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

[Pit Schultz <pit@contrib.de>]

What these developments have meant is that suddenly the two major actors in
electronic space --the corporate sector and civil society-- which until
recently had little to do with one another in electronic space, are running
into each other. Then as today, corporate actors largely operate in private
computer networks. But two years ago business had not yet discovered the
Internet in any significant fashion, the World Wide Web -- the multimedia
portion of the Net with all its potentials for commercialization-- had not
yet been invented, and the digitalization of the entertainment industry and
of business services had not exploded on the scene.

This is also the context within which we need to read the recent and sharp
trends towards deregulation and privatisation which have made it possible
for the telecommunications industry to operate globally and in a growing
number of economic sectors. It has profoundly altered the role of
government in the industry, and, as a consequence has further raised the
importance of civil society as a site where a multiplicity of public
interests can, wittingly or not, resist the overwhelming influence of the
new corporate global actors. Civil societey, from individuals to NGOs, has
engaged in a very energetic use of cyberspace form the bottom up.

To the extent that national communication systems are increasingly
integrated into global networks, national governments will have less
control. Further, national governments will feel sharp pressure to help
firms become incorporated into the global network, to avoid the risk of
being excluded from the increasingly electronically operated global
economic system. If foreign capital is necessary to develop the
infrastructure in developing countries, the goals of these investors may
well rule and shape the design of that infrastructure. This is of course
reminiscent of the development of railroads in colonial empires, which were
clearly geared towards facilitating imperial trade rather than the
territorial integration of the colony. Such dependence on foreign investors
is also likely to minimize concerns with public applications, from public
access to uses in education and health.

There are today few institutions at the national or global level that can
deal with these various issues. It is in the private sector where this
capacity lies, and then only among the major players. We are at risk of
being ruled by the MNCs, accountable only to the global market. Most
governmental, non-profit and supranational organizations are not ready to
enter the digital age. The political system even in the most highly
developed countries is operating in a pre-digital era.

The overshwelming influence that global firms and markets have gained in
the last two years in the production, shaping and use of electronic space
along with the shrinking role of governments, has created a political
vacuum. Bit it does not have to.

Because the ascendance of digitalization is a new source of major
transformations in society, we need to develop it as one of the driving
forces of sustainable and equitable development in the world. It should be
a key issue in political debates about society, particularly equity and
development. We should not let business and the market shape "development"
and dominate the policy debate. The good side of the new technology, from
participation to telemedicine, is not necessarily going to come out of
market dynamics.

Further, even in the sites of concentrated power, these technologies can be
destabilizing. The properties of electronic networks have created elements
of a crisis of control within the institutions of the financial industry
itself. There are a number of instances that illustrate this: the stock
market crash of 1987 brought on by program trading and the collapse of
Barings Bank brought on by a young trader who managed to mobilize enormous
amounts of capital in several markets over a period of 6 weeks. Electronic
networks have produced conditions that cannot always be controlled by those
who meant to profit the most from these new electronic capacities. Existing
regulatory mechanims cannot always cope with the properties of electronic
markets. Precisely because they are deeply embedded in telematics, advanced
information industries also shed light on questions of control in the
global economy that not only go beyond the state but also beyond the
notions of non-state centered systems of coordination prevalent in the
literature on governance. [23]

Finally, the Net as a space of distributed power can thrive even against
growing commercialization. But we may have to reinvent its representation
as impervious to such commercialization and as universally accessible. It
may continue to be a space for defacto (i.e. not necessarily
self-conscious) democratic practices. But it will be so partly as a form of
resistance against overarching powers of the economy and of hierarchical
power, rather than the space of unlimited freedom which is part of its
representation today. It seems to me that there are enough changes in the
last two years to suggest that the representation of the Internet needs to
be subjected to critical examination. Perhaps the images we need to bring
into this representation increasingly need to deal with contestation and
resistance, rather than simply the romance of freedom and
interconnectivity. Further, one of the very important features of the
Internet is that civil society has been an energetic user; but this also
means that the full range of social forces will use it, from
environmentalists to fundamentalists such as the Christian Coalition in the
U.S. It becomes a democratic space for many opposing views and drives, and
for a range of criminal uses -- often referred to as the "blacknet."

This is a particular moment in the history of electronic space, one when
powerful corporate actors and high performance networks are strenghtening
the role of private electronic space and altering the structure of public
electronic space. But it is also a moment when we are seeing the emergence
of a fairly broadbased--though as yet a demographic minority-- civil
society in electronic space. This sets the stage for contestation.


