| REPORT OF THE COMMITTEE | Wednesday, December 11, 2002 |
The Standing Senate Committee on Transport and Communications
has the honour to table its
THIRD REPORT
Your Committee, which was authorized by the Senate on Wednesday, October 30, 2002, to examine and report on issues facing the intercity busing industry, now tables its report entitled Intercity Bus Service in Canada, which is attached hereto.
Respectfully submitted,
JOAN
FRASER
Chair
INTERCITY BUS SERVICE IN CANADA
The
Standing Senate Committee on
Transport and Communications
Chair:
The Honourable Joan Fraser
Deputy Chair:
The Honourable Leonard
Gustafson
THIRD
REPORT
December 2002
MEMBERSHIP
The
Honourable Joan Fraser, Chair
The Honourable Leonard Gustafson, Deputy Chair
and
The Honourable Senators:
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Willie
Adams |
B.
Alasdair Graham, P.C. |
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Michel
Biron |
Janis
G. Johnson |
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Catherine
S. Callbeck |
Laurier
L. LaPierre |
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*
Sharon Carstairs, P.C. (or Fernand Robichaud, P.C.) |
*
John Lynch-Staunton (or Noël Kinsella) |
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Joseph
A. Day |
Gerard
A. Phalen |
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J.
Trevor Eyton |
Mira
Spivak |
* Ex
Officio Members
The
Honourable Senator Bacon was Chair of the Committee during the First Session of
the Thirty-Seventh Parliament, and the Honourable Senator Oliver was Deputy
Chair. In addition, the Honourable
Senators Adams, Atkins, Baker, P.C., Biron, Callbeck, Carstairs, P.C. (or
Robichaud, P.C.), Comeau, Eyton, Forrestall, Gustafson, Jaffer, LaPierre,
Lawson, Lynch-Staunton (or Kinsella), Maheu, Phalen, Spivak, and Watt were
members of the Committee or participated in its work during this study during
that Session.
Research Staff:
Martin
Brennan, Special Advisor to the Committee
Joseph
P. Dion, Parliamentary Research Branch, Library of Parliament
Note:
Michel Patrice and Richard Maurel served as Clerk of the Committee at
different times during the First Session of the Thirty-Seventh Parliament.
Clerk of the
Committee
ORDER
OF REFERENCE
Extract
from the Journals of the Senate of
Wednesday, October 30, 2002:
The
Honourable Senator Fraser moved, seconded by the Honourable Senator Lapointe:
That
the Standing Senate Committee on Transport and Communications be authorized to
examine and report on issues facing the intercity busing industry;
That
the Committee submit its final report no later than Friday, December 20, 2002;
and
That
the papers and evidence received and taken on the subject and the work
accomplished during the First Session of the Thirty-Seventh Parliament be
referred to the Committee.
The
question being put on the motion, it was adopted.
Paul
Bélisle
Clerk of the Senate
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The Economic
Regulation and Economic Deregulation of Transportation |
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Appendix A: Letter from the Honourable David Collenette, P.C., M.P., to the Honourable Senator Lise Bacon |
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Appendix
B: Section Five, Canada
Transportation Act |
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Appendix
C: Selected Bibliography |
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Appendix
D. Industry Structures |
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Appendix
E: User Charges and a Road
Agency |
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Appendix
F: Witnesses |
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While
this report is being tabled in the Senate during the Second Session of the
Thirty-Seventh Parliament, the reader should know that most of the preparatory
work leading to this final product took place during the First Session of the
Thirty-Seventh Parliament.
This
study was undertaken after a letter was received from the Minister of Transport
in mid-2001. It was Senators who
were on the Committee during the First Session of the Thirty-Seventh Parliament
who held the great majority of the Committee’s hearings on this matter and who
delved into these issues in great detail. When
the Committee was tasked by the Senate with completing this study during the new
Session of Parliament, those of us who were appointed to the Committee were able
to benefit from the accumulated wisdom of their predecessors.
While
this report builds on, and would not have been possible without, these efforts,
it is the product of the current Committee.
Any issues relating to its contents should, therefore, be laid only at
the foot of the current Committee.
On
behalf of all my colleagues on the Committee, I therefore wish to recognize our
great debt to those Senators who participated so diligently in this study, both
during the current Session and most especially the previous Session.
In particular, I wish to recognize the work of Senator Lise Bacon, who
was Chair during the last Session, and Senator Donald Oliver, who was Deputy
Chair. The names of other Senators
who participated in this work, both during the current and the previous Session,
are recorded on the first page contained in this report.
The Honourable Joan Fraser
Chair
1.
The Committee recommends that the economic regulatory regime for
extra-provincial bus transportation be amended to require at most a reverse-onus
test for entry into service, similar to the regime introduced for trucking in
1987, and that, after five years, a formal review be conducted to determine
whether further deregulatory steps might be appropriate.
Such
a reverse-onus scheme, suitably qualified with safety and liability
requirements, should include a means to discourage frivolous challenges to
applicants for licences.
2.
The Committee recommends that a modest subsidy program be established,
perhaps in the order of $30 million per annum, during the transitional period.
This subsidy, which would be examined as part of the five-year formal review,
would be used to help establish local community bus services in rural areas
using appropriate small vehicles where a need could be demonstrated and a
community, a provincial government or a local business were willing to
co-invest.
3.
The Committee recommends a serious reappraisal of the problems of
disabled people travelling by bus, to be carried out jointly by the federal and
provincial governments with the objective of ensuring that the provisions of the
policy statement in the Canada Transportation Act are carried out.
4.
