Department for InternationalDevelopmentReview of Urban Public Transport CompetitionDraft Final ReportMay 2000

Halcrow Fox

Halcrow FoxVineyard House 44 Brook Green London W6 7BYTel +44 (0)20 7603 1618 Fax +44 (0)20 7603 5783www.halcrow.com

Halcrow Fox has prepared this report in accordance with theinstructions of their client, Department for InternationalDevelopment, for their sole and specific use. Any other personswho use any information contained herein do so at their own risk.

© Halcrow Group Limited 2000

Department for InternationalDevelopmentReview of Urban Public Transport CompetitionDraft Final ReportMay 2000

Halcrow Fox

Halcrow FoxVineyard House 44 Brook Green London W6 7BYTel +44 (0)20 7603 1618 Fax +44 (0)20 7603 5783www.halcrow.com

Halcrow Fox has prepared this report in accordance with theinstructions of their client, Department for InternationalDevelopment, for their sole and specific use. Any other personswho use any information contained herein do so at their own risk.

© Halcrow Group Limited 2000

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Contents

1 Executive Summary 1

2 Introduction 8

3 Scope and Aims 9

4 Working Methods 10

5 Types of Regulation and Competition 115.1 Introduction 115.2 Conditions for Effective Competition 125.3 Types of Regulation 145.4 Types of Competition 215.5 The Implications of Urban Public Transport Modal Characteristics for

Competition and Regulation 325.6 Changing Competitive/Regulatory Regimes 42

6 Conclusions from Case studies on Good Practice inCompetition and Regulation 476.1 Introduction 476.2 Comparative Performance Analysis 47

7 Design of Competitive Systems, Contracting,Concessioning and Licensing issues 687.1 Introduction 687.2 Public Policy 687.3 Institutional Capabilities 687.4 Urban Form and the Transport Market 697.5 Industrial Strength and Structure 697.6 Contract Parameters 697.7 The Allocation and Management of Risk 797.8 Securing Integration 827.9 Competition for Service Planning 847.10 Evaluating Service Proposals 857.11 Contract Administration 877.12 Renewal and Extension 887.13 The Para-transit Issue 88

7.14 Conclusion 89

8 Implications for the poor 908.1 Introduction 908.2 Accessibility 908.3 Congestion and Environmental Nuisance 958.4 Employment: Practices and Conditions 958.5 Overall Efficiency and the Demand for Public Funds 96

A Annex One 100Case study descriptions 104

Bibliography 170

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1 Executive Summary

With almost half the world’s population living in towns and cities and most of theserelying heavily on public transport to meet their mobility needs, efficient and effectivepublic transport operations are critical to sustainable economic and socialdevelopment. Continuing rapid growth of the cities of the developing world, whereincreasing wealth creates more demand for public transport, means this dependencewill grow strongly for the foreseeable future. Whilst investment in new transportinfrastructure is needed to help meet mobility needs it will not be sufficient on its owneven in those rare circumstances where it can be expanded to match the growth intravel demand. In most cities of the developing world more effective and efficient useof existing infrastructure and equipment will be not only the most cost effective, but isthe only practicable option, for many years to come.

Changes in the way public transport services are provided by well-chosen use of amixture of competition and regulation have shown themselves to be capable of majorimprovements to services at lower costs to passengers and taxpayers. This study haslooked at a range of competitive/regulatory regimes in order to help develop guidanceas to the most effective way competition can be deployed to improve public transportin the many different types of towns and cities of the developing world. Inconsidering the effects of alternatives arrangements particular attention has been paidto the implications for the urban poor.

There is an extensive range of types of competition and accompanying regulationoperating in the urban public transport sector. Indirect competition can be seen incompetitive procurement of support activities, competition within the firm betweenbusiness units and managers, competition for profitability and competition for acclaimeither by repute or more systematically through benchmarking. Whilst indirectcompetition can achieve some improvements in performance, and help prepare apublic transport operation for direct competition, experience shows that it is muchless powerful in driving performance improvements than direct competition. Similarlycompetition from private transport is not that strong a driver of public transportperformance improvements.

There are essentially two basis types of direct competition: competition for the marketand competition in the market. In the first a contract or permit to provide services orfacilities is granted for a defined period following an open competition. In the secondoperators offer competitive services to users subject to a number of rules governingtrading and operating practices. Within these two broad categories there is a widerange of arrangements that do not readily lend themselves to simple classification.For the purposes of this review however we have broken this down into eight types,which with public monopolies where indirect competition can be applied, makes ninein all being:

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• Public monopoly

• Management contracting

• Gross cost service contracting

• Net cost service contracting

• Franchising

• Concessions

• Quantity licensing

• Quality licensing and the

• Open market

The break between competition for the market and competition in the market willusually lie between concessions and quantity licensing except where franchises orconcessions overlap competitively. There are many variants on these nine themes andmore then one arrangement can apply in the same area; indeed this is likely wherethere are several modes of public transport. Which types of competition are suited tothe different modes, and how some types of transitions occur, is shown in figure 5.1of the main report. At one extreme the potential for fixed track systems competing inthe market is very limited. At the other the very nature of para-transit suits it tocompetition in the market rather than for the market. With buses almost any type ofcompetition is possible and can be found somewhere. However not all are effective inpromoting efficiency and best meeting the needs of passengers.

Public monopolies are, almost always, less efficient than competitive regimes. Thisresults from a combination of political interference, poorly incentivised management,the power of organised labour and social and other obligations. Not all these are atwork in all public monopolies and their extent varies but, almost without exception,they are present in sufficient degree to result in a significant efficiency deficiencycompared with a well-chosen alternative competitive regime. Public monopolieshowever have the advantage of closer authority control over services and fares. Thiscan make integration and attention to social and other wider community needs easierto achieve. But even this requires a coherence of purpose and action within the publicsector that is all too often missing. In the case studies and literature research we havenot found any examples where a pure public monopoly offers a superior alternative tothe best-designed competitive arrangement.

Management contracting allows private sector skills to be brought into service design,operational control, labour management, and equipment procurement whilstmaintaining asset ownership in the public sector. Competition is for the market andthis approach has proved quite successful in the USA where it is particularly wellsuited to small and medium sized public transport enterprises as it can provide skillsand expertise that would not normally be economic to employ within operations ofthese scales. This type of competition is rare in developing countries as the conditions

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of extensive public sector patronage which management contracting best suits are not,at least as yet, to be found.

Gross cost contracting has been used successfully for procuring bus services in anumber of developed cities. It transfers the production risk to private operators butshields them from the full commercial risks. This has the advantage of facilitatingintegration and enlarging the pool of competition, which is particularly important incities where there has been a long tradition of public provision and public transportmarkets are weak. Cost saving over public monopolies in the range of 20% to 30% isnot uncommon with this type of competition.

Net cost contracts require the operator to bear most or all of the revenue risks and arealso used in bus operations. They have the advantage of relieving the authorities ofrevenue risks and responsibilities and, in some circumstance can act as a spur toimproving operator performance. This kind of contracting however does makeintegration more difficult to achieve and requires safeguards to prevent operatorsindulging in revenue-share competition, which may act against the passengers’interests, and to ensure that any loss making service that are required are notneglected.

Franchising can be used for routes or groups of routes over a contiguous area. In thelatter case operators will usually have the freedom to plan services to maximise acombination of operational and passenger service efficiency. The rôle of the authorityis limited to setting down the fares and service parameters and monitoring theperformance of the franchisee. Like net cost contracts, franchises can involvepayment in either direction between the authority and the operator depending on thestrength of the public transport market and, given constraints on fares, how much un-remunerative service the authority requires to be operated. Whilst taking fine controlout of the hands of the authority, an exclusive franchise will encourage the operator toprovide fares and service integration within the franchise domain.

Public transport concessions are quite common in the cities of the developing world.Here the operator has complete commercial responsibility for the concessionoperation within the limits set by the authority. The key distinction we make betweena concession and a franchise is that, in a franchise the authority is in the lead inspecifying the broad public transport product and is prepared to incur the costs ofdoing so, whilst in a concession the authority impose a few basic requirements and hasno financial responsibility. These arrangements relieve the public sector of technical,organisational and financial responsibilities but limit its influence on servicearrangement. Where the public transport market is strong and commercial servicessuffice to meet the communities needs this is not a problem. The more influence theauthorities wish to have over fares and service quality and provision the less effectiveconcessions become and the more franchising schemes have to offer.

Concessions give an exclusive right to an operator for a service or set of services in anarea and, as such, provide competition for the market. Once the concession has been

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awarded competition will be at an end until the next award, unless concessionsoverlap. This has a number of potential drawbacks which the limited power of theauthorities may not be able to prevent. Quantity licensing can maintain continualcompetitive pressure in the market by allowing a number of operators to providecompeting services. This acts as a continual spur to keep down costs and maintainservice standards (which may not necessarily be very high) but may result in unwantedon-the-road chicanery as a competitive tool. However, by setting quantity limits, theauthorities are able to moderate competition between licensed services and any otherpublic transport in the area and adjust supply between one area and another.

Quality licensing does not have restrictions on the number ofoperators/services/vehicles that can serve an area and allow a “natural” balancebetween supply and demand to occur. Quality controls can include vehicle fitness,trading practices and operating arrangements and these will usually also be applied inquantity licensing. By having no limits on supply, quality licensing allows unfetteredcompetition between licensed and other forms of public transport and does not evenprovide a crude way of spreading supply to weaker market areas.

Finally an open market allows services to be provided without any constraint otherthan conforming to the general laws of the land. It is appropriate where theauthorities judge that the market outcome is sufficiently in accord with its transportobjectives or it has neither the means nor resources to intervene to change theoutcome. Generally in urban public transport it is the lack of means to intervene andresources that is the reason for open market competition.

All these regimes are to be found in bus operation but only the range from publicsector monopolies to concessions for fixed track systems. Informal transportinvariably exists as licensed services, open market or illegal operations. With fixedtrack systems the concession usually involve the provision of costly non-tradableassets. This makes longer term periods (10 – 30 years) appropriate compared with buscontracts (3 – 7 years) and franchises (5 – 10 years). Moreover special provisions inthe agreements will be needed to deal with the maintenance, betterment andsubsequent transfer of these at the end of the concession period.

Competition cannot occur in a vacuum. There are preconditions for competition totake place and regulation is required for it to be fully effective. Firstly the use ofcompetition must be favoured by public policy. For this to be effective a legalframework is required which allows and protects property rights and fair trade. Theremust be clear transport objectives in which competition has a place and administrativeand institutional capacity to promote, direct and regulate competition to serve these.Where public policy objectives cannot be achieved without some form of publicfinancial support then this must also be available for the system to work.

Secondly there must be a culture of competition and industrial capacity to turn thisinto a reality. In developing countries the imperatives of earning a basic living haveusually produced a competitive culture but industrial organisation is often weak and so

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the scale at which competition can effectively take place is limit. In the developedcountries the tradition of competition in the public transport sector is modest andbuilding the right kind of capacity there can also be an important issue.

Thirdly there have to be rules to regulate the ways in which competition operates andthese have to be designed to suit the circumstances of the urban area in question andthe public policy objectives for public transport.

The regulation of public transport will normally include safety, environmentalperformance and economic issues. These can be regulated by more than one agencyand some may be regulated at a local level whilst others are regulated at regional,national, or even international, levels. Whilst all three of these are important the firsttwo are general to all industrial activities and raise few issues that are peculiar to urbanpublic transport. Because of the scale and transience of the public transport productits economic regulation presents some particular challenges.

Where public transport services are being operated exclusively undercontracts/franchises to a public authority these can be used to regulate:

• Relationships between operators (e.g. integration issues)

• Potential abuse of monopoly powers (e.g. fares and information)

• Service of non-commercial policy requirements (e.g. concessions and socialservices)

as well as some non-economic characteristics (e.g. vehicle emissions). Where publicinstitutional capacity is limited it may be possible to introduce self-regulation throughoperator associations. However there may also be a need for macro-regulation toprevent excessive market power at a regional or national level.

With concessions and licenses, or in mixed regimes with several operators (perhapsincluding both service and infrastructure operators) in the same market an externalregulator will be necessary. As well as regulating macro industrial aspects the regulatormust be able to deal with the first two of the three issues listed above. Regulation isnot without its disadvantages and, apart from its cost; it can stifle innovation, supplyof services and competition if applied inappropriately.

The case studies have revealed many different examples of competition and a highproportion of competitive and regulatory failures. There is no one best regulatoryregime and for each situation the most appropriate generic format should be selectedand then customised to suit the cities particular characteristics. The factors affectingthis choice include:

• The geographic, demographic and socio economic characteristics of the area

• Transport policy, pricing and objectives for public transport

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• Institutional capacity and industrial structure

• The types and modes of transport in the area

The design of the competitive regime must reflect and these and include:

• Length of contract/licence term

• Scope of contract/licence area

• Size of business package

• Ownership of key assets

• Allocation of risks

• Contract/licence monitoring and enforcement

Each type of competitive regime has its own advantages and drawbacks: none areperfect in all respects. Gross cost contracts expose operators to limited risk and allowintegration and closed authority control, but provide little room for innovative flair.Net cost contracts give operators more incentive to provide an attractive service butbrings with them greater risks and open up the potential for rivalry on the street.Management contracts allow the authority to retain its assets but can give access to arange of expertise that would not otherwise be possible.

Franchises and concessions give operators more scope to plan services and theresources to operate them jointly and to design integrated systems. These types ofarrangements are generally used for rail but can be vertically integrated (services andinfrastructure in one) or vertically segregated. Where there is value in having morethan one service operator running over common infrastructure then verticalseparation is usually preferable. Where the operation is discrete then usually a fullyintegrated arrangement will offer best value.

Concessions and licences for bus and para-transit operations have the advantage ofrequiring limited institutional capacity and little or no public financial support and soare very common in the cities of the developing world. In these cities the demand forpublic transport is usually strong and so largely commercial services are feasible.However low incomes often mean low quality and poor service to some needy areasso there is usually some need for public authorities to intervene in the market toovercome these shortcomings. Although there are ways of doing this such asrequiring particular services as conditions of concessions, ensuring that theseobligations are fulfilled is often beyond the competence of the relevant authorities.Institutional strengthening has emerged as a key requirement to the development ofgood competitive regimes in many of the case study cities.

Well designed and operated competitive regimes can help the urban poor byimproving their mobility and reducing the impacts of intrusive transport operationson their living and working environment. Competition reduces costs making

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transport more affordable and expanding the amount of service on offer. Ifsensitively regulated this can be used to ensure more service for the poor and serviceand to create fares arrangements that recognise their particular needs. Howeverregulation can also work against the interests of the poor. Expensive fixed trackpublic transport is of little value to the urban poor as are complex ticketing andconcession arrangements. Over regulation can inhibit cheap transport, whichalthough problematic in traffic and environmental terms, may be their only way ofaccessing social and economic opportunities. Moreover it may also be an importantsource of employment for the urban poor.

Competition can be a powerful force in urban public transport and can be used forthe good. However it will only bring the large benefits it offers if suitably – and thisdoes not necessarily mean heavily – regulated. In the cities of the developed worldregulatory capacity is strong but competitive forces are rather weak. In the towns andcities of the developing world the opposite is the case. Choosing the right type ofcompetitive regime and installing the regulatory capacity to operate it are thechallenges that face these settlements. The evidence so far is that there is much scopefor improvement on both counts – especially the second.

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2 Introduction

With almost half the world’s six billion population living in towns and cities, urbantransport is an important aspect of millions of people’s lives. Although urbanisation islower in the Less Developed Countries (LDCs) there are already 340m urban dwellersin Africa, 400m in Latin America and 1.4bn in Asia. The twin processes of populationgrowth and urbanisation mean that the numbers living in the towns and cities of theLDCs are growing rapidly - by more than one million people a week.

This pace of urbanisation is leading to severe stresses on urban services, as most ofthese countries have neither the necessary existing infrastructure nor wealth to addnew infrastructure. As an illustration the US, with its already well developed urbaninfrastructure, has a GDP/urbanisation quotient of $3bn/106people compared withAfrica’s quotient of $30m/106: a ratio of 100:1. Moreover many of the new urbandwellers in the LDCs’ cities are in settlements with populations more than 5 million.Of the twenty-five largest cities only six are in Western Europe, the USA and Japan.

City dwellers in developing countries have to rely on walking cycling and publictransport for almost all of their travel needs. Buses are the most important form ofurban public transport carrying 6½ x1012 passenger kilometres a year in three millionor so vehicles, of these over two million operate in the cities of the developing world.Railways are important but to a lesser extent. Metros in developing countries carryabout 11bn journeys a year, surface rail about 5bn and light rail about 2½ bn. Thusrail carries only 50m journeys a day compared with buses’ ¾bn. How many journeyspara-transit vehicles carry is almost impossible to estimate but with more than 2m ofthese vehicles in LDC cities they almost certainly carry more journeys than rail.

Although the world average GDP/capita is of the order of $5,000/pa, that of thedeveloping countries is closer to $1,000. As incomes rise in LDC cities, so will theuse of public transport, as the growth in car use does not start to outstrip that inpublic transport use until average annual GDP/capita rises above $4,000. Publictransport activity will grow substantially in developing cities and mainly on road basedsystems, as any reasonable estimate of growth in rail capacity in LDC cities suggestthat, overall, it will be difficult on present trends for rail to hold its market share.

Despite the importance of urban public transport, in developing cities it is oftenpoorly financed, badly managed and neglected by governments. This presents aworrying paradox, as the raison d’être of cities is easy communication between a widerange of activities and skills. Thus poor public transport suppresses the economic andsocial advantages for which cities developed in the first place. There is much thatneeds to be done to put this right and the better organisation of the provision ofpublic transport by effective competition and well-designed regulation offers thepossibility of substantial improvement, with relatively little investment.

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3 Scope and Aims

This review considers public transport in the urban areas of developing countries,how competition operates in these and how it might be improved. In order to do thiswe have also looked at the development of competition in local public transport in anumber of more developed cities to ensure that the full range of relevant experience isbrought into scope. The review covers the main modes of public transport frominformal para-transit, to buses, to light rail and metros and includes a few instances ofsurface commuter rail operations.

The review looks at the full range of factors that affect competition in the provisionof public transport services. As such it includes transport and industrial policy,institutional factors, finance, cultural factors as well as the characteristics of thedifferent public transport modes and the markets that they serve. Given the keeninterest in the alleviation of poverty by both the World Bank and the Department forInternational Development we have addressed this issue specifically. This has beenassisted by a parallel project, funded by the Bank’s Private Infrastructure Division, ontransport and the urban poor.

Competition, short of anarchy, always takes place within a regulatory framework.Understanding competition therefore requires an understanding of these regulatoryregimes, both in theory and in practice. The twin phenomena of competition andregulation are therefore usually discussed as a pair. In many urban areas in developingcountries regulation operates differently in practice from how it was designed, as aresult of unsuitable regulation, institutional weakness and corruption. By their verynature these phenomena are rather difficult to measure except in the most general ofterms. However we have identified these, and the consequences they have foreffective regulation, as far as the available information permits.

The purpose of the review is to identify the main competitive regimes to which publictransport is subject and what types and instruments of regulation and other forms ofpublic intervention are required for these to operate effectively. The review alsoassesses their effects on transport efficiency, safety and the environment, trafficconditions, the accessibility of the urban poor and the opportunities for employmentand entrepreneurship amongst urban populations.

We have brought together what information we have been able to gather oncontracting issues however the limitations of a short desk study are such that its hasnot been possible to obtain much detail on contracts. However we have tried toidentify the important principles of good contracting in this area and the sorts offeatures that aid their effectiveness and enforcement.

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4 Working Methods

The working method is that set out in our Inception Report. The review has beencarried out over a period of four months and has been based mainly on desk researchsupplemented, to a limited extent, by meetings with experts available in the Londonand written comments and advice from a number of members of staff of the WorldBank. The Bank has also provided copies of relevant internal reports and providednames of other useful contacts. The TRL has also provided advice anddocumentation.

The first phase comprised a review of the literature on competition in urban publictransport and drawing up a list of case studies. Where we were able to identify knowncontacts that could help us with the case studies we made direct approaches to these.In other cases existing published material was used. It was decided not to try and seekfurther information from those cities for we did not have know contacts as the shorttime scale of the study meant that the likelihood of getting much further usefulmaterial was outweighed by the effort that would have been involved. Directapproaches were made to a number of individuals.

The literature review enabled us to define which features of competitive/regulatoryregimes it would be desirable to gather information on and what it would bepracticable to collect. This conditioned the choice of information sought fromcorrespondents. The main phase of the review was the collection of case studyinformation from published sources such as Jane’s Urban Transport Systems, articlesand papers culled from a range of sources (including using the Internet) and materialprovided by our correspondents. As far as possible this information was codified in aform that was suitable for analysis.

The results of the case studies were then brought together with the results of thereview of existing literature on the subject and assessed against the criteria developedin the study and conclusions framed on the effectiveness of alternative regimes in lightof the circumstances of different urban transport settings. Finally advice on contractfeatures, which facilitate effectiveness and enforcement, was formulated in light of theassessment of regime design and information collected in the literature review andcase studies.

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5 Types of Regulation and Competition

5.1 IntroductionIn the developed countries, where urban public transport has long beenpredominantly provided by public sector agencies, recent years have seen a process ofliberalisation and the emergence of a range of competitive regimes in the transportsector. The general rationale for this is that competition promotes improved efficiencyand greater sensitivity to users needs. Moreover, when associated with privateownership and/or management, this can improve access to capital, introduce newskills and enable different and more effective ways of working. Indeed in thedeveloped world, and some parts of the developing world competition is sometimesregarded as the key to “solving” the “urban public transport problem”. Of course,just as with any other singular measure (various new technologies, fares and serviceintegration, etc.) it will not solve all the problems of urban public transport. Howeverit has shown itself, if applied correctly, capable of generating substantialimprovements in the cost effectiveness of urban public transport.

In developing countries a mixture of public and private operations provides publictransport and competition in the provision of services is common. Sometimes this isthrough some form of organised scheme but, often, it is simply as a result of aplethora of private initiatives which the public authorities struggle to regulate in orderto achieve a measure of safety in operations, a semblance of fair trading and to try andlimit their traffic and environmental effects.

In the Soviet Union urban public transport was provided by the State according to ageneral scheme, which involved comprehensive coverage and affordable fares withlimited regard to conventional cost/effectiveness. Along with very low car ownership,this resulted in high ridership levels, generous networks and extensive use of fixedtrack systems. The manufacture of equipment was centrally planned with poorefficiency and high manning levels reflecting the full employment policy. Since thebreak up of the Soviet Union this has changed. Equipment has to be procured withhard currency, rising car ownership is depleting ridership and revenues and statesupport is shrinking. This has resulted in a need for much improved efficiency ofoperation and consequently competition. This has not always been welcomed, as longestablished habits die hard.

There are several forms of competition that can, and have been, applied in urbanpublic transport. These have been used at different stages and in respect of differentcomponents of public transport systems. Understanding these differences in a clearand systematic way can enable a framework to be drawn up into which the range ofexperience and its effects can be placed as a guide to designing competitionarrangements appropriate to the variety of situations to be found in cities around theworld.

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5.2 Conditions for Effective CompetitionTo be effective competition cannot take place in a vacuum. One the one hand theremust be a range of economic actors interested in providing the goods or servicesrequired. One the other there must be a regulatory regime that channels thecompetitive pressures towards improving productive efficiency and responsiveness toconsumer needs. If either of these conditions is not satisfied then the potentialbenefits from competition will not be realised.

5.2.1 The need for a diverse industrial structureThe availability of competition for the provision of public transport variesconsiderably between different countries. In a number of industrialised countries theprovision of urban public transport is still virtually a public monopoly and the mainchallenge in introducing competition is the development of a vigorous private publictransport operations sector. This is all the more difficult where, as is usually the case,services are not commercially viable and their provision depends on the support ofthe state which is frequently the patron of incumbent operations.

In developing countries there is usually plenty of competition to provide publictransport services of sorts. However the results of this often fall well short of areliable, comprehensive and affordable public service. Where competition is verydiverse and active this can result in "near anarchy" on the streets. Where operatorsgroup to bring some order this may well result in the un-competitive practices such asthe formation of cartels. Here the challenge is not that of creating competition butcreating a regulatory framework that brings order and purpose that acts in theconsumers' interests.

5.2.2 A sound legal and institutional frameworkFor competition to be ordered effectively there needs to be:

• A legal system that establishes and protects property rights, principles of fair tradeand effective procedures for enforcing these

• A policy making system which is capable of developing public policy objectivesfor urban public transport and

• An institutional competence in the areas where competition is to be applied bothto regulate competition and to promote actions to secure public service outcomes

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Most countries have the basic legal framework that allows competition to operate inthe economy in general. When this is not so (as used to be the case in some centrallyplanned economies) then any attempts to introduce competition in urban publictransport are likely to fail. In some countries however, specific laws that conferexclusive rights and obligations on individual (usually public) agencies govern urbanpublic transport provision. In these instances there needs to be a change in the law toat least permit competitive processes. Whilst it is a matter of public policy forindividual governments, experience has shown that a requirement for competitionmay be necessary to overcome entrenched interests in preserving the status quo.

To be effective the appropriate legal system must be accompanied by an effectivepolicy making system. The law itself may lay down the foundation for public policy,and the principles on which it is to be constructed, but does not comprise policy itself.The system must be capable of making policy and the regulations and other actionsthat are needed to allow its implementation.

Finally there must be the administrative, technical and financial resources to put policyinto action. The institutions that are responsible for overseeing competition musthave:

• Clear objectives

• A good understanding of the market and the relevant industry

• Adequate control mechanisms

• Sufficient resources to carry out their duties

• A high level of integrity

Deficiencies in any of these areas will compromise the ability of the public sector toexercise effective control of competition. All too often these requirements are notmet in cities of the developing countries. In designing a competitive regime the scopefor strengthening and/or institutional competence should be a prime considerationand the limits for realistically achieving this appreciated. Where it is not possible tostrengthen institutional capabilities to the extent consistent with the preferredcompetitive regime then the choice of regime may have to be adapted to suit. Thereare a number of ways that this can be done - such as the use of self-regulation forsome aspects of performance. In a similar vein, where the public authority is unableto manage service revenues, internalising this risk to the operator (or individual vehicledriver) can avoid this problem.

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5.2.3 Competition and pricingCompetition can only work perfectly if the prices to which the various actors areexposed reflect the true social costs of their operations. In urban transport thedistortions created by irrational pricing regimes are probably felt most stronglybetween the different modes - especially in the undercharging of private vehicles forthe use of congested road-space. However, irrational pricing can have significanteffects within the urban public transport sector. The undercharging of road basedpublic transport for the use of road space ceteris paribus puts it an advantage over railtransport (however of all road users were charged correctly road based publictransport would be even better off).

By the same token small public transport vehicles, such as are commonly used forpara-transit, are likely to benefit from these pricing deficiencies compared with largebuses (provided these are well used). This price advantage is made greater if weakregulation means that small vehicles escape the costs of complying with achievingsafety, environmental and other "public interest" standards. The effects of thesepricing deficiencies can be substantial and put para-transit at a substantial unfairadvantage: an advantage that may be impossible, in some circumstances, for scheduledbus operations to overcome.

5.3 Types of RegulationEven so-called laissez-faire markets are usually subject to some type of regulation butthe form, purpose and subject of this can vary widely. With urban public transportthe regulatory task has the added complexity of an authority having a more or lessdirect interest in the price, nature and quality of the service being regulated. In otherareas of regulation the regulator can be said to have done his job if the best outcomethat the market can produce is achieved. With public transport, authorities may notfind this satisfactory and may wish to supplement or manipulate the market “product”to serve public interest objectives other than preventing the abuse of market power.

There is an important distinction to be made between procurement and regulation.The procurement agency is sometimes, incorrectly, described as the regulator. Whilstit is true to the extent that in such situations the public authority lays down a numberof constraints and requirements, these typically form part of the contract between thetwo parties and are not acts of regulation imposed by a third party with no directinterest in the contract. Regulation is process of ensuring conformity, of the actionsof operators, by an authority, with one or more rules outside any specific contractualarrangement.

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5.3.1 Regulating operations and the industryIn the public transport business there can be two different types of regulation – microand macro. Micro regulation is in respect of individual transport operations. Thus anoperator may have to have a licence with specific conditions attached (e.g. to operate aminimum level of service or keep fares below a specified level) in order to run aparticular service or network. This is the most common form of regulation in urbanpublic transport. At the macro level regulation may be needed to prevent or limit theabuse of market power. In the public transport industry, as in some others, there maybe a tendency towards oligopoly, cartels and even monopoly that can act against thepublic interest. The extent and form of these tendencies will depend on the structureof individual economies, business practices and cultural traits but will invariably bepresent to some degree.

5.3.2 Micro economic regulationMicro regulation deals with the conditions under which an operator can take part in aparticular market. It can restrict the number of operators on a route – in which casethere should be a rational and transparent basis for the selection and it can imposeconditions on the way in which operators trade. The sorts of matters that can besubject to regulation include:

• Fares and ticketing

• Provision of information

• Vehicle types, appearance and standards

• Routes and areas to be served

• Minimum/maximum service frequencies

• Operating times

• Environmental standards

• Stopping rights

• Notice/frequency of service changes

• Relations with other operators

Not all of these will always be necessary. The design of the regulation regime shouldreflect the purposes of regulation, the likely behaviour of operators (individually andas a group) and what, in practice, is realistically enforceable.

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5.3.3 Macroeconomic regulationThe macro regulation of the urban public transport industry raises many of the sameissues as the regulation of cement manufacturing, brewing, and other activities wherethere may be oligopolistic tendencies. In all these areas the purpose of regulation is toprevent one commercial grouping securing so large a share of the market that it canexploit consumers by charging excessive prices or restricting choice and innovation.I1n all cases there is a problem of the definition of ‘the market’ and with publictransport this is a particularly difficult matter.

The definition of the market will depend, in part, on the form of micro regulation.Where an authority competitively procures services for a community then within therelevant area the fact that an operator enjoys a monopoly should not itself necessarilylead to a need for macro-regulation as the competition issues should have beenresolved when the contract was let or the franchise awarded. However if the samecommunity were to be served by a deregulated regime in which there was only a singleoperator then this could give rise to the need for macro regulation. This is becausethe single operator may have used predatory behaviour to establish his monopoly and,once established, can use his position to raise fares or depress services to generateexcess profits. Of course such a position is contestable but ownership of assets andmarket strength may make this difficult or impracticable, in which case macro-regulation is necessary.

Even where local markets are the subjects of “regulation” through franchising orcontracting there can still be macro-regulatory issues. Where a small group ofoperators dominate the national market and have even more dominant presences inparticular areas or regions then there is the potential for abuse of market power notjust in local markets but for local markets.

Macro-regulation should not unduly inhibit economies and qualities of scale and therecan be integration benefits from one operator providing all or most of the services inan area as well as higher investment because of greater market security

The benefits from these will depend on local circumstances and these have to bebalanced against the actual and potential effects of actions against the public interestfrom excessive market power. As such it is very difficult to formulate generally validrules such as a not exceeding a fixed percentage of a defined market.

This creates a problem for the regulator. Where there is a defined limit to thepermissible market share, although perhaps somewhat arbitrary, then the bounds ofcompetitive behaviour are known in advance and any potential breach should becapable of being identified and prevented before any substantial damage is done. Inthe absence of a pre-determined limit episodes of anti-competitive behaviour mayoccur and lead to substantial and, in extreme cases, irreparable damage.

The implications of this are that wherever possible market share limits, or howeveranti-competitive behaviour is defined, should be specified in advance. Where this is

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not practicable then those features, which typify anti-competitive behaviour in thetype of market at issue, should be clearly and explicitly identified. Moreover theremedies for breach should be commensurate with the greater of:

• The damage done to consumers and competitors or

• The benefit to the offending operator

5.3.4 A regulator and a transport authority?Whilst a regulator and an authority have different rôles in principle a franchiser can incertain circumstances, through agreements with operators, carry out the functions thata regulator would otherwise discharge. The most obvious situation is where thefranchiser gives exclusive and specific rights to an operator. There may becircumstances however where an independent regulator is needed as conflicts mayarise in which the franchiser has a direct interest. The rôle of a regulator in suchcircumstances should be:

• To control competition between the franchisee and independent operators wheretheir markets overlap

• To regulate the relationship between service and infrastructure operators

• To control competition between the franchisee and other operators for facilities(rights of way, terminals etc.)

• To adjudicate on disputes between the franchisee and other operators (perhaps, incertain circumstances, between the franchiser and the franchisee)

It is important, as far as possible, to avoid imposing the regulator between thefranchisee and the franchiser on matters that are within the scope of the franchiseagreement.

5.3.5 Non-economic regulationEconomic regulation is only one of the forms to which transport operators may besubject. Others may include:

•Vehicle safety

•Financial soundness

•Depot location and operational practices

•Professional competence

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•Environmental performance

•Vehicle/system accessibility

•Labour quality and monitoring (including drugs abuse etc.)

Regulation of these attributes can be through the agency that deals with economicregulation or one or more separate agencies. Often they will extend to operationsbeyond urban passenger transportation (e.g. national railways or trucking) andconsequently there can be qualities and economies of scale from their being regulatedby separate national or regional agencies. Some, for example, planning controls, willbe outside the transport sector. Usually these regulations will have limited implicationsfor competition in urban public transport as they apply equally to all operators andtherefore have similar implications for each.

However there may be features of the non-economic regulation regime (e.g. depotlocation) that ceteris paribus put some operators at a marked disadvantage to others andconsequently significantly distort competition. In these cases it may be necessary toobtain special dispensation or variation in these regulations to enable the competitiveregime to be designed to overcome these distortions. In the case of the depotproblem this could be by the authority securing control of suitable depots and makingthem available to all potential operators on an equal basis.

Where economic and other types of regulation are industry specific and operate at thelocal (procurement) level then it is desirable to combine these. However the range ofagencies regulating different aspects of public services and the variety of scales atwhich these regulations are operated will mean that it is rarely possible to combine allelements of regulation in a single package under one regulator. National governmentsshould ensure that separate regulatory systems are consistent with each other to themaximum extent possible. Again the particular characteristics of public transport maylead to special consideration. An example of this was the operation of the generalcompetition law in the UK, which inhibited worthwhile cooperation between busoperators in establishing joint ticketing schemes, and had to be amended to avoid thisproblem.

5.3.6 Forms of Regulation/InterventionPublic intervention and regulation include a wide range of mechanisms used forreducing or counteracting market failure. The main policy instruments are:

• Competition policy – across all sectors of the economy regulations andinstitutions are used to prevent the abuse of monopoly power and uncompetitivepractices. These also need to apply to the transport sector. The state ownershipcan often lead to problems with political interference

• Standards – minimum standards for safety and the environment or access to theprofession are usually introduced by national governments through the use of

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laws of regulations. Minimum standards can also be set through the setting ofcontract specifications or licence or concession requirements

• Entry controls – entry to the market can be regulated through the issue ofcontracts, operator licensing or franchising. Entry controls can also be outsidestate control, for example operator or route associations, which introducecontrols, for example annual payments, to protect members. These can includeaccess to facilities such as transport terminals

• Price controls – maximum fare levels can be set nationally by a regulator or locallyby transport authorities in contracts and through concessions or licences. Oftenfuture price increases are built into contracts or decisions using formula related toconsumer price indices

• Rate of return regulation – maximum returns on investment or capital can also beused to control market power. Sometimes this can be explicit or implicit throughnegotiation between Government and private operators

• Tax concessions/rebates can be used to reduce operators’ costs (for example fueltax concessions or special allowances for defined types of investment). In somecountries there is tax hypothecation to support public transport. This can includefuel taxes, sales taxes, payroll taxes and various types of property tax

• Subsidies to help provide/enhance service levels beyond those that would beprovided commercially, to keep fares below their commercial levels or to supportparticular services or facilities including those for special groups such as themobility handicapped. These can be either payments for a “social” service, faresubsidies/rebates or direct revenue support for the operator or some combinationof these

5.3.7 Drawbacks of regulationRegulation is neither costless nor perfect and there are a number of reasons why itmay not work effectively. In designing a scheme of regulation account should betaken of these potential problems:

• Asymmetry of information – the operators will usually have more information onthe cost and revenue streams of operation. The regulator may misperceive these andso make a less efficient or economically beneficial outcome than would otherwiseoccur from the market

• High operating costs – state provision of services or a state sanctioned monopolywill have reduced incentives for keeping costs at a minimum due to the lack ofcompetitive pressures and the fear of bankruptcy

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• Lack of dynamism – heavily regulated industries will either be constrained againstinnovation or have less of an incentive to do so. Regulations will also hinderstructural changes and make the industry less responsive to market conditions

• Regulatory capture – close relationships between operators and the regulator toensure that market and political goals are met can end up in regulatory capture withthe regulator acting more in the interests of the operator rather consumer

• Perverse incentives – the focusing of regulation on a number of core indicators canlead to a perversion of incentives where an operator will find it beneficial toconcentrate on these elements to the detriment of other factors for example onprices rather than quality of service

• Regulation costs resources – virtually all regulations will impose institutional costsfor administrating, monitoring and enforcing the system

Some of the potential dangers with the different types of intervention are illustrated inTable 5.1.

