Regulation and Governance (UK) - Amazon S3 · 2019-09-06 · Funded by Innovate UK, the UK’s innovation agency. Innovate UK works with people, companies and partner organisations

Regulation and Governance (UK)August 2018

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Report produced by Future Cities CatapultFuture Cities Catapult accelerates urban ideas to market, to grow the British economy and make cities better. It brings together businesses, universities and city leaders so that they can work with each other to solve the problems that cities face, now and in the future.

Funded by Innovate UK, the UK’s innovation agency. Innovate UK works with people, companies and partner organisations to find and drive the science and technology innovations that will grow the UK economy – delivering productivity, new jobs and exports. Our aim at Innovate UK is to keep the UK globally competitive in the race for future prosperity.

Innovate UK is the trading name of the Technology Strategy Board, which is an executive non-departmental public body sponsored by the Department for Business, Innovation and Skills, and incorporated by Royal Charter in England and Wales with company number RC 000818. Registered office: North Star House, North Star Avenue, Swindon SN2 1UE.

The content of this publication does not reflect the official opinion of Innovate UK. Responsibility for the information and views expressed herein lies entirely with the authors. Reproduction is authorised provided the source is acknowledged. Any mention of specific products or services in this report does not imply endorsement by Future Cities Catapult or Innovate UK.

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This document is part of the Hyper Connected and Data Rich Cities (HCDRC) programme. It seeks to address some of the policy and regulatory opportunities and challenges that need to be considered when the public sector, regulators and commercial organisations work together to innovate new technology and business models.

The Smart Cities Playbook 1 and the Global Review of lessons learnt from smart city demonstrators 2 provide additional background and support for policy makers, innovators and participants in smart city testbeds.

It is clear that the UK is now in a position to exploit new technologies to assist with a number of public policy challenges. However, in order for hyper-connected cities to thrive, we need to establish new governance and commercial models, new ethical approaches and new data security regimes. One of the immediate challenges is how do we create relevant test-beds and sandpits that allow new products and processes to be developed through collaboration across the sectors. There are a variety of well documented cases where the commercial sector has been ‘ahead’ of the regulators in recent years – e.g. Uber and Airbnb – although whether the customer was/was not served by these innovations is a matter of dispute.

The smart cities and 5G use cases sector is characterised by complex regulated markets. UK businesses are unlikely to want to invest in

1 Add link to playbook 2 http://futurecities.catapult.org.uk/2018/03/22/

hyper-connected-data-rich-city-publishes- white-paper/

innovation in cities if there is either a lack of appropriate regulation or if the regulatory environment is unclear. At the same time, regulators are concerned about the impact of new technology on the companies they regulate and the possible disruption to business models which could have a radical effect on cost structures and revenue streams.

Investment will only flow into new business models and technologies if there is stable regulatory support around issues such as taking on technology risk in long term capital investment decisions.

There is also concern within the private sector that the current regulatory frameworks discourage innovation and restrict the scope of demonstration and testing that can be carried out at scale in real world cities. Future open access city scale testbeds could test the suitability of the current regulatory framework for a relevant sector(s) and identify how regulation could be changed to enable market creation. New city scale testbeds would provide a mechanism for regulators to move more quickly in developing frameworks. This activity would place the UK as a global leader in support and accelerate market creation, bringing certainty and confidence to investors.

These new technologies require cities to be heavily reliant upon digital networks, interconnected sensors, robotics and other actuators. These in turn create a vulnerability to cyber-attacks and technological malfunctions. For example, in 2015, a self-driving Jeep Cherokee was ‘hijacked’ by external hackers in a test experiment, removing control of the vehicle from the driver and communicating with him verbally over the car’s speaker system.

http://futurecities.catapult.org.uk/2018/03/22/hyper-connected-data-rich-city-publishes-white-paper/



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1. Large scale, open access testbeds for 5G and smart city use cases require cross-sector innovation, testing and deployment.

2. To ensure success of open access testbeds in the UK, the regulators will also need to be agile, innovative and responsive.

3. There will need to be ‘safe spaces’ for the regulators, private sector and public bodies to innovate together.

4. It is vital that the regulators collaborate, adapt and work across sectors to enable and foster 5G use case and smart cities innovation.

5. Regulators will need to be brought in to the planning process for open access, city scale test beds at an early stage.

6. Regulators will need support and resources to deal in an agile way with this new environment.

7. Participants in open access testbeds will need to operate with governance that is both robust and agile.

SUMMARY OF GOVERNANCE AND REGULATORY CHALLENGES

We have identified some key regulatory and governance challenges such as:

a. The requirement for regulatory compliance or change in regulation/legislation

b. Requirement for internationally agreed standards

c. Need for standardisation/interoperability of data

d. Need for data privacy, security and portability

e. Cyber security riskf. Challenge of insurance and liabilityg. Need for innovative governance models

which enable data sharing, asset sharing and decision making

h. Clarity of ethical approach around sharing of data/assets/IP agreed by participants

i. Innovative & clear commercial arrangements & avoidance of conflict around exploitation of IP

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CITY SCALE OPEN ACCESS TESTBEDS – CHECKLIST FOR PARTICIPANTS

Regulation a. Be clear about who your partners are

and who regulates them.b. Clarify if your trial will need authorisation

or involvement from more than one regulator.

c. Can you engage with your regulator in the early planning stages?

d. Can the regulator help you create a ‘safe space’ for trialling the new processes?

e. Can you include the regulator in your governance model?

f. What are the relevant lessons learnt from other sandbox activity carried out by your regulator?

g. Is there an opportunity for your regulator to use your demonstrator to move their own policies and practices forward?

General a. Can a ‘safe space’ be created for

partners and users to innovate?b. Do you have clear and shared objectives

with your partners? c. Have you established the appropriate

governance vehicle for your programme?d. Have you set up the relevant advisory

boards to complement your main board? e. Will the local Government body be the

lead partner? f. Do you have a neutral board member?g. Have you got a shared ethical

agreement with your partners and stakeholders, and does it cover data, intellectual property and future commercialisation?

h. Have you established a shared liability with your partners?

i. Can any of your partners offer ‘in kind’ or material contributions (i.e. non- financial) and what is the status of those contributions?

j. Can you set up a presumption of minimum levels of commercial confidentiality?

k. What is the risk appetite of your programme and is it shared amongst partners?

l. What will be your dispute resolution escalation route?

m. Can you avoid hard legal agreements between the private and public organisations which may have long gestation periods and stifle innovation?

n. Do you know which of your stakeholders are looking for commercial gain?

o. Have you engaged with the relevant central government bodies?

p. Do you know what legislation is in train for your industry and whether your testbed will be legal once the legislation is enacted?

q. If there is new legislation being drafted, can you provide context/lessons learnt for officials and regulators to influence the new legislation?

r. What other cities in UK or internationally have faced these challenges and what were the lessons learnt?

s. Once you have set up the demonstrator, how can you and your partners share best practice with other cities and the regulators?

t. Can you offer end users an ‘opt in’ agreement, enabling their data to be shared between all partners in the testbed?

CONT

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1. SMART REGULATION1.1 Ofcom1.2 Information Commissioner’s Office1.3 Ofgem1.4 The regulation of autonomous

vehicles1.5 Ofwat1.6 The Financial Conduct Authority1.7 The United Kingdom Regulators Network

(UKRN)1.8 Civil Aviation Authority & Nesta Flying High

Challenge

2. HCDRC USE CASES & CHALLENGES 3. CITY SERVICES DEMONSTRATORS

4. SMART UTILITY DEMONSTRATORS

5. SMART HEALTH DEMONSTRATORS

6. CONNECTED AND AUTONOMOUS VEHICLE DEMONSTRATORS

7. LAST MILE SUPPLY CHAIN AND LOGISTICS DEMONSTRATORS

8. NEXT-GENERATION CONNECTIVITY AND DATA DEMONSTRATORS

9. REGULATORY IMPLICATIONS OF THE USES CASES

8.1 Civil Aviation Authority & Nesta Flying High Challenge

8.2 Smart Services8.3 Healthcare8.4 Mobile Media and Cloud8.5 Supply Chain and Logitics8.6 Smart Utilities

10. REGULATORY IMPLICATIONS OF THE USE CASES

11. SMART GOVERNANCE

ANNEX A: CONTACT INFORMATION FOR REGULATORS

ANNEX B: GOVERNANCE CASE STUDIES

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1SMART REGULATION


CITY SCALE OPEN ACCESS TESTBEDS – CHECKLIST FOR PARTICIPANTSThe 5G and smart cities environment raises key questions about how legislators and regulators should handle fast-changing technologies and industries. How can regulators balance the risks that come with new ideas without stamping on innovation? How can they help to ensure that the benefits of new technologies are widely spread without breaking commercial agreements?

