Proceedings of the Standing Senate Committee on
Transport and Communications

Issue 26 - Evidence (morning session)


TORONTO, Thursday, March 28, 2002

The Standing Senate Committee on Transport and Communications met this day at 9:30 a.m. to examine issues facing the intercity busing industry.

Senator Lise Bacon (Chairman) in the Chair.

[English]

The Chairman: I want to welcome the members of the committee and our witnesses and observers to the public hearings here in Toronto of the Standing Senate Committee on Transport and Communications. The subject of our hearings is the committee's special study of intercity buses; thus, we are pleased to be in Toronto, in the province of Ontario.

Toronto is the hub for passenger and air travel in Canada. Because of the population density of Ontario, other public modes, such as bus, are important too. I am sure that the province as a whole may have issues of concern such as we have heard elsewhere: declining populations in small communities; an overall ageing population; and the need for public transportation to give older citizens access to health care and to give youth access to employment opportunities.

The federal Minister of Transport has asked the committee to undertake this study. We have already heard from the public and others in Ottawa, Montreal, Halifax, Vancouver and Calgary.

[Translation]

We will be submitting the findings of our study to the Senate by the end of 2002. We have already begun our research and we have drawn upon the work of many committees, studies carried out by the federal government and many provinces on the matter, as well as reports produced by other countries. However, it is essential that as part of our study, we hear the opinion of the public and that is why we are here today.

[English]

Occasionally in transportation studies, it is possible for those inquiring to get caught up in the operational problems or even in the details of the equipment of a carrier, or to get caught up in the merits of different regulatory regimes, before fully understanding what the users of the service actually want. The primary responsibility of our inquiry, in our view, is to understand the wants and needs of the user of intercity bus service, what the economist would call the demand side. After all, that is why the carriers are there, to serve the users. We believe that if that demand side is understood, designing responsive service and appropriate regulation may become more straightforward. Concerns over equipment, business, competition, administrative priorities and similar matters should always be put to the test of: What do the users want?

Before we hear from our first witness, I will say a few words to review why we have been asked to study intercity buses.

The essence of the problem is that intercity bus ridership has been steadily declining for several decades. This decline is troubling because the mode is an important part of the passenger transportation system. The bus mode can go virtually everywhere, it is environmentally friendly, and traditionally it has been inexpensive.

There are several possible explanations for the decline. It could be that people are better off than before and are travelling more by automobile. It could be that more people are living in big cities. It could be that there is too much government regulation, or that regulation varies too much from one province to another. This is what we hope to find out in the days and months to come.

Our first witness this morning is Richard Soberman. Please proceed.

Mr. Richard Soberman, Professor Emeritus of Civil Engineering, University of Toronto: Thank you for the opportunity of appearing before this committee.

I should begin with a caveat. Some years ago, I did some work in the bus industry particularly related to bus-rail competition in the Quebec-Windsor corridor and to the implications of the Canada-U.S. Free Trade Agreement for the transportation industry as a whole. However, for the last 10 or 12 years I have been involved almost solely in the area of urban transportation and, in particular, urban public transit. Some of my views, therefore, may be a little dated, as I may not be up to date with the latest events.

I should like to make four points. The so-called ``Quebec-Windsor corridor'' was a phrase coined back in 1961 in a study I directed done by the Canadian Transport Commission. The notion of the Quebec-Windsor corridor was generated in that study. The conclusion we reached then, which I think is still the case but perhaps to a lesser extent, is that one of the biggest problems faced by the bus industry is that it must match fares offered by highly subsidized VIA Rail service.

What that means is that bus fares have to be competitive with the subsidized competitor. That has constrained the emergence of a wider variety of services tailored to special niche markets. These might involve different sizes of vehicle, different amenities, better seating, plug-ins for computers. No one had laptops in 1969; today, almost everyone has a laptop computer.

These services, however, would require higher pricing. They are not suitable in an environment where somebody can get a lower fare by going by train, which has the appearance, at least, of being a higher quality service but which is fairly highly subsidized. I expect that today it is not as subsidized as it was 10 or 15 years ago. Still, the cost-recovery ratio or the operating ratio for rail passenger service is less than $1. No bus company can stay in business unless the operating ratio is greater than $1 and produces some return on investment and some return to capital.

My second point relates to the whole manner of regulation and deregulation. While I am stretching it a bit, fundamentally, in Canada the bus industry is the only element of the transportation industry that is still regulated. This includes urban public transit, which is not so much regulated as it holds a monopoly. As a result, opportunities might be missed where intercity buses can even provide services within cities, services such as special airport express, among others, that in some cases can be highly successful.

Throughout the rest of the western world, governments have deregulated all forms of transportation. They have gotten rid of the concept of public convenience and necessity; they have substituted the concept of fit, willing, and able. Anyone who is fit, willing, financially responsible and in conformance with safety requirements should be allowed to enter and provide a wider variety of service that fills the special needs of special niche markets.

The concern the concept fit, willing and able raises is that in rural and small communities the kind of service provided under a deregulated environment may be poorer from their standpoint than what they previously had. My view, however, shared by many who have studied this concept, is that if we deregulate and services disappear, new entrants to the market will offer different types of service and different types of vehicles.

For example, the bus industry and the urban transit industry are the only ones that try to be all things to all people. No other transportation industry does this. Air Canada does not fly from Thunder Bay to Sault Ste. Marie. If they did, they would have to pay the pilot on a Twin Otter at least as much as they pay a co-pilot on a jumbo jet. Therefore, they subcontract that service out to a different type of carrier, like Air Ontario or Air Nova. The nature of the collective agreements that they have and the nature of the equipment they use suggest that all markets cannot be served by a single type of supplier.

Many operators are already licensed and favour continued regulation because they are in the club. However, the continuation of bus regulation runs contrary to what is actually the modern environment for transportation policy- making in most industrialized nations, including the United States.

My third point relates to the environmental issue. Despite what is going on in the United States and its decision not to conform with the Kyoto Protocol, Canada, the last I heard, is still committed to meeting its commitments under the Kyoto Protocol to reduce greenhouse gas emissions because there is a wide body of opinion that believes that greenhouse gas emissions, the most important of which is carbon dioxide, contribute to global warming and all of the ill effects associated with global warming.

Emissions, particularly carbon dioxide emissions, are directly related to fuel consumption. Therefore, there is a national interest, almost a strategic interest, in ensuring the health of the bus industry because it has by far the highest energy-efficiency of any mode of transportation.

Let me give you an example. I recently did a study in the Toronto area, about a year and a half ago, related to something else. We looked at bus, commuter rail and the private automobile in the Greater Toronto Area. The fuel efficiencies were 60 passenger kilometres per litre of fuel in the bus industry; 44 for the efficient and intensively used GO Transit commuter rail system; and about 12 passenger kilometres per litre in the case of the private automobile. Therefore, I believe the federal government has a strong strategic interest in ensuring that we have a healthy bus industry if for no other reason than it helps us meet our commitments under the Kyoto Protocol. These will be extremely difficult to meet in any case.

The last point I want to make is that one of the problems with the bus industry is that it still is quite fragmented across the country. Many people may not use bus services simply because they do not know that it is available or they do not know how it fits in with the rail system.

We have seen marvellous advances in communications technology and information technology. Those wonderful signs on highways tell you what you already know — that you are travelling in congested conditions. Those signs cost about $1 million each. On the other hand, information technology advances in wireless communication would make it simple to develop information systems that are Web-based. With these systems, people could figure out the best combination of bus and rail, or bus and bus, or bus only, to get from an origin to a destination either on the basis of travel time or on the basis of travel cost.

Let me provide a simple example. One could access one of these systems either from one's own computer or from a kiosk located in transportation terminals, major centres, hotels, or places like the Eaton Centre. An individual would enter an address. It could be as simple as a major intersection, for example, Dundas and Bay; it could be a major landmark, for instance, the casino in Niagara Falls or the casino in Orillia, which is one of the biggest industries in Ontario today. The same could then be done with the destination. Out would come a listing showing the traveller the optimal way of getting to where he or she wanted to go, the options for travel time, connections with other modes, and cost.

In that regard, the federal government has turned over the business of bus regulation to the provinces. Nevertheless, here is an area where the federal government could, at modest cost, develop an information system, accessible on a regional or national scale, as a service to travellers. It could be taken advantage of by any bus operators willing merely to take the trouble to submit their schedules to the information system.

I would now be pleased to answer any questions you might have.

The Chairman: Canada is huge, and transportation systems or modes differ from place to place, as do the needs of users. Which government policy would best support rural and small community service?

Mr. Soberman: That issue has been the hub of the argument for deregulation. It applies as well in the case of air service. When the airline was deregulated, some communities complained that they used to have jet service or 747s and now they receive a different type of plane with less frequency. The fundamental policy basis for changes in the character of our national transportation system is that we have outgrown the infant industry market. We are a developed country. Most Canadians live within 200 miles of the U.S. border.

There are remote communities and rural communities that probably cannot support the kind of service that they have been used to. If you live in North Bay, it is true that you will not have the same air service or bus service available to Torontonians. On the other hand, you pay a lot less for your housing. One can fall into this philosophical argument. I am just a poor boy from Nova Scotia who came to Upper Canada to make his fortune — and I am still working on that. Every once in a while, however, I recognize the many advantages to living in Halifax as compared to Toronto, although there may be some disadvantages. I think there is also an option. If the situation arises where a community is denied service simply because no operator was willing to step in and provide any kind of a bus service, on a case-by- case basis, much precedent exists for the government to take action. Either the provincial or the federal government level may decide that it is in the public interest to have this community served, and they are prepared to provide some money.

That is rather different than telling the industry to work out internally all its cross-subsidies. These involve making money from Toronto to Montreal or Montreal to Ottawa and using that to offset losses on bus service from Rimouski to Quebec City. That mode of economics is no longer appropriate. Canada is not in the developing-country stage. We consider ourselves to be a highly developed, industrialized nation. Therefore, different approaches to serving the market have to be taken.

The Chairman: What are the prospects of serving remote and rural routes with a type of service other than large intercity buses? Are small vans and the like feasible options on these routes?

Mr. Soberman: I think they are feasible. They do not necessarily have to be vans. There is a variety of bus sizes. Actually, an analogy can be taken from the airline industry. Following the deregulation of the airline industry in the United States in particular, to a lesser extent in Canada, what we started seeing was the emergence of hub-and-spoke operations, which offered users of transportation services, such as a bus, service from a low-density area to a point of concentration where the user could hook up with other low-density or mainline services. Such operators can structure the type of equipment they use, which might be a smaller but more comfortable bus with different types of amenities. One of the advantages is that, although service now comes from a different quality vehicle, the service is more frequent because the vehicle is smaller. I saw some statistics yesterday indicating that the average load on the airport express bus from Pearson International Airport to downtown Toronto is 10 people, yet we are using a bus with 40 seats.

The concept and the theory of deregulation do not always work. Deregulation means provision of a variety of services. Deregulation also means the freedom to go bankrupt. In that case, someone else steps in to provide a more suitable service, catering more to the needs that can be supported.

The Chairman: Is economic regulation of the industry still appropriate? Should some or all of the industry be deregulated now and at some point in the foreseeable future?

Mr. Soberman: I favour deregulation on a general basis, subject to some special considerations for particular communities. One of the problems with regulation at the federal level is that the federal government transferred this responsibility to the provincial government. During the time when I was working in the Canadian Transport Commission, there was a big discussion about whether we should upload the responsibility for trucking and bus regulation to the federal government. The answer from a range of economists from slightly to the left of Karl Marx to slightly to the right of Margaret Thatcher was this: Do not get into the business of regulating this industry. They all had different reasons, but they came to the same conclusion.

