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Should a Private Tech Giant Be Designing Cities?

Google’s sister company wants to build the city of the future on Toronto’s waterfront, raising concerns over privacy and the role of government.

Just one kilometer east of downtown Toronto, the largest civil engineering project in North America is reshaping the course of the Don River, a major waterway. “We’re extending the Don by about 2 kilometers,” says Cam Coleman, a communications director with the Canadian construction firm EllisDon. Once the project is complete, a canyon of caissons, drilled 40 to 80 meters into the bedrock and filled with concrete, will carry the river southward, through a largely vacant industrial area known as the Port Lands and out into Lake Ontario. The result will be a whole new set of neighborhoods -- 750 acres of waterfront property near the heart of a big city that is growing prodigiously.

The new area will fill up rapidly. Looking back toward downtown on a recent morning, Coleman pointed out a new island rising just opposite a fire-gutted warehouse on the docks. At the moment, it’s a pile of mud. But in a few years’ time -- if all goes according to one tech giant’s plan -- it will be the home of Google’s Canadian headquarters. It will also be the center of the most technologically advanced neighborhood in the world.

Revitalizing a waterfront, changing the course of a river, setting the rules by which neighborhoods operate -- these are things that government, not the private sector, has traditionally done. Government initially took the lead in reimagining Toronto’s waterfront, too. Back in 2001, the federal, provincial and local governments teamed up to create a new entity, Waterfront Toronto, charged with doing just that. The parks, trails and high-rise buildings rising along the harborfront today testify to that strategy’s success. 

But two years ago, Waterfront Toronto decided to do something different with a 12-acre parcel of property at the edge of the Port Lands known as Quayside. It decided to make those 12 acres into a neighborhood that showcased “smart city” solutions. It put out a request for an “innovation and funding partner.” In October 2017, Waterfront Toronto announced the winner of the competition -- Sidewalk Labs, the sister company of Google. 

The partnership agreement was announced with great fanfare. According to the terms of the deal, Sidewalk would invest $50 million in creating a new entity, Sidewalk Toronto, and developing a plan for the Quayside area. Sketches put forward a picture of a technological wonderland. Residents would inhabit eco-conscious timber high-rises that were elegant, airy, green and cheap. Units would be modular: They would expand for families and contract when kids left. Robots in underground tunnels would deliver packages and reduce waste. Above ground, autonomous vehicles would ferry residents around, removing the need for parking spaces. Solar power would light the neighborhood; fresh air off the chilly waters of Lake Ontario would cool it in the summer. Removable pavers would make street repair easy. And everywhere -- everywhere -- there would be sensors, sorting the flow of people, bicycles and driverless cars; noting when trash bins need emptying; and calibrating building light and temperature settings, allowing the physical environment to interact with visitors and residents. News and design sites around the world rushed to publish images of this futuristic Elysium.


Sidewalk Toronto’s offices in Quayside (David Kidd)

It wasn’t long before some Torontonians began to have second thoughts. The first one was about privacy. What would Sidewalk Labs do with the mountain of information Quayside would collect about residents and visitors? This remains a central focus of the debate about whether the company should be allowed to realize its vision. However, as Sidewalk Labs has moved ahead with its plan, an even more consequential debate has emerged -- a debate over government’s role, and government’s ability, to shape the future of the smart city. Companies such as Google already shape our digital worlds. The debate unfolding in Toronto may determine whether they shape our physical worlds as well. 

Toronto has been one of the fastest-growing big cities in North America for more than a decade. Canada’s open immigration policies account for much of this growth. It is far easier for well-off, skilled people to immigrate to Canada than to the United States. Most of them make their home in or around Toronto. Forty-six percent of the city’s 6 million residents are immigrants; tens of thousands more arrive every year. 

This growth has produced winners and losers. Homeowners and property holders have been winners. Property values have risen sharply, boosting city revenues and allowing elected officials to keep property taxes low. But rising property values have also made housing unaffordable to many Torontonians and put the city’s transit system under intense pressure. Voters could have chosen to respond to these pressures by increasing public investment. They haven’t. Instead, conservative governments in Ontario and at the federal level have slashed support for public housing and public transit. In 2010, Torontonians elected an outspoken, car-loving populist mayor, Rob Ford. Ford died in 2016, but his like-minded brother Doug was elected premier of Ontario last year. Among his first actions were cutting the size of Toronto’s city council in half and moving to take control of the city’s subway system. Although Ford vowed to fund improvements in that system, much of his plan to pay for them relies on billions in federal and city aid that he hasn’t been able to secure.

