Paul Bedford’s Road Ahead

I am encouraged that someone of the intellectual stature and reputation of Paul Bedford has the courage to put his name to the advocacy of road tolling.

Most complaints about this idea center on three areas:

Over taxation. No one ever wants to pay more taxes. Fuel taxes have largely gone to the general fund and governments now struggle to explain that the fuel tax is no longer adequate in volume or in structure (it is insensitive to congestion). While no one would argue that Canadian citizens are under-taxed, it is clear that Canadian motoring is mis-taxed. In other words, the wrong thing is taxed (fuel instead of road use) and the wrong people are paying some of the tax via property taxes and sales taxes. We who favor road tolls are asking for fairness and effectiveness by way of tax shifting. Would such a shift leave every motorist neutral with respect to taxation? Likely not. Some who can change travel times or modes will be better off, some who cannot or will not may be worse off. Will most citizens be better off on the whole? Absolutely. Every transit user, every cyclist, every pedestrian, every motorist who still travels in peak hours, every worker who would be permitted more telework, every citizen who breathes air. The way to be certain that motorists are not overtaxed is to remove or rebate fuel taxes if we expect acceptance of wide area road tolling.

Privacy. There is an automatic assumption that the use of satellite tolling automatically implies tracking or monitoring of motorists. This is based on the Hollywood assumption that journey data is sent from the vehicle to a central location for processing. Some systems can operate this way and such systems can be hacked. But few governments contemplating the use of GPS data would permit this. It is almost universally denounced in the EU and as we in North America get closer to using such systems (we are currently only at the stage of economic and social theory), you can be sure no trip data will be allowed to leave the vehicle. The expected solution is one of (a) payment at the vehicle with a smart card (full anonymity) or (b) movement of billing-data only from the vehicle to a payment center. Mandated, third party audits would be used to ensure this. So while absolute privacy can be provided technically, legislation must also be in place to prevent the use of location data from tolling devices to be used in any way except to settle tolling charges and to severely discourage hacking, including culpability on the part of any private operator who was hacked and can be found negligent based on regular security audits.

Government Trust. Many anti-tolling commentators seem not to trust that governments will use the revenues fairly or properly. Others are of the opinion that governments would themselves ignore privacy constraints. I am not an apologist for government trustworthiness, but there are other routes to ensure constraints regarding revenue use and privacy abuse. I also think the “government distrust card” is overplayed and that the real underlying issue is simple entitlement: “I am entitled to free road use, as were my forefathers” and “I am entitled to go where I want and with whom I want when I want without being observed.” Such commentators as these may be are simply dishonest. Free road use is an oxymoron to anyone experiencing frequent congestion. And the freedom to go when, where and with whom I want can be guaranteed in legislation, enabled in technology, audited in practice, and challenged in court. The day we cannot to that, we have a bigger problem than funding transportation.

There are a few other objections, such as we should just increase the gas tax, or we should build more roads, but these are simply amateur misunderstandings. The real issues that governments must address and that Mr. Bedford must face are the entrenched and real perceptions regarding tax-burden and privacy. If these can be addressed in a manner that a majority believe, then the distrust argument will abate and the natural intelligence of the market will prevail.

We are at the stage where a critical mass are able to see that pricing is coming. Our governments need to move toward education regarding tax-shifting (yes, we will need to remove or rebate some existing taxes), and must also promote privacy legislation specific to location information collected for road pricing. That foundation legislation is in place in Canada and in Ontario for over a decade. This legislation should be reviewed to ensure that we can use GPS for tolling and to ensure that said use cannot admit abuse.

Smart Mobility Metering

New technology often needs new vocabulary.

Once upon a time the toll booth was it. One day they started to be replaced by coin counters which were then replaced by Electronic Toll Collection (ETC) which is now being replaced by Open Road Tolling (ORT). The difference between ETC and ORT is that for ETC you have to slow down and be channeled into a lane to have your transponder read, but for ORT you can rip through at speed and if you don’t have a transponder you’re license plate will be read and you can pay a little later and likely a little more.

If you’ve been paying attention you know that something new is afoot – a way to meter your use of the road without those big metal monster-gantries reading your transponder (“tag” if you are European). This new technology uses GPS and a bunch of other techno-magic to provide satellite-based tolling, or GPS-based tolling. At Skymeter we call this class of highly-reliable GPS, Financial-grade GPS (FGPS), since it can produce evidentiary quality trip records in the event a motorist wishes to confirm or refute whether a certain trip was taken exactly as billed.

