: prepared for the Economic Development Administration, Office

of Economic Research, U.S. Department of Commerce, August 1975.

Rhodes, Maurice, Letter and materials to Gretchen Kolsrud, Office of

Technology Assessment describing the Blue Ridge Electric Membership

Corporation’s feasibility Study of a Cable TV system, 3 February

1976.

Letter to Ronald Knouse, Blue Ridge Electric Membership Corporation,

describing the Consideration of the Cable Television Information

Center on the proposed Blue Ridge System, 15 August 1973.

U.S. Congress, Senate, S. 1219.

U.S. Congress, House, H.R. 5319.

U.S. Congress, House, H.R. 244, 14 January 1975.

U.S. Congress, House, H.R. 4564, 10 March 1975.

U.S. Congress, Senate, S. 1257, 20 March 1975.

U.S. Congress, House, H.R. 9630, 21 January 1976.

U.S. Congress, House, Committee on Interstate and Foreign Commerce,

Educational Broadcasting Facilities and Telecommunications Demonstration

Act of 1976: Committee Report 94-772.

U.S. Congress, House, H.R. 9289.

IV-103
APPENDICES
APPENDIX A

REQUESTING LETTER FROM SENATOR TALMADGE

MCWMAN r. TALMADGE, cm., CIUIRMAN

JAMES 0. EASTLAND, MISS. CARL T. CURTIS. MUR.

GEORGE MC GOVERN Lm*. S. oAS. aron~c D. AIKEN, VT.

JAMLZ ~. ALLEN, ALA. MILTON R. YOUNG. N. DAK.

IWBC WT u. bw~tnmv. MINN . noocn’f DOLE, KANS.

HENRY BE UMOM, OKLA.

JESSE MCLMS. N.C.

-C M. MWSCR, MOUSER, CU.NC

 COMMlTEE ON

● AGRICULTURE AND FORESTRY

W ASHINGTO N , D . C . 2051 0

.

June 25, 1974

Emilio Q. Daddario

Director

Office of Technology Assessmen t

300 New Jersey Avenue, ” S. E.

Washington, D. C. 20515

Dear Mr. Director:

For all of my career, I have been seriously concerned

about the problem of equity for rural people. I have had

some successes and some failures in dealing with this problem,

but the fact remains that it is very difficult to deliver

basic human services to people who live in low density cir-

 cumstances in the American countryside.

Therefore, I was very excited to receive the enclosed

good letter from Russell A. O’Neal, General Manager of theWisconsin Electric Cooperative Association concerning the

use of broad-band two-way telecommunications in rural areas.

As you will see from Mr. Kaye's enclosed paper on transport- .

ation of older Americans in rural areas, he suggests that

some transportation of people in rural areas might be supplanted

with just such a system.

I am also enclosing a copy of Rural Electric magazine

which describes some “of the activities which rural electric

cooperatives are doing in regard to cable television, as

well as the New Rural Society Project of Dr. Peter Goldmark.

This material is on pages 12-20.

I also call your attention to a communications satellite

which was launched recently that will be used to train rural

para-professionals in Appalachia and the Rocky Mountain States,

and then will be turned around to beam a signal to India.

From what I have seen of this project, it was hastily conceived and launched before there was a clear understanding

by anyone of what was to be accomplished. However, it is

an example of the fact that communications can play an

important role in reaching rural people, providing some types

of services, educating and informing. .

A.1
Emilio Q. Daddario page 2 June 24, 1974

I am aware that the FCC is still groping with

the notion of what it wants cable television to be, and this

indecision has caused delays in exploring the full potential

of the concept of a “wired nation”.

But it seems to me that we already are a wired nation.

It is my understanding that with some modifications, lines which

carry electricity can also carry television pictures. Therefore, it would appear that the rural electric systems which

are already in place in rural areas could provide a vital new

service for rural people at a limited cost.

However, it is not the intention of the rural electrics

to capture all of cable television in rural areas. Many and

perhaps most of these cooperatives may not want to get involved

at all. 

But for those which might want to get involved -- for

that matter, for any-individual or group which might want to

get involved, the potential for using communications technology

as one of the components that make up the concept of broad

based rural community development is a new ballgame.

Therefore, I would appreciate it if OTA would consider

a project to determine the feasibility and value of experimental

efforts to develop public service for rural areas through the

use of broadband communications techniques, whether cable or

satellite.

If it would be helpful to your staff in determining

whether to attempt this project, I would be pleased to put

them in touch with Mr. Kaye, Dr. Goldmark and the National

Rural Electric Cooperative Association.

With every good wish, I am,

cc: Ira Kaye

Russell A. O’Neal

Dr. Peter Goldmark

Tom Hoy

Robert Partridge

David Hamil

Sincerely,

HERMAN E. TALMADGE

Chairman

A.2
APPENDIX B

PERSONS INTERVIEWED

Gary Alpert, ADT Security Systems, Denver Colorado

A. J. Anderson, Communications Department, State of Colorado,

Denver, Colorado

Frank Ashford, Darco Telemetering Systems, Omaha, Nebraska

William Barnhart, Cadco, Inc., Garland, Texas

John R. Barrington, Home Box Office, Inc., (Time Corp.), New York,

New York

George Bartlett, National Association of Broadcasters. Washington, D.C.

Rashid Bashshur, Department of Medical Care Organization, University of

Michigan, Ann Arbor, Michigan

Judith Bazemore, The Rand Corporation, Spartanburg, South Carolina

Calvin Beale, Economic Research Service, U.S. Department of Agriculture,

Washington, D.C.

Layne Beaty, Office of Communications, U.S. Department of Agriculture,

Washington, D.C.

