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70 Benevolent St.
Providence, RI 02912
(401) 261-3715
UNITED LATTICE CORPORATION
®
MeshCard Systems
(Contact-less Multi-Modal Debit Smart Card System)
Project Principals:
Joshua Cohen
Kenrick Fok
Kelvin Lo
Adrian Tong
This Business Plan is confidential. Neither the plan nor any of the information contained in the plan may be
reproduced or disclosed to any person without the prior written permission of ULC.
ULC MeshCard Systems
TABLE OF CONTENTS
Statement of Purpose …………………………………………………………………………………… 4
Executi ve Summary …………………………………………………………..………………………….5
The Co mpany
The Product
Backg round on the Market and Competit ion
Marketing and Sales Strategy
Manufacturing and Operations
Financial Prospects
Summary
The Company……………………………………………………………………………………………...8
Co mpany History
Management and Personnel
Organizational Structure
Founders
Management
Management of Finance
Sales and Marketing
Project Management/Operations Research
Future Additional Staff
Co mpany Su mmary
The Product ……………………………………………………………………………………………….11
Product Description
How does the system work?
What is the infra-structural equipment required of ULC?
Product Summary
Background on the Market and Competition …………………...………………………………………12
Market Overview
Existing Transaction Methods
Boston Transportation System
Market
Co mpetitive Advantage
Boston Private Parking Lots
Market
Co mpetitive Advantage
Location
Customer Su mmary
Marketing and Sales Strategy……………………………………………………………………………..14
Marketing Strategy
MBTA Strategy
Boston Private Parking Lots Strategy
Attracting Clientele For Customers
Marketing Ideas
Public Relations
Pricing Strategies
Subway
Bus
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ULC MeshCard Systems
Private Parking
Future Strategy
Marketing Su mmary
Manufacturing and Operations .…………………………...……….………………………….…….…..22
Manufacturing
Operations
Use and Expected Effect of Money Requested
Implementation Schedule
Subway
Bus
Private Parking
Operations Summary
Financi al Pros pects ………………………………………………………………………………...……..25
Sources of Income
Pro Forma Assumptions
Revenue
Costs
3 Year Plan
Balance Sheet
Cashflow Statement
Income Statement
5 Year Plan
Balance Sheet
Cashflow Statement
Income Statement
Breakeven Analysis
Financial Su mmary
Summary………………………………………………………………………………….………………37
Appendi x A: FAQ………….……………………………………………………………..……………... 38
Appendi x B: Email Corres pondence wi th ERG Group…………………………………..…………….39
References ……………………………………………………………………………….….……………...40
Resumes ……………………………………………………………………………….….……...…………41
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ULC MeshCard Systems
STATEMENT OF PURPOS E
United Lattice Corporation (ULC) presents a new smart-chip technology payment system we call the
―MeshCard System‖. A MeshCard is a wallet size contact-less multi-modal debit smart card optimal for
small transactions. Our init ial target markets include both the public tran sportation system as well as
private parking lot facilit ies in Boston, MA. ULC will install its system in both the public transportation
system operated by the Massachusetts Bay Transportation Authority (MBTA) as well as private parking
lots in and around Boston at no cost to these organizations. The convenience, efficiency, and security that
our payment system offers the consumer, is unparalleled in the United States. Most importantly our system
will enable MBTA as well as private parking owners to cut their operating costs considerably by reducing
payment collect ion staff, accounting staff, as well as office supplies and payment equipment expenses.
ULC requires capital fro m venture capitalists for the implementation of its 3-year launch plan that includes
both the MBTA and those entities who own the majo rity of the private parking facilit ies distributed
throughout the central and greater Boston, MA area. In itial capital will be used to purchase any licensing
and smart chip technology needs through different out-sources such as the ERG Group (ie, the leading
smart chip technology provider with offices throughout Europe, Canada, and Asia).
Successful entry into the two aforementioned markets will g ive ULC the flexib ility to enter a wo rld of
endless opportunity. ULC is offering venture capitalists a once in a lifetime short -term investment
opportunity as it prepares to revolutionize the American s mall transaction industry.
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ULC MeshCard Systems
EXEC UTIVE S UMMARY
The Company
“Extensive technological developments in many forms of payment media have recently occurred. The trend
towards an "electronic cashless commerce" is a growing business practice being implemented
worldwide”10
“Transit, like other service areas, has the desire to reduce the use of cash payments while improvi ng
customer convenience… Currently, stored-value and multi-use programs are in limited trials in U.S. cities.
Multi-use transit projects are already in operation in the United Kingdom, Germany, France, Australia,
Netherlands, South Korea, and Hong Kong.” 10
In recent years, the applications of smart chips have grown extensively. While the U.S. remains a
technological archetype for the rest of the world in most respects, it has failed to keep up with its
counterparts when it comes to smart card technology. Many countries have transformed, for examp le, their
public transportation systems using this technology. We, the founders of ULC, believe now is the perfect
time to facilitate the introduction of smart card technology into Boston, which has one of the large st
transportation systems in the United States.
ULC is a company formed by four Bro wn engineers, among which there are two Business Economics and
Electrical Engineering majors (specializing in Co mmun ications and Microelectronics respectively), one
Electrical Engineering (specializing in Co mmunications) and Visual Design major, as well as one
Co mputer Engineering major (specializing in Signal Processing).
Each founder will be g iven a position of President, Chief Manager of Finance, VP of Marketing or VP o f
Operations depending on the particular strengths and abilities he brings to the company. ULC will have a
board of directors comprised of its founders as well as some high tech CEOs who have experience with
startup companies. In addition, ULC will hire additional staff to handle various tasks such as maintenance
and customer services.
The Product
ULC offers its customers a contact-less multi-modal debit smart card system. Wallet-sized cards encasing
smart chip technology as well as the infrastructure th at supports it through the networking of all
transactions with a central terminal fo rm the basis of the ―MeshCard System‖. All that is required of the
consumer is a single flash of the MeshCard in front of a fare deducting processor. The consumer need not
even remove the card from his/her purse or wallet to initiate the transaction. Add Value Machines allow
consumers to replenish their cards at their convenience for further use. ULC will operate a central terminal
to handle all transactions.
Background on the Market and Competition
ULC plans to introduce MeshCard into two primary markets in the greater Boston, MA area: the public
transportation system run by the MBTA and the private parking lot industry. MeshCard faces two broad
forms of co mpetition including existing transaction methods as well as established, institutionalized
practices in the transportation and private parking systems.
MeshCard offers a very attractive option to existing transaction methods, avoiding the pitfalls of other
forms of currency when small transactions such as those required by the MBTA and the parking lots are
involved. It avoids the hassles of using cash which can create lines in crowded locations while at the same
time takes advantage of and makes improvements upon existing forms of electronic payment. MeshCard
allo ws consumers to spend at specified congested locations with ease and without the fear of vandalis m. A ll
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ULC MeshCard Systems
of these characteristics make MeshCard a smart rep lacement for existing transportation as well as private
parking lot payment systems. MeshCard is not only more desirable for the consumer but also, very
importantly, MeshCard can increase profitability for MBTA and private parking lot owners by cutting
operating costs considerably by reducing payment collection staff, accounting staff, as well as office
supplies and payment equipment expenses.
Marketing and Sales Strategy
ULC will stress several key issues when marketing to our customers: M BTA and private parking lot
owners. Our system involves little or no s etup cost to our customer. Our system will result in considerable
cost savings for our customer. The increased efficiency, wh ich MeshCard generates, will increase MBTA
and private parking lot customer satisfaction and thus business will increase. The techn ology supplied by
ERG Group has been the most technically advanced for several years. The high level of security that
MeshCard offers will reduce theft. These are among many key reasons for MBTA and private parking lot
owners to allow ULC to install its MeshCard systems.
Manufacturing and Operations
The ERG Group will be responsible for manufacturing and providing the smart cards and the equipment
(card processors, add value machines, ticket office terminals.) They will also assist ULC in maintaining th e
system and performing necessary upgrades and repairs. When a customer first purchases a MeshCard, the
customer will pay for the price of the card as well as provide a card deposit. The deposit will be required to
ensure that funding is available in the event that the value of the card becomes negative.
In the first year, ULC‘s main goal is to attract customers, increase the company‘s market share and
customer base, thus ULC will not charge a commission for the consumer‘s use of the MeshCard. In the
second year, a one percent commission will be introduced and by the third year, ULC will initiate the two
percent commission rate at which it intends to use for MeshCard fro m this point forward. ULC‘s main
source of income will be derived fro m investing the mo ney consumers deposit in the card. Since the
company can be expected to have large amounts of inco me available at any given time, it is ULC‘s intent to
use this factor to its advantage. The company will h ire an investment management team to handle this
aspect of its operations.
ULC has developed a 3-year launch plan that will imp lement ideas with both the MBTA and those entities
who own the majority of the private parking facilities distributed throughout the central and greater Boston,
MA area.
Financi al Pros pects
The Pro Forma pro jects that a profit will be recorded in Year 2. Fro m Year 4 onwards, the net profit after
tax will be 4 millions dollars a year with the assumptions that the firm would confine its focus to the
transportation and parking industries within the Boston, MA area. With the credibility established through
its success in its initial business ventures during its first two years of its three year plan, opportunities for
expanding operations to include a range of other industries would be unlimited. MeshCard would have
immed iate imp lications for a large nu mber of businesses that rely on customers to provide small amounts
of currency to make quick purchases
Summary
ULC has attracted a mentor Erik Petersen, CEO and founder of Orbitex.
ULC is under the guidance of Professor Barrett Hazelt ine, professor of engineering at Brown
University, Providence RI.
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ULC MeshCard Systems
The MeshCard concept is currently competing for start-up capital fro m the Brown University
Entrepreneurial Program.
We are in the process of locating venture capitalists to invest in our Pro Forma plans.
We have initiated communication between potential suppliers of various components of our
system.
Our system is clearly superior to the co mpetition‘s in terms of convenience, efficiency, security,
and profitability. The MeshCard System possesses the potential to revolutionize the means of
currency exchange, while proving extremely beneficial to both the MBTA and private parking lot
industries as well as their customers.
