Making the Connection

Label it an unwritten but long-standing contract between citizens and government: Whenever a new or necessary utility comes along that promises quality-of-life improvements or economic opportunity, the government — be it federal, state or local — will step in to make it a reality. They will finance it, regulate it as a monopolistic enterprise or simply take it over — that is how railroads, interstate highways, telephones, electricity and cable television became universal.

The same rationale could be applied to today's newest technological and economic necessity: high-speed telecommunications networks. Any community with long-term business development aspirations will have to find a way to hook up with remote marketplaces. A number of states and communities are trying to figure out the best way to extend broadband networks to businesses off the beaten path.

"It's pretty simple: High-speed Internet access is going to be a key competitive factor for all states, and the regions that don't do something to bring in that access are going to be left behind in the new economy," said Dan Berglund, executive director of the State Science and Technology Institute, Westerville, Ohio. "And so states and counties can either control their own destiny or they can have it controlled by the telecommunication companies."

Still, the old strong-arm tactics used to motivate the building of yesterday's utilities are not likely to work with today's state-of-the-art networks. The rapid advancement of communication technology makes the idea of paying for new infrastructure impractical for budget-strapped governments. And telecommunications companies — left to their own devices — are more inclined to spend their resources plucking the fruits of high-population areas first.

The answer, said Don Upson, secretary of technology for Virginia, is to turn the old model upside down. Instead of government stepping into the thick of it and dictating terms, officials need merely plant a competitive seed and then let free market forces take over.

Virginia, for example, took an active role in helping to establish VirginiaLink, a brand-new multiple-vendor program that offers businesses throughout the state that join a buyer's consortium the opportunity to access a statewide Asynchronous Transfer Mode (ATM) network and to buy advanced telecom services at discounted rates.

The lower prices are expected to draw businesses that otherwise couldn't have afforded such access, and the large number of potential customers is drawing strong participation from telecom companies suddenly eager to increase market share and build advanced data networks.

However, the program is not a government-run program, nor is it government-subsidized in any way, Upson said. "We encouraged it, enabled it and did everything we could to bring it about," he explained, noting that the Virginia Center for Innovative Technology (CIT), a nonprofit organization, negotiated the contracts with MCI WorldCom and Sprint (and continues to do so with other potential vendors). "But this is not a state contract. That's what makes it so great. It's the private sector stepping up and doing what it does best."

And now that they're involved, the vendors are well on their way, building networks, developing services and programs, and providing technical advice to potential customers. Sprint, for its part, already has an ATM network in place, thanks to a lead role in a prototype state agency and education discount program known as Network Virginia. But even with that, the vendor wouldn't have gone out on a limb without this gentle prod from the state.

"The truth is, we would never have done this on our own," said Mike McDowell, major account manager for Sprint. "But now we feel like we've got a customer base that we can leverage."

Making It Happen

Several state and community organizations are concluding that the most attractive avenue to region- and statewide telecom connectivity is aggregating the customer base and enticing telecommunications companies to come in, build the network, and take on the risks.

Consider the case of Berkshire Connect, an organization set up by the Massachusetts Technology Collaborative (MTC) to bring connectivity to the more rural western part of the state. The communities there — stocked with a mix of manufacturers, high-tech firms and small retailers — were chafing under telecom costs that in many cases were as much as four times higher than in Boston. The expenses drove one major firm to relocate to New Jersey.

"Clearly, enterprises were being put at a terrible disadvantage in terms of being able to compete in the marketplace," said Patrick Larkin, senior vice president of MTC, which is an economic development organization set up by the state.

Initially, everyone in the Berkshire Connect effort expected that the state would have to make a substantial financial investment to get a high-bandwidth pipe from Springfield to outlying mountainous communities. Instead, the group conducted surveys, made revenue projections and built technology and business plans.

"The region has become a very prized customer for a telecommunications provider, because they can now come in here with an organized marketplace and not have to spend so much money trying to win the business," Larkin said.

When Berkshire Connect dangled a contract for a new regionwide connection, several providers bid for the opportunity. In early February, the organization announced that Global Crossing Ltd. would build the high-speed voice, data, video and telephony network, which is expected to be up by late spring.

"This way, the last person in will benefit — even if it's a mom-and-pop general store on the extreme edge of the county — in the same way that a heavy user who negotiates a deal upfront would benefit," Larkin explained.

