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Fair Move: 07 Fares that reflect the time and place of travel

Recommendations
  1. Immediately introduce peak and off-peak fares on public transport in places and locations which are at capacity. Modes and zones which are rarely at capacity should have all-day off-peak fares.
  2. Consider a new `City Zone’ with its own peak price, composed of the City Loop service train stations (Parliament, Melbourne Central and Flagstaff, Southern Cross and Flinders Street) and the Metro Tunnel stations (Arden, Parkville, State Library, Town Hall and Anzac). This will be contingent on CBD public transport travel patterns returning to pre-COVID-19 levels, with significant crowding at peaks times.
  3. Introduce directional pricing so that trips in counter-peak directions are not charged a peak fare e.g. those travelling away from the CBD in the morning peak.

Peak use contributes to an unbalanced network

Use of the overall transport network in Melbourne is highly dependent on the time of day.

As Figure 10 clearly shows, both public transport and roads have a `peak’ period of use that ranges from around 7:30am to 9:30am and then a double peak in the afternoon, likely attributed to school pickups and returning from work trips.

The peak is even more pronounced for public transport, as use in the off-peak periods falls much more heavily than road use. This underuse of the network during the off-peak and highly congested times in the peak shows that the network is imbalanced.

The peak for train travel is particularly pronounced close to the CBD. Figure 13 shows that for train travel within the City Loop there is a significant peak within the peak periods (highlighted in red). Occurring within both peak periods, this is an hour in which there is a large increase in touch on/off transactions, from around 1000 transactions per minute up to 1500.

An option for pricing to specifically flatten the peak curve for the CBD was considered, and is detailed in our technical report. We have not recommended this pricing because the practical implementation and complexity trade-offs are considered too great at this time, and because there is some uncertainty in the future levels of CBD train congestion post-COVID-19. Instead, we focus on a single peak period for the morning and evening peaks (7:30am-9:30am and 4:30pm-6:30pm). Future technology and greater familiarisation with demand-based pricing could make pricing to flatten the peak curve more viable in the future.

Peak usage is not just a weekday phenomenon. Figure 11 shows that while there is no pronounced weekend peak for public transport, there is a large single peak for road use during the middle of the day. This has implications for setting fares, as significant road congestion benefits are available when shifting people off roads on weekends, while the public transport network is mostly empty.

Crowding and congestion also varies by location. Figure 13 shows that there is spare capacity at even the busiest times in the extremities of the network, primarily located outside Zone 1 (approximated by blue shading). While not perfect, the existing Zone 2 boundary does correlate strongly with the spare capacity on the network, even during the peak periods.

Public transport pricing based on the time of day in which travel occurs has a long history in Victoria. Before the late 1970s, Melbourne train fares included peak and off-peak fares and were set according to a detailed schedule based on distance. In under ten years, this was all replaced with the much simpler Metro card system, which evolved into today’s zonal system (Infrastructure Victoria, 2020).

The current fare system in Victoria only varies by time in two limited cases: the Early Bird ticket in metropolitan Melbourne and V/Line services.

The Early Bird ticket offers free travel on metropolitan trains for all trips completed by 7:15am, while trips on V/Line trains that travel at least three zones and finish in the CBD at peak times are priced higher than other V/Line trips.

A full understanding of the rationale behind the move away from peak and off-peak fares is not readily available, but annual reports for the Victorian Railways Board and Melbourne and Metropolitan Tramways Board suggest it was in part a response to declining patronage and a way to support the introduction of ticket machines (Infrastructure Victoria, 2020).

The rise of the automobile had significant effects on public transport patronage, resulting in broad underuse of the network.

These issues no longer exist: public transport use has surged in the first part of the century [13] and smartcard ticketing technology has been introduced.

Interestingly however, peak prices have not resurfaced for Melbourne’s metropolitan fares.

Across the country, a number of public transport systems feature peak fares, including Sydney, Brisbane and Adelaide.

Internationally, the use of peak fares is also mixed: peak fares are a feature in the public transport systems of London, Tokyo and Berlin, while absent from cities such as Auckland, New York, Madrid and Paris.

