Some thoughts on transport network pricing

On Saturday I participated in an Infrastructure Victoria session on transport network planning. It was described as a kind of speed-dating session – seven speakers doing quick 12 minute conversations with groups of 4-5 people.

They suggested kicking off with an introduction to your view on the topic, then seeing where the conversation takes you. After a couple of goes you pretty quickly get into a rhythm.

The thoughts below started as an approximation of my opening comments, but I’ve added a bit along the way:

Fare pricing can be an important tool to help ease congestion – both on the roads and on public transport.

Crowded train and platform at Caulfield during service delays

The fare system we have now is a hangover from the 1980s.

Before then, trains trams and buses had complicated, separate fares.

In the early 80s they had a shake-up – and introduced the three zones in Melbourne, one inside the other.

There have been tweaks and adjustments, but that’s basically what we still have today.

  • In 2004 they removed the Short Trip ticket from zone 1
  • In 2007 they got rid of zone 3; it merged with zone 2
  • In 2010 they removed the City Saver zone from Myki
  • Then in 2015 they made it so if you pay for zone 1, you’ve also paid for zone 2.

So we now basically have a flat fare system in Melbourne. If you want to travel two stops on the tram, it’s $4.40. If you want to travel from Werribee right across Melbourne to Pakenham, that’s also $4.40.

Given governments have an eye on cost recovery, this may mean upward pressure on that flat fare. It’s already risen at CPI plus 2.5% for four years running.

And for short trips this can discourage people from using public transport – they might see it as cheaper to drive.

There’s no peak/off-peak difference. If I travel on the train at 8am when it’s packed, it’s the same cost as at 11am when there’s plenty of space. (Of course, there has to also be a good frequent time-competitive service available at 11am. Off-peak service is very patchy around the network.)

“Peak” crowding is not confined to commuting hours. CBD trams were already crowded at lunchtime before the Free Tram Zone was introduced. This has considerably added to crowding.

Crowding on tram route 96 in Bourke Street

There is the Earlybird discount – free rides before 7:15am. This is bit of a blunt instrument – it reflects what Metcard was capable of when it was introduced last decade. A free ride in the morning, but the usual price going home later. So there’s no incentive to make your trip home in the afternoon at a time when it’s quiet. It also only applies to Metro trains. Catch a bus to the station? Then you pay. This can encourage people to drive to the station instead.

There is a discount of sorts after 6pm – you only pay one fare for unlimited travel until 3am. That’s good, but it’s also a reflection on the old ticket system – when paper tickets were around, there wasn’t enough space for a notch for every hour of the day!

2-hour Met ticket from 1991-92

So having spent a billion dollars on a complicated smartcard system, we have it charging a $4.40 flat fare for almost everybody.

But the Melbourne flat fare doesn’t apply outside zone 2. It jumps dramatically if you travel beyond Melbourne.

People coming in from Geelong to Melbourne pay $13.40 one way – if instead they drive through suburban Geelong to Lara and get on the train there, it’s $4.40. The fare system is providing a huge incentive for people to drive through Geelong.

Free station car parks are also an issue. Some of them get misused by non-public transport users. But apart from that, they cost tens of thousands of dollars per space – then they’re given away to whoever is lucky enough to show up early enough in the morning to get them – even if they have options to use a connecting bus, or walk or ride to the station. Those options need to improve, of course. (And maybe they could if all the money wasn’t spent on parking.)

So there’s plenty of scope to reform fares – Myki is capable of more zones, and off-peak discounts, and concessions for those who need them. This could be the way forward – but whatever the system, it’s important that the fares are affordable, logical, and equitable.

They could start with easy stuff like re-introducing the once-proposed weekly cap, which would encourage Monday to Friday users to also use the system at weekends (as well as removing some confusion and doubt for people trying to decide between Myki Money and Myki Pass).

King Street, lunchtime

Road pricing isn’t really my area, but it’s not hard to see how it’s similarly flawed. The only road pricing in Victoria is the toll roads. Again, it’s a hangover from past decades – tolls are to pay private toll companies that built Citylink and Eastlink.

This means it’s free to drive through the CBD, but it costs money to bypass the City and drive over the Bolte Bridge instead, which is a crazy outcome.

So the pricing on public transport and on roads is problematic.

