In the 3rd quarter of 2014, AT&T connected more new vehicles than new smartphones for the first time. Growing to reach a 40% share, automaker and aftermarket telematics will be the dominant sector for cellular M2M connections, according to ABI Research. The next frontier to create a differentiating connected vehicle experience is to connect our vehicles to our homes, our smart grids and most importantly a smart roadside infrastructure to deliver on the promise of safer, smoother and more enjoyable rides on our roads.
But smart connected roads appear to be utopia faced with a reality where current road funding is failing to even maintain our roads, and where bad roads are imposing a hidden tax on our economy, and as a result leaving underfunded governments to hold the lifeline for transportation innovation.
It is upon us again here in the Midwest. Our roads are facing the grueling cycle of freezing and melting that will strip away the band aids and rip open hardly healed scars from last winter and force us motorists to steer clear of minefields of treacherous potholes. In 2014, my “tax” for driving on substandard roads was two new suspensions, new steering seals and a set of new tires. Each vehicle owner in the U.S. pays this nearly $400 dollar “bad road tax” each year, totaling $80 billion according to a study by TRIP.
The “bad road tax” nearly doubles the roughly $100 Billion in fuel tax and tolls the U.S. collects and spends each year to maintain our road infrastructure. $100 Billion translates into a 0.4% return on our paved road assets of estimated $27 trillion in value and means that we are “sweating” our road transportation infrastructure for 250 years.
We need new funding sources to fix our roads and to connect them for a future where intelligent transportation systems will be run with networked information. While there is broad consensus on these worthy goals, suggestions on how to get there are often met by countless concerns of the guardians of the status quo. Let me share some food for thought from many discussions with government and industry stakeholders, some admittedly off the beaten path.
Nobody wants tolls or another stupid tax? Maybe, but every one of us indirectly pays more than $7,000 per vehicle per year in “hidden societal taxes” for bad roads, for crashes and for the time we lose stuck in traffic. A Smart Road Price would make these hidden costs visible, be a tool to reduce them and spawn innovations that benefit all of us. In contrast to conventional mileage based tolls, a Smart Road Price charges for driving on roads —based on time of day, road congestion, road type and condition, allowable speed, vehicle weight, fuel economy, or emissions— thus provides smart incentives for drivers and road operators to balance supply and demand more effectively. Overly stressed parts of the road system would dynamically command price premiums to flexibly divert demand to less costly routes and, eventually, to finance the elimination of bottlenecks. Drivers could invest in the roads most traveled and most important for their personal commutes, which would yield returns in both time and money for them.
The standard Smart Road Price could be set at the average fuel tax a vehicle owner pays per mile. In addition, participation could be made optional. This way, drivers could elect to pay a Smart Road Price in exchange for no longer having to pay fuel tax. Increasing the fuel tax over time towards a planned long-term phase out could provide further incentive to join Smart Road Pricing immediately.
U.S. toll projects have not been overly successful? Approximately 34 percent of the highway system across Europe is toll-operated, compared to 3 percent of the national highway system in the United States. If a no-cost road alternative is readily available, many drivers will opt for the no-cost alternative, undermining the very business foundation of toll operated roads. One way to address this issue is to implement a ubiquitous Smart Road Pricing system that covers the entire road system, as it is being discussed in Germany and other European countries. However, a Smart Road Price system would require ubiquitous vehicle connectivity platform that would replace incumbent technologies like proprietary toll collection systems, road gantries, license plate recognition, and certainly “vignettes”.
Who pays for the on-board connectivity unit? Most new vehicles produced in the U.S. will be equipped with embedded connectivity. Connected vehicle life cycle and owner management, navigation and infotainment, and most importantly safety – 80% of crash scenarios can be addressed with vehicle connectivity – are making a compelling case for vehicle connectivity. An App that collects a smart road price would add another reason to justify this investment. Waiving vehicle-licensing fees for one or more years to subsidize the on-board unit could further accelerate the penetration in both, the new vehicle and more importantly the vehicle aftermarket.
Who pays for the connected roadside infrastructure?Connecting vehicles to roadside infrastructure in the United States could be a profitable business at a cost of only a tenth of a cent per vehicle mile traveled, or one dollar per vehicle per year. While U.S. Department of Transportation (DOT) cost estimates for connecting vehicles to infrastructure have varied over time, an estimate we used indicated that $2.3 billion in revenues is needed to fund a roadside infrastructure business with 50% gross margin.
