Hi, That Anonymous Dude. Great to see you in the Comments section again. I rented a Ford Focus, which does, in fact, have pretty decent gas mileage.
It also has an E-ZPass transponder on the front windshield. I haven’t seen that in a rental car before, but it makes perfect sense. Apparently, the car rental companies have been trying this out for a couple of years, but now it seems standard. Avis, where I rented, charges $1.50 a day on top of tolls to use the system.
That got me to thinking about the company behind E-ZPass. As anyone living in the Northeast knows, E-ZPass is ubiquitous–12 states, from Maine to Illinois to Virginia, use E-ZPass to let motorists electronically pay tolls for highways, bridges and tunnels. The company that sells the transponder technology is called Mark IV.
Mark IV has what we like to call sustainable competitive advantage. Good luck trying to break into this business. It’s true there are other companies that make electronic-toll technology–a firm called TransCore makes the devices used in Florida’s SunPass system, for example–but Mark IV really has the Northeast locked up.
Mark IV first got this gig back in 1994 when a consortium of 22 state and local highway agencies decided to use its technology. I guess it makes it a lot easier to convince people to go electronic if you can tell them their transponder will work over a quarter of the country. (If you are a transportation geek and want to know the inside story of how Mark IV won that contract, check out this story that ran in Toll Road News last month.)
My theory is that unless Mark IV really screws something up royally, they will never lose this contract. It took that consortium 18 months to test and agree on a common technology the first time around. The costs of switching at this point are so high that I think it’s safe to say Mark IV is in something of a transportation sweet spot. That’s especially true since there’s so much opportunity for growth: car rental companies, late adopters still paying with cash, a growing driving population.
Unfortunately, this is not a theory you can invest on. Mark IV went private back in 2000.