EXECUTIVE SUMMARY

—    Transaction Systems Limited, (TranSys) is the consortium that designed, developed, maintains and operates the Oyster smartcard transport ticketing system in London under the terms of the 17 year PFI PRESTIGE services contract that was signed in 1998.

—    PRESTIGE has been an undisputed success. 7.6 million journeys every working day are made using Oyster.

—    From the passenger perspective, smartcards can deliver increased convenience and flexibility.

—    For the operator, smartcards can reduce costs of ticket selling, improve security through reduced cash-handling and provide better usage information.

—    The experience of London shows that smartcard technology works and can help to reduce passenger congestion and fraud. Savings from reduced fraud are extremely difficult to estimate accurately and depend upon the extent to which the operator wishes to operate a closed system. However, the experience with gating on London Underground shows that revenue growth immediately following introduction of the gates averaged about 10%.

—    With the right policy direction from Government, TranSys believes an economically-viable integrated smartcard ticketing system across Transport for London (TfL), National Rail and other transport modes is achievable.

—    For the bulk of passenger mass transit journeys in the UK, a smartcard ticketing system is the best way forward for enabling operator integration and delivering benefits to the passenger.

INTRODUCTION

  The TranSys consortium provides, maintains and operates the Oyster smartcard transport ticketing system in London under the terms of the 17-year PFI PRESTIGE services contract that was signed in 1998. The principal partners of the TranSys consortium are Cubic Transportation Systems (CTS) and Electronic Data Systems (EDS) who are responsible, respectively, for asset provision and operational services. Fujitsu and WS Atkins are also minor shareholders in the consortium.

  The PRESTIGE-Oyster system is designed to be multi-modal and smartcards work across London's Tube, Docklands Light Railway (DLR), tram, and bus network, as well as on specified national rail services. Users with travelcards (daily, weekly or monthly) can also travel on rail services within the Greater London area in all the zones for which they have validity on their card.

  The National Audit Office report on Achieving Innovation in Central Government Organisations published in July 2006 stated "The project was developed to time and to budget and has won several awards, such as the New Statesman "Modernising Government" award (2004), the MCA award for technology innovation and the PFI best Transport Award".

  The Oyster smartcard has been an unqualified success since its launch in 2002, and the Oyster card is used by more passengers each day than any other smartcard system in Europe.

  TranSys will be working closely with TfL over the coming months and years to achieve the shared vision of integrated smartcard-based ticketing within the Greater London Authority (GLA) area.

  TranSys' responses to the Transport Select Committee's questions are set out below, following the same numbering as set out in the Committee's terms of reference.

INTEGRATED TICKETING

1.   Is ticketing sufficiently integrated across different modes of transport and between different geographical areas?

  1.1  No. However, the arrangements in London show that integration is possible across modes (Underground, tram, buses, light rail, and specified national rail services) when there is a will to achieve it.

  1.2  At present, the extent of ticketing integration varies within different geographical areas, between different geographical areas, and across different modes of transport. National rail tickets are integrated between overground/mainline stations and through magnetic stripe tickets with London Underground.

  1.3  However, outside of the London Oysterised area there is little integration with local bus services in different geographical areas, or with other forms of transport (light rail, metro). Customers are baffled and irritated at the disjointedness of ticketing policy and possibly discouraged from using public transport by the need to queue and purchase more than one ticket on multi modal journeys. If the government wishes to encourage the use of public transport, whether it be bus or rail, to reduce car usage and meet energy and emissions targets it needs to enable public transport with "a convenience factor"—get in and go—and then provide the service and capacity necessary.

  1.4  The term "integrated ticketing" needs to be commonly understood by and from a passenger's perspective. TranSys' experience in London tells us that passengers want:

(a)  Convenience—one ticket covers all modes of travel—easily purchased without queuing from a wide range of retail and other channels that suit the passengers' preference.

(b)  Value—the ticketing system will succeed if it provides best value, i.e. discounts, capping or loyalty benefits without the passenger having to be an expert in ticketing and fare rules. These benefits are most effectively delivered by a smartcard system with "pay-as-you-go" capability that "caps" a passenger's fare to be equivalent to a best value fare.

