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Introduction
1. The current bus fare structure is based on fare stages, the further one travels, the more one pays. In comparison, commuters in London pay a flat fare. Both cities have had recent fare increases so this proposal is not about cost per se. It considers whether flat fares may be a better way to eliminate fare cheating and it might increase the geographic reach of lower paid workers.
Not EZ to Thwart Fare Cheating
2. Anyone who has ever taken the bus knows, the old way of fare cheating with the magnetic Transit Link farecard was to choose the lowest fare after slotting in the farecard regardless of the length of journey. The chances of being caught were small and it was perfectly plausible to claim that one genuinely believed the amount paid was the appropriate fare.
3. EZ-Link was held up as the final solution to the fare cheat. The system was supposed to be largely self-enforcing; the maximum fare is deducted upon boarding and the difference refunded upon the exit tap. If one forgets to do the latter, the highest fare of SGD 1.58 is deducted. It also eliminates the excuse of not knowing the correct fare to pay.
4. However, EZ-link has certainly not eliminated the problem. This post assumes the reader knows how fare underpayment still occurs. Based on mrbrown's post, the SGD 300 million EZ-Link system reduced fare cheating from an estimated SGD 10 mil a year to SGD 9 mil. To put this in some perspective, this SGD 1 mil clawed back from fare cheats represents 0.3% of the cost of the system, 0.2% of SBS's SGD 493.2 mil turnover, 2% of its SGD 50.7 mil profit and just under the amount that SBS donated to the Public Transport Fund (SGD 1.25 mil) as well as various charities and grassroots organizations (SGD 100,000) based on 2005 figures (annual report PDF). This could be seen as positive (10% reduction achieved) or negative (poor return on investment given high capital costs).
5. Conversion to a flat fare system will eliminate under-paying and enforcement action can be targetted against non-payment (e.g. from passengers boarding from the exit). It will also simply the administration of the fare system.
Is Flat Fairer?
6. The current fare stage system conforms to the determination of price according to marginal utility; passengers who travel further consume more resources and thus should pay more. However, it could argued that the marginal cost of each additional metre that a passenger is carried is zero as the bus still has to complete its designated route regardless of what a passenger gets off at point A or B.
7. A flat fare system would also mean that passengers who take shorter journeys would be subsidising those with longer journeys. The post merely notes that passengers who have to take a longer journey are, under the current system, paying more than those with a shorter journey although the marginal cost for either passenger is not significantly different.
8. The flat fare should be set at a level which is revenue-neutral. Taking a simple average based on 2005 figures of SGD 493.2 mil turnover divided by an average bus ridership of 2 mil a day x 365 yields a figure of SGD 0.68. Given that the lowest fare payable for via EZ link for an air-con service is SGD 0.65, a flat fare of SGD 0.70 does not seem excessive.
9. Lower paid workers (e.g. the cleaning auntie at my previous office) can seek employment opportunities that are further from their homes without incurring additional cost (assuming the number of bus trips remains constant). Under the current system, said cleaning auntie spends SGD 13 every four weeks (SGD 0.65 x 2 trips x 5 days x 4 weeks). If she took a job at a place that cost the maximum single fare of SGD 1.58 to travel to, it would cost SGD 63.20, thus SGD 50.20 more. Assuming her income for either workplace was constant at SGD 600, the added travel cost amounts to 8.4% of income. If pay and conditions are the same at the further location, it would not be economically rational to take a job there. A flat fare would go some way towards ameliorating the added cost as well as to give her more employment opportunities.
10. More data is required to look at the distribution of fares collected from passengers to see if a majority will be better off or not under a flat fare system as well as to see how many need to change buses and how design a robust system to ensure they are not unduly penalized under a flat fare system and maintaining or even reducing current fare caps of SGD 1.90 for a single journey regardless of number of buses changed.
Conclusion
11. A flat fare will eliminate the problem of under-payment of fares. It can hold or even reduce travel costs as well as increase employment opportunities for the lower paid.
12. As this is a post for information (rather than for approval), the interim recommendation - before the additional information vide Para 10 is collated - is that the approving body mandate the bus companies to switch to a flat fare system at a flat fare of SGD 0.70 for a single bus journey regardless of distance travelled.
13. For your information please.
Comments (15)
Just FYI.
Busfares in central Tokyo are 200yen flat, while busfares in the residential area where I live is staggered with the maximum at 210yen.
