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Appendix C

Technology as a key

determinant of viability

A prerequisite for a successful congestion charging scheme is appropriate technology:

one that meets the system requirements at the right price.

Modern-day technology was foreshadowed almost half a century ago when

distinguished economist, William Vickrey, proposed a system to the Joint Committee

on Washington Metropolitan Problems involving an in-vehicle unit that would

provide a unique signal identified by in-pavement equipment (Vickrey 1959). The

data from this equipment would be transmitted to a central computer, enabling bills

to be calculated and sent to vehicle owners. This technology is now established

practice in many countries.

However, the most technically-advanced solution is not always appropriate. Britain’s

first congestion charging scheme, covering Durham’s historic centre and widely

regarded as a success, involves very rudimentary technology.

In contrast, the national road pricing scheme mooted for Britain is currently estimated

to cost £62 billion to set up and £8 billion a year to administer. Based on the British

Government’s experience with large information technology (IT) contracts, the

final figure could be many times this estimate. In addition, the cost of the in-vehicle

equipment ranges from £15 –£500, depending on the sophistication with around

£100 for installation. Hence, conservatively assuming £200 for each of the 33 million

vehicles registered in 2005, this would add another £6.6 billion.

Hence, an integral part of the decision to introduce congestion charging is choice

of technology. As with most technology, there is a trade-off between cost and

functionality. The many systems that operate today reflect a wide range of unit costs,

capabilities and charging applications. As the price of the technology falls, more

congestion charging schemes will become viable.

In Singapore, enhanced requirements and technological advancements accompanied

by declining costs led to the migration from a paper-based system to electronic toll

collection (ETC) in 1998. The choice of a relatively labour-intensive ANPR system for

the London scheme reflected a desire to reduce uncertainty by avoiding ‘frontier

technology’. In the early years of the scheme, the cost of the system consumed more

than 60 per cent of the revenues raised.

By one estimate, after allowing for depreciation and the appropriate cost of capital,

the cost of the London scheme exceeded revenue raised (Prud’homme and Bocarejo

2005, Table 1). The equivalent figure for Singapore is around 20 per cent. The

Netherlands has set their target for the operational costs of future road-user charging

schemes as 5 per cent of revenue.

139

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