Project Number: TA No. 7044-THA February 2009 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project (Financed by the Japan Special Fund) Final Report Prepared by CECI Engineering Consultants, Inc., Taiwan TAP For Office of Transport and Traffic Policy and Planning, Ministry of Transport, Thailand Asian Development Bank This consultant s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents. For project preparatory technical assistance: All the views expressed herein may not be incorporated into the proposed project s design.
Table of Contents Summary...I Abbreviation Reference Table...VIII 1. Introduction...1-1 1.1 Background... 1-1 1.2 Objectives... 1-2 1.3 MRT Systems in Bangkok...1-2 2. Fare Policy and Integrated Ticketing Strategy...2-1 2.1 Key Findings from Previous ADB TAs... 2-1 2.2 Objectives of an Integrated Ticketing System... 2-4 2.3 Fares Structure... 2-5 2.4 Fares Models... 2-8 2.4.1 MRT Price Elasticity of Demand... 2-8 2.4.2 Testing of Various Fares... 2-9 2.4.3 External Benefits... 2-14 2.4.4 Suggested Fare Model... 2-15 2.5 Fare Products... 2-15 2.6 Fare Policy Conclusion... 2-17 2.7 Implementation Strategies for the MRT Common Ticketing System... 2-17 2.8 Current MRT Operator Plans for Establishing a JV Company to Issue Common Tickets on Their Own Systems... 2-23 2.9 Applications of Electronic Money (E-money) and Electronic Tickets (E-ticket)... 2-23 3. Procurement for Back-end System...3-1 3.1 Introduction... 3-1 3.2 Procurement Method and Procedure... 3-2 3.3 Appraisal Mechanism... 3-5 3.4 System Requirements... 3-7 3.4.1 Central Clearing House (CCH)... 3-7 3.4.2 Card Issuing Machines (CIM)... 3-12 3.4.3 Key Management System (KMS)... 3-13 3.5 System Specification Recommendations and Cost Estimation... 3-15 3.6 System Operation and Maintenance... 3-19 3.7 System Technology Transfer... 3-23 3.8 Potential Risks... 3-24 4. Determine Financing Requirements and Funding Strategy...4-1 4.1 Introduction... 4-1 4.1.1 Overview of Project... 4-1 4.1.2 Financial Analysis... 4-1 4.2 Financial Model... 4-2 4.2.1 The Model... 4-2 i
4.2.2 The Model Cases... 4-3 4.2.3 The Business Model... 4-6 4.2.4 The Investment Costs... 4-7 4.2.5 The Revenue... 4-9 4.2.6 Operations & Management Costs... 4-11 4.2.7 Financing... 4-14 4.2.8 Projected Financial Performance... 4-14 4.2.9 Transaction Fee... 4-15 4.2.10 Sensitivity Analysis... 4-16 4.3 Project Value for Money Assessment... 4-17 4.3.1 Introduction... 4-17 4.3.2 Funding Options... 4-18 4.3.3 VfM Analysis... 4-18 4.3.4 Analysis Results... 4-21 4.4 The Management of the Fare-based Revenue Streams as well as the Smartcard Funds Pool... 4-22 4.4.1 The Smartcard Pool (Pre-paid Account)... 4-22 4.4.2 The Working Capital Account... 4-23 4.5 The Financing and Funding Strategy... 4-24 4.6 The Financial Management of the Government Agency... 4-24 4.7 The Investment Recovery Plan for the Government... 4-25 4.8 Forming a Common Ticketing Company (CTC)... 4-27 4.8.1 The Establishment of CTC... 4-27 4.8.2 The CTC Registration Process... 4-31 4.8.3 The Applying for the E-Transaction Licenses... 4-33 4.8.4 Other Issues on the Forming of CTC... 4-34 4.9 Smartcard Regulations... 4-36 4.10 Operation of a Common Ticketing Company (CTC) and Related Issues of Transportation Policies... 4-37 5. Governance Structure and an Implementation Plan...5-1 5.1 Organization Structures of MRT Systems in Bangkok... 5-1 5.2 Laws and Regulations for an Integrating Ticketing Organization... 5-3 5.3 Supervision of the Operations of the Common Ticketing Company... 5-5 5.4 Model of Establishing a Common Ticketing Company... 5-5 5.5 Implementation Plan... 5-6 6. Terms of Reference (TOR) for Program Management Services...6-1 6.1 Introduction... 6-1 6.2 Project Schedule... 6-3 6.3 Scope of Services... 6-5 6.4 PMS Works of Each Stage...6-6 6.5 Skills, Experience Requirements and Tasks of PMS... 6-35 ii
6.6 Level of Efforts and Outputs... 6-51 6.7 Service Cost... 6-53 7. Conclusions...7-1 References and Bibliography Appendix 1: Report and Recommendation of the President, Proposed Technical Assistance Loan Appendix 2: Draft Contract of the Procurement of Backend System Appendix 3: Financial Model Assumption Appendix 4: Projected Financial Statements Appendix 5: Summary of Funding Option Features Appendix 6: E-Money Business Rules Appendix 7: The Recovery Plan for the ADB Investment Loan Appendix 8: Cabinet Resolution on MRT Issues Appendix 9: Outlines of Terms of Reference for Program Management Service Appendix 10: Laws, Draft Laws and Regulations Relevant to the Common Ticketing Project iii
List of Figures Figure 1.1: 5 New MRT Lines Approved in November 2006...1-4 Figure 2.1: Single Integrated Ticketing System (End State)...2-3 Figure 2.2: Single Integrated Ticketing System (Interim State)...2-3 Figure 2.3: Structure of the Common Ticketing System...2-18 Figure 2.4: The Development Concept of Common Ticketing System...2-21 Figure 2.5: Approaches of System Migration...2-22 Figure 3.1: Relationship of Back-end and Front-end Systems...3-2 Figure 3.2: Procurement Process and Schedule...3-5 Figure 3.3: Operation of Back-end System...3-19 Figure 4.1: Project Financial Model Logical Structure...4-2 Figure 4.2: The Business Model for the Gross Cost Concession of the New Lines...4-6 Figure 4.3: The Business Model for the Net Cost Concession of the Existing Lines...4-7 Figure 4.4: The Organization Structure of Common Ticketing Company...4-12 Figure 4.5: The NPV of Life Cycle Cost for Government Payment and Cost...4-22 Figure 4.6: The Smartcard Pool...4-23 Figure 4.7: The Working Capital Account...4-23 Figure 4.8: Establishment of CTC...4-31 Figure 4.9: The Company Registration Process...4-32 Figure 4.10: Procedure of Applying for e-transaction License...4-34 Figure 4.11: The Governance and the Supervision of CTC...4-36 Figure 5.1: Governance Structure of the Common Ticketing...5-2 Figure 5.2: Timing Plan for the Common Ticketing Project...5-6 Figure 5.3: Common Ticketing Road Map for the Government...5-9 Figure 6.1:Project Schedule...6-4 Figure 6.2:Scopes of Program Management Services...6-5 Figure 6.3:Relations between Government Agencies and the PMS...6-7 Figure 6.4:Gross Cost Concession Concept for Accounting and Requests of Payment...6-13 Figure 6.5:Structure of PMS consultants...6-36 iv
