Monday, May 4, 2009

Distance Is Not Dead or Cost Free

In 1997, Frances Cairncross wrote a book entitled The Death of Distance (Harvard Business School Press) that heralded the Internet’s ability to transcend and mitigate much of the financial and logistical challenges posed by geography. Certainly the Internet enhances productivity and opportunities, particularly for people in remote places. But what make distance less significant is the product of cost allocation and cost recovery policies and not some new transcendental notion that it has become easier, cheaper or more efficient to serve rural areas.

Professor Michael Katz angered some rural advocates when he articulated this concept, perhaps more bluntly: “The notion that we should be helping people who live in rural areas avoid the costs that they impose on society … is misguided from an efficiency point of view and an equity one.” See Howard Berkes, Stimulus Stirs Debate Over Rural Broadband Access, National Public Radio, Morning Edition (Feb. 19, 2009); available at:

Professor Katz is quite right that because rural areas have a diffuse, spread out population, the cost of installing a distribution infrastructure is higher than the cost of serving the same number of people located more close together. If government decides to bridge this cost differential—as it did expressly in the Telecommunications Act of 1996—one could infer that universal service has a comparatively high public policy priority. Professor Katz might favor government spending less on broadband and more on subsidizing infant immunizations, but note that the issue becomes one of whether and how to compensate for cost differentials, not that technology somehow has eliminated them.

Rural residents have qualified for a number of public policy initiatives aiming to defray the cost of living in remote locales. “Keeping them happy down on the farm” may have national security benefits, and perhaps the United States does not differ much from China insofar as the consequences of mass migration from rural to urban areas and the congestion costs that would generate.

From my perspective distance surely does matter, both in terms of my out of pocket costs and more broadly “opportunity costs,” i.e., the time, money, effort and foregone options resulting from my residency in a rural locale. While I can blog to my heart’s content and achieve parity with an urban blogger, being out of sight and not a frequent attendee at various Washington, D.C. political/social/educational events means that I am not going to be on decision makers’ radar screens for conference invitations, new employment and life time achievement awards to name a few.

In my case, rural residency came with the decision to accept an academic appointment. Perhaps I could have held out for an urban posting, but it did not turn out that way. Thanks to cost averaging decisions and “All You Can Eat” unmetered monthly Internet access subscriptions—itself another inefficient artifact of the Internet’s long past promotional phase—I can try to compensate for my location. But being “centrally located in the middle of nowhere” has costs that government cannot offset.