SECTION: CAPITOL HILL HEARING TESTIMONY

LENGTH: 2760 words

COMMITTEE: HOUSE SMALL BUSINESS

SUBCOMMITTEE: REGULATORY REFORM AND PAPERWORK REDUCTION

HEADLINE: TESTIMONY BROADBAND IMPACT ON RURAL BUSINESS

TESTIMONY-BY: NANCY STARK , DIRECTOR OF COMMUNITY AND ECONOMIC DEVELOPMENT

AFFILIATION: NATIONAL CENTER FOR SMALL COMMUNITIES

BODY:
May 17, 2001 House Committee on Small Business "Economic Development in Rural America - Small Business Access to the Broadband" Prepared Remarks of Nancy Stark National Center for Small Communities Chairman Pence and Chairman Thune, members of the subcommittees, thank you for the opportunity to testify before you today. I am Nancy Stark, Director of Community and Economic Development at the National Center for Small Communities (NCSC), here in Washington DC. For the past 24 years, I have directed research, designed and conducted training programs, written guidebooks and provided technical assistance to small town leaders and rural development practitioners, especially on the topics of economic development and (most recently) technology. It is a pleasure to share the NCSC's insights on the impact of broadband telecommunications services on small businesses in rural America, and its importance in maintaining the economic health of rural communities. The National Center for Small Communities (NCSC) is the only national, non-profit research and technical assistance organization devoted exclusively to serving the public servants of America's small and rural communities. The Center accomplishes this mission by providing small town leaders with tools to govern effectively, and by developing skills to expand local economies, protect natural resources and preserve community character. The NCSC was founded in 1984 as the educational arm of the National Association of Towns and Townships (NATaT). Incorporated as a separate non-profit organization in December 1996, the National Center develops and distributes educational and training program materials in such critical areas as local government management, community and economic development, funding and fundraising, environmental issues and telecommunications. Guidebooks and other materials are particularly geared to rural and small communities with limited staffing and financial resources. On the topic of rural telecommunications, the NCSC has directed three recent initiatives. In September 1999, the National Center published Getting Online: a guide to the Internet for small town leaders. Initially developed with funding from the USDA Fund for Rural America, the guidebook went into its third printing (thanks to private sector support) and distributed more than 40,000 copies to small community leaders across the country. Also in 1999, NCSC partnered with the AOL Foundation (now the AOL Time Warner Foundation) to launch the AOL Rural Telecommunications Leadership Awards. The Awards recognized and promoted outstanding achievement in rural community development, resulting from the deployment and use of advanced telecommunications. All applications demonstrated how enhancing rural telecommunications had invigorated the community or region in demonstrable ways. The National Center managed the Awards program for two years and distributed $100,000 to successful applicants. In October 2000, the NCSC commenced a year-long research project to identify and explore effective Technology-Led Economic Development Strategies for distressed rural communities, with funding from the U.S. Department of Commerce, Economic Development Administration (EDA). Through in-depth case study research, NCSC will produce two useful and accessible research products for economic development practitioners: (1) a Best Practices print publication that identifies and describes the most effective technology-led economic development strategies for distressed rural communities; and (2) a collection of 14 in-depth case studies on technology-led economic development drawn from distressed rural regions. Both products will be accessible on the NCSC Web site by October 2001. America is a nation of very small communities. The latest Census of Governments reports that of the 36,001 sub-county local governments, approximately 90 percent have fewer than 10,000 residents; 82 percent have fewer than 5,000 residents; and, 51 percent have fewer than 1,000 residents. These are the small communities that, in large part, remain on the wrong side of the digital divide, with significant consequences for business development and economic vitality. Much has been reported about an apparent narrowing of the urban- rural digital divide. According to the U.S. Department of Commerce, nationwide, the gap between rural households and others that access the Internet has narrowed from 4 percentage points in 1998 to 2.6 percentage points in 2000. The Falling Through the Net: Towards Digital Inclusion October 2000 report also showed that 38.9 percent of households now have Internet access, a 75 percent gain from 22.2 percent in December 1998. However, these statistics mask the real urban-rural digital divide. More and more rural households and businesses have Internet access, but few have high-speed, broadband telecommunications services. While nearly all rural users can now ramp onto the Information Superhighway via a local dial-up connection (versus paying long-distance charges to simply