Hostname: page-component-cd9895bd7-7cvxr Total loading time: 0 Render date: 2024-12-23T16:39:36.455Z Has data issue: false hasContentIssue false
  • English
  • Français

The Business of Internetworking: Standards, Start-Ups, and Network Effects

Published online by Cambridge University Press:  21 March 2022

Andrew L. Russell ,
James L. Pelkey  and
Loring Robbins
Get access Rights & Permissions [Opens in a new window]

Abstract

Historical accounts of the Internet's origins tend to emphasize U.S. government investment and university-based researchers. In contrast, this article introduces actors who have been overlooked: the entrepreneurs and private firms that developed standards, evaluated competing standards, educated consumers about the value of new products, and built products to sell. Start-up companies such as 3Com and Cisco Systems succeeded because they met rapidly rising demand from users, particularly those in large organizations, who were connecting computers into networks and networks into internetworks. We consider a relatively brief yet dynamic period, from the late 1960s to the late 1980s, when regulators attacked incumbent American firms, entrepreneurs flourished in new market niches, and engineers set industry standards for networking and internetworking. As a consequence, their combined efforts forged new processes and institutions for so-called open standards that, in turn, created the conditions favorable for the “network effects” that sustained the formative years of the digital economy.

Keywords

InternetStandardsTelecommunicationsRegulationDataNetworks
Type
Research Article
Information
Business History Review , Volume 96 , Issue 1: Standards and the Global Economy , Spring 2022 , pp. 109 - 144
Copyright
Copyright © The President and Fellows of Harvard College 2022

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

1 On the history of Internet standards, see Abbate, Janet, Inventing the Internet (Cambridge, MA, 1999)Google Scholar; Abbate, “Government, Business, and the Making of the Internet,” Business History Review 75, no. 1 (2001): 147–76; Burg, Urs von, The Triumph of Ethernet (Stanford, 2002)CrossRefGoogle Scholar; Campbell-Kelly, Martin and Garcia-Swartz, Daniel D., “The History of the Internet: The Missing Narratives,” Journal of Information Technology 28, no. 1 (2013): 18–33CrossRefGoogle Scholar; Russell, Andrew L., Open Standards and the Digital Age (Cambridge, U.K., 2014)CrossRefGoogle Scholar; DeNardis, Laura, Protocol Politics (Cambridge, MA, 2014)Google Scholar; Greenstein, Shane, How the Internet Became Commercial (Princeton, 2015)CrossRefGoogle Scholar; Yates, JoAnne and Murphy, Craig N., Engineering Rules: Global Standard Setting since 1880 (Baltimore, 2019)CrossRefGoogle Scholar.

2 A leading text describes network effects as follows: “other things being equal, it's better to be connected to a bigger network than to a smaller one.” See Shapiro, Carl and Varian, Hal R., Information Rules: A Strategic Guide to the Network Economy (Boston, 1998), 173–226Google Scholar. Robert Metcalfe, the inventor of Ethernet who plays a prominent role in several parts of our story, also invented “Metcalfe's law,” the idea that the value of a network is proportional to the square of the number of connected users. See Metcalfe, Robert, “Metcalfe's Law after 40 Years of Ethernet,” Computer 46, no. 12 (2013): 26–31CrossRefGoogle Scholar; and Rohlfs, Jeffrey, “A Theory of Interdependent Demand for a Communications Service,” Bell Journal of Economics and Management Science 5, no. 1 (1974): 16–37Google Scholar.

3 James L. Pelkey, The History of Computer Communications http://www.historyofcomputercommunications.info/. The transcribed interviews are now archived as the James L. Pelkey Collection: History of Computer Communications, cat. no. 102746648, Computer History Museum, Mountain View, CA (hereafter, CHM), and available online at https://www.computerhistory.org/collections/catalog/102746648. Market data sources include Dataquest, Datapro, Yankee Group, Frost & Sullivan, Alex. Brown & Sons, Montgomery Securities, financials, corporate annual and research reports, trade publications (Business Week, Communications Week, Computerworld, Datamation, Data Communications, Electronic News, IEEE Spectrum, and many others), ephemera from trade shows and conferences, and scientific and scholarly publications. Much of the data is publicly available at Pelkey's website. See “Appendix A: Market Research” at https://historyofcomputercommunications.info/section/a.1/product-revenues-1970-1988/. Additional data for the data communications, networking, and internetworking market structures is found under “Market Sector” at https://historyofcomputercommunications.info/explore.html.

