Wednesday, 11 April 2012

Macro Level Trends – UK Investment (Part 3) – New Perspectives on Toll Roads - Future Models

The previous two web-logs highlighted the national paradox Britain faces, its desperate need for transport infrastructure renewal yet without the public monies to fund such a renaissance. As has been the case with other infrastructure works – namely airports and water – the funding made available over recent years and of today is of invariably in foreign hands, by way of SWF bodies and PE companies.

Western infrastructure projects thus increasingly rely upon the demands of others.

There are two prime aspects to the investment agenda behind much of that liquidity: the desire for risk averse, long-horizon propositions and the ability to re-play the scheme again elsewhere geographically. (This done within the funder's own homeland as part of its own national economic agenda, and if possible in other similar infrastructure evolved countries).

Thus it could be said that the foreign SWF or PE fund of the 21st century views its investment decisions upon much the same philosophical lines as those 20th century American companies which created the iconic US shopping mall, then multiplied what became well understood, almost standardised models across the world.

As mentioned in Part 1, Britain's powerful past and its ability to combine mercantilism with industry meant that it played perhaps a pivotal role in the idea of transport and transport network infrastructure in formative modern times – from the creation of tarmac to invention of 'cat's eyes' – physically and metaphorically laying the foundations. Yet whilst the UK saw increased standards of living thus providing for mass vehicle ownership and seeming unending logistical demand of goods hauliers to feed consumerism, the country has also increasingly suffered road network congestion and resultant affects of loss of productivity, driver & social stress and area specific grid-lock pollution.

[NB However, the advances in modern internal combustion engine efficiency by the major VMs (including 'add-on' start-stop function) must be recognised and praised as the prime enablers of impressive pollution reduction. London's 'pea-soupers' are very much a past phenomenon].

Nevertheless, governments, green campaigners, institutional-type investors and indeed auto-manufacturers, all alike well understand the massive advantage that a truly intelligent 21st century road network – and indeed holistic transport network – would provide for Britain. Yet since its own pioneering advancement all those years ago, the country has arguably not even 'kept pace' with the advancements made elsewhere: from the relatively rudimentary payage system seen on France's motorways to the phased advancements seen in Singapore since the 1970s.

Britain's examples, described previously with the QE2 Dartford Bridge, the London Congestion Zone, the M6 Toll Expressway, the (failed) Manchester Congestion Zone, and the Greater London Emissions Zone, have all highlighted the manner in which semi-state and non-state funding seek commercial methods (obvious or invisible) to improve Britain's age-old transport network.

Different schemes in varying locales have been designed to suit local conditions, the socio-economics and indeed regional psycho-graphics.

Schemes such as Milan's original 'Eco-Zone' format have used the level of a vehicle's CO2 emissions (g/km) to either effectively prohibit, allow at no cost or allow with fee, various vehicles of age and size into the city's central area. This contrasts with other schemes but highlights the development of segmented usage.

Segmentation is hardly a new concept, simply a pseudo-modernist word for old world categorisation, the kind of categorisation which on British toll roads centuries ago charged different rates for different types of conveyance; from pedestrian through to heavy draft horse and wagon.

Today's we see renewed interpretations, but the very action of segmenting what had previously been regarded 'utility goods' has been a marked trend for the last few decades.

Utility Service Segmentation -

The most commercially visible case-study has perhaps been the market for drinking water. This very essence of life has evolved from merely its basic tap-water form (still the envy of millions) through to variously offered varieties in variously offered containers: from glass bottled premium branded 'spring' waters, to basic 'bottom-rung' non-tap waters in 5 litre sizes, to scientifically vitamin enriched health waters, to sports-science developed energy water and beyond. Thus, market-enabled adaption of a basic commodity to suit ever more nuanced, and critically different, customers' needs, wants and desires.