FGPS enables tolling anywhere – or better still everywhere – and that makes it the key to eventually ending the gas tax. (The gas-tax has several major problems: it cannot manage congestion, it is already diminished by fuel efficiency, and it will soon become further diminished by alternate fuels including the hybrid and the all-electric vehicle. It has other problems, but let's go with these for now.)

More interesting is the fact that FGPS permits the variation of tolls by place (roadway or area), time of day, day of week and type of vehicle. This introduces a way to protect the environment by tolling differentially by vehicle emission class, a way to reduce congestion by charging more during peak hours, and a far fairer way to fund roads than raising property or sales taxes.

In addition to all that fairness and greenness, FGPS enables automated parking payment and pay-as-you-drive insurance. These get high marks for convenience and yet more fairness. Pay-as-you-drive insurance also reduces congestion and increases road safety.

Even better, it is possible to reward drivers (say, with parking credits) when they do not use their vehicles during peak hours. So they’d pay lower tolls AND receive a reward.

Altogether these capabilities combine to form what we call Smart Mobility Metering, which is analogous to smart electricity metering or water metering and other simple supply-and-demand payment variation.

AND all of this is provided in a manner that keeps the vehicle and driver ID anonymous. We think that is equally smart.

Orski on Obama

Ken Orski writes some very valuable things. While predicting the future is risky, at best, I suspect there are a lot of good insights in his description of the state of play regarding transportation and the incoming Obama administration. I reposted it all here.

November 12, 2008
The Transportation Agenda of the Obama Administration

The election is behind us. A Democratic administration headed by President-elect Barack Obama and a heavily Democratic Congress will assume power next January. How will this influence the direction of federal surface transportation policy and programs? To gain some insight, we have solicited the views of a number of people, including some who are familiar with the thinking of President-elect Obama’s transition team. While the views expressed below are our own, they have been influenced by the observations and speculations expressed in these interviews. By common agreement, all conversations were held off the record and not for attribution in order to allow for the freest possible expression of views.

###

The transportation agenda of the Obama Administration can be viewed as a two-stage strategy: a short-term action agenda and a longer term policy agenda. A good portion of the short-term action agenda is already known. It is tied to a job stimulus (or "economic recovery") bill, a $100 billion spending package a portion of which (perhaps as much as $25 billion) is expected to be dedicated to roads, bridges and other public infrastructure. As President-elect Obama stated, he wants to see the stimulus bill enacted "sooner rather than later," but if the bill does not get done during the lame-duck session, it will be "the first thing I get done as president," Obama said at his press conference.

A January 2008 AASHTO survey of State Departments of Transportation identified 3,071 "ready-to-go" highway and bridge projects at a total cost of $17.9 billion. A further 559 "ready-to-go" transit projects at a total cost of $8.03 billion have been identified in an October 2008 survey by the American Public Transportation Association (APTA). Obviously, only a small portion of this wish list can be funded through the stimulus bill. At an October 29 congressional hearing on infrastructure, Rep. James Oberstar (D-MN), Chairman of the Transportation and Infrastructure Committeee, was careful to emphasize the need to prioritize the selection of these "ready-to-go" projects using objective criteria of need and job creation potential. Both Congress and the new Administration want to avoid the criticism that the infrastructure projects are nothing more than "pork-barrel spending masquerading as economic stimulus," as House Minority Leader John Boechner (R-Ohio) has already charged.

Another item on the short-term action agenda might be a rescue package for some 30 public transit agencies that are at risk of defaulting on billions of dollars of loans which they entered into from the late 1980s to early 2000s. The transactions involved selling rail cars to banks, then leasing them back. The arrangement provided banks with a tax shelter and transit agencies with upfront capital. The deals were guaranteed by the American International Group (AIG). AIG’s collapse invalidated the guarantees, allowing banks to collect their money immediately. Transit authorities are asking the Treasury Department to assume the role as guarantor of these transactions, lest lenders to transit agencies across the country call in their loans (so far only one bank has done so). Allowing these defaults, wrote Rep. Oberstar to Secretary Peters, "will threaten the very existence of some of the nation’s largest transit agencies, as well as the financial stability of the state and local governments that fund them. ...We urge you to work closely with the Department of Treasury to quickly resolve this pending crisis." Like the stimulus bill, the responsibility for action on this matter may end up with the next Administration.

