The Urban-Rural Telecommunications Divide Endures: A Historical Perspective from Landline Telephony

Abstract

The popular press and academic literature show that the urban-rural divide persists with regard to recent telecommunications technologies, such as broadband and wireless service. As was the case for landline telephony, this lack of deployment in rural areas is rooted in cost differentials and lack of agglomeration economies. This paper provides historical insights on this divide, using 1990 data on voice communications in a region located in the northeastern United States, and investigates (1) whether there are differences in telecommunications usage between urban and rural firms, (2) whether advanced telecommunications technologies provide an economic advantage to rural firms, and (3) what are the factors encouraging and inhibiting the provision of these technologies in rural areas. Exchange-level data on telephone usage by eleven economic sectors are first linked, through regression analysis, to data characterizing the exchange employment, rural character, availability of advanced technology, and geography. Rural activities turn out to use telecommunications less than urban ones in the absence of advanced technologies, but the latter tend to significantly increase usage. Next, a logit model is estimated to link the deployment of one advanced technology—digital switching—to market and geographical variables. The results tend to support the idea that an advanced telecommunications infrastructure in rural areas may be important to attract activities that make heavy use of telecommunications, but also that its provision is inhibited by the traditional rural barriers of distance and low population density.