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Infrastructure, including transportation, telecommunications, water,
and energy, connects rural America with the urban and global economies.
Hence, improvements to infrastructure may be the driving force behind
some development strategies. Improvements to infrastructure—particularly
transportation infrastructure—are also critical to rural areas
with a high stake in the agricultural economy. For discussion of the
relationship between infrastructure and the food and agricultural
economy for different countries, including the United States, see 2004-2005
individual economy profiles.
Some infrastructure improvements aim to improve local quality of life
but by doing so can also further economic development. For example, many
rural areas envision broadband Internet services as a way to connect
households, as well as schools, hospitals, and other organizations, to
resources available through the worldwide telecommunications systems.
However, broadband Internet provision may also benefit rural business
development.
Although infrastructure improvements can benefit rural communities and
their economies, they come with a price tag. Infrastructure improvements
often cost more, per job generated, in rural areas than in urban areas
because rural areas lack economies of scale (see Economic
Impact of Water/Sewer Facilities on Rural and Urban Communities).
Moreover, it is difficult to predict the impact of infrastructure improvements
on a local economy. Hence, careful planning is important when undertaking
infrastructure projects.
Infrastructure often has a regional dimension, partly because it is
more economical to build infrastructure for the entire region than for
each town separately, and partly because of the need for a community
to control negative externalities, such as traffic congestion or pollution
spilling over from neighboring communities.
Regulatory policy also has a role in infrastructure development and
use. For many forms of infrastructure, particularly transportation, electricity,
and telecommunications, regulators loosened regulations during the last
quarter century for the industries that depend on infrastructure to provide
services. During the same period, environmental regulations tightened.
These changes had implications for rural communities in terms of cost
and access to services using infrastructure.
Transportation
Roads and bridges are probably the most fundamental form of infrastructure
for any community, providing transportation to both commodities and people,
connecting businesses to suppliers and consumers, and connecting residents
to critical public services, such as health, education, and emergency
services. Rural road and bridge quality has improved in recent years,
aided by increased Federal funding. Nevertheless, many rural (nonmetro)
areas are still plagued by traffic congestion and poor-quality roads
and bridges (see the brochure Rural Transportation
At A Glance). Shortcomings
in a local or regional road network can affect not only local quality
of life but also limit the potential for economic development, since
poor roads can hurt businesses and lessen an area's appeal to tourists.
Interstate highways play a key role in economic development strategies
because they connect rural businesses to urban markets, rural residents
to urban shopping and services, and urban tourists to rural tourist destinations.
An increasingly global marketplace also makes airports and regular air
service important to today's rural economy. In addition, airports
can help attract tourists or residents to geographically isolated areas.
Not surprisingly, both forms of infrastructure have been found to be
statistically significant in terms of their effect on rural economic
growth (see Rural Economic Development:
What Makes Rural Communities Grow?).
The Nation's railroads and inland waterways are vital to rural
businesses that transport commodities or inputs in bulk. Other industries
also depend on these transport systems. Deregulation has helped to reduce
the cost of transporting goods on the rail system, which has been restructured
to achieve gains in efficiency. However, this has led rail firms to abandon
unprofitable lines, requiring affected businesses to find alternative
means of transportation, such as trucking. Some communities have sought
to offset these losses by establishing small railroads that continue
to serve key industries. With the booming U.S. economy in recent years,
freight shipments by truck and rail have grown rapidly. Waterway shipments
have declined over the same period.
Deregulation has also affected trucking, interstate bus service, and
airline passenger service. In many cases this has lowered costs to businesses
and consumers, but it has also presented problems for some communities.
For example, many rural communities lost airline service after the Airline
Deregulation Act of 1978. While Federal subsidies help maintain some
of the airlines serving rural areas, many residents, particularly those
in sparsely populated areas, still lack local airline service and often
must travel long distances to urban airports. Some affected rural communities
have banded together to support regional airports that serve their joint
needs and promote economic development.
For more information on rural transportation infrastructure and related
issues, see Transportation
in Rural America: Issues for the Twenty First Century.
Telecommunications
In recent years, advanced telecommunications, including the Internet,
have increased their presence in rural areas, improving both the rural
quality of life and the rural economy. Still, rural areas lag behind
urban areas in Internet
use, with 52 percent of rural residents versus 60 percent of urban
residents using the Internet in 2003. Broadband, the most quick and effective
form
of Internet service, was used by 21 percent of rural Internet users
versus 39 percent of urban users in 2003. This so-called urban-rural
divide may narrow somewhat in the future, but a gap will likely
remain.
Where broadband Internet is available, rural development
strategies might target the development of certain types
of businesses that are believed to benefit the most
from the service:
"lone eagles" who can conduct private consulting,
investment activity, and other business pursuits from
any location; telecenters, telecottages, and workers
who telecommute; existing rural businesses that wish
to expand their niche markets, such as farms that sell
organic foods; and telecommunications-dependent firms
such as catalog retail operations. However, all rural
businesses can benefit from this broadband technology.
They can also benefit from guidance in using the Internet
provided by USDA's
National E-Commerce Extension initiative.