4 Langlois, Richard N. and Robertson, Paul L., Firms, Markets, and Economic Change (London, 1995)CrossRefGoogle Scholar.

5 The name “Autofact” captured its sponsors’ dedication to the vision of automated factories; “Interop” pursued a vision of interoperability in computer networks.

6 Andrew L. Russell, “‘Rough Consensus and Running Code’ and the Internet-OSI Standards War,” IEEE Annals of the History of Computing 28 (2006): 48–61.

7 Our study ends in 1988 because that is when Pelkey conducted his interviews and stopped his active collection of market data.

8 Brad Reese, “Cisco's Storied Past as the Most Valuable Company on Earth,” Network World, 18 Feb. 2010, https://www.networkworld.com/article/2229885/cisco-s-storied-past-as-the-most-valuable-company-on-earth.html; “Cisco Ascends to Most Valuable Company,” CNET.com, 2 Jan. 2002, https://www.cnet.com/news/cisco-ascends-to-most-valuable-company/.

9 Yates, JoAnne, Structuring the Information Age: Life Insurance and Technology in the Twentieth Century (Baltimore, 2005)CrossRefGoogle Scholar.

10 Cisco, Company Prospectus and Registration Statement for Initial Public Offering.

11 Anderson, Philip and Tushman, Michael L., “Technological Discontinuities and Dominant Designs: A Cyclical Model of Technological Change,” Administrative Science Quarterly 35, no. 4 (1990): 604–33CrossRefGoogle Scholar. “A dominant design is a single architecture that establishes dominance in a product class. Once a dominant design emerges, future technological progress consists of incremental improvements elaborating the standard and the technological regime becomes more orderly as one design becomes its standard expression” (p. 613).

12 Galambos, Louis and Amatori, Franco, “The Entrepreneurial Multiplier Effect,” Enterprise & Society 17 no. 4 (2016): 763–808CrossRefGoogle Scholar; Gawer, Annabelle and Cusumano, Michael A., “Industry Platforms and Ecosystem Innovation,” Journal of Product Innovation Management 31, no. 3 (2014): 417–33CrossRefGoogle Scholar. See, more generally, Chandler, Alfred D. and Cortada, James, eds., A Nation Transformed by Information (Oxford, 2000)Google Scholar; and Aspray, William and Ceruzzi, Paul E., eds., The Internet and American Business (Cambridge, MA, 2008)CrossRefGoogle Scholar.

13 Russell, Open Standards, chap. 5.

14 Coll, Steve, The Deal of the Century: The Breakup of AT&T (New York, 1986), 104–11Google Scholar; Henck, Fred W. and Strassburg, Bernard, A Slippery Slope: The Long Road to the Breakup of AT&T (New York, 1988), 126–42Google Scholar; Peter Temin with Galambos, Louis, The Fall of the Bell System: A Study in Prices and Politics (New York, 1987), 41–47, 63–65Google Scholar.

15 Jasper L. Tran, “The Myth of Hush-A-Phone v. United States,” IEEE Annals of the History of Computing 41 (2019): 6–19; Usselman, Steven W., “Public Policies, Private Platforms: Antitrust and American Computing,” in Information Technology Policy: An International History, ed. Coopey, Richard (Oxford, 2004), 97–120CrossRefGoogle Scholar; Usselman, “Unbundling IBM: Antitrust and Incentives to Innovation in American Computing,” in The Challenge of Remaining Innovative: Insights from Twentieth-Century American Business, ed. Sally H. Clarke, Naomi R. Lamoreaux, and Steven W. Usselman (Stanford, 2009), 249–80.

