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Now that ICF has announced its Top Seven Intelligent Communities of the Year, it is a good time to reflect on “the other 14.”  That is, the 14 out of the Smart21 Communities of the Year that were not selected by our analysts to be among the Top Seven.

These stages in the competition are my least favorite part of our yearly process.  So much innovation, inspiration and hard work are on display from October to January, only to be pushed out of the limelight by the Top Seven selection.  It’s true that the Top Seven scored higher on our Intelligent Community Indicators, and on the annual theme of the Awards, than the other 14.  But those 14 deserve to be honored.  More important, the rest of us need to know about the strategies and practices that put them on the short-list of the world’s most successful Intelligent Communities.

Three of our Smart21 – Danville and Bristol in the state of Virginia, USA, and Porto Alegre in Brazil – illustrate a really successful strategy for community broadband, one that has put them square at the center of growing regional economies. 

When local governments go into telecommunications, they have different priorities than do private companies. They need to deliver dependable, high-quality, cost-effective service, and to make money doing it, because otherwise there’s nothing to invest in maintenance and growth.  (For all those who like to chant “people, not profits,” I offer the wisdom of management consultant Peter Drucker, who pointed out that, contrary to popular belief, businesses do not exist to make profits; it’s just that they just can’t do anything else unless they do.)  But governments have other goals that are part of their special mission: economic development, improved public services, more equal access to opportunity.  Sometimes the pursuit of those goals distracts them from running the store properly, in which case they lose money and make voters angry.  But that’s certainly not the case with Porto Alegre, Danville or Bristol. 

All three communities were starved for both broadband and economic opportunity.  They are in rural areas and long depended on agriculture and low-skilled manufacturing for employment. Not a recipe for economic success in the 21st Century.  The incumbent telephone or cable TV providers were not willing to make the investments needed to create a robust level of service.  So, all three communities decided to do something about it themselves. 

In Bristol and Danville, the cities owned their own electric utilities, and made these the basis for the build-out of a 100 Mbps fiber-optic network.  In Porto Alegre, a city-owned communications and IT company built a hybrid fiber and wireless network.  The original concept was to serve city-owned facilities as a substitute for paying the incumbent telephone carrier for service.  In other words, to save the taxpayers money.  But demand from businesses and citizens caused all three communities to aim higher.  Bristol fought in the courts and state legislature for 3 years, at a cost of US$2.5m, to win the right to compete with incumbents – and within a few years had over 60% of the market.  In Danville, community leaders were able to sidestep legal battles by making theirs an open-access network, in which the city provided the physical infrastructure that private-sector carriers used to deliver voice, Internet and video services.  Because of a different legal and political climate, Porto Alegre reported no major obstacles to its deployment of both infrastructure and services.

So far, these are community network stories like many others.  It was after the networks were up and running that things got interesting.  Bristol Virginia Utilities (BVU), the city-owned carrier, developed partnerships with neighboring counties, and became the prime contractor for a network build-out there funded in part by public grants.  The networks linked not only to homes and businesses, but also to a new technology park that attracted major IT employers.  In Danville, the city-owned electric utility services the entire region, and the third phase of the nDanville network is reaching outside the city limits to more than 20,000 rural businesses and homes.  It will support telework, rural schools and local business start-ups.  Porto Alegre is using their 350km regional fiber ring to connect rural health clinics with hospitals downtown.  That has reduced waiting time at the clinics from 4 months to 30 days, and missed appointments from 40% to less than 10% of the total. 

What’s the point?  Each of these communities has leveraged its own hunger for broadband to make itself the hub of a fiber-connected region.  As Mayor Jim Rector of Bristol told me, BVU is generating income from places far outside the city.  The network is making possible high-quality jobs to which Bristol residents commute.  It has encouraged the state university system to build a satellite campus nearby – connected, of course, to the fiber network.  Senior executives of a Fortune 500 mining company headquartered in Bristol told me that they couldn’t keep their corporate nerve center where it was without the connectivity provided by BVU.  Broadband-based services flow outward from the hub and prosperity flows back in, only to flood outward again like a spring tide. 