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ULC MeshCard Systems
THE COMPANY
Company History
Four senior Brown University electrical and computer engineers founded ULC in September of 2001. We
are seeking venture capitalists to support us as we prepare to bring our system to the attention of the MBTA
within the next 5 years.
Management and Personnel
Organizational Structure
As a startup company we have limited resources and assets, therefore careful management of all aspects of
the company is critical to the success of our entry into the contact-less multi-modal debit smart card system
industry. The four founders will each be assigned a position in the co mpany‘s proposed organizational
structure. Each founder will be given a position, which best draws on the particular strengths and abilities
he brings to the company. This company‘s organizational structure can be delineated into four majo r areas:
management of administrative/regulatory affairs, management of finance, management of sales and
market ing, and project management/operations research.
Board of Directors
The board will be co mposed of the 4 founders plus some h igh tech CEO‘s that have experience with startup
companies. All major issues will be brought before the board, voted on and a plan put forward to resolve
the issues.
Founders
Each founder will take up a head position in the organizational structure as follows:
President – Management of Administrative/Regulatory Affairs
Chief manager of finance – Management of Finance
VP of Marketing – Sales and Marketing
VP of Operations – Project Management/Operations
Management of Administrative/Regulatory Affairs
The President will be in charge of the administrative affairs branch. He will assume primary responsibility
for making the final decisions on most administrative issues. All strategic planning propositions such as the
introduction of MeshCard to a new region, must be thoroughly examined and reviewed by the President
and must gain final approval fro m the President before being carried out. The President will also oversee
the conduct of the company‘s regulatory affairs such as legal matters and government policies, and
adherence to regulation standards. In addition, the President will also ensure the company‘s conformation
to industry corporate rules. Whenever necessary, the President will seek legal counsel to ensure that the
company is in compliance with all standards. He will also be given the task of ensuring that any complaints
filed fro m the public receive company attention and prompt response. The President will also serve as the
company‘s primary spokesperson, representing the company to the public and to potential industry
clientele.
Management of Finance
The chief manager of the finance branch will be responsible not only for maintaining the company‘s
financial records but also for the financial p lanning and fun ding for all current and future company projects.
Budgeting tasks include:
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ULC MeshCard Systems
1. Minimizing expense (e.g. expenses on buying equipment fro m our supplier and expenses
on maintenance).
2. Overseeing capital—(e.g. making sure there is sufficient funding to meet comp any
expeditures.)
3. Keeping track of all accounting transactions (e.g. tracking of sales and cash flow at the
end of each business day).
4. Estimating future revenues/losses of the company—(e.g.using break-even analysis in
projecting a net positive return over the years.
Financial planning will involve NPV (net present value) and risk analyses of all proposed actions,
predicting the effects and consequences of such actions to the company, and estimat ing costs and returns.
The work of this branch will therefore be essential to all strategic planning decisions (e.g. setting the
commission rate or adjustments on the price of cards based on sales history and market demand, possible
geographic expansion, possible future equity issuance, etc.) of the co mpany.
Early corporate funding will main ly focus on debt management with the venture capitalist, since this
individual o r group of individuals will be the company‘s only init ial source of capital. The chief manager of
finance is responsible for overseeing the management of all co mpany funding. He will also assume
responsibility for working with and monitoring the efforts of the investment management team that has
been hired to work with the company to identify effective strategies for investing the company‘s cash and
earnings.
Sales and Marketing
The VP of Marketing will be responsible for selling our idea to MBTA and Boston public parking
operators. He will make all necessary attempts to highlight the benefits of our system to MBTA and public
parking operators and persuade them to adopt our system. Later on, together with MBTA, the VP of
Marketing will take care of much of the advertisements, promotions and sales of MeshCard. He will be in
charge of all pro motional activ ities in the hope of seeking new potential MeshCard users. He will attempt
to maximize exposure of MeshCard to the public through advertisements, and if necessary, may collaborate
with a third party advertising firm on this task. Developing new sales and product ideas to attract
customers, such as creating a company‘s web page to allow MeshCard users to replenish their cards online
or proposing an improvement in design over existing MeshCard, is also the responsibility of the VP of
Marketing. To a certain extent, the VP o f Marketing will assist the President in managing customer
relations and will wo rk alongside the VP of Operations Management in carry ing out new improvement
ideas.
Project Management/Operations Research
The VP of Operations will be in charge of project management and operations research. The main function
for project management is imp lementing all approved manufacturing and engineering -related projects (e.g.
changes in MeshCard technology), and ensuring that each project will be undertaken successfully.
Problems that occur during the imp lementation will be reported. Constant monitoring of ongoing
operations such as the maintenance of machines will also be performed. Research on operations include
optimization of queue lines and placement of storage replenishing machines, minimizatio n of maintenance
costs, analyzing design and material usage, service improvements, quality assurance, and tracking use of
the smart card market. The VP of Operations must also be on a constant outlook for new potential suppliers
who may provide better equipment or service at a lower cost. In the future, he will be in charge of staffing
the operations branch as a whole.
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ULC MeshCard Systems
Figure 1: Organizational Structure
Chief of Finance VP of Operations President VP of Marketing
Project Sales &
Finance Management/ Administration Marketing
Operations
Budgeting Financial Project
Planning initiations/ Administrative
Services
implementations
Advertisements
Corporate Operations / promotions
Capital, Funding Research
revenues,
expenses
VC/Debt Data
Management/ Strategic
Analysis
Investments Planning
Accounting
Fiscal Analysis:
NPV, risk
analysis of Public and
proposed Regulatory
actions, Affairs
Maintenance/
estimating costs
Quality
and returns
Services
Possible web
development
Security
Staffing
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ULC MeshCard Systems
Future Additional Staffing
The company will be launched with the four founders. However, once MeshCard has been released into the
market p lace, we will require additional staffing to increase the frequency of site inspections, data
collection concerning customer use and satisfaction, and maintenance of computer systems and
replenishing machines. New emp loyees will be main ly allocated to the operations branch, where much of
the technical functions take place. Staffing on security technology imp rovements will also be of top
priority. Additional personnel to improve customer s ervices will be hired. Maintenance crews will be hired
to do 24-hour repair of ULC products. They will guarantee on site presence within 30 minutes of a
component malfunction. ULC expects to have a minimu m o f 25 emp loyees by the end of the first business
year.
Company Summary
The four partners of ULC have combined talents to develop a new technique that will provide Boston
commuters with a payment system for both public transportation and private parking wh ich is convenient,
efficient, and safe from vandalism. Eventually this system will be expanded into other industries where we
believe it will provide similar advantages over current technologies.
THE PRODUCT
Product Descripti on
The concept is to introduce a contact-less multi-modal debit smart card system providing a revolutionary
efficient payment method for consumers in potentially a vast number of areas of consumer spending. Areas
of application tailored to the US market will potentially include: various forms of public transportation
(subway, buses, trolleys/trams, ferries), fast food purchases, convenient stores, vending machines, pay
phones, parking tolls and meters, and much more.
The system allows for a vast range of applicat ions generated by the flexibility of a central clearinghouse,
which coordinates all t ransactions from a central terminal.
How does the system work?
The MeshCard will first be targeted at two core agents representative of niche industries (such as public
transportation and parking). Then the card can be bought from any retail branch of these core agents within
the core/edge network of our business.
The price of the card will cover both the costs of the card and a refundable deposit if the consumer decides
to return the card.
To use the card, the consumer simp ly touches the MeshCard on a fare deducting processor installed by
ULC at appropriate areas depending on the application and agent. For examp le:
1. Subway stations: the processor will be in the form of sensory pads at the turn -styles.
2. Public buses and trams: sensory pad where change is usually paid.
3. Fast food: sensory pads at payment cashiers.
4. Parking tolls: sensory pads at the teller booths etc. etc.
The MeshCard will also work if it is inside a wallet or handbag (within 6 inches from the fare deducting
processor), further increasing efficiency of customer flow, and the convenience for customers to purchase a
product or service as they do not need to physically locate the MeshCard nor does it need to be visible.
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ULC MeshCard Systems
The MeshCard may only be used when it has a positive value. Any transaction that takes the card to a
negative value will be deducted the next t ime the card has value added to it.
The MeshCard can be replenished in value at ―Add Value Machines‖ installed by ULC at locations
convenient for customers of MBTA or private parking lots (core agents). These machines are like ATM
mach ines only they accept coins, bills, debit, and credit payments, which stores the consumer chosen value
onto the inserted MeshCard. Stored value will have liquidity of cash restricted to th e allowed applications.
Each time the card is used in a transaction, a display accompanying the payment sensory pad clearly
indicates to the user the remain ing value in the card, and the cost reduced from the latest transaction.
Different audible signals can be integrated with the reading of the card during each transaction to indicate
negative stored value to the user.
What is the infra-structural equipment required of ULC?
1. Wallet-sized plastic cards with smart ch ips inside.
2. ATM-like Add Value Machines to be installed in core agents. Machines store consumer
payments and records and report transactions to a central clearing house operated by ULC.
3. Portable or installed ―fare deducting processors‖ interact with the customer through sensory
pads and display panels.
4. ULC operated central transaction monitoring station.
Product Summary
ULC offers its customers a contact-less multi-modal debit smart card system. Wallet-sized cards encasing
smart chip technology as well as the infrastructure that supports it through the networking of all
transactions with a central terminal fo rm the basis of the ―MeshCard System‖. All that is required of the
consumer is a single flash of the MeshCard in front of a fare deducting processor. The consumer need not
even remove the card from his/her purse or wallet to initiate the transaction. Add Value Machines allow
consumers to replenish their cards at their convenience for further use.
BACKGROUND ON THE MARKET AND COMPETITION
Market Overview
ULC plans to launch the use of the MeshCard by focusing on the public transportation and private parking
lot industries. More specifically, ULC intends to negotiate possible jo int ventures with MBTA and top
parking facility owners within the Boston area. This will allo w ULC to provide services for all Boston area
residents and commuters who depend upon either public transport or private vehicles.