16 Mark Smith, oral history interview by James L. Pelkey, 28 Nov. 1988, Huntsville, AL, CHM, https://archive.computerhistory.org/resources/access/text/2017/10/102738572-05-01-acc.pdf.

17 Art Carr, interview by James L. Pelkey, 6 Apr. 1988, Newton, MA, CHM, https://archive.computerhistory.org/resources/access/text/2015/10/102737982-05-01-acc.pdf; Jerry L. Holsinger, oral history interview by James L. Pelkey, 6 Apr. 1988, Westborough, MA, CHM, https://archive.computerhistory.org/resources/access/text/2016/04/102738129-05-01-acc.pdf.

18 Bygrave, William D. and Timmons, Jeffry A., Venture Capital at the Crossroads (Boston, 1992), 22Google Scholar; more generally, see Nichols, Tom, VC: An American History (Cambridge, MA, 2019)CrossRefGoogle Scholar.

19 G. David Forney Jr., Robert G. Gallagher, Gordon R. Lang, Fred M. Longstaff, and Shahid U. Qureshi, “Efficient Modulation for Band-Limited Channels,” IEEE Journal on Selected Areas in Communications 2, no. 5 (1984): 632–33.

20 James L. Pelkey, “Codex Selected Balance Sheet,” available from https://historyofcomputercommunications.info/section/a.19/data-communications-sector-income-statements/.

21 Schmidt, Susanne K. and Werle, Raymund, Coordinating Technology: Studies in the International Standardization of Telecommunications (Cambridge, MA, 1988)Google Scholar.

22 Carr interview, CHM.

23 John Pugh, oral history interview by James L. Pelkey, 25 Feb. 1988, Canton, MA, CHM, https://archive.computerhistory.org/resources/access/text/2016/03/102738098-05-01-acc.pdf.

24 “Data Com, Distributed EDP Push Modems toward $200 M Year,” Electronic News, 14 Mar. 1977, 1.

25 For a useful corollary in facsimile technology, see Coopersmith, Jonathan, Faxed: The Rise and Fall of the Fax Machine (Baltimore, 2016)Google Scholar.

26 Von Burg, Triumph of Ethernet.

27 Abbate, Inventing the Internet; Waldrop, M. Mitchell, The Dream Machine: J.C.R. Licklider and the Revolution That Made Computing Personal (New York, 2001)Google Scholar.

28 Von Burg, Triumph of Ethernet, 100.

29 David Liddle, oral history interview by James L. Pelkey, 11 Oct. 1988, Mountain View, CA, CHM, https://archive.computerhistory.org/resources/access/text/2013/05/102746649-05-01-acc.pdf.

30 Phil Kaufmann of Intel recalled his perspective on Intel's desire to use standards to find large markets for their integrated circuits: “I had also been heavily involved in pushing forward on the IEEE floating point standard. It was clear that the only way to make floating-point work was to have a standard, because everybody was doing it differently, and if you wanted to sell a lot of the same chip, you had to have a standard. . . . The PCs were taking off, and local area networks of some kind were going to be pervasive.” Kaufman, oral history interview by James L. Pelkey, 17 June 1988, Campbell, CA, CHM, https://archive.computerhistory.org/resources/access/text/2013/05/102746652-05-01-acc.pdf.

31 Maris Graube, oral history interview by James L. Pelkey, 12 July 1988, Portland, OR, CHM, https://archive.computerhistory.org/resources/access/text/2020/04/102792042-05-01-acc.pdf.

32 Von Burg, Triumph of Ethernet, chap. 4. See also IEEE Computer Society History Committee, “Materials Collected for Unfinished Project about 802 Standard,” accessed 3 Nov. 2021, https://history.computer.org/pubs/802/802.html.

33 Paul Severino, oral history interview by James L. Pelkey, 16 Mar. 1988, Cambridge, MA, CHM, https://archive.computerhistory.org/resources/access/text/2017/11/102738590-05-01-acc.pdf.

34 Charles (Charlie) Bass, oral history interview by James L. Pelkey, 16 Aug. 1994, Palo Alto, CA, CHM, https://archive.computerhistory.org/resources/access/text/2018/03/102738753-05-01-acc.pdf.