List of Tables Table 1.1: 5 New MRT Lines Approved in November 2006...1-3 Table 2.1: Comparison between Net Cost and Gross Cost Concession Models...2-1 Table 2.2: Comparison between Different Fare Strategies...2-6 Table 2.3: The Comparison of Fare Structure Based on Distance...2-7 Table 2.4: Fare Models Results...2-11 Table 2.5: Sensitivity Analysis of Fare Elasticity of Demand (for CASE 5 only)...2-12 Table 2.6: Sensitivity Analysis of Fare Elasticity of Demand (for all CASES)...2-13 Table 2.7: Vehicle Distance and Time Traveled per Day, with and without the MRT Project Implemented...2-14 Table 2.8: Average Vehicle Operating Cost of Representative Vehicle...2-14 Table 2.9: Average Value of Time...2-14 Table 2.10: Current Fare Products of BTS and BMCL...2-15 Table 2.11: Discount Level for Stored Value Cards in Other Cities...2-16 Table 2.12: Recommended Future MRT Fare Products...2-17 Table 2.13: Advantages and Disadvantages of Different Integration Approaches...2-20 Table 3.1: Committee Background...3-5 Table 3.2: Business Scale Prequalification of Bidders...3-6 Table 3.3: Evaluation Items for Technical Proposal...3-6 Table 3.4: System Requirements for CCH System...3-15 Table 3.5: System Requirements for KMS...3-18 Table 3.6: System Requirements for CIM System...3-18 Table 3.7: Back-end System Cost...3-19 Table 4.1: The Ridership Estimation of MRT lines...4-5 Table 4.2: Base Cost Estimate...4-8 Table 4.3: Inflation Escalation...4-8 Table 4.4: Price Contingency Cost...4-9 Table 4.5: Project Investment Plan...4-9 Table 4.6: Prepaid Card Usage Rates of Different Ticketing Systems...4-10 Table 4.7: Card Issuance Accumulated Volume / Number of Card-person-trips per Day of Different Ticketing Systems...4-10 Table 4.8: Size of the Organization of Common Ticketing Company...4-12 Table 4.9: Financing during the Construction Period...4-14 Table 4.10: Sensitivity Analysis...4-17 Table 4.11: The Allowance of Sensitive Factors...4-17 Table 4.12: The Models of Forming CTC...4-30 v
Table 5.1: Activities and Actions for the Government to Implement the Common Ticketing System...5-8 Table 6.1: Skills and Experience Requirements for PMS...6-49 Table 6.2: Schedule and Level of Input for Program Management Team-1...6-51 Table 6.3: Schedule and Level of Input for Program Management Team-2...6-52 Table 6.4: Outputs...6-53 vi
Summary Status Report for ADB Technical Assistance on Preparing the Bangkok Mass Rapid Transit Integrated Ticketing Project Purpose of the Technical Assistance Since 2005, ADB has supported a number of technical assistance (TA) projects aimed at improving the convenience, affordability and operating efficiency of the new rail mass rapid transit (MRT) lines planned for development in Bangkok. The ongoing project preparation TA (PPTA) is designed to prepare a roadmap for introducing a single, common fare smartcard that can be used on the new MRT lines, and eventually used on other modes of public transit. The Office of Transport and Traffic Policy and Planning (OTP) is also managing a separate study to address issues concerning the introduction of a common ticket that can be used on the existing skytrain and subway systems. ADB's PPTA includes six interrelated tasks for the consultants: (i) to develop a transit fare and integrated ticketing policy framework; (ii) to propose a strategic approach to implementing integrated ticketing; (iii) to prepare project cost estimates and a funding strategy; (iv) to develop draft procurement documents for the integrated ticketing system; (v) to prepare a project governance structure and implementation plan; and (vi) to prepare terms of reference for program management consulting services. The PPTA consultants were mobilized in June 2008. Workshops on their study findings have been held on December 22, 2008 and January 12, 2009. The consultants are scheduled to present their draft final report on January 26, 2009, and the final report is due on February 27, 2009. TA Study Findings Transit fare and integrated ticketing policy framework. A distance-based, uniform and integrated fare structure is recommended for the new MRT lines based on equity and efficiency considerations. A uniform fare tariff is needed because there is no significant difference in services provided by different MRT operators. An integrated fare will also support a single flag-fall whereby only one flag-fall will be charged no matter how many MRT lines a rider transfers in a single trip. To promote public private partnerships (PPPs) in operating future MRT lines, a gross-cost concession contract is recommended because it better supports a uniform and integrated fare structure, as well as more synchronized MRT operations, than a net-cost operating concession. Additionally, gross-cost concessions provide more secure and stable revenues to concessionaires operating lines with low and unpredictable ridership levels. Furthermore, gross-cost concessions allow the Government to retain control over fare policy as well as farebox revenues. In summary, integrated ticketing will help to improve passenger convenience, promote greater use of public transit, support a uniform and integrated fare structure and, in the presence of a gross-cost PPP concession model, more efficient and sychronized MRT operations. Strategic approach for implementing integrated ticketing. Given the adoption of a uniform and integrated fare structure and a gross-cost concession model, the preferred strategic approach for implementing an integrated ticketing system on future Bangkok MRT lines is to promote: (i) a single ticketing system; (ii) a single ticket issuer; and (iii) multiple ticket vendors. I
