ÆäÀÌÁö À̹ÌÁö
PDF
ePub

going to full-time jobs. Anyone wanting to go shopping or to visit a doctor or relatives in Tallahassee could not ride in one of Mr. Browing's vans.

Mr. Browning's modest odyssey through the twisted channels of the regulatory process was only one of scores of problems-unnecessary problems-that we, in Florida, uncovered during our review of surface transportation regulations last year. Until the Florida Legislature terminated transportation regulation in 1980, the state had controlled entry into the market, rates and restricted operation for half a century.

The application process alone could entail up to 78 separate procedural steps. As in the case of Mr. Browning, an application was open to challenge by bus operators already in business. Challenges were used to limit competition, to exclude potential competitors or to restrict their operation so that they were no longer an economic threat.

These challenges and the long drawn out application process made geting a certificate expensive and time consuming. One applicant in central Florida went through 44 hours of hearings and spend $30,000 in legal and accounting fees. He ended up with a route eight miles long. At $3,700 a mile, that's an expensive eight miles.

Even when an applicant survived the application process, he often found that his operating authority was bound in ways he had not expected.

For example, one south Florida carrier was prohibited from using buses equipped with air conditioning, reclining seats or restrooms.

Another carrier could use only two buses at one time and could not advertise its schedules.

A third carrier was allowed to run from Quincy to Chattahoochee or Tallahassee, but not between Chattahoochee and Tallahassee.

A fourth carrier was allowed to carry passengers from Punta Gorda to Fort Myers, but could not pick up or drop anyone off between those two points.

These are only a few examples of many instances where regulation had a bizarre impact totally unrelated to protecting the public.

Wrapped in such an all embracing blanket of regulation, the industry was shielded from market forces and was unable to respond flexibly to changes in demand. One area of the industry in Florida that desperately called for flexibility was charter bus service. We have nearly 30 million tourists a year in Florida; half of them do not bring their own cars with them. They are dependent on whatever mass transit we can provide.

Charter bus operators reported that charter service was so unsatisfactory that the tourist industry was threatened. Major attractions reported that the scarcity of charter buses prevented thousands of people from visiting them.

Senior citizens also are heavily dependent on charter service. They told us that for lack of available buses, many seniors could not even organize a trip to the movies.

This scarcity of buses was caused by the fact that to operate a charter service, a bus company had to run regular routes. It could not simply operate charters. This significantly restricted the number of companies capable of running charters.

The high costs of entry into the market and the fact an operator was protected once he got there combined to drive through the roof the price people would pay for an existing operating certificate.

For example, a package of charter bus routes in central Florida sold for a whopping quarter million dollars.

One single 18-mile route from Miami to Hollywood sold in 1977 for $200,000—or $11,000 a mile.

From all this the Legislature could only conclude that regulation was not serving the public as much as serving existing bus operators. The state was holding a protectionist umbrella over the industry, guaranteeing a monopoly to those already in the market and ensuring their well-being.

For the most part, the industry argued that regulation was the only dam between the state's economy and transportaton chaos. It confidently expected that total disarray would be the result of deregulation.

The industry predicted that a horde of untested operators, unsafe and unreliable fly-by-nights, would glut the market and abuse the public.

The industry predicted cut-throat competition among current operators who would battle ruthlessly for the most lucrative markets.

The industry predicted that bus companies would abandon small rural communities in their rush to capture more profitable urban routes.

But none of these predictions came to pass.

While there was some minor dislocation at first-which we anticipated-the market has forced a readjustment that is favorable.

With the expiration of entry controls, a large number of small operators have entered the market. But these so-called "gypsies" have not proved to be unsafe, unreliable or irresponsible. Competition, especially among charter bus services, has increased tremendously, but it is not the kind of cut-throat competition predicted before deregulation.

Some major carriers did in fact discontinue service to small towns and rural communities, but this has proven to be more of an inconvenience than a hardship for passengers. Regular route service generally is available within 9-11 miles of these towns, or small van services are coming into the market to handle demand where it exists.

