Improving Irish Bus Markets: But Not by Competition Alone

July 01, 2005

News

01/07/2005

 

Improving Irish Bus Markets: But Not by Competition Alone

By J. Jerome Casey

Embargo: Friday 1 July at 00:01 a.m.



Article appearing in the forthcoming Quarterly Economic Commentary, Summer 2005

 

 

  • If a modal shift from car to bus is to occur in Ireland, bus markets need to be improved. Advocates of competition have argued that the two Irish public bus companies have monopolistically exploited their markets and have captured their regulators. Looking for inspiration to the UK, they argue for the introduction into Ireland of bus route franchising (as in London) or for complete bus deregulation (as outside London).
  • This article finds little evidence of monopolistic exploitation of Irish bus markets: fare levels are not high in European terms and Ireland has experienced one of the fastest growth rates in bus patronage in recent years. Also, evidence of regulatory capture is weak: regulators have kept Irish bus fare increases in line with inflation while holding the rate of subsidy for Irish buses to among the lowest in Europe.
  • Bus deregulation in the UK has been a transport disaster, with falling patronage and very high fares. The route franchising model in London and Copenhagen has reduced patronage, increased public subsidies and replaced public monopolies with private oligopolies.
  • Network management approach holds most hope for improving Irish bus markets. In parts of Finland and Belgium, a publicly-owned bus operator, under a PPP contract, acts as network manager and lead operator, providing an integrated network through a combination of own and subcontracted private bus operators.
  • Network management breaches many taboos of competition theory. But it works. In parts of Belgium and Finland bus patronage has increased, and costs have fallen as a result of transparent benchmarking between public and private operators. In addition, the State would retain strategic direction of a necessary piece of physical infrastructure, rather than cede control to multinationals with a different development agenda, as occurred with Telecom.
  • Overall, network management may turn out to be the least unpalatable method of upgrading the Irish bus system for its patrons, operators and regulators.