3 Smartcard technologies |
New technologies, new opportunities
30. The era of the paper ticket may be drawing to
a close. Technologies now exist that enable more sophisticated
and integrated ticketing arrangements. "Virtual" tickets
can now be included in smartcards or in mobile phones or other
electronic items, which are read automatically (or semi-automatically)
at some point on the journey.
The most intensively-used system is the London Oyster. Launched
in 2002, there are now 15 million Oyster cards in circulation,
used for some 7 million journeys each day. The Oyster card allows
users to mix a fixed period Travelcard with Pay-as-you-Go credits
that can automatically charge for extensions beyond the Travelcard's
validity. They are also significantly quicker to read than magnetic
paper tickets and this has increased passenger throughput at busy
Underground stations, and, along with other changes, has helped
to reduce bus boarding times.
31. TfL told us that
Overall, TfL considers that the introduction
of the Oyster smartcard has been unambiguously positive. It has
improved the customer experience in many ways. Certainly customers
can proceed through TfL stations and board TfL buses much more
quickly than used to be the case, and they are unanimously positive
about this. [
] Customers now have a wider choice of travel
products including the Oyster Pay-as-you-Go stored value product
which was impossible to deliver using paper tickets.
32. TfL pointed out, however, that such a scheme
does not come cheap: TfL pays its PFI contractor substantial service
charges to provide and operate the Oyster system. These costs
are deemed justified because of the benefits that the system provides.
33. Outside London, the take-up by the transport
industry of smartcard technologies has been limited. It is mainly
restricted to the metropolitan areas and some other cities, mostly
those which have been part-funded by the local transport authorities.
Smartcard systems can be complex and expensive and may not be
appropriate in all situations, particularly for infrequent travellers
or less intensively used transport systems.
34. Smartcards present new challenges to transport
operators and public authorities. They offer the potential for
a new level of passenger convenience, flexibility and choice in
ticketing. The technology and economics are advancing fast and
smartcards are likely to be commercially viable for a wider range
of transport uses in future. In the right circumstances, they
can also provide the transport operators with major benefits,
including reduced costs of ticket sales, better monitoring, and
more accurate allocation of costs and revenues. However, they
are not appropriate for all people on all journeys. For example,
long-distance rail passengers may not wish to have a high-value
ticket included in a smartcard, which they cannot visually check.
The Association of Train Operating Companies has been involved
with ITSO from the outset but it is not convinced that smartcards
are what the public wants for many journeys on National Rail.
35. A ticket that can be easily bought, at an acceptable
price, and widely used has to be backed by robust customer service
arrangements and contractual agreements between multiple parties.
The initial investment in the smartcard equipment can be costly
but the greater challenge tends to be the ongoing operation of
the system and maintaining it to a standard that retains the customer's
Smartcard ticketing is inherently very, very
different from paper ticketing. It is an invisible medium where
people are unable to see the content of what lies inside their
smartcards and it raises its own customer service challenge. The
biggest customer service challenge around smartcards is that the
customer needs to have absolute confidence that they will always
be charged the right fare and that money is not going to disappear
from their cards.
36. A single national transport smartcard may seem
an attractive proposition but it is currently impractical.
The challenge is therefore to find the right combination of scale,
functionality and sophistication at a price that is attractive
to the passenger and which provides a worthwhile return on investment
(in either commercial or social cost-benefit terms). An advanced
system such as Oyster may be appropriate for London but it would
be unnecessary and prohibitively expensive for, say, all buses
in rural areas. London shows that the benefit of smartcards can
be significant. But London is a special case, with an extensive,
integrated public transport system, low car-ownership, measures
to restrain car use, a large and growing population and a strong
37. There are examples of smaller-scale smartcard
systems that have been in operation for several years and proven
themselves to be viable. Cheshire County Council's Chester Travelcard
for buses was established using the powers in the Transport Act
2000 and the Public Transport Schemes Block Exemption Order 2001.
Three popular yet incompatible smartcard schemes also operate
|Smartcards: lessons learned
Lessons can be learned from the experience of London, Scotland and elsewhere with smartcard technology. Some of these are:
- Much of the challenge associated with the introduction of smartcards lies not so much in the technology itself as in the business processes and with the agreements necessary to allocate costs, payments and liabilities.
- Smartcards are not a simple solution. The London Oyster has proved complex and expensive but successful; the ambitious Scottish Entitlement Card has proven to be a more difficult project and is still being rolled out.
- It is important to keep in step with commercial operators and the technology industry. Some witnesses have suggested that Holland offers a good model for industry-government partnership.
- Passengers' expectations rise and dissatisfaction can result from those parts of the system aspects that are not integrated, such as the parts of the London rail network that do not accept Oyster, despite the increase in some fares as a result of zoning.
- A single overall customer or "systems integrator" is crucial to drive progress as in London and Scotland.
38. The limited take-up by the transport industry
of smartcard technologies is the result of two major factors:
a) The structure of the transport industry, particularly
the bus sector, is competitive and fragmented.