Existing Transacti on Methods
The main methods for payment in public transportation and private parking that exist today include cash,
personal check, debit card, and cred it card. Personal check makes up less than 8% of transactions because it
is simply unaccepted at most places due to the possibility of fraud or overdrawn checks. Cash is still one of
the primary means of payment but it has slipped well below the 54% of all transactions it was responsible
for in 1993. Credit and debit cards are beco ming the payment method of choice in this booming
technological age where the main concerns of the typical American consumer are efficiency and
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ULC MeshCard Systems
convenience. Already in the year 2001, the amount spent on credit cards nationwide has risen to $540
million per month since September 2000. MasterCard has 180.7 million users in the US alone, up 2.5%
fro m last year, who spent a total of $3.1 billion last year.
MeshCard promises to play a significant role in the economy that relies so heavily on electronic forms of
payment. Although Americans prefer electronic payments, it is usual practice for businesses to exclude
small transactions on either debit or credit cards because the handling fee required by the banks outweighs
the advantage of using either a credit or debit card. Thus for small transactions, approximately less than 10
dollars, the primary method of payment remains cash. However, it must be remembered that one of the
primary reasons credit and debit cards became popular was their ability to eliminate the exchange of coins
or dollar bills. These cards eliminated the consumer or vender‘s need to carry proper change at all times
proving ext remely efficient and convenient. MeshCard extends the efficiency and convenience consumers
have come to value by acting as a debit card for s mall t ransactions.
With this new era of electronic payment has also come a new concern for sophisticated electronic theft. In
1999, $962.49 million were stolen from A merican consumers by electronic theft from both debit and credit
card holders. Regarding electronic theft in the US in 2000, over 30.9% of issued cards were stolen, 18.6%
lost, 9.7% intercepted in the mail, 8.7% taken by identity theft, 4.3% false application as well as several
other criminal methods. This rise in crime has made 67% of A mericans feel threatened or concerned with
debit and credit card transactions. Analysts estimate that it will cost $7 billion in anti -fraud software to
make existing credit and debit card systems more secure.
Table 1: Fraud Totals For 2000 on US Credit & Debit Cards
Type of Fraud Fraud (millions) % of Total
Stolen $297.41 30.9%
Lost $179.02 18.6%
Skimming $111.65 11.6%
Mail Intercepted $93.36 9.7%
Identity Theft $83.74 8.7%
Altered Cards $51.97 5.4%
New Counterfeit $44.27 4.6%
False Applications $41.39 4.3%
Telefraud $38.49 4.0%
Other $21.17 2.2%
Total $962.49 100.0%
Source: The Nilson Report 2000
MeshCard eliminates the American consumer‘s fear of theft. It is a s mall transaction nameless debit card
based system that only represents small amounts of money at any given time based on consumer
preference. Thus if the card is lost or stolen while paying to get on a subway, ent er a bus, or leave a parking
lot, the thief cannot continue to spend incessantly on the card. MeshCard is designed for specific
applications. A thief would only be allowed to spend as much as is currently entered on the card, say $20,
and only use this amount of money for designated applications such as public transportation and private
parking. Parents would not feel insecure about letting their teenager carry his own MeshCard to go to high
school on the bus or soccer practice using the subway because the complications involved when a
MeshCard is stolen or lost are quite minimal. Conversely, there are very few parents who would trust their
14-year-o ld son or daughter with a MasterCard or Visa. Th is is the very reason smart cards are becoming so
popular in for examp le, East Asia, since they offer the maximu m security available against electronic theft
as well as provide the convenience of a credit or debit card. Even though smart cards cannot be cancelled
when stolen, the amount of money that can be stolen v ersus other forms of electronic pay ment is quite
minimal.
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Table 2: Number of Smart Cards I ssued in Asia
Country Number Primary Use s
Australia 10 million Phone, Pos, ticketing
Cambodia 8.5 million National ID
China 3 million eCas h, utilities, tolls
Hong Kong 5 million Transit, eCash, parking
Malaysia 2 million eCas h, ID, tolls
Philippines 35 million Social security
Singapore 0.7 million Tolls, transit, eCash,
South Korea 9 million Transit, eCash
Taiwan n/a Transit, eCash
Thailand n/a eCas h, loyalty
Source: International Data Corporation 2001
Boston Transportati on S ystem
Market
The Boston transportation system is operated under the direction of the M BTA. It offers 7 d ifferent
methods of transportation to Boston commuters, wh ich results in a t otal annual fare revenue of
$250,311,545. This system services over 1,038 square miles giving access to over 2,602,487 people in the
greater Boston area. MBTA vehicles travel 1,677,781,807 miles annually.
Table 3: Vehicles Operated by MBTA
Purcha sed
Branch Directly Operated
Transportation
Bus 769 132
Heavy Rail 320 0
Commuter Rail 379 0
Demand Response 0 370
Light Rail 154 0
Trolleybus 23 0
Ferry Boat 0 12
Total 1645 514
Source: NTD Program 2001
MBTA has a total annual operating expense of $710,709,000 of wh ich $513,437,426 is spent on salaries,
wages, and benefits and an additional $51,158,217 on materials and supplies. MBTA offers a variety of
fares and passes to fit the needs of commuters fro m around the greater Boston area. The subway system
consists of 4 major lines: red, green, blue and orange. The basic subway fee is $1 or a token. The monthly
subway pass for $35 is valid for unlimited travel at all $1.00 subway stations, however, some entry points
require more than the basic fee such as Riverside "D" branch which is $2.50 when boarding through
Chestnut Hill Stat ion and $1.25 when boarding fro m Reservoir through Fenway. For these areas the
monthly subway pass is not valid. The basic bus fare is 75 cents for adults, half fare for ch ildren fro m five
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ULC MeshCard Systems
to eleven and high school students with a student badge. Children under 5 ride free when accompanied by
an adult. A monthly bus pass is available fo r $25 but is only good for 75 -cent zones. It is invalid, for
example on the green line, where a cash payment of $1.25 is required. One can also buy a monthly combo
pass for $57 that is valid as a co mbination of the monthly subway and bus passes.
Table 4: Rapid Transit, Bus, and Ferry Daily Boarding Statisti cs
Rapid Transit, Bus and Ferries Daily Boarding
Green Line 222,700
Red Line 225,400
Orange Line 157,100
Blue Line 56,900
Mattapan Trolley 7,000
MBTA Bus 375,400
The RIDE (parat ransit) 4,100
Commuter Ferries 4,150
Total 1,052, 750
Source: MB TA 2001
Table 5: Commuter Rail Boarding Statistics
Commuter Rail Daily Boarding
Nort h Side Lines
Rockport 8,000
Ipswich B ranch 10,900
Haverhill 10,000
Lowell 11,100
Fitchburg 9,100
South Side Lines
Attleboro/Stought on 16,800
Framingham/Worcester 16,500
Needham 8,600
Franklin 15,800
Fairmount 2,600
Middleborough/Lakeville 9,000
Plymouth/Kingston 8,400
Total Commuter Rail 126,800
Source: MB TA 2001
Competitive Advantage
Users of the Boston transportation system can be split up into regular customers as well as infrequent
customers. For infrequent customers of the transportation system who don‘t buy monthly passes but rely on
buying tokens using cash, MeshCard is a superior system for many of the same reasons stated above about
electronic transactions versus cash. Riders don‘t have to worry abo ut having the right amount of change or
missing the subway due to long payment or payment verification lines. With MeshCard, the rider always
has the right ticket to get on any subway or bus any time. Fro m the perspective of MBTA, many of their
costs are reduced because the employees of MBTA in over 79 booths around the city who accept payment
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fro m consumers to ride public transportation are no longer required. With a quick flash of the MeshCard at
the gate, payment is verified and the customer is on their way. When you consider that 375,000 people ride
the subway 700 miles of routes every weekday, convenience and efficiency beco me key.
For buses the same problems are evident. At crowded stops where 20 o r 30 people get on or off the bus, the
lines build up for payment at the front of the bus. With MeshCard, customers don‘t need to worry about
carrying the correct change. A quick flash of the MeshCard and payment is finished eliminating any sort of
line for entering or exiting the bus. This also makes the bu s driver‘s job much easier. Instead of having to
verify payment for every customer, the MeshCard System removes this hassle by handling all calculat ions
on its own. For frequent users of the Boston transportation system, the MeshCard System still remains
optimal. Where payment is not $1 the monthly subway pass fails and when the bus fee is not 75 cents the
monthly bus pass fails. The combo monthly pass fails in both circu mstances. MeshCard eliminates this
inconvenience by being acceptable no matter what the subway or bus fee happens to be. Thus it acts as a
citywide t ransportation pass for the 819,700 one-way passenger trips taken every day by way of subway,
bus and commuter rail systems.
With MeshCard there is no need for consumers to worry about expirat io n dates or whether they have
received next month‘s monthly pass in the mail. MeshCard never exp ires. MBTA removes the expenses
required for distributing and manufacturing monthly passes as well as tokens. MeshCard is very durable
and the MeshCard System covers the minimal expense of replacing a worn or damaged card. If the
consumer wishes to drive one day and take the subway the next no money is lost since unlike a monthly
pass, MeshCard only deducts money when the consumer is actually using it. Accounting tasks are also
minimized through the use of the MeshCard System.
Boston Pri vate Parking Lots
Market
Downtown Boston contains over 40,000 parking places provided by private parking lot corporations. The
historic North End of downtown Boston near the Boston Harbor contains 6,951 parking places alone
provided by 12 parking garages. These parking garages, Pinstripe Parking, North Station Garage, and
Govern ment Center Garage to name a small number, are a few minute‘s walk away fro m over 150
restaurant and business establishments. Typical prices are $10 for up to 2 hours of parking and $15 for 3
hours of parking. Throughout the rest of Boston there are several major co mpanies such as FitzInn Parking
Systems that provide private parking. FitzInn alone has over 20 parking lots throughout the greater Boston
area including Harvard Square, Boston University, Central Square, Boston Medical Center, etc.