Brian Belcher, TOCOM, Inc., Irving, Texas

.

Blair Benson, Goldmark Communications Corp., Stamford, Connecticut 

Michael Blair, Reuters, Ltd., New York, New York

Issac Blonder, Blonder-Tongue Laboratories, Inc., Old Bridge, New Jersey

John Bowles, Community Facilities Division, Farmers Home Administration,

U.S. Department of Agriculture, Washington, D.C.

Charles Brady, Indian Health Service, U.S. Department of Health, Education

and Welfare, Washington, D.C.

Brian Brock, Darco Telemetering Systems, Omaha, Nebraska

Charles Brownstein, National Science Foundation, Washington, D.C.

Robert Burgers, Northwest Computer Services, Minneapolis, Minnesota

B-1
William Burns, First National Bank of Lafayette, Lafayette, Colorado

Edward Callahan, American Television and Communications Corporation,

Denver, Colorado

Lita Colligan, Rehabilitation Services Administration, U.S. Department

of Health, Education and Welfare, Washington, D.C.

William Clements, Mountain Bell Telephone Company, Denver, Colorado

Howard Crispin, Scientific - Atlanta, Inc., Atlanta, Georgia

Larry A. Day, Continental Telephone Service Corporation, Bakersfield,

California

Robert V. C. Dickinson, E/Corn Corporation, Berkley Heights, New Jersey

David Dixon, Rural Health Associates, Farmington, Maine

Floyd English, Darco Telemetering Systems, Omaha, Nebraska

Ann Erdman, Office of Telecommunications Policy, Department of Health,

Education and Welfare, Washington, D.C.

Donald Flansburg, Mountain Bell Telephone Company, Denver, Colorado

Dennis Goldstein, Appalachian Regional Commission, Washington, D. C.

Paul Guthrie, Executive Services Division, Department of Administration,

State of Wisconsin, Madison, Wisconsin

Marvin Halton, AT&T, Washington, D. C.

Samuel Hardin, Farmers Home Administration, Stevens Point, Wisconsin

Samuel B. Harvey, Singer Corporation, New York, New York

Jocelle Heatherly, Spartanburg Technical College, Spartanburg, South Carolina

Gordon Herring, TeleCable Corporation, Norfolk, Virginia

C. Palmer Hickey, Business and Industrial Loan Division, Farmers Home

Administration, U. S. Department of Agriculture, Washington, D. C.

Carol Lee Hielwich, Goldmark Communications Corp. , Stamford, Connecticut

Larry Higgins, United Bank of Denver, Denver, Colorado

Edward D. Horowitz, Home Box Office, Inc. (Time Corp.), New York, New York

Tom Hey, Writer for the National Rural Electrical Cooperative Association,

Washington, D. C.

B-2
Ira Kaye, Consultant to Congressional Rural Caucus, Washington, D.C.

Peg Kay, Consultant, Washington, D.C.

Joseph Kelly, Manhattan Cable (Time Corp.), New York, New York

Dennis Kirkman, Trempealeau Valley School Cooperative, Trempealeau, Wisconsin

Jans Kliphuis, Intech Laboratories, Inc., Roskoskoma, New York

Donald Knowlton, Colorado Cooperative Council, Denver, Colorado

Charles Lowe, TOCOM, Inc., Irving, Texas

William Lucas, The Rand Corporation, Spartanburg, South Carolina and

Washington, D.C.

Capt. William McCaa, Boulder County Sheriffs Department, Boulder, Colorado

Sergeant Frank McCarron, Philadelphia Police Department, Philadelphia. Pennsylvania

Kenneth W. McCharen, Tulsa Public Schools, Tulsa, Oklahoma

Alan Maltz, Bankers Trust Company, New York, New York

Dr. Roger Mark, Boston City Hospital, Boston, Massachusetts

Raymond J. Marks, Public Service Company of Colorado, Denver, Colorado

Gordon Meistad, Trempealeau Electric Cooperative, Trempealeau, Wisconsin

S. Byers Miller, Bank Administration Institute, Park Ridge, Illinois

William Moore, Union Trust Company, Stamford, Connecticut

Tom Mulherin, INTERACT, Dartmouth - Hitchcock Medical Center, Hanover, New

Hampshire

Victor Nicholson, Cable Television Information Center, Washington, D. C.

Gerhard Nilsestuen, Trempealeau County Association of Cooperatives,

Trempealeau, Wisconsin

Donald Norman, Farmers Home Administration, Williamson, North Carolina

Gary Nugent, Extension Service, U. S. Department of Agriculture, Washington, D. C.

Dr. Jack O’Neill, Mitre Corporation, McLean, Virginia

Robert Ottman, Western Telecommunications, Inc., (WIIC), Denver, Colorado

Joseph Paglia, Philadelphia Police Department, Philadelphia, Pennsylvania

Ben Park, Alternate Media Center, New York University, New York

B-3

75-605 0 - 76 -20
Ms. Jacqueline Park, Alternate Media Center, New York University, New York

Delmer C. Ports, National Cable Television Association,

Robert Powers, F.C.C. Cable Bureau, Washington, D.C.

Lt. Charles Pringle, Boulder County Sheriffs Department

James Rathbun, Farmland Industries, Inc., Kansas City,

Washington, D.C.

, Boulder, Colorado

Missouri

Maurice Rhodes, Blue Ridge Electric Membership Corporation, Lenoir, North Carolina

Steven Rivkin, Attorney at Law, Washington, D.C.

Maxine Rockoff, National Center for Health Services Research, Health

Resources Administration, Rockville, Maryland

Solomon Sagan, Teleglobe Pay-TV Systems, Inc., New York, New York

Vincent Sardella, Office of Telecommunications Policy, Washington, D. C.

