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An Efficient Toll System: Understanding Road User Charging and Tolls Payments

2MSTS Tolls: An Efficient Toll System

Table of Contents

Introduction03 The Polder Model of Implementation09

Why Do Tolls Exist?04 Tolls for Commercial and Personal Vehicles10

Road Taxes, Tolls and Road User Charging (RUC), What Does It All Mean?

05 Standardization of Processes Implementation11

How Tolls in Europe Differ From U.S. Systems06 Choose Partnership for

Long-Term Success12

Role of EETS Providers and Toll Service07

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Introduction

Infrastructure improvements have relied on toll roads for more than 2,700 years. Designed to raise funds while providing safe passage across the globe, toll roads will continue to be an important part of our transportation system.

In addition, as the use of electric vehicles increases, fuel tax revenue that supports infrastructure is expected to decrease. In the UK, unreceived fuel tax from electric vehicles is £40 billion.1 The governments are turning to road user charges to cover the losses.

Electronic Toll Collection (ETC) has made it easier and faster to assess and pay tolls with its wireless system that automatically collects tolls when a vehicle passes over toll roads, tunnels, bridges and HOV lanes. With a CAGR of 10.7%2, ETC revenues from all types of vehicles are set to reach $15.6 billion by 2028.

Innovation in technology includes building partnerships to help businesses make the process easy to manage.

1 www.business-live.co.uk/ports-logistics/rise-electric-cars-could-lead-19293189 2 www.alliedmarketresearch.com/electronic-toll-collection-system-market

MSTS Tolls: An Efficient Toll System

4MSTS Tolls: An Efficient Toll System

The cost of maintaining roadways tops $900 billion per year globally

Why Do Tolls Exist?

Research shows the cost of maintaining roadways tops $900 billion per year globally.4

Tolls are charged to offset the high cost of road construction, maintenance and improvements. Bridges and tunnels may also charge tolls to fund maintenance for these structures. In addition, expanding international commerce is increasing the rate of deterioration to our roadways, making an even stronger case toll charges are here to stay.

Tolls fund improvements such as additional lanes, adjustable road signs and adaptive

traffic lights. Improvements also include implementing new technologies like navigation apps fueled by crowd-sourced traffic information.

These new tools provide the power to monitor and regulate road congestion. Increasing rates on popular routes during peak times and rush hours incentivize users to optimize their routes to either avoid high-traffic areas or pay a premium to navigate popular routes.

Furthermore, governments strongly seek to manage congestion and its influence on the climate through road user charging.

4MSTS Tolls: An Efficient Toll System

4 www.irf.global/mckinsey-irf-diagnostic/#:~:text=Improving%20the%20global%20delivery%20of,by%20%24180%20billion%20per%20year.

5MSTS Tolls: An Efficient Toll System

Governments typically choose time based, distance based or fixed fees to levy for the use of their infastructure. For example, the Eurovignette system in the Netherlands is a well-known road tax which is time based.

Road taxes are usually not subject to VAT (value-added tax). Other countries, such as France, have outsourced the maintenance of its infrastructure to concessionaires who charge for the use of their motorway network depending on the distance driven on a specific network. In this case, passage is considered a service and is subject to VAT. In Europe, Tolls and Road User Charging are interchangeably used.

We currently see a trend where countries with time-based systems are beginning to switch to distance-based charges. Out of 27 EU countries, 14 have implemented a distance-based system and we see some more countries considering switching to a distance-based system in the next few years.

Toll charges are based on vehicle type and attributes such as weight, Euronorm class and number of axles. In some countries, certain vehicles classes are exempt from tolls (i.e., passenger cars and coaches). Some toll roads offer discounts for frequent users.

A differentiated pricing structure helps reduce traffic congestion by determining when to assess taxes and charges based on vehicle size and weight, in addition to placing premiums on heavily trafficked times of day.

Road Taxes, Tolls and Road User Charging (RUC), What Does It All Mean?

Toll charges are based on vehicle type and attributes such as weight, Euronorm class and number of axles.

5MSTS Tolls: An Efficient Toll System

6MSTS Tolls: An Efficient Toll System

How Tolls in Europe Differ From U.S. Systems

In Europe, Road User Charging (tolls) is commonplace. Conversely, in the United States users pay a fixed toll for bridges and tunnels. Only a few motorways are tolled where all vehicle classes pay a fixed toll amount.

