Technology trickles throughout the state.

John Connaughton is a professor of economics and director of UNC Charlotte's Economic Forecast. Kip Frey is president of Durham-based OpenSite Technologies Inc., an Internet-auction company that is planning an initial public offering in 2000. Jim Nichols is the director of electronic and information technology development at the N.C. Department of Commerce. They discuss how high-tech has changed the state's economy and how it will continue to alter the way Tar Heels do business.

BNC: Can high-tech development be fostered in rural areas, or should we accept there will never be a Red Hat in Kinston?

Frey: Could we change that first question to read OpenSite instead of Red Hat?

Nichols: Good one, Kip.

Frey: There's an opportunity for a lot of involvement and a lot of activity that isn't there today. I'm not sure that it's realistic to believe there might be the critical mass that it takes to develop a very large software organization in very rural areas. But clearly, there are ways of bringing those communities into this type of economy. One way, obviously, is to encourage telecommuting and the facilitation of work that can be done from remote areas. That takes a change of mind-set on the part of employees and in companies that are hosting that type of activity, and it takes the ability to manage remotely and create a culture that embraces that type of participation.

Connaughton: The contrast between urban and rural development over the last 40 to 50 years in the state has been something the state has spent a lot of money on. It has really struggled to keep the gap from widening. There is something to be done to link rural development to the high-tech development that's taking place, particularly in the Raleigh area. That's to model after the success of the pharmaceutical industry, which has a lot of R&D in the Triangle, but the manufacturing arms of those companies have located in more rural areas.

Nichols: The high-tech industry tends to cluster around Charlotte, the Triangle and the Triad. There are a number of reasons for that. You've got a base of intellectual capital there, and having strong universities is a big factor. The fact that there is a degree of comfort with the technology infrastructure is important. The financial infrastructure is there in the urban areas more so than in the rural areas, and so is the ability to recruit management talent. Also, there's good primary and secondary education for their children and, in some cases, secondary job opportunities for their spouses. Having said that, here's what I think is happening in some of our rural counties. It's not always the software development and Internet-type services that are there, but they are holding their own in manufacturing. There's a company called Magnolia Manufacturing, up in Alleghany County. It makes cotton yarn and employs about 100 people. From the time the cotton arrives in the facility to the time it's ready for shippi ng, human hands never touch it. It's a totally automated process.

Frey: Software-oriented companies are becoming heavily dependent on call centers and tech support -- people who support the product. It doesn't matter where you are in that discipline, and it's easier to find people outside the normal areas you would look. There might be opportunities over time in rural areas to develop more centers in which people come in and do their function over the phone.

Nichols: Kip, I'm glad you brought that up. Customer call-support centers are starting to look at some of our areas that have a surplus of labor, like our military bases. The Fayetteville area is very popular for call-center projects. Jacksonville got an AT&T call center not too long ago. Goldsboro has a substantial military population and is a good candidate. Some of the development can go to our smaller metro areas, if not some of our more rural areas.

How has high-tech changed the state's economy in the last decade?

Connaughton: You have to go back more than just 10...