If your community has its own broadband network, you probably have opportunities to grow it beyond your own boundaries.  In fact, neighboring communities and counties may be clamoring for your help.  Should you give it?  The experience of the Smart21 suggests you should.  You have to get the funding and business model right, of course, but the rewards to the network owner and operator can be substantial.  And while you are building traffic on your network and incomes in your community, you will be doing a lot of good for your neighbors as well.

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This week, we announced our 2010 Top Seven Intelligent Communities of the Year.  They were selected by an international academic team of analysts from among the Smart21 Communities we named in October.  As always, some of my personal favorites did not make the list, and I failed to appreciate fully the strengths of some that did.

But there was one trend I did notice.  It was a focus on entrepreneurship: creating and growing new businesses.  Every one of this year’s Top Seven Intelligent Communities based their economic success on creating the right environment for the start-up of small, fast-growing companies and on nurturing their progress in ways large and small. 

That turns out to be a smart move.  Last year, Metro Innovation – a venture capital firm in Cincinnati, Ohio, USA – published a brochure called Ideas in Progress.  It would be hard to find a better summary of why promoting entrepreneurship is a major best practice of Intelligent Communities.  Here are just a few of the important questions they answer.  All are based on US economic statistics but I think the conclusions apply anywhere that free enterprise is allowed to flourish.

♦  Where does prosperity come from?  Over the last 20 years, 100% of net job growth in the US can be attributed to companies that are less than five years old.  When the tech bubble burst in 2001, Fortune 500 firms cut more than 900,000 jobs.  In the same year, venture-backed start-ups created 4.3 million jobs and $736 billion in annual revenues.  In 2008, venture-backed companies employed more than 12 million Americans and produced nearly $3 trillion in revenue.  That accounts for 11% of private-sector employment and 21% of US GDP. 

♦  Why is venture capital so important?  Venture capital is early-stage investment in business.  It isn’t essential to start-ups – 76% of American companies are financed by the founders themselves and 23% by their friends and family.  In fact, only one start-up in one thousand receives venture capital.  But they do better.  In 2000, venture-backed companies had a failure rate of less than 1%, compared with the 46% failure rate for all start-ups.  One percent compared to forty-six percent.  That sounds like magic, but it’s not.  Investors in early-stage companies are very selective: for every 100 business plans they evaluate, on average, they fund only one.  So a company that receives venture financing has been tipped by experts as a likely winner – and still, only 10-15% of them will grow enough to meet their investors’ goals. 

♦  Why is Silicon Valley so successful?  It’s about clusters, sure.  Business-university collaboration, of course.  But money helps.  On average, the US venture capital industry invests $25 billion every year in start-ups – and 50% of that is invested in the state of California.  This money is raised from sources all across the United States, which means that most American communities are exporting investment to the Golden State.  In 2009, McKinsey & Co. published a “Global Innovation Heat Map” showing centers of innovation around the world.  Guess what region comes out on top.

View the interactive map at McKinsey & Co.

♦  Why does innovation matter?  Nobel Prize-winning economist Robert Solow has the answer.  In a major study, he found that “ingenuity” accounted for 88% of the growth in output per man-hour between 1909 and 1949.  Eighty-eight percent.  Innovation drives the economy because it is the only way to make costs lower while improving quality and usefulness.  It is the only way, in short, to improve our standard of living over time. 

What are the leaders of Intelligent Communities to make of all this?  Simply put, local entrepreneurship is a “must have” in the Broadband Economy.  If it is not taking place within the city line, it had better be going on nearby, so that your citizens can benefit from it.   

To become reliable creators of prosperity, entrepreneurs need risk capital, whether it comes from private, public or nonprofit sources.  The money fuels growth, but even more important is the experience, objectivity and downright ruthlessness that venture investors bring to business.  If a group of seasoned, committed investors is picking winners in your community or one next door, only one out of a hundred may get the cash, but other 99 will raise their game, too.  Creating an entrepreneurial culture, developing funding sources and attracting investors is one of the biggest challenges that Intelligent Communities face.  The good news is that, from the example of this year’s Top Seven, they are tackling the challenge with everything they’ve got. 

While Baharul Nizam Said Daliman of Telecom Malaysia (TM Global - www.tm.com.my) was elaborating in his keynote remarks (titled "Intelligent Communities 2010"), on emerging intelligent communities in Malaysia and TM's commitment to the implementation of broadband in support of more intelligent communities, Professor Mel Horwitch of NYU's Polytechnic Institute, who joined me in Honolulu for the ICF program whispered, "The Malaysian telecom sector gets it."  He was referring to the criteria and vision of ICF.

