“It happened because we computerised a system that has existed since before everyone had computers. Unlike the airlines, we did not tear up the system and start again.
“The actual physical relationship between a ticket and the price is something the airlines moved away from. There is no exchange of a coupon for a seat, whereas our vending machines are trying to marry new technology with an old system. Until we tear it up there is going to be tension.
“You could wipe away the ticket and just go to smartphone technology, but not everyone has one. But in time it is inevitable, and it takes us further away from what the public actually want: a fixed price ticket for a journey.”
“Tech can reduce some of the complexity for users,” counters the head of one of the leading tech firms. “It will get easier for the public who access their tickets online. But people who do not engage with the tech to get the better fare should not be penalised - we have to serve all customers.
“Tech can smooth the peak. It can incentivise shoulder-peak services. And there is a lot it can do around season tickets to manage the complexities of the travelling week. The current set-up does not match demand.
“For people who commute two or three days a week we have no incentive. We don’t offer a season ticket that can be used over a period but not every day - like a book of 20 journeys which could be used over three months.
“Working patterns are changing, and commuters do not all work Monday to Friday in the same office, 47 weeks of the year. There is no product that serves their need because the regulatory architecture is rigid and doesn’t allow it.
“What we need is more flexibility, not less. Are we actually trying to solve yesterday’s problems, rather than tomorrow’s?”
If these problems are to be tackled, how can the franchising system accommodate it? Companies bid for contracts based on their assessments of revenue and risk. None would bid against the unquantifiable risk of reforming the way the revenue is raised. If the flexible season tickets advocated by the technology company were introduced, the impact on income would be unpredictable.
“The prediction of revenue is the single biggest number on a bidder’s spreadsheet,” explains a former train operating company managing director.
“East Coast has failed several times now. Each time, it happened because the companies overestimated what the revenue could be. Each time, they over-promised because they got the headline number wrong.
“So bidders will want to see whether they can abstract revenue in a more sophisticated way - making the fares system more complex, rather than less. They will want to spread the peaks into the shoulders because that can increase income.
“If you had (say) only three types of single-leg tickets, you would unquestionably reduce the scope for demand management, and you would reduce income. This cannot be in the wider public interest, which is best served by a well-financed railway.”
Transport Focus’s Smith suggests bidders for future franchises would have to submit their plans based on existing revenue streams with provision for in-franchise adjustments to account for what actually happens when fares are reformed. In that sense, the franchise would become more like the management contract currently held by Govia Thameslink Railway.
“I can’t see anybody bidding on the basis of trying to guess the magnitude of change this will bring,” he says.
“There will have to be quite considerable adjustment. But we cannot keep on doing nothing and ducking the issue just because it is difficult. The Department will not be able to see the degree of exposure to which it will open itself. And on behalf of taxpayers, I don’t want to see that happen either. But doing nothing about our fares regime is not an option.
“It’s like a game of 3D chess. The train companies will want to be indemnified against any loss. And the Department will want to ensure the operators do not reap massive rewards from any new anomalies that emerge. We are all learning on the job, but I think politicians have now been sufficiently convinced that there is a suppressed demand for travel that comes from replacing paper tickets. The quality of information we can get from the new environment is so much better.”
The tech company boss contends: “If you have a year’s planning, there is no technical reason why you cannot transfer to a new fares process mid-franchise. A new franchise could be awarded on a series of financial and commercial assumptions, with an agreement that they can be varied in the light of the changes.
“Ticketing technology will change beyond recognition in the next 15 years. Travel will become ticketless. Your smartphone will be picked up by beacons at the station, and then on the train. You will effectively be tracked on the train until you get off, including any changes of train. And in effect, you will be billed for your travel after the journey has finished, based on the best possible fare for that journey.
“So you have post-travel accounting. Which means you clearly cannot benefit from advance fares - an increasing number of passengers will not buy anything until they travel. This is what is already happening in London.
“But this is the rail industry! Change is slow because it is run around engineers, not around customers. Until you have a Government that is determined to solve it, it will not be solved.”
Smith concludes: “I don’t want to turn up on the news again in three years’ time saying the fares system is broke, complex and chaotic. I want to say we’ve given change a chance. Saying the same thing year after year is boring!
“People are chomping at the bit to get on with new and cleverer forms of ticketing. But if they are to do that, we have to sort out the institutional changes first.”
