Ahead of the release on November 5 of a major report by Enterprise IoT Insights into the state of the smart city market, entitled How to buy / sell a smart city – procurement models to make every city smart, we present five burning questions for five leading solutions providers around the issue of funding in smart cities.
These questions will be posed in turn, across a ‘5×5’ series of five articles (see bottom for all series entries). Here, we consider whether public-private partnership (PPP) deals, as the most prominent of new smart-cities funding models, are the most effective way to finance smart city projects, and whether there are disadvantages.
2 / 5 | Is the public sector too dependent on private money to fund smart cities, or can it make it alone? Are there disadvantages either way?
Michael Zeto, vice president and general manager of smart cities, AT&T –
“The last year or two, people have been really hung up on the PPP concept. There are a lot of different ways to structure public private partnerships that will allow you to get to the same place, but in different ways. PPP is a really broad and widely used term, which can mean a lot of things, depending on the relationship you enter into with a city, and also with other partners – because it’s usually multiple parties that come together as part of an ecosystem, rather than one large provider.
“We are participating in the value creation, like we normally would. We provide a product and service, and in many cases we get a feedback for that. There are emerging business models that allow you to exchange some value, and have some fees lowered and some access granted in exchange for goods and services.
“There are some some models out there where you’re providing an (energy savings) ESCO type of model, where you provide a solution as-a-service, and the capital investment is made by the private sector partner, and the city pays the private sector partner out of the savings. And lastly, you have that that data monetisation piece – where the city owns the data, but the partners might arrange to share in it if they’re making the investment in the technology.”
Mike Zeto – emerging business models enable value exchange
Alicia Asín, chief executive, Libelium –
“Public-private financing models run the risk of choosing proprietary technologies that make it difficult for projects to be compatible and scalable with future developments. There are solutions, however, that lend themselves to this model, and can be very successful for both parties.
“In the case of smart parking, for example, private management of public parking spaces means cities can avoid the cost of financing technology deployments by allowing private companies to manage the service over a set period, and make a return on their investment.”
Alicia Asín – PPP deals risk proprietary technologies
Itai Dadon, director of smart cities and IoT, Itron –
“In many cities, just the research into the ROI of the kind of major infrastructure upgrades required to support IoT applications is a considerable investment in itself, and often takes years. Many leading cities have relied on PPP arrangements to accelerate their smart city deployments. But there are two other considerations: architecture and applications.
“Most smart city providers have implemented architectures like Wi-SUN that have been proven in the field already. Their applications have been validated in municipal deployments. Most cities have been accelerated their plans by partnering with these providers – spending less time on research, going live sooner, and improving ROI.”
Itai Dadon – PPP arrangements accelerate deployments
Markus Keller, senior vice president for smart city, Deutsche Telekom –
“It is important the public and private sectors work together to design projects in line with funding programmes and objectives. This combination is the key to a successful, fast and cost-effective implementation of smart city applications in Europe and beyond. Not all cities have sufficient resources for making ‘smart’ happen, and often money available is invested in other activities.
“However, Deutsche Telekom also works with cities directly. Our goal is to become a leading smart-city solution provider in Europe. For us this means we are a trustworthy, reliable, and long-term partner for a city’s digitisation. We are helping to address and manage ecological and economic pressures, as well as urban transformation needs due to continued rapid growth and recent technology advances.”
Markus Keller – important for public and private sectors to work together
Max Claps, global future cities team lead, SAP –
“PPP arrangements are adequate for complex infrastructure projects, like brownfield re-developments of whole neighbourhoods, as they require a long-term investment and clear metrics to monitor the risk-reward sharing agreement. Other alternatives include green bonds, for projects that have an expected long-term return in terms of energy savings and environmental sustainability.
“But cities are often looking for short term returns. They want to explore new technologies and enable innovative business models. They want to scale the digital solutions that yield results. This is best achieved by implementing smaller projects, while making sure the architectural capabilities are platform based, so they can be re-used across use cases and domains.
“In many cases it is not the city that funds a project, it is the local transit authority, a local utility and increasingly local businesses that want to contribute to the city prosperity. In those cases the city still plays a role to orchestrate services, set the policy context. and ensure equal engagement for all citizens.”
Max Claps – adequate for complex infrastructure projects
This is an excerpt and forerunner for a report and webinar, titled How to buy / sell a smart city – procurement models to make every city smart, to be published on November 5. Sign up to the Enterprise IoT Insights newsletter here to get the next instalment in the 5X5 series, updates about the report, and related news. Register for the webinar here to hear from speakers from AT&T, Cisco, the City of Cardiff, Cradlepoint and Navigant.
Smart cities 5×5 | How hard is it to fund smart cities? (1/5)
Smart cities 5×5 | What’s so good about PPP? (2/5)
Smart cities 5×5 | Which smart city apps provide the surest ROI? (3/5)
Smart cities 5×5 | Should cities build a central data platform? (4/5)
Smart cities 5×5 | Does the tech industry need a new way to sell to cities? (5/5)
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