Numbers, Facts and Trends Shaping Your World

Cities Online: Urban Development and the Internet

Part 3: Austin


Austin has experienced a high-tech boom in the past ten to fifteen years that has transformed a university and state government town into one of the country’s most dynamic technological environments.  Leading the boom has been electronics manufacturing, primarily semiconductors.  Firms such as IBM, Advanced Micro Devices (AMD), and Motorola all have large semiconductor manufacturing plants in Austin, and IBM, Intel, and Motorola also have significant research and development (R&D) operations in the area.  The Austin area’s R&D capacity was greatly bolstered in the 1980s when two R&D consortia, the Microelectronics and Computer Technology Corporation (MCC) and Sematech, decided to locate there.  MCC, which disbanded in 2000, was devoted to next-generation computer research. Sematech, which still exists, conducts research to improve semiconductor manufacturing technology. 

Dell Computers, founded in Austin in 1984, is a large presence in Central Texas, but its innovation has been in business practices rather than technology development.  By creating a business model that minimizes inventory, Dell has grown to the world’s second largest computer company.  In terms of its impact on Austin, Dell has spawned so-called “Dellionaires”—people who have amassed large fortunes from skyrocketing stock options.  Between the core of technology professionals attracted to Austin by large electronics firms or R&D consortia and Dellionaires, there has been ample talent and wealth in Austin to fuel a number of dot-com start-ups.  And, very notably, wealth created by Dell and dot-com start-ups is beginning to be channeled into the community for social purposes.

The city has benefited from the new wealth but it is also increasingly burdened by rapid growth.  In Austin, the three issues that have dominated community and political debate in recent years are all related to growth: traffic congestion, environmental protection, and income inequality among citizens.  In many communities, rapid growth brings environmental activists to the forefront, but Austin’s concern with its environment predates the 1990s growth boom and is very much part of the city’s political fabric.  Issues of economic inequality have a long history as a central part of the city’s political debate, without much resolution.  However, growing technology-generated wealth, along with input from community activists, has resulted in innovative programs to improve technology access to low-income Austinites. 

The Internet and the Community

Austin has been at the forefront in promoting access to the Internet for low-income people through Internet-based literacy programs and job training programs.  City officials, in most cases prompted by community activists, have devoted energy and resources to using the Internet to reach out to citizens.  This combination of activism and city leadership has resulted in community initiatives remarkable in their scale and scope.  The level of Austin’s activism in technology is owed mainly to its progressive government and engaged citizens, and less to the presence of technology firms in the region.  However, Austin’s high-tech community has recently begun to turn its attention to social equity issues in the city.

Less attention has been paid to thinking of ways to use the Internet for delivery of public services, such as housing.  Part of this is because Austin does not have a well-developed network of community development corporations that might be vehicles for delivering such services using the Internet. 

i.        The Austin Free-Net

The Austin Free-Net (AFN) is the city’s most established public Internet access project and is an important node for related initiatives that have blossomed in Austin over the past six years.  The AFN got its start in 1995 when city employees began creating a Web page for the City of Austin.  It occurred to them that not all of Austin’s citizens would have access to the information that they planned to put online, and this made public Internet access a priority.  From the start, AFN’s approach has been to provide a place for people to learn about the Internet, not just a site where computer terminals are publicly available. This was a departure from many public-access initiatives, which typically provided only computer access and free dial-up connections.

Initially, one full-time city employee ran AFN.  Over time, the city also provided a contract for AFN to maintain computers at libraries and community policing stations.  However, the Free-Net by necessity has also raised funds within the community from local foundations or from companies such as Southwestern Bell, Time Warner Cable, Sematech, Excite, and Applied Materials.  A 1996 grant from the forerunner of the U.S. Commerce Department’s Technology Opportunities Program enabled the AFN to pursue a community network project in one of East Austin’s poorest neighborhoods.  The $250,000 grant, which covered about half the project’s total cost, established the East Austin Community Network (EACN), connecting 11 places in the neighborhood, such as schools, libraries, job training centers, and public housing sites. 