Geoff Mulgan, CEO of Nesta, the global innovation foundation, points to the emerging need for ‘anticipatory regulation’ 3. He recommends that regulators adopt new ways of working in order to rise to these modern challenges. He proposes that new principles are necessary in the regulatory environment, including:

• Moving from stable to iterative regulation• Having an open dialogue with innovators

as well as incumbents• Adopting iterative, not definitive, rules• Promoting testbeds and sandboxes• Supporting joined up regulation• Allowing risk management rather than

risk avoidance• Engaging with the public • Encouraging ministerial involvement • Helping regulators to learn new skills

For their own part, a number of UK regulators have expressed the view that they need to be open to innovation by those they regulate, and be part of the innovation process. The challenge is for the UK

3 https://www.nesta.org.uk/blog/anticipatory- regulation-10-ways-governments-can-better-keep- fast-changing-industries

to foster ‘learning’ regulators who can enable and deliver change rather than stifle innovation. Innovation in the regulatory sector has been characterised as:

• Technical innovation: the improvement of existing and development of new technologies used to deliver goods and services more efficiently, more safely and/or more reliably.

• Process innovation: the improvement of management and operational processes, usually leading to a decrease in cost.

• Business model innovation: the use of new/alternative business models to deliver services that might not otherwise have been commercially feasible.

The Government announced in the 2017 Autumn budget statement the establishment of a £10 million Regulators’ Pioneer Fund which should assist regulators in their innovation work.

The term ‘sandbox’ has become common in the innovation/regulation space. A number of regulators are experimenting with sandboxes whereby commercial organisations can test new products in a safe environment with access to the support and expertise of the regulator. This may in turn foster change within the regulatory environment by pointing the regulator to emerging structures and practices.

Inevitably these challenges will require investment of resources by the regulators. One example is the Ofgem Network Innovation Allowance (NIA) which allowed 0.7% of distribution network revenue to be used for innovation projects delivered through the smarter networks portal.

There is a supplementary question about whether regulators and legislators can actually incentivise innovation in their respective fields.

https://www.nesta.org.uk/blog/anticipatory-regulation-10-ways-governments-can-better-keep-fast-changing-industries




Clearly there is a need for new models and for commercial and public providers to occupy the same space, and find new ways of sharing and utilising data.

The National Infrastructure Commission report ‘Data for the Common Good’4 cites the importance of collaboration and data sharing across the infrastructure industry. They propose that ‘The UK’s economic regulators may also play an important role in raising the quality and openness of infrastructure data, and should be closely involved’. The report highlights the risk of the ‘do nothing’ option:

• Without coordination and collaboration across the infrastructure network operators, regulators and user, the benefits that could be achieved from data and the application of data science will not be realised. Progress towards greater innovation is being hindered by a closed attitude to data across the infrastructure sector, and by an array of regulatory, commercial and cultural barriers. The infrastructure sectors will not coordinate the sharing of data and enable innovation without direction from Government and regulators to ensure that both private and public benefits are fully realised. Regulators should ensure that operators take responsibility for collating this data, verifying its quality, and making it available to the appropriate parties and using it in a safe and ethical way.

The report recommends that The Digital Framework Task Group5 should work with the UK Regulators Network and relevant Government departments to review and, where possible, strengthen the role of economic regulators in improving the quality and

4 https://www.nic.org.uk/publications/data-public-good/5 https://www.nic.org.uk/news/new-technologies-help-cut-delays-disruption-britains-infrastructure/

openness of infrastructure data. It is proposed that this should include: a. Participation by the UK Regulators Network in the

formulation of the digital framework set up by the Centre for Digital Built Britain6 (CDBB) to ensure that it is effectively aligned with regulatory work on innovation and data.

b. Assessment of the potential role of regulators and of possible barriers within current regulatory frameworks regarding:

– Ensuring compliance by regulated network operators and utilities with the national framework and adherence to data collection standards and formats.

– Sharing of data to inform better understanding of asset performance and user experience.

– Sharing of data across infrastructure sectors and the value chain to enable greater innovation in the development of new technologies and data management focused on better asset management and increased productivity.

c. Support for CDBB’s engagement with network operators and utilities around the provision of data of verified quality for the development of a national infrastructure digital twin over the long term.

d. Identification of relevant areas for further trials or studies to enable regulators, and regulated industries, to understand and demonstrate how monitoring technologies and data can support cost-effective maintenance decisions and proactive asset management, working with relevant research organisations.

6 https://www.cdbb.cam.ac.uk/

https://www.nic.org.uk/publications/data-public-good/

https://www.nic.org.uk/news/new-technologies-help-cut-delays-disruption-britains-infrastructure/

https://www.nic.org.uk/news/new-technologies-help-cut-delays-disruption-britains-infrastructure/

https://www.cdbb.cam.ac.uk/


1.1 OFCOMThere are a number of significant challenges for Ofcom in the smart city space. When the shift towards the Internet of Things (IoT) is combined with customer expectation around accessibility of mobile services and the current lack of clarity around how 5G will affect the landscape, we can see that there are many issues for the regulator to adapt to. Of all the regulators, Ofcom will perhaps need to be the most agile in its approach if the UK is to exploit both 5G and smart city opportunities.

Ofcom acknowledged some of these challenges in a speech last year7. It described how the IoT

7 https://www.ofcom.org.uk/about-ofcom/latest/media/speeches/2017/where-are-communications-heading

will pose new questions of jurisdiction, and demand even greater collaboration between national regulators and governments. It proposed that the communications regulators of the future may need to invoke as much moral philosophy as competition economics.

In the speech it noted a growing reliance on digital technology which demands ever-greater vigilance against cyber-attacks and it stated that consumers and businesses should not be constrained by infrastructure that fails to keep pace with their needs and ambitions:

‘…regulate too slowly, and the market may face changes that are hard to unwind. Regulate with haste, and we risk stifling innovation and the incentive to invest. To achieve that balance, perhaps we may need to reimagine Ofcom for the future. We would hope to be a regulator with the right balance of economic, technological and cultural expertise to ensure that people and businesses benefit from the new, super-connected world. Can we, the regulator, show enough agility and foresight to ensure our rules remain effective, and help to keep markets competitive? It also means building separate, secure mobile networks capable of withstanding extreme weather, fire, vandalism or sabotage – so they can support life-critical communications between vehicles or medical equipment. In the smart cities of the future, more connections will mean more potential points of failure. Just as networks must become more secure, so too must our data. This will be even more important in a world where CCTV networks combine to recognise faces, or computers routinely monitor our movements.’ 8

When we look back at the last ten years, we can see that the challenges for Ofcom were more

8 https://www.ofcom.org.uk/about-ofcom/latest/media/speeches/2017/where-are-communications-heading

https://www.ofcom.org.uk/about-ofcom/latest/media/speeches/2017/where-are-communications-heading





linear and mono-dimensional in their nature. It could be argued that the current complexity in the communications industry requires a new and multi-dimensional approach to regulation.

In March 2018, Ofcom published ‘Enabling 5G in the UK’ 9 outlining the opportunities and challenges faced by the industry and the regulator. It recognises the need to ensure that regulation does not impede innovation. In particular, they point to the need to address industry concerns around Net Neutrality rules, which currently require that all traffic on the internet is treated equally.

1.2 INFORMATION COMMISSIONER’S OFFICE

The Information Commissioner’s Office (ICO) is the UK’s independent authority with responsibility for upholding information rights in the public interest, promoting openness by public bodies and data privacy for individuals.

It is obvious that the ethical sharing of personalised data across agencies and commercial organisations will be central to the success of smart cities. Clearly, to be successful, testbeds will need to allow the flow of information and data across providers and systems. This is a process that is subject to legislation.

Management information, for example around traffic flow, will be vital to enabling some 5G use cases and smart cities to function. However this will take us into new territory around the use of personal data. End users will need to be satisfied that their personal information is being protected and only used for specific purposes.

9 https://www.ofcom.org.uk/__data/assets/pdf_file/0022/111883/enabling-5g-uk.pdf

The UK Government has recently introduced a Data Protection Bill designed to ‘support businesses in their use of data, and give consumers the confidence that their data is protected and those who misuse it will be held to account.’10

The stated aims of the Data Protection Bill are to:• ��Make it simpler to withdraw consent for the

use of personal data.• Allow people to ask for their personal data

held by companies to be erased.• Enable parents and guardians to give consent

for their child’s data to be used.• Require ‘explicit’ consent to be necessary

for processing sensitive personal data.• �Expand the definition of ‘personal data’

to include IP addresses, internet cookies and DNA.

10 https://www.gov.uk/government/news/government-to-strengthen-uk-data-protection-law

https://www.ofcom.org.uk/__data/assets/pdf_file/0022/111883/enabling-5g-uk.pdf

https://www.ofcom.org.uk/__data/assets/pdf_file/0022/111883/enabling-5g-uk.pdf

https://www.gov.uk/government/news/government-to-strengthen-uk-data-protection-law

https://www.gov.uk/government/news/government-to-strengthen-uk-data-protection-law


products or systems with privacy in mind at the outset can lead to benefits which include:• Potential problems are identified at an early

stage, when addressing them will often be simpler and less costly.

• �Increased awareness of privacy and data protection across an organisation.

• Organisations are more likely to meet their legal obligations and less likely to breach the Data Protection Act.

