Full Version - Issue 7 | November 2011 - LTA Academy

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Different Approaches to Public Transport Provision less than CityRail’s. Connex’s crewing costs per service kilometre were about half of CityRail’s, while the former’s station costs per passenger, overhead costs per service kilometre, and employees per service kilometre were less than half of the latter’s. Proponents believe that governmentrun public transport operators which are not profit-driven would be less likely to abuse their market power, and would place greater priority on public service objectives, such as affordable fares and service enhancement. Competition in the Market At the other extreme, the government could deregulate (through relaxing price and quantity controls) the public bus services market and allow private operators to compete in the market. Operators are allowed to choose the routes they wish to serve and set fare and service levels. This could lead to cherrypicking where only profitable routes with high commuter demand would be served, sometimes by more than one operator, as is the case in New Zealand. Competition between the operators, however, encourages them to be cost efficient and reduce their operating costs, and could lead to increased choice and lower fares for commuters, but the evidence in urban areas is that natural monopoly tends to result in a single service provider. However, competition in the market, with more than one operator providing bus services on the same routes, leads to wasteful duplication of fixed costs and may prevent operators 34 JOURNEYS | November 2011 from reaching sufficient size to benefit from economies of scale. In addition, unprofitable routes with low commuter demand would not be served. This could lead to a fragmented public transport system with poor connectivity and accessibility where commuters have to make several transfers and journey times are long. Competition for passengers between buses could also lead to unsafe driving and unreliable schedules. Competition in the market, with more than one operator providing bus services on the same routes, leads to wasteful duplication of fixed costs and may prevent operators from reaching sufficient size to benefit from economies of scale. Although unit costs fell after privatisation and deregulation of bus services, the experiences of Sri Lanka with ‘peoplisation’ in the 1990s (Gomez-Ibanez 1997) and Britain (outside London) after deregulation in 1986, show the shortfalls of competitive and unregulated bus markets. Their bus networks were not integrated, leading to unserved corridors and timings with low demand. Bus drivers drove recklessly to compete for commuters and waited at bus stops until their buses were full. In Sri Lanka, buses were often overcrowded, old and not well-maintained. Singapore’s experience with an unregulated bus market before the 1970s was similar to Sri Lanka’s. In Britain, bus services in some areas are monopolised by large operators after they priced out smaller competitors and fares would rise.
In Britain, bus services in some areas are monopolised by large operators after they priced out smaller competitors and fares would rise. Government Regulation of Fares and Services With privatisation of essential services, governments often have to be more involved in regulating monopolistic operators to prevent abuse of market power. They may have to regulate prices and service levels to ensure affordability and minimum service standards. Fare regulation involves the regulator controlling fares that the public transport operator could charge. The criteria for deciding an appropriate fare level could include operator’s costs, rate of return on assets, improvements in productivity and fare affordability. If such criteria are applied correctly, the resulting subsidy is optimal in terms of value for money. To prevent operators from cutting corners to increase profits, it may be necessary for regulators to specify minimum service standards that operators have to comply with or be penalised for non-compliance. The standards could include service coverage, frequency, crowding and vehicle breakdowns. To improve public transport accessibility, regulators may require that operators serve some unprofitable routes and off-peak hours as a condition for the rights to operate services. The success of government regulation requires that regulators be able to approximate the optimal level of fares and service standards. Optimal fares have to be affordable to most commuters, but allow operators to provide reasonable quantity and quality of services and earn adequate profits for shareholder dividends and capital investment. This is difficult due to lack of information. The public may also judge the success of the regulatory regime based on their perceptions. Public acceptance would drop if the operators are perceived to be making excessive profits from high fares or providing poor quality of service. Singapore’s current approach to public transport provision, which will be discussed below, is an example of government regulation. Competitive Tendering Competition is important to ensure that privatisation improves efficiency. Many cities have introduced competition for the market through competitive tendering (CT) of licences to operate public transport services for a specified duration, for example, 15 years to operate a rail line or 5 years to operate a package of bus services. Cherry-picking of profitable routes could be prevented by packaging unprofitable routes with profitable ones or by provision of government subsidies. Licences could be awarded based on a number of criteria, for example, track record, proposed fares and services, or required amount of government subsidies. JOURNEYS | November 2011 Different Approaches to Public Transport Provision To prevent operators from cutting corners to increase profits, it may be necessary for regulators to specify minimum service standards that operators have to comply with or be penalised for non-compliance. 35
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Page 5 and 6: Mohinder Singh Dean LTA Academy A s
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Page 17 and 18: References Urban Sustainability and
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Page 41 and 42: Hensher, David A and Stanley, John.
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Page 49 and 50: Urban Planning in Shanghai, People
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Page 53 and 54: Barriers to a Sustainable Road Frei
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Page 57 and 58: Bangkok 2020 Declaration signed by
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Page 70 and 71: References VIENNA Population: 1.6 m
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Page 74 and 75: References Toei - Tokyo Tokyo Metro
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Page 79 and 80: The LTA Academy was launched in Sep

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