[NB investment-auto-motives conjects that in years to come segmentation may appear regards industry and household (domestic-use) consumption. Critically where varying levels of water purity can command a graduated pricing structure – from filtrated pure drinking water to (today's) standard drinking water to personal washing/bathing & white goods water to garden 'grey-water'. Thus mimicking the segmentation of household waste into: recyclable, green-matter & refuse].

However, a more meaningful parallels to road-pricing possibilities come from the general 'utility' service sector, in the provision of electricity, gas and telecoms.

In the UK these markets have long since been segmented, yet whilst consumer complaints have been made about the confusing tariff structures of electricity and gas – especially when combined - the most prescient example of well received segmentation is that of the telecoms sector.

Here the proliferation of services across land-line phone, mobile phone, internet and cable television has meant that consumers can buy ever more discretely separate offerings, or indeed the opposite of ever more 'bundled' offerings, to suit their lifestyle and functional needs. The telecoms experience then appears to offer good guidance as to how any seeming 'commoditized' utility may be creatively developed and differentiated for improved price modelling and ultimately latter-day re-investment. Though it must be recognised that – unlike the electricity or gas cases – it has been innovation has played a major role in enabling such segmentation.

Models To Date -

The traffic management toll-enforced initiatives to date - started at different times in different cities and with subtly different agendas - in effect create a matrix of usage and so pricing possibilities.

The 'pricing dimensions' seen thus far which allow such a flexible structure are:

1. Time of Travel (ie hour of day & accordant traffic level)
2. Environmental (CO2 Pollution) Affect (ie vehicle rating).

The relatively new access schemes seen thus far were introduced using a singular dimension, for ease of public acceptance, ease of administration and the ability to evolve ever more segmented future pricing structures. So these two seemingly separate elements will undoubtedly corss-fertilise in years to come, and thereafter various new additional 'price dimensions' could be applied – such as vehicle footprint size and passenger / load capacity-usage of vehicle (ie efficiency). To create an ever more 3-dimension or even 4-dimensional structures, so ever more pricing flexibility and thus 'intelligent pricing'.

[NB Though it is recognised that such additional initiatives could be seen as ever incremental stealth taxes upon road users where vehicles are not used at optimum levels].

This then reflects the thesis that has been well under-way in certain quarters of government and investment houses, which views the future of road travel as 'segmentable'. What was once a utility service, with accordant low public expectations, may offer a plethora of combinations and so pricing options.

This then a 'dicing and slicing' of the basic element in much the same way that many other previous 'commodity markets' were developed.

Planning 'C21' Britain: Four Basic Models -

Below are listed 4 basic but distinct road-pricing models. Each pertains to what may be regarded as the 4 basic locational and usage road types, and seeks to reflect logical reasoning as to how each may be segmented to provide fair graduated system.

The accompanying graphic provides visual depiction of what investment-auto-motives views as 'naturally evolved' road pricing models across the 4 discrete categories, with rates related to the predominance of either geographic locale and / or a specific user types.

The 4 types encompassed are:

1. Urban Roads
2. A & B Roads
3. Motorway Roads
4. Rural Roads

Urban Roads :

Historically, urbanisation trends are typically accompanied by raised living standards and so general raised levels of motorisation. The UK an obvious example in the latter half of the 20th century. Though suburbs and new towns grew to cater for that requirement, given its relatively small land mass, its long history of established habitation, and so a necessarily ad-hoc and constrained approach to infrastructure development, the UK is almost endemically 'network constrained'.

Unlike say the USA with greater land availability, so suburban stretch and indeed development of 'auto-cities' such as Los Angles - which fundamentally differ in plan from traditionally historically evolved European cities and towns - the UK has always had to try and efficiently operate the available space of its cities and towns, whether in the majority of old cities or the far fewer 'new towns' latterly built.

Any city-based toll scheme must reflective the real-world transport challenges faced within that specific city. Yet of course whilst cities differ geographically and regards specific problems and 'problem areas' and must function under various political and administrative leanings, the fact that urban roads may be viewed as 'network systems' - with levels of usage and flow predictability, even with supposedly autonomous users – means that variously developed models have come into being since Singapore's pioneering effort.