[13] Melbourne Public Transport Patronage Long Run Series 1945-46 to 2010-11

New peak fares

Peaks across public transport and roads matter for fare setting.

Flat fares give people no financial incentive to shift their time of travel. Without any shift in travel behaviour, the only response available is to provide more services and expand infrastructure, increasing the financial costs associated with the public transport network and contributing to ever increasing levels of imbalance.

The unsynchronised private and public transport weekend peaks demonstrate that significant road decongestion benefits can be realised with increased use of public transport, which is underused on weekends.

However, the synchronised peaks for private and public transport on weekdays are more challenging.

There are significant road congestion benefits in moving people to public transport during this time, yet there are also significant crowding issues on public transport (particularly trains and trams). The costs of increased public transport use in the peak and the benefits of decreased road use need to be balanced.

Modelling and research performed by CIE (in line with our approach, and which takes into account the complexities of capacity constraints on both the roads and public transport) reveals that the social costs for additional train and express bus use is higher in the peak than the off-peak (Figure 15), and so fares should also be higher at these times (CIE, 2020).

Additional train capacity is extremely costly due to the limited options available for new train infrastructure in inner Melbourne, usually involving signalling upgrades and tunnelling, the latter of which almost certainly involves expenditure in the billions of dollars. If travellers face fares that reflect the additional costs their behaviour induces, then planners can be more confident that future infrastructure to meet peak demand is of benefit to society and valued by users.

The results were less conclusive for additional tram use (Figure 15). However, not all constraints on tram capacity were able to be included in the CIE work, and our view is that the demonstrated overcrowding of trams in inner Melbourne sway the argument firmly in favour of peak fares, at least in the first instance.

The St Kilda Road and Swanston Street tram corridor is one of the busiest in the world, and serves as an excellent case study. The route carries 10 of the 24 tram lines in Melbourne and is particularly problematic as peak frequencies cannot be increased on any of the routes in the corridor (there is a tram every minute in both directions for much of the day), as safety regulations permit only 60 trams per hour (Langdon and Degnan, 2017).

Limited increases in capacity can be made in the short to medium term by increasing the capacity and size of the trams themselves. More substantial increases may require network reconfigurations in some of the nation’s most expensive areas (due to the high land value and construction costs in inner Melbourne).

As explained in detail in the Fare Reform Technical Report that accompanies this paper, we have concluded that peak fares are warranted for trains, trams and express buses, but that this is unlikely to be the case for regular bus services (although further research into specific bus services is warranted) (Infrastructure Victoria, 2020a).

The main reasons contributing to the conclusion that there should be flat fares for bus services are the low costs of accommodating new trips during the peak (due to existing capacity on buses at this time and low infrastructure costs for additional services where required) and the significant congestion benefits from reducing private transport use during peak times.

Locational peak fares

The extent of crowding and congestion doesn’t only vary by time but also by location. Therefore, we propose that the application of peak fares varies across zones.

As discussed previously, the train network is not crowded for extended periods of time within Zone 2. Therefore, trips solely within Zone 2 should be charged off-peak fares.

In addition, because the congestion and the cost of expanding the train network in and around the CBD is greater than the rest of the network, we are proposing the introduction of an additional zone for Melbourne’s trains: a City Zone (when travel and crowding returns to near pre-pandemic levels). Trips to (and through) the City Loop stations are the primary contributors to congestion on the network, as evidenced by the need for Metro Tunnel and the line loads presented in Figure 17, which is representative of typical metro lines and shows that loads increase until people get off in the city loop (City Zone).

Across a typical weekday, stations like Southern Cross and Flinders Street cater for between 70,000 to 100,000 train passenger arrivals while stations like Parliament and Melbourne Central also cater for high passenger arrivals ranging between 43,000 to 51,000 a day. Compare these with major stations on the metropolitan train network like South Yarra and Footscray station with daily arrival numbers around 15,000 and it becomes clear that the CBD stations cater for some of the highest passenger numbers across the network (Figure 18).

In other words, people travelling into these busy CBD stations at peak times are contributing the most to crowding, congestion and capacity issues.

