Myth: Smartcards will encourage use and reduce fare evasion

Myth: Smartcards will encourage public transport use and reduce fare evasion

Fact: Smartcards will actually make it even harder for people to do the right thing and pay their fare with the requirement to validate twice, when entering and leaving each vehicle. For the cost of the smartcard contract - now $1.13 billion over 10 years - we could put conductors back on our trams and staff on all stations, and have money left over to pay for service improvements.

Despite the glowing promises made before its inception, the 'Metcard' automated ticketing system has been one of the most unloved government initiatives in Victoria's history. Ever since its installation at great cost over ten years ago it has been plagued by machine failures, tickets that suddenly stop working and force patrons to jump through bureaucratic hoops to rectify, and a culture of rampant fare evasion that is estimated to cost the system $50 million a year. Passengers have even been driven away from public transport by ticketing hassles.

Fare evasion in Melbourne has two main causes. There is a small group of public transport users that refuses to pay fares in protest over the removal of tram conductors and station staff. But for the most part, fare evasion is a matter of simple opportunism. Human nature being what it is, if you make it difficult to buy a ticket and easy to avoid buying one, a small but significant minority of people will try to 'game' the system to see how much they can get away with. According to a Herald Sun survey reported in January 2007, one in 10 Melburnians admits to sometimes evading fares.

It wasn't always this way. There was a time in the recent past when buying a ticket was as easy as turning up, and where 'casual' fare evasion was virtually impossible, because chances were that somewhere on your journey you would encounter a tram conductor or a guard at a station barrier. This all changed in the 1990s when the Kennett government signed a $400 million contract ($40 million per year over 10 years) to replace staff with ticket machines. Without staff to ensure passengers were actually buying tickets, fare evasion skyrocketed.

Taking into account the lost revenue from increased fare evasion, the cost to the Victorian public is almost certainly more now than when the system was fully staffed. On our staffing page we estimate that the net cost of re-staffing the system is at most $25 million a year - $15 million less than the annual cost of the Metcard system.

The Brumby Government is continuing this failed strategy, spending money hand over fist to replace one automated ticketing system with another. Originally, Victorians were told the cost of smartcards would be $494 million over 10 years, somewhat more than the cost of Metcard. But as documents from the Auditor-General's office revealed in early 2008, the real cost is actually expected to be $1.13 billion - or $113 million a year until at least 2015. (The government has tried to insist that the cost was known to be this much all along because their original estimate excluded operating costs of $434 million as well as contingencies. Yet nowhere in the publicity for the new system did we ever see it implied that costs of such magnitude were excluded.)

True, the new system will have some advantages over the old one: validating will be slightly easier (though we'll have to do it twice as often); the cards will be less prone to failure than the paper Metcards; and prepurchasing will probably raise fewer hassles. But this is all a bit beside the point when you consider that for less then one-quarter the cost, we could return conductors to almost all trams and staff to all stations. In fact, the $113 million annual cost far exceeds even the gross cost of full staffing - which means tram conductors and station staff are better value for money, even if they don't raise one cent in extra revenue.

Put another way, if we used $130 million of the $1.13 billion cost to overhaul the existing ticket apparatus, and put the remaining $100 million a year toward re-staffing the system, we would have some $16 million surplus annually to spend on service improvements, even before considering the impact on revenue and patronage. If the new staff proved successful in deterring casual fare evasion, this surplus would soon grow to as much as $80 million - which even as operating expenditure would go a very long way.

Yet in reality the waste of money gets worse: in May 2008 newspaper reports revealed that, due to ongoing delays and failures in the smartcard project, the Government has signed a $216 million contract to keep Metcard ticking over for another five years. At this rate, the system is losing somewhere between 30 and 50 cents from every dollar of revenue simply to administer the ticketing system; in the old days of paper tickets and staff, the equivalent figure was less than 20 cents (and the staff had many functions other than selling tickets).

For a while back in 2006, the government published its own FAQ page detailing the supposed benefits of smartcards over the current Metcard system. By failing to consider any alternatives, it was rather like extolling horse-drawn carts over carts that you have to pull yourself. It omitted to mention that a smartcard cannot assist people with prams or wheelchairs on or off vehicles, cannot give directions to infrequent travellers, and cannot provide passenger and system security. It admitted that Smartcards are not intended to solve the problems of determined fare evasion, allowing only that unintended fare evasion through not having the right change or not knowing the right ticket to choose should be eliminated. This is fiddling round the edges of the biggest problem with our ticketing system - for $113 million a year we should be expecting better!