As such London's planners were able to take on board lessons learned from elsewhere when originally conceiving the London Congestion Charge, which itself will be used as the template for latter day roll-out of other UK city schemes. This meant exploring various 'simple to complex' pricing structures which had to be assessed for level of popular acceptance and implementation ability.

Though new tolls are inevitably unpopular, to lessen resistance, aid popular comprehension and so make introduction workable, the London scheme was brought into being using a simple flat-fee pricing structure.

However, its original guise saw a more complex scheme, like Milan, deploying CO2 emissions pricing bands within a maturing Vehicle Road Fund Licence (ie Road Tax) system. Thus proposing to align zone entry charges relative to vehicle type. This is partially employed with exemption of zero-emissions vehicles and the pricing difference between cars and trucks, yet the flat-fee system was used to “sugar the pill” Londoners and provincial commuters.

However, the Congestion Zone's future will inevitably be one where segmentation plays a greater role to good effect for the benefit of all road users and indeed public space users. Moreover, given the scale of the UK's national financial deficit, and the city's own (post-Olympic) economic growth ambitions, it seems that London's 'CC' scheme must be developed to provide the metropolitan and nation-wide income so desperately required to help the UK back into the black.

The accompanying graphic shows a chart titled 'Urban Centre' which displays exactly how the London scheme must be developed. It shows both Non Peak Hour and Peak Hour scenarios (as is the case today) with an additional price relative “Vehicle CO2-band” staircase within each scenario.

The fee structure shows exactly the same 'rate of climb' relative to the recognised CO2 bands, but rationally the base level for Peak Hour driving (ie the entry point price of “Y”) is higher than that of its Off Peak counterpart of “X”.

Unlike today, this then introduces a 'payage' across a full day's 24 hour period to enter the city centre.

A & B Roads :

This roadway classification has been the official and popularly recognised prefix naming convention for what may be termed 'senior' and 'junior' route-ways carrying differing weights of traffic. With the expansion of general network capacities over the years some lesser used old 'A' roads were demoted to 'B' road status. Whilst many view the archetype A road as a dual carriageway and the archetype B road as single lane, the fact is that both can consist of either single or double lanes, often combining both relative to local traffic needs.

Since A and B roads comprise the majority of prime suburban and inter-regional connections, and can be characterised by their respective 'directness' to whichever destination, it is envisioned that both types convey different levels of usage fee. Obviously the more senior reflecting a higher toll and the junior a lower toll. Unlike the city-centre scheme there would not initially be Peak Hour and Non Peak Hour rates, although such a system could be latterly introduced.

This is depicted in the relevant chart as a simple 2 tier pricing structure.

For such road rating purposes, investment-auto-motives believes that a new national road survey may be required to fundamentally assure that any levied toll would be commensurate with the level of roadway provision given.

Motorways :

These would mirror what the British see as the 'continental' motorway set-up, seen with the M6 Expressway and the similar examples in Toronto, Canada and elsewhere. Thus the typical introduction of 'toll plazas' providing the e-Tag system, automated coin collection and manned coin collection, and in course more sophisticated electronic vehicle identification and tracking methods.

The prime difference being that the roadway itself is philosophically and physically evolved to proffer 3 distinct products. Via greater application of electronic intelligence, the conventional 3 lanes of 'slow-lane', 'middle-lane' and 'fast-lane' are differentiated and re-established. Leveraging the public's basic perceptions of each type, the routeways are metaphysically divided into respectively: the 'eco-lane', the 'mass-lane' and the 'fast-track'.

The eco-lane would operate at speeds up to 60mph, the,mass-lane range between 60-80mph and the fast-track to offer drivers the ability to legally drive 'at speed' between 80-100mph, mimicking the model of the German Autobahn.

This then allows differing driver types and their relative vehicle types better “allocation”.

