WINNIPEG: The Frontier Centre for Public Policy recently released Inter-City Busing: A New Regulatory Framework for Canada, authored by policy analyst Steve Lafleur.
Canada’s inter-city bus industry provides crucial mobility to rural residents and low-income urban Canadians. But the cost of providing inter-city bus services to rural areas experiencing population declines is becoming prohibitive in some cases. Greyhound has historically been required to subsidize unprofitable rural routes through artificially high fares paid by urban riders. This model has been abandoned in most of Canada, so a new approach will be required to keep the buses running for the sake of rural residents and low-income urban Canadians.
Given the importance of rural busing, there is a justification for subsidies. However, overcharging the urban poor to subsidize rural residents has been the wrong approach.
The study examines prices in several North American jurisdictions, and finds that prices are typically higher in Canada, particularly in Saskatchewan, which has a government monopoly on inter-city busing within the province. By contrast, the entry of discount carrier Megabus has reduced prices between many destinations in the Windsor-Toronto-Montreal corridor to roughly the level found in major U.S. cities.
Eliminating price and scheduling regulations would allow for discount carriers such as Megabus to provide frequent, low cost travel between large urban destinations. But the corollary to deregulating the inter-city bus market is that rural residents will have to pay the full cost of buses, or companies will continue to reduce service.
The solution presented in the paper is to adopt a system of competitive tendering based on the model used in Washington State, whereby companies bid on the minimum level of subsidization at which they can service unprofitable routes. Washington is one of the few jurisdictions that has increased rural bus service recently, and have done so at a lower rate of subsidization than Manitoba or Saskatchewan. It is an approach that harnesses competition, while ensuring that rural communities don’t get left behind. It offers a more lasting solution that will benefit rural travellers and low income urban residents.
– Author Steve Lafleur is a policy analyst with the Frontier Centre for Public Policy.