2010

Joint Transport Research Centre
ROUND TABLE
4-5 February 2010, ParisDISCUSSION PAPERS

3

critical success factors
for implementing roadcharging systems
Bernhard OEHRY, Rapp Trans AG, BaselJOINT TRANSPORT RESEARCH CENTRE

Discussion Paper No. 2010-3

Prepared for the ITF/OECD Round Table of 4-5 February 2010 on
Implementing Congestion Charging

Critical Success Factors for
Implementing Road Charging Systems

Bernhard OEHRY
Rapp Trans AG
Basel
Switzerland

January 2010

The views expressed in this paper are the author’s, and do not necessarily represent theopinions of Rapp Trans AG, the International Transport Forum or the OECD.

Contents

1.

FROM ROAD USER CHARGING TO CONGESTION CHARGING ................................ 3

2.

AN INDISPENSABLE CONGESTION MANAGEMENT TOOL........................................ 4

3.

WHAT MAKES A CHARGING MEASURE A SUCCESS ? ............................................. 5

4.

TECHNICAL DESIGN ISSUES....................................................................................... 6
4.1.
4.2.
4.3.
4.4.
4.5.
4.6.

5.

SCHEME LAYOUT ISSUES ......................................................................................... 13
5.1.
5.2.
5.3.
5.4.

6.

Technology .............................................................................................................. 6
Urban constraints ..................................................................................................... 7
Occasional users ..................................................................................................... 9User compliance .................................................................................................... 10
System costs ......................................................................................................... 12
Security .................................................................................................................. 12
Scheme principle ................................................................................................... 13
Geographic perimeter ............................................................................................ 15
Tariff level .............................................................................................................. 16
Legal status of the charge ...................................................................................... 17

ACCEPTANCE ISSUES ............................................................................................... 18
6.1.
6.2.
6.3.
6.4.
6.5.
6.6.

Managing public perception ................................................................................... 18
Pressing traffic problems........................................................................................ 19
Use of income ........................................................................................................ 20
Transparent, fair and understandable system ........................................................ 20
Privacy ................................................................................................................... 21
Accompanying measures ....................................................................................... 22

7.

CONCLUSIONS ........................................................................................................... 23

8.

REFERENCES ............................................................................................................. 24

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FROM ROAD USER CHARGING TO CONGESTION CHARGING
Road user charging is used as an „umbrella‟ term to describe a wide range ofapplications of pricing roads and infrastructure. Road user charging includes a number ofcharging measures that governments and other road owners use to: Finance new or maintain existing road infrastructure, Manage traffic (e.g. reduce congestion), Minimise environmental impacts of transport,
 Internalise the external costs of road transport caused, e.g., by pollution and noise
emissions.
Historically, the common approach to charging for road use is some form of generaltaxation rather than differentiated road user charging. Road user charging has long been
proposed as an efficient and equitable method to pay for road use and to fund roadinfrastructure projects. However, there is an important distinction between charging forrevenue generation purposes as opposed to pricing roads to provide congestion relief. The
two basic objectives, revenue generation and congestion management, differ in several
ways, as shown in the following table.

Revenue generation

Traffic management

 generate funds
 rates set to maximise revenues or reduce peak-period vehicle traffic used as a travel demand management

recover specific costs revenue often dedicated to roadinfrastructure projects(construction and maintenance) traffic diversion to alternativeroutes and modes not desired as it
reduces revenue collections.

strategy revenue not dedicated to road infrastructure

projects
 requires variable charging rates (i.e. higher
during congested periods)
 travel shifts to other modes and times
considered desirable.

[TDM Encyclopaedia - http://www.vtpi.org/tdm/tdm35.htm]
Road user charging objectives: revenue rising vs. congestion management

Road user charging can improve transport efficiency by rationing road capacity,
including influencing the demand for road capacity as it applies to various road classes,
vehicle classes or peak traffic conditions. It can be a useful travel demand management tool.
Effective pricing schemes can change travel patterns by exposing road-users to the marginal
social cost of their travel choices. Pricing affects all stages of travel decision making fromchoosing to make a trip to destination choice, mode choice, time of travel choice and route
choice.

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Electronic pricing and related Intelligent Transport Systems (ITS) technologies havematured considerably in recent years. Improvements in coverage, ease of implementation,
cost and public acceptance are occurring at a rapid pace.
The importance of road user charging as an effective instrument against congestion isincreasing. The well known London Congestion Charge, the Stockholm City Ring and the
Cordon Pricing in Oslo are European examples of successful realisation of such a charging
policy.

