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Monopoly to Blame for Online Rail Ticketing Debacle

01-31 14:13 Caijing
Administrative order replaced bidding, and 12306.cn became a natural monopoly as a result.

By staff reporters Zhang Youyi, Zhang Lu, Weng Shiyou, and He Tao
Contributing author Fu Ming

The Spring Festival travel season, or "chunyun," is the world's largest annual migration movement. During the 40-day travel rush, there will be 3.158 billion passenger trips. Among them, 235 million passengers are expected to choose rail as their mode of transportation, indicating that the Ministry of Railways (MOR) will have to allocate at least 235 million tickets during this period.

Since the start of the 2012 Spring Festival travel season, the MOR has implemented a three-pronged approach for passenger ticketing: Internet booking, telephone booking, and real-name ticket purchasing. The changes in 2012 have led to increases in the variety and effectiveness of access channels for buying tickets.

Despite some notable improvements, the flaws of the new system were brought to light at the start of the travel season. In early January, China’s only official railway ticketing website 12306.cn was overwhelmed with the pressure of more than 1 billion daily visits. The frequent downtime and unresponsiveness of the site caused a flood of complaints from users. The MOR's explanation was insufficient bandwidth and inadequate advance estimates.

Caijing learned that 12306.cn was originally designed to handle an average daily traffic of only 300 to 400 million passengers for high-speed rail and bullet train online ticket sales. However, on the eve of the Spring Festival travel period, the MOR unexpectedly decided to include ordinary train ticket sales as well, resulting in far more visits to the site than originally anticipated. "It was like putting a big foot in a small pair of shoes," said one insider. Traffic reached a peak of 1.4 billion hits in one day, making it "the world's busiest website" and crippling the site’s server in the process. Nevertheless, some improvements have been made since the site launched in early January.

A source from the China Academy of Railway Sciences (CARS) told Caijing that no bidding was involved for the rights to develop the network system for 12306.cn. Rather, the Electronics and Computer Technology Institute under CARS developed the site under administrative order from the MOR.

Administrative order replaced bidding, and 12306.cn became a natural monopoly as a result. The doubts and controversy surrounding the site provide impetus for a comprehensive review of China's railway ticketing system. How should the monopoly be broken up?

Zhang Haijun, CEO of Kuxun.cn, told Caijing that in the future 12306.cn will be spun off by the MOR. Its operations will be corporatized, creating what is in essence a nationwide monopoly in the online railway ticketing market by a "big state-owned enterprise." It may also follow the example of TravelSky and focus on operating a background inventory system which offers real-time query port resources to other e-commerce websites, said Zhang.

Train ticket consulting and its associated businesses is a lucrative market which could reach the scale of 3 billion yuan in the future, added Zhang.

The MOR has initiated the planning and design of a new generation ticketing system, but solutions to the current problems have not been disclosed, according to the Xinhua News Agency.

An executive from CARS told Caijing that the MOR intends to cooperate with the civil aviation industry to develop its new online ticketing system. In the future, the network ticket windows for online rail ticket sales will be moved to local railway administrations. Geographical differences will help to balance out website traffic and reduce pressure on the network server. Moreover, the railway ticketing system has already started adopting a channel allotment ticketing sales method similar to what is currently used in the aviation industry.

Some industry personnel contend the central government should relax its policy to allow e-commerce websites to collect fees such as "five yuan service charges" for bookings. However, according to Zhang, it is still too early to discuss this issue. “Even the issue of opening up ports has yet to be solved,” he said. “This is completely dependent on the attitude of the railways ministry.”

Perhaps it needs to come from reform of the MOR itself.

1 yuan = 15 U.S. cents

Full article in Chinese: http://magazine.caijing.com.cn/2012-01-29/111641729.html

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