Creating a Level Playing Field
For the benefits of competition to be fully realized, all competitors must be able to compete on equal terms. All operators must be treated equally. All regulations should apply equally to all operators.
In many nominally competitive situations, there are operators who have an unfair advantage over others.
Public versus private sector operator advantages
Public sector operators sometimes have advantages over private sector operators, such as exemption from certain taxes or licensing requirements. This may reduce their costs, and enable them to charge lower prices than their competitors. Or, when bidding for area or route contracts, enable them to make more attractive bids.
On the other hand, public sector operators may be at a disadvantage in other respects, such as having to pay their employees at government rates of pay which may be higher than those in the private sector.
If there is a public sector operator operating in the same city, it must be subject to the same rules and regulations as the private sector operators. Any special concessions which a public sector operator enjoys, such as tax relief, must either be waived in respect of the operator concerned, or extended to private sector operators in the city.
Similarly, if the public sector operator is committed to government regulations which put it at a disadvantage, these must be waived.
In practice, the complexities of ensuring equality between public and private sector operators may be such that it is preferable for the public sector not to be involved in the operation of bus services in a competitive situation.
Open access to terminals, bus stops, depots and workshops
Access to bus stops and terminals must be open to all operators. An operator owning its own terminal in a strategic location may exclude other operators from using it and put them at a disadvantage.
This applies not only in the case of on-road competition, but also in competition for the market. A bidder with access to terminal facilities may be able to offer a more attractive bid than those which do not, even though in other respects these operators may be able to provide a better service.
It is normally more satisfactory, particularly in the case of urban bus operators, for bus terminals not to be owned by the operators, but by the local authority, which can make them available to all operators on an equal basis.
The same may be said of depot and workshop facilities. If some operators have facilities but others do not, this may drastically reduce the number of potential bidders. In a mature market, where there are many established operators with their own facilities, this may not be a significant issue. But in the majority of developing cities it will be.
A satisfactory means of overcoming this problem in a city where there is a large public sector bus operator which is to be privatized, is to retain the infrastructure in public ownership. Then the infrastructure can be leased to successful bidders.
Where bus services are subsidized, the basis for calculating the subsidy must be consistent.
Other key issues to consider
Changes in industry structure
Increasing the number of operators
Consolidating small operators
Forming operators’ associations