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Virginia's Net impact is great and growing

From The Virginian-Pilot
October 10, 1999

As much as half the world's Internet traffic flows through Virginia.

America Online, which provides Internet service to 20 million people, is headquartered in Dulles.

The state is second in the nation in software industry jobs, and among the top five in technology growth.

As the world grows more and more wired, as increasing numbers of people turn to cyberspace to shop, to socialize and to govern, Virginia is emerging as a key player in an industry that may dominate the next century.

Gov. Jim Gilmore calls it ``the Internet state,'' and while some may disagree, it's clear that few states, if any, are as plugged-in as Virginia.

The state is home to several industry pioneers, in addition to AOL. According to the Virginia Center for Innovative Technology, Virginia ranks fifth in the United States in technology employment, and ninth in the number of technology firms -- and that was before last month's announcement that Intel would put a $130 million Internet service center in Fairfax County.

Although much of Virginia's Internet industry is concentrated in the northern part of the state, Hampton Roads has a mushrooming technical community as well. The region has more than 80,000 private-sector, high-tech jobs and more than 450 technology-related companies, according to the CIT.

Hampton Roads also is being recognized as among the country's most hooked-up territories. A June study by Cyber Dialogue, a New York-based online market research firm, ranked the region No. 10 in the United States in household Internet usage.

By most accounts, Virginia appears to be on the crest of the Internet wave that is sweeping the globe. And the Net impact will be dramatic.

"It creates jobs, it increases productivity," said Ted Leonsis, head of AOL's Interactive Properties Group. ``There's an unbelievable reordering going on.''


A century ago, Virginians would have been linked by a different vehicle of commerce: tobacco.

In 1899, 184,334 acres of tobacco were harvested in the state. By 1997, the crop was down to 53,080 acres.

As Virginia was known for tobacco in the past, officials now want the state to be known for the Internet and technology.

Location shouldn't matter for a phenomenon such as the Internet, built on the premise that ``here,'' wherever that is, doesn't matter. It doesn't matter to Net surfers whether e-mail came from next door or Nevada.

If location ruled, California would have a birthright to the kingdom, since it saw the start of the Internet 30 years ago.

In September 1969, the U.S. Defense Department's Advanced Research Projects Agency built the computer network that would become the Internet. Dubbed ARPANET, it linked UCLA, Stanford University, the University of California at Santa Barbara and the University of Utah.

California still has Silicon Valley and a bustling Net presence that developed from ARPANET. But Virginia just happens to have the source behind the source of the Net. ARPA's bosses in the Defense Department work in the Pentagon, on the Virginia side of the Potomac River. A host of private-sector firms that do defense work also congregate nearby.

"Virginia had a lot of military contractors and they were heavy users of ARPANET" after it expanded, said Alfred C. Weaver, a computer science professor at the University of Virginia. "Universities saw how effective ARPANET was and got the National Science Foundation to build NSFNET."

Northern Virginia, in particular, is Net-centric, Weaver said. Businesses were born and raised around the Internet, and the region was ready when the foundation sold NSFNET's computer backbone service to the private sector in 1991.

Six years earlier, Quantum Computer Services Inc. of Vienna, Va., started the ``Q-Link'' service to offer technical support and entertainment features to users of Commodore computers. Quantum broadened its focus to other computer brands and changed names in October 1989 to become America Online, now best-known by its initials: AOL.

With 20 million members, AOL is the world's largest online company. It's a big reason why so much Internet traffic courses through the region's digital traffic hub, dubbed MAE East, nearby in Vienna.

Managed by telecommunications titan MCI Worldcom, MAE East looks like a group of rooms reserved for nothing more than telephone wires and nondescript gray boxes. But the wires and boxes, which are really modems and computer relay switches, send everyday e-mail messages and World Wide Web page searches to their appropriate destinations.

MAE East is a network access point, one of four main gateways and the one through which 90 percent of Net traffic travels to Europe and back.

AOL isn't the only Net megapower in the state. PSINet shares Net space status and Northern Virginia real estate. It's just not as well known among the rank and file online.

PSINet Inc. of Herndon, Va., went live in 1989 as the world's first commercial Internet service provider, or ISP. The company is Canada's largest ISP and offers service to a quarter of the Fortune 500 companies.

Other well-known online leaders such as UUNet Technologies Inc., now part of MCI Worldcom, and domain name registrar Network Solutions Inc. also give the state a strong Net reputation.


The economic impact of the Internet in Virginia is only part of the equation. Virginians are among the heaviest users of the Internet.

The Cyber Dialogue survey last summer that ranked Hampton Roads No. 10 in the United States in Internet usage said that 44 percent of local residents were online. Renowned wired communities such as San Francisco and Seattle were only a few percentage points higher, at 48 percent and 46 percent, respectively.

Earlier this year, the region ranked 41st in Yahoo! magazine's March list of ``America's 50 Most Wired Cities . . . and Towns.'' That low ranking drew the ire of some local Net insiders.

Bill Winter, chairman of Virginia's Electronic Commerce Technology Center, or VECTEC, predicted the area's rapid rise in the rankings.

"The reputation of Hampton Roads isn't as a high-tech area," Winter said at the time of the ranking. ``But that will change.''

It changed more in August, when Media Metrix, a New York-based Net measurement firm, ranked Pilot Online, the Web site produced by The Virginian-Pilot, fourth nationally in area penetration by news and information Web sites for newspapers.

Pilotonline.com reaches about 16 percent of local Internet users, according to the rankings, which reflect penetration among regional Web surfers. Washingtonpost.com took top honors, followed by sites in Atlanta, Charlotte and Boston.


On its surface, the Internet is a clean, well-lighted industry that doesn't pollute and rakes in lots of money.