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Figure 2: FitzInn Downtown Boston Parking Locations
Source: FitzInn Parking Systems
Competitive Advantage
Most parking locations in downtown Boston operate on a ticket payment system where the consumer
receives a ticket upon arrival that is time-stamped. Upon exiting the garage, the time on the ticket is
verified and payment is made in cash. A monthly pass system exists at certain locations as well. We
propose the introduction of MeshCard into this industry.
For private parking lots where the ticketing system exists, MeshCard is superior for many of the same
reasons described previously. MeshCard is the debit card set aside for private parking. The consumer never
has to worry about having the right amount of change on hand and the owner of the parking lot can remove
the costs generated by having ticket booth people on hand throughout all hours of operation. MeshCard
handles these tasks for both the parking lot management as well as their customers. MeshCard removes the
long lines of cars at exit points of the parking garage while attendants count change. With a quick flash of
the MeshCard, payment is made and the customer is on their way home after a long day at the office or
running errands in the city. MeshCard is in effect a universal method of payment for the consumer at all
parking lots.
Users who have monthly passes will also find the MeshCard a preferab le means of pay ment. Fo r days in
which the monthly pass is not used the consumer loses no money. In addit ion the consumer never has to
worry about obtaining a new pass once a month to park at a parking lot. MeshCard, as stated previously,
does not expire. Further, the parking lot‘s costs of producing and maintain ing monthly passes are
nonexistent. The need for regular mailing of statements, accounting, follow-up on delinquent payment, etc.
all become unnecessary tasks for the parking lot owner. There are security advantages for lot owners and
personnel as well. Since attendants no longer have need to keep cash on hand in a register, there is minimal
risk of robbery.
Location
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We propose the greater Boston area as the initial location of choice for imp lementing MeshCard. Our
proposed MeshCard System focuses on two industries, public transportation as well as private parking.
Both of these industries are well established in Boston but lack the degree of technological sophistication
that MeshCard would provide. Over a million people ride the subway every week. In addition Boston has
the 5th highest traffic p roblem in the country and is home to over 400,000 drivers who co mmute each day
within the greater Boston area. These statistics make the Boston‘s transportation system an excellent focal
point for our in itial introduction of the MeshCard System.
When the current mayor o f Boston, Mayor Thomas M. Menino, was elected in 2001, he made using new
technology to reach out to as many people as possible a priority for h is election term. MeshCard is one of
these technological promises that can be fulfilled to make life easier for commuters as well as private
parking owners and customers.
It has been shown time and time again that young people are more inclined t o use new technologies than
the elderly. This is for instance why more teenagers learned how to make web pages before many adults
even learned how to use a web browser. The dynamic makeup of Boston, population size 589,141 in 2000,
where 33.4% are between the ages of 20-34 and the median age is 31.1, is very desirable for our MeshCard
System. A young professional co mmunity that is undaunted by changes in technology is a perfect fit fo r the
smart card technology that forms the basis of MeshCard.
Table 6: Boston Age Breakdown 2000
Total population 589,141 100.0
Under 5 years 32,046 5.4
5 to 9 years 33,721 5.7
10 to 14 years 32,553 5.5
15 to 19 years 43,631 7.4
20 to 24 years 70,084 11.9
25 to 34 years 124,762 21.2
35 to 44 years 86,420 14.7
45 to 54 years 63,554 10.8
55 to 59 years 22,746 3.9
60 to 64 years 18,288 3.1
65 to 74 years 31,154 5.3
75 to 84 years 21,675 3.7
85 years and over 8,507 1.4
Median age (years) 31.1 (X)
Source: US Census Bureau 2000
In a city where the community is comprised of such a young populace, there is also a large segment of the
population who are transients. Analyzing the US Census Bureau housing market one can see that in the
apartment sector of Boston in 1998 over 60% moved out of their current residence within the first year.
Since a large percentage of the Boston community, the younger populace, is constantly changing its
makeup, MeshCard will always have new customers to attract thus preventing a saturation of the market.
Customer Summary
ULC will initially target two segments: the Boston public transportation system and private parking. We
will be competing with existing transaction methods as well as existing systems in our target markets.
MeshCard avoids the hassles of using cash and offers the convenience of electronic payment. Consumers
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can spend at congested locations without the fear of vandalism. MeshCard will increase profitability for
MBTA and private parking owners by automating tasks that previously would have required hiring
emp loyees to perform. The young population, established transportation system, and high automobile use
make Boston an ideal location for an in itial imp lementation of the MeshCard System.
MARKETING AND SALES S TRATEGY
Marketing Strategy
MBTA Strategy
The MBTA has recently expressed interest in comp letely upgrading its ticketing system within the next 5
years. Being a startup company, ULC can afford to take a long -term view on profits and offer excellent
service at no cost to our customers.
Our market ing plan to the MBTA will stress the follo wing advantages of the MeshCard System:
(1) Little or no init ial setup cost to MBTA, except for space provision for placement of Add Value
Machines and automated fare gates.
(2) No operating cost to MBTA or consumers in the first year of operation. Costs to be borne by MBTA
consumers will start with the second year. MBTA stands to benefit from lowered overhead resulting from
reduced staffing at teller booths and reduced maintenance costs derived from the phasing out of existing
outdated ticketing equipment. Redundant staff can be retrained to oversee security at the stations, thereby
boosting passenger confidence in the subway system.
(3) Considerable cost savings to MBTA in the long run resulting fro m t he phasing out of old ticketing
mach ines. Although the MBTA does not breakdown in its financial statements the operating costs
attributable to the various units, e.g. subway, buses and ferries, it is still possible to conclude fro m the
available data that the operations of the ticketing section of the subway system require significant outlays to
cover wages, employee insurance, maintenance of outdated equipment, etc. Upon replacement of most or
all of the o ld ticketing mach ines, the high maintenance costs involved in obtaining hard to find replacement
components would be greatly reduced or even eliminated. Moreover, since the ERG Group will be
responsible for the maintenance of all MeshCard equipment, MBTA can significantly reduce its
maintenance staff in the ticketing section. Over time, damaged and lost tokens will not have to be replaced
and this will result in cost savings to the MBTA as well. Fro m the limited data MBTA makes available
ULC pro jects that MBTA annual savings will be appro ximately in the $2 50 million range.
(4) Faster passenger flow at automated fare gates with the use of contact -less tickets will help boost overall
customer satisfaction with the MBTA and increase the number of passengers.
(5) The equipment supplied by the ERG Group is among the most technically advanced in the world.
ERG‘s installed facilit ies around the world have been operating at high levels of efficiency and reliability
for several years.
(6) MeshCard network can be expanded at a later date to cover MBTA buses, a nd maybe even its trolleys,
commuter rail and ferry services at minimal costs, and with no changes necessary to the format.
(7) ULC‘s advertising on radio, television and billboards heralding the introduction of the MeshCard
service to the MBTA subway system will not only highlight the timesaving benefits of the card, but will
indirectly p roject an image of the subway as a modern, safe and efficient mode of transportation.
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(8) ULC intends to introduce the MeshCard System to private car parks in the third year, thereby
facilitating the ‗Park and Ride‘ concept for the subway system. This is mutually beneficial for MBTA and
car park operators.
Other reasons for choosing our system also need to be pointed out to the MBTA:-
(a) Expense-paid overseas trips will be arranged for personnel of the MBTA to visit the manufacturing
facilit ies of ERG as well as some majo r cit ies to see the latest ERG equip ment in operation.
(b) After the system is setup and running, MBTA personnel will be allowed to be stationed a t our central
terminal to monitor and audit all monetary transactions moving through the system.
(c) With the permission of the MBTA, a study will be conducted to determine the optimal number of init ial
equipment placements as well as the subsequent speed of adding MeshCard automated entry and exit gates.
The resulting data will be used to make appropriate adjustments to our original imp lementation plan to
ensure a smooth transition for all the subway stations in the Boston Underground T System.
Boston Private Parking Lots Strategy
In the third year, ULC p lans to negotiate with private parking facilities on the use of the MeshCard System.
Our most important selling point for the private parking sector is the efficiency of our system. The
MeshCard contact-less ticketing process can help reduce the long queues often seen at entrances and exits
to parking lots. In addition to all the advantages quoted to the MBTA, MeshCard can also provide greater
convenience and security to parking lot users.
Attracti ng Clientele For Customers
Marketing Ideas
In order fo r MeshCard to be successful it must convince customers of MBTA as well as private parking lots
to use MeshCard. The in itial and primary target market ranges fro m teenagers to middle age persons (16 -45
years of age) who rely heavily on either the use of Boston Underground T System or personal cars to travel
in, around, and out of the Boston area on a daily basis. Predominantly, the expected volume of transactions
will derive fro m the daily travel of students and the corporate/working population. Thus, the system feeds
off a market that demands efficiency, security, and convenience in the payment of relat ively low cost goods
and services.
Marketing in the form of advertising about the MeshCard concept wil l commence well before the actual
system infrastructure is implemented into subway stations and parking lots. Marketing locations will
originate in the obvious venues in which the MeshCard can be issued to consumers, thus being Boston T
stations and related parking facilities. Th is could involve distributing and presenting posters at key payment
locations of the two industries, introducing the MeshCard concept.
Marketing content however, must initially include much more than the information of ULC targete d entry
applications. The concept of mult i-modal, or the potential and expected reach of the system to numerous
applications must be emphasized. Thus, ULC must have an init ial understanding of the feasibility,
expectation of return on investments, and a battle plan of execution for the MeshCard‘s success in reaching
out to other services such as public buses, vending machines, convenient stores etc. The emphasis on its
diverse usage will prepare the market for a monu mental change or alternative in daily pay ment methods.
Thus, ULC would initially advertise the concept at its pilot locations and industries. However, this would
rapidly expand to industries in wh ich the MeshCard System would thrive. These are predetermined by ULC
before the business is launched to the pilot locations.
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ULC also hopes to attract high profile co mpanies like Coca-Co la, Kodak, McDonald‘s etc. to advertise
their designs on the MeshCards providing aesthetic appeal to the wallet -sized cards.