The Committee recommends that the federal and
provincial governments review the National Safety Code in order to ensure that
small buses and vans of the sort that could be used in public service are
included, so that their maintenance requirements, driver training standards and
other safety essentials can be well publicized and enforceable.
5.
The
Committee recommends that the federal and provincial governments consider
collaboration to examine how Canada can more fully benefit from the
environmental advantages of buses, particularly in light of the Kyoto Protocol
on Climate Change. The Committee
also recommends further study of broader issues relating to the relative
benefits and costs of different types of transport.
6.
The Committee recommends that the federal government
re-evaluate the need for consensus among all the jurisdictions and players
before initiating action on intercity bus policy.
This
report is about buses – not the buses that take Canadians to work every day,
but those that carry people on longer trips between cities, perhaps to visit
relatives, to take up a new job, to go back to school, to take a vacation or to
get medical care. These buses move
approximately 14 million passengers a year in Canada.
From the outset, it is essential to recognize that buses are a key means of transportation in this country. For many Canadians – especially the young, the old, the less well off, and those living in remote areas – buses provide one of the most readily available, if not the only, means of transport. In many cases, those who need to travel simply do not have access to a car.
Buses, as the Committee was told, serve thousands of centres of all sizes in this country, compared with only a few hundred large towns served by trains or a few dozen major cities served by airplane. The network of bus routes is like a web binding the smallest towns in Canada to the largest urban centres. They ensure that all Canadians – both rural residents wishing access to urban areas and urban residents seeking access to the country – enjoy mobility throughout the country and can benefit from the full range of opportunities and possibilities the country has to offer. Buses are relatively inexpensive, and are fast, convenient, and environmentally friendly.
Over the years these buses – generally referred to as intercity buses – have seen their share of total ridership decline. This has been linked to a variety of factors, including rising incomes and car ownership; urbanization; the expansion of urban transit systems to surrounding areas; and a system of government regulation dating from the 1930s. This Committee was invited to consider these factors and to identify ways of ensuring that this vital means of public transport is preserved and thrives in the future.
The Committee examined issues such as the effects of government involvement on bus services, whether governmental regulation is a help or hindrance in the busing field, and whether continued government regulation is necessary to maintain some of the more lightly travelled routes.
Although not all Committee members agreed on this point, the majority concluded that governments should gradually pull out of regulating fares and should eventually allow competition to govern service standards and prices. At the same time, the entire Committee is deeply concerned that doing this might leave some routes without service. These routes tend to be in the very areas of the country that are most in need of bus services.
The Committee therefore makes recommendations aimed at encouraging entrepreneurs to step in with more suitable equipment like small vans to show what they can do. This report also recommends subsidies be made available in rural areas to ease these adjustments during a transitional phase.
The Committee also has some comments on the problems faced by disabled travellers and makes a recommendation on that subject. Issues relating to the ownership of bus companies, safety, and national policies on transportation are also addressed in this report.
The
Committee faced challenges in developing suggestions as to how Canadians can
fully benefit from the environmental benefits of buses.
Although buses are very efficient at carrying people, most Canadians
still make intercity journeys by car. The
convenience, comfort, and privacy of cars make it very difficult to persuade
users to leave their private vehicles at home.
The Committee did not hear enough about options such as road pricing to
allow it to make any specific recommendations, although this area is identified
as one requiring more work.
This
report provides some background information on bus matters and provides some
references so that those who wish to study the matter in more detail can do so.
The Committee’s report is therefore both an introduction for those who
are interested in the possibilities of this means of transport – users,
environmentalists and those concerned with rural issues – and also a guide to
assist those with responsibilities in the field – the federal government, the
provinces and territories, and the operators – as to how to best realize the
full potential of buses.
In May 2001, the Minister of Transport, the Honourable David Collenette,
approached the then Chair of the Standing Senate Committee on Transport and
Communications, the Honourable Lise Bacon, with a request that the Committee
examine the public policy issues relating to changing conditions in the bus
industry that, if varied, might bring about a healthy, efficient and competitive
situation in that industry.[1]
The Minister also provided the Committee with a Transport Canada
orientation document dated March 2001.[2]
The
Minister noted that buses provide a useful, environmentally friendly, flexible
and widely available service, but that they have steadily lost ground in the
competition for intercity passengers. He
suggested two broad questions for the Committee to consider.
First, what are the prospects for reversing the long term decline in
ridership and second, what should be the role of the bus industry in Canada’s
overall strategy for dealing with environmental issues relating to
transportation.
·
Are the differences between the provincial regimes that
have developed over the last decade detrimental to the industry and the
travelling public?
·
If they are, what is the appropriate remedy?
·
What are the policy implications of the growth in
industry concentration over the last decade?
·
Is economic regulation of the industry still an
appropriate regulatory tool?
·
Is the traditional scheduled bus industry the
appropriate tool for providing public mode rural and small community service?
What alternatives to traditional bus services are available?
The
Minister summed up by asking the Committee to provide a prescription for the
problems that face the Canadian bus industry, mainly the slow decline of what he
considers to be a useful mode of transport.
This
report does not provide a great mass of detailed background in this section,
since much information is readily available elsewhere.
For example, Transport Canada’s annual reports contain a great deal of
information about the various modes of transport.[3]
These reports include information on the structure of the industry,
revenue and passenger history by sector of the industry, lists of the main
carriers, and financial performance.
In addition, a number of significant studies or other publications are
available which help in developing an understanding of the situation of the bus
industry. They cover recent history in Canada, as well as reporting on
the economic deregulation of long distance buses in the United Kingdom and the
United States. A list of many of
these studies and reports is attached as Appendix C to this report.
The remainder of this section deals with a number of key issues relating
to intercity bus service.