Dr. Louis Sasmor, Westinghouse Health Systems, Miami, Florida

James Schmeiser, Teleprompter, Inc., New York, New York

Robert Schneider, Farmers Home Administration, Stevens Point, Wisconsin

Robert Schuman, Appalachian Regional Commission, Washington, D. C.

Allen M. Shinn, Jr., National Science Foundation, Washington, D. C.

Donald A. Smith, INTERACT, Dartmouth-Hitchcock Medical Center, Hanover,

New Hampshire

William Smith, Cadeo, Inc., Garland, Texas

Shelby Southard, Cooperative League of the U. S. A., Washington, D. C.

George Steffen, Bank Administration Institute, Park Ridge, Illinois

t

Bermey Stevens, Windsor CableVision, Williamson, North Carolina

James Stevens, Public Service Company of Colorado, Denver, Colorado

William Tadlock III, Farmers Home Administration, Williamson, North Carolina

Rod Thomas, First National Bank of Denver, Denver, Colorado

B-4
Ernest Unrein, Farmers Marketing Association, Denver, Colorado

William Urban, Trempealeau Valley School Cooperative, Trempealeau, Wisconsin

Joseph Wager, Peoples National Gas Company, Omaha, Nebraska

Russell White, Public Service Company of Colorado, Denver, Colorado

Shirley White, Cornell University, Ithaca, New York

Thelma Whitesill, Farmland Industries, Inc., Denver, Colorado

David Willis, Tele-Communications, Inc., Denver, Colorado

Ed Wilson, Bureau of Education for the Handicapped, Department of Health,

Education and Welfare, Washington, D.C.

James Wright, Rockford Cablevision, Rockford, Illinois

Harry Zacher, Philadelphia Police Department, Philadelphia, Pennsylvania

B-5
The

needs of

areas is

APPENDIX C

HEALTH NEEDS IN RURAL POPULATIONS

purpose of this Appendix is to examine the health services and

rural populations. Analysis of the health care needs of rural

difficult because of the lack of homogeneity among rural populations. Differences in economics, occupations, and population density and

dispersal among rural areas limits the conclusions which can be drawn.

Nevertheless, on an aggregate basis there are some “significant general

differences between health “in rural and urban areas.

Available data on health characteristics suggest a number of important

needs in rural areas including:

● need for increased primary health, medical specialist,

and dental care;

● need for greater accessibility to medical facilities

and services;

● need for increased emergency medical services; and

● need for continuing medical education for physicians,

specialists, and other allied health manpower.

In the following pages, the various health conditions, resources, and

services of rural areas are discussed. The factors and reasons for the

existence of these health care needs are examined, and recent federal

initiatives related to rural health services are highlighted.

c-l
Health Conditions in Rural Areas

Health conditions in rural areas can be identified from the rates

of chronic diseases, mortality, and injury among rural populations. Comparisons are made with metropolitan rates to illustrate the differences of

health conditions in rural populations.

Chronic medical conditions such as heart disease, diabetes and asthma

are more prevalent in persons between the ages of 17 and 64 living outside

metropolitan areas than in persons living in metropolitan areas. There

is an even more dramatic difference in chronic illness for persons 65 and

over. Approximately 50 percent of farm persons and 47 percent of non-farm

persons over 65 from nonmetropolitan areas suffer from limitation of activity

due to chronic illness compared to 39 percent of persons of similar age

living in metropolitan areas (1-18). Several reasons which may account

for this are the lack of availability of medical care to permit early

detection of such conditions, lack of knowledge on the part of populations

about the necessity for diagnosis and medical treatment and the distances

which must be travelled to obtain medical care. Money necessary to pay

for medication and medical service and sociological reasons, such as fear

of separation from family, may also inhibit persons from obtaining medical

treatment.

Two factors demonstrating health conditions are the rates of infant

and maternal mortality. The data show that infant and maternal mortality

rates are higher in nonmetropolitan areas than in metropolitan areas.

There are 23.0 infant deaths per 1,000 live births in nonmetro areas

compared to 21.1 in metro areas. There are 26.4 maternal deaths per

100,000 live births compared to 23.6 for metro areas (1-16). There is no

definitive explanation for this difference, however more deliveries are

C-2
likely to occur in a nonmedical environment in rural areas due to the

distances that must be travelled to receive medical assistance. This

factor introduces a greater element of risk, particularly in complicated

deliveries. In addition, lack of medical specialists for prenatal care

in nonmetro areas may contribute to the higher incidence of infant and

maternal mortality in those areas.

An unpublished HEW report showed that rural nonfarm residents had a

higher injury rate than did either rural farm residents or metropolitan

residents. Persons injured were defined as those needing medical attention

or limited in activity for at least one day. In metropolitan areas

approximately 247 persons per 1,000 were injured annually compared to

256 rural nonfarm persons per 1,000 and 225 rural farm persons per 1,000

(1-18ff.), The reasons for the higher injury rate among nonfarm rural

people are unknown although some hazardous occupations such as mining

are found in nonfarm rural areas. However, it appears unusual that farm

residents showed the lowest injury rate considering the type of work they

do. Farm work, the distance which must be travelled to obtain assistance,

and the condition of the roads may result in a lowering of the reporting

rate and therefore result in a statistically lower injury rate. According

to an article published in Rural and Appalachian Health, “the West Virginia

State Road Commission reported that in 1965 within an eight-county area

only one-fifth of the road mileage met minimum specifications” (2-41).