NOTES

1. It might be worth repeating that even if we just consider IP compatible
networks, there are about 40,000 networks today and that the Internet is
constituted by about 12,000 of these. The Internet is a global computer
network that provides technical compatibility and transparent connectivity
based on a widely used suite of protocols, Transmission Control
Protocol/Internet Protocol (TCP/IP).
Usage of IP networks by 1994 broke down as follows: 50% commercial; 29%
research; 9% government; 7% defense; and 4% educational. For the Internet,
the corresponding figures were: 29% commercial; 48%research; 7% government;
9% defense; and 6% educational. In Europe, networks based on the IP
protocol have been developed in conjunction with E-bone, a consortium of 35
groups including regional networks, universities, and laboratories. New
commercial IP networks are also underway in Europe. Today there are IP
internets in 91 countries. In 53 these internets are linked to the
Internet, which provides electronic mail and other gateways to 127
countries. The number of foreign IP networks connected to the Internet is
growing at an average monthly rate of almost 9%; the growth rate in the
U.S. is 7%. (Garcia, 1995)

2. There is quite a literature on this aspect. Perhaps the most radical
analysis and theorization can be found in the work of Arthur and Mary
Louise Kroker (e.g. "Cyberstories for the Road", presented at the Museum
fur Gestaltung in Zurich, March 9, 1996). In German, see some of the work
carried out by the Telepolis project of the Akademie des Jahres Dreitausend
in Muenchen (and now the Telepolis Online journal); the work of the
Interface project in Hamburg, and the long-standing Ars Electronica of Linz
(e.g. selections by such authors as Peter Weibel, Geert Lovink, Timothy
Druckrey or Pierre Levy in the 1995 volume). For a different interpretation
from these see, for instance, the 1995 Roemerberg Gespraeche in
Frankfurt/M. on 'Die Neuen Medien'.

3. Cities are production sites for the leading service industries of our
time and they contain the infrastructure of activities, firms and jobs that
is necessary to run the advanced corporate economy. Specialized services
are usually understood in terms of specialized outputs rather than the
production process involved. A focus on the production process in these
service industries allows us a) to capture some of their locational
characteristics and b) to examine the proposition that there ia a new
dynamic for agglomeration in the advanced corporate services because they
function as a production complex, a complex which serves corporate
headquarters, yet has distinct locational and production characteristics.
It is this producer services complex more so than headquarters of firms
generally that benefits and often needs a city location. This dynamic for
agglomeration operates at different levels of the urban hierarchy, from the
global to the regional. At the global level, some cities concentrate the
infrastructure and the servicing that produce a capability for global
control. The latter is essential if geographic dispersal of economic
activity -- whether factories, offices or financial markets -- is to take
place under continued concentration of ownership and profit appropriation.
This capability for global control cannot simply be subsumed under the
structural aspects of the globalization of economic activity. It needs to
be produced. It is insufficient to posit, or take for granted, the awesome
power of large corporations or the existence of some "international
economic system." (For a detailed discussion of these issues please see
Sassen 1996a).

4. This is well illustrated by the case of the leading telecommunications
firms in the world. Let me elaborate. The combination of the global scope
of operations and the lack of a seamless communication network at the
global scale has meant that it is becoming cheaper and easier for
multinational firms to outsource the management of their communication
networks. For example, J.P.Morgan, one of the largest US financial services
firms, has contracted with British Telecom North America to handle its
overseas, terminal to host networks. And BT North America has contractedwit
h Gillette Co, to manage its telecom operations in 180 countries. AT&T
provides the network linkages for General Electric in 16 countries. And so
it goes on. This expanding network of services has significantly raised the
complexity and importance of central functions in all these major
telecommunications firms.

5. The formation and continuity of an economic center in the types of
cities which I all global, rests on the intersection of two major
processes: a) the growing service-intensity in the organization of all
industries, a much neglected aspect that I consider crucial, and b) the
globalization of economic activity. Both growing service-intensity and
globalization rely on and are shaped by the new information technologies
and both have had and will continue to have pronounced impacts on urban
space. The growing service-intensity in economic organization generally and
the specific conditions under which information technologies are available
combine to make cities once again a strategic "production" site, a role
they had lost when large-scale mass manufacturing became the dominant
economic sector. It is through these information-based production processes
that centrality is constituted.

6. We are seeing the formation of a transterritorial "center" constituted
via telematics and intense economic transactions. The most powerful of
these new geographies of centrality at the inter-urban level binds the
major international financial and business centers: New York, London,
Tokyo, Paris, Frankfurt, Zurich, Amsterdam, Los Angeles, Sydney, Hong Kong,
amongst others. But this geography now also includes cities such as Sao
Paolo and Mexico City. The intensity of transactions among these cities,
particularly through the financial markets, trade in services, and
investment has increased sharply, and so have the orders of magnitude
involved.