• Actions are less likely to be privacy intrusive and have a negative impact on individuals.

In terms of current law and regulation, there is an expectation from the ICO that privacy will be taken into consideration across the life cycle of any programme, i.e.:

• Building new IT systems for storing or accessing personal data.

• Developing legislation, policy or strategies that have privacy implications.

• Embarking on a data sharing initiative.• Using data for new purposes.

Key to privacy by design is the privacy impact assessment11. Smart cities will need to establish best practice as a minimum requirement from the outset to provide reassurance to end users and commercial partners that personal data is being treated responsibly.

11 https://ico.org.uk/media/for-organisations/documents/1042837/trilateral-report-executive-summary.pdf

• Update and strengthen data protection law to reflect the changing nature and scope of the digital economy

• Make it easier and free for individuals to require an organisation to disclose the personal data it holds on them

• Make it easier for customers to move data between service providers

The ICO regulates both the flow and privacy of information. Two principles that smart cities will need to adhere to are privacy by design and privacy by impact.

Privacy by design is described by the ICO as an essential tool for minimising privacy risks and building trust. Designing projects, processes,

https://ico.org.uk/media/for-organisations/documents/1042837/trilateral-report-executive-summary.pdf




platform aims to allow residents in urban areas to source their energy from local renewables and trade that energy with their neighbours, increasing self-consumption of low carbon energy and reducing overall energy costs.

b. Empowered – trialling a local peer-to-peer energy trading scheme. The trial is aimed at enabling consumers to trade electricity directly with each other and yield benefits for the local community and the wider electricity system.

c. Ovo Energy – trialling an innovative tariff supported by smart home technology. The trial product is designed to enable lower bills and warmer homes for customers with storage heaters who are currently limited to economy 7 / economy 10 tariff options, whilst also enabling grid balancing capabilities.

The learnings from Innovation Link so far include:• ��Innovators need support in defining regulatory

barriers – many innovators can develop their business models without a sandbox.

1.3 OFGEMOfgem regulates the gas and electricity markets. In December 2016 Ofgem established Innovation Link12, a ‘one stop shop’ offering support on energy regulation to businesses looking to introduce innovative or significantly different propositions to the energy sector.

In addition to wanting to generate innovative ideas that bring benefits to consumers, they intend to collaborate with suppliers to help them to understand emerging trends in the sector and identify areas in which our regulation may need to adapt to sustain innovation.

The Innovation Link has three broad functions:• To offer fast, frank feedback on the regulatory

implications of disruptive new business propositions. • �A regulatory sandbox to enable innovators to trial

new products or services where they face a regulatory barrier.

• Offering a knowledge base for making regulatory information accessible to innovators in the early stages of developing their ideas.

Ofgem engage with innovators to understand their business model, the regulatory barriers they are experiencing and work with them to identify potential solutions, and provide bespoke advice for up to 24 months from the granting of a sandbox. The discussions give rise to agreed regulatory arrangements for the duration of the trial, including protection for consumers and in some cases agreement with third parties.

Since launching, the Innovation Link has worked with 150 innovators. From the first 2017 round, three sandboxes were granted:

a. A consortium led by EDF Energy R&D UK and including Electron, PassivSystems, Repowering London and University College London – trialling a peer-to-peer local energy trading platform. The

12 https://www.ofgem.gov.uk/about-us/how-we-engage/innovation-link

https://www.ofgem.gov.uk/about-us/how-we-engage/innovation-link

https://www.ofgem.gov.uk/about-us/how-we-engage/innovation-link


• Regulatory barriers may reside outside Ofgem’s scope – for example in legislation or codes, which Ofgem does not directly control. This involves influencing other parties, government or industry panels.

Joined up support is necessary as innovators are faced with the realities of funding which regulators can’t help with – regulators cannot deliver alone as rules are not all within their scope but also business models are equally influenced by commercial/funding realities.

In October 2017, the Innovation Link invited applications to the regulatory sandbox for the second time. They are currently collaborating with the following organisations to establish if a sandbox trial is appropriate:

• � Isles of Scilly Smart Islands Programme Smart energy systems, flexibility services and community-driven commercial models to enhance the Islands’ resilience and reduce bills for local residents.

• �Owens Square Community Energy

A community-scale shared battery to balance local generation with consumption at a school and local residential and commercial developments.

• Gower Power Solar Storage A direct local supply arrangement in Swansea, with power from community-owned solar farm and storage facilities supplied to local residents and businesses.

• Good Energy Community-scale shared battery paired with micro-generation at the Smart Fintry project.

• �SIG and SmartKlub �Using behind the meter digital switching and control technologies to optimise consumption, export and storage, creating a smarter local power network. The trial will include embedded electronics, software, sensors and controls in the home and grid, enabling consumers to access new services via the Cloud.

• �Energise Barnsley A peer-to-peer trading platform for social housing tenants in Barnsley with Barnsley Council and Northern Powergrid. The purpose is to share the benefits of solar PV with those residents who do not have solar PV (or a battery installed).


• Verv �Peer-to-peer energy trading field trial on social housing at Hackney’s Banister House. By installing Verv smart hubs and battery storage into the estate, the trial is designed to enable reduced energy bills for social housing communities thanks to improved access to green power made possible by energy trading

1.4 THE REGULATION OF AUTONOMOUS VEHICLES

Clearly, a key feature of a smart city will be its capability to support autonomous vehicles.In addition to the challenges around data flow and access to infrastructure, there are a series of questions around insurance and liabilities which have been articulated but not answered.

The UK Government has commissioned a detailed review of driving laws to ‘ensure that the UK remains one of the best places in the world to develop, test and drive self-driving vehicles’13.

A three-year review will be carried out by the Law Commission of England and Wales and the Scottish Law Commission to examine any legal obstacles to the widespread introduction of self-driving vehicles and highlight the need for regulatory reforms. The work will be crucial in examining how current driving laws – designed with traditional motoring in mind – can support the next generation of vehicles. The Law Commissions’ joint project will examine difficult areas of law in order to develop a regulatory framework that is ready for self-driving vehicles.

13 https://www.gov.uk/government/news/government-to-review-driving-laws-in-preparation-for-self-driving-vehicles

The project will review and answer key questions, such as:• �who is the ‘driver’ or responsible person, as

appropriate?• how to allocate civil and criminal responsibility

where there is some shared control in a human-machine interface.

• ��the role of automated vehicles within public transport networks and emerging platforms for on-demand passenger transport, car sharing and new business models providing mobility as a service.

• ��whether there is a need for new criminal offences to deal with novel types of conduct and interference.

• what is the impact on other road users and how they can be protected from risk?


1.5 OFWAT

In February 2018, Ofwat launched an Innovation Campaign entitled Spark14. Ofwat have specific interests in fostering better use of remote sensing and monitoring, and better exploitation of the data rich aspect of smart cities.

1.6 THE FINANCIAL CONDUCT AUTHORITY (FCA) The FCA have established a sandbox process which allows firms to test innovative products, services and business models in a live market

14 https://www.ofwat.gov.uk/spark/

environment, while ensuring that appropriate safeguards are in place. The aim is to promote more effective competition in the interests of consumers.

The FCA provides access to regulatory expertise and a set of regulatory tools to facilitate testing. The 2017 lessons learnt report15 found that around 90% of firms that completed testing in the first cohort are continuing toward a wider market launch.

Key outcomes to date from the sandbox work include: • Reduction of the time and cost of getting

innovative ideas to market.• Facilitated access to finance for innovators.• Enabled products to be tested and introduced

to the market.• Created a shared workspace with innovators

to build appropriate safeguards into new products and services.

1.7 THE UNITED KINGDOM REGULATORS NETWORK (UKRN) UKRN16 exists to encourage collaboration between regulators in the UK. To date it has played a co-ordinating role in highlighting the need for regulators to be joined up in their approaches to innovation.

This is partly because the technologies and

15 https://www.fca.org.uk/publications/research/regulatory-sandbox-lessons-learned-report

16 UKRN ‘Innovation in regulated infrastructure sectors’ 2015 http://www.ukrn.org.uk/wp-content/uploads/2016/07/20150112InnovationInRegInfrSec.pdf

https://www.ofwat.gov.uk/spark/

https://www.fca.org.uk/publications/research/regulatory-sandbox-lessons-learned-report

https://www.fca.org.uk/publications/research/regulatory-sandbox-lessons-learned-report

http://www.ukrn.org.uk/wp-content/uploads/2016/07/20150112InnovationInRegInfrSec.pdf




requirements for data sharing are new, but increasingly also because in order for hyper-connected programmes to succeed, there will need to be enhanced co-operation and collaboration between the regulators.

UKRN has pointed to the need for regulators to adapt to a mixture of technical innovation, process innovation and business model innovation 17.

As the smart cities’ challenges will affect a number of regulators and will be need to be developed in an agile and co-ordinated way, UKRN could perhaps provide an oversight role for the industry.

1.8 CIVIL AVIATION AUTHORITY & NESTA FLYING HIGH CHALLENGE

The Civil Aviation Authority (CAA) supports the safe development of drones in the UK. The CAA have been working with Government and the aviation and drone industries to educate drone operators by successfully promoting the Dronecode18, which provides an easy to follow guide to UK drone rules.