A Common Ticketing Company (CTC), proposed to be a state-owned enterprise with the majority of its shares owned by the Government, would invest in and operate the central clearing house (CCH), and also serve as the single ticket issuer. The CTC would be responsible for developing the standards and specifications for a common ticket system in order to ensure interoperability between the CCH, the front-end devices, and the smartcards. The CTC will also collect and control the fare revenues from the new MRT lines operated under gross-cost concessions, as well as other stateowned rail systems such as the Airport Rail Link. All MRT operators can serve as ticket vendors. The expansion of CTC s common ticket to the two existing MRT lines and other public transit modes, such as buses, in the future will require that the CTC and existing transit operators are able to agree upon mutually acceptable business rules on key issues such as the collection and distribution of fare revenues and cost-sharing arrangements to for new equipment as well as O&M expenses. One of BTS's main concerns, however, is that information regarding its fare revenues would no longer be proprietary under a common ticketing system. Project cost estimates and funding strategy. The PPTA consultants preliminary estimates suggest that CTC s investment cost could be on the order of 400 million Baht for start-up operations, procurement of the back-end system (i.e. the CCH and related systems) and construction. Based on revenues from transaction fees and cards sales, the operation has a high possibility of being self-sustaining once the number of transactions reaches 1.5 million per day. If the two existing MRT operators adopt CTC s common ticket, the transaction volumes from these two systems would enable CTC to reach its cost recovery threshold sooner. Procurement and program management consulting services. As indicated above, CTC would procure the back-end system (including a CCH and related systems) to support the common ticketing system. The PPTA consultants are detailing the steps and associated timeframes for the entire procurement process, through the testing and commissioning phases, which will be based on international competitive bidding. The complexity of the procurement process and the need to ensure that the Government achieves good value for money suggests that the specialized services of program management consultants be retailed to provide assistance in finalizing the system specifications, preparing the tender documents, evaluating and ranking proposals and bid documents, negotiating with the first-ranked bidder, managing procurement, and overseeing the testing and commissioning of the new system. The program management consultants can also assist the Government in setting up the CTC and in training CTC staff. The PPTA consultants' preliminary estimates suggest that the program management services would be required over a period of 4 to 5 years. The cost for a qualified team with international experience and expertise in managing the implementation of an automated fare collection system is estimated to be on the order of 200 million Baht. Governance structure and implementation plan. A government agency under Ministry of Transport must be selected to champion the project and to work on a proposal to set up a CTC to the Cabinet. The agency would be responsible for establishing the CTC, tendering for program management service and overseeing the CTC s work through the implementation and operation and maintenance of the integrated ticketing project. To assume this role, a subcommittee for the integrated ticketing system could be established under the Committee for Management of Land Traffic (CMLT). This subcommittee would be responsible for defining the policy framework and providing management direction and guidance for establishing a CTC that maximizes the efficiency of ticketing services and convenience to transit passengers. An indicative governance structure for the integrated ticketing project is depicted in Figure 1. II
Subcommittee of CMLT* BOT* 1. Proposes a plan to set up a CTC 4. Establishes CTC MOT* 2. Approves the Smartcard plan 3. Tenders for a Program Management Service Program Management Consultant 5. Supervises system construction 6. Applies for CTC & e-money Licenses CTC Notes: CMLT refers to Committee for the Management of Land Traffic BOT refers to Bank of Thailand MOT refers to Ministry of Transport 7. CTC tenders ticketing system Smartcards & CCH Figure 1: Indicative Governance Structure A key output of the PPTA will be a proposed TA loan for program management services to assist the Government in setting up the CTC and in managing the procurement process for the CCH and related back-end systems, and possibly for some front-end systems to be installed on the new MRT lines. A fundamental precondition for ADB to build upon the PPTA and to structure a formal loan proposal, however, is the need for the Government to designate an appropriate Executing Agency. Ultimately, this decision will need to be taken by the Ministries of Transport and Finance. Future Actions and Issues The next step in the formal processing of a TA loan for the program management consulting services involves a tripartite meeting of Government (OTP, PDMO, BOT and other agencies concerned), ADB, and the PPTA consultants. This meeting would be used to seek clarification and confirmation with respect to key issues, including: (i) the Government s decision on designating an appropriate Executing Agency to coordinate and manage the program management services under the TA loan; (ii) the Government s plans to establish a CTC to assume primary responsibility for the procurement and O&M of a common ticketing system; (iii) the Government s position on implementing gross-cost concessions for the new MRT lines; (iv) the Government s position on implementing a uniform, integrated MRT fare policy for the new MRT lines; (v) the Government s plans for restructuring the existing MRT concessions; and (vi) the Government s position on creating an overarching Bangkok Integrated Transport Authority with a mandate to plan and oversee the integration of different modes of public transport. III
Abbreviation Reference Table ADB AOA ARL B/S BOT BOT BECM BITA BMA BMCL BMR BMTA BTS BTSC CCC CCH CIM CPEX CPS CTC DBOM DPS ETA (1) ETA (2) ETC EV E-money E-ticket FIRR ICB KMS LOE Asian Development Bank Articles of Association Airport Rail Link Balance Sheet Bank of Thailand Build-Operate-Transfer Bangkok Extended City Model Bangkok Integrated Transit Authority Bangkok Metropolitan Administration) Bangkok Metro Public Company Ltd, Underground Bangkok Metropolitan Region Bangkok Mass Transit Authority Bangkok Mass Transit System, Sky train Bangkok Mass Transit System Public Company Limited Civil and Commercial Code Central Clearing House Card Issuing Machines Chao Phraya Express Boat Central Processing System Common Ticketing Company Design-Build-Operate-Maintenance Deport Processing System Expressway Toll Authority Electronic Transaction Act Electronic Technology Committee Electronic Value Electronic-Money Electronic-Ticket Financial Internal Return Rate International Competitive Bidding Key Management System Level of Effort VIII
