This month David Briginshaw Editor-in-Chief


Open-access operators deserve fair treatment


W


HILE members of the European Parliament’s


Tran Committee are currently debating amendments to the European Commission’s Fourth Railway Package regarding the opening up of domestic passenger rail markets to competition, the reality on the ground is that the number of open-access domestic passenger operators is steadily increasing despite some of the considerable obstacles in their way. Perversely, there has been very little interest in establishing open-access international services even though this market was liberalised some time ago. There are currently domestic open-access passenger operators in Austria, Britain, the Czech Republic, Germany, Italy and Sweden, and more are on the way. MTR, Hong Kong, is setting up an operation in Sweden to compete with SJ on the prime Stockholm - Gothenburg route. Alliance, a subsidiary of German Rail (DB)-owned Arriva, wants to compete head-to-head on the London - Edinburgh route, and Spain is opening its high-speed network to competition. Currently, the only open- access international service operates between France and Italy.


Even though most of the evidence to date dispels some of the misconceptions about on-rail passenger competition, there is still considerable reluctance to allow it or even experiment with it in some countries such as France. The main fear is that the newcomer


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will abstract traffic from the incumbent and worsen the economics of the services currently provided. While there will inevitably be some traffic abstraction, at least initially, this soon gives way to growth allowing rail to increase its overall market share.


This is because competition


forces both the newcomer and incumbent to attract new business to survive. Competition also increases public awareness of the benefits of rail travel, spurs the incumbent to up its game both in terms of service quality and pricing, and it stimulates new ways of thinking and innovation.


buy tickets on-board or encouraging them to book online, rather than resorting to traditional methods such as selling tickets at stations. Sometimes this has been borne of necessity as the newcomers have either been denied the use of station facilities or found it very difficult to access them.


New entrants to the market have to be pretty determined to succeed. On top of risking their own capital and having to cope with the normal challenges of launching a new business, would-be operators have to contend with myriad obstacles strewn in their path by the incumbent operator and infrastructure manager who


Politicians often do not understand how a free market works and therefore do not know how to create a level playing field.


When NTV started to operate high-speed services in Italy with a new fleet of trains providing three classes of travel and high-quality service, the incumbent Trenitalia responded quickly by relaunching its own high- speed service. Trenitalia started by refurbishing its trains to offer four classes and then ordered a new fleet of trains designed to be the fastest in the world. It is highly unlikely that Trenitalia would have gone so far so quickly had NTV not been snapping at its heels. The newcomers have


introduced innovations in the way they market, sell and distribute tickets, offering passengers the opportunity to


often try their hardest to derail the attempt. Most countries still lack a level playing field. Take Spain, the latest country to allow competition, starting this year. Only a limited number of operators will be allowed to compete against incumbent Renfe and only on selected high-speed routes. New entrants will have to bid for a limited number of temporary permits from the government, while Renfe can continue to operate its existing services without a permit or time limit on every line. Newcomers will be able to lease former Renfe trains or acquire their own rolling stock. Despite these obstacles, two companies have expressed an interest in competing, and


the newly-formed Adif-AV high-speed network infrastructure manager should be incentivised to attract new operators.


While some governments have opened their markets to competition, they are often fearful of its potential consequences, namely the weakening or even elimination of the national operator, and end up stacking the dice in favour of the incumbent. Politicians often do not understand how a free market works and therefore do not know how to create a level playing field.


If the Fourth Railway Package survives intact, domestic competition will become obligatory in December 2019. So what will the market look like six years from now? One scenario is that private operators will have flourished so the legislation will be an irrelevance. Alternatively many private operators will have either gone to the wall in the face of continuing obstruction or will have been swallowed up by the large national players, as is happening in railfreight, in which case the Fourth Railway Package will be too late to save them. So it is down to national politicians to create a level playing field. However, they should remember this is not a game: people are risking capital, and jobs are at stake.


db@railjournal.co.uk IRJ January 2014


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