The UK Government has introduced a draft Drone Bill to the House of Commons and has indicated that it will introduce secondary legislation amendments in early 2018. Changes to the Air Navigation Order will mean that:

• Drone users will have to sit safety awareness tests.

17 UKRN ‘Innovation in regulated infrastructure sectors’ 2015 http://www.ukrn.org.uk/wp-content/uploads/2016/07/20150112InnovationInRegInfrSec.pdf

18 http://dronesafe.uk/drone-code/

• users of drones weighing 250 grams and over will in future have to be registered.

The UK Government is also working closely with drone manufacturers to use geo-fencing to prevent drones from entering restricted zones.

Nesta, the global innovation foundation, is currently running the Flying High Challenge19, to explore with five cities the implications of drone technology for UK cities and how drone technology could be used to support their local needs. Nesta has engaged with city leaders, regulators, public services, businesses and industry to scope and shape the programme. Use cases will span the public and private sectors and focus on the themes of technology, cities and people, potential impact and integration challenges. The programme will: • Shape city plans on the future of drones in UK

cities, exploring specific applications of drones within cities and hazardous environments.

19 http://flyinghighchallenge.org/

http://dronesafe.uk/drone-code/




• �Identify and address key complexities such as technology, infrastructure, law, regulations, safety and privacy.

• Detail technical and economic plans that unlock market opportunity through regulatory testbeds, open innovation technology challenges and live, real-world demonstrations.

The cities chosen for the scheme are Bradford, London, Preston, Southampton and the West Midlands.

�Bradford: Bradford is an early adopter of drone testing. It is a district with a population of over half a million across an area that is two thirds rural and includes densely populated urban areas, moorland, farmland and woodland. It will be investigating how drones can support district priorities such as disaster response, digital health, surveying and community safety.

London: The capital has the busiest and most heavily regulated airspace in the UK, and the Flying High Challenge will allow the city to have serious conversations about if, how and where drones could safely be used in future for the benefit of the city. London has already experienced initial use of drones for safer infrastructure inspections and helping the capital’s emergency services, and now needs to identify what steps are needed to ensure the use of drones benefits the city and support its ‘Healthy Streets’ approach for London’s future.

Preston: Drones are already being used in Preston in inspections of utilities and council buildings, supporting fire and rescue services and assisting the Environment Agency. Through the Flying High Challenge, the city council, in partnership with UCLan, will be exploring other areas of city need where drones could play a role, including flood management, assisting police helicopters and upgrading road networks.

Southampton: The council is working in collaboration with the University of Southampton, which has very strong drone and autonomous systems expertise, as the leader of a large consortium project, CASCADE, looking at the implementation of drones in civil airspace.

West Midlands: The region is interested in UAV use cases surrounding the world class ‘UK City of Culture 2021’ and Commonwealth Games events. Innovative Research & Development across the region offers other potential areas of synergy with the Flying High challenge, including the construction of a cutting-edge testbed for Connected and Autonomous Vehicles.


2HCDRC USE CASES

& CHALLENGES


The use cases within the HCDRC programme include:

l��City Services: including traffic, parking, lighting, waste management and public safety demonstrators

l��Smart Utilities: including smart meters and smart grids demonstrators

l��Smart Healthcare: including assisted living, remote health and preventative health demonstrators

l��Connected and Autonomous Vehicles: including driver assistance and various levels of Society of Automotive Engineers (SAE) autonomy demonstrators

l��Last Mile Supply Chain and Logistics: including fleet management and drone delivery demonstrators

l��Next generation Connectivity and Data: including IoT and 5G test networks


3CITY SERVICES

DEMONSTRATORS


The past five years has seen an explosion in the number of smart city demonstrators aiming to deliver solutions that will increase the efficiency and effectiveness of everyday city services. This has led to the creation of some of the largest and most costly demonstrators included in this report.

The most common use-cases demonstrated were found to be:

l��Smart traffic management: the use of sensors, cameras and networked traffic signals to regulate and optimise the flow of traffic through a city in response to demand. Aimed at reducing congestion, pollution and accidents.

l��Smart parking: the use of sensors, cameras and data to deliver solutions such as smart ticketing and access control, revenue management, parking guidance and automated slot management.

l��Smart street lighting: the replacement of current streetlights with more efficient LED technology, along with the integration of a communications platform enabling the integration of other assets such as electricity and water meters, traffic lights, parking meters and environmental sensors.

l��Smart waste management: use of analytics, routing algorithms and sensors to reduce waste and increase the reuse and recovery of materials amidst growing populations and resources scarcity.

Within the UK, notable examples of city services demonstrators are the Future City Glasgow, Manchester CityVerve and MK:Smart projects. These projects demonstrated a range of use-cases in the city services domain, as well as several use-cases that cross into other areas such as preventative health applications.

These large-scale, multiple use-case demonstrators were typically funded jointly by government and industry, with public-sector funding being provided by the Department for Digital, Culture, Media and Sport (DCMS), Innovate UK and the Higher Education Funding Council for England (HEFCE).

Several other cities in the UK have succeeded in launching large pilots which focus on one specific use-case – for example, Cardiff City Council ran a smart parking pilot in a subsection of the city, which has now progressed to full city-wide implementation.


Across Europe, the European Commission has funded a number of large demonstration projects, including Triangulum, Synchronicity and Grow Smarter, which aim to demonstrate, showcase and build the market for smart city solutions. Cities in the Netherlands, Denmark and Finland have also experienced success in using arm’s length organisations to create multi-use, city-based test bed environments, which enable the demonstration of solutions and services linked to specific city challenges. For example, the Smart Kalasatama living lab has been established by Forum Virium, an arm’s length organisation of the City of Helsinki, and the Copenhagen Street Lab has been established by the Copenhagen Solutions Lab in collaboration with the City of Copenhagen.

Outside of Europe, the smart city agenda is rapidly gaining pace. In 2015, the Indian government launched their Smart Cities Mission, a USD 7.2 billion initiative aiming to create 100 Indian smart cities by 2020. Similarly, 290 Chinese cities have initiated smart-city pilot projects and more than 300 cities have signed smart city construction agreements with IT companies.

The U.S. Department of Transportation launched a Smart City Challenge which asked mid-sized cities across America to develop ideas for an integrated smart transportation system. The U.S. and Canada are also seeing increased private-sector investment in the smart city agenda, as illustrated by Sidewalk Lab’s recent announcement of their involvement in Toronto’s Eastern Waterfront redevelopment.

Finally, Middle Eastern countries, including the United Arab Emirates, Qatar and Saudi Arabia, have invested billions of dollars into retrofitting existing cities and creating new smart cities. These projects are typically broader green field city construction projects, with elements of the smart city services agenda included.

Cities in the Netherlands,

Denmark and Finland have

also experienced success

in using arm’s length

organisations to create

multi-use, city-based test bed

environments, which enable

the demonstration of solutions

and services linked to

specific city challenges.

2424 Regulation and Governance (UK)24

4SMART UTILITY

DEMONSTRATORS


The water and energy sectors are currently facing challenges in meeting increased demand and environmental targets.

Demand for energy is rising due to the anticipated growth in the adoption of electric vehicles and the use of electricity for heating. Furthermore, as traditional sources of energy supply are replaced by new ones, supply and demand are becoming more dynamic, making energy systems more difficult and complex to manage. Demand for water is also outstripping supply.

Compounding these challenges, environmental considerations are becoming more important, with European Commission legislation requiring member states to reduce greenhouse gas emissions by 80% (compared to the 1990 level) by 2050.20

Therefore, the drivers at the heart of smart utility demonstrators and solutions are the need to reduce energy and water consumption and carbon emissions, lower the costs for consumers, increase resilience and ultimately reduce the requirement to expand networks to cope with increases in demand.

The most common applications piloted in demonstrators were found to be smart meters, smart grids and dynamic energy marketplaces. There was also a growing trend to deliver energy as a service to consumers, rather than as a commodity.

Our research has revealed a wide variety of smart utility demonstrators in the UK, ranging from discrete projects aimed at piloting smart micro-grid solutions and dynamic energy

20 2050 Low-Carbon Economy, European Commission Climate Action https://ec.europa.eu/clima/policies/strategies/2050_en

marketplaces, to those that create testbed facilities in the public or private domain to allow the testing of numerous smart utility applications.

In the energy sector, private-land testbeds such as the Keele Smart Energy Demonstrator and the Power Networks Demonstration Centre provide R&D facilities to enable highly realistic and accelerated technology testing of smart grid solutions, without the constraints of operating on public networks.

Demonstration projects such as the Customer-Led Network Revolution, FALCON Smart Grid and Low Carbon London used public energy networks to establish large-scale smart grids and demonstrate innovative consumer services and commercial arrangements between key stakeholders in the electricity industry.

https://ec.europa.eu/clima/policies/strategies/2050_en

https://ec.europa.eu/clima/policies/strategies/2050_en


In the water sector, Anglian Water and Thames Water have designated parts of their live networks as testbeds to enable the demonstration of future water-monitoring solutions. There are several instances where demonstrations on these networks have led to the procurement of full operational solutions.