Two federal studies, one by the ICC and the other by the U.S. Department of Transportation, have documented how deregulation has brought on increased competition. That competition has resulted in more flexible service and prices for con

sumers.

Let's look at what has happened with companies offering regular route service, such as Greyhound and Trailways.

Following deregulation both companies changed their routes extensively. Trailways dropped service to eight small towns, most of them in the Florida Panhandle, and picked up 10 others in the central part of the state.

It concentrated on express service between the larger cities, cutting travel time substantially, yet overall, it added 7.5 percent more miles to its scheduled routes. Greyhound did much the same, dropping some small towns and adding eight percent more mileage to its scheduled routes.

Both Trailways and Greyhound have loosened up their rates. Greyhound, for example, now offers an array of discounts to encourage ridership such as one for senior citizens.

One of our major concerns was the potential loss of regular bus service to small towns once carriers' certificates no longer required them to go there.

Our experience so far has been that this is not as significant a problem as we originally feared. The DOT study concluded that the loss of a major carrier to a small town was mainly an inconvenience. DOT looked at nine small North Florida towns that lost direct service after deregulation and found that each of them within nine to 21 miles of a Greyhound or Trailways route. Passengers were the most inconvenienced. Package service apparently has not suffered, since things once carried by bus now go by United Parcel Service.

The major carriers curtailed service in small towns because there was not enough consumer demand to justify the operating costs. For example, the operator of a charter bus line in the small town of Palatka, south of Jacksonville, told a DOT investigator that people there hardly noticed cutbacks in regular bus service because they weren't "bus oriented".

Many of these smaller towns that need regular bus service are finding it from small van companies like that of Mr. Browning.

Yet major carriers are not entirely unwilling to do business in small towns. After deregulation, Greyhound discontinued service to Jasper, a town of 2,200 people south of the Georgia line between Jacksonville and Tallahassee. The people of Jasper petitioned Trailways to come in and the company did.

Greyhound now maintains "flag stops", in some small towns now, such as Silver Springs outside Ocala, and passengers can wait at designated points and wave down a bus as it passes.

In Florida, we have remained sensitive to the concerns of the small towns. Had there been a real problem in them after deregulation, the state Legislature would have heard of it. Yet there has been no public outcry, no call for a return to regulation.

Deregulation has brought about increased efficiency and competition over regular bus routes, but it has had its most dramatic impact in the charter service area.

Charter bus service is undergoing an unprecedented expansion. New firms are proliferating: since deregulation the number of charter services has increased almost eight times, from 25 companies (only three with statewide operating authority) to between 150-200. Because there are no restrictions on entering the market, it is hard to keep a count of all the new companies and solo operators coming into the field.

Easy entry has not proven harmful. Instead, it has boosted competition and benefited consumers by providing flexible services at lower rates. Let me give you some examples of route flexibility. Between Gainesville and Tallahassee, there is a small state park called Ichetucknee Springs. It has a spring and a three-mile run that people come from miles around to enjoy. One of the things they do is float with the current down the run on inner tubes until they reach the end of the park at a high

way bridge. Until deregulation, people had to take two cars, leaving one at the bridge and driving the other to the spring head. But since deregulation, a number of van owners have appeared at the bridge to carry people on the five mile roundabout trip by road back to the spring, where they left their cars, doing away with the need to bring two cars. In the long run, this is more convenient, and saves people money and gasoline.

In another example, during our legislative hearings before deregulation, senior citizen groups testified that older people dependent on mass transit had tremendous difficulty getting charter transportation. They had trouble even organizing trips to the movies. A spokeswoman for a senior citizens group told me recently that charter buses are now readily available and at a lower cost.

It is now easier for large groups to plan trips well in advance, first because there are now more buses, and second, they no longer need to know exactly how many buses to reserve. In the past it had been necessary to know, otherwise groups could lose a substantial deposit when they canceled the need for a bus.

We have seen a great deal of pricing flexibility in the charter market, too. For instance, the cost of a 50-passenger charter from Orlando to the attraction Busch Gardens in Tampa, about a two-hour trip one way, fell from $350 to about $295.

