Effect of different funding and operating models of public transport on cost and efficiency of bus and rail services

Mobility is essential to human function in a city, as one needs to use a combination of foot power, and public transport to perform various activities. Thus, alongside safety, health, education, and housing, a society needs to provide for individuals the ability to move within and between cities, and this underpins the essence of public transport. Thus, how should public transport be funded and operated for maximizing the utility to city dwellers as well as allowing for smooth and efficient operation of the economy? The perfect competition model, where public transport companies compete head-on in defining overlapping routes in maximizing profit on each route, may not be feasible given that in public transport, there lies the need to serve the entire population. Thus, the universal service requirement in public transport meant that a severe externality exists in operating transport companies: routes must be delineated by a state regulated body able to allow the entire population to be served by at least a bus route which feeds into a wider city level bus or rail network. Hence, public transport companies operate within a set of constraints, chief of which is the inability to maximize profits through route planning. Another important area is the procurement of buses and train carriages. Herein lies the perennial problem for regulators around the world: the use of buses and trains beyond the recommended life span increases maintenance cost, and raises issues of safety and overall quality of public transport. Therefore, a model of public transport where the state owns all the assets surrounding the provision of public transport such as rail network, stations, bus-stops and buses, but not maintenance bases, as well as auctioning of bus and rail routes to operators who tender based on their ability to meet various service requirements with a sound operating and business model. Fares would be set by a state regulatory body to ensure the average public would not be disadvantaged in their need for mobility to obtain work. Hence, public transport operators would not compete against each other, but would rather streamline their operations to obtain a profit for their shareholders, while maintaining service obligations to the public. Collectively, the economic disadvantages of route overlaps between transport companies remove the perfect competition model from framing public transport. Further, the need for connecting the entire population to the public transport network meant that inefficient and unprofitable routes would operate alongside profitable ones in a bundle auction of routes, where fares are determined by the state, which owns the public transportation assets.