HEAD 2 HEAD: YESDeclan Purcell says competitive tendering for city bus routes is the only way to make our bus services cost effective and consumer focused NOMichael Faherty says a fragmented, privatised system of public transport will be more expensive and less efficient
At one time the general consensus was that a regulated monopoly bus provider was the best way to provide city bus services. It avoided the congestion associated with having multiple companies competing on the same routes. It allowed for cross-subsidisation of unprofitable routes with profitable routes. It thus ensured that everyone had access to regular, safe, cost-effective public transport. Or so the argument went.
The reality of the CIÉ monopoly today is rather different. Our cities are congested with cars as many consumers opt not to use public transport, even when it is available.
Let us be clear that opening up city bus services to private competition does not mean a free-for-all with multiple buses chasing one consumer down a street. Competition in city bus services involves inviting all bus operators - be they privately or publicly owned - to compete for licences to provide specific bundles of bus routes, while meeting set standards, for a specific period of time.
Typically, each bundle of bus routes would include profitable and unprofitable routes, thus ensuring all areas of the city are served. For example, the new Dublin Transport Authority would invite tenders to provide the bus routes in, say, parts of Dublin's northeast or southwest for five years.
The advantages of competitive tendering over a CIÉ monopoly are clear and numerous: operators can be fired if they don't meet performance standards; and there are plenty of other operators available to take up the licence.
Any subsidy, ie taxpayers' money, paid to operators is fully transparent.
Competition between operators will drive them to provide their services in the most cost-effective way. Dublin Bus has no incentive to be cost effective as it does not risk losing business to another company.
The routes and quality of service will respond to consumer demand, rather than being dictated by one company. Recall what happened when the privately run Aircoach service to Dublin airport started and how strongly the State-run service responded to the competition.
There is no downside to introducing competitive tendering: standards of safety, cleanliness and comfort can be written into each licence.
Prices could, if necessary, continue to be regulated. Incentives could be offered for unprofitable routes.
CIÉ could continue to operate, in public ownership, if that was thought desirable.
Some people argue that an integrated monopoly can introduce advances more quickly, for example, interoperable smart cards and real-time passenger information. Unfortunately, experience suggests otherwise, as none of this has yet happened.
Many reports since the 1980s have advocated the introduction of competition in bus services, but little of substance has happened. This seems odd, since Irish consumers have benefited hugely from the liberalisation of other parts of the transport sector - think of airlines, taxis and intercity buses.
The roadmap for introducing competition in bus services is clear.
First, the regulatory system for public transport needs to be radically overhauled. Current legislation is more than 80 years old, badly outdated, and favours Dublin Bus.
Second, we need to see the establishment of an independent, properly resourced, national transport regulator to make decisions on the bus routes to be opened up to competitive tendering. The Government's current position as shareholder, regulator and policymaker in this area is not tenable, nor is it best practice.
Third, we need a clear decision on how the bus market in the greater Dublin area is to be liberalised. In 2002, the government proposed opening 25 per cent of bus routes in the greater Dublin area to competition by 2004 via competitive tendering, with further progress in subsequent years. However, this hasn't happened. To send a clear signal to potential market entrants that the Government supports competition in bus transport, clear, quantitative targets for opening the market need to be set out.
Liberalisation should ultimately apply to the entirety of the bus route network in Dublin, rather than just new routes. To do otherwise would maintain the advantages held by Dublin Bus.
Finally, for a network of competing operators to work, we also need progress on and delivery of integrated ticketing, ie smart cards that work on every form of public transport in our cities. Clear responsibility for delivery of this should be given to a single agency.
A safe, reliable and efficient public transport system is one of the cornerstones of any competitive economy. Improving our city bus services through the introduction of competitive tendering will benefit not only users of bus services, but also the wider economy.
Declan Purcell is a member of the Competition Authority and director of its advocacy division
The joys of privatisation have received quite a battering in recent times, as the Eircom and Aer Lingus debacles testify. There are just two main questions to consider when deciding whether to privatise all or part of the Dublin bus market: will it improve services and will it bring down the cost to the taxpayer? The answer to both is no.
Congestion is the key problem facing road transport in Dublin. Last year, gridlock cost Dublin Bus more than €60 million, almost as much as the €69.8 million the company received in State subventions to meet its public service obligations. Last year, buses in Dublin were running 13 per cent slower than in 2005. Allowing private operators to enter the fray will only add to the problem.
Nor will private operators be interested in loss- making routes or in cross-subsidising them from profitable ones. Experience in London, Copenhagen and elsewhere shows that handing routes over to commercial operators sees only the profits privatised and the taxpayer picking up the tab for everything else.
Because it can avail of economies of scale, Dublin Bus minimises the cost of subsidies from the taxpayer.
Up until 2000, it had one of the smallest public subventions in the world, just 4 per cent of operating revenue. Thanks largely to congestion, it has grown each year since to reach 25 per cent by 2006. This is still comparatively low by international standards and far less than the 33 per cent in London. The key difference is that subventions in Dublin are used to provide a public service, while in cities such as Copenhagen and London they are used to subsidise profits.
In both of these cities, privatisation reduced fares in the short term, but a few dominant players quickly emerged to establish de facto cartels. At present there are just three dominant players in Copenhagen and five in London. Each of the London companies controls a catchment area as big as Dublin and competition levels are so low that more than 90 per cent of routes do not change hands when they come up for retendering. However, fares have only been contained by increasing public subsidies, now costing more than €1 billion a year in London.
