First principles assessment

Why introduce changes to service levels?

Changes to service levels tend to be implemented for the following key reasons:

1. Improve the quality of service for existing customers - An increase in service frequency will reduce the schedule waiting time, the schedule delay time, excess wait time and overcrowding levels for existing customers. This will reduce the generalised costs associated with trips and help to maintain the existing customer base and in some cases generate additional trips.

An extension of service hours reduces the likelihood of a passenger being stranded and increases the opportunities to access particular goods and services. As such it is seen as an improvement of service quality by existing passengers and will help to maintain present patronage levels and generate further passenger trips.

2. Improve the quality of service to attract additional customers – Just as an increase in service frequency will help retain existing public transport passengers, so an increase in service frequency will help attract additional passengers by reducing the generalised cost of public transport travel vis a vis private travel. Similarly an extension to the hours operated will increase the opportunity to travel and make public transport a real alternative for a wider range of journeys.

3. To be cost effective – Many transport operators will offer different levels of service throughout the week to minimise their operating costs. Typically services tend to be lower in off peak periods (Monday to Friday), evenings and weekends. In the UK this has been the case for a number of private bus operators who have withdrawn from services, especially with regard to rural and evening services (Preston and Mackie, 1996). This has left local authorities to support replacement services.

4. To meet a social welfare criterion – Additional services may be operated to help achieve some kind of social aim such as overcoming social exclusion, improving levels of accessibility and achieving modal switch away from car (so reducing accident and environmental impacts). This tends to be the rationale behind local authority tendered bus service in the UK.

Demand impacts

When service levels change they influence the level of demand for public transport. In general, all other things being equal, an increase in service levels will increase patronage, whilst a decrease in service levels will reduce patronage. The size and direction of the change in demand following a change in service levels can be expressed in terms of a service elasticity and is defined as,

For example, if the service elasticity of bus demand with respect to service frequency is 0.4, and all service frequencies were to increase by 10% we would expect patronage to increase by 4%. The service elasticity is therefore a measure of the sensitivity of bus passengers to service levels.

The absolute size of the service elasticity conveys information on the sensitivity of demand to changes in the factor affecting demand and its sign conveys information on the direction of the change. Service elasticities are defined as inelastic if they are less than 1.0 and elastic if they are greater than 1.0.

A wide range of factors influence the size of service elasticity and these are listed below:

• Service levels – the lower the current level of service the more sensitive passengers will be to service level changes. Size of service level change – the larger the change in the service level the more sensitive passengers will be to the service level change.
  
• Income levels – those on low incomes are less likely to be sensitive to changes in bus service levels and more sensitive to changes in fares.
  
• Competition from other modes – strong competition from other public transport operators will make passengers more sensitive to fare changes.
  
• Demographic factors – The elderly and school children are more sensitive to changes in service levels.
  
• Journey purpose – travellers commuting to work tend to be less sensitive to service level changes, whilst leisure travellers are more sensitive.
  
• Urban vs Rural – passengers tend to more sensitive to service changes in rural areas compared to passengers in urban areas.
  
• Area - passengers tend to be less sensitive to service level changes in metropolitan areas compared with non- metropolitan areas.

Whilst these factors can be discussed in isolation it is likely that more than one of them will exert an influence at the same time. In general terms TRL (2004) reports a short run service frequency elasticity with respect to bus of around 0.4 and a long run elasticity of 0.7, with slightly higher figures for rail. These figures relate to mainly UK based evidence whereas the TRB report (2003) is based mainly on US evidence. This reports general service elasticities of around 0.5 in the short run, with most recent studies tending to group their observations around 0.3 and 1.0. The former figure tend to represent studies that are based on central city urban locations and the latter on suburban systems that have undergone well thought out expansion in a growing economy where public transport is well regarded. The expected responses and situations to changes in service levels are outlined below. We note that the extent of modal switch between bus and car will be dependent upon the service cross elasticity between each mode. Cross elasticities measure the change in demand for one mode as a result of the change in one of the factors associated with another transport mode (mainly fare/cost or service frequency). The size of the cross elasticity will therefore depend upon how demand for car will alter (and therefore how demand for bus will alter) due to a change in bus service frequencies.

Response	Reduction in road traffic	Expected in situations
	-	A change in service levels is likely to affect peoples' schedule delay time and so departure time.
	-	Unlikely to affect peoples route.
	-	Unlikely to affect peoples choice of destination. Although a poor service may deter people from travelling further afield and encourage them to access more local shops and services. If new service to new destinations were introduced then destinations may well alter.
	-	Very much dependent upon whether the change in service levels is positive or negative.  If positive then it is likely to generate more bus trips from existing users and new users.
		Very much dependent upon whether the change in service levels is positive or negative.  If positive then it is likely to make bus a more attractive mode of travel and so attract car users.  If negative then the opposite might happen..
		Likely to affect second household cars more.
	-	Most likely to move house for other reasons.

