Facebook fails to heat up Swedish town’s economy

Facebook fails to heat up Swedish town's economy
You may not have heard of Luleå, but if you use Facebook, your online presence has been there. However, many still wonder if the social media company's massive server hall near the Arctic Circle will ever heat up the local job market.

When the social media phenomenon Facebook picked this chilly city 725 kilometres north of Stockholm for its first data centre outside the United States, it was wooed by the climate – literally and figuratively. 

"The already positive business climate was a big reason we decided to establish in Luleå," said Joel Kjellgren, the data centre's 32-year-old manager, as he paced the facility, a concrete building the size of five soccer fields.

The Baltic port lies in a region already dubbed the "Node Pole" for its high company growth, notably in IT and telecoms. But Luleå's own record of no major power outage since the late 1970s also pleased Facebook, as did its secure access to green energy in the form of hydropower. A government pledge of 103 million kronor ($15.5 million) in regional investment aid also helped.

IN PICTURES: Take a peek inside Luleå's Facebook server

And then there was the weather.

Located just 100 kilometres south of the Arctic Circle, Luleå's average temperature stays below 10 C nine months of the year. This means Facebook can cool down the vast server halls with chill air from just outside, driving the energy cost down and the sustainability factor up. What other power it needs, it gets from hydropower stations along mountain rivers nearby.

"The halls might seem gigantic, and it requires a lot of energy to run them, but imagine if all those people would try to communicate by other means, calling each other, sending e-mails and pictures," said Kjellgren.

In fact, he said, the digital energy consumption of an average Facebook user is similar to the calories contained in three bananas or one caffe latte – per year.

Jury still out

Luleå has yet to see the full impact of the Facebook presence. Two server halls were opened this summer, and the remaining two will be operational in the middle of 2014. And that's just the beginning. There is room for two more giant buildings next to the existing one, for a total of 12 server halls if need be.

But five months after the grand opening, the jury is still out on the actual economic benefits for Luleå's 46,000 residents, whose livelihood historically relied on steel production.

The business community is all for the project, as are the local politicians, delighted to see their small town on the world map. But critics point out that only a few jobs have been created so far, most of them for low-skilled workers.

One of the staunchest supporters is Matz Engman, CEO of the Luleå Business Agency, who traveled to Facebook's Palo Alto headquarters in 2009 in a successful charm offensive to win over the board. Two years later, work began on the first building.

"It has created 750 construction worker jobs since the start in 2011 and it still goes on. At the moment around 200 people work on installation jobs in the halls," he said.

Although no more than 50 to 100 people are eventually expected to work in the Facebook data centre itself, Engman forecasts that it will generate up to 300 other new jobs in catering, cleaning, garbage collection, security and childcare.

"It has created an incredibly positive attitude towards the Luleå business community," said Engman.

The town's science park, which mainly caters to the IT and telecom industry, grew 25 percent in 2012. The park's 100 companies employ 1,100 people – almost as many as the town's largest private employer, steel manufacturer SSAB.

A recent survey by Swedish business daily Dagens Industri showed that the Norrbotten region, where Luleå is located, has more growth companies even than the busy Stockholm area.

The Node Pole

Engman expects the "Node Pole" region to attract 200 billion kronor ($30 billion) within the next 10 years.

"All curves are pointing in the right direction," he said.

But others, like Håkan Ylinenpää, a business professor at the Luleå University of Technology, have a harder time seeing potential spin-off, such as a boom in new high-tech jobs.

"We haven't seen any major effects yet. The direct effect of the first building is around 100 jobs in total, and those are not very skilled," he said.

Ironically, environmental watchdog Greenpeace, not normally a fan of big corporations, has waded into the debate with its own endorsement.

"One of the key reasons to choose Luleå was the access to renewable energy," said Martina Krüger from Greenpeace Sweden. "That one of the world's largest IT companies made such choice sends a positive signal."

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