Economic development

It is being widely reported that Internet shopping over the Thanksgiving weekend jumped dramatically, especially on Thanksgiving Day. Apparently, while everyone was waiting for the turkey to cook, twice as many people as last year went online to do a little shopping. Friday also saw a big increase (about 50% more).

The big loser was Walmart, which did not see the big increases expected. Other stores, like Target, apparently did better. There are all sorts of theories explaining various aspects of the holiday shopping--that Target offers a nicer shopping environment and better quality, that Walmart shoppers bought from Walmart.com instead of going to the store, and so on. All the explanations probably have some truth to them.

I'm more interested in the implications for smaller and rural communities. One interesting fact is that half of broadband users were apparently shopping online, by one estimate. That's a big number, and I think the reason is that you really need (and want) broadband for online shopping. Browsing an online catalog by dialup is painful. You might as well get in the car and drive to the shopping center.

For rural communities, affordable broadband and the willingness to shop online means people living in these towns and regions have much the same shopping alternatives available to them as people in the suburbs and big cities. But you have to have the affordable broadband.

It also means that small towns and communities may want to think differently about their approach to retail. In many of the towns and regions in which I work, there is much worry and discussion about the lack of retail. Maybe this is not the problem we think it is--if your residents have affordable broadband. It may be that money spent on retail initiatives might be better directed at quality of life issues that will attract entrepreneurs and businesspeople to the community, who know they can shop online, and instead want a Main Street that supports small businesspeople (lawyers, accountants, copy services, coffee shops, good restaurants, etc.). Finally, the change agent is affordable broadband. Instead of putting new street lamps on Main Street with the hope of reviving retail stores there, invest in a public broadband infrastructure that will bring broadband providers to town--thereby letting people shop online.

There is the old joke that goes like this:

"There are two kinds of people in the world--those that divide people into two groups, and those that don't."

At the risk of self parody, there are two kinds of people in the world (and I'm broadly overgeneralizing, of course)--those that use eBay and those that don't.

For those that don't, the eBay phenomenon is a bit of mystery. From a certain distance, EBay is cluttered with junk, trivia, excess, and silliness. But it also is a terrific business transaction mechanism, for both formal and informal business.

About this time last year, Virginia Tech, right here in rural Appalachia, made world news with a dirt cheap supercomputer that ranked number 3 in the world in terms of speed and processing power.

The university did some thinking out of the box and discarded the conventional approach to building supercomputers (typically using a lot of custom hardware). Instead they bought 1100 off the shelf Macintoshes, wired them together with more off the shelf hardware, and wrote a small amount of software to turn the Macs into a monster supercomputer.

Outsourcing of U.S. jobs to other countries, depending upon who you believe, is wrecking the country or no big deal. Based on data developed by business experts like Peter Drucker, who says three U.S. jobs are created for everyone that is outsourced, I'm inclined to believe that it is not a major concern as a national issue.

The U.S. Dept. of Labor has announced they are going to revise the way they count jobs. In the past, the emphasis was on the Payroll Survey. In this survey, employers are called and asked how many employees they have. Payroll jobs have been shrinking, hence a lot of political heat and smoke about whether the economy is improving or not. But Labor has also been doing what's called the Household Survey, in which households are polled about who is working in the household. Job counts based on the Household Survey have been increasing rather dramatically, but the government has not really factored those jobs into the "jobs" number that typically gets published and discussed widely.

If you have a self-employed husband and wife, both fully "employed" in their own businesses, those jobs never show up on the Payroll Survey. They would on the Household Survey.

This is an important issue for communities trying to measure the impact of new and diversified economic development efforts, like investments in getting affordable broadband and small business training and development. If economic developers are being rewarded for increases in payroll jobs, the community is losing out big time--that's not where the growth is.

Not only that, a factory floor payroll job is not necessarily equal to a self-employed job. A prosperous microenterprise owner with a gross business income of $150,000/year and take home "pay" of half that has a much larger impact on the economic health of the community than a $12/hour full time hourly worker, and it's probably much more than just a simple 3x factor. One economic developer I talked to thought that the impact of a single self-employed professional in the community might be worth as much as ten shop floor jobs, because of the indirect effect. Self-employed professionals are spending some of their business income on local businesses--attorneys, accountants, copy services, and other professionals in the community, lifting all of them.

