Sidewalk Labs’ Grand Vision Meets Reality in Toronto

Sidewalk Labs executives were full of ambition two years ago when they pitched their parent company, Alphabet, more than 600 pages of plans for building a city neighborhood from scratch.

The 2016 proposal, which Sidewalk described as preliminary, was designed to stretch the conventions of urban planning, proposing things like enclosing the newly created district with a 260-foot-tall plastic dome. Residential buildings would be constructed with interchangeable, prefabricated sections to make housing easy to customize. The new development eventually was expected to generate tens of billions of dollars in revenue over several decades through land or building sales and tax revenue.

Some of these more audacious plans, detailed in confidential materials viewed by The Information, have been scrapped or scaled back.

What Sidewalk Labs ended up with was a more down-to-earth plan for a high-tech district in Toronto, although one that has also butted up against technological and political realities. Sidewalk last fall announced it would build a commercial and residential neighborhood on a largely undeveloped waterfront site in the city, and began working to get input from local groups and public officials—and hopefully to win their support.

But Sidewalk executives appeared to have been caught off guard by the pushback the project has encountered locally, people close to the company said. The endeavor has faced mounting public skepticism of big technology firms and concerns about consumer privacy.

Dan Doctoroff, Sidewalk Labs’ chief executive, acknowledged in an interview that the project has been refined from the initial 2016 plan, but generally has remained consistent. “Technologies change. You learn more about what is feasible over time. You face political realities and opportunities,” he said.

Other tech firms have been tempted by the idea of building or reshaping communities. In 2016, Y Combinator launched a research project to learn how it could build and finance a new city. Zappos CEO Tony Hsieh has poured hundreds of millions of dollars to help turn downtown Las Vegas into a tech hub, and later admitted making several mistakes in his approach. A cryptocurrency millionaire has been planning a new community that leverages blockchain technology near Reno, Nev.

But none of these efforts has the scale or ambition of what Sidewalk hopes to build in Toronto.

Sidewalk’s current proposal for that city is to build an initial 12-acre site, potentially with new streets, housing, retail and an office for Google, its sister company. From there, the company would hope to fan out across 800 acres on the city’s waterfront, on one of the “largest underdeveloped urban sites in North America,” as the company described it recently. The future neighborhood would serve as a testing ground for things like concrete that can melt snow and underground systems for package delivery.

Sidewalk is planning to release more details for the proposed development in the coming weeks, with a full outline due early next year. The plans will need the approval of various local entities as well as the Alphabet board. While it is still possible that the proposal will be rejected or even that Sidewalk would pull out, people familiar with the matter said it is more likely that the project proceeds in a curtailed form.

Privacy Concerns

In Toronto, residents and public officials have expressed concern that a neighborhood built from the ground up by an internet giant raised the specter of masses of personal data commandeered for commercial purposes, or even left vulnerable to hackers.

In recent months, Sidewalk has tried to address the privacy issue, saying it would set up an independent trust to manage the data gleaned from its operations. Toronto officials have pledged to bring extra scrutiny to the proposal to ensure sufficient affordable housing and privacy standards.

“The fundamental problem is: Why do you let this company run the show?” said Bianca Wylie, co-founder of Tech Reset Canada, an advocacy group focused on public policy and tech. “You are dealing with public assets. You don’t get to act like this.”

While Mr. Doctoroff allowed that perceptions of big tech have changed, he defended Sidewalk’s plans for handling personal information, saying the company always intended to have privacy protections in the district. “People went on the attack without listening to what we were saying or giving us the time to wrestle with a complicated issue,” he said. “We took our time, candidly, to develop an approach we think is pretty radical and something we don’t think people would have expected us to articulate.”

An Alphabet manager briefed on the project said Sidewalk Labs executives have said they have struggled to manage the project’s image with the public. “They realize they need to come up with something sooner or later” that offers more specifics on the proposed development. “People are getting antsy,” the manager said.

Real Estate Returns

The rewards of pulling off large-scale development from scratch could be immense, Sidewalk Labs suggested in the confidential plans in 2016. The company planned for several revenue sources when it modeled financial scenarios for building across 750 to 1,500 acres, using such cities as Alameda, Calif., Denver and Aurora, Colo., and Detroit as case studies.

Its largest revenue source was projected to be from real estate development. Sidewalk estimated it could pull in between $43 billion and $83 billion in revenue—depending on factors such as how quickly it could attract residents and workers—from leasing buildings it constructed or selling land over the next three decades. Another revenue source would come from things like pay-as-you-go fees for people to use electricity, waste management and internet connectivity that Sidewalk planned to provide. It also looked to strike revenue-sharing agreements with local governments, including property and sales taxes.

Mr. Doctoroff said this week the project would make money from some limited real estate development and an increase in land value. But the company has put a stronger focus on underwriting infrastructure for the district that would be difficult to finance. “Our role is to create conditions so others can be successful,” he said.

It isn’t clear how Sidewalk’s revamped vision will affect its initial financial projections. A person close to Sidewalk said the company has discussed how there is “a lot of money to be made on being a utility or charging people money for tolls,” as well as new urban products and services it can test in the city.

Opponents Emerge

Mr. Doctoroff, a former deputy mayor of New York City and the former CEO of Bloomberg LP, has run Sidewalk Labs since 2015. The idea for the company was hatched a year earlier inside Google, before the creation of the Alphabet holding company, with support from Google co-founder Larry Page.

Mr. Page, who didn’t return a request through a spokesperson to comment for this article, is said to be intensely interested in finding private-market solutions to urban problems. In addition to Sidewalk, the search-advertising giant has built divisions focused on urban technologies including Waymo, for autonomous vehicles, and Google Fiber, for high-speed internet connectivity.

‘Technologies change. You learn more about what is feasible over time.’

Its consumer mapping apps Google Maps and Waze remain popular, and its real estate division had been working on futuristic building concepts at its Mountain View headquarters.

Google wanted a new division that could work on urban innovations, exploring things like software to track future autonomous vehicles and new construction materials. It also wanted to figure out how Sidewalk could play a role in managing utilities and transportation in parts of major North American cities to prove that governments and financial backers of big infrastructure projects should take more risks.

The company figured it could “stack the deck” toward bringing technologies such as shared self-driving vehicles into the mainstream by banning traditional vehicles and implementing new road pricing policies in the new Sidewalk neighborhood, according to the 2016 proposal.

While Sidewalk Labs announced its deal in Toronto last year to much fanfare, skeptics have since emerged in nearly every branch of government in Canada. At the federal level, cabinet ministers peppered Google’s head of public policy in Canada with questions about Sidewalk Labs’ commitment to data protection and how the company won the development bid.

At Waterfront Toronto, the publicly funded agency that oversees development at the water’s edge and that selected Sidewalk Labs, at least one government-appointed board member resigned, claiming she had insufficient time to review terms of the deal. Other advisers tapped by Sidewalk or government agencies to work on the project have left after being asked to sign non-disclosure agreements or having other disagreements.

Ann Cavoukian, a former Canadian privacy commissioner who had been advising Sidewalk Labs on data-collection matters, left the project last month over concern that residents’ data would be vulnerable to exposure inadvertently. She said Sidewalk Labs has agreed with her stipulation that data collected from sensors and other technologies should be anonymized at the time of collection so that it couldn’t be traced back to specific people. But the company’s proposal for an independent body—rather than Sidewalk Labs itself—to approve and control the collection and use of urban data was too risky.

“Sidewalk Labs could no longer guarantee that all data would be de-identified at source—they could only encourage other parties to do so,” she wrote in an email to The Information.

One proponent of the project, Mark Wilson, a former IBM executive who used to chair the board of Waterfront Toronto, said he believed Sidewalk Labs had made some mistakes in the process, but he hoped that more detailed plans would help allay public concerns.

“Sidewalk is being accused of trying to privatize the city. People have a notion in their mind that they’re going to run this neighborhood and propagate it across the city. I don’t think that will be the outcome,” he said.

In one way, Sidewalk is ahead of the timetable it set in 2016. The company originally planned a competition for cities to vie for Sidewalk to build the district, with a bid awarded by this fall. It considered trying to convince U.S. cities to use the powers of eminent domain to acquire land for Sidewalk, which at the same time would use a public-relations strategy to “convey clearly that the project is not a fully determined, top-down development.” It would pick 5 to 10 finalist cities, and planned op-eds from experts “praising the project’s approach and goals.”

Instead, the company worked quietly in search of friendly cities, considering sites in Nevada before landing on Toronto, people familiar with the matter said.

Smaller Canopies

Several of the outlined concepts in the 2016 plans have remained central to the project. A core part of its vision is using mass-produced timber rather than more costly concrete in tall buildings. The company also has studied how to better design very small apartments known as micro-units. Another concept described in the 2016 planning documents imagined gates at the entrance of the district to block human-driven vehicles. The company said publicly last year it eventually expects to close off most streets to human-driven cars.

Other proposals appear to have evolved significantly. Sidewalk’s plastic dome concept has morphed into plans for smaller, retractable canopies and partially heated outdoor spaces for winter. An idea to use software to track vehicles’ movements in the district and charge them based on road usage and vehicle occupancy turned into a startup the company spun out, called Coord, which now sells information on cities’ parking rules and toll prices. Sidewalk Labs hasn’t elaborated on its plans for ground traffic control in Toronto.

As the company appeared to devote more resources to real estate planning, infrastructure finance and public policy issues, at least a half dozen employees who work on the company’s potential technology products and business strategy have left in the past year. Those include Anand Babu, a Sidewalk Labs co-founder, and Nicholas Chim, who helped lead the development of transportation software Replica.

Mr. Doctoroff said the company would continue to build product and engineering teams to develop certain products and services in the district, while leaving it to others to develop the “vast majority” of new technologies.

Managing Expectations

The original idea for a plastic dome covering the new neighborhood was viewed as the district’s “signature feature,” according to the 2016 planning document. Inspired in part by science fiction, the dome, dubbed the Canopy, was projected to cost $325 million. It was described as a way to make buildings less expensive to construct by protecting them from wind forces. The company planned to “design a major public event around the ‘dome-raising’ in which the Canopy will be pressurized and rise,” according to the plans. The book included a photograph of Buckminster Fuller, a radical architect who built dome structures in the mid-20th century.

The concept didn’t make it into Sidewalk Labs’ plans for Toronto, in part because of myriad technical hurdles. There also were potential public-relations headaches. The Canopy had become somewhat of an inside joke inside Sidewalk, especially after a late 2016 “Saturday Night Live” sketch following President Trump’s election that satirized young urban liberals wanting to live in a literal bubble. Other ideas were equally unconventional. In a Bay Area lab, for instance, a Sidewalk Labs group grew a fungus called mycelium to see if it could become a sustainable building material, to be used in place of drywall.

Ken Greenberg, a Toronto-based urban designer who has advised Sidewalk Labs since 2015, said he was optimistic that the company would focus on practical solutions to problems involving housing, climate change and transportation that eventually could be replicated in other cities.

“We’re at a pivotal moment, where until now most people have only seen pieces of the puzzle being described,” said Mr. Greenberg. “That will be an interesting moment for people to see—what the urban world might look like if we take a few significant steps beyond what we’re used to.”

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