Bus industry transformation: A bright future ahead
THE shift to service contracts would likely entail the consolidation of big and small bus operators into large consortia. To facilitate the consolidation process, the Department of Transportation (DoTr) may require that each contract should be with an entity (contractor) that is able to deploy a minimum of, say, 500 buses from a combination of its own fleet, plus the vehicles of other associated bus operators, which would serve as subcontractors under the same contract. Only entities that achieve this minimum scale would be eligible to bid for a contract. This could be an interim arrangement until the time that the consortium members form a legal entity (corporation) that can be the contracting party for future contracts. When a service contract is signed by the DoTr and the contractor, the Land Transportation Franchising and Regulatory Board (LTFRB) can then issue a franchise or special permit to the contractor covering all vehicles under the contract.
Within each consortium, there should be the internal capacity to monitor and give instructions to each bus in real time, using a control center with modern information technology (IT) systems (computers, screens, software and data storage, etc.) that can track vehicle location and speed at any time using global positioning system (GPS) signals from each bus. Two-way communication between the bus driver and the control center would be very useful, since the driver can receive instructions at any time and also inform the control center in case of any emergency. This connectivity to a control center is crucial because the consortium should have a way to ensure that every bus performs according to the agreed service plan. Noncompliance of an operator with the service plan or operating guidelines will result in the imposition of financial penalties.
This capability to monitor all vehicles using IT systems will also permit the consortium to prepare and submit daily reports on its performance (dispatch times, kilometers traveled, number of round trips, etc.) of every vehicle in the fleet; such reports will be the basis for the consortium’s claims for payment by the DoTr. This also means that buses without GPS devices and real-time connectivity to the control center will not be allowed to operate.
To manage different consortia and thousands of buses in the system, the DoTr is likely to recruit a system manager. This is a firm that should have expertise in bus operations management in a city and in planning and monitoring routes and service contracts. The manager may recommend route changes, system enhancements and infrastructure development required to improve service quality and increase ridership. The manager will also work closely with operators to improve their capacities, so that they can deliver better services to commuters.
Consolidation is not easy, but there are proven models for agreeing on each operator’s shareholding in the new corporation. An operator’s share in the new corporation could be in direct proportion to the operator’s contribution to the total number of operational buses under the consortium. For example, if there are 800 operational buses within the consortium and an operator contributed 80 buses to it, that operator would be assigned 10 percent of the shares in the corporation. Of course, an operator may be entitled to additional shares for providing any assets in addition to the buses, such as a depot or control center. A consortium may also decide to have other shareholders who are not transport operators. As a shareholder in a corporation, the bus operator will have the option of exiting the firm by selling his or her shares.
The benefit of consolidation for the government is that it will be easier for agencies like the DoTr and LTFRB to monitor and regulate bus services. Instead of the LTFRB having to deal with over 100 different bus operators in Metro Manila, it would deal with only six consortia or fewer. Also, the move to service contracts would enable government to rationalize bus and jeepney routes and franchises, many of which are decades old, overlapping and inefficient.
Creating a new bus system
It will not be possible to open new bus services on all routes at the same time. In the short term, the priority will be on activating “mass transit” or “trunk” routes (these are the high-volume routes, such as EDSA, Quezon Avenue, Commonwealth Ave., Roxas Blvd., Taft Ave., etc.), where buses will need to be deployed with high frequency. Once such routes are operational, the next priority will be to introduce “feeder” or “branch” routes, which will enable passengers get to population and activity centers. Studies are ongoing to determine such routes for Greater Manila (under a route rationalization study), including the vehicle requirements and service plans.
Initially, the services could be provided for free or with “zero” fares. However, the government will need to move as quickly as possible to introduce automatic fare collection on all bus units under service contract, so that the services can become financially sustainable. The revenues collected will go to the government and will be used to pay for bus services that were delivered by operators under contract. If fare revenues are not enough to cover the costs of the service contracts, the government will need to subsidize the difference. To address any deficit, other sources of revenue can be identified by government to help finance public transport operations. These measures could include congestion charging (as in London and Singapore), vehicle and fuel taxes, and taxes on non-residential parking spaces in urban centers.
Robert Y.Siy is a development economist, city and regional planner, He can be reached at mobility matters. Twitter@RobertRsiy.