AN INDISPENSABLE CONGESTION MANAGEMENT TOOL
Traffic is increasing. There is no limit in sight. In many areas of the world, congestion isgoing to be amongst the most pressing problems of this century.
Supply-side solutions alone do not suffice. Demand management, including the use of
price incentives, is also needed. The need to combat traffic congestion and the desire to find
new revenue sources for transport investments have stimulated the interest in schemes
where charges for road use are introduced, such as parking fees and charges to allow
vehicles to use certain roads. The theoretical advantages of charging for road use have long
been discussed in economic literature. Practical experience with such schemes is more
recent. A key element of demand management in urban transport is the allocation of road
space. As this space is a finite resource, absence of regulation can lead to overuse, whichappears in the form of congestion. Reserving road space to public transport vehicles or to
private vehicles with high occupancy are two ways of allocating road space. Another way is
to restrict access to certain areas of the city. This latter kind of control measure does notmake a distinction between trips of different value. Conversely, if travellers are faced with aroad user charge, they will be encouraged to make their own judgement on the value of theirtrip. Charging for road use, often referred to as road pricing, has long been advocated byeconomists on the grounds that it is socially advantageous. Congestion occurs as every
additional trip made forces those vehicles already on the road to slow down. The introductionof a corrective charge will make each driver aware of the cost he imposes on other drivers.
This may help reduce traffic volumes and have positive effects in terms of reduction ofcongestion and overall travel time on the network. In reality, the efficiency effects of roadcharging policies are the consequences of both the actual behavioural responses of thetravellers as well as the way the revenues from charges are spent. In addition to travel timesavings, benefits include increased travel time predictability, reduced pollution and noise,
reduced accidents and improved travel conditions for public transport (from Ref. [1]).
Economic theory and mathematics of road pricing also dictate that the charge should beequal to the monetary value of the additional travel time imposed by each driver on otherdrivers. This is the „marginal cost pricing‟ principle. The principle extends into „marginal social
cost pricing‟ if, in addition to time, other costs, for example pollution, are considered whensetting the charge. Economists have gone on to extend the welfare maximisation framework
to cases where the price of public transport is set together with road charges. The othermotivation for introducing road charges is to provide financial resources for infrastructure
investment programmes. Revenues from road charges can be spent as well to improvetransport at large. Both demand management and fund raising make charging for road use ofinterest to policy makers.
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Research efforts as well as the introduction of toll rings and congestion charging
schemes in a few European cities in the last two decades provide considerable experience todraw from and support the translation of theoretical principles into practical policies. This
paper looks at factors that make a pricing measure a success. The approach taken is not atheoretical one, but looks at practical implementation aspects.
Access to inner cities is becoming a scarce resource and has to be managed. According tomarket theory pricing is the most effective means to allocate scarce resources. Congestion
pricing will become an indispensable tool for managing the challenges of urban mobility.

WHAT MAKES A CHARGING MEASURE A SUCCESS ?
Simply put, a charging measure is a success if it works in all relevant aspects:
Technical implementation
Obviously an important precondition of success is a technical implementation that works
smoothly, i.e. is implemented in time and at budgeted costs, and operates without hick-ups.
Choice of technology is one important aspect of the technical system. Charging
technologies as such are mature but other system aspects remain demanding. One suchaspect is the special technical challenge imposed by the urban surroundings, where many
design constraints apply. Another aspect of core importance is the handling of occasional
users, who may enter the charging system without being properly informed, not being
equipped and not willing to spend undue time and money to become compliant. Enforcing
compliance of all users is a further critical aspect where no ready-made solution is available.
Finally the technical system has to be implemented at acceptable overall system costs andmust encompass a security concept that defends the system against all conceivablethreats.
Scheme layout
Successful technical operation is only a precondition for a charging measure to achieve
its true goals, namely to manage traffic and to generate revenue in the desired way. Thisrequires a proper scheme layout, where foremost the scheme principle is decisive, namely
whether the charge is only a flat fee, a distance-based area charge, cordon pricing, or a
combination of such basic principles. Besides the principle, the right choice of charging
perimeter is decisive, namely which geographic areas are subject to the measure andtherefore which types of trips become subjected. Whether the size of the effect is as
expected will depend on the right choice of tariff level. Often disregarded at first, but actually
one of the core decisions to make in system layout is the legal nature of the charge,
namely whether the charge is legally constructed as a public levy, say a tax, or as a private
levy, like a fee for use.
Acceptance
Actually the single most important aspect for successful introduction of a charging
measure is its acceptance. Without acceptance the system will simply never become reality.
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Acceptance needs to be actively planned and public perception has to be managed.
A precondition to achieve acceptance is that the public perceives a pressing traffic
problem. No majorities in favour of a pricing measure thought to relieve congestion can befound without sufficient daily pain. No less important is the use of revenue. If the pricing
measure smells like “just another tax”, political failure is guaranteed. Finally acceptance by
the general public requires a transparent and understandable system and careful
treatment of the user‟s privacy. Acceptance can be increased if accompanying measures
are designed into the system from the very beginning, with the intention to bring additional
benefits to the individual users.
In the following, this paper looks into the three core success factors in turn.

A successful measure works smoothly regarding the technical implementation,
 achieves its traffic management goals, and most importantly: becomes accepted.

TECHNICAL DESIGN ISSUESTechnology
Choice of technology is less critical than is appears at first glance. Actually, thetechnologies employed in road user charging devices are standard technologies, for example
short range communication (DSRC), satellite localisation (GPS) and mobile communications(GSM).
More important than mere technology is the system concept that is made out of thetechnical building blocks. Here we see four basic concepts that can all be considered mature,including practical proof in real systems:
 Manual, manned and barrier controlled toll stations. Such stations are the traditional
means to collect charges on interurban motorways, especially on networks operated
by concession companies. Due to the tight space constraints in an urban
environment, such toll stations are rarely an option for congestion charging.
 User self-declaration systems. In such a system concept, road usage has to be
declared by the user either before or after the trip. An on-board device is not required.
The operational processes for such a manual charging system strongly depend on thedetails of the charging scheme. Users may book and pay trips at kiosks, fuel stations,with their cell phone via SMS or via internet. An indispensable part of any manualsystem is an Automatic Number Plate Recognition system that can be used to check
whether users have actually paid for their trip.
 In DRSC systems, on-board equipment communicates with road side beacons for anelectronic charging process. The on-board equipment works as an electronic tag,which will be recognized when passing specific beacons which have to be installed at
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pivotal points of the road network. DSRC on-board equipment is low price, can bebattery powered and does not need a proper installation.
 GPS/GSM based systems use GPS for localizing the vehicle. The GPS positions arethen identified on a map and matched to the most likely roads. This map matching canoccur in the on-board equipment or in a central system. Cellular communication via
GSM or similar transfers either the raw GPS position data or the map-matched road
usage data to the back office system. This technical concept requires comparatively
sophisticated on-board equipment that needs at least some minimum installation
since it requires electrical power supply from the vehicle, either via permanent
installation or from the cigarette lighter.
GPS/GSM systems are the ultimate dream of any traffic manager since the capabilities
for differentiated charging are nearly unlimited. The price for this is the need for capable onboard equipment, which is not only a cost issue but implies a number of complex challenges,
e.g. the logistics of distribution and installation, the handling of occasional users, and meansof protecting the privacy of the users in a convincing way.
The choice of technology can nowadays considered a mere engineering decision andshould under no circumstances become a political issue (“we want the technically mostadvanced satellite system”). Technology is mature and choices should be made for technicalreasons only.
In several countries have been examples of projects where the choice of technology has
been made even before other critical questions, such as the determination of charged road
network, of liable vehicles and of basic charging rules have been made. Especially satellite
technology appears to be magically attractive but should not become an implicit pre-requisiteof system design since it is not by necessity the best choice. Especially for congestion
charging in the typical city environment, with a small geographical perimeter, manyoccasional users and limited financial room for manoeuvre, more mundane technologies
usually make for a better overall outcome, with lower costs, lower risk and faster
implementation.

