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?
Technology/Privacy
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
19 comments
Thank goodness for you, John. No one seems to want to talk about this issue. I know it’s the summer and we’re all on vacation, but that’s exactly why Giambrone is pushing this now.
Oh…something to think about…isn’t Mastercard the one who bailed out the hockey rinks a few years back? I wonder what they asked for in exchange…a fare system, perhaps.
Yep…in 2007, Mastercard paid $160,000 to keep Toronto rinks open for one month.
Maybe I’m being paranoid. Credit card companies do that to me.
I’m curious as to why this journalist uses his visibility and clout to dog at the heels of Miller and Giambrone on their way out rather than do some more investigation into the folks on their way in. I expect more from Mr. Lorinc but I guess it’s an easy way to fill column inches.
The Presto scheme has been underway for several years, and nobody in the media has bothered to ask questions about it until now — and even now the default assumption seems to be that the province is on the side of angels.
The author seems to support the technique of blocking progress through analysis paralysis — every time something is about to get done, just insist that a few more questions need to be answered, a few more edge cases need to be fully debated before it’s reasonable to go forward. Rest assured, once that debate is finished they’ll have new questions and concerns manufactured and ready to go. It’s disingenuous.
And what about the transaction fees downloaded to the consumer using their debit card? I use TTC at least 100 times a month.
@Paul: “…every time something is about to get done, just insist that a few more questions need to be answered, a few more edge cases need to be fully debated before it’s reasonable to go forward….” You could be describing the way David Miller, through diligent and persistent questioning, drove to the rotten heart of the proposed Adams Mine contract circa 2001. I’m glad he persisted in his search for the “edge cases.”
@Paul – if Giambrone wasn’t intent on ramming this through before the election, John Lorinc wouldn’t have to be writing about it during the campaign, would he?
@JohnLorinc 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.
To be fair, that’s a level of scrutiny a hell of a lot of other retailers (McDonalds and Loblaws for instance) who use PayPass RFID units don’t face right now – maybe they should, but that’s the reality. There is also a lot of iffy information circulating like entering PIN numbers – make a $10 purchase on a Paypass card at Loblaws and you won’t be asked to give a signature so why would you enter a PIN or otherwise authenticate for a $3 purchase?
At the same time while using “open” payment tech compliant with ISO/IEC 14443 and the EMV Payment standards might prevent or minimise vendor lock-in on the hardware side, someone is going to have to implement a back-end to this thing between the customer and the transit authority to allow volume discounts (day pass, metropass) and transfer tracking – and whoever does that is unlikely to do so without some form of proprietary involvement and contracts of an opaque nature complete with break fees. For some reason this is only deemed dodgy in Presto’s scenario where both the backend and some of the front end is bespoke.
The other “big win” – “tourists will arrive at Pearson ready with their credit cards to take transit”, this might not be so happy if it results in large minimum currency conversion charges for US and other overseas tourists relative to the value of the fares purchased – but if these tourists are precluded then a big chunk of the win just vanished.
It is also difficult to surmise that all of the posited savings can be recovered. Will the TTC really rid itself of collectors, for instance? I doubt it – cases will be made that a human presence is good for stations, and that many collectors are drivers on modified duties with limited alternative employment within the system.
At best stations which deploy extra personnel at rush hour like Dundas to wave people through an open turnstile will be replaced with additional turnstiles and readers and retain the booth collector.
As for rollout – tokens should be the last thing to be replaced in the system. Replacing passes – student/university, metropass, passes for TTC retired staff and day passes will in itself be a huge rollout, with student tickets being the first non-card medium killed in favour of a loadable card with limited payment ability to overcome fears associated with minors and credit cards. The bigger question should be how quickly can vehicles be made cashless – tokens and passes only – to reduce risk to drivers and in transfers of cash to counting centres.
On the flip side, John, will you also be looking at whether Presto is worth the money? Cause the $1.3 million the TTC spent on the open fare RFP really pales in comparison to the $250 million contract the province signed to develop Presto.