Another factor indicating health conditions of rural populations is

the rejection rate of persons for military service. Statistical evidence

provided by USDA shows that rural residents between the ages of 27 and 34

c-3
had a rejection rate for the military service for physical and mental

health conditions at least twice as high as those from metropolitan areas

and residents from small cities and towns of 25,000 (1-18). This provides

another indication of the health conditions of rural populations.

Health Resources

Health resources in rural areas

and emergency medical services. The

resources to rural residents is also

of Rural Areas

include health facilities, manpower,

degree of accessibility of those

important.

Health manpower is traditionally concentrated

concentrations of people (l-l). Rural populations

many doctors per capita as do urban areas. Of the

in areas with greater

have less than half as

doctors serving rural

areas there are proportionately more general practitioners than there are

specialists. In contrast, metropolitan areas have a greater number of

specialists than general practitioners. According to the USDA report,

in 1970 there were 16,457 general practitioners, 16,377 specialists, and

4,507 hospital-based , nonfederal physicians serving nonmetropolitan areas.

There were 34,359 general practitioners, 121,731 specialists, and 61,596

hospital-based physicians serving metropolitan areas. The ratio of physicians

per 100,000 population for nonmetropolitan areas was 30.4 for general

practitioners, 30.3 for specialists, and 8.3 for hospital-based physicians.

The ratio of physicians per 100,000 for metropolitan areas was 23.0 for

general practitioners, 81.5 for specialists, and 41.2 for hospital-based

physicians (1-7ff.), There are proportionately fewer dentists, pharmacists,

and registered nurses serving rural areas compared to those serving urban

areas. In 1966 and 1967, there were 54.7 pharmacists per 100,000 in

metropolitan areas compared to 43.7 for nonmetropolitan areas; 332.1

c-4
registered nurses per 100,000 for metro areas compared to 223.0 for nonmetro

areas; and 61.7 dentists per 100,000 for metro areas compared to 35.5

for nonmetro areas (l-9ff.).

A variety of reasons can be advanced to account for the phenomenon

of a shortage and maldistribution of health manpower. In the case of

physicians, there is evidence indicating that a rural background is a strong

contributing factor in a physician’s choice of a rural practice. Almost

half of the physicians practicing in towns of 2,500 or less are from communities

of similar size (3-llff.). Cooper states that “practice in a small community

is more likely to be the choice of those who grew up in small communities

than of those who did not” (4-940). In addition, factors of location of

the medical school attended by the physician and the location of the

internship and residency also tend to influence the

practice. According to an article published in the

Education:

choice of location or

Journal of Medical

“Current medical education is not, for the most

part, designed to train and encourage rural practitioners. Though there are welcome signs of change,

medical students still receive most of their training

in institutions which are oriented toward special

practice and secondary and tertiary care of inpatients.

Since students receive very little exposure to family

practice in general, it is unrealistic to expect

them to enter rural practice” (5-886).

Other reasons for the maldistribution of physicians and shortage of

physicians in rural areas arise from some of the unique features of a rural

practice for both the general practitioner and the specialists. In general,

the rural physician is characterized as a person who is isolated from peer

consultations and referrals. He or she is isolated from easily accessible

information regarding new medical trends and procedures. The rural

practitioner may have difficulty locating his or her practice close to

c-5
facilities which may be equipped with the latest medical instruments and

technology. And, too, the rural physician is in a position which requires

service to a greater number of people distributed over a larger land area.

The generalist physician in a rural practice is confronted with cases

requiring specialist attention. Yet the resources are often not available

to the physician to effectively refer and assist patients in such situations.

The specialist in rural practice finds that in order to make the practice

economically feasible, a large portion of time must be spent on generalist

cases thereby diminishing the prospects of furthering his or her development in the work for which training was received (10-55). Phillips and his

colleagues have noted in a study that:

“The social and economic nature of rural areas

repel most young physicians, even those considering

solo practice, as well as their families. None (of

the physicians contacted) were particularly enchanted

with the low economy, the poor school systems, sparse

population, the paucity of cultural opportunities, the

isolation from modern medical facilities and the round

the clock practice, especially when these were compared

with the advantages of urban life. Even the energetic

outdoors man or the disenchanted city dweller seeking

the bucolic country life found the small country

community cramped, limited and confining” (6-1263ff.).

Another contributing factor to the shortage of physicians in rural areas

is the increasing

have in replacing

rural counties in

median age of rural doctors and the difficulties communities

physicians who leave, retire or die. A study of 20

Missouri showed that between 1958 and 1973 there was

a 33 percent attrition rate of MDs serving those areas. In 1958, there

were 100 practicing physicians. The greatest losses were due to death

and migration but retirement was also a factor. For the period between

1965 and 1973 the counties lost 22 MDs. Of those lost,

and three retired (7-313ff.). Taylor and his colleagues

ten moved, nine died

have indicated that

c-6
“Whether caused by a national shortage of physicians, or by maldistribution,

or both, younger physicians are failing to replace established practitioners

who leave rural practices due to death, retirement, or overwork” (5-885).

Reasons for the disproportionate distribution of dentists, and other

categories of health manpower may also be attributed to factors similar to

those for physicians. For dentists, metropolitan areas are more appealing

due to the larger number of persons to be served per unit area and the

greater access to the equipment, facilities and support staff necessary for

a practice. In the case of nurses and pharmacists, these fields have been

linked traditionally to primary health service facilities and manpower in

the role of support staff. As such, choice of location in a rural area would

seem less likely for those in the field. Concurrently, the economic advantages,

advancement possibilities and continuing education incentives for those in

nursing and pharmacy are greater in the more densely populated areas.

