Outsourced Within

BENJAMIN BENSCHNEIDER / THE SEATTLE TIMES After school, John Larsen and his son, Max, prepare to launch their white-water kayaks for a quick afternoon run through the town of Winthrop on the Chewuch River. Larsen moved his dot-com, HomeMovie, from Everett to Winthrop to provide middle-class jobs — and to allow him time for paddling, skiing and hiking with his three children instead of getting stuck in traffic.

AT NIGHT, Rachel Evans nestles under a canvas teepee in the Methow Valley, a spot so pastoral she can hear her Norwegian fjord horse gently breathing.

By day, she directs research and development at a thriving dot-com.

That a 25-year-old sleeps in a teepee and works for a high-tech company is not surprising. What's groundbreaking, literally, is the location of her employer, HomeMovie.com, just up the road in the Western-theme town of Winthrop, population 351.

Though well-known for its human-powered recreation (hiking, mountain biking, cross-country skiing), the glacial valley around this town is cut off from the rest of the state by the jagged geography of mountains and hardscrabble steppe. When winter closes the North Cascades Highway, this is beyond the end of the road.

It's more than three hours by car to the nearest freeway exit, two hours to movie theaters and shopping malls. It's a place where, as late as 2001, folks in certain canyons were struggling to get phone service. Four hours from Seattle, a century-wide gap in telecommunications.

No more. These days, fiber-optic cables run like a river down the valley. Microwave towers beam data from peak to peak.

Jokingly, I ask Evans if she can get streaming video in her teepee.

Seriously, she replies, "Of course! . . . Six megabits per second."

The Methow Valley, along with the rest of rural Washington, is now wired. The same technology that makes it possible to outsource to India and the Philippines is changing the labor landscape closer to home. Thanks to broadband, specks on the map now have the potential to be cyber kingdoms and server farms, data portals and telecommuting perches.

Companies that once looked across the Pacific for cheap tech labor are starting to set up shop in unexpected rural locales. It's less expensive than doing business in American cities, they say, without the language or culture hurdles often found overseas.

In Winthrop, on the slopes of Patterson Mountain, there's a new call center with 25 employees, NCTeleserv, set up by businessman George Dale, who had previously built call centers in Manila and Bangalore. "Companies moved overseas because there was a big price break," Dale says. "The trend now is bringing business back to the U.S. primarily because customers are not happy."

Other businesses are shifting from urban to rural. Evans' company, HomeMovie, moved from Everett to Winthrop in 2002. Washington Dental Service expanded in 2002, setting up a claims-processing center in Colville, Stevens County, population 5,000, that created 50 jobs and saved more than $1.2 million in salaries, wages and real-estate costs over three-plus years.

Amazon and Yahoo located service centers in the Tri-Cities and Wenatchee, respectively. HouseValue.com set up in Yakima and plans to double its workforce of 150. Google grew a mammoth server farm at the Dalles. Yahoo and Microsoft are both building huge server farms in Quincy, Grant County, land of cheap, clean, redundant hydroelectric power.

Not to mention all the "lone eagle" telecommuters.

"I've been in love with Methow Valley for 30 years," says Dan Aspenwall, an IBM computer programmer who lived in Portland before moving to Winthrop. Three years ago, when he and his wife saw an ad in the Methow Valley News with the magic words Wireless Internet, they said, "That's it!" and moved. Now, from his home office, he watches yellow balsam bloom underfoot and white clouds race overhead from the Columbia Basin to the North Cascades.

Aspenwall e-collaborates on projects with colleagues in Toronto, San Jose, Cambridge, Cupertino and Toronto, so it doesn't matter where he is, as long as he's accessible online.

At IBM, 42 percent of the global workforce doesn't work in an IBM office. For Aspenwall, that translates to a 7-to-7 workday — with glorious breaks. Sometimes he'll start a big program running, then head out while it's compiling to ski or feed his chickens.

Goodbye, cubicle! So long, congested commute!

