How highway operators are increasing capacity, decreasing costs and increasing revenues at the same time.

As big and important cities’ population grows every year, transportation becomes a key issue.  Adding to this is the increasing income of the population and the decreasing prices of cars, multiplying the number of vehicles on the road year by year. Cars on English roads grew by 600,000 in one year (2.4% increase) (1), and growth in developing countries is even faster.

To face the challenges that this effect poses, governments have to deal with limited options to address the issue. This usually comes in the form of building new highways, a very high investment, particularly for emerging countries in which the growth in car ownership is the highest and resources are scarce.

One potential, and more cost-effective, way to attack this problem is Electronic Toll Collection (ETC). ETC is the process by which highway tolls are collected electronically from the drivers passing through a certain point. Although the main objective of implementing this system is initially to reduce travel time, there are many other benefits that come with this model.

The system works with gates located along the highway (or at the exits), and this gates connect through a signal to a device (transponder) usually located on the vehicle’s windshield. Although this system has existed for a long time, it has recently become more widely used worldwide and efficient enough to allow cars to go through the gates at full speed; in 2004 Chile implemented the world’s first full speed ETC.


By using ETC, an operator is able to increase traffic flow in almost 5 times compared to traditional manual toll collection (2). This means huge amounts of savings for governments in terms of investments that can be allocated towards other under covered areas such as health or education. These savings are amplified by the fact that ETC facilitates concession from the private sector, such as Costanera Norte, so the government investment is even lower.

Private investors are more likely to operate a highway with ETC because this system allows for better and easier payment collection, reduces cash handling by toll operators (which also reduces the potential for robbery, frequent in some countries), and cost reduction. ETC provides savings of $40,000 per lane for equipment costs, plus $135,000 per lane in annual operation and maintenance (3). In addition, the ability of ETC to increase capacity means that more vehicles can go through the highway in the same time, which translates into the operator making a higher revenue for the same investment when compared to manual toll.

But not all the benefit is for the government and operators. ETC reduces congestion by not having cars stop in the middle of the road. Aside from the psychological benefit to drivers, this also means considerable time savings (4) and a reduction in fuel consumption by as much as 12% (5). This last point also translates in a reduction of emissions and pollution. Additionally, just like Uber adds value by linking the account to a credit card to which the trip is automatically charged, ETC allows for flexibility in terms of payment for the driver.

On another hand, ETC allows operators to track every vehicle that goes through a gate, with the system being able to read and determine license plates. This makes possible for the operator the determine if drivers go through the highway without a transponder, and take the actions needed to charge for the service. This information is also used to collect data on traffic, directions and times of higher congestion. This information can be used by the company for vehicle count and others, as well as by the government to help in their implementation of different actions. In addition, the information is used to reduce traffic in peak hours by increasing tolls.

Despite all the benefits for investors, society and the environment mentioned above, there are still ways in which this system can improve and help drivers as well as the community. One way is finding a way to efficiently determine when a car goes over the speed limit, so a speeding ticket can be issued, and help reduce the number of accidents. Although implementation of a system that determines the time it took a vehicle to go from one gate to another to get the average speed has been discussed, this system doesn’t allow to determine the actual speed of the car. On another hand, having gates in each entrance and exit instead of along the highway can help in more efficient and fair pricing of each driver compared to the system now, in which every car that goes through a gate pays the same amount independent of the distance travelled to reach that gate.


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  1. Thanks for the essay Fransisco. I particularly like this example because it speaks to immediate, low cost solutions that many communities can employ to reap the rewards of digitization. Although driver-less cars may be the future, the technology you have discussed in your review will play an important role in getting some quick wins for congestion and efficient road utilization. Is this technology limited to highway applications? I would be interest to understand what / if any impact it would have on inner-city congestion. I particularly liked your comment regarding private investors being more willing to invest in roads with this capability.

  2. What I particularly like about electronic tolling is introducing the hardware and software infrastructure to allow for future dynamic pricing and data collection, as you mentioned in your post. Even better than decreasing throughput times (TOM shoutout) of vehicles on the road, I think a greater benefit that electronic tolling offers to governments is the ability to adjust pricing, and (ideally) therefore driving patterns, to be able to mitigate some of the negative effects of the increasing numbers of cars on the roads. I don’t think it’s a far reach to say that data collection on highways can help cities to develop more effective solutions to its transit problems, such as implementing ride-sharing options for drivers that are commuting to and from similar areas each day, or better managing public transportation routes that meet the demands of a larger number of commuters. I think the ultimate goal of electronic tolling should be to help even out traffic throughout the day while overall reducing the growth rate of cars on the roads.

  3. Thanks for the interesting post Francisco. In addition to the comments that have been made so far, I would be curious to understand the regulatory challenges that could stand in the way of using the data captured by the ETC system for purposes other than payment collection. For example, do you think that the ETC system that is paid for by private companies and the proprietary data on it would be: A) Made available to the government for speed limit enforcement purposes and if so at what cost? and B) Would the courts allow for this data to be used as evidence of the committed offense? Finally, if this data system is not treated as a closed loop, how do we ensure that drivers are not worried about data-protection issues such as cameras on the road recording their locations and then sharing that information with third parties?