	= Weakest possible response,		= strongest possible positive response
	= Weakest possible negative response,		= strongest possible negative response

= No response

In the short run passengers facing a change in service levels can either switch modes or not travel. In the long run the number of options increases to include, switching destinations, changing jobs, changing homes, purchasing a car etc.

Short and long run demand responses

The direction of the responses depend upon whether service levels have increased or decreased. The latter will result in negative responses and the former in positive responses.

	= Weakest possible response,		= strongest possible positive response
	= Weakest possible negative response,		= strongest possible negative response

= No response

Supply impacts

Altering service levels will have a direct effect on the fixed, the semi-variable and the variable costs experienced by transport operators. These are outlined in Whelan et al (2001) below.

(a) Variable costs are costs that vary directly and immediately with output. For example, fuel costs vary directly with vehicle kms operated, crew costs may vary directly with vehicle hours etc.

(b) Semi-variable costs are costs that only vary partially with output. For example, vehicle maintenance is partly related to the extent that vehicles are utilised but there is some element of maintenance that will need to be undertaken irrespective of how intensely the vehicle is utilised. Similar arguments hold true for vehicle depreciation.

(c) Fixed costs are costs that do not vary immediately with output. That is, they cannot be varied in the short run. These costs include buildings and general administration.

Transport services are not divisible and so neither are the costs associated with them. For example, if a bus operator wished to increase a bus service from 4 buses per hour to 5 buses per hour in the morning peak period (7am till 9 am) it would not simply be a case of hiring an additional bus and driver for that two hour period. The additional bus would have to be either purchased or leased on a permanent basis and the driver hired as either a part time or full time employee. The fixed cost element of an increase in service would therefore be substantial, i.e. the bus purchase costs, vehicle insurance, vehicle taxes, depot costs, maintenance costs. In practise a bus operator might choose to increase the service level throughout the day on one particular route, or may increase the service level of one route during the peak and another during the off-peak.

The same problem of indivisibility is faced by other public transport operators and means that the ability of public transport operators to change its service levels, in terms of frequency, are restricted. It is much easier to extend hours of operation since existing vehicles can be utilised.

Financing requirements

The financing of an increase in service levels will tend to come from two main sources, the fare box and support from local/transit authorities. The make up of the funding will largely be decided by who makes the decision to increase service levels and the rationale for that increase. If the decision is made by the transport operator on purely commercial grounds then the operator will expect fare box revenue to cover the financing of the service increase. If a decision is taken by a local/transit authority to increase service levels on social grounds (e.g. to reduce social exclusion) then the costs of providing those services are likely to be met by a combination of fare box revenue and operating subsidies from local/transit authorities. These costs are also likely to vary according to the degree and/or type of regulation that is in place.

Expected impact on key policy objectives

Objective	Scale of contribution	Comment
		Increase in public transport service levels - reduction in the waiting times & overcrowding experienced by existing passengers and so a reduction in the  generalised costs of travel.  Public transport becomes a more attractive mode of transport and will encourage car users to switch, helping reduce traffic congestion. Note the amount of switching depends upon the cross elasticity between car and bus.
	-
		Increase in service levels - will lead to some mode switching from car and so help reduce air and noise pollution. Note the amount of switching depends upon the cross elasticity between car and bus.
		Extension of service - allows a wider range of services, goods & opportunities to be accessed. Additional new services may be focused in particular areas currently not served by bus or to new destinations that better meet user's needs.
		Increase in service levels - will lead to some mode switching from car and so help reduce accidents. Note the amount of switching depends upon the cross elasticity between car and bus.
		Increase in service levels - will lead to a reduction in the generalised cost of travel, some mode switching from car and so a reduction in traffic. This may free up time for additional work.
		Increase in service levels - if financed by the fare box then no burden is placed on the tax payer.  If financed through local/transit authority subsidies then a burden to the tax payer.

