10.2 – Governance, Management and Digitalization

Author: Dr. Jean-Paul Rodrigue

Transportation systems are complex assets that are under a governance structure and managed accordingly.

1. Transportation Governance

Transportation systems and their supporting infrastructures have become so complex in terms of management and scale of operation that governance models need to be revised. The main circumstances under which governance can be revised include:

  • When a transport infrastructure is experiencing a decline in traffic or is losing its market share, often because of higher operating costs.
  • When the behavior of competing organizations or facilities may be perceived as unfair, such as being subsidized.
  • When there is the potential duplication of infrastructure as each competing facility is vying for the same traffic. This particularly occurs when different jurisdictions compete to attract economic development opportunities.
  • When the effectiveness of the existing governance structure is being questioned, often triggered by allegations of corruption and waste of resources.
  • When the scale of an existing or projected transportation infrastructure project, such as an airport, is so complex that an existing entity cannot effectively manage it.

From a tradition of public provision and management, there has been a tendency towards privatization in transport, particularly with deregulation. Inefficiencies of national and international regulations, notably over environmental issues, have created opportunities for non-governmental actors such as private companies and trade groups to be more actively involved in regulatory and governance matters.

Thus, public/private partnerships are seen as a dominant trend in transportation governance. Transport terminals increasingly became an attractive form of investment for private equity firms seeking valuable assets and a return on their investments. This is manifested in the sale of ports and airports in some countries and the break-up of state rail monopolies. However, privatization is most evident in awarding operational concessions to private companies. The trend toward concessions is partly warranted by the belief that the private sector is more efficient than the public in operating terminals. This form of governance keeps the ownership still under public control. It is also seen as a means of reducing public expenditures at a time when states are becoming less willing (or able) to make substantial investments.

2. Management of Transport Systems

The transportation industry is changing significantly in form, and function, and how it is organized and managed tends to be overlooked. Yet, it is through different management practices that the spatial manifestations of the industry are expressed. It is perhaps easiest to see the changes in management through the lens of governance, where an industry that used to be primarily managed and controlled by the public sector has become increasingly controlled by the private sector. Privatizing transport companies and infrastructures has been an important feature of the last decades and is likely to continue. However, there are still many issues about the role of the public sector in transportation, and deregulation, which has prevailed, could be reversed.

The growing role of the private sector in an industry that has become global and multi-functional has necessitated a shift in management and ownership relationships that are still evolving. They include:

  • The emergence of horizontally linked global corporations that, through acquisitions and mergers, have bought up similar operating companies in different markets. A good example is global port terminal operators.
  • The development of vertically integrated corporations that have grown by merger and acquisition to control several segments of the transport chain, namely modes and terminals.
  • Intermediaries that provide transport services on a global scale, without direct ownership of infrastructure. 3PL companies operate in many markets and are major actors in the transport chain.
  • Alliances are informal groupings of transport providers that pool resources and offer joint services between major global markets as the partners combine their regional networks. The main goal of alliances is to manage capacity to avoid undue market disruptions while maintaining competitive mechanisms.

At the same time, transport is being increasingly integrated into global production systems. It is becoming an integral part of production and distribution chains, which give rise to distinct patterns of spatial organization with different operating practices. The operational interests of a vertically integrated enterprise differ from one that is horizontally linked. This highlights the need to understand the nature of business organizations involved in transport to explain existing patterns and predict their future forms. The organization of transport firms explains the concentration of traffic and its associated congestion since they focus on the existing and potential demand and the supporting capacity. In turn, the organization of global firms is shaped by the conditions of local markets. A distinct geography of transport firms has emerged, focusing on gateways, corridors, and logistics clusters.

Another change in the management of transport systems concerns information technologies and the automation of vehicles and terminals, which open new venues in operations and the management of transportation assets. Self-driving vehicles are being gradually deployed, which may lead to higher use of existing vehicle assets. The same number of vehicles could carry more people or freight while putting less pressure on existing roads, highways, terminals, or rail lines. The automation of logistics nodes is more advanced, particularly at port terminals and distribution centers. For instance, e-commerce has driven the automation of distribution centers, particularly e-fulfillment centers. Congestion and demand peaks, a recurring challenge for transportation, could be more effectively mitigated.

3. The Digitalization of Mobility

The digitalization of transportation and mobility is ongoing and far-reaching in consequences. Many transport actors (planners, operators) see technology, including information technologies, as solutions to a wide range of transport problems. Integrating infrastructures, processes, and services provides better information and control over traffic flows and transportation assets. This approach has achieved wide acceptance since there is a strong emphasis on seeking engineering solutions to transport problems. This represents a low-hanging fruit due to the ubiquity of information systems.

An important effect of the digitalization of mobility concerns its substitution effect. Virtual activities can be substituted for physical activities requiring mobility. For instance, telecommuting, teleconferencing, and online banking all involve a form of mobility substitution. The diffusion of e-commerce has been an important driving force in the decline in store-related movements, including deliveries. Digitalization also has a generation effect as E-commerce generates logistics flows and activities involving fulfillment centers at locations different from those preconized by retail. These effects need to be better understood, particularly their impacts on the spatial structure.

Intelligent highways have been considered a potential mitigation for road congestion and safety. They are a means of communication between the road and driver that warn of approaching road conditions. Warnings include electronic message boards suggesting alternate routes to approaching motorists and designated radio frequencies that give updated traffic reports and information. Closed-circuit TV systems (CCTV) record lane-by-lane occupancy, volume, and speed. At the same time, ramp meters record the amount of traffic entering the highway in real time. This information is analyzed and processed at a control center that can dispatch emergency equipment to accidents as they happen and can inform other drivers of road conditions, accidents, construction, and delays. However, technological developments in personal computing devices have sidetracked the full implementation of intelligent highways. They involve navigation aids through mobile devices and onboard systems. They have the double advantage of offering real-time routing options while providing locational and speed attributes that can inform about the network condition for all users. It is unclear to what extent information technologies in the form of navigation aids have contributed to optimizing mobility at the aggregate level and reducing congestion and energy consumption.

Information technologies are providing many solutions to the problems of pricing transportation assets, particularly road pricing. Toll collection increasingly uses electronic means without requiring vehicles to stop at toll booths. In its simplest form, vehicles equipped with a transponder that emits details of the vehicle are allowed to pass through toll lanes without stopping to pay. Receptors at the booth record the passage and debit the account. This is at the heart of the cordon pricing and most new toll systems. Toll collection is rapidly evolving from the conventional toll booth approach where a fare was manually collected or a vehicle needed to slow down to go through a toll gate. The latest systems are gantries on top of collection points where the electronic tags of vehicles are scanned and wherein the case of a vehicle without tag license plates is scanned for an invoice to be issued to the registrant’s address after a specific amount of time or number of toll use.

An emerging digitalization paradigm concerns mobility as a service where transportation services are offered to users through information technology platforms. Thus, there is the possibility of better using existing transportation assets through a higher level of market transparency in the cost, scheduling, and availability of services. A salient example concerns ride-sharing services that substantially impacted urban mobility by creating an extensive market of drivers offering mobility services.

The digitalization of mobility has also been associated with the automatic generation of large quantities of data, colloquially labeled “big data“. This sensor-derived data collection allows transport assets such as vehicles, equipment, and terminals to generate information about their location, users, and status, which can serve analytical purposes. 

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