Digital Futures Exploring the future impacts of digital technology on the New South Wales infrastructure system - Infrastructure NSW

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Digital Futures Exploring the future impacts of digital technology on the New South Wales infrastructure system - Infrastructure NSW
Exploring the future impacts of digital technology
on the New South Wales infrastructure system
Digital Futures Exploring the future impacts of digital technology on the New South Wales infrastructure system - Infrastructure NSW
Hajkowicz SA, Devaraj D, Horton J, McLaughlin J, Quezada G (2017) Digital Futures –
Exploring the future impacts of digital technology on the New South Wales
infrastructure system. Data61 Insight Team, CSIRO, Brisbane.

© Commonwealth Scientific and Industrial Research Organisation 2017. To the extent
permitted by law, all rights are reserved and no part of this publication covered by
copyright may be reproduced or copied in any form or by any means except with the
written permission of CSIRO.

Important disclaimer
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statements based on scientific research. The reader is advised and needs to be aware
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The report authors would like to thank Kirstie Allen, Nick Saphin, Simon Hunter and
Bronwyn Weir for comments and suggestions on early draft versions of this report.
The authors would also like to express gratitude to the many experts and stakeholders
working in the infrastructure planning and development ecosystem of New South Wales
for attending meetings and participating in discussions.

Sea Cliff Bridge in the northern Illawarra region of New South Wales (Source: Shutterstock)
Digital Futures Exploring the future impacts of digital technology on the New South Wales infrastructure system - Infrastructure NSW
1	Digital Futures ........................................................................................................................... 1
     Scenarios ............................................................................................................................................................................3
     Policy implications..............................................................................................................................................................5

2    Background ...............................................................................................................................7
     Digital technology and the fourth industrial revolution.................................................................................................7
     The challenge of meeting NSW’s future infrastructure needs........................................................................................8
     The importance of digital technology..............................................................................................................................9

3	The data deluge .......................................................................................................................11

4	Porous boundaries................................................................................................................... 15

5    Competing for connectivity .................................................................................................... 18

6	Digital dividends...................................................................................................................... 21

7	Relentless automation.............................................................................................................25

8 Virtually here........................................................................................................................... 29

9 New vulnerabilities..................................................................................................................32

10 Strategic foresight methods................................................................................................... 34

11	Key findings..............................................................................................................................37

12	References................................................................................................................................38

Digital Futures Exploring the future impacts of digital technology on the New South Wales infrastructure system - Infrastructure NSW
ii   Digital Futures
Digital Futures Exploring the future impacts of digital technology on the New South Wales infrastructure system - Infrastructure NSW
1 Digital Futures
The New South Wales, Australian and global economies                     However, there is much uncertainty about how the future
are in the early phases of an information revolution fuelled             of digital technology will unfold. This report presents the
by rapid advances in digital technology. Sensory systems,                results of a strategic foresight study into the impacts of
artificial intelligence, automated systems, robotics, online             digital technologies on the NSW infrastructure system
platforms, predictive analytics, confidential computing,                 over the coming 20 years. This story of the future is told
the internet of things (IoT), big data and other digital                 using megatrends and scenarios identified via structured
technologies will reshape economic activity, governance                  processes developed by the Data61 Insight Team.
models and lifestyles within cities and regions over the
coming decades.                                                          The megatrends (Figure 1) and scenarios (Figure 2) are
                                                                         designed to help decision makers at INSW, the State’s
This holds implications for the supply and demand of                     infrastructure planning agency, and other private and
built infrastructure across the entire State. New types,                 public sector organisations engaged in infrastructure
and geographic configurations, of infrastructure will be                 planning. They will be used to inform the NSW State
needed. There may be opportunities to sweat existing                     Infrastructure Strategy and help ensure the NSW
assets harder through digital solutions. In time, mobility               infrastructure system continues to meet the needs of
and land-use patterns could change in line with digital                  residents and visitors into the distant future.
technology adoption. This will have flow-on implications
for built infrastructure.

                                                                                             Virtually here

                                                      Competing for
                           The data deluge

                  Pourous                   Relentless                                                                 New
                 boundaries                automation                                                              vulnerabilities

Figure 1. Megatrends describing the impacts of digital on the NSW infrastructure system over the coming 20 years

