Written evidence from T N D Anderson (LBS 01) Synopsis The submission identifies stability, reliability, punctuality, affordability and accessibility as key to the retention of bus modal share. It applauds both the significant benefits arising from geographic market segregation and franchising as the obviously successful model for widespread adoption. It deplores the Competition Commission’s preoccupations with theoretical models and ideological concerns remote from the real world. While conceding that there are improvements required in the bus industry, it identifies the objectives of their findings as irrelevant and antagonistic to the concerns of passengers. The submission is sceptical about Quality Partnerships and recommends cross‐industry consultations on a series of issues. 1. Introduction 1.1 Your Committee has invited evidence pertinent to the Competition Commission’s recent findings on competition in the local bus market, and posited a number of questions. 1.2 My submission comments on the UK Bus Industry (section 2.), critically reviews some of the Competition Commission’s (CC) findings (3.), and attempts to answer the Committee’s questions and in doing so makes some suggestions as to the way forward (4.). All references to the findings are by paragraph numbers in the CC Summary. 2.0 The Bus Industry in the UK 2.1 Passengers primarily require bus services which are stable, reliable, punctual, affordable and accessible (in the broadest sense of the latter term). These are the keys to the retention of bus modal share. The last thing that passengers require is instability brought about by competing services on bus routes. Head‐to‐head competition at the service level is invariably destructive and confusing to bus users, and wholly undesirable. Both employers and employers want to be assured of reliable public transport in making critical location decisions. While buses cannot offer the assurance of fixed rail services, many who do not drive or have access to a vehicle are highly dependent on public transport. In order to carry out its function, the bus industry must be profitable. 2.2 The London model of bus regulation provides for competition in the procurement of services. While the process and provision could no doubt be improved, it has been effective in meeting the needs of passengers, and is respected internationally. Integrated Transport Authorities (ITA) for rationalised ‘city regions’ and/or the larger well‐ defined sub‐regions (eg. North‐East of England, Wales) should define routes and services, select operators for long‐term franchises, design and promulgate service information and upgrade modal interchanges to a passenger‐friendly standard wherever indicated. It is extraordinary that there are 132 LTAs in the Competition Commission’s study area. This must entail completely unnecessary duplication of effort and multiple conflicting policies and practices. All bus operators, especially those who offer services in more than one LTA area, would benefit from a rationalised and simplified system. 2.3 Geographic market segregation has facilitated better information provision, route and service stability and greater passenger satisfaction. Where bus operators have provided a reliable service, their reputation is often high and modal share is easier to maintain. The commitment of the Brighton and Hove Bus and Coach Company to their community is an exemplar that the whole industry should be encouraged to emulate. The dominance of the larger operators has been hugely positive for quality control and the long‐term survival of routes. The ability to cross‐subsidise poorer‐performing routes, no doubt anathema to the Competition Commission, is a strength that passengers in many areas appreciate, even if the service is infrequent. There are important economies of scale in bus service provision. 2.4 Many operators – large and small ‐ have been innovative in major respects of service provision (eg. discounted and multi‐trip tickets, passenger comfort, multi‐operator ticketing schemes, diversified services). If we wish to increase bus modal share however, there are aspects of the bus industry that ought to be carefully reviewed. 2.5 The industry tends to be conservative, often for very good reasons. Business risk is not something any manager wishes to flirt with if avoidable, as it has career‐threatening implications. Applying a tried and tested route and service pattern ensures a reasonable return to stakeholders, whereas sufficient investment in a new route or area could be expensive over the duration of the commitment. 2.6 Most bus routes in cities and towns are radial. Yet in mature cities like Melbourne or London, about 44% of movement is orbital. Orbital routes are often expensive to operate by bus and would depend on efficient interchange with radial routes (bus, rail). Orbital light rail would be more appropriate in London and larger cities, as in Paris. Many bus routes have a historic pedigree, reflecting land uses of long ago that have now changed. Dramatic changes of land uses are relatively rare, and frequent route reviews are unnecessary. Any reviews of bus routes in cities and large towns should take more account of significant traffic generators in suburban and outer areas (eg. hospitals, supermarkets), and facilitate the development of polycentric urban forms. 