Saturday, August 11, 2012


The new New South Wales (NSW) Government has taken on the challenges of Sydney’s public transport fare collection with fresh vigour after two decades of mismanagement. In September 2011, the NSW Transport Minister unveiled a new integrated ticketing project, Opal, which she explained will cost over one-billion dollars. Make no mistake: this is a very big technology project.

There is a new perspective and renewed energy, but there are strategic gaps that will stop Opal delivering its intended benefit. Significant hardware roll-out is already complete in Sydney’s rail network, and the newly franchised Sydney Ferries is set to be the first to switch over to Opal revenue collection in November this year. Fare structure reform accompanying the technology should be well advanced. And yet it seems key strategic and operational issues are yet to be treated:

  • What the structure of pricing will be for users,
  • How revenue will be divided from integrated multi-modal journeys amongst operators,
  • What the demand-side competitive price-drivers will be for newly franchised ferry and bus services will be under a centralised pricing model and clearing house.

Simply overlaying a smart-card system on the existing pricing framework will not create integrated ticketing e.g. of the kind that exists with London’s Oyster.

London's Oyster card in use, often used as a role model for Sydney (Source: Guardian)

Development of frameworks for revenue division, performance contracts, and pricing structures for users is critical for a system like Opal to deliver meaningful benefits.


The Sydney Integrated Ticketing project was first announced in 1998 for completion before the 2000 Sydney Olympics. Perth-based ERG was awarded the contract. According to the former NSW Transport Coordination Authority, the User Requirement and contract that stood 2m high when printed on A4 paper.

In 2003, with the project still far from delivery, I anticipated in a contrarian Transit Australia feature article that fare complexity would lead to an unworkable basis for integrated ticketing. I put the case that the technology was the means, and that the end- revenue collection- had to be sorted out by Government and operators first.

In 2008, the $250m+ integrated ticketing project failed, delivering nothing except for ERG’s near-bankruptcy. ERG cited challenging relationships with disparate operating groups and “complexity of fare structures” as core problems.

Later in 2008 I wrote in Transit Australia on a proposal to progress integrated ticketing in Sydney. This went on to be part of Dr Grarry Glazebrook’s 2009 “Thirty Year Public Transport Plan for Sydney” (pp38-39). This formed part of the Sydney Morning Herald’s campaign on Sydney’s public transport.

Subsequently, two of these recommendations (then adopted as opposition policy) were belatedly adopted by the Keneally government just before losing office in March 2011:
  • Private bus services were rolled into the MyZone revenue sharing framework
  • Mode specific zone-based fares (blue TravelPass etc) were rolled into full multi-modal fares
And a third was acted on upon the new Government coming to power:

  • Sydney’s Trams were rolled into MyZone revenue sharing framework

Despite these advances, Sydney’s zone system remains poorly defined and inconsistent with present and future land use. It is entirely independent of the predominant distance-based fares on both trains and buses. It only applies to periodical usage over periods of one week or more; it is not possible, for example, to get a daily or two-hourly zone fare. There is no geographic discrimination in zone fares for buses and ferries resulting in significant inequity for short multi-modal journeys (e.g whether you use a zone ticket to go 5km on two buses or commute from Manly on an ocean-going ferry you pay the same).

There is a realisation that integrated zone-based ticketing is good, but there seems to be little practical action or understanding of how it might be realised. Though former Premier Keneally seems to have believed she was signing off on a new zone-based fare system in 2011, it is demonstrably not the case. Base fares for bus, rail and ferry remain based on distance travelled on a single mode, not on zone or time.

Even though the multi-ride tickets have been rebranded as “my zone”, they are not zone-based at all, but rather remain nothing more than ride-based tickets! 

Spot the imposter: A Sydney MyZone ticket (2012), A London mag-stripe TravelCard (2009) and an Aahrus, Denmark (2012) zone ticket. The Sydney MyZone ticket is actually not a zone ticket at all, but rather a single trip multi-ride ticket based on 1-2 mile sections developed in the 1940s.

For confirmation of the marginalisation of integrated revenue collection and distribution, one need look no further than the discussion paper recently issued by the NSW Independent Pricing and Regulatory Tribunal (IPART) for pricing determination on Sydney Ferries.

Sydney Ferries is the first privately operated franchise within NSW Government controlled public transport network, and is to be the first system switched over to the new Opal smart-card late this year. Despite this, there is no mention of how revenue share will be determined from integrated multi-modal journeys under Opal. In fact, in the current cycle of price and price-structure determinations, the last before the implementation of Opal, IPART indicates that new integrated price structures for ferries are out of scope, a matter for later rail fare reviews (see s7.4 p38 here).

