INCHEON, South Korea — It’s a product like no other: a complete city for a million people.
As tens of millions across the developing world migrate from the countryside to new cities, Cisco Systems is helping build a prototype in South Korea for what one developer describes as an instant “city in a box.” Cisco is wiring every tech nook and cranny of the new city, making it one of the most technologically sophisticated urban centers on the planet.
Delegations of Chinese government officials looking to purchase their own cities of the future are descending on New Songdo City, a soon-to-be-completed South Korean metropolis about the size of downtown Boston that serves as a showroom model for what is expected to be the first of many assembly-line cities. In addition to state-of-the-art information technology, Songdo is supposed to emit just one-third of the greenhouse gases of a typical city of similar size.
Cities of a million-plus population are popping up across the developing world,but the foremost market for the prototype is China, where a demographic shift from rural to urban already is under way, requiring hundreds of new cities.
“They come in here and say, ‘I’ll take one of these,’” said Richard Warmington, the former head of Hewlett-Packard’s Korea operation who is now president of Chadwick International School, which is setting up a campus in Songdo.
The potential is so big that executives at Cisco, the key tech partner for the development, get giddy talking about what could be a $30 billion business over coming years for the San Jose, Calif., networking giant.
Still, there’s the question of how many whistles and bells developing countries are willing to pay for. For some local officials from China and elsewhere, Songdo, which has a 100-acre park and Jack Nicklaus golf course, is a bit like visiting a luxury auto dealer when the budget calls for a Honda Civic.
It’s easy to see why Cisco is excited about the possibilities: According to a study by investment bank CIBC World Markets, governments are expected to spend $35 trillion in public-works projects during the next 20 years. In Songdo alone, Cisco sold 20,000 units of its advanced video-conferencing system called Telepresence - a billion-dollar order - almost before the ink had dried on the contract, said developer Stan Gale, the chief visionary of the project.
“Everything will be connected - buildings, cars, energy - everything,” said Wim Elfrink, Cisco’s Bangalore, India-based chief globalization officer. “This is the tipping point. When we start building cities with technology in the infrastructure, it’s beyond my imagination what that will enable.”
The project is rising from former mud flats along the Yellow Sea. Cisco and New York City-based Gale International hope the privately funded, $35 billion Songdo project leads to at least 20 similar developments in China, India, Vietnam and other countries in coming years. Much of Songdo will be completed in 2014.
“Five hundred cities are needed in China; 300 are needed in India,” Gale said.
The project calls for wired everything - an urban center where networking technology is embedded into buildings from the ground up and every home, school and government agency is equipped with sophisticated Telepresence video technology - what in Cisco mantra is called Smart+Connected Communities.
The idea was 10 years in the making for Gale, though Cisco signed on just two years ago. The concept was inspired not just by mass demographic shifts but also new technology that supporters say can significantly reduce energy use and pollution while transforming how people interact with the world around them.
For Cisco, Songdo represents more than a chance to sell hardware. The company envisions its technology as the connector for all aspects of urban life: government services, utilities, entertainment, health care, education. The company envisions new business models built around its Telepresence technology - say a yoga class beamed into living rooms or medical checkups done remotely. All of these would be managed through a single Internet network, and Cisco would collect a recurring fee for maintaining the services, almost like a utility.
“It will be like paying a maintenance fee once a month,” said Christopher Khang, a Cisco vice president based in Singapore. “It’s a radically new business model for the company.”
Building this technology into new construction adds relatively little to the overall construction costs, he said. “But the benefits are going to be huge. I believe we are the only company that can provide this holistic [technology] environment.”
It looks good on paper. But will those Chinese officials buy this tech utopian vision?
“It seems a little speculative,” Broadpoint AmTech research analyst Mark McKechnie said. Still, he added, “If you want to be around, you have to have a 10-year plan. If this doesn’t develop, at least they’ll learn something new they can apply to different businesses.”
Cisco is using its Shanghai World Expo pavilion, which displays a compelling video detailing a totally linked city, to sell its technology. Government officials are then invited to hop on a plane for the hour-and-ahalf flight to Incheon, South Korea, near the Songdo site.
“There will be at least 100 new cities with a minimum population of 1 million each being built in China in the next three years,” said Anthony Elvey who, as director of Cisco’s Expo pavilion, gives tours to Chinese provincial officials, each hoping to outdo the other in creating an instant city that will attract job-creating investments.
So far, Cisco has signed deals with two Chinese municipalities. It will be the main networking infrastructure provider for Chongqing, which has a population of more than 31 million in southwestern China. And Cisco and Gale will provide a city-scale development in Changsha in Hunan Province.
“These guys can snap their fingers and put all this infrastructure in place,” Elvey said.
Business, Pages 19 on 06/21/2010