TORONTO:407-ETR Needs New System

Raytheon has been contracted for toll system work on the extensions to the toll road and for upgrade work on the existing front end. This consists of ramp based toll points to enable trips to be sensed with ramp gantry based laser vehicle presence detectors as system triggers and profilers for classification purposes, cameras for photographing the rear license plate of vehicles, an open road time division multiplexing and vehicle-tracking vehicle-to-roadside data communications system to work with transponder-equipped verhicles, roadside data storage, a fiber optic backbone and central processing. The toll system covering 29 interchanges and 69km (42mi) cost about $50m. Up to the central processing works alright.

But, Lopez says, the back office systems really stink. The accounting, toll management, billing and customer service systems inherited from the provincial managers are “totally inadequate,” he says, and need to be rebuilt from scratch. A fundamental mistake was made having these systems designed by a telephone company.

“This is a toll road and it needed toll road people who understand the customer service issues of a toll road. A telephone company is good at sending bills and they know their business, but they don’t know a toll road. You can’t expect them to.”

The inadequacy of the accounting and customer service software has led to “serious problems” in relations with customers, Lopez says. Moreover, waiting times for customers continue to be too long despite extra lines. Too many customers give up. He was speaking after the company had announced it had asked the provincial ministry of transport to suspend the practice of denying license plate renewal to 407-ETR customers with an unpaid 407-ETR balance.

“We know our customers have had difficulty getting through on the telephone lines to our customer service department. They’ve been frustrated by their inability to speak to us and ask about their bills.”

Since the 407 company bought the road 80k drivers with overdue 407-ETR accounts have had to pay them at the provincial ministry motor vehicle registry offices to get their license plates removed.

Lopez says that some of the people “may have legitimate concerns about their invoices, but they couldn’t get anyone on the phone to hear them” and hence may have been forced to pay invalid bills.

407-I is instituting a ‘dispute resolution’ process. Letters have gone out to those who settled at the motor registry, possibly feeling they were wrongly billed. 110k ETR customers who were in a situation of ‘plate denial’ (“Pay your 407 bills or no license plate”) were temporarily taken out of that status by the ministry at 407-I’s request. Only if after the dispute-resolution procedure they are found to still owe money will they be stuck back in ‘plate-denial’ status.

Customer service reps (CSRs) are being increased from 23 to 55. There were only 17 when 407-I took over last spring. The company has a ‘system enhancement plan’ expected to cost $70m, part of which will cover the extensions to the highway, but over half of which is being devoted to the core operations.

Revenue

Revenue in the final quarter of 99 was running at an annual $112m (US$s based on 67c=C$1) while for the whole period under private ownership (3/17 to 12/31/99) revenue was at $95m annual. Operating expenses for the 41 weeks to the end of the year were running at $52m/yr, for an operating income of $43m/yr. Interest and other expenses were $73m/yr for an overall loss at $30m/yr.

Toll trips 5/5/99 to12/31/99 (238 days) were 50m or 210k/day, 2% higher than projections. Transponders on issue at year’s end numbered 346k.

The leader shareholder in 407-I is Spanish-based Cintra, one of the world’s largest toll road operators. The other major owners are Quebec-based SNC-Lavalin an engineering and construction company and CDPQ, a large investment bank. They paid the province of Ontario about $2.1b for the road in the spring of 1999.

The new owners are committed to a 24km (15mi) extension westward which is under construction and due for opening July 2001, and to a 15km (9mi) extension eastward the permitting of which has delayed a start. These extensions are expected to cost about $600m. (Contact M Hutnick MRHutnick@407etr.com) NOTE: All dollars are US$ unless otherwise specified. And we round numbers.