This makes long-term planning more difficult and investment more
risky. Countries that have implemented smartcards on a large scale,
such as The Netherlands, tend to be those where the national or
regional authorities have more direct control over transport operations.
b) The business case for the industry to adopt
smartcard technologies on a large scale has, until recently, been
weak. The operators
argue that integrated ticketing is not a high customer priority,
and the returns do not justify the substantial investment, particularly
in a declining market. The problem is greater for the bus industry.
39. However, the signs are that the industry is now
more receptive as technical issues are being resolved and potential
benefits recognised, although the structural difficulties remain.
The necessary infrastructure and economies of scale through shared
back-office services have not been put in place. Outside London,
the regulatory framework has not been sufficiently strong to require
it to happen.
40. Conventional ticketing systems will still be
needed to cater for those passengers for whom smartcards are unsuitableat
least, for the foreseeable future. This applies in London as well
as elsewhere. Differential
pricingdiscounts for Oyster users but fare increases for
those buying conventional ticketsare one reason why the
Oyster card is much preferred. A single Zone 1 Tube journey with
a paper ticket costs £4.00, comparable to the cost of a short
black cab journey, whereas using Oyster it costs only £1.50.
It is reasonable to charge a modest differential to encourage
uptake of smartcards and to reflect any additional costs of issuing
paper tickets, but those passengers who cannot or choose not to
opt for smartcards should not be heavily or unfairly penalised.
The Government must ensure suitable guidelines on differential
pricing are included in decisions on rail fares, rail franchises
and other fare regulations.
The Integrated Transport Smartcard
Organisation (ITSO) Standard
41. As smartcards become more common it is obviously
desirable that the products are compatible, as far as possible.
A common standard is a good thing because it provides a platform
for a range of products and uses and should reduce costs. The
UK has developed the ITSO standard which is intended to ensure
that smartcards and smartcard equipment are interoperable.
ITSO (the Integrated Transport Smartcard Organisation) was founded in 1998 as a result of discussions between various UK passenger transport authorities on the lack of suitable standards for inter-operable smartcard ticketing. ITSO's initial role was to create a specification or industry standard to make interoperable smartcards a reality. It is supported by the Department for Transport and its members include bus operators, train companies, suppliers to the industry and local authorities. Originally a UK initiative, ITSO has been adopted as an international standard. The scope of the organisation's work has spread beyond smartcards and ITSO has therefore been adopted as the official name and not merely as an abbreviation.
42. The specification for interoperable, contactless
smartcards that ITSO has developed is intended to cover the entire
system, from the dimensions of the smartcard itself, to how the
data are written to the smartcards and the communication protocols
for cards and readers. ITSO is a set of technical specifications
and not a product or system in its own right. Two different systems
could be designed independently that were nonetheless both ITSO-compliant
and therefore interoperable. Agreements between all the parties
(transport operators, ticket sales outlets etc) covering customer
service arrangements, charges, allocation of revenues, liability,
etc still need to be made for each ITSO product.
43. There was a clear consensus among our witnesses
that having a common standard, such as ITSO, was in principle
the right approach. However, industry witnesses were critical
of the ITSO organisation, the Government's project management
and the speed at which the ITSO specification has developed.
Nonetheless, a significant amount of progress has already been
made with ITSO: it is the standard for concessionary travel bus
passes in England and Scotland
and it has been included in the conditions for new rail franchises.
It now seems certain that ITSO will be the standard for transport
smartcards on bus and rail networks outside London, for the near
44. The Government funding for ITSO-compliant concessionary
travel cards is likely, in the long run, to give a boost to the
introduction of ITSO equipment on buses. However, this is proceeding
slowly and few of the 15 million concessionary travel passes will
function as smartcards in the first instance. Of the 324 travel
concession authorities, 253 are non-ITSO-compliant; and only 5
to 10% of the bus fleet will be ITSO equipped by the end of 2008.
Further take-up will depend on how well the Government and travel
concession authorities encourage operators to equip their buses
with ITSO smartcard readers. Given the potential of ITSO smartcards
to provide passenger data, to allocate costs more accurately and
to enable concessionary travel across the UK, it is important
that ITSO continues to develop quickly.
45. Transport authorities and operators have sought
to ensure compatibility amongst these new technologies through
a set of ITSO standards. The English national concessionary travel
scheme passes that are now being issued are ITSO-compliant smartcards.
A number of smaller ITSO-based smartcard schemes are also in operation
or planned, such as Yorcard in South Yorkshire, which is to be
piloted on three bus routes in Sheffield and on rail routes to
Oyster on rail services in London
Oyster is available on all London Overground services and on interavailable routes on other National Rail services. Oyster is available from around 100 stations served by National Rail.
The rules governing what journeys can be made from these stations are complicated as not all services accept Oyster Pay-as-you-Go. This causes a large degree of customer confusion. On the London Overground, which TfL took over in November 2007, Oyster Pay-as-you-Go is accepted at all stations and on all routes. Additionally Chiltern and c2c accept Oyster on all their routes within London; One Railway (now National Express East Anglia)accepts Oyster on all services in the Hackney area; and London Midland accepts Oyster between London Euston and Watford Junction.
