March 29, 2010

By Laurence Cruz

Cisco Systems is already in the business of supplying the networking brains for smart cities built from scratch. Now, for the first time, the company is planning to retrofit an existing U.S. city with Internet technology.

The networking company recently began working with Holyoke, Mass. to make the 150-year-old former mill town the first city in the United States to pilot a model 21st century neighborhood. Cisco executives say residents will have access to bleeding-edge education, healthcare and government services, among other benefits, with initial pilot programs launching in 6-12 months.

The Holyoke venture is one in a flurry of Cisco partnerships that bring the company's networking expertise to bear on cities or communities, both current and nascent, around the globe.

Last week, the company said it was teaming with the state of Colorado on a series of pilot programs to use network-driven technologies in the areas of education, healthcare and energy to foster statewide economic development and sustainability.

In December, the company agreed to transform a handful of locations in San Francisco into paragons of smartness and sustainability, including Hunters Point Shipyard and Treasure Island. Cisco is also a lead player in an urban renewal project for the Toronto Waterfront, and it has started opening high-tech work centers around Amsterdam to reduce commutes, boost worker productivity and enhance quality of life.

Cisco is also helping to create brand new smart cities like Songdo, a $35 billion business district rising out of reclaimed swampland near Seoul, South Korea. (Listen to related podcast, "City of the Future.") It has agreed to design the networking infrastructure for three new cities in Saudi Arabia, among other projects.

All of these efforts fall under the umbrella of the Cisco "Smart+Connected Communities" initiative.

A Blueprint for Urban Renewal

The Holyoke project initially calls for transforming a central downtown district with state-of-the-art Internet technology, then rolling out that blueprint across the rest of the city. Cisco executives say the aim is to spur long-term economic, social and environmental sustainability in a city whose fortunes rose with the paper mills that dominated it in the Industrial Age but have since vanished.

In a recent Cisco TelePresence session announcing the urban planning initiative, Holyoke Mayor Elaine Pluta shared a wish-list of goals the city and its residents want to address through the venture – from creating jobs and higher education opportunities to removing blight, promoting green, encouraging businesses, expanding housing choices and creating a strong downtown core, among many more.

"These were all the things I talked about when I was running for mayor," Pluta said.

It's too soon to say which goals will be met, but Cisco and city officials say Holyoke is a good choice for the project. Not only has it received a state grant for "re-visioning" its urban core, but it also has a fiber optic backbone in place that will make it easier to deploy the new technologies, and it has been tapped to host a regional high-performance computing center. In addition, Cisco has offices in Massachusetts and it recently acquired Starent Networks, which is based there.

"We have the presence and we have the knowledge available in Massachusetts," Wim Elfrink, Cisco's chief globalisation officer, said via TelePresence from the company's second global headquarters in Bangalore, India.

Vision vs. Reality

As Cisco sees it, the heart of a Smart+Connected Community is the underlying network. The idea is that a city can operate more efficiently and sustainably if its multiple systems – telephone, traffic signal and video surveillance, for example – run on a single Internet protocol (IP)-based network.

Smart cities are designed to be easier to manage, thanks to central controls, greater integration among systems and less redundant wiring. And they are potentially more cost effective. According to a recent Cisco case study, the state of Missouri saved more than $35 million a year by running 1,000 government buildings on a single, intelligent network.

In practice, creating smart cities is a relatively new and immensely complex undertaking, says Margaret Adam, a research manager with analyst firm IDC. Challenges include the time it takes to plan the smart component of such cities – at least 18 months in emerging markets, she says.

"The reality is you've got investors who want a building ready in 18 months," she says. "While there may be a 'smart' vision at the outset, there just isn't enough time to follow through."

And then there's the challenge of generating a return on investment. Adam says during the construction boom in the Middle East that preceded the global recession, every development wanted to be a smart city. But now, she says, there's much more pressure on developers to make such projects pay and pay fast – which puts developers in a bind.

The Urban Century

The Songdo, South Korea, project is, among other things, a giant petri dish for the myriad ways Cisco and its partners can make such projects pay, Cisco executives say. Lessons learned and business models perfected in Songdo can be applied to Holyoke, for example.

Just as people are willing to pay for mobile phone services that didn't exist a decade ago, Elfrink is betting they'll be willing to pay for things like Cisco TelePresence, which the company says will be ubiquitous in Songdo; or to commute on a Wi-fi-enabled, hybrid-fuel connected bus such as the one Cisco recently piloted in San Francisco. The question is, how much?

"That's something Cisco and Holyoke will learn together," says Elfrink, who is also executive vice president for Cisco Services.

One thing is clear: The stakes are very high. Company executives say the potential market opportunity for Cisco in the smart city arena is in the billions of dollars. And they say several trends are feeding into Cisco's Smart+Connected Communities strategy.

One is a rapid increase in urbanization, which has led United Nations Secretary General Ban Ki-moon to dub this "the urban century." Elfrink says 500 million people will move to cities in the next five years, and new cities are taking shape to accommodate this flow. Add to that the many existing cities using technology to revitalize themselves for the 21st century.

Networked Services Increasing

At the same time, the number of objects which are connected to networks and that can therefore be imbued with intelligence and "green" features is exploding, Elfrink says. This phenomenon – which Elfrink calls "the Internet of Things" – further sets the stage for smart cities by multiplying the number and variety of networked services that can be offered, he says.

On top of that, the real estate industry is seeing a convergence of physical assets and information communication technology, says Wolfgang Wagener, who directs Cisco's connected urban development programs. The result is what he calls an emerging "real estate IT industry."

"Internet technology is becoming as essential as the other basic forms of infrastructure – water, power and transportation," Wagener says.

And it's just a matter of time before the real estate industry fully embraces and standardizes around this, which in turn will bring costs down, Wagener says.

Cisco also expects to see costs diminish as consortiums begin what can be described as the mass production of smart cities, executives say.

Gale International, the master developer in the Songdo project, expects to start building 20 more smart cities in the next five years, including the 1,675-acre Meixi Lake District in Changsha, the capital city in Hunan province. Seven others are under evaluation, the company says. And Cisco is on board to provide the networking infrastructure.

"I don't know how it will all look 10 years out," Elfrink says. "But we have to dream and embrace the opportunities technology is offering."

 Laurence Cruz is a freelance writer in Los Angeles.