2.1
Economic Regulation
of Buses
It
must be noted that economic regulation and safety regulation are two different
things.[4]
No one in any way involved in this study is proposing less safety
regulation. Nevertheless, the
Committee has some observations to make on safety later in this report.
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Economic regulation is not necessarily an all or nothing affair. At one extreme is tight regulation with cross-subsidization; at the other extreme is deregulated entry, where a carrier can offer any bus service it desires, provided it meets safety and insurance standards.
In deregulating extra-provincial trucking with the Motor Vehicle Transport Act, 1987 the federal government changed the rules to allow provinces to regulate extra-provincial trucking only on the basis of a “reverse-onus” test. With such a test, any carrier wanting a licence could apply to the provincial board. Third parties could object, but the onus was on them to prove that the new applicant was offering something contrary to the public interest. If they failed to make that proof, the board was obliged to grant the licence.
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This is a very different situation from having the onus rest with the new service applicant, as is the case today for buses in regulated regimes. For trucks, the 1987 measure was introduced as a temporary step towards full economic deregulation, which was intended to follow within five years.
In the 1950s, the courts determined that the economic regulation of bus
companies that operate across provincial and international borders (sometimes
called extra-provincial busing) is a federal matter, even if the company
concerned has only part of its operations outside its home province.[5]
All of the company’s operations would be subject to federal economic
regulation.
However the federal government of the day, unprepared
to take on this responsibility, decided to hand the power back to the provinces,
which had the personnel and institutions to deal with it.
It did so by passing the first Motor Vehicle Transport Act in
1954. Subsequent modifications to
this law, the most recent being in 2001, have continued this delegation.
The provinces are therefore free to control or not to control intercity
bus fares and service entry conditions as they see fit.
This
situation could be changed by a simple legislative amendment, as was done in
1987, when Canada began the economic deregulation of extra-provincial trucking.
Some provinces continued the economic regulation of some aspects of
intercity bus traffic, and so in these provinces buses remain the only form of
long distance transport, including both freight and passenger, in which
government has a hand in setting prices.
Regulation can involve setting conditions for starting a business so that
applicants must prove to a board that there is a real need for their services.
Other operators already serving the routes may well contest an
application. Granting a licence to
an applicant can involve limits being put on fares, frequency of service, and
conditions on which routes may be abandoned.
Cross-subsidization of unprofitable routes by profitable routes can also
be a condition of granting a licence, and the fares charged may reflect a total
revenue expectation geared to an agreed rate of financial return for the
business concerned.
In other provinces, buses may not be subjected at all to economic
regulation, the only conditions necessary for entering service being that
applicants have a safe bus and adequate insurance coverage.
Under these circumstances, companies are free to set their own fares,
routes and timetables. This
situation is sometimes described as an applicant being “fit, willing and
able.”
2.2 The
National Transportation Policy Framework
One aspect of the Canada Transportation Act that is of particular interest in this study is the national policy statement in section 5 of the Act, which is intended to apply to all modes of transportation under federal jurisdiction. It is reproduced in Appendix B to this report. The policy states, in its first paragraph, “that a safe, economic, efficient and adequate network of viable and effective transportation services…is essential to serve the needs of shippers and travellers” and, later, that “these objectives are likely to be achieved when all carriers are able to compete both within and among the various modes….”
Other
companies whose operations tend to be provincial or regional in scope include
Orléans Express in Quebec, Coach Canada in Ontario and Pacific Western, which
is based in Alberta.
Laidlaw’s
dominance has come about in relatively recent times and has been part of a
restructuring and consolidation process that has been going on for the last
decade.[7]
Laidlaw acquired Canadian Greyhound in 1997, and bought American
Greyhound in 1998. In 2000 it
purchased the remainder of Penetang-Midland Coach Lines, completing a process it
had begun in 1998. The result of
these transactions is that the concentration of ownership in the industry is at
its highest level ever.
Laidlaw
reported significant losses in 1999 and 2000.
In June 2001 it filed voluntary petitions to reorganize under the United
States Bankruptcy Code and Canada’s Companies’ Creditors Arrangement Act.
Recent information concerning Laidlaw’s financial situation, including
Canadian and US revenues, total liabilities and assets, can be found in its
Fiscal 2002 Third Quarter Report of May 31, 2002.[8]
Transport Canada’s orientation document shows that revenues from
scheduled intercity bus services were $236 million in 1999.
Charter revenues for the same year were $305 million.
Scheduled service revenues have been in the range of $235-270 million
over the last 10 years, while charter revenues have been increasing.
A measure often used as a guide to the performance of
transportation companies is operating ratio.
It is defined as the ratio of a company’s operating expenses to its
revenue, expressed as a percentage, so the lower the operating revenue, the
better for the company. Transport
Canada’s annual report for 2000 gives a figure of 85.1 as the operating ratio
for the intercity bus industry, a figure that it says represents viable
financial returns, and an improvement from the 91.6 figure in 1994.[9]
2.4
Previous Attempts to Agree on Policy
Over
the past 12 years there have been several attempts to agree on new policy
directions for intercity buses. Revisions
to the Motor Vehicle Transport Act in 1987 did nothing to deregulate
buses, but did start the economic deregulation of long distance trucking and
prompted some provinces to voluntarily deregulate buses.
Federal-provincial-industry
groups met at various times in the mid-nineties, and, while some agreement was
reached that the charter operations of buses could be deregulated, there was no
agreement on scheduled service deregulation.[10]
As recently as March 1999, revisions to the Motor Vehicle Transport
Act, 1987 were proposed in Bill C-77 (First Session, Thirty-Sixth
Parliament), which would have removed the delegated power of provinces to
regulate interprovincial and international routes.
