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Smart Cities: Changing dynamic between private and public actors

White & Case Technology Newsflash

The concept of smart cities has transformed from science fiction to reality. Articles about smart city projects address various facets: connectivity and Internet of Things, data collection and privacy, cybersecurity, safety and public health, infrastructure and transportation, waste-to-energy and sustainability, etc. All these facets are linked by an overarching theme: the changing interaction between private and public actors due to the central role of the public actors in smart city projects. This is illustrated by a brand-new German draft bill on autonomous driving.

 

The status quo

Let us take, as an example, a commute from a suburb to a workplace in the city center. This commute involves three steps. First, commuters drive their relatively new car to the nearest train station. Second, they take the train to the city center. Third, they switch to the subway for a few stops, before walking a few streets to the office (while cursing the weather half the year). 

For each step, we have several involved actors, who have access to some of the data and could be liable in case of an accident:

  • The makers: the manufacturers of the car, train and subway 
  • The controllers: the authorities granting the necessary approvals, registering the vehicles, monitoring the functioning of the train, etc. 
  • The operators: the commuter as car owner, the private rail operator, and the city's transit authority operating the subway
  • The supporters: the private internet/telecommunication providers necessary for the safe operation of the vehicles, the car manufacturer's backend communicating with the car, etc. 

As we will show below, in a smart city, these roles will converge and significantly reduce the number of actors.

 

The cooperation in a smart city

All the (very different) definitions of "smart city" have in common that technology and data are used intensively to fundamentally affect the life of the inhabitants. This requires that the large amount of collected data is centrally available to organize the city's infrastructure and services. In that regard, the topic of mobility is a perfect example to show the convergence of the actors' roles.

Mobility: The smart city's crown jewel

Science fiction got this point right. If there is an image that we can label as "futuristic", it is the image of a metropolis with flying cars. Although we have not yet reached that point, ease of mobility is one of the predominant characteristics of the smart city. 

In the status quo section above, we listed the different actors involved in one's daily commute to work. One obvious disadvantage of such a large number of actors is that it is more difficult to offer services centrally. To make the journey described above, the commuter needs (i) a private car (purchase, registration, insurance, etc.), (ii) a ticket for the privately operated train, and (iii) a subway ticket. In many cities, tickets for different trains, subways and buses cannot be purchased from one platform. Since this makes it more difficult to organize such trips downtown, many still prefer using their own car (even if that means having to find and possibly pay for a parking space in the city center). This leads to high emission levels and the unavailability of land that could otherwise be used for housing or enhancing the quality of life. It is one of the central concerns of many cities to bring about a change in behavior in this respect.

The concept that will provoke this change is called "Mobility as a Service" (MaaS). Although this concept is currently also being introduced in some "non-smart" cities, it is not really able to realize its full potential there. This is because the existing infrastructure (and involved actors) can only be changed to a certain level.

Smart cities, however, could provide the impetus to largely move away from car ownership to MaaS. At its core, MaaS transforms the owner to user. In essence, MaaS is based on a digital platform that integrates end-to-end trip planning, as well as booking and payment services. It is not limited to a specific mode of transport, but it integrates different options. In the example above, the commuter could book a car-sharing vehicle for the first step to the train station. (Of course, in a few years, there will be free-floating autonomous shuttles, as addressed below.) Through the same platform, the commuter may then book his train ticket for the second step. Finally, for the last step, instead of walking a few streets to the office, the commuter could book an e-scooter or bicycle through the same platform.

The platform will therefore be hosting a different number of service providers, each offering a different type of service. 

New mobility concepts will change the role of the public actors

The biggest challenge for MaaS is alignment and integration of the different service providers, as well as the use of their individual data on customer information, infrastructure status and capacity. The necessity to share this data with the smart city as platform operator (and to some extent other actors) is one of the key changes to the actors' interaction.  

