The type of market regime and the different public transport authority responsibilities have a strong impact on the contractual design. In a franchising or “area regulation” market structure the contract for provision of public transport services can be said to represent “a balanced attitude towards the management of public services between the two extremes of a public monopoly on the one hand and total deregulation on the other hand …” In a deregulated market a contract may also exist for the provision of services which the market would not otherwise provide. The major types of market regimes are:

• Regulation - authority-initiated regime: In a regulated market, the public transport authority sets the rule for the operators. Within the ‘givens’ of such regulation of service provision the contract should be an efficient tool for the management of public transport services. Public transport authorities, which decide to delegate the delivery of transport services, must generally use tendering procedures (according to the EU procurement framework) under certain conditions depending on the amount of the contract.
• Regulation - market initiative regime: This is common practice in Germany, for instance, where public transport is considered to have to fulfil public service requirements and it is considered that the product design cannot be left to the market. Therefore the Public Transport Authorities focus on organisation, monitoring and regulation of the transport services. A large share of the public transport is not tendered, but is operated with a concession to run a specific service with exclusive rights for exploitation.
• Deregulation - market initiative regime: This is currently the norm in the UK outside London and Northern Ireland: commercial operation prevails on bus routes, according to what is financially attractive for the operator, and is in general completely deregulated without a formal contract between the public transport authority and the operator. However, there may be informal quality partnerships. Also, the Transport Act 2008 made it easier for local transport authorities to introduce both Statutory Quality Partnerships (SQPs) and Statutory Quality Contracts (SQCs), where the operator has to perform to certain conditions on a corridor or in an area.There are currently no SQCs in operation in the UK. Within commercial operation, operators are completely free to operate under their own conditions the service of their choice in terms of route, schedule, and tariffs, subject to fulfilling certain notification conditions. The public transport authority decides if these services meet the social needs or whether it is necessary to add non-commercial services. In this latter case, the public transport authority will use different types of contracts to organise the non-commercial services.

The different categories of regimes vary from fully competitive open entry regimes to strict authorisation regimes. However, market fairness requires transparency, and organisational development which is both sustainable and responsive to the needs of the travel market, in order to prevent monopoly characteristics.