Have we Failed?

Said the Competition Commission, “Too many operators face little or no competition in local areas”. Of course, they’re right about a general lack of competition. But that need not be a bad thing in itself. In the light of the initial findings from the CC’s market investigation, has the English provincial bus industry failed to embrace the Transport Act 1985?

“To deregulate” doesn’t just mean “to compete”. Deregulation means “to remove regulations & controls”. Once those controls were loosed, several things happened. Here are the successes:

1. The industry has rejuvenated itself. Taking control of its own destiny, many (not all) managers have consistently stepped up to the plate. It’s hard to imagine our current crop of astute, commercially-focused, driven young managers being who they are in a regulated environment.


2. The profit motive that drives the provincial bus industry aligns nicely with the need to run buses where and when passengers want them. Commercial services generally run free of other outside influences.


3. Niche providers are doing well in supported markets. Virtually every market place now has a lower cost operator whose cost base means they are often more competitive than the bigger groups. Here, niche operators are most comfortable in terms of competition.


4. Subsidies have decreased. They may have crept up but 1986 saw a rebalancing, a re-benchmarking of public support far below the feather-bedding of whole network revenue support.


5. Over 90 per cent of provincial mileage is provided commercially, without direct local support. This benefits the public purse, especially at a time of austerity.


6. Operators have innovated and grown their businesses. Taking advantage of the post-deregulation ability to be nimble on their feet, operators espy opportunities and they tackle them. Some work, others don’t but it’s a healthy industry that takes (measured) risks.


7. Operators have oft branded and marketed their services effectively, winning new customers. Many such operations spring to mind.


8. Operators are fully flexible to respond to market needs. Once too flexible, now that flexibility emerges in the provision of faster, direct services; commercial Sunday mileage; night buses; and clockface, understandable timetables, even on previously ragbag inter-urban and rural services.


9. Once we’d left the initial, painful years of dereg behind, the level of investment began to rise. Especially in the last 12 years, it’s been consistently high. This in spite of profit margins that give long-term investment concerns.

But, on the other hand…

1. Fares are lower where there’s competition and daytime services often better, too, but this brings a burden on other parts of the network where either there are fewer journeys than might be viable or fares are higher.


2. Indeed, monopolies offer no incentive to operators to reduce fares. Fares are the one barrier that passengers perceive as difficult to overcome. Passengers do not see the link between fares and investment or quality of service.


3. Parallel with deregulation, there’s been a growth in off-centre destinations such as industrial estates, hospitals and retail parks. Commercial operators cannot easily serve such disparate demand with its smaller flows. This is a weakness that often not even local transport authorities can easily cover.


4. Where an incumbent faces competition, it would be madness not to react. If new competition keeps operators “on their toes”, being on their toes means that they will respond in ways that try to destroy that competition. This surely is inevitable.


5. Competition tends to be in bursts along specific, selected corridors during daylight hours. Not only are the benefits of competition therefore narrow, such actions are usually highly unstable. Often relatively short lived, it damages both parties and probably one irreparably. This would tend to indicate that the market in many towns cannot sustain competition.


6. There are few examples of whole network competition. Again, few towns can sustain it. Where they do, it’s still invariably along certain corridors only. Or operators using the Transport Act 2008 reach some form of accommodation (e.g. Chester, Oxford).


7. Large operators seem reticent to target adjacent large operators commercially. They have learnt from the past that markets struggle to support two. If this was so easy, why isn’t it universal? There is the obvious fear of retaliation but also there are considerable set up costs involved.


8. Small operators seem reticent to target large operators commercially. There’s simply too much at stake. Better to concentrate on where competition tends to be easiest—off street, during tender time.

So, have we failed? Not at all. There’s plenty of evidence of that. We’ve done all that has been asked of us. But have we succeeded? That’s a different question. With both sides of the argument claiming a victory, the CC nevertheless thinks we haven’t succeeded and is starting to address the issue with possible remedies, in particular:

• Improvements & changes to multi-operator ticket schemes, making them more inclusive


• Restrictions on aggressive, predatory behaviour


• Recommendations on the circumstances that might dictate a QC or QP—no doubt to be welcomed by operators and LTAs alike

And what was missing? What external factors have the CC forgotten?

1. References to the car as the main competitor.


2. Public policy that still drives passengers away because of off-centre destinations.


3. The use of bus priority and roadspace.
   

Yes, we’re doing all that’s asked of us. We face competition from niche providers for tenders. We’re balancing our books in difficult circumstances. We’re improving our game and winning customers. And investing. Clearly, that ain’t enough. We should be wading in and picking fights elsewhere.

Has deregulation, then, been a big fat failure? Would the pre-1986 status quo have been better? What do passengers make of it all? It’s hard to conclude that the only real solution is a franchised environment.