Fare pricing and transit ridership

Gabe Newell, co-founder of Valve Corporation, recently gave an interview about game pricing strategies, with some perhaps surprising information as to the level of revenue increase thanks to lowering the price of games.

“The sale is a highly promoted event that has ancillary media like comic books and movies associated with it. We do a 75 percent price reduction, our Counter-Strike experience tells us that our gross revenue would remain constant. Instead what we saw was our gross revenue increased by a factor of 40. Not 40 percent, but a factor of 40. Which is completely not predicted by our previous experience with silent price variation.”

While retail purchases of games is, obviously, not the same as mass transit, the synergistic effect of heavy advertising combined with temporary reductions in fares should achieve the result of large increases in transit ridership. Presuming a decent level of service and that non-sale fares are kept at reasonable levels, a high proportion of the patrons ought to be kept, resulting not only in major increases in ridership and farebox recovery ratio, but also in political support for the capital funds needed for expansion and service enhancements.

Coaster, for instance, has seen a major gain in ridership this past year due in large part to lowered fares. According to page 47 of the November LOSSAN meeting, which details a Coaster ridership survey, 68% of new pass holders started riding due to lower fares, in full or in part. This is while showing 20-30% gains in ridership year over year and 26% of all monthly pass holders surveyed had started since January of this year, when a price reduction went into effect.

There are two major notable factors concerning ridership however. The first is that only 30% of Coaster passholders pay the full fare themselves. 23% have it paid entirely by their employer (46% of all new pass holders) with a similar amount receiving subsidies from their employer (over half of whom pay less than half the full fare out of pocket as a result). Advertising should probably focus upon this market then, seeking to win more customers from a pool already interested in Coaster ridership thanks to the very low fares. This could be as simple as liaising appropriately with individual companies near Coaster stations (or in San Diego proper) and getting permission to hang posters in the break rooms advertising Coaster and mentioning the individual company’s transit subsidization policies.

Such a simple means of advertising would do rather well as current Coaster advertisement is atrocious. 52% of those surveyed first heard of Coaster by word of mouth. Valve’s price drops don’t occur in a vacuum and they could not achieve such remarkable gains as 40-fold revenue increases without heavy sales promotions. Valve does have the advantage of a somewhat captive market when it comes to their promotions. All Steam games are, of course, through Steam and advertising for sales is presented when logging into Steam or upon exiting a game.

While there is not such a similar captive audience means for commuter rail ridership, the same principle of heavy focused advertising along with discounted fares should result in greatly increased ridership, with the loss of captive audience being made up for by a higher degree of advertising with consequent spending. This is something that Metrolink, with its stagnant ridership since the downturn of the economy and low existing ridership per route mile, needs to look at in order to boost its ridership numbers.

The highway boondoggle that broke Maryland's transportation budget

A whopping 136 million dollars per mile for the 18.8 mile InterCounty Connector. What's even worse is that this was apparently in a semi-rural area for the construction, not an urban area with its attendant expenses.

The 18.8-mile Intercounty Connector, which opened in full Tuesday, could be the last publicly funded highway built in Maryland for a generation, as the state’s tolling agency, which financed its $2.56 billion construction, reaches its debt limit, local transportation experts said.

Financing for the six-lane toll road linking Interstate 270 in Montgomery County with Interstate 95 in Prince George’s County leveraged the Maryland Transportation Authority’s statewide toll collections.

But the transportation authority’s debt capacity is tapped out from borrowing to build the ICC and $1 billion in express toll lanes on I-95 northeast of Baltimore, state budget analysts said. Mounting debt recently prompted the authority to raise tolls statewide as the authority also struggles to maintain its aging bridges, tunnels and roads.

“You’re probably looking at another 20 years before we see another major road like this be built,” said Lon Anderson, a spokesman for AAA Mid-Atlantic.