Advanced telecommunications can also enhance rural education, for
example, through distance learning courses, and rural health and
hospital services, through telemedicine. These and other such uses of telecommunications
may particularly benefit smaller, more isolated rural communities,
including those losing population.
For more information on the Internet and rural telecommunications, see
the ERS Rural Telecommunications Briefing Room.
Water
Water infrastructure often goes unnoticed by the general public until something
goes wrong. In extreme cases, such as the bursting of the levies in New
Orleans following Hurricane Katrina, the costs to the community and the
economy can be extremely high. Such incidents, however, are infrequent.
More typical water infrastructure issues involve municipal water and
sewer systems. These issues generally stem from inadequate capacity to sustain
growth or the need to improve water quality. Rural communities can derive
sizeable economic benefits from water and sewer projects, including increases
in jobs, private investments, and property tax bases (see Economic
Impact of Water/Sewer Facilities in Rural and Urban Communities).
Many industries benefit directly from access to clean water. For example,
manufacturers in the U.S. use about 13 trillion gallons of clean water
annually.
The U.S. soft drink industry, with about $50 billion in sales, uses
about 12 billion gallons of drinking water. Agriculture, too, depends
on access to a reliable and clean water supply. Approximately 15 percent
of U.S. farmland is irrigated, producing crops worth about $70 billion
per year.
Irrigated
agriculture and livestock production employs 3 million people. Thus,
some rural development strategies can target water system improvements
to meet
the needs of such industries.
Water infrastructure also helps maintain environmentally healthy bodies
of water, which, in turn, help stimulate rural economies. For example,
beaches, lakes, and rivers are major sources of recreation and tourism.
Clean water sustains a U.S. commercial fishing and shellfish industry
worth about $45 billion per year and employing more than 250,000
people.
Water infrastructure is also critical to the local community—all
residents need clean water. Hence communities planning for economic
development
and growth must consider the capacity and condition of their water
systems.
The per capita cost of water investments can be very high for small,
sparsely populated rural communities lacking economies of scale.
Environmental regulations protecting water quality add to these
costs (see Small
Rural Communities' Quest for Safe Drinking Water). Rural
communities also face higher per capita operational, maintenance,
and compliance
costs once their water systems are functioning. Moreover, many
of these rural areas have limited tax bases to pay the higher
per unit cost of
small-scale drinking water and wastewater treatment facilities.
Many small systems serve fewer than 1,000 residents, making it
difficult for water users to pay for full-time system operators,
operator training,
and advanced technology systems. To cover costs, the systems
must charge relatively high user charges. Although some communities
may be able
to join together to build jointly operated systems that take
advantage
of
scale economies, many rural towns are isolated geographically
and cannot use this cost-cutting approach. Federal programs
can help
by providing
financial and technical assistance to rural communities seeking
to upgrade their water infrastructure.
Energy Infrastructure
A prerequisite to rural development is an ample supply of electricity
and other forms of energy, such as natural gas, coal, and oil, that
are used to heat homes and to fuel industry. The main form of energy
infrastructure is the network of electric and gas lines that transmit
energy from the producer to the user. Energy producers also rely
on infrastructure, including hydroelectric dams and other electric-generation
plants, oil depots, and special port facilities.
Rural America currently enjoys high-quality electric service, and the
continued provision of that service is essential to rural economic development
efforts. However, changes in regulatory policy may affect the cost and
availability of electricity to rural communities. In recent years, efforts
to use regulatory policy to restructure the electric market have been
a source of controversy. For example, after California restructured its
market, electricity prices increased significantly, leading some States
to reconsider plans to restructure their electricity markets.
Rural electric utilities, most of which are cooperatives, serve 11 percent
of the U.S. population and 75 percent of the country's total land mass.
They are small entities, compared with the typical investor-owned utility
(IOU); on average, rural utilities serve 10,000 customers while IOUs
serve 315,000 customers. Rural electric utilities are costly. Their customers
are far apart and require larger per capita investments in infrastructure.
These customers, who are mostly residential, also tend to have highly
variable demand. The extra capacity needed to serve peak demand is costly
and goes unused for significant portions of the day. Urban utilities
have more nonresidential customers who can operate at off-peak hours,
allowing them to better optimize the use of their capacity. Federal assistance,
primarily in the form of loans and loan guarantees, can help finance
rural electric cooperatives.
Some rural industries, such as food processing plants, are heavy users
of electricity or natural gas, making them susceptible to regulatory
changes that might increase the cost of these sources of energy. Similarly,
some rural communities with unusually high heating or cooling needs
are also susceptible to changes in energy costs. Thus, rural development
strategies can benefit by considering the implications of changes in
energy prices or energy infrastructure regulation.
In recent years, rural development strategies have encouraged the development
of businesses that make use of alternative energy sources to create
energy. Some of these businesses, such as wind energy generation
plants, require
the use of power transmission lines to sell the electricity they
produce. Hence, they are also affected by electricity regulation policy
governing
the construction and use of such lines.
See related links and recommended
readings covering issues on infrastructure and rural development.
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