De-privatizing to increase competition?

Singapore's bus industry is about to go through a huge change, with the announcement by the Land Transport Authority (LTA) to take charge of all planning of bus routes and bus frequency. Commuters can also expect a change in the fares system, which will allow them to swap buses without having to pay extra charges.

Good news for frequent bus travellers? Probably so. Commuters now pay fares based on distance rather then by number of buses changed, ie. you pay lesser when switching buses to travel alternative routes than before. This would benefit those who currently have to switch between 2 or 3 bus routes to get to work/home/etc.

The LTA further claims that there would be more competition than before, since bus operators would now be invited to bid for bus routes planned by the LTA, and no longer have the right to plan and run routes they think are profitable. It is likely that routes planned by the LTA would provide a wide enough coverage with a higher bus-frequency to serve it's users. Singapore Bus Services (SBS) and SMRT Buses currently run a duopoly with a total of about 3700 buses (2800+ from SBS, 860+ from SMRT).

Transport Minister Raymond Lim said in this speech, "There are limited economies of scale for bus operations above a fleet size of 500 buses. Hence, our current bus industry of about 3,700 buses could potentially support more than the current two operators."

So is this a right move for Singapore's bus industry? Perhaps so, but is it what we would really want? If the LTA had to plan routes all over, does this also mean that many bus routes will change, and some current routes may have to be cancelled? Hopefully the LTA keeps most bus routes that SBS currently runs - I rely a little too much on them myself.

Also, would SBS be willing to give up a portion of it's current fleet just so to accommodate a competitor? SBS currently runs about 75% of buses in Singapore. How many more bus routes can we add to this already comprehensive bus network to support a third operator to run efficiently on the projected 500 buses? Does this mean that the LTA will control the number of buses each operator can run? Perhaps SBS could look at selling some of it's current buses to a new operator if such a scenario happens.

This move would lead to massive changes in current system, and many are eager to see how things would change. This might seem as a de-privatization of the public transport market, but I believe that this is perhaps the best way to introduce competition into the already regulated market - current barriers to entry is simply too high for a third operator to bear.

If there are plans for a decent-sized third operator, my hunch is that it would have to be government linked (again). I doubt a new-comer can afford to run a few hundred buses and fight with SBS/SMRT for the more profitable routes. Otherwise, the new operator would have to settle for a couple of routes with a smaller fleet - like how the newly regulated taxi market sees 4 new operators running a mere 4000 of the 23000 taxis in Singapore.

I guess everyone's waiting to see how this would work out in the future. One thing's for sure, with the new bidding system, you can definitely expect less cries for higher fares for 'unprofitable' routes.

Competition is good only if its existence isn't orchestrated.