Bellingham's promise

-- THE CITY'S LOCATION is stunning. The high-tech infrastructure is in the works. The question is: Will high-tech jobs follow?

BELLINGHAM--When a software company laid off development manager Bill Luton more than a year ago, he was faced with the possibility of leaving the place where he grew up and started a family.

Instead of heading 90 miles south to Seattle for a comparable job, he went to companies such as e-tailer Amazon.com and software company Attachmate with the proposition of opening a satellite office in Bellingham--and hiring Luton and his 30 co-workers from Wall Data. Four months later, Attachmate opened its Bellingham office.

"At first, I was like, `Yeah, right,' " said Lisa Demback, vice president of development for Attachmate in Bellevue. But then she considered the pluses: bargain rents, lower pay scales and less competition for the same work force.

"I think the thing is: We are right on the battlefield and are always anxious to get more people," she added.

The office is now used as a recruiting tool and has doubled in size.

Luton, now director of product development for Attachmate, said: "Maybe it was a stupid try, but it worked. I really didn't want to leave."

As Bellingham tries to develop a reputation as a high-tech town, it is using stories such as Luton's to illustrate why tech companies and dot-coms should relocate to an area better known for its mountainsides of unharvested timber and the steam billowing from the Georgia-Pacific pulp plant along Bellingham Bay.

Electricity and water are in short supply in the Bellingham area because of heavy demand among existing manufacturers. That's why city and Whatcom County officials have been switching gears, emphasizing offices with fiber-optic Internet connections instead of trying to lure Old Economy manufacturing plants.

The Bellingham Whatcom Economic Development Council is now two years into a plan to attract new start-up companies.

The plan: Build the fiber-optic infrastructure, encourage the building of first-class office space, add some eager investors, and hopefully the New Economy growth will come.

"It's kind of like everything has to be in process at the same time," said Fred Sexton, who made the decision to focus on technology as president of the Economic Development Council. The agency works with existing employers while also trying to promote growth to the area through marketing, recruitment, promotion and accommodating new business.

Ray Poorman is president of Computer Systems & Services, which provides wireless technology to connect companies to the fiber-optic backbones.

"We're seeing people from all over the nation relocating here because it's beautiful, it's a nicer place to live and now it has the connectivity," said Poorman.

Already, Verizon, Qwest and AT&T Broadband have expanded their high-speed Internet services. The Port of Bellingham has connected its business tenants to fiber-optic cables along Bellingham Bay, and the city permits telecommunications companies to lay fiber-optic cable whenever construction is under way because it is still difficult and costly to connect some locations to the lines.

Office parks have been built and more are on the way. Trillium, a real-estate holding company, is pooling capital to create a local fund to finance early-stage companies.

"I'm surprised that it's taken so long," said Martin Osborne, a Western Washington University computer-science professor working at Post Point Software in Bellingham.

Still, having Bellingham on a return-address label may be downright stifling for business.

"I spend 15 seconds explaining why I'm in Bellingham, and that's 15 seconds less on explaining my product," said John Ketcham, chief operations officer of TerraGraphics, an industrial-mapping company in Bellingham.

For others, location is not an issue.

Wayne Berry, president and chief executive of Post Point Software in Bellingham, said: "As far as running a technology business, it doesn't matter where we are located. To our customers nationwide, they don't know the difference between here and Seattle."

Besides, said Paul Storer, associate professor of economics at Western Washington, Bellingham over the last few years has been branching out from fishing and timber to a more services-focused economy. The number of people employed in the services sector, which includes software, increased from 17 percent in 1970 to 28 percent in 1998.

The Economic Development Council received 134 inquiries from businesses considering new locations or expansions during 1998. From 1996 to 1998, 210 new businesses were started in all sectors.

FiberCloud, described as a co-location data center, is a mile or two away from that Old Economy stalwart, the Georgia-Pacific plant. It's Bellingham's answer to Seattle's Westin Building and provides off-site data storage for a company's computer system. Company servers are then connected to fiber-optic backbones for speed to the Internet.

The FiberCloud building has two redundant lines coming in from Canada and two heading north from Seattle. The company claims to provide faster data-delivery times to Europe and the East Coast through Canada than traffic traveling across congested lines in the U.S.

Bellingham officials, the port and local business owners say it is infrastructure like this that attracts and produces new high-tech companies.

