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GABRIEL SANCHEZ-MARTINEZ:
So let's get started today.

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Again, the topic is fare policy,
structure, and technology.

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So we'll cover policy
objectives, the issues

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that agencies face,
fare structure,

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demand response to fare
changes and fare technology.

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00:00:39,150 --> 00:00:41,810
So what are the
objectives of fare policy?

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There are multiple objectives,
and they don't necessarily

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support each other.

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In fact, they often
go against each other.

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So the number one objective
is to fund operations.

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That's the reason there's
a user fee for service.

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And I say here at
least partially

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because for the most part,
the revenues obtained

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by fare collection do not cover
the full operational costs,

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let alone capital costs.

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So here we have some examples
of fare recovery ratios

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based on the 2014
National Transit Database.

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Now, you might
remember that we talked

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about the National
Transit Database

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earlier in this course.

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And here is a breakdown.

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I looked at all
heavy rail and I saw

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a range of between 0.14 0.78.

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So between 14% and 78%
of operational expenses

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are covered by fare revenue.

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The highest one here
is in California.

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For light rail a little lower
and for bus all over the place.

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Here we have the averages.

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These tend to be higher
for rail and lower for bus.

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So why is that?

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Why would that be the case?

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AUDIENCE: On an
operational level,

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one rail driver is carrying
a lot more passengers

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than one bus driver.

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00:02:03,919 --> 00:02:05,210
GABRIEL SANCHEZ-MARTINEZ: Yeah.

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Although you can
fill up a bus, right?

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AUDIENCE: You can fill up a
bus [INAUDIBLE] train carrying

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500 passengers.

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00:02:15,770 --> 00:02:16,160
GABRIEL SANCHEZ-MARTINEZ: Yeah.

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Yeah.

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Yeah.

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Yeah.

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00:02:19,560 --> 00:02:25,020
So to sort of go
back to my rebuttal,

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there are some buzzers here with
fare recovery ratios over one.

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So it's possible to have a bus
service that returns profit

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even.

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So why is it that
system-wide, bus services

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tend to have lower
fare recovery ratios?

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Because you have a good point,
the productivity of rail

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can be higher.

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Of course, if rail
is underutilized,

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then you still have that issue.

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Any other ideas?

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[INAUDIBLE]

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AUDIENCE: Buses [INAUDIBLE]
who can have the most service

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and cover the most
low ridership routes?

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GABRIEL SANCHEZ-MARTINEZ: Right.

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So there's an agency
and you system-wide

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have to cover your territory.

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That will include buses that
are not very heavily utilized.

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Also, you're
providing service late

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at night and all those things.

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So there are many cases of buses
not being very well utilized,

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and that brings down
the fare recovery ratio.

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I did not include here
demand responsive.

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Demand responsive is
usually around 1% to 2%.

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So I'm talking about
what here in Boston

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is called the ride for
disabled passengers.

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And it can cost
around $20 per ride,

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and people pay a lot less.

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So I think $20 is low.

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I think it's higher.

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Sorry.

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I don't remember the number,
but it's closer to $30 or $40,

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I think.

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So the fare recovery ratio
for demand responsive transit

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is much lower.

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OK.

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So other goals.

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Keep transit affordable
and promote social equity.

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So here we have the
first conflicts, right?

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The first objective would mean
that you want to raise fares,

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and if you raise fares then
you get more fare revenue.

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But there's another
objective, which

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is to keep transit affordable
and for social equity,

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and that would indicate that
you want to keep fares low.

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Right?

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So also, supporting growth
for demand of transit

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also keeps fares low.

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Make the fare structure
easy to communicate.

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We'll talk about different
fare structures and market

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segmentation later
in this lecture.

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But the point is that when
you do market segmentation,

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you can get more revenue
out of your fare system.

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00:04:45,560 --> 00:04:47,420
When you want to
keep things simple,

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then you're probably going to
suggest going for a flat fare

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structure, where people that
have much higher willingness

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to pay are still
paying low fares.

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So that objective
of keeping the fare

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structure easy to
communicate and simple

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will reduce fare earnings.

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And finally, to reduce
fare system costs.

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So there are costs
to fare collection

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and to the fare
system as a whole.

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Fare collection is one of them.

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So obviously, the capital cost
of installing the fare boxes

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and maintaining the
whole AFC system.

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00:05:21,770 --> 00:05:24,800
There is a cost for people
who are maintaining those fare

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00:05:24,800 --> 00:05:29,000
boxes and vaulting cash
out of the fare boxes

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and counting the cash and
keeping it in a safe place.

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And there's customer service.

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So customer service involves
more than the fare system.

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But some aspects
of customer service

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involve my CharlieCard doesn't
work, can I get a new one?

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Or I already paid
for that ride and you

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00:05:47,510 --> 00:05:49,260
need to give me a refund.

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00:05:49,260 --> 00:05:53,930
So these kinds of
inquiries or complaints

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are coming from the fare system.

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OK?

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Questions about
these objectives?

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00:06:01,060 --> 00:06:01,560
No.

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00:06:01,560 --> 00:06:02,360
OK.

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00:06:02,360 --> 00:06:05,770
So how does fare policy
intersect with other areas?

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It intersects with many areas,
and that makes fare policy

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and fare structure a very
powerful sort of lever or knob

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for a transit agency.

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So obviously, finance.

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We're talking about funding
operational expenses

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from the revenues derived
from the fare system.

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And then there's operations.

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So if you have a fare policy
that makes people board faster

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because, for example,
it's proof of payments

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so there's no
validation required

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or you have fare technology
that a smart card is

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much faster than
paying cash, then

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that means that you'll have
faster boarding, shorter dwell

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times, shorter cycle
times, higher reliability.

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So you might affect operations
through fare technology.

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Some fare structures
require fare inspection.

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So proof of payment is
one that people board

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without interacting
with any fare system,

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00:07:00,570 --> 00:07:02,490
so then an inspector
has to come in

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and either for all
passengers or more likely

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for a subset of passengers, a
sample of passengers, request

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proof of having paid the fare.

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And of course, that
involves some cost.

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There's maintenance
of equipment.

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If equipment breaks
down, the bus

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needs to be taken out
of service, et cetera.

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Public support.

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So politicians may
promise not raising fares.

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That's a popular
campaign promise.

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And then of course, that
puts a lot of pressure

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on the agency to
do more with less.

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And we'll talk more
about that when

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we discuss transit finance.

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There's difficulty gathering
support to raise fares.

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Usually, we'll
improve service first

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and then that justifies
raising fares.

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Right?

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I don't want my service
to get more expensive

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if it's not very good service.

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AUDIENCE: [INAUDIBLE]

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GABRIEL SANCHEZ-MARTINEZ: Right.

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And essentially, if you
have lower service quality,

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then fewer people end up
taking it or liking it,

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and those people
are not going to be

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the ones rallying for a
transit sort of fare hike.

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Then there's also labor's
push for higher wages.

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So that's another sort
of political pressure

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on the agency that
increases operational costs

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and therefore, may require
an increase in fares.

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But both a labor
dispute and a dispute

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with the passengers
on the fare hike

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are the result of unpleasant
negotiations or interactions

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in public.

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Administration, so fare
technology and fare policy

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and equity analysis.

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If you're considering any
change to technology or policy

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or structure, you have to
analyze the economic aspects

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of it and you have to
prove that you're not

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00:08:51,170 --> 00:08:54,850
discriminating against any one
group, even unintentionally.

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So disproportionately affecting
a disadvantaged community,

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either by race or income, that's
called Title VI in the US.

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Then there's another
big policy issue

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00:09:07,850 --> 00:09:10,160
is revenue sharing
across jurisdictions.

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Not so much an issue on the east
coast of the US, but certainly

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if you go to the West Coast, you
have in the San Francisco Bay

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Area dozens of operators.

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Some of them share
the same fare system.

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So how much does
each operator pay

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for routes that serve
multiple jurisdictions?

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That's one question.

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The other question might be,
if we are separate operators

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and we each have a route
so we take care of that,

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we still are collecting
fares with a joint system.

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Do we trust each other?

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And often, actually, the
barriers to integration

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are more about trust and
less about technology.

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Marketing is another
sort of issue

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the agency has to deal with.

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00:09:59,070 --> 00:10:02,640
How much do they market
and what is the message?

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00:10:02,640 --> 00:10:05,460
And customer service,
which we already mentioned.

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00:10:05,460 --> 00:10:07,260
It's interesting
to note that fares

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00:10:07,260 --> 00:10:09,390
are one of the first
things that a person

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00:10:09,390 --> 00:10:11,901
has to sort of understand
about a transit system

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00:10:11,901 --> 00:10:12,900
to be able to take them.

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00:10:12,900 --> 00:10:15,160
So if you're a tourist
and you go to a new city

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00:10:15,160 --> 00:10:17,670
that you've never been to
before you arrive at the airport

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00:10:17,670 --> 00:10:20,430
and you want to take the bus
or the train from the airport,

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00:10:20,430 --> 00:10:21,804
the first thing
you have to do is

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00:10:21,804 --> 00:10:24,240
buy a ticket, right, and
figure out the fare structure

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00:10:24,240 --> 00:10:27,570
and where are the
maps and et cetera.

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00:10:27,570 --> 00:10:30,840
So this is sort of one
of the first issues,

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00:10:30,840 --> 00:10:33,450
the first impression that a
passenger has about the fare

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00:10:33,450 --> 00:10:36,390
system, about the
transit agency, something

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00:10:36,390 --> 00:10:39,720
related to the fare system.

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00:10:39,720 --> 00:10:40,220
OK.

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00:10:40,220 --> 00:10:44,800
What issues do agencies
face regarding these topics?

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00:10:44,800 --> 00:10:46,420
One is fare recovery ratios.

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00:10:46,420 --> 00:10:48,390
So we looked at ranges.

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00:10:48,390 --> 00:10:50,790
Typically, fare recovery
ratio system-wide across modes

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00:10:50,790 --> 00:10:52,200
is about 1/3.

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00:10:52,200 --> 00:10:54,940
It varies a lot, as we saw.

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00:10:54,940 --> 00:10:57,160
It's rare to make
a profit system.

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00:10:57,160 --> 00:11:00,120
So one of the
issues is how much--

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00:11:00,120 --> 00:11:03,030
well, the first question is, how
much of a fare recovery ratio

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00:11:03,030 --> 00:11:09,720
do we need or do we set a goal
to cover operational expenses?

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00:11:09,720 --> 00:11:12,930
And is it sort of a
strong requirement,

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00:11:12,930 --> 00:11:14,420
as it is in some agencies?

238
00:11:14,420 --> 00:11:18,540
Some agencies have laws that
say the fare recovery ratio must

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00:11:18,540 --> 00:11:19,950
be at least this much.

240
00:11:19,950 --> 00:11:24,270
So if expenses go up,
automatic fare hike.

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00:11:24,270 --> 00:11:28,640
Others, it's more of a guideline
or maybe there is no policy.

242
00:11:28,640 --> 00:11:31,150
So that that's one
of the key issues.

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00:11:31,150 --> 00:11:33,630
The second one is how
often to raise fares.

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00:11:33,630 --> 00:11:36,270
I think most agencies
are reactive.

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00:11:36,270 --> 00:11:38,370
So a reactive
approach is one where

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00:11:38,370 --> 00:11:41,220
you avoid the headache
of a fare hike

247
00:11:41,220 --> 00:11:46,110
and all the sort of public
engagement that goes with it

248
00:11:46,110 --> 00:11:49,590
and you only do that
when you have to so

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00:11:49,590 --> 00:11:54,600
you are in a financial
situation where you absolutely

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00:11:54,600 --> 00:11:59,880
need to raise fare revenues
to continue operating.

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00:11:59,880 --> 00:12:03,370
So that happens less
than once every year

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00:12:03,370 --> 00:12:05,280
and it's a big effort.

253
00:12:05,280 --> 00:12:08,400
Some agencies take the
approach of an annual fare

254
00:12:08,400 --> 00:12:10,196
hike with inflation.

255
00:12:10,196 --> 00:12:11,820
So it's kind of
predictable, it happens

256
00:12:11,820 --> 00:12:13,380
every year at the same date.

257
00:12:13,380 --> 00:12:16,590
It tends to make each
one easier than one

258
00:12:16,590 --> 00:12:20,160
done ad hoc because
it's more expectable

259
00:12:20,160 --> 00:12:23,420
and there's less public outrage.

260
00:12:26,222 --> 00:12:28,180
So gathering and maintaining
political support,

261
00:12:28,180 --> 00:12:30,910
we talked a little
bit about that.

262
00:12:30,910 --> 00:12:35,270
Of course, that is an issue that
will play out and sort of it

263
00:12:35,270 --> 00:12:40,570
will affect how other issues
are faced and dealt with.

264
00:12:40,570 --> 00:12:43,030
One other issue is do
we raise base fares

265
00:12:43,030 --> 00:12:47,680
or do we change the relative
cost of passes and discounted

266
00:12:47,680 --> 00:12:48,980
fare products?

267
00:12:48,980 --> 00:12:52,300
So if a base fare
is $2, you might

268
00:12:52,300 --> 00:12:57,610
have 50% subsidy
for seniors and you

269
00:12:57,610 --> 00:13:01,570
might have some other discounts
for students or other groups.

270
00:13:01,570 --> 00:13:04,600
You might also have passes
like a weekly pass, which

271
00:13:04,600 --> 00:13:07,210
if you take some number
of trips you break even

272
00:13:07,210 --> 00:13:09,160
and after that, you ride free.

273
00:13:09,160 --> 00:13:12,880
So you might actually leave
the base fare the same

274
00:13:12,880 --> 00:13:17,350
and change the percentages
of subsidy or discounts

275
00:13:17,350 --> 00:13:20,020
or the break even
point of a pass.

276
00:13:20,020 --> 00:13:21,550
And that can affect
fare revenues,

277
00:13:21,550 --> 00:13:24,010
it can affect ridership, and
it can affect people's choice

278
00:13:24,010 --> 00:13:25,700
of fare product.

279
00:13:25,700 --> 00:13:32,980
So you might bump people towards
letting go of fare passes

280
00:13:32,980 --> 00:13:37,480
and opting to do pay as you
go more often or the other way

281
00:13:37,480 --> 00:13:38,240
around.

282
00:13:38,240 --> 00:13:39,910
And that has implications
on how people

283
00:13:39,910 --> 00:13:45,520
think about the transit system,
how much it costs for them.

284
00:13:45,520 --> 00:13:49,330
For a pass holder, of course,
once they've paid for it,

285
00:13:49,330 --> 00:13:52,630
it's kind of a
non-salient expense.

286
00:13:52,630 --> 00:13:55,350
So you don't think
about it every time

287
00:13:55,350 --> 00:13:59,770
you're tapping as much as having
value deducted from the card

288
00:13:59,770 --> 00:14:00,280
every time.

289
00:14:00,280 --> 00:14:04,732
So those people might
ride opportunistically

290
00:14:04,732 --> 00:14:06,190
because they've
already paid for it

291
00:14:06,190 --> 00:14:09,460
and they might do shorter
trips, discretionary trips

292
00:14:09,460 --> 00:14:11,680
more so than someone
who is paying

293
00:14:11,680 --> 00:14:14,524
every fare independently.

294
00:14:14,524 --> 00:14:15,940
And another big
issue is investing

295
00:14:15,940 --> 00:14:17,050
in new fare technology.

296
00:14:17,050 --> 00:14:19,090
That's a headache,
a big headache.

297
00:14:19,090 --> 00:14:23,610
You can imagine changing the
way the old technology, all

298
00:14:23,610 --> 00:14:28,090
the analytics and administration
depends on uncertain system.

299
00:14:28,090 --> 00:14:31,840
And bringing in a new system
that nobody understands yet

300
00:14:31,840 --> 00:14:33,410
might work or not.

301
00:14:33,410 --> 00:14:36,220
So all the maintenance
needs to be figured out.

302
00:14:36,220 --> 00:14:39,310
And you have to communicate with
the public about what impact

303
00:14:39,310 --> 00:14:42,760
that has on them, and
that could involve changes

304
00:14:42,760 --> 00:14:45,760
in the fare structure,
not just the technology.

305
00:14:45,760 --> 00:14:48,820
So sometimes technology enables
new fare structures or new fare

306
00:14:48,820 --> 00:14:49,890
policies.

307
00:14:49,890 --> 00:14:51,400
And that can be
one of the reasons

308
00:14:51,400 --> 00:14:54,130
for bringing new technology.

309
00:14:54,130 --> 00:14:55,844
Questions on the issues?

310
00:14:55,844 --> 00:14:56,475
[INAUDIBLE]

311
00:14:56,475 --> 00:14:57,100
AUDIENCE: Yeah.

312
00:14:57,100 --> 00:15:02,370
I wonder if the
rising fare issue

313
00:15:02,370 --> 00:15:06,620
is less common in
privately operated system

314
00:15:06,620 --> 00:15:07,954
than in public operated systems.

315
00:15:07,954 --> 00:15:10,161
GABRIEL SANCHEZ-MARTINEZ:
Can you give me an example?

316
00:15:10,161 --> 00:15:11,910
I'm not sure I
follow the question.

317
00:15:11,910 --> 00:15:14,680
AUDIENCE: In systems where
bus and rail are exceptions

318
00:15:14,680 --> 00:15:15,717
to the private sector.

319
00:15:15,717 --> 00:15:17,050
GABRIEL SANCHEZ-MARTINEZ: Right.

320
00:15:17,050 --> 00:15:19,390
Sometimes the public
sector is the one--

321
00:15:19,390 --> 00:15:22,960
so if you look at
the case of London,

322
00:15:22,960 --> 00:15:25,930
for example, even though
buses are operated

323
00:15:25,930 --> 00:15:31,060
by private companies in
some way it's a contract

324
00:15:31,060 --> 00:15:34,150
so the fare policy
is still set by TFL,

325
00:15:34,150 --> 00:15:36,430
which is the government.

326
00:15:36,430 --> 00:15:38,470
That's I think usually
the case if you

327
00:15:38,470 --> 00:15:45,520
have a push for a unified
single brand of the system.

