The New Fibers of Urban Economic Development

The growth of cities is linked in history to the development of critical public infrastructure - public markets, roads and highways, maritime facilities, railroads, and airports. With the rise of information-intensive activities in both the service and manufacturing sectors, a vital new element in the urban economic system has emerged - the flow of information in, through and out of cities. Building an infrastructure for the movement of people and goods is no longer enough to assure urban economic development - it also requires a modern telecommunications infrastructure that can allow firms to serve international markets with high-speed digital communications.

From National Monopoly to Regional Competition

Until quite recently, telecommunications services were provided by public or private monopolies. In most industrialized nations, the stare-owned postal service also controlled the telephone system. Investment in telecommunications infrastructure competed with other government programs, and the pricing of telecommunications services did not reflect market conditions. In the United States, a private monopoly, AT&T, was responsible for the design and construction of the telephone system in most urbanized areas of the country. National communications monopolies in other countries and AT&T's hegemony in the United States, preempted cities from any substantive role in telecommunications planning, policy-making, or development. Unlike many elements of the urban infrastructure that were initiated by cities - such as mass transit, port development, and water supply - policies for the telecommunications infrastructure originated at the national level with virtually no involvement of cities and local government.

With the privatization of once publicly-owned telecommunications carriers, the deregulation of public monopolies, and the rise of competition in the telecommunications industry, local governments have become actively involved in using information and communications technologies to foster economic development. This new role poses special challenges for city governments. First, they must recognize the growing role of information and communications technology in office activities, the design of office buildings, and in the global operations of private firms. Second, city officials must develop an awareness of the criteria that determine private sector investment in telecommunications infrastructure so that local governments can attract such investment and link it to urban development priorities. Third, cities should use telecommunications to improve public sector productivity, and thereby stimulate both a local market for telecommunications vendors and the organizational capacity to apply technology to economic development programs. Finally, cities need to consider how they can attract information intensive businesses. This article examines some of the ways cities around the world are meeting these challenges.

Teleports

Several dozen cities in the U.S., Europe and Japan have sought to respond to these challenges by promoting the development of teleports. The teleport concept was first developed by the Port Authority of New York and New Jersey. In the late 1970's, the Port Authority began the planning for a "Teleport" - modeled after an airport - in which a large parcel of land would be set aside for satellite dishes operated by different communications companies. An office park for telecommunications-related businesses would be developed at the site. And a fiber optic system would provide direct access to the Teleport, thereby overcoming the microwave congestion of New York City. A private firm, Teleport Communications, Inc., now wholly owned by Merrill Lynch was created to develop and operate the telecommunications facilities and fiber optic network.

There are currently twenty earth stations operating at the Teleport, which has a capacity for thirty. Satellite transmission is managed by IDB Communications Group, Inc. and is used by broadcast networks such as ABC, CBS, and the European Broadcasting Union as well as major financial companies. The regional fiber system extends for 174 miles, serves 247 customers in 162 office buildings, and has become a competitor to New York Telephone for local high-speed business communications. Real estate development is under the jurisdiction of the Port Authority, and more than one million square feet of office space has been built at the Teleport; tenants include Merrill Lynch, Recruit U.S.A., Nomura Communications, and Dunn &. Bradstreet.

The success of the Teleport in New York has encouraged the diffusion of this innovation to other cities such as London, Rotterdam, Bremen and Tokyo and Osaka. In the United States, most teleports are privately financed and consist solely of communications equipment linked to satellite and local terrestrial networks; users are not physically located at the site but gain access to the teleport through a regional distribution system. By contrast, "real estate-based teleports", similar to the one on Staten Island, have been developed in San Francisco and Dallas and in cities outside North America, as a way to use high technology to stimulate real estate development.

The Osaka Teleport - already in operation - is a main element in the project known as Technoport Osaka, which is designed to reclaim land from the harbor and modernize the city's trade, transportation and telecommunications infrastructure. The Osaka Teleport's satellite facilities serve Pacific and Indian Ocean satellites and are to be linked to the greater Osaka area via an integrated digital fiber optic network being built by the Osaka MediaPort Corporation.

The London Docklands Development Corporation, which is overseeing the revitalization of the once run-down and decaying docklands, has also included satellite earth stations in its overall development project. The teleports - operated by Mercury Communications and British Telecom - will be in close proximity to Olympia &. York's Canary Wharf development, which consists of 24 buildings on 71 acres (including a 50-story skyscraper that will be the tallest building in Britain when finished). According to the London Docklands Development Corporation, the presence of the satellite earth facilities on the Docklands provides a high-tech image for this area and reinforces efforts to attract financial service firms and communications companies.

In Rotterdam, the world's largest port, a teleport has been built in conjunction with the port, so as to provide advanced communications services for all shipping and trade functions. The growing use of communications satellites (MARISAT) to guide and coordinate shipping illustrates how telecommunications systems have become an integral element of modern transportation activities.

