Urban Mobility Systems: Regulation Across Modes - the View of an Operator

1st European Intermodal Transport Regulation Forum

Deutsche Bahn AG Dr. Markus Ksoll Head of Associations and Länder Policy Florence, 07 December 2012 Key Hypotheses

regulation is characterized by mode-specific approaches – market regimes differ according to economic and political conditions

 Among benchmarks with positive track records are “open access” in long-distance passenger rail transport and “competition for the market” in regional/ urban passenger rail transport

 Transport operators are fit to provide embracing mobility solutions across modes - public authorities should set reliable frameworks for entrepreneurial and customer-oriented behavior, rather than hamper or fulfill entrepreneurial activities themselves  Finance levels and instruments for infrastructure investment are key success factors for public transport, demand-driven prioritization and investment incentives should be safeguarded

2 Agenda

DB at a glance

Intramodal finance and regulation

Entrepreneurial solutions across modes

3 DB comprises three divisions and nine business units

Passenger transport: Infrastructure: Transport and logistics: Domestic and European-wide Efficient and future-oriented rail Intelligent logistics services mobility services infrastructure in Germany via land, air and the sea

DB Bahn Long Distance DB Netze Track DB Schenker Rail Long-distance rail passenger Rail network European rail freight transport transport1 DB Bahn Regional DB Netze Stations DB Schenker Logistics Regional/urban passenger Traffic stations Global logistics services transport (Germany) DB DB Netze Energy DB Services3 Regional/urban passenger Traction current Integrated range of services transport (Europe)2 1 Within Germany as well as cross border traffic; 2 In UK with Arriva-affiliate ‘CrossCountry’ also long-distance passenger transport; 3 Business unit is assigned to the Rail Technology and Services division 4 DB has about 295,000 employees around the world, of which more than 190,000 are based in Germany

Employees by region Employees by business unit 100% ~ 284,319 full time equivalent 100% ~ 284,319 full time equivalent Europe excluding G. 27% Other activities North- Germany Asia America 65% 5% DB Bahn Long Distance: 5.6% DB Services 3% DB Bahn Regional: 13.1% DB Arriva: 13.4%

Remaining international locations 1%

DB Netze Track: 14.5% DB Netze Stations: 1.7% DB Schenker Rail: 11.4% DB Netze Energy: 0.6% DB Schenker Logistics: 21.9%

As of December 31, 2011; Total employee number as of December 2011 5 Passenger Transport DB is the second biggest provider in the European passenger transport market

 2.72.7 DB Bahn Long Distance DB Bahn Regional billionbillion passengerspassengers perper yearyear inin trainstrains andand busesbuses

 26,00026,000 passengerpassenger trainstrains perper dayday

 OnceOnce aroundaround thethe worldworld –– the the distancedistance traveledtraveled by by every every ICEICE traintrain per per monthmonth  99 DB Arriva DB Bahn Sales1 neighboringneighboring countries countries can can bebe reached reached directly directly via via DBDB

As of December 31, 2011; Figures on the left side are rounded and exclude Arriva; 1 DB Bahn Sales is a service center within the passenger transport division 6 Current trends: Long-distance passenger and transport post gains – bus transport declines due to structural reasons

Long-distance rail transport Regional/ urban rail transport Bus transport in millions of pkm in millions of pkm1 in millions of pkm1,2

Declining number of school children in Germany!

+4.9% +4.0% -7.0%

1 H 1 H 1 H 1 H 1 H 1 H 2012 2012 20122012 1 Figures excluding Arriva 2 Excluding Pan Bus for 2011 due to merger with Arriva 7 Agenda

DB at a glance

Intramodal finance and regulation

Entrepreneurial solutions across modes

8 Public institutions fulfill several distinct roles in the transport market

RoleRole ofof publicpublic institutionsinstitutions Examples in railways

Legislator  Establishment of access regime, regulatory bodies, definition of their functions and competencies (EU, Federal Gov’nt)  Unbundling-requirements (EU, Federal Gov’nt)  Definition of passenger rights (EU, Federal Gov’nt)  Definition of fiscal framework (Federal and Länder Gov’nt)