In terms of funding sources, the utility sector displayed considerable variety. Funding for demonstrators was received from the European Regional Development Fund, Horizon 2020, City Deals, the Department for Business Energy and Industrial Strategy (BEIS) and Ofgem’s Low Carbon Networks Fund. Furthermore, distribution network operators (DNOs) were also able to fund their own demonstration projects by leveraging Ofgem’s Network Innovation Alliance (NIA). The NIA is set by each operator as part of their price control allowance which can be used to fund

smaller technical, commercial or operational projects that have the potential to deliver financial benefits to licensees and customers.

In 2017, the BEIS in collaboration with the Office for Low Emission Vehicles (OLEV) and Innovate UK launched an Innovation in Vehicle-to-Grid (V2G) systems competition which provides £20 million to real-world demonstrators to develop future V2G products, services and knowledge.

The international smart utility demonstrator landscape is punctuated by a number of very large electrical smart grid projects which aim to enable the incorporation of renewable energy sources and cope with the stress that electric vehicle charging places on the existing energy infrastructure. These demonstrators were often funded by national or city governments.


5SMART HEALTH

DEMONSTRATORS


Ageing populations are leading to an increase in age-related health conditions and demand for adequate social care, creating challenges for healthcare providers. In the UK, the population aged 65 and over is expected to rise from 18% in 2016 to 24.7% by 2046, and this trend is replicated in the majority of developed countries worldwide. In order to handle this increase in demand for health services, there is a growing focus on using demonstrators to:

l��Design buildings and communities that are appropriate for all ages

l��Enable the self-monitoring of chronic conditions

l��Deploy assisted living technologies to support people to stay in their homes longer

Over the past 10 years, the UK has launched a number of prominent large-scale smart health demonstration projects, including the Delivering Assisted Living Lifestyles at Scale (DALLAS) programme and the Whole System Demonstrator, which is believed to be the largest randomised controlled trial of telecare and telehealth in the world to date. More recently, NHS England has initiated a Healthy New Towns programme and a number of IoT Test Beds.

The UK continues to strive for excellence in the smart health domain with the establishment of the £40 million National Innovation Centre for Ageing in Newcastle.21

In Europe, the European Commission has funded several large smart health demonstrators, such as the ACTIVAGE demonstrator, which aims to support the piloting of IoT-based active and healthy ageing solutions, and the RAMCIP demonstrator, which aims to develop assistive robotics solutions for the elderly and those suffering mild cognitive impairments.

Furthermore, a number of Asian countries, including Singapore, Japan and Thailand, are also expected to be challenged with the effects of ageing populations in coming years, and hence have launched their own demonstrators involving assistive technologies, robotics and telehealth initiatives.

More broadly, the wider health demonstrator landscape is typified by a number of incubators, accelerators and technology clusters which support the creation of solutions by businesses, who then run smaller-scale pilots with local health providers. Examples include the Copenhagen Health Tech Cluster, the Paris e-Health Incubator, the Digital Health London Accelerator and the Digital Health

21 National Innovation Centre for Ageing https://www.ncl.ac.uk/ageing/innovation/national%20innovation%20centre%20for%20ageing/

https://www.ncl.ac.uk/ageing/innovation/national%20innovation%20centre%20for%20ageing/




6CONNECTED AND

AUTONOMOUS VEHICLE

DEMONSTRATORS


Breakthrough Network in New York.

In recent years, there has been a rapid worldwide proliferation in the number of connected and autonomous vehicle (CAV) demonstrators. However, while research and development projects have become practically countless, commercial deployments remain rare.

Our analysis has shown that the focus of CAV demonstrators spans the SAE autonomy-level spectrum, ranging from those aiming to deliver driver assistance (level 1) use-cases to those focused on high automation (level 4) demonstrations in real-world conditions. Specifically, the most common use-cases being demonstrated include:

l��Driver Assistance: advanced vehicle-to-vehicle (V2V) and vehicle-to-infrastructure (V2I) systems that use on-board sensors and connections to other vehicles and back-office systems to improve safety as well as reduce congestion.

l��SAE Autonomy level 3 (conditional automation): described as ‘an automated driving system that handles all aspects of the dynamic driving task, with the expectation that the human driver will respond appropriately to a request to intervene’.

l��SAE Autonomy level 4 (high automation): defined as ‘an automated driving system conducting all aspects of the dynamic driving task, even if a human driver does not respond appropriately to a request to intervene’.

In addition to demonstrating technical automation capabilities, the majority of projects also seek to understand and address the potential barriers to large-scale CAV deployment, such as legal, societal and regulatory challenges.

The CAV agenda is a key focus area for the UK, with the 2017 Industrial Strategy stating that the government wants to see fully self-driving cars, without a human operator, on UK roads by 2021. This ambition has been reinforced by the establishment of the Centre for Connected and Autonomous Vehicles. Set up in 2015, the centre is tasked with working across government to support market creation for CAVs. It has since provided over £250 million in funding for CAV demonstration projects and test beds. The most recent round of investment funded the creation and expansion of real-world test environments in the West Midlands, Oxfordshire and Bedfordshire. This new testing ecosystem will be coordinated by MERIDIAN, a new government-backed and industry-led hub to develop CAV technology in the UK.


Within the UK, a number of geographical areas are emerging as front runners in the real-world testing and deployment of CAVs. Projects and test beds are being clustered in the following areas:

l��London: The Smart Mobility Living Lab is based in Greenwich and Stratford. This lab hosts various CAV projects including the GATEway and MOVE_UK trials.

l��Milton Keynes: The city is pioneering the use of autonomous pods to create new transport options as part of the UK Autodrive, SWARM and LUTZ Pathfinder projects. The Millbrook proving ground is also located near the city.

l��Coventry: The city plays host to the UK Central CAV test bed as well as the large UK CITE and UK Autodrive projects.

l��Bristol: The city and the wider South Gloucestershire area host the Venturer and FLOURISH CAV projects.

l��Oxford: Roads within and between Oxford and London will be used to host SAE level 4 autonomous vehicle journeys as part of the DRIVEN project by 2019. The Culham Autonomous Vehicle Living Lab is also nearby.

Internationally, a number of countries are pushing ahead with the CAV agendas, including Singapore, Germany, USA, China, Korea and Sweden. Huge numbers of private-land test beds have been established, including the National Intelligent Connected Vehicle Testing Demonstration Base in Shanghai, the K City test bed in South Korea and the M City test bed in Michigan, USA. More recently, the number of instrumented roadways and on-road trials has increased dramatically, with the USA, Germany and Sweden leading the way.

Internationally, a number of

countries are pushing ahead

with the CAV agendas,

including Singapore,

Germany, USA, China, Korea

and Sweden.


7LAST MILE SUPPLY

CHAIN AND LOGISTICS DEMONSTRATORS


Freight distribution is an increasingly important part of modern city life. Most goods consumed in our cities originate externally and must be transported into urban centres. Trucks and vans remain the dominant transport mode as they are perceived to be most suitable for delivering goods to specific destinations within complex urban street systems. However, the rising numbers of freight vehicles are causing economic, social and environmental impacts in the form of congestion and noise and air pollution.

In response to these impacts, investments are being seen in a range of demonstrators aiming to pilot the following technologies and solutions:

l��‘Green’ delivery vehicles: in the form of electric vans and bicycle delivery systems to reduce emissions.

l��Advanced algorithms and analytics: covering the distribution, storage and transport of goods, to help delivery companies optimise aspects of their operations in areas such as fleet management and routing.

l��Delivery drones and robots: enabling companies to provide extremely fast and flexible delivery services, with smaller environmental impacts at potentially lower prices.

The primary focus of demonstrators, both in the UK and globally, has been and remains the introduction of electric freight vehicles and other environmentally friendly goods delivery options.

In Europe, this focus was established in the early 2000s with the launch of the European Commission’s CITY–VITAlity–Sustainability (CIVITAS) initiative, which provided funding for projects and acted as a convening forum, bringing cities together across Europe to design and test solutions around urban freight management. This focus has been further reiterated through the formation of the Global Green Freight Action Plan and the Green Freight Asia Initiative.

The focus on low-emission urban freight continues, highlighted by the 2017 announcement from the Office of Low Emission Vehicles (OLEV) regarding its allocation of £20 million in funding for 20 trial projects to demonstrate new technologies and to encourage widespread introduction of low – and zero-emission vehicles into UK commercial fleets.

Emerging technology solutions such as drones and delivery robots are starting to be demonstrated in the public domain. These smaller-scale demonstrators are predominantly driven by the private sector, with little funding coming from public sources. Examples include Starship Technologies testing autonomous delivery robots on the pavements of Milton Keynes and Greenwich, and UPS testing a delivery drone that launches from the top of a UPS van and autonomously delivers a package to a home before returning to the vehicle while the delivery driver continues along the route to make a separate delivery.