Digital Futures Exploring the future impacts of digital technology on the New South Wales infrastructure system - Infrastructure NSW
Megatrends                                                  4. Digital dividends – Digital technology will continue
                                                               to improve the efficiency and effectiveness of existing
                                                               infrastructure assets in addition to boosting industry
    A megatrend is a deep-set and significant                  productivity. For example, the red-green lighting and
    trajectory of change which occurs at                       display systems now commonplace in contemporary
                                                               car parks substantially increase the utilisation of
    the intersection of numerous political,
                                                               vacant spaces, thereby improving the customer
    economic, social, technological, legal and                 experience without the need for additional car park
    environmental (PESTLE) trends. Trends have                 construction. Digital could be deployed in similar
    tighter typological, geographic and temporal               ways across the entire NSW infrastructure system
    definitions. Megatrends are conceptual tools               for improved planning, maintenance and operation
    used within the field of strategic foresight and           of built assets. Digitally enabled models present
                                                               opportunities to rethink solutions to infrastructure
    by technology advisory companies to craft a
                                                               demand – for instance, to what extent can a co-working
    narrative of the future.                                   centre substitute for an upgrade to transportation
                                                               infrastructure for commuters living on the outskirts
                                                               of a major city?
1. The data deluge – The infrastructure system and
   entire NSW economy will be increasingly dependent        5. Relentless automation – As the costs of artificial
   on large and complex data flows. Individuals and            intelligence decrease and the capabilities increase,
   organisations will be both data rich and data               it will be more widely deployed across the economy.
   overloaded. A capacity to convert the inflows of data       Technological trends suggest this is happening
   into useful information to inform decisions will be         and that artificial intelligence by the year 2025 will
   critical for planning, constructing and operating           be substantially superior compared with today.
   built infrastructure.                                       Practically all industry sectors are actively and
                                                               relentlessly deploying technologies which automate
2. Porous boundaries – What Uber did to taxi companies         and/or augment human performed tasks. The NSW
   may be just the first of many waves of platform-based       infrastructure system of the future will be much more
   and digitally enabled business models entering and          automated than today.
   disrupting existing markets. Peer-to-peer marketplaces
   enabled by digital technology and distributed ledgers    6. Virtually here – Digital will reduce the necessity of
   (i.e. blockchain) are set to fundamentally alter how        visiting an office, shop, hospital, university and other
   goods are traded, and how transactions occur, within        physical places. Background logistics and supply chains
   the economy. These models often emanate from                will expand to move the goods ordered online, which
   ‘the edge’ of well-established industries and may           will comprise an increasingly large share of retail.
   occur outside the current regulatory models. As such        Whilst there’s no evidence of mobility declining, the
   they can be disruptive and challenging for current          nature of trips, and the destinations and travel times,
   longstanding marketplace incumbents.                        could change. Eventually, changes in mobility patterns
                                                               and the removal of geographic necessity may change
3. Competing for connectivity – Fast and reliable              land-use patterns. The new geography of the future
   internet along with individual and institutional            digital economy is virtually here.
   capacity to exploit digital connectivity will be
   increasingly vital for regional economic growth.         7. New vulnerabilities – With increased connectivity
   The large areas and relatively low population density       comes increased and new vulnerability to cyber-
   of regional NSW will create challenges for the public       physical attacks and data breaches. Whilst industry
   and private sector working to achieve ubiquitous,           and government expenditure on cyber security may
   reliable and speedy connections. Last century, roads        be growing rapidly, the number, and cost, of cyber
   and highways were needed to ensure NSW regions              security incidents and data breaches are growing
   were included in the economy. This century, it is           even more rapidly. Some forecasts suggest that in the
   digital connectivity.                                       absence of new cybersecurity paradigms, the costs of
                                                               being connected due to data breaches may exceed the
                                                               benefits. This megatrend heralds an urgent need to
                                                               secure NSW future cyber‑physical systems.

2     Digital Futures
Digital Futures Exploring the future impacts of digital technology on the New South Wales infrastructure system - Infrastructure NSW
                                                                                                    Our scenarios are based on the deductive reasoning
   Scenarios are plausible and evidence-based                                                       approach taught at the Oxford University Scenario
   stories about what the future may hold based                                                     Planning School (Wilkinson & Ramirez, 2016). This involves
   on how the trends and megatrends play out.                                                       identifying, usually two, axes of critical uncertainty about
                                                                                                    the future relating to the trends and drivers. The axes also
   Because multiple futures are possible, there
                                                                                                    capture critical impacts on the focal issue – in this case the
   are multiple scenarios. Scenarios enable the                                                     impacts of digital on built infrastructure in NSW out to the
   stress testing of alternative policy designs and                                                 year 2037. Two axes generate four quadrants and therefore
   strategic frameworks.                                                                            four scenarios.


                2. Restructured                                                                         4. Renaissance
                Within the envelope of (mostly)                                                         Widespread technology adoption is
                existing technological capability and                                                   associated with profound changes in
                adoption NSW residents and businesses                                                   where people live and their mobility
                restructure their lifestyles to take                                                    patterns. This is combined with highly
                advantage of remote connectivity and                                                    capable digital technologies that
                avoid commuter stress. Infrastructure                                                   substantially reduce costs and improve
                planners need to respond to different                                                   the effectiveness of infrastructure.
                                                                   Impacts of digital on mobility

                lifestyle preferences.
                                                                   and settlement patterns

                                                                                                            Extent to which digital solutions

                                                                                                            reduce cost and improve services

                1. Heritage                                                                             3. Enabled
                The impacts of digital on the types                                                     In this future NSW citizens have chosen
                of infrastructure and geographic                                                        to adopt similar mobility patterns
                configuration of infrastructure                                                         and lifestyles but the infrastructure
                is limited. This scenario is still                                                      solutions are highly technology enabled.
                associated with technological                                                           Infrastructure planners incorporate
                improvements but they are relatively                                                    advanced digital solutions into new
                modest and incorporated within                                                          designs, and retrofit existing structures,
                existing frameworks.                                                                    to achieve improved efficiency and
                                                                                                        effectiveness of the assets.


Figure 2. Scenarios for 20 years into the future relating to digital and built infrastructure (based on how the megatrends may play out)

Digital Futures Exploring the future impacts of digital technology on the New South Wales infrastructure system - Infrastructure NSW
The two axes identified in this study are:                       2. Restructured – Under this scenario technology gains
                                                                    have been modest but there’s been considerable
1. Digital technology capability and adoption                       lifestyle adjustment within the envelope of (mostly)
   (high to low) – This axis relates to the extent to               existing digital capabilities. Residents and visitors
   which digital technologies transform how we utilise              of NSW have opted for teleworking, online retail,
   infrastructure and reduce operational and maintenance            telehealth and other digital services to a much greater
   costs. The key uncertainty here relates to how good              extent. This is associated with changes in mobility
   digital technology actually gets and the extent to which         patterns in the near term (next 5-10 years) and
   it is adopted by people in NSW. For example, at the              eventually with changes in land-use and settlement
   high end automated vehicles perform sensationally                patterns. This means infrastructure planners need to
   well at reducing accidents, congestion and costs                 meet the needs of a different settlement pattern across
   on the NSW road network. As such they are widely                 the State – albeit with technologies not too much
   adopted with impacts on infrastructure needs. At the             further progressed than today.
   low end the performance of automation has been
   less-than-hoped and they are not widely adopted. The          3. Enabled – Under this scenario people in NSW have
   axis captures all forms of digital technology including          maintained roughly the same mobility and settlement
   sensory systems, the internet of things, predictive              patterns over the coming 20 years. The currently
   analytics, confidential computing, artificial intelligence,      highly sought-after postcodes remain attractive and
   computing power and other technologies.                          people continue to wear commuter stress for trips
                                                                    into city/town centres. However, the infrastructure is
2. Impacts on settlement patterns (high to low) –                   much more technologically enabled. Sensory systems,
   Another key area of uncertainty and impact in how                predictive analytics, automation and other digital
   the megatrends play out depends on how digital                   technologies are deeply embedded within the State’s
   technology changes mobility and, in turn, land-use               infrastructure system. Infrastructure planners need
   and settlement patterns across the State of NSW.                 to design for similar lifestyle needs but with digitally
   Digital holds the promise of reducing or removing                enabled solutions.
   the necessity of visiting the physical place for work,
   shopping, healthcare and countless other services.            4. Renaissance – Under this scenario the infrastructure
   At the low end digital technologies haven’t, over the            system of NSW is completely reinvented. People
   last 20 years, had a significant impact on mobility nor          living in different places with different lifestyles
   settlement and land-use. People still shop, work and             demand different services. At the same time, digital
   have other lifestyle patterns with a similar geographic          technologies have proven highly capable at reducing
   expression. At the high end of the scale people                  cost and improving the quality of services. Under this
   have radically reshaped their lifestyles due to digital          last scenario digital is a driving factor in the NSW
   enablement. Mobility may not have reduced but the                infrastructure system and guides the decisions of
   trips are very different and the settlement patterns (and        private and public sector stakeholders as they develop
   infrastructure needs) are very different.                        the State’s infrastructure.

