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The Internet and Business

February 10, 2015

Provided byBBVA

Early in the 1990’s, the Internet became the predominant mode of data transfer and business harbored a seemingly insatiable appetite for Internet systems and services. As services and applications proliferated, finance, manufacturing and communication sectors made ever-increasing use of the Internet, so that information processing and communications outlays by U.S. companies comprised the greatest single portion of corporate capital investment overall.

In the 1970s and 1980s, big banks devoted an ever-increasing share of their operating expenses to data processing and telecommunications. In 2011, at about $50 billion, overall investment in ICTs by U.S. financial institutions including insurance companies was the second largest of any sector, and accounted for some 17 % of total U.S. corporate ICT investment.

Big manufacturing industries were early adopters of computers, spending nearly half of what all American industries did on this technology in the 1950s and, even two decades later, nearly a quarter. Computer-aided design and manufacturing, robotics and data networks were expressions of this impulse. As in other sectors, networking followed an evolutionary trajectory. In 2011, U.S. manufacturer’s investments in information processing and communications equipment were the third largest of any sector: $34.7 billion, or around 12 % of the total.

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  • • The Internet and Business

The information industry accounts for the largest single share of overall U.S. investment in ICTs —$80 billion in 2011, or about 28 % of the total. In an ongoing transition whose character and limits remain open-ended, suppliers advanced three interrelated programs of development.

Cloud computing —distribution of content and software as a service from centralized data centers— was the first. A second initiative coheres around the Internet of Things —arrays of sensors are being embedded in roads, industrial plants and equipment, and consumer goods— and all of these appliances are being assigned unique Internet addresses to enable machine-to-machine communication. The volume of data produced as an adjunct of these different types of machine-to-machine and human-machine interaction increased, and became omnipresent. To capture and manipulate it, a third initiative took place: Big Data, which centered on the analysis and feedback of data into products and services.

The Internet industry’s colossal public relations machine popularized these initiatives. Prospectively more important, however, were the online product lines that were being readied for Internet distribution: in education, cultural heritage, biotechnology, and medicine. The Internet’s function as a critical business infrastructure was thus matched or even surpassed by its importance as a site of commodification, that is, as a site of new industries capable of generating profit growth.

And, across the entire landscape of Internet systems and services, U.S. companies built up such a comparative advantage that the digital capitalism itself became a lopsided construction. A 2013 report underlined that the U.S. captures more than 30 % of global Internet revenues and more than 40 % of net income. Furthermore, and despite years of rhetoric about the virtues of market freedom, historically the U.S. government has been the most important structuring force behind the Internet. Not only the U.S. military contracts underwrite the research and development on which the Internet’s underlying technology is based and not only the Government supplies an unrivaled market for Internet equipment and services. The U.S. Government also helped establish a U.S.-centric Internet.

 “When we discuss the global free flow of information over the Internet, there are potentially trillions of dollars of U.S. economic activity at stake”, stated the Computer & Communications Industry Association. However, transnational businesses are increasingly demanding policies to ensure unrestricted proprietary data flows because the key element of the economics of cloud computing is the unrestrained ability to move data and workloads.

Following the Snowden’s disclosures about NSA, the furor erupted over U.S. Government surveillance programs, but the underlying issue was actually corporate and state power over the extraterritorial Internet. The long-standing international conflict over the Internet’s skewed structure in turn became freighted with new contingency. In an insurrectionary world, the question of how the Internet might be restructured —and with what ramifications for business— was not only increasingly palpable but also vital.

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