  4. Thank you for your great post, Francisco! Like Adam, I have very similar concerns of the ETC system. Being from Los Angeles, I definitely believe there is a large benefit of reducing traffic, etc… by implementing the ETC system. I am however concerned about the implications of an application of the technology to enforcing the law. It reminds me of the book 1984, in which the government becomes overly-invasive in the lives of its constituents. I do however understand that there are positive implications of safety for those driving on the roads. In this regard, I believe society must find a balance between government invasiveness and government’s responsibility to protect inalienable rights- one of those being safety. Some argue, and I agree, that things like cameras and the potential use of ETC to issue speeding tickets is less intrusive than a traditional encounter with a police officer. Many argue that a police stop is a “seizure” or a temporary deprivation of liberty- It is a lot more invasive than say getting a ticket in the mail. I do like the government using ETC technology to enforce certain traffic laws but I do feel at a certain point (perhaps enforcing curfew laws with cameras) there may be over reach.

    I found this article by a University of California Los Angeles Law School Professor to be particularly useful when thinking through your blog post and possible future implications-

  5. Hey Francisco, thank you for this post! What stuck out to me was how ETC’s data-gathering ability of # of cars on the road at different points in the day allows for dynamic pricing to adjust traffic flow. However, the same number of people need to get from point A to point B with or without ETC, so unless they start carpooling, everyone with a WTP lower than the toll price would be left behind at point A. Additionally, ETC increases capacity as compared to manual tolls, but not compared to no tolls. I wonder if there is a way to apply technology in the “no toll” highways to decrease travel time without building entirely new highways. As for the developing countries you mentioned at the beginning, I can see ETC being successful only with increased trust-building between the people and the government (people want to see how their money is being transferred) and with the concurrent shift from cash economies to electronic payments.

  6. Hey Fransisco, great post! Infant with recent push in emerging economies like India to change to cashless economies this makes a lot of sense. Traffic congestion is a huge problem in India and the road infrastructure is lagging far behind to keep pace with growing number of cars. Full speed ETC’s will definitely help to some extent in reducing the issue. As we know, lot of infrastructure in terms of banking systems accessibility to all levels of society is required to make this change effective, however this is definitely the way to go. I also agree to the usage of the same to extend to traffic regulations implementation as otherwise more expensive resources of the country are spent on the same. I do understand the concerns shared by Craig and Adam on their post regarding the data privacy and data sharing. This needs to be addressed by means of resolution and data security however the use of technology should be implemented in my opinion specially in a resources starved countries.

  7. Francisco nice post! I love the application of this technology prior to simply adding more lanes. There are numerous benefits as you mentioned as well as potentially many more to come. Just thinking back to our last class in dynamic pricing, coming from San Francisco we had tolls which were higher in price during rush hour commutes. We also had smart tolling systems which charged less if you were carpooling with other individuals and thereby reducing pollution and traffic congestion. I think the applications of smart roads will play a large role in reducing CO2 emissions. Often we focus too much on the vehicle itself.

  8. Francisco, thanks for the post.
    The Electronic Toll Collection mechanism you described has been around for years and it would be interesting to see how companies such as Costarena Norte are innovating in this space, particularly around new ways of using the data gathered from these devices.
    I think the traffic efficiencies realized with the ETCs occur mostly in highways and I am curious if there are similar solutions for dealing with the congestion problems in the city centers.
    More broadly speaking, transportation is one of the biggest challenges in large cities and I think we should stop encouraging cars for transportation and instead transition to other more sustainable alternatives.

  9. Francisco, excellent post! just two comments:
    I disagree on the fact that “Private investors are more likely to operate a highway with ETC because this system allows for better and easier payment collection”, the ETC system involves a late payment which allows consumers not to pay or to pay late, when the traditional toll system the cash has a 100% collection rate.
    The second point is related with the usage of the information the ETC system is collecting. Currently this information is being shared with the police to locate stollen cars. By doing this the police can narrow the search perimeter and increase the probability of getting back the stolen car. This use is a clear example of how sharing the private information of the users can lead to higher social benefits.

  10. Thanks Francisco. Does Chile also have the longest highways in the world?

    I was living in Johannesburg, South Africa when the local government implemented a new ETC system. Public sentiment was extremely anti – ETC. Citizens held multiple protests that forced the system’s implementation to be delayed. Voluntary sign-ups were so low that the government initially lost money tracking down all the drivers who owed money.

    The situation wasn’t exactly comparable to Francisco’s example since South Africa’s ETC were brand new tolls, not just replacements of existing manual tolls. Nevertheless, I think computerized, faceless toll collection has the potential to anger citizens more than traditional toll collection. With manual collection, people could at least take solace in the fact that the tolls were helping to provide jobs for their fellow countrymen. Many South Africans viewed the ETC as just another example of Big Brother overstepping its bounds.

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