                                                                 The scenarios arise from the megatrends, and underlying
These two axes give rise                                         trends, which are described in more detail in the following
to four scenarios:                                               sections of this report. The concluding sections of the
1. Heritage – Digital technology has advanced in this            report examine the policy implications of the scenarios
   scenario but the results have been underwhelming.             and megatrends.
   The pathway to adoption is slow and uneven. As such
   this scenario holds the lowest level of digital impact on
   infrastructure planning. This means that digital has had
   only a limited impact on the geographic configuration
   and settlement patterns of NSW. It’s close to a business
   as usual scenario as the State continues down roughly
   the same pathway of using digital within the context of
   the infrastructure system.

4    Digital Futures
Policy implications                                            2. Improve digital connectivity across the entire State.
                                                                  Good digital connectivity is a prerequisite for economic
The megatrends and scenarios identified through this              activity and job creation in regional NSW within the
study hold implications for both public and private sector        digital economy of today and, increasingly, the future.
organisations making operational and strategic decisions          At the current time some regional areas within NSW are
about infrastructure. We note that the policy space is            below national and regional standards for connectivity.
not a blank canvas. Excellent programs and activities             This will harm their economic prospects. Improving
are underway already. However, we argue there is                  digital connectivity is a pressing priority relevant to all
considerable scope to do more in the following areas:             government levels and industries, warranting further
                                                                  effort and innovative models. Actions that could be
1. Use digital to push existing infrastructure assets             considered by NSW State Government and industry/
   harder. This would involve greater utilisation of              professional organisations include:
   automated systems, sensory systems, telehealth,
   telecommuting, digital government service delivery             • Evaluate the gaps in digital connectivity given
   and predictive analytics for the more efficient                  current and near term future data transmission
   operation of infrastructure. Given the relative novelty          technologies which need to be filled to ensure
   of these technologies, there is much value in applying           regional economies can participate in the digital
   lean innovation models involving rapid and low                   economy. Work with partner organisations to fill
   cost cycles of design -> test -> refine -> redesign.             these gaps.
   Resulting data can enable ubiquitous adoption through          • Develop methods and a transparent and analytically
   sharing of information across government and the                 robust framework to prioritise investments in
   private sector. Actions that could be considered by              digital infrastructure upgrades. This is needed
   NSW State Government and industry/professional                   because resources are limited and insufficient to
   organisations include:                                           be spread evenly across all regions and locations.
                                                                    Prioritisation is needed to ensure the maximum
   • Create a knowledge exchange on digital solutions               beneficial outcomes under a constrained budget.
     for infrastructure problems used by the private                It is important that the decision frameworks are
     sector and Local and State governments to                      transparent, evidence-based and analytically robust.
     document case studies and evaluate outcomes.
     This could take the form of newsletters, journals,        3. Adopt and promote building information
     conferences and/or websites. The objective is to             modelling (BIM). The benefits of BIM have been
     share technical and business process learnings to            well demonstrated as detailed in this report under
     increase adoption rates.                                     the ‘digital dividends’ megatrend. However, for
   • Conduct and publish benefit-cost analyses and                these benefits to be realised the construction sector
     cost‑effectiveness analyses on internet of things (IoT)      needs to adopt consistent BIM standards across
     solutions to infrastructure bottlenecks across the           the entire industry and, ultimately, use BIM on a
     State (e.g. the sensor system on the Sydney Harbour          business‑as‑usual basis. Industry, government and
     Bridge) so that investors have improved visibility on        professional associations can escalate the effort to
     the financial performance of proposed solutions.             achieve BIM adoption.
     A key challenge for private and public sector
                                                                  • Study and diagnose the BIM implementation failure.
     investors at the current time is a lack of information
                                                                    Numerous case studies and objective research
     about what works.
                                                                    has demonstrated the efficiencies associated
                                                                    with BIM. However, implementation in NSW
                                                                    remains low compared to other world jurisdictions
                                                                    (e.g. the United Kingdom and Singapore). To improve
                                                                    adoption and usage we need to understand the
                                                                    barriers to adoption, and solutions for overcoming
                                                                    these barriers, in NSW specifically.

• Provide resources, information support, standards,     5. Identify how digital connectivity impacts mobility
      general assistance and if/where appropriate apply         and land-use in NSW to inform planning decisions.
      efficient regulatory mechanisms to increase the           There is a possibility, some might argue likelihood, that
      uptake and use of BIM across NSW.                         digital reshapes mobility and land-use patterns across
    • Work towards achieving BIM adoption thresholds            the State and thereby calls for new infrastructure in
      across industry. When used by an individual               different locations (and possibly leaves some existing
      company, BIM may not yield strong positive financial      assets stranded). However, the issue has not been
      returns. However, when applied across an entire           subject to rigorous peer reviewed research. As a
      industry there is strong evidence of strong positive      consequence the land-use implications of digital are
      financial returns for the companies within the            not being factored into local/state town/regional plans.
      industry and the industry as a whole.
                                                                • Consider a potential future study to examine the
4. Undertake research and analysis to proactively                 possible relationship between property prices
   identify risks and secure cyber-physical systems.              (e.g. unimproved capital value data) and broadband
   The IoT is expected to grow rapidly at a global scale,         speed and reliability in regions and cities across
   and could potentially outstrip the development of              NSW (paying consideration to cause-effect issues in
   the cyber systems needed to ensure its security.               addition to statistical correlations).
   As the IoT advances, a greater focus on cybersecurity        • Search for other evidence of a relationship between
   is needed to ensure the safe, seamless, and                    digital connectivity and mobility and land-use
   effective implementation of future IoT-enabled                 patterns within NSW to document trends and issues
   infrastructure systems.                                        of relevance to strategic planners.