Ford’s actions have upset many of Toronto’s elected officials. However, the various levels of government have worked well together in other ways. The new agency they combined to create, Waterfront Toronto, was designed to take more risks than government agencies typically would. Indeed, assuming responsibility for certain risks, such as environmental remediation and regulatory approval, was Waterfront’s central purpose. “We take all that on,” says Meg Davis, Waterfront Toronto’s chief development officer. “Then the developers take on the risks that they’re the most equipped to bear, which include construction, market, design risk, all of those sorts of things.” 


Waterfront Toronto chief development officer Meg Davis (David Kidd)

Waterfront’s approach proved remarkably effective. A billion dollars in public investment leveraged more than $10 billion in private-sector investment. High-rise office towers and condominiums and a branch of George Brown College quickly spread across the harborfront. Gradually, development moved east, toward the Port Lands. Eventually, Waterfront Toronto’s attention came to rest on the 12-acre parcel of land on the edge of the Port Lands known as Quayside. 

Waterfront Toronto owned most of Quayside outright. That gave the agency the freedom to look for something big to try. It didn’t have to look far. Its managers listened to consultants describe “smart cities” as a $1.8 trillion business opportunity. So they decided to seek a private-sector partner that could offer ideas to transform the way issues of sustainability, mobility and affordability are addressed. The agency reached out to more than 50 companies around the world. In the end, it found itself considering three proposals. One company stood out for the scope of its ambitions: Sidewalk Labs.

Tech companies are strangely personal things. Their intellectual property consists of 0s and 1s, of code and bits. But their cultures reflect the personalities of their founders. Sidewalk Labs is legally a sister company of Google and a subsidiary of Alphabet, Google’s global parent. But its mission and mindset reflect the ambitions of its founder and CEO, Dan Doctoroff. 

Doctoroff has been described as the greatest builder in New York City since Robert Moses. Unlike Moses, Doctoroff entered public service mid-career. After starting out as an investment banker, he led New York City’s bid to land the 2012 Olympics. That effort failed, but it attracted the attention of billionaire businessman Michael Bloomberg, under whom Doctoroff served as deputy mayor for economic development and rebuilding. In that job, Doctoroff led a variety of major efforts, ranging from the creation of more than 150,000 affordable housing units to the development of the massive mixed-use Hudson Yards project on Manhattan’s West Side. 

After Bloomberg left office, Doctoroff ran his media and financial information company, until Bloomberg himself decided to return to a leadership position at the company. In 2015, Doctoroff and Google’s then-executive chairman Eric Schmidt announced the formation of Sidewalk Labs. Its premise was that cities were ripe for reinvention. Sidewalk would use new technologies, in Doctoroff’s words, “to fundamentally bend the curve on virtually every aspect of quality of life.” 

As for how Sidewalk would make money doing this, that would come later. “We believe that if we can demonstrate that level of improvement there’ll be plenty of ways to make money,” Doctoroff says. Quayside would be where the company was going to figure this out. 

In October 2017, Waterfront Toronto announced that Sidewalk Labs had been selected to develop a plan for Quayside. The initial reaction was overwhelmingly positive. Elected leaders from all three levels of government turned out for the announcement. Sidewalk announced it would invest $50 million to develop a detailed plan, and quickly set up an office in the area, with a staff of 30 people. In addition to hosting its Toronto workforce, the office serves as a demonstration space for new technologies such as permeable street pavers, modular apartments, “dynamic streets” with integrated lights to direct pedestrians and cyclists, and other sensor-driven technologies. 

Sensors were an inescapable part of the smart city project from the beginning. That effectively guaranteed that privacy and data collection would be concerns. Sidewalk and Waterfront Toronto were aware that their affiliation with Google, a company that earns most of its money by serving targeted ads to consumers whose lives and preferences it understands in intimate detail, might raise issues. Doctoroff was adamant that Sidewalk was not interested in earning money in a similar fashion. “We’ve made that clear pretty much from day one,” Doctoroff says. “That is just not a part of our business model.” However, he and Waterfront Toronto knew from the start that not everyone would take his word for it. To address privacy concerns, Waterfront created an advisory council. It included a prominent privacy advocate, Ann Cavoukian, the well-regarded three-term Ontario privacy commissioner, as a consultant.