Technology is mature and available, and as such not a critical success factor – at least as
long as optimal choices from an engineering perspective are made.
Technology should not become a political issue or a matter of national pride.

Urban constraints
In an urban context a successful technical system design must address the challenges
imposed by the urban environment with high priority. Charging technologies have initiallybeen designed for the inter-urban motorway environment and do not naturally blend well into
an urban situation. Several issues have to be considered (Ref. 2):

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Aesthetic impact
The physical appearance of roadside installations is a much more politically sensitive
issue in urban areas than in inter-urban contexts. There are generally tighter restrictions aswell as existing visual, environmental and historical contexts. Street furniture needs to be
sympathetic to such contexts, including colour, style, size and location. Only rarely will it bepossible to even contemplate the use of gantries and thick structural elements in theselocations. This reflects the fact that many more people live and work in urban areas and they
have some degree of ownership of that landscape. As a policy, road user charging issensitive enough without the controversy associated with physical changes to the local built
environment. Therefore, any system that is deployed in the urban environment must be
discreet, have minimal impact and be sympathetic to the surrounding environment.
Chaotic traffic behaviour
The traffic characteristics in urban areas are different from inter-urban contexts,
including much more chaotic patterns of movement and behaviour. The urban road can bejust as much a destination as it is a through-route, for a wide range of people and goods.
With road works, building works, parked or static objects, contra-flow bus lanes, slow traffic,
overtaking and general chaotic driving behaviour in urban areas, there is often no realconcept of a left or right hand “side” of the road, no real concept of a lane, and the potential
for unusual manoeuvres (e.g. u-turns and reversing) at any location on the road at almost
any time. Unlike inter-urban roads, urban thoroughfares have a very diverse range of traffic
restrictions and traffic management measures on them, including segregated lanes, trafficislands, chicanes, barriers, rising bollards, road humps, textured surfaces, pedestriancrossings and roundabouts. Finally charges may be applied which are direction dependant.
Therefore, any system that is deployed should provide complete carriageway coverage forthe monitored directions and have the capability to determine the direction of travel.
Diversity of road users
The range of objects using or adjacent to roads in urban areas is different from interurban contexts, reflecting the greater diversity of travel activities taking place in urban areas.
This includes a much wider range of powered and un-powered vehicles, pedestrians andstatic objects (e.g. refuse skips, parked vehicles, trees). It is also reasonable to expect thatfor any particular urban charging scheme there will be a mixture of equipped and nonequipped vehicles legally using the road, with potentially a relatively high proportion of nonequipped users. Again this reflects the fact that, as a destination, the urban area cannot
always be by-passed, unlike most inter-urban routes and it is unlikely that all objects using
the road will be subject to a charge.
Highly variable road topology
The topology of a road in an urban area is much more likely to vary between different
charge point locations than in an inter-urban context. Road widths are highly variable ranging
from as little as 3m through to 5 or 6 lanes in each direction at busy intersections. Footways,
narrowing roads, bends, skew junctions and roundabouts all reflect the extent to which urban
roads are as much multi-purpose spaces between the buildings (and the subject of historicalprecedent and shared usage) as they are a thoroughfare designed to move traffic.

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Examples of Variable Road Topologies (courtesy of Transport for London)
Challenging installation
With lower traffic speeds, urban roads are much more likely than inter-urban roads tohave other physical structures immediately adjacent to, over and below the road surface.
This will include railway lines, tram lines, power lines, telephone lines, buildings, sewers,
ducts, water, gas and electricity supplies. The works involved in constructing charge points
may require a degree of consultation with the owners of such assets in terms of disruption
and future access. This creates straightforward physical as well as logistical andadministrative challenges in trying to erect structures, tune performance and maintainsystems. Ultimately this may limit the range of locations where charge points can be erected.
The special challenges of the urban context need to be addressed from the very beginningand are not restricted to purely technical issues but also a matter of aesthetics andperception of the required technical gear.

