2018

Innovative, Responsive &

Interconnected Cities
Growing Australian Productivity via Smart Cities Policy
Australian National Internship Program Report by Matthew Bowes
 Acknowledgements
Many thanks to my hosts at the Office of The Hon. Anthony Albanese for making this report possible.

Thanks also to the Australian National Internship Program office for organising my placement.

Thank you to Holly and Ed, who aided immensely in the editing of this report.
 5.2 CASE STUDY OF MANCHESTER, UK .................................................... 15
5.3 AUSTRALIAN GOVERNMENT SMART CITIES POLICY................................. 16
Table of Contents 5.4 CASE STUDY OF NEWCASTLE............................................................. 18

6 RECOMMENDATIONS ................................................................... 19
EXECUTIVE SUMMARY ...................................................................... 4

6.1 DIGITAL AND KNOWLEDGE CITIES ...................................................... 19

TABLES & FIGURES ............................................................................ 5
6.2 ENHANCING OPENNESS AND COLLABORATION ...................................... 19
6.3 BALANCING LOCAL AND NATIONAL INTERESTS ...................................... 21
ABBREVIATIONS................................................................................ 5
A APPENDICES ................................................................................ 22
1 OVERVIEW ..................................................................................... 5
A.1 INEQUALITY IN SMART CITIES ........................................................... 22
2 DEFINING SMART CITIES ................................................................. 6 A.2 PRIVACY AND SECURITY IN SMART CITIES ............................................ 23
A.3 SUSTAINABILITY IN SMART CITIES ...................................................... 24
3 URBAN PRODUCTIVITY AND SMART CITIES ..................................... 8
REFERENCES ................................................................................... 25
3.1 DRIVERS OF URBAN PRODUCTIVITY ...................................................... 8
3.2 URBAN PRODUCTIVITY IN AUSTRALIA ................................................... 9
3.3 CHALLENGES TO URBAN PRODUCTIVITY ............................................... 11

4 A FRAMEWORK FOR PRODUCTIVE SMART CITIES .......................... 12

4.1 INNOVATIVE ................................................................................. 12

4.2 INTERCONNECTED .......................................................................... 12
4.3 RESPONSIVE ................................................................................. 13

5 SMART CITIES POLICY IN AUSTRALIA AND ABROAD ....................... 15

5.1 CASE STUDY OF SANTANDER, SPAIN ................................................... 15

Matthew Bowes, Australian National Internship Program 2018 3


Executive Summary
 As Australia becomes increasingly urbanised, smart cities policy
represents an opportunity to increase urban productivity and
manage the challenges associated with increased density.
 Smarts cities combine the benefits of knowledge-intensive
economies with the latest pervasive internet technologies.
 By evaluating the potential productivity benefits of smart
cities policy, this paper seeks to demystify the concept of
‘smartness’ and outline concrete ways in which smart cities
policy can grow urban economies.
 Smart cities should build upon the existing productive
advantages of cities by:
 enhancing knowledge transfer, worker specialisation and
access to key institutions;
 and minimising congestion, pollution and relocation costs.
 Productive smart cities are innovative, interconnected and
responsive.
 Innovation requires collaborative research institutions,
private research & development, and a specialised
knowledge-intensive workforce.
 Interconnection involves efficient transport and
communications infrastructure, and urban communities
that facilitate personal interaction.
 Responsiveness requires a ground up approach to local
governance, alongside widespread data collection and
utilisation in government and industry.
 Smart cities policy should foster digital & knowledge capacities:
Matthew Bowes, Australian National Internship Program 2018
 City Deals style agreements should coordinate education,
employment, innovation and communications policy.
 Investments in data collection infrastructure should only
proceed where cities have demonstrated capacity to
produce actionable data-driven insights.
 City progress should be measured using both economic and
survey indicators.
 Concurrent investments in education should be targeted to
overcome regional knowledge and digital skill shortages.
 Smart cities policy should enhance openness and collaboration:
 City Deals agreements should be structured to encourage
policy learning among local and state governments.
 Urban datasets collected through smart city infrastructure
should be incorporated in a national data regulatory
scheme, to improve accessibility.
 Data collection infrastructure should incorporate existing
data sources and accommodate third party access.
 Smart cities policy should balance local and national interests:
 City Deals agreements should be based around a
transparent national policy framework that outlines smart
city goals and clarifies the opportunities available.
 Grant-style funding for smart cities projects should be
incorporated within the broader framework of City Deals.
 City Deals should aim to increase local government capacity,
including by creating metropolitan governance institutions.
 Future City Deals should include long term targets for the
use of new population-level data sources to drive smarter
and more efficient urban planning and zoning.
 Infrastructure projects funded under such deals should
integrate data collection technology.
4

Tables & Figures
 Figure 1: Smart Cities as Digital and Knowledge Cities
 Figure 2: Word Cloud of Smart City Definitions
 Figure 3: Average Growth in Hours Worked and Total Factor
Productivity by Industry, 1990-2017
 Table 1: Mechanisms and Policy Implications of Urban
Productivity
 Table 2: Challenges to Urban Productivity and Policy
Implications
 Table 3: A Framework for Productive Smart Cities
 Table 4: Comparative Evaluation of Smart City Case Studies
 Table 5: Recommendation Time Frames and
Implementation Levels
Abbreviations
 Application Programming Interface (API)
 Internet of Things (IoT)
 Information Communications Technology (ICT)
 Manchester City Deal (MCD)
 Science Technology Engineering and Maths (STEM)
 Greater Manchester Combined Authority (GMCA)
 Infrastructure and Project Financing Agency (IPFA)
Matthew Bowes, Australian National Internship Program 2018
1 Overview
Australia is becoming an increasingly urbanised nation. Over the past
decade the proportion of Australians living in cities has grown from
77% to 79% [1], a growth rate 82% faster than the OECD average [2].
Much of this growth is occurring in major metro areas, with more
than 61% of Australians living in our 5 most populous metro areas.
The concept of ‘smart’ cities was developed in response to increasing
urbanisation. Smart cities are those that combine specialised
workforces with the latest advancements in information
communications technology (ICT) to improve the liveability,
productivity and sustainability of urban areas [3], [4]. Smart cities
concepts have become central to the urban policy discourse of a
range of policy actors, including in Australia [3], [5]–[7].
Nonetheless, governments seeking to design smart cities policy face
numerous barriers. Not only is the concept of smartness contested
[8], but concerns remain around the efficacy of policies that have
smarter cities as their goal [9]. This report develops a framework for
smart cities policy, by considering the potential for such policies to
increase urban productivity. Focusing on productivity alone allows
for a frank evaluation of the merits smart cities programs and
situates them in the context of alternative urban policy options.
Ultimately, if well designed, smart city policies can be an efficient
means of increasing productivity growth in urban areas. However, to
succeed at this goal, urban policymakers must look past smart cities’
futuristic sheen, and instead focus on concrete actions that can make
Australian cities more innovative, interconnected and responsive.
5
2 Defining Smart Cities
The usage of the term ‘smart’ to describe technologically advanced,
innovative urban economies follows in the wake of a range of other
city labelling trends, such as ‘future cities’ and ‘intelligent cities’ [10].
Unsurprisingly then, the term has garnered significant criticism for
its lack of precision [9]. Nevertheless, the essential aspects of smart
cities can be traced to two concurrent urban design trends:
knowledge cities and digital cities [4].

