THE NOBLE, MISGUIDED PLAN TO TURN COAL MINERS INTO CODERS: EXPENSIVE HIGH-SPEED INTERNET AND JOB TRAINING WON'T TRANSFORM APPALACHIA INTO "SILICON HOLLER.".

• Author: Bailey, Ronald

EVEN IN COAL'S heyday, Appalachia was still relatively poor and backward. At the time, policy makers blamed its lack of economic development on mountainous inaccessibility. Their solution: End the region's isolation with massive infrastructure projects, most notably a network of four-lane highways that would connect the region to the rest of the country.

So in 1965, President Lyndon Johnson signed the Appalachian Regional Development Act, creating the Appalachian Regional Commission (ARC). Over the subsequent five decades, ARC has spent $27 billion (in 2015 dollars) to build nearly 3,000 miles of the Appalachian Development Highway System that is threaded throughout the mountains.

The highways, constructed along officially designated "Corridors," are splendidly engineered--and largely empty. They utterly failed to spark an economic renaissance. Despite tens of billions in federal money, the "region's performance relative to the national average is similar to its position in the 1960s," reported economists Carl Kitchens and Taylor Jaworski in a 2016 study published by the National Bureau of Economic Research. They calculate that the gigantic transportation investment boosted incomes in the region by just $586 per capita.

Far from being discouraged by this result, policy makers are at it again. This time, they want to drag Appalachia into the 21st century over newly installed information superhighways, known--God help us--as "eCorridors."

Here's the plan: First lace the mountains with high-speed broadband fiber-optic networks to connect the region to opportunities in the outside world. Then train unemployed miners in the art of computer coding. The first step aims to generate new jobs by luring companies to the area; the second is supposed to let people stay put and work.

I grew up as a hillbilly in central Appalachia, on a dairy farm in Washington County, Virginia. Like many folks, I left to seek an education and better opportunities beyond the confines of the Mountain Empire. I returned for a week in June to cruise the mountainous Corridors and meet with some of the people in Eastern Kentucky and Southwestern Virginia who are trying to jumpstart a hillbilly tech revolution. But instead of a burgeoning tech sector fed by glorious new fiber-optic cables, I found pure deja vu: Underutilized, debt-saddled infrastructure projects and an ever-growing number of Appalachians being expensively trained for jobs that are unlikely to show up.

HOPE OR HYPE?

"SILICON HOLLER: HOW workforce retraining is bringing tech jobs to Appalachia," blares the headline in TechRepublic. "Can an Appalachian 'Silicon Holler' rise in coal's shadow?" asks Reuters. The Guardian informs us that the fiber-optic cables being built across Kentucky could transform coal country into "a new place on the map the hopeful call 'Silicon Holler.'"

The hype began as far back as 1999, with a project launched by Bristol Virginia Utilities (BVU), the city agency in charge of providing water, sewer, and electricity services to the 17,000 residents of Bristol, Virginia. That year, the utility proposed and the City Council approved a fiber-optic network to connect its eight electric substations and all city offices, including City Hall, public schools, libraries, and the police and fire departments.

That might have been seen as a logical extension for a utility company. But mission creep was inevitable, and in 2002, BVU began deploying a fiber-to-the-home network for residential customers. At the same time, it started to expand its OptiNet broadband network into Southwestern Virginia using revenue bonds, plus grants from the federal and state governments and tobacco settlement money--for a total of $132 million spent. In the end, OptiNet managed to pick up 13,000 customers and get spun off into an independent authority with its own board of directors.

Cash inflows from successive government grants enabled OptiNet to function like a Ponzi scheme, masking the fiscal rot at the heart of the enterprise. Eventually in 2013, an audit found extensive misuse of funds--personal trips, bribes, and kickbacks--by board members, officers, and contractors. In 2016, nine people associated with the BVU Authority, including its CEO, chief financial officer, and board chairman, were sent to prison for conspiracy and fraud. The state government's 2016 final report noted that the OptiNet division was operating at a net loss, that this was expected to continue, and that therefore it was unlikely to generate enough cash to pay both the principal and interest owed on $45.5 million in bonds it issued in 2010.

The audit also found that the BVU Authority used an improper methodology to account for and cancel debt when it became an independent entity, and as a consequence it now owes the Bristol city utility division nearly $14 million. The auditors' blunt assessment: "These conditions raise substantial...