Rural Development: Steps Towards Realizing the Potential of
Telecommunications Technologies (Letter Report, 06/14/96,
GAO/RCED-96-155).

Pursuant to a congressional request, GAO reviewed rural communities'
efforts to develop advanced telecommunications technologies, focusing
on: (1) federal programs that fund rural telecommunications projects;
(2) lessons learned for developing such projects; and (3) whether
changes to these programs are needed.

GAO found that: (1) as of December 1995, there were at least 28 programs
that provided discretionary development funds for rural
telecommunications projects; (2) 13 designated programs provided about
$715.8 million for 540 telecommunications projects; (3) program users
and rural development experts believe that rural communities need a
basic understanding of telecommunications technologies and their
potential benefits, strategic plans to determine the technical and
financial feasibility of telecommunications development, and
partnerships among key players involved in constructing, financing, and
using telecommunications networks; (4) rural development experts and
public officials believe that telecommunications programs could be
improved by educating rural communities on the potential benefits of
telecommunications technologies, building in requirements for
considering telecommunications technologies in long-range planning, and
making multiple federal programs easier to use; (5) most federal
agencies lack the resources required for educational outreach programs;
and (6) 1996 legislation emphasizes the need for rural communities to
include telecommunications projects in their long-term planning and
coordination of multiple federal programs.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  RCED-96-155
     TITLE:  Rural Development: Steps Towards Realizing the Potential of 
             Telecommunications Technologies
      DATE:  06/14/96
   SUBJECT:  Rural economic development
             Telecommunications operations
             Federal aid to localities
             Community development programs
             Data transmission operations
             Telephone communications operations
             Strategic planning
IDENTIFIER:  USDA National Rural Development Partnership Program
             Federal Telecommunications Fund
             REA Distance Learning and Medical Link Program
             USDA Agricultural Telecommunications Program
             Dept. of Education Star Schools Program
             Dept. of Education Challenge Grant for Technology in 
             Education
             Dept. of Education Telecommunications Demonstration Project 
             for Mathematics
             HHS Research, Demonstration, and Evaluation Projects Program
             HHS Rural Telemedicine Grant
             NSF Networking Infrastructure for Education Program
             NSF Connections to the Internet Program
             Public Telecommunications Facilities Planning and 
             Construction Grant
             Dept. of Commerce Telecommunications and Information 
             Infrastructure Assistance Program
             USDA Distance Learning and Telemedicine Loan Program
             Community Development Block Grant
             HHS Rural Health Services Outreach Program
             Ringgold (GA)
             Mayfield (KY)
             Oregon
             Paducah (KY)
             Spokane (WA)
             Internet
             
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Cover
================================================================ COVER


Report to the Committee on Agriculture, Nutrition, and Forestry, U.S. 
Senate

June 1996

RURAL DEVELOPMENT - STEPS TOWARDS
REALIZING THE POTENTIAL OF
TELECOMMUNICATIONS TECHNOLOGIES

GAO/RCED-96-155

Telecommunications Technologies in Rural Areas

(150419)


Abbreviations
=============================================================== ABBREV

  ARC - Appalachian Regional Commission
  EDA - Economic Development Administration
  ESD - educational service district
  GAO - General Accounting Office
  GPEDC - Greater Paducah Economic Development Council
  HCFA - Health Care Financing Administration
  HHS - Department of Health and Human Services
  LEA - local educational agency
  NADO - National Association of Development Organizations
  NRDP - National Rural Development Partnership
  NSF - National Science Foundation
  PADD - Purchase Area Development District
  RUS - Rural Utilities Service
  SEA - state educational agency
  STEP - Satellite Telecommunications Educational Programming
  TVA - Tennessee Valley Authority
  USDA - U.S.  Department of Agriculture

Letter
=============================================================== LETTER


B-271609

June 14, 1996

The Honorable Richard G.  Lugar
Chairman
The Honorable Patrick J.  Leahy
Ranking Minority Member
Committee on Agriculture,
 Nutrition, and Forestry
United States Senate

For many rural areas, social and economic vitality hinges on
overcoming the problems posed by remoteness from urban centers--such
as the lack of easy access to advanced education, medical knowledge,
and enterprise development opportunities.  While improved roads were
once seen as the key to rural areas' overcoming the barrier of
distance, experts now believe that sophisticated use of
telecommunications technologies may be a critical element in many
rural areas' efforts to maintain and foster social and economic
development.  Advanced telecommunications technologies--the Internet,
videoconferencing, and high-speed data transmission--offer some rural
areas the chance to overcome the problems they face as a result of
their geographic isolation.  These technologies can link rural areas
with other communities and expertise to improve medical services,
create new jobs, and increase rural residents' access to education. 

In October 1995, you asked us to (1) identify federal programs that
rural areas can use to fund telecommunications projects, (2) identify
lessons learned by rural areas that have used these programs to
establish such projects, and (3) obtain the views of experts, public
and private officials, and program users on whether changes to these
programs are needed. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

As of December 1995, at least 28 federal programs administered by 15
federal agencies provided funds that were either specifically
designated for telecommunications projects in rural areas or could be
used for that purpose.  For example, the U.S.  Department of
Agriculture's Rural Utilities Service, which funds telecommunications
infrastructure in many rural areas, also provides grants to link
rural health care clinics with larger hospitals to better serve rural
residents.  With such linkages, the larger hospital can review
X-rays, CAT scans, and other medical evidence to diagnose an illness
and prescribe treatment without having the patient make long, and
sometimes difficult, trips to the larger institution. 

The communities sponsoring the five rural telecommunications projects
we visited and the rural development experts we spoke with identified
three specific actions that must be taken to lay the foundation for
establishing telecommunications projects in rural areas.  First,
communities should develop a basic understanding of
telecommunications technologies and their potential benefits. 
Second, communities should develop strategic plans to determine the
technical and financial feasibility of telecommunications
development.  Finally, community officials need to build partnerships
among the key players--federal and state officials; telephone
carriers; utilities; Internet providers; and potential beneficiaries,
such as hospitals and schools. 

Rural development experts and public officials we interviewed
suggested that federal telecommunications programs collectively
needed to change in several areas:  (1) educating rural communities
on the potential benefits of telecommunications technologies, (2)
building in requirements for considering telecommunications
technologies in long-range planning, and (3) making the multiple
federal programs easier to use.  Currently, federal
telecommunications programs do not generally focus on educating the
general public about the potential benefits of telecommunications. 
Officials informed us that rural communities could benefit from such
an outreach effort, but most of the federal agencies we reviewed told
us that they lack the resources required to advise communities to
consider telecommunications technologies in their long-range
comprehensive plans.  Finally, the number and complexity of the
federal programs available for telecommunications assistance make
them difficult for rural areas to identify and use. 

The planning and coordination aspects of the Federal Agriculture
Improvement and Reform Act of 1996 (P.L.  104-127, Apr.  4, 1996), as
well as changes to strategic planning guidelines contemplated by the
Economic Development Administration, should help address these
problems. 


   BACKGROUND
------------------------------------------------------------ Letter :2

The federal government has long played an important role in promoting
the economic vitality of rural America--from supporting agriculture
to building rural infrastructure, such as the electrification of
rural America in the 1930s.  More recently, since 1983, the federal
government has funneled over $15.5 billion to rural areas for such
activities as small business assistance, industrial development, and
economic planning.  In addition, rural areas receive federal funds
that are not specifically targeted to economic development but that
nevertheless influence rural economic development, such as
agricultural payments, infrastructure assistance, and job training. 

The U.S.  Department of Agriculture (USDA) has primary federal
responsibility for rural development and provides leadership within
the executive branch for coordinating federal programs, services, and
actions affecting rural areas.  Other federal agencies, such as the
Department of Commerce's Economic Development Administration (EDA)
and the Department of Housing and Urban Development, also provide
assistance for economic and other types of development to rural
communities.  Finally, independent federal agencies--such as the
Appalachian Regional Commission, Small Business Administration, and
the Tennessee Valley Authority--provide assistance in rural areas. 

To facilitate the delivery of assistance through the programs that
these agencies administer, USDA has promoted the development of the
National Rural Development Partnership (NRDP), whose objective is to
promote collaboration, innovation, and strategic approaches among
federal and state agencies involved in rural development.  NRDP's
members include the National Rural Development Council and State
Rural Development Councils.  The national council is composed of
senior program managers from over 40 federal agencies and
representatives of public interest, community, and private
organizations.  State councils, which have been established in 39
states, are composed of representatives from federal, state, and
local governments, tribal councils, and the private sector. 

Despite the range of federal assistance, many rural areas continue to
face distinct barriers to social and economic development.\1 One of
these barriers, remoteness from population centers, means that rural
areas may find it difficult to attract many services--such as access
to advanced medical care and higher education--that are available in
or near population centers and may offer fewer job opportunities than
urban areas. 

Increasingly, telecommunications technologies are seen as a way to
overcome the problems posed by distance, according to rural
development experts.  For example, some communities are using
interactive videoconferencing to provide medical consultations.  Some
colleges and schools are offering classes, and even degree programs,
to students on-line in remote locations.  Large businesses have found
it cost-effective to establish or maintain branch offices in rural
areas by using videoconferencing or on-line access to hold meetings
and conduct business. 

In February 1996, the Congress enacted the Telecommunications Act of
1996 (P.L.  104-104, Feb.  8, 1996), the first major overhaul of
telecommunications law in over 60 years.  The new law, which includes
important provisions promoting the use of advanced telecommunications
in rural America, seeks to preserve and advance the concept of
universal service, defined generally as an evolving level of
telecommunications service.  The preservation and advancement of
universal service is to be based on seven principles, including the
availability of advanced services in all regions of the nation and
access to services in rural and high-cost areas.  The act also
establishes the Telecommunications Development Fund, which, among
other things, is to support universal service and promote the
delivery of telecommunications services to underserved rural and
urban areas. 


--------------------
\1 See Rural Development:  Rural America Faces Many Challenges
(GAO/RCED-93-95, Nov.  20, 1992). 


   MULTIPLE FEDERAL PROGRAMS
   DIRECTLY OR INDIRECTLY PROVIDE
   TELECOMMUNICATIONS ASSISTANCE
------------------------------------------------------------ Letter :3

At least 28 federal programs in 15 agencies provide funding for
telecommunications programs.  Of the 28 programs, 13 are specifically
designed to support telecommunications projects, although not
necessarily for rural areas.  The remaining 15 programs have more
general economic development purposes but can be used for
telecommunications efforts.  In fiscal year 1995, the 13
telecommunications programs provided about $715.8 million for about
540 projects.  Programs ranged from the Rural Utilities Service's
rural telephone loan programs ($585 million combined), which are
designed to ensure that rural areas have telephone service comparable
with urban areas', to the Department of Health and Human Service's
(HHS) Health Care Financing Administration's Research, Demonstration,
and Evaluation Program ($0.5 million), which funds, among other
things, innovative projects that use telecommunications technologies
to improve medical access and care.  Table 1 lists the 13
telecommunications-related programs, their funding levels, and the
other types of activities they support. 



