Suppliers reshape to provide tolling and traffic management expertise

Jason Barnes examines the trend towards single source supply of complete tolling and traffic management solutions with some senior tolling industry figures.

Only a few years back, the major tolling system suppliers were aggressively positioning themselves as one-stop shops for tolling solutions and operations. No sooner has that little flurry of innovation settled than another trend has emerged – tolling companies wanting to become major ITS suppliers as well.

Various tolling company seniors have in recent months looked to reinvent (they would perhaps prefer ‘reaffirm’) themselves as traffic management experts. At the same time, the tolling sector is itself seen as a hot tip from without; as the issue of infrastructure funding gets harder to ignore and the user-pays principle finally starts to gain real traction, venture capital has – coincidentally? – become rather more interested. But what do the major tolling players, new and old, make of the trend?

Getting started

Jerome Couzineau, director of development at 480 Sanef and chairman of Sanef ITS, sees convergence working both ways: “Big players from the tolling sector are positioning themselves as ITS systems suppliers and ITS systems providers are moving into tolling. They were already using the same technologies – HD cameras, ANPR, roadside networks, highway traffic management systems, hub systems and so on – so change hasn’t been too great for either side. They share a common target, though: a global offer which can address global markets.”

139 Transcore’s senior vice president Michael Mauritz points to express lanes, and their combination of traffic management and pricing technologies, as a driver of natural convergence, as does Pat McGowan, president, transportation North America at 729 Schneider Electric.

“Managed lane projects and integrated corridor management mean we can no longer look at any toll road as an independent road. Now, we need to be aware, in real time, of what is happening on adjacent roadways and in the nearby regions because that can have a direct impact on the price to use those managed lanes,” says McGowan.

For 108 Q-Free’s chief technologist Knut Evensen, convergence is the result of technology progressing to a point where we have “a seamless platform onto which to place new apps ... the smart device.”
“Until now the time has not been right. In fact, I wonder if whether the time is indeed yet right. The ITS sector is not as quick-moving as the consumer electronics sectors such as PCs and smartphones. Particularly on the infrastructure side, investments tend to be much longer-term prospects. There’s a real revolution about to happen for end users which goes far beyond in-car devices. Handhelds will be much more important in future ITS and it’s difficult to grasp how important full cooperative ITS integration will be in terms of safety, efficiency and the environment.”

Ken Philmus, senior vice president, Transportation Solutions Group at 4186 Xerox Services, echoes Evensen’s point. “Agencies are being forced to do more with less money. That’s pushing holistic thinking – bringing together tolling and transit, for instance. Providers are looking to do things the same way – everyone’s talking about ‘smart’ somethings at the moment: smartphones, smart parking, smart cities...

“Agencies are finally grasping that they can utilise the progress in data analytics and smart devices. They don’t just have to build their way out of a problem. They’re also getting that it’s about moving people and goods, not vehicles. Xerox is currently working hard on vehicle occupancy technology for HOV/HOT lane applications but we’re finding that agencies are looking to use the same technology to provide head counts. They want to know the actual numbers of people passing through a facility – not just the numbers of vehicles.

“Transport agencies which have had to deal with severe congestion have long since abandoned silo thinking but the pace of change is only now picking up elsewhere. From the private-sector side, meanwhile, there’s a desire to maximise market share. It’s a very interesting dynamic.”

Ryan Schultz, global marketing manager - toll services within 3M’s Traffic Safety & Security Division, sees two main drivers: certain technologies (principally video) becoming low-cost and robust; and motorists becoming accustomed to having information at their fingertips. “Motorists expect that information to be there. Also, given current economic austerity, agencies are getting serious about efficiencies and revenue generation. They want data penetration at low cost.”

Erwin Toplak, 4984 Kapsch TrafficCom’s chief operating officer, notes that from a tolling agency perspective, there is a desire to not just build and maintain facilities but also to provide better, safer levels of service. From the public authority side, meanwhile, there is a need to improve safety but also a pressure to find income to finance those improvements.

“Whichever end of the scale an organisation is coming from, the fact remains that the two topics are growing together. The difficulty is that there is no one-size-fits-all solution for all environments.”

