(FORTUNE Magazine) – It's 9 A.M. Thursday, and magistrate Janie Moore is facing a scruffy blond accused of drunk driving. Moore goes over the charges and sets bail at $200. The accused signs his stack of forms and hands the pen back to a TV set. Both laugh at his mistake: They're separated by 20 miles, talking over a two-way video network. Superfast Internet connections and sophisticated videoconferencing software are making it easier for defendants to be tried from their cells.

Ironically, it's one of the the nation's poorest, most rural states that's pioneering this practice: West Virginia. The system was born of necessity. From 1990 to 1998, West Virginia's prison population surged 122%, and antiquated local jails were overwhelmed. When an inspection found that most facilities didn't meet federal standards, the state began to replace its 55 county jails with ten regional jails, says Regional Jail Authority director Steve Canterbury. That solved one problem but created another: Many of the jails were a two-hour drive from a courthouse.

Worried that transportation costs would skyrocket, West Virginia's governor asked Verizon, the area's local phone company, for a communications system. Its solution was to build a $25 million voice, video, and data network across the state. The state then spent $2.5 million to connect all of its courthouses and jails. The system is now used in magistrate courts only for initial appearances on felonies, misdemeanors, and traffic violations. But supreme court chief justice Elliott Maynard says that within a few years West Virginia will likely conduct an entire civil jury trial over the network.

Verizon wasn't in this just for the good will. It correctly predicted that a state-of the-art network would spark development. The new high-tech regional jails installed water and sewer lines that have been tapped into by merchants to start new businesses, including Wal-Mart, Toys "R" Us and Mercedes-Benz. Plus hospital emergency rooms and prison medical centers are making room for remote cameras so doctors can do virtual exams over the new network. "The applications are going to be endless," says Cabell County circuit court judge Dan O'Hanlon. "It's going to be up to the folks around the state to dream up ways to use it."