CIÉ's two bus companies benefit from several anti-competitive practices in the bus and coach market, a new report alleges.

The report, from Goodbody Economic Consultants, says private companies have to pass a very severe public interest test before they are granted a licence for a new service, whereas the two CIÉ bus companies simply notify the Department of Transport of proposed new services.

The report, commissioned by the Coach Tourism & Transport Council, which represents private bus firms, also claims the Department of Transport does not make decisions on services based on research.

The report notes that the Department, as a shareholder in CIÉ, "may not be able to fulfil its regulatory role in a fully independent fashion".

The report claims all these arrangements are "anti-competitive" and give the CIÉ companies a sizeable advantage over private sector rivals. The study is particularly critical of the way CIÉ's two bus companies - Bus Éireann and Dublin Bus - are funded by the State.

In the National Development Plan (2000-06), a total of €543 million was committed to the two companies but the report claims this sort of State funding is not allocated in a transparent fashion.

"The level of State subsidies provided to Dublin Bus and Bus Éireann is undermining the competitive position of the private bus and coach industry in Ireland. There is a pressing need for transparency in relation to State support for the CIÉ group companies," states the report.

It says services that are "social in nature" should be identified clearly and State grants should only be allocated to those services.

The report points out that the private bus and coach industry employs 6,000 people directly, with another 3,000 jobs dependent on it.

The report is firmly against total deregulation, believing that would only benefit the biggest players. "If large networks are franchised, the potential number of bidders will be relatively low as fewer operators will have the capacity required to service the networks," says the report.

But it welcomes the idea of franchising on a smaller scale. "If franchising is introduced on a route-by-route or small to medium area basis, the level of potential bidders will be high and thus the level of competition will be more intense," it states.

It also calls for a regulator for the sector to ensure fair play. The report contends strongly that more competition should result in lower fares and increased frequencies.

The last minister for transport, Seamus Brennan, was a strong supporter of the franchising model, but he was fiercely opposed by the unions. The current Minister, Martin Cullen, has steered clear of the controversial area so far.