IoT Now Magazine June-July 2017 Smart Cities

ANALYST REPORT

SMART CITIES Will clever networks and cool apps make the concept a reality?

IN ASSOCIATION WITH:

ANALYST REPORT

The author, Tom Rebbeck, leads Analysys Mason’s Enterprise and IoT research practice

Motives and challenges for smart city projects In the 1969 heist movie, The Italian Job, the team replaces the tapes for the computer used to manage the city of Turin’s traffic lights. In the ensuing traffic chaos, they are able to steal the gold and make their getaway. While the technology may have moved on, with tapes replaced by the cloud, the idea of technology being used to improve a city and even the applications (a form of traffic management in The Italian Job) remain the same

Each smart city project will have different goals but all hope to use technology to improve the city, by increasing productivity, reducing pollution and enhancing life for citizens.

Individual projects may vary depending on the city and the region, but they all include this basic idea of improving a city through the application of technology.

The central and multifaceted role of governments in smart city plans is also a common feature. Governments, whether local, regional or national, have a role to play in various aspects of smart city development.

Firstly, the government is a user – often the largest user – of smart city services. Secondly, the government is the main buyer of smart city services. Finally, it dictates the rules that cities

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must follow, from planning regulations to the licensing of taxi firms. In large part, the success of a smart city project will depend on how the government is able to manage these various, and sometimes conflicting, roles.

The benefits of a smart city project fall into three categories – economy, people, environment Rather than focus on the technology for smart cities, it may be more useful to frame our understanding of projects around what the city is trying to achieve. There are three interlinked core areas that smart cities aim to target: the economy, people and the environment.

• Economy. Economic factors include increasing competitiveness, managing resources efficiently and investing in core infrastructure. Almost all projects will have some impact on a city’s economy, though those with the largest impact are likely to

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Smart cities all involve the application of technology to the city, typically by government

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Economy

People

Environment

• Increase competitiveness • Manage city resources • Develop ICT sector

• Retain human capital and attract new talent • Improve quality of life • Ensure public safety

• Achieve energy efficiency • Reduce pollution • Accommodate increasing urbanisation

Figure 1: Key motives for smart city deployments [Source: Analysys Mason, 2017]

• People. The aim of many smart city projects is to improve quality of life, to attract and retain human capital. This can be done by improving air quality, reducing commute times or even by simply providing better information on the city. Smart city projects are increasingly aware of the need to involve citizens in the decision-making process – a city’s inhabitants are important stakeholders, and smart city projects need to involve them and not just happen to them.

• Environment. Fighting climate change and meeting the COP21 targets to keep “the increase in global average temperature to well below 2°C above pre-industrial level” are important aspects of most smart city projects.

Transport and energy projects are central to achieving these aims.

Some of the key motives associated with each of these three areas are listed in Figure 1.

Transportation and traffic

Public services

• Intelligent transport system

• Smart street lights

• Smart parking • Traffic monitoring • Electric vehicles • Bicycle sharing • Multi-modal route planning • Fleet management for buses and other local authority vehicles

• CCTV cameras with command and control • Power-storage systems • Waste management

These three areas are strongly interrelated. Some initiatives, such as reducing congestion, could have an impact on all three, by increasing productivity – and therefore helping the economy, improving the quality of life for people, and reducing the polluting impact of traffic.

However, the emphasis of these three aims varies – in high-income countries such as Singapore, the focus is more on the people aspect. For projects in middle- and low-income countries, such as India and China, greater stress is laid on the economy – using technology in cities to increase the efficiency of existing infrastructure.

However, the vast majority of projects at least touch on each of these three aspects of the economy, people and the environment.

Smart city applications fall into six broad categories Given the rapid development of smart city solutions, it is challenging to produce a definitive list of smart city applications, but current solutions can be collected into six broad categories, outlined in Figure 2. ▼

involve infrastructure. The promise of the smart city lies in utilising existing resources more efficiently and delaying or even foregoing future investment altogether.