An op-ed piece in the NY Times (registration required) provides another data point to show that outsourcing jobs to other countries is not the national crisis the mainstream media has tried to make it.

The author provides data that shows the U.S., as other studies have suggested, is actually showing net gains from outsourcing. That is, outsourcing low pay, low skills jobs creates other business opportunities that more than offset the direct job loss.

As the author notes, this data is not a great comfort to a region that has lost those jobs. Factory floor workers who have had their jobs outsourced need training and help to be able to compete for the higher wage, higher skill jobs that are being created.

For rural communities, it's another indicator that business as usual just won't work. The Old Economy jobs being lost cannot be replaced by more aggressive industrial recruitment, better brochures, or a new logo--all things I've seen promoted as "proof" of a revitalized local economic development program.

What does work? Here are some things that are important in the Knowledge Economy:

• Recognition and acceptance that most new jobs are likely to be created by businesses already in your community. Action step: Diversify your economic development program into three parts: continue industrial recruitment (30% of resources), but add education, training, and support of existing local businesses (40% of resources), and create an entrepreneurship development program to create new, local businesses (30% of resources).
• Tightly couple technology council, chamber of commerce, and economic development efforts. In some communities, all three entities are working in stovepipe efforts with little or no cooperation and are often competing with each other for the same community support and resources. Local leaders should withold funds if these groups do not work together on substantive projects.

I met a scientist and researcher a few days ago who is putting together a pharmaceutical startup in a very rural community. He owns several patents and putting together an operation to manufacture and market the new drugs. Size of the company? Approximately ten highly paid scientists, researchers, and marketers. Virtually all other operations will be outsourced.

This businessperson chose where he lives based on two criteria: great quality of life and the availability of broadband.

According to an article in USA Today, more than 800 communities in the United States are building their own networks. There is some fascinating stuff in this article, which highlights a high speed fiber network and MSAP (Multimedia Services Access Point) in Danville, Virginia.

I visit a lot of rural communities. Most of them are trying to chart a path for themselves in the Knowledge Economy. But there is still a lot of stovepipe thinking going on. Economic developers are rarely talking to town planners. Town planners are rarely talking to business people. Hardly anyone is talking to work at home businesspeople.

No one cares about broadband. Let me repeat that. Businesspeople that are engaged in the new economy don't care about broadband. What they care about is being able to meet their customers needs and expectations. Broadband is needed to do that, but broadband is not really an issue for them--what they are able to do with it is an issue.

What I'm trying to say is that broadband is simply one part of a bigger picture for communities, and the bigger picture, for the entrepreneurial, microenterprise businessperson (remember that small businesses are creating 75% of new jobs), is that they need a bunch of amenities and services in a community to be able to meet their customer needs and expectations. It's never just one thing (like broadband).

What are some of those things? Here's my list:

• Affordable,world class business office space -- Some of you are already thinking, "We've got our incubator." I am thinking about incubators, but too many that I visit are heavy on the industrial look and feel, and short on the kinds of finishing details that are not always expensive but that project, "We're doing business here." Many communities, instead of putting slab-steel siding buildings far out of town in a former industrial park, would be much better off rehabbing empty buildings on Main Street, like they did in Norton, Virginia, where they rehabbed a 1920s era hotel, got tax credits to do so, won awards for excellence, and are filling the space faster than they can finish the next floor.
• Once you get some businesses downtown, you need a great coffee shop, like the one in Franklin, Pennsylvania started by someone who just moved back to their hometown after ten years in California. Coffee shops with great coffee, an upscale ambiance, and a private meeting room are a key requirement of work at home businesspeople, who need a place to meet clients, have a light lunch, or just "get out of the office" to do some work.

A few years back, Idaho set its eyes firmly on the future, and the effort is beginning to have a major impact in the rural state. Idaho is not only not on the way to anywhere, it does not come to mind quickly as a hotbed of technology companies and entrepreneurs.

MuniWireless has a story about Scottsburg, Kentucky and the importance of broadband to the future of the community.

