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  COVINGTON &
  BURLING

  1330 AVENUE OF
  THE AMERICAS

  NEW YORK

  NEW YORK, NY
  10019

  WASHINGTON

  TEL 212.841.1000

  SAN FRANCISCO

  FAX 212.841.1010

  LONDON

  WWW.COV.COM

  BRUSSELS

November 21,
2005

VIA EDGAR AND
OVERNIGHT DELIVERY

Securities and Exchange
Commission

100 F Street, N.E.

Washington D.C. 20549

Attn: Michele Anderson, Legal Branch Chief

Re:                               Traffic.com, Inc.

Amendment No. 3 to Registration Statement on Form S-1

File No. 333-127973

Dear Ladies and Gentlemen:

On behalf of Traffic.com, Inc. (the “Company”),
we are responding to Comments 1, 2, 3, 5 and 8 of the Staff’s letter dated November 16,
2005, relating to the Company’s Registration Statement on Form S-1.  The Company will respond to the other
comments from the Staff in a subsequent letter.
For the Staff’s convenience we have repeated the Staff’s comments below
before each of our responses.  The
Company would very much appreciate the Staff’s prompt review of these
responses.  The Company would be willing
to schedule a conference call to further discuss any of these responses
with the Staff.

General

1.                                       We
continue to evaluate your responses to comments 5, 7 and 18.

The following responds to oral comments received from
the Staff on November 17, 2005 regarding the Company’s revenue recognition
policies:

The
Company has commenced revenue recognition under its government contract in each
deployment area prior to formal system acceptance with the local government
agency.  Historically, the Company
concluded that acceptance occurred at the time the Company began providing
significant and useful traffic information to its customers in that area.  Upon reconsideration, the Company has
determined that a more appropriate policy would be to commence revenue
recognition upon formal system acceptance, because it believes that this policy
is more consistent with the presumption in SAB Topic 13A.3.b  that customer acceptance provisions are
substantive.

The
Company previously recognized revenue on a proportionate performance method
basis, over a 3-year life through analogy to government grant assistance
accounting which resulted in revenue recognition over the original estimate of
life of the digital traffic assets.   The Company continues to believe
that a proportionate performance approach is appropriate; however, upon
reconsideration, it has determined that a more appropriate measure of delivery
would be the estimated economic life of the services

contract.  Accordingly, the Company intends to revise
its financial statements to recognize revenue on a pro rata basis over the
estimated economic life of the services contract.

In
determining the appropriate period to recognize revenue, the Company noted the
following:

The 1st
Federal Task Order which covered the Pittsburgh and Philadelphia locations did
not provide a contractual term.  Under
the 2nd Federal Task Order (which covers 25 additional cities), the
contractual obligation to provide the Government with traffic flow data under
the Federal Task Order will end ten years from the date of system acceptance in
each metropolitan area, or January 1, 2012, whichever is the earlier of
these two dates.  These dates, however,
identify the minimum period over which the Company would be obligated to
provide the data and they are not necessarily indicative of the economic life
of the contract.  It is noted in the
Federal Task Order that the Company is expected to continue to provide services
to public agencies and commercial clients on an ongoing basis. It is further
noted in the task order that the continued services for pubic agencies will be
consistent with that provided under the task order and will be provided at no
additional cost to the public agencies.

The
2nd Federal Task Order allows the Federal government to terminate its agreement
with the Company for cause at any time within the first ten years after system
acceptance in each metropolitan area or January 1, 2012, whichever is the
earlier of these two dates.  If such were
to occur, the Company would be obligated to pay liquidated damages of $960,000
in year one reducing by 10% each year through year 10; however, in no case can
any liquidated damages be imposed after January 1, 2012.

