Dr. Val Farmer
Rural Mental Health & Family Relationships

Can Telecommunication Save Rural Communities?

October 6, 1997

In the 90s new telecommunication businesses have emerged in the upper Midwest. Many choose to locate in rural communities because of an educated, stable work force and the rural work ethic. The stereotype is that these positions are low-wage, part-time, no benefit jobs.

F. Larry Leistritz, professor of Agricultural Economics at North Dakota State University and his associate, Randal C. Coon, have studied the development of information-age jobs in North Dakota. Telecommunication makes it possible for companies to reduce costs by locating or moving their business to a rural site remote from their parent company, their customers or both. Leistritz and Coon found that 50 percent of new jobs created in North Dakota since 1990 have been telecommunication-linked or telecommunication-based businesses. This is on a par with new manufacturing jobs.

What kinds of jobs are these? These businesses sell an information service or product primarily outside their locality or region. They can choose rural areas where an available labor pool fits their job requirements. Leistritz classifies these new jobs into three categories.

- Outbound telemarketing. This is where the marketing agent calls prospective customers. They hire telephone sales representatives for their sales ability and computer/data proficiency. National telemarketing firms choose Midwestern locations because there is no regional accent. They favor Central Time locations because they can call eastern destinations earlier and western destinations later during the prime 6:00 to 9:00 p.m. calling period.

- Inbound telemarketing and related customer service activities. In this type of business the marketing agent receives calls from customers for such services as hotel reservations, mail ordering and travel arrangements. Phones are staffed for the convenience of the customers.

These firms require round the clock workers with flexible schedules. Work may fluctuate seasonally. College or Vo-Tech towns are good sites because of the many part time, evening or weekend jobs that fit well with a college schedule. In rural areas, many farm women also prefer part-time jobs and flexible hours.

- Data processing and related office activities. This requires data entry, data processing and high quality data transmission. An example would be workers who also have a background in health and health terminology processing medical claims. Other examples are banks, mortgage and credit companies who choose to locate a financial center away from their home office or main business locations. These sites may process travel reimbursements, accounts payable and other accounting functions.

Who works in these businesses? In their survey of these new jobs, Leistritz and Coon found that 59 percent are female. Two-thirds are between 20 to 40 years old. Local residents accounted for 79 percent of the jobs.

What about pay and benefits? The survey also showed an average wage of $10.26 for these telecommunication-based jobs as compared to $8.70 for the new manufacturing jobs created during the same time frame. Most workers received health insurance, pension plans and other benefits based on the number of hours worked. These often exceeded the benefit packages of manufacturing jobs.

What are the drawbacks for rural communities attracting these businesses? The local phone service has to have state-of-the-art fiber optics, digital switching and high speed, high volume, data quality lines. Rural telephone companies have developed the equipment and infrastructure necessary to sustain these types of businesses.

The cost of calls can erode profits. Access ports to major long distance carrier services are called "points of presence." Companies that locate near a point of presence generally have lower rates. Rural areas not near a point of presence have to pay a surcharge for "hauling" the signal from its location to a point of presence. A telecommunication company looking at a rural location may prefer to be near a "point of presence" or else negotiate a special rate based on anticipated volume.

Deregulation theoretically makes it possible for competition to enter the telephone long distance market. However, it is likely that the competition will be the most intense where the greatest volume is - in urban centers.

Can telecommunication cause a job loss in a rural community? Leistritz points out that telecommunication can be a two-edged sword. It has the potential for siphoning off jobs from rural areas. Big firms use advances in telecommunication businesses to pull jobs out of rural areas and serve customers via telephone from one centralized location. These new financial centers are pulling jobs from somewhere.

What are lone eagles and telecommuters? Lone eagles are entrepreneurs who have a telecommunication-based clientele and can live and do business from anywhere they please. They choose rural areas for lifestyle considerations.

Telecommuters are people who are connected with main offices via the new telecommunication technologies. More and more people can fit into companies and be productive while living where they want to live.

Are there other benefits to telecommunication? The quality of medical care, education, libraries and other services improves with telecommunication advances. Long distance learning, training upgrades, telemedicine and consultation all improve the quality of life and services in rural areas. It gives rural communities new linkages that make rural living more attractive to newcomers. It brings a higher quality of life for local residents.

Rural businesses no longer suffer the tyranny of distance. They can access state-of the-art knowledge, along with market information and opportunities. So, despite the creation of new jobs, telecommuncation’s main impact is in helping existing local businesses and professionals be more efficient, productive and competitive. But that is another story.