A new City Zone is proposed to include City Loop service train stations (Parliament, Melbourne Central, Flagstaff, Southern Cross and Flinders Street) and the Metro Tunnel stations (Arden, Parkville, State Library, Town Hall and Anzac). This would further refine the existing metropolitan rail zone system to separately price those areas with the highest levels of congestion: Melbourne’s rail lines as they tunnel through the city.

Using the underground tunnelling system and major stations associated with the City Loop (Flinders Street and Southern Cross) to define the new zone will also make it easy for people to remember where the City Zone applies.

City Loop station services are already referenced separately on train services and in timetabling, and typically involves tunnels so people identify this as different and appreciate its higher cost of provision.

This approach means that the metropolitan rail network would have three zones: the City Zone (Melbourne city), Zone 1 (inner Melbourne) and Zone 2 (outer Melbourne).

The additional City Zone is supported by the high social costs of additional public transport travel in these locations. However, due to the effects of COVID-19 (see COVID-19: a new set of problems for public transport, pg 27) there is uncertainty around whether travel patterns will return to pre-COVID-19 levels. We suggest government consider the proposals of a new City Zone post the COVID-19 recovery, determining whether crowding and congestion remain highest at these times and locations.

A new zone in the CBD would only be supported if crowding and congestion are high, and where increased passenger trips will require new infrastructure to be built and maintained in the future to cater for the increasing demand, as was the case pre-COVID-19.

The proposed structure of peak fares across the three zones for train travel is summarised in the table below.

Travel that does not cross into or out of the City Zone is priced at a lower fare, meaning that travel solely within a single zone (and Zone 1/2 trips) are priced lower than those trips that cross into/out of the City Zone. This is because the point of congestion is mostly crossing into/out of the City Zone. In the main, those passengers getting off before the CBD free up space for others to get on during the AM peak. Those getting on and off within the City Zone are contributing less to crowding than those travelling across the City Zone/Zone 1 boundary, which is where crowding is at its highest.

The fare also captures the significant current and potential future costs of increasing capacity in the inner CBD, which has required large scale projects such as the Metro Tunnel (current) and potential future projects such as the City Loop reconfiguration or Melbourne Metro Two.

Trips that travel in a counter-peak direction are charged at the discounted off-peak rate ie. travelling away from the city in the AM, travelling towards the city in the PM.

Directional peak fares

Congestion on the public transport network varies not only by location, but also by direction of travel.

For example, in the morning peak, a trip from Box Hill to Flinders Street arriving at 8:30am will be highly crowded, while a trip heading in the opposite direction will be mostly empty.

Because of this, we recommend that peak fares only apply in the directions where there is congestion.

This would deliver benefits in two ways. First, it would encourage people to board mostly empty train services that are running anyway. Second, it would remove car traffic from heavily congested road networks during their most busy times.

Will peak pricing make any difference?

Changing people’s behaviour

Analysis shows that the reasons people use public transport are quite different in the peak and off-peak periods. Given people’s need to get to work and education on time, will peak fares change behaviour?

While it is true that work and education trips dominate the peak periods, there are still a number of trips taking place for less time-critical tasks. Our analysis using Department of Transport (DoT) survey data found that even for work trips, over half of people said that they are able to shift their time of travel: 54% of those able to shift were able to shift their trip by up to 15 minutes, 38% by up to half an hour, 24% by up to an hour and 13% by more than one hour.[14]

In a survey by BehaviourWorks in May 2020, 60% of people said they were more likely to shift their time of public transport travel if it were discounted in off-peak periods (Figure 20). Interestingly, the price difference was comparable with the impacts of more structural changes in people’s ability to manage their own time, such as changes to school drop-off or work times.

Our modelling (detailed in the chapter benefits of change) shows that peak pricing can change behaviour, and that people will move their time of travel. This suggests that a significant number of Melbourne commuters may welcome and respond to off-peak fares. This conclusion is supported by the BehaviourWorks survey results.

The DoT survey data suggests people are most likely to shift their travel by small time periods, with the vast majority of those able to shift being able to do so by less than 30 minutes. To enable people to shift more easily from the peak to the off-peak, a shorter peak period could also be considered, for example 7:45am-9:15am.

