With the election upon us, some candidates have decided that transit Smart Cards are an issue they can use to say “I’m the best candidate” by hitching their star to Ontario’s Presto card program.

The Star reports that the TTC will proceed with a tender for an Open Payment system later this year with the intent of a 2011 rollout.  Mayoral hopeful Rocco Rossi has his own scheme called “Presto Plus”.  Can the TTC actually commit to a new system with the current regime still in office?  Rossi’s campaign confirms that he would cancel the TTC’s scheme if he were to become mayor.

Metrolinx would love to see the TTC sign on to Presto, but many questions remain about just what Presto can do for a truly integrated transit system.

Smart Cards are yet another example of the way that transit technology wars in the GTA get in the way of solving fundamental transit problems.  The technology choice becomes more important than the service it provides.  Here are a few questions anyone with “the answer” should consider.

What Will It Cost and Who Will Pay for the Technology?

Estimates of the Presto implementation for the TTC have ranged well over $400-million, and we don’t have a reliable figure for comparative purposes.  The scheme was originally expected to come in at about a third of that price.  We need a credible implementation cost with no hidden add-ons or scope creep.

The cost estimate has grown over time:

• November 2000 Fare Collection Study:  $140-million
• March 2004 Canada Strategic Infrastructure Funding announced:  $140-million shared between Ottawa, Queen’s Park and Toronto
• June 2007 Business Case Report:  $260-million (2006$) [Full report]
• 2010 Capital Budget:  $416-million plus costs related to Transit City and the two YUS subway extensions totalling $489-million

It is unclear how long the CSIF money will remain on the table, or if it was ever “real” funding.

Queen’s Park wants to pay 1/3 of the cost.  Bully for them.  The last time I looked, Queen’s Park hasn’t got two pennies to rub together and hopes that advisory panels of businessmen, civic luminaries and activists will carry the can for hard decisions on transit funding.  Who will pay the other 2/3?  Depending on the total cost, that’s a lot of money to spend on fare collection technology.

Over at the TTC, advocates of Open Payment systems claim that the implementation will be paid for by the banking system.  I would like to see that in writing, and whether there’s an upper limit to what the banks will invest in this rollout.  Of course, we won’t know this until after a Request For Proposals has made its way through the mill, and the details may still be considered as confidential commercial information.

What Can The Technology Do?

Presto is a stored value system, in the sense that you load money onto your card’s account, and as you travel around the network, Presto deducts the appropriate fare.  Open payment systems track your riding, and bundle this together in a bill periodically charging you (say via credit card or bank withdrawal) for usage.  That leaves a nice “float” in Presto’s hands of all the unspent fares, similar to the value of unused tickets and tokens for which the TTC has already been paid.

Presto has an automatic reload feature, but this presumes that you have an account that can be billed for that reload.  If reloads using cash are to be supported, then the whole infrastructure of add-value machines and cash handling must be added to implementation and operating costs.

Presto operates by deducting the value of “one fare” (whatever that may be locally) from the stored value of the card.  In the case of GO trips, it also calculates the fare appropriate to the distance travelled, and riders can have a “default trip” programmed on their account.  That default allows riders to avoid having to “tap out” at their destination.  It’s a nice idea, but it shows how much Presto is oriented to people making standard commutes, rather than a more complex pattern of travel through the network.

Open Payment systems work on the premise that people already have something that they routinely use, or can use, to identify themselves.  The obvious examples are credit and debit cards which can interact with contactless readers using RFID technology (Radio Frequency Identification).  However, this is also available using cell phones.  Regardless of the medium, a customer registers with the system to permit transit fares to be billed based on their identification.

Fare Policy is Not a Technology

Far more fundamentally, the question we should ask is this:  what types of fare arrangements would each system offer?

A vital question for proponents of either scheme is the menu of fare options that their systems can support.  Already, we know from the FAQ on Metrolinx site that there are some constraints in the fare combinations that Presto can handle.  Are there more?

Presto does not address the fundamental issue of fare policy.  All it does is to duplicate the existing fare systems.  Is this a system constraint, or does the capability of alternate fare models exist waiting only for policy direction to be implemented?

