Google affiliate Sidewalk Labs is walking away from building a smart-city development in Toronto after two and a half years of controversy over its origins, overreach, and privacy and financial implications.
The Alphabet Inc. subsidiary won the right to plan a community called Quayside on the downtown Toronto lakeshore in 2017, hoping to build a 12-acre neighbourhood “from the internet up.” In partnership with the tripartite government agency Waterfront Toronto, the New York urban-planning firm imagined a place filled with new technologies such as heated sidewalks, robotic garbage systems, and, crucially, sensors to learn about how people move about cities in ways that could inspire even more innovations.
But the project faced frequent delays and a constant flurry of criticisms from a group of unlikely allies. Ontario’s Progressive Conservative Premier Doug Ford lambasted the project’s value to taxpayers on the same day as progressive activists raised concerns about governance and surveillance implications. Tech billionaire Jim Balsillie criticized Sidewalk for compromising the future of Canadian innovation, arguing it would divert new intellectual property and the wealth it would create to Alphabet.
Sidewalk announced the cancellation Thursday morning, saying it made the decision because of COVID-19′s devastation to the global economy and Toronto real-estate market. “It has become too difficult to make the 12-acre project financially viable without sacrificing core parts of the plan we had developed together with Waterfront Toronto to build a truly inclusive, sustainable community.,” its CEO Dan Doctoroff said in a statement.
Mr. Doctoroff had said before the pandemic that he was unsure if the project would make financial sense on a 12-acre site, after paring back controversial plans last year to plan a 190-acre site instead. Sidewalk and Waterfront were negotiating project details ahead of a June 25 Waterfront board meeting that would have seen
A source close to the negotiations, who was not authorized to describe them, said Waterfront had in recent weeks arrived at project details that it was satisfied with, including financial considerations, then sent them to Sidewalk and Alphabet. The ball was in Alphabet’s court: Waterfront wanted confirmation that the cash-rich parent company would financially backstop the project, particularly if things went awry.
But since the coronavirus crisis began, Alphabet had been cutting costs and reportedly slowing its real estate investment more broadly.
Waterfront Toronto chair Stephen Diamond said in an interview that he was disappointed, but not surprised, because of the reports he’d seen about Alphabet’s reduced interest in real-estate. The Quayside site, at the foot of Parliament Street in downtown Toronto, is majority-owned by Waterfront; the public agency is now able to consider new options for the site’s future.
Mr. Diamond said that while the cancellation is still fresh – noting he couldn’t speak for the whole of Waterfront Toronto – the pandemic has caused him to rethink the economic opportunity of the Quayside site. Among other possibilities, said he is open to proposing greater public housing than SIdewalk had pitched for the prime real-estate – not just rental units, but affordable homes for ownership.
“Every crisis brings opportunity, and we have to look at these things now,” the Waterfront chair said. He declined to comment on recent negotiations, except to say that parent company Alphabet was involved.
The future of Sidewalk Labs is now in question. Quayside was its only significant real-estate project. Last year, it announced it had formed an infrastructure investment company with Ontario Teachers’ Pension Plan called Sidewalk Infrastructure Partners – but Sidewalk Labs has insisted Loading…it is a separate entity. Still, its business model is aligned with Mr. Doctoroff’s experience in New York, where as deputy mayor he prided himself in creative project financing.
Though it was first awarded the right to plan a 12-acre site, Sidewalk caught the city by surprise in 2019 when its draft master plan asked to control a swath of extraordinarily valuable Lake Ontario real estate Loading…16 times that size.
The company had long said it wanted more land to scale its proposed technologies – including in its original 2017 proposal – but its June 2019 plan tried to contain extensive requests that stretched far beyond Waterfront Toronto’s purview. The agency’s chair, Stephen Diamond, publicly questioned whether some were even legal. He would go on to spend four months wresting control back of the project from Sidewalk, at one point complaining that the Google affiliate should never have shared such an extensive plan publicly without Waterfront’s input. Last Halloween, Sidewalk agreed to return to a 12-acre plan.
Many of the people who pushed the project through in the first place left in its early days, either by choice or by force – including Waterfront Toronto CEO Will Fleissig, who had enthusiastically set the project in motion but clashed with its board over the extent of that enthusiasm.
Mr. Ford’s government later fired three directors UPDATED DEC 7, 2018 3:48PM EST – The firings would mark the first significant public government intervention in a widely criticized partnership with Sidewalk Labs, a subsidiary of Google parent Alphabet Inc. – PUBLISHED DEC 6, 2018 10:00PM EST– including chair Helen Burstyn and Mr. Fleissig’s successor, acting CEO Michael Nobrega – in December 2018. That was just one day after Ontario auditor-general Bonnie Lysyk published a scathing report that found Sidewalk was among bidders for the project that receive more information than others.
While cities worldwide are trying to find ways to embed new technologies into their infrastructure, Quayside would have been globally unique because of its top-down nature – a whole community put together by one of Silicon Valley’s richest companies.
Sidewalk routinely emphasized the measures it would put into place to ensure that peoples’ privacy was protected in the sensor-filled community. But opponents flagged concerns that it could set a bad precedent for surveillance in cities, and warned of loopholes that could re-identify people with anonymized data. And an early planning document from 2016 unearthed by The Globe and Mail revealed Sidewalk’s founding vision for a community, which included having the power to track and predict people’s movements.
That data could also be harnessed for other means: generating intellectual property, or IP. Intangible assets have become an enormous source of wealth generation in recent decades, boosted in large part by IP such as patents that can be licenced for long-term income.
Canada has been trying to reframe its economy around innovation, and some local tech leaders and venture capitalists heralded Quayside as a chance to showcase Toronto as a global technology centre. But other Canadian technology entrepreneurs – and Mr. Balsillie, who made his fortune off of BlackBerry smartphones – feared that IP generated on site would only go to pad Alphabet’s massive market capitalization instead of benefitting Canadians.
Some of those fears were reinforced as Waterfront and Sidewalk negotiated the terms of their partnership. The Globe and Mail found a document in August 2018 that saw Sidewalk ask designers for full ownership of some design IP, contradicting language in its then-latest agreement with Waterfront Toronto. And Sidewalk’s June 2019 plan contained provisions that many IP experts warned could leave Canada behind.
Mr. Balsillie summarized these fears in an October 2018 op-ed: “Canadians will continue to be treated to glitzy images of pseudo-tech dystopia while foreign companies profit from the IP and data Canadian taxpayers fund and create.”