Routemaster weren't right to stop running the C84 without giving 56 days notice but the question is perhaps whether a blanket 56 days notice rule is suitable. If they had been running a subsided service and another operator had started up a duplicate service the council would have to withdraw the contract at short notice which would allow a short notice cancellation to be granted. However, with a commercial service a short notice cancellation isn't permitted.
This is taking me back fifty years to a time when I was taking my 'A' levels and C.P. Snow was in the news with his book and thoughts on 'Two Cultures'. We essentially have had two cultures since bus deregulation, the one where competition is king and enterprise must not be denied, and the other where the Traffic Commissioners still reign supreme in the detailed small print and can get quite pernickety about it too.
So bus company A gets set up with 'clean skins' and a reputable transport manager, bombards local media with press releases which get faithfully reprinted, this now being the extent of most local journalism, and announces a 'brand new experience' on the route from Shangri La to Neverland which company B has faithfully operated for 20 years. The new experience is a couple of fifteen year old buses which have been adorned with new paint such that the old liveries are almost obscured, with a fare of 20p any distance and operating five minutes ahead of company B's, in both directions. It is no concern of the TCs that, by any logical point of view, it is not possible for two companies to operate the route successfully: even predatory pricing is a matter for the competition authority, who might stir their stumps after a year or so (and preferably when the situation has resolved itself). 'A' starts their route, but after two weeks complain to the TC that some of 'B's drivers are running early, even leaving stops ahead of 'A'. The TC takes the complaint seriously and send their officials to monitor the situation, and over a two-day period finds 13% of B's buses were running over one minute early. 'B' is then given a written warning, and decides on receiving it to give 56 day notice of withdrawing from the route, which it duly does. In the meantime, 'A' has suddenly discovered that 20p is not a viable fare but £2 is, so that's what it becomes. As B's 56 days count down, though, it's A's services which start to go to pot. The engine of one of their two buses seizes, but in any case they no longer have sufficient drivers as some have left in frustration after waiting too long for their wages to be paid. A week after 'B' leave the route, 'A' do too, an hour's notice via Twitter informing both passengers and staff that they've gone into administration. The County Council makes noises, but everyone knows where the blame lies.
Here is my (partial) solution to the situation. When the TC gets a proposal by an operator to start a route, and provides a proposed timetable, then the TC should inform every other operator which has a route along the same roads (say, 25% and more) and give them the opportunity to amend their route or timetable or even withdraw their route from the date of inception of the rival, all conditional on it actually happening. So then the operator planning to run 5 minutes in front can find they'd actually be running 5 minutes behind, and may decide not to proceed after all. This could be refined so that a to-ing and fro-ing results and, who knows, sense might prevail in that A's times are midway between B's. Markets could still be said to have prevailed, for those with a fetish for such things.