Seoul has introduced an Integrated Distance-based Fare System to all public transportation means as a part of its public transportation reform since July 2004. Before the Integrated Distance-based Fare System, users had to pay for each and every transfer between subway stations and bus stations. However, the new system allows passengers to make transfers up to five times without extra fees, and it charges a fare based on the user's travel distance. The introduction of the system has promoted the convenience of the public transportation for users and has also increased the usage of public transportation by relieving their fare burdens.
 

Decline in the competitiveness of bus services

Chronic congestion in major road sections was the most important factor causing deterioration in bus operating conditions. In 2002, average travel speed of buses was 18.9km/h, lower than the 22.5km/h of passenger cars. Buses could not ensure reliable services due to irregular operation intervals and delays in schedule. Furthermore, bus companies’ excessive pursuit of profits led to bus routes overlapping on arterial roads, thereby aggravating the congestion problem.
 
The decline in the competitiveness of buses and their services caused a vicious circle. It caused bus users to make shifts to personal cars, and the increased private car usage further aggravated bus problems.
 
Problems with the conventional public transport fare system

The metro system in Seoul applied different criteria in determining the fares: a zone-based scheme for travel within the city limits, and a distance-based system for travel outside. The difference caused unfairness in terms of fare burden. For example, fares for the same distance of travel differed depending on whether the travel was made in our outside city boundaries.
Also, since buses provided no transfer discounts at all, those who could reach destination with just one ride paid half the price paid by travelers who transferred from one bus to another.
 
Moreover, the conventional system did not allow transfer discounts between different modes of travel. Because of the disconnected fare scheme, fare burden doubled when doing transfers, regardless of whether the transfer was from subway to bus, from bus to subway, or from a common city bus to local area bus. This was a disadvantageous system for those who lived far away from urban railway stations or who had to ride local area buses to reach subway stations.
 
Establishing partnership between Seoul and GyeongGi Province

It was important to include GyeongGi residents into the system since a number of them commuted between Seoul and GyeongGi Province. However, the existing law made it clear that decisions regarding public transportation fares were the sole responsibility of the head of the local administration. This left GyeongGi Province buses off the list. Accordingly, GyeongGi residents whose offices were located in Seoul (in average 400,000 people commuting/day) were left out and their discontent grew worse. Seoul also needed to embrace GyeongGi buses within its reformed system not only to ease the burden for the disgruntled residents in GyeongGi Province but to encourage people to use public transportation rather than cars.

For that to happen, either Seoul or the GyeongGi administration had to provide financial subsidies in the form of discounts. How the two authorities should share this burden and whose system should have priority were issues where a mutual agreement was needed. The enactment of the Integrated Distance-based Fare System was a long-cherished desire among users of the public transportation system in the Seoul Metropolitan area.
 

￭ To alleviate the burdens of the public by removing financial penalties for transfers between different modes of transport;
￭ To facilitate the convenience of the public transportation users by diversifying fare systems(i.e. daily free pass, season ticket and so on); and
￭ To contribute to the perception of public transport as a comprehensive and united network
 

Introduction of a quasi-public operation system to jointly manage revenues

While pursuing the reform, Seoul replaced the private operation system of city buses with a quasi-public operation system. The move was designed to strengthen the public-serving functions of the city buses. The quasi-public operation system was based on the principle that public benefits should be the leading criteria for determining bus routes and operating systems.
 
Under the quasi-public operation system, fare revenues from the city buses running in Seoul were pooled and allocated to the operators depending on their performance. When the revenues fell short of the costs, the SMG compensated for the shortfall through subsidies. This was to stabilize the management of bus companies by guaranteeing their income through financial support. This scheme was an essential factor that made the management of the bus companies agree on the city’s public transport reform plan.