The other goal is for the EACN is to build “community competence.”  This means increasing the community’s capacity for helping itself through the knowledge and skills learned through the Internet.  Such increased competence could take the form of better jobs for people in East Austin or greater ease in finding places to live.  Indeed, according to a federal evaluation of the EACN grant, increased self-esteem among community residents is cited as an important outcome.  East Austinites who have become Internet users through AFN feel more in control of their ability to figure out what bureaucracies need from them. 

Much of AFN’s early work involved establishing Internet presences at schools and libraries in Austin’s low-income neighborhoods.  State and national programs have relieved AFN of that obligation, enabling AFN to devote its efforts to helping nonprofits wire themselves in order to improve operating efficiencies.  Where possible, AFN encourages nonprofits to make their Internet connections available to under-served people in their communities. 

As AFN approaches seven years of operation, it finds itself on a firmer funding base than it was during its infancy.  It is also growing. AFN now boasts 34 sites throughout Austin, with 10 new sites on the drawing board.  Demand in the community for Internet access has always been high and continues to grow, according to AFN Director Ana Sisnett.

A new challenge that AFN faces is coordination.  It is no longer the only Internet access initiative in Austin, and AFN must keep up with other programs so it can refer people appropriately. For example, AFN’s introductory Internet courses are inadequate for people seeking high–tech jobs, so AFN refers such people to the Capital Area Training Foundation, which offers in-depth computer training.  The success of the Free-Net, in combination with continued political pressure from Austin’s technology activists, has led to the creation of additional access programs by city government.

ii.     City Government Initiatives

Having funded the Free-Net mainly through in-kind contributions such as salaries and office space, the City of Austin has embarked on two grant programs to promote Internet access for Austin’s low-income population.  The city is also involved as a partner in a third project, funded by the state’s Telecommunications Infrastructure Fund (TIF), whose objective is to provide Internet access to specific population groups.

The first program is the Community Technology and Training Center (CTTC), until recently known as the Telecommunity Partnership Initiative.  This initiative was conceived by the Austin Telecommunications Commission, a City Council-appointed citizens advisory panel that believed that the Internet could increase civic participation and that the city should play a role in encouraging this.  As the initiative evolved, its focus shifted to job training, in part because of Austin’s high demand for people with technology skills.

In August 1998, the city awarded its first CTTC grant to the Capital Area Training Foundation (CATF), an arm of the Greater Austin Chamber of Commerce.  With the $200,000 grant, CATF began operating a computer and Internet training program in January 1999 using six classrooms and 120 computers in the evenings at a local high school.  Some students take courses to upgrade job skills.  Some own small businesses and want to learn how to design a Web page so they can use the Internet to advertise their business or sell a product.  And others would like to start their own business and want to gain enough Internet skills to function in the New Economy.

The CATF’s executive director, John Fitzpatrick, says two things have surprised him about the job-training program he runs.  First is the level of demand; classes are filled, and CATF is expanding its programs to other high schools. Fitzpatrick has also been struck by the “esprit de corps” of a typical CATF class.  People talk about their Internet experiences after class and help each other troubleshoot computer problems they are having at home.

The second City initiative, the Grant for Technology Opportunities Program (GTOP) is brand new.  It was announced in February 2001, with applications for the $100,000 program due in March.  GTOP is designed to fund organizations and citizens groups in Austin to:

a)      Increase points of public access to computers and information technology;

b)      Support information technology literacy, education, and training;

c)      Encourage information technology applications that support community and neighborhood planning and action;

d)      Support access to information technologies and applications by community media groups.

Distributed funding and community activism are the themes for GTOP.  Where the Telecommunity Partnership Initiative directed all its funding to one organization, the goal of GTOP is to provide grants of $5,000 to $10,000 to a number of existing organizations in Austin that could benefit from bolstering their Internet capabilities. 