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Table 5.1: Summary of Impacts of Policy Instruments

Instrument Aims DrawbacksDirect provision Economies of scale, scope and

density. Closer control of productX-inefficiency, lack of dynamism

Subsidy Increase mobility for low incomegroups Improve competitivenesswith other modes. Meet specialneeds.

May end up subsidising middle incomegroups where there is low demand – Leakageinto inefficiencies.

Tax privileges Reduce costs/improve supply ofservice.

May create expenditure bias. May leak intolower productivity. May encourage excessprovision.

Competition policy Prevent abuse of market powerand uncompetitive practices.

Slow acting: rivals may be out of businessbefore intervention occurs – Can impairintegration in some circumstances.

Standards Provision of basic standards ofenvironmental protection andsafety.

Can be too prescriptive: client may notproperly reflect views of consumers. Canlead to excessive costs.

Entry controls Limit unwanted competition. Removal of some competitive pressures -Lack of responsiveness. May result ininadequate services, excessive prices andartificial rents.

Price controls Limit fares for disadvantagedgroups. Prevent abuse of marketpower

If fares set too low services may not beviable. May inhibit product differentiation.

Rate of return regulation Prevent abuse of market powerfor monopoly profits

Perverse incentives for capital investment

5.4 Types of CompetitionCompetition can come in various forms and is not simply a matter of public tendersfor service or operators vying for custom. It can take place within an organisation,between organisations and can be measured in profitability, market share and othernon-financial achievements. This section looks at the different types of competitionthat are to be found in urban public transport in both the developed and thedeveloping world.

5.4.1 Indirect Competition

5.4.1.1 Competitive procurement of Supplies and Support Services.

There are few public transport systems where there is not some form of competitionat work. Even in the centrally planned Soviet system there was more than one sourceof supply for some goods and services and frequently the choice of supplier reflected,to some extent, the performance of the different candidates. Today most publictransport operators are engaged in competitive procurement of equipment and a range

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of support services (cleaning, catering, professional services, construction,maintenance, engineering etc). Whilst rather obvious the significance ofsupplementary outsourcing of this kind can be substantial. It can:

• Reduce costs and improve service and product quality

• Even out internal work-loads and so eliminate the need for peak capacity

• Provide benchmarks for internal productivity

• Eliminate the need for internal investment and training

• Help prepare for more extensive competition

It is good management practice to conduct regular “make or buy” assessments toensure that best value for money is being obtained in respect of support products andservices. Organisations that do this effectively have less to fear from externalcompetition and are better prepared for it should it come. The sudden exposure of anorganisation that has not been procuring supplies and services competitively toexternal competition can lead to widespread trauma. This will often mean that it isnot able to face the external competition effectively and consequently diminishes theoverall level of competition as well as increasing the chances of its own collapse.

5.4.1.2 Competition between business units

Competition can take place within an organisation, especially where two or more unitsare engaged in similar activities. Thus in a bus company different garages with similarequipment, operating conditions and markets can be compared and bonuses formanagement and staff can be related to relative performance. Arrangements of thiskind exist within at least one of the large French operator groups where managers’rewards and promotion prospects depend on relative performance.

These two types of competition operate within an organisation and can take place, atleast in theory, even if there is no external competition. There can also be indirectexternal competition for example between two organisations carrying out similaractivities in separate commercial domains. The measures of success can, in somerespects, be quantified (e.g. return on assets, earnings per employee etc.). Where thereare financial performance yardsticks of this kind the more successful enterprises willhave better access to capital and other resources and consequently are better placed toexpand and prosper.

5.4.1.3 Competitive pressure by regulation

Where an organisation is operating in a monopoly situation, as many public sectoroperations are, in theory it can raise prices and profitability as long as this does notprovoke an attack on its position or choke of consumption at a rate that leads to areduction in profits. In these circumstances the direct incentives to improve

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productivity and quality are weak. However, where the operation is regulated,constraints can be imposed on its freedom of action (e.g. controlling prices whilstsetting enforceable service standards) that spur improvements in performance. Thisapproach has been used in those privatised utilities where competition through theconsumer is not possible (water supply and drainage being the classic cases) tosignificant effect. The management of the enterprise is caught between the pressurefrom shareholders for a return on their equity and the regulator demanding a morecost-effective service for consumers.

Where a regulated utility monopoly regime has been an intermediate stage en route tocompetition it has been demonstrated (electricity, telecommunications and gas in theUK) that it does not achieve the full cost effectiveness of a competitive regime.However it is substantially more cost effective than its traditional public sectormonopoly predecessor and, once again, can enable a relatively smooth transition to amore competitive regime. This type of competitive pressure is unlikely to be of mucheffect in subsidised publicly owned enterprises but can be enabled by corporatisationor, better still, privatisation.

5.4.1.4 Competition for acclaim

Not all individuals and organisations are motivated by financial reward and theacclaim of peers can be a powerful spur to seeking excellence. Benchmarkingamongst similar enterprises and objective and prestigious performance reviews canhelp to design and motivate improvement. The performance of amateur athletes isperhaps the best example of how strongly the desire for recognition and acclaim candrive performance. Key features of this type of competitiveness are its simplicity andits general visibility. This phenomenon is also to be found in the public transportindustry and should not be entirely overlooked. However it does appear to have tworather important limitations as a spur to general improvements in performance. Thefirst is that public sector enterprises rarely compete with each other on equal termsand therefore a direct comparison of performance is difficult.

Rivalry between public transport operations is often focussed on a few visible andprestigious aspects of their operations, such as the introduction of new technology,financial performance, or advanced service features. As such it is unlikely to be aproperly balanced comparison as the provision of prestigious innovation may be atthe expense of, or have little bearing on, the main day-to-day activities of theenterprise. Indeed, if carried too far, they can lead to a distortion in the application ofresources. A second problem is that of comparability. Invariably each system willhave a number of unique features that can confound overall comparisons ofperformance.

Carefully designed benchmarking can reduce these problems of comparison. By suchprocesses, enterprises with sufficiently similar operations, and broadly comparableservice and financial objectives, can have their performances compared in systematicand comprehensive way. Benchmarking exercises are not easy to carry out rigorouslyand require a measure of objectivity, which may be a difficult test for management.

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Also they need to have a scope that embraces all the key performance attributes.Nevertheless they can play an important rôle in helping operators understand howwell they are performing compared with their peers and indicate which measures canhelp to improve their performance.

Sub-contracting provides a powerful form of benchmarking that can be used in thebus industry. Here the costs of buying in services can be compared with the in houseproduct and, as part of the process to wards the introduction of a competitive regime,this can be a useful practice. However this practice can also be used to transfer theoperation of poor and difficult route to lower cost independent operators whilstretaining the more lucrative for the public sector enterprise. Bangkok provides andexample of this. This practice may also be used to try and create a semblance ofcompetition in order to avoid real competitive pressures.

If sub-contracting reduces costs then it should not be rejected, however the clientagency should be required to shed the full costs of the services involved andprogressively sub-contract all services where there is a prospect of securing asatisfactory service at a lower cost. If this policy is followed, unless the incumbent isextremely efficient this will lead to a process of competitive tendering as describedbelow in "competition for the market".

5.4.1.5 Competition from other modes

Collective public transport in towns and cities is subject to a degree of competitionfrom other modes of transport. These include walking and cycling, private motorisedtransport and taxis. Competition from walking and cycling is not an issue as generallypublic transport seeks to serve those journeys that cannot be easily made as apedestrian or a cyclist.

In developed countries with high car ownership it is sometimes claimed that there isno need for competition within the industry as there is sufficient from the car.Because of the high level of captive journeys this overstates the degree of competitionfrom private motorised transport. Whatever this might be in any particular sector ofthe market, experience has shown that overall internal competition is a much morepowerful force for improving cost effectiveness than that from private transport.

In developing cities this is not so much an issue, as most of the urban passengertransport market does not have access to private motorised transport. However thereis an important counter issue. This is the extent to which public transport can, orshould, be developed, perhaps through the use of premium services, to be sufficientlyattractive to damp down the growth of private transport use. This is of particularconcern in those cities with substantial bicycle use where the pathway to urbanmobility can be from bicycles to powered two wheelers to cars.

Another area of potential competition between private motor transport and publictransport is in the use of road space. If both are allowed to compete for the samespace then road based public transport – especially large buses on fixed routes – will

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be the loser. This raises wider issues of what priorities are to be given to pedestrians,cyclists and freight as well as buses and cars. However the optimal output of the roadsystem will usually require the conferring of priorities on high occupancy publictransport vehicles over general traffic in the more densely trafficked road corridors.

There is also, of course, the broader issue of the priorities for expenditure ontransport and what the balance should between expenditure to assist public transportand that more generally. However that is a separate matter and not the subject of thisreview.

The most ubiquitous type of public transport is the taxi – to be found, almost withoutexception, in all the world’s towns and cities. Often this is a complement toscheduled public transport catering for sectors of the market that can’t be effectivelyserved by buses, trams and trains. However, if unregulated, shared taxi operations candevelop which both serve the conventional taxi market and eat into the scheduledpublic transport market in the same way as unregulated para-transit. Although taxioperations have not been included within this review it is clear that they raise similarissues to the smaller capacity end of the para-transit spectrum and should be treated ina similar fashion.

5.4.2 Direct Competition

5.4.2.1 Service competition

The most effective forms of competition however are likely to be between differententerprises and there is a range of ways in which this can be done in the urban publictransport sector. To specify a clear and unambiguous typology for this is not a simplematter as the many cultures in which urban public operations are found have diverse,and sometimes rather opaque, business practices. For the purposes of this review wehave taken the following as the main types of competition ranging from a publicmonopoly at one extreme to the open market at the other:

• Public Monopoly: In this regime transport operations are exclusively by anoperator enjoying a Permit from a public agency without having to compete for itor having to face service competition from other operators. The operator willoften be the public agency itself or another public corporation but can also be aprivately owned enterprise. This regime can include sub-contracting of services toother operators.

• Gross Cost Service Contracts: This type of operation involves a publicauthority procuring services from another party without the operator taking anydirect commercial responsibility for the overall financial performance of theservice. However the operator is responsible for meeting his cost targets. Usuallythe services will be procured through competitive tendering amongst a number ofprivate operators but can involve publicly owned operators and contracts may benegotiated.

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• Net Cost Service Contract: Are similar to gross cost contracts except that theoperator is responsible for the revenues from the service as well as the costs ofproviding it and, as such, is responsible for the overall commercial performanceof the service.

• Management Contract: In these types of contracts the operational assets areusually owned by the (public authority) client and the operator is responsible forthe management of the operations, possibly including service specification withinagreed parameters. Whilst the contractor does not own the assets he may beresponsible for their procurement and maintenance to agreed standards as well asnegotiating wages and conditions for labour. The performance responsibility fora management contractor may cover a combination of production costs, servicequality, ridership and overall financial performance.

• Franchise: In franchising arrangements the franchisee is granted an exclusiveright, usually as a result of a competition, to provide a service, which meets anumber of quantity, quality, and price standards laid down by the authority. Thiswill usually be for a reasonably self-contained service area such as a town or sectorof a larger city. However it is also possible to have route franchises - especiallywith fixed track systems. The franchisee may have to be paid by the authority toprovide service and fare combinations that are not commercially viable.

• Concession: Again these involve the granting of an exclusive right to provide aservice but without payment by the authority although the authority may attachconditions such as maximum fares or minimum service requirements. In all otherrespects the concessionaire is acting on his own behalf and not as an agent of theauthority.

• Quantity Licensing: The numbers of vehicles allowed to operate a defined typeof service, or in a defined area, is limited by the authority – but there may beseveral operators providing services. This means that the licences will have avalue as a "business asset": a value that may be charged for by the licensingauthority, or when a licensee sells it on. Where quantity licensing is practised thiswill usually be on top of a form of quality licensing.

• Quality Licensing: Operating a public transport service is allowed by anyonereceiving a licence and complying with any conditions attached to it. Theseconditions may include vehicle specifications, environmental performance,maintenance standards, type of service to be operated (including stopping places),fares and trading practices.

• Open Market: No restrictions on transport operators except those imposed bygeneral law on business practices, vehicle construction and use and highways andtraffic matters.

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This array of forms of competition can be divided into two ranges. The first involvesthe granting of an exclusive right to an operator to provided services - competitionfor the market. The second involves no such exclusivity and allows operators tocompete in the market. There can be considerable variation in practice within each ofthese categories: particularly towards the lower end of the list where, for example,there are many types of licensing.

5.4.2.2 Competition for the market

Commercial operations seek profitability and to do this they need access to markets.One such means of access is by an exclusive Permit to serve a defined market. In thisreport we use the term “Permit” to signify any type of right conferred by an authorityon a provider of transport services or facilities. Indeed, provided the terms are right,from the operators’ point of view this can be an ideal arrangement. Once the right tooperate has been won, and the competition has been shut out, the winner is able toget on and maximise his profits within the constraints of the Permit (whether this is acontract, franchise or concession). There are good reasons why, in certaincircumstances, a specified service is best provided by a single operator at any one time.This may be for technological reasons, economies of scale or because a multiplicity ofoperators would resort to competitive behaviour which acts against the public interest.In such circumstances (and there should be good reason for adopting this approach)competition for the market rather than face to face in the market place is likely tohave a better outcome for the consumer.

5.4.2.3 A Permit for what?

Permits can be awarded for the whole or only part of a transport operation. Forexample a public authority may award a concession to a private company for theprovision of vehicles (e.g. by a performance-based operational lease) or revenuecollection services. Permits may be awarded for the management of a set of assets theownership of which remains with the client for the duration of the concession. Suchmanagement concessions are to be found widely in the transit industry in UnitedStates of America. More substantially, concessions may be for the operation ofservices using the concessionaire’s vehicles and staff but using the fixed assets (depotsand, in the case of railways, track, signalling etc.) of the clients, under a licence.Beyond this concessions can be for the whole operation “lock, stock and barrel”.Clearly the extent to which the concessionaire owns the operating assets – especiallyfixed and unique assets – the less contestable the market will be. Again this isspecifically referred to because with some type of urban public transport operationsaccess to specific assets is critical and exclusivity of these means that the market maybe essentially incontestable.

Concessions may also be for other than simply transport services. Where a publictransport service requires major construction of facilities and/or equipment then aconcession may be awarded for that with a greater or lesser operational rôle. Theconcessionaire may build the facility and lease it to an operator, or lease and maintainit or operate the services over the facility itself. Thus concessions can be for:

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• Operating transport service

• Management of a transport enterprise

• Supplying and operating transport Infrastructure

• Supplying and operating transport equipment (vehicles, revenue systems, etc.)

• Support activities and services (maintenance, fuel, cleaning, etc.) as an alternative toconventional contracting.

Concessions can be formed of a range of sizes of “business packages”. In the busindustry there is a large number of permutations of possible sizes of operations. Withurban rail, where operating entities have rather well defined boundaries because ofrail’s technological characteristics, this is less likely to be possible. Work carried outover a number of years has indicated that there are only limited economies of scale inurban bus operations1. Depending on the type of service to be provided it makessense to conduct operations at the scale that makes full use of basic operating facilitiessuch as a bus depot but beyond this economies of scale are less obvious but they canexist. Large groups can procure vehicles, equipment and services more costeffectively by using their bulk purchasing power, but this does not mean that theindividual operating units need to be very large. With rail systems there are naturaloperating units that are not easily divisible and it will usually make sense to scalebusiness packages to match these natural sized units. Again there can be economiesof scale in procuring specialist equipment (e.g. customised rolling stock and highlyspecific plant such as heavy-duty escalators). Whether correspondingly large businesspackages are necessary to obtain these will depend on the nature of contract orconcession and the structure of the local industry.

Where the concession extends to a range of services beyond that of a simple transportoperation there can be other factor that have an influence on the size and/or contentof the business package. For example if fares and ticketing are to be unified over arange of public transport modes/services then this can be easier if a single operatorprovides all the services. Similar considerations apply to passenger informationsystems and their associated technologies (e.g. Automatic Vehicle Location). Theadvantages of a single operator are increased if these ancillary services impact on thecommercial performance of the transport services. However these are not absoluteconstraints as it will be usually be possible to devise arrangements where severaltransport providers can be brought together to jointly provide these common servicesor support an “umbrella” provider. A balance has to be struck between thecompetitive advantage of a more diversified regime and the simplicity of one operatorproviding the full range of transport and related services.

1 see for example Button and O’Donnell (1985) and Cowie and Asenova (1999)

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Most public transport operations involve some facilities (stops, terminals, etc.) thatneed to be served by all the local operators for the convenience of passengers. Itwould be wrong for one operator to have exclusive rights to these where this actsagainst the interest of passengers (as it can usually be expected to do). Such facilitiesshould therefore be under the control of the transport authority or access to themregulated in a non-discriminatory manner if the authority is not responsible for them.

5.4.2.4 Competition in the marketplace

The most common and, in many circumstances the most effective, form ofcompetition is directly in the market place. Here the consumer can usually browse, trydifferent products, compare prices, and choose the goods and services that best suithis/her pocket. Producers must remain competitive to survive and this leads to moreefficient procurement/production and adaptation of products to better meetconsumer preferences. There are, of course, conditions for this process to operateeffectively (accurate and complete information, easy access to all products,opportunities to learn from experience, etc.) and these are rarely completely satisfied.However the imperfection of market mechanisms are not so great as to make othermeans of distribution of a wide range of goods and services superior.

A fundamental question that has to be asked however is that of whether the relevantgovernment or authority, representing the choice of society at large, accepts that thegoods or services in question should be provided and distributed according toindividuals ability/willingness to pay. If it does, then provision through competitionin the marketplace will, almost always, be the most effective mechanism. If it doesnot, then some form of intervention – of which there are many kinds – may benecessary. This caveat is made at this point because urban public transport, and urbantransport more widely, has a number of attributes, which mean that conventionalmarket mechanisms for the provision and distribution of public transport may notalways be appropriate.

There are three basic types of circumstances, which apply in varying degrees to urbantransport, where normal market operations may be inappropriate. The first is inrespect of those goods and services where society collectively chooses that theirprovision should be determined by need or merit rather than ability to pay. In mostdeveloped societies basic welfare, education and health-care fall into this class. Heresociety decides that there should be at least a basic provision for all, and eitherprovides this from general taxation or sets up some other form of mandatory scheme(e.g. compulsory insurance). In most countries ensuring reasonable access to basicservices is something that governments aim for and may not be obtained withoutsome form of intervention in the provision of public transport services as poorercommunities may not have the market power to secure adequate provision.

The second is where there are significant and variable externalities. Different modesof transport have different externality rates and public transport will usually (but notinevitably) generate less noise, less atmospheric pollution, fewer accidents and lesscongestion than motorised private transport, per passenger kilometre of output.

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Where these effects are significant and outside the scope of the operating market, thenthere is a case for intervention by public authorities. The implications of this forpublic transport are twofold. As public transport generally generates fewerexternalities then, all other things being equal, government should promote it overprivate motorised transport. This also means that where competition can beharnessed to produce more cost-effective public transport the case is stronger thensimply getting a better deal for the user/taxpayer. However in applying competition,care should be taken to avoid forms that lead to unnecessary increases in theseexternalities. The implications for urban public transport are that competition shouldnot depress vehicle environmental standards, should not create excessive capacity oncongested streets and should not foster obstructive or un-safe operating practices.

Thirdly, markets scarcely ever work perfectly and there are good reasons why urbanpublic transport is particularly prone to certain types of market failures. One is thedifficulty of “shopping around”. For regular daily journeys, travellers are rarely in aposition to vary their origin, destination or time of travel to get the “best” service(unlike long distance leisure travellers). Even where there is a choice of service,usually the cost of exercising it (e.g. letting a few buses go by until a modern cleanvehicle turns up) is too high compared with simply taking the first offer.

Moreover uncertainty about when the next vehicle will arrive and whether it will besuitable exacerbates this. Another problem in complex urban networks is that to getthe best journey impartial information on the options is needed. If individualoperators are left to their own devices they may be selective in the information theyprovide in order to promote their services over those of their competitors, to thedisadvantage of the travelling public.

Where buses compete “on the streets” experience has shown that this can lead to anirregular service (a problem which occurs naturally and does not need aggravating).For example one bus will “hang back” to collect a greater share of the traffic/revenueon offer resulting in a service with uneven intervals leading to a poorer service forusers.

There are therefore potentially three sets of circumstances in urban public transport –social need, externalities and failures in the public transport market itself – whereconventional competition may perform inadequately.

5.4.3 Competition and Multi-modal IntegrationWhere cities have a range of types/modes of public transport there can be substantialbenefits from operating these in concert. A good example is the use of buses asfeeders for rail and metro lines. Here the low cost of the marginal rail use (if the railsystem is not overcrowded) and the high cost of radial road congestion can mean thatthe collective benefits from this kind of integration can outweigh the disadvantagesthat arise form a free market outcome where buses would try and compete with therail services for the trunk section of the journey. To achieve integration of this kindrequires:

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• Bus service patterns which complement the rail network

• Reliable multi-modal information

• Easy interchange facilities

• Tariff structures which do not penalises interchanging compared with throughjourneys

• Multi-modal ticketing

It will usually not be in the interest of individual bus operators to adapt their servicesand fares to promote integration with rail. Even if it were, the complexity of gettingall the interested parties to act together is such that the transport authority mustestablish and maintain the arrangements needed to provide this integration. This doesnot mean that there cannot be competition – there certainly can – but its operationmust be regulated so as to promote, rather than thwart integration where this has beenestablished as being in the interests of the travelling public.

5.4.4 Competition and Wider Policy Issues.Urban public transport is an important social and economic activity and itsmanagement and operation will be, to varying extents, subject to general nationalpolicies in these areas – especially where it is receiving public funding. Clearly anynational regulations on safety, working conditions, discrimination, environmentalstandards etc. should be respected and competitive pressures should not be allowed toresult in these being breached, whether applying to the economy as a whole or thepublic transport sector in particular. However there is the opposite question as towhether, through procurement procedures or regulation, transport authorities shouldrequire higher standards than those applying nationally. There may be good transportor transport related reasons for requiring higher standards. Examples include:

• Vehicle specifications to cope with particular local circumstances (e.g. lowemissions in dense urban areas)

• Multi-lingual signage in an international tourist environment

On the other hand the public authority may wish operators to adopt employment andother policies for non-transport reasons. An example of this was the retention of busconductors in South Yorkshire (UK) in the late 1970s/early 1980s in order to helpkeep down local unemployment levels. Policies like this may well have adverseimplications in increasing costs and consequently making public transport lessaffordable and less competitive with private transport. If it is decided that extraneousconditions of this kind are to be imposed by the authority they must be imposeduniformly on all operators to ensure fair play not, as has happened in some cities (e.g.Zurich), just on public sector operators.

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5.5 The Implications of Urban Public Transport Modal Characteristics forCompetition and RegulationThe several modes of urban public transport have particular technical, economic andsocial characteristics that have important implications for the types of competitionand regulation to which they can effectively be subject. These are discussed belowand the implications for the choices of competitive/regulatory regimes outlined.

5.5.1 Fixed Track SystemsThe technology of fixed track systems (trams, metros and heavy rail) give themdistinguishing characteristics which limit the extent to which they can be subject tocompetition. The containment of operations on a set of tracks means that the scopefor a variety of operators to offer competitive services over the same route is limited.This is made more problematic with sophisticated systems where technological andoperational compatibility are essential requirements to safe operation. Moreover inthe urban market the service requirement is usually well defined and, in most cities indeveloping countries, the available capacity is fully subscribed. The scope for offeringeffective competitive alternatives “over the tracks” is therefore minimal. As such theopportunities for competition lie in offering concessions for operations, facilities andservices.

The layout of some fixed track systems can permit competition between lines thatserve overlapping markets, but this is rare in urban operations.

Many railway organisations are monolithic, conservative and largely self sufficient forday-to-day activities. They are, or have been, para-statal enterprises dependent ongovernments for their franchise and often their financial viability. Because of theireconomic and social significance they are highly regulated which has reinforced thisintegrated, often neo-military organisational style. These types of organisations canbenefit substantially from the introduction of “internal competition” which allowsexternal suppliers of goods and services to compete with internal business units. Thismay require the development of outsourcing capacity, which can take time, butincreasingly large commercial railway equipment groups are now providing a range ofservices that have been traditionally sourced within large railway corporations. Thereare also many ancillary services (cleaning, catering, engineering services, maintenance,advertising, property management, etc.) that are readily available in the market placeand should be procured competitively to ensure value for money.

The main scope for direct competition in urban fixed track systems lies withcompetition for franchises and concessions. The main obstacle to engaging in suchcompetition is that the incumbent usually owns the infrastructure and rolling stock,employs most of the skilled workers and has the special technical and managementskills associated with that particular type of enterprise. As long as this situationremains, there is little scope for competition. To overcome this problem the entiretyof the key assets have to be offered as part of the competition or transferred to thirdparty providers who will deal with the competing bidders on an equal basis, or ahybrid of these two arrangements.

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5.5.1.1 Two basic models

This has lead to two basic models of competition for fixed track systems. One is thevertically integrated operation and the other is the vertically separated option. TheManchester Metrolink (UK) with the responsibility for all aspects of infrastructure,operations and commercial policy lying with the concessionaire is an example of avertically integrated operation. With the vertically integrated option a completeoperation is offered to bidders for a concession period. There may be conditions inrespect of:

• Service levels

• Service quality

• Fares

• Maintenance and investment

• Treatment of employees

• Condition of assets at the end of the concession term

and the concession will typically be strongly regulated especially in respect ofpassenger safety. The franchise will usually involve payments (either way) between theauthority and the operator and the period may be predetermined or negotiated as partof the award process.

In the vertically separated option, one agency is responsible for the infrastructure(track signalling, structures, etc.) and multi-user facilities. Other agencies areresponsible for operating the services over the infrastructure. Perhaps the best-knownexample of this is the national railway system in the UK. Here twenty five passengertrain operating companies and one freight operator run services, by agreement, overan infrastructure network owned and operated by a single private company - Railtrack.This has the theoretical advantage that, in those limited instances where services canbe operated commercially; service operators can compete with each other. In purelyurban operations this is likely to be very limited in practice so these theoreticaladvantages rarely exist. However as many urban heavy rail systems are part ofnational system with longer distance services, where this kind of competition may bepossible, there can be overlapping competition between local and long distanceservices for that part of the market which cam use either. There may be economies ofscale from having a single infrastructure operator but this is by no means certain.

The issues for urban railways therefore are how to define franchises, conductcompetitions and regulate franchisees. The choice between an integrated orsegregated franchise will probably be strongly influenced by the technicalcharacteristics of the operations. If the urban service is self-contained then almostcertainly an integrated franchise will be the most effective.

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Currently proposals are being developed for franchising the infrastructure of one ofthe world’s largest metros – the London Underground. This involves theinfrastructure (including rolling stock) being packaged into three long-terminfrastructure franchises with the services remaining as a single public sectoroperation. This has the advantage of making private finance available for those capitalassets for which it is needed whilst maintaining fine public control over fares andservices. On the other hand the costs and complexities of managing the interfaceswith three infrastructure operators and co-ordinating, often disruptive, assetimprovements between these suggest that this may not be the optimal franchisestructure for this type of system.

5.5.1.2 Sharing of infrastructure

Where the urban services have to share infrastructure with other services (e.g. longdistance passenger or freight) then a segregated franchise/concession may benecessary. If however the urban service is the dominant user, and the infrastructure isnot closely integrated with a wider system (e.g. through signalling and train controlsystems), it may be possible to have an arrangement with the urban operators beingresponsible for the infrastructure he uses but providing capacity for the secondaryoperator. The desirability and practicability of arrangements of this kind can only bedetermined on a case-by-case basis and great care will have to be taken to have clearresponsibilities; especially for safety matters.

5.5.1.3 Length of concession

As any rail franchise is likely to last for a substantial period (seven years to thirty yearsor more appears to be the most likely range) the competition will have to address theissue of commitment and competence of bidders over the longer term - includingtheir financial soundness. The period will have to reflect the scope of the franchise.A "UK style" franchise where the franchisee does not have to own rolling stock and isnot responsible for infrastructure can be short. Although even in these circumstancessome franchise periods have had to be extended to make replacement of rolling stocka viable proposition. On the other hand where the franchise involves responsibilityfor all the assets a longer period will be appropriate in order to allow thefranchisee/concessionaire to obtain a reasonable return on the cost of assetimprovements. This requirement for a full return on assets can be reduced bytransferring assets to a successor franchisee at a price, or by a price formula,determined at the outset.

5.5.1.4 Conditions of concession

It is unlikely that the authority will want to give up responsibility for the fixed tracksystem in perpetuity, so there will have to be provisions for the franchisee to returnthe system to the authority in good order and for the authority to be able to step in, inthe event of one or more types of failure of the franchisee. The authority will alsowant to ensure that the franchisee operates the franchise in accordance with the termson which it was let which may include:

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• Periodic payments between the parties

• Fares levels and structure

• Minimum service provisions

• Capacity requirements

• Service quality standards

• Asset maintenance and renewals

• Co-ordination/integration with other operators

How many requirements are placed on the franchisee and their content will be amatter to be determined by the authority in the light of its transport and financialobjectives and negotiations with the bidders. Because the operations of railways areso contained monitoring performance should be relatively easy, however enforcementmay not be so unless well targeted and powerful bonus/penalty arrangements are inoperation.

Where the franchise involves payments from the authority to the franchisee thenenforcement can be aided by adjusting the payments. Where this is not the case thena system of performance bonds will be required sufficient to incentivise performanceachievement and, in the extreme, to finance the replacement of the franchisee byanother party.

Where the franchise is purely a matter between the authority and the franchisee then itshould not be necessary to have independent regulation except to assist witharbitration in the event of disputes between the two parties. Where third parties areinvolved (other service operators and infrastructure operators) then an independentregulator will be needed. Also if the franchise does not control key aspects of faresand services then the regulator may be needed to protect the public interest frommisuse of quasi-monopoly power unless the system is in direct competition with othereffective modes/services then this form of regulation might be deemed to beunnecessary.

Where the franchise includes maintenance of assets then there must be clear standardsto which they are to be maintained. When this extends to asset improvements, as onewould expect to be the normal case, this becomes more complex. It will not usuallybe possible to specify what improvements should be introduced when and what willbe the most cost effective technology at some distant point ahead in time. Moreoverthere is the matter of how to ensure value for money in the procurement of assetimprovements if they have to be negotiated with the infrastructure franchisee. Clearlyprocedures will be needed which addresses both these issues.

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Most fixed track systems are rail based. However there are a number of (non-guided)busway systems where open access is practicable. The competition and regulatoryissues for these are more akin to those of buses generally except in the important issueof operational and safety aspects of the busway which would have to be subject tocontrol by the authority, or on its behalf, by an independent entity if it were to be usedby more than one commercial interest.

5.5.2 BusesThe bus industry enjoys relatively low barriers to entry and limited economies of scale;therefore the introduction of competition should be relatively easy and effective.Where competition has been introduced in replacement of public sector operationssubstantial cost reductions almost inevitably follow and usually services are alsoexpanded. In both Stockholm and Copenhagen costs were reduced by about aquarter and some of these savings have been put back in service quality and volumeimprovements.

For the full benefits of competition to be realised it will usually be necessary foroperators to be in the private sector. This is because they are able to be more flexiblewith labour agreements, have greater freedom to raise capital are able to rewardsuccess in a way that is often difficult in the public sector. Privatisation also has theessential feature of eliminating the danger of hidden subvention by the public owner.Even if this does not occur in practice suspicions by private companies that it isactually or potentially available to a public operators can inhibit competition.

5.5.2.1 Problems of unregulated competition

Open competition in the provision in bus services however can lead to a number ofproblems which some form of public intervention may be needed to avoid. If left totheir own devices operators will only provide those services that produce acommercial return. This may leave some areas and times of day poorly served. In theUK following bus deregulation low density, late evening and weekend services wereheavily cut back in the operators' commercial networks. Where this out of line withthe transport authority's objectives then action will be needed to remedy thisshortcoming. This could be either by:

• The authority assuming control of overall service planning

• The authority imposing service conditions in Permits to operate

• The authority providing supplementary services to cover gaps in the commercialoperation

Again in the UK deregulated regime the "gaps" in the commercial network were filledby the authorities competitively procuring "socially necessary" services.

Commercial fare levels and structures may not fit with the transport authority's aims.If fare levels are "too high" overall then regulation downward is likely to result in

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reductions in service quantity and quality (putting greatest pressure on the leastremunerative services) unless additional finance is provided to suit. Conditions ofPermits can require particular tariffs and concessions to rectify deficiencies ofcommercial fare arrangements but again, unless these are revenue neutral, they willhave to be paid for somehow.

Another way in which purely commercial bus operations may lead to a deficientoutcome is in their effects on traffic congestion and environmental nuisance. Left totheir own devices commercial bus operations will tend to gravitate to the busier routesand exacerbate congestion and environmental nuisance thereon. There is alsoevidence that commercial operators will use smaller vehicles in an attempt to obtain aservice frequency advantage over their competitors - again making traffic congestionworse on main roads. In the absence of congestion charging, close prescription ofservice specifications by the transport authority can avoid this, as conditions of moregeneral Permits that restrict the types of buses that can be used on particular types ofstreets.

In large cities, with complex transport systems, there are substantial benefits to berealised by the different types of services working together. As buses are one of themore flexible forms of public transport the arrangement of bus services should be akey feature of this co-ordination. Commercial self-interest and/or suspicions aboutcollaborating with commercial rivals will mean that operators will fail to make the bestof these synergies unless the transport authority requires them to. These are quitedifficult to achieve without a fairly prescriptive regime so point to the desirability, ifco-ordination is required, of well-defined contractual arrangements in larger cities.

The final area in which commercial operations may lead to outcomes that are not inthe passengers' interest, is that of behaviour on the road. There are several examplesof such practices such as

• "Hanging back" to maximise patronage either on the road or at terminals (Accra)

• "Blocking" to obstruct rival operators' services (Santiago when deregulated)

• "Racing" to beat rivals vehicles in picking up passengers (Nairobi)

• "Turning back" to pick up passengers waiting to travel in the opposite directionwhen lightly loaded (Pusan).

These practices are most likely to occur when competitors operate services over thesame roads and are very difficult to control in practice. To deal with them effectivelyrequires separation of rival services (e.g. by area franchising), the removal of thefinancial incentives for such behaviour (e.g. gross cost contracts) or rigorous on theroad enforcement of regulations.

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5.5.2.2 Different regimes for different purposes

Earlier in this chapter we identified the main types of competition that can be used forurban transport, these being:

• Gross cost contracting

• Net cost contracting

• Management only contracting

• Franchising

• Concessions

• Quantity Licensing

• Quality Licensing

• The open market

As indicated in Figure 5.2 not all the regimes are appropriate for the different modesof urban public transport. These neat definitions do not always replicate in practiceand often one type of competition with shade into another. For example looselyspecified net cost contract may be little different from a route franchise. Each ofthese competitive regimes has its own characteristics, which affect the extent to whichcompetition is promoted and the ease with which the potential market failuresidentified above can be mitigated. This is illustrated in Table 5.2, which shows thatthe different regimes present rather different opportunities for modifying marketoutcomes whilst allowing competition to take place. The table includes a public sectorcomparator. The scoring in the table is based on typical schemes to be found inpractice and there is substantial scope for varying the requirements of these basicregimes to increase competition (e.g. by having smaller area franchises) or morecontrol over performance (e.g. by attaching a range of conditions to licences).

Because the bus industry can change and adapt fairly quickly and the requirements forurban public transport change from time to time, it is important to recognise that busservice regimes can and do change over time. Sometimes this is by design, e.g. toreflect the introduction of a metro or light rail line, and sometimes as a consequenceof circumstances which may not be directly concerned with urban transport policy.This dynamic is illustrated in Figure 5.1, which shows a range of different types ofpublic transport operations and how transitions occur from one to another. Thesignificance of this is to help authorities understand where they are in the range ofpossibilities in relation to where they might want to be - what ladders will have to beclimbed to reach the position they desire and what snakes are laying in wait for themto slide down.

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Table 5.2. Competitive Regimes -Competitive Intensity, Institutional Requirements and Control of Market Failures

TYPE OFCOMPETITION

INTENSITY OFCOMPETITION

INSTITUTIONLOAD

SERVICECONTROL

FARESCONTROL

CONGESTIONPROBLEMS

COORDINATEPROBLEMS

ON THE ROADCHICANERY

Public sector 0 * **** **** **** **** ****

Gross cost contract ** ? *** * **** **** **** **** ****

Net cost contract ** ** *** ***? **** *** *** **

Management cont. **? *** *** **** **** *** **** ****

Area franchise * *** **? *** *** ** **** ****

Concession ** *** ** ** * ** ***

Quantity Licence *** *** *? ** *? ** * * **

Quality Licence **** *** * * * * *

Open market **** **** * * * * *

* Bad ? Good ***

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5.5.3 Para-transitBy its very nature para-transit is usually the least regulated form of urban publictransport. Often it has sprung up to fill gaps left by the inadequacies or collapse offormal public transport. When it did not, it grew in an environment where therewas insufficient institutional interest or capacity to provide formal services.Typically para-transit is provided at a low cost by small enterprises and ranges atone extreme from the rickshaw through to various forms of mini-bus, which maybe of superior quality. However most commonly para-transit in developing citiesis rather low quality.

