8 Conclusion and the Way Forward
8.1.1 This final section draws together the analysis contained in the previous sections of the document, recognising that whilst there are some challenges, there is a real drive to see the progress towards Smart and Integrated ticketing continue. This section is therefore used to signpost a number of actions which can be taken in the short, medium and long term to deliver the overall vision for Smart and Integrated ticketing.
8.2 Current Position and Inherent Challenges
8.2.1 Smart and integrated ticketing has the potential to offer a range of benefits to passengers, the public sector and private sector operators. This has been recognised by the DfT, which is providing seed funding to help a range of regional public transport authorities develop Smart and Integrated ticketing products. Furthermore, achieving these benefits is a fundamental component of the Scottish Governmentâ€™s policy commitment to the concept of Smart and Integrated ticketing. Many of these benefits can be derived from smart ticketing and integrated ticketing in isolation although greater benefits are derived from the combination of smart and integrated ticketing.
8.2.2 However, there are a series of challenges to a credible national business case for smart and integrated ticketing at the present time. In particular, operators are sceptical of the benefits of integrated ticketing and have expressed concerns that it could harm their market share by eroding the brand loyalty built up when customers purchase operator-specific tickets. Uncertainty surrounding the real value of benefits means it is not possible to convince operators that the potential benefits of smart and integrated ticketing outweigh required investment levels and the threat to their business model.
8.2.3 In addition, though ITSO can provide a platform for interoperable smart ticketing and much has already been invested in ITSO technology, there is a degree of risk relating to its future development and its ability to support a project of the size and functionality required by Transport Scotland.
8.2.4 These two significant issues limit the strength of any business case for Smart and Integrated ticketing at the present time.
8.3 Maintaining Momentum in the Short Term
8.3.1 Although the time is not currently right for a wholescale implementation of smart and integrated ticketing in Scotland, it is possible to maintain a degree of momentum towards this as a long-term vision. This can be done by taking advantage of developments towards smart ticketing that are already taking place.
8.3.2 As discussed within section 3 (Overview of the Current Position), a number of the building blocks for Smart infrastructure have been or are planned to be put in place. Smart ticketing equipment has been rolled out across the Scottish bus fleet through the Concessionary Fares Scheme and several large commercial operators have made moves to introduce Smart ticketing for commercial purposes (e.g. Lothian and Stagecoach).
8.3.3 In addition to this, FSR is trialling a Smartcard product on the Glasgow â€“ Edinburgh service. To keep this momentum going, Smart technology could be factored into the next franchise agreement and should be built into the franchise consultation which is due to begin in Spring 2011.
8.3.4 In Strathclyde, SPT is procuring new Smart ticketing and gating equipment for the Subway to replace existing equipment which is nearing the end of its useful lifespan. The timing of and funding for this procurement are, however, uncertain at present. Nevertheless, it is important to note that SPT does already operate an integrated ticket in Strathclyde through its ZoneCard product.
8.3.5 Assuming these developments do proceed as is currently intended, it appears that significant elements of the public transport network in Scotland will become Smart-enabled. The precise timescale is difficult to ascertain at present â€“ particularly because several of the developments are being undertaken by commercial operators who are reluctant to share details for reasons of commercial sensitivity.
Focusing on a phased approach
8.3.6 It is sensible for Scottish Government to have an overall strategic vision for the long-term migration to a Smart and Integrated environment. A series of stepping stones towards this vision can be laid out:
- Short-term (2011 â€“ 2013) â€“ Continuing with the roll-out of Smart technology in Strathclyde and the rest of Scotland;
- Medium-term (2013 â€“ 2018) â€“ Taking steps towards the integration of modes in Strathclyde; and
- Longer-term (2018 onwards) â€“ further integration of Smart-enabled modes, beyond Strathclyde and progressing to other areas, leading to nationwide coverage.
8.3.7 The arguments presented within section 4 (Options Appraisal) for an initial Strathclyde focus for Smart and Integrated ticketing apply equally to a phased approach that would see Smart roll-out, followed by integration.
8.3.8 The majority of current known Smart developments (bus, rail and subway) will affect Strathclyde, meaning that the region will begin to benefit from technological advances before other regions. In light of this, it makes sense to integrate the different modes first in Strathclyde â€“ where the size of benefits is potentially greatest â€“ and then to look to roll out the model to other parts of the country once a proof of concept has been established. However, this approach will not preclude advancing smart and integrated ticketing elsewhere should the opportunity and the demand arise.
8.3.9 Focusing on making the case for integration in Strathclyde first would allow TS to concentrate on a defined area which accounts for a significant proportion of total public transport journeys in Scotland and also offers scope for a modal shift. It therefore offers the highest potential benefits, which should help to make the case overall.
8.3.10 However, before the case for integration can start to be made, work needs to be undertaken in the short to medium term in order to remove some of the challenges that currently exist for the investment case for a Smart and Integrated product.
8.4 Building the case over the Short Term
8.4.1 In essence, if smart ticketing continues to be rolled out (whether through Concessionary Fares, by private investment or through the rail franchise) the key issue is for the Scottish Government to make the case for integration.
8.4.2 However, there are a number of key business issues which create difficulties for the case for integrated ticketing. The most significant of these relate to the development of the ITSO technology solution and the robustness of the case for bus operator involvement. Further related challenges also relate:
- What the real level of demand is for integrated ticketing across operators and modes and its dependency on the customer increasing travel by these modes and within what fare structure;
- What incentives can be offered to passengers to drive high levels of take-up;
- Who is best placed to take the lead delivery role if the programme of change is to proceed effectively; and
- What the scale of and responsibility for funding the significant investment would be and whether this is feasible against a backdrop of public sector spending constraint.