I should like to raise another, not so nice reason. We have changed our style of government throughout the world, and our style of management, where everybody is a hostage to the management consulting philosophy. It goes back to the Glasgow commission of the mid-sixties. The conclusion reached was that a manager is a manager is a manager. As long as you are smart, have presence, and are good in meetings, you do not have to know anything because you can always reach down and find the people who know something. The problem is that the people who know something are told that they are too narrow and they are never going to advance in the system.

One of the biggest disadvantages of trying to regulate the transportation industry further is that governments today do not have the professional capacity and capability to do this effectively. Governments and private sectors, as well as universities, now are governed by people who believe that process and methods and structure is the answer to everything. However, methods have never solved the problem. Knowledge and decisiveness on a substitute basis have solved the problem. So, even if theoretically one could argue for continued regulation in some sectors, practically speaking we have passed the point where regulation can be effective, because that is not the nature of the animal that now sits in the upper levels of the bureaucracies.

Senator Gustafson: I must say I enjoyed your presentation and your frankness.

You remind me of something Doug Fisher said a few years ago, when Margaret Thatcher and Ronald Regan started the whole change that we are going through that even liberals accept today. He said: ``Where are all the university professors who taught our kids the opposite?'' It seems that we run with it in one direction; if it ain't broke, don't fit it.

I come from a rural area. We have heard people from the coaches, and they seem to think that things are going pretty well. Regarding the Air Canada situation, I think that Air Canada has the government over a barrel. The government has no choice. It does not matter how big the debt is or where Canada is heading; our government has to keep Air Canada alive, or we will have a country without air service.

Is there a balance somewhere? The deregulation of the railroads, for instance, worked wonderfully for Alberta. It almost put people off their farms in Saskatchewan and eastern Manitoba, because farmers there now had to pay to $2 per bushel to move grain out of the Regina/eastern Saskatchewan area. Deregulation has, however, been a big benefit to Alberta, and until Saskatchewan and eastern Manitoba develop a feeding industry not much can be done about it.

Mr. Soberman: That is right.

Senator Gustafson: It is almost impossible to put those railroads back into place. Then, of course, there is a road problem too.

This is my question: Are we heading into a situation that is not ``broken'' and yet we are trying to fix it? One of our witnesses yesterday made a statement I thought was good: that many rural areas have had no service for years and that it is not going to change much. For some areas on a mainline, certainly the bus is going to stop and pick up the people. On the secondary lines, however, there has been no service. I wonder, then, if we should take some time to think this through pretty thoroughly.

Mr. Soberman: I should like to make several comments.

Do not start me on the topic of airline deregulation. Many years ago, the CBC interviewed me when Canadian Airlines was in trouble the first time. The issue was whether we should allow American Airlines to take an equity position in a national airline. I have to tell you, as a footnote, that while working for the federal government, I worked for a man you will probably remember, Mr. Pickersgill. Most of the people I worked with had never heard of him. Mr. Pickersgill was of the view that this country cannot afford two airlines because of the nature of our demography and geography.

In the urban areas, everybody is now involved in so-called ``PPP'' — private/public partnership. To me, PPP means ``the public pays the private,'' because in these partnerships the public takes all the risk and the private takes none of it. The problem with Air Canada is that the president of Air Canada and the presidents of other airlines do not know the difference between revenue and profit because they probably went to the Harvard Business School. Their problems are basically bad management and mismanagement. In their attempt to go after market share, they run five times a day from Toronto to Nashville. Who goes from Toronto to Nashville? I happened to once, and I was amazed at the variety of choices I had.

I agree to a point with the adage ``if it ain't broke, don't fix it.'' The problem is, who is saying it ain't broke? They tend to be the ones already there who are defensive about staying there. I can understand that. The background material that I received and, actually, the chair's opening comments said that this is an industry that is in decline. If the industry is in decline, then I would argue that we can get a lot more out of the bus industry for a whole bunch of things, if for nothing else than energy efficiency.

Thinking in the large cities and in most of Canada has been dominated with the idea that somehow we need rail transportation because it is better. That is true, but it is also more expensive. There is, thus, a trade-off to be made here. Do we want very high-quality services in a limited market, or do we want more diversified services in a broader market? To give an example from an urban setting, Toronto, I can show you a picture of a streetcar on Spadina that costs $3 million, for which six buses could be purchased. The six buses would provide more capacity, a better level of service and higher frequency.

Returning to the bus industry, I believe that in a deregulated market the strong and the well-managed would survive. Some communities would definitely see a difference in the kind of service they receive in terms of the vehicles and their frequency. Some communities might actually see a loss of service. Then there are communities that might see a big improvement in the choices available to them. In one of the best examples I have seen, the best public transit system that we have is in Ottawa. It is OC Transpo's transitway. I know none of you ever do this; I never did before either. The last time I went to Ottawa, I got off the plane and got on the OC Transpo number 95 bus. For $2.25, I got to the Westin Hotel faster than I would have by a cab.

So the bus industry is flexible. It offers many options around origins and destinations. I think there are some untapped markets there.

Senator Gustafson: The global economy is changing. I believe Canada is not changing apace. I am speaking now mainly from an agricultural perspective because I think we are in big trouble. Our dollar is dropping and we are not dealing with these matters. Maybe we will have to let some American competition in here.

Mr. Soberman: Maybe we will have to. A little bit of healthy competition from American airlines flying from New York to Toronto to Vancouver might shake out the problem of Air Canada. That is what competition is all about.

With all due respect to Air Canada, not many of the U.S. airlines are doing any better. I always argue at City Hall that you guys are nuts. You keep talking about the private sector. Do you really think that Robert Milton or John Roth could do a better job of running the TTC or GO Transit than the guys who now do it? The difference is that when those guys mess up somebody hands them $6 million, $10 million, $20 million and tells them to go away and have a good life. In the public sector, when somebody messes up, you promote the individual.

We do keep talking about the globalized market and whether we are behind. This business of change, however, is cyclical. Canada in 1961 was held up by the world as the example of modern transportation policy. It was as a result of the MacPherson Royal Commission on Transportation. It produced the National Transportation Act of 1967. One benefit of that act was to give me a job in the federal government because it created the Canadian Transport Commission.

Even then, the government's position was for getting rid of global subsidies. Rather, it should subsidize to meet strategic objectives. If Canada decides branch lines should be subsidized because the agricultural sector is important to the national economy, so be it. However, does it have to subsidize rail service between Toronto and Montreal when there are highways and buses and cars and airlines? One size does not fit all.

While Canada set the precedent in 1967, 10 years later we were already behind again. The Americans, who I think have an ability to change more quickly than any country in the world, turned around their whole view of freedom of the skies, bus deregulation and railway deregulation.

Senator Gustafson: My next question is directly related to transport. In Canada, we were going to be perfect; we gave that up when it came to world trade. We gave up the railroads. The Americans said they did, and so did the Europeans. What they did however was put an additional $171 billion into agriculture. This decision directly affected Canada vis-à-vis transportation because we threw everything on the board. We are still suffering from that decision.

The Americans and the Europeans do not intend to give up their subsidies. You talk about deregulation, but these areas have not been deregulated. America and Europe have merely shifted the game around a little. They have poured in much more money than Canada has. We have not kept up with the global changes, and we will pay a big price for that.

Mr. Soberman: We are getting out of my area, but I will say this. It is no secret that every municipality and every province in the country is screaming that the government should take some of the gasoline tax and put it into urban transit, to reduce congestion.

To my way of thinking, such a step is a zero sum game. If some federal money is used for public transit, another service will lose out, as, for instance, transfers to be used for education and health. Personally, given a choice between waiting in traffic and waiting in a hospital, I would rather not wait in the hospital. In fact, once I waited almost too long.

The problem appears to be that deregulation of the American railways ended up with a big shakeout. However, you and I can still remember the days when we would go down to CP Express to send a package. We remember the days when people used to go to England by ship. Technology has changed. The only thing one can take to CP today is a carload, if not a trainload. The whole nature of the transportation market has changed. We have to evolve accordingly.

Obviously, we must be careful how we do that, because we live in a country with a different social conscience than the United States. We are concerned about small communities and rural communities. We are concerned about communities in the North. We are concerned about health care. The difference in health care systems is that 35 million Americans have no health care. There are no Canadians with no health care, just some who may not have access to it in a timely enough manner. Canada and the United States do have different philosophies about what are social goods that justify government investment.

However, on the issue of deregulation, I believe the bus industry definitely will be downsized. One solution just does not suit all.

The industry is, as Madam Chair said at the beginning, there to serve Canadians' needs. Downsizing could lead to the emergence of a more diversified bus industry that offers greater amenities and quality of service to those who are prepared to pay for it, as long as they do not have to compete with what is essentially unfair competition from subsidized competitors.

Senator Callbeck: In your presentation this morning, you touched on four important points. I want to come back to the second one, which the chair has already talked about, that is, regulation versus deregulation. I come from a rural area, so I am concerned about the service to that area. What is the best way to ensure that we can have service in the rural areas at affordable prices?

You talk about economic deregulation. If the government decided to deregulate, are there steps it should take prior deregulating this industry, or should it just go ahead and do it and see what happens?

Mr. Soberman: I am in favour of decisiveness on an informed basis rather than on an uninformed basis. Before one takes a bold step, one has to examine the implications. One may do some case studies, or take certain regions and explore what would happen there. And what one would find, without question, is that some communities would see an improvement in the type of service they received. Those will tend to be the bigger centres. Some communities will see a reduction, if not the elimination, of the kind of service they get.

My argument is that, one way or another, if we provide service that is uneconomic, we can do it through a cross- subsidy. This means that what one makes on the apples one loses on the oranges, and one hopes to have more apples than oranges. Alternatively, we can allow market conditions to prevail. In communities where no one emerges to provide a service that meets some minimum standard, then some form of government assistance or some form of government incentive might be appropriate. Direct monetary transfers may not always be necessary. It may be changes in tax regulations that would allow somebody to start a service in a certain kind of community — give them an accelerated write-off for the capital that they have to spend on the vehicle, or things like that.

I think your point is excellent. Do we just say, ``Okay, it is deregulated; let's see what happens?'' No. We should do some useful analysis of what may happen to look at whether this is something that ought to be staged or whether it ought to be timed at one fell swoop with certain conditions attached as to government support. Governments at all levels spend enough money on studies that nobody looks at anyway. I have written half of them, probably. The fact is that deregulation has to be looked at more carefully.

I fall back to my original position. I am talking to you on the basis of 12-year old history. Maybe I am not up enough with what is happening in the bus industry, but I read the premise, which is that the industry is in decline. I think decline for the industry is bad. We want it to go up for a whole bunch of reasons, not the least of which is environmental. Let us see what it would take to improve the general level of service. Then we can deal with the fallout.

We see this approach in every area, for instance, rationalization of hospital services. All the hospitals in Toronto are right here across the street, but that is not where all the people live. So the government does some rationalization and creates new cardiac centres and cancer centres, on a regional basis. Then the people who are down here and who have had total access to everything suddenly find that they do not have as much as they used to have; but the people living in the growing suburbs and outer reaches of the city of Toronto are getting better service than they previously had.

We like to think that those decisions are made on the basis of some analysis, or review, or at least an attempt to anticipate what the results will be.