Public Relations
ULC plans an extensive public relat ions campaign. We believe that the nature of the MeshCard concept is
inevitably successful as long as our credibility is established firmly and quickly. With a successful
introduction to our product and services, it will be a monu mental positive c hange for both consumer
spending and customer profitability; so much so that we believe it will attract the interest of significant
news distribution mediums such as television shows, magazines, newspapers, and the internet. As
mentioned before, ULC will s tress the efficiency, convenience, and reliability of the MeshCard concept.
Probably the most crucial element for a successful introduction is ensuring that the services provided to our
customers and their clients are always of high quality. The technology must be highly reliable and the
recording and execution of transactions extremely accurate. Add Value Machines must be securely
installed in designated locations, and the daily cash count between customers must be flawless and
proficient. Efficiency, convenience, security, and credibility are the backbone concepts of ULC and its
MeshCard Systems.
Pricing Strategies
ULC anticipates a steady increase in revenue generation with our entry into different segments; that is the
expansion of the MeshCard‘s applications. Our 3-year p lan consists of the targeting of the Boston
underground transit system the first year followed by the entry into the complementing service of the
Boston public bus system in the second year, and then the privately owned parking facilit ies in the third
year.
Subway
Revenue is generated essentially through four main channels. The primary source is the issuance of the
MeshCard to travelers initially availab le at only the teller booths of each Boston T Station. Our evaluated
price co mes to $20 per issuance of one card, where $15 of this price goes to covering the cost of each
card‘s manufacture by our out-sources and ULC profiting, and $5 is a deposit that can be returned to
consumers who choose to return the card to ULC. This deposit is an essential regulation device that
motivates consumers to return their cards if they are no longer in use and provides insurance to ULC for
consumers whose last transaction makes their MeshCard balance as low as negative $5.
The second means of revenue involves the cash ULC holds at hand at any given time derived fro m the
money consumers choose to store in their MeshCard for future transactions. This money is anticipated to be
about an average value of $20 per person on each card at a given time. ULC ant icipates that the average
replenish for consumers will be at least $40. This cash at hand can be invested by ULC into global markets
through the help of wealth management professionals and investment consultants, helping us to strategize
long-term and short-term investments.
The third revenue channel is planned to inaugurate in the Q5 with the entry of the MeshCard System into
the public bus segment. This is the commissioning of consumer cash stored onto the MeshCards. ULC
plans to activate a 1% commission rate in Q5, so that for every dollar a consumer stores on his/her card
he/she can use 99 cents of it on MeshCard compatible applications. ULC then plans to increase this rate to
2% in Q9 along with the MeshCard entry into parking facilities and services. We will not have such
commissions the first year with our pilot industry of subway systems as we want to avoid discouraging the
market early on with overwhelming costs for an unfamiliar concept. We estimate that we will need at least
a year to build credibility through the quality and security of our MeshCard System amongst the Boston
area market psyche.
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Finally, ULC expects to generate revenue through providing advertising mediu ms for high profile and
respected companies. Advertising space includes the MeshCard itself and the add value machines ULC
plans to distribute throughout locations where MeshCards can be issued. This includes subway stations,
parking lots, and bus terminals. Preliminary idea for charges in advertisement space is $10 per MeshCard
for the lifet ime of the card, and $200 per month per add value machine.
Bus
This segment will generate revenue through the same four channels. With ULC‘s entry into this segment in
Q5, MeshCard issuance services will become available in central bus termin als. Price of card issuances and
commission rates will be identical for all segments. The bus segment will p rofit fro m a consumer
commission rate right off the bat in its commencement in Q5. One difference would be that ULC has yet to
determine the number of add value machines distributed throughout bus affiliated locations, thus the
advertising revenue from this aspect has not been accounted for. Investment strategies for the cash at hand
generated from this segment will be determined like the other segmen ts through the help of professional
financial consultants.
Private Parking
This segment will be entered in Q9 following the same revenue generation means as the prior two
segments. Consumer co mmission rate at this point is expected to be about 2% of the value stored.
Future Strateg y
With the establishment of the MeshCard System in the Boston T Stations, ULC can evaluate the system‘s
appeal to the market and the consumer response generated. With market feedback, ULC expects to consider
additional applicat ions of the MeshCard starting with directly co mp limenting uses to the targeted entry
applications. This would entail the expansion of the smart card system into other means of public transport
such as buses, which would complement the traveler‘s transferring between subway and buses. In addition
we will target private parking lots to attract consumers fro m other segments of the population who prefer to
drive. More long-term considerations include vending machines, convenient stores such as 7-Eleven, pay
phones, and fast food restaurants.
Marketing Summary
ULC will stress to MBTA the cost advantages of using the MeshCard System. Upon successfully entry into
the MBTA Subway system, we will seek entry into the MBTA Bus system as well. In the third year of
operation, ULC p lans to target the private parking sector. Our most important selling point for this market
is efficiency, security, and convenience for consumers. ULC will direct an extensive advertising campaign
to ensure that consumers use MeshCard. Advertising locations will be strategically placed to maximize
their effectiveness.
MANUFACTURING AND OPERATIONS
Manufacturing
The ERG Group will be responsible for manufacturing and providing the smart cards and the equipment
(card processors, add value machines, ticket o ffice terminals). The ERG Group is experienced with the
technology since they have already successfully installed an advanced smart card system in Hong Kong,
and numerous of systems with varying degrees of sophistication throughout Europe. ERG Group will also
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assist, when available, the 24-hour ULC operated maintenance crews in maintaining the system and
performing necessary upgrades and repairs.
The follo wing is a picture of the cards produced by the ERG Group for the transportation syst em in Hong
Kong. The image next to it is a terminal used to read the stored value of the card.
Figure 3: The Smart Cards and the Sensory Pads used in Hong Kong
Operations
When a customer first purchases a MeshCard, the customer will pay for the price of the card and a deposit.
The deposit is paid in case the value of the card becomes negative. For example, if the customer has a
stored value of 5 dollars and then wants to makes a purchase of seven dollars, the deposit will allow the
customer to make that purchase. However, the customer will not be able to use the MeshCard until he
deposits additional value into the card. The value of the card will be negative and the customer will have to
deposit two dollars to increase the stored value of the card to zero and then add additional value to the card
in order to use the card.
There will not be commission on the customer or the subway and parking companies for the first year.
They would use alternative forms of payments as substitutes such as cash, credit card or bank debit cards.
By taking co mmission from the subway company and the parking garage companies, although the
efficiency gained leading increased usage will benefit them, the companies will have a decrease in revenue
per transaction. This might discourage the companies who will try to transfer the cost onto their customers
by increasing the price that could lead to a decrease in usage.
In the first year, the main goal is to attract customers and increase ULC‘s market share and customer base,
thus charging no commission on the MeshCard. There will be a one percent commission in the second year
and a two percent commission from the third year onwards. There are tentatively no plans made to charge
commission on the retailers – the MBTA or private parking lots. The main goal is to increase the amount of
retailers that would accept the MeshCard with future plans of restaurants and convenient stores. Therefore,
there will be no co mmission in order to encourage the participation of the retailers.
The main source of inco me co mes fro m investing the money the consumers deposited in the card. Since the
company will have a large lu mp su m of cash on hand at any given time, this factor should be used as an
advantage. The money should be spilt into four categories: long term investment, short term investment,
cash on hand for operational purposes and cash on hand to cover the customers‘ purchases. The company
will hire a wealth management to invest the capital or consult with an investment consultant. Liquid ity is
very important since the company has to bear the risk that all the customers who bought a card decide to
use all their money in the card.
With the integrated systems in networks, the accounts of each transaction can be cleared instantaneously.
As more retailers feel that the use of the card will benefit their business and help them attract more
customers, the more retailers will want to install these free systems that we provide through ERG Group.
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As more retailers begin to accept these cards, the more useful the customers will find the card and feel
secure about putting more money in the card since it can be used at more p laces. ULC in turn benefits since
the more money the customer puts on their MeshCard, the more capital ULC will have to invest.
Use and Expected Effect of Money Requested
ULC requires initial capital of $10 million to pay the ERG Group for the purchase and installation cost of
the smart cards and the associated equipment such as card processors and add value machines. This capital
is sufficient for a full implementation of the MeshCard System in the Boston subway system. If given less
than the required $10 million, ULC will not be able to meet its implementation schedule. The services that
the MeshCard System provides cannot be fulfilled and thus ULC will not pursue this venture under such
circu mstances. During the first several years until the imp lementation schedule is finished, MBTA will
operate under a parallel system in which riders carry tokens or MeshCards. The company will als o need to
request money for advertising in order to raise awareness of the smart card in the general public before
actually introducing it to the market.
Implementati on Schedule
Subway
Upon the successful signing of a Memorandum of Understanding with the MBTA, the actual setup of the
central terminal and installation of equipment at individual subway stations shall co mmence after a wait
period of 60-days, to allow time for the necessary equipment to be manufactured and shipped to the Boston
area.
The imp lementation plan calls for 2 automated fare gates (terminals) to be installed at each subway
entrance initially. There are a total of 79 stations with an average of 3 entrances per station, so the total
number of installations of fare gates is 2x79x3 or 474 units. This schedule should help min imize disruption
for passengers still using the old method of ticketing. The plan calls for a further installation of additional
terminals at the rate o f 1 per subway entrance every three months, subject to adjustment based on the actual
MeshCard sales and station usage data collected from the first three months of operation after the initial
install is completed. Barring unforeseen circumstances, a total of 1,185 fare gates are scheduled to be in
operation by the end of the first year. Each subway entrance will hold 1 Add -Value Machine, with an
average of 3 entrances per station, for a total of 237 (1x3x79) units, to be co mpleted before the system goes
into operation. The plan, if fully implemented, would require $1 0 million in capital spending.
In the event that MeshCard usage data after the first three months suggest that the 474 installed units will
be sufficient for the first year of operation, further installat ion of automated fare gates (terminals) will be
suspended until a later date. In this case, $9 million of the originally projected $10 million will be
necessary in the first year.