Everyone who crosses the 905/416 boundary complains about multiple fares.  Indeed, one big attraction of subway expansion north of Steeles Avenue is the disappearance of the fare boundary.  This is not a technology issue, it is a policy issue.  How much should we charge people to ride, and should crossing an invisible line incur a completely new fare?

If we give cross-border riders a discount, what will make up the difference in total revenue?  If we change to a zone system or a time based fare, what are the implications for riders elsewhere in the network?

If we attempt to duplicate the TTC’s transfer regulations, the system must track passengers as they move from route to route, and determine when a “new” trip begins.  That’s a lot of effort and infrastructure we could replace simply by moving to a time based fare.

Why is GO Transit a special fare zone?  How does this fit into The Big Move where GO’s rail lines are treated as if they were a regional rapid transit network?  How far out will we push the subway system so that riders can avoid a higher GO fare?

As part of its review of the Open Payment concept, the TTC has asked its staff to report on a variety of fare options so that we can have an informed debate on a future fare structure.  I have yet to hear a word on the issue from Metrolinx even though this is central to fare policy.

These questions are independent of whichever technology is chosen, but they must be answered.  Some aspects of the system implementation cost are directly linked to the fare structure.  A scheme for fare-by-distance, for example, will require that riders “tap out”.  This changes the passenger flow on vehicles and in stations.  Indeed, the “default trip” scheme on Presto was implemented specifically to avoid “tapping out” for the most common trips.

The Fine Print

The Presto system depends on back-end services provided to Metrolinx by Accenture who, as I understand things, bases their fees on transaction counts.  Without the TTC on the system, the potential fees are much lower, and the business model falls apart.

According to the 2007 TTC report, Queen’s Park has already paid $250-million to Accenture for the development of a GTA farecard system, not including any implementation on the TTC, and that contract goes back nearly a decade.  Is there a contractual arrangement requiring Queen’s Park to make up a minimum payment to operate Presto?  How much have we already invested in that system?  Will this be competitive with an Open Payment system?  Is Queen’s Park locked into a high-cost, proprietary technology?

Beyond Fares

If the transit smart card’s use extends to other services, this moves into an area where the banking industry is already well established.

An important difference between Presto and Open Payments is that the latter does not require reinvention of the banking system.  Banks already exist, and they know how to handle payments through a wide variety of outlets.  If Presto is to become a payment standard, then every store, every agency, must support Presto in addition to the standard bank payment systems, or alternately Presto must adhere to payment industry standards.

This is a case of the tail wagging the dog.

A related issue is “the unbanked”, those who operate only with cash on a day-to-day basis.  The banking industry views these people as a large untapped market.  Moving them to a smart card lifestyle is challenging, but it should be solved by the banking industry as a whole, not as a special function of the transit system.

Where Do We Go From Here?

It’s easy for mayoral candidates and provincial Pooh-Bahs to slag the TTC for its foot-dragging on smart card implementation.  [Yes, I know, “Pooh-Bah” almost by definition cannot be made plural.]  However, the question of “who will pay” has never really been answered, and on that basis the TTC has demurred at each opportunity.

Now with the experience of other systems, notably New York City, in moving to Open Payment technology, the TTC is starting to budge, encouraged by the possibility that they won’t have to pay for or operate a goodly chunk of the system.  I hope that we will see a reworked “business case” soon to substantiate this claim.

Our new streetcars, due to appear in only a few years, will force the TTC to shift away from pay-as-you-enter fare collection.  These cars will load at all doors, and passengers will generally not use a farebox or transfers.  This sets the TTC on a path to a complete revolution in its fare collection, and this will involve some flavour of smart card regardless of which technology is chosen.

Meanwhile, Queen’s Park has insisted that Presto be implemented on the Transit City lines.  The first of these, Sheppard, won’t be in operation until after new LFLRVs hit the city streets, and we will see which fare technology is actually implemented on Sheppard and other Transit City routes.

The TTC and Metrolinx must sort out a viable, common fare collection scheme, but more importantly the entire region must sort out an integrated fare policy.  This brings us directly to the question of operating subsidies from local governments and Queen’s Park, an issue nobody wants to touch.

Battling it out with razor-edged smart cards at dawn is so much simpler, but so much less productive.