Politicians are terrified of changes, because inevitably someone ends up being disadvantaged, but it’d be good to see them have the courage to introduce reforms to fix some of these problems.

Some people will always object to reform, but if the benefits can be quantified and explained, the broader community will take it on board.

Fares for short trips now double the cost of Sydney

As expected, public transport fares in Victoria go up from 1st January. This time it’s a CPI rise of 2.2% – thankfully not as high as the last four which were CPI+2.5% (budgeted by the Coalition in 2014, delivered by Labor).

This takes the standard zone 1 or 1+2 daily fare to $8.80, and the 2-hour fare to $4.40.

It’s worth noting that for short trips in zone 1, this is now precisely double the $2.20 Sydney tram or bus Opal fare for up to 3 kilometres.

The fare rules are a bit different – Sydney’s free transfers are generally limited to the same mode within 60 minutes, and the daily cap is much higher (except on Sundays).

(The short distance single zone Go Card fare in Brisbane is $3.25 peak, $2.60 off-peak. In Perth the Smartrider fare is $1.98 for two “sections”, or $2.79 for one zone.)

It turns out that the fares in Sydney in most cases are lower than Melbourne’s standard $4.40.

  • Sydney tram/bus: $2.20 for up to 3km, half the Melbourne zone 1 cost, and 26% cheaper than Melbourne zone 2 at $3
  • Sydney tram/bus: $3.66 for 3-8km, still 17% cheaper than Melbourne zone 1, though more expensive than Melbourne zone 2
  • Sydney train: $3.54 peak/$2.47 off-peak for up to 10km
  • Sydney train: $3.08 off-peak for trips of 10-20km. (The peak fare is identical to Melbourne, at $4.40)
  • Even train trips of 20-35km off-peak are cheaper in Sydney, at $3.53

Melbourne’s fares (within zones 1 and 2) are generally cheaper for longer trips: over 8km on buses (Sydney trams don’t even go that far!) or over 20km on trains in peak, or over 35km off-peak.

And the transfer rules and daily cap mean Melbourne is cheaper for roaming around all day (for instance, tourists) – but this is not what most daily commuters do.

It’s those short trips that really sting, thanks to the nearly flat fare structure. You wonder how many people choose the car by default for short inner-city trips because of it, especially when travelling in a group.

Also spare a thought for V/Line passengers. Anomalies in the zone system mean that, for instance, a passenger from Lara to Melbourne pays $4.40, but hopping on the train a few minutes earlier at Geelong will cost a whopping $13.40 in peak, $9.38 off-peak.

How much have fares gone up over time?

Looking at the basic 2-hour zone 1 adult fare, it’s gone up quite a bit over time – from $1.60 in 1990 to $4.40 in 2019. If it had followed the rate of inflation, it’d now be about $3.57.

Melbourne PT fares since 1990

See the data. I am currently missing the prices for 1993. Can anybody help?

People travelling long trips (the old zone 1-2-3) have benefited from the removal of zone 3 in 2007, and the fare capping added in 2015. In 1990 the 2-hour fare was $3.80, from January it’ll be $4.40. If that had followed the rate of inflation, it’d be about $8.49.

There was a slight drop for all fares in 2013 (actually in the last days of 2012) when single use Metcards were phased out, forcing everyone onto the bulk price Myki fares.

Solutions are hard

Solutions are hard because so often the politicians reject any policy change where anybody is disadvantaged.

The flat fare has pros and cons. The only logical alternatives are more zones, or point-to-point pricing. The latter is difficult given the older Myki readers still common around the system on trams and buses are so unreliable, and Myki zone detection is so hopeless.

It appears for instance that buses have two GPS systems. One is able to, usually, tell the real-time apps how far away the bus is to a minute’s accuracy; the other is often unable to figure out which of two gigantic zones it’s in.

Introducing off-peak fares is another option. V/Line gives a 30% discount for off-peak. Perhaps this should be looked at for metropolitan trips too. The same discount would bring that $4.40 fare down to $3.08, matching Sydney on more trips. This would help improve demand at off-peak times, and would shift some trips out of peak.

There is a kind of off-peak pricing: between 6pm and 3am you’ll only pay one 2-hour fare – this was inherited from Metcard, and inherited from the 1980s era paper tickets before that! There is also the weekend/public holiday $6.30 cap.