328
00:15:45,520 --> 00:15:46,930
Maybe in other countries--

329
00:15:46,930 --> 00:15:50,110
I'm thinking more of
Latin America, Africa--

330
00:15:50,110 --> 00:15:51,790
there are sort of
independent people

331
00:15:51,790 --> 00:15:53,750
running their own systems.

332
00:15:53,750 --> 00:15:56,200
And those are usually
cash-based so there's

333
00:15:56,200 --> 00:15:58,740
no integration whatsoever.

334
00:15:58,740 --> 00:16:00,585
Maybe you have a
different example.

335
00:16:00,585 --> 00:16:01,380
AUDIENCE: But No.

336
00:16:01,380 --> 00:16:05,750
Still [INAUDIBLE] just
[INAUDIBLE] the government.

337
00:16:05,750 --> 00:16:09,440
So I wonder if the type
of contracts [INAUDIBLE]

338
00:16:09,440 --> 00:16:12,590
engage with the private
[INAUDIBLE] concessions.

339
00:16:12,590 --> 00:16:13,900
I mean, there is a difference.

340
00:16:13,900 --> 00:16:16,640
There is a myriad of
types of [INAUDIBLE]..

341
00:16:16,640 --> 00:16:22,820
I wonder if that allows you more
flexibility to sort of delay

342
00:16:22,820 --> 00:16:25,580
because you're under a contract
with a specific [INAUDIBLE]

343
00:16:25,580 --> 00:16:28,420
negotiation [INAUDIBLE].

344
00:16:28,420 --> 00:16:32,480
So I wonder if that give you
leverage to delay increasing

345
00:16:32,480 --> 00:16:35,135
fares, as opposed to--

346
00:16:35,135 --> 00:16:36,760
GABRIEL SANCHEZ-MARTINEZ:
I'm not sure.

347
00:16:36,760 --> 00:16:38,260
Frankly, I'm not sure.

348
00:16:38,260 --> 00:16:43,210
Sort of the issues related
to concessions in that case

349
00:16:43,210 --> 00:16:45,700
depend a lot on the
contract structure.

350
00:16:45,700 --> 00:16:52,300
So some concessions derive
revenue from the fare.

351
00:16:52,300 --> 00:16:55,400
I think that's not the
best way of doing it.

352
00:16:55,400 --> 00:16:57,370
But if that's how the
contract is structured,

353
00:16:57,370 --> 00:16:59,930
essentially, you say,
I want you to operate.

354
00:16:59,930 --> 00:17:01,870
You keep the fares.

355
00:17:01,870 --> 00:17:06,430
Then of course, any fare
question will affect revenues

356
00:17:06,430 --> 00:17:09,250
and it will affect
ridership too.

357
00:17:09,250 --> 00:17:13,510
So the private operator will be
interested in any kind of fare

358
00:17:13,510 --> 00:17:16,900
policy change if that
increases their revenues

359
00:17:16,900 --> 00:17:22,210
and will be disinterested in
any fare policy change that

360
00:17:22,210 --> 00:17:24,760
decreases their revenues, or
increases the risk of revenue

361
00:17:24,760 --> 00:17:25,260
anyway.

362
00:17:25,260 --> 00:17:28,750
So that is probably
a poisonous topic

363
00:17:28,750 --> 00:17:30,640
during the length of
a contract and you

364
00:17:30,640 --> 00:17:34,780
might have to then do
it between contracts.

365
00:17:34,780 --> 00:17:37,090
Here I'm speculating,
but I imagine

366
00:17:37,090 --> 00:17:42,800
this is a case where you
pay to run by distance

367
00:17:42,800 --> 00:17:45,070
or you might have some
performance standards as well,

368
00:17:45,070 --> 00:17:46,660
but it's not fare so much.

369
00:17:46,660 --> 00:17:48,580
So the government
keeps the fares

370
00:17:48,580 --> 00:17:51,490
and then pays the operators
the contracted amount.

371
00:17:51,490 --> 00:17:56,770
Then that disconnects the
operator's performance

372
00:17:56,770 --> 00:18:00,820
from fare revenue and it allows
the government or the planning

373
00:18:00,820 --> 00:18:06,140
agency to change the fare
structure, change fare

374
00:18:06,140 --> 00:18:08,960
technology in the
middle of a contract.

375
00:18:08,960 --> 00:18:12,370
And so in the former case, I
imagine it's quite complicated.

376
00:18:12,370 --> 00:18:19,420
Because usually, the contracts
are not awarded on cycle, i.e.,

377
00:18:19,420 --> 00:18:22,000
at a certain moment in time
you might have a contract that

378
00:18:22,000 --> 00:18:25,100
expires next month; another
one that expires in a year;

379
00:18:25,100 --> 00:18:27,010
another one that
expires in five years.

380
00:18:27,010 --> 00:18:29,710
So to implement a
system-wide change,

381
00:18:29,710 --> 00:18:32,010
it would be very
difficult if the contracts

382
00:18:32,010 --> 00:18:34,945
depend on the fare revenues.

383
00:18:38,000 --> 00:18:38,536
Yeah.

384
00:18:38,536 --> 00:18:39,590
AUDIENCE: So a
couple of questions.

385
00:18:39,590 --> 00:18:42,000
One, it seems like one of
the biggest choices you make

386
00:18:42,000 --> 00:18:44,550
is whether to have
[INAUDIBLE] whether to have

387
00:18:44,550 --> 00:18:45,710
a flat or a zoned fare.

388
00:18:45,710 --> 00:18:45,940
GABRIEL SANCHEZ-MARTINEZ: Yeah.

389
00:18:45,940 --> 00:18:48,023
And we're going to talk
about market segmentation.

390
00:18:48,023 --> 00:18:48,780
AUDIENCE: OK.

391
00:18:48,780 --> 00:18:55,810
And then about raising fares,
I see that the MTA in New York

392
00:18:55,810 --> 00:18:58,300
battles to raise
fares, so I think

393
00:18:58,300 --> 00:19:00,950
flow is really hard for them,
whereas when I lived London,

394
00:19:00,950 --> 00:19:03,230
literally every single year on
January 1st, the fare changed.

395
00:19:03,230 --> 00:19:03,390
GABRIEL SANCHEZ-MARTINEZ: Yeah.

396
00:19:03,390 --> 00:19:05,370
So that goes back
this sort of annually

397
00:19:05,370 --> 00:19:08,130
with inflation and strategy
where you do it every year

398
00:19:08,130 --> 00:19:10,877
and it just happens
on January 1st.

399
00:19:10,877 --> 00:19:12,960
AUDIENCE: People get a big
grumpy, but [INAUDIBLE]

400
00:19:12,960 --> 00:19:13,500
about it.

401
00:19:13,500 --> 00:19:14,833
GABRIEL SANCHEZ-MARTINEZ: Right.

402
00:19:14,833 --> 00:19:16,242
Right.

403
00:19:16,242 --> 00:19:17,760
And there are many
other examples

404
00:19:17,760 --> 00:19:20,490
of that kind of approach.

405
00:19:20,490 --> 00:19:22,250
I think it's more
effective, frankly.

406
00:19:22,250 --> 00:19:26,520
Expenses go up every
year, so why not?

407
00:19:26,520 --> 00:19:30,180
Communicate what the
strategy is, make it fair--

408
00:19:30,180 --> 00:19:37,710
no pun intended-- and do it.

409
00:19:37,710 --> 00:19:41,820
AUDIENCE: I read once that
King County Transit in Seattle

410
00:19:41,820 --> 00:19:44,930
discounts fares
for people living

411
00:19:44,930 --> 00:19:50,996
below the poverty line or
some threshold based on that.

412
00:19:50,996 --> 00:19:54,100
[INAUDIBLE] Is
that pretty common?

413
00:19:54,100 --> 00:19:55,350
GABRIEL SANCHEZ-MARTINEZ: Yes.

414
00:19:55,350 --> 00:19:57,067
So we'll talk-- in
market segmentation,

415
00:19:57,067 --> 00:19:58,650
one of the things
you might segment by

416
00:19:58,650 --> 00:20:01,020
is socioeconomic status.

417
00:20:01,020 --> 00:20:02,270
Yeah.

418
00:20:02,270 --> 00:20:04,000
And there's different
ways of doing that.

419
00:20:04,000 --> 00:20:06,120
So we can talk more about
that when we get there.

420
00:20:06,120 --> 00:20:07,842
AUDIENCE: I have
another question.

421
00:20:07,842 --> 00:20:11,830
I also have heard it
argued that with the switch

422
00:20:11,830 --> 00:20:13,890
to all electronic
tolling that it

423
00:20:13,890 --> 00:20:17,879
increases [INAUDIBLE] obscures
how much you actually pay.

424
00:20:17,879 --> 00:20:19,170
GABRIEL SANCHEZ-MARTINEZ: Yeah.

425
00:20:19,170 --> 00:20:21,070
This is a saliency issue.

426
00:20:21,070 --> 00:20:24,149
AUDIENCE: [INAUDIBLE] switch
from cash-base fare system to--

427
00:20:24,149 --> 00:20:25,690
GABRIEL SANCHEZ-MARTINEZ:
Absolutely.

428
00:20:25,690 --> 00:20:26,190
Yeah.

429
00:20:26,190 --> 00:20:28,860
Especially if you go to
passes or a capping scheme,

430
00:20:28,860 --> 00:20:30,450
which we'll discuss.

431
00:20:30,450 --> 00:20:31,230
So yeah.

432
00:20:31,230 --> 00:20:33,240
The more obscure, you
make the fare system,

433
00:20:33,240 --> 00:20:39,560
the less of an impact it
will have on demand response.

434
00:20:39,560 --> 00:20:43,630
And that is true in other areas.

435
00:20:43,630 --> 00:20:46,080
If you look at it from a
macroeconomic perspective,

436
00:20:46,080 --> 00:20:47,080
that's true in business.

437
00:20:47,080 --> 00:20:48,935
AUDIENCE: Wouldn't that
mean the more obscure you

438
00:20:48,935 --> 00:20:49,870
make it, the less--

439
00:20:49,870 --> 00:20:52,286
GABRIEL SANCHEZ-MARTINEZ: Well,
if people don't understand

440
00:20:52,286 --> 00:20:59,350
pricing, it may be you might
get a sort of lower reaction

441
00:20:59,350 --> 00:21:02,410
to changes in pricing.

442
00:21:02,410 --> 00:21:04,070
You make less of
a fuss about it.

443
00:21:08,710 --> 00:21:09,210
OK.

444
00:21:09,210 --> 00:21:11,690
Fare structure, so
market segmentation.

445
00:21:11,690 --> 00:21:13,580
That's a good segue
with these questions.

446
00:21:13,580 --> 00:21:17,580
So one possible way of
having a fare structure

447
00:21:17,580 --> 00:21:19,230
is to have a flat
fare structure.

448
00:21:19,230 --> 00:21:20,690
That's the simplest one.

449
00:21:20,690 --> 00:21:23,970
It costs some amount to
ride, no matter what.

450
00:21:23,970 --> 00:21:26,390
No matter where from,
what time of day,

451
00:21:26,390 --> 00:21:29,190
what mode, that's the price.

452
00:21:29,190 --> 00:21:30,950
So again, that's the simplest.

453
00:21:30,950 --> 00:21:33,230
I think most
agencies, if you look

454
00:21:33,230 --> 00:21:35,480
at the profile of all
agencies, including small ones,

455
00:21:35,480 --> 00:21:36,980
have that fare structure.

456
00:21:36,980 --> 00:21:40,070
Bigger agencies tend to have
some market segmentation

457
00:21:40,070 --> 00:21:46,460
because they are bigger and they
serve a wider range of people,

458
00:21:46,460 --> 00:21:48,530
they serve a wider
geographic area,

459
00:21:48,530 --> 00:21:50,670
and they have some
congestion problems.

460
00:21:50,670 --> 00:21:52,880
So how can we
differentiate fare,

461
00:21:52,880 --> 00:21:54,620
how can we segment the market?

462
00:21:54,620 --> 00:21:56,160
One is spatially.

463
00:21:56,160 --> 00:22:00,650
So you could have a flat
geographic structure

464
00:22:00,650 --> 00:22:04,250
where no matter where you
ride from, it costs the same.

465
00:22:04,250 --> 00:22:05,510
You could have zones.

466
00:22:05,510 --> 00:22:11,870
So here in Boston, we have no
zones outside of commuter rail.

467
00:22:11,870 --> 00:22:13,200
We have no zones.

468
00:22:13,200 --> 00:22:17,660
When you go to London, there's
zones one through nine,

469
00:22:17,660 --> 00:22:21,630
but most of the greater London
is in the first three, about.

470
00:22:21,630 --> 00:22:28,430
So it costs more to cross zones
than to ride within a zone.

471
00:22:28,430 --> 00:22:34,110
And you can buy passes that are
zone 1, zone 1-2, et cetera.

472
00:22:34,110 --> 00:22:36,770
So that's one way of doing it.

473
00:22:36,770 --> 00:22:40,880
If you take that to the extreme
and imagine many, many zones,

474
00:22:40,880 --> 00:22:43,790
you could end up with something
called distance-based pricing,

475
00:22:43,790 --> 00:22:46,400
where each of the pair
has a different fare,

476
00:22:46,400 --> 00:22:51,580
depending on how
long that ride was.

477
00:22:51,580 --> 00:22:55,090
So you can do that if you
have a tap-in, tap-out system,

478
00:22:55,090 --> 00:22:58,060
you can do that with proof
of payment in some cases.

479
00:22:58,060 --> 00:23:01,480
It's more common in Europe.

480
00:23:01,480 --> 00:23:04,270
And regarding zones,
a lot of agencies

481
00:23:04,270 --> 00:23:06,520
used to have more
zones and are going

482
00:23:06,520 --> 00:23:09,370
for reducing zones and
simplifying the system.

483
00:23:09,370 --> 00:23:11,890
It's an interesting,
curious trend

484
00:23:11,890 --> 00:23:14,920
because they've been doing
this at the same time

485
00:23:14,920 --> 00:23:17,350
that they've been investing
in new fare technology that

486
00:23:17,350 --> 00:23:20,920
enables more complex
fare structures.

487
00:23:20,920 --> 00:23:23,920
But it's a choice of
communicating to the public

488
00:23:23,920 --> 00:23:26,920
and keeping it simple,
easier to understand.

489
00:23:26,920 --> 00:23:29,350
AUDIENCE: And do a couple
of years' long advertising

490
00:23:29,350 --> 00:23:30,850
campaign to get
people to figure out

491
00:23:30,850 --> 00:23:33,183
how to cap for the
overground system, which

492
00:23:33,183 --> 00:23:35,020
is part of the TFL.

493
00:23:35,020 --> 00:23:38,310
Because you could essentially
go around the entire city just

494
00:23:38,310 --> 00:23:40,090
in zone 2.

495
00:23:40,090 --> 00:23:41,757
But if you don't tap
in in the right way

496
00:23:41,757 --> 00:23:43,340
when you transfer
trains or something,

497
00:23:43,340 --> 00:23:45,220
it will think you went
into the city and out.

498
00:23:45,220 --> 00:23:47,710
It's a lot cheaper to go
regularly than it is to go--

499
00:23:47,710 --> 00:23:48,070
GABRIEL SANCHEZ-MARTINEZ: Right.

500
00:23:48,070 --> 00:23:49,310
Because you stay in one zone.

501
00:23:49,310 --> 00:23:50,560
AUDIENCE: It was so confusing.

502
00:23:50,560 --> 00:23:52,518
They had people on the
platforms explaining it.

503
00:23:56,355 --> 00:23:59,800
AUDIENCE: Is DC Metro an
example of distance-based?

504
00:23:59,800 --> 00:24:01,930
GABRIEL SANCHEZ-MARTINEZ:
In some ways, yes.

505
00:24:01,930 --> 00:24:07,030
They have many sort of
things that influence price.

506
00:24:07,030 --> 00:24:10,300
So I don't know if you've had
the experience of going to CRB

507
00:24:10,300 --> 00:24:12,370
and trying to figure out
how much money to put

508
00:24:12,370 --> 00:24:16,600
on your smart trip card because
it varies by time of day

509
00:24:16,600 --> 00:24:18,477
or how long you are
going to travel.

510
00:24:18,477 --> 00:24:20,560
And you don't necessarily
know that ahead of time,

511
00:24:20,560 --> 00:24:22,180
so you end up loading--

512
00:24:22,180 --> 00:24:23,320
it works in their favor.

513
00:24:23,320 --> 00:24:26,470
I just load up $20
or $40 depending on--

514
00:24:26,470 --> 00:24:29,590
I don't really figure out how
much my rides will cost and put

515
00:24:29,590 --> 00:24:31,510
in just that amount.

516
00:24:31,510 --> 00:24:34,330
Eventually, maybe I lose my
card and they keep the revenue.

517
00:24:36,920 --> 00:24:37,420
OK.

518
00:24:37,420 --> 00:24:38,630
Another-- oh, Eli.

519
00:24:38,630 --> 00:24:40,820
AUDIENCE: So you said
that you really need

520
00:24:40,820 --> 00:24:42,653
a tap-in, tap-out system
for distance-based,

521
00:24:42,653 --> 00:24:44,944
but for zonal [INAUDIBLE],,
how do you run that?

522
00:24:44,944 --> 00:24:46,360
GABRIEL SANCHEZ-MARTINEZ:
It could

523
00:24:46,360 --> 00:24:50,640
be proof of payment as well,
not just check-in, though.

524
00:24:50,640 --> 00:24:53,850
So in Europe, you
have some symptoms,

525
00:24:53,850 --> 00:24:56,680
especially it happens
more intercity.

526
00:24:56,680 --> 00:25:02,140
So you buy a ticket between
this station and that station

527
00:25:02,140 --> 00:25:04,650
and you have a paper ticket.

528
00:25:04,650 --> 00:25:08,110
And you when you board you
validate it so essentially,

529
00:25:08,110 --> 00:25:11,260
it gets canceled
with a timestamp.