Jim Pennington, the founder and CEO of ApplicationStation.com, a start-up application-service provider, moved to the city this summer from North Carolina after vacationing in the San Juan Islands. He researched the area and found lifestyle and business advantages, such as proximity to the mountains and water and reasonable operating costs.

"I was expecting Billy Bob and a server on the back of the truck," said Bay Area transplant James Ransdall, ApplicationStation's chief operating officer. But FiberCloud has been accommodating. "It's small, it's state-of-the-art and it's a beautiful facility," he said.

The Economic Development Council is launching a $45,000 advertising campaign to let regional companies know what's up in Bellingham.

Almost everyone in the high-tech industry knows each other, and without a critical mass encouraging more companies to the area, some worry that it will be tough to compete with cities such as Tacoma that are pegging themselves as the next Silicon Valley.

"We're not there yet locally," Storer said. "I think it can happen. It will take the spirit of the pioneer and risk-taker that's in the roots of Seattle."

Ketcham of TerraGraphics and Drew Fleck, vice president of business alliances and marketing for TerraGraphics, agree that Bellingham has a long way to go.

Together with friend Kelly Lockhart, they founded The Hive, a monthly technology networking event, which may be the first step in starting a buzz, a critical element for attracting qualified employees to an area. The idea came when people from Bellingham started to drive to Seattle for similar events.

Some of the differences between Bellingham and other tech hubs are as basic as cultural misunderstandings. For instance, Fleck, who telecommutes from Wisconsin and spends about every other month in the city, feels like he's the only one in a hurry. When using his cell-phone headset in the grocery store, people think he's talking to himself, and he receives speeding tickets for going 5 miles per hour over the limit.

And, while the technology may exist in Bellingham, professional services such as banking, investing and legal advice are not up to speed on the issues of high-tech business, Ketcham and Fleck said.

Poorman doesn't think Bellingham has the risk-takers to support rapid growth. "What you have is cowtown businessmen, and they don't go out on a limb, they go with firms they know," he said.

As a former commercial fisherman, owner of FiberCloud and TerraGraphics' angel investor, Gary Nelson is someone who must straddle the divide between the Old Economy and the new direction some in the city would like to take.

Nelson heard about the fiber-optic lines running parallel to the train tracks outside his building by the water, and wondered how he could take advantage of all that information passing by.

"I spent a few months looking into the business and more or less got immersed into it," Nelson said.

He admits to a pretty tough transition from commercial fisherman to high-tech entrepreneur. When entering the FiberCloud data center, Nelson must put anti-static booties on his feet and then pass through a retinal-scanning device. Inside, it's a maze of lockers, heavy cabling and rooms with glaring "do not enter" signs.

But this is where he sees growth. He is talking with the port to build a second data center.

Nelson isn't the only one willing to invest in the new direction of Bellingham. Trillium is, too.

"There's an interest in diversifying, and we are now proactively looking into technology," said Ted Mischaikov, Trillium's director of capital resources.

He said the real-estate company has high-tech investments and now intends to develop a venture-capital fund focused on early-stage financing that would also include outside investors.

Poorman is optimistic change in the Bellingham economy will occur eventually.

Still, without a critical mass, it's difficult to be convinced that Bellingham can become another high-tech town.

Storer sees Bellingham as still somewhat of an undiscovered gem. "Bellingham is not a country-club address yet," he said.

Bellingham's location, quality of life

Bellingham is 90 miles north of Seattle on Interstate 5 and 50 miles south of Vancouver, B.C.

** Vancouver's international airport has service comparable to Los Angeles International.

** Bellingham has 160,000 residents.

** Bellingham has three institutions of higher education: Western Washington University, which has a computer-technology program; Whatcom Community College; and Bellingham Technical School.

** If you made $50,000 a year in Seattle, you would need to make about $40,511 in Bellingham if you owned your home.

** According to the Bellingham Whatcom Economic Development Council, in 1997, a three-bedroom, two-bath, 1,500 square-foot house cost $151,800 and took an average of 91 days to sell. A one-bedroom, unfurnished apartment rented for $479 a month.

** The Bellingham metro unemployment rate for October was 5 percent, compared with the Seattle area's 3.4 percent and the nation's 3.9 percent unemployment rate.

** A computer programmer made a median base salary in Whatcom County of $28,116 a year, while a senior computer programmer made $45,636.

Bellingham bargains

** A quarter lasts for an hour in the parking meter.

** Office space rents for 85 cents to $1 a square foot a month.