The Nation: The Municipal-Industrial Complex Around the World
The serial failures of Chicago’s new “smart card” public transportation fare collection system isn’t really a Chicago story—any more than the dark, satanic mills of nineteenth-century England were a Manchester story, or impoverished temp workers risking life and limb packaging iPads is a story about California’s Inland Empire. This is a tale about the world taking shape before us now, everywhere: public provision being turned over to private interests, subverting democracy and all economic good sense in the (terrible) bargain.
RFID fare-collection systems implemented by the San Diego–based defense contractor Cubic have caused public outcry wherever they’ve been introduced, across all four corners of the globe. London is Cubic’s biggest customer, accounting for 33 percent of their transportation business. There, “Oyster” smart cards were introduced in 2003 via what is known in England as a Private Finance Initiative. The parties were a consortium including Cubic and EDS (formerly Electronic Data Systems, a subsidiary of Hewlett-Packard), and London’s transport agency TfL; the seventeen-year contract, signed in 1998, was worth £1.1 billion. They system began with a modest range of features and slowly expanded; but according to Wikipedia, in “August 2008, TfL decided to exercise a break option in the contract to terminate it in 2010, five years early, this followed a number of technical failures.” But a subsequent contract lasting through 2015 was inked nonetheless.
And the failures went on.
There were 190,0000 complaints about overcharging in 2008 (only 46 percent of complainants had their money refunded)—with the pace accelerating month by month. In 2010, with Londoners still baffled by a confusing system that requires them to “tap out” their cards upon leaving a station lest they get hit by the maximum fare, TfL responded by blaming the customers. The next year, the maximum fare was increased; overcharges thus added £61.8 million to the consortium’s coffers. This year, a transportation watchdog group reported of the Oyster machines that “almost no one they interviewed understood how they worked.” The Guardian reported authorities were “knowingly overcharging some Oyster card users.” The paper noted, “Transport for London (TfL) has been made aware of the glitch but is not going to fix it until September at the earliest—because it only updates the Oyster system three times a year.” One of the most embarrassing problems in Chicago—machines charging the wrong customer card—is rampant in London, according to a report in the excellent local Chicago news site Gapers Block. Another system glitch reported by Gapers Block was that vendors were able to receive money from customers, then void the transaction and still keep the cash. Meanwhile customers are owed some £53 million in unclaimed refunds; but there is “no easy way to reclaim the funds.”
The system is up for rebid in 2015. Trouble for Cubic stockholders, right? Not so much. Observed a Credit Suisse equity report, “it is a longstanding relationship that is likely to be renewed.” Nice work if you can get it.
You could enjoy a nice around-the-world tour just traveling to cities where Cubic has screwed up fare collection. Gapers Block documented them: double-charging in Atlanta. Twenty-fold charging in Brisbane, Australia. Miami-Dade’s “Easy Card” system was dubbed “Easy Fraud”: this fall, “a 22-year-old man has stood trial over a a glitch allowing him (and members of a WSVN Channel 7 News team) to load money onto Easy Cards for free.” In San Francisco, “Cubic disclosed it received 38,000 customer service phone calls in August 2011.”
And then Los Angeles: in spite of “nearly consistent one-star reviews on Yelp, Cubic still got a six-year, $545 million contract extension.”
None of this bothered the city fathers of Vancouver, British Columbia, apparently. Their Cubic-built system “Compass” comes fully online this January. A large-scale Beta test, though, has already enraged citizens who realized that buying a fare through the traditional system, which will continue on buses, forced you to pay twice when transferring to trains, which only accept the new cards.
And so Cubic continues to thrive and grow, much to Wall Street’s delight. Wrote security analysts of Cubic’s military subsidiary, “2013 is likely to be a year of flattish revenue and lower earnings owing to tight defense budgets.” But “[t]here is no pure-play publicly traded fare-collection competitors,” so “[w]e see a solid growth story/existing backlog in Transportation,and believe that CUB’s efforts to expand its addressable market…. Scope for smart card penetration in existing U.S. transit systems is another growth lever.”