This Bill did not, however, proceed after objections from several
provinces. Much of the detail of
these discussions can be found in the publications listed in the bibliography in
Appendix C.
In
Canada, construction standards for motor vehicles, including safety standards,
are a federal responsibility, but once a vehicle is on the road, its safety is
primarily a matter governed by the highway traffic acts of the various
provinces.
In
an attempt to co-ordinate safety across the country, and out of concerns about
safety at the start of the process to deregulate trucking, the federal and
provincial transport departments drew up a National Safety Code for commercial
vehicles in 1987.
The
Code is a collection of regulations and standards prepared jointly under the
auspices of the Canadian Council of Motor Transport Administrators.[11]
The idea of a national code is to bring more uniformity to safety
regulation. The Code consists of 15
standards covering items such as driver permits and the testing of drivers,
medical standards, the loading of vehicles, vehicle maintenance, on-road
inspections, and facility audits. Standard
14 covers the measuring of compliance by carriers with the overall code.
Recent
amendments to the Motor Vehicle Transport Act, 1987 will give legal
status to the National Safety Code.[12]
When in force, they will allow the provincial regulations to be
incorporated by reference into the Code and will also allow the Minister of
Transport to enter into safety agreements with the provinces.
Such agreements would authorize officials to give safety ratings to
extra-provincial motor carriers. Noncompliant
carriers can ultimately lose their safety rating and be shut down. The Code also applies to extra-provincial bus companies.
In
September 2001, the Minister announced funding of $17.8 million to further
assist provinces and territories with the implementation of the Code.
This will go towards assisting in further harmonization between them, and
help fund on-road enforcement, which is a provincial responsibility.
The
Committee sought to receive input from the three major groups with an interest
in the intercity busing field – users, carriers and government regulators.
Hearings took place both in Ottawa and in major centres across the
country. In addition, the Committee
received input from three leading academic experts in the field.
To
facilitate its work, the Committee put together a background paper containing a
range of questions and issues, which it posted on the Internet.
This paper was to help witnesses prepare their statements to the
Committee. The questions suggested
in the paper were not intended to be exhaustive; indeed the Committee expected
many more questions would be raised before the study was complete, as was indeed
the case.
A
special effort was made to hear from the users of intercity bus services.
These users are generally acknowledged to be the less financially well
off, and include students, other youth and seniors.
Therefore, seniors’ groups, student groups, poverty groups and
municipal representatives from all regions of the country were asked to appear.
Federal bodies focused on rural issues and ageing were also invited.
Seniors were especially willing to appear; while student organizations
appeared to have other pressing issues more directly related to their education
that were their major focus.
The
general view of the users and their representatives was that bus services are
important to them, and that these services are not as good as they should be.
They expressed concerns that services could deteriorate, either because
of continuing demographic and economic trends, or because of changes to the
regulatory regime. Many witnesses
from these groups supported the view that economic regulation is necessary to
cross-subsidize low-density routes. Many
were greatly influenced by a 1998 KPMG study, commissioned by the bus industry.[13]
Some who had benefited from conditions that had allowed innovative
service, such as the van service in the Maritimes, were more optimistic about
possible future developments.
Carriers
were split in their views on economic regulation.
Some carriers with existing operating authorities that limit new entrants
expressed the view that the status quo, although not ideal, is fairly good and
that change would be a leap into the unknown.
Some existing carriers who wish to expand their operations, and who have
been frustrated in their attempts, argued vigorously for greater market freedom.
Carrier associations, and the association of lawyers practising in the
transport field, declined to take a position on regulation versus deregulation
because their memberships were so evenly split on the issue.
Representatives
of three provincial governments appeared as witnesses before the Committee,
while eight others made written submissions.
Some argued for the deregulated approach, or already have it.
Some urged caution if changes were to be implemented.
Few or none argued for the status quo.
This may reflect the fact that these same governments have, for ten
years, been attempting to bring about change to achieve harmony among their
regimes.
The
academic observers argued vigorously for a shift to a deregulated regime.
To them the economic advantages of deregulation are clear, and the
purported benefits of a regulated system are illusory, with the real effects
being poor service and a lethargic industry.
Many issues arose in the course of this study.
What follows is a list of the most significant of them, with some
discussion. The Committee’s conclusions are included here.
The Committee’s recommendations are to be found in section six of the
report.
Transport Canada’s annual reports for the last five years and the orientation document mentioned in section two of this report show intercity ridership falling from about 32 million in 1980 to about 14 million today, though there has been a levelling off in the last four years. These figures appear to be consistent with figures for bus-kilometres,[14] equipment utilization and other measures.
The
1992 report of the Royal Commission on National Passenger Transportation
concluded that there had been decreases in bus traffic over the preceding years,
and a federal-provincial group of transportation officials drew a similar
conclusion in a 1996 report.[15]
Many witnesses spoke about their concerns relating to route withdrawals,
and even the bus industry has used the word “decline” to describe conditions
in the early 1990s.[16]
From
the start of the study, the bus industry was uneasy with the statistics quoted.
The industry claims that there has been no real decline in ridership on
intercity buses, and that the confusion arises from the way bus passengers were
counted in the 1970s, when even a ride of three miles could be counted as
intercity. Bus operators argue that
municipal amalgamations and the growth of urban transit have made comparisons
meaningless.
The
decline is not unexpected. There
have been quite marked changes in population distribution over the years as
urbanization has continued, automobile ownership has increased
substantially, and standards of living have increased.
As far as this study is concerned, one of the elements at issue is
whether other factors, such as continued economic regulation of much of the
industry, may also have had an impact on the decline.
