Proceedings of the Standing Senate Committee on
Transport and Communications
Issue 32 - Evidence - June 12 sitting
OTTAWA, Wednesday, June 12, 2002
The Standing Senate Committee on Transport and Communications met this day at 5:31 p.m. to examine issues facing the intercity busing industry.
Senator Donald H. Oliver (Deputy Chairman) in the Chair.
[English]
The Deputy Chairman: I would like to call this meeting of the Standing Senate Committee on Transport and Communications to order. I would like to extend a warm welcome to Mr. Neggers and Mr. Hadfield.
We are here to do a special study of intercity buses. As you know, the Minister of Transport, Mr. Collenette, asked this committee some time ago to undertake this study for reasons I will mention below. We started our work at the end of last year and began our public hearings last February. We are required to report before the end of 2002, and I am confident we will have sufficient time to adequately study these issues and develop recommendations. We do yet not have recommendations because we are still listening to witnesses such as you. We have heard from a number of other witnesses here in Ottawa, and in Montreal, Halifax, Vancouver, Calgary and Toronto.
This evening we will have two witnesses, one from the Saskatchewan Department of Highways and Transportation, and one from the Saskatchewan Transportation Company. The Government of Saskatchewan has taken an active role in providing public transportation in the province, and we look forward to seeing how it is working.
We have been asked to study intercity buses because the essence of the problem is that intercity bus ridership has been steady declining for several decades. This decline is troubling because the bus mode is an important part of the passenger transportation system in this country.
The bus can go virtually anywhere. It is environmentally friendly and, historically, the bus mode has been a relatively cheap means of travel for many Canadians. There are several possible explanations for the decline. It could be that people are better off and are travelling in their own cars. It could be that more people are living in big cities, or there is too much government regulation or it varies too much from one province to another. That is what we are here to study, and we look forward to hearing from you. After you make your presentation, honourable senators will have a number of questions for you.
Mr. Carl Neggers, Assistant Deputy Minister, Policy and Planning Division, Saskatchewan Highways and Transportation: Thank you. We appreciate the opportunity to come to Ottawa today and make presentations on behalf of Saskatchewan.
Accompanying me is Mr. Jim Hadfield, the Chief Executive Officer of the Saskatchewan Transportation Company, STC. He is a sponsor of the principal scheduled carrier in Saskatchewan. STC is a government-owned bus carrier and the main vehicle for providing access to rural and remote areas throughout our province. Mr. Hadfield will be making his presentation subsequent to mine on behalf of STC and will able to answer questions specific to STC, and I will field questions on behalf of the province on any policy-related concerns.
The basic position of the Government of Saskatchewan is to ensure access for both rural residents, who are dispersed over a wide geographic area, and residents in remote areas, such as Northern Saskatchewan, to reasonably priced bus service. Bus service is crucial for seniors who no longer drive and for low-income earners who do not use the automobile.
I propose to address four specific areas. First, I will outline bus regulations in Saskatchewan; secondly, I will provide a broad description of the bus industry within Saskatchewan; third, I will identify the major issues affecting that industry; and fourth, I will offer some thoughts on the future direction of bus regulation in our province.
My first point deals with the regulatory framework in Saskatchewan. Saskatchewan presently regulates both extra- and intra-provincial bus undertakings, including scheduled bus undertakings, charter buses, limousine service and special-use taxis in Northern Saskatchewan.
Carriers transporting passengers for hire on Saskatchewan highways typically require an operating authority certificate, or OAC, from the highway traffic board, our regulatory agency. Applicants need to demonstrate public need and necessity. Applications are advertised and can be opposed or challenged.
In considering applications, the board takes into account not only whether the public interest will be promoted, but also the fitness of the applicant based on safety records, adequacy of equipment and insurance. The highway traffic board requires every passenger service operator to comply with laws and regulations designed to protect customers of the service and the public interest.
Generally, transportation operators require four specific ingredients: a valid OAC issued by the highway traffic board, a proper vehicle registration and safety inspection, adequate insurance to protect passengers and a valid classification of driver's licence. The board issues OACs for a five-year period and automatically approves renewal if the holder can demonstrate fitness. The board may issue temporary OACs and authorities with special conditions to accommodate unique circumstances.
Carriers require board approval for passenger rates and for changes to frequency of service. In the past, the board thoroughly reviewed these rates. Currently, it accepts filed passenger rates unless they appear to be unreasonable.
The board no longer regulates rates for parcel and bus express, as this was deregulated in our province in January 1998. The OACs for scheduled bus undertakings list the points the carrier will serve. The OACs for charter bus undertakings include the type of service, the location of operating terminals, the location of storage of coaches, et cetera.
