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Business Perspectives

ITS covers a wide range of systems and services. Different players are involved – so stakeholder roles and attitudes and the legal and institutional issues vary for each sector. There will be wide variations between different applications and individual institutions, but there are three broad groups of stakeholders that invest in ITS:

  • users and consumers of ITS (corporate or individual) require systems and services that meet their real needs. They have high expectations of service quality, reliability and availability. The willingness to pay for ITS systems and services strongly depends on the actual and perceived utility of the service – as well as on its public image. The acceptable price may not correspond to the actual costs of service generation and delivery. For example, people expect travel information services to be free at the point of use but the cost of service provision is very high
  • public sector adopts ITS to deliver various public services, objectives and strategies. Public interests require that ITS service development should contribute to positive impacts on traffic management and modal shift, economic development, business location and social inclusion. Public authorities seek to involve the private sector in order to benefit from the entrepreneurrial culture, to limit public expenditure and increase transport efficiency
  • private sector players seek to sell equipment and services to the public sector and to market consumer-based ITS products and services – capitalising on market development potential to create profitable businesses. The private sector has to be responsive to framework conditions established by the public sector – which are often seen as an obstacle to free market competition

These three groups adopt very different evaluation systems when they consider whether to invest and allocate their budgets to ITS deployments:

  • the public sector has to justify investment in ITS on public service criteria or on the basis of benefits to the community – including affordability of the initial capital spend and any maintenance and long-term operating costs
  • the private sector is concerned with the forecast return on the investment needed to bring ITS equipment, products and services to market – and the extent and reliability of any revenue streams
  • the consumer (any individual or organisation that uses an ITS system or service) evaluates the usefulness of the equipment or service in relation to the buy-in cost, and any recurring fees and charges that have to be paid

The interactions between these very different requirements is illustrated below. For ITS projects to be viable, they will often require justification against at least two, if not all three of the underlying value criteria. Failure to meet one or other of the investment tests will produce a classic “chicken and egg situation” – who goes first, the supplier or the purchaser in making a commitment to the system or product?

Inter-dependencies between the public sector, the private sector and consumers (© World Road Association)

Commercial Business Case

Private sector involvement is generally motivated by the opportunity to generate revenue and/or make a profit. Commercial businesses must be able to generate a profit through their activities to survive in a competitive market place. The continuing development of technology and advances in user needs and expectations means that the potential for new products and services is always there. The private sector can provide these new products and services, as and when time demands. Increasingly, the public sector is looking to the private sector, for the investment in ITS infrastructure and the delivery of certain ITS services – such as providing travel data. The private sector business case will largely depend on risk assessment of several factors. (See Formulating a Programme)

It is likely that the private sector will wish to develop market opportunities for new service needs arising from public sector investments in ITS. For example, a company might make use of traffic data (advisory and predictive) collected by public agencies to develop customised, real time travel information as a value added service for its customers. Arrangements of this kind – if they are exclusive to one provider – can become problematic unless they have been awarded on the basis of fair and open competition.

Public Private Partnerships

Private investment in road infrastructure and traffic services is growing as many public agencies struggle to meet increased travel demand within limited budgets. For example, toll roads and traffic control centres are often implemented through a partnership contract or franchise (See Contracts and Toll Collection). Private sector participation offers new opportunities and challenges to the transport industry.

The challenge in a public private partnership lies in how to achieve a balance between the policies and objectives of public agencies – while satisfying the business goals of private companies. To achieve a successful public private partnership, various issues need to be addressed:

  • defining and agreeing the roles and responsibilities of the public and private sector in each phase of the life cycle of the project
  • sharing the development and operational risks
  • ensuring that both benefit from the partnership
  • cost sharing
  • private sector interest in the transport service
  • public sector support for the private sector’s business case

In preparation for negotiations with private industry, public agencies need to determine their requirements – which may be encapsulated in an ITS regional architecture. By defining requirements before entering into a resource sharing agreement the stakeholders will be in a stronger position to conduct the negotiations.

Motivating factors for public private partnerships in ITS include:

  • the opportunities that ITS offers as a market for the development of new products and services by the private sector – based on access to publicly owned data (open data) and permission to install equipment on the road network (See Open Data)
  • mobilising private sector investment in ITS deployments – which would otherwise be a challenge for public sector budgets to meet.

Examples of viable partnerships which benefit both sectors include:

  • a cellular phone company that provides telecommunications support to public agencies for their ITS infrastructure connections – in the expectation of business growth from road users (such as travellers) accessing traveller information services through their wireless mobile devices
  • a public agency that gives permission to telecommunications companies to construct cellular communication towers or install fibre optic cables on publicly-owned land alongside a highway – in return for in-kind ITS programme-related hardware, software and services up to an agreed value

 

ERTICO: a Europe-wide Public Private Partnership

ERTICO – ITS Europe represents the interests and expertise of around 100 public and private partners involved in providing Intelligent Transport Systems (ITS) services. It facilitates the safe, secure, clean, efficient and comfortable mobility of people and goods in Europe and beyond through activities supporting the development and deployment of ITS.

Specifically, ERTICO:

  • provides a platform for its partners to define ITS development and deployment needs
  • acquires and manages publicly funded ITS development and deployment activities on behalf of its partners
  • enhances the awareness of ITS benefits amongst decision-makers and opinion leaders
  • formulates and communicates the necessary European framework conditions for the deployment of ITS

ERTICO’s public private partners include mobile network operators, public authorities, academic and research institutions, service providers, suppliers, traffic and transport industry, users and vehicle manufacturers.

Source: http://www.ertico.com/assets/Partners-List/Partner-listJune-142013.pdf

 

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