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Smart Cities and Resident Data: Owners or Raw Material?

I. The Core of the Question: Are Residents "Subjects" or "Ingredients"?

In smart city concepts, resident data on mobility, purchasing, and health function as the "fuel" of cities. However, whether these residents are truly the "owners" of such data presents a three-layer divergence between legal systems, design philosophies, and operating entities.

According to the Strategic Information and Communications Technology Promotion Strategy Council's Smart City Security Guidelines (2024), collected personal data includes "personal attribute information, mobility, behavioral, and purchasing history data from which individual relevance can be inferred," requiring protection appropriate to their nature.

However, there exists a significant gap between "protection being required" and "protection actually being provided" in practice.

II. Resident Rights Under Current Legal Systems: Form and Reality

▶ The Formal Guarantee of "Consent Principle" Under Personal Information Protection Law

According to the Act on Protection of Personal Information (APPI), third-party provision of personal data requires principal consent in principle (Article 23(1)), and in smart city data coordination and sharing, acquiring resident consent is similarly the standard.

However, the law contains exceptions. "Consignment provision" and "joint use" of personal data do not require principal consent, which in practice can become a loophole for "data circulation without consent."

▶ 2023 Legal Reform: Expanded Application to All Organizations

From April 2023, the revised Act on Protection of Personal Information applies to all organizations, including local public authorities. This requires both companies and municipalities to fulfill their responsibilities and appropriately manage personal information handling.

However, being "required to fulfill responsibility" differs from "residents owning data." Japan's current legal system lacks explicit provisions recognizing data ownership rights for residents.

▶ Legal Risks and Litigation Potential

If some residents file suit claiming privacy violations and lose, defendants may face damages (tort liability under Civil Code Article 709) or injunctions halting operations (based on infringement of personality rights).

Ironically, the last safeguard protecting resident rights is "litigation," an ex-post measure, with weak ex-ante institutional safeguards.

III. Opt-in vs. Opt-out: The Political Nature of Two Models

Here, the inherent power structure of smart cities becomes apparent.

For city managers and service providers, the opt-out method is more efficient. However, building trust in smart cities is difficult if residents don't understand how their personal information is being used.

▶ GDPR's "Bundle of Rights"

Under Europe's GDPR, explicit and free consent is mandatory at the point of data acquisition, and purposes for data use are limited. Additionally, data subjects are granted rights such as "data portability," with violations subject to fines reaching up to 4% of company revenue.

This is not merely a "right to refuse" but extends to residents having the right to remove data, making it significantly more progressive than Japan's system.

IV. Leading Examples and Failures: Two Contrasting Realities

✅ Aizuwakamatsu City: A Design Philosophy of "Data Belongs to Citizens"

Operating under the principle that "data belongs to citizens," Aizuwakamatsu City has adopted an opt-in approach since 2013, with the number of residents participating in smart city initiatives steadily growing.

The city employs an opt-in style data provision framework with a regional management organization (a consortium of local companies), aiming for regional participation through opt-in of citizen data rather than adopting GAFA's data management model.

❌ Sidewalk Toronto: Collapse from Privacy Concerns

The "Sidewalk Toronto" project promoted by Sidewalk Labs from 2017 initially garnered global attention but was withdrawn in 2020. Privacy concerns regarding data collection and utilization became critical issues, leading to project suspension.

The plan, even criticized as a "surveillance society dystopia," failed to allay public concerns.

Sidewalk Toronto is discussed in multiple prior studies as a representative failure of large-scale smart city projects where diminished social acceptance triggered project termination.

V. Data Monopoly as a Structural Problem

Mobility service providers may monopolize data collected through smart city initiatives, potentially hindering fair market competition. In smart city concepts, data should be treated as shared community wealth, requiring systems ensuring fairness and equality in its use.

NTT Group's smart city concept adopts the stance that "data ownership belongs to the municipality." The attitude of advancing data utilization with resident permission differs from the GAFA approach.

VI. The "Information Bank" Model: Potential and Limitations of a Third Path

Information banks receive personal information from individuals and provide necessary information to suitable recipients on the individual's behalf. Information Bank certification by the Japan IT Industry Association functions as a system ensuring proper operation.

This model structures data as residents maintaining "ownership and delegating management," closest to the current law's most coherent "ownership model." However, adoption remains limited, and it is not a nationwide mandatory system.

VII. Summary: Are Residents "Owners" or "Raw Material"?

Conclusion and Questions to Ask

Limited resident participation in smart city design and operations hinders democratic decision-making.

OECD advocates principles of data governance, transparency, accountability, and data minimization, making it essential to establish legal systems, guidelines, and mechanisms for citizen participation and operational oversight nationally and internationally.

Currently in Japan, residents are institutionally "those with the right to consent," but this resembles "licensees of use" rather than "owners." In most cases, the freedom to opt-out (withdraw) is left to the designer's goodwill and is not legally guaranteed rights.

The fundamental question is not technological but political. Who manages the data, who benefits, and who bears the risks—without mechanisms for democratically determining these answers at the urban design stage, smart cities become not "cities for residents" but "cities using residents as raw material." The "freedom to withdraw" is the litmus test of whether such governance functions.

The handling of resident data in smart city concepts and resident rights vary depending on specific laws and regulations, regional and national policies. However, the following general points can be considered:

Data Ownership or Raw Material

• Data Ownership: In most cases, personal data is said to be owned by the data subject—the resident themselves. However, in practice, enterprises or municipalities collecting data may generate value through processing and analyzing that data.
• Data Usage: How data is utilized is determined by law and contracts. Consent is often required for personal data.