MOF MOI MOT MRT MRTA MUV NEC NECTEC NPV OTP PBY PDMO PFI PM PMS POS PPP PSC SAM SOE SOP SPS SRT TA TOD TOR VAT VFM WACC Ministry of Finance Ministry of Interior Ministry of Transport Mass Rapid Transit Mass Rapid Transit Authority of Thailand Manufacturer s Unit Value National Economy Committee National Electronics and Computer Technology Center: Net Present Value Office of Transport and Traffic Policy and Planning Pay Back Year Public Debt Management Office Private Financial Initiative Prime Minister Program Management Service Point of Sale Public-Private-Partnership Public Sector Comparator Security Access Module State Owned Enterprise Standard Operation Procedure Station Processing System State Railway of Thailand Technical Assistance Transit Oriented Design Term of Reference Value Added Tax Value for Money Weighted Average Cost of Capital IX
1. Introduction 1.1 Background Since the beginning of operations of Mass Rapid Transit (MRT) services in Bangkok, the incompatibility of the ticketing systems of BMCL (Bangkok Metro Public Company Ltd.) and BTS (Bangkok Mass Transit System, or Skytrain) has been creating an inconvenience for residents and visitors traveling in the city. Passengers have to purchase at least two forms of tickets and pay additional flagfall charges when making transfers. This payment mechanism not only creates confusion at gates when riding BMCL or BTS, but also prevents passengers to transfer between both systems. As Bangkok s MRT systems grow, this problem will get worse and persuade people to drive private vehicles. The previous Technical Assistance (TA) project from Asian Development Bank (ADB) suggested that an integrated ticketing system can improve the quality of MRT service. Following the concept of a gross cost concession contract, the new MRT concessionaires may provide service according to the service agreement instead of expected profit. Subsequently, all of the income would go to the Government and then be distributed to the operators according to their service provided. Such a process may require a Central Clearing House (CCH) that audits the performance of the MRT services. The process of planning and designing a back-end system, which includes a CCH, for a new ticketing company (the Common Ticketing Company) will be the primary task in this project. A gross cost concession can also benefit the CCH by offering a more simplified functional design because of no need to allocate the fare revenue between MRT operators. This prevents the need for commercial agreements, which normally requires a time-consuming negotiation procedure. The project work also includes the preparation of the Terms of Reference (TOR) for Program Management Services (PMS) and the back-end system procurement projects funded by ADB loans. The loans should assist Thailand s government to build up an integrated ticketing system that will cater to the needs for promoting general public transit in the Bangkok metropolitan area. For deriving better applications of transportation smartcards in Bangkok, differing types of overall fare structures are under study, such as distance-based, flat fare, zonal-based, time-based, etc. With the coming expansion of the MRT network and the subsequent demands for transferring between different modes, both single and multiple ticketing systems are to be analyzed. Under the study up-to-date, the single ticketing system with a single issuer and multiple vendors option appears to be easier to implement and the least costly; however, when faced with the burden of modifying the existing operating system s equipment and replacing current smartcards, there are still some obstacles which need to be addressed before rolling out a brand-new ticketing system. Lastly, in view of the additional energy demands and unstable fluctuation of oil prices, the concept of Transit Oriented Design 1 (TOD) has become an increasingly important issue around the world. Bangkok is no exception to this predicament and needs to rapidly integrate its public transit systems so as to ease the impact of any energy crisis. Because public transit transportations usually bring about external benefits such as less congestion and air pollution, subsidized public transit industries should lead the way when external benefits are greater than subsidies from the government. By deploying a common ticketing system, some subsidization schemes, such as the implementation of discounted transfer schemes, would be possible. 1 TOD is a term used to describe an environment or a community is friendly to public transportation system users. TOD creates compact, pedestrian oriented neighborhoods around transit stations. Providing a seamless public transportation system is also a form of TOD. 1-1
1.2 Objectives To solve the ticketing problem of the non-interoperability between different MRT systems, this project has set to accomplish the goal of integrating smartcards for MRT systems. Four objectives must be achieved to realize this integration, that is (1) the new back-end system must have an open standard that allows future expansion; (2) the new back-end system must support the policy of reducing inefficiency of the transit travel; (3) the new Common Ticketing Company must be financially feasible; and (4) the new Common Ticketing Company must be a legal and law-abiding entity. 1.3 MRT Systems in Bangkok Current Bangkok Mass Rapid Transit (MRT) systems are separated by two different systems and three lines. Opened in 1999, BTS (Bangkok Mass Transit System) or Skytrain is the elevated Metro system operated by Bangkok Mass Transit System Public Company Limited (BTSC). BTS consists of two lines, Dark and Light Green Lines, with a combined distance of 24 km and 23 stations. Since 2004, BMCL (Bangkok Metro Public Company Ltd.) has run the underground Blue Line with a distance of 20 km and 18 stations. Both systems had a total ridership of 679 thousand trips per day (485 thousands for BTS and 194 thousands for BMCL) in 2007, which occupied 10% of total public transportation trips (OTP 2008a). Currently, BTS and BMCL have 3 interchange stations: (1) Saladaeng/ Silom, (2) Asok/ Sukhumvit, and (3) Mochit/ Chatuchak Park. Not only are the station names different for both of the systems, but the distance between the respective stations locations at the interchange is a little bit far from each other. This adds confusion and dissuades people from transferring between the systems. With regard to payment, both BTS and BMCL adopt MIFARE 1k smartcards for their stored value cards. However, due to differing card formats