Obstacles to competition in the bus sector are greater now than at any time since the 1930s and State subsidies for CIÉ group companies are very likely illegal under EU law, writes Tim O'Brien.

That is the opinion of TCD lecturer Dr Seán Barrett, who argues that the success of deregulation of air transport, as well as road freight and taxi services, demonstrates that restrictions should also be lifted on bus services.

Speaking to The Irish Times before the launch of the Economic and Social Research Institute's (ESRI) Autumn Quarterly Economic Commentary, Dr Barrett recalled that the subsidies given to Ryanair at Charleroi in Brussels were ultimately found to be anti-competitive.

Dr Barrett compared the subsidy Ryanair had received at Charleroi to the Government's subsidy for CIÉ and said he believed it was "very likely" that CIÉ's support was illegal under EU competition law.

"Even now, there is probably a bureaucrat working on the case in an office in Brussels," he quipped.

In addition to the "rapidly increasing" State subsidies to CIÉ, Dr Barrett said "the allocation of all of the National Development Plan public transport funds" was anti-competitive.

In his contribution to the Quarterly Economic Commentary on competition in the provision of bus services, Dr Barrett wrote that fares on the Dublin/Waterford and Dublin/Galway routes, where competition is available, were significantly less than fares on the Cork and Belfast routes where there is no competition.

Dr Barrett also pointed to the privately operated Aircoach service to Dublin Airport from the south of the city. The service carries an estimated 1.1 million passengers on two routes. "It does not require subsidisation or investment grant aid in contrast with its competing bus company, Dublin Bus.

"It operates a 24-hour, high-frequency service at a higher vehicle standard than its competitor with a peak frequency of five minutes," he said.

However, Dr Barrett said the regulatory framework imposed by the Department of Transport actually worked against the interests of services which do not require subsidies. New Aircoach services to be introduced this autumn are heavily restricted he said, noting that the new service from Portlaoise to Dublin is barred from arriving at Dublin Airport before 10 a.m. In addition, the Belfast to Dublin Airport service was not allowed to serve points south of the Border.

A further service between Dublin and Cork is allowed to bring passengers from intermediate points south of Portlaoise to Cork, but not Dublin, he claimed.

Dr Barrett argued that the very persistence of the private bus fleet "in a hostile licensing, operating and investment environment" should indicate that the private sector was more efficient.

It should at least, he said, "raise the question whether it might benefit bus users, the national finances and overall economic efficiency if governments were to abandon the policy of discrimination against the private bus sector".

Dr Barrett also said the fear that private enterprise would cherry-pick profitable routes leaving Bus Éireann with unprofitable routes serving small towns and villages had been dealt with in recent years by the rise of small bus services.

"There are small bus operators in most small towns and villages despite public policy not to give them public service contracts," he said.

Dr Barrett compared two consultants' reports on competition in bus services, commissioned by CIÉ in 1985 and 1992. He found that a number of arguments against competition in the 1985 study were not repeated in the 1992 study.

These included fears that bus deregulation would: lead to a decline in safety standards; adversely impact on CIÉ; cause redundancies; and cause the closure of cross-subsidised routes.

Criticising the CIÉ reports, Dr Barrett said a crucial flaw "has been a failure to analyse the highly successful examples of competition in Ireland between operators serving the same destinations and routes".

"Future studies of deregulation in any field in Ireland must cover far more ground, both intellectually and in the field. Otherwise, protected companies and the bureaucrats who serve them will continue to deny the wider economy the benefits of deregulation," he concluded.