Knowledge cities are those that foster knowledge creation and

innovation by investing in education and social infrastructure, and
supporting entrepreneurial businesses and research institutions [8],
[11]. Relatedly, digital cities are instrumented with internet of
things (IoT) sensors that enable pervasive real time data collection
and analytics, across a range of areas such as transport, health,
energy and climate [12], [13]. In essence, smart cities harness the
benefits of both knowledge-intensive economies and digital
technologies. As such, smart cities policy must account for the
interaction of these two streams of urban development (See Figure
1). The scope of this two part definition can be explained by the
breadth alternative smart city definitions available (see Figure 2),
and by the broad range of institutions that contribute to a city’s
smartness: smart economy, people, governance, mobility,
environment and living [8], [14].
Although smart cities are further theorised to have implications for
sustainability, equity and privacy (see Appendices), this report shall
focus more narrowly on the potential impact of smart cities
Figure 1: Smart Cities as Digital and Knowledge Cities
projects on urban productivity. Productivity can meaningfully be
understood as the growth in economic outputs that occurs above
and beyond any growth in labour or capital inputs [15]. Productivity
growth is thus essential to prosperity, because it represents the
only means of achieving economic growth without relying on
increases in population, investment or natural resource extraction.
Per economist Paul Krugman [16, p. 11]:
“Productivity isn’t everything, but it is almost everything.”
Productivity growth is thus an essential metric by which to evaluate
urban policy [17]. Smart cities policy that increases long run
productivity will grow wages, per capita GDP, and future government
revenue [18].

Matthew Bowes, Australian National Internship Program 2018 6

 Considering the productivity implications of smart cities in isolation
allows a distinction to be made between policies which take
‘smartness’ as a goal in itself and those in which smart cities policy is
merely one of many urban policy tools. The absence of such a
distinction is particularly evident in many third-party evaluations of
smart cities, which problematically juxtapose concrete metrics (e.g.
particulate pollution and GDP per capita) alongside less tangible
indicators of cultural and technological sophistication (e.g. number
of local theatres and LinkedIn accounts) [19]–[21] .

Focusing on productivity in smart city evaluation also raise questions

over how best to measure the impacts of so-called “knowledge
workers” in STEM, innovation and research industries, who are key
to the functioning of smart cities [22, p. 45]. Not only do such
workers affect the productivity of industries outside of their own,
but they work across a range of industrial sectors, making it hard to
measure their effect within industries.

This is particularly the case in data coded using traditional industry

classification schemes (see Figure 3). Notably, industrial productivity
data coded using such classifications hides the true source of a
particular industry’s productivity growth. For example, in the
Australian context, it is likely that the recent productivity growth in
Agricultural industries was partly the result of innovations created or
Figure
Figure2:2:Word
WordCloud
CloudofofSmart
SmartCity
CityDefinitions,
Definitions,from
from[8,[8,pp.
pp.6–8]
6–8] implemented by workers in other industrial sectors, such as the
scientific, technical or even manufacturing sectors.

Matthew Bowes, Australian National Internship Program 2018 7

 Source of Urban Mechanism of Productivity Smart City Policy
3 Urban Productivity and Smart Cities Productivity Growth Implications
Ongoing Sources of Urban Productivity
3.1 Drivers of Urban Productivity Research & Higher R&D activity in cities Largely a
Development leads to more efficiency- downstream
Economists have long recognised the potential for cities to increase (R&D) Activity increasing innovations indicator of
the productivity of the workers and firms within them [23]. This is being made available to all productivity.
the result of both static factors, such as greater specialisation of the firms [27].
labour force and better supply chain management, and dynamic Firm Density increases business Favours denser
factors, such as the concentration of a highly educated labour force, Competition competition [28], which in cities.
and increased research and innovation (see Table 1) [24]. turn drives innovation
Supply Chain Proximity to suppliers and Limit urban
However, interpreting the impact of cities on productivity is Management customers allows for more congestion.
complicated by selection effects: better educated, more productive efficient production [29].
workers often prefer to live in cities, thus artificially inflating their
Key Sources of Urban Productivity for the Information Age
aggregate productivity [25]. Moreover, the policy implications of the
literature on urban productivity are somewhat unclear. In particular, Knowledge Dense networks of human Facilitate
the effectiveness of public investment in areas of higher productivity Spillover capital facilitate ‘spillover’ interactions
must be established on a case by case basis, compared with the (Transfer) of information and between urban
benefits of alternative policies that aim to support growth in less innovation within local innovators.
productive regions. areas [30]–[32].
Specialisation of Labour density allows Focus on
In this context, smart cities provide a point of departure for the Labour better matching between utilisation of
design of productivity-enhancing cities policy. Since the 1990s, the workers and jobs [33]. worker skillsets.
advent of ICT has led to a reinterpretation of the role of cities in Access to Key Proximity to financial and Invest in public
advanced economies [26]. In particular, the rapid decrease in Institutions government institutions facing services and
communication costs reduces the need for firms to be physically increases productivity, facilitate industry
proximal to one another to access R&D innovations, capital flows, especially in highly clusters.
and public institutions. Such technological trends even led Edward educated cities [25].
Glaeser to pen a 1998 paper entitled, ‘Are Cities Dying?’ [26]. Table 1: Mechanisms and Policy Implications of Urban Productivity