    • Focus on improving risk identification and
      mitigation related to cyber-physical systems and
      infrastructure – for instance, by expanding the
      capabilities of the Government Chief Information
      Security Officer (GCISO), and establishing multiple
      dedicated cyber-security teams reporting to
      the GCISO.
    • Work with other government agencies at State
      and Federal levels to conduct novel research into
      cybersecurity that involves new paradigms and
      different approaches. This recognises that current
      cybersecurity systems and technologies are not
      keeping pace with breaches and a fundamental
      rethink is required.

6     Digital Futures
2 Background
Digital technology and the                                      What are all the digital technologies? There have been
                                                                some attempts at developing taxonomies and classification
fourth industrial revolution                                    systems for sub-categories of digital technology.
                                                                For example, the ‘Encyclopaedia of Sensors’ comprises
According to Klaus Schwab – Founder and Executive               10 volumes with more than 400 chapters (Grimes &
Chairman, World Economic Forum – there have been                Pishko, 2006). However, as yet the world does not have a
four industrial revolutions in the history of the world         definitive generic classification of digital technologies; and
(Schwab, 2016). The first industrial revolution saw the         may never have one. Digital technologies are so deeply
invention of steam power and railways. The second saw           intertwined with each other they’re hard to separate.
the invention and widespread use of electricity. The third      They’re also changing all the time. Some of the candidate
saw automation within factories and mass production.            entries for high-level digital technology groupings would
The fourth industrial revolution – the one which Schwab         include sensory systems, predictive analytics, machine
believes we’re in the early phases of – is about online         learning, augmented and virtual reality, distributed ledger
connectivity, the fusion of existing technologies and the       technology, confidential computing, cryptography, and
blurring boundaries between the physical, digital and           IoT applications.
biological spheres.
                                                                In practice, each of these technologies contains elements
Also referred to as the ‘information age’, the fourth           of the others. There will be millions of digital technologies
industrial revolution is often seen as distinct from its        impacting the NSW infrastructure system. The unifying
predecessors for two main reasons: (a) a faster and             feature which ties these technologies together is data.
exponential rate of technology development and                  All digital technologies use, record and transmit data in
penetration and; (b) the ubiquity of impacts across all         some way. The flow of data between digital technologies
industries and geographic regions. There are few sectors        is what creates higher level functionality and gives rise to
of the economy and few individuals in society who are not       the fourth industrial revolution. This is why infrastructure
being impacted by digital technology. Arguably the phrase       planners, and so many other professions, are actively
‘digital economy’ will have a short shelf-life not because      examining the impacts of digital.
it will stop happening but because of its ubiquitous
presence; there simply won’t be a non-digital economy.

In this study we’re focused on the impacts that digital
technology will have on the NSW infrastructure system.
We define digital technology as any device, or network
of connected devices, which generates, transmits and/or
uses electronic data to perform a useful function. Data is
central to this definition. The ability to use and share data
is what elevates an electronic device (e.g. lightbulb) to the
status of digital (e.g. wifi-enabled lighting system). The
other central component of this definition is the notion of
connectivity. A digital technology depends on some level
of data connectivity to other devices in order to perform
useful functions.

The challenge of meeting NSW’s                                             intergenerational report (NSW Treasury, 2016), for the
                                                                           2014-15 financial year, the gross public sector capital
future infrastructure needs                                                expenditure on infrastructure in NSW was A$9.4 billion
                                                                           and for recurrent operational expenses was A$64.5 billion.
Given the forecast population growth and economic                          Capital expenditure is forecast to grow out to the year
growth for NSW, the demand for built infrastructure                        2056 at an average rate of 4.1 percent per annum reaching
is high and set to escalate. The fundamental driver                        A$49.2 billion. Recurrent expenses for infrastructure borne
is population growth. The total NSW population is                          by the public sector in NSW are forecast to grow by half
forecast to grow from 7.6 million people today to                          a trillion Australian dollars over the same time period.
between 10.8 million and 11.6 million in 30 years’ time                    This means total expenses (capital plus recurrent) will
(NSW Treasury, 2016). More people will require more                        increase at the rate of 5.3 percent per annum over the
built infrastructure. However, the nature of growth also                   next 30 years.
matters. The aged and youth dependency ratios measure
the relative portion of older and younger persons who                      Against a backdrop of overall growth, the relative shares
depend on a productive workforce to meet their needs.                      of expenditure within different categories of public
The youth dependency ratio will grow from 29 percent of                    infrastructure spending are also likely to change over
the population to 30 percent and the aged dependency                       time. Health will increase from 11.4 percent to 20 percent.
ratio will rise from 24 percent to 42 percent (NSW                         Education will increase from 4.8 percent to 11.6 percent.
Treasury, 2016). This will be associated with increased                    Recreation and culture will increase from 1.9 to 5.4 percent.
pressure on healthcare, education, and other categories                    This is partly the consequence of the continued growth of
of infrastructure.                                                         the services sector of the NSW economy in line with other
                                                                           advanced economies worldwide. Health and education in
However, government budgets at State, Federal and                          particular have in recent times been growth sectors of the
Local levels are stretched. At the national level the public               economy creating the bulk of jobs and economic activity.
debt to gross domestic product ratio has been steadily                     However, health and education will also have considerable
rising each year since 2013 (OECD, 2017). The challenge                    infrastructure needs with associated cost burdens.
is mirrored at the State level. As documented in the