Another factor related to health resources for rural populations is the

availability of health facilities. Statistics show that there are proportionately more hospital beds per capita for rural areas than for metropolitan

areas. The USDA report states that there were 7,123 hospitals in the U.S. in

1970. Of that number, 82% or approximately 5,800 were community hospitals.

Overall, there were 977.3 hospital beds per 100,000 in rural areas compared

to 719.2 beds for urban areas. Further analysis of hospital facilities in

metro and nonmetro areas showed that nonmetro areas had both proportionately

more long term hospital beds for psychiatric care and more community hospital

beds for short term care than did metro areas. There were 370.6 psychiatric

beds per 100,000 in nonmetro areas compared to 207.2 psychiatric beds in

c-7
metro areas. There were 497.6 community hospital beds per 100,000 for

nonmetro areas compared to 394.1 for metro areas (1-12ff).

These facts present an interesting disparity in the distribution of

physical and mental health facilities among metro and nonmetro areas. In

the categories of hospitals, rural areas have relatively more facilities.

The reasons for the existence of more hospitals can partially be explained

by the federal monies provided for construction of medical facilities in the

Hill-Burton Act based in part on the philosophy that the introduction of

facilities to underserved areas would attract more health manpower to those

areas. This is hypothesis was essentially disproved by the programs which built

a number of community health clinics or hospitals for the purpose of attracting

health manpower and increasing health services to certain rural areas.

Communities continued to experience difficulty in attracting and keeping

physicians and other allied health manpower despite the new buildings and

equipment (2-38ff.). . .

The reasons for the disparity in mental health facilities between metro

and nonmetro areas are unclear. However, traditionally state and private

mental institutions have been placed away from large concentrations of

people, and hence have been located in rural areas. Another pertinent

and unanswered question related to the location of mental health facilities

is: are the patients in these rural institutions from rural or from urban

areas?

The correlation of inadequate manpower, distribution of facilities, and

the extent to which the facilities can be furnished with modern equipment

directly affects the quality of health resources for rural populations. It

appears that the existence of a greater proportion of hospital facilities

c-8
in rural areas does not necessarily compensate for the health problems which

rural people face.

Accessibility of health resources is a key aspect of health care for

rural populations. One type of accessibility is physical and is related to

the distances which people must travel to health resources and the transportation systems available to them. Despite the fact that there are more

hospital beds for rural populations, rural people must still travel considerably

more distance to receive health care or emergency medical services. Statements

made in Rural and Appalachian Health give a revealing picture of rural .

Appalachian health manpower and facilities problems.

. . . “In a county where about half of the families

earn less than $3,000 annually and the proportion of

welfare cases is higher than the state norm, travel

is too expensive for the majority. The county desperately needs transportation to out-of-county hospitals,

as well as local emergency care and local practitioners. . .

There are many such areas in the Appalachian region. . .

where because of a lack of personal resources, inadequate public support of essential services, and unavailability of health care, significant proportions of the

population have gone without any expert crisis medical

care for many years. In these areas Hill-Burton built

hospitals are understaffed and underused. In some of

these hospitals entire wings are closed due to a shortage

of physicians and nurses” (2-38ff.).

Rural persons not living in close access to health facilities or service

areas have more difficulty obtaining primary health care or emergency medical

service. Because the most common mode of transportation for people in rural

areas is the automobile, those persons who do not have access to a car can

have great difficulty in obtaining medical assistance. In addition, the

roads and highway systems in some rural areas are at times impassable,

making routine and emergency health care impossible. In addition to

Appalachian areas these problems are also readily apparent in the northern

regions of this country in areas such as Alaska, Maine and the Northern mid-west

states.

c-9
The other type of accessibility is financial and is related to the

costs of health care and provisions to pay for it. The cost of health care

for many rural people is a limiting factor in terms of health resources

accessibility. The economic characteristics of rural areas show that

14 percent of rural people are below the poverty level compared to

9.7 percent of metropolitan populations (8-16). In addition, the non-poverty

level incomes are also lower in rural areas. Concurrently, statistics show

that rural residents have a lower rate of hospital and surgical insurance

than do urban residents. The percentage of metropolitan residents not

covered with hospital insurance was 17.5 compared to 24.2 for rural nonfarm

residents and 36.8 for rural farm residents. The percentage of metropolitan

residents not covered with surgical insurance was 18.9 compared to 25.5

for rural nonfarm residents and 38.8 rural farm residents (l-23).

The reasons for the greater insurance coverage of metropolitan residents

may be explained largely by the group insurance available through company

employment plans. Another reason for the difference may be a lack of knowledge

on the part of rural residents about insurance coverage, and economic ability

to pay for coverage -- particularly in the group just above the poverty level.

One final health resource which should be examined for rural areas is

the availability of emergency medical services. A great portion of the grants

made possible by the Emergency Medical Services Act have been directed toward

nonmetropolitan areas. However, the implications for rural populations of

transportation, distance to health facilities, and health manpower shortages,

render a rather bleak picture for those who require emergency health care.

Utilization of Health Services in Rural Areas

The extent to which rural populations utilize the health resources

available to them may be related to the health conditions of those populations.

c-lo
Utilization can be determined by several factors such as frequency of visits

to physicians and the rate of hospitalization for rural populations.

Generally rural nonfarm residents used physician and dental services

with slightly less frequency than metro populations. However, rural farm

residents showed a sharply lower frequency of physician visits. In

addition, statistics show a dramatic difference in the number of visits

to specialists by rural residents compared to urban residents (1-11).