After data became the new oil, companies were even more reluctant to share their customers' data with third parties. But if they want to become part of the MaaS system, they will need to. To which degree data is shared and anonymized differs significantly based on the project and, in particular, on the applicable law. If a MaaS system is introduced in a European city, both the law and the relevant actors will prevent a very far-reaching data sharing. This is very different in a smart city in, for example, the Middle East or Asia-Pacific. Instead of introducing a new system in a very entrenched infrastructure and legal framework, much more flexible solutions can usually be applied there. This leads to one of the biggest changes in terms of the roles of the players: The power of the public actors will increase. Until now, their tasks in many countries have been focused on creating a legal and administrative framework as "the controllers". While there are, of course, public service operators, they have generally played a lesser role than private operators, particularly in the more recent developments.

In smart cities, however, there will be less of a coexistence of service providers. Instead, these cities will have a central system in many areas (like mobility or healthcare), which will make organization and data processing more efficient and enable new services. In this new structure, the cities (i.e., almost always public actors) take the central position. They will often be at the same time (i) the legal and administrative framework provider, (ii) one of the main actors, and (iii) the final decisionmaker about which other actors are allowed to offer their services in the system. While the cities will of course need private actors as partners, such convergence will in many projects affect the actors' interaction and also competition.

This development is illustrated in the following using a draft bill on autonomous driving that has a smart city focus.

The new draft bill on autonomous driving: New focus on public transport operators

That these new mobility and convergence developments are not limited to regions outside Europe is demonstrated by the new German approach to autonomous driving. In 2017, Germany introduced the Law on Highly and Fully Automated Driving, which allows drivers to divert their attention from traffic while using automated driving systems. On March 15, 2021, the German government proposed a new draft bill on Autonomous Driving to the Parliamant (Gesetzentwurf zur Änderung des Straßenverkehrsgesetzes und des Pflichtversicherungsgesetzes – Gesetz zum Autonomen Fahren).

The 2021 bill aims to take the regulatory framework one step ahead—and shifts the focus from private ownership of autonomous cars to the public operation of "people movers". In this next step to autonomous driving, fully autonomous shuttles will be able to be used in defined operating areas on public roads (i.e., SAE Level 4). Unlike under the current law, this will be without a physically present driver in the vehicle. This use is also not limited to testing but explicitly open for public regular operation. Control over each autonomous vehicle will be exercised by a remote "technical supervisor". This must be a natural person who, in individual cases, can disable or enable driving maneuvers from the outside. The technical supervisor is not required to continuously monitor the motor vehicle that is in autonomous operation.

In the bill's explanatory note, the government refers to enabling autonomous driving for various mobility sectors.  In addition to logistics, the government's examples include many services that will be offered in smart cities: 

  • Trips between medical care centers and retirement homes
  • Service and supply trips for people with limited mobility
  • Company shuttles for employee transportation and
  • Smaller and larger vehicles in public transport to cover various passenger transport needs in municipalities

In line with these smart city use cases, the government's stated goal is that these vehicles:

"… cannot only increase traffic safety and efficiency, but can also achieve positive environmental effects (reduction of emissions, decrease of land use). Technological progress will also have an impact on the day-to-day life and provide a new impetus to the economy."

The implementation of such concepts of autonomous shuttles in smart cities will lead to the above-mentioned convergence. The public entities will set the legal and administrative framework, which includes the requirements for the shuttles to get a type approval and operating permit (i.e., "the controllers" in the status quo). The public entities will often also act as service providers, who own, maintain, and operate these shuttles ("the operators"). Moreover, due to the public entities' central role in smart cities regarding infrastructure and data, they will also become or have significant influence over "the supporters" (the internet/telecommunication providers necessary for the safe operation of the shuttles). This shows that the number of actors, who compete, have access to data, and could be liable in case of an accident, will reduce. But even if the autonomous shuttles are operated by a private actor, the cities' access to data and increased role will impact the interaction between the involved players.

 

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