I found myself agreeing more than I anticipated with yesterday’s 176-page OFT market study report into local bus services. It’s been well researched and the industry should welcome it if only as a jumping off point for further negotiations and discussions.
Some of the information within comes as no surprise, like the dominance of the Big Five and the preponderance of smaller operators but with little in between. Others parts are inexact. For example, the OFT seems to treat free travel not as a reimbursement but a subsidy. And the OFT seems to dismiss the competition from the car as more-or-less irrelevant.
It still seems odd to me that this report should present itself at this time—in the midst of a recession, especially as bus services are lag indicators. The industry isn’t as robust as it was 18 months ago, as can be seen by the changes some operators are making.
It seems even odder that, when the government appears to be relaxing the tight competition authorities’ grip on the industry through the Local Transport Act 2008, the OFT should be so resolute in its intent in the first place.
What are the OFT’s main findings? Here are some off-the-cuff thoughts... please share *your* views.
1. Operators tend to eliminate competition and this leaves no long term benefit to customers
Some might say this is how the market will always work. Smaller operators might argue that, for them, competition is for tenders and not commercial bus services. Has the OFT considered the benefits of a single supplier in a natural monopoly? Little waste, network benefits, an ability to invest, stability, the commercial operation of marginal services.
2. Concessionary fares incentivises operators to increase fares
Let’s be honest and for some of us hold our hands up. But let the competition authorities be honest and remember that in great swathes of England reimbursements are insufficient. And let them remember that day and season tickets offer better value for money. Indeed, these classes of tickets are generally climbing at a slower rate than single fares.
3. There is no incentive for larger operators to enter into network ticketing with smaller operators
Does the OFT recognise that one reason for this might be the complexity of competition rules surrounding fares? Should this area remain the province of neutral third parties? And would you honestly expect an operator with a large network to take a one-route, 0700-1900 operator’s ticket?
4. Over-busing is a strategy in reducing or deterring competition
Perhaps some of us need to be honest here, too. This might be a good thing save that it is often short term. Generally, when it finishes, passengers tend to be no worse off than when it started.
5. The OFT estimates that fares are nine per cent higher if there is one large incumbent compared to two or more operators
Above left, the spread of fares in transport authorities with one provider. On the right, with two or more. Has the OFT considered what might happen if there was a fares reduction? How would it impact on investment? What might be the effect on marginal mileage? The economics of bus operation are finely balanced.
6. Contract prices are rising ahead of transport and general inflation
Does the OFT recognise that tendering authorities now ask for better quality? And accessible vehicles, with higher capital and operating costs? The OFT might also recognises that operators are no longer prepared to retain work at any price that otherwise used to drain a business. There are also plenty of smaller lower cost operators filling tender voids.
And the suggested remedies: where are we going on this? Here are the main ones.
1. The traffic commissioners to control over-busing. How?
2. The use of quality contracts (franchising) to develop competition for but not in the market. Would this help smaller operators? Would there be too much political interference?
3. Mandatory multi-ticketing. How would operators differentiate their product, the benefits of quality or a strong network? Perhaps by under-cutting the multi-ticket price with their own scheme.
Friday, 21 August 2009
A Far-reaching Report
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7 comments:
The OFT report merely sets out in writing what the OFT's masters wanted it to say before they went through this farce.
It's political tosh of the highest (or lowest order)...
Not to forget that this is a government still struggling by every possible expedient to distract attention away from its continuing expenses scandal...
If operators want to undercut interavailable tickets, that's fine by me!
The reason that I think interavailable ticketing should be put in place in far more places (not sure abut "mandatory", not quite sure how you would enact and enforce it) is because passengers making multi-leg journeys can end up seriously out of pocket if they have to use two different bus companies.
eg in York, several operators have all-day tickets for around £3.50. But if you have to use two bus companies, you might still end up paying £6 for a return journey. So a city-wide ticket at £4 would be good value for passengers, but would still allow companies to sell their own individual day tickets cheaper.
Inter availability /through ticketing: if the railways can do it, why can't the bus industry? If I want to travel from Southampton to Maidstone ( Kent) one ticket suffices.
In some parts of the country, such as Devon and Cornwall there is interavailability and through ticketing between operators. How much of this is operator initiated and how much local authority is not immediately obvious.
There are a number of areas in Southern England where Explorer tickets have wide availability. They are not without problems, however. Each operator sets its own prices and so the ticket cost depends on who you but it from. The other is that there is very little publicity about who accepts which ticket. Some of the local authority websites help on this, but not all.
I have done journeys such as Bromley-Hastings, via Ramsgate, and Hastings-Bournemouth using only one ticket, but there were sometimes tense moments because drivers were unsure about accepting my ticket.
"I have done journeys such as Bromley-Hastings, via Ramsgate, and Hastings-Bournemouth using only one ticket, but there were sometimes tense moments because drivers were unsure about accepting my ticket."
Is that because the drivers are not properly instructed, perhaps? And what of "X Co does not accept paper tickets issued on Y Co's services, will accept cards issued at their travel offices"? IRCC, something like that applied on the then 729 Tunbridge Wells Brighton service, that was shared by Arriva, B&H, and SC, about 10 years back? Who on earth comes up with such complications? Its certainly not passenger friendly.
"Inter availability /through ticketing: if the railways can do it, why can't the bus industry? If I want to travel from Southampton to Maidstone ( Kent) one ticket suffices."
The different ways in which TOCs market themselves means this is sometimes going the other way. If you want to go from London to Manchester on a weekday but with some flexibility on your return later the same day you will find that Virgin Trains will sell you an Advance fare going out and half of an Off-Peak Return to come back. Say you want to include the Underground to get from Victoria to Euston that half Off-Peak Return suddenly becomes an Off-Peak Single (£1.00 less than the return) because they have to account for some interlining. Are the OFT looking at that?
There are some reasonable conclusions in the report, but every action results in an equal and opposite reaction - so to say that some operators increase fares as a result of the concessionary fare scheme is undoubtedly true, but this is because of the way that reimbursement is calculated. We have been here so many times before - The analogy I was quoted by a Commercial Director was 'can you imagine the government telling Tesco that they must give free bread and milk to passholders, but we're not telling you what we are paying you for so doing?'
As for multi operator ticketing, it's the revenue apportionment that always seems to be the stumbling block. If a scheme (such as most Explorer schemes, Wiltshire Day Rover and Solent TravelCard)works on the basis of the revenue stays where it falls (i.e. with the operator issuing the ticket) then admin. is easy; this works well in counties such as Wiltshire where large parts of the network are tendered so the council can insist on network tickets being accepted. As soon as revenue apportionment comes into play (as I assume happens in many PTA areas) then admin costs start to complicate things - Railway tickets with 'any permitted' routing must be a nightmare to apportion; it's just a nonsense for a £5 Day bus ticket.
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