and other technical issues, their smartcards lack interoperability. In 2008, approximately 1.5 million BTS smartcards were in circulation. The volume of smartcard transactions is around 330k per day and amounts to around 2/3 of the total transactions. The remaining 1/3 transactions comes from magnetic strip card trips for single journey tickets and one-day passes. For BMCL, approximately 1 million smartcards were in circulation. The volume of smartcard transactions was around 125k per day and amounted to around 3/5 of the total transactions. The remaining 2/5 transactions come from IC token trips for single journey tickets. BTS and BMCL are authorized by net cost concession. To maximize their profits, there is some degree of competition between them to attract more ridership. In the area of ticketing, they want passengers to buy and use their own smartcards. The willingness for them to make interoperability between their ticketing systems is weak. Therefore, passengers need to purchase two cards and pay additional flag-falls when transferring between the systems. This kind of competition caused by net cost concession will not only deter the common ticketing plan for MRT systems, but also affect the transfer willingness between systems. For other public transport systems in Bangkok, there are currently no electronic types of ticketing payments. Buses and ferries accept only cash and pre-paid paper coupons. The cash form of ticketing slows down passenger flows at the stations and on the vehicles, and is labor-intensive in managing cash and coins. Hence, the lack of integration in ticketing discourages transit patronage in the use of public transit. Four MRT lines are currently under construction, including the Airport Rail Link (Suvarnabhumi Airport Makkasan, 28 km, scheduled to be open in 2009), Dark Green Line Extension (Saphan Taksin Bang Wa, 8 km, scheduled to be open in 2012), Light Green Line Extension (On Nut Bearing, 5 km, scheduled to be open in 2010) and a segment of the future Red Line (Bang Sue Makkasan Hua Mak, 19 km scheduled to be opened no later than 2012). The 1-2
Airport Rail Link will provide two types of services, a City Line and an Express Line, but each line will have separate gates and different tickets. The ticketing system of the Airport Rail Link is also now under construction and plans to issue two types of ticket media, smartcards (stored value cards) and tokens (single journey tickets). At this point, State Railway of Thailand (SRT), the management authority of Airport Rail Link, does not support the idea of implementing common ticketing standards since any change in plans will likely delay their opening schedule. In November 2006, the government approved a plan for five new MRT lines in the Bangkok Metropolitan Region. The plan is scheduled to be finished by 2012 with a total length of 118 km rail lines to be constructed. The information of these new lines is shown in Table 1.1 and Figure 1.1. After these new lines are finished, the entire MRT network in the Bangkok Metropolitan Region (BMR) will reach a length of 222 km and the estimated ridership of the MRT network will be 2.4 million trips per day in 2012. Although the 2012 ridership will be more than 3 times of the current ridership, MRT systems are still forecasted to occupy only 28% of total public transportation trips (OTP 2008a). In comparison, MRT ridership in Taipei and Hong Kong occupied 40% and 35% of total public transportation trips respectively in 2007. Table 1.1: 5 New MRT Lines Approved in November 2006 Line Red Line Blue Line Dark Green Light Green Purple Line Line Line Section Bang Sue- Rang Sit Bang Sue- Taling Chan Bang Sue- Tha Phra Hua Lamphong- Bang Khae Bang Yai- Bang Sue Mo Chit- Saphan Mai Baring- Samut Prakan Length(km) 26 15 13 14 23 13 14 No. of Stations 10 4 7 10 15 7 7 Managed by SRT 1 MRTA 2 MRTA MRTA MRTA 1: State Railway of Thailand. 2: Mass Rapid Transit Authority. Source: OTP 2008b. 1-3
Source: OTP 2008b Figure 1.1: 5 New MRT Lines Approved in November 2006 1-4
2. Fare Policy and Integrated Ticketing Strategy 2.1 Key Findings from Previous ADB TAs 1. Fare Options Previous TAs (2006b, 2007a) utilized the Bangkok Extended City Model (BECM) to estimate the fare elasticity of demand for existing MRT lines in Bangkok. The analysis was based on the ridership of 2005 and the fare of 2006. Short term elasticity is around -0.5. The analysis estimated that the average daily ridership increased by 11% or 154,000 trips for MRT and air-con buses if a flat fare of 15 Baht was applied to these two modes. The net cost for the public transportation would increase 690 million Baht per year, or one-third of the current deficit of Bangkok public transportation systems. If the 15 Baht flat fare expands to non-air-conditioned buses, the buses would then lose a large number of riders and end up with several empty buses. Therefore, previous TAs recommended distance-based fares in Bangkok. Furthermore, if a common ticketing system is in operation, a zonal fare type of system should be taken into serious consideration. 2. MRT Concession Options Previous TAs discovered that different types of net cost structure were disadvantageous for both the Government and concessionaires. A standard gross cost concessions model should be developed for the new MRT concessions. Differences between net and gross cost models are summarized in Table 2.1. From the standpoint of ticketing systems, a gross cost concession model would allow the Government to have more control over the pricing policy, enable the Government to more easily implement desired social objectives, and bring about simpler fare revenue management actions. Table 2.1: Comparison between Net Cost and Gross Cost Concession Models Net Cost Model Gross Cost Model Brief Description Disadvantages Advantages Concessionaires: Tends to reinforce Keep revenue they incumbent collect. concessionaires. Bid on the net amount Cost structure may be they need (or will pay) to higher than Gross Cost operate services. Model. Operate within imposed Less suitable where policy framework (eg. services may change. fare structure), and Less control by generally accept revenue government. risk. Concessionaires: Pay all revenue to government. Bid the cost that they need to be paid to operate a specified service, and unit costs for service variations. Operate within imposed policy framework (eg. fare structure). Revenue risk may be shared, Government generally takes more revenue risk. Concessionaires may not be encouraged to be innovative and develop their markets. These constraints can be ameliorated by transferring a reasonable share of patronage risk to the concessionaire. 2-1 Transfers patronage risk to concessionaires. Encourages concessionaires to be innovative & take more responsibility for service planning (more relevant to bus). Government can be more hands-off. More flexible solution for expansionary situation. Costs of providing services clearer than with Net Cost Model, and some evidence that it leads to lower costs. Government more in control, has more flexibility to seek changes in services, and
