Southwest Virginia Job loses 2010-2020.
Southwest Virginia Job loses 2010-2020.

Telecom is no Future for Southwest Virginia

by Lewis Loflin

Telecom is not the god-send politicians make it out to be. We are not getting high-tech or high-paying jobs, just low-end service jobs paying between $7 and $8 an hour. They come here for three reasons: 1) To influence Congressman Boucher who writes Telecom legislation.* 2) Cheap labor. 3) Government subsidies costing tens of thousands of dollars per job including free infrastructure, job training, and even office equipment. The New York Times has warned about this since mid 2002 and the recent loss of Travelocity in Clintwood, Virginia has proven them correct.

Major companies such as Sykes Communications are moving call centers overseas and abandoning rural America. $1 an hour for an English speaking college graduate is just too good to miss. Others such as AT&T and Verizon are moving to the region while firing better paid union employees elsewhere. Rural communities have become a rest stop for companies moving to Asia, Latin America, and other cheap foreign labor markets.

Since this was written Mr. Boucher was voted out of office in 2010 and the verdict is in on Southwest Virginia telecom.

What about Southwest Virginia?

US Solutions Group is a call center for Fed-X that located in Bristol, Virginia. They received a $25,000 check from the taxpayers as an "incentive," to help with their parking according to Bristol officials. (They are located downtown.) It's claimed by public officials they pay $10 an hour, but have refused to answer my inquiries. Nor will anyone give me any figures on how many people they do employ.

Update 2012: US Solutions had suddenly closed their centers in Abingdon and Bristol and jumped to state line to Bristol, Tennessee to collect incentives from Tennessee taxpayers. They joined the Bristol, Virginia Sprint call center to collect millions in corporate welfare creating no new jobs in the process - except in paper in Tennessee. The claim of $10 an hour also turned out to be false paying only $8 an hour.

Nearby Clintwood, Virginia has put these claims into doubt. According to information sent to me by the VCEDA ( website has since gone down) a company called Nexus hired 550 workers and the travel/vacation company hired 500. These are listed as projected hires; both companies received together about $10 million in various taxpayer incentives. Local politicians tout these as "technology jobs" when in fact most are answering the phone or taking orders. It includes very little of what is considered traditional IT jobs.

According to economic development officials I have spoken to, they avoid telemarketing firms and firms are required to pay at least 150 percent of minimum wage. That's $7.73 an hour or about $16,000 a year. While better than Wal-Mart, it's below the poverty rate for a family of four. This leaves open another loophole as well: Companies using temp workers and sub-contractors to avoid these wage requirements. These people don't work for the firm.

By November 2000 the local press reported Nexus fired their 188 workers, never hiring near the 550 promised. Company officials called this "temporary." By July 2001, Travelocity announced their new call center in the same building after Telecorp PCS pulled out of the deal. They claimed to start out at $8 an hour and "We are going to get to our 450 to 500 people here very rapidly, within a year." Taxpayers later spent thousands to train their workers and even spent $1.6 million to open an on-site day care because the pay made it difficult to afford day care.

By December 2004 Travelocity was gone and fired their 250 workers. Sykes Communications closed down two call centers in nearby Eastern Kentucky costing another 1000 jobs. Both firms shipped the jobs to India. As of May 2005 Sykes still has their call center in Wise, Virginia claiming about 600 employees. A new AT&T call center in nearby Lebanon, Virginia touts 500 employees, but I'm unable to get either company to respond to my inquiries. I don't believe these figures are accurate.

In Bristol, Virginia Bristol Virginia Utilities multi-million dollar foray into fiber optic has yet to land a single firm anyone will name. We do have Boise Cascade which has been here several years and has a good reputation, but they were here before the Utility got involved in broadband. The services had been available for years. Another company called Cross Stone Products located in a Bristol industrial park, was touted in Virginia Business in January 2004 as proof that broadband is successful. The company was gone by September 2004. Bristol, Virginia, which purchased their building for them, got stuck for about $2 million. I believe the building has been recently sold.

Another call center recently located in Pennington Gap, Virginia (Lee County) and a telemarketing firm located in a closed grocery store in Marion, Virginia. (Smyth County) The Virginia Employment Commission is locating their call center in Buchanan County while firing workers in Bristol and other locations. Most economic development efforts seem aimed at expanding/keeping existing firms, not getting new ones.

The big question is to what extant does government get involved in traditional private business ventures? The rave all the sudden is for municipal utilities to get into the phone, internet, and cable business, often in direct competition with existing private business. We are not getting new services for the most part, but a duplication of services. Part of this trend is because deregulation of the electric industry has made municipal utilities less profitable while telecom could make this profitable again.

But this comes at a risk to other utility customers. In Bristol, Virginia the city owned utility did just that while incurring $50 million in debt directly and indirectly due to their Opti-Net services. Because of the high cost (often $2000 per household) the promised services to unserved area of the community have not been met while simply overbuilding existing private sector infrastructure.

The verdict on telecom being a solution for job problems is a mixed bag. It's the usual "build it and they will come" wishful thinking. We've gotten few of the high quality jobs, which are also being shipped to Asia or being given to foreign workers abusing the visa system. Should we keep sinking taxpayer dollars into this questionable kind of investment? Our public officials do try hard to succeed, but unless there is some effort to halt destructive labor policies at the federal level, the future will remain questionable.

See College Graduates Flipping Burgers in Tri-Cities

Yes we have broadband and spent millions.

To quote LENOWISCO Broadband Study Warned against Call Centers (PDF file):

"The region has been replacing traditional (better paying) manufacturing jobs with (low paying subsidized) call center jobs, which provide limited advancement and work opportunities. Call centers represent the factory floor of the Knowledge Economy; they are an important part of a diversified economic development strategy, but the region must be careful not to rely too heavily on them, as the work is easily moved to other regions and/or other countries."

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