And another upgrade that would be of benefit: re-instating the weekly and monthly caps once planned for Myki would help stop Myki Money users paying too much, and remove the confusion of having to choose between Money and Pass to get the best deal.

We need better public transport, not free public transport

From time to time the topic of free public transport comes up, most recently because of changes in Estonia.

I think it’s a distraction from far more important issues.

I just wanted to address a few points about it. Apologies for the rambling.

Would it be a good idea in Melbourne and/or Victoria?

I don’t think so.

The first point is the cost: the PTV Annual Report indicates around $800 million is collected in fare revenue every year.

Even allowing for the running costs of the ticket system and fare enforcement, hundreds of millions of dollars would have to be found to cover that.

That’s money that wouldn’t be available for upgrades, which are a far higher priority, because the main reason people don’t use public transport isn’t the fares, it’s the service quality.

If the system goes free, assuming that at least some of the shortfall is via higher taxes, you’d have a lot of people paying more for a service they can’t practicably use, which brings me to the next point.

Free Tram Zone

Would free PT get more people on board?

Melbourne’s existing free public transport is an indicator of what would happen if the whole system was free.

The usable, frequent services would be swamped with people. They’d need upgrades to keep up with growth — upgrades which would be far more difficult if revenue isn’t growing with patronage growth. Example: the Free Tram Zone; free New Years Eve trains.

You’d also lose any peak/off-peak pricing mechanism that can moderate peak demand and help encourage off-peak travel. This is used heavily on V/Line (30% discount outside peak, and for all trips that don’t go through Zone 1), and also on Metro (100% discount before 7:15am on weekdays), though arguably this could be used more extensively.

The infrequent, less usable services — such as suburban buses — still wouldn’t get a lot of use. Example: Seniors and Myki Pass-holders on weekends. Some use the buses, but plenty would rather drive, even if they can use public transport for free (or for no extra cost with their weekday ticket).

And that’s a problem if one of the prime aims is to increase public transport usage. Those middle and outer suburban areas where most people travel day to day is where public transport is failing to win market share, thus driving dominates. It would continue to be the case.

If a suburban bus is once an hour (and plenty are), then it’s not suddenly a compelling service if it becomes free. They need more services, not free services.

Myki, Smartrider, Go card, Opal public transport smartcards

It costs more to collect fares than the revenue

No, completely wrong.

Myki was an expensive system to build; around $1.5 billion including ten years running costs = $150 million per year.

It’s still expensive. The recently signed operations contract is $700 million for seven years = $100 million per year.

(Sydney’s Opal card system is also expensive, at $1.2 billion for 15 years. That’s a bit cheaper, but these systems can be very expensive when they involve coverage of a large network, requiring lots of hardware — whether or not it’s established technology or being built afresh.)

So yes, ticket systems cost a lot of money. But even if you supposed that on top of the $100-$150 million per year for the ticket system, ticket inspections were costing another $50 million per year (and assuming those staff aren’t needed anyway for other purposes such as safety), that’s still around $600 million per year lost if fares aren’t collected.

Or to put it another way: if Myki hadn’t been built, instead the system could have been fare-free… but only for about two years.

There would be some benefit from going fare-free: better passenger flows in and around stations, as fencing and gates are removed, and on and off trams and buses. But at a huge cost, and these issues can be ameliorated in other ways.

New Myki signage on trams, October 2015

But Estonia has free public transport!

No it doesn’t. If you look beyond the headlines, you’ll discover that recent changes have made regional buses in Estonia free.

Free journeys will be available for all Estonians using county buses, but wonโ€™t be available on trains (although enhanced subsidies will make tickets on the state-owned rail network cheaper). And in Estonian cities outside of Tallinn, all passengers will still have to pay to use all modes of public transit, including buses. — Huffington Post

It’s apparently not even all county regional buses:

To date, not all Estoniaโ€™s 15 counties have taken up the offer, though the free-fare zone is set to cover large areas of the country. — European Sting

So it excludes rail services, and city (suburban) buses — which would account for the majority of passengers.

Tallin, the capital of Estonia (population 610,000) does have free buses, trolley-buses, trams, ferries and trains within the city limits, but only for residents.

People still use a smartcard, but the cards issued to local residents give them free rides. Which means the system still incurs the cost of running the ticketing system. In fact Wikipedia notes that services are stopped during ticket checks (though this practice may not still be current) — so it’s really not a fare free system at all.

