[sustran] Santiago and regulated bus fares

[P. Christopher Zegras]

In response to Paula's comments on Santiago; services clearly detiorated
after the initial complete deregulation of the Pinochet regime.  But, this
is nothing more than an example that a public transport market cannot be
effectivvely completely deregulated, because of the well known problems of
public goods, externalities, etc.  

The democratic government recognized the problems brought on by complete 
deregulation (unsafe driving practices, cartel behavior, excessive supply....)
and has worked hard over the past decade to introduce targetted regulations
within an atmosphere still dominated by chicago-boy neoliberalism.  

It might be fair to say that the govt does not 'control' fares, but it is not
a simple caseof 'letting the market' freely decide.  The process of route
bidding in Santiago is a case of what the Bank would call competition for
the market, as opposed to 'in the market.'  while by no means perfect, it has
helped de-politicize fare setting (fares can only be raised according to
a detailed and transparent formula accounting for the financial inputs to
bus operations); furthermore, in real terms fares have remained stable in 
real terms since 1992 (declining substantially after initial
 implementation of the scheme in 91.).

Of course, wheter service is 'bad' depends on one's perspective.  chileans
often criticize santiago for having a 'first world' metro system, but a 
3rd world bus system.  The comparison is not entirely valid - the bus 
system far superior in service quality than that of peru or even mexico (in
my humble opinion).   Indeed, the high frequency and complete service coverage
make the system far superior - in  my view - than, for example, most
U.S. cities (i know, that's not saying much).  

The deregulated and private sector dominated system does intorduce challenges
to system improvmeents - such as fare and service integration, continued on-
street competition for passengers, and formalization of the companies.  Also,
while operators are subject to detailed specifications regarding operating
characteristics - frequencies, cleanliness, etc. - these are not necessarily
easily controlled (lack of regulatory staff, poor use of advanced technologies.
There are, hoever, important advances that have been made - emissions 
norms have been integrated into route bidding and over half the fleet now
meets epa91 standards.  the problem with poor quality these days stem
more from a declining passenger base, not necessarily the regulatory structure.

I don't think Chile offers an effective argument against deregulation per se;
rather, it offers a case against complete deregulation.  I would argue
that Chile's recent experience with "re-regulation" actually offers a good
example of what can be done and what still needs to be done.  The main
challenges to bus operations today is, of course, motroization and the loss
of client base, and urban expansion and the subsequent increase in operating
costs and decreasing revenue per km that implies.  The bus lobby actually
should be a logical choice for partnering in pushing for progressive changes:
they benefit from road pricing, dedicated infrastrucutre and bus priority
measures, and transit oriented development.  They also are a powerful voice
to be heard - since they still carry 45% of all travellers, they can 
effectively shut down the city.  The challenge of course, is getting them
to look beyond their short-term vision
to instead focus on the underlying causes of declining passenger ridership
due to motorization and getting them to focus on 
measures that can improve their travel time - the only way
that they can effectively compete with the car that otherwise
wins on service characteristics shown to be of great value to users (in
Chile, based on surveys): privacy, flexibility, comfort, music, security, etc.)
A simple  back of the envelope user operating cost analysis shows that 
auto users are willing to pay more  than double (after counting personal
travel time savings due to auto use) for these "personal" liberties...

Anyway, this has probably strayed too far off the original quesion...
sorry for rambling, 

cz   

Date: Wed, 15 Nov 2000 16:31:52 -0500
From: Negron Poblete Paula <negronpp at MAGELLAN.UMontreal.CA>
Subject: [sustran] Re: world bank urban transport strategy

Concerning Walter Hook's request about if transport services can deteriorate
even if fares are not regulated, I think of Santiago's case. In Santiago, buses
have been totaly deregulated since the 80's. The authorities don't control
fares at all, they're supposed to be let in "market's hands". But even if fares
are not controlled, service is bad, as a consequence of the competition between
buses' operators themselves. Since there's no control at all, vehicles are not
in good conditions, in part because operators want to spend the minimum in order

to offer the service.

___________________________
Paula NEGRON POBLETE
Faculte de l'Amenagement
Universite de Montreal