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Liberalisation of the European rail market

Implementation of the First Rail Infrastructure Package (EC/13/14/16/EC) by the EU Member Countries and the ongoing work on adoption of Interoperability Legislation (EC/16/2001) opened access to rail infrastructure for licensed private rail undertakings and fundamentally transformed the rules of competition in the rail market and supply of rail service in Europe. However, findings from the ongoing REORIENT project reveal that in terms of national transposition there is still some way to go before the new rail legislation is adopted in spirit. As a consequence, the following types of barriers still hinder the seamless international rail operations in trans-European corridors:

Legal barriers caused by political opposition to the EC rail policy leading to reduction of the national EC directives’ transposition to an absolute minimum.

Institutional barriers arise from the lack of independence between the previously integrated political and administrative structures such as train operating companies and infrastructure managers. If an infrastructure manager is still organisationally linked to a national railway company, he/she may hinder non-discriminatory access to infrastructure for new rail ventures. In this context, the issue related to abuse of dominant position by the incumbent railway undertaking becomes a highly relevant barrier. In addition, controls/inspections and equipment shifts at border-crossings add to institutional obstacles that hinder uninterrupted rail freight operations.

Technical barriers arise from the lack of functional and network-related interoperability between the EU countries. Different traction voltage, signalling and traffic management systems, exploitation/maintenance standards for rolling stock plus information transfer cause significant disparities in safety certification and homologation requirements needed for approval of foreign rolling stocks to operations on other countries’ rail networks. This in turn, impedes the incentives for foreign operators to run international freight trains. These barriers are exacerbated by legal hindrances, such as outdated inter-governmental agreements on management of international rail traffic, which do not recognise the licensed rail undertakings as parties to inter-country traffic management treaties. In addition, outdated specifications of locomotive types allowed to haul traffic into border-zones of neighbouring countries magnify the technical and legal hurdles for new operators offering international freight transfer.

Market barriers produced by inconsistent infrastructure charges along trans-European corridors constitute considerable impediments to competitive international rail service. These obstacles are rooted in political and administrative idiosyncrasies of national rail systems. In addition, the structure of charges is constrained by divergence between how the competition is designed under the national and the European transport policies. As a consequence, the ways how charges are calculated and levied in different parts of railway markets – sub-urban passenger services, inter-city services, high-speed-trains, domestic and international freight - increase the cost of recovery for rail freight operators but maximise financial returns for infrastructure managers. These aberrations damage the terms of competition between the international rail freight service and the motorised haulage. In addition, the level of charges in the new member states is not based on economically justified marginal cost pricing but on politically defined needs to recoup the total cost of infrastructure’s wear and tear and subsidise passenger traffic. The below presented diagrams visualise the inconsistencies in the European infrastructure charges and the disparities between the infrastructure charging regimes.

Total costs
Figure 2: Percent of Total Cost Covered by Infrastructure Charges in 20041

Acces charges

Figure 3: Average access charges in 2004 (€/train km, excluding cost of electric traction)

Market barriers limit incentives for new railway undertakings to enter segments with distorted competition terms. In addition, incompatible rail workforce regulations as regards the numbers of allowable working hours and overtime remuneration influence the costs of service and exacerbate the impacts of other types of market barriers. As already mentioned, levying of asymmetric infrastructure charges also discriminate against new operators to the benefit of incumbent railways. By so doing, they distort the intra-rail competition and create a relative competitive disadvantage for the newcomers.

Social barriers are manifested in behaviours of important national stakeholders and political decision makers who resist changes imposed by the EC legislation. Reason for that is that opening of the rail market to competition may lead to job losses at national railway companies, which are resisted by the employees’ trade unions and some politicians.

Political barriers arise from the lack of willingness of national governments to invest in upgrading of rail infrastructure. These impediments affect both, the incumbent and the new rail operators and put implementation of the entire railway legislation into jeopardy. Political impediments may also hinder the new rail freight operators from attracting financial capital to long-term investments in rolling stock and IT systems, and by so doing add substantial hurdles to the existing market barriers.

The developments are supported by the growth in volumes of international combined rail transport on eighteen main trans-European corridors which in 2003 reached 54.5 million tonnes, or 4.7 million TEU. The transfer of unaccompanied load carrying units in 2002 amounted to 43.9 million tonnes, while the accompanied transport carried the remaining 10.6 million tonnes. This has opened an opportunity for an efficient rail service corridor from Rotterdam (NL) to Constanza (RO). Competition in this railway pipeline will encourages undertakings to innovate and operate efficiently, in order to reaching business objectives. The ASSESS project, appraising contributions of the TEN and other transport policy measures to the midterm implementation of the White Paper on the European Transport Policy by 2010, concludes with: "There are however clear signs of progress. Effective competition has emerged on some key international corridors, most notably through the Alps. The activities of the Rail Net Europe consortium of infrastructure managers is improving the marketing of international paths, and the formation of the European Bulls consortium of private rail freight operators promises to spread competition. (…) Thus it appears likely that the efficiency and quality of service of rail freight will improve over the coming years under the impact of greater competition and indeed it is possible that the scene has been set for very major changes over the next few years".


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