8NEXT-GENERATION

CONNECTIVITY AND DATA DEMONSTRATORS


Emerging smart city solutions such as smart city services applications, smart grids and smart healthcare services often rely on the use of connectivity networks. In many cases, the requirements of these smart solutions cannot be met with today’s connectivity networks. New types and combinations of underlying connectivity infrastructures are required to meet unprecedented needs in terms of agility, reliability, security, scalability and partnerships.

Realising that a reliable communication network is an essential part of a fully integrated, truly connected smart city, a number of demonstrators have emerged that are focused on enabling and underpinning a wide range of use-cases, rather than being specific to one.

In the UK, demonstrators such as Bristol is Open and the Things Connected programme aim to provide open, experimental, next-generation ICT platforms that can be used by companies and developers to build and test a wide range of applications. Bristol is Open provides combinations of Wi-Fi, 3G, 4G, LTE, early 5G and radio frequency mesh networks, while Things Connected provides a free LoRaWAN™ network.

In some cities, basic underlying connectivity infrastructure is not yet in place. Our research has uncovered some innovative approaches to deploying fibre and wireless networks, along with some novel methods of enabling new services to be developed on top. These examples will be discussed in more detail in the lessons learned section of this report.

As the commercial rollout of 5G approaches, several test beds have been created that aim to provide businesses and entrepreneurs with access to emerging 5G technologies. In the UK, two 5G test beds have been funded by local enterprise partnerships

(LEPs) based on the potential of new technologies to catalyse business growth and local economic development. However, these test beds are currently deployed within buildings or on closed sites, rather than real-city environments.

The UK Government has a clear ambition for the UK to be a global leader in the next generation of mobile technology. The 5G Innovation Centre has been established, bringing together leading academics and key industry partners to help define and develop the 5G infrastructure that will underpin the way we communicate, work and live in the future.

In July 2017, the UK Government announced that three universities had been awarded £16 million in funding to develop cutting-edge 5G test networks. This funding included plans to deliver an end-to-end 5G trial in early 2018.


In October 2017, DCMS launched its 5G Testbeds and Trials Programme which provides up to £25 million in funding to encourage the development of a UK 5G ecosystem with technology and deployment, test beds and trials to stimulate the development of 5G use-cases and business models. (24)

Internationally, 5G trials are continuing at pace in Japan, Germany, China, South Korea, USA, France and Sweden. These small-scale trials are invariably led by respective large telecommunication providers such as AT&T, NTT DoCoMo, Deutsche Telekom, KT, Orange, Ericsson and China Mobile. Open-access, city-based 5G testbeds have been established in Sweden (Urban ICT Arena) and Germany (5G Berlin).

If communication networks are the critical infrastructure for smart cities, then data is the critical information. In the same way a smart city requires ubiquitous connectivity, it also requires access to various open and closed, public and private data sources.

The creation of open data hubs is becoming commonplace in the UK and abroad, with numerous cities launching their own in recent years. Examples include the London Data Store, Data Mill North and Birmingham Data Factory.

Taking this concept one step further, Singapore has created its Virtual Singapore platform which provides a collaborative, dynamic data platform for public, private, research and citizen use. This platform acts as a virtual test bed and experimentation environment. The UK is now seeking to build a similar platform with its UK Digital Twin pilot project.

In terms of demonstrators, our research has identified a growing global trend around creating data marketplaces. The City Data Exchange in Copenhagen is a software-as-a-service solution that makes it possible to purchase, sell and share a broad range of public and private data types. In the UK, the oneTRANSPORT Data Marketplace demonstrator aims to gather data about the transport operations of multiple towns and cities and make this available using a data-licensing approach.


9REGULATORY

IMPLICATIONS OF THE USE CASES


The 5G use cases raise quite general regulatory issues, especially in relation to radio frequency licensing, access to public realm and data privacy and security. Engagement with the relevant regulatory authorities has helped clarify the approach being adopted for these issues.

In respect of radio frequency licensing, in summary, both licensed (cellular mobile) and unlicensed (Wi-Fi) frequency allocation models make a major contribution to public wireless services. Licensing frequency bands typically enables the state to raise significant amounts of money, in excess of the costs of regulation, to prevent interference and to achieve coverage and quality of service standards. Unlicensed access to frequency bands enables a variety of uses to share frequencies and facilitates innovation.

In the context of 5G, it appears probable that both licensed and unlicensed modes will have a role to play, with unlicensed or shared access particularly suited to low power applications. Ofcom’s experience, for example when it offered to assign 2.6GHz spectrum either to high power exclusive use or to low-power concurrent use, is that high-power uses outbid low-power. So the case will need to be made that unlicensed or shared use has significantly greater public benefits.

In respect of access to public realm for the installation and maintenance of wireless infrastructure, the adequacy of recent changes made to regulation has still to be established. For example, changes proposed for, but not yet introduced into, the Electronic Communications Code (ECC) remove the requirement for planning permission for multiple small base stations installed on buildings. The General Permitted Development Order (GPDO) was only revised in 2016, for example to increase the permitted height of mobile transmitter towers to 25 metres. It may be necessary to await evidence of continuing difficulties before proposing additional relaxations. The HCDRC project may itself produce such evidence.

In respect of data privacy, several of the use cases will not only generate very substantial volumes of data, but also require third party access to the data. Where customers have a contractual relationship, direct or indirect, with such third parties, contract terms can help protect data privacy. However, there will not always be a contractual relationship in place or enforceable. Moreover, it will be possible for data from a variety of sources to be put together in ways that enable individual users to be identified and monitored, even when each data stream is protected, for example by being anonymised. New rules will be necessary to manage such situations and maintain public confidence.


9.1 CIVIL AVIATION AUTHORITY & NESTA FLYING HIGH CHALLENGE

As set out in the report on the Connected and Autonomous Vehicles Use Cases, it is connected vehicles that pose the more significant policy and regulatory challenges. The precise nature of these challenges is still being assessed and the HCDRC demonstrator is expected to contribute practical information for regulatory authorities on critical requirements.

For example, it is understood that existing public wireless networks (3G, 4G and Wi-Fi) do not currently provide the coverage or capacity required for connected and autonomous vehicle use cases, such as driver assistance. Coverage and capacity could be improved through the densification of mobile networks. The policy issue is how best to achieve this outcome, given that the economic incentives for MNOs to do so are evidently weak; the evidence being poor mobile coverage along transport routes. At a policy level, the licensing framework could be modified to ensure use case requirements are met.

Improved latency performance for connected and autonomous vehicles would appear to necessitate the installation of roadside network access and infrastructure. To support current and future use cases, low cost methods of provision should be facilitated by the HCDRC demonstrator. Keeping costs down is likely to entail using in combination frequencies assigned or to be assigned to MNOs and frequencies that can be shared, as well as sharing fixed network capacity (backhaul).

A further specific change in regulation that may be necessary to ensure latency requirements are met is to allow MNOs to prioritise the relevant categories of traffic, that is, to be exempt from net neutrality rules. Ofcom currently permits prioritisation subject to not degrading other services, but the relevant EU Directive does not.

9.2 SMART SERVICES

Three smart city solutions have been identified as part of the City Services Use Cases: smart waste management, smart parking systems and smart street lights. These solutions have already been trialled in pilot schemes but have not reached a full city-scale deployment yet. The opportunity exists for the HCDRC demonstrator to test their viability on a city scale.


The delivery of these City Services is likely to require much greater density of wireless networks in urban areas. Dense deployment of small cell sites in urban areas may be most efficiently achieved using street furniture such as street lights, rather than buildings. The experience of local authorities contracting for Wi-Fi coverage suggests that revenues could be enhanced and costs could be reduced through adopting a standardised contracting approach and encouraging national suppliers (Arqiva, BT Wholesale, Virgin Media) which should be more securely financed and which could attract more advertising revenue. Leaving contracting to individual local authorities is likely to result in patchy coverage and poor incentives to invest.

Other issues that concern the delivery of City Services by local authorities include access to public realm and restrictions on road works. Here the issue is fundamentally cost-benefit in nature: whether restrictions on access to public realm in place are more beneficial for the public than allowing freer access for the installation of network infrastructure.

Small cell sites for 5G are unlikely to be confined to public building and the public realm. Recent regulatory reforms22 should be reviewed to see if they will be sufficient for the purpose of facilitating low cost installation of infrastructure.

To deliver City Services, data will be generated from everyday objects, such as smart bins and smart lights. Connecting together more data, from more sources, will make it possible to identify and profile individuals and households. The HCDRC demonstrator will provide an opportunity to test what measures can be put in place to preserve data privacy.

