1. Materials developed by K. Watkins, J. LaMondia and C. Brakewood Fare Policy & Technology Unit 8: Improving Transit Quality

2. Materials developed by K. Watkins, J. LaMondia and C. Brakewood Motivation: Why do we care about fares? The fare system impacts many aspects of the transit system, including… Planning: fare technology provides data about ridership Operations: – fare technology impacts dwell times and subsequently service reliability – fares affect demand and subsequently amount of service Finance: important source of revenue

3. Materials developed by K. Watkins, J. LaMondia and C. Brakewood Motivation Fares can be highly political & subject to public scrutiny.

4. Materials developed by K. Watkins, J. LaMondia and C. Brakewood Motivation While fares are highly visible, they cover only a fraction of operating costs.

5. Materials developed by K. Watkins, J. LaMondia and C. Brakewood “Parameters” of a Fare System The primary parameters of a transit agency’s fare system: 1.Policy 2.Structure 3.Technology These 3 parameters are closely interrelated: “Policy generally sets the direction for the strategy and specific structure, but technology choices can also affect the structure selected.”

6. Materials developed by K. Watkins, J. LaMondia and C. Brakewood Parameter 1: Fare Policy Definition: establishes principles and goals underlying and guiding the agency’s pricing- related decisions Example: Mandated fare recovery ratio

7. Materials developed by K. Watkins, J. LaMondia and C. Brakewood Parameter 2: Fare Structure A.Fare Strategy – General approach: flat vs. differentiated (zonal, distance) – Transfer policy B.Payment Options – Forms of fare payment (period passes, multi-ride tickets, stored value cards, etc.) C.Pricing Levels – Actual pricing levels, including discounts

8. Materials developed by K. Watkins, J. LaMondia and C. Brakewood 2A. Fare Strategy – Base Fare Basic fare strategies fall into 2 groups: Flat fares: pay the same fare regardless of the length of the trip, time of day, speed, or quality of service – Advantages: easy to administer & understand Differentiated fares: fares differ depending on length of trip (zonal or distance), time (peak or off-peak), or service (express vs. local, rail vs. bus) – Advantages: efficiency and equity

9. Materials developed by K. Watkins, J. LaMondia and C. Brakewood Example of Differentiated Fares WMATA has: – Distance-based fares – Time-based fares (peak and peak-of-the-peak) – Service-based (rail differs from bus)

10. Materials developed by K. Watkins, J. LaMondia and C. Brakewood 2A. Fare Strategy - Transfers Many systems require riders to transfer between routes or between modes Most transit agencies offer free or reduced price transfers – Advantage: passenger convenience – Disadvantages: revenue foregone, difficulty determining validity of transfer What do you think? Do you pay for a “connection” when traveling on an airplane?

11. Materials developed by K. Watkins, J. LaMondia and C. Brakewood 2B. Payment Options Single-ride Multi-ride Period pass Stored value Post payment

12. Materials developed by K. Watkins, J. LaMondia and C. Brakewood Other Payment Options Initial purchase bonus Guaranteed last ride (negative balance) Capping – typically timed-based Discounts: Seniors, students (e.g. university pass programs), etc.

13. Materials developed by K. Watkins, J. LaMondia and C. Brakewood 2C. Pricing Levels Pricing levels vary by mode.

14. Materials developed by K. Watkins, J. LaMondia and C. Brakewood 2C. Pricing Levels… Can fares be fair? Transit subsidies v. car subsidies – We calculate the farebox ratio for transit, shouldn’t we do the same for cars? – E.g. fuel tax, registration & fees Free Fares – If we accounted for all the invisible subsidies to the motorist, and set equal transit subsidies, we would see huge growth in transit funding. – This could make it possible to eliminate fares. – No big-city transit agency has free fares

15. Materials developed by K. Watkins, J. LaMondia and C. Brakewood Parameter 3: Technology A.Type of Fare Collection – refers to the manner in which fares are paid or inspected (e.g. barriers) B.Fare Media – instrument used for payment

16. Materials developed by K. Watkins, J. LaMondia and C. Brakewood 3A: Types of Fare Collection Barrier Pay on Board Self Service or Proof of Payment (POP) Conductor Validated

17. Materials developed by K. Watkins, J. LaMondia and C. Brakewood 3A: Types of Fare Collection Fare collection types certain for transit modes

