Anticipating Effects of Technology on Transportation Revenue
transportation revenue

One of the more interesting sessions at the recent Transportation Research Board (TRB) Conference on Surface Transportation Finance in Irvine, California was titled “The Impacts of Technology on Transportation Revenue.”

The session was presided by Sarah Puro of the Congressional Budget Office.  To give you some background on the TRB, it was established in 1920 as the National Advisory Board on Highway Research to provide a mechanism for the exchange of information and research results about highway technology.  And obviously technology in 1920 is a lot different than it is today.  So we are faced with this challenge:  how to predict and forecast transportation revenues as our methods prove to yield less consistent, long-term information.

Marty Wachs of RAND led off and made the point that a result of new technology is greater funding uncertainty.  30 years ago, revenues were predictable 20 years into future.  20 years ago, the predictability window was about 10 years.  Now we don’t feel confident predicting transportation revenues out further than 2-3 years.  A result is that some funding strategies are being adopted based on their certainty more than any other reason.  Marty contends that we should instead design strategies that respond well under a variety of futures, including open road tolling & mileage based user fees.  These can overcome the disruptive transportation changes such as Uber, Lift, and Google cars.

Adrian Moore of the Reason Foundation made related points supporting the concept that the industry will continue having trouble building predictive models for funding.  One related to demand and how the millennial generation views the need to travel.  His family move from CA to FL was not as much of a disturbance to his teen daughter as he would have thought; Skype, Facebook, and other communication channels have allowed his teenagers to continue all their close relationships, taking distance out of the equation.  For him personally, he is now a telecommuter.  Today, in the US, telecommuters outnumber transit riders.  So the question he posed was: will worrying about modal funding be as important as understanding the impact of less demand for travel?

The third speaker, JJ Eden of AECOM, was one of the initial creators of toll road interoperability standards, but pointed out that about seven national transponder communication protocols have emerged simply as a natural evolution of technology, lowering the possibility of a transparent national tolling implementation.  A former House T&I Chairman was reportedly fined for trying to use his state’s toll pass in a different state unsuccessfully – he thought, because of all his committee’s discussion about interoperability standards that they were interoperable systems! So as a result, MAP-21 requires interoperability by 2016!

One area that is quickly gaining momentum that not many folks are aware of is the “mobile commerce” aspect of tolling operations.  The financial transactions that toll roads manage are becoming more technology-based (e.g., connecting toll payment to credit card accounts), and for that reason, begin to feel very much like business models that connect with other small, simple credit purchases like cell phones, app purchases, and even paying for your McDonalds hamburger with an account that can also pay your tolls.  So JJ is currently receiving calls from companies like Verizon, T Mobile, 3M, VISA and Google, to enter or connect with the toll business.

Also, talks are ongoing with auto manufacturers that will likely result in a transponder being placed in a commercial auto by 2017.  But once that happens, who ‘owns’ the account that runs through that transponder?  The federal government?  The states?  Who controls the business model?  Think in terms of selling radio frequencies and you get a sense for where this part of the industry is going. AECOM gets ‘a couple calls a week’ regarding app development, including back office management – they are meeting with ALL of them.

My takeaway, and the conclusion of most of the panelists, is that legislation that governs transportation revenues is not going to keep up with how technology allows revenue collection to evolve.  Today’s companies move quickly to beat the competition and take advantage of technological advances to reap more revenue and profit.  The federal government reacts, it reacts mostly to crises, and it reacts slowly.  The introduction of technology and business into transportation commerce will not be viewed as a crisis for some time if at all, and indeed, the large companies will lobby to continue to have it viewed positively.  The speed of the process of government – hearings, deliberation, lobbying, and compromise – is not the same as the speed of technology businesses.

Keeping all the electronics talking across systems that may be proprietary and at various stages of evolution, will be the real challenge.  AASHTO, FHWA, and the state DOTs will likely need to evolve along these areas as well, otherwise we will likely see a very organic, regionalized development of ‘transportation commerce’ models over the next few years.

 

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