Public safety

Energy

E-governance

• Floodmanagement systems

• Smart grid

• Open data platform

• Earthquake monitors • Child-location monitoring

• Environmental monitoring

• Smart meters (gas, electricity, water) • Energy and water network monitoring • Renewable energy plant monitoring,

• Digital government access

Comms infrastructure • High-speed broadband • Public Wi-Fi network

• Smart identification • E-learning • Common payment card for services • E-municipality services • Digital money

• Real-time traffic information and information displays • Wi-Fi connectivity on public transport • Automatic toll collection Figure 2: Examples of smart city applications by category [Source: Analysys Mason, 2017]

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ANALYST REPORT

• Public services: This category covers a range of different applications, the common thread being that all the services are typically paid for by the government (normally the local government). The key drivers behind investment here are mostly economic – for example, by connecting sensors to rubbish bins, local authorities can improve the efficiency of waste management, reducing fuel and maintenance costs.

• Public safety: Services in this category will depend on the location of the city and the threats it faces, such as earthquakes or flooding. The impetus for these services is to save lives, though there may also be secondary economic or environmental benefits.

• Energy: While energy projects such as smart metering and smart grid are not exclusively city based, they are often included in smart city plans (for example, where a municipality also owns the local energy company) or where there are local issues, such as water shortages. The drivers are a mix of environmental and economic but should result in benefits for citizens too.

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• E-governance: The final category of smart city projects are primarily broader government initiatives that involve technology, rather than being directly linked to the infrastructure of the city. However, city authorities often incorporate them into more extensive smart city plans. They typically involve eliminating cost from existing solutions, while also improving services for citizens.

• Communications infrastructure: A number of smart city plans include enhanced telecoms access networks, through investment in fibre networks or public Wi-Fi connectivity. In Australia, as part of its smart city plan, Adelaide aims to be the first city with a 10Gbit/s access network.

A clear link is needed between the services being developed and the objectives (economic, people, environment) that drive the overall smart city strategy. Many smart city services are possible, but priority needs to be given to those that promote a city’s overarching agenda.

Smart cities will only realise their vision if they move away from point solutions Smart city projects are often developed in isolation from one another. However, many of the services listed above have elements that can be combined. Cities should consider how different services can be combined, as standalone projects will be less successful in achieving their goals.

For example, we are aware of cities that have built smart lighting solutions, including a connectivity network, from one vendor, and then taken another complete parking solution

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• Transport and traffic: Smart transport and traffic systems remain the primary focus of many smart city projects. Improving transport systems, notably enhancing existing infrastructure through the application of technology has many obvious benefits, including economic – making better use of existing infrastructure and avoiding or delaying major capital investments, increasing productivity, environmental (reducing pollution) and for citizens (reducing commute times).

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from a second supplier, which included a new and separate connectivity network. A more efficient model is to build a single public connectivity network that can support many solutions. As the IoT market matures, we expect to see more solutions based on open, nonproprietary technologies, such as NB-IoT, LTE-M and LoRa, rather than on closed proprietary networks.

Networks are just one example of how cities can build services on top of common platforms or technologies. At other layers of the solution stack, such as for application enablement or data analytics, common platforms can be used which both reduce the costs of developing new services and make it easier for data from different applications to be combined to make new solutions.

Over time, this should make it simpler to create services that combine information from multiple smart city sources, such as transport applications that integrate data traffic flow, public transport and bike-sharing schemes, as well as other data from major events such as football matches. Common platforms for multiple services can help reduce costs and increase the value of services.

Cities will need to support an increasingly wide variety of smart city services. Some of these, like e-health solutions, are not yet commonly deployed as part of smart city projects. The potential characteristics of future services should be considered when deciding which platforms and networks to adopt. The features of future services may differ from services deployed early on in a city’s smart city roadmap – for example, they may have additional requirements for privacy, security or quality of service.

management, traffic management, street lighting and crowd management already exist, and adopting proven solutions is likely to be more economical, as well as requiring less support in the long term.