The Longer-term Policy Agenda

The longer-term transportation policy agenda of the Obama Administration is more difficult to predict. Individuals who have served on past presidential transitions teams (including your editor) agree that the influence of transition teams assigned to individual agencies is short-lived. Reams of position papers and issue memoranda generated by the transition teams tend to be ignored or quickly forgotten by the political appointees once they are placed in charge. The influence of the personal advisers to the President-elect also wanes once a cabinet Secretary is appointed, especially if the Secretary in question has stature, enjoys the confidence of the President, has the respect of the congressional leaders and is knowledgeable in the ways of the Washington bureaucracy. Thus, the longer-term future of the federal transportation program, including its restructuring, will be shaped not by the transition team or the current presidential advisors but by the new Secretary of Transportation and his/her team— subject of course to future legislative directives.

To be fair, the Obama transition team seems disciplined and well organized and is intent on avoiding the mistakes of past transitions by producing short, precise issue assessments and by having its key people cleared in advance for access to sensitive government information. A lean and effective transition could be decisive in how much the new Administration could accomplish in its first year in office.

Development of a Legislative Reauthorization Proposal

An early challenge facing the incoming Transportation Secretary and his team of sub-cabinet officials will be to develop a legislative reauthorization proposal. In theory, the new team will have just a few months to complete this task since the current transportation authorization (SAFETEA-LU) expires on October 1, 2009. Fortunately, they will not have to start from scratch. A solid foundation for a legislative strategy already has been laid down in several reports. Of special value will be the recommendations of the National Surface Transportation Policy and Revenue Commission, the soon-to-be-released (in January 2009) report of the National Surface Transportation Infrastructure Financing Commission and the U.S. DOT report, "Refocus. Reform. Renew." the latter containing departing Transportation Secretary Mary Peter’s recommendations for a comprehensive reform of the surface transportation program. In addition, the incoming team will have the benefit of a set of program recommendations from AASHTO and the American Road and Transportation Builders Association (ARTBA), including the latter’s proposal for "Critical Commerce Corridors." Finally, the team will have an early indication of the thinking of the House Transportation and Infrastructure Committee when the Committee releases a detailed outline of its legislative proposal in February 2009.

Collectively, these documents will offer the incoming transportation team a wealth of advice on a number of crucial issues. Among them are recommendations concerning the overall level of funding for the highway and transit programs; the approach to be taken toward a restructuring of the surface transportation program; the potential value of tolling, pricing and private investment in a future capital program; the appropriate future focus for the Highway Trust Fund; the emphasis to be given to investment in intercity passenger rail, mass transit and freight infrastructure; the fiscal impact of a potential carbon cap-and-trade legislation; and the timetable for a transition to a mileage-based funding system.

Development of a multi-year surface transportation authorization will be a "monumental task" in the opinion of one veteran DOT senior executive, given the expectation of a fundamentally restructured program. Ordinarily, the preparation of a reauthorization proposal and its clearance through the Office of Management and Budget (OMB) and the White House takes several months. This time around, the process may take even longer because of the relative newness of the DOT team and because the White House will have many other pressing legislative priorities on its agenda. While some of the work of drafting the bill can be delegated to the Department’s career staff, many fundamental policy decisions on funding levels, program structure, etc. will require close involvement of the political-level appointees: the Deputy Secretary, the Undersecretary for Policy, the General Counsel, the Assistant Secretaries, the modal Administrators and their key staff.

If past experience is any indication, the vetting and appointment process of these officials will continue well into late spring and early summer of 2009.(President- elect Obama has promised to move on presidential appointments with all deliberate speed, "but I want to emphasize deliberate as well as speed," he added. ) This does not bode well for a timely enactment of new transportation authorization, i.e. by October 1, 2009, since the congressional authorizing committees will wish to obtain the new Administration’s input before acting on a bill. More likely, the Department will seek an extension of the current legislation into 2010.

The National Infrastructure Bank

One of the few specific proposals endorsed by President-elect Obama during his campaign dealt with the creation of a National Infrastructure Bank. The proposal also enjoys the support of House Speaker Nancy Pelosi and Senate Banking Committee chairman, Christopher Dodd (D-CT). With congressional support already assured, there is a good chance that the Bank could be established in the first year of the Obama Administration.

However, precisely what form the new bank should take still needs to be determined. Its initial formulation, as proposed by Senators Christopher Dodd (D-CT) and Chuck Hagel (R-NE) in Senate Bill 1926, called for an institution that would provide financial assistance to public infrastructure projects over $75 million in value, that are "not adequately served by current financing mechanisms." In the Dodd-Hagel version, the bank would be financed with a $60 billion capital contribution over 10 years— a sum of money that appears hardly adequate to meet the vast needs for infrastructure reconstruction and renewal in the years ahead.