Occasional users
The handling of occasional users strongly determines charging system design. If
charging requires the use of on-board equipment then it can be assumed that frequent users
will equip themselves in order to take part in the scheme. But according to the UN
Convention on Road Traffic (Ref. 3) all users, including non-equipped ones, must equally be
admitted to the road network.
The UN Convention on Road Traffic from 8 November 1968, also known as the “Vienna
Convention”, is an international treaty that facilitates international road traffic bystandardising uniform traffic rules among the contracting parties. It defines that signatory
states have to admit unconditionally vehicles to their territories if they fulfil the requirementsof the convention. Charging on-board units are not a requirement listed in the convention.
Hence, also vehicles without installed charging devices have to be admitted to the road
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network. It is possible though to require vehicles to carry something non-permanently on
board, such as a simple sticker or a windscreen mounted tag.
Occasional users will not be prepared to equip themselves with permanent equipment. If
the technical solution is based on complex on-board equipment with high effort for integration
into the vehicle, requiring e.g. several hours of installation in a dedicated workshop, then asecond solution must be offered to cover the needs of occasional users. This second solution
must ensure that unequipped or occasional users can have access to the system in a simple
way and with minimal effort, e.g. with a ticket based solution.
In charging, equal treatment means that all user groups pay the same when using thesame roads under the same conditions. System design must ensure that equipped users
essentially pay the same as non-equipped ones. Especially with vehicles coming fromabroad it is usually not possible to give equipped users better tariffs or to treat occasional
users with a simplified charge without violating international treaties such as European
Community law.
Therefore even the most sophisticated technical charging solution is limited in its
charging capabilities (tariff modulation, complex tariff structure, flexible extensibility, etc.) to
the capabilities of the solution for the occasional user. Only what can be done for theoccasional user can also be done for the equipped frequent users. One solution to the
problem of occasional users, which are often foreign users on transit, is to construct the roaduser charge as a national tax which foreign users do not have to pay.
In city schemes a high number of users will be occasional visitors from the wider
surroundings of the city. Costs to treat these users adequately are usually rather high, andrevenue will be very limited. In many systems, the handling of occasional users is the single
most important cost driver. Hence, a proper solution for the occasional user has to be seen acore problem of system design and is by no means a fringe problem.
Occasional users require high attention in system design. A simple and cost effective
solution for this user group is decisive for overall system success.

User compliance
A charging system is all about compliance. There are traditional toll stations where theuser stops in front of a barrier, then throws coins into a basket and the barrier will open. If
there is no coin in the basket the barrier does not open. The barrier and not the basket has
made the user pay.
In an electronic fee collection system the on-board equipment will automatically via
some modern technology “throw coins into the basket” and free the user from this task. But
there is a catch: The on-board equipment replaces the basket but does not replace thebarrier. The vehicle is not stopped by the on-board equipment if the coin is not thrown.
Hence some kind of virtual barrier is required to make the user pay. This virtual barrier is thecompliance checking system. In essence a charging system is as good and reliable as its
compliance regime.
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Compliance control by barrier
The aim of compliance activities is that on average a compliant user pays less than a
non compliant one. There are two extreme options to achieve this target. The first is to have
many compliance checks and a low penalty. The second is to have only occasional
compliance checks but high penalties. There is a limit to penalties that is given by politicaland legal acceptance. This limit defines the minimum density of compliance checking
activities required in a system.
Advanced technical solutions that allow for charging and enforcement in free,unconstrained traffic exist. Usually there is a mix of permanently installed automatic
enforcement stations combined with a certain number of mobile enforcement units, i.e.
manned patrol cars with special enforcement equipment. The fixed enforcement stations
check the correctness of payment of vehicles passing by without any obligation to stop. Thisis achieved by a combination of technologies, including laser scanners to determine vehicle
and tariff class, automatic licence plate reading equipment to check for user registration, andvideo cameras to create pictures for proofing the case.
The processes of compliance checking and prosecution can not fully be transferred to
private organisations because of legal constraints. Especially for a public levy, enforcement
is in the overall responsibility of and has to be controlled by an agency equipped with therequired legal powers.
Enforcement of correct toll payment is amongst the most important single issues in acharging system. The reliability and the strictness of the enforcement system is the basis for
ensuring the revenues and the overall acceptance of a system. Only an enforcement system
which detects violators in a proper way can assure the integrity and acceptance of thesystem. In a system where incorrect payment or non-payment is tolerated confidence in thesystem decreases and acceptance by the paying majority may become critical.
The compliance system is also a major cost driver. For every system, there is an
optimum balance between enforcement effort and revenue loss due to violations.
Every charging system is only as good and reliable as its enforcement system.

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System costs
A lot has already been said about cost drivers in charging implementations. Experience
shows that people have a tendency to focus on capital expenditure at implementation timeand often pay less attention to operational costs.
In fact one should consider overall costs of ownership over the whole operational
lifetime. In our experience from many implementations, the operational costs over a typicalsystem lifetime of ten years exceed the implementation costs by about a factor of ten.
Cost drivers are all non-automated processes needing manual intervention:
 Handling occasional users creates little revenue but requires costly infrastructure anda dense network of points of sales. In addition every single payment transaction
comes at some cost.
 Operation of the compliance system requires a considerable number of staff either on
the road for compliance checking patrols or in the back office for checking
automatically generated evidence.
 Back office operations are costly especially if there is high number of non-standard
activities such as user data mutations and user requests or complaints via the user
front desk.
 Payment transactions eat a fraction of the revenue. Every loading of an account andevery credit card transaction has an associated cost. Costs of payment are usually inthe order of 2-5 % of total revenue.
A successful system must focus on good solutions for the cost drivers. Neither policy
makers nor users easily accept a charging system that itself consumes an appreciablefraction of the revenue. It is rather important, though, to communicate quite early in thepolitical process that a complex measure such as a time-distance-place differentiating
charging system comes at cost. It is close to impossible to design a system whereoperational costs are below 10% of revenue. Operational costs of 15 to 20% of grossrevenue are a more typical goal of a city-size charging system. Even these figures have
proven to be difficult to achieve in practice.
Operational costs by far outrun implementation costs. Complex charging systems come atcosts. Realistic costs have to be communicated as being an intrinsic property of capableroad pricing solutions.