For some types of service, the OAC may stipulate vehicles not be fitted with taxi metres, and trips must be pre- booked at least two hours in advance to avoid conflict with municipally regulated taxis.
Saskatchewan has two major intra-provincial carriers: the Saskatchewan Transportation Company, and Greyhound Lines of Canada, or GLC. The provincial government established STC in 1946. It currently serves 275 communities throughout the province. The vast majority of these communities are in rural Saskatchewan, which, like other parts of rural Canada, is experiencing a decline and an aging population.
GLC serves communities on the two major highways between the Alberta and Manitoba boundaries, Highway No. 1, or the TransCanada, and Highway No. 16, the Yellowhead.
There are seven smaller schedule carriers that interline with STC and serve a number of rural communities. Approximately 74 carriers currently have authority for bus charter operations. Of this total, 56 have both intra- and extra-provincial authority, and 18 have intra-provincial authority. Some of these carriers may have authority to operate long-distance charters, but may not exercise it. For example, STC does not aggressively pursue charter bus service.
Following the Second World War, much of Saskatchewan's population relied on public transportation. A sparse and scattered population made it difficult for companies to serve a large part of our province profitably. As a result, many smaller communities had no public transportation services.
The government created STC to ensure that communities had access to reasonably priced bus transportation. The STC expanded rapidly and extended bus routes to many communities without bus service by using the revenues from profitable routes to subsidize the less profitable.
During the 1980s, bus passenger traffic decreased by about one quarter across the industry. STC's passenger traffic declined 50 per cent from 1980 to 1995. In response to declining markets, STC initiated a phased transition plan that included introducing smaller, more efficient coaches to its fleet, reducing the number of buses in the fleet, reducing the number of trips made on some of its routes and enhancing capacity for freight service by adding trailers to its buses.
STC provides regular discounts to senior citizens, and a low-cost $55 per month medical pass for people who need to travel from rural communities to the bigger centres for prescribed medical treatment.
STC has also equipped several buses for the transportation of persons with physical handicaps. If a person requires a wheelchair-accessible bus service and phones ahead, STC will ensure that such a bus is put on the route for both the inbound and outbound legs of the trip.
In 1996, STC's operations were scrutinized as part of the Saskatchewan Crown review process. Analysis found that if the bus industry were deregulated, as proposed in Bill C-77, STC would lose an additional $2 million per year. STC currently has two passenger routes that return a profit, five that are marginal and 21 that are non-commercial, or money losers. To meet costs on the passenger side, STC receives a government subsidy of approximately $2 million a year for operating costs and $2 million a year for capital costs.
STC estimates that if it were to run its operations solely on a cost-recovery per-route basis, over 204 communities would lose all service. Rural Saskatchewan would bear the brunt of the loss.
In a deregulated environment, STC is likely to face stiff competition from the new entrants on its more profitable main routes, such as Saskatoon-Regina and Saskatoon-Prince Albert. This will reduce STC's capacity to cross- subsidize less profitable routes and place pressure on the government to increase its subsidy to STC. This would be difficult in the current fiscal climate in our province.
The alternative is to abandon several rural routes. This would have an adverse impact on the main users, such as senior citizens who no longer drive, lower-income people such as single parents, the unemployed and students. As you have heard from previous witnesses, the main users of scheduled bus service are the economically disadvantaged and, in Saskatchewan, the elderly.
My third point is a summation concerning potential deregulation. From the foregoing, it is evident that the main issues for Saskatchewan in a deregulated environment are a threat to reasonably priced access to bus service because of the inability of scheduled carriers to cross-subsidize their less profitable or non-profitable routes, the potential adverse impact on rural bus service because of low traffic volumes and the impact on seniors and the lower-income segment of the population who use the current system.
My final point is about future direction. I would now like to offer some thoughts on this as it relates to the industry in our province. Specifically, Saskatchewan supports the continued regulation of our bus service. However, if there is a move towards a more deregulated environment, we are prepared to modify our position with the implementation of a reverse onus test. Under this test, the onus would be on the carrier that opposes the application for scheduled service to demonstrate that the application would not be in the public interest. Currently, this onus is only on the applicant.
Saskatchewan can also agree to removing regulatory approval for routine schedule changes, provided the carrier notifies the public of the proposed changes well in advance.
The highway traffic board would continue to have the power to investigate complaints regarding schedule changes and service.
Saskatchewan will continue to require regulatory approval for schedule service reductions below the minimum stipulated in the OAC or abandonment of service.
Saskatchewan could support deregulation of charter bus service, if agreed to by other provinces, with adequate safeguards to prevent this service from undermining municipal licensing authority, mandatory safety, fitness and insurance standards for chartered operations.