Financier  Financing of railway infrastructure investment (Federal gov’nt)  Financing of transport contract payments (Federal and Länder Gov’nt)

PP contract partner  Ordering of public transport (Regional transport authorities)  Determination of infrastructure investment (Federal and Länder Gov’nt)

Regulator  Check of access conditions and charges (BNetzA)  Technical regulation and licencing (EBA/ ERA)

Owner  Owner of transport operators (Federal state, municipalities)

9 Market regimes and regulation and differ across modes

Market regimes in Germany: Overview

Business segment Financing Governance and regulation

Operations and maintenance Rail infrastructure purely commercial, public-private Access- and price-regulation co-finance of investment

Long distance passenger Competition in the market (open Purely commercial rail transport access)

Regional and urban Commercial revenues Competition for the market (service passenger rail transport and public franchise fees contracts)

Various regimes, dominant feature Regional and urban bus/ Commercial revenues in urban transport: Inhouse metro/ light rail and several public finance flows operator of municipality

Competition in the market (open Long distance bus Purely commercial access, as of 2013)

10 Agenda

Intramodal finance and regulation

Focus: Rail infrastructure

Focus: Regional/ urban passenger rail

Focus: Urban bus/ metro/ light rail

Focus: Long distance bus

11 Infrastructure capacity is a key factor for quality and growth - major investment requirements in and between urban agglomerations

Examples: Delays and congestion on the infrastructure area

Rail: Delays1 Road: Traffic jams2

. 2/3 of delays have . Average citizen their origin in urban endures 60 hours of agglomerations traffic jam p.a.

1 Delays caused by „Zugfolge“ in passenger and freight transport (LeiDis 2007) 2 Forecast for 10.-12.08.08, source: ADAC 12 Infrastructure financing rests on public and private contributions

Rail infrastructure financing in Germany Schematic diagramm

Federal funds  Bund determines and Investment:  Replacement: approx. finances investment Bund Replacement and 2.5 Bill. € subject to with public budget Newbuilt/ multiannual contract contributions Upgrading LuFV 1)  Newbuilt/ Upgrading: approx. 1,1-1,4 Bill. € Maintenance subject to individual  DB finances contracts following operations/ DB Bundesverkehrs- mainenance with own wegeplanung funds1), and contributes Operations to investment

Source of funds Use of funds

1) Based on user charges 2) „Leistungs- und Finanzierungsvereinbarung“

13 Next to other tasks, the regulatory framework in network industries needs to facilitate investment

Regulatory tasks

Safeguard non-discriminatory access 

Avoid monopolistic pricing and excessive rents 

Incentivize cost efficiency and investment Stronger focus recommended

14 Agenda

Intramodal finance and regulation

Focus: Rail infrastructure

Focus: Regional/ urban passenger rail

Focus: Urban bus/ metro/ light rail

Focus: Long distance bus

15 Regional passenger rail transport is subject to competition for service contracts and concession fees

Regional passenger rail revenues Regionalization funds1) (bill. €)

CAGR +1.5%

7299 6980 7085 7191 6675 6775 6877

Fare Contract Revenues Fees

2008 2009 2010 2011 2012 2013 2014  The federal government provides Regionalization funds in the general interest, it’s the Laender’s responsibility to spend them on regional transport services  The Laender pay fees subject to service contracts concluded with a railway company 1) Source: Regionalization Act of December 2007 –  The railways compete “for the contract“ subject to annual federal budget legislation

16 Transport volume in regional passenger rail has increased considerably since rail reform of 1994

Transport volume: Regional passenger rail (in bill, pkm)

49,4 47,0 47,4 48,0 44,2 44,9 7,0 41,2 5,4 6,3 6,5 39,6 40,1 3,9 4,2 . Steady growth of 38,2 2,3 1,5 1,7 2,2 transport volume since 1994 28,3 0,6 . Ongoing increase of non-incumbent market 40,3 40,7 41,6 41,1 41,5 42,4 36,7 37,9 37,9 38,9 share 27,7 14,3 . DB keeping transport 13,2 13,6 volume above histirocal/ 3,9 4,3 5,5 5,7 11,4 2,2 8,9 9,5 pre-liberalisation levels

