If I close my eyes when Adam Giambrone waxes on about an open payment fare system for the TTC, I could swear I was listening to the business-friendly pols from the Lastman/Harris days shilling for the rapid approval of various Triple-P schemes that promised the sky and delivered mostly trouble.
Indeed, it is passing strange to observe how, in the waning days of an apparently progressive council, Giambrone, with the full support of Mayor David Miller, is charging ahead to negotiate a public-private partnership for a largely untested technology. There’s been virtually no broad public debate about the merits of a scheme that will affect a huge number of Torontonians on a daily basis.
It’s precisely the sort of thing Miller would have fought against when he was a reform-minded councilor looking to purge City Hall of the lobbyists who routinely turn up, touting all sorts of miracles.
Let’s start with the context:
The TTC in June hired two consultants, for $1.3 million on an untendered contract, for about five months work (that’s a staggering $1.5 million of compensation per person on an annualized basis), during which time they will essentially adapt for the TTC an RFP document they prepared for Chicago and a few other cities considering open fare.
There are no major North American transit authorities that have adopted open fare on a system-wide basis. The first, established in the Salt Lake City region, dates to early 2009 and is still not fully deployed. New York has a six-month trial that began in June, 2010 (Mastercard provided the card readers in exchange for a strong branding presence), while Chicago, Washington and Philadelphia remain in the RFP phase or delayed.
Montreal and now Vancouver have both made fairly recent moves to invest in traditional smart-card systems, suggesting that other transit agencies are satisfied that the current technology remains viable.
The global credit card/banking sector has been the primary advocate of the contactless open fare because these institutions want to make inroads in the $72 billion global transit fare market as part of a broad strategy to persuade consumers to use plastic for small dollar purchases.
From where I sit, several substantial policy questions need to be debated before we get down to the technical business of issuing an RFP:
The business case
Yes, Presto is expensive, but it doesn’t follow that the open fare system will be necessarily cheaper. In theory, open fare makes sense if the total expense of the fare system (printing tickets and fare cards, collector salaries, cash handling, anti-counterfeiting measures, etc.) is less than the total expense for an open fare system (contactless card readers, transmission equipment, back-end payment processing systems, call centres, and the interchange, or transaction, fees — i.e., the gross profit — payable by the transit agency to the card companies, etc).
But as far as I know, no one’s come forward to tally up the costs on both sides of the ledger, even on a pro forma basis. Giambrone assures us that open fare is an order of magnitude cheaper. But I don’t know, for example, who ultimately pays for and owns the card readers, who operates the call centre, the quantum of the transaction fee, etc. And because no one else has done it, we have no clue what the prevailing market approach is.
What’s more, there will likely be a transitional phase of undetermined duration, when riders may still be using the traditional fare media even though the open fare system is up and running. Does the TTC plan to aggressively `transition’ riders to the new system, e.g., by eliminating tokens? And how long will it be before the operating costs associated with the traditional fare collection system ($67 million per year, according to the TTC) begin to fall sufficiently to produce savings?
While contactless technology – known as radio frequency identification, or RFID — is fairly mature, there have been concerns about security; after all, a tiny transmitter in your credit card sends the number to the reader across the airwaves, so we have to hope the encryption systems work well. But with open fare, your card number may make a second journey through open space — when it will be uploaded from the contactless readers on surface vehicles to some processing centre. That’s a lot of sensitive information travelling through the ether, and there’s been no broad debate that I’ve heard about security.
Yes, it’s certainly possible to scramble wireless signals; indeed, the cell phone industry is drooling over technology that can transform a smart phone into a credit card for mobile commerce. But I’m not going to take all this on faith. If the TTC is planning to broadcast my credit or bank card number twice every time I ride a streetcar, I need to know a lot more about how they plan to protect that data, and it would help if that assessment came from an independent source.
Speaking of data, what becomes of that precious little shard of personal information I provide if I pay with my credit card to board at Bloor? Will the consortia vying to provide this service have the ability to link my travel habits to my shopping habits? Or is that tap stripped of identifying information and simply registers as a charge?
There’s a flip side to this question: for transit planners, all that fine grain information about passenger boarding locations and times is a potential gold mine that will allow them to make more nuanced decisions about scheduling, etc. But if we outsource the fare collection system, which is what open fare partly does, will the TTC have access to this data for its own planning purposes? Again, not clear.
Fare Policy Issues
Two questions arise: Is an open fare system better suited for a zone fare type system (London, Vancouver) or a flat fare system, such as we have? It’s not clear, but the question seems to be worth asking.
If we adopt open fare and it takes off rapidly – e.g., within a decade, say, riders have almost completely abandoned all other forms of payment — how will the TTC defend itself against abrupt or unjustified hikes in the transaction fees charged by the credit cards and banks? A number of U.S. retailers are involved in a long-running class lawsuit against the credit card companies over the magnitude of their transaction fees and allegations of collusion. In the TTC’s case, the potential problem with transaction fee hikes is that riders, unlike shoppers, don’t have a choice to go elsewhere (except their car).
None of these questions have solid answers, yet the TTC is trying to put an RFP out on the street by next week. I’m not against the potential of open fare; for the record, I like paying for things with my credit card because I ring up lots of travel points. But if the idea’s so great, it can surely withstand the scrutiny of an, um, open debate. Giambrone and Miller owe Torontonians nothing less.
photo by Scott Snider