5.5.3.1 Quality

This low quality raises issues for passengers, operators and third parties. Forpassengers the most serious potential problem is that of vehicle safety but this canbe dealt with by a system of vehicle standards and inspection. A basic requirementfor this to work is that all vehicles must be licensed, and failure to meet andmaintain basic safety standards should lead to licence suspension or withdrawal.As far as passenger amenity is concerned the standard of para-transit vehicles canoften be assessed prior to boarding and, where there is a choice of services, thecase for attempting to enforce vehicle quality standards is weak given that there isusually a more costly - higher quality - alternative. Just as shops are allowed to sellcheap - and perhaps shoddy - goods provided they do not attempt to present themas something they are not, there are usually no good reason not to allow this inpara-transit. The exception to this is where a para-transit system markets itself ashaving superior attributes (e.g. air conditioning) and is licensed to do so. In thiscircumstance the authorities have a responsibility to monitor the quality andenforce the licensing conditions.

5.5.3.2 Fares

The other aspect of the service for passengers is that of fares. Where there are norestrictions of entry there will usually be no case for regulating para transit fares, asunregulated supply should lead to market equilibrium. Where quantity licensing isin place, and there is no effective competition from other modes, the situation isdifferent and a form of fare regulation may be merited. Even if fares are notregulated there may be a case for regulating trading practices - difficult though thismay be to implement in practice. This could, for example, be by imposing anobligation to agree a fare in advance.

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5.5.3.3 Regulating operating practices

As operation of para-transit is usually a commercial activity and these is a pluralityof customers it could be argued that there is no need to intervene in the conditionsfor operators. The extent to which this is right will depend on the local culture.The use of child labour, working hours etc. are all social issues which should beregulated as part of the national economy as a whole. Although if one area oftrade is particularly prone to malpractice then targeted measures may be needed,but within the overall context of the general law. From a transport authority’spoint of view operator regulation should be confined to effects on customers (e.g.excluding criminals from holding licences) and doubtful practices on the street (e.g.blocking).

The third parties interests in para-transit operations will be largely centred on theirbehaviour on the streets - effects on traffic, pedestrians and the environment.Emissions from motorised para-transit should be capable of being controlled bystandard vehicle certification and inspection procedures. The other aspects areparticularly difficult to control as they involve transient behaviour. Little otherthan fines and suspension and withdrawals of licences through normalenforcement procedures is likely to be possible in most situations. This could becarried out formally by the authorities or informally by operator associations or acombination of the two.

5.5.3.4 Quantity licensing

Finally an issue for the authorities is whether to impose quantity licensing andwhether this is likely to be effective given the propensity for illegal operations.The factors to be taken into account in reaching such a decision include:

• The adequacy of formal public transport in terms of capacity, ubiquity, qualityand price

• The burden para-transit operations impose on street capacity and theenvironment

• How well specific regulations can prevent wasteful competition andexternalities

• The employment implications of limiting number of operators and vehicles

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If the number of para-transit licenses is unrestricted, experience shows that, in theabsence of very stringent quality controls, the number of vehicles will expand tocreate excess capacity – especially in economies with significant un, and under,employment. Excess capacity occurs when there is more capacity than is neededto meet demand and the advantages of higher frequencies are outweighed by theoperating and external costs of additional vehicles. Whilst this will give higherfrequencies it has a number of disadvantages. The search for profitable traffic willlead to competition with higher capacity modes (buses and trams). This willexacerbate congestion in the busier corridors these serve and undermine theirfinancial position. Over capacity also means low returns for para-transit operatorsresulting in poor vehicle quality and aggressive on-street behaviour. It may alsolead to substantial financial failure and default on loans creating an aversion in thebanking community to financing urban public transport operations.

It is not uncommon to find para-transit operators (and in some instances busoperators also) forming route or operator associations to limit the problems ofexcess capacity. Where this occurs the operators group together to share business.In so doing they may agree common fares and service arrangements and soprovide a more consistent and reliable service for customers. Such associationsmay also act to curb abuses and unruly behaviour by its members. This form ofself-regulation can supplement weak public regulation but is also open to abuse inthat it can easily develop into a system of cartels. To rely completely on this as aform of regulation is consequently very risky, but licensing the associationsconditional on agreed standards and letting the associations control their memberscan be a useful way of reducing the public sector administrative load. Indeed insome societies the use of peer pressure of this kind can be more effective thencontrol by the authorities.

5.6 Changing Competitive/Regulatory RegimesIn most urban areas the competitive/regulatory regime has changed at least once.Sometimes this has been by a well-managed process and sometimes as result offorce majeur. These changes can be gradual or involve sudden upheavals.Understanding of how and why these changes take place can aid the appreciationof the reasons for the prevailing regime in any given area and help to selectpathways to a preferred regime.

Mexico City provides an example of regimes changing over the last twenty years.In the early 1980s privately operated medium-sized buses served Mexico City. Inorder to increase vehicle size and bring greater order to the network these were

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municipalised and the company Ruta 100 was formed. This company was notsuccessful in meeting demand adequately and large numbers of passenger vans –Combis, filled the shortfall in service. Also the low level of efficiency of Ruta 100meant it needed financial support.

At the end of the 1980s Ruta 100 was privatised and Combi operators had theirlicenses replaced on a one-to-one basis by microbus licences: microbuses havingseveral times the capacity of the Combis. Consequently there was a largeexpansion in capacity and the number of large buses fell sharply as a result ofcompetition form microbuses. The 30,000 microbuses which now ply the streetsof Mexico City now compete with the Metro and are draining riders from thismore efficient system and worsening street congestion and pollution.

The over capacity also meant low returns for the Combi operators which, in turn,has lead to lower vehicle standards and defaults on vehicle purchase loans. A newregime is now being proposed which will phase out most microbus licenses andissue fewer licenses for full sized buses. This is intended to reduce over capacityand its attendant effects on traffic and air quality. So, in a little over two decades,we will see a transition from a private bus regime to a municipal bus/para-transitregime and back to a private bus regime.

5.6.1 A typology of regimes and transitionsFigure 5.1 sets out a stylised representation of the range of maincompetitive/regulatory regimes to be found in urban public transport and some ofthe principal transitions between them. It would be appealing to think that there iscomplete and precise schema for this realm of competition but we have found somany variations that this has eluded us. Indeed the diagram contains a number ofsimplifications and omissions, but it serves to show the main structures and howthey relate in broad terms.

Those regimes on the left of the diagram are the more regulated and are limited inthe quantum and/or form of competition that they exhibit. Moving to the rightmeans less regulation and, at least at the micro scale, greater competition. At thetop of the figure there is extensive financial involvement by the public sectorusually, but not always, requiring substantial public subsidies. At the bottom of thefigure operations are on a purely commercial basis. There are three domains in thefigure. The organisation of bus transport can lie anywhere, whilst fixed trackoperations will usually be found in the top left sector and para-transit in thebottom right.

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The distinctions between these different classes of regimes are not always clear-cutbut we think this representation is a helpful one for the purposes of this study.Real life regimes can follow one of these models closely or comprise a variant.They can also take the form of a hybrid. The UK deregulated bus regime is acombination of quality licensing and net/gross cost contracting. In Adelaide thecombination is that of a public monopoly in the urban core and concessions inperipheral areas. Sub-contracting provides another variation. An example of thisis where a franchisee finds another operator can operate part of his services moreeconomically and awards an operating contract to him whilst retaining overallresponsibility for the service in his franchise area (e.g. Bangkok).

The type of regime will often vary between modes where several modes are foundin the same urban area. A common example is where there is a public metrosystem, whilst independent operators under contract to the transport authorityprovide bus services (e.g. London).

The figure shows some of the more important ways in which one regime changesinto another. Of course, in any particular urban area there had to be a startingpoint. In some cities this was a result of the authorities deciding to provide apublic transport service as part of their civic responsibilities. In others, privateoperators initiated services and the authorities simply introduced a system oflicensing, or regulation, to improve safety and to match the service offer moreclosely to their perceptions of the needs of the travelling public. In still others theauthorities played no part and private operators or local communities simply goton and organised their own services

Not all the possible transitions are shown and we have not found examples of allthose illustrated amongst the cases we have studied. The main drivers of transitionidentified are:

• Public policy initiatives

• Shortages of public finances

• Emergence of new competition

• Institutional failure

• Collective initiatives of private transport operators

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either singly or in combination. Most recent changes have been in a "south-easterly" direction although there have been changes in the other direction (e.g.Santiago {Chile}). In developed countries this has been to improve efficiency andreduce public expenditure. In developing countries this has more often been to tryand increase capacity or as a result of failure of public enterprises.

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Figure 5.1

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6 Conclusions from Case studies on GoodPractice in Competition and Regulation

6.1 IntroductionAnnex 1 summarises the findings from the twenty-six case studies that wereconducted as part of this review. In this chapter we set down the conclusions we havebeen able to draw from these.

Attempting to apply one general solution to all situations would not represent gettingthe most benefit from the use of competition in urban public transport. The genericregime most appropriate to the circumstances of the area in question should beselected and then customised to reflect its particular characteristics. In doing this, theconstraints imposed by limitations in institutional and financial capacity must be fullyrecognised. It is also important to identify the different aspects of competitiveregimes that can improve performance of urban public transport systemsincrementally as it may not always be possible to make wholesale changes to regimesdue to political and social considerations.

The performance of a system should not be judged simply on the basis of what ismost efficient or the most equitable as the aims of urban public transport policy oftenserve wider goals. The following analysis examines the performance of differentcompetitive regimes by considering:

• Coverage• Efficiency• Safety• Environment• Integration

One regime is unlikely to provide the best outcome against all criteria and there areinevitably trade-offs to be made, which reflect policy priorities and financial andinstitutional realities.

6.2 Comparative Performance AnalysisThe performance of different competitive regimes has been assessed, as far aspossible, by using comparative performance indicators. These indicators derived frominformation gained during the literature survey. They are, of necessity, rather crudeand are not always comparable across case studies, as definitions vary or data may beunreliable or missing. Comparability is also confounded by differences in the citiesthemselves, for example some cities have more commuting from outside theirboundary thereby increasing the number of public transport trips in the city itself.

The performance indicators have been limited to those of coverage and efficiency.Information on safety was limited to cross sectional data in a few case studies.

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Detailed information on pollution was not generally available. In circumstances wheresome pollution calculations had been carried out differences in methodology havemade direct comparability impossible. Conclusions on good practice therefore havehad to be limited to the partial information that is available.

The level of system integration is very difficult to judge using performance indicators.Assessments of environment and integration have been limited to a descriptiveanalysis.

6.2.1 Socio-economic conditionsThe demand for public transport will depend heavily on the characteristics of the cityitself. Kenworthy and Newman2 have identified the following factors as the mostrelevant to public transport demand:

• Density of population and jobs throughout the city

• Weight of the central area especially in its residential concentration but also in theproportion of jobs it contains

• Car ownership

• Road space per capita

• Central area parking provision

• Car travel speeds

• Public transport service quality

Population density and the relative importance of the Central Business District (CBD)are both important determinants of the level of public transport usage. Publictransport is most effective where flows are concentrated along main corridors.However such concentrations of flows lead to congestion for general traffic and,unless extensively protected, road based public transport.

There is no single source of relevant statistics for the cities we have taken for our casestudies. City population data is available from a number of sources, howeverdefinitions of city boundaries differ. The area of responsibility for the transportauthority will also vary, particularly in large cities where there will often be a city and ametropolitan authority, neither having overall responsibility. As far as possiblepopulations have been taken to be commensurate with the area of responsibility of the

2 Cities and Automobile Dependence: An International sourcebook, P.W. Newman & J.R. Kenworthy, AldgatePublishing Co., 1989.

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transport authority. Land areas have also been taken over similar areas. The resultingpopulation densities can be misleading, as large tracts of land may be lightly populated,for example in Rio de Janeiro 76% of the population live on only 15% of the land.Population densities along main transport corridors can also be higher. In Curitibadevelopment is focused along the main transport corridors leading to higher levels ofpublic transport usage.

Car ownership, road space and parking provision are all important determinants of thelevel of car usage. Information gathered on car ownership on a city basis is patchyand so has been supplemented by national data. Available data on road space andparking provision is limited to a few cities and so has not been shown. This has beensupplemented by information on income/head3, which provides a general indicator oflikely car ownership. Public transport quality is covered in the remainder of theindicators.

Socio-economic indicators of the case studies are summarised in Table 6.1. Table 6.2summarises the competitive regimes present in each of the case studies.

6.2.2 CoverageThe coverage of public transport is an important determinant of accessibility andmobility. A rough guide to the coverage of public transport can be gained from thenumber of buses per million inhabitants. A more meaningful measure of buscoverage is bus route km per million inhabitants. Bus transport, despite dominatingpublic transport in most cities does not provide all transport. In more developedcities metro, light and urban heavy rail systems can all carry significant proportions oftraffic. An indication of their coverage has been given by route-km per millioninhabitants.

These measures take no account of the contribution of the informal sector. This canaccount for 50% or more of public transport movements in some cities (Kunaka,1996). An indication of the coverage of para-transit operations has been given byidentifying the number of para-transit vehicles per million inhabitants althoughbecause of the nature of this sector these are likely to be the least reliable of thestatistics.

Indicators of public transport network coverage are shown in Table 6.3. There areobviously a number of gaps and inconsistencies in the data however a number ofgeneral conclusions can be drawn.

Good practice in public transport coverage can be characterised as the provision of acoherent, comprehensive and efficient public transport network, responsive to

3 City urban capita per head = national GDP/head/(0.6a + 0.4) where a is the ratio of urban to total nationalpopulation. Where the city is a capital city the estimate is increased by 10%. Taken from Allport and Thomson (1990)

50

demand and the needs of consumers. Para-transit operations, as illustrated in Table6.3 can provide very high levels of service. Quality para-transit operations, forexample express ‘seat-only’ minibuses, will be concentrated on corridors with veryhigh levels of demand and a sufficient density and variety of demand for marketdifferentiation. Services to low demand areas can be inadequate and the poor can beexcluded from public transport through high fares. In Accra almost all publictransport is provided by para-transit. Despite fares being reasonable, services areconcentrated on main routes with feeder services operating to lower demand areas.Consequently trips across the city can result in long wait times and severalinterchanges.

Direct public sector provision can ensure that an affordable well ordered publictransport network is provided4. This requires technical expertise to ensure thatservices are responsive to demand, effective administration and financial resources toensure that operations are viable. There are however dangers that, in the absence ofcompetition, financial support leaks into operational inefficiencies. Public sectorprovision where there are severe technical and/or financial constraints can result ininadequate services. This is well illustrated in Cairo where a fare-freeze has led to adecline in the number of public sector buses, resulting in low levels of service andovercrowding. The gaps in public sector provision have been filled by para-transitshared taxi/minibus services. Fares for these services are considerably higher thanthose for bus, excluding poorer sections of the community. Even where there aresufficient resources high levels of technical expertise are needed to ensure thatservices are responsive to demand. Similar examples of fare controls impacting onservice adequacy are to be found in Harare, Bangkok, Kuala Lumpur and manyAfrican cities.

4 Direct public provision is not a sufficient condition for a well-ordered public transport regime. To be effective publicprovision needs to be backed by an appropriate administrative and legal regime.

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Table 6.1: Overview of Characteristics of Case Studies

Case StudyCity

Pop.(m)

Area(km2)

Density(p/km2)

CityGDP

US$/head

Cars/ 1000 pop

Para

-

Bus

Ligh

t rai

l

Met

ro

Urb

an ra

il Notes

Accra 1.75 700 36 3 3Adelaide 1.1 930 1,200 22,700 527 3 3 3 3Bangkok 5.7 380 14,900 4,400 205 3 3 3 3Bogota 6.1 350 17,400 3,200 78 3 3 Densities range up to 40,000 p/km2.Budapest 1.9 525 3,600 7,100 280 3 3 3 3Buenos Aires 12.4 16000 800 9,400 70 ? 3 3 3 3 Buenos metro area, city density

14,800 p/km2.Cairo 14.9 1296 11,500 2,300 77 3 3 3 3 Density as high as 70,000 p/km2.Copenhagen 1.3 450 11,500 39,900 280 3 3Curitiba 1.6 430 3,700 3,700 430 3 Density on transport corridors 50,000

p/km2.Delhi 8.4 1486 5,600 900 60 3 3Harare 1.4 1,000 110 3 3Hong Kong 7.0 1098 6,400 25,800 55 3 3 3 3 Urban area density is 36,000 p/km2.Kuala Lumpur 1.2 211 5,400 5,200 170 3 3 3Lahore 6.1 700 3 3 3London 7.1 1586 4,500 27,900 351 3 3 3 3Manchester 2.7 1287 2,100 25,400 386 3 3 3Manila 9.8 636 15,400 1,500 59 3 3 3 3 Metro manila only.Mexico 20 1600 12,500 5,700 170 3 3 3 3 3Nairobi 3.0 600 3 3Pusan 3.9 647 6,000 9,700 55 3 3 3Rio de Janeiro 10.4 5610 1,900 3,700 280 3 3 3 3 Density of much of urban area -

10,000 p/km2

Rouen 0.4 286 1,400 29,900 680 3 3Santiago 4.9 2027 2,400 5,800 125 3 3 3 Vehicle ownership figure.Sao Paulo 17.0 8000 2,100 3,700 ? 3 3 3Singapore 3.3 640 5,200 27,400 100 3 3 3Stockholm 1.5 280 5,400 32,400 410 3 3 3 3Warsaw 1.6 495 3,300 5,700 412 3 3 3 3 Vehicle ownership.

52

Table 6.2: Overview of Competitive Regimes in Case Studies

Case StudyCity

Para

-tran

sit

Bus

Ligh

t rai

l

Met

ro

Urb

an ra

il

Brief description

Accra 4 4 Para-transit shared taxis and trotos (minibuses) controlled by union.

Adelaide 2 2 2 Contracted bus operations. State authority provision of tram and railservices under contract.

Bangkok 4 1/4 4 1 Para-transit taxis and rickshaws. Route licensed state and private bus.Concessioned metro. National railway.

Bogota 4 4 Wide variety of route licensed bus. Para-transit vans and jeeps.

Budapest 1 2 2 2 Municipal bus, tram, metro and urban rail services.

Buenos Aires 4 4 4? 4 4 Extensive taxis. Overlapping bus route concessions. Concessionedmetro and urban rail services.

Cairo 4 1 2 1 Public bus operations with extensive fixed route shared taxis. Transportauthority operated light rail/tram. Metro operated by national railway.

Copenhagen 2 1 Gross cost contracted bus operations with quality incentives. Nationalrailway.

Curitiba 2 Gross cost contracted bus services.

Delhi 4 1/2/4 Buses provided by a mix of state, private contracted, private licensedand unlicensed operations. Para-transit rickshaws. Regional railway.

Harare 4 3 Para-transit shared taxis and commuter omnibuses (minibuses).Franchised conventional bus.

Hong Kong 3/4 2/4 2 2 Franchised conventional bus. Franchised and licensed minibus. Privatetrams. State company provides heavy and light rail and some buses.

Kuala Lumpur 4 4 3 1? Licensed bus operators with overlapping routes. Concessioned metro.Privately managed but publicly owned rail.

Lahore 4 2/3 Para-transit shared taxis and minibuses. Franchised and NGO bus,national railway.

London 2 4 1 4 Contracted bus. Franchised light and urban rail. Public sector metro.

Manchester 2/4 4 3/4 Deregulated and contracted bus, franchised light rail, contracted andfranchised urban rail.

Manila 4 4 1 1 Para-transit jeepney and rickshaws. Licensed bus. Central governmentcontrolled light rail, metro and urban rail.

Mexico 4 4 2 2 1 Extensive licensed bus, microbus and combi operations. Some publicsector buses. Trolleybus, light rail and metro run by public companies.

Nairobi 4 4 Franchised conventional bus. Para-transit matatus (minibuses).

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Case StudyCity

Para

-tran

sit

Bus

Ligh

t rai

l

Met

ro

Urb

an ra

il

Brief description

Pusan 4 4 1 Extensive taxis. Licensed buses. Public sector metro.

Rouen 2 2 Bus and light rail operated under management contract by privateoperator.

Rio de Janeiro 4 3/4? 4 4 Para-transit vans. Licensed and tendered bus. Concessioned metro, railand ferry services.

Santiago 4 2/4 1 Shared and single use taxis. Tendered and deregulated bus. Public sectormetro.

Sao Paulo 4 2? 2 2 Contracted bus and trolleybus. State controlled metro and urban rail.

Singapore 3? 2 2 Franchised bus. Public sector metro and light rail.

Stockholm 2 3 3 3 Contracted bus, tram, metro and urban rail.

Warsaw 1 1/2 2 1 City operated bus, tram and metro. Light and heavy rail provided bynational railway.

Key:

Road based modes (paratransit and bus):

1 – public sector provision2 – contracted3 - franchised/concessioned4 – licensed/deregulated

Track based systems:

1 – national public sector provision2 – local public sector provision3 – contracted4 - franchised/concessioned

54

Table 6.3: Network coverage

Route kmCase StudyCity

Buses Busper minhab

Para-transit

Bus &Para

per minhab

Bus

Ligh

t Rai

l

Met

ro

Urb

anR

ail

Tot

al

kmPer

inhabitant

kmperkm2

Notes

Accra - - 22,000 12,600 - - -Adelaide 743 680 - 680 1,700 10 120 1,830 1,700 2.0Bangkok 10,170 1,800 10,400 3,600 6,800 6,800 1,200 17.9Bogota 20,764 3,400 3,308 3,900 31,346 31,346 5,100 89.6Budapest 1,554 810 - 810 1,178 209 31 176 1,594 830 3.0Buenos Aires 15,000 1,200 N/a 1,200 25,000 22 37 822 25,881 2,100 1.6Cairo 2,626 180 65,000 4,500 1450 86 58 1,594 110 1.2Copenhagen 1,193 920 - 920 4,500 170 4,670 3,600 10.4Curitiba 1,217 760 - 760 1,217 1,217 760 2.8Delhi 8,841 1,100 N/a 1,100 n/a - - -Harare 696 500 3,900 3,300 n/a - - -Hong Kong 11,194 1,600 - 1,600 n/a 56 84 34 - - -Kuala Lumpur 1,000 810 800 1,450 n/a 53 153 - - - Bus excludes

minibus.Lahore 5,610 920 31,183 6,000 n/a - - - Bus includes

minibus.London 5,932 840 - 840 2,900 22 392 3,314 470 2.1 Excludes urban

rail.Manchester n/a 0 - 0 n/a 31 228 - - -Manila 9,600 1,000 118100 13,500 2,345 15 2,360 250 3.9 PNR excluded.Mexico 3,000 150 110000 5,700 n/a 13 191 - - - -Nairobi 422 140 2,500 970 n/a - - -Pusan 2,762 710 - 710 n/a 55 - - - Taxis not included.Rio de Jan. 7,338 710 6,200 1,300 n/a 26 264 - - -Rouen 216 550 - 550 471 15 486 1,250 1.7Santiago 9,000 1,900 42,000 10,500 1,583 38 1,621 330 0.8Sao Paulo 11,450 670 n/a 670 21,690 49 270 22,009 1,300 2.8Singapore 3,412 1,000 - 1,000 3,495 8 83 3,586 1,100 5.6Stockholm 1,676 1,100 - 1,100 7,600 6 110 93 7,809 5,200 27.9Warsaw 2,171 1,300 - 1,300 777 151 11 939 580 1.9

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Private provision under various public authority mandates allows the range betweendirect public and private provision to be bridged using a range of interventions fromdirect procurement to concessions and licensing.

The case studies where there are high levels of relatively well-ordered public transportprovision are Stockholm, Copenhagen, Singapore, London and Hong Kong. InStockholm and Copenhagen public transport is provided by private operators throughhighly specified gross cost contracts, requiring high levels of institutional capacity toensure that services reflect demand. Outside the industrialised countries this type ofsituation is harder to come by, with some Brazilian cities providing the best cases.

In Hong Kong the majority of bus services are franchised on an area basis to privateoperators. Routes and fares are fixed, but changes to routes can be made, usually atthe suggestion of the operators, to ensure that services reflect demand. Fare changesare negotiated between operators and the transport authority according to theoperators’ financial position and public acceptability. This system still requires fairlystrong institutional capacity and relies on operators to provide socially necessaryservices through cross subsidy.

A summary of the impacts of various competitive regimes on public transportcoverage is given in Table 6.4.

Track based systems that are provided nationally tend to be less responsive than thoseunder the control of urban authorities. The decentralisation of rail services in SaoPaulo has improved service frequency and capacity. Ridership has also increased inrecent years.

Increasing commercial risk can also increase responsiveness. The concessioning ofrail and metro services in Buenos Aires has resulted in an increase in ridership withrevenue passenger doubling since the introduction of the concession.

Table 6.4: Summary of Impacts on Coverage

Competitive Regime Impact on CoveragePublic sector Can direct provision to where it is needed but services can be

unresponsive to demand. Can lead to higher costs.Contracted Heavily specified contracts will have much the same impact

as public sector provision. Redesign incentives can increasedemand responsiveness. Will tend to provide a lower costsolution than public provision.

Franchised Can be used to ensure cross subsidy of socially necessaryservices and demand responsiveness on high demand routes.Lower costs than direct provision.

Licensed Routes defined and demand responsive. No requirement tooperate socially necessary routes. Services may beconcentrated where demand is high.

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6.2.3 EfficiencyTypically measures of efficiency focus on the cost of operation. Whilst it would havebeen of some interest to include financial performance as an indicator there wasinsufficient data available to allow this. In the systems of the developed countriesfinancial performance is strongly influenced by public policy factors and therefore arenot necessarily a good indicator of efficiency. In the cities of the developing worldmany public transport operations are commercial and, even if the relevant data wereavailable, it would be unlikely to be a significant discriminator between regimes.Efficiency indicators have therefore been limited to labour and capital productivity.

Two indicators have been used to assess labour productivity:

• Staff per bus (or route-km/station for track based modes)

• Number of passengers per member of staff

The latter measure will also provide a measure of the effectiveness of operations. Itwould have also been useful to consider the number of passenger kilometres per staffmember to take account of trip distance however sufficient information was notavailable for this to be done.

Labour productivity indicators should be treated with care. The two main sources ofincomparability are:

• Contracted out activities, for example maintenance, will not show up in staffnumbers

• Not all companies carry out route planning and scheduling, reducingemployment in planning and administration

Asset utilisation for public transport operations has been assessed in terms of thenumber of passengers per vehicle. To take account of network size on track basedsystems the number of passengers per station and route-km has also been used.

Efficiency indicators have been limited to formal public transport. Information oninformal para-transit operations is extremely limited. Due to strong competition inthis area it is likely that efficiency will be generally high although effectiveness isanother matter.

There will obviously be differences between capital and labour efficiency in developedand less developed countries. The cost of labour is lower in less developed countriesand so more people are employed for each capital asset. The increase in capitalproductivity is most apparent in lengthening vehicle lifetimes and so will not beobvious from the presented performance indicators. This should be borne in mindwhen comparing figures.

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Bus efficiency indicators are shown in Table 6.5 and those for light rail and metrosystems in Tables 6.6 and 6.7.

Efficient public transport operation will not occur without a good framework ofincentives in place. These incentives commonly operate through competition,whether it is for or in the market place. The following sections describe the mainconclusions that can be drawn from the case studies, highlighting the measures thathave been introduced to improve efficiency, in particular the impact of alternativecompetitive regimes.

6.2.3.1 Public sector

Public sector operations generally lack proper incentives for, or are constrainedpolitically against, acting very efficiently. This cannot be easily seen in thecomparative performance indicators in Table 6.5, as differences between countriesand within regimes tend to outweigh those from different competitive regimes. Thedifferences in efficiency become more apparent when considering two differentregimes within a country. In Delhi the efficiency of the state operator DTC is wellbelow that of competing private operators as shown in Table 6.8. Similarly where acompetitive regime has replaced a former public sector monopoly in the same city(e.g. London {UK}) efficiency improves substantially.

Table 6.8: Efficiency of bus operations in Delhi, 1995

Measure DTC PrivateFleet utilisation (%) 83% 93%Km/bus/day 216 246Pax/bus/day 751 1584Staff/bus 9.6 4.6

The reasons for this lack of efficiency are several. Public sector operators usually haveother functions to undertake, for example planning and co-ordination of the publictransport system. In Sao Paulo the now defunct state operator had an average of 8.6employees per bus compared to only 5.5 for private sector operators. Even afterallowing for employment associated with non-core activities labour productivity wasstill 28% below that of private sector operators (ECLAC, 1992). This figure is notuntypical of the increases in efficiency of competitive private operations over publicsector monopolies.

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Table 6.5: Bus Efficiency (various years)

Labour Efficiency Capital EfficiencyCase Study City CompanyStaff/bus Pass/staff* km/bus* Passenger/bus*

Adelaide TransAdelaide 1.5 31,000 - 52,000Bangkok BMTA 5.4 - 87,000 280,000Bogota - - - 140,000Budapest Bus - - 79,000 510,000

Trolleybus - - 56,000 590,000Buenos Aires - - - 200,000Cairo CTA – Bus - - - 670,000

CTA – Minibus - - - 160,000Copenhagen 3.1 69,000 - 220,000Curitiba 6.9 39,000 - 270,000Delhi DTC 6.4 32,000 52,000 210,000

Private - - 64,000 -Harare ZUPCO - - - 160,000Hong Kong Franchised 3.0 88,000 88,000 240,000

Green Minibus - - 110,000 160,000Red Minibus - - - 120,000

Kuala Lumpur - - - -London Average 3.0 54,000 58,000 215,000Manchester Average 2.3 40,000 63,000 90,000Manila - - - -Mexico - - - -Nairobi 7.3 44,000 58,000 320,000Pusan 2.8 130,000 - 360,000Rouen All 2.7 41,000 51,000 111,000Rio de Janeiro - - - 260,000Santiago - - - -Sao Paulo 5.1 28,000 74,000 140,000Singapore Average 2.7 120,000 85,000 320,000Stockholm All - - - 150,000Warsaw 2.4 - 43,000 -

* Annual rates

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Table 6.6. Light rail efficiency indicators

Case Study City System Year Cars/route-km

Car-km/car*

Pass/routekm*

Passengers/ station

Passengers/car*

Staff/route-km

Staff/station

Staff/pass*

(thou) (thou) (thou) (thou) (million)Adelaide Tram 1996/7 2 38 160 71 71 8 3 48Budapest Tram 1997 4 48 1,600 500 420Buenos Aires Tren de la Costa 1996 1 560 8 23

Light rail 1991 2 380 215 170Cairo Helewan 9 980 110

Tram 8 370 50Hong Kong Tramways 1999 7 42 3,700 720 540

Peak tram 1999Light rail 4 91 3,600 2,000 960

London DLR 1997/8 3 27 1,100 820 330 14 11 13Manchester Metrolink 1997/8 1 450 530 530 7 8 16Mexico Light rail 1993 1 830 620 660Rouen Light rail 1999 2 50 1,000 460 550 9 4 9Singapore LRT 1997 2Stockholm Tram 1996 350Warsaw Tram 1996 7 49 27 6 9

Light Rail 1997 1 170 130* Annual rates

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Table 6.7: Metro Operating Indicators

Case Study City Year Cars/routekm

Car-km/car*

MillionPassengers/route km*

MillionPassengers/

station*

MillionPassengers/

car*

Staff/passenger(million)*

Staff/routekm

Staff/station

Budapest 1997 12 81,000 10.2 7.7 0.83Buenos Aires 1997 14 66,000 7.0 4.0 0.51 13 93 54Cairo 1999 8.8 11.6Kuala Lumpur** 1996/7 4 0.8 1.0 0.22 24 20 23London 1997/8 13 2.1 3.1 0.17 19 41 60Hong Kong 1999 11 96,000 9.4 17.9 0.86 11 101 193Manila 1997 12 8.9 7.4 0.76Mexico 1996 14 120,000 8.3 9.5 0.57 9 74 86Rio de Janeiro 1998 3 3.3 3.5 0.95Pusan 1998 12 6.2 6.3 0.53 8 51 52Santiago 1996 9 5.3 4.3 0.62 7 36 29Sao Paulo 1997 13 14.0 15.0 1.06 11 159 171Singapore 1997 6 4.1 7.0 0.66 8 33 56Stockholm 1997 8 95,000 2.4 2.6 0.29Warsaw 1997 6 2.7 2.7 0.49 26 69 69* Annual rates

* *STAR only

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The aims and the remit of public sector operators may also be different. Public sectoroperators often provide socially necessary services that are not commercially viable5.In Central and Eastern Europe the ex-Socialist countries tend to have high levels ofconcessionary travel. In Warsaw the state operator must carry a large number ofconcessionary travellers including transporting for free those over 75, the disabled andwar veterans as well as providing deep discounts for the transport of schoolchildren,students and pensioners.

Public sector operators generally suffer from lower efficiency as a result of lowerlabour productivity. Even if public sectors are operating as efficiently as their privatesector counterparts in terms of staff and capital productivity their costs will tend to behigher. Public sector operators tend to be highly unionised and will attempt to bid upwages. In a large number of case studies this lack of efficiency, due not only to Xinefficiency but also to differences in remits, has resulted in severe financial difficultiesfor public sector operators. These difficulties tend to be self-reinforcing with a lack offinance resulting in poor capital investment; old poorly maintained vehicles andconsequently lower efficiency.

6.2.3.2 Contracting

In response to these problems many countries have introduced some form ofcompetition into public transport. In many developed countries the response hasbeen to contract public transport service from the private sector through competitivetendering. This has provided a major impetus to improved efficiency. In Stockholmgross cost tendering has reduced the costs of bus operation by 23% in real termsbetween 1989 and 1996. A similar picture has been found in Copenhagen, wherevehicle-operating costs have fallen by 24% (1990-8) and London where the unit costfell by 46% (85/6-97/8). In Santiago the reduced costs have been reflected in thestabilisation of fare levels that had increased sharply following earlier liberalisation.

Contracting has also been applied to rail systems in Stockholm. Competitivetendering of the metro has reduced costs by 48% and the local train and tram servicesby 2% (both in real terms), although public sector operators have still maintained asignificant market share. The tendering of commuter rail services in Stockholm hasbeen less successful. The contracting of operations to the Go-Via group in January2000 led to staff shortages as the majority of employees decided to stay with the staterailways due to better terms and conditions.

The level of institutional capacity required for successful competitive tendering is highas the transport authority usually determines frequencies, routes and fares. This inaddition to the transaction costs associated with the tendering process can significantlyadd to costs. Contracting per se will not necessarily increase efficiency, as it is thecompetition for contracts that provides the main driver for improved performance.

5 Some private sector operating regimes also contain social service obligations.

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The level of competition and the outcomes that result will strongly depend on thedesign of the contracts and tendering system. This is discussed in more detail inChapter 7. Contracting has however crystallised operator performance requirementsand focuses management attention on its priorities.

6.2.3.3 Franchising and concessioning

Franchising and concessioning of public transport gives operators more responsibilityfor the provision of services, allowing them to tailor services to the needs of themarket as they see them. Where the operator is responsible for service planning he isable to optimise service effectiveness and operating logistics together. Where theauthority determines services this may result in less efficient operations.

Hong Kong’s system of franchising for conventional bus operations has routes andtimetables set in consultation with operators. Fares are set according to the financialposition of operators and public acceptability. Efficiency of public transportoperation in Hong Kong is likely to be lower than it could be. The introduction ofnew operators, New World First Bus and Citybus, has offered significantimprovements in quality of service compared to existing operators, at competitivefares.

Franchising places less institutional burden on transport authorities and Governmentand so can have a crucial role to play in improving efficiency. Conventional busservices in Nairobi were franchised to a private operator, Stagecoach. Allresponsibility for routes, timetables and fares rested with the operator. Initially thissystem was successful with improved bus service performance and increased quality.But a combination of deteriorating road standards, and strong competition from para-transit operators have led to the Stagecoach selling the operation to local interests.

Concessioning of fixed track systems has had a significant impact on the efficiency ofoperators in South America. In Buenos Aires the concessioning of the metro andurban rail system in 1994/5 has led to an increase in revenue passengers, up by 75%on the metro and more than doubling on the railways. Efficiency has also increasedwith car-km up by over 50% and staff numbers reduced by nearly half. A similarpicture has occurred in other South American concessions. In Buenos Aires theconcessions are currently being renegotiated in order to cater for the unexpectedgrowth in ridership that has followed privatisation, as the original agreement did notprovide for the increase in capacity this has necessitated.

6.2.3.4 Licensing

Service licences confer a non-exclusive right to operate. Licences are common overmuch of South America and are often issued for particular routes with fares being setcentrally. In Bogota licences are given to companies of which the operators of aparticular route are usually shareholders with no limits on vehicle numbers. A similarsystem operates in Buenos Aires with route associations replacing the company.These systems behave more like franchises, as the associations/companies tends to

63

have an exclusive right to operate over a particular route, although routes oftenoverlap. A form of quality licensing is often used in deregulated regimes. Licensedoperators tend to be responsive to demand. Where licences are issued until demand isfully satisfied, for example under the LTS system in Lahore this has lead to efficientlyoperated, demand responsive public transport system. In practice entry into manylicensing schemes tends to be limited by interest groups such as route associations orunions.

Although deregulation or licensing may result in more efficiently operated vehicles thepublic transport system, as a whole may not be more efficient. In Britain thederegulation of the bus market has lead to a marked increase in the number of vehiclekilometres. The cost per vehicle kilometres has fallen by 47% since 1985/6 but thecost per passenger kilometre has fallen by only 3% because of falling ridership and anexcess of supply. In Santiago deregulation also led to an increase in supply but thiswas coupled with a 13% annual real fare increase for microbus transport between1980 and 1987.

