The Information City in the Global Economy
Introduction
One of the paradoxes of contemporary society is that the abundance
of advanced telecommunications services, such as cellular telephony,
electronic funds transfer, and computer-based communications, has
not reduced the attractiveness of large cities as places to transfer,
process and exchange information. Indeed, cities such as New York,
London, Tokyo and Los Angeles have flourished as centres for international
finance and advanced business services at the same time that new technologies
designed to facilitate communication without face-to-face contact
have proliferated. How can we explain the growth of telecommunications
technologies designed to overcome traditional barriers to communication
with the emergence of major cities as hubs for communication - both
electronic and face-to-face? In order to fully understand the relationship
between information technology and urban development, we need to go
beyond the current areas of research on issues such as the location
of office activities, the internationalisation of business services,
employment and labour force skills, and regional development policy
- and look more closely at the way in which changes in the function
of cities are reflected in the development of different patterns of
physical development and transportation and communications infrastructure
(see, for example, Gillespie & Hepworth 1986; Goddard & Pye
1977; Gottmann 1983; Hepworth 1987b).
This chapter consists of three sections: a review of the way in which
technological changes influence the physical pattern of urban development;
a discussion of how information moves within and among cities, with
a specific emphasis on the location of such activities in the New
York City central business district; and a discussion of the new telecommunications
and transportation infrastructure in large metropolitan areas.
Telecommunications, Offices and Physical Development
Each era gives rise to a type of physical structure which symbolises
the principal function of the city. As Cowen (1961, p. 25) observes,
'the main symbols of the city, for several hundred years prior to
the mid-eighteenth century, were the castle, the cathedral, the palace,
and the market place'. With the rise of industrialisation, the factory
became the dominant urban symbol, and with it came the 'factory towns'
dominated by steel mills, textile plants and the employer-owned housing
built for industrial workers. The growth of business services at the
start of the twentieth century was the impetus for the skyscraper,
which Gottmann (1966) has called 'an expression of a social and intellectual
revolution characteristic of our era... the first skyscraper in Chicago
and some of the early ones in New York were built by insurance companies
- that is, by companies whose business is entirely bureaucratic. Their
work is all on paper and in transactions.'
The office building - initially designed to accommodate everyone
from the executive to the clerical worker - has been reshaped and
reconfigured with the advent of computers and advanced telecommunications.
The clerical worker is now equipped with a computer workstation linked
by telephone lines that allows the worker to access more information
and thus perform more tasks than could be done with a typewriter or
adding machine. In 1987, 'there were thirty million computer work
stations [in the United States], a number that is expected to double
by 1995 so that nine of ten white collar workers will be so equipped'
(Parker et al. 1989, p. 41). Computer terminals and related equipment
impose new demands for space and supporting infrastructure, and, with
the reduction in cost and size of information systems, there has been
a proliferation of printers, fax machines, and related equipment.
As Dowall and Salkin (1986) note, 'new technologies beget new machines
which must be housed'. The office, rather than diminishing in importance,
has become even more important as the hub for the flow of information
- by electronic means, on paper, and in-person. As a study by the
US Congress Office of Technology Assessment (1985, p. 7) states:
The office plays the same role for an organisation that the brain
plays in a living organism. It receives information flowing in from
all parts of the organisation (or organism) and from the external
environment, processes that information and sends back responses,
instructions, and commands through an extended nervous system-established
channels of communication.
Traditional categories of front-office and back-office are no longer
appropriate for classifying the activities that occur in the office
environment. Automation may not have improved worker productivity,
but it has altered the structure and scope of office functions. Computer-based
activities are no longer confined to routine activities - such as
check processing and claims settlements - but have been expanded to
encompass a vast array of functions including customer service, retail
shopping and equipment repair. The General Electric Company, for example,
uses an 800-phone system to respond to inquiries about appliances
and to provide on-line telephone assistance, prior to assigning personnel
to repair equipment.
The growth of computer-based office functions has created a demand
for a new generation of buildings designed for computer operations
and telecommunications-based activities. Huge floor areas with large
weight loads are needed to accommodate computers, raised floors and
ceilings are required for electrical and communications cables, and
increased energy capacity is required for operating and cooling office
equipment. Just as mass assembly manufacturing led to the decline
of the old industrial loft building and to the construction of single-storey,
horizontal factories, so has modem office technology led to the need
for new office buildings capable of meeting modem technological and
spatial conditions.
Duffy and Henney (1989, p. 33) have identified the key challenges
that information technology present for urban planners, developers
and architects: 'The more information is handled, stored and retrieved
electronically the more vital it is that buildings have the capacity
to accommodate information technology (IT). Buildings have become,
in a sense, an extension of the computer'. While several studies (e.g.
Daniels 1985; Thrift et al. 1987) have analysed how telecommunications
has affected the movement of office activities out of the central
city to the suburbs, it is also important to recognise how information
technology and the high value placed on face-to-face communication
has changed the physical pattern of urban development.