To complete the picture for intercity passenger transport as a whole,
Transport Canada’s annual report for 2000 indicates that there were
approximately four million rail trips in 1999 (excluding commuter travel) and
almost 27 million domestic air trips. While
figures are given for automobile traffic as a whole, including those who
commute, none is given specifically for intercity trips.
However, previous work has shown that some 85% of intercity trips for
journeys of less than 500 kilometres are made by private car, a figure that
swamps the public modes. As a
result of this imbalance, even small changes in automobile travel can result in
large percentage changes in ridership for public transport.
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CONCLUSION After a decline in
passengers over several decades, intercity bus ridership seems to have
reached a plateau of about 14 million riders per annum over the last four
years.[17]
The decline has been due to a number of factors, including
increasing car use, population drift toward cities, discount airfares on
some routes, changing economic conditions and, possibly, a regulatory
framework that does not foster innovation. |
4.2
Bus Ridership and Ridership Prospects
Nevertheless, some relatively affluent Canadians do choose the bus when
it is fast and convenient. Committee
members were surprised, when they took the bus from Ottawa to Montreal at the
start of the hearings, to see how many passengers were air travellers who got
off at Dorval airport. The
Edmonton-Calgary services are also well patronized by business travellers.
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CONCLUSION The bus certainly fills a need.
Most, but not all, passengers are among the less affluent in
society. Given that little
has changed in the bus business or its institutional framework for many
years, and that all the factors that led to the decline in traffic are
still present, there is no reason to expect a turnaround in years to come,
unless the institutional framework is changed or other steps are taken to
encourage the use of buses. |
4.3 National
Transportation Policy Principles
The
Canada Transportation Act was mentioned earlier, in section 2.2, as
setting a framework for federal transport policy in Canada that is essentially
competition based. Another
reference to this policy can be found in section 3(1) of Bill S-3, passed in
2001, which provides for amendments to the Motor Vehicle Transport Act, 1987.[21]
This section
indicates that one of the objectives of the Act is
to ensure that the National Transportation Policy set out in section 5 of the Canada
Transportation Act is carried out with respect to extra-provincial motor
carriers. That being said, it could
be argued that the Motor Vehicle Transport Act, 1987, in allowing quite
strict economic regulation in several provinces, contradicts itself as it
applies to buses.
Over
the past several years, most transport sectors in Canada have been deregulated.
This is part of a worldwide trend. Rail
freight deregulation is now complete, and there is no regulation of fares and
entry into airline service in Canada, though there are ownership restrictions.
Historically, shipping has been lightly regulated.
Thus, if city buses – which are usually municipally owned and highly
subsidized – are disregarded, the regulatory regime applying to long distance
buses is something of an anomaly. It
is the only one that shelters carriers from competition in a large proportion of
the country.
Several witnesses before the Committee spoke of a need to develop a
national passenger strategy that would provide a framework within which to
consider the regulation of buses.[22]
Others pointed to the Canada Transportation Act as containing a
clear and unambiguous policy statement,[23]
though some noted that the federal government itself does not always abide by
its precepts; for example, it subsidizes VIA Rail.
CONCLUSION While some witnesses called for a policy framework
for buses, the Canada Transportation Act of 1996 contains a clear
statement of federal policy as it applies to all transportation activities
that fall within the legislative authority of Parliament.
It is difficult to envisage a unique policy statement for intercity
buses if that statement would contradict statements in existing
legislation. |
4.4 Regulation,
Cross-Subsidization and Deregulation
It
was often a condition of serving a profitable route that an unprofitable route
be served as well, and that the losses for the latter be made up partially from
profits from the former. This
mechanism is known as cross-subsidization.
The
sort of regulation described above still goes on in several of Canada’s
provinces, in the area of bus transport, with implicit federal approval via the Motor
Vehicle Transport Act, 1987. The
Committee in its travels heard, for example, about the strict regulatory regimes
in Quebec and British Columbia and the somewhat looser regimes in Nova Scotia
and Ontario.
Working with the industry’s own data, Transport Canada has tried to
come to some conclusions on the relationship between high and low density routes
and cross-subsidization.
|
Categories
of Intercity Bus Routes and Ridership, 1998 |
||||
|
Category
of Route (profitability and denisity of ridership) |
Number
of routes |
%
of Routes |
Passenger
Trips (millions) |
%
of Trips |
|
Most
profitable, highest density |
15 |
11 |
2.8 |
40 |
|
Profitable,
medium density |
42 |
32 |
2.7 |
38 |
|
Marginal,
low density |
41 |
31 |
1.2 |
17 |
|
Unprofitable,
lowest density |
34 |
26 |
0.4 |
5 |
|
|
|
|
|
|
|
Totals |
132 |
100 |
7.1 |
100 |
Source:
Transport Canada’s March 2001 orientation document at p. 13, based on
KPMG’s December 1998 study entitled Impact of the Deregulation of Scheduled
Inter-City Bus Service. This
table reflects information from six carriers.
Transport
Canada concluded as follows:
These
data suggest that the number of low income passengers that might be affected by
changes in low density service is considerably smaller than the number of low
income passengers who might be assumed to be paying higher fares on the
profitable routes in order to maintain cross subsidized networks.[28]
In
addition, regulation has an impact beyond the jurisdiction doing the regulation.
If a jurisdiction is deregulated, then a carrier based in a neighbouring
regulated jurisdiction may freely enter the market of the unregulated
jurisdiction, but the opposite does not hold true.
The carrier from the regulated jurisdiction therefore has an unfair
advantage. A representative of the
Government of Alberta, when speaking to the Committee, went as far as to say
that Alberta would be inclined to deregulate fully were it not for the
restrictive regulatory practices of British Columbia.[29]
Carriers in Ontario spoke of problems they had encountered with the
relatively light degree of regulation there compared with the strict regulatory
regime in Quebec.[30]
|
CONCLUSION The
economic regulatory regime across the country is quite varied, strict in
some provinces, quite light in others, and non-existent in a few.
