The ARPANET architecture called for specialized network communication computers
called Interface Message Processors (IMPs). Each IMP was to connect from
1-4 hosts, and be linked to from 3-5 other IMPs. The original message format
specification had only a 6-bit address, limiting the network to 64 IMPs.
IMPs performed such communication tasks as routing, error checking, flow
control, and network management. The hosts were heterogeneous, time-sharing
systems, isolated from their IMPs by well-defined electrical and software
interfaces. TIPs, terminal IMPs, were later designed to connect terminals
to the net without the need for an intermediate host. (A TIP was a mini-host
plus an IMP). 

In 1974 the NSF Computer Science and Engineering Advisory Panel recommended
"the NSF provide to qualified computing researchers easy access to
an international computer network. This access would create a frontier
environment that would offer enhanced communication, collaboration, and
the sharing of resources among geographically separated or isolated researchers."
[6]
NSF funded THEORYNET, a central email computer at the University of Wisconsin,
where roughly 100 theoretical computer scientists dialed in using modems
or X.25 and exchanged email. There were scattered UUCP efforts, but relatively
few computer scientists were networked. THEORYNET organizer Larry Landweber
convened an NSF sponsored meeting in 1979 to plan connectivity for all
compute! scientists. The result, after two major review and revision cycles,
was the establishment of CSNET in 1981 [6]. CSNET was seeded with a $5
million grant from NSF, which also managed the project for two years, before
turning it over to BBN. It provided email service for small institutions,
TCP/IP connectivity over X.25 or the ARPANET for larger institutions, and
name server. The mail software was provided by the University of Delaware,
and TCP/IP, which had become a Department of Defense standard came from
ARPA.
CSNET was arguably the first ISP. Their charter called for financial independence
after five years, and member institutions paid either $30,000 (industrial),
$10,000 (government or nonprofit) or $5,000 (university) per year. This
was later reduced for small computer science departments. CSNET was self-sufficient
under BBN, and, by 1985, had over 165 member institutions' (mostly academic)
in the U.S. and abroad. CSNET, along with Bitnet, was eventually transferred
to the Corporation for Research and Education Networking.
By the mid-1980s, the value of networks was abundantly clear, and many
discipline-specific, state and regional, corporate, and campus networks
were operating [15, 23]. It was time to link these efforts, and move networking
from computer science to the entire university and research community,
then to the commercial sector. Again, NSF provided seed funding and leadership
in creating NSFNET [8].