Memorandum by Paul Kevill Esq (Bus 37)
THE BUS INDUSTRY
1. The following describes some of the findings
of a research project,
that I am currently writing up as a PhD thesis under the supervision
of Prof. John Hibbs at the University of Central England. I have
combined this with some of my own general experiences of transport
in local government, academia and consultancy in the hope that
it will be of assistance to the Sub-Committee in its inquiry.
2. During the 1990s I was South Yorkshire
Passenger Transport Executive's Business Analysis Manager. With
some responsibility for strategic thinking, I was concerned about
the contribution our organisation could make within the framework
of the 1985 Act. Some officers repeatedly cited their lack of
powers as reasons for lack of innovation and despite a continually
expanding budget there were no corresponding increases in effectiveness
that could be measured.
3. We therefore approached the public transport
problem from the perspective of the conditions that would be necessary
to make organisations such as PTEs or Council public transport
departments superfluous. Bearing in mind that transport is not
an end in itself, and what matters is access to the things that
go to make up the quality of life, we concluded that the objective
of public transport policy should be Sustainable, Equitable
Access. As things stood, access was neither sustainable (tending
to require increasing mobility and such mobility being increasingly
frequently by car) nor equitable (there being a large and widening
gap between the mobility poor and the mobility rich).
4. Without assuming the need for LA intervention,
we then considered to what extent bus operators on their own could
make access more sustainable and equitable. In common with many
other areas, we observed that as well as the inherent weaknesses
of public transport (such as the need for comparatively concentrated
flows) and the external problems such as traffic congestion or
unsympathetic land-use planning, the bus industry contrived to
shoot itself in the foot with poor information, rude drivers,
dirty buses, buses that didn't stop etc.
5. The central curiosity was then the fact
that commercial organisations did not treat their customers as
well as they could, and in fact spent considerably less on consumer
research than the PTE. Whilst a good deal of academic work had
been done on what had happened post-deregulation (such as comparisons
between London and elsewhere) there was little evidence about
why it had happened. A practical benefit of explanatory research
would be to understand what lies behind what operators do, such
that LA spending could be used to encourage market orientation
rather than attempt to substitute for it.
6. By conducting in-depth interviews with
bus company directors and senior managers, I hoped to understand
their view of regulation, competition andtwo of the most
disappointing post-deregulation responsespricing and passenger
information. I also explored general attitudes to the concept
of marketing. 
7. Responses were expected to shed light
on the apparently inexplicable lack of marketing orientation to
be found amongst many bus operators.
8. I interviewed 20 bus operators, representing
urban (excluding London) and rural situations; ownership by large
groups, independents and councils; long-established and new entrants.
The fieldwork took place between 1997 and 1999 but despite several
important developments in the past few years, the essential attitudes
and problems persist. Below I refer to the findings as they relate
to the Sub-Committee's items that they wish to consider.
9. The largest component of subsidy, concessionary
fares, appears from my research to be a major distorting presence
in the market. Operators were clear that without it, services
would be less frequent and some would not be viable at allthus
showing that the condition of being "no worse or better off"
has been flouted. The subsidy to the person is in effect leaking
into general network subsidy, a process sometimes referred to
euphemistically as "providing stability".
10. Operators were generally satisfied with
arrangements for tendering for subsidised services, although several
questioned the value for money of some of the services deemed
socially necessary by councils.
11. Indirect subsidy, such as passenger
facilities or information provided by local authorities produced
mixed responses. Some of the more customer-orientated operators
saw no logic in someone else being responsible for important parts
of their service marketing mix. Several saw a degree of sense
in shared facilities being provided by an authority but resented
having to pay for them, especially where they had no input to
standards or management. Attitudes appeared to depend on how good
the local authority output was. Where it was satisfactory, operators
were prepared to quietly accept the subsidy.
12. At the time of the fieldwork, these
were beginning to take shape in a few of the respondents' areas
and operators were generally enthusiastic about them. In particular
they provided an opportunity to establish responsibilities between
operator and authority. In all cases, relationships were better
where it was clear who was expected to do what.
13. The question of quality contracts did
not really arise at the time. However, the legitimacy of an authority
to specify service quantity, quality or price must rest on their
understanding of the consumer and an objective measurement of
effectiveness. Whilst a good LA, following BV principles, can
get closer to their customers than a poor, product-orientated
bus company it is unlikely that they can do a better job than
a market-orientated bus company. There is also the important difference
that a commercial organisation provides service to earn revenue
(so the more the better) whereas the public sector sees increases
in service as an increase in costs. It also seems to be frequently
forgotten how often producer convenience was prominent in LA-controlled
14. Arising from the discussion of who should
do what, it was clear from the research that the majority of operators
wanted to be "left to get on with it". However, they
saw themselves in the unfortunate position of being unable to
supply the most vital attribute of the servicereliabilityand
expected that the LA should deliver a clear road.