The third project is an effort among five entities—Austin Community College, the City of Austin, Knowbility (a nonprofit that promotes Internet access to disabled people), St. Edward’s University, and the University of Texas.  This project has a two-year, $500,000 grant from the State’s TIF fund to provide Internet access at five sites throughout the city.  One site will serve the disabled and one will be aimed specifically at seniors, with the remaining sites in Austin’s low-income area.  Another part of the grant will fund community mapping, creating a database of community Internet access sites throughout Austin.  Eventually, using GIS software, online maps of community Internet resources will be developed.  This is similar to the initiative being carried out by Portland State University for the Portland area.  With community access sites proliferating—Austin’s Parks and Recreation Department recently decided to provide public Internet access at parks throughout the city—coordination is increasingly difficult.  The mapping project will facilitate coordination simply by identifying where resources are.

iii.   The Austin Learning Academy

While most technology initiatives in Austin have coincided with the growth of the Internet, the Austin Learning Academy (ALA) is a literacy program founded in 1988 that has transformed itself into a family-learning project that uses the Internet to promote informational literacy.  The ALA grew out of the frustration of a small group of teachers with the educational bureaucracy of the Austin Independent School District.  ALA founders decided to provide a place for after-school learning that would be less regimented than school and inclusive of the entire family.  As one of the Academy’s founders, Lodis Rhodes, puts it, the ALA promotes a “social learning” model whereby learning occurs through rich interaction among students and teachers.  Classrooms, Rhodes says, are among the worst places to learn; we learn more informally by working with others and observing situations.

The ALA began using computers in its programs in 1996 as a literacy tool.  As ALA executive director Toni Williams says, the Internet improves students’ reading because they have to practice their reading just to use it.  Because the Internet lets students go where their interests takes them, reading is fun for them, and they can read while surfing to sites they like. While there is no definitive evaluation of ALA’s program yet, the Academy continues to experiment with ways to use the Internet to improve people’s educational levels.

One example is ALA’s collaboration with the Children’s Bookpress in San Francisco.  Children at ALA communicate over the Internet with the author of a children’s book and work with the author to develop an online book of their own. Similarly, for ALA’s general education diploma program, adults develop a cyber yearbook, which requires them to practice a number of different computer skills.

Toni Williams believes the 50 computers at the ALA’s four sites attract people to its programs who otherwise would not be there.  How much “community building” has resulted is another question–both Williams and Rhodes say building community is a long-term process–but Williams believes the ALA has certainly helped the East Austin community.  It serves about 400 students a year and gathers families together in news ways with a focus on education. But no one who has come through ALA has seized on the Internet as a tool for political action.  That may be a consequence of the perception in East Austin that city leadership is still not attuned to their needs.

As an organization, ALA continues to grow.  It now has a $1 million annual budget, and the Dell Foundation is among those who have given it grants. The ALA also attracts national attention as a model to address gaps in technology access.  When President Clinton focused on the digital divide at an event in East Palo Alto, Calif., last year, the ALA was one of five sites around the country online to participate in a chat with the president.  At the state level, the ALA received visits from then-Governor Bush and his wife Laura.

The Internet and Austin’s Economy

Economic growth has been rapid in Austin in recent years, fueled by computer and semiconductor firms (whose growth in part has been generated by the Internet) and dot-coms.  Personal income in Austin rose an astonishing 14 percent in 1999 and unemployment stood at only 1.9 percent at the end of 2000.  In a sense, the New Economy in Austin can be divided into “old” New Economy activities such as computer and semiconductor manufacturing and “new” New Economy ones, such as software, multimedia, and Internet start-ups.  Austin’s business leaders see the region’s economic future in the latter sectors, but the technological and financial resources that give this future its potential are in large measure the “old” New Economy companies. 

