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How would you like to price an unproven software based system for service from 1 January 2009
Bidding for franchises is all about accepting, managing and pricing risk. In the case of Greater Western, for example, bidders had to take a punt on the fuel economy of re-engined IC125 power cars. Did you choose the frugal, but relatively unproven, in IC125 service, MTU, or play safe with the proven, but thirstier MAN-B&W?
Now, DfT Rail has introduced risk which is about unquantifiable as it gets. Tucked away in the Stakeholder document for the new South Western franchise is the requirement ‘to price the introduction of ITSO-compliant ticketing throughout the franchise area from January 2009, with an expectation that ITSO compliant ticketing products will be available for use in London zones 1-6 from that date’.
ITSO, which stands for Integrated Transport Smartcard Organisation, is the Bristol Brabazon, or R101 for older readers, of smart card ticketing. That is to say it is the creation of civil servants.
In contrast, the Oyster Smartcard was specified by London Transport, but implemented by a private sector consortium. At the last count there were around three million Oyster cards in use.
Naturally, ITSO is much more ambitious than Oyster. Its aim is to provide a common smartcard for use by all transport operators throughout the UK and, particularly, within and between the Passenger Transport Executives.
Currently, there are three ITSO schemes, for Scotland, Cheshire and Merseytravel. The two English authorities have systems installed but are waiting for the security keys for which Royal Bank of Scotland are the provider. Being on the spot, Scotland has got the keys from RBS, but the ITSO system is only part complete.
Were I to go into detail about ITSO security this page would explode in a blizzard of acronyms. We might try that another time, but for the moment all that matters is that ITSO said at the end of February that it was still on course to deliver live ITSO operations ‘within the next few months’.
Now, back to the South Western franchise. There is no better way to illustrate the challenge than to quote the Stakeholder document.
‘Bidders will therefore need to provide an ITSO compliant ticketing system comprising ticketing issuing equipment, readers/validators and appropriate gating throughout the franchise, including within the London (zones 1-6) area, and any ITSO back-office functionality they require to enable use of the sophistation (sic) afforded by smart ticketing as appropriate. This will also require negotiations with other train operators through ATOC and with Rail Settlement Plan.
The franchise specification requires bidders to price acceptance of Oyster Pay as You Go products (as well as Travelcards, which are already accepted by London TOCs) in zones 1 to 6 once the Waterloo station gateline is complete and operational (hence from January 2009, or potentially earlier). This will require all SW stations within the London (zones 1-6) area to be fitted with equipment enabling Oyster acceptance, at gating levels deemed appropriate by the bidder, at the operator’s expense. Bidders can retail Oyster tickets for use within London zones 1-6 at their own discretion.
The Department will work with TfL to modify the existing Oyster estate to accept ticketing products meeting the ITSO specification as well as existing Oyster ticketing products’.
Now there are two parts to this requirement – the acceptance of Oyster smartcards at South Western stations within the London Zones and the provision of an ITSO compliant ticketing system, ‘throughout the franchise’.
In the case of Oyster at London Zone stations, bidders will become embroiled in an on-going political fracas centred on the Mayor of London’s desire to control national rail services around the city. Oyster has become a symbol of this aspiration.
Back in 2001 and 2002, in the run-up to Oyster, going live, TranSys, the contractor for the system, offered to provide free Oyster retail terminals at all rail stations in Greater London. Train operators refused this offer.
But, by the time of Oyster went live in June 2003, TfL had provided validators at 18 gated rail stations and 2,166 hand-held ticket checking devices. TfL also paid for smart card readers at 35 gated stations in London operated by National Rail and serving only National Rail customers.
Despite this, the TOCs decided not to accept Oyster Pay As You Go for trips to or from these stations. Subsequently, says TfL, it has provided a further 2,766 hand-held devices, plus station surveying services claimed to be worth £750,000 and ‘hundreds of hours of free consulting and project management service to train operators’.
In late 2004, TfL tried again with a new package deal. It would manage the installation of validators to allow Oyster to be accepted at all rail stations in Greater London stations by the end of 2006. TfL would also finance this £25 million investment and accept repayment over five years. This offer, too, was refused
Enter the DfT. Last summer officials from the Department brought the TOCs and TfL together in an attempt to develop a business case for smart card ticketing at National Rail stations within the TfL Zones. TfL is scathing on the outcome.
It claims that a combination of ‘ very conservative’ benefit assumptions and the inclusion of ‘long standing revenue control problems’, resulted in the TOCs arriving at a cost for smartcard implementation of £60 million with a 20 year payback period.
Here we have a classic non-meeting of minds. The TOCs think they would be doing TfL a favour by installing Oyster and, since the cost is not covered by their franchise agreements, expect TfL to pay.
TfL think they would be doing the TOCs a favour by given them access to a proven smart card-based system. Waxing strong, TfL says that even though train operators have taken little or no action to tackle fare evasion or provide customers with up-to-date ticketing systems, they hope to pay nothing for systems that will bestow significant financial rewards.
So, that’s the first minefield the bidders for SW have to traverse.
And note that DfT Rail says that it is up to the bidders to decide whether they sell, rather than accept, Oyster products. Sorry, a bit of smartcardspeak crept in there. A ‘product’ is what normal people call a ticket, such as a single journey or a travel card.
Having sorted out Ken and his Oyster myrmidons, bidders face the real task, getting an ITSO compliant ticketing system on line and running in 32 months’ time – eight months of which are taken up winning the franchise. Achievement of this is less likely that the arrival of little two-tone green men from planet Deltic.
When DfT Rail says that this will ‘also require negotiations with other train operators through ATOC and with Rail Settlement Plan’, the civil servants are surely laughing up their elegantly tailored sleeves. Or they have not thought through the ramifications.
For a start, according to Informed Sources the SW announcement came as a surprise to ITSO. ATOC’s record on ITSO and Oyster is to keep a watching brief rather than take action.
Whoever wins SW might be able to get a closed ITSO system running, with smartcards talking to gates and gates talking to the central processor. And, don’t forget that ITSO supplies only the components and security keys, the operator has to provide the commercial software to tie it all together.
But how do you reconcile such an ‘ITSO island’ with the requirements of RSP and the technicalities of revenue allocation, through ORCATS, to other train operators who’s services penetrate the island?
ITSO purists argue that, come the revolution, ORCATS will be surplus to requirement because every stage of every journey will be allocated to an operator. But back in the real world, the successful bidder will have to cope with a passenger in Portsmouth using his ITSO smartcard for a journey to Peterborough. It works fine until he comes out of the tube at Euston and gets onto a non ITSO GNER service.
Well, that’s a slight exaggeration. Whereas a conductor can scan a paper ticket in less than a second, he has to put the smartcard into a reader and interrogate it. But because ITSO is essentially about buses and concession passes, it has no journey log. So all the conductor will know is that a journey is in progress.
I leave readers to ponder what this might mean for revenue allocation. The odd thing is that introducing the Stakeholder document Transport Secretary Alistair Darling chose to highlight the smart card requirement.
I suspect he sees it as a way of manipulating peak hour travel to avoid spending on concrete and steel to provide permanent extra capacity. Meanwhile I must persuade the editor to find space for an article on how ITSO works.