HGVs, motorhomes, towed caravans and typically smaller cars using the eco-lane, the slower speeds thus maximisng fuel efficiency and maintaining the natural 'safety zone' for different vehicle types seen today. The toll levied here would be minimal (see the relative chart's “X”) given the reduced impact on the environment, and the nature of the vehicles using this lane.

The mass-lane would consist of cars and lighter commercial vehicles (LCVs) whose drivers wish to drive in the conventional manner, but now with an enhanced speed limit of 80mph to aid traffic flow and assist in creating better vehicle separation so as to allow greater breaking distances, so aiding safety. The toll levied would be at “Y” at the medium point of the 3 level range, reflecting the mid-point utility of the road and possibly the greatest road-surface 'wear & tear' given the mass density of traffic.

The fast-track would critically offer a graduated toll relative to the speed travelled, as recognised by speed cameras or similar advanced technology. Thus the faster driven the greater the toll to be paid. This would then create a useful unhindered 'expressway' to be used by those who are “cash-rich & time-poor” under the greatest pressure to travel quickly; so including company executives, managers and travelling commercial staff, aswell offering a more efficient roadway to (car & LCV) based delivery companies – which are expected to grow in number as a result of continued postal deregulation and a re-emergent UK economy.

Of course vehicles would not be prohibited from lane-changing as necessary, and as is the norm today, but it might be envisaged that a specific (chargeable) lane is specified at entry to the toll plaza, with an allotment of say 5% travel time to be allowed for the required lane changing for natural over-taking of a vehicle in front.

Rural Roads :

City dwellers no doubt view these roads as costly on a per mile travelled basis, their sparse use highlighting them as under-utilised, whilst there necessary surface maintanance regime (because of exposure to wide ranging climatic conditions) means that the relative cost for each actual user is high. Thus on a purely measured and calculated basis, rural roads have about as much reason for 'not being' as those closed rural rail-lines under Dr Beeching in the 1960s.

However, this is to over-simplify the matter, since roads provide a far greater case as a social and economic life-line than the railway ever could, especially under the then weight of a rising UK car-parc. Rural roads, though possibly 'cut-off' in extreme conditions in certain regions, provide the transport back-bine for small towns and villages by way of private car, often shared car journey and of course public transport.

Furthermore, they are the literal routeway into what is often considered 'Real Britain', that countryside idyll, and an idyll which is today being re-awoken as the UK seeks to grow its domestic tourism sector.

To this end, the very distinct uses of country roads by distinct user types means than this category of road ought to be rated not simply upon a usage basis – as is the case elsewhere – but on a user basis.

Thus user differentiation provides for the Rural-Dweller, the Suburban Dweller and the Urban Dweller. These three types then typically have different uses of rural roads. Looking at the relative chart, the former Rural Dweller, being 'in-situ' and bound to rural roads would pay the lowest toll “X” so that he she can go about his/her daily lives. The Suburban Dweller with perhaps greater call or necessity to travel to and across what is classed as countryside - given geographic proximity – would pay “Y”. Whilst the Urban Dweller would pay the highest rate of “Z” given the more likely reason to use country roads as that of a tourist. Moreover, this high rate toll would be paid by those wealthier city-based people who are fortunate to also have a country home or weekend retreat, thus in effect utilised by government as a progressive tax.

[NB This then depicts four models relative to to four distinct roadways. Whilst the reasoning offered is considered sound, of course far greater exploration and analysis would be required before these specific models were to be recommended for eventual adoption].

It is then shows the complexity in theorising and installing a nationwide road-tolling scheme, whether in a peace-meal manner via private funding on a per project basis, or 'in extremis', if government were to fundamentally alter the structure of state-induced road pricing, away from the current vehicle road fund license and fuel duty toward something far more proactive.

As mentioned throughout the 3 web-log parts, it appears that private finance and new era PFI initiatives would take such a lead on a project by project basis, utilising advanced traffic management technologies to assist in monitoring road usage and pricing models to balance overall costs versus the income stream.