Establishment of an integrated transit fare card system

Through the reforms of 2004, SMG has integrated all the public transport charging systems into one that applies not just to Seoul but also to the entire Seoul metropolitan area. Moreover, it charges based on the total travel distance of passengers instead of the number of trips. Previously, different modes of transportation charged for trips independently, not based on the person’s total travel distance. The new charging system has reduced citizens’ burden of transportation costs considerably.
 
 
Use of single card for all public transportation - T-Money Card

The city’s integrated transit fare card system became complete with the introduction of T-money, a new rechargeable transportation card. The previous transportation card system was outdated, had reached its capacity limit, and failed to meet the international standards. With the introduction of the new transportation card system, SMG was able to replace the outdated system, adopt an integrated transit fare system, ensure the transparent management of bus companies, and boost citizens’ convenience by introducing more stores that accept T-money as a payment method.

T-money is used to pay for public transport services such as buses, subway, and taxis. It is also used for other purposes including toll gate fee payment.

□ Construction cost of integrated transfer and distance-based fare system (Unit: billion KRW)
 
 ￭ Of the total cost for establishing Integrated Transfer and Distance-based Fare System, nearly 62% was spent on establishing IT infrastructure and 38% was spent on constructing data acquisition center.
 
￭ Implementation of the system led to a revenue loss of around 20 billion KRW per year, which was to be paid with taxpayers’ money. However, when considering potential cost reduction from decreased traffic congestion, increased energy conservation, and other positive effects, the gains from implementing the system outweighed the financial losses.
 

Economic benefits
￭ The daily average of public transport users in 2012 was 1,175,000, up 9.8% from 1,054,000 recorded in 2007
￭ The daily average of transfer discount per person was 612 KRW as of 2012, which was 16.3% increase from that of 2007 (512 KRW)
 
Enhancement of Traffic flow
 
￭ The daily average of inflow and outflow automobile in the city center of Seoul was 654,494 as of 2013, decreased by -1.5% compared to the data analyzed during the same period in the previous year (664,531)
￭ The daily average of number of passengers making intermodal transfer was 1,175,000 as of 2012, which was 10.2% increase from that of 2007 (1,054,000)
￭ The rate of making intermodal transfer was 58.2% as of 2012, which was 3.7% increase compared to that of 2007
 
Seoul Citizen’s High Level of Satisfaction
￭ Citizens’ satisfaction level with the reorganized public transportation service kept rising, and reached the 7.5 mark on a scale of 0-10 in 2012.
 

With the introduction of the Integrated Transfer and Distance-based Fare System, people living within a one-day life zone were able to use and transfer between buses and subways in the Seoul Metropolitan area at an affordable price. Thus, the new system has not only eased the burden of the Seoul citizens, it has also encouraged them to use public transportations that were environmentally friendly.

In addition, an extensive implementation of the system has promoted regional integration between Seoul and GyeongGi Province, which indicated that a win-win partnership could be forged between both parties: Seoul was willing to take the financial burden caused by the revenue losses while GyeongGi Province was willing to cooperate in protecting environment.
 
Finally, the system has enhanced the overall competitiveness of public transportation in the Seoul Metropolitan area. Fewer cars on the roads led to good results; less traffic congestion and an improved environment including better air quality and energy conservation.
 

The extensive implementation of the Integrated Distance-based Fare System has earned a reputation as a role model to other cities, and Seoul City was selected as the most excellent win-win organization among all local self governments.
 
Cities with the Integrated Distance-based Fare System or similar systems can now directly refer to the example of Seoul. As the importance of public transport is ever more increasing, a number of big cities such as Auckland, Wellington, and Kuala Lumpur has already adopted transfer fare discount systems to increase the competitiveness of mass transportation. Cities like Beijing, Baku in Azerbaijan, and Almaty in Kazakhstan are also expected to introduce the system in the near future.
 
Aside from the introduction of a public transportation fare system, many other countries where administrative areas do not correspond with real life zones could benefit from Seoul’s strategy. This is especially the case when they need to resolve issues involving more than one administrative organization in a one-day living zone.