18. Materials developed by K. Watkins, J. LaMondia and C. Brakewood Comparison of Fare Collection Approaches Factor / IssueProof of Payment (POP)BarrierConductor-validatedPay on boarding Equipment NeededTicket Vending Machines (TVMs), validators, Ticket Office Machines (TOMs), hand-held readers Faregates, TVMs, add- fare machines TVMs, TOMs, validators, hand-held readers Fareboxes, ticket processing units Station or platform characteristics Open (elevated) or on- street platform Requires space for gates and TVMs, and defined entry/exit Open platformNA Handling large passenger volumes Crowded cars can interfere with inspection. May require high number of TVMs Doesn’t affect ability to collect fares Crowded cars can interfere with inspection. Slows boarding Fare evasionDepends on inspection pattern, fine structure, level of crowding Caused by faregate “jumping”, short-swiping farecards Minimal, since conductor inspects or collects fare from everyone; could be problem at congested times Caused by using invalid pass or transfer. Also caused by crowding at boarding point Handling intermodal transfers Transfer from bus can be used as POP on LRT; POP can include transfer to bus Transfer from bus must be machine-readable; transfer to bus must be issued with rail ticket Transfer from other mode can be shown to conductor (see other approaches) Handling zonal faresMore complicated (to use and to enforce); must include origin for validation Requires exit gates and add-fare machines Commuter rail lines invariably zoned Rider tells driver destination (or zone), pays accordingly

19. Materials developed by K. Watkins, J. LaMondia and C. Brakewood Comparison of Fare Collection Approaches Factor / IssueProof of Payment (POP)BarrierConductor-validatedPay on boarding Use of Automatic Fare Collection (AFC) Use to buy POP ticket, or have to validate farecard – or have pass (inspectors need hand- held readers) Faregates read farecard and deduct value or indicate valid pass Conductors need hand- held farecard readers / processing units Need ticket processing units / card readers; ease of revaluing is issue Security and customer service Inspectors provide presence on vehicles and platforms. Added security needed at other times. If no ticket agents, security needed in stations and on trains Conductors provide presence on all trains Driver responsible for security and customer assistance on bus Customer convenienceNeeds validation of multiride or stored value tickets; may be queues to buy or validate, but not to board Depends on types of payment accepted in gates (easiest if cash accepted); may be queues No need to prepay or validate, no need for exact change, and no queuing to pay or board Needs either prepayment (pass or multiride option) or exact change; may be queues Capital costsLower than barrier unless high vol. Requires many TVMs Cost of faregates high, but requires fewer TVMs than for POP (validation at faregate) Lower than POP; may be lowest (depending on number of TVMs used) Lowest costs; fareboxes, but no TVMs Operating costsHigher labor cost than barrier. Lower labor cost than POP. Highest labor costLowest labor cost

20. Materials developed by K. Watkins, J. LaMondia and C. Brakewood 3B: Types of Fare Media Cash Tokens Paper Ticket Magnetic Stripe – magnetic variations along longitudinal “tracks” in the stripe can store a certain amount of data Smart Cards – small plastic card with an embedded integrated circuit or processor that is used to store data and perform simple fare logic Credit/debit/ATM card

21. Materials developed by K. Watkins, J. LaMondia and C. Brakewood Magnetic Stripe v. Smart Cards Magnetic StripeSmart Cards Strengths Cards are inexpensive (< 10 cents) Cards can be readily vended from point of sale devices (TVMs) or possibly from fareboxes (TVMs that vend smart cards are much more expensive) If cards are used for stored value (rather than rides), when the card balance drops to a small level, some customers may purchase a new card rather than revaluing the old one. This means that residual value may never be used, which could become extra revenue. Data capacity and security features needed to support multiple card applications. Such partnerships can help spread system costs and make card use more attractive. Data capacity and processing also enable introduction of special features: Registering the card, so that value is not lost with the card Automatic revalue from credit card Automatic employer or other transit benefits on cards Contactless easy to use for disabled / seniors Weaknesses Data capacity may be too limited to support multiple agency pass or multiride options. May be limited to stored value. Card readers require considerable maintenance / cleaning. Card slots are vulnerable to insertion of foreign items Card readers tend to be more expensive to purchase. Cards are expensive ($1.5 to $10 each). To ensure cards are retained, a fee or deposit may be required, raising equity objections. Not suited for one time use for visitors. Variety of card interfaces in market place complicate potential to integrate with other regions or applications.

