WORKSHOP 1: MULTI LANE FREE FLOW

1. WORKSHOP 1: MULTI LANE FREE FLOW Zaida Abdul Aziz Malaysian Highway Authority 22 April 2011

2. OBJECTIVES • To share the experiences and perspectives of Multi lane Free Flow Tolling implementation in Malaysia • Migration To Multi lane Free Flow Tolling System In The Malaysian Toll Highways: Critical Success Factor, Issues and Challenges.

3. EXPERIENCES AND PERSPECTIVES OF MULTI LANE FREE FLOW IMPLEMENTATION IN MALAYSIA

4. BACKGROUND • Expressways in Malaysia • Total length: 1,740 km • 27 Highway in operations • 5 in construction stage • Two type of Highway Operation: • Closed System • Open System • Payment Method: • Cash • Electronic

5. ETC Chronology Infra-red (Two-piece SmartTAG) Infra-red (Two-piece SmartTAG) MLFF Microwave 2.45 Ghz (PLUStag) Microwave 2.45 Ghz (PLUStag, KESASTag) 1994 - 1997 CONTACTLESS SMARTCARD (BRIDGEKad, Touch ‘n Go) Microwave 5.8 Ghz (FASTRAK, EXPRESSTAG, SAGATAG) 1998 - 2003 2004 - Current 2015 onwards

6. CURRENT ETC SYSTEM IN MALAYSIA • Single and Common ETC System based on pre-paid electronic purse concept • The same contactless smartcard can be used for other transportation needs such as parking and public transport (bus and LRT) • For non-stop ETC, a two-piece OBU system is introduced in 1998.

7. CONTACTLESS SMARTCARD APPLICATION PIARC 14-16 AUGUST 2006

8. NON STOP ETC SYSTEM IN MALAYSIA • Enable non-stop toll payment capabilities – Infra-red transponder with smartcard reader • Two piece unit; SmartTag function as transponder (On Board Unit) and Touch ‘n Go card provides the e-purse function

9. Needs for MLFF Implementation • Based on current capacity, toll plaza congestion is not a big problem today, however, 20% of toll plazas will be congested in 5 years • There is a need to plan for MLFF today • SmartTAG is not the solution for the long term • There is a long lead time to address the challenges involved in moving to MLFF, in particular, the legal and enforcement challenges

10. Definition of Multi Lane Free Flow ETC(MLFF) • MLFF is a fully electronic tolling system which features an overhead gantry, with no lane barriers, to transact the users toll charges accordingly. • Tolling at highway speed

11. Technology Consideration • DEDICATED SHORT RANGE COMMUNICATIONS • Most common solution in most scenarios when used with Video ALPR • Exceptions: • Few users and large road network • When legislation needs something else • VIDEO AUTOMATIC LICENSE PLATE RECOGNITION (ALPR) ONLY • Solution when license plates are very good, update to date license plate registry • Limited number of license plate types & fonts • Native traffic subject to toll • When legislation prevents DSRC • GLOBAL NAVIGATION SATELLITE SYSTEM (GNSS) • Large road networks and few vehicles • Still very high OBU cost and installation cost • Need for enforcement means roadside installations are still required

12. Cost Benefit for MLFF Electronic tolling has proven value Cost per transaction for TnG / SmartTAG lanes significantly lower than cash lanes Need to address systems as well as business / operating model issues Poor perceptions of reliability and security will impact customer adoption and operator support Some questions whether Malaysia is ready for MLFF Operator perception that driving penetration of existing solutions can alleviate congestion in near to mid term Critical to make migration to MLFF as painless as possible for customers Address issues limiting adoption of current solutions (e.g. cost of tag, reload convenience) Rakyat Highway operators Government Legal and enforcement model most critical concern Need reassurance over ability to enforce and manage impact of leakage and disruptions to cashflow and existing concession agreements; govt role is key MLFF brings additional benefits (e.g. speed, safety, lower costs to build new highways) Investment can also be leveraged for other applications e.g. congestion pricing, parking payment

13. Two Phased Implementation of MLFF Proposed All MLFF New tag Touch & Go Cash Cash Traffic flow Traffic flow Phase 1: Achieve MLFF readiness (2011-2015) Phase 2: Full MLFF rollout (~2015 onwards) DESCRIPTION • Distribute new microwave tag to users with 1-to-1 replacement for SmartTAG owners • Convert ~1000 lanes to new tag, beginning with SmartTAG lanes; barrier stays • Close all but 2 cash lanes/plaza by 2015 • Establish legal and enforcement model • Increase toll plaza capacity, reduce congestion, improve user experience in cost-effective way • Drive penetration to 90% by closing cash lanes • Lower operating costs • Allow time to agree and establish legal and enforcement model • Progressively lift barrier and convert selective toll plazas to SLFF or MLFF based on need • Implement enforcement model • Provide "free flow" benefits to consumers • Virtually eliminate toll plaza congestion • Lower operating costs • Lower construction costs for new highways OBJECTIVE