I’m looking forward to the Auditor General weighing in on that debacle – http://www.citytv.com/toronto/citynews/news/local/article/88592–ndp-asks-ont-auditor-general-to-investigate-presto-smart-card-contract
The real issue should not be the use of credit cards per se, but the use of generic, industry standard RFID communications so that any identity card can be used. In John’s article in the Globe, he mentions a standard student card in BC as an example of a card that is not used to store value (the way Presto does), but simply to identify a user. Such a card can be linked in the back end system (see next paragraph) to payment via a predefined credit or bank account, just as people do now for their phone and hydro bills, and, oh yes, a Metropass subscription.
As for a back end system, if it doesn’t have to keep track of your electronic purse, only the use you make of the system, it gets a lot simpler. There is a good analogy here to a hydro meter, your phone or even a Highway 407 transponder. You don’t pay as you go — the system keeps track of usage and bills you once a month.
That is absolutely essential for elimination of the micropayment problem. You may use your credit card as identification, but it should not trigger a billed charge on every use. (For those worried about bogus cards, the back system can, at its leisure, check for the validity of “new” cards in the system. If it finds one, it can be blacklisted from further use. The maximum loss to the TTC is maybe one or two fares — cheaper than the overhead of doing this in real time.)
That whole back end system issue is an important one because built into it would be any options for discount plans. Nobody seems to want to talk about that part, only about the technology of the cards and the readers. If the TTC were to implement a charge-as-you-go system, the fees would be astronomical and the system unworkable.
Finally, the subject of the “unbanked” comes up from time to time. They are a special group whose financial needs should not be taken on by the transit system. What is needed is a way to give them an account that can accept payments from a “debit” card whether it be issued by the City or the Province or a bank, under contract. The unbanked have needs for cash access and management far beyond just riding the TTC.
What we need is to finish the FARE POLICY debate first, then find the appropriate technology for implementation.
The cost and complexity of a trying to roll-out technology that can handle both fare-by-distance AND a flat fare system; and do so for more than a dozen discrete systems, AND have the ability to handle not only alternate rates but fare models in the future, all while still having photo ID sensitive (age-based) passes that can only be managed by people….is, to put in charitably, NUTS
We need to settle on an integrated fare model we can all agree on, then source the technology that utilizes this most efficiently.
For instance, the moment you eliminate age-based fares, you can eliminate photo ID and go entirely to automatic entrances with most ‘collector’s being redundant.
The moment you settle on either Fare by Distance OR Fare by Time ( I think the cheapest and easiest and least controversial to implement)
then you can have a fare that easily crosses political boundaries without a big fuss or tons of new infrastructure. Tokens can even deliver time-based fares by simply spitting out a receipt/transfer from the turnstile or special machine on a bus/streetcar etc.
Ideally the rates for time or distance are harmonized for the sake of simplicity, though strictly speaking, this is not a requirement, however the fewer computations and the simpler the billing, the cheaper the back-end systems and processes.
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Here is what I would do instead of Presto or Open payment.
1) Scrap age-based fares immediately (and lower adult fares accordingly, so that all fares are instantly cash/token/GO Ticket/Pass for every system.
2) Migrate GO then all other systems to fare by time, with time purchasable in minimum 30 minute increments. (while tokens remain, these would be 2-hour fares, as having several version of tokens would be NUTS also.)
3) Then move to allow fare purchase though machine at ALL stops for all buses/streetcars/ and at stations (GO and TTC); and have those machines accept cash/credit/debit. Once this is done, all cash handling on vehicles and though turnstiles can be eliminated.
4) Settle the question of passes (pre-loaded fare discount (ie, discount at 10 fares purchased, then 50?) or whatever other model you wish.
5) Now your ready for a common pass/card and turnstile system.
perhaps the ttc should also abandon line-specific fare policies, like limiting proof-of-payment to the queen streetcar and limiting time-based transfers to the st. clair streetcar. don’t get me wrong — these are both good policies– it’s just confusing and bizarre to have special rules for certain routes.
as for technology, i agree that the fare structure should be settled before making a selection. i also think that the ttc and metrolinx should go shopping among existing technologies instead of reinventing the wheel. toronto can’t possibly be more complicated than all of the much-larger cities with huge public transit systems and fares that vary by distance, age and volume.
