Article originally published on www.cities-today.com.
By Sarah Wray
To unlock more value from their data, cities are exploring public-private collaborations and potential new revenue models. Sarah Wray highlights the opportunities and pitfalls.
While plenty of cities are now sharing open data, many find it is not yet delivering the innovation they had hoped. At the same time, the volume and variety of data, including that from artificial intelligence (AI) and Internet of Things (IoT) systems, is making it more costly to share.
To address this, some cities are beginning to explore new financial and innovation models as a potential way ahead. Previous attempts in this space have not succeeded and there are significant ethical and legal complexities. However, shifts in thinking, new tools and fresh urgency around challenges to be solved could make the difference.
In June, the North Texas Innovation Alliance (NTXIA), a regional consortium of municipalities, agencies, companies and academic institutions, began evaluating options to monetise data and assets such as land, buildings, lighting and roads to generate new revenue. The group issued a call for solutions via govtech procurement platform Marketplace.city.
It requested: “Ways for the governments to individually or regionally capture revenue for the resources, assets and efforts for the creation and use of government data.”
“The governments remain committed to open data rules but want to explore solutions at the regional level or that account for improvement or intelligence related to the data,” the call said.
Jennifer Sanders, Executive Director of NTXIA, says revenue generation is among the major priorities for members, particularly coming out of the pandemic.
“There’s a recognition that for some of these massive capital projects, we need to move away from relying on bonds every few years to get that infrastructure to looking at how we can develop sustainable models that continue to feed in and update,” she comments.
Many cities faced tight budgets even before the pandemic and cities in Texas have the additional challenge of state law tax caps which limit the money they can bring in towards public services.
James Childers, Assistant City Manager, City of Irving, says: “The reality is we have got to be a lot more creative about how we generate revenue and we have got to start turning over new stones.
“We have this data and we are using it already, but we’re just trying to find an opportunity to see how we can leverage it to potentially bring in more revenue in addition to the efficiencies that are there.”
The call received 35 submissions overall, with the data monetisation options among them including charging for access to Application Programming Interfaces (APIs) or API calls, making certain datasets available for a fee, or combining data from public and private sources. Those could be standalone or as part of a larger data exchange. The consortium is now assessing these options and potential next steps.
Other cities are also beginning to weigh up options.
Andrew Collinge, Advisor to Smart Dubai, comments: “In the age of mass data when you start to think about the costs around data pre-processing and preparation, the investment of human time and getting things like data governance and ethics in place, then it becomes increasingly necessary to have some kind of pricing strategy or monetisation in place.”
“If there is data out of which money can be made and privacy can be assured, then we’re open to thinking about those things,” he adds.
Following increasing queries from internal departments, Smart Dubai has created an initial data monetisation policy and framework which covers the fundamentals on data quality and privacy.
There’s also an education and skills piece, Collinge says, to shift thinking from a “rent mentality to a value mentality.”
Lessons learned from previous programmes and elsewhere in the world could help to guide the efforts of cities pursuing similar lines of enquiry.
It was back in 2005 that Vienna, Austria took the decision to launch a geolocation data ‘shop’, which it ran until 2012.
Brigitte Lutz, Data Governance Coordinator, City of Vienna, comments: “Ultimately it was a strategic decision [to close the shop], because the operation was actually not economical. It was too expensive because uptake wasn’t good.”
Alongside large companies, many of the ‘customers’ for the geolocation data were other city departments so money was just moving from one budget to another. Some users, particularly universities, were ‘priced out’ of buying the data, even at a large discount, so the city didn’t get the innovation or the revenue.
The city also increasingly realised that it couldn’t compete on geolocation data with start-ups, companies like Google and free tools like OpenStreetMap.
“Selling data is the most expensive way to share data – open data is the cheapest way,” Lutz says, adding: “Data of the public administration, which has been generated with tax money, should be made available to the public — citizens, economy and science — free of charge.”
What’s the problem?
Still, many are frustrated that their open data is failing to stimulate the innovation they envisioned.
This realisation and the hypothesis that data is most valuable when it can be combined with other sources led Copenhagen to launch a City Data Exchange with Japanese technology firm Hitachi in 2016.
The platform facilitated the exchange of public and private data, including options for buying and selling. Two years later, the initiative was disbanded after the partners struggled to get enough data providers and users on the platform – even with matchmaking efforts – and to make it financially sustainable. There was a lack of successful examples to persuade providers and consumers of the value and some lost patience in searching for the specific data they needed. Although data was aggregated and anonymised, privacy, public perception and competitive considerations also made providers hesitant.
“Back then, it was much more big data thinking – having all the data in one data lake and all types of data from all different sectors,” says Marius Sylvestersen, who until recently was Smart City Program Director for the City of Copenhagen and is now Chief Innovation Officer at the University of Copenhagen. “But for cities, the problem is not to get data, or to get innovation going, it’s to make certain that we collect our garbage or that we control the traffic. I guess we lost sight of the problem.”
