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FINANCE AND THE VISIBLE HAND OF TECHNOLOGY 81 In sum, I believe that there is an interaction among elegance and effectiveness of Adam Smith's invisible finance, technology, customer service, and the manage- hand, but a good second best is much better than what ment of departments of transportation (DOTs). If we we have now. look at finance alone, we risk continued frustration-- Transportation depends on assets, but this emphasis and a transportation system that fails to meet our eco- ignores the routine economic and social values that it nomic and social needs. If we work to improve provides. For example, while volumecapacity ratios and management alone, we miss using one of the more levels of service provide one measure of congestion, the effective tools for efficiency and customer satisfaction. consumer of transportation services probably relies on a To set the stage for this argument, I will address two much more basic measure: Did I get where I want to go trends that are broader than finance itself: first, the on time? Or more broadly, what fraction of peak-hour move by secretaries of transportation and many other trips arrived on time this morning? What fraction of sup- transport administrators to emphasize their role as man- ply chain shipments arrived on time? This is similar to agers of a business, and second, changes in technology measures used by the airline industry today. Again, this that make it possible to measure highway performance requires a direct and personal measure of highway per- directly. formance--something that a vehicle-oriented technology might provide. MANAGEMENT TECHNOLOGY Today, the most imaginative DOT leaders think and act as if they are running a business--indeed, most state Technology refers to human knowledge about products secretaries of transportation now call themselves CEOs and services and the way they are made and delivered. rather than CAOs or chief administrative officers. This This is a fairly broad definition and is certainly relevant has generated interest in new management techniques to the surface transportation industry. Advances in and approaches. For example, asset management is technology can dramatically alter the surface trans- now a hot topic, albeit one that remains dominated by portation industry's landscape. They make it possible to engineering-based techniques and measures rather than produce new and better service at lower cost and help financial measures and economic efficiency. create new revenue sources. Asset management offers promise, but few systems Technology also offers a possible way to measure have been implemented that examine assets the way a direct performance. Certainly one dream of the ITS private enterprise would. One reason is simply that our community has been roadway sensors that make it pos- surface transportation systems do not operate in a free sible to know traffic speeds on all roadways, all the time. market. Our ability to generate a breakthrough in this Such information could then be used both to manage the regard could take one of two paths: system better and to provide information to the travel- ing public. In reality, over the past dozen years the pace 1. Direct competition. To be effective, this needs to of deployment has been glacial, with only 22 percent of be more than transit versus highways, since it is tough urban expressways having sensors of any kind by 1999 to have competition when one entity has 95 percent of and fewer than 10 percent of major arterials (Figure 1).1 the market and its competitor 5 percent. Thus, despite In recent years the rate of growth has rocketed to 3 per- the ideological appeal of publicprivate partnerships, cent per year--which means that the problem will not be we are unlikely to have more than one DOT per state. solved in my lifetime. 2. True measures of performance. If real competi- As Phil Tarnoff from the University of Maryland tion is unlikely, then at least we can try to improve our points out,2 advances have been made that include the measurement of service. Once we measure the perfor- following: mance of the highway system on a consistent and rou- tine basis, we can start to develop a pricing system · Sophisticated side-fire radar detectors capable of that sends market signals to travelers and providers providing traffic flow data by lane; alike. · Video imaging that can now provide reliable measurements of traffic speeds, counts, and queues; Because there is no true competition for local high- ways and transit, there is no incentive to develop true measures of customer satisfaction or system perfor- 1 Tarnoff, P. J. Getting to the INFOstructure. Prepared for TRB mance. How do we do this without the invisible hand Roadway INFOstructure Conference, Aug. 2002. of the marketplace? Perhaps we can use technology to 2 Tarnoff, P. J. Getting to the INFOstructure. Prepared for TRB create a smarter visible hand. This will never replace the Roadway INFOstructure Conference, Aug. 2002, p. 7.