Brief Description Disadvantages Advantages though may reside more heavily with has a more active role in network development. government. Source: Asian Development Bank (2006a) 3. Technical Options of an Integrated Ticketing System There are two basic ticketing system structures to integrate different MRT concessionaires. The first would be multiple systems integrated by interoperability standards, and the second is a single integrated ticketing system. Previous TAs recommended the single integrated ticketing system structure in view of its major advantages, such as: Less system implementation and procurement costs. More scale of economics. Less requirements/interfacing for each MRT line to negotiate with each other and set up standards for their own system. The structure of the single integrated ticketing system is shown in Figure 2.1 while its major components are comprised of: Single common ticket. Single clearing house. Interoperable front-end. For the existing ticketing systems of BTS and BMCL, there may be a need for a transition period to migrate the systems into a single integrated ticketing system. In addition, the existing net cost concession model needs to be changed into a gross cost concession model in order to allow a common fare policy to be practical and feasible. Based on the current net cost concession, BTS and BMCL have different cost models and concession agreements. Thus, it will be difficult for them to charge a same fare tariff and eliminate a second flag-fall when transferring between different systems. A same fare tariff and the elimination of a second flag-fall comprise the core concept of a common fare policy. The system structure in the transition period is shown in Figure 2.2. The BTS and BMCL may first need to integrate their ticketing systems between each other before migrating into the gross cost concession model. After migrating into the gross cost concession model, they can be integrated with the new single integrated ticketing system. 2-2
Figure 2.1: Single Integrated Ticketing System (End State) Source: Asian Development Bank (2007a) Figure 2.2: Single Integrated Ticketing System (Interim State) Source: Asian Development Bank (2007a) 2-3
4. Institutional Arrangements In order to enhance the coordination of public transportation systems development in Bangkok, previous TAs initiated the idea of establishing a Bangkok Integrated Transit Authority (BITA). There are two possible plans of implementation for BITA: (1) Management BITA In this option, BITA will be in charge of strengthening the integration and management of rail system development. Bangkok Metropolitan Administration (BMA), MRTA and SRT, under BITA s control, will implement and manage their own MRT projects; however, they would be subject to BITA s approval to deliver MRT projects and would follow BITA s instruction guidelines for preparing MRT concession agreements. (2) Full BITA In this option, BITA would be responsible for ensuring the provision of the full integration of Bangkok public transportation systems, that is, at least for MRT lines and buses. BITA would replace the MRT functions of BMA, MRTA, SRT and the proposed Bus Control Management Authority (BCMA). This option would substantially improve the provision of seamless public transportation systems in Bangkok. Similar organizations of full BITA in other countries are Transport for London, the Land Transport Authority in Singapore and the Verkehrsverbund in Germany. 2.2 Objectives of an Integrated Ticketing System Two kinds of objectives of the integrated ticketing system are defined to encompass an entire MRT system: 1. Social objectives (1) Increase ridership and maintain occupancy Increasing the ridership of MRT systems will decrease private vehicle trips and consequently reduce the level of traffic congestion and vehicle tail air pollution. However, the objective of increasing ridership must be accompanied by maintaining sufficient occupancy to avoid high operating costs. (2) Establish equitable fares For an integrated MRT network, MRT fares structure should consider the level and quality of service provided and should not be different due to the different costs of each MRT system. For example, the difference in the construction and operating costs for elevated, underground and at-grade MRT systems is significant. From the viewpoint of passengers, however, their services are almost the same. Hence, these systems should not have different fare structures. (3) Increase ease of use This objective is to simplify the fare structure of MRT systems. For example, should MRT fares be priced in a more convenient way for single journey tickets (15 or 20 Baht instead of 14 or 22 Baht)? The fare structure should be easily understood by customers and enable them to choose the most advantageous fare (i.e. monthly passes for students). 2. Financial objectives (1) Increase fare revenue and maintain ridership Under the circumstance of gross cost concession for MRT, the fare structure highly affects the government budget. MRT fare structure should increase revenue as much as possible. Considering the fare elasticity of MRT demand is usually less than -1 (neglect 2-4