The infrastructure bank was resurrected in a fresh and more elaborate form by Everett Ehrlich and Felix Rohatyn in a recent article in The New York Review of Books ("A New Bank to Save Our Infrastructure," October 9, 2008). Both Ehrlich and Rohatyn had been key figures in the CSIS Commission on Public Infrastructure that had produced the original 2007 report recommending the National Infrastructure Bank. In its new version, the National Infrastructure Bank would replace the various modal programs as the source of capital for highways, mass transit, airports and other public infrastructure. The authors have proposed that the Bank’s capital would come from the funds now dedicated to existing infrastructure programs — about $60 billion annually.

Whether Congress could be persuaded to adopt an Infrastructure Bank along the lines proposed by Messrs Ehrlich-Rohatyn is an open question. Asking Congress to cede control over the federal public works programs, surrender its power to make infrastructure investment decisions, and abolish all modal distinctions seems remote. A more promising model might be the already existing Transportation Infrastructure Finance and Innovation Act (TIFIA). The TIFIA program provides federal credit assistance to transportation projects of substantial regional or national significance. TIFIA assistance can take the form of secured loans for construction and permanent financing (for a term of up to 35 years); loan guarantees to institutional lenders making loans for projects; and lines of credit that may be drawn upon to supplement project revenues. Projects must generate a dedicated stream of revenue from user fees.

Endowing the proposed National Infrastructure Bank with TIFIA-like authority while expanding and liberalizing TIFIA’s conditions, e.g., by substantially increasing its capitalization and lifting the ceiling on credit assistance (currently at 33 percent of project costs), is likely to be among the models seriously considered by the new Administration.

###

Like the economy at large, the nation's transportation system presents the Obama Administration with daunting challenges: growing metropolitan congestion, aging infrastructure requiring billions of dollars in reconstruction and modernization, and inadequate freight system capacity requiring more billions of dollars in upgrades and new facilities. At the same time, the Highway Trust Fund is faced with dwindling gas tax revenues, while new taxes and deficit spending are expected to encounter both popular and congressional opposition. Coupled with these challenges is a widely-shared sense that traditional solutions no longer are working and that the federal transportation program will require a fundamental reform. Along with the rest of the transportation community we wish the Obama Administration well in its efforts to come to grips with these issues. We sincerely hope that the new transportation team will rise to the challenge.

Please feel free to forward or reprint this item with appropriate citation. All correspondence, including requests to subscribe and unsubscribe, should be addressed to: C. Kenneth Orski, Editor/Publisher; email: korski@verizon.net; tel: 301.299.1996; fax: 301.299.4425.

The Rand Road Report

“Will Los Angeles begin to pursue pricing to manage demand for peak-hour automotive travel, or will it instead simply allow congestion to worsen in the coming decades? These are the only choices.”

So concludes the summary paragraphs of a 556 page monograph: “Moving Los Angeles”, just published by the Rand Corporation. If you think congestion pricing is a tool of last resort or just a “European thing” then read this.

The nine study authors, lead by Paul Sorensen and Martin Wachs, compared 28 strategies ranging from freeway ramp metering through one-way streets, car sharing, telecommuting, rush-hour construction bans, driving restrictions, deep discount transit passes, to bicycle strategies. They left out only PAYD insurance and changing the minimum driving age to 21. These 28 were compared for public–sector cost/revenue implications as well as both short and long-term congestion reduction (figure 2.6 in the book). None of the strategies examined has anything but a modest long-term effect on congestion.

Except pricing. Five types were listed, and three – HOT lanes, variable curb-parking rates and parking cash-outs – perform better than all the others except for cordon congestion tolls which performed the best of all 28. The fifth pricing strategy, local fuel taxes*, performed as badly as the 23 non-pricing strategies.

On the flip side, 19 of the 23 non-pricing strategies have modestly-advanced implementation programs in Los Angeles while none of the 5 pricing strategies are past “hardly anything”. In fact “HOT lanes” scored zero.

Worse, is that two of the pricing strategies that show high congestion reduction value also show no implementation obstacles: variable curb-parking rates and parking cash-outs, yet nothing is being done about them.

There are three lessons here: (1) we are spending money on the wrong solutions while clearly ignoring the evidence for the right solution; (2) this is not completely due to the cowardice of democracy, because two of the four winning approaches have no implementation obstacles; and (3) the first key to addressing congestion is through parking pricing rather than road pricing.

There is a fourth lesson: the definition of insanity is doing the same thing over and over but expecting a different result.

________

* Recently, Mary Peters, US Secretary of Transportation, was quoted saying: "Relying on the gas tax is like relying on cardboard to keep the rain out – the longer you use it the less it works." I’m going to miss her. How can Obama do better?