Senator Callbeck: You said that you agree with deregulation, except for some stipulations that we may want to make for smaller communities. Are you talking about subsidies or changes in taxes?

Mr. Soberman: It is subsidized. It is only a question of who it is being subsidized by. Is the service to the small community carried on the backs of the high-revenue services paid by users of those services? At the end of the day, somebody is putting some money into it. The problem with cross-subsidies is that they are not strategically enough targeted. It becomes hard to focus on exactly what is happening. Cost accounting is not so easy either.

Senator Callbeck: We have had, of course, witnesses who are for deregulation and others that are for regulation. Do you think the concentration of ownership of the industry has anything to do with this? If there were less concentration, would there be less opposition to deregulation?

Mr. Soberman: I am out of my depth here, but the business of concentration to me actually means, under a deregulated environment, that if a business wants to take over another business and then start gouging the public — that is the concern — under a deregulated environment, there is somebody who will step in and offer the service at lower cost.

Hence, I am not convinced that concentration by itself is bad. We have the Competition Bureau. What you have to be careful of is destructive pricing, where the big guys just say: ``Just you try to get into my market. I will kill you.'' That is what competition acts and government regulators are there to oversee. If an operator is providing service at less than marginal costs in order to drive somebody else against the business, that is against the law. Then, maybe, we should be dealing in another arena with how we ensure that potential entrants are not faced with unfair competition.

Talking about the railways in the old days, it was cheaper to send something from Toronto to Vancouver than it was from Toronto to Saskatoon. This did not make any sense, but Toronto to Saskatoon had no other option. That was basically a monopoly malpractice.

Senator Gustafson: If the federal government were to deregulate, as Senator Callbeck indicated, and the provinces still put down laws that are going to govern, what will happen?

Mr. Soberman: I am in favour, every once in a while, of federal and provincial governments talking to each other in a sensible manner.

Senator Gustafson: If B.C. and Ontario decides that they are going to protect their respective coach carriers and never mind about Saskatchewan or Manitoba, nothing is going change.

Mr. Soberman: You are right. My knowledge may be too stale, but my understanding, at least as far as interprovincial transportation was concerned, was that the federal government has the power and the authority, which it loaned to the provincial governments. It can step in there. I am not sufficiently familiar with the current regulation within the Province of British Columbia to say that if it decided to regulate intraprovincial busing that might not create a huge problem.

People from the Niagara region might decide that what they really would like to do is take a bus trip to Nova Scotia, go through New Brunswick cross the Canso Causeway. If they cannot get an integrated service because New Brunswick decides it is going to behave differently than Nova Scotia, then that goes back to the senator's question about whether to just jump into this.

There has to be some modicum of agreement at the federal and provincial levels that this will not happen. The municipalities are also involved here, because large municipalities, certainly Toronto, have a total monopoly. Hence, while we say that it would be great if people did not use cars and used transit, an area without transit service but with someone willing to step in and run a jitney service to the subway station would be dead if they tried to do that. Under Toronto law, nobody can do that except the TTC. While the TTC is a wonderful organization, they cannot do everything for everybody.

Senator Forrestall: Mr. Soberman, you have not slowed down too much. I recall your contributions to Canadian transportation 10 or 15 years ago.

I have questions regarding a couple of narrow areas. One has to do with the speed at which we make decisions, the length of time it takes to change our minds. There is no question that you are right that our decisions must be informed. The Competition Bureau itself and the various commissions — in the old days the CTC, and more currently the CRTC — would take two or three years to arrive at a decision. Can you expand on whether that process constituted well-informed opinion or was just a nuisance?

I am talking about the importance of movement. The rapid change concept is wishful thinking. It is just not going to happen, and this committee is not going to change it. We will try to advise the minister of what we have heard and our sense about informed people and older people in our municipalities and communities, what they feel about transport and the problems as they see them.

Is it now time for us to change the control mechanisms, not only in the area of transport but in these other regulated areas?

Mr. Soberman: I do not know what the right time is; however, regarding the flexibility to make changes, in 1989, I did a study for the Region of York, which is the fastest growing region in the GTA. I recommended that they establish a regional transit authority to replace seven different operators. They recently did it, 13 years later, not because I recommended it but because they were afraid of what the province might do to them if they did not.

Some of these changes seem to take a long time to do. There is a lot of talk today about road pricing, that allegedly automobile users are being subsidized. We see a lot of hocus-pocus in macroeconomic models that people are running. Transport Canada has just finished a series of studies on urban transit where they have proved that investment in urban transit stimulates the economy. I am sure you all know the story. I could hire somebody to throw a brick through the window of a retail store, and that would stimulate the economy, because everything has multiplier effects. We start using these methods as crutches.

However, except in some areas like health care, which is changing depending on the province, and in education, increasingly in the western world, at least, the view is held that people should pay for what they get and that if they cannot then they should be helped. If you are in Kingston and you want to take the train to Toronto, as opposed to the bus, often you will do it because there is this perception that buses are at the lower end of the spectrum of transportation. They are not the same quality. You cannot move around. They lurch around. They are not as nice as trains.

So we would like to have a really good train service. The problem we have in transportation generally in this country is that there is an expectation about the level of service and the quality of service we have everywhere. Once upon a time this expectation may have been affordable. Today, it is not affordable because society has other pressing needs, not the least of which in an ageing society is health, and not the least of which is education.

I do not say that because I come from a university. The real university I went to is Dalhousie; the one I made my money at was University of Toronto. Some people, however, argue that the best way to invigorate the economy is to educate young people to think differently, to step out of the box.

Regarding the rapidity with which we get change, my guess is that every time we enact something or we have a major inquiry it is seven to ten years before we change anything. Now, seven to ten years did not look like a long time to me when I was 35, but it is starting to look like a long time to me now.

Senator Forrestall: You lead me into my other area, which has to do with informed opinion, education and educated society.

Data collection is nearly non-existent. We asked a colleague of yours yesterday for some indication of where the repository of transportation information in Alberta was. He gave a number of us a disk, and he told us the information was on there. He said: ``It is in the back of my mind, and it is at the university, but you could never bring it all together even if you tried. It took me years to produce that disk.''

Can you tell us something about data collection, storage, analysis and dissemination? Who should be proactive in this field? Should it be governments, or is there a marriage between government and the private sector, represented by universities? Universities are one of the great economic generators beyond the educative process.

Mr. Soberman: In the transportation field, 95 per cent of decisions are made on the basis of subjective opinions that do not stand the test of real facts and real data.

Canada has some serious data problems, as does every other country. Some of these derive from the fact that some of the data sought are deemed proprietary by the operators, who do not want the competition to know what they are doing. Some of these are due to the fact that people in government at all levels have the characteristic reaction, when they collect data, that the data affects the security of the nation. They are not going to let anybody have it. We have a population forecast for the City of Toronto. I get my knuckles rapped because I let other people use it to do certain kinds of analysis. I am told: ``Look, those data have not been released yet.'' Those data are just projections.

Hence, we make many decisions on the basis of data that just simply do not exist, or on the use of forecasting and modelling techniques that actually are not robust. I will tell you a little story.

In Toronto, everybody's got a transportation plan for the city, except the City Planning Department for whom I work. They have all produced these forecasts of what different new facilities would carry, and my guys have also. I am not prepared to write the report yet, though, because I do not believe those numbers. I find some inconsistencies in the kinds of results we are getting.

The fact that other people have used these data to promote their cases is fine, but I am not signing their reports. We have a funny situation in the transportation profession. When you go to a doctor, you expect him or her to tell you what he thinks. You may not like what you hear, but you expect the truth. I am an engineer, and sort of a half-baked economist. In the transportation field, whether it is economists or consulting engineers, one finds in general that what they tell one is what they think one wants to hear.

I am 65 years old. I have been in this business for 40 years, more or less. I have never seen a transportation study on any subject that did not come to the following conclusion: ``This is a wonderful thing to do.'' I have never seen a report that said: ``This is crazy. This is not worth doing. This is not cost-effective.'' I get in trouble with my own profession. I gave a speech on this at the University of London about two years ago. They wanted to publish it. I said: ``Listen, I will talk about it but do not publish it. I have to go home and live.'' The speech ran the gamut from magnetically levitated trains that were going to carry people at 500 miles an hour between Queen and Bloor Streets. Yes, it is off-the-shelf technology and it will work and make money. Studies are ongoing now related to rail links to Pearson Airport and things like that. These studies always end up saying that whatever it is they studied is a good idea. I am waiting for the first one that says it is a bad idea.

I take a note from the World Bank and some U.S. government agencies that says: Anyone who does a feasibility study or an environmental impact assessment is precluded from being involved in the implementation of the project or the design. We used to have an expression in the consulting engineering business a long time ago. It goes like this: ``Give us the design, and we will do the planning for free.''

That is a long-winded answer to say that we do not have good data and that every time a study is done the first thing we do is run around and try to collect data. Some of it exists and we cannot get it. Yes, I believe that that is a role of government. In just the same sense, we have Statistics Canada, which provides data that is used for a lot of different reasons. There is a government role in ensuring that we have reasonable quality transportation data upon which to base policy decisions, rather than just some uninformed opinion.

However, they always talk about: ``You know, when I was a boy, I remember that we had this.'' And therefore, for the rest of one's life, one believes that ``this'' is the solution to the particular problem.

Senator Forrestall: It does not matter where the repository of this information is. The important thing is that it is accessible.

Mr. Soberman: I believe that it has to be accessible. At the University of Toronto, we have established a model. We have something there called the Joint Program in Transportation. It used to be funded by the federal government. The federal government decided that it was going to cancel the university research program for the whole country, which am amounted to $1.8 million a year for six different centres. We sat around saying: ``What are we going to do? The sky is falling in.'' Finally, we got together. Originally three, and now 28 different agencies in the Toronto area, subscribe to something called the Data Management Group, which collects data every five years. It runs the surveys. It is the repository of those data. Any of the partners may have access to it. If a partner hires a consultant, the partner just telephones to announce that they have hired someone to do a study. They have access to the data.

On the subject of secrecy associated with data. I recognize some commercial concerns about confidentiality and competitiveness, but I believe that data that is collected by government with taxpayers' money should be accessible in a easy manner.

Senator Forrestall: Where should the physical repository be? Should it be in the universities?

Mr. Soberman: It does not have to be in the universities. It cannot really be in a private company. It can be in a government agency, provided the government agency recognizes that it needs professionals to do it.

Senator Forrestall: Taxpayers' money going into universities is what renders universities viable.

Mr. Soberman: We do not have to worry about it in Ontario. We just rent a tent.

Senator Forrestall: I am sorry that Senator Eyton is not here today. Your distinguished mayor has some great committee of experts that is going to solve the transport problems here in Metropolitan Toronto.

Mr. Soberman: Who is going to do that?

Senator Forrestall: Senator Eyton and his committee will solve the transport problems.

Mr. Soberman: The private sector has now decided that Canadian cities should become world-class cities and Toronto should be a world-class city. I agree with that. I think one of the significant characteristics of a world-class city is that it has world-class administration.

Senator Forrestall: The other qualifier is that the city be a significant target. Toronto is not, but Halifax is.

Senator Adams: We have just come back from Vancouver, Calgary and Halifax. I should like to clarify something you said concerning travelling by bus. In Nunavut, where I come from, we have no buses. The only way to travel there is by air. Yet we see magazines and newspapers advertising typical trip fares anywhere for a nine- or ten-day holiday. Right now, however, no bus operators are in business to run that type of trip to Nunavut.