These differences in rural areas reflect the manpower shortage, a lack

of knowledge of the available services, the lack of funds necessary to pay

for health care, and transportation difficulties. The

suggest inadequate reporting may be one reason for the

figures.

differences also

lower incidence

The hospitalization rate of rural nonfarm residents is higher than that

of persons living in metropolitan areas. The rural farm rate is lower except

for persons over 65. According to the USDA report for all age groups,

approximately 93 persons per 1,000 in metro areas were hospitalized in 1968

compared with 103 per 1,000 from rural nonfarms and 88 per 1,000 from rural

farms. For persons over 65, 143 per 1,000 from metro areas were hospitalized

compared with 171 from rural nonfarms and 195 from rural farms (1-20).

One hypothesis which could be advanced from greater hospitalization rates

among nonfarm rural residents may be attributed to the lack of enough

physicians and the type of facilities which provide outpatient care. Another

is that hospital costs have not risen so high as to force a change to outpatient treatment where possible. The high hospitalization rates of the

elderly in rural farm and nonfarm environments may be attributed to the inadequacy of health services for those populations, the lack of physicians, the

C - n
inability of families to provide the type of care necessary for the elderly

suffering from chronic or immediate illness, and the apparent lack of

nursing homes and other alternative care facilities. In addition, the

lack of earlier health care may contribute to greater hospitalization

rates.

Federal Efforts Related to

Health Care Delivery in Rural America

The federal efforts impacting rural health care have increased considerably over the last two decades. However, these initiatives have largely

been directed toward the general population rather than rural populations.

Governmental programs have addressed specific problems such as health care

financing, organization, manpower education, research and development, or

health services and quality of care. A few, however, have been directed

toward a very specific population such as indians or migrant workers.

One new important effort being made at the Federal level is the Rural

Health Initiative being conducted by the Public Health Service. This effort

began in July 1975 and is a program designed “to coordinate existing federal

resources administratively in order to encourage residents in natural medical

trade areas irrespective of geopolitical boundaries to take an integrated

and holistic view of health care system requirements and priorities.” As

a part of the initiative more than 100 developmental grants will be awarded

in FY 1976 to encourage formation and integration of rural health

Another recent effort which potentially impacts rural health

systems is the National Health Planning and Resources Development

system.

care

Act of 1974.

C-12
This act is designed to provide a comprehensive means for addressing equal

access to quality health care a reasonable cost. The legislation provides

the mechanism for establishing systems for planning, implementation and

evaluation of health care delivery in this country. In addition, the

legislation sets as a national priority improved health service and care

for rural and underserved populations (Public Law 93-641). Therefore,

the implications if this act for resolving some of the health care problems

of rural areas are significant.

Findings for Health Needs of Rural Areas

In conclusion, an examination of the health conditions, resources and

services of rural areas indicates that the health care problems and needs

of those populations are significant. Comparative analysis of the health

conditions of rural versus urban populations has shown higher infant and

maternal mortality rates and greater incidence of chronic conditions in

rural populations. Rural nonfarm residents have greater injury rates and

a greater percentage of medical disqualifications for military duty than

do their urban counterparts.

The health resource information for rural areas indicates a shortage

and maldistribution of physicians (particularly specialists), dentists and

allied health manpower in rural compared to urban areas. Statistics show

a greater number of community and psychiatric hospital beds per capita

for rual populations compared to urban populations. However, the accessibility of these facilities in terms of location, available transportation

systems and costs for utilizing the facility services present severe problems

for many individuals residing in rural areas. In addition, the emergency

medical services for rural populations appears inadequate.

C-13

75-605 O -76 - 21
Finally, information on the extent of utilization of health services

by rural populations shows that those populations tend to visit physicians,

specialists and dentists with less frequency than urban residents. However,

the hospitalization rates for rural non-farm residents and rural farms

residents over 65 are proportionately greater than those of metropolitan

populations.

The information concerning health conditions, resources and services

points to the following health care needs for rural populations:

● need for increased primary health care specialists and dental

services based on the inadequate number of physicians, higher

hospitalization rates, greater incidence of infant and

maternal mortality, and higher incidence of medical disqualification for military duty;

● need for greater economic and physical accessibility to

medical facilities and services due to maldistribution of

facilities and physicians, the distances rural people

must travel, inadequate transportation services or alternatives, and lower insurance subscribership and economic

deprivation of some rural populations;

● need for emergency medical services due to chronic illness

conditions, injury rat, and distances to facilities; and

● need for continuing medical education for physician,

specialists and allied health manpower based on physician

isolation, physician (specialist) shortages, lack of

accessibility to medical peer consultations and referrals.

C-14
In light of these needs and the recent federal legislation relevant

to the health care problems of rural areas, it is important to evaluate

existing communications experiments as a health service delivery tool for

rural populations.

C-15
1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

USDA, Rural Devleopment

Agriculture Information

Rural America”.

References

Service and Economic Research Service

Bulletin No. 362. “Health Services in

Nolan, Robert L. and Jerome L. Schwartz, eds., Rural and Appalachian

Health, Charles C. Thomas, Publisher; 1973.

Bible, B. L., “Physicians’ Views of Medical Practice in Nonmetropolitan

Communities”, Public Health Reports, Vol. 85, 1970.

Cooper, James K., Karen Heald, and Michael Samuels. “The Decision for

Rural Practice”, Journal of Medical Education; Vol. 47, No. 12,

December, 1972.

Taylor, Mark, William Dickman, and Robert Kane, “Medical Students’

Attitudes Toward Rural Practice”, Journal of Medical Education,

Vol. 48, No. 10, October, 1973.

Phillips, M. L., J. H. Maybry, and C. S. Houston, “Eager Communities

and Reluctant Doctors”, New England Journal of Medicine, 278, 1968.

