The background of this measure is as follows. In Japan, bus
operators, regardless of whether they are publicly or privately
managed, partially allowed other companies to operate on their route to reduce operating costs. However, for a route that an
operator wished to abolish because of a paucity of passengers
and difficulty in maintaining the route by cross subsidisation, the
operator was permitted to cut costs by delegating certain operations.
This is because the national government still desires to
maintain an organisational structure that combines entry regulation
and cross subsidisation, and it therefore has burdened the
existing bus operators with the responsibility for local networks.
In MCGL all the management functions are conducted in the
name of the relevant municipal government and they delegate
managerial responsibilities to a third party. Contractual operators
(subcontractors) are required to use municipal bus vehicles, garage
facilities, depots, and uniforms; in addition, they must operate
within the existing municipal bus fare structure. This contractual
structure is preferable, since it meets the abovementioned
government objective. In other words, reduction in costs is possible
without changing the previous ownership structure.