Mr. Soberman: So many people respond to the frequent ads one sees to take a tour of Turkey or of Spain. These trips are all bus-based. Certainly one may see similar trips in Canada, where low-cost packages are offered and where all the arrangements are made for you.

I was a federal civil servant before I took early requirement and became a university professor. In those days, I frequently travelled from Ottawa to Montreal. Montreal was the centre of the transportation industry. Everybody was there. I was with the Regulatory Commission, and typically I would take the train in the morning. In the morning, I do not want to talk; I just want to sit there. I want to have a cup of coffee. However, when I was through my work, I would walk across to the bus station, which used to be nearby. All the transportation industries were clustered. Every hour, there was a bus to Ottawa, and it took you right downtown.

Many bus companies have moved their terminals away from the centre of the city. If you take the bus to Kingston, it will no longer take you to downtown Kingston. Now one must add in the cost of the taxi.

In the travel section of most weekend newspapers, one sees ads for cruise ships, airlines, motorized pogo sticks, and what not, but not very much about opportunities for buses. This may be partly because of the fragmented nature of the industry. I remember going from Halifax to New York once by bus. Acadian Lines took me to the New Brunswick border. I had to show my passport. Then I got on a bus belonging to the line that operated in New Brunswick, and it took me down to the border crossing at St. Stephen. Then I transferred from that bus to another one that took me to Boston, where I transferred to a bus that took me to New York City. That part of the trip took 36 hours. I then got on a plane that was going to the Middle East. The first stop it made was in Gander, Newfoundland. I thought to myself, I think I have just gone the wrong way.

Senator Adams: We were in Calgary the day before yesterday. We had the opportunity to witness some new bus technology belonging to Red Arrow. The buses had telephones, a washroom, a beverage dispenser. I think people today are looking for comforts of that sort when they travel. In my time, there was nothing like that available. As well, people want faster, more direct routes. They do not want a 36-hour trip such as you described. People want to embark today and arrive tomorrow. The bus may represent a slower and therefore less attractive means of transport.

Mr. Soberman: Halifax is probably not a good bus market, but consider, for example, charter services that take people skiing. These trips are attractive for reasons that have nothing to do with the price. There are movies on these buses. What is more, at the end of the day, if one has not broken one's leg and is still walking, one can actually have a beer and get on a bus and leave the driving to the bus driver. That is why people take the bus. So there is potential.

In the Toronto area, I am trying to convince municipal and provincial administration to stop expanding subways and rail transportation. We cannot afford it. Yes, Yonge Street subway is wonderful, but we cannot build subways forever. Buses provide much more flexibility. They offer the opportunity to get on once and get off once, instead of transferring. If combined with highway engineering policies that under congested conditions give buses reserved lanes and high occupancy vehicle lanes, this service can be quite attractive on a travel time basis.

Senator Adams: The committee asked the witness from Greyhound, the biggest bus line in the world, if Greyhound offered connections to airlines. He said that the company does not. I think other forwarding-looking bus lines should develop routes that do connect with airlines.

Mr. Soberman: That suggestion goes to my point that we need some information systems and some better integration. I will give you an example. Years ago, I worked in Haifa, Israel. The French built a rapid transit line there. Haifa also has a bus system. However, the bus system does not stop at any of the stations on this funicular that goes up the mountain, because why would they want to give them business?

However, using Kingston as an example, a smart operator may figure out that maybe there should be a bus that goes from Kingston right to Pearson Airport. After all, what is Kingston but a university town; and university professors tend to travel in their spare time. Rather than travel out of Kingston, they travel to the airports at Toronto or Montreal and do not necessarily want to go downtown first in order to reach the airport.

The Chairman: We do appreciate your presence here today, Professor Soberman, and your openness in answering our questions. We are happy you could accept our invitation.

Our next witnesses are representatives of Coach Canada. Please proceed.

Mr. James J. Devlin, President, Coach Canada: Honourable senators, I thank you for the opportunity to appear before your committee today to present the views of the Coach Canada Group of Companies in these proceedings.

I was an owner in the bus industry. I have 43 years' experience as an entrepreneur trying to conduct business in this regulatory environment. I will say at the outset, even though we are probably at least the third largest scheduled service provider in Canada, I am pro deregulation.

The first few slides we are going to present to you today are really for background information only because I think it is important that I focus my comments on my experience over that 43-year period in trying to do business in this environment.

We are a part of the Stagecoach Group, with a head office in Scotland, a very large organization operating 20,000 vehicles, employing 40,000 people worldwide.

In Canada, Coach Canada has its head office in Peterborough. The main part of the Coach Canada operation, Trentway-Wagar, was founded in Peterborough in 1956, and all 43 years of my experience have been with Trentway- Wagar.

Coach Canada is made up of four operating entities — the one I just mentioned, as well as Autocar Connaisseur located in Montreal, Erie Coach in London and Century Airline in Peterborough. We employ 925 people, and we operate 460 vehicles in Canada.

We provide scheduled service on an annual basis; we operate over 47,000 trips, carrying in excess of 1.1 million passengers over 9.9 million kilometres.

In charter service, we operate over 33,000 trips on an annual basis, carrying 1.6 million passengers over 14.9 million kilometres. As well, we operate school contracts. We make more than 45,000 trips on an annual basis, carrying 1.8 million students over 2.6 million kilometres.

Our airport shuttle from Peterborough operates over 8,000 trips a year carrying 28,000 passengers. Our transit operation operates over 86,000 trips a year, carrying close to 2 million passengers over 2.6 million kilometres.

In total in Canada, we operate over 224,000 trips a year, carrying more than 6.3 million passengers and operating over 30 million kilometres a year.

I have been involved in many, many discussions on regulation-deregulation, and I have often heard it said that this is a union-non-union issue from the bus industry. We are a unionized workshop and have been for 24 years. We have contracts with the CAW, the Teamsters, and three different contracts with the Amalgamated Transit Union as well as the Erie Drivers Association.

I should like to focus on some of the issues that we face in the industry. In that regard, as we heard earlier today and we all know, cross-border bus transportation is a federally regulated industry with the responsibility passed to the provincial transport boards to monitor. Unfortunately, that brings in a lot of problems. For instance, Quebec exercises its authority to license to destinations beyond their borders. That is one of the few jurisdictions that does. It is a process that has been upheld by the Supreme Court of Canada, so there is nothing wrong with it; it is just that they insist.

At Coach Canada, we have a licence issued by the Province of Quebec to operate on No. 40 Highway, meeting Highway No. 417 at the Ontario-Quebec border. Ontario has issued us a licence to operate from Ottawa down the 417 to join with the Quebec highway at the Ontario-Quebec border. We filed a timetable and tariff with the Quebec Transport Board asking for approval because Quebec still approves rates, unlike Ontario. It is a free-for-all in Ontario, with a monopoly, and I will address that later.

We applied for approval, and the Quebec Transport Board took the position that we do not have a licence from Montreal to Ottawa. At the hearing, I produced our Ontario licence. It was a licence we purchased from Voyageur in 1996 when we purchased the licence to operate between Toronto and Montreal. We are the carrier in that heavy corridor.

The Quebec Transport Board did not recognize the Ontario licence, whatsoever, and ordered us to make an application and go through the hearing process in Quebec to obtain a Quebec licence to go Montreal all the way to Ottawa — forget the Ontario licence.

The result of that kind of approach — now the issue here is — and I may appear critical of the transport boards, but I am not. They can only work with the rules that are handed to them by the politicians, and I think that is an important issue here.

The result of that kind of approach is that the public is denied a choice of services. Peterborough-Toronto, Peterborough being near and dear to my life — I was born and raised there and operated the business for 43 years out of Peterborough. Pre-June 1996, you could approach the Ministry of Transport and consult with them as to interpretation of licences. I took my licence that I thought would allow us to operate between Peterborough and Toronto to the ministry and met with their officials. We had discussions.

There was a disagreement. We agreed that we would put that licence before the court, that we would let the court determine whether we could operate the service between Peterborough and Toronto. We won the court case. Unfortunately, we won the battle but we lost the war, because in June 1996, when the government introduced an interim process for that 18-month period leading to deregulation, they gave all the responsibility to the transport board for interpretation, enforcement, et cetera.

Our direct competitor — Greyhound — filed a complaint with the transport board that we were operating the service. The transport board ruled that the licence did not allow us to travel on the preferred highway, No. 115, which is a divided highway, faster, safer, smoother. We were forced to use secondary roads, 7A or 28, which meant longer trip times, a two-lane highway and a lot of difficulties in the wintertime.

That process cost us $500,000. We can sell a ticket to travel between Peterborough and Toronto, but we have to take our passengers on a sightseeing tour; the highway we travel is not the preferred highway, not the one people would like to travel.

We no longer provide that service. Once again, the public is denied a choice of service. Does competition work? I say, yes, it does, and I think you heard in Alberta an example where the competition does work and the competitor is very successful.

We applied a number of years ago to provide service between Toronto, St. Catharines and Niagara. We had looked at the operation there, and we found that the level of service had deteriorated. There had been a reduction in the number of trips operated. Hence, we applied, and we brought in 65 members of the public to give evidence of the type of service.

Once again, our competitor was Greyhound. In their defence, they said that they had just recently purchased the operation. It was an operation that had gone to the courts for court protection. They said that they had not had an opportunity to upgrade the level of service to their normal levels but that they were going to do that imminently. The board ruled in their favour and denied our application.

I have been around this industry for 43 years, and I just do not go away that easily. A year later, we went back and monitored the system; the level of service had not changed. We reapplied, brought forward the public witnesses, some of them the same. Two hours into the hearing, our lawyer was approached by Greyhound's lawyer to see if we could negotiate at deal. The end result was that they withdrew their opposition and we got the licence.

In July 1994, they were providing 160 trips a week. In July 2001, between the two carriers, because they still remain in the corridor, we operate 347 trips a week. Last year, we carried 430,000 passengers in that corridor. It is very financially successful. It must be for them also, because they are still there. Therefore, I believe competition does work.

I should now like to address the subject of rural service. I know this is a huge issue that you are trying to wrap your minds around, and I think that it is an issue that is being made by those who want continued regulation, the bus operators.

In August 1995, the then Ontario Transport Minister, the late Al Palladini, announced that 400 Ontario communities had lost service despite economic regulation. The purpose of that announcement was that the Ontario government wanted to deregulate the industry and as far as they were concerned the argument that it was maintaining service to rural Ontario had long gone.

Needless to say, when the government announced that it wanted to deregulate, it created a lot of discussion between the Ontario stakeholders, of which I was one, as well as Greyhound.

The government brought all the parties together. The Ontario Motor Coach Association, representing most of us, entered into an agreement that, instead of deregulating in April 1996, the government would introduce a bill and have an 18-month delay, to allow us to put our houses in order, and that deregulation would take place on January 1, 1998.

Some of us went away and worked very hard to put our houses in order, to get ready for January 1, 1998, because according to the doomsayers the industry was going to fall apart that day.

Unfortunately, not all the players to that agreement did the same thing. Some of them hired high-priced lobbyists, economists and spin doctors, to convince the Premier's Office that the Minister of Transport was wrong and that the industry should not be deregulated.

Today, the transport board is harnessed with a law that was created for an 18-month period. We in the industry are forced to operate in this regime — and there is only one winner. The winner in this current regulatory environment in Ontario is Greyhound.

