Author Topic: Bus Franchising vs Deregulation  (Read 382 times)

Offline John

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Bus Franchising vs Deregulation
« on: August 19, 2017, 03:21:53 am »
Charlie Hamilton mentioned the loan of this demonstrator at the inaugural meeting of the Cambridge Bus Forum on Saturday 29th of July.

I don't recall him saying anything about which routes it would be trialed on.

It was interesting to see him and Andy Campbell on opposite sides of the debate about franchising.

Why should Stagecoach have their Cambus company franchised, they bought it in good faith and have continued to invest in it. This is not London.
« Last Edit: August 20, 2017, 12:06:54 pm by Palatine One »

Offline TCD813

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Re: Bus Franchising vs Deregulation
« Reply #1 on: August 19, 2017, 08:11:57 am »
Why should Stagecoach have their Cambus company franchised, they bought it in good faith and have continued to invest in it. This is not London.

Under franchising no companies are confiscated. Companies continue to own their fleets and their premises. The change is that they are required to compete for the market rather than in the market.

The deregulated model of competition in the market has clearly failed, because virtually nowhere are there different bus operators competing on price and quality over parallel routes. Instead, monopolistic 'territories' have been created all over the country, where one dominant operator decides which routes, at what frequencies and fares, and what quality of vehicles serve the public.
TCD813? The reg of a Southdown Motor Services, Northern Counties bodied, Leyland Titan PD3/4 FH39/30F (popularly dubbed 'Queen Mary') from the late 50s.
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Offline dwarfer1979

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Re: Bus Franchising vs Deregulation
« Reply #2 on: August 20, 2017, 10:17:03 am »
Under franchising no companies are confiscated. Companies continue to own their fleets and their premises. The change is that they are required to compete for the market rather than in the market.

The deregulated model of competition in the market has clearly failed, because virtually nowhere are there different bus operators competing on price and quality over parallel routes. Instead, monopolistic 'territories' have been created all over the country, where one dominant operator decides which routes, at what frequencies and fares, and what quality of vehicles serve the public.
No companies are confiscated but assets effectively are, routes are assets & they also have goodwill attached which has a value in company worth (there are numerous instances of businesses changing hands for a financial consideration when no vehicles/property changed hands) and this current franchising model assumes getting access to all this for no compensation, when these businesses were sold off by the government there would have been a value attached to the routes as part of the sale price.  Additionally there is no value in a business that is prevented from carrying out its business so the government is removing value from private companies that are not failing businesses.  It does not help that the whole implementation plan for these type of schemes seems to assume access to existing fleets & facilities which are owned by the existing operators (there aren't that many sites in most places suitable for basing a large fleet of buses so if you don't have use of the existing depots you will struggle to find somewhere else), if authorities aren't prepared to consider buying the base assets at the start (and most can't afford it) then you can't assume you will be able to use them, most sites would have more value on the open market for another use than a bus company could afford to pay.  The point to remember with London is that the businesses were privatised on the basis of a contracted/franchised business model with the local authority owning the routes whereas the rest of the country was privatised on the basis of the operators owning the routes so if they want the routes back they really need to compensate the current operators accordingly.

I don't think deregulation has failed, I'm not sure anyone beyond a few unrealistic Tories ever expected widespread sustained on the road competition, what you have is a structure that the bus industry always seems to default to when left to find its natural equilibrium without government interference of a single large area operator (financially strong enough to handle the major investment & expensive innovations that people like to see implemented but which are expensive to pioneer) with a group of small/medium sized operators underneath keeping the major operator on its toes and keeping tender costs down and covering marginal routes with a lower cost business model.  No operator has a complete monopoly, they always have to think about the potential for other operators coming in if they take their eye off the ball and they are competing with other modes (such as cars, trains etc) as well as locations away from their network such as out of town shopping sites so they can never dictate what happens but do their best with the resources they have to do what they can.

London is not a great example to look at, its success is entirely down to a massive amount of subsidy (more than the rest of England combined) in a city that even without outside restrictions, such as congestion charging, is a place that many wouldn't drive a car into by choice - it remains to be seen if it can operate with no subsidy as the last time it tried it was a complete failure with old vehicles cascaded from the provinces providing a very poor quality services, they are going to have to try again and it remains to be seen if they will be more successful the second time but that will be after 20 years of major subsidy which has covered much of the major investment needed to raise the starting position of the business.

