nettime: THE TOPOI OF E-SPACE - Saskia Sassen 1/2

[Pit Schultz <pit@contrib.de>]

Saskia Sassen
Professor of Urban Planning
Columbia University

THE TOPOI OF E-SPACE: GLOBAL CITIES AND GLOBAL VALUE CHAINS

This paper was held as a lecture during the DEAF96 Symposium, Digital
Territories, in Rotterdam on 19 September 1996.

Electronic space is easily read as a purely technological event and in that
sense as self-contained and neutral. But this is a partial account. In this
brief essay I will argue that what is left out of this technological
reading is that electronic space is embedded in the larger dymanics
organizing society. Whether in the geography of its infrastructure or the
structuration of cyberspace, it is inscribed and to some extent shaped by
power, concentration, contestation, as well as openness and
decentralization. Thus it is by now well known that the particular features
of the Internet are in part a function of the early computer hacker culture
which designed software that strengthened the openness and decentralization
of the Net and which sought to make it universally available. It is also
clear that in the last two years, when business discovered the Net, we are
seeing attempts to commercialize it through the development of software
that can capitalize on the net properties and through the extension of
copyrights--in other words, the opposite of the early hacker culture.

In this regard, it seems to me that we need to re-theorize electronic space
and uncouple it analytically from the properties of the Internet which have
shaped our thinking about electronic space. We tend to think of this space
as one that is characterized by distributed power, by the absence of
hierarchy. The Internet is probably the best known and most noted. Its
particular attributes have engendered the notion of distributed power:
decentralization, openness, possibility of expansion, no hierarchy, no
center, no conditions for authoritarian or monopoly control. [1].

Yet the networks are also making possible other forms of power. The
financial markets, operating largely through private electronic networks,
are a good instance of an alternative form of power. The three properties
of electronic networks: speed, simultaneity and interconnectivity have
produced strikingly different outcomes in this case from those of the
Internet. These properties have made possible orders of magnitude and
concentration far surpassing anything we had ever seen in financial
markets. The consequence has been that the global capital market now has
the power to discipline national governments, as became evident with the
Mexico "crisis" of December 1994. We are seeing the formation of new power
structures in electronic space, perhaps most clearly in the private
networks of finance but also in other cases.

The concern in this brief essay is to elaborate the proposition that
electronic space is embedded and to do so through an examination of what I
think of as cyber-segmentations. The focus here is particularly on economic
electronic space, and the digitalization of a growing component of the
economy. This focus privides a particular set of analytic pathways to the
broader notion that electronic space is embedded. These are pathways
grounded in realms of practice rather than in ideas about electronic space.
It is the beginning of a research inquiry and presents only elements of a
new theorization. Whether this analysis is pertinent, or can be used for
other types of electronic space and realms of practice is a question I
cannot answer and probably is a question for research.

There is another side to this story which I will only touch on briefly
which has to do with the fact that the ascendance of digitalization and
virtualization is also, in turn, inscribing lived experience and the mental
categories through which we experience and understand, as well as
engendering new mentalites till now largely confined to particular
subcultures. [2]

Here I examine three ways in which the embeddedness of electronic space can
be captured:

1) There is no fully virtualized enterprise nor fully digitalized industry.
Leading economic sectors that are highly digitalized require strategic
sites with vast concentrations of infrastructure, the requisite labor
resources, talent, buildings. This holds for finance but also for the
multimedia industries which use digital production processes and produce
digitalized products.

2) The sharpening inequalities in the distribution of the infrastructure
for electronic space, wheter private computer networks or the Net, in the
conditions for access to electronic space, and, within electronic space, in
the conditions for access to high-powered segments and features, are all
contributing to new geographies of centrality both on the ground and in
electronic space.

3) Commercialization of public networks and hierarchical concentrations of
power in private networks are producing what I think of as
cyber-segmentations--instantiations of dynamics of inequality and of power.

After an examination of these three subjects the final section incorporates
these issues in a larger discussion about space and power.


