[sustran] What I think is meant by cross-subsidy

[Eric Bruun]

Alan and others:

The proponents of deregulation meant that each route should stand by
itself. This is very simplistic. My point is that routes are to some
extent arbitrary. One can design a system with parallel lower 
capacity routes or fewer higher capacity routes with feeders, for example.
Any given route might serve more than the community it passes through
if it is chosen to be a trunk line, or if historical investments made
it so. Other routes may then be somewhat isolated and perform relatively
poorly. But should the affected community pay extra because of decisions
that were taken for the greater good? Maintaining a minimum frequency 
and/or using a joint fare with a connection is just a way to provide
equitable service to all, not a harmful subsidy.

What was not mentioned about the UK deregulation is that ridership 
continued to decline at the same time that service hours increased. The
network was dissolved and the "cross-subsidized" routes lost service while
the "profitable" services had excess capacity. The only good thing 
I can see from deregulation is that some smaller buses were put
on some of the lower performing routes to help maintain service,
something that should have been already done under integrated networks,
but for which incentives perhaps were lacking.

Eric

On Thu, 9 Nov 2000, Alan Howes wrote:

> Oh whizzo! A debate!
> 
> <climbs on soapbox>
> 
> Broadly I agree with what the WB are saying - and I am neither conservative
> nor an economist. Of course there is scope for some cross-subsidy within
> transit networks - but you have to be clear where and why. Who is
> subsidising whom in Toronto and Montreal? (And do any routes actually make a
> _profit_ that's available for cross-subsidy?) If it's low-income users on
> high-volume lines subsidising high-income users on low-volume lines, then I
> would venture to suggest that something is wrong - and this is what I read
> the WB as saying. If anyone should bear the cross-subsidy, it should be the
> car users in the high-income areas - especially commuters. But cross-subsidy
> is a very blunt instrument compared with a proper road user charging system
> that, as nearly as possible, reflects the true infrastructure, operational
> and social costs of transport use.
> 
> It might come strangely from one who works for a transport firm, but IMO one
> of our main problems is that [mechanised] transport is just too cheap, in
> just about every country of the world - and this is even more true in
> less-developed countries than in developed ones. (In this context, North
> America is less-developed!) It is certainly the case
> here in Saudi. If car travel is too cheap, it may be tempting to reduce
> transit costs to match - but all that does is to encourage travel-dependency
> at the expense of more rational land-use / transport patterns. (To the
> extent that here, for instance, there isn't even a decent postal system -
> people drive to pay their bills, drive to deliver messages, drive, drive,
> drive ...)
> 
> When I worked in Glasgow in the early 80s, the residents of the highly
> deprived area of Easterhouse, who used buses in the absence of anything
> else, cross-subsidised the rail service to Milngavie and Bearsden, one of
> the most prosperous areas of the city! (Guess where the elected
> representatives lived!)
> 
> And here at SAPTCO in Saudi, we make profits on the (pretty good) intercity
> bus
> network which subsidise the (lousy) urban bus services. But why should the
> intercity users subsidise the urban users? And it makes us less
> competitive - and while we in theory have a modal monopoly on intercity, (a)
> the theory doesn't hold good, and (b) what about the other modes?
> 
> I am quite happy to accept the need for cross-subsidy across time zones
> within a corridor. Also, I would accept cross-subsidy between routes serving
> the same residential neighbourhood - e.g. a route to downtown supporting a
> route to a hospital. But beyond that, I need a lot of convincing.
> 
> And in fact, the ridership losses in the UK were mainly a continuation of a
> previous trend. It's not really true that there was a dismantling of route
> networks - what there was was a substantial increase in fares in real terms,
> and a dismantling of network ticketing. Both undesirable - but not
> necessarily a result of reduced cross-subsidy. (In Metropolitan areas
> outside London, over the period 1985 to 1998, fares went up by 60% in real
> terms, while patronage declined by 40%. in the UK as a whole, in the period
> from 1950 to1985 (pre-deregulation), patronage went down by about 67%.) I
> have a .ppt presentation with an overview of UK experience if anyone wants
> it.
> 
> <climbs down from soapbox>
> 
> --
> Alan & Jacqui Howes, Riyadh, Saudi Arabia
> (also Perthshire, Scotland)           [MSOE]
> alanhowes at usaksa.com      work: howesap at saptco.com.sa
> 
> ----- Original Message -----
> From: Eric Bruun <ebruun at rci.rutgers.edu>
> To: <sustran-discuss at jca.ax.apc.org>
> Sent: Thursday, November 09, 2000 12:50 AM
> Subject: [sustran] Re: WB urban transport draft strategy ex.summ.1
> 
> 
> >
> >
> > RE.  Paragraph xiv. I don't agree with this concern over
> > "cross-subsidization".  This comes from conservative economists
> > who don't understand transit networks. Look what happened in the
> > UK when they dismantled networks --- large ridership losses.
> >
> > The two most heavily used systems in North America, Toronto and Montreal,
> > are "cross-subsidized".
> 
> 
> 
>