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$50M in US taxpayer funds didn't save Traffic.com

Solyndra isn't the only US company where millions in federal aid failed to create a lasting business. But investors did all right

    by Joseph N. DiStefano
    Published 
It's bad enough that the planned closing next year of the Traffic.com headquarters in Malvern, announced by owner Nokia's Navteq division last week, will idle 300 software engineers and other professionals.
But it's also a blow (like the federally-subsidized Solyndra debacle) to people who think the federal government should have a direct role in picking which private-sector companies deserve taxpayer support.

From 2000-06, Traffic.com consumed $50 million in no-bid US Department of Transportation funding to develop an online traffic data service, with backing from former U.S. Sen. Arlen Specter, R/D-Pa., and US Rep. Bud Shuster, R-Pa., and other Congressional supporters.
The money helped Traffic.com win contracts with Microsoft, Comcast, the Weather Channel, and other big companies and build a staff of at least 650 by 2006.
But critics in Congress (who represented districts with rival traffic start-ups) and in private industry said the government's favoritism to Traffic.com unfairly crowded competitors out of the market, as Jerry Werner (who worked for a traffic-data industry group) and Peter Samuel reported in a 2008 article for TollroadsNews.
A December 2009 report by Joseph W. Come' of the US Department of Transportation's own Inspector General's Office found the Federal Highway Administration officials who administered the Traffic.com grant allowed the company to restrict public access to the data it had collected with public money, bought equipment for the company with government grants instead of waiting to purchase finished data as the funding program was designed to do, and otherwise failed to "protect the public interest" because they were too busy "addressing congressional interest" in the contract, and protecting the company's financial position.
The DoT made some changes to the program, and Traffic.com eventually paid a total of $1.5 million to cities that helped collect traffic data. More than half went to Chicago, one of a handful of cities that makes Traffic.com data available to the public. About $125,000 went to Philadelphia, DoT spokeswoman Nancy Singer told me.  
The $50 million failed to give Traffic.com a sustaining edge in the face of competition from Google Maps (which uses data from Traffic.com and other sources, according to Singer) and other data aggregators, who now provide similar services without big federal subsidies. Nokia cited the unprofitability of the business group including Traffic.com in announcing the Malvern shutdown.

Nokia told me it will keep Traffic.com running and the site available to the public, while moving the work to Boston and Chicago. The federal contract requiring Nokia to share traffic data and revenues with participating cities expires in 2014, DoT's Singer told me.

Despite its business reverses, Traffic.com did show returns for its investors and owners, who split $179 million when the business was bought by the former Navteq Inc. in 2006.
Traffic.com backers included Robert Keith's TL Ventures, whose clients include Pennsylvania state retirement funds; Internet Capital Group, of Wayne; Pennsylvania Early Stage Partners, the investment fun formerly run by Rob McCord, now Pennsylvania's elected State Treasurer; former Traffic.com chairman Mark J. DeNino, a TL partner; and former Traffic.com manager David L. Jannetta, a former mayor of Altoona and supporter of Rep. Shuster, among others.
Keith, DeNino and Jannetta, now a partner at King of Prussia-based Alara Capital, didn't return my calls asking for comment on what we've learned from Traffic.com and its experiment in public financing. 
    JN
    Joseph N. DiStefano