Anthony J. Pennings, PhD

WRITINGS ON DIGITAL ECONOMICS, ENERGY STRATEGIES, AND GLOBAL COMMUNICATIONS

How IT Came to Rule the World, 2.3: Data Packets for Dollars

Posted on | June 25, 2010 | No Comments

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This is the 18th post in the mini-series How IT Came to Rule the World and addresses some of the earliest attempts to privatize and globalize the Internet. Here, the early Internet, called ARPANET, was privatized by a bunch of entrepreneurial engineers who worked with the International Telecommunications Union (ITU) to make a pre-TCP standard, the X.25 and X.75 protocols to provide data networking for banks and other multinational users.

Larry Roberts, the Chief Scientist at ARPA who oversaw the development of the ARPANET, became the CEO of the new subsidiary – Telenet, that went into operation in 1974 offering packet-switched data communications commercially. Telenet also set out to plan a new international data-networking standard and quickly began working on packet-switching standards with the ITU, the organization that set standards for world’s telephone organizations.

Generally called PTTs (Post, Telephone, and Telegraph), these organizations were nearly universally controlled by the governments of their respective countries. They were concerned that privately owned data networks would cut them economically out of potentially profitable new services and were thus motivated to facilitate the new standards that would allow them to manage and tariff (price) international data flows. They were also politically concerned that proprietary data networks would become “Trojan Horses”, allowing sensitive national information to pass easily through their borders.

Roberts negotiated a series of new protocols that left more control at the level of the telecommunications network rather than at the individual host (as it would with TCP/IP). The X.25 and related X.75 protocols allowed countries to set up their own public-switched data networks such as Uninet, Euronet and the Nordic Data Network. The new data communications standards would not end the economic and political debates. In fact, they would just begin, as packet-switching networks began to have a revolutionary new role as a major conduit for a brave new world of electronic money and international news. Before email and the World Wide Web, electronic money was the “killer app” for data networking.

Using the new X.25 series of packet-switching protocols embraced by the ITU, banks developed extensive international networks and clearinghouse systems to offer information services for the movement of credit information and money and to settle accounts. The supranational fund of electronic eurodollars that emerged out of the OPEC surpluses of the 1970s’ oil crises an provided an important step to the global Internet as the packet-switched technology was implemented in banking networks to coordinate the resultant flows of international currency exchange and debt. This newly forming regime of electronic money led to dramatic transformations of the world’s electronic infrastructure, including the privatization of the global satellite system and national telephony systems that had previously set up formidable obstacles to the flows of digital communication.

Anthony

Anthony J. Pennings, PhD was on the NYU faculty from 2001 teaching digital media, information systems management, and global political economy.

Category: global communications, how IT came to rule the world
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    Professor at State University of New York (SUNY) Korea since 2016. Moved to Austin, Texas in August 2012 to join the Digital Media Management program at St. Edwards University. Spent the previous decade on the faculty at New York University teaching and researching information systems, digital economics, and strategic communications.

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