Saskatchewan suggests the definition of bus as ``a vehicle designed and built to transport 10 or more passengers.'' Saskatchewan proposes that charter bus operations with less than nine passengers within a municipality receive approval from that municipality before they can offer service. These safeguards would go a long way to prevent charter operations from undermining or circumventing municipal regulation of taxi service.
Mr. Chair, thank you again for the opportunity to present Saskatchewan's perspective on the bus industry.
Mr. Jim Hadfield, President and Chief Executive Officer, Saskatchewan Transportation Company: On behalf of the Saskatchewan Transportation Company, I thank you for this opportunity to address the important issue of intercity bus deregulation.
I would like to start by bringing to this committee a brief history of our company and an overview of where it is today.
The Saskatchewan Transportation Company, STC, is a Crown corporation of the Province of Saskatchewan founded in 1946 by Order in Council. It has operated continually since then. In the 1940s and 1950s, and even through the 1960s, STC played a fundamental role in providing transportation in Saskatchewan. Our province, while vast in area, is relatively sparse in terms of population. There was a lot of need, whether medical, commercial or personal, for people to travel from town to town, or town to city. STC offered the most viable mode for this travel.
Things began to change in the 1970s, however. Shifting demographics meant an increasing depopulation of our rural areas and more people moving into the cities. That trend continues today.
In addition, increased prosperity for both the province and its residents saw a large upswing in private vehicle ownership and well-maintained highways on which to operate them.
The result of these factors was that fewer people needed STC to meet their transportation needs. The committee will know that STC is not alone. This trend has been noticed by bus companies across the nation, even across all of North America, and shows no sign of reversing. As a result of these changes, STC has been losing money for more than 20 years now.
In years past, attempts were made to address this problem by growing revenues with the introduction of such things as executive shuttle bus service and overnight courier service. All such attempts were disappointments.
In 1997-98, the company took a more fundamental approach: ``sticking to our knitting.'' STC is fundamentally a passenger bus service for rural Saskatchewan, and that is what we decided to concentrate on.
The first step was that the government wrote off the company's accumulated indebtedness to it and prohibited it from deficit budgeting in the future. Instead, it agreed to pay us a yearly operating grant. In exchange, STC agreed to cut its expenses to live within a grant ceiling. However, we were not allowed to cut expenses when it came to providing passenger service. We had to maintain the same level of service as existed in 1987. It was difficult to control expenditures when the largest expense, over-the-roads operations of buses, could not be touched. We met the challenge, however, and our overall expenses at the end of fiscal year 2001 were 23 per cent lower than in 1997. We did this by cutting and curtailing all discretionary spending, eliminating half our out-of-scope staff, and replacing our truck courier service with trailers attached to our buses. Our overall loss for 2001, including cash shortfall and depreciation, was $3.4 million, compared to 8.6 million in 1997. Our yearly operating loss is about half that experienced by the municipal transit systems in each of Saskatchewan's two major cities.
At the same time, STC, along with every other company, has faced inflationary pressure, the two largest factors being increases in fuel and staff costs. We have managed to absorb these increases for the most part. By 2000, we found the company was cut virtually to the bone, and there were no places left for cutting discretionary spending.
In 2001, the government gave us limited authority to make service reductions based on business needs.
We removed about 62,000 miles from service by reducing frequency to low-demand scheduled service and eliminated service to only one community. In 2002, we are planning to eliminate about 107,000 miles with no communities seeing their service eliminated.
At the end of 2001, STC was servicing 275 Saskatchewan communities on 28 bus routes, running about 3.3 million miles per year or about 5.3 million kilometres. We have 206 agents operating in rural Saskatchewan; we employ a staff of 237; we maintain depots in Regina, Saskatoon and Prince Albert; and we have service garages in Regina and Saskatoon.
We have a fleet of 38 coaches, ranging in size from 55-seat buses to 15-seat vans, four of which are equipped with wheelchair lifts that could be made available on any route upon request. That is STC today.
The question before the committee is: What would STC look like in a deregulated marketplace? Let me begin by saying that we at STC do not fear deregulation. We run a lean, efficient company that is prepared to meet any competition head on. We are not only a business. As a Crown corporation, we are also responsible for delivering on public policy commitments, and it is in this area that we believe deregulation could have the biggest impact.
STC currently has two routes that are profitable. There are another five routes that are marginal, which is to say that in any given month, they could be running at a slight profit or loss. The remaining 21 routes are non-commercial. Our revenue stream is evenly split between our passenger services and parcel express services. Express revenues more than pay for their operating costs and the profit is used to pay corporate overhead and, to a degree, subsidize passenger operations. The passenger revenues do not pay for passenger service expenses, which is why we require a government subsidy.
