ELD Service Providers are in a Race to the Bottom

By Joyce Deuley

In December of 2015, the Federal Motor Carrier Safety Administration (FMCSA) passed its electronic logging device (ELD) mandate, requiring that all commercial trucks and buses become equipped with electronic logging devices by December 2017. This mandate has been in the works since March of 2014, and surprisingly (or unsurprisingly) many carriers delayed their participation in implementing the ELDs, choosing to wait until the mandate was officially passed to comply.

The updated FMCSA regulations are meant to increase driver safety, reduce liabilities for companies, and to reduce unnecessary paperwork. Currently, most carriers rely on paper logs, which can be falsified, and usually requires additional time spent on record keeping. This creates potential liabilities for the company as well as inefficiencies. In addition to the massive amounts of paperwork, companies that don’t currently have electronic hours of service logs cannot always account for driver behavior and safety. At times, drivers may feel compelled to drive beyond the recommended amount of time, and/or may not even realize that they are doing so, which could lead to fatigue-related accidents. By having ELDs installed, companies can ensure that drivers adhere to their schedules and reduce fatigue-related accidents overall.

Despite knowing what to do, carriers are struggling with the idea of HOW they are going to meet the new FMCSA requirements, such as figuring which type of hardware (if any) they will need, as well as which software application will work best for them. But the carriers aren’t the only ones confused by the new mandate. ELD service providers know that there is a market that is required to purchase their services, but few have been able to make those services profitable.

For example, DAT, a freight-match service provider, recently announced its foray into the electronic hours of service market. However, just a few months later, DAT has thrown in the towel.  When asked about the phase out of its ELD service, InView, Product VP, Greg Sikes, claimed that the current ELD market is a “race to the bottom.” As compliance is required by 2017, ELD service providers are entering into a price war, in an attempt to undercut the competition. Because of this commoditization, DAT recognized that its ability to maintain a viable long-term ELD service just wasn’t in the cards. Instead, Sikes said that the company will help its customers transition to “somebody who wants to be in the business.” According to Sikes, the reality is that “there’s not really a lot of profit opportunity” with ELD services and that there are better ways DAT can serve its customer base.

This is just the first of many small to mid-sized ELD service companies that are going to see short-term success, but struggle to maintain their profit margins once everyone has their ELD services up and running. Two years could be enough time for a quick-grab tactic, but unless your company has additional fleet services to fall back on, long-term revenue will be a major hurdle. Ultimately, a large, white label ELD solution provider or two will take major stake in the market and utilize monthly service fees as an additional source of revenue, leaving the little guys out in the cold. But even with a successful ELD service offering, these larger providers are still only going to have tertiary ELD offerings at best. Now all we need is time to see which company will win out.