the minus sign), increasing fares means increasing revenue and the operator naturally would like to raise the fare as much as possible. This strategy however conflicts with the social objective of increasing ridership. Therefore, there should be an equilibrium mechanism between fare revenue and ridership. One method to achieve the equilibrium is to use the farebox recovery ratio, which is fare revenue divided by fare operating costs. A ratio equal to 1 means that MRT fare revenue just covers the operating cost. In this situation the ridership can maintain a certain level and the government does not need to subsidize the operating cost. Therefore, both revenue and ridership objectives can be achieved with the farebox recovery ratio equal to 1. (2) Increase fare options This objective is to increase the ability of passengers to choose a fare option which best meets their needs. For example, two types of options would be (1) day passes with unlimited uses which would appeal to tourists and (2) passes with limits of number of trips, which would appeal to students and workers. (3) Reduce the fare collection cost Under the current situation of BTS and BMCL ticketing systems, their construction and operation costs in total are high because separate front-end and back-end systems are needed. One of the important objectives of the integrated ticketing system is to reduce the cost of fare collection. By using common systems and equipment items, such as add-value machines, the CCH, the key management system, card issuing machines, etc, MRT operators will save on this cost due to less purchasing, development and operation of such systems. In addition, the economy of scale reduces the unit price of systems and equipment. (4) Develop a more transparent fare collection system Under the gross cost concession, the government controls MRT fare revenue; therefore, the ticketing systems of MRT lines need to be transparent enough to ensure that the government receives accurate fare revenue. If MRT operators conduct their own ticketing systems, the government will need an extra mechanism to routinely inspect the results of fare collection. But on the other hand, if the government has direct control over the ticketing system, the results of fare collection will be more convincing. 2.3 Fares Structure 1. Different Fare Strategies Generally, two ticketing structures are commonly employed for MRT systems all over the world - flat fare and differential fare structures. Flat fare is the easiest solution for operators and passengers and requires simple low-cost technology for implementation. However, unfairness is a major problem found in the flat fare structure since operators or governments have to subsidize long-distance passengers from the income of the short-distance passengers. On the other hand, differential fare structure is the structure most favorable by operators and governments. In this case, fare can be determined by distance, time, and market demand; market demand pricing is the offering of passes and discounted tickets. Passengers and operators are likely to accept the differential fare structure when the technique of fare collection is feasible. The different types of strategies are summarized as follows: (1) Flat Fare-flat fare is the simplest fare strategy and the easiest one for people to understand. However, it causes unfairness because persons with long trips pay the same fare as those with short trips. (2) Distance-based Fare-paying according to the distance traveled is a very common concept 2-5
in transport modes. Distance-based is the most fare benefit efficient. That is to say, passengers just pay what service they obtain. But, there should be a fare cap beyond a certain long distance; otherwise fares would be too expensive for passengers with very long distance trips. (3) Zonal fare derived from distance-based fare. Zonal fare is simpler and easier to use for passengers. However, the zonal system has some equity concerns for drawing up the zone boundaries since a higher price will be paid when a zone boundary is crossed. (4) Time-based Fare-usually divided into peak-time and non-peak time fares. Peak-time fare is higher because peak-time passengers are usually less sensitive to fare increases. Time-based fare can achieve peak-spreading. It is useful if the off-peak time has spare capacity and the peak time is saturated. From the view point of passengers, however, peak time means more crowded conditions and more travel time. People may object to pay more money for less service quality and challenge the idea of time-based fare. Traditionally, time-based fare is basically a textbook strategy because of the difficulty in its implementation, but in fact it is a feasible option because of the electronic ticketing. (5) Market Demand Fare-this fare strategy depends on the frequency of use and willingness to prepay. Discount fares are usually provided for pass and stored-value card holders. Table 2.2: Comparison between Different Fare Strategies Fare strategy Advantages Disadvantages Flat Fare Easy for people to understand (especially for visitors). Easy for operators to collect fares. Large subsidies from short-distance trips to long-distance trips and unfair for short-distance trips. Possible to lose many short-distance Distance-based Fare Generally considered equitable because longer trips require higher cost. Fare revenue most efficient. Zonal Fare Fare rate is simple and easy to collect fare. Time-based Fare Market Demand Fare Source: Consultant. May increase non-peak time trips and balance peak and non-peak time ridership. May increase the total revenue. Welcome for frequent riders. trips. Unpopular for passengers with long trips. Zonal boundaries are not easily divided. Unfair for short trips across zonal boundaries Could cause the objection from peak-time commuters. May decrease revenue. 2. Suggested Fare Strategies Distance-based fares are implemented in most Asian cities, ex. Seoul, Hong Kong, Singapore, Taipei, Guangzhou, and Shanghai. On the other hand, most European cities apply zonal fares, whereas flat fares are often employed in North American cities. Table 2.3 compares these three fare structures based on distance. Currently, a differential fare structure is applied to Bangkok s mass rapid transit systems and passengers pay their fares according to the distance traveled. For BTS, single-trip fare starts from 15 Baht and adds 1 or 2 Baht after every station until reaching the fare ceiling of 40 Baht, and for BMCL, single-trip fare starts 2-6