The U.S. government is exploring if and how to implement a nationwide Road User Charging scheme, where all users pay for the use of the infrastructure, meaning both on and off the motorway.

To get to a nationwide interoperable system that serves the over the road industry, the U.S government may want

to look at the European Electronic Tolls Service (EETS) that was introduced in 2004 to simplify travel between countries. EETS aims to standardize road user charges, using one on-board unit (OBU) across all European countries.

Today, in the U.S., every state manages their own toll roads, and when looking at implementing a genuine charge for the use of the entire U.S. infrastructure, the current arrangement brings up challenges for deployment. However, as electric cars and ride-sharing reduce fuel consumption and fuel tax revenues in the U.S., a road user charge may help recoup lost revenues.

7MSTS Tolls: An Efficient Toll System

In Europe, the New Legislative Framework (NLF) was adopted in 2008, strengthening the free movement of goods inside the European Union. Trade between European countries grew 66% from 2002 to 2008.5 To support the economic growth and the seamless flow of the transport, a standardized system of toll payments was needed.

For perspective, two decades ago, a fleet travelling across multiple countries was required to pay road user charges with multiple devices or cards, resulting in a heavy administrative burden and long lines at tolls gantries. Finally, in 2009, the European Commission introduced the European Electronic Toll Service (EETS) and its technical elements.

The guiding principle of EETS is to ensure when charging a road user, it is simple and applies in any country across Europe. Ultimately, HGVs would travel within Europe using one interoperable box to pay all tolls. For trucking companies, this would mean a single contract with one service provider, one invoice and one on-board unit (OBU) covering multiple toll domains (motorways, tunnels, bridges etc.).

Under EETS, the tolling system is disconnected from other tax systems to avoid double taxation and inequality. As the new tolls systems are mainly distance-based, an on-board unit is used to collect the information for toll charges. This OBU should be easy to use, and the cost calculations should be straightforward.

Role of EETS Providers and Toll Service Providers

A single contract with one service provider, one invoice and one on-board unit (OBU) covering multiple toll domains.”

“

5ec.europa.eu/eurostat/statistics-explained/index.php?title=Intra-EU_trade_in_goods_-_main_features&oldid=452727#Evolution_of_intra-EU_trade_in_goods:_2003-2019

8MSTS Tolls: An Efficient Toll System

The European Union provides standards, such as ISO and GDPR, to ensure the technologies used in these OBUs to detect the location of the vehicles are compliant with GNSS and DSRC. This allows OBU holders to drive through gantries without stopping.

To increase adoption, many toll chargers have incentivized fleets to use an OBU instead of a fleet card to obtain discounts, as it is done in Norway and on Scandinavian bridges. The OBU should be accredited in each toll domain separately to ensure an error-free performance.

Quality checks are done on both the OBU and the back-end data collection systems that generate invoices.

A specific point of discussion is enforcement between countries. For example, drivers from Belgium must pay tolls in Germany. The EETS facilitates the easy collection of unpaid tolls through the EU Council’s legal framework and national vehicle database.6

6www.consilium.europa.eu/en/press/press-releases/2018/06/07/eu-is-making-it-easier-to-recover-unpaid-road-tolls-council-agrees-its-stance/

9MSTS Tolls: An Efficient Toll System

EETS guidelines are clear and logical, but to create this optimal system, governments should actively involve market players in the development of the national tolling system. Governments capitilizing on the success seen across Europe. Belgium and the Netherlands are examples of countries leveraging market stakeholders in the development of new systems. As a result, Belgium has the highest numbers of EETS providers accredited and healthy market competition.

In the Netherlands, the polder system of consensus building promises to create a new tolls system by 2024. The Dutch government invited MSTS Tolls alongside other fleets,

transportation associations and environmental associations to consult on the new RUC system.

In Europe, governments or toll operators typically rely on EETS providers and toll service providers to serve as intermediaries between toll chargers and road users. This ensures the toll charger receives funds for developing infrastructure in a timely manner, while allowing the end user to pay on terms.

This adds stability to the market given that 85% of commercial tolls payments are completed post pay today through EETS providers or toll service providers.