Cavoukian developed a framework she called “privacy by design,” whose first precept was that privacy should be the default option: People should have to opt out of privacy protection, not take special steps to ensure it. Cavoukian also had strong opinions about cameras and sensors and the data they captured. She insisted that when a sensor collected any information on a person, all personal identifiers needed to be removed at the source before any data was sent to a central server. Processing data at the source was more computer-intensive and thus more challenging than uploading data to a central server and processing it there. Nevertheless, Sidewalk indicated that it agreed with this standard. Cavoukian was pleased by their commitment. “I told them we’re going to make this a smart city of privacy,” she says, “not a smart city of surveillance like everywhere else in the world.” 

However, Sidewalk didn’t fully appreciate the commitment Cavoukian thought they were making. At an advisory board meeting last October, Sidewalk and Waterfront executives proposed what they saw as a novel solution to privacy concerns -- an independent trust that would hold all data generated and collected by the Quayside project. But Sidewalk also said that while vendors involved in Quayside would be encouraged to “de-identify” data, it did not have the power to require other companies to do so. “The minute you lay it out like that, you’re going to have personally identifiable data collected, which is totally unacceptable,” Cavoukian says. The next morning, she resigned. 

Cavoukian’s resignation ignited a media firestorm that caught both Sidewalk Labs and Waterfront Toronto off guard. Sidewalk quickly announced that it supported her stringent guidelines but could not guarantee they would be binding on every company or vendor operating in Quayside. Doctoroff immediately called to ask what had happened and what could they do to get her back. Cavoukian declined to rejoin Sidewalk Labs, though she says she did not intend for her action to create “such a negative backlash.” 

The fallout, however, was only just beginning. 


Toronto’s most ambitious current project, the redirection of the Don River, will open 700 acres of waterfront property near downtown to redevelopment. (David Kidd)

Jim Balsillie is one of Canada’s best-known tech executives. He was the longtime head of Research in Motion, the company that launched the first popular mobile computing device, the BlackBerry. Balsillie has been critical of Waterfront Toronto’s partnership agreement with Sidewalk Labs from the beginning. “The first principle in a democratic smart city strategy is for citizens and their government to agree on the data governance policies that a vendor must respond to,” says Balsillie. Instead, he continues, Waterfront Toronto “has turned the most valuable piece of undeveloped real estate in North America over to a two-year-old startup with zero development experience.”

Worse, in Balsillie’s opinion, is that Waterfront Toronto was unwittingly allowing Google to develop a smart city operating system that could entrap rather than empower cities and their residents. 

“Making data open does not address the core issue of control, and control of the data determines who can monetize it,” Balsillie says. With access to parent company Alphabet’s portfolio of patents and its vast trove of preexisting data, Sidewalk Labs would enjoy an enormous advantage converting data generated by Quayside into profitable applications, even if other companies had access to that data too. 

Democracies, notes Miovision CEO Kurtis McBride, another critic, are organized in ways that give citizens the chance to change leadership or change direction every few years. In contrast, tech giants such as Google “are really good at using technology architecture to implement business models that survive decades.” In short, says McBride, “democracy and technology are built on different principles.” 

Waterfront Toronto and Sidewalk Labs have worked hard to respond to these criticisms. Waterfront hired an intellectual property expert recommended by Balsillie. Sidewalk Labs held a series of public meetings to address the concerns. But efforts to respond were hampered by a lack of clarity about the relationship between Sidewalk Labs, Sidewalk Toronto and Waterfront Toronto. Sidewalk Toronto’s building on the waterfront showcasing new technologies made it the focus of media attention. But what was Sidewalk Toronto? The Toronto office of Sidewalk Labs? A partnership between Sidewalk and Waterfront Toronto? Who should be responding to these criticisms? To many, it was unclear.

Also unclear was Sidewalk Labs’ business model. If the company didn’t intend to make money by selling information to advertisers, how did it intend to make money? To Balsillie, the answer was simple. “Sidewalk Labs is a poorly disguised data and real estate front for Google,” he says. “No matter how much they try to hide this, it always comes out.”