Hassinger, Edward, Billy L. Hu, Donald Azstings, and Robert L. NcNamara,

“Changes in Number and Location of Health Practitioners in a 20-County

Rural Area of Missouri”, Public Health Reports, Vol. 90, July-August, 1975.

“Social and Econmic Characteristics of the Metropolitan and Nonmetropolitan

Population: 1974 and 1970”, Current Population Reports, Series P-23,

No. 55), September, 1975.

Public Law 93-641. National Health Planning and Resources

Act of 1974.

“Rural Health and,Telemedicine: A Study of a Rural Health

and Interactive Television,Interim Report”, Volume 1, prepared for the

National Science Foundation, No. GI-41770, June 1975.

Development

Care System

Martin, Edward D. “The Federal Initiative in Rural Health,” Public

Health Reports, Vol. 90, Number 4, July-August, 1975.

C-16
APPENDIX D

TECHNOLOGY

This Appendix describes the technologies included in the assessment

and comments upon some of the economic factors governing their use. The

technologies described are:

● coaxial cable (cable television)

● translators

● telephone

● microwave

● communications satellite

● fiber optics

D-1
Coaxial Cable

Cable television depends on coaxial cable which consists of a metallic

shield and a hardwire core separated by insulating material. The cable

distributes signals collected at a central point (headend) to the viewing

audience. Cable systems were initially developed to provide service in

small towns. Today, more than two decades after the first systems began

operation , almost half of the 3000 systems in operation still serve

towns with less than 1000 subscribers (1).

Twenty million homes are now within reach of cable and about 10 million

subscribe to the service at rates of $5-10 per month (1). The

capital investment per home served averages around $100 and ranges from

approximately $500 in sparsely settled areas (15-20 households per square

mile) down to $40 in more densely settled areas (greater than 1000 households per square mile). Cable plant costs are $3000 and up per mile (2-67).

Because of these high costs, cable installation’s are generally made only in

areas with population densities of at least 30-40 households per cable

mile (2-4). Although 30-40 households per mile is a rough rule of thumb

used by private cable operators, it has been suggested that, in rural

areas, as few as 7

mile at 50 percent

of installation in

lower figure.

subscribers per cable mile (14 households per cable

penetration) may be economic (3-107). The reduced costs

easily accessible rural areas is one factor favoring the

More than two-thirds of the cable systems in operation have a channel

capacity of less than twelve channels. More typically, the capability is on

order of six channels. By comparison, coaxial cable now available offers

the capability of furnishing 30 to 40 full television channels.

D-2
Translators

Federal Communications Commission Rules and Regulations define translators

as broadcast stations “. . . operated for the purpose of retransmitting the

signals of a television broadcast station, another television broadcast

translator station, or a television translator relay station by means

of direct frequency conversion and amplification of the incoming signals. . .“

(4-74701). Translators are used to receive signals at strategically located

points and to distribute those signals to areas where acceptable signals

cannot be received directly from the originating broadcast station. Distribution is accomplished by “translating” the signals to another channel

to avoid interference with the originating station, and rebroadcasting

the signal over the air. One translator is required for each signal received

and rebroadcasted.

As stated in Broadband Communications in Rural Areas prepared by

the Denver Research Institute (2-4 ) :

“Translators provide the lowest cost way of providing

one-way broadband service in rural areas. In Utah, which

has a well-developed translator network, virtually the

entire population receives several channels of television,

and cable television has made few inroads. In countries

such as Japan, extensive translator networks provide

television service in rural areas at low cost.”

The capital costs per household to supply six channels of television

with good signal quality in sparsely settled areas (15-20 households per

square mile) will range from $10-50 depending on the equipment used and the

height of the broadcast antenna. These costs will be approximately

$70 in communities with 100 homes and $7 in communities with 10,000 homes (2-35).

D-3
Although approximately 3000 translators are in operation in the

United States, there is no accurate estimate of how many households depend

on translators for television service (5). Several factors, such as

regulatory impediments (discussed in the next section) and the fact that

subscriber revenues are difficult to obtain since those not paying can

still receive the signal, have limited the use of translators in the

United States (2-5).

Two technical considerations limit translator use. First, as mentioned

above, because translators broadcast1 over the airwaves, anyone can

pick them up making it difficult to collect revenues. This could be

remedied with “scramblers” which would make the signal meaningless for

television sets without decoding equipment. Such equipment could be

charged for monthly as in cable systems. However, hardware costs are

about $50 per household, a cost which might be reduced by further technical

development (2-5). (Scramblers would also require regulatory changes.)

Another technical characteristic of translators is that signal quality

degrades so as to be unusable after several translations. One reason

is that translators use amplitude rather than frequency modulation.

Another is the simple and relatively inexpensive design of many translators

(2-5). If translators are to see more frequent use in rural areas, the

tradeoffs in these characteristics should be examined.

As indicated previously one translator is required for each signal.

Signals from more than one translator can be transmitted from a given

antenna. However, spectrum availability limits the number of channels

which can be provided to six to eight. There is the possibility of more

in very remote regions (2-4).

D-4
Translators provide one-way signals to the consumer. — Return

capability could be provided via telephone.

Telephone

The telephone system depends on a variety of transmission media to

transmit voice and data. Signals are distributed locally over small gauge,

narrowbandwidth copper wires; transported intermediate distance by coaxial

cable trunks; and transported long distances by terrestrial, or satelliteborne, high frequency (microwave) radio systems. Telephone systems have

effectively served the general public (more than 94 percent of the households in the United States), business and government. New services are

being continually proposed (e.g., automatic meter reading) to more efficiently

utilize the extensive local residential distribution network.

