ELECTRONIC TOLL COLLECTION
MARGIN OF ERA: Toll Collection in Transition
It is frequently difficult to determine when an industry is in transition and even more difficult to determine if the transition will be broad or simply an incremental improvement until such time as we look back on the history, says Harold Worrall. This is certainly the case for toll collection
When we look back on the development of electronic toll collection (ETC), it was clear in the beginning that ETC would have a significant impact on safety, throughput and initially reduced costs of collection. But the transition was gradual as agencies slowly adopted it.
There was concern about the large capital expenditures required to install lane equipment and set up a back office. There was the question of whether the systems could accurately record and collect all of the toll revenue, the life blood of any toll entity and how systems could be tested sufficiently to ensure proper and complete toll collection would occur.
The first era involved the slow movement from barrier systems, which ensured collection, to barrier systems with ETC. Then the gates were lifted and lanes were dedicated to ETC as we became comfortable with the systems’ capabilities. These incremental improvements led to less collection personnel at the booths and there was incremental improvement in throughput and safety. To this point in the development of ETC, the primary customer was the frequent commercial users and commuters. Customers were delighted not to have to stop and to be able to make the payments via credit cards and other methods.
The percentage of ETC revenue collected continued to climb as the industry adopted open road tolling. New technology challenges were introduced with open road tolling, like straddlers and associating RFID reads with the correct vehicle. It was a period of increased complexity and technical challenges that required very accurate lane equipment tuning and placement but once again safety was improved and throughput increased. These were considerations primarily for urban expressways but agencies operating long-distance ticket systems saw less of an improvement in efficiency or even the need for ETC.
To this point, ETC adoption was an incremental process and there was time to adjust to conditions as the various phases occurred. During this phase more and more infrequent customers began to adopt ETC and the cost per transaction to operate the back office costs began to increase. As more infrequent customers became ETC customers, service center calls increased to correct account balance issues, resolve questions and correct improper violations that were levied. The number of violations began to increase and agencies began to wrestle with the most efficient means of collecting from vehicles without transponders.
“As more infrequent customers became ETC customers, service center calls increased to correct account balance issues, resolve questions and correct improper violations that were levied”
As demonstrated in the figures below, the growth in revenue processed by ETC became much smaller than the growth in the number of customer accounts. It took increasingly more accounts to increase the percentage of ETC revenue collected because progressively more of the new accounts were for infrequent users.
Figure 1 shows the relationship between the number of customers and the percentage of revenue depending upon the frequency of use by the customer. This chart is based upon statistical information gathered at a number of agencies.
Another way of looking at this information is shown in Figure 2. It is clear that a point is reached at which applying the same ETC solutions, which worked so well in the beginning, will not work in the future. This is why more solutions are being put forward which focus on more convenient methods of toll collection and account management especially for the infrequent customer.
As shown in Figure 2, when the percentage of revenue approaches 90%, only 42% of the total customer base will have some form of customer account. The smooth back-office process of setting up an account with a credit card, or other payment method, and processing tolls from that point forward on a more or less automatic basis begins to erode. From this point forward, the agency is working harder and harder to accomplish less. In fact, the argument could be made that once 80% of the revenue is collected via ETC, other means should be deployed.
Violations also begin to increase, as a greater percentage of customers were infrequent. Figure 3 shows how violation costs increase as the percentage of infrequent customers increase. Violations do not increase on a linear basis with the number of customers but rather increase with the likelihood that the customer is unfamiliar with the use of ETC transponders, the difficulty in obtaining one, or how to rectify payment issues. This chart does not anticipate the impact that would occur with AETC implementation.
Through the 1990s, and until the percentage of revenue collected approached 80%, ETC development stabilized ETC systems were implemented by more agencies. The cost to collect tolls began to rebound from the low point immediately after introducing ETC and costs of collection were reduced by lane personnel reductions and the costs of handling cash. As the number of accounts increased the amount of revenue collected for each open ETC account reduced. There were more customers that did not have bank accounts or credit cards, more violations occurred, more images were reviewed, more violation letters were sent and tracked when the original letters were not paid. To ensure that violations were sent to the correct person, image review increased to avoid bad press for errors. As the percent of customers using ETC increased, the cost per customer and per transaction increased.
“To ensure that violations were sent to the correct person, image review increased to avoid bad press for errors. As the percent of customers using ETC increased, the cost per customer and per transaction increased”
AETC is not a transitional event but rather a broad event impacting 58% of the customers who use the toll road annually. Now there was no option other than to use ETC to pay the toll, even if it was for one trip during the year. Most ticket system toll roads retained the ability to pay toll with cash and maintained some toll collectors. Urban expressway operators, however, believed that AETC would eventually be accepted by those making up the remaining 10% of the revenue. Other programs were put in place that allowed customers to pay through license plate recognition by either registering a license plate prior to using the road or after the fact. To cover the cost of these payment methods, administrative costs of reviewing license plate images, mailing notices and tracking payment were passed on to the customer. If payment did not occur, violations processes proceeded. Because the agencies were now dealing with 58% of the customer base, the image of the toll agency was tarnished.
Toll users want to pay and if given an alternative convenient method which, can be implemented "on the go", the majority of these very infrequent customers will opt to pay the toll.
The implementation of AETC for a frequent customer was inconsequential. By this point in time, they were familiar with ETC and implementation of AETC made little or no difference to their daily routine. This group is however less than half of the annual customers.
“The implementation of AETC for a frequent customer was inconsequential. By this point in time, they were familiar with ETC and implementation of AETC made little or no difference to their daily routine”
To the infrequent customer cash had always been an option. Regardless of how much was spent on public relations and press releases to make the customer base aware, the majority of customers remained unfamiliar with the ETC process. For those who traveled from states in which there are no tolling operations, it was a huge concern when they were suddenly faced with violating toll payment and having to deal with administrative costs that sometimes exceeded the toll.
This was especially difficult for car rental companies. Private concerns came into being to deal with car rental issues but there had to be a profit in the transaction for both the rental car company and the company processing toll payment. The customer bore the financial burden of all of the surcharges and the toll payment.
“87% of the adult US population has a smartphone - the future of toll payment will certainly involve the smartphone.”
The IPhone was introduced on January 9, 2007 and smartphones have become ubiquitous. In 2018 the number of smartphone users in the United States was 257.3 million. The entire 2018 population of all ages in the US is 327.16 million and those over 18, and eligible to drive, are 255.1 million. Another source reports that 87% of the adult US population has a smartphone. Regardless, the future of toll payment will certainly involve the smartphone.
Further, more financial transactions across the economic spectrum are being performed without the use of cash. Norway and Denmark have become almost cashless and Sweden professes today to be the first cashless country in the world. Besides payment cards, smartphones are more and more becoming the keeper of the electronic wallet and performing an ever-greater percentage of financial transactions. Considering the ability to communicate with customers through pushed text messages as well as emails, the smartphone has the potential to become the full service, convenient toll payment mechanism
It is also possible that the smartphone offers the ability to create and record toll transactions through GPS and other very accurate locational technologies and could be very useful in complementing the widely installed ETC technology. GPS has proven its advantages in Germany and other countries for toll collection. Smartphone solutions have the advantage of less in lane infrastructure and the potential to move the more costly infrequent customer transactions from ETC back office operations designed for the frequent customer.
ETC history can teach us much about technology development in the tolling environment and by considering trends in complementary technologies we may learn what is next in electronic tolling.
Harold Worrall is a world-renowned electronic toll collection expert and the CEO and founder of Transportation Innovations, based in Orlando, Florida.