Ontario continues to lose service. Of course, they never had it in the first place. If carriers come forward and suggest to you that they are going to shut down services because of deregulation, you should challenge them to name those communities and to provide you with a list. I will offer to return — if you share that list with me. I will study it determine, from my point of view, whether they are real issues or whether they are doctored to advance the argument that you must keep regulation.

Safety is dealt with differently in the different provinces, as well. For instance, Quebec will hear evidence on safety issues in the bus industry and will make decisions based on that evidence. The Ontario Transport Board do not have the same authority; therefore, it will not hear evidence on safety issues.

As far as I am concerned, bus transportation is the safest industry in the world; however, we do have bad actors from time to time. I tried to bring evidence to a Province of Quebec government inspector about some particular individuals who wished to enter the Ontario scene. The board did not hear the evidence.

We work very closely with our drivers on health issues, but there are certain things that happen from time to time that you must react to.

There was a situation where a particular company had a driver who blacked out, which is obviously the worst situation in our industry. Fortunately, the bus got stopped. Our company experienced that once. By the time the medical profession has had an opportunity to examine the individual, to deem them fit to return to drive, the process takes 9 to 12 months. That same driver was on the road and suffered a blackout two weeks later. Both of those were recorded in the newspapers, so I am not coming here and telling you things I know because I am in the industry. The Peterborough Examiner carried the story on both of those incidents. Both times, the bus was carrying the Ottawa 67's hockey team; same customer. That should not happen, but then I am not surprised.

Not so long ago, the National Post had an article about the same company. One of their drivers was driving with no hands. He had one on his cell phone and other one on a PalmPilot. Fortunately, for all of us, they were petitioned into bankruptcy about a week ago. It had nothing to do with economic regulation; market forces did them in.

In fact, in a number of areas, there are a number of illegal rogue van operators. There is a role for vans in transportation. We operate vans in our company. Unfortunately, if you look at what we have here — and I will try to put the perspective of these illegal van operators before you — in Ontario, we have a user-pay approach to economic regulation. That was the other change that took place in 1996.

We have spent well over $100,000 in private investigators riding these vans to get the evidence that we can present to the transport board. We must pay a fee to the transport board to hear this evidence, to conduct a hearing. We have to do that.

For our company, it involves legal fees and lost management time. I would say that we have spent upwards of $500,000 in total on these illegal rogue van operators.

The board will issue a decision, a stop order, and it will award us costs. Unfortunately, the costs cannot be collected. There is no money. You cannot find them to collect. They disappear after the board order is issued.

These unsafe van operators continue unabated. The provincial governments have not figured out a way to determine who is providing these commercial operations. It is left to the industry — and, believe me, I would rather spend my time trying to create a better mousetrap and expand services for our company than run around trying to find illegal van operators. That is a total waste of my 43 years' experience in this industry.

You will recall the Prescott accident — and I know Mr. Collenette in his appearance last June mentioned it, and I think it has come up a couple of other times — where five people were killed in a van. We filed complaints against that company about a year and a half prior to that accident.

Following that accident, our files became very important to the investigators. They wanted to know everything there was about these people. We were on to them for a 18 months or so before the accident, but the system was unable to get them, and it led to the tragic death of five people.

The gentleman who lost his daughter in that accident phoned me from Montreal many times to discuss the situation with me. I felt so sorry for him. He innocently believed that it was a transportation company, that it must have insurance, trained drivers and well-maintained vehicles. People generally assume that if you are selling a service, you must be okay, but that company is not.

Why can't we compete with them? Why can our fares not match the fares they offer, so that customers will buy our service? The biggest explanation is that they are a cash operation. It is an underground economy. It is a very large underground economy.

If I could cut out of my company all government-regulated payroll deductions that I have to forward, whether it is WSIB, EI, CPP, you name it, I could cut millions of dollars of expense. If I could cut my garages by three-quarters, or just forget about maintaining vehicles, just pull them into a service station, get the oil changed, and run them until they fall apart, I could cut out millions of dollars of expense.

As a matter of fact, maintenance, cleaning, garages, maintenance staff costs us 70 cents a kilometre. On top of that, our company absorbs a huge training bill for our drivers, a huge monitoring cost. The people who operate these vans have none of that. That is the only reason that they can provide a cheaper fare. Economic regulation alone will not stop that operation. This is beyond economic regulation.

Do we need subsidies for rural services? I am going to say no, but I will give you a qualifying response. I think the bus industry can and will provide scheduled services in competition with itself and other modes. Unfair competition from subsidized VIA Rail may destroy the bus industry. Their plans could have drastic impact on our operation, the Toronto-Montreal corridor; there is no doubt about it.

I would ask that the committee consider endorsing the Canada Transportation Act Review Panel Report concerning VIA Rail. Air and bus modes operate at a full-cost recovery. VIA receives huge subsidies, to cover losses, and those subsidies, in part, are paid for by the users of air and bus mode. VIA Rail should operate on a full-cost recovery basis.

I am not a VIA Rail basher. VIA Rail is an excellent operation. There is a role for VIA in the transportation business. However, its service must be priced somewhere between the high, high cost of air travel — and I know most of you travel by air. With all the add-ons, the various fees that are being charged at the airports, and I know what we have to take into account, the price of our bus ticket, there is a role for VIA somewhere in the middle.

Even though this is an issue of regulation-deregulation, it would be well within the committee's mandate to express the view that VIA should be forced to make the user pay.

In the report of the Canada Transportation Act Review Panel, there was a statistic about who uses VIA. By and large, VIA passengers are the middle- and higher-income earners in the country. Like those of us who are prepared to pay the cost of air travel, they should pay the cost of that trip.

With respect to routes that are not self-sustainable — and I agree with Professor Soberman — if there is a social need for service in a remote area, there is a way to provide the service. However, that does not mean opening up the public purse to the current licensed operator to keep running the service. If there is a social need, the government should make that determination, and the service should be subject to competitive bidding — competitive bidding, not opening up the public purse.

The Province of Ontario has had a series of meetings throughout the province, discussing transportation needs of the future. One of those meetings took place in Peterborough. I attended three, but the one in Peterborough sticks out in my mind.

I was there along with the Greyhound representative. The Greyhound representative said that they provide — I forget the number — something like nine or twelve trips a day between Peterborough and Toronto and that if rural communities like Peterborough can expect to have this level of service in the future they can expect to start paying a subsidy for it.

I spent $500,000 trying to get a licence to put a competing service on there. I would be on that route in a heartbeat. I could not believe the statement made by Greyhound; nor could some of the local municipal politicians around the table who just rolled their eyes.

Obviously, the person who made that statement was a very junior person in the organization. Someone cranked him up and turned him loose, and said, ``Get out there and tell everybody we need subsidies to provide these services.''

Peterborough is not a rural community. If in Greyhound's reference to rural communities they think of Peterborough, then they probably want subsidies to provide the whole operation.

What am I really saying? The current state of economic regulation of the intercity bus industry is a disgrace. Economic regulation passed its usefulness long time ago. Today, it serves as a deterrent to industry growth. I believe that organizations that fight to keep regulation to stave off competition are no longer entrepreneurial-driven.

There should be tighter control over bus-van operators from a safety perspective. A registration system could be implemented. If a company or an individual is going to provide a commercial passenger transportation system, they must register.

The insurance levels in this business should be greater, to protect the public. You cannot operate a van carrying seven paying passengers. To be licensed in Ontario, you only need $1 million in insurance. Most people carry on more than on their house. With vans, we are talking about a commercial operation on the highway. Those are areas that need to be addressed.

Governments must strengthen their oversight of the industry; as well, they should have enforcement programs and sanctions.

The federal government must exert control over economic regulation; as well, it alone must make the decision about whether the industry should be regulated or deregulated. Otherwise, there will never be consensus.

I have been involved in too many federal-provincial task forces studying this subject, and I assure you that ad nauseam, I have heard from the different provinces all the reasons why you cannot. There is no consensus on this subject because, quite frankly, there are too many lobbyists making a great deal of money presenting the pro- regulation story and it is not going to get shut down.

The Chairman: That is why we are here: to make some proper recommendations to the minister. That is why he asked us to conduct this study and we have a full year to try and find proper solutions for the industry.

We have often mentioned the declining of scheduled bus ridership and I would like to have your views on that. What are the prospects for reversing the long-term decline?

Mr. Devlin: I can share my personal experience. In late 1995 when I began negotiations with the Voyageur Corporation to buy the Toronto-Montreal route, they gave us their financials and the riderships on their route. Their statement showed a declining ridership over a number of years declining and declining revenues. Because this was a big investment, I decided to get a second opinion on the numbers from someone outside the company to be sure I did not make the wrong decision.

The reviewer suggested that it was a high risk, based on the declining numbers. However, I have spent 43 years in this industry going on gut feel and I had a gut feel I could turn it around. I looked at the product that was on the corridor and I knew that I could upgrade it.

First, we sold the 19 buses operating in that corridor and purchased 19 brand new buses. Since then, month over month, year over year, we have had increased ridership and increased revenues.

When we bought the licence, there was $30,000 a month net-net profit from carrying freight. Because of the dominance in that marketplace of our competitor, we never got a nickel of that operation. The last trip operated by Voyageur, the buses went out full of freight. The first trip we operated, it had been diverted into the Greyhound system. We are not in the freight business; we are a passenger-carrying business. Those revenues have all been growth from passengers — increased ridership. We believe that it was the better product. We spent a great deal of money in customer service training with our drivers. You are there to serve the public. You are not there to drive the bus.

The Chairman: We have heard that, in some instances, P.E.I and Nova Scotia use vans for small communities. The senior citizens there feel they are well protected. Whether they are right or wrong, they use some nine-seaters. Do you recall that?

Mr. Devlin: Yes.

The Chairman: Not seven, nine — and maybe ten or fourteen. Do you agree with such a service for small communities?

Mr. Devlin: Oh, yes, absolutely. As I said earlier, we operate vans. We operate vans on small schedules. The Peterborough-Havelock cannot get any smaller. The issue is that with the type of vehicles available, there is always going to be someone to come out and that will service that need. There is a place for vans. It is just that we have got to bring them into the safety loop and ensure that they are part of the economy and not operated as an underground economy.

The Chairman: Yes. I fully agree. You mentioned the differences between the provincial bus regimes, which have developed over the last decade or so. It is detrimental to the industry and to the travelling public, and you feel that the federal government should implement remedy to the various regimes?

Mr. Devlin: I think if your report determines there must be continued regulation, I think the federal government has to take control of the rules of the game to ensure fairness and a harmonious approach to doing business.

I do not think I, as an operator should be sitting with licences to connect Montreal and Ottawa, be faced with a situation where one Board will recognize that we want to license you all the way, while the other Board has already licensed part of the route. In this day and age, it is just ludicrous. Sometimes I wonder if I am a masochist for hanging around this industry for so many years.

Senator Gustafson: I want to thank you for a very frank presentation. I think there is no question where you stand on the issue. I like your suggestion of competitive bidding for rural areas.

We have become the most urbanized country in the world. When we look at statistics and where we are going, we see that the problems will simply compound. It is going to be — to some extent — government's responsibility to determine how we are going to deal with this issue.

Mr. Devlin: Exactly, yes.

Senator Gustafson: I think competitive bidding is an excellent idea. Are you in the parcel business?

Mr. Devlin: No. We thought we were going to be, but we found out quickly that we were not dominant enough in the market to hold it.

