A New Brand Of Tech Cities

When telecom executive Mory Ejabat was looking for a home in 1999 for Zhone Technologies, his networking-equipment start-up, one of his first calls was to Oakland's mayor, Jerry Brown. "I said I planned to put up four buildings and create 1,500 jobs," says Ejabat. "He said, 'Let's make a deal'." City officials gave Ejabat a discount on a large parcel of undeveloped land on Oakland's waterfront in exchange for 100,000 shares of Zhone's pre-IPO stock. "We did what any good venture capitalist would," says Bill Claggett, a Brown adviser. In addition to the discount, building permits were filed and approved over the Internet, and the city quickly built the needed access roads and power grid. It even named the freeway exit to the company's new campus Zhone Way. Within six months, Zhone employees had moved into the first of four airy glass-and-steel buildings. "I've never seen a city government move that fast," says Ejabat.

The royal welcome--and unconventional sweeteners--were all part of Brown's campaign to transform Oakland, the gritty, "other" city by the bay, into a technology center. With commercial real-estate prices 25 percent lower than in San Francisco and nearby Silicon Valley--and with relatively affordable housing stock--Oakland has made itself an increasingly attractive location for start-ups. More than 300 companies, ranging from unknown biotech outfits to webvan.com, the struggling Internet grocery service, have come to Oakland since Brown, California ex-governor and two-time presidential candidate, became mayor in 1998. "The key to Oakland is its proximity to San Francisco and its relatively undeveloped character," Brown says. "There's room here for investment and change."

Brown's team developed an innovative package of goodies to dangle in front of companies searching for a home. In 1998 Oakland started offering tax breaks to desirable industries, including software, multimedia, telecommunications and biotech. Companies that qualify are given a discount on their business-license tax for up to a decade. Oakland also subsidizes its own start-up incubator, the Communications Technology Cluster, in the historic Rotunda building downtown. After a $49 million private restoration, the 100-year-old former department store now boasts high-speed fiber-optic connections and subsidized rent, furniture and utilities for up to a dozen companies. A bonus: the Rotunda is close to city hall, so it's protected from northern California's rolling blackouts. In today's hostile market, those fledglings may not survive outside the nest, a prospect that doesn't seem to trouble Brown. "Some die, others come up," he says with a shrug. The same is true for cities. Omaha, Neb. Omaha is definitely not hip; green-haired XML programmers do not glide past gourmet coffee emporiums on Razor scooters. But Omaha is where the blue-collar work of the information economy is done. Phones are answered, money is counted and data are processed. Six national fiber-optic networks converge here. Twenty million toll-free calls come into 23 corporate call centers each day (answered in flat, Midwestern English). In a hundred-year-old building, technicians monitor thousands of freight trains crossing the Western United States. Indeed, Omaha has been a Tech City since the cold war, when the Strategic Air Command set up shop at nearby Offut Air Force Base in 1947. SAC attracted talent, but more importantly, it built a communications network that could stand up to a nuclear blast. Peter Kiewit Sons Inc. was the construction company that dug the trenches and laid the fiber. Eventually Kiewit's owners realized businesses might want access to all that bandwidth, too. For a risky $10 million, they built a new high-capacity phone network in 1987.

The problem was creating a new generation of workers and keeping homegrown companies in town. The city knew things were bad when Level 3, the fiber-optic company that grew out of Kiewit's second big network project, moved to Colorado in 1997. Local firms responded by giving $47 million for an info-tech institute at the University of Nebraska. Joe Ricketts, founder of Ameritrade, ponied up $1.5 million for another one at Creighton University. And after Bruce Springsteen played Fargo, N.D., but not Omaha, voters last year approved a new $300 million arena and convention center.

Still, recruiting remains a challenge, particularly when candidates find out that the best sushi bar in town is in an old IHOP. But housing is cheap and commutes are light. In all, not a bad place to set up the back room of the New Economy.

Tulsa, Okla. Growing up, Tulsa native Christopher Broyles expected to work in the oil business and be a cowboy. Today Broyles wears black cowboy boots to work and plays a decent country guitar. But he does it in his office at C2 Technologies, a software- engineering firm he runs out of an old bank building downtown (the old vault makes a nifty place for a server). "We deal with people from the coasts, and their first image of us is that we're just Okies," Broyles says. "I like to think we're technology cowboys."

The crowning moment in Tulsa's transformation from oil town to telecom frontier came last month, when Williams Communications officially spun off from parent company Williams Oil and Gas. The collapse of the oil industry in the 1980s cost Tulsa 40,000 jobs and threatened to turn the city into a ghost town. But Williams hung on. The company stayed in its skyscraper downtown, determined to figure out what to do with a nationwide network of decommissioned pipelines. After briefly considering piping milk to the far corners of the country, Williams's bosses figured they'd try running fiber-optic cable for telephone lines. It worked. Williams begat WilTel, now part of telecom giant WorldCom--at a gain of 4,500 jobs for Tulsa. Eventually the extensive local fiber network attracted national call centers, like the one for airline-travel reservationist Sabre.

