Business Models to Facilitate Deployment of Connected Vehicle Infrastructure to Support Automated Vehicle Operations (2020)

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102 CHAPTER 6: CONCLUSIONS AND SUGGESTED RESEARCH This report summarizes the findings of research conducted to answer the questions: • Do DOTs need to make any investments in CV infrastructure to develop and implement V2I applications? • If such investments are warranted, which emerging candidate V2I applications must be prioritized and planned for in the next 5 to 10 years? • What scale of investment is needed, and which of these investments should be advanced to a formal business case analysis? • How does the DOT construct the business case and move forward to select an investment pathway that, compared to the status quo, yields the most benefit, makes the best use of available resources, and mitigates risk or uncertainty? This study developed answers to these questions and used them to prepare the primary product of the research, the separately published Guidance to Develop Business Cases and Explore Business Models for Connected Vehicle Infrastructure to Support Automated Vehicle Operations. It presents: 1. Methods to identify the most plausible CV infrastructure investments that DOTs may encounter for which quantitative business case arguments must be advanced. 2. How to build effective business case arguments that consider market conditions and uncertainties. 3. Specific business model options during project procurement and delivery that help agencies deliver on the value propositions articulated in the business case with the least cost and risk. This study has also revealed several areas worthy of further research. KEY FINDINGS State DOTs are actively preparing for a future with CVs and AVs. State DOTs and other agencies at the local, metropolitan, and multi-state levels of government see an opportunity to collaborate with vehicle manufacturers and fleet operators to address safety and mobility challenges on the nation’s roadways. This finding is supported by the 120+ planned or operational CV deployment locations across 30 states, which includes 50+ operational projects with more than 15,500 devices and covering nearly 6,200 infrastructure components. Planned projects account for another with 3,300+ devices and nearly 2,000 infrastructure components. DOT policy frameworks and plans illustrate that agencies are anticipating, and indeed creating, a future where CV technologies and AVs will become a part of their routine business operations (NOCoE, 2020).

103 The benefits of V2I applications can help DOTs achieve their objectives. An established and substantial set of V2I applications can help meet specific DOT objectives to improve safety, reduce congestion, and achieve other goals outside of using conventional means. This report analyzes approximately 100 applications to identify their benefits types and dependence on V2I communication. There is a value proposition in CV infrastructure investment that DOTs should consider, but there are risks as well. DOTs recognize the importance that CV infrastructure can play toward helping future CVs and AVs benefit from multiple layers of on-board and off-board data to ensure safe and efficient operations. Enabling these V2I applications requires data collected from CVs (and AVs) to be communicated through technologies installed along the roadside, often combining it with other DOT-provided information on the status, condition, and performance of its network. Both the CV infrastructure in terms of RSUs and data are uniquely provided by DOTs; therefore, it is in their interest (the value proposition) to consider investing in these technologies. However, there are challenges and risks associated with deployment right now—technical, institutional, and business risks that in many instances are outside DOT control. These risks include what wireless communication radio technology standard will prevail that provides high- speed, low-latency communications necessary to enable time-critical and safety-critical V2I applications. There is also uncertainty around the exclusive availability of a communication spectrum for transportation safety, which if not maintained, could deter both public and private investments in CV technologies. The market penetration of private vehicles equipped with OBUs to communicate with RSUs and achieve the benefits of certain applications is also uncertain. Therefore, it may be reasonable to wait and see what may change. There are identifiable approaches to navigating CV infrastructure investment decision- making. Given the compelling opportunity to substantially advance their objectives through V2I applications, DOTs must determine how best to deal with the ambiguity that questions of costs (both investment and opportunity costs) and uncertainty raise to avoid making a “wrong” choice or risk falling behind. Despite the known uncertainties and a lack of CVs on roadways today, some DOTs have decided to make investments now, taking a cautious investment approach but exhibiting clear interest in certain V2I applications that meet current agency objectives. Examining 30 of the most advanced and extensive CV infrastructure investment pilot programs, test beds, and projects across the country reveals strong interest in applications that target signalized intersections; use DOT-provisioned network data (signal phase and timing, weather, work zones, and traffic volumes of non-CVs) to deliver benefits; and focus predominantly on mobility-related benefits accruing to DOT fleets. Today’s activities show that there is a logical sequencing of V2I applications when DOTs choose to follow the cautious approach to investment. Sequencing should progressively build on prior investments, starting with applications that can provide benefits and learning opportunities today while laying a foundation for others that may depend on greater market penetration and other

104 developmental factors in the future. Sequencing investments should also consider the scalability and leverage of the initial investment and include prioritization for components of the deployment that might be considered “no regrets” investments (e.g., signal controllers and backhaul) because they are outside the influence of market, regulatory, or technology uncertainties. A strategy can start modestly (e.g., localized projects involving key arterial corridors) and grow as results suggest further investment is warranted and resources are available. The same infrastructure base could also provide the benefits of advanced TSMO strategies or ITS applications otherwise performed using conventional cellular communications methods. However, because these investments can potentially be expensive, justification must usually be sound to help support the decision-making process. DOTs can use a business case analysis to support their decision to make CV investments. Decisions to make significant investments in CV infrastructure can be justified by evidence and analysis that establish the rationale for investment at the time investments are being considered. This evidence-based analysis is termed a business case and can be structured using a four-part model: • A Strategic Case establishing why the investment should be made by demonstrating how the investment would solve a problem and achieve a DOT’s strategic goals and objectives. • An Economic Case documenting the investment’s overall value to society by using a standard benefit-cost analysis approach. • A Financial Case laying out the financial implications for the DOT and funding arrangements. • A Deployment Case presenting the risks and requirements to be met to deliver and operate the investment, including a procurement strategy. This study developed step-by-step instructions to build each of the business case components. For the economic case, the study also developed a benefit-cost analysis spreadsheet tool to perform deterministic analysis for five popular V2I applications and serve as a model for evaluating additional applications. Implementation plans can articulate ways to deliver a proposed CV deployment project to DOT customers at an appropriate cost. The study identified three business model options DOTs could consider for implementing the recommendations of a positive business case. These options include the traditional model (public sector development, funding, and ownership—delivered as a stand-alone or a part of a construction project); P3s centered around data sharing; and other data or resource sharing agreements, such as fiber optic broadband communications, and “all-in services” where the private sector supplies “all-in” services (physical assets, cloud data, analytics) for a fee.

105 SUGGESTED RESEARCH This study found areas worthy of further research that could help inform DOTs’ decision-making process on making investments in CV infrastructure: • National set of consensus V2I applications or bundles in support of CVs and AVs that are arrayed by deployment context, e.g., roadway type (urban freeway, rural freeway, arterial, or roadways in any location). • Quantification of V2I application-specific benefits (e.g., safety and mobility) within these contexts, either from formal performance assessment of early deployments or by simulation, to facilitate benefit-cost analysis and better inform the economic case. • Relationship of certain V2I application benefits to revenue opportunities, e.g., a link between travel time savings or reliability and transit ridership due to Transit Signal Priority implementation, or freight-related direct and indirect economic output due to Freight Signal Priority implementation. • Consistent cost data aggregation using standardized cost categories in ongoing pilot projects and test bed activities. • Given the uncertainty with the communications technology of choice and CV market penetration, a periodic review of the business case components and business models, along with the associated tools and methods advanced in this report that quantify CV investment value, should take place to ensure alignment with current events, policies, and industry trends. Future findings in these areas of proposed research would increase the level of knowledge and consistency with which V2I application benefits and costs are known, strengthen the ability of DOTs to make an informed and lower-risk decision on investing in CV infrastructure, and provide greater confidence in the business case made.