This causes problems between jurisdictions by giving advantages to
some companies offering services in neighbouring deregulated provinces due
to a lack of reciprocity. In provinces with strict regulatory regimes,
cross-subsidization is very much a reality.
Companies are given licences for profitable routes on condition
that they serve unprofitable routes.
While this process fills a need, it is quite a coarse tool for
keeping rural routes alive, results in higher bus fares than necessary on
profitable routes, stifles competition on these routes, and is dependent
for success on a complex regulatory structure.
One witness described cross-subsidization as the poor subsidizing
the poor.[31] Many bus users in rural areas are concerned about the
impact that deregulation might have on cross-subsidized routes.
They fear widespread loss of service and are not prepared to bet
the efficiencies promised through deregulation against the possibility of
no service at all. There is little doubt that if this loss of service were
seen to occur, there would be a clamour for government intervention to
help restore services. While
the Committee believes that small operators would, in many cases, move in
with different equipment, it also believes that the government should be
prepared to provide a modest funding program to help establish community
bus services or other suitable alternatives. The Committee finds some attraction in introducing,
as a partial deregulatory step, a reverse-onus test for new applicants,
similar to the one introduced when trucking was deregulated in 1987.
This offers the prospect of allowing some of the gains of
deregulation, while allowing some of the cross-subsidized situations to
continue. If introduced for a
limited time (five years is suggested as a reasonable time period), the
reverse-onus regime could be then evaluated and it could be determined
whether to let the system continue, or whether further deregulatory steps
might then be taken. |
4.5 Buses,
Vans and Rural Routes
A bus then, seems to be whatever a province defines as a bus, and
presumably includes mini-vans in certain situations.
In other provinces, such as Ontario, some vans offering lower fares than
buses operate illegally. Unlike the
situation in Nova Scotia, they need approval from a regulatory board and, not
being able to get it, do not pay much attention to safety either.
This
illustrates one of the problems of regulation.
It can encourage illegal operations to offer services with few, if any,
quality or safety controls. If the
system of economic regulation allowed more flexibility of market entry, these
same operators might be prepared to improve their drivers’ skills and the
maintenance of their vehicles, while probably still keeping their prices lower
than large buses. This point was
made to the Committee by a number of witnesses.[34]
|
CONCLUSION Buses are defined in provincial highway statutes,
though the definitions at the small end of the vehicle spectrum are not
always consistent. There are
clearly options to serve at least some rural routes other than the big
company 40-plus-seat coach. The
small vans used in Nova Scotia and by some small companies in Alberta are
examples of different approaches to busing.
The definition of a bus needs more attention, and the inclusion of
small buses in the National Safety Code is clearly necessary. The Committee cannot help
but think that the van or mini-bus may well be a feasible alternative on
the remote routes now served by cross-subsidized buses. It could also surely fill a role providing community busing
in remote areas where no service exists today.
What seems to be needed is an appropriate regulatory framework,
perhaps some economic stimulus, and a safety enforcement regime to keep
out unsafe and unqualified operators. |
While
subsidies are part of Canadian transportation history, the last decade has seen
many of them either significantly reduced or swept away entirely.
Some do, however, remain. During
2000-2001, federal direct operating subsidies to ferry services in Atlantic
Canada amounted to almost $70 million, while VIA Rail received $231 million.[35]
There
are no federal subsidies to buses, though the Committee was told of a few small
provincial subsidies to buses in Quebec, and a provincial fuel tax rebate
program was described by one of the witnesses in Montreal.[36]
Consideration
of new measures, such as a community small bus program to offset the impact of
some degree of intercity bus deregulation, raises the question of the sources of
funds and the amounts involved. It
is difficult to estimate precisely what a community assistance program might
cost. One option might be to
allocate funding for operating subsidies. As
already noted, the federal government now does this for Via Rail and ferries,
though governments often prefer to subsidize through one-time capital
contributions rather than through ongoing operating grants.
Total
scheduled intercity bus revenue in Canada was estimated by Statistics Canada as
about $236 million in 1999.[37]
Remote services are estimated to amount to about 15% of total ridership.
As previously noted, one operator told the Committee that about 10% of
revenue goes to subsidize remote services.
However, many rural areas have no service now, and further study would be
needed to estimate what the national demand might be.
|
CONCLUSION There are certain conflicts between bus operators and
the providers of subsidized services, which in most cases are governments.
One such conflict is with VIA Rail, which competes with bus
services in some parts of the country.
Other conflicts arise in urban areas where the spread of a
subsidized urban service such as Go Transit in the Toronto area can reach
well into the intercity market and attract riders away from a private
sector intercity bus service. Given
the ridership on buses, and given the contribution they make to low
density rural routes when cross-subsidized, there appears to be a case for
a modest subsidy program to promote the establishment of appropriately
structured rural bus services to offset any problems that steps towards a
broader deregulatory national framework might cause. |
4.7
Passengers with Disabilities
In
response to a related recommendation, the Canadian Transportation Agency has
worked actively for the last 10 years to achieve this goal.
Evidence to the Committee suggested that all carriers are aware of the
importance of reaching this goal and that they make considerable effort to
achieve it. It is also clear from
the evidence of disabled representatives that there is still some distance to
go.[38]
The
Committee heard from members of the disabled community about their experiences
with buses. There are buses
equipped with ramps for wheelchair access, but not all buses on all routes are
so equipped. Travellers in
wheelchairs must pick their time of departure more selectively than others.