530
00:25:11,260 --> 00:25:15,160
And if a fare inspector
comes, you better have one.

531
00:25:15,160 --> 00:25:17,840
Otherwise, you'll
be heavily fined.

532
00:25:17,840 --> 00:25:20,170
So that's one way of doing it.

533
00:25:23,190 --> 00:25:24,870
Any other questions?

534
00:25:24,870 --> 00:25:25,510
OK.

535
00:25:25,510 --> 00:25:28,370
Temporal segmentation, so
that's pretty straightforward.

536
00:25:28,370 --> 00:25:30,160
You've got a flat
system where there

537
00:25:30,160 --> 00:25:33,100
is no change in fares
across time of day

538
00:25:33,100 --> 00:25:35,890
and another one where
you have a peak surcharge

539
00:25:35,890 --> 00:25:37,300
or an off-peak discount.

540
00:25:37,300 --> 00:25:39,700
Same thing, two ways
of marketing it.

541
00:25:39,700 --> 00:25:43,390
Most agencies prefer to
offer a discount on off-peak

542
00:25:43,390 --> 00:25:46,090
than to charge more
during the peak,

543
00:25:46,090 --> 00:25:48,350
but it's all psychological.

544
00:25:48,350 --> 00:25:51,640
So why would an agency
be interested in doing

545
00:25:51,640 --> 00:25:55,090
this and what are the impacts?

546
00:25:55,090 --> 00:25:55,590
Henry.

547
00:25:55,590 --> 00:25:58,530
AUDIENCE: It would influence
people to maybe think more

548
00:25:58,530 --> 00:26:02,660
about taking the trips during
off-peak so that there are

549
00:26:02,660 --> 00:26:04,300
alternatives that they--

550
00:26:04,300 --> 00:26:05,508
GABRIEL SANCHEZ-MARTINEZ: OK.

551
00:26:05,508 --> 00:26:10,270
So nudging people who can
do off-peak to do off-peak

552
00:26:10,270 --> 00:26:13,300
rather than during the peak.

553
00:26:13,300 --> 00:26:14,120
What else?

554
00:26:14,120 --> 00:26:17,040
Any other ideas?

555
00:26:17,040 --> 00:26:19,250
AUDIENCE: Just encourage
more off-peak ridership

556
00:26:19,250 --> 00:26:21,476
in general, like people
should probably do this.

557
00:26:21,476 --> 00:26:21,718
GABRIEL SANCHEZ-MARTINEZ: Right.

558
00:26:21,718 --> 00:26:23,310
So more discretionary trips.

559
00:26:23,310 --> 00:26:26,331
So encourage more
off-peak ridership.

560
00:26:26,331 --> 00:26:26,830
OK.

561
00:26:26,830 --> 00:26:29,200
And why does it make
sense to charge more

562
00:26:29,200 --> 00:26:31,690
during the peak than
off-peak, regardless

563
00:26:31,690 --> 00:26:33,492
of how you market it?

564
00:26:33,492 --> 00:26:35,436
AUDIENCE: Some people
are [INAUDIBLE] flexible

565
00:26:35,436 --> 00:26:38,484
in their schedules and
[INAUDIBLE] capture that.

566
00:26:38,484 --> 00:26:39,900
GABRIEL SANCHEZ-MARTINEZ:
Exactly.

567
00:26:39,900 --> 00:26:41,850
So willingness to
pay is higher, either

568
00:26:41,850 --> 00:26:43,230
because they are
actually willing

569
00:26:43,230 --> 00:26:45,600
or because they are
captured on time like they

570
00:26:45,600 --> 00:26:49,350
have to arrive at some
time to work so they

571
00:26:49,350 --> 00:26:50,520
don't have many options.

572
00:26:50,520 --> 00:26:53,760
And that means that
they're much less flexible

573
00:26:53,760 --> 00:26:58,960
and that their response will be
much lower to a price change.

574
00:26:58,960 --> 00:27:01,340
OK.

575
00:27:01,340 --> 00:27:03,880
By service, that's
pretty simple too.

576
00:27:03,880 --> 00:27:05,630
You could charge the
same for bus and rail

577
00:27:05,630 --> 00:27:07,850
or you could say rail is
a better service so it's

578
00:27:07,850 --> 00:27:09,120
going to be more expensive.

579
00:27:09,120 --> 00:27:10,910
The MBTA has this option.

580
00:27:10,910 --> 00:27:13,970
Regular bus versus express
bus, another way in which

581
00:27:13,970 --> 00:27:16,370
the MBTA segments the market.

582
00:27:16,370 --> 00:27:20,990
So the idea is if it's a
nicer service, you pay more.

583
00:27:20,990 --> 00:27:22,520
By socioeconomic status.

584
00:27:22,520 --> 00:27:24,710
So students might get
a discount, seniors,

585
00:27:24,710 --> 00:27:26,900
disabled might get a discount.

586
00:27:26,900 --> 00:27:29,390
We have some rules
here where seniors

587
00:27:29,390 --> 00:27:32,520
have to be offered
half the base fare,

588
00:27:32,520 --> 00:27:35,590
so that's one example of that.

589
00:27:35,590 --> 00:27:37,620
Some of it can be mandated
by the government.

590
00:27:37,620 --> 00:27:38,995
And then there's
social programs.

591
00:27:38,995 --> 00:27:41,000
So there's different
ways of doing that.

592
00:27:41,000 --> 00:27:43,070
It could be as part
of your participation

593
00:27:43,070 --> 00:27:45,800
in some social
program, it could also

594
00:27:45,800 --> 00:27:51,560
be a needs-based subsidy
where you essentially

595
00:27:51,560 --> 00:27:56,730
prove that you have financial
need and based on your need,

596
00:27:56,730 --> 00:27:58,370
you give some amount of subsidy.

597
00:27:58,370 --> 00:28:02,000
So a subsidy could be on or
off, you either have the subsidy

598
00:28:02,000 --> 00:28:05,520
or you don't or it could
be depending on your need,

599
00:28:05,520 --> 00:28:07,670
you have more subsidy
or less subsidy.

600
00:28:07,670 --> 00:28:10,280
And usually, it's
the simpler one.

601
00:28:10,280 --> 00:28:13,580
I don't actually know
of any example that

602
00:28:13,580 --> 00:28:16,732
is done based on
your specific case,

603
00:28:16,732 --> 00:28:18,440
but you could think
of doing it that way.

604
00:28:18,440 --> 00:28:23,890
Because if somebody is
very, very poor then

605
00:28:23,890 --> 00:28:26,910
they might need more
subsidy than somebody who

606
00:28:26,910 --> 00:28:30,124
is just below the poverty line.

607
00:28:30,124 --> 00:28:34,108
AUDIENCE: [INAUDIBLE] is that
because those groups tend

608
00:28:34,108 --> 00:28:36,754
to have less ability to
pay or what's the logic?

609
00:28:36,754 --> 00:28:38,920
GABRIEL SANCHEZ-MARTINEZ:
That is usually the logic.

610
00:28:38,920 --> 00:28:40,560
So yeah.

611
00:28:40,560 --> 00:28:44,130
Again, it's sort of
social equity goal.

612
00:28:44,130 --> 00:28:50,380
So seniors and students
often can't drive, et cetera.

613
00:28:50,380 --> 00:28:53,460
So it's the goal of the transit
agency or the transit provider

614
00:28:53,460 --> 00:28:58,185
to increase mobility for
all groups of people,

615
00:28:58,185 --> 00:29:01,210
the way in which that
goal is satisfied.

616
00:29:01,210 --> 00:29:01,945
Henry.

617
00:29:01,945 --> 00:29:03,805
AUDIENCE: How about
programs where

618
00:29:03,805 --> 00:29:09,060
you can take out your income
pre-tax and [INAUDIBLE]??

619
00:29:09,060 --> 00:29:11,270
Is that like a social program?

620
00:29:11,270 --> 00:29:12,850
GABRIEL SANCHEZ-MARTINEZ: No.

621
00:29:12,850 --> 00:29:16,220
I do have that in
another lecture, yeah.

622
00:29:16,220 --> 00:29:18,260
Because that is
done for people--

623
00:29:18,260 --> 00:29:22,610
often, they are employee
who have a decent salary.

624
00:29:22,610 --> 00:29:25,000
So that's an incentive.

625
00:29:25,000 --> 00:29:28,460
And that incentive
exists for a car as well.

626
00:29:28,460 --> 00:29:32,630
So that's a different strategy.

627
00:29:32,630 --> 00:29:34,910
Another way of segmenting
is by willingness to prepay.

628
00:29:34,910 --> 00:29:39,110
So in other words, are
you willing to buy a pass?

629
00:29:39,110 --> 00:29:41,420
So if you can commit
to a whole month,

630
00:29:41,420 --> 00:29:43,280
then you get some discount.

631
00:29:43,280 --> 00:29:47,840
And this depends heavily on
what the break even point is.

632
00:29:47,840 --> 00:29:50,830
Usually, passes-- it used
to be the case that passes

633
00:29:50,830 --> 00:29:52,830
had heavy discounts.

634
00:29:52,830 --> 00:29:59,210
So even without having a commute
two times a week for five days,

635
00:29:59,210 --> 00:30:01,010
you would still get a discount.

636
00:30:01,010 --> 00:30:05,690
Now it tends to require
sometimes between two

637
00:30:05,690 --> 00:30:09,050
and three trips daily to
get that break even point.

638
00:30:09,050 --> 00:30:11,870
Some people still decide to
go with that because it's more

639
00:30:11,870 --> 00:30:14,570
convenient, it's less salient.

640
00:30:14,570 --> 00:30:20,300
So it's another way of
discriminating or segmenting

641
00:30:20,300 --> 00:30:22,240
the market.

642
00:30:22,240 --> 00:30:24,730
Any questions on
market segmentation?

643
00:30:24,730 --> 00:30:26,800
AUDIENCE: [INAUDIBLE]
so speaking

644
00:30:26,800 --> 00:30:31,439
of [INAUDIBLE],, the subsidies
given by government?

645
00:30:31,439 --> 00:30:32,980
GABRIEL SANCHEZ-MARTINEZ:
It depends.

646
00:30:32,980 --> 00:30:35,020
So it could be
that the agency has

647
00:30:35,020 --> 00:30:37,570
a mandate they have to do this.

648
00:30:37,570 --> 00:30:40,630
That is often the model.

649
00:30:40,630 --> 00:30:42,520
From an agency's
perspective it would

650
00:30:42,520 --> 00:30:47,680
be much preferable to have the
subsidy come from someone else.

651
00:30:47,680 --> 00:30:49,540
Because then that
would allow the agency

652
00:30:49,540 --> 00:30:52,390
to focus on operating,
It would set fares

653
00:30:52,390 --> 00:30:56,140
to what it needs to cover
operational expenses.

654
00:30:56,140 --> 00:30:59,110
And then if it's a
social program, well,

655
00:30:59,110 --> 00:31:02,200
why doesn't that social
program provide the subsidy?

656
00:31:02,200 --> 00:31:09,370
If it's disabled, maybe there's
some other government entity

657
00:31:09,370 --> 00:31:11,560
that can provide that subsidy.

658
00:31:11,560 --> 00:31:14,200
For students, why
not the schools

659
00:31:14,200 --> 00:31:16,240
or the Department of Education.

660
00:31:16,240 --> 00:31:19,420
So that's an interesting
sort of policy debate

661
00:31:19,420 --> 00:31:21,700
and we could talk about
it for a long time

662
00:31:21,700 --> 00:31:23,890
because some people are
very much against it

663
00:31:23,890 --> 00:31:27,300
and some people think
that's a good idea.

664
00:31:27,300 --> 00:31:28,110
Yeah.

665
00:31:28,110 --> 00:31:31,330
AUDIENCE: Also another thing
about the various groups that

666
00:31:31,330 --> 00:31:33,050
are entitled to
subsidies is that you

667
00:31:33,050 --> 00:31:36,160
have to have some mechanism
within your technology

668
00:31:36,160 --> 00:31:38,179
that verifies that a
person is [INAUDIBLE]..

669
00:31:38,179 --> 00:31:39,970
GABRIEL SANCHEZ-MARTINEZ:
To prevent fraud.

670
00:31:39,970 --> 00:31:41,660
Yeah.

671
00:31:41,660 --> 00:31:45,230
So smart cards are
helpful with that

672
00:31:45,230 --> 00:31:51,140
because you can embed the
transit chip into a student

673
00:31:51,140 --> 00:31:52,360
card, for example.

674
00:31:52,360 --> 00:31:54,970
And that's what we
have here at MIT.

675
00:31:54,970 --> 00:31:55,470
OK.

676
00:31:55,470 --> 00:31:56,400
Fare elasticities.

677
00:31:56,400 --> 00:31:59,850
So they can range from -1 to 0.

678
00:31:59,850 --> 00:32:04,320
We know that demand of
transit is inelastic.

679
00:32:04,320 --> 00:32:10,860
So it means that almost always,
virtually in every case,

680
00:32:10,860 --> 00:32:13,020
if you raise fares, you
increase your revenue

681
00:32:13,020 --> 00:32:15,560
and your ridership
decreases not by too much,

682
00:32:15,560 --> 00:32:18,370
not by so much that your
fare revenues go down.

683
00:32:18,370 --> 00:32:22,680
So here are some examples
of typical elasticities.

684
00:32:22,680 --> 00:32:26,460
They usually are
closer to -0.3 or -0.4.

685
00:32:26,460 --> 00:32:32,130
For rail, it's a little
less, so -0.2, -0.15.

686
00:32:32,130 --> 00:32:35,010
For off-peak, it tends
to be twice as much

687
00:32:35,010 --> 00:32:37,830
because more trips
are discretionary.

688
00:32:37,830 --> 00:32:40,440
For work trips, it tends
to be much more inelastic,

689
00:32:40,440 --> 00:32:43,890
as we discussed, so even
half of their base one.

690
00:32:43,890 --> 00:32:45,600
And there's
something interesting

691
00:32:45,600 --> 00:32:47,560
that is maybe not as
important anymore,

692
00:32:47,560 --> 00:32:49,562
but I wanted to add it here.

693
00:32:49,562 --> 00:32:51,270
There is a higher
demand for free transit

694
00:32:51,270 --> 00:32:53,190
than there is for very,
very cheap transit.

695
00:32:53,190 --> 00:32:54,720
Even if you have
to pay, say a cent,

696
00:32:54,720 --> 00:33:00,570
to really get to the extreme,
the simplicity of not having

697
00:33:00,570 --> 00:33:03,810
to deal with paying fares, not
having to interact with a fare

698
00:33:03,810 --> 00:33:07,650
system, and from the marketing
point of view, it's free--

699
00:33:07,650 --> 00:33:11,850
you can just take it
whenever, you don't

700
00:33:11,850 --> 00:33:14,790
have to be ready to take it--

701
00:33:14,790 --> 00:33:17,790
then that sort of
drives demand up.

702
00:33:17,790 --> 00:33:19,680
So that's an
interesting finding.

703
00:33:19,680 --> 00:33:21,510
A lot of agencies have
moved away from that

704
00:33:21,510 --> 00:33:24,150
because these are
usually smaller agencies.

705
00:33:24,150 --> 00:33:28,319
But of course, operational costs
increase and at some point,

706
00:33:28,319 --> 00:33:29,610
you need to cover them somehow.

707
00:33:32,210 --> 00:33:39,990
So these inelastic values
mean that raising fares

708
00:33:39,990 --> 00:33:42,082
is an effective way of
increasing revenues.

709
00:33:42,082 --> 00:33:43,540
Not so much to
increase the demand,

710
00:33:43,540 --> 00:33:46,710
although sometimes some
aspects of fare policy

711
00:33:46,710 --> 00:33:48,300
are changed to
increase the amount.

712
00:33:48,300 --> 00:33:51,270
You know you're going to get
a small response to that.

713
00:33:51,270 --> 00:33:54,300
From a microeconomics
perspective,

714
00:33:54,300 --> 00:33:56,880
if you think about market
segmentation and running

715
00:33:56,880 --> 00:33:58,920
transit like a
business, then you

716
00:33:58,920 --> 00:34:02,760
would want to charge
more for longer trips;

717
00:34:02,760 --> 00:34:05,640
trips in more convenient,
reliable, comfortable,

718
00:34:05,640 --> 00:34:09,420
and frequent modes; peak
period trips; trips where

719
00:34:09,420 --> 00:34:12,750
other modes are inconvenient
or costly, therefore this

720
00:34:12,750 --> 00:34:15,030
is the best option and why
not charge more for it;

721
00:34:15,030 --> 00:34:17,250
and trips subsidized
by third parties

722
00:34:17,250 --> 00:34:20,639
because then you could
capture some of the increased

723
00:34:20,639 --> 00:34:22,590
fare from an outside source.

724
00:34:22,590 --> 00:34:23,159
All right.

725
00:34:23,159 --> 00:34:27,060
So of course, not
everybody would

726
00:34:27,060 --> 00:34:29,730
agree that this is what
agencies should do.

727
00:34:29,730 --> 00:34:31,230
But if you are
thinking of running

728
00:34:31,230 --> 00:34:34,170
an agency as a business, this
is exactly what you want.

729
00:34:34,170 --> 00:34:37,530
If you have more willingness
to pay for whatever reason,

730
00:34:37,530 --> 00:34:39,139
your fare is higher.

731
00:34:39,139 --> 00:34:41,760
And that means that
fare revenues go up

732
00:34:41,760 --> 00:34:43,969
and your fare recovery
ratio goes up.

733
00:34:43,969 --> 00:34:46,949
And that means you can
operate more service

734
00:34:46,949 --> 00:34:48,780
or you can operate more
reliably or you can

735
00:34:48,780 --> 00:34:50,591
get nicer vehicles, et cetera.

736
00:34:50,591 --> 00:34:51,090
All right.

737
00:34:53,880 --> 00:34:55,900
So transfer pricing and policy.