Likewise, the state of Minnesota recently awarded a contract to Universal Communications Network, Denver, to build a high-speed, fiber-optic backbone that will include loops extending north and south of the Minneapolis/ St. Paul area. The network, funded solely by the private-sector, is expected to reach 80 percent of citizens.

In the meantime, Gov. Jesse Ventura's administration has proposed deregulating current telecom laws to spur competition at the local loop level. Among the most critical elements: allowing local service providers to get into long-distance telephone service and a Universal Service Fund that will subsidize firms that provide data access in low-population areas (see "Getting Out of the Way").

Getting the private sector involved is not always as easy as pulling together a few potential customers.

The West Georgia Telecommunications Alliance (WGTA) — a nonprofit coalition of schools, businesses and local and state agencies in a three-county area about an hour west of Atlanta — hopes to leverage free-market forces to build a regional fiber-optic network, but thus far the venture has been tedious. The organization still expects that it will have to rely on public funds — possibly from end-user fees and state grants.

"Density is the magic number for a telecommunications provider to come in and make an investment, and when you've got a dispersed population, you've got to look at other ways," said WGTA founder and past president Martin Smith. "The key for us is to get the basic infrastructure built so that a lot of second-tier and third-tier carriers will come in here and service this market. A lot of them have said they'd love to do it, but they can't take the risk. If we can spread the cost and risk around to end users and perhaps some private investors, then it becomes a little more palatable."

All Ships Rise

Although states and communities are playing a more laissez-faire role in facilitating the building of this newest utility, government officials recognize that community access to digital networks is critical to long-term economic development. Not taking an active role could leave rural communities in economic ruin.

Such statements might seem dramatic, but businesses with access to high-speed networks have a jump on their competitors.

"If we can help Virginia businesses improve their productivity by 50 percent, that would be a tremendous economic boost," said Anne Armstrong, president of CIT, which administers the VirginiaLink program. "It's enough to take a business from paper operations to a true electronic commerce paradigm, and for the state, we're talking about more jobs, more taxes, more spin-off businesses, everything."

An engineering company in rural southwest Virginia, for example, will be able to transmit blueprints to customers in mere seconds, rather than having to rely on overnight mail. Other businesses will have access to videoconferencing, video streaming, medical imaging, World Wide Web-based electronic commerce, remote data storage and enterprise management.

The technology has long been available for companies with enough resources to access it, but VirginiaLink offers affordability and the critical mass of customer demand to make it worthwhile for telecom companies to offer it at competitive rates.

"It's just the right amount of price discount to bring most businesses in this area into the electronic fold," said Doyle Edgerton, president of Rev.Net Technologies Inc., an Internet service provider in Roanoke, Va. "For us, though, it's the support that's critical. We no longer feel like we're taking on the world by ourselves."

The digital connection is only the first step in the process.

"Education is critical," Armstrong said. "If businesses don't understand what this network can do for them, if they don't understand the services and what to ask for, then it's useless to them."

As a result, Armstrong, Upson and participating vendors will hit the road this spring with a series of seminars aimed at small and midsize businesses. Minnesota and Berkshire Connect are also planning educational ventures.

A Brave New World

For states and communities looking to embrace broadband digital networks, the transition from utility provider and controller to change agent and business partner can be difficult. Those who have waded into the public/private waters advise those who are tempted to follow to think positively — while moving slowly.

"The first thing I would suggest to anyone considering this is: Don't underestimate the power of the marketplace," Larkin said. "Quite frankly, we did that. We'd gotten so used to an immature marketplace in the Berkshires that we didn't know what a good functioning market could do for us. But the truth is that the private sector is in the business of doing this, and they can keep up with technology and provide a level of service and quality that no public instrumentality could possibly sustain over time."

Working with those telecom providers and getting them to come to the table isn't always easy. Many of those firms have spent the past century operating as a monopoly in their service areas and may fight any effort to change the model.

"Telecommunications companies can be a somewhat intransigent group, so you have to be very careful when you begin to wean yourself away from this monopolistic practice," said David Fisher, commissioner of administration for Minnesota. "These firms in most cases haven't had any competition and they really don't want any competition, so if you're thinking about bringing them in the door and making a deregulatory marketplace- oriented structure, you have to be prepared for resistance."

— Heather Hayes is a free-lance writer based in Stuarts Draft, Va.


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