Problems aside, was Tallinn’s free public transport a success? That depends on how you define success:

a 2016 analysis of the Tallinn scheme found it didn’t really encourage many people to stop driving.

In 2014, a year into the experiment, the use of public transport had increased by 14%. However, car use only declined by 5%.

In fact, it was walkers who hopped on buses, as the number of trips made on foot dropped by a staggering 40%.

And while the share of car use marginally decreased, the average distance travelled by car actually went up. — European Sting

Cardiff Bay: Pierhead building and Millennium Centre

Wales has free public transport!

No it doesn’t. Wales has free bus services on weekends only… but only for 9 bus regional routes run by one operator, the Welsh government-owned Travel Cymru. It appears to be a measure designed to stimulate tourism.

The scheme excludes rail services, and all other bus services — including bus services within cities.

Hasselt, Belgium has free public transport!

No it doesn’t. They had free buses (not other modes) from 1997 until 2013 when they scrapped the scheme because of cost — in part the costs of running services to cater for higher patronage. The buses are still free for those under 19.

Hasselt isn’t a big city, in any case – it has a population of only about 71,000 people. That means it’s not a good example to point to when arguing for a large city to go fare free.

Paris…

The (socialist) Mayor of Paris has proposed it, but the idea has been opposed by others.

As far as I can make out, as of 2018, there is no major city in the world (of say more than a million people) where all public transport is free.

But the roads are free

Toll roads are an obvious exception, but even “free” roads aren’t actually free. They are heavily subsidised, but motorists still have to pay fuel tax at the pump, and registration and licencing fees.

Public transport is subsidised too of course. This is no reason to cut out fare collection and make the subsidy even bigger.

Crowded train, Richmond

Priorities

Chris Hale recently wrote in The Age that: “a public dollar frittered on fare discounting is invariably a waste, whereas that same dollar invested in better off-peak service gets great results.”

Fares certainly need to be affordable. Part of that is addressed ensuring there are concessions to those who need them.

But in any big city, even those hailed as having great public transport, service and infrastructure improvements are needed.

In fact the best public transport cities tend to get into a growth spiral of patronage – they need ongoing investment. It costs, but it’s good for their city.

All of which means that in any city, with even a moderately successful public transport network, given the huge amount of money raised from fares, it’s very difficult to envisage a time when making the service free would be a priority, or even desirable.

Melbourne’s fares rise above CPI again

As expected, fare rises have been announced to take place on January 1st.

It’s a rise of 4.7% — which is CPI+2.5%.

(At least, 4.7% is the claim. Some fares, such as a Zone 1 two-hour fare, are rising by more: $4.10 to $4.30 is almost 4.9%, thanks to the price being rounded to the nearest 10 cents… which makes no sense, because you can’t directly buy these fares with cash.)

Just as this was emerging on Saturday, the Caulfield group of lines suffered major unplanned disruptions. Channel 9 was out for the fare rise story, but captured the train chaos as well:

Here’s the official PTV price list (which oddly doesn’t list the Weekend/Public Holiday Daily Cap, believed to still be $6 adult/$3 concession, or the Seniors Weekday Cap, which in 2017 is $4.10).

Here’s the State Government press release (which tries to temper the anger by announcing minor reforms such as free rides for primary school groups at off-peak times).

So how much have fares gone up over the years?

I thought I’d do a quick graph of the last 20 years.

Melbourne fares 1997-2018

Notable:

  • 1998 and 2010 saw no rise, as prices were frozen those years
  • 2007: Zone 3 is merged with zone 2, resulting in 3-zone trips dropping in price
  • 2013: single fares (on Metcard) were abolished, switching everyone to the slightly cheaper Myki fares, which were equivalent to 10×2 hour discounted fares under Myki
  • 2015: Zone 1 and 2 fares were capped at zone 1 rates, resulting in 2-zone trips dropping in price to the nearly-flat fares we have now

What if we look at the rises in those fares, and compare them with CPI?

Melbourne fare rises since 1997

  • 2004 saw a whopping 9.8% increase in fares, about three times CPI, the same year that Short Trip tickets were abolished, resulting in a huge jump for non-CBD short trips
  • 2012 and 2013 saw rises of CPI+5%, budgeted by Labor, implemented by the Coalition
  • 2015 to 2018 saw rises of CPI+2.5%, budgeted by the Coalition, implemented by Labor. What a team.