The impacts of COVID-19 have demonstrated that employer and employee arrangements are more flexible than they have ever been, and that people’s ability to shift their time of travel has likely increased. Significantly, surcharges at peak times could reinforce measures to encourage social distancing on public transport.

Using time of day pricing to make best use of the network while still encouraging social distancing

While public health experts advise travellers to maintain social distance on public transport, the data show that even when travellers consider the virus, additional measures are required to achieve this.

The Annual Change in Patronage by Day from DoT’s `Weekly Patronage Report’, May 25-28, 2020 shows that total network patronage had dropped by 10% compared to the same time last year by the start of March, two weeks before the COVID-19 State of Emergency was announced for Victoria. When the State of Emergency was announced, patronage had fallen by 33%. However, the fall in patronage only reached around 80% of the levels required for social distancing after the closure of non-essential activity on March 23.

It is probably most effective to directly restrict the number of travellers per train carriage, tram or bus, to achieve social distancing – but doing so may be difficult or impractical. But if prices remain flat, then the demand for public transport will exceed the available places at certain times.

There is also a significant risk that trains and trams would fill up in the outer and middle suburbs before they even get close to inner Melbourne, and that residents of the city’s inner suburbs would be unable to board public transport.

Making it relatively cheaper to travel during off-peak times would provide a financial incentive to encourage those who don’t have to travel at peak not to do so. It would also help to reduce crowding: those who need to travel at peak times will be able to do so more safely.

This approach has been taken by the NSW Government, who have increased the off-peak discount and altered the time of the peak periods, as detailed in section 5.

Equity

Our research shows that introducing higher peak fares and discounted off-peak fares should have the overall effect of improving equity.

For modes with peak pricing, the burden of higher prices during peak hours will mainly fall on those with higher incomes. Conversely, those on lower incomes will gain the most from off-peak discounts.

Figure 21 illustrates public transport use by those on different income levels during peak and off-peak periods. In peak times, 50% of public transport use is made by those in the top 40% of household incomes, while only 31% is made by those on the lowest 40% of household incomes.

In the off-peak, the situation reverses, with only 34% of all trips being made by those in top 40% of household incomes, and 45% being made by those in the lowest 40%. The difference between peak and off-peak for trains and trams is even more acute.

Providing people with greater choice by enabling them to trade off travel time and price gives them the opportunity to shift their time of travel if it will make them better off. This trade off may benefit those on lower incomes who have limited financial resources. When very low income earners, for example pensioners, need to travel in peak periods they will continue to be eligible for concession fares at 50% off the full fare price.

Having no peak fares for buses is likely a better option on equity grounds, compared to a peak fare across all modes, and is likely to still make the best use of the network.

More than half of people making work trips say they can shift their time of travel, suggesting that many Melbourne commuters may welcome and respond to off-peak fares.

Our recommended fare structure charges peak fares not just based on time of travel, but also location. The highest fares for peak travel are charged for trips to the CBD at peak times, and these types of trips are disproportionately taken by those on higher incomes. 61% of public transport trips to the CBD at peak times are made by those in the top 40% of household incomes, while only 23% are made by people in the bottom 40% of household incomes (shown in Figure 23).

We also recommend charging off-peak fares for train travel which occurs solely within Zone 2. This also aligns well with equity, given that a large proportion of these trips are taken by those in the bottom two income quintiles (as shown in Figure 24).

While those taking trips solely within Zone 2 are on lower incomes, and while Zone 2 residents are on average on lower incomes that the general population, it is not the case that residents of Zone 2 who are users of public transport are on lower incomes. As Figure 24 shows, Zone 2 residents who used public transport are very similar in income distribution to the overall population, with around 20% in each income quintile. This is consistent with the fact that those using public transport are on average wealthier than those who do not.

Looking specifically at public transport users in Zone 2 shows that peak users are better off than the average population, while those taking peak trips to the CBD are significantly better off than the general population. Only 25% of trips being taken at peak times to/from the CBD are by those in the lowest 40% of household incomes, with 58% being taken by those in the top 40% of household incomes.

[14] Department of Transport survey data analysed by Infrastructure Victoria

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