The central terminal shall be ready, with all co mputer hardware and software fully tested and debugged,
before the first day of service. Systems engineers will be on hand to ensure smooth operation of the new
system.
A total of 50,000 MeshCards printed with the MBTA and ULC logos will be available for sale on the first
day of operations. Subsequent batches will be manufactured every week and will include advertisements
fro m lead ing companies. Radio, newspaper and television ads will be in place for, as well as before and
after, the launch of the MeshCard System. By the end of first year, an estimated 400,000 cards will be in
circulat ion.
ULC will train and deploy a team of temporary workers to teach passengers who may need help with the
new ticketing system during the first two weeks of operation.
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Bus
Upon the full imp lementation of the MeshCard System for the Subway segme nt, and successful contract
negotiations with the MBTA for the Bus segment, the planned schedule calls for MeshCard readers to be
installed on all buses at the beginning of the second year of operations. There are currently approximately
981 vehicles in the Transit Bus fleet but these numbers will change as there are over 300 new vehicles on
order. So there should be over 1,000 installations.
Add Value Machines will be installed at central bus terminals and affiliated bus locations. Although the
total number of locations is not yet finalized, it is planned to have at least two units installed at each central
bus terminal and one or mo re units at each of the other locations. There is no rush to install at all
prospective locations since many bus passengers are also subway users and will therefore be able to use the
existing Add Value Machines at the subway entrances.
The required capital for imp lementing the MeshCard System for the Bus segment is $2 million.
Private Parking
Subject to successful contract negotiations, the third year will see the installation of MeshCard equipment
at private parking facilit ies in the city of Boston. At least 2 fare gates (1 fo r entry and 1 for exit) and 1 Add
Value Machine will be installed at each location. For larger facilities, this number will be increased. The
installation process is straightforward so no fixed schedule is planned at this time.
The required capital here depends on the number of parking facilit ies that will join our system, and main ly
involves the capital cost of equipment and cards. The amount is estimated to be around $2 million if 60
parking facilit ies join our system and could come fro m internal funding if the first two imp lementation
plans run successfully and according to schedule.
Operations Summary
The ERG Group will be responsible for manufacturing the smart cards as well as supporting equipment.
They will also handle all maintenance, repairs, and system upgrades. ULC will make a profit by charging a
1 percent commission in the 2nd year and a 2 percent commission from the 3rd year onwards to all
consumers of MeshCard. In addition since ULC will have a large lu mp sum of cash on hand at any given
time it will invest this capital with the advice of an investment consultant. Also ULC will c harge other large
corporations to place advertisements on the MeshCards. ULC has developed a very precise implementation
schedule for entering each of the desired markets.
FINANCIAL PROSPECTS
Sources of Income
The MeshCard concept generates revenue in a number of ways fro m a few seg ments. Primary revenue
arrives from the issuance of MeshCards to consumers where 75% of the issuance price is taken as revenue,
and the remaining 25% as a deposit that is returned to the costumer if their MeshCards are return ed. At any
given time the value stored by costumers on the MeshCard is received by ULC in cash and allows us to
allocate such assets into appropriate long-term and short-term investments under the guidance of
professional financial consultants.
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After the first year, ULC anticipates to apply a 1% commission rate to the money stored by costumers onto
the MeshCard. This rate will increase to 2% after the second year. This would generate a further amount of
revenue that allows ULC to invest further into global markets.
Advertisement is another means of revenue generation. ULC will provide long -term advertisement of
reputed companies on its MeshCards. This exposure will last the lifetime of the card. Annual exposure will
also be provided on ULC add value machines distributed throughout the stations of the Boston T network,
and numerous parking facilities around the city.
The above means of revenue generation apply initially to the subway segment the first year. ULC plans to
enter the bus segment in the second year, follo wed by the parking segment in the third. Other industries
after the third year include vending machines etc.
Pro Forma Assumpti ons
Revenue
Subway Seg ment
400,000 MeshCard users and issuances the first year
Additional 50,000 card issuances after the first year
$20 per MeshCard issuance
1% co mmission rate fro m consumer deposits in MeshCard(Starting in Q5)
2% co mmission rate (Start ing in Q9)
$20 average value stored per costumer in the MeshCard at any given time
50% of average cash on hand invested into global markets (25% of invested cash in short
term and 75% in long term)
3% short-term ROI annually, 4% long-term ROI annually
$10 one-time advertisement fee per card
$200 monthly advertisement fee per add value machine (237 add value machines with 3
in each of the 79 stations in the Boston T network)
Bus Segment
Bus Segment inaugurated in Q5
100,000 card issuances generated by bus segment its first year followed by a 30,000
accumulat ion each year then after
1% co mmission rate fro m consumers fro m its launch in Q5
2% co mmission rate fro m consumers starting Q9
50% of average cash on hand invested with similar asset allocation plans as the subway
segment
3% short-term ROI annually, 4% long-term ROI annually
$10 one-time advertisement fee per card
Parking Seg ment
Parking Seg ment inaugurated in Q9
20,000 card issuances generated by parking segment in its first year follo wed by an
identical nu mber in accu mulat ion each year then after
2% co mmission rate fro m consumers right at segment launch in Q9
50% o f average cash on hand invested with similar asset allocation plans as prior
segments
3% short-term ROI annually, 4% long-term ROI annually
Confidential 26
ULC MeshCard Systems
$10 one-time advertisement fee per card
$200 monthly advertisement fee per add value machine (60 add value machines with one
in each of 60 parking facilities)
Costs
Start-up / First 3-years
$12.50 per out sourced smart-card fo r a MeshCard
$550,000 to establish a central terminal to monitor Mesh-wide t ransactions
$1250 per terminal (Providing data transfer to and fro m the central terminal to
applications distributed throughout targeted segments)
$30,000 per add value machine
$20,000 per month average rental fees for ULC storage and office space over three years
Co mmunicat ion equipment: $40,000 per quarter
Accumulated wages: $400,000 per quarter
Advertising in various mediu ms: $200,000 per quarter
Legal and licensing fees: $200,000 per quarter
Confidential 27
3 Year Plan
INCOME STATEMENT Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12
Revenues:
Subway
Sales of MeshCard ($20) 50,000 75,000 125,000 150,000 12,500 12,500 12,500 12,500 12,500 12,500 12,500 12,500
MeshCard Sale Revenue 1,000,000 1,500,000 2,500,000 3,000,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000
Commission Rate 0.00 0.00 0.00 0.00 0.01 0.01 0.01 0.01 0.02 0.02 0.02 0.02
Revenue From Commission 0 0 0 0 720,000 720,000 720,000 720,000 1,440,000 1,440,000 1,440,000 1,440,000
Average Cash On Hand 1,000,000 2,500,000 5,000,000 8,000,000 7,920,000 7,920,000 7,920,000 7,920,000 7,840,000 7,840,000 7,840,000 7,840,000
Short Term Investment 125,000 315,625 632,891 1,015,822 1,015,396 1,015,385 1,015,385 1,015,385 1,005,385 1,005,135 1,005,128 1,005,128
Short Term Rate (%) 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03
Short Term Investment Revenue 3,125 7,891 15,822 25,396 25,385 25,385 25,385 25,385 25,135 25,128 25,128 25,128
Long Term Investment 375,000 2,594,700 4,370,988 7,067,040 7,894,882 4,522,995 4,388,120 4,382,725 4,352,509 5,071,300 5,100,052 5,101,202
Long Term Rate (%) 0.04 0.04 0.04 0.04 0.04 0.04 0.04 0.04 0.04 0.04 0.04 0.04
Long Term Investment Revenue 15,000 103,788 174,840 282,682 315,795 180,920 175,525 175,309 174,100 202,852 204,002 204,048
Advertising Revenue From Add-
Value Machines ($200/month) 142,200 142,200 142,200 142,200 142,200 142,200 142,200 142,200 142,200 142,200 142,200 142,200
Advertising Revenue Per Card 10 10 10 10 10 10 10 10 10 10 10 10
Advertising Revenue 642,200 892,200 1,392,200 1,642,200 267,200 267,200 267,200 267,200 267,200 267,200 267,200 267,200
Total Subw ay Revenue 1,660,325 2,503,879 4,082,862 4,950,277 1,578,380 1,443,504 1,438,109 1,437,894 2,156,435 2,185,180 2,186,330 2,186,376
Total Annual Subw ay Revenue 13,197,343 5,897,888 8,714,322
Bus
Sales of MeshCard ($20) 15,000 25,000 30,000 30,000 7,500 7,500 7,500 7,500
MeshCard Sale Revenue 300,000 500,000 600,000 600,000 150,000 150,000 150,000 150,000
Commission Rate 0.01 0.01 0.01 0.01 0.02 0.02 0.02 0.02
Revenue From Commission 27,000 72,000 126,000 180,000 360,000 360,000 360,000 360,000
ULC MeshCard Systems
Average Cash On Hand 297,000 792,000 1,386,000 1,980,000 1,960,000 1,960,000 1,960,000 1,960,000
Short Term Investment 37,125 99,928 175,748 251,894 251,297 251,282 251,282 251,282
Short Term Rate (%) 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03
Short Term Investment Revenue 928 2,498 4,394 6,297 6,282 6,282 6,282 6,282
Long Term Investment 111,375 778,455 1,372,888 1,823,416 1,887,937 1,395,517 1,375,821 1,375,033
Long Term Rate (%) 0.04 0.04 0.04 0.04 0.04 0.04 0.04 0.04
Long Term Investment Revenue 4,455 31,138 54,916 72,937 75,517 55,821 55,033 55,001
Advertising Revenue Per Card 10 10 10 10 10 10 10 10
