Set attainable goals when developing a business model for ITS projects.

The Florida Department of Transportation's experience with implementing a regional ATIS program in the Miami tri-county region.

April 2002
Miami,Florida,United States; Fort Lauderdale,Florida,United States; Hialeah,Florida,United States

Background (Show)

Lesson Learned

When working with a private sector partner to develop a business model it is important to maintain goals that can easily be reached with available resources. The business model proposed by SRS for the Miami Regional ATIS Project, a self-sustaining ATIS, turned out to not be attainable. SRS indicated that developing the ATIS as a self-sustaining business area was not feasible, and proposed that the service be continued on a fee-for-service basis. Based on FDOT’s experience with the SunGuide business model, the evaluation team highlighted lessons that should be considered when developing a business model for ATIS:
  • Use services and marketing strategies that have proven track records.
    • Internet-based advertising was a cornerstone of the business model proposed by SRS. At the time of the project the market for Internet-based advertising had not developed as anticipated, and this fact, coupled with the collapse of the "dot com" market in the two years prior to the project, in essence eliminated this particular source of revenue.
    • FDOT and SRS both anticipated the development of value-added and customized information services as an additional revenue source for the project. The language in which the ISP is encouraged to provide revenue-generating customized information to clients and generate commercial revenues reflects this. However, as of the evaluation, SRS had not offered value added services to clients. The market for such services was not developed as anticipated. FDOT and SRS also recognized that marketing and outreach would be required to establish the SunGuide system as a brand name that travelers and commuters would recognize. The importance of this is reflected in the identification of specific marketing and outreach services that were to be provided by the ISP in the project’s negotiated scope of work. While these activities resulted in a concurrent increase in user contact to the SunGuide system, this increased contact was not for value-added services. Most contacts have been to obtain travel information or to report incidents and congestion and have not expressed interest in obtaining value-added services. An additional constraint was that the further development of value-added services would require an additional investment of resources in advertising. Experience in other markets has shown that such an investment can be cost-prohibitive (an example is the TravTIPS project implemented as a public-private partnership by the I-95 Corridor Coalition and ARINC, Inc., of Annapolis, MD. A study conducted for ARINC estimated that approximately $40 million in marketing and outreach would be required to establish the TravTIPS system as a brand name). The potential return on investment needed to justify such a resource outlay did not appear to be attainable in the Miami tri-county region.
  • Clarify the role of public sector agencies that control information infrastructures. Once this role has been clarified and public sector agencies have determined how to treat the private sector agencies, private sector agencies can make business decisions related to entering the market.
    The partners have successfully established a working relationship that enables the sharing of data and information. The problem with the business model regards developing other business areas and revenue sources that will support the core ATIS function.
  • Make the business planning process flexible with strong support from the public sector.
    The ATIS contract document did not contain a process for deleting or revising services that are not profitable. Adding additional services does not appear to be a problem; addressing issues related to unprofitable performance has been a source of disagreement between the partners. The project would seem to be better served by an agreement that enabled revisions of the business plan using this iterative approach.
When developing a business model agencies should set realistic goals to achieve the desired results set out in the initial planning process. When laying out a business plan for an ITS project it is important to begin with defining the role of the public sector agencies that control information infrastructures. This allows private sector agencies the ability to make sound decisions on how best to enter the market. Public sector involvement is also crucial during the initial planning process to address how to deal with possible future issues related to the business plan. Based on the evaluation of the SunGuide business model, revenue generation from ATIS services, both wholesale and to the individual, did not prove to successfully support an ATIS service.

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Miami Regional Advanced Traveler Information System: Final Evaluation Report

Author: SAIC

Published By: Prepared by SAIC for the USDOT FHWA

Source Date: April 2002

EDL Number: 13678

URL: https://rosap.ntl.bts.gov/view/dot/3843

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Lesson Analyst:

Jane Lappin
Volpe National Transportation Systems Center


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Systems Engineering

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Lesson ID: 2007-00373