He managed to convince a Los Angeles company to bring the Web north, but there was a hitch: He had to sign up 10 customers. "I cold-called 100 businesses," MacFarlane says.

MacFarlane's software messaging firm has since exploded into a $5 billion company that recently announced a merger with Silicon Valley's Phone.com. And now, the greater Santa Barbara region -- aka Silicon Beach -- is home to an estimated 600 technology or dot-com companies, including Expertcity.com, Commission Junction, Somera Communications, QAD Inc. and Bertelsmann Ventures. Once known primarily as a beachside enclave of wealthy retirees and Hollywood expatriates, Santa Barbara has forged a new identity as a dot-com destination.

Communities across the country have made similar transformations, seizing on digital opportunities to pump juice into the local economy. And while the emergence of these new economy hubs has led to countless new jobs, changes have brought challenges not all residents have embraced.

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