In New York City, the preference for newer and larger office buildings
- that provide prestige as well as a modem information infrastructure
- has fostered a vacancy rate in downtown Manhattan that is almost
40 per cent higher for older buildings than for new office buildings.
The migration of the Manhattan financial district from the narrow
caverns of Wall Street north to the World Financial Center on the
Hudson, and to large parcels on Water Street next to the East River,
reflects the demand for mega-structures that can be built on landfill
rather than on the narrow urban street-grid of the early twentieth
century. The stock market is no longer defined by a place - such as
Wall Street - but is what Duffy calls 'an aggregate of activities'
located in trading rooms linked to each other and to stock exchanges.
Similarly in London, the financial district - once defined by proximity
to the Bank of England - has been extended to encompass new sites
on the Docklands and over railroad land that can meet the spatial
and technological requirements of the financial services industry.
Instead of location', investment banks and securities companies want
buildings with large clear floors for trading, high floor-to-ceiling
heights to accommodate a raised floor, and high-performance mechanical,
electrical and telecommunications services. The ability of buildings
to meet these requirements now rivals location as the most important
factor. Only the Lloyd's Triangle and to a lesser extent the Baltic
Exchange provide a precise physical location for their markets. The
new, more fluid locational rules for banks are clearly shown by the
rapid take-up of space in Broadgate, which is partly in Hackney; in
London Bridge City, which is in Southwark; and in Salomon Brothers'
move to Victoria (Duffy & Henney 1989, p. 19). As technology has
accelerated, the movement of electronic information in, out, and through
the office building, the value placed on face-to-face interaction
and the specialised information conveyed through personal interaction
have also intensified. While routine office functions that do not
involve face-to-face transactions have been dispersed to suburban
settings in the United States, advanced business services dependent
on immediate access to specialised expertise have concentrated in
selected central cities. As Richard Meier (1961, p. 64) wrote more
than a quarter of a century ago, 'the need for face-to-face contact
offers perhaps the best explanation for the strong attraction retained
by the urban centre'. Moreover, the deregulation of financial markets
has led to the emergence of new, complex financial instruments that
require direct and reliable contact to produce and explain these new
financial instruments. Although the buyers of the new financial services
can be located anywhere on the globe, the sellers - the information
producers - are concentrated in a few major financial centres.
As Thomas Alien (1979, p. 42), in a study of engineers and organisations,
has pointed out, 'human beings are the most effective carriers of
information... and the best way to transfer information between organisations
or social systems is to physically transfer a human carrier'.
Thrift's (1987, p. 208) analysis of international financial centres
highlighted 'three interrelated reasons the organisations of commercial
capital tend to group together in these centres... to be near clients...
to be in close proximity to relevant markets... to tap into information
on markets and the operations of banking and industrial corporations
and the state rapidly and efficiently'. The principal function of
major world cities today is to provide access to information users
and providers engaged in the provision of advanced business services.
As a result, technology-intensive office buildings are being built
in high-cost urban centres - albeit in new locations - and advanced
business services are continuing to concentrate near each other. In
New York City, the movement of corporate headquarters to locations
in Connecticut, New Jersey, Westchester County and other parts of
the country has not stopped the migration into New York City from
other nations and other parts of the United States, of law firms,
advertising agencies and financial service firms that require access
to the high value and specialised information-based activities situated
in Manhattan.
Furthermore, Gordon Clark (in press) argues that the popularity of
mergers and leveraged buy-outs has reinforced the hegemony of financial
capitals where productive corporate assets can be converted into financial
assets. The decision to move the headquarters of RJR Nabisco from
Atlanta to New York City is based on the need to be in an 'arbitrage
centre' rather than in a traditional production centre. In essence,
the logic of centralised control and decentralised production (so
fundamental to textbook treatments of the geography of corporate management)
has been taken-over: centralised control in other centers is now necessary
for the efficient conversion of assets and decentralised production
networks are assets to be sold rather than managed.' The high value
that advanced business service firms place on proximity to clients
and to each other is shown in Figures 1 to 5, which illustrate the
clustering that occurs with regard to the location of foreign banks,
advertising agencies and law firms in Manhattan. Law firms, which
were initially situated near corporate headquarters or the downtown
courts, are located near each other and their major clients in mid-town.
Advertising agencies maintain their traditional concentration on Manhattan's
east side, and foreign banks are located in distinct nodes based on
nation of origin.
The Movement of Information Between Cities
If information is the key product of cities, how does this information
get transported from one place to another and how does information
flow affect the relationships between cities? Clearly, individuals
remain the principal means for transporting information - whether
in the office, from seller to buyer, or from city to city. In addition,
a plethora of telecommunications systems supplements the human being
and provides virtually instantaneously, flows of information designed
to enhance office productivity. Timeliness is crucial; the US Office
of Technology Assessment (1985, p. 307) observes: Information is ephemeral.