BENJAMIN BENSCHNEIDER / THE SEATTLE TIMES Glacial peaks cut off the Methow Valley from the rest of the state, especially when winter closes the North Cascades Highway. Since the advent of high-speed Internet access a few years ago, however, local residents can do business with the rest of the world at the speed of light

You no longer need reside in a cyber city or suburb to be part of the tech workforce. Translators, radiologists and accountants who'd always dreamed of country living are moving to 20 acres and telecommuting at high speeds. Locals once limited to nearby low-wage work and shrinking forestry jobs are reinventing themselves as broadband entrepreneurs.

"You're talking about an economic base that wasn't here before," says Maria Converse, who, with husband Jeff Hardy runs Methownet.com, one of the valley's three (yes, three!) Internet-service providers for a population of 5,000.

To be sure, a few pockets in the valley — and the state — still have only dial-up connections. Long stretches of fiber remain dark, like pipes with no water, because Internet-service providers haven't yet lit them. And even where broadband is widely available, not everyone has the know-how or equipment to make use of it.

Still, many call the spread of high-speed Internet the most radical redefinition of the workplace since the Industrial Revolution.

"It's a restructuring of rural places," says Bill Gillis, director of the Center to Bridge the Digital Divide at Washington State University. "Accomplished professionals are moving into rural areas, and young, educated people are not having to move away. There's a stronger tax base, and this feeds into schools and public services.

"Ideally in a global world, people have choices about where they want to live and work — whether that would be Queen Anne Hill or a wheat field or the Methow. Broadband enables the opportunity. It doesn't necessarily guarantee the result."

PIONEERING IS never easy.

BENJAMIN BENSCHNEIDER / THE SEATTLE TIMES "It's a little like the Old West out here," says John Larsen, who, after moving his dot-com, HomeMovie, from Everett to Winthrop, renovated a building and paid to deregulate and lease two strands of fiber. "We had to create all of our own infrastructure."

Just ask John Larsen, CEO of HomeMovie.com, who experienced a blizzard-hits-covered-wagon moment three years ago, when relocating his business — a dozen employees, 100-plus servers and computers — from Everett to the Methow Valley. Everything was packed and ready to roll. Former office building had been sold. Cell phone rang.

On the other side of the mountains, the landlord they'd planned to lease from had found a more lucrative deal. Even worse, the county's grant to build a fiber-data connection to Winthrop had somehow evaporated..

"The rural reality began sinking in," Larsen says. "No fiber, no building, and the trucks were loaded. It was ugly."

Larsen is not the type to look back. So he forged ahead.

HomeMovie headed east, setting up shop in a former lumber mill in Twisp. They were grateful for space on such short notice, but Larsen recalls, "It was quaint to say the least. Dusty. Drafty. Broken single-paned windows. No grounded electrical power." HomeMovie, which provides digital video storage and video sharing for families around the world, is a server-based business with row upon row of computer hard drives constantly whirring. The mill, a relic from the Old Economy, didn't have modern ventilation. "The place was 99 degrees in the middle of winter."

But it got them through. Meanwhile, in Winthrop, Larsen renovated an indoor skate park into modern office space and paid $400,000 out-of-pocket to deregulate and lease two strands of fiber the 43 miles between Winthrop and Pateros.

"It's a little like the Old West out here," Larsen says. "We had to create all of our own infrastructure."

Internet-based businesses require speed, redundancy and stable electricity. The first enables quick transfer of lots of data, important for streaming video. The second guards against static, shut-down and information loss in case, say, lines get sliced by a backhoe. The third keeps everything going.

BENJAMIN BENSCHNEIDER / THE SEATTLE TIMES The Chewuch River runs through downtown Winthrop, one of the many natural attractions drawing high-tech companies and telecommuters to the Methow Valley.

In an urban corridor, speed, redundancy and consistent power are a given.

But then you wouldn't be able to walk out the door with your kids after work to go white-water kayaking or mountain-biking. And you wouldn't be able to see, so clearly, the impact your business has on your community.

In Larsen's case, this includes building a 240-foot pedestrian suspension bridge across the Chewuch River, buying 30 acres at the north end of town, and donating a long riverfront swath for a nature park that will highlight tribal art.