Wealth generated by Dell Computers is setting the table for the future.  Dell’s growth has helped provide capital for local venture capital firms such as Austin Ventures and Triton.  Growing investment opportunities in technology companies have attracted additional venture capitalists from outside Central Texas. John Thornton of Austin Ventures, the city’s most prominent venture capital firm, says, “The rate of change in activity in venture capital has been larger in Austin than probably anywhere else in the country.”  In 1996, venture capitalists invested $67 million in Austin; by 1999, investment had soared to $1.1 billion.

Dell is by no means the only homegrown tech company that has spurred economic change in the city.  Tivoli Systems, founded in 1989, develops systems management software that enables computers to link remotely regardless of software platform.  Tivoli made its founders very rich in 1996 when IBM acquired the company for $743 million; today Tivoli employs 4,200 people worldwide, 1,600 in Austin.  Vignette, a software company whose products enable companies to conduct business online, was established in 1995, had its initial public offering in 1998, and now has annual revenues of about $500 million.  Finally, a number of local dot-coms have made a splash, although some of the more prominent, such as and, have been casualties of the dot-com shakeout.

City government has also been preparing for a New Economy future in Austin with initiatives in multimedia and film.  Austin bills itself as the “Live Music Capital of the World,” and city officials see the multimedia and film industries as sectors with economic growth potential that fit with Austin’s artistic profile.

i.        Austin Idea Network

The Austin Idea Network is a coalition of entrepreneurs and community leaders organized to engage high-tech executives in the Austin community by addressing “quality of life” issues facing Central Texas.  Rapid growth is straining capacity throughout the area, with tight labor markets, crowded roads, limited and expensive housing. This is an area that takes great pride in its cultural and natural environment, and the fear is that high-tech riches will rob Austin of essential parts of its identity.  This sense of identity is seen not just as a component of Austin’s character, but also as an economic asset.  In bringing the resources and talents of high-tech executives to bear on these issues, the Austin Idea Network issued a “Declaration of Interdependence” proclaiming the high-tech community’s intention to reach out to the Austin community to maintain Austin’s status as a “cool” place to do business.

The Idea Network had its origins in 1999 at Austin’s 360 Summit, a gathering of the high-tech community that examined challenges facing the industry and sought to explore the industry’s role in the Austin community.  The summit became an annual event, and in 2000 summit attendees decided to set up an organization to help bring entrepreneurs’ community enthusiasm to life.  At the 2001 summit, the Idea Network announced four projects: promoting affordable housing, improving air quality and reducing traffic congestion, increasing access to technology, and strengthening educational resources in East Austin. 

The technology access project is called DigiKids and its objective is to improve educational achievement through home computer ownership for public school students in Austin’s low-income neighborhoods.  As a start, DigiKids will provide computers and training to teachers in a given grade level, followed by students at that grade level.  The Capital Area Training Foundation will train both students and teachers at its centers, thereby expanding its mission, which has been devoted to job training for adults. 

The DigiKids project is in its formative stages, and funding remains unsettled.  The Idea Network has calculated that to purchase computers for kids and teachers in one grade level in Austin public schools would cost between $10 and $15 million. For outside funding, the Idea Network will explore local and national foundations for funds, as well as wealthy individuals.  Corporate sponsorship of classrooms or schools is another possibility.

ii.     Austin Entrepreneurs Foundation

The Austin Entrepreneurs Foundation (AEF) was established in 1999 to bring the concept of “equity philanthropy” to Central Texas.  Spearheaded by Bill Bock, CEO of a local software company called Dazel, the idea was to channel funds from successful entrepreneurs to social causes.  Bock initially had the idea for something like AEF in 1997, when a friend from the Austin Community Foundation suggested that he set up a family foundation.  Bock had accumulated significant personal wealth as chief operating officer at Tivoli Systems, as CEO after IBM acquired Tivoli, and as CEO of Dazel, a software company whose products ensure the reliable delivery of information over electronic networks.  Upon being pitched the idea of a family foundation, it occurred to Bock that many other successful entrepreneurs in Austin might be interested in family foundations, and that they might do more good if they were organized in some fashion.