15. There was dissatisfaction with this
in many areas, and operators believed that despite favourable
local policies, councils at a highway engineering level were not
really serious about re-allocation of road space and allowed what
seemed to be trivial problems or the least amount of motorist
opposition to veto the introduction of bus priority.
16. There is a strong case from the research
that competition with private cars is a limiting factor on innovation
and market segmentation. Because car users are able to externalise
their costs (congestion, pollution, accidents, severance) the
main advantages of public transport (efficient use of road space
and natural resources) have no value in the market for travel.
Worse still, what are in effect the car user's "waste products"
contaminate the bus service by reducing reliability, which in
other spheres of business would be grounds for redress.
17. The basic problem is then that bus services
are arguably not "fit for purpose", to borrow a consumer
protection term. Although the more market-orientated operators
have learnt to listen to customers and improve quality and they
recognise the potential for people being willing to pay more for
a better service, there is only so far they can go with services
that can not be absolutely relied upon. They are effectively barred
from the upper end of the market by the relative cheapness and
superior quality of car travel.
18. Road pricing of some sort would be a
solution to the problem that road space is perceived as free and
is therefore consumed until marginal benefit to the consumer is
zero (ie it is wasted) but we can only speculate on the extent
to which bus operators would exploit the higher price/quality
19. Operators were broadly content with
the regulations as they stood, and there was little evidence of
an effect on market orientation. There was universal support for
higher standards of entry to the industry. Traffic Commissioners
and bus service registrations drew some criticism for being irrelevant.
20. Not a major feature of my research with
operators, but I should like to draw the committee's attention
to the work
commissioned by South Yorkshire PTE from TR&IN, with which
I was involved. This drew on existing sources and original fieldwork
to show that the transport system currently contributes to social
exclusion in several ways.
21. In particular, whilst fiscal exclusion
(in the bus industry context, high fares or having to pay twice
when interchanging) is a major issue, it is probably less important
than services which go to the places people need, at the times
they need or even the existence of a service at all (temporal
and spatial exclusion). The Government's emphasis on minimum concessions
with narrow eligibility criteria, although understandable, may
not be the most efficient way to reduce social exclusion.
22. It is unfortunate that local authorities
are therefore committed to large sums in concessions reimbursement
whilst at the same time tendered service budgets are under pressure.
In order for bus services to contribute to social inclusion, local
authorities must have quantitative measurements of accessibility
(to facilities, not just bus routes) and a Best Value obligation
to determine the allocation of resources to the different types
of exclusion. The leakage of concessions subsidy means that the
extent of the network may be greater than it otherwise would be,
but a local authority has no control over where and when.
23. One might also question the paternalism
implied by types of income support that specify on what services
the benefit should be spent.
24. Part of my research with bus operators
was concerned with cultures or paradigms ie "the way we do
things here". The proponents of free markets assumed that
a deregulated private sector would be more responsive to the consumerthey
had to be, otherwise they would go out of business. What was surprising
was not that public sector companies did not change overnight,
or even the self-destructive territorial battlesthese are
common phenomena in liberalised marketsbut the length of
time it has taken for the consumer-satisfying paradigm to take
25. After more than 15 years it becomes
difficult to defend the bus industry against the charge that it
will never change, but the lack of change can at least in part
be attributed to local authority willingness to subsidise firms
that would otherwise have struggled.
26. The key to progress would seem to be
to identify the best bus operators and help them do what they
do, and stop subsidising the dinosaurs, rather than widespread
reversion to local authority specification and control.
Paul Kevill began his transport career in 1977
in the road haulage industry, and following a BSc in Transport
Operation and Planning has worked in academic research and local
authorities. This included 15 years with Passenger Transport Executives
in a research and strategic planning capacity, also serving on
the CLIP Transport Statistics Group. He is now a freelance consultant
and associate lecturer in transport research methods on Sheffield
Hallam University's transport planning MA.
12 April 2002
4 Interim findings published: Kevill, P (2000). The
effects of local authority intervention in local transport markets
on bus operator paradigms, Proceedings of the UTSG Annual
Conference, Liverpool 2000. Back
"Marketing" in this context means the management's orientation
towards the customer as the primary reason for the business as
well as the systematic treatment of the product or service through
the "six Ps". Product, Price, Place, Promotion, People
and Process. Back
Transport Research & Information Network (2001) Transport
and Social Inclusion in South Yorkshire, South Yorkshire PTE,