Most of all, it means creating middle-class jobs in a place that had none. HomeMovie provides Seattle-level wages and health insurance for 20 employees, a staff Larsen expects to quadruple or quintuple within two years.

"These are our neighbors," Larsen says. "You look at your friends and the people you hang out with. Don't you want (them) to have good jobs with self-respect and be able to put their kids through college?"

At 43, Larsen radiates energy. Backed by Sound-of-Music views in HomeMovie's conference room, he spews ideas faster than a puppy shaking rain. He is an amiable Type A — good thing, given the challenges of the broadband frontier.

"It was more of a sacrifice than we thought," he says. "At the same time, we'd probably do it again."

Seven years ago, after Larsen sold his first successful company, Bingo Technologies, his oldest son asked, "Well, Dad, how much did we make selling the business?" Enough so Larsen wouldn't have to work again for the rest of his life.

"So, Dad, why are you still working?" asked the 9-year-old.

"That was a wake-up call to me," Larsen says. "I was 36 years old, working hard for 10 years, and hadn't been able to spend a lot of quality time with my family and children."

He took six months off to clean the garage and organize family videos — and stumbled onto another irresistible business idea: Digital preservation, storage and sharing of home movies. Larsen and business partner Lars Krumme founded HomeMovie with a dozen employees in Everett.

"If you're a workaholic business type," Larsen says, "even though the last business made enough money to retire, you can't help yourself from starting another. You want to set an example. The last thing you want to do is raise young kids seeing a loafer."

Still, the new business squeezed family time, and when he did take an afternoon off to be with his three children, they got stuck in traffic trying to get out of town.

Recalling the open space of his childhood in Bothell, Larsen and his wife decided to move the family to the mountains and run HomeMovie remotely, leaving Krumme in charge of the day-to-day. It was a beautiful life. They built a house on the Methow River; the kids loved their new schools; they stepped out the door to paddle, ski and hike.

But Larsen felt guilty about enjoying this lifestyle without giving back what the community most needed: jobs. "It seemed real clear there was a robust tourist economy and construction, but given the isolation, it was difficult for the families my kids were going to school with. The community needed more year-round full-spectrum employment . . . Otherwise, you're getting people at the top and bottom of the economic ladder. The middle class needs industry rather than just me living in my great house, buying groceries, donating to local groups but not really employing anyone."

Krumme agreed to move the company. All but one of their employees decided to make the leap. When it finally settled into its new Winthrop digs, HomeMovie ran a "Bring Back the Kids" campaign to let grads who'd moved away from the Methow know there were now high-tech, high-paying jobs in their hometown.

Rachel Evans showed up at the first open house, impressed that the caterer served vegetarian options. With a degree in classics from the University of Washington, Evans had worked on contract as a systems administrator for Microsoft. But she missed her horses and open space, so moved back to family land, waiting tables at the Duck Brand restaurant.

"I was willing to basically sacrifice working in my area of expertise to do whatever so I could live my country life and enjoy it, " she says. She never dreamed she'd find a high-tech job.

THE WEST as we know it was built by individuals madly working the infrastructure to tame the environment. Think settlers and homesteads. Miners and railroads. Farmers and dams. Developers and highways.

These days, we have Internet pioneers such as Larsen tapping into thousands of miles of fiber-optic cable. The infrastructure comes courtesy of the last millennium's high-tech bubble, when telecommunications companies and venture capitalists poured millions into fiber, dug up the streets and laid cable in clay conduit. In Washington, 17 public utility districts and the Bonneville Power Administration bought enough fiber to loop around the state, creating NoaNet, Northwest Open Access Network.

The buzz was all about Internet usage doubling every month.

"Everyone could see it as plain as we could see the railroads coming across the country, and everyone wanted to be ready," says Dick Larman, director of business development in Washington state.

But the dot-coms crashed, leaving fiber fallow. The cable lacked the expensive booster and billing equipment needed to "light" it. State laws allow public utility districts to lay wire, but not to operate it because that would mean competing with the private sector. Private companies, still reeling from the late-'90s bust, initially invested only in places with enough potential users to make a profit.