1. THE TOPOI OF E-SPACE: GLOBAL CITIES AND GLOBAL VALUE CHAINS

The vast new economic topography that is being implemented through
electronic space is one moment, one fragment, of ean even vaster economic
chain that is in good part embedded in non-electronic spaces. There is no
fully virtualized firm and no fully digitalized industry. Even the most
advanced information industries, such as finance, are installed only partly
in electronic space. And so are industries that produce digital products,
such as software designers. The growing digitalization of economic
activities has not eliminated the need for major international business and
financial centers and all the material resources they concentrate, from
state of the art telematics infrastructure to brain talent (Sassen 1996a).

Nonetheless, telematics and globalization have emerged as fundamental
forces reshaping the organization of economic space. This reshaping ranges
from the spatial virtualization of a growing number of economic activities
to the reconfiguration of the geography of the built environment for
economic activity. Whether in electronic space or in the geography of the
built environment, this reshaping involves organizational and structural
changes. Telematics maximizes the potential for geographic dispersal and
globalization entails an economic logic that maximizes the
attraction/profitability of such dispersal.

One outcome of these transformations has been captured in images of
geographic dispersal at the global scale and the neutralization of place
and distance through telematics in a growing number of economic activities.
Yet it is precisely the combination of the spatial dispersal of numerous
economic activities and telematic global integration which has contributed
to a strategic role for major cities in the current phase of the world
economy. [3] Beyond their sometimes long history as centers for world trade
and banking, these cities now function as command points in the
organization of the world economy; as key locations and marketplaces for
the leading industries of this period (finance and specialized services for
firms); and as sites for the production of innovations in those industries.
The continued and often growing concentration and specialization of
financial and corporate service funtions in major cities in highly
developed countries is, in good part, a strategic development. It is
percisely because of the territorial dispersal facilitated by
telecommunication advances that agglomeration of centralizing activities
has expanded immensely [4]. This is not a mere continuation of old patterns
of agglomeration but, one could posit, a new logic for agglomeration. [5] A
majority of firms and economic activities do not inhabit these major
centers.

Centrality remains a key property of the economic system but the spatial
correlates of centrality have been profoundly altered by the new
technologies and by globalization. This engenders a whole new problematic
around the definition of what constitutes centrality today in an economic
system where i) a share of transactions occur through technologies that
neutralize distance and place, and do so on a global scale; ii) centrality
has historically been embodied in certain types of built environment and
urban form. Economic globalization and the new information technologies
have not only reconfigured centrality and its spatial correlates, they have
also created new spaces for centrality. [6]

As a political economist interested in the spatial organization of the
economy and in the spatial correlates of economic power, it seems to me
that a focus on place and infrastructure in the new global information
economy creates a conceptual and practical opening for questions about the
embeddedness of electronic space. It allows us to elaborate that point
where the materiality of place/infrastructure intersects with those
technologies and organizational forms that neutralize place and
materiality. And it entails an elaboration of electronic space, the fact
that this space is not simply about transmission capacities but also a
space where new structures for economic activity and for economic power are
being constituted.


2. A NEW GEOGRAPHY OF CENTRALITY

We are seeing a spatialization of inequality which is evident both in the
geography of the communications infrastructure and in the emergent
geographies in electronic space itself. Global cities are
hyperconcentrations of infrastructure and the attendant resources while
vast areas in less developed regions are poorly served. But also within
global cities we see a geography of centrality and one of marginality. For
instance, New York City has the largest concentration of fiber optic cable
served buildings in the world; but they are mostly in the center of the
city, while Harlem, the black ghetto, has only one such building. And South
Central Los Angeles, the site of the 1993 uprisings, has none.

There are many instantiations of this new unequal geograhpy of access.
Infrastructure requires enormous amounts of money. For example, it is
estimated that it will cost US$ 120 billion for the next ten years just to
bring the Central and East European countries communication networks up to
date. The European Union will spend US$ 25 billion a year to develop a
broadband telecommunications infrastructure. The levels of technical
development to be achieved by different regions and countries, and indeed,
whole continents, depend on the public and private resources available and
on the logic guiding the development. This is evident even with very basic
technologies such as telephone and fax: in very rich countries there are 50
telephone lines per person; in poor countries, fewer than ten. In the US
there are 4.5 million fax machines and in Japan, 4.3 m., but only 90,000 in
Brazil, 30,00 in each Turkey and Portugal, and 40,000 in Greece. (Garcia
1995). [7]