Security
Charging systems are payment systems with large money flows. System security is an
important issue that has to be considered in the design of every system aspect. The issues
regarding the security of a road user system can be grouped into:

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B. OEHRY — Discussion Paper 2010-3 — © OECD/ITF, 2010 Security of the data, payment and information flows against fraud and externalinterference.
 Protecting the operations against system breakdown.
 Overall system security regarding the correctness of the charged toll and its solidity incase of legal disputes.
External and internal threats to the correct flow of data, payment and information must
be analysed and appropriate countermeasures be designed. High attention has to be paid to
all conceivable ways of users attempting to fraud the system. Available countermeasures are
physical protection of critical system elements and cryptographic protection ofcommunication channels. Especially fraud by internal users (tolling personnel) has to receive
high attention.
In case of system breakdown it is necessary to have a fall back solution ensuring that noloss of data occurs. The probability of an extended system breakdown strongly depends on
the technical approach chosen, the dependence on external entities and the system
distribution into central and de-central components. Core central components have to be
designed fully redundantly.
Ultimately system security relies on the availability of data that allow monitoring of thesystem. Errors and frauds can only be detected if sufficient data is available. It is essentialthat security requirements are designed into the system from the very beginning in order tobe able at any time to have correct data that can stand detailed scrutiny in front of a court incase the need arises.
Road charging systems are large payment systems. System security is a critical design
issue. Security is an end-to-end problem, where the complete and long path from use of
the road to booking of the payment in the central system needs to be protected.

SCHEME LAYOUT ISSUES
Scheme principle
In theory, the charging scheme as defined by its rules for charge determination can takemany forms. Basically we distinguish cordon-oriented schemes where crossing of a definedborder triggers the charge and area schemes where being in a certain area defined by aborder triggers the charge, which might be a fixed sum per day, time dependent such as aparking fee, or distance dependent. Schemes can be designed with any complexity, e.g.
where one charging cordon with high tariff is situated within another larger cordon with lower
tariff, or where a distance dependent system is simultaneously time dependent with tariffs
varying according to the time of day.
This is not the place to contemplate all available possibilities. Modern charging
equipment, especially of the GPS/GSM type, will enable all conceivable scheme principles.

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In practice, only the most simple scheme principles stand a chance of realisation. This is forthe following practical reasons: In order to have an effect on the user, the system must have simple rules like “drivingin the rush hour is costly” or “driving off motorway is costly” or “using an old stinker iscostly”. Users must be able to react to the price incentives given. This means that therules must be understandable and must give clear indications on how to best react.
 In fact the system component caring for the occasional user will limit systemcomplexity. As discussed above, it is difficult to equip occasional users withsophisticated equipment. Occasional user solutions typically are simple booking
systems that cannot support a complex, highly differentiated and variable charge.
 As laid out in the next section, every city has a structure leading to natural perimeters
for charging zones. Theoretical considerations work in idealised surroundings. In
practice, historically grown structures of spatial development or of traffic flow will leadthemselves to a very limited choice of feasible options.

Ten options discussed for a congestion charging scheme for the city of Helsinki(Ref. 4)
Marginal social cost pricing is a theoretical concept. Practical implementations will try toconsider these results but will in practice be limited by very mundane considerations.

In theory charging principles of any complexity can be designed that would lead to
optimum outcomes and efficiency. In practice, systems must have simple rules in order tobe understandable, must support simple solutions for occasional users and must work ingrown urban patterns. “Keep it simple” is the best advice one can give in this respect.

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Geographic perimeter
When road pricing is being planned as a tool to combat congestion, it is critical tochoose the right border of the area where the charging sets in. This is true irrespective of the
choice of scheme principle, e.g. cordon pricing or area pricing. It is essential to set the bordersuch that a large fraction of the commuter traffic is being captured, without disrupting modesof traffic that are less relevant for congestion, such as delivery traffic, transit, occasional trips,
and – especially critical for some stakeholders – shopping traffic.
Again, theory will provide for excellent guidelines on crossing which line should trigger acharge or at least start liability or an increased tariff. In practice there always is very limited
choice. Many cities have a natural structure that is visible already at a cursory glance at thecity map, and is also reflected in the mental representations, the “personal maps”, of the city
inhabitants. Such natural structures might be a ring road, as e.g. used as the perimeter of the
London congestion charge, or a natural barrier, such as the waterways surrounding
Stockholm‟s inner city.

Charging perimeters of the London and Stockholm congestion charges

Although such natural choices for the charging perimeter are usually not the ones thatwould be optimal from theory, they are very effective in practice. Such natural structures
have over a long history been shaping the spatial development of living and working areas,of shopping streets and quiet neighbourhoods, and to an amazing extent even cultural
identity. For a Londoner born south of the Thames it is close to unthinkable to live north, andvice versa. These grown spatial and behavioural patterns are reflected in the daily traffic
flows. These considerations may explain why “logical” or “natural” choices of charging
perimeters, even if not necessarily optimal in theory, will normally be quite effective inpractice.
Perimeters cannot be chosen in a clean environment. Since the Western Extension of
the London Congestion Charge has been implemented, there is an uncharged transit route
cutting through the congestion charging zone. In Stockholm, inhabitants of the island Lidingö
cannot travel anywhere without crossing the charging zone. This situation requires a special
arrangement. The inhabitants of this special area may cross the inner city at any time without
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being charged. The administration of this special measure causes an appreciable fraction of
the operating costs of the Stockholm congestion charge.
When setting the perimeter for the charging measure it is also important to consider theavailability of other transport modes. In many cities there is a rich choice of public transportmeans in radial direction, i.e. in an out, but much less convenient choices for going from one
peripheral destination to another. Paris is a very good example of such a centralised city. If
one is living in the west but working in the north, there are far less good public transport
connections as compared to living west and working centrally. Congestion charging will only
flourish if good transport alternatives are available to commuters. These considerations areto be taken into account when designing a pricing measure, and especially when defining thecharging perimeter.

Most cities have historically grown structures that lead themselves to natural choices forcharging perimeters. It is wise to benefit from them rather than to contemplate “optimal” but
artificial boundaries.

