Appendix 8: Possible Bus Operator Incentivisation Models

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 – 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 – 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 operators’ key financial parameters – could be a powerful disincentive.

Political appetite unclear

6b

Reduction in Concessionary Fare Payments

Reduces revenue and margin

Affects operators’ key financial parameters – could be a powerful disincentive.

Political appetite unclear

6c

Introduce Quality Partnerships

Removes flexibility that operators currently have

Considered by SG’s response to the Competition Commission

Political appetite unclear