Further steps are required now to make Sydney’s public transport revenue collection integrated and sustainable before implementing Opal.

Example of how it’s been done before

Starting off with an international example of how integrated transport systems and pricing successfully evolve, I’ll come back to Sydney.

There are some great international examples of how to do things really well when it comes to public transport service and fare integration. London, until around 2003, was not such an example. Partially because it took a long time for London to “get it right”, and partially because of London’s familiarity to many Sydneysiders, it is actually an informative case study.

What we’ll see as we walk through the timeline, is that the technology, though an enabler, is only a small part of what brings an integrated ticket pricing framework to fruition.

Her Majesty the Queen tries out Cubic’s revolutionary ticket barriers at the 1969 opening of the Victoria Line in London
  • 1969: The start of modern revenue control in London. Cubic’s high performance pneumatically-powered ticket barriers were essential to getting large number of people into and out-of the new Victoria Line stations quickly. Coupled with electronic ticket machines and a computerised back-office, it became possible to track revenue and protect revenue as never before.
  • 1981: Greater London Council implemented zone-based ticketing, covering both Tube and Buses across two zones. Passengers could now seamlessly transfer between buses and tube trains on periodical tickets (weeklies, monthlies, etc)
  • 1983: TravelCard launched across five London zones. The bus/ tube zone pricing now had higher granularity and greater geographic scope.
  • 1985: Revenue sharing agreement concluded between British Rail and London Transport, enabling full multi-modal CapitalCard. Now the foundation for full multi-modal integrated ticketing was enabled for across bus, tube and train.
  • 1989: CapitalCard merged into TravelCard. 
  • 1998: Prestige Private Finance Initiative (PFI) initiated between the Government Transport for London (TfL) and TranSys consortium to take over revenue collection management and implement Oyster smart card
  • 2003: Oyster card rolled out, zone TravelCard system shifted onto Oyster and new “pay as you go” stored value overlay introduced for one-off trips. Crucially, the “pay as you go” stored value fare-cost does not exceed the equivalent daily TravelCard cost. The zone-based TravelCard model defines the upper-limit.
  • 2008: Tfl Purchased Tramtrack Croydon Ltd PFI (Croydon Tramlink) in part due to an increasing shortfall in revenue as a consequence of the 2006 inclusion of TCL in the TravelCard revenue sharing framework
  • 2008: Prestige PFI terminated seven years early, TfL assumed TranSys assets (brand, equipment etc) and established direct maintenance with Cubic
  • 2010: Oyster Pay As You Go valid on National Rail lines across greater London

Over this 40-year history, technology was an enabler, but only a small part of what delivered the seamless, integrated-pricing Oyster system we know today. There are two key developments here: pricing by geographic zone and complimentary revenue distribution agreements. I’ll just flesh these out a little more, and then I’ll come back to Sydney’s progress on the timeline.

Geographic Zones Critical

The establishment of geographic London’s zones in 1981 as a basis for pricing (as distinct from individual rides on individual buses etc) was the first big step. This meant pricing was no longer a function of how many times you got on-and-off the bus or tube, but rather a generalised approximation of usage of a geographic area and time period.

This is the fundamental enabler of flexibility in urban transportation that users have come to expect from their cars. In urban planner parlance, this step represented the removal of flag-fall “fare penalties” on multi-modal chained trips or broken journeys within the zones.

Just to give a specific example of the kind of difference this makes, it means that a passenger can take a break in their journey, say to pick up some groceries at a shop on Oxford Street (be it London or Sydney!), and not pay an additional fare. This does not cost the operator any more, and zone and time based ticketing means that it doesn’t cost the passenger any more either.

It is not broadly understood (and was ignored in Sydney’s previous attempts at a smart card system) that the zone system is the foundation of today’s Oyster card. The “electronic purse” or “Pay as you Go” provides trip-based fares for occasional usage, but this is only up to the envelope defined by the underlying zone TravelCard system.

Fare Zone map for the Zurich Verkehrsverbundes (ZVV) . Zurich, like Hamburg, was an early adopter of integrated multi-modal zone-based ticketing.