                  FINANCIAL YEAR                                    FINANCIAL YEAR
                    ENDING 2015                                       ENDING 2056

                  11.2                                              10.3
                                                                                                        Transport and communications
              6                                               6.8
                                                                                     45.9               Education

                                                                                                        Recreation and culture
                               64.8                                                                     Public order and safety


Figure 3. Current and forecast percent shares in public infrastructure spend in NSW
Source: (NSW Treasury, 2016)

8       Digital Futures
Arguably one of the largest challenges in planning
for NSW’s future infrastructure needs is the fiscal gap
                                                             The importance of
projected by the NSW Treasury – the difference between       digital technology
public sector revenue and expenditure. This gap is, in
the absence of corrective action, forecast to grow to        There is an a priori case that digital technologies will be
3.4 percent of gross state product (GSP) by the year         able to deliver the same, or better, service outcomes at
2056. This means that revenue falls 3.4 percent short        lower cost. Digital could allow public and private sector
of expenditure and causes the deficit to grow and debt       organisations to push existing assets harder. Telehealth
to accrue. The intergenerational report also creates a       can reduce doctor and nurse time via reduced hospital
scenario where the fiscal gap has grown to 20 percent        visits and therefore save money in the healthcare system.
and net debt grows to 75 percent of gross state product.     Connected sensors and ramp signals can manage traffic
The NSW Treasury notes that such a scenario would            flow at key congestion points, maximising highway
not be permitted to occur in practice as governments         capacity and reducing the need for new roads. Sensory
would have to respond with corrective measures well          systems can detect and pinpoint the need for water pipe
before it eventuated. The NSW Treasury also notes in the     maintenance before the breakage occurs, making the
intergenerational report that the fiscal gap is not solely   repair job much cheaper. Teleworking systems may in
controlled by government and results from driving forces     time remove the need for a commuter trip altogether,
in the public and private sector. This includes ambient      decreasing peak traffic on the road network.
national, regional and global economic conditions.
                                                             Another impact of digital is on the demand side.
                                                             The growth of the digital economy and the conversion
                                                             of almost all analogue business processes into online
                                                             equivalents will change the demand for infrastructure.
  “… government services and infrastructure delivery
                                                             The first and most obvious will be the demand for
  will need to be as efficient and effective as possible.
                                                             broadband and mobile data transmission infrastructure
  Improved services that are consumer-centric and
                                                             across the State which enables regional economies to
  outcomes focused, leveraging the digital age,
                                                             actively participate in the digital economy. Governments
  innovative delivery models and dedicating resources to
                                                             at all levels and the private sector are all likely to play an
  where they are needed most all offer great potential to
                                                             important role in providing this infrastructure. There is
  improve services at lower cost”
                                                             also a distinct possibility that, in time, digital will change
  NSW Treasury, Intergenerational Report, Page 86            mobility patterns, settlement patterns and land-use. Put
                                                             simply, residents of NSW may choose to live in different
                                                             places, and make different type of trips, because digital
                                                             has removed the necessity for workers to be physically
Nevertheless, closing the fiscal gap will call for cost      present at work, for shoppers to be physically present
efficiencies across all categories of spending, including    in the shop or for patients to be physically present
infrastructure. The objective for infrastructure planners    in the hospital.
and operators is to maximise the level of beneficial
services from infrastructure (e.g. improved health, access   Therefore, there is every reason to believe that digital
to a job, energy supply…) whilst minimising the costs of     will impact both the demand and supply side of NSW’s
supplying those services.                                    infrastructure system. There is enough evidence to act.
                                                             However, the speed of digital technology development
                                                             and adoption is making it challenging for government,
                                                             industry and society to make sense of the opportunities
                                                             and indeed the risks.

                                                             This report aims to set the scene for a new perspective on
                                                             infrastructure planning by describing a set of megatrends
                                                             and scenarios for the coming 20 years. These give rise to
                                                             a set of policy implications and actions for both the public
                                                             and private sector to act upon.


10   Digital Futures
3 The data deluge
  The amount of data being recorded,                                                           This megatrend is about the growing volume and diversity
                                                                                               of data being generated and accessed. It’s also about
  stored, analysed and distributed                                                             the increasing dependence that industries, governments
                                                                                               and communities have on digital datasets to perform
  will continue to grow exponentially.                                                         routine and mission-critical operations. The supporting
  The NSW economy will become                                                                  trends include:

  increasingly dependent on these data.                                                        • Growing demand for data downloads. Data from the
                                                                                                 Australian Bureau of Statistics reveal an exponential
  Individuals and organisations will be                                                          growth in data demand nationwide with per
  both information rich and information                                                          capita downloads from 6,000 mb/year in 2006 to
                                                                                                 158,000 mb/year in 2016 – that’s 25 times more data
  overloaded. Data will continue to                                                              being downloaded over a ten year period (ABS, 2017).
  transform the way businesses and                                                               All indications are for the demand for data downloads
                                                                                                 by businesses and individuals to grow substantially.
  governments operate.
                                                                                               • Fixed broadband dominates but mobile is growing
                                                                                                 rapidly. The quarterly data from the Australian
                                                                                                 Bureau of Statistics on downloads for the three
  Banks, government departments, hospitals, retailers and                                        months preceding December 2016 reveals fixed
  even farms will be concerned with capturing, prioritising,                                     broadband delivered 93 percent of all downloads at
  analysing and using enormous and complex datasets                                              2.6 million terabytes (ABS, 2017). Wireless accounted
  to make better choices and deliver services. The NSW                                           for 55,000 terabytes (2 percent) and mobile handsets
  infrastructure system will need to ensure the data flows                                       for 146,000 terabytes (5 percent). However, mobile
  are secure, fast and reliable to meet the demands of                                           downloads grew most rapidly with a 21 percent increase
  industry and society. The business of planning, building                                       over the previous quarter. By 2020, global mobile data
  and operating infrastructure itself will also become more                                      is expected to exceed 30 exabytes (i.e. 30 x 1018 bytes)
  data intensive.                                                                                every month (Cisco, 2016b).

                                                                                               • Video drives data demand. With the rise of streaming
                                                                                                 services and social media video platforms, video
                                                                                                 has become a significant driver of data demand.

