Germany and France, whilst still opposing the 4th RP in the Council and Parliament, are already making sure it will have no effect in bringing competition to PSO contracts in their countries.
In France, many regions have been persuaded by SNCF to enter into PSO contracts for ten years without any competition so that, even if the PSO text in the 4th RP does happen, then there is a ten year window before any threat of competition for SNCF on regional passenger services.
In Germany, Nord Rhine Westfalia, the regional rail services PSO has sensibly invited tenders separately for supply of new rolling stock and operation of trains. National Express won the operating part, with the Region procuring the new trains separately, part funded by the European Investment Bank. That means that the Region owns the trains and can allocate them to any new operator it chooses.
However, in Berlin, the old way has prevailed, with the Berlin City transport authority insisting that tenderers to operate the S-Bahn network supply new rolling stock to the value of €1 bn as well, and under very strict detailed conditions. Surprisingly, only DB tendered, and will receive €250m a year from the Federal Government.
So the key to keeping the PSO contracts within the monopoly house is to let all contracts for as long as possible to the incumbents whilst this is still allowed, and make the conditions of tenders unacceptable to any competing private sector operator, even if that costs the taxpayer millions more.
For smaller German cities, DB has another way of attracting PSO money. According to press reports, CDU political heavyweight Ronald Pofalla, now Head of Lobbying at DB, seeks to get DB intercity and ICE trains to every city with more than 100,000 inhabitants provided that the cities pay DB a PSO. There cannot of course be any competition for this, since there is no competition for such long distance services, except HKX which operates between Hamburg and Köln.
Meanwhile, at least the German Monopolies Commission, in its 5th Report issued on 22 July 2015, recommends total separation of infrastructure manager and train operators.
The Monopolies Commission states that the ‘only way to establish undistorted competition is to completely separate the infrastructure and transport units of the integrated company Deutsche Bahn AG. It reveals how an integrated company is structurally able to discriminate against competitors and why current legislation is not suited to prevent discriminating behaviour’. It recommends ‘the organisational and financial unbundling’ of DBAG.
Interestingly, in the same month, the UK Competitions and Market Authority also published a report into options for competition in passenger services in Great Britain, where the railways are already ‘unbundled’. The CMA suggests four options for further discussion:
- Existing market structure but with significantly increased open access operations
- Two franchisees for each franchise
- More overlapping franchises
- Licenced multiple operators, subject to conditions including PSO obligations.
The CMA suggests that these are designed to achieve real improvements for passengers, for taxpayers and the industry. https://www.gov.uk/government/news/cma-consults-on-possibilities-for-greater-competition-in-passenger-rail
So the two competition authorities agree! What a pity that the German Government does not listen to its Monopolies Commission and instead, along with France and some other member states, oppose with all their power any move towards unbundling or more competition above rail.
By Tony Berkeley
Tony Berkeley is Chairman of the Rail Freight Group and a Board Member of the European Rail Freight Association, and a member of the UK House of Lords.