Tariff level
It is difficult to find the right tariff level for a congestion charge. The charge must be
hurting sufficiently such that people react, and at the same time being acceptable enoughthat people will not heavily oppose.
Theory offers several approaches to tackle the problem. One can look, e.g., into thevalue of time in order to see what the monetary equivalent of a quarter hour lost incongestion might be, or one can look at marginal congestion costs to society. In practice,these deliberations may give some indication on where the right tariff level should be, butultimately the tariff is a political decision that will rather be oriented towards creating
acceptance than at creating an optimal traffic management outcome.
The political promise often is “revenue neutrality”. This sounds like a good deal for the
citizen: Before introduction of the pricing measure, everybody pays some fixed taxes or fees,
like the annual registration fee, vehicle tax, or the like. If this fee is replaced by a variablecongestion price that is revenue neutral, it is likely that the citizen buys in. If I have to pay
something anyway, why not pay for something intelligent, which has positive traffic effects?
In addition, the majority of citizens will drive less than average, and is most likely better off in
the new regime, thereby creating a natural majority of winners.
This sounds like a clever strategy to create acceptance, but in fact carries quite someinherent risks. In most communities, tax income from the road sector can under nocircumstances decrease. Revenue from the road sector is essential for financing a lot of
public duties, like road maintenance, road construction or even a major contributor for thegeneral community budget. Hence, whatever the new pricing measure, net revenue mustremain at least the same. Neutrality in terms of net revenue means that gross revenue has toincrease – but gross revenue is what is being collected from the users. The difference
between net and gross revenue is the collection costs, which are close to zero for annual
registration fees and similar levies, but even under very favourable circumstances hardly canbe below 20% of revenue for city road pricing schemes.
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Hence it is politically dangerous to promise revenue neutrality when in fact grossrevenue needs to increase in order to keep budgets balanced. Public acceptance might well
be better if the pricing measure is from the very beginning designed to create some
additional income which is earmarked to do something that is widely accepted as beneficial,
such as the construction of a new bridge or tunnel or the introduction of new tram or bus
lines.
The right tariff level is a political decision rather than the result of theoreticalconsiderations. “Revenue neutrality” sounds like an attractive way to go, but has proven to
be difficult to achieve in practice.

Legal status of the charge
A road charge can have the legal status of a tax, which is a public levy that is owed
unconditionally, or a fee, which is a private levy and a price for a certain service
consumption.
For a tax only an authority has the fiscal sovereignty to collect it. Daily operations may
be outsourced but control and governance must remain in the public sector. A tax is usually
defined as a levy that does not give a right to a certain service. Taxes are simply instruments
for financing community budgets. For taxes strict regulations and procedures apply. There ise.g. a well defined way to appeal. Toll charges with a tax status usually also rely on a user
self declaration of road usage and the technical equipment is only considered a tool to help
the declaration. For a tax, compliance checking and prosecution are legally rather simple toimplement, since public servants can be sworn and receive the necessary powers, e.g. tostop a vehicle or to access the national licence plate database.
In contrast, a fee is usually defined as a charge that is directly related to the use of aservice. A fee can be collected by a public authority or a private organisation alike. With fees,
the freedom in system design is higher since the environment is less regulated. For a fee it
is, for example, acceptable that the road side system measures road usage without a user
declaration. Compliance checking and enforcement is more of an issue, though. A privatecompany cannot prosecute ordinary citizens like a sworn public servant might do. For a fee,
special legal or organisational measures are required to set up a tight enforcement regime.
A simple way to distinguish between tax and fee often is Value Added Tax (VAT). If aroad usage charge is legally considered a tax, it is not subject to VAT. If the charge isconsidered a fee, VAT normally applies. VAT adds some complexity in handling andprocessing payments, but not an issue for the road user charging scheme itself.
The legal status tax or fee might appear to be a minor issue, but in practice it is of crucial
importance to get the legal status right. For the Stockholm scheme, e.g., this single issue has
caused many months of delay. The legal status reaches deep into many aspects of thecharging processes, from the right to collect, the need for fully equal treatment, over the legal
significance of the user “declaration”, compliance and enforcement powers, applicable court
processes for legal recourse, and applicability of VAT.

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The legal status “Tax” or “Fee” is not a minor design issue but of crucial importance andrequires early and careful consideration for a successful implementation.

ACCEPTANCE ISSUESManaging public perception
Acceptance for a measure is not constant but changes with the development of the
public discourse. When looking at the available examples one recognises a pronounced
temporal development.
Obviously people first focus on their individual costs, without any believe regarding
positive personal effects. Accordingly one often experiences fierce initial rejection. Costs are
imaginable, but not the benefits. Discussion usually is polemic and undifferentiated.
It is the task of a well managed public discourse that preconceptions and outright fears
are addressed and not repressed. Precondition is that the public indeed perceives a problem,as discussed below. Over time, emotions will calm. This is the point where opinions arebeing made.

Public acceptance changes over time (from Ref. 7)18

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From observation a critical success factor appears to be that this process is actively
managed. A positive factor is strong political leadership. Leadership and decidedness appear
to support identification with the measure and also lead to a deeper involvement in thediscussion.
This is the “window of opportunity”, when there is sufficient support to trigger
deployment. From then on support will fade away again as issues emerge in detailed
planning and law making. Support is lowest just before introduction, since fears will peak andbenefits are not yet visible. Only after introduction “seeing is believing” and support will build
up.

Public opinions need to be managed through leadership, decidedness and skilful timing.

