Blacktown Railway Station - taken by SITWWW hosted wikipedia

Blacktown is another one of these ‘over the top’ palaces that has been built to serve passengers changing vehicles or modes. Despite its multi-tens-of-millions cost, its value to the passengers is zero, and would not have been needed to be so vast if other obvious changes had been made, for example, making Seven Hills the junction.

This morning’s Sydney Morning Herald refers to the decision of the Independent Pricing Tribunal (IPART) to set higher fares for Cityrail. While some efficiencies are expected from Cityrail, the fare increase was announced in dollar terms but also in terms of what the “flagfall” is and the per-km rate.

This is an important first step in getting a system that can be easily priced by an electronic swipe-on swipe-off system, and also redirecting resources away from encouraging outer-suburban and interurban long distance commutes.

But what is, or should be, in the ‘flagfall’ and how does the consumer value it?

When I looked at “Value Proposition and Value Adding” I put the view that for some customers the value proposition is very limited: to get from point A to point B. Trimming such as nice stations, comfortable vehicles and lavish customer service are excessive and not required by the customer, who will resent having to pay for these in their fare. Other artefacts of the service such as tickets, machines, storage and so on are more for the operators’ benefit than the customer’s.

However the value propostion of getting from point A to point B needs to be unpacked. Just how is the operator to deliver on the value proposition? It is fine to say that items such as tickets or stations add no value, but is that strictly correct?

A platform certainly adds value, if climbing up onto a train (with a floor height of 1.5 metres) from the ballasted track is the alternative. A sign on the platform adds value to the customer who has never been there before (but no value to the customer who knows the area).

The cost of these things is not variable; it is fixed. A customer travelling one kilometre or one hundred still needs a platform. And the only appropriate point to charge for the platform is from the customer when they pay for their ticket.

This is one component of flagfall.

Does the operator charge for the vehicle?

No vehicle means no value, so yes they need to charge for the vehicle. Is the vehicle a fixed cost? Yes again, it can do only one short journey a day or a full day of long journeys and still cost the same in opportunity cost of capital.

What about the staffing? This is trickier and depends on what value the customer assigns staffing. Much of railway staffing these days is not actually part of the value proposition and adds no value, however, in a society where anti-social behaviour and crime is widespread, providing a staff presence adds value through the value proposition of travelling from point A to point B safely.

We also need to unpack the value proposition “getting from point A to point B” in terms of the service standard. Does the customer want to go right now?

If I need to catch the tram at lunchtime, I want it now. But my flight to Vietnam later this month, I will travel on the scheduled service because I’m not so worried what time it goes; I do not value and am not prepared to pay for a turn-up-and-go services.

Others might: this is probably why Malaysian Airlines have five flights a day to KL, because some business people are fussier on their timings than I am. Their value proposition is not just to get from point A to point B, but to do it at unpredictable timings.

So some contribution to frequency, if the customers value it, needs to be priced into the flagfall rather than borne by the variable charge alone. And to off-peak services, if the piece of mind of knowing that the service is there, even if you are unlikely to use it, is valued by the peak time consumer.

There is an element of ‘divisibility’ which arises when we compare different service standards. The turn-up-and-go customer expects a whole package of services, several runs a day including the ones they actually use. So if I leave work around 6pm but can’t be sure which of the next 6 services I will actually catch, in effect I am valuing the presence of all of them, and should pay accordingly. If, on the other hand, I value a single train a day to Ararat, and will adjust my timing around that schedule, then I would not value any other trains they run besides the one I wish to catch.

What about mode-changing? As I mentioned in the earlier post, the simple value proposition for the train-bus customer, going from Point A to Point C via Point B, is that the customer walks off the train and onto the bus. Ideally the bus is already there, is metres from the train and is obvious where it is, where it is going, and the fare is already paid. You simply leave on vehicle and walk onto the other.

Anything above that is not valued by the customer and it doesn’t matter how colourful the LCD passenger information display is, or how grand the station concourse is, or even how comfortable the seats are while waiting for the next vehicle; none of these things were sought by the customer and are only artefacts of the operation. Operators, planners and politicians frequently lose sight of this, and are often overcome by the ‘ribbon-cutting effect’ or non-transport related motivation such as creating construction jobs, or making communities seem grander than they really are. They are certainly something the customer would resent paying for as part of their fare.

In fact many excuses are given, from town planning, to disabled access, to heritage, to the excessive cost, to avoid doing what the customers would actually like: to have the bus waiting right where the trains pull in, as I have seen done in so many country stations, but seems so difficult to achieve in urban areas.

When I went to Echuca the buses waited in the forecourt and the train was not 10 metres (through the side gate) from the bus. The passengers board through the door and the driver places the luggage underneath. A simple solution which addresses a simple value proposition. The customer, buying their ticket to Moama from Melbourne is expecting no more and does not need to pay for passenger information displays, fancy kerbing and bus layover areas, or excessive staff.

Maintenance is a semi-fixed, semi-variable component, with some of the wear and tear on the vehicle attributable to distance, and some simply to age and the need to stay ready for use. Flagfall needs to cover the age and ‘readiness’ element of maintenance.

I will look at per-km charging in a later post and its relationship to zonal fare structures, as well as a future post on cost-recovery levels.