1994 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Market share non-incumbentNon-incumbent DB

Source: Statistisches Bundesamt, DB AG 17 Competitors operating regional and urban passenger trains increase market share up to 24 percent

Ordered local passenger rail services (Mio. train kilometers)

. Market share of DB‘s competitors measured 619 628 634 637 633 629 629 634 642 in train kilometers grew 75 83 61 97 103 116 502 128 137 155 by 12% in 2011 12 . Market share of the competitors operating regional passenger trains increases up to 558 553 551 540 530 24% 490 513 501 497 488 . Total market volume increased since 1994 20.3% 21.6% 24.1% 2.4% 16.2% 18.4% around 28% above 640 13,1% 15.2% 9.9% 11,9% million train kilometers

1994 2003 2004 2005 2006 2007 2008 2009 2010 2011 competitors competitor‘s market share

Source: DB 18 Foreign transport undertakings have a strong presence in the German rail passenger market (as at: 2010 timetable)

Successful tenders

Source: Federal Office for Freight Traffic –regional rail traffic, cartographic presentation: regional rail passenger market SPNV in Germany, 5.5.2010 19 Regional passenger rail transport offers more value for money today

TransportIndexierte volumes Entwicklung and effective von SPNV- publicLeistungen spending, und effektivennominal/ realÖPNV-Mi and ttelper nominal/realpkm u. pro Pkm 135 130 125 123 130 128 124 114 115 112 111 108 110 108 106 106 103 105 106 108 105 102 105 105 100 101 103 104 103 95 98 98 97 99 95 97 96 94 96 94 93 93 85 91

84 75 77 72 71 73 65 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Index regional passenger rail in pkm Index effective public funds/pkm (nominal) Index effective public funds/pkm (prices at 1996) 20 Public transport authorities draw a positive resumee after 15 years of regionalisaion

Positive aspects and results

 +28% trainkm (635 Mio.)

 +45% passengers  > 300 new stations Negative aspects and  > 500 km new lines challenges  -20% à -30% cost savings  > 200 conrcts to be managed  Renewal of rolling stock  Complex tendering and  Improved timetables … award procedures  Integrated tarriffs and ticketing  Divesity of approaches of  Strengthened passenger rights public transport authorities increase complexity  Innovation

 Enhanced quality performance

 New TOCs

Source: Presentation of B. Wewers, Paris, 7.7.2010

21 Agenda

Intramodal finance and regulation

Focus: Rail infrastructure

Focus: Regional/ urban passenger rail

Focus: Urban bus/ metro/ light rail

Focus: Long distance bus

22 Finance structure in urban bus/ metro/ light rail reflects variety of historically grown instruments

Finance structure in regional/ urban public tranport (other than rail)

Customer Bund Steuerausfall durch Querverbund

EntflG Regionalisierungsmittel

Land Steuerausfall durch Querverbund

ÖPNV-Zuweisung Municipality as Minicipalitiy as PTO Owner of TO Fahrgelderlöse* Steuererleichterungen 148 SGB IX § 45aPBefG, 6a AEG AEG 6a 45aPBefG, Verbundzuschüsse* Verträge § GVFG Infrastruktur Bundesprogramm Infrastruktur GVFG EntflG für Beschaffung EntflG für Infrastruktur Eigenanteil Querverbund Infrastruktur/ Infrastruktur/ Defizitabdeckung Verbundförderung Betriebsleistungen/ Betriebsleistungen/

TransportÖSPV Operator Unternehmen

Source: Own sketch based on Nahverkehrsberatung Südwest 23 Agenda

Intramodal finance and regulation

Focus: Rail infrastructure

Focus: Regional/ urban passenger rail

Focus: Urban bus/ metro/ light rail

Focus: Long distance bus

24 Long distance bus market up to now characterised by restrictive licencing and Berlin-services

Status Quo: Long-distance bus services (as at Dec. 2012)