                                         Table 1
                         
                              Thirteen Programs That Support
                           Telecommunications-Related Projects

                                  (Dollars in millions)

Department and/or                                                  Type and purpose of
agency                  Program                     FY 1995 funds  assistance
----------------------  --------------------  -------------------  ----------------------
USDA--Rural Utilities   Rural Telephone                    $410.0  Long-term loans to
Service\a               Loans and Loan                             improve rural
                        Guarantees                                 telecommunications
                                                                   infrastructure

                        Rural Telephone Bank                175.0  Long-term loans to the
                        Loans                                      Rural Utilities
                                                                   Service's borrowers

                        Distance Learning                     7.5  Grants for rural areas
                        and Medical Link                           to use
                                                                   telecommunications in
                                                                   schools or to improve
                                                                   medical care

USDA--Cooperative       Agricultural                          0.9  Grants for an
State Research,         Telecommunications                         agricultural
Education, and          Program                                    communications network
Extension Service

Department of           Star Schools Program                 25.0  Grants for statewide
Education--Office of                                               or multistate distance
Educational Research                                               learning projects
and Improvement

                        Challenge Grants for                  9.5  Grants for distance
                        Technology in                              learning
                        Education

                        Telecommunications                    1.1  Grants to improve
                        Demonstration                              mathematics
                        Project for                                instruction through
                        Mathematics                                telecommunications

HHS--Health Care        Research,                             0.5  Grants for using
Financing               Demonstration, and                         telecommunications to
Administration          Evaluation Projects                        improve medical care

HHS--Office of Rural    Rural Telemedicine                    5.1  Grants for using
Health Policy           Grants                                     telecommunications to
                                                                   improve medical care
                                                                   in rural areas

National Science        Networking                           11.7  Grants or cooperative
Foundation              Infrastructure for                         agreements to use
                        Education                                  technology to improve
                                                                   education

                        Connections to the                    5.8  Grants to colleges and
                        Internet                                   universities for
                                                                   connecting to the
                                                                   Internet

Department of           Public                               27.7  Grants for public
Commerce--National      Telecommunications                         broadcasting projects
Telecommunications and  Facilities Planning
Information             and Construction
Administration          Grants

                        Telecommunications                   36.0  Grants to promote use
                        and Information                            of advanced
                        Infrastructure                             telecommunications
                        Assistance Program                         technologies

=========================================================================================
Total                                                      $715.8
-----------------------------------------------------------------------------------------
\a The Federal Agriculture Improvement and Reform Act of 1996 made
substantial changes to USDA's rural development authorities that will
affect funding for, among other things, telecommunications projects. 
For example, the act authorizes the Distance Learning and
Telemedicine Loan Program (replacing and expanding the Distance
Learning and Medical Link Grant Program) at $100 million annually. 
The act also establishes a Rural Community Advancement Program under
which some federal assistance may be used for telecommunications
activities. 

The other 15 programs we identified that can be used for
telecommunications projects are intended to support a range of
community assistance projects.  For example, the Department of
Housing and Urban Development provides Community Development Block
Grants to communities for development purposes, while the EDA
provides grants to communities for public works and infrastructure
development.  In addition, HHS' Office of Rural Health Policy
supports the Rural Health Services Outreach Program, which, among
other things, can be used to provide better access to health care
through telecommunications technology.  (See app.  I for more
detailed information on all 28 programs.)


   COMMUNITIES IDENTIFIED THREE
   STEPS FOR DEVELOPING A
   TELECOMMUNICATIONS PROJECT
------------------------------------------------------------ Letter :4

Officials in five rural communities that have obtained federal funds
for telecommunications projects identified three key actions for
putting telecommunications projects into place:\2 (1) developing a
basic understanding of the potential benefits of telecommunications
technologies; (2) engaging in long-term planning to determine the
need for, and ensure the technical and financial feasibility of,
their project; and (3) building partnerships among the key players
who would be needed to support and/or benefit from the project.  The
representatives of the State Rural Development Councils and
representatives of rural associations, such as the National
Association of Development Organizations (NADO) and National
Association of Regional Councils, confirmed the importance of these
actions. 


--------------------
\2 The projects we visited in five rural communities are the
Ringgold, Georgia, Telephone Company; the Mayfield, Kentucky, Rural
Telecommunications Resource Center; the Eastern Oregon RODEONET
Project; the Paducah, Kentucky, Information Age Park; and the
Spokane, Washington, Satellite Telecommunications Educational
Programming (STEP)/Star Network.  These projects, which all received
federal funding, are discussed in greater detail in app.  II. 


      DEVELOPING A BASIC
      UNDERSTANDING
---------------------------------------------------------- Letter :4.1

In examining options to address a particular problem in their rural
communities, officials at all of the projects we visited identified
telecommunications as a possible solution.  They all agreed, however,
that they had to develop a basic understanding of telecommunications
technologies before they could evaluate their usefulness in solving
their problem. 

For example, a consortium of mental health officials in eastern
Oregon were seeking ways to reduce the risk, expense, and time
involved in transporting individuals who might be committed to mental
health facilities to and from various types of court hearings and
psychiatric evaluations.  Once they learned about various
telecommunications technologies and the ways in which the
technologies could help them deliver mental health services, these
officials identified video teleconferencing as a alternative to
repeatedly transporting patients across long distances.  They
developed the RODEONET project, which has 14 sites in eastern and
southern Oregon.  Similarly, in Kentucky, the Chief Executive Officer
and Chairman of the Greater Paducah Economic Development Council told
us that he first became interested in the potential of an information
age park to bring economic opportunities to his community when he
attended a telecommunications conference in 1989 that was sponsored
by a telephone company.  An information age park is an office park
that, by concentrating state-of-the-art telecommunications--such as
videoconferencing, high-speed data transfer, and computer
networking--could attract a host of new industries, such as credit
card centers and telemarketers.  After studying the technology, he
and the Greater Paducah Economic Development Council asked for
assistance from the local carrier to determine the feasibility of a
project. 

Most representatives of the 15 State Rural Development Councils,
NADO, and many other experts on rural development underscored the
importance of gaining a basic understanding of telecommunications
technologies as a first step in using them.  Furthermore, NADO, as
well as others, reported that rural communities need reliable,
centralized information on the use of telecommunications. 


      ENGAGING IN LONG-TERM
      PLANNING FOR THE PROJECT
---------------------------------------------------------- Letter :4.2

Officials for all of the projects we visited developed long-term
plans to ensure the technical and financial feasibility of their
project.  For example, the director of the Paducah Information Age
Park, told us that, in 1990, the Greater Paducah Economic Development
Council formally requested a carrier's assistance to identify and
quantify the potential economic benefits of developing such a park
for use as a resource in recruiting information-intensive,
high-technology industries. 

In March 1991, project officials and their partners conducted a study
to determine if information age business parks might be economically
feasible in nonmetropolitan areas, such as Paducah, Kentucky.  The
study concluded that the proposed site would be a suitable location
to develop a "micropolitan" information park.  Planning for the
project's funding involved multiple participants.  Total funds of $21
million were secured through investments from individuals and private
businesses as well as state and federal loans and grants from the
state of Kentucky and the Tennessee Valley Authority.  In addition,
the city government granted certain zoning concessions. 


      BUILDING PARTNERSHIPS AMONG
      KEY PLAYERS
---------------------------------------------------------- Letter :4.3

According to officials of all of the projects we visited and the 15
State Rural Development Councils we spoke with, partnership building
is critical to the successful creation and continued operations of
telecommunications projects.  Partnership building involves bringing
together the key players, such as telephone companies, anticipated
users, and government officials at all levels.\3

For example, the Spokane, Washington, STEP/Star Network, which
develops, produces, and broadcasts education programs for credit,
primarily at the high school level, relies on its relationships with
the school districts, teachers, students, states, private businesses,
and government.  Further demonstrating the value of a strong
partnership, in fiscal year 1994, the project received about $2
million from users and other local sources.  In January 1994, the
STEP/Star Network joined forces with other education broadcasters to
create a new, much larger network.  With the new network, the
STEP/Star Network and other providers share programming, which
greatly increases the course offerings to their subscribers. 

In commenting on a draft of this report, USDA officials reemphasized
the importance of partnership building in developing
telecommunications capabilities.  They further explained that USDA
actively encourages partnership building by those rural communities
seeking the Rural Utilities Service's assistance, but any rural
community interested in using telecommunications as a rural
development tool should include its local carrier in its partnership. 


--------------------
\3 Similarly, as we reported in March 1996, the experiences of three
statewide telecommunications projects illustrate the importance of
building and maintaining consensus among the parties that will be
involved in constructing, financing, and using advanced
telecommunications networks.  See Telecommunications:  Initiatives
Taken by Three States to Promote Increased Access and Investment
(GAO/RCED-96-68, Mar.  12, 1996). 


   EXPERTS REPORTED THAT CHANGES
   IN TELECOMMUNICATIONS PROGRAMS
   COULD MAKE THEM MORE USEFUL TO
   RURAL AREAS
------------------------------------------------------------ Letter :5

Rural development experts and public officials we interviewed
suggested three ways to improve federal programs providing
telecommunications assistance:  (1) educating rural communities on
the potential benefits of telecommunications technologies, (2)
building in requirements for considering telecommunications
technologies in long-range planning, and (3) making the multiple
federal programs easier to use. 


      EDUCATING RURAL COMMUNITIES
      ABOUT TELECOMMUNICATIONS
---------------------------------------------------------- Letter :5.1

Although at least 28 federal programs are available to help
communities improve their telecommunications capabilities, these
programs offer only limited outreach aimed at educating rural
communities about the potential of advanced telecommunications for
development, according to most of the program and rural development
officials we spoke with.  Instead, the programs generally offer
technical assistance to communities that have already received
approval and funding for a particular project. 

All of the experts we spoke with and the studies we reviewed pointed
out that many rural areas do not have a full understanding of the
development opportunities that the new technologies offer.  For
example, the Executive Director of the Missouri Rural Opportunities
Council told us that her experience with residents and business
people in rural midwestern communities showed that they have had
limited exposure to telecommunications technologies and do not
understand their potential benefits.  She believes that better
education, training, and overall exposure to these technologies are
needed by rural areas. 

Most of the federal telecommunications program officials agreed that
all rural areas should receive information and training in the uses
of telecommunications technologies.  They also agreed that providing
this information and training was a valid federal role but that they
lacked the staff and resources to provide such outreach. 


      BUILDING TELECOMMUNICATIONS
      INTO LONG-RANGE PLANNING
---------------------------------------------------------- Letter :5.2

The federal programs that provide telecommunications assistance
require plans for the projects they fund, but most of the officials
again reported a lack of resources to actively encourage all rural
areas to consider telecommunications infrastructure as a component in
their comprehensive, locally based economic development plans. 
According to a number of rural development officials we spoke with,
many rural areas have not considered telecommunications in their
long-term strategic planning. 