738
00:34:55,900 --> 00:34:58,320
Another issue,
some agencies don't

739
00:34:58,320 --> 00:35:02,670
have any sort of
integration between rides

740
00:35:02,670 --> 00:35:05,790
so every time you board a
vehicle, you pay a full fare

741
00:35:05,790 --> 00:35:07,710
and there's no free transfer.

742
00:35:07,710 --> 00:35:10,470
Some agencies have a
reduced price transfer

743
00:35:10,470 --> 00:35:11,880
or a free transfer.

744
00:35:11,880 --> 00:35:14,950
And free transfers can be
done in different ways.

745
00:35:14,950 --> 00:35:17,250
One of the most
common ways is to have

746
00:35:17,250 --> 00:35:19,590
a time-based free transfer.

747
00:35:19,590 --> 00:35:23,850
So you tap and you
get, say, an hour

748
00:35:23,850 --> 00:35:29,920
or two hours of free transit
starting from that point.

749
00:35:29,920 --> 00:35:33,270
So if you transfer,
you'll presumably

750
00:35:33,270 --> 00:35:36,450
be in this two-hour window
and the next time you tap,

751
00:35:36,450 --> 00:35:38,490
it'll be a free transfer.

752
00:35:38,490 --> 00:35:42,390
Here in the MBTA, the price
is higher for rail and bus.

753
00:35:42,390 --> 00:35:45,390
So if you transfer from bus to
rail, you pay the difference.

754
00:35:45,390 --> 00:35:49,440
If you transfer from rail
to bus, both are free.

755
00:35:49,440 --> 00:35:52,110
Interestingly, with
this time-based rule,

756
00:35:52,110 --> 00:35:55,360
you can often do something
very quickly and return

757
00:35:55,360 --> 00:35:57,510
and these are actually
two different trips

758
00:35:57,510 --> 00:36:02,000
and you would still
get a free return trip

759
00:36:02,000 --> 00:36:03,640
and it's not a transfer.

760
00:36:03,640 --> 00:36:05,460
So with more complex
fare rules, you

761
00:36:05,460 --> 00:36:09,270
could say you should get free
transfers within this window,

762
00:36:09,270 --> 00:36:11,340
but not if you are
on the same bus route

763
00:36:11,340 --> 00:36:14,220
or if you are tapping into
the same station or things

764
00:36:14,220 --> 00:36:15,150
like this.

765
00:36:15,150 --> 00:36:17,880
You could think
of the rules used

766
00:36:17,880 --> 00:36:21,880
for transfer insurance when we
discussed all the [INAUDIBLE]..

767
00:36:21,880 --> 00:36:23,940
These are not fare transfers.

768
00:36:23,940 --> 00:36:26,260
Those were sort of a
logical trip transfers

769
00:36:26,260 --> 00:36:27,900
and you could apply those rules.

770
00:36:27,900 --> 00:36:29,640
You could put them
into a fare engine

771
00:36:29,640 --> 00:36:35,160
and not give free transfers
when it's not a transfer.

772
00:36:35,160 --> 00:36:35,670
OK.

773
00:36:35,670 --> 00:36:37,950
Pay-as-you-go,
passes, and capping.

774
00:36:37,950 --> 00:36:38,450
OK.

775
00:36:38,450 --> 00:36:40,340
One question before we--

776
00:36:40,340 --> 00:36:41,100
Daniel.

777
00:36:41,100 --> 00:36:43,250
Yeah.

778
00:36:43,250 --> 00:36:44,770
AUDIENCE: Is there--
how do agencies

779
00:36:44,770 --> 00:36:48,796
determine if it's unlimited free
transfers within the same trip

780
00:36:48,796 --> 00:36:52,030
or [INAUDIBLE]?

781
00:36:52,030 --> 00:36:57,088
Because [INAUDIBLE] bus,
rail, bus [INAUDIBLE]

782
00:36:57,088 --> 00:36:58,550
have to [INAUDIBLE].

783
00:36:58,550 --> 00:36:59,000
GABRIEL SANCHEZ-MARTINEZ:
You usually

784
00:36:59,000 --> 00:37:01,370
don't have to because they
set the window wide enough

785
00:37:01,370 --> 00:37:05,600
so that you can get your
whole three-four trip done

786
00:37:05,600 --> 00:37:07,121
in that two-hour window.

787
00:37:07,121 --> 00:37:09,942
AUDIENCE: [INAUDIBLE] trips and
I've been charged [INAUDIBLE]..

788
00:37:09,942 --> 00:37:11,150
GABRIEL SANCHEZ-MARTINEZ: Oh.

789
00:37:11,150 --> 00:37:14,270
In theory, I think you could
go to customer service and say,

790
00:37:14,270 --> 00:37:15,410
this was a transfer.

791
00:37:15,410 --> 00:37:17,420
Your policy is free transfers.

792
00:37:17,420 --> 00:37:21,880
You need to refund me.

793
00:37:21,880 --> 00:37:22,380
Yeah.

794
00:37:26,520 --> 00:37:28,230
I don't know the
details of it, but I

795
00:37:28,230 --> 00:37:30,105
imagine that's the case,
that you could argue

796
00:37:30,105 --> 00:37:31,290
that you deserve a refund.

797
00:37:31,290 --> 00:37:33,266
AUDIENCE: [INAUDIBLE] paid
fare policy [INAUDIBLE]

798
00:37:33,266 --> 00:37:34,200
reach your [INAUDIBLE].

799
00:37:34,200 --> 00:37:35,408
GABRIEL SANCHEZ-MARTINEZ: OK.

800
00:37:35,408 --> 00:37:37,260
I haven't, clearly.

801
00:37:37,260 --> 00:37:39,630
It would probably be very
interesting, actually.

802
00:37:39,630 --> 00:37:42,196
Any other questions
on transfers?

803
00:37:42,196 --> 00:37:44,070
Transfers are more of
an issue when there are

804
00:37:44,070 --> 00:37:46,137
multiple operators in a region.

805
00:37:46,137 --> 00:37:47,970
And we'll talk a little
bit more about that.

806
00:37:47,970 --> 00:37:53,890
If it's one operator, that's
sort of less controversial.

807
00:37:53,890 --> 00:37:54,510
OK.

808
00:37:54,510 --> 00:37:56,850
So pay-as-you-go
passes and capping.

809
00:37:56,850 --> 00:38:02,580
So pay-as-you-go is the simplest
way of paying for trips.

810
00:38:02,580 --> 00:38:05,190
You can do that with cash or
with tickets or smart cards

811
00:38:05,190 --> 00:38:06,670
that have a balance.

812
00:38:06,670 --> 00:38:09,210
So you load up some
value onto the card

813
00:38:09,210 --> 00:38:14,080
and every time you interact
with a fare box or fare gate,

814
00:38:14,080 --> 00:38:18,480
some amount of that balance
is deducted from the card.

815
00:38:18,480 --> 00:38:20,407
That's pretty clear, hopefully.

816
00:38:20,407 --> 00:38:21,240
Then there's passes.

817
00:38:21,240 --> 00:38:23,850
So the idea of a pass is
that you sort of prepay

818
00:38:23,850 --> 00:38:28,650
for three days, for a
week, sometimes for a day,

819
00:38:28,650 --> 00:38:30,060
sometimes for a month.

820
00:38:30,060 --> 00:38:35,610
And it's a fixed price so you
ride with zero marginal costs

821
00:38:35,610 --> 00:38:37,330
after paying that fixed price.

822
00:38:37,330 --> 00:38:40,230
If you ride frequently
enough, then you break even

823
00:38:40,230 --> 00:38:42,790
and anything beyond
that is a free ride.

824
00:38:42,790 --> 00:38:48,360
So it's interesting to note that
because passes are convenient,

825
00:38:48,360 --> 00:38:51,630
some fare revenue is
derived from past sales

826
00:38:51,630 --> 00:38:54,210
for people that
don't break even.

827
00:38:54,210 --> 00:38:55,840
That could happen
for several reasons.

828
00:38:55,840 --> 00:38:57,780
One of them might be
it's more convenient

829
00:38:57,780 --> 00:39:00,690
and I'm not going to figure
out every month if I'm

830
00:39:00,690 --> 00:39:03,420
going to be having the
pass or not the pass.

831
00:39:03,420 --> 00:39:06,510
It could also be that some
people receive a subsidy

832
00:39:06,510 --> 00:39:09,660
from somewhere and
what they spend

833
00:39:09,660 --> 00:39:12,126
on the pass is lower
than the pass value.

834
00:39:12,126 --> 00:39:14,250
And so for them, the real
break even point is lower

835
00:39:14,250 --> 00:39:17,580
and you may not necessarily
be considering that when

836
00:39:17,580 --> 00:39:19,681
you do this break even
point calculation.

837
00:39:22,390 --> 00:39:27,072
So in some cases, going
back to transfers, agencies

838
00:39:27,072 --> 00:39:28,530
that don't have
free transfers, you

839
00:39:28,530 --> 00:39:30,870
can get them indirectly
through a pass.

840
00:39:30,870 --> 00:39:33,660
Because they might
say, well, you

841
00:39:33,660 --> 00:39:36,480
break even at 10 rides
per week so that's

842
00:39:36,480 --> 00:39:41,400
your five weekdays times
two of going and returning.

843
00:39:41,400 --> 00:39:44,880
And if you have no
free transfers policy

844
00:39:44,880 --> 00:39:47,610
but your trip
requires one transfer,

845
00:39:47,610 --> 00:39:50,430
then you're going to very
quickly reach that limit

846
00:39:50,430 --> 00:39:52,420
and you're going to
ride free after that.

847
00:39:52,420 --> 00:39:56,590
So in practice, that would
be a free transfer policy,

848
00:39:56,590 --> 00:39:58,770
although not directly.

849
00:39:58,770 --> 00:40:01,430
So passes increase
convenience, we know that.

850
00:40:01,430 --> 00:40:03,290
The reduce saliency
so you're not

851
00:40:03,290 --> 00:40:05,720
thinking about how much money
you're paying every time

852
00:40:05,720 --> 00:40:07,820
because it's more convenient.

853
00:40:07,820 --> 00:40:11,240
They can be subsidized by
employers, by universities,

854
00:40:11,240 --> 00:40:11,990
by governments.

855
00:40:11,990 --> 00:40:14,610
So here we talk about
the pre-tax benefit

856
00:40:14,610 --> 00:40:16,310
that Henry brought up.

857
00:40:16,310 --> 00:40:18,440
And then there are
social programs,

858
00:40:18,440 --> 00:40:21,890
like access to jobs
programs, that give

859
00:40:21,890 --> 00:40:24,860
passes subsidized or
sometimes even free

860
00:40:24,860 --> 00:40:29,660
for people that are
economically disadvantaged.

861
00:40:29,660 --> 00:40:31,340
Questions on passes?

862
00:40:31,340 --> 00:40:33,091
I think we're all
familiar with passes.

863
00:40:33,091 --> 00:40:33,590
OK.

864
00:40:33,590 --> 00:40:36,950
So capping is less common,
it's a newer thing.

865
00:40:36,950 --> 00:40:38,300
It's more common in Europe.

866
00:40:38,300 --> 00:40:41,400
London has it, Germany has it
in many places, the Netherlands.

867
00:40:41,400 --> 00:40:47,000
So the idea is that when
you have a complex fare

868
00:40:47,000 --> 00:40:51,980
structure where the prices
are difficult to figure out,

869
00:40:51,980 --> 00:40:56,030
then the agency says, don't
worry about calculating which

870
00:40:56,030 --> 00:40:58,910
fare products you need
to buy; we'll do the math

871
00:40:58,910 --> 00:41:01,140
and give you the best price.

872
00:41:01,140 --> 00:41:03,050
So that's called
best price guarantee.

873
00:41:03,050 --> 00:41:05,480
And the idea is that
instead of committing

874
00:41:05,480 --> 00:41:08,390
to getting a pass
or not a pass, you

875
00:41:08,390 --> 00:41:12,350
pay as you go but when you
reach a certain daily limit,

876
00:41:12,350 --> 00:41:14,550
no more is charged
during that day.

877
00:41:14,550 --> 00:41:15,950
So you can keep riding.

878
00:41:15,950 --> 00:41:17,670
And that doesn't stop there.

879
00:41:17,670 --> 00:41:20,450
So the card keeps
counting the trips

880
00:41:20,450 --> 00:41:23,060
in one week, the
trips in one month.

881
00:41:23,060 --> 00:41:25,180
And so you might
have multiple caps

882
00:41:25,180 --> 00:41:29,080
and you might reach
different caps on one session

883
00:41:29,080 --> 00:41:31,280
sort of with one card.

884
00:41:31,280 --> 00:41:34,220
So essentially,
you end up getting

885
00:41:34,220 --> 00:41:38,570
the equivalent of a pass if it
was worth it and not otherwise.

886
00:41:38,570 --> 00:41:41,300
Obviously, that means
agencies lose some revenue

887
00:41:41,300 --> 00:41:44,640
from people who didn't
make the right decision,

888
00:41:44,640 --> 00:41:50,030
but it's one way of having a
complex fare structure that

889
00:41:50,030 --> 00:41:52,220
heavily segments the
market and therefore does

890
00:41:52,220 --> 00:41:53,870
obtain more fare revenues.

891
00:41:53,870 --> 00:41:59,930
And it allows for simple
communication with people

892
00:41:59,930 --> 00:42:02,720
by saying, don't worry about
it; we know it's complicated,

893
00:42:02,720 --> 00:42:04,640
but we'll figure it out for you.

894
00:42:04,640 --> 00:42:08,250
That's one argument.

895
00:42:08,250 --> 00:42:11,010
In London, one of the reasons
capping was introduced

896
00:42:11,010 --> 00:42:15,030
was with the movement to
contactless bank cards.

897
00:42:15,030 --> 00:42:18,350
So essentially, you can pay
with your Visa or MasterCard.

898
00:42:18,350 --> 00:42:21,570
You can have it on your phone,
Apple Pay or Android Pay,

899
00:42:21,570 --> 00:42:24,550
you tap, it works.

900
00:42:24,550 --> 00:42:28,830
So obviously, a
normal Visa might not

901
00:42:28,830 --> 00:42:32,070
have the logic inside
the card's computer

902
00:42:32,070 --> 00:42:35,410
to hold a pass or
anything like that

903
00:42:35,410 --> 00:42:37,260
so the card becomes a token.

904
00:42:37,260 --> 00:42:41,610
One way of dealing with
that is to say, it's capped.

905
00:42:41,610 --> 00:42:43,740
We'll keep track of
your usage for the month

906
00:42:43,740 --> 00:42:45,660
and when you reach
the monthly cap,

907
00:42:45,660 --> 00:42:47,820
we'll stop charging you for it.

908
00:42:47,820 --> 00:42:52,650
So it simplifies the move to or
towards contactless bank card

909
00:42:52,650 --> 00:42:53,770
usage.

910
00:42:53,770 --> 00:42:55,210
And we'll talk more about that.

911
00:42:55,210 --> 00:42:55,490
Yeah.

912
00:42:55,490 --> 00:42:57,239
AUDIENCE: So since
London introduced this,

913
00:42:57,239 --> 00:43:00,040
have they seen a drop in the
number of pass purchases?

914
00:43:00,040 --> 00:43:01,290
GABRIEL SANCHEZ-MARTINEZ: Yes.

915
00:43:01,290 --> 00:43:03,270
Well, they've seen
an increase in--

916
00:43:03,270 --> 00:43:06,270
the penetration for
contactless bank card use

917
00:43:06,270 --> 00:43:07,830
has been increasing steadily.

918
00:43:07,830 --> 00:43:12,030
And if you go to London,
my last experience there

919
00:43:12,030 --> 00:43:16,500
was on the train ride
between the airport

920
00:43:16,500 --> 00:43:20,670
and the center of London, I
heard several people talking

921
00:43:20,670 --> 00:43:22,050
about how convenient it was.

922
00:43:22,050 --> 00:43:24,960
So people are
excited about this.

923
00:43:24,960 --> 00:43:27,150
And it's great for
a city like London

924
00:43:27,150 --> 00:43:28,640
that has a lot of
people that are

925
00:43:28,640 --> 00:43:31,950
occasional users, a lot of
business travelers being

926
00:43:31,950 --> 00:43:34,290
able to not have
to think about it

927
00:43:34,290 --> 00:43:36,350
and just pay with a credit card.

928
00:43:36,350 --> 00:43:38,760
It really helps.

929
00:43:38,760 --> 00:43:40,230
And it has several
other benefits.

930
00:43:40,230 --> 00:43:43,129
I'll discuss them more in detail
when we get to smart cards.

931
00:43:43,129 --> 00:43:44,670
AUDIENCE: If you
say that it's capped

932
00:43:44,670 --> 00:43:48,080
and you said that there's
a trend away from passes,

933
00:43:48,080 --> 00:43:49,650
people are not buying passes.

934
00:43:49,650 --> 00:43:51,650
But isn't that essentially
saying that actually,

935
00:43:51,650 --> 00:43:54,120
no; people are buying
more passes than ever.

936
00:43:54,120 --> 00:43:56,900
GABRIEL SANCHEZ-MARTINEZ: Well,
it's capping so it's not--

937
00:43:56,900 --> 00:43:58,524
AUDIENCE: It's
capping, but it comes--

938
00:43:58,524 --> 00:44:00,690
GABRIEL SANCHEZ-MARTINEZ:
It's equivalent to a pass.

939
00:44:00,690 --> 00:44:02,340
The math works out
so that it a pass,

940
00:44:02,340 --> 00:44:04,970
but you're not selling
a monthly pass.

941
00:44:04,970 --> 00:44:05,760
Yeah.

942
00:44:05,760 --> 00:44:07,650
It's not a pass.

943
00:44:07,650 --> 00:44:08,767
You're paying each ride.

944
00:44:08,767 --> 00:44:09,840
AUDIENCE: --acts
like a [INAUDIBLE]..

945
00:44:09,840 --> 00:44:10,640
It induces [INAUDIBLE].

946
00:44:10,640 --> 00:44:11,264
AUDIENCE: Yeah.

