ESRI Quarterly Report: Franchising out the bus routes operated by State-owned bus companies will reduce passenger numbers, increase public subsidies and end up creating a private oligopoly, a new report has alleged.
The report, written by economist Jerome Casey and published yesterday in the Economic and Social Research Institute's Quarterly Economic Review, claims that bus deregulation in the UK and several European cities has failed. The author says public monopolies have been replaced by private oligopolies.
The report comes as Minister for Transport Martin Cullen considers deregulating the bus market. He is expected shortly to amend the 1932 Road Transport Act and set up a public transport commission with the power to franchise out routes.
Mr Casey, whose report is titled Improving Irish Bus Markets - But Not By Competition, says experience from abroad shows that franchising out bus routes under a transport authority will not work and economists need to accept that one policy instrument - competition - is not the only answer.
Mr Casey suggests instead that a system called network management should be tried. This would involve Dublin Bus or Bus Éireann acting as "network manager" or "lead operator" and effectively sub-contracting routes out to private operators.
"The publicly-owned operator acts as network manager and lead operator, providing an integrated network through a combination of own and sub-contracted private sector service," suggests the report.
"This introduces competition into the marketplace in a structured manner which is sustainable in the longer term."
Mr Casey says this type of system is already in place via Bus Éireann's management of the school transport system, where private operators are sub-contracted to operate certain routes. The contracts are awarded by the Department of Education.
Mr Casey says there is one major benefit of this kind of approach. "The State would retain strategic direction over a necessary piece of physical infrastructure rather than cede it to a private multinational with a contrary development agenda, as occurred with Telecom Éireann, and network management looks like the only system which can provide modal shift," claims the report.
"For existing State companies, network management is less unpalatable than franchising, under which they would have been taken over or replaced by multinationals. For small private bus operators, it also offers a brighter future than under franchising.
"Network management may turn out to be the least unpalatable method of upgrading the Irish bus system for its patrons, operators and regulators."
Mr Casey, who has provided consultancy services in the past for CIÉ companies, is well known for his work in the area of construction economics. He also compiles public transport statistics.
In his report, he claims that bus deregulation in Britain has failed on several levels. He says the usage of bus transport since deregulation "has declined continuously in Wales, in English metropolitan areas and in English shire counties".
He says despite the problems, it is proving difficult to correct the mistakes in Britain.
"Under deregulation, bus transport will make no incremental contribution to spatial, social or economic policy, without explicit and substantial subsidy.
"The franchising model by no means assures increases in patronage. Copenhagen saw a continuing reduction in passenger numbers following the introduction of franchising."