(c)  Security—the ticketing system and the supporting infrastructure must be trusted by the passenger, particularly so where the passengers "stored value money" of a "pay-as-you-go" capability is concerned.

(d)  Non-intrusive—anonymous if the passenger so chooses.

(e)  Equipment that works—reliable and user-friendly.

  1.5  The term "integrated ticketing" also needs to be understood from a policy maker's perspective. Issues to be addressed include: what is the scope in terms of the modes of travel? Which operators are to be included from day one and what might be added at a later date? Who will have control during implementation to ensure that resolution of emerging issues and who will manage change over time?

  1.6  At present, data on National Rail travel usage is derived from manually conducted twice annual passenger count surveys which are used basically for revenue allocation. These are inaccurate, inefficient, partial and expensive. An integrated smartcard ticketing system would transform this for policy makers and offer real benefits:

—    real and accurate data on usage and time of usage, assisting with demand management planning and the planning of service frequency; and

—    data on origin and destination of journeys, which can be very useful in optimising capacity planning and thereby reducing energy and carbon emissions.

INTEGRATION IN LONDON

  1.7  Within London, ticketing has become highly integrated (a single ticket for Underground, bus, DLR, and tram services). The present gap in London is for those passengers travelling to London on national rail tickets, especially from south London and from the wider South East region. Although the system is not fully integrated, the introduction of national rail zoned fares within London and the outline agreement in January 2007 of TOCs operating in London to accept Oyster PAYG will integrate the London transport system even further. It has not yet been determined by transport operators and transport specifiers (PTEs, Department for Transport) how far this ticketing integration will extend beyond Greater London Authority (GLA) boundaries. The Department for Transport is due to approve shortly the extent to which the Mayor of London will be granted powers to specify rail services and potentially fares in areas beyond the Greater London boundary.

  1.8  The transport pressures in London are unique. About 70 per cent of all rail journeys in Britain either start or finish in London. The PRESTIGE contract was designed to ensure that London has a ticketing system that enables it to cope with heavy peak traffic loads. The Oyster smartcard system is an example of an integrated ticketing system that can handle thousands of passengers every minute and millions of passengers each day, and which allows Londoners to travel around the Capital on different modes with greater ease.

  1.9  Transport for London's T2025 document anticipates that the predicted employment and population growth in London will result in a 30% increase in public transport passenger km travelled in the morning peak by 2025. [25]The speed of the Oyster smartcard allows 40 people a minute to pass through a ticket barrier, which is critical at times of peak passenger flow through busy stations.

  1.10  An integrated ticketing system would need to recognise the particular conditions in London if it was to be compatible with London's system and not cause delays and blockages at mainline terminals and major interchanges throughout London. It must be able to safely, speedily and faultlessly handle thousands of passengers arriving at a station within a short time (eg due to simultaneous peak hour train arrivals on several platforms, which may unload several thousand people in a couple of minutes).

  1.11  The further roll-out of Oyster Pay-As-You-Go (PAYG) to national rail services in London raises the proposition of how far integration should extend out of London to a commuter's journey starting point—for example, onto local bus services in the Home Counties. This is a matter for transport policy and delivery authorities to consider.

INTEGRATION NATIONALLY

  1.12  Nationally, there are significant structural, legal and commercial barriers to ticketing integration.

  1.13  Barriers on the rail network include:

(a)  The fact that the TOCs carry the revenue risk within the franchise agreement and therefore any change to ticketing or fares policy (whosoever makes it) is seen as a potential risk to their business.

(b)  An integrated ticketing system requires a level of cooperation and sharing that is culturally difficult for a competition-based industry focused on short to medium term profit maximising, particularly if it requires any significant capital investment with a longer payback period than the duration of the franchise.

(c)  As a consequence of the value of the franchise agreements they are caught by the European mergers and competition rules. Since the TOC owning groups are mostly also major UK bus operators, they can be reluctant to integrate fully national rail and local bus services in order to avoid the possibility of being regarded as having exploited a dominant position.

