The past 20 years of deregulation in the bus service have shown that it does not work and cannot be made to work, MPs have warned.
The transport select committee says the current system of competition is "clearly failing many non-core routes and the communities [that] depend on them".
Bus passenger numbers have been falling since the 1950s and deregulation has done little to halt this - between 2000 and 2005, they fell by seven per cent in the regions. In London, where a regulated system remains, there has been a 32 per cent increase.
The MPs call for more research into the London system and says there must be more flexibility elsewhere, in particular making it easier for bus companies to sign up to 'quality contracts' where they can offer exclusive services on a particular route.
In return, the local authority can be sure that a certain level of service and quality is being offered to its residents. The MPs warn: "The current situation cannot go on."
The Conservatives, who deregulated the bus service with the Transport Act 1985, reacted angrily to the committee's claims and shadow transport minister Stephen Hammond said the move had delivered "an affordable, high quality bus service" in many areas.
He blamed a lack of cooperation between the bus companies, local authorities and the passenger transport authorities (PTAs) for high fares and reduced services.
"There is no one who would seriously suggest that we turn the clock back to the era of regulated buses. We all accept there is more to be done but to suggest bus deregulation has failed is wrong," Mr Hammond said.
Responding to the report, the Department for Transport said it had been taking a "long, hard look" at a whole range of issues concerning buses to help get more people using them, and hoped to make decisions later this year.
"The aim is to give those local authorities that need them real powers to make a difference. But it is also vital that bus operators and local authorities work together to deliver the kind of quality bus service that people want," a spokeswoman said.
But Liberal Democrat transport secretary Alistair Carmichael noted that bus deregulation was a "bad Tory idea which Labour, despite being in power for nearly a decade, has done nothing about".
He said there should be no return to the old system before the 1985 act, but called for a "re-regulation" which would give local communities some control over their bus services and ensure taxpayers got value for money.
The committee also says traffic commissioners should be better funded and given more powers to promote the bus network. Bus lanes should cross local authority borders and be better enforced, it says, and the government should make cutting congestion a priority.
"There is still a perception that bus services are generally unreliable and of a poor quality; that vehicles are old and inaccessible; that drivers are rude and that passengers are unsafe and uncomfortable," said chairwoman Gwyneth Dunwoody.
In an effort to get more people out of their cars and using the bus, the committee also urges increased concessions for the under 16s - although it warns that current requirements on firms to offer reductions must be backed with government funding.