A theoretical analysis of business models for urban public transport systems, with comparative reference to a Community Franchise involving Individual Line Ownership

This paper reviews existing business regimes in public transport in the broad areas of economic theory of competition, ownership and regulation. It then contrasts those existing regimes with the specific case of a Community Franchise (CF) business regime with Individual Line Ownership (ILO), as currently exists in the ski lifting industry and as it may potentially be transferred to an urban public transport context. Traditional economic theory is supplemented by considering theories from human psychology, complexity theory and the evolutionary effects from more traditional theoretical understandings of equilibrium economics. This theoretical review highlights the idiosyncrasies of the CF/ILO business regime. Existing regimes are shown to have incentives that do not necessarily benefit consumers of transport services, but are conducive to unintended outcomes shaped by political and commercial forces. The CF/ILO regime, because of its particular structure, is shown to be less prone to these same forces and more responsive to consumer demands with potential benefits for passengers and government transport objectives. As well there is shown to be more incentive in the CF/ILO to manage capital expenditure in a prudent fashion.