Toll Collect: Tolling the Demise of the Commercial Vehicle Telematics Market? Analyst Commentary by Frost & Sullivan
Toll Collect: Tolling the Demise of the Commercial Vehicle Telematics Market? By Miranda Carpenter, Programme Manager at Frost & Sullivan As the European Commission prepares to make its final judgement on Toll Collect this week, Frost & Sullivan discusses whether the offering of value added services such as track and trace capabilities will signify the end for the commercial vehicle telematics providers, or whether it could act as a much-needed boost for a flagging market. On 31st August 2003, the German government will introduce its innovative road pricing scheme to charge vehicles over 12 tonnes using its motorways. The technology, whose in-vehicle terminals combine positioning (GPS) and communications (GSM) for tracking and payment purposes, was developed by Toll Collect, a consortium consisting of DaimlerChrysler Services, Deutsche Telekom and the French company Cofiroute. Toll Collect recently announced its plans to offer value added services (VAS) in its in-vehicle terminals. Effectively, this would mean that by installing the on-board unit in their trucks, fleet operators would not only be able to pay the toll in the quickest and most convenient way, but they could also track the geographic location of the vehicles, and communicate with them via text messaging. However, the European Commission has expressed fears that the system could become “a predominant platform for the provision of telematics services for the transport and logistics sector”, and has been investigating the consortium’s competitive position. Frost & Sullivan has conducted interviews with a number of key stakeholders in the telematics industry, and believes that the offering of value added services by Toll Collect could severely impact the commercial vehicle telematics suppliers. This is due to the fact that track and trace – the services proposed by Toll Collect – are the mainstay of the telematics market. In a recent study on the European Commercial Vehicle Telematics Market, Frost & Sullivan found that around 75 percent of commercial vehicle telematics systems on the road today offer two basic functions – track and trace – and little else. Clearly, if Toll Collect were to offer these same services, truck operators would have little incentive to specify a dedicated fleet management system, as the terminal would be more than adequate for most of their needs today. The problem is exacerbated by the sheer volume of on-board units that are likely to be installed. Frost & Sullivan anticipates that at least 950,000 Toll Collect units will be installed on heavy vehicles by the end of 2004 – a figure which could create a severe drain in the potential market for telematics systems. The issue is further complicated by the fact that the majority of telematics providers are the truck makers such as Volvo, Scania, DAF and MAN. With DaimlerChrysler - one of the most advanced developers of commercial vehicle telematics systems and Europe’s leading commercial vehicle manufacturer in terms of sales - a participating member of the Toll Collect consortium, the playing field is distinctly uneven. So how can this be resolved? Toll Collect has announced that it will open up its technology to its rivals. This can be achieved either by giving third parties access to the GSM/GPS module, or by permitting third parties to install Toll Collect software in their hardware. Both these scenarios would offer existing telematics suppliers the advantages of raising awareness of telematics systems and services and also significant cost savings, as telematics systems are expensive to produce and costly to deploy. However, even if one or both of these alternatives are granted by the European Commission, a critical unequal situation still remains if Toll Collect is permitted to offer value added services through the on-board unit. Whilst Toll Collect will be able to offer its services on a unit which is offered to the vehicle owner free of charge, the other players will have to install their own computer and screen alongside the Toll Collect unit. Not only will this make it difficult for the suppliers to compete, as the computer and screen form a major part of the total cost of a telematics package over time, but also customers tend to prefer a single screen. Furthermore, because it will be difficult for the telematics suppliers to reach levels of production similar to those of Toll Collect, the cost of hardware is likely to decrease at a slower rate. Frost & Sullivan therefore believes that the optimum solution is for the Toll Collect on board unit to remain a closed system, offering no value added services. Whilst this would do nothing to promote awareness of the capabilities of telematics, it would be most likely to appease the largest number of players. A further advantage of this would be that Toll Collect could licence its protocols to the EU to enable it to achieve its objectives of introducing Europe-wide interoperable GSM/satellite based toll collection by 2008. The European Commission is currently deliberating over its decision and an announcement is anticipated at the beginning of May. Whatever it decides, the impact of the effect of Toll Collect on the German telematics industry will be intensified if the field is widened to include vehicles between 7.5 and 12 tonnes, which is widely expected to be the case in the next 5 years. Furthermore, the governments of a number of other countries are actively looking at the Toll Collect system. The Austrian government has already taken the decision to introduce a scheme compatible with the German one. The UK is anticipated to introduce one around 2006, and other countries such as Sweden, the Netherlands and the Czech Republic, amongst others are also known to be exploring this possibility. It is imperative therefore that the standards are set now for the new age of tolling systems geared up to take Europe by storm over the next decade. Background Frost & Sullivan is an international marketing consulting company that monitors a comprehensive spectrum of high-tech markets for trends, market measurements and strategies. This ongoing research is utilised to complement a series of research publications to support industry participants with customised consulting needs. Interviews and free executive summaries are available to the press. 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