Smart city deals could give web giants huge monopolies

As cities embrace digital transformations, adding smart city technologies to save money and boost efficiency, they are drawing the attention of web giants like Google and Amazon, which view cities as new platforms on which to build all-encompassing services. There is a risk that these web giants, already established in core markets, will use their cash reserves to wrap up entire cities, enmeshing them within a platform, and building a proposition that a city can’t extricate itself from.

It’s a long-term view, and one that is admittedly a little alarmist, but companies like Google and Facebook have expressed clear interest in expanding their involvement into other areas of their customers’ lives. As growth stalls in one market, whether that’s online advertising or social media, many IoT verticals will catch the eyes of already rich companies looking for greenfield opportunities.

Smart cities run the risk of being locked into contracts or indebted to a technology, unable to move away from a vendor because of the immense cost of breaking a contract or replacing a platform or service. Google has previously discussed an experiment in Detroit, which would use Alphabet’s array of services to completely transform the city, and Toronto has recently picked the company to build a new waterfront development to showcase Google Urbanism – outlined here by the Guardian.

While these tech giants could disrupt the current IT and systems integration markets heavily, to the benefit of cities and their citizens, it remains to be seen how the public would react to the likes of Amazon, Google, or Facebook providing smart city services in their neighborhoods, but these web giants know that smart cities represent a huge opportunity for them to expand, using their existing expertise as leverage to dethrone the incumbent IT providers that are typically seen as inefficient, uninspired, and devoid of innovation.

Judging whether you want a web giant to run your city will come down to their performance, and while they may never take the plunge, for fear of damaging their core brands, smart cities are massive greenfield opportunities for these companies to explore.

The EU and its associated competition watchdogs and bodies have recently shown that they are quite interested in direct interventions on companies they think have the potential to abuse a dominant market position. The IoT trend seems unique in its ability to benefit a cash-rich early adopter, who could then push and keep rivals out of a market.

For different verticals or markets, there may well be a concrete limit that a company can’t exceed. For instance, we’re unlikely to ever see John Deere become a public transport monopoly, even though that market has overlap with its increasingly automated agricultural machinery.

But certain platforms have many more opportunities – especially those that end up governing public life. Smart cities are perhaps the most potentially damaging, given the massive amount of insight into the life of a private citizen that could be gathered by a provider of smart city platforms and services.

While the cronyism of large government infrastructure projects might help keep some new companies from competing here (the likes of Capita or G4S in the UK, for instance, although they are hardly shining lights for the anti-monopoly IoT brigade), Amazon, Facebook, or Google would love to combine the smart city data with their own data reserves, as a means of boosting their own profitability.

Now, there are at least two sides to that coin, in that such combinations could be (perhaps simultaneously) both very good and very bad for the citizen. These technologies, using the huge amount of data that an increasingly interconnected world provides, could eliminate poor health, traffic congestion, and poverty, but on the flip-side, they could enable panopticon levels of mass surveillance that are easily exploitable by a so-inclined government.

The post-Snowden world, and the reality that technologies like machine-learning and machine-vision are being explored by governments looking to ensure ‘stability,’ has spurred something of an awakening in the consumer press – with left-leaning and technology-focused outlets providing extensive coverage and commentary on the perils of unchecked government monitoring.

But in the political sphere, there hasn’t been much of a reaction to the revelations. There were no revolutions or forced exoduses from power, by citizens outraged at the level of insight a government could hold into their most private affairs, which could be read as either a sign of public apathy or acceptance of/with this new norm.

So while smart cities might provide a new wave of convenience, ensuring that a citizen is never late for an appointment or that traffic levels are controlled to provide the best air quality and transport efficiency in an urban environment, the trade-off is that one of these PaaS applications could track a person’s precise location throughout an entire day, and it seems that the citizen wouldn’t have much of a recourse.

But it currently seems that a shift to these potentially Orwellian smart city applications will be accepted by most citizens – after all, they provide the potential for great convenience and security, and shouldn’t increase their tax burden, thanks to the promised increases in operational efficiency that such a system could provide.

The question then becomes what is the difference when Facebook starts offering this sort of service to cities, rather than an incumbent IT systems integrator – a well-known brand versus a largely anonymous business. For many, the introduction of someone like Facebook would be uncomfortable – as they have an existing relationship with Facebook or Amazon.

Facebook is where they digitally socialize, where all the pictures of their children are stored and commented upon by friends and family, and Amazon has surged to dominance by using data-based systems to know how to better monetize its customers. Bezos & Co. know how to get more money out of you, and most are aware of this fact.

Facebook and its marketplace feature shows that it is interested in expanding its scope, but Google is similar in that it isn’t charging customers to use its platform – and if you aren’t paying for the service, then you are the commodity. Google’s core business remains advertising, using data gleaned from its web services to better pitch advertising impressions to marketers – but Google has a long track record of investing in projects to diversify its portfolio.

Google has its Waymo self-driving cars, Project Loon, Google Fiber, and of course Android, but Amazon is also a solid example of this diversification – constantly adding more services to its Prime subscriptions, becoming a leader in cloud computing using AWS, and now leading the charge in the smart home using Alexa and its Echo devices. For each hit, these companies have a good few misses – don’t mention Fire Phone or Google+.

These companies are going to explore smart cities as opportunities for expansion, and definitely have the cash to spare to fuel those ventures. Thanks to their cloud platforms and partner ecosystems, the technology barriers to entry into government IT contracts have been greatly lowered, for the likes of Amazon and Google, and Facebook’s social media insight gives it a pretty strong position when it comes to understanding how people think and live – and therefore how to better organize a smart city system.