The co-ordinated development of the smart city concept is a relatively recent phenomenon, but many of the technologies and components on which the applications are based are not new. Investment in smart city projects will need to continue for many years – often more than a decade, and so a long-term perspective is required.

Cities should look to make data easily accessible, while still protecting citizens’ privacy. Cities generate a wealth of data, which can be used internally but also by third parties. This is the aim of the open-data approach taken in the Future City Glasgow project, which is offering new service providers access to data, to allow them to innovate and create new services and businesses.

Another example is the London Datastore which offers open access to almost 700 data series, with information ranging from usage of the city’s cycle scheme to levels of nitrogen dioxide in the air at different locations. Other cities should look to make data open so that opportunities to develop new services can be more easily exploited.

This does not mean that the data should be available free of charge – if it has value a city should look to charge for it where possible. For example, Copenhagen has set up a City Data Exchange for the sale of its data.

It is important for cities to implement solutions that suit their specific circumstances. But given that most cities face similar problems, it is often most economical and efficient to look at successful deployments elsewhere. For example, well-established solutions for parking, waste

Understanding the motivations for smart city projects and the type of applications available is only part of the story: for many cities, the greatest problems relate to delivery and management of projects.

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Most smart city applications are not new; cities will only rarely need to pioneer new ideas

In considering what data to make available, cities also need to consider privacy issues and make sure that data is suitably anonymised. Cities also need to think about how this data openness will be perceived by the public, and consider how to manage issues around data privacy and how to explain the benefits.

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ANALYST REPORT

Smart city implementations will affect many departments that have not traditionally interacted with one another. While solutions like smart parking and smart street lights can use the same connectivity network, be built using a common application platform and feed into a single central data repository, the divisions of local government that manage parking and lighting are typically in separate departments. For smart city projects to be successful and efficient, coordination is needed between these different teams, each of which have its own slightly different agenda. Smart city projects should look to involve all affected departments.

Around the world, smart cities are using two primary models to try to align the different teams within local governments to deliver projects.

• Appoint a strong senior manager to run smart city projects. Rather than have each department develop and run its smart city projects, which is likely to lead to duplication, a popular model is to have a single person who oversees all projects and typically reports to the city’s CEO (or equivalent leader). This person, often the city’s chief information officer (CIO), is responsible for coordinating between departments, implementing digital practices and solutions, and aligning projects to the smart city or ICT strategy. Singapore is one city that has adopted this approach, with a CIO who is also a deputy director of GovTech, the agency which was developed to oversee the Smart Nation project.

• Create a separate special-purpose vehicle to manage projects. An alternative approach used in some cities, notably in India, is to create a special-purpose vehicle. This

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method frees a project from the constraints of existing ways of working (such as slow, bureaucratic procurement processes) and can allow the project to have a more radical vision and alternative business models, for example exploring how to exploit open data models. As we discuss later, the specialpurpose vehicle may also be able to explore new funding. However, this model may struggle when the smart city projects need to be tightly coupled with existing infrastructure or programmes, which is likely to be the case in many high-income cities that already have smart elements, such as traffic-management solutions.

While these approaches do have differences, they both put the authority to develop solutions in the hands of one person or body.

This makes it easier for the city to outline a single vision of what it is trying to achieve, instead of having many separate initiatives, possibly with competing aims. In turn, this single vision is easier to communicate to other stakeholders, such as businesses and citizens, which should make it easier to gain support for projects. Finally, suppliers find it easier to deal with only one party. The promise of large contracts may also attract more bidders and greater competition between suppliers.

Central governments have an important role in supporting local bodies Smart city projects are almost by definition local projects, but there is still a strong role that central government can play. For example, most cities will not have the resources or expertise to manage and understand cybersecurity or privacy issues. The risks associated with cyber attacks become much more important as a city moves towards integration of services with IT and telecoms networks. ▼

Smart city projects need clear management responsibilities

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The Irish government has taken some steps in this direction, such as establishing the Government Data Forum, a crosssector body to explore data-privacy and data-protection challenges. Its January 2016 paper, Getting smarter about smart cities: Improving data privacy and data security, was aimed at helping cities across Ireland.

