Alphabet’s Dream of a Smart City in Toronto Is Over

(Bloomberg) -- Alphabet Inc.’s ambitious dream to create a city of the future on Toronto’s waterfront is over. Millions of dollars and years of lobbying weren’t enough, and the tech giant’s urban planning unit, Sidewalk Labs, officially shuttered the project on Thursday.The stated reason was the coronavirus pandemic’s effect on real estate prices. Without the ability to profitably sell office space and homes in the development, the project wasn’t viable, Sidewalk Labs Chief Executive Officer Dan Doctoroff said in a blog post.But even before the virus swept over the world, Sidewalk’s Toronto ambitions had been scaled back significantly. Years of opposition from privacy activists and urbanists, as well as pushback from prominent members of Canada’s tech industry had relegated Alphabet to a 12-acre plot of land that would essentially only have room for a handful of residential and commercial buildings.

Sidewalk Labs’ failure signals how much attitudes toward big technology companies and their influence over our lives has shifted in recent years. If a company like Alphabet, with its talent and resources, can’t pull off such a project, it’s not clear anyone can.

“I would like to think this is the defeat of the privately owned city,” said Greg Lindsay of NewCities, an urban policy think tank, and a visiting scholar at NYU’s transportation policy school.

Privacy and control over one’s digital data is a more mainstream concern than it was just two or three years ago. Ideas that initially seemed futuristic and exciting to many are now being questioned, with politicians around the world more likely to gain support for attacking companies like Google, Facebook Inc. and Amazon.com Inc. than they would by embracing them.

Sidewalk Labs’ Toronto project was announced in 2017, after Canadian officials put out a request for private companies to help develop a large swath of the city’s formerly industrial waterfront that had sat mostly dormant for years. In one of the hottest real estate markets in the world, the project was potentially lucrative.

The plan was ambitious, complete with heated sidewalks, underground garbage disposal and tall timber buildings. Sensors would monitor the area, feeding data to AI-enabled computers that would manage stormwater systems and direct traffic. One proposal included a light rail line that would connect the area to the rest of the city’s transit network. Sidewalk invested more than $50 million in the project, including opening a 30-person office on site. The company said it will keep an office in Toronto will stay open and re-assign staff to other projects.

Prime Minister Justin Trudeau welcomed Alphabet with open arms, hosting a high-profile interview with then-chairman Eric Schmidt at a conference meant to showcase the country’s tech sector. Trudeau, two years into his tenure, had made tax credits for big U.S. tech firms bringing jobs to Canada a tenet of his economic policy.

That didn’t sit right with some local business leaders, including the former co-CEO of BlackBerry, Jim Balsillie, and John Ruffolo, one of the country’s best-known venture capitalists. They argued homegrown startups would be squashed by U.S. giants under Trudeau’s policies. Sidewalk Labs became an easy target, and the two wrote columns and lobbied politicians to stop the project.

At the same time, long-standing questions about data privacy and the role of private companies in city development became more relevant as Torontonians faced the prospect of an American corporation monitoring and collecting information about part of their city. Local activists, tech researchers and urbanists joined together to demand more transparency from Sidewalk Labs.“They really didn’t have answers when people wanted them,” said Alex Ryan, senior vice president at MaRS, an organization that promotes tech and startups in Toronto. “So in the place of answers were conspiracies and concerns on privacy, the business model, and the scale of the project.”

Complicating matters, the organization overseeing the project was made up of representatives from the local, provincial and federal governments. Everyone wanted a say, and the project went through an endless series of proposals, meetings and consultations.

Sidewalk Labs, staffed by former New York City administrators, was accused of being tone deaf to the Canadian political context. Local indigenous leaders said their concerns had been ignored. The Canadian Civil Liberties Association sued the company, accusing it of proposing tech that would infringe on Canadians’ privacy rights.

Sidewalk’s retreat from Toronto coincides with broader changes at its parent company. Sundar Pichai took over the CEO role from founder Larry Page in December. With Covid-19 devastating the global economy, Alphabet has cut back on spending, slowing down hiring and focusing its resources on fewer projects.

Doctoroff hinted that Sidewalk could turn its attention to coronavirus-related projects. “The current health emergency makes us feel even more strongly about the importance of re-imagining cities for the future,” he said. Doctoroff is a former CEO of Bloomberg LP, the parent company of Bloomberg News, and a deputy mayor of New York City under Michael Bloomberg.

Alphabet’s final goals for the Toronto project never seemed clear throughout its life.

“Their business model continually shifted, and they never presented a final plan,” Lindsay said. “It appears that they never settled on one.”

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