22. Materials developed by K. Watkins, J. LaMondia and C. Brakewood IN-CLASS EXERCISE

23. Materials developed by K. Watkins, J. LaMondia and C. Brakewood NEW FARE TECHNOLOGY CASE STUDY 1: CHICAGO

24. Materials developed by K. Watkins, J. LaMondia and C. Brakewood Current Fare System: Chicago Card Introduced system- wide in 2002 Valid on Chicago Transit Authority (CTA) buses and trains Some acceptance on Pace; not on Metra 32% use Chicago Card*

25. Materials developed by K. Watkins, J. LaMondia and C. Brakewood New Fare System: Open Payments Accept contactless credit and debit cards (bankcards) American transit agencies accepting bankcards: – System-wide: Salt Lake City (Utah Transit Authority) – Pilot Program: New York City (MTA, PATH and NJT) Upcoming Chicago Launch (Summer 2013): – CTA trains and buses – PACE buses

26. Materials developed by K. Watkins, J. LaMondia and C. Brakewood Advantages of Open Payments Transit Riders Convenience Interoperability Transit Authority Operational Cost Savings Future Technology Financial Institutions New Customers Consumer Education

27. Materials developed by K. Watkins, J. LaMondia and C. Brakewood What about riders without bankcards? CTA has a sizable rider population without bankcards Multiple fare payment options may be needed to accompany bankcards – Transit-Only Prepaid Cards e.g. gift card – Network Branded Prepaid Cards e.g. general purpose reloadable card CTA’s Ventra system has a prepaid card that can be either transit-only or general purpose

28. Materials developed by K. Watkins, J. LaMondia and C. Brakewood NEW FARE TECHNOLOGY CASE STUDY 2: BOSTON Source: MBTA

29. Materials developed by K. Watkins, J. LaMondia and C. Brakewood Original Fare System: Paper Tickets Zonal fare policy with period passes and pay-per- ride Conductor-validated system using flash pass or hole punch Charlie Card smartcards used on MBTA bus, subway and light rail Charlie Card not expanded to Commuter Rail due to high costs & complexity

30. Materials developed by K. Watkins, J. LaMondia and C. Brakewood New Fare System: Mobile Payments November 2012: – 1 year pilot program of mobile payments Advantages of Mobile: – No waiting in ticket lines – Losing a ticket – Don’t need cash

31. Materials developed by K. Watkins, J. LaMondia and C. Brakewood ‘Flash Pass’ Mobile Ticketing on Your Phone 1. Select Origin 2. Purchase 3. Display & Destination a Ticket Active Ticket

32. Materials developed by K. Watkins, J. LaMondia and C. Brakewood Conclusion The primary parameters of a transit agency’s fare system: – Policy: overarching guidance – Structure: strategy (flat vs. differentiated, transfer), payment options (e.g. period passes, multi-ride) & pricing levels – Technology: type of fare collection (e.g. barrier, POP) & fare media Fare policies, structures and technologies are closely interrelated. The real purpose of a fare system is to bring in a needed level of revenue while imposing a minimum of delay, hassle, confusion, and perverse incentives. Effective fare systems focus on these outcomes, support the goals of the network design, and accept that they will never be perfectly fair. – Jarrett Walker

33. Materials developed by K. Watkins, J. LaMondia and C. Brakewood Future Trends Increased flexibility in fare structures enabled by technology Importance of standards and interoperability Convergence toward the mobile phone (likely NFC) because multifunctional (provides travel information, payment media, etc.)

34. Materials developed by K. Watkins, J. LaMondia and C. Brakewood Reference The materials in this lecture were taken from: TCRP Reports 10 & 94: Fare Policies, Structures and Technologies TCRP Report 32: Multipurpose Transit Payment Media New fare technologies: – Brakewood et al. (2013). Forecasting Mobile Ticketing Adoption on Commuter Rail. 2013 TRB Proceedings. – Brakewood et al. (2013). Unbanked Transit Riders and Open Payment Fare Collection. 2013 TRB Proceedings.