Study on Regulatory Options on Further Market Opening in Rail Passenger Transport Final Report 09/09/10 IDEX TABLE OF FIGURES ...........................................................................10 LIST OF AEXES ..............................................................................12 Executive Summary...............................................................................13 Introduction.............................................................................................................. 13 Existing Market Position of Passenger Rail........................................................... 13 Market Opening for International Passenger Rail ............................................... 17 Key Lessons from Case Study States...................................................................... 18 Market Opening Options......................................................................................... 18 Impact Assessment of Possible Regulatory Options ............................................. 20 Conclusions............................................................................................................... 22 1. Introduction ......................................................................................24 1.1. Background........................................................................................................ 24 1.1.1 Rail’s market position.................................................................................. 24 1.1.2 The policy context........................................................................................ 25 1.1.3 Rail passenger market opening for international traffic............................... 30 1.2. Study Objectives................................................................................................ 30 1.3. Content and Structure of the Report .............................................................. 31 2. Qualitative Analysis of Market .........................................................33 2.1. History & Evolution.......................................................................................... 33 2.2. The Challenge Facing the Industry ................................................................. 34 2.2.1 Overview...................................................................................................... 34 2.2.2 Threats to the position of passenger rail ...................................................... 35 2.2.3 Changes required to meet policy objectives ................................................ 38 2.3. Players Involved ................................................................................................ 39 2.3.1 Overview...................................................................................................... 39 2.3.2 Governments & governmental bodies.......................................................... 40 2.3.3 Regulatory bodies ........................................................................................ 42 2.3.4 Railway Undertakings.................................................................................. 42 2 2.3.5 Infrastructure Managers ............................................................................... 43 2.3.6 Rolling stock providers ................................................................................ 44 2.3.7 Bodies representing passengers ................................................................... 44 2.3.8 Representative bodies for the industry & trade associations ....................... 44 2.4. Interfaces between Infrastructure Managers & Railway Undertakings ..... 45 2.4.1 Role of Infrastructure Manager.................................................................... 45 2.4.2 Interactions between IM & RUs .................................................................. 46 2.4.3 Relationships between IMs and RUs ........................................................... 48 2.4.4 Infrastructure charging & Government support........................................... 51 2.5. Lessons from domestic freight liberalisation.................................................. 54 2.6. Definition of Market Segments ........................................................................ 57 2.6.1 Overview...................................................................................................... 57 2.6.2 Characteristics of entrants............................................................................ 60 2.6.3 Characteristics of segments.......................................................................... 62 3. Quantative Analysis of Market..........................................................67 3.1. Overview & Assumptions................................................................................. 67 3.2. Total Passenger Traffic .................................................................................... 70 3.2.1 Aggregate traffic levels................................................................................ 70 3.2.2 The influence of high-speed rail .................................................................. 73 3.2.3 Underlying rail volume trends ..................................................................... 77 3.2.4 Relative importance of domestic and international rail traffic .................... 79 3.3. Rail Market Share............................................................................................. 80 3.3.1 Aggregate traffic levels................................................................................ 80 3.3.2 Underlying rail volume trends ..................................................................... 82 3.3.3 Impact of market opening on modal share................................................... 85 3.4. Segmented Analysis........................................................................................... 88 3.4.1 High Speed in Europe .................................................................................. 88 3.4.2 Long distance & regional rail....................................................................... 91 3 3.4.3 Public Service Obligation (PSO) ................................................................. 92 3.5. Profits, Revenues and Costs ............................................................................. 95 3.6. Conclusions – Quantitative Analysis............................................................. 102 4. Analysis of the Impact of Market Opening for International Passenger Traffic ............................................................................104 4.1. Background and Approach............................................................................ 104 4.2. The Present Situation...................................................................................... 105 4.3. Parallels with Open Access in Freight........................................................... 107 4.4. Prospects of Entry in International Passenger Markets ............................. 108 4.4.1 Markets & players...................................................................................... 108 4.4.2 Open access operation by incumbents ....................................................... 111 4.4.3 Open access operation by new Railway Undertakings .............................. 113 4.5. Cabotage & Competition................................................................................ 114 4.6. Conclusions...................................................................................................... 116 5. Assessment of Existing Legal Regimes ............................................118 5.1. Typology of Legal Regimes ............................................................................ 118 5.1.1 Overview.................................................................................................... 118 5.1.2 Market delineation & responsibility .......................................................... 118 5.1.3 Access to the market: Entry Regimes ........................................................ 120 5.1.4 Regulation of market behaviour (only RUs).............................................. 120 5.1.5 Access to infrastructure and to framework contracts................................. 121 5.1.6 Access to the network of services provided by other operators (incumbent)122 5.1.7 Access to complementing services (independent providers) ..................... 122 5.2. Investigation of Previous Studies................................................................... 123 5.2.1 Studies examined ....................................................................................... 123 5.2.2 Key findings............................................................................................... 124 5.3. Differences between Legal Regime in Theory/on Statute Books & that in Practice............................................................................................................. 128 5.3.1 Structure of sub-section ............................................................................. 128 5.3.2 Overview of regulatory framework............................................................ 128 4 5.3.3 Separation .................................................................................................. 130 5.3.4 Regulatory body......................................................................................... 132 5.3.5 Administrative barriers .............................................................................