Under the terms of
the Federal Task Order, the Company is required to enter into separate
agreements with each metropolitan city for which it is providing traffic data
services.  The terms of these local
agreements are unique for each metropolitan city based on specific negotiations
between the Company and the local governmental agencies.  The contract life for each of the local
agreements is unique to the contract itself, ranging from a period of five
years to a period no longer than the January 1, 2012 contract termination
date under the Federal Task Order, in addition to renewal and extension
periods. Also stipulated in these local government contracts are the provisions
related to the sensor network in the event that the contract is either
terminated with cause or not renewed upon completion of the original contract
term.  As noted in the local government
agreements, if the Company ceases to operate, maintain or manage the traffic
sensor network in any of its metropolitan cities prior to termination of the
agreement, the Company must dispose of it equipment in the following manner:

2

•                  For equipment purchased by the
Company with private funds, the local government agency will have right of
first refusal to purchase the equipment at fair value.

•                  For equipment purchased with public
funds, the local government agency can exercise its right to obtain the
equipment at no cost. It should be noted that the Federal Task Order
specifically states that no federal funds can be used for the purchase of
equipment.

•                  In the event the local government
agency does not exercise its rights to purchase or obtain the equipment, the
Company must dispose of the equipment at its own cost.

As
noted above, the Company’s federal government task order provides a contract
end date of January 1, 2012; however, it also provides that Traffic is expected
to continue to provide services (at no cost) to public agencies and commercial
clients on an ongoing basis. The Company has an expectation that it will
maintain the sensor networks beyond January 2012 and provide the traffic
flow data to the federal and state agencies.
By not doing so, the Company could subject itself to the agency
requiring the sensors to be removed or sold which would jeopardize the Company’s
substantial commercial revenue stream.

The
Company believes that it will continue to provide data to the government
agencies for a long period, but is unable to estimate with any clarity how long
that period will be.  In particular,
these government agencies have been collecting traffic data from their own
sensors for a period of at least 20 years and there is no reason to believe
that this will change in the near future.
In addition, the contract with the Company allows the government
agencies to receive data for an indeterminate period at no extra cost.  The collection of this data also supports the
business model of the Company in that the Company provides the same data to
other entities for commercial gain and expects to do so as a significant part
of its business model well into the future.
The Company expects, however, that other technologies may reduce the
specific importance of the sensor data in the long term.

The
Company has considered the length of time over which to recognize revenue and has
concluded that a period of 15 years from the date of system acceptance, on a
city-by-city basis, would be the most relevant time.

The
Company has considered whether a longer term would have been appropriate;
however, it believes that as time passes, it is possible that the sensor data
may become less important as other technologies, such as GPS, location-based or
satellite-based technologies become more prevalent.

3

In
making this determination the Company concluded that, given the pace of
technological change, it is possible that other technology approaches may
become as important or useful as the sensor data currently provided.  In this event, it is likely that the useful
life of the Company’s sensor data will be limited, and that the government will
use data from other technological solutions ahead of or in parallel with it.

Despite
potential changes in technology, as long as the Company is servicing the
contracts and providing data to the federal and local departments of
transportation, we would retain access to the right of way and would not be
required to remove the sensor network.

In connection with the
Company’s revised revenue recognition policy, the Company has reevaluated the
useful lives of its sensor network site assets.
In performing this reevaluation, the Company has bifurcated the senor
network site assets into two components—the pole assets and the technology
assets.  The pole assets include the
pre-site installation, field engineering, the steel pole used to mount the
equipment and the radar and solar panels which are expected to have a life of
15 years.  Pole assets also include the
work required to erect the pole in the ground.
The technology assets include electronics items such as modem, battery
and wiring assembly.  These items are
more likely to be replaced in a much shorter time as other technologies may
supersede them.  The Company will
continue to depreciate the technology assets over the 3-year useful life that
has previously been used.

The pole assets, which
represent approximately 88% of the estimated site asset cost, have been
determined to have a longer life.
Consistent with the period that the Company believes that it should
recognize revenue on the US DOT contract, the Company has concluded that a
15-year useful life is an appropriate life for the sensor network pole
assets.  As previously noted, while the
pole upon which the sensor equipment is positioned could remain in place for a
considerable period of time, the collection of roadside data using the
Company’s current process may become superseded by other technologies, limiting
the economic useful life of the assets concerned.

As
discussed in response to Comment 2, the Company plans to restate its financial
statements and related footnote disclosures. The revised useful life will be
reflected in this restatement.