Feature from 15 Baht and adds 2 or 3 Baht after every station until reaching the fare ceiling of 39 Baht. There is also a 15% discount for BMCL users with stored value cards while BTS has just recently terminated its promotion of a 20% discount for the Sky SmartPass (its stored value cards) during August 2008. Table 2.3: The Comparison of Fare Structure Based on Distance Fare structure Flat fare Zonal fare Distance-based fare Equity to passengers Low Medium High Fare benefit efficiency Low Medium High Simplicity of fare collection High Medium Low For most passengers, distance-based fare is the most equitable fare structure since zonal fare has some equity concerns when a zone boundary is crossed. The fare structure of all public transport modes needs to be integrated in order to apply zonal fare, otherwise a big portion of trips across zones might migrate to other modes which cost much less, thereby decreasing ridership. The distance-based fare is recommended for future Bangkok MRT systems. Nonetheless, due to its simplicity and ease to collect, zonal fare will be a long term option for all Bangkok public transportation modes when the respective fares are integrated. Market demand fare is also suggested for future Bangkok MRT systems. The strategy can meet the demand of different groups of riders, such as frequent riders, tourists and students. For some large metropolitan areas like Singapore and London, distance-based fare is accompanied by time-based fare to balance the peak and non-peak period ridership of the MRT systems and to reduce the operation burden in peak periods. However, for all current public transport systems in Bangkok, only distance-based fare is applied with the exception of non-air con buses (flat fare is used). In fact, time-based fare in Bangkok could persuade peak hour passengers to instead take a taxi or drive and thereby cause a negative impact for street traffic. From observations made by the Consultant, the ridership difference between peak and non-peak periods of BTS and BMCL is not very significant. The phenomenon may be due to the large number of tourists traveling throughout the day and lacking of industrial workers in Bangkok. It seems that visitors and the working class have opposite travel behavior from the standpoint of travel time of day. Therefore, time-based fare is not recommended in Bangkok s MRT systems. In Bangkok, every MRT system is owned by a different concessionaire and has different concession conditions. Hence, one may expect every system to have a different fare structure. But, for customers, there is no significant difference of service between MRT systems; therefore, the same fare rate should be applied across all MRT systems. Same fare rate across all MRT systems is defined as uniform fare. Most of the MRT systems in large metropolitan areas employ a uniform fare. If future MRT systems apply a gross cost concession model, then all fare revenue should be given to the government directly and the government should pay the service fee to concessions based on services they provide. Even though the construction and operating cost for changing to a gross concession model would not affect the fare rate of current MRT systems, migrating from net cost model to gross cost model is a process that can be highly politicized, risky and costly. Hence, due to the uncertain limitations of current concessions, not much can be done in changing to a uniform fare for current MRT systems in the short term. But in the long run, every MRT system needs to apply the uniform fare policy to achieve the objectives defined. Another issue related to fare policy is the flag-fall. Currently, BTS and BMCL collect 2-7
their own flag-falls with 15 Baht. So, passengers transferring between the systems need to pay 30 Baht for both flag-falls. When considering that the average fare for each system is equivalent to 22 Baht, these flag-falls are costly and certainly harm the ridership of transfer trips. Collecting both flag-falls also goes against the objective of establishing equitable fares. Although the policy of collecting flag-falls once will decrease the average fare of transfer trips, according to the previous TA (ADB 2007), only 0.2% of the revenue would decrease. This is because the total ridership would increase by 8.3%, which thereby compensates for loss generated by the lower average fare. So, to attract more passengers to ride the MRT, future Bangkok MRT systems must apply an integrated fare policy (no second or subsequent flag-fall) which will effectively make up for lost fare revenue. Under the current situation, each MRT system has its own smartcard ticketing system and is not interoperable, which means that the ticketing system cannot identify passengers transferring from one system to another. For the current MRT systems, an integrated fare policy can only be put into practice if a common ticketing system is implemented. For reasons of the elimination of 2 nd flag-fall and the interoperability of ticketing systems between MRT systems, a Common Ticketing Company must be set up to process the common ticketing of all MRT systems. The Common Ticketing Company should be led and financed by the Government in order to control the fare revenue of MRT operators. Being owned and led by the Government will also prevent MRT concessions to enter into any commercial arrangements regarding fare revenues between themselves. 2.4 Fares Models 2.4.1 MRT Price Elasticity of Demand 1. MRT Price Elasticity Review The objective of MRT fare model analysis is to suggest a future MRT fare model based on the gross cost modes for MRT operators. To this end, MRT price elasticity of demand is firstly examined. The MRT price elasticity of demand is defined as (change of MRT ridership) / (change of MRT fare), and has been analyzed in a number of studies; for instance, (1) Balcombe et al (2004) studied the demand of public transportation systems in England and obtained the following results: The short term (less than 2 years) MRT fare elasticity of demand is between -0.15 and -0.55 with an average of -0.30. The long term (12 to 15 years or longer) MRT fare elasticity is between -0.61 and -0.69 with an average of -0.65. The short term peak hour MRT fare elasticity has an average of -0.26, and non-peak hour has an average of -0.48. The short term Bus fare elasticity has an average of -0.42, and long term has an average of -1.01. (2) According to a recent fare adjustment in 2008 for the Taipei Metro system, The fare elasticity of demand surveyed one week after the adjustment is -0.39; (3) Litman (2004) compared public transportation fares in several areas (mainly in Europe and Australia) and suggested the following elasticity of demand: The short term elasticity is between -0.2 and -0.5, and the long term elasticity is between -0.6 and -0.9. The short term elasticity in peak periods is between -0.15 and -0.3, and the long term 2-8