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Is the future EU railway market liberalisation a replication of the old British franchising model?

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Dima

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Hi all,

I read a bit about the EU plans to liberalise the railway systems inside its member states, which causes huge strikes in France a couple of years ago, and I got a very clear sense of déjà vu. It looks like from 2024 all the rail contacts must be put out for bidding, which sounds very similar to the recently abandoned British franchising system.

What do you think about it? Will it work? What was the motivation to introduce it, given that as far as I am aware such system has never existed anywhere in the EU outside GB? Do you think that the decision to move away from franchising in GB will affect the EU plans?

Cheers,
Dina
 
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Bletchleyite

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What the UK does won't affect the EU as we have left.

That aside it is a mind numbingly stupid idea and a fine example of the way the EU often chooses ideology over practicality. Tendering only really saves money if you can get economies of scale, and you can't really get economies of scale much better than a single national state operator.
 

JonasB

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That has been the case in Sweden for 20 years or so an usually works fine. It has made it a lot easier for regional public transport authorities to start train traffic when SJ doesn't have a monopoly anymore. And it has revived many smaller rail lines.
 

jamesontheroad

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That has been the case in Sweden for 20 years or so an usually works fine. It has made it a lot easier for regional public transport authorities to start train traffic when SJ doesn't have a monopoly anymore. And it has revived many smaller rail lines.

I was about to refer to Sweden, which actually introduced market liberalisation before Britain. It did it differently, separating track and operations first, and then privatising SJ into SJ AB, which is a private company owned by the state. Much later SJ lost their monopoly, and today we have a sort of liberalized model where (unlike the UK) two or three different companies compete on the most profitable intercity routes.

But also, along with other reforms to county traffic (including bus lines), regional authorities were given the rights to establish their own rail traffic. This is perhaps more in common with Germany, where cities and regional authorities have a greater say in setting the specification of local and regional rail services. It has had the greatest of impacts in regions like my own (the north of Sweden) where neighbouring counties formed Norrtåg not only to restore passenger service lost when it was deemed uncommercial (eg Lycksele-Vännäs), but also establish new regional rail connections on the Botniaban.

But, in brief, to answer the OP: no, the liberalization of the EU railways is different. The privatization of British Rail was a more dramatic intervention, especially in terms of transfer of state-owned assets to private actors. It also did very little to create competition between operators on the platform, so to speak. Bidders competed for franchises, but then that was it. Liberalization of railways in the EU has the potential to break open some of the most intransigent state-owned monopolies in certain countries.
 
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LNW-GW Joint

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In many ways we are now moving towards the EU model - public sector administrations contracting out railway operation to competing bidders on a concession basis.
The EU model doesn't force UK-style franchising, just periodic competition for services and open access for new operators, on a level commercial playing-field.
The new EU TOCs are a mix of private and public operators, with public sector regional companies often winning local concessions.

Generally the model involves smaller contracts that ours, often a handful of local routes or a single hub/spoke operation.
Regional/Land governments also have the powers and funding to make their own deals, unlike our more centralised system.
Just as we have operators owned by EU states, your local TOC in Germany might be owned by the neighboring state/land, as a commercial enterprise.
If DB Regio operates the service, it will have won the contract against competition from other public/private operators.

The French strikes were about the breakup of the SNCF monopoly and the long-standing status of rail workers in France (pensions etc).
Currently SNCF buys all rolling stock in France, and the regions will now have their own powers to buy the trains they want.
Open access also means operators can enter any EU market, hence SNCF in Spain and Trenitalia in France.
The EU high-speed network also has plenty of capacity for new services.
Freight is a lot further down the EU open access route than passenger services, though the operators might well be state-owned, if not the state you are in.
 
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Bletchleyite

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That has been the case in Sweden for 20 years or so an usually works fine. It has made it a lot easier for regional public transport authorities to start train traffic when SJ doesn't have a monopoly anymore. And it has revived many smaller rail lines.

Having the option to tender is rather different from being forced to, though. If it isn't broke, there should not be compulsion to "fix" it on purely ideological grounds.
 

jamesontheroad

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Having the option to tender is rather different from being forced to, though. If it isn't broke, there should not be compulsion to "fix" it on purely ideological grounds.