Instead of Courage

I hosted a round table discussion today, Wednesday, 24 September 2008, at the offices of ITS America in Washington DC. Following are the notes I made to open that discussion.

I attended a breakfast speech yesterday morning, during which the Chair of the Greater Toronto Transportation Authority, Rob MacIsaac, described a new multi-year plan to revitalize road and transit infrastructure in the Greater Toronto Area costing multi-tens of billions of dollars.

I asked his view on protecting that investment in roads and transit with road pricing so that people would tend to use the new transit infrastructure and so that the new roads did not simply fill up with cars as they always do, thereby keeping a sustainable balance instead of returning once again to state we are in now.

His answer was: “"The sides of the road are littered with the bodies of politicians that made ill-advised proposals regarding road pricing."

He went on to say "transit needs to be put in first" citing the example of Livingstone putting buses in just prior to the London Congestion system going live.

But I believe there are many creative ways to introduce pricing at the same time we are providing new infrastructure. There are ways to ease pricing into place over such a multi-year span even if you are not putting in infrastructure. I believe there are ways to do this while retaining political support. I believe we must do this in order to shift away from the gas tax. That is what I will describe today, and that is what I would like this round table to explore.

There are now in the United States, in Europe, and in the world thousands of politicians, traffic engineers, legislators, environmentalists, analysts, bureaucrats, economists and thought leaders that know that our surface transportation systems are as unsustainable as they are critical. Some of us work in jurisdictions that are, in fact, in immediate crisis.

What is more amazing is that the vast majority of these thousands understand the problem and its solution. We understand that automobile use is incorrectly taxed. That what direct taxes are collected are insufficient. That large externalities are shared across all people including non-drivers. We understand that the fuel tax is a proxy for road use and as such its relevance to demand management is rapidly diminishing. As a funding source its efficacy slips monthly and as reminder that we pollute with our vehicles it is almost completely powerless.

Some of our thousands call for more roads to be priced – sometimes in small areas as in London or New York; sometimes in whole countries as in Netherlands or Slovenia. But most often, just another interurban highway where we can or where we must price.

But we know better. We know we need to shift away from the gas-tax. We know that is becoming more and more one of the sources of the problem rather than a tool for its resolution. We are beginning to clearly understand that the consumption that needs market pricing is the use of the road rather than the consumption of fuel. We know that as we move away from the gasoline and diesel-powered engine the gas-tax will fail utterly.

Nevertheless, a few days ago, I received an email from Robin Chase [founder of Zipcar], that said: "When I presented to the executive board of TRB [Transportation Research Board], and [market pricing] came up, they all concurred that: “People won't like it; hence their governors won't support it; hence we won't push it. We want to privatize roads so that someone ELSE will be responsible.”

What this says to me is that as our surface transportation systems become unsustainable, there will be no political will to solve it. Rather, we will sell off the problem.

I believe we have alternatives. These involve slowly addressing antiquated enforcement methods such as ticketing courier vehicles, outdated commercial vehicle registration technologies such as taxi plating, inefficient insurance regimes such as annual or monthly automotive premiums with pay-as-you-go forms of payment. Couriers can pay by the mile or minute for driving and parking in urban centers, taxis can pay commercial registration by the mile, so that a plate owner is not forced to run a vehicle 24 hours whether needed or not and so on.

As trust in anonymous GPS tolling technology’s reliability and privacy and as its cost drops, it can be used for parking payments, traditional tolling, and numerous new programs not otherwise feasible – for example tolling an urban center without cameras and RFID/DSRC gantries.

Building an installed base of road-use meters means that when the time comes to turn off the gas tax, an alternate system will be in place. It will be reliable, cheap, trusted and most of all actually understood. Approaching the problem this way, we can diminish the danger of “political suicide” without selling off all easy-to-toll roads, leaving an unaddressed congestion and funding problem for our city streets.

Senator Dibble Speaks

Sen. D. Scott Dibble, Chair of the Minnesota Senate Transit Subcommittee, gave the luncheon address for the 13th International HOV/HOT Systems Conference in Minneapolis on September 8, 2008. Sen. Dibble talked about how he got involved in transportation issues and gave his thoughts on congestion pricing and HOT lanes. His speech is posted on the Humphrey Institute's congestion pricing blog, here.

From Lee Munnich, Senior Fellow and Director, State and Local Policy Program - Hubert H. Humphrey Institute of Public Affairs University of Minnesota.

Long Live Norwich Union!