Matthew Bowes, Australian National Internship Program 2018 8

In fact, both Glaeser and others have since found that the
productivity benefits of cities have remained stable in the face of
continuing innovations in ICT [30], [34]. This is especially the case in
economies, like Australia’s, which are reliant upon growth in service
industries. On this basis, Porter [29] concluded that,
“Paradoxically, the most enduring competitive advantages
in a global economy seem to be local.”
Productivity enhancing smart cities policy should then build upon
these ongoing local advantages to co-location: knowledge spillover,
labour specialisation and proximity to institutions.
These core mechanisms of productivity growth have three key
implications for the design of smart cities policy. Firstly, smart cities
must enhance knowledge transfer between research institutions and
proximal private industries. While investment in universities is not a
necessary condition for innovation [35], the presence of industry
focused, research intensive institutions nonetheless increases local
productivity [36]. Secondly, productive cities will aim to foster
clusters of industries which are best suited to the realities of the local
market for labour and key inputs, so as to most effectively foster
worker specialisation and regional knowledge transfer [29], [37].
Finally, smart cities will focus on the transfer of innovations into
industrial practices, to ensure that the benefits of knowledge
transfer and access to institutions are not wasted [38], [39]. In
particular, urban innovation can be supported by improvements in
the data collection and analysis infrastructures that facilitate
productivity enhancing market insights [18, Sec. 5.2].
Matthew Bowes, Australian National Internship Program 2018
3.2 Urban Productivity in Australia
In the Australian context, productive smart cities policy represents
both challenges and opportunities. One key challenge for policies
that aim to enhance productivity growth involves managing the
transition for workers whose jobs become untenable: because
increased short-run productivity involves producing more with less
labour, rapid increases in productivity may necessitate layoffs. In
Australia, this trend is especially notable in industries such as
agriculture, manufacturing and wholesaling, where increased
productivity has seen the number of workers fall (see Figure 3).
Beyond the short term however, smart cities policy should aim to
counterbalance such contraction by promoting growth in higher
paying knowledge-intensive and digital industries. In particular, this
will increase demand for workers STEM-related skills, which are
essential to urban productivity growth [33]. Although, the scientific
and technical industry in Australia has seen promising recent growth
(See Figure 3), measuring the impact of this growth in knowledge
workers presents significant challenges, as noted above.
Importantly, the role of knowledge workers is less as inventors than
as innovators [40, p. 25]. While Australia’s comparatively small size
limits its potential role as a global leader in knowledge creation and
technological invention, knowledge workers in Australia still play a
crucial role in local innovation, i.e. in adapting and implementing the
latest technologies and business models from abroad, both in legacy
companies and in start-ups. Worryingly, recent indicators suggest
that Australian businesses may be falling behind their global peers in
the adoption of new innovations such as cloud computing [41].
9
 Such factors have a number of implications for Australian smart cities
policy. Firstly, increasing productivity in urban areas may be more
difficult in regions lacking the workforce and industrial knowledge
required to effectively utilise particular smart city innovations [43].
Thus, to drive inclusive productivity growth, smart cities policy in
Australia will have to adapt to support a range of local industrial
clusters. For example, smart cities policy in service industry oriented
metropolitan precincts might focus on fostering marketable
innovations through population tracking technology, while
complementary policies in urban areas reliant upon agribusiness
might instead aim to support local smart agriculture companies in
their use of crop imaging technology. More severe inequities in
human capital can further be combatted by improving education and
training services in relatively disadvantaged urban areas.

Secondly, smart cities policy should aim to create the right

environment for Australian businesses to adopt innovative practices.
While disruptive start-ups, big-business funded research and
development, and local technological invention will all play a role in
the economies of smart cities, policies that attempts to directly
subsidise any one of these factors are likely to be relatively
ineffective [44]. Rather, smart cities policy should aim to grow
productivity through improvements in the business environment of
urban areas, for example via investment in communications and
transport infrastructure. Furthermore, despite Australia’s relative
Figure 3: Average Growth in Hours Worked and Total Factor success in removing overly burdensome business regulation, further
Productivity by Industry, 1990-2017. Note: Points sized by total improvements in regulatory efficiency are desirable, especially in
Derived from
sectoral ABS Data in
employment & 2016-17.
EstimatesExcludes
[42] public sector industries. regard to the regulation of data [18], [45]. The contours of such a set
Industries highlighted in blue are considered key to Australia-wide of policies will be outlined in Sections 4 and 6.
productivity growth [19]. Derived from ABS Data & Estimates [42].

Matthew Bowes, Australian National Internship Program 2018 10

3.3 Challenges to Urban Productivity essential to minimise relocation costs in metro areas, as urban
densification stalls and property prices rise [40, p. 8], [52, pp. 21–22].
Beyond growing knowledge-intensive industries, smart cities policy
can also increase productivity by combatting the downsides of urban To support the detailed analysis required for such smart urban
density (See Table 2).1 Much of the potential of smart cities policy in planning processes, cities must be equipped with the requisite data
this regard can be attributed to the opportunities for more efficient infrastructure, supported by a base of data-literate workers. In some
urban governance enabled by IoT data. This is facilitated by the cases, such capacity can be developed via the monetisation of IoT
installation of smart sensors in urban infrastructure and by the data, to provide an ongoing revenue stream to support IoT networks.
mining of existing data sources, such as GPS and utilities data [13]. These factors further speak to the importance of developing both
knowledge-intensive and digital urban capacities [53].
Three examples of IoT data usage are particularly illustrative. Firstly,
IoT sensors can be embedded in roads, traffic lights, and emergency Challenges to Mechanism Policy
service vehicles to allow dynamic minimisation of traffic via changing Productivity Implications
speed limits, rerouting, and mobile notifications to drivers [46]. Pollution & Pollution and waste create Limit pollutants
Sensor technology can also be used to help efficiently regulate ride- Waste additional costs, degrade & invest in clean
sharing and taxi networks, or institute congestion charging [47], [48]. employee health and infrastructure
Secondly, sensors in built areas can monitor temperatures, pollution worsen work conditions [54]
and energy usage to enable governments and businesses to better [49], [50].
manage the challenges associated with urban heatwaves and Congestion Overuse of existing Invest in
pollution [13]. Given the impact of heat and pollution on worker transport and necessary built
productivity [49], [50], heat and pollution management programs communications infrastructure
will become essential as climate change becomes more severe. infrastructure [34].
Lastly, sensors and satellite imaging can be used to monitor urban Cost of Limited land within cities Focus on dense
density and population movements, allowing for more efficient Relocation increases costs of development &
urban planning and development [51]. 2 In the Australian context, construction and efficient urban
smarter urban planning at the state and local level is particularly relocation [55]. zoning
Table 2: Challenges to Urban Productivity and Policy Implications

1See Appendices for further discussion of challenges to smart cities that lie 2 See [54] and [100] for interesting applications of such satellite technologies.
beyond the scope of this report.