Other than Greyhound, there are five private companies offering bus service in the province, four of which interline with STC. They are small operations with 12-seat to 15-seat vans. There were others operating in the province, but they closed their doors because they could not make a profit. There are areas of the province where, in the late 1980s and early 1990s, STC terminated service and no private operators came forward to pick up the running rights. Simply stated, the anecdotal evidence would show that, should STC withdraw service from smaller rural communities, no private operators would come forward to take over that service.
In that case, STC would be ``cherry-picked'' on its two profitable routes and on some of its five marginal routes. While we feel we can be competitive with any private operator, the existence of competition suggests that you would see some loss of business. The only question is: How much of a loss? If there were seepage to completion, STC would not only lose its passenger dollars, but would also lose its freight dollars.
Our overall revenues would decline. Some of our services could move from the marginal to the non-commercial designation, and perhaps even from the profitable to the marginal designation. There would be less profit from parcel express to cross-subsidize passenger operations.
That would leave us with two unpalatable options: to further eliminate service in rural Saskatchewan or to ask the government for an ever-increasing subsidy. Despite all the best intentions of any government, it will reach the point where enough is enough, as with the federal government in the case of passenger rail service.
Were the grant requests to become too high, the government would be faced with instructing STC to abandon service or to close its doors. If STC operates as a Crown corporation that loses money and cannot meet its public policy obligations to provide service to rural Saskatchewan, the logical choice is to abandon it. Whether the government were to sell the company or close it down, I would suggest the results would be the same. In a very short time, Saskatchewan would have a bus service that would consist of one or two private operators with service on the Regina-Saskatoon-Prince Albert corridors, and possibly one or two small operations in the rural areas.
However, without STC in place to connect the province, there would be no depots to interline the services and no network of agents to coordinate customer needs. In short, there would be no bus passenger network in the province, with only a small group of people enjoying any service at all.
Fewer and fewer people seem to need our service each year. Consider those people who do rely on STC: seniors, students and the economically disadvantaged. While fewer of those people need our service each year, the ones that do, need it more than ever.
I would like to address the items brought up by my colleague, Assistant Deputy Minister Neggers. First, on the operating authority certificate or running rights, STC agrees with the position of reverse onus on the granting of running rights. Where we see the preservation of our exclusivity to be important to the company, we will do whatever we can to prove our case and to preserve our rights. In cases where exclusivity is not as crucial, we would be less likely to run into a dispute.
Concerning economic deregulation, STC is a Crown corporation, and the people of Saskatchewan demand a certain degree of transparency and accountability from Crown corporations. If the highway traffic board in Saskatchewan lost the responsibility to regulate passenger fares, it is highly likely that the government would regulate STC's fares through some other agency. This would put us at a disadvantage in a competitive environment, in that our fares would be regulated and those of our competition would not.
On the issue of safety regulation, STC feels very strongly that the safety of our passengers is our number one concern and so we apply a very high standard of maintenance and safety checks to our equipment. We would continue to do this regardless of the regulatory environment in the province. However, we do feel that it would be beneficial for the industry as a whole if rigid safety regulations were in force and enforced.
We are not opposed to the deregulation of charter bus service. Although we do charter work, it is not our primary line of business. We do not aggressively compete with private charter operators in the province, and all of our charters are with customers who approach us. We do not advertise for the business and we do not designate coaches or staff to the charter business. If some group approaches us and we have a coach and a driver available, we will gladly take the contract.
In recent years, the amount of charter business we do has been increasing, but this is because of STC's reputation for safety and reliability. We do not see where deregulation would have any impact on this line of business.
With respect to taxi operators, STC has no authority to operate within municipal limits and is not looking for such authority. As such, the point is moot.
This concludes my remarks. Mr. Neggers and I would be happy to answer any questions you may have.
The Deputy Chairman: On page 3 of your report, Mr. Hadfield, you say that in years past, attempts have been made to address the problem by growing revenues with the introduction of such things such as executive shuttle bus service and overnight courier service, and that all such attempts were disappointments. Why were they disappointments?
Mr. Neggars: The cost of operating the service was far greater than the revenues generated.
The Deputy Chairman: Did you market and promote the service?
Mr. Hadfield: I believe they did, but I was not with the company then. They heavily marketed the shuttle bus service, I believe. I do not know exactly what happened. It was an early morning return service to Saskatoon, and then the time was changed. I do not know why. When that happened, the response was negative and the service was abandoned.
The Deputy Chairman: You were basically a cross-subsidized business. Some people have suggested that if rural scheduled service has to be subsidized, the government should subsidize it directly rather than utilizing cross- subsidization. The government should contract a carrier to do it through a competitive tender. Have you considered this in Saskatchewan? What do you think might be the advantages or disadvantages of such an approach?