9.3 HEALTHCARE

Healthcare Use Cases have been grouped under three headings: Assisted Living, Remote Healthcare and Preventative Health. The delivery of digital healthcare in the home is likely to be achieved by connecting devices via a local area network to a fixed or wireless broadband connection, and in other cases by connecting directly to an outdoor wireless network.The Healthcare Use Cases raise much the same

22 For example, the revisions to the General Permitted Development Order, introduced in 2016, and in the Electronic Communications Code, due to come into force in 2017.


issues as regards the provision of denser wireless networks as City Services. In addition, reliable indoor connectivity is crucial for the delivery of Assisted Living services that rely, for example, on the connection of alarms and sensors to central monitoring services. Assisted Living services are expected to involve the communication of relatively low volumes of data at low intervals and limited outdoor usage, implying that M2M connectivity will be the primary requirement. The HCDRC demonstrator will provide the required infrastructure to enable highly reliable indoor connectivity required for the delivery of digital healthcare services. It provides the opportunity to test the most economic solutions, which will provide useful insights for regulators to guide the development of rules to apply at a national level.

Healthcare provision raises data privacy and security issues, for example in relation to controlling access to, and sharing of, patient records. Here the issue is primarily ensuring HCDRC initiatives are designed and implemented in compliance with good practice, rather than the question of whether data privacy regulation might inhibit innovation.

9.4 MOBILE MEDIA AND CLOUD

The Mobile Media and Cloud Use Cases for HCDRC include virtual and augmented reality (VR and AR), ultra HD video (4K/8K content), and collaborative working through cloud computing services.

The bandwidth available will be key to the success of these Use Cases. Virtual and augmented reality and ultra HD video typically consume substantial bandwidth. For example, the bandwidth required for VR video could

range from 100 Mbit/s to 2.35 Gbits/s with two screens used. For ultra HD video, a good surfing experience requires continuous 30 Mbit/s to 100 Mbit/s bandwidth. Yet the average home broadband download speed in less than 30 Mbit/s (50.5 Mbit/s in urban areas).

The HCDRC demonstrator could help improve the network speed and quality in urban and suburban areas, supporting VR, AR and ultra HD video and collaborative working on the cloud through ubiquitous mobile broadband connectivity. This implies a dense urban mobile network with cell sites deployed across the city. The HCDRC demonstrator could help inform network design by showing the density required for good performance for each of the Use Cases. It can also inform communications regulation by providing insight into the future level of a broadband universal service obligation for public fibre and wireless networks.


Mobile Media Use Cases and collaborative working through cloud computing services raise data privacy and security issues. For example, interactive games and apps generally can collect large quantities of personal data and involve accessing device functions, even if with the consent of users, which may be used for other purposes or aggregated in ways that breach data privacy rules.

9.5 SUPPLY CHAIN AND LOGISTICS

The HCDRC demonstrator would facilitate data exchange between commercial vehicle fleets and despatching offices to improve service

operations efficiency by improving wireless connectivity and coverage along the roads. Commercial vehicle connectivity and remote management requires effectively universal wireless coverage. The regulatory issues that arise are therefore the most effective method of enhancing coverage along roads and of enabling further reductions in the costs of network deployment.

In addition, the HCDRC demonstrator provides the opportunity to explore new logistical techniques, such as platooning and drone delivery.

Platooning (whereby a group of vehicles travels as a convoy very close to each other) is a way to reduce congestion and fuel consumption on motorways and other major routes. The HCDRC demonstrator could include a corridor between the city and another node along which the communication requirements required to enable platooning could be installed.

Automated delivery by drones is envisaged taking place along pre-determined routes. To enable this the current requirement of the UK Drone Code for a human operator to remain in visual contact with each drone will need to be modified, and agreement reached on the appropriate alternative safeguards required for safe and efficient operation.

9.6 SMART UTILITIES

Two recommended use cases – smart grid applications and smart metering – could be tested within the HCDRC demonstrator.


Smart Grid ApplicationsSmart grid operators, such as local electricity network operators (DNOs and IDNOs23), are able to aggregate data from smart meters in their area, and to combine these data with information about generation and transmission to optimise network performance and facilitate demand side response24. Optimising network performance is becoming of increased importance as renewable but intermittent forms of energy generation (especially wind and solar panels) increasingly contribute to electricity supply.

Work on smart grids is at an early stage, and it is recognised that a framework formalising interactions between all interested parties does not yet exist. The establishment of standards and protocols that integrate supply and demand data for electricity will be needed to optimise demand side response. Because of the critical nature of public energy networks, control of smart grids will be very tightly regulated in order to deter hacking and other forms of disruption of networks. Therefore, it is perhaps unlikely that third parties will have independent access to the data produced within smart grids. Even so, the HCDRC demonstrator presents the opportunity to explore smart grid applications on a city scale.

At present, the balancing of supply and demand for electricity is undertaken principally at the national level. As concern has grown about the adequacy of existing generating capacity to meet peaks in demand, a national capacity market has

23 Distribution network operator, which has a universal service obligation to connect customers to the public electricity network in its licensed area, and independent DNOs, (IONO), which compete with them in the new connections market.

24 Demand side response (DSR) means measures taken to reduce the consumption of electricity during periods of peak demand.

been opened to parties who are able to provide reliable capacity on tap for peak periods, to store electricity for release in peak periods or to reduce electricity consumption in peak periods. The particular contribution of a smart grid would be to co-ordinate all these activities at city level automatically, based on access to data from smart meters, from local generators and local capacity providers.

Smart MetersSmart meters are connected to a central server in order for readings to be automatically uploaded throughout the day and the information made available to the customer as well as the utility company. The UK’s energy smart meter programme covering electricity and gas is well underway and expected to include all households by 2020. The smart meter programme is a regulatory requirement and is being funded by electricity suppliers.


Given the universal deployment of smart energy meters, the regulatory issues involved include the extent to which the systems being deployed will be technically and commercial interoperable, as well as guaranteeing data privacy and security. To secure the potential benefits from smart energy meters, users need to have a right of access to their own data so that smart meters can be integrated into smart home devices and services. To simplify this process, data interoperability standards should be introduced. The HCDRC demonstrator could allow innovative companies to test products and services that build on this platform.

Energy UK, the trade association of energy suppliers and generators, has produced a smart

meter privacy charter25. Its terms are relatively flexible. For example, the charter states:

‘Consumption information will not be collected in real-time (your energy supplier won’t be able to see the exact time you have used energy, just a total amount used between any two separate meter readings) unless it is needed for a particular product or service you have agreed to take.’

This would appear to leave room for new services to be developed that depend on the real-time exchange of data from smart meters.

There is no equivalent national programme of smart meter roll-out in the water sector, as the general economic benefits are not considered sufficient to justify the cost. Thames Water is deploying smart water meters in the London area, as it considers that their installation is an efficient method of leak detection and of encouraging lower consumption in water-stress areas. In the HCDRC demonstrator, there may be an opportunity, through co-operation with the local water utility company, to explore ways of lowering the cost of smart water meter systems, for example through integration with already-installed energy meters.

Successful testing of smart city demonstrators and testbeds inevitably requires innovative governance, and we consider that this goes hand in hand with innovative regulation. The majority of projects and test beds reported having several levels of day to day governance to ensure the successful delivery and operation of projects and test beds.

25 Energy UK’s Privacy Commitments for Smart Metering, undated.


10REGULATORY

CHALLENGES BY USER CASE


REGULATORY AND GOVERNANCE CHALLENGE

CONNECTED AND AUTONOMOUS VEHICLES

LAST MILE SUPPLY CHAIN AND LOGISTICS

SMART UTILITIES

SMART HEALTHCARE

CITY SERVICES (TRAFFIC, PARKING, LIGHTING ETC)

CONNECTIVITY AND DATA

Requirement for regulatory compliance or change in regulation/legislation

Requirement for internationally agreed standards

Need for standardisation/interoperability of data

Need for data privacy, security and portability

Cyber security risk

Challenge of insurance and liability

Innovative governance models for data sharing, asset sharing and decision making

Clarity of ethical approach to sharing of data/assets/IP agreed by participants

Innovative and clear commercial arrangements and avoidance of conflict around exploitation of IP

Table 1: Regulatory challenges by user case


11SMART GOVERNANCE


Whilst adhering to rules and regulations is obviously important, as is the ability of demonstrators to help rule makers and regulators understand new challenges and governance issues, perhaps more crucial is the trust required to ensure that the smart city testbeds are seen as responsible and driven by public good objectives as opposed to purely commercial gain.

Whilst the technological challenges are clearly front and centre where 5G use cases and smart cities are concerned, there is perhaps more to be lost and gained around lack of transparency and openness in the processes adopted. New relationships between providers will need to be established, as will new relationships between the combined providers and the users. Trust will be key. The ability to communicate what is happening, why it is happening, to whom and the benefits must

be prioritised. The governance must support and promote trust and openness across all stakeholders, as well as being guardians of legality and risk.

The various participants in smart city projects and test beds reported challenges in learning to work under these new, multi-agency partnership models, citing cultural differences, resistance to change and little shared history of working together as key contributing factors. Despite these challenges, a number of projects and test beds have set up successful delivery vehicles.

In addition, there will need to be agreed escalation routes for when parties disagree.

