Electric Place: The Economics and Politics of a Local Internet

by john fraim

The Internet's original "home" was in local communities like Berkeley, Palo Alto, and Westwood Village. Yet since leaving "home" a number of years ago to seek fame and fortune in the big world of cyberspace, it's been difficult for the Internet to return home to its local roots.

Even to casual observers, it is apparent that the focus of Internet technology has been in cyberspace rather than cyberplace. The result is that the local Internet has been left to non-profit "grass roots" concerns funded by foundations fostering "feel good" community services.

With the current failure of the Internet in cyberspace, it might be a good time for it to consider a return "home" to local communities.

One of the main reasons cyberspace was chosen over local place was the existence of the belief in its vast, seemingly boundless market. But this market proved to be based mostly on ad click-throughs and banner advertising. When the click-through model proved a failure much of the cyberspace Internet became a failure also.

Yet some Internet companies have had great success in cyberspace. In general, these were the sites based on transactions other than the redirection of Web traffic via click-throughs. Sites such as eBay with its auctions. Or Napster with its peer-to-peer exchanges. Or Amazon with its collaborative filtering.

Now, in this period of high-tech slowdown and reassessment, it is a good time for the Internet to reassess its focus on cyberspace and consider application of its most effective cyberspace technologies to local communities. The payoff could be substantial.

In focusing on local communities, Internet entrepreneurs would be joining a growing trend to return to local concerns. They would be going against those buzz words "global economy" which dominated business thought through much of the '90s. This trend toward local concerns is embodied in a few major movements. One is the New Urbanism movement. The other is the connected or smart communities movement.

New Urbanism is directed by architects and urban planners with a purpose of making suburbs and cities more livable mainly through lessening the impact of cars. Connected communities relate to the Internet and are led by communities that have made conscious efforts to become connected to the Internet. Both movements could be termed social movements which attempt the creation of what Harvard's Robert Putnam terms "social capital" in local communities.

Social capital means greater social connection between residents of local communities. Both the New Urbanism and connected communities movement argue that local communities have become homogenized with the area outside of them by "importing" into them such things as national franchises, chains and national news and media. By establishing such "home grown" things as stores, news and architecture, the two movements argue a community can regain its sense of unique place.

Of course the argument is an important one. Especially so since the tragedy of Columbine and the large part the homogenized suburbs of Denver were imputed to play in the tragedy. Yet it is still a social argument and one that has not attracted the attention of the Internet and its new business entrepreneurs.

Might there be a particular economics for a local Internet? Might this economics be far beyond the ad click-through and ticketing functions of present local Internet sites like Sidewalk?

In considering the possibility for a new economics of local cyberplace, it is informative to consider an analogy between local communities and global nations and the import/export ratios for each of them.

Once, nations and communities were relatively self-sufficient and needed to import few natural resources into them. However, with industrialization and its concomitant specialization, communities and nations developed the need to import more outside resources.

Today, all communities and nations need to import a certain percentage of their resources. But economically healthy communities and nations need to import less than unhealthy ones. At the same time, economically healthy communities and nations should show greater export of local products and services than economically unhealthy communities and nations.

The challenge for local Web sites is to center around this "big picture" import and export question. However, too often in the past, local sites have become little more than local vehicles for advertising brochure-ware or failed social communities which float around like ghost ships in cyberspace.

To decrease imports and increase exports, local Web sites need to be based not on the past one-way broadcasting concepts of traditional advertising but rather on two-way communication. Think of the Napster, eBay and Amazon technology redirected toward local communities.

This is somewhat easier said than done. Especially in a time when the major economic models of the Internet are based on one-way streaming of content rather than two-way interaction. Today is much different from the early years when the Internet was both "server" and "client."

Now, the balance continues to move toward "client" rather than "server." This of course is because "client" is far more valuable to leading Internet and media companies (like AOL/Times Warner) than "server." In fact, there is no business model for "server" with major media companies because a "server" is, in effect, a broadcaster. In effect, a "server" is a broadcasting competitor to them. This is one of the reasons that "receiving" bandwidth for "clients" is far greater than the "sending" bandwidth for "servers."

The connected community movement is being implemented in many communities around the world. One of its major tools in this implementation is a matrix type of chart that accesses a community's connectivity measured by installed technologies such as high-speed modems and DSL.

However, the connectivity being measured by the matrix is connectivity of a local community to the cyberspace of the Internet. The real metric that needs to be measured (as well as achieved) is the amount of local Internet traffic in a community. In effect, cyberplace traffic needs to be measured rather than cyberspace traffic. Connectivity is one of the first steps to achieving cyberplace traffic but connectivity alone does not ensure that it will be used for local rather than cyberspace communication.

Increasing local rather than cyberspace traffic is one of the first steps to decreasing imports of resources and increasing exports of products and services. Another key step is in seeing that local traffic creates economic value rather than degenerates into a new economy version of a 24/7 party line full of little more than self-serving promotional chat. In other words, local traffic needs to engage in activities such as auctions, exchanges, trades and sales transactions. Again, local Internet technology needs to learn to utilize leading cyberspace Internet technology.

What is good for the local economy might be good for an emerging new form of electric democracy. Marshall McLuhan once observed that the living room was the new voting booth. With this observation he hinted at a new form of democracy where leading entertainment and consumer brands are the real leaders rather than political leaders. After all, they are voted on each day rather than every two or four years.

In the same way, an entire local community might be likened to one great living room voting electronically thousands of times each day. Leading local events, products, services, places, people, and Web sites gain ascendance or descent based on these electronic votes. And this local popularity might be automatically ranked by another one of those successes from cyberspace, the self-organizing site similar to Plastic.com.

>From all of this, there is the chance for greater electronic interaction leading to greater human interaction and social capital. There is the chance for the production of more products to export. There is also the possibility for the importation of fewer resources. And finally, there is the possibility for a new type of local democracy.

Copyright © 2001 John Fraim. All Rights Reserved.