TVA Rural Studies

Telecommunications and Rural Development:
Threats and Opportunities

Edwin B. Parker
Parker Telecommunications
May 1996

4. The Information Superhighway

The overused superhighway metaphor means different things to different people, and is often used as a catchy label for a hoped for outcome of the profound changes now taking place. Dramatic changes in telecommunications and information processing technologies may be the root cause of the changes. The consequences include a complete restructuring of telecommunications institutions, bringing competition to former telecommunications monopolies. In the process, laws and regulations are changing and Federal, state and local governments are launching new initiatives intended to shape the revolution to better serve public purposes. Many business opportunities abound in the rapid transformation. As with any change of this magnitude, there are both opportunities and threats. Rural communities and the people and small and medium sized businesses located in them have both the most to lose and the most to gain. The only certainty is change. The key question is how can rural communities take advantage of the opportunities and avoid the threats.

Telecommunications switches use the same electronic information technology that brings a dizzying rate of increased capacity and lower costs in computing. Fiber optic and radio technologies are bringing comparable technical revolutions to the transmission side of telecommunications. The technologies of telephony, broadcasting, cable television and computing are converging and becoming less costly. Our personal computers are becoming multi-media and teleconferencing machines. Formerly separate analog communications technologies are converting to digital and becoming indistinguishable digital bits of information on multi-purpose broadband digital communication channels.

Telephone companies will soon be offering video services and cable television companies will soon be offering telephone services. Wireless telephones, including established cellular telephone services and emerging personal communications services (PCS), will provide competition for both. Electric power utilities, which already have extensive telecommunications capacity for their own internal communications needs or can easily install it on their rights of way, are likely to be selling telecommunications services in competition with established telecommunications providers. Local telephone carriers will bring additional competition to the already competitive long distance telephone market. Long distance competitors, including AT&T, MCI and Sprint, will bring increased local telephone competition. Since nobody has all the answers and the costs of entry to specialized markets will be small, new entrepreneurial companies will expand in a variety of specialized niche businesses.

The Communications Act of 1996 is the most extensive revision of telecommunications law in the United States since 1934. The legislation removed most remaining barriers to widespread telecommunications competition, including preempting state legislation and regulation that might otherwise inhibit competition. The legislation recognizes that these changes could harm rural communities and businesses and therefore contains some rural safeguards to help minimize the potential damage. It does not exempt rural locations from competition nor protect rural areas from potential benign neglect by present rural monopoly providers focused on responding to competitive threats in their more lucrative urban markets.

The new Federal legislation includes some elements of the Clinton-Gore National Information Infrastructure Initiative, including some assistance for services to rural schools, libraries and medical facilities. The Federal Communications Commission has issued a notice of proposed rulemaking and established a Federal-State Joint Board to reconsider universal service policies and support mechanisms in the light of the new legislation.

Some potential competitors view the information superhighway as a broadband communications network permitting customers to rent movies from the comfort of their homes, without having to go to a video store to rent a VCR. Others see it as a vehicle for selling interactive video games and other multi-media entertainment.

Some consumer advocates argue for advanced universal service, "To make available as far as possible, to all people of the United States, regardless of race, color, national origin, income, residence in rural or urban area, or disability, high capacity two-way communications networks capable of enabling users to originate and receive affordable and accessible high quality, voice, data, graphics, video and other types of telecommunications services."

Meanwhile, not waiting for any legislative or regulatory changes, the Internet (a global network of interconnected computer networks) continues its explosive exponential growth. To many, the Internet with its global digital interconnections, is the Information Superhighway. For many rural communities, the issue of on-ramps to the Information Superhighway is really a question of whether residents and businesses have local access to the Internet or must pay long distance toll calls to make their Internet connections. Already many Internet users have become dissatisfied with the slowness of Internet access using standard modems over typical analog telephone lines. The next major Internet access issue is certain to be more universal availability of high speed digital access instead of (or in addition to) the current low-speed access over analog telephone lines.

Many businesses view the Information Superhighway as an electronic means to connect with their suppliers and customers with lower transaction costs than those required by current means of buying and selling goods and services. Making the Internet secure for electronic commerce is their primary goal. Rural retailers without appropriate access to the Internet will face tough new competition, just as they did from Wal-Mart or other discount super stores and from mail- and telephone-order catalog sales. On the other hand, rural businesses with appropriate products and with Internet access may find major opportunities to reach beyond their local market to other rural areas, and to urban and international locations, either directly or through distributors.

Whatever form the Information Superhighway ultimately takes, it will be unlike the construction of railroads and interstate highways in one important respect. Because of the enormous costs of major transportation infrastructure, railroads and interstate highways could not be available everywhere. They primarily connected urban centers and only incidentally brought economic advantage to the rural areas they passed through. Rural communities left off the major transportation networks were disadvantaged. The Information Superhighway is different. The costs of construction, although huge, are not so prohibitive that some rural communities must be left out. Instead of battling to have transportation routes pass through their community at the expense of other communities, every rural community can fight successfully for local access to the Information Superhighway. Just as with major railroad and interstate highway construction, those communities not connected to the emerging Information Superhighway will have a serious economic disadvantage. The good news is that with determined local action, every rural community wanting access should be able to be connected.

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