• Free for qualified executives and consultants to industry

  • Receive quarterly issues of Area Development Magazine and special market report and directory issues


Intelligent Rural Cities Offer Big-City Benefits Without the Urban Challenges

The broadband connectivity of the 21st century has made rural areas vital places to grow a business and a career.

Q3 / Summer 2013
Why would a $2 billion company have its headquarters in a rural city of 17,000 people located in the poorest corner of the Commonwealth of Virginia? That was the question I asked several years ago of an executive of K-VA-T Foods, operator of 100 grocery stores spread across the Southeast. The answer was about information technology.

The company had spent the last several years centralizing data management for its stores. By bringing it all under one roof, K-VA-T had been able to develop several powerful, real-time applications and roll them out to the stores. A data-mining app gave store managers instant insight into what was selling and what wasn’t. Training videos and applications were being delivered to supervisors and staff. A hiring application asked job candidates to complete an online application and then instantly flagged each candidate as green (hire right away), yellow (seek more information), or red (don’t hire). The general manager credited the system with reducing turnover by 35 percent in a business that runs on razor-thin margins.

It doesn’t sound like the kind of activity that would happen in a place like Bristol, Virginia, which calls itself the birthplace of country music and hosts one of America’s biggest NASCAR tracks. The fact that it did can be credited to the municipally owned Bristol Virginia Utilities (BVU) and the Bristol City Council behind it. In 2001, BVU made the brave decision to become a competitive fiber-optic carrier. Courage was required, because that decision kicked off a three-year battle that cost this small city more than $2.5 million in legal fees just to win the right to compete against the incumbent telephone and cable company. By 2008, BVU had captured more than 62 percent of the available market and, according to a study it commissioned, saved customers like K-VA-T nearly $10 million over incumbent operators’ rates.

“Before BVU got into the business,” the general manager told me, “we were using dial-up and leased lines to connect to our stores. There is no way we could have done what we are doing now and no way we could have stayed competitive without it. That’s why we are here.”

The Economic Value of Being Connected

Bristol is an example of a rural city that has figured out how to make itself a competitive location for business using the power of broadband communications. BVU’s success led neighboring counties to find funding and invite BVU to run fiber there: the network proved instrumental in location decisions for a data center and a software company in 2008 and a new branch of the University of Virginia in 2009. The city's per-capita income in 2007 was only $20,000 compared with the Virginia average of more than $41,000. But the fiber buildout generated 1,220 jobs paying about two thirds more than the normal weekly wage, and attracted $50 million in new private investment.

Moreover, executives at Bristol’s Alpha Natural Resources, a publicly traded mining company that runs 58 mines, said that residential access to BVU’s high-quality broadband — a kind of digital quality of life — has made it easier for them to attract the talent they need.

A “Quaint” Little Town Thinks Big

Stratford is a small city of 32,000, often called “quaint,” that’s a two-hour drive from Toronto. Like Bristol, Stratford owns its own electric utility and made the investments needed to transform it into a fiber-optic carrier. Unlike Bristol, Stratford chose to offer an open-access platform that service providers could use to deliver revenue-generating services to customers. This allowed it to sidestep much of the legal fracas that engulfed Bristol.

Two of Canada’s biggest banks have sizable IT operations in the city. Scotiabank operates a 120-person IT department supporting systems and software used by 70,000 employees, while the national mortgage department runs a 350-person data center. RBC Royal Bank chose to move a 400,000-square-foot data center from Toronto to Stratford, bringing 80 permanent jobs to town. When the project was announced, 200 municipalities submitted proposals. Stratford offered available property backing onto protected natural land, diverse fiber connectivity, and a power grid upgraded and made self-healing by significant city investment.

Toward the end of the evaluation, RBC sent executives to town with the bad news that it wasn’t going to be the final choice. Mayor Dan Mathieson asked why. The bank’s problem was a natural gas main that ran too close to the property to meet safety guidelines. The Mayor asked them to be frank: was that really the problem or were they just being polite? It really was the problem. A few phone calls later, the Mayor had a commitment from the utility to relocate its main at city expense. The RBC guys were so impressed by this can-do spirit that they closed on the deal.

Holding Onto and Growing the Population
A little more than a thousand miles (1,700 km) due west of Stratford lays Mitchell, a city of 15,000 on the plains of South Dakota, at the center of a region that has lost 30 percent of its population over the past 70 years. With a willing private communications company and a federal broadband stimulus grant, Mitchell has developed a fiber-to-the-premise network serving every business and residence. The City Council developed a strategic plan that has a local university, technical school, businesses, public schools, and a major hospital working together to promote digital literacy and supply the highly trained work force in increasing demand by area businesses. These include growing software companies, data centers, customer service centers, and communications consulting firms attracted by Mitchell’s network or fostered by its construction. Alone in its region, Mitchell has held onto its population and even achieved modest growth.

Communities like Bristol, Stratford, and Mitchell are bringing new hope to their residents at a time when experts are writing off rural places economically and the UN forecasts that two thirds of the world’s population will be city-dwellers by 2030. They are proof that, increasingly, rural places where land is available at attractive prices, where taxes are lower and regulation is not as heavy, can also be places of innovation, education, and specialized skills.

The broadband connectivity of the 21st century offers rural areas the opportunity to plug into the world at low cost and to affordably import the world’s learning and culture to enrich the lives of young and old. It is helping to make some rural areas as vital and exciting a place to grow a business or build a career as the busiest city center. For companies seeking the right location, these places can offer a mix of opportunity, quality of life, and access to talent rarely found together in one place.

Exclusive Research