(In September 2006 when the system was officially launched under the 'myki' brand name, the government's FAQ page vanished. The official myki.com.au site doesn't even pretend to talk about the alternatives, since its purpose is marketing, not explaining bad policy decisions.)

The government is upfront about admitting that the new system will further increase the number of hoops passengers have to jump through in order to do the honest thing by the ticketing system. One of the most hated aspects of the Metcard system was the requirement that a ticket that had already been paid for and date-stamped had to be revalidated through a machine every time a passenger changed vehicles. Virtually no other city in the world has this requirement - not even those using a similar ticket technology. But the new smartcard system will require people to validate twice on each vehicle, once when entering and again when exiting.

Why is this thought such a good idea? Apparently, the government thinks passengers have so much difficulty working out which ticket they need, that we would prefer waving our wallets past a detector up to 12 times a day so the system can work it out for us. (This is no exaggeration: a city worker who takes the bus from home to the station and whose workplace is a short tram trip away from the city station uses three vehicles each way, so must 'scan' their smartcard a dozen times each day.)

But there are two problems with this supposed 'benefit'. First, most passengers know exactly which ticket they need; that's the advantage of a simple fare system based on two-hour, daily and periodical fares. Holders of periodical tickets in particular only have to decide on their fare once a week, or month or year - not every time they board a vehicle. Certainly, new and infrequent users do not always know which ticket they need, but one advantage of a fully staffed system is that people can be assisted with such matters rather than having to put blind faith in a ticket machine.

Which brings us to the second problem: people generally don't trust machines to work out how much they should be paying. Most of us already have an uneasy sense that we're being subtly ripped off by mobile phone charges; now we'll have to worry about public transport fares as well. But unlike a mobile phone where one can dial a special number at any time to find out one's remaining credit, it is unclear how people will be able to conveniently track what value remains on their smartcards or how close they are to being upgraded to a periodical fare. And that's assuming the machines actually work - no small matter given past experience in Melbourne and elsewhere.

But consider the reasoning of the less principled among us. They have a choice: do the right thing and scan on and off each vehicle; or don't bother, avoid the effort, and run the slight risk of encountering a ticket inspector. According to an analysis of fines data in July 2005, fare evaders have only a 1 in 590 chance of being caught. Such people have weighed up the risk of fare evasion against the reward under the current system and found it worthwhile. Is it only a matter of time before some enterprising fare cheats start up a scheme like this one in Mumbai?

Changing to smartcards will not alter the balance of this unprincipled calculus, other than making it even less attractive to be honest. Needless to say, none of this means we condone fare evasion; we'd just like to see money spent on a solution that fixes it, rather than allowing it to continue!

The government for its part promises that scanning on and off will be made much easier than is currently the case, in particular that it won't be necessary to remove the card from one's wallet when moving past the scanner. But remote sensing has its own pitfalls. If the readers on trams or buses are too close to people's pockets (an unavoidable situation on crowded vehicles), they could inadvertently scan people off partway through their journey and charge the incorrect fare (say, when crossing a zone boundary). Problems can also arise if passengers must get off at a stop to allow others to disembark, then get on again - a common enough situation on Melbourne's trams.

Most other purported advantages of smartcards are classic cases of 'solutions in search of a problem'. For example, it is proposed that the smartcard system will cover not only Melbourne fares but also V/Line fares. Yet contrary to the situation in Melbourne, people generally have no difficulty paying for and using V/Line tickets - and smartcards might just provide a pretext for removing conductors from V/Line trains, where they are highly valued by passengers.

Last but not least, the idea that smartcards will make the public transport system more attractive to use is contradicted by the government's own market research. As reported in The Age on 16 July 2007, the people who are least likely to favour the 'myki' system and most likely to be confused or deterred by it are those who do not currently use public transport very frequently - that is to say, the majority of Melbourne's population. The research suggests that smartcards might just be another barrier to getting more people onto public transport, when there are already so many other barriers being neglected by the government.

Unfortunately, smartcards appear to have been embraced by our transport bureaucracy as another example of technology for technology's sake. It appears the most cost-effective and passenger-friendly solution - returning staff to the system - has been overlooked for not being technologically sophisticated enough.

© 2007 Public Transport Users Association Inc. (PTUA), Victoria, Australia. ABN 83 801 487 611.
General copying and distribution on a non-commercial basis is permitted subject to proper acknowlegement.
Authorised by Tony Morton, 247 Flinders Lane, Melbourne, for the PTUA

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