France is quite a good example in this regard: in compliance with earlier EU legislation, various tenders for rolling stock, material, services, etc are indeed forced to be tendered and yet (surprise surprise) the preferred French supplier will usually win. You can see this in many sectors, not just rail. There is always a way to tilt a tendering process in the direction you want it to go, it's just that British companies and institutions have never been very good at this (and would rather blame the EU than actually work creatively with the cards they have been dealt).

Consider also the state of regional rail in France, which is - by and large - terrible, with infrequent and uneven service on many lines. The relationship between SNCF, the various TER units and the départements has not exactly delivered a world-class or even consistent level of rural rail service. If you give a region the power to call for tenders, you have the opportunity for local politicians and communities to demand better or more appropriate services.

To refer back to my post #5 above, by the mid-nineties almost all local rail had disappeared from northern Sweden because it wasn't commercially viable. It had nothing to do with whether it was the monopoly SJ or the privatised SJ AB running the trains: these economic decisions were more easily made in a system that was closed to competition so no-one ever thought differently. When the laws on procurement of rail changhed and the four northernmost counties of Sweden had the opportunity, they were able to win the political argument at a local level to subsidise local rail and then invite tenders to run trains that actually served the needs of people in the region. If I am not mistaken, the operator proposes a fee to operate the services specified in the tender: there is no financial reward for selling more tickets or setting the prices higher... so it is slightly different from the UK franchising model which is much more dependent on the financial return from tickets.

Norrtåg is not, in strict business-sense, a profitable operation. But the procuring counties know that and the operator gets paid what they bid for running the trains, and it gets thousands of people to school, college, hospital and work on time and has a broader societal benefit. It only exits because of the liberalization of the railway.

I'm not a champion for these neoliberal methods, by the way, but I am open the opportunities they bring when they are seized and used proactively by people who know what they are doing.
 

Fragezeichnen

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I read a bit about the EU plans to liberalise the railway systems inside its member states, which causes huge strikes in France a couple of years ago, and I got a very clear sense of déjà vu. It looks like from 2024 all the rail contacts must be put out for bidding, which sounds very similar to the recently abandoned British franchising system.

What do you think about it? Will it work? What was the motivation to introduce it, given that as far as I am aware such system has never existed anywhere in the EU outside GB? Do you think that the decision to move away from franchising in GB will affect the EU plans?
They aren't really plans. Other countries like Germany and the Netherlands have been following this system for years, but France has held out as long as possible. Amusingly the article even admits that SNCF already takes advantage of rail liberalisation in other countries. Unlike the UK franchise system, the operator is being paid to operate the trains rather than take the revenue risk.
Some of French regions are delighted - they are sick to the back teeth of being forced to pay SNCF high prices for shoddy service.

That aside it is a mind numbingly stupid idea and a fine example of the way the EU often chooses ideology over practicality. Tendering only really saves money if you can get economies of scale, and you can't really get economies of scale much better than a single national state operator.
Theoretically a single large operator has economies of scale, but in practice what you often end up with is a bloated, inflexible behemoth which prioritises maintaining it's monopoly above everything else and gets distracted with unecessary side ventures. Anyhow, if the economies of scale really do work, the national incumbent ought to win anyway.

Having the option to tender is rather different from being forced to, though. If it isn't broke, there should not be compulsion to "fix" it on purely ideological grounds.

In the case of France, I think a lot of people that have attempted to use french rural rail services would agree that they are "broken". The political power of SNCF at national level is the roadblock.
 

LNW-GW Joint

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Rail is not unique as a travel market, and some of the "ideology" is to get more common standards and methods across the various transport modes.
The air, road and ferry markets are largely a free-for-all across the EU, leading to cross-EU operators like easyJet and Ryanair, which have greatly impacted the longer-distance rail market, and the coach market is growing at the other end of the market.
The aim of establishing commercial rail operators, able to operate anywhere in the EU, is quite a good one, in my view, regardless of ownership.
At the technical level, it's what all the "interoperability" standards are about, eg the introduction of ETCS.
Borders and national rules just get in the way of wider connectivity and free access, which is a severe handicap for rail.
 
