A Solution for National Interoperability
A truly peer-to-peer system for interoperability in electronic toll collection would allow payments to be sent directly from a customer to a toll agency without going through a central party. The benefits and simplicity of an in-person, cash toll transaction can be realized in a distributed network that allows a customer to transact directly with any toll agency, anywhere.
To overcome the challenges of national toll interoperability, we propose a solution that uses a peer-to-peer network built on blockchain technology, a “Unified Tolling Network.” The inherent structure of the model provides a cryptographically secure peer-to-peer network for recording transactions and tracking digital assets and identities in shared, replicated ledgers, such that both the toll agency and the customer are mutually protected from double-billing, double-spending, fraud, and external malicious attacks on the system. The unique design of the Unified Tolling Network eliminates the need for agencies to a) share transponder and license plate validation lists and b) exchange and reconcile interoperable transactions and funds.
The Unified Tolling Network provides three distributed sets of information that would be shared by the participants in the system: 1) a transaction ledger, 2) an asset inventory, and 3) a list of certified identities. Toll agencies certify suppliers who list their assets—transponders, license plates, and other vehicle identifiers—in the shared inventory. Customers use a digital wallet to store payment instruments, hold prepaid balances, and list their certified assets. When a customer uses a toll facility, the toll agency initiates a transaction directly with the customer’s electronic wallet. The customer participates in the transaction by approving and thus cryptographically signing the transaction.
The concept of interoperability in toll collection essentially means that one customer, with one transponder account, can seamlessly use the toll facilities of many agencies. Well-known examples include E-ZPass, Fastrak, and SunPass. This topic comes with some challenges–challenges that industry groups have been working to overcome or minimize since the transponder was first introduced in the late 1980’s. Today, old issues still exist and new ones are being created as operations evolve. The upcoming deadline for national interoperability in October makes it even harder to jump the hurdles.
The Problem with Centralization
In reality, can one organization or company be trusted to act as a middleman for every toll agency in the US? The hub and spoke model can suffer globally from one participant’s mistakes. Those mistakes don’t always make the news, but they exist and the toll industry struggles with solutions to these problems.
Operationally, every toll agency has its own requirements and legislative directives. The different characteristics of toll facilities—roads, bridges, tunnels, and urban, rural, commuter—complicate the landscape. Plus, the cost of doing business, the “the cost to collect,” varies widely in the industry. Every agency calculates transaction processing costs differently. These things combine to be a significant source of difficulty in negotiating interagency agreements. Centralized consortiums require a single set of rules to operate, and a national consortium of all toll agencies will be even harder to wrangle than the current regional collectives. Interoperability needs to support the vast uniqueness within the industry and make participation easy for toll agencies of all shapes and sizes.
Beyond Decentralized: A Distributed Solution?
What if we had another model altogether? Not just decentralized, but truly distributed. What if we could have a distributed system that would allow agencies to use their own rules and cover their unique costs to collect? What if we had a system that could scale to any number of customers and agencies and could eliminate the need for the difficult hub and spoke architecture? A Unified Tolling Network built on blockchain technology and distributed applications opens the door to all of these ideas.
Blockchain technology is being developed beyond its initial uses in cryptocurrency. Many of the major financial institutions in the world are exploring the potential uses of blockchains. Efforts extend into a wide array of business models that require transactional accuracy, chains-of-custody, unsurpassed security, and complete transparency. The built-in benefits of the Unified Tolling Network can improve toll collection operations in ground-breaking ways by simplifying processes and drastically reducing operating costs.
Back to Basics
Let’s deconstruct a bit. Toll collection began with cash transactions at the toll booth. With cash, the customer physically hands money to the toll collector for the transaction.
Both sides participate and, more importantly, they agree on the terms of the transaction. The customer transacts directly with the toll agency. This type of transaction is ideal for everyone involved, except for one problem—it’s slow… very slow.
Automatic coin machines sped up the process, but the invention of the transponder made things happen really fast. It was a great leap forward in the world of toll collection. However, the transponder also introduced a great deal of operational complexity. It created the need for a customer account, and it took away the active participation and agreement that happens in a cash transaction.
Toll violations notwithstanding, the transponder is essentially the root of operational complexity and many customer service issues in toll collection. The transponder also presents some of the largest hurdles for interoperability.
We need to get back to the simplicity of the cash transaction, but how do we achieve the speed and efficiency of a transponder transaction with the accuracy and trust of the cash transaction… along with all of the interoperability solutions we’re looking for?
The Next Generation of Toll Collection
Toll collection started with cash collection, became automated with coin machines, and went digital and wireless with transponders. Now, a fourth generation of operations is possible: the Unified Tolling Network, founded in the technology of cryptography and blockchains. Goldman Sachs extols the blockchain as technology that “has the potential to redefine transactions and the back office of a multitude of different industries.” In a nutshell, a blockchain is a record of events that is virtually impossible to change. You can record anything in a blockchain, and it becomes an ironclad record of everything that happens to it.
The Unified Tolling Network provides three things that will revolutionize toll collection:
A shared, replicated, and transparent ledger for all toll transactions
A secure, unified register of customers, license plates, and transponders
A method for any customer to transact directly with any agency
This puts the customer back in the center of the picture. By using a shared blockchain architecture, every participant in the system has direct access to the data they need. The need for agency-to-agency data transfers and agency-to-agency financial exchanges for interoperable transactions is eliminated. Every customer can transact directly with every agency.
Implementing the Unified Tolling Network
The Unified Tolling Network is made of up a few basic ideas: user certification, asset registration, a transaction ledger, and an electronic customer wallet. The participants in the system are toll agencies, asset suppliers, and customers.
All participants register through a certification process and are given unique, private digital keys. Agencies and suppliers register and attach to the network by acting as nodes. Customers register and attach to the network through an electronic wallet, much like Apple Pay, Google Wallet, or the Coinbase bitcoin wallet.
Suppliers and agencies add their assets to the system as they are introduced into circulation. For example, a transponder supplier would add sets of inventory to the blockchain as they are sold to customers. Similarly, as suppliers, Departments of Motor Vehicles would add license plate and registered owner information to the blockchain. (The current state of DMV data presents some hefty challenges, but we believe there are solutions to be found in blockchain capabilities.) Customers use an electronic wallet to store payment instruments, transponder IDs, license plates, and any other potential asset information. The architecture allows for anonymous customers through the private key mechanism, so personal data such as address, phone number, etc. are not necessarily required.
Toll transactions occur in the lane as they do today. The agency reads a transponder or takes a picture of a license plate. Instead of taking the payment from a customer’s prepaid transponder account, the agency connects directly with the customer’s electronic wallet and initiates a transaction. The customer then approves the transaction and the payment is processed. Transaction approval could be addressed in various ways: customers could manually approve transactions with a button-push; auto-approve transactions from their local agency; auto-approve transactions based on GPS location from a mobile wallet; and auto-approve transactions for certain days and times based on a commute schedule. There are many possibilities for smart and efficient solutions to create a win-win situation for the agency and the customer.
All agencies have access to the entire set of assets and wallets through the blockchain. In essence, agencies have a real-time connection to what is known, in industry jargon, as the transponder and license plate validation lists, but with even more information at their fingertips. The blockchain contains the complete chain-of-custody for all assets. The blockchain also provides access to a customer’s wallet, which contains the current status of payment instruments.
The drawing below outlines the main principles of operations across participants and the blockchain in the Unified Tolling Network.