947
00:44:11,264 --> 00:44:14,340
But I think if you go to
London every couple of months

948
00:44:14,340 --> 00:44:16,330
and you can just
show up in London

949
00:44:16,330 --> 00:44:18,704
and you don't have to fill up
an Oyster card or anything.

950
00:44:18,704 --> 00:44:21,525
You can tap your card and use
it like you normally would.

951
00:44:21,525 --> 00:44:24,060
If you ride too much in a
day, they cap it as well,

952
00:44:24,060 --> 00:44:26,430
which is something they
don't do on a monthly pass.

953
00:44:26,430 --> 00:44:27,721
GABRIEL SANCHEZ-MARTINEZ: Yeah.

954
00:44:29,430 --> 00:44:29,970
OK.

955
00:44:29,970 --> 00:44:32,280
We'll discuss more on the
contactless bank cards.

956
00:44:32,280 --> 00:44:35,040
This is a very interesting
trend that we're seeing.

957
00:44:35,040 --> 00:44:37,650
So fare policy demand analysis,
we talked a little bit

958
00:44:37,650 --> 00:44:40,080
about this on
ridership forecasting.

959
00:44:40,080 --> 00:44:42,930
Just a little recap, the
traditional four-step modeling

960
00:44:42,930 --> 00:44:44,580
process is not
usually appropriate.

961
00:44:44,580 --> 00:44:48,270
And that's because A, it has
insufficient spatiotemporal

962
00:44:48,270 --> 00:44:52,140
resolution and B, the planning
horizon for a fare hike

963
00:44:52,140 --> 00:44:55,500
is kind of short- to
medium-term so you're not

964
00:44:55,500 --> 00:45:00,120
thinking about land use changes
that will generate new trips.

965
00:45:00,120 --> 00:45:03,300
So therefore, total amount
is, we can assume, fixed.

966
00:45:03,300 --> 00:45:05,970
And what you want to play
with is the modal split

967
00:45:05,970 --> 00:45:10,680
and the assignment
to specific trips.

968
00:45:10,680 --> 00:45:12,930
The other thing is that these
four-step models usually

969
00:45:12,930 --> 00:45:15,810
don't have all the details of
all the fare products in them.

970
00:45:15,810 --> 00:45:17,850
And for an agency,
it's important to know

971
00:45:17,850 --> 00:45:20,010
what people will do
about getting a pass

972
00:45:20,010 --> 00:45:21,600
or paying as they go.

973
00:45:21,600 --> 00:45:26,040
So usually, fare elasticity
analysis is simple;

974
00:45:26,040 --> 00:45:29,520
in reality, a passenger is
considering multiple things

975
00:45:29,520 --> 00:45:30,400
at the same time.

976
00:45:30,400 --> 00:45:33,256
So which mode are
they going to take,

977
00:45:33,256 --> 00:45:35,130
are they going to drive
their car or are they

978
00:45:35,130 --> 00:45:39,430
going to take transit, are
they going to take bus or rail?

979
00:45:39,430 --> 00:45:41,610
Fare products, are they
going to go for the pass

980
00:45:41,610 --> 00:45:43,109
or are they going
to pay as they go?

981
00:45:43,109 --> 00:45:45,610
And maybe there are
multiple passes, which one?

982
00:45:45,610 --> 00:45:48,630
And then costs, not
just in absolute terms.

983
00:45:48,630 --> 00:45:50,940
So usually,
elasticity only looks

984
00:45:50,940 --> 00:45:54,760
at the percentage increase
in fares for this mode.

985
00:45:54,760 --> 00:45:58,350
But what if car costs have
gone up by more than that.

986
00:45:58,350 --> 00:46:01,570
So really, it's relative
to your alternatives

987
00:46:01,570 --> 00:46:03,660
and each person might
have a different choice.

988
00:46:03,660 --> 00:46:07,820
For some people, transit might
be the only mode of choice

989
00:46:07,820 --> 00:46:10,080
[INAUDIBLE] the only
mode in the choice set

990
00:46:10,080 --> 00:46:11,700
because they don't own a car.

991
00:46:11,700 --> 00:46:15,610
For others, there may
be multiple options.

992
00:46:15,610 --> 00:46:18,741
So the other aspect of it
is that exogenous factors

993
00:46:18,741 --> 00:46:21,240
influence demand response and
they're not usually controlled

994
00:46:21,240 --> 00:46:21,739
for.

995
00:46:21,739 --> 00:46:24,420
So fuel prices, employment,
residential development,

996
00:46:24,420 --> 00:46:27,210
tax policy,
sociodemographics, new modes--

997
00:46:27,210 --> 00:46:30,230
the introduction of
TNCs like Uber and Lyft

998
00:46:30,230 --> 00:46:36,720
and other companies have
potentially affected ridership,

999
00:46:36,720 --> 00:46:37,730
we think they have.

1000
00:46:37,730 --> 00:46:40,250
And most of these
elasticity models

1001
00:46:40,250 --> 00:46:43,610
don't really sort
of control for that

1002
00:46:43,610 --> 00:46:46,460
to get the real fare
elasticity, and that

1003
00:46:46,460 --> 00:46:51,740
would be what you would want
to do, an accurate model.

1004
00:46:51,740 --> 00:46:52,240
OK.

1005
00:46:52,240 --> 00:46:53,740
Communication of fare policy.

1006
00:46:53,740 --> 00:46:56,470
So obviously, to the public
it needs to be communicated.

1007
00:46:56,470 --> 00:46:57,970
You can do that on
your website, you

1008
00:46:57,970 --> 00:47:00,890
can have near fare vending
machines there's usually you

1009
00:47:00,890 --> 00:47:03,060
know an explanation
of the prices,

1010
00:47:03,060 --> 00:47:05,179
you have a customer
service booths.

1011
00:47:05,179 --> 00:47:06,970
If there's going to be
a fare change, again

1012
00:47:06,970 --> 00:47:09,386
you post things on the website;
there's flyers and posters

1013
00:47:09,386 --> 00:47:11,740
everywhere; public
hearings, of course,

1014
00:47:11,740 --> 00:47:17,080
to sort of hear complaints
and defend the hike.

1015
00:47:17,080 --> 00:47:20,290
And I wanted to add one sort
of third emerging but very

1016
00:47:20,290 --> 00:47:25,110
important aspect that
we haven't figured out,

1017
00:47:25,110 --> 00:47:28,300
and it's via APIs or standard
feeds for trip planners.

1018
00:47:28,300 --> 00:47:32,020
So if you have an app or if you
use Google Maps to get transit

1019
00:47:32,020 --> 00:47:34,990
directions and you want it to
calculate what your fare will

1020
00:47:34,990 --> 00:47:38,290
be, unless the agency has
a simple fare structure,

1021
00:47:38,290 --> 00:47:39,082
that can't be done.

1022
00:47:39,082 --> 00:47:41,248
Even for agencies that have
a simple fare structure,

1023
00:47:41,248 --> 00:47:43,240
most of them don't
provide the two files

1024
00:47:43,240 --> 00:47:46,600
in GTFS that allow that
calculation to happen.

1025
00:47:46,600 --> 00:47:49,410
And for agencies like London
that have a capping scheme,

1026
00:47:49,410 --> 00:47:51,820
the GTFS specification
does not provide the means

1027
00:47:51,820 --> 00:47:56,564
by which to input the fare
rules that would accurately

1028
00:47:56,564 --> 00:47:57,730
calculate the person's fare.

1029
00:47:57,730 --> 00:47:59,229
Because you would
need to keep track

1030
00:47:59,229 --> 00:48:04,410
of how much they've taken
service over a week,

1031
00:48:04,410 --> 00:48:05,560
over a day, et cetera.

1032
00:48:05,560 --> 00:48:08,680
So that we haven't figured out.

1033
00:48:08,680 --> 00:48:11,500
Third party apps
like the transit app

1034
00:48:11,500 --> 00:48:14,170
would love to be able
to calculate fares

1035
00:48:14,170 --> 00:48:15,541
accurately and display them.

1036
00:48:15,541 --> 00:48:17,290
Because they can do
that for Uber and they

1037
00:48:17,290 --> 00:48:22,665
can do that for other modes,
so why not for transit as well?

1038
00:48:22,665 --> 00:48:24,790
And although they would
prefer to do that in-house,

1039
00:48:24,790 --> 00:48:28,330
one alternative to
that is to define

1040
00:48:28,330 --> 00:48:30,550
some sort of standard
API where it's

1041
00:48:30,550 --> 00:48:34,720
up to the agency to
calculate what that would be.

1042
00:48:34,720 --> 00:48:37,150
But you make an API
call and you say,

1043
00:48:37,150 --> 00:48:39,340
this is the hypothetical
trip that I'm planning.

1044
00:48:39,340 --> 00:48:43,810
Give me how much [INAUDIBLE]
and the agency would respond.

1045
00:48:43,810 --> 00:48:47,170
But for performance
reasons I think

1046
00:48:47,170 --> 00:48:48,700
the transit app
would prefer to be

1047
00:48:48,700 --> 00:48:50,146
able to do that
with their servers

1048
00:48:50,146 --> 00:48:51,520
so that there's
a quick response.

1049
00:48:54,310 --> 00:48:57,250
Partnerships, another
sort of emerging trend.

1050
00:48:57,250 --> 00:48:59,270
So employer partnerships
is one example.

1051
00:48:59,270 --> 00:49:01,080
I'll give you the
example of MIT, actually.

1052
00:49:01,080 --> 00:49:03,910
MIT has something
called AccessMyCommute.

1053
00:49:03,910 --> 00:49:06,010
Our lab was actually
involved in that.

1054
00:49:06,010 --> 00:49:10,360
So every MIT student
or employee badge

1055
00:49:10,360 --> 00:49:13,060
has a Charlie chip
embedded inside.

1056
00:49:13,060 --> 00:49:15,610
You can look at the back
and it says, Charlie inside.

1057
00:49:15,610 --> 00:49:20,560
And to employees, it's marketed
as an unlimited use pass.

1058
00:49:20,560 --> 00:49:23,560
So I can use my MIT
ID and ride the MBTA.

1059
00:49:27,020 --> 00:49:30,220
MIT gets billed on a
pay-as-you-go basis.

1060
00:49:30,220 --> 00:49:34,780
So the reason that
was the agreement

1061
00:49:34,780 --> 00:49:38,380
is that a lot of people
don't use transit enough

1062
00:49:38,380 --> 00:49:40,280
to justify the value of a pass.

1063
00:49:40,280 --> 00:49:43,960
So there was no
way that MIT would

1064
00:49:43,960 --> 00:49:47,080
agree to pay a pass
for every employee.

1065
00:49:47,080 --> 00:49:49,690
And it's in the interest
of MIT to foment,

1066
00:49:49,690 --> 00:49:53,500
to encourage ridership,
so to decrease saliency,

1067
00:49:53,500 --> 00:49:56,560
in this case to the
extreme by making it free.

1068
00:49:56,560 --> 00:50:01,950
So one way of doing that is to
say, market it as a free pass.

1069
00:50:01,950 --> 00:50:07,770
There is a mix of people that
had passes and people that

1070
00:50:07,770 --> 00:50:09,546
ride less often.

1071
00:50:09,546 --> 00:50:10,920
AUDIENCE: Could
MIT reach a point

1072
00:50:10,920 --> 00:50:13,570
where it might actually
want everyone to the pass

1073
00:50:13,570 --> 00:50:16,780
without the [INAUDIBLE]
employees knowing it

1074
00:50:16,780 --> 00:50:17,280
[INAUDIBLE]?

1075
00:50:17,280 --> 00:50:17,490
GABRIEL
SANCHEZ-MARTINEZ: I don't

1076
00:50:17,490 --> 00:50:19,780
think so because many,
many employees-- yeah,

1077
00:50:19,780 --> 00:50:20,880
it's not close.

1078
00:50:20,880 --> 00:50:26,610
And some people ride
a lot more so MIT

1079
00:50:26,610 --> 00:50:30,150
in some ways for some
employees is paying more

1080
00:50:30,150 --> 00:50:32,070
because they're paying by ride.

1081
00:50:32,070 --> 00:50:34,560
But many people that
have a subsidized pass

1082
00:50:34,560 --> 00:50:38,530
because their break even
point is so much lower

1083
00:50:38,530 --> 00:50:39,930
don't really break even.

1084
00:50:39,930 --> 00:50:42,570
And so it works out to--

1085
00:50:42,570 --> 00:50:45,360
AUDIENCE: The next project
that project might do

1086
00:50:45,360 --> 00:50:47,940
is to find a way
to predict based

1087
00:50:47,940 --> 00:50:51,282
on the employee [INAUDIBLE]
this information

1088
00:50:51,282 --> 00:50:53,490
and they make a prediction
for what he's going to do.

1089
00:50:53,490 --> 00:50:55,460
And you might save MIT
a fair amount of money.

1090
00:50:55,460 --> 00:50:56,751
GABRIEL SANCHEZ-MARTINEZ: Yeah.

1091
00:50:56,751 --> 00:50:58,800
Well, one of the
reasons MIT decided

1092
00:50:58,800 --> 00:51:00,870
to do this is because
parking is very expensive,

1093
00:51:00,870 --> 00:51:03,720
real state is very
expensive-- very expensive.

1094
00:51:03,720 --> 00:51:06,840
And that's, of course,
not true everywhere.

1095
00:51:06,840 --> 00:51:08,070
It's not true in most places.

1096
00:51:08,070 --> 00:51:11,130
Most places have free
parking, plenty of land.

1097
00:51:11,130 --> 00:51:14,370
But in a place that has high
density, building new parking

1098
00:51:14,370 --> 00:51:17,190
is very expensive and you
could use that real state

1099
00:51:17,190 --> 00:51:18,220
for something else.

1100
00:51:18,220 --> 00:51:20,850
In fact, MIT has taken a
parking down near Sloan

1101
00:51:20,850 --> 00:51:22,730
and is making a
new building there.

1102
00:51:22,730 --> 00:51:26,970
So it costs less to
provide transit to people

1103
00:51:26,970 --> 00:51:28,860
and to encourage
people to take transit

1104
00:51:28,860 --> 00:51:31,350
than to build new parking
and maintain parking.

1105
00:51:34,170 --> 00:51:35,530
Here's another example.

1106
00:51:35,530 --> 00:51:39,000
So the Chicago
Transit Authority has

1107
00:51:39,000 --> 00:51:41,280
partnerships with other
transportation providers.

1108
00:51:41,280 --> 00:51:44,190
And they do that by providing--

1109
00:51:44,190 --> 00:51:47,550
there are some passes and
some fare products that

1110
00:51:47,550 --> 00:51:50,619
allow riding in PACE, which
is the original bus provider;

1111
00:51:50,619 --> 00:51:52,410
Metra, which is the
commuter rail provider;

1112
00:51:52,410 --> 00:51:55,470
and Divvy, which
is the bike share.

1113
00:51:55,470 --> 00:51:59,460
So you can buy things that--

1114
00:51:59,460 --> 00:52:02,490
there are some partnerships that
allow some integration here.

1115
00:52:02,490 --> 00:52:05,320
And there is a trend towards
mobility as a service.

1116
00:52:05,320 --> 00:52:08,030
So the idea of
mobility as a service

1117
00:52:08,030 --> 00:52:10,170
is that you make a monthly
payment for a bundle

1118
00:52:10,170 --> 00:52:12,850
of transportation options.

1119
00:52:12,850 --> 00:52:13,990
Here's an example.

1120
00:52:13,990 --> 00:52:18,000
You could have unlimited transit
pass five bike rides and five

1121
00:52:18,000 --> 00:52:18,840
TNC rides.

1122
00:52:21,660 --> 00:52:24,840
So you provide this bundle.

1123
00:52:24,840 --> 00:52:28,020
The person is purchasing
my transportation from home

1124
00:52:28,020 --> 00:52:30,860
to work and back on a
combination of both.

1125
00:52:30,860 --> 00:52:34,430
So if it's today it's
inconvenient to take transit,

1126
00:52:34,430 --> 00:52:39,960
that day I will use the
bike share or the TNC.

1127
00:52:39,960 --> 00:52:43,410
The word is out on whether
this will work or not.

1128
00:52:43,410 --> 00:52:45,720
Many agencies are
interested; most of them

1129
00:52:45,720 --> 00:52:47,250
don't want to talk about it.

1130
00:52:47,250 --> 00:52:51,392
And we'll see what
happens as time goes by.

1131
00:52:51,392 --> 00:52:52,850
AUDIENCE: Is the
reason that MIT is

1132
00:52:52,850 --> 00:52:55,410
hesitant to extend the transit
benefit to grad students

1133
00:52:55,410 --> 00:52:58,680
because grad students tend
not to be parkers so we

1134
00:52:58,680 --> 00:53:02,520
don't have that bargaining?

1135
00:53:02,520 --> 00:53:06,530
GABRIEL
SANCHEZ-MARTINEZ: That is

1136
00:53:06,530 --> 00:53:10,520
sort of a reason for why they
shouldn't or wouldn't, but I'm

1137
00:53:10,520 --> 00:53:13,010
not sure that it is
the actual reason.

1138
00:53:13,010 --> 00:53:16,460
I think this was always
conceived as an employee

1139
00:53:16,460 --> 00:53:17,800
benefits program.

1140
00:53:17,800 --> 00:53:19,680
AUDIENCE: Aren't
we like employees?

1141
00:53:19,680 --> 00:53:21,180
GABRIEL SANCHEZ-MARTINEZ:
Not quite.

1142
00:53:21,180 --> 00:53:22,970
So yeah.

1143
00:53:22,970 --> 00:53:26,210
So I don't really know
the actual reason.

1144
00:53:26,210 --> 00:53:28,520
Sometimes decisions
are made for--

1145
00:53:28,520 --> 00:53:32,000
you justify them in all sorts of
ways and then someone decides.

1146
00:53:32,000 --> 00:53:36,091
So many other factors play in.

1147
00:53:36,091 --> 00:53:36,590
OK.

1148
00:53:36,590 --> 00:53:38,260
Fare control.

1149
00:53:38,260 --> 00:53:40,210
Tap in, you know what that is.