Also, train fares have not risen in the past 8 years despite ongoing upgrades to trains and stations. I don't take buses often so I'm not sure if there were any changes.
Posted by ah.heng | January 21, 2007 11:34 AM
Forgot to mention that most companies pay for worker's transport, even for temp. staff. Some get a full ride while some get between 10-30kyen a month, which is more than sufficient for most.
Posted by ah.heng | January 21, 2007 11:39 AM
Last bit, really sorry.
There are concession passes for trains, where you pay a fixed amount to travel between 2 destinations. The price amounts to 60% of a daily return trip (ie. 130yen x 2trips x 30days x 60%). If you need to go further than usual, you just top up the amount accordingly. There is no limit to number of trips (contrast to SMRT's 4 trips) and you can get off or on at any of the stations between your start and end station.
The passes are available to everyone.
Student passes are at 40%.
Posted by ah.heng | January 21, 2007 11:53 AM
Alot of Singapore's problem would be resolved if Singapore becomes part of Japan. A city-state like Singapore cannot last long, so I recommend 2nd world Singapore Inc "merging" with 1st world Japan Inc. This is the best economic solution to fix a collasping Singapore. Japan already has a large foothold interest in Singapore, with similarities more than other countries and their consumerism influence here is blinding. Then at least the uncivilised peasants of Singapore Inc can learn some overdued manners and enlightened culture from their more civilised and globalised asian counterparts.
Let's join Japan!
Posted by whybegay | January 21, 2007 12:06 PM
an outta point comment..
actually the ezlink is more than juz a "device" to curb "fare cheating".. i think that is significantly cut the boarding times at bus interchanges and bus stops with heavy traffic.. at a hefty price tag though..
will think about your proposed flat rate public transport.. on first look it sounds reasonable enough.. but revenue neutral for a transport company that seeks to maximize profit as well? lol..
Posted by stanley | January 21, 2007 3:12 PM
Hi Ringisei, good questions raised and it resulted in some head-scrathing and shoulder shrugging. Is flat fare the way to go? SBS already has flat fare for feeder bus($0.65 EZ link) and night owl services ($2.50 EZ link). So in essence it is limited in terms of geography and time. But is there a need for change simply to cut down fare cheats? Is it also because the public transport companies are charging too much relative to the type of service commuters get? If they are, although they are private companies, then maybe a fare revision downwards is more appropriate. Furthermore, a flat fare might go hand in hand with a fare zoning structure, and is that the middle ground between the current fare stages and a flat fare systems? It seems like it is. Hmmmm
Posted by The Void Deck | January 21, 2007 6:27 PM
Most countries have the fare zoning structure (zone 1, zone 2 and zone 3) for buses.
Is there also the additional advantage of being more simple to understand so consumers actually know what they are doing, and is actually fairer to consumers? Why we have so many zones in our small countries (called stages) and divided into 17.5, 18, 19, 19.5 appears to my consumer brain somewhat a confusion.
I also don't understand the difference of taking bus 77 and bus say 852 from Bukit Batok to Bukit Timah, one costing 20-30 cents more (if I don't remember wrongly), simply because bus 77 takes me through more 'stages'.
But I speculate that it is the opinion of well heeled people that our bus very cheap so if there is to be a flat bus fare, maybe they will try to make it the higher end which umm, might not be good for the luckless consumer...
Posted by ben | January 21, 2007 8:41 PM
ah.heng - Thanks for bringing in another perspective. Do you have any information on whether the bus companies that operate in Central Tokyo are making profit or are receiving government subsidies? How are their fares regulated?
stanley - Indeed EZ-link is more about curbing fare cheating. However, based on the mrbrown article that I linked, it seemed that fare cheating was a big reason, at least initially. Intuitively EZ-link should speed up boarding and de-bussing but I do remember several occasions when the card reader scolded passengers and everything go bottlenecked. :P
TVD - personally I don't think current levels of fare cheating pose a commercial threat to SBS but I just wanted to point out how their initial reasons doesn't match the outcome, either they are shifting the goal posts (by changing the KPI) or that fare cheating was never really the real main reason for replacing a system that worked fine for most of us. About the fare zoning:
ben - I agree completely with your point. Singapore is about as big as the whole of the Greater London era. Which is one big single fare zone for buses rather than the many many fare stages in Singapore. What London authorities recognize is that it is very expensive to live in central London so a flat fare is a way of not further penalizing lower paid Londoners who have to commute long distances to work.