35 Bass interview, CHM; Ralph Ungermann, oral history interview by James L. Pelkey, 20 July 1988, Mountain View, CA, CHM, https://archive.computerhistory.org/resources/access/text/2018/03/102738765-05-01-acc.pdf; James (Jim) Jordan, oral history interview by Pelkey, 19 July 1988, Hillsdale, CA, CHM, https://archive.computerhistory.org/resources/access/text/2018/04/102740315-05-01-acc.pdf.

36 Bass interview, CHM.

37 Smith, Douglas K. and Alexander, Robert C., Fumbling the Future: How Xerox Invented, Then Ignored, the First Personal Computer (New York, 1988)Google Scholar; Hiltzik, Michael A., Dealers of Lightning: Xerox PARC and the Dawn of the Computer Age (New York, 2000)Google Scholar; Bardini, Thierry, Bootstrapping: Douglas Engelbart, Coevolution, and the Origins of Personal Computing (Stanford, 2000)CrossRefGoogle Scholar.

38 Grove, Andrew S., Only the Paranoid Survive: How to Exploit the Crisis Points That Challenge Every Company (New York, 1996)Google Scholar.

39 Branscomb, Lewis and Kahin, Brian, “Standards Processes and Objectives for the National Information Infrastructure,” in Standards Policy for Information Infrastructure, ed. Kahin, Brian and Abbate, Janet (Cambridge, MA, 1995), 11–12Google Scholar. See also Michelle K. Lee and Mavis K. Lee, “High Technology Consortia: A Panacea for America's Competitiveness Problems?,” Berkeley Technology Law Journal 6 (1992): 335–72; Peter Grindley, David C. Mowery, and Brian Silverman, “SEMATECH and Collaborative Research: Lessons in the Design of High-Technology Consortia,” Journal of Policy Analysis and Management 13 (1994): 723–58; Andrew L. Russell, “Dot-Org Entrepreneurship: Weaving a Web of Trust,” Enterprises et Histoire, no. 51 (June 2008): 44–56.

40 IRIA is an acronym for Institut de recherche en informatique et automatique (Institute for Research in Computer Science and Control).

41 Andrew L. Russell and Valérie Schafer, “In the Shadow of ARPANET and Internet: Louis Pouzin and the Cyclades Network in the 1970s,” Technology & Culture 55 (2014): 880–907.

42 See Schafer, Valérie, La France en Réseaux: La Rencontre des Télécommunications et de l'informatique (Paris, 2012)Google Scholar; and Russell and Schafer, “In the Shadow.”

43 See, for example, Russell and Schafer, “In the Shadow”; and Russell, Open Standards.

44 John Day, oral history interview by James L. Pelkey, 11 July 1988, Canton, MA, CHM, https://archive.computerhistory.org/resources/access/text/2017/11/102738592-05-01-acc.pdf.

45 On ARPANET management and development, see Bradley Fidler and Andrew L. Russell, “Financial and Administrative Infrastructure for the Early Internet: Network Maintenance at the Defense Information Systems Agency,” Technology and Culture 59, no. 4 (2018): 899–924.

46 Vinton G. Cerf, “Protocols for Interconnected Packet Networks,” Computer Communication Review 18 (Oct. 1980): 10–11; Jon Postel, ed., “DOD Standard Internet Protocol,” 1980, RFC 760, accessed 10 November 2021, http://tools.ietf.org/rfc/rfc760; For a critical appraisal of the TCP/IP split, see Fred Goldstein and John Day, “Moving Beyond TCP/IP,” Apr. 2010, http://www.ionary.com/PSOC-MovingBeyondTCP.pdf, accessed 10 November, 2021.

47 Russell, Open Standards.

48 Standards insiders consistently worry about the various ways that companies can “capture” standards bodies and steer outcomes of standards processes toward their own proprietary ends. See, for example, Paul Kunert, “Open letter to Internet Engineering Task Force: Back Off Cisco, Not All Members Want to ‘Play to Your Tune,’” The Register, 17 Apr. 2020, https://www.theregister.com/2020/04/17/open_letter_to_internet_engineering/.