Excellent piece. I for one am glad that at least a few journalists are treating this issue with the gravity it deserves. The author is right that an open discussion is absolutely needed. To date, it has played out as little more than a “he said, he said, she said” routine in which none of the parties have any real credibility — not Wynne not Smitherman and not Chair Giambrone (and no Paul, this is not a personal attack against your idol).
It looks like implementation of “open payment” will be subsidized by the banks, under as yet uncertain terms (otherwise, how could it be an order of magnitude cheaper than competing schemes?). No major transit system IN THE WORLD has tried this — Toronto will be the test case — so open payment is in no way a proven or off-the-shelf technology in the transit fare payment space. Aside from metropasses, the TTC has no experience at all with electronic fare media (and, apparently, a managerial antipathy towards the same), yet we are to believe that they will suddenly leap ahead to the bleeding edge of fare technology. The biggest political advocate of the new system, trying to force it ahead as fast as possible, won’t have so much as a council seat in six months. Lots of questions remain concerning privacy and security.
I’m more than a little surprised that transit bloggers (cf. Steve) are quick to assume the best of open payment and don’t seem to be asking difficult questions. Do we need a big, flashing neon sign saying “POSSIBLE BOONDOGGLE” to make it more obvious?
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While I don’t necessarily agree with his solution, I agree with James (and MKM) that TTC needs to stop worrying about something that can wait for the election and solve the operational issues it is already dealing with.
The creation of a revised fare and transfer policy cannot wait as it is untenable to consider all passengers boarding a 28m streetcar through the front door – it’s bad enough that we do so with 18m and 23m vehicles. Accordingly, Staff should report immediately on the results of the “trial” of time-based transfers on 512 St. Clair and put forward an immediate implementation plan for proof of payment inspection on all streetcar routes. Of course, that could have been done a year ago – special constables being retrained as fare inspectors while TPS took over the subway security role.
As a commenter noted on Steve Munro’s site yesterday, the spectacle of new LRVs fresh from their transport wrapping lying idle in the Portlands while the existing ones struggle on because a fare policy for them is not agreed is not only possible, it becomes more probable the longer we wait.
There’s an existing boondoggle called Presto, that has already cost orders of magnitude more than the open payment (OP) idea, that no-one seems to be examining at all, so forgive me if I find the intense skepticism of OP puzzling.
I will agree that the consulting contract for doing the initial research and developing the RFP for open payment was absolutely outrageous. I think the TTC overpaid for that work by five to ten times, easily. It makes me think of the joke about political candidates who don’t know how much a loaf of bread costs.
Paul, I’m not clear on why I can’t be skeptical of both systems.
It has been said before but it is worth repeating.
Why is the most antiquated large transit system in North America now determined to rush through an alternative to the Presto system that is already being used at some TTC stations? Why is this major decision in the hands of a Commissioner that will not be around in 6 months? What is the rush? Is it the lure of free money from the Province to continue to install Presto that is so terrifying? Am I the only one that is suspicious of their motives?
I think the answer is clear: the TTC does NOT want Presto/Oyster technology because it fears assimilation (aka. take over) from Metrolinx if TTC fares are compatible/merged with GO fares. The fear is that they will lose control to the Province but will be able to maintain it if they bring in Mastercard to process the transactions.
There are many good reasons for keeping the TTC out of the province’s hands, but to be so resistant to change or muddy the waters of modernization at the expense of it’s own customers for ideological reasons is just plain wrong.
Honte sur vous Giambronne!
I don’t know if I’ve missed something, so will ask — how will people without credit cards or bank accounts be able to access transit? how will social agencies (that currently provide tokens to people accessing their services, and in need of transport) be able to provide one-off transit access?
@dandmb50 – PRESTO kicked off in May 2010 and still problems with activation.
Maybe the TTC knows what I found out, it’s very difficult to activate a PRESTO card and there is no info on their website how to do it, unless you are using GO train. If they can’t organize it before they start, and 5 months later, maybe we should look at other options.
Daniel .. Toronto
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