Telecommunications technologies should at least be considered in
communities' long-range plans, according to the federal officials and
rural development experts we spoke to.  In some instances, requiring
such consideration is being contemplated.  For example, the Director
of the EDA's Planning Division confirmed that although the agency
recognizes telecommunications as a high-priority item, the agency's
current guidelines for producing an economic development plan do not
require including telecommunications.  As we pointed out to the
Director, these guidelines were last updated in 1992, and he agreed
it is time for them to be updated again, and to include
telecommunications issues.  If such a change were implemented, 315
economic development districts across the nation, each encompassing
multiple counties, would be coached to consider telecommunications
technologies in their long-term strategic planning.\4

The National Association of Regional Councils informed us that
communities have economic development plans that do not include
consideration of telecommunications technologies because the plans
were developed before these technologies were fully recognized as a
potentially important tool for rural areas. 

The Federal Agriculture Improvement and Reform Act of 1996 may also
encourage rural communities to consider telecommunications
technologies, depending on how the act is implemented.  The act
requires the Secretary of Agriculture to direct all of the Directors
of Rural Economic and Community Development State Offices to prepare
a 5-year strategic plan for their states.  They are to work closely
with state, local, private, and public persons, State Rural
Development Councils, Indian tribes, and community-based
organizations in preparing the plan.  Once the plan is established,
financial assistance for rural development is to be provided only for
orderly community development that is consistent with the state's
strategic plan.  The Deputy Under Secretary for Rural Development
told us that USDA will encourage all rural areas to consider
including telecommunications projects in their long-term strategic
plan, which will be included in the state plan.  He also stressed
that others involved in the plan development process, including the
State Rural Development Councils, are very strong advocates of using
telecommunications technologies as a rural development tool and will
encourage rural areas to consider these technologies in their plan. 


--------------------
\4 Economic development districts include both urban and rural
counties.  However, not all rural areas are covered by an economic
development district. 


      MAKING FEDERAL PROGRAMS
      EASIER TO USE
---------------------------------------------------------- Letter :5.3

As we previously reported, federal programs providing assistance to
rural areas are difficult to identify, understand, and use.\5 This is
also the case for telecommunications programs, according to all of
the officials of the State Rural Development Councils we spoke with. 
For example, the Director of the Montana State Rural Development
Council told us that with the exception of grants given by the Rural
Utilities Service to telephone companies, most of that state's rural
planners do not have the expertise to obtain access to federal
grants.  In Montana, the applications submitted typically come from
grant writers located at universities and other centers of expertise. 
Similarly, the Executive Director of the Iowa Rural Development
Council told us that assistance programs tend to go to organizations
like the universities.  While the universities have some good project
ideas, Council officials said, they do not always consider the local
needs of rural America. 

Better coordination of federal programs would also help rural
communities, according to officials we spoke with.  For example, the
Executive Director of the Colorado Rural Development Council told us
that rural communities would benefit if the plethora of federal
telecommunications programs could be coordinated because currently a
full-time grant writer must spend much of his time tracking all the
programs.  She also said that given the extremely limited capacity of
most small rural communities to access this type of technical
assistance, most are effectively eliminated from applying for any of
the grant programs.  However, these are the same communities that
would benefit the most from such assistance.  Similarly, the National
Association of Regional Councils told us that the federal government
needs to pull these programs together to ensure consistent, readily
understandable, and accessible assistance. 

The Federal Agriculture Improvement and Reform Act of 1996 emphasizes
the need to better coordinate federal programs, requiring the
Secretary of Agriculture to provide leadership within the executive
branch and establish an interagency working group to be chaired by
the Secretary.  The working group is to establish policy for,
coordinate with, make recommendations with respect to, and evaluate
the performance of all federal rural development efforts.  The
conference report for the act noted that the NRDP should continue its
role in monitoring and reporting on policies and programs that
address the needs of rural America.  The State Rural Development
Councils, which are members of the NRDP, are to continue to act as
the conduit of information to the partnership. 


--------------------
\5 Rural Development:  Patchwork of Federal Programs Needs to Be
Reappraised (GAO/RCED-94-165, July 28, 1994). 


   AGENCY COMMENTS
------------------------------------------------------------ Letter :6

We provided USDA a draft copy of this report for its review and
comment because USDA is responsible for the federal involvement in
rural development.  For all other agencies and organizations that
provided input to this report, we provided relevant sections of the
draft report that either dealt with information they had provided to
us or that we synthesized from data obtained both from them and other
respondents. 

We met with USDA officials to obtain their comments, both on the
programs discussed in this report and on policies relating to rural
development.  These officials included the Deputy Administrator of
the Rural Utilities Service and representatives of the Office of the
Under Secretary for Rural Development.  The officials agreed with the
report and provided several additional clarifying comments, which we
have incorporated into this report as appropriate. 

In commenting on the draft report, the USDA officials also said that
it was important to recognize the recent changes to rural
telecommunications programs made by the Federal Agriculture
Improvement and Reform Act.  Specifically, they noted that the Act
authorized $100 million for loans under the Distance Learning and
Telemedicine Loan Program.  They said this will result in a real cost
to the government of $1 million, representing interest-rate
subsidies, some general and administrative expenses, and allowance
for bad debt.  The officials also stressed that many rural areas lack
the basic infrastructure needed for advanced telecommunications and
that the Rural Utilities Service will continue its mission of meeting
the needs of rural America. 

Officials from the other agencies and organizations that responded to
our request for comments agreed with the facts presented in the
report and, in some cases, provided clarifying information that we
considered and incorporated as appropriate in preparing our final
report. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :7

In developing information for this report, we identified the federal
agencies and programs offering telecommunications assistance to rural
areas by searching the June 1995 Catalog of Federal Domestic
Assistance.  Our search covered all programs that offer grants,
loans, or technical assistance to rural areas for planning,
constructing, expanding, demonstrating, and/or operating advanced
telecommunications projects for rural development.  We reviewed
documents describing these programs and met with program officials at
their headquarters offices in Washington, D.C., and in Knoxville,
Tennessee, to learn about the programs' operations.  We obtained
fiscal year 1995 funding amounts from agency officials.  We did not
independently verify this information. 

We judgmentally selected for site visits five telecommunications
projects that received federal funds.  We met with project officials
and reviewed documents to learn how these projects were developed and
are currently operating and what lessons officials had learned from
these projects.  For each project selected, we developed a
description and identified the source of funds for the project. 
These projects are the Ringgold, Georgia, Telephone Company; the
Mayfield, Kentucky, Rural Telecommunications Resource Center; the
Eastern Oregon RODEONET Project; the Paducah, Kentucky, Information
Age Park; and the Spokane, Washington, STEP/Star Network.  These
projects are discussed in greater detail in appendix II. 

To gain further insight into the lessons learned by other rural areas
using the federal programs and to identify any changes needed, we
reviewed relevant studies by the Aspen Institute, the National
Governors Association, the National Association of Development
Organizations, the Organization for the Protection and Advancement of
Small Telephone Companies, the National Association of Regional
Councils, the American Academy of Political and Social Science,
USDA's Economic Research Service, the Rural Policy Research
Institute, and the Office of Technology Assessment. 

To obtain the state perspective on telecommunications technologies in
rural communities, we spoke with a group of officials from 15 State
Rural Development Councils through a conference call arranged by the
National Rural Development Partnership Office at our request.  These
officials were in Alaska, Colorado, Florida, Idaho, Iowa,
Massachusetts, Minnesota, Missouri, Montana, Nebraska, Ohio, Texas,
Washington, Wisconsin, and Wyoming. 

To obtain a grassroots perspective, we requested NADO, the National
Association of Regional Councils, and the Organization for the
Protection and Advancement of Small Telephone Companies to solicit
the views of their members on the same issues discussed with state
officials.  (See app.  III for a brief description of these
organizations.)

We conducted our review from August 1995 through May 1996 in
accordance with generally accepted government auditing standards. 


---------------------------------------------------------- Letter :7.1

We are sending copies of this report to the House Committee on
Agriculture; other appropriate congressional committees; the
Secretary of Agriculture; and federal and state agencies with
responsibility for telecommunications technologies in rural areas. 

If you or your staff have any questions about this report, I can be
reached at (202) 512-5138.  Major contributors to this report are
listed in appendix IV. 

Robert A.  Robinson
Director, Food and
 Agriculture Issues


FEDERAL PROGRAMS THAT CAN BE USED
FOR TELECOMMUNICATIONS PROJECTS
=========================================================== Appendix I

This appendix presents detailed information on the 28 federal
programs we identified that are either designed to support
telecommunications projects or that can be used for that purpose. 
This information was principally obtained from the June 1995 Catalog
of Federal Domestic Assistance.  We confirmed the budget information
with appropriate program officials but did not independently verify
the information. 


   PROGRAMS THAT ARE DESIGNED TO
   SUPPORT TELECOMMUNICATIONS
   PROJECTS
--------------------------------------------------------- Appendix I:1

Thirteen programs we identified are designed to provide funding for
telecommunications projects. 

U.S.  Department of Agriculture

The Department has four programs that directly support
telecommunications projects.\6

The Agricultural Telecommunications Program, supported by the
Cooperative State Research Education and Extension Service, awards
grants to eligible institutions to assist in the development and
utilization of an agricultural communications network to facilitate
and strengthen agricultural extension, residents' education, and
research, and domestic and international marketing of U.S. 
commodities and products through a partnership between eligible
institutions and the Department.  The network employs satellite and
other telecommunications technologies to disseminate and share
academic instruction, cooperative extension programming, agriculture
research, and marketing information. 

Types of assistance.  Project grants. 

Funding levels.  This program was initially funded in fiscal year
1992.  Funding levels remained constant at $1.22 million through
fiscal year 1995. 

Eligibility criteria.  Applicants must demonstrate that they will (1)
make optimal use of available resources for agricultural extension,
residents' education, and research by sharing resources between
participating institutions; (2) improve the competitive position of
U.S.  agriculture in international markets by disseminating
information to producers, processors, and researchers; (3) train
students for careers in agriculture and food industries; (4)
facilitate interaction among leading agricultural scientists; (5)
enhance the ability of U.S.  agriculture to respond to environmental
and food safety concerns; and (6) identify new uses for farm
commodities and increase the demand for U.S.  agricultural products
in both domestic and foreign markets.  Proposals are invited from
accredited institutions of higher education. 

Intended beneficiaries.  Institutions of higher education, state and
local governments, private organizations or corporations, and
individuals. 

Examples of funded projects.  One project is to develop and deliver a
model program for staff and faculty training in agricultural distance
learning at 13 land grant universities.  In another project, six land
grant universities will develop a network training concept to improve
the dissemination and sharing of academic instruction, extension
programming, and research activities. 