Matthew Bowes, Australian National Internship Program 2018 11


4 A Framework for Productive Smart Cities
To structure discussion around the role of smart cities policy in
boosting productivity, this section outlines a three-part framework
which combines the key findings from urban productivity research
with the literature on smart cities (see Table 3).
4.1 Innovative
In the first instance, smart cities policy can foster innovation by
increasing the output of public research institutions [56]. However,
beyond merely ensuring that such institutions are well funded, smart
cities policy should see such institutions as key stakeholders in the
development of a city’s ICT infrastructure [14]. Moreover, for those
cities with relatively weak research and development capacity, smart
cities policy should instead aim to better equip workers to translate
existing innovations into industrial practices [35].
Similarly, smart cities policy should support a specialised workforce,
and private research and development efforts. The specific skillsets
targeted by such policies will depend largely upon the comparative
strengths of specific cities and regions, but in general such policies
should be industry-agnostic, and should avoid attempts to
dramatically reorient urban economies by favouring particular
industries or sectors (such as the technology industry) at the expense
of others [29], [37]. To the extent that such efforts have a common
goal across all urban areas, it should be to equip workers and
businesses with the tools to analyse and utilise emerging urban
datasets and digital innovations [57].
Matthew Bowes, Australian National Internship Program 2018
4.2 Interconnected
Productive smart cities need to be well connected by both ICT and
transport infrastructure. This primarily involves investing in a
transport network that minimises the costs of congestion and
pollution, and allows for efficient movement of workers from all
parts of the city. While this goal is common to many urban policies,
it is nonetheless worth noting the importance of transport networks
in facilitating the movement of the large pool of skilled workers
necessary for knowledge-intensive urban economies [18, Ch. 4], [22],
[58].
Given the role of population density and interpersonal connections
in facilitating knowledge transfer, smart cities policy should also
invest in programs and infrastructure that maximise personal
interaction and create cohesive urban communities [25], [31].
Measuring progress in this regard requires a mix of economic and
subjective wellbeing indicators.
To support networks of IoT sensors, productive smart cities also
require significant ICT infrastructure. This infrastructure involves
both rapid, publicly accessible wired internet, and low power
wireless networks to enable real time monitoring of IoT sensors [13],
[51]. IoT networks further rely on data relay and storage
infrastructure, to enable the compiling and sharing of large volumes
of data, ideally using a centralised data portal and code-scheme [59].
For each network component, smart cities will need to balance the
competing demands of speed, cost and reliability, alongside further
considerations such as the extent of public involvement in network
operation.
12
The extent of public involvement is of particular importance given urban planning is particularly important to ensure that cities can
the ongoing leadership of large technology firms such as Microsoft, expand and densify as they are subject to increasing urbanisation, so
Cisco and IBM in designing and maintaining smart city infrastructure. as to minimise the costs of worker and business relocation.
While such firms may prove an important partner in the creation of
IoT networks, partnerships with such firms must nonetheless
safeguard the ability of various public and private stakeholders to
make use of the data produced by such systems.

4.3 Responsive

Primarily, responsiveness should be seen as an organising principle

for smart urban governance. Flexible smart cities policy should allow
local and state governments to be responsive to the particular
challenges their cities face, thus avoiding policy solutions that are
one-size-fits-all or which attempt to pick winners. Public and
business engagement with smart city projects is also essential for the
successful implementation of smart public services, innovation
enhancing industrial and research programs, and large-scale data
collection [60].

Responsiveness further requires smart cities to maximise their data

collection capacity, and to make use of the insights such data sources
can provide. Importantly, smart cities policy should focus as much on
the quality as the quantity of sensor data available, and should also
aim to retrofit and make use of untapped data sources, such as
building electrical systems, which can offer significant insights with
minimal investment [12]. Moreover, smart cities policy should
outline clear processes for the use of these data sources and their
insights, both in the daily management of public services and
congestion, and as an ongoing tool of urban planning [46]. Smarter

