Ziatech, an Intel (INTC) subsidiary, employs about 200 people making and selling servers and communications equipment.

"We can attract a lot of young people who want to stay around here,'' says Hassan Miah, a Hollywood veteran who came here and founded Xing Technology, which helped develop file-swapping technology and was purchased by RealNetworks (RNWK) in 1999.

Miah, formerly the head of new media at Creative Artists Agency in Beverly Hills, Calif., also founded SloMedia, a company that develops digital entertainment software. It's based in the heart of downtown, but Miah is leading a migration to a fledgling industrial zone near the city's airport that officials hope will become a hub for technology firms. Miah broke ground in November on a 56,000-square-foot complex that was specially equipped with high-speed Internet access to attract software companies, especially in entertainment. SloMedia will occupy half of the space and lease the rest. "I'm pretty bullish on the area,'' Miah says.

The new complex will help address the main obstacle to San Luis Obispo's emergence as a full-fledged tech center: the city's long-standing slow-growth policies and the consequent tight market for office and manufacturing space. The community's skittishness about growth dates back to the 1980s, when locals were stunned by an influx of Los Angeles retirees and white-flighters who erected suburban tract boxes in the surrounding pastures.

These days local officials want low-impact businesses, such as software and new-media companies, that can take advantage of the city's location along the state's fiber-optic data network, which links up here with trans-Pacific undersea cables. However, officials remain wary about going too far. Recent plans for a 130,000-square-foot fiber-optic switching center hit a snag when the architectural review commission objected that it would block views of the Santa Lucia Mountains.

Another factor for business executives pondering a move here: College students grab most of the rental vacancies in town, and the area's attractiveness and the tight rein on growth have driven home prices to new heights. The median home price in the area hit $260,000 last year, low for the Bay Area or Los Angeles, but a 20 percent jump over the previous year.

For now, Wireless Mountain is happy with its office space. The staff works in a sunny, open room with pods and enough open space for a pingpong table. But King is uncertain about what will happen when the company outgrows its current digs, a former nursery behind Spike's Place, a bar and grill on Higuera Street downtown. The city is so strict about expansion that, he says, "I'm not sure this is the place for a company that is doubling and tripling in size."

Maybe not, but the firm's marketing director, Mary Slagle, is against moving. After telecommuting for tech firms elsewhere, she landed a job at Wireless Mountain, 15 easy miles from her home in the beach town of Arroyo Grande. The commute takes her past coastal dunes and diving pelicans – and precious few traffic snarls: "For the L.A. commuter or the San Jose commuter, this place is heaven."