TVA Rural Studies

Telecommunications and Rural Development:
Threats and Opportunities

Edwin B. Parker
Parker Telecommunications
May 1996

10. Bringing Telecommunications Applications to Rural Users

The benefits of telecommunications investment will only come to rural users when they have access to applications that will make a difference in their quality of life or the productivity or their organizations. Making applications accessible to users requires more than installing appropriate telecommunications networks. It also requires: (1) the availability of terminal equipment to attach to the networks, including computers and application software, (2) the information content or services that will be transported to those terminals over the networks, and (3) the availability of training and technical support services to teach users the skills needed to take advantage of the applications. Rural users are already skilled in using telecommunications networks for voice and facsimile transmission applications. Two new clusters of application types are now emerging in rural areas. The first is data networking, electronic mail and Internet access. The second is distance learning, telemedicine and videoconferencing.

Rural businesses and rural residents are increasing their use of computers at a rapid rate. Small rural businesses throughout the country are finding that they need computer access to customers and suppliers. The use of electronic mail and access to the Internet is now growing faster than the explosive growth of facsimile transmission in the past ten years. Urban residents and businesses have an advantage over rural residents and businesses, because those in urban areas can connect with electronic mail services, electronic bulletin boards and on-line databases with a local call. Many rural residents pay long distance toll calls to connect via modem to these services.

In urban areas, Internet providers and on-line services such as CompuServe, Prodigy and America Online provide local access numbers. Alternately, urban subscribers may dial the local urban number for one of the value-added data network services such as SprintNet or BT Tymnet for data network connections via a local call. Many of the services and networks also offer 800 number access, which rural users can use. Such “free” services are often uneconomic for rural users because the information service providers add a surcharge to their information services to cover the higher costs of 800 number access. The resulting higher charges are usually as much as or more than telephone toll charges from rural locations to the nearest urban information service node.

One goal should be to have data network access to the Internet and to the major information services providers available as a local call from all rural areas of every US state. One way to achieve that would be to share network access services with a state government data network. Another would be for rural carriers to offer to the information network providers a shared data network access tariff or rate. For example, each information provider willing to pay for the service could get a unique local phone number within each local service area, without paying for an unneeded local access line. The number would connect to shared data network line back to the nearest urban area with a connection to the Internet or the appropriate information service provider. Information service providers would pay for their portion of the shared data network access line until such time as their volume of business from that location was sufficient to justify the costs of dedicated leased line services. Because the local phone number would be unique to each provider, even though they used a shared long distance leased line, the information service providers would be able to market services to rural areas as if they had their own dedicated network in place. Rural telephone carriers would need to learn something about the data business and have authority to offer flexible local access rates in order to make it a profitable service.

Many rural business users, like business users in urban areas, are likely to quickly outgrow the data capacity of a voice-grade telephone line with modem attached. The next level of capacity need, however, is less likely to be the capacity of a T1 circuit or similarly wide-band channel. (A T1 circuit provides capacity equivalent to 24 voice channels or 24 data channels each with 56 kilobit per second capacity.) More likely, they will need switched 56 kilobit data services or the data networking capacity of a basic rate ISDN channel (two 64 kilobit channels). Most digital switches in rural telephone service can handle 56 kilobit data service. Many rural telephone switches cannot provide ISDN services however, because the necessary software is not yet available from the switch vendors.

In cases where there is insufficient demand to justify the cost of adding a feature to the rural switch, it is still possible to provide service by offering it from another switch that does have the desired feature. If there is adequate capacity on the interexchange trunk lines, for example when interoffice fiber optic capacity has been installed, then the incremental cost of providing the service from another switch would be minimal. Nevertheless, if the carrier bills the customer for a leased dedicated toll line to another switch, the price to the customer would be prohibitive.

Rural carriers should get regulatory authority to provide free or incremental cost backhaul, when they can provide customer service in that manner more cheaply than adding costs to the local switch. This will allow the offering of rural service and the chance to develop the market to the point where, eventually, it will be cost-effective to add the desired feature to the local switch. Otherwise, rural users may be trapped forever in the chicken and egg problem of never getting service because there is not enough initial demand to add the desired data capability to the local switch. Once the service is available from a remote switch (permitting aggregation of business from a wider number of locations) then carriers can market the service and benefit from growing demand.

Rural schools, much more than urban schools, need access to broadband video distance learning networks. Rural schools may not be able to offer with local on-site staff all the technical and specialty courses their students need. Distance learning options are particularly attractive to rural schools with a shortage of science and foreign language teachers. Rural medical clinics and hospitals could particularly benefit from broadband telemedicine applications permitting medical consultations without requiring transport of rural patients to urban medical centers. Rural businesses could often benefit from access to business videoconferencing facilities. Rural businesses are likely to save more travel costs than comparable urban businesses because of the greater distances involved.

Such broadband services are beginning to appear in rural locations throughout the country, but usually as specialized dedicated applications instead of switched public access services. In rural Lincoln County, Oregon there are two videoconferencing facilities, neither of which is available for general small business and public access. One is an educational network facility (Oregon EdNet), and the other is a dedicated facility located in the mill that is the county’s largest commercial employer. That facility permits local management to videoconference with their corporate management at an east coast facility. At this time, there does not appear to be enough market demand from the remaining businesses and institutions in the rural county to support a public access facility. Lodging facilities might attract more conference business if they had local videoconferencing capabilities to connect multiple sites or bring in speakers by remote conferencing hookups. The local economy would benefit if businesses could share conferencing facilities. Unfortunately, if the major customers provide private, dedicated facilities the remaining market will be too small for public access videoconferencing to be profitable. Similar situations may exist in other rural communities. Local committees could perhaps work with telecommunications providers and the potential large users to see if they can work out a sharing arrangement to create at least one public access videoconferencing facility.

The next large market in videoconferencing is likely to be desktop videoconferencing to personal computers. The retail price per computer is now down to about $2000 per computer for the necessary hardware and software. Some analysts predict that rate will drop to $500 within the next two years. Unfortunately, this application requires basic rate ISDN lines to work satisfactorily. This desktop videoconferencing application may bring substantial additional business to those rural carriers able to offer ISDN service, either directly from the local switch or via backhaul to an appropriately equipped switch.

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