6.2.4 Conclusions on the Efficiency of Different Types of CompetitionFor a public transport system to be efficient it requires that there are sufficientcompetitive incentives and regulatory constraints. No one regime is inevitably moreefficient than any other and institutional capacity as well as the type of regime willdetermine the outcome. Contracts can lead to large improvements in efficient butmay not lead to increased effectiveness (in terms of passengers per vehicle) unless theinstitutional authority has sufficient knowledge about demand. Franchising reducesthe constraints on operators and so will tend to improve effectiveness. This may notlead to an increase in efficiency unless competitive incentives are present. Licensingand deregulation will provide incentives for both efficiency and demandresponsiveness but may result in over supply in areas where demand is high and/orunder supply in low demand/poor areas.

Table 6.9: Impacts of competitive regimes on efficiency and effectiveness

Regime ImpactPublic sector X-inefficiency, more sluggish response to demandCompetitive contracting Efficiency high but may not be so effectiveFranchising Effectiveness increases but efficiency will be dependent on the level of

competitionLicensing Can lead to over-supply reducing the effectiveness of the system as a

whole

6.2.5 SafetySafety may not be given sufficient weight in the transport marketplace as often therisks associated with taking an unsafe service are perceived to be outweighed by theadditional waiting time for another services. Accidents are also discrete and onaverage taking a particular service will not result in an accident. Consumers aretherefore weighing up a probability against a definitive article, usually cost, waiting andtravel time, and will find this difficult. Safety will be under-valued unless accidents

64

become so frequent that they register strongly in the public perception. Safety shouldtherefore be treated as an externality. The following paragraphs examine the impacton safety of different competitive regimes and the types of regulation that they allow.

6.2.5.1 Public sector

Public sector operators are subject to direct political accountability and so should beresponsive to society’s demand for safety. This does not always hold true, as theremay be a long chain of bureaucracy between political decision makers and operators.Generally it is better to have localised accountability and control.

Public sector operators may also have severe financial constraints, reducing theirability to invest in new vehicles. Roadworthiness tests are sometimes devolved topublic sector operators. In Budapest BKV carries out its own roadworthiness tests,reducing the disincentives for the use of old and less safe vehicles operating publictransport.

6.2.5.2 Contracting/franchising

Contracting and franchising of operators can lead to a better enforcement of safetystandards depending on the effectiveness of inspection and enforcement practices.Operators will tend to be subject to independent roadworthiness checks and non-compliance with these tests can reduce the chances of contract renewal.

6.2.5.3 Licensing/deregulation

Public transport regimes that are not subject to periodic review will require a strongerinstitutional body to ensure safety. Roadworthiness standards may decline unlessthere are effective penalties within the system for non-compliance. On roadcompetition between operators may lead to unsafe practices such as racing andblocking. Generally in developed countries, with strong institutions, deregulation hasnot led to a reduction in safety (Evans, 1994). In less developed countries, withweaker institutions, reductions in safety seem to have followed the deregulation ofpublic transport. In Delhi the liberalisation of the bus system led to an increase inaccidents from 134 accidents from 1,100 private buses in 1992 to 1,072 accidentsfrom 3,800 private buses in 1995. Prosecutions for poor driving rose from 16,264 in1993/4 to 38,050 in 1995/6. Accidents were only reduced when a comprehensivetesting programme was put in place in 1996.

6.2.5.4 Conclusions on safety of different regimes

Good practice for safety in public transport requires that there is an effective andindependent safety authority. Increasing incentives for self-compliance throughregular inspections by licensing, contracting or regulatory bodies will reduce theinstitutional costs of this enforcement. One of the most effective ways of enforcingstandards in countries with weak institutions has been to hand over responsibility toroute associations who can then regularly inspect operators. Each route associationbeing held responsible for the maintenance of its member’s vehicles.

65

6.2.6 EnvironmentThe enforcement of environmental standards has similarities to safety enforcementand many of the same conclusions apply. Incentives for compliance withenvironmental standards will be strengthened if they are internalised in theregulatory/contracting system.

6.2.6.1 Emissions

The main contributor from passenger transport to atmospheric pollution is the privatecar. The dramatic rise in car ownership in many developing cities has led to anincrease in congestion and pollution.

Table 6.10 Sources of air pollution in Delhi (% of total)

1970-1 1980-1 1990-1Industrial 56 40 29Vehicular 23 42 63Domestic 21 18 8

Source: Mathur (1998)

Inadequate public transport has often contributed to the rise in car ownership. Asincomes, car ownership and values of time increase conventional bus services arecompetitive with private transport for a reducing proportions of journeys. For manyjourneys conventional bus services are not able to offer a competitive service toprivate transport as incomes and values of time rise. In some cities, for example Riode Janeiro and Cairo, this has led to a growth in premium para-transit operations,providing a fast, limited stop service at a higher price, using vans and minibuses. InRio de Janeiro it is claimed that as many as 85% of passengers on these services havetransferred from car (Janes 1999/00). Para-transit operations in other cities havetaken proportionately more passengers from bus transport, instigating a vicious circleof increased fares, lower frequencies and reduced patronage.

Para-transit operations are difficult to regulate, making vehicle standards difficult toenforce with vehicles often not properly licensed and ownership widely dispersed. Onthe road competition from para-transit operations leads to irregular stopping patterns,increasing congestion particularly in city centres. High levels of supply will exacerbatethis. A similar pattern of over supply can also be found under other deregulatedregimes, for example bus transport outside London in the UK and Santiago in Chile.

6.2.6.2 Conclusions on emissions and competitive regimes

Essentially there will be a trade-off between congestion and pollution from publictransport and car use. Premium para-transit operations should be attractive enough toappeal to higher income car owners but have a sufficient price premium to detersignificant switching from regular bus services. Licensing or franchising minibusoperations from private operators can do this, thus allowing some form of regulation

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to be imposed. These systems have been relatively successful in Hong Kong andBogota.

6.2.7 IntegrationAn integrated public transport system will feature:

• Common fares and ticketing

• Multi-modal information

• Easy transfer between modes

• Design of routes/networks to optimise the use of the system as a whole

Integration facilitates the provision of a ‘seamless’ public transport network. Demandcan be focused on modes with low marginal costs and spare capacity, for examplemetros, improving the efficiency of public transport.

(a) A single operator or a strong authority?

Integration is easiest in systems where provision is by one operator, who will haveincentives to maximise the use of the public transport network as a whole.Contracting of public transport operations where routes, schedules and fares are allspecified by a single transport authority allows integration to be maintained anddeveloped.

Integration will require a strong transport authority responsible for all publictransport. In Sao Paulo different political bodies are responsible for city andmetropolitan transport authorities. This has led to frequent political conflicts and alack of integration.

When a single transport authority is responsible for all urban public transport modesintegration is easier to achieve. The decentralisation of urban railways in Rio deJaneiro has allowed greater integration with other modes, improving integration andridership.

Increasing operator freedom and risk will reduce incentives for integration, whether itis by the introduction of net cost contracts or the franchising or licensing of operators.In Hong Kong the construction of the metro initially led to lower levels of ridershipthan expected due to lack of integration. The competing bus operators continued tooperate parallel routes due to fears over the reduction in revenue. Only afterGovernment intervention, and compensating fare increases, were feeder servicesintroduced, along with more aggressive marketing, and frequencies on parallel routesreduced to a limited extent.

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(b) Franchises and consolidation

Integration can be enhanced under franchising through the provision of areafranchises, as in Hong Kong. Where operators have responsibility for all services inan area they will seek to plan routes and co-ordinate timetables to ensure publictransport use in maximised.

Combining the operation of different modes can also enhance integration. In SaoPaulo and a number of other cities feeder bus services are operated by or responsibleto the metro. A similar rationale lies behind the proposed integration of light rail,metro and bus services into two groups in Singapore.

Service integration under a licensing scheme can be increased through the definitionof routes to ensure that feeder services are provided. The provision of a fast, relativelylow cost mode may, in itself, provide an impetus to integration as seen in Cairo wherethe introduction of the metro has led to the development of feeder para-transitservices.

(c) Fares integration and independent operators

Fares integration may prove more difficult with independent operators. Historicallyprivate operators have proved resistant to fares integration and through ticketing asthey feel it erodes their revenues. In Rio de Janeiro, private bus operators kept muchof the revenue from though ticket sales to themselves until tokens were introduced(needs checking). The introduction of smartcard technology is one possible wayforward. Initial results from the introduction of the Octopus system in Hong Kongshow strong levels of take up by private operators, with consumers using thoseservices on which the cards are not valid less. In a simplified form it may provepossible to implement smartcards to developing countries and even extend their useto para-transit operations.

6.2.7.4 Conclusions on integration

Effective integration ideally requires that a single local transport authority isresponsible for the main service features of all transport modes within an urban area.With multiple transport authorities effective integration is still possible but isconsiderably more difficult. Efficient integration in smaller towns and cities isprobably best achieved by franchising all public transport services to one operator, asin Rouen. In larger cities, such as Stockholm, gross cost contracting is probably themost effective means of maintaining integration and efficiency.

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7 Design of Competitive Systems,Contracting, Concessioning and Licensingissues

7.1 IntroductionThe preceding chapters have looked at how competition can be applied to publictransport operations in the light of its particular characteristics and how this hasworked out in practice in a number of case studies. This chapter draws together whatwe have been able to conclude from this for the design of competitive systems.

The most striking features of the case studies is the great variety of competitivesystems that are in operation, ranging from the tightly prescribed schemes inStockholm, London and Copenhagen through to near “free for alls” in Accra andLahore. The second most striking feature is how large the gap is in many citiesbetween how competition and regulation are designed to work and how they turn outin practice. From this two, perhaps rather obvious, conclusions can be drawn. Firstlythere is not a simple set of models that can be readily adopted to suit the all of thewide variety of sets of circumstances to be found in the cities of the developing world.Secondly, many competitive/regulatory regimes fail because they do not adequatelyreflect the political, administrative, financial and technical realities of the environmentsin which they operate.

Competition will occur wherever there is a market in which more than one player cantake part. Public authorities can influence this competition by a number ofinstruments, the most important of which are by the granting of various kinds ofrights, ranging from direct contracting through to licensing, and by constraining theway in which operators are able to behave through regulation. In the followingparagraphs the several features of these Permits are looked at along with theirassociated regulation.

7.2 Public PolicyFirst and foremost in the design of a competitive regime the public policy objectivesfor public transport, both in its own right, and as a wider tool of economic, social andland use policy should be established. If the public sector is simply interested inminimising the cost to the public purse then one type of regime may suit. If on theother the promotion of economic renewal, providing an alternative to using privatevehicles or serving the needs of particular sections of the community are importantaims, a more prescriptive type of regime may be needed.

7.3 Institutional CapabilitiesBecause of the constraints that institutional and financial capacity impose on theeffectiveness of competitive regulatory regimes there is a strong case for assessing thisat the outset of the design process. The strength of the institutional capacity, the

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range of administrative procedures and the level of financial resources that theauthorities are able or prepared to put into urban public transport should beestablished.

7.4 Urban Form and the Transport MarketThe type of urban area, especially its density, will have implications for the mostappropriate type of competitive regime. Where densities are high commercially viableservices are likely to be dense and frequent and there may be rôles for a number ofoperators. On the other hand where the market is thin the only means of gettingreasonable coverage may be by granting an exclusive franchise or concession and/orproviding subsidies. The structure of urban areas also has implications for the patternof public transport usage. Complex multi-nodal and very large cities will tend torequire multi-leg journeys so making regimes that secure integration more appropriate.With simple mono-centric cities this will be of less importance.

7.5 Industrial Strength and StructureThe power and type of competition that can be expected will depend critically on thestate of the local public transport industry and its established practices. Where there isa diverse range of independent operators used to taking commercial risk, then there isa wide range of competitive formats that could be used. Where there are only a fewoperators reluctant to take commercial risk then area franchising or gross costcontracting may be more appropriate. If there is a public sector incumbent then thecompetitive strategy should be designed to overcome concerns about bias and"leakage" of public funds to help the public sector company compete

It is more than likely that the political, institutional and industrial factors will not allpoint to the same form of competition. This should be recognised at the outset andan approach agreed to the preferred compromise. The authorities may be able to varyone or more of these factors by, for example bringing in operators from other sectorsof the economy or from outside the area. Creating a new source of dedicated revenue,or securing an increased share of an existing revenue scheme may ease shortage offunds. Institutions can be strengthened and, just as outside service operators can bebrought in, it may be possible to contract in an external regulatory organisation. If theregulatory regime involves financial penalties it might even be possible that such anoperation could be self-funding.

These issues should be addressed and resolved at the outset as if there are seriousmismatches between the competitive/regulatory regime and the basic “resources” ofindustrial, regulatory and financial capacity it is probably that the regime will beineffective and may even collapse.

7.6 Contract Parameters

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7.6.1 ScopeThe scope of contracts can vary widely. Contracts can be for the provision ofinfrastructure and/or operations. Operational contracts can include revenueresponsibility or simply be based on costs. The specification of contracts can bedetailed or broad. All these factors will affect the performance of the contract.

The inclusion of assets within a contract can both be an incentive to reduce orincrease efficiency. The client may wish to provide joint assets such as bus stations toensure fair access, as is the case in many cities. The client can also provide strategicassets to prevent exploitation by the incumbent. The client can also provide otherassets such as vehicles. This is particularly important where finance is difficult toobtain. Client responsibility for rolling stock can be used to as a means to ensure thatvehicles are replaced in a timely fashion and standards maintained. However theclient must take care with the provision of assets, as this will reduce the operatorspotential for improving efficiency. For example the requirement to use a particularbus depot can restrict the operators ability to find better or cheaper locations. Themore assets of the clients that the operator uses the greater the scope for dispute overresponsibility for performance failure.

The level of detail in contracts will also affect efficiency. On the one hand a highlyspecified contract will ensure that the service product closely follows the client’srequirements. On the other a looser specification gives the operator greateropportunity to increase operating efficiency and tailor services to better meet marketneeds.

The scope of franchises and concessions is usually greater than that for contracts andusually includes the provision of a greater range of assets by the operator than withsimple contracting. This may allow the operator to maximise efficiency by optimisingthe location of some facilities. This will increase the incumbent advantages for theoperator, forcing potential entrants to provide alternatives. One way to ensure thatassets are provided efficiently is to set up a leasing company for fixed or costly longlife assets, such as bus terminals and trains. Assets can then be provided to allentrants.

Generally the constraints imposed by licences are limited and the transport authorityhas no direct involvement in the provision of services. Private companies on acommercial basis typically provide all operating assets. In developing countries thiscan result in difficulties in obtaining finance for vehicles. This gap tends to be filled byprivate leasing companies to whom the operators pay a fixed fee or % of revenue orby route associations who make finance or vehicles available to members.

7.6.1.1 Detailed features

The following paragraphs set down a range of features that could be included in urbanpublic transport contracts. It contains many elements that would only be required invery prescriptive contracts. In more liberal concessioning and licensing regimes only afew of these would have to be included. However it should serve as a useful checklist

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to help those designing contracting regimes to decide what features of the operationsthey wish to have control or influence over. The features identified are mainly inrespect of services rather then infrastructure provision. Infrastructure concessions aremore complex and circumstantial and we have not attempted to do more than give afew basic pointers as to what issue they should address.

Service Specification

• Routes, services and areas to be served

• Stops and terminals to be served

• Capacity to be provided: peak/off peak

• Frequencies: minimum/maximum, peak/off peak, timetables

• Service quality: reliability, punctuality

• Crowding limits

Vehicle Specification

• Vehicle size, capacity, make/model

• Vehicle age: average/maximum

• Vehicle accessibility

• Door arrangements

• Seating/standing provision, seating for handicapped

• Luggage storage arrangements

• Heating/air conditioning

• Exhaust emissions

• Livery requirements

• Safety standards/equipment

• Information displays: internal/external (including that on other operatorsservices)

• Ticketing/fare collection equipment

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• Standards of repair and cleanliness

• Inspection procedures

Fares and Revenue

• Tariff structure: flat/zonal/graduated, fare values/maxima

• Means of payment: cash, token, voucher, period pass

• Concessionary arrangements

• Compensation for accepting concessionary fares

• Acceptance of other operator/joint tickets

• Payment formula for accepting other operators’ tickets

• Allocation formula/procedures for joint ticketing revenue

• Penalty charges for fare avoidance/overriding

• Fares adjustment formula: fixed, CPI + X

• Compensation formula for variation in fare adjustments from formula

• Advertising rights and sharing of revenue

Road service infrastructure provision

• Location of equipment to be provided/adopted

• Responsibility for and standards of maintenance to be achieved

• Response times for repair of damage

• Services to be provided (e.g. passenger information) and media to be used

• Quality of services to be achieved

• Arrangements for monitoring performance

Performance monitoring

• List of performance indicators (e.g. punctuality, % of schedule run, cleanliness,emissions, customer satisfaction indices, etc.)

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• Frequency of reporting

• Accident reporting procedures

• Provision for independent checks

Performance penalties/bonuses

• List of indicators subject to penalties/bonuses

• Penalty bonus formula for each indicator individually & indicators collectively

• Arrangements for paying/collecting bonuses/penalties

• Penalty points system (leading to contract termination)

Arrangements with third parties

• Responsibility for consents, permits, licences, way-leaves, etc.

• Requirements to prove validity of consents etc.

• Insurance and liability responsibilities

Operational facilities

• Arrangements for vehicle servicing and maintenance

Operational competence

• Possession of relevant operator licences

• Arrangements for employee certification and checking their licensing

• Arrangements for ensuring employee fitness for work (state of health, freedomfrom the influence of drugs, etc.)

Financial matters (other than fares and revenues)

• Evidence of financial standing

• Arrangements for performance bonds

• Payment schedule

• Cost rates for agreed variations in service

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• Insurance and liability responsibilities

Employment practices

• Hiring practices (equal opportunity, positive discrimination etc.)

• Wages and conditions of employment

Miscellaneous

• Period of notice for service and fare changes

• Requirements to consult on proposed service and changes

• Authorities rights to approve/vary proposed service and fare changes

• Rights to sub-contact and approval procedures

• Rights of contract novation and approval procedures

• Bye-laws and Conditions of Carriage

• Compensation to passengers for failure to run contracted services

• Reporting of passenger complaints and how they were dealt with

• Code of conduct in passenger/public relations

• Code of conduct in service operations

• Arrangements for lost property

• Auditing of accounts

• Actions/circumstances amounting to breach of contract

7.6.1.2 Treatment of assets

Where a concession includes long-term custody of substantial assets there will need tobe provisions to ensure that they are operated, maintained and, if relevant, improvedas required in the terms of the concession. In principle there are four types ofperformance to be dealt with in the contract:

• Asset availability

• Asset performance

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• Asset health

• Asset improvement

Asset availability can be specified by setting down the periods during which the assetshould be available for service, along with penalties for non-availability. This regimemust recognise the joint asset issue. For example there is no value in track andsignalling being operational on a metro if there is no power supply.

Asset performance can again be specified by a set of standards dealing with thecapacity and quality of service they deliver. Again the standards should take accountof the interaction of the performance of synergistic sets of assets.

Asset health is a subtler phenomenon and can be dealt with in more than one way.The contract can specify a programme of works which the client judges will maintainthe assets at the desired level. Performance will then be measured by comparing theworks carried out with the contract programme. Usually national or internationalstandards will be available as benchmarks for assessing the quality of the works. Ofcourse the standards that are to be applied must be specified in the contract.Alternatively ranges for the maximum and average life of each type of asset can be setin the contract. This will give the contractor greater freedom in carrying out hismaintenance programme but will require a comprehensive system of asset agecertification. Again the standards to which works are carried out will have to bespecified.

In either case the contractor must have an absolute responsibility to ensure that allassets are in a safe condition irrespective of their age and the terms of the contractprogramme. Additionally there should be a provision at the end of the contract termfor the client to recover any costs involved in rectifying any shortfall in asset healthbelow the agreed standards.

Asset improvement is potentially the most difficult issue to cater for in a long-terminfrastructure concession, especially where complex and rapidly changing technologiesare involved. Where the asset is entirely new then the contact can specify how it is tobe procured by the contractor and how he will be compensated for the procurementrôle. Replacement of obsolete assets before life expiry or, on life expiry, by a productof a different specification from “normal renewal” is less straightforward.

Of course a programme of improvements can be specified in advance (e.g. areplacement passenger information system, of an agreed specification, will be installedin X years time). However, taking this example, communication and displaytechnologies are changing fast and a specification set as little as five years in advancemay be out of date when the implementation time arrives. This may be partlyovercome by using a performance specification but again a much improvedperformance capabilities may make this obsolete also.

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Where there are problems of this kind it will not usually be possible for the contract tocope specifically with the improvements of the assets involved. Instead of this therewill have to be procedures laid out for negotiating the specification of theimprovements and their procurement. These will have to accommodate thecontractors’ basic asset maintenance programme whilst allowing the client to assurehimself that he is obtaining value for money. Provisions for both technical andfinancial arbitration will also be necessary.

7.6.2 DurationThe longer the contract period the fewer occasions will the operation be subject tocompetition but the greater will be the incentives for the operator to innovate andinvest. A contract should be of sufficient length to allow the full depreciation of anysunken assets unless mitigated by a “buy-back” provision. However increasing thelength of the contract will increase contractual risks. Contract length will also help todefine the contestability of the market. Once the contract has been won all incentivesfor improving performance must be defined within that contract. Over a long-termcontract operator performance, unless proper incentives are at work, will tend todecline, as there is no effective competition. This will only return when the contract isre-tendered.

7.6.2.1 Bus contracts

For highly specified contracts for bus operations the optimum contract length appearsto be around 5 years. Contracts of around 3 years were initially used in Denmark butresistance by operators reduced the number of tenders and raised contract prices.Similarly in London contract lengths have been extended from 3 to 5 years but thiswas partly to keep down the annual route review and tendering load (and cost).Longer contracts have been used in other countries but these have also tended toresult in reduction in the number of tenders.

7.6.2.2 Franchises and concessions

The optimum duration for franchises and concessions is naturally somewhat longerthan that for contracts as the operator provides more less-tradable assets.Concessions for rail operators in Buenos Aires are generally for a 10-year period.This allows the operators to realise a commercial return on the investments they makeon the system. Seven-year franchises for the rail system in the UK, although adequatefor operation of existing assets, were generally seen as being too short for high levelsof investment in new rolling stock and longer franchises of 10-20 years are currentlybeing let. Extending the length of franchises however will have drawbacks. The risksto operators will increase. In Buenos Aires 10 and 20 year concessions have beenrenegotiated for the railway and metro as predictions for demand have been exceededand further investment is required. This increases the potential for regulatory capture.

7.6.2.3 Treatment of capital assets

Where a contract requires substantial assets but the authority does not wish to enterinto a long-term contract with the operator then there are ways in which this can be

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achieved. Taking the assets out of the contract by licensing them, or leasing themfrom a third party are options. Alternatively an agreed “buy-back” formula can beincluded in the contract. In any even there is merit in having some form of liquidationarrangement as there is always the possibility of some unforeseen event arising whichwill require either of the parties to have to back out of the contract. A privatecontractor is always subject to the vicissitudes of commerce such as bankruptcy,acquisition and takeover. As such he has a de facto exit possibility. In order to guardagainst “capture” and to keep open options for material change it is reasonable thatthe public client also has a means of exit. In some cases specific triggers can bewritten into the contract. This was done in the original Manchester Light Railconcession where the probability of future extensions was provided for and theconcession was subject to re-tender. But it is not possible to specify all possiblechanges in the client’s circumstances many years in advance so a general terminationscheme (with clearly understood terms) is desirable.

7.6.2.4 Quantity licensing

With quantity licences the duration should be designed to allow sufficient capacity tocome up for renewal each year to enable the supply of services to be adjustedpromptly to changes in demands and needs. Limiting licence terms is also a means oflimiting the creation of excessive artificial rents.

Where quantity licensing creates a licence value the issue of to whom this is to accruemust be faced. In some wealthy cities where the numbers of taxi licences arerestricted these can change hands for the equivalent of many tens of thousands of$US. "Taxing" the value can reduce this. At the same time this recovers some of thecreated value for the licensing authority whose actions cause it in the first place.Alternatively the authority can sell the license for a fixed period and at the end of thatthe holder will have to pay a new purchase fee, reflecting the market rate, to renew itfor a further term.

7.6.2.5 Conclusions on duration

In selecting contract durations both individual contract issues and the ability to changeoverall service provision need to be brought into account. The longer the termchosen the more important it is that provisions are included for change toaccommodate a wider range of factors. Generally 3 to 5 years seems to give areasonable balance for bus service contracts. Rail service franchises with significantcapital requirements need 7 to 15 years. Bus franchises usually merit a longer periodof 7 to 10 years and infrastructure concessions anything from 10 years up to 30depending on their capital requirements. Quality licenses do not need long periods as,subject to achieving agreed standards, the licensees are at little risk and the main issuefor the authority is the administrative task of evaluating applications and issuinglicenses. The duration of quantity licensing should allow supply to adjust to demandin a timely fashion.

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7.6.3 Spatial extent

7.6.3.1 Size of business package

Contracts can range from those for individual routes to those for all services within anurban area. The extent of the area included in the contract will influence the size ofthe business package, which has an important influence on the level of competitionthat may be available. Larger contracts will usually reduce the level of competition.More information will be needed for bidding purposes, increasing the incumbentadvantages. Even if assets such as depots or buses are available outside the contractthen competition will be minimised by the size of the market. In Stockholm largercontracts have tended to limit the number of bidders, this has not been the case inCopenhagen where areas have been smaller.

7.6.3.2 Structure of the industry

A crucial factor in choosing the scale of contracts is the structure and capacity of thepublic transport industry that will compete for the business. This will depend on localcircumstances and may vary through time. Before choosing contract sizes andtherefore spatial extent an assessment of the scale of competition and the terms onwhich it is likely to wish to engage in public transport services should be carried out.It may well be best to start with smaller contracts that attract a wide range ofoperators in the first instance and migrate to larger contracts as competitive capacitybuilds. In order to maintain entry possibilities for new smaller operators there is valuein packaging business opportunities in ways which allow efficient small operators towin individual contracts whilst allowing larger operators to bid for sets of contractsthat bring economies of scale.

7.6.3.3 Importance of integration

However if all services in a self-contained public transport domain are packagedtogether as one, contract integration will be easier to achieve. Larger contracts willalso allow firms to take advantage of any scale or scope economies that may bepresent – this is particularly significant in railway and some other fixed trackoperations.

Area franchises have the merit of allowing one operator to provide an integratedservice for a coherent local public transport market. This allows an integrated systemto be provided and more freedom in optimising the supply and demand aspects of theservice. They may also bring some economies of scale. The optimum spatial extentof franchises will therefore be larger than that for route contracts. Franchises allowgreater freedoms for operators and so integration will only be assured if an operator isresponsible for all services in an area. The franchising of bus services to five largeoperators in Hong Kong has been relatively successful with integration betweenoperator’s services whilst maintaining the contestability of the market.

Again there is a balance to be struck between the extent of the franchise (and usuallylonger duration) and the level of contestability. As a general rule the scale of any

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individual franchise such not exceed that where less than three rival operators are in aposition to seriously bid for it. If, because of some public policy requirement orindustrial weakness, this is not possible then the franchise may well be better treatedas a non-competitive concession and regulated accordingly.

Quantity licenses can be for routes or areas. Where there are tendencies forconcentration of operators in denser parts of the market, there is a strong case forlimiting the licence to a route or a specified sub-area in order to achieve a reasonablespread of supply. This is particularly important where operators under licence maycompete with scheduled services.

7.7 The Allocation and Management of RiskRisk is an intrinsic feature of any competitive regime. Indeed it acts as a spur toinnovation, which allows one enterprise to flourish and succeed where another mayfail. However risk needs to be allocated and managed efficiently if its benefits are tobe realised in full. In public transport there are four main types of risk:

• Production risk

• Commercial risk

• Policy risk

• Other legislative risks

These risks should be defined, understood by all parties concerned, clearly allocatedto, and accepted by, the most appropriate party for the purposes of the venture inquestion and managed prudently throughout the project.

7.7.1 Production riskProduction risk includes all those features that relate to the production of transportservices such as:

• The cost of capital

• Labour efficiency

• Labour relations

• Management efficiency

• Technical performance of plant, equipment and other assets, including

• "Natural" changes in the operating environment (e.g. road and traffic conditions)

• Passenger, employee and public safety

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• Compliance with legal requirements

Ideally these should lie unambiguously with the transport operator. However this maynot always be possible. For example with bus contracts or franchises the authoritymay retain ownership of key assets such as depots in order to facilitate competition inthe longer term. Where this occurs the responsibility, for the time being, for theperformance of the assets should be transferred to, and unambiguously accepted by,the contractor. In so doing, if there are risks associated with the performance of theseassets, the contractor should reflect those and the likely costs of mitigation in the pricequoted for the contract/franchise. Alternatively there could be a contract between theauthority and the contractor for the provision of the assets, which is separate from thepublic transport service contract and under which, should the asset fail to perform aspromised, the contractor would be able to seek redress from the authority. Again theterms should reflect the damage the failure causes to the contractor including anypenalties for poor performance he may incur from the authority in its rôle as client.

With management contracts this clear contractor responsibility for operating assetswill obviously not be possible. The style of contract will be much closer to that forfacility management. In such circumstances it is particularly important to specifywhich party is responsible for what aspect of the operation and how the effects ofunder-performance are to be dealt with and reflected in the financial settlementsbetween the authority and the contractor. This type of contracting is best conductedin a partnership environment, as the need for joint working between the client and thecontractor may be very substantial. If a partnership approach is not practical then analternative arrangement where the key assets are licensed to the contractor for theduration of the contract may be preferable.

7.7.2 Commercial riskCommercial risk requires the operator to take responsibility for earnings as well ascosts. This has the advantage that it opens up the possibility for optimising operatingcosts and revenues jointly. Amongst other things this means that any savings fromproviding a poorer service will be offset, to some extent, by reduced revenues.However, in complex transport systems there can be problems of passing on thecommercial risk to the operators. These include:

• A high operators risk aversion which will require a premium to overcome

• A potential loss of scale economies from pooling risks from sets of contracts (theswings and roundabout effect)

• The costs of allocating off-vehicle revenue

• The uncertainty premium associated with third party allocation of off-vehiclerevenues

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• Possibly perverse incentives to maximise individual revenue shares rather than tomaximise total market yield

• Dealing with external influences on revenue yields (e.g. fares levels)

It is possible to incorporate formulae for revenue sharing in contracts where theoperator takes the commercial risk, but this may have to allow for such factors as oneoperator varying his routes or frequencies with knock on effects on the revenues ofother operators. Another factor that needs to be addressed is that of authority controlover fares. When a contract is let then it will be usual for a future fares regime to bedefined as the basis for the contract. If, for one reason or another, this is not realisedit may be necessary to compensate the contractor or claw back "excess" earnings. Forthis to happen there will have to be an appropriate formula. Usually the most sensiblebasis for this is one that is financially neutral for the operator. This will require a basisfor calculating what the fare revenue would have been in the absence of the deviationand comparing this with the actual. In addition the volume of service may have to bevaried and the formula must then also take account of changes in operating costs.Again there are precedents for this but these are typically quite complex and fertilegrounds for dispute.

Similar issue arises with compensation for concessionary fares. Again the ideal is thatthe arrangements leave the operator no better nor worse off than if the concessionsdid not exist. However where the concession is precisely determined in advance thisis not essential as any discrepancies in the compensation formula can be taken accountof in the bid price if the operator is able to reliably estimate the level of compensation.Should the concession be changed during the term of the contract then a variationformula will be needed. With a revenue neutral basis for compensation this willrequire knowledge of the fares elasticities of the concession groups in the range ofvariation. This is not always easy, as there may have been little experience of theresponse of these groups to fare changes in recent years.

7.7.3 Public policy riskPublic policy can have important implications for the performance of a servicecontract, franchise or concession. This could affect costs (e.g. changes in taxes andtraffic restrictions) and also revenues (e.g. parking taxes and authorising competitiveservices such as taxi sharing). Because these are better understood by, and under thecontrol of, the public sector these risks will generally reside better with the publicauthorities. If contractors have to bear them then there will be a tendency tooverestimate these; therefore the cost of carrying the risk will be higher than if it werein the public sector. If the contractor under-provided for them then there is a goodchance that he would get into financial difficulties and the authority would be in theposition of either compensating him, or embarking on the costly and disruptiveprocess of his replacement. Even then the new contractor would include the effectsof the policy change in his price.

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7.7.4 Legislative riskAll businesses have to face the risks from changes in legislation. Such changes maylead to more demanding environmental or safety requirements, better conditions forthe workforce and changes in general taxation. Public transport operators are nodifferent from other businesses in this respect and there is no reason why publictransport service contracts should differ from those in other sectors in this respect.However public transport contracting should follow good commercial practice andrecognise these possibilities and make provision for re-negotiation in the same way asin contracting generally. The exception to this may be discriminatory legislation thatparticularly and substantially affects public transport services (e.g. motor spirit duty orPSV licensing costs). In these instances it will probably make commercial sense torecognise that the authority will carry these kinds of risks, at least in part. This willhave to be done by example as it is not possible list all possible contingencies of thiskind. The principle underlying such compensation should be that of compensationfor "demonstrable loss". Although this might seem unduly onerous for operators itdoes not prevent the authority compensating fully and promptly, but puts it in astrong negotiating position.

7.8 Securing IntegrationThe value of transport integration depends on the scale and complexity of the systemin question. Clearly in the case of a network with a few bus routes serving a smalltown centre there is little to integrate and if timings and frequencies match andthrough booking is possible then that is all that is needed to provide for the fewpassengers who make a journey using more than one service. In complex systemswith several modes and operators and a high proportions of journeys with more thanone leg the advantages of integration are much greater.

7.8.1 The dimensions of integrationThe term “integration” is often used without a clear definition. In its fullest itrequires:

• Coherence between transport, land use and other social and economic policies

• Consistent resource allocation criteria between transport modes

• Consistent budgeting across all modes and services

• Rational pricing, including externalities

• A coherent multi-modal system of regulation

• Design of services and facilities to reflect their individual strengths

• Facilities for easy interchange between modes and services

• Common fares and ticketing

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• Co-ordinated timetabling where practicable

• Multi-modal passenger information

In practice public transport integration is usually taken as including only the lower halfof this list, with the last five or six features being regarded as representing anintegrated public transport system. This part of the range has been used to describepublic transport integration in earlier chapters. However there is one importantexception. Most integrated networks will include services (or service elements) thatare un-remunerative and are provided for wider social reasons. This implies theinclusion of an element of the first feature in the list. In individual urban areas thenotion of what comprises “integration” may differ from this and this needs to betaken into account in looking at the regime necessary to secure integration in thatparticular situation.

7.8.2 Public MonopoliesIntegration is, at least in theory, most easily achieved with a public monopoly. Inpractice there are often divided responsibilities for different parts of the (public)transport system that make this difficult if not impossible. Whatever the theoreticaladvantage of public monopolies in terms of integration their competitive weaknessesare such that they will rarely be the optimal way of providing service in this area.However for integration to be effected in public sector monopolies an administrationwhich employed coherent investment, budgeting and regulations across all the publictransport operations is necessary. This does not necessitate a single agency butrequires the responsible agencies to work within a common framework in theserespects.

7.8.3 Management ContractingManagement contracting provides a way of furthering integration where there areseveral authorities in that the management contractor can be given a specific remit,delegated by more than one authority, to provide an integrated system. The degree ofintegration in a management contract can be essentially as great as the authority/ieswish and are able to agree on and define in the terms of the contract.

7.8.4 Gross Cost ContractsIn complex systems gross cost contracts allow integration to be effected by providingrelatively fine control of the interfaces between the different modes and services andremoving most of the incentives for operators to indulge in “selfish” behaviour whichmay thwart integration. Moreover the need for common services will be clearer andthe authorities will have to take conscious decisions about their provision. Howeverwith gross cost contracting there have to be reliable means of ensuring that operatorscollect revenue and pass it on to the client. Net cost contracts can also operate in astrongly integrated environment provided there is little overlapping of services andduplication between modes (e.g. express buses competing wastefully with rail) iscarefully constrained. In this case there will have to be provisions in the contracts to

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deal with the allocation of revenues from joint ticketing and payments for commonservices.

7.8.5 FranchisesWith exclusive franchises for an area, market pressures will usually promote co-ordination and integration save in one important respect. – that of un-remunerativeservices. Here it is essential that the basic “safety net” requirement is clearly specifiedin the terms of the franchise and effective means of enforcing it are provided. Withconcessions where the authority does not provide any support the pressure tominimise the operation of loss making services will be even stronger and consequentlythe need to incorporate specific safeguards in this respect that much greater. Clearlythere will be limits to the amount of cross subsidisation that an operator can provide ifhe is subject to fare controls and the authority will have to take decisions on fares andthe social service requirement which are consistent with the concession beingcommercially viable.