It’s old news by now that pay-as-you-drive innovator Norwich Union has withdrawn from the fledgling PAYD insurance market. Many were taken by surprise. Listening to spokesperson Erik Nelson explain why provides that perfect 20-20 hindsight for the rest of us. He also provides a fabulous insight into the value of this program. He still clings to one critical, false hope however. But let’s hear from Erik first. He is interviewed here by Traffic Technology International, and transcribed below for your convenience.

TT: Norwich Union's innovative telematics-based pay-as-you-drive insurance policy was withdrawn earlier this year because it was costing too much to operate, but as spokesman Erik Nelson reveals, the company plans to re-enter the market once economic conditions prove more favorable.

EN: What we did was we installed a box in their vehicles, a GPS-based box and that box tracks their movements, it tracks a couple of things actually. It tracks how far they were traveling, it tracks the time of day and it tracks where they were traveling - that is what type of road specifically they were on. The reason we are interested in a road – what type of road - is because we know for example that motorways are ten times safer than urban roads so we’re able to give you better rate on motorways than driving on an urban road which is more dangerous. We also know for example that driving at night, especially for young drivers is much more dangerous than it is traveling during the daytime, so we take in the time of day, we take in the road that you’re using and we’re able to give you an individualized pence-per mile tariff. Now based on that, [and] the number of miles you drive, you get your premium.

TT: Did you find that people actually did change their driving habits as a result of this policy?

EN: That’s a very interesting question. I think that’s very difficult to answer, because of course we didn’t know what they were driving like beforehand. What we did see was that people were driving over the time gradually a little bit less, I think they were very conscious of how far they were driving. The big thing is not about how far they were driving, though. It’s about the times of day and they types of roads they were using. We definitely saw safer driving behavior. As a result our claims reduced by more than 30% which is a staggering statistic and a huge boon for road safety. But when you are able to incentivize, for example, young drivers not driving during the most dangerous times of day for them, when they are 10 times more likely to be involved in an accident at night, 14 times more likely to be involved in an accident at night on the weekend. And you incentivize them to take the taxi, take public transport or whatever when they go out during those times you see accidents drop more than a third, you’re really on to something in terms of roads safety.

TT: I understand that renewals were really quite high on this, the policy seemed to be popular, yet you didn't carry it on from the Spring of this year.

EN: That’s correct. The retention rate was at or above 90% during the time that we operated the policy, and feedback from customers was overwhelmingly positive. This is probably because customers were saving around 30% on their premiums. So we paused it because, simply put, because the economics of the policy don’t work out for us right now. We thought that telematics was going to be a lot further along than it actually is. We thought that motor manufacturers would be installing telematics devices in the vehicles that they are making at the point of manufacture, but that did not come to be, and certainly not on the scale that we imagined. So instead of piggy-backing our little insurance policy on the back on existing piece of kit in a car, we were actually forced to provide the kit and install the kit ourselves which from an operating model point of view becomes very expensive and that is why we have temporarily withdrawn.

TT: Is it the case that the motoring industry just isn’t ready for this yet?

EN: I don’t know if it is the case of whether the motoring industry is ready for it. You’d have to speak with the motor manufacturers about that. Certainly it’s the case from our perspective I think we were just a little bit ahead of our time. I think we as a company still have faith that the telematics industry will continue to evolve and at some point the time will be right for us to re-enter the market because their will be more telematics devices in vehicles and it will be much more sustainable for us to operate a policy such a pay-as-you-drive and we look forward to re-enter the market in a very good position at that time.

TT: Do you foresee that technology like that is very much going to be a key part of insurance policies in the future, like red-light boxes that stop cars maybe from driving over red lights, that sort of technology’s going to be key?

EN: There are so many different ways that this technology can be used. As an insurer, our main objective is to find a way to calculate a premium. I think that is what pay-as-you-drive did incredibly cleverly and incredibly well and that is calculate a usage-based premium that motorists found fair and transparent in a way that has never been done before.

