You may not know Affiliated Computer Services, but if you've ever paid a fare or toll, it's likely that they know you.
For three decades, ACS has been in the business of moving money for government transportation agencies.
When you pay a toll on the highway with an "EZPass"-style device, ACS is there.
When you use a modern parking meter for a municipal parking lot, ACS is there.
When you use a smart credit card to ride the subway or bus, ACS is there.
Run a red light and receive a ticket in the mail? Yep -- that's ACS, too.
So when it comes to rolling out smarter transportation schemes in the world's most progressive cities, ACS -- now a Xerox company -- is there, too. Because when we talk about "smart transportation," we're really talking about "smart finance" -- that is, removing the technological barriers for commuters to pay for transportation services.
I spoke with ACS Transportation chief David Cummins about the future of smart transport, the business model that achieves it and the reason why so many cities aren't yet on board with technology.
SmartPlanet: If you would, please explain what ACS Transportation does.
DC: The transportation solutions group is, in terms of revenue, the largest in the world [for ACS]. We've been in the business for nearly 30 years now, providing outsourced transportation solutions to government. We're in every market except aviation.
Our major business is tolling -- we process half of all tolls here in the U.S.
We also do fares -- smart ticketing and so forth. The idea there is that you use the already existing banking infrastructure.
Our third-largest business is what I call on-street or municipal parking -- parking meter technology and fines. Airports, machines, et cetera.
The next business would be our photo enforcement business, for red light running, speeding, and new violation types for cities around the world.
And finally, we have a program for the commercial trucking industry that allows them to bypass weigh stations.
It's a big group. It's a global business. It has become a [common] denominator for the application of [transportation] technology.
Sometimes we use our own technology -- smart card readers on buses -- and sometimes we use technology from third parties. We always try to manage the account and process transactions. We're collecting mission critical revenue, billions of dollars every year, for tolling authorities and transit authorities. They trust us to speak with their money and optimizing their revenue collection. That requires us to have the back end systems to handle those volumes; the financial integrity and data security required to deal with this kind of information.
SmartPlanet: It's hard to find someone who doesn't want to improve the nation's transportation systems. But the digital revolution is barely underway in the U.S. in this regard. What are the challenges?
DC: Our clients are governments -- municipalities in particular, or what I call "special entities."
These clients have competing demands on resources. They have pretty rigid procurement law. They have budgetary pressures that have been accentuated in the last five years or so -- $80 billion in projected budget deficits across the states. They don't have the money to make the capital investment for these technology purchases.
The U.S. transportation industry is behind the rest of the world in adoption of new technologies. You'll find one or two countries in the world -- there are very few -- that have "dumb" coin-based parking meters. In Europe, there are pay-and-display meters.
In the tolling world, the U.S. was a late adopter in open road tolling, what we call "free flow" tolling. Most toll plazas still have manual lanes accepting cash. And the U.S. adoption for speed photo enforcement is pretty limited for a handful of states, whereas the rest of the world, Europe in particular, has had massive deployments.
SmartPlanet: What's the hold up?
DC: There's a little bit of a conservative, late adopter approach to new technology.
Another constraint is -- and this is true outside the U.S., too -- there's a general reluctance toward outsourcing. That's particularly true in the transit space. There is very limited outsourcing in the U.S. of the services provided. Which is remarkable, because there's not a profitable transit service that I'm aware of -- all of them are hugely subsidized by their respective states.
SmartPlanet: What's the ROI timeline for your services? If it's saving municipalities money, why won't they bite?
DC: There's obviously the top line -- revenue optimization and maximization with these technologies. There's also the operational savings.
The challenge is the reluctance to outsource. Transit authorities are heavily unionized. With this technology, we could do things exponentially more efficient -- that means we could reduce their workforce, if you will. But there are some challenges to that, particularly in the recent push to maximize employment [in the wake of a global recession].
The thought that we have to use the standard procurement model -- we pay for the tech up front, and they pay us back over time -- the more progressive authorities in the world are turning that on its head and saying, "If the ROI is that good, why don't you pay for it [completely], and we'll sign a revenue-sharing contract?"
We've recently been doing that model around the world: no investment, a shared reward, and the technology is turned over to the authority.
It's a bit of not knowing enough what the ROI would be, and not necessarily trusting us, the private sector.cThere are some bureaucratic constraints to making the best ROI decision.