1150
00:53:40,210 --> 00:53:42,650
You interact with a
fare box or fare gate

1151
00:53:42,650 --> 00:53:45,450
only when you're entering
the system or vehicle.

1152
00:53:45,450 --> 00:53:48,980
Tap in and tap out, you do
that when you enter and exit.

1153
00:53:48,980 --> 00:53:54,650
Usually, tap in and tap out
is for systems that have zones

1154
00:53:54,650 --> 00:53:57,110
and you tap out so
that we know if you've

1155
00:53:57,110 --> 00:53:59,210
traveled multiple zones
or not and therefore, we

1156
00:53:59,210 --> 00:54:01,790
know how much to charge you
because of the segmentation

1157
00:54:01,790 --> 00:54:04,550
by geography.

1158
00:54:04,550 --> 00:54:08,570
It also happens when there
are multiple agencies sharing

1159
00:54:08,570 --> 00:54:09,660
the revenue.

1160
00:54:09,660 --> 00:54:18,800
So intercity bus in some cities,
if a person takes a bus route

1161
00:54:18,800 --> 00:54:22,400
within a city, then that
revenue would go to that city.

1162
00:54:22,400 --> 00:54:25,400
If the person travels
across cities,

1163
00:54:25,400 --> 00:54:27,650
then the revenue would
be shared across cities.

1164
00:54:27,650 --> 00:54:31,070
So that's one way you
might want to do this.

1165
00:54:31,070 --> 00:54:33,849
I know that it does exist
in some places for bus

1166
00:54:33,849 --> 00:54:35,390
where you have to
tap in and tap out,

1167
00:54:35,390 --> 00:54:38,940
although it's much less
common for bus than for rail.

1168
00:54:38,940 --> 00:54:40,218
Henry.

1169
00:54:40,218 --> 00:54:45,670
AUDIENCE: If the tap system
introduces a day pass,

1170
00:54:45,670 --> 00:54:49,269
for example, where
[INAUDIBLE] go to multiple--

1171
00:54:49,269 --> 00:54:50,560
GABRIEL SANCHEZ-MARTINEZ: Yeah.

1172
00:54:50,560 --> 00:54:51,250
Yeah.

1173
00:54:51,250 --> 00:54:51,720
AUDIENCE: [INAUDIBLE]

1174
00:54:51,720 --> 00:54:53,011
GABRIEL SANCHEZ-MARTINEZ: Yeah.

1175
00:54:53,011 --> 00:54:55,031
AUDIENCE: Then would
they just [INAUDIBLE]..

1176
00:54:55,031 --> 00:54:57,280
GABRIEL SANCHEZ-MARTINEZ: I
don't know how they do it.

1177
00:54:57,280 --> 00:54:59,530
Funding formulas
are a huge debate.

1178
00:54:59,530 --> 00:55:04,060
And as an engineer, I would
propose to look at their OD

1179
00:55:04,060 --> 00:55:09,250
and figure out the most fair
way of allocating that revenue.

1180
00:55:09,250 --> 00:55:13,747
But how would they actually
do it is probably simpler.

1181
00:55:13,747 --> 00:55:15,330
Another thing about
tap in and tap out

1182
00:55:15,330 --> 00:55:18,380
is that you may require
internal vending machines.

1183
00:55:18,380 --> 00:55:20,970
It may increase
your capital costs.

1184
00:55:20,970 --> 00:55:21,690
Why is that?

1185
00:55:21,690 --> 00:55:24,660
Because you have multiple costs.

1186
00:55:24,660 --> 00:55:27,260
The price of your ride
depends on how far you ride

1187
00:55:27,260 --> 00:55:28,590
and if you cross zones or not.

1188
00:55:28,590 --> 00:55:30,131
So you might have
just enough balance

1189
00:55:30,131 --> 00:55:33,900
to enter, not enough to exit
if you cross multiple zones.

1190
00:55:33,900 --> 00:55:37,170
So you might have
to top up the card

1191
00:55:37,170 --> 00:55:38,754
before being allowed to exit.

1192
00:55:38,754 --> 00:55:40,170
That means you
need a fare vending

1193
00:55:40,170 --> 00:55:45,165
machine that a person
can use to top up

1194
00:55:45,165 --> 00:55:47,250
if they don't have a pass.

1195
00:55:47,250 --> 00:55:50,070
It means that you might
need a station attendant

1196
00:55:50,070 --> 00:55:51,030
to deal with somebody.

1197
00:55:51,030 --> 00:55:53,640
If the fare vending
machine is not working

1198
00:55:53,640 --> 00:55:56,460
or my bank card is not
working and is being rejected,

1199
00:55:56,460 --> 00:55:59,910
I need to get out
of the station.

1200
00:55:59,910 --> 00:56:00,690
I'm trapped.

1201
00:56:00,690 --> 00:56:02,430
So what do I do?

1202
00:56:02,430 --> 00:56:05,400
So it can increase
costs in that way.

1203
00:56:05,400 --> 00:56:06,570
You had a comment?

1204
00:56:06,570 --> 00:56:07,570
OK.

1205
00:56:07,570 --> 00:56:08,831
No.

1206
00:56:08,831 --> 00:56:09,330
Right.

1207
00:56:09,330 --> 00:56:12,030
So that's one potential issue.

1208
00:56:12,030 --> 00:56:15,850
Something that some agencies do
is allowing a negative balance.

1209
00:56:15,850 --> 00:56:18,420
So when we are
softening the blows

1210
00:56:18,420 --> 00:56:22,590
to allow when you tap
out to go below zero.

1211
00:56:22,590 --> 00:56:28,800
Next time you fill up the card,
you top up, if you put in $20

1212
00:56:28,800 --> 00:56:31,540
and you had a $1 deficit,
your balance is now $19.

1213
00:56:34,470 --> 00:56:37,920
You can't do that if cards
are [INAUDIBLE] because people

1214
00:56:37,920 --> 00:56:40,590
will then toss the
card and get a new one.

1215
00:56:40,590 --> 00:56:43,410
So you make people buy the.

1216
00:56:43,410 --> 00:56:48,160
The cards are maybe $10 and
a $5 balance or something.

1217
00:56:48,160 --> 00:56:51,810
So there's a disincentive
to tossing the card

1218
00:56:51,810 --> 00:56:54,180
and getting a new one.

1219
00:56:54,180 --> 00:56:56,280
And by the way, smart
cards cost money.

1220
00:56:56,280 --> 00:56:58,350
They're not that cheap.

1221
00:56:58,350 --> 00:57:01,920
Some agencies have paid $10
per card for their card.

1222
00:57:05,080 --> 00:57:07,410
Proof of payments, we
sort of discussed that.

1223
00:57:07,410 --> 00:57:10,840
You buy a ticket.

1224
00:57:10,840 --> 00:57:12,840
It might be OD, it
might be flat fare.

1225
00:57:12,840 --> 00:57:15,480
It doesn't matter, you buy
the ticket that you need.

1226
00:57:15,480 --> 00:57:18,990
And then when you board,
there's usually some validator

1227
00:57:18,990 --> 00:57:21,180
that prints a time stamp.

1228
00:57:21,180 --> 00:57:23,400
It can be electronic as well.

1229
00:57:23,400 --> 00:57:26,220
And what it requires
is fare inspection.

1230
00:57:26,220 --> 00:57:29,070
So at random, a fare inspector
will board the vehicle

1231
00:57:29,070 --> 00:57:32,580
and have a handheld device
requiring people to confirm.

1232
00:57:32,580 --> 00:57:36,660
If it's an electronic system,
then they'll tap on here

1233
00:57:36,660 --> 00:57:39,120
and I want to make sure that
you've actually validated.

1234
00:57:39,120 --> 00:57:41,127
If it's paper, then they
would look at the paper

1235
00:57:41,127 --> 00:57:43,210
and make sure that you've
canceled it or validated

1236
00:57:43,210 --> 00:57:44,970
that paper ticket.

1237
00:57:44,970 --> 00:57:46,350
And otherwise, big fine.

1238
00:57:46,350 --> 00:57:51,720
So the discouragement to fare
evasion is through fining

1239
00:57:51,720 --> 00:57:53,790
and through policing.

1240
00:57:53,790 --> 00:57:57,270
But the research shows
that there are still

1241
00:57:57,270 --> 00:57:59,127
higher fare evasion
rates on systems

1242
00:57:59,127 --> 00:58:00,210
that are proof of payment.

1243
00:58:00,210 --> 00:58:06,798
People opportunistically board
and they don't pay anything.

1244
00:58:06,798 --> 00:58:07,770
OK.

1245
00:58:07,770 --> 00:58:08,800
Fare technology.

1246
00:58:08,800 --> 00:58:12,310
So we've talked about
structure and policy,

1247
00:58:12,310 --> 00:58:13,630
let's talk about technology.

1248
00:58:13,630 --> 00:58:17,280
So this is how an AFC
system is usually set up.

1249
00:58:17,280 --> 00:58:18,780
You have a fare engine.

1250
00:58:18,780 --> 00:58:22,530
It's a server that has
all the fare rules in it

1251
00:58:22,530 --> 00:58:27,300
so it can calculate fares
based on a sequence of taps.

1252
00:58:27,300 --> 00:58:28,950
And it's connected
to different things.

1253
00:58:28,950 --> 00:58:30,325
So a fare vending
machine, that's

1254
00:58:30,325 --> 00:58:35,130
where you purchase your
card or your ticket.

1255
00:58:35,130 --> 00:58:37,890
So these are usually
fiberoptic connections

1256
00:58:37,890 --> 00:58:44,090
or hardline connections
and so they're fast.

1257
00:58:44,090 --> 00:58:46,350
It's a real-time validation.

1258
00:58:46,350 --> 00:58:48,810
As soon as you buy
a card and add value

1259
00:58:48,810 --> 00:58:50,820
to it from a fare
vending machine,

1260
00:58:50,820 --> 00:58:53,130
that balance is usually updated.

1261
00:58:53,130 --> 00:58:56,430
If the fare engine
has a balance in it,

1262
00:58:56,430 --> 00:58:58,140
it will be updated
in the fare engine.

1263
00:58:58,140 --> 00:58:59,430
That's not always the case.

1264
00:58:59,430 --> 00:59:01,620
There's many kinds of systems.

1265
00:59:01,620 --> 00:59:04,170
So customer service
booths are also connected,

1266
00:59:04,170 --> 00:59:06,210
fare gates are usually
connected as well.

1267
00:59:06,210 --> 00:59:11,060
So when you tap
into a fare gate,

1268
00:59:11,060 --> 00:59:13,690
there's a quick communication
with the fare engine saying,

1269
00:59:13,690 --> 00:59:15,169
is this card valid, yes or no?

1270
00:59:15,169 --> 00:59:15,960
Is there a balance?

1271
00:59:15,960 --> 00:59:17,100
If so, deduct balance.

1272
00:59:17,100 --> 00:59:19,470
This is how much balance
needs to be deducted.

1273
00:59:19,470 --> 00:59:20,850
And the fare gate opens.

1274
00:59:20,850 --> 00:59:24,960
Or maybe the fare engine
says, no, the card's not good.

1275
00:59:24,960 --> 00:59:27,550
Sound the alarm, don't open.

1276
00:59:27,550 --> 00:59:29,040
There are other
ways of doing it.

1277
00:59:29,040 --> 00:59:32,190
So the card itself might hold
the balance and the fare gate

1278
00:59:32,190 --> 00:59:35,290
might have the logic to
decide whether to open or not.

1279
00:59:35,290 --> 00:59:39,420
But there's a whole range
of ways in which this

1280
00:59:39,420 --> 00:59:40,900
can be configured.

1281
00:59:40,900 --> 00:59:42,810
Fare boxes and
validators are usually

1282
00:59:42,810 --> 00:59:47,640
on vehicles, although there
can be handheld validators.

1283
00:59:47,640 --> 00:59:51,840
Again, a validator is more
often used for proof of payment.

1284
00:59:51,840 --> 00:59:55,530
A fare box is used when
it's pay-as-you-go or pass,

1285
00:59:55,530 --> 00:59:58,890
so that's what we
have here in Boston.

1286
00:59:58,890 --> 01:00:00,300
There's two ways of doing this.

1287
01:00:00,300 --> 01:00:03,120
It used to be the case
that they were not

1288
01:00:03,120 --> 01:00:05,860
communicating in real
time with a fare engine.

1289
01:00:05,860 --> 01:00:08,700
So the card and the fare
box have a little chat

1290
01:00:08,700 --> 01:00:11,700
and decide how much
value to deduct.

1291
01:00:11,700 --> 01:00:15,930
Later, the bus reaches the
garage or it's being cleaned

1292
01:00:15,930 --> 01:00:18,420
and at the garage there's
a garage server that

1293
01:00:18,420 --> 01:00:20,700
wirelessly probes the
fare box and extracts

1294
01:00:20,700 --> 01:00:21,864
all the data from it.

1295
01:00:21,864 --> 01:00:23,280
And only then will
the fare engine

1296
01:00:23,280 --> 01:00:27,120
receive the information
about what transactions have

1297
01:00:27,120 --> 01:00:28,650
been done in that fare box.

1298
01:00:28,650 --> 01:00:33,080
So you might have, again,
a real time validation.

1299
01:00:33,080 --> 01:00:35,680
It can be a little
slow over the air.

1300
01:00:35,680 --> 01:00:40,740
So what happens, and this is
being done London, for example,

1301
01:00:40,740 --> 01:00:42,930
with contactless
bank cards, what

1302
01:00:42,930 --> 01:00:47,220
happens is that maybe the
first time the card is seen,

1303
01:00:47,220 --> 01:00:51,090
there is this dialogue
and validation.

1304
01:00:51,090 --> 01:00:55,050
After the card is
marked as trusted,

1305
01:00:55,050 --> 01:00:57,420
then it can just
validate immediately

1306
01:00:57,420 --> 01:01:02,610
and the actual deduction
can wait a little bit

1307
01:01:02,610 --> 01:01:05,250
and be sent in batches
to the fare engine.

1308
01:01:07,950 --> 01:01:10,080
There's a cash
vault. That's where

1309
01:01:10,080 --> 01:01:16,800
if your system accepts cash
when the bus or fare box reaches

1310
01:01:16,800 --> 01:01:20,010
the garage, that cash
vault is taken out

1311
01:01:20,010 --> 01:01:23,610
and the cash needs to be counted
and moved out of the fare box

1312
01:01:23,610 --> 01:01:25,950
and to a safe place.

1313
01:01:25,950 --> 01:01:28,710
Smart cards themselves
are computers.

1314
01:01:28,710 --> 01:01:32,880
They are small computers
with a battery and a clock

1315
01:01:32,880 --> 01:01:36,185
and some amount of
processing power.

1316
01:01:36,185 --> 01:01:37,560
So they have some
memory, so they

1317
01:01:37,560 --> 01:01:41,640
can hold some history
about your last trips.

1318
01:01:41,640 --> 01:01:46,480
They can hold how much balance
there is in some cases.

1319
01:01:46,480 --> 01:01:50,430
They are able to encrypt
and decrypt communication

1320
01:01:50,430 --> 01:01:54,600
so that it's harder
to break the security

1321
01:01:54,600 --> 01:01:57,510
and say add balance your card.

1322
01:01:57,510 --> 01:02:00,360
And I want to add although
this is not necessarily

1323
01:02:00,360 --> 01:02:03,150
part of the fare system,
data [INAUDIBLE]..

1324
01:02:03,150 --> 01:02:05,610
Increasingly, we are
doing a lot of analytics.

1325
01:02:05,610 --> 01:02:07,650
So usually, there's
some connection

1326
01:02:07,650 --> 01:02:11,070
between the live production
system and a data warehouse

1327
01:02:11,070 --> 01:02:14,080
where on a daily
or a weekly basis,

1328
01:02:14,080 --> 01:02:17,170
there's an extract of data
into a data warehouse.

1329
01:02:17,170 --> 01:02:23,790
And that allows analysts to run
heavy queries on a server that

1330
01:02:23,790 --> 01:02:26,900
is dedicated to analysis and not
on the live system [INAUDIBLE]

1331
01:02:26,900 --> 01:02:29,658
whether or not to open a
fare, if that makes sense.

1332
01:02:33,465 --> 01:02:33,965
OK.

1333
01:02:33,965 --> 01:02:35,020
Fare media.

1334
01:02:35,020 --> 01:02:37,720
Any questions about fare
technology and the framework

1335
01:02:37,720 --> 01:02:38,945
of how this is set up?

1336
01:02:38,945 --> 01:02:40,570
There are lots of
variants and I didn't

1337
01:02:40,570 --> 01:02:45,150
get into the details of
how any one system works.

1338
01:02:45,150 --> 01:02:45,930
OK.

1339
01:02:45,930 --> 01:02:47,220
So fare media.

1340
01:02:47,220 --> 01:02:51,450
Cash, we all know
what that is; tokens.

1341
01:02:51,450 --> 01:02:55,020
So I don't need to
go into how cash

1342
01:02:55,020 --> 01:02:57,300
is minted or anything, right?

1343
01:02:57,300 --> 01:03:02,460
So tokens are little coins
that you buy with money

1344
01:03:02,460 --> 01:03:05,200
and it's like a
ticket in some ways.

1345
01:03:05,200 --> 01:03:07,290
It has some value
and sometimes it's

1346
01:03:07,290 --> 01:03:10,530
possible to be able to have
to pay two tokens for a ride,

1347
01:03:10,530 --> 01:03:13,039
although usually it's just one.

1348
01:03:13,039 --> 01:03:14,580
They're being phased
out because they

1349
01:03:14,580 --> 01:03:16,950
can print paper tickets
with magnetic stripes

1350
01:03:16,950 --> 01:03:18,350
and there's more data to it.

1351
01:03:21,056 --> 01:03:21,960
AUDIENCE: [INAUDIBLE]

1352
01:03:21,960 --> 01:03:23,251
GABRIEL SANCHEZ-MARTINEZ: Yeah.

1353
01:03:23,251 --> 01:03:24,530
So they still exist.

