Memorandum from PA Consulting Group (TPT
17)
EXECUTIVE SUMMARY
The key points that we make in this submission
are as follows:
INTEGRATED TICKETING
— Integrated ticketing is not
necessarily a panacea in terms of passenger experience though
it does have a significant role to play.
— The Government does not currently
have sufficient control over ticketing on all modes of transport
to implement true interoperability.
— Ticketing asset replacement
and uptake incentives/mandates drive business cases for technology
adoption and the case is difficult to make in isolation and in
the short term.
— ITSO is capable of meeting the
needs of operators and passengers, as are some other systems,
though there must be interoperability between solutions if the
benefits are to be delivered.
— The more control over ticketing
that a single entity has, the more manageable integration becomes
though the risk on monopolistic supply increases.
REVENUE PROTECTION
AND THE
POWERS OF
TICKET INSPECTORS
— The disincentives to travelling
without a ticket are not sufficiently strong or consistently applied.
CONCESSIONARY FARES—THE
RIGHT STRATEGY
— The precise strategy is not
clear.
— Integration across modes and
geographies will be important to enable easy movement across local
authority boundaries and operators and simpler governance of the
concessionary fare scheme would enhance its chances of success.
— Smartcards could provide the
basis for a realistic implementation of the national concessionary
fares strategy and ITSO would provide a robust and secure technological
platform for this implementation and its integration with other
schemes.
INTRODUCTION TO
PA
1. PA Consulting Group is extremely well
placed to provide evidence and insight for the Transport Select
Committee on ticketing on public transport given our history,
independence, experience, and subject-matter experts.
2. PA is a leading management, systems and
technology consultancy with a unique commitment to the integration
of these capabilities. Established 60 years ago, and operating
world-wide from around 50 offices in 20 countries, PA draws on
the knowledge and experience of over 3,000 employees, whose skills
span the initial generation of ideas and insights all the way
through to detailed implementation.
3. PA is independent of all hardware and
software suppliers, and is committed to remaining so. Our technical
advice to our clients is therefore independent and untainted by
any possibility of commercial bias.
4. PA is one of the leading consultancies
in ticketing on public transport and specifically smartcards.
Our work includes consulting for Government Departments on ITSO;
advice to private-sector organisations on business cases; feasibility
and operational deployment for smartcard schemes; and the integration
of proprietary technology alongside open-specification schemes
in transport.
5. Our consultants are subject-matter experts
in the ticketing on public transport environment and come from
a variety of backgrounds, including government departments and
financial institutions through to private sector transport operators
and providers of proprietary smartcard technology. Specifically,
our response to this has included experts in rail retail, ticketing
systems, transport economics and smartcard technology.
RESPONSE TO
SPECIFIC QUESTIONS
Is ticketing sufficiently integrated across different
modes of transport and between different geographical areas?
6. There is a difference between integration
per se and the ability to integrate. Our view is that passengers
do not necessarily want or need integrated ticketing in every
case (eg, point-to-point or single-operator journeys) and there
are some situations where customers benefit from a lack of integration
(for example, being able to choose products where using a single
operator has some financial benefit over and above an integrated
product).
7. The ability to integrate is however sometimes
lacking, but this raises the question of why the ability is not
there. Technical integration is almost always possible rather
it is the commercial will and business benefit that tends to limit
the ability to integrate. Commercial blockages will tend to be
eliminated when there is a business benefit to all parties.
8. There are good examples of integrated
ticketing where it is in the best interests of the operators to
integrate (for example, the London Travelcard agreement) but where
there is limited business benefit in completing integration it
is unlikely to happen. This is compounded when integration involves
expensive technology developments.
Does the Government have an adequate strategy
for developing the integration of ticketing systems?
9. Ticketing systems themselves (ie, the
physical hardware and software) are primarily the responsibility
of the transport operator). The way that they interact with each
other is often however influenced or specified by larger bodies.
The conflict here is that the Government (through its departments)
does not have absolute control over very many of the systems.
Traditional rail retail systems are specified by Rail Settlement
Plan, London ticketing is determined by Transport for London and
non-franchised bus operations are largely self-determined (albeit
with supply market dynamics at play).
10. The main involvement of the Government
directly is via the Department for Transport's ability to specify
non-traditional retail systems in new franchises (eg, ITSO-specification
smartcard ticketing).
11. By definition, therefore, any Government
strategy for the integration of ticketing systems when it only
has direct control over one of the modes will be difficult to
implement and enforce.
12. A more relevant issue is therefore how
the Government can be more active in ensuring that deployment
of the likes of ITSO compliant systems—in particular across
bus operators in a deregulated and competitive marketplace.
Is the industry taking up modern smartcard technologies
adequately and appropriately?
13. A commercial entity will take up new
systems and product offerings that are appropriate to its commercial
success. There is nothing, in our opinion, to suggest that the
industry has not considered the commercial viability of modern
smartcard technologies. Specifically, we have worked on a number
of business cases to evaluate precisely this on behalf of parts
of the industry.
14. A more relevant issue is perhaps a question
as to why there are generally not business cases for the adoption
of smartcard technology. In our experience, we have seen that
the business case for smartcard technology is generally made on
the back of two things—technological refresh and uptake
profile.
