21st Century Competition

Where are we exactly with competition these days?

We can all quote examples of pockets of competition, where an incumbent faces what is perhaps an 0700-1900 six day week onslaught, often on a few key routes but rarely over a whole network. Such competition invariably and ultimately turns out to be unsustainable but can do irreparable damage. It often takes years for fares to recover to levels that can sustain a network while promoting investment.

Similarly, we all know that quality competition in the likes of Bournemouth & Oxford has real benefits for the customer and market growth. Yet, this applies to but a handful of towns and it’s fair to say that in counting them you probably won’t run out of fingers and toes. Elsewhere, in the majority of towns, the market isn’t there or isn’t strong enough.

The architects of deregulation foresaw small family firms and even own account operators popping up like mushrooms after rainfall. They may be disappointed to find this wasn’t the case in 1986 and is unlikely to be so now. Meanwhile, the industry points to its successes in areas where there is mostly a monopoly.

So, in the Local Transport Act 2008 era, is 21st century competition dead? New Transit suggests that there should be less physical and more off-road competition, for tenders. In suggesting this, it is playing to its audience, whose readers are likely to offer quality (e.g. Stagecoach, Arriva), distinctiveness (e.g. Go Ahead) or are just plain large (e.g. First). There are few arenas where these players compete, though there are areas where they overlap. Instead, operators get on with the job of building their local markets, largely unhindered. Better, then, to foster and nurture off-road competition.

This is exactly how the smaller operators think and have done so for years. Many of them can’t (or daren’t) compete commercially head on but they can vie for tenders. For them, tenders are fair game. Some call these low cost operators. I prefer *lower* cost. This recognises the strides they have taken in the 20 years of deregulation as they have perhaps developed from coach operators to fully-fledged bus operators. Some of them have as high if not a higher ratio of SLFs to conventionals, thanks to the public purse. They have no shareholders to please and can helpfully settle for lower margins. Such operators have developed a niche, picking at those areas where larger operators have a disadvantage.

But if New Transit is calling for competition in future to be confined to public tender rounds, why stop there? Isn’t this argument an admission that the competitive free market isn’t working on the ground and actually can’t? Better, then, for transport authorities to invite expressions of interest for franchises. That way, we may yet see the apex of off-road competition. But is this realistic, fair and above all cost effective?