Some of the costs that are driven down by private companies actually lead to new subsidies. For instance, when private bus operators in London cut wages and working conditions, there was a 15 per cent to 20 per cent reduction in the frequency of services because of difficulties recruiting and retaining drivers. To deal with the problem, the Transport for London authority had to introduce an allowance for drivers of £4 (€5.73) a day.
Other hidden costs included the building and upkeep of basic infrastructure such as garages, bus stops and security.
Hidden costs for the Irish taxpayer will range from the family income supplement for low-paid workers in private bus companies, to footing the bill for decommissioning existing staff in Dublin Bus, to establishing a regulatory framework to oversee the new, privatised marketplace. When the idea of privatising 25 per cent of the Dublin Bus market was first mooted five years ago, the cost of voluntary severance payments, including buying out the letters of comfort from pre-1986 CIÉ staff, was estimated at €100 million. The figure now would be about €120 million. If a larger proportion of the market was privatised and more redundancies were required, then the costs would rise correspondingly.
In Dublin, the cost of running a regulatory system to ensure a level playing pitch is estimated at €14 million a year. Research elsewhere shows that regulatory bodies are slow to identify and respond to changing commuter demand. They require that all the players have an opportunity to tender for new routes, leading to further delays and more administrative costs. As private operators have to make a profit, these additional costs are passed on to the travelling public. Dublin Bus ploughs its albeit modest profits back into the service.
Another consequence of fragmenting the market is the loss of an integrated transport network, as anyone using British bus and rail routes discovers when they have to make a trip that crosses boundaries between networks run by different operators. A similar situation exists in Dublin to a limited extent because there was no real attempt to integrate bus and Luas networks. While bus usage in Luas catchment areas almost halved, car usage only fell by 2 per cent.
To lure commuters out of their cars, an integrated programme of more buses, more quality bus corridors and lower fares is needed. Above all, faster journey times and reliable bus timetables are essential. At present it can take up to 45 minutes to travel from Dorset Street or Parnell Square to St Stephen's Green or Camden Street. A fragmented, privatised system of public transport with higher fares will only aggravate the gridlock.
Michael Faherty is acting general secretary of the National Bus and Rail Union
online: join the debate @
www.ireland.com/head2head
Last week,
Richard Gillisand
Ruairí Quinndebated the question : should a
sponsor be able to buy the right to name the new Lansdowne stadium?
Here is an edited selection of your comments:
Yes. For all those of a generation when Lansdowne Road was just Lansdowne Road, it will always be that. But to a new generation, it'll be known as the Blankety Blank stadium. This sort of thing happened before, when the British pulled out and many of the train stations and towns got renamed, like Amiens Street to Connolly, Westland Row to Pearse station, Kingstown to Dún Laoghaire, and so on. So I think people will be able to cope, but of course there will be grumbling and petty complaints. - Carl, Ireland
Ruairí Quinn, on the renaming of the Lansdowne Road stadium, asks the question, "What's in a name?" and answers that there is a great deal indeed. He might be interested to know that his contention would be supported by Winston Churchill. In 1943 the old warrior who led the fight against fascism sent an interesting memo to the British chiefs of staff. Churchill warned against giving frivolous code names to actions involving great danger. No family, he said, wanted to hear that their loved one had died in an operation christened "Bunnyhug" or "Ballyhoo".
Do we really want to win a Six Nations grand slam in the Tesco Stadium, for example? On the other hand, given present form, it would be nice to win in a stadium, whatever the name. - Fr Iggy O'Donovan, Drogheda
Lansdowne Road was the oldest rugby stadium in the world and selling the naming rights shows that heritage means nothing to the IRFU. It's not as if they need the extra money, as every match in the old stadium was a sell out. - Kealan Varian, Ireland
While the full redevelopment of Lansdowne stadium is a positive decision, it is essential that it retains at least one prominent link with its history and heritage. I'm sure that after its establishment every inch of the stadium will be plastered with its sponsors' trademarks in any case. - Iain McG, Ireland
No change, because we can't keep up with change. When I visit, I could be in a foreign country. Don't know my Dublin anymore. - Mrs MacGiffin, UK
Yes, a sponsor should be able to choose whatever name they want - but they would be foolish not to incorporate the word "Lansdowne" into that name, as everyone will always refer to it as Lansdowne anyway. So roll on the Coca-Cola/BMW/Smurfit/ O'Reilly Lansdowne stand, or whatever sponsor stumps up the money. I can't see the supporters having any additional loyalty to the sponsor in thanks for their cash, but maybe name recognition is worth that. - takingthe5th, Ireland
The largest stadiums in the world are named after their location, the exception being Barcelona's "Camp Nou", which means "new pitch". Obviously, it's not that new any more.
Lansdowne is named after the road, which in turn is named after the earl of Kerry and Shelbourne. Why not get similarly basic and call it the Dublin Stadium or the New Stadium? Then visitors or returning exiles who can't recognise their city will ask, "whither is the new stadium of which they speak?". The answer will come naturally - "Lansdowne Road". Unless, of course, someone thinks of selling the names of Dart stations and streets to private corporations. Isn't that a great idea? Pearse station could be Pepsi and Connolly could be Coke. - o as if, Spain