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Smart Travel 29/04/2003
By Christmas the whole show should be up and running. By then London will have become the latest - and largest - city in the world to embrace smart card technology in its public transport system. And by then the financial markets will have been able to take an early view on whether or not the scheme, known as the Oyster Project, is likely to prove the money making venture that Transys, the consortium running the show, hope it will be. It is likely to be a tense six or seven months for financial director, John Stout and his team.

"We have done a great deal of market research over the last four years," said Stout. "We know that travellers in Londoners are, for a number of reasons, keen on the idea of using smart cards in place of the present magnetic strip paper tickets. The large number of ticketing outlets including the Internet and the telephone, means that people will not have to queue every week or every month to renew their season tickets. They will simply top up the value on their smart cards whenever they choose."

And it is important for Transys that the new system is user-friendly. The consortium's confident expectation that it will earn about 1.61 billion Euro over the 17 year life of the contract, is predicated on the notion that extra business (or ridership) will be generated through the use of smart card technology. If the travelling public find the system irksome or if the new technology fails to live up to its expectations, the revenue stream may begin to suffer.

"It was precisely for this reason that we began with a large scale trial of the technology and conducted public attitude surveys," said Nicole Carroll, business development director for Transys. "Since August last year, 80,000 TfL (Transport for London) staff have been using the Oyster smart cards and we have managed to sort out the few gremlins that were in the system. Nine out of ten people interviewed for the surveys have welcomed the idea of smart cards."

Perhaps, but contactless smart card technology is a relatively new medium in the transport sector and although it is being increasingly used in public transport systems throughout the world, London is in a category of its own in the size of its venture. And much is dependant upon the good will of the customer. If the technology were to break down for any reason or fail to perform in the manner expected of it, not only would there be great disruption but, over time, a growing reluctance by the travelling public to use the system in the numbers needed to generate a profit for the consortium.

So what are the risks being taken by the consortium whose members include data processing giant EDS (UK), automated fare collection specialists Cubic Transportation Systems, Fujitsu Computer Services and WS Atkins? The PPP (Public/Private Partnership) contract entered into with London Transport (now Transport for London), in 1998, was for a centralised, inter-modal, ticketing system, valid across all forms of public transport in the capital, including some urban train services. The consortium was given four years to develop the system and have the infrastructure in place, ready for an operational launch by the end of this year with revenue streams based on two criteria. The first of these was the availability of the assets. If these failed to work for any reason, the consortium's payments would be abated. The second criteria was usage. The more that people used the smart card system, the more Transys would get paid as a proportion of the whole. The risk is that insufficient additional journeys are made to provide Transys with its expected revenue from TfL. The new system needs to be demonstratively more efficient than the one it replaces if it is to persuade Londoners to make more use of the public transport system.

"We have looked very carefully indeed at all the risks involved in this undertaking," said Stout, "and are satisfied that the business case is sound."

In the meantime, Transys has invested about 226 million Euro on providing the necessary infrastructure with a further 77.5 million Euro on upgrading the existing technology. This has included the equipment needed to dispense and re-charge the stored value cards which have now been installed in around 2500 newsagents and other retail outlets in the London area under the LT PASS - EPoS (London Transport Pass Agency Sales Service - Electronic Point of Sale) solution.

But why the change? What additional value will the new technology bring that could not have been achieved using magnetic strip, paper tickets? The Oyster card, which takes around 200 milliseconds to work, contains information on the holder's name, any discount availability and a photocard number. It will tell the system where and when the holder entered and left the network and enable TfL to better plan its services. It should also help reduce the huge burden of fraud.

"The current, paper-based system provides little or no management information, is open to fraud and allows for little flexibility in the fare structure," said Stout. "The system we have devised overcomes these difficulties and gives TfL the opportunity to introduce off-peak and other concessionary fare systems like the Freedom Pass for the elderly. We began rolling out the system to season ticket holders in May and should have completed the process by Christmas."

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