8.4.3 In order to construct a credible case for integration in the long-term, it will be necessary to address these uncertainties. This work should be initiated in the short-term and developed further in the medium-term, in parallel with other market-driven developments such as commercial bus Smartcards.
Monitoring the Development of ITSO
8.4.4 TSâ€™s presence on the Board of ITSO means it is well placed to monitor the ongoing developments and to assess the evolving DfT approach. TS should also use its presence on the Board to shape the direction of travel and to ensure that solutions proposed will meet the requirements of TS.
Estimating Passenger Demand
8.4.5 Realistic passenger demand for Smart and Integrated ticketing must be established, focusing on the incremental demand generated by the integrated aspect. This will allow more accurate estimation of benefits on offer and will quantify the potential growth in the market, thereby providing a useful foundation for the commercial case.
8.4.6 This will require work to design the intended ticketing product(s), to estimate take-up and to evaluate the optimum fares structure.
Achieving Bus Operator (and other Operator) Commitment
8.4.7 Building on a more accurate estimation of passenger demand, it will be possible to better quantify and articulate better the potential benefits for individual operators through projected growth in passenger numbers, impact on market share and ability to realise other possible benefits. This will become a crucial component of the case for bus operator participation in integrated ticketing.
8.4.8 The outcome of the Competition Commissionâ€™s review will also have an impact on bus operatorsâ€™ willingness to engage in further discussions around integrated ticketing. The Commission plans to publish its report in Autumn 2011.
Defining future roles and responsibilities
8.4.9 As part of the overall assessment of the feasibility of a Smart and Integrated ticketing solution, it will be important to explore how it might eventually be delivered. From the outset, there will be a need for a strategic oversight and coordination role covering:
- Liaison with commercial operators;
- Liaison with DfT and ITSO; and
- Assessment of emerging Smart developments across the public transport network in Scotland and internationally.
8.4.10 Moving towards the integration phase, there will be a need for a clear delivery lead that can coordinate the technological and commercial aspects of integration. Operational delivery will also include provision of front and back office services and administration of revenue allocation structures.
8.4.11 It is sensible for the Scottish Government, through TS, to maintain the strategic coordination role at the outset to ensure that developments can be aligned with policy objectives. Over the medium term, TS should assess what level of involvement it wishes to have in operational delivery and the extent to which the public sector will need to take delivery risk. This assessment should also cover which partners are best placed to lead on operational integration of each of the Smart-enabled modes.
Identifying Costs and Funding Sources
8.4.12 Early on, high-level costs will be needed to gauge the scale of funding commitment that is being sought. This will allow an early decision to be made on whether public sector funding for integration is likely to be feasible against the current backdrop of reducing spending in the sector.
8.4.13 It is important to note, though, that by adopting a phased approach which builds on planned Smart developments, TS would be seeking to make an investment case for the incremental spend required to make the scheme integrated, rather than making a case for the full investment in a one bid scenario.
Soft Market Testing
8.4.14 Building on the additional analysis suggested above, an early approach could then be made to test the marketâ€™s view of likely costs for integrating the modes in a manner that would meet the output specification defined by TS and its partners. Assuming Smart developments proceed as planned, TS would be approaching the market to discuss likely costs for integrating known Smart technology across a defined set of modes. This degree of clarity should help ensure responses from the market are accurate and credible.
8.5 The Medium and Longer Term â€“ rolling out integrated ticketing
8.5.1 The long-term aspiration is to roll out Smart and Integrated ticketing across Scotland. The phased approach set out here suggests that Smart developments should be promoted first in Glasgow (where several are planned to happen anyway), followed by the rest of Scotland. However, this will not preclude development being delivered elsewhere should the need / desire arise.
8.5.2 This means that significant elements of the required Smart infrastructure should be in place across Scotland. While it will undoubtedly be challenging to integrate the disparate elements effectively, this will provide a helpful foundation for integration work.
8.5.3 Efforts should initially focus on integrating the modes in Glasgow, drawing on experience with existing integrating ticketing products to develop a model for Smart and Integrated ticketing that could be rolled out nationally.
8.6.1 Fundamental uncertainties around the achievability of benefits â€“ in a deregulated market â€“ mean that the commercial case for operators for Smart and Integrated ticketing cannot be made at present. Operators have also shown limited appetite for discussions about integrated ticketing while the outcome of the Competition Commission review is pending. In addition, there remains a risk relating to the future suitability of ITSO as a platform for a fully integrated Smartcard product on a large scale.
8.6.2 However, existing planned developments suggest that individual modes will become Smart-enabled within the short- to medium-term horizon regardless, thereby allowing TS to concentrate on making the case for integrating the Smart infrastructure on these modes. Indeed many of the stated benefits of smart and integrated ticketing can largely be achieved by smart ticketing alone.
8.6.3 It is important to note that a phased approach creates the risk that integration ultimately cannot be achieved either for commercial or for technological reasons. To mitigate this risk, it is essential for TS to adopt an oversight role from the outset. This will ensure that it can maintain an awareness of important emerging developments with ITSO and with commercial operators, thereby ensuring that the path to integration can be managed effectively.
8.6.4 Assuming this risk can be managed effectively, adopting a phased approach will allow TS to maintain short-term momentum through planned technological developments, while taking time to progress the robust case for integration at a more appropriate and viable point in the future. Building on the Smart technology that is expected to be put in place, TS can then move forward to develop a model for integration in Glasgow that can, in turn, be rolled out to deliver the long-term vision of Smart and Integrated ticketing for the whole of Scotland.