Electronic Road Tolling & the Need for a Flexible, Reliable, Cost Efficient, Best-Of-Breed Solution

Electronic road tolling has emerged as a highly competitive, political and dynamic market. While international regulations and standards have yet to be established, countries all over the world are beginning to respond to financial and environmental pressures with new laws and taxes that could dramatically affect the market. Hans Gerhard Landgraf, Industry Solution Manager at SAP, Jens Lehmann, Sales Director at Telargo, and Christophe Justeau, VP of Strategic Alliances at Highdeal discuss emerging trends in the electronic road tolling market and how their partnership can meet the market’s need for a reliable, cost efficient, and flexible best-of-breed solution.

Jens Lehmann, Sales Director at Telargo

Hans Gerhard Landgraf, Industry Solution Manager at SAP

Christophe Justeau, VP of Strategic Alliances at Highdeal

Transaction Reporter: What is driving the market demand for new road tolling technology and business models?

Hans Gerhard Landgraf: There are two issues affecting the road tolling industry. Governments are running out of money to be able to maintain and build roads and cities have too much traffic, at least during certain periods of the day. As a result, countries and regions, particularly in the EU, are passing laws that regulate the usage and finance the maintenance of roads, tunnels, and bridges. The new laws are being created to control traffic and to ensure that the people using the roads are the ones financing the infrastructure.

Jens Lehmann: Road tolling is also being used to finance new infrastructure in developing countries. Private investors are building bridges, tunnels, and highways in exchange for the rights to collect tolls for a certain period of time. In times of general and non-specific high taxes, road tolling is being investigated as a new and potentially more balanced way of replacing general road taxes and charge the equivalent on a per-use basis.
Furthermore, customer’s convenience needs to be improved, as not everyone wants to stop at a toll plaza (like in the US). Also the users want to be treated fairly.

Christophe Justeau: We see also another trend: as competition is increasing, and profits are eroding, the service providers managing road tolling are increasingly looking at opportunities to extend their portfolio of services beyond road tolling, i.e. with park tolling, car cleaning, communication services, gas services…

TR: Can you give any examples or case studies where road tolling has impacted congestion or is financing infrastructure?

Hans: The Stockholm case study is an excellent example of how road tolling can successfully control urban congestions. Drivers in Stockholm are taxed depending on the time of the day they enter or exit the congestion tax area. During the initial seven month trail period, traffic was reduced by 22% and carbon dioxide emissions were reduced by 14% in the inner city. Based on this success, Stockholm voters have chosen to keep the tax in the municipality of Stockholm.

Jens: Since 2005, Germany charges toll on trucks driving on the Autobahn and on a few federal roads. Trucks are required to have an on board GPS unit that tracks the vehicles location. Those trucks not having an on board unit (OBU) are required to register their route at established points of service, such as gas stations and post offices, in advance. This new tolling system is bringing in billions to the government – a real ‘cash-cow’. Elsewhere, like in Italy most motorways are privately owned and financed by toll routes. In Singapore there is a system based on short-range radio. This road toll system is a more sophisticated scheme than the central London congestion charge. Its key difference is that it can change the value of the toll hourly according to the level of car use.

TR: What is the current growth expected for electronic road tolling and how do you see this growth vary across regions?

Hans: At SAP we are foreseeing that most countries, especially in Europe, will have some kind of road charging within the next few years. We’re just waiting to see what will be tolled, trucks and cars, just trucks, only highways, or tolls on everyone throughout the country’s entire road network. Congestion fees are sooner or later going to exist in every major city of the world as well. Traffic is increasingly becoming a problem, even in cities like Bangkok and Tokyo and what has being done in Stockholm and London may be a good model for other cities.

Christophe: Highdeal is seeing more and more road tolling projects in different places in the world, including Asia Pacific, Latin America, the Middle East, and Europe. This is indicating to us that the market has the potential for tremendous growth in the coming years. In addition, the recent deployment of Highdeal by a leading European park tolling player is proving that, besides road tolling, there are additional related segments that are following the same trend for more flexible business models.

TR: Do you see new architectures or new standards being established as a result of regulations or the increased demand across regions for interoperability?

Hans: It will probably take years to get the standards nailed down. Right now there are several projects regarding interoperability standards ongoing at the EC level. Unfortunately, most the countries driving these projects are promoting the technology that their country already has in place. This isn’t working. We need to get to a situation similar to where the mobile phone operators are today. All the different operators have to have the capability to exchange information and communicate charges across countries and regions. It shouldn’t matter who issues your tag or onboard unit.