As you can see, for trips formerly covering three zones, these are still cheaper (just) than they were before 1997. Two zone trips are still relatively cheap, rising at well below CPI.

Zone one trips were tracking a bit above CPI until 2012, but when Metcard was abolished the switch to bulk rates brought it back down pretty much in line with CPI since 1997. Rises since have it well above.

There are still Ways to save. Options include Earlybird, and Myki Pass if travelling most/all days of the week. In fact you can buy a Myki Pass before January 1st and pay the pre-rise price, then use it later.

Additional fare revenue adds up to a lot of money, which can go into upgrades — we all understand that.

But the fare changes to a largely flat fare have resulted in some people benefitting enormously with fairly cheap fares for long trips, at the expense of others, who are paying a lot for short trips.

Upgrades to infrastructure and services are important to get more people using public transport. But affordable fares are also important — with repeated above CPI rises, for many people, this is going backwards.

With this fourth CPI+2.5% increase, Labor implemented the Coalition’s budgeted rises. They can argue that if they hadn’t, they’d have had to find the money elsewhere. Question is: what will happen next?

Is it time to buy a Yearly Myki fare?

Generally every January, public transport fares in Victoria go up.

This year it’s expected to be a 4.3% rise — this is CPI of 1.8% 2.8% (for the year to September), plus a 2.5% 1.5% rise that was first announced by the Coalition in December 2013, to be implemented in January 2015-2018, and dutifully followed by Labor each year.

(Did the Coalition plan that rise to cover the Free Tram Zone and Zone 1+2 capping? I’m betting yes; they announced the zone changes as an election policy just three months later in March 2014, which was quickly matched by Labor. I wonder how long it’ll take for zone 1+2 fares to reach their previous levels?)

Just before the price rise is a good time to decide if buying a Yearly Pass is good value.

These are available for any combination of Myki zones, provide a discount (365 days for the price of a 325 day Pass) — and because you pay up-front, you’ll be getting travel during 2018 for the 2017 price.

Cheaper than buying a Yearly Pass at the retail price is buying it through Commuter Club. CC is a discount scheme offered by a number of large corporate employers, particularly government departments and universities.

The biggest seller of CC tickets is the PTUA. PTUA membership plus the cost of the ticket is still a saving compared to the full price — $84 cheaper at 2017 prices. And by being a PTUA member, you’re supporting the organisation and its campaigns.

PTUA CC orders at the 2017 price will close on 30th November. This is imposed by PTV on all CC re-sellers, though some may have slightly different close dates.

  • PTUA CC tickets are paid in advance. Some employers who offer CC will do it by regular salary deductions, which could be a better option.
  • Unfortunately CC tickets are only available for Zones 1 and 2. (That said, if you’re a V/Line user living further afield, you could probably buy a Zone 1+2 CC ticket and load Myki Money onto it for your travel further out.)

New Myki signage on trams, October 2015

So, how much can you save? It varies, according to how much you usually travel. Here’s a couple of ways of working it out.

Cost in days – this compares the cost of 365 days on a Pass, with the cost if you’re paying for individual days

What this means is that if you buy a PTUA Commuter Club Yearly for $1515, you’re getting 365 days of travel for the same cost of 184 days of Myki Money, or 308 days of Myki Pass days (assuming you buy Passes of between 28 and 325 days).

In both cases, the cost in days goes down in 2018 if you’ve paid in advance, because the prices go up.

Another way of working it out is Cost Per Day (inspired by this Reddit post).

So a PTUA CC Yearly will cost you $4.15 per day if you travel every single day, or $5.83 per day if you travel on weekdays only — compared to a Myki Money price of $8.20 (2017) or $8.55 (2018).

A secondary saving might be if, because you’ve prepaid your travel, you end up using public transport more often instead of driving.

Flagstaff: extra standalone Myki readers to take gate overflow

If you think this all sounds more complicated than it needs to be, you’re right. Myki was originally designed with automatic weekly and monthly capping which would have made it a bit easier to pay-as-you-go on Myki Money but still get the discounted Pass rate.

Perhaps one day it’ll be re-instated, but until then, for regular users it’s worth doing a little research to find the cheapest option.