Traffic Recognition Technology Advancement -

As previously highlighted, to date traffic management technology has developed to become increasingly sophisticated over the decades. Its prime purpose to identify specific vehicles and their owners in order to levy any access fee. It consists primarily of 2 technologies, depending upon whether 'area-bound' relative to a congestion zone or 'pass-point' relative to bridge or motorway.

The technologies developed generally :

1. Camera based for visual recognition of vehicle number plate.
2. Micro-chip based “master and slave” electronic sensors.

However, ever more sophisticated sensing technology has emerged in recent years, one which originated inside the automotive industry with its need for efficient logistical planning and been latterly rolled-out amongst many kinds of B2B and B2C groups.

It is of course the QR (Quick Response) graphic coding system, now deeply embedded within the public's own consciousness given the 'Aztec' style black and white blocks that have appeared across many spheres, and endemically linked to the smart-phone arena, in which the term 'flashgram' is often used.

Its origins lay within DENSO, the auto-parts manufacturing and supply sub-division of Toyota, yet interestingly Toyota preferred to let the technology become public domain as opposed to trying to commercialise itself. (Possibly given the fact that similar 'matrix code' exercises were being researched by others).

The graphic coding system has been adopted by the railway and airline sectors as part of their ticketing methods – both in printed and screen formats, and recognised by an official code-reader.

But appears not to have yet been adopted by any country's official vehicle registration bodies for full scale implementation; although the Polish Vehicle Registration Authority has apparently applied the graphic to its own registration documents so that auto insurance companies can avoid fraud by obtaining precise official records 'first hand', instead of relying upon what might be adulterated paperwork.

The UK vehicle registration system came into being in 1903, and has seen crucial modification as a result of increasing number of road vehicles in 1932, requiring greater alpha-numeric combinations, and since 2001 has had to address the influence of EU standardisation. To date standard UK mainland plates have been alpha-numeric, yet like EU counterparts may also carry a blue band on the left-hand edge which to date has been used for displaying a national flag and – at least in the UK – other symbols such as the logo of a favourite football team etc.

It looks to be the case that this blue-band margin then may be used to in future house other graphic signifiers which may be of use to either official governmental bodies or private toll-road operators, or indeed both.

Thus, it may well be the case that the QR matrix coding graphic could in time become a 'quick read' option for electronic eyes, and far beyond the limited capabilities of the established alpha-numeric system, could hold a broader raft of vehicle information within its matrix that would be of use to police and emergency services, such as owners name, vehicle crash history, etc, and perhaps allows for an immediate 'read' of the vehicle's recent whereabouts and last inspection condition by police, insurers, highways agency etc.

Thus, the inclusion of QR coding technology in combination with the creation of a truly intelligent road and transport network would propel the UK into the future.

Conclusion -

The very issue of road tolls and road pricing is understandably a contentious one; especially so in the UK where unlike other nations road travel has been notionally 'free'. Yet of course it is not free, it is a public and industry funded 'public good'.

Roadways (like canals and railways) have been the very foundations of national economic growth in the UK since Roman times, and have historically been seen as a core governmental responsibility to assist economic mobility and so the national wealth.

But as seen with even the Roman Empire, aswell as 17th century land and road and bridge owner-operators, toll collection became a requisite part of road creation and improvement funding. The development of smoother, safer and faster roads - along with concomitant improvements in horse-drawn carriage design and size – sped-up general mobility and saw a massive productivity boost. To such an extent that Victorian England's postal service had more daily collections as part of its general service than today.

Of course ethereal e-travel of information across internet has in many quarters superseded the capabilities for informational relay that can be done physically by road, rail or air. But much of the economic activity with the UK is vitally dependent upon the transport of people, goods and services.

And so still (thankfully) a long time away from the wholly e-connected distopia described in Graham Greene's 'The Machine Stops'...which ironically highlights a return to the natural and physical.

