25 January 2009

Paying for Public Transit Without Tickets, Tariffs, and Taxes


Is there another way to pay for public transit? Could we even make it free?

There are three ways that most municipalities pay for public transit:

  • Tickets - where each rider pays per trip
  • Tariffs - where the people who don't use public transit pay a fee (see London, UK)
  • Taxes - where everyone pays a portion whether you use the system or not

Unfortunately, public transit has a very inflexible cost structure:

  • huge setup cost (sometimes >$20 million per km)
  • large fixed cost - the buses and subways run on a schedule, regardless of ridership
  • very low variable cost - a very small incremental cost for fuel per rider

This means that whether people use the system or not, the municipality has to pay the bills -including labour, fuel, and maintenance. Therefore, the public transit system needs to be efficient and valuable to attract the maximum number of riders.

This leads me to wonder: *Are there other ways to pay for public transit other than Tickets, Tariffs and Taxes? *

For example. While people pay for tickets to go to the movies, the revenue hardly flows to the movie theater - it goes straight to the producers. Instead movie theaters make their money on the value-ad, on the popcorn and soda sales.

Further, could you give away public transit for free and make money via another revenue stream? (Much like advertising to Google's free search).

These are just questions for now with no real answers. Some possible answers could include:

  • targeted or focused advertising (such as forcing people to watch tv commercials)
  • up-selling for cellphone or wifi coverage during the trip
  • selling comfort or convenience on longer trips (such as padded chairs, etc)
  • integrated restaurant ordering systems so your table is ready for you when you get to the restaurant or your pizza is waiting at your door by the time you get home

This is just the tip of the iceburg. What other ways can public transit be funded - without asking riders to pay more for each trip?