Mr. Neggars: We have not considered that at this time. The direct subsidy is through STC, and alternatives would need to be explored. We have not done that.
The Deputy Chairman: Do you think it would be a good suggestion to explore and put things out to tender? Would that not be good business in Saskatchewan?
Mr. Neggers: I would have to look at what advantages it would employ from a policy perspective, so I would rather not comment.
Senator Callbeck: Mr. Hadfield, on page 11, you mentioned that you do charter work, but do not aggressively pursue it. Is that because you are subsidized and do not want to be in competition with the private sector?
Mr. Hadfield: The present government believes that it is a sensitive area, and it is exactly the case that they do not wish us to enter into competition with the private sector.
Senator Callbeck: Is ridership going up or down? Do you have any figures on that?
Mr. Hadfield: Ridership is going down by anywhere between 4 and 6 per cent a year. We currently carry approximately 300,000 riders a year, and it has dropped approximately 5 per cent a year.
Senator Callbeck: What about your fares? Are they comparable with the train? I realize that there would be no train in many of these places.
Mr. Hadfield: There is no train service at all in Saskatchewan. Our fares actually are slightly lower than the Western Canadian average. We try to keep our fares in line with that. Most of our routes are short hauls, versus our major competition, for which of course we are also an agent, Greyhound Bus Lines. They have long-haul routes. Our mileage rates are the same, but there are some administrative costs that are added to the ticket. We try to keep the minimum charge low for the short-haul passengers, who in the majority of cases are seniors and the economically disadvantaged.
Senator Callbeck: You mentioned using smaller vehicles on some of your routes. Is there a problem with illegal vans operating in Saskatchewan?
Mr. Hadfield: Illegal vans? Not that I am aware of.
Senator Callbeck: You do not have people buying a van and taxiing people from one location to another?
Mr. Hadfield: If that is case, it is not been brought to our attention.
The Deputy Chairman: You said that other than Greyhound, there are five other companies offering bus service in Saskatchewan, four of which interline with STC. You indicate they are small operations, mostly operating with 12- to 15-seat vans. Are they profitable? How do their fees compare with yours?
Mr. Hadfield: Their fees are similar to ours. As far as I know, they are making money, or else they would not be in business. Most of them are owner-operated vehicles, so they have no staff. There was another service that actually terminated this year. The difficulty comes when there is a need for capital replacement of the equipment. The owner- operator has extreme difficulty in coming up with the necessary funds to replace the van and trailer.
The Deputy Chairman: What new public policies would it take in Saskatchewan to see the emergence of a lot of new small vans?
Mr. Hadfield: In my opinion, there would have to be a funding agency because operators could not do it on their own. It has been tried, and they failed.
The Deputy Chairman: More subsidization?
Mr. Hadfield: You raised that issue before, and I question that, because without STC's agency and depot infrastructure, you have a group of independents. You need that infrastructure to operate. I raise the example of someone travelling from somewhere in Southeast Saskatchewan, like Estevan, to somewhere in Northwest Saskatchewan, like North Battleford. How do they buy a ticket when travelling on a number of small carriers from place to place? It is the same issue with freight.
The Deputy Chairman: At first blush, you sounded as if you were a little top heavy with people, but I presume that most of your 206 agents are not full-time, eight-hours-a-day agents?
Mr. Hadfield: They are commissioned agents. They operate businesses within communities in Saskatchewan, and they provide the agency service more as a service to the community. There are few standalone agencies.
Senator Gustafson: I wanted to compliment you on a very good report and welcome you here. Coming from Saskatchewan, I know there is no question that we are in a unique situation. Without STC, we are in trouble in covering the necessary rural routes.
I want to commend you on the parcel service. We get parts out of Edmonton, Saskatoon and Regina on just about overnight service. That is very good service.
If this committee were to recommend deregulation, you indicated that it would not really have too much effect, or would it?
Mr. Hadfield: It would. On the face of it, as I said, we estimate two of our routes, and maybe up to five of the marginal routes, would be cherry picked. The question is why would we run service on the same route if somebody else were running it. That leaves us in a difficult position. Because of our public policy obligations, we would have to continue to provide service to the other non-profitable routes, and therefore we would require a greater subsidy because we would no longer have cross-subsidization from the profitable routes. It raises the question of whether the service should continue. If it becomes too costly for the province, then it would be abandoned and there would be no service.
Senator Gustafson: The whole issue of rural development and people living in rural areas will be a greater challenge in the future. That seems to be the indication.
Can the provincial treasury endure this kind of thing indefinitely? Did you say it was $3 million?
Mr. Hadfield: It is $2 million of operating and $2 million of capital per year, approximately.