So whilst undoubtedly e-connection has brought many commercial and social advantages, the fact remains that old fashioned physical infrastructure remains vitally important for the good of the economy and individual and so national well being.

However, after over a century of notionally 'free' infrastructure use – paid for by the largely invisible public purse as opposed to the sensitive private purse – the ultimate true cost of vehicle travel is yet to be wholly recognised by the general public and enterprise alike.

This must change in due course.

As the topic of financing becomes more prescient for all at personal and state levels, the opaqueness – indeed invisibility - of the current system administered by the state and constantly criticised by the private motorist and haulage contractor alike, will need to evolve.

That evolution will require formulae that provides account of the cost-benefit equation, so that users can be better informed and so make more economically rational choices from sets of broader choices about their vehicle travel requirements.

And to so will require innovation, with a far greater proportion of R&D put into the hands of industry and enterprise, so that a new vitality can over-ride years of institutional state conformity by divesting R&D operations as spin-off in the Qinetiq mould. Such spin-off companies then given the freedom to interact with private construction companies and their SWF and PE infrastrcuture fund backers. And to in time set new worldwide roadway standards, eminating from the UK.

As regards toll roads thus far, there have undoubtedly been teething problems – as with the (not unexpected) under-capacity of the M6 Toll Motorway. But such experiences will obviously occur as the toll road system slowly develops from that of a very static, realistically uninformed and slow reacting, pricing system toward something far more trend and user sensitive.

It is an approach that has served well in other 'utility service' spheres, with the obvious example of the internet, telephone and tv channel providers providing highly segmented pricing structures to suit the varying needs of different parties. What the yesteryear GPO or 'old BT' could not possibly have achieved as state-run concerns, in terms of customer service and technological development, has been achieved by the many 'visioneering' private and public companies. The ownership de-regulation of the communications industry changed the face of society and assisted the development of the national economy immeasurably.

However, transforming the engrained public perception of roadways is a very hard task, especially when there appears little or no cohesive grand vision as to what that future may look like.

To this end, such possibilities should be explored, conceived and explained.

[ NB. In parallel there may be changes required made regards the executive responsibilities of roadways, at present seemingly a web of bodies which span-out from the 2 prime 'chairs' of the The Highways Agency and Local Authorities. investment-auto-motives is admittedly wholly unfamiliar with the bureaucratic format].

A singularity of purpose and responsibility appears key.

The difference between the implementation success of London's Congestion Charge toll system and the inability of local government to create a parallel initiative in Manchester seems in large part to result from the presence – and lack of - of a singular City Mayor.

The wide-reaching leadership, PR and legal powers held by such high office then appears to ensure that public and commercial reaction (and opposition) can be distinctly heard via the normal consultative process, but also ensures that what is inevitably an initially unpopular income raising scheme can be realised.

As Britain economically chugs forward very very slowly, symbolic initiatives such as the High Speed Rail 2 (HS2) and the creation of what may be considered a 4th London airport to the east in Southend promise themselves as precursors to a far more dynamic 'Great Britain'.

Yet the UK's road system today demonstrates itself on a daily basis to be both the thorn in the heel of commercial and social mobility, and hence the slowed circulation of national productivity.

As former Prime Minister, Lady Thatcher once remarked that...”you and I come by road or rail...but economists travel on infrastructure”.

The austerity era has induced the British population to start thinking like pragmatic economists on a personal and household level. Now it must do so on a national level. Part of that starts at the end of their individual driveways.. between 80-100mph, mimicking the model of the German Autobahn.

This then allows differing driver types and their relative vehicle types better between 80-100mph, mimicking the model of the German Autobahn.

This then allows differing driver types and their relative vehicle types better between 80-100mph, mimicking the model of the German Autobahn.

This then allows differing driver types and their relative vehicle types better between 80-100mph, mimicking the model of the German Autobahn.

This then allows differing driver types and their relative vehicle types better