Thanks to Tulsa's relative lack of dot-com companies and the world's perception that barbecue is its main contribution to civilization, the venture-capital boom passed it by. Which means the city's economy remains relatively robust. Williams is building a new $100 million building to go with the old one downtown. Nearby, 20 miles of hiking and biking trails line the Arkansas River. Those kinds of amenities--shorter commutes, good public schools, outdoor recreation facilities--attract older, more stable employees. And the barbecue is darn good, too.

Campina Grande, Brazil In the dry badlands of north-eastern Brazil lies an oasis of rain and opportunity. Half a century ago, merchants of Campina Grande imported early cotton presses to build a leading textile center. Now this patch of nowhere hosts 50 firms making everything from software to display panels. Campina Grande sets the tech-industry standard for Brazil.

The key is the Federal University of Paraiba. In 1967, Paraiba scholars persuaded locals to buy a $500,000 IBM mainframe, creating a computing tradition that now draws students from across Latin America. Paraiba set up a Technology Park in 1984 that has spawned 60 tech enterprises, from shrimp farms to Internet portals. Spinoffs born in the dorm rooms include Light Infocon, which makes software police use to track drug traffickers. Local talent also draws giants like Coteminas, Latin America's most sophisticated fabric maker. Technology accounts for nearly 20 percent of the city's $650 million economy, and explains why local incomes average $2,500 per year, twice the northeast norm. Technology pays, even in the middle of nowhere.

Mac Margolis Huntsville, Ala. Want to develop a thriving tech community in your town? Have the U.S. government put a piece of the space program in your backyard. The government located Marshall Space Flight Center here in northern Alabama in 1960. These days it puts together payloads for the International Space Station. And around it is a concentrated but thriving high-tech cluster, one that has largely weathered cuts in both defense and aerospace research. The rocketeers came here, and some started companies--which attracted even more technology. "We grew up with the space program," says Olin King, who worked with the legendary German rocket scientist Wernher Von Braun at nearby Redstone Arsenal. In 1961, King started SCI in a basement; now it's an $8.3 billion electronics firm.

City officials say up to 85 percent of Huntsville's high-tech companies trace their origins to the Army or NASA. Former rocket scientists diversified into industries from software to biotech to telecom. Time Domain is working on a way to transmit wireless data via short bursts of radio waves. At Shearwater Corp., biotechnologists are making drugs more soluble, so lower doses will work better. The space age echoes after hours, too, when "Microwave" Dave Gallaher, an Air Force vet who served in Vietnam, plays the blues with his band, the Nukes--a reminder of another world-changing technology.

Akron, Ohio For most of the 20th century, Akron's success smelled like molten rubber. Goodyear, BF Goodrich, Bridgestone/Firestone and General Tire once were headquartered here. But takeover attempts, globalization and product recalls battered the once thriving industry and the tire plants all left. Only Goodyear kept its corporate headquarters in what was once the "Rubber Capital of the World." Between 1970 and 1990 Akron lost 35,000 manufacturing jobs. By the 1980s, the city didn't have much to offer except for new-wave rock bands Devo and the Pretenders, whose lead singer Chrissie Hynde, an Akron native, lamented in song that "my city was gone."

But luckily for Akron, the rubber industry left behind a research infrastructure. It was dedicated to the field of polymers, long chains of molecules found not only in rubber and plastic but in lubricants, superstrong fabrics and liquid-crystal displays like those found in computers and mobile phones. It turns out the New Economy is not entirely virtual--big swaths of it are made out of real stuff, and polymers are needed to hold much of that stuff together. Northeastern Ohio's "Polymer Valley," with Akron in the center, has 400 polymer-related companies, employing 30,000 people. Ninety-four of the companies are in the city itself. "Polymers saved Akron," says Alan Robbins, president of The Plastic Lumber Co., which makes outdoor furniture and play structures from recycled plastics.

Polymers are found in washing-machine seals and tool grips, too, but they also have higher-tech applications. At the University of Akron's 146,000-square-foot Goodyear Polymer Center, researchers are working on cut- and puncture-resistant surgical gloves, artificial organs and light, strong prosthetic limbs.

