TVA Rural Studies

Telecommunications Technology and American Rural Development in the 21st Century

Edward J. Malecki
Department of Geography
University of Florida
Gainesville, FL 32611-7315
July 1996

9. Telecommunications Infrastructure as a Policy Priority

Telematics "are the central physical technologies of the postindustrial society" (Coates 1982: 181). In order to combat the tendency for spatial concentration, many governments have invested in telecommunications infrastructure, often in order to attract firms for data-entry and data-processing activities (Grimes 1993). At the national scale, Porter (1990: 75) includes infrastructure among the factor endowments which determine national competitive advantage. Among the elements of infrastructure are the transportation system, the communications system, mail and parcel delivery, and payments or funds transfer. However, Porter (1990: 76-77) contends that these are advanced factors, along with highly educated personnel and university research institutes, which are scarcer because their development demands large and often sustained investment in both human and physical capital.

Policy choices are made more difficult because of the fact that telecommunications networks are a non-standard infrastructure, made up of juxtaposed sub-networks, based on different hardware, software, and standards (Bar et al. 1989: 52). The decentralized U.S. federal system has led to few national policies, and many local or state-based programs (Lewyn 1994). Such a decentralized approach fails to ensure compatibility across state borders (Wilson and Teske 1990). Plans for upgrading the country's telecommunications infrastructure are largely internal to the national and regional telecom operating companies and to the local exchange carriers (LECs), with city and state governments playing minor roles. There are many rural telephone companies in the United States, many serving only small numbers of subscribers. However, these LECs (local exchange carriers) are very diverse, as are the rural areas that they serve (Egan 1992; 1996).

Since the onset of deregulation and telecoms competition, the situation in the 1990s shows greater variation from place to place. Deregulation immediately shifts priorities in decision-making from equity and universal service to new criteria the favor economic efficiency and profitability. Thus, it is large cities, where large firms (and large telematics customers) are found, as well as concentrations of small businesses, organizations, and households. The attraction of a market size will not diminish as increasingly sophisticated technologies are developed to attract customers who can afford them. Government programs seem to be necessary to counteract the tendency for urban bias (Eskelinen 1993).

In rural regions, telecommunications-led development does not occur on its own. Nor is there a simple correlation between telecommunications and regional development (Qvortrup 1994). Using county-level data in Pennsylvania from 1965-1991, Cronin et al. (1993) found that investment in central office equipment causes income growth, generally with a two- to four-year lag. Variation in investment in cable and wire had no significant effect on income. Within two individual counties, their findings suggest that investment in both types of infrastructure enhance county employment. Given the chicken-and-egg nature of telecommunications and income-employment measures, Cronin et al. (1993) also tested whether economic activity causes investment in telecommunications. Their results were much weaker in this direction, especially for individual counties.

Dholakia and Harlam (1994) analyzed data for all 50 states, including telecommunications as only one of several independent variables influencing average annual pay and per capita income. Their variable for telecommunications (number of business access lines per non-farm employee) is perhaps not the best measure, but it explains 67% of the variance in average annual pay across states. When all variables are included, telecommunications remains the most important determinant of annual pay. When a five-year lag between resources and pay is modeled, telecommunications becomes the second-most important variable behind education in explaining interstate variations in pay. No analysis thus far has examined broadband services, but it is evident that rural regions with low population densities are considered low priority for these technologies (Qvortrup 1994).

Qvortrup (1994) suggests that these correlation analyses fail to consider the economic, social, organizational and cultural factors involved in regional development. There is not a simple linear model of development, but a complex, synergistic one demanding integrated strategies. The issue is one of jobs, as it always is in rural development, and these jobs can come from exogenous sources (branch plants and other externally-controlled operations) or endogenous sources or local firms (Freshwater 1996). Both approaches, but especially the endogenous or locally-based one, require cooperation and partnership between public and private sector actors through which learning and synergy develop (Millard and O'Shea 1995: 35-36; OTA 1991: 31-32).

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