Who should lead this – government or industry? A city, county, state or the federal government could transfer its road assets – or parts of them – into Connected Road Investment Trusts, in return for partial cash out or as an investment, if public asset ownership is preferred. The Connected Road Investment Trusts could attract additional private investments in the financial market or from stakeholders like road builders, intelligent transportation system providers or mobile network operators. The funds raised could be invested in an Intelligent Transportation Services NewCo that collects a Smart Road Price for the use of these roads.
In due time, Smart Road Price revenue could be deployed to fix our roads and to build an intelligent transportation system that connects vehicles to traffic operations, traffic lights, streetlights, electronic signs, road sensors, parking spots, and provides ubiquitous roadside internet access. Intelligent Transportation Services could be sold to drivers to reduce the risk of crashes and congestion and to infrastructure operators to improve planning and maintenance of roads.
This would help reduce the nearly $400 dollar cost each vehicle owner pays for driving on our substandard roads, and help unlock benefits of more than $1,400 per connected vehicle per year.
The Connected Road Investment Trust would also accelerate the growth of the connected vehicle and intelligent transportation system industries and become an engine for job creation. Based on earlier estimates, selecting the top 20 percent of the nearly 1 million miles of the U.S. national highway system with highest congestion, crash risk or repair needs, and assuming a Smart Road Price participation of 1/3 of U.S. drivers has the potential to create between 400,000 and 550,000 jobs.
However, making this idea real would require a big leap of faith in any land of [the] free roads. Therefore, other nations with even more pressing transportation problems or more appetite for making connected transportation an economic growth engine, may end up winning this global innovation race.
Personally, I am a strong believer and ready to advance this “food for thought” toward the “art of the possible”.
When I’m stuck in one of Silicon Valley’s many traffic jams, my frustration level rises as rapidly as my speedometer slows down. I think about how the digital synchronization of highways, vehicles and traffic lights could unclog congestion, lower pollution, eliminate delays and significantly reduce our collective frustration levels.
Just a little digital automation could go a long way to reduce not only traffic and accidents but also time, gas, smog and the costs of road and car repairs. Not to mention, helping us all attain a much more sustainable environment.
So when I’m stuck like this in traffic, whether at home or internationally, my thoughts turn to how we can get to the Last Traffic Jam.
The answer is a more connected world—or the Internet of Everything. It’s how we’ll change the way we live, work, play, and learn. This has been Cisco’s goal for 30 years, and today we have an unprecedented opportunity, along with our partners, to transform our world for the better
And that includes eliminating traffic headaches.
Studies show that for every minute spent clearing an accident from a road, there is a four-minute delay to get traffic moving again. And it’s not just delays. Today, traffic congestion costs Americans alone more than $124 billion a year. By 2030, experts predict the average American household will spend 33 percent more in traffic-related costs than today and the annual price of traffic in the United States and Europe could rise nearly 50 percent from today’s costs.
Want to know more? Here are some insights on the Last Traffic Jam.
Today, we are already connecting roadways, cars, drivers, traffic lights, parking spaces, public transportation and commercial traffic. The early results show dramatic improvement in traffic flows, fewer roadside incidents, and lower transportation costs. And one day this all will lead to the Last Traffic Jam.
This is happening by connecting disparate intelligent transportation systems to provide a centralized view of highway systems, including road conditions, traffic, construction, and transit information. Connected roadways and connected cities, are improving decision-making while reducing operating and maintenance costs.
I believe the “beginning of the end” has started. Cities around the world are getting connected.
At the ITS World Congress last month in Detroit, we saw a wide range of intelligenttransportationsolutions and concepts. The most popular solutions on display –presented by several Auto Manufacturers, ITS suppliers, and Cisco along with partner Cohda Wireless – were simulated and live Vehicle-to-Vehicle (V2V) and Vehicle-to-Infrastructure (V2I) demonstrations, which showed how vehicles will communicate to each other and to roadside infrastructure in the not-too-distant future. A key goal of V2V and V2I is safety, for drivers and pedestrians, as vehicles will be able to synchronize their movement with traffic lights, roads, toll plazas, rail crossings and of course other cars.