49 Glenis More, “Manufacturing Automation Protocol: Mapping the Factory of the Future,” Electronics & Power, Apr. 1986, 269–72; Hollingum, Jack, The MAP Report: Manufacturing Automation Protocol (London, 1986)Google Scholar; Rizzardi, Victor A., ed., Understanding MAP: Manufacturing Automation Protocol (Dearborn, MI, 1988)Google Scholar.

50 Bunnell, David and Brate, Adam, Making the Cisco Connection: The Story Behind the Real Internet Superpower (New York, 2000)Google Scholar.

51 Sales numbers reveal their changing fortunes: 3Com had sales of $723 million in 1993, compared with $649 million for Cisco. However, by 1996, Cisco was almost twice the size of 3Com ($4.1 billion versus $2.3 billion), and by 2001, Cisco was more than nine times bigger ($22.3 billion versus $2.4 billion). By 2004, Cisco was roughly twenty times bigger: $18.9 billion versus $932 million. See Joel Shore, “The 3Com Saga,” Network World, 12 Apr. 2004, https://www.networkworld.com/article/2332073/the-3com-saga.html.

52 Ungermann interview, CHM.

53 Daniel Lynch, oral history interview with James L. Pelkey, 16 Feb. 1988, Cupertino, CA, CHM, https://archive.computerhistory.org/resources/access/text/2016/02/102717120-05-01-acc.pdf.

54 Lynch interview, CHM.

55 Ibid.

56 Susan Kerr, “Stuck in Square One,” Datamation, 1 Mar. 1987; Paulina Borsook, “TCP/IP and Interoperability: Separating Myth from Reality,” Data Communications, Aug. 1987, 60–61.

57 Borsook, “TCP/IP.”

58 Lynch interview, CHM; Connexions, premiere issue, Spring 1987.

59 “The Incredible Shrinking Mini-MAP,” Data Communications, Nov. 1988, 50; Paul R. Strauss, “The Standards Deluge: A Sound Foundation or a Tower of Babel?,” Data Communications, Sept. 1988, 150–64.

60 “Show Network Joins 54 Vendors, Remote Links,” InfoWorld, 10 Oct. 1988, 18.

61 “The Age of Standards: Promises, Products, and Problems,” Data Communications, Sept. 1988, 13.

62 Bill Carrico and Judith Estrin, oral history interview with James L. Pelkey, 23 June 198, Los Altos, CA, CHM, https://archive.computerhistory.org/resources/access/text/2018/03/102740285-05-01-acc.pdf.

63 Brian Carpenter, “Is OSI Too Late?,” Computer Networks and ISDN Systems 17 (1989): 284–86.

64 See “A Brief History of the Internet Advisory / Activities / Architecture Board,” Internet Architecture Board, accessed 3 Nov. 2021, https://www.iab.org/about/history; and Russell, Open Standards.

65 Similar dynamics were playing out at more or less the same time, in a distinct industry of wireless telecommunications. See Funk, Jeffrey L., Global Competition between and within Standards: The Case of Mobile Phones (London, 2001)Google Scholar.

66 Mazzucato, Mariana, The Entrepreneurial State: Debunking Public vs. Private Sector Myths (London, 2013)Google Scholar; Jakobs, Kai, “Why Then Did the X. 400 E-Mail Standard Fail? Reasons and Lessons to Be Learned,” Journal of Information Technology 28 (2013): 63–73CrossRefGoogle Scholar.

67 Donald C. Latham quoted in Jon Postel, “A DoD Statement on the NRC Report,” May 1985, RFC 945, https://tools.ietf.org/html/rfc945; “No ISO Protocol Yet for Defense,” Data Communications, Apr. 1985, 15.

68 “OSI Heading for Full Bloom,” Data Communications, Nov. 1985, 16.

69 See Yates and Murphy, “Essay on Primary Sources,” in Engineering Rules, 339.