COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying the document Proposal for a Directive of the European Parliament and of the Council amending Directive 2012/34/EU of the European Parliament and of the Council of 21 November 2012 establishing a single European railway area, as regards the opening of the market for domestic passenger transport services by rail and the governance of the railway infrastructure
Date: 2013-01-30
Institutions: European Commission
Subjects: carriage of passengers, free competition, liberalisation of the market, national transport, provision of services, rail transport, services contract, transport infrastructure

EUROPEAN 
COMMISSION 

Brussels, 30.1.2013  
SWD(2013) 12 final 

COMMISSION STAFF WORKING DOCUMENT 

IMPACT ASSESSMENT 

Accompanying the document 

Proposal for a Directive of the European Parliament and of the Council amending  
Directive 2012/34/EU of the European Parliament and of the Council of 21 November 
2012 establishing a single European railway area, as regards the opening of the market 
for domestic passenger transport services by rail and the governance of the railway  
infrastructure 

{COM(2013) 29 final} 
{SWD(2013) 13 final} 

EN 

   EN 

 
 
 
 
  
 
COMMISSION STAFF WORKING DOCUMENT 

IMPACT ASSESSMENT 

Accompanying the document 

Proposal for a Directive of the European Parliament and of the Council amending  
Directive 2012/34/EU of the European Parliament and of the Council of 21 November 
2012 establishing a single European railway area, as regards the opening of the market 
for domestic passenger transport services by rail and the governance of the railway  
infrastructure 

2 

 
 
 
 
 
 
 
Disclaimer: This impact assessment commits only the Commission's services involved in its 
preparation and does not prejudge the final form of any decision to be taken by the 
Commission 

3 

 
 
TABLE OF CONTENT 

1. 

Introduction ......................................................................................................................... 5 

2.  Procedural issues and consultation of interested parties ..................................................... 6 

3.  Problem definition............................................................................................................... 9 

4.  Objectives.......................................................................................................................... 31 

5.  Policy options.................................................................................................................... 34 

6.  Analysis of impacts ........................................................................................................... 39 

7.  Comparing the options ...................................................................................................... 59 

8.  Monitoring and evaluation ................................................................................................ 61 

Annexes 

Annex I 

–  The 4th Package – The 'Big' Picture................................................................. 63 

Annex II  –  Consultation analysis ........................................................................................ 72 

Annex III  –  Evidence of discriminatory practices ............................................................... 85 

Annex IV  –  Options analysis................................................................................................ 92 

Annex V  –  Analysis of the costs and benefits of further separation requirements ........... 108 

Annex VI  –  Analysis of social impact................................................................................ 126 

Annex VII  –  Governance and access conditions to rail related facilities ............................ 127 

Annex VIII –  Summary of the conference “The Last Mile towards  

the 4th Railway Package”............................................................................... 133 

Annex IX  –  Glossary and Acronyms.................................................................................. 157 

4 

 
 
 
1. 

INTRODUCTION 

1.1 

Background 

In its 2011 White Paper on transport policy adopted on 28 March 2011 (hereinafter the 2011 
White Paper), the Commission announced its vision to establish a Single European Railway 
Area  and  clarified  that  this  objective  implies  creating  an  internal  railway  market  where 
European  railway  undertakings  can  provide  services  without  unnecessary  technical  and 
administrative barriers. 1 

Several policy initiatives have recognised the potential of rail infrastructure as a sustainable 
backbone for  the  internal market  and  a  driver of  sustainable growth. The European  Council 
conclusions  of  January  2012  highlight  the  importance  of  unleashing  the  growth-creating 
potential  of  a  fully  integrated  Single  Market,  including  measures  with  regard  to  network 
industries.2 Furthermore,  the  Commission  Communication  on  Action  for  Stability,  Growth 
and Jobs adopted on 30 May 2012 stresses the importance of further reducing the regulatory 
burden  and  barriers  to  entry  in  the  rail  sector,  making  country-specific  recommendations  to 
that aim.3 In the same manner, on 6th June 2012 the Commission adopted the Communication 
on strengthening the governance of the single market, which also stresses the importance of 
the transport sector.4 

At the same time, important financial means have been made available for investment in rail 
infrastructure  by  Member  States  as  well  as  through  EU  structural  funds.  In  addition,  the 
Commission  has  proposed  for  the  next  2014-2020  multi-annual  financial  framework  the 
creation of a new infrastructure instrument supporting the priorities in Transport, Energy and 
Telecommunications:  the  "Connecting  Europe  Facility"  (CEF) 5 .  Of  the  total  €50-billion 
envelope €31.7 billion are allocated to transport infrastructure. 

The EU railway market has seen important changes in the recent decade. They were gradually 
introduced by three legislative "railway packages" (with some accompanying acts) intended to 
open  up  national  markets  and  make  railways  more  competitive  and  interoperable  at  the  EU 
level, while maintaining a high level of safety. The most recent development is the adoption 
(passed 2nd reading in Parliament in July, to be adopted by the Council before the end of 2012) 
of the recast of the 1st Railway Package, which, in addition to legislative simplification and 
consolidation, reinforces existing provisions on competition issues, regulatory oversight and 
financial architecture of the railway sector6. 

Despite  the  considerable  development  of  the  'EU  acquis'  establishing  an  internal  market  for 
rail  transport  services,  the  modal  share  of  rail  in  intra-EU  transport  has  remained  modest. 

1  

2 
3 
4 
5 

6 

White Paper Roadmap to a Single European Transport Area – Towards a competitive and resource 
efficient transport system (COM/2011/0144 final) 
http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/127599.pdf 
COM (2012) 299 final 
COM(2012) 259 final 
Communication from the Commission to the European Parliament, the Council, the European 
Economic and Social Committee and the Committee of the Regions “A Budget for Europe 2020”, 
29.6.2011, COM(2011)500 Final. 
Frequently asked questions on the recast of the first railway package. European Commission, 
http://europa.eu/rapid/pressReleasesAction.do?reference=MEMO/12/520&format=HTML&aged=
0&language=EN&guiLanguage=en 

5 

 
 
 
                                                 
Therefore the Commission has planned to put forward the 4th Railway Package (cf. Annex I 
for further details) in order to enhance the quality and efficiency of rail transport services by 
removing  the  remaining  identified  obstacles  of  different  types,  and  by  thereby  fostering  the 
performance  and  competitiveness  of  the  railway  sector.  As  announced  by  the  2011  White 
Paper, these issues will be addressed by different initiatives: 

•  Removing  remaining  administrative  and  technical  barriers,  in  particular  by 
establishing  a  common  approach  to  safety  and  interoperability  rules  to  increase 
economies  of  scale  for  railway  undertakings  active  across  the  EU,  decreasing 
administrative  costs  and  accelerating  common  administrative  procedures,  as  well 
removing disguised discrimination; 

•  Opening  the  domestic  rail  passenger  market,  granting  open  access  rights  but  also 
addressing  competition  for  public  service  contracts  (PSCs)7 award  process,  in  order  to 
complete  the  process  of  rail  passenger  market  opening;  accompanying  measures  will 
facilitate  Member  States'  retaining  integrated  timetabling  and  ticketing  systems  where 
this benefits the passenger; 

•  Optimising  the  governance  of  infrastructure  management,  in  particular  by  ensuring 
that the infrastructure manager performs a consistent set of functions that optimises the 
efficient  use  of  infrastructure  capacity  and  ensuring  effective  non-discriminatory  access 
to the infrastructure. 

1.2 

Scope of the impact assessment 

This impact assessment focuses on the third point mentioned above. It draws in particular on 
the  experience  gained  in  all  25 8 Member  States  which  have  opened  the  rail  freight  and 
international  passenger  markets  under  EU  law  as  well  as  those  that  have  already  chosen  to 
take measures to open their domestic rail passenger markets to competition. 

This impact assessment will not deal with the issue of access and governance of rail-related 
services (such as passenger stations, freight terminals, maintenance facilities) as this has been 
already been addressed recently by the Recast of the First Railway Package. However, since 
this  issue  is  directly  linked  with  the  governance  and  the  conditions  of  access  to  the  railway 
networks, this question is presented under Annex VII of the present document. 

2. 

PROCEDURAL ISSUES AND CONSULTATION OF INTERESTED PARTIES 

2.1 

Organisation and Planning 

This IA is prepared by DG MOVE to support the legislative initiative on the governance of 
railway  infrastructure  in  the  Single  European  Railway  Area  (Agenda  Planning  number 
2011/MOVE/…).  The  Commission  proposal  in  this  regard  will  include  amendments  to  the 
Directive  of  the  European  Parliament  and  of  the  Council  establishing  a  single  European 
railway area9. 

An Impact Assessment Steering Group was created in December 2011 and has been actively 
consulted during the IA process. This Steering Group has counted on the membership of DG 
CLIMA, COMP, ECFIN, EMPL, ENER, ENV, ENTR, LS, MARKT, REGIO, SANCO, EEAS, 

7 
8 
9 

List of abbreviations with explanations is provided in Annex IX. 
Cyprus and Malta have no rail system. 
[reference to be added (unknown, text adopted by Council on 29 October and published in OJ in 
December)] 

6 

 
 
                                                 
TRADE ELARG and SG and met 8 times, with the last meeting being held on 4 October of 
2012. The IASG has been re-consulted in writing on the final draft on 8 October 2012. 

2.2 

Consultation and Expertise 

Expertise 

In order to support the Commission in the impact assessment process, an external consultant 
was  tasked  to  prepare  a  support  study10 and  to  undertake  a  targeted  consultation.  The  study 
started in December 2011 and the final report was delivered in November 2012. 

Consultation of stakeholders 

To  gather  the  views  of  the  different  stakeholders,  a  comprehensive  mix  of  targeted 
consultation  methods  completed  by  a  Eurobarometer  survey  was  preferred  to  an  open 
consultation for two main reasons: 

(1)  The  technical  nature  of  some  of  the  questions:  not  all  stakeholders  could  have  been 

expected to have a knowledge of the subject-matter, in particular passengers. 

(2)  Representativeness  of  passengers'  responses  would  have  not  been  ensured  without  a 
structured  sampling  of  responses,  and  in  particular  the  Eurobarometer  offered  the 
possibility to interview a carefully structured sample of 25.000 respondents in their own 
language. 

Within the main consultation organised by the external consultant (from 1 March 'til 16 April, 
responses obtained up to mid-June were accepted), tailored questionnaires were sent to each 
group of main stakeholders - railway undertakings, infrastructure managers, public transport 
ministries,  safety  authorities,  ministries,  representative  bodies,  social  partners  etc.  The 
consultation reached out to 427 rail stakeholders and had a 40% response rate. The consultant 
and/or  the  Commission  services  also  held  face-to-face  interviews  in  10  Member  States  - 
Austria, Czech Republic, France, Germany, Hungary, Italy, Netherlands, Sweden, Poland and 
the United Kingdom. 

The views of passengers were collected through a Eurobarometer survey, which reached out 
to more than 25.000 respondents, with a representative sample (circa 1000 per Member State) 
of respondents in each of the 25 Member States with railways. 

A stakeholder hearing was held on the 29 May 2012 (with some 85 participants). Commission 
services  have  also  met  with  sector  representatives  on  an  on-going  basis  throughout  2012  to 
listen to their views, including organisations such as CER (incumbent railway undertakings), 
EPTO  (private  passenger  transport  operators),  ERFA  (private  rail  freight  operators),  ETF 
(transport workers), EPF (passenger federations), EIM (independent infrastructure managers) 
and  UITP  (urban  transport  operators).  The  consultation  process  was  concluded  by  a  large 
conference “Last Mile towards the 4th Railway Package” with 420 participants representing 
the entire sector in September 2012. 

The  majority  of  stakeholders  agreed  during  the  targeted  consultation  that  the  quality  of  rail 
services  and  the  competitiveness  of  the  sector  in  the  EU  were  affected  by  different  access 
barriers  for  RUs.  69%  found  different  interpretation  of  legislation  to  be  an  issue. 

10 

Steer Davies Gleave (2012): "Study on further action at European level regarding market opening 
for domestic passenger transport and ensuring non-discriminatory access to rail infrastructure and 
services" (further referenced as IA support study) 

7 

 
 
                                                 
Infrastructure  capacity  constraints  were  considered  to  be  the  main  access  barrier  for  RUs 
(quoted by 83%). 

The  result  of  the  consultation  shows  that  views  are  highly  polarised  regarding  the 
appropriateness of solutions to these problems (e.g. how to ensure independent and efficient 
governance  of  railway  infrastructure).  Some  stakeholders  -  a  large  majority  of  transport 
ministries,  competition  authorities,  regulatory  bodies,  independent  infrastructure  managers 
and  RUs,  passengers  and  freight  forwarders  associations  -  advocated  a  complete  separation 
which  would  ensure  full  transparency  and  a  level  playing  field  for  all  operators.  Other 
stakeholders,  in  particular  holding  companies,  infrastructure  managers  depending  on  such 
holdings  and  workers'  representatives,  argued  that  there  is  no  empirical  evidence  about  the 
benefits of complete separation and that some scientific literature indicates that it could lead 
to  higher  transaction  costs.  These  stakeholders  think  that  a  stronger  role  of  regulatory 
oversight  could  be  sufficient  to  solve  the  issues.  64%  of  respondents  support  the  idea  of 
creating of a specific body of representatives from all infrastructure users to ensure interests 
are taken into account in a non-discriminatory way. 

In  line  with  the  IA  Guidelines  on  the  consultation  of  social  partners,  the  Sectoral  Social 
Dialogue Committee was consulted on 26 March and 19 June 2012, in particular with regard 
to the options and social impacts. However, during the meetings worker organisations did not 
wish  to  position  themselves  on  any  of  the  options  related  to  the  IM  governance,  as  they 
considered  them  as  supporting  measures  in  favour  of  market  opening,  a  principle  to  which 
they were fundamentally opposed. Finally the network of the Committee of Regions was used 
to reach local and regional passenger transport authorities. Such consultation was open from 
14 May till 21 June.  

Throughout  the  consultation  process  the  Commission  has  taken  a  proactive  approach  to 
prompt  stakeholders  to  participate.  Given  that  all  relevant  parties  have  been  given  an 
opportunity  to  express  their  opinions  the  minimum  consultation  standards  of  Commission 
have  been  met.  More  detailed  overview  of  the  consultation  process,  representativeness  and 
content of responses is provided in Annex II. 

2.3 

Impact assessment Board 

This  impact  assessment  was  reviewed  by  the  Commission's  Impact  Assessment  Board  on 
7 November  and  30  November  2012.  Based  on  the  Board's  recommendations,  the  impact 
assessment has been revised as follows:   

The  problem  definition  has  been  revised  to  make  it  more  robust.  Additional  anecdotal 
evidence, benchmarks between comparable Member States, in particular to examine to which 
extent the institutional setting in place can influence the success of liberalisation and improve 
the  intensity  of  infrastructure  use  have  been  added.  Where  relevant,  analogies  with  other 
network  industries  have  been  made.  The  context  of  the  initiative  has  been  further  clarified 
with a presentation of the current approach and on-going reforms in Member States, as well as 
with  additional  explanations  on  its  relation  with  the  Recast  and  with  on-going  infringement 
procedures.  The  content  of  each  possible  policy  option,  their  differences  and  their 
implications,  as  well  as  the  criteria  for  screening  them  have  been  further  explained.  The 
definition,  analysis  and  comparison  of  alternative  policy  scenarios  presenting  (a)  only 
efficiency  measures  and  (b)  efficiency  measures  in  combination  with  2  different  separation 
modes,  have  been  strengthened  with  further  discussion.  Where  possible,  a  quantification  of 
the  costs  and  benefits  related  to  each  policy  scenario  has  been  added.  Furthermore 
quantitative estimates of the impact of this initiative, when combined with the other initiatives 

8 

 
 
of the 4th Railway Package aimed at opening the domestic rail passenger markets, have been 
added. The methodology retained for the calculation of both costs and benefits has been more 
clearly  explained.  Stakeholders'  views  have  been  further  detailed  throughout  the  report  and 
the choice of a mix of targeted consultations completed by a Eurobarometer survey justified. 
Finally the presentation of the report has been improved with the provision of references of 
the  studies,  reports  and  decisions  quoted  as  well  as  web  links,  where  available.  Graphs  and 
figures  have  been  revised  and  further  explained,  referencing  of  stakeholders  opinion  and 
studies  improved,  and  the  map  demonstrating  the  structural  models  of  Member  States  has 
been incorporated. Notwithstanding, where relevant the limits of available quantification have 
also been stipulated. 

3. 

PROBLEM DEFINITION 

3.1 

Description of the current framework for the governance of railway infrastructure 

3.1.1  Rail infrastructure as natural monopoly 
Railway  infrastructure  is  a  natural  monopoly 11 .  Its  construction  is  very  expensive  and 
consequently  it  is  not  economically  justified  that  each  railway  undertaking  builds  its  own 
tracks. Therefore there is a need for specific rules in order to ensure optimal management and 
utilisation  of  the  shared  infrastructure  by  different  railway  undertakings.  Even  then  the 
construction and maintenance of railway infrastructure is mostly not commercially viable and 
relies on public support. Revenues collected by infrastructure charges are typically absorbed 
by  maintenance  needs.  Against  the  background  of  growing  pressure  on  public  finances, 
improving the efficiency of railways is more crucial than ever. 

This intrinsically raises two challenges from an economic and regulatory point of view: 

−  Efficient  management  challenge:  the  current  governance  does  not  provide  sufficient 
incentives and means for infrastructure managers (hereinafter IM) to respond to the needs 
of the transport services market and to contribute to the optimisation of the performance 
of the sector taken as a whole; 

−  Equal access challenge: Given that historically infrastructure was owned by incumbent 
rail operators, conflicts of interest naturally lead to discriminatory/protectionist practices 
of  incumbents  which  impair  competition  in  rail  services.  Eliminating  the  incentives  for 
the  incumbent  to  discriminate  against  its  competitors  via  different  infrastructure 
management  functions  is  arguably  even  more  necessary  in  the  rail  sector  than  in  the 
electricity or telecom grids, as the rail IMs have a wider range of services and therefore 
more means for discrimination. 

3.1.2  Infrastructure management functions 

Infrastructure management relates to different activities which can be categorised in different 
manners but correspond basically to the four following elements: 

a)  Infrastructure  development.  This  includes  responsibilities  for  the  ultimate  network 
planning, financial and investment planning and building on the basis of market analysis, 

11 

A natural monopoly is a type of monopoly that may arise when there are extremely high fixed 
costs such as exist when large-scale infrastructure is required to ensure supply. These costs are also 
sunk costs, and they deter entry and exit. 

9 

 
 
                                                 
business plans, fund raising from public authorities and financial markets. Simplistically, 
this means building new tracks, depots and stations to increase the size of the rail network. 

b)  Track  access  charging.  This  includes  the  determination  and  collection  of  charges  but 
also  more  generally  infrastructure  marketing  –  i.e.  relations  with  customers  (railway 
undertakings  and  other  categories  of  applicants  for  infrastructure  capacity),  public 
authorities  and  regulators.  In  practice,  this  means  that  the  IM  markets  access  to  the 
network. 

c)  Infrastructure  operations,  including  path  allocation  and  traffic  management.  This 
includes  the  provision  of  services  necessary  for  infrastructure  access  on  a  long  or  short 
term  basis  through  assessment  of  availability  and  allocation  of  individual  train  paths, 
timetabling,  traffic  management,  control  command  and  signalling  as  well  as  traffic 
information services. In short, this means that the IM is responsible for the organisation 
of the traffic on its network, including in case of traffic disturbances. 

d)  Infrastructure  maintenance.  This  includes  infrastructure  upgrade  and  renewal  and  is 
linked  to  asset  management  activities.  The  IM  is  thus  responsible  for  organising  and 
conducting the maintenance of the network assets. 

According to current legislation, the functions of the IM may be allocated to different bodies 
or  firms.  On  the  one  hand,  the  two  "essential  functions"  of  IM  -  path  allocation  and  track 
access  charging  -  may  be  assigned  to  an  allocation  body  and  charging  body  (See  under 
Section 3.2.1.2). 

3.1.3  The current European regulatory framework for the governance of the railway 
infrastructure 

The Commission has long considered that the improvement of the functioning of the internal 
market  should  stimulate  the  rail  industry  to  become  more  efficient  and  responsive  to 
customers’  needs.  Thus  the  development  of  EU  rail  market  access  legislation  has 
progressively encouraged market opening. 

Within this framework, certain degree of separation between infrastructure management and 
transport  operations  have  been  introduced  under  EU  law  with  the  aim  to  thereby  prevent 
discriminatory practices distorting competition in integrated structures12. This policy is in line 
with  the  general  Commission  policy  for  the  regulation  of  network  industries  (see  Box  1 
below). 

Box 1 - Analogies with other network industries: link between market opening and separation 

As  highlighted  in  the  report  on  the  market  functioning  of  network  industries  (Electronic 
Communications, Energy and Transport) produced for the Economic Policy Committee and published 
by the Commission on 16 November 2012, network industries share common characteristics. On the 
one hand, the infrastructure segment displays features of natural monopoly (high sunk costs and non-
duplicable network) and is subject to regulation on pricing and access to the network. This applies to 
the  transmission  and  distribution  networks  in  e-communications  (backbone,  backhaul  and  last  mile) 
energy  and  transport  infrastructures  (road,  rail,  ports  and  airports).  On  the  other  hand,  competition 
needs to be ensured in network services, as long as each operator gets a fair and transparent access to 
the  infrastructure.  These  industries  are  intrinsically  characterized  by  the  co-existence  of  competitive 
and regulated segments with natural monopolies, sunk costs, and economies of scale due to the crucial 

12 

integrated structure' means an entity being in charge of both transport operations and infrastructure 
management. 

10 

 
 
                                                 
role played by the underlying infrastructure. Given the economic  costs associated with monopolistic 
rents, these sectors have thus been reshaped by  major regulatory reforms over the past two decades, 
mainly in order to promote competition and safeguard consumers' rights. 

In  the  case  of  companies  which  integrate  infrastructure  and  the  related  upstream  or  downstream 
services, it is difficult for other operators on these related markets to compete against such a company, 
since the control over the infrastructure confers a number of competitive advantages to the integrated 
company: not only does it have exclusive information about costs and other items of the infrastructure 
which  are  relevant  for  competitors,  but  it  also  has  the  possibility  to  exploit  the  control  over  the 
infrastructure  in  order  to  limit  the  actions  of  the  competitors.  Therefore  on  the  one  hand  market 
opening of such network industries requires a separation of accounts which allows a transparency of 
costs of and charges for the infrastructure and on the other it must be ensured that the decisions related 
to the management of the infrastructure are taken in an independent way. European legislation in all 
the  network  industries  mentioned  above  has  opted  for  the  unbundling  of  infrastructure  and  related 
services as a preferred means to guarantee non-discriminatory access to the infrastructure, and to make 
market-opening a success. 

This  was  done  in  the  air  transport  sector.  After  the  three  liberalisation  packages  adopted  between 
1987  and  1993,  separation  measures  were  introduced  to  ensure  access  of  airlines  to  the  necessary 
resources  and  services  in  airports:  Council  Regulation  (EEC)  No  95/93  on  common  rules  for  the 
allocation  of  slots  at  Community  airports  and  Regulation  (EC)  No  793/2004  of  the  European 
Parliament and of the Council of 21 April 2004 amending this Regulation introduced slot allocation 
bodies and ground handling services which had to be independent from air carriers. The aim was to 
prevent  dominant  air  carriers  from  controlling  these  functions  of  the  infrastructure  manager  and 
services with a view to discriminate their competitors. 

Market opening in the telecom sector followed the same principles. Regulation (EC) No 2887/2000 of 
18 December 2000 provided for an unbundled access to the local loop. The Regulation addresses the 
problem  of  the  lack  of  competition  on  the  local  network  where  incumbent  operators  dominated  the 
market for voice telephony services and high-speed Internet access. Allowing new entrants access to 
the  local  loop  has  led  to  increased  competition  and stimulated  technological  innovation  on  the  local 
access market. It has not only produced much lower charges for telecom users, but also encouraged the 
provision of a large range of competitive electronic communications services. 

In the  energy  sector, the process of market opening has been  launched in the  mid-90s to enable all 
consumers  to  benefit  fully  from  competition  and  fair  prices.  The  Second  energy  Package  of  2003 
introduced  some  limited  unbundling  provisions,  with  the  requirement  that  network  operations  be 
legally and functionally separated from supply and generation or production activities. The functional 
independence was described with some limited safeguards concerning the structure, but essentially it 
was only about legal separation. 

However,  the  Commission’s  Energy  Sector  Inquiry,  launched  in  June  2005,  identified  a  number  of 
areas where the market was not working properly. This concerned in particular the continuing market 
power  of  incumbents  in  many  Member  States,  stemming  from  an  inadequate  separation  of  network 
and supply companies and leading to foreclosure of new entrants and investments. The integration of 
network  and  energy  generation  in  the  same  companies  also  caused  an  unwillingness  of  integrated 
national  incumbents  to  make  investments  in  cross-border  infrastructure,  since  integrated  companies 
have an incentive to protect their own home markets from competing energy producers from other EU 
countries.  This  has  undermined  cross  border  integration  of  networks.  That  is  why  the  Commission 
proposed in 2007, in its Third Energy Package, an ownership unbundling of the network from energy 
supply and generation activities. In addition to the ownership unbundling, the option of an independent 
system  operator  (ISO)  was  proposed,  giving  the  member  states  also  the  opportunity  to  let  the 
transmission  networks  remain  under  the  ownership  of  energy  groups,  but  transferring  operation  and 
control  of  their  day-to-day  business  to  an  independent  body.  A  third  possibility  was  added  at  the 
request of a number of Member States during inter-institutional debates: the ITO model. This model, 
the  Independent  Transmission  Operator  (ITO),  envisages  energy  companies  retaining  ownership  of 

11 

 
 
their transmission networks, but the transmission subsidiaries would be legally independent joint stock 
companies  operating  under  their  own  brand  name  and  with  a  number  of  very  strict  structural 
safeguards ensuring the autonomy of the ITO from the holding company. These safeguards contain the 
appointment and supervision of board members, the prohibition of financial flows between ITO and 
the  holding,  the  decisions  on  investments  and  many  other  strict  "Chinese  walls"  which  practically 
prevent the holding company from influencing the day-to-day management of the ITO. The addition of 
the ITO model to the package allowed a compromise and the adoption of the Third Energy Package in 
2009.  Because  Chinese  walls  under  the  ITO  model  are  very  burdensome,  one  can  observe  that 
Member States tend to prefer the full ownership unbundling. For the same reasons, in a Member State 
where the ITO model was retained, such as Germany, the two biggest infrastructures (out of four) were 
sold by energy holdings to third parties. 

For  more  than  twenty  years,  Directive  91/440/EEC 13  has  provided  for  the  separation  of 
accounts between rail infrastructure and transport operation to ensure  financial  transparency 
and  avoid  cross-subsidisation  between  infrastructure  and  operation  management.  Following 
the  First  Railway  Package  adopted  in  2001,  additional  separation  requirements  were 
introduced through Directive 2001/12/EC14 and Directive 2001/14/EC15. The latter stipulates 
that the "essential functions" of IMs – train path allocation and infrastructure charging - must 
be separated from transport operations in legal, organisational and decision making terms. In 
addition,  the  same  Directive  foresees  that  Member  States  have  independent  Regulatory 
Bodies in place to oversee railway markets and to act as an appeal body for rail companies. 

The  Recast  of  the  First  Railway  Package  (hereinafter  'the  Recast')  merging  nine  previous 
legislative  texts  was  proposed  by  the  Commission  in  September  2010  with  the  objective  to 
strengthen the power of regulatory bodies, improve the framework for investment in rail, and 
ensure  fairer  access  to  rail  infrastructure  as  well  as  rail  related  facilities  and  services. 
Following a final vote of approval in the European Parliament on 3 July 2012 and adoption by 
Council on 29 October 2012, these new EU rules will be transposed by 2015. 

Despite requests from some Members of the European Parliament and specific Member States 
during  inter-institutional  negotiations,  issues  related  to  the  separation  between  infrastructure 
management and transport operations were finally not directly addressed by the Recast. The 
Commission  argued  in  particular  that  further  stakeholder  consultation  and  a  robust  impact 
analysis was required. As a final compromise, the Recast calls on the Commission to act by 
December 2012: "the Commission shall, if appropriate, propose legislative measures […] to 
develop  appropriate  conditions  to  ensure  non-discriminatory  access  to  infrastructure, 
building  on  the  existing  separation  requirements  between  infrastructure  management  and 
transport operations, and shall assess the impact of any such measures". 

Further  details  on  the  current  legal  framework  are  provided  in  section  3.2  as  part  of  the 
baseline developments. 

3.1.4  The implementation of the EU regulatory framework by the Member States 

Member  States  have  chosen  different  models  of  governance  to  implement  this  legislation. 
More than half of the Member States with a rail transport system (13 out of 25) went beyond 
what  is  required  by  EU  law  and  opted  for  an  institutional  separation  between  (a)  a  fully-
fledged  IM  in  charge  of  all  the  IM  functions  described  under  section  3.1.2  and  (b)  the 
transport  operators.  These  Member  States  are  listed  in  category  1  in  Table  1.  Others  have 

13  
14  
15 

OJ L 237, 24. 8.1991, p. 25. 
OJ L 075 , 15.3.2001, p. 1. 
OJ L 75, 15.3.2001, p. 29. 

12 

 
 
                                                 
integrated  structure  (with  only  separation  of  accounts  between 

chosen  to  establish  more  complicated  structures.  Four  Member  States  in  category  3  kept  a 
fully 
infrastructure 
management  and  transport  operations)  but  delegated  the  two  essential  IM  functions  to 
external  bodies  (called  charging  and  capacity  allocation  bodies).  Some  Member  States 
established a holding structure with a legally separated subsidiary in charge of infrastructure 
management  (categories  2  and  5).  Ireland  and  the  United  Kingdom  (in  respect  of  Northern 
Ireland)  benefit  from  an  exemption  from  separation  requirements  until  15  March  2013  and 
have until now maintained a fully integrated structure in charge of both transport operations 
and infrastructure management, including IM essential functions. 

Table 1 – Institutional settings in the Member States 

Category 

IM responsibilities 

Level of independence 

Member States 

1 

2 

3 

4 

5 

6 

in  charge  of  all  IM 
capacity 

IM 
functions 
allocation and charging) 

(incl. 

in  charge  of  all  IM 
capacity 

IM 
functions 
allocation and charging) 

(incl. 

IM in charge of IM functions 
with  the  exception  of  the 
essential  functions  (capacity 
allocation  and 
charging) 
under the responsibility of a 
separate body 

IM in charge of the essential 
functions 
(capacity 
allocation  and  charging)  but 
having  delegated  specific 
parts 
essential 
the 
function  capacity  allocation 
and other IM functions (e.g. 
maintenance)  to  a  railway 
undertaking 

of 

in  charge  of  all  IM 
capacity 

IM 
functions 
allocation and charging) 

(incl. 

in  charge  of  all  IM 
capacity 

IM 
functions 
allocation and charging 

(incl. 

IM 
independent 
railway undertaking 

institutionally 
any 

from 

controls  a 

independent 
a 
by 

Legally 
IM 
holding 
owned 
company  which  also  owns 
and 
railway 
undertaking  but  with  strong 
guarantees of organisational 
decision-making 
and 
independence  in  relation  to 
the railway undertaking 
IM  integrated  in  a  structure 
responsible 
transport 
operations 
Separate  body  in  charge  of 
essential 
functions 
institutionally independent 

for 

IM 
independent 
railway undertaking 

institutionally 
any 

from 

with 

independent 
a 
by 

IM 
Legally 
holding 
owned 
company  which  also  owns 
and  controls  one  of  the 
operators 
limited 
guarantees of organisational 
decision-making 
and 
independence  in  relation  to 
the railway undertaking 
IM  integrated  in  a  structure 
responsible 
transport 
operations and 

for 

Britain), 

Bulgaria,  Czech  Republic, 
Denmark, UK (for the part of 
Estonia, 
Great 
Greece, 
Finland, 
Netherlands, 
Portugal, 
Romania,  Spain,  Sweden 
and Slovakia 
Belgium and Latvia 

Hungary, 
Luxembourg and Slovenia 

Lithuania, 

France 

Austria,  Germany,  Italy  and 
Poland 

Ireland  and 
the  United 
Kingdom  (for  the  part  of 
Northern Ireland) 

The Commission is, however, of the opinion that not all Member States have implemented the 
legislation  properly  and  has  accordingly  launched  a  number  of  infringement  procedures 
concerning in particular three groups: 

13 

 
 
 
•  Category  3  Member  States  having  integrated  IMs  working  alongside  an  independent 
charging and path allocation body, in so far as in cases of disruption on the network the 
path allocation is performed via traffic management by the incumbent rail operator. 

•  Category  5  Member  States,  with  holding  companies  in  which  the  IM  is  a  controlled 
subsidiary  and  where  the  guarantees  of  decision-making  independence  from  the  railway 
holding are missing or insufficient in the view of the Commission. 

•  Category  4  -  France,  where  parts  of  the  essential  function  of  path  allocation  and  traffic 
management  have  been  delegated  by  the  independent  IM  to  the  incumbent  railway 
undertaking. 

3.1.5  On-going reforms in Member States 

As  a  consequence  of  these  infringement  procedures,  because  of  the  termination  of  the  on-
going derogation as well as national debates on the benefits of separation, six Members States 
are in the process of reforming the institutional structure of their national rail sector: 

Belgium  is  currently  in  the  process  of  reviewing  its  legislation  to  ensure  institutional 
separation  between  the  IM  and  the  incumbent.  The  national  government  indicated  that  it 
intends to submit such reform to the national Parliament by the end of the year. The Polish 
government  has  also  indicated  at  several  occasions  its  intention  to  dissolve  the  existing 
holding  and  separate  institutionally  the  IM  and  the  incumbent.  However  it  has  recently 
announced  that  such  reform  would  be  postponed  to  focus  efforts  on  the  absorption  of  EU 
funds  for  rail  infrastructure  projects.  In  Hungary,  public  authorities  have  also  indicated  that 
preparations  for  further  separation  are  on-going  but  the  exact  timing  and  content  of  such 
reform remains uncertain. In Italy the newly created independent transport authority has been 
tasked  to  issue  recommendations  to  the  national  government  on  separation  between  the  IM 
and the incumbent. The issuance of such recommendations is due by 30 June 2013. 

The termination of the derogation applicable to Ireland until 15 March 2013 will also lead to a 
reform  of  the  national  rail  sector.  Irish  authorities  appear  inclined  to  establish  a  legally 
independent  IM  owned  by  a  holding  company  but  with  strong  guarantees  of  organisational 
and decision-making independence in relation to the incumbent railway undertaking. France 
announced  on  30  October  2012  the  creation  a  new  fully  fledged  infrastructure  manager 
grouping RFF with the SNCF services active in infrastructure management (DCF for traffic 
management  and  SNCF  Infra  for  maintenance).  This  new  infrastructure  manager  should  be 
attached  to  the  incumbent  operator  SNCF  in  a  new  grouping  called  "Pole  ferroviaire  public 
unifié".  However  the  legal  form  of  this  grouping  will  only  be  decided  next  year.  French 
authorities indicated publicly, that they are willing to put in place all the necessary safeguards 
to  ensure  the  absence  of  conflicts  of  interest  between  the  infrastructure  manager  and  the 
incumbent and to prevent discriminatory practices. 

No  other  Member  State  has  indicated  so  far  its  intention  to  review  its  institutional  settings. 
Germany and Austria do not appear to be willing to abandon their holding model. However 
German regional authorities awarding public service contracts and new entrants active on the 
German market repeatedly requested the introduction of institutional separation. The coalition 
agreement concluded in 2009 by the political parties of the current majority in the Bundestag 
foresaw  that  the  independence  of  infrastructure  management  should  be  guaranteed,  profit 
transfers excluded and infrastructure revenues used exclusively in favour of infrastructure. 

In  Member  States  such  as  Finland,  Romania,  Spain,  Sweden  and  the  United  Kingdom,  the 
current institutional separation is largely supported, including so far by national incumbents. 

14 

 
 
In  the  United  Kingdom,  the  McNulty  study  commissioned  by  the  previous  government 
proposed  to  test  "alliancing"  as  a  way  to  ensure  better  alignment  between  the  infrastructure 
manager  and  the  railway  undertakings  in  charge  of  franchises.  However,  even  in  the  most 
advanced  type  of  alliances  to  be  tested,  the  current  institutional  separation  would  not  be 
questioned.  Similarly  the  national  governments  in  the  Netherland  and  Czech  Republic  have 
not indicated so far their intention to modify the current institutional settings in absence of EU 
reform, despite calls from their national incumbent (respectively NS and CD) to reintegrate. 

The  current  situation  in  all  25  Member  States  with  a  rail  transport  system  and  the  possible 
reforms mentioned above are illustrated by Map 1. 

Map 1 - Current institutional settings and announced reforms in Member States 

15 

 
 
 
Description of the problem 

3.2 
In its 2010 Communication concerning the development of a Single European Railway Area16, 
the Commission explained that "competition between railway undertakings is still limited by 
various factors stemming from the protectionist behaviours of historical incumbent operators 
and the collusive management of rail infrastructure, which, being a natural monopoly, should 
be  accessible  to  all  applicants  in  a  fair  and  non-discriminatory  manner.  Insufficient 
transparency of market conditions and ineffective functioning of the institutional framework 
in most Member States continue to make the provision of competitive rail services difficult. 
Operators  entering  a  new  market  continue  to  face  discrimination  in  obtaining  access  to  the 
infrastructure and rail-related services, which are often owned and operated by the incumbent 
rail undertaking. Member States’ regulatory bodies encounter difficulties in carrying out their 
supervision  duties  over  IMs,  in  particular  to  ensure  non-discriminatory  treatment  of  new 
entrants  and  to  check  whether  charging  principles  and  accounting  separation  are  properly 
applied." 