Rural Telephone Loan and Loan Guarantees, in the Rural Utilities
Service (RUS), has as its objective ensuring that people in eligible
rural areas have access to telecommunications services comparable in
reliability and quality with the rest of the nation. 

Types of assistance.  Direct loans. 

Funding levels.  Cost-of-money\7 loans totaled $186.4 million in
fiscal year 1991, rose to $311.03 million in fiscal year 1993, and
fell to $242.35 in fiscal year 1995.  The total loans guaranteed
remained fairly constant at $120 million, from fiscal year 1991 to
fiscal year 1995.  Funding for hardship loans became a distinct
funding category in fiscal year 1994.  Fiscal year 1994 funding was
$70.34 million and fiscal year 1995, $69.5 million.  While the
funding levels varied from year to year, this reflects the amount of
funding (budget authority) provided by the Congress, not the number
of applications received; in each year, more applications were
received than could be funded. 

Eligibility criteria.  Telephone companies or cooperatives, nonprofit
associations, limited dividend associations, mutual associations or
public bodies, including those located in the U.S.  territories, are
eligible for this program. 

Intended Beneficiaries.  Residents of rural areas and others who may
also receive telephone service as a result of service provided to a
rural area. 

Examples of funded projects.  Since 1992, loans have been made to RUS
borrowers to finance over $368 million in projects for fiber optic
cable, over $350 million for digital switching equipment, $70 million
for advanced telecommunications features, and $14 million for
distance learning. 

Rural Telephone Bank Loans (Rural Telephone Bank), under RUS, is
designed to provide supplemental financing to extend and improve
telecommunications services in rural areas. 

Types of assistance.  Direct loans. 

Funding levels.  The program made loans totaling $177.0 million in
fiscal year 1991, $199.85 million in fiscal year 1994, and $175
million in fiscal year 1995. 

Eligibility criteria.  Eligible recipients are borrowers, including
those located in the U.S.  territories, or possessions that have
received a loan or loan commitment under section 201 of the Rural
Electrification Act or that have been certified by the Administrator
as qualified to receive such a loan. 

Intended beneficiaries.  Residents of rural areas and others who
receive telecommunications service resulting from service provided to
rural areas. 

Examples of funded projects.  Since 1992, loans have been made to RUS
telephone borrowers to finance over $368 million for fiber optic
cable, over $350 million for digital switching, $70 million for
advanced telecommunications features, and $14 million for distance
learning equipment. 

Distance Learning and Medical Link Grants, provided by RUS, are
intended to encourage and improve the use of telecommunications,
computer networks, and related advanced technologies to provide
educational and medical benefits to people living in rural areas. 

Types of assistance.  Project grants. 

Funding levels.  Funding for fiscal years 1993 and 1994, the first 2
years that grants were awarded, was $10.0 million each year.  The
program's funding level was reduced to $7.50 million in fiscal year
1995. 

Eligibility criteria.  Eligible recipients include organizations such
as schools, libraries, hospitals, medical centers, or similar
organizations that will be users of a telecommunications, computer
network, or related advanced technology system to provide educational
and/or medical benefits to rural residents.  The applicant must not
be delinquent on any federal debt. 

Intended beneficiaries.  Rural communities will benefit, particularly
in the areas of health care and education. 

Examples of funded projects.  The program has supported a network to
link rural hospitals and health care clinics with urban tertiary care
centers to provide rural residents with continuous access to trauma
and emergency care.  It has also sponsored a system to provide 37,000
rural residents--including students, patients, and other
residents--with access to the Iowa Communications Network for
educational and medical services. 

Department of Education

The Department has three programs that directly support
telecommunications projects. 

The Star Schools Program encourages improved instruction in
mathematics, science, and foreign languages, as well as other
subjects, such as literacy skills and vocational education.  Grants
are made to eligible telecommunications partnerships to enable them
to (1) develop, construct, acquire, maintain, and operate
telecommunications audio and video facilities and equipment; (2)
develop and acquire educational and instructional programming; and
(3) obtain technical assistance for the use of such facilities and
instructional programming. 

Type of assistance.  Project grants. 

Funding levels.  The program's funding has increased from $14.4
million in fiscal year 1991 to $25 million in fiscal year 1995. 

Eligibility criteria.  Eligible telecommunications partnerships must
be organized on a statewide or multistate basis.  Two types of
partnerships are eligible.  One type is a public agency or
corporation established to develop and operate telecommunications
networks to enhance educational opportunities provided by educational
institutions, teacher training centers, and other entities.  The
agency or corporation must represent the interests of elementary and
secondary schools eligible to participate under title 1 of the
Elementary and Secondary Education Act of 1965, as amended.  The
second type is a partnership of three or more agencies, such as a
state educational agency, a local educational agency that serves
certain types of students, an institution of higher education or a
state higher education agency, a teacher training center, an adult or
family education program, a public or private elementary or secondary
school, a telecommunications entity, or a public broadcasting entity. 
At least one of the partners must be an eligible local educational
agency or state educational agency. 

Intended beneficiaries.  The program serves underserved populations,
including those who are disadvantaged or illiterate, as well as those
who have disabilities or limited proficiency in English. 

Examples of funded projects.  In fiscal years 1994 and 1995, Star
Schools funded 13 projects totaling approximately $50.9 million.  For
example, the College of Eastern Utah received grants totaling $4.4
million to develop state-of-the-art studios and linked classrooms to
improve the delivery of education services to the Four Corners area
of the Southwest.  The project is aimed at rural and Native American
populations.  The Pacific Mountain Network received $741,000 to
develop eight 30-minute video modules focusing on distance learning
and education reform, to screen distance learning resources, and to
provide background information on technology's role in education. 

Challenge Grants for Technology in Education provide support to
consortia that are using new applications of technology to strengthen
the school reform effort, improve the content of the curriculum,
increase student achievement, and provide sustained professional
development for teachers and others who are employing new
applications of technology to improve education. 

Types of assistance.  Project grants (discretionary). 

Funding levels.  The program was originally appropriated $27 million
for fiscal year 1995, its first year of operation.  However, the
Congress later reduced the appropriated amount to $9.5 million for
the year.  Challenge grants are for 5-year projects.  Each project
will receive an initial 15-month budget from combined fiscal year
1995-96 appropriations. 

Eligibility criteria.  Consortia must include at least one local
educational agency (LEA) with a high percentage or number of children
living below the poverty line and may include other LEAs, state
educational agencies, institutions of higher education, businesses,
academic content experts, software designers, museums, libraries, or
other appropriate entities. 

Intended beneficiaries.  Elementary and secondary education students,
teachers, administrators, and school library media personnel benefit
from the program. 

Examples of funded projects.  The program funded 19 projects in its
first year.  For example, the program provided funds to Westside
Community Schools and the Nebraska Consortium for Discipline-Based
Art Education to use telecommunications and digital technology to
link urban and rural schools to the art collections of five major
museums across the country.  The program also funded the state of
Utah Resource Web to use telecommunications to provide quality
educational opportunities in low-income, rural, and culturally
disenfranchised communities. 

Telecommunications Demonstration Project for Mathematics carries out
a national telecommunications-based demonstration project to improve
the teaching of mathematics. 

Types of assistance.  Project grants. 

Funding levels.  In fiscal year 1995, the first year of the program,
$1.1 million was appropriated. 

Eligibility criteria.  State educational agencies (SEA), LEAs,
nonprofit telecommunications entities, or partnerships with these
entities may apply. 

Intended beneficiaries.  Those benefiting from the program include
elementary and secondary school teachers of mathematics and schools
of LEAs having a high percentage of children who are counted for the
purpose of part A, title 1, of the Elementary and Secondary Education
Act of 1965, as amended. 

Examples of funded projects.  One grant was awarded in fiscal year
1995 to the Public Broadcasting Service for an elementary component
of PBS Mathline.  The project will provide video modules and on-line
resources for teachers of mathematics in more than 30 states across
the country. 

Department of Health and Human Services

The Department has two programs that support telecommunications
projects. 

Health Care Financing Administration's (HCFA) Research,
Demonstration, and Evaluation projects are designed to support
analyses, experiments, demonstrations, and pilot projects aimed at
resolving major health care financing issues or developing innovative
methods for the administration of Medicare and Medicaid.  In 1994,
HCFA identified a number of areas in which specific information or
experience was needed to improve programs' effectiveness or guide
decisions.  These priority areas for discretionary cooperative
agreements and/or grants were to be HCFA's guide for project
selection in fiscal years 1994, 1995, and 1996, and included (1)
access and quality of care; (2) managed care systems; (3) provider
payments; (4) health care systems reform and financing; (5) program
evaluation and analyses; (6) service delivery systems; and (7)
subacute and long-term care.  However, substantial cutbacks in
discretionary funding for HCFA in fiscal years 1995 and 1996 resulted
in only a few new awards in these areas in 1995 and none in 1996. 

Types of assistance.  Project grants or cooperative agreements. 

Eligibility criteria.  Grants or cooperative agreements may be made
to private or public agencies or organizations, including state
agencies that administer the Medicaid program.  Private for-profit
organizations may apply.  Awards cannot be made directly to
individuals. 

Intended beneficiaries.  Contributing retirees or specially entitled
beneficiaries, which include those with disabilities, end-stage renal
disease, and families receiving Medicaid benefits. 

Funding levels.  HCFA funded five telemedicine demonstration projects
totaling $858,000 in fiscal year 1993, $4 million in fiscal year
1994, and $524,000 in fiscal year 1995.  New telemedicine projects
have not been funded since fiscal year 1994.  The fiscal year 1995
funding was to begin a comprehensive evaluation of HCFA's previously
awarded telemedicine demonstration projects. 

Examples of funded projects.  The program funded five telemedicine
demonstration projects in 1993 and 1994.  For example, in fiscal year
1993, the program provided about $700,000 to the Iowa Methodist
Health System for its telemedicine services in cardiology and
pathology consultations.  In fiscal year 1994, the program provided
about $272,000 to East Carolina University to test a system of
Medicare payments for telemedicine services involving two rural
hospitals and a medical school affiliate. 

Rural Telemedicine Grants support projects to demonstrate and collect
information on the feasibility, costs, appropriateness, and
acceptability of telemedicine for improving access to health services
for rural residents and reducing the isolation of rural
practitioners. 

Types of assistance.  Project grants. 

Eligibility criteria.  The grant recipient can be a public
(nonfederal) or private nonprofit or for-profit entity, located in
either a rural or urban area.  The entity must be a health care
provider and a member of a telemedicine network or a consortium of
providers that are members of a telemedicine network. 

Intended beneficiaries.  Rural health care providers, patients, and
rural communities benefit from this grant program. 

Funding levels.  The program received $4.6 million in fiscal year
1994, its first year, and $5 million in fiscal year 1995. 