7.8.6 Licensing and ConcessionsWith licensing, as with concessions, the extent to which co-ordination and crosssubsidisation is limited by the need for the operator to make a commercial return.Licences can be issued for specific areas and routes to try and achieve a broaderservice spread. This is easier with quantity licensing, as numbers of licensees can belimited on the busier routes so increasing the demand for licences on quieter routes.If fares are controlled, as is usually the case, then common fares (often the maximumpermitted) can be secured on all the licensed services. However it will not be practicalto avoid the problem of re-booking on journeys involving more than one leg. This isparticularly a problem where the disposition of services (e.g. collector, trunk,distributor) “forces” multi-leg journeys.

7.9 Competition for Service Planning

7.9.1 Planning ConsultantsThere will be some situations where it is appropriate to introduce competition into theplanning and design of public transport systems. Clearly one way is for the authorityto go through a process of competitively procuring the services of a consultant withexpertise in this field. In doing this the authority will have to establish a set of criteriaagainst which the design can be evaluated which include operating costs, coverage,service quality etc. It will also be necessary to require the consultant to be able todemonstrate convincingly the feasibility of the design and the contract could include aprovision for payment to be linked to the outcome of the procurement of theresulting transport services.

This linkage between planning and performance can be internalised by consolidatingthe planning and procurement task. In this arrangement the consultant becomesresponsible for the overall performance of the system although the operations arecontracted in from third parties. This amounts to a form of management contractexcept that the contractor does not use the assets of the authority/client organisation.

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7.9.2 Management ContractsManagement contracts and area franchises provide the greatest scope for serviceplanning to be incorporated into the competitive process. In both cases the authoritycan set down the basic service features it wishes to be included and let the operatorsplan services and facilities to produce the most cost-effective service scheme withinthese constraints.

7.9.3 Consolidating Planning and Operational Competition – or not?In these kind of arrangements competition for planning is linked to operationalperformance, which has the advantage of being able to optimise supply and demandside factors, in the design but does not separate out planning and operations. This canbe a disadvantage as a good operator may be a poor service planner and theoperational efficiencies may well mask planning inefficiencies. Thus there is astrategic choice to be made on whether to combine these two functions, which musttake account of:

• The degree of control the authority wants of service details

• The planning competence of the authority

• The planning strengths of operators

• The costs and complexities of engaging separate planning consultants.

With concessions and licences such service planning that takes place will be in thehands of the concessionaires/licensees. As such any competition for “planning” willhave been subsumed in the competition for the concessions/licenses. Generally theuse of concessions or licences for the provision of services is consistent with a regimewhere the authorities have chosen to have only a limited involvement in the planningof public transport services.

7.10 Evaluating Service ProposalsThe criteria against which service proposals are to be evaluated should reflect therequirements set out in the tender documentation along with any general requirementsas to the status and experience of bidders. Where there are substantial requirementsfor qualification for bidding then it will probably be worthwhile going through a pre-qualification phase to eliminate unsuitable enterprises from the competition and limitthe types of features to be considered in the final evaluation. This two-stage processalso has the merit of saving unsuitable enterprises the cost of preparing unsuccessfulbids.

7.10.1 Clear Weighted CriteriaWhere the award criteria are absolutely clear and complete, the choice of whichenterprise to make the award to should be relatively straightforward. The operatorthat satisfies all the requirements at the lowest cost should normally be awarded thecontract. Where not all the requirements are met in full then the choice is more

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difficult. To make this process easier the requirements should be grouped into two ormore sets: those that must be satisfied and the rest. These could be divided into“more important” and “less important”. It may even be possible to attach the relativeweights to be given to the individual criteria, or sets of criteria, to facilitate the choice.These classifications and weights should be included in the tender documents so thatthe bidders are aware of the client’s priorities and how their bids will be reviewed.

The process of bidding and evaluation should be made clear in advance and potentialbidders should have reasonable notice of when invitations to tender are to be invitedand given sufficient time to put their proposals together. If it is intended to try andbring in entrants form other sectors or countries then a correspondingly longer periodmust be allowed. Where appropriate the client agency should publish its programme,at least in outline, a year or more in advance as potential bidders may not wish toparticipate in all rounds of bidding and should be able to select the most appropriaterounds well in advance. The notice of intention to invite tenders and the invitationsthemselves should be published in the relevant trade publications and in accordancewith any public procurement procedures. As well as invitations to tender the clientshould consider holding briefing meetings early on in the process to ensure that allpotential bidders are aware of what is intended and to enable the client to take accountof their legitimate concerns in the conduct of the process.

7.10.2 Dealing with Non-compliant BidsIn any invitation to bid there should be a clear basic specification for which all biddersshould put in a costed proposal. If alternative proposals are also invited then the basison which a choice is to be made between these should be clear and based on theevaluation criteria and their respective weights as described above. Where a bidderputs in his own variation as a non-compliant bid then the value for money most bejudged by the defined criteria against the best bid for the basic service. If the bidderdid not have the most competitive basic bid then, to be successful, his non-compliantbid must offer value for money for the variations on his basic bid, plus covering theadditional costs of his basic bid against the best on offer.

Where the variations are so substantial that they are not capable of beingsystematically compared with the basic bid or the variant is sufficiently attractive butthe bidder’s basic bid is too high to allow it to be fairly accepted, then a further roundof bidding should be undertaken with the variant specifically identified. It may beappropriate to replace this second round by negotiations with two or three of the bestbidders but there should be good and clear reasons for this. Such reasons can beexpected to include savings of time and cost, he fact that there will still be realcompetition in the process and that, based on the first round of bidding, the excludedbidders were most unlikely to be able to put in competitive bids.

7.10.3 Transparency and Independent ScrutinyHow much information it is appropriate to publish on the successful (and other) bidsdepends on local circumstances and practice, however there should be a presumptionof openness and transparency especially where there are concerns about bias and/or

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corruption. Where one of the bidders has a relation with the awarding agency (e.g. asubsidiary of the relevant transport authority) then the case for transparency is evenstronger. In the normal course of events the identity of the successful bidder shouldbe published along with the main financial and service features of the award. By thesame token the equivalent prices of the unsuccessful bids (which may includealternative bids of the successful bidder) should also be published.

Where there are subtle and complex issues to be included in the evaluation thenpublication of the outcome can lead to difficulties. However the question ofpublication should be determined, and made known, in advance and appliedconsistently irrespective of the identities of the bidders in any one bidding process. Ifthere is a case for not publishing the results of a bidding (other than the identities ofthe successful bidders) the there should still be a process of feedback to advise theother bidders of how their bids compared with the successful bids and how theyshould be improved in future to improve the chance of success.

Given the presumption of openness and transparency it will only be appropriate notto publish the results of bidding exercise where there is a strong tradition of highstandards of integrity and the industry generally understands and accepts the process.

In all bidding processes there should be a facility for independent scrutiny on a regularbut random basis and when it appears that an award may not have been fairly made.

7.11 Contract AdministrationThe basis of good contract administration lies in the quality of the contract itself. Thecontract should cover all relevant features of the service procured, should haveadequate provisions for dealing with disputes and unforeseen events and containrealistic and effective provisions for monitoring and enforcement of the terms of thecontract. The contract provisions must be matched by procedures and executivecapacities in both the client and contractor organisations. Each performance featureshould be clearly identified, along with how it is to be measured, who is responsiblefor doing this, what remedies are to be used in the event of performance failure andhow these are to be implemented.

Typical contract features and procedures are listed in section 7.6. The choice of whichto include in a particular contract must reflect the client’s objectives and the practicalcapabilities of both the client and the contractor. It must be recognised by publictransport authorities that contract administration is a vital function that requires bothtechnical and administrative skills and resources. The savings from competition arelikely to be substantial but the transaction costs of tendering, award andadministration can be significant and must be faced up to if the full benefits ofcontracting are to be realised. With improvements in cost effectiveness of up to 20%to 30% compared with a public sector monopoly; contracting costs of 3% to 5% ofturnover are well worth paying. Care must be taken in calculating these costs, as theremay be re-allocations of costs consequent on contracting (e.g. transfer of somepassenger service costs from operations to the client).

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7.12 Renewal and ExtensionContracts will normally be for a defined period and may include options for earlycurtailment or extension. The use of options such as this can be a valuable feature ofcontract administration. The prospect of early curtailment, or extension beyond theinitial contract period, can act as a powerful incentive for operator performance.Extensions and curtailment can also be used to provide a measure of flexibility inmanaging the contracting workload and can reduce the costs of re-tendering.

If extensions are to be used as a normal feature of the contracting regime then theyshould be provided for in the initial contract. Definition of the criteria which are tobe used to trigger extension allows the operator to know where he stands and to andplan his performance to take advantage of the extension option should he wish.However explicit criteria also let the operator know of impending termination and canlead to performance deterioration unless adequate safeguards are in place. Theopportunity to extend can be used to increase the flexibility of contract management.For example where an operator has a problem requiring a capital outlay to solvecontract extension can be used to help finance the necessary investment. Extensionsof this kind will have to be negotiated and the client should make it clear that the basisof the negotiation is a presumption of re-tendering unless there is an advantage to theclient.

The use of contract extensions however is open to abuse and reduces the incidence ofcompetition for contracts. It is therefore something that should be used sparingly.Extensions should be used only when there is a high likelihood that both the shortand long-term public interest will be served. As a general rule only one extensionshould be allowed for any contract.

7.13 The Para-transit IssuePara-transit activity appears to be growing rapidly in many cities of the developingcountries and what to do about this is a difficult issue for urban policy makers. Onthe one hand it can provide public transport where otherwise there would be none atall, or none that the poor could afford, and many jobs for people who otherwisemight not have any gainful employment. On the other it often provides low qualitytransport, which may undermine more efficient services and can cause substantialcongestion and environmental nuisance.

There cannot be a universally correct resolution to this dilemma. Where theauthorities are unable to arrange adequate conventional public transport then the bestshould be made of the potential of this capacity. "Making the best" will entail basiccontrol of the sector to ensure safety and operating standards and to limitcompetition, which undermines effective conventional services and excess capacity onfreestanding routes.

Where the authorities are in a position to provide conventional services that meetmost needs then para-transit operations should be confined to carefully defined nicherôles. This can be by restricting some para-transit capacity to cover areas where the

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provision of conventional public transport is not physically practicable and/oreconomically viable. Some para-transit operators may be switched to licensed taxioperations and the provision, where the market is sufficiently strong to supportdifferentiated services, of premium services that provide a competitive alternative toautomobile use. The transition from one regime to the other will not be sudden andneeds careful management - especially where this involves loss of business rights.This can be aided by ensuring a form of licensing from the outset that limits para-transit operators’ business rights.

7.14 ConclusionContracts are an important determinant of the incentives faced by operators inundertaking public transport operation. There is not one form of contract that suitsall situations. Different contracts have different features that mean that they aresuitable for rather different ranges of public transport operations and markets.

The most efficient size, scope or duration of a contract will also be dependent on localcircumstances. Larger, longer more detailed contracts will have beneficial impacts interms of integration and scale and scope economies but this will be offset by areduction in competition and increased institutional costs. It is not possible to beabsolutely categoric as to which type of contract (or its derivative) should be used in aparticular set of circumstances but the discussion above should provide guidance onthe issues to be addressed in selecting a contract form.

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8 Implications for the poor

8.1 IntroductionUrban public transport operations can have important implications for the poor inthree main ways. These are:

• Their transport utility for different sections of the urban community

• Their impacts on congestion and the environment

• The opportunities they present for various types of workers and entrepreneurs

8.2 Accessibility

8.2.1 Fares and TicketingThe value of public transport in enabling poor people to have access to economic andsocial opportunities depends on:

• Fare levels, structures and ticketing arrangements

• Service patterns and service quality

• Physical access

• Ease and cost of interchange

The level and of fares charged for public transport is especially important for poorpeople as high fares will take a disproportionate share of their meagre finances and, insome circumstances, limit their opportunities to those that can be reached on foot orby bicycle. This can be particularly significant when poor people have to take morethan one job which, in turn, leads to several journeys to and from work each day.However, whatever the fare, the existence of a basic public transport system isessential if mobility of the poor is not to be limited to walking and cycling.

8.2.1.1 Fare levels and service implications

In an unregulated environment fares will de determined by market forces. Withstrong competition this will mean that inefficiencies, and the consequently excessivefares, will be kept to low levels. However excessive provision of services can developon busy routes leading to fares that would be higher than otherwise. This problem isusually not a serious one in LDC cities. Therefore, all other things being equal,competition will lead to more affordable fares that will benefit the poor. Shouldmonopolies or cartels form then this will tend to result in fares that are higher thanthey should be and this needs to be controlled by the relevant authorities. In urban

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areas, where there are large numbers of poor people, market pressures will be for lowfares and a basic service. Indeed it may be that all the market can afford is insufficientto meet reasonable mobility needs. The issues here then are whether the authoritiescan afford subsidies or whether fares regulation can give an improved fare/servicemix to the urban poor.

Leaving aside the question of public subsidies, fares regulation can take the form ofminimum fares – presumable to ensure a “better” level of service or, more likely, afares ceiling to ensure that public transport is affordable by a greater proportion of theurban poor. Where fares are set above the market level the poorest citizens will beless able to afford them and so the better service will be of no benefit to them. Wherefares are constrained this will mean that what was probably an inadequate service willbe worsened at least whilst fares elasticities remain below unity. What little evidencethere is indicates that, like their better-off counterparts, the urban poor have fareselasticities less then unity. Whilst the better off may suffer most from such policies itis interesting to consider in what circumstances the poor will be better off.

The poor will benefit from lower fares and reduced service where the level of publictransport service is already more than adequate for their needs. Thus the inner citypoor living close to dense public transport services will suffer little from lower servicefrequencies or slightly less dense route patterns, provided there is still sufficientcapacity to meet demand, but could be substantially better of from lower fares. Onthe other hand those poor who live on the urban periphery where public transportservices are insufficient for their needs, and this is very common in many cities indeveloping countries, are likely to be worse off if services deteriorate significantly orare withdrawn - even if the fares are lower. It appears therefore that regulating faresabove their market levels will harm the poor, as would keeping fares down for thosepoor groups who are badly served by public transport. However for the urban poorwho live in dense inner city locations the reductions in service consequent upon farelevel controls are likely to be outweighed by the money savings from lower fares.

8.2.1.2 Fares structures and ticketing

Fare structures and ticketing can have important implications for public transportaffordability by the urban poor. Market fares structures will tend to be graduated withhigher fares for longer journeys.

Where the poor have short journeys this will tend to be to their relative advantagehowever, for those who have long commutes to work, market fare structures willusually be to their disadvantage. Fares paid depend not just on levels and structuresbut also on the ticketing arrangements. For those who frequently make journeys withmore than one leg then the need to re-book typically leads to a higher fare than if thejourneys were made without interchanging. In a deregulated/competitiveenvironment operators rarely collaborate to provide joint ticketing, whereas with ahigh degree of regulation both integrated ticketing and flat and zonal fares structuresare commonplace. On the other hand in a strongly regulated environment there is agreater likelihood of sophisticated fares schemes with discounts for pre-payment and

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support for those in the formal employment sector. The urban poor are less likely tobe able to benefit from these features because of cash shortages and their informalemployment status.

The inner urban poor are less likely to travel long distances and make complexjourneys, so market fares structures and ticketing will not be particularlydisadvantageous to them. However for those who live on the urban periphery thegraduated fares and the need to re-book for multi-leg journeys can be expensive andmaterially reduce the affordability of public transport. These penalties are doublyimportant as they add the “insult” of high fares to the “injury” of poor services anddifficult journeys.

8.2.2 Service Patterns and QualityThe greater the degree of regulation the more specifically can service patterns andquality be set by the authorities. The more there is free competition the less controlthere is over services. However it is possible to have a considerable measure ofcompetition whilst still regulation services. The issue here is the extent to whichmarket determined services serve the interests of the poor better, or worse, than thosewith a measure of authority determination.

8.2.2.1 Services to poor areas

Where an authority prescribes services, the level of service to areas populated by thepoor can be enhanced either through authority planning and procurement or settingspecific service requirements as conditions of franchising or licensing. It may be thatthese require a measure of cross-subsidisation within a franchise or concession, thusproviding support for the poor without direct cost to the public purse. Where servicesare determined by market forces the outcome is less certain and the poor who live inareas that are difficult and/or costly to serve are likely to lose out. Again this pointsparticularly to problems for the peripheral poor.

The absence of regulation however can lead to an expansion of cheap, if low quality,public transport by the informal sector. In the right circumstances this can makegood the deficiencies of more conventional public transport services and consequentlyresult in services that would not exist in a regulated environment.

The capacity of the formal sector in poorer countries is often so limited that whetherit is regulated or not is of little consequence and the only way many poor people willget any form of public transport service is through a little/un regulated informalsector.

8.2.2.2 Problems of crowding

Where there is insufficient public transport capacity there will be overcrowding andthe poor are less likely to be able to find remedies to the problems this causes. Theproblem of crowding can be a particular problem to women who find it especiallydisagreeable and this can result in their eschewing public transport and denying

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themselves important economic, educational and social opportunities. The argumentsfor substantial regulation appear to point in both directions: so how do they work outin practice?

8.2.2.3 Importance of institutional capacity

This can be illustrated by contrasting the situation in Sub-Saharan Africa with that insay Brazil. In many Brazilian cities there is sufficient institutional capacity andfinancial resource to support a regime in which there is a fair degree of regulation butwith extensive competition. Although many of these cities have an active informalsector the formal operators are the main carriers and the resultant mix appears toserve most sections of the community reasonably well. In Sub-Saharan Africa thelimited capacity of the public sector is such that, because of the shortcomings of theformal sector often the only way most of the travel needs of the urban poor are met isby their own devices or the informal sector. The conclusion to be drawn from this isthat the service needs of the poor are best met in a regulated regime if the authoritieshave the capability and resources to secure an effective formal sector. Where theyhave not the poor are likely to lose out first and the only way of dealing with this is toallow the informal sector in. Whilst there should be sufficient regulation to securesafety and fair trading practices it should not be taken to a level which excludes thesmall entrepreneurs who are essential to provide the level of service required to meetthe basic mobility needs of the poor.

8.2.2.4 Urban rail and the poor

Metros, commuter and light rail can provide superior quality and higher capacityservices. However they frequently have higher fares than road based public transportand service is restricted to a relatively few corridors typically focused on the CBD.Where private companies operate urban rail services as commercial ventures faresrevenue will have to cover operating costs and debts. This will again exert upwardpressure on fare levels resulting in limited use by the poor. If private operators planthe routes, these will be located to maximise income and consequently focus onserving the wealthier areas of the city that have reasonably high densities. Clearly thiswill also provide some service to poorer communities but, with high fares and longeraccess distances, their benefits will be less.

Whether public agencies or private consortia build rail systems, there is a strongtendency to minimise right of way acquisition costs. This will be achieved byconstruction of sections though poor neighbourhoods (where consistent with theoverall route plan) and the use of intrusive elevated rights of way will have adverseeffects on the poor. Even where urban rail brings benefits to poor areas the resultingincreases in land values accrue to the landowners rather than the poor tenants who, inextreme cases, may be driven out as a result.

8.2.3 Physical AccessMany poor people are elderly and suffer from physical disabilities. This can makeusing public transport difficult. In developed countries regulations have been

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introduced over recent years to ensure that access to public services and faculties ispossible by the mobility impaired. These problems of accessibility are probably moreacute in developing countries than in the industrialised nations. Despite the assertionsthat improved accessibility increases the appeal of public transport to all, andtherefore should be commercially worthwhile, there is little evidence to support this inrespect of the cities of the developing countries, where most of the urban poor live.Therefore accessible transport is unlikely to be provided in an unregulated commercialenvironment.

Where public transport systems are operated or procured by public authorities this canbe remedied by requiring the operators to make their vehicles and facilities accessibleto defined standards. Although it is more difficult, especially with weak institutionsand enforcement procedure, to do this in an unregulated environment, in theory atleast, public service vehicles and facilities can be required to be "accessible" beforethey are licensed for public service.

8.2.4 Ease and Cost of InterchangeThe cost implications of multi-leg journeys have been referred to above. The physicalproblems of interchange can be even more important. Where services can be linked itis important that that there are facilities for ease and safe interchange with protectionfrom the weather and adequate information about the public transport services.Ideally services should be timed to minimise waiting when transferring from onevehicle to another. These desiderata do not apply just to the urban poor but to allpassengers; however they are important for the poor.

Many poor live in the less accessible quarters of developing cities. Public transportjourneys to and from these are more likely to involve interchange from a local feedermode onto a main bus (and in some instances rail) route. Moreover the poor are lesslikely to be employed in the large commercial centres, with their cohorts of skilled andsemi-skilled white-collar staff, on which the main public transport routes focus. Thusthe main section of their journey is also more likely to involve interchange en route.

As arranging good interchanges is a complex, and sometimes costly, business it needsa party to take the initiative and perhaps a measure of risk. Individual operators oftenperceive ease of interchange with a rival’s services as a commercial threat andtherefore may be positively antagonistic to facilitating interchange.

Thus it is clear that whilst those interchange opportunities, which are and are seen tobe in operators’ commercial interest, may be provided many other - which are also ofvalue to passengers will not - without some form of regulation and perhapsinvestment by public authorities. The extent of interchanging between modes willincrease with the size of the city and the complexity of its transport network. Thispoints to a greater need for regulation and public sector intervention in the largercities.

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8.3 Congestion and Environmental NuisanceWhere public transport goes unregulated in developing cities the proliferation ofsmaller vehicles is often a major contributor to traffic congestion. This hasimplications for the economy of the city as a whole. For those poor workers whohave to travel in by bus from their neighbourhoods on the edge of the urban area thisadds directly to their commuting time and discomfort as well as, indirectly, to its cost.For those who live alongside these congested roads the reduced accessibility iscompounded by the environmental disruption that prolonged congestion brings withit.

Urban environments and air quality are matters of concern in many countries and forall citizens. However, all too often, the urban poor have to suffer the worst effects ofnoise and pollution because of the areas in which they live and work and because theydo not have to resources to mitigate their effects in the same ways as the better off.Transport, and road traffic in particular, is a major source of noise and pollution inmost towns and cities. In developed countries, with high car ownership and use,public transport vehicles are only a small part of urban traffic but in developingcountries this is different. Low car ownership and large numbers of small publictransport vehicles mean that public transport is a substantial part of road traffic and,on some urban streets, can be dominant.

In developing countries main streets are important places of activity especially for thepoor who may be marginal traders, hawkers and beggars. In some extreme examplesthis is where some poor people live. Clearly such people are heavily exposed to trafficnoise and fumes, as will be a proportion of the general population of high-densityareas where poorer people are frequently disproportionately represented. The pooralso walk more to go about their daily business and therefore the street environment issomething that affects them in motion as well as at rest. Where transport is regulatedthere is a greater chance of emission and noise controls. Where transport is providedthrough professional transport companies vehicle sizes will tend to be larger andtherefore emissions per passenger kilometre less. On balance then the urban poor’sphysical environment is likely to suffer less where transport is well regulated thanwhere it is not.

8.4 Employment: Practices and ConditionsAs well as providing services public transport is a source of employment and businessopportunities. It is not known how many people work in the public transportindustry in developing countries but as a very rough estimate there must be about 15memployed on bus operations in LDC cities, along with para-transit and rail workers thetotal must exceed 25m. Thus public transportation provides a significant employmentopportunity for the urban poor. Perhaps equally important the informal sector, withits low barriers to entry, also provides an opportunity for business enterprise. Smallpassenger vehicles require a limited capital outlay and can be operated and maintainedwith modest skill levels. Such ventures can be run on a family basis with the elderly,women and children contributing by carrying out some tasks, so providing economicactivity for some poor groups for whom formal employment may be beyond their

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reach. Moreover there are relatively easy migration pathways from single owneroperator to a multi-vehicle enterprise for those who acquire basic business ability.

8.4.1 Different opportunities in the formal and informal sectorsThe informal public transport sector provides both employment and businessopportunities for at least part of the urban poor population but what about the formalsector? Again this can be a large employer: Indian Railways alone employs about1½ m people and a proportion of these will be from the urban poor. Whilst we haveno hard evidence to support this it seems likely that the even the limited skillrequirements for work in a formal transport enterprise are such that the really poor areonly likely to obtain menial and casual employment. As such deregulated publictransport is probable a significantly more promising source of employment for theurban poor than formal transport.

Formal transport enterprises provide training opportunities in ways that informaltransport does not. Some of these are specific to the enterprise or the industry butmany are generic and equip employees with skills that can then be taken into otherjobs or businesses. Accounting, IT, personnel management and works supervision areexamples but these opportunities will be of little value to the casual and menialworkers amongst whom the urban poor are to be found so, once again, it seem thatthe opportunities for the poor are better in a deregulated environment.

Employment in the informal sector may be a lifeline to the poorest citizens however itdoes have disadvantages. Often there are safety risks and sometimes-criminal threatsand actions. Working conditions can damage health and reduce life expectancy. Theemployment may be insecure and may "trap" the worker outside the legal employmentregime. Where employment is in obsolescent technologies (e.g. human poweredtransport) it can lead to dead end jobs. Whilst in the short run (and for the very poorthis will be an over-riding concern) informal public transport operations can providevaluable employment opportunities in the longer run there are disadvantages in relyingtoo much on this activity as a source of employment.

8.5 Overall Efficiency and the Demand for Public Funds

8.5.1 Competition reduces transport’s need for public fundsThere is no doubt that the application of competition improves productive efficiencyand therefore allows more service to be provided without recourse to public funds. Insome instances the effectiveness of transport services can be maximised with only alight touch by the hand of the regulator. Again this will improve appeal, use and, inturn, revenue so reducing the need for public funds. In other situations, especially inlarge cities with complex transport systems, a substantial degree of regulation will beneeded to ensure that the individual services work together to best effect. Socompetition will almost always help to reduce the need for public funds, and/or meanthat a greater volume of service can be provided but the regulatory regime, whichmaximises the effectiveness of public transport, must be chosen to suit thecircumstances of individual areas.

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8.5.2 More Available to Help the Poor?The less the need for public funds to support public transport the more is available tofund other services for the urban poor. The extent to which the resources released byefficiency improvements in public transport find their way to other worthy purposes isa matter of good governance, which cannot be guaranteed. But at least a well-designedpublic transport regime opens up the opportunity. In many countries with largenumbers of urban poor there is little or no money available to support publictransport. In these circumstances greater efficiency means more service. It can alsoincrease the scope for cross subsidies but this can only be guaranteed with asubstantial level of regulation: for example as a condition of a franchise or concession.Where there is money for service support the authority will need to have the ability toallocate particular sums to particular purposes that requires a strong regulatory (or aprocurement) regime. Again this can be done whilst maintaining competition.

8.5.3 But How to Reach the Truly PoorFinally, if there are public funds available to help the urban poor meet their transportneeds; carefully targeted user subsidies through fares concessions should be the mostcost effective. Where there is a general welfare system this can be done by providingfares concessions to those on welfare and basic pensions. Where there is not, arougher system targeting children, the elderly and the disabled is a possibility.However even these require a measure on institutional competence both in theallocation of concessions and the administration of any compensation to operators.

8.5.4 ConclusionsTable 8.1 summarises the main effects of public transport competition on the urbanpoor. By reducing costs and expanding services competition on balance is of potentialbenefit to the poor. However there are dangers that, unless adequately regulated,competition could work in ways that also caused significant disadvantages. Weakpurchasing powers can mean that some poor communities would not secure areasonable share of the service offered and these may have inadequate physicalaccessibility. Commercial fares can disadvantage the peripheral poor and extensiveunregulated bus and para-transit operations can bring congestion and environmentalintrusion to poor areas. Urban rail will usually be of limited value to the poor unlessconscious decisions are taken to attend to their interests in its planning andoperations. Many of the potential disadvantages of free competition for the poor canbe mitigated or overcome by well-chosen regulation.

98

Table 8.1: Summary of Main Effects of Public Transport Competition on the Interests of the Urban Poor

COMPETITIVE FEATURE EFFECT ON THE POOR POLICY REMEDY/IMPLICATIONS

Unregulated Fares Strong competition - very high fares avoided

Graduated structure - costly for peripheral poor but OK forinner area poor

Rebooking – costly for complex journeys

Require flat structures as licence condition

Require fares associations as licence conditions

Regulated Fares and Ticketing Fares can be lower - helps the poor but may reduce availableservices for the poor

Structures can favour travel by poor

Rebooking can be eliminated - helps complex journeys

Advanced purchase discounts - disadvantages the poor

May require public subsidy especially to securemarginal services

Requires cross-subsidy

Complex revenue sharing agreements

No obvious remedy

Unregulated Bus Services Low income areas will get poor scheduled service

Excessive service on busy routes - bad for nearby poor

Formation of cartels – acts against the public interest includingthat of the poor

Basic para-transit helps fill the gaps

Inadequate accessibility - disabled poor disadvantaged

Awkward interchanges - bad for complex journeys

Growth of para-transit - good for mobility of the poor & good

Pubic Service Obligation as condition of licence

Regulate noise and emission standards

Industry macro-regulation

Avoid undue damage to schedule services

Regulate vehicle design standards

No obvious remedy

Need to limit adverse externalities such as

99

COMPETITIVE FEATURE EFFECT ON THE POOR POLICY REMEDY/IMPLICATIONS

for short term employment and business prospects congestion and excessive emissions

Commercial Rail Operation Higher fares - little use to the poor Require/fund fare "concessions"

Commercial Rail System Design Focus on dense wealthier areas - against poor's interests

Low cost/intrusive RoWs - against poor's interests

Inadequate accessibility - disabled poor disadvantaged

Authority specify route choice

Authority constrain design & require fair deal

Authority specify accessibility standards

Competition Generally Reduces costs and expands services - can be beneficial for thepoor if the benefits are managed in their favour

Reduces the need for public finances which can be usedelsewhere including to help the poor

Regulate competition to the extent needed to helpthe poor

Positive welfare policies and identification of thepoorest in society needed

A Annex One

Description of Case Studies

Introduction

The role, organisation and efficiency of urban public transport will be shaped bothby the characteristics of the town/city that it is operating in and the type ofregulation it is subject to. In turn the form of regulation and competition mayitself be strongly influenced by the conditions that are prevalent in the city.

The case study cities have been chosen to reflect a broad range of competitiveregulatory regimes and a wide range of physical, social, economic andadministrative conditions. Consideration has been given to city size and density,institutional capacity and structure, available modes, the split between public andprivate sector and the split between formal and informal sectors. Also cities areincluded where there are either particularly interesting features of public transportoperation or organisation, or where the outcomes of the regime are particularlyimportant. Cities from both developed and developing countries are featured, andthe selection of cities from developing countries has been made to give a broadrange of coverage. The list of case study cities is given in Table 5.1.

Table 5.1: List of Case Study Cities

No. Region City Country1 Western Europe Copenhagen Denmark2 Rouen France3 Stockholm Sweden4 London England5 Manchester England6 Africa Accra Ghana7 Cairo Egypt8 Harare Zimbabwe9 Nairobi Kenya10 Central & Eastern Europe Budapest Hungary

No. Region City Country11 Warsaw Poland12 South Asia Delhi India13 Lahore Pakistan14 East Asia Pusan Korea15 Hong Kong China16 South East Asia Bangkok Thailand17 Kuala Lumpur Malaysia18 Manila Philippines19 Singapore Singapore20 Australasia Adelaide Australia21 Latin America Bogota Columbia22 Buenos Aires Argentina23 Curitiba Brazil24 Rio de Janeiro Brazil25 Sao Paulo Brazil26 Santiago Chile

Framework for case studies

The case studies have been described using a framework approach. This includesthe following items:

City statistics – details of three of the key socio-economic characteristics in thedetermination of the range and usage of public transport; population, area andincome per capita.

Extent and use of public transport – brief description of the public transportsystem and figures on the mode share of public transport, level of car ownership,split between public transport modes (including the extent of informal transportwhere available).

Institutional and Regulatory Framework – outlines the main regulatory bodies,their responsibilities and relationships and the key areas of control.

Competitive regime – categorises the level of competition in each mode ofpublic transport into one of four different typologies based on the 9 competitiveregimes identified in Chapter 5, see below.

Level of regulation – identifies, by mode, the main body that determines the keytactical variables; fares, routes, timetables and vehicle type.

Financing – provides an overview of cost recovery, level of subsidy and currentfinancial position for each of the public transport modes.

Effects of regime – briefly describes the main outcomes of the presentcompetitive regime.

Typology of competitive regimes

The competitive regime in no one of the case study cities is identical to that in anyother. The 9 competitive regimes described in Chapter 5 have been amalgamatedinto two separate ranges. These are for road based public transport, principallybus and para-transit, which exhibit relatively few economies of scale, and trackbased public transport, which includes urban rail, metro, light rail and tram andtrolleybus, which have declining average costs.

Road based public transport has been categorised as:

• Public sector operations (1)

The operation of public transport is carried out by directly by the state with nocompetition for contracts or services. This encompasses regimes where theoperation is carried out through a branch of Government; a separate authority or astate owned company. Typically the authority closely prescribes fares and servicelevels, a high degree of integration is possible and transport policy is aligned withbroader public policy objectives. This also includes the situation whereGovernment contracts private sector operators, without competitive tendering.

• Contract (2)

The operation of public transport is sub-contracted to private operators is usuallyvia competitive tender. This regime implies a high degree of contract specificationby the transport authority, with fares, services and vehicle types often specified. Itencompasses both net and gross cost contracts and management contracts. This

also includes instances where public sector operators competitively win contractsfor service operation.

• Concessioned or franchised (3)

The exclusive right to operate public transport is concessioned or franchised to asingle operator. A franchise is an exclusive right to operate a service under a fairlyhigh degree of specification by the transport authority and may involve paymentsbetween the authority and the franchisee. A concession also implies an exclusiveright to operate but at a much lower level of specification. Both Permits imply ahigher degree of operator autonomy than under a contract.

• Licensed / deregulated (4)

A licence is regulates access to the public transport market but does not implyexclusive rights. This category includes both quantity licences where limits areplaced on the number of firms or vehicles operating on a particular route or in aparticular area, and quality licences where only minimum standards are laid downfor entry to the market. It also includes completely deregulated regimes wherethere are no formal controls, common among para-transit operations.

Competitive/regulatory regimes for track-based modes tend to be distinct fromthose for road-based modes. Economies of scale, and technological constraints,mean the scope for competition is considerably more limited and so regimes tendto be more prescriptive. For those modes that have large economies of scale orserve significant proportions of the population, for example metros and urbanrailways, there is often a strong feeling that they should be operated in the nationalrather than the local interest. This can lead to different sets of priorities.Operations can also be let to the private sector, but with a greater level ofregulation than usual for road-based modes.

The four typologies used for track-based modes are:

• National public operation (1)

The operation of public transport is carried out by a company owned by thenational Government or to requirements set down by the national Government.This is common form of operation of heavy rail and also applies to a number ofmetros.

• Local public operation (2)

The operation of public transport is carried out by a company owned by, orrequirements set by, the city or metropolitan public authority. This allows a higherdegree of integration with other services in the city.

• Contracted (3)

The operation of public transport is competitively tendered through a heavilyregulated contract usually specifying fares, frequencies and can even be extendedto cover vehicle and personnel numbers and rostering.

• Concessioned (4)

The operation of public transport is concessioned or franchised to a singleoperator. This implies a higher degree of autonomy than contracted servicesalthough minimum standards of fares and frequencies are likely to be set.

There is considerable overlap in the level of regulation entailed in the abovecategories. Licence conditions can set fares, frequencies and vehicle types whereasunder a concession these may not be directly specified (and vice versa). Theregulatory agency may not be the public transport authority but a route associationor drivers or owners union. Often this is used as a more efficient means ofregulation in areas where operations are diffuse and formal authority weak.

Case study descriptionsThe following section outlines the main characteristics of urban public transportoperation in the case study cities.

Case Study Accra – GhanaCity StatisticsPopulation (m) 1.5 – 2 Area Income/head US$ 700Extent and Use of Public TransportShare of public transport (%)PT 74-89 Car 11-26 Car

ownership36/1000(1993)

Transport Mode Split (%)Walk Cycle Trotos Shared Taxi10-25 0-5 30-40 35-55Public transport marketPublic transport operation in Accra is limited to shared taxis and trotos (minibuses). Estimates of taxisvary between 9-12,000 trotos and 13-30,000 taxis. Public owned bus operations ceased in urban area inthe early 1990s following mounting lossesInstitutional and Regulatory FrameworkThe Government has mandated control over both trotos and shared taxis to Ghana Private RoadTransport Union (GPRTU) whose members provide 80-90% of services in Accra. GPRTU controls theterminals and effectively limits access to members. GRPTU allocates routes and sets fares for members.Union members pay an annual fee. The only regulatory power resides with the Ministry of Transport,which intervenes if there are serious problems. Police enforce levels of vehicle maintenance.Competitive RegimeShared taxis Trotos4 4Level of Regulation

Sharedtaxis

Trotos

Fares GPRTU GPRTURoutes GPRTU GPRTUTimetables GPRTU GPRTUVehicle type None NoneOther Terminals

–GPRTUTerminals–GPRTU

Financing – fareboxShared taxis Trotos100% 100%Effects of regimeThe regime requires very little institutional capacity in the Government and fares tend to be low.However, frequencies are limited by holding back and interchange levels are high. Vehicle maintenanceand safety is poor. The number of small public transport vehicles causes considerable congestion inurban areas.

