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Are train and bus really in competition?

Andrew Allen's picture
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Joining up bus and train services makes them easier to use and more attractive for passengers. So why has the Competition and Markets Authority (CMA) decided they are anti-competitive, and what does this mean for integrating tickets and services?

In December 2015, Arriva was awarded the Northern rail franchise. All seemed to be progressing smoothly until 10 months later when the CMA began an inquiry into anti-competitive behaviour. Arriva’s parent company, Deutsche Bahn, also operates bus services in the Northern area and in the magical world of the economist this could be a conflict of interests. 

The inquiry cuts to heart of how public transport works.The CMA investigation contends that the way to get the best services for passengers is not by offering an integrated and complementary service across modes, but by trains and buses competing for passengers’ patronage.

The trouble is most people’s transport choices are not hindered by operators being in league. Instead, it is the absence of cooperation – shared timetabling or ticketing – that make it more difficult to use public transport. Here, Arriva’s successful bid for Northern offered some hope of improvement with shared ticketing promised in some areas. 

So, what have the CMA discovered? In their provisional findings the overwhelming conclusion is ‘not a lot’. From over 1,000 overlaps in service, it picked out just three bus routes and four rail routes where competition could be significantly diminished. But even here there are questions. For example, the CMA considers there may be 'significant competing services' between Middlesbrough and Redcar. But is a half-hourly rail service which takes 10 minutes and has no intermediate stops really in competition with bus routes which are much more frequent but have numerous stops and take up to an hour?

Worse, by choosing to open this inquiry the CMA may actually undermine efforts to better integrate public transport in the future. In judging rail franchise competitions, how likely is the Department for Transport to look positively on bids which offer better integrated rail and bus, as Arriva’s did? If the CMA had any worries that award of the franchise to one of the preferred bidders would lead to monopolistic behaviour, the time to start an inquiry and make findings was at that preferred bidders announcement stage? In addition to the CMA’s direct costs, taking part in the inquiry also comes with substantial cost implications for bus and rail companies, and other bodies the CMA requests information from. As such, it is directly taking money out of already stretched budgets. 

Why the CMA chose now to undertaken such an inquiry is unclear. It is certainly not the first time a single company has controlled both train and bus services in an area. For example, prior to 2015 the TransPennine franchise was held by the First Group whilst First Bus were the sole operator in numerous locations in the area. For that matter, what of Virgin Trains involvement in running both East and West Coast Mainlines? 

But clearly the CMA’s interest in transport has been sparked by something - perhaps its recent inquiry into rail franchising? This called for more open access operators to be allowed on the rail network, but went much further in calling for direct on-track competition through a redrawing of the franchise map and overlapping or multi-operator franchises to be considered. With bus operations being drawn in too, the concern is that we are going to see more of this sort of inquiry. 

The reality of local transport markets is that rail and bus serve largely separate markets. Rail journeys tend to be longer than bus trips, something reflected in numbers of stops and average speeds. The main area of competition in local transport is not between bus and train, but public transport and cars. 

More and better integrated public transport services are a much greater prize than any slight reduction in train or bus fares achieved through competition. One hopes that in future, the CMA will choose more fertile ground to make their stands. Rather than imagining pure competition and perfect information can create the best possible transport options, they should accept the real world is rather more complicated and focus on helping public transport as a whole provide a competitive alternative to car travel.

 

Image courtesy of Mikey via Flickr.

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