How new technologies are helping achieve global transport objectives
In the second of our blogs discussing the impact of technology on pricing in the transport sector, we examine real-world applications to understand how new technologies are helping to achieve global transport objectives
Around the world, pricing strategies within the transport industry are set to meet four key objectives – manage the use of transport provision, allocate resources and products according to need, and generate revenue.
In The technologies driving change across the transport sector, we identified the main technologies that are revolutionising the way transport is priced by providers, and accessed by users. This blog takes the argument one step further, looking at real-world examples of how smart solutions are catalysing change across four key areas.
Transport demand management
Transport demand management is the general term given to strategies that increase efficiency by maximising the use of a transport system. These can include providing alternative travel options, or the adoption of dynamic pricing options that depend on mode of travel or time of day. In these instances, pricing can be used to reduce travel during peak periods, manage capacity and maintain good levels of service.
CASE STUDY: Rewarding smart travel choices with Spitsmijden, Netherlands
Rather than punishing old commuting habits, technology can be used to reward new ones. The same systems that enable cities to track vehicles and charge a fee when they enter a congestion zone can be used to encourage people toward positive travel choices.
One of the pioneers of this approach was the Spitsmijden (peak avoidance) programme introduced in the Netherlands in 2006. A group of commuters were recruited to participate in the experiment, and a GPS installed in their cars so rewards could be earned if they avoid using the roads at rush hour – either by travelling at a different time, or choosing alternative transport.
The results showed that participants reduced their travel at peak times by 50%, and the majority of this behavioural change was motivated by rewards of just €3 a day.
A toll road in Washington DC with signage that allows prices to change dynamically over time.
Economists and transport practitioners often argue that today’s road users do not bear the true cost of social mobility, and that this has profound consequences in terms of both capacity and funding of the infrastructure system. Consequently, pricing the use of roads in a way that recognises direct use (such as distance travelled) rather that indirect use (such as vehicle or fuel tax) is being investigated in many countries.
CASE STUDY: Pioneering a road usage charge with OReGO, US
Launched by the Oregon Department of Transport in July 2015, OReGO is the first mileage based revenue programme for light vehicles in the US.
Currently limited to 5,000 vehicles, the programme sees participants’ cars fitted with an on-board device that logs miles driven. Users then pay a road usage charge of 1.5 US cents for every mile they drive, while being credited the 30 US cents per gallon fuel tax.
This technology based initiative has enabled the State of Oregon to price road use in a more proportional way. It provides an alternative funding option for infrastructure that is fairer to users, and more sustainable in the long term.
The increasing commercialisation of the transport sector has put providers under pressure to achieve a strong return on investment, even when operating within tariff or price ceilings. Because of this, many have moved away from distance-based pricing models to more flexible structures that offer greater agility to respond to the market and remain competitive. Rail companies, for example, are increasingly applying airline-style pricing techniques to maximise revenue and make use of available capacity.
CASE STUDY: Offering flexible rail fairs with EuroStar Snap, Belgium, France and UK
Eurostar Snap uses integrated revenue management, pricing and seat allocation systems to underpin an innovative, lower cost alternative to traditional Eurostar booking.
Since summer 2016, this initiative has enabled passengers to book a train ticket up to a week in advance, but only specify whether they would prefer to travel in the morning or afternoon. Eurostar then allocates seats on specific trains 48 hours prior to departure.
This allows Eurostar to tap into the ever-increasing demand for spontaneous travel to increase occupancy rates on its trains, and spread demand more evenly across its services.
Transport represents a major source of pollution, and many countries are looking to technology to find ways to reduce emission levels as they pledge to address the effects of global warming. As a result, a number of pricing programmes and initiatives have sprung up around the work aimed at reducing the environmental harm caused by road vehicles.
CASE STUDY: Implementing tolls for trucks with Toll Collect, Germany
In 2005, Germany introduced toll payments for heavy trucks that are determined by distance travelled, emission class and the number of axles on the vehicle.
The automatic system uses GPS to determine the position of the truck and recognise route sections, so that the toll can be calculated and sent via mobile radio technology to the Toll Collect computing centre at regular intervals. Enforcement is achieved via a combination of toll gantries on motorways, overhead cameras and random police checks.
Since its inception, Toll Collect has generated over €44 billion in revenue, the number of toll violators remains below 1% and vehicles registered in the top three cleanest emission classes account for about 90% of the km travelled on German toll roads.
Keeping on track
New technology has played an instrumental role in connecting transport users and providers, bringing unprecedented benefits to both. It has enabled the move away from static pricing structures to more dynamic models that reflect real-time conditions on transport networks, increase value for users and allow providers to optimise their service provision.
As change continues apace, both in the real and digital world, we look forward to seeing how new services, alternative transport options and ever-more intelligent technology combine to impact and influence the evolution of the transport sector. And, while we can’t predict the future, there in one thing we do know for sure – maintaining flexible pricing options will keep providers on the right track to achieving their key policy and commercial objectives.