If Sylvestersen were to try again – and he says many cities and private companies are interested in doing so and regularly approach him about his experience – he says he would instead focus on creating a “problem-solving machine”, setting concrete challenges such as becoming carbon-neutral or how to track Scope 1, 2 and 3 emissions.
The private sector could also be an important source of challenges for the ecosystem to solve and galvanising stakeholders around these challenges could provide the impetus to work through some of the sizeable knots still to be addressed.
Collinge says: “Some of the more interesting propositions could come from the private sector who want to drive customer choice in the real estate market, for example, or insurance companies who are thinking about new business models, or companies exploring new mobility services. Those are really interesting problems to solve through data sharing, and possibly monetisation.”
Copenhagen learned that the platform isn’t a magic bullet but it’s still an important factor. Sylvestersen adds: “You do need some kind of exchange mechanism, otherwise it’s impossible to orchestrate all the different public-private partnerships that you need to put in place in order to solve specific problems. It’s way too complicated otherwise.”
Dawex provides data exchange platforms to facilitate data circulation among many stakeholders, allowing them to source, distribute, monetise and exchange data securely, in compliance with technical, contractual, financial and regulatory frameworks. Sectors include retail, travel, energy and finance.
There’s a growing interest and several requests for proposals (RFPs) from public sector organisations, cities and regions, says Didier Navez, Senior Vice President of Strategy and Alliances, Dawex. He said that many are focusing on specific areas such as health, and financial models are part of the requirement.
Navez explains: “Most public entities – smart cities or regions – have an open data policy which will remain, but it costs money if you want to make data available.”
He said some cities are also frustrated that their data is often used freely by large, profitable technology companies or even hedge funds.
This was echoed by William Zielinski, Chief Information Officer, City of Dallas, who says: “As we are making data open and available, there are businesses who are taking that data and they are monetising it themselves and creating additional products from it, and in some instances they are selling it back to us. So we really do need to think about where and how we can benefit from that value chain, and receive some of those revenues.”
The next phase of data sharing offers the flexibility of monetising data in certain cases and making it freely available in others, Navez says. This is possible via a data exchange where users must register and which can keep track of how data is used. This isn’t a requirement or feature of most open data portals.
As ecosystems and platforms emerge, a grab for power typically follows – the mobility-as-a-service (MaaS) space is a prime example which hasn’t yet been solved between the public and private sector.
Cities and governments must undoubtedly play a central role in defining the rules of engagement around data and aligning challenges with societal goals. They also bring some ‘secret sauce’ which should not be undervalued, says Bas Boorsma, who recently joined the City of Rotterdam as its first Chief Digital Officer, following a long career in the private sector and academia.
“People always say data is the new oil but that’s not exactly true because oil is scarce, and data is not,” says Boorsma. “The better comparison is with solar energy because it’s practically infinite. However, the means to get at and deliver that solar energy — that is scarce, more difficult to drive and that is monetisable.”
This means cities are central to shaping the algorithms, models and policies, and providing the context that is needed to drive the insights out of data.
“More and more government entities see themselves as the orchestrator of a broader ecosystem,” Navez says. Exchanges could help them cover their costs through small access fees, subscriptions, revenue percentages or other methods.
An emerging idea is that of the ‘data utility’ or ‘trust’ which has a mandate to provide oversight and determine how data gets used, by who and under what conditions – whether that is data coming from the municipality, private sector or other sources.
Boorsma says: “By setting up a data utility, you can potentially outsource some of the technical expertise to a company, but within the rules and regulations stipulated by the city, with an independent board that has a strong remit to decide what’s right and what’s wrong.”
He added that utilities are not to be confused with data hubs “that all too often attempt to mix a confusing set of regulatory, innovation and business development agendas”.
Getting foundations such as these in place could give cities space to more confidently explore new opportunities.
Collinge comments: “There’s still a lot of work to be done around the business, licensing and the profit-sharing models that could emerge. We need a lot more experimentation spaces.”
The acid test
Talking about city data and money in the same breath could set alarm bells ringing and attract the wrong sort of headlines, particularly at a time of heightened concerns about privacy and data.
It is possible that citizens could view new business models around data and potential monetisation as a prudent and innovative way to manage government funds, especially as they become familiar with new tools which allow them to trade and manage their own data. On the other hand, they may fear being sold out.
Major Youngblood, Management Analyst for the City of Irving, says: “The data that is publicly collected does not contain any personal identifiable information. Ensuring that we are really out there with our transparency and making sure we’re educating residents on that would be key, as well as making sure that there are necessary protections built in for protection of that data in the same way we do with all vendors.”
Ultimately, Boorsma urges cities to keep their eyes on the prize. “The overall point with leveraging data is to improve the lives of citizens in your city. Improving municipal services is part of that but quality of life is the acid test that should always be applied.”
This starts with understanding what citizens want and need, and looking at how tools such as data can support that and the sources that would be needed.
“You may or may not arrive at a point where you realise you could actually monetise some of that data, but it will be incidental to the outcome that you want,” says Boorsma. “You can’t start from monetisation.”