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I NDICE T HEORETICAL ISSUES AND INSTITUTIONAL DESIGN Editorial rasporti uropei 2 The Motivations of a Debate T E Edoardo Marcucci RIVISTA QUADRIMESTRALE DI DIRITTO ECONOMIA E INGEGNERIA DEI TRASPORTI 6 The Transaction Cost Economics of Railways QUARTERLY JOURNAL OF TRANSPORT LAW, John Preston ECONOMICS AND ENGINEERING Implementing Marginal Cost Pricing Anno VII / n. 20-21/ agosto 2002 16 Special issue of Rail Infrastructure-Barriers and Solutions Chris Nash - Bryan Matthews “Deregulation and vertical separation in the railway sector” The Process of Railway De-Verticalisation in Italy: 25 Guest Editor State of the Art and Possible Evolutions Edoardo Marcucci EDOARDO MARCUCCI 34 Appendix: The Full Legislative Story of the Rail Transport Reform Process Direttore Responsabile/Editor-in-chief Emanuela D’Alessio GIACOMO BORRUSO 38 Railway Liberalization from a “Public Choice” Perspective Marco Ponti - Stefano Erba Comitato scientifico/Publishing board AURELIO AMODEO The Economic Regulation GIACOMO BORRUSO 47 of Railway Infrastructure: The Role and Future of the SERGIO CARACOGLIA ROBERTO CAMUS Proposed European Railway Agency ROMEO DANIELIS Paolo Polidori FABIO SANTORINI 54 Possible Scenarios in the European Railway Industry After the Present Phase of Change Comitato editoriale/Assistant editor board Ennio Forte - Francesco Del Vecchio ELENA MAGGI EDOARDO MARCUCCI 61 Transfer Pricing: Theoretical Aspects MARCO MAZZARINO and the Case of Ferrovie dello Stato S.p.A. VITTORIO A. TORBIANELLI Elisabetta Venezia 69 Are Trains More Dangerous than Planes? And, if so, What? Fabio Nuti Direzione, redazione e amministrazione/Publisher I.S.T.I.E.E. ISTITUTO PER LO STUDIO DEI TRASPORTI E XPERIENCES AND EMPIRICAL EVIDENCE OF VERTICAL SEPARATION NELL’INTEGRAZIONE ECONOMICA EUROPEA Via Lazzaretto Vecchio, 13 76 Experience of National Railways Privatisation, 34123 TRIESTE and of Vertical Separation in Metro Systems Tel. +39/040/311464 Peter White - John Ball Fax +39/040/311465 E-mail: [email protected] The Japanese Experience with Non-Verticalised http://www.univ.trieste.it/istiee 89 Urban Private Railways: An Analysis of Strategy and Performance of the “Minor” Companies Progetto grafico/Graphic design Kenichi Shoji - Bruce J. Killeen STUDIO MARK, TRIESTE The Production Economics of a Vertically 96 Separated Railway - The Case of the British Stampa/Print Train Operating Companies MODERNA S.R.L. TRIESTE Jonathan Cowie 104 Metropolitan and Urban Traffic in the Abbonamento annuale/Annual subscription: Euro 90,00 De-Verticalisation Process of Italian Railways Enrico Musso - Claudio Ferrari Autorizzazione del Tribunale di Trieste, n. 915 del 31 ottobre 1995 117 The Impact of Vertical Separation on Regional Railways: The Case of Veneto and Friuli Venezia Giulia Vittorio Torbianelli Spedizione in A.P. 70% DC TS Tassa pagata/ Taxe perçue 125 Competition in Railways: the Case of United Kingdom Fabio Carlucci Il contenuto degli articoli pubblicati è di esclusiva responsabilità degli autori; 129 Public and Private Railway Companies th th esprime pertanto la loro personale opinione in 19 and Early 20 Century Italy e non necessariamente quella della rivista Andrea Giuntini - Stefano Maggi EDITORIAL Railway policy is a controversial The Motivations evaluation of transport attributes. or, shall we say, is still a contro- The increase in demand, both for versial issue. In fact, it has been, of a Debate passenger and freight, pro- is, and probably will continue to gressively and steadily shifts be a highly debated question for Edoardo Marcucci towards other competing modes various reasons, the most important in general, and to road in of which are the: particular; 1. relevant social impact railway policy has on people’s 2) the monopolistic organisation of the market seems to everyday lives, on the social welfare of millions of contrast with the diversification of services required by passengers/citizens and on the competitiveness of the market as well as with the re-organisation and companies using the railway system to move their harmonisation that has begun in all public utilities at the inputs and outputs; European level; 2. substantial financial repercussions transport subsidies 3) the positive results in terms of increased competition, have on the public purse; reduced costs and increase in demand brought about by 3. considerable consequences transport policies have on combined liberalisation and deregulation in air transport the environment; seem impossible in the railway sector exactly because of 4. socially controversial and politically sensitive issue of its staunch monopolistic characteristics. The most employment, retribution and unionisation in the sector. evident effect of a full fledged vertical separation (as