1354
01:03:24,530 --> 01:03:25,620
AUDIENCE: [INAUDIBLE]

1355
01:03:25,620 --> 01:03:26,911
GABRIEL SANCHEZ-MARTINEZ: Yeah.

1356
01:03:26,911 --> 01:03:29,050
They still exist.

1357
01:03:29,050 --> 01:03:30,140
Yeah.

1358
01:03:30,140 --> 01:03:33,298
This is a Boston token, by
the way, this one right here.

1359
01:03:33,298 --> 01:03:35,440
AUDIENCE: [INAUDIBLE]

1360
01:03:35,440 --> 01:03:37,640
GABRIEL SANCHEZ-MARTINEZ: No.

1361
01:03:37,640 --> 01:03:40,070
I'm pretty sure this
is an old Boston token.

1362
01:03:40,070 --> 01:03:40,570
Yeah.

1363
01:03:40,570 --> 01:03:41,880
AUDIENCE: [INAUDIBLE]

1364
01:03:41,880 --> 01:03:43,171
GABRIEL SANCHEZ-MARTINEZ: Yeah.

1365
01:03:43,171 --> 01:03:43,940
Yeah.

1366
01:03:43,940 --> 01:03:45,870
Maybe I'm wrong, but I
think that's the case.

1367
01:03:45,870 --> 01:03:46,370
OK.

1368
01:03:46,370 --> 01:03:46,910
Tickets.

1369
01:03:46,910 --> 01:03:50,030
So tickets are they're
printed on paper

1370
01:03:50,030 --> 01:03:51,380
and they have a magnetic stripe.

1371
01:03:51,380 --> 01:03:53,710
They don't have a
computer in them.

1372
01:03:53,710 --> 01:03:55,700
The magnetic stripe
holds information

1373
01:03:55,700 --> 01:03:59,550
that can be encrypted.

1374
01:03:59,550 --> 01:04:02,390
So it can be, but it's
not always encrypted.

1375
01:04:02,390 --> 01:04:08,000
It's a little easier for there
to be fraud with tickets.

1376
01:04:08,000 --> 01:04:12,167
So if there are
questions on tickets,

1377
01:04:12,167 --> 01:04:13,250
I'll talk more about them.

1378
01:04:13,250 --> 01:04:15,530
Smart cards I've talked about.

1379
01:04:15,530 --> 01:04:17,030
Mobile ticketing
is another option.

1380
01:04:17,030 --> 01:04:19,340
So that's a recent development.

1381
01:04:19,340 --> 01:04:26,690
You have an app, you pay
for a ticket for your ride

1382
01:04:26,690 --> 01:04:27,470
on the app.

1383
01:04:27,470 --> 01:04:30,560
And it's usually kind of
a proof of payment system

1384
01:04:30,560 --> 01:04:35,630
where a fare inspector comes
along and scans a QR code

1385
01:04:35,630 --> 01:04:39,770
on the app, proving that
you've purchased a valid fare

1386
01:04:39,770 --> 01:04:42,140
for that OD pair, for example.

1387
01:04:42,140 --> 01:04:44,600
This is being used here in
commuter rail in Boston.

1388
01:04:47,580 --> 01:04:51,980
And then the sort of newest
form is contactless bank cards.

1389
01:04:51,980 --> 01:04:58,330
So that's a wireless Visa,
MasterCard, credit charge card,

1390
01:04:58,330 --> 01:05:03,060
debit card and you
tap it on the--

1391
01:05:03,060 --> 01:05:04,470
there you go.

1392
01:05:04,470 --> 01:05:07,610
You can pass it if you want.

1393
01:05:07,610 --> 01:05:08,190
Can I see it?

1394
01:05:12,360 --> 01:05:14,160
So you tap it just
like you would

1395
01:05:14,160 --> 01:05:17,550
a Charlie card or an
Oyster card in London

1396
01:05:17,550 --> 01:05:24,450
and there's the dialogue
between the fare and the card.

1397
01:05:24,450 --> 01:05:26,950
Strong encryption.

1398
01:05:26,950 --> 01:05:29,640
As I said, the full
validation process

1399
01:05:29,640 --> 01:05:33,120
doesn't always happen,
especially in bus,

1400
01:05:33,120 --> 01:05:34,864
because you can trust the card.

1401
01:05:34,864 --> 01:05:36,030
There is a separate antenna.

1402
01:05:36,030 --> 01:05:38,820
Of course, the frequencies and
the protocols are different.

1403
01:05:38,820 --> 01:05:40,380
But there are good
standards for this

1404
01:05:40,380 --> 01:05:43,890
and London has moved to this.

1405
01:05:43,890 --> 01:05:46,860
CTA's system is based
on this technology,

1406
01:05:46,860 --> 01:05:54,890
even though they opted
to only use token cards.

1407
01:05:54,890 --> 01:05:56,500
So it's the same
technology, but it's

1408
01:05:56,500 --> 01:05:58,070
branded as their own thing.

1409
01:05:58,070 --> 01:06:00,850
And I don't know if they can--

1410
01:06:00,850 --> 01:06:01,810
now it does, right?

1411
01:06:01,810 --> 01:06:03,229
But at the beginning, it wasn't.

1412
01:06:03,229 --> 01:06:05,020
AUDIENCE: I met someone
who had a problem--

1413
01:06:05,020 --> 01:06:06,311
GABRIEL SANCHEZ-MARTINEZ: Yeah.

1414
01:06:06,311 --> 01:06:07,630
AUDIENCE: [INAUDIBLE]

1415
01:06:07,630 --> 01:06:08,921
GABRIEL SANCHEZ-MARTINEZ: Yeah.

1416
01:06:08,921 --> 01:06:14,170
So with this, as you
have more and more cards

1417
01:06:14,170 --> 01:06:15,670
on your wallet that
are contactless,

1418
01:06:15,670 --> 01:06:19,030
you should get like
a copper-lined wallet

1419
01:06:19,030 --> 01:06:21,360
or something, to
like copper sleeves.

1420
01:06:21,360 --> 01:06:26,480
They exist to sort of prevent
two reads from the same card.

1421
01:06:26,480 --> 01:06:29,450
AUDIENCE: So if I have
a contactless bank card,

1422
01:06:29,450 --> 01:06:31,940
can I just walk up to one
of those systems and tap in?

1423
01:06:31,940 --> 01:06:33,340
GABRIEL SANCHEZ-MARTINEZ: Yeah.

1424
01:06:33,340 --> 01:06:34,460
AUDIENCE: [INAUDIBLE]
absolutely nothing?

1425
01:06:34,460 --> 01:06:35,380
GABRIEL SANCHEZ-MARTINEZ:
Absolutely nothing.

1426
01:06:35,380 --> 01:06:37,090
You just get on the bus.

1427
01:06:37,090 --> 01:06:38,290
Yeah.

1428
01:06:38,290 --> 01:06:39,860
It used to be the
case in Chicago

1429
01:06:39,860 --> 01:06:41,350
that it was kind
of their own thing

1430
01:06:41,350 --> 01:06:43,656
and you were given a card.

1431
01:06:43,656 --> 01:06:45,280
It was the same thing
as a credit card,

1432
01:06:45,280 --> 01:06:49,720
but just as a token with no
balance or account on it.

1433
01:06:49,720 --> 01:06:53,530
And now they've enabled this.

1434
01:06:53,530 --> 01:06:55,461
So that's the new way.

1435
01:06:55,461 --> 01:06:56,960
AUDIENCE: But there
are other issues

1436
01:06:56,960 --> 01:07:00,940
about that because
there are issues of what

1437
01:07:00,940 --> 01:07:04,360
if the card is from a different
country and things like that?

1438
01:07:04,360 --> 01:07:06,485
GABRIEL SANCHEZ-MARTINEZ:
Again, you do validation.

1439
01:07:06,485 --> 01:07:07,390
There are policies.

1440
01:07:07,390 --> 01:07:10,019
That's what these
card companies do.

1441
01:07:10,019 --> 01:07:10,810
They're good at it.

1442
01:07:10,810 --> 01:07:13,690
There is insurance for fraud.

1443
01:07:13,690 --> 01:07:17,240
So they-- yeah.

1444
01:07:17,240 --> 01:07:17,870
Yeah.

1445
01:07:17,870 --> 01:07:19,630
AUDIENCE: It's a big push
from Visa and MasterCard

1446
01:07:19,630 --> 01:07:22,180
to get [INAUDIBLE] contact
list because [INAUDIBLE] money

1447
01:07:22,180 --> 01:07:23,440
[INAUDIBLE].

1448
01:07:23,440 --> 01:07:26,110
So every way they can make
it easier to spend money

1449
01:07:26,110 --> 01:07:27,140
is better for them.

1450
01:07:27,140 --> 01:07:28,080
GABRIEL SANCHEZ-MARTINEZ:
Eli, you have a comment?

1451
01:07:28,080 --> 01:07:30,430
AUDIENCE: And in Chicago,
it doesn't process transfers

1452
01:07:30,430 --> 01:07:30,970
or passes.

1453
01:07:30,970 --> 01:07:34,851
They're just charging
you a la carte, one trip.

1454
01:07:34,851 --> 01:07:37,690
GABRIEL SANCHEZ-MARTINEZ:
So there's

1455
01:07:37,690 --> 01:07:39,190
they don't have
a capping scheme.

1456
01:07:39,190 --> 01:07:40,735
AUDIENCE: Right.

1457
01:07:40,735 --> 01:07:41,860
And it doesn't [INAUDIBLE].

1458
01:07:41,860 --> 01:07:43,600
GABRIEL SANCHEZ-MARTINEZ:
So if you want a pass,

1459
01:07:43,600 --> 01:07:45,350
that's not an option for
you is what you're saying.

1460
01:07:45,350 --> 01:07:47,010
AUDIENCE: You need to
actually [INAUDIBLE]..

1461
01:07:47,010 --> 01:07:47,340
GABRIEL SANCHEZ-MARTINEZ: OK.

1462
01:07:47,340 --> 01:07:47,840
Yeah.

1463
01:07:47,840 --> 01:07:51,010
So that's an interesting
comment which no one heard.

1464
01:07:55,360 --> 01:07:58,440
I'm sure the comments on the
back are also interesting.

1465
01:07:58,440 --> 01:08:01,390
AUDIENCE: They're just
asking me about [INAUDIBLE]..

1466
01:08:01,390 --> 01:08:04,960
GABRIEL SANCHEZ-MARTINEZ:
I'm generally interested.

1467
01:08:04,960 --> 01:08:06,410
Can you share with the class?

1468
01:08:06,410 --> 01:08:08,576
AUDIENCE: They were just
asking whether you actually

1469
01:08:08,576 --> 01:08:09,602
have to [INAUDIBLE].

1470
01:08:09,602 --> 01:08:10,810
GABRIEL SANCHEZ-MARTINEZ: Oh.

1471
01:08:10,810 --> 01:08:11,820
OK.

1472
01:08:11,820 --> 01:08:13,736
AUDIENCE: You do have
to take it [INAUDIBLE]..

1473
01:08:13,736 --> 01:08:16,000
GABRIEL SANCHEZ-MARTINEZ:
As opposed to EMV, yeah.

1474
01:08:16,000 --> 01:08:17,375
AUDIENCE: But
[INAUDIBLE] Chicago

1475
01:08:17,375 --> 01:08:19,670
have it because I
thought it [INAUDIBLE]

1476
01:08:19,670 --> 01:08:21,340
penetration [INAUDIBLE].

1477
01:08:21,340 --> 01:08:23,715
GABRIEL SANCHEZ-MARTINEZ: But
I think they will increase.

1478
01:08:23,715 --> 01:08:26,380
And that I think could be driven
by agencies in big cities,

1479
01:08:26,380 --> 01:08:26,899
actually.

1480
01:08:26,899 --> 01:08:29,050
That's one example of that.

1481
01:08:29,050 --> 01:08:31,600
The US has been a little
late in adopting credit card

1482
01:08:31,600 --> 01:08:32,560
technology in general.

1483
01:08:35,851 --> 01:08:36,350
All right.

1484
01:08:36,350 --> 01:08:37,069
Smart cards.

1485
01:08:37,069 --> 01:08:41,270
So I've already talked
a little bit about them.

1486
01:08:41,270 --> 01:08:43,819
They enable more
complex fare structures,

1487
01:08:43,819 --> 01:08:47,060
they allow faster boarding
and higher gatebank throughput

1488
01:08:47,060 --> 01:08:49,520
because the validations are
much faster than a ticket.

1489
01:08:49,520 --> 01:08:52,520
A magnetic stripe ticket
needs to be fed in

1490
01:08:52,520 --> 01:08:54,439
and read multiple
times sometimes

1491
01:08:54,439 --> 01:08:56,479
and it takes more
time to do that.

1492
01:08:56,479 --> 01:08:59,330
Certainly, cash is slower.

1493
01:08:59,330 --> 01:09:03,020
So account registration is one
of the benefits of smart cards.

1494
01:09:03,020 --> 01:09:07,040
You don't have to do
this, but you often can.

1495
01:09:07,040 --> 01:09:09,620
So you open an account and that
gives you balance protection.

1496
01:09:09,620 --> 01:09:12,350
If your card is lost, you
can log into your account

1497
01:09:12,350 --> 01:09:13,880
and remove that card.

1498
01:09:13,880 --> 01:09:16,011
The balance could be
retained on the account

1499
01:09:16,011 --> 01:09:18,260
so you can get a new card
associated with that account

1500
01:09:18,260 --> 01:09:20,220
and you have your balance.

1501
01:09:20,220 --> 01:09:22,340
Autoload is another convenience.

1502
01:09:22,340 --> 01:09:26,090
You might have a rule that says,
if my balance drops below $5,

1503
01:09:26,090 --> 01:09:27,500
charge $20.

1504
01:09:27,500 --> 01:09:31,700
So if it's top up
or pay-as-you-go,

1505
01:09:31,700 --> 01:09:35,180
then this one feature.

1506
01:09:35,180 --> 01:09:40,939
Of course, it's much better for
us sort of researchers and data

1507
01:09:40,939 --> 01:09:43,430
nerds, better data for
analysis and planning,

1508
01:09:43,430 --> 01:09:45,020
longitudinal studies.

1509
01:09:45,020 --> 01:09:46,970
You can track a
token longitudinally

1510
01:09:46,970 --> 01:09:49,970
and understand more
about behavior.

1511
01:09:49,970 --> 01:09:53,859
It's embeddable in employee and
student budgets, as we've seen.

1512
01:09:53,859 --> 01:09:55,400
They are more
expensive than tickets.

1513
01:09:55,400 --> 01:09:58,520
Now there are some smart
tickets so you can print a card

1514
01:09:58,520 --> 01:10:00,800
with a chip circuit inside.

1515
01:10:00,800 --> 01:10:02,660
Those are a little cheaper.

1516
01:10:02,660 --> 01:10:06,110
One issue with smart cards is
that a lot of these systems

1517
01:10:06,110 --> 01:10:07,370
are proprietary.

1518
01:10:07,370 --> 01:10:09,830
And there are some standards,
but there are several

1519
01:10:09,830 --> 01:10:11,970
standards-- too many of them--

1520
01:10:11,970 --> 01:10:14,080
and they don't all
work everywhere

1521
01:10:14,080 --> 01:10:16,670
and so you can't
really use a card

1522
01:10:16,670 --> 01:10:18,470
from one system
on another system.

1523
01:10:18,470 --> 01:10:20,130
That's usually not the case.

1524
01:10:20,130 --> 01:10:21,770
There are some
exceptions to that.

1525
01:10:21,770 --> 01:10:25,280
There is a move towards open
source hardware specifications.

1526
01:10:25,280 --> 01:10:27,000
New York is a good
example of that.

1527
01:10:27,000 --> 01:10:28,970
They recently did
some procurements

1528
01:10:28,970 --> 01:10:32,670
where they asked all
the parts to be--

1529
01:10:32,670 --> 01:10:35,120
it was for an AVL
system in this case--

1530
01:10:35,120 --> 01:10:40,380
to be open source hardware
and communications technology.

1531
01:10:40,380 --> 01:10:42,720
That means they're not
locked into that vendor.

1532
01:10:42,720 --> 01:10:47,780
So if they need to replace
one aspect of that system,

1533
01:10:47,780 --> 01:10:50,090
they can hire someone
else that also

1534
01:10:50,090 --> 01:10:52,760
complies with that standard
and that part can be replaced.

1535
01:10:52,760 --> 01:10:56,270
That lowers costs,
increases competition,

1536
01:10:56,270 --> 01:10:58,855
and it means again that they're
not locked into that vendor.

1537
01:10:58,855 --> 01:10:59,354
Lee.

1538
01:10:59,354 --> 01:11:01,904
AUDIENCE: [INAUDIBLE] security
at all or [INAUDIBLE]..

1539
01:11:01,904 --> 01:11:03,820
GABRIEL SANCHEZ-MARTINEZ:
Usually, the systems

1540
01:11:03,820 --> 01:11:05,990
have strong standard encryption.

1541
01:11:05,990 --> 01:11:08,180
Part of the standard is
what encryption is used

1542
01:11:08,180 --> 01:11:14,480
and what encryption algorithms
are used, hashing, et cetera.

1543
01:11:14,480 --> 01:11:14,990
Yeah.

1544
01:11:14,990 --> 01:11:17,840
So the Charlie card has
pretty weak encryption,

1545
01:11:17,840 --> 01:11:25,390
40 bits I think, and the
same key on every card.

1546
01:11:25,390 --> 01:11:28,930
So a long time ago, someone
cracked the key by brute force

1547
01:11:28,930 --> 01:11:31,000
and that's the same key
on every Charlie card.

1548
01:11:31,000 --> 01:11:34,300
So once that key is public,
anyone with the equipment

1549
01:11:34,300 --> 01:11:38,080
could load a fake
balance to the card

1550
01:11:38,080 --> 01:11:41,770
because the cards are the ones
having the balance in the AFC

1551
01:11:41,770 --> 01:11:44,470
system here and not
the fare engine.

