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Case 6- Automated Fare Collection.Pdf Public-Private Partnerships Case Study #6 Automatic Fare Collection System (AFCS): The Case of Manila By Mathieu Verougstraete and Ed MacDonagh (February 2016) This case study examines how governments may benefit from involving the private sector in integrated ticketing services for urban transport systems and how Public- Private Partnership (PPP) structure can be used to introduce modern technology BACKGROUND ADVANTAGES OF THE SYSTEM Contactless smartcards, first implemented In Manila, the smartcard technology brings in the late 1990s in Hong Kong and Seoul, now important benefits to the more than 1 are increasingly favoured for urban transport million daily passengers who use the light rail fare collection systems.1 Typically the size of lines, to the authorities operating these lines, a credit card, smartcards hold a microchip as well as to the wider public.3 which stores and transmits data through radio frequency identification (RFID), allowing the Benefits for the government / operator smartcard to communicate with a device (within 10 centimetres) without physical Efficient fare collection: contact. Smartcards are also able to store Traditionally, the cost of collecting cash from enough information to process monetary multiple fare-collection points in a city has transactions and profile a card holder’s details been considerable. Such a system requires for security purposes. With these systems, security, and a lot of manpower is expended users no longer need coins, tokens or paper counting coins and reconciling trips with tickets. the amount collected.4 Smartcards can reduce these expenses while allowing ticket Recognizing the benefits of these smartcards, inspectors to spend more time in targeting public authorities in the Philippines decided areas with higher incidence of illegal or irregular card use.5 Accuracy of revenue to introduce this technology for the three ESCAP supports govern- Urban Rail Transit Systems in Manila: namely collection is also greatly improved, as with ments in Asia-Pacific in the Light Rail Transit Line No. 1 (LRT 1), the automatic fare collection systems, no money implementing measures Light Rail Transit Line No. 2 (LRT 2), and the needs to be counted, and inconsistencies are to efficiently involve Mass Rail Transit Line No. 3 (MRT 3). eradicated as there is an accurate record of the private sector in every transaction. infrastructure develop- All three lines (including 44 stations) have ment. This case study been utilizing magnetic stripe card - fare Cases of fraud can also be greatly reduced – is part of this effort and collection technology. However, this system a UK Department for Transport study shows promotes exchange of experience among the that since the introduction of the Oyster is currently at the end of its usability. Such countries of the region cards are more fragile than smartcards, Card (i.e. the smartcard system used on easily damaged and no longer readable if public transport in London), the percentage For further information scratched or bent. Furthermore, the memory of irregular travel (journeys made with consult our website capacity of these cards is significantly lower either no ticket or the wrong ticket) fell by or contact than smartcards. This not only limits the approximately 2.5% to 1.5% of total journeys Transport Division made. It was estimated that this reduction in complexity and range of ticket types than can United Nations ESCAP be ascribed to the card, but also means that fraud represented cost savings of up to £40m recording the identity of the card holder is not per year.6 Telephone: usually practicable.2 (66) 2-288-1371 Email: [email protected] More informed transport planning: Benefits for the passenger AFCS data can Typically, the data used to inform transport User friendly/integrated ticketing system: help governments policy and the planning of service provision has been gathered from sources such as Smartcards are, first and foremost, simple to understand use, allowing passengers seamless transfers passenger travel annual travel surveys, which are costly and inevitably provide only a small sample of all from one line (or mode of transport) to demands, providing journeys undertaken in the system.7 AFCS another, which in turn, can also allow for enhanced planning data can supersede traditional manual greater flexibility in a passenger’s travel & optimum asset surveys because its collection at the time of plans. A single multi-purpose card can utilization transaction incurs essentially no marginal also encourage more people to use public cost to the transport agency. AFCS data also transport as well as facilitate multimodal represents a complete sample of journeys travel behaviour that is encouraged by made by passengers using smartcards. operators and transport planners. Journeys For these reasons, AFCS data is hugely no longer need to be pre-scheduled and valuable and can support governments in tickets bought in advance. ‘Pay as you go’ understanding