in Given its well known structural characteristics (high the British case), is the substantial increase in demand; irreversible capital investment, dedicated labour supply, 4) the Italian situation presents some peculiarities with costly technical innovation, high coordination respect to other European cases since the low tariff level is requirements among the various activities at all levels, not merely attributable to market decisions but rather to etc.) the railway sector is not naturally prone to welfare considerations. However, the logic adopted, and accommodating rapid and low cost modifications of the absence of an even minimally business oriented adopted working procedures and regulatory regime attitude, coupled with a public monopoly structure has under which it operates. induced a swell up of production costs led by labour costs. In other words one should never expect rapid structural Great attention to market demand appears necessary if a (technological, organisational, regulatory, etc.) changes truly structural re-organisation is desired. A pre- in this industry. condition to pursuing this objective was the provision of better quality services, that is, increasing commercial Restructuring a declining industry speed, flexibility, and reliability while, at the same time, The structural reform effort promoted and sustained at reducing costs. The all-purpose instrument to be the European level and, with varying degrees of adopted is competition. The deplorable situation enthusiasm and perseverance, endorsed at the national characterising the railway sector can be de facto level is a product of the progressive worsening of the attributed to the unsuitable market and institutional structural and financial conditions of the sector. In fact, structure. In fact, until the early ‘90s the all- given that in 1970 within the fifteen member states the encompassing characteristic of the various European railway system moved 32% of the total freight railways was its management by public monopolists of a transported while in 1994 the percentage was below vertically integrated sector. 15% and, for passengers in the same period the percentage fell from 10.3% in 1970 to 6.2% in 1994, the The role of independent research Community assumed that structural changes had to be One should never underestimate the force of research in implemented to stop and reverse this trend. shaping policy. In fact, it is this belief that allows The railway sector crisis may be analysed and independent and high quality research the possibility of considered under various points of view. Among the influencing and redirecting policy by: evidencing most relevant one should consider: specific technical problems, suggesting possible 1) it is a structural crisis of the whole sector that is solutions, independently analysing strategic interactions linked to the intrinsic characteristics of the railway among the various actors directly involved in the system. In fact, structural changes in the economy process of defining objectives, strategies for acheiving attributable to the transformation produced by the them, and assessing the results. This independent form increasing relevance of information and communication of judgement characterising academic research is always technologies produced a substantial change in the desirable and it is particularly valuable in a sector such 2 EDOARDO MARCUCCI as rail, where regulatory capture is highly likely. are commonly suggested for striking a balance between Independent economic analysis can work for the “public the two contrasting objectives of infrastructure use good” because it contributes to the knowledge and maximisation and total cost recovery. The cost of the understanding of those issues that need to be debated compromise is paid in terms of potential distortions to and discussed in a process of transition from one market competition between train operators. The authors structure and organisation to another - such as, for conclude that the most relevant issue to be investigated example, transaction costs, infrastructure charging, in order to achieve marginal social cost pricing for rail strategic institutional analysis, etc. Dodgson, in a recent infrastructure is connected to the desire for rail issue of the Journal of Transport Economics and Policy1 infrastructure managers to cover their total cost from dedicated to the railway sector, enumerates several charges. This will in turn provoke the need for two-part important issues where economic analysis can tariffs or for tariffs differentiated according to contribute. They are: cost productivity measurement, willingness to pay. demand modelling, pricing final and intermediate 3. The presence of an institutional and regulatory products, optimal industry structures, competition