The US Department of Homeland Security also believes that central government has a leading role on security. In its paper, The future of smart cities: cyber-physical infrastructure risk, it calls for a coordinated approach across infrastructure/systems, led by central government.

The paper states that central government can “assist in the development of standards and regulations, helping to ensure consistency across sectors and geographic areas”.

Similar to the situation with local government, smart cities will require the participation of central government agencies that may not typically work together, such as regulators (e.g. telecoms and energy), various ministries and supranational bodies (e.g. the EU). Central governments should have a plan to involve these different actors in their broader smart city initiatives.

Smart city projects need to engage with a range of stakeholders outside of government Smart city projects are most likely to succeed if their aims are understood and supported by local stakeholders, such as citizens, local companies and other parts of the public sector (such as hospitals and schools). The benefits of smart cities need to be explained, and challenges – such as the collection and usage of data – addressed openly.

Projects will be far more likely to gain traction if the tangible benefits, such as a reduction in tax or congestion, are understood.

There is growing emphasis on involving citizens in the design and deployment of smart city projects, to garner their support and acceptance. Bhubaneswar in India illustrates how cities can engage with the community to increase their involvement in a smart city project. The city

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is running contests (with prize money), online polls, discussion forums and smart city labs, as well as encouraging volunteers – all activities designed to foster greater awareness of and participation in the project.

Similar approaches have also been used in Lyon (France) and Adelaide (Australia).

Many cities are exploring new funding and business models As discussed earlier, one of the key drivers for smart city projects is economic – typically this means that a city will generate broader economic benefits from an investment in smart infrastructure. Some of these investments provide a direct return for the local government making the investment – it is no accident that both smart street lights and smart parking are projects that gained early traction.

Both have a direct financial incentive for a city – in the form of reduced energy costs for lighting and higher revenue from parking. However, for many smart city projects the benefits are indirect and difficult to quantify – such as the benefits of improved traffic flow, which increases productivity, lowers fuel usage and so on. These benefits may all be real, but it can be difficult for a city to incorporate them in a business plan to justify investment.

Many cities look for some form of external funding Some city governments are able to fund projects directly, with no recourse to external funding. For example, Hong Kong, Shanghai and Singapore were able to fund their projects. Most cities, however, especially lower-income cities, need external financing.

In their early stages, most cities depend on government funding. National funding is available in many countries, but this is often insufficient for large, long-term developments. Local government funding has been used for some smaller, discrete smart city projects, such as street-lighting initiatives.

For more ambitious larger-scale ventures, most smart city projects will seek partnerships with the private sector, and

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Central governments need to take the lead in these areas, such as by putting together policy guidelines or technical frameworks that local planners can implement.

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ANALYST REPORT

Central government may also have a role in creating PPP schemes. A pilot project in Los Angeles generates US$1200 per year from each street-light pole, by turning each one into a ‘smart pole’ that contains cellular and Wi-Fi connections, in a PPP project involving Ericsson, Philips and city authorities. This type of innovative funding model is only available where the basic PPP mechanisms have been established. Local government, especially in smaller cities, is not well placed to develop these instruments and may need central government support to do so.

Other forms of financing include vendor financing, bilateral and multilateral bank funding. Municipal bonds, debt and equity vehicles are also options being considered to fund smart cities, occasionally from ‘green’ banks. For example, the Green Investment Bank provided a loan to Barking and Dagenham, in London, to fund low-energy street lights in December 2016. Other organisations, such as The Clean Energy Group (Australia), Green Finance Organisation (Japan) and the New York Green Bank (USA) offer similar types of funding.

Local governments may not have the skills or resources to apply for this funding and may even require central government support for any funding bids.

Special-purpose vehicles, a model used extensively in India, also allows new funding

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models to be explored. This model requires private-sector financing to supplement central, state and local funding. While it is still early days for projects in India, private financing could include PPP, debt, equity and tax financing.

