The main goals of public transport regulation are to:
- ensure that services are operated in line with government policy
- satisfy demand for public transport as much as possible
- maintain standards of quality and safety
- control fares at affordable levels (sometimes)
Regulation may also be considered necessary to prevent operators from abusing a monopoly position, or, in a competitive situation, to control undesirable or potentially dangerous aspects of competition between operators.
The extent of regulation varies considerably. At its most basic, it covers the licensing of vehicles only, usually with certain provisions designed to promote safety. At the other extreme, it may cover almost every aspect of the transport operation, including:
- licensing of vehicles, operators, drivers and conductors
- construction and use of vehicles
- supply of services
- safety standards
- conduct of drivers, conductors and passengers
- administration of route franchising or tendering
- allocation of subsidies
There is considerable debate regarding the extent to which market forces should be allowed to determine the nature of the transport system, and the extent to which regulation should over-ride market forces. Market forces often fail to achieve the desired results, and transport operators may lack the capability to develop efficient systems without external intervention. But it must also be recognized that regulatory failure can create even greater problems.
Government intervention in transport operation is often misguided or irrational, and can do more harm than good. Regulation might stifle enterprise on the part of the operators. They frequently have a better idea of what services are required than bureaucrats, who are often unqualified political appointees. In fact, it is debatable whether poor regulation is preferable to no regulation at all.
Weak regulation may result in inadequate service capacity, if available resources are inefficiently utilized due to a regulatory regime that permits inefficient operating practices. It may result in the use of inappropriate or poor quality vehicles, or poor safety performance, if construction and use regulations are poorly framed, or poorly enforced. Inappropriate vehicle types, or inefficient operating practices, may in turn result in buses contributing unnecessarily to traffic congestion.
Inappropriate fare control may result in excessive fares or create financial difficulties for bus operators.
The most appropriate regulatory regime in any particular situation is determined mainly by the structure of the passenger transport industry. Conversely, the regulatory regime has a strong influence on the nature of the industry, and the way that it operates.
A change in the structure or nature of the industry might be engineered by modifying regulations to encourage the industry to develop in the desired way. Ideally, the regulatory system should create an environment where efficient transport operators, whether in the private or public sector, can develop naturally.
This development should take the form that is most appropriate in the circumstances, in terms of fleet size and composition, routes, and fares. Operators should be able to co-operate or compete with one another on an equal basis in ways that provide the best possible service to riders.