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Bletchleyite

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Borders and national rules just get in the way of wider connectivity and free access, which is a severe handicap for rail.

And yet the EU rail systems of the 1990s interacted far, far better than they do now. What does that tell you? It tells me that state operators in it for the good of the passenger do better than commercial fiefdoms.
 

Meerkat

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And yet the EU rail systems of the 1990s interacted far, far better than they do now. What does that tell you? It tells me that state operators in it for the good of the passenger do better than commercial fiefdoms.
Why would state operators be in it for the good of the passenger - Does experience really support that theory?
Private Operators have to satisfy the customers to survive, so are more likely to fight for their rights rather than just go for the solution that satisfies the engineers.
Obviously this is far less relevant to metro networks which are more suited to concessions, but still relevant.
Also a state operator has to satisfy the Treasury, so you find even a profitable business case might not be enough if the Treasury is on a cash squeeze.
 

Fragezeichnen

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And yet the EU rail systems of the 1990s interacted far, far better than they do now.

Did they? That's news to me

SNCF and DB run Paris - Frankfurt high speed services together, for instance. Sure, there might be less traditional multi-country services with loco changes at every border, but that's because the market for that has beeen irrevocably changed by the advent of low-cost air travel.

Yes, in theory a state-owned monopoly with vast resources can do great things. In practice they often end up being for the good of the themselves, or become so bound up in inertia that they can't adapt to changes in needs.

I put the level of support for a national monopoloy on rail travel in the UK down to having had one of the best and most forward looking national monopolies followed by by far the worst attempt at liberalisation.
 

Bletchleyite

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Did they? That's news to me

You don't remember the operation of long distance EC, EN and D trains across borders, with the coaches going through and responsibility changing at the border, and the likes of CIWL and Mitropa dealing with hospitality throughout?

You don't remember through ticketing across the whole of Europe, issuable by any railway?

Co-operation over a single route hardly beats that.

I put the level of support for a national monopoloy on rail travel in the UK down to having had one of the best and most forward looking national monopolies

Was it? I would agree with anyone who said SNCF was a bit rubbish. But DB, SBB and OeBB for example seem really quite good to me. And SNCB/NMBS and NS are hardly bad at running what are just commuter railways.
 

JonasB

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Having the option to tender is rather different from being forced to, though. If it isn't broke, there should not be compulsion to "fix" it on purely ideological grounds.

Yes, but only routes that are subsidised have to be tendered as I've understood it. The rest can be treated as open access. So SNCF can keep operating their TGVs and ICs. But to operate subsidised TERs they will need to compete with Abellio, Serco, Trenitalia and other interested companies. This might be a really good thing for regional trains in France.

To refer back to my post #5 above, by the mid-nineties almost all local rail had disappeared from northern Sweden because it wasn't commercially viable. It had nothing to do with whether it was the monopoly SJ or the privatised SJ AB running the trains: these economic decisions were more easily made in a system that was closed to competition so no-one ever thought differently. When the laws on procurement of rail changhed and the four northernmost counties of Sweden had the opportunity, they were able to win the political argument at a local level to subsidise local rail and then invite tenders to run trains that actually served the needs of people in the region. If I am not mistaken, the operator proposes a fee to operate the services specified in the tender: there is no financial reward for selling more tickets or setting the prices higher... so it is slightly different from the UK franchising model which is much more dependent on the financial return from tickets.

Not only northern Sweden, by the early 90s there were next to no local trains in Sweden apart from the Stockholm and Gothenburg areas and parts of Skåne. The counties could procure rail traffic if they wanted, but since SJ had a monopoly they could charge high fees, and often did. This resulted in a lot of buses running parallell to railways. But it has changed. Today all counties, except Gotland, has some kind of local trains. On their own or as a part of a larger train system like Norrtåg in the north, Mälartåg around Mälaren, Krösatåg in Småland etc.

And yes it is usually a fixed fee to run the service while the local public transport authority sets the schedule and ticket prices and handles the branding and customer service. Although there are often some kind of incentives for attracting more passengers. Norrtåg however operate on some kind of hybrid model where Vy sells single tickets if I'm not mistaken.
 

