We need to push bus market liberalisation further.

One of the EU’s common transport policy principles is the freedom to provide services in the field of transport. This freedom includes access to international transport markets for all EU carriers without discrimination on the grounds of nationality or place of establishment. The second Mobility Pack is encouraging the liberalisation of the inter-city bus market. Therefore, it is attempting to replicate that which has been a success in countries like Germany (and subsequently France after the Macron labour reforms).

In Germany, the coach usage has sextupled between 2012 and 2016, while ticket prices are simultaneously falling from €0.11 to €0.089 per kilometre in the same period, with discount prices going down from €0.05 to €0.036 per kilometre. This evolution is crucial for the development of improved transport services, and most importantly, for the living standards low-income households. The competition of buses in the inter-city transport business has increased competition between air travel, rail, and car-sharing, to the extent that consumers see themselves with increased choices and reduced prices on all fronts. Instead of giving in to interest groups in one sector or the other, which profit from restricted market access, allowing for the competition is the real way to improve consumer services quality.

Protecting a local provider for the sake of protectionism would negate the spirit of free trade within the Single Market. This will ultimately be the challenge if liberalisation of the coach market is settled as a desirable goal by the EU: market entry costs will be crucial in determining if the system works. Allowing for bus travel between city A and B is all well-intended. Still, suppose city B requires a special permit, paid in the local currency and subject to administrative approval. In that case, we’ll soon find ourselves once again with increased prices in favour of a state-owned rail company or a subsidised airline. Market entry costs cannot only be unfairly advantageous to local providers but may very well turn against them. Large coach-providers have the capabilities to comply with local market regulations and figure out rules and regulations, while small start-ups might not be able to do the same. 

Once again, market-entry costs would then limit the supply and give a specific provider preferential treatment. In the interest of the consumers, member states should commit to liberalise the routes and make it easy for new companies to enter the market and compete on it.

Bus transport providers will be aware that price increases will experience the market’s price-elastic nature, meaning that consumers respond swiftly to higher prices. This is, of course, related to the fact that the market provides alternatives such as air travel, car sharing, rail, or simply using your car. The fact that all options remain on the table is crucial for the price development in this sector.

As long as local regulators respect this principle, the fear that the current market landscape, or even a more concentrated market in which a handful of companies take over their competitors, would become predatory, is doubtful. In this instance, consumer choice isn’t only an argument of principle for the freedom of consumers. Still, it represents a guarantee against a market controlled by a handful of people or companies.

Ultimately, bus market liberalisation means that consumers can travel more efficiently and cheaply than ever before. It offers low-income households the opportunity to benefit from the same opportunities as everyone else. It helps reduce social inequality. 

However, challenges remain even as liberalisation progresses. Not all member states are on top of their game when it comes to reducing barriers, so more is left to be done to reach a fully integrated single transport market.

Originally published here.

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