Key stakeholders for city scale, open access testbeds are likely to include:

l��Local authorities (should start from the position that they are lead partners)

l��Central Governmentl��NHS l��Commercial parties/private sectorl��Academial��Relevant utilitiesl��Relevant regulatorsl��Insurance bodies l��Public & end users

Some of the new challenges will involve:

1. Understanding and mitigating cyber- security risks.

2. Information sharing and data protection. 3. Asset and Infrastructure sharing (& accessibility). 4. Establishment of new commercial vehicles.5. Intellectual property arrangements.6. Ethical considerations.7. Change management – the challenge of

different ways of working for public/private sector partners but also for end users and other data/asset owners.


The majority of demonstrators in the UK to date have adopted a collaborative innovation approach to create new solutions. This approach is reported to deliver a number of advantages including shortening innovation timescales, sharing risks and reducing costs. Within these innovation consortia, protecting intellectual property and securing control over the future use of resultant solutions are the primary aims of many participants. Therefore, the agreement of collaboration terms and intellectual property rights were found to have been the critical foundations of successful demonstrators.

Governance modelsThe minimum requirement for governance for city scale open access testbeds is likely to be:

l��Governing Board: comprising funders and key stakeholders is responsible for providing financial, operational and strategic oversight.

l��Advisory Group or Steering Group: comprising relevant companies, research groups, regulators, government officials and independent individuals. These groups are responsible for providing expert advice and at times were seen to make additional financial contributions to the initiative.

l��Sub-Committees and Working Groups: comprised of those directly involved in the project. Working groups were formed around particular workstreams or challenge areas to unblock issues and enable the project to progress.

Demonstration projects, particularly those funded by the European Commission and the UK Government, have used collaboration agreements to create delivery consortia comprising public, private and academic organisations. These arrangements typically involve the appointment of a lead beneficiary who receives funding from the awarding body, and the creation of collaboration

agreements or memoranda of understanding to set out the terms and details of requirements and responsibilities for other consortia members.

Generally speaking, test bed environments tend to use special purpose vehicles (SPVs) to enable the participating organisations to operate a combined governance structure. Public sector organisations stated that the use of SPVs allowed for swifter decision-making capabilities and shorter procurement timescales, while private sector organisations believed that the use of SPVs offered a degree of protection from potential reputation risks.

However, these new models are not without challenges. The various participants in smart city projects and testbeds report difficulties in learning to work under these new, multi-agency partnership models, citing cultural differences, resistance to change and little shared history of working together as key contributing factors.


Many SPVs have been set up as not-for-profit organisations.The most common forms of SPV used were:l��Joint Ventures: have been used to create

formal partnerships between universities, local government and other key stakeholders.

� ��Private sector holds fewer than 49% of shares

l��Arm’s Length Organisations l��Trusts and Community Interest Companies Inclusion of a neutral board memberFeedback from existing smart city programmes has indicated that having a neutral board member who is separate from any of the key partners of the testbed is an important component of good governance. The neutral board member should be formally linked to the organisation through (e.g. a 5% stake). Experience indicates that merely

having an ‘independent’ board member has not proved to be sufficiently neutral, as that model suffers from the premise that the independent member is employed by the board and therefore does not have a completely free voice. The 5% stake allocated to the ‘neutral’ board member could be a voting entitlement as opposed to the release of any potential profits.

Mitigating cyber risk The interconnectivity required by hyper-connected cities brings a new level of challenge around data security and privacy, but also a risk of cyber-attack. Inevitably, smart cities will require sharing of channels that, if not properly protected, could leave essential services vulnerable.

The UK Government’s description of essential services mapped to cyber security clearly has implications for smart city testbeds, specifically when and if they become live services, so would need to be built in to the test environment.26

The specific implications for governance include the need for: l��a suitable reporting procedures on cyber

risk assessment during the test stages, and; l��an appropriate escalation route to be

established during test phases so that the planning is in place for the live services.

Any city testbed work could also help the UK Government to understand the new processes required for essential services in relation to the mitigation of cyber risk.

Data ProtectionSharing of personal data across agencies and commercial organisations is subject applicable to law. Clearly, to be successful, smart cities will need

26 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/677065/NIS_Consultation_Response - Government_Policy_Response.pdf


to allow the flow of information and data across providers and systems. Management information, for example around traffic flow, will be vital to enabling smart cities to function. However this will take us into new territory regarding the use of personal data. End users will need to be satisfied that their personal information is being protected and only used for specific purposes. Governance models will need to be set up to demonstrate both the transparency of data flow, and the commitment to ethical and legal use of data.

Shared information standardsClearly one success criterion for the testing and implementation of smart city demonstrators is that digital assets can be shared. This will pose a number of challenges in terms of how existing and proprietorial data can be read and interpreted by new processes and systems. There will be new scenarios to consider around the differences between data owners and data users. From a governance perspective, clear agreement and boundaries will need to be established, and an escalation route will need to be established where there is disagreement around practices.

Intellectual PropertyThe governance and intellectual property arrangements surrounding smart city demonstrators are intrinsically linked and vary considerably depending on the funding sources, partners involved and use-case area.

Collaboration agreements are the most common way of formalising these arrangements between multiple partners. Projects unanimously reported that these agreements took considerably longer than expected to put in place, with legal negotiations typically lasting between 6 months and 1 year. The most common sticking points were intellectual property rights and liabilities.

Within collaborative demonstration projects, background IP arrangements were found to be

standardised, with the party that brought the IP into the consortium retaining full ownership. However, foreground IP arrangements differed depending on the type of partners involved and the funding source. Two major arrangements were seen to distribute IP amongst partners.

Commercial partners such as corporates or small medium businesses were keen to obtain IP rights while local authorities and other asset owners were found to be less keen due to the high costs associated with maintaining IP and the lack of knowledge around how to commercialise. Asset-owning partners supported IP remaining with commercial partners, so they could develop market-ready solutions and sell to multiple customers. This would enable replicable solutions to be produced and would reduce the subsequent price, allowing both the solution owner and asset owner to benefit from economies of scale.


Universities were seen to have mixed views on IP ownership, with some requiring access to IP for research and teaching purposes only, while others were keen to secure full ownership in order to develop their own commercial propositions or to licence the innovation to other commercial actors. Foreground IP arrangements can become more complex and difficult to agree as the number of partners involved increases.

Finally, where public sector funding had been received, there was a requirement to make some IP open. This was normally achieved through the opening of data produced by the project and sharing of results in the form of published whitepapers or through speaking at conferences. There were very few objections to this condition.

Testbeds reported that they wished to encourage the sharing of knowledge and learning between innovation groups wherever possible. Some testbeds used financial incentives to encourage knowledge sharing, offering cheaper access arrangements to those that agreed to share learnings.


ANNEX A: CONTACT INFORMATION

FOR REGULATORS


CONTACT INFORMATION FOR REGULATORS

REGULATOR

Ofwat

Ofgem

UK Regulators Network

Ofcom

Civil Aviation Authority

Financial Conduct Authority

Information Commissioner’s Office

Office of Rail and Road

https://www.ofwat.gov.uk

https://www.ofgem.gov.uk

http://www.ukrn.org.uk

https://www.ofcom.org.uk/about-ofcom/contact-us

https://www.caa.co.uk/Our-work/About-us/Contact-us/

https://www.fca.org.uk/contact

https://ico.org.uk

http://orr.gov.uk/contact-us


ANNEX B: GOVERNANCE CASE

STUDIES


CASE STUDY

BRISTOL IS OPEN (JOINT VENTURE)In order to deliver and operate its network infrastructure, Bristol is Open was created as a joint venture company, owned by Bristol City Council and the University of Bristol. This allowed the infrastructure to be procured and deployed quickly. Furthermore, funds were being received through multiple avenues, including research and corporate monies, and a joint venture allowed these funds to more effectively accounted for and managed. The joint venture then used a series of local host partnership agreements to deploy equipment in various locations across the city and charged variable rates to corporates, SMEs, academics and entrepreneurs based on usage.

GOVERNANCE CASE STUDIES

CASE STUDY

SMART KALASATAMA (ARM’S LENGTH ORGANISATION) The Smart Kalasatama programme (2014-2017) is financed by EU Regional funds and formally governed by the city of Helsinki. However, the programme is coordinated and delivered by Forum Virium Helsinki, a city-owned subsidiary (limited company) tasked with smart city innovation and development. As a subsidiary of the City of Helsinki, Forum Virium operates according to the city’s legal and administrative processes, and roles and responsibilities which are defined in a cooperation agreement. While the city operates in departmental siloes, the arms-length organisation is tasked with working across them in order to enable cross-cutting innovation projects to progress more efficiently.

CASE STUDY

MOBILITY OXFORD FOUNDATION (MOBOX) (COMMUNITY INTEREST COMPANY)The Mobility Oxford Foundation is aiming to create a Living Laboratory in Oxford to assess, validate and prove the business cases of a variety of innovative transport solutions. The MobOx Foundation has been set up as a Community Interest Company, established by key stakeholders from the transportation industry and local stakeholders including businesses, government and academic organisations in Oxfordshire. The group will be the custodians of any data produced and learning gathered from the laboratory.


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Documents

Regulation and Governance (UK) - Amazon S3 · 2019-09-06 · Funded by Innovate UK, the UK’s innovation agency. Innovate UK works with people, companies and partner organisations