And then there are the finer points. The worldwide deployment of integrated
services digital networks (ISDN) depends on interoperability and on a
technology base. Both of these conditions severely restrict where it will
actually be available. For example, even in Europe where there is a common
communications policy calling for harmonization, ISDN deployment varies
greatly: in France it has reached 100%; in Greece it is virtually
nonexistent. Another instance, the establishment of the General European
Network which provides 8 channels of two megabits per second each, does so
only among nodes in Frankfurt, Paris, London, Madrid, and Rome--a select
geography. The availability of leased two Mbps circuits in Europe is highly
uneven--from 40,000 circuits in Great Britain to 17 in Ireland (as of the
early 1990s). [8]

The growing economic value and hence potential profitability of
communications are creating enormous pressures towards deregulation and
privatization. The fact that the top players need state of the art
communication systems further creates pressure for immense amounts of
capital and high level expertise. This has meant that public telecoms all
over the world are finding themselves between the pressure to privatize
coming from the private sector and the insufficiency of public funds to
develop state of the art systems -- systems which may well largely benefit
top players. Even in countries such as France and Germany, with long held
preferences for state control, we are now seeing partial privatization.
Similar devolopments are taking place in countries as diverse as Japan,
Australia, New Zealand, Singapore, Indonesia, Malaysia. The notion,
particularly in less developed countries, is that privatization will help
them gain access to the foreign capital and expertise they need to develop
their national infrastructure. Thus Mexico, Argentina, Venezuela, India and
even China are considering such initiatives. [9]

Deregulation and privatisation are facilitating the formation of megafirms
and global alliances. Further, new technological developments are
facilitating convergence between telecommunications, computers and TV
leading to the formation of a mega multimedia sector. [10] Globalisation is
a key feature of the new multimedia sector. And all developments signal
that this will only grow. (Serexhe, 1996) These global players and the
state of the art infrastructure and technologies they will have access to,
can only increase the distance between the technological have and have nots
among firms and among consumers. [11]

Finally, once in cyberspace users will also encounter an unequal geography
of access. Those who can pay for it will have fast speed servicing, and
those who can't will increasingly find themselves in very slow lanes. For
instance, Time Warner ran a pilot project in a medium sized community in
the U.S. to find out whether customers would be willing to pay rather high
fees for fast services; they found that customers would, that is, those who
could pay. The next section examines some of these issues.


3. EMERGENT CYBER-SEGMENTATIONS.

One way of beginning to conceptualize the possibility of forms of
structuration in electronic space is to specify emerging forms of
segmentation. There are at least three distinct forms of cyber-segmentation
we can see today. One of these is the commercializing of access, a familiar
subject. A second is the emergence of intermediaries to sort, chose,
evaluate information for paying customers. A third, and the one I want to
focus in some detail is the formation of privatized firewalled corporate
networks on the Web.

Regarding commercialization of access, what matters for me here is not the
current forms assumed by paid services, but what lies ahead. [12] Curruent
commercial forms of access are undergoing change. Microsoft, after being an
Internet laggard is now offering free Internet access and browser programs.
And AT&T, the world's largest telephone company, has just announced it will
offer free access to the Internet to its customers. All this free access
offered by giants in the industry is tactical. There is right now an
enormous battle among the major players to gain strategic advantages in
what remains a fairly unknown, underspecified market. Microsoft's strategy
in the past has been to set the standard, which it did for operating
systems. The issue today, it seems, is once again to set standards, and to
do this by providing the software for free in order eventually to control
access and browsing standards and thus be able to charge. [13]

We cannot underestimate the extent of the search for ways to control,
privatize, commercialize. [14] Three major global alliances have been
formed that aim at delivering a whole range of services to clients. [15]
While the mechanisms for commercialization may not be available now, there
is enormous effort to invent the appropiate billing systems. It is worth
remembering that in the U.S. the telephone system started in the late 1800s
as a decentralized, multiple-owner network of networks: there were farmers
telephone networks, mutual aid societies telephone networks, etc. This went
on for decades. But then in 1934 the Communications Act was passed defining
the communication systems as a "natural monopoly situation" and granting
AT&T the monopoly. AT&T is up to 60% a billing company: it has invented and
implemented billing systems. And much effort today is likely to be
addressing the question of a billing system for access to and use of what
is now public electronic space. [16]