1552
01:11:44,470 --> 01:11:47,290
That means that effectively,
you can lie to the fare system

1553
01:11:47,290 --> 01:11:50,620
and say that you have
more money than you have.

1554
01:11:50,620 --> 01:11:53,380
Much harder to do with
any modern system,

1555
01:11:53,380 --> 01:11:55,210
certainly contact
with a bank card

1556
01:11:55,210 --> 01:11:57,730
which has a very strong
encryption and unique keys

1557
01:11:57,730 --> 01:11:58,909
per card.

1558
01:11:58,909 --> 01:12:00,950
AUDIENCE: Did MIT students
get caught doing that?

1559
01:12:00,950 --> 01:12:02,700
GABRIEL SANCHEZ-MARTINEZ:
The MIT students

1560
01:12:02,700 --> 01:12:04,540
were the first to do this.

1561
01:12:04,540 --> 01:12:08,120
They were caught and
there was some issue.

1562
01:12:08,120 --> 01:12:10,650
Which I think it ended up
being just a slap on the wrist,

1563
01:12:10,650 --> 01:12:15,557
but there was a lot
of issue with it.

1564
01:12:15,557 --> 01:12:17,140
Because they wanted
to publish a paper

1565
01:12:17,140 --> 01:12:20,000
or publish something and
then that was an issue.

1566
01:12:20,000 --> 01:12:20,500
OK.

1567
01:12:20,500 --> 01:12:24,410
So integration across agencies
of a region is possible.

1568
01:12:24,410 --> 01:12:28,160
That's one of the reasons for
moving towards smart cards,

1569
01:12:28,160 --> 01:12:31,030
especially in regions
that have many providers.

1570
01:12:31,030 --> 01:12:33,100
But it's challenging, and
usually the challenges

1571
01:12:33,100 --> 01:12:37,190
are less technical and more
about trust and business

1572
01:12:37,190 --> 01:12:40,420
and who gets to decide
what color the card is

1573
01:12:40,420 --> 01:12:44,314
or exactly what the
fare policy will be.

1574
01:12:44,314 --> 01:12:45,730
This is another
interesting thing.

1575
01:12:45,730 --> 01:12:49,540
In some countries, and
I'm thinking specifically

1576
01:12:49,540 --> 01:12:53,980
of Japan and China, there
are examples of retail stores

1577
01:12:53,980 --> 01:12:55,960
that have partnered
with a transit agency

1578
01:12:55,960 --> 01:13:00,707
and you can use the card
at retail locations.

1579
01:13:00,707 --> 01:13:02,040
Hong Kong is an example of that.

1580
01:13:02,040 --> 01:13:06,880
There's more than 100 retail
locations that accept Octopus.

1581
01:13:06,880 --> 01:13:10,570
And in Japan, I know that
there are entire cities where

1582
01:13:10,570 --> 01:13:13,600
there's like a whole mall and
this is what most people use

1583
01:13:13,600 --> 01:13:15,160
as a charge card.

1584
01:13:15,160 --> 01:13:18,490
So that's interesting.

1585
01:13:18,490 --> 01:13:21,100
If you don't have very
tough privacy laws,

1586
01:13:21,100 --> 01:13:23,780
as you do in Europe and the US--

1587
01:13:23,780 --> 01:13:25,750
I'm not sure what
they are in Japan,

1588
01:13:25,750 --> 01:13:28,420
but there was some
research where

1589
01:13:28,420 --> 01:13:33,130
they were combining all the
data from shopping and transit

1590
01:13:33,130 --> 01:13:38,110
to get really interesting
behavioral analytics.

1591
01:13:38,110 --> 01:13:39,790
And you can do
interesting things

1592
01:13:39,790 --> 01:13:46,290
like offer discounts at stores
if you do something in transit.

1593
01:13:46,290 --> 01:13:51,295
So there's a lot of very
interesting [INAUDIBLE]..

1594
01:13:51,295 --> 01:13:53,346
AUDIENCE: Our company
did the same thing

1595
01:13:53,346 --> 01:13:55,796
and once [INAUDIBLE].

1596
01:14:00,075 --> 01:14:04,264
So after that, we are
very careful about dealing

1597
01:14:04,264 --> 01:14:05,169
with [INAUDIBLE].

1598
01:14:05,169 --> 01:14:06,460
GABRIEL SANCHEZ-MARTINEZ: Yeah.

1599
01:14:06,460 --> 01:14:07,680
Yeah.

1600
01:14:07,680 --> 01:14:10,200
Thanks for sharing.

1601
01:14:10,200 --> 01:14:11,400
So contactless bank cards.

1602
01:14:11,400 --> 01:14:12,899
We started talking
about this, we've

1603
01:14:12,899 --> 01:14:14,430
mentioned that multiple times.

1604
01:14:14,430 --> 01:14:16,560
Here's the logic for it.

1605
01:14:16,560 --> 01:14:18,090
A transit agency
would prefer not

1606
01:14:18,090 --> 01:14:20,550
having to deal with the
complexities and costs of fare

1607
01:14:20,550 --> 01:14:21,776
collection.

1608
01:14:21,776 --> 01:14:23,400
Essentially, if you
have a fare system,

1609
01:14:23,400 --> 01:14:26,320
it's like having a small bank.

1610
01:14:26,320 --> 01:14:28,890
It doesn't give out loans,
it doesn't do other things

1611
01:14:28,890 --> 01:14:30,780
that banks do, but
you are dealing

1612
01:14:30,780 --> 01:14:33,570
with money and the cards
and customer service related

1613
01:14:33,570 --> 01:14:36,150
to cards and all those things.

1614
01:14:36,150 --> 01:14:37,950
Banks do that, and
they do it very well.

1615
01:14:37,950 --> 01:14:42,840
So why not outsource that
part of the business to banks?

1616
01:14:42,840 --> 01:14:46,780
There are multiple banks so
they can get competition.

1617
01:14:46,780 --> 01:14:50,190
So credit card companies
specialize in payment;

1618
01:14:50,190 --> 01:14:52,380
contactless bank
cards are very secure,

1619
01:14:52,380 --> 01:14:55,950
much more so than
say the Charlie card;

1620
01:14:55,950 --> 01:14:59,860
you can use cards like
this in several ways.

1621
01:14:59,860 --> 01:15:03,150
So you could directly
use them for payment

1622
01:15:03,150 --> 01:15:05,070
as you would at
a retail location

1623
01:15:05,070 --> 01:15:09,570
or you can use the token that
identifies that card, tying it

1624
01:15:09,570 --> 01:15:10,890
to an account.

1625
01:15:10,890 --> 01:15:14,460
And then your fare engine can
calculate what the fare will be

1626
01:15:14,460 --> 01:15:15,990
and capping and all that.

1627
01:15:15,990 --> 01:15:21,270
And then on a
regular basis, there

1628
01:15:21,270 --> 01:15:25,050
would be a charge to your
credit card or account

1629
01:15:25,050 --> 01:15:29,940
for whatever total
was calculated.

1630
01:15:29,940 --> 01:15:34,140
So that also enables
Apple Pay and Android Pay.

1631
01:15:34,140 --> 01:15:36,580
If you can put your
credit card on your phone,

1632
01:15:36,580 --> 01:15:40,350
then you can use your phone
to get into the system.

1633
01:15:40,350 --> 01:15:43,110
In London, people love that.

1634
01:15:43,110 --> 01:15:44,860
It reduces fare
collection costs.

1635
01:15:44,860 --> 01:15:47,610
So why?

1636
01:15:47,610 --> 01:15:49,770
Not necessarily obvious.

1637
01:15:49,770 --> 01:15:52,050
So it simplifies
customer communication.

1638
01:15:52,050 --> 01:15:55,260
You don't have to issue
new cards to people,

1639
01:15:55,260 --> 01:15:59,310
you don't have to explain
how you pay because people

1640
01:15:59,310 --> 01:16:01,500
know how to use cards.

1641
01:16:01,500 --> 01:16:03,150
It relies on open
standards so there's

1642
01:16:03,150 --> 01:16:04,660
more competition on the market.

1643
01:16:04,660 --> 01:16:06,780
There's several
banks, for example,

1644
01:16:06,780 --> 01:16:10,980
and you could have
banks compete for who

1645
01:16:10,980 --> 01:16:16,140
will give you a better deal in
terms of fees on these cards.

1646
01:16:19,080 --> 01:16:21,480
It outsources some aspects
of customer service to banks.

1647
01:16:21,480 --> 01:16:23,340
So if my card stopped
working, who's

1648
01:16:23,340 --> 01:16:27,630
going to get the phone call,
the transit agency or the bank?

1649
01:16:27,630 --> 01:16:30,570
And it eliminates costs of sort
of creating and distributing

1650
01:16:30,570 --> 01:16:31,380
smart cards.

1651
01:16:31,380 --> 01:16:35,250
So there's several ways in
which this is reducing costs.

1652
01:16:35,250 --> 01:16:39,580
London has successfully
been able to reduce

1653
01:16:39,580 --> 01:16:46,950
the number of station attendants
and especially of booths

1654
01:16:46,950 --> 01:16:49,580
where they sell Oyster cards and
have customer service related

1655
01:16:49,580 --> 01:16:50,540
to Oyster cards.

1656
01:16:50,540 --> 01:16:53,726
They've been able to close
those and save money.

1657
01:16:53,726 --> 01:16:55,100
And then there's
an equity issue,

1658
01:16:55,100 --> 01:16:57,420
and this is what is
always sort of brought up

1659
01:16:57,420 --> 01:16:59,750
when you talk about
contactless bank cards, which

1660
01:16:59,750 --> 01:17:01,580
is what about the unbanked?

1661
01:17:01,580 --> 01:17:06,120
The poorest people are the ones
who don't have a bank account.

1662
01:17:06,120 --> 01:17:08,120
So what can you do about that?

1663
01:17:08,120 --> 01:17:10,340
Does that make this not work?

1664
01:17:10,340 --> 01:17:13,160
So there are multiple
ways of addressing that.

1665
01:17:13,160 --> 01:17:16,520
An agency can issue cards
that have preloaded balance.

1666
01:17:16,520 --> 01:17:20,510
So that person could interact
with the agency, not the bank.

1667
01:17:20,510 --> 01:17:23,030
They don't necessarily
need a bank account.

1668
01:17:23,030 --> 01:17:25,240
You can have banks
offer free accounts.

1669
01:17:25,240 --> 01:17:26,780
So you can try to
encourage people

1670
01:17:26,780 --> 01:17:30,500
to open accounts that have
no fee, no minimum balance.

1671
01:17:30,500 --> 01:17:34,830
So some [INAUDIBLE] special
accounts created for that.

1672
01:17:34,830 --> 01:17:36,800
And one other issue
is that you must

1673
01:17:36,800 --> 01:17:40,310
be able to obtain these
cards at many locations.

1674
01:17:40,310 --> 01:17:43,520
If you move towards
a system like this

1675
01:17:43,520 --> 01:17:47,630
and you can only get one
of these sort of equity

1676
01:17:47,630 --> 01:17:54,380
issued cards if you want from
one station downtown, that

1677
01:17:54,380 --> 01:17:58,580
means that the person who
depends on two or three buses

1678
01:17:58,580 --> 01:18:02,450
to get into downtown
can't easily get a card.

1679
01:18:02,450 --> 01:18:05,600
So you must be able
to maybe get these

1680
01:18:05,600 --> 01:18:08,390
at several retail
locations or have

1681
01:18:08,390 --> 01:18:13,980
fare vending machines
in multiple places,

1682
01:18:13,980 --> 01:18:17,510
especially in zones of high
concentrations of people

1683
01:18:17,510 --> 01:18:22,960
that depend on transit and
don't have bank accounts.

1684
01:18:22,960 --> 01:18:23,860
OK.

1685
01:18:23,860 --> 01:18:27,800
So there are ways of
dealing with that.

1686
01:18:27,800 --> 01:18:31,119
Boston is considering now
what they call AFC 2.0.

1687
01:18:31,119 --> 01:18:32,660
They're sort of
branding it that way.

1688
01:18:32,660 --> 01:18:37,100
And they're probably
going to be moving forward

1689
01:18:37,100 --> 01:18:41,840
with the London model of
using contactless bank cards.

1690
01:18:41,840 --> 01:18:43,910
So we'll see how it
plays out and we'll

1691
01:18:43,910 --> 01:18:47,210
see what that does to the
payment industry in general

1692
01:18:47,210 --> 01:18:52,590
in the US in terms of that means
more people will have these.

1693
01:18:52,590 --> 01:18:57,710
Does that mean that a lot of
readers at retail locations

1694
01:18:57,710 --> 01:19:01,050
will start accepting that,
and what will that do?

1695
01:19:01,050 --> 01:19:01,910
It's a question.

1696
01:19:01,910 --> 01:19:04,620
We'll see what happens.

1697
01:19:04,620 --> 01:19:05,310
OK.

1698
01:19:05,310 --> 01:19:06,650
Last topic is fare analytics.

1699
01:19:06,650 --> 01:19:09,440
So obviously, lots of data is
generated by these systems.

1700
01:19:09,440 --> 01:19:11,120
We've used it for
all the [INAUDIBLE],,

1701
01:19:11,120 --> 01:19:13,380
you've looked at it
in your homework.

1702
01:19:13,380 --> 01:19:18,950
So here's an example from one of
the students in the transit lab

1703
01:19:18,950 --> 01:19:20,510
who has one more
year to graduate,

1704
01:19:20,510 --> 01:19:22,940
but he's done great work.

1705
01:19:22,940 --> 01:19:24,980
His name is Andrew Stutz.

1706
01:19:24,980 --> 01:19:27,260
And one of the
examples of his work

1707
01:19:27,260 --> 01:19:33,710
is dashboard, where you can
look at all sorts of fare

1708
01:19:33,710 --> 01:19:41,750
transactions by fare product, by
pass or no pass, by user type.

1709
01:19:41,750 --> 01:19:44,750
And you can sort of filter
and see exactly who's

1710
01:19:44,750 --> 01:19:46,430
using your system how often.

1711
01:19:46,430 --> 01:19:48,292
Let me see if I can
show that to you live.

1712
01:19:51,370 --> 01:19:51,870
OK.

1713
01:19:51,870 --> 01:19:57,840
So here's AFC validations
for October 2015.

1714
01:19:57,840 --> 01:20:02,736
So if I want to
see, for example,

1715
01:20:02,736 --> 01:20:04,110
here we're looking
at everything.

1716
01:20:04,110 --> 01:20:07,080
So we're looking at tickets and
cards and passes and monthly

1717
01:20:07,080 --> 01:20:08,830
passes and pay-as-you-go.

1718
01:20:08,830 --> 01:20:12,502
So if I want to look at
stored value, so no passes,

1719
01:20:12,502 --> 01:20:13,710
I'll sort of filter that out.

1720
01:20:13,710 --> 01:20:17,640
Then of course tariff type
becomes 100% pay-as-you-go.

1721
01:20:17,640 --> 01:20:20,340
And then you see the breakdown
between cards and tickets

1722
01:20:20,340 --> 01:20:22,260
for stored value use.

1723
01:20:22,260 --> 01:20:27,120
We see the trends by time
of day here and by date.

1724
01:20:27,120 --> 01:20:31,331
So you can see that weekends
are lower and the user type

1725
01:20:31,331 --> 01:20:31,830
right here.

1726
01:20:31,830 --> 01:20:36,630
So adults very high and then
senior students below that.

1727
01:20:36,630 --> 01:20:42,670
If you want to look at
passes, for example,

1728
01:20:42,670 --> 01:20:46,540
we could then say passes and
monthly passes in particular.

1729
01:20:46,540 --> 01:20:49,320
You see that most of those
are cards, not tickets.

1730
01:20:49,320 --> 01:20:51,360
Makes sense.

1731
01:20:51,360 --> 01:20:55,244
Higher number of students
than we saw before, et cetera.

1732
01:20:55,244 --> 01:20:56,910
So you can really
sort of play with this

1733
01:20:56,910 --> 01:21:02,510
and understand how the
market segments itself

1734
01:21:02,510 --> 01:21:06,960
with these different
fare products

1735
01:21:06,960 --> 01:21:09,150
that people are purchasing
based on the fare policy.

1736
01:21:09,150 --> 01:21:14,160
And there's another
dashboard for fare revenue.

1737
01:21:14,160 --> 01:21:19,860
So these are fare revenues
by month across many years.

1738
01:21:19,860 --> 01:21:23,607
And you can see
the total up here.

1739
01:21:23,607 --> 01:21:24,940
But you can break it down again.

1740
01:21:24,940 --> 01:21:28,750
So you can look at how much
of it is monthly passes

1741
01:21:28,750 --> 01:21:31,980
and you can see how much
of it is normal commuter

1742
01:21:31,980 --> 01:21:33,540
pass versus commuter rail.

1743
01:21:33,540 --> 01:21:39,990
And you can see, if you're
interested in students,

1744
01:21:39,990 --> 01:21:41,790
here's your students.

1745
01:21:41,790 --> 01:21:44,910
So you can really slice and
dice it any way you want to.

1746
01:21:44,910 --> 01:21:46,410
And there's many
more applications,

1747
01:21:46,410 --> 01:21:49,811
but I just wanted to
demonstrate a few.

1748
01:21:49,811 --> 01:21:50,310
OK.

1749
01:21:50,310 --> 01:21:52,120
So that was it.

1750
01:21:52,120 --> 01:21:55,980
I'm not going to lecture
anyone for this semester.

1751
01:21:55,980 --> 01:21:59,820
So I'll still come.

1752
01:21:59,820 --> 01:22:02,700
And I'll let you
know about the test

1753
01:22:02,700 --> 01:22:05,140
as soon as I have more
information on it.

1754
01:22:05,140 --> 01:22:09,040
Any questions on fare
policy, fare structure,

1755
01:22:09,040 --> 01:22:10,300
fare technology?

1756
01:22:10,300 --> 01:22:10,800
No.

1757
01:22:10,800 --> 01:22:11,860
All right.

1758
01:22:11,860 --> 01:22:12,360
Thank you.

1759
01:22:12,360 --> 01:22:15,110
[APPLAUSE]