Smart Cities and Opportunities for Telcos

by Anna Wang, Elcio Yanaga, Tatyana Ivanova, Tejinder Chahal

Half of the global population lives in cities, consuming 75% of the planet’s resources and generating 80% of carbon emissions worldwide. Looking forward, those numbers are expected to become even more relevant, as by 2050 the population is forecast to be close to 10 billion people, with three quarters of that population expected to live in urban settings.

This growing urbanisation creates large scale sustainability challenges, with congested transport and traffic, overcrowded districts and a strain on resources. To tackle these challenges, governments and city leaders worldwide are increasingly using technology and innovation, paving the way for the emergence of smart city solutions to improve lives and manage cities more efficiently. More than a hundred cities are currently building smart city ecosystems worldwide, developing platforms to help meet sustainability requirements while creating new business opportunities.

But what is a smart city? Definitions are varied, but simply put, a smart city uses information technologies, such as the Internet of Things (IoT), cloud computing and big data, to collect and analyse data to improve urban infrastructure and services. Applications of smart cities solutions are wide, including transportation, utilities, safety and security, education, healthcare, tourism, and public administration.

In this context, telecoms are finding new opportunities to capture value from the growing global smart city market, expected to increase from USD 1.3 trillion in 2016 to USD 2.1 trillion in 2020, considering all projected investments throughout the value chain.

The deployment of smart cities ecosystems involves the collaboration of multiple stakeholders, often based on a public-private-people-partnership, with governments playing a key role in funding projects, and citizens also being actors and builders of the smart city environment. At the center of the ecosystem are the information and communications technologies, where telcos, network vendors and IT companies play. Thinking about smart city as a collection of IoT applications, multiple networks are clearly required to enable the integration of the smart city ecosystem. In this field, telecom operators are regarded as fundamental in providing the required connectivity to guarantee the successful delivery of IoT functionalities.

However, the growth potential for telcos lies on becoming more than pure connectivity providers. Operators such as Telefonica and China Comservice are taking steps to position themselves as significant drivers of smart cities initiatives. Companies like those can adopt new business models, capturing a larger portion of the smart city market size. Sensor networks management, basis of every smart city project, is the first natural extension, as telcos already have the expertise in operating traditional networks. Beyond that, they could also move up in the value chain to become aggregators/enablers in smart cities, rather than just passive network providers.

The figure below illustrates examples of how different operators are occupying their space in the smart city value chain, making partnerships and adopting more complex business models to achieve greater potential to capture value.

Source: Arthur D. Little

For instance, Telefónica collaborated with the municipality of Valencia to carry out a smart city project that merged 45 different city services into a standard digital platform. The fibre optic and mobile network infrastructure, core businesses of Telefónica, were the backbones for the project, but the operator also led the development and implementation of control systems and service integration, centralizing traffic monitoring, improving resource efficiency through smart lighting and smart watering, enforcing public safety through camera surveillance, and reducing administrative paperwork by implementing online city services.

Another example is the partnership between the Busan Metropolitan Government, Cisco and KT – the largest telecom operator in South Korea. Busan’s so called Green u-City project started in 2005 and combined different sources of expertise to foster smart community, green urban mobility, smart energy/resource recycling, smart safety and security and smart green logistics. The project is helping Busan reduce its operating costs, create new jobs through the establishment of new companies in the city, and become more sustainable by monitoring and controlling electricity consumption. Busan’s target is to reduce its carbon emissions by 2,981 metric tons by 2020, 68% lower than in other developed Korean cities without the smart city capabilities.

The preliminary estimated savings of smart city solutions for an average city are around 15% in water management, 20% in waste costs, 20% in parking time, and 30% in energy usage. Extrapolating the energy savings level to the global consumption rate in cities would generate equivalent savings of roughly 15 billion barrels of oil per year, or 41 million barrels a day.

There are still many challenges for building a sustainable future with smart cities. Demographic and political changes may require continuous adaptation of plans and solutions. Ageing infrastructure, particularly in ancient historical cities, can create installation and maintenance issues. Innovative business models should ensure financial sustainability of projects.

Nevertheless, the potential of smart cities is immense and, undoubtedly, IoT technologies will continue to evolve, profoundly changing the way we live. The right connectivity, infrastructure and services will be required from the players in this market, representing both opportunities and threats for operators. Ultimately, as the ecosystem evolves, we will certainly see smarter and more sustainable cities.

 

References:

http://www.huffingtonpost.co.uk/eman-martinvignerte/how-the-iot-and-smart-cit_b_15183452.html

https://www.theguardian.com/sustainable-business/smart-cities-innovation-energy-sustainable

http://telecoms.com/intelligence/smart-cities-what-are-the-opportunities-for-telcos/

http://www.adlittle.com/downloads/tx_adlreports/ADL_SmartCity_Telcos-as-enablers.pdf

https://iot.telefonica.com/blog/valencia-on-the-smart-city-fast-track

http://esci-ksp.org/wp/wp-content/uploads/2016/11/cl_busan_08_121.pdf