Senator Gustafson: What is the answer?
Mr. Neggers: You have to consider that most of our submission on modal activity is primarily premised on market behaviour and competitive aspects, but there is the subtlety of providing service to disadvantaged locations where there is rural depopulation, shifts in medical services and access to other, alternative social requirements. When we look at the bus industry as the last bastion of hope for passenger alternatives, particularly in an aging demographic and a declining market situation, it does not seem to allow for greater levels of competition. The more competition you allow into this market, the more you dilute it and the more difficult you make it for service providers like STC to provide access at an affordable price to the people in those remote or rural communities. That is what this is all about from a policy perspective, from Saskatchewan's viewpoint.
Senator LaPierre: This has been very instructive. Everything from Saskatchewan is instructive. You said you had 300,000 users. What percentage of the rural population of Saskatchewan does that represent?
Mr. Hadfield: It is difficult to answer that because we have repeat users. We count our passengers based on legs.
Senator LaPierre: What is cherry picking? You said you would be cherry picked. I do not understand what that means.
Mr. Hadfield: It is slang terminology. Competition would enter the profitable routes.
Senator LaPierre: And your profitable routes are from Saskatoon to?
Mr. Hadfield: Regina to Saskatoon and Saskatoon to Prince Albert.
Senator LaPierre: In that corridor?
Mr. Hadfield: Yes.
Senator LaPierre: Tell me about your native communities. Does your company serve them?
Mr. Hadfield: We serve some native communities in Northern Saskatchewan. However, there are also some independents that operate taxi services to those communities. A scheduled service that departs at a certain time may or may not be convenient when there is a taxi service available. Quite often, the taxi service is used more than our bus service.
Senator LaPierre: In the Aboriginal communities?
Mr. Hadfield: Yes.
Senator LaPierre: Because it is more convenient for them?
Mr. Hadfield: Yes.
Senator LaPierre: Could the taxi service be an instrument that the Saskatchewan government could look at to ease the burden of subsidization in smaller communities? If this taxi service works for the native communities, would it not work for other small communities that are not necessarily Aboriginal?
Mr. Neggers: I am not convinced that the natives use the taxi service because it works for them. I think it is their only choice. In a lot of cases, our reserves are off the mainstream. In Southern Saskatchewan particularly, reserves are on the grid system and not the paved highway system. They are not close to rural centres. The only way that they can access major rural centres and the large urban centres is via customized services that taxis provide. Some of the reserves have their own taxi services. A scheduled service that is more on the beaten path is really not accessible to them.
Senator LaPierre: Do you do school busing? Do you take kids from a rural community to an urban centre to school? Is that possible?
Mr. Neggers: There are bus services.
Senator LaPierre: Your company does not do that?
Mr. Hadfield: No.
Senator LaPierre: You do not do any interprovincial routes except through your charter operations?
Mr. Hadfield: That is right.
Senator LaPierre: Why are you not more aggressive about your charter services? I am sorry you explained that it was because it would upset Greyhound.
Mr. Hadfield: It is not Greyhound. There are independent charter companies within the province. It is a very sensitive issue. Personally speaking, I believe there is an opportunity for our company in that area.
Senator LaPierre: Your masters allow you —
Mr. Hadfield: It is based on demand. We provide the service for those who approach us.
Senator LaPierre: Philosophically speaking, if I live in rural Saskatchewan, do I have a right to transportation paid for out of the public coffers, or should I find my own transportation and go wherever I want to go? Is it a right?
Mr. Neggers: It is not a right. It is the difference between having a choice and not having one. We make it clear that when people make a choice to live somewhere based on transparent decision criteria, so be it. People, industries and governments make choices based on available criteria. They make logical choices based on their best interests.
It is different when you live in a certain community, things are transformed and you have no say in or control over it. You are desperately trying to cope, in terms of your quality of life, with the constant expectations of communities about accessing particular markets and moving people to certain places to get needed services, such as medical services, that used to be there and are no longer. I do not say it is a right. However, I think there is an obligation to provide transitional services for people who are stuck in situations beyond their control.
The choice of the Government of Saskatchewan is that, as rural Saskatchewan transforms itself from circa 1946 to 2002 to 2025, it must be done in a meaningful way. With the aging demographic, our government feels there is an obligation to do that.
Senator LaPierre: When I am good in the Senate, I am allowed to go to the Standing Senate Committee on Agriculture and Forestry. From the few times I have been at that committee, I have learned that there is a great crisis in the rural areas of our country, and I suspect in yours more than any other. That is my judgment and may not be correct. Is it not therefore the responsibility of society as a whole to assess the viability of rural areas? If I talk here any longer, I will start evangelizing about broadband — I will not do that. Do you not think that is a responsibility that deregulation may seriously affect? If that is a political question, do not answer it.
