Public Transportation Needs to Adopt New Business Models

5 december 2016

“We are in an early stage of yet another technology revolution,” said the Head of Department for Information Technologies Alexander Malakhov, speaking at the 5th international forum Smart Cities of the Future with the presentation entitled ‘Third Generation of IT Systems in Urban Passenger Transport’. “This new technology revolution is based on a new generation of mobile communication devices that combine the functions of personal identification, voice and text communication, news reading, electronic payment, security, health monitoring, environment monitoring and a number of others. In addition, these same mobile communications devices implement information exchange and other similar functions for other technologies that can utilize them to exchange messages between each other and to communicate with the human user.”

According to Mr. Malakhov, one result of this new technology revolution is a transition to new technologies in business processes that involves putting maximum emphasis on special algorithms and software that utilized mass-produced items as basic hardware solutions that enables developers to move away from customized hardware solutions targeting specific narrow areas. This approach is already being widely used in the services sector (for example taxies, banking and communication services etc.)  It allows for significant savings on investment and running costs while expanding the functional capabilities and usability of interfaces.

The developments in the taxi services both in Russia and around the world have clearly demonstrated the effectiveness of the new business model that has drastically reduced the costs of the services while promoting competition in the industry with the overall result being higher customer satisfaction and lower fares.

Public transport is one area that is in bad need of transitioning to new business models, seeing how much money governments at all levels are having to spend on it and how much money is being spent to subsidize all types of public transport, the expert believes.

The specialists have identified 3 generations of IT systems in transport:

1st generation: paper tickets and a conductor collecting fares. This was characterized by generally poor record keeping and outdated and often unreliable reporting. The vast majority of regions and cities in Russia are still stuck in this first generation.

2nd generation: specialized solutions for collecting fares in a cashless manner and for keeping track of rides. These include public transport passes, validating devices, turnstiles, vending machines etc.

3rd generation: cloud based IT systems that rely on very simple equipment installed on vehicles and that combined different payment modes within a single system: specialized equipment gets replaced with special algorithms.

The proposals drafted by the Analytical Center in conjunction with the Ministry of Transport of the Russian Federation focus on implementing new business models in public transport. These aim to reduce investment and running costs, which would in turn lead to lower state subsidies, while improving the comfort and security on public transport (buses, trolleybuses, streetcars, commuter trains, rapid transit systems) to the level of the best public transport systems around the world (Germany, Belgium, the Netherlands), the expert said.