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Canada's secret national bus service
The distance between communities in Canada is often pointed to as the reason we pay the highest rates for telecommunications and air travel, and why Canadians have such limited options to traverse our country. But this distance should be the rationale for a deeper public commitment to mobility and access for communities of all sizes in Canada.
Greyhound Canada has announced it will end service on all routes in Ontario and Quebec due to low ridership. Regional bus travel is a declining market. When it comes to bussing, it is unclear whether Greyhound Canada’s announcement is the direct result of a market or policy failure. The firm wasn’t eligible for a “bail out” in the pandemic because it’s not Canadian.
“Competition also played a role. The company ended its operations in Western Canada in 2018 amid deregulation measures and after subsidized competitors like Via Rail disrupted Greyhound’s near-monopoly on intercity transport.”
Private monopolies have failed us, the public sector needs to create a new alternative. Perhaps policymakers need to abandon the “market failure” framework and think more about how and when governments can create and sustain competition. Nationalization and competition are not antithetical to each other. Rather, they are complementary. Nationalized businesses can act as effective competitors to current oligopolists and monopolists, especially for markets with high investment costs (high barriers to entry).
The counter argument is that nationalization would drive out competition because private businesses don’t want to compete with the government because it is too capitalized and can afford to run efficiently.
Nationalizing key businesses, like transit, can increase the geographic scope of markets, making them more competitive. Take this example of Rusty - a real person and not a pastiche. We met Rusty in this CBC News article about how “Saskatchewan made a ‘fundamental mistake’ treating STC as a business, not a service: researcher.”
*The STC was the Saskatchewan Transit Company.
“Rusty Cameron owns Rusty's Wild Rice near Hudson Bay. He has seen sales cut roughly "in half" since the STC closed, as those ordering his product are not willing to pay the more expensive freight, which jumped from roughly $25 with STC to about $50 through the mail.” "It's basically doubling our freight," said Cameron, who was headed out to work in the rice fields on Friday morning."The price of the rice is great. They love the price of the rice but the price of the freight, they just can't handle. That's what's really hurt us."
More competitive markets have benefits for both consumers but also governments; allowing them to get the best prices and reduce costs. It was anticipated that the STC’s closure could lead to higher shipment costs for patients, medical samples, drugs, and equipment related to a host of government programs.
We know from the Bell-MTS merger in 2017 that when there are four competitors in a market, prices are lower. This is because there is more competitive rivalry between the firms, and why many want a fourth carrier in the market. But rather than relying on foreign investment to provide this, governments can create the fourth carrier. We can use public funds to create effective competitors in oligopolistic markets to achieve the competitive rivalry we need.
But perhaps the question of nationalization is less about assigning a distinct role to the government and more about creating an organization that is accountable to the public, charges fair prices, and provides competitive rivalry that keeps telcos in check.
The same principle could apply to transport. There is likely some substitution between bus, train, and flights for some people along certain routes.
Could a public bus company act as an effective competitor against the airlines for these routes?
Some have called on the federal government to create a national bus service that will act as an effective regulator against other transportation services. Canada already has one - sort of. It’s Canada Post.
Avid Regs to Riches reader Graeme Moffat tipped us off that Switzerland merged remote postal delivery with motor coaches in 1906 (!) in what is now called the PostBus. The Swiss Post parent company provides regional and rural bus service throughout Switzerland and also in France, Germany, and Liechtenstein.
Perhaps Canada Post could procure a fleet of domestically manufactured “green” PostBuses (maybe from The Lion Electric Co) with 8-12 seats and the kit for mail and packages. COVID 19 has had a significant impact on revenue and costs for Canada Post, and public transit fares could be a help.
This idea has been tossed around before (2018). Since then, there are even *more* parcels being delivered through Canada Post and UPS, and far fewer buses. More people are also moving to less-urban areas, potentially creating a little more demand for local public transit options.
Governments have a role to play in creating and shaping markets. Indeed, governments always have been and always will be participants in markets. They also have a role to play in creating and maintaining the infrastructure that we need for competitive markets. *All of those sentences ended with “markets.”
Vass Bednar is the Executive Director of McMaster University’s new Master of Public Policy in Digital Society Program.