Mr. Neggers: There is probably politics in any response that you could give. A couple of things have occurred in rural Saskatchewan or rural Canada. One is that technology has moved us to where we wanted to go, but we were not ready to go there. The result is that technology has liberated us to do more with less in rural Saskatchewan. Unfortunately, that more with less has had a profound impact on the communities and the way of life in rural Saskatchewan. Most producers and farm families understand that. However, it is difficult to accept when you have lived in a certain environment and that starts to dissipate.
When we talk about diversification and change, it is easy to change when you are accustomed to a certain way of doing things. The advent of the computer is a good example. If you grew up with a computer, you will be more apt to use it in your business. If you did not, are 55 years of age and looking at retiring, yet all your capital is invested in a certain way of doing business — and that has a low value now — it makes it difficult for you to exit. You must almost maintain it to survive. Some people are very locked in to a situation.
The government and public service must make sure that they do not put additional burdens on the communities and that they assist in the transition, to the extent possible. However, we have to keep in mind that government's ability to provide is limited by its revenue stream. A classic example is our use of STC, which is a good balance between trying to maintain a service and minimizing the cost to government.
Senator Gustafson: On the subject that was raised here, I think that our neighbours to the south have given us an example. The United States federal government takes a lot more responsibility for the rural areas in North Dakota and Montana — in fact, they take full responsibility. It appears to me that our provincial administrations do not have the wherewithal to deal with the highways and the vast challenges in a province like Saskatchewan or Manitoba. I think we are not far from the day when the federal government and provincial governments will have to recognize this and come to the table with some solutions.
Mr. Neggers: I think you would garner great support from us. Our view is that, living in Saskatchewan, we are just about as far away from the world markets as you can get in this country. We rely almost exclusively on an efficient transportation network, and it is intermodal — it is not just rail, air or road; they need to work together. There has to be healthy, robust competition between and within the modes. However, it cannot be a destructive kind of competition that promotes monopolistic behaviour, which we see in some of the modes.
Our hope is that if we all work together — it is not just governments but also the private sector — investing in the appropriate infrastructure and regulatory frameworks, we will be far better off. Our concern with the federal government is that it has responsibility for a number of the modes and takes vast revenue streams from them. However, it does not provide sustained investment in infrastructure, which is a capital asset that depreciates on an ongoing basis.
Roads, rail, airports, seaports all need ongoing reinvestment to stay competitive in the global marketplace. If we lose that, we become less than competitive; we lose our position, and it is hard to regain it.
From a Western perspective, particularly as it relates to Saskatchewan, cooperation with the municipalities, federal government, provincial government and industry is imperative in the transportation network.
The Deputy Chairman: I wanted to ask a supplementary to Senator LaPierre's probing question about the right of rural people in Saskatchewan to bus transportation.
You said the majority of people who use buses in Saskatchewan are seniors, the disabled, students and people without a lot of means. When you have cross-subsidization in an economically regulated regime, it seems users are subsidizing users. If the users are the disabled, seniors and people who do not have a lot of money, it seems fundamentally unfair and poor public policy to have the poor subsidizing the poor.
Could you comment on that?
Mr. Neggers: To a certain degree, your analysis is correct, except that we do put an additional $4 million of public funds into the operation of STC, $2 million for operating and $2 million for capital. There is some cross-subsidization, but there is also some direct subsidization by the government.
The additional $4 million annually put into the company reduces the degree of cross-subsidization there might otherwise have been.
The Deputy Chairman: Should the state not have every citizen contributing to help those who are disabled, and not just those who are in need? That is my question. What is the best public policy?
Mr. Neggers: In a perfect world? I am not quite sure.
In Mr. Hadfield's presentation, he talked about subsidization by freight. That comes from industry, and people who are utilizing the movement of goods. From a public policy perspective, it is always better, when we do subsidize, that it is for the greatest good and the contribution is from the greatest number within the province, and certainly not the disadvantaged. However, in this case, there is a direct commitment from the province and there is cross-subsidization from other sources, not just the users.
The Deputy Chairman: Is the province's commitment going to continue?
Mr. Neggers: I do not have any indication that it is going to change.
Senator LaPierre: Did you say that your profitable routes help subsidize your unprofitable routes?
Mr. Hadfield: That is correct. We only have two that are profitable.
Senator Phalen: When we were in Calgary, one of the companies there indicated to us that they were able to use large buses in some of the rural areas because of their parcel service. Is that your experience?