SmartPlanet: Is the revenue-sharing model better in the long run for ACS?
DC: I think we do make more money, but it really fits our [corporate business] model better, with more consistent income.
Ultimately what we want to be doing is account management -- there are a lot of services you can layer on an account.
SmartPlanet: Let's talk cities. Philadelphia, Las Vegas, New York, Chicago -- who's doing what well? Which are the most progressive?
DC: On the transit side, Philadelphia is on the forefront of using bank cards. That will make a pretty big impact on their operating revenue.
In Las Vegas, they're working on parking. People might ask, well, isn't parking free? Yes, but there's a lot of on-street parking, and it's real old technology.
I wouldn't list New York City as the most progressive big city out there. It's a good deal behind, say, San Francisco.
Our small city customers are asking us to try technologies that no one else in the world is trying. Progressive cities, without generalizing too much, are west of the Mississippi. They're willing to try out all sorts of new technologies, and if it blows up, there's less risk.
On the big city side, you have a scale issue as well. It's one thing to try out a next-generation meter or sensor in a small town in California; it's another thing to put it in every single parking space in San Francisco.
When you're starting to talk about high volumes, you're talking about hundreds of millions of dollars or even billions of dollars. There's a lot of revenue at stake. New technology doesn't necessarily scale well. When you get to the size or scale of New York City or Philly, there's really only two or three companies that can bid on that [job].
New York City, Philly and Chicago have some of the oldest fare-collection transit technology in the world. The MTA [in New York] still uses gates. That's like, two steps removed from free-flow, open road tolling, where's there's no people at all.
In New York, we've been doing that [MasterCard] pilot for the bank card for seven years now. But they haven't adopted it beyond that pilot area.
SmartPlanet: Does the hurdle of legacy infrastructure impact what you do?
DC: Clearly, there's a notion of the cost of what's already in the ground. What we're offering in our particular niche of transportation is really electronic payments and making manual operations more efficient. We like to say that we take cash out of the system. It creates a huge amount of operating expense, and potential leaks in payments.
From what we're selling into the market, we are not constrained by infrastructure. Our argument is, it will take you 10 years or more to build new infrastructure; let ACS make the existing infrastructure more efficient. We're taking technology and layering it on the roads, rail lines and parking spots today.
Photo enforcement is the fastest growing of all the transportation verticals that we have today -- a 30 percent clip in the U.S. over the last five years. It's been growing in the rest of the world -- China, the Middle East.
In the Middle East you have a crisis, a pandemic, of traffic fatalities. It's unbelievably dangerous to drive on the road in the Middle East. Wherever you stick cameras has a dramatic impact on speeds and driving behavior, and accidents usually drop 20 to 40 percent.
In the U.S., with a couple of notable exceptions like Arizona, there has been greater and greater acceptance of what these cameras do in terms of traffic safety and less of a paranoia as it relates to privacy issues.
SmartPlanet: Your business is processing the money for citizens on behalf of government. Is privacy a big issue for you?
DC: The one that I'm least concerned about from a privacy standpoint is probably transit. Typically smart card programs are anonymous -- there's no way to associate them with an individual. We'd like that to change, to be more account-based, like they have in L.A. That's where we'd like to go, but most authorities today are just focused on getting smart cards rolled out.
The photo enforcement privacy issue is front and center. It's the most obvious [technology], and we pay most of our attention to it. You can't have any missteps on the privacy side, or it can kill a program. In most states it's owner liability, so it doesn't matter who's driving the car.
SmartPlanet: What is your biggest challenge?
DC: Getting our customers comfortable with new business models.
I've been out in Indianapolis a lot recently -- we were awarded a 50-year concession to run parking in Indianapolis, the second concession of its kind. The first was in Chicago. But we're taking a different approach than Chicago, and it's a new business model, and it's getting citizens of Indianapolis comfortable with the idea that a parking space is a city asset being given over to a private player.
This notion of a public-private partnership -- a shared risk-reward. We have a lot of creative ideas about how to structure a program that minimizes upfront investment and maximizes control, but there's a decent amount of education about the business model. It's challenging.
What keeps us preoccupied? How to communicate and convince our government customers to deal with new business models to deal with intractable problems such as congestion and dealing with the scarce resources that they have.