Why does the government grant monopolies to bus companies that cut routes?

OPINION: Greyhound just announced dramatic service cuts, but their most lucrative routes in this province will be protected. That doesn’t make sense for Ontarians in the north or the south, writes John Michael McGrath
By John Michael McGrath - Published on July 10, 2018
a Greyhound bus driving in Ontario
Bus routes are legal monopolies guaranteed by the Ontario Highway Transportation Board. (Nathalie Madore/CP)

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Anyone living in British Columbia, Alberta, Saskatchewan, or Manitoba who was planning to take a Greyhound from anywhere to anywhere else after Halloween is out of luck: the bus company announced Monday that it will be cutting all of its Canadian intercity bus routes west of Sudbury after October 31 of this year. In Ontario, the northwest is now looking for a new bus provider.

According to Greyhound, the decision is pure economics — the company says ridership in Canada has plunged 41 per cent since 2010 alone, and changes to its operations didn’t stanch the bleeding. It’s not just Greyhound facing these problems: earlier this year, Caribou Coach, a company that operates exclusively in Ontario’s north, folded in the face of high costs and dwindling revenues. Given the problems all over the industry, it’s not obvious who (if anyone) could replace Greyhound in rural areas. Firms such as Kasper Transportation, in the province’s northwest, are looking at filling some of the gap (Kasper has an existing partnership with Ontario Northland) — but one small company is no replacement for a massive brand like Greyhound.

Greyhound has now effectively pared its services back to the handful of the most lucrative routes in Canada. In Ontario, that means serving the 401 corridor from Windsor to Toronto to Ottawa and running some buses to south to Niagara and north to Sudbury (but no farther).

So why is Greyhound getting a guaranteed monopoly from the Ontario government if it’s cutting its services and focusing on the biggest money-makers?

For those who don’t know, Ontario gives intercity bus companies a pretty sweet deal: bus routes are legal monopolies guaranteed by the Ontario Highway Transportation Board — it’s effectively illegal to operate a scheduled commercial bus on the same route as any incumbent. (Technically, the board could grant permission, but that doesn’t happen.) This isn’t supposed to be a giveaway: the idea was that bus companies would plow the profits from more lucrative routes between big cities into the lower-ridership services rural communities depend on.

That’s the theory: in practice, though, Greyhound has made cuts, cuts, and more cuts to rural bus service while continuing to enjoy the golden goose that is the Toronto–Ottawa route. After the latest round of cuts, Greyhound’s rural service will basically not exist. But its monopoly on some of the highest-ridership routes in the country will — for now.

This doesn’t make sense. Riders on the 401 corridor deserve at least some competition between private bus operators to keep prices low and to spur companies to offer better service. An argument could be made for the old monopoly when Greyhound was serving more remote locations, but if that’s no longer happening, then intercity passengers in southern Ontario shouldn’t be bilked.

The previous Liberal government periodically talked about making changes to the province’s intercity bus rules and was vocally concerned about the impact of service cuts on rural communities. But with the exception of a modest expansion of Ontario Northland service into the province’s northwest, it made no significant changes to the way the province’s buses run.

The Liberals were wary of blowing up the existing set of rules because they were worried that rural Ontario would simply lose service altogether. Well, they left the old rules in place, and rural Ontario is still losing service altogether. Alberta did deregulate its bus services earlier this decade; Greyhound is leaving Alberta. British Columbia has route regulations similar to Ontario’s; Greyhound is leaving B.C.

But even if Greyhound isn’t extracting monopoly profits from its few remaining routes (a generous assumption, given that they are literally monopolies), it’s still obvious that the current regulatory regime isn’t working. Rural bus service is collapsing everywhere — both in provinces where routes are regulated and those in which they aren’t.

Premier Doug Ford and his minister of transportation, John Yakabuski, are inheriting a problem not of their making, but it’s one they can’t avoid: they’ll need to find some way to revive and preserve rural bus service across this province, and there’s basically no way to do that without spending a lot of new money. They could subsidize private operators directly, or they could expand either of the province’s two existing public regional transportation companies, GO and Ontario Northland. (I’ve made this argument before.)

When intercity passenger rail companies entered their death spiral in the 1960s, federal and provincial governments stepped in to preserve them, creating first GO and later Via Rail. Serving rural routes is legitimately expensive, and it’s likely to get only more so over time. The alternative, however, is leaving rural Ontario communities even more isolated than they already are. That would be an odd choice indeed for a government that was elected on a promise to work for the people.

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