Case Study Adelaide – Australia

City StatisticsPopulation (m) 1.1 Area (km2) 930 Income/head US$ 22,700Extent and Use of Public TransportShare of public transportPT Car Car

ownership527/1000pop

Split of public transport (m passengers per year, TransAdelaide, 1998/99)Bus Tram Rail25.5 1.5 7.4Public Transport MarketPassenger transport in Adelaide is limited to bus, tram and a suburban railway. Certain buses are adaptedto run on a 12km-guided busway, which provides speeds of up to 100km/h (the O-Bahn). The tramwayis limited to one line of 9.5 km. Suburban railway services are provided on six arterial routes totalling120km.Institutional and Regulatory FrameworkAll passenger transport services in Adelaide are administered by the Passenger Transport Board, whichhas responsibility for integrated services, fares and ticketing. Until April 2000 TransAdelaide, the formerState Transport Authority, operated the majority of services, under contract to the PTB, which fundedand controlled the integrated ticketing system. In 1996/7, in response to declining patronage andincreasing subsidies, six bus services were tendered. Contracts were on a gross cost basis with patronageand redesign incentives. TransAdelaide won three of the contracts, with a further contract later takenover as a subsidiary. The contracts were for a three-year period. The competitive tendering of contractswas then halted and the remaining 10 areas were contracted to TransAdelaide through negotiation. Thecontracts under the new regime differ in that, the contract period has been extended to five years (with aright to renew for a further five years), the number of areas has been reduced from 14 to 6 and thepatronage incentives have been reduced. Service planning is also intended to be undertaken inpartnership with contracts able to be modified. TransAdelaide only won one contract as part of a jointventure.Competitive RegimeBus Tram Rail2 2 2Level of Regulation

Bus Tram RailFares PTB PTB PTBRoutes PTB and operator PTB PTBTimetables PTB and operatorVehicle type PTB owns vehicles and

depotsOtherFinancingCost recovery for all public transport in Adelaide was 19% in 1994/5. Since then subsidies have beenprogressively reduced with the extension of competitive tendering.

Effects of regimeThe first round of competitive tendering was fairly successful:

44 new services were introduced including increases in frequency on the O-Bahn and the city freeroutes

the freefall in patronage was stemmed and stabilised savings in operating subsidies of A$59 million – compared to no policy change

A number of changes were made in the tendering process in the second round as it was felt that contractperiods were too short and risk levels too high. After the first round of tendering the process waschanged as it was felt that the tender periods were too short and the levels of risk were too high. Thesecond round of tenders has initially been successful with a large number of bidders for contracts. It istoo early to judge the longer-term impacts. The possibility of competitive tendering has been on and offthe agenda in Adelaide for over a decade and has been strongly resisted by organised labour and someother vested interests. It seems likely that the cautious approach being adopted is as much the result ofthis political climate as the technical results of the first tranches of contracting.

Case Study Bangkok – ThailandCity StatisticsPopulation(m)

5.6 (1998) Area (km2) 380 Income/head US$ 4,400

Extent and Use of Public TransportShare of public transportPT 60% Car (m/c) 30% (10%) Car

ownership205/1000pop

Split of public transport (000 passengers per day, 1997 (taxis 1995)Taxi & tuk-tuk

Ordinary Bus Air con Bus Other bus Ferry Rail (SRT)

1,310 5,104 681 2,082 400 176Public transport marketDespite extremely high levels of congestion Bangkok has a relatively high level of car ownership. Thebus dominates public transport in Bangkok. In 1999 there were 4,200 ordinary and minibuses operatedby BMTA with a further 5,600 run by private operators. There were also around 3,000 unlicensed 12-seat minibuses. There are several types of bus operations including ordinary and air-conditioned servicesfor which a premium fare can be charged. There are also a large number of para-transit modes. In 1997there were 51,133 taxis, 7,400 tuk-tuks and around 100,000 unlicensed taxi motorcycles. In 1989 it wasestimated that 21% of all passenger trips were by para-transit.Institutional and Regulatory FrameworkThere are 27 agencies in charge of transport in Bangkok Metropolitan Area (BMA). The main busoperator is BMTA, a state owned enterprise, which was granted a legal monopoly on bus operatingrights in 1976. The Department of Land Transport issues licences for bus operation under the authorityof Land Transport Control Board (LCTB). LTCB must take into account the interests of BMTA whenawarding licences and can impose conditions including vehicle types, fares and service levels. In effectseven-year route licenses are issued to BMTA, which then sub-licenses routes to private operators underjoint service agreements for routes where it cannot cover its costs. BMTA operates the premiumservices, leaving many of the rest to private sub-contractors. Agreements with private operators last for1-3 years and operators pay a yearly charge for each vehicle used. All buses over 7 years old are subjectto compulsory inspection.

DLT also sets taxi fares and licences tuk-tuks.

The Bangkok Transit System opened on Dec 1999 and is operated through a 30-year concession byBTSC, 65% owned by Tanayong plc. Fares are set by BTSC and approved by Bangkok MetropolitanAuthority.

Two private operators carry out ferry services under a restrictive regulatory regime.

Competitive RegimeTaxi/tuk-tuk Bus Ferry Metro Rail4 1/4 ? 4 1Level of Regulation

Para-transit

Taxi/tuk-tuk

Bus Ferry Metro –BTS

Urban rail

Fares none DLT/none

DLT ? BMA-BTSC

?

Routes none none/none

DLT ? n/a ?

Timetables none none/none

DLT ? None ?

Vehicle type none none/none

DLT ? None ?

Financing – fareboxPara-transit Taxi Bus Ferry Metro Urban rail100% 100% 77% ? 100% ?Effects of regimePublic transport is relatively cheap in Bangkok (ordinary bus fares haven’t risen since 1991). Despitesub-contracting many basic fare services BMTA suffers large losses that must be largely attributable tosignificantly lower efficiency than private operators. BMTA is not subject to any type of formalcompetition and routes are only contracted to private operators to suit it’s own needs.

The lack of coverage by bus operations has resulted in the expansion of para-transit operations,unlicensed motorcycles have moved to fill accessibility gaps and minibuses quality gaps. There is also ahigh level of car usage (which increased by 12% pa in early 1990s), resulting in significant congestionand pollution. The safety record of Bangkok is one of the worst in the world with 903 road accidentdeaths in 1997 (1,500 in 1996). The dispersion of responsibilities results in a lack of integration and co-ordination. The reliance on mega-projects does not satisfy the needs of the local population and hasoften ended with concession disputes.

Case Study Bogota – ColumbiaCity Statistics

Population 6.1 Area (km2) 350 Income/head US$ 3,200Extent and Use of Public TransportShare of public transport (JICA 1996)PT 72% Car 28% Car

ownership78/1000 pop

Split of public transport (passengers per year, 1998))Taxi Bus Bus Empresa Bus Escolar216 2,662 46 241Passenger Transport MarketBogota probably has one of the world’s largest varieties of bus operations. Essentially there are threetypes of buses, buses, with a capacity of more than 30 passengers, busetas, with a capacity of around 27persons, and microbuses, which hold around 10 persons. Within these three types there areconventional, executive and super executive buses and busetas. Bus fares vary with the type of vehicle,the time of day and vehicle age and are between 450-750 Colombian pesos, 1999 prices (0.23-0.38 US$).The average age of the bus fleet is high at around 20 years. Over recent years there have been movestowards smaller buses to increase speeds in increasingly congested conditions. A busway system iscurrently being introduced. The first stage will have three corridors over 40km. Car ownership hasgrown rapidly following the relaxation of import controls in the early 1990s. There are also someunregulated jeeps and vans that operate in outlying areas and radial routes in peak hours.Institutional and Regulatory FrameworkThe organisation of public transport in Bogota is complex. The Secretariat of Transit and Transport isresponsible for traffic law enforcement, traffic safety, driver and vehicle licensing and supervision ofpublic transport. STT is part of the central sector in District administration. All operations are carriedout by the private sector. EDTU the state company finished operating more than 10 years ago. STTissues operating licences to registered transport companies. These licences specify routes, operatinghours and company capacity. Within the route specification there are some schedules for frequency. STTis authorised to set fares but basic fares tend to be set through negotiation, with premium fareseffectively decontrolled. The transport company is essentially a group of bus owners. The licence itself isto a large extent separate from bus ownership. Bus owners pay an entry fee to a company who islicensed to operate buses on a route they wish join. There is a legal obligation that all bus owners servinga particular route have a share holding in the company licensed to operate it, however this is not alwaysstrictly enforced. Since 1997 there has been a condition that the company must own 10% of the busesthat operate on the route. Nevertheless the majority of bus owners are owner operators. There is anobligation for the transport company to join a transport union, which carries out negotiations with STTon behalf of its member companies.Competitive RegimePara-transit Bus4 4

Level of RegulationPara-transit Bus

Fares None STT and ownersRoutes None STTTimetables None STT - minimumVehicle type None Vehicles are licensed by STTOther None NoneFinancingSubsidies were paid to operate certain services, however these have since been removed. Workersreceive a special bonus equivalent to 80 standard bus trips per month.Effects of regimeEnforcement of transport restrictions is poor, with frequency standards particularly poorly enforced.There is limited competition between transport companies as they are effectively awarded monopolyfranchises. In effect routes with high demand will attract more buses. Access to outlying areas isrelatively difficult due to steep gradients, poor road conditions, especially in the rainy season. Unlicensedjeeps and vans infill gaps in services at much higher fares.

Case Study Budapest – HungaryCity StatisticsPopulation(m)

1.909 Area (km2) 525 Income/head US$ 7,100

Extent and Use of Public TransportShare of public transport (%)PT 61% Car 39% Car

ownership280/1000pop

Transport Mode Split (%)Bus Trolleybus Light

rail/tramMetro Suburban rail

688.7 80.7 335.6 31.1 63.2Public transport marketBudapest has a comprehensive public transport network. BKV a municipal limited company operatesbus, trolleybus, light rail/tram, metro and suburban rail services. A fleet of 798 conventional busesprovides bus services, 573 articulated buses and 90 low floor minibuses. There are also some 182trolleybuses. Tram services are run over 31 routes across the city covering 209km. The metro is made upof three lines covering 31km. There is also an extensive suburban rail network operating over 176 km inthe Budapest area. This is supplemented by irregular services operated by the national railway.Volanbusz, a state company, provides longer distance bus services but these are not allowed to competefor passengers in the urban transport market.

The public transport vehicle fleet is ageing as BKV does not have sufficient funds to replace vehicles.The EBRD and the World Bank have financed recent bus purchases and network rehabilitation. In1998 BKV launched a new buys service called BKV+ operating an express service with better reliabilityon three routes.

Car ownership has grown rapidly and has more than doubled in the last 10 years. Over this period thepublic transport mode share in Budapest has fallen from around 80% to 61%. This decline is stillongoing, with public transport passenger journeys falling by 2% between 1996 and 1997. BKV hasreduced staff, from 19,000 in 1993 to 15,850 now, and vehicles to reflect this.Institutional and Regulatory Framework

BKV organises, provides and manages all public transport in Budapest. BKV has been transformedfrom a state company via municipal ownership to become a joint stock company owned by theMunicipality of Budapest and BKV employees in 1996. Since 1994 there has been a service contractbetween BKV and the Municipality of Budapest (BMA). Through this BKV is obliged to provide a basicservice, defined by peak and off-peak frequencies and accessibility levels for different parts of thenetwork. The specification is revised annually by the Municipality and agreed by the City Clerk. BKVthen prepares supply plans and timetables that must be approved by the Transport Department of theMunicipality. BKV can also define additional services through a separate contract, however theMunicipality does not offer subsidies in these cases. Over recent years BKV has started to contract somebus services from private operators.

Flat fares, set by the Ministry of Finance, apply to the whole of the BKV network with a combination ofsingle tickets and period passes. There are also extensive concessionary passes.

Competitive RegimeBus Trolleybus Tram Metro Suburban rail1/2 2 2 2 2Level of Regulation

Bus Trolleybus Tram Metro Suburbanrail

Fares MoF MoF MoF MoF MoFRoutes BMA BMA BMA BMA BMATimetables BMA BMA BMA BMA BMAVehicle type BMA BMA BMA BMA BMAOther Accessibili

ty - BMAAccessibility - BMA

Accessibility – BMA

Accessibility - BMA

Accessibility – BMA

FinancingDespite fare increases and staff cuts, cost recovery is low. In 1996 fares and subsidies only covered 69%of costs. Fares only made up a 40% of total revenues, around two-thirds of which comes from the saleof monthly passes. Fare avoidance is high, in 1995 around 12% of passengers were found not to have avalid ticket.

The Municipality provides funding for the basic service. This sum is fixed and is calculated on the basisof the BKV’s business plan. Additional subsidy is available to BKV through meeting a number of qualitycriteria. Concessionary fares are subsidised by the Ministry of Finance

BKV attempts to finance vehicle replacement and network rehabilitation through it’s own sources.Funding is also available from Municipal sources.Effects of regimeThere are a number of major problems facing urban transport in Budapest:

low public transport fares resulting in a low cost recovery ratio and low levels of vehicle replacement partially consequent on the above, ageing and obsolete network and vehicles an over large public transport network, encouraged by the low public transport fares public transport

usage of high. Flat fares have encouraged a diffuse land use pattern necessitating long journeys. lack of focus on core operations within BKV. BKV is also responsible for tourist and water transport,

construction and a number of health and sports centres. falling ridership, partially as a result of recent fare increases and partially due to increases in car

ownership lack of a link between productivity and remuneration lack of competition

Case Study Buenos Aires – ArgentinaCity StatisticsPopulation(m)

12.4 (1997) Area (km2) 16,000 Income/head US$ 9,400

Extent and Use of Public TransportShare of public transportPT 67% Car 33% Car

ownership70/1000

Split of public transport (1998, 106 passengers per year)Para-transit Bus Light rail Metro Urban Rail400 2,600 5 254 478Public Transport MarketPublic transport in the metropolitan area of Buenos Aires (AMBA) is provided around 15,000 buses, a44km metro system and 900km of suburban railway. Regular buses and route associations or collectivosof midi and minibus operations provides bus operations. In addition to these there are around 60,000taxis serving AMBA. The market share of bus operations has been falling rapidly as a result ofcompetition from "remises", but he size of the bus fleet has remained relatively constant over recentyears. On some routes higher quality vehicles offer guaranteed seats at a higher price. Bus servicepatronage has declined in recent years as a result of competition from the privatised rail operators andincreased congestion. Further pressure has come from the increasingly important illegal para-transitminibuses and owner-operated old buses and coaches. A recent phenomenon is the emergence of"remises", private cars which club together to provide para-transit type operations, many driven byformer railway workers.Institutional and Regulatory StructureThe national transport authority (CNTA) is controlled by 3 bodies; the national transport department,the Province of Buenos Aires and the suburban municipalities. CNTA overseas minimum frequenciesfor route association in or to the city area, accounting for around 10,000 of the 15,000 registered buses.That municipality regulates buses, which operate entirely within a municipality. The ProvincialGovernment regulates inter-municipal services. Route associations are licensed to operate throughconcessions, which often overlap. The associations, most of which have now been corporatised, aretypically made up of owner operators, whose buses effectively represent a share of the company.Generally fare revenue is collected by the company, which pays expenses and then distributes netincome. Fare collection is through fareboxes and magnetic cards. In addition to the regulated busservices there are a number of illegal minibus and owner operator coach services which compete withregulated services. The Ministry of Economy sets fares for bus services in and to/from the city. Fares inother parts of the Metropolitan area follow these.

A municipal authority regulates taxis. Policy is fairly liberal with over 20,000 taxis operating illegally inaddition to the 40,000 licensed vehicles.

Private operators operate the railways and metro through concessions. These operators receive or makepayments to the national government in respect of the routes they operate. Competitive bids for theconcessions were made on the basis of minimum NPV of Government payments. Rail fares arespecified in real terms in the concession contracts and can be increased in line with inflation orimprovements in service.

The concessions are regulated in terms of fare setting and contract changes by a national body, SOPyT,(Secretary of Public Works and Transport). CNRT is responsible body for monitoring of theconcessions (as for bus). The day-to-day regulation of the metro has recently been transferred to the Cityof Buenos Aires.

Included in the concessions are a number of investment programmes, mostly funded by theGovernment. Rail infrastructure and rolling stock remain in national Government ownership. Themunicipality of the city of Buenos Aires (MCBA) is the owner of the subway and rolling stock. This has,in the past, lead to numerous conflictsCompetitive RegimePara-transit Bus Light rail Metro Urban rail5 4 4 4Level of Regulation

Bus Metro Urban railFares Ministry of Economy SOPyT SOPyTRoutes CNTA SOPyT SOPyTTimetables CNTA-min/association SOPyT SOPyTVehicle type Operator SOPyT SOPyTOther Conamba – road safety Enforcement – City of

Buenos AiresEnforcement – CNTA

FinancingBus operations are 100% privately funded.

The metro concessionaire agreed to pay a fee to the government of US$438 million for the concession.However the concession included a government grant of US$432 million for capital investment.

Rail concessions were let on a mixture of operating subsidies paid by the Government and operator feespaid by the private operators. These ranged from a payment by Government of US$178 million for theSarmiento concession to a payment of US$178 million by the private operator of the Belgrano Norteconcession. All rail concessions included Government backed capital investment worth between US$43– 243 million.

Effects of regimeThe operation of transport within Buenos Aires is uncoordinated due to the large number of differentresponsible agencies, answerable to different political bodies.

Buses Vehicles are generally well maintained staff per bus is low at around 3 people per bus (most buses are one-person operation) Bus fare collection is a problem as fareboxes tend to be slow. Buses operations are current under very

tight financial pressure as rail fares tend to be less than half those for buses for long distance trips.

Metro Innovation with remodelling of stations. Passengers increased by 75% between the letting of the concessions in 1994/5 and 1998 (compared

to a 3% pa decline in the period immediately before privatisation) however this growth appears to haverecently reversed.

metro car-kms up 64% quality of service improved fare increase of 20% 1997-98 concession renegotiated in 1998 with an increased investment programme 50% funded by public

money and fare increases of over 50% in the next 3 years, and removal of access charges.

Rail labour productivity up (staff fallen from 16,000 in 1991 to 8,400 in 1996). Passengers doubled by 1998, with increases of up to 700% on Belgrano Sur, but now in decline again. car kms up by 20-295%. 1997-98 fares up by 6%-32%.

Concessions are currently being re-negotiation due to increases in traffic, necessitating additionalinvestment in rolling stock and infrastructure.

Case Study Cairo – EgyptCity StatisticsPopulation(m)

14.9 Area (km2) 1,300 Income/head US$ 2,300

Extent and Use of Public TransportShare of public transportPT 72% Car (taxi) 20% (8%) Car

ownership77/1000 pop

Split of public transport (passengers per year, various years)Shared taxi CTA-mini CTA- Bus Other bus Tram Light rail Metro510 117 1264 248 20 31 512Public Transport MarketPublic transport in Cairo is dominated by the conventional bus, which provides 65% of all formalpassenger transport. Bus operations in Cairo are carried out directly by the Cairo Transport Authority(CTA) and the Greater Cairo Bus Company, a wholly owned but separately governed subsidiary. CTAalso operates surface trams, including the Heliopolis light rail. The Egyptian National Railway operatesthe metro. CTA bus operations are supplemented by those operated by schools and employers.

The bus fleet is old and inadequate. Bus fares on existing routes are frozen at 13 piastres. New servicescan be established under a separate fare, ranging from 10 to 50 piastres. Average fares on CTAminibuses are 30 piastres.

Tram operations are run on surface lines. The rolling stock and infrastructure is very old. The trams areseen to interfere with road traffic and ridership is very poor. The tram system is slowly being dismantled.The exception to this is the Heliopolis light rail, which has high levels of ridership and publicacceptability.

The metro system consists of two lines, one of 43.5km and one of 14.5km. The metro is heavily usedand its share of public transport increases to up to 50% in the corridors that it serves.

The inadequacies of the bus operations have resulted in an increase in the informal sector. There areestimated to be 65,000 shared taxis or microbuses. These are supposed to run along fixed point-to-pointroutes but often stop every ½ km to pick up passengers and deviate from routes in response tocongestion.

Institutional and Regulatory FrameworkThe responsible agencies in the operation of public transport system in Cairo are diverse:

National Authority of Tunnels (under MoT) – responsible for metro construction Egyptian National Railway – operates metro and suburban and regional railways Cairo Transport Authority – plans bus and minibus services, operates some bus services with rest

operated by GCBC. Also operates light rail and tram. Service Taxi Project – regulating shared taxis/minibuses Cairo Traffic Police under the Ministry of the Interior but reporting to the Governor of Cairo –

licence shared taxis and the normal ‘black and white’ taxis. Terminal Authority of Cairo builds inter-city and shared taxi terminals.

Shared taxis are supposed to be regulated by the Service Taxi Project (STP), however only 8,200 of the65,000 vehicles have a route licence and 40% of drivers are not licensed to operate a shared taxi. Onlyaround 20% of vehicles are owner driven the rest tend to be leased to drivers in return for a percentageof the fare collection. Shared taxi fares are around 3 to 4 times bus fares.Competitive RegimeShared taxi Bus Light

rail/tramMetro

4 1 2 1Level of Regulation

Shared taxi Bus Light rail/tram MetroFares ? CTA CTA ENR/MoTRoutes STP CTA CTA ENRTimetables None CTA CTA ENRVehicle type None CTA CTA ENROther Traffic Police –

licencesFinancingPara-transit operates on a purely private basis. No information is available on the financing of CTA butit likely to require large amounts of subsidy. Cairo is apparently one of the few metros that covers it’soperating costsEffects of regime

Lack of co-ordination – no feeder bus services to metro stations Considerable congestion problem – (some estimates say as many as 50% of trips are by car) Serious air quality problem CTA does not have enough buses and those it does have are poor quality Lack of responsiveness to demand – extensive para-transit in-fills gaps in the market Surface transport is financially unsustainable Enforcement is poor, traffic police have sufficient staff but are under-trained

Case Study Copenhagen - DenmarkCity StatisticsPopulation (m) 1.3 Area (km2) 450 Income/head US$ 39,900Extent and Use of Public TransportShare of public transportPT 20% Car 80% Car

ownership280/1000pop

Split of public transport (passengers per year, 1998)Bus Metro Local rail Urban rail256 - - 92Passenger transport marketThe main public transport mode in Copenhagen is bus. The majority of these are single deck, of which alimited number are articulated. The average age of buses is 4-5 years. There is also a suburban rail serviceoffering fast and frequent services over a 170 km network with 80 stations. This is supplemented byservices from five small railways that operate on local routes. A mini-metro is due for completion in2002 to link Amager Island with the mainland.Institutional and Regulatory StructureCopenhagen Transport, HT, regulates transport in Copenhagen. HT's role is now limited to invitingtenders for bus operations and co-ordination of bus services in Copenhagen. In 1995 the bus divisionwas separated from the planning functions of HT and renamed Bus Danmark. It was subsequently soldto Arriva in 1999. HT is also now responsible for the planning of some ferry services in Copenhagenharbour. The 3 counties and 2 county municipalities in Copenhagen own HT.

Until 1995 all tenders for bus operations where let solely to the private sector. Public companies cannow compete on an equal footing. The only public bus company that remains, Combus, now has 22%of the tendered bus market.

Tenders for the bus market are for gross cost contracts based on bus hours with performance bonuses.There are joint timetables for buses and trains and tickets are transferable. HT decides fares, schedules,quality and stipulates the interior design of the buses. HT also stipulates the required number of buses,the daily bus schedule, the period of operation and the costs of renting facilities. Bus drivers of existingoperators must be offered a job with the new company at equal pay and working conditions. Bids aretherefore based on average salaries. Contracts are let for a variety of different sized routes so that smalland large operators can compete. Contracts are let for 5-year terms.Suburban trains are owned, maintained and operated by DSB – Danish State Railways. The state andlocal authorities own local rail services jointly. The State and the city municipalities own the metro.Arriva Danmark will operate it.Competitive RegimeBus Urban rail Local rail2 1 1

Level of RegulationBus Urban rail

Fares HT HTRoutes HT DSBTimetables HT DSBVehicle type HT DSBOther see aboveFinancingOperating costs for HT are covered by: fares 52% (including concession payments from the state) andsubsidies 43% with the remainder funded by grants and commercial sources.

Operating costs for rail are covered by fares 77%, other commercial sources 9% and national subsidies14%.Effects of regimeThe main positive impacts of the introduction of contracting have been:

a reduction in the hourly vehicle operating cost of 24% between 1990 and 1998, an increase in quality - 88% of passengers are now satisfied with the service and only 2% dissatisfied a decline in the average age of fleet from 9 to 4.5 years an increase in bus boarding by 8% between 1993 and 1997. fare and service integration maintained cost savings estimated at DKK 1.8 million in 1999, two thirds of this been used to improve services

for customers, and a recent focus towards increasing quality – although this has led to an increase in contract prices, costs

per hour rising by 5% in the 1999 tender round.

The main drawbacks of the system have been: 22% of buses are still operated by Arriva under non-competitive contracts – increasing the possibility

of grant leakage into commercial operations. incentives are linked to an operator and not to a bus line, this is currently being changed lack of incentive for revenue collection operators feel that they would be better doing own scheduling and rostering quality index can be too

sensitive and often does not take into account the reasons for poor quality.

Case Study Curitiba – BrazilCity StatisticsPopulation 1.6 Area (km2) 430 Income/head US$ 3,700Extent and Use of Public TransportShare of public transportPT Car Car

ownership430/1000pop

Split of public transport (passengers per year)Para-transit Bus Trolleybus Light rail Metro Urban rail

325Public transport marketCuritiba is well known throughout the world for its high-speed bus network. Integrated land use andtransport planning has resulted in high levels of bus use even though Curitiba has one of the highestlevels of car ownership in Brazil. This has been achieved through the encouragement of high-densitymixed-use development adjacent to busways, with buildings of up to 20 storeys allowed on blocksadjacent to busway corridors. Large terminals are situated at the end of busways with medium sizedterminals at regular intervals along the route.

There are five main categories of bus transport in Curitiba: express which operate along the main busways. feeder lines which connect to the main busways at integration terminals speedy bus that connects the main busways, the CBD and other major stops. This has ‘tube’ style

stations to reduce dwell times inter-suburban buses conventional buses

Since it’s inception in 1991 the speedy bus network has proved very popular. Buses average 34km/h,compared to 22 km/h on express buses. This fast service has attracted 28% of its passengers fromprivate cars.Institutional StructureURBS, a city authority, contracts 10 private companies on a gross cost basis. Operators are reimbursedon a per km basis, calculated on a full cost basis, including the cost of fuel, lubricants, depreciation andeven lubricants. Journeys not performed or timetables cancelled are not paid. Efficiency is maintained byperformance benchmarks across operators. Contracts are area based, with each operator running alltypes of bus.

URBS also specifies fares, vehicle types, number of buses to be used, timetables, driver training anddevelops new routes. URBS is also responsible for parking policy, the Curitiba taxi system, and busterminals.Competitive RegimeBus1/2

Level of RegulationBus

Fares URBSRoutes URBSTimetables URBSVehicle type URBSOther see aboveFinancingFares are flat and are set to ensure that no worker spends more than 10% of their income on transport.Fares are usually paid to conductors on board buses, however there are a number of fare free transferpoints. Fares for the speedy bus are paid on entrance to the ‘tube’ station.

Subsidies for public transport operation come from the vale transporte, or transport voucher system.Every month each employee advises his or her employer of journeys he/she needs to make by publictransport. Employees are then provided with the appropriate number of public transport vouchers and6% of their monthly salary is deducted (obviously less if they have low travel costs). This schemeoperates across Brazil and is of considerable benefit to the low paid.Effects of regimeThe Curitiba busway is renowned for high passenger usage and good performance. Around 75% ofcommuters and 50% of residents use a bus each day. The success of the busways has led to congestion,which has reduced travel speeds limiting future growth. The system is constantly innovating to ensurethat demand is met, for example the development of speedy bus network. Curitiba has one of the lowestrates of air pollution in Brazil.

Case Study Delhi – IndiaCity StatisticsPopulation(m)

8.4 (1991)(9.9)

Area (km2) metro 1486 Income/head US$ 900

Extent and Use of Public TransportShare of public transport (motorised, 1986, walk and cycle 44%)PT 82% Car &

m/cycle18% Car

ownership60/1000pop

Split of public transport (passengers per year)Para-transit DTC Bus Other Bus Light rail Metro Urban rail

1,002Public transport marketPublic transport in Delhi has undergone a major change in recent years. In 1992 the bus market wasliberalised with the issue of 3,000 carriage permits to bus owners with 5 or less vehicles. Permits wereallotted by a draw and routes were allocated according to preferences. The routes were then supposedto be operated on a 60:40 split in favour of the state owned carrier DTC. This resulted in an increase inpoor driving habits and a dramatic increase in accidents. DTC suffered mounting losses and its bus fleetfell from around 3,000 to around 600, capturing only 14% of the market. The combined size of the citybus fleet fell to 4,500, an all time low. This resulted in the growth of a subscription bus service thatprovided a premium service for a semi-fixed group of clients at higher fares. At their largest extent therewere 5,000 subscription buses in operation.

In 1996 the ownership of DTC was transferred from national to local government and outstandingloans were written off. DTC was restructured and investment provided for the purchase of new buses.This increased fleet utilisation from 48 to 96%. Fare collection has improved with the introduction ofDTC paid conductors on contracted operations. At the same time vehicle maintenance checks wereproperly enforced on private buses. This has restored some order to the Delhi public transport system.

Currently there are 3,100 DTC buses and 7,000 private buses operating in Delhi. There are also a largenumber of para-transit vehicles, auto-rickshaws or cycle rickshaws, accounting for between 10 and 20%of public transport.

Delhi also has a suburban railway operated by Northern Railway. This operates stopping services on aring around the city. The main routes are around 100km in length A new metro is being constructed by ajoint venture between national and local government.

Institutional and Regulatory StructureBus operations in Delhi are a complex mix of state operated, private contracted, private licensed andprivate illegal operations. DTC operates 3,200 buses from its own fleet DTC is responsible for allaspects of the operation of these buses, including routes, scheduling etc but not fares. All private andpublic bus fares are set by the State Transport Authority, STA.

DTC also contracts around 2,600 buses on distance-based contracts. Private operators provide vehicles,drivers and fuel. DTC provides conductors to ensure revenue collection and full route running andcarries out scheduling, administration and marketing. Private operators are guaranteed a minimum of225 km per day. The current mileage rate is Rs 13 per km, set more by administrative and legal pressuresrather than through the market. Vehicles contracted to DTC should be under 8 years of age, althoughover 50% are older than this. Fares are distance related and range from Rs 2-8 for normal services. DTCalso provides a limited premium service at a flat fare of Rs 10.

STA issues permits for private buses and minibuses. Terminal use is allowed on the payment of amonthly fee to DTC. Bus routes were originally planned by DTC but the State Transport Authority hasallowed numerous changes to routes in response to demands from private operators. A special fitnesstest for Blue Line buses was introduced in 1996. This took over 9,000 checks to approve the 3,000vehicles in the fleet. STA is responsible for enforcement of standards.

In addition to the licensed private operators there are around 1,500 buses operating illegally. Theseservices use buses over 8 years old that are retired from DTC contracts There are also 1,400 charterbuses in regular service. These buses originally catered for group work or school charters. They thenevolved to cater for the higher income journey to work market. It is argued that these buses are nowpicking up passengers on a single trip basis as well as providing contracted services.

Competitive RegimeDTC Bus Private Bus Private Bus Para-transit1 2 5 5Level of Regulation

DTC Bus Contracted Private bus Licensed private busFares STA STA STARoutes DTC DTC STATimetables DTC DTCVehicle type DTC DTC – under 8yrsOther DTC DTC – conductorFinancingPrivate buses operate commercially and so receive no subsidies. DTC makes large losses. In 1997/98DTC lost Rs 1,567 million, mainly due to uneconomic fare levels, surplus staff and the large number ofconcessions and free passes. Farebox revenue only covers 67-68% of costs.

Effects of regimeThe liberalisation of the bus industry in Delhi resulted in:

reduced safety – accidents rose from 134 accidents from 1,100 private buses in 1992 to 1,072accidents and 3,800 buses in 1995;

a significant expansion of service volume following the entry of private operators into the market; poor driving – prosecutions rose from 16,264 in 1993/4 to 38,050 in 1995/96; poor vehicle maintenance

Case Study Harare – ZimbabweCity StatisticsPopulation(m)

1.4 (1995) Area Income/head US$ 1,000

Extent and Use of Public TransportShare of public transport, (44.5% of trips are by walk or cycle)PT 68% Car (& m/c) 32% Car

ownership110/1000

Split of public transport (1996, 000s passengers per day)Meter taxi Emergency taxi Commuter omnibus ZUPCO bus14 140 590 309Public transport marketThe public transport market in Harare is made up of three main modes:

ZUPCO - a partially government owned company operating traditional bus services Commuter omnibuses – private, largely minibus operations although there are some conventional and

articulated buses operating Emergency taxis – shared taxis seating not more than 7 passengers

In 1996 there were 1,500 shared-taxis and 2,400 commuter omnibus services. In the same year ZUPCOhad 640 conventional buses and 110 minibuses. ZUPCO operations have now fallen to around half their1996 level.Institutional and Regulatory StructureZUPCO is 51% owned by the state and 49% by the United Transport Group, a local business. Themanagement of ZUPCO is subcontracted to UT. ZUPCO operates under a 10-year franchise with theMinistry of Local Government, Rural and Urban Development which was due to expire in 1999

Emergency taxis were legalised in 1982 and are supposed to operate on a fixed route. Commuteromnibuses were legalised in 1993 in response to financial constraints on ZUPCO limiting its ability toexpand the bus network to satisfy demand. The increase in the commuter omnibus services has led toZUPCO pulling out of some routes including the City – Chitungwiza – the longest in the network. Inthe last couple of years ZUPCO services, and market share, have been reduced further.

Government sets maximum fares but these tend to be above market rates and so operators. Ratescharged by ZUPCO closely follow officially set maximum rates. Fares for commuter omnibuses andemergency taxis are 43% and 24% higher than those charged by ZUPCO. Peak period commuteromnibus fares often exceed stipulated maximums.Competitive RegimeBus3

Level of RegulationBus

Fares Govapproval

Routes ZUPCOTimetables ZUPCOVehicle type ZUPCOOtherFinancingZUPCO should be able to cover all costs with fares however this has become increasingly difficult dueto competition from emergency taxis and commuter omnibuses. All other modes are privately operated.Effects of regimeThe effective liberalisation of urban transport in Harare with the legalisation of commuter omnibuseshas;

increased capacity by 17% between January and September 1994. dramatically increased service frequency, reducing wait times from 18 to 12 minutes increased congestion and pollution increased fares at peak times reduced safety- information on accidents in Harare is limited however commuter omnibuses are

considerably more likely to be involved in accidents than other types of vehicles (even allowing for thegreater distances travelled)

Case Study Hong Kong – ChinaCity StatisticsPopulation(m)

7.0 (1999) Area (km2) 1,098 Income/head US$ 25,800

Extent and Use of Public TransportShare of public transport (%)PT Car Car

ownership55/1000pop

Public Transport Mode Split (annual passengers, million, 1999)Bus Tramway Light rail Metro Urban rail Ferry1,445 91 115 790 276 57Public transport marketPublic transport usage in Hong Kong is high. High vehicle registration fees that are paid to theGovernment, effecting limiting ownership to the rich, dissuade car ownership.

The major public transport mode in Hong Kong is the franchised bus operations, which account for42% of total public transport trips. Six private big bus operators, supplemented by tendered greenminibuses, carry out operations and semi regulated red minibuses and residential coach services.

Hong Kong is also served by metro, light rail, tram, heavy rail and ferry services. Two private tramwayoperators operate tram services over a track of 18km. Metro operations are carried out over a networkof 3 lines and 43km, including a new 34km line serving the airport, which opened in July 1998. Furtherextensions are under construction. Light and heavy rail operations serve the east and west parts of thenew territories.Institutional and Regulatory FrameworkThe ultimate regulatory responsibility rests with the Government, which approves fares, routes andtimetables for franchised bus services. The Commissioner for Transport initially determines fares, routesand timetables in consultation with operators. The Transport Advisory Committee, made up ofcommunity leaders and transport professionals, provides advice. Bus franchises are let on a competitivebasis but there are significant advantages to the incumbent operators, three of whom operate very largenetworks. Despite this in 1997 one of the existing operators, China Bus Company, had its franchiseremoved in October 1997 due to poor performance. The new operator New World First Bus has beenable to introduce high quality services at competitive fares.

Bus franchisees are generally operated on a district basis, although there are some overlapping routes.Fare increases are based on the franchisee’s financial position and the level of public acceptability. Mostrecent franchises have incorporated powers to withdraw one of more routes and impose financialpenalties. The duration of franchises is long, often over 10 years.

In addition to the big-bus franchises there are also a number of franchised minibus services (GreenPublic Light Buses). These are for routes that are unsuitable for high capacity buses. Minibus franchisesare let on similar basis as those for conventional buses. There are also a number of partly regulatedminibus operations (Red Public Light Buses). The operators determine fares, routes and schedules forthese services. Red minibuses are limited to 16 seats and are prevented from operating in certain areas,reducing the competition with franchised operators. As well as these services there are also a number ofcoach services operating from new residential developments Fares for these operations are not fixed butoperations are controlled to avoid conflicts with franchised operators.