At the same time, another Austin entrepreneur, Ingrid Vanderveldt, CEO of Dryken Technologies, was thinking of ways to help good causes.  She asked her company’s attorney to draw up the papers to give 1,000 shares of her company’s stock to seven Austin nonprofits.  The attorney, Paul Hurdlow, was aware of Bock’s similar interests and suggested that the two meet.  Because it was legally cumbersome and financially complex for nonprofits to manage gifts of equity shares, it was decided to establish the AEF to manage that process for start-up companies with philanthropic intentions. 

The AEF now has about 100 members—a number that has contracted slightly as some dot-coms have shut their doors—and it has gained significant capital through initial public offerings or acquisition activity by member companies. One was Bill Bock’s Dazel, which was purchased by Hewlett-Packard in 1999, generating $120,000 for the AEF.  Another member firm, Agere, was bought by Lucent, resulting in $150,000 for AEF.  These funds have been directed to Austin charities identified by the companies themselves; the AEF does not manage its own grant making. 

The AEF’s second function, which has grown in importance since the dot-com shakeout, is advising start-ups on how to manage their philanthropic impulses.  The young founders of many start-ups simply lack information on philanthropic opportunities in the community; AEF executive director Paula Fracasso will help them identify opportunities.  The AEF will also broker relationships between nonprofits and AEF member companies, for example by directing volunteers to causes that need them.

iii.   The Digital Downtown

Austin’s long-standing tradition of environmental activism has combined with its recent ire at growing traffic congestion to create a movement for a “digital downtown,”  a technology district that would be home to New Economy companies, residential space, and a vibrant social scene.  An early impetus for this movement came in 1996 when the city asked a University of Texas professor to survey high-tech workers for their perspectives on Austin’s livability.  One striking finding was that many workers—particularly those identified as working in multimedia—said they would prefer to work downtown rather than in suburban Austin.  At the same time, much of Austin’s development was taking place to the west, an environmentally sensitive area that marks the beginning of the Texas Hill Country.  Politically influential environmental activists were loudly arguing for limits to growth there.

Momentum for developing a digital downtown accelerated with the election in 1996 of Mayor Kirk Watson.  A proponent of “smart growth”—packing business and residential development downtown—Watson also wanted to be responsive to Austin’s environmentalists in the community and on the City Council.  This meant, among other things, convincing high-tech companies to abandon a traditional preference for sprawling corporate campuses that had led to the rapid development of northwest Austin. 

The digital downtown movement has scored a number of successes in Austin, in part because of $52 million in incentives that the city has offered to three large corporate construction projects downtown.  In 1999, Computer Sciences Corporation decided to put its headquarters in Austin’s warehouse district along Town Lake’s north shore.  The $161 million project will be home to 3,500 workers and be complete in 2002.  The second large downtown corporate presence was slated to be a $124 million chip-design facility for Intel Corporation.  The final project in the triad was to be Vignette Corporation’s headquarters building, which in November 2000 received City Council approval for $25 million in incentives to build downtown. 

The dot-com downturn has knocked two legs out of this three-legged stool.  Intel put its facility on hold in mid-construction, leaving a skeleton of a building in downtown Austin—an eyesore that has irritated many citizens and public officials.  Vignette, which employs 1,000 people in Austin and 2,500 worldwide, laid off about 15 percent of its workforce, prompting an indefinite delay indefinitely in construction of its new facility.

The “digital downtown” has not been oriented solely toward large companies.  Small software and multimedia firms are increasingly locating downtown.  The city also funds a business incubator designed to provide space and business services to multimedia entrepreneurs.  This modest effort, funded at about $30,000 per year but matched with in-kind contributions from the University of Texas, has resulted in several business successes from incubator graduates.  As an added stimulus, the city has turned over the former municipal airport to the film industry.  The Austin Film Society will renovate old hangars to provide sound stages and offices for multimedia companies.  The objective is to make Austin more desirable for both local and out-of-town filmmakers to shoot in Central Texas.  