Supporters say the ICC provides a vital east-west link long missing from Maryland’s highway network, but some critics worry about the toll road’s long-term financial effects. They say the ICC’s hefty price — it’s the most expensive road Maryland has ever built — has hamstrung the state’s transportation finances for years.

“The state has mortgaged its transportation future in many ways to the ICC,” said Montgomery County Council member Phil Andrews (D-Gaithersburg-Rockville), a longtime critic of the highway. “The opportunity cost of building the ICC has been huge, because it’s foreclosed improving many other roads.”

Whether the highway proves worth the investment — and at what cost — will play out over the next 10 to 30 years in several key measures: how many vehicles the ICC absorbs from local roads, time saved by motorists who use it, job growth from companies that rely on it to attract workers, and the impact it has on local streams and air pollution.

“The road, from an economic standpoint, will pay for itself many times over,” said Maryland Comptroller Peter Franchot (D), who helped put together the ICC’s financing plan in 2005 when he represented Montgomery in the General Assembly.

More at the link.

OCTA considering no confidence vote on CAHSRA

Voice of OC:

The Orange County Transportation Authority is considering sending state high-speed rail officials a memo urging them to "pull the plug" on the proposed $98-billion Anaheim-to-San Francisco project.

The 17-member board will vote next month on the wording of a message it plans to deliver to the state's High-Speed Rail Authority, which has overall authority to contract for construction of the rail system if the state Legislature and federal officials approve financing.

OCTA plans and builds most Orange County highway and rail systems, using federal, state and local tax money. But it has no jurisdiction over the planned 520-mile high-speed rail project.

A vote of no-confidence would come in part from a Republican-dominated board and be directed at Gov. Jerry Brown and Democratic legislators and members of Congress who support the rail plan.

But it was a Republican, former Anaheim Mayor Curt Pringle, who spearheaded much of the local support for the project. Pringle also served on the OCTA board and chaired the High-Speed Rail Authority in 2009 and 2010.

With Pringle gone, no one on the OCTA board spoke up for the rail system during Monday's meeting.

And at least six of the OCTA board members said they opposed the way the project is being handled.

The high-speed rail project has been beset by management problems. Voters approved the system in 2008 on the condition that when it is finished, no tax money will be used to operate it.

A new business plan released earlier this month was hailed for its realistic approach. But that created other problems, because the plan estimated the cost would be $98.5 billion, more than double the previous $43-billion estimate. It also predicted that most private investment, which had been promoted as a way to offset tax money, wouldn't materialize until after the system is up and running.

The rail authority's new business plan is open for public comment through January, which prompted OCTA board member Peter Herzog, a Lake Forest City Council member, to suggest the board send its own comments. Some wanted to vote immediately to oppose the project.

"The emperor has no clothes," said Supervisor John Moorlach, one of the OCTA directors. "Sometimes with a deal, it's good to tell someone 'no.' "

But OCTA Chairwoman Pat Bates, also a member of the Board of Supervisors, said, "Today, I don't think, is the day we should say ‘pull the plug.' I think we should have a deliberative process and not just knee-jerk here."

The board asked two of its committees to review the business plan and next month recommend what to tell the High-Speed Rail Authority.

Even though a no-confidence vote would have no legal effect on the rail authority, OCTA board members said such a vote coming from the transportation agency in California's third largest county would carry impact.

"Orange County already is left out of most of it," said Fullerton City Councilman Don Bankhead. "The whole thing doesn't make sense anymore."

While I've been a supporter of high speed rail in California, and continue to support a high speed rail network for California, the demonstrated incompetence and corruption by the Authority's recent business plan has caused me to turn against the current implementation of it. I intend, actually, to write to OCTA in support of this no-confidence motion.

The value of crash energy management

FRA delay and refusal to reform on its current "safety" regulations is inexcusable.

Edit on July 7, 10:15am: This brief paper puts forth in lives the difference between current standards and CEM: With only a 30 mile per hour impact, 55 lives would have been lost in the demonstrated collision with FRA equipment, but none with a CEM consist.