14. Malaysian like MLFF concept but quick to express concerns and question value Free flow concept appeals to drivers... ...But pricing and security concerns quickly follow... ...Along with questions of value add and enforceability ? ? • Positive reaction to MLFF concept board and pictures • "This would be awesome to use" – TnG user • "OBU is so stylish" • – Cash user • Customers see potential benefits of speed, convenience and security • "It is more convenient because I don't need to slow down" • – SmartTAG user • "Better than SmartTAG because of free flow" • - SmartTAG user • "Smaller size makes it easier to keep and carry around" – TnG user • Immediate concerns of how much extra cost for added benefits • "Number one concern is price, It has to be value for money" • – SmartTAG user • "We must know how much you’re going to charge for it" • – Cash user • "Is it free for us?" • – TnG user • And other questions around capabilities and security • "The question is, how good is this thing first?" • – SmartTAG user • "What about security? Someone can steal it right?" • – TnG user • Value add of MLFF questioned by some users • "Many times congestion is after the Toll so what's the point of this new system" • – TnG user • High scepticism regarding enforceability • "You must remember, this is Malaysia. If we can have free lunches, we’ll go for it. How are they going to control?" • -SmartTAG • "You cannot even serve summons, how are you going to enforce MLFF?" • –SmartTAG Despite concerns, high acceptance amongst users towards idea of Mandatory MLFF

15. MIGRATION TO MULTI LANE FREE FLOW IN THE MALAYSIAN TOLL HIGHWAYS: CRITICAL SUCCESS FACTOR, CHALLENGES AND ISSUES

16. Critical Success Factors to MLFF Implementation • MLFF typically implemented on new or previously un-tolled roads, or as part of major upgrade - very few examples of replacing systems • E-tolling operators typically do not guarantee tolls, only responsible for violation and evidence mgt • Legal and enforcement infrastructure must be in place before launching MLFF • Governments have typically supported the implementation of MLFF – several social benefits (congestion, convenience, safety, environment) • OBU and systems capabilities supports extension into other govt applications e.g. congestion pricing • Pricing differential sometimes used to encourage people to adopt Description • There is typically one company managing e-tolling • Key drivers: economies of scale, simple co-ordination, ensure that ETC operator has singular focus on driving penetration • Systems, including reload infrastructure are user-friendly, reliable and secure • Convenient sales, reload and service channels

17. Four Key Challenges to MLFF Implementation Business model Legal & Enforcement Customer adoption Technology & Operation • SmartTAG in use today is not MLFF ready • Works on infra-red which requires line of sight • Microwave tag is needed for MLFF • Along with new tag, a proven MLFF backend needs to be installed • New backend will also address other known weakness of existing system • New capex • Under proposed model, TnG will fund, own, operate and maintain all roadside as well as backend equipment • Higher commission rate to cover investment • Full control of end-to-end infrastructure to ensure system integrity (equipment malfunctions, blacklist updates etc) • Operators will need time to plan and manage operational impact • Moving to MLFF has inherent risks of leakage • Multiple agreements involving multiple stakeholders impacted • Highway concession agreements • Financing agreements between operators and bondholders • TnG service agreements • Lead time required to: • Agree on enforcement models, roles and responsibilities • Change necessary laws and regulations • Set-up enforcement infrastructure and processes • Combination of push and pull factors needed to drive customer adoption • Push factors: • Convert all lanes to new tag • Close down cash lanes • Pull factors: • 1-for-1 replacement for SmartTAG users • Incentives / rebate for new tag users • Higher price for cash vs. e-payment • Cross-sector e-payment capability

18. Prerequisites for MLFF Operation Many legal considerations.. ... with implications on existing agreements involving multiple parties Increased risks of leakage of toll collections Government • Concession agreements • Mode of toll collection • Toll rates • ... Agreement on enforcement model, roles and responsibilities Highway concessionaire Bondholders • Financing agreements • Impact on cashflows • Consents required Changes to laws and regulations needed • Service agreements • Scope of services • Commercial terms • SmartTAG arrangements MLFF Operator Set-up of the enforcement infrastructure and processes Need to work jointly with stakeholders to develop legal & enforcement model before barrier can be lifted