LPWA will become the dominant networking technology for smart city applications Analysys Mason has developed full value-chain forecasts for smart city applications. Figure 3 below shows a global forecast of connections by network connectivity type for all dedicated connections using a public network, split into fixed, low-power wireless access (LPWA) and mobile connections. Private networks have not been included, nor have local area connections – for example, ZigBee networks in private car parks would not be included).

LPWA connections include all types of LPWA connectivity, whether using licensed or unlicenced spectrum – such as NB-IoT, Sigfox and LoRa. Mobile includes traditional cellular connectivity, such as GSM and LTE connections, while fixed includes dedicated fixed lines supporting a smart city application, such as a DSL connection for the docking station of a bike-sharing scheme.

As can be seen, while the number of LPWA connections is still small today, it is expected to grow to dominate the landscape for smart city applications. By bringing costs down, and also offering greater propagation and longer battery life, LPWA connections should address some of the critical technical and business-case problems associated with cellular deployments.

In addition, most smart city applications – like

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the public–private partnership (PPP) model is becoming well established. The PPP model is often used for large infrastructure projects, as a way of both obtaining funding and benefiting from expertise within the private sector.

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ANALYST REPORT

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most IoT applications more broadly – only need low bandwidths and do not require the low latency offered by more advanced cellular or fixed technologies.

300 250 200

Emerging Asia–Pacific will have as many connections as Europe, North America and Developed Asia combined Analysys Mason’s forecasts split the world into eight regions, with Emerging Asia–Pacific easily the largest in terms of connections (see Figure 4). While this is unsurprising – as the region contains three of the four most populous countries (China, India and Indonesia) – it does reflect the aggressive smart city plans that have been put in place in both China and India. For example, in 2015 the Indian government announced plans to build 100 smart cities over the next five years, and also committed to rejuvenate another 500 towns and cities as part of the same project.

The high-income regions of North America, Western Europe and Developed Asia–Pacific (which includes Japan, Korea and Australia) also have ambitious plans for smart city projects and connection numbers will also be high here.

150 100 50 0 2016

2017

2018

2019

Mobile

2020

2021

Fixed

2022

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2024

2025

LPWA

Figure 3: Worldwide smart city connections by connectivity type, million [Source: Analysys Mason, 2017]

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Successful smart city projects are about structures and organisation as much as technology

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As indicated in our forecasts, the smart city market is still in its early stages. While some of the basic concepts date back at least 50 years, as shown in The Italian Job, it is only now that we see the combination of technology

0 2016

2017

2018

2019

2020

2021

2022

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2025

Emerging Asia-Pacific

Western Europe

North America

Developed Asia-Pacific

Latin America

Central and Eastern Europe

Middle East and North Africa

Sub-Saharan Africa

Figure 4: Worldwide smart city connections by region, million [Source: Analysys Mason, 2017]

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ANALYST REPORT

availability and affordability, and government willingness needed to drive the market forward. While there are many motives behind these investments, the key aspects relate to the economy, the environment and people – with each smart city application addressing one or more of these areas.

Technology and applications are only part of the picture for a smart city project, however – of equal if not greater importance are the structures that a city uses to lead and manage a project, and the financing mechanisms to support it.

About Analysys Mason Analysys Mason is the global specialist adviser in telecoms, media and technology (TMT).

For more than 30 years Analysys Mason has played an influential role in key industry milestones and helped clients through major shifts in the market. We continue to be at the forefront of developments in the digital economy and are advising clients on new business strategies to address disruptive technologies.

Our global presence matched with unique local perspective has helped hundreds of clients across TMT sectors around the world. Clients call on us to help them better understand industry and technological challenges and changes so that they can thrive in demanding market conditions and position themselves for the future. In addition to our global network of consultants, our research is relied on by many of the world’s leading operators, vendors, regulators, investors and market players. Covering all key areas in telecoms and telecoms software, clients rely on our insight to inform their decision making.

For further information visit: http://www.analysysmason.com/Trending-Topics/Positioningfor-the-Internet-of-Things-IoT/

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