Pressing traffic problems
Studies have shown – and this comes at no surprise - that in all successful
implementations it has been essential that road pricing has been perceived as a true solution
to a problem (see e.g. Ref 5). This finding entails three elements:
 There has to be a major traffic problem. People are only prepared to pay for mobility
if there is a massive congestion issue without simple and common solutions.
Interestingly also financial issues, like a lack of financial resources to fundconstruction of important infrastructure, such as a relieve road or an important tunnel
or bridge to combat congestion in the inner city, are perceived as relevant problems.
Unfortunately, these findings mean that pricing cannot be used to combat congestion
before the problem occurs. Pricing as a pre-emptive measure will find neither politicalnor public acceptance. Consensus in society appears to be a precondition that thestate of affairs regarding traffic that can no longer be tolerated – irrespective whether
the individual person is concerned in daily life.
 It is also important that people trust that charging will have a true contribution to
alleviating the problems. Acceptance can only be expected if the pricing measure“works” according to the judgment of the concerned people. Since pricing measures
are new instruments in traffic management, lack of personal experience is a hindrance
in this process. Humans learn from experience and the effects of a pricing measurecannot be felt beforehand. Effects are predicted but cannot be experienced before themeasure is introduced.
Tests and pilot projects can have an important contribution by proofing effects andeven making them perceptible for the individual. This concept was exceptionallysuccessful in introducing the Stockholm charging system.
 Finally the traffic problems need to be perceived as severe and pricing as a suitablemeasure. The public dialogue in London and Stockholm has moved congestion into
public awareness. At the beginning of the discussion congestion has in both cities
been accepted as unavoidable and “god-given”. Only the public discussion has
created awareness about the extent of congestion and on its disrupting influence on
quality of life in a city. In the UK, phrases like “we cannot build our way out of
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congestion” have become common wisdom. This perception is an essential basis forwidespread acceptance of pricing as a traffic management tool.
World-wide all studies, see e.g. Ref. 6 for a typical example, underline the importance ofthe perceived necessity and effectiveness for the acceptance of a road pricing measure. In
the cited study the authors compare systems across the globe and conclude that publicly
perceived necessity is the single most important success factor.
Prerequisites for success are: a massive congestion problem that is perceived as suchand that at the same time pricing is believed to be effective.

Use of income
As discussed in the section about tariff level, revenue neutrality is probably not the best
approach to win the public. If a new pricing measure is introduced it is wise to abolish or
reduce some other taxes and fees, but creating extra net revenue is nothing to shy away
from. Under no circumstances extra revenue should be a hidden agenda (like: “We will begrossly revenue neutral. Later tariff increases cannot be excluded as this point in time”).
Use of revenue is critical. Initially it was believed that broad acceptance of a measurerequires that revenue is earmarked to go into the road sector again and that especially public
transport is an acceptable destination for spending the money. More recent experience, as
collected e.g. in Ref. 5, shows that earmarking is the essential element. As a destination forthe money also other generally “good” places are acceptable to the public. It is important thatthose that pay also benefit. Revenue from city pricing needs to be spent in the city, for roadinfrastructure, public transport, or even to subsidise ecological projects. My money should be
used in my neighbourhood.
Revenue is an essential element of pricing. Instead of promising “revenue neutrality” thatis difficult to achieve and to maintain in practice it might be well worth being courageousand use the extra revenue for something that is widely welcomed.

Transparent, fair and understandable system
Acceptance requires trust. Trust can only be won through transparent, open
communication. Transparency implies that the system rules are clear and simple. Everybody
must understand where he has to pay, when and how much. There should be simple rules tofollow, without undue complexity and without many exceptions.
The successes of the charges in London and Stockholm are to a large extent due to thesimple and transparent rules. The charge perimeter is easy to recognise and wellcommunicated. It is simple to understand at what time of day the different tariffs apply. It isclear where one can pay and what to do if one did not manage to pay before use.

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It is essential that people feel treated fairly. Nobodies wants to be fined just because he
did not know some detail or because of a minor neglect. This implies clear and simple rules
but also a simple access to the system. I personally do not mind to pay a few Euros forparking or for road tolls, but I do not want to be hassled. I do not want to search for the rightcoins, or to have to stop and leave the vehicle, or to fill in long forms, and the like. The “frontdesk” of the charging system must be user friendly. National charging systems for heavy
vehicles, such as the ones deployed in Germany, Austria or Switzerland, and as currently
being procured for France, have no need to be overly simple to use. Truck drivers areprofessionals used to pay fees, tolls and taxes of all sorts. One can reasonably expect thatcommercial drivers are informed and can manage more complex tasks. This is not true for acity charging system that has to accommodate everybody, not just the interested andinformed, young and active citizen.
Fair treatment also implies a credible compliance regime. It is essential that people trustthat everybody pays and not only the “honest idiots”. Compliance checking has to berecognised as proportionate. It must have a certain visibility but should not be perceived as
constant surveillance, and must not be intrusive.
A transparent, fair and understandable system is achieved through clear rules, simple
access to the system and a credible compliance regime.

Privacy
Privacy aspects influence the technical solution for a road user charging system and its
public and legal acceptance. In a charging system, privacy must be guaranteed regarding: Personal user data
 Payment and contract data
 Movement data
The privacy requirements regarding personal user data, payment and contract data of aroad charging system are basically the same as in similar systems such as
telecommunication, banking, or retail and must be handled in the same way.
A special property of a road user charging system is that a vehicle is identified as being
at a certain location at a certain time. Depending on the charging concept and the technicalsolution, this may imply that data on the daily movement profile of a user is available in thesystem. System design must ensure that such data are treated according to privacy laws andin a transparent and understandable way for the public. Privacy is more an issues for private
vehicles than for commercial fleets since private vehicles can be associated to a certain
person (owner/driver) whereas commercial vehicles cannot (changing drivers).
There is a tendency to treat privacy issues by technical means. Various measures basedon cryptographic techniques are being proposed. There is also a discussion on keeping data
within certain environments, such as processing all data in the on-board equipment, and onlytransferring daily aggregates to the back-office. Such privacy-protecting concepts usually
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imply some costs and a certain inconvenience in system design. The solutions are fine in
principle and are normally sufficient to fulfil the legal requirements.
The perception is not influenced by design, though. It is probably better to look into theinstitutional arrangements. I have, e.g. no problems with the fact that my mobile phone
provider knows every movement I make, or that my bank knows a lot about my financial
capabilities. People like to have a choice regarding whom to give their data, and they are
more relaxed about it if they receive a clear benefit. I would like to be able to pay my roaduser charge with somebody unsuspicious, such as my automobile club, the supermarket or
my mobile phone company. Authorities usually outsource operations of the charging systemanyway. Why not use this also to provide for good user privacy, especially in the eye of
public perception.

