On-rail competition – who wins?

‘Downward pressure on fares, upward pressure on service quality and innovation and greater efficiency are – in theory at least – benefits delivered by competitive markets.’

According to its March 2016 report, the Competition and Markets Authority (CMA) suggests that more direct (on-rail) competition between passenger train operators in Great Britain could lead to lower fares, greater efficiency, and more effective use of capacity.

The existing system involves a competitive bidding process ‘for’ the market of passenger rail services, whereby train operators compete to win long-term (7- to 15-year) franchises for specific routes.

At the same time there exists a small amount of competition ‘in’ the market (on-rail), which occurs in three ways:

  • overlapping franchises: two or more franchised train operating companies (TOCs) operate on the same route, and therefore compete against each other for passengers on that route
  • parallel franchises: two or more franchised TOCs operate services between the same city pairs, although on different routes, and so compete for passengers travelling between those cities
  • Open Access Operators (OAOs): operators of passenger services authorised access to the network on certain routes for a specified time by the Office of Rail and Road (ORR), independently of the franchising system

Increasing the number of open access services or dividing franchises could improve the current system, says the CMA, referring to the local bus service model to strengthen its argument: sustained head-to-head competition where it exists has delivered benefits to customers, as a result of bus operators competing on the basis of service frequencies, in addition to fares and service quality.

It also mentions the trend favoured by the European Commission (EC) of introducing greater on-rail competition in Europe.

The ORR “welcomed” CMA’s recommendation, with chief executive Joanna Whittington commenting, “we now look forward to working with governments and industry partners in developing the important changes needed to help provide the opportunity for more competition in the future.”

However bearing in mind the practical challenges of such “important changes”, and the complex yet essential need to adopt a system approach to improving the railways, the Rail Delivery Group, which represents train operators and infrastructure manager Network Rail, has unsurprisingly reacted with less enthusiasm.

The Campaign for Better Transport suggests passengers would benefit far more from a joined up network, rather than greater competition. “The Government has committed billions to upgrading the railways to meet record passenger demand,” said its chief executive Stephen Joseph.

“Rather than handing this much needed capacity to open access operators, as the Competition and Markets Authority proposes, communities and the economy would benefit far more if train companies worked with new city regions and combined authorities on joined up networks of public transport designed to support the local economy.”

Following just eight days after the CMA release, on March 16 the Department for Transport (DfT)  published  Nicola Shaw’s report on the future shape and financing of Network Rail.

 

 

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s