During an unabated recession such as this, we wonder why so few competing operators are entertaining statutory quality partnerships, as available to them under the Local Transport Act 2008.
In theory, these should seem quite attractive. Since costs need cutting in a static market, it might seem logical to come to an agreement with a competing operator to share resources. A co-ordinated, even headway timetable offers the benefit of enhancing the combined service while still making savings—but without all the negativity associated with a straight cut in frequency.
Where there is currently no combined timetable, one co-ordinated service by two operators at every 7½ minutes is probably better than two independent services at every 10. In this case, network and return ticket holders only have the benefit of six buses an hour on just one of the two operators. A combined service at eight per hour is an improvement, might grow the market again and yet there is a third reduction in resources. And, a SQP staves off the possibility of a quality contract.
No doubt the OFT would welcome the forthcoming so-called bus war in Plymouth but the question is, will it last? First’s actions may either be destabilising during the sale process or it may be protectionist. In the end, it’s unlikely that the market can sustain such competition in the longer term. Something’s got to give. If a second operator other than First successfully buys Plymouth Citybus, might the end product be a SQP? Interesting to speculate.
Take a look at the resources First will need. One of the services operates at every 15 minutes, two at every 12 and the fourth is registered as a frequent service. Assuming that a round trip on each journey lasts an hour, my guess is that First will need to employ about 25 vehicles, including spares. Given the services operate on Sundays (at lower frequencies) and allowing for holidays and sickness, First will need over 45 drivers to maintain this level.
One of the reasons Plymouth council cites for its market testing is that Plymouth Citybus is vulnerable to attack. This, the council argues, would make Citybus a liability. Better, then, to sell or at least market test. It’s a little ironic that Citybus finds itself in that very position because the council has announced a sale.
Saturday, 22 August 2009
SQPs
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7 comments:
This impending "bus war" in Plymouth is absolutely disgusting greedy conduct by First, given that its objectives in launching it are so blatantly at odds with the interests of passengers and local taxpayers. Not unexpected though, unfortunately. If it does develop into a major scandal a la Darlington, it will surely just add fuel to the re-regulation argument.
As for SQPs, yes it is puzzling that these aren't appearing very much. Obviously moves are afoot in Oxford, but there would seem to be many other places where they would be beneficial.
Incidentally, the issue underpinning SQPs - that the total value to passengers of two or more uncoordinated bus services on the same route does not equal the sum of the parts - is a fundamental industry-specific factor that I think the OFT completely overlooked in its report. In most industries this is not a problem, and it is possible to enter a market producing a small fraction of the units produced by the incumbant firm as each customer requires only one unit and doesn't genarally care how many other units the firm in question supplies. Obviously in the bus industry this is not the case as passengers also care about the total number of units provided by a given operator on a route, ie. their service frequency, especially if they are buying a return or season ticket. An operator launching an hourly service against an existing operator's 5 minute service is unlikely to get very far. Hence, successful competitive entry into a bus market usually has to be based on the new entrant at least equalling the frequency already provided by the existing operator, or in other words, the number of buses on the route at least doubling overnight. As the number of passengers will certainly not have doubled overnight this a) is extremely wasteful and inefficient and b) renders the competition inherrently unsustainable, and leads inevitably to the 'fight to the death' that we see time and time again. This I would say is an absolutely fundamental reason why direct competition does not work as well in the bus industry as other industries. I hope the CC recognises this when it eventually reports.
First are, of course, only doing the same thing in Plymouth that Arriva did in Chester, and Stagecoach did in Preston - plus no doubt several other examples. Based on those two examples, one could say that it worked for Stagecoach but not for Arriva, so presumably First think it's worth a try.
The First action in Plymouth is also a bit embarrasing for the City Council as clearly the company is only under attack because it is up for sale. The council are spending just under £1 million to evaluate the company to ensure they get what the company is worth (assuming a sale). Ironic that the price will almost certainly have gone down now!
The Plymouth situation can in no way be described as 'absolutely disgusting greedy conduct by First' What are they doing wrong? They're not running free to destabilise a financially weak opponent (Darlington) or offering a low quality service; They're legally competing to deter any purchasers who may threaten First's position in the city.
Appearences can be deceptive - from outside the South West Plymouth Citybus appears to be a modern, reliable well run operation, but I am led to believe that First generally run vehicles in better condition, with friendlier drivers and better punctuality than CityBus.
The old image of FDC has gone since Marc Reddy took over as MD, witness the quality P&R operations First provide in Plymouth. Yes, some services still have problems (the Torbay X80 comes to mind) but issues are addressed rather than just being swept under the carpet as 'too difficult'. The new competitive network does indeed need to match CityBus to have any chance of success, and the situation probably isn't sustainable long term (even if the OFT think it should be), but what other course of action should First take given the possible sale of CityBus?
" They're not running free to destabilise a financially weak opponent (Darlington) or offering a low quality service"
It hasn't yet been announced what kind of fares will be charged or vehicles used. It may be that you already know, in which case I am glad to hear they will not be doing either of those two things. From the outside though, FDC will clearly be making a concerted and almost certainly loss-making effort to destabilise and devalue a smaller opponent, and may yet provide a relatively low-quality and/or low cost service in order to do so.
"What are they doing wrong?...They're legally competing to deter any purchasers who may threaten First's position in the city."
And, in all likelihood, depriving Plymouth taxpayers of a significant chunk of the value of Citybus if/when it is sold. And then, if all goes to plan, be in a position to carry out large scale service cuts, not to mention picking up most/all of the resultant tenders at a price of their choosing due to lack of competing bids.
"but what other course of action should First take given the possible sale of CityBus?"
This is certainly a fair point, and I don't know the answer. Clearly the action First is taking is the best for their own business interests given the situation. It clearly isn't best for anyone else's interests though, indeed quite the opposite. I guess it just illustrates why I don't believe the current system is working well.
"Appearences can be deceptive - from outside the South West Plymouth Citybus appears to be a modern, reliable well run operation, but I am led to believe that First generally run vehicles in better condition, with friendlier drivers and better punctuality than CityBus."
Well I'm from outside the area (but visit fairly regularly) and had apparently been taken in by this 'deceptive appearence'. As have most locals, judging by the local press coverage. Which would suggest it may not be so "deceptive" after all.
"The old image of FDC has gone since Marc Reddy took over as MD, witness the quality P&R operations First provide in Plymouth. Yes, some services still have problems (the Torbay X80 comes to mind) but issues are addressed rather than just being swept under the carpet as 'too difficult'."
I do agree with this. While I suspect the P+R operation is tightly specified by the contract (not sure though), the standards on many commercial routes do seem to have improved significantly, albeit from a pretty low base. Also agree about the X80 though! Why is it that Totnes Outstation/previously Garage seems to be such a law unto itself?!!
At the end of the day it is just business, and the same would happen if it was Tesco, B&Q or whoever !
First Devon and Cornwall are doing nothing wrong, they are simply protected their market position hopefully they will add a few more routes!!!
FDC offer a much better and reliable service with generally friendlier drivers than Citybus do, so good luck to them. They are obviously not out to put Citybus out f business as their fares will be the same..I am sure they would much rather compete with Citybus than say Stagecoach for example.
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