RANDALL’S ISLAND SECRET OUT:Mark IV gets Big Contract Extension

Seems someone thought this might encourage litigation. [No good subpoenaing us, guys, the notes are unreadable, and we’ve already forgotten who told us.]

The current IAG contract under which Mark IV is the sole supplier at a fixed price for transponders and plaza equipment expires in August after five years duration. The contract has made Mark IV the largest supplier of ET tags in the world. About 3.7m tags have been sold to the IAG members and another million to 407 Ont, IL, VA, and to Canadian border crossings on the fringe of the IAG area.

The IAG group was persuaded, we’re told, that no competition was likely with Mark IV because (1) its prices are already very competitive, and (2) some elements of its system are proprietary and patented so competitors might not be able to tender without infringing Mark IV patents and getting into litigation. We were told the new contract with Mark IV has reduced some of the listed prices.

The basic Mark IV tag has been supplied to E-ZPass members for around $22.50 and the new price is “around $20” one source told us, without any provision for inflation. Mark IV also supplies the ‘roadside’ equipment, antennas and readers which complete the pure ET system. Mark IV has not gotten into system integration of lane controllers, vehicle classification, displays, gates, video enforcement and interface with host computers where big electronic toll conversion money is made (and lost.)

The IAG’s contract extension is likely to provide Mark IV with orders for over a million tags over the next year in NJ/NY and a similar number in PA over 2 to 3 yrs, with VA, MD, DE together probably taking another million in 2 years.

Givin dem l’il guys a go

The IAG also moved recently to meet a longstanding criticism that it’s just the big guys club. Smaller toll agencies have complained for some time that the flat joining fee of $175k is excessive and that they won’t be buying enough Mark IV equipment to profit by the IAG contract price break. Annual membership fees range between $5k and $25k depending on the size of the agency. The original seven member agencies’ response to the joining fee was that they had each put up $2m in cash to float the IAG in the first place so the johnie-come-latelies should contribute something by way of capital to obtain the advantages of the group’s purchasing power and expertise.

But the IAG has now relented a bit. It is now offering associate membership where the joining fee is waived. (Rumors have it that associate members get to sit in a second row of seats behind those at the main table, and unlike the full members have to pay a quarter toll for their coffee.)

The first associate member is West Virginia’s parkway authority with just one toll road. New Brunswick is also expected join, the first Canadian member. It has Mark IV equipment operating already on the Fredericton-Moncton toll road and expects to handle a lot of traffic from NY and MA with E-ZPass tags.

Other likely associate members are Butler Co Ohio and the Delaware River & Bay Authority which runs the Delaware Memorial Bridge on I-95 between NJ and DE, the Buffalo NY-Ont Peace Bridge, the Chicago Skyway, and the 3 bridges and tunnels between Michigan and Ontario. In time outlying areas from the IAG such as IL and SC will probably join there is no urgency given their distance and the limited volume of visiting traffic.

Pressure will shortly build on VA to join given that it now shares the Washington-Baltimore metro area with MD in which physically identical but non-interoperable tags are proliferating for lack of IAG type business arrangements across the Potomac River. Similar pressure will develop on IL, once OH and IN move to adopt electronic tolling, though they are such big trucking toll roads they may choose to go with more truck oriented systems like the Raytheon HTMS/Mark IV Fusion technology.

The IAG could get its first private sector members in the CINTRA/SNC consortium that has recently bought 407-ETR in Toronto.

IAG membership comes with a difficult set of positives and negatives. The big positives are the customers’ sense of the wide geographic area over which the one tag can be used and the agency’s ability to service more customers without the need to proliferate customer accounts and tags. Something of a downside is that the IAG demands a level of conformity – adherence to common policies on ET accounts and customer service – that some tollsters find limits their flexibility to manage their business. And there is considerable cost in arranging for interoperability – in establishing the communications links, enhancing computer storage and writing software to manage the constantly changing lists of valid tags from the rest of the group.

MD and MA have joined the IAG recently but without using the E-ZPass logo as their primary symbol. That’s in part because they aren’t yet interoperable. Both want to get a basic system running before they focus attention on the added complexity of having tags from other agencies, but both have a detailed schedule for attaining interoperability, which is the rarionale for IAG.

As the number of IAG members grows however the complexity of agency-to-agency dealings increases (to the factorial of the number of members) and they say the case grows for a centralized clearinghouse. The IAG is run out by a small secretariat located at the Robert Moses Building of the MTA’s Triborough Bridge and Tunnel Authority on Randall’s island in the East River in New York City. (Contacts Rena Barta IAG 212 360 3181 www.EZPass.com)