Senator Gustafson: I think Greyhound indicated that parcel business was a major part of their business. In some routes, 50 per cent of the business was parcel I was wondering if deregulation took place and minivans were put on to pick up the parcels and that, whether Greyhound could compete with them.

Living in a rural community myself — my background is farming — I know the parcel business is an important business because we get repairs out of Regina or Edmonton or Winnipeg and so on and that type of service has really improved over what it was 20 years ago. Of course, everything has improved to some extent.

If it were deregulated, would you have a crack at the parcel business as well?

Mr. Devlin: I have a crack at the parcel business now. Unfortunately, they have such a dominant position, and because we are one of their competitors, we do not share in that market. For instance, I am sure Ontario Northlands, Orleans, SMT, and Saskatchewan Transportation all share in that because they are content to be a part of the system and not compete.

Well, I am not. I happen to be very aggressive. We have one of the largest charter operating authorities in Ontario and in the Montreal area. I believe we would be the second or third largest scheduled service operator.

If regulation was that important to the industry, I should be here, telling you, ``Do not deregulate.''

Senator Gustafson: If federal government were to deregulate, it would appear to me that they would have to negotiate with the provinces beforehand, unless we continue to operate as 10 vassal states and we always have trouble at the borders. Of course, that happens in a lot of areas other than transportation, but it seems to be a major problem in transportation, licensing and so on.

Mr. Devlin: I think there are different issues here. Let us deal with the vehicles and road safety, et cetera. That is all contained under various Highway Traffic Acts for each province. That is a provincial issue. I think the federal government's role is to act as a sort of a central voice to create harmony among the rules and regulations.

In terms of operating buses, we are a federal operation. If I could just turn to labour for a moment, every province has its own provincial labour boards and labour personnel. Because we operate a cross-border bus operation, all our employees are subject to the Canada Labour Code and the health and safety aspect of that. We had challenged the Workplace Safety and Insurance Board in terms of their enforcing their health and safety programs on our company. We said that the WSIB covers Ontario and we are a federal operator. We received the decision only yesterday: our statement was upheld and we won our case.

Although these different regimes provide the Workers' Compensation to our employees, with respect to health and safety, we are subject to the Canada Labour Code. Transportation would be no different. If we are a federal operator and if the feds decide to deregulate and the provinces wanted regulation, I would say that I would not be subject to that provincial regulatory requirement.

Senator Gustafson: The Americans are deregulated. What is your observation of how their bus system is operating?

Mr. Devlin: I think it is no secret that Greyhound organization is not the healthiest operation in the world, but then how much of that is self-destruction? How much of that is the marketplace?

I am the Vice-President of Coach USA with a head office in Houston. It is very successful bus company, very successful. It is the second-largest bus company in North America.

Senator Callbeck: I have some questions relating to that, but first I would like to pose couple of brief questions that came up with the last witness.

One of the observations he made was if you pick up the newspaper today, you see lots of ads of cruise ships going places, airline, special pricing and so on, but you do not see very much about buses being promoted. What percentage of your revenue do you spend on promotion?

Mr. Devlin: I would say it is probably almost 2 per cent. However, we have a huge ``other'' account in our ledger which is legal fees, private investigators trying to work in this regulated environment that I would love to roll into marketing and promotions.

Senator Callbeck: I recall in the hearings I have been at, one company said they spent 3.5 per cent; another said they spent 4 per cent. Do you feel if your ridership would increase if you spent more money?

Mr. Devlin: I think it is a combination of a number of things. First of all, I am a firm believer that you need modern buses with curbside appeal being driven safely by well-trained drivers. That will do more for you in exposure than anything else.

So you want your brand to be easily identifiable so that when you do advertise, the audience can relate to something they saw going down the road. That has been my approach and it has been successful.

Our buses do not have advertising all over them because, quite frankly, I want to advertise our product. We will promote our service to Kingston or Montreal. If people see it, I want them to have the impression that they have seen that brand, that it is clean and that they would like to use it.

You need to spend more time in the amenities on a bus. For instance, this is a small item and I know Senator Adams mentioned washrooms earlier this morning. We go to the extra expense. It is a small item, but there are holding tanks. There are many buses on scheduled services that if you go back to use the washroom, you would probably want to make a quick exit. Unfortunately, those are the things that creep in. It is a little extra thing, but it just helps to make the service a little more appealing.

It is a combination of marketing, the product and the drivers. As well, you must have an organization that is focused totally on customer service.

A management meeting in our organization is customer service. Every issue brought to the table is considered in how it relates to customer service. I think that that is what is missing in this regulated environment with some of the larger organizations. They become so focused on maintaining this monopoly situation.

In Ontario, we have control on entry. We have no control on fares and the monitoring of the service delivery is very low. In a regulated industry, how does the public get protected when you have a monopoly on a corridor, but there is no one saying, ``Are you charging the right fares? Are you gouging?'' It just does not work.

Senator Callbeck: What about the age of your buses? How long do you generally keep a bus?

Mr. Devlin: Our coach fleet right now has an average age of five years.

Senator Callbeck: Five years?

Mr. Devlin: Five years. It is a very modern fleet. We have different levels of service. We will bring them in, operate them in an area, and then roll them into another area. I would say throughout North America right now in the Coach Canada, Coach USA fleet, that the oldest bus you might find would be 10 years.

Senator Callbeck: The last witness also touched on bus stations. So many of them now have been moved outside the city.

Mr. Devlin: Yes. That comment did not slip by me because we provide the service to Kingston, but we inherited the bus terminal in Kingston when we purchased the Toronto-Montreal route.

I think the terminal should be in the city centre. I have been working for a number of years to try to get a better bus terminal here in Toronto — one that would be centrally located at Union Station, which is the hub of the transportation system. The buses should go into the city centre. Look at the market: seniors, students and professors at Queen's. A bus terminal downtown makes sense. Unfortunately, we inherited a long-term agreement when we purchased that route and it is the wrong location. I will be the first to say so.

Senator Callbeck: Why did this happen? Did the bus companies feel they could not afford the expensive real estate downtown?

Mr. Devlin: No. I think it was operation driven. Companies have very expensive union contracts and they have very extensive rules of work. From an operational cost point of view, it is better to keep the driver on the expressway rather than moving up and down from the city centre out to the expressway. That is not customer-service driven.

Senator Callbeck: I noted a couple of things when you were going through your brief. Did you say that for the Peterborough to Toronto service, you were forced to use a secondary highway?

Mr. Devlin: Yes.

Senator Callbeck: Is that because you were to make certain stops at places?

Mr. Devlin: No. There is a direct line from Peterborough to Toronto, on these secondary highways and it was a combination of what we refer to in Ontario as ``tacking of authorities.'' When I went to the ministry to present my case to them, it was the tacking of a number of licences that would allow us to operate on the 115 Highway, and that was the case we put before the court. The court upheld that we could, but following a subsequent complaint to the Transport Board, the Transport Board ruled that we could not operate on the 115 Highway, we could not tack those authorities together, so we could only go the secondary routes. We shut the service down.

By the way, for a period of about five months we provided the service between Peterborough and Toronto for free, as we fought and worked this thing through the various hearings.

Senator Callbeck: You also said that some carriers say they will cut rural service if deregulated and to just ask them to name the communities.

Mr. Devlin: Yes.

Senator Callbeck: Do you think there would be very few communities that would be cut out?

Mr. Devlin: I have to go with my experience here in Ontario and I think there would be very few communities. We provide a weekly service to the First Nations community at Curve Lake. We do not make money on it, but there is a local collateral benefit to provide that service. They charter a lot of buses and they look for that Saturday service. We have been operating it now for over 40 years.

If the industry is deregulated, we will not shut that service down. There is another benefit to it. When these people say they are going to shut everything down ought to be a little more forthright and list exactly what they will shut down, where they will not carry freight or passengers and so forth. I think they are few and far between.

Senator Adams: You have employed 925 and now you have 420 buses.

Mr. Devlin: Yes.

Senator Adams: These are vehicles. Are these all buses? You mentioned small vans. Are they included in that total?

Mr. Devlin: We have a combination of small and large vehicles, yes.

Senator Adams: You mentioned Greyhound, a monopoly. I live in Ottawa. I have never taken a bus between Montreal and Ottawa, but I know that Greyhound has a lot of buses running between Ottawa and Toronto.

You also talked about regulation and that you have been able get a licence to operate from Ottawa to Toronto. However, you have concerns about operating from Ottawa to Montreal. You are having difficulty operating in Quebec.

Mr. Devlin: I feel I like I have been operating in a vacuum since 1996 — as though I have been put in a box and stored in a corner because I cannot do anything. I cannot move; I cannot expand the business.

After 43 years in this business, I am not going to change careers. I am a bus operator. That is what I do and that is what I want to do. I want to grow. Growth allows you to bring into your organization the technology to bring some of the things that we need in this industry — a better ticket distribution system, for example. Such a system could be a kiosk where you simply grab the ticket, step on the bus, verify it, and go on.

You see that in public transit, but the governments are spending literally millions of dollars funding those programs. We do it out of the fare box. However, in order to do that, you have got to grow your organizations. I think our industry needs it and our industry can create ridership by putting a better level of service out there.

Senator Adams: I think that sounds like what we heard in our Calgary hearings.

Greyhound boasts shareholders and owns Voyageur. Greyhound is almost a monopoly in Canada and in the States. What are your thoughts on economic regulation?

Mr. Devlin: Greyhound can speak for itself. This issue of deregulation has been on the table. I have a basement full of files of all the committees I have been on, studying this question for so many years now.

I have been on the record for many years saying that economic regulation passed its usefulness in this industry long ago. I have had experience in the St. Catharines-Niagara corridor and the Toronto-Montreal corridor where we went in and we made just subtle changes, but we reversed trends and increased ridership.

Greyhound can defend its own operation. Last year, we are carried 430,000 passengers on the Toronto-St. Catharines-Niagara corridor. We are ecstatic about that. They must be carrying people, too, because they are still there. Therefore, competition will work. On some rural areas, you cannot have the competing services. However, the heavier populated communities are going to get more service, more choice.

My wife comes from Peterborough to shop in Toronto because she said that she can go into a particular store and find more choice than she can in Peterborough. That is the world we live in today. The larger the communities, the more options you have. However, the smaller communities will not lose everything. There may be a local guy with a van who could start up a service to provide a once- or twice-a-day service between two remote areas. As I said earlier, you can look at the competitive bidding process to see if there is a social need to make sure that people can have an opportunity to travel.

Senator Adams: I think you said that the federal government instead of the provincial government should regulate and that there should be one set of regulations for busing.

Mr. Devlin: The court decision in 1954 said that the federal government is the regulator of interprovincial bus operations. I think it is the time for the federal government to take hold of their responsibility because it is a mess.

Senator Adams: In your business, do you pay GST?

Mr. Devlin: Yes we do. There is not a government auditor anywhere in Canada that does not know our address because we are visible. It is these rogue van operators they cannot find.

Senator Callbeck: You are talking about increasing the ridership, or you have already increased the ridership tremendously between Peterborough and Toronto?

Mr. Devlin: No. We have increased Toronto-Montreal and Toronto-St. Catharines-Niagara Falls.

Senator Callbeck: Right. The one you did not get was Peterborough-Toronto.

You said you did two things differently. What are those things you did?

Mr. Devlin: First we put a better product on the road — a better bus, a few amenities such as carpet on the ceilings and walls to reduce the noise level. We put in better seats.