Flensburg Kiel Market for scheduled long-distance bus Rostock services regulated by licencing process Hamburg „Prohibition of parallel services“, Bremen Hannover requirement to consult incumbent Magdeburg Berlin operators Dortmund Halle Kassel Therefore, restricted scope for access Düsseldorf Leipzig Köln Dresden Erfurt Chemnitz Special status of Berlin-services due to Frankfurt / Main Hof historical ban of rail services between Other operators Berlin and West Germany Mannheim Würzburg Nürnberg Strong focus of current line-network on Ulm Passau Berlin and DB subsidiaries München Lindau

25 From January 2013 on, a new legislation applies for licencing of long-distance bus lines

Long-distance bus market: Perspectives for 2013

Kiel Starting January 01, 2013 a new legal framework applies

Hamburg No more „prohibition of parallel Bremen Hannover services“, licencing of lines will in Berlin general be granted Dortmund Düsseldorf Focus on long distance, i.e. minimum Köln distance between stops 50 km Veolia Frankfurt / Main Public Express Various private operators have already Trier Flixbus notified new lines, especially in Mein Fernbus Mannheim/Heidelberg Deinbus.de western parts of Germany

Stuttgart Müller - Kylltal Reisen Extend of entry and effects on other Freiburg München Exact route Lörrach not yet modes remain to be seen announced

26 Agenda

DB at a glance

Intramodal finance and regulation

Entrepreneurial solutions across modes

27 Current market trends demand for integrated mobility solutions

Integrated access and billing solutions throughout the whole journey

City Interurban City

Demand for integrated mobility solutions

Integrated information, access and billing solutions throughout the whole journey Register Start journey Inspection End of journey After sales

City City Interurban

Market trends  Urbanisation tendency and demographic change  Growing ecological awareness  Development of new communication technologies  Stronger need for information and transparency  Decreasing demand for cars within young population  Cross-integrated networks

28 DB provides innovative mobility solutions for urban transport –

Touch&Travel integrates urban and interurban transport Integrated access and billing solutions throughout the whole journey

City Interurban City

DB Bahn mobility solutions for urban transport

City Interurban

Bus Flinkster Call-a-Bike Touch&Travel service

S-Bahn service  2,000 vehicles at 800  110,000 Call-a-Bike  Touch&Travel for stations in Germany users in Germany public transportation in (e.g. 120 vehicles in (e.g. 850 Callbikes in Berlin since July 2011 Cologne) Cologne)  Complete rollout for  Large fleet of electric  Spontaneously useable Hessia planned until vehicles (e-Flinkster) (after a one-off 2013 registration)

29 DB constantly invests into innovative, intermodal information and access systems throughout the whole journey Integrated information, access and billing solutions throughout the whole journey

City City Interurban

DB Bahn mobility solutions for integrated interurban transport

City Interurban

Touch&Travel Comparison of DB Railnavigator Long-distance transport modes traffic

Regional  Since July 2011  Introduction in 2009  Real-time door-to- traffic available for long- on bahn.de door travel distance traffic in  Comparison of train, information for Germany plane and car Germany  Integration of long- based on various  Integration of urban distance and urban parameters and interurban passenger traffic traffic information during RUHR.2010

30 DB Bahn is developing into an integrated mobility solutions provider

DB Bahn on its way to a mobility solutions provider

Specific action: Mobility Solutions Mobility Components Mobility Solutions  Improve offers and Provider  Door-to-door  Individual door-to-door products information solutions   Online-Ticket  Comprehensive and trans- Accompany customers during every phase of  Call-a-Bike, regional integration of Carsharing mobility offerings the travel  Mobility BahnCard  Internal and external 100 integration of mobility offerings  Connection to urban Mobility aims: transport  Retain existing customers

 Acquire new customers for public transport

Rail Operator Station - Station Door - Door Integrated Mobility Solutions

past future

31 Thank you for your attention!

Deutsche Bahn AG Dr. Markus Ksoll Head of Associations and Länder Policy Florence, 07 December 2012