All tram and ferry services are operated by private companies under licence. The main tramway,Hongkong Tramways follows a historical low fares policy but is coming under increasing competitionfrom franchised bus operations. Routes, frequencies and running times are currently being revised. Theother tramway, Peak Tramway, is a cabled hauled funicular and mainly serves tourist traffic. Two privateoperators provide ferry services, Government specifying minimum frequencies, routes and fares.

The metro is operated by the MTR Corporation, which is wholly government owned. Fares andfrequencies for the metro are set by MTR. MTR is currently being prepared for a partial privatisationwith the sale of 20-30% of equity later this year.

The urban and light rail operations are provided by Kowloon Canton Railway Corporation, a publiccorporation. Fares and frequencies on routes are set by KCR. KCR also operates a feeder bus networkon 22 routes to rail and light rail stations.Competitive RegimeBig Bus GPLB RPLB Tram Light rail Metro/rail2/3 2/3 4 4 2 2Level of Regulation

Big Bus GPLD RPLD Tram Light rail Metro/railFares CT CT Operator Operator Operator OperatorRoutes CT CT Licensed Fixed Fixed FixedTimetables CT-min CT-min Operator Operator Operator OperatorVehicle type CT/ops Seat limits Seat limits Fixed Fixed FixedOtherFinancingAll public transport in Hong Kong is supposed to be self-financing. Bus fares are regulated so thatoperators can make a suitable return on capital invested. Both MTR and KCR are also expected to makea similar return on capital for the Government. MTR is one of the few metros in the world which coversnot only it’s operating costs but also it’s capital costs. The main source of income besides fare revenue isproperty development along the main metro corridors. In 1998 MTR made a profit of HK$2.8 billion.In the same year KCR also made a profit of HK$1.6 billion, also including a significant contributionfrom property development.

The two tramways are currently facing financial difficulties brought about by falls in ridership ofbetween 25 and 30% over the last six years. Timetables and routes are currently being revised to reflectthis.

Effects of regimeThe current competitive regime works well in Hong Kong. Competition between modes is strong andcongestion and car ownership are low. There are however a number of provisos that must be added:

the regime relies strongly on the strong institutional capabilities of the regulatory agencies and themixture of commercial and social objectives of both the private and state companies involved. Thesecharacteristics may be difficult to replicate elsewhere

the large bus franchise areas and long franchise lengths reduce potential competition. This has notprevented the replacement of one operator however it is likely that operating costs are not as low as theycould be.

The basis for setting fares on the financial position of the company, particularly the return on capitalinvestment can lead to over investment

Much of the success of MTR and KCR has been based on the development of property, which is onlypossible due to the large constraints on land in the area.

Case Study Kuala Lumpur – MalaysiaCity StatisticsPopulation (m) 1.24 Area (km2) 2100 Income/head US$ 5,200Extent and Use of Public TransportShare of public transport (1999,%)PT 20% Car 80% Car ownership 170/1000 popPublic Transport Mode Split (passengers per annum estimated 1999)Park May (bus) Intrakota (bus) STAR (l. rail) PUTRA (l. rail) KTM (rail)- 145 20 27 9Public transport marketThere are two dominant private bus operators in Kuala Lumpur: Intrakota, which operates services withinKuala Lumpur, and Park May, which operates longer distance services. There are also a number of otherprivate operators, each servicing a separate area of the city. It has been broadly estimated that theseoperators account for around a third of all bus trips in Kuala Lumpur. In total, there are around 7-800buses operating in Kuala Lumpur daily. Minibuses used to duplicate much of the full sized bus networkbut their operations have now been cut back to providing feeder services to the STAR LRT system.

Kuala Lumpur also has two metro/light rail lines, with a third one under construction. The STAR systemcovers around 24 km and carries around 20 million passengers per annum. The PUTRA system startedoperating on 29 km of track in 1999 and carries around 27 million passengers per annum.

In addition to the metro services, there are urban rail services, KTM Kommuter, operated by the nationalrailway, which run across the cityInstitutional and Regulatory FrameworkBus operations in Kuala Lumpur are licensed to two lead operators, Pak May and Intrakota. Althoughthere is no official agreement operators provide services on both profitable and social routes. Crosssubsidy of social services is hindered by the fact that a number of other private bus operators have beenseparately licensed to operate within KL. By their existence, it is implicit that these operate exclusively onprofitable routes. Each operator negotiates fares independently with the government. The main regulatorybody for buses is the Road Transport Licensing Board (DBKL), a part of the Ministry of PublicEnterprise. Licenses for other conventional bus operators are issued on an area basis. RTLB also issuesroute licences for minibus operations.

Both PUTRA and STAR are operated by private companies under a 30-year BOT concession (with thechance of a further 30 year extension). Fares are again set through negotiation with the government.

KTM, the urban rail service, is publicly owned but managed by a private company. Again fares are setthrough negotiation with Government.

Competitive RegimeBus Metro/LRT Rail2 3 1?

Level oBus Metro/LRT Rail

Fares Operator/government Operator/government Operator/governmentRoutes Area restrictions Fixed FixedTimetables Operator Operator OperatorVehicle type General types defined Fixed FixedOtherFinancingCost recovery of public transport operations in Kuala Lumpur is very low. Of the five main operatorsPark May is the only one expected to turn in an operating profit in 1999. PUTRA is currently losingRM114 million per annum, whereas STAR is losing around RM70 million per annum. KTMKommuter’s fare box ratio, excluding interest on debts, is 52%.Effects of regimeThere is a considerable oversupply of public transport in Kuala Lumpur. The financial viability of theexisting operators is tenuous without industry restructuring. This will lead to a reduction in the provisionof social public transport services by the two main bus operators, unless there is a reduction in the totalnumber of bus operators. Greater use of the capacity of the rail systems could be achieved by networkand fare integration and reductions in parallel bus services.

Poor network integration has resulted from a lack of requirements for operators to work together, e.g.poor interchange facilities between bus and metro/light rail systems.

Similarly the lack of fare integration, with a mix of flat fares on buses and distance related fares on rail,does not encourage interchange between bus, metro and rail services.

Case Study Lahore – PakistanCity StatisticsPopulation(m)

6.1 (1994) Area Income/head US$ 700

Extent and Use of Public TransportShare of public transport (1990/ JICA/TEPA, walking 52% bicycle 7%)PT 36% Car (inc m/c) 64% Car

ownership6/1000(national)

Mode split of transport (thousand passengers per day, 1990)Taxi Rickshaw Minibus PTRC bus Private bus Rail7 69 618 137 519 61Public transport marketWalk dominates personal movements in Lahore, accounting for 52% of all trips. The share of publictransport is low. In 1990 public transport only accounted for a third of all motorised trips, reflecting theinadequacy of services.

The Punjab Road Transport Corporation, a provincial government owned company, used to operateconventional bus services in the urban and surrounding area until it was wound up on 1 June 1997. Publictransport is now predominately provided by private operators. On 1 March 1997 (before the end ofPRTC) there were 27 buses operated by PRTC, 267 private buses and 200 buses from the Lahore UrbanTransport Project (LUTP). There were also 889 Mazda vans, 4,114 wagons and minibuses and 289 Suzukivans. Operating contract carriage were 8,700 taxis, 12,483 auto rickshaws and 10,000 tongas (horse drawncarts).

The LUTP buses are operated under a franchise awarded to a private operator, who then subcontractsroutes to other operators. Only around 90 of the private and LUTP buses are operated on urban routes. In1997, 50 conventional buses were operating under the Lahore Transport System a NGO made up ofgovernment and operator representatives. By March 1998 LTS operations had increased to 60 buses on 3routes.

Urban rail services are limited to peak hours and irregular services at other times on three routes.Institutional and Regulatory StructureThe Secretary of Transport (ST) is the statutory authority for controlling public transport, including fares.The is no legal procedure for setting fares, usually ST publishes an application for a fare increase andinvites objections which are heard before the increase is authorised. Fares are distance related, with lowerfares for Suzuki vans and higher fares for conventional buses operated under LTS. Fares for students areofficially Rs 0.25 but they often do not pay at all (students pay half fare on LTS services)

The main regulatory body for public transport in Lahore is the Regional Transport Authority. RTA issuesroute licences for bus and minibus services. Licences are for a maximum of 3 years. Route permits can beissued automatically to applicants for existing routes. Passenger transport in Lahore is organised intooperators associations that control entry to their routes by limiting access to terminals. The result is astatic network that does not properly reflect the pattern of demand.

LTS, although in law operated under a board made up of private operators and governmentrepresentatives, is entirely made up government officials. The board has responsibility for planning,operation and control of the operations under their control. It defines the route network, terminals, busstops and service schedules for operators. Permits are issued on a route basis on a first come first servedbasis. The number of permits is limited through discussions with operators. The board also enforces thequality of services under their control. This includes requirements for the vehicle to be clean and notoverloaded, and to only charge set fares. LTS staff is posted at terminals to check on arrivals anddepartures. Fines are levied for non-compliance. Members sign up on a yearly basis, paying a monthlyservice charge and committing to livery and quality standards. The main popularity of LTS with operatorsis that it allows them to charge double the normal fare. There are complaints from customers that thisdoes not guarantee an appreciable increase in the quality of service.

LUTP buses are operated under a franchise for specific routes let by the Lahore Commissioner. Thefranchise was originally granted to an individual operator who then sub-contracts services to otheroperators to serve his routes at a fee around 25% of revenue. There are no checks on timetables oroverloading. Fares are charged on the standard scale.

Pakistan railways, the national railway operator, carry out rail operations.Competitive RegimePara-transit Minibus LTS bus LUTP bus Rail4 4 2 3 1Level of Regulation

Minibus LTS bus LUTP busFares STA STA STARoutes RTA Board franchiseeTimetables operator Board operatorVehicle type operator Board franchiseOther RTA/police -

enforcementBoard - enforcement RTA/police-enforcement

FinancingOnly minibus operators can cover their costs at current fare levels. Conventional bus operators find itimpossible to fully cover operating and financing costs. It is likely that LTS operators fair slightly betteralthough the current position is unclear.

Effects of regimeIt is clear that the public transport system in Lahore is not working. The main reasons are:

Standard fare levels are too low to allow any type of quality in the public transport system with highlevels of overcrowding and poor levels of service

Officially there are no limits on route permits as they must be issued to all operators that meetrequirements. However the real control rests with the associations. This results in a shortage of transportcapacity and unresponsiveness to demand

Diffusion of ownership has lead to poor co-ordination

The LUTP system is constrained by low fare levels. The lack of competition for franchisees on theroutes gives the franchisee a monopoly right which he can exploit, although competition from minibuseshas reduced this advantage

LTS offers some hope for the future. It allows higher fares making operations financially viable for theprivate sector. It also allows for greater enforcement of regulations and timetables. The board of LTShowever has yet to include operators’ or customers’ representatives so it currently only works in theinterests of the Government. It may however form the basis of a government controlled contractingscheme.

Case Study London – UKCity Statistics

Population (m) 7.1 Area (km2) 1586 Income/head US$ 27,900Extent and Use of Public TransportShare of public transport (journeys 1998, %, walk and bicycle 10%)

PT 48% Car (m/c) 51% (2%) Car ownership 350/1000 popPublic Transport Mode Split (passengers per annum, 1997/8, * South East England)Bus Light Rail Metro Suburban rail1,277 23 832 576*Public transport marketMore than 30 private operators using over 5,500 double and single decked conventional buses andaround 1,000 minibuses provide bus transport in London under contract.

Light rail transport is currently provided by Docklands Light Railway, which has 3 lines in the East ofLondon. Driverless trains provide Service. Another light rail line in the South of London, CroydonTramlink, is under construction and is due to start operation in April 2000.

London has an extensive metro network of 12 lines covering 412 km. A 16km extension was completedat the end of 1999. Most of the metro system was mainly constructed in the last century and there is aconsiderable backlog of engineering work.

There is also an extensive suburban rail network, with services provided by 11 private operatingcompanies. In 1997/8 576 million passengers were carried by these services. Services operate atdistances of over 100km from London. There rail services are particularly important in the North Eastand South of London, areas poorly served by the metro. A number of extensions and upgrades to thenetwork are planned over the coming years.Institutional and Regulatory FrameworkThe overall authority for bus and metro transport in London is London Transport (LT). LT is currentlyunder the control of central government but will come back under the control of local governmentwhen a major is elected in May 2000. LT’s main responsibilities are the planning and co-ordination ofpublic transport within London. LT provides integrated ticketing for bus, metro and suburban railways.LT is also responsible for the operation of the metro.

Docklands Light Railway is owned by DLR ltd, a holding company of the Department of Environment,Transport and Regions (DETR). A private company under a seven-year franchise carries out operationand maintenance of DLR. The recent extension to Lewisham has been provided through a privateconcession.

Private companies provide suburban rail services under franchises. A private company - Railtrack,provides rail infrastructure. Access charges are regulated by Office of the Rail Regulator. Passengerfranchises are currently the responsibility of the Shadow Strategic Rail Authority (SSRA). Franchisesstipulate minimum frequencies on certain routes. Fares are constrained to RPI-1% with enhancementsfor achieving quality standards. Fare increases for regulated tickets are dependent on performance.

Competitive RegimeBus Light rail Metro Suburban rail2 4 1 4Level of Regulation

Bus Light rail Metro Suburban railFares LT LT LT Franchise/operato

rRoutes LT/LTB Fixed Fixed Franchise/operato

rTimetables LT/LTB Operator LT Franchise min freqVehicle type LT/LTB – some

vehicle specFixed Fixed Some spec in

franchiseOther LTB/LT-

marketing, info,monitoring

FinancingIn 1997/8 bus fare revenue, including concessionary fare subsidies, was £629 million and directsubsidies £42 million. Subsidies are made up of service support grants and fuel tax rebates (worth about£40m - £50m a year). Another effective subsidy is provided by Central Government by the zero ratingof public transport for VAT purposes.

Metro fares cover 125%of operating costs before depreciation and renewal costs. These costs are around£400 million per annum with an estimated renewal and maintenance backlog of £1.2 billion. Includingthese costs gives a cost recovery of 86%. Government finance has increased in recent years but themetro still has a significant financial shortfall. Alternative financing methods are currently beingconsidered, including private finance and public bond issue.

Passenger rail franchises were awarded on the basis of a declining subsidy profile. Total subsidypayments for the whole network are predicted to fall from around £2.0 billion in 1996/7 to £0.9 billionin 2002/3. A number of franchises are currently being re-tendered. Subsidy payments are expected toremain at around their current level of £1.4 billion to pay for expanding infrastructure capacity.

Effects of regimeBus contracting in London started in 1985 when LT bus operations were formed into a separate,subsidiary, operating company. Bus service planning was retained at the centre and combined with theprocurement function. From that time bus services were progressively put out to competitive tender. In1994/5 LT sold its bus operating companies to the private sector. The impacts of bus contractingcannot be easily separated into those that occurred before and after the sale of operating concerns as amajor impetus to improved efficiency was given by the preparation for privatisation: The main impacts(using 1997/8 figures) since 1985/6 have been:

Bus ridership has increased by 12%, compared to a fall of 23% for Great Britain as whole Bus vehicle kilometres up by 33% Bus operating costs per vehicle kilometre have fallen by 46% Bus operating costs per passenger kilometre have fallen by 47% Bus fares have increased by 38% Direct subsidy payments have fallen by 85%

LT buses retain the right to operate services and have recently taken over the operation of 6 bus routesdue to poor performance by the private sector.Rail franchises were let progressively from 1995 to 1997. The main impacts of the franchising processwere:

Competition for rail franchises has been significant – with an average of 5 bids for each franchise. Competition increased as the franchise process went on with a 27% reduction in subsidy payments

from the first to tenth tranches On rail competition ahs been limited to a few parts of the network were there are parallel operators A large number of innovative services have been developed Ridership has increased: passengers up by 20% passenger km up by 16% between 1993/4 and 1998/9 Revenue has increased by 25% (1993/4 to 1998/9) Punctuality and reliability have increased slightly although there are large disparities between operators There has been a 48% reduction in staff numbers

The first round of franchise renewal bids have been sought for three franchises, Connex South Central,Chiltern Railways and East Coast Mainline. Three serious bids were received for each of the franchises.

Case Study Manchester – UKCity Statistics

Population (m) 2.7 Area (km2) 1267 Income/head US$ 25,400Extent and Use of Public Transport

Share of public transport (1991, %)PT 40% Car 60% Car ownership 390/1000popPublic Transport Mode Split (passengers per annum 1998)

Bus Light Rail Local rail Suburban rail227 14 11 -Public transport marketBuses carry 90% of the passenger movements in Greater Manchester. Services are split betweencommercially operated services accounting for 87% of bus mileage and contracted socially supportedservices accounting for 13%. Over 50 private companies operating over 2,500 buses provide services.Buses are a mixture of double and single deck and minibuses. Recently articulated buses have beenintroduced on some services.

Light rail services, commencing in 1992, are provided over a one-line network of 31km. A 7.5kmextension is currently partially open. Further extensions are also proposed.

Rail services in Greater Manchester are provided by over a network of 228 km by a private operatorunder a franchise. Some local services are supported by GMPTEInstitutional and Regulatory FrameworkThe main regulatory authority for public transport in the Greater Manchester area is Greater ManchesterPassenger Transport Authority (GMPTA). It is made up of representatives from the 10 local councils.Greater Manchester Passenger Transport Executive GMPTE implements the policies of GMPTA.GMPTE is responsible for contracting socially necessary bus services and supporting local rail services.GMPTE issues around 1,000 contracts for socially necessary services each year. Contracts are tenderedon a net cost basis with operators bidding on the basis of minimum subsidy to provide a set timetable.Fares for contracted services are set either by GMPTE or on a commercial basis. Contracts are tenderedfor between 3 and 5 years. The network of socially necessary services is assessed on the basis of gaps inthe commercial network. GMPTE also contracts school bus services on a gross cost basis.

The majority of the bus network is operated on a purely commercial basis. Bus operators are free to setfares, routes and timetables entirely commercially. There is some form of quality regulation through thelicensing of operators. Requirements include professional competence and financial standing.

Manchester Metrolink, a wholly owned subsidiary of GMPTE, provides light rail services. Operationsare franchised to a private operator, Altram. The franchise includes the DBMO of the 7.5km extension.

Some local rail operations are supported by GMPTE. These services are operated, under contract , bythe regional franchised rail operator, North West Trains. Details of the rail franchising are given in thediscussion of the London case study.

Competitive RegimeCommercialbus

Supportedbus

Light rail Local rail Suburban rail

5 2 4 3 4Level of Regulation

Com Bus Sub Bus Light rail Local rail Suburban railFares Operator Op/GMPTE GMPTE GMPTE? Franchise/opRoutes Operator GMPTE Fixed Fixed FixedTimetables Operator GMPTE ? GMPTE Franchise

min freqVehicle type Operator Op/GMPTE Fixed Operator Some spec in

franchiseOtherFinancingThe majority of bus services are commercially operated - but again benefiting from fuel duty rebates andzero-rating of VAT. In 1998 service subsidies amounted to £12 million, with a further £36 million fromconcessionary fares. GMPTE also provided £78 million to support local rail services.Effects of regimeThe main impacts of the introduction of bus deregulation in Greater Manchester are:

Passenger journeys have fallen by 36% between 1986 and 1998. Bus service mileage has increased by 14% Cost per supported bus mile has decreased by 63% in real terms Operating subsidies more then halved. Cost of bus travel has increased by 85% in real terms (for a 3.5 mile journey) Some price competition has occurred (with the introduction of MagicBus) Lack of integration of fares and services and tickets

Rail service franchising is discussed under the London case study.

Case Study Manila – PhilippinesCity Statistics

Population (m) 9.82 Area (km2) 636 Income/head US$ 1,500Extent and Use of Public TransportShare of public transport (%)PT 78% Private (Car) 22% (19%) Car ownership 82/1000popTransport Mode Split (Metro Manila, 103 trips per day, 1996)Jeepney Tricycle Taxi Bus Light Rail Urban Rail6,952 2,373 1,088 3,093 409 6Public transport marketThe public transport market in Metro Manila is dominated by para transit. This is made up of tricycleand jeepney operations. Jeepneys are essentially shared taxis, which can carry anything up to 20 people.It is estimated that there are 60,000 jeepneys operating in Metro Manila. These operate along the mainradial routes, often in competition with buses, although trips tend to be shorter.

There are also 60,000 non-motorised tricycles operating in Metro Manila, with about the same numberagain, operating in the immediately adjoining area. Tricycles tend to operate from jeepney or busterminals, taking passengers to local housing areas, where poor roads will not allow motorised transport.

Bus operations in Metro Manila are provided by as many as 10,000 buses with a further 3,000 operatingon commuter routes into the area. Conventional buses with 60 seats carry out the majority of operations.Increasingly these buses are fitted with air-conditioning. Fares for conventional buses and jeepneys aresimilar, fares for air-conditioned bus are around 2-2.5 times conventional fares.

Light rail/metro services are provided along two lines. Line 2 runs for 15 km and is operated by metrostyle coaches. Line 3 is currently under construction with 11km completed and opened. Light rail stylecars operate this. The initial patronage on the completed section of Line 3 is disappointing with onlyaround 40-50,000 passengers per day. This is expected to increase to around 300,000 passengers a daywhen it is completed. Line 2 is also under construction but this has hit political difficulties.

There is also a limited poor quality heavy rail service operating in Manila by Philippine National Railway.There are effectively two routes, one with a branch. This is predominately single track and is in a classicdownward spiral of declining patronage and declining service.

Institutional and Regulatory FrameworkOver 100 bus operators provide bus transport, most of who are members of the Integrated Metro BusOperators Association (IMBOA). Bus operators are licensed and there is supposed to be a minimumoperator size of 10 vehicles, however many operators have less than 10 vehicles. The LandTransportation Office (LTO) licenses buses. The Land Transportation Franchising and RegulatoryBoard (LTFRB) issue bus licences. Licences specify routes and fares. Operators must pay a registrationfee for the route. Licences do not allow an exclusive right to operate a route. The capacity of the route interms of the number of vehicles allowed to operate is predetermined by LTFRB.

The Land Transport Commission also supervises the regulation of jeepney operations. Jeepneys aresupposed to have a license to operate. Routes and fares are again specified. The majority of operatorshowever are do not meet all required criteria and so operate illegally, although fares limits tend to beclosely followed. The ownership and operation of jeepneys is usually separated with over 70% ofoperations carried out by rented vehicles.

The Light Rail Transit Authority (LRTA) is the owner of LRT Line 1 and the Metro Rail TransitOrganisation (MERTO), a Government owned and controlled corporation, which is contractuallyresponsible for the management and operation of the light rail. The recently constructed Line 3 isoperated by DOTC. The line was built and will be maintained by Metro Rail Transit Corporation aprivate company.

Urban rail services are operated by Philippine National Railways, a government owned corporationalthough systems of control are weak.Competitive Regime

Jeepney Bus Light rail Urban Rail4/5 4 1 1

Level of RegulationJeepney Bus Light Rail Urban Rail

Fares LTFRB LTFRB DOTC DOTC/PNRRoutes LTFRB LTFRB Fixed FixedTimetables operator Operator DOTC PNRVehicle type operator Operator Fixed FixedOther

FinancingBus and jeepney operations are carried out privately and no subsidies are given for operation. Fares forbus operation tend to be low and insufficient to properly cover capital costs, resulting in a large numberof old and polluting vehicles on the road. The Government owned bus operator Metro Manila Transitwas forced to close in 1994 due to financial losses.

LRTA is in a dire financial condition. Fares currently cover operating costs by a ratio of 1.7-1.9 butinterest payments on large debts that accrued during the construction of the project. In 1995 LRTA hada financial deficiency of P1,300 million and would have gone bankrupt had it not been for state backing.

PNR is also in a dire financial condition and again only continues because of Government backing

Effects of regimeDespite low public transport fares and high levels of usage Metro Manila remains very congested. Thiscongestion is exacerbated by the large number of jeepney operations, which dominate short trips withinthe centre of Metro Manila.

The large financial losses run up by rail based modes in Manila are financially unsustainable andnumerous attempts have been made to restructure the industries. These have largely been unsuccessful.

Case Study Mexico city – Mexico

City StatisticsPopulation(m)

20 Area (km2) 1,600 Income/head US$ 5,700

Extent and Use of Public TransportShare of public transport (1996, %)

PT 83% Private 17% Car ownership 170/1000popTransport Mode Split (Metro Mexico, % 1994?)

Collectivo Urban Bus Suburban Bus Trolleybus Light rail Metro70% 8% 5% 1% - 16%Public transport marketThe public transport market in Mexico City is dominated by collectivo microbus and shared taxi orCombi operations, carried out by around 90,000 taxis and 30,000 microbuses. Taxi and microbusoperations have grown rapidly over the last three decades from around 40,000 in 1976 to around110,000 now. This mirrors the growth in car registrations.

Almost exclusively private operators under licence now run bus operations. STE, the trolleybus and lightrail operator operate some busy routes. A fleet of articulated buses serves these routes.

Trolleybus services are operated over a network of 17 routes covering around 200km. Light rail isprovided over one line of 13km and metro services over 11 lines and 178km.Institutional and Regulatory FrameworkPrivate operators mainly carry out bus operations under licence, although competitive tendering iscurrently being introduced. Licences are essentially route based. Separate licences are issued for bus andminibus operations. Minibus operations are allowed to charge between 2.5 and 5 times the fare ofconventional bus services. No subsidy is available for bus or minibus operations. Conventional privatebus services have declined rapidly over the last decade as they cannot compete with the microbusoperations. Due to concerns over air pollution microbus licenses are being reduced and replaced withfewer conventional bus licences. These new licences are for services that complement, rather thancompete, with the metro, which has been the case in the past.

There are two main regulatory authorities in Mexico City. The Federal District for the city centre (10+million inhabitants) and the province of Mexico covering the suburbs. The main regulatory authority inthe city is the Secretaria de Transporte y Vialidad (STV). This is responsible for the issue of city bus andmicrobus licenses. In the metropolitan area licences are issued by Secretaria de Communicaciones yTransportes (SCT).

The trolleybus light rail and some bus routes are operated by STE, a federal body. The metro is underfederal control. STV is the co-ordinating body for bus, trolleybus, light rail and metro services in thecity.Competitive RegimeBus Trolleybus Light rail Metro1/4 2 2 1

Level of RegulationBus Trolleybus Light Rail Metro

Fares SCT/STV SVT SVT SVT/SCT metroRoutes SCT/STV Fixed Fixed FixedTimetables Operator SVT/STE SVT/STE SVT/ SCT metroVehicle type Operator Fixed Fixed FixedOtherFinancingMost bus, microbus and shared taxi services are carried out privately with no subsidies. STE operates thebusiest conventional bus services and so is unlikely to receive subsidy.

The position of the trolleybus and light rail systems is unclear but it is likely that they are making heavylosses. Trolleybus services have been cut from over 350km to 200km in the last decade.

Metro fares have risen considerably over recent years from 1US cent to over 15 US cents, in an attemptto reduce subsidies. Farebox revenue was estimated to be around 30% in 1997. This is likely to haveslightly improved in recent years.Effects of regimeThe main problems of the transport system in Mexico are the high levels of traffic congestion and airpollution. Car ownership is growing rapidly and the introduction of microbuses appears to have donelittle to stem this growth. Attempts have been made to reduce air pollution, for example the use ofunleaded fuel by the taxi fleet, but these have generally had a negligible impact. The replacement ofmicrobuses with conventional buses may provide some relief in the short term.

The metro system is poorly planned and despite high ridership on a number of lines the majority of linesare poorly used.

Integration between public transport modes is poor. Fares are flat but do not allow transfer betweenmodes, encouraging urban sprawl.

Case Study Nairobi – KenyaCity Statistics

Population (m) 3 Area Income/head US$ 900Extent and Use of Public TransportShare of public transport (%)

PT Car Car own(national, 96)

9/1000 pop

Public Transport Mode Split (%, 1994)Bus Matatus57% 43%Public transport marketThe public transport market in Nairobi is made up of conventional buses operated under franchise andinformal para-transit, Matatus. Matatus are were typically converted pickups but have been replaced by12-25 seat minibuses. There are around 2,500 matatus operating in Nairobi.

The rapid expansion of the population of over 5% per year has put a considerable strain on the publictransport system and causes high levels of congestion in peak periods.Institutional and Regulatory FrameworkKenya Bus Services, the conventional bus franchisee was sold by Stagecoach holdings plc to aconsortium of local business in 1998. The concession allows the company to determine its own routes,fares and schedules without any reference to any regulatory authority. A public sector bus company alsoproduced conventional bus services, Nyayo Bus Services however this could not compete with theprivate sector and was wound up in 1996.

Matatus have not been subject to any formal regulation after deregulation in 1994. Various Matatusstages are controlled by cartels, which extort money from operators. Operators are also organised intoroute associations, which attempt to limit new entrants to routes. Matatu fares are not regulated and varywith the time of day and month.Competitive RegimeMatatus Bus4 3Level of Regulation

Matatus BusFares None None apart from politicalRoutes Route association NoneTimetables None NoneVehicle type None NoneOtherFinancingBoth conventional buses and Matatus operate commercially. Both are unlikely to make much profit. Thewithdrawal of Stagecoach from KBS was associated with financial losses. Matatu operators rarely makeprofits due to high operating costs including bribes and membership fees.

Effects of regimeThe franchising of conventional bus services to KBS initially worked well under Stagecoachesownership. Although fares were decontrolled, Matatu operators provided strong competition on routes.KBS invested in a high quality bus operation that made a profit for a number of years. Fares for Matatuoperators on competing routes were lower than in other areas. The administrative burden on authoritywas low and the operations actually made small profits for the City Council, which was a minorityshareholder.

Declining road standards due to storm damage in 1997/8 and increasing congestion, made the operationof the buses increasingly unprofitable and Stagecoach has withdrawn from the market, selling to localinterests. It has yet to be seen whether the new owners can successfully turned the business around.

The operation of matatus and the lack of regulation have had a number of undesirable effects: Accident levels are high, drivers work long hours and race between stops to pick up passengers Congestion is high, particularly at stops in the city centre with drivers dawdling at stops to pick up

passengers Operators are also open to corruption from cartels who ‘regulate’ stops Conflicts between operators, route associations and other interest groups is high, often breaking out

in violence

Case Study Pusan – South KoreaCity Statistics

Population(m)

3.9 Area (km2) 647 Income/head US$ 9,700

Extent and Use of Public TransportShare of public transport (1991,%, 11% travel by other modes)

PT 75% Car 14% Car own (91) 55/1000popTransport Mode Split (%)Taxi Bus Metro Car Other22% 45% 8% 14% 11%Public transport marketPusan has an extremely high level of taxi usage. Taxis are provided both by companies and individualoperators

Bus operations are provided by two types of service: ordinary or basic service – which offers around 20 seats but the standing capacity is 85 people seat-only buses – with only 45 seats and all passengers must be seated. These services charge a

premium over the basic service, typically around 2-3 times the priceBus services are provided by 48 companies with around 2,800 buses (1992). These buses carry around1,000 million passengers per annum.

In addition to the road-based modes Pusan also has a 2-line metro. The first line of the metro some38.5km was completed in 1985. Line 2 is opening in two phases. Phase 1, some 22.4km, opened in1997. Phase 2 was due to be completed in 1999. The metro handled 208 million passengers in 1998.Ridership on Line 2 has been disappointing at only 103,000 passengers per day compared to forecastsof 300,000.Institutional and Regulatory FrameworkOver recent years there have been progressive moves towards decentralisation and deregulation ofurban transport in Korea. The main regulatory agency in Pusan is the Bureau of Transportation andTourism (BTT). This has a responsibility to plan, co-ordinate and implement all transport modes. BTTis part of the Pusan City Government. Since June 1994 bus fares in Pusan are regulated by BTT, whomust confer with the Economic Planning Board of National Government before any fare increases canbe implemented.

Bus licences are issued by BTT. These specify the number of buses to be used on each route. Theconditions for licences are reviewed to take account of changes in the level of demand. The minimumsize of company allowed to operate in Pusan is 40 vehicles. The number of firms has remainedrelatively stable with BTT rarely issuing new licences due to worries over the impact on existingoperators. Until the early 1990s, changes in the operational characteristics of the operators such asschedules, depot management had to be approved by BTT. These changes now only have to benotified. The operators are still required to notify the authority if there any changes in the number ofemployees. Vehicles must be replaced every seven years and are inspected every six months. Busoperators must be members of operators associations. Fare increases must be put through regionaloperators associations to the local authority.

In addition to these bus services a provisional license has been introduced for the operation of feederservices between remote residential areas or large apartment complexes and metro stations. The fareson provisional licences are not regulated but tend to be below conventional licensed fares. Localauthorities issue provisional licences annually. Restrictions and supervision of these services isconsiderably below that for normally licensed buses

Taxi fares are regulated nationally and are revised in response to cost data submitted by operators. Taxicompanies must have a minimum of 50 vehicles to operate in Pusan. Licences are transferable and apremium is often paid. The number of licences is slowly increasing.

PUTA, the Pusan Urban Transit Authority was created in 1981 to construct and operate the masstransit system. PUTA was transferred to the Ministry of Transport in 1987 in response to financialdifficulties. The Ministry of Transport centrally sets fares for the metro.Competitive RegimeBus Metro4 1Level of Regulation

Bus MetroFares BTT MOTRoutes BTT FixedTimetables operators PUTAVehicle type some

limitsFixed

Other see above

FinancingBus and taxi operators are under increasing pressure from regulated tariffs and declining productivity(due to congestion). This is alleviated to some degree by increasing the number of premium busservices. There was deficiency of 27% in the number of taxi drivers in Seoul due to low fare levels.

PUTA covers its operating costs and has in recent years even covered rolling stock depreciation. PUTAdebt is financed through obligatory subway bonds that must be purchased by new car buyers.Operating costs are rising faster than inflation due to increases in wages. Finance costs for the metroare large and are unable to borne by Pusan City Government.

Effects of regimeThe main effects of the regime are:

the poor are relatively well catered for with a large number of cheap basic bus services there is evidence to suggest that keeping fares low has resulted in a poorer quality bus service with

operators running short services, skipping stops and neglecting vehicle maintenance the lack of proper competition has hindered innovation and responsiveness to demand as licences are limited a premium is paid for them, which can have a detrimental effect on the

financial status of the companies the share of taxis is increasing from 17% in 1981 to 22% in 1991, reflecting the stagnation in the bus

system capacity

Case Study Rio de Janeiro – BrazilCity StatisticsPopulation(m)

9.8 Area (km2) 5,469 Income/head US$ 3,700

Extent and Use of Public TransportShare of public transport (%, walk 20% of all trips)PT 87% Car 13% Car own (city) 280/1000popTransport Mode Split (formal, million passengers per annum, 1998)Bus Ferry Metro/light

railSuburbantrain

1,885 21 84 53Public transport marketPublic transport in Rio is dominated by bus transport, accounting for 92% of all public transport trips in1998. A one-line metro supplements this with a one line light rail/pre-metro covering some 25.5km. Thesuburban rail network is fairly extensive with lines in 15 of the 17 districts of Rio de Janeiro. Totalnetwork length is 264km, of which 172km is electrified. Ferry services link Rio with islands in the Baisde Guanabara and Niteroi. Peak headways for ferry services can be as short as 7 minutes.

The formal public transport sector is declining. Rail transport has fallen by 61% since 1995. Metro/lightrail ridership has fallen by 16% from 100 million passengers per year in 1995. The decline in ferry andbus transport has been less marked. Ferry transport has declined from 24 million passengers per annumin 1995. Over the same period bus transport has declined by 3%.

At the same time that the share of informal passenger transport has increased. Paratransit vehicles rangefrom Kombi to 14-seat imported Topics with air conditioning, music and reclining seats. There areessentially two forms of informal passenger transport. Complementary services, mainly provided byKombi, which serve narrow and steep roads inaccessible to bus transport; and competing higher qualityexpress services operated by the Topics. Fares on para-transit operations are typically two or three timesthe equivalent bus fare.

Until the 1990s the number of para-transit operations was relatively stable with around 600 vehiclesoperating in the municipality. This has increased to around 6,000 vehicles in recent years. Someestimates put the number of van services as high as 8-9,000 vehicles. In response to this competition busoperators have been diversifying their operations to infill gaps in demand. In 1998 5% of the bus fleethad been fitted with air-conditioning and minibus operations has increased from 1 to 5% of the totalbus fleet.

The other reason for the decline in formal public transport has been the increase in car ownership inRio. Between 1985 and 1995 the car fleet was increasing at 4.5% per annum. Since then this rate hasdoubled to 9% per annum. Car ownership is now 280/1000 population and in some high-income areasit is estimated to have increased to around 800/1000 people, i.e. it seems more cars than drivers!

Institutional and Regulatory FrameworkThe regulation of transport within the Rio de Janeiro Metropolitan Region is under the jurisdiction ofthe constituent municipalities. The main agency for the regulation of transport in Rio Municipality isSMTU – Superintendencia Municipal de Transportes Urbanos. SMTU also regulates the cities 20,000licensed taxis. The Secretary of State for Transport in Rio de Janeiro (SECTRAN) regulates all rail-basedpublic transport and ferry services. Inter-municipal bus services are regulated by another agencyDETRO.