Larry Yermack, strategic adviser at 378 Cubic Corp believes agencies are seeing the value in sharing more intelligence. “Tolling agencies have long recognised that there are additional tools, in the form of ITS, which can aid management of their facilities but I think multimodality is also having an influence.”

Timing

The logic of convergence is apparent but there’s always a question of, “Why now?”

Couzineau points to a combination of technological maturity and a lack of money.

“Tolling has been used to fund strategic infrastructure for decades but now cities are starting to use it as a mean to reduce congestion and pollution. This results in toll revenues being reinvested not only in road infrastructure but also in mass transit. At the same time, ITS has matured beyond ‘just’ traffic management and provision of traveller information. There are business models which are now able to generate profits through selling access to better data quality or real-time traffic info.

“The trigger has been global mobility and how to finance it. There’s a growing need for infrastructure funding, but states simply don’t have the money any more. As a result, PPP models are being used to tackle large infrastructure projects. Tolling is certainly the most efficient funding mechanism and road users increasingly understand having to contribute directly for road usage.

“At the same time,” Couzineau continues, “road users want better services – they’re happy to pay but they want something for it. And efficient mobility services don’t happen without efficient ITS.”

Mauritz notes that from an agency perspective public acceptance of tolling has been an issue, a view that is shifting as other funding streams such as fuel tax revenues dry up. Xerox’s Philmus agrees with this, however, for his part, Kapsch’s Toplak sees the emergence of the V2X cooperative ITS platform as significant: “On that platform you’ll see even further integration of travel information and traffic management, safety and traffic law enforcement, as well as tolling. At the same time, and ahead of this platform being deployed, the industry is still looking for ways to combine existing infrastructure and modules to realise greater exchanges of data. There’ll be a migratory period, not least because some of the more recent deployments still have a lot of life left in them.”

Increasing complex tenders mean suppliers need a more profound knowledge of tolling as well as the various aspects of traffic management, he says: “The market needs companies with the ability to get those complexities under control, and in the last few years I think the leading companies have learned a lot. I don’t believe in a top-down, buy-modules-and-integrate approach, though; there has to be a greater understanding of the applications themselves and a realisation that technology is just a vehicle, not a goal.”
The synergies possible within V2X will result in faster data exchanges and the ability to build more effective management responses. Road users will enjoy more complete information and agencies will more able to fulfil their political obligations. The biggest issue, says Toplak, is how to get that platform into vehicles.

Cubic’s Yermack feels we need to take a look at the differences in concept of vertical and horizontal business integration.

“Agencies don’t see themselves as islands and nor are travellers exclusive customers – an individual travelling to and from work might use several different facilities and modes along the way.

“There’s a debate to be had over whether vertical or horizontal business models work best. If we look at a company like Apple, it’s very vertically integrated. It has a very desirable product and has been able to develop a distribution chain which offers a very high level of customer support. As a result, I’m more likely to buy from Apple than, say Amazon.

“But does that translate into the transport sector? I’m not so sure. Suppliers might think ‘I want to add capability ‘X’ to my service because it’s in my interest’ but from an agency’s perspective is there any more advantage to that than buying from a specialist traffic management system supplier? A decade ago, traffic management systems were expensive; now they’re pretty much off-the-shelf technology. The advantage of having ‘only one throat to choke’ in procurement terms has to be balanced against using specialists with superior offerings – best of breed in one field doesn’t necessarily mean best of breed in another.”

Pluses and minuses

This highlights the debate over whether convergence is a good thing as an ever-dwindling number of suppliers can lead to ever-fewer options. But is this necessarily so?

For his part Evensen says: “The picture is rather mixed. Lots of the big IT players see ITS as their next growth market and we’ll see much more competition as a result. Niche players will find themselves in a more open environment – and the winners are likely to be the ones that can supply products that will cope with the pace of technology change over 10, 15 or even 25 years.”

From an integrator’s and consultant’s perspective it’s becoming a case of looking for additional ways to serve customers but for agencies there are big efficiency gains to be enjoyed, says Mauritz.
“There’s an argument that consolidation reduces choice but the reality is that agencies will still have to do due diligence when hiring the right talent. I don’t see consolidation reducing the talent pool because in many instances we’re talking about tolling and ITS using the same technologies – in the digital, IP-based era there’s a lot of overlap of staff skillsets.