                           8                                                                     72 percent of online Australian adults now go online
                                                                                                 to watch video content, with streaming the preferred
Data Downloaded (Tb)

                                                                                                 method (ACMA, 2016). While IP video traffic comprised
                                                                                                 70 percent of all consumer internet traffic in 2015, that
                           5                                                                     figure is predicted to rise to 82 percent by 2020, at
                           4                                                                     which point nearly a million minutes of video content
                                                                                                 will cross the internet every second (Cisco, 2015).

                           2                                                                   • Into the clouds. The Cisco Global Cloud Index forecasts
                                                                                                 that cloud data traffic will grow at an annual rate of
                                                                                                 27 percent from 2015 to 2020 and that global cloud IP
                                                                                                 traffic will increase from 3.9 ZB/year to 14.1 ZB/year over








                                                                                                 the same time period (Cisco, 2016a). Organisations
                                                                                                 worldwide are storing an increased share of their
                                      Actual downloads                                           data, including sensitive data, as well as conducting
                                      Projected downloads (exponential)                          an increased portion of computations on cloud based
                                                                                                 systems (as opposed to local networks and servers).
  Figure 4. Current and forecast data downloads on the Australian
  Internet (fixed line and wireless)
  Source: Australian Bureau of Statistics (ABS, 2017)

• New health technologies could explode data demand.         • Data democracy. Institutions are increasingly
  New health technologies of personalised genetics in          opening their datasets to the public. According to the
  the healthcare system suggests genomics will exceed          Global Open Data Index, approximately 10 percent
  storage volumes of 2-40 exabytes per year – that’s           of government datasets are now open (Global Open
  more than the entire data uploaded to YouTube per            Data Index, 2017), and universities and other large
  year (Stephens et al., 2015). Telehealth will be another     organizations (e.g. the World Bank, the IMF, and the
  development placing increasing load and value on             UN) are also releasing open datasets. Australia is at the
  digital infrastructure.                                      forefront of this global trend, ranking fifth in the world
                                                               for readiness, impact, and implementation of open
• Smart cities are data cities. As smart city devices          data (Global Open Data Barometer, 2017). As of June
  proliferate, the contemporary city is becoming a data        2017, the NSW government had released 82,825 datasets
  generator: by 2020, cities will include a predicted 10       – the most of any state government in Australia.
  billion smart objects (Gartner, 2015). Consumer demand       In 2016, the NSW government released its Open Data
  for smart home devices will also drive the increase: the     Policy, including the creation and support of a Data
  European Commission expects that by 2020, 72 percent         Analytics Centre and the NSW Open Data Advocate.
  of EU consumers will have smart electricity meters           The Digital+2016 ICT Strategy Update also reflected a
  installed in their homes, and 40 percent will have smart     focus on the value of open data in NSW. Open data are
  gas meters (European Commission, 2017). As the volume        becoming an increasingly important asset in the digital
  of smart city-generated data increases, so too does          economy, creating about 0.5 percent more GDP than
  the importance of data in city planning frameworks           paid data (ACIL Tasman, 2008). The total potential value
  (Rathore, Ahmad, Paul, & Rho, 2016). For instance,           to the Australian economy is estimated at A$64 billion
  as smart ticketing systems collect data on passenger         per annum (Lateral Economics, 2014).
  behaviour, transport planning decisions are increasingly
  framed around those data.                                  • Data is becoming a universal resource. Although
                                                               businesses focused on digital technology are generally
• Data enabled means data dependent. On 27 May 2017            more focused on data, it is becoming crucial across a
  British Airways cancelled 1,200 flights scheduled to         range of sectors. In 2014, a PricewaterhouseCoopers
  carry over 75,000 passengers (The Economist, 2017).          survey found that 44 percent of business owners
  Analysts estimate that refunds and compensation could        globally intend to spend more on data collection and
  reach £150 million (A$260 million). This happened            analysis, making data the biggest priority for strategic
  because of an unscheduled outage impacting the               technology across almost every industry (PwC, 2014).
  airline’s global information technology system locked        95 percent of businesses believe that big data and
  up vital travel data. This recent example illustrates        analytics are necessary to remain competitive (IBM,
  that when data become corrupted or inaccessible,             2015), while over half of surveyed executives expected
  the infrastructure which depends on that data also           to face increased competition from start-ups enabled
  becomes dysfunctional.                                       by data (Capgemini, 2015). While only 5.4 percent of
                                                               Fortune 100 companies planned to invest more than
                                                               US$50 million into big data in 2014, by 2017 this had
                                                               climbed to 26.8 percent (New Vantage Partners, 2016).
                                                               In 2015, 61 percent of surveyed decision-makers agreed
                                                               that big data is now a driver of revenues in its own
                                                               right, and is becoming as valuable to their business as
                                                               existing products and services (Capgemini, 2015).

12   Digital Futures
• Needle in a haystack. Not all data are created equal.
  While massive amounts of data will be produced, only
  a small minority will be useful, creating the need for
  dedicated processes to extract value from big data.
  The data science job market is expected to grow
  rapidly, with demand for data scientists and advanced
  analysts projected to spike 28 percent by 2020 (S. Miller
  & Hughes, 2017). Worldwide revenues for big data
  and business analytics are estimated to grow from
  US$130.1 billion in 2016 to more than US$203 billion
  in 2020 (IDC, 2016). However, artificial intelligence
  applications may disrupt this market as analytical
  capabilities improve – for example, MIT have recently
  developed a Data Science Machine that mimics human
  intuition in data analysis (Hardesty, 2015).

• Blockchain could transform data management.
  Because of its ability to create timestamped, inalterable
  records linking transactions together, blockchain
  presents a possible tool for managing the data deluge.
  For instance, the land title registry process – which
  involves the exchange of massive amounts of data
  between various parties – can be simplified through
  the use of blockchain, as is being trialled in Sweden.
  Similarly, a blockchain for the travel booking supply
  chain – currently being developed by travel company
  Webjet – would create shared, independent, and
  trustworthy documents detailing transactions, thus
  removing the possibility of data discrepancies between
  parties. A sample use case developed by IBM has shown
  how the data generated by vehicle sensors could
  be processed by a government transport authority
  blockchain to automatically set driver ratings and
  impose penalties (Gantait, Patra, & Mukherjee, 2017).