Policies to Encourage Private Investment

The private sector will build most of the telecommunications infrastructure of the future, but local governments can do much to encourage private telecommunications investment. By making rights-of-way available for fiber optic systems, by providing incentives for investment in buildings that incorporate the latest advancements in communications technology, and by identifying opportunities for public-private cooperation, local governments will greatly stimulate private activity. Governments control the rights-of-way on highways, mass transit systems and railroad lines. These rights-of-way are of great value to developers of fiber-optic networks since they link major cities, which are the major sources of information traffic. Moreover, once permission to utilize a public right-of-way is granted, construction can be completed in a timely fashion since the corridor is already clear and accessible.

MCI Communications has installed its fiber optic network along the AMTRAK rights-of-way between New York and Washington. Metropolitan Fiber Systems, a provider of local fiber optic networks in major U.S. cities, has installed fiber optic in a conduit leased from the Southeastern Pennsylvania Transit Authority and adjacent to Philadelphia subway tunnels. The City of Chicago has also provided a right-of-way for a fiber optic system in the downtown business district that uses century-old coal tunnels buried deep under the city streets. One benefit of fiber installed in underground rights-of-way is that it is well protected and less likely to be damaged by street construction.

In order to install a fiber optic network in the City of London, Mercury Communications relied on the old and unused rights-of-way of the hydraulic system that was far more accessible than the narrow and highly-congested street grid of the City. The London Docklands Development Corporation also decided to install eighteen miles of fiber optic cable in the Docklands to help attract new investment. By providing ducts for the cable during the construction of new roads in the Docklands, the London Docklands Development Corporation highlighted the benefit of planning and coordinating the construction of all new infrastructure - roads as well as communications - prior to development.

New information and communications technologies have created new demands for buildings that can accommodate the energy, space and telecommunications needs of the modern office. In New York City, the older, narrow buildings in the Wall Street financial district have a vacancy rate twice that of newer office buildings because of their limited capacity to provide sufficient energy for cooling and duct space for telecommunications equipment. Real estate developers have begun to provide the capacity for advanced telecommunications equipment, as well as higher energy loads for cooling and operating equipment.

Francis Duffy and Alex Henney, authors of The Changing City, have observed that, "The more information is handled, stored and retrieved electronically the more vital it is that buildings have the capacity to accommodate IT [information technology]. Buildings have become, in a sense, an extension of the computer."(1) In Canada, for example, an organization devoted to automated buildings, called the Canadian Automated Building Association, has recently been created. It includes representatives of business and government, and is intended to assure compatibility in regulations, standards, and building codes.

The public sector can also work more directly with private institutions to create new telecommunications infrastructure. Government efforts to develop new telecommunications networks have traditionally been initiated to spur economic development through the sharing of technical information among universities, government, and industry. Michael Batty has analyzed the evolution of computer networks for academic and research purposes and has wisely noted the importance of the linkages between local area networks and national networks: "What is manifestly clear in the study of computer-communications networks is that a high degree of central coordination and planning is required to enable subnetworks to communicate with one another and to enable a common infrastructure to be developed for diverse applications."(2)

The city-state Singapore has explicitly sought to encourage information and communications technology in its development plans. A National Plan for Information Technology was published in 1986; it included seven elements: 1. information technology manpower, 2. information technology culture, 3. information communication infrastructure, 4. information technology applications, 5. information technology industry, 6. climate for creativity and entrepreneurship in information technology, and 7. coordination and collaboration of the information technology plan.(3) The Plan called for development of a computerized information system, TRADENET, which would electronically process all import and export trade and reduce the cost of the paperwork that now represents seven percent of the value of all trade. According to Batty, the TRADENET system is estimated to save $50 million each year.(4) Singapore has also strengthened its telecommunications infrastructure with submarine cables that link it to other Southeast Asian countries, and a fiber optic link among all its telephone exchanges that will be the basis for ISDN - an integrated system that can handle voice data and video communications simultaneously.

The development of computer networks is especially significant in the financial services industry where stock exchanges - once anchored to specific places in major cities - have become electronic networks linked to buyers and sellers around the world. Several cities have sought to establish cooperative ties among their stock exchanges in order to enhance their competitive position with the larger exchanges in New York and London. For example, the Stockholm Stock Exchange is attempting to create a Nordic exchange by developing point-to-point and satellite connections with the Oslo, Helsinki and Copenhagen markets. At present, trading volume in many Swedish companies is higher in London than in Stockholm, and this joint venture represents an effort to attract business from other large European centers.

Governments as Telecommunications Customers

Local government is a major user of information and advanced telecommunications services. Public organizations can often provide these services more cost effectively than private firms.

The port of Bremen, for example, has created a separate firm, Datenbank Bremische Hafen, which operates a logistics information system serving more than one hundred customers. The system provides cargo information, shipping schedules accounting services, as well as access to international trade and financial databases. The firm has recently expanded its services to other forms of advanced telecommunications as well.

