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.