eight - Fare structures

Summary

Introduction

Customers pay fares for the services they consume on public transport and fares are the means by which operators receive a contribution to the cost of service provision. This simple exchange belies a complex set of decisions in every urban area which have far reaching impacts beyond the operation and use of the public transport system. It affects the accessibility of citizens and ultimately impacts on urban form.

A fare system is defined by its structure, its collection method and the fare level. The objectives for public transport guide how these three elements are combined. For instance, a transport authority may use fares as a tool to meet policy objectives such as demand management to reduce congestion or subsidy allocation to promote equity or social inclusion. In this chapter, we are concerned with the fare finally paid by the user in contrast to the technical fare (BRT Planning Guide (ITDP 2007)), which is related to the amount per passenger received by the operator and how this is related to efficiency and incentives (Laffont and Tirole 1993), which is more properly considered as a part of the contract design (see Chapter Seven).

The implementation of a BRT system as new infrastructure offers an opportunity to reinforce government objectives because the process usually introduces regulations and contractual agreements that allow the authority to set fare fixing criteria consistently. In the case of urban areas with unregulated bus transport systems, such as many cities in developing countries, BRT implementation is also an opportunity to harmonise transport in the city by regulating the fares of previously unregulated operators either by offering a substitute mode with a regulated fare, which could be lower, or by giving incentives to complementary services to agree an integrated fare system. New BRT or integrated systems are however different from the many unregulated services they replace since the latter typically operate without subsidy and behave like typical ‘firms’.

It is important to understand the overarching goal of a BRT system – whether the objective is to maximise the number of passengers, maximise the revenue or to reach some other specific goals such as commercial cost recovery or to benefit some sector of the community, such as the socially excluded. It is clear that cities cannot expect to meet all these goals at the same time and that they will have different implications for fare levels in particular.