Telecommunications can also be used to provide tourist information, as is currently being done on the French Minitel system. Hotel and car rental firms have used toll-free "800" numbers to serve customers, but public agencies have only recently begun to market their tourist attractions with such long-distance calling services. As cities begin to recognize the economic contribution that tourism makes to urban economic activity, they will begin to use computer networks and videotext services in their promotional efforts.

Attracting Information-Intensive Activities

Many cities have come to recognize the importance of information and communications firms in shaping their economic development policies. In Cologne, the city has created a "MediaPark" in the inner city as part of a program to strengthen its position as a center for broadcasting and publishing. In Japan, there have been numerous efforts to harness information and communications technology to urban development. According to Anthony Newstead, "there is an almost obsessive attachment to the concept of information cities, which feature in the national plans of central government agencies and in the strategic plans of municipalities."(5) Over the past decades, there have been a series of programs that emphasize telecommunications and economic development, encompassing two-way cable television, fiber optic networks, videotext, and teleports. Batty summarizes this national and local policy will: "Over the last decade, Japan has pursued the development of information technology with a single mindedness and zeal which cannot be surpassed by any other nation state. This is manifest at all levels in the belief that information technology will enable economic and social solutions to many of the deep seated paradoxes facing modern Japan."(6)

Kawasaki, for example, has decided to become an "information city" by creating 18 "intelligent plazas", that will be nodes of smart buildings linked by a 30-km optical fiber system. Although implementation of this plan is not certain, the fiber system is being installed and other efforts to strengthen Kawasaki's downtown are underway as well. Approximately 240,000 workers commute to Tokyo from Kawasaki each day, and one goal of the Kawasaki plan is to stimulate neighborhood offices at each of the eighteen "intelligent plazas" by relying on advanced communications systems.

The importance of telecommunications to the City of New York led Mayor David Dinkins to establish a task force to explore ways to enhance the reliability of New York City's telecommunications network. The task force builds upon a report issued by the New York City Partnership which stated that one-third of all overseas telephone calls from the United States originated in New York City, reflecting the telephone networks role in establishing the city as an international information capital. Much of the international traffic flows through fiber cables located in the Holland and Lincoln Tunnels, roadways under the Hudson River that are operated by the Port Authority of New York and New Jersey but which provide vital linkages for privately-owned communications carriers.

An Assessment

It is too soon to evaluate the impact of the information and telecommunications systems described in this article. Technological innovations require time to diffuse; for example, it took the telephone more than 50 years to reach 30 percent penetration of American households. It is possible, nevertheless, to identify certain implications of emerging trends in telecommunications that cities should be prepared to address. First, the growth of new communications technologies have not eliminated the face-to-face activities that occur in central cities. There is no substitute for direct personal contact for the exchange of confidential, specialized, and timely information. In fact, as more information becomes computerized, the value of face-to-face transmission of information is enhanced since there are fewer opportunities for such specialized and personalized information to be exchanged.

Second, the internationalization of economic activities will require cities to make certain that advanced, competitive telecommunications services are available to the firms located in a given community. Regulations that restrict communications innovations and that create pricing schemes that reduce the use of telecommunications will inevitably endanger a community's economic development. Cities need to monitor telecommunications policies at the national and international level, in order to maintain their competitive position as centers for face-to-face and electronic communications. Finally, cities should be prudent risk-takers in the deployment of information and telecommunications technologies in their own organizations. "These technologies offer opportunities for accelerating economic development, for facilitating economic transactions, for improving the quality of life, for establishing new patterns of social interaction. At the same time, they allow urban governments to develop new, more flexible services" and to improve the functions of urban administration.(7)

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1. Francis Duffy & Alex Henney, The Changing City, Bulstrode Press Ltd., 1989, p. 33.

2. Michael Batty, "Cities and Information Networks: The Evolution and Planning of New Computer and Communications Infrastructures," Paper presented at the Third International Workshop on Innovation, Technological Change, and Spatial Impacts, Cambridge, September, 1989.

3. Kenneth E. Corey, "The Role of Information Technology in the Planning and Development of Singapore," in Collapsing Space and Time: Geographical Aspects of Communication and Information, Unwin-Hyman, 1990.

4. Batty, p. 19.

5. Anthony Newstead, "Future Information Cities," Futures, June, 1989, p. 263.

6. Batty, p. 20.

7. Joanne Fox-Przeworski, "Information and Communication Technologies: Are Three Urban Policy Concerns?" Paper presented at the international symposium on "Communication and Spatial Organization," Telecommunications and Communications Commission, International Geographical Union, Geneva, November, 1989, p. 19.

 

Originally published in Portfolio, Spring 1991
Volume 4, Number 1
The Port Authority of NY and NJ. New York. 1991