Follow the U.S. lead on inter-regional bus service

To get out of its transportation crisis, Canada must consider the intercity network a public utility. (Pexels Photo)

(Version française disponible ici) 

Since 1981, the number of weekly intercity coach departures in Quebec has fallen by 85 per cent. The offer is seven times smaller than it was 40 years ago. In the province, as in the rest of Canada, intercity bus transport has been in crisis for decades. 

While urban public transit – metro, light rail, bus – is financed by governments as a fee-based public service, inter-regional bus transport (IBT) does not benefit from recurrent state support. IBT, which is almost entirely financed by users, is struggling across the country with the profit motive applied by private carriers, who are doing their best to maintain the service in the face of growth in the number of private vehicles per capita. 

This rate, which has almost tripled in Quebec since the 1970s, represents increased competition for other modes of transport, including inter-regional bus. Faced with increasingly loss-making routes, carriers have reacted as any reasonable private company would: by reducing frequency or eliminating routes that operate at a loss. The following graph shows the evolution of intercity bus service in Quebec over the past 40 years. 

Even though people are travelling more by car, provincial and federal governments have not changed their approach to funding the IBT. As a result, the offer has shrunk, unable to be maintained by private companies self-financed by ticket sales. 

IBT is thus the poor cousin of public transit policies, as the following table shows. This table breaks down the Quebec Transport Ministry’s main budget envelope. The underfunding of IBT in relation to urban public transit is clear. 

When the United States set the example 

Our southern neighbors aren’t known as the Mecca of public transit. And yet, unlike Canada, the federal government runs a IBT subsidy program funded by a portion of the proceeds from a 2.86-cents-per-gallon national gas tax. The Federal Transit Administration distributes funds to states that request them, with the aim of providing recurrent funding for loss-making intercity bus routes and thus preventing their disappearance. 

The State of Oregon has taken advantage of this program. Not only have routes been maintained despite the industry’s financial difficulties, but the cost of tickets for routes of similar distance is significantly lower than in a province like Quebec. Publicly funded IBT is more competitive with the car. This can be seen by comparing two similar routes: a one-way ticket between Montreal and Trois-Rivières (180 km) costs $47, while a one-way ticket between Astoria and Portland (150 km) costs US$18 (C$24.56).  

ITB by tender 

States such as California, Washington and Oregon practice an innovative model where, backed by federal subsidies, governments plan ITB through invitations to tender for service on identified routes. Unlike the Canadian provinces, which depend on private-carrier initiative to operate routes, some U.S. states organize ITB services themselves. 

Invitations to tender are often issued for routes that would otherwise not be served because they are unprofitable. Carriers submit an amount corresponding to anticipated annual operating deficits, according to a fare schedule prescribed by the call for tenders. In this way, ITB by tender frees this sector from the profitability requirement, and makes it possible to guarantee intercity transport service where the private market would otherwise see no interest. 

Every five years, several U.S. jurisdictions carry out a review of the ITB offering, with a view to identifying obstacles and improving planning, for example through the use of a competitive bidding model. To the best of our knowledge, this type of exercise, in which public authorities assume responsibility for the ITB offer, is unprecedented in Canada. Here, the provinces continue to rely on the private market, with the exception of Saskatchewan, which had a Crown corporation responsible for ITB, the Saskatchewan Transportation Company. However, it was dissolved in 2017. 

Liberalization might not be the best idea 

Most provinces in Canada use the regulated monopoly model, in which carriers are granted exclusivity over the routes they operate by a provincial regulatory body. 

In 2020, Ontario decided to liberalize the sector by ending the monopoly. Faced with a collapse of the sector accelerated by the pandemic, the government felt that the incentive of competition would stimulate supply. This market solution may well have some positive effects for profitable corridors with more sustained demand, such as those linking Toronto to Niagara or London. However, this approach is silent on peripheral and regional routes, which are suffering from a decline in TIA supply that cannot be attributed to the monopoly. 

In the literature on ITB, the example of Michigan is held up as a textbook case of liberalization. Beginning in 1976, the state introduced public subsidies to support routes that had become unprofitable, then resigned itself to liberalizing the sector six years later. The consequences of this policy soon became apparent: five years after liberalization, the network had shrunk by 40 per cent, accompanied by a 30 per cent reduction in the number of stops served. The ever-present risk of competition prompted carriers to turn to charter services and abandon scheduled services. The number of companies in this sector dropped from 12 to 3, while the number of charter operators rose from 55 to 120. Starting in 1988, the State of Michigan decided to change its approach, setting up several public support programs for IBT. 

The collapse of the IBT offer across Canada is less the result of carriers too accustomed to a monopolistic position on their routes than the consequence of the motorization of the population and the car-centric public policies on mobility and urban planning that have been adopted in recent decades. 

By proceeding with liberalization, Ontario is making the wrong diagnosis, since it assumes that the collapse of IBT is due to a poor choice of regulatory approach. Unfortunately, the problem goes much deeper than that, and mainly concerns the vicious circle of increasing car ownership per capita, which in turn leads to a reduction in the supply of ITB, further reinforcing car dependency. 

In short, the policy of liberalization is a convenient solution for a government that wishes to avoid committing public funds to support a ITB offer that is being destroyed by the automotive industry. However, this solution is not suitable for routes that are difficult for the private sector to profit from, regardless of the regulatory model. 

Mobility at the crossroads 

Climate change is precipitating an acute crisis in the transport system based around the private car. Should we renew this system in an electric mode, with public subsidies for electric car factories and purchase rebates, or rather transform mobility infrastructures for a mass transit model? 

Undoubtedly, if the second option is chosen, Canada’s public authorities must consider intercity transit as a public service. In this respect, our neighbors to the south can provide us with inspiration for reform. 

This article first appeared on Policy Options and is republished here under a Creative Commons license.