The key issue addressed  by  this IA  is that,  despite regulatory developments in recent years, 
the  current  governance  of  railway  infrastructure  in  the  EU  still  causes  problems  of 
(1) network  inefficiencies  and  (2) discrimination  in  infrastructure  access,  preventing  the 
smooth functioning of the Single European Railway area. Accordingly, the analysis of problems 
has been grouped under efficient management and equal access challenges. 

Box 2: Key issue of availability of data 

Key issue of availability of data 

Evidence used to support the problem definition is mostly anecdotal for a number of reasons. 

• 

• 

• 

Given  the  very  different  models  of  IM  governance,  regulatory  practices  and  level  of 
competition on domestic rail markets, comparisons between Member States are often difficult. 
For  this  reason,  the  statistical  comparisons  provided  under  this  report  for  benchmarking 
purposes  exclude  Member  States  whose  performances  are  overly  determined  by  geographical 
and technical factors (peripheral Member States with an isolated rail network and/or with track 
gauge different from the main network: Baltic States, Finland, Spain, Portugal and Greece). As 
far  as  IM  efficiency  is  concerned,  statistical  benchmarking  remains  problematic  and 
inconclusive as efficiency very much depends on the national cost structures, characteristics of 
the network, management practices or commodities transported but also on the level of public 
support and business climate. 

Furthermore, studies prepared on functioning of rail models in other major economies outside 
Europe (e.g. in USA, Canada, Russia, Japan, China) should be interpreted with care. They do 
not  allow  comparison  between  separated  and  integrated  structures  and  can  only  evaluate 
whether  performance  of  an  integrated  company  has  evolved  positively  over  time.  But  these 
countries are organised with a single RU enjoying a monopoly and do not provide indications 
on  the  best  possible  model  for  the  EU  rail  system  which  is  already  characterised  by  a  single 
market with competition between different operators. 

The  same  type  of  concerns  exist  regarding  evidence  on  discrimination  in  terms  of  access  to 
infrastructure.  A  low  number  of  complaints  can  be,  on  the  one  hand,  an  indication  of  a  well-
functioning  open  market  where  conflicts  are  prevented  by  structural  measures.  On  the  other 
hand,  there  might  be  no  complaints  in  a  closed  market  where  new  entrants  have  no  trust  on 
regulatory interventions. When markets are only formally open to competition and there is no 
entrant to submit complains, discriminatory practices are particularly hard to detect. 

16 

COM (2010) 474 final. 

16 

 
 
                                                 
• 

By definition, the lack of financial transparency is an element which is difficult to assess and 
quantify. Therefore, assessment of the various impacts of distortions of competition caused by 
possible cross-financing between infrastructure and rail operations can be made only on a case 
by case basis. 

However, all the evidence and information collected from stakeholders is convergent and indicates that 
the problems discussed below could significantly affect the benefits of the Single European Railway 
Area  and,  in  particular  limit  the  impact  of  rail  market  opening  initiatives.  Anecdotal  evidence  is 
referred to under this Section 3.2. This evidence is further substantiated and completed in Annex III. 

3.2.1  Efficient management challenge 

3.2.1.1 IMs are not sufficiently market oriented 

Since railway infrastructure is a natural monopoly and its construction and maintenance relies 
heavily  on  public  funding,  IMs  tend  to  manage  the  infrastructure  giving  priority  to  the 
instructions received from the public authorities and to neglect the needs expressed by users – 
railway  undertakings.  In  this  context,  construction  of  new  lines  but  also  maintenance  and 
closure  of  existing  ones  may  be  dictated  by  political  considerations  rather  than  an  in-depth 
assessment of potential market developments. 

According  to  the  Everis  study17,  path  allocation  management  shows  that  IMs  tend  to  be 
reactive  rather  than  proactive.  They  respond  to  applications  for  paths  rather  than  trying  to 
optimize the use made of infrastructure. . 

IMs  may  fail  to  have  a  sufficient  knowledge  of  the  market,  the  needs  and  the  business 
environment  in  which  the  infrastructure  users  operate.  They  may  not  be  in  a  position  to 
respond adequately and comprehensively to the operational constraints faced by their users. In 
some  cases,  IMs  may  neglect  in  particular  the  needs  expressed  by  small  operators  and  new 
entrants.  This  could  lead  to  suboptimal  use  of  resources  and  limit  the  development  of  rail 
operators. Politically, driven rather than market-oriented priority rules for traffic management 
(e.g. between freight and passenger traffic) illustrates this situation. 

IMs  generally  acknowledge  the  "need  to  better  meet  their  customers'  and  funders'  needs"18 
and  require  tools  necessary  to  fulfil  such  responsibilities,  while,  infrastructure  users,  in 
particular  railway  undertakings,  claim  that  their  interests  are  not  sufficiently  taken  into 
account in both operational and investment decisions taken by the IMs and request to be better 
associated to such decisions. 

Box 3 – Cases of non-market-oriented decisions of IMs in the UK and Austria 

McNulty Report19 (2011) points out that the UK still suffers from a lack of coordination between IM 
Network Rail and railway undertakings, having different goals and objectives. It recommends closer 
co-operation  and  alignment  between  organisations  and  the  establishment  of  stronger  incentives  to 
focus on cost reduction and the delivery of high-quality services. 

17 

18 
19 

EVERIS (2010) "Study on Regulatory Options on Further Market Opening in Rail Passenger 
Transport", p.55). 
http://ec.europa.eu/transport/modes/rail/studies/doc/2010_09_09_study_on_regulatory_options_on
_further_market_opening_in_rail_passenger_transport.pdf; 
Cf. EIM Working Paper on the 4th railway package adopted on 26 October 2012. 
Realising the Potential of GB Rail, Report of the Rail Value for Money Study, May 2011, 
http://assets.dft.gov.uk/publications/report-of-the-rail-vfm-study/realising-the-potential-of-gb-rail-
summary.pdf 

17 

 
 
                                                 
The Austrian IM ÖBB Infrastruktur AG instructed all railway undertakings in its network statement 
2012/13 to use the new Inn Valley route only with locomotives which are equipped with the signalling 
system ETCS. At this moment only ÖBB’s own subsidiaries and DB have the necessary locomotives. 
All  the  other  (private)  rail  freight  operators  will  only  be  able  to  use  such  locomotives  in  about  two 
years,  since  the  rail  industry  is  not  able  to  supply  these  locomotives  before.  ÖBB  refuses  to  grant  a 
transition period to the new entrants, in which they could use either ETCS or the national PZB system, 
although, according to the private operators, there are no technical reasons for this refusal. Both ETCS 
and PZB can run on the new route, and PZB fulfils the environmental/noise reduction requirements. 
The  new  route  is  part  of  an  important  trans-European  corridor.  Therefore  the  behaviour  of  the  IM 
could mean that other operators cannot offer services, in addition to the Inn Valley route, on the entire 
trans-European corridor. There is a risk that the positive environmental effect brought to the sensitive 
alpine eco-system by enhancing quality of infrastructure and moving goods from road to rail will be 
annihilated by this measure. 

Baseline developments 

The  Recast  reinforces  the  obligations  of  IMs  to  consult  infrastructure  users  on  important 
decisions, including the content of the IMs business plan and network statement detailing the 
conditions for access to the infrastructure. 

The  Recast  also  foresees  that  performance  targets  which  are  defined  in  contractual 
agreements between Member States and IMs shall be user-oriented. The Railway Directives 
also require Member States to set incentives for IMs to reduce both infrastructure costs and 
the levels of access charges. However, the performance targets will be set by IMs and public 
authorities with little or no involvement of rail operators and do not therefore guarantee that 
users' needs will be adequately addressed. 

The Recast also details the content of the performance scheme which IMs must introduce as 
part  of  their  infrastructure  charging  scheme.  In  this  framework,  penalties  for  IM  actions 
disrupting  the  operation  of  the  network,  compensation  for  undertakings  suffering  from 
disruption  and  bonuses  rewarding  better-than-planned  performance  are  foreseen.  However 
performance  schemes  focus  only  on  cases  of  disruption  of  traffic  and  delays  and  do  not 
provide incentives in relation to other aspects of performance such as line speed, operational 
costs or capacity under normal conditions. 

In  conclusion,  these  ad  hoc  consultations  of  infrastructure  users  will  not  allow  a  structured, 
transparent  and  continuous  exchange  of  information  between  IMs  and  users.  They  will  not 
address  specific  operational  problems  that  may  emerge  during  infrastructure  usage.  Some 
Member  States,  such  as  France,  the  UK  and  Sweden,  have  already  taken  the  initiative  to 
create formal structures of coordination between IM and its infrastructure users 

3.2.1.2 Inconsistencies in the management of infrastructure and increased coordination 
costs 

The  capacity  of  an  IM  to  develop  and  optimise  transport  infrastructure  and  ensure  quality, 
reliability, flexibility and customer orientation, depends on its control over the functions listed 
in section 3.1.2. 

According to current legislation, the functions of the IM may be allocated to different bodies 
or firms, e.g. the two "essential functions" (path allocation and track access charging) may be 
assigned  to  an  allocation  body  and  charging  body.  Accordingly,  several  Member  States 
(Hungary,  Estonia,  Luxembourg,  Slovenia,  and  Lithuania)  have  externalised  these  two 
essential functions to independent bodies, while the rest of functions have been kept within an 
integrated incumbent structure. The allocation of the essential functions to entities outside the 

18 

 
 
IM  has  certainly  brought  great  advantages  for  a  more  equal  access  to  infrastructure  and 
thereby  helped  market  access  of  new  entrants.  However,  These  governance  models  and  the 
model adopted by France (which is splitting the different functions further), do not allow the 
IM to have effective control on all the activities required to manage the infrastructure, as it is 
dependent  on  decisions  of  other  bodies  with  specific  and  possibly  diverging  interests. 
Infrastructure managers consider on the contrary that they should have all the levers of control 
over their business. This position is largely shared within the rail sector. 

Box 4 - Example: Conclusions of the "Assises du ferroviaire" in France 

In  September  2011  the  French  government  launched  the  "Assises  nationales  du  ferroviaire" 20  to 
involve  all  French  stakeholders  in  the  preparation  of  a  new  reform  of  the  rail  sector,  focussing  on 
market  opening,  financing  and  governance  issues.  The  conclusions  of  this  process  were  adopted  in 
December  2011.  They  demonstrated  a  large  consensus  on  the  inefficiency  of  a  system  based  on  the 
allocation  of  infrastructure  management  functions  in  two  separate  entities:  on  the  one  hand  the  IM 
RFF in charge of infrastructure development, capacity allocation and charging and on the other hand, 
SCNF in charge of maintenance works as well as traffic management. 

RFF transfers to SNCF each year a network management fixed fee of around €3bn. RFF is responsible 
to oversee SNCF’s efficient use of the network management fee. However, at the moment, there is a 
relatively small technical team available to RFF to oversee the efficiency and effectiveness of SNCF’s 
management of the IM contract. This means that some of SNCF’s actions might not be fully observed, 
or properly monitored. This structure would lead to a lack of coordination with a negative impact on 
operations  and  to  the  absence  of  costs  optimisation.  It  was  therefore  recommended  to  unify  all 
infrastructure management functions in the same entity soon. 

There  are  substantial  interactions  between  the  functions  currently  defined  by  EU  law  as 
essential  and  the  other  IM  functions  described  under  section  3.1.2,  such  as  infrastructure 
development,  traffic  management  and  infrastructure maintenance.  As  illustrated below, their 
distribution among different market players can lead to inconsistencies in the management of 
infrastructure and increase coordination costs. 

•  Charging and maintenance - if the body responsible for the charging cannot control the 
costs  of  the  infrastructure  (i.e.  investment  and  maintenance  activities),  the  charges  may 
not be set at the right level to reflect these costs. It also means that possible cost savings 
or scale effects may not be passed on to the infrastructure users in terms of lower charges, 
even though this is a requirement under EU law. It may also lead to a situation where the 
IM  does  not  charge  railway  undertakings  for  maintenance  costs,  thereby  ultimately 
leading  to  a  decrease  in  maintenance  services  and  to  the  degradation  of  the  rail 
infrastructure. 

•  Charging  and  development  -  under  a  charging  system  designed  to  obtain  full  cost 
recovery, control over the charging is important for being able to fund projects under the 
best  possible  conditions.  The  price  signals  sent  out  by  the  different  charging  levels  of 
various parts of the network should be correctly set to prompt the best possible use of the 
network as a whole (new sections and existing network). 

•  Path allocation and traffic management - the re-allocation of pre-assigned train paths 
in  cases  of  delays  and  disruption  of  traffic  is  one  of  the  core  activities  of  traffic 
management, and at the same time it is part of the essential function path allocation. In 
addition  an  adequate  path  allocation  process  implies  an  in-depth  knowledge  of  traffic 

20 

http://www.developpement-durable.gouv.fr/-Assises-du-ferroviaire-.html 

19 

 
 
                                                 
management practices and constraints and some return on experience which cannot occur 
when these functions are assigned to separate entities. 

•  Path allocation/traffic management and maintenance - if the body responsible for path 
allocation and traffic management does not have full control over the actual availability 
of  the  allocated  slots  (which  depends  inter  alia  on  maintenance  works  planned  and 
executed by another body) this could create problems in traffic management. Furthermore, 
regarding  the  planning  of  works,  only  the  allocating  body  knows,  on  the  basis  of  path 
requests received, which are the most intensely used parts of the network and therefore 
could  need  maintenance  most  urgently  in  order  to  ensure  safety  levels  and  to  avoid 
disruption of operations. 

•  Path allocation/traffic management and development - infrastructure development has 
a  direct  impact  on  travel  time,  the  number  of  paths  available,  potential  traffic  types 
(platform length, etc.) and the quality of operations on lines. Therefore splitting control 
functions over path allocation and infrastructure development decisions will, in the best 
case scenario, create coordination problems. 

•  Development and maintenance - where the functions of development and maintenance 
are split, there is a threat that suboptimal trade-offs could be made between the network 
“maintenance"  and  “development”  works.  It  is  necessary  to  coordinate  “development” 
and  “renewal”  in  order  to  avoid  having  too  many  renewal  and  development  operations 
going on at the same time, as these activities reduce the number of available train paths. 

•  Path  allocation  and  charging  -  charges are a price signal to infrastructure users and a 
tool to optimise the use of the infrastructure. If the entity in charge of path allocation has 
no control over track access charges, they miss such optimisation and only face the costs 
of  infrastructure  (development  and  maintenance).  Without  the  possibility  to  manage 
revenues,  the  IMs'  financial  management  is  limited  to  the  channelling  of  subsidies 
without any consideration of profitability. 

Box 5 - Analogies with other network industries concerning infrastructure managers functions 

Air transport: Airports are responsible for their own investment planning and maintenance, they also 
collect  airport  charges,  while  slot  allocation  is  the  responsibility  of  a  "coordinator"  which  is 
independent  from  the  Member  State,  the  airport  managing  body,  service  providers  and  the  airlines 
operating from the airport in question. 

Electricity  and  gas:  Transmission  system  operators  are  by  definition  responsible  for  infrastructure 
development and maintenance. They collect congestion charges and allocate transmission capacity. 

In  both  cases,  the  entities  in  charge  of  infrastructure  management  have  a  direct  responsibility  for 
infrastructure development, charging, operations and maintenance. 

Baseline developments 

While the definition of essential functions and the separation requirements applicable to them 
have  not  been  changed  by  the  Recast,  the  latter  provides  for  a  new  definition  of  IM  which 
refers to a "body or firm responsible in particular for establishing, managing and maintaining 
railway  infrastructure,  including  traffic  management  and  control-command  and  signalling". 
However this does not ensure that all the functions listed are in the hands of the same entity as 
the text foresees explicitly that "the functions of the IM on a network or part of a network may 
be allocated to different bodies or firms". 

20 

 
 
It  cannot  be  excluded  that  Member  States  which  have  allocated  IM  functions  in  different 
entities will adjust the governance of their infrastructure on their own to reunify them. This 
should  be  the  case  in  France  where  there  is  large  consensus  on  the  unification  of  all  IM 
functions  in  the  same  structure  (see  Box  5  above)  and  in  Hungary  where  the  government 
announced  a  reform  of  the  national  institutional  settings  (see  Section  1.3.5).  However  other 
Member States,  in particular  Lithuania, Luxembourg or Slovenia (which  finalised  in 2011 a 
reform maintaining the fragmentation of IM functions) suggest otherwise. 

3.2.1.3 Cross-border cooperation between IMs is insufficient 

An  important  condition  for  completing  the  Single  European  Rail  Area  is  well  functioning 
cross-border  cooperation  of  IMs.  With  this  regard,  the  problems  mentioned  hereunder,  and 
illustrated by examples in Box 6, are still widespread. 

IMs  do  not  efficiently  cooperate  to  cope  with  traffic  disruptions  and  temporary  traffic 
restrictions, especially when more than two IMs are concerned. They may neglect the impact 
of  their  decisions  on  the  business  situation  of  international  traffic  and  traffic  beyond  their 
network. There is a lack of integrated and proactive cross-border communication with users, 
such as railway undertakings, terminal operators and shippers. 

As regards investment, national infrastructure management often neglects interoperability and 
cross-border infrastructure (in particular port terminals and hinterland connections by rail) in 
favour of the needs of domestic passenger and freight traffic. Where the investment decisions 
of  national  infrastructure  management  are  biased  towards  the  needs  of  the  incumbent, 
international trains suffer most because they have to be configured and/or routed according to 
the "weakest link" in the infrastructure chain (in terms of ERTMS deployment21, axle loads, 
loading gauge, electric supply, train length, train mass etc.). 

National  infrastructure  funding  priorities  may  not  necessarily  consider  future  pan-European 
demand  despite  the  incentives  to  do  so  which  is  provided  through  EU  co-financing 
instruments such as the TEN-T programme. The long lifetime of assets, conservatism of the 
sector  and  a  preference  to  maintain  national  or  regional  specifications  curb  the  benefits  for 
investment. Obligations imposed by Member States to keep unprofitable infrastructure open 
results  in  funds  trickling  away,  and  not  being  focused  on  main  international  corridors. 
Considerations  of  available  approvals  prevail  over  traffic  needs  when  it  comes  to  project 
selection. 

Freight  trains  run  at  low  speeds  (18  km/h)  on  many  international  routes.  This  results  from 
time-consuming  operations  at  borders  for  railway  undertakings.  Operations  at  borders  have 
not  yet  been  streamlined  to  exploit  the  advantages  of  the  internal  market  and  the  Schengen 
rules. As a result, rail fails to capture certain commodity groups who prefer the higher speeds 
of road transport. 

21 

There are still more than twenty different signalling systems coexisting in Europe. These systems, 
generally developed on the scale of a national network, which are very heterogeneous as regards 
performance  and  the  level  of  safety.  The  European  Rail  Traffic  Management  System  (ERTMS) 
constitutes a major European industrial standard that enables trains to cross national borders and 
enhances safety. 

21 

 
 
 
                                                 
Box 6 – Examples of IMs coordination problems 

IMs  along  the  corridor  Rotterdam-Genoa  made  substantial  investments  to  enhance  capacity  and 
establish the interoperability of train control and command systems on the basis of ERTMS. In doing 
so,  they  expected  that  all  participants  would  stick  to  the  agreed  time  tables.  However  the 
corresponding  investments  on  the  German  stretches  of  this  corridor  will  only  be  made  several  years 
later, which means that benefits will be delayed for other IMs as well as for the users. 

Rail  freight  undertakings  operating  in  France  and  the  UK  enjoy  moderate  levels  of  infrastructure 
charges  that  are  by  and  large  competitive  with  road.  Whereas  this  allowed  rail  freight  to  grow  in 
England, the number of freight trains through the Channel tunnel to and from London did not grow or 
even  dropped  though  the  link  accommodates  trains  with  the  main  continental  (UIC)  gauge  and  has 
capacity  available.  Infrastructure  charges  in  the  tunnel  and  on  the  link  to  London  are  high  such  that 
freight  trains  are  not  attractive  and  shippers  prefer  trucks.  A  better  coordination  of  charging  policy 
between the four different IMs involved might open the opportunity to attract more trains and at the 
same time safeguard the financial interest of all companies involved. 

Freight  trains  operating  on  the  South  East  Axis  to  and  from  Greece/Turkey  suffer  from  important 
delays at borders. On such axis two TEN-T corridors (IV and X, passing respectively via Belgrade and 
Budapest) compete on the basis of different infrastructure charges. A better coordination between IMs 
could curb delays and allow more balanced use of capacity. 

This  situation  contributes  to  an  imbalance  between  international  and  domestic  traffic  for 
passengers  but  also  the  negative  trend  observed  in  the  development  of  international  freight 
traffic, as illustrated by the Figure 1 below. 

Figure 1 Evolution of domestic and international traffic in the EU (in Mton/km for freight traffic 
and Mpassenger/km for passenger traffic)22 

22 

SWD (2012) 246 final. 

22 

 
 
 
                                                 
Figure 1 shows in particular that international passenger traffic remains very marginal when 
compared  to  domestic  passenger  traffic.  It  also  shows  that,  despite  the  potentially  higher 
competitiveness of rail freight vis-à-vis other transport modes over medium to long distances, 
international  freight  continues  to  decline,  both  in  absolute  and  in  relative  terms  when 
compared to domestic freight traffic.23 

Baseline developments 

Some  on-going  actions  are  already  heading  in  the  direction  of  increased  integration  of 
national infrastructure management at the European level, with a specific emphasis being put 
on EU freight corridors. 

The  Rail  Freight  Regulation 24  provides  a  cooperation  framework  for  freight.  Corridor 
structures involving Member States and IMs are set up to cooperate on specific aspects. The 
Rail Freight Regulation requires coordination of infrastructure management in aspects such as 
maintenance  work,  upgrades  and  renewals,  the  allocation  of  international  paths  and  in  the 
supervision of international traffic. The activities of the Corridors in the field of allocation of 
paths  and  traffic  supervision  are  based  on  the  work  done  by  RailNetEurope  (RNE),  a 
partnership  of  IMs  and  allocation  bodies  which  strives  to  simplify,  harmonise  and  optimise 
international rail processes such as Europe-wide timetabling, co-operation between IMs in the 
field of operations, train information exchange in real time across borders and reporting. 

The obligations of national IMs to cooperate in the allocation of infrastructure capacity and in 
the charging for the operation of train services crossing more than one infrastructure network 
will  be  extended  from  the  corridor  approach  to  all  networks  and  types  of  traffic  with  the 
Recast.  It  will  actually  oblige  IMs  to  formalise  their  cooperation  with  the  establishment  of 
IMs'  associations  which  can  charge  and/or  allocate  capacity  at  an  international.  The  Recast 
also  foresees  that  regulatory  bodies  will  have  to  increase  their  cooperation  in  order  to 
supervise  the  IM's  joint  activities.  The  Commission  will  be  invited  to  participate  in  IMs' 
deliberations on common principles and practices. 

While  the  cooperation  activities  under  the  Rail  Freight  Regulation  are  comprehensive 
(addressing path allocation and charging but also development, maintenance and operations) 
they are limited to specific rail freight corridors. At the same time, the obligations under the 
Recast  apply  to  all  networks  and  types  of  traffic,  but  relate  only  to  path  allocation  and 
charging.  Therefore  there  is  still  a  need  to  address  coordination  problems  related  to 
development,  maintenance  and  operations  beyond  EU  rail  freight  corridors  and  to  ensure 
consistency between the existing approaches. 

3.2.2  Equal access challenge 

The level of entry into freight markets has progressively increased as a result of the various 
market opening measures implemented on the basis of national initiatives before 2000 and at 
the EU-level since 2000. As indicated in Figure 2 below, progress can be observed over the 
last 5 years in almost all countries. 

However there are marked differences in the level of entry reached as well as in the growth of 
new  entrants'  market  shares.  The  share  taken  by  non-incumbents  reached  40%  in  only  four 
Member States in 2010 (NL, SE, UK and RO), all of them with separated structures. For the 

23  

24  

Absolute decline between 2008 and 2009 can be at least partly attributed to the impact of the economic 
crisis on the transport sector in general. However such a negative trend is faster than the one observed 
during the same period in other transport modes. 
Regulation 913/2010 concerning European railway network for competitive freight 

23 

 
 
                                                 
period 2006-2010 examined in Figure 2, new entrants' market shares have grown by 13.8% on 
average in Member States with separated structures while it has increased by only 8.9 % in 
Member States with integrated structures. 

Figure 2  Market share of non-incumbent freight operators 

60

50

40

30

20

10

0

SK

CZ

BG

DK

NL

SE

UK

RO LU

SI

BE

AT HU

FR

IT

DE

PL

Separated

2006

2008

Integrated

2010

Source: Rail Market Monitoring Scheme 2007, 2009 and 2012 and SDG report 

Comparison  of  entry  levels  in  passenger  markets  remains  difficult  at  this  stage  as  market 
opening for domestic services has only been introduced by a very limited number of Member 
States, from  different  dates and under conditions which are not harmonised by EU law (see 
for further details the IA report on market opening of domestic passenger services). However 
it can be noted that the pace of market entry in those few Member States which have already 
allowed  the  provision  of  domestic  passenger  services  in  open  access  differs  substantially. 
Such  differences  seem  somehow  correlated  with  the  separation  model  in  place  in  those 
Member  States:  in  the  case  of  Germany,  Austria  and  Italy  which  formally  opened  their 
domestic passenger market more than a decade ago, the number of new entrant remains very 
limited and market entry took place only very recently (only Westbahn since 2011 in Austria, 
only  NTV  since  2012  in  Italy,  only  HKX  since  2012  and  InterConnex  in  Germany).  In  the 
case of the Czech Republic, the UK and Sweden, the number of new entrants is higher and 
market  entry  of  open  access  operators  came  faster  after  formal  market  opening  (in  the  UK 
Grand  Central  and  First  Hull,  in  Sweden  both  Veolia  and  Blataget,  in  Czech  Republic  both 
RegioJet and LEO-Express). 

3.2.2.1 Persistent conflicts of interests of IMs 

Experience  over  the  last  decade  has  demonstrated  that  the  implementation  of  current 
separation requirements did not completely prevent the conflicts of interest and discriminatory 
practices  in  respect  of  access  to  rail  infrastructure  and  related  services.  In  addition,  the 
existing  legal  framework  has  proven  to  be  insufficient  to  allow  detection  and  prevention  of 
cross-subsidisation  from  IMs  to  incumbents.  Even  reinforced  regulators'  powers  as  already 
foreseen under the Recast cannot prevent this, as the risk is inherent in some of the existing 
institutional settings. 

24 

 
 
 
3.2.2.1.1 

Diverging interpretation of existing rules  

The  current  EU  legislation  requires  legal,  organisational  and  decision-making  independence 
for the essential functions, but it does not provide for concrete criteria as to how the IM needs 
to  be  organised  in  order  to  meet  these  basic  requirements.  While  there  is  broad  agreement 
about  the  definition  of  legal  independence  (meaning  that  the  relevant  body  must  have  a 
separate  legal  personality),  definition  of  organisational  and  decision-making  independence 
must be interpreted on the basis of existing case-law of the European Court of Justice (ECJ). 
Consequently  there  are  problems  with  the  transposition  and  enforcement  of  these 
requirements and The Commission has initiated several infringement procedures. 
According  to  the  Commission,  to  fulfil  their  objective  of  absence  of  conflict  of  interest, 
separation requirements should at least imply restrictions in the composition and nomination 
of the management boards, cooling-off periods for managers, the existence of separate staff, 
facilities  and  information  systems  and  new  powers  to  national  regulators,  as  explained  in 
Annex  V  of  the  Communication  on  the  implementation  of  the  First  railway  Package25.  The 
interactions between railway undertakings and IMs, where these independence rules have not 
been implemented properly, have created conflicts of interest and still result in access barriers 
and market distortions, such as access denials and discriminatory charges. 

Discriminatory  practices  in  Member  States  with  vertically  integrated  undertakings  are 
illustrated  by  a  high  number  of  examples  which  are  detailed  under  Annex  III.  These 
discriminations  relate  in  particular  to  charging  and  path  allocation  practices  but  also  to 
asymmetries in access to information.  

While  such  practices  are  illegal  under  the  current  regulatory  framework,  it  generally  takes 
time for the regulator to investigate and decide on the legality of such practices, at the expense 
of new entrants who are accumulating costs during the investigation period (which could take 
years). 

The  absence  of  independence  between  IM  and  incumbent  railway  undertakings  can  also 
distort  competitive  tendering  procedures,  given  that  the  incumbent  may  have  access  to 
information on the technical characteristics of the network and their implication for transport 
operations  which  are  not  available  for  new  entrants.  Integrated  structures  may  also  be  in  a 
position  to  include  in  their  offer  infrastructure  related  improvements.  And  the  possibility  to 
prioritise infrastructure investments may give a decisive advantage to the bid submitted by an 
integrated structure26. Discriminatory practices may lead to distortions of competition in the 
award  of  public  service  contracts  but  also  to  a  lower  number  of  bidders  since  some  of  the 
latter are deterred from participating in tendering procedures. 
The  progressive  reduction  in  the  number  of  bidders  in  competitive  tenders  observed  since 
1997 in Germany, illustrated by Figure 3 below, can be explained by various factors such as a 
consolidation  of  the  sector,  the  increased  competitiveness  of  the  incumbent  but  also  by  the 
deterrent  effect  of  discriminatory  practices  which  German  public  transport  authorities 
complained about. 

25 

26 

Report from the Commission to the European Parliament, the Council, the European Economic 
and Social Committee and the Committee of the Regions on the implementation of the first 
railway package, COM(2006)189 
This risk was also highlighted during the stakeholder hearing 

25 

 
 
 
 
 
                                                 
Figure 3 

 Number of bidders in competitive tenders for public service contracts (PSC) 
in Germany 

Source: Holzhey, M., Berschin, F., Kühl, I. and Naumann, R. (2011) Wettbewerber-Report Eisenbahn 
2010/2011 quoted in Appendix K of the IA support study. 

Baseline developments 

The  Commission  has  provided  some  interpretation  of  the  practical  implications  of  existing 
independence requirements in Annex V of the Communication on the implementation of the 
First railway Package. However, some Member States do not consider that such interpretation 
derives  necessarily  from  existing  law.  ECJ  is  expected  to  express  its  view  on  on-going 
infringement  procedures  and  address  this  specific  issue  before  spring  2013.  The  ECJ  ruling 
early next year will pave the way for a timely and well-informed inter-institutional debate on 
the need for new measures. 
While  the  ECJ  will  decide  on  whether  specific  national  transposition  measures  can  be 
considered  sufficient  to  comply  with  the  existing  independence  requirements,  it  is  not 
expected to provide detailed guidance on how to ensure uniform and effective implementation. 
If  the  ECJ  supports  the  Commission  interpretation  and  considers  national  transposition 
measures  insufficient,  there  would  be  a  need  to  clarify  in  law  which  are  the  necessary 
safeguards  to  implement  existing  independence  principles.  If,  on  the  contrary,  the  ECJ 
considers national transposition measures compliant with existing EU requirements, it would 
prove  that  EU  law  currently  in  force  is  inadequate  to  prevent  discriminations.  This  would 
represent an additional incentive to further detail and strengthen separation requirements. 
Some  Member  States  are  currently  taking  new  national  measures  on  separation  of 
infrastructure  management  from  transport  operations.  However,  as  indicated  under  Section 
3.1.4.,  the  outcome  of  these  initiatives  is  still  uncertain.  And  in  other  Member  States  the 
conflicts  of  interest  are  likely  to  persist  without  modification  of  EU  law  and  these  issues 
would thus continue to hinder competition in the railway markets and the development of the 
Single  European  Railway  Area.  Some  Member  States  are  still  caught  up  by  their  multiple 
roles  as  national  policy  decision  makers,  owners  of  rail  assets,  shareholders  of  railway 
undertakings and contractors of rail services – and find it difficult to distinguish between their 
different responsibilities in their different roles. This situation results in very conservative and 
defensive  positions  aimed  at  protecting  the  incumbent  which  they  perceive  as  their  national 
champions. 
While  a  majority  of  interested  parties,  including  national  regulatory  bodies,  favours 
institutional  separation  (see  Annex  II  stakeholders  consultation,  section  2.4.3),  several 
incumbents  are  actively  lobbying  national  authorities  to  maintain  regulatory  status  quo  or 

26 

 
 
 
even  to  weaken  existing  separation  requirements.  DB  and  SNCF  claimed,  during  bilateral 
consultations with the Commission services, that, as dominant operators, they can defend the 
interest  of  all  railway  undertakings  in  their  relation  with  IMs  and  should  therefore  act  as 
"system integrator". The complexity of interfaces would be lower, operational co-ordination 
and  dispute  resolution  easier  within  such  "system  integrator".  As  part  of  an  integrated 
company, IMs would be more "customer-driven". In addition, DB argues that the persistence 
of an integrated structure has clear advantages in terms of fiscal consolidation. 

3.2.2.1.2 
Persistent risks of cross-subsidisation due to lack of financial transparency 
The enforcement of existing account separation requirements27 has proven to be difficult and 
insufficient for various reasons: 
a)  These requirements can be circumvented, for instance via accountancy tools (evaluation 
of certain assets belonging to the different subsidiaries, grants given between subsidiaries 
and  holdings  which  have  an  effect  of  reducing  or  increasing  results  of  the  respective 
entities, profit transfer agreements, asset sharing, etc.); 

b)  Monitoring  by  regulatory  bodies  is  very  complex,  lengthy  and  resource  consuming 
process requiring specific expertise. In many cases incumbents show little willingness to 
fully  comply  with  information  requests.  Even  the  most  powerful  and  well-equipped 
national  regulators,  such  as  BNetzA  in  Germany  and  ARAF  in  France,  have  indicated 
difficulties in fulfilling this task28 and may therefore tend to prioritise other actions; 
c)  Any  results  of  ad  hoc  investigations  and  conclusions  by  national  regulators  can  be 
contested  and  experience  shows  that  such  fairly  systematic  contestations  related  to 
account  separation.  Judicial  appeal  procedures  against  regulators'  decisions  lead  to 
particularly  long  delays  (up  to  five  years29)  in  the  implementation  of  corrective  actions 
which may create irretrievable damage to the market; 

d)  Existing  account  separation  requirements  do  not  prevent  the  distortion  of  competition 
resulting  from  the  potentially  more  favourable  conditions  of  financing  that  the  holding 
can obtain due to its larger scope of activity benefitting both rail transport undertakings 
and the IM. 

Box 7 – Examples: Competitive advantages of (semi)integrated structures in terms of cross-
financing 

The RGL-AECOM-Frontier Economics study on account separation (2009) shows that the provision 
of  regulatory  accounts  by  integrated  structures  upon  requests  by  regulators  is  unlikely  to  correctly 
identify if cross-subsidisation is taking place or not. For instance, depreciation of fixed assets is one of 
the main costs for railway undertakings. However, changes in valuation methods for depreciation can 
significantly  affect  both  profitability  and  charges.  Financial  accounts  typically  do  not  calculate 
marginal  costs  and,  as  a  result,  statutory  accounts  are  unable  to  provide  clear  insight  on  this  key 
variable  necessary  for  cross-subsidisation  calculations.  Therefore  it  would  remain  feasible  for  the 

27 

28 

29  

Account separation is the first level of separation introduced by Directive 91/440/EC requiring the 
publication of separate regulatory accounts for the infrastructure activity and the rail transport 
activities. 
See e.g. Decision of the French Regulator ARAF No 2012-016 of 11 July 2012, para. II.33 where 
it is said that the regulatory body did not have access to and was not able to find out about the 
precise data on investment volumes and priorities of the part of SNCF which is operating railway 
stations. 
See case related in judgment of highest German administrative court Bundesverwaltungsgericht, 
BVerwG 6 C 39.10 – judgment of 7 December 2011 

27 

 
 
 
 
                                                 
profit-making subsidiaries of holding structures to offset the losses of the other subsidiaries. The study 
indicates  that  the  Deutsche  Bahn  considers  that  its  structure  is  compatible  with  the  accounting 
separation  requirements  of  Directive  2001/12/EC.  However,  at  the  same  time  Deutsche  Bahn 
acknowledges  the  existence  of  a  control  and  profit  agreement  between  each  subsidiary  of  the  DB 
Group. This agreement does not contain any limitations as to the use of revenues from one subsidiary 
(including  the  infrastructure)  for  the  purposes  of  subsidisation  of  another  (including  train  operating 
subsidiaries).  As  a  result,  profits  generated  by  one  of  the  entities  can  be  transferred  to  the  other, 
without  possibility  for  monitoring  of  cross-subsidies.  The  study  shows  that  the  efforts  of  regulators 
cannot prevent cross-subsidisation alone. 

In  its  investigation  on  Ferrovie  dello  Stato  (FS)  practices,  the  Italian  Competition  Authority  (ICA) 
ascertained  that  the  “complex  and  unified  strategy”  developed  by  FS  to  keep  Arenaways  out  of  the 
profitable  route  between  Milan  and  Turin  between  2008  and  2011  included  Trenitalia  providing  a 
misleading  representation  of  its  costs  when  the  Regulator  (URSF)  asked  the  data  necessary  for  the 
assessment of economic equilibrium of PSCs, so as to deceive it. 

DB Holding concluded profit transfer agreements with all its subsidiaries, including the infrastructure 
companies  DB  Netz  (for  rail  network),  DB  Station  and  Service  (for  passenger  stations)  and  DB 
Energie (Energy supply). On the basis of these agreements, profits of subsidiaries are transferred to the 
holding,  which  in  turn  compensates  losses  of  these  subsidiaries.  In  the  last  years  the  infrastructure 
subsidiaries DB Netz and DB Stations and also the subsidised regional passenger branch DB REGIO 
have transferred "profits" to the holding, which were only possible due to the State financing of these 
companies,  and  would  otherwise  not  exist.  At  the  same  time  DB  Holding  compensated  losses  of 
transport  operators  under  competition.  This  mechanism  makes  it  possible  to  increase  track  access 
charges to the detriment of only the competitors, while the DB railway operators may be compensated 
for  losses  resulting  from  higher  access  charges.  This  does  not  formally  represent  a  discrimination, 
since formally all pay the same access charges, but it has the same effect. Since track access charges 
constitute about 45% of the total costs of a railway undertaking30, the effect of increasing track access 
charges is significant for competition31. 

In  Germany,  DB  Regio  has  been  subject  to  allegations  that  its  services  are  cross-subsidised  from 
infrastructure access charges, which is possible because of the existence of profit transfer agreements 
between  DB  Holding  and  its  subsidiaries.  The  practice  of  "profit"  transfer  to  the  holding  and 
redistribution among subsidiaries is said to have a number of anti-competitive consequences. E.g., DB 
is  able  to  present  offers  for  transport  services  which  are  only  possible  on  the  basis  of  such  a  cross-
subsidising mechanism between the sectors transport and infrastructure. E.g., in the contract attributed 
for  the  "Elektronetz  Nord"  in  Saxony-Anhalt,  DB  REGIO  took  over  the  risk  of  increases  of  track 
access  charges  for  a  period  of  15  years.  Such  an  offer  is  only  possible  when  it  is  irrelevant  for  DB 
whether the revenues come from the infrastructure or from transport operators, since profits and losses 
are balanced out at the level of the holding. If the track access charges are increased, DB REGIO will 
make  a  loss,  however  this  will  be  compensated  by  a  corresponding  profit  of  DB  Netz  from  the 
increased track access charges. DB's competitors for transport services, which are not able to use such 
a  mechanism of profit transfer, are obviously unable to make offers in which they would commit to 
compensate all possible increases of track access charges for such a long period32.  

30 

31 

32  

See report of Monopolkommission, http://www.monopolkommission.de/sg_60/s60_volltext.pdf,, page 55, 
Fn. 69. On the profit transfer agreements see  
On the profit transfer agreements and their consequences see e;g. article in 
http://www.wiwo.de/unternehmen/dienstleister/deutsche-bahn-gewinne-aus-infrastruktur-
verdoppeln/6146542.html, and in the printed version of Wirtschaftswoche 6.2.2012, page 54, page 12. 
Examples taken from a press release of Mofair, a competitors organisation, of 3.9.2012, 
http://www.mofair.de/db/news/meldung_13033.html 

28 

 
 
                                                 
Baseline developments 

The  Recast  provides  for  clear  competences  and  additional  means  to  regulatory  bodies  to 
monitor  the  existing  obligations  in  terms  of  account  separation.  With  its  implementation, 
regulators  will  have  in  particular  the  power  to  carry  out  audits  or  initiate  external  audits  to 
verify compliance with accounting separation requirements. It stipulates that the accounts for 
the different areas of activity must be kept in a way that allows detection of transfer of public 
funds and of the use of incomes from infrastructure charges. But, despite these improvements, 
monitoring  of  the  use  of  public  finances  within  integrated  structures  and  identification  of 
cross-subsidisation practices will remain a specifically complex and difficult exercise because 
of the great variety of accountancy tools which can be used to circumvent account separation 
and the very high number of financial transactions to be controlled. Furthermore, adoption of 
ex-post corrective would continue to take years while irretrievable damage would be caused 
to the functioning of the rail market (with in some cases the bankruptcy of the new entrants 
which suffered from the anti-competitive practices of the integrated structure). 

3.2.2.2 Wide range of IM functions being the source of discrimination. 

Beyond the essential functions, the absence of separation for other IM activities (development, 
infrastructure operation and maintenance) in integrated structure causes potential conflicts of 
interest. 

Development  decisions  on  infrastructure  may  lead  to  discrimination  as  an  incumbent  in 
control will be able to prioritise them to the advantage of its own subsidiaries. 

When the entity in charge of traffic management remains under the control of the incumbent, 
the latter can interfere to ensure that it is better served in the daily re-allocation of train paths 
in case of delays or disruptions (incidents, accidents, strikes, climate-related problems, etc). In 
such cases, there is also an element of urgency which makes traceability and opportunities of 
appeal extremely difficult and creates more room for discriminatory practices. 

In  relation  to  maintenance  (as  for  infrastructure  development),  there  are  clear  risks  in 
integrated  structures  that  IM  decisions  are  prioritised  in  favour  of  the  transport  operation 
subsidiary  as  illustrated  by  the  examples  presented  in  Annex  III.  An  integrated  IM  may 
disinvest  in  lines  used  essentially  by  competitors  and  conversely  may  continue  to  maintain 
under-utilised lines used by the incumbent. The planning of maintenance works may also be 
used  by  an  IM  in  an  anti-competitive  way  if  it  schedules  maintenance  work  to  affect  the 
transport operations of new entrants more severely than those of its own transport companies. 

Furthermore,  as  discussed  in  Section  3.2.1.2,  there  is  substantial  interaction  between  the 
essential  functions  (capacity  allocation  and  infrastructure  charging)  and  other  infrastructure 
functions (maintenance and development). 

Anecdotal  evidence  proving  the  existence  of  discriminations  rising  from  the  absence  of 
separation requirements for traffic management, infrastructure maintenance and infrastructure 
development functions are provided under Annex III. 

Baseline developments 

The  Recast  extends  part  of  the  existing  separation  requirements  (accounting  separation, 
organisational  and  decision-making  independence)  to  access  to  those  rail-related  facilities 
which  are  considered  essential  (such  as  passenger  stations,  freight  terminals,  maintenance 
facilities and port facilities). These new rules apply to transport operators holding a dominant 
position in national rail transport markets and operators of specific service facilities. However 

29 

 
 
these  legislative  changes  preserve  the  concept  of  essential  functions  of  infrastructure 
management and do not extend the IM functions covered by the separation requirements. As 
such  they  do  not  prevent  discrimination  in  infrastructure  maintenance  and  development 
decisions or in traffic management. 

Table 2 – Mapping between Problems, Problems drivers and their root causes 

Root causes

Drivers

Problems

EFFICIENT M ANAGEM ENT CHALLENGE

IMs are not  
market oriented

Suboptimal 
structure of IM 
portfolios

Inefficiencies in 
infrastructure 
m anagement

Insufficient cross-
border 
cooperation of IMs

EQUAL ACCESS CHALLENGE

Diverging 
interpretation of  
existing rules

Persistent risk of 
cross-
subsidisation 
w ithin holdings

Existing 
separation rules 
are partly 
ineffective

Functions not 
covered by 
separation rules 
also result in 
discrimination

Access barriers  to 
infrastructure

Low  quality of 
services

Low  operational 
efficiency

3.2.3  Who is affected 

The problems described above and the measures to be proposed to address them will affect a 
large number of players in the rail market. They affect in particular national authorities which 
are responsible for establishing the IM and assigning infrastructure management functions but 
also  which  finance  the  infrastructure  and  award  public  service  contracts.  They  affect  the 
regulatory bodies which oversee railway markets and act as an appeal body for rail companies 
if they believe  they have been unfairly treated, IMs which are responsible  for infrastructure 
management  functions  and  are  subject  to  separation  requirements,  railway  undertakings 
operating freight and passenger rail transport services and other authorised applicants which 
are infrastructure users. They will also affect indirectly passengers and potentially those using 
rail  freight  transport  services,  as  well  as  operators  of  rail  service  facilities  whose  activities 
depend on the volume and nature of rail traffic. 

3.2.4  Aggregated baseline scenario 

The detailed elements of the baseline scenario were provided while different root causes were 
discussed.  The  overall  conclusion  is  that  while  the  Recast  and  the  Rail  Freight  Regulation 

30 

 
 
 
 
already contain some obligations for IMs to cooperate with their counterparts and to consult 
infrastructure  users  on  specific  issues,  a  more  systematic  and  consistent  approach  would  be 
necessary to address the problems mentioned above and their root causes. The Recast foresees 
explicitly  that  Member  States  can  allocate  IM  functions  to  distinct  entities,  but  it  does  not 
modify the scope of the IM functions subject to independence requirements nor the content of 
these requirements. In this context, the models of IM governance in place in Europe will not 
ensure  the  optimisation  of  infrastructure  management  and  a  level  playing  field  for 
infrastructure  access.  Existing  distortions  of  competition  are  likely  to  persist  despite  the 
reinforcement of regulatory activities. 

3.3 

Subsidiarity 

3.3.1  Legal basis 

EU  action  in  the  field  of  rail  transport  infrastructure  is  grounded  in  the  Treaty  on  the 
Functioning  of  the  European  Union,  in  particular  in  its  Articles  58,  90  and  100  setting  the 
basis for internal market in the context of an EU Common Transport Policy. 

3.3.2  Subsidiarity 

The rationale for a European action in the field of railway infrastructure stems from the trans-
national nature of the Single European Railway Area. Actions by Member States alone cannot 
ensure the coherence of market access and competition rules needed for the emergence of a 
genuine internal market for rail transport. The absence of a clear and comprehensive system 
of governance of infrastructure hinders the cross-border operations of rail service providers. 

Rules  to  improve  the  governance  of  infrastructure  should  be  developed  so  that  they  can  be 
adapted to the existing institutional setup in each Member State. However, this should be done 
following common general principles and requirements in order to ensure the coherence of the 
single  market.  Therefore,  to  ensure  the  viability  of  a  Single  European  Railway  Area,  EU 
railway acquis should be developed further, allowing the railway operators to benefit from a 
single  consolidated  legislative  framework  and  to  face  predictable  business  conditions 
throughout the EU. 

4.  OBJECTIVES 

4.1 

General objectives: 

The 2011 White Paper foresaw a progressive modal shift from airplane and road vehicles, so 
that  by  2050  the  majority  of  medium-distance  passenger  transport  should  go  by  rail.  This 
modal  shift  will  contribute  to  the  20%  reduction  of  GHG  emissions  foreseen  in  the  Europe 
2020 Agenda for smart, sustainable and innovative growth. More specifically, the White Paper 
concluded  that  no  major  change  in  transport  will  be  possible  without  the  support  of  an 
adequate infrastructure and a smarter approach to using it. 

The  overall  objective  of  the  Fourth  Railway  Package  is  to  enhance  the  quality  and 
efficiency of rail services by removing remaining legal, institutional and technical obstacles, 
fostering  the  performance  of  the  railway  sector  and  its  competitiveness,  in  order  to  further 
develop the Single European Railway Area. The initiative on infrastructure governance aims 
to  improve  the  management  of  rail  infrastructure,  where  necessary,  through  revisiting 
remaining institutional obstacles: 

31 

 
 
GO:  Strengthen  further  the  governance  of  railway  infrastructure,  thereby  enhancing  the 
competitiveness of rail sector vis-à-vis other modes and developing further the Single European 
Rail Area. 

Overall,  the  stakeholders  have  supported,  during  stakeholder  consultations,  the  general 
problem  and  the  problem  drivers  as  identified  by  the  Commission,  as  well  as  the  general 
direction of EU action - 69% agreed with the objective of improving access to infrastructure 
(see  Annex  2).  Others  considered  that  the  availability  of  rail-related  facilities  or  the  lack  of 
adequate  regulatory  oversight  constitute  the  most  important  access  barrier  for  railway 
undertakings. 

4.2 

Specific objectives: 

The general objective has been translated into specific and operational objectives attributed to 
the two challenges of efficient management and equal access challenges: 

EFFICIENT MANAGEMENT CHALLENGE 

SO1: 

Improve the IM ability to manage efficiently the infrastructure in favour of users 

EQUAL ACCESS CHALLENGE 

SO2:  Eliminate conflict of interest and distortions of competition in infrastructure access 

4.3 

Operational objectives: 

The  following  operational  objectives  have  been  identified  in  order  to  address  the  drivers 
identified in the previous section. 

EFFICIENCY CHALLENGE 

OO1:  Ensure better coordination/alignment between the IMs and rail operators 

OO2:  Ensure coherence in the management of the different IM functions 

OO3:  Ensure  that  the  cross-border  and  pan-European  dimension  of  rail  infrastructure  is 
adequately addressed 

EQUAL ACCESS CHALLENGE 

OO4:   Extend the scope of "essential functions" to all IM activities which are potential sources 
of conflict of interest and distortion of competition 

OO5:  Apply appropriate safeguard measure(s) preventing conflicts of interest and distortions 
of competition to all the "essential functions" of IMs 

Given the nature of the initiative, which is to identify the optimal governance structure of IMs, 
the operational objectives remain rather generic indicating the scope and direction of intended 
change.  Targets  cannot  be  set  for  these  objectives;  however  the  progress  will  be  measured 
according to the monitoring indicators outlined in Section 8. 

32 

 
 
 
Table 3 – Mapping between problem drivers, root causes and objectives 

Operational objectives

Root causes

Drivers

Specific

EFFICIENT M ANAGEM ENT CHALLENGE

OO1: Ensure better 
coordination/alignment 
betw een the IMs and 
rail operators

OO2: Ensure 
coherence in the 
management of the 
different IM functions

IMs are not 
sufficiently  
market oriented

Suboptimal 
structure of IM 
portfolios

OO3: Ensure that the 
cross-border and pan-
European dimension of 
rail infrastructure is 
adequately addressed

Insufficient cross-
border 
cooperation of 
IMs

EQUAL ACCESS CHALLENGE

OO4: Extend the scope 
of "essential functions" 
to all IM  activities w hich 
are potential sources of 
conflict of interest and 
distortion of competition

OO5: Apply 
appropriate safeguard 
measure(s) preventing 
conflicts of interest and 
distortions of 
competition to all the 
"essential functions" of 
IMs

Functions not 
covered by 
separation rules 
also result in 
discrimination

Existing 
separation rules 
are partly 
ineffective

inefficiencies in 
infrastructure 
m anagement

SO1: Improve the IM 
ability to manage 
efficiently the 
infrastructure

Access barriers  to 
infrastructure

SO2: Eliminate IM 
conflict of interest 
and distortions of 
competition 

4.4 

Coherence with other horizontal policies 

The proposed initiatives aim to meet the objectives of the renewed policy agenda outlined in 
the Europe 2020 Strategy, the 2011 White Paper for transport and the Strategy for Growth and 
jobs. Transport infrastructure is being considered as the backbone of the internal market and 
this objective has been retained as one of the "Twelve levers to boost growth and strengthen 
confidence" in the recently adopted Single Market Act33. 

Additionally,  this  initiative  is  consistent  with  EU  competition  policy  and  legislation  in  the 
transport sector, which aims to ensure that transport markets operate efficiently, as has been 
seen in the aviation sector. The equal access challenge identified in the previous sections is in 
line with this horizontal objective. 

33 

Communication from the Commission to the European Parliament, the Council, the European 
Economic and Social Committee and the Committee of the Regions COM(2011) 206/4. 

33 

 
 
 
 
 
                                                 
5. 

POLICY OPTIONS/POLICY SCENARIOS 

5.1 

Identification of possible policy options 

The  problem  definition  identified  two  main  challenges  to  be  addressed  in  order  to  find  an 
optimal  governance  structure  of  IMs  –  efficiency  challenge  and  equal  access  challenge. 
Section  2  above  identified  for  each  challenge  a  series  of  root  causes.  In  order  to  solve  the 
identified problem, five groups of options are considered, each of them proposing options to 
remedy the different problem elements. For each group, two to four options are identified in 
addition to the baseline options which are presented under Annex IV. 

Efficiency challenge: 

•  C options: Coordination between IM and RUs (linked to operational objective 1) 

Option  C1:  RUs  participating  in  the  administrative  board  or  supervisory  board  of  the  IM. 
While EU law currently in force implies that RUs do not control the decision making process 
of IMs in relation with essential functions, this option would foresee that all RUs active on a 
network  would  be  entitled  to  a  seat  in  the  supervisory  board  or  management  of  the  IM 
responsible  for  this  network.  RUs  would  therefore  take  a  direct  and  active  part  in  the 
management of the infrastructure. This Option C1 corresponds to the arrangements in place in 
Switzerland  for  the  company  in  charge  of  capacity  allocation,  Sillon  Suisse  SA  -  Trasse 
Schweiz AG which is owned by four Swiss operators CFF, BLS, SOB and UTP which seat in 
its administrative board. 

Option  C2:  Coordination  bodies.  This  option  foresees  a  creation  of  coordination  bodies 
representing  all  RUs  and  providing  opinions  to  IMs.  RUs  would  not  participate  in  the 
administrative  board  or  supervisory  board  of  the  IM,  preserving  the  existing  principle  of 
decision-making  independence.  However,  in  order  to  align  strategies  and  to  jointly  address 
issues which cannot be solved by the implementation of the charging principles, performance 
regimes  foreseen  by  the  Recast  (such  as  operational  costs  or  capacity  under  normal 
conditions), would be part of a consultative body allowing a constant exchange of information 
between  IMs  and  RUs.  Such  arrangements  are  already  in  place  in  a  limited  number  of 
Member States (such as the United Kingdom and France). 

Option  C3:  Financial  incentives  alignment.  Under  this  option  financial  incentives  are 
introduced  for  both  RUs  and  IMs  to  ensure  that  they  contribute  to  the  jointly  established 
efficiency targets. Such type of arrangements is recommended by the McNulty report for the 
UK (see Box 3). 

•  F options: Consistent management of key functions (linked to operational objective 2) 

Option F1: New coordination mechanism. This option would maintain the current possibility 
to allocate IM functions to different entities and foresee the establishment of a mechanism to 
oblige  these  entities  to  better  coordinate  the  management  of  IM  functions  to  ensure 
consistency of their decisions. 

Option F2: Unified IM. Under this option, all IM functions – path allocation and track access 
charging,  but  also  traffic  management,  infrastructure  maintenance  and  development  are  put 
under the responsibility of a single entity, the unified IM. 

34 

 
 
•  CB options: Cross-border infrastructure management (linked to operational objective 3) 

Option  CB1:  Establishment  of  a  EU  network  of  IMs.  This  option  consists  in  the 
institutionalisation  of a  network of national  IMs  to  exchange  best  practices, in particular on 
operational  and  infrastructure  development  issues.  A  pan-European  organisation  such  as 
RailNetEurope already constitutes a coordination forum gathering the vast majority of IMs on 
specific technical projects, such as the development of common IT tools. 

Option  CB2:  Creation  of  an  EU  structure  integrating  IMs.  This  option  foresees  the 
establishment  of  a  structure,  such  as  a  European  Economic  Interest  Grouping  (EEIG) 
integrating the existing national Infrastructure Managers into a single European Infrastructure 
Manager. Such type of structure is already foreseen for the management of specific European 
rail freight corridors. 

Equal access challenge: 

•  SF  options:  Functions  subject  to  the  separation  requirements  (linked  to  operational 

objective 4) 

Option SF1: Traffic management also covered by separation requirement. Traffic management 
-  a  function  which  cannot  be  dissociated  from  path  allocation  and  has  a  very  important 
potential  for  discrimination  -  is  added  to  the  list  of  essential  functions  subject  to  separation 
requirements. 

Option  SF2:  Traffic  management  and  maintenance  also  covered  by  separation  requirement. 
Essential  functions  subject  to  separation  requirements  are  extended  to  include  both  traffic 
management and the maintenance of new infrastructure considering the inter-relation between 
the two and their high potential for discrimination. 

Option SF3: All IM functions subject to the same separation requirements. This would mean 
that  path  allocation  and  track  access  charging  as  well  as  traffic  management,  infrastructure 
maintenance  and  development  are  subject  to  the  same  separation  requirements,  independent 
of the fact that these functions are performed by the same entity or by different ones. 

•  S options: Way of separation between IMs and RUs (linked to operational objective 5) 

Option  S1:  New  competences  for  regulatory  bodies.  This  option  foresees  that  regulatory 
bodies are tasked with controlling that existing independence requirements in organisational 
and decision-making terms are respected. In this framework any RU would have the right to 
appeal to the national rail regulator if it believes that these independence requirements are not 
respected. In line with this option, the German rail regulator today has competences to control 
the implementation of the German rules related to separation. 

Option S2: Clarify existing EU law.  This  would  mean  revision  of  the  existing  provisions  in 
the Directive so that the interpretations provided by Annex V of the Communication on the 
implementation of the First Railway Package would become indisputable. This would clarify 
in  particular  that  the  existing  independence  requirements  in  organisational  and  decision-
making  terms  require  in  particular  strict  separation  between  the  holding  and  IM 
supervisory/management  board,  cooling  off  periods  for  IM  board  members,  own  staff,  IT 
tools and premises. In this option, the competences for regulatory bodies are also extended as 
foreseen  under  Option  S1.  Such  option  corresponds  to  the  measures  developed  in  Belgium 
and Latvia (see Section 3.1.4). 

35 

 
 
Option S3: Institutional separation between IM and RUs. Under this option, the same persons 
are not entitled to control, hold any interest or exercise any right over an IM and a RU. When 
both IM and RU are public entities, distinct public authorities must exercise such control over 
them.  This  option  corresponds  to  the  institutional  settings  in  place  today  in  14  out  of  25 
Member States (see categories 1 and 4 in Table 1 under Section 3.1.4). 

Option S4: Compliance officers in integrated structures. The supervisory board of integrated 
IM would appoint a compliance officer responsible for monitoring the implementation of any 
specific  measures  taken  within  the  integrated  structure  to  ensure  non-discriminatory 
behaviour.  The  compliance  officer  would  also  issue  recommendations  and  report  on  these 
measures to the supervisory board and to the regulatory body. Such arrangement is in place 
today within the Deutsche Bahn group. 

5.2 

Screening of policy options 

In  total,  19  possible  policy  options  (including  baseline  options)  related  to  the  five  problem 
elements have been identified. The combination of all these options could create theoretically 
576 scenarios which would evidently be impracticable to assess. To reduce complexity, these 
19  policy  options  have  been  pre-screened  for  each  problem  element  as  per  Annex  IV.  Such 
screening is based on (1) stakeholder views, (2) compliance with subsidiarity/proportionality 
principles,  (3)  effectiveness  in  terms  of  policy  objectives  as  well  as  (4)  overall  feasibility. 
Where relevant, the implementing measures are also discussed in Annex IV. The table below 
summarises the results of the screening. 

36 

 
 
Policy options considered 

Retained 

Table 4 – Result of policy option screening 

Problem element 

Insufficient market 
orientation of IMs 

Respective 
category of 
options 

C options: 
Coordination 
between IM and 
RUs 

IM functions 
managed in an 
inconsistent manner 

F options: 
Consistent 
management of 
key functions 

Option C0: Baseline – improvements as foreseen by 
the Recast 

Option C1: RUs participation to IMs' board 

Option C2: IMs-RUs coordination bodies 

Option C3: Alignment through new financial 
incentives 

Option F0: Baseline – the content of existing essential 
functions is clarified by the ECJ 

Option F1: New coordination mechanism between the 
various entities in charge of IM functions 

Option F2: Unified IMs (all IM functions under IM 
responsibilities) 

Option CB1: Establishment of an EU network of IMs 

Option CB2: Creation of an EU structure integrating 
national IMs 

Option SF0: Baseline – separation requirements 
applying only to path allocation and track access 
charging 

Option SF1: Current essential functions+ traffic 
management separated 

Option SF2: Current essential functions +traffic 
management + maintenance separated 

Option SF3: All IM functions separated 

Cross-border 
cooperation 
between IM not 
sufficient 

CB options: 
Cross-border IM 
management 

Option CB0: Baseline - implementation of existing 
EU law (the Recast, regulation of rail freight corridors, 
etc.) 

Equal access needs 
to be assured to all 
key functions 

SF options: 
Functions subject 
to the separation 
requirements 

Conflicts of 
interests in the 
management of IM 
functions 
management 

S options: Way of 
separation of IMs 
from RUs 

Option S0: Baseline - existing separation requirements 
for the essential functions as interpreted in the 
forthcoming ECJ ruling 

Option S1: Additional competences for regulatory 
bodies 

Option S2: Clarify in EU law the concrete 
implications of existing separation obligations 

Option S3: Institutional separation 

Option S4: Compliance officer in integrated structures 

5.3 

Construction of policy scenarios 

The  table  4  above  identifies  the  11  options  that  have  been  retained  (including  5  baseline 
options)  out  of  the  19  options  screened.  Of  these,  three  policy  scenarios  combining  policy 
options in the five areas highlighted above (in addition to the baseline) have been designed for 
the assessment of impacts. The rationale of the choice is explained in Annex IV. 

37 

√ 

√ 

√ 

√ 

√ 

√ 

√ 

√ 

√ 

√ 

√ 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
•  Scenario  0  –  Baseline:  this  Scenario  includes  only  baseline  options  and  is  used  for 

comparison purposes only. 

•  Scenario  1  –  focussing  only  on  the  efficiency  measures  –  this  Scenario  includes  all 
three retained options related to the efficiency challenge (an IM-users coordination body 
is  created,  IM  functions  are  unified,  an  EU  network  of  IMs  is  created  and  all  IMs 
functions  are  subject  to  the  existing  separation  requirements)  but  only  the  baseline 
options related to the equal access challenge; 

•  Scenario  2  –  efficiency  measures  and  better  enforcement  of  existing  separation 
requirements  –  this  Scenario  combines  efficiency  measures  (an  IM-users  coordination 
body is created, IM functions are unified, an EU network of IMs is created) with a first 
set  of  equal  access  measures  (all  IM  functions  are  subject  to  the  existing  separation 
requirements  with  their  concrete  implications  according  to  the  Commission  clarified  in 
EU law); 

•  Scenario  3  –  efficiency  measures  and  new  institutional  separation  requirements  – 
this  Scenario  combines  efficiency  measures  (an  IM-users  coordination  body  is  created, 
IM  functions  are  unified,  an  EU  network  of  IMs  is  created)  with  a  second  set  of  equal 
access measures (all IM functions are subject to institutional separation requirements). 

The composition of these Scenarios is summarised in the Table 5 below: 

Table 5 – Detailed content of Policy Scenarios 

Category of options 

Baseline Scenario 

Scenario 1 

Scenario 2 

Scenario 3 

Coordination between 
IM and RUs 

Consistent 
management of key 
functions 

Cross-border IM 
management 

Functions subject to 
the separation 
requirements 

Way of separation 

Option C0: 
Improvements as 
in the Recast 
Option F0: 
Existing essential 
functions are 
clarified by the 
ECJ, but scope 
remains limited 
Option SC0: 
Implementation of 
existing EU law - 
the Recast, 
regulation of rail 
freight corridors. 
SF0: Only path 
allocation and 
track access 
charging separated 

Option C2: 
Coordination 
bodies 
Option F2: 
Unified IMs 

Option C2: 
Coordination 
bodies 
Option F2: 
Unified IMs 

Option C2: 
Coordination 
bodies 
Option F2: 
Unified IMs 

Option CB1: 
Establishment of 
an EU network of 
IMs 

Option CB1: 
Establishment of 
an EU network of 
IMs 

Option CB1: 
Establishment of 
an EU network of 
IMs 

Option SF3: All 
IM functions 
separated 

Option SF3: All 
IM functions 
separated 

Option SF3: All 
IM functions 
separated 

Option S0: 
Existing separation 
requirements 

Option S0: 
Existing separation 
requirements 

Option S3: 
Institutional 
separation 

Option S2: Clarify 
in EU law the 
concrete 
implications of 
existing separation 
obligations 

38 

 
 
ANALYSIS OF IMPACTS 

6. 
The analysis below details the economic impacts of the baseline scenario and the comparative 
outcomes of the three policy scenarios. Section 6.1 focuses on direct impacts on the railway 
sector  in  terms  of  enforcement  costs,  transaction  costs,  regulatory  costs,  the  costs  of 
discriminatory practises, that of the cross-subsidisation, but also the impacts of separation on 
the  efficiency  of  infrastructure  usage  (including  assessment  of  misalignment  costs). 
Assessment of these impacts is most detailed and supported with further details in Annex V. 
Section  6.2  looks  in  addition  at  the  induced  impacts  of  the  initiative,  such  as  level  of 
competition, level of activity, investments, service quality, safety and SME impacts. The rest 
of this chapter covers the indirect impacts on transport sector and wider economy including 
range of economic, social and environmental impacts. 
This section provides an assessment of the main economic, social and environmental impacts. 
The  analysis  is  mostly  derived  from  a  qualitative  assessment  of  the  policy  options  which  is 
supported where possible by quantitative elements. To the extent such an approach provides 
sufficient basis for comparative analysis, it is considered being proportionate to the nature and 
purpose  of  the  policy  measures  under  consideration.  The  overall  results  of  the  analysis  of 
impacts are summarised in the table in section 6.4. 

6.1 

Direct impacts on the railway sector 

6.1.1  Enforcement costs 

While, by definition, there are no enforcement costs under the baseline scenario, creation of 
IM-users coordination bodies under Scenario 1 will imply limited  administrative burden  for 
IMs and infrastructure users which are already involved in ad hoc consultations. In the same 
manner, without any permanent secretariat and only few meetings per year under the auspices 
of the Commission, the establishment of  a European IMs' network is not expected to create 
important  enforcement  costs.  In  a  limited  number  of  Member  States,  the  unification  of  IM 
functions  will  require  merging  the  IM  with  allocation  and  charging  bodies  or  specific 
departments  of  the  incumbent.  This  reorganisation  will  necessitate  transfer  of  staff  and 
reorganisation of the IM management chain. 

Scenario  2  implies  the  generalised  establishment  of  safeguards  capable  of  ensuring  the 
decision-making  independence  of  IMs.  Such  "Chinese  walls"  may  increase  moderately  the 
cost of IM infrastructure management, for instance through the recruitment of distinct board 
members  and  development  of  new  staff  policies,  IT  systems.  However  these  restructuring 
costs,  affecting  only  those  Member  States  which  have  not  opted  for  institutional  separation, 
are  expected  to  remain  moderate  (costs  associated  to  legal  separation  but  also  some  costs 
resulting from decision-making  and organisational separation are supposed  to  be part of the 
baseline scenario). 

Institutional  separation  under  Scenario  3  is  also  expected  to  bring  enforcement  costs. 
However  such  costs  are  expected  to  be  limited  and  not  necessarily  higher  than  those  of  the 
"Chinese wall" under Scenario 2 and, as for Scenario 2, to be concentrated on those Member 
States  which  have  not  opted  for  institutional  separation.  Implementation  of  Scenario  3 
essentially  requires  changes  in  the  ownership  structure  without  a  need  to  shift  personnel  or 
assets from one part to another. 

Impacts compared to the baseline 

Scenario 1 

Scenario 2 

Scenario 3 

Enforcement costs 

0/- 

-- 

-- 

39 

 
 
Here and afterwards, comparison tables compare the relative impacts within a row but not the relative 
importance of different rows. '+' indicates positive impacts, '-' negative impacts. 

Evidence provided under Annex V indicate that Member States currently without institutional 
separation  (categories  2-6  in  Table  1)  could  be  expected  to  incur  potential  one-off  costs 
equivalent to 0.7% of annual operating costs (the 0.5% mid-point estimate for implementing 
Scenario 2 plus the 0.2% arising from Scenario 3). This would imply EU level expenditure of 
€0.24 billion. 

6.1.2.  Transaction costs 

Under the baseline scenario, transaction costs exist as a result of the interaction between the 
IM,  the  incumbent  and  new  entrants.  But  while  transaction  costs  between  the  IMs  and  new 
entrants can be easily identified, those between IMs and incumbents are less transparent but 
equally existent within integrated structures. Such costs derive for example from the level of 
contractualisation  and negotiation, the process of capacity  allocation, timetabling and traffic 
management, performance monitoring and alignment of incentives, delay attribution, capacity 
planning and dispute resolution. All these activities have to be undertaken, in the framework 
of the EU railway Directives, independently of the governance model retained, and of whether 
the railway undertakings belong to an integrated group or not. Their cost may vary with the 
number of transport operators (depending from the level of market opening), but not with the 
level  of  separation.  In  the  case  of  rail  infrastructure  management  there  is  no  possibility  to 
have double marginalisation with integrated structures because the prices of the infrastructure 
is regulated and its profits are constrained by charging principles applicable under EU law. In 
some  Member  States  additional  transaction  costs  derive  from  the  fact  that  IM  functions  are 
spread between different operational bodies. 

Scenario  1  reduces  transaction  costs  in  two  different  ways:  (1)  with  the  unification  of  IM 
functions, those costs resulting from interfaces between the different entities in charge of IM 
functions will be removed; (2) better coordination between IMs and infrastructure users will 
ensure  alignment  of  strategies  and  objectives.  As  a  consequence,  contractualisation  and 
negotiation  costs  should  be  minimised,  performance  monitoring  simplified  and  potential  for 
disputes partly removed. 

Under  Scenarios  2  and  3,  some  transaction  costs  are  likely  to  increase  together  with  the 
number of infrastructure users and volume of traffic. However the benefits resulting from an 
increase  in  the  offer  of  rail  transport  services,  such  as  higher  track  access  charges  revenues 
will more than outweigh such costs. In addition, the efficiency measures implemented under 
Scenario 1 (as well as the implementation of the Recast under the baseline scenario) will act 
as mitigating measures under these Scenarios. 

Compared with Scenario 2, transaction costs under Scenario 3 are expected to vary essentially 
as a result of the increasing number of new entrants and higher traffic volumes. However such 
increase  will  impact  exclusively  those  Member  States  which  have  not  yet  opted  for  a 
separated  model  (see  Graph  2  in  Section  3.1.4).  In  addition,  under  Scenario  3  specific 
transaction  costs,  in  particular  those  resulting  from  dispute  resolution,  are  expected  to 
decrease  compared  to  Scenario  2,  as  illustrated  by  UK,  Sweden  and  Germany  examples  in 
Box 9. 

40 

 
 
 
Box 9 – Example of dispute resolution costs in UK, Sweden and Germany 

Merkert  et  al.  (2008)  compared  the  railway  systems  in  the  UK,  Sweden  and  Germany  in  terms  of 
complexity of its transaction processes at interfaces and the related costs. The authors found that the 
partially integrated holding model adopted in Germany clearly reduces uncertainty for the integrated 
DB group and thus for a large part of all transactions in the German market. It does, however, increase 
uncertainty  for  non-DB  operators  significantly.  This  is  because  most  disputes  between  non-DB 
operators and the IM require ex post intervention from the Regulatory Body and many of them end up 
in court, thereby lengthening the time required to resolve them. In the light of an expected increase in 
the number of new entrants, the dispute resolution system currently in operation in Germany may lead 
to  substantial  cost  increases.  In  contrast,  most  of  the  disputes  in  Britain  and  Sweden,  which  are 
anyway fewer in number, can be resolved between the RUs and the IMs. Merkert et al. conclude that 
the  British  and  Swedish  systems  "provide  competition  at  not  unusually  high  transaction  costs"  and 
work at least as well as the German system 

Box 10 – the "PRIMON" study34 on synergy costs in Germany 

In  2006,  the  PRIMON  report  was  commissioned  by  the  German  government  with  the  aim  of 
evaluating different options with respect to the privatisation of Deutsche Bahn. The report estimated 
synergies  benefits  from  an  integrated  structure  to  be  up  to  €1.1  billion  for  the  first  four  years  after 
separation.  However,  according  to  PRIMON,  these  costs  of  separation  are  not  transaction  costs  but 
rather those resulting from the abandon of single wagon load activities by DB Schenker – 298 m€), 
cancelled internal efficiency programs (195 m€), misallocation of investments (164 m€) and distinct 
procurement and other central administrative services (432 m€). However it can be argued that some 
synergy  benefits  are  not  necessarily  eliminated  in  the  case  of  institutional  separation.  In  particular 
charging policies supporting single wagon load activities, joint efficiency programs and alignment of 
investments  can  be  developed  through  IMs-users  coordination,  benefitting  thereby  new  entrants  in 
addition to the incumbent.  

Impacts compared to the baseline 

Scenario 1 

Scenario 2 

Scenario 3 

Transaction costs 

0 

- 

-- 

Here and afterwards, comparison tables compare the relative impacts within a row but not the relative 
importance of different rows. '+' indicates positive impacts, '-' negative impacts. 

According to the evidence collected under Annex V, the potential transaction costs range 
between 0.05 and 0.16 bn euro per annum with Scenario 2 and 3. They should impact only 
Member States with integrated structures and represent at least 0.15% of operating costs 
under Scenario 2 and nearly 0/3% of operating costs under Scenario 3. 

6.1.3.  Regulatory costs 

Under  the  baseline  scenario  as  well  as  Scenarios  1  and  2,  the  persistence  of  integrated 
structures  will  oblige  regulatory  bodies  to  deploy  important  administrative  resources  to 
effectively control and detect discriminatory behaviour of and cross-subsidisation within the 
integrated railway undertaking. 

Under  the  baseline  and  Scenario  1,  discriminatory  practices  are  already  prohibited  and 
regulatory bodies are competent to act following an appeal from a party which considers itself 
discriminated  or  on  their  own  initiative.  While  the  scope  of  separation  requirements  varies 
between  these  two  scenarios,  there  is  no  evidence  that  regulatory  costs  will  change 
significantly. 

34  Booz Allen Hamilton (2006), Privatisierungsvarianten der Deutschen Bahn AG "mit und ohne Netz" 

(PRIMON), Berlin. 

41 

 
 
 
 
                                                 
With  Scenario  2,  regulatory  bodies  are  tasked  with  a  new  competence  requiring  additional 
resources: controlling that independence requirements in organisational and decision-making 
terms  are  respected.  However  the  related  increase  in  regulatory  costs  should  be  at  least 
compensated by a reduction in the number of appeals resulting from the absence of conflicts 
of interest. 

Finally,  transparency  resulting  from  institutional  separation  under  Scenario  3  will  greatly 
facilitate and make more effective regulation. As conflicts of interest are prevented but also 
financial  transparency  ensured,  the  cost  of  regulation  will  substantially  decrease  under  this 
Scenario.  According  to  the  evidence  collected  under  Annex  V,  regulatory  costs  per  train-
kilometre could decline up to 75% as a result of institutional separation. Such positive impact 
would be concentrated in Member States with integrated structures. 

Impacts compared to the baseline 

Scenario 1 

Scenario 2 

Scenario 3 

Regulatory costs 
*   Here and afterwards, comparison tables compare the relative impacts within a row but not the relative 

+ 

0 

0 

importance of different rows. '+' indicates positive impacts, '-' negative impacts. 

6.1.4  Costs of discriminatory practices 

  By  reducing  or  even  eliminating  the  scope  for  discriminatory  behaviour,  all  three  policy 
scenarios would evade opportunity costs of potential operations of new entrants omitted due 
to discrimination in gaining access to infrastructure. Equal access to infrastructure would also 
provide  for  the  development  of  competition  for,  and  in,  the  market,  in  particular  if  coupled 
with market opening initiative. 

  Already in the Baseline Scenario, any discriminatory practices are prohibited by existing EU 
law and regulatory bodies are competent to act following an appeal or on their own initiative. 
However, as presented in the problem definition of the IA, the discrimination in infrastructure 
access,  preventing  the  smooth  functioning  of  Single  European  Railway  area,  still  occurs. 
Under  Scenario  1,  measures  ensuring  better  coordination  between  Ims  and  infrastructure 
users will provide an opportunity for new entrants to have their interests taken into account by 
IMs and thereby to reduce the scope for discrimination. 

In  case  of  Scenario  2  independence  requirements  in  organisational  and  decision-making 
terms are further detailed and the scope of oversight of regulatory bodies is extended to verify 
that these requirements are respected. However, without full institutional separation and full 
financial  trasparency,  an  opportunity  and  motivation  for  discrimination  remain.  Damages 
caused by discriminations could be illustrated in terms of 'opportunity costs' expressed as loss 
from non-running of services as well as lost return on investments. Whilst such costs can be 
significant, quantification is challenging being each time dependent on the circumstances and 
the nature of services involved. For instance, one of the discrimination cases quoted in Annex 
III  refers  to  hurdles  the  Italian  new  entrant  NTV  experienced  during  the  homologation 
procedure for its HS trains. The process took 45 months between July 2008 and March 2012 
main  reason  for  delays  being  the  infrastructure  manager's  RFI  (subsidiary  of  the  Ferrovie 
dello  Stato)  refusal  to  grant  the  train  paths  necessary  for  testing  purposes.  The  excessive 
duration of the procedure led to a lost return on its €1 billion investment for the development 
of its new rail transport services. 

Scenario  3  would  imply  a  structural  change  by  introducing  full  institutional  separation  and 
thus  prevent  (rather  than  correct)  occurrence  of  discriminatory  behaviour.  Therefore  this 
Scenario is much more efficient in terms of evading discrimination related opportunity costs. 

42 

 
 
 
 
 
Impacts compared to the baseline 

Costs of discriminatory practices 

Scenario 1 

Scenario 2 

Scenario 3 

0 

0/+ 

++ 

Here and afterwards, comparison tables compare the relative impacts within a row but not the relative 
importance of different rows. '+' indicates positive impacts, '-' negative impacts. 

6.1.5.  Costs of cross-subsidisation 

Separation  would  also  reduce  the  risk  of  cross-subsidisation  embedded  in  integrated  and 
holding structures. Complex bundle of services offered over the same network and potentially 
by the same or closely linked companies has inherently implications for cost-accountancy and 
transparency  even  if  account  separation  requirements  are  in  place.  In  these  terms  only  full 
institutional separation, as foreseen under Scenario 3, would reduce and ultimately eliminate 
the  risk  of  cross-subsidisation  between  different  rail  services.  Improved  transparency  would 
provide the decision-makers within the relevant competent authorities with more transparent 
financial information about asset values and cost structure, allowing improving the allocation 
of  public  funds  to,  and  within,  the  rail  sector.  However,  likewise  the  opportunity  costs, 
transparency  linked  benefits  would  not  be  easy  to  quantify.  In  any  terms  Scenario  3  is 
considered much more effective, given that institutional separation would structurally prevent 
the case for cross-subsidisation, while Scenario 2 would still allow the persistence of cross-
subsidisation through the use of complex accountancy tools which are difficult for regulators 
to monitor and control. 

Impacts compared to the baseline 

Scenario 1 

Scenario 2 

Scenario 3 

Costs of cross-subsidisation 

0 

0/+ 

++ 

Here and afterwards, comparison tables compare the relative impacts within a row but not the relative 
importance of different rows. '+' indicates positive impacts, '-' negative impacts. 

6.1.6.  Efficiency of infrastructure usage 

Under  the  baseline  scenario,  efficiency  improvements  measured  by  the  passenger-km  and 
tonne-km per kilometre of rail network and per unit of rolling stock will continue to be largely 
determined  by  technological  evolutions  and  by  the  managerial  independence  of  market 
players  (i.e.  the  ability  of  railway  undertakings  to  manage  their  business  on  a  commercial 
basis and for the IM, its responsibility over its own management, administration and internal 
control). In this context, it can be expected that efficiency will continue to improve to some 
extent.  However,  a  low  competitive  pressure  on  transport  operators,  sub-optimal  asset 
management and biased investment allocation of some IMs would limit efficiency gains. 

The  measures  to  be  implemented  under  Scenario  1  are  specifically  designed  to  increase 
efficiency. They will allow IMs to better assess market needs at both domestic and EU level 
and  to  develop  infrastructure  capacity  responding  to  these  needs,  thanks  to  their  ability  to 
control the various activities which determine it.  

Under  Scenarios  2  and  3,  increasing  competitive  pressure  and  specialisation  of  the  market 
players will have an additional positive effect on their productivity and efficiency. At the same 
time, as further explained under Annex V, there are risks of loss of synergies and economies 
of  scope  which  can  appear  in  cases  of  separation  between  IMs  and  a  dominant  RU  (the  so 
called 'misalignment costs'). However, this is inherent in order to ensure a level playing field 
for all operators. These risks will be mitigated by the enhanced coordination between IMs and 
infrastructure users as well as full implementation of the financial incentives foreseen by the 

43 

 
 
 
 
 
 
Recast  (modulation  of  charges,  incentive  scheme  and  performance  regime).  Such  measures 
will ensure adequate alignment of strategies and investments leading essentially to long term 
efficiency gains. 

Box 8 – Example of impacts on efficiency in Australia 

Evidence  of  efficiency  gains  as  a  result  of  unbundling  has  been  found  in  Australia  (OECD  (2005), 
where  an  inter-state  IM  was  created,  whose  aim  was  to  provide  the  infrastructure  on  a  non-
discriminatory  basis  to  several,  mostly  freight,  RUs.  The  IM  was  able  to  decrease  infrastructure 
charges  by  25%  compared  to  the  situation  under  mutual  agreements  between  vertically  integrated 
companies in place hitherto. 

Figure 6 below illustrates the findings of a study of 16 European railway networks conducted 
by  Sanchez  and  Monsalvez  (2008).  They  found  that  structural  reforms  and  market  opening 
have a positive effect on productivity and efficiency of the railway industry measured by the 
passenger-kilometre and tonne-kilometre and per unit of rolling stock. The authors found in 
particular  that  horizontal  separation  (i.e.  opening  up  of  the  rail  transport  services  market) 
without  vertical  separation  (as  in  Austria,  Germany  or  Italy)  had  a  limited  impact  on  the 
efficiency.  On  the  other  hand,  efficiency  gains  in  vertical  separated  countries  were 
significantly  higher  compared  to  those  countries  where  industries  remained  vertically 
integrated  only  where  vertical  separation  was  introduced  with  some  degree  of  horizontal 
separation  (as  in  the  UK  and  Sweden).  Vertical  separation  without  market  opening  (as  in 
Spain and in France) had a negative impact on efficiency.   

Figure 6 

Productivity and efficiency changes on European railways35 

 Source: Sanchez P., Monsalvez J., Martinez L. (2008) quoted in Appendix E (E2.4) of the SDG report. 

Impacts compared to the baseline 

Scenario 1 

Scenario 2 

Scenario 3 

Operational efficiency 

Scope efficiencies between IM and incumbent 

Overall level of efficiency 

+ 

0 

+ 

++ 

- 

+ 

+++ 

- 
++ 

35 

Sanchez P., Monsalvez J., Martinez L. (2008), Vertical and Horizontal Separation in the European Railway 
Sector, Bilbao. 

44 

 
 
 
 
 
 
                                                 
*   Here and afterwards, comparison tables compare the relative impacts within a row but not the relative 

importance of different rows. '+' indicates positive impacts, '-' negative impacts. 

6.2.  Induced impacts on the railway sector 

6.2.1.  Level of competition 

Under the Baseline scenario as well as under Scenario 1, changes in the level of competition 
are likely to remain limited. However the efficiency measures adopted under Scenario 1 may, 
in  comparison  to  the  baseline,  have  an  additional  impact  on  competition:  the  new  IM-users 
coordination  mechanisms  will  address  the  problem  of  asymmetries  of  information  in  the 
dialogue  between  IMs  and  infrastructure  users,  including  new  entrants.  In  addition,  by 
extending  existing  independence  requirements  to  all  IM  functions,  Scenario  1  may  also 
address  some  potential  discriminatory  practices  arising  for  functions  which  are  not  defined 
today as being 'essential'. However distortions of competition are expected to persist because 
of  the  weaknesses  of  these  independence  requirements  explained  under  Section  3.2.2.1.1. 
Identifying  and  correcting  anti-competitive  practices  will  remain  particularly  difficult  for 
regulatory bodies and will continue to be a long process with important opportunity costs for 
the  victims  of  discrimination.  New  entrants  would  therefore  continue  to  face  difficulties  in 
developing alternative transport offers. 

Under  Scenarios  2  and  3  strengthening  of  the  separation  between  the  IM  and  the  railway 
undertakings is expected to address anti-competitiveness concerns by eliminating conflicts of 
interest between IMs and incumbent operators. 

Under Scenario 2, competition will increase compared to the baseline as the decision-making 
independence  of  the  IM  would  be  ensured.  However  its  impact  in  terms  of  competitive 
pressure  vis-à-vis  railway  incumbents  will  not  be  as  strong  as  in  Scenario  3.  In  fact,  the 
existence  of  integrated  structures  and  the  associated  persisting  risks  of  cross-subsidisation 
explained under Section 3.2.2.1.2 will continue to slow down new entrants' development – in 
freight  and  in  passenger  transport.  Integrated  structures  will  find  possibilities  to  continue 
using  public  infrastructure  subsidies  to  gain  competitive  advantages  for  their  commercial 
operations. In addition, under Scenario 2, competitive advantages of incumbents in access to 
resulting from infrastructure ownership will not be addressed. 

Full institutional separation under Scenario 3 will guarantee financial transparency, absence of 
cross-subsidisation  and  fair  financing  conditions,  reduce  further  the  risks  of  conflicts  of 
interest  and  ultimately  create  the  conditions  for  increased  competition.  However  it  must  be 
acknowledged that institutional separation and non-discriminatory coordination between IMs 
and users will not directly affect the dominance of incumbents. The latter will continue to use 
their  market  power  to  claim  favourable  infrastructure  access  conditions  from  independent 
IMs. 

Figure 2 under section 3.2.2 has shown the evolution of the market shares of new entrants in 
freight  markets.  It  indicates  that  the  share  taken  by  new  entrants  has  been  generally  greater 
and has grown faster in countries adopting full institutional separation than in those with an 
integrated structure: in 2012, the market share of new entrants was above 21% in 6 out of 8 
countries in the separated sample while it was above this same figure only in 2 out of the 8 
countries in the integrated sample. It can be concluded that combining IM and RU functions 
within a single organisation is likely to prevent or discourage new entry. 

45 

 
 
 
 
Impacts compared to the baseline 

Scenario 1 

Scenario 2 

Scenario 3 

Level of competition 

+* 

++ 

+++ 

*   Here and afterwards, comparison tables compare the relative impacts within a row but not the relative 

importance of different rows. '+' indicates positive impacts, '-' negative impacts. 

6.2.2.  Level of activity of railway operators (traffic) 

Under the baseline scenario, the level of activity, linked to infrastructure usage and the level 
of traffic, is likely to remain constrained by the difficulties faced by new entrants in accessing 
the rail market. However some access barriers will already be removed by the development of 
common  technical  standards  (for  both  safety  and  operability)  and  by  the  implementation  of 
the  Recast  which  will  in  particular  facilitate  access  to  rail-related  services  for  new  entrants. 
Other  initiatives  under  the  Fourth  railway  package  (single  certification  and  homologation 
procedures, opening of the domestic passenger markets) will have an important impact on the 
evolution of rail traffic. 

Implementation  of  the  efficiency  measures  foreseen  under  Scenario  1  will  have  a  positive 
impact  on  the  level  of  traffic:  IMs  coordination,  improved  consultations  between  IMs  and 
infrastructure users as well as the unification of IM functions will ensure that the availability 
of  existing  infrastructure  capacity  is  maximised  (through  better  maintenance  planning  and 
operational  practices)  and  that  investments  in  infrastructure  development  are  optimised  to 
respond to transport operators' demand. 

In  addition  to  the  positive  impact  of  the  efficiency  measures  mentioned  above,  Scenarios  2 
and  3  will  facilitate  market  access  and  the  increasing  number  of  operators  will  ultimately 
generate  new  business  activity  and  additional  traffic.  For  freight  and  passenger  rail  in  open 
access,  this  will  lead  to  an  increase  of  traffic  generated  by  additional  transport  supply.  For 
competitively-tendered  passenger  rail  services,  new  bidders  bringing  additional  competitive 
pressure will lead to additional savings for competent authorities  and improvements in service 
quality  for  passengers.  These  benefits  will  ultimately  increase  the  possibility  for  awarding 
authorities  to  purchase  additional  train-km  or  passenger-km  of  train  services  for  the  same 
amount of subsidies. As the level of competition will be higher under Scenario 3 than under 
Scenario 2 (see section a) above) these effects will be respectively stronger under Scenario 3 
than under Scenario 2. 

Empirical evidence shows that there is a correlation between the level of separation and the 
intensity of infrastructure use. Figure 4 below shows that rail infrastructure tends to be most 
intensively  used  in  those  countries  that  have  adopted  institutional  separation  and  liberalised 
their respective rail markets. Sweden is a notable exception, with the relatively low intensity 
of  use  reflecting  geography  and  network  configuration.  Such  correlation  appears  even  more 
obvious  when  changes  to  the  intensity  of  use  are  observed:  While  intensity  of  use  of  rail 
infrastructure in the UK and the NL, which had reached an already remarkably high level in 
2006,  remained  fairly  stable,  such  intensity  increased  particularly  rapidly  in  other  Member 
States with separated structures, such as the Czech Republic, Sweden, Denmark and Romania. 
Among  Member  States  with  integrated  structures,  the  intensity  of  use  reached  relatively 
important  levels  in  Italy,  Austria,  Germany,  Belgium  and  Luxembourg.  However,  with  the 
exception of Austria and France, such intensity deteriorated or remained fairly stable during 
the reference period 2006-2009. 

46 

 
 
 
 
Figure 4 

Intensity of use of infrastructure and variation 2006-2009  
(passenger train-km / km of line) 

Source: Rail Market Monitoring Scheme (RMMS) 2012 and Eurostat data. 

CHANGE OF USE OF INFRASTRUCTURE IN SELECTED COUNTRIES IN 2006-
2009, % 

Source: Rail Market Monitoring Scheme (RMMS) 2012 and Eurostat data. 

Impacts compared to the baseline 

Scenario 1 

Scenario 2 

Scenario 3 

Level of activity of railway operators 
*   Here and afterwards, comparison tables compare the relative impacts within a row but not the relative 

+++ 

++ 

+ 

importance of different rows. '+' indicates positive impacts, '-' negative impacts. 

47 

 
 
 
 
 
 
 
 
6.2.3.  Investments in infrastructure and transport operations 

Under  the  baseline  scenario,  investments  by  new  entrants  in  transport  operations  will  be 
constrained  by  the  fear  of  distortions  of  competition  (discriminatory  practices  and  cross-
subsidisations) but also by the persistence of inefficiencies in infrastructure management. In 
addition  the  variety  of  governance  structures  will  continue  to  affect  the  transparency  of 
market access conditions making cross-border investments of rail undertakings more difficult. 
Public authorities may ultimately decide to limit their funding to the rail infrastructure due to 
the sub-optimal management of the rail infrastructure as well as the persistent risk of transfer 
of public funding for the infrastructure to other activities. 

Improving the efficiency of infrastructure management, Scenario 1 is expected to reduce its 
costs.  This  may  result  in  IMs  requesting  lower  public  funding  for  specific  infrastructure 
development  projects  and ultimately making rail  more attractive for  both  public and  private 
investments. Investments in favour of competing modes could be re-allocated in favour of rail 
in the future.  

Under both Scenario 2 and Scenario 3, independent decision-making processes in relation to 
infrastructure development and maintenance will optimise further usage of available funding 
and  should  lead  to  higher  public  and  private  investments.  However,  with  persistent  risks  of 
reallocation  of  public  funds  for  infrastructure  development  to  transport  operations  under 
Scenario 2, the increase of public and private investments is likely to remain lower than under 
Scenario 3. 

Experiences  in  both  the  UK  and  Sweden  have  shown  that  public  contributions  to  the  rail 
sector  in  general  have  increased  significantly  after  institutional  separation.  Such  increase  is 
illustrated by the Figure 5. 

Figure 5 

UK Government Support to the rail industry in Great Britain36 

*

Source: UK Department for Transport, Transport Scotland and Welsh Assembly 

36 

Public support includes grants provided by local authorities competent for the award of public service 
contracts, called public transport executives (PTE). 

48 

 
 
 
                                                 
As  highlighted  in  the  IA  report  on  market  opening  in  domestic  passenger  services,  such 
increases in the level of investment has led to an higher offer of rail transport services and the 
investment  efficiency  has  improved.  According  to  this  report,  the  increase  of  passenger-
kilometre per subsidies between 2003 and 2008 is the highest in the UK and Sweden. 

Impacts compared to the baseline 

Scenario 1 

Scenario 2 

Scenario 3 

Level of investment 
*   Here and afterwards, comparison tables compare the relative impacts within a row but not the relative 

++ 

+ 

++ 

importance of different rows. '+' indicates positive impacts, '-' negative impacts. 

6.2.4.     Service quality 

Under  the  baseline  scenario,  low  competitive  pressure  as  well  as  the  absence  of  proper 
coordination between  IMs and infrastructure  users may  lead to investments  not focussed on 
users' needs in terms of service quality and sub-optimal traffic management decisions creating 
recurrent problems of punctuality in a context of traffic growth. 

With the efficiency measures implemented under Scenario 1, service quality will be improved 
as  IM  having  full  control  over  the  all  key  functions  should  result  in  more  effective  and 
coordination  with  railway  undertakings  will  make  them  more  aware  of  the  needs  of 
passengers and freight forwarders. 

Under  Scenario  2  and  Scenario3,  higher  competitive  pressure  will  bring  market  players  to 
become even more customer-oriented and focus their investments on service quality (in terms 
of comfort, reliability, speed, etc.). Box 11 below illustrates such impact. 

Box 11 – Example of impacts on service quality in the Netherlands 

A study by Mulder (2005) looks at the institutional change process of the Dutch railways, and its effect 
on passenger welfare. While there were many transitional problems evident, the report concludes that, 
following  initial  problems  with  performance  and  punctuality,  there  has  been  an  improvement  in  the 
quality of passenger transport, arising through the institutional separation of different railway entities 
and the formalisation of the relationships between them. 

Impacts compared to the baseline e 

Scenario 1 

Scenario 2 

Scenario 3 

Level of service quality and punctuality 
*   Here and afterwards, comparison tables compare the relative impacts within a row but not the relative 

+= 

++ 

+ 

importance of different rows. '+' indicates positive impacts, '-' negative impacts. 

6.2.5.  Rail safety 

Under  the  baseline  scenario,  the  level  of  safety  is  expected  to  continue  to  increase  as  a 
consequence of the continuous development of safety and interoperability standards as well as 
the  improvement  to  certification  and  homologation  procedures  foreseen  under  the  Fourth 
Railway Package. 

With  Scenario  1,  coordination  between  IMs  and  infrastructure  users  and  among  IMs  will 
cover  safety  aspects  (investments  in  new  technologies,  operational  practices)  and  should 
improve further safety levels. 

49 

 
 
 
 
 
 
Scenarios 2 and 3 scores are expected to be identical to Scenario 1 in relation to safety as the 
latter is not influenced by the degree of separation. There is no evidence that competition in 
general  and  the  increasing  competitive  pressure  resulting  from separation  may  affect  safety. 
On  the  contrary,  there  is  evidence  that  safety  levels  improved  in  countries  which  have 
separated  their  systems  as  illustrated  by  examples  in  Box  12.  It  can  actually  be  argued  that 
specialisation  and  clearer  responsibilities  of  the  different  market  players  creates  a  more 
favourable institutional framework. 

Interestingly,  less  than  20%  of  the  respondents  to  the  Eurobarometer  survey  think  that 
competition  is  expected  to  have  a  negative  influence  on  the  safety  of  the  network  and  55% 
think that there will be an improvement. 

Box 12 – Example of safety impact in UK 

A  study  by  OECD  (2010)  found  that  there  has  been  no  decrease  in  safety  (measured  in  terms  of 
fatalities) as a result of unbundling in the UK and in Japan. Accident levels in the UK have fallen at a 
faster rate after market opening and separation rather than before it. Steer Davies Gleave (2011) and 
Thompson  (2004)  agree  that  safety  in  the  UK  did  not  suffer  from  the  unbundling  and  privatisation 
process. 

Impacts compared to the baseline 

Scenario 1 

Scenario 2 

Scenario 3 

Level of safety 
*   Here and afterwards, comparison tables compare the relative impacts within a row but not the relative 

0 

0 

0 

importance of different rows. '+' indicates positive impacts, '-' negative impacts. 

6.2.6.  Impact on SMEs 

New entrants in the railway freight and passenger markets as well as services providers such 
as maintenance operators are partly SMEs. There are no obvious differences in the impact of 
each  Scenario  on  these  SMEs  compared  to  large  railway  operators.  It  may  be  argued  that 
Scenarios  1,  2  and  3  are  increasingly  likely  to  create  new  business  opportunities  for  these 
SMEs  as  these  business  opportunities  very  much  depend  on  the  variations  in  the  level  of 
traffic. 

Impacts compared to the baseline 

Scenario 1 

Scenario 2 

Scenario 3 

Impact on SMEs 
*   Here and afterwards, comparison tables compare the relative impacts within a row but not the relative 

+ 

0 

++ 

importance of different rows. '+' indicates positive impacts, '-' negative impacts. 

6.3.  Indirect impacts on the transport sector 

Taken in isolation, the impact of this initiative will be rather limited at the transport sector and 
EU economy levels. However, with the development of the European Single Railway Area, it 
will contribute to fostering modal shift and the efficiency of the transport system (see below). 
It will also improve the environmental impact of the transport systems, but these impacts are 
minor  compared  to  the  impact  of  better  resource  efficiency  and  cleaner  energy  use  of  the 
transport systems, rail included. For example, the electrification of the rail network as well as 
the increased share of low-carbon electricity would have a much more pronounced impact on 

50 

 
 
 
 
 
the  environment.  However  the  increases  of  competition  and  activity  in  the  railway  sector 
under the different options will impact the European transport system as a whole. 

6.3.1.  Modal shift 

Under  the  baseline  scenario,  in  terms  of  modal  split,  the  various  modes  are  in  general 
expected  to  maintain  their  relative  importance  at  EU  level.  Road  is  expected  to  remain  the 
largest mode. Aviation is expected to continue to grow consolidating its position as the second 
most  important  passenger  mode  (in  terms  of  passenger*kilometres).  While  the  total  rail 
passenger  transport  volumes  should  continue  to  grow,  rails  modal  share  is  expected  to 
increase  only  modestly.  As  regards  freight,  total  transport  volumes  are  expected  to  grow  at 
rates comparable to the ones of road and maritime transport. Rail is expected to grow faster 
aided by an expected slower increase in fuel costs37. 

The  impact  on  modal  shift  is  likely  to  be  proportionate  to  the  impact  on  the  level  of 
competition  and  the  level  of  activity  in  the  railway  sector.  Increased  competition  under 
Scenarios  2  and  3  will  lower  the  cost  of  rail  and  will  make  the  sector  more  responsive  to 
customers'  needs,  allowing  railway  operators  to  compete  with  other  modes,  therefore 
increasing  modal  share  compared  to  the  Baseline  and  Scenario  1.  Passenger  high  speed 
services will improve the competitive situation with airlines and rail freight will increase its 
market share. 

Impacts compared to the baseline 

Scenario 1 

Scenario 2 

Scenario 3 

Modal shift 
*   Here and afterwards, comparison tables compare the relative impacts within a row but not the relative 

+ 

0/+ 

+ 

importance of different rows. '+' indicates positive impacts, '-' negative impacts. 

6.3.2.  Efficiency of the transport system (congestion and travel times) 

In the Baseline scenario, efficiency improvements will result from market opening initiatives, 
increased investments in infrastructure in line with the TEN-T Guidelines and the Connecting 
Europe  Facility,  favouring  intermodal  connections  and  reductions  of  missing  links  at  cross-
border sections and bottlenecks. 

The  expected  modal  shift  under  Scenarios  1,  2  and  3  would  have  an  increasingly  positive 
effect  on  congestion  levels  of  roads  and  is  likely  to  reduce  societal  costs  compared  to  the 
baseline. Additionally, the more favourable climate for public and private investments under 
Scenario  3  will  allow  investing  in  the  rail  infrastructure  to  reduce  bottlenecks  and  missing 
links, therefore improving the efficiency of the rail network. 

Impacts compared to the baseline 

Scenario 1 

Scenario 2 

Scenario 3 

Efficiency of the transport system (congestion 
and travel times) 

+ 

+ 

++ 

*   Here and afterwards, comparison tables compare the relative impacts within a row but not the relative 

importance of different rows. '+' indicates positive impacts, '-' negative impacts. 

37 

Impact Assessment accompanying the White Paper (SEC(2011)358) 

51 

 
 
 
                                                 
6.4.  Indirect impact on the European economy 

Studies by the World Bank on countries logistics performance show the correlation between 
economic  growth  and  freight  transport  logistics  effectiveness  and  efficiency.38 Therefore  as 
explained above, the improved conditions for competition and the improved efficiency of the 
railway system will affect economic growth. 

A  more  integrated  and  efficient  transport  system  enabling  the  free  movement  of  people  and 
goods across the EU and with its neighbours is expected to contribute to economic growth, as 
it  would  allow  for  a  more  efficient  use  of  resources.  The  EU  economy  should  also  benefit 
from  the  increase  in  the  capacity  and  performance  of  the  infrastructure  resulting  from  its 
improved management of the infrastructure. Additionally, the improvement of the efficiency 
of  the  transport  system  and  the  reduction  of  related  obstacles  would  improve  the  economic 
conditions  for  both  transport  businesses  and  enterprises  heavily  depending  on  transport  for 
their activity. 

Impacts compared to the baseline 

Scenario 1 

Scenario 2 

Scenario 3 

Impact on the European economy 
*   Here and afterwards, comparison tables compare the relative impacts within a row but not the relative 

+ 

+ 

+ 

importance of different rows. '+' indicates positive impacts, '-' negative impacts. 

6.5.  Environmental impacts 

6.5.1.  Impact on climate change 

According to the business-as-usual scenario of the Commission Communication "A Roadmap 
for  moving  to  a  competitive  low  carbon  economy  in  2050",  EU  transport's  GHG  emissions 
will  increase  by  60%  to  70%  in  2050  in  comparison  to  the  1990  levels.  In  addition,  a  50% 
reduction of emissions in other sectors compared to 1990 would increase transport's share in 
total emissions from 20% (current state) to 50% by 2050. 

Improved efficiency of the rail transport system and modal shift will reduce the greenhouse 
gases emissions. However, the level of impact of the policy scenarios will very much depend 
on the energy supply for trains (i.e. energy mix for electricity used by electric trains and share 
of trains running on diesel). 

Impacts compared to the baseline 

Scenario 1 

Scenario 2 

Scenario 3 

Impact on climate change 
*   Here and afterwards, comparison tables compare the relative impacts within a row but not the relative 

+ 

+ 

0/+ 

importance of different rows. '+' indicates positive impacts, '-' negative impacts. 

6.5.2.  Impact on pollution 

Air pollution levels, as defined by the Directive 2008/50/EC of the European Parliament and 
the  Council  on  ambient  air  quality  and  cleaner  air  for  Europe,  freight  transport  logistics 
effectiveness  and  efficiency  mostly  depend  on  the  vehicles'  (including  ship's)  pollutant 
emissions performance and road traffic congestion in urban areas. 

38 

World Bank Report—Connecting to Compete 2010 Trade Logistics in the Global Economy -The 
Logistical Performance Index and its Indicators 

52 

 
 
 
                                                 
Compared  to  the  baseline,  Scenarios  1,  2  and  3  would  increasingly  contribute  to  further 
reduction in emissions thanks to their positive impact on congestion reduction, as a result of 
induced modal shift. The level of the impact will partly depend on the extent to which cleaner 
rail transport is introduced, for example by fostering the replacement of diesel locomotives by 
electric  ones  (with  a  cleaner  electricity  mix).  Since  rail  transport  is  the  second  most  energy 
efficient mode, larger volumes of rail transport traffic flows should lead to a reduction of the 
overall energy and fuel consumption. 

Impacts compared to the baseline 

Scenario 1 

Scenario 2 

Scenario 3 

impact on pollution 
*   Here and afterwards, comparison tables compare the relative impacts within a row but not the relative 

+ 

+ 

0/+ 

importance of different rows. '+' indicates positive impacts, '-' negative impacts. 

6.5.3.  Impact on noise 
According  to  one  study, 39 road  generally  accounts  for  approximately  70%  of  total  noise 
emissions by transport, rail for 10% and air transport for 20%. The reference scenario of the 
Impact Assessment of the White Paper highlights that the forecasted increase in traffic would 
lead  to  roughly  €20bn  increase  of  noise  related  external  costs  by  2050.  All  scenarios  will 
stimulate  traffic  growth  and  therefore  have  a  negative  impact  on  noise  emission.  However 
such rail noise increase may be partly compensated by specific measures (such a track access 
modulation based on the noise performance of trains foreseen in the Recast, implementation 
of  new  interoperability  standards  as  well  as  noise  bans).  In  addition  benefits  should  accrue 
through modal shift from road to rail for freight transport, and from road and aviation to rail 
for passenger traffic as, in relative terms, road and air transport noise will decrease. 

Impacts compared to the baseline 

Scenario 1 

Scenario 2 

Scenario 3 

impact on rail noise 
*   Here and afterwards, comparison tables compare the relative impacts within a row but not the relative 

0/+ 

0/+ 

0/+ 

importance of different rows. '+' indicates positive impacts, '-' negative impacts. 

6.6.  Social impacts 

6.6.1.  Impact on employment levels and working conditions, including wages, in the 

railway sector 

As to the direct employment deriving from organisational changes, separation will reduce the 
economies  of  scope  of  carrying  out  the  infrastructure  and  operation  tasks  within  a  single 
organisation. Therefore, in the short term, it will imply that more people will be required to do 
complementary tasks in the IM and in railway undertakings. 

The  growth  of  railway  activity  stimulated  by  the  improved  governance  of  the  infrastructure 
will increase the demand for qualified rail workers in railway undertakings, operators of rail 
services  facilities  but  also  for  rolling  stock,  therefore  creating  new  jobs  in  railway 
manufacturing. Such positive impact will be partly mitigated by the productivity gains called 
by competitive pressure, resulting in lay-offs in some incumbent railway undertakings. 

Changes in the governance of the infrastructure will not impact directly working conditions. 
The continuous applicability of existing rail worker status to the whole rail sector is not linked 

39 

Noise Pollution Emitted by Transportation Systems, Dr. Jean-Paul Rodrigue 2009 

53 

 
 
 
                                                 
to the efficiency measures or the level of separation between IMs and incumbent. Wages are 
likely to evolve based on market conditions such as specialisation, skills or scarcity. Higher-
skilled  professions  (traffic  controllers,  train  drivers,  train  technicians)  are  most  likely  to 
experience an increase in wages. As a result of increasing competition, railway undertakings 
and  IMs  may  be  inclined  to  outsource  the  provision  of  specific  services  like  maintenance 
works  or  clerical  functions.  In  the  medium  term,  this  would  lead  to  some  job  losses  in  rail 
sector but to new business opportunities of other sectors. 

Lower costs of transport resulting from efficiency measures and increasing competition will 
have an induced impact on employment in the EU, as it will free resources to carry out other 
activities thus increasing the competitiveness of the EU and its production and employment. 

Impacts compared to the baseline 

Scenario 1 

Scenario 2 

Scenario 3 

impact on employment and working conditions 
in the railway sector 
*   Here and afterwards, comparison tables compare the relative impacts within a row but not the relative 

++ 

+ 

+ 

importance of different rows. '+' indicates positive impacts, '-' negative impacts. 

6.6.2.  Impact on transport safety: 

As rail is the safest transport mode, the potential increase of rail travel will result in overall 
safer transport. This impact could be important in specific regions, such as South-East Europe, 
where road traffic modal share is currently increasing and where fatalities are highest. 

Impacts compared to the baseline 

Scenario 1 

Scenario 2 

Scenario 3 

Impact on transport safety 
*   Here and afterwards, comparison tables compare the relative impacts within a row but not the relative 

0/+ 

0/+ 

0/+ 

importance of different rows. '+' indicates positive impacts, '-' negative impacts. 

6.7.  Summary of assessment of direct and induced impacts 

54 

 
 
 
 
Table 6  -  Assessment of direct impacts (as per Annex V) 
Impacts compared to the 
Baseline 

Scenario 1 (only 
efficiency measures) 

Enforcement costs (one off) 

0/– 

Limited costs related to 
establishment of 
coordination bodies in 
many MSs and unifying 
IM functions in some MS. 

Transaction costs 

+ 

Regulatory costs 

Other costs and benefits, 
linked to: 

Discrimination 

Cross-subsidisation 

Some improvement due 
to better coordination. 
Impacts to all MSs. 

0 
It is not expected the 
costs of regulatory 
enforcement under 
Scenario 1 to be 
materially lower than 
those arising in the 
Baseline. 

0 
No impact 

0 

No impact 

Efficiency 

+ 

Scenario 2 (efficiency 
and enforcement of 
separation) 
– – 
Potential scale of costs 
€0.17 billion 

Related to the costs of 
internal reorganisation 
necessary to put in place 
"Chinese walls". 
Impacts the MSs having 
integrated or holding 
structures. 

– 
Potential cost range €0.05 
bn and €0.16 bn per 
annum 
At least 0.15% of 
operating costs. 
Impacts the MSs having 
integrated or holding 
structures. 

0 
It is not expected the 
costs of regulatory 
enforcement under 
Scenario 2 to be materially 
lower than those arising in 
the Baseline. 

Scenario 3 (efficiency 
and institutional 
separation) 
–  
Potential scale of cost 
€0.24 billion – 

~0.9% of yearly 
operating costs.  
Impacts the MSs having 
integrated or holding 
structures. 

– – 
Potential cost range 
€0.05 bn and €0.16 bn 
per annum 
~0.3% of operating 
costs. 
Impacts the MSs having 
integrated or holding 
structures. 

+ 
Regulatory costs per 
train-kilometre could 
decline by up to 75% as 
a result of institutional 
separation. 
Impacts the MSs having 
integrated or holding 
structures. 

0/+ 
The scope of oversight of 
regulatory bodies is 
extended, but remains 
mostly reactive thus only 
partly evading 
discrimination related 
opportunity costs. 
0/+ 

Transparency issues and 
cross-subsidisation risks 
remain inherent in 
integrated and holding 
structures even if account 
separation requirements 
are in place. 
+ 

++ 
Full institutional 
separation would 
eliminate opportunity 
and motivation for 
discrimination. 

++ 

Full institutional 
separation would provide 
necessary transparency 
and eliminate 
opportunity for cross-
subsidisation. 

++ 

Increasing competitive pressure and specialisation of the market players will have 
an additional positive effect on their productivity and efficiency. At the same time, 
as further explained under Annex V, there are risks of loss of synergies and 
economies of scope which can appear in cases of separation between IMs and a 
dominant RU. However, this is inherent in order to ensure a level playing field for 
all operators. These risks will be mitigated by the enhanced coordination between 
IMs and infrastructure users as well as full implementation of the financial 
incentives foreseen by the Recast (modulation of charges, incentive scheme and 
performance regime). Such measures will ensure adequate alignment of strategies 
and investments leading essentially to long term efficiency gains. 

55 

 
 
 
 
 
 
 
 
 
 
 
 
 
In  terms  of  scale,  the  implementation,  transaction  and  regulatory  costs  are  relatively  less 
significant  than  costs  linked  to  discrimination  and  lack  of  financial  transparency. 
Misalignment  costs  could also  be significant. However, increasing  competitive pressure and 
specialisation of the market players will have an additional positive effect on productivity and 
efficiency. In these terms Scenario 3 seems to be the preferred way forward. 

Table 7 – Assessment of induced and indirect impacts  

Impacts compared to the baseline 

Scenario 1 

Scenario 2 

Scenario 3 

Economic impacts 

- Impact on railway business 

Level of competition 

Level of activity of railway operators 

Level of investment 

Level of service quality and punctuality 
Level of rail safety 
Impact on SMEs 
- Impact on the transport sector 
Modal shift 

Efficiency of the transport system (congestion 
and travel times) 

- Impact on the European economy 

Environmental impacts 
Climate change 
Pollution 
Rail noise 
Social impacts 
Employment and working conditions in the 
railway sector 
Transport safety 

+ 

+ 

+ 
0/+ 
0 

0 

0/+ 

+ 

+ 

0/+ 
0/+ 
0/+ 

+ 

0/+ 

++ 
++ 
++ 
+ 

0 

+ 

+ 

+ 

+ 

+ 

+ 
0/+ 

+ 

0/+ 

+++ 
+++ 
++ 
++ 

0 

++ 

+ 

++ 

+ 

+ 

+ 
0/+ 

++ 

0/+ 

Comparison of induced and indirect impacts confirms that Scenario 3 should be the preferred 
way forward as it performs in the same manner (in relation to investment, safety, modal shift, 
European  economy,  environmental  impacts  and  transport  safety)  or  better  (competition,  rail 
activity, service quality, SMEs, transport efficiency, employment) than any other Scenario. 

6.8.  Synergies between the IM governance and domestic passenger market opening 

initiatives 

The  ultimate  goal  of  separation  is  to  create  a  more  competitive  and  efficient  rail  sector  and 
thus  encourage  a  better  service  offer,  while  improving  the  use  of  public  funds  fed  via 
subsidises  into  railways.  The  institutional  separation  envisaged  under  Scenario  3  is  an 
important  precursor  to  the  delivery  of  the  full  benefits  of  market  opening,  as  already 
implemented  for  rail  freight  market  and  international  passenger  rail  market  and  further 
proposed  by  the  4th  Railway  package  for  domestic  passenger  market.  This  can  be 

56 

 
 
 
 
 
 
 
 
 
 
demonstrated by comparing the estimated outcomes of a specific form of market opening with 
and without separation, which has been developed by the IA support study40. 

The projections were carried out by the consultant in cooperation with the Commission. There 
are high uncertainties linked to calculations of aggregated impacts, because of (1) limited 
empirical evidence, (2) any effects are dependent on baseline situations in Member States and 
(3) other principal uncertainties in the baseline developments and exogenous factors. 
Therefore  the  quantification  results  were  not  used  for  comparison  of  options.  However, 
scenario  analysis  accompanied  with  sensitivity  tests,  as  presented  below,  should  give  a 
relatively  sound  idea  of  potential  outcomes  of  the  proposed  policy  in  different  situations, 
based on the most credible information available as of the date. Assumptions are provided in 
Annex V of this IA, for detailed information on the assessment methodology see Annex 8 of 
the IA on Access to Domestic Passenger Rail Markets41. 

Table 8 below summarises the financial benefits for: 

• 

• 

the separation initiative only (column 1) 

the domestic passenger market opening only for two scenarios: 

─ 

  Market  opening  Scenario  1  -  Focus  on  savings  (column  2)  -  In  this 
scenario  it  is  assumed  that  competent  authorities  would  focus  on  cost 
savings,  taking  all  the  reductions  in  PSC  tender  costs  as  cash  savings  and 
not reinvesting any of these in higher rail quality or capacity. 

─    Market opening Scenario 2 - Reinvestment (column 3)- In this scenario it 
is  assumed  that  competent  authorities  would  not  focus  on  cost  savings  but 
would  instead  implicitly  “reinvest”  half  the  potential  reductions  in  PSC 
tender  costs  by  specifying  higher  quality  or  capacity  in  PSCs.  In  terms  of 
monetary impacts this implies reduction in NPV, while the benefits appear 
in terms of increase in passenger km-s. 

•  combined impacts of both initiatives separating two different outcome scenarios: 

─  Combined impacts Scenario 1 – Focus on savings (column 4) 

─  Combined impacts Scenario 2 – Focus on reinvestments (column 5) 

40 
41 

SDG support study. 
C.f. also Appendix I 'Impact assessment' of the IA support study by SDG 

57 

 
 
 
 
                                                 
Table 8  Combined impacts of market opening and infrastructure governance 

policies – Summary of core financial estimates 

All changes are illustrative estimates 
NPVs (bil €) to 2035, discounted at 4% 
to 2019 

Transaction costs (mean estimate) 

Domestic service benefits* 

International service benefits 

Freight benefits 

Total NPV 

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1 

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4 

-1.37

5.86

1.07

1.00

-0.42

29.85

-0.42 

-1.77 

21.46 

43.07 

1.05 

1.00 

5 

-1.77 

33.71 

0.89 

1.00 

6.56

29.44

21.04 

43.35 

33.83

Table 9 below presents a wider range of indicators for individual and combined policies. 

Table 9  Combined impacts of market opening and infrastructure governance 
policies - Range of expected outcomes (in euros per annum) 

All changes are illustrative 
estimates 

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Scenario 1 –Focus on saving 

Vertical separation42 

6.56 

Domestic passenger market opening 

29.44 

Combination of market opening and 
vertical separation 

43.35 

Scenario 2 – Reinvestment 

0.1 

0.3 

0.5 

0.01 

0.03 

0.8 

2 

0.1 

3.8 

0.5% 

3.8% 

6.4% 

Vertical separation alone 

4.42 

Domestic passenger market opening 

21.04 

0.1 

0.9 

0.01 

0.13 

1.1 

8.4 

0.5% 

3.7% 

Combination of market opening and 
vertical separation 

33.83 

1.7 

0.2 

16.4 

6.2% 

*  NPVs to 2035, discounted at 4% to 2019, the benefits encompass mainly savings for 

competent authorities, but also profits of operators. 

The result for both scenarios demonstrates the existence of significant synergies between the 
separation and market access measures as proposed in the 4th package. 16 billion passenger-

42 

As foreseen by Scenario 3 of IA Governance IA. 

58 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
km potentially made available by implementing market opening and separation polices, while 
re-investing  half  of  efficiency  savings  back  to  railways,  would  result  in  6%  increase  of 
passenger-km on top of the baseline developments. In addition a more level playing field in 
access to infrastructure, as provided by vertical separation measures, would enable to increase 
the market share of new entrants from 19% in the baseline to 25%. 

Further  value  will  be  achieved  by  quicker  time  and  cost  to  market  for  rail  undertakings,  as 
provided by the revised scope of the European Railway Agency, also being the part of the 4th 
Package. 

7.  COMPARISON OF POLICY SCENARIOS 
See table 10 below.

59 

 
 
Table 10 Comparison of Policy Scenarios 

Effectiveness  

Efficiency 

Coherence 

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Scenario 0 
Scenario 1 

0 
++ 

0 
+/0 

0 
+ 

0 
0/- 

0 
0 

0 
+ 

0 
+ 

0 
0/+ 

Scenario 2 

++ 

++ 

++ 

-- 

0 

- 

+ 

+ 

Scenario 3 

++ 

+++ 

++ 

- 

+ 

-- 

++ 

+ 

Motivation 

Scenario 1 is expected to already have a substantial positive impact on IM 
efficiency. However, in terms of reduction of conflicts of interest, it will have 
only  a  limited  resulting  from  the  extension  of  the  existing  independence 
requirement  to  all  IM  functions.  While  existing  transaction  costs  are 
impacted in a positive but limited manner by better alignment between IM 
and  RUs,  regulatory  costs  and  enforcement  costs  increased  moderately  as 
efficiency  measures  imply  a  limited  administrative  burden.  Social  and 
environmental impacts are moderate but positive.  
Scenario  2  will  have  the  same  positive  impact  than  Scenario  1  on  the  IM 
ability  to  manage  the  infrastructure.  However  its  operational  efficiency  will 
improve  further  with  increasing  competitive  pressure  on  RUs.  Scenario  2 
removes  conflicts  of  interest  in  infrastructure  access  but  does  not  ensure 
optimal financial transparency and the absence of distortion of competition. 
Transaction  costs  increase  with  the  number  of  new  entrants  and  traffic 
growth. Both enforcement and regulatory costs are higher due respectively 
to  the  implementation  of  "Chinese  walls"  and  the  absence  of  financial 
transparency. Social and environmental impacts are moderate but positive. 
Scenario  3  improves  further  the  IM  ability  to  manage  the  infrastructure 
thanks  to  the  specialisation  benefits  on  institutional  separation.  With  full 
financial  transparency,  it  eliminates  completely  risks  of  distortion  of 
competition at a relatively low enforcement and regulatory cost. Transaction 
costs  increase  further  despite  the  mitigating  effect  of  better  alignment 
between  IMs  and  RUs.  Traffic  growth  and  efficiency  generate  the  highest 
positive social and environmental impacts.  

*   Here and afterwards, comparison tables compare the relative impacts within a row but not the relative importance of different rows. '+' indicates positive impacts, '-' 

negative impacts.

60 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Considering this comparison of the three policy scenarios, it appears that Scenario 1 can be 
discarded.  While  it  has  a  significant  impact  on  IM  efficiency  and  positive  influence  on 
transaction costs, it does not provide an effective answer to the second challenge in terms of 
equal access. Scenarios 2 and 3 have different advantages and disadvantages which have been 
highlighted  by  stakeholders.  Both  perform  well  in  relation  to  the  IM  ability  to  optimise 
infrastructure  management  (as  they  include  the  efficiency  measures  of  Scenario  1)  and  to 
remove  risks  of  discriminatory  practices.  However  Scenario  3  is  considered  as  the  most 
effective  and  efficient  to  eliminate  distortions  of  competition,  as,  contrary  to  Scenario  2,  it 
ensures  financial  transparency  and  reduces  the  cost  of  regulation  with  limited  enforcement 
costs.  Despite  the  fact  that  Scenario  3  implies  higher  transaction  costs,  this  option  must  be 
retained as such costs deriving from market entries and traffic growth will be outweighed by 
their benefits. 

8.  MONITORING AND EVALUATION  
The Commission will monitor and evaluate the implementation of the specific objectives of 
this legislation and its impacts through a set of indicators. In order for these indicators to be 
consistent throughout EU legislation and not to increase the burden on bodies responsible for 
providing the data to compile the indicators, these indicators are aligned with those provided 
to the Commission as part of the implementation of existing EU law: enhanced Rail Market 
Monitoring  Scheme  (RMMS)  and  network  of  regulatory  bodies  under  the  Recast  as  well  as 
European Railway Agency (ERA) reporting on safety and interoperability. 

Specific objectives 

Indicators 

EFFICIENCY CHALLENGE 

Improve 

to  manage 
SO1: 
efficiently  the  infrastructure  to  the  benefit  of  the 
users 

IM  ability 

the 

EQUAL ACCESS CHALLENGE 

SO2:  Eliminate 
and 
distortions of competition in infrastructure access 

conflict  of 

interest 

Infrastructure utilisation rate/Trafic Volumes 

Number of new entrants 

Market share of new entrants 

Complaints to regulators 

8.2.  Monitoring and evaluation arrangements 

Information is already available by way of the existing rail market monitoring scheme which 
involves  all  relevant  stakeholders  (representatives  of  the  Member  States,  including 
representatives  of  the  regulatory  bodies,  representatives  of  railways  sector,  including,  social 
partners, users and local and regional authorities representatives and, where appropriate, the 
European Railway Agency). 

The  Recast  already  foresees  enhancing  such  market  monitoring  in  relation  to  the  use  of  the 
networks  and  the  evolution  of  framework  conditions  in  the  rail  sector,  in  particular 
infrastructure  charging,  capacity  allocation,  investments  made  in  railway  infrastructure, 
developments as regards prices and the quality of rail transport services, rail transport services 
covered  by  public  service  contracts,  licensing  and  the  degree  of  market  opening  and 
harmonisation  between  Member  States,  development  of  employment  and  the  related  social 

61 

 
 
 
 
conditions in the rail sector. The Commission will continue to collect data and to report every 
two years to the European Parliament and the Council on the following elements: 

(a)  the evolution of the internal market in rail services and services to be supplied to railway 

undertakings; 

(b)  the  framework  conditions  mentioned  above,  including  for  public  passenger  transport 

services by rail; 

(c)  the state of the Union railway network; 

(d)  the utilisation of access rights; 

(e)  barriers to more effective rail services; 

(f)  infrastructure limitations; 

(g)  the need for legislation. 

In addition the Recast will create a Network of Regulatory Bodies, with a coordination role 
attributed  to  the  Commission  in  this  Network,  which  will  exchange  information  about 
regulatory  bodies'  activities  (decisions  but  also  on-going  complaints  and  investigations). 
Finally  Regulation  (EC)  881/2004  (so-called  ERA  Regulation)  foresees  that  the  European 
Railway Agency reports on a regular basis on safety and interoperability issues. 

The potential indicators mentioned in the above table are addressed by these monitoring and 
reporting activities already in place under EU law. In this context, it is considered that there is 
no need to create any new arrangement and obligation. 

62 

 
 
 
 
 
 
ANNEX I 

THE FOURTH RAILWAY PACKAGE – THE 'BIG PICTURE' 

Caveat:  The  content  of  this  Annex  will  be  further  refined  and  updated  as  the  policy 
preparation processes for the different initiatives within the Fourth Package progress 

1. 

INTRODUCTION 

In its White Paper "Roadmap to a Single European Transport Area - Towards a competitive 
and resource efficient transport system" adopted on 28 March 2011 ('2011 White Paper'), the 
Commission unveiled its vision to establish a genuine Single European Transport Area and it 
clarified that this objective implies creating the true Single European railway Area. A crucial 
condition  to  meet  this  goal  is  the  removal  of  all  obstacles  of  administrative,  technical  or 
regulatory nature still holding back the rail sector. As announced in the 2011 White Paper, the 
Commission  has  prepared  a  set  of  proposals,  to  be  adopted  sequentially  within  the  Fourth 
Railway Package. 

Additionally, the European Council conclusions of January 2012 highlight the importance of 
releasing  the  growth-creating  potential  of  a  fully  integrated  Single  Market,  including  as 
regards network industries.43 More precisely, the Commission Communication on Action for 
Stability,  Growth  and  Jobs  adopted  on  30  May  201244 stresses  the  importance  of  reducing 
further the regulatory burden and barriers to entry in the rail sector, making therefore country 
specific recommendations in that direction. In the same vein, the Commission adopted on 6 
June 2012 the Communication on strengthening the governance of the single market, which 
stresses the importance of the transport sector with a special attention to rail.45 

This Annex gives a brief background of the development of EU railway acquis and clarifies 
the necessity and objectives of the Fourth Railway Package within this context. It presents all 
the  elements  included  in  the  Package  (a  chapeau  communication  and  seven  legislative 
proposals  accompanied  by  three  impact  assessments)  and  explains  how  different  pieces  fit 
together.46 

2. 

DEVELOPMENT OF EU RAILWAYS ACQUIS 

In  the  past  decade,  the  European  legislator  has  considerably  developed  the  EU  acquis 
encouraging competitiveness and market opening. The overarching idea has been that greater 
competition makes for a more efficient and customer-responsive industry. In parallel measures 
have  been  taken  to  improve  the  interoperability  and  safety  of  national  networks;  and 
encourage  the  development  of  well  integrated  rail  system  leading  to  'European',  rather  than 
'national', railways. 

Rail  legislation  in  the  early  nineties  introduced  some  limited  degree  of  market  opening  and 
prompted  the  railways  to  improve  efficiency  by  introducing  management  independence  of 

43  
44  
45  
46 

http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/127599.pdf 
COM (2012) 299 final. 
COM(2012) 259 final 
The intention is to add this (identical) background Annex to each of the 3 rail package IAs. 

63 

 
 
 
                                                 
railway  undertakings  from  the  state  and  separation  of  accounts  between  infrastructure 
management  and  transport  operations.  Since  2000,  however,  the  European  Commission  has 
put forward further initiatives in the shape of packages of legislative measures. 

The First Railway Package, adopted in 2001, was designed to: 

• 
• 

• 

• 

open the international rail freight market, 
establish a general framework for the development of European railways, and clarify the 
relationship between (a) the state and the infrastructure manager; (b) the state and railway 
undertakings  and  (c)  the  infrastructure  manager  and  railway  undertakings  (Directive 
2001/12/EC); 
set out the conditions that freight operators must meet in order to be granted a licence to 
operate services on the European rail network (Directive 2001/13/EC); and 
define policy for capacity allocation and infrastructure charging (Directive 2001/14/EC). 

The Second Railway Package was adopted in 2004. Its aim was to determine: 

• 
• 

• 

• 

a common approach to rail safety (Directive 2004/49/EC) 
requirements  for  interoperability  of  the  European  high  speed  and  conventional  rail 
systems (Directive 2004/50/EC) 
the  opening  of  national  and  international  rail  freight  markets  on  the  entire  European 
network (Directive 2004/51/EC) 
the establishment of the European Railway Agency (Regulation (EC) 881/2004, amended 
by Regulation 1335/2008). 

The  Third  Railway  Package  was  adopted  in  2007,  to  open  up  international  passenger 
services to competition. The objective of the package was: 

• 

• 

• 

opening  the  market  for  international  passenger  services  to  competition  (Directive 
2007/58/EC) 
setting  the  conditions  and  procedures  for  the  certification  of  train  crews  operating 
locomotives and trains (Directive 2007/59/EC); and 
ensuring  basic  rights  for  rail  passengers  (Regulation  1371/2007),  for  example,  with 
regard to insurance, ticketing, and for passengers with reduced mobility. 

The  Recast  of  the  First  Railway  Package  was  proposed  by  the  Commission  in  2010. 
Following a final vote of approval in the European Parliament on 3 July 2012, the new EU 
rules should come into force by the end of 2012. The recast aims to simplify and consolidate 
the rules by merging three directives and their amendments into a single text. Importantly, the 
Recast also seeks to clarify existing provisions and tackle key problem areas which have been 
identified  in  the  market  over  the  last  ten  years.  In  particular,  the  new  legislation  will 
strengthen the power of national regulators, improve the framework for investment in rail, and 
ensure fairer access to rail infrastructure and rail related services. 

3. 

DEVELOPMENTS IN EU RAIL MARKET 

Despite the considerable development of the EU acquis and rail markets, the modal share of 
passenger rail in intra-EU transport has in average remained more or less constant since 2000, 
at around 6%. The latest Euro-barometer survey suggests that only 6% of Europeans uses the 

64 

 
train  at  least  once  per  week.47 It  should  be  noted  that  there  are  marked  differences  between 
Member States, but in overall rail loses out in terms of modal share compared to other modes, 
reflecting a (real or perceived) low level of efficiency, service levels and quality compared to 
other transport modes. In the Consumer Scoreboard 201148, train services score worst of all 
transport services and four in ten consumers consider the choices in that service category to be 
inadequate. 

Improvements will be necessary in all rail segments 

As demonstrated by the EVERIS study49, to improve the overall modal split in favour of rail, 
improvement will be necessary in all rail segments, including conventional long-distance and 
urban train services. 

The 6% modal share for rail in the EU has remained fairly stable in spite of the impressive 
development of high-speed train networks. The latter have managed to gain some markets at 
the  expense  of  air  transport  services,  but  at  the  same  time  air  transport  has  maintained 
important flows of passenger traffic on routes competing with rail50. 

Since the mid-nineties, local and regional passenger train services in most Member States 
that did not open up their market have fallen in a downward spiral of continuous operational 
losses and subsequent reduced service offer. This decline has been exacerbated in the EU12 
Member  States  by  the  decay  of  old  infrastructure  and  rolling  stock  on  the  one  hand,  and 
wealth driven high-growth of car ownership, on the other hand. 

Although  commuter  transport  around  urban  agglomerations  experiences  growth  in  some 
Member  States,  cars  still  secure  an  important  share  of  urban  transport  –  59%  of  Europeans 
never use suburban trains. This situation contrasts with the 75% urbanisation rate of the EU27 
and  therefore  indicates  a  huge  market  development  potential  for  suburban  and  regional 
passenger rail transport, especially given the raising congestions on roads. 

The  rail  freight  markets  within  the  EU  have  been  opened  for  a  number  of  years,  and  the 
industry’s stagnation cannot therefore be simply explained by the existence of legal barriers of 
the kind that continue to restrict competition in domestic passenger services. The problem to 
be addressed therefore also needs to be defined in terms of technical, physical capacity and 
institutional barriers, which have frustrated action to open markets taken at the EU level. 

4. 

WHAT ARE THE PROBLEMS NECESSITATING ANOTHER RAIL PACKAGE? 

According to available studies, the modest development of the rail sector, as explained above, 
can  be  attributed  to  the  presence  of  several  administrative,  technical,  institutional  and  legal 
obstacles, which still hamper market access and operational efficiency of service providers. 

47  
48 
49 

50 

http://ec.europa.eu/public_opinion/flash/fl_326_en.pdf 
http://ec.europa.eu/consumers/consumer_research/cms_en.htm 
http://ec.europa.eu/transport/rail/studies/doc/2010_09_09_study_on_regulatory_options_on_furt 
her_market_opening_in_rail_passenger_transport.pdf 
27 out of the 40 largest intra-EU air routes in the EU were within the reach of competing long-
distance (high-speed) railway services and yet attracted some 50 million passengers a year - i.e. as 
much as the 4th largest EU airport, Madrid-Barajas. 

65 

 
                                                 
Domestic passenger market opening 

Whereas markets for rail freight services have been fully opened to competition since January 
2007 51  and  those  for  international  passenger  transport  services  as  of  1  January  2010 52 , 
national domestic passenger markets remain largely closed53. However, by removing the legal 
barrier by allowing open access to infrastructure for domestic passenger services, would have 
rather limited effects  given  that  major  part of the domestic rail market is covered by public 
service contracts (PSC). The rules on the provision of transport services under public service 
obligations  (PSO)  are  laid  down  in  Regulation  1370/200754 which  gives  the  possibility  to 
competent  authorities  to  exclude  rail  transport  services  from  the  obligation  to  award  PSCs 
through an open tendering procedure. This means that most local and regional services, and 
certain  long-distance  services,  are  operated  under  PSO  and  attributed  to  operators  through 
direct  award.  In  addition,  the  actual  impact  of  market  opening  depends  on  the  specific 
requirements  imposed  for  and  within  PSCs,  making  the  call  either  attractive  or  disguisedly 
non-attractive  for  new  entrants  in  tendering  procedures  (e.g.  with  the  aim  to  protect  the 
incumbent railway undertaking). 

Infrastructure governance 

The  First  Railway  Package  established  a  distinction  between  infrastructure  managers  (IM), 
who run the network, and railway undertakings (RUs), that use it for transporting passengers 
or goods. The legislation requires that infrastructure charging and  capacity allocation, being 
key factors in opening up the market, must be performed independently of the incumbent RU 
so  as  to  ensure  fair  and  non-discriminatory  access  of  all  operators  to  infrastructure. 
Independence of essential functions of infrastructure management has to be ensured in legal, 
organisational  and  decision-making  terms  as  to  allow  for  all  railway  undertakings  an  equal 
access  to  infrastructure  and  related  services.  Member  States  must  also  have  independent 
regulatory  bodies  in  place  to  monitor  railway  markets  and  to  act  as  an  appeal  body  for  rail 
companies if they believe they have been unfairly treated. 

There  are,  however,  problems  with  the  transposition  and  enforcement  of  these  requirements 
and  the  Commission  has  initiated  several  infringement  procedures,  on  which  it  expects  the 
Court of Justice of the EU to express its view by the spring 2013. The interactions between 
railway  undertakings  and  infrastructure  managers,  where  these  independence  rules  have  not 
been  implemented,  have  created  conflicts  of  interest  still  resulting  in  access  barriers  and 
market distortions at the expense of new entrants, such as access denials to infrastructure and 
discriminatory charges. 

However,  even  where  the  existing  legislation  has  been  respected,  there  remain  certain 
problems  related  to  the  use  of  infrastructure  and  related  services.  Partially  these  issues  are 
expected to be solved through the more precise provisions provided in the Recast of the First 
Package, especially through the strengthened role  of rail regulators.  However, certain issues 
appear to require further legislative intervention. For instance, according to the structure and 
economics  of  the  railway  sector,  it  could  be  necessary  for  the  purpose  of  efficient 
infrastructure management to keep certain IM functions together, rather than allowing them to 

51 
52 
53 

54 

Directive 2004/51/EC, amending Council Directive 91/440/EEC. 
Council Directive 91/440/EEC, as amended inter alia by Directive 2007/58/EC. 
Some Member States, such as United Kingdom, Germany, Sweden or Italy, have unilaterally 
opened their domestic markets. 
Regulation (EC) No 1370/2007 of the European Parliament and of the Council of 23 October 2007 
on public passenger transport services by rail and by road and repealing Council Regulations (EEC) 
Nos 1191/69 and 1107/70 

66 

 
                                                 
be performed by separate (though independent) bodies (e.g. it could be useful to couple traffic 
management  with  planning  of  maintenance  works).  Furthermore,  today  the  independence 
requirements  apply  only  to  the  essential  functions  (infrastructure  charging  and  capacity 
allocation),  but  it  might  be  necessary  to  extend  these  requirements  also  to  certain  other 
activities  of  the  IM  crucial  for  competition,  such  as  infrastructure  investments  planning, 
financing  and  maintenance.  The  optimal  governance  structure  has  also  led  to  reflections  on 
the  degree  of  institutional  separation  between  infrastructure  management  and  service 
provision. 

Interoperability and safety 

Specific  EU  legislation  exists  to  promote  interoperability  in  order  to  overcome  national 
historic  differences  in  the  field  of  technical  specifications  for  infrastructure  (gauge  widths, 
electrification  standards  and  safety  and  signalling  systems55).  EU  legislation  also  sets  the 
framework for a harmonised approach to rail safety in the EU56. Furthermore, it obliges the 
Member  States  to  set  up  the  system  of  national  authorities,  consisting  of  national  safety 
authorities, notified bodies, national investigation bodies and regulatory bodies. 

The European Railway Agency (ERA)57, established by the Second Railway Package, plays a 
central  role  in  promoting  interoperability,  harmonising  technical  standards,  and  developing 
common  approach  to  safety,  all  requiring  close  interaction  with  the  Member  States  and  rail 
sector stakeholders. 

While the level of safety on EU railways has gradually increased, and therefore safety levels 
as such are not an issue, stakeholders have drawn the Commission's attention to the fact that 
certain  technical  and  administrative  hurdles  still  persist,  creating  excessive  administrative 
costs  and  market  access  barriers,  especially  for  new  entrants.  This  suggests  that  the  highly 
decentralised  system  of  railway  authorities  in  place  may  not  have  fully  coped  with  the 
European dimension of the rail services. Firstly, existence of largely non-transparent national 
technical and safety rules, which overlap and/or are in conflict with the EU legislation, creates 
unnecessary  complexities  for  RUs.  Secondly,  there  are  marked  discrepancies  in  how  the 
national  safety  authorities  (NSAs)  conduct  vehicle  authorisation  and  safety  certifications 
processes, some NSAs being less efficient and effective than others. This has led to reflections 
on how to further enhance the role of the ERA in the integration processes. 

5. 

RATIONALE OF THE FOURTH RAILWAY PACKAGE 

The main objective of the Fourth Railway Package is to enhance the quality and efficiency of 
rail services by removing remaining legal, institutional and technical obstacles, fostering the 
performance of the railway sector and its competitiveness. As announced by the 2011 White 
Paper, these issues will be addressed by the different initiatives in three main domains: 

−  Domestic  passenger  market  opening  –  opening  domestic  rail  passenger  market  to 

competition, including open access lines as well as the routes under PSOs; 

55  

56  

57 

Directive 2008/57/EC of the European Parliament and of the Council of 17 June 2008 on the 
interoperability of the rail system within the Community (Recast) 
Directive 2004/49/EC of the European Parliament and of the Council of 29 April 2004on safety on 
the Community's railways (Railway Safety Directive). 
Regulation (EC) No 1335/2008 of the European Parliament and of the Council of 16 December 
2008 amending Regulation (EC) No 881/2004 establishing a European Railway Agency (Agency 
Regulation) 

67 

 
                                                 
− 

− 

Infrastructure  governance  -  ensuring  that  the  infrastructure  manager  performs  a 
consistent  set  of  functions  that  optimises  the  use  of  infrastructure  capacity,  and  its 
organisation  guarantees  non-discriminatory  access  to  the  infrastructure  and  rail  related 
services. 

Interoperability and safety - removing remaining administrative and technical barriers, 
in  particular  by  establishing  a  common  approach  to  safety  and  interoperability  rules  to 
decrease administrative costs, to accelerate procedures, to increase economies of scale for 
RUs and to avoid disguised discrimination. 

What about infrastructure? 

Obviously, to contribute to the growth of the modal share of rail, new rail infrastructures need 
to  be  built  across  Europe.  The  2011  White  Paper  calls  for  completing  the  European  high-
speed  rail  network  by  2050,  so  that  it  would  be  fully  connected  to  airports  enabling  the 
majority of medium-distance passenger transport to be performed by rail. Future EU strategy 
for  infrastructure  development  has  been  already  set  out  in  the  Commission  proposals  for 
Connecting  Europe  Facility58 and  the  new  TEN-T  Guidelines59 and  therefore  remains  out  of 
the scope of the Fourth Package. 

6. 

CONTENT OF THE FOURTH RAILWAY PACKAGE 

The package consists of following elements in the three domains: 

Domestic passenger market opening: amendments to: 

–  Council  Directive  91/440/EEC  on  the  development  of  the  Community's  railways/the 

Recast of the first railway package 

–  Regulation  (EC)  No  1370/2007  of  the  European  Parliament  and  of  the  Council  of 

23 October 2007 on public passenger transport services by rail and by road 

The initiatives will be accompanied by the Access to Domestic Passenger Rail Markets. 

Infrastructure governance: amendments to: 

–  Council  Directive  91/440/EEC  on  the  development  of  the  Community’s  railways  as 
amended  and  Directive  2001/14/EC  on  the  allocation  of  railway  infrastructure  capacity 
and  the  levying  of  charges  for  the  use  of  railway  infrastructure/the  Recast  of  the  first 
railway package 

The initiatives will be accompanied by the IA on the Governance of Railway Infrastructure in 
the Single European Railway Area. 

Interoperability and safety: amendments to: 

–  Directive 2004/49/EC of the European Parliament and of the Council of 29 April 2004 on 

safety on the Community's railways 

58 

59 

Proposal for a Regulation of the European Parliament and of the Council establishing the 
Connecting Europe Facility, COM(2011) 665 final – 2011/0302 (COD) 
Proposal for a Regulation of the European Parliament and of the Council on union guidelines for 
the development of the Trans-European Transport network, COM/2011/0650 final/2 - 2011/0294 
(COD). 

68 

 
                                                 
–  Directive 2008/57/EC of the European Parliament and of the Council of 17 June 2008 on 

the interoperability of the rail system within the Community 

–  Regulation (EC) No 881/2004 of the European Parliament and of the Council of 29 April 

2004 establishing a European Railway Agency 

The  initiatives  will  be  accompanied  by  the  IA  on  improving  interoperability  of  the  Single 
European Railway Area. 

In addition the Fourth Package contains: 

– 

– 

a chapeau Communication, providing overall context and justifications for the package of 
proposals; 

an  ancillary  initiative  repealing  Regulation  (EEC) 1192/69  on  common  rules  for  the 
normalisation of the accounts of railway undertakings, which has become obsolete and is 
inconsistent with EU law in force today. 

7. 

OBJECTIVES OF THE FOURTH RAILWAY PACKAGE 

The  analysis  conducted  by  the  Commission  shows,  that  the  operational  inefficiencies  and 
quality  issues  of  rail  services  are  mainly  caused  by  low  degree  of  competition,  remaining 
market distortions and suboptimal structure of EU rail market. Underlying reasons – long and 
costly  procedures,  access  barriers  for  new  entrants  and  different  market  access  rules  in 
Member States – will be addressed from different angles by all the Fourth Package initiatives. 

Given that, the initiatives in the Fourth Package are complementary, they all contribute to the 
same general objective of improving the competitiveness of rail sector vis-à-vis other modes. 
In  addition,  some  specific  objectives  are  also  similar  of  the  initiatives,  e.g.  facilitating 
entrance  of  new  operators  into  the  market.  The  operational  objectives  are  unique  for  each 
domain of action. The table below demonstrates how the different elements fit together. 

Figure I-2: Summary table of the objectives of the Fourth Railway package initiatives. 

Domestic passenger 
market opening 

Infrastructure 
governance 

Interoperability and 
safety 

General 
objective 

Improve the quality of rail 
passenger services and enhance 
its operational efficiency … 

Strengthen further the 
governance of railway 
infrastructure 

Eliminate existing 
administrative and technical 
barriers … 

… thereby enhancing the competitiveness of rail sector vis-à-vis other modes and developing 
further the Single European Rail Area. 

SO1: 

Intensify competitive 

pressure on domestic rail 
markets 

SO2:  Create more uniform 
business conditions 

SO3:   Better value for public 
money spent on public transport 
services 

SO1: 

Improve the IM ability 

to manage efficiently the 
infrastructure to the benefit of 
the users 

SO1: 
Facilitate entrance 
of new operators into market

SO2:  Eliminate conflict of 
interest and discrimination in 
decisions and operations of the 
IMs 

SO2:  Reduce 
administrative costs of 
railway undertakings 

Specific 
objectives 

69 

 
 
 
 
8. 

OPTIONS AND MAIN IMPACTS 

To  achieve  these  objectives,  all  IAs  will  consider  a  range  of  different  options,  which 
ultimately should improve the operational efficiency and quality of rail services. 

The  IA  for  the  domestic  passenger  market  opening  would propose and assess options on 
how the interaction of access conditions between open access services and services under PSC 
should  be  arranged.  The  IA  would  also  discuss  different  criteria  for  the  design  of  PSC  and 
analyse  a  possibility  of  introducing  mandatory  competitive  tendering  for  PSC.  The  aim  of 
these  options  would  be  to  open  the  domestic  rail  market  to  competition,  which  should  lead 
more  passenger  friendly  services  and  better  use  of  public  money.  In  order  to  enhance  the 
positive  effects  of  market  opening,  the  IA  would  analyse  also  additional  options  for 
'framework conditions', such as access to rolling stock, through-ticketing and inter-availability 
of train tickets of different RUs. 

The IA for the infrastructure governance initiative would study two dimensions of options: 
on the one hand, what functions should be included in the portfolio of an 'ideal IM' in order to 
optimise its operational and in investment decisions, and on the other hand, how should the 
separation  between  the  IM  and  RUs  to  be  enhanced  in  order  to  ensure  equal  level  playing 
field  for  the  access  to  infrastructure  and  the  related  services.  As  a  result,  new-entrant  RUs 
should get a better access to infrastructure and related services, at the same time the efficiency 
of infrastructure utilisation at national and EU level should increase. 

The  IA  under  the  interoperability  and  safety  pillar  would  assess  several  'institutional' 
options on the level of interaction between ERA and national authorities with the aim to (a) 
enhance the effectiveness and efficiency of safety certification and rolling stock authorisation 
processes and (b) reduce complexity caused by excessive national railway rules. As a separate 
option, a set of additional horizontal measures would be considered, which on their own could 
achieve the mentioned objectives, but could also be applied on top of the institutional options 
to reinforce the overall impact of reduced administrative costs/less fragmented markets. 

These  policy  options  and  their  impacts  will  be  presented  and  assessed  in  detail  in  the 
respective IAs. 

9. 

EXPECTED SYNERGIES OF THE PACKAGE 

The idea of the proposed package approach is that there are synergies to be achieved via the 
combined effects of the individual initiatives. Some examples of such synergies are provided 
below. 

–  Effectiveness  of  de  jure  market  opening  depends  on  allowing  for  certain  'framework 
conditions', such as access to infrastructure, rolling stock, stations, train path allocation, 
etc. Some of these framework conditions will be addressed within the domestic passenger 
market opening initiatives, while the others via the proposal on infrastructure governance. 

–  One way to improve rolling stock availability is to support development of rolling stock 
leasing  market  (as  considered  under  in  the  domestic  passenger  market  opening  IA). 
However, a necessary condition for that is more standardised equipment and the on-going 

70 

 
 
standardisation  process 60 is  expected  to  be  enhanced  by  the  European  "passport"  for 
vehicles, considered within the interoperability and safety initiatives. 

–  All  initiatives  would,  in  their  own  terms,  contribute  to  a  more  predictable  business 

models for RUs operating across the borders of EU Member States: 

•  interoperability  initiative  by  harmonising  approach  to  safety  certification  and 

authorisation of rolling stock, 

•   market  access  initiative  by  introducing  universal  licence  for  provision  of  passenger 
services throughout the EU and setting common principles for PSO definition, and 

•  infrastructure  governance  initiative  by  proposing  a  more  harmonised  institutional 

setup of infrastructure managers in different Member States. 

–  Better  infrastructure  governance  should  improve  the  operational  efficiency  of  railways 

and possibly allow to improve the travel times for passengers and freight. 

Overall, the different operational gains expected as a result of each initiative should allow a 
better value for public money, on which the functioning of railways is still heavily reliant. 

60 

As the result of the changes induced by the Technical Specifications for Interoperability (TSIs) 
decision. 

71 

 
 
 
 
 
                                                 
ANNEX II 
PUBLIC CONSULTATION 

1. 

INTRODUCTION – OVERVIEW OF THE CONSULTATION PROCESS 

The  consultation  process  was  run  through  several  channels  to  reach  out  to  different  groups 
that face different problems vis-à-vis railways and that may be impacted differently by the 4th 
railway package initiative. 

In this context, 4 consultations run in parallel were preferred to an open consultation: 

− 

− 

− 

− 

a stakeholder consultation 

a Eurobarometer survey 

a consultation of the Sectoral Social Dialogue Committee for Railways 

a consultation of regional authorities (together with the Committee of the Regions) 

The views of stakeholders were collected through targeted detailed questionnaires and were 
completed by face-to-face interviews, one intermediate hearing and finally a conference. 

The views of citizens and passengers were collected through a broad Eurobarometer survey 
involving 25.591 interviews in 25 Member States (Cyprus and Malta have no railways) asking 
some  25  questions.  The  Eurobarometer  did  not  especially  cover  questions  related  to  the 
management  of  infrastructure  but  rather  views  on  market  opening  in  general.  More 
information on it can be found in the impact assessment on the opening of passenger domestic 
rail markets. 

The Sectoral Social Dialogue Committee on Railways was consulted twice in February and 
June. 

Finally, the network of the Committee of the Regions was used to reach local  and  regional 
authorities. 

2. 

CONSULTATION OF STAKEHOLDERS 

2.1 -Overview of the consultation 

The consultation of stakeholders was organised in 5 phases. 

Figure 1- The Stakeholders Consultation Action Plan 

After a thorough identification of 427 potential respondents (cf. infra), in-depth questionnaires 
were sent to each group of main stakeholders (railway undertakings, infrastructure managers, 

72 

 
 
 
public  transport  authorities,  safety  authorities,  ministries,  representative  bodies,  social 
stakeholders, etc.). 

The  contractor  in  charge  of  the  support  study  conducted  face-to-face  interviews  with 
stakeholders in Germany, UK, Italy, Hungary and Sweden. In parallel, face-to-face interviews 
were  organised  with  those  stakeholders  that  wished  to  meet  DG  MOVE,  including  face-to-
face meetings in Sweden, Poland and The Netherlands. 

On  29  May  2012  a  public  hearing  with  85  participants  was  organised  in  Brussels  to  share 
preliminary  results  obtained  in  the  analysis  of  completed  questionnaires  and  to  obtain 
feedback on these findings. The workshop also sought to explore some specific issues: access 
to rolling stock, unbundling and social impacts for consumers and workers. 

On  24  September,  a  stakeholder  conference  was  organised  in  Brussels  with  some  400 
participants.  The  conference  gave  the  opportunity  to  stakeholders  to  provide  their  views  on 
the opening of domestic rail markets to competition, on their role to growth, on rail and the 
value for society. 

All feedback made by way of the questionnaire, the public hearing, by phone or by face-to-
face sessions was analysed in detail and contributed to the definition of the problem and the 
the 
analysis  of 
Commission's standards for public consultation. 

impacts.  The  comprehensive  consultation  process  described  meets 

2.2 - Profile of identified stakeholders and respondents 

2.2.1 – Profile of respondents to the stakeholder questionnaires 

Initially,  almost  427  stakeholders  from  EU-25  (EU-27  excluding  Cyprus  and  Malta  which 
have  no  railway)  were  identified  as  being  involved  and  potentially  affected  by  the  market 
opening. The detail of these persons and organisations is at the end of this annex. 

These stakeholders can be categorised in four groups: 

− 

− 

− 

− 

authorities (rail regulatory bodies, competition authorities and ministries of transport) 

infrastructure manager managers 

railway undertakings (including incumbent and newcomers), and 

other stakeholders (railway manufacturers, wagon keeper and rail car leasing companies, 
terminal  operators,  maintenance,  workshop  operators  and  other  providers  of  rail  related 
services, customer and rail passenger organisations, railway workers' organisations). 

In  March  2012,  these  427  stakeholders  were  sent  several  on-line  questionnaires  that 
comprised a set of common questions like the important factors associated with quality of rail 
services,  the  problems  that  affect  the  quality  of  rail  services,  the  objectives  of  the  Fourth 
Package  policy  initiative,  policy  options  with  market  opening,  but  also  specific  questions 
related  to  the  issue  that  might  have  greatest  relevant  to  the  organisation(s)  that  they  are 
representing. Of almost 427 questionnaires sent, 99 completed questionnaires were returned. 

73 

 
Responses were obtained from the 25 Member States. However, for 12 Member States there 
were 5 or fewer responses. 

Figure 1 - Respondents' self-reported location of activities 

Respondents identifying themselves with a Member State or with the EU

0

5

10

15

20

25

Germany
United Kingdom
France
Austria
Netherlands
Sweden
Poland
Belgium
Italy
Czech Republic
Hungary
Denmark
Romania
Luxembourg
Finland
Slovenia
Spain
Portugal
Latvia
Lithuania
Bulgaria
Ireland
Slovakia
Estonia
Greece
EU

The  99  respondents  identified  themselves  as  representing  a  total  of  172  different  types  of 
organisations (which represents a response rate of 41%). 

Figure 2 - Respondents' self-reported type of activity 

Respondents identifying themselves as each type of body
5
15

10

20

25

30

0

Infrastructure Managers

Incumbent passenger RUs

Incumbent freight RUs

New entrant passenger RUs

Transport Ministries

Regulatory Bodies

Public Transport Authorities

National Safety Authorities

New entrant freight RUs

Rolling Stock Leasing Companies

Workers' Representatives

Industry suppliers

Competition Authorities

Passenger Organisations

Other

74 

 
 
 
 
 
Because of double identifications61, respondents were reclassified to provide a better view of 
the  profile  of  the  types  of  stakeholders.  Respondents  might  have  more  than  one  role  for 
reasons such as: 

−  Railway  undertakings  identifying  themselves  as  both  passenger  and  freight,  or  as 

incumbent in one Member State and new entrant in one or more others 

−  Holding companies identifying all the roles fulfilled by their subsidiaries 

−  Regulatory bodies which are also competition authorities 

−  Representative bodies that represent different types of stakeholder 

As  noted  above,  we  received  few  responses  from  some  Member  States  and  types  of 
organisation.  We  concluded  that  it  would  not  be  possible  to  analyse  systematically  by  both 
Member State and respondent type. 

After careful review of the identity of the respondents we therefore reclassified them with the 
objective of providing a clearer basis for analysis: 

From the organisation name provided, we identified and distinguished: 

−  Holdings/groups 

−  Associations/representatives 

For railway undertakings: 

− 

Incumbent and new entrant passenger railway undertakings were combined as “Passenger 
RU” 

− 

Incumbent and new entrant freight railway undertakings were combined as “Freight RU” 

We  combined  into  a  single  category  of  “National  Authorities”  three  different  types  of 
respondent, all with at least some regulatory role: 

−  Regulatory bodies 

−  Competition authorities 

−  National safety authorities 

61  

The 99 respondents reported 172 different industry roles: 
− 38 described themselves as having a single role 
− 35 described themselves as having more than one role 
− 26 described their role as “other” 

75 

 
 
 
                                                 
 
Fig. 3 – Respondents reclassified by type 

Finally, the answers represent an exhaustive sample and a good cross-section of stakeholders 
from almost all MS. 

2.2.2 – Profile of participants to face-to face interviews 

In  April  2012,  targeted  interviews  with  stakeholders  were  organised  by  the  contractor  in 
charge  of  the  support  study  in  UK,  Italy,  Sweden,  Hungary  and  Germany  to  discuss  and 
understand better their responses during the extensive stakeholder consultation exercise. The 
majority  of  these  interviews  ware  held  as  face-to-face  sessions,  with  many  of  the  most 
significant stakeholders within Member States of those countries for which more detailed case 
studies  were  prepared.  In  addition,  the  Commission  held  bilateral  meetings  with  numerous 
associations from the rail sector in order to hear their view. 

TABLE 1 

STAKEHOLDER INTERVIEWS (CONTRACTOR) 

Rationale 

Location 

Face-to-face 

Telephone 

Written 

Full country fiche

France 

Germany 

Great Britain 

Hungary 

Italy 

Austria 

Czech Republic 

Netherlands 

Intermediate 
country fiche 

Pan-European organisations 

7 

6 

5 

4 

4 

1 

1 

1 

4 

76 

1 

1 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stakeholders interviewed by contractors 

France 

Ministry responsible for 
railways 
Representative of region 
ARAF (Regulatory Body) 
RFF (Infrastructure 
Manager) 
SNCF (Incumbent RU) 
Keolis (Non-incumbent 
RU) 
FGTE-CFDT 
(Workers Representatives) 

Germany 

Ministry responsible for 
railways 
Bundesnetzagentur 
(BNA) (Regulatory Body) 
Deutsche Bahn AG (DB) 
(Infrastructure Manager 
& Incumbent RU) 
BAG-SPNV (Umbrella 
body for Competent 
Authorities) 
Keolis (Non-Incumbent 
RU) 
HKX (Open-Access RU) 

Hungary 
Ministry responsible for 
railways 
NKH (Regulatory Body 
and Safety Authority) 
VPE (Capacity Allocator) 
MAV and GySEV 
(Infrastructure Managers 
and incumbent RUs) 

Face-to-face 

23/04/2012 

Face-to-face 
Face-to-face 
Face-to-face 

Face-to-face 
Face-to-face 

24/04/2012 
23/04/2012 
10/04/2012 

07/05/2012 
29/03/2012 

Face-to-face 

20/04/2012 

Face-to-face 

20/04/2012 

Face-to-face 

18/04/2012 

Face-to-face 

18/04/2012 

Face-to-face 

18/04/2012 

Face-to-face 

30/04/2012 

Face-to-face 

25/04/2012 

Face-to-face 

25/04/2012 

Face-to-face 
Face-to-face 

25/04/2012 
25/04/2012 

77 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Italy 

FS (Incumbent RU) 
URSF (Regulatory Body) 

Face-to-face 
Face-to-face 

26/04/2012 
18/04/2012 

Also,  Commission  services  met  in  Brussels  with  representatives  from  the  following 
organisations throughout 2012: 

− 
− 
− 
− 
− 
− 
− 
− 
− 
− 
− 
− 

BAFG – German Association of Passenger Rail Authorities 
CER – Community of European railways 
EIM – European Infrastructure Managers Association 
EPTO – European Passenger Transport Operators 
EPF – European Passenger Federation 
ERFA – European Railway Freight Association 
ETF – European Transport Worker's Federation 
Network Rail 
NMBS-SNCB Holding (Belgian Railways) 
ÖBB – Austrian railways 
UITP – Union Internationale des Transports Publics 
UK Department for Transport 

Additionally,  the  Polish,  Swedish  and  Dutch  authorities  organised  meetings  between 
stakeholders  (infrastructure  managers,  regulators,  railway  undertakings)  and  Commission 
services in Stockholm, Warsaw and Utrecht: 

2.2.3- Profile of participants of stakeholder hearings and conferences 

The list of participants to the stakeholder hearings and conferences was drawn on the basis of 
the list of initially 427 identified stakeholders. 

The following organisations took the floor at the stakeholder hearing of 29th May: 

− 
− 
− 
− 
− 
− 
− 
− 
− 
− 
− 
− 
− 
− 
− 

Association of Train Operating Companies (ATOC) UK 
BAG SPNV (German passenger transport authorities) 
Community of European Railways (CER) 
Deutsche Bahn 
European Infrastructure Managers (EIM) 
European Passenger Federation (EPF) 
European Passenger Transport Operators (EPTO) 
European Rail Freight Association (ERFA) 
European Transport Workers Federation (ETF) 
Ferrovie dello Stato / Trenitalia 
Freighliners 
Irish Department of Transport 
JSC Lithuanian Railways 
Ministry of Transport, Infrastructure and Environment (Netherlands) 
Ministry of Transport (France) 

78 

 
 
 
 
 
− 
− 
− 
− 
− 
− 

SNCF 
Network Rail (UK Infrastructure Managers) 
NTV Nuovo Trasporto Viaggatori 
Transportstyrelsen (Sweden) 
Union Internationale des Transports Publics (UITP) 
Veolia 

The  following  organisations  made  presentations  at 
24th September: 

the  stakeholder  conference  of 

− 
− 
− 
− 
− 
− 
− 
− 
− 
− 
− 
− 
− 
− 
− 
− 
− 
− 

Ministry of Transport (Sweden) 
Community of European Railways (CER) 
NTV Nuovo Trasporto ViaggatoriFirst Group (UK) 
Amadeus 
Ministry of Transport (Belgium) 
CFR Calatori (Romanian railways) 
GATX Railcar Leasing 
Office of Railway Regulation (UK regulator) 
Freighliner UK 
Freighliner Poland 
UNIFE (European railway industry) 
European Infrastructure Managers (EIM) 
Network Rail (UK Infrastructure Managers) 
BAG SPNV (German passenger transport authorities) 
European Passenger Transport Operators (EPTO) 
Verkehrverbund Berlin-Brandenburg 
European Passenger Train and Traction Operating Lessors' Association ( EPTTOLA) 
Province of Gelderland (Netherlands) 

Members of the European Parliament were also invited to take the floor. 

2.3 - The stakeholder consultation process 

This targeted consultation was organised by the contractor in charge of the support study. The 
consultation  took  place  from  1st  March  till  16  April  (responses  obtained  till  mid-June  were 
accepted and incorporated). 

As a first step, the contractor consulted stakeholders through a two-part questionnaire sent via 
email.  The  first  questionnaire  was  common  to  all  stakeholders  and  was  completed  by  extra 
questions  for  each  type  of  organisation  (infrastructure  manager,  passenger  operations, 
worker's representative etc…). 

The questionnaires were structured in four sections focused on: 

•  The quality of rail services in the EU, which includes punctuality, passenger comfort, on 
board services, information, service frequency and intra-modal and intermodal integration, 

79 

 
 
 
•  Obstacles  which  hamper  market  access,  limits  new  entrants  and  hinder  the  internal 

market for rail passenger services; 

•  The  different  objectives  of  this  policy  initiatives  that  could  improve  the  quality  of  rail 

services 

•  Checking the willingness of stakeholders to adopt a specific option concerning the market 

opening 

2.4 - Main results of the on-line consultation 

2.4.1 - The problem definition 

The  majority  of  the  stakeholders  (85%  for  passenger  services  and  90%  in  freight  services) 
agreed that the quality of rail services affects the competitiveness of the rail sector. 

The  majority  of  the  stakeholders  of  the  targeted  consultation  supported  the  problem  and 
agreed  that  the  quality  of  rail  and  the  competitiveness  of  the  rail  sector  in  the  EU  were 
affected  by  lack  of  competitive  incentives,  inadequate  regulatory  oversight,  discriminatory 
framework conditions and access barriers for railway undertakings. 

2.4.2 - The objectives 

Overall,  the  stakeholders  have  supported  the  general  problem  and  the  problem  drivers  as 
identified by the Commission, as well as the general direction of EU action. 69% agreed that 
the objective of improved access to infrastructure addressed the objectives of the initiative. 

2.4.3- The policy options 

Concerning  the  creation  of  a  coordination  body  including,  in  a  non-discriminatory  manner, 
representatives  from  all  infrastructure  users  to ensure  that  their  interests  are  duly  taken  into 
consideration by IMs, 64% of those who responded and offered an opinion supported this idea. 
Few respondents commented that bodies allowing a dialogue between IMs and RUs already 
exist (one referred to RailNetEurope, EIM and CER as appropriate EU fora for such dialogue). 
In the same manner, the unification of IM functions is largely supported by stakeholders. 

Regarding  the  appropriate  measure  to  prevent  conflicts  of  interest  and  distortion  of 
competition, the responses of the different stakeholders are highly polarised. 

Institutional  separation  is  generally  supported  by  the  largest  number  of  stakeholders: 
independent IMs (such as Network Rail, RFF, represented at EU level by EIM), new entrant 
railway undertakings operating freight (e.g. Mofair in Germany, Freightliner in Poland, AFRA 
in France, HektorRail in Sweden, ERFA at EU level) and/or passenger services (e.g. NTV in 
Italy, RegioJet in Czech Republic) but also few IMs and railway undertakings part of holding 
structures (in particular Infrabel and SNCB in Belgium). The same position is largely shared 
among  transport  ministries,  competition  authorities  and  regulatory  bodies  (including  in 
Member  States  which  opted  for  holding  structures),  passenger  organisations  (such  as 
Passenger Focus in UK, FNAUT in France), freight forwarders and shippers (represented at 
EU  level  by  CLECAT  and  ESC),  public  transport  authorities  (e.g.  in  Germany  BAFG)  and 
industry suppliers (e.g. FIF in France). 

80 

 
These interested parties request in particular the establishment of a genuine level playing field 
ensuring the absence of conflicts of interest and full financial transparency. They claim that 
institutional separation is most efficient model and the only one capable to ensure that IMs, as 
a natural monopoly, work not only in favour of the incumbent but all whole society and are in 
a position to develop cross-border cooperation (rather than to protect the incumbent domestic 
market). They argue that with holding models regulatory supervision would be necessarily too 
burdensome  (and  costly).  Suspicion  of  the  lack  of  fairness  in  infrastructure  management 
would persist and affect private investments in the rail sector significantly. 

The  main  supporters  to  alternatives  to  institutional  separation  are  quite  logically  holding 
structures,  including  the  incumbent  freight  and  passenger  railway  undertakings  and 
infrastructure managers which are part of them, (in particular the members of DB, OBB, FS 
and  PKP  groups)  and  some  workers  representatives  (represented  at  EU  level  by  ETF). 
Transport ministries, and in few cases, the regulatory body, in Member States where holding 
structures are in place tend to also support status quo or alternatives to institutional separation, 
such  as  a  stronger  role  for  regulatory  bodies  (eg  in  Germany).  Some  incumbents  currently 
separated  (such  as  SNCF  in  France  and  NS  in  the  Netherlands)  and  few  new  entrants 
(specifically those at least partly owned by incumbents such as Arriva, WestBahn) are also in 
favour of alternatives to institutional separation or at least to leave to Member States to choice 
of such option. In one Member State, France, the public transport authorities (represented by 
the ARF) indicated that they would support the holding model. 

These opponents to institutional separation tend to accept that this is the most effective way to 
avoid  conflicts  of  interest  and  ensure  financial  transparency.  However  they  argue  that  there 
are alternative ways to ensure the absence of discriminatory practices and, in particular that 
the  reinforcement  of  regulatory  bodies  (which  is  one  measure  already  introduced  by  the 
Recast) should ensure this in a more efficient manner. They generally claim that institutional 
separation  could  affect  the  "system  efficiency"  leading  to  loss  of  economies  of  scope 
(misalignments).  They  favour  the  existence  of  a  "system  integrator"  which  would  be  the 
incumbent/dominant operator rather than the infrastructure manager itself. They also suggest 
that the chosen model must provide for an efficient and non-discriminatory network access for 
all operators but also must remain affordable. Finally, few stakeholders argued that there is no 
empirical  evidence  about  the  benefits  of  complete  separation  and  that  part  of  the  available 
scientific literature highlights disadvantages of complete separation. A number of incumbent 
railway  undertakings  also  suggested  that,  particularly  in  small  and  technically  separated 
national  railway  markets,  benefits  of  full  separation  might  not  offset  the  corresponding 
transaction costs. Some proposed that respective Member States should be allowed to choose 
the most appropriate model. 

The  following  table  show  the  main  advantages  and  risks  of  each  type  of  governance  of  the 
infrastructure manager according to stakeholders. 

81 

 
Institutional separation 

Potential benefits 

Potential risks 

•  No conflicts of interest and absence of 
discrimination in infrastructure access 

•  Disconnection of  IM from the market 

needs 

•  Clearer 

role 

and 
responsibilities of the different market 
players 

division 

•  Specialisation benefits 

•  Full financial transparency ensured 

•  Harmonisation of national governance 
facilitating  cross-border  cooperation 
between IM 

•  Give  confidence  to  new  entrants  and 
stimulate thereby private investments 

•  Abuse  of  the  infrastructure  monopoly 

position 

•  Fragmentations  and  misalignment  of 
and 

synergy 

system: 

the 
communication losses 

•  Additional 

transaction  costs  and 

efficiency loss 

Holding Model 

Potential benefits 

Potential risks 

•  No  transparency  in  decisions-making 

and financial flows 

•  Persistence of discriminations 

•  More  intense  regulatory  supervision 

required 

•  Minor willingness to cooperate 

•  Easier 

alignment/coordination 
between  IM  and  RU  (the  incumbent) 
operational 
for 
decisions 

investment 

and 

•  Limited transaction costs (between the 

IM and the incumbent) 

•  Make  the  provision  of  services  under 
public service contracts easier (for the 
incumbent) 

•  Facilitate  investments  in  rolling  stock 

(for the incumbent) 

2.5 - The stakeholder hearing of 29 May 

The  stakeholder  hearing  was  devoted  to  the  presentation  of  the  results  of  the  on-line 
consultation  and  subsequent  discussions  on  market  opening  (not  relevant  for  this  impact 
assessment) and the IM governance. 

82 

 
 
 
 
Several views were expressed regarding infrastructure governance: 

−  An association of passenger transport authorities indicated that integrated structures do not 

allow for independent investment decisions. 

−  An  infrastructure  manager  called  for  a  broadening  of  the  scope  of  essential  functions 

beyond capacity allocation and charging 

−  Rail freight undertakings advocated separation as the only way to build the single market 

and underlined that unbundling would not hamper performance, quite the contrary. 

−  Railway undertakings called for a facts-based pragmatic approach, asking for a thorough 

estimation of transaction costs and impact on the quality of infrastructure 

−  A  workers  organisation  claimed  that  institutional  separation  could  destroy  jobs  and 
remove  the  possibilities  of  mobility  for  rail  workers  (to  change  functions  within  single 
railway undertakings). 

2.6 - The stakeholder conference of the 24th September 

The conference was attended by 420 representatives across the industry who participated in 3 
key workshops as well as hearing an array of speakers. 

It was clear that there was a desire to get the structure of the railway right once and for all. An 
interactive and competitive railway across all of Europe was in the best interests of everybody. 
Interoperability is vital to allow innovation through liberalisation and a level playing field is a 
pre-requisite for encouraging new market entrants. 

On the governance proposals for IMs, a broad consensus was agreed on the needs of a better 
governance  relationship  containing  strategic  intermodal  and  efficiency  drivers.  Discussions 
took place on issues such as equality, impartiality and the vital need for a level playing field. 
The relationship between the IM and all RUs was discussed, as was whether incumbents are 
better  placed  to  bring  forward  operational  efficiencies.  It  was  felt  that  any  future  proposal 
should  ensure  stability  for  the  medium  to  longer  term  bearing  in  mind  the  dynamics  of  the 
potential tensions between equality and efficiency. 

Participants  were  broadly  in  favour  of  improving  the  competitiveness  of  rail  and  further 
development  of  the  Single  European  Rail  Area.  For  sustainable  high  quality  and  efficient 
transport  a  move  to  mandatory  tendering  of  contracts  with  some  open  access  provision  was 
felt  to  provide  improved  value  through  a  reduction  in  public  subsidies  and  benefits  through 
improvements in service quality and infrastructure use and patronage. Fears of social dumping 
and  lowering  of  safety  standards  were  tempered  down  drawing  on  the  experience  of  the 
Member States that liberalised their rail markets.  

Further details can be found in minutes of the conference. 

83 

 
3. 

CONSULTATION OF SOCIAL PARTNERS  

The  railway  manufacturing  industry  responded  through  one  questionnaire  and  worker 
organisations were also consulted through the Social Dialogue Committee and through  ETF 
(European Transport Workers Association) in the consultation of stakeholders (social aspects 
were also covered during the stakeholder hearing of 29 May).  

The Sectoral Social Dialogue Committee on Railways was consulted on the 26 March and the 
19  June,  in  particular  on  the  options  and  the  social  impact  assessment.  Associations  of 
workers  were  overall  sceptical  that  the  opening  of  domestic  rail  passenger  markets  would 
contribute to the growth of the rail traffic, the improvement of the efficiency and quality of 
rail services. Worker organisations present at the meeting highlighted that funding of the rail 
sector and its infrastructure would be more effective to reach those same objectives. In such 
context,  worker  organisations  did  not  wish  to  position  themselves  on  any  of  the  options 
related  to  the  IM  governance  that  were  presented  to  them  on  those  meetings  as  they 
considered  them  as  supporting  measures  in  favour  of  market  opening.  The  employer's 
representatives (from incumbent) did not take part in the discussion on this occasion. 

84 

 
 
 
ANNEX III 

PROBLEM EVIDENCE 

1. 

ANECDOTAL  EVIDENCES  RELATED  TO  THE  PROBLEM  OF  DIVERGING 
INTERPRETATION OF EXISTING SEPARATION REQUIREMENTS (SECTION 3.2.2.1.1 OF 
THE MAIN REPORT) 

Discriminations in charging practices: 

•  A  number  of  cases  have  been  dealt  with  by  German  competition  and  regulatory 
authorities  in  which  the  German  IM  (which  is  part  of  the  German  incumbent  holding 
group)  was  accused  of  having  introduced  discriminatory  charges.  For  instance,  the 
competition authority found that the charging system TPS 1998 allows for charges for DB 
Regio  to  be  25%  -  40%  lower  than  that  of  its  competitors.  The  German  regulator  also 
pinpointed the use of "regional factors" in track access charging (i.e. definition of charges 
applicable  to  specific  parts  of  the  rail  network)  which  were  discriminatory  vis-à-vis 
competitors of the incumbent. 

• 

• 

• 

62  

63  

In  Austria,  the  infrastructure  division  of  ÖBB  is  responsible  for  setting  the  relevant 
charges,  for  both  infrastructure  and  station  access.  The  new  open-access  operator, 
WESTbahn,  has  reported  that,  starting  from  2012,  station  access  charges  for  passenger 
trains will rise at a much higher rate than in previous years. According to the competitor, 
station  prices  have  risen,  but  in  particular  for  those  stations  on  the  Westbahn  line 
including St. Pölten (78% more) and Linz (66,33% more). At the same time, track access 
charges suddenly increased by 14.4%, while in previous years the increases were about 
2.5% on average62. In addition ÖBB introduced a special surcharge for high-speed trains 
which did not exist before. The congestion surcharge will be replaced from 2013 onwards 
by  a  new  capacity  utilisation  surcharge,  which  is  approximately  60%  higher.  These 
increases also affect the incumbent ÖBB's services, however according to the competitor 
ÖBB  is  compensated  for  such  increases  by  the  state  in  the  public  service  contract  (see 
below).  OECD  (2005b)  describes  a  case  in  Germany  in  which  the  Bundeskartellamt 
found that IM DB Netz favoured the integrated railway undertaking DB Regio over rivals 
by means of volume discounts in an early version of its track access charging system. 

In February 2011 ÖBB Personenverkehr and the Austrian Competent Authority SCHIG 
GmbH  signed  a  framework  PSC,  in  which  SCHIG  agreed  to  compensate  fully  any 
increases in track access charges throughout the duration of the contract63. This follows 
the conclusion of a new PSC framework contract between the Ministry of Transport and 
ÖBB,  which  provides  for  full  compensation  for  any  increase  in  access  charges. 
WESTbahn  have  argued  that  the  new  charging  structure  is  discriminatory  since  ÖBB 
does not face the same risk. 

In May 1998, Deutsche Bahn introduced its charging system ‘TPS 98. This system was 
essentially  based  on  quantity  rebates.The  German  Cartel  Office  Bundeskartellamt  came 
to the conclusion that new entrants had to pay 25%-40% higher charges than the holding 
operators  of  DB.  In  another  legal  procedure  regarding  the  same  system  the  courts 

See article in "Die Presse", 4.6.2011, 
http://diepresse.com/home/wirtschaft/economist/kordiconomy/667572/ 
This results from Article 7(5) of the PSO contract concluded between SchIG and ÖBB Personenverkehr 
of February 2011, as mentioned in a parliamentary question of MP Deimek, Vilimski and others, 
http://www.parlament.gv.at/PAKT/VHG/XXIV/J/J_09274/fnameorig_230429.html 

85 

 
                                                 
recognised that a new entrant freight operator had to pay 130% higher charges than DB 
Cargo. The legal proceedings on this issue lasted until 200564. 

•  On 5 March 2010 the regulator BNetzA decided that the so called regional factors must 
be deleted from December 2010. Regional factors lead to an increase of up to the factor 
1.91  for  lines  in  the  countryside  which  are  primarily  used  by  DB's  competitors.  The 
authority considered these price factors as an illegal obstacle network access, which was 
based on any valid reason. After some legal proceedings the authority concluded a deal 
with DB Netz, according to which these regional factors will be scrapped from December 
2011.  Since  they  were  introduced  already  in  2003,  htis  illegal  discrimination  of 
competitors existed for almost 9 years65. 

• 

In Germany, DB Energie,  the  DB subsidiary responsible for providing electricity to the 
rail network applied  volume  discounts that  favour DB operating subsidiaries  since only 
they  benefit  from  the  maximum  discount  available.  As  a  result,  competing  RUs  paid 
electricity charges 15-20% higher than those paid by DB. In February 2012 BNetzA, the 
German  rail  regulator,  required  that  DB  Energie  reduce  the  fee  by  23%,  which  it  has 
agreed to do. However, DB Energie did not keep its promise to abolish the discriminatory 
discount system as of 1/1/201366. 

Discriminations in path allocation practices: 

•  On 25 July 2012, the Italian Competition Authority (ICA) sanctioned Ferrovie dello Stato 
(FS)  for  a  violation  of  Article  102  of  the  Treaty  on  the  Functioning  of  the  European 
Union (TFEU) and imposed a fine amounting to € 300 000 following a complaint filed by 
Arenaways S.p.A., a competitor of FS active on the passenger rail transport market and 
two  Consumers  Associations.  In  particular,  the  ICA  found  that  FS,  through  its 
subsidiaries RFI and Trenitalia had put in place a “complex and unified strategy” to keep 
Arenaways, which went bankrupted at the time of the decision, out of the profitable route 
between Milan and Turin between 2008 and 2011. The ICA ascertained that RFI put into 
place  a  dilatory  conduct  when  Arenaways  asked  the  assignment  of  train  tracks:  when 
receiving  the  first  track  assignment  train  path  allocation  request  by  Arenaways  on  11 
April 11, 2008, RFI did not process the request, arguing that it could not answer before 
being  sure  that  the  PSCs  the  economic  equilibrium  of  the  PSCs  would  not  be 
compromised.  The  access  to  the  tracks  was  thereafter  delayed  for  over  18  months,  i.e. 
until 13 May 13, 2010, when RFI finally asked the Regulator to start the procedure aimed 
at evaluating the impact of the economic equilibrium of the PSCs of competitor’s. 

•  At the end of 2010 and beginning of 2011, Italian new entrants complained about several 
unexpected changes in the Network Statement of RFI which would obstruct their access 
to  the  network.  First  of  all  the  date  for  the  presentation  of  a  safety  certificate  was 
advanced from November to August in the year before a new timetable. This would have 
had the consequence that NTV would not have been able to apply for train paths for the 
period from December  2011,  since  their  trains would only be operational  from October 
2011. According to NTV there was no technical reason for advancing this deadline. At the 
same time, the draft network statement of  November 2010 also  inflicted  other  new  and 

64 
65 

66 

http://de.wikipedia.org/wiki/Trassenpreissystem#cite_note-eri-2003-278-9 
http://de.wikipedia.org/wiki/Trassenpreissystem#cite_note-eri-2010-210-28;  
Annual report of BNetzA for 2010, page 63, 
http://www.bundesnetzagentur.de/SharedDocs/Downloads/DE/BNetzA/Presse/Berichte/2011/Taetigkeitsb
erichtBahn2010pdf.pdf?__blob=publicationFile 
See press release of Mofair, a competitors organisation, of 9.11.2012 
http://www.mofair.de/db/bahnpol/meldung_13345.html 

86 

 
                                                 
onerous conditions on the operators to apply for train paths, in particular the obligation to 
keep  reserve  locomotives  and  cranes  in  order  to  continue  their  operations  respectively 
remove the broken down locomotives in case of accidents. Such requirement is unusual 
as in other EU countries such tasks are done by the IMs. While it is not a problem for a 
large company such as Trenitalia, it would be financially so burdensome for smaller new 
entrant freight operators that it could seriously affect their ability to stay in the market. 

•  The Italian new entrant NTV complained publically about the high cost and long duration 
of  the  homologation  procedure  for  its  AGV  trains  (45  months  between  July  2008  and 
March 2012) and claimed that such process has been negatively impacted by FS practices 
and in particular by the refusal of its infrastructure management subsidiary RFI to grant 
the train paths necessary for testing purposes. 

• 

In Italy, for example, when incumbent operator Trenitalia withdrew its Eurocity services 
to Austria and Germany, it claimed a number of the previously used train paths for other 
services. This meant that the joint venture involving DB, ÖBB and an Italian RU received 
less  favourable  paths  and  was  not  able  to  offer  equivalent  journey  times  to  the  former 
Eurocity services67. It is not clear whether the resulting allocation of capacity was more 
or less efficient, but decisions of this kind  on the  part  of a  vertically-integrated railway 
are likely to give rise to allegations of discrimination even if they are motivated by other 
considerations. 

•  The  company  Locomore  wanted  to  offer  train  services  from  Cologne  to  Hamburg  from 
August  2010.  They  wanted  to  apply  for  a  framework  agreement  which  would  give 
sufficient certainty for the heavy investment which is needed for long-distance passenger 
services. In order to have the necessary time to plan the service and acquire the necessary 
rolling stock, they wanted to conclude such a framework agreement in 2010 with a view 
to offer their services from 2012 or 2013. However the infrastructure manager DB Netz, 
which  is  part  of  the  integrated  DB  Holding,  refused  this  and  insisted  on  a  start  of  the 
operation in December 2011, with the argument that 5-year periods have to be respected 
for  framework  agreements.  Locomore  had  to  postpone  its  services,  in  order  not  to  risk 
penalty payments in case it is not able to start in December 201168 . It referred the case to 
the regulator BNetzA which ruled that DB Netz has to accept applications for framework 
agreement  even  within  the  five-year  periods  (a  possibility  also  foreseen  in  the  law) 69. 
However  DB  did  not  accept  this  decision  and  started  a  legal  procedure  in  the  Courts 
which  is  still  ongoing.  Similar  problems  as  in  the  case  of  Locomore  were  also 
encountered by SNCF which had to withdraw its project to offer a train from Cologne to 
Hamburg. They criticised that "the procedure of DB Netz for the path allocation is done 
in a way to leave no chance for competitors to make alternative offers"70. 

67 

68  

69 

70 

See Bahnbrief of DB of February 2010, page 6; 
http://www.deutschebahn.com/file/2194792/data/bahnbrief_februar_2010.pdf 
See for this case Wirtschaftswoche, 9.4.2010, http://www.wiwo.de/unternehmen/bahn-konkurrenz-ein-
schwarzer-tag-fuer-bahnreisende-seite-all/5635928-all.html 
See annual report of the German Regulator, BNetzA, Jahresbericht 2010, page 209/210; 
http://www.bundesnetzagentur.de/SharedDocs/Downloads/DE/BNetzA/Presse/Berichte/2011/Jahresberich
t2010pdf.pdf?__blob=publicationFile 
Süddeutsche Zeitung 10.4.2010, http://www.sueddeutsche.de/wirtschaft/deutsche-bahn-konkurrenten-
geben-auf-1.14209 

87 

 
                                                 
• 

In  Germany,  a  recent  report  by  the  Monopolkommission 71  (MK)  has  accused  the 
incumbent operator DB of discrimination against competitors when giving access to the 
network, in particular by providing: (1) Insufficient information about the infrastructure 
capacity available (regarding both train paths and facilities). (2) No information regarding 
the physical characteristics of routes (such as curve radii or gradients). (3) Making non-
flexible framework contracts and providing insufficient time between contract signature 
and  the  start  of  operations.  (4)  Lacking  a  framework  of  incentives  for  the  IM  which 
would motivate the IM to improve the quality of its infrastructure. (5) Not granting access 
to service facilities for competitors (although the MK believes this problem is the result 
of insufficient clarity of current legislation). 

Competitive advantages of integrated structures in terms of information asymmetry 

•  Westbahn,  a  new  entrant  in  Austria  requested  the  Austrian  IM  (ÖBB  Infrastruktur)  to 
allow  all  operators  the  access  to  real  time  information  so  that  they  could  inform  their 
passengers  about  actual  departure  times  of  connecting  services  –  mostly  run  by  the 
competing incumbent ÖBB - in the light of delays and cancellations. ÖBB Infrastruktur, 
which has real time data available on the whole Austrian rail network, rejected the request, 
arguing  that  it  only  discloses  data  belonging  to  the  railway  undertaking  making  the 
request. Westbahn filed a complaint to the Austrian regulator (which has in turn referred 
prejudicial questions to the ECJ). In his conclusions of 7 June 2012 the Advocate General 
of the Court of Justice Niilo Jääskinen supported this claim of Westbahn72. 

• 

• 

71 

72 
73  

74  

In  Germany,  in  the  past,  the  incumbent  was  in  a  position  to  propose  bids  for  public 
service  contracts  containing  discounted  infrastructure  charges,  which  other  participants 
could  not  enjoy.  This  practice  was  criticised  by  the  German  regulator  (and  was  later 
forbidden)  A  recent  case  published  by  MOFAIR,  the  organisation  of  new  entrant 
passenger  operators  in  Germany,  seems  to  indicate  that  this  practice  is  still  on  going. 
MOFAIR highlights the case of a public service contract for rail in Saxony-Anhalt where 
the  contract  was  directly  attributed  to  DB,  on  the  basis  of  a  commitment  of  DB's 
subsidiary  DB  Regio  to  compensate  any  rise  in  track  access  charging  affecting  the 
contract for a duration of 15 years.73 MOFAIR claims that such conditions can only be 
offered  by  an  integrated  company  where  the  losses  of  the  transport  subsidiaries  are 
covered by contributions from the holding which are drawn from infrastructure revenues. 

In November 2008 investigators of the French competition authority DGCCRF searched 
offices of SNCF on the basis of allegations that several new entrants had made about the 
fact  that  SNCF,  in  view  of  its  participation  in  the  timetabling  process,  obtained 
knowledge  of  the  train  paths  requested  by  these  new  entrants.  On  the  basis  of  this 
knowledge  SNCF  was  alleged  to  have  found  out  about  the  identity  of  the  prospective 
clients  of  these  new  entrants  and  to  have  approached  them  proposing  more  favourable 
conditions than the new entrants. 74 

See special report of the German Monopoly Commission "Sondergutachten 60 der Monopolkommission, 
Bahn 2011: Wettbewerbspolitik unter Zugzwang", pp. 105 – 106, pp. 106 – 109, pp. 112 – 113, pp. 114 – 
122 
 http://www.monopolkommission.de/sg_60/s60_volltext.pdf 
Case C-136/11 Westbahn-Management GmbH v ÖBB-Infrastruktur AG 
See MOFAIR's press release of 21 September 2012 "Eisenbahnregulierungsgesetz hilft der 
Deutschen Bahn und nicht dem Wettbewerb" 
See article in "La Vie du Rail International", 3/12/2008, pages 52-55. 

88 

 
                                                 
•  According  to  the  German  competitors'  association  Mofair75,  the  yearly  timetable  was 
elaborated in a two-tier system: first DB Netz was coordinating the basic schedule with 
its sister companies of the holding, on the basis of their needs, only afterwards DB Netz 
tries  to  fit  the  requests  of  competitors  in  this  schedule.  DB  Netz  refuses  to  publish 
schedules  which  would  allow  (in  an  anonymous  way)  to  see  which  tracks  are  reserved 
and whether the infrastructure manager has really checked all the possible alternatives in 
case the path which was originally rejected cannot be realised. This type of information is 
given in other countries such as Denmark, Norway, Sweden, etc. 

•  According  to  the  report  of  the  German  Monopoly  Commission 76 ,  an  independent 
consultative  body  to  the  German  government,  there  have  been  in  the  past  many 
complaints  on  insufficient  and  untimely  information  about  planned  works  on  the 
infrastructure. After an action of the regulator, the situation seems to have improved on 
the  basis  of  a  deal  which  DB  Netz  concluded  at  the  first-level  administrative  court  in 
Cologne,  having  first  attacked  the  regulators  injunction  to  improve  the  information. 
However,  despite  these  improvements,  according  to  the  Monopoly  Commission  the 
integrated  infrastructure  manager  still  does  not  take  account  of  the  interests  of 
competitors  when  planning  works,  but  only  considers  costs  and  opportunity  of  such 
measures for the companies of the holding77. 

2. 

ANECDOTAL  EVIDENCES  RELATED  TO  DISCRIMINATIONS  IN  IM  FUNCTIONS  NOT 
COVERED  BY  EXISTING  SEPARATION  REQUIREMENTS  (SECTION  3.2.1.3  OF  THE 
MAIN REPORT) 

Discrimination rising from the absence of separation of maintenance and development functions 
of IMs 

•  A  French  MEP  has  officially  expressed  to  the  Commission  its  dissatisfaction  with  the 
attitude  of  the  Italian  IM,  RFI,  which  is  integrated  in  the  holding  group  of  the  railway 
incumbent Trenitalia. RFI would have performed maintenance works on the Mont Cenis 
line affecting specifically the provision of cross-border passenger services by SNCF. 

•  The  vertically  integrated  Lithuanian  IM  removed  19km  of  tracks  at  the  border  between 
Lithuania and Latvia for maintenance reasons. The Latvian authorities publically claimed 
that this action has affected competition from railway undertakings from Latvia. 

• 

75  

76 

77 
78 

In  Austria,  the  regulatory  body  Schienen-Control  received  several  complaints  regarding 
line  closures  due  to  engineering  works  for  the  Brenner  tunnel  in  the  summer  2012.  In 
order  to  save  on  construction  costs,  ÖBB-Infrastruktur  tends  to  close  lines  for  several 
consecutive weeks. New entrants claimed that this behaviour leads to increased costs for 
them  since  they  have  to  bear  extra  costs  and  higher  access  fees  for  deviations  or  a 
temporary contracting-out of road transport services. While the Austrian regulator did not 
object  to  the  closure  of  the  tunnel  as  such,  which  it  considered  as  necessary,  however 
priority rules applied during the closure were considered as discriminatory78. 

See competitors' report of 2009, page 132, http://mofair.de/content/20090707_wettbewerber-report-
eisenbahn.pdf 
See Sondergutachten 60 der Monopolkommission, Bahn 2011: Wettbewerbspolitik unter Zugzwang, page 
179; http://www.monopolkommission.de/sg_60/s60_volltext.pdf, point 179. 
See Report point 182. 
See annual report of the Austrian regulator for 2011, http://www.schienencontrol.gv.at/files/schienen-
control_taetigkeitsbericht-2011.pdf 

89 

 
                                                 
Discrimination rising from the absence of separation for traffic management 

• 

In  2010  the  German  regulator  BNetzA  ruled  that  DB  has  to  change  the  practice  of  its 
traffic  management  centres.  DB  Netz  had  so  far  only  invited  staff  of  the  railway 
undertakings  of  its  own  holding  to  attend  traffic  management  activities  in  the  centres. 
This  gave  these  persons  the  possibility  not  only  to  know  about  traffic  relevant  issues 
(delays, works etc.) much faster than the competitors, but also potentially the possibility 
to influence the priority given to trains of different RUs in case of delays. This results in 
competitive advantages of the DB Holding companies in terms of costs and punctuality of 
their own trains79. 

•  Competitors  criticised  the  way  in  which  DB  Netz  organised  its  performance  regime.  A 
performance  regime  is  a  system  devised  by  an  infrastructure  manager,  as  part  of  its 
charging  scheme,  which  is  supposed  to  penalise  delays  in  the  train  operation  caused 
either by infrastructure managers or railway undertakings. In the first proposal for such a 
performance regime 90% of the delays were attribute to railway undertakings, and only 
10% to DB Netz, by exempting delays caused by works on the infrastructure. This was 
criticised  by  competitors,  and  the  regulator  ordered  DB  Netz  to  change  its  system.  DB 
was also criticised by the competitors for having instructed its dispatchers to attribute the 
delay causes in a way to keep DB Netz penalties as low as possible. Another criticism of 
this performance regime was that freight trains had to pay the same penalties for delays as 
passenger  trains  which  are  much  more  time  sensitive.  At  that  time  competitors  had  a 
much  higher  market  share  in  freight  traffic  in  comparison  with  passenger  traffic  where 
the market share of DB is even much higher. The performance regime of DB Netz has led 
to  lengthy  legal  procedures,  leading  to  a  suspension  of  the  system,  and  a  reformulation 
which was again under review of the regulator80. 

• 

79 

80 

In  France,  the  new  entrant  freight  company  Euro  Cargo  Rail  (ECR)  has  since  2011 
operated  cross-border  services  between  France  and  Spain  in  competition  with  the 
incumbent  operator  SNCF.  Due  to  the  different  gauge  sizes  between  the  two  countries, 
these  operations  require  a  gauge  change  at the  marshalling  yards  in  Cerbère  (Pyrénées-
Orientales).  Soon  after  operations  began,  ECR  filed  a  complaint  to  ARAF  against  RFF 
and  SNCF.  The  new  entrant  claimed  that  its  shunting  and  train  formation  activities  had 
been  purposefully  impeded  at  Cerbère,  and  that  the  operational  management  of  the 
service tracks necessary for the management should not be done by its competitor SNCF 
Fret, but by DCF, the traffic management entity of SNCF which is under the supervision 
of  the  independent  infrastructure  manager  RFF.  ARAF  agreed  with  the  part  of  the 
complaint that the management of shunting should not have been under the supervision of 

See annual report of the German Regulator Bundesnetzagentur Jahresbericht 2011, page 208, 
http://www.bundesnetzagentur.de/SharedDocs/Downloads/DE/BNetzA/Presse/Berichte/2011/Jahresberich
t2010pdf.pdf?__blob=publicationFile 
See competition report of competitor association Mofair, 
http://mofair.de/content/20090707_wettbewerber-report-eisenbahn.pdf, page 142, 
and Activity Report of BNetzA for 2010, page 65, 
http://www.bundesnetzagentur.de/SharedDocs/Downloads/DE/BNetzA/Presse/Berichte/2011/Taetigkeitsb
erichtBahn2010pdf.pdf?__blob=publicationFile.  
According to the Mofair Report, several instances of jurisdiction were dealing with the system 
(Landgericht and Oberlandesgericht Frankfurt) 

90 

 
                                                 
Fret SNCF. As a result, the Authority ordered RFF to modify the organisation at Cerbère 
and to give DCF the responsibility to manage both RUs81. 

• 

In  the  Netherlands  the  regulatory  body,  the  NMa,  has  reported  some  complaints  over 
ineffective  allocation  of  functions  in  2010.  Transport  operators  voiced  concerns  about 
ProRail’s  neutrality  with  regard  to  the  Day  Plan.  This  is  the  updated  version  of  the 
Annual  Timetable  for  a  specific  day  in  which  all  changes,  such  as  ad  hoc  capacity 
requests  and  planned  network  closures,  have  been  processed.  The  reason  for  these 
concerns is the presence of NS's presence at the OCCR (Operational Control Centre Rail), 
where the Day Plan is formulated, as this could be a potential threat to the creation of a 
level playing field. For this reason the NMa issued a Notice of  Opinion  concerning the 
development  of  the  OCCR  to  the  effect  that  certain  conditions  must  be  met  in  order  to 
ensure ProRail’s neutrality. In particular, ProRail must: (1) Guarantee that it will allocate 
rail  capacity  in  an  independent  and  non-discriminatory  manner,  (2)  Ensure  that  RUs 
cannot gain access to confidential information, (3) Charge RUs the costs of the OCCR, 
by means of an infrastructure charge, (4) Include all information regarding the OCCR in 
the Network Statement. The NMa is closely following the development of the OCCR to 
ensure that it is consistent with the development of competition82. 

81 

82 

See decision of regulator ARAF of 3.5.2011, http://www.regulation-
ferroviaire.fr/index.asp?a=10758&n=2&b=3 
See opinion of Dutch regulator NMa from 17.6.2010, 
http://www.nma.nl/images/Zienswijze_NMa_OCCR_OV22-157933.pdf 

91 

 
                                                 
ANNEX IV 

OPTION ANALYSIS 

1. 

APPROACH TO POLICY OPTIONS 

The  impact  assessment  identified  two  main  challenges  to  be  addressed  in  order  to  find  an 
optimal  governance  structure  of  infrastructure  managers  (IMs)  –  efficiency  challenge  and 
equal access challenge. 

To address the efficiency challenge, the IMs should be more market oriented and focussed on 
the  needs  of  infrastructure  users.  Firstly,  means  should  be  foreseen  to  improve  the 
communication  between  IMs  and  RUs.  Secondly,  coordination  among  IMs  should  be 
improved.  Thirdly,  to  improve  performance,  the  IM  functions  should  be  managed  in  a 
consistent manner. 

To  address  the  equal  access  challenge,  there  is  a  need  for  further  reinforcement  of 
independence  of  IMs  from  incumbent  operators  in  order  to  avoid  discrimination  of  new 
entrants  and  conflicts  of  interest  stemming  from  existence  of  holding  structures.  The  key 
question  is  two-fold:  which  IM  functions  should  be  separated  and  how  strict  should  the 
separation requirements be? 

This annex considers five groups of options, each proposing measures to remedy the different 
problem  elements.  The  aim  is  to  justify  the  decision  making  of  policy  creation  and  make  it 
transparent  why  certain  initial  policy  measures  have  been  dropped  and  how  the  options  in 
different groups will be assessed and combined. 

For  each  group  of  options  the  annex  explains  the  context,  discusses  possible  policy  choices 
and screens them on the basis of stakeholder views, effectiveness, efficiency, compliance with 
subsidiarity  principles  and  overall  feasibility.  Where  relevant,  the  different  aspects  of 
implementation are also discussed. 

2. 

STAKEHOLDER VIEWS 

The  majority  of  stakeholders  agreed  during  the  targeted  consultation  that  the  quality  of  rail 
services  and  the  competitiveness  of  the  sector  in  the  EU  were  affected  by  different  access 
barriers  for  RUs.  69%  found  different  interpretation  of  legislation  to  be  an  issue. 
Infrastructure  capacity  constraints  were  considered  to  be  the  main  access  barrier  for  RUs 
(quoted by 83%). 

The  results  of  the  consultation  show  also  that  views  are  highly  polarised  regarding  the 
appropriateness of solutions to these problems, e.g. how to ensure independent and efficient 
governance  of  railway  infrastructure.  Some  stakeholders  (a  large  majority  of  transport 
ministries, competition authorities, regulatory bodies, passenger and freight RUs, passengers 
and freight forwarders associations) advocated a complete separation which would ensure full 
transparency  and  a  level  playing  field  for  all  operators.  Other  stakeholders,  in  particular 

92 

 
 
holding  companies,  infrastructure  managers  depending  on  such  holdings  and  workers' 
representatives,  argued  that  there  is  no  empirical  evidence  about  the  benefits  of  complete 
separation  and  that  some  scientific  literature,  highlights  disadvantages  such  as  higher 
transaction  costs  and  risks  of  disconnection  inefficiencies.  These  stakeholders  think  that  a 
stronger role of regulatory oversight could be sufficient to solve the issues. 

64% of respondents support the idea of creation of a specific body of representatives from all 
infrastructure  users,  with  the  aim  of  ensuring  that  their  interests  are  taken  into  account  in  a 
non-discriminatory way. 

More detailed overview of stakeholder views is presented in Annex 2 of the IA. 

3. 

DESCRIPTION OF DIFFERENT GROUPS OF OPTIONS 

3.1.  COORDINATION (C) OPTIONS: COORDINATION BETWEEN IMS AND RAIL OPERATORS 

3.1.1.  Context 

Railway  infrastructure  is  a  natural  monopoly  and  its  construction  and  maintenance  relies 
heavily  on  public  support.  This  means  that  IMs  tend  to  manage  the  infrastructure  giving 
priority  to  the  instructions  received  from  the  public  authorities  and  to  neglect  the  needs 
expressed  by  users  in  the  infrastructure  operations  and  planning.  Therefore,  the  appropriate 
incentives  for  IMs  to  better  respond  to  market  needs  have  to  be  ensured  by  relevant 
governance mechanisms. 

3.1.2.  Description of options 

In this context, the following options have initially been considered: 

•  Option  C0:  Baseline  scenario  –  do  nothing.  The  Recast  reinforces  the  obligations  of 
IMs  to  consult  infrastructure  users  on  important  decisions,  for  instance  giving 
infrastructure users the opportunity to express their views on the content of their business 
plan and on the network statement detailing the conditions for access to the infrastructure. 
The  Recast  also  foresees  that  performance  targets  defined  in  multi-annual  contract  by 
Member  States  and  infrastructure  managers  shall  be  user-oriented.  It  requires  Member 
States  to  set  incentives  for  infrastructure  managers  to  reduce  both  costs  and  access 
charges. 

•  Option C1: RUs participate to the administrative board or supervisory board of the 
IM. While EU law currently in force implies that RUs do not control the decision making 
process of IMs in relation with essential functions, this option would foresee that all RUs 
active on a network would be entitled to a seat in the supervisory board or management 
of the IM responsible for this network. RUs would therefore take a direct and active part 
in the management of the infrastructure. 

•  Option C2: Coordination bodies. This option foresees a creation of coordination bodies 
representing  all  RUs  and  providing  opinions  to  IMs.  RUs  would  not  participate  in  the 
administrative  board  or  supervisory  board  of  the  IM,  preserving  thereby  the  existing 

93 

 
principle of decision-making independence. However, in order to align strategies and to 
address  jointly  issues  which  cannot  be  solved  by  the  implementation  of  the  charging 
principles,  performance  regime  foreseen  by  the  Recast  (such  as  operational  costs  or 
capacity under normal conditions), they would be part of a consultative body allowing a 
constant exchange of information between IMs and RUs. 

•  Option  C3: Financial  incentives  alignment. Under this option financial incentives are 
introduced for both RUs and IMs to ensure that they contribute to the jointly established 
efficiency targets. 

3.1.3.  Options discarded at an early stage 

None. 

3.1.4.  Screening of options 

The initial set of options has been screened in terms of stakeholder support, effectiveness in 
achieving  the  operational  objectives,  efficiency  and  compliance  with  the  subsidiarity 
principle.  In  addition,  the  overall  feasibility  has  been  verified,  i.e.  whether  the  options  are 
legally and technically possible to pursue. Brief explanation relating to the scores is presented 
in the column 'motivation'. 

94 

 
 
 
 
 
 
 
 
 
 
Key of scores applied: 
--- … - 

decreasingly negative 

0 

neutral 

+ … +++ 

increasingly positive 

/ 

√ 

~ 

not relevant 

complying 

not complying 

Effectiveness in 
terms of 
operational 
objectives 

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Option C0: 
Baseline 

- 

0 

/ 

/ 

0 

√ 

√ 

Option C1: 
Participation to 
IM board 

+ 

++ 

/ 

- 

+ 

~ 

~/
√ 

Option C2: 
Coordination 
bodies 

++
+ 

++ 

/ 

+ 

++  √ 

√ 

+ 

++ 

/ 

- 

0 

~ 

~ 

Option C3: 
Financial 
incentives 
alignment 

95 

Motivation 

to 

IMs 

specific 

incentives 

addressing 

Measures foreseen in the Recast will provide 
some  additional 
to 
improve  their  performance,  but  would  not 
operational 
allow 
problems  or  ensuring  communication  of 
strategic needs of users. 
This option would ensure alignment between 
IM  and  RUs  and  non-discriminatory  access 
to  information.  However  it  may  still  create 
problems  of  conflicts  of 
interest  and 
discriminations in IM decisions depending on 
the weight of each RU in the board. It would 
be  a  burdensome  solution  and  difficult  to 
implement  as  the  number  and  identity  of 
the RUs operating on a network may evolve. 
This option is largely supported by 
stakeholders. It should ensure IM-RUs 
alignment while preserving their decision-
making independence and thereby 
preventing conflicts of interest. The creation 
of a coordination body is the less 
burdensome option easily adaptable to the 
characteristics of individual IMs.  
This option can be an effective solution for 
incentive alignment between IM and RU. 
However, depending on how incentives are 
designed, they may be sources of 
discrimination between IMs. The efficiency 
of this measure largely depends on the way 
incentives are adapted to the individual IM 
which may be considered a matter of 
subsidiarity. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Along  with  the  baseline  scenario,  Option  C2  will  be  retained  for  further  analysis  of 
different policy scenarios in the impact assessment. 

3.1.5.  Aspects of implementation 

As explained above, ad hoc consultations between IMs and RUs are already required by EU 
law and IMs have in place different arrangements to dialogue with infrastructure users. Under 
Option  C2,  the  formalisation  of  a  coordination  body  would  be  required.  Its  role  and  its 
purpose  would  be  defined  by  EU  law.  In  accordance  with  the  principle  of  subsidiarity,  the 
adoption of more detailed provisions would be left to Member States, subject to the principle 
of transparency and non-discrimination between its members. 

3.2. 

FUNCTION (F) OPTIONS: CONSISTENT MANAGEMENT OF IM FUNCTIONS 

3.2.1.  Context 

The  capacity  of  an  IM  to  develop  and  optimise  transport  infrastructure  and  ensure  quality, 
reliability,  flexibility  and  customer  orientation,  depends  on  its  actual  control  over  all  key 
infrastructure functions. According to current legislation the two essential functions of IM are 
path allocation and track access charging. However, there are substantial interactions between 
these  essential  functions  and  other  key  IM  functions,  in  particular  traffic  management, 
infrastructure  maintenance  and  development.  Their  distribution  among  different  market 
players can lead to inconsistencies in management and increased coordination costs. 

3.2.2.  Description of options 

The  options  below  are  defined  to  identify  an  optimal  portfolio  of  IM  functions  ensuring  its 
control over all functions necessary for efficient performance. 

•  Option F0: Baseline scenario - do nothing – EU law foresees the possibility to allocate 
IM functions to different entities and stipulates explicitly that existing essential functions 
may  be  allocated  to  independent  charging  and  allocation  bodies,  distinct  form  the  IM. 
There  is  no  specific  incentive  to  ensure  a  consistent  management  of  these  different 
functions when they are allocated to different entities. 

•  Option  F1:  New  coordination  mechanism.  This  option  would  maintain  the  current 
possibility to allocate IM functions to different entities but foresee the establishment of a 
mechanism to oblige these entities to better coordinate the management of IM functions. 

•  Option F2: Unified IM. Under this option, all IM functions – path allocation and track 
infrastructure  maintenance  and 
traffic  management, 

access  charging,  but  also 
development are put under the responsibility of a single entity, the unified IM. 

3.2.3.  Options discarded at an early stage 

None 

96 

 
3.2.4.  Screening of options 

Criteria applied to screening of options are the same as in previous section. 

Effectiveness in 
terms of 
operational 
objectives 

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Option F0: 
Baseline 

- 

/ 

-- 

- 

- 

√ 

√ 

Option F1: New 
coordination 
mechanisms 

- 

/ 

+ 

0 

+ 

√ 

√ 

Option F2: 
Unified IMs 

++
+ 

/ 

+++  + 

++  √ 

√ 

Motivation 

This  option  does  not  ensure  a  consistent 
management  of  the  different  IM  functions 
and may create conflicts of interest as some 
IM  functions  may  be  controlled  by  a  RU.  It 
raises  costs  as  interfaces  between  the 
different  entities  in  charge  of  IM  functions 
have to be established. 
This  option  could  be  neutral  in  terms  of 
conflicts  of  interest  and  improve  to  some 
extent consistency in the management of IM 
functions. However the effectiveness of such 
a  measure  is  lower  than  the  one  of  option 
F2  and  its  efficiency  is  limited  by  the 
persistence  of 
the 
different entities in charge of IM functions. 
This is the preferred option for stakeholders. 
It ensures full consistency in the 
management of IM functions and reduces 
the risk of conflicts of interest as all 
functions are de facto subject to the same 
level of independence. It is the most 
efficient option as interfaces are removed. 

interfaces  between 

Option F2 will be retained for further analysis. 

3.2.5.  Aspects of implementation 

Option  F2  will  require  that  in some  Member  States  (in  particular  Estonia,  France,  Hungary, 
Lithuania, Luxembourg, Slovenia), the responsibility of specific IM functions are transferred 
from the incumbent to the IM (eg. in France the "Direction des Circulations Ferroviaires" in 
charge of traffic management and "SNCF Infra", in charge of maintenance activities, should 
become part of the IM, Réseau ferré de France). In some cases, such change will necessitate 
an important transfer of staff (nearly 50.000 in France) and resources. It will also lead to some 
reorganisation  of  the  IM  as  existing  interfaces  would  disappear.  However  it  is  not  expected 
that  such  changes  would  have  an  impact  on  the  working  conditions  of  the  staff  concerned 
(applicable social rules are normally the same for IM and RUs staff). 

97 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3.3.  CROSS-BORDER COORDINATION (CB) OPTIONS: CROSS-BORDER INFRASTRUCTURE 
MANAGEMENT 

3.3.1.  Context 

An  important  condition  for  completing  the  Single  European  Rail  Area  is  well  functioning 
cross-border  cooperation  of  IMs.  National  infrastructure  management  often  neglects 
interoperability and cross-border infrastructure in favour of the needs of domestic passenger 
and  freight  traffic.  Infrastructure  managers  neglect  the  impact  of  their  decisions  on  the 
business  situation  of  international  traffic  and  traffic  beyond  their  network  and  do  not 
efficiently  cooperate  to  cope  with  traffic  disruptions  and  temporary  traffic  restrictions, 
especially when more than two infrastructure managers are concerned. Cooperation activities 
under the Rail Freight Regulation and under the Recast will address these issues only partially. 
Therefore  there  is  still  a  need  to  address  coordination  problems  related  to  development, 
maintenance  and  operations  beyond  EU  rail  freight  corridors  and  to  ensure  consistency 
between the existing coordination activities. 

3.3.2.  Description of options 

In this context, the following options have initially been considered: 

•  Option  CB0:  Baseline  scenario  –  do  nothing.  The  implementation  of  the  Rail  Freight 
Regulation  requires  the  establishment  of  specific  European  rail  freight  corridors  with  a 
common  "corridor  structure".  The  Recast  will  oblige  IMs  to  create  IMs  associations  to 
coordinate their charging and path allocation practices or to perform these tasks on their 
behalf. 

•  Option  CB1:  Establishment  of  a  EU  network  of  IMs.  This  option  consists  in  the 
institutionalisation of a network of national IMs to exchange best practices, in particular 
on operational and infrastructure development issues. 

•  Option  CB2:  Creation  of  an  EU  structure  integrating  IMs. This option foresees the 
establishment  of  a  structure,  such  as  a  European  Economic  Interest  Grouping  (EEIG) 
integrating  the  existing  national  Infrastructure  Managers  into  a  single  European 
Infrastructure Manager. 

3.3.3.  Options discarded at an early stage 

None. 

3.3.4.  Screening of options 

The initial set of options has been screened in terms of stakeholder support, effectiveness in 
achieving  the  operational  objectives,  efficiency  and  compliance  with  the  subsidiarity 
principle.  In  addition,  the  overall  feasibility  has  been  verified,  i.e.  whether  the  options  are 
legally and technically possible to pursue. Brief explanation relating to the scores is presented 
in the column 'motivation'. 

98 

 
Key of scores applied: 

--- … - 
0 
+ … +++ 
/ 
√ 
~ 

decreasingly negative 
neutral 
increasingly positive 
not relevant 
complying 

not complying 

Effectiveness in 
terms of operational 
objectives 

n
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√ 

- 

- 

0  ++ 

+ 

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Option CB0: 
Baseline 

Option CB1: 
Establishment of 
a EU network 

Option CB2: 
Creation of an 
EU structure 
integrating IMs 

Motivation 

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F

0 

Some  stakeholders  favour  the  baseline  to 
focus on the implementation of existing law 
(rail freight corridors and Recast). 

- 

++  This Option CB1 is the preferred option for 
stakeholders.  While  being  neutral  on 
parallel objectives (IMs-RUs  alignment and 
distortion  of  competition),  it  will  improve 
efficiently  IMs  ability  to  optimise  the 
infrastructure  management.  Option  CB1 
would  develop  and  extend  existing 
practices  and  does  not  raise  problems  of 
feasibility  
Integration of IMs under a single EU 
structure will be the most effective 
measure to ensure coordination of 
investments and operational practices. It 
would also prevent conflicts of interest that 
may occur with national incumbent. 
However this option is not supported by 
stakeholders in the short term as it may 
affect negatively the relation with local 
users. Because IMs are essentially financed 
and regulated by national authorities who 
have a more in-depth knowledge of local 
markets, this Option raises problems of 
subsidiarity and feasibility. 

Along  with  the  baseline  scenario,  Option  CB1  will  be  retained  for  further  analysis  of 
different policy scenarios in the impact assessment. 

3.3.5.  Aspects of implementation 

Options  CB2  and  CB3  are  expected  to  have  very  different  implications  in  terms  of 
implementation. The EU network of IMs under Option CB2 would require the organisation of 
regular  meetings  which  could  be  done  with  the  support  of  and  under  the  auspices  of  the 
Commission. Such network would develop its activities with any permanent joint secretariat, 
at least in short term. 

99 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Option  CB2  would  imply  the  creation  of  a  single  entity,  such  as  an  EEIG,  responsible  for 
infrastructure management. Responsibilities for the historical debts of national IMs, allocation 
of public funding provided by individual Member States to specific projects and employment 
of  national  IMs  staff  could  raise  serious  difficulties  of  implementation.  Another  difficulty 
relates to the fact that an increasing number of key international rail links are owned and/or 
managed by private entity (PPP, concession etc.) which could probably not be integrated in a 
single EU entity. 

SEPARATION  (S)  OPTIONS:  ENSURING  ADEQUATE  SEPARATION  OF  IMS  TO  PREVENT 

3.4. 
CONFLICTS OF INTEREST 

3.4.1.  Context 

The current separation requirements (legal, organisational and decision-making independence 
for  the  essential  functions)  do  not  yet  prevent  completely  the  conflicts  of  interest  and 
discriminatory  practices  as  regards  access  to  rail  infrastructure  and  related  services.  In 
addition,  the  existing  legal  framework  has  proven  to  be  insufficient  to  prevent  cross-
subsidisation  from  infrastructure  managers  to  incumbents.  The  underlying  reasons  are  two-
fold:  firstly,  current  legal  provisions  leave  room  for  diverging  interpretation  and  secondly, 
even if fully implemented and enforced, full financial transparency would be problematic to 
achieve. 

3.4.2.  Description of options 

The options below consider whether and how the separation requirements should be revised. 

•  Option  S0:  Baseline  scenario  -  do  nothing.  Baseline  means  decision-making 
independence for the essential functions, although interpreted differently by Member 
States.  The  Commission  detailed  its  interpretation  of  the  practical  implications  of 
existing requirements in Annex V of the Communication on the implementation of the 
First Railway Package83, however some Member States remain reluctant to accept this 
interpretation.  ECJ  is  expected  to  express  its  view  on  this  issue  in  spring  2013. 
Regarding  financial  transparency,  the  Recast  provides  for  clear  competences  and 
additional  means  for  regulatory  bodies  to  monitor  the  existing  account  separation 
obligations. 

•  Option  S1:  New  competences  for  regulatory  bodies.  This  option  foresees  that 
regulatory bodies are tasked with controlling that existing independence requirements 
in organisational and decision-making terms are respected. In this framework any RU 
would  have  the  right  to  appeal  to  the  national  rail  regulator  if  it  believes  that  these 
independence requirements are not respected. 

•  Option  S2:  Clarify  existing  EU  law.  This  would  mean  revision  of  the  existing 
provisions  in  the  Directive  so  that  the  interpretations  provided  by  Annex  V  of  the 

83 

Report from the Commission to the European Parliament, the Council, the European Economic 
and Social Committee and the Committee of the Regions on the implementation of the first 
railway package, COM(2006)189 

100 

 
                                                 
Communication  on  the  implementation  of  the  First  Railway  Package  would  become 
indisputable.  This  would  clarify  in  particular  that  the  existing  independence 
requirements  in  organisational  and  decision-making  terms  require  in  particular  strict 
separation  between  the  holding  and  IM  supervisory/management  board,  cooling  off 
periods  for  IM  board  members,  own  staff,  IT  tools  and  premises.  In  this  option,  the 
competences for regulatory bodies are also extended as foreseen under Option S1. 

•  Option  S3:  Institutional  separation  between  IM  and  RUs.  Under  this  option,  the 
same persons are not entitled to control, hold any interest or exercise any right over an 
IM  and  a  RU.  When  both  IM  and  RU  are  public  entities,  distinct  public  authorities 
must exercise such control over them. 

3.4.3.  Options discarded at an early stage 

Some  stakeholders  proposed  an  option  of  appointing  compliance  officers  in  integrated 
structures.  In  practice  the  supervisory  board  of  integrated  IM  would  appoint  a  compliance 
officer responsible for monitoring the implementation of any specific measures taken within 
the integrated structure to ensure non-discriminatory behaviour. The compliance officer would 
also issue recommendations and report on these measures to the supervisory board and to the 
regulatory body. However, in practice this measure would not guarantee remedy to conflicts 
of  interests.  Compliance  officers  remain  appointed  by  the  holding  compromising  their 
independence or their ability to influence strategic decisions, as suggested by past experience 
in Germany. 

3.4.4.  Screening of options 

Effectiveness in 
terms of 
operational 
objectives 

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Option S0: 
Baseline 

0 

0 

0 

-- 

0 

√ 

√ 

101 

Motivation 

Experience  shows  that  existing  separation 
requirements  –  as  interpreted  by  some 
Member  States  -  have  not  been  able  to 
avoid  the  persistence  of  conflict  of  interest. 
As  regards  financial  transparency,  despite 
the  improvements  provided  by  the  Recast, 
monitoring  of  the  use  of  public  finances 
within 
and 
identification of cross-subsidisation practices 
will  remain  a  specifically  complex  and 
difficult exercise, even for the most powerful 
rail regulators. 

integrated 

structures 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
+ 

0 

+ 

+ 

- 

√ 

√ 

Option S1: New 
competences for 
regulatory 
bodies 

Option S2: 
Clarify existing 
EU law 

++  + 

+ 

++  + 

√ 

√ 

Option S3: 
Institutional 
separation 
between IM and 
RUs. 

--
/++
+ 

--
/++ 

++ 

++
+ 

++  √ 

√ 

considerably 

strengthened 

Incumbents  in  integrated  structures  have 
called  for  an  increased  regulatory  oversight 
as  an  alternative  to  further  separation. 
However this option does not differ radically 
from  the  baseline  since  the  Recast  has 
already 
the 
powers  of  regulatory  bodies  (including  for 
the  monitoring  of  account  separation).  The 
effectiveness of such option is limited by the 
fact  that  regulatory  bodies  can  only  act  ex 
post,  which  means 
that  violation  has 
already  taken  place.  In  addition  experience 
proves  that  it  is  specifically  difficult  for 
regulatory bodies to provide evidence of the 
existence  of  collusion  or  cross-subsidisation 
between the IM and the incumbent. 
More straightforward provisions would allow 
the existing separation requirements to be 
implemented in a more uniform and 
effective manner. This would allow 
prevention of some persistent discrimination 
practices and facilitate the management of 
IM functions in a consistent manner, as 
holdings' interference in IM decisions should 
be removed. However, as regards financial 
transparency and potential cross 
subsidisations in holding structures, their 
monitoring by regulatory bodies remains a 
very complex and lengthy process requiring 
significant resources and exceptional 
expertise by regulators. This option does 
not allow to remove completely the 
distortion of competition between RUs as 
the ownership of infrastructure may need 
better financing conditions. 
The views of stakeholders vis-à-vis 
institutional separation are very polarised. 
Some incumbents, in particular those part 
of an integrated structure, and workers in 
such structures oppose it arguing that it 
would reduce staff mobility and increase 
risks of misalignment between IM and RUs. 
Other parties are of the view that a fully 
independent IM is on the contrary better 
placed to take into account the needs of all 
RUs in a neutral way and play the role of 
system integrator. This option is the most 
effective option to guarantee the absence of 
discrimination and cross-subsidisation. 

Options S2 and S3 will be retained for further analysis. 

3.4.5.  Aspects of implementation 

Options  S2  and  S3  are  expected  to  have  very  different  implications  in  terms  of 
implementation.  While  Option  S2  implies  additional  competences  and  resources  for  the 
regulatory bodies, Option S3 should reduce the number of appeals, the need for investigations 
and therefore it would be less demanding for regulatory bodies. 

Option  S2  would  allow  some  Member  States  to  retain  existing  holding  structures  but  both 
Options  S2  and  S3  would  oblige  them  to  review  management  boards'  appointment  and 
dismissal rules. In both cases, Member States will have to ensure that IMs have their own staff 
and premises as well as the resources necessary to perform their functions independently. In 

102 

 
 
addition Option S3 implies the transfer of control over the IM legal entity from the holding to 
a public authority or another entity over which the incumbent does not exercise control. 

SEPARATED  FUNCTIONS  (SF)  OPTIONS:  FUNCTIONS  SUBJECT  TO  THE  SEPARATION 

3.5. 
REQUIREMENTS 

3.5.1.  Context 

As explained in section 3.3 current separation requirements apply only to essential functions, 
being  currently  capacity  allocation  and  infrastructure  charging.  Beyond  these  essential 
functions, the insufficient degree of separation for other activities in integrated structure, such 
as traffic management, maintenance and development causes conflicts of interest. 

3.5.2.  Description of options 

In this context the following policy options have been identified: 

•  SF0: Baseline scenario – do nothing. The separation requirement applies only to the two 
functions currently defined as essential, path allocation and track access charging. Other 
functions may be managed under the control of a RU. 

•  SF1  Traffic  management  also  covered  by  separation  requirement.  Traffic 
management, a function which cannot be dissociated from path allocation and has a very 
important potential for discrimination, is added to the list of essential functions subject to 
separation requirements. 

•  SF2: Traffic management and maintenance also covered by separation requirement. 
Essential functions subject to separation requirements are extended to include both traffic 
management  and  the  maintenance  of  new  infrastructure  considering  the  inter-relation 
between the two and their high potential for discrimination. 

•  SF3: All IM functions subject to the same separation requirements. This would mean 
that  path  allocation  and  track  access  charging  as  well  as  traffic  management, 
infrastructure  maintenance  and  development  are  subject  to  the  same  separation 
requirements,  independently  of  the  fact  that  these  functions  are  performed  by  the  same 
entity or by different ones. 

3.5.3.  Options discarded at an early stage 

None. 

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3.5.4.  Screening of options 

Effectiveness in 
terms of operational 
objectives 

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Option SF0: 
Baseline 

-- 

0 

--- 

0 

0 

√ 

√ 

Option SF1: 
Current 
essential 
functions+ 
traffic 
management 
separated 

Option SF2: 
Current 
essential 
functions traffic 
+management 
maintenance 
separated 

Option SF3: all 
IM functions 
separated 

+ 

+ 

+ 

+ 

+ 

√ 

√ 

++ 

+ 

++ 

++ 

+ 

√ 

√ 

+++  +++  +++  +++ 

++  √ 

√ 

Motivation 

cannot 

traffic  management 

The changes in the Recast do not modify the 
scope  of  the  IM 
functions  subject  to 
separation  requirements  and  therefore  do 
not  prevent  discrimination  in  infrastructure 
maintenance and development decisions. As 
different  functions  are  subject  to  different 
separation  requirements,  this  option  has  a 
negative  impact  on  the  consistency  of  IM 
functions management. 
A  large  majority  of  stakeholders  recognise 
that 
be 
dissociated  from  capacity  allocation  and 
should  therefore  be  subject  to  the  same 
separation  requirements.  This  view  is  only 
contested by some incumbents who wish to 
maintain  control  over  on  this 
function 
arguing  that  RUs  operational  constraints 
have  to  be  taken  into  account  in  traffic 
management.  
A large majority of stakeholders argue that 
maintenance planning is a potential source 
of discriminations between incumbent and 
new entrants and applying separation 
requirements to this function is an effective 
way to prevent them. As even more 
functions are subject to the same separation 
requirements, this option has a positive 
impact on the consistency of IM function 
management.  
Applying the same separation requirements 
to all IM functions effectively prevents 
conflicts of interest and contributes to the 
consistent management of these functions. 
It is the most efficient measure as it 
facilitates the grouping of all functions 
under the responsibility of one single entity 
without problems of interface and 
coordination.  

Option SF3 will be retained for further analysis. 

3.5.5.  Aspects of implementation 

Applying the same separation requirements to all IM functions does not necessarily imply that 
they  are  managed  by  one  single  entity.  Its  implications  in  terms  of  implementation  depend 
largely  on  the  choice  of  separation  requirements  retained  under  options  S  (see  above). 
Furthermore,  separate  functions  provide  the  basis  for  an  exchange  of  best  practice  and 

104 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
monitoring  of  the  progress  within  the  network  of  EU  infrastructure  managers,  notably  in 
terms of user orientation as regards quality, costs and prices of infrastructure services. 

4. 

SUMMARY OF RETAINED OPTIONS 

The table below provides an overview of all the screened and retained options in four groups. 

Policy options considered 

Retained?

Problem element 

Insufficient market 
orientation of IMs 

Respective 
category of 
options 

C options: 
Coordination 
between IM and 
RUs 

IM functions 
distributed among 
different actors 

F options: 
Consistent 
management of 
key functions 

Option C0: Baseline – improvements as foreseen by 
the Recast 

Option C1: Participation to IM board 

Option C2: Coordination bodies 

Option C3: Financial incentives alignment 

Option F0: Baseline - existing essential functions are 
clarified by the ECJ 

Option F1: New coordination mechanisms 

Option F2: Unified IMs 

Cross-border IM 
cooperation not 
sufficient 

CB options: 
Cross-border IM 
management 

Option CB0: Baseline - implementation of existing 
EU law (the Recast, regulation of rail freight corridors, 
etc.) 

Option CB1: establishment of an EU network of IMs 

Option CB2: Baseline: creation of an EU structure 
integrating national IMs 

Conflicts of 
interests of IMs 

S options: Way of 
separation of IMs 
from RUs 

Option S0: Baseline - decision-making independence 
for the essential functions, interpretation dependent on 
ECJ ruling 

Equal access needs 
to be assured to all 
key functions 

SF options: 
Functions subject 
to the separation 
requirements 

Option S1: New competences for regulatory bodies 

Option S2: Clarify existing EU law 

Option S3: Institutional separation between IM and 
RUs. 

Option S4: Compliance officer in integrated structure 

SF0: Baseline – separation requirement applies only to 
path allocation and track access charging 

Option SF1: Current essential functions+ 
maintenance separated 

Option SF2: Current essential functions 
+maintenance+ development separated 

Option SF3: All IM functions separated 

105 

√ 

√ 

√ 

√ 

√ 

√ 

√ 

√ 

√ 

√ 

√ 

 
 
 
 
 
 
 
 
 
 
 
 
 
5. 

CONSTRUCTION OF POLICY SCENARIOS 

Of 19 options screened in 5 groups, 10 have been retained including 5 baseline scenarios. The 
combination of all these options could create theoretically 48 scenarios which would however 
be impracticable to assess. To reduce complexity, the following arguments are considered to 
reduce the number of possible scenarios: 

1.  Any  of  the  baseline  options  in  combination  with  non-baseline  options  in  other  groups 
would not be sustainable as the non-baseline options in each group call for action in the 
other  groups.  E.g.  unified  IMs  (F2)  would  require  that  similar  separation  requirements 
would  apply  to  all  IM  functions  (SF3),  not  only  to  the  existing  essential  functions  as 
foreseen in S0. Similarly all IM functions being subject to separation requirements (SF3) 
would increase the need for coordination bodies (C2). Therefore all four baseline options 
are  maintained  only  in  the  Baseline  Scenario,  necessary  for  the  comparison  of  other 
policy scenarios. 

2.  While  all  options  discussed  under  each  group  make  sense  when  taken  in  isolation,  the 
policy choices retained in some groups may influence or determine the validity of options 
in another group. Consequently the interaction of policy choices retained for 

a)  F options - Consistent management of key functions: "unified IM responsible for all 

IM functions"  

and 

b)  S options – Measure preventing conflicts of interest: "clarifying existing EU law (re-

enforced decision making independence) or institutional separation" 

inherently mean that any separation requirements apply to all IM functions as foreseen under 
Option SF3. 

This leads to the three policy scenarios on top of the baseline: 

•  Scenario  1 - an IM-users coordination body is created, IM functions are unified, an EU 
network  of  IMs  is  created  and  all  IMs  functions  are  subject  to  the  existing  separation 
requirements;. 

•  Scenario 2 - an IM-users coordination body is created, IM functions are unified, an EU 
network  of  IMs  is  created  and  all  IM  functions  are  subject  to  the  existing  separation 
requirements  with  their  concrete  implications  according  to  the  Commission  clarified  in 
EU law ;. 

•  Scenario 3 – an IM-users coordination body is created, IM functions are unified, an EU 
network  of  IMs  is  created  and  all  IM  functions  are  subject  to  institutional  separation 
requirements. 

Their composition is described in detail in the table below: 

106 

 
Category of options 

Baseline 
Scenario 

Scenario 1 

Scenario 2 

Scenario 3 

Coordination 
between IM and RUs 

Consistent 
management of key 
functions 

Cross-border IM 
management 

Option C0: 
Improvements as 
foreseen by the 
Recast 

Option F0: 
Existing essential 
functions are 
clarified by the 
ECJ, but scope 
remains limited 

Option SC0: 
Implementation of 
existing EU law - 
the Recast, 
regulation of rail 
freight corridors. 

Option C2: 
Coordination 
bodies 

Option C2: 
Coordination 
bodies 

Option C2: 
Coordination 
bodies 

Option F2: Unified 
IMs 

Option F2: Unified 
IMs 

Option F2: Unified 
IMs 

Option CB1: 
Establishment of 
an EU network of 
IMs 

Option CB1: 
Establishment of 
an EU network of 
IMs 

Option CB1: 
Establishment of 
an EU network of 
IMs 

Way of separation 

Option S0: 
Existing separation 
requirements 

Option S0: 
Existing separation 
requirements 

Option S3: 
Institutional 
separation 

Option S2: Clarify 
in EU law the 
concrete 
implications of 
existing separation 
obligations 

Functions subject to 
the separation 
requirements 

SF0: Only path 
allocation and 
track access 
charging separated 

Option SF3: All IM 
functions 
separated 

Option SF3: All IM 
functions 
separated 

Option SF3: All IM 
functions separated 

All  three  scenarios  foresee  establishment  of  coordinating  bodies  which  should  enhance  the 
interaction between infrastructure users and IMs and the creation of an EU network of IMs to 
facilitate cross-border cooperation. They also provide that all key functions should be unified 
under  the  IM.  However,  when  Scenario  1  would  continue  to  apply  existing  separation 
requirements  (to  a  larger  number  of  functions),  Scenario  2  proposes  to  clarify  the  existing 
rules and thus achieve a reinforcement of organisation and decision making independence and 
Scenario 3 foresees a more fundamental institutional separation of all key functions. 

These three scenarios, along the baseline scenario, are assessed in more detail in Section 6 of 
the IA report. 

107 

 
  
ANNEX V 

THE ANALYSIS OF THE COSTS AND BENEFITS OF FURTHER SEPARATION 

1. 

INTRODUCTION 

This annex explores the costs and benefits of separation, as they occur depending on the way 
the  separation  requirements  are  applied.  It  should  be  noted,  that  the  principle  of  vertical 
separation  is  already  established  in  the  EU  law  and  need  for  separation  as  such  is  not 
discussed.  Instead  the  discussion  focuses  on  the  way  of  separation  –  i.e.  how  IM  functions 
shall be separated in a most efficient and effective way. 

The  analysis  distinguishes  between  the  three  main  categories  of  costs  directly  rising  from 
separation requirements: 

– 

Implementation  costs,  which  are  related  to  one-off  arrangement  to  establish  required 
structures,  e.g.  creation  of  "Chinese  walls"  (safeguards  necessary  for  ensuring  the 
decision-making  and organisation independence) between entities being the parts of the 
same vertically integrated company; or changes in the ownership structure. 

–  Transaction costs - the cost associated with exchange of goods or services and incurred 
in  overcoming  market  imperfections.  Transaction  costs  cover  a  wide  range  of  costs: 
communication  charges,  legal  fees,  informational  cost  of  finding  the  price,  etc.  In 
railways some of these transaction costs are related to core operations, such as including 
timetable  coordination  and 
long-term  capacity  allocation,  security  management, 
investment  planning.  In  addition  to  the  operation  related  costs  mentioned,  transaction 
costs  could  also  derive  from  the  need  of  establishing  business  relationship,  including 
contractualisation,  establishment  of  partnerships,  negotiation,  performance  monitoring, 
and alignment of incentives. To justify separation, the competition driven efficiency gains 
resulting from separation should be higher than additional transaction costs between the 
IM and the incumbent operator. 

–  Regulatory  costs  related  to  regulatory  oversight  and  enforcement  by  competent 

authorities. 

In  addition  the  costs  and  benefits  linked  to  discrimination,  financial  transparency  and 
scope efficiencies of integrated and separated systems are discussed. 

Below  is  recalled  the  content  of  the  the  policy  scenarios  combining  the  efficiency 
(coordination) measures with different level of separation, for which separation related costs 
and benefits will be assessed. 

–  Baseline – No additional coordination measures, existing separation requirements (legal, 
organisational and decision-making independence) applicable for the essential functions 
(path  allocation  and  infrastructure  charging).  It  should  be  noted,  that  some  costs 
associated  to  legal  separation  but  also  some  costs  resulting  from  decision-making  and 
organisational separation are supposed to be part of the Baseline Scenario. 

–  Scenario 1 – focussing only on the efficiency measures - IM functions are unified (i.e. 
in  addition  to  current  essential  functions  also  maintenance,  investments  and  traffic 
management)  and  coordination  bodies  created  to  mitigate  loss  in  scope  efficiencies;  all 
IMs functions are subject to the existing separation requirements; 

–  Scenario  2  –  efficiency  measures  and  better  enforcement  of  existing  separation 
principles  -  like  Scenario  1,  but  the  practical  consequences  of  the  existing  separation 
principles will be clarified to allow better enforcement; 

108 

 
–  Scenario  3  –  efficiency  measures  and  new  institutional  separation  requirements  – 
like Scenario 1, but all IM functions are subject to institutional separation requirements 

No change of separation requirements is foreseen under Scenario 1 which focuses exclusively 
on  IM  efficiency  measures.  Therefore  the  analysis  of  separation  related  costs  concentrates 
essentially  to  the  comparison  of  Scenario  2  (enforcement  of  existing  separation  principles) 
and Scenario 3 (institutional separation). Measures taken under Scenario 1 are still considered 
to the extent they include unification of all IM functions and creation of coordination bodies. 

2.  CONSTRAINTS 

The IA support study concluded that, evidence on which to quantify the impacts of different 
governance arrangements is limited and, as the stakeholder consultation and literature review 
illustrates, has been interpreted in different ways by different parties. Fundamental difficulties 
include: 

–  Limited  empirical  evidence  -  no  Member  State  has  unbundled  exactly  as  envisaged  in 

Scenario 2 or 3 without simultaneously making other changes. 

–  Access to data - the costs of separation is not monitored in sufficient detail to determine 
the  difference  between  distinct  approaches,  for  example  institutional  separation  as 
compared with legal, decision-making and organisational separation. 

–  The benefits, which include a reduction in or elimination of discriminatory behaviour as 
well  as  greater  financial  transparency,  cannot  be  measured  easily  due  to  the  mixed 
impacts with other contextual factors and the lagged effects on observed outcomes. 

In  these  circumstances,  no  full  cost  benefit  analysis  can  be  provided.  Instead  an  attempt  is 
made  to  compare  the  scale  of  potential  costs  and  benefits  of  separation  in  case  of  different 
governance models. 

3.  RESULTS OF THE ASSESSMENT 

3.1. 

Implementation costs 

There is evidence that restructuring costs are likely to be limited when compared with total 
industry costs. Even in Great Britain, where restructuring and privatisation went much further 
than requirements set by EU law, total set up costs only amounted to no more than 3.5%84 of 
total annual industry costs. 

The table below summarises the requirements and their implications in terms of potential cost 
impacts. 

84 

IA support study. 

109 

 
                                                 
TABLE 1 

One-off cost implications of separation 

Requirement 

Cost implication 

Compliance to be monitored by independent 
authority or third party 

No additional costs – regulatory bodies 
already created under existing legislation 

Statutory/contractual independence of entity 
entrusted with essential functions, maintenance 
planning and investment from other entities in 
the same group 

Establishing the necessary statutory or 
contractual provisions is an 
administrative change, the costs of which 
are likely to be negligible 

Members of the board of the entity entrusted 
with essential functions, maintenance planning 
and investment should not be on the board of 
any entity within the same group 

2

o
i
r
a
n
e
c
S

Members of the board of the entity entrusted 
with essential functions, maintenance planning 
and investment barred from serving on the 
board of any entity within the same group for a 
number of years 

The management board of the entity entrusted 
with essential functions, maintenance planning 
and investment must be appointed under clear 
conditions and legal commitments to ensure the 
necessary degree of independence 

The entity entrusted with essential functions, 
maintenance planning and investment must 
have its own staff and be located in separate 
premises (or be subject to protected access) 
and access to its information systems must be 
protected 

All of the requirements of U1 as well as change 
in ownership needed to secure institutional 
separation of infrastructure management and 
train operations  

2

o
i
r
a
n
e
c
S

Could require the recruitment of 
additional board members depending on 
how existing boards are currently 
comprised – one-off costs of recruitment 
likely to be negligible 

No additional costs beyond those already 
identified above 

This is an administrative change which 
would not result in material additional 
costs, although it could lead to further 
recruitment in circumstances where a 
new board had to be appointed in order 
to comply 

Could require changes in staff allocation 
and administration as well as 
modification of IT systems depending on 
the degree of functional separation 
already implemented  

Primarily the costs of legal activity 
required to establish separate ownership 
although there may also be costs arising 
from the reallocation of staff and 
functions from the holding entity, 
depending on the extent of its previous 
functions 

Implementation costs of Scenario 3 

In the case of Scenario 3, set-up costs would arise from changes in the ownership of existing 
legal  entities  and  associated  contractual  relationships.  The  additional  costs  are  likely  to  be 
limited given that the degree of organisational and decision-making separation adopted in the 
majority of Member States in response to existing legislation is already substantial. 

Furhter  evidence  on  which  to  quantify  the  impacts  of  different  governance  arrangements  is 
limited.  The  cost  of  separating  functions  will  depend  on  whether  and  how  they  were 
integrated  under  the  former  structure.  Moreover,  in  larger  railway  organisations,  the 
incremental costs will depend on the existing management configuration: integrated railways 
may  be  organised  by  engineering  function,  or  by  regional  or  route,  or  by  business  market, 
with different degrees of subcontracting of functions and activities to external suppliers. The 

110 

 
 
 
 
 
 
costs of separation may be borne by a number of bodies, over a period of several years, and 
are not collated or reported in sufficient detail to allow extrapolation. 

From the available evidence, the IA support study looked into following cases: 

Rail reform in Great Britain 

Some  of  the  costs  of  restructuring  the  rail  industry  were  identified  and  reported  in  Great 
Britain, where however restructuring of rail sector was very radical and therefore the observed 
costs  should  substantially  exceed  those  of  the  simpler  forms  of  separation  envisaged  under 
Scenario 2 or Scenario 3.  

The  restructuring  costs  incurred  by  both  British  Rail  and  Railtrack  (the  initial  IM, 
subsequently replaced by Network Rail) in 1993-94 and 1994-95 are shown in Table 2. 

TABLE 2  Restructuring and privatisation costs of British Rail 

£ million (current prices) 

1993-94 

1994-95 

British Rail 

Railtrack 

Total 

As percentage of total industry costs 

92 

92 

2.6% 

85 

46 

131 

3.5% 

Source: Hansard, 26 November 1996, volume 286, British Rail Annual Report 1993-94 

The  period  covered  by  the  table  excluded  initial  feasibility  studies  but  included  all  of  the 
restructuring  activity,  incurred  within  those  organisations  (but  not  others,  such  as  the 
Department of Transport which specified and oversaw the process). These include the creation 
of  Railtrack  as  a  separate  legal  entity,  and  part  of  the  subsequent  work  in  support  of 
privatisation.  However,  it  is  unclear  how  much  of  the  reported  cost  relates  to  institutional 
separation which would be required by Scenario 3, not least because: 

– 

A  proportion  reflects  activity  associated  with  bringing  Railtrack  to  market,  and  would 
therefore not have been incurred had the objective been institutional separation alone. 

–  Much  of  the  restructuring  cost  incurred  in  1993-94  was  the  result  of  a  radical 
restructuring  of  British  Rail,  which  included  the  creation  of  25  train  operating 
subsidiaries  (subsequently  franchised),  a  number  of  rolling  stock  leasing,  renewals, 
maintenance and other companies as well as a separate infrastructure manager. 

– 

The activity undertaken involved reform of an industry structure in place prior to, and 
therefore not complying with, the requirements of the First Package. 

This cost information is nevertheless useful in illustrating that restructuring costs are likely to 
be limited when compared with total industry costs in any given year. Even in Great Britain, 
where restructuring and privatisation went further than in any other Member State, total set up 
costs  amounted  to  no  more  than  3.5%  of  total  annual  industry  costs.  The  costs  of 
implementing  Scenario  3  in  isolation  would  have  been  considerably  lower  although  highly 
dependent  on  the  exact  internal  management  organisation  in  each  case.  If  the  creation  of  a 
separate infrastructure manager in 1993-9485 resulted in British Rail incurring one third of the 

85

 It is likely that only costs incurred in 1994-95 are relevant to the calculation, since those in 1995-96 were heavily driven by the legal and 

financial activity underpinning flotation of Railtrack and procurement of the various train operating franchises. 

111 

 
 
 
                                                 
restructuring costs actually reported for that year, the total would have amounted to only 0.9% 
of overall annual industry costs. 

Setting up the independent Infrastructure Manager in Spain 

The  overall  cost  of  the  setting  up  of  ADIF,  the  independent  Infrastructure  Manager  for  the 
Spanish  rail  industry,  identified  total  restructuring  cost  of  € 6.8  million  over  the  three  year 
period  2004-2006.  It  is  not  clear  what  activities  these  costs  covered,  but  the  figure  was 
equivalent  to  0.2%  of  the  reported  operating  costs  of  RENFE,  the  incumbent  national  rail 
service  provider,  in  2004  (the  last  year  in  which  RENFE  operated  as  a  vertically  integrated 
entity). This indicates that one-off costs of functional separation, which will exceed those of 
the more limited forms of separation under Scenarios 2 or 3, are relatively small in relation to 
overall industry costs. 

Transformation of Czech Railways 

Further  data  is  available  for  Czech  Republic,  which  in  2000  specified  a  project  entitled 
“Preparation  of  conditions  for  the  application  of  the  EU  Directives  in  the  transformation  of 
Czech Railways (CD)”86. The project anticipated much of the work needed to implement the 
changes eventually put in place in 2003 and was expected to cost €2 million, around 0.1% of 
CD’s  annual  operating  costs  at  the  time.  This  tends  to  support  the  view  that  the  costs  of 
implementing  more  focused  unbundling  on  a  simpler  rail  network  than  in  Great  Britain  are 
likely to be substantially less than those reported in Table 2. However, the evidence from the 
Czech Republic must also be substantially qualified since: 

– 

– 

There is no information confirming that the outturn costs of the project were comparable 
to the estimate of costs in the project specification 

The project included a number of elements, such as harmonising infrastructure charges 
and financial revitalisation, required for implementation of the First Package but which 
would not be required in order to implement either Scenario 2 or 3. 

Finally,  corroborating  evidence  was  sought  also  form  the  experience  of  other  network 
industries. Table 3 below gives insight on one-off cost of separation in electricity distribution, 
which is broadly comparable to the rail sector in that it is network based and has been subject 
to  restructuring,  including  the  creation  of  institutionally  separate  entities  responsible  for 
activities  such  as  generation,  transmission  and  distribution,  in  a  number  of  countries  within 
and outside Europe. 

86  

Project fiche CZ01-03-01, December 2000. 

112 

 
 
                                                 
TABLE 3  One-off costs of separating electricity distribution 

Example 

Estimated 
cost 

Scale factor 

Comment 

Source 

Creation of 
Distribution Network 
Operators in New 
Zealand 

Creation of 
distribution Network 
Operators in the 
Netherlands 

Further separation of 
Distribution Network 
Operators in the 
Netherlands 

Further separation of 
Transmission System 
Operators in 
Germany 

NZ$30 
million 

3.5% of annual 
revenues 

Represents the cost of creating 
separate operating entities from a 
fully integrated structure 

PWC (2006) 

€70-100 
million 

0.7% - 1% of 
annual 
operating costs 

Costs attributed to modification of IT 
systems, transfer, re-contracting and 
re-administration of staff and legal 
activity underpinning ownership 
separation 

Deloitte 
(2005) 

€20 million 

0.2% of annual 
operating costs 

Estimate of moving to separation of 
ownership after functional separation 
has been completed 

De Nooij and 
Baarsma 
(2008) 

€100 
million 

0.2% of annual 
operating costs 

Explicitly based on estimates made 
by De Nooij and Baarsma (2008) 

Brunekreeft 
(2008) 

Source: Brunekreeft (2008) 

These figures should be treated with care, given the uncertainties surrounding the estimations 
and  differences  between  the  sectors.  However,  the  evidence  consistently  supports  the 
conclusion  that  the  costs  of  radical  restructuring  of  a  fully  integrated  industry  of  the  kind 
undertaken in Great Britain will substantially exceed those of the simpler forms of unbundling 
envisaged under U1 and U2. More specifically, it suggests that changes in staff allocation and 
administration  together  with  supporting  IT  systems  changes  can  be  expected  to  be 
significantly below 1% of annual operating costs, and that the costs of establishing separate 
ownership, assuming functional separation has already been achieved, might be only 0.2% of 
annual costs. 

In conclusion, the Member States currently without institutional separation (categories 2-6 in 
Table 1 of the main report) could be expected to incur potential one-off costs as equivalent to 
0.7%  of  annual  operating  costs  (the  0.5%  mid-point  estimate  for  implementing  Scenario  2 
plus  the  0.2%  arising  from  full  institutional  separation).  This  would  imply  expenditure  of 
€0.24 billion.  These estimates are considered conservative in the light of the estimates of one-
off costs for Spain and the Czech Republic reported above. 

Implementation costs of Scenario 2 

Under  Scenario  2  the  set-up  costs  would  be  related  to  the  costs  of  internal  reorganisation 
deriving  from  the  establishment  of  the  "Chinese  walls"  necessary  to  enforce  the  existing 
decision-making  and  organisational  separation  requirements  within  a  vertically  integrated 
undertaking,  as  indicated  in  Table  1.  This  means  that  some  vertically  integrated  Member 
States would incur one-off costs of up to 0.8% of annual operating costs (the 1% indicated by 
Deloitte (2005), less the 0.2% required for ownership separation estimated by De Nooij and 
Baarsma (2008)). In practice some Member States, for example Belgium, which have already 
implemented  measures  to  meet  the  requirements  of  Annex  V  of  the  Communication  on  the 
implementation  of  the  First  railway  Package87 ,  would  incur  no  significant  additional  costs. 

87 

Report from the Commission to the European Parliament, the Council, the European Economic and 
Social Committee and the Committee of the Regions on the implementation of the first railway package, 
COM(2006)189 

113 

 
 
                                                 
On the assumption that, as a whole, these Member States would incur enforcement equivalent 
to the mid-point average of these two extremes (0.5% of annual operating costs), the resulting 
expenditure would be €0.17 billion. 

Implementation costs of Scenario 1 

Under  Scenario  1  there  are  limited  implementation  costs  related  to  the  establishment  of 
national  coordination  bodies  between  IMs  and  RUs.  Some  Member  States  already  have 
mechanisms  in  place  to  deal  with  some  or  all  of  the  proposed  functions  of  the  proposed 
coordination body, in other cases involving bodies already established, functioning and with 
effective  powers.  It  has  not  been  attempted  to  estimate  the  additional  cost  of  establishing  a 
coordination bodies in all Member States, as the related costs would depend on the number of 
actors and on the detail of whether any of the functions were transferred from existing bodies 
or  arrangements.  In  any  case,  the  scale  of  expected  efficiency  benefits  (very  difficult  to 
quantify - see the discussion on misalignment cost below) would be of a much higher scale 
than establishment and administration costs of the coordination bodies. In addition Scenario 1 
foresees the establishment of an EU network of IMs, which would require organising regular 
meetings. This could be done with the support of and under the auspices of the Commission. 
Such network would develop its activities without any permanent joint secretariat, at least in 
short term and thus will have only limited cost implications. In a limited number of Member 
States  (Hungary,  Estonia,  Luxembourg,  Slovenia  and  Lithuania  but  also  in  France)  the 
unification of IM functions will require merging the IM with allocation and charging bodies 
or specific departments of the incumbent. This reorganisation will necessitate transfer of staff 
and reorganisation of the IM management chain. 

3.2.  Transaction costs 

The  IA  support  study  suggests  that  the  recent  study  by  Merkert  et  al.  (2012)  provides 
relatively  robust  estimates  of  recurring  transaction  costs  as  it  is  based  on  bottom-up 
investigation of costs through interviews with individual rail organisations in Germany, Great 
Britain  and  Sweden.  This  approach  allows  for  identification  of  relevant  cost  categories. 
Although  it  has  to  be  noted  that  the  resulting  estimates  are  not  fully  compatible  with  the 
additional  transactions  costs  likely  to  arise  under  either  policy  Scenarios  compared  to  the 
Baseline since some of the costs covered are driven primarily by factors other than the degree 
of institutional separation in place, while others arise, at least to some degree, from EU rail 
legislation that is already in place. 

The  key  results,  expressed  in  the  form  of  transaction  costs  per  train-kilometre  and  as  a 
proportion of total operating costs, are shown in Table 4. They indicate that, on either measure, 
the German rail network has the lowest transactions costs and Great Britain has the highest. 
This is consistent with the view that a more disaggregated industry structure leads to higher 
transactions  costs,  although  the  authors  qualify  the  comparison  by  noting  that  the  German 
network may benefit from scale economies and that there is in any case considerable variation 
in the level of transactions costs between individual rail organisations in Germany. 

114 

 
Table 4 

Estimates of rail industry restructuring costs 

Transaction costs  
per train-kilometre 
(€, Purchasing Power Parity 
PPP) 

Transaction costs as 
proportion of operating costs 
(%) 

Germany 

€0.08 

Great Britain 

€0.34 

Sweden 

€0.22 

Source: Merkert et al. (2012) 

0.49% 

1.42% 

1.27% 

More specifically, the Merkert et al study sought to identify, through discussion with industry 
representatives in both IMs and Rail Undertakings, seven main categories of transaction cost. 
These are summarised in the Table below. In each case, the impact of further unbundling has 
been  summarised,  drawing  on  a  more  comprehensive  qualitative  assessment  of  the  likely 
effects of policy changes on transactions costs. 

Table 5 

Impact of further unbundling on transactions costs 

Transaction cost category 

Summary of likely impact 

Franchise and transport contract 
bidding and making open access 
applications 

Overall process should not differ materially from that 
already in place. These costs are driven primarily by the 
level of competition rather than the level of separation. 

Procuring and modifying assets 

Possibly some additional transactions costs incurred under 
Scenario 3 where new or modified assets affect the wheel-
rail interface. 

Setting up and amending access 
and performance regimes 

No significant additional costs under either Scenario 2 or 
Scenario 3 – performance regime already required under 
existing legislation. 

Allocating train paths, timetabling 
and train planning 

Should not differ materially from existing processes under 
either Scenario 2 or Scenario 3, although any associated 
disputes may be more costly to resolve under Scenario 3. 

Day-to-day operations (including 
train operation/formation, 
maintenance and the provision of 
customer information) 

Operational procedures already in place should continue to 
operate, although disputes over scheduling of engineering 
works may be more difficult to resolve under Scenario 3. 

Reporting, billing and application of 
performance regimes 

Existing procedures should continue to apply, although 
disputes over responsibility for service disruption could be 
more difficult to resolve. 

Safety, planning and enforcement 
processes 

No material change under either Scenario 2 or Scenario 3. 
Planning in respect of issues relating to the wheel-rail 
interface might be affected. 

On  the  basis  of  this  assessment  it  can  be  concluded  that  the  majority  of  transactions  costs 
covered by the study would not increase as a result of the implementation of either Scenario 2 
or  Scenario  3.  Hence,  the  estimates  derived  by  Merkert  et  al  need  to  be  adjusted  for  the 
purpose of this IA. 

Recognising that the findings of the study by Merkert et al. are based on an investigation of 
transactions  costs  in  only  three  Member  States,  and  in  the  absence  of  similar  detailed 
investigation  of  rail  industry  transactions  costs  in  other  EU  countries,  it  has  been  sought  to 
identify evidence of similar costs in other sectors. A number of the studies of the electricity 
sector cited above provide some estimates of transactions costs in addition to the estimates of 
one-off separation costs already reported. This evidence is considered to be informative since 

115 

 
 
some studies take account of the implications of different levels of separation. Key results are 
summarised in the Table 6 below. 

Note  that  these  studies  do  not  distinguish  between  enforcement  and  transactions  costs  or 
between the explicit costs of supporting a given organisational structure and loss of synergy. 
However, costs are attributed to specific categories of activity including general management, 
human resources, IT, finance and general support. 

Table 6 

Estimated transaction costs of separation, electricity sector 

Example 

Estimated 
cost 

Scale 
factor 

Comment 

Source 

Creation of 
distribution Network 
Operators in the 
Netherlands 

Further separation of 
Distribution Network 
Operators in the 
Netherlands 

Further separation of 
Transmission System 
Operators in 
Germany 

Further separation of 
Transmission System 
Operators in 
Germany 

€350 – 450 
million per 
annum 

€20 million 

€50 million 

€250 million 

3.5% - 4.5% 
of annual 
operating 
costs 

Full costs of 
organisational 
separation 

Deloitte 
(2005) 

0.2% of 
annual 
operating 
costs 

0.1% of 
annual 
operating 
costs 

0.5% of 
annual 
operating 
costs 

Estimate of moving to 
separaion of ownership 
after functional 
separation has been 
completed 

Base case estimate - 
explicitly based on 
estimates made by De 
Nooij and Baarsma 
(2008) 

De Nooij and 
Baarsma 
(2008) 

Brunekreeft 
(2008) 

High case estimate 
based on top-down 
analysis 

Brunekreeft 
(2008) 

Source: Brunekreeft (2008) 

This evidence suggests a range of possible outcomes but supports the view that the costs of 
further  separation  after  functional  separation  has  already  been  implemented  amount  to  no 
more than 0.5% of annual operating costs. 

Transaction costs of Scenario 3 
To  derive  a  range  for  the  assumed  level  of  transaction  costs,  the  key  evidence  can  be 
summarised as follows: 

– 

– 

The  costs  of  functional  unbundling  could  be  significant,  and  in  the  electricity  sector 
have  been  estimated  at  up  to  4.5%  of  annual  operating  costs.  However  the  IA  support 
study concluded that there is no evidence that the costs of separation in the rail sector to 
date are of this magnitude. 

Evidence  from  Belgium  suggests  that  they  are  no  more  than  1.4%  of  operating  costs. 
The authors of the report prepared for the National Bank of Belgium88 do report some 
evidence of the impact of restructuring in the form of a recent claim by the Chairman of 
SNCB-Holding to the effect that the restructuring had resulted in additional costs of €50 
–  100  million  per  annum.  These  were  attributed  to  the  increased  cost  of  IT  services, 
communications  and  legal  services,  although  the  basis  on  which  the  estimate  was 
derived  is  not  clear.  However,  while  costs  of  this  magnitude  could  be  considered 
significant, equivalent to up to 1.4% of annual operating costs, they apparently relate to 

88 

National Bank of Belgium Working Paper Document No 221 (2012). 

116 

 
                                                 
– 

– 

the  effects  of  the  restructuring  of  SNCB  in  2005  rather  than  the  costs  of  ensuring 
compliance with the requirements of Annex V in isolation. 

Evidence  from  the  rail  sector  indicates  that  additional  transactions  costs  in  Sweden, 
which  has  implemented  institutional  separation,  account  for  a  higher  proportion  of 
annual operating costs than in Germany under a holding company model. However, the 
difference, equivalent to 0.78% of operating costs, undoubtedly overstates the impact of 
institutional separation in isolation since it includes costs that are driven primarily by the 
level  of  competition.  The  difference  in  transactions  costs  between  Germany  and  Great 
Britain,  equivalents  to  0.93%  of  operating  costs,  further  overstates  the  impact  since  it 
reflects  the  complex  nature  of  the  contractual  structure  put  in  place  following  the 
restructuring and privatisation of British Rail. 

Further  evidence  from  the  electricity  sector  indicates  that  the  cost  of  institutional 
separation implemented following functional separation of transmission and distribution 
has resulted in ongoing transaction costs of between 0.1% and 0.5% of annual operating 
costs. 

Given  the  lack  of  precision  in  the  available  cost  estimates,  a  relatively  wide  cost  range  of 
transaction costs has been calculated. The basis of the estimate is the difference in normalised 
transactions  costs  between  Germany  and  Sweden  derived  from  the  study  by  Merkert  et  al., 
equivalent  to  0.78%  of  operating  costs.  To  obtain  a  range  it  has  been  20%  of  this  figure  to 
derive a lower bound (giving 0.16%) and 60% of the figure to derive an upper bound (giving 
0.47%). 

This choice of range has been informed by the following considerations: 

– 

– 

– 

The study by Merkert et al., while it is the most detailed available and the most relevant 
for  the  purposes  of,  covers  only  three  Member  States,  and  it  is  therefore  necessary  to 
estimate  a  relatively  wide  range  of  outcomes  to  ensure  that  potential  cost  impacts  in 
other Member States are represented. 

The assessment of the likely impact of Scenario 3 on the various cost elements included 
in the study nevertheless suggests that any increase in transactions costs will be limited. 
The review of the evidence on enforcement costs also suggests no discernible impact on 
annual  operating  costs.  The  proposed  range  is  therefore  based  on  a  significant 
adjustment of the transaction cost differences reported by Merkert et al. 

The  proposed  range  is  consistent  with  a  similar  range  estimated  for  ownership 
separation  in  the  electricity  sector  (of  between  0.1%  and  0.5%),  as  reported  by 
Brunekreeft (2008). 

Applying the range to the annual rail sector operating costs of Member States in categories 2-
6 in Table 1 of the main report, gives a transaction ongoing cost impact of Scenario 3 of 
between €0.05 billion and €0.16 billion per annum. 

Transaction costs of Scenario 2 
The study results reported above do not provide a basis for estimating the transaction costs of 
Scenario  2.  Many  organisations  implement  so-called  Chinese  walls  in  order  to  preserve 
confidentiality  or  decision-making  independence,  but  do  not  seek  to  estimate  or  report  the 
associated costs. However, the costs of implementing Scenario 2 will be restricted to those of 
introducing  decision-making  independence  in  maintenance  planning  and  investments. 
Scenario 2 could thus be expected to have broadly similar cost impacts to Scenario 3, since it 
would  require  the  incumbent  Rail  Undertaking  and  IM  to  operate  as  if  they  were 
institutionally independent even though they remained in the same holding group. Hence, the 

117 

 
range of cost impacts estimated for Scenario 2 is considered being broadly equivalent to those 
for  Scenario  3.  It  should  be  noted  though  that  Scenario  2  transactions  costs  could  be 
somewhat  lower  to  the  extent  that  the  lack  of  institutional  separation  enabled  disputes  over 
train  planning,  the  cause  of  service  disruption  or  the  scheduling  of  engineering  works  to  be 
resolved more easily. However, these effects are considered being not material. 

Transaction costs of Scenario 1 
Scenario  1  reduces  transaction  costs  in  two  ways:  (1)  with  the  unification  of  IM  functions, 
those costs resulting from interfaces between the different entities in charge of IM functions 
will  be  removed;  (2)  better  coordination  between  IMs  and  infrastructure  users  will  ensure 
alignment of strategies and objectives. These benefits apply to all Member States, which do 
not yet have these coordination mechanisms in place. 

Under all scenarios some induced increase of transaction costs would appear together with the 
increase in the number of infrastructure users and the related growth of traffic volumes. The 
latter reflects the increase in the offer of rail transport services in line with the general policy 
objectives and will be recovered by track access revenues. 

3.3.  Regulatory costs 

Any separation arrangement would imply regulatory oversight costs linked to the need of the 
authorities  to  prevent,  control  and  detect  discriminatory  behaviour  and  cross-subsidisation 
within  the  integrated  and  holding  structures.  Transparency  resulting  from  institutional 
separation  under  Scenario  3  should,  compared  to  the  Scenario  2,  lead  to  the  reduction  of 
regulatory  enforcement  costs  of  market  opening,  both  by  eliminating  the  incentive  for 
discriminatory behaviour and by improving the financial information available to regulators. 

The potential reduction in regulatory enforcement costs can be estimated from the results of 
the study by Merkert et al. (2012) cited above. The study takes regulatory costs into account 
in the calculation of overall transactions costs and these are reported separately, as shown in 
Table  7.  While  the  authors  note  that  they  cannot  be  certain  of  whether  all  of  the  associated 
staff  within  the  various  regulatory  organisations  are  involved  in  transactions  relevant  to  the 
study, they consider that the costs shown provide a reasonable basis for comparing between 
Member States. 

Table 7 

Estimates of rail industry regulatory enforcement costs 

Regulatory enforcement costs 
per train-kilometre 
(€, Purchasing Power