A part-time economist writes on passengers catching the first bus that comes…
In many ways, competition is a good thing. Competition gives us cheap products in our supermarkets, and differentiation too. Without it you would probably be having expensive sawdust instead of cheerios for breakfast this morning. There are a few examples of where competition has yielded better offerings in terms of bus services too, including express buses to the suburbs of Glasgow, which (conveniently) holds host to Britain's most extensive urban motorway network. You wouldn’t have as many buses between Poole and Bournemouth either.
Competitively, buses don’t really behave in the same way as groceries, though. You will notice that, despite fairly low barriers to entry, there are only a few active battlegrounds in the UK. Where there is competition, most places—like Bournemouth—seem to have settled into a comfortable duopoly equilibrium.
Why this happens is not as interesting, though, as why it has to happen. As far back as its report into the Darlington Bus War, the Competition Commission noted an interesting property of bus passengers—that they just catch the first bus that comes. As much as we might like it to, quality competition doesn't really work. You can stick on a banger a minute ahead of a leather-seated Enviro 400 and people will tend to catch the former. Passengers travelling from Oxford to London can be seen to catch the first bus to their stop: Tubes and Espresses frequently play cat & mouse heading out of town.
Bangers there may be but investment in new vehicles is needed. In the Commission’s report, Stagecoach and Go Ahead justified what amounted to predatory behaviour on the grounds of providing new investment in vehicles. Yet, it should be obvious that the only sensible thing to do in the face of competition is to deliver bargain basement service (e.g. Wellglade’s Midland General Bargainbus cf. its Cotgrave Connection).
But if you did that everywhere, where would cascades come from?
Effectively, then, London had subsidised the rest of the country. TfL demands new, low-floor buses and its older stock is quickly strewn elsewhere. Indeed, it shouldn't surprise you that, until recently, First wouldn’t sell on buses for further use. Why? Because it can’t afford the competition that other firms who didn’t need to pay off the depreciation on new buses could manage. And if First (et al) couldn’t afford new vehicles, where would they come from?
Saturday, 4 December 2010
What Price Competition?
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8 comments:
Have First finally changed their scrapping policy then?
London Transport destroyed itself by selling on perfectly usable vehicles that would just pass into the hands of competitors who would undercut their bids and put them straight back into service.
All the evidence suggests that competition is ultimately bad for the consumer. In the short term residents of Sheffield are "enjoying" frequencies unheard-of since the days of the tams and fares that are simply unsustainable. There has to be a "reconciliation" (usually a highly illegal "pub deal" - one that never happened!).
Once competition goes, prices are likely to increase substantially and frequencies will be cut back, if for no other reason than to pay for the accumulated losses.
Whilst the London system may not be perfect, at least it provides a stable and generally reliable service.
And, by the way, whatever happened to the big agreements in Oxford, dues in August 2010 but yet to materialise?
I have no idea. Double deckers are here, and companies' websites have vague promises of their smart cards being ready for future improvements... but that's all.
Passengers catch the first bus that comes along.yes .unless its a first bus!!
There is also the unusual issue in the bus industry that customers are concerned with the overall level of supply provided by an operator (ie. the service frequency), rather than just the supply of the one journey that they will actually use - because frequency = convenience.
For instance, in a market for bread, the customer doesn't really care about the size of the total production or the percentage market share of the supplier they use, just as long as they can supply the loaves that they want at the price they are prepared to pay. This fact means it is quite feasible for there to be many different suppliers in the same market, each producing a small fraction of the total output, and also for new entrants to start with a very small output and grow from there.
But this will never be the case on a bus route. It is not in anyone's interest to have 12 operators each running (in a completely uncoordinated fashion) once every 2 hours - far better to have a single operator running a clockface timetable every 10 minutes. Likewise, no-one is going to buy a return or season ticket with an new entrant running just 2 trips a day against an incumbent running every 15 minutes. Therefore any new competitor has to match (or at least get fairly close to) the frequency of the incumbent, who may in turn increase their frequency even further to regain the advantage, and so on. The result, of course, is massive overbussing that is completely unsustainable, and you inevitably end up with a fight to the death until one operator withdraws.
The exception to this is the few routes (Poole-Bournemouth, Southampton-Millbrook, etc.) where demand is high enough for two operators to sustain 'turn-up-and-go' frequencies long term, and then the benefits of competition can take effect. But these are of course the exception. On the vast majority of routes, on street competition simply does not work.
Interesting article, of which I have first hand experience of as a passenger in my locality.
I live in a little Welsh village in the valleys near Aberdare. When I moved here a year ago, there were 4 buses an hour through the village, all run by Veolia - their X6 Aberdare - Pontypridd - Cardiff route and their 26,27 Aberdare - Pontypridd service, calling at other estates en route. Service was generally poor, many services were over 10 minutes late or didn't run at all. Glamorgan Bus ran some services, again with huge reliability issues.
In June, Veolia withdrew their 26,27 service and it was take over by Stagecoach, who turned it into a more direct service no 60 (using 24 seater Solos), which ran half hourly. This was to compete with Veolia's rebranded X6, the 600, which saw newer Optare Tempo's given service livery.
In competition, Glamorgan bus have recently upgraded their services between Aberdare and Pontypridd. 4 an hour now run, using a variety of bangers such as Mercedes breadvans and some recently acquired Darts. They also run other services from Aberdare down the valley and services from Pontypridd up the valley.
Stagecoach have now announced the 60 is set to run every 20 minutes from Monday due to excellent patronage. The result is 9 buses an hour from where I live to Pontypridd (or 11 if I'm prepared to walk a mile), or 11 to Aberdare.
Veolia have done much to improve reliability and, while not brilliant, is a lot better than before. Stagecoach are hugely reliable. Glamorgan bus appear to have a policy of registering plenty of services but many don't run and many of those that do devise their own timetables on the fly!
The result? Most people seem to get to a bus stop and buy single tickets. I have seen evidence of a few passengers favouring Stagecoach, maybe because they have more of a bus network for follow on journeys, though I have heard a couple of passengers saying they'd rather support them because they are reliable.
Are the buses full? Most of the time they have not much more than a handful of passengers. Stagecoach's Solos appear fuller but they use the smallest vehicles of all operators along the corridor.
The article is very accurate in terms of OAPs using their free passes. They are not loyal to any operator now and despite the poor reimbursement rates operators complain of, a whole host of other companies have set up competing services along busy corridors to cash in on this new, indifferent clientel. Bargainbus being one. Premier being another.
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