Offline cesar

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Re: Bus Franchising vs Deregulation
« Reply #3 on: August 20, 2017, 11:30:20 am »
'Franchising' is a common business practice where a business chooses to trade under a brand or network owned by a third party to their mutual advantage. If they choose not to, they can still carry on their business (whether it be a burger bar or coffee shop or restaurant) under another name. The use of the term with buses is a misnomer- 'business confiscation' would be more appropriate, or at the very least 'contracting'.  If I'm ABC coaches - a long established family business running in (say) Manchester-with a property, 15 buses, and 25 staff and 4 long-established commercial bus routes - my business and the value in it consists of assets (the buses etc) and 'goodwill' - the fact I have a customer base, a good name, and profits both historical and future. Chances are my pension will be that business - I will sell it when I want to retire, or pass it down to my family for their future wealth. 'Contracting' takes away that business with no compensation. Yes I will have a property and some buses, but chances are they'll have to be sold off at less than book value, plus I'll have staff and other liabilities (HP, redundancies etc) to pay.    Unlike a coffee shop I won't have the opportunity to continue trading under my own or different brand name. If I don't win a similar number of routes back under the new regime I have no ability to carry on running buses in Manchester.  My pension, savings, livelihood have gone.....  The same applies with a big group though no one feels as sorry for them - they may have paid the local authority many millions several years ago for a business which included both assets and goodwill. Suddenly part of that value has gone. And whilst plc's may be seen as big nasty fat cats, remember that if you have a pension, its funds are most likely invested in ..... Plc's!!   So be careful what you wish for!!    Fair or reasonable - I think not!!

Offline Palatine One

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Re: Bus Franchising vs Deregulation
« Reply #4 on: August 20, 2017, 12:04:31 pm »
Franchising seems like a good idea on the outset when the "London model" is held up as an example, and indeed most seem to continually compare any and all local bus services to those provided in London while remaining ignorant of the massive subsidies it demands.

However it isn't all rosy, TFL aren't the fastest at responding to areas of new demand with issues of overcrowding on some routes that could be solved by changes of route or vehicle type, both of which they appear to be rather slow at responding to. Would anyone trust CCC to plan routes in a responsible and sensible way according to current and future demand? After all, their failure to put in adequate priorities for the Busway services on their on-road sections has made timekeeping a nightmare.


As we're heading somewhat off-topic, I'll be dropping these posts into a new thread.
« Last Edit: August 20, 2017, 03:40:50 pm by Palatine One »

Offline TCD813

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Re: Bus Franchising vs Deregulation
« Reply #5 on: August 20, 2017, 02:55:07 pm »
Thanks for creating the new thread.
TCD813? The reg of a Southdown Motor Services, Northern Counties bodied, Leyland Titan PD3/4 FH39/30F (popularly dubbed 'Queen Mary') from the late 50s.
There's all 'manor' of stuff on my Twitter A/c.

Offline barryb

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Re: Bus Franchising vs Deregulation
« Reply #6 on: August 20, 2017, 08:15:37 pm »
While everything said against franchising may be true, it has to be weighed against the counter-argument; would you trust Stagecoach and Whippet to, ...

I feel the answer there is also no.  Whippet rely on the goodwill (and the mutually beneficial aspect of that their low key existence operating service Stagecoach doesn't want to lets them pretend there is competition). 

Stagecoach operate as an effective monopoly.  The laws of economics say that they must be giving a lower level of supply than there would be in a truly competitive market and that they are likely to not be as innovative as they would be in a competitive market.  We can see this in things like then not improving the evening busway services when it appears that they easily could, and in them not trying out routes like Haverhill or Royston via the southern guideway.

However while a monopoly provider (or an oligopoly at best) is not the answer, true competition is not the answer either.  We have seen before that is inefficient because it mis-serves markets by concentrating on the most potentially profitable, and that it damages operators where we need them to be stable.

My other with franchising is that (unlike in Manchester) there is in fact unlikely to be sufficient competition between reliable operators capable of producing a quality service in this area.

Offline dwarfer1979

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Re: Bus Franchising vs Deregulation
« Reply #7 on: August 21, 2017, 08:26:09 am »
While everything said against franchising may be true, it has to be weighed against the counter-argument; would you trust Stagecoach and Whippet to, ...

Yes, absolutely, and far more than I would trust any local authority to manage the bus networks in a cost-effective & customer focused manner.  I have dealt with dozens of local authorities across the country and the only ones who came close to being successful in managing the local supported bus networks were the ones who effectively accepted they knew nothing and worked closely with bus operators in getting the most effective solutions to serving the local area.  I have even worked for a local authority who owned a large municipal and spent the entire time I was working there actively assisting a very low quality large independent to compete head on with the business they owned because the council officers didn't like the management of their bus company.  Stagecoach offer a very good network for Cambridgeshire considering the rural and, being very general here, relative affluence of the county.  Whippet is slightly different as they have just been taken over by a foreign owned multi-national business which clearly have little interest in/understanding of commercial work which means they seem to be struggling in this new, to them, environment though it seems as though they bought the business for the contracting opportunities rather than their existing commercial work.

Evening services are a difficult area for bus operators, there is no consistency or clear pattern as to whether evening work is cost effective and many of the factors have little to do with the bus network (quality & type of nightlife and how safe people feel getting to/from the bus at either end of the journey late at night) and long distance services like the Busway are the hardest to predict.  Sundays are a different matter, the problem here is that many bus company managers are stuck in the old view that Sundays are bad but often they are actually very busy, particularly on a per bus basis due to reduced frequencies, though higher pay rates mean that profitability can be a bit lower than on weekdays it can often still match Sundays if companies will take the risk and give it the time to develop (as with most new projects it takes a while for people to change habits to match the new offering).  In both these areas direct on-the-road competition tends to reduce the service levels as there is less income during the busy parts of the day to help support the quieter periods around the edges.