Introduction 1

From the earliest days of telephony in the United States, serving rural subscribers has presented major problems because of the higher costs of constructing and maintaining facilities in less densely populated areas. In developing countries with emerging market economies, policymakers face the same dilemma as they try to provide basic residential "dialtone" and advanced business services in more profitable urban centers while extending service to the more difficult to serve and less profitable rural areas.

During the past few years, Robert R. Bruce, former General Counsel of the Federal Communications Commission, has proposed ways to organize and restructure the business activities of the telecommunications sectors in emerging market countries. 2 Bruce's proposals are intended to improve the ability of telecommunications operators (TOs) to finance the rapid and efficient expansion of the telecommunications infrastructure. As summarized here and described in more detail in the referenced papers, a key aspect of the proposals is to create opportunities for entrepreneurial activities while continuing to foster efficiency and economies of scale and scope. Bruce refers to this as a bottom-up rather than a top-down approach to telecommunications development.

A review of a now relatively obscure aspect of the early history of rural telephony in the United States suggests that such proposals could indeed speed telephone service to rural areas while achieving other desirable economic and social objectives. This paper describes that early history the development of so-called farmer lines and relates it to Bruce's proposals.

This paper is divided into three sections: a critique of the history of farmer lines in the United States and an analysis of that experience in terms of Bruce's proposals for creating opportunities for local entrepreneurial activities; a review of Bruce's proposals and their potential advantages; and a summary of the paper with a call to test some of the concepts described.