“So I don’t see competition being hindered. If anything, it’ll bring new talent in because you’ll see ITS specialists looking to take on a small-scale tolling project and vice versa. Going back to my example of express lanes, there’s a lot of knowledge that an ITS specialist can bring to such a project in terms of detection and monitoring, cameras and dynamic signage. Agencies are going to see more choice and there’ll be more opportunity for niche players to pursue a greater number of projects than they might have done previously.”

“The main benefit of convergence is sharing real-time roadway information allowing better decisions to be made. Shared message signs, cameras and some detectors can also mean more efficiency,” says Schneider’s McGowan. “But we need to be mindful of the protection of personal and financial information in the tolling back office.”

Perhaps the biggest challenge is tempting the more conservative agencies away from a silo mentality but agencies and DOTs are going to need options if there’s less government funding and fuel tax monies around, says Ken Philmus.

“Xerox’s vehicle occupancy detection work is only one strand of our research. We’re also looking at how to provide travellers with single accounts for mobility. Data analytics – how people travel – is a big trend and will continue to grow. Smart City concepts are all about measuring all utilities and holistic thinking. Digitally based data will help provide the services that people want at less cost.”

And the arrival of the truly massive venture capitalists need not be viewed as a bad thing, according to 3M’s Schultz.

“Tolling is seen increasingly as the only viable way for agencies to get the money to build and maintain infrastructure but the tolling sector has been somewhat insular. Consolidation and the arrival of some big players is good because it allows cross-fertilisation. 3M, for instance, has the ability to look across a very large portfolio, see what works globally in terms of business models and technology and then replicate those in any space. It may mean that customers from different regions are then given the choice to use solutions they hadn’t even considered. Also, volumes will result in economies of scale.”
Big companies, however, have a reputation for unwieldiness. Schultz is keenly aware of such impressions.

“It’s why 4080 3M has spent four or five years in the tolling sector seemingly before having a strong product offering. We spent the time listening and learning. Tolling is characterised by very, very smart players who know their business inside and out. We needed to come with humility and focus on collaboration. We might appear to have been on radio silence but we’ve been focused on integrating our recent acquisitions. We’re now ready to tell the sector we’ve got a product that we very much believe in and which is applicable globally.”

Both Philmus and Yermack note the advantages from an agency perspective of “only having one supplier’s throat to choke” however, Kapsch’s Toplak says the debate should consider whether an all-in-one tender is really an advantage.

“A road authority may not know the true competencies of a supplier in, say, tolling and traffic management, safety and enforcement. If the chosen supplier turns out to be somehow lacking, it can be difficult to rectify any issues later because of dependency on a single source.

“A challenge for the V2X platform is that only those with the technology will be able to benefit. It needs investment on the government side and action to convince road users to start specifying these systems when they buy cars. The car companies are helping here; we’ll see the first systems as standard fitment from 2015 but that’s only in top-end vehicles. Speed of deployment is going to be an issue.”

Individual efforts

Although a trend is clearly discernable – and, indeed, all the major players acknowledge that something is happening – it is still possible to find both agreement and dissent.

Couzineau  says in Sanef’s case, its traditional competency was as a concessionaire and toll road operator but to address the requirements of tolling schemes around the world, it needed to add a system integration capability to its portfolio. That led to the acquisition of CS ITS in 2012. Sanef itself is part of the larger 6605 Abertis group, the world’s biggest concessionaire, and has been appointed as the tolling excellence centre within that group.

Toplak notes that Kapsch has an extensive background in tolling, and the core competencies of traffic management, safety and enforcement. An issue for the company is how these things have been brought together in the past. He acknowledges that not enough attention was paid to how solutions were integrated, something which has been addressed in recent months with the setting up of a new ITS business unit to complement the company’s tolling activities.
“We’ve regularly installed ITS in concert with the deployment of a new toll scheme and we’ve been doing a lot of weigh-in-motion work in countries where that’s needed. What we’ve not been so good at is selling our ITS capabilities by themselves. Recent company reorganisations have looked to change this and we’re working to substantially grow that part of the business,” he adds.

Evensen also stresses that, despite being widely perceived as a tolling company, Q-Free is very firmly an ITS supplier: “That’s been so since the company was founded in the 1980s but we’re now emphasising our advanced transport management system expertise. Some of that has come through acquisition, such as the purchase of TCS International last year, and we’re still active in the mergers and acquisitions arena. So, absolutely, we’re gearing up to service this current trend even more.”