(d)  The differing characteristics of each TOC (traditionally characterised as London and South East (LSE), Intercity, and Regional) is a barrier to integration. There is a strong and positive business case for those franchisees for LSE TOCs, where there is heavy usage and where overcrowding is an issue. But "pay-as-you-go" from a stored value on the card has little benefit from a passenger's perspective for Intercity services where the average fare value is over £20. Passengers will not want to tie up cash to pay Intercity fare levels from a stored value. Conversely, in regional TOCs the fare paid by the passenger is only c25% of the real cost of providing the service (eg Arriva Trains Wales or Northern franchise) and in these cases the value of an integrated system is a function of the importance of an integrated system with local bus services.

(e)  Who is, or will be, the customer with the vision to drive it forward?

  1.14  On the bus network, the barriers to integration include:

(a)  the de-regulation of bus services outside of London and the multiplicity of small operators mean it is difficult to deliver a national integrated system unless it is mandated at the outset as part of an operators' licence—this may be possible through the intervention of PTEs; and

(b)  Nationally integrated ticketing will be low on the agenda for the multitude of small local bus operators because they will be reluctant to pay for the infrastructure cost associated with a National system.

2.   Does the Government have an adequate strategy for developing the integration of ticketing systems?

  2.1  No, TranSys does not believe that the current strategies being pursued will result in a National integrated ticketing system in the short to mid term that truly benefit both regular mass transit passengers and operators.

  2.2  The current strategies are:

—    to mandate ITSO compliant cards on national rail in franchise agreements and require bidders to submit bids for smartcard schemes;

—    TranSys is not aware of any policy on buses other than to mandate ITSO cards; and

—    integration of London into a national scheme will be by requiring TfL to accept ITSO cards.

  2.3  TranSys believes this will not deliver an integrated ticketing system because:

—    A national integrated ticketing system is an achievable but very complex system—the ticket medium (smartcard) or ITSO specification used on the card is only a small element in that system. Other key features of a successful integrated system are base data, ticket logic and fares tables, revenue allocation protocols, inter-device and device-to-communications processing communications protocols, security protocols, comprehensive business rules and operational rules, data outputs and formats, system and equipment redundancy, disaster recovery arrangements, maintenance and service levels and device availability.

—    The ITSO specification is "permissive" (allowing differing solutions and options) rather than "definitive" (providing a measurable and defined envelope of parameters or performance). It is therefore capable of being met by a number of different interpretations.

—    By allowing multiple operators to develop smartcard solutions within franchises there is the danger that they develop ITSO compliant solutions that meet their franchise obligation but do not consider a national perspective as part of the delivery and are therefore unlikely to be an integrated solution. The worst outcome would be a passenger taking a journey from (for example) Brighton to Birmingham that requires 3 separate smartcards.

—    Following the franchise replacement route will mean that a totally integrated ticketing system will not be available until late in the next decade.

—    Multiple operators with their own solutions will require multiple back office environments all with potentially different security arrangements and information protocols. Management of all of these facilities and ensuring that they all access and use the same fares information and revenue allocation rules will be an operational nightmare.

  2.4  For success, our experience in London shows that you must have:

—    a robust and knowledgeable client with vision, empowerment and clear objectives;

—    a contract that provides incentives to meet the project objectives;

—    a single systems integrator; and

—    a chosen supplier with proven experience of similar applications which minimises the risks in the project.

  2.5  The chance of delivering an integrated system without a systems integrator is virtually non existent.

  2.6  Given that the ITSO specification is subject to interpretation and may be met in different ways it is vital that there is a single customer with the power to make decisions on security arrangements, interpretation of the specification, communications protocols and so forth. This customer must have an intelligent vision of what is required and a full understanding of all of the implications of any changes from an end user and an operator's perspective. This customer must have the respect of all of the operators.

  2.7  TranSys believes that the Rail Settlement Plan (RSP) should serve as the "customer" for a national integrated ticketing system. They have the respect of the rail operators, they have managed ticketing integration across the national rail network through magnetic tickets, and they have a full understanding of all the operational issues.