Matthew Bowes, Australian National Internship Program 2018 13

 Core Capacity Key Aspects
Integration of educational & research institutions
within the broader economy. Focus on utilisation of
innovative technologies and practices [35], [56].
Development of a skilled workforce, capable of
applying the latest technology and data insights to
Innovative
their area of specialisation [14, p. 142], [57].
Private research activity that builds on a region’s
comparative strengths, in particular by analysing and
utilising local data sources [12], [14], [29].
Extensive and efficient transport networks to
enhance communities and minimise the costs
associated with urban density [17, p. 193], [61].
Rapid and reliable communication and data storage
infrastructure. Focus on network compatibility and
Interconnected
streamlined access [13], [51, p. 403], [59].
Built environment and residential development that
facilitate personal interaction and dense, cohesive
communities [8, p. 13], [14], [25], [31], [62].
Ground up approach to governance facilitated by
citizen participation, flexible national policy and
transparent local institutions [59, p. 492], [60].
Widespread integration of sensors within urban
infrastructure. Collection and release of anonymised
Responsive
household and industry data [12], [13], [46], [51].
Dynamic use of data in day to day operation of built
infrastructure. Adoption of data-based approaches
to urban planning [3, p. 6], [59, p. 500].
Table 3: A Framework for Productive Smart Cities
Matthew Bowes, Australian National Internship Program 2018
Productivity Benefits
Increases human capital and local
knowledge spillover between
universities and industry.
Increases labour force specialisation
and capacity to exploit knowledge
spillovers.
Targeted innovation helps
overcome regional inequities and
enhance industry knowledge.
Lowers congestion, pollution &
waste. Increases knowledge
exchange.
Improves flow of knowledge and
information. Facilitates storage and
analysis of locally sourced data.
Facilitates information sharing and
specialisation. Combats cost of
relocating to city centres.
Allows communities to respond to
local challenges. Enhances access to
public services and information.
Facilitates government response to
urban challenges, provides basis for
new research and innovation.
Minimises congestion, pollution and
relocation costs. Facilitates efficient
infrastructure investment.
Example Indicators
- No. of research institutions
- Quality of research institutions
- No. of private/public grants
- No. of workers in transport,
creative, STEM and data industries
- Level of worker education
- Patent filings and R&D spending
by region and industry
- GDP per capita
- Average travel time
- Air quality and urban climate
- Extent of transport network
- % of people with internet access
- Use of accredited ICT standards
- Subjective wellbeing indicators
- Housing density & affordability
- Use of green & public spaces
- Levels of community engagement
- Spending on e-government and
non-emergency public services
- No. of smart sensors installed
- No. and quality of publicly
accessible data sources
- No. of new dynamically adaptive
infrastructure projects
- Audits of local governance process
14

5 Smart Cities Policy in Australia and Abroad
Two international case studies serve to highlight the some of the key
challenges in implementing productivity enhancing smart cities
policy.
5.1 Case Study of Santander, Spain
Funded by a European Union grant, the SmartSantander project
brought together 25 university, government and business partners
to build a citywide testbed for IoT sensor technology within the
Spanish port city of Santander (pop. 172,000) [63]. The network was
composed of more than 15,000 sensors, embedded in a wide range
of urban infrastructure e.g. parking sensors, GPS sensors on buses,
moisture sensors in parks and motion sensors in street lights [64].
Supporting this sensor network were more than 1200 repeaters,
which created a low power wireless network for short range data
transmission, and several gateways, which allowed for easy external
access to the network via a proprietary application programming
interface (API) [65].
Santander’s strengths as an IoT enabled smart city stand out (see
Table 4). By making a significant investment in IoT sensor network
technology, Santander has already developed a large urban database,
and has ensured that future sensor additions are interoperable with
existing systems. This avoids the inefficiencies that arise when IoT
data is ‘siloed’ away from external access, or not consistently
labelled and stored. Moreover, because this network was designed
Matthew Bowes, Australian National Internship Program 2018
in collaboration with research institutions, it facilitates easy
experimentation and allows for streamlined data access [66].
However, Santander’s efforts fall short of constituting a wholistic
smart cities policy. Firstly, there have been only limited attempts to
integrate data analysis into city management and no apparent
efforts to coordinate transport investments with smart city projects.
Secondly, only limited attempts have been made to coordinate with
businesses to integrate smart city projects with the region’s broader
industrial activity, despite Santander having a large advanced port
facility. Lastly, the city’s local government has so far been relatively
inattentive to the role of community engagement and relational
networks in facilitating policymaking and knowledge exchange.
5.2 Case Study of Manchester, UK
Having been previously reliant upon a now declining manufacturing
industry, the Greater Manchester city-region (pop. 2.75 million) has
made several attempts to increase regional productivity through
smart cities programs [67]. Beginning in 2002, the Knowledge Capital
program united councils, businesses and universities to boost
scientific research, reduce household energy usage, and bring local
innovations to market [68]. In 2008, recommendations from the
Manchester Independent Economic Review led local governments to
prioritise increased density, especially around university precincts,
and enhanced business engagement in policymaking, to increase
regional productivity [69].
15
More recently, the Manchester CityVerve program aimed to install
IoT sensors in transport infrastructure and parks, connect businesses
with new data sources, and revitalise public spaces [70]. While such
efforts have seen significant success, this federated approach to
smart cities policy may have stymied advancement in citywide
communications and data usage.
Concurrently, the 2010 UK coalition government established the
Greater Manchester Combined Authority (GMCA). This multi-council
regional authority was gifted significant powers over urban planning,
business regulation, professional skills training and welfare
programs, as part of the 2012 Manchester City Deal (MCD) [71]–[73].
MCD aimed to revitalise regional economic policy, and make local
governance more efficient, partly by allowing the GMCA to spend the
increased tax revenue brought about by its economic policies.
As a means of empowering Manchester to design its own productive
smart cities policy, MCD has had a decidedly mixed impact.
Promisingly, the GMCA has invested in transport and skills-training
programs that specifically aim to support knowledge-intensive
industries [74], even if its capacity to shape such policy is still limited
under the terms of the MCD. However, the MCD has been plagued
by disagreements between the GMCA and the UK government over
how best to measure policy impact, and calculate the value of
increased revenue to be collected by the GMCA [75]. Additionally,
the MCD’s deal-making mechanisms have faced criticism for being
opaque, and for stifling community engagement [73].
Matthew Bowes, Australian National Internship Program 2018
5.3 Australian Government Smart Cities Policy
This section will explore the content of the Australian Government’s
current smart cities policies and their impact on productivity, while
the next section will outline the interaction of these policies with
local and state government policy via the case study of Newcastle.
The Department of Prime Minister and Cabinet’s 2016 Smart Cities
Plan outlines three key components to Australian smart cities policy
[7]. Most immediately, the plan sets aside $50 million for investment
in smart cities projects that improve urban infrastructure, local
government service delivery, liveability and sustainability [76]. This
Smart Cities and Suburbs Program was run via a grant application
process, with local governments able to bid for funds to cover up to
50% of project costs.
The second component of the Australian Government’s Smart
Cities Plan involved the creation of the Infrastructure and Project
Financing Agency (IPFA). This agency aims to connect local
governments with private sources of infrastructure financing, and
to design value capture financing schemes similar to those used in
the MCD [77]. To date, no major IPFA projects have been
publicised. The final component involves the negotiation of City
Deals with local and state governments, borrowing from the use of
such deals in the UK [78]. To date, deals have been established with
Townsville, Western Sydney and Launceston.
16
 Core Capacity Santander, Spain Manchester, UK Newcastle, Australia
Collaborative Sensor tested run by universities from Efforts to better exploit impact of local Local universities included as key
Research across Spain and the EU. Technology universities. Integration of institutions stakeholders. Ongoing progress on
Institutions optimised for experimentation. with IoT infrastructure still ongoing. creation of a sensor testbed.
Innovative