33 licensed independent private companies provide bus services. Licences regulate operators to providea specified level of service at a set of fares. The flat bus fare is currently around $0.40 for conventionalbus transport. Fares for air-conditioned buses are twice this fare and those for minibus services are threetimes as high. There used to be requirement that private bus operators had a minimum fleet size of 120buses but this has since been relaxed. In 1996 Rio municipality issued tenders for 12 new bus routeconcessions – the first time this had been done in 22 years. Concessions were awarded to the operatorswho promised the most investment in terminals and signing.

Metro services were concessioned to a private operator on a 20-year concession, renewable once for 20years in 1997. Bids were received on the basis of the best net present value of offers. No subsidies foroperation were given but prior to the concession a $620 million investment was secured for increasingroute length from 23 to 35 kilometres, allowing ridership to double. The winning bidder was anArgentinean/Brazilian consortium.

Urban rail services were concessioned in July 1998 to a private operator, made up of Bolsa 2000(Brazilian) and Caf and RNDLF (Spanish), after a brief yet fraught period under state ownership. Whenthe assets were transferred to the state from the federal government in 1995 the state paid a full year ofstaff salaries which was supposed to finance redundancies and the rehabilitation of rolling stock.However delays and poor decisions meant that rolling stock rehabilitation was delayed and ridership fell.A rationalisation program in 1996 failed to stop the fall in ridership.

The rail concession was for 25 years, again renewable once for 25 years. Bids were also selected on thebasis of the highest net present value of offers, over a minimum bid price. The initial attempt toconcession the railway failed due to lack of interest. The second attempt included the payments from themetro concessionaire and the concession was successful let.

CONERJ, the ferryboat operator, has also been concessioned to the private sector on a 25-yearconcession. Again the bids for the concession were based on the highest net present value of the offersabove a minimum sum. Only one bid was received for CODERJ of r$28 million, the minimum bidprice. Again no subsidies were available for operation. Two other pre-qualified consortia failed to submitbids. Prior to the concession CONERJ had a subsidy of US$ 31 million in 1995.

All three concessions are regulated by ASEP-RJ, the public service regulatory agency of Rio de Janeirostate. Fares for all three concessions are fixed with an allowance for increases in line with inflation overtime. Rail fares are allowed to increase by 50% once the rail carriages were fitted with air-conditioning.

CODERTE a state company owning road terminals, garages and parking lots was, in 1998, in theprocess of being sold. CODERTE’s main asset the parking garage in downtown Rio has been sold forR$80millionCompetitive RegimePara-transit Bus Metro Rail Ferry4 3 4 4 4Level of Regulation

Para-transit Bus Metro Rail FerryFares Operators SMTU/

DETROConcession Concession Concession

Routes Operators SMTU/DETRO

Concession Concession Concession

Timetables Operators SMTU/DETRO

Concession –min freq

Concession –min freq

Concession –min freq

Vehicle type Operators SMTU/DETRO

Concession Concession Concession

Other ASEP-RJ enforcementFinancingAlthough the municipalities including the city receive the benefits from urban rail, metro and ferryservices they do not contribute to the capital or operating budgets. These are paid by the state.

The state bus company, CTC/SERVE, which was making losses of $38 million in 1995, has since beenwound up with its assets sold and routes let to private operators. There are no subsidies in bus operationat present, apart from the "vale transporte" tickets which are subsidised by employers at up to 6% ofwage levels

The metro system lost $114 million in 1995 prior to the letting of the concession. No further subsidiesare expected throughout the duration of the concession. In 1994 the urban railway was losing US$1.6per passenger. Again, there are no subsidies at present.

In 1995 around 9% of the state budget was taken up by blanket operating subsidies.

Effects of regimeThe concessioning of the rail, metro and ferry services has been successful in terms of removing subsidy,albeit with large investments in equipment and infrastructure by the public sector.

The success of the concessioning programme is difficult to judge. The main points that can be identifiedare:

The process was transparent and was apart from the ferries, a large number of internationalconsortium bid for the contracts

Staffing has been reduced. Nine months after the concessions there were close to 3,000 redundantstaff, 2,500 from the railway and 500 from the metro. This is in addition to the 1,800 positions at theurban rail and 800 at the metro that were eliminated in 1996

Ridership on the ferries and the metro has increased, reversing earlier declines (no data was availableon rail transport)

Bus operations are under strong competition from illegal van services, which arose from theunresponsiveness of bus services to demand. The rise in van services has lead to a growth in premiumbus services to try to fend off the competition. The para-transit operators have argued that around 85%of their passengers have come from car transport, although bus operators dispute this.

Case Study Rouen – FranceCity Statistics

Population (m) 0.39 Area (km2) 286 Income/head US$ 29,000Extent and Use of Public TransportShare of public transport (%)PT Car Car ownership 680/1000popPublic Transport Mode Split (passengers per annum, 1999)Bus Light rail24.0 15.3Public transport marketPublic transport in Rouen is provided by integrated bus and light rail operations. Bus transport isprovided by 216 buses with a mix of conventional and articulated buses. Light rail operations areprovided over 2 light rail lines covering a distance of 15km.Institutional and Regulatory FrameworkAll public transport operations are carried out by TCAR, a part of the Vivendi group, under a 30-yearconcession. The main regulatory authority is Rouen Metropolitan Community, which is made up ofrepresentatives of the 33 communities that make up Rouen Metropolitan Area.

Fares and vehicle-kilometres are set by RMC. Operating costs are paid monthly by RMC. Each yearoperating cost funding is reduced by 0.4% to take account of productivity gains.Competitive RegimeBus Light rail2 2Level of Regulation

Bus Light railFares RMC RMCRoutes RMC RMCTimetables RMC? RMC?Vehicle type Vehicles financed by RMC Vehicles financed by RMCOtherFinancingThe operating costs of the public transport system are financed by fares, 30%, commercial sources 4%and subsidy and grants 66%. Subsidy finance is through the ‘versement transports’ a payroll tax onemployers with more than 9 employees in the metropolitan district.Effects of regimeIntegration is high with full bus and light rail network and a common fares system.

Ridership on the public transport system has increased by 20% since the first full year of metrooperation in 1995. The proportion of Rouen residents using public transport has increased from 46% in1994 to 53%.

Case Study Santiago – ChileCity Statistics

Population (m) 4.85 Area (km2) 2,027 Income/head US$ 5,800Extent and Use of Public TransportShare of public transport (%, 21% of trips are non-motorised)

PT 63% Car 37% Car ownership 125/1000 popTransport Mode Split (trips per day, 1997)Taxi Collectivo Bus Metro180,000 340,000 4,550,000 770,000Public transport marketBus transport dominates public transport market in Santiago, accounting for 78% of all public transporttrips in 1997. Around 9,000 vehicles mainly on tendered routes operate bus services. The number ofbuses has declined in recent years. In 1991 2,600 buses were removed from service through aGovernment buy-back of old and obsolete buses. A further 2,000 vehicles were removed in the nextthree years from the introduction of a maximum age limit of 18 years. There are currently 354 bus linesof which 311 are tendered. There are also 22 feeder bus routes for the metro.

There are also some 42,000 taxis operating in the city. These taxis are a combination of single use andshared taxis. The number of taxis has increased by 58% in the last 4 years. Fixed route taxi fares arearound 5 times greater than bus fares.

In 1991 trolleybus operations were restarted using a private operator. These operations were ceased in1994 after the company ran into financial difficulties.

Metro services are operated on 37km of track on three lines. Patronage on the metro has increasedsubstantially following the re-introduction of bus licensing in 1992. 10km of track was opened in 1997and a further 3km is currently under construction.

There is also a limited suburban rail service carrying around 2 million passengers per year on 11 servicesper day.Institutional and Regulatory FrameworkAll bus routes entering the CBD are competitively tendered. Contracts are let on the basis of vehicle age,capacity, toll collection mechanism and service coverage. Tenderers are also offered four possible farelevels, with lower fares preferred. Contract periods range from 3 to 5 years. There have been 3 rounds oftendering in 1992, 1994 and 1998. The regulatory authority is the Ministry of Transport (SECTRA).Outside the central area bus services are deregulated.

Fixed route taxis are mainly regulated by an association of taxi drivers, however some remain subject toindividual bargaining. Fares are set at around 5 times the bus fare. Services must operate fromrecognised termini in the city centre.

Since 1990 the Metro is an autonomous enterprise, owned by the state and Corfu, the Ministry ofProduction Promotion. It is unclear whether the metro is directly controlled by SECTRA.

Competitive RegimeCollectivo Bus

(tendered)Bus (free) Metro

4 2 4 1Level of Regulation

Collectivo Bus (tendered) MetroFares Association Operator/contract GovernmentRoutes Fixed route licences Contract FixedTimetables Operator Contract – max

frequencyGovernment

Vehicle type Licence conditions Contract/operator FixedOtherFinancingBus operations are all carried out commercially with no subsidies.

Operating costs for the metro are covered by fares, 90%, and 10% from other commercial sources.Effects of regimeThe introduction of contracting has;

Reduced the number of vehicles from 13,5000 to 9,000 vehicles of which 8,700 operate on tenderedservices.

Reduced the average age of the bus fleet from nearly 14 years in 1992 to around 4 years for tenderedservices.

Created investment of US$500 million from private operators Reduced pollution, over half of buses comply with EPA-91 and EPA-94 Improved comfort, cleanliness and safety Reduced travel times but lead to a reduction in service frequency Fare levels have stabilised in real terms (there were sharp increases in fares following liberalisation

which subsequently fell back) Increased use of metro up from 155.5 million in 1991 to 178.5 million in 1996.

However, There has been a dramatic increase in the number of shared taxis up from 5,000 in 1988 Bus share of motorised trips has declined from 66% in 1991 to 49% in 1997 Reduction in innovation – removal of minibus services that were introduced with liberalisation

Case Study Sao Paulo – BrazilCity StatisticsPopulation(m)

17 (SPMR) Area (km2) 8,000(SPMR)

Income/head US$ 3,700

Extent and Use of Public TransportShare of public transport (%, 1997 motorised, around a third of total trips are walk)PT 55% Car 45% Car

ownership476/1000pop

Transport Mode Split (million trips per annum, 1997)Bus Rail Metro1,611 272 690Public transport marketBuses dominate the public transport market. 50 private operators operate these. At the end of 1998there were 10,800 buses and 650 trolleybuses in operation, in fleets ranging from 35 to 440 vehicles. Themain transport corridors have median busways, with island passenger boarding stations.

Sao Paulo has a full metro comprising 4 lines. This is one of the most heavily utilised in the worldcarrying over 2m journeys a day on its compact 49km network. Capacity is currently being expandedthrough a number of extensions and the construction of a new line.

The rail system is made up of six routes covering 270km. Services are operated by a predominately stateowned company, CBTU. Rail tends to serve the lowest income groups due to a policy of setting farebelow that of competing modes.Institutional and Regulatory FrameworkThe main regulatory body within Sao Paulo is Secretaria Municipal de Transportes (SMT). This hasoverall responsibility for city traffic and transport management. Sao Paulo Transporte (SPTrans)regulates bus, taxi and para-transit operations on behalf of SMT. Private operators operating underservice contracts currently carry out bus operations. Services are contracted according to standard costschedules, with operators paid on a cost per vehicle-km basis. The contracts are heavily standardisedlimiting the potential for innovation. Bus operators must take part in the quality managementprogramme. Bus operators must also submit regular vehicle maintenance reports.

Three private operators under similar schemes provide trolleybus operations in Sao Paulo city. Asuburban feeder trolleybus network is administered by the Metropolitan Bus Transit Agency (EMTU)and was transferred to a private sector operator in 1997. EMTU also provides inter-urban buses in themetropolitan region under a complex arrangement with STM, the State Metropolitan TransportSecretariat.

The metro is operated by Companhia de Metropolitano de Sao Paulo (CMSP). The city, state and federalgovernments own this jointly, with a dominant share held by the state. The expansion of the metro isbeing funded by a combination of loans from the World Bank of $300 million and BNDES, theBrazilian national investment bank. CMSP also operates four bus terminals and oversees the feedertrolleybus network. STM supervises metro operations.

The urban rail system is now under the control of Companie Paulista de Trens Metropolitanos (CPTM).This took over control of services from CBTU and FEPESA in 1993 under a decentralisation plan.Operations are supervised by STM.Competitive RegimeBus Metro Rail2? 2 2Level of Regulation

Bus-city Bus-metro Metro RailFares unclear Unclear unclear UnclearRoutes SMT STM Fixed FixedTimetables SMT STMVehicle type SMT - general STM – general Fixed FixedOtherFinancingBus operations are funded in on a per-km basis with unprofitable operations funded through crosssubsidy. Diesel bus operations cover 90% of operating costs with trolley bus operations covering only40%. The removal of the ex-state operator CMTC has improved efficiency and lower operating costs.

The metro claims to be able to cover operating costs. Fares cover 81%, other commercial sources 5%,government grants 8% and tax levy 3%.

The financial position of CPTM is unclear, however it is likely that the large subsidies required underCBTU operations continue to be paid. Farebox recovery of operating costs under CBTU, excludingdepreciation and capital costs was only 11%.Effects of regimeThere are considerable institutional conflicts between the city of Sao Paulo, population 8.5 million, andthe state, which has responsibility for the rest of the metropolitan area. The main cause of difficulties ispolitical with the two levels of Government controlled by different political parties. This preventsproper fare and service integration

Then current system of bus operation lacks innovation and responsiveness to demand even thoughprivate operators operate it. It is unclear how far para-transit operations have penetrated the market.

The rail network has been starved of investment and is generally perceived to be of poor quality by itsusers. Fare evasion is rife. It has yet to be seen whether state control will improve matters although plansare in-hand to rehabilitate the system.

Case Study Singapore – SingaporeCity StatisticsPopulation(m)

3.3 Area (km2) 640 Income/head US$ 27,400

Extent and Use of Public TransportShare of public transport (1991, %)PT 63% Car 37% Car

ownership100/1000pop

Passenger Transport Market (1997, million passengers per year)SBS Bus Tibs Bus SSB Bus Bus-Plus SPTS Bus Metro922.9 156 9.5 53 38 337Public transport marketOver 75% of public transport trips in Singapore are carried by bus. There are four main types of busoperations:

Scheduled bus operations provided by Singapore Bus Services (SBS) and Trans-Island Bus Services(TIBS).

Singapore Shuttle Bus (SSB) – which provide shuttle services between private housing estates, MRTstations or main roads and places of work

Bus-plus services, which are upmarket semi-express services operating during peak hours, which plybetween private and public housing estates and the CBD. In the off peak these buses are used forcharter.

Supplementary Public Transport Scheme Buses (SPTS) operate only in peak hours along maincorridors. These buses tend to be used for private hire or school traffic at other times of the day.The majority of bus services in Singapore are operated by two private companies SBS and TIBS

Singapore Metro was opened in 1987. The metro is made up of 2 lines of a distance of 83 km, coveringmost of the island. Metro patronage has been increasing steadily in recent years, assisted by thewithdrawal of parallel stage bus services. The metro is operated by Singapore MRT (SMRT) agovernment-linked company, its majority shareholder is Temasek Holdings Pte Ltd.

The Light Rail line between Bukit Panjung with Choa Chu Kang was opened in November 1999. Thisoperates over 8 km of track. Singapore LRT (SLRT), a wholly owned subsidiary of SMRT, operates thisline. Two more light rail lines are planned in conjunction with the Northeast Metro line, which iscurrently being built. This is scheduled for opening in 2002. This line will be operated by SBS through aclosed tender.

Regular public transport services are supplemented by taxis services operated by four companies. Faresfor taxis were deregulated in 1998.

Bus and mass transit fares are integrated. The three operators have formed a company, TransitLink,which handles ticket sales, fare collection and allocation of revenue.

Part of the success of public transport in Singapore has been due to the introduction of road pricing.The area-licensing scheme was introduced in 1975. This only allowed access to a restricted are onpossession of a paper licence. This was replaced in 1998 with Electronic Road Pricing. ERP is currentlybeing extended to cover roads in the outer ring road. ERP is supplemented by a vehicle quota system,which restricts the registration of new vehicles through a bidding process.

Transport in Singapore is currently being restructured. There are plans to amalgamate light rail, metroand bus services into two competing groups to enhance integration.Institutional and Regulatory FrameworkThe main regulatory authority is the Land Transport Authority (LTA). LTA is a statutory body underthe Ministry of Communications was formed in 1995. LTA is responsible for land transport policy anddevelopment within Singapore. LTA is the owner and builder of transport infrastructure including themetro and light rail system.

Bus operations are regulated by the passenger transport council (PTC). PTC is a statutory board withmembers from grassroots organisations, academia, professional bodies etc appointed by the Ministry ofCommunications. PTC has defined a set of standards covering route planning, service efficiency andhours of operation affordability. Bus operators must take re-route plans to PTC to obtain a licence foroperation. Proposed fare increases are scrutinised by PTC and are only approved if they are seen to befully justified by increases in operating costs. Fares are set so that they cover operating costs with anallowance for depreciation.

Singapore Mass Rapid Transit (SMRT) operates the metro under licence from LTA. The licensing andcontrol of LRT and MRT operators is carried out by LTA. PTC approves and regulates fares. There areplans to float 30-40% of SMRT on the stock exchange this year.

LTA is also responsible for the licensing and control of taxi operators.Competitive RegimeTaxi Bus Light rail Metro4 3? 1/2 1/2Level of Regulation

Taxi Bus Light rail MetroFares none PTC PTC PTCRoutes none PTC- minimum Fixed FixedTimetables none PTC – minimum LTA? LTA?Vehicle type LTA PTC – some

limitsFixed Fixed

Other

FinancingPrivate operators who operate commercially provide bus operations. As two operate carry out virtuallyall bus transport loss making lines are cross-subsidised by profitable ones. Fares cover operating costsand an allowance for depreciation. This allowance only covers historical cost of the first set of operatingassets. Government finances all infrastructure and co-finances new operating assets.

The SMRT generates a fairly large operating profit. In 1998 fare revenues come to S$329m, commercialleases S$19m, advertising S$10m. Total expenditure comes to S$276m.Effects of regimePassenger car ownership in Singapore has increased from 1 in 15 people owing a car in 1981 to 1 in 10in 1995, low by international standards. The proportion of trips taken by car has increased to 37% in1991, up from 31% in 1981. The high public transport investment, strong integration and the use of carrestraint measures seem to have prevented the congestion that has plagued many world cities.

The bus system of private operators working closely with a government appointed commuter boardseems to work well. However there are a number of drawbacks. Setting appropriate fare levels requires alarge amount of commercially sensitive information to be available. With only two operators the scopefor collusion is high and benchmarking low. There may also be difficulty with directing funding towardssocially necessary routes was this relies on cross subsidy from the operators. As routes are planned byoperators and approved by PTC there is considerable scope for service innovation. There are also someincentives for cost minimisation although these may not be the same as a fully competitive market.

The operation of the metro has been successful, being one of the few in the world that covers itsoperating costs. It is unclear though whether costs have been minimised, although the preparation for apublic listing provides good commercial incentives.

The proposed amalgamation of bus and rail operators will undoubtedly increase service integration.Other impacts are as yet unclear.

Case Study Stockholm – SwedenCity StatisticsPopulation(m)

1.5 (county) Area (km2) 280 Income/head US$32,400

Extent and Use of Public TransportShare of public transport (%)PT Car Car

ownership410/1000pop

Transport Mode Split (million passengers per annum. 1997)Bus Tram Metro Local rail Suburban rail Ferry258 1 263 16 62 4Public transport market Public transport in Stockholm is mainly provided by the (Tbahn) metro, which carry 44% of publictransport trips, and buses, which provides 43%. Local and suburban railways and a limited tram serviceserve the remainder of the public transport market.

Stockholm has a very extensive bus network with 2,604 routes and 1,676 buses operate a one-way routelength of 45,000 km (this great length is probably the sum of the lengths of all one way routes and so ismuch longer than the road length operated over). Three main operators provide the largely contractedbus services, SL Bus, owned by the municipality, with 63% of the market, Swebus, owned byStagecoach, with 22% and Linjebuss, a private national operator, 15%.

Local train services operate on three lines totalling 93km. Services are provided by competitive tender bytwo operators, SL train, owned by the municipality, and Linjebuss in a consortium with Adtranz.Uniform fares based on distance are applied to all modes on a zonal based system.

The tramway runs for only 5.7km and is currently closed for rehabilitation. An 11km extension iscurrently under construction, which was scheduled for opening in 1999.

The extensive metro network of 3 lines covering 110km is contracted to the municipal operator SLmetro, again after competitive tendering.

The suburban rail network is currently run under competitively tender contract by Go-Via, howeverproblems with staffing have led SL to say that it will resume control in January 2001.Institutional and Regulatory FrameworkGreater Stockholm was the first West European city to establish a fully integrated public transportsystem. The arrangements made in 1964 brought together all bus, tram and metro services operatedwithin the region. Management reorganisation in 1991 saw SL split into management and operatingdivisions. The SL planning division specifies service levels and contracts with operators for the provisionof services. The SL operating division was split into three divisions SL Bus, SL train and SL Metro.Stockholm County Council owns SL.

All public transport services in Greater Stockholm have now been competitively tendered. The contractsare highly specified. Bus contracts are tendered on a gross cost per km basis. Contracts are for 5 years.SL remains the owner of the depots and the installed equipment and these are leased to operators.Operators are offered to buy buses presently owned by SL at fixed prices but there is no subsequent buyback guarantee at the end of the contract. SL specifies route alignment and service frequency. Schedulingand rostering is left to the operator. Revenues are collected by SL. Fares are paid either through pre-purchase multi-tickets or single coupons bought from the driver. Sanctions are applied if less than 99.8%of the kilometres are not covered with the operator fined three times the contract price. SL does notspecify vehicle age but this is included in negotiations. In all routes tendered so far the lowest costoperator has won the tender, however there is scope for higher price or non-compliant tenders to win ifthe cost savings from the redesign outweighed the disbenefits.

The same contracting procedures are also used for the other modes, with SL holding all the assets,which are then leased to operators. In some cases the station staffing and rolling stock maintenance isincluded in the contract.Competitive RegimeBus Metro Local rail Suburban rail2/1 3 3 3Level of Regulation

Bus Metro Local rail Suburban railFares SL SL SL SLRoutes SL – some

potential forredesign

Fixed Fixed Fixed

Timetables SL SL SL SLVehicle type General type SL SL owned SL owned SL ownedOtherFinancingThe contracting of services has reduced the contribution of subsidies from 70% of operating costs to55%. The remainder of revenues comes from fares.Effects of regimeThe contracting of 70% of bus routes and all rail and metro services has lead to a 25% annual costsaving compared to 1989 (prior to contracting), reducing subsidy by 1.3 billion SEK (1996 prices). Theother advantages of the regime are:

Maintenance of integrated fares and ticketing The phasing out of diesel engine buses over 8 years old

Maintenance of depots and infrastructure in public hands – ensuring strategic assets are not sold.

Ridership has increased. Bus passenger boardings up by 11%, vkm 5% 94-99, metro passengerboardings up 8%, vkm 6%, local rail boardings up 23%However

Worries over cross-subsidy by SL Bus as it still operates 30% of the bus system without competitivetender and Swedbus as it operates 90% of the inter-regional market without strong competition

SL operating companies are still owned by the municipality leading to worries over bias Appears to be significant incumbent advantages in rail and metro contracts only two have not gone to

the municipal operator Problem with transfer of staff from SJ to Go-Via, as terms and conditions for the former were better No small bus companies have won contracts due to the large contract areas Lack of incentive for innovation No incentive for revenue collection only quality (although 70% of journeys paid for by prepaid ticket)

Case Study Warsaw – PolandCity Statistics

Population (m) 1.6 Area (km2) 495 Income/head US$ 5,700Extent and Use of Public TransportShare of public transport (%, 30% of all trips are by walk)PT 70% Car 30% Veh own (97) 412/1000 popPublic Transport Mode Split (million passengers per annum, 1997, * 1992 estimate)Bus* Tram Metro Light rail Suburban rail870 350 29.5 5 80Public transport marketA fleet of 2,200 buses provides the majority of public transport in Warsaw. These are operated by thecity owned operator, MZA. In addition to these services there are a number of contracted busoperations provided by private operators and suburban bus operations run by the municipal areasaround Warsaw.

Warsaw also has an extensive tram operation covering some 28 routes, operated by city owned operator,TW. The metro has only one route and is again owned and operated by a city company, MW. The maintransport corridors are served by tram and metro services with buses serving feeder and secondaryroutes.

This is supplemented by extensive suburban rail operations. This includes operations to outlying areasand a cross-city service. There is also a limited suburban light rail line.Institutional and Regulatory FrameworkThe transport authority, ZTM, was established in 1992. It overseas all transport planning, ticket salesand marketing. It purchases services from three city owned companies, MZA (bus), TW (tramway) andMW metro. There are an increasing number of bus services contracted to private operators. In 1997private companies operated 8 routes in the city. There are also substantial private operations onsuburban routes. Fares are integrated across ZTM’s operations.

The rail and the light rail networks are operated by PKP, Polish State Railways. The Ministry ofTransport regulates this.Competitive RegimeBus Tram Light Rail Metro Suburban rail1 2 1 2 1Level of Regulation

Bus Tram Light Rail Metro Suburbanrail

Fares ZTM ZTM PKP ZTM PKPRoutes ZTM ZTM Fixed Fixed FixedTimetables ZTM ZTM PKP ZTM PKPVehicle type ZTM ZTM PKP ZTM PKPOther

FinancingLosses accruing to ZTM have been steadily increasing in recent years. In 1992 fares cover 92% ofoperating costs. In 1999 this had fallen to 57%. The city is currently proposing the sale of 67% of thebusiness in order to fund rehabilitation of the network. Although with the current level of losses this isunlikely to raise much if any finance.

PKP also makes substantial losses, although it is currently being restructured.Effects of regimeThe Warsaw public transport system is highly inefficient and ultimately unsustainable. The publicoperators have no adequate incentive to minimise costs. Losses are increasing and investment is low,with vehicles and track in need to rehabilitation.

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Manila

ALMEC Corporation et al, 1998. Metro Manila urban transportation study (MMUTIS). InterimReport.

Pacific Consultants International, 1996, LRTA Financial Restructuring Study.

Pusan

Bajpai, J. Hong, W-S., Promoting an integrated strategy for urban congestion management in Pusan.

Chang-Kab, K., 1991. First line spawns network: Developing Metros 1991.

Kang, Il, Y. 1995. The development of urban bus regulatory policy in Korea reviewed, TransportReviews, 15.

World Bank, 1994. Pusan urban transport management project, World Bank Staff Appraisal Report.

World Bank, 1995. Korea transport sector: Resource mobilisation challenges and opportunities

World Bank, Pusan urban transport management project – Supervision Mission

Singapore

Willoughby, C., 2000. Motorization in Singapore.

Australasia

Adelaide

Gargett A. and Wallis, I., 1995. Quasi-commercial bus service contracts in South Australia, 4,Thredbo V, Rotorua, New Zealand

Radbone, I. 1997. The competitive tendering of public transport in Adelaide, Thredbo V, Leeds,United Kingdom

Wallis, I., 1995. Urban bus reform ‘down under’. Six years of words, actions and achievements?Thredbo V, Rotorua, New Zealand

Wallis, I. and Lupton, D., 1997. Urban bus reform models in practice – experience down under,Thredbo V, Leeds, United Kingdom.

Europe

Copenhagen Transport, 1995. The financing of urban public transportation systems.

ECMT, 1999. Implementing strategies to improve public transport for sustainable urban travel

EC/OGM et al, 1998. Quattro: Quality approach in tendering urban public transport operations, ECTransport Research Fourth Framework Programme.

UITP, 1998. Incentive agreements in public bus transport: An international survey

Budapest

Symonds/SYSTRA, 1996. Budapest metro feasibility study.

World Bank, 1999. Budapest urban transport project, World Bank Staff Appraisal Report.

Copenhagen

Hassenkam, H., 1997. This is not privatisation, it is a change to make the railway more competitive:Railway Gazette International, Feb 1997.

London and Manchester

Bannister, D, and Mackett, R., 1990. The minibus: Theory and experience and their implications,Transport Reviews, 10.

Bayliss, D., 1999. Buses in Great Britain: Privatisation, deregulation and competition

DETR, 1999. Transport statistics report: Transport statistics for London 1999

GMPTE, 1999. Trends and statistics

GMPTE, 1999. Greater Manchester Local Transport Plan.

Kennedy, D., 1995. London bus tendering: An overview, Transport Reviews, 15.

Mackie, P. Preston, J. and Nash, C., 1995. Bus deregulation: ten years on, Transport Reviews. 15, 229-251

Preston, J., 1999. An overview public transport in the United Kingdom and forecasts for the newmillennium, Thredbo VI, Cape Town, South Africa

Preston, J. and Whelan, G., 1995. The franchising of passenger rail services in Great Britain, 4Thredbo V, Rotorua, New Zealand

Tyson, W., 1997. Manchester Metrolink and the private initiative, Thredbo VI, Leeds UnitedKingdom.

White, P., 1997. What conclusions can be drawn about bus deregulation in Britain, Transport Reviews17

White, P. 1998. Impacts of rail privatisation in Britain, Transport Reviews, 18

Rouen

Hue, R., 1996. Metrobus builds on its first year success: Developing Metros 1996.

UTP, 1995/6 and 1998/9. Les chiffres cles du transport public urbain

Stockholm

Alexandersson, G. and Hulten, S., 1999. Competitive tendering of railway service in Sweden: Extentad effects, 1989-99, Thredbo VII, Cape Town, South Africa,

Andersen, B., 1993. Tendering in Scandinavia, systems and results: Sustainable competition throughtendering? Thredbo III, Toronto, Canada.

Janson, K and Wallin, B., 1991. Deregulation of public transport in Sweden, Journal of TransportEconomics and Policy, 25

Janson, K., 1993. Swedish competitive tendering in local and regional public transport: Overviewand comparative case studies, Thredbo III, Toronto, Canada.

Kadmark, L., 1998. SL90 delivers more passengers at lower cost, Metro Report 1998.

Nordenlow, L, and Alexandersson, G, 1999. Standing in the shadow of giants, Thredbo VII, CapeTown, South Africa.

Peterson, B., 1998. Results from procurement of local and regional public transport in theStockholm region: Public Transport International 1998/1.

Peterson, B., 2000. Swedish public transport organisation.

Pyddoke,R., 1997. The competition effects on costs of tendering of bus contracts in Sweden,Thredbo VI, Leeds, United Kingdom.

Warsaw

Mitric, S and Shaw, N., 1996. From monopoly towards market: Recent changes in Polish urban masstransport, World Bank Infrastructure Note

Latin America

Alouche, P., 1995. Public transport challenges in Latin America: Public transport international1995/4.

Amara, P. and Banister, D., 1993. Social inequalities in the provision of public transport in LatinAmerican cities, Transport Reviews, 13.

Brasileiro, A., Santos, A. and Aragao, J., 1998. A new institutional framework for Brazilianmetropolitan railways, CODATU VII, Cape Town, South Africa.

Diaz, R.D., Schneck, D.C., 2000. An overview of bus rapid transit technologies in the Americas.

ECLAC, 1991. The impacts of subsidies, regulation and different forms of ownership on the qualityand operational efficiency of urban bus services in Latin America.

Guilherme de Aragao, JJ. and Brasileiro, A., 1999. The Brazilian urban bus industry: Presentchallenges and future perspectives, Thredbo VII, Cape Town, South Africa.

Jackson, C., 1996. Private sector promises Latin Rail boom: Railway Gazette International, Dec1996.

Smith, N. and Hensher, D., 1998 The future of exclusive busways: The Brazilian experience,Transport Reviews, 18

Transport Research Board, 1998, Private urban transit systems and low-cost mobility solutions inmajor Latin American cities

Bogota

Chodai Co. et al, 1999. The Feasibility study on the project of highway and bus-lane of Santa Fe deBogota in the Republic of Columbia, Study Report for JICA/Santa Fe de Bogota and the Republicof Columbia.

Maunder, D., 1998. An evaluation of the proposed integrated mass transit system for Bogota,Columbia, TRL.

Steer Davis and Gleave, 1999. Proyecto Transmillennio

World Bank, 1996. Bogota urban transport project, World Bank Staff Appraisal Report.

Buenos Aires

Agosta, R., 1998. TBA moves towards a regional network: Rail Business Report 1998.

Arcusin, S., Brennan, M., Ternavasio, A., Turco, N. and Vicente, O., 1993. Urban transportderegulation and the evolution of mobility in Buenos Aires, Thredbo VI, Tunisia.

Brenna, P., 1996. How to cope with transport and traffic crisis in Buenos Aires City: A newinstitutional approach, CODATU VII, New Delhi, India.

Brennan, P. and Ribera, A., 1999. Urban bus transport regulation in Buenos Aires, CODATU VII,Cape Town, South Africa

Eastache, A., Carbajo, J. and de Rus, G., 1999. Argentina’s transport privatisation and re-regulation:Ups and downs of a daring decade long experience, World Bank Policy Research Working Paper

Garibotto, E., 1996. BA commuters return to the rails: Railway Gazette International, Dec 1996.

Kogan, J., 1993. Restructuring metropolitan railway services in Buenos Aires, CODATU VI,Tunisia.

Macias, R., 1994. Metrovias takes over metro and suburban lines: Developing Metros 1994.

Salvucci, F. 1997. Observations on the Buenos Aires experience with increased private sector rolesin the production of commuter rail, transit and bus services, Thredbo VI, Leeds, United Kingdom.

Turco, N. and Arcusin, S., 1998. Institutional bottom-up approach for Buenos Aires urbantransport, CODATU VII, Cape Town, South Africa.

World Bank, 1997. Buenos Aires urban transport project. World Bank Staff Appraisal Report.

World Bank, 1997. Argentina – Buenos Aires urban transport – project summary, World Bank.

SUBTE concession renegotiated: Railway Gazette International, Oct 1998.

Curitiba

Cannell, A., 1995. The Curitiba bus (r)evolution: Integrated transport systems as mass transport, 4Thredbo V, Rotorua, New Zealand.

Santoro, R. and Leitmann, J., 1996. Innovative urban transport in Curitiba, Brazil: A successfulchallenge to conventional wisdom, LACTD Regional Study.

Taniguchi, C., 1993. Transport integration strategy in urban planning: The experience of Curitiba,CODATU VI, Tunisia.

Rio de Janeiro

Balassiano, R., 1998. Vans a new public transport alternative in a developing country.

Balassiano, R., and Braga, M., 1999. Buses and vans – assessing public transport competition in Riode Janeiro, Thredbo VII, Cape Town.

Balassiano, R and Braga, M., 1998. How to integrate vans’ services into a conventional publictransport system. CODATU VII, Cape Town, South Africa.

Munck, P., 1994. Transfer to single authority will integrate urban trial networks: Developing Metros1994.

Ratton Neto, H., 1998. The new challenges for Rio de Janeiro urban public transport, CODATUVII, Cape Town, South Africa.

Rebelo, J., 1999. Reforming the urban transport sector in the Rio de Janeiro metropolitan region: Acase study in concessions: World Bank Working Paper.

Rebelo, J., 1999. Rail and subway concessions in Rio de Janeiro – designing contracts and biddingprocess. Transport Research Board.

Torres, A., 1998. Policies to control informal transporters – the Rio de Janeiro case, CODATU VII,Cape Town, South Africa.

World Bank, 1993. Rio de Janeiro metropolitan transport decentralisation project. World Bank

World Bank, 1997. Rio de Janeiro mass transit project. World Bank Staff Appraisal Report

Flumitrens to transfer on November 1 1998: Railway Gazette International, Sep 1998.

Santiago

Busta, F., 1999. Description of the transportation system of Santiago.

Darbera, R. 1993. Deregulation of urban transport in Chile: What have we learned in the decade1979-89? Transport Reviews, 13.

Dourthe, A. Wityk, M., Malbran, H. Figueroa, O., Deregulation and regulation of urban publictransport: The case of Santiago, CODATU VII, Cape Town, South Africa.

Dourthe, A., Malbran, M. and Wityk M., 1998. The Santiago of Chile’s experience with theregulation of the public transport market

Dourthe, A., Malbran, M. and Wityk M., 1999. The Santiago de Chile experience with the regulationof the public transport market: Transport Research Board 1999.

Koprich, D., 1994. The modernisation of Santiago’s public transport: 1990-1992, Transport Reviews,14.

Ponce, F., Beltran, P., and Malbran, H., 1999. Quantification and characterization of the publictransport demand in Santiago de Chile: Transport Research Board 1999.

Thomson, J. 1992, Urban bus deregulation in Chile. Journal of Transport Economics and Policy, 26, 319-326

World Bank, 1997. Urban streets and transport project. World Bank Implementation CompletionReport.

Zegras, C. The cost of transportation in Santiago de Chile: analysis and policy implications, TransportPolicy, 5.

Sao Paulo

Alouche, P.M., 1999. Sao Paulo Metro – An efficient system that needs expansion. TransportResearch Board.

Rebelo, G., and Benvento P., 1995. Concessions of busway to the private sector: The Sao Pauloexperience, World Bank Policy Research Working Paper

Rebelo, J. and Beinvenuto, P. 1997. Lessons from Sao Paulo’s metropolitan concessions program,World Bank Policy Research Working Paper.

World Bank, 1992. Sao Paulo metropolitan transport decentralisation project, World Bank StaffAppraisal Report.

World Bank, 1998. Sao Paulo integrated urban transport project. World Bank Project AppraisalDocument.

World Bank, 1999. Sao Paulo metropolitan transport decentralisation project. World Bank ProjectCompletion Report.