I found this a very interesting read:
Free public transit in Tallinn is a hit with riders but yields unexpected results
In Tallinn, Estonia, since January 2013, residents of the capital city are entitled to unlimited free rides on trams, commuter trains, and buses or trolley buses within the city limits. The costs are recovered through taxes. Riders still have to buy a smart card and tap on and off each vehicle, and carry proof of residence. The main motive for this is to encourage residents who aren't registered as residents of Tallinn to register and start paying taxes to the city. There are about 40,000 of these unregistered residents.
This could never work in Toronto - the only reason it works in Tallinn is because transit is heavily subsidized to begin with. But it does raise some good points, such as what Singapore is experimenting with to alleviate congestion:
Transit authorities offer commuters in Singapore free off-peak fares in effort to alleviate morning rush, by offering free subway service to riders exiting at 16 central stations before 7:45am.
Once Presto is implemented in Toronto, we can introduce variable pricing, so fares vary by time of day. This gives people an incentive to change their travel patterns. Fares can be set to penalize those who travel on certain routes when rush hour is at its worst. We can also tie fares in with income like Helsinki, Finland does, so if you earn more, you pay more.
What I would like to see done is expanding the network of 140-series routes, having all-day two-way, regular fare service. Some of the routes need to be adjusted to terminate at more logical places, e.g. it would make sense for the 144 to terminate at Don Mills Station instead of VP/Ellesmere.
I would just like to add, it's good to see Tallinn moving away from the old Soviet-era trams and commuter trains, with the recent orders of 16 CAF-built trams, and 38 Stadler Flirt commuter trains (18 EMUs and 20 DMUs). Tallinn is also planning to extend their tram network to the airport and ferry terminals in 2017.