No. 362: The relevance of liberalisation and regulatory strategies for the development of long distance passenger rail transport in Germany, Sweden and Great Britain
The relevance of liberalisation and regulatory strategies for the development of long distance passenger rail transport in Germany, Sweden and Great Britain
No. 362 / December 2011
(Full version only available in German)
Since the railway reform of 1994, the volumes sold (pkm) and produced (train-path km) in the German long distance passenger rail market have remained almost unchanged. The market share of new competitors stagnates at well below one per cent, and a number of attempts to enter the market were only successful for a short term at best. Against this background, this discussion paper compares the legal and regulatory frameworks as well as the market conditions for Germany, Great Britain and Sweden in order to identify the factors that particularly determine the intensity of competition in long distance passenger rail markets. Thereupon, the paper concludes making appropriate reform proposals.
Competitive pressures in the high-speed passenger rail market will remain very low whereas this market segment is predicted to grow further. Demand for conventional long distance passenger rail transport will decline modestly but we expect alternative undertakings to enter the market on single lucrative lines. New providers endeavour to entice passengers away from the incumbent by offering higher service quality and lower fares. For the ‘inter-regional’ market segment in Germany, growth and ponderable competition could only be expected if unprofitable routes were tendered.
In all countries examined, striking barriers to market entry include a lack of remunerative train paths on lines with strong demand, poor availability of rolling stock, intermodal competition in connection with insufficiently harmonised terms of competition, as well as economies of size and scope and the competitive edge of incumbency. In Germany, newcomers also consider the implementation of the capacity allocation process, the requirements concerning the application for framework contracts and certain elements of the traction current pricing system as problems. In Great Britain and Sweden, stakeholders complain about limitations for open-access services and deficiencies in the design of tenders for public passenger rail services.
Expected profitability of the business concept is the key factor for the decision to enter the long distance passenger rail market. In Germany, tendering unprofitable ‘inter-regional’ passenger rail services could perceivably enhance competition in the market. The removal of all legal barriers to market entry for profitable passenger rail services, as well as ownership unbundling of vertically integrated railway companies and/or more competences for regulatory bodies to control access to infrastructure and rail infrastructure charges, are necessary but not sufficient conditions for more competition. Adequate conventional track capacities and more available rolling stock at a reasonable price can further encourage market entry of new undertakings. For these reasons, investment in enhancement and renewal of congested conventional tracks and nodal points in Germany should be more prioritised, and the effective functioning of vehicle markets should be improved.