The Case For Overhauling STC

Commentary, Steve Lafleur (historic), Transportation, Uncategorized

During the holidays, many Saskatchewanians have made travel arrangements to visit family around the province. For some, that's meant taking a bus ride with the Saskatchewan Transportation Co. (STC). It is often the only option for non-drivers.

While STC's prices aren't astronomical, they're higher than they need to be. Given that non-drivers are disproportionately people with low incomes, high rates can be burdensome.

But rather than increasing subsidies, the provincial government needs a new model for intercity bus transit. It should balance the needs of riders on unprofitable rural routes with those on profitable intercity routes. And to do so, the government needs to become a purchaser, rather than a provider, of intercity bus services.

STC has a monopoly on intercommunity bus transit in Saskatchewan. Others – namely Greyhound – can only provide service between Saskatchewan and destinations outside of the province.

The only STC routes not operating at a loss are those between Prince Albert, Saskatoon and Regina. STC received an operating grant of $9 million from the provincial government in 2010.

Intercity buses in most of Canada operate without subsidies, though they are mandated to service unprofitable routes. An exception is Manitoba, where Greyhound received $3.9 million in 2010.

Like STC, Greyhound uses urban routes to subsidize rural routes. However, urban routes still manage to be considerably cheaper in the rest of the country.

A survey of 36 urban routes by the Frontier Centre found that Saskatchewan routes are the 10th, 14th, 17th, and 19th most expensive in the country when booking seven days ahead.

But because they offer no discounts for booking ahead, they are the four most expensive in the country when purchased 21 days in advance.

Interestingly, all routes originating in Regina or Saskatoon, but heading out of the province, are among the cheapest. These routes are operated by Greyhound.

The intercity bus industry has faced challenges outside of Saskatchewan. Greyhound threatened to withdraw services to Manitoba and northern Ontario if it didn't receive subsidies to make up for a $15-million loss. Manitoba capitulated.

Alberta has deregulated bus services, and Greyhound has eliminated some routes in the province. It is uncertain whether other companies will take up the slack. There have been encouraging signs thusfar.

Despite challenges, the industry in North America has quietly exploded over the past few years, propelled by the expansion of low-cost intercity buses traveling from downtown to downtown. It is often more convenient than taking conventional buses, trains or even flying. Not to mention much cheaper. It is not difficult to find tickets between New York and Washington, D.C., for less than $10.

But the expansion hasn't just happened in the northeast United States. Discount carriers have expanded into Ontario, as well as the U.S. Midwest.

The finance director of First Group (owners of Greyhound, Mega Bus and Bolt Bus) recently stated he believes this business model will work across the entire United States. Logically, there is no reason why it couldn't work in Saskatchewan.

Given that ridership of STC has declined during a period where ridership has increased by 22 per cent in the United States, there is no reason to believe intercity bus service cannot be expanded here under a better model.

The challenge is serving rural areas. Roughly 62 percent of vehicle kilometres provided by intercity buses in Canada operate unprofitably. Many only exist because Greyhound is forced to provide them in order to gain access to lucrative urban markets.

Rural routes are subsidized by urban riders, effectively making the urban poor subsidize the rural poor. This is the wrong approach.

If there is a compelling need to subsidize rural routes – and there is a strong argument for subsidies – it should be done through tax revenue.

But simply handing out subsidies to a monopoly won't ensure low prices. Competition is essential to ensuring competitive prices. In order to introduce competition, the government should put rural routes out to tender.

Under this system, it would have competitors bid on how little of a subsidy they would require in order to operate a given route. The bid with the lowest subsidy would win. In some cases, it would be zero.

Subsidies wouldn't be necessary for urban-to-urban routes or many suburban-to-urban routes.

The crux of the shift is that the government would change the meaning of the "C" in STC. Instead, it would become the "Saskatchewan Transportation Commission" and would be a purchaser, rather than a provider.

Given that Greyhound is able to operate in Manitoba with a $3.9-million subsidy, there is good reason to believe that Saskatchewan could reduce its subsidies to that level.

More importantly, Saskatchewanians would have access to cheaper, more convenient transportation.