Advertising Revenue 150,000 250,000 300,000 300,000 75,000 75,000 75,000 75,000
Total Bus Revenue 482,383 855,636 1,085,309 1,159,234 666,800 647,103 646,315 646,283
Total Annual Bus Revenue 3,582,563 2,606,501
Parking
Sales of MeshCard ($20) 5,000 5,000 5,000 5,000
MeshCard Sale Revenue 100,000 100,000 100,000 100,000
Commission Rate 0.02 0.02 0.02 0.02
Revenue From Commission 18,000 18,000 18,000 18,000
Average Cash On Hand 98,000 196,000 294,000 392,000
Short Term Investment 12,250 24,806 37,370 49,934
Short Term Rate (%) 0.03 0.03 0.03 0.03
Short Term Investment Revenue 306 620 934 1,248
Long Term Investment 36,750 242,970 287,969 326,519
Long Term Rate (%) 0.04 0.04 0.04 0.04
Long Term Investment Revenue 1,470 9,719 11,519 13,061
Advertising Revenue From Add-
Value Machines ($200/month) 36,000 36,000 36,000 36,000
Advertising Revenue Per Card 10 10 10 10
Confidential 29
ULC MeshCard Systems
Advertising Revenue 50,000 50,000 50,000 50,000
Total Parking Revenue 169,776 178,339 180,453 182,309
Total Annual Parking Revenue 710,877
Total Revenue 1,660,325 2,503,879 4,082,862 4,950,277 2,060,763 2,299,141 2,523,419 2,597,128 2,993,011 3,010,622 3,013,098 3,014,969
Total Annual Revenue 13,197,343 9,480,450 12,031,700
Costs:
Subway
MeshCard Manufacturing Cost 625,000 937,500 1,562,500 1,875,000 171,250 181,250 186,250 186,250 168,750 168,750 168,750 168,750
Terminal Manufacturing Cost 1,481,250
Add-Value Machines Manufacturing
Cost 7,110,000
Central Terminal 550,000
Returned Cards
Storage/Offic e ($20000/month) 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000
Communication 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000
Advertising 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000
Wages 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000
Legal Fees 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000
Total Subw ay Cost 10,666,250 1,837,500 2,462,500 2,775,000 1,071,250 1,081,250 1,086,250 1,086,250 1,068,750 1,068,750 1,068,750 1,068,750
Total Annual Subw ay Cost 17,741,250 4,325,000 4,275,000
Bus
MeshCard Manufacturing Cost 187,500 312,500 375,000 375,000 93,750 93,750 93,750 93,750
Terminal Manufacturing Cost 2,500,000
Returned Cards
Total Bus Cost 2,687,500 312,500 375,000 375,000 93,750 93,750 93,750 93,750
Total Annual Bus Cost 3,750,000 375,000
Confidential 30
ULC MeshCard Systems
Parking
MeshCard Manufacturing Cost 62,500 62,500 62,500 62,500
Terminal Manufacturing Cost 225,000
Add-Value Machines Manufacturing
Cost 1,800,000
Returned Cards
Total Parking Cost 2,087,500 62,500 62,500 62,500
Total Annual Parking Cost 2,275,000
Total Cost 10,666,250 1,837,500 2,462,500 2,775,000 3,758,750 1,393,750 1,461,250 1,461,250 3,250,000 1,225,000 1,225,000 1,225,000
Total Annual Cost 17,741,250 8,075,000 6,925,000
Profit Before Tax -9,005,925 666,379 1,620,362 2,175,277 -1,697,987 905,391 1,062,169 1,135,878 -256,989 1,785,622 1,788,098 1,789,969
Annual Profit Before Tax -4,543,907 1,405,450 5,106,700
Profit After Tax (37%) -5,673,733 419,819 1,020,828 1,370,425 -1,069,732 570,396 669,166 715,603 -161,903 1,124,942 1,126,502 1,127,680
Annual Profit After Tax -2,862,662 885,434 3,217,221
Capital Expenditures:
CASH FLOW STATEMENT Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12
Starting Cash 10,000,000 4,440,533 4,930,180 6,020,836 7,461,088 6,492,435 7,163,909 7,934,154 8,750,835 8,715,322 9,955,405 11,197,047
+ Profit After Tax -5,673,733 419,819 1,020,828 1,370,425 -1,069,732 570,396 669,166 715,603 -161,903 1,124,942 1,126,502 1,127,680
+Depreciation (20 yrs) 114,266 69,828 69,828 69,828 101,078 101,078 101,078 101,078 126,391 115,141 115,141 115,141
- Capital Expenditure
- Pay down debt
Ending Cash 4,440,533 4,930,180 6,020,836 7,461,088 6,492,435 7,163,909 7,934,154 8,750,835 8,715,322 9,955,405 11,197,047 12,439,868
BALANCE SHEET Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12
Assets:
Cash 4,440,533 4,930,180 6,020,836 7,461,088 6,492,435 7,163,909 7,934,154 8,750,835 8,715,322 9,955,405 11,197,047 12,439,868
Current Assets 4,440,533 4,930,180 6,020,836 7,461,088 6,492,435 7,163,909 7,934,154 8,750,835 8,715,322 9,955,405 11,197,047 12,439,868
Confidential 31
ULC MeshCard Systems
Equipment 9,141,250 9,141,250 9,141,250 9,141,250 11,641,250 11,641,250 11,641,250 11,641,250 13,666,250 13,666,250 13,666,250 13,666,250
Accum. Depreciation 114,266 184,094 253,922 323,750 424,828 525,906 626,984 728,063 854,453 969,594 1,084,734 1,199,875
Net Equipment 9,026,984 8,957,156 8,887,328 8,817,500 11,216,422 11,115,344 11,014,266 10,913,188 12,811,797 12,696,656 12,581,516 12,466,375
Total Assets 13,467,517 13,887,336 14,908,164 16,278,588 17,708,857 18,279,253 18,948,419 19,664,022 21,527,119 22,652,061 23,778,563 24,906,243
Liabilities:
Short Term Debt
Curren Liabilities
Long Term Debt
Retained Earnings 13,467,517 13,887,336 14,908,164 16,278,588 17,708,857 18,279,253 18,948,419 19,664,022 21,527,119 22,652,061 23,778,563 24,906,243
Total Liabilities 13,467,517 13,887,336 14,908,164 16,278,588 17,708,857 18,279,253 18,948,419 19,664,022 21,527,119 22,652,061 23,778,563 24,906,243
Confidential 32
5 Year Plan
INCOME STATEMENT Y1 Y2 Y3 Y4 Y5
Revenues:
Subway
Sales of MeshCard ($20) 400,000 50,000 50,000 50,000 50,000
MeshCard Sale Revenue 8,000,000 1,000,000 1,000,000 1,000,000 1,000,000
Commission Rate 0.01 0.02 0.02 0.02
Revenue From Commission 2,880,000 5,760,000 5,760,000 5,760,000
Average Cash On Hand 16,500,000 31,680,000 31,360,000 31,360,000 31,360,000
Short Term Investment 2,089,338 4,061,550 4,020,776 4,020,776 4,020,776
Short Term Rate (%) 0.12 0.12 0.12 0.12 0.12
Short Term Investment Revenue 52,233 101,539 100,519 100,519 100,519
Long Term Investment 14,407,728 21,188,721 19,625,063 19,625,063 19,625,063
Long Term Rate (%) 0.16 0.16 0.16 0.16 0.16
Long Term Investment Revenue 576,309 847,549 785,003 785,003 785,003
Advertising Revenue From Add-Value Machines ($200/month) 568,800 568,800 568,800 568,800 568,800
Advertising Revenue Per Card 40 40 40 40 40
Advertising Revenue 4,568,800 1,068,800 1,068,800 1,068,800 1,068,800
Total Subw ay Revenue 13,197,343 5,897,888 8,714,322 8,714,322 8,714,322
Bus
Sales of MeshCard ($20) 100,000 30,000 30,000 30,000
MeshCard Sale Revenue 2,000,000 600,000 600,000 600,000
Commission Rate 0.01 0.02 0.02 0.02
Revenue From Commission 405,000 1,440,000 1,440,000 1,440,000
Average Cash On Hand 4,455,000 7,840,000 7,840,000 7,840,000
Short Term Investment 564,695 1,005,144 1,005,144 1,005,144
Short Term Rate (%) 0.12 0.12 0.12 0.12
Short Term Investment Revenue 14,117 25,129 25,129 25,129
Long Term Investment 4,086,134 6,034,308 6,034,308 6,034,308
Long Term Rate (%) 0.16 0.16 0.16 0.16
Long Term Investment Revenue 163,445 241,372 241,372 241,372
Advertising Revenue Per Card 40 40 40 40
Advertising Revenue 1,000,000 300,000 300,000 300,000
Total Bus Revenue 3,582,563 2,606,501 2,606,501 2,606,501
Parking
Sales of MeshCard ($20) 20,000 20,000 20,000
MeshCard Sale Revenue 400,000 400,000 400,000
ULC MeshCard Systems
Commission Rate 0.02 0.02 0.02
Revenue From Commission 72,000 72,000 72,000
Average Cash On Hand 980,000 980,000 980,000
Short Term Investment 124,361 124,361 124,361
Short Term Rate (%) 0.12 0.12 0.12
Short Term Investment Revenue 3,109 3,109 3,109
Long Term Investment 894,208 894,208 894,208
Long Term Rate (%) 0.16 0.16 0.16
Long Term Investment Revenue 35,768 35,768 35,768
Advertising Revenue From Add-Value Machines ($200/month) 144,000 144,000 144,000
Advertising Revenue Per Card 40 40 40
Advertising Revenue 200,000 200,000 200,000
Total Parking Revenue 710,877 710,877 710,877
Total Revenue 13,197,343 9,480,450 12,031,700 12,031,700 12,031,700
Costs:
Subway
MeshCard Manufacturing Cost 5,000,000 725,000 675,000 675,000 675,000
Terminal Manufacturing Cost 1,481,250
Add-Value Machines Manufacturing Cost 7,110,000
Central Terminal 550,000
Returned Cards
Storage/Offic e ($20000/month) 240,000 240,000 240,000 240,000 240,000
Communication 160,000 160,000 160,000 160,000 160,000
Advertising 800,000 800,000 800,000 200,000 200,000
Wages 1,600,000 1,600,000 1,600,000 1,600,000 1,600,000
Legal Fees 800,000 800,000 800,000 200,000 200,000
Total Subw ay Cost 17,741,250 4,325,000 4,275,000 3,075,000 3,075,000
Bus
MeshCard Manufacturing Cost 1,250,000 375,000 375,000 375,000
Terminal Manufacturing Cost 2,500,000
Returned Cards
Total Bus Cost 3,750,000 375,000 375,000 375,000
Parking
MeshCard Manufacturing Cost 250,000 250,000 250,000
Terminal Manufacturing Cost 225,000 225,000 225,000
Add-Value Machines Manufacturing Cost 1,800,000 1,800,000 1,800,000
Returned Cards
Total Parking Cost 2,275,000 2,275,000 2,275,000
Confidential 34
ULC MeshCard Systems
Total Cost 17,741,250 8,075,000 6,925,000 5,725,000 5,725,000
Profit Before Tax -4,543,907 1,405,450 5,106,700 6,306,700 6,306,700
Profit After Tax (37%) -2,862,662 885,434 3,217,221 3,973,221 3,973,221
Capital Expenditures:
CASH FLOW STATEMENT
Starting Cash 25,391,548 29,051,586 38,618,609 38,618,609 43,063,642
+ Profit After Tax -2,862,662 885,434 3,217,221 3,973,221 3,973,221
+Depreciation (20 yrs) 323,750 404,313 471,813 471,813 471,813
- Capital Expenditure
- Pay down debt
Ending Cash 22,852,636 30,341,332 42,307,642 43,063,642 47,508,676
BALANCE SHEET
Assets:
Cash 22,852,636 30,341,332 42,307,642 43,063,642 47,508,676
Current Assets 22,852,636 30,341,332 42,307,642 43,063,642 47,508,676
Equipment 36,565,000 46,565,000 54,665,000 54,665,000 54,665,000
Accum. Depreciation 876,031 2,305,781 4,108,656 4,108,656 4,108,656
Net Equipment 35,688,969 44,259,219 50,556,344 50,556,344 50,556,344
Total Assets 58,541,605 74,600,551 92,863,986 93,619,986 98,065,019
Liabilities:
Short Term Debt
Curren Liabilities
Long Term Debt
Retained Earnings 58,541,605 74,600,551 92,863,986 93,619,986 98,065,019
Total Liabilities 58,541,605 74,600,551 92,863,986 93,619,986 98,065,019
Confidential 35
ULC MeshCard Systems
ULC assumes that $10,000,000 start-up capital will be funded by supportive venture capitalists. We assume
no account receivables or accounts payable: our fees from customers will be paid up front on MeshCard
revenues.