7. The enormous growth in the worldwide trade in communications services
and products has occurred against this background of sharp inequalities in
the infrastructure, further strengthening these inequalities in so far as
much of it is going to the technological haves. E.g. in 1990 the market for
international telephone calls was US$ 50 billion; but that for
telecommunications equipment and services was US$ 370bn, and up to US$
400bn in 1992. Business demand has increasingly become more important than
consumer demand in some of these industrial sectors.

8. The case of frame relay technology is of interest here as well: many
TNCs would use it as a networking technology; but it is only available in a
few major cities.

9. There is also a trend towards the privatization of international
agencies. This is well illustrated by the case of INMARSAT, an
international treaty organization established in 1979 to provide
communications services to ships, especially those from poor countries. As
INMARSAT has expanded into increasingly profitable activities (services to
media, portable satellites, airlines) there have come pressures to
privatize it; this particular agency has been growing at 20% a year for the
last ten years. (Garcia 1995)

10.This is supported and made possible through a range of innovations and
technical developments: digitalization, optical fibers, compression,
navigation software, Pcs' new capacities, networks such as the Internet and
other internets. Further, global corporations need seamless worldwide
networking technologies that can support applications such as electrodic
data interchange, computer-integrated manufacturing, databases for
information management, video conferencing, etc. This will require enormous
investment and expertise and will favor global players.

11. he leading telecommunications firms are positioning themselves to
become part of the lucrative outsourcing market to provide seamless global
communication networks to the world's 5000 largest MNCs. This market is
estimated at $10bn. a year and is growing rapidly. AT&T has established
WorldPartners, a one-stop shopping consortium and joint venture, in
conjunction with Japan's largest international provider, KDD and Singapore
Telecom, and after an anxious search, with ... as its European partner --
essential if it was to be a provider of global services. What I find
interesting and politically significant, though rarely noted, is that to
provide such telecommunication services which neutralize distance, they
need access to very material land, because the main technology is still
fiber optic cable, and it is also very material. Here lies a possibility
for governments to exercise regulatory power, but this point is lost in the
ascendant rhetoric of dematerialization. (see Sassen 1996b)

12. There is also a widespread conviction that we will see the emergence of
intermediaries to sort out, edit, and evaluate information and services
available on the net. The enormous growth and proliferation of information
and options is creating a need for "editors" who will read, sort and rank
information for their clients. Brandnaming is inevitable and hence the
possible overvalorization and overpricing of these editors.

13. 20 European companies recently joined to form the European arm of an
Internet research group. The group includes major telecom and computer
firms, both from the public sector and private sector. It will be based at
the French national computer research institute Inria. The WWW Consortium's
European branch will work with the US Web Consortium on such global issues
as electronic commerce. It will also work on the use of languages other
than English on the Web. The French business and government establishment
now shows a remarkable interest in the Web, when only last year it had
dismissed the whole Internet as a version of the French Minitel. Inria has
taken over some of the Web research from CERN, the nuclear research
organization where the Web was created by Tim Berners-Lee in 1989; he, now
at MIT, heads both the US and European research consortia. One of the
concerns of the newly formed European consortium is that improvements made
by such rivals as Netscape and Microsoft (both members of the US
consortium) don't create separate parts of the Internet that can only be
read by Microsoft or Netscape software.

14. The Internet is becoming big business. Revenues from Internet-related
products and services will go from US$ 300mio. in 1995 to US$ 10bn. by
2000. About US$ 4.2bn. of that will be spent by consumers and business for
access fees to get online and for the time spent there.

15. Three of the world's leading telecom operators have formed the world's
third global telecom alliance: Deutsche Telekom and France Telecom, the two
biggest operators in Europe, together will invest US$ 4.2bn. in the third
partner, Sprint, the third largest long-distance operator in the US. The
forecast is for sales of US$ 5bn by 2000. It is to be called Global One,
and will offer clients a single global network reached through a single
point of contact, with state of the art technology and a range of new
services. It will focus on three segments of the international telecom
market: worldwide voice, data and video services for corporate clients;
international consumer services such as calling cards; and international
transmissions and support to other internatioanl carriers. There are two
other global telecom alliances: AT&T has linked up with four European
operators forming Uniworld, now the world's largest global alliance, and
British Telecommunications and MCI have joined to form the second largest
global alliance, known as Concert.

16. Worldwide it is mostly small companies that have till now offered
access to the Internet. The total number of personal computers worldwide is
estimated at 57 million, and at 100 million by 1999. The largest telecom
and computing companies are well-positioned to take advantage since
Internet travels over the fiber optic backbone owned by the world's
long-distance carriers. These are now developing Internet services for
business. For instance, the share of revenues from business clients has
been rising for AT&T; over half of its profits from telephone services
today comes from business rather than consumers.

