Appendix 8: Possible Bus Operator Incentivisation Models

This appendix considers potential means of motivating bus operators to participate in an integrated ticketing scheme, while bus fares are unregulated. It has been developed drawing on lessons from other ticketing schemes and the concerns that operators have raised in meetings. Further analysis is needed to quantify their potential attractiveness to operators, assess their costs to the public sector and consider their feasibility.

Table A8.1 â€“ Possible Bus Operator Incentivisation Models

No	*Description*	*Benefit to operator*	*Notes / Examples*	*Issues Affecting Feasibility in Scotland?*
1	Providing Subsidies
1a	Direct subsidy for accepting an integrated ticket, which is priced at a premium.	Protects margin for minimum usage with potential upside.	Ticket premium could be used to generate the subsidy. The ticket premium would need to be comparable with the operator cost and margin per passenger carried. Already in place for SPT ZoneCard.	Further work required before conclusion could be drawn about passenger demand price sensitivity.
1b	Fixed subsidy independent of volume of integrated tickets accepted	Reliable margin increase	A fixed level of income that was not volume dependent would provide a reliable revenue stream and be cheap to administer	Availability of public sector funding unclear.
1c	Subsidy per ticket for accepting an integrated ticket, which is not priced at a premium	Protects margin with potential upside	Encourages operators to carry more passengers.	Availability of public sector funding unclear.
1d	Subsidy to cover cost of exit readers, ticket product changes and customer education to use them	Introduces distance measurement for smart card customers	Already operational on OV Chipkaart scheme in the Netherlands and on Der Lijn tram in Belgium	Further work required to establish if exit readers are practical on Scottish buses.
1e	Increase in Bus Services Operator Grant for taking an integrated ticket	Introduces a reliable revenue stream	In England BSOG increase of 8% for buses carrying smart card ticketing machines. Submission by Scottish Govt to Competition Commission considers an increase in BSOG.	Scale of incentive needed to be sized against potential demand and take up of an integrated ticket
2	Promoting Operator Products
2a	Advertising or brand promotion of the operator	Creates potential demand for the linked product	In Government marketing campaigns on modal shift, identify operator brand.	Unclear if this would be possible (c/f Competition Commission review).
2b	Encouraging bus usage through measures that discourage use of motor vehicles where there are available bus services	Potentially increases levels of patronage.	Customer education to encourage bus take up â€“ see Scottish Government Social Research Report on "Understanding why Some People Do Not Use Buses".	Requires linkage of Smart & Integrated ticketing strategy with wider cross-modal transport policy.
2c	Linking integrated ticketing to other products	Promotes other operator services.	Relate integrated ticket to the operator and their travel products, for example through branding.	Risk that Government is seen as preferring selected operators and not acting independently
3	Providing ticketing infrastructure
3a	Provision of retail and customer channel with the integrated ticket	Takes the cost of retail and customer channels for the integrated ticket away from the operator	This may save cost.	This may also reduce ownership of the customer which operators perceive as important for brand differentiation.
3b	Provide a central system for each operator to use	Reduces risk of having to design, implement operate and refresh a ticketing system	Could be administered by the lead delivery partner, thereby offering control over the Scheme.	Some operators have already invested in their own systems or may have concerns about protecting their commercial data.
3c	Provide access to customer data in way that boosts operator market access but does not invade customer privacy	Enables operator to promote their services to a wider customer base.	Understanding customer journey data would allow tailored / targeted products.	May be complex to administer
3d	Act as card issuer and back office clearer	Reduces risk of having to design, implement operate and refresh tickets and a back office	Could be administered by the lead delivery partner, thereby offering control over the Scheme.	Places significant responsibility on one delivery partner.
4	Procurement of a central ticketing system
4a	Favour an operator-backed consortium to implement system/back office	Allows operators control over back office infrastructure	Trans Link (a consortium of operators) in the Netherlands has sourced the new OV Chipkaart system	Achieving operator buy-in difficult at present when benefits remain un-quantified.
4b	Provide access to multi-modal back office (e.g. ATOC) for rail	Builds on existing operator facilities	Potentially minimises additional cost to public sector, but may need UK-wide cooperation	Ability to achieve UK-wide cooperation unclear
5	Mitigating Costs
5a	Provide transition relief for a change project	Protects operator margins	Costs could be met by lead delivery partner.	Public sector funding availability unclear
5b	Remove ITSO fees	Protects operator margins	Costs could be met by lead delivery partner.	Public sector funding availability unclear
6	Introducing Disincentives for Non-participation
6a	Reduction in BSOG	Reduces revenue and margin	Affects operatorsâ€™ key financial parameters â€“ could be a powerful disincentive.	Political appetite unclear
6b	Reduction in Concessionary Fare Payments	Reduces revenue and margin	Affects operatorsâ€™ key financial parameters â€“ could be a powerful disincentive.	Political appetite unclear
6c	Introduce Quality Partnerships	Removes flexibility that operators currently have	Considered by SGâ€™s response to the Competition Commission	Political appetite unclear