The approach towards gaining control is through strategic partnerships.
Growth strategies and global alliances are not only geared to provide
computer services and telephone calls, but also data transmission, video
conferencing, home shopping, television, news, entertainment. Mergers and
acquisitions have risen sharply in the global IT industries, as companies
are seeking the size and technology to compete in global markets. In 1995
these transactions reached record numbers, with 2, 913 deals, that is a 57%
increase over the 1,861 recorded in 1994. The total value of these deals
was US$ 134 billion, which is a 47% increase over the US$ 90.5 billion in
1994. [17] Deregulation is a key step towards the expansion in service
coverage and the formation of global alliances. But experts are forecasting
that after a period of sharp global competition, a few major global players
will monopolize the busines. AT&T already has the nation-wide
infrastructure and a billing system in place to provide and charge for
services.

Intranets: Towards firewalled citadels on the Web?

Perhaps one of the most significant new developments is the use of the Web
and firewalls by firms to set up their own internal computer networks.
Rather than using costly computer systems that need expert staffing and
employee training, firms can use the Web to do what those systems do at
almost no cost and with little need for expert staffing. Firms save
enormous amounts of money by using the Web for their own internal corporate
purposes.

Is this a private appropriation of a public good? It seems to me there are
definite elements of this here, especially in view of the millions of
dollars firms can save. Are the firewalled intranets the citadels of
electronic space? The formation of private intranets on the Web is probably
one of the more disturbing instances of cyber-segmentation. I would like to
give some details about it here since it is a very recent development but
one that is growing very rapidly.

About a year ago business discovered that the WWW is a great medium to
communicate with customers, partners, investors. [18] Now they are using
the WWW to set up internal networks, surrounded by firewalls. Beyond very
elementary uses such as information about new developments, directories
that can be updated easily, these intranets create access to a firm's
various databases, and make these easy to use for everyone in the firm, no
matter what computer systems, software or time zone they are in. [19] Firms
can avoid complicated, costly and time consuming retrieval procedures which
have often meant that these databases were de facto of little use in
decision-making. Lotus Notes, the leading provider of internal computer
network technology has far more complexity than is often necessary; and it
is expensive and requires expert staffing.

Private intranets use the infrastructure and standards of the Internet and
WWW. This is cheap and astoundingly efficient compared to other forms of
internal communication systems. [20] Because Web browsers run on any type
of computer, the same electronic information can be viewed by any employee.
Intranets using the Web can pull all the computers, software and databases
of a corporation into a single system that enables employees to find
information wherever it is in the system. Computer and software makers have
been promising this for a while but have not yet delivered it. Now firms
have found that the Web can do it for them. [21]

This all has had sharp effects in changing the software industry. At first
software makers focused on Web browsers and other programs aimed at making
the Web a consumer medium. Now its increasingly aimed at building intranets
for firms using the Web. [22] Thus the firewalling of sites on the Web is
only going to continue to expand at growing speed.


CONCLUSION: SPACE AND POWER

Electronic space has emerged not simply as a means for transmitting
information, but as a major new theater for capital accumulation and the
operations of global capital. This is one way of saying that electronic
space is embedded in the larger dynamics organizing society, particularly
the economy.

There is no doubt that the Internet is a space of distributed power that
limits the possibilities of authoritarian and monopoly control. But it is
becoming evident over the last two years that it is also a space for
contestation and segmentation. Further, when it comes to the broader
subject of the power of the networks, most computer networks are private.
That leaves a lot of network power that may not necessarily have the
properties/attributes of the Internet. Indeed, much of this is concentrated
power and reproduces hierarchy rather than distributed power.

The Internet and private computer networks have co-existed for many years.
But there is something different today, and that drives my concern with the
need to re-theorize the Net and the need to address the larger issue of
electronic space rather than just the Net, or public electronic space. The
three subjects discussed above can be read as an empirical specification of
major new conditions: the growing digitalization and globalization of
leading economic sectors has further contributed to the hyperconcentration
of resources, infrastructure and central functions, with global cities as
one strategic site in the new global economic order; the growing economic
importance of electronic space which has furthered global alliances and
massive concentrations of capital and corporate power, and contributed to
new forms of segmentation in electronic space. These have made electronic
space one of the sites for the operations of global capital and the
formation of new power structures.

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