17. There was rapid growth in activities across all sectors in 1995. The
largest deals were in the telecommunications sector, with 98 transactions
worth US$ 20bn. The most active sector was software and services, with 356
deals valued at a total US$ 4.4bn. In Europe we increasingly see
acquisitions of national brandname firms by foreign companies. Companies
with expertise in the Internet were favored targets, as were those with
expertise in ISDN (the data transmission technology). US firms acquired 11
European ISDN specialists. Two-thirds of Europe's top 20 transactions
involved a buyer from abroad.

18. Perhaps oe of the first and best-known cases is that of Fed Ex, the
international courier service. Fed Ex first set up a Web site in November
1994 so customers could track their packages worldwide by accessing
directly Fed Ex's own package tracking database. It was an enormous success
(and a lot of fun for those with time to track their packages). About
12,000 customers clicked in er day, clicking their way through Web pages to
track their very own package instead of having an operator do it for them.
Fed Ex saved up to US$ 2 million. Fed Ex has now also set up an intranet;
today it has 60 Web sites running inside the company.

19. The numbers of sites in these intranets are sometimes quite high: e.g.
at Silicon Graphics Inc., its 7,200 employees have access to 144,000 Web
pages stored on 800 internal Web sites.

20. This is also a threat to software companies that produced network
systems now being replaced by the far simpler device of using the web. It
used to require immense amounts of complex codes and specialized programs
(e.g. Lotus Development Corp.'s Notes program). The Web is far cheaper and
simpler. Germany's SAP, a US$ 1.9bn software maker rose to the top of the
industry with its complicated programs to override the differences among
computer systems. Now the web can do much of this faster and far cheaper.
Also Lotus or SAP's programs require paying programmers to customize and
maintain these systems. Further using the Web reduces training costs. The
Web's HTML (Hypertext markup language) standard has emerged as a standard
user interface which millions of PC users have become familiar with.
Because the same basic programming can be used on lots of different kinds
of hardware, corporations will need fewer programmers to write and maintain
software.

21. Intranets will not replace the complex business programs that have been
refined over many years (e.g. in finance); further, security and
confidentiality concerns may limit use of intranets, which are at this time
less secure than conventional programs. But more sophisticated intranets
are being developed. For instance, Silicon Graphics began using the Web
internally almost as soon as we had Mosaic, the original web browser;
today, almost all information at this firm is online: it makes available
internally almost two dozen corporate databases that employees can traverse
by clicking on hyperlinks. This feature of intranets sounds very attractive
to me; I have no objections to internal democratizing in access to firm
information. It's using a public good to raise a firm's profits, privately
appropriated, which I find problematic.

22. The forecast is that sales of software to run intranet servers will
jump to US$ 4bn in 1997, from less than half a billion in 1995. By 1998 it
could be at US$ 8bn which is four times larger than the Internet server
business. These figures exclude all the application packages, programming
tools, and other requirements of intranets. All the big software makers
(Netscape, Microsoft, Sun Microsystems, IBM, Oracle, Computer Associates)
and just about all others are producing and launching intranet products.

23. For a full discussion of these issues and the pertinent literature
please see Sassen 1996b.


REFERENCES

Druckrey, Timothy. (Forthcoming) Representation and Photography.
Manchester, UK: Manchester University Press.

Garcia, Linda. 1995. The Globalization of Telecommunications and
Information. " Pp. 75-92 in Drake, William J. (ed)The New Information
Infrastructure: Strategies for U.S. Policy. New York: Twentieth Century
Fund Press.

Rapp, L. 1995. "Toward French Electronic Highways. The New Legal Status of
Data Transmissions in France." Pp. 231-246 in L. Rapp (ed)
Telecommunications and Space Journal. Vol. 2 (Annual Edition).

Rotzer, Florian. 1995. Die Telepolis: Urbanitat im digitalen Zeitalter.
Mannheim: Bollmann.

Sassen, Saskia. 1996a. Metropolen des Weltmarktes. Frankfurt: Campus Verlag.
_____ 1996b

Scherer, J. 1995. "Regulatory Reform in Germany: Privatizing and Regulating
Deutsche Bundespost Telekom." Pp. 207-230 in L. Rapp (ed) op.cit.

Serexhe, Bernard. 1996.

Meurer, Berndt. 1994. Die Zukunft des Raumes.

BIO: Saskia Sassen is Professor of Urban Planning and serves on the faculty
of the School of International and Public Affairs at Columbia University,
New York, USA. Two of her books have been published in German. Metropolen
des Weltmarktes (Campus Verlag, 1996) and Migrantes, Fluchtlinge und
Siedler (Fisher Verlag, Taschenbuch, 1996). Her most recent book is Losing
Control? Sovereignty in an Age of Globalization. (The 1995 Columbia
University Memorial Schoff Lectures, published by Columbia University
Press, 1996).

(Thanks to Nicole Meijer for typing out the text.)

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