Freedom to Opt-out

• Privacy Laws: Most countries have established data protection laws that typically guarantee opt-out rights based on those laws. Examples include the EU's General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA).
• Municipal Initiatives: Smart city projects often emphasize resident privacy protection, implementing clear opt-out procedures and initiatives ensuring transparency in data management.

In reality, how each smart city project addresses these issues depends on that region's policies and the project's specifics. Confirming the latest information is important.

Regarding the handling of resident data in smart city concepts, protecting the rights of residents as data subjects is an important issue.

1. Are residents data owners or raw material?

The concept of "ownership" of resident data in smart cities is complex, but most discussions and guidelines adopt the view that residents are data subjects with rights over their personal information. Data is utilized to enhance urban efficiency and improve residents' quality of life, while simultaneously requiring consideration for personal information protection and privacy.

Since data is exchanged among diverse businesses through city operating systems, it is desirable for residents to always control what data about them is collected and to whom they permit usage.

2. Is the freedom to opt-out (withdraw) guaranteed as a system?

The "opt-out" right—allowing residents to refuse data provision—is highly valued from a privacy protection perspective in smart cities.

In Japan, the revised Act on Protection of Personal Information applying to all organizations including local authorities from April 2023 has strengthened responsibilities for personal information handling. This requires both companies and municipalities to clarify purposes for using collected information and fulfill explanatory responsibilities to relevant parties.

Europe shows a tendency to prioritize "citizen consensus" over technology adoption in smart city initiatives, carefully designing operational rules with citizen agreement. The "citizen perspective" is essential in Japan's smart city promotion, and recommendations suggest referencing the "opt-in model" where data provision is not authorized unless residents consent.

Actually, both domestically and internationally, smart city plans have been withdrawn or specific initiatives discontinued due to inability to dispel privacy concerns, highlighting the importance of appropriate privacy risk management.

One challenge in smart city promotion is the consent acquisition process when collecting resident behavioral data, requiring clear explanations of what data and for what purposes will be used, obtaining understanding.

Overall, resident data in smart cities is more often discussed from the perspective of data subject rights rather than ownership, and the freedom to know how one's data is handled and to refuse its use (opt-out) is recognized as important and should be guaranteed within system design from perspectives of personal information protection law, related guidelines, and citizen consensus.

Residents are "data subjects" with legal protections and certain control rights, not "owners" nor "merely raw material." The freedom to opt-out (withdraw/revoke consent) is emphasized and recommended institutionally, but the degree of guarantee varies by project and context, not universally guaranteed.

Data Positioning: Ownership vs. Protected Rights

• Under Japanese Law (APPI): Personal data is not "subject to property rights," and exclusive property rights like ownership are not recognized. Data typically has usage rights defined by contracts or terms of service. Residents, as "principals," receive protections including consent acquisition, restrictions on use beyond stated purposes, and prohibition of third-party provision in principle. Collecting and utilizing entities (municipalities, enterprises) bear management responsibilities, but exclusive ownership is not assumed.
• In some smart city cases (e.g., Aizuwakamatsu City), data is positioned as "community shared assets," with rules preventing enterprise monopoly and promoting regional-wide utilization. Resident data is treated as "community resources" while respecting resident intentions.
• International Context (GDPR): EU emphasizes individual rights (access, deletion, portability), with data subject control strongly emphasized, though explicit ownership recognition is uncommon. US cases (Sidewalk Labs' Toronto plan) showed enterprise data dominance as a project termination factor.
• In summary, residents should be treated not as "raw material" but as "rights-bearing subjects." However, practical operations often give collecting entities de facto management authority, making transparency and governance critically important.

Institutional Positioning of Opt-out (Freedom to Withdraw)

• Japan Smart City Guidelines and Cases: Data coordination and sharing recommend principal consent (opt-in) as standard, with dynamic opt-in/opt-out management features built into city operating systems. Even with My Number Card integration, mechanisms allowing users to control provision destinations are envisioned.
• Public space cameras and sensors employ anonymization processing and post-analysis data destruction to avoid individual identification, while service users are offered opt-in systems. Opt-out methods (collecting unless refused) are generally avoided due to privacy concerns.
• Guideline Direction: Cabinet Office documents emphasize "human-centered" data governance, prioritizing citizen participation, transparency, and consent management. Ideal systems allow residents to control which services receive their data. However, this is not "absolutely guaranteed by system" but depends on individual project design.
• Challenges and Limitations: Public space data collection (movement, surveillance) makes opt-out physically difficult, with consent acquisition problematic in "ambient" environments, raising privacy violation risks. Internationally, consent withdrawal rights legally exist but show poor effectiveness in reported cases.

Summary and Caveats

In smart cities, resident mobility, purchasing, and health data are treated as protected personal information with usage based on consent. Residents are "rights-bearing subjects" rather than "owners," though they should not be treated unilaterally as "raw material." Opt-out is emphasized in guidelines and technologically/institutionally implemented (consent management functions), but is not completely guaranteed across all projects, with public infrastructure portions facing limitations.

Operations vary by specific project (particular city smart city plans), so confirming individual project documents and privacy policies is recommended. Data governance transparency improvement and citizen participation are future keys.