Figure 4: Expected Profits in First 5 Years of Commencement
4,000,000
3,000,000
2,000,000
1,000,000
Profits (USD)
0
-1,000,000
-2,000,000
-3,000,000
1 2 3 4 5
Year
The Pro Fo rma shows that we will first show a profit in year 2. Fro m year 4, it is projected that the firm
will generate a steady 4 million dollars a year. Our firm will also enjoy a rapidly increasing cash balance.
The firm‘s profit and ending balances are summarized in Figures 4 and 5.
Figure 5: Ending Cash Balance
50,000,000
45,000,000
40,000,000
35,000,000
30,000,000
Cash (USD) 25,000,000
20,000,000
15,000,000
10,000,000
5,000,000
0
1 2 3 4 5
Year
Break-Even Anal ysis
The Break-Even Analysis shows that the firm will break even in year 2. There is a drastic decrease in the
total cost after the imp lementation of the equipment. After year 4, it is projected that the total revenue will
level out at approximately 12 million dollars while the total cost will remain steady at merely 6 million
dollars.
Confidential 36
ULC MeshCard Systems
Figure 6: Break-Even Analysi s
20,000,000
18,000,000
16,000,000
14,000,000
Cash(USD)
12,000,000
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
0
1 2 3 4 5
Year
Total Revenue Total Cost
Financi al Summary
A profit will be recorded by Year 2. Assuming ULC does not expand into additional markets, fro m Year 4
onwards the net profit after tax is $4 million per year.
SUMMARY
ULC‘s market ing analysis demonstrates that our MeshCard System has a large market in the public
transportation and private parking sectors in the central and greater Boston, MA area. Based on our Pro
Forma ULC will record profit by its second year of existence. Once credib ility of the MeshCard System has
been established by the end of 8th quarter, the opportunities for expansion into other existing markets would
be endless. ULC also envisions that the revolutionizing concept of the MeshCard System could capitalize
based on similar principles of our pilot program and enter successfully in other industries including retail
and telecommunication sectors. The founders of ULC have pers onal convictions that their concept is the
concept of the future in a monumental development in American consumer efficiency and retailer
profitability.
Confidential 37
ULC MeshCard Systems
APPENDIX A: FREQUENTLY AS KED QUES TIONS
Question 1: Are contact-less smart cards a practical solution for public t ransport?
Answer: The user convenience and security control that MeshCard offers have been enough to convince
many cities in developed countries such as London, Hong Kong, Singapore, Seoul, to invest in similar
systems. Currently smart cards used for transportation have millions of transactions per day from around
the world. This number will continue to increase as people realize the benefits of such a system pertaining
not only to transportation but also other industries.
Question 2: Should MeshCard be completely contact-less or not?
Answer: Contact-less systems require smaller reader capacity for chip card that is easier to achieve. It also
decreases maintenance costs since it requires fewer electro mechanical devices. There is a general
consensus in the scientific co mmunity that contact-less is better and obviously faster.
Question 3: What would be required for a smooth transition to the MeshCard System?
Answer: High quality customer information and training, educating the staff to answer user questions and
to assist with problems, educating the public of the low risk involved using a value card by emphasizing
user-friendliness, demonstrating MeshCard‘s invulnerability to vandalism, as well as the convenience of an
all-purpose small transaction debit card, are measures to be taken to guarantee MeshCard success.
Question 4: What is our vision for MeshCard?
Answer: Our vision for MeshCard is to incorporate a global positioning system (GPS) such that our cards
are personalized to our customers. If for example, passengers enter and exit one of the modes of
transportation in different price zones, they will be charged accordingly. ULC also envisions an eventual
expansion of the concept into numerous sectors beyond transportation and p rivate parking both in Boston
and other desirable locations.
Question 5: How do we prevent vandalism to our MeshCard System?
Answer: The presence of an attendant is insufficient to restrain vandals. Human error and sophisticated
electronic theft are two major concerns with regard to vandalism. MeshCard uses the most current
encryption technologies to prevent electronic theft. As opposed to other electronic card systems, i.e.
MasterCard, MeshCard is low risk since it is nameless and only stores a limite d amount of cash for
specified applications at any given time.
Confidential 38
ULC MeshCard Systems
APPENDIX B : EMAIL CORRS EPONDENCE WITH ERG GROUP
From: Shannon Yujnovich [SYujnovich@erggroup.com]
Sent: Monday, October 15, 2001 4:00 AM
To: Kelvin_Lo@Brown.edu
Subject: Smart Cards
Hi Kevin
Please find below information on smart cards as requested by you
Advantages:
The smart card is secure. It can be trusted to carry secret information or
value. In a loyalty scheme the points can still be treated as money/value as
they can be converted to products/rewards. The smart card can perform processing
internally, which a magnetic stripe or bar code can't. This means that you can
offer instant rewards with a smart card as it can be trusted to carry the points
securely.
Disadvantages:
Cost.
These are the most obvious advantages and disadvantages without getting too
deeply into it.
1) Infrastructure will depend on how much security you need. Does the system
need to be audited or not? With a non-smart card system, everything must be sent
to a central system for recording, tracking, rewarding, etc. In a smart card
system it may not as the smart card can work independently. The only problem
with this is if someone does crack the system, you don't know about it as you
aren't tracking everything. In a small system you may get away with it, but in a
large, high-value system it is better to audit it. The basic infrastructure is
therefore a central system (which can be extremely complex), a smart card
terminal at every merchant and a smart card in everyones pocket. The smart card
terminals would most likely dial into the central system as necessary, avoiding
the need for a large private network.
2) The cost is a very tough one, it really depends on how large and complex the
system is. There will be significant R&D to develop the exact system and
significant costs in operating the system. The capital costs are fairly simple
once you have paid for the R&D. The smart cards are between $5 and $20 each
depending on the complexity. The smart card terminals are between $500 and $2000
each depending on the complexity. The central system is between $100,000 and
$10,000,000 depending on the complexity.
Designing a simple model of the system in the lab is quite easy. Rolling a large
commercial system out into the real world is not as simple as it initially
appears to be. There are many, many possibilities, some work well, some don't.
I hope that this helps.
Shannon Yujnovich
Marketing Officer
ERG Group
+61 8 9 273 1210
www.erggroup.com
Confidential 39
ULC MeshCard Systems
REFERENCES
1. Boston Online http://www.boston-online.co m/
2. Chief Financial Advisor http://www.cfo.co m
3. City of Boston http://www.ci.boston.ma.us
4. Co mmonwealth of Massachusetts http://www.state.ma.us
5. Dial-a-Fish, January 2000. Pg. 1-30
6. Engineering Your Start-up, Michael L. Baird, Professional Publications Inc., 1999
7. ePayments Resource Center http://www.epaynews.com/
8. ERG Group http://www.erggroup.com/
9. Fit zInn Parking Systems http://www.fitzinn.co m/
10. Hong Kong Smart Card System
http://lnweb18.worldbank.org/External/ lac/lac.nsf/Sectors/Transport/D5A576A039A802C08525 6
8B2007988A D?OpenDocu ment
11. International Data Corporation http://www.idc.co m
12. North End Boston Parking http://www.northendboston.com/parking.html
13. NTD Program http://www.ntdprogram.co m/NTD/Profiles.nsf/2000+All/1003/$File/P1003.pdf
14. Octopus Card http://www.octopuscard.com/octopus_eng/e_press9.htm
15. The Nilson Report http://www.nilsonreport.com/
16. The World Ban k Group http://www.worldbank.org
17. U.S. Census Bureau http://factfinder.census.gov
Confidential 40
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