With the removal of route restrictions on charters, they are now free to go anywhere in the state. This means that tour groups can go all over Florida on the same carrier. Before they had to switch carriers when they passed out of one's territory. The main beneficiaries of the expansion of charter bus service have been Florida's tourists. Many Latin Americans and Europeans arriving in Miami and Orlando, for example, are helpless without some kind of mass transit. Tour operators specializing in serving foreign tourists now are able to provide their own transportation and are no longer at the mercy of a regulated and restricted supply of buses. Hotels and motels also are now providing their own transportation services from airports at a reduced cost to the traveler.

The Florida Hotel and Motel Association is a strong advocate of deregulation. So is the Florida Attraction Association, which has such members as Disney World, Busch Gardens, Sea World and Cypress Gardens.

Altogether, the public is responding positively to deregulation. A survey by the Florida Chamber of Commerce found that the public favored deregulation by five to

one.

From all of this, I can confidently say that deregulation of the bus industry has benefited the public far more than regulation ever did. We have seen increased service, reduced prices and enhanced business environment caused by the entry of small businessmen into a once restricted market.

Service is gradually becoming available to the smaller towns that lost it after deregulation. Those routes that are profitable eventually will have service.

To impose the entire panoply of rate, route and market-entry regulation merely to ensure service to the four or five routes in a state that are unprofitable brings on a cure worse than the disease.

Moreover, lifting restrictions on the size of packages buses can carry provides further incentive for companies to continue serving small towns.

I see no reason for Congress to half-way deregulate bus operators as it did the trucking industry. Even half-regulation imposes costs on the public and burdens on the industry that are not justified when measured against the benefits of full deregulation.

The same kind of total phase-out used for airlines is suitable for the bus industry. Should you decide to fully deregulate, with I urge you to do, please consider the impact on the industry from 49 state regulatory programs. For deregulation to be completely effective, federal deregulation must be accompanied by state deregulation.

Otherwise the busing industry will face continued regulation from the states that will be conflicting and burdensome. We faced a similar situation in Florida. Our local governments proceeded to enact licensure and route restrictions after state deregulation, so the state found it necessary to preempt their power to do so.

The Florida experience has shown that deregulation of the bus industry can work to the public benefit without harming industry. If it can work in Florida, it can work throughout the country. The conditions in Florida are not so different from those elsewhere to make the state experience a fluke. Florida is a microcosm of the United States. We have sprawling urban areas isolated from each other by wide expanses of farmland, dotted with small towns and rural communities. Florida is not a small state. It takes longer to drive from the state capital of Tallahassee to Miami than it does to drive from Boston to Washington, D.C. If bus deregulation can work

to Florida's advantage, it can repeat the experience in other areas, like the nation's northeast.

We have discovered the government is a very poor allocator of market resources. It's intrusion into the marketplace should be limited to only extreme situations and should come only as a last resort. The interstate bus system is not such a situation. The federal government, by your action, can set an example for the rest of the country and free the bus industry from needless government regulation.

We should give the Henry Brownings of the nation and their customers a break. We will all be the better for it.

Senator DANFORTH. The next witness is Norman Sherlock, president of the American Bus Association.

STATEMENT OF NORMAN R. SHERLOCK, PRESIDENT AND CHIEF EXECUTIVE OFFICER, AMERICAN BUS ASSOCIATION, ACCOMPANIED BY CHARLES WEBB, LEGAL COUNSEL; WILLIAM B. GROSSMAN, PRESIDENT, NATIONAL TOUR BROKERS ASSOCIATION; WAYNE SMITH, EXECUTIVE DIRECTOR, UNITED BUS OWNERS ASSOCIATION; AND JOHN A. GRADY, PRESIDENT, BUS TRAFFIC ASSOCIATION

Mr. SHERLOCK. Good morning. Thank you, Mr. Chairman and members of the committee. I am Norman Sherlock of the American Bus Association, accompanied by our legal counsel, Charles Webb. Seated with me is Wayne Smith, executive director of the United Bus Owners of America, and Bill Grossman, president of the National Tour Brokers Association, and John Grady, president of the National Bus Traffic Association.

