Power to the little guy

Many small carriers struggle to keep pace with changing market conditions and standards. Shipper requirements that carriers use electronic data interchange or certain mobile communications systems, for example, may put these carriers at a disadvantage to those with greater purchasing power and economies of scale.

Representing the American Trucking Associations, Ralph Richmond last month recommended some ways Congress could spur technology investment among small and medium-size carriers.

Richmond, the president of USA Cartage, an 85-truck carrier in Williamsport, Md., testified before the U.S. House Small Business Committee on small business access to technology.
Carriers buy new technology, Richmond notes, to boost employee and equipment productivity and performance, to meet customers’ needs and to comply with government regulations and mandates. Richmond suggested four ways that lawmakers could specifically help small fleets meet these goals.

Faster Depreciation. Currently, the IRS requires companies to depreciate systems over 5 years, but systems often become obsolete in much less time. Richmond would like the depreciation to match the systems’ actual useful life.

Tax Credits. Richmond also asked the committee to look at offering tax credits to small businesses for technology purchases.

Proprietary Policies. Richmond asked the committee to encourage standardization and freer access for companies to build on emerging technologies such as satellite communications and GPS tracking. These systems typically require significant investments in hardware and software, which are proprietary to specific vendors. Carriers often become stuck with a system that does not “speak” to other systems, even though the technology is fundamentally the same, Richmond says. Because of the start up cost, small carriers find it difficult – if not impossible – to switch to another vendor or better service.

A current example of this problem, Richmond says, is the new satellite radio services from XM and Sirius. “Those things run around $300 for a radio,” he says. “To change to the other service, you have to get all new radios. These type of things restrict a small company like us.”

Data Privacy Protection. Richmond asked the committee to “bear in mind” the importance of data privacy to each company and to set policies to protect it. On-board computers and automatic vehicle location systems, for example, collect and record information that could be used against the carrier for law enforcement, Richmond says.

“I want to make it clear who owns that data. When you start gathering a lot of information on what your trucks do, that scares a lot of people,” Richmond says. “It belongs to us.”

Faster depreciation and availability of tax credits are simple matters. There isn’t much opposition on principle. The only question is whether the business community’s pressure to obtain them can overcome the government’s resistance due to the cost to the U.S. Treasury.

Richmond’s call for data privacy protection is controversial, but the history of enforcement and litigation has shown that the concern over self-incrimination is legitimate.

Richmond’s remaining suggestion wisely does not go further than it does. It’s great for government to encourage standardization; but rigid, government-imposed standards can seriously stifle innovation. On the other hand, many government-endorsed organizations in a variety of industries have set valuable technology standards for years. Often, technology companies come together informally in consortia to set standards. And groups like American Trucking Associations’ Technology and Maintenance Council develop “recommended practices,” which are a type of standard.

What make these initiatives work is the fact the standards are, in effect, set by the users. But frankly, even without formal standardization efforts, the free market often finds a way to solve these problems. Richmond’s own trucking company uses Aether’s MobileMax2 mobile communications system built on a platform called Fusion. When USA Cartage decides to add other wireless applications and networks, such as a handheld device or cell phone, Fusion consolidates all the company’s wireless data into a standard format that communicates with the other systems.

This kind of flexibility may not be available in all cases, but the marketplace has a fix for that too. Competition – even for the business of a small carrier – breeds attractive pricing and flexible terms. If the technology leap is powerful enough, the benefits should outweigh the costs.