	= Weakest possible positive contribution,		= strongest possible positive contribution
	= Weakest possible negative contribution		= strongest possible negative contribution

= No contribution

Expected impact on problems

Contribution to alleviation of key problems

Problem	Scale of contribution	Comment
Congestion-related delay		Low cross elasticities between changes to service levels and modal switch will limit the impact on congestion from an increase or decrease in service levels.
Congestion-related unreliability		An increase in service frequency will help combat unreliability amongst public transport users.  Mode switching unlikely to have a major impact.
Community severance	-
Visual intrusion	-
Lack of amenity	-
Global warming		By reducing/increasing car traffic-related CO2 emissions.  This will outweigh any change in public transport vehicle kms emissions.
Local air pollution		By reducing/increasing car traffic emissions of NOx, particulates and other local pollutants.  This will outweigh any change in public transport  vehicle kms emissions.
Noise		By reducing/increasing traffic volumes
Reduction of green space	-
Damage to environmentally sensitive sites	-
Poor accessibility for those without a car and those with mobility impairments		An increase in the service period will increase the range of services, goods and opportunities open to people without a car.  A decrease will reduce such opportunities.
Disproportionate disadvantaging of particular social or geographic groups		An increase in the service period will increase the range of services, goods and opportunities open to people on low incomes without a car.  A decrease will reduce such opportunities.
Number, severity and risk of accidents		By reducing traffic volumes
Suppression of the potential for economic activity in the area		An increase in services will help improve the efficiency of the local road network through reduced congestion, especially where combined with other measures. A decrease in services will have the reverse impact.

	= Weakest possible positive contribution,		= strongest possible positive contribution
	= Weakest possible negative contribution		= strongest possible negative contribution

= No contribution

Expected winners and losers

Winners and losers

Group	Winners / losers	Comment
Large scale freight and commercial traffic		High value freight journeys - less time spent in congestion the greater the vehicle utilization, however a relatively small proportion of the journey distance is in urban conditions. Service increase reduces traffic congestion so is beneficial. This depends upon the size of the cross elasticities between car and bus.
Small businesses		Service increase - encourages trips to non local areas.
High income car-users		High incomes associated with high value of time and thus continued car use for high value journeys. These journeys will benefit from reduced congestion. A service increase reduces traffic congestion so is beneficial. This depends upon the size of the cross elasticities between car and bus.
People with a low income		Unlikely to have car access.  An extension of the service will increase the range of services, goods and opportunities open to them.
People with poor access to public transport		If changes in service levels are restricted to existing services then no impact. However, if new services are implemented serving different areas then a very positive impact.
All existing public transport users		Service increase -  will lead to reduced generalised costs of travel (e.g. reduced waiting and overcrowding) & more opportunities to travel if the service is extended.
People living adjacent to the area targeted		Service increase - they may benefit from reduced congestion and improved or increased public transport supply.
People making high value, important journeys		Reduced generalised costs of public transport and reduced congestion will result in valuable time savings.  A service increase reduces both so is beneficial.
The average car user		Reduced congestion will result in valuable time savings.  A service increase reduces both so is beneficial. This depends upon the size of the cross elasticities between car and bus.

Barriers to implementation

Scale of barriers

Barrier	Scale	Comment
Legal	Rail Based Bus(UK) Bus (other)	This will vary from local authority to local authority and by type of mode.  In most countries altering rail and air based public transport is extremely complicated, for technical and legal reasons, and takes several months to implement.  Technically it is much easier to alter bus service levels. The legal barriers will, however, differ depending upon the local transit authority in charge of providing/regulating the bus service.  In the UK (outside of London) bus services are provided and planned by the operators using a commercial criterion.  Operators can change the level of bus services simply by notifying their local traffic commissioner of the intended change a few days beforehand.  In most of Europe the planning of bus services tends to be the responsibility of the local transit authority.  Any changes to service levels tend to involve detailed discussion amongst affected parties and will take several months.
Finance	Rail Based Bus(UK) Bus (other)	Altering service levels has a large impact on costs.  The key issue is whether such changes are self financing or not.  In the case of the UK bus industry such changes will tend to be self financing and the cost implications will fall upon the passenger and not tax payers.  In Europe the financial burden will tend to fall on both passengers and tax payers. It will therefore be a lot more difficult to finance any increase in services and politically very difficult to reduce services.  This is also the case for rail based transport in the UK and abroad.
Political	Reduction Increase + Subsidy Increase + No Subsidy	Political pressures, following a change in service levels, are likely to bear down from a number of sources. A reduction in service levels will not prove popular amongst the general public, but might be seen as politically necessary for budgetary reasons.  Alternatively, an increase in service levels would receive support from the general public but not from all political parties if it mean an increase in government subsidies, e.g. some politicians might prefer government support to be used elsewhere, e.g. hospitals.
Feasibility	Rail Based Bus	Changing the service levels of rail based public transport modes would appear to face substantial technical barriers in that any single change has a significant network impact.  For bus based modes technical barriers do not exist and changes service levels is relatively straightforward.