15. Firstly, when all the ticketing assets
of an organisation are being replaced, the marginal cost of including
a smartcard ticketing system are small in comparison with the
cost of the replacement of the ticketing assets themselves. The
problem with this in the transport industry is that ticketing
assets tend to last for a long time, sometimes because of integration
requirements. Changes to systems to retrofit smartcard ticketing
are necessarily expensive. In particular, the rail franchising
systems makes investment in such systems difficult outside the
franchise renewal process.
16. Secondly, the update profile is an important
factor in consideration as this determines how quickly non-smartcard
ticketing systems can be removed. Leaving systems in side-by-side
without mandating or incentivising a change in customer behaviour
leaves the necessity for two systems to run in parallel, thus
adding a cost without removing one.
17. Amending these two restrictions would
lead to a faster uptake in smartcard ticketing technologies.
Does the ITSO system cater for the needs of all
passengers and travel providers?
18. ITSO is, as are other schemes, capable
of catering for the needs of all passengers and public service
providers.
19. That ITSO specification schemes have
not been implemented for all passengers and all travel providers
suggests that it is not the only alternative to meet the needs
of specific passengers, particularly in a closed geographic environment,
and travel operators.
20. This however raises the question as
to what needs would be catered for by ITSO specification schemes
over and above non-ITSO specification schemes.
21. The first point is that we have yet
to see a significant impact on passengers based on the specification
of a scheme. Passengers are most influenced by the ticketing proposition
and usability, which should not be affected by the specification
used to build a system.
22. In terms of travel providers, this is
not necessarily clear-cut as different scheme types will have
different advantages for different reasons. Proprietary schemes
can provide benefits to their operators and users, just as open-specification
schemes can. The same applies for the disbenefits.
23. An open-specification scheme allows
more theoretical choice down-stream with components and expandability
and discourages monopoly supply but requires separate systems
integration effort whereas a proprietary scheme allows a thinner
client function to start with but increases barriers for competitor
entry longer-term and can push prices up for system changes. The
ability to achieve inter-operability on a large scale without
absolute control over all the participating schemes necessitates
an open specification.
What can be learned from the experiences of areas
such as London and Scotland where smartcard technology is already
in place?
24. The main lesson to be learned from these
experiences is that where there is a single entity in control
of, and responsible for, ticketing technology (whether a public
body, or private entity) there is much more likelihood that a
system will be implemented. This factor has helped to reduce the
commercial blockages referred to in the answer to the first question.
One size doesn't necessarily fit all with smartcard schemes, but
if passenger choice & flexibility is a goal then must be within
a business, commercial & technological framework that enables
interoperability.
Is the legal framework within which ticket inspectors
function appropriate?
25. We do not wish to express a view on
the legal framework for ticket inspectors.
What appeal mechanisms exist for passengers, and
are they adequate?
26. We do not wish to express a view on
the appropriateness of appeal mechanisms for passengers.
Are the rights of passengers and the powers of
ticket inspectors well-balanced?
27. We do not wish to express a view on
the rights of passengers versus the powers of ticket inspectors.
Do operators of public transport take adequate
measures to protect fares revenue?
28. A commercial entity will protect its
revenue when it is appropriate to its commercial success. There
is nothing, in our opinion, to suggest that operators have not
considered the commercial viability of revenue protection activity.
29. It is therefore our opinion that operators
generally have an appropriate level of cover based upon the risk
and benefit. This does not mean that all revenue is necessarily
protected, rather, that which is efficient to protect is protected.
The level of efficiency will by definition be distorted where
there is shared revenue risk, or in the extreme case where the
operator takes no revenue risk, there is not likely to be any
protection (nor is there usually any expectation of such).
30. A larger issue is that of the adequacy
of the measures than can be taken. Specifically in this area,
penalty fares on rail are felt to be inadequate to disincentivise
ticketless travel. The disincentive for ticketless travel needs
to be considered in terms of both the expected value rather than
the actual value (value of the penalty x the probability of being
caught). The current expected value of penalty fare does not constitute
a sufficient disincentive relative to the likely price of travel.
We would therefore recommend a full economic analysis to determine
the precise expected value of the penalty fare versus which would
better inform this debate.
Is the Government's concessionary fares strategy,
including the proposed scheme for concessionary bus travel, adequate?
31. It is not immediately apparent what
the Government's strategy is for the deployment of a concessionary
fares scheme, however if it is as per the Bill currently before
Parliament then our view is that an open specification scheme
will assist significantly in the realisation of the benefits likely
to arise from the end-position allowed for in the Bill. Our concern
is over the degree to which progress will occur if there isn't
a nationwide scheme implemented quickly (as this is likely to
embed interim solutions, thus reducing the impetus for improvements).
Are concessionary fares schemes sufficiently integrated
across different modes of transport and different geographical
areas?
32. As with ticketing integration, concessionary
fares do not necessarily need to be integrated in all circumstances.
In terms of customer proposition however, integration can help,
especially in a bus environment when local authority boundaries
can be crossed mid-journey. The Scottish model is a good example
of making the proposition simple for the customer. The ITSO specification
also offers a good technological solution for this. The commercial
models still need to be refined if funding comes in via local
authorities. As per the question above on lessons from Scotland
and London, if a single entity was to control the scheme, then
the commercial blockages would become much less significant, and
integration across modes and boundaries will significantly simplify
the customer proposition.
March 2007
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