However, as stated by the Denver Research Institute (2-6).

“It is unlikely that telephone lines can be used

for video signals in analog form or with present digital

coding techniques. As digital telephone systems are

introduced in rural areas subscriber response capability

for applications such as polling could be provided for

minimal additional distribution plant cost. However,

because subscriber response services have not yet been

defined as a need or a potential market, current digitallybased telephone systems designed for rural areas do not

provide such capability. There is potential for shared

telephone and television plant as the technology of

digital television transmission is further developed over

the next ten to twenty years.”

Microwave

Integration of rural telecommunications systems; whether cable or

translator, both can be accomplished with microwave relay systems (however,

present regulations prohibit such use for translators). Microwave relays

are used for transporting large amounts of information point-to-point

over line-of sight distances (15-30 miles) or further if repeaters

are used.

D-5
Capital costs for transmit-only or receive-only equipment for transporting 12 television channels, using 10-foot dish antennae are $80,000-

$100,000 each. Repeaters (receive/transmit stations) cost approximately

$160,000-200,000 each (2-95ff.). For two-way communications, transmitter

and receiver equipment would be required at each location. It is also

possible for subscribers to lease channel space on established common-carrier

microwave systems. The typical rate for one-way, CATV-type service, if,

for example, eight channels were transported 100 miles, would be approximately

$20 per channel-mile per month, or $16,000 per month. Rates will vary as a

function of distance and number of channels (6).

Communications Satellites

A communications satellite serves as a microwave relay in space.

Such satellites are placed in a geostationary orbit so that their position

remains fixed over a particular location on earth. Because microwave

repeaters transmit along a line-of-sight path, location of such repeaters on a

satellite permits coverage of a large portion of North America by each repeater,

rather than, as in land-based relays, requiring one repeater every 20 to 30 miles.

Receive-only earth stations are now available for $65,000-75,000

and can be located at the head-end of a single cable television system

or centrally located to provide direct service to a number of cable systems,

Alternately, cable or terrestrial microwave systems would be used to transport

the signals from the earth receiving station to the head ends of these systems.

Although regulations do not currently permit such use, the signals could

also be distributed by translators.

It is currently very unlikely that in the United States signals will

be distributed directly to home receivers from broadband satellites,

D-6
Development of a $50-200 home receiving unit would require a capital

investment of $100 to 400 million, exclusive of satellite costs, to reach

the three percent of U.S. households not currently receiving any television

(2-6),

Fiber Optics

Recent developments in fiber optics, light emitting diode and laser

technologies make it possible to consider glass fibers as a communications

medium much sooner than has been predicted. According to statements

in a recent issue of the Bell Lab News reliable fibers can now be fabricated

reproducibly through which light can travel over a half a mile and lose

“less intensity than it would in passing through ordinary window pane”.

The problem of splicing optical cables, one of the major obstacles in the

development of optical communications, appears to have been resolved.

Powerful and reliable semiconductor light sources; methods of encoding

information on the light beam; and repeaters, to amplify or regenerate

signals weakened by traveling great distances, have all been developed

in recent years. Light detectors, needed at the receiving end to convert

the coded information back into electrical signals compatible with the

rest of the network, have been available for a number of years. Once

all of these elements are tied together into an economical system

it will be a communications system with the potential for carrying far

more information than any available today. Fiber optics could eventually

be used to distribute television signals at costs lower than coaxial

cable distribution costs. Some perspective on the potential impact of

fiber optic communications can be obtained from the following table which

compares telephone, coaxial cable and fiber optical systems.

D-7
Transmission Medium

Diameter

(in mm)

Bandwidth

(in M Hz)

approximate

number of

TV channels

Throughput

Capacity

(in mbps)

Capacity of Cable

with Dia = CATV

Coaxial (in mbps)

Repeater

Spacing

(in km)

approximate

Present Costs

(per meter)

Notes:

Table D-1

Comparison Of Telephone, Coaxial Cable And

Fiber Optics Technologies

TELEPHONE

WIRED PAIR

.004

0

( 1 )

.0048(2)

.150-.250

1.8

$.05

o

( i )

COAXIAL CABLE

CATV TYPE

300

30-40

300

300

.5

$.70-.80

30-40

FIBER OPTICS

LED LIGHT SOURCE LASER LIGHT SOURCE

PHOTO DIODE DETECTOR AVALANCHE DIODE DETECTO

.02 I .02

10-2 0

(3) (4)

2-3 Analog

1 Digital 10 Digital

100 1000

3-5X107 3-5X108

10 I 10

$1.00(5) $1.00(5)

(typical cable) (typical cable

Analog: 600,000(6) Digital: (6)

-1,500,000 3,000,000

Digital: 300,000 -5,000,000

(1) Can be increased under special conditions.

(2) Recent developments suggest that one TV channel can be

transmitted over short distances.

(3) Will vary according to light intensity and distance.

(4) Analog service will probably not be considered.

(5) .10/meter anticipated when production quantities achieved.

(6) Provided to illustrate potential. Cables of this size may not be practical.

D-8
1.

2.

3.

4.

5.

6.

References

National Cable Television Association. Cable/Info. , Washington, D.C.,

April, 1975.

Bortz, P., Spongberg, R. and Vendetti, F., Broadband Communications in

Rural Areas, Denver Research Institute, Final Report to the Executive

Office of the President, Office of Telecommunications Policy, November,

1973.

Nicholson, V., Rural Extension Techniques and Systems, NCTA 74-105.

FCC Rules and Regulations

Paper delivered at the National Telecoummnications Conference,

December, 1975.

Interview with Robert Ottman, Western Telecommunications, Inc.

D-9