connect to the Internet), the deployment of high-speed services has been slow and limited. As explained in Advanced Telecommunications in Rural America, an April 2000 joint U.S. Department of Commerce and U.S. Department of Agriculture report, rural America's Internet service providers rely, primarily, upon local telephone carriers to transmit data, with a resulting connectivity speed limit of about 33 Kbps. Less than one percent of residents in communities with fewer than 10,000 residents have access to DSL, while this number explodes to 86 percent for cities with populations above 100,000. The same is true for high-speed cable modem access. Approximately one percent of residents in communities of 10,000 population has access to cable modem service, compared to 72 percent of residents in cities above 250,000 population. Additionally, on top of the slow connectivity problem, many rural dial-up customers experience busy signals due to crowded phone lines. Without state-of-the-art telecommunications, rural businesses are at a severe disadvantage. Today, nearly all businesses have some connection to the Internet. Small- and mid-sized enterprises are being forced to migrate their businesses to the Internet by the bigger companies they are affiliated with. In this symbiotic relationship, most small businesses are either suppliers to, or distributors of, bigger businesses. Businesses need high-speed, broadband services to download files, submit or receive orders, view graphics, access databases, etc. Even if they don't maintain a Web site to sell goods and services directly to consumers (although many do), they must still maintain electronic communications with their affiliated companies. Without state-of-the-art telecommunications, businesses are less productive. Consider the time it takes to download a 10-megabyte file using dial-up versus high-speed Internet access. Using a common 28.8 Kbps dial-up modem, it would take 46 minutes to download the file, or 1.5 hours using a slower, 14.4 Kbps modem. In contrast, the same 10-megabyte file could be downloaded in 20 seconds using a 4Mbps cable modem or in 10 seconds using an 8Mbps DSL connection. Rural businesses that transmit or receive large files, especially graphics, x-rays and audio files, require high- speed connections. There are signs that the deployment of broadband telecommunications services to rural America is increasing. Several of the small communities participating in NCSC's research project on Technology-Led Economic Development are benefiting from high-speed communications, primarily DSL. Examples include Abingdon, VA; Klamath County, OR; Colville, WA; and, Watford City, ND. Our observation is that, despite demand from the local residential and business market, it is chiefly the small, local telephone companies or cooperatives that are providing DSL (and, rarely, cable) services to small communities, not the larger companies. Sometimes, high-speed telecommunications services result from a partnership between the local telephone company or cooperative and a rural electric cooperative. As reported in May 2001 magazine of the National Rural Electric Cooperative Association (NRECA), Willmar, MN is now served by a cooperative-run telecommunications venture called En-Tel. The venture includes a power company, a rural electric coop, three independent telephone companies and a municipal utility. En-Tel is building redundancy - creating a loop that will keep Willmar in business even if a fiber optic cable is cut or there's a failure outside the city - and overbuilding, meaning laying cable to nearly every home and business without any guarantee that they will purchase the service. Redundancy and overbuilding are critical elements of successful telecommunications services, but are rare in small, rural communities. There is much disagreement in Washington about if and how the Federal government should stimulate broadband deployment in rural areas. Our observation is that the market forces in many small, especially remote communities may not be sufficient to inspire the development of high-speed services, and that Congress may need to consider market-based incentives to spur deployment. As small, rural communities struggle to create, retain and expand local jobs and income generation, broadband deployment will become increasingly vital. The following is a partial list of technology-led economic development strategies that are far more effective if high-speed telecommunications services are available: Business and technology incubator (shared space and services for business start-ups) Interactive community Web site (to promote business attraction or tourism development) Internet Masters Program (train-the-trainers introduction to the Internet) Community Technology Center (public access for community residents) Tech Training (info tech or scientific training to enhance local labor skills) Youth cyberguides (young people assisting local businesses with e-commerce) Because of the critical influence of broadband telecommunications services on rural economic development, the National Center hopes that Congress will explore strategies for helping communities that remain on the other side of the digital divide. Thank you again for this opportunity to testify and I will be happy to answer any questions you may have.

LOAD-DATE: May 18, 2001, Friday