The Polder Model of Implementation

Traditional Tolling Model EETS

10MSTS Tolls: An Efficient Toll System

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Both private cars and commercial heavy vehicles contribute to road congestion and deterioration. The abundance of personal vehicles globally typically are heavy contributors to overcrowding on the road. Charging more for travel in peak hours, a tolls system can help regulate rush hour traffic and raise needed funds for improvements. On the other hand, RUC are appropriate tolls for commercial vehicles that cause more wear and tear to roadways.

Data privacy issues are an additional barrier to toll collection for personal vehicles, given drivers don’t want an OBU tracking their travel. Several e-payments apps and electronic wallets have been developed as a way to use technology to make it easy to collect fees for personal travel on toll roads.

Commercial drivers have fewer limitations related to data privacy because fleet managers want insights about their fleet to reduce costs and eliminate fraud. Unlike personal vehicles, commercial vehicles travel internationally and between countries.

According to EuroStat, 73% of Hungarian fleets, 70% of Portuguese fleets and 40% of Austrian fleets travelled internationally in 2017.7 That number is expected to continue to increase this decade. Given the distances traveled, providing an easy way to pay multiple tolls across an entire fleet is critical.

The most sought-after features are streamlined payments, device availability across multiple countries and a robust reporting/management system. These needs have given rise to EETS and a spike in development of sophisticated fleet management systems.

Tolls for Commercial and Personal Vehicles

73% of Hungarian fleets, 70% of Portuguese fleets and 40% of Austrian fleets travelled internationally in 2017.

-EuroStat

10MSTS Tolls: An Efficient Toll System

7ec.europa.eu/eurostat/statistics-explained/index.php?title=Road_freight_transport_statistics

11MSTS Tolls: An Efficient Toll System

The global trend is to charge road users based on distance driven, with variable rates determined by vehicle attributes such as weight, type and emission class. The use of electronic devices to pay for tolls also helps to diminish manual processes and make the passage of toll gantries faster across all continents.

In the U.S., states are responsible for road maintenance, not the federal government. Federal fuel taxes are paid at the pump based on the amount on fuel acquired by a distributor, not the final consumer.

On top of that, fuel taxes charged to drivers vary by state. Also in the U.S., fuel taxes and toll charges are still segmented by state. Several states (Washington, California, Colorado) have piloted RUC programs but a national interoperable approach is yet to materialize.8

Harmonizing this whilst coupling a road user charging program with fuel tax reduction, seems challenging. Europe on the other hand, is implementing a standardized system for a free flow of transport across countries without coupling it with fuel tax reductions.

Standardization of Processes

The use of electronic devices to pay for tolls also helps to diminish manual

processes and make the passage of toll gantries faster across all continents.

11MSTS Tolls: An Efficient Toll System

8www.ncsl.org/research/transportation/road-use-charges.aspx

12MSTS Tolls: An Efficient Toll System

Currently MSTS Tolls provides a comprehensive tolls solution for 20 European toll domains. MSTS developed distinctive toll payment and billing programs for the transportation industry over the past decades. The natural next step is to become an EETS provider.

In 2019, MSTS Tolls received an EETS registration in the Netherlands and began development of a new interoperable toll box and advanced customer portal. The launch of the new EETS toll box is planned for Autumn 2021. It has a strong presence as a direct service provider to the Benelux transportation industry.

The company partners with fuel card issuers, freight forwarders, VAT-reclaim companies and other players in the transportation market to help expand their service portfolios with a white-label toll program. These companies take advantage of an additional revenue stream from the toll payments. The value-added services increase customer loyalty, as they don’t need additional suppliers.

Contact MSTS Tolls today to find out how the partnership can help you stand out from the competition and optimize your processes and profits.

Choose Partnership for Long-Term Success

12MSTS Tolls: An Efficient Toll System

Contact Us to find out how MSTS Tolls can help you stand out from the competition.

13MSTS Tolls: An Efficient Toll System

About MSTS Tolls

MSTS Tolls provides white-label tolls programs for fuel card issuers, freight forwarders and other players of the transportation market. Making tolls payments faster, easier and smarter, MSTS Tolls provides a comprehensive toll solution for 20 European toll domains and an advanced online portal to manage the OBUs of an entire fleet. Since 2019, MSTS Tolls has been EETS certified in the Netherlands and is working to launch an interoperable box in 2021.

For more information, visit MSTSTolls.com