We are really focused on training our drivers and providing customer service. Personally, I did nothing. Our drivers did it in Toronto, St. Catharines and Niagara. We were a Peterborough-based company. No one knew us in the Niagara Peninsula. The drivers won over the customers. They provided friendly service levels. They are there to serve, not just to drive the bus. I think that is the big issue.

Senator Callbeck: Do you take reservations?

Mr. Devlin: We do on airport operations between Peterborough and Pearson. We operate the service from Kingston to Pearson airport and we will take reservations there. We have a reservation system.

Senator Maheu: I really appreciated your presentation, Mr. Devlin. I am curious about just a couple of things. You mentioned that the average age of your buses is five years. When did you roll buses over to a school student operation?

Mr. Devlin: The intercity coaches never go into school operations. There are different regulatory requirements such as the chrome yellow requirement, the flashing lights. However, we do put them into charter operations.

The oldest intercity coach we have right now is about 1993 or 1994.

Senator Maheu: What about your school coaches?

Mr. Devlin: These are school buses. Some school boards require you to roll them over at 10 years, others at 12 years.

Senator Maheu: Can a 10- or 12-year-old bus meet the safety level we need for students?

Mr. Devlin: Yes, absolutely.

Senator Maheu: I am from Quebec. What exactly was the problem regarding your Quebec licence? You said that you did not apply. Why not?

Mr. Devlin: When we purchased the package of licences from Voyageur in 1996, there was no licence for the junction from No. 40 and 540 west of Montreal to the Ontario-Quebec border on No. 40.

I instructed my lawyer to apply and we obtained that authority. After 43 years, believe it, I am still sometimes naive. I thought by closing that gap and joining it with our Ontario licence, that we could operate Montreal to Ottawa. Unfortunately, Quebec took the position that they had to license us all the way and would give not recognition to the Ontario licence.

The waters got muddied when we ended up in court. Greyhound had joined in and there were arguments coming from all over the world that were unrelated to the real issue. I will probably be revisiting that and be going back to the Quebec Transport Board.

They did nothing wrong. They can insist to license to destinations, but I believe it is the only province that does insist on it.

Senator Maheu: We are unique. When you talked about the van operators, I recall very clearly that accident. You also suggested operator registration and there should be a tighter control. When you are dealing with bandits and illegal van operators, how can you get ``tighter'' control? How would you suggest that governments go about it? It is not unique to Quebec and Ontario. I am sure it is happening elsewhere.

Mr. Devlin: Under the current system, for every motor vehicle that is purchased or leased, you must go to the local licensing branch to obtain plates. There can be a process in place through some kind of an inquiry when a van is being registered, ``What is the purpose of this van? Why do you have 14 seats or why do you have 12 seats?'' They can try to detect at that point if it is going into a commercial operation.

You will not get 100 per cent detection at that level, but if there was a quick-and-easy registry office that those who are licensed could call to say that there is a van operation going on and that they are not registered but it is a commercial operation, that bureau could quickly deal with it.

We seem to be functioning in a void in the laws. The Ministry of Transport is not involved in enforcement of van operators in Ontario. That is an economic regulatory issue. Take it to the transport board.

Where do you go with these issues? It is very difficult and confusing to figure out.

By having this simple registration system — and I am not suggesting control on entry other than you understand the laws under which you must operate — you have the proper insurance and the insurer knows that you are in a commercial operation. As you know, if you put insurance on your car for driving around you local community it will cost one rate. However, if you are a salesman driving 100,000 kilometres on a year, it will be a different rate. For a taxi business, it would be another rate yet again.

I think the insurance industry must be made aware that it is a commercial operation, and these are not difficult tasks to bring into the marketplace.

Senator Maheu: I can understand that. My question is, how do you control it? If someone is going to be illegal, the fact that they must be up front about how they plan to use the van is not really going to change anything. I think they will still be dishonest at that level.

Mr. Devlin: Absolutely. They will be still there and it will be left up to those carrying on legal van operations to report them.

The Chairman: Mr. Devlin, Ms Nayler, thank you very much for your presentation. We appreciate your comments and answers to our questions.

Senators, our next witnesses are from the Ontario Northland Transportation Commission. Please proceed.

Ms Susan Schrempf, Senior Director, Marine Service and Service Improvement, Ontario Northland: Madam Chair and honourable senators of the committee, thank you for inviting us to address your questions regarding the provision of intercity motor coach services to rural communities. Permit me to give you a brief background of our businesses and the geographic area serviced.

The Ontario Northland Motor Coach Services is a provincial Crown corporation responsible to the Ontario Minister of Northern Development and Mines. The corporation is the provider of telecommunications services, freight and passenger rail services, marine services via passenger/vehicle ferries, and highway motor coach passenger services. The services subsidized by either the federal or provincial government are limited to marine and passenger rail. The remaining divisions are classified as commercial and must be financially self-sustaining.

It is the highway motor coach division that we are here to speak to today. In our division, we utilize a modern fleet of 23 buses with an average age of 6.6 years. Ontario Northland Motor Coach Services provides scheduled service along the main highway corridors in Northeastern Ontario. Ontario Northland's routes encompass a system stemming from Hearst to Toronto via North Bay and Sudbury, servicing some 40 communities along the way. In many cases, this service is the only regular means of public transportation for the communities.

In addition, as part of our seamless network, Ontario Northland Motor Coach Services has developed interline agreements with carriers servicing other regions of the country with connecting points at Hearst, North Bay, Sudbury, and Toronto. Complementing the scheduled services, Ontario Northland offers charters to service those groups who wish to travel into and out of Northeastern Ontario.

We own and operate eight full-service terminals, 38 contract agencies on the corridors, and we have contractual agreements with four full-service terminals in Sudbury, Toronto, Barrie, and Orillia, as well as nine bus stops. We directly employ 59 persons in the motor coach division. Our bus fleet includes four accessible coaches for physically limited passengers. In a typical year, we move approximately 200,000 passengers over a combined distance of 3,250,117 kilometres.

Our revenue studies indicate that the demographic splits of passengers carried on our motor coaches are approximately 47 per cent adult, 9 per cent senior, 3 per cent child, and 27.5 per cent students. Family plan fares make up approximately 6 per cent of traffic, split between 4 per cent adult, and about 2 per cent children. Our multiple trips —10 trip purchases — make up roughly 5 per cent of our traffic and are utilized mainly south of North Bay. Approximately 3.5 per cent of traffic is made up of medical passes, complimentary and passes such as for handicapped attendants.

Ontario Northland Motor Coach Services is a member of both the Canadian Bus Association and the Ontario Motor Coach Association. For the purpose of these Senate committee hearings, Ontario Northland has taken the decision not to take a position on the economic deregulation of highway passenger coach services.

We do, however, have a position on the regulation of safety in the highway passenger industry. My personal experience has been 15 years in the highly regulated safety environment of the marine carriage of passengers. My exposure to motor coach has spanned the last five months, during which time I have been engaged to look at the motor coach division from a service improvement perspective and determine what the customer is expecting of our services.

I performed an extensive search for safety regulations regarding the carriage of passengers on highway coaches. I had automatically searched the Ontario government's website to find the applicable acts and regulations, which I am used to doing for marine. I did not find any for highway coaches. Air, marine, and rail are all governed by safety acts and regulations of the federal government, but highway transformation is not. I ended up finding any regulations in the Motor Vehicle Act for the Province of Ontario.

I also searched the other provincial websites and found that while safety regulation does exist, it is inconsistent from province to province and between Canada and the United States. More disturbing was that, relative to the definition of ``safety'' and the qualification of safety in the marine industry, it is not as well defined in the highway coach industry.

Those observations do not necessarily mean that Ontario Northland has taken a position that safety should be federally regulated. It is our position that it is in the best interest of the passengers to have a level playing field with respect to safety well in advance of opening up the industry to economic competition. Without such, it is probable that economic competition will erode the level of safety that presently exists — it certainly will not get better, since there is always a price tag associated with safety. In addition, as I have heard over my several years in marine, from the federal government, there is never a price tag associated with a human life.

Ontario Northland Motor Coach Services exceeds the safety regulation that exists. Our coaches are highly maintained. We have an equipment replacement program and preventive maintenance programs in place. Our drivers are highly trained and experienced. Northern Ontario in the middle of winter is a dangerous place to be in a poorly maintained vehicle. We have also been in the position of moving passengers in the winter who prefer the safety of transportation on highway coach instead of their private automobiles. Accessible and reliable mobility in the North makes a significant contribution to the physical and social needs of the population.

We would like to believe that the less than 10-passenger vans or taxis that we sometimes transfer our passengers to are equally vigilant about safety. Unfortunately, we do not have that assurance. Our customers believe that we would not transfer them if the connecting equipment were not safe. The truth of the matter is that we have no way of knowing when the van driver last slept, the last time the vehicle was serviced, or the level of driver's training the driver has undertaken.

This is important to us because we anticipate the day where we will be connecting with a greater number of smaller vehicle services, particularly in Northern Ontario where the density of population is decreasing annually.

On the topic of economic deregulation, we would not be very astute businesspersons if we believed deregulation would have no impact on the level of rural services we are presently able to provide. One of your earlier witnesses remarked that: ``Where rural services are important, the bottom line is that if there is a market, someone will provide the service. If there is no market, there will be no service.''

That seems to be stating the obvious. However, how would one define ``market''? It is a totally different definition in the north. There will always be a market; it may simply not be a sustainable market for anyone.

On that note, I would like to introduce you to my associate, Ms Joan Buckolz, who is the Manager of Administration and Information Services for our Motor Coach Division.

As you have already been informed through both the CBA submission as well as through your previous witnesses, the determination of numbers of passengers carried in the motor coach industry is a nebulous art. Ms Buckolz has analyzed our traffic and will be able to address your questions on demographics, internal cross-subsidization of routes, and other questions relating to numbers or data.

Please remember when asking your questions, however, that we did not request an appearance before the committee. We were invited to attend, as it is believed that our rural intercity experience will provide the committee with information that may assist in formulating recommendations to the minister. We will do our best to respond as completely as we are able.

The Chairman: We knew we would be better informed after your submission. Thank you.

Ms Buckolz, would you like to add something now?

Ms Joan Buckolz, Manager of Administration and Information Services — Passenger, Ontario Northland: Listening to the professor who spoke earlier, I noted the discussion about how one gets information to the passenger. If anybody has gone through the Russell Bus Guide, timetable, the NBTA, tariffs, TASA, point of sale, it is a nightmare. We are currently working on a concept that involves transmitting schedules over a virtual private network — not only our own but in conjunction with the other carriers — to supply that information to people. We deem that as necessary.

Everything is built up in point of sale. Our databases are unique on all point-of-sale equipment. We would like it to be real-time. We would like our customers to have immediate answers to questions — for example, know how they can get to Goderich, or who serves Lindsay with freight, since a passenger carrier is not necessarily a parcel carrier. We have been trying to address that area.

The Chairman: Would Ontario Northland extend its services to other markets if regulations allowed it to do so?

Ms Schrempf: I do not think that we are the product of regulation right now. Our service in the North is not limited by regulation. We originally began as a company to develop the North. In the process of doing so, we tried to connect families with other families in distant northern communities. For us, a short run is less than 200 kilometres. For long runs, we will go 800 to 1,000 kilometres on one piece of equipment. People are on buses for 14 hours to get from Hearst through to Toronto. That is why we decided not to speak to the economic portion.

The Chairman: Do you think competitive bidding could ensure service to small communities if the system were deregulated?

Ms Schrempf: Are you asking if it would work?

