Billing systems – necessary for roads to become utilities

I once read that AT&T was a billing system attached to a telephone network. The point was, the complexity of the phone network was incidental to the amount of technology and effort required to bill for the use of that network.

AT&T Phone Bill
AT&T Phone Bill

In contrast, road organizations often don’t have any billing system at all, and have no way interacting with their users. As they transition into road utilities, developing some form of revenue collection system from users (be it tolls or mileage fees, or indirect like fuel taxes) is essential to the operation and closing the loop so that users who benefit from the system pay for the cost of that system, and the revenue generated pays for the infrastructure users benefit from. It will become a core competency for which there will be a penalty to pay for outsourcing.

While discussion of money is often considered unseemly, if the benefits that transportation provides have economic value (and they do), users should be willing to pay for them, just as users pay for other utilities. Presently state DOTs typically have no direct revenue collection interaction with users. Turnpikes are often separate agencies, and gas taxes are similarly collected by third parties. But collecting revenue from customers is critical to transactions, and while once it was complicated to do anything other than coins or cash, today even food trucks and non-profit blogs can accept credit card transactions. (state agencies admittedly have trouble).

This is an important interaction with the consumer if done in person, or even remotely, an opportunity to manage the customer service aspects. While many utilities do this poorly (Comcast being the most obvious), it doesn’t have to be done poorly.

Initially we will think of transportation systems as charging per use. But there are many different services people may buy. For instance unlimited mileage, or unlimited off-peak mileage, or a limited number of trips per month with overage charges. All of these can be good for consumers, as it may save them money, or at least ensure the reliability of their price and travel time. It may also be useful for the organization operating the system, as they can adjust prices in advance (with fewer surprises) in order to smooth out demand. Pricing will be far more sophisticated than a simple marginal cost price charged in real-time. This implies a relationship with customers. Further, there may be value added resellers, who consumers can deal with, who each have a particular number of slots on the system, and can develop other pricing strategies.

Closing the loop between benefits and revenue has several advantages.

  • First it is confidence building, people will clearly see that their payments go to pay for the utility, and don’t get lost in the black hole of governmental general revenue. Even though gas taxes today are hypothecated to pay for roads at the federal and most state levels, many if not most consumers are unaware and disbelieving. Yet few doubt the electric utility keeps the money it collects monthly.
  • Second, it is educational to consumers, transportation users will see what transportation costs to provide at a particular level of service at a particular time of day. The resulting incentives can only reduce consumption.
  • Third, it is educational to the agency, the agency will see what it does that provides value, and what doesn’t. A revenue forecast will be coupled with demand forecasts. There will be a real penalty for mis-forecasting.
  • Fourth, it will lead to better investments, since the return on investment will be aligned directly with the agency’s decision making process.