Single-track

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Bletchleyite,
You don't remember the operation of long distance EC, EN and D trains across borders, with the coaches going through and responsibility changing at the border, and the likes of CIWL and Mitropa dealing with hospitality throughout?

You don't remember through ticketing across the whole of Europe, issuable by any railway?

Co-operation over a single route hardly beats that.

through ticketing is a matter of coordination that can be resolved by both state and private actors. to act as if it is contingent upon the domination of the former is at best ignorant. jamesontheroad provided a nuanced example of how one implementation of market liberalisation was able to satisfy a locally recognised social need. other situations may warrant a different solution. are you sure it is the EU that is viewing the matter through a nostalgic lens clouded by ideological essentialism?
 

Bletchleyite

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through ticketing is a matter of coordination that can be resolved by both state and private actors. to act as if it is contingent upon the domination of the former is at best ignorant.

I don't think calling people with views that differ from yours ignorant is the way to conduct a civilised debate, do you?

jamesontheroad provided a nuanced example of how one implementation of market liberalisation was able to satisfy a locally recognised social need. other situations may warrant a different solution. are you sure it is the EU that is viewing the matter through a nostalgic lens clouded by ideological essentialism?

No, I don't. A national railway that belongs to the public whose sole purpose is to serve the public will tend to work better and provide better value than fragmentation. There is no reason why other things can't exist on the side where they make sense, e.g. separate railways like Merseyrail.

Integration never works nicely if the actors (as you put it) have their own profit motivation, as integration never maximises profit for each actor. Witness the UK bus market.
 

Gag Halfrunt

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Consider also the state of regional rail in France, which is - by and large - terrible, with infrequent and uneven service on many lines. The relationship between SNCF, the various TER units and the départements has not exactly delivered a world-class or even consistent level of rural rail service. If you give a region the power to call for tenders, you have the opportunity for local politicians and communities to demand better or more appropriate services.

TER services are supervised by regional councils, not départements. The regions set the routes, fares and frequencies, and pay a share of the subsidy.

 

Giugiaro

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Interestingly, from the point of view of Portugal, the railway market liberalisation isn't much about franchising, but more about actual open market.

It's like there's a sign on top of the country saying "Yo! Want to create a railway company and put some trains running? Now YOU can!!!".


In practice, instead of inviting private companies into competing in the most profitable routes, it instead is doing the same but between publicly owned companies, which is rather ironic to be honest...
 

LNW-GW Joint

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No, I don't. A national railway that belongs to the public whose sole purpose is to serve the public will tend to work better and provide better value than fragmentation. There is no reason why other things can't exist on the side where they make sense, e.g. separate railways like Merseyrail.
Part of the EU railway packages (which were influenced by the UK while we were a member) was to identify a level playing field in rail in order to crack the closed world of state-owned utilities and their wooden-dollar economics (not just rail), and allow EU-wide competition in contracts.
Hence the infrastructure/operator accounting split, and open access.
How each state manages that is up to them, but limited-time concessions seem to be the model that works.
The competition, apart from LCCs, are the open Schengen borders with ever-more-efficient truckers and coach groups.
SNCF might run a tight ship around Paris, but it hasn't opened up fully to cross-border freight, to the detriment of neighbouring countries' rail business.
SNCF also has fingers in many railway pies outside France, not least in our high-speed and regional networks, so quid pro quo and all that...
 

Bletchleyite

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Part of the EU railway packages (which were influenced by the UK while we were a member) was to identify a level playing field in rail in order to crack the closed world of state-owned utilities and their wooden-dollar economics (not just rail), and allow EU-wide competition in contracts.

Which rather assumes you think that is a good idea. I can see only a small amount of good, and plenty bad, that has come from the tendency to outsource things in this manner.

Let competition exist in areas that are a genuine free market. But subsidised public services should be provided on a public basis.
 

DanielB

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They aren't really plans. Other countries like Germany and the Netherlands have been following this system for years, but France has held out as long as possible. Amusingly the article even admits that SNCF already takes advantage of rail liberalisation in other countries. Unlike the UK franchise system, the operator is being paid to operate the trains rather than take the revenue risk
What you're writing last is not necessarily true: operations in Dutch franchises are indeed subsidised, but there are several franchises were the operator is responsible for the revenue himself.

