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
Citation 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. Copyright © 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 CSIRO advises that the information contained in this publication comprises general statements based on scientific research. The reader is advised and needs to be aware that such information may be incomplete or unable to be used in any specific situation. No reliance or actions must therefore be made on that information without seeking prior expert professional, scientific and technical advice. To the extent permitted by law, CSIRO (including its employees and consultants) excludes all liability to any person for any consequences, including but not limited to all losses, damages, costs, expenses and any other compensation, arising directly or indirectly from using this publication (in part or in whole) and any information or material contained in it. CSIRO is committed to providing web accessible content wherever possible. If you are having difficulties with accessing this document please contact csiroenquiries@csiro.au. Acknowledgments 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. COVER PHOTO Sea Cliff Bridge in the northern Illawarra region of New South Wales (Source: Shutterstock)
Contents
1 Digital Futures ........................................................................................................................... 1
Megatrends.........................................................................................................................................................................2
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
i
ii Digital Futures
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.
Digital
Virtually here
dividends
Competing for
The data deluge
connectivity
Pourous Relentless New
boundaries automation vulnerabilities
Figure 1. Megatrends describing the impacts of digital on the NSW infrastructure system over the coming 20 years
1
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
Scenarios
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.
HIGH
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
HIGH
Extent to which digital solutions
LOW
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.
LOW
Figure 2. Scenarios for 20 years into the future relating to digital and built infrastructure (based on how the megatrends may play out)
3
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 FuturesPolicy 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.
5• 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 Futures2 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.
7The 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
1.9
Health
5.4
4.8
45.9 Education
Recreation and culture
11.6
11.4
64.8 Public order and safety
Other
20
Figure 3. Current and forecast percent shares in public infrastructure spend in NSW
Source: (NSW Treasury, 2016)
8 Digital FuturesArguably 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.
9#Megatrends 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
9
has become a significant driver of data demand.
MILLIONS
8 72 percent of online Australian adults now go online
7
to watch video content, with streaming the preferred
Data Downloaded (Tb)
method (ACMA, 2016). While IP video traffic comprised
6
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).
3
2 • Into the clouds. The Cisco Global Cloud Index forecasts
that cloud data traffic will grow at an annual rate of
1
27 percent from 2015 to 2020 and that global cloud IP
0
traffic will increase from 3.9 ZB/year to 14.1 ZB/year over
2006
2008
2010
2012
2014
2016
2018
2020
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)
11• 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).
1314 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
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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)
15Disruptive 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 Freelancer.com
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.
175 Competing for
connectivity
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).
160
140
(thousands of AUD, current prices)
120
GDP per capita in 2014
100
80
60
40
20
0
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
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