Examples of funded projects.  For fiscal year 1994, the program
granted 11 new awards.  No new grants were made in fiscal year 1995
because of budget constraints.  One project is the High Plains Rural
Health Network in Fort Morgan, Colorado.  This project is a
consortium of hospitals, clinics, and physician practices in
Colorado, Nebraska, and Kansas.  Its telemedicine network will have
two hub facilities serving two rural hospitals, two community health
centers, and a long-term care facility.  The network will have a
videoconferencing system and an electronic bulletin board for ongoing
communications among all network practitioners.  Another project is
the University of Kentucky's Medical Center's plan to provide
specialty consultations to Berea Hospital (with 42 acute-care beds)
and several clinics in rural Kentucky.  The university hospital also
will be linked with the Saint Claire Medical Center in Morehead,
Kentucky, which will serve as a second hub site. 

Department of Commerce

The Department sponsors two telecommunications projects under its
National Telecommunications and Information Administration. 

Public Telecommunications Facilities Planning and Construction Grants
can be used to assist in the planning, acquisition, installation, and
modernization of public telecommunications facilities, through
planning grants and matching construction grants, in order to (1)
extend the delivery of public telecommunications services to as many
citizens of the United States and its territories as possible by the
most efficient and economical means, including the use of broadcast
and nonbroadcast technologies; (2) increase public telecommunications
services and facilities available to, operated by, and owned by
minorities and women; and (3) strengthen the capability of existing
public television and radio stations to provide public
telecommunications services to the public. 

Types of Assistance.  Project grants. 

Funding levels.  This program's funding was increased from $19.7
million in fiscal year 1991 to $27.7 million in fiscal year 1995. 

Eligibility criteria.  Several types of entities are eligible for
these grants:  (1) public or noncommercial educational broadcast
stations; (2) noncommercial telecommunications entities; (3) systems
of public telecommunications entities; (4) public or private
nonprofit foundations, corporations, institutions, or associations
organized primarily for educational or cultural purposes; and (5)
state or local governments or agencies, including U.S.  territories,
federally recognized Indian tribal governments, or political or
special purpose subdivisions of a state. 

Intended beneficiaries.  The general public and students benefit from
the program. 

Examples of funded projects.  One project funded under this program
is the construction of a new noncommercial radio station in Ada,
Oklahoma, to provide the first public radio signal to 40,000
residents in southeastern Oklahoma.  Another is the replacement of
the transmission system, the remote control, and associated
dissemination equipment for a public television station in Austin,
Texas. 

The Telecommunications and Information Infrastructure Assistance
Program promotes the widespread use of advanced telecommunications
and information technologies in the public and nonprofit sectors. 

Types of assistance.  Project grants. 

Funding levels.  This program was initially funded in 1994.  The
program funded projects totaling $24.4 million in fiscal year 1994
and $36.0 million in fiscal year 1995. 

Eligibility criteria.  State and local governments, nonprofit health
care providers, school districts, libraries, universities and
colleges, public safety services, and other nonprofit entities. 

Intended beneficiaries.  The general public benefits from the
program. 

Examples of funded projects.  One project involves a rural
educational system in Washington State, serving a predominantly
Native American population, that will build a systemwide voice, data,
and video instructional network.  This system will be connected to
statewide educational and national information services.  Another
project is the Kansas State Corporation Commission's effort to
develop a comprehensive, statewide telecommunications infrastructure
plan that addresses the needs of business, health care, education,
government, and the public. 

National Science Foundation

The National Science Foundation (NSF) has two programs that support
telecommunications projects. 

Connections to the Internet is intended to encourage U.S.  research
and educational institutions to connect to the Internet.  In March
1996, this program extended the Connections to the NSFNET program,
which has been in place since 1990. 

Types of assistance.  Project grants. 

Funding levels.  The program's funding was $1.6 million in fiscal
year 1991.  Funding rose to $8.3 million in fiscal year 1993 and fell
to $5.8 million in fiscal year 1995. 

Eligibility criteria.  Proposals may be submitted by any U.S. 
research or educational institution or consortium of such
organizations as appropriate for connections categories:  (1)
connections utilizing innovative technologies for Internet access;
(2) connections for institutions of higher education; and (3)
connections for research and education institutions and facilities
that have meritorious applications requiring high network bandwidth
or other novel network attributes not readily available from
commodity network service providers. 

Intended beneficiaries.  Students, faculty, and researchers at the
connected schools. 

Examples of funded projects.  One example of a Connection to the
Internet project is an NSF-funded connection of five community
colleges in eastern New Mexico. 

Networking Infrastructure for Education has as its goal building
synergy between technology and education researchers and developers
and implementers so that they can explore networking costs and
benefits, test self-sustaining strategies, and develop a flexible
educational networking infrastructure that will be instrumental in
the dissemination, integration, and application of technologies to
speed the pace of educational innovation and reform. 

Types of assistance.  Project grants or cooperative agreements. 

Funding levels.  NSF allocated $8.7 million to the program in fiscal
year 1994, its first year, and $11.7 million in fiscal year 1995. 

Eligibility criteria.  Individual institutions or groups of
institutions within the United States.  Alliances of 2- and 4-year
degree-granting academic institutions, school districts, professional
societies, state agencies, public libraries, museums, and others
concerned with educational reform.  Business and industry
participation, with cost-sharing consistent with their role, is
required for demonstration, model site, testbed and infrastructure
projects and encouraged for policy studies and research and
development projects. 

Intended beneficiaries.  Elementary, secondary, and undergraduate
science, mathematics, and engineering teachers and faculty;
secondary, undergraduate students; public and private colleges
(2-year and 4-year) and universities; state and local educational
agencies; nonprofit and private organizations; professional
societies; science academies and centers; science museums and
zoological parks; research laboratories; and other institutions with
an educational mission. 

Examples of funded projects.  One project funded under this program
is a Montana statewide coalition featuring partners from all public
and private stakeholders, including the Statewide Systemic
Initiative, to plan for the development of a lasting infrastructure
that will support a variety of educational telecommunications
services, paying particular attention to the special conditions in
this largely rural state.  Another project is a regional data network
to connect schools, libraries, and community centers to individual
households, the network itself, and the Internet. 


--------------------
\6 The changes made under the recently enacted Federal Agriculture
Improvement and Reform Act are not reflected in the information
presented in this appendix. 

\7 RUS makes concurrent cost-of-money and rural telephone bank loans
(to be discussed later) to finance the improvement, expansion,
construction, and acquisition of systems or facilities (unless
otherwise excluded). 


   PROGRAMS WITH OBJECTIVES NOT
   SPECIFIC TO TELECOMMUNICATIONS
--------------------------------------------------------- Appendix I:2

We also identified 15 multipurpose programs that do not have
telecommunications projects as a specific objective but can fund such
projects.  While these programs have similar objectives--such as
economic development, education, and health outreach-- they do not
specifically cite telecommunications as the means to accomplish their
objectives.  Table I.2 lists these programs. 



                                        Table I.2
                         
                          Multipurpose Federal Programs That May
                           Fund Telecommunications Projects in
                                       Rural Areas

Agency                         Program name or service provided
-----------------------------  ----------------------------------------------------------
U.S. Department of
Agriculture

Rural Business and             Rural Economic Development Loans and Grants
Cooperative Development
Service

Appalachian Regional           Special Appalachian Regional Commission Initiatives
Commission

                               Appalachian Area Development

Department of Education

Office of Educational          Library Research and Demonstrations Program
Research and Improvement

Office of Elementary and       Eisenhower Professional Development State Grants Program
Secondary Education

Department of Commerce

Economic Development           Economic Development Grants for Public Works and
Administration                 Infrastructure Development

                               Economic Development Technical Assistance Grants

                               Planning Program for States and Urban Areas

National Institute of
Standards and Technology       Advanced Technology Program

Department of Health and
Human Services

Office of Rural Health Policy  Rural Health Services Outreach

Department of Housing and      Community Development Block Grants/State's Program
Urban Development

Small Business Administration  Small Business Loans

Tennessee Valley Authority     Economic Development Loan Fund

                               Special Opportunity Counties Revolving Loan Fund

                               Technical Assistance Program
-----------------------------------------------------------------------------------------
Although these programs may fund many different kinds of projects,
some have emphasized telecommunications technologies.  For example,
the Appalachian Regional Commission views telecommunications as
crucial to Appalachia's economic development.  Telecommunications
technologies is one of three initiatives ARC has targeted for the
region, along with civic development and preparing Appalachia for the
global economy.  The ARC Co-Chairman has pledged to ensure that "the
'information superhighway' not bypass Appalachia as the national
highway system did some four decades ago."

U.S.  Department of Agriculture

The Department has one program in its Rural Business and Cooperative
Development Service that, while not specifically designed for
telecommunications technologies, can be used for them. 

Rural Economic Development Loans and Grants are designed to promote
rural economic development and help create jobs, including funding
for project feasibility studies, startup costs, incubator projects,
and other reasonable expenses for the purpose of fostering rural
development. 

Types of assistance.  Direct loans; project grants. 

Funding levels.  The program received $13.5 million in fiscal year
1994. 

Eligibility criteria.  Electric and telephone utilities that have
current Rural Electrification Administration or Rural Telephone Bank
loans or guarantees outstanding and are not delinquent on any federal
debt or in bankruptcy proceedings may apply. 

Intended beneficiaries.  Rural communities and the general public
benefit from this program. 

Examples of funded projects.  Program officials say the program has
not funded telecommunications projects. 

Appalachian Regional Commission

The Commission currently offers two programs that can be used for
telecommunications projects.  ARC receives only one appropriation
each year for its assistance activities.  All projects are funded
from this "Area Development" allocation.  Area Development funding
has ranged from $39.5 million in fiscal year 1991 to $102.0 million
in fiscal year 1995; only a small amount of this funding is used for
telecommunications under the two programs discussed below. 

Special ARC Initiatives have been funded during fiscal years 1995 and
1996 and are planned to be funded again in fiscal year 1997.  The
three special initiatives provide assistance for telecommunications,
internationalization of the Appalachian region's economy, and local
leadership and civic development.  (Approximately $5 million to $6
million was set aside from the Area Development allocation for these
three initiatives in fiscal years 1995 and 1996, and a similar amount
is anticipated for fiscal year 1997.)

Types of assistance.  Project grants. 

Funding levels.  See description of Area Development funding, above. 

Eligibility criteria.  Multicounty organizations, state universities,
community colleges, high schools, nonprofit organizations, and school
boards. 

Intended beneficiaries.  Residents of the Appalachian region. 

Examples of funded projects.  Assisted with the strategic plan for
the Multiregional Telecommunications Improvement Project in New York
and the Western Maryland WMDNet Equipment Project, which connected
universities, junior colleges, libraries, county governments, and
health facilities. 

Appalachian Area Development provides assistance for a variety of
needs, including telecommunications projects.  (See Special ARC
Initiatives described above).  On average, across the region, about
$2.5 million to $3 million is annually provided for
telecommunications-related projects from the overall Area Development
funding allocation. 

Types of assistance.  Project grants. 

Funding levels.  See description of Area Development funding, above. 