But there is a dark side: con artists, pornographers and casino operators all angling for a way into your home via the Net.

Virginia ranked fourth in Internet company complaints in 1997, according to the National Consumers League's Internet Fraud Watch. The league had about 50 reports on Virginia-based companies accused of online misconduct.

Most of the money gambled online is likely to be American, said Sue Schneider, chairwoman of the Interactive Gaming Council in Vancouver, British Columbia.

"The U.S. is the market for these operators," Schneider said.

Individual cyber-casinos report that as much as 90 percent of their betting business comes from American players, she added.

Schneider said one operator claimed that 80 percent of its gamblers came from the United States, and 60 percent of those players came from Virginia. She declined to name the operator.

"The only thing I can think of is, you have a fairly high-tech focus there,'' Schneider said.


The Internet has created unlimited business opportunities.

Brian Thomas and Jason Osborne, both graduates of Hampton Roads high schools, trained themselves to be Internet entrepreneurs. Their Net-dependent business, eFirms, turned a simple idea -- matching buyers and sellers of services -- into a prospect for global commerce.

While preparing his law school applications as a James Madison University senior in March 1998, Thomas wondered if that was the best way to spend three years of his life. Thinking about careers and options, he came up with the idea of using the Internet to match buyers and sellers. Buyers post their needs on eFirms' Web site, or search for skills listed by sellers.

Thomas hustled across campus to tell his buddy Osborne, and the pair hatched the plan for eFirms. Osborne, a JMU senior, is the ``driver'' for eFirms, ensuring that Thomas' ``intellectual'' concepts are carried out.

After operating out of an apartment near JMU's Harrisonburg campus the first year, Thomas and Osborne now work out of an office in Staunton. The interior brick walls and exposed wood-beam ceilings give the place the look of an Internet start-up movie set.

But this is the real world, and eFirms needs money. Thomas and Osborned have raised less than $100,000 in ``angel'' money from private investors, but they need more to really get going.

"We're looking for about $5 million in venture capital," Osborne said. "We're establishing a true online auction for services. People are going to outsource work this way."


Roger Wright doesn't think the Net has had much impact on him, but he still heads to the library each day to "catch up on my pile of e-mail" and delete the spam he receives.

Wright, 66, doesn't want a computer at home. He has seen reports of "retired people going into depression because of excessive online usage," he said. The public library, and its one-hour Net usage limit, keep him from that fate.

"I would probably use an inordinate amount of time if I were online at home," Wright said. "The main thing I enjoy is Pilot Online and the TalkNet topics. I've been having ongoing discussions for some time now. They're usually very interesting, but sometimes, people can get very personal."

When that happens, Wright said, he just logs off.


In the future, people are likely to do more business and more activities on the Net -- especially as the latest generation of school-age children grows up with it.

Teachers such as Elizabeth Turner are making that happen.

Turner has been on the Net at home since 1997. Many of her students at Great Bridge Middle School have access at home now.

"Often, they surprise me by bringing in things they have found on the Internet related to what we are studying in class," Turner wrote in an e-mail message.

When the class was reading an essay on Easter Island, students became fascinated with the statues. Turner brought in pictures from an Easter Island tourist Web site and, later, so did class members.

She gives her e-mail address to parents at the beginning of the year and often receives messages about student absences and requests for work assignments.

"I can even e-mail worksheets and assignments I've composed at home right off the hard drive to their home," Turner said.


Steve Sanford, president of ChannelSpace Entertainment Inc. in Chesapeake, has done more than witness the Net's impact in Virginia. He has helped create it.

Sanford's year-old business incorporates "affinity portals," or subject-related gateways on the Net, with television programming. The business is primarily driven by collectors and the market to acquire and sell unusual items.

"The impact on Hampton Roads is that companies like ours, as they go to e-commerce, are going to have a significant impact on how they do business," Sanford said. "Virtually every business will be touched by the Web in the next four or five years."

The Internet will affect manufacturers as well as retailers. Barnes & Noble, Sanford suggested, might find that it sells more books through the Web than in its brick-and-mortar stores. Egghead Software has already ditched its stores, after finding that operating a virtual business was better than traditional retailing.

Sanford predicts that the trend will continue into areas that most people don't think of as e-commerce businesses.

"Virtually everything I buy now is through the Web," Sanford said. "It saves time, increases productivity, delivers better service."

The Net has a direct impact on Hampton Roads when companies such as ChannelSpace locate here, he added.

Sanford started his business in 1998 with eight employees. Counting television production employees and Internet staff, the company payroll is about 120 now.

The impact of Hampton Roads' fledgling Internet industry is still developing. Once word gets out about Hampton Roads, Net companies will find the way and make the region a hotbed, Sanford predicts.

"We'll see more companies coming here, saying, `We can operate from here,' '' he said.


While ChannelSpace prepares to go public and offer stock this fall, it's also bidding to become a major player on the Net. Sanford's model for Web offerings is cable television programming, turning the Web into easily accessed channels. It's a model used before by a company already acknowledged as a major player on the Net.

From AOL's Vienna campus, Leonsis explains that the Net is changing work and lifestyles, that it's becoming a way of life.

It's also the "great equalizer," where a person's race or wealth and a company's size are not immediately discernable. Small companies that hustle can look just as good to clients, if not better, than large monoliths.

But you have to be "committed, passionate and fast," said Leonsis, a creative force at AOL -- an ISP and content provider that he prefers to call "a media company."

Leonsis helped the company build its "community of members," which he ranks above content in Net value.

"Socializing in the real world is hard," he said.

That's why the Net appeals to groups with interests that are esoteric but meaningful to them, such as "Dentists of Baltimore who like to go bike riding," Leonsis said. It's how Net companies such as AOL are "pushing more and more to become part and parcel of your life."


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