Posted by ringisei | January 22, 2007 1:41 AM
Flat fair of below $1 per way from home to destination will result in overall benefit to commuters and bus company. Needless for me to talk about benefits to commuters. Only need to add that the ezlink card is needed to monitor the "per way" journey which often involves feeder bus + main bus + feeder again for long journey.
Bus company can benefit by (a) prolonging interval between bus thereby ensure bus fully packed, (b) simplified collection system which reduces operating costs and (c) added bus travellers converted from car-owners who find difficulties maintaining their cars.
I have been riding buses for 20+ years so I know clearly the problems of commuters. And it is high time bus companies and government look into the daily problems of those who take bus. Please stop looking at buses from the company's angle and therefore profit angle.
Posted by dogafox | January 22, 2007 9:17 AM
This just in: PTC To Allow More Premium Bus Services for Niche Market (via Sprinter.gov.sg).
Posted by ringisei | January 22, 2007 6:20 PM
One gripe that I have about the current fare stage system (as Ben pointed out) is that it is more profitable for bus companies to design routes that are long and windy, which takes LONGER for a commuter to get from pt A to B and yet charge a HIGHER fare for it (as the bus travelled more useless fare stages as compared to a more direct route).
So is it any wonder that only a minority of bus services actually take a quick, direct route, leaving the majority (including trunk services) to take detours and diversions all around the neighbourhood?
And seen from this perspective, the Express services that charges more for 'direct' routes seems to be a profit making move to exploit this system.
Posted by Jolly Jester | January 22, 2007 11:29 PM
A bit of an aside: I think we (Customers) really need to ask for more information or to collect information to "bargain" with the bus company if we want prices to decrease. (since they practically operate in an oligopoly).
Practically, I think customers need to know the answers to these question:
a) Do the buses actually follow the schedule? Do they indeed come in 7-15 minutes at peak hour etc?
b) Do the buses actually reach on time?
c) Are the buses actually comfortable (how packed the bus is)?
This is because the bus companies are using these 'facts' (better service, better buses, more timely service etc) as a 'reason' to increase fares. If we don't know how 'well' the bus companies are doing 5 years ago, it is easy for them to assert 'improvements' now and forever more. If we can show that they are a) not doing as well as they claim, b) and later, no improvement, there is probably a better case to argue against fare increases.
But very complicated to collate such information.
Posted by ben | January 23, 2007 1:01 PM
Dear Ringsei,
A fascinating article. However, since public transport companies are listed companies, they are accountable very much to the shareholders in generating the necessary profits and dividends.
Unlike public transport elsewhere in the world, Singapore's unique form of "privatised/duopolize" public transport creates incentives to maximize profits rather than maximize utility for the customers.
Unless public transport companies are convinced of win-win solutions; aka that changes in transport policies benefit the consumers as well as the companies economically, will they probably change.
My main concern is that since Singapore's population is growing so rapidly because of immigration and migrant workers, can this mode of managing public transport be viable in the future? It seems to be that there are much more people using public transport than 10 years ago; Taking a Bus seems to be more packed and MRT too, even during off peak hours.
Posted by Wayne Soon | January 23, 2007 4:45 PM
Wayne, thanks for your points. The "privatised/duopolize" arrangement is also present in London where Transport for London (TFL, the equivalent of the PTC) regulates fares and the contractors are dominated by privatized former state-owned companies like Arriva PLC. Even the market fundamentalist publication The Economist has acknowledged that London's bus system (in contrast to the rest of metropolitan UK) is working only because of heavy regulation. Flat fares are recognized by the transport companies here as win-win because it reduces costs of administration and does not impact revenue negatively. If PTC imposes flat fares of SGD 0.70, SBS's revenue will actually *increase* by 3%!
On the issue of population increase, increased passenger ridership and added crowding, I think this is why transport companies' interests still need to be taken into account despite the heavily public and social interests bound up in the services they provide (as pointed out by dogafox) - if they can't make money, they can't invest in new infrastructure or services. Structurally, hopefully the Circle line will be able to distribute travel loads more evenly when it becomes operational.
Posted by ringisei | January 23, 2007 5:33 PM
ringisei.
Sorry, I don't know much about the companies, I remember them being fully privatised though. Maybe this link might help some.
http://www.jreast.co.jp/e/investor/ar/2006/index.html
http://www.jreast.co.jp/e/investor/financial/index.html
Posted by ah.heng | January 24, 2007 1:14 AM