Seated behind me are four representatives of small bus companies: Mr. Robert Basse of VIP Stagecoaches in Missouri, E. L. Hotard of Hotard Coaches in Louisiana, Lowell Hansen of Jack Rabbit Lines in South Dakota, and Frank Mikulich of the Las Vegas-Tonopah-Reno Line in Nevada.

All of these people have traveled to Washington to express support for H.R. 3663. Regulatory reform is needed to modernize the law under which the bus industry has operated for nearly 50 years. We are in a bind today, reaping all of the disadvantages, and very few of the advantages, of regulation. Irresponsible regulation has weakened the bus industry financially and prevents it from adding and improving its service to the public.

We have been particularly hard-hit in two areas: First, discriminatory and arbitrary State regulation has devastated regular route bus service. States have forced bus operators to maintain financially unsound routes and schedules. Many States will not allow bus operators to charge the rates needed to justify the service. As a consequence, the public also suffers.

Bus operators, hamstrung by losses related to this kind of regulation, cannot sensibly assume the risks of adding service, fearful that they may have to maintain it indefinitely regardless of the ridership.

Second, incredible regulatory lag in rate adjustments have prevented the bus industry from earning the capital it needs to improve facilities and purchase new equipment. Rate increases which were denied by the ICC between 1973 and 1978 alone totaled $110 million. A 1-percent increase denied daily can cost the industry around $18,000 a day.

The problem of lag in relationship to inflation compounds the situation. No wonder we are playing catchup. Once again, not only our industry but the public, the traveling public, have been critically compromised.

H.R. 3663 is a thoughtful and a comprehensive response to the problems I have just explained. And I am pleased to tell you that all sizes and types of bus operators are firmly united behind this legislation. Our unified position is the product of 3 years of intensive debate, deliberation, and analysis.

While this bill meets the industry's needs, it is clearly responsive to the public need for a more competitive environment which can be expected to yield greater market choices in routes, rates, schedules, and quality of service.

Let me address briefly how H.R. 3663 resolves the first problem I noted, the burden of discriminatory State regulation. The bill more closely alines the relationship of State and Federal regulatory practice. It gives the ICC the authority to act on appeal in two areas: First, to determine whether or not financially unsound service constitutes an undue burden on interstate commerce; second, to determine whether or not continuation is in the public interest.

At the same time, H.R. 3663 assures a continuing role of the States by reserving the right of initial review and decisionmaking. This alinement can also cure the problem of discriminatory State rate regulation.

It seems appropriate to discuss more pointedly now the safeguards for small-community service in H.R. 3663. In this process, the bill requires the ICC to give special consideration to last-bus service in a community. No service can be terminated abruptly; rather, public hearings and notice are required. And if termination is advised, it cannot be put in effect immediately. In fact, a provision of the bill provides for continuation of up to 300 days.

At the same time, I would like to make sure you understand the bill makes it easier for small communities to secure or expand bus service. The bill minimizes the loss of service, whereas total deregulation, as some are proposing, certainly increases the likelihood of wholesale abandonment.

In terms of the second problem I mentioned earlier, ratemaking, H.R. 3663 gives bus operators the freedom to act independently and quickly to meet competition and to recoup inflationary costs. At the same time, collective action on joint-line rates and general-fare increases, as well as interline arrangements, are continued.

This responds to the need for bus operators to act together in order that passengers can be sold a ticket in advance at a known price and can travel throughout the country with convenience on different carriers. Smaller bus operators particularly feel that they would be lost without the rate bureau and the ability to interline. Viewed broadly, H.R. 3663 achieves very substantial deregulation. It puts the bus industry in a much more competitive environment in three ways: First, liberalization of entry is achieved, making it easier for people to go into the business or expand their service. The means of doing away with protective closed-door restrictions is provided.

Second, the scope of antitrust immunity for collective ratemaking is narrowed. The process is open to public scrutiny.

91-998 0-82--9

« ÀÌÀü°è¼Ó »