These already exist in Hongkong, Singapore, and Paris, but they are crazy expensive. And, AV bus sounds harder than AV car due to boarding and fare payment issues. I disagree with your ideas for early AV applications.
I think you're assuming a city bus needs a fare. It doesn't. Santa Cruz County, CA has just passed a resolution where all busses in the county will be free to ride. It already is for folks working downtown, anyone under 18, anyone at the university, and for a small per-semester fee at the local community college.
This not only makes it more convenient to get around without worrying about buying transit tickets ahead of time, it means the busses can load from the front AND the back, making the time spent at each stop shorter and schedules easier to keep.
Much easier problem for autonomous setups when you remove fares and just have to monitor if anyone's in danger.
Public mass transit never breaks even from fares. What it does very well however is free up the money folks would have spent on gas, parking, car maintenance, etc., so they can move around and spend it more freely in the community.
You see this spectrum in various cities. Some cities make you pay depending on how far the light rail travels, so you naturally condition riders not to ride any more or further than they absolutely need to go. Places like New York City on the other hand just sell you a pass; taking an extra trip to the Met or to Central Park doesn't cost extra, so folks do it, socializing and stimulating the economy along the way.
New York's biggest transit mistake in my opinion is keeping the fares. They'll spend HUNDREDS OF MILLIONS of dollars on NYPD overtime to catch turnstile jumpers when they could spend less just letting people ride for free.
https://gothamist.com/news/nypd-overtime-pay-in-the-subway-w...
According to a quick Google search, the NYC subway has fare recovery ratio of about 20%. Do you really think "NYPD overtime to catch turnstile jumpers" is 20% of the cost to run NYC subway? Not even close -- surely much less.