Eligibility criteria.  Multicounty organizations, state universities,
community colleges, high schools, nonprofit organizations, and school
boards. 

Intended beneficiaries.  Residents of the Appalachian region. 

Examples of funded projects.  Assisted with the Elmore County
(Alabama) Telecommunications Network Project (connecting high
schools, junior colleges, businesses, and government offices) and the
Greenville (South Carolina) Hospital Home Health Project. 

Department of Commerce

The Department has four programs that can be used to support
development of telecommunications projects. 

Economic Development Grants for Public Works and Infrastructure
Development, administered by the Economic Development Administration,
are used to promote long-term economic development and assist in the
construction of public works and development facilities needed to
initiate and encourage the creation or retention of permanent jobs in
the private sector in areas experiencing severe economic distress. 

Types of assistance.  Project grants. 

Funding levels.  The program's funding has ranged from $140.8 million
in fiscal year 1991 to $195.0 million in fiscal year 1995. 

Eligibility criteria.  States, cities, counties, other political
subdivisions, Indian tribes, the Federated States of Micronesia, the
Republic of the Marshall Islands, commonwealths and territories of
the U.S.  flag, and private or public nonprofit organizations or
associations representing a redevelopment area or a designated
Economic Development Center are eligible to receive grants. 
Corporations and associations organized for profit are not eligible. 

Intended beneficiaries.  Local economies, unemployed and
underemployed persons, and/or members of low-income families benefit
from the program. 

Examples of funded projects.  These grants have supported
infrastructure necessary for economic development (e.g., water/sewer
facilities), the construction of incubator facilities, and port
development and expansion.  With respect to telecommunications, two
rural community colleges in North Carolina received grant assistance
to install two-way interactive telecommunications equipment that is
used to provide training for underemployed and unemployed youths and
adults. 

Economic Development Technical Assistance, administered by the
Economic Development Administration, provides funding to promote
economic development and alleviate underemployment and unemployment
in distressed areas.  The program provides funds to enlist the
resources of designated university centers in promoting economic
development, support demonstration projects, disseminate information
and studies of economic development issues of national significance,
and finance feasibility studies and other projects leading to local
economic development. 

Types of assistance.  Project grants. 

Funding levels.  The program's funding increased from $6.6 million in
fiscal year 1991 to $10.9 million in fiscal year 1995. 

Eligibility criteria.  Private or public nonprofit organizations,
educational institutions, federally recognized Indian tribal
governments, municipal, county or state governments, and U.S. 
territories or entities thereof. 

Intended beneficiaries.  Projects are intended to assist in solving
economic development problems, respond to economic development
opportunities, and expand organizational capacity for economic
development. 

Examples of funded projects.  Management and technical assistance
services to communities, counties, districts, nonprofit development
groups; technology transfer assistance to firms; studies to determine
the economic feasibility of various local development projects.  An
example of a recent telecommunications-related project involved
providing grant assistance to rural communities in Colorado to
improve the competitive stance of existing, emerging, and prospective
businesses through Internet-based services. 

Planning Program for States and Urban Areas, administered by the
Economic Development Administration, is designed to assist
economically distressed states, substate planning regions, cities,
and urban counties to undertake significant new economic development
planning, policymaking, and implementation efforts.  (Rural areas are
included in this program). 

Types of assistance.  Project grants. 

Funding levels.  The program's funding has remained fairly stable
over the past 5 years, ranging from $4.7 million in fiscal year 1991
to $4.5 million in fiscal year 1995. 

Eligibility criteria.  Eligible applicants include states, substate
planning units, cities, urban counties within metropolitan
statistical areas, and combinations of these entities. 

Intended beneficiaries.  Residents of eligible areas. 

Examples of funded projects.  The state of Alabama received a grant
in 1994 that drew on computer technology to assist high school
students in rural areas, as well as the unemployed and underemployed,
in getting job training that would enhance their ability to obtain
employment.  The New River Valley Planning Development Council, in
Radford, Virginia, received a grant in 1994 that uses
telecommunications technology to link Southwest Virginia to areas
that are more industrially developed. 

Advanced Technology Program, administered by the National Institute
of Standards and Technology, is designed to promote "commercializing
new scientific discoveries and technologies rapidly" and "refining
manufacturing practices" through supporting high-risk civilian
technologies that are in the nation's economic interest. 

Types of assistance.  Project grants (cooperative agreements). 

Funding levels.  The program's funding increased steadily between
fiscal years 1991 and 1995, from $35.9 million to $341.0 million. 

Eligibility criteria.  Recipients must be U.S.  businesses or joint
research and development ventures.  Foreign-owned businesses are
eligible, if they meet the requirements of the American Technology
Preeminence Act of 1991 (P.L.  102-245, Feb.  2, 1992). 

Intended beneficiaries.  U.S.  businesses and U.S.  joint research
and development ventures.  Foreign-owned businesses, if they meet the
requirements of P.L.  102-245. 

Examples of funded projects.  Printed wiring board manufacturing
technology, flat panel display manufacturing, magnetoresistive random
access memories, and ultra-high-density magnetic recording heads. 

Department of Education

The Department has two programs that can be used to support
telecommunications projects. 

The Library Research and Demonstrations Program has as its objective
the awarding of grants and contracts for research and/or
demonstration projects in areas of specialized services intended to
improve library and information science practices.  Among other
things, the program may fund the use of new technologies to enhance
library services. 

Types of assistance.  Project grants. 

Funding levels.  Funds increased from $325,000 in fiscal year 1991 to
$6.5 million in fiscal year 1995. 

Eligibility criteria.  Institutions of higher learning or public or
private agencies, institutions, or organizations are eligible. 

Intended beneficiaries.  Institutions of higher learning or public or
private agencies, institutions, or organizations are the
beneficiaries. 

Examples of funded projects.  Since fiscal year 1993, funds have been
used to establish statewide multitype library networks.  For example,
in fiscal year 1993, Louisiana State University and Agricultural and
Mechanical College was awarded a $2.5 million grant to expand its
electronic library network to connect libraries around the state. 
Other grant recipients for the same purpose are the Colorado
Department of Education's State Library and Adult Education Office
(fiscal year 1994, $2.5 million); State Library of Iowa (fiscal year
1995, $2.5 million); and West Virginia Library Commission, Department
of Education and the Arts (fiscal year 1995, $2.5 million).  Each
project is making its databases available to all types of libraries
throughout the state.  In Iowa, the State University Extension
Service is also participating in the project to coordinate
information resources. 

The Eisenhower Professional Development Program is designed to give
teachers, administrators, and other school personnel access to
high-quality, sustained, and intensive professional development
activities in the core academic subjects aligned to challenging state
content and student performance standards. 

Types of assistance.  Formula grants. 

Funding levels.  $251.3 million in fiscal year 1995. 

Eligibility criteria.  Funds are distributed to the states on a
formula basis.  Of the total state allocation, the SEA receives 84
percent and the state agency for higher education, 16 percent.  The
SEA distributes, by formula, at least 90 percent of the funds that it
receives to LEAs within the state.  The state agency for higher
education distributes at least 95 percent of its allocation in the
form of competitive subgrants to institutions of higher education and
nonprofit organizations. 

Intended beneficiaries.  Teachers, administrators, and other school
personnel are direct beneficiaries, and as a result of these
populations' participating in professional development, students are
indirect beneficiaries. 

Examples of funded projects.  One project supported through this
program is "Geometry Enhancement Models Institute:  Meeting the
Challenge of Mathematics Education," funded through the University of
Memphis, which is to be conducted during the summer of 1996.  The
Institute is planned for 20 middle school in-service teachers to
acquaint participants with the van Hiele theory of geometry through
interactive, hands-on participation drawing on a number of
instructional methods. 

Department of Health and Human Services

The Department has one program that can be used for
telecommunications projects. 

Rural Health Services Outreach is intended to provide health services
to rural populations that are not receiving them and to help rural
communities and health care providers coordinate their services and
enhance linkages, integration, and cooperation among rural providers
of health services. 

Types of assistance.  Project grants. 

Funding levels.  Funds for telemedicine projects have increased from
$220,000 in fiscal year 1991 to $1.7 million in fiscal year 1995. 

Eligibility criteria.  Nonprofit public or private entities located
in nonmetropolitan statistical areas or a rural area within a larger
metropolitan statistical area may apply. 

Intended beneficiaries.  Medically underserved populations in rural
areas will receive expanded services. 

Examples of funded projects.  The program funded eight new
telemedicine projects in fiscal years 1994 and 1995.  For example,
the program provided assistance to Douglas County Hospital in
Alexandria, Minnesota, to develop an advanced telemedicine network to
serve eight rural communities in central Minnesota.  The network's
goal is to reduce the isolation of rural health care providers and to
enhance access to specialized medical services.  For another project,
the program provided a total of $306,000 to Big Bend Regional Medical
Center of Alpine, Texas, over 3 years to use telemedicine to offer
primary care and health education services to the underserved
population of Presidio, Texas.  A telecommunications system is being
set up in the town to link it with Big Bend Medical Center in Alpine
and the Texas Tech Health Sciences Center. 

Department of Housing and Urban Development

The Department administers one program that can be used to support
telecommunications projects. 

Community Development Block Grants/State's Program has as its primary
objective the development of viable communities by providing decent
housing, and a suitable living environment and expanding economic
opportunities, principally for persons of low and moderate income. 

Types of assistance.  Formula grants. 

Funding levels.  Total funding levels for the program were $1.0
billion in fiscal year 1992, $1.2 billion in fiscal year 1993, $1.3
billion in fiscal year 1994, and $1.3 billion in fiscal year 1995. 

Eligibility criteria.  State governments receive funding according to
a formula; funds are then provided through the state to eligible
units of general local government.  Eligible units of general local
government are generally cities with populations of 50,000 or less
that are not designated central cities of metropolitan statistical
areas, and counties with populations of 200,000 or less.  Forty-eight
states and Puerto Rico participate in the state Community Development
Block Grant program. 

Intended beneficiaries.  Low- to moderate-income persons. 

Examples of funded projects.  No telecommunications-related projects
have as yet been completed by this program, according to program
officials.  One project--a telemedicine project linking 45 rural
clinics to larger hospitals in Oklahoma--is being pursued at this
time. 

Small Business Administration

We identified one program that can be used for telecommunications
projects. 

Small Business Loans (7(a) Loans) are guaranteed loans to small
businesses that are unable to obtain financing in the private credit
marketplace but that can demonstrate the ability to repay the loans
granted.  This program can also provide guaranteed loan assistance to
low-income business owners or businesses located in areas of high
unemployment or to specific types of businesses, such as those owned
by handicapped individuals. 

Types of assistance.  Guaranteed/insured loans. 

Funding levels.  In fiscal year 1992, loans totaling $6.0 billion
were guaranteed.  In fiscal year 1995, guaranteed loans totaled $8.3
billion. 