THE USE OF SMARTCARD TECHNOLOGIES

3.   Is the industry taking up modern smartcard technologies adequately and appropriately?

  3.1  There has so far been limited take up of smartcard technologies outside of London. Take-up has been patchy and has been on a small scale eg for bus services in Chester, bus services in Cumbria, bus services in Southampton, and concessionary bus fares in Cornwall and in Mid Suffolk. In some places, smartcards have been taken up, but these have been for local non-transport services such as libraries and leisure facilities (eg Sheffield, Cambridgeshire, Bolton, and Bracknell Forest). Southampton has taken up smartcards for bus services, proof of age, and for NHS organ donor registrations. At present, smartcard technologies have not been taken up or delivered successfully in big UK cities or in the Home Counties on a scale anywhere near that of PRESTIGE.

  3.2  The experience of London has shown that some train operating companies (TOCs) have been slow to take-up these cards (although the TOCs have recently agreed to accept an offer from Transport for London to install Oyster PAYG equipment). The TOCs have had concerns about revenue sharing and allocation, and about the capital cost of system-wide installation. The barriers to the take-up are set out in paragraphs 1.13 and 1.14.

  3.3  The PRESTIGE-Oyster system in London is the largest commercial based ticketing system in the UK. The system handles 36 million passengers a week. It is a system that is durable, efficient, fast, and has equipped TfL with unprecedented levels of relevant and reliable data on journey and sales trends which they can use to plan accurately future services.

  3.4  The Scottish Executive is commissioning the first large scale implementation of an ITSO compliant smartcard. The scheme is for concessionary travel on Scotland's public transport for elderly and disabled citizens across Scotland. It is currently undergoing a live test in the Shetland Islands.

4.   Does the ITSO system cater for the needs of all passengers and travel providers?

  4.1  The Government has for some time mandated the use of the ITSO standard for smartcard ticketing when specifying contractual arrangements. ITSO was created to facilitate smartcard transport ticketing inter-operability "from Land's End to John O'Groats".

  4.2  The ITSO specification covers:

—    Cards;

—    Points-of-sale/service;

—    Back office systems;

—    Data formats and transfer protocols; and

—    End-to-end security architecture.

  The ITSO specification does not cover:

—    Paper, magnetic or bar code ticketing;

—    Business logic and rules; and

—    Back office systems such as fraud analysis, financial reconciliation and settlement, although some of these issues are now being addressed under the association of ITSO licensed operators.

  4.3  TranSys supports the objectives of ITSO, which offer the prospect of greater convenience for passengers. TranSys has contributed to the development of the ITSO system and London's Oyster card equipment can be made to be compatible with the ITSO system, although this will be at a significant financial cost.

  4.4  However, there is no fully functional intermodal (rail) ITSO card system in place yet and the system is somewhat unproven, particularly in a rail environment. In our view the most important objective is to enable interoperability for as many travellers who require it as possible at the lowest cost. A high proportion of all UK rail journeys are either wholly within or start or end in London. In addition, a very high proportion of the heavy rail journeys that start or end in London involve a journey segment on Transport for London's bus or Underground services. Therefore the biggest issue to be addressed is interoperability between National Rail and Transport for London (ie Oyster).

  4.5  Passengers and transport operators in London will be keen that an ITSO card is suitable for use in the high density high performance London transport environment. This is important not only because 70% of all rail journeys start or finish in London, but also because of the need to keep London moving.

  4.6  Beyond London, the next strongest candidates for integrated ticketing are (1) travel in and around the major UK cities and large towns, and (2) some extension of Oyster into the Home Counties. This is based on the relative volumes of passenger transport use in dense urban areas, and the ability to enlarge the Oyster catchment. Our comments in para 2.4 apply, to ensure delivery of such initiatives.

5.   What can be learned from the experiences of areas such as London and Scotland where smartcard technology is already in place?

  5.1  TranSys can only provide an answer in relation to London.

  5.2  The experience in London shows that smartcard technologies work and are popular with customers. 7.6 million journeys a day are made using Oyster, allowing passengers to use five different modes of transport on a single ticket. 80% of all journeys on London's Underground and buses are paid by Oyster card. This is by far the largest smartcard scheme fully operational in the UK and is one of the largest in the world.

