Are Smart Cities Still A Smart Bet Amid ‘Urban Flight’ And The Pandemic?

smart city

Companies are reconsidering investing in smart city technology in the wake of the continuing pandemic.

The pandemic has pressured corporate top lines — and as a result, leaves less money to go around to fund innovation, especially for tech-focused firms. So-called “smart-city” initiatives might be a casualty, especially if it’s perceived that people are leaving urban areas for the ‘burbs. In other words, to mangle a line from “Field of Dreams”: “Why build it if they won’t come?”

Anecdotally, there are some indications that at least some companies are pulling in at least some of their ambitions to create the “cities of the future” marked by connected devices, green infrastructure and of course, seamless payments. But some evidence doesn’t herald a wholesale shift.

True, The Wall Street Journal reported this week that tech giant Cisco “is pulling the plug” on its efforts to create smart, digitally modern cities.

Part of the reason has been tied to the fact that the core Cisco business of supplying networking equipment has been pressured. The company’s key customer base of local governments is seeing its own revenue/cash flow constraints, limiting the ability to fund infrastructure initiatives.

Drilling down a bit, for Cisco, the ripple effect has darkened the Cisco Kinetic for Cities software business. That product portfolio was created in part by a $1.4 billion 2016 acquisition by Cisco of Jasper Technologies to expand its Internet of Things (IoT) effort.

“We recently decided to stop sales and eventually support [for] the Cisco Kinetic for City product line to align our product investment to evolving market needs and customer requirements,” a company spokesman told The Wall Street Journal.

As for other anecdotal evidence: Alphabet’s Sidewalk Labs, has left a billion dollar smart city initiative in Toronto, as noted by Bloomberg.

Pressures On Infrastructure Spending  

The National League of Cities estimated in June that 65 percent of U.S. cities are being forced to “delay or completely cancel” capital expenditures and infrastructure projects.

But might be more positive developments on the horizon — even the near-term horizon?

State Tech reported that the incoming Biden administration is likely to boost smart-city development. Indeed, Biden’s own website noted that among its initiatives will be to “encourage innovation and launch smarter cities.”

“Transportation patterns are changing across the country,” Biden’s site noted. “New modes of car ownership, the explosive growth of ride-hailing and ride-sharing services and the rapid adoption of electric scooters and bike-share programs are giving Americans new ways to move. But the biggest disruption lies ahead: self-driving cars.”

“Citizens will benefit if cities can adapt to those new technologies — for example, by reshaping streets to protect cyclists and scooters, connecting transit systems to last-mile solutions like ride-shares and e-scooters, or using real-time data to manage traffic flows,” the site said.

In terms of dollars, the Biden administration has said it will launch a yearly $1 billion competitive grant program “to help five cities pilot new planning strategies and smart-city technologies that can serve as models for the country.”

And as reported in a recent PYMNTS IoT Tracker, the near-term headwinds put in place by the pandemic could prove fleeting. At least some studies profiled in this space project that the IoT market will grow by double digits through 2021 to reach $243 billion.

And the much-sensationalized “urban ghost towns” that have been predicted as fallout from the pandemic have not, in fact, come to pass.

The Wharton School at the University of Pennsylvania recently reported that the anticipated mass migration hasn’t happened. Yes, some areas such as Manhattan have seen small population losses.

But as noted by Wharton real estate professor Jessie Handbury, while “it’s possible that we’ll have a short-term shift in the demographic … for a few years, I do think this is not going to be dramatic, and it’s not going to be a reversal of the trends that have been seen over the past 10 or so years.”

In other words — the population is in place, the funding might recover and eventually, so will the infrastructure investment. The timeline may shift a bit, but the movement toward smart cities will be inexorable.

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