The most obvious evidence of Akron's rebound is Canal Place, a 38-acre development on the former site of BF Goodrich's tire plant. When Goodrich pulled out, an investment firm prevailed on the company to help clean the site, which was overrun with asbestos, PCBs and contaminated soil. Both companies threw in $4 million to renovate the old factory's main building. Today the project, located along the banks of the Ohio & Erie Canal, houses The Plastic Lumber Co. and 145 other businesses, including polymer heavyweight Advanced Elastomer Systems. Nearby, the minor-league Akron Aeros play baseball in a brand-new park that's packed with fans every summer. The new smell of Akron's success: popcorn and hot dogs.

Barcelona, Spain In the heart of beautiful Barcelona is gritty Poblenou, a 19th-century factory district that is rapidly disappearing. Workers are turning more than 100 city blocks into "22@," a new neighborhood of apartments and offices designed to attract high-tech enterprises. While streets are ripped up so workers can lay high-speed cable, companies such as LycosEurope have already moved in. Run by Barcelona's new City of Knowledge Department, the philosophy of the project is simple, says department councilor Vladimir de Semir: Barcelona can't live on its beauty alone. "Without new jobs people would have to go elsewhere," says de Semir. "The model here is Silicon Alley in New York but adapted to Mediterranean culture."

That means promoting Barcelona as a crossroads of European, Arab and Asian influences, and building on the technology base first laid 25 years ago. An area west of the city called Valles is home to factories belonging to Sony, Sharp, Sanyo, Hewlett-Packard and Samsung. The New Economy industries now account for 5 percent to 10 percent of Barcelona's economy, according to Brian Subirana, a professor at the local IESE business school. He expects this share to rise to 25 or 30 percent within 10 years, fueled by online shopping, publishing and banking services.

The aim is not a clean copy of New York. After living in the United States for 12 years, computer professor and entrepreneur Eva de Lera came home to find Barcelona a bit backward. No high-tech incubators. No online business networks. A robust old-boys network. De Lera set up the city's first online network for female executives, partly to discuss profits and partly to bring families together to socialize. After all, why come back to sunny Barcelona with a 24/7 mentality? "We are not trying to bring America here," says de Lera. "We are seeking a balance between the U.S. and Spain."

Suzhou, China This is the tale of two tech cities, both Suzhou. The first emerged from a meeting of the minds of two elder statesmen. The city of Suzhou had fallen on hard times by 1992 when Singapore's Lee Kuan Yew visited the fabled Yangtze River port and met its mayor. The mayor asked Lee to bring Singapore dollars to the cause of reviving his dilapidated garden city, once famous for its silk, its rice and its grand canals. When paramount leader Deng Xiaoping later backed the plan, what could Lee say? Before long, Suzhou Industrial Park began rising from the empty flats outside town and foreign technology companies began moving in.

That park gave a huge push to its rival. Dissatisfied with a deal that profited mainly Beijing and Singapore, Suzhou city officials began promoting their own tech park, already going up on the opposite side of town. They offered cheaper land. Singapore offered lower requirements for worker benefits, coupled with lower taxes on workers' pay. The result of this growing competition for customers: 550 companies, including giants like Fujitsu and Philips, have poured more than $8 billion into the two zones, creating 80,000 new jobs.

The duel is not without casualties. Dismayed by the local resistance, Singapore has retreated to a minority position and given up management control of its zone. Executives of Suzhou Logitech Electronic Co., which controls about one third of the global computer-mouse market, say they have trouble keeping managers due in part to poaching by companies in the Singapore zone. Yet the promise of both zones has attracted major suppliers to line the corridor between Suzhou and Shanghai, an hour and a half away. Logitech now buys molded-plastic mouse bodies, integrated-circuit guts and wire mouse-tails from plants nearby. "Suzhou has become fully integrated, with both the supply base and production base here," says Logitech regional finance director Colin Kwok. And over time, divided Suzhou appears likely to become part of one much larger high-tech megalopolis.

Cote d'Azur, France Long ago, in the dot-com era, the Sophia Antipolis technology park in the Cote d'Azur seemed like an archeological curiosity. Founded more than 30 years ago, it catered to state research labs, not start-ups. All the hype was in Paris's silicon sentiers. Sophia looked like a fading silent-screen star.

Now it looks like a leading lady. The Cote d'Azur is weathering the dot-plosion better than most tech regions. IBM is developing its research center near the village of La Gaude into an e-business community. Texas Instruments is building a new facility at its 40-year-old settlement in Villeneuve-Loubet. At Cannes, a small constellation of independent companies orbits Alcatel's satellite factory. The 5,700-acre Sophia Antipolis park is home to 1,200 companies employing 23,000 people. Among the stars: Right Vision, which makes Internet appliances, and Castify Networks, which has developedprograms for full-screen streaming video. "Companies here were not just exploiting a supposed marketing opportunity, but offering real technical know-how," says Francois Kester, director of Cote d'Azur Development. Who would have thought? The Riviera: no glitz, just serious technology.