Limited efforts to make data accessible to Policy aims to balance legacy of industrial Focus on high-skill industries, e.g. defence
Specialised
local workers. Lack of integration with development with the expansion of manufacturing, but links to broader
Workforce
regional economic policy. centrally located knowledge industries. regional economic plan unclear.
Data network attempts to balance speed Creation of ‘living labs’ and other Creation of framework for collaboration
Private Research
with accessibility. Consulted with local coordinated research consultancies. and easy data access. Only a limited range
& Development
companies to create APIs for their use. Support of data-based local research. of industries considered.
Integration with broader transport policy Creation of a regional transport network Despite a robust transport plan, the
Efficient
unclear. and green transport corridors. Still, council lacks the capacity to shape local
Interconnected

Transport
benefits of devolved funding unclear. transport policy.
While public data storage is limited, data Federated approach to Smart City policy Work underway on long range wireless
Communications
networks are pervasive, easily maintained, complicates citywide communications networks to link IoT sensors. Plans for co-
Infrastructure
rapid, modifiable and highly accessible. infrastructure efforts. -investment in data storage facilities.
Lack of clear strategy for use of smart city CityVerve program aims to encourage use Focus on community as part of smart city
Cohesive
planning to enhance relational networks. of central public spaces. Planning policy strategy. Lacks a citywide plan for
Communities
facilitates both density and inclusion. development and built environments.
Consultation occurred only on a project by City Deals agreement created without Extensive community consultation and
Ground-up
project basis. E-governance and public consultation. Largely technocratic engagement. Plans for expanded e-
Governance
transparency reforms ongoing. approach to Smart City governance. governance services.
Responsive

Large scale, dense sensor networks in both Ongoing IoT integration in transport, Plans for expansive sensor installation.
IoT Sensor
mobile and static infrastructure. Continued health, and emergency services. Efforts to Testing of initial ground sensors
Installation
expansion and experimentation. retrofit existing buildings sensors. underway.
Considerations around data usability Data use occurs mostly on a program by Limited transport management plans.
Dynamic Data
integrated into design of sensor network. program basis. Ongoing efforts to better Council efforts held back by lack of
Utilisation
Nonetheless, limited usage to date. utilise existing data sources. governance capacity.
Sources: [63]–[66], [79]–[81] [67]–[75], [82]–[84] [85]–[87]
Table 4: Comparative Evaluation of Smart City Case Studies. Legend: Comparative Weakness Progress Ongoing Comparative Strength
Matthew Bowes, Australian National Internship Program 2018 17
Evaluated using the framework outline above, Australian smart cities
policy is clearly falling short of maximising urban productivity growth.
Firstly, the Smart Cities and Suburbs Program has failed to
adequately prioritise the deployment of IoT networks and has set no
standards for IoT infrastructure to improve the accessibility and
interoperability of networks that do exist. Furthermore, the program
has largely ignored the potential of projects that free up existing
urban data sources to enable third party analysis.
Secondly, although ensuring adequate infrastructure financing is
important, it is not clear that infrastructure financing, whether public
or private, is best established and managed at the local and regional
level. Not only is private financing often costlier than government
borrowing, but value capture revenue schemes present significant
logistical challenges for local and state governments, and may
increase compliance costs for businesses [88]. As of yet, value
capture and private infrastructure financing have failed to provide a
meaningful alternative funding stream for general infrastructure or
smart city projects, so exacerbating the issue of limited funding
available through the current smart city grants programs.
Lastly, the current series of City Deals have failed to strike the right
balance between outlining a national smart cities policy and allowing
local governments policy flexibility. Unlike in the UK, the Australian
Government’s City Deals have been arranged on a city by city basis,
leading to a fragmented approach and raising concerns that such
deals are ‘picking winners’ at an industrial and regional level [89]. On
the other hand, the lack of a transparent, bottom-up deal-making
process has limited the ability of local governments to develop truly
innovative productivity enhancing urban policies [90], [91].
Matthew Bowes, Australian National Internship Program 2018
5.4 Case Study of Newcastle
Newcastle (pop. 480,000) provides a case study of the strengths and
limitations of current Australian smart cities policy (see Table 4). In
2017, the Newcastle Council outlined an expansive Smart City
Strategy [85], which encompasses projects to reform transport, built
environments, public spaces, and public services, all supported by a
city-wide IoT network. This network, partly funded by a grant from
the Smart Cities and Suburbs program, will be designed and installed
in collaboration with both local research institutions and ICT
providers. In contrast to the case studies previously discussed,
Newcastle’s smart city strategy incorporates extensive community
consultation.
Despite these positive signs, Newcastle’s efforts have been stymied
by the Council’s limited governance capacity, and an absence of
coordinated Australian or State Government involvement in smart
cities initiatives. These shortcomings are particularly apparent in
policies targeting transport and knowledge-intensive infrastructure.
While the New South Wales State Government has invested in the
Newcastle Light Rail, this project has not been designed to integrate
with the city’s strategy for smart sensing or transport management
[92]. Moreover, because this infrastructure is privately managed,
Newcastle Council has limited options in this regard. More broadly,
although the Council’s smart city strategy notes the importance of
tourism to the region’s economy, smart cities policy that enhanced
regional productivity in this area would require significant state and
federal involvement.
18
6 Recommendations
6.1 Digital and Knowledge Cities
The evidence presented in this report speaks to the importance of
taking a broad approach to smart cities policy that fosters both
knowledge-intensive and digital innovation in a range of industries,
so as to maximise potential productivity growth.
In the Australian context, several changes to policy would better
facilitate this broad approach. Firstly, key smart cities programs, such
as Smart Cities grants and City Deals, should be coordinated with
spending by other key departments and agencies, at all levels of
government, that are engaged in education, employment,
innovation, and communications policy. Failures
interdepartmental collaboration have previously limited the efficacy
of the UK City Deals [75]. Engaging Infrastructure Australia to
oversee the City Deals process may help to identify gaps in
coordination and ensure that these deals make efficient use of the
available public funds.
Secondly, government support for digital infrastructure such as IoT
networks should only proceed in cases where there is the workforce
and knowledge base for local governments and business to produce
actionable insights using these data. In cases where cities lack the
immediate capacity to make productive use of IoT technologies, a
federated, industry-led approach that grows local capacity for digital
and data-based innovation over time may be preferable.
Matthew Bowes, Australian National Internship Program 2018
In the long run, Australian smart cities policy should seek to
overcome skill shortages in the key areas of technological innovation,
knowledge creation and data analysis by implementing targeted
training programs at the state and regional level. While such
programs are not likely to completely overcome disparities in the
pool of skilled knowledge workers available to businesses in
metropolitan as opposed to regional cities, judicious investment in
policies to increase human capital is a key precondition to the long-
term development of smart cities within Australia.
Lastly, Australian smart cities policy should aim to measure progress
using a mix of long-term economic indicators and surveys of
residents and businesses, to best capture a city’s wholistic capacity
for knowledge transfer and productivity growth. It is notable, for
example, that many Australian cities currently lack explicit targets for
of
active modes of transport [40, p. 7]. By contrast, despite being
commonly used, indirect indicators of digital engagement such as
social media usage provide only limited insights into the actual
uptake of digital innovations, and thus should be treated with
scepticism. Furthermore, attempts should be made to quantify the
number of knowledge-intensive workers across Australian industries,
so as to better facilitate industry-agnostic innovation policy.
6.2 Enhancing Openness and Collaboration
Collaboration between governments, businesses and research
institutions plays a central role in shaping productive smart cities
policy. Given that smart governance reforms, from e-governance to
data-driven urban planning, will require local and state governments
to learn from and iterate on pioneering policies trialled in other
19