"There's so much fiber in the ground that's unused," says Bob Williamson, high-tech specialist with the Washington Utilities and Transportation Commission. "Now that more people do voice and video, capacity is the name of the game. The fact that it's in the ground is fueling some of the video and voice trend. It's not so expensive because it's already there."

The groundwork for the future has already been laid.

Larman, who handles high-tech recruitment , takes two to three calls a week from corporate site selectors looking to set up plug-and-play back offices. "Move in over a weekend, plug in computers and go to work," he says. "It's hard to find buildings (with appropriate fiber, power, earthquake safety, ventilation) large enough to put 400 people in."

He's proud that HouseValues and Amazon, looking to expand outside Seattle, stayed in Washington instead of moving to New Mexico, Arizona or Texas. Texas has a huge back-office industry. "When Bush was governor," Larman says, "they spent hundreds of millions on telecommunications infrastructure. We didn't. But we've caught up."

Just how far is unclear, as the state hasn't analyzed rural high-tech, Larman says, instead focusing on aerospace, forest products, life sciences, agriculture, marine services and so on. "We haven't had resources to do analysis in any significant way."

A quick estimate by a state employment security economist finds 2,910 rural workers in call centers, document prep and back offices. At WSU's Center to Bridge the Digital Divide, e-work Director Dee Christensen guesstimates broadband is an economic lifeline for at least several hundred lone-eagle telecommuters, Internet entrepreneurs and small companies in rural Washington. "It's really growing," she says.

In the Methow, everyone knows someone for whom broadband enables a living.

There's Melody Lucas, a popular florist who does weddings at Sun Mountain Lodge and Freestone Inn, and gets virtually all of her business from out-of-town brides surfing the Web. And glass artist Jeremy Newman, who has a stream of commissions from 50 studios around the country and clients who access his portfolio online.

And Steve Hirsch, a former Microsoftie who founded Naturalhealers.com, a search engine for alternative-medicine schools, while living in Green Lake. Since moving to Winthrop five years ago, he's helped several friends start search engines based on the same model; three are in Winthrop, employing 10 locals.

Just after Libby Creek Road finally got phone service five years ago, Jennifer and Ross Allen-Tate moved into a log cabin there with space for a huge vegetable garden and koi pond. Jennifer grew up in Twisp, Okanogan County, graduated from Washington State University, and moved to Hawaii, where her Ross started a Web-design and graphics business. Four years ago, they moved back to the Methow with their young daughter to be closer to Jennifer's family.

Now Ross programs out of a humble home office, his wireless antennae jerry-rigged with straggly speaker wire, tape and a big patch of tinfoil. Jennifer runs the Earth and Sky Studio in a Twisp office with one full-time and three part-time employees. They use e-mail, PDFs and Web sites to develop marketing plans and Web sites for clients around the Northwest, including some they've never met in person. Without high-speed telecommunication, Jennifer says, "we couldn't do it here."

Of course, the surge in rural Internet entrepreneurs has affected everything from the increasing burger business at Three Finger Jacks Saloon to United Parcel Service drivers (two additional routes in two years) to real-estate values. A series in the Methow Valley News last summer found home prices in the Methow appreciating 24 percent in a year. In prime spots, prices doubled. A plan to update the valley's power is controversial.

Still, almost everyone agrees the new Internet economy beats a mine or ski-lift resort, like the one driven away decades ago by a grassroots coalition.

"We're completely clean," says Larsen of HomeMovie. "It's all about data moving up and down that fiber. We bring digital dollars from all over the world."

Economic development is all about certainty, says Larman. Businesses need to know the infrastructure isn't going to fail them; communities need to know companies will enhance the tax base rather than strain local services.

"The certainty that high-end companies need to have is just now occurring," he says. "The pioneers are out there, and the wagon trains will follow."

Paula Bock is a Pacific Northwest magazine staff writer. E-mail: pbock@seattletimes.com. Benjamin Benschneider is a magazine staff photographer.