How can we make the rail ticket market more innovative and stimulate competition to benefit passengers?

3 July 2015

John LarkinsonAt the Office of Rail and Road (ORR), we've been conducting a review of the rules and regulations governing the way tickets are sold, what tickets are sold and the format tickets are provided in (eg orange credit card-sized paper ticket or smart card). We want to know whether these regulations are getting in the way of passengers benefitting from better service and more innovation. Last week, ORR published its emerging findings and proposed remedies for consultation and comment from all stakeholders.

Since we launched the rail ticket market review early last year, we have engaged extensively with stakeholders across industry, with passenger representative groups and with experts in other industries. We have also undertaken research into what passengers buy and, by talking directly with them, into what they think about ticketing.

Our emerging findings suggest that, while the market is working well in some respects, there is scope for further improvement. Specifically:

  • Passengers could benefit from having an even wider choice of retailers (e.g. newsagents) and a wider choice of products that meet different needs (e.g. more carnet tickets or part-time Season tickets); 
  • There is scope for improvement in the way tickets are bought (for example, though ticket vending machines); and 
  • Innovation in providing new ticket formats, such as mobile phone tickets, is slow, particularly where more than one TOC operates on a route.

To help address these issues, we are proposing some solutions that could ensure the industry is incentivised to deliver benefits to passengers (and the wider industry and taxpayers).

To improve competition among TOCs which, in turn, could enable passengers to access a wider range of fares and products that meet their needs:

  • Governments and industry should ensure that TOCs have stronger incentives to introduce new products, including within the period of their franchise;
  • Governments and TOCs should improve the way in which TOCs introduce new products by, for example, streamlining and accelerating the industry process; and
  • TOCs should ensure that they do not suppress the potential for innovation in working with the technology providers of ticket vending machines.

To improve the competitive role of third party retailers which, in turn, provides passengers with more choice in where and how they buy their ticket:

  • Governments and industry should introduce independent oversight of the third party retailer arrangements (i.e. those parties who sell tickets on behalf of TOCs e.g. The Trainline) to address the potential conflicts of interests that may arise from the fact that TOCs set the entry requirements on third party retailers while competing with them;
  • TOCs should be transparent about third party retailers' costs and commission by having publically accessible guidelines; consulting with industry on changes to the third party regime; and providing a right of appeal to all third party retailers in the event they wish to challenge TOCs' decisions;
  • Industry should identify and address the barriers smaller retailers (e.g. newsagents) face from selling tickets, for example around the requirement to have relatively expensive machines to access and sell a range of fares; and
  • TOCs should explore the merits of making all fares and products (such as carnet and Season tickets) available to all retailers.

To improve necessary collaboration among retailers so that, for example, shared IT systems can support better availability of tickets through ticket vending machines and websites and that ticket formats develop to meet passengers' expectations:

  • Governments, working with TOCs, can continue to play an important role in developing a longer-term strategy for ticketing, particularly in the context of specified and time-limited franchises;
  • Governments and bodies awarding innovation funding (e.g. Future Railway) should give emphasis to innovation in retailing and, specifically, how it can encourage parties to collaborate and benefit from an integrated network; and
  • TOCs should establish formal working groups (made up of, for example, passenger representative groups, third party retailers and technology providers) to inform the development of the industry's ticket selling arrangements.

We want to work with stakeholders to develop our proposed remedies and, where appropriate, to help implement them. We also propose some possible longer-term options for discussion that could require further consideration. These centre on whether ticket prices should vary depending on where or how the ticket is bought, as it does in other sectors and in other countries (e.g. Sweden).

In this consultation, ORR is seeking to promote debate among stakeholders on the effectiveness of the current arrangements and the future design of rail retailing. The consultation will run until Monday 14 September 2015. We are also hosting a workshop on 7 September 2015.

To learn more, visit: http://orr.gov.uk/consultations/policy-consultations/open-consultations/retail-market-review