Eligibility criteria.  Small businesses that are independently owned
and operated and not dominant in their field are eligible; businesses
must also meet specific criteria for size, depending on the industry. 

Intended beneficiaries.  Small businesses, including those owned by
low-income and handicapped individuals, or located in high
unemployment areas benefit from the program. 

Examples of funded projects.  With respect to
telecommunications-related loans, the Small Business Administration
has assisted small businesses that provide telecommunications-related
services such as paging services and cellular telephone services. 

Tennessee Valley Authority

The Tennessee Valley Authority (TVA) has three programs to support
telecommunications. 

The Economic Development Loan Fund was established to stimulate
industrial development and leverage capital investment in TVA's power
service area.  Specifically, the fund is used to promote economic
expansion, encourage job creation, and foster the increased sale of
electricity by TVA and its power distributors. 

Types of assistance.  Direct loans. 

Funding levels.  This revolving loan fund was initially funded in
fiscal year 1995 with $20 million from power revenues. 

Eligibility criteria.  Projects are sponsored by a local government,
power distributor, or established economic development organization. 
Loans are made to TVA power customers, communities or nonprofit
economic development corporations to support approved projects. 

Intended beneficiaries.  The ultimate beneficiaries are the people of
the Tennessee Valley region. 

Examples of funded projects.  As of November 1995, this program had
not funded any telecommunications projects. 

The Special Opportunity Counties Revolving Loan Fund is designed to
stimulate economic development and private sector job growth in the
most economically disadvantaged counties in the Tennessee Valley. 

Types of assistance.  Direct loans. 

Funding levels.  This revolving loan fund was funded with a $14
million allocation from TVA's appropriations for fiscal years 1981
through 1987. 

Eligibility criteria.  Per capita personal income and percent of
persons below the poverty level were the two variables used to
determine which of the 201 Tennessee Valley counties were eligible
for the program.  First, the 100 counties with the lowest per capita
personal income were chosen.  Then, the 50 counties with the highest
percent of persons below the poverty level were considered to be
eligible for the program. 

Intended beneficiaries.  The ultimate beneficiaries are the people of
the Tennessee Valley region. 

Examples of funded projects.  One project is an interactive
television network, a two-way interactive television network, in the
Upper Cumberland area of Tennessee.  The network provides full
motion, multisite, multichannel simultaneous two-way interactive
communication capabilities. 

The Technical Assistance Program invests in economic development to
increase the production of goods and services and generate a higher
standard of living for all citizens of the Tennessee Valley Region. 

Types of assistance.  Advisory services, counseling, architectural
and engineering studies, and the dissemination of economic
information.  Investments in the research, development, and
implementation of a regional small business incubator network. 

Funding levels.  Funding for this program includes salaries and
expenses.  Fiscal year 1991 funding was $21.2 million.  Funding
dropped to $18 million in fiscal year 1994, but rose to $22.5 million
in fiscal year 1995. 

Eligibility criteria.  Within the Tennessee Valley, officers and
agencies of state, county, and municipal governments; quasi-public
agencies; and private organizations, individuals, and business firms
and associations may seek technical advice and assistance in
community resource development. 

Intended beneficiaries.  The ultimate beneficiaries are the people of
the Tennessee Valley region. 

Examples of funded projects.  TVA's technical services include
architectural/engineering, economic research and forecasting,
information services support, environmental coordination, and project
management. 


DETAILED DESCRIPTION OF FIVE
TELECOMMUNICATIONS PROJECTS IN
RURAL AREAS
========================================================== Appendix II

We visited five telecommunications projects--two economic development
projects, one distance learning project, and one medical link
project.  These projects are funded in part with federal moneys.  In
addition, we visited a borrower of the Rural Utilities Service's
Telephone Bank Loan program.  The results of those visits are
summarized below. 


   THE PADUCAH INFORMATION AGE
   PARK
-------------------------------------------------------- Appendix II:1

The Paducah Information Age Park, located in Paducah, Kentucky,
includes 650 acres, with 360 acres planned for development.  The park
is designed for companies that heavily utilize telecommunications and
telecommunications-related research and development.  Typically, such
companies move volumes of information:  data processing companies,
reservation businesses, credit card companies, payroll centers, and
catalog companies.  The park provides a fiber optic system that
supports high-quality video conferencing, Lan-to-Lan internetworking,
and multimedia communications.  The park also includes an on-site
digital switching center, which provides a network-based Automatic
Call Distributor and Integrated Services Digital Network as well as
other state-of-the-art capabilities.  The mission of the park is to
create economic growth for the region. 

The Chief Executive Officer and Chairman of the Greater Paducah
Economic Development Council (GPEDC) said that, by the early 1980s,
the Paducah area's economy had stagnated.  Community leaders
recognized that new development opportunities were needed.  Toward
this end, they created GPEDC in 1989.  GPEDC first became interested
in the feasibility of an information age park in Paducah after an
official attended a telecommunications conference in 1989 that was
sponsored by a carrier.  In 1990, GPEDC formally requested the
carrier to identify and quantify the potential economic benefits of
"developing an information age park for use as a resource in
recruiting information-intensive, high-technology industries." In
March 1991, the carrier contracted for a study to help determine
whether information age business parks might be economically feasible
in nonmetropolitan areas such as Paducah, Kentucky.  The contractor
subsequently determined that Paducah/McCracken County would be a
suitable location for such a park. 

The park officially opened in May 1994.  According to GPEDC
officials, it will be 12 to 15 years before it is fully developed. 
The contractor determined that the park could have an economic impact
on the area of $100 million to $300 million, an estimate based on
adding between 2,500 to 7,500 jobs in two information age parks and
the multiplier effects of that employment.  As of November 1995, four
sites were sold, options to buy were held on three more, and one
12,000- to 15,000-square-foot speculative building is planned. 

GPEDC officials said that local government entities set aside
jurisdictional questions to commit themselves to the park's ability
to provide high-quality services at the lowest possible cost.  The
city of Paducah has annexed the park because the city can most
economically extend public services like water, sewer, and police and
fire protection.  Officials of McCracken County, in which the project
is located, agreed to forgo the tax revenues from the park itself,
confident that countywide growth will more than compensate for any
short-term revenue losses. 

Paducah community leaders see the park's creation as validating their
commitment to the "partnering" of various private, public, local and
state organizations.  The Chief Executive Officer and Chairman of
GPEDC is not aware of any case in which an organization that was
asked to be a partner in the project declined to participate. 
According to GPEDC officials, the park has benefits beyond new jobs
for the region.  Residents have a positive attitude about the
economic potential of the community, and new ways of approaching
economic development are being considered, such as development
involving advanced telecommunications technologies. 

GPEDC officials said that the total cost of the project is just over
$21 million.  According to GPEDC officials, a carrier invested $6
million in the project, including building a central office in the
park.  Additionally, TVA provided over $1.8 million in financial and
technical assistance towards the development of the park.  GPEDC
officials said the Commonwealth of Kentucky created a $6.2 million
package of combined grants/loans for infrastructure, the conversion
of a wetlands area into a lake, and the partial construction of the
Resource Center.  Public and private local investments total almost
$6.7 million and GPEDC officials said the council itself provided
$300,000. 


   THE MAYFIELD RURAL
   TELECOMMUNICATIONS RESOURCE
   CENTER
-------------------------------------------------------- Appendix II:2

The Purchase Area Development District (PADD), an economic
development district serving eight western Kentucky counties, created
the Rural Telecommunications Resource Center to serve both public
agencies and businesses in its service area in an effort to promote
economic development using advanced telecommunications.  The resource
center is located in Mayfield, Kentucky, in Graves County, and has
two conference rooms, encompassing 4,000 square feet of the
15,000-square-foot PADD office complex.  The resource center, which
officially began operations in October 1995 has advanced
teleconferencing capability, including equipment to make live
interactive presentations.  Additionally, the resource center has a
satellite downlink and a graphical information system, a data tool
for analyzing and displaying geographically related information. 
PADD officials said that the resource center has access to other
Kentucky networks and that, ultimately, the center will have direct
Internet access. 

PADD officials expect several benefits, including (1) increased
training opportunities for employees of area businesses because of
reduced travel costs and time, (2) improved communications between
plant managers and their company headquarters and reduced travel
costs for these executives, (3) improved business access to customers
and suppliers, and (4) improved communication with state regulators
and other officials in Frankfort, Kentucky.  PADD officials believe
that these benefits will enable businesses in their area to become
more productive and therefore more competitive in the global economy. 
Furthermore, PADD officials expect the resource center to be a
demonstration project that spawns additional interest in the economic
development potential of telecommunications in the PADD area. 

PADD officials became interested in telecommunications as a tool for
business and economic development in 1989.  In October 1990, the
Development District held the region's first seminar on the
telecommunications technology available for all types and sizes of
businesses.  Over the years, PADD has worked with groups such as
South Central Bell, the West Kentucky Private Industry Council, and
the University of Louisville Telecommunications Research Center to
assist area businesses and industries to become better informed about
the changing trends in communications and information technology.  In
1994, PADD asked over 450 regional businesses and industries about
their need for advanced telecommunications capability. 

To obtain funding for the resource center, PADD officials contacted
the Economic Development Administration (EDA) in January 1992.  PADD
officials said that in February 1992, their agent, the Jackson
Purchase Local Officials Organization, in partnership with Murray
State, applied for an EDA public works grant.  According to PADD
officials, that application requested funding for the Rural
Telecommunications Resource Center, as well as for linkages between
each county and a districtwide economic and information database that
PADD maintains.  The total cost of the project was estimated at
$572,679, with EDA providing a grant of $343,362, Murray State
providing "in-kind" equipment valued at $168,907, and the Jackson
Purchase Local Officials Organization providing $60,000.  However,
PADD officials said that EDA turned down the request in the spring of
1992 because it was not the type of project EDA normally funded. 
According to an EDA representative in Washington, D.C., as well as
EDA's Kentucky state representative, when the application was
submitted, EDA generally was unfamiliar with the economic development
potential of telecommunications projects.  Traditionally, projects
funded under the public works program have been for infrastructure
items such as water or sewer systems for industrial parks. 

PADD officials said that EDA subsequently reconsidered the
application, and following the visit of an EDA representative from
Washington, D.C., in March 1993, PADD officials reworked and
resubmitted the application.  It was approved in September 1994.  The
approved project totaled $658,158.  EDA supplied a grant of $451,236,
Murray State provided $191,922 in "in-kind" equipment, and the
Jackson Purchase Local Officials Organization contributed $15,000 in
cash.  Also, district officials said that they received a $25,000
technical assistance grant from EDA in September 1994 to help fund a
full-time PADD position to assist in facilities operation. 


