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APPENDIX "O."
China Motor Bus Company, Limited, in relation to its application to embark on intensive and uneconomic competition with Tramways Service.
MEMORANDUM BY MR, A. B. STEWART, CHAIRMAN, HONG KONG TRAMWAYS, LIMITED.
1. When I appeared before the special Traffic Committee under Mr. Hallifax in 1931 I specially pressed the view that the principle of tendering for the exclusive right to operate a public utility like a bus service by a percentage on gross receipts is contrary to business ethics and is actuarially unsound.
2. Nevertheless the Tramway Company did tender in accordance with the conditions laid down and offered a 12% Royalty on the gross receipts. The tender was unsuccessful and the franchise was awarded to the China Motor Bus Company and within four months of commencing operations the Bus Company was applying for extensions of routes. This application went before the Executive Council and was refused after my Company had been consulted as to the effect these extensions might have on the Tramway receipts.
3. In the present instance, the first intimation we had of the position was from a report in a Chinese newspaper and it is rather difficult to understand why this Company was not formally advised as in the previous instance of contemplated changes which were likely to affect them to a very serious extent.
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4. It be difficult for the lay mind to immediately appreciate the dangers of uneconomic and wasteful competition but we have only ourselves to read Sec. 72 of the Road Traffic Act of 1930 to fully realize that the application now submitted by the Bus Company would not be granted by the Traffic Commissioners.
This Company has been operating for 31 years and- the circumstances being what they are protection over its routes would certainly be accorded.
5. When motor buses were introduced on to the streets of Hong Kong in 1928 two definite conditions were laid down regarding minimum fares. One read:-
"The service to be for one class of passengers only," and the other :- "Fares to be not less than 1st class fares for the time being on the trams."
I claim that this principle was strictly followed in 1933 when in the particulars and conditions covering the tenders for the bus franchise the scale of maximum fares-so far as those routes competing with tram routes are concerned -were a complete blank in the column marked 2nd class fares. This was relied upon-not only by my Company but by at least one other tenderer-as implying that there would be no 2nd class fares on the bus routes competing with tramcars and that the Tramway Company would thus be accorded equitable and fair pro- tection just as it would have received in England in similar circumstances. desire to stress that at the time tenders were invited fares less than 10 cents were never contemplated and for that reason should not be countenanced by Government.
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6. Should the Council not decide to countermand the sanction in this respect which it is alleged to have given four results will soon follow
(a) Loss to my Company
(b) Loss to the Bus Company.
(c) Loss to the Government (through royalty reduction) and
(d) Ultimately, an increase, all round, in fares.
7. Any estimate of the probable loss to the Tram Company on the one hand and the Bus Company on the other would be largely guess work but I am of opinion that both must inevitably suffer due to the Bus Company with its smaller vehicles carrying at an uneconomic rate an unknown number of passengers which the larger and more suitable tramcars hitherto carried at a profitable rate.
8. A problem somewhat similar to the problem now under review faced Northern Ireland 3 or 4 years ago and several bus companies running into Belfast were doing so at fares which were too low to be permanent. A tribunal consisting of eminent men such as Sir William McLintock, Mr. Frank Pick and Sir Josiah Stamp heard exhaustive evidence on the subject and I now quote from part of the final report:-
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With those who have to pay increased fares at the present time the Tribunal have every sympathy, but they feel it their duty to point out that the present conditions in Northern Ireland in regard to fares could not possibly continue. The old conditions of destructive competition "under which fares were reduced to their present low level have resulted in
indefensible anomalies
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Although they may not know it, the public of Northern Ireland are con- "fronted with the certainty that, unless the fare basis is revised, there must inevitably be a great withdrawal of facilities and steady and progressive "deterioration of the efficiency and stability essential to the passenger road transport services. Sir Josiah Stamp in his evidence before the Tribunal dealt with the fallacy inherent in the popular view, that it is both economically and socially to the advantage of a community that goods or "services should be provided on a low basis of charge which does not afford an economic return. That is to-day precisely what the passenger road transport industry in Northern Ireland is doing. Under these conditions "it would be well that the travelling public should realize that there is no escape whatsoever from the inevitable result so clearly indicated by Sir Josiah Stamp that the passenger road transport undertakings must obtain "the necessary increase in revenue to put them on an economic basis or else inevitably fall into decay. It is impossible that road passenger trans-
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port undertakings should go on indefinitely living on capital as so many of them have been doing for several years past."
9. My Company can carry all the 2nd class passengers without the least difficulty. To emphasize this I might mention that Hon. Mr. T. H. King (the then Acting Inspector General of Police) in 1932-the year of our heaviest traffic-remark- ed in a letter that he thought we had more cars on the road than was necessary. Meanwhile the number of second class passengers has dropped by about 14 millions.
10. Surely the question of the Tramway franchise, Royalty and roadway obligations cannot be ignored. When those who concluded the terms of the Tram- way Ordinance of 1902 agreed the conditions it was not contemplated that-33 years later--after bearing the heat and burden of the day and developing the
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