Mr. Hadfield: It is a delicate balance. We actually look at the amount of freight service that we provide on a particular route, and also at the number of passengers. Fortunately, we have been able to downscale the size of our coaches to 22 passenger, 33 passenger, and in some cases 15. We also enjoy the benefit of being able to pull a trailer. That has been able to satisfy the demand. Therefore, our operating costs for that unit are less than putting in a large coach on the run, where the freight would be in the belly of the bus, underneath it.
Senator Phalen: Do you carry mail?
Mr. Hadfield: No.
Senator Phalen: There is an increase in the use of 7-passenger vans in Nova Scotia, and there are no regulations covering them. The province has started to draft regulations in respect of those vehicles and institute safety checks. These vans pick passengers up at their home and take them from Sydney to Halifax, which is about 250 to 260 miles. They are charging about $25 or $30 for the trip.
Would that type of service work in rural Saskatchewan?
Mr. Hadfield: It is debateable. I believe that in some cases it might, but our experience has been, particularly with freight, that you have to have some sort of an interline agreement. You need the infrastructure.
When smaller carriers go from point A to point B, point B is not necessarily the destination. There may be a point C to which that carrier does not go. Who is going to point C from B? That is the problem we face. That is why I do not think the smaller operations would work. We do have smaller carriers presently, but they enjoy an interline agreement with us and, in turn, with Greyhound, to access that network.
Senator Phalen: Are you saying that people use them as feeder lines?
Mr. Hadfield: Yes. In the areas where service has been abandoned, our experience has been that no private operators are knocking at the door to take over that service because there are insufficient volumes.
Senator Phalen: Your vans carry 12 to 15 passengers.
Mr. Hadfield: They are operating on non-profitable routes, because that is public policy.
The Deputy Chairman: You said earlier they were making a profit.
Mr. Hadfield: They are still operating. I do not have access to their financial statements.
Senator Adams: You mentioned that some of the passengers are going to the hospital. We had a witness a couple of weeks ago from a seniors' organization, and they had difficulties in rural areas in getting to the hospital. How does the system work? You do not go right to the hospital in the city on the bus. Do you have any other vans that go to the hospital?
Mr. Hadfield: Our system allows for a companion to go with them. We provide the coach, which comes to our depot. Once they are within the city, there are a number of services available there. There is a taxi and a paratransit service. We do not get involved in that.
Senator Adams: You mentioned some of the reservations. Do you have scheduled services for some of the reservations?
Mr. Hadfield: We provide service to two or three up North, yes.
Senator Adams: How about the handicapped persons? Do you have any of your buses equipped for them? We saw a new one in Calgary, and it cost over $10,000 for the hydraulics.
Mr. Hadfield: We have four coaches that are accessible, and the use of those coaches is based on a request. Somebody would phone in and request that the coach be placed on the route on a certain date.
Senator Adams: Do you take more than one person, or do you have to have a separate bus for each one?
Mr. Hadfield: If there is one call, we send the bus.
Senator Adams: Can you take more than one?
Mr. Hadfield: Oh yes, we can take more than one.
Senator Adams: You mentioned freight. Do you contract with the post office?
Mr. Hadfield: No.
Senator Adams: I live in a small community. If I need parts for a machine, they come from Winnipeg by airplane.
Mr. Hadfield: If we service the community and they require a part, then the supplier would take it to our depot and we would ship it.
Senator Adams: Do some of the buses have a trailer?
Mr. Hadfield: Yes. The bigger buses have an undercarriage where we carry freight in addition to luggage, and if there is an over-abundance of freight, all our coaches are able to pull a trailer.
Senator Adams: In some of the smaller communities up North, say 50 people or so, the post office used to subsidize bringing in dry goods. Can you tell me what kind of margin you are making just on the freight, not including passengers? You do not have any other company that supplies stuff to the smaller communities?
Mr. Hadfield: The profit margin on the freight varies. It depends how many times the package is handled, because if an agent handles it, he gets a certain percentage or a flat fee for that. It depends on the size and weight of the package. Overall, our freight business is profitable and it pays for the administration of the company. There is a small amount, once that is covered, that actually cross-subsidizes the passenger side to keep our government subsidy down.
Senator Adams: We live in a rural area in the Arctic. When they bring in a 737 plane, it can only take about 28 passengers, and the rest is freight. I wonder whether you have competition in carrying to some of the rural areas.
Mr. Hadfield: The freight business is a deregulated environment.
Senator Gustafson: I wanted to thank you for a very good presentation, typical of all Saskatchewanians.
The Deputy Chairman: I think you can tell by the variety of questions that have come from all senators that you have stimulated them and provoked good questions, and I thank you for coming. It has been appreciated.
The next scheduled meeting of the Standing Senate Committee on Transport and Communications is next Tuesday at 9:30 a.m. and will be a continuation of the intercity busing special study.
The committee adjourned.