Alphabet's Sidewalk Labs had a vision of an eco-friendly, tech-heavy tomorrow-land on Toronto's waterfront, but it's been drastically scaled back.
This article is part of a Fortune Special Report on Rethinking the City.
Jesse Shapins’s blue and orange polka-dotted Stan Smiths squish the refuse-speckled muck of Toronto’s harbor.
Protected from the winter chill by a buffalo plaid jacket, hot pink toque, and Karl Marx–style beard, Shapins is showing off his adopted home. For the past couple of years, Shapins, a Colorado native and BuzzFeed alum with a Harvard Ph.D., has lived and worked in and around this muddy, 12-acre plot of industrial barrenness. This is Quayside (pronounced “key-side”), where Sidewalk Labs, the Google sibling and Alphabet subsidiary that focuses on urban infrastructure, intends to develop a Torontonian tomorrow-land.
So far, the area consists of nothing much. A “poutinerie” food truck idles in an unpaved parking lot. Long-abandoned soybean storage silos loom nearby. A few run-down charter boats line a slip where a flotilla of mallards honk at passersby.
As he explains the interlocking technologies that may someday converge here, Shapins rotates his hands as though manipulating a Rubik’s cube. Sidewalk’s “urban design and digital integration director” (yes, it’s ungainly) outlines a mini-city of eco-friendly laminated timber, some dozen buildings soaring up to 35 stories. These mixed-use structures will be replete with solar arrays and rainwater-draining “blue roofs.” Underground, conduits to an efficient thermal grid will supply heat, and A.I.-powered pneumatic tubes will sort recycling.
The neighborhood Shapins describes will be a marvel—if it ever gets built. Sidewalk won a bid to propose plans for the area three years ago, pitching Quayside as a tech-centric model for urban reinvention. Since then, however, the project has been mired in controversy, amid an outcry over data mining and objections to the civic encroachment of a powerful corporation. While polling has found that only 17% of residents oppose the project, that minority has voiced its views loudly. Chief among the dissenters is Jim Balsillie, the former co-CEO of BlackBerry maker Research in Motion, who says the deal “was mismanaged” from the start. One local leader compares Quayside to Guadalcanal, a similarly tiny tract of land where a particularly bloody World War II battle was fought.
Bureaucratic combat continues. “Anytime you do something bold and ambitious it’s going to have both ups and downs,” says Toronto Mayor John Tory, who backs the plan. Waterfront Toronto, the nonprofit development corporation that manages the minuscule patch of land, says it will decide by May 20 whether to proceed. But while Waterfront Toronto appears likely to approve Sidewalk’s plans, the Quayside vision has been drastically scaled back—offering a lesson in the perils of public-private partnership.
As more of the world’s population migrates to cities, the planet’s environmental crises are concentrating there too. Already cities are the world’s biggest emitters of greenhouse gases, while generating immense amounts of trash and consuming copious quantities of water and energy. “Cities need to be more efficient in the way they interact with the environment,” says Sasson Darwish, an RBC Capital Markets managing director and “smart city” financier. “The way you can do that is through data.”
Data, of course, is Alphabet’s business. And for Toronto—whose population is increasing at a faster clip than any other big city north of the Rio Grande—Sidewalk seemed like an ideal partner. When Waterfront Toronto welcomed Sidewalk in 2017, Eric Schmidt, then Alphabet’s executive chairman, joked that the company’s founders were excited about “all the things you could do if someone would just give us a city and put us in charge.”
Torontonians had concerns. Sidewalk’s arrival coincided with a mounting “techlash,” as consumers grew distrustful of Big Tech’s data gathering. And its plans for Quayside depend on sensors embedded throughout the environment—gathering data on where people go, how they live, and more.
Early on, opponents blasted Sidewalk as a thinly disguised attempt to gobble up data on citizens’ real-world habits, extending Google’s dominance from Internet to omnipresence. Sidewalk remained adamant it would anonymize Quayside data, where possible, and never use it to support Google’s advertising machinery. For some, those assurances fell flat. And Sidewalk’s proposal to establish an independent “data trust,” which could have put that data up for grabs by third parties, alarmed privacy advocates even further.
Dan Doctoroff, Sidewalk’s CEO, says ads play no part in its business model: “Zero—not one bit.” Still, Alphabet expects the unit to earn an “adequate financial return,” says the former CEO of Bloomberg, the news and financial-data company, and former New York City deputy mayor. Sidewalk plans to invest in real estate. It anticipates earning fees for advising developers. And the firm will invest in, sell, and manage new smart-city tech. (It already has a stake in such products as an energy-efficient alternative to traditional electric wiring.)
But to some critics, that profit-seeking motive is part of the problem. “People are talking about privacy when what they should be talking about is privatization,” says Bianca Wylie, a founding member of the #BlockSidewalk movement. Under the Quayside model, she says, the government would cede control of public goods to largely unaccountable private interests. Further, she argues, Sidewalk is “A.I.-washing” infrastructure with complex tech that could result in vendor lock-in—making Toronto dependent on Sidewalk for its own growth. “I have no interest in being Larry Page’s hobby,” Wylie says, referring to Alphabet’s cofounder.
The grinding conflict has forced Sidewalk to tamp down its ambitions. The company sharply downsized its proposed development, which originally encompassed hundreds of acres beyond the Quayside site, including a potential Canadian headquarters for Google on a nearby island. This fall, Sidewalk dumped its “data trust” idea. In November it agreed to effectively leave data governance questions to the discretion of, well, government—plus Waterfront Toronto, whose board is appointed by municipal, provincial, and federal officials. (Even that compromise has critics: The Canadian Civil Liberties Association sued to stop the deal, and CCLA director Michael Bryant contends that Waterfront Toronto “has zero experience or jurisdiction to manage people’s data—any more so than they could build a nuclear plant.”)
All this wrangling is the antithesis of the agile, move-fast culture of Alphabet’s Silicon Valley home turf. Doctoroff concedes that “in retrospect we should have listened sooner and better and carved it back to what we knew would be politically acceptable.” Still, even in its truncated state, he sees Quayside becoming a showcase for Sidewalk’s city tech—a sort of in situ product catalog. For Alphabet, even a mini-display may be worth the wait. The smart-city industry—a category that includes automation in infrastructure, energy, and transportation, among other areas—is a $500-billion-a-year industry, according to Allied Market Research. Capturing even a small share could be a boon for a digital giant eager to expand beyond advertising.
For now, though, Sidewalk’s city of the future remains on hold. At nearby construction sites, cranes pluck up I-beams and send them skyward, cement trucks roll, and workers clank away. At Quayside, the waterfowl still hold sway.
A version of this article appears in the March 2020 issue of Fortune with the headline “Upgrade, Interrupted.”
More from Fortune’s special report on cities:
—Why the modern city needs a makeover
—The city that sees it all
—Can San Francisco be saved?
—5 big ideas for fixing global cities’ most daunting challenges
—20 maps charting the rise of the modern megacity
Subscribe to Eye on A.I., Fortune’s newsletter covering artificial intelligence and business.