A similar sentiment pervades at TransCore, says Mauritz.

“With the merging of tolling firm Syntonic and traffic engineering/management firm JHK and associates in the 1990s, TransCore has worked to compete in both the tolling and ITS fields. What we’ve done in Utah illustrates this. We started installing ITS there in 1995, work that was accelerated and expanded ahead of the 2002 Winter Olympics. Now, there’s effectively a state-wide ITS system with all the features you might expect of a modern solution and in 2009 the system was expanded to include express lanes.”

There are also different interpretations of convergence and Yermack sees Cubic’s approach as more horizontal than that of others: “Cubic is offering a superior transaction handling system across multiple sectors and agencies. That reflects that the urban environment is becoming increasingly priced; we’re seeing the expansion of transit, tolling and parking as well as elements of the shared economy – car- and bike-sharing, for instance.”

His assertion that such an approach is unique is challenged by Philmus who says Xerox is doing many of the same things “but taking a more data analytical and less branded approach than some of our competitors”.

Schneider Electric, meanwhile, has recently released software solutions that ease data integration, allowing analysis and forecasting of conditions. This can then be translated into pricing solutions for managed lanes.

Future trends

As industry stakeholders converge, they also diverge – or, at least, they focus on different aspects of the future.
According to Couzineau: “PPP models will proliferate over the next five to 10 years, as will global mobility projects connecting cities via national road networks and motorways. What we realised in Vancouver for the Port Mann project is a good picture of what the future looks like. For this very large infrastructure project, funded wholly by tolling, huge numbers of sticker tags have been deployed; they are given free to Vancouver commuters. ITS have been implemented to ease operation and improve the customer experience – registration convenience, web-based and smartphone payments and interoperability with regional systems are all there. The combination of ITS and tolling has been the key to success in Vancouver.”

But change won’t take place overnight, notes Q-Free’s Evensen.

“We’re seeing some interesting movements, such as cooperative ITS corridors being launched as commercial pilots rather than technology tests. Players are looking to position themselves in the market, and the car companies are also considering how to make the switch. The relationship between 2214 Microsoft and 1674 Fiat is an example and we’re going to see app systems which are remotely downloadable and configurable, or even plug-and-play replaceable. 609 Volvo, for instance, is now supplying cars with wholly retrofittable dashboard-mounted ITS.

“It’s difficult to predict where we might be five or 10 years from now but I see such solutions gradually becoming mass-market.”

As agencies continue to merge their DOTs and tolling it’s only natural that the current trend will continue, says Mauritz.

“At the same time, integrators and service providers will move to meet their customers’ needs, either through hiring additional staff or through acquisition. But boundaries will continue to blur.”

Increasing urbanisation will accelerate the trend towards multimodalism and shared customers, Yermack feels: “The next five to 10 years will be characterised by increasing numbers of mobile phone apps making greater use of GPS and NFC chipsets to facilitate payment by phone. Things emerging in the for-profit economy will make their way into the public transportation sector. Big Data – the concept of using and fusing more and more streams of information – is also going to be a major trend.”

Schultz agrees that there will be greater emphasis on the management and analytics space but also sees low-cost, interoperable technologies such as -6C becoming more standard.

“We never seem to worry enough about freight,” says Philmus. “Last-mile delivery tends to be by truck, not transit or train, but there’s an over-concentration on moving people, not goods. We need to bring freight into the equation more – look at timetabling for deliveries and so on.”

For McGowan, integration and information-sharing of information across all city utilities such as transportation, power, oil/gas, water, security and other critical services is the big trend: “The move to a Smart City solution is already under way in some very progressive cities. As events occur in any critical infrastructure, solutions can be calculated and other infrastructure modified in real time.”

Meanwhile Toplak sees a mix of things happening.

“We’ll still see deployments where tolling is predominant but we’ll also see greater numbers of deployments in combination. We’ll see most change in the urban and suburban environments, because that’s where safety and road financing come into the closest contact; 10 years out, we’ll see 5.9GHz-based platforms working but there’ll still be a lot of legacy systems providing valuable service.”