Movement data is sensitive and has privacy implications. Again, perceived privacy isdecisive. The feeling of having a “spy in the car” has to be avoided.

Accompanying measures
A price is only acceptable if there is something of the correct value offered in return. As
discussed before, the benefits of congestion relief cannot be experienced beforehand andare vague promises to most citizens.
It is therefore wise to bundle the pricing measure with more return for the individual. To
my personal amazement, the focus in this discussion has been on providing “value added
services”. The message is this: “Dear user, you will need a box in your car that charges you,but it can also provide some useful services for you”. A long list of such value added services
has been proposed in the past especially with the introduction of heavy vehicle charging
systems that required rather capable on-board equipment. Proposed services included
navigation, traffic information, fleet management, emergency call, automated payment forparking, pay at pump, and even McDonalds drive through payment.
The proposals have been very technology driven and have not achieved market
success. When it comes to useful applications in a city environment, modern mobile devices
such as the iPhone are hard to beat. I do not need a charging box to tell me which way to go,
to find the next restaurant or to pay for my burger.
What I would love, though, is a proper integration of the whole charging measure into
daily mobility in the city. If the congestion charge, e.g., would be the same as a day pass for
public transport, or would have an option to include city parking, or would at least have thesame cordon layout as the public transport tariff zones, I would feel that someone has
invested some thoughts and has being caring about my daily life. If I feel that I am not simply
being charged but that this is part of a package that improves my city mobility, I am less
opposed to pay a price.
As discussed before it is advisable to plan for some extra revenue and not go for full“revenue neutrality”. Extra money is well spent on accompanying measures such as
improving public transport, providing park-and-ride facilities or introducing a city mobility card
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that can be used to access all transport offers, from public transport, over parking to roadpricing.
Strictly speaking not an accompanying measure but quite akin to it is providing forinteroperability. Currently city pricing schemes are confined to larger metropolitan areas andare lone islands in the sea. As soon as more regions employ charging for demand
management purposes and as soon as interurban motorway tolls increasingly become
electronic, users must be offered a single device with a single contract to pay for all road-use
related charges and fees. The focus today is on commuters within city limits with usually little
need for interoperable equipment. With the increasing success and inevitability of pricing
measures, interoperability will become a must, and not a nice accompanying goodie.

Pricing should be part of a package. Individual users will more likely accept a new charge if
there are clear benefits that accompany the pricing measure.

CONCLUSIONSIn order to make charging a success, three core aspects need to be planned andimplemented skilfully: technical design scheme layout
 acceptance
The order of priorities is in fact bottom-up: Without sufficient acceptance and support a
new charging measure will not stand a chance to pass early political hurdles andimplementation will not even start. A clever scheme layout comes next, since the charging
rules determine whether or not the desired traffic effects will be seen. Proper technicaldesign is certainly also an important success factor, but appropriate technology is available
and should not become a driver of the project.
Unfortunately also the level of difficulty is bottom up: Acceptance is hard to steer. The
report gives some hints on where the focus of activities should be according to experiencefrom projects world-wide, but there is no guarantee. The subject is emotional, non-linear,time-dependent and multi-faceted. The good message is that knowledge and understanding
about proper scheme layout has increased over the last years, and especially that technicalissues are no longer an obstacle. Good solutions and products exist and only require proper
engineering and project management.
Yet the main conclusion of this review of critical success factors is that pricing as a traffic
management measure has become a tool that is now available to tackle the problems of our
growing cities. Congestion pricing is not yet a tool as ready to use as any other traffic
management tool. Success is not guaranteed, but the effects are unsurpassed. Besides adriving ban, no other traffic management tool has a better effect on congestion than pricing.

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Designing a nation-wide high-tech charging system for trucks needs good engineering andproject management - it requires good craftsmanship.
Designing a congestion pricing system for a city needs careful handling of a number of
acceptance-critical implementation issues - it requires vision, inspiration, leadership andluck.
City congestion pricing is art, not craft.

REFERENCES
1
2

3
4
5

6
7

24

“Urban Pricing - From Theory to Reality”, DG Energy and Transport, European
Commission 2006.
adapted from: “The Urban Environment: The New Challenge for DSRC”, Mark Wedlock,Jeremy Evans, Nick Patchett, Paul Mellon, Jesper Engdahl, Ian Wilkinson; ITS World
Congress, London 2006.
Convention of the United Nations on Road Traffic, 8 November 1968, Vienna.
Helsinki Road User Charging Workshop, Kristian Appel and Bernhard Oehry, Helsinki
Nov. 2008 (available at the authors).
“Mobility Pricing Synthesebericht (Mobility Pricing Synthesis Report)”, M. Rapp,
B. Oehry, Ch. Egeler, Rapp Trans AG; published by Schweizerischer Verband derStrassen- und Verkehrsfachleute (VSS), October 2007.
“Congestion Charging Critical Success Factors”, Booz Allen Hamilton, Report to Ministryof Transport, New Zealand, 2005.
P. Goodwin, keynote speech at the IET Seminar on Road Pricing 2007, 22-23 May
2007, Birmingham.

B. OEHRY — Discussion Paper 2010-3 — © OECD/ITF, 2010