   RODEONET
-------------------------------------------------------- Appendix II:3

RODEONET, which began operations in 1992, is a mental health
telemedicine project using advanced telecommunications technologies,
such as two-way video teleconferencing, to provide selected mental
health services and professional development opportunities to
consumers and mental health professionals in 13 rural counties in
eastern Oregon, an area of about 45,000 square miles.\8 In 1995, the
service was expanded to include one site in southern Oregon and three
sites on the northwest Oregon coast.  RODEONET's services include
consultation/evaluation, preadmission and predischarge interviews,
medication management, and staff training and demonstrations.  The
Eastern Oregon Human Services Consortium, a consortium of community
mental health programs, operates RODEONET, using the
telecommunications facilities of Oregon's educational network
(ED-NET). 

The size of the eastern Oregon service area, the location of the
state's two public psychiatric hospitals, and Oregon's laws regarding
hearings and admissions to state mental health facilities make a
project such as RODEONET a practical way of providing some mental
health services to residents and training for mental health
professionals in Eastern Oregon.  The precommitment service, for
example, operates in the following manner.  If a mental health
professional believes that a patient is a danger to himself or
others, the mental health professional can have the patient
transported to a mental health hospital and held.  Oregon has two
public psychiatric hospitals--one in northeast Oregon and one in
western Oregon.  For many rural communities in the extreme eastern
and southern parts of Oregon, this often means a trip of hundreds of
miles.  During periods of inclement weather, the trip can be
dangerous.  Furthermore, consortium officials said that Oregon law
requires that the patient be given a precommitment hearing within 72
hours or released, and the hearing must be presided over by a judge
in the county in which the patient lives.  If the patient is
committed, a total of three long, costly, and frequently hazardous
trips to court and to a psychiatric hospital will be made within a
few days.  When appropriate, two of the three trips can be avoided if
video teleconferencing is used in lieu of face-to-face meetings. 

Recognizing the potential for reducing training and travel costs and
the scarcity of mental health services in many rural communities, the
consortium began planning a telemedicine project.  In May 1991, it
applied for funding from the Department of Health and Human Service's
Office of Rural Health Policy and was subsequently awarded a 3-year
Rural Health Outreach demonstration grant.  From October 1991 to
September 1994, the grant provided over $800,000 of the project's
estimated $1.3 million cost for that 3-year period.  RODEONET has
been self sustaining since September 1994, and users are now required
to pay their own satellite and access charges.  RODEONET member
institutions or agencies are now charged $145 per hour for video
teleconferencing, with another $20 per hour for each additional site. 

All of the officials with whom we spoke, including officials from the
Office of Rural Health Policy, consider the project a success and
believe that there is increased potential for using advanced
telecommunications to provide mental health services.  RODEONET
officials told us that a major factor contributing to the success of
the project was that the 13 eastern Oregon counties that are partners
in RODEONET had a long history of collaboration on providing mental
health services in their nearly 45,000-square-mile service area. 
Officials stressed that without this long history of collaboration,
successful completion of the project would not have been possible. 


--------------------
\8 The 13 counties in the Eastern Oregon Human Services Consortium
are Baker, Gilliam, Grant, Harney, Hood River, Malheur, Morrow,
Sherman, Umatilla, Union, Wasco and Wheeler. 


   THE SPOKANE, WASHINGTON,
   STEP/STAR NETWORK
-------------------------------------------------------- Appendix II:4

The Satellite Telecommunications Educational Programming/Pacific Star
Schools Partnership (STEP/StarNetwork) is a satellite-based K-12
distance learning network.  Educational Service District (ESD) 101, a
state-chartered regional agency located in Spokane, Washington,
operates the STEP/Star Network.  STEP/Star Network offerings include
full-credit traditional courses in subjects such as foreign
languages, mathematics, science, and vocational education.  The
network also offers innovative courses such as Young Astronauts, a
course for fourth to sixth graders using space themes to teach math
and science.  The courses ESD 101 broadcasts over the STEP/Star
Network include those developed by or for the district as well as
those developed by other distance education providers.  Through the
STEP/Star Network, ESD 101 also offers a variety of other services
for educators, school administrators, parents, and community leaders,
including in-service workshops for college credit, teleconferencing,
and parenting classes.  ESD 101's programming serves 31,500 students
and 43,000 teachers located in 31 states and six time zones.  Nearly
90 percent of the participating schools are in rural areas, and the
average Star school is about 80 miles from the nearest university or
college. 

The network's principal customers are the remote or rural school
districts in Alaska, Hawaii, Idaho, Montana, Oregon, and Washington
State, and the Colorado and the Central Indiana educational service
districts.  The network is now expanding into the Pacific
territories.  The programming is broadcast live from ESD 101's
television studios via satellite uplink.  Student and teacher
interaction is achieved through a combination of two-way audio,
one-way video, and two-way data transmission.  Where possible,
students' papers and tests are submitted to instructors
electronically.  According to district officials, some instructors
are developing tests that their students will be able to take
on-line. 

Participating school districts pay an annual membership fee of $2,950
for basic services for a single site.  Each additional site is $150. 
The membership fee includes the startup equipment needed to interface
with the network (e.g., satellite dishes, computers, modems, and
scanners).  Some courses require the students to use computers.  The
participating school district is responsible for providing this
equipment.  The equipment ESD 101 provides for interface with the
STEP/StarNetwork remains the property of ESD 101 and is retrieved
from a district that discontinues its participation.  Participating
school districts are charged varying fees for the K-12 courses they
use.  For example, Elementary Spanish for grades 1 and 2 costs a flat
$500 per site, but Advanced Placement English costs $490 for a
maximum of seven students, with each additional student costing $175. 

ESD 101 officials said that the original STEP distance education
network, which began operating in the district's service area in
1986, was started because some farsighted school and community
officials saw a need to provide educational offerings that the
district's schools would be unable to provide otherwise.  They also
said that the formation of the first Star program in the five
original northwestern states was greatly assisted by the fact that
these states had a long history of collaboration and partnerships on
regional projects, and that partnership and collaboration has been
key to the STEP/Star Network's subsequent expansion. 

Since 1990, ESD 101, on behalf of its STEP/Star partners, has been
awarded three successive 2-year Star Schools grants totaling $21.3
million from the Department of Education.  These grants have enabled
ESD 101 to (1) expand course offerings beyond those initially offered
in STEP/Star and (2) expand the area it serves.  The first grant
totaled about $9.9 million for September 1990 to September 1992.  The
second grant totaled about $5.2 million for October 1992 to September
1994.  The third grant totaled about $6.2 million for October 1994
through September 1996. 

As significant as ESD 101's funding from the Star Schools Program has
been, it does not represent all of the District's funding.  According
to the District's superintendent and the District's annual financial
report for the fiscal year ending August 1994, the agency's total
annual operating budget is about $40 million, with about $13.1
million in revenues coming from all sources.  Of that amount, only
about $3.6 million was from federal sources, and the balance was from
local, state, and cooperative programs; payments for other programs;
and investment earnings.  Amounts from local sources included $1.7
million in tuition and fees and about $331,000 from sales of goods,
supplies, and other services.  Funds received from the state included
an ESD allotment of about $685,000 and $100,700 for traffic safety
education.  Amounts from federal sources other than STEP/Star Schools
included $420,400 for the Job Training Partnership's payments for a
program it operates for the city of Spokane. 


   THE RINGGOLD, GEORGIA,
   TELEPHONE COMPANY
-------------------------------------------------------- Appendix II:5

The Ringgold Telephone Company began operations in 1912 in Ringgold,
Georgia, to serve the citizens of Catoosa County, located in extreme
north Georgia.  In 1958, Ringgold applied for and received a loan
from the Rural Electrification Administration (subsequently organized
as a part of RUS).  The loan was needed for capital improvements and
expansion to keep up with the growth in demand.  Today, Ringgold
services 11,000 lines, and its equipment includes digital switching
gear and 100 miles of fiber-optic lines. 

According to the company's executive vice president, if
telecommunications is inadequate in any rural area, development of
that area will suffer.  He said that businesses usually ask about the
transmission speed and band width capabilities of the phone system
before deciding to locate in the area.  He also said that his company
works closely with its customers, the Catoosa County Chamber of
Commerce, and the Economic Development Commission, which assists
rural areas in north Georgia with development planning.  He said that
forming such partnerships and establishing such plans is an integral
part of achieving projects' success. 

The executive vice president told us that although he works actively
on long-term county planning, he is aware of only two federal
programs for telecommunications.  He said that the RUS loans have
made it possible for the company to provide its customers with
advanced technologies.  He considers RUS' requirement that its
borrowers maintain a 5-year telecommunications plan a very positive
factor. 


ORGANIZATIONS REPRESENTING RURAL
AREAS
========================================================= Appendix III


   NATIONAL RURAL DEVELOPMENT
   PARTNERSHIP
------------------------------------------------------- Appendix III:1

The National Rural Development Partnership, created in 1991, has as
its objective the promotion of (1) innovative and strategic
approaches to rural development and (2) collaboration among federal
and state agencies involved in rural development.  It also helps
identify and resolve intergovernmental and interagency impediments. 
The partnership's members are drawn from federal agencies involved in
rural development, the 39 State Rural Development Councils, and
national rural organizations. 


   NATIONAL ASSOCIATION OF
   DEVELOPMENT ORGANIZATIONS
------------------------------------------------------- Appendix III:2

The goals of the National Association of Development Organizations
are to (1) promote economic development, focusing primarily on rural
areas and small towns; (2) serve as a forum for communication and
education; and (3) provide technical assistance to its members. 
Founded in 1967, the organization has more than 300 members drawn
primarily from multicounty planning and development agencies. 


   ORGANIZATION FOR THE PROTECTION
   AND ADVANCEMENT OF SMALL
   TELEPHONE COMPANIES
------------------------------------------------------- Appendix III:3

The Organization for the Protection and Advancement of Small
Telephone Companies is a national trade association of nearly 450
small independently owned and operated local exchange carriers
serving more than 2 million subscribers in the rural United States. 
Founded in 1963, the organization represents small independent
telephone companies before the Congress and provides a forum for the
exchange of ideas and a discussion of mutual problems. 


   NATIONAL ASSOCIATION OF
   REGIONAL COUNCILS
------------------------------------------------------- Appendix III:4

The National Association of Regional Councils has as its members
regional planning agencies, councils of government, and development
districts.  The association was founded in 1967 and has about 230
members.  It provides legislative representation in Washington, D.C.,
and technical assistance to its members through workshops and
training programs. 


   NATIONAL GOVERNORS ASSOCIATION
------------------------------------------------------- Appendix III:5

The National Governors Association represents governors at the
national level to inform the federal government of the needs and
views of the states.  The association also provides technical
assistance to the governors and serves as a vehicle for sharing
information.  Founded in 1908, the association has 55 members,
including the governors of the 50 states and representatives from
Guam, American Samoa, the U.S.  Virgin Islands, the Northern Mariana
Islands, and the Commonwealth of Puerto Rico. 


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix IV

Robert C.  Summers, Assistant Director
John K.  Boyle, Project Leader
Sara Bingham
Clifford J.  Diehl
Natalie H.  Herzog
Carol Herrnstadt Shulman
Frank C.  Smith


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