Friday, August 20, 2010

Transport Econ 3: Brand Competition Among Jeepneys and Buses

A friend, Benson Te, posted a good article today, Can Government Prevent Disasters? It's about his reaction to new government moves to further regulate buslines and bus drivers in order to "prevent future accidents."

Benson observed that
regulators are obsessed with rules and NOT with pleasing the consumers. Yet rules don’t and won’t incorporate everything that is known for the benefit of society. The fundamental premise of which anew is the Knowledge problem and of the interest of diverse groups involved in shaping the laws.

So instead of looking for the welfare of their clients or the consumers, industry providers will be forced to pay attention FIRST to comply with the web of laws.

And he made this concluding statement,
you don’t need more government intervention, what you need is more competition and judicious facilitation of tort laws.

I agree with many points that Benson wrote, especially on the role of allowing more competition among more industry players. But I will suggest that we specify and qualify the term competition: that there will be brand competition.

Jeepneys, tens of thousands of them in the Philippines, compete with each other on various routes, but they have no corporate brand, they compete as individual units. Thus, they can be reckless and discourteous (like stopping in the middle of the road) and they risk not losing any credibility or brand reputation.

Bus lines compete on brand: Victory, Five Star, Philtranco, Penafrancia, Dagupan, Ceres, Jam, other local bus lines. When just one bus of any of those bus lines meet an accident, especially involving death to many passengers, the whole brand or the entire bus company is affected. Passengers would shy away from that busline, thinking that drivers of that bus company maybe over-worked and over-fatigued, or underpaid and have low morale, or the company hires undertrained and underqualified drivers, and so on.

With competition among buslines that keep their brand reputation, internal control among bus companies become strict. The pressure to bus drivers not to be involved in any accident -- zero accident goal -- is high. And this protects passengers.

Zero government regulation will be needed there as self-regulation is strict and efficient.

Back to jeepneys. I think either we abolish the Land Transport Franchising Regulatory Board (LTFRB), or we change its mandate to promotional, not regulatory, of transpo franchises. All jeepneys should belong to a jeepney corporation or cooperative, they should belong to a particular jeepney brand. A jeepney brand, say brand A, will have a distinct corporate or coop entity, will have one design, and can field jeepneys in various routes. Operators and owners of individual jeepney units will pay to the jeepney corporation or cooperative, the brand, and the brand will provide various services to the jeepney operators. Like continuing driver education and training, good maintenance of units, advertising the brand to attract more passenger loyalty, etc.

Passengers will remember the brand -- more courteous drivers, they don't over-charge, they follow traffic rules, they don't stop in the middle of the road, more comfortable units, drivers don't overload their jeepneys, etc. Those brands that have ugly record and have no reputation will go bankrupt. Or they will be forced to improve their services to regain passenger loyalty.

There is practically zero government role to improve the services of jeepneys. Government comes in only in disputes like accidents and there are casualties. Government enforces the rule of law -- laws to protect passengers' right to life, right to safe travel.

* See also:

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