By Alec Appelbaum
FORTUNE -- Roughly 22 miles north of the Magic Kingdom in Orlando, Fla., just a few days before Superstorm Sandy ripped up the East Coast, networking giant Cisco Systems co-sponsored and participated in a two-day meeting unabashedly called an "Impact Forum." Among developers and politicos stood CEO John Chambers, an outspoken Republican who nonetheless wound up his welcome with a salute to government investment. "Government can bring courage," he said; courage, that is, to put faith in the Internet for all municipal services.
In fact, Cisco (CSCO) wants city governments to be among its biggest customers. The company that investors have rewarded for enabling increasingly faster Internet connections has edged into equipping, master planning, and otherwise advising city governments.
So far, Cisco has teamed up with New York City and two other companies to turn some 250 pay phones into screen-based information kiosks, and it joined forces with Canada's University of Regina to endow a professorship in e-governance. And, most visibly, it is working with a conglomerate called the Tavistock Group in Orlando to create a mixed-use "Medical City" around an existing VA Hospital. In this city, the electric utility and nearly everything else will hook into Internet-centered networks that will allow residents and workers all kinds of remote access and monitoring.
"Cisco is really targeting infrastructure companies -- architecture, construction, engineering, municipalities," says Rick Huijbregts, the company's VP for industry and business transformation in Canada. (Corporate titles in Cisco take a priestly air.) Cisco wants cities to believe that all urban systems will work better as bits. "A lot of infrastructure in cities is nearing the end of its life and since it's obsolescing anyway, there's an opportunity to replace it with smart-embedded material." As an example, Cisco likes to boast about how it helped a region in Germany manage all of its roads on a single IP network.
In America, Cisco wants to pounce on piecemeal Internet commitments that construction and facilities firms have been making for several years. Building owners have crammed their properties with gizmos that eat a lot of electricity, Huijbregts says, which would make connecting these devices to each other a cost-saving measure. "The industry is realizing that it's built so much [backup power] into everything," he says. For example, Cisco aims to show property owners how to make heating, cooling, and electric meters essentially talk to each other with Internet protocols.
"We've focused on real estate because that's an industry that hasn't [absorbed] tech all that fully," Huijbregts says. But things are changing, fast. "In a few years, nine of ten high-rises under construction in downtown Toronto will be IP-enabled."
Cisco wants to go beyond individual buildings and move into whole urban systems across the world. It's nurtured a business group called Smart + Connected Communities with showcase rollouts in South Korea, Spain, and Orlando.
"Smart+ Connected Communities argues for the Internet of everything," Huijbregts says. "It's important for a municipality to start thinking about speeds and feeds in terms of business value."
This plays out in mega-developments like Lake Nona, the site of the Lake Nona Institute's 2012 Impact Forum. Lake Nona is a 7,000-acre site in the Orlando area where Cisco is advising the Tavistock Group on the rollout of its 650-acre "Medical City," which will include a nursing home, veterans' hospital, children's hospital, and ultra-fast fiber connections to homes.
The emcee for opening night of the forum was Thaddeus Seymour, senior VP of Tavistock Group, which purchased Lake Nona several years ago, planning the area for mixed-use development with the city of Orlando and non-profit partners. Cisco has been giving a combination of strategy advice, equipment, and other services to Tavistock to support the Lake Nona project.
As Seymour tells it, Lake Nona's success hinges on a bet that Internet overdrive -- including wiring each house for a connection up to 10 times faster than standard broadband -- will attract medical experts to live and conduct research in the area and will sustain a price premium if the developer and Cisco tune the amenities just right. This wager -- which is much easier to make when you can build on unspoiled land rather than in an existing city -- is based on the idea that IT has become a "fourth utility" on top of power, heat, and water.
This bet also pulls Cisco into product design and branding, areas where its tech skills may fail to soften some Big Brother-like designs. At Lake Nona, Cisco chief demonstration officer Jim Grubb showcased a "raspberry pie," a $35 computer initially marketed to kids. "It can be your garage door opener, it can be your thermostat," said Grubb.
"In this metropolitan area, which is half the size of Manhattan, there will literally in 10 years be billions of sensors," said Chambers a bit later, as Grubb sidled across the stage to show off a range of surveillance cameras. "This has the capability, if a child disappears, to be able to use the bank cameras and others to quickly locate them," interrupted Chambers. "So it suddenly begins to allow us to protect our children and our environment in a very unique way."
Government courage, to Chambers, means embracing the idea of protecting kids with cameras. As Cisco moves into older cities, it should brace itself for some static.
Editor's note: A previous version of this story incorrectly stated that the 2012 Lake Nona Impact Forum was run by Cisco. Cisco co-sponsored the event, but the forum was run by the Lake Nona Institute.
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