2.7 The industry (and its local authority partners) should be congratulated for its efforts to make buses more accessible to people with mobility impairments. Huge strides have been taken in the last 20y that have benefited a much wider constituency than just disabled people. In relation to wider or service accessibility, the picture is much more mixed. While it is possible to exaggerate the importance of this aspect, bus routes and services are often opaque to current non‐users and visitors. Yet the latter constitute a huge potential market. At least 80% of people in most locations choose not to use a bus, so the quality of service or information provided is effectively irrelevant. Tourists will choose a taxi rather than wrestle with the intricacies of local bus routes, stop locations, frequencies, identificants and operating conventions. Multiple service providers, whether competing or not, compound the problems of communication, dissemination and interpretation. Nevertheless, and at the margins, there are gains in ridership and revenue which could be made by paying closer attention to information design, especially at passenger terminals. 2.8 The revenue per seat‐km or per passenger‐km to the bus operator has always been low. As a result, bus companies, especially small ones, conspicuously lack middle‐tier management, cannot justify expensive marketing, and are constrained from investing in research or external consultancy. Competent bus inspectors, of which there are many, are often under‐ qualified and under‐trained for the more sophisticated elements of modern‐day bus operations and management. 3. The Competition Commission’s Findings 3.1 The CC Summary para 7 estimates the costs of adverse effects on competition (AEC) in the range of £185 – 375m annually, while para 10 notes that 2.9b passenger journeys were made in 2010/11. I calculate from this that the cost to passengers of AECs is between 6.4 – 12.9p/journey. This must surely be a small proportion of typical fares, and barely significant. Furthermore, the CC Summary (paras 17, 29, 49) highlights the predilection of passengers to be relatively unconcerned about features (price, service quality) that the CC nevertheless focuses on! 3.2 One is tempted to conclude that the CC report is much ado about nothing, a true arrow sadly misdirected. The OFT and the Competition Commission should recognise that head‐to‐head competition, rare and ineffectual enough in the rest of the economy in restraining cost inflation, is wholly inappropriate for the bus market. Bus operators are already chasing a small proportion of the travel market, and neither they nor passengers are well‐served by the application of arcane theories of textbook‐pure competition far away from the real world. Perfect competition implies a zero rate of return, hardly helpful in any industry or enterprise, and certainly not in one where under‐ investment is an issue. The real competition for buses arises from the low marginal cost of private transport. It is disappointing to see intellectual effort of a high‐order being distracted from the more substantive issues that face the UK economy. 3.3 I conclude that the Commission’s recommendations are likely to be counter‐productive, even if they proved workable. 4. The Committee’s Questions 4.1 Has the Competition Commission addressed the issues of most importance to the bus passenger? In the Commission’s perfect world, a reduction in the cost of 6.4 – 12.9p/journey might appear like success. Yet the loss of that revenue could render some services and operators unviable, thereby reducing competition. The Commission appears to have acted with flagrant disregard for the passenger, and interpreted its brief too literally. The answer to the Committee’s question is therefore, on its own admission, self‐evidently not! 4.2 How effective are the remedies proposed by the Competition Commission likely to prove? The case that the system is broke is unproven. Let’s not fix it! It is clear from the Commission’s report that the difficulties of sustaining competition over time are considerable and the gains near‐invisible. While there may be a temporary victory for doctrine, changes in the manner they recommend are likely to be ineffectual. It is really unfashionable to believe that more interference by bureaucrats is a good thing. A reality check appears to be required. 4.3 Is sustained head‐to head competition feasible or desirable? As 4.2. It may be theoretically feasible, but it is probably impractical, certainly undesirable and clearly unsustainable without inviting more cost than benefit. The bus industry should not be experimented with in such a superficial and cavalier manner, even in the pursuit of ideological purity.