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82 T R A N S P O RTAT I O N F I N A N C E 55% in 2010 Floating car data and vehicle probes appear more pow- % Urban Freeway Miles Instrumented 50 erful and cost-effective than fixed, infrastructure-based Optimistic Projection 44% in 2010 sensors. 40 Vehicle-based sensors offer several advantages: 30 22% in 1999 Pessimistic Projection · They provide a direct measure of performance as 20 seen by the roadway customer, rather than measures a lled Inst 16% in 1997 inferred from volumecapacity ratios. 10 6% in 1990 · They can do this across all roads in all parts of the country at the same time. 1990 1995 2000 2005 2010 · They can provide measures that are consistent Year from road to road and from city to city. FIGURE 1 Percentage of urban freeway miles instrumented. · They provide geographic detail that can be reshaped to meet a variety of public and private purposes. · Cellular geolocation technology with the capabil- Such data, in turn, will support most traditional traf- ity of tracking individual vehicles to measure their fic management activities. Because of the direct link speeds and travel times; with roadway performance, they also provide the foun- · Tracking of vehicles with toll tags to measure dation for a profound shift in transportation manage- speeds and travel times; ment. This has implications for such activities as · Tracking of vehicles through the use of license day-to-day management, financing, and emergency sup- plate readers that measure speeds and travel times; and port. The same data provide the long-sought informa- · Development of systems of instrumented probe tion needed by the traveler information portion of the vehicles that use the Global Positioning System for posi- telematics industry. It may even be possible for more tioning and other sensors to measure travel speed, than one of these firms to make money! weather, and pavement conditions. Vehicle-based sensors are well along the develop- ment path. Floating car data systems exist on small Frustration with the slow pace of deployment despite scales in Europe. OnStar in the United States has units the range of technical solutions has led to some new in some 3 million vehicles. These represent more than 1 approaches. The U.S. Department of Transportation's percent of the nation's fleet--which should be enough INFOstructure plan, for example, calls for a nationwide to estimate travel speeds by roadway link. Of course, a network of traffic sensors and video monitors. On the number of communication and financial issues need to one hand, this is ambitious and offers benefits for be resolved before this becomes commercial reality. At Homeland Security. On the other hand, the cost is high the same time, some 600,000 commercial vehicles ($5 billion has been mentioned), and the plan faces a already have tracking equipment as part of the fleet problematic future in our new world of growing budget management industry, with Qualcomm the leader. deficits. It also represents a continuation of existing Other systems propose the use of cell phones as data technologies, just with a fixed schedule and more funds probes to provide location, speed, and acceleration to back them. information. Progress is being made in enforcing the Technology, however, can also develop along nonlin- Federal Communications Commission's E-911 mandate ear or divergent paths. These types of changes are hard to convert the nation's 100 million cell phones into to foresee, in part because many fail or remain dormant probes, although this process is well behind schedule. until the time is right. When they do occur, they can cre- As one example, the British firm ITIS Holdings has ate a chain reaction of changes well beyond the immedi- deployed a floating vehicle system that converts high- ate area of focus. Examples abound in our daily lives, mileage vehicles into probes and provides regular with the most obvious coming from the Internet, wireless reports on more than 8,000 miles of motorway and communication, and the personal computer. Examples major arterials in the United Kingdom. Commercial from previous generations include the automobile, jet customers include the British AA, BMW, and OnStar. aircraft, the Interstate highway system, and so on. While Other than this, no vehicle-based system has been progress continues, transportation technology has yet to deployed on a significant scale. All have one or more see such a breakthrough. problems to resolve, most of which are finance-related. Within the world of traffic sensors, we may be on the But the time is right for a new way to collect traffic verge of a nonlinear shift. This revolution will be based data. The technology exists, and several commercial on vehicle-based sensors rather than those reporting enterprises have begun to deploy their networks. from specific points along the highway infrastructure. Vehicle-based systems will support activities and busi-