The Chairman: Yes.

Ms Schrempf: Well, perhaps Ms Buckolz could add to this. We have been in that position in the airline industry in Northern Ontario and she can speak more specifically to it. There are communities there that are no longer serviced by the airlines. The government continued a subsidy until as recently as last December. We do not yet know what is going to happen to some of those airlines. Competitive bidding is the current position of the Ontario government, so I do not believe we would dissent from that position. Would it continue the level of service that exists now? I do not know.

The Chairman: Are there any points that you would like to serve that are not being serviced currently?

Ms Buckolz: We service the smaller rural communities. When in earlier discussions ``rural'' was used to refer to Peterborough, my thought was, if only we served Peterborough. What a market.

We serve communities of 100 to 900 people. We go off the highway in order to get these people. Many operators would not do that, because it adds running time. Would we like to go somewhere else? Probably we would. We wanted to go to the airport but were not allowed. We have to drop passengers off at Yorkdale. They have to go off inside the terminal. They cannot accept our coupon because it is a different kind of transportation. They transfer the coupon, get on the bus and go to the airport.

I do not consider that excellent customer service. There is an airport limo service offered by another operator, but our frequencies are greater. We have four round trips a day between North Bay and Toronto. We have three between Sudbury and Timmins. With those round trips, we also connect to the North, to Timmins and Hearst. Not all of them do, obviously. One trip will go from Sudbury to Timmins, and then the reverse.

There are things we would like to do that would improve service for our customers.

The Chairman: Do you use buses or vans for small communities?

Ms Buckolz: Every bus in our Ontario Northland fleet carries either for 47 or 55 passengers. In Hearst, we may only have 10 people for a trip south. However, if we want to provide seamless transportation in North Bay, if we take on another 30 passengers, does it make sense to make everybody get off? In addition, the trip is a long haul. Because of its duration, we would like to have a bathroom on board, because often, if departing at 2:00 a.m., there is no place to stop.

The Chairman: I refer to you page three, when you say:

From there, I searched provincial sites and found that, while safety regulation exists, it is inconsistent from province to province and between Canada and the United States. More disturbing is that the safety regulation is minimal in definition.

What would be the ideal definition of ``safety''?

Ms Schrempf: I resort back to my experience in the marine industry, where safety is defined and enforced by the federal government, even to the extent that a lot of the safety information and audit functions are being delegated to classification societies. However, there is a consistent rule, which everybody understands. When I went from motor vehicle act to motor vehicle act to motor vehicle act, trying to put them side-by-side, I found it a massive undertaking.

I understand that our vehicles already meet all the rules, but who enforces them across the board?

The Chairman: Do you feel that the federal government could implement more safety regulations?

Ms Schrempf: Well, no, but they managed to do it.

The Chairman: Would they be in a better position to do so?

Ms Schrempf: Yes. They have managed to do it in the marine industry and in the airline industry. It is being done now. Persons who work for the federal government may not be implementing safety regulations, but the classification societies are all following the same rules.

Senator Gustafson: Ontario Northland is a Crown corporation, yet you say Ontario Northland has taken the decision not to take a position. On the right hand, you are with your friends and on the left hand you are with your friends. Do you think that Ontario Northland could operate within a deregulated system as well as it can now? You talk about bidding.

Ms Schrempf: Yes.

Senator Gustafson: I should think that if open bidding is entertained, the door must be opened for everybody to come in and compete with Ontario Northland.

Ms Schrempf: It is no secret in the motor coach industry that in order to operate our routes in the North at a tariff acceptable to northern customers, we are subsidizing these routes through our southern routes. It is an internal subsidization that occurs.

In a deregulated environment, it would be possible to lose our lucrative routes to larger operators and therefore be unable to afford to operate all of our routes in the North. That is the looming fear.

Senator Gustafson: I am well familiar with the fact that nobody runs anything worse than government. It gets top- heavy. There seems to be no clause to shut things down. Provision is made for shutting down but it never happens. I wonder if the bidding process would not be a good process. Perhaps a different approach would be advisable, for example, modifying the process in a way that would keep costs down.

Ms Schrempf: We do not disagree with that. Our main concern is that sometimes in the bidding process, if safety has not been appropriately regulated, the bidding process might offer the customer a level of service, but is it the appropriate level? Customers assume, if the operator has sold them a ticket, that the vehicle is safe.

Senator Gustafson: Your concern could be overcome by good strict regulations on safety checks, as found in the trucking industry and every other industry. The general public wants to see government move in the direction of good safety regulations.

Senator Callbeck: Is your ridership increasing every year?

Ms Buckolz: It is at 200 now. Last year it was 229. Sometimes a simple change in connections can affect the ridership. If the operator has another origin/destination, OD, and somebody has to get on and off a bus, then the passenger is counted twice.

Ontario Northland's passenger trend for the past five years has been static. We have not added much. We have not changed our connection points. Our service is basically holding its own, even though the population in Northern Ontario is declining.

Senator Callbeck: If one looks at it that way, it appears that Ontario Northland's ridership is actually increasing.

Ms Buckolz: I think we are doing well. A small bus company such as ours does not have a lot of terminals. There are few terminals in Smooth Rock Falls. Toronto has all these facilities and everybody shares the cost. To reach small communities, there are not many facilities. With regard to the comment that the bus might connect to a van, this means the bus stops on the highway and the driver has to decide how long to wait for the van. Does one leave somebody on the side of the road at 4:00 a.m.? A lot of the communities that we serve have substantial safety issues. A hub is something the operator can connect to, but a lot of these places are not close to a hub.

Senator Callbeck: I see that Ontario Northland's passengers break down into about 9 per cent seniors and about 28 per cent students. Is that breakdown consistent from year to year or has it changed?

Ms Buckolz: We do a revenue study about four times a year. It seems to be fairly consistent. We do a complete sampling of every coupon we sell, as well as all the origin/destination fare type. These seem to be consistent.

Senator Callbeck: The breakdown is 46 per cent adult and about 9 per cent senior. Is that 9 per cent not included in the 46?

Ms Buckolz: No, it is not. Seniors pay a different fare.

Senator Callbeck: Would students and children also pay different fares?

Ms Buckolz: Yes. Our seniors have a 10 per cent discount at the age of 60, and students receive a 15 per cent discount.

Senator Callbeck: You have stated that Ontario Northland does not want to take a position on deregulation. However, you have expressed a concern that, with deregulation, larger companies might step in and take over the lucrative markets. I am wondering why you are hesitant to take a position.

Ms Schrempf: The way the bus company is currently tied into the remainder of Ontario Northland, one could argue — successfully or not — that perhaps we are already a subsidized operation and we should not be competing anyway. That is the short answer.

Senator Adams: Earlier there was mention made about our airlines running into trouble. Are you saying that airlines are going bankrupt because airfare is becoming unaffordable and that it would be easier to go by bus? Would an airline have difficulty competing with bus service where Ontario Northland is operating?

Ms Buckolz: At one time Ontario Northland used to run an airline called norOntair, which was eventually sold off. In different communities, we receive subsidies to attract commercial operators who could offer a better, more profitable service. Ultimately, that idea proved not to be viable. It was not viable to fly to some of these places or to serve them.

Consider a flight from North Bay to Timmins. If I try to fly on Air Canada right now, they will route me via Toronto and send me up to Timmins. This big long haul is necessary at present. In some of the other communities, one goes via Sudbury. After Sudbury, the connections are not what they should be. We have lost air services to some of the small places — rightly or wrongly. The question is: Should these places ever have had the air service? They like to think so, but I could not judge that.

Senator Adams: Are you talking about a private airline or about Air Ontario?

Ms Buckolz: In some cases Bearskin Airlines, a private airline, would serve some of these communities. Not everybody could afford the fare. As well, people used to having a Dash 8 find themselves on a Twin Otter with no bathroom. Sometimes it is a long flight.

Senator Adams: The committee has heard from other bus owners, mostly Greyhound. They have a monopoly for their freight. What about the post office in a small community? Canada Post is a Crown corporation and thus has a monopoly on the delivery of parcels and mail. Can Ontario Northland bid on delivery to the post office and obtain a handling contract with Canada Post?

Ms Buckolz: Right now we do a parcel business. We do not have a tracking system, as does Purolator. We are a station-to-station operator in most cases. However, our prices are very competitive. If one were to ship a parcel from North Bay to Toronto, and then ship the same parcel back via someone else, the rate would not be the same. We do not charge a great deal for our parcels. We like to support the local industry, much of which is cottage industry. These small businesses do not have a lot.

We are not a Purolator-type delivery service that will pick up and deliver. However, we do offer our northern communities high frequency service.

Senator Adams: When people need to get to a hospital for a check-up and their community does not have access to an airline or they cannot afford airfare, does your bus service offer those connections? You had mentioned a discount for seniors.

Ms Buckolz: We have a medical policy and a handicapped attendant policy. If a handicapped person is travelling, his or her attendant travels free. Yes, we offer that service.

Senator Maheu: I have a question on safety. On one hand, you say that Ontario Northland does not take a position that safety should be federally regulated. On the other hand you are saying passengers should have a level playing field with respect to safety.

Later on, you spoke about transferring some of your passengers to 10-passenger vans or taxis on one hand. On the other, you were never quite sure about the safety of these vehicles or whether the drivers had indeed had enough rest.

How do you correlate your ``level playing field'' position with the situation involving transfer to another operator's van or taxi? Your passengers have to leave your line and transfer to a much smaller line. How do they feel about that type of possibility towards safety?

Ms Schrempf: They are not happy about it. We receive some interesting written comments from our passengers. Transfers to a van or taxi happen frequently in the North. It is the only way to connect smaller communities.

Some of you, perhaps, had to fly into Moosonee and reach Moose Factory Island in February. This year the freeze- up was late, which made the crossing in an unlicensed taxicab very interesting. That is, however, the only way to cross. You have to do it.

Some of that happens in Northern Ontario as well. Recently one of our customers complained. They were expecting a certain level of service from a larger van. The backup to the larger van was a taxicab. The taxicab travelled along the highway at 130 kilometres an hour, carrying more people than seatbelts.

Unfortunately, when those situations arise, we are the one selling the ticket — for the most part a through ticket or a replacement service that we have to implement. It is difficult for us because the passenger expects that because they bought the ticket from us, they will enjoy the same level of safety on the van or taxicab that they receive in our 47- to 55-passenger motor coaches.

Senator Maheu: What about your liability in a case like that?

Ms Schrempf: We do not even want to discuss it. Since September 11, liabilities have become an extremely large issue. All of our insurance is being looked at right now. We are finding our premiums pretty much across the board are going a lot higher than anyone had anticipated. It will take a very long time for that market to stabilize. We cannot pass the extra cost on to our customers.

Senator Maheu: That is true.

Senator Callbeck: You have 23 buses in your fleet, four of which are accessible for physically limited passengers. Is there any way that physically limited passengers may get on the other 19 buses?

Ms Buckolz: No, they can just get on the four buses, depending on the level of limitation. We have a practice where the person can call us. We then have to cycle our equipment, moving and positioning it. To do so we need 48 hours' notice. Sometimes the bus may be in Timmins but is needed in Toronto. We will cycle it down the next day. In a year we may carry 200 passengers like that.

Senator Callbeck: Are you saying that the passenger could get on within 48 hours?

Ms Buckolz: Yes.

The Chairman: We thank you for accepting our invitation. We appreciate your presence here. Feel free to send us more information if you wish.

The committee adjourned.