Scottsburg is a rural community of 6000 north of Louisville. The problem they were facing there is common to rural communities: a T1 line in metro Louisville cost $300/month, and in rural Scottsburg it was $1300/month--that's the difference between a thriving business sector and and an economic disaster.

Over the past couple of weeks, three major cities in the U.S. have announced ambitious plans to extend connectivity of one kind or another. New York and Philadelphia are moving forward with plans to create wireless blankets over most of each city.

New York's plan is more ambitious. The city is looking at making virtually every lamppost available for WiFi and cellular telephone access. Part of what is driving this is money. Even at the modest fees the city says it will charge for the right to mount antennas, it represents new income to the municipal government. What is less clear is if the plan will succeed. Some elected officials and citizen groups have raised concerns about the amount of additional EMF radiation that will be propogated by the plan. Not everyone is keen to have 24 hour/day gigahertz frequency radiation emanating from an antenna just a few feet from their second floor apartment window.

Philadelphia's plan is to create a WiFi blanket throughout the core area of the city, to make the place tech friendly. Both cities will rely on the private sector to spend the money to do the work, and will simply put the ordinances and fee structure in place that will allow those companies to place antennas and equipment on public property.

The third city, Chicago, is planning to put 2000 remote control surveillance cameras throughout its neighborhoods and city streets, with the dual aim of curbing crime and providing better coverage of potential terrorist targets. The system will be tied directly into the 911 system, which will allow 911 operators to pull up real time video of a crime, fire, or accident in progress. In Chicago, some groups have raised concerns about the potential privacy issues related to such comprehensive surveillance. In the end, the city will probably have its way, as we have no constitutional guarantee to privacy in public places.

All these initiatives are mixed news for smaller and rural communities. On the one hand, these initiatives not only raise the bar for what kind of infrastructure is expected in our communities (i.e. WiFi blankets), but as this kind of infrastructure becomes commonplace, smaller communities especially lose any competitive advantage they may have had from early investments. That is to say, instead of touting public WiFi as an economic development advantage that other places do not have, public WiFi is now going to be increasingly seen as part of the base, required infrastructure--imagine trying to promote your community without a public sewer system in place.

If you have been thinking about attending the Rural Telecommunications Congress 8th Annual Conference, Friday is the last day to save $100 on early bird registration. If you are a vendor, it is a great place to meet the representatives of community and regional broadband projects from around the country. If your community is interested in broadband, it's a great place to hear about what has worked and worked well.

For the past eight years, RuralTeleCon – the annual conference of the Rural Telecommunications Congress – has been the premier venue for understanding the issues surrounding the deployment and use of advanced telecommunications in rural communities. Each year, the event focuses on a critical issue facing rural communities and rural residents as they use telecommunications for community and economic development. This year’s theme is “Putting Broadband to Work.”

KEYNOTE SPEAKERS

• Anthony (Tony) G. Wilhelm, PhD., Director, Technology Opportunities Program (TOPs), National Telecommunications and Information Administration, U.S. Dept of Commerce - Find out the latest on NTIA TOPs programs and initiatives.
• Hilda Gay Legg, Administrator, Rural Utilities Service (RUS), U.S. Department of Agriculture - Hear RUS success stories demonstrating broadband applications as rural solutions.
• K. Dane Snowden, Chief, Consumer and Governmental Affairs Bureau, Federal Communications Commission (FCC) - The current status of broadband deployment in rural communities.
• Andrew M. Cohill, President and CEO, Design Nine/Virginia – Discover why community investments in technology and telecommunications often fail to have the hoped-for impact, and how you can integrate technology with other community and economic development goals and objectives.

• Dane A. Deutsch, President and CEO, and Pete Adams, COO, DCS Netlink – Meet “Bobby Blackhat” and learn why we need to take Internet security seriously today and tomorrow.

• Plus more Speakers and Panels including experts on telehealth, e-commerce, entrepreneurship, education, e-government, deploying and maximizing the broadband infrastructure, and economic and community development, all focusing on rural issues.

For more info and to register visit www.ruraltelecon.org.

Almost a year ago, I wrote enthusiastically about Virginia Tech's low cost, high powered supercomputer, and suggested that supercomputers for hire were a way of attracting businesses into a region, just as water and sewer were attractors forty years ago.