On an aside, though TfL are often cited as an example in Australia, the credit for this move towards zone fares and the broader movement to integrated transit planning and management does not go to London Transport or TfL. Credit goes to Hamburg: the Hamburger Hochbahn Aktiengesellschaft zone system implemented in 1963, which was incorporated into the Hamburger Verkehrsverbunes (HVV) in 1967.
The rationale for zone fares and integrated revenue distribution, as now exists in London, Melbourne, Brisbane, Perth, etc, can be found on pp 11-15 of this 1967 UITP paper I scanned.

Revenue Division Challenging

It took eight years to get London’s BR heavy rail system into the integrated TravelCard System for a very good reason: it’s tough getting the different operators with sometimes opposing interests to agree with one-another on revenue division. It took another seven years after the implementation of Oyster on TfL to extend “pay as you go” to the Network Rail operators (who have replaced the former state-run BR). Dividing revenue from a single multi-modal clearing house is complex and fraught with challenges.

Agreeing how operators are to be remunerated, in return for delivering what, also overlaps with performance incentives and penalties which are important parts of Government’s interaction with privately operated and/or financed operations including those delivered through a concession, a franchise agreement or PPP/ PFI. If existing or new services are to be delivered by the private sector, knowing exactly from where and why the cash comes in is essential. Every dollar of uncertainty is reflected as a dollar of increased operating cost.

The failure of the Tramtrack Croydon Ltd PFI is particularly illustrative of the complexity. Initially operating on its own independent non-integrated revenue collection framework, Transport for London (or more specifically the Mayor of London) sought to role TCL into the Oyster fare collection system, which necessitated adopting the TravelCard revenue distribution framework. Because there was a gap between what TCL thought it could have earned under its independent price structure and what it got from oyster users, TfL had to pay penalties to TCL.

This unsustainable position compelled TfL to buy out the TCL PFI, as the Mayor’s office explained:

“The current contract requires TfL to make compensation payments to Tramtrack Croydon Ltd for changes to the fares and ticketing policy introduced since 1996.
[In 2007], that payment was £4m, and the rate is increasing annually.
Taking control of Tramtrack Croydon Ltd means that TfL will no longer have to make those payments and will be able to concentrate on improving the network.”

Action required now

In comparative terms, Sydney is approximately where London was in the mid 80s: there are integrated multi-modal zone fares, but they are marginal and yet to be rolled out as a universal, underlying foundation for new technology. Unfortunately Sydney, as with the previous failed ERG contract, remains steadfastly obsessed with technology, rather than addressing fundamental economic, engineering and business challenges that underpin integrated ticketing and revenue sharing.

The current NSW Government came to power with a mandate both to increase private sector involvement in Sydney public transport operation, and to integrate public transport ticketing into a TfL Oyster style system.

Without fare-structure and revenue-source transparency, private franchisees and PFI-style operators are left at considerable revenue risk, of the kind that forced TfL’s purchase of the Croydon Tramlink PFI (CTL). This will invariably lead to forecasting conservatism and loss of economic benefit from private sector participation.

Without expansion of zone-based pricing principles there is no general pricing framework to enable “integrated ticketing” of the kind that enables multi-modal linked trips and broken journeys. Though London’s Oyster card is an enabler of an electronic purse, it is underpinned by a zone-based revenue sharing framework that took more than ten years to develop.

The present agenda of the NSW government pricing tribunal, IPART, responsible for setting fares and structure of fares, shows no progress whatsoever towards addressing either of these principles. Fast policy action is needed if value is to be derived from a $1bn investment in Opal.

UPDATE 27/8/2012

The Government agency responsible for public transport (including Opal), Transport for New South Wales, has this to say in their current submission to the Government's Independent Pricing and Regulatory Tribunal:

Opal CardThe Opal Card and electronic ticketing system will be rolled out on CityRail services during 2013-14. Opal will be a pay-as-you go system which will automatically deduct the correct fare from stored value on a customer’s Opal Card. The system is being designed so that passengers do not have to decide which ticket or tickets that they need to buy before they travel. Instead, they will be able to travel across the public transport network using one card and, regardless of whether they are using a bus, train or ferry – or where their journey starts and finishes – the Opal Card system will work out the fare for their trip combination.The Government will make further announcements about how the Opal Card will operate before the roll out commences in late 2012. 

This seem to confirm hardware role-out will indeed precede development of the mechanisms necessary to deliver integrated ticketing.

UPDATE 22/9/2012

The New South Wales Government authority which sets prices for transport, The Independent Pricing and Regulatory Tribunal (IPART), has recommended that Sydney Ferries be removed from integrated multi-modal fare system, currently known as "MyZone1". IPART says on page 4 of their fact sheet:

we recommend that the additional subsidy for ferry travel offered by MyMulti1 tickets be removed and that these tickets are no longer valid for travel on Sydney Ferries.

