fourth railway regulation package

7/28/2019 Fourth Railway Regulation Package

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The Fourth Railway Regulation

Package

Economics of Regulation

Csaba Gbor Pogonyi


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Outline

Introduction to rail passenger industry

What do we want?

What is the Fourth Railway Package about? Discussion of its proposed solutions

Possible problems with the solutions

Conclusion

05/30/2013 Economics of Regulation 2


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Introduction

2011: Transport White Paper: vision for a SingleEuropean Railway Area (SERA)

Enhance to role of rail

Efficient and attractive services + eliminate regulatoryand market failures (barriers to entry, administrativeburdens)

Last years: public sector investments nearly

doubled in six years rail demand increased only moderately (around 10%

modal share) a regulatory failure?



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The Actors

Government

Competent Authority (CA)

Infrastructure Manager (IM)

Railway Undertakers (RU)



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Where Do We Stand?

Former regulation:

progressive

market opening

Since 2000:

3 packages:

progress!



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Where are we going?

EU: every MSs system is designed to be asingle country level network.

Efficiency of infrastructure = intensive use

Infrastructure is likely stay to be a state-owned

otherwise: too high prices for the usage of

infrastructure inefficiency



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Where are we going?

Existing EU legislation:

separation between IM (Infrastructure Manager)

and RU (Railway Undertaker)

IM should ensure fair and equal treatment ofall RUs

Full independence of the IM: key to ensure equal

access in charging and capacity allocation



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Separation of IM and RUs

Problem: IM and RU in the same holding

natural monopolies: no incentives to provide the

needs of the market

new market players are given higher charges and

insufficient capacity

Information asymmetries: competitive advantage

for the incumbent risk of cross-subsidisation (no financial

transparency)



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Separation of IM and RUs

Why is it not satisfactory?

HOWEVER: where MS wish to maintain existingholding structures with the IMs ownership, it

proposes strict safeguards Loophole, strict safeguards have no proper

enforcement

Still there is no real enforcement



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Opening up the domestic market

Problem

Domestic passenger markets are still closed

Low quality, lack of proper availability, high costs

Solution Competing in the market

Differenct RUs offerings

Incumbent has to allow access to rolling stocks

Competing for the market Compulsory competitive tendering of contracts (2019)

No maximum contract volume




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Opening up the domestic market

Why not satisfactory?

In the market

Lack of proper enforcement + what is the fair rate?

We know nothing about the enforcement power of the

ERA

For the market

No maximum contract volume (flexibility!)

CA can construct only one huge tender for the whole country,

so only the incumbent will be able to compete for it credibly!



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EU-wide approval of standards

Problem: Entry barriers

No interoperability

Huge administrative costs

Solution European Railway Agency (ERA) has more

responsibilites in setting administrative decisions

licencing, safety certificates, vehicle authorisations, etc.

20% reduction in time and costs for new entrant RUs

Why not satisfactory regulation?



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EU-wide approval of standards

Why not satisfactory regulation?

Very very costly

No borders between countries no market

barriers

Implicit collusion between the big players

BB and DB have implicitly agree which CEE country tomonopolize

No real competition, layoffs and CA becomes

dependent on the international RU

Maybe a worse-off outcome?



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Protection of skilled workforce


In most MS rail workers already have a strong

union

Expensive labor: High wages, pension, state-pension

Making it more difficult to lay them off

Market less effective

Entrance is more costly



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Conclusion

The Fourth Railway Package

Good direction

Has been significantly watered down

Holdings of IMs and RUs are still allowed

All European standards very important

5th Package?



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Links

http://europa.eu/rapid/press-release_MEMO-13-45_en.htm

http://www.youtube.com/watch?v=8GHz-stzCso

http://ec.europa.eu/transport/modes/rail/packages/2013_en.htm

http://www.etcr.eu/

VVH 591-609. Sherman 540-589.

Pogonyi (2012)

http://europa.eu/rapid/press-release_MEMO-13-45_en.htmhttp://europa.eu/rapid/press-release_MEMO-13-45_en.htmhttp://www.youtube.com/watch?v=8GHz-stzCsohttp://ec.europa.eu/transport/modes/rail/packages/2013_en.htmhttp://ec.europa.eu/transport/modes/rail/packages/2013_en.htmhttp://www.etcr.eu/http://www.etcr.eu/http://www.etcr.eu/http://ec.europa.eu/transport/modes/rail/packages/2013_en.htmhttp://ec.europa.eu/transport/modes/rail/packages/2013_en.htmhttp://www.youtube.com/watch?v=8GHz-stzCsohttp://www.youtube.com/watch?v=8GHz-stzCsohttp://www.youtube.com/watch?v=8GHz-stzCsohttp://europa.eu/rapid/press-release_MEMO-13-45_en.htmhttp://europa.eu/rapid/press-release_MEMO-13-45_en.htmhttp://europa.eu/rapid/press-release_MEMO-13-45_en.htmhttp://europa.eu/rapid/press-release_MEMO-13-45_en.htmhttp://europa.eu/rapid/press-release_MEMO-13-45_en.htmhttp://europa.eu/rapid/press-release_MEMO-13-45_en.htmhttp://europa.eu/rapid/press-release_MEMO-13-45_en.htm


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Thank you for your attention!


fourth railway regulation package

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