The Top Seven announcement was scheduled to be the finale in a series of other awards presented by the Pacific Telecommunications Council and Mr. Said Daliman's keynote at its annual luncheon.  We knew the Top Seven was the highlight, but had no prior knowledge that Nizam would speak elegantly and with conviction about the importance of intelligent communities, base his entire set of remarks around ICF and kindly refer to ICF and its work with such elegance.  Thank you again, Nizam.  It was a pleasant surprise.  2010 may be full of surprises like this!

The 2010 Top Seven Intelligent Communities of the Year may offer a few surprises to people.  Certainly newcomers Arlington County, Virginia and Dublin, Ohio help to lay claim to the notion that the United States may be coming to the table in a more consistent way in terms of broadband and community enablement.  "This is huge," reads the headline of yesterday's TechLife Columbus (Ohio) in response to Dublin being named after two years on the list of Smart21.  The home of Cleveland Browns quarterback Brady Quinn and a very famous golf tournament has broken out and seems to sense validation for their strong fiber city strategy through our award.  Dundee, Scotland's return surprised some, but not ICF.  Dundee remains one of the great success stories in economic recovery and cluster development through collaborative planning and constant innovation. 

I am sure there was disappointment in the great cities of Moncton and Windsor at not making the Top Seven list for the second year in a row, but Canada can rejoice with the ascension of its nation's capital, Ottawa, to the list.  Canada has not missed placing a community on the Top Seven in any year - and someone suggested it should get a special award simply for that achievement.  "Can you call it an intelligent nation?" someone asked me at PTC.  Maybe someday soon.  Ottawa is another story of how a community can find balance between government and the tech sector through good policy, investment and education.  Eindhoven, Holland remains one of the anchors of the intelligent community movement and I am pleased that this most creative of places, "Brainport," will return to New York to share its experiences for its second consecutive appearance on the list of seven.  Like Dundee, Eindhoven needs to be more widely recognized. 

Suwon, South Korea is perhaps the "dark horse" surprise of the group, although the words "Korea" and "Broadband" to go together like gin and tonic or Ginger Rogers and Fred Astaire.  No one was surprised that a community from Korea made the Top Seven.  Gangnam had set the tone for Korea's excellence within the intelligent community movement prior to being named Intelligent Community of the Year.  It remains one of the most studied communities, along with Waterloo, Ontario (Canada).  This may bode well for Suwon as it continues to develop its science-based local economy. Finally there is Tallinn - again.  The fourth time in a row for the Estonian capital, which continues to charm people with some mystical quality we cannot quite define.  Let it be known that universally everyone seems pleased to know that an ICF list includes an Estonian city.  "Such a cool place," said a university telecom professor after the Honolulu announcement and luncheon.  Tallinn's selection was a bit of surprise to us, perhaps, but not to people who know the wireless telecom industry.  According to our assessment team, Tallinn performed very high again in the ranking among the seven.  It will be great to see their representatives as they are emerging as one of the legendary intelligent communities, like Sunderland, England.

The overall gap between 11 communities and the final seven was very thin, a matter of not more than three points overall.  According to the leaders of the Top Seven assessment project, this suggests yet again the difficulty ranking communities who all achieve at an increasingly high level.  (I am glad I only have to announce the T7 and look forward next to visiting these communities to verify claims, learn more about them, and help prepare them for their experience in New York in May.)

I arrived in New York this afternoon (21 January) one day ahead of schedule.  While Hawaii truly is paradise, it is great to be home in the cold to prepare for the happy surprises ahead.

Report from Honolulu

Despite the prediction of rain earlier, we have another beautiful evening in the Hawaiian Islands.  The Indian carrier Tata threw a massive party, with a flotilla of white balloons bouncing on the surface of the big pool at the Hilton and much talk about broadband and “cloud computing” between the Hawaiian singers.   The Pacific Telecommunications Council conference is well underway with a majority of attendees from among wholesale suppliers, submarine cable, the international satellite community and the world’s carriers and technology suppliers.  About 1,200 overall I am told. 

I participated on a panel this afternoon moderated by Tara Giunta of Paul Hastings law firm on the role of regulation in facilitating telecom infrastructure deployment, user adoption, economic growth and social development.  It was far more interesting than its title.  With Cliff Beek, CEO of Star Asia Technologies of Singapore and Jeff Brueggeman, VP of Public Policy for AT&T in the United States we looked at how regulation could enable or prohibit robust telecommunications access.  I provided the group with a snapshot of how the work of regulators impacted local communities by enabling a culture of use which could either prevent a community from falling apart or enable it to meet our five criteria.  It was agreed that organizations such as ICF and law firms who practice in this area need to speak with more regulators about the role of broadband in shaping the destinies of communities. 

One key point raised often was the degree to which the silos regulators operated from need to be broken down.  Brueggeman of AT&T had a view of broadband as a key infrastructure, correctly, and Beek presented a very insightful slide showing how the “footprint” of regulation in six Asian nations, including Japan and Vietnam, had or had not enabled telecom services and development to advance.  The impact on everything from healthcare to credit card payments could be felt, he said.  (I will attempt to publish this slide when I receive it.)  I noticed that the session was attended by a mix of people, including several people from the Pacific Island nations, with which ICF has made a connection through the Pacific Islands Telecommunications Association and will sign an MOU shortly, as well as the Philippines.  One woman, referring to the importance of laptops and access there said that in tough neighborhoods in the Philippines, people used to steal televisions.  Now they leave them alone and steal laptops. 

Everyone was asking about the Top Seven selection.  Special thanks to Jag Rao, an ICF jurist (voter) for volunteering to distribute information about ICF, the Top Seven program and the upcoming May 19-21 Summit in NY to dozens of colleagues around the conference.  With his usual enthusiasm he cornered friends and colleagues – and even people he did not know – and discussed the intelligent community movement and its relevance to the international telecommunications industry and global economy.  I cannot thank him enough for making the trip and being a part of ICF’s success.

Thanks also to the professors Sylvie Albert of Laurentian University and Don Flournoy of Ohio University for their incredible work to lead the assessment and selection of the Top Seven.  Their painstaking attention to detail will yield a new Top Seven for 2010.  In the scoring, I am told, 11 of the communities were separated by no more than three points.  With regard to Don and Sylvie, I would encourage people to read their book, “Networked Communities: Strategies for Digital Collaboration,” which focuses on sustainability for communities. 

I have just looked at the list of seven.  There will be a few surprises in this year’s list and a few communities may be disappointed – 14 to be precise.  I am proud of them all and will show a slide with a list of the 21 before announcing the Top Seven.

Telekom Malaysia is hosting the luncheon tomorrow at the Mid Pacific Conference Center at the Hawaiian Village where the Top Seven will be named.  When people ask tonight who the seven will be, I show them a slide of me shrugging my shoulders if they are asking via email.  I also presented the slide at the end of my panel session.  They laugh and stop asking.

PS: For the first time since I have been doing this announcement in Honolulu, there will be a tech rehearsal before the actual show by the company producing the Luncheon.   I am not used to rehearsing, but it may not be a bad idea!

Time to open the balcony door, let the trade winds in and think about our new Top Seven as I fall asleep on my last night here.  Truthfully, I cannot wait to get back to New York to talk about our new “stars.”

Aloha.

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I wrote in earlier posts about the Asian Way and the European Way of being an Intelligent Community.  Now it’s time to come home and reflect on the North American Way, as illustrated by our Smart21 Communities of the Year. 

The same caveats apply to North American communities as to their Asian and European peers.  All are different from each other, and all share characteristics with communities in other parts of the world.  But they occupy a distinctly North American cultural, political and social environment.  That has shaped their evolution. It has given them something unique to share with the world. 

1.  Eagerness to Experiment.  North America is known as a place where innovation thrives.  It goes back a long way in history.  In his 1835 book Democracy in America, Alexis de Tocqueville told about a conversation with an American sailor, in which de Tocqueville complained about the poor quality of American shipbuilding.  The sailor told him that ship design changed so fast that it wasn’t worth building ships that would last very long.  They became uncompetitive too quickly. 
 