An unavoidable lesson of Austin’s digital downtown experience is the fragility of its dreams.  Beyond the effect of the slowdown in the Internet economy on Intel and Vignette, the city’s plans also relied on the building of a light rail system to ease automobile congestion downtown.  Austin voters rejected a referendum to build light rail by a 2,000-vote margin in November 2000.  For a variety of reasons, then, Austin’s digital downtown may take longer than anticipated to come online. 

The Internet and Social Capital in Austin

Austin is blessed with two indispensable elements when it comes to using the Internet for community purposes: ambition and resources.  A tradition of community activism, a progressive city government, a core of skilled technology professionals, and riches from electronics and dot-com successes have combined to make Austin a place where the number of Internet-related undertakings is startling.  With the Austin Free-Net at the center, other initiatives—often unconnected to one another—have fanned out, such as the Austin Learning Academy and the Capital Area Training Foundation.  Help from all levels of government—city, federal, and state—and numerous volunteer efforts have exposed a lot of low-income people in Austin to the Internet, and the Austin Idea Network and the Austin Entrepreneurs Foundation hold the potential to bring enormous resources to this group.

Austin’s exploitation of the Internet has focused on access rather than content, a surprising finding in light of the city’s substantial Internet resources.  The CATF is mainly about increasing the supply of high-tech workers through computer and Internet literacy.  The Austin Free-Net is one of the oldest and most expansive access projects among the five cities.  DigiKids has access as its main goal, along with home-school communication between families and teachers.  Access is a laudable goal in each case, but content creation is very much on the periphery. 

One reason for the comparative lack of emphasis on content in Austin is that infrastructure for community development there is not as well developed as in other places studied.  There are relatively few community development corporations in Austin, and they do not appear to have a strong role in public debate.  Cleveland’s T2K and Portland’s Bureau of Housing have partnered with community nonprofits to develop content for improved service delivery.  This simply has not happened in Austin, due mainly to lack community infrastructure to reach into the low-income housing community. 

Still, Austin is not completely lacking in efforts to spur Internet content.  The Austin Learning Academy’s “family learning model” builds Internet competency in part through the creation of Web pages by ALA’s clients.  On the business side, the hoped-for “digital downtown” looks to multimedia firms to create a vibrant central city economy.  Austin’s traditional electronics manufacturing high-tech base is diversifying into software development, suggesting that programs to develop multimedia firms hold real promise.  Of course, much depends on capital availability.  Although Austin has a core of homegrown venture capitalists, the dot-com downturn has dampened investment in Internet companies.

Overall, Austin represents the huge potential and likely challenges in putting the Internet to work for community purposes.  If social capital is thought to be broadly in decline in America, one would expect a city enjoying an Internet-driven boom and an influx of young people to demonstrate little interest in things that could even loosely be classified as social capital.  Young people tend to be less civically engaged than older ones, and the flat-out mentality of the dot-com business culture leaves little time for anything other than work.  However, with the Austin Idea Network and the Austin Entrepreneurs Foundation, the commitment to community building in Austin is notable.  The objective that connects dot-com riches to Austin’s east-side, low-income community is ambitious indeed.

Even in the midst of plenty and with the commitment of high-tech entrepreneurs to community causes, profound cultural differences in Austin make realizing the city’s ambitions a huge challenge.  The divide between East Austin and the more prosperous west side has strong historical roots.  This divide will not vanish because a coalition of high-tech executives issues a “Declaration of Interdependence.”  It is likely to take considerable effort to effect long-term change in Austin’s low-income communities.  Initiatives such as the Idea Network or the Austin Entrepreneurs Foundation are necessary but not sufficient for accomplishing the far-reaching goals articulated by the coalitions.

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