This Slashdot story describes Lord of the Rings director Peter Jackson's latest venture--a supercomputer for hire in New Zealand.

Early bird registration for the 8th Annual Rural Telecommunications Congress Annual Conference is still available through September 10th.

If you live in a rural community and are interested in economic development and broadband issues, this is one of the best conferences going. The RTC conference works hard to keep the sesssions focused on best practice, lessons learned, funding opportunities, and solid, practical information.

The news is full of stories about USAir's financial woes, which they blame on the airline pilots. Their labor costs are probably too high. But I think there are other contributing factors. I just had to book a flight to Pittsburgh (round trip from Roanoke, Virginia). USAir has a hub there, and direct flights from Roanoke. The other three Roanoke airlines fly you through one of their hubs before getting to Pittsburgh.

You would think USAir would have a natural advantage, since businesspeople don't want to waste time in airports--a nonstop flight is always preferrable to one that requires a stop. Except when the nonstop flight costs two-thirds more! USAir is going broke because they are charging $800 for a single flight segment when all their competitors will fly two legs for under $500. Not only that, the times of the USAir flights are lousy, so I don't really lose that much time with the extra hop.

Another airline got my business, and USAir lost out because of absurd pricing coughed up by hideously complex pricing schemes generated by computer programs that only a bean counter could love. It's obvious that NO human being has ever looked at the Roanoke-Pittsburg pricing and asked, "Does this make sense?" If they had, the prices would be different, and USAir would be making money instead of losing it. Applied over their whole flight network, it's a wonder they have lasted this long. And it explains why the pilots are reluctant to make concessions--why should they if the real problem is not being fixed. Your costs could be zero, but if your prices drive your customers to another airline, it won't make any difference.

In part, this is a natural consequence of the Knowledge Economy. In the old days, travel agents worked mysteriously and invisibly to come up with ticket prices. They had special access to airline fee schedules, and we did not. So we took pricing more or less for granted. We had no information with which to make an informed decision. Today, I can hop onto Orbitz or Expedia and see every price from four or five airlines, and the pricing insanity that USAir calls a "business" is patently obvious.

There is a mildly partisan op-ed piece in yesterday's USA Today about how jobs are and are not being counted in the U.S. Whichever side of the political fence you happen to be on, it's well worth a read. It does a nice job of summarizing the differences between the Payroll Survey (the traditional measure of jobs growth) and the Household Survey.

Dave Winer, who in many ways invented blogging, is on a coast to coast road trip. Guess what his number one complaint is? How hard it is to find hotspots at night so that he can get online and take care of work.

Everyone I've talked to in the past couple of months has laughingly agreed that they no longer care about hotel chains, frequent traveler points, or the quality of the breakfast buffet. One road warrior summed it up this way: "I'll sleep on the floor in a sleeping bag, but I want broadband."

Hotels are catching on, and many chains now advertise their broadband access heavily. But others don't, and Winer's complaint is that it is too hard to find public hotspots. He wants local and regional maps he can pull up on the Web that identify where WiFi is available.

How does your community portal measure up? Can visitors quickly determine where the hotspots are in your community? How about your economic development Web site? Can your out of town relocation prospects find broadband access locations easily on your Web site?

A robust community portal, designed to meet the needs of visitors and economic development prospects, sends a strong message that your community "gets it." I still visit too many communities complaining about their lack of jobs and lack of economic development activity, but a quick check of the Web often reveals the following: no county Web site or a very limited one that looks like it was last updated in 1998; no community portal or a mediocre "tourist brochure" approach that is mostly pretty pictures and little information. Or the worst of all--dueling Web sites that all claim to be the "official" community portal. The latter situation is a clear signal that the community lacks leadership and direction.

The community portal is the world's window into your community. How your community portal portrays your schools, your civic organizations, your recreational activities, and the business life of your community counts.

Indium sounds like one of those made up compounds, like Intel's "Itanium" or Volkswagen's "Turbonium." but indium is a little known metal that is essential to the manufacture of LCD panels. The Wall Street Journal reports on a potential shortage of the transparent, conductive metal. It's refined from the tailings of commodity metals like zinc and lead.

A Ziff-Davis news article chronicles a series of new broadband projects and applications using broadband, and calls broadband a "necessity."