It must be available when and where it is needed; too late, it may
be useless'.
Measuring the movement of information thus must take into account
the flow of people and the flow of information. Government agencies
and transportation researchers have developed an elaborate set of
measures for the movement of cargo and people, but virtually no data
exist on telephone traffic between cities. A recent study (Staple
& Mullins 1989) highlighted the need for telecommunication traffic
statistics at the national level in order to provide a better understanding
of national and international economic activity. At the urban level,
Fred's analysis of the movement of information in colonial America
provides a model for researchers of inter-urban information activity
patterns in the twentieth century.
Urban researchers have made preliminary attempts to develop new ways
to measure the flow of information between and among cities. However,
the deregulation of telecommunications in some nations and the privatisation
of telecommunications in other nations, limits our capacity to develop
systematic measures of voice and data traffic since there is no longer
a single telecommunications provider and competition creates an incentive
to keep market data private. New measures of information systems and
traffic are essential if we are to improve our understanding of urban
activity patterns.
One study (Moss 1988) used data from DHL private overseas mail to
examine the flow of information between Tokyo and US cities and also
identified the largest origination points for DHL private mail, revealing
that London, New York and Tokyo were the leading sources of DHL overseas
mail. A recent study by Wheeler and Mitchelson (1989a) relies on the
data drawn from Federal Express Corporation's overnight letters and
packages sent to analyse the flow of information among forty-eight
metropolitan areas in the United States.
Wheeler and Mitchelson's analysis of Federal Express data found that
New York generated 14 per cent of all traffic among the forty-eight
metropolitan areas, that the top five centres accounted for 40 per
cent of all the information flows, and that the top fifteen centres
accounted for 70 per cent of all the information flows. Furthermore,
the New York to Los Angeles city-pair was the largest traffic route,
and New York dominated all but one metropolitan area in its generation
of traffic. The authors (1989b) have also conducted a detailed analysis
of Atlanta's role as an information centre and propose that 'information
genesis, hierarchy of control, and spatial independence are useful
conceptual alternatives for understanding information flows among
metropolitan centres'.
Information Activities and the Telecommunications Infrastructure
Telecommunications technologies make it possible for the specialised
information-based activities located within Manhattan and other central
city office centres to be easily converted into global services and
products. New telecommunications services are being developed according
to market criteria and are reinforcing the comparative advantage of
cities which are major information producers. Local and metropolitan
fibre-optic systems - designed to serve major business centres - are
being developed by the regional telephone companies and new competitors
in the United States. Firms situated in the major business districts
will have the benefit of competition in selecting fibre-optic local
carriers, while in rural areas copper cable is unlikely to be replaced
by fibre optics. A study by the US Department of Commerce, National
Telecommunications and Information Administration (1988, p. 261) noted
that, 'since the high-capacity feature of optical fibre, offers little
advantage where traffic and future growth are low and the remote sites
are dispersed, some companies (e.g. Pacific Bell) have chosen .not
to abandon their substantial capital investment in copper-based systems'.
There is also a fundamental question about the future architecture
of telecommunications networks in which Peter Huber, author of The
Geodesic Network: 1987 Report on Competition in the Telephone Industry,
argues that reduction in switching costs will lead to a decentralised
network, while others (e.g. Flamm 1989, p. 61) believe that 'transmission
costs have dropped much faster than switching costs and, with the
advent of fibre optics, have continued to do so'.
The development of local fibre systems that bypass public networks
and link large users to national and international telecommunications
networks, demonstrates the way in which large metropolitan areas -
with multiple fibre systems - become more attractive to communications-intensive
industries. In the United States, local bypass is 'a $400 million
business growing at 22 per cent a year. Twelve cities from New York
to Orlando and Chicago to Boston are wired with 774 miles of fibre
and another three cities and 215 miles are planned' (Siler 1989).
New firms have been created, such as Teleport Communications and Metropolitan
Fiber, and hence provide large firms located in major downtown areas
with low-cost access to long-distance networks. This pattern of competition
in telecommunications resembles the initial railroad era when 'the
competitive points, enjoying lower rates than rural towns on a single
line, absorbed all the growth of a region' (Weber 1969, p. 199).
Conclusion
This paper has sought to identify the way in which information-based
activities are influencing the physical pattern of development in
cities, the movement of information between cities, and the development
of telecommunications systems in metropolitan regions. The evidence
presented here suggests that there is a synergistic effect in which
the rise of advanced business services generates a demand for technologically-sophisticated
buildings and a high value on those urban settings in which face-to-face
transactions can occur. In addition, the deregulation of telecommunications
has reinforced the comparative advantage that large information hubs
have in gaining access to the latest and lowest-cost telecommunications
services. Further research on the relationship of information flows
to cities is essential to understand how urban centres can form economic
development policies that build on information-based industries.
Originally published in Cities
of the 21st Century
Brotchie, Batty, Hall, Newson, eds.
Halsted Press. New York. 1991