2.             We note that you restated your
financial statements to add the discount of $25.4 million to your net loss
available to common stockholders in your statement of operations for the fiscal
year ended December 31, 2003.  As a
result, you should:

•     Revise to label your financial statements as
restated.

•     In the notes to the financial statements, describe
any and all revisions, including the change to earnings per share, and provide
the disclosures required by paragraph 37 of APB 20.

•      Have your auditors revise to include a
reference to the restatement in the auditor report.

The
Company plans to label its financial statements as restated and the Company’s
auditors plan to revise their audit report to include a reference to the
restatement.  Revisions will also be made
to the accompanying notes to the financial statements as requested.  Further detail regarding these changes will
be included in our subsequent letter responding to the remainder of the Staff’s
comments.

Management’s Discussion
and Analysis of Financial Condition and Results of Operations, page 25

Sources of Revenue and
Cost of Revenue, page 27

Traffic Data Services, page 29

3.                                      Refer
to your response to comment 6.  We note
that you have not established an asset retirement obligation associated with
the cost of removing your digital sensors because you do not have any reason to
believe that the governmental agencies will ask that the sensors be
removed.  SFAS 143 indicates that
uncertainty about whether performance will be required does not defer the
recognition of a retirement obligation; rather, that uncertainty is factored in
to the measurement of the fair value of the liability through assignment of
probabilities to cash flows.  Refer to
paragraphs A5, A17-A18 and C10- C12 of SFAS 143 and revise or advise.

4

Further to help us
evaluate your response and the magnitude of your asset retirement obligations,
please provide us the following information:

•                  Describe the
properties included in your analysis and indicate how many properties are
involved;

•                  Provide the
estimated cost of removal per property;

•                  Give us a better
understanding of your contractual removal and remediation responsibilities;

•                  Tell us in your response letter about
the contract terms (i.e. length, renewal options, etc);

•                  Tell us in your
response letter the assumptions, including the probability of remediation that
you used in determining a potential liability.
Tell us in your response letter your basis for each of your assumptions;
and

•                  Describe your
historical experience with remediation of properties, including the number of
sites exited and the range of costs incurred.

The Company had not
previously established an asset retirement obligation in its financial statements
because the Company deemed the probabilities and amount to not be
significant.  After consideration of the
SEC staff’s comments and further review of the applicable guidance, the Company
is establishing an asset retirement obligation as described below for the
removal of the sensor network for the six metropolitan areas completed and
placed into service as of September 30, 2005 and will establish an asset
retirement obligation for future metropolitan areas as they are placed in
service.  In accordance with SFAS 143,
the obligation will be amortized over the 15 year life of the major site
assets.

The sensor networks
consist of a series of sensor sites on major roadways in large metropolitan
areas such as Philadelphia, Chicago, and Los Angeles.  The sensor sites consist of a galvanized
steel pole and foundation on which a solar panel, radar, and communications
equipment are mounted.  The Company’s
contracts with the federal and local departments of transportation allow the
Company to install the sites in the right of way of major roadways.  Access to the right of way is controlled by
the local departments of transportation and should the Company’s contract be
terminated, its access to the right of way would be revoked and would most
likely be required to remove the sensor network.

The Company’s contracts
with the federal and local departments of transportation allow the local
departments of transportation, upon termination, to purchase the assets from
the Company at fair value, in which case the Company would incur no retirement
costs, or to require the Company to remove the network at its cost, in which
event the Company may be able to use the assets in the build out of other
metropolitan areas, thus saving cost.

The Company believes the
probability of the federal or local departments of transportation opting to
purchase the sensor assets from the Company to be remote considering the
governmental agencies are not required to make additional investments for the
continuance of the data and the Company would generally not be required to make
available the intellectual property which integrates the data received.  Therefore, in the event any or all of the
contracts are terminated, the most likely outcome would be for the Company to
remove the sensor network.

However, the Company also
believes that there is a possibility that the governments will never require
the Company to remove the poles for the following reasons:

•      The
location of the poles in the sensor