While bus terminals in cities are usually equipped for wheelchair
passengers, stops in small towns are rarely configured this way, and present one
of the obstacles to bus travel.
|
CONCLUSION Given the economics of the bus industry it can be hard for some bus operators to meet the goal of appropriate service to all passengers, including those with disabilities. However, this is national transport policy and, if it is not now being attained buses, measures need to be taken to ensure that it is attained in the future.
|
The
background to the safety issue was discussed earlier in this report, in section
2.5. The Committee did not detect
widespread concern about the safety of buses in its hearings.
Witnesses
pointed out that bus accidents are rare. Occasionally
there is a tragic accident in which 10 to 20 people may be killed.
In most years, however, the number of bus passengers killed is in single
digits. Bringing buses under the National Safety Code, a process that
will be significantly advanced when the 2001 of amendments to the Motor
Vehicle Transport Act, 1987, implemented by Bill S-3 from the First Session
of the Thirty-Seventh Parliament, come into force, can only help this
situation.
The
Committee is not as confident when it comes to smaller buses and mini-vans used
as buses. These smaller vehicles
are inherently less safe, but most of the accidents involving fatalities with
these vehicles result from poor maintenance and/or inexperienced or unqualified
drivers. This is the aspect that
requires attention, and the Committee noted the interest among provinces in
upgrading standards for these vehicles.
|
CONCLUSION Safety standards are generally good in the bus
industry, and the safety-related changes in recent amendments to the Motor
Vehicle Transport Act, 1987 and the application of the National Safety
Code will all help. With
small buses and vans coming into wider use, provincial governments need to
re-examine their safety procedures as they relate to these vehicles and,
as stated elsewhere, the National Safety Code should be re-examined and
revised to incorporate a definition of a small van or other vehicle likely
to be used as a bus.
|
4.9
Concentration of Ownership
Although
there is a significant degree of concentration of ownership in the hands of one
company, Laidlaw, this was not raised with the Committee by any of the witnesses
as a major issue. The witnesses
from the Competition Bureau referred to it, and stated that the Bureau is
willing and able to deal with the matter if and when it sees concentration
become a major problem.
|
CONCLUSION Ownership of the industry is concentrated, with
companies representing almost 45% of scheduled bus ridership ultimately
under the control of Laidlaw. This
did not seem to concern those who appeared before the Committee.
The Committee’s view is that the Competition Bureau is the
appropriate authority to examine this matter as and when it sees fit. |
A
bus under charter is simply one booked by some group as a whole, in the way
travel agents book entire aircraft to fly to holiday destinations. Charter services may consist, for example, of taking people
on vacation, taking a local group to a hockey game, or taking people to work at
some industrial site. The Committee
heard of examples of these services in its hearings.
The
charter business is growing and appears to be quite healthy in Canada.
It too is regulated in some provinces in a similar way to scheduled bus
services.
There
has been some suggestion that, if deregulation were phased in, charter services
could be deregulated first. It was
pointed out to the Committee that, in the case of a long-distance regulated
scheduled carrier, it is possible that an unregulated charter operation with
tickets bought through a travel agent could compete over the same route, laving
the regulated carrier unable to respond to lower fares offered by the charter
bus.
|
CONCLUSION With respect to intercity charter bus service, the
Committee believes that it should be treated for deregulatory purposes in
the same way as scheduled buses. Existing
cross-subsidy patterns sometimes involve charter services and there are
ways in which deregulated charters can compete with regulated services.
There would seem to be little point in deregulating charters, other
than in parallel with scheduled services. |
4.11
Is Consensus Possible on Deregulation?
Speaking
to the Committee in June 2001, the Minister of Transport indicated that the
government had always made clear that it had no intention of changing the rules
at the federal level unless there was a consensus among the provinces and the
industry as to what the changes should be.
It may be that, if change is to occur, the federal government will have
to lead the way, as it did for trucking and other modes of transport after 1987.
More than one witness made that point to the Committee.
|
CONCLUSION Agreement among all the parties involved in the bus
industry on what, if anything, to do about deregulation is clearly
unlikely at the present time. Views
are too strongly held and too diverse.
If the federal government wants to take action, it will have to
lead the way, not follow. |
4.12
Environmental Issues[40]
In theory, the more people travel by bus, the more energy is saved,
assuming of course that these are people who would otherwise have travelled by
some other means, in particular by the highest per-
|
|
|
|
Both the Royal Commission on National Passenger
Transportation of 1992 and the 2001 report of the Canada Transportation Act
Review Panel raised the question of road user charges. The two studies suggested that it was perhaps time to
introduce a system of road-user charges to reflect the actual usage of resources
by the particular vehicle concerned. Transport
Canada has not yet responded to the recommendations of the Canada Transportation
Act Review Panel. Since this is a
subject beyond the Committee’s mandate in this study, this report does not
comment on what could be a fundamental change in the way infrastructure is
provided. However, the Committee
recognizes that these issues are complex and require study.[41]
|
CONCLUSION The intercity bus is the most energy efficient mover
of people, yet it receives little or no credit for this in terms of
taxation or other measures such as priority traffic rights or exclusive
rights of way. Its main
competitor is the much less efficient private automobile, whose fuel costs
and right-of-way privileges are comparable. The Committee sees an urgent
need for further study of methods to encourage the use of intercity buses
and to improve even further their environmentally related efficiency. |
[1]
This letter, dated May 16, 2001, is appended to this report as
Appendix A.
[2]
Transport Canada, The Canadian Intercity Bus Industry:
Orientation Document, March 2001.
[3]
See, for example, Transport Canada, Transportation in Canada 2001:
Annual Report.