Innovation thrives because of a willingness, often an eagerness, to experiment.  In the Smart21 Community of Riverside, California, USA, a new city manager experimented with a whole series of changes.  He hired the city’s first CIO.  He asked that CIO and the city’s Economic Development Department to collaborate on an economic growth agenda.  He tried hiring a “high technology business concierge,” and having this single point of contact helped attract and retain high-tech companies.  In another experiment, Riverside installed a small WiFi zone in the city’s downtown.  It proved popular, so the city’s new CIO started work on a more robust system that would double as the city’s first-responder network.   

Arlington County, Virginia displays the same restless energy.  Government, business, institutions and citizens engage in intensive, ongoing collaboration that has been named “The Arlington Way.”  This collaboration spawns an apparently endless flow of programs, projects and ideas, from professional internships in the schools to educational programs on the local cable TV network and the Web-based Arlington Teen Portal.  Successful programs endure.  Unsuccessful ones expire.   And the community as a whole moves forward.  

2.  Focus on Job and Wealth Creation.  Lacking the job and income protections common in Europe, North American Intelligent Communities make the creation of jobs and prosperity their top priority.  Many of the 2010 Smart21 offer “comeback” stories.  Windsor in Essex County, Ontario, Canada, is sister city to Detroit in the US.  Its fortunes waxed with those of Motor City, and have waned just as drastically.  With an unemployment rate the highest in Canada, Windsor and Essex County put retraining, job creation and economic diversification at the top of their list, and are pursuing them through an impressive array of programs from broadband deployment to education to investment attraction. 

Danville, Virginia, USA prospered when tobacco was a growth business and the American textile industry was globally competitive.  But by the beginning of the new century, it had Virginia’s highest unemployment rate.  The nDanville fiber network was conceived as a means to change the dynamic – to create a knowledge-based economy and transform the city into an entrepreneur’s haven. 

3.  Local Solutions in the Absence of National Policies.  While nations in Europe and Asia have long had national broadband strategies, it was only with the coming of the Obama Administration that America got serious about a Federal plan.  By contrast, Canada has been a leader in broadband policy and development projects for more than a decade.  In the US, the lack of national policy was hardly helpful, but it did spawn really innovative local solutions.  The history of rural electrification left many US communities the owners of their own electric and water utilities.  Some, like Bristol, Virginia, turned them into telecommunications carriers – and like Bristol, many spent years in the courtroom fighting incumbents for the right to compete.  Running at a profit, the Bristol Virginia Utilities network now extends into neighboring communities and counties, and has put Bristol at the center of an expanding web of connectivity for regional and national companies.  Dublin, Ohio followed the same path: laying conduit for carriers, then building its own fiber network in partnership with a telecom contractor and interconnecting it with public-sector state and national nets, and finally overlaying a WiFi network on top of it for public use.  Using tax-increment financing, Dublin ensured that the network paid its own way at every step in development.   Because American taxpayers are fierce overseers of every penny of public spending. 

And in some Canadian communities, they have decided that local solutions offer the best return.  Moncton, New Brunswick, relied on its incumbent carrier to help transform a former railroad town into a mecca for call centers.  But as the community’s needs grew, it was forced to branch out.  Working with a local company, it installed WiFi in its downtown core, its municipal bus network, sports arena and concert site.  The city will soon expand and diversify that network to bring Moncton’s fast-growing businesses the world-class connectivity they need.

The North American Way of being an Intelligent Community seems natural to me, because this is where I make my home.  But beyond that, I find it offers interesting values.  I believe that job and wealth creation belong at the center of the Intelligent Community movement, because it is economic vitality that makes possible everything else we love in our communities – the culture, social connections and quality of life. 

The willingness to try new things and then either scale them up or end them is essential to successful innovation anywhere.  So much so that innovation experts have a name for it: “fast failure.”  If it’s going to work, find out fast.  And if it’s not going to work, find that out fast, too. 

And finally, I just like the scale of local solutions.  They are something you can pursue and hope to see results in your lifetime.  And that’s true no matter where the community is.  During the last Building the Broadband Economy summit in New York, I spoke with Vice Mayor Ulf Kristersson of Stockholm, which was named the Intelligent Community of the Year.  He talked about his previous career in Sweden’s Parliament and his decision to return to local politics.  “It was interesting being a legislator,” he said, “and working on national policies.  But I prefer working in local government, because you know you are making a difference.”