Cisco also showed how Connected Transportation solutions can leverage the intelligent – and virtualized – mobile core network. We demonstrated a [fictional] after-market connected car application (“CarConcierge”) that enables users to remotely start or unlock their car, do a car “health check,” and extract car-sourced analytics over an LTE mobile network. The demonstration showed how the Connected Transportation market will see an explosion of innovative new applications that mobile operators can monetize by providing secure, intelligent, and cost-effective connectivity and process automation to devices and vehicles.
Watch a video summary of the Cisco demonstration: Read More »
Ford, GM, Honda, Toyota, the U.S. Department of Transportation. It’s no surprise why they were front and center at the Intelligent Transportation Systems (ITS) World Congress which wrapped up in Detroit last week. But, Cisco?
Barry Einsig, Cisco Global Transportation Executive and John Gillan, Sales Relationship Manager for Cisco Advanced Services prepare for a customer meeting at ITS World Congress.
Cisco has long been recognized as a leader in traditional IT and networking, but customers are starting to see how the Internet of Everything and the Internet of Things is driving a big transformation in transportation. And, they trust Cisco to lead the way again.
If cities would set aside dedicated lanes on highways or exclusively autonomous sectors in cities, autonomous vehicles could probably become reality as early as 2015 to 2019 on dedicated highway lanes and 2020-2024 in dedicated city sectors. Mixing with and managing the human errors of drivers in conventional vehicles will move the time horizon for fully autonomous vehicles out to 2018 to 2022 on mixed highway lanes and post 2025 in mixed urban driving sectors.
Today, technology is assisting drivers in preventing crashes (e.g., line keeping assist) and is allowing drivers to delegate driving to the “autopilot” under certain circumstances (e.g., adaptive cruise control). It is available in many premium models and also becoming an option in other vehicle categories for all who are willing to pay a premium for a safer ride. Cruise, a startup just announced plans to launch a $10,000 autonomous aftermarket kit for newer Audi cars early 2015. While the call is still out whether upgrading conventional vehicles to become autonomous is a viable strategy, it is a good example for how quickly the technology is evolving.
Technology companies and automakers have fully autonomous vehicles that have driven hundreds of thousands of miles on our roads to date. The time when we can buy and ride in a fully autonomous vehicle will not only depend on the autonomous vehicle technology the industry is maturing at rapid pace, but even more on the driving space we allow such vehicles to drive in. The options are best described in a four quadrant grid: One axis differentiates highway and city driving, the other axis distinguishes exclusive or non-exclusive driving space, meaning whether autonomous vehicles operate on dedicated lanes or city sectors or have to mix and cope with the mistakes of conventional drivers.
An investment in driverless vehicles will likely break even within one to six years, depending on the readiness of the auto insurance industry to adapt rates to the lower risks of autonomous vehicles and on owners’ willingness to share autonomous vehicles.
The fixed ownership cost of the average U.S. passenger vehicle is approximately $8,700 per year:
$4,300 depreciation, financing
$1,900 license, parking, warranty, etc.
$1,500 crash related cost born by the owner
$1,000 auto insurance
Human error accounts for over 90% of crashes. Assuming autonomous vehicles can eliminate 80% of this risk, the average vehicle owner would save approximately $1,800 (80% x 90% x $2,500) each year.
Conventional vehicles are used less than 5% of their usable time. The convenience of being able to call an autonomous vehicle when it is needed and easily release it for others to use when it is not needed is likely to make autonomous car sharing a much more convenient and cost-efficient mode of transportation for many. Assuming the remaining ownership cost ($6,900) can be shared by 3 users, this would equate to additional savings of $4,600 per user.
For the purpose of this “back of the envelope calculation”, let’s assume that structural design savings and the incremental autonomous cost are a wash. Virtually crash-less autonomous vehicles would require less structural and other safety features (e.g., fenders, airbags) built into vehicles, thus reducing cost and weight.
According to a recent Morgan Stanley study, driverless technology is estimated to initially add about $10,000 to the cost of a vehicle (less than the cost of a battery pack for an average electric vehicle). At the above savings rates, the investment in an autonomous vehicle would pay back in year six at $1,800 crash risk related savings, and in year two at $6,400 savings including the sharing option.
With mass market adoption, the autonomous upgrade cost is expected to go down to about $5,000 per vehicle. At this price point, the investment in an autonomous vehicle would pay back in year three at $1,800 crash risk related savings, and in less than a year at $6,400 savings including the sharing option.