Earlier this year, a report in the Toronto Star lent credence to this viewpoint. The paper published a report suggesting that Sidewalk was considering plans to implement innovations across the entire 715-acre Port Lands area, not just the 12-acre Quayside parcel. It was also allegedly willing to spend hundreds of millions of dollars to bring light rail to the Port Lands -- something the city had long sought but never proposed to fund. The internal documents cited in the report suggested that in exchange, the company might seek a share of property tax revenue from developments whose value would be increased by the proximity of mass transit. 


(Sidewalk Toronto)

The scope of Sidewalk’s ambitions -- and the idea that an American tech company was prepared to step in to address a problem that government had failed to address -- bothered opponents of the project. Doctoroff and Sidewalk Labs insisted they had nothing to hide. Creating a zone for autonomous vehicles or a district-wide energy system could not be accomplished on a parcel of 12 acres. Doctoroff noted that Sidewalk’s proposal had mentioned the larger Port Lands parcel numerous times. Critics were not appeased. The Canadian Civil Liberties Association sued Waterfront to prevent it from acting on Sidewalk’s proposal. A media-savvy technologist, Bianca Wylie, formed a new coalition to oppose Sidewalk’s vision of a privatized neighborhood for Quayside. But its first public meeting produced an unexpected result. 

The meeting took place this spring in a library on Toronto’s East Side, across the Don River from downtown. Councillor Paula Fletcher, a critic of the deal, presided, along with Bianca Wylie. Two nervous-looking staff members from Waterfront Toronto sat in the audience. By the time the meeting began at 6:30, some 200 people had filled the room. It was not a pro-Sidewalk crowd. But it turned out to be pro-government -- or at least pro-Waterfront Toronto.

Wylie spoke up and said she trusted Waterfront Toronto and was going to give them a chance. One of Waterfront’s representatives rose to speak. He announced that Waterfront would set up its own public comment process to review the master plan for Quayside that Sidewalk Labs was expected to present in the early summer. 

Still, Wylie didn’t soften her skepticism about the role of Google, or the partnership approach. “Why,” she asked, “would you empower a vendor to that degree to be working on a project like this, which is this wonderful opportunity to engage people?” 

As one might expect, Canadian tech executive Kurtis McBride sees a more significant role for the private sector in fostering smart cities. “Smart cities,” he says, “are an opportunity to develop and use technologies that can make cities more livable, democratic, efficient and sustainable.” Still, he cautions, “there is a danger in thinking technology can solve problems that are not tech-related or that vendors should lead these strategies.”

Surprisingly, that’s a sentiment with which Sidewalk’s Dan Doctoroff agrees. “We agree government should be setting the rules,” he says. “That’s what I always believed when I was in government. Government’s job is to create the conditions at the end of the day for the private market to be successful. And we believe, very strongly, that that is government’s job here. The fact that a private party participates in that doesn’t mean the usurping of government’s authority. In fact, we believe very strongly in government’s role to set the rules to oversee it. And we’re eager to kind of follow that model.”


High-rises on the harborfront testify to the success that Waterfront Toronto has already had. (David Kidd)

But it’s a mistake, he adds, to think that governments will be able to realize the potential benefits of smart cities on their own. “We hope to develop a set of products or services that get deployed in Toronto for the first time that then have value to other places around the world,” he says. “I think what’s probably not appreciated is the kind of risks that we’re prepared to take in order to demonstrate that.” Sidewalk, for example, is ready to take the risk of building 30-story wooden skyscrapers to demonstrate to both governments and more cautious developers that timber buildings’ time has come. “We’re prepared to take that risk to demonstrate that it can work commercially and that’s why we’re doing the development we are.”

Whether Sidewalk’s ambitions will ultimately attract or put off local residents remains to be seen. The first indication will come later this year, when Waterfront Toronto’s board will vote first on the plan. A vote by Toronto’s city council will follow, most likely before the year is over. Cavoukian, the privacy expert, remains wary. “Trust is at an all-time low,” she says. 

Doctoroff admits that he was caught off guard by the controversies Sidewalk Toronto has elicited. He wishes he’d done some things differently, foremost among them articulating a data use and privacy policy earlier. But his experiences in Toronto haven’t changed his thinking about Sidewalk’s mission at all. Problems such as sustainability, affordability, health and mobility, he says, “have only gotten worse.” As for improving the quality of urban life (and profiting in the process), “we are more and more convinced of the possibility.” 

“So,” he continues, “I think the mission is exactly what we thought it would be.”

John is a Governing correspondent covering health care, public safety and urban affairs.
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