passenger travel demands, (PAYG) features also ensure that passengers thus allowing for better operations and get exactly what they pay for, as the card is planning and for optimum asset utilization.8 swiped at the beginning and end of every journey. Enhanced demand management: Governments primarily aim to promote public Reduced journey time: transport usage by investing in the supply A key advantage of smartcards for passengers of new infrastructure and rolling stock. is shorter journey times (through faster Implementing smartcard ticketing provides an transaction times and reduced queueing opportunity for governments to considerably at ticket offices and barriers). Typically, influence the demand for public transport a smartcard transaction takes just 150 and to support a move away from private cars. milliseconds to complete, and with public With open access to complete travel data on transport employees no longer required to the demand side, transport operators can collect fares and issue tickets, smartcard provide discounts on journeys to and from ticketing systems enable substantial savings specific locations at certain times to stimulate in boarding times. In London for example, the the spread of demand across a network, Oyster Card has contributed to a significant maximizing its revenue earning potential and reduction in queue times at ticket machines: encouraging increased patronage in off peak the average ticket office queue time has gone periods.9 down from 129 seconds pre-Oyster to 78 seconds post Oyster - a reduction of 40%; this is in spite of a reduction in the number of ticket offices in operation.10 An improved daily passenger flow in and out of stations can Revenue streams also, in turn, ease congestion - particularly The Philippine’s in densely populated urban environments Importantly, the Philippine’s new AFCS new AFCS system such as Manila, and cases where ridership system will come at no extra cost to the will come at no is increasing year on year. Consequently, passenger, as well as to the government. The extra cost to the operators are able to increase service government support for this project in this respect is very limited, with the government passenger as frequency, enhancing the utility of transport well as to the assets. only providing a 5-year exclusivity right on the ticketing services for the light rail systems. Government The private operator will be installing the PPP STRUCTURE new ticket gates as well as operating the Where Manila’s AFCS system differs from system and is not expected to make any profit its counterparts in Singapore and Hong- on fare transactions. In effect, the winning Kong is that the provider of the fare system bidder pays the government a premium of is not a subsidiary of the public operator. It Php1,088,103,900 (roughly $23.4 million) is a private company contracted through a on top of the project cost of installing and Public-Private Partnership (PPP) structure. operating the AFCS; probably a first in the In January 2014, the AF Consortium, led history of this type of system.12 by Metro Pacific and Ayala, was awarded In return, the private consortium expects the P1.72 billion / USD 38.22 million to make an appropriate return on capital Automatic Fare Collection System contract invested out of areas it will expand into such by the Department of Transportation and as commercial payment in shopping malls, Communications. The AF Consortium will run customer loyalty schemes, etc. Indeed, the system for 10 years, inclusive of 2 years the AFCS system has been designed to development/delivery, and will be responsible accommodate a roll out into other modes for the financing, installation, construction, of transport and/or micro-payment services refurbishment, and maintenance of the outside of public transport.13 In this respect, automatic gates for the existing LRT ½ and the large and widespread user base of the MRT 3. A central clearing house system card system will make its expansion a highly will also be introduced by the private sector viable option - as in the case of the Octopus that will perform validation and clearing of Card in Hong Kong, which was initially all transactions. In effect, the private sector launched in 1997 for use on buses and will build, operate and maintain the fare MTR. Currently the Octopus Card is used by collection system throughout its duration. 99 per cent of people in Hong Kong aged Competitive tendering between 16 and 64 and for over 13 million transactions a day, valued at over HK$160 In the procurement of Manila’s new AFCS, million.14 A large share of revenues for the the government of the Philippines was Octopus Card are coming from outside able to induce healthy competition in the transport, with the card system currently bid to operate the new AFCS system, with involving over 7,000 service providers. 33 prospective bidders and 5 prequalified For example, the Octopus card is used for bidders initially competing for the payment in outlets such as supermarkets and opportunity.
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