14   Digital Futures
4 Porous boundaries
Digitally enabled businesses are                                                                                                                                                               This megatrend is about how digitally enabled business
                                                                                                                                                                                               models will cross traditional and longstanding
crossing marketplace boundaries                                                                                                                                                                marketplace, and jurisdictional boundaries, to disrupt and
                                                                                                                                                                                               reshape existing industries. The supporting trends include:
to compete with longstanding
incumbents. Google’s automated cars                                                                                                                                                            • Technological diffusion is speeding up. It took 30 years
                                                                                                                                                                                                 for electricity and 25 years for telephones to achieve
will compete with car manufacturers.                                                                                                                                                             10 percent household penetration, compared to less
                                                                                                                                                                                                 than five years for tablet devices (McGrath, 2013).
Apple’s smartphone enabled                                                                                                                                                                       Meanwhile, the smartphone went from five percent
payment apps will compete with                                                                                                                                                                   penetration to 40 percent in four years, despite an
                                                                                                                                                                                                 economic recession (DeGusta, 2012). New platforms
banks. Amazon’s platform enabled                                                                                                                                                                 measure their adoption rate in weeks and days –
online retail business will compete                                                                                                                                                              Google+ took 16 days to reach 10 million users,
                                                                                                                                                                                                 compared to 780 days for Twitter and 852 days for
with supermarkets.                                                                                                                                                                               Facebook (EY, 2016). Increasingly rapid rates of diffusion
                                                                                                                                                                                                 mean that new platforms and technologies can enter
                                                                                                                                                                                                 and disrupt existing markets with very little warning.
The popular ride sharing app Uber didn’t wait for
permission to become established. It used relatively                                                                                                                                           • Boutique service is the norm. The level of connection
simple technologies, and a new consumer mindset, to                                                                                                                                              enabled by the Internet has allowed companies
break into a well-established marketplace. The next                                                                                                                                              to cultivate much more direct and personal
decade will see digitally enabled models impact financial                                                                                                                                        relationships with consumers (Simmons, 2008),
services, retail, healthcare, transport, education and                                                                                                                                           which has led consumers to increasingly expect
many other sectors of the NSW economy.                                                                                                                                                           personalised and authentic engagements (EY, 2016).

       16000                                                                                                                                                                                              3000




       8000                                                                                                                                                                                               1500




          0                                                                                                                                                                                                 0













Figure 5. Left: Value of ATM withdrawals in Australia. Right: Price of Bitcoin.
Source: Reserve Bank of Australia (RBA, 2017), Google Finance (Google Finance, 2017a)

Disruptive business models cater to this expectation        digital, cryptocurrency-based payment systems
     through the delivery of individualised choices – for        that operate on the blockchain. Cryptocurrencies
     instance, Netflix offers the opportunity to consume         are expected to drive innovation across a range of
     media according to personal preference, rather than         industries – in fact, research has found that innovation
     a mass broadcast schedule. Similarly, Airbnb offers         potential is the most important factor associated with
     a personalised homestay experience, in contrast to          the rise of cryptocurrency value (Wang & Vergne, 2017).
     the relative blandness of a mass-market hotel. As the
     expectation for boutique service becomes normalised       • Gigs are the new jobs. The gig economy points to the
     among consumers, business models will be increasingly       emergence of a peer-to-peer labour market that could
     pressured to adapt.                                         significantly disrupt existing norms of employment.
                                                                 By 2020, ‘contingent workers’ are projected to
• No more middlemen. New, disruptive technologies                exceed 40 percent of the US workforce (Intuit, 2010).
  and platforms have decentralisation as a key aspect of         In Australia, the gig economy is gaining a foothold, with
  their design and operation – for instance, crowdfunding        32 percent of the Australian workforce undertaking
  and peer-to-peer transaction platforms (e.g. Uber              freelance work in 2014-15 (Edelman Berland, 2014),
  and Airbnb). However, blockchain is perhaps the most           and the users of Australian platform
  significant example – instead of trusting third-parties,       growing from one million in 2009 to ten million in 2014
  users trust a majority of the collective jointly operating     (AIG, 2016). While the gig economy can offer a good
  the blockchain, and the correctness of their shared            match of job opportunities and allow flexible working
  technology platform (Staples et al., 2017). Blockchain         schedules, gig economy workers do not enjoy the
  has particular potential to transform the banking and          rights, protections, or stable income associated with
  financial services sector, as the elimination of manual        traditional employment (De Stefano, 2016), which may
  third-party oversight enables a networked global               have long-term economic impacts.
  economy that is more efficient, more transparent, and
  operates at greater speed (WEF, 2016a). Overall, the         • Success happens faster. Companies identified by the
  decentralized nature of blockchain has the potential           McKinsey Global Institute as ‘supergrowers’ – those
  to radically transform traditional economic and social         whose growth was greater than 60 percent when
  models, challenging traditional mechanisms of state            they reached US$100 million in revenues—were eight
  authority, citizenship, and democracy (Atzori, 2015).          times more likely to reach US$1 billion in revenues
                                                                 than those growing less than 20 percent (Kutcher,
• End of the dollar’s dominance. Enabled by                      Nottebohm, & Sprague, 2014). The speed of market
  the development of blockchain technology,                      growth for technology start-ups has almost tripled
  cryptocurrencies represent alternatives to the dollar          since 2000, when measured on Time to Market Cap
  and the potential transformation of the monetary               (TTMC) – i.e. the measure of time it takes a company
  system. In June 2017, the price of one bitcoin rose to an      to reach certain market capitalization milestones.
  all-time high of A$3,704, representing a surge of more         A typical company founded between 2009 and 2013
  than 245 percent since the beginning of the year, and          will reach US$500 million almost three times as fast
  more than 4 million percent from its starting price of         as a typical company founded between 2000 and
  9 cents in mid-2010 (Chau, 2017). Bitcoin is not unique:       2003 (Ramadan, Lochhead, Peterson, & Maney, 2015).
  the value of other cryptocurrencies such as Ethereum           There is a correlation between rapid growth and market
  and Ripple have also risen sharply. The total combined         dominance – companies that dominate a given market
  market capitalization of cryptocurrencies had, as of           have an annual market capitalization growth of nearly
  June 2017, reached A$101 billion (Chau, 2017). While           US$1.6 billion, and often reach US$5 billion in a few
  cryptocurrencies are still not widely used, their rise         years (Ramadan et al., 2015).
  signals the possibility of a move away from domestic
  fiat currency (e.g. the Australian dollar) toward entirely

