Highway to hell...

Across the northern part of the GTA (Greater Toronto Area) there is an Express Toll Route freeway called the 407 ETR. The highway was built to ease the congestion across one of North America's busiest highways, the 401 (MacDonald Cartier Expressway).
It was built in phases and is now complete - spanning from the Eastern most parts of the area (Oshawa) to the Western most parts of the city (Close to Hamilton). For many commuters it has been a godsend in terms of reducing not only the time required to even get on to the 401, but the time spent with your foot on the brake once you're lucky enough to merge on to it. The government of Ontario sold this toll road a number of years ago - possibly a big mistake, but at the same time, was a nice one-off revenue source for a government running a hefty deficit. The highway was actually provided free-of-charge for the first year of its existence, at which point a digital transponder was required to gain access (or at least gain access to 'reduced' rates).
In the beginnings, it was moderatle priced at around $0.04-0.05 per kilometre. Once it was sold to a European private equity firm the rate increase began.
Currently, at the end of the summer of 2006 the rates sit at approximately $0.15/km and $0.10/km for prime and 'off-peak' times, respectively.

This is the set up for an idea that I think would be an absolutely beautiful (and sly) way of reclaing the 407 from private hands - most imporantly, at minimum cost. And by minimum cost, I mean next to nothing.

Part of existing as an autonomous state is having a monopoly of policing within your territory. This simply meaning that only sanctioned police organizations are allowed to enforce the law in a criminal sense. Of course you can have private security firms - but they are simply a sub-step to the actual police being called in to arrest and charge you of a crime. In this, all roads are enforced by sanctioned police officers with the given authority to ticket and stop traffic violators and offenders. Finally, even a privately-owned toll road is subject policing by public forces - with absolutely no exceptions.

So here is my idea - the 407 needs police - and if doesn't 'need' police - we pass a law that says ALL roads within Ontario are required to be policed. Public roads, of course, are simply policed - but we then pass a law saying that all privately owned roads must be policed, at a small fee.
This is the set-up: You then set your rate of 'private policing of roads' to an astronomical price. The current owners of the 407 cannot avoid having to pay this ridiculous price - becuase it is the law that one's private road must be policed (by your publicly funded monopoly of a police force).

So now the owners are in a slight predicament - they need police, by law, but are buyers in a monopoly market. We, being the friendly public, are charging them an absolutely ludicrous price for policing - which they are required to have. So now the owners have a choice - raise the price of the toll, or sell off the highway due to its lack of profitability.
Now, the current price more or less sits at the cup of the willingness to pay - meaning that if they were attempt to raise the toll - they would most certainly lose customers, if not all of them.

The company is stuck between a rock and a hard place. Raise prices and lose money, continuing operating at status quo with greatly increased costs and lost money, or sell the asset. Option (a) is not profitable (therefore sell), option (b) is not very profitable (therefore sell), and option (c) is... wait, who is going to buy a losing asset?
I can only think of one customer interested in own this asset - you guessed it - the government.

Bringing a whole new meaning to a rock and hard place. Three simple manoeuvres and you wedge the current owners of the 407 between a monopoly and a monopsony.

To add insult to injury - who did they buy the asset from? The government itself!

Write to your local concillor or MPP - lets get our highway back - for less than for what we sold it.
And in the interim - lets fund our local police services not by way of increased taxation, or more useless enforcement of not stopping all the way at a red light when you are trying to make a right hand turn onto a street with absolutely no traffic on it, or user fees - but by billing a myopic corporation for their lack of foresight.

Bounded rationality and opportunism are wonderful.


Anonymous Anonymous said...


3:11 PM  

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