Level of Implementation
Federal
- Coordinated,
interdepartmental
approach to smart cities
Near Term
programs
- Ensure federally funded
Implementation Time Frame
infrastructure projects are
IoT compatible
- Institute independent
oversight of City Deals
process
- Negotiate City Deals in
waves around a national
urban policy framework
that aims to increase core
Long Term
smart city capacities
- Consider metropolitan
governance institutions as
part of City Deals
- Integration of urban data
within national data
regulatory scheme
Table 5: Recommendation Time Frames and Implementation Levels
Particularly Relevant
Legend: Universal
to Metro Cities
Matthew Bowes, Australian National Internship Program 2018
State & Local
- Invest only in accessible,
interoperable & easily
expandable IoT networks
- Federated approach to
IoT networks where city
capacity lacking
- Use of survey and
economic indicators to
track city progress
- Use smarter planning to
increase metro density
- Design innovation policy
using a broad definition
of knowledge workers
- Encourage inter-
governmental policy
learning on smart cities
- Invest in training
programs to overcome
key skill shortages
Particularly Relevant
to Regional Cities
jurisdictions, Australian Government policy should encourage, not
hinder such learning. Unfortunately, regardless of their other merits,
the processes involved in infrastructure grants and City Deals can
incentivise local governments to go it alone, lest they risk gifting
others a competitive advantage [75], [90]. Negotiating deals in large
‘waves’ and providing other avenues for policy learning could
combat this perception of scarcity. More involved responses could
further aim to disincentivise local and state government policies that
merely pull knowledge-intensive workers and businesses from other
regions yet provide no benefit to national productivity.
While a broad range of competition, business creation, and
intellectual property regulations are relevant to the growth of
knowledge and digital economies, the immediate development of
smart cities in Australia is particularly held back by an inefficient and
outmoded data regulatory system. As such, a key priority of
Australian smart cities policy should be to facilitate openness and
collaboration around urban data sources. In the first instance, this
can be achieved by adopting a national set of regulations regarding
the treatment of data, such as those recommended by the
Productivity Commission [45].
By adopting a national framework for data use, key urban datasets
could be designated as ‘national interest’, allowing streamlined
access and use. Partner institutions or agencies that hosted urban
datasets could provide expert advice to improve data use. Local and
state government participation in this data framework, alongside the
participation of key communications enterprises, could become a
condition for the receipt of smart city grants. Such a framework
could also advance the release and use of publicly sector data, both
20
within government as a tool of urban policymaking, and external to
government as a source of marketable insights [52, p. 22], [93].
Australian smart cities policy should further prioritise investment in
IoT and ICT infrastructure that is interoperable with a wide range of
data sources and which facilitates collaboration with business and
research institutions on data collection and analysis efforts. IoT
networks that ‘silo’ individual datasets and frustrate attempts to
retrofit, expand and experiment with new data sources limit the
potential for productivity gains through data driven innovation.
6.3 Balancing Local and National Interests
If well designed, intergovernmental pacts in the mould of City Deals
provide a promising means of bringing a national lens to local
economic issues, including productivity enhancing smart cities policy.
Yet the current City Deals process is too opaque and ad-hoc to live
up to this promise. Future deals should engage with a wide range of
local governments simultaneously around national framework for
urban policy. This framework should outline national goals for the
creation of urban IoT networks and the building of knowledge-
intensive urban economies, and should focus on developing the core
capacities of productive smart cities.
A national framework for City Deals should also specify the
opportunities available to local and state governments that enter
into these partnerships. While such opportunities should not
necessarily include local revenue collection if it unduly increases
compliance and governance costs, these deals could still increase
capacity for local governance and create metropolitan scale
Matthew Bowes, Australian National Internship Program 2018
governance institutions [58]. By specifying the Australian
Government’s approach to City Deals at the outset and incorporating
smart cities grants within such deals, local and state governments
would have an opportunity to develop genuinely innovative smart
cities policy.
As Australia’s largest cities continue to grow, further efforts need to
be made to ensure that the costs of relocation to dense metro areas
are minimised. While changes to tax arrangements and urban
planning regulations may provide more immediate tools to
efficiently increase urban density and lower relocation costs, in the
future, population-level smart city data should be used to drive
urban planning and zoning policy. Given the important role of state
and local governments in designing zoning and planning policy, the
use of such data to promote more efficient densification could
become a key goal of future metro city deals.
Finally, evaluations of all new Australian Government funded
infrastructure projects should include consideration of whether and
how the projects will integrate IoT technology. This is particularly
relevant for new transport projects, given the potential for smart city
technologies to drastically reduce transport congestion via dynamic
transport and traffic management, and congestion pricing schemes.
Nonetheless, it should be noted that the optimal level of investment
in specific IoT technologies will depend largely upon the urban
context in which they are employed: in relatively uncongested urban
areas, smart cities policy should instead focus on alternative
mechanisms of productivity growth, such as improving data
utilisation, worker specialisation and implementation of innovative
business practices.
21
A Appendices Future research questions in this area could include:

 Is there a role for smart home innovations in reducing

A.1 Inequality in Smart Cities
gender disparities in caring and other unpaid labour?
 How can smart cities policy best work towards decreasing
Discussion of smart cities policy raises several questions around the
the significant gender wage gap that exists in knowledge-
distributional and gendered impacts of policies that aim to grow
intensive industries?
knowledge-intensive and digital-based economies. Notably, in 2018,
 How can smart cities governance processes best ensure a
the technical and communications sectors in Australia had some of
diverse range of stakeholders are included in the design of
the highest gender wage gaps of all industries [94]. A brief perusal of
smart cities programs?
the papers on IoT technologies cited here will further highlight the
 What measures can be taken to limit the market power of
significant gender gap that exists among researchers in the field of
companies with sole access to valuable urban datasets?
smart cities research, an imbalance that may affect the design of
How can data regulations best be designed to increase
smart cities programs.
competition?
While innovation is often (incorrectly) associated with start-up  Will productivity enhancing policies continue to provide
companies, concerns could be raised that innovation in smart cities significant benefits to workers in terms of increased wages,
might have the opposite effect, if certain large tech companies were or are other structural forces intervening?
granted or could manufacture an effective monopoly on smart cities
data. In cases where such companies have exclusive access to
valuable urban datasets, this might well increase their market power
at the expense of consumers and workers. Pro-competition policy,
and particularly pro-competition data access regulation is thus an
essential complement to smart cities policy.

Lastly, even though long run productivity growth has traditionally

been associated with increased wages, there are some signs that this
relationship may now be weaker than in decades past [95]. This may
limit the potential benefits of productivity enhancing policies for
lower payed workers.

Matthew Bowes, Australian National Internship Program 2018 22

A.2 Privacy and Security in Smart Cities
Smart cities programs may have important impacts upon the privacy
and security of city residents. In terms of security, smart cities may
provide a number of strategies for reducing crime in urban areas:
 Automatic light and motion sensors could be used to better
light areas at night, while limiting light pollution and energy
use;
 Motion and heat sensors, along with mobile GPS data, could
be used to track population flow throughout the city, to
better anticipate higher crime areas;
 Mobile applications could be used by citizens to collect data
on minor crimes such as public graffiti;
 Centralised and interconnected databases could allow for
novel analyses of crime statistics;
 Coordinated camera systems could identify and track
criminals across the city.
Nonetheless, it is immediately apparent that many of these smart
city applications come with significant risks to individual privacy.
Some authoritarian regimes are already attempting to use camera
based identification and tracking software to constantly monitor
residents’ movements, both on foot and in vehicles [96].
Further privacy problems are raised by the potential for the large-
scale use of mobile phone GPS data. Even though such data could
theoretically be rendered de-identifiable, in many cases doing so
would lead to a loss of important contextual data. Moreover, while
mobile data collection systems are designed to minimise the
Matthew Bowes, Australian National Internship Program 2018
possibility of illicit access, and require users to regularly consent to
data collection, the data produced by such systems still runs the risk
of being intercepted by third parties [97]
A national data regulatory scheme, of the sort recommended here,
could regulate the types of potentially identifiable smart cities data
collected, and structure an ethics process for those wishing to access
and use such data. Without such a scheme, current legal frameworks
are ill-equipped to protect users’ privacy as big urban datasets
become more pervasive [98].
Future research questions in this area could include:
 What are the potential benefits offered by smart city crime
monitoring systems and how can such systems be designed
to maximise the privacy of residents?
 Should tracking systems that monitor residents in public
places be considered a breach of their privacy?
 To what extent can mobile phone data be meaningfully ‘de-
identified’ without compromising data usefulness?
 How can our current legal frameworks around data access
be updated to protect user privacy as IoT sensor networks
become more pervasive?
23

A.3 Sustainability in Smart Cities
Much of the literature on smart cities takes improved sustainability
to be a key benefit of their implementation. While this report largely
sought to work around this literature, it is nonetheless notable that
many of the key sustainability outcomes mentioned as being central
to the purpose of smart cities are also productivity enhancing:
 Smart cities offer opportunities for more efficient waste
triaging and management, helping minimise the amount of
non-recyclable waste [79];
 Pollution sensors allow for the real time monitoring of
sources of urban pollution, and facilitate government and
business management of such pollution, which has
significant benefits for worker productivity;
 IoT networks could be used to help implement congestion
charging, which can limit road congestions as well as shift
users to cleaner means of transport;
 Smart energy monitoring systems allow for more intelligent,
adaptive energy networks, which not only reduces the
amount of energy used, but also allows for better
management of intermittent energy sources.
Besides these benefits, smart cities provide numerous
opportunities to improve urban sustainability:
 Smart parking systems could aid in the transition towards
vehicle electrification;
Matthew Bowes, Australian National Internship Program 2018
 Pollution sensors could be used to facilitate monitoring and
taxation of carbon emissions;
 Smart sensing systems could be used to improve public
utilisation of green spaces;
 Knowledge-intensive industries present opportunities to
minimise the costs of economic growth, by creating an
economy that does more with less [99].
Lastly, there are some concerns that the technologies involved in
smart cities could have negative environmental impacts. In particular,
some IoT sensing technologies involve the use of battery powered
sensors, which could increase waste.
Future research questions in this area could include:
 What are the most useful indicators of a smart city’s
sustainability?
 How could governments and businesses integrate real-time
pollution monitoring into urban planning processes?
 How could IoT networks be designed to complement
congestion charging infrastructure, while limiting negative
privacy implications?
 How can smart cities foster sustainable innovation that
reduces resource utilisation?
 How can IoT sensors be designed to improve reusability and
minimise waste?
24

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