One could wonder however if this system really introduces competition. There aren't really any new operators, it's just operators from other countries operating across borders.
The biggest operator in The Netherlands after NS is for example Arriva (DB) followed by Keolis (SNCF) and Qbuzz (Trenitalia). Only Connexxion (Transdev) isn't owned by a foreign railway company.
And NS itself is then again operating abroad through Abellio.

By the way: in The Netherlands only some regional networks are tendered. Open access services are rare (we've had them in the past, but that was a big failure). Arriva is trying now and it's said the new Nightjet to Zürich which is being planned would be operated as open access, but in general it would be incredibilly hard to get attractive paths in between the highly frequent NS services.
 

rf_ioliver

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Interestingly, from the point of view of Portugal, the railway market liberalisation isn't much about franchising, but more about actual open market.

It's like there's a sign on top of the country saying "Yo! Want to create a railway company and put some trains running? Now YOU can!!!".


In practice, instead of inviting private companies into competing in the most profitable routes, it instead is doing the same but between publicly owned companies, which is rather ironic to be honest...
Same more or less in Finland, except it is "Yo! Want to create a *freight* rwailway company and put some trains running? Now YOU can!!!" and lo we have 3 companies: VR, Fenniarail and Operail. Finland has an exemption from opening up the passenger market until late in the 2020s - though the Helsinki commuter network and the Allegro trains to Russia are technically seperate companies (for some accounting/political definiition).

The model for private passenger companies has not been worked out at this time, though I think the Danish model where certain areas/lines are tendered will probably be the way to go rather than multiple companies running, say, between Helsinki and Oulu.
 

Meerkat

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No, I don't. A national railway that belongs to the public whose sole purpose is to serve the public will tend to work better and provide better value than fragmentation.
That Purpose isn’t the actuality though. They end up serving the convenience of the company and it’s staff, the cashflow desires of the Treasury and the passengers with political clout rather than the most needy or those willing to pay the most.
 

Bletchleyite

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That Purpose isn’t the actuality though. They end up serving the convenience of the company and it’s staff, the cashflow desires of the Treasury and the passengers with political clout rather than the most needy or those willing to pay the most.

I think DB, SBB, OeBB, NS and SNCB/NMBS do a pretty good job of serving the passenger, all things considered.
 

Meerkat

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I think DB, SBB, OeBB, NS and SNCB/NMBS do a pretty good job of serving the passenger, all things considered.
Weren’t DB protected from coach competition until recently? Also if they were that good for the passenger why do they keep losing franchises (despite the alleged economies of scale) and how does Open Access survive?
Anyway, pretty good doesn’t mean better.
 

Bletchleyite

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Weren’t DB protected from coach competition until recently? Also if they were that good for the passenger why do they keep losing franchises (despite the alleged economies of scale) and how does Open Access survive?
Anyway, pretty good doesn’t mean better.

They are losing bids because others are doing it cheaper. Cheaper is not necessarily better. The "race to the bottom" has not delivered anything of benefit, ever. All it does is understands the price of everything and the value of nothing.

There is hardly any Open Access in Germany - much less than in the UK. Flix might have a reasonably sized network, but it's on very low frequencies - typically one train each way per day, the numbers are tiny compared with DB's Takt. And Nightjet could have been done under the "old" system - national railways allowed other national railways a get-in if they weren't interested in the traffic themselves, and if they were they'd operate it co-operatively.

Lopping DB up into bits categorically would not improve it.
 

LNW-GW Joint

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There's the minor problem of DB being in a bad state financially.
None of the supposedly "perfect" state operators is in a healthy state, and there's a limit to the subsidy begging bowl.
It's at least one reason why the governments are pursuing radical change (as they are here, of course).
 

Meerkat

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They are losing bids because others are doing it cheaper. Cheaper is not necessarily better. The "race to the bottom" has not delivered anything of benefit, ever. All it does is understands the price of everything and the value of nothing.
Cheap is also not necessarily any worse, and as it’s specced by the local authorities it’s less likely to be worse than if distant central government do it. Also DB would be bidding to the same spec, so how can it be worse rather than just less efficient (despite the alleged economies of scale!)
Pushing my buttons with the meaningless value of nothing line!!
 
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