TT: Erik Nelson from Norwich Union. If you have any questions about this feature contact tt@ukintpress.com.

~~~

The false hope Erik Nelson clings to is that the automotive manufacturers will soon pre-install the telematics he needs. While this is technically possible, it is unlikely – mostly because we do not yet know everything about how we want these telematics to behave. To do insurance-only is an unworkable business model – as Erik can attest. We’ll need a whole fleet of cross-subsidizing services to make the pre-installation calculus work out. Even a package like OnStar causes the new-car purchaser some pause before adding it to the invoice. We will soon be paying for road use via GPS, which itself remains unreliable for most telematics manufacturers in built-up cities. And why not handle parking while we’re at it?

The assumption that we will record GPS tracks and process them off-board will hit a privacy wall. The counter assumption that we will pay everything on-board raises equal security concerns. The ISO standards to guide all this were completely scrapped a couple of years ago after nearly a decade of work. Only some components of the new edition, which I estimate to be about ¾ complete, will survive a hard privacy review in the EU and the US. What little the privacy advocates leave intact of the new standard will cause more hesitation on the part of the automotive manufacturers.

I believe all this will serve to postpone the time when the automotive manufacturers will provide a “whole product” that an insurer could simply “piggy-back” on. The telematics market segment that will handle financial transactions (insurance, road-use, parking), must be “liability critical” – in other words, it must be critically reliable and repeatable – something we call “financial grade” GPS. The technology to do this is not the same as navigation grade GPS and the automotive manufacturers know this.

This, and the fact that there is already a world fleet of well over 500,000,000 vehicles that will need an aftermarket fitting, informs my prediction that the early years of PAYD will based on self-installed, specialized, “financial-grade” systems that can be purchased anonymously, monitored without knowing the vehicle or owner ID and without data retention, and that also provide a couple of other payment services such as road and parking tolls.

High oil prices are good for you?

From Maclean’s, July 28 2008

The oil diet
Your wallet may be hurting, but soaring gas prices could be the answer to a long – and skinny – life, according to new research out of Harvard, traffic deaths will plummet by as much as one-third over the next year because so many motorists simply can’t afford o back out of the driveway. A separate study by a North Carolina professor has found that a $1 boost at the pumps could cut obesity rates by nine per cent, as people are forced to walk, bike, and cook at home.

~~~

I notice on my drive to work a huge increase in cyclists. People of every age and weight class. This is a good thing, of course, but the condition of our roads (Toronto) and the lack of marked bike lanes on the roads I use make it a very dangerous-looking trip. I can’t help but wonder if there will be enough cycling deaths to make up for the automotive fatality shortfall predicted by Harvard.

When are we going to start putting a couple of bucks into biking facilities for every zillion dollars we spend on automotive facilities?

Oh, yeah, cyclists don’t pay gas tax, right? I forgot.

On-Street Convenience Pricing

The University of Minnesota hosts a listserv dedicated to congestion pricing. I recommend it for browsing on occasion.

Roger Herz of NYC and a long-time advocate of market pricing recently included a comment, there: "on-street parking should be priced at least equal to and perhaps more than off-street."

I couldn’t agree more.

On-street parking should be by-the-minute with no ceiling and at rates comparable with or somewhat higher than off-street parking (which could retain ceilings to be more competitive with on-street). This can be done with in-car meters that are commercially available.

This encourages turnover and a greater preference for off street-parking. The price difference between on-street and off-street should generally reflect the relative convenience of the on-street offering against the inconvenience of off-street. Call this "Value pricing" for parking. Or use USDoT Secretary Mary Peters' newer and more direct term "convenience pricing".

To bring shop keepers and the disadvantaged on side, offer 10-20 minutes free, but make that up in the remainder of the first 60 to 90 minutes. Don't lower it after the make up period, rather make that the premium for convenience.

With such a system, a municipality could save enforcement dollars while maintaining enforcement revenues by using a simple price escalator after the usual two- or three-hour parking allowance is used up. For example double or triple the minute-rate after the allowance period is up.

As well, it is possible – when the system is GPS based and fully automated – to provide parking credits to motorists who do not move their vehicles during peak hours. Such a pricing-and-reward parking system, priced appropriately, would have a dramatic effect on CBD congestion, without the introduction of cordon tolling as London and Singapore have done. Here is an amusing scenario about this new type of meter: http://grushhour.blogspot.com/2007/08/how-to-get-free-parking.html

