WASHINGTON, July 10, 2002—Appalachia substantially lacks both adequate access to a robust telecommunications infrastructure and the local capacity to use technology effectively for economic development, according to a new study prepared for the Appalachian Regional Commission (ARC). But the study also underscores the potential contribution information technology can make to the Region's economy, and highlights steps that can help narrow the gaps that separate Appalachia from the rest of the nation.

Concerned that Appalachia is failing to reap the benefits of the telecommunications revolution, ARC commissioned an outside study of the availability and use of telecommunications in the Region. Researched by University of Texas professors Sharon Strover and Michael Oden, Links to the Future: The Role of Information and Telecommunications Technology in Appalachian Economic Development provides the most detailed regional analysis of telecommunications barriers and opportunities yet conducted for any portion of the United States. The study incorporates data from the Federal Communications Commission, a review of state regulatory policies, interviews with service providers, and local case studies.

"This study demonstrates how crucial information and communications technology is to economic development," said ARC Federal Co-Chairman Jesse L. White Jr. "We need to pay attention to the lessons it draws for us so that Appalachia will not be left behind, the way it was when the interstate system bypassed the mountains. It has taken over three decades and billions of dollars to remedy this deficit. We still have time to ensure that this does not happen again with the telecommunications infrastructure. Our region deserves no less."

"The authors show that Appalachia has not been given the opportunity to participate in the information revolution to the extent that other regions in the country have," noted Tennessee Governor Donald Sundquist, ARC states' co-chairman. "But this well-researched and thoughtful study shows the steps that can be taken to rectify this situation. The current status quo is clearly unacceptable. Appalachia should have the same access to telecommunications as any other region of the United States."

"This report confirms that when deficiencies exist in a region's telecommunication system, economic potential suffers, and we're seeing that in Appalachia," said Ohio Senator George V. Voinovich, author of the 2002 ARC reauthorization bill. "It's this problem that I specifically hope to address with the new telecommunication initiative I included in this year's reauthorization bill for the Appalachian Regional Commission. When fully funded, this new initiative will help improve telecommunication infrastructure and expand the use of the Internet as a tool for business growth and education."

The full report in PDF format is available on the ARC Web site. To request a paper copy, contact Greg Bischak at 202-884-7790.

Major Findings and Recommendations of Links to the Future: The Role of Information and Telecommunications Technology in Appalachian Economic Development

1. Major Telecommunications Gaps Plague the Region

Fewer computers, less Internet access. Many parts of Appalachia?especially the more rural areas?have penetration rates of home computers, Internet access, and even basic telephone service lower than the national average.

Broadband/cable deficit. DSL-capable lines, a lower-cost broadband technology favored by small and medium-sized businesses in the rest of the United States, are not widely available in Appalachia, and cable modem service is spotty at best. As University of Texas professor Sharon Strover has noted, the research "shows that there are many regions in Appalachia that are lagging behind the national development of broadband connectivity." While many telecommunications providers' central offices are DSL-ready, many are not yet offering such services. In addition, the backbone providers' trunk lines and nodes are not plentiful in much of Appalachia. More advanced technologies are not on the immediate horizon for the Region's rural areas.

Fewer e-rate dollars. Federal Universal Service funding of E-Rate and Rural Health programs indicates that ARC counties taken together have received a significantly lower per-capita allocation of funds than the nation as a whole ($12.76 per capita in Appalachia, compared with $20.05 per capita for the United States).

Lack of skills in using technology. Locally based businesses have difficulty understanding and evaluating technology needs and choices, integrating new technology into their business plans, and implementing new technologies in ways that improve competitiveness. This lack of information, combined with access barriers, limits the effective adoption of information technologies and services across Appalachia.

2. The Economy Pays the Price

Costs create a competitive barrier. Advanced telecommunications at prices affordable to local businesses is a significant barrier to economic development in parts of the Appalachian Region. Rural broadband access for business can cost up to $2,500 a month, while urban access can cost as little as $150 per month. There are few competitive pressures for the pricing of telecommunications services. Nine Appalachian states have average loop costs that exceed the national average.

Slower information-technology sector job growth. While Appalachia shared in the late 1990s boom in information technology industries, the Region's employment in these industries lagged behind the nation's, growing 46 percent compared with the national rate of 53 percent.

Impediments to diversification. Technology barriers are having a profound effect on the growth and diversification of locally based manufacturing, service, and trade sectors. In manufacturing, branch plants have largely relied on parent companies to provide access in training, leaving small and medium-sized local businesses at a disadvantage.

Impact on health care. Limited telecommunications access and use is a particular problem for the health-care sector in rural communities. Both larger hospitals and rural health clinics have difficulty getting broadband access to offer new telemedicine services and meet the administrative demands of major provider networks.

3. Opportunities Exist to Bridge the Gaps

Technology potential is there. The Region has considerable potential for increasing the availability and use of technology products and services. States are adopting programs that seek to expand broadband availability, while local communities are investing in improved infrastructure. In the 1990s, employment gains in the information-technology sector outpaced general employment growth in the Region.

Leadership programs count. Case studies demonstrate that improvements in telecommunications access and use have been strongly driven by effective local leadership. Many information and telecommunications deficits can be addressed by improving the overall awareness of community and business leaders.

Innovative models offer promise. Various federal and state programs have enabled widespread connectivity among schools and libraries across Appalachia. Individual communities and some utilities have created alternative networks to make affordable broadband service widely available.

4. Key Recommendations

To address the gaps and capitalize on the opportunities disclosed by the research, the study recommends a diverse set of activities. Many of these parallel the elements of the telecommunications program authorized in ARC's new reauthorization legislation.

• Expand technical assistance to small and medium-sized Appalachian firms.
• Assist states and localities in applying for e-rate and Rural Health Assistance.
• Encourage demand aggregation strategies to improve the power of communities to bargain with telecommunications providers.
• Identify and disseminate information on model programs.
• Monitor state regulatory efforts to leverage improvements in infrastructure and service.
• Support demonstration projects with alternative technology providers.
• Support the expansion of public institutions' roles in offering broadband access.
• Continue to monitor broadband deployment and work with organizations attempting to initiate national or statewide deployment policies.