UPDATE

The Information Highway:
If you build it, will they come?

---

By John Toon

IF YOU BUILD IT, will they come? That is a key question being studied as part of national debate over the potential economic development benefits of the proposed "Information Superhighway."

Will the advanced telecommunications infrastructure proposed by the Clinton Administration really bring widespread economic benefit, especially to rural areas?

Fiber optic cables, such as those Dr. Jan Youtie displays here, are among the advanced telecommunications capabilities some communities are depending on to spur business development. Such communities must prepare for economic growth in other ways as well, Youtie notes.

In a presentation to the annual meeting of the American Association for the Advancement of Science on Feb. 18, 1995, policy researcher Dr. Jan L. Youtie argued that telecommunications-based economic development strategies are too new to permit an analysis of their success. Although telecommunications services provide an important foundation for economic competitiveness, she warns that providing advanced telecommunications capabilities may not necessarily spur business development -- especially if communities have not otherwise prepared for economic growth.

Her comments are based on detailed case studies of five communities that used different telecommunications-based strategies as cornerstones for their economic development. The most successful of those -- Richardson, Texas, and the Asian nation of Singapore -- benefitted from unique factors that may not be present in other communities.

"There are two camps concerning the issue of telecommunications and economic development," explains Youtie, a senior research associate in Georgia Tech's Economic Development Institute.

"One of the camps could be called the 'recruiting camp,' which says that the best way to create economic development with telecommunications is to recruit telecommunications firms to the area using traditional techniques. The other would be characterized as the 'Information Superhighway' camp, which says, 'Build it and they will come.'"

The "Texas Telecom Corridor" in Richardson, a suburb of Dallas, developed from two companies -- Collins Radio and Texas Instruments -- as well as the relocation of telecommunications firms such as MCI, Northern Telecom and Fujitsu. Also included were smaller start-up firms that spun off from the larger ones.

"We originally looked at Richardson's development in terms of the Silicon Valley model in which there is a critical mass of universities and business clustering with venture capital," she explains. "Although Richardson had some of these pieces, it didn't completely fit the model. For example, the local university came afterward to support industry's burgeoning labor force and training needs."

Company recruitment and advanced information infrastructure helped Singapore become an international telecommunications gateway for the Asia/Pacific region. In that nation, just as in Richardson, unique community factors combined with good timing to bring about a positive economic result.

"Both of them had 'technocracies.' In the case of Richardson, the government was run by people from the high technology companies who could 'walk the walk and talk the talk' of telecommunications," Youtie adds. "Singapore had a champion, former prime minister Lee Kuan Yew, who used his considerable governmental powers and involvement of then-government run Singapore Telecom to sell the idea. But there was also an element of luck, because if you place a strategic bet on a certain economic sector, there is always risk."

Youtie and fellow researcher Dr. William H. Read, who is Southern Bell Professor of Telecommunications Policy at Georgia Tech, also studied three other communities that hoped an advanced information infrastructure would spur business growth. While the jury is still out on the economic success of those moves, there have been problems just in building the infrastructure.

In New Jersey, legislators lessened regulatory controls so statewide New Jersey Bell Company could bring new technology to the state's residents much sooner than might have been allowed under traditional demand-based rate structures. Under traditional regulations governing telecommunications companies, demand for costly optical fiber and digital switching systems must be shown before major investments can be made in the new technologies.

Relaxing those rules meant New Jersey citizens would have access to these technologies ahead of citizens in competing states like New York and Connecticut. However, the special advantages given to New Jersey Bell created controversy among other potential service providers. Youtie believes states considering similar regulatory moves should head off trouble by fairly addressing the competing interests of all the players in the market, including industry segments that have not traditionally provided telecommunications services.

The advantage provided by advanced telecommunications to states like New Jersey, however, may prove only temporary as competing states build their own advanced systems.

"We feel that most of the states will follow along and that eventually all of the states will have the same kind of infrastructure," she added. "We don't think there will be as big a difference from one state to another as there will be from one country to another."

Providing advanced telecommunications services to rural areas has been proposed as a way of attracting growth in "telecommunications-intensive" industries such as back-office data processing operations of insurance and credit card processing companies.

Youtie believes this "build it and they will come" strategy is flawed and could leave rural areas without supporting hardware, software, training, and maintenance -- and at a greater disadvantage relative to urban areas.

Further information is available from Dr. Jan Youtie, Economic Development Institute, Georgia Institute of Technology, Atlanta, GA 30332-0640. (Telephone: 404/894-6111) (E-mail: jan.youtie@edi.gatech.edu)

 

Send all questions and comments to Webmaster@gtri.gatech.edu

Last updated: 26 Jan. 1996