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Bus Fare Too Cheap? Is There Another Point Of View?

by Heng-Cheong Leong, MyAppleMenu

There have been a lot of comments lately on the web, decrying Public Transport Council's (PTC) initial rejection of SMRT's new bus route service as being "too cheap". Imagine that: SMRT wanted to charge cheaper fares, but the government says no! (Note: The fare SMRT wanted to charge , and end up charging, is still more expensive than the basic fare; it is 'cheaper' only when compared with 'premium' services, which is usually between $2.50 to $3.00.)

But there is a vey clear reason why this is so on PTC's part: this particular route service is not classified as a basic service.

ComfortDelgro and SMRT are given duopoly status in operating basic transport services in exchange for a set of rules that govern the two transport companies. These rules are quite wide in scope, and range from train and bus fares, frequency of services, hours of operation, and route coverage. The two companies will need to get PTC's approval for any changes in fares and routes.

To protect the duopoly status of the two companies, the government imposed many restrictions on non-basic transport services, including the fare: "Premium bus services are positioned as niche services distinct from basic bus services, and have to meet the following requirements... Fares are at least 1.5 times the equivalent fare of basic public transport services."

Perhaps there is an alternative view point on PTC's initial rejection. Perhaps, one can see PTC as saying to SMRT: either serve this route as a basic service and earn back the money you can get from having more customers for the MRT network, or take the business risk to serve this route as a premium serivce at 1.5 times the basic fare.

One point of the basic transport fare structure is that passengers on popular routes subsidise passengers on less popular routes. By compromising on this basic point by "caving in" to SMRT, the PTC may be weakening its fare regulation framework. There are now more ammunition for ComfortDelgro and SMRT to start charging higher prices for non-HDB estates and other so-called niche destinations not covered by the current service standards.

I believe PTC need not resort to price-differentiation for premium services in order to protect the basic services, but that's what we have, and that's what PTC get to use.