19. Prerequisites for MLFF Enforcement Prevention Recovery Applicable when toll is not paid at toll plaza 1 2 3 4 5 Prevention Detection & Evidence Mgmt Infringement Mgmt Collection & Recovery Enforcement & Legislation • Provide support to users to minimise the risk of involuntary violations • e.g. Reminders to top-up prepaid accounts, check OBUs working • Detects patterns of behaviour that may indicate tendency to violate • Mobile and portable detection of potential violations • Approach users before violations occur Captures and stores all vehicle images including registration number for vehicles performing violations Identifies vehicle owner performing violation from Vehicle Ownership Database Detects and identifies all types of violations performed by vehicles Maintains central database recording transactions, image captures, payments and violations • Collates all information of vehicle performing violations • Violation type • Image captured • Registration number • Vehicle class • Vehicle owner • Time and date of violation, etc. • Calculates charge to be imposed • Issues notice of overdue payment required to vehicle owners • Trace violators • Tracks recovered and non-recovered payments • Performs collection processes • e.g. phone calls, follow-up letters, etc. • Identifies enforcement and legislation activities going forward • Performs necessary enforcement and legislative actions to recover unpaid violation payments • e.g. blacklist, license denial, court prosecution, etc.

20. Operational Issues Identified • Migration issues • Lane downtime • Lane configurations – hybrid or new systems • OBU replacements • Take up rate • Asset transfers • Possible impact of traffic revenue due to change in vehicle classification method. • Accuracy of MLFF’s vehicle classification method. Classification of motorcycles as well. • Transponder shall be based on the class of vehicle and the requirements to access Jabatan Pengangkutan Jalan (JPJ) database to associate transponder with vehicle’s owner. • Intense and considerable backend processing at MLFF’s Back Office’s Server system due to various type of reconciliations (financial, classes, license plates, etc) • Change of vehicle classification method due to MLFF implementation. Affects Concession Agreement and possibility of effect on toll revenue due to change from axle-based to vehicle size/shape. • License plate issues (non-standard license plates such as ‘Putrajaya, Proton, etc’ and unapproved material).

21. Impact To Toll Operators • Possibility of roadside infrastructure and certain operations being passed to MLFF operator (CAPEX, OPEX, maintenance) and third party Changing roles and responsibilities Leakage in toll payment Compensation for CAPEX investment that have been made/planned • Issue of who is responsible for leakage (MLFF operator/Toll Operators/Government) • Issue of who is responsible for collection and recovery of leakage (MLFF operator/Toll Operators/Government • Issue of whether ETC capex already invested by Toll Operator shall be compensated by MLFF operator • Design issues for new toll operators and new highways • Rollout should minimise disruption to existing traffic low • Confusion to highway users • Driving the MLFF adoption rate and phasing out existing ETC/cash users MLFF implementation impact on existing traffic flow • Free tag replacement for existing SmartTag users • Government Frequent Travelers Plan (GFTP) rebates to extend to the new Tag users • Mechanism to convert/induce cash users to Tag users (fare differential, etc) Incentives to migrate to new MLFF Tag need to be provided for each user group

22. Impact To Users • Toll users like the speed and convenience of free flow • MLFF viewed favorably compared to SmartTAG (no need to slow down, no fear of getting stuck at barrier, smaller, less bulky OBU) Free flow concept is appealing to drivers However, some drivers questioned value ... ... and cited pain points limiting adoption of TnG / SmartTAG • Users make distinction between congestion at the toll plaza (addressable by MLFF), and congestion before/after toll plaza (MLFF cannot address); perception that congestion frequently due to latter • Longest queues typically at cash lanes • Key pain points in terms of reload inconvenience, issues of insufficient balance, and perceptions around system reliability/security • For SmartTAG, additional issues are price of the tag and fear of theft • Segment of customers that are sensitive to prepayment • Immediate concerns raised over how much the new tag will cost – users need to see value for money • SmartTAG users expect a free 1-to-1 replacement • Non SmartTAG users expect discount to SmartTAG price Cost will be a key consideration in adopting MLFF • Poor track record in enforcing traffic violations raised as issue • Concerns also want to be able to easily check their account balances and amount deducted • MLFF pilot users felt that MLFF lanes should be dedicated during the migration period to reduce confusion and avoid SmartTAG issues Enforceability identified as a key implementation challenge, migration plan needs to be convenient for users

23. THANK YOU