[4]
For a discussion of ideas relating to economic regulation and
economic deregulation in the transportation field, refer to the box on the
following page.
[5]
See the February 22, 1954 decision of the Judicial Committee of the
Privy Council in A.-G. Ont. v. Winner [1954] A.C., on an
appeal from the Supreme Court of Canada (see Winner v. S.M.T.
(Eastern) [1951] S.C.R., decision rendered on October 22, 1951).
This case is discussed in the Royal Commission on National Passenger
Transportation’s final report (see Directions:
The Final Report of the Royal Commission on National Passenger
Transportation, 1992, Volume 4, Chapter 16, pp. 1211-1298, “An
Analysis of the Canadian Scheduled Intercity Bus Industry,” Appendix A).
[6]
See table in Appendix D entitled “Representative Canadian Scheduled
Carriers/Markets Served, 2000.”
[7]
See table in Appendix D entitled “Major Industry Restructuring
After 1988.”
[8]
This report can be accessed at www.laidlaw.com.
[9]
Transport Canada, Transportation in Canada, 2000:
Annual Report, p. 181.
[10]
Canadian Intercity Bus Task Force, Report to the Council of
Ministers Responsible for Transportation and Highway Safety, October
1996.
[11]
The Canadian Council of Motor Transport Administrators is a
federal-provincial association of officials responsible for highways and
motor transport.
[12]
Bill S-3, An Act to amend the Motor Vehicle Transport Act, 1987
and to make consequential amendments to other Acts, received Royal
Assent on June 14, 2001 (Statutes of Canada 2001, chapter 13), but has not
yet been proclaimed. In
addition to its provisions relating to the Code, it may be noted that
section 1 provides for the renaming of the Motor Vehicle Transport Act,
1987 as simply the Motor Vehicle Transport Act.
[13]
This study is entitled Impact of the
Deregulation of Scheduled Inter-City Bus Service
and was commissioned by the Canadian Bus Association.
[14]
Bus-kilometre is a measure of vehicle use and is of interest to bus
operators for operational reasons. This
contrasts with passenger-kilometres, which is a measure of ridership.
[15]
See the Royal Commission on National Passenger Transportation, Directions:
The Final Report of the Royal Commission on National Passenger
Transportation, 1992, Volume 4, Chapter 16, pp.1211-1298, “An
Analysis of the Canadian Scheduled Intercity Bus Industry;” and the
Canadian Intercity Bus Task Force, Report to the Council of Ministers
Responsible for Transportation and Highway Safety, October 1996.
[16]
See W.D. Haire, Background Report on the Substantial Relaxation of
the Bus Economic Regulatory Framework, December 1994.
[17]
According to Transport Canada’s 1996 Annual Report, the equivalent
figure had been 72 million in 1950. See
Transportation in Canada, 1996: Annual
Report, pp. 97-99.
[18]
See, for example, Committee Evidence, February 11, 2002 (Douglas
Norris).
[19]
Refer to KPMG’s December 1998 study entitled Impact of the
Deregulation of Scheduled Inter-City Bus Service, at p. 29 and p. 31.
[20]
Committee Evidence, February 21, 2002 (Olive Bryanton).
[21]
As noted earlier in this report, Bill S-3 was passed during First
Session of the Thirty-Seventh Parliament, but the changes to the Motor
Vehicle Transport Act, 1987 that it contains have not yet been
proclaimed.
[22]
Committee Evidence, February 20, 2002 (Sylvain Langis, Brian Crow,
Romain Girard and Roger Gervais).
[23]
Committee Evidence, February 12, 2002 (Michael Colborne).
[24]
See, for example, Committee Evidence, February 20, 2002 (Hugo Gilbert
and Normand Parisien) and 26 March (Roger Pike).
[25]
See, for example, Committee Evidence, February 20, 2002 (Martine
Rioux) and March 25, 2002 (Hans Cunningham).
[26]
Committee Evidence, February 20, 2002 (Sylvain Langis).
[27]
Committee Evidence, March 25, 2002 (Bill Waters) and March 26, 2002
(Barry E. Prentice).
[28]
Transport Canada’s March 2001 orientation document, p. 14.
[29]
Committee Evidence, March 26, 2002 (Peter Dawes).
[30]
Committee Evidence, March 28, 2002 (James Devlin).
[31]
Committee Evidence, March 26, 2002 (Barry E. Prentice).
[32]
Committee Evidence, April 17, 2002 (Donna Mitchell).
The Rural Secretariat (a federal agency that works to ensure national
policies are positive for rural communities) makes a useful distinction
among three types of rural communities:
“metro-adjacent,” “heartland communities” and “remote
communities.” The three have different types of transportation, and public
transportation, needs.
[33]
Committee Evidence, February 21, 2002 (Don Stonehouse).
[34]
See, for example, Committee Evidence, March 25, 2002 (Bill Waters)
and March 26, 2002 (Barry E. Prentice)
[35]
Transport Canada, Transportation in Canada, 2001:
Annual Report, p. 10.
[36]
Committee Evidence, February 20, 2002 (Romain Girard).
[37]
See Transport Canada’s ’s March 2001 orientation document at pp.
17-18.
[38]
See, for example, Committee Evidence, February 20, 2002 (André
Leclerc and Johanne St-Martin) and March 28, 2002 (Stephen Little).
[39]
Committee Evidence, March 26, 2002 (Peter Dawes), February 12, 2002
(Michael Colborne) and March 25, 2002 (Sheldon Eggen).
[40]
For a general discussion on the environmental friendliness of
intercity buses, refer to the box on the following page.
[41]
For a general discussion of these issues, refer to Appendix E.
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