The meter is available from Skymeter and is available in an anonymous version (wink-wink, nudge-nudge), and, one assumes, in any color, as long as it is black.

~~~

A related idea to offer a reward to delay your entry into traffic comes from the Netherlands.

“Rijkswaterstaat (Dutch road administration) [are] providing real-time traffic and public transport information to visitors of amusement parks and catering establishments [to achieve] a better dispersal of traffic. … displays with traffic information are placed at the exit of a large number of amusement parks, zoos, road restaurants and conference centers [to show] real-time traffic jams and or train delays. When there are traffic jams in the surroundings of the participating locations an interesting alternative can be offered to prolong the visitors stay. For example a ‘rush hour menu' for a special price. The ‘rush hour menu' has to stimulate visitors to stay longer at the location when there are traffic jams or train delays. This will create a better dispersal of traffic.”

"It won't happen here..."

Mary Peters - on the mark again

Mary Peters, the US Secretary of Transportation, authored an op-ed piece this weekend. I took the liberty of copying the whole thing below, because few say it better than she and if her article ever becomes unavailable, it would be a loss.

Unfortunately, she missed three critical words. In her bold and correct assertion that “… a larger scale regional approach throughout Northern Virginia and the Hampton Roads regions could be put in place in a relatively short period of time”, she did not mention that the only realistic way to do this is with anonymous satellite technology.

Bravo for getting the economics right (and she is no longer a loner on that score), but we cannot straddle large regions like Northern Virginia with current RFID technology because of its expense, its intrusiveness, and its uneven (read unfair) distribution. The proper way to directly charge for road use in lieu of increased fuel taxes (or any fuel taxes if I had my druthers) is to charge everywhere – variably of course, as Secretary Peters prescribes – but everywhere.

TRANSPORTATION

By MARY E. PETERS
TIMES-DISPATCH COLUMNIST

Try Real Reform – Not Additional Taxes

WASHINGTON With the special transportation legislative session complete, Virginia's leaders and legislators now have a clean slate to consider real reforms to the commonwealth's transportation challenges.

The answer to these challenges, for both the nation and Virginia, lies in a fundamentally different approach to financing and managing our highways and transit systems. For example, at the heart of Virginia's transportation's debate was a proposed $6.4 billion tax increase to pay for transportation improvements. Yet Virginia has more than $4 billion worth of projects underway utilizing private funds for new construction. And recent studies show that direct pricing of roads would generate at least as much in revenue while delivering far better economic results.

Clearly, we need to change how we fund transportation projects. It makes little sense -- and it's certainly not sustainable -- to increase our reliance on gasoline taxes at a time when we all recognize the need to decrease fuel consumption and increase the use of alternative fuel sources. And, as virtually every study has concluded, gasoline, car, property, and sales taxes have little or nothing to do with the use of highways and are ineffective at reducing highway congestion, increasing business productivity or improving quality of life. Not to mention that they are rightfully unpopular with the public.

The commonwealth should make history by widely embracing the use of new open road tolling technologies where prices vary throughout the day. As traffic levels change, so too would the nominal amount drivers are charged. These varying tolls would ensure that car and bus traffic keeps flowing, even during the busiest times of the day.

Variable pricing, or congestion pricing as it is more commonly called, is a proven approach to managing and financing transportation systems that price road use based on supply and demand, just like long distance phone service, hotels and electricity. Imagine a rush hour where cars move and commuters get home in time for dinner with their families.

This concept is not a new solution for Virginia, where some of the most significant projects -- such as widening the Capital Beltway -- are moving forward as tolled facilities funded with significant amounts of private sector funds. As a result, while many other local transportation projects are likely to be stalled until Virginia settles on a new funding solution, some of the most significant projects in the state will continue unaffected.

Pursuing this approach on a project-by-project basis, as Virginia is doing with the Beltway project, is certainly preferable to doing nothing. But a larger scale regional approach throughout Northern Virginia and the Hampton Roads regions could be put in place in a relatively short period of time. Virginia's leaders could easily and rapidly oversee the first ever statewide reduction in traffic congestion.

Virginia's leaders have a clear choice. They can ask drivers to pay more at the pump, more at the store, and more at the DMV -- regardless of where they live or when they drive. Or, they can put in place direct user fees that will be targeted to areas where congestion is at its worst, and will actually cut traffic, speed commutes and improve the timeliness and quality of transit bus service.

As important, direct road pricing would provide the commonwealth with a significantly more robust and sustainable revenue stream. Congestion pricing would provide needed revenue for road construction projects. It also would help fund transit agencies struggling to cope with the recent surge in ridership. And, it would help finance some of the ambitious transit expansion plans being contemplated.

Embracing direct pricing for road use would also have the added benefit of encouraging better decisions about land use, stimulate reductions in carbon-dioxide emissions and encourage more of the commonwealth's commuters to try transit. In short, embracing tolling as a solution to Virginia's transportation funding challenges would cut traffic, generate needed revenue, improve transit, and significantly benefit the environment.

Clearly, there is good policy available for Virginia's leaders to take up -- policy that promotes accountability and delivers the results that Virginians, and Americans, want and deserve.

Mary E. Peters is the U.S. Secretary of Transportation. To contact her please visit the Web site www.dot.gov.

Why the Gas Tax is a Lame Duck

How many times have you read a comment that road pricing is unnecessary (the language is usually baser) because you could just raise the gas tax?

How many times have you heard recently that the rising gas prices will end the conversation about congestion pricing?

Maybe this will help drive some of the air out of those arguments.