The methodology by which IPART ascertained or quantified this "additional subsidy" to which they refer is not clear. This is not to mention the loaded terminology of "subsidy" for multi modal journeys. I suspect these numbers are generated from a methodology similar to that of the former Total Value of Travel study or TVT used on the former TravelPass revenue sharing framework. This methodology is seriously flawed, as per my 2004 IPART submission (Section 2, p13). I'll be looking further into this over the coming weeks and will write another post when more information becomes available in a final determination.

The proposed removal of Sydney Ferries from intermodal penalty-free commuter fares, on the eve of implementation of the planned Opal smart card, is a dark irony indeed; and one in diametric contrast to the example of TfL's approach to Croydon Tramlink and integrated ticketing in London.


  1. Regarding your comments about London Tube/bus journeys, is that right? My reading of the rules is that a separate fare is payable for the bus (flat fare 1.35) and tube (zone based).

    1. Hi Simon the current arrangement is that buses are indeed on a flat fare, up to a daily cap limit. If you only use buses there is a special (zone independent) cap, but if you use the tube or trains, the corresponding TravelCard zone cap applies. If you have a travelcard (daily or otherwise) you have access to all buses irrespective of zone.
      Historically my understanding is that zones applied to London Buses as well but this was simplified before the role out of oyster, as acompromise.
      Other cities like Zurich and Hamburg (and even Sydney under the old TravelPass regime) apply the zones equally to all modes.

  2. Re: Ferries and myZone. I can see where IPART is coming from. The way the myMulti tickets were setup, it is cheaper to buy a myMulti ticket than it is to buy a Travel Ten myFerry ticket. This leads to the perverse scenario where it is never worthwhile buying a myFerry ticket unless you make only occasional trips, which is the problem that IPART is seeking to solve.

    A somewhat similar issue exists with the long distance bus routes from the city to Northwest Sydney, the Northern Beaches and Parramatta. Bus tickets are now capped at around $3.40.

    In both cases the solution would be to rebuild the fare structure from the ground up, and Opal provides the perfect opportunity to do so. Fares could be calculated point to point, regardless of what or how many modes of transport are used, or with a zonal system as currently exists for myMulti periodical tickets.

    Unfortunately, with regards to fares on ferries at least, IPART's band aid solution could potentially make things worse. But I can definitely see where they are coming from.

    1. Hi Bambul thanks for the comments, Agreed to the extent that there are some very unfortunate consequences of the merging of the previously separate "inner harbour 1" "inner harbour 2" and Manly periodicals, and Red and Green Travelpasses. As a starting point the earlier inner Sydney zones should be reintroduced, and Manly should be removed from the MyZone1 fare band. You rightly observe the current arrangement is ridiculous.

      However I totally disagree with IPART on two counts: 1. characterisation of ferry subsidies as upper-class welfare and 2. failure to recognise general principle of fare integration (which I'll come back to). Areas that are served by feries are in many cases areas that are also poorly served by transport infrastructure (be it roads or rail) otherwise. Good examples include the dropping of Bradfield's Eastern Suburbs (Rose Bay) Railway, and of the indefinitely postponed northern beaches/ spit bridge bypass tunnel. Multi-billion dollar projects in the current value of money, permanently alleviated by zero-dollar infrastructure cost of ferries, like the rose bay and manly services.

      These in turn free up finite capital for major works like the North West Rail Link. Operating subsidy is not "dead money" when viewed in the context of how it influences mode choice and infrastructure requirements of alternatives.
      IPART's economists work within very narrow terms of reference which ignore these kinds of effects.

      I also agree that it seems technologically plausible that point-to-point fares, with no flag fall component, should be workable. But the lack of such systems in global practice is a warning I think. There is no need to invent systems from scratch, there are great examples throughout Europe ready to copy, the HVV (Hamburg) and ZVV (Zurich) being my two favourites,

      On my 2nd objection to IPART's view of transport consumer economics, it is integrated ticketing that broadens the ferry patronage catchment beyond the wharf walking distance. Failure to enforce an integrated pricing regime- one where interchange between modes is not penalised- produces a self-fulfilling elitist, marginalised destiny for harbour transport, one where the economics only works for those in harbour-side walking distance to a wharf, rather than the many tens of thousands who were once efficiently connected by feeding trams and buses to interchanges at Manly, Balmain, Rose Bay etc.


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