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 Public transport 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 Arriva 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 regional rail 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 Metropolitan 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 Deutsche Bahn 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: