Didier Van De Velde Nettiin - vayla.fi

EffectsofVerticalSeparationintherailwaysector

Verticalseparation,competitionandcoordinationDidiervandeVelde(inno-V)

19 January 2016 - Turku

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Competitionintherailwaysector

19 Jan. 2016Rata 2016 - D. van de Velde

Estimatedsituation(2015)

Openaccesswithentry

Openaccessnoentry

Noopenaccess

Competitivetendering ?

?

?

Verticalseparation:Aproblematicsolutiontoaproblem…


Inefficiency /Lackofcustomer orientation

Efficiency /Morecustomerorientation

Needformorecompetitive pressure

Competitive tenderingand/or open access

Fairness andnobarrierstoentry

Full verticalseparation

Problem

Wish

Probablyagoodidea

Perhaps,buttherearealsootheroptions

Arequirementthatisdifficulttorealise

Radicalsolutionthatcouldbecostlyinlongerrunduetocoordinationlosses

EVES-Rail:EconomiceffectsofVerticalSeparationintherailwaysector

Pre-existing academic resarchNoevidencethatunbundlingisbetter/worseManydeficiencies

Dataquality,Codingofstructuraloptions,

EVES-RailreportMoreandbetterdataMorerefined approach

Verticalseparation,holdingcompany,verticalintegrationTrafficDensity

Quantitativeresearch(keyfindings)NoevidencethatverticalseparationisunconditionallysuperiororinferiortootherstructuraloptionsAthighertrafficdensities,verticalseparationincreasescostsAndatahigher shareoffreightintotalrevenues,verticalseparationincreasescosts

à Coordination issuesCompetitiondoesnotappear toworkbetterorworseunderverticalseparation

à UniversalverticalseparationislikelytoincreasetotalcostsQualitativeapproach(valuechainanalysis)

Furtherinvestigationofincentivemisalignment issues


!

inno%V!consultancy!(Amsterdam,!NL)!Didier&van&de&Velde&

!

ITS,!University!of!Leeds!(GB)!Prof.&Chris&Nash&Andrew&Smith&!

!

Kobe!University!(JP)!Prof.&Fumitoshi&Mizutani&Fukuyama!Heisei!University!(JP)!Shuji&Uranishi&

!VU!University!(Amsterdam,!NL)!Mark&Lijesen&

!civity!management!consultants!(Hamburg/Berlin,!DE)!Frank&Zschoche&

!

Valuechainanalysis

Decompositioninelementsofthevaluechain


OperateMaintainOwnBuild

Carriagebuilding

Locomo7ve

building

Sta7on

building

Track

building

Energy

Trackequipment

building

Carriage

ownership

Locomo7ve

ownership

Rollingstock

maintenance

Track

maintenance

Sta7on

maintenance

Sta7on

ownership

Trackownership Trackavailability

Sta7on

availability

Trac7onstock

availability

Drivers

Conductors

Carriagestock

availability

Trac7onservice

Carriageservice

Trackservice

TrafficcontrolInfrastructure

service(path)

Trainservice

Sta7onretail

Transport

service

Real-7me

Informa7on

Trackequipment

ownership

Traincatering

Transport

control

Parking,

cleaning,etc.

Sales,informa7on

andsupport

Sta7onservice

(forconsumer)

Sta7onservice

(forRU)

Depot

building

Depot

ownership

Valuechainanalysis

Typicallayersofanytransportsystems

Butrailverticalseparationisnotthatsimple

ManydifferentregimesacrossEurope!



Carriagebuilding

Locomo7ve

building

Sta7on

building

Track

building

Energy

Trackequipment

building

Carriage

ownership

Locomo7ve

ownership

Rollingstock

maintenance

Track

maintenance

Sta7on

maintenance

Sta7on

ownership


Sta7on

availability

Trac7onstock

availability

Drivers

Conductors

Carriagestock

availability

Trac7onservice

Carriageservice

Trackservice


service(path)

Trainservice

Sta7onretail

Transport

service

Real-7me

Informa7on

Trackequipment

ownership

Traincatering

Transport

control

Parking,

cleaning,etc.

Sales,informa7on

andsupport

Sta7onservice

(forconsumer)

Sta7onservice

(forRU)

Depot

building

Depot

ownership

Train

Sales

Sta7on

Track

Ini7a7ve

TransportServiceforthecustomer

Valuechainanalysis

JapanFullverticalintegrationRegionaloperatorsPrivatisationStability(notendering)HighefficiencyHighcustomerfocus



Carriagebuilding

Locomo7ve

building

Sta7on

building

Track

building

Energy

Trackequipment

building

Carriage

ownership

Locomo7ve

ownership

Rollingstock

maintenance

Track

maintenance

Sta7on

maintenance

Sta7on

ownership


Sta7on

availability

Trac7onstock

availability

Drivers

Conductors

Carriagestock

availability

Trac7onservice

Carriageservice

Trackservice


service(path)

Trainservice

Sta7onretail

Transport

service

Real-7me

Informa7on

Trackequipment

ownership

Traincatering

Transport

control

Parking,

cleaning,etc.

Sales,informa7on

andsupport

Sta7onservice

(forconsumer)

Sta7onservice

(forRU)

Depot

building

Depot

ownership 6JR&

Privaterailways

Fullintegra7on

Example:(Japan)

Valuechainanalysis

SwitzerlandIntegratedoperatorNotenderingHighestperformance(inEurope)



Carriagebuilding

Locomo7ve

building

Sta7on

building

Track

building

Energy

Trackequipment

building

Carriage

ownership

Locomo7ve

ownership

Rollingstock

maintenance

Track

maintenance

Sta7on

maintenance

Sta7on

ownership


Sta7on

availability

Trac7onstock

availability

Drivers

Conductors

Carriagestock

availability

Trac7onservice

Carriageservice

Trackservice


service(path)

Trainservice

Sta7onretail

Transport

service

Real-7me

Informa7on

Trackequipment

ownership

Traincatering

Transport

control

Parking,

cleaning,etc.

Sales,informa7on

andsupport

Sta7onservice

(forconsumer)

Sta7onservice

(forRU)

Depot

building

Depot

ownership

SBB

TrasseSchweiz

BAV

Ver7calintegra7onwithsepara7onofessen7alfunc7ons

Example:SBB(Switzerland)

Valuechainanalysis

FranceVerticalseparationuntil2014In2015movedtoalessseparatedregimeNocompetition(yet)



Carriagebuilding

Locomo7ve

building

Sta7on

building

Track

building

Energy

Trackequipment

building

Carriage

ownership

Locomo7ve

ownership

Rollingstock

maintenance

Track

maintenance

Sta7on

maintenance

Sta7on

ownership


Sta7on

availability

Trac7onstock

availability

Drivers

Conductors

Carriagestock

availability

Trac7onservice

Carriageservice

Trackservice


service(path)

Trainservice

Sta7onretail

Transport

service

Real-7me

Informa7on

Trackequipment

ownership

Traincatering

Transport

control

Parking,

cleaning,etc.

Sales,informa7on

andsupport

Sta7onservice

(forconsumer)

Sta7onservice

(forRU)

Depot

building

Depot

ownership

SNCF

SNCF

GaresetConnexions

RFF

SNCF

(DCF)

Ver7calsepara7onwithcontrac7ngback

Example:SNCF(France)un

#l2014

SNCFInfra

Maintenancecompanies

Valuechainanalysis

NetherlandsVerticalseparationTenderingonbranchlinesHighperformance(inEurope)Coordinationissuesleadingtocoordinationfocus



Carriagebuilding

Locomo7ve

building

Sta7on

building

Track

building

Energy

Trackequipment

building

Carriage

ownership

Locomo7ve

ownership

Rollingstock

maintenance

Track

maintenance

Sta7on

maintenance

Sta7on

ownership


Sta7on

availability

Trac7onstock

availability

Drivers

Conductors

Carriagestock

availability

Trac7onservice

Carriageservice

Trackservice


service(path)

Trainservice

Sta7onretail

Transport

service

Real-7me

Informa7on

Trackequipment

ownership

Traincatering

Transport

control

Parking,

cleaning,etc.

Sales,informa7on

andsupport

Sta7onservice

(forconsumer)

Sta7onservice

(forRU)

Depot

building

Depot

ownership

NS

ProRail

Ver7calsepara7on

Example:NS(TheNetherlands)

Maintenance

companies

NedTrain

Valuechainanalysis

SwedenFullseparationOpenaccessandtenderingRailwayinvestigationfinalisedinDecember2015



Carriagebuilding

Locomo7ve

building

Sta7on

building

Track

building

Energy

Trackequipment

building

Carriage

ownership

Locomo7ve

ownership

Rollingstock

maintenance

Track

maintenance

Sta7on

maintenance

Sta7on

ownership


Sta7on

availability

Trac7onstock

availability

Drivers

Conductors

Carriagestock

availability

Trac7onservice

Carriageservice

Trackservice


service(path)

Trainservice

Sta7onretail

Transport

service

Real-7me

Informa7on

Trackequipment

ownership

Traincatering

Transport

control

Parking,

cleaning,etc.

Sales,informa7on

andsupport

Sta7onservice

(forconsumer)

Sta7onservice

(forRU)

Depot

building

Depot

ownership

SJ

Jernhusen

Trafikverket

Ver7calsepara7on

Example:SJ(Sweden)

Euromaint

Infranord

Valuechainanalysis

GreatBritainMcNulty(2011)

HighleveloffragmentationisimportantreasonforinefficienciesRecommendscloseralignmentandpartnershipsBut,deepallianceprovesproblematic…



Carriagebuilding

Locomo7ve

building

Sta7on

building

Track

building

Energy

Trackequipment

building

Carriage

ownership

Locomo7ve

ownership

Rollingstock

maintenance

Track

maintenance

Sta7on

maintenance

Sta7on

ownership


Sta7on

availability

Trac7onstock

availability

Drivers

Conductors

Carriagestock

availability

Trac7onservice

Carriageservice

Trackservice


service(path)

Trainservice

Sta7onretail

Transport

service

Real-7me

Informa7on

Trackequipment

ownership

Traincatering

Transport

control

Parking,

cleaning,etc.

Sales,informa7on

andsupport

Sta7onservice

(forconsumer)

Sta7onservice

(forRU)

Depot

building

Depot

ownership

TOC(Franchise)

NetworkRail

ROSCO

Ver7calsepara7on

Example:Bri7shRail(GreatBritain)DE

EPALLIANCE

Rollingstock

manufacturer

Valuechainanalysis

Howfarcanwego?

Howfarshouldwego?



Carriagebuilding

Locomo7ve

building

Sta7on

building

Track

building

Energy

Trackequipment

building

Carriage

ownership

Locomo7ve

ownership

Rollingstock

maintenance

Track

maintenance

Sta7on

maintenance

Sta7on

ownership


Sta7on

availability

Trac7onstock

availability

Drivers

Conductors

Carriagestock

availability

Trac7onservice

Carriageservice

Trackservice


service(path)

Trainservice

Sta7onretail

Transport

service

Real-7me

Informa7on

Trackequipment

ownership

Traincatering

Transport

control

Parking,

cleaning,etc.

Sales,informa7on

andsupport

Sta7onservice

(forconsumer)

Sta7onservice

(forRU)

Depot

building

Depot

ownership

Railwayundertaking

Sta7onserviceprovider

Leasing

company

Maintenance

company

Trac7oncompany

Infrastructuremanager

Infrastructureprovider

Retailcompany

Energyprovider

Ancillary

Cateringcompany

Sta7on

owner

Rollingstock

manufacturer

Construc7oncompany

Signallingmanufacturer

Thehypothe7calfullyunbundledrailway

Maintenancecompany

IncentivemisalignmentConcept– actors– economiceffects

VerticalSeparationFullyseparatedIMalongsideRUsEachsubject tosetofincentives(marketorregulation)Eachoptimisesown economicposition

Optimalityforeachactor…Isnotnecessarilyoptimalityforthewholerailsector!

CanleadtoeconomiclossesDuetosub-optimalchoicescomparedbetteraligned(morecooperative)set-upExamples:

AdditionalcapacityinvestmentneedsAdditionaloperationalcostsLostopportunitiesforrevenue-making




Carriagebuilding

Locomo7ve

building

Sta7on

building

Track

building

Energy

Trackequipment

building

Carriage

ownership

Locomo7ve

ownership

Rollingstock

maintenance

Track

maintenance

Sta7on

maintenance

Sta7on

ownership


Sta7on

availability

Trac7onstock

availability

Drivers

Conductors

Carriagestock

availability

Trac7onservice

Carriageservice

Trackservice


service(path)

Trainservice

Sta7onretail

Transport

service

Real-7me

Informa7on

Trackequipment

ownership

Traincatering

Transport

control

Parking,

cleaning,etc.

Sales,informa7on

andsupport

Sta7onservice

(forconsumer)

Sta7onservice

(forRU)

Depot

building

Depot

ownership Produc'onplanning

coordina'on

Timetableplanning

coordina'on

Investmentcoordina'on

Produc'on(real-'me)coordina'on

Coordina7onneedsbetw

eensystemelements

atvarious7mehorizons

Overallconsistencyandfeed-backloopsfromrealisa7ontoplanning

Coordinationissuesatvariouslevels

Coordinationissuesatvariouslevels

Examplesofcoordination issues&realignment



Carriagebuilding

Locomo7ve

building

Sta7on

building

Track

building

Energy

Trackequipment

building

Carriage

ownership

Locomo7ve

ownership

Rollingstock

maintenance

Track

maintenance

Sta7on

maintenance

Sta7on

ownership


Sta7on

availability

Trac7onstock

availability

Drivers

Conductors

Carriagestock

availability

Trac7onservice

Carriageservice

Trackservice


service(path)

Trainservice

Sta7onretail

Transport

service

Real-7me

Informa7on

Trackequipment

ownership

Traincatering

Transport

control

Parking,

cleaning,etc.