Jens: Much thought and effort has been spent on the European level. Maybe the EU should press more for countries to finally accept one standard – at least for some level of interoperability.
There are economic and even environmental benefits which should be enough for more powerful action from Brussels. Basically all technologies are known, tested and proven, but “free” market seems to have the effect sometimes, if no regulatory decision are taken, we could face a stand-still.

Christophe: Over the last ten to fifteen years, road tolling has shifted from being a domain traditionally handled by organizations close to the public sector to being handled privately. The privatization of road tolling has resulted in increased competition and many national road tolling companies are becoming trans-national. Unless there are major political initiatives within the next few years, standards could naturally evolve as a result of globalization.

TR: Can you describe the different electronic tolling technologies currently on the market?

Hans: There are three main types of electric road tolling technologies being deployed today: GPS/GSM, microwave-based (DSRC), and video surveillance. The GPS system uses an onboard unit that can pay for tolls on any road. Right now, Germany is the only country with a GPS system. Most of our projects at SAP are microwave based. The tags are relatively cheap compared to the onboard units, but for certain scenarios we don’t have any other option than using GPS. We believe this will bring down the cost of the on board unit, becoming eventually a standard installation in all new cars.

Jens: DSRC (Dedicated Short Range Communications) video and GPS all have their sales pitch, but we – Telargo - have decided to focus mostly on the GPS/Galileo part of system as we believe, that it should at least complement other methods - if not prevail. We see many benefits out of more comprehensive information from a road network for an operator, while wireless communication is definitely coming into almost every car. So in the not too distant future every car will basically come with some equivalent of today’s GPS-based toll device.

TR: What market challenges are electronic road tolling providers facing?

Christophe: The major limitations right now are high operating costs and the difficulty in convincing drivers to accept that they now have to pay for services they are used to getting for free. It’s easier to apply new fees to foreign trucks and new roads than to existing infrastructures.

Jens: Privacy is another issue we’re seeing with regards to the onboard GPS systems. In Germany, employee boards have objected to the boxes in their trucks being used by employers to monitor their location. Apart from that, there is the uncertainty of regulators, initial investment, and the reliability and flexibility of the equipment/system.

Christophe: In addition to these data collection issues, there are also the pricing and charging issues. Current toll collection systems use a simple pricing and charging method, one type of vehicle is charged for going a certain distance, but once toll collecting is no longer constrained by tollgates, the pricing models can be diversified. The pricing and charging systems put in place today need to be flexible and adaptable enough to accommodate future demands.

TR: What types of pricing and charging models are service providers deploying?

Hans: Most systems offer postpaid and prepaid payments. The German system has a manual payment process for trucks that are only pass through one time, but otherwise regular users have postpaid accounts.

Jens: Road tolling companies need to follow a similar path as the telecom providers. The pricing and rating system needs to be flexible and easily adaptable enough to handle future demands. A driver crossing international borders needs to pay for certain things, such as tolls and fuel, without worrying about what kind of currency is in their wallet and it’s easy to imagine this is something an on-board system could do.

Hans: While bundled deals are not the major driver for new road tolling technologies, these sort of added-value offerings could certainly result as a side affect. Another example could be if you have a GPS onboard unit within your car road tolls, you may be able to negotiate a lower insurance fee depending on how you drive

Christophe: The parallel with the pricing revolution that the telecom industry is facing for the last 10 years is highly exciting. We think that road tolling will follow the same evolution towards more personalized offers. Today, while the average pricing models for road tolling remain rather classical, we see leading service providers willing to move aggressively from the traditional “1 toll fee for all” to segmented offers. And the battle against traffic congestion is already imposing in some places fees that evolve according to the time of the day, and the conditions of the traffic.

TR: Can you describe SAP, Telargo, and Highdeal relationship and activities?

Hans: SAP and Telargo are working together on a number of projects involving Telargo’s onboard unit, including fleet management and road tolling. Telargo has been decreasing the cost of the onboard unit while increasing the unit’s functionality and reliability. Highdeal is a certified partner of SAP and compliments SAP’s product offer. The Highdeal product offers the flexibility and scalability required for our road tolling projects.

Jens: Our mission is to together provide a best-of-breed solution. This means providing the least expensive solution with guaranteed flexibility, reliability, and adaptability. Our vast international experience from FMS and wireless markets enables our group to provide superiorservices to operator. We are striving to have a solution that can deal with all regulations while still delivering the best service to cost ratio. Highdeal has the market perception of being simple, flexible, and a professional best-of-breed solution. No one else can bring this experience and reputation with regard to pricing and rating to our partnership.