  5.3  Smartcard transaction performance times are extremely important—the shorter the transaction time, the higher the first time read reliability will be and the higher the validation throughput will be. Fast, reliable Oyster transactions have helped increase passenger flows through Underground ticket gates and helped to reduce Bus boarding time, which in turn, has helped to reduce congestion and helped to deliver timetable efficiencies.

  5.4  The key lessons from London are:

—    That smartcard technology works. It works reliably when the system is well specified, designed and maintained by a competent, experienced, system integrator and hardware provider. It is low risk.

—    Agree a specification and don't change it.

—    Set clear business goals.

—    PFI contracts can work efficiently between Government, Operators and Contractors with appropriate risk sharing.

—    A phased roll-out ensured the system was sufficiently tested (from both a technical and a customer perspective), facilitating the introduction of the smartcard in a way that did not inconvenience or disadvantage the customer.

—    Passengers like it. Almost 10 million cards have been issued since 2002.

  5.5  Passengers like it because:

—    Cards can be issued and renewed more conveniently, not only from ticket offices but also at retail outlets, by phone, over the internet or by auto-load i.e. once issued with a card passengers never need to visit a ticket office again.

—    The system provides peace of mind that it will always charge the equivalent of a "best fare" for the journey taken i.e. end-to-end journey discounts, daily, weekly and monthly capping options.

—    No need to carry money or have the correct change.

—    No need to understand complex fare tables.

—    The card can be kept in a purse or wallet and does not need to be inserted in a slot to be read.

—    The system can provide security against loss or theft, if the card is personalised and registered with the operator.

  5.6  Transport Operators like it, because:

—    It provides more comprehensive data on revenue and usage by time of day, origin and destination, class of travel etc.

—    It facilitates better service planning and optimisation.

—    It reduces operating costs in certain circumstances.

—    Stolen or fraudulent cards can be hot-listed and prevented from use.

—    It enables accurate apportionment of revenue between different operators and modes of transport.

—    The smartcard increases passenger flows through gated stations and on buses.

—    It enables Local Authorities to provide concessionary travel to students and pensioners etc and to obtain accurate usage information as a basis for reimbursing transport operators.

—    Reducing cash transactions and increasing electronic payment methods can achieve significant savings. (Cash handling is costly and more open to fraud). Reduced cash handling also provides better security, particularly for bus operators.

—    Businesses can be incentivised to provide employee passes for business use, and receive monthly, itemised billing.

—    Smartcards provide opportunities for non-transport related, secondary revenue generation e.g. combined travel and theatre / sports admission tickets, parking, congestion charging payment, etc.

  5.7  It has taken political leadership from Transport for London (with the offer to fund the installation of Oyster PAYG equipment) to get the TOCs operating in London to accept Oyster PAYG on their services. This shows the importance of having a centralising, co-ordinating integrator.

REVENUE PROTECTION AND THE POWERS OF TICKET INSPECTORS

6.   Is the legal framework within which ticket inspectors function appropriate?

7.   What appeal mechanisms exist for passengers, and are they adequate?

8.   Are the rights of passengers and the powers of ticket inspectors well-balanced?

  TranSys is not qualified to respond to these questions.

9.   Do operators of public transport take adequate measures to protect fares revenue?

  The extent of fare evasion is extremely difficult to quantify and the incremental business case for gating additional stations cannot always be made within the duration of a franchise. A national integrated ticketing system would perhaps enable better revenue capture overall by the extension of gating to more stations as a result of a longer term holistic view being taken rather than an incremental business case for each station. Clearly on trams and buses it is not cost effective or it is physically impossible to provide suitable automatic entry and exit gates and in these circumstances revenue protection personnel need to be employed, but there are limitations as to their capabilities to restrict fare evasion during the morning and evening peaks.

CONCESSIONARY FARES—THE RIGHT STRATEGY?

10.   Is the Government's concessionary fares strategy, including the proposed scheme for concessionary bus travel, adequate?

11.   Are concessionary fares schemes sufficiently integrated across different modes of transport and different geographical areas?

  TranSys is not qualified to respond to these questions.

March 2007