The Internet Capital
As Southern California and other regions compete to raise their profiles as technology centers, an unlikely place has emerged as a high-tech citadel: Virginia.
Long famous for a rich history that spawned eight U.S. presidents and helped shape the nation, Virginia this times finds itself as an intellectual mecca of a different sort.
With its 2,500 high-tech firms, the state is home to a world-class concentration of Internet businesses ranging from America Online Inc. to domain-name issuer Network Solutions Inc. Earlier this month, WorldCom Inc., the telecom Goliath that is the nation’s biggest Internet access provider, announced plans to build an office complex for 30,000 employees in northern Virginia that will be about three-quarters the size of the Pentagon.
About 350,000 Virginians work in the high-tech industry, which has accounted for nearly 30% of the state’s growth in personal income since 1991, according to a study by the College of William and Mary in Williamsburg.
Virginia ranks among the top 10 states in terms of tech jobs, and its growth rate is among the highest in the country, according to the American Electronics Assn.
Job growth is so hot that one northern Virginia software firm made headlines recently when it hired a teenage dropout, Doug Marcey, as a part-time programmer for $50,000 annually. Nonetheless, Virginia’s well-regarded university system, established by Thomas Jefferson, is key to nurturing the state’s job force.
“Virginia has a very good pool of skilled workers, and we invested heavily in attracting technology companies,” said former Gov. George Allen, who left office in January. “People have started calling us the Silicon Dominion.”
Virginia’s appeal is due largely to initiatives launched by the Pentagon about 20 years ago. Federal money and know-how helped develop the Internet and created a pool of experts who transplanted the network to the commercial sector.
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At the same time, the intelligence and national-security agencies were developing other communications technologies such as satellites and nurturing a vast contractor base to support their worldwide communications--and espionage--systems.
Those early developments put Virginia in a position to capitalize on a profound shift now taking place in the computer industry: networking.
As personal computers have evolved from mere number crunchers to communications tools for managing e-mail, Web pages, faxes and other information coursing through data networks, Virginia has emerged as the world’s electronic nerve center. The state boasts a large community of Internet service providers, computer systems managers, software developers and networking consultants.
“This is a new medium with new rules,” observed Steve Case, chairman of America Online. “The Internet has created an environment that is less location-dependent,” allowing places like Virginia to compete effectively with traditional industrial capitals.
“There is considerable momentum [in Virginia] that will drive the creation of more start-ups,” Case said.
The state also is benefiting from the government’s breakdown in modernizing its information technology. Federal agencies are being forced to downsize and out-source billions of dollars’ worth of technology projects, many of which are going to firms in the Virginia suburbs of Washington. They include the massive computer modernization program at the Internal Revenue Service and huge contracts to supply the government with local telephone, computer-networking and other services.
Indeed, the migration of high-tech firms to Virginia recalls a similar sea change that occurred a generation ago, when personal computers began to supplant large mainframes, resulting in a geographic shift in the industry.
The change undermined Boston’s Route 128 corridor and sparked an explosion of software and semiconductor firms in Silicon Valley. Similarly, by some estimates, about half of U.S. Internet traffic passes through Virginia today.
“Virginia is clearly now the networking capital of the nation, if not the world,” said Mark Warner, a Virginia venture capitalist who ran unsuccessfully for the U.S. Senate in 1996. “With companies like AOL, [WorldCom unit] UUNet, PSINet and others, we’ve become a magnet for high tech.”
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Until recent years, Virginia’s economy had suffered from a dearth of high-wage jobs. Although the state was the intellectual center of the nation at the time of the Revolutionary War, it has lagged economically through much of the century following its defeat in the Civil War.
Even today, the state often seems at odds with a high-tech image: Many corporate chiefs, such as Black Entertainment Television Chairman Bob Johnson, live on country estates where they collect horses rather than fancy sports cars.
But with more states clamoring to climb aboard the high-tech boom, Virginia’s quiet success is proving instructive to regions that have campaigned to become technology centers.
Not unlike the heated regional competition to land National Football League expansion franchises early this decade, tech firms are being showered with incentives to relocate to states ranging from Arizona to North Carolina. But experts say the multimillion-dollar bidding wars have shown only varying success and rarely benefit taxpayers.
“Any sort of targeted industrial policy is a bad idea,” said Dean Stansel, fiscal policy analyst at the Cato Institute, a conservative Washington think tank. “The way to create and maintain a healthy economy is keep the tax burden low.”
“Your community needs to be relevant to the economic activities you are targeting,” said Steve PonTell, president of the La Jolla Institute in Claremont. “A region has to have the raw ingredients: a qualified work force with the relevant skills. Companies are not going to go to a community just because they saw some clever advertising.”
To be sure, Virginia has enhanced its fortuitous location and skilled work force with good old-fashioned boosterism and by introducing educational programs to prepare a new generation of tech workers.
Speaking at a gathering celebrating one such initiative--Virginia’s High-Technology Partnership Program--Federal Communications Commission Chairman William E. Kennard said the state’s focus is already paying off.
“Virginia continues to lead the nation into the future,” Kennard said. “Tech companies are falling over themselves to find technology-skilled workers to keep pace with expansion. One estimate predicts that over the next five years, there will be 112,000 jobs in Virginia awaiting qualified applicants.”
But if Virginia does not yet spring to most people’s minds as a technology stronghold, a glittery Fairfax County event called the World Congress on Information Technology could finally put the state on the map.
Hosted by the Information Technology Assn. of America, the June gathering will bring such political luminaries as former British Prime Minister Margaret Thatcher and former Soviet President Mikhail Gorbachev together with more than 1,500 industry captains, such as Netscape Communications Chief Executive James A. Barksdale and Dell Computer Corp. Chairman Michael S. Dell.
“This will definitely make more people aware of Virginia as a center of high technology,” said Harris Miller, president of the technology association.
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The challenge for Virginia won’t be getting on the high-tech map, but staying there. To that end, experts say, the state must build on its strength in computer networking by diversifying into other high-tech fields.
“The challenge is whether we can take all of the raw information flowing through networks here--stuff from the national government, the Smithsonian and other sources--and also become an effective content capital,” said venture capitalist Warner.
Such an expansion would put Virginia in direct competition with content strongholds such as Southern California, however.
Los Angeles and Orange counties already boast more than 242,600 high-technology jobs, many of which are concentrated in entertainment and the lucrative multimedia content area. Experts are encouraging Virginia to develop its own multimedia industry.
By some measures, the state is already well on its way to diversifying beyond its core networking franchise.
Former Gov. Allen helped persuade Motorola Inc. and a joint venture of Toshiba Corp. and IBM Corp. to build three semiconductor manufacturing facilities in the state. And he cajoled PC maker Gateway 2000 to locate an assembly plant in Hampton that now employs 1,450 people.
But for the most part, Virginia’s tech industry has been domestically nurtured rather than imported.
Patricia M. Woolsey, chairwoman of the Fairfax County Economic Development Authority, said nearly two dozen high-tech companies based in the county have gone public over the last two years. Growth has been fueled by the expansion of companies already doing business in the county.
“It’s just recently gotten to the point where the concentration of telecom and information technology companies here is starting to have a ripple effect of attracting companies,” she said. “Most of our success has been home-grown.”
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Jube Shiver Jr. can be reached at jube.shiver@latimes.com