16     Digital Futures
• And platforms do it better. Platform companies               • And governments have new opportunities to adapt.
  are demonstrably better at scaling up quickly. Uber            While governments traditionally set the terms for
  launched in 2009, but in 2016 offered five million             buisness operations, disruptive, digitally-enabled
  trips each day in over 70 countries and had privately          platform models are changing this relationship. As
  raised capital valued at more than A$79 billion                customer demand and loyalty drive the success of
  (Minifie, 2016). Airbnb, which launced in 2008, is now         platform businesses, government response to the legal
  privately valued at around US$25 billion (worth more           ambiguities surrounding these models has been varied.
  than all except one hotel chain) and causes the hotel          Governments have the opportunity to act as business
  industry to lose approximately US$450 million in direct        enablers – for instance, the NSW government legalised
  revenue each year (HVS, 2015). Other peer‑to‑peer              Uber in December 2015, and is currently developing
  platforms developed in the late 2000s are also                 regulations to standarise Airbnb legalities across the
  growing fast, and there are now over a thousand                state. However, many governments struggle to adapt to
  operating worldwide (Minifie, 2016). Their dramatic            regulatory challenges posed by new business models,
  rise signals a fundamental shift away from traditional         and some respond by banning or sporadically cracking
  business models toward digitally enabled, peer-to-peer         down on platform models. As digital technology
  companies that are inherently designed to scale rapidly.       advances and continues to transform business models,
                                                                 government adaptability will be key to embracing the
• New models aren’t asking permission. Disruptive                new economic opportunities that arise.
  platform businesses often operate in a legal grey
  zone where there is no legislation either banning or         • Digital companies spend a lot on R&D and they’re
  permitting them. Uber has notoriously utilised digital         more competitive as a result. Spending on R&D is
  technology to give it a clear competitive advantage            increasingly driving a company’s growth, and tech
  over the taxi industry, leveraging customer loyality           companies are among those pursuing R&D investment
  while exploiting regulatory amibguity (McKenzie-               most aggressively. According to Google Finance, the
  Murray, 2015). Similarly, Airbnb’s model circumvented          companies that invest the most in R&D (and R&D-related
  existing hospitality industry regulations, relying on a        ventures) as a proportion of total revenues include
  superior service to drive massive uptake, with more            Facebook (26.9 percent), Intel (21.9 percent), Alphabet
  than a million listings in 34,000 cities and 192 countries     (Google) (16.4 percent) and Amazon (11.7 percent).
  (Varma, Jukic, Pestek, Shultz, & Nestorov, 2016). In 2016,     To illustrate the scale of this spending, Australian
  Sydney rose to fifth place in global Airbnb user numbers       businesses spent a total of A$18,849 million on R&D
  (McCormack, 2016).                                             in 2013-14 (ABS, 2015), while in 2016 alone, Amazon
                                                                 spent over A$21 million (Google Finance, 2017b).
                                                                 This trend demonstrates the growing importance of
                                                                 innovation and ‘future-thinking’, with firms no longer
                                                                 able to rely on existing technologies and strategies for
                                                                 long‑term growth.

5 Competing for
 The competitiveness of regional,                                                            This megatrend is about the increased importance of digital
                                                                                             connectivity and the competition likely to occur at State,
 state-wide and national economies                                                           national and global levels to better connect residents and
                                                                                             industry. The trends supporting this megatrend are as follows:
 will increasingly hinge upon the
 connectivity of governments,                                                                • Internet speed, access and reliability is uneven across
                                                                                               NSW. The Australian Digital Inclusion Index (ADII) measures
 companies, communities and                                                                    the access, affordability and abilities of citizens across the
                                                                                               nation to use digital technology. Digital inclusion refers
 individuals to digital services.                                                              to “the ability of individuals to manage their health and
                                                                                               wellbeing, access education and services, organise their
 Regional economies within NSW which have slow                                                 finances, and connect with family, friends, and the world
 or unreliable connectivity compared to global                                                 beyond” (Thomas et al., 2016). As such, an ADII score
 benchmarks (or with limited skills and capabilities to                                        provides a comprehensive measure of how effective a
 fully utilise digital services) will be held back in terms                                    region’s digital infrastructure is in enabling social and
 of economic growth and job creation. NSW will be                                              economic participation through digital technology.
 racing within the context of the global economy to                                            The quality of digital infrastructure and internet speed
 achieve improved connectivity. The vast geographic                                            and reliability varies considerably across the State. Sydney
 area and dispersed population of NSW will be the                                              scores well above the national average of 54.5 with an
 key challenge to ensuring ubiquitous and reliable                                             ADII score of 57.5 (one point below Melbourne). However,
 connectivity across the entire State.                                                         country NSW has an average ADII score of 50.1. In the
                                                                                               Hunter Valley the ADII score is far below the national
                                                                                               average at 41.2 (Thomas et al., 2016).


(thousands of AUD, current prices)

     GDP per capita in 2014






                                             30        40            50             60             70             80             90           100

                                                        Percentage of households with broadband (fast internet) connections in 2014

 Figure 6. Relationship between income (GDP/capita) and broadband connectivity in the OECD – are countries wealthy because they had fast
 internet or did they get fast internet by being wealthy?
 Notes: This graph shows the relationship between economic income (GDP per capita) and percent of households with broadband in the year 2014
 (with polynomial trendline shown) for 29 countries in the OECD. Each dot on the graph represents a country for which data were available (note:
 no data available for Australia in this year).
 Source: OECD Statistics

 18                                  Digital Futures
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