The roll out of Oyster to the remaining London stations depends on when the Train Operating Companies and TfL conclude the commercial agreements. TfL expects this to be in 2009.
Smartcards in LondonOyster and ITSO
46. A major dilemma is that the biggest smartcard system in the
UK is not an ITSO system, but the London Oyster. Despite its success,
Oyster cannot be developed into a national system. Oyster was
developed before ITSO and they are currently incompatible.
47. An interoperability study is underway, funded
by the Government, to assess the feasibility of adding ITSO readers
to the Oyster system. It was suggested to us by TranSys that it
would be possible to produce a single card containing both types
of chip, but the arrangements required to support both systems
would be complex. There are also potential problems with the longer
time it takes to read and write to an ITSO card compared to Oyster.
Although measured in milliseconds, the difference can be critical
at busy stations or on buses in London.
48. Given London's status as the most heavily used
public transport network in the UK, and its position as a major
interchange point for National Rail journeys as well as several
major airports, it would seem to be perverse if it were not compatible
with the national smartcard standard. However, there are at least
three major issues that need very careful consideration if compatibility
is to be achieved.
a) Firstly, doubts exist about value for money.
According to TfL, to make London ITSO-compliant would cost in
the region of £50 million,
yet demand to use ITSO products (as opposed to Oyster) on the
London network is currently small and growth uncertain. Since
most users of TfL services are London residents or regular commuters
who already have an Oyster card it is not clear what problem is
b) Secondly, the complexity of the customer service
arrangements could be formidable. For example, who would deal
with a passenger who bought an ITSO-compliant smartcard in, say,
Newcastle, took the train to London, and discovered that his ITSO-compliant
smartcard did not work on the Underground?
c) Thirdly, as we have already noted, TfL has
concerns about the processing speed of ITSO products compared
with Oyster. This could result in a reduced capacity at peak hours
and additional costs.
The problem is not merely the delay but also that a longer processing
speed may result in more 'torn' transactions (i.e. those where
the smartcard is not properly read by the reader and the passenger
has to touch again or the transaction is simply not recorded).
The Chair of ITSO described this as "a red herring",
with ITSO's benchmark time of 0.6 seconds being perfectly adequate
for use in London.
49. Oyster is a proven large-scale system, used and
trusted by millions of passengers. ITSO-compliant smartcards have
shown themselves workable in smaller schemes but have yet to be
tested on a large scale. The Government must not force ITSO onto
the London Oyster system. It is imperative that any introduction
of ITSO on the Oyster system be rigorously piloted to prevent
any loss of operational efficiency or customer confidence in smartcards.
Testing must include arrangements for supporting customers using
ITSO products out-of-area. Given the uncertain level of demand
for ITSO in London, the costs and benefits of the investment should
also be robustly assessed. This must have regard to the need to
avoid financially penalising TfL for having been at the vanguard
of smartcard ticketing in the UK.
50. One of the clear lessons from Oyster is that,
to make real progress, a strong customer or "systems integrator"
is needed. Some industry
witnesses have suggested that the train operating companies, through
the Rail Settlement Plan,
should take over ITSO as they have demonstrated their competence
with running the Ticketing and Settlement Agreement. The Government's
strategy of using ITSO as a way to promote integrated ticketing
is a step in the right direction, but not enough. It is fine in
theory but not producing results in practice. ITSO may be a useful
technical specification but it is designed to facilitate integrated
ticketing, rather than to make it happen. The Government needs
also to articulate a clearer strategy for the development of integrated
ticketing in general and smartcards in particular. The current
laissez-faire approach is inadequate. The Government must
listen carefully to the transport operators and the technology
industry. The criticisms of ITSO need to be addressed and the
Government must ensure it has adequate technical capacity to provide
leadership in this area.
32 A related development is the contactless bank card,
which can be used for low-value purchases in place of cash. Although
Barclaycard already issue a card which combines Oyster, a credit
card and a contactless payment, a contactless bank card could
be used on its own for public transport, if the appropriate systems
were installed. Back
Ev 159 Back
Ev 133 Back
Q 255 [Mr Verma] Back
Ev 125 Back
Ev 192 Back
Q 170 [Mr Jones] Back
Ev 85 Back
Ev 66 Back
Ev 68 Back
Qq 172-174 Back
Q 288 Back
Ev 65 Back
Although concessionary travel passes in Scotland have been ITSO-compliant
for several years, the installation of smartcard machine readers
on buses has taken longer than anticipated due to the need to
conduct integrity testing on the ITSO equipment. Approximately
700 Stagecoach buses are now equipped. Back
Ev 198 Back
Ev 65 Back
Q 310 but see also Ev 122 in which Trainline.com suggests that
an ITSO-compliant smartcard could be used on the Oyster system
without modifying existing gates and systems. Back
Ev 160 Back
Qq 255-256 Back
Q 264 Back
Ev 198 Back
Ev 126 Back
The Rail Settlement Plan is part of the Association of Train Operating
Companies. It provides central retail support services to the
UK train operating companies. This includes the distribution of
fares and timetable data, the provision of other retail information
to all National Rail retailers and the allocation and settlement
of rail revenue to operators. Back