Sales,informa7on

andsupport

Sta7onservice

(forconsumer)

Sta7onservice

(forRU)

Depot

building

Depot

ownership Produc'onplanning

coordina'on

Timetableplanning

coordina'on

Investmentcoordina'on

Produc'on(real-'me)coordina'on

Coordin

a7onne

edsbet

weensy

stemele

ments

atvario

us7me

horizon

s

Overallconsistencyandfeed-backloopsfromrealisa7ontoplanningInvestmentcoordination

Productionplanningcoordination

Timetableplanningcoordination

Production(real-time)coordination

• Extension /decommissioning

• Upgrading /downgrading

• Qualityofresourcesandreliability

• Small/mediumscaleinvestments

• Maintenance/renewalversusoperations

• Timetablerobustness

• Disruptionhandling

• Feed-backloops

• Rail2000 (CH)• Highfrequencyrail

(NL)• RUS/IIP(GB)• Prioritisation(FR)• Rollingstockand

powersupply(GB)• ERTMS/ETCS• Synergyrealestate–

rail

• Coordinationofsmallscale/ highimpactinvestments(JP)

• IM/RUcooperation/misalignment(NL,FR,GB)

• Trade-offstrackmaintenance/totalsystemcosts

• Timetablingandpathallocation(CH,GB,FR,NL)

• Trackpossessionsandcommercialconsequences(FR,PL)

• Trafficcontrolcentrescolocation(GB,NL,FR)

• Passengerinformation (NL)

• Feed-backloops(JP,NL)

IncentivemisalignmentsFindingsVerticalseparation cangeneratesubstantial incentivemisalignmentsbetweenIMandRUs

Likelytobelarger thantransactioncostsgenerated byverticalseparation

Misalignment issuesincrease inimportance…

…Wheninvestments arerequiredIngrowingrailways(e.g.growingdemand)Fortechnicalinnovation(e.g.ERTMS)

…Andespeciallyathighertraindensities

Trackaccesschargescansolvesomeissuesbutnotall

Additional hybrid re-alignmentarrangements havestartedtoappearbut

Unlikely thatthesewillsolveallissuesinunbundled railways…Especiallywhen thiswouldinvolvemoneytransfersbetween IMandRUs

à Misalignment issuesurgently requiremoreattention andanalysisinordertomakesoundchoicesbetweenstructural options


Foodforthought

Overthelonger run, verticalseparation mightprovetobeacostlyobstacle tosystem-wideoptimisation andvalue-chain optimizationdue tothetechnical characteristics oftherailwaysector.

However, verticalseparation mayhavebeentheoccasion forshake-ups andmanagementreforms leading toperformanceimprovements (including competitivetendering)

Butthese could alsohavebeen realised underdifferent institutional configurations.


Furtherbackgroundinformation

ExtendedresearchreportvandeVelde,D.,C.Nash,A.Smith,F.Mizutani,S.Uranishi,M.Lijesen andF.Zschoche (2012),"EVES-Rail-EconomiceffectsofVerticalSeparationintherailwaysector",ReportforCER- CommunityofEuropeanRailwayandInfrastructureCompanies,byinno-V(Amsterdam)incooperationwithUniversityofLeeds– ITS,KobeUniversity,VUAmsterdamUniversityandcivity managementconsultants,Amsterdam/Brussels,188pp.

AcademicpublicationsNash,C.A.,A.S.J.Smith,D.VandeVelde,F.MizutaniandS.Uranishi (2014),"Structuralreformsintherailways:Incentivemisalignmentandcostimplications",ResearchinTransportationEconomics,48,16-23.

Mizutani,F.,A.Smith,C.NashandS.Uranishi(2015),"ComparingtheCostsofVerticalSeparation,Integration,andIntermediateOrganisational StructuresinEuropeanandEastAsianRailways",JournalofTransportEconomicsandPolicy(JTEP),49,496-515.

vandeVelde,D.M.(2015),"EuropeanRailwayReforms:UnbundlingandtheNeedforCoordination",In:Raileconomics,policyandregulationinEurope(Eds.:Finger,M.,T.HolvadandP.Messulam),EdwardElgar.


EffectsofVerticalSeparationintherailwaysector

Thankyou for your attention!

DidiervandeVelde(inno-V)

19 January 2016 - Turku

Pict

ure

sour

ce:

kalle

rna

(CC

BY-S

A 3.

0)

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Didier Van De Velde Nettiin - vayla.fi