Cisco wires 'city in a box' for fast-growing Asia

Networking pre-fab cities may be $30 billion business

San Jose Mercury NewsJune 8, 2010 

— It's a product like no other - a complete city for a million people.

As tens of millions of people 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, which has more than 4,400 employees and contractors in Research Triangle Park, 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 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 will 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 massive demographic shift from rural to urban already is under way, requiring hundreds of new cities.

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. Just a year ago, the usually buttoned-down Cisco CEO John Chambers engaged in a night of "love shots" - locked-elbow drinking toasts - with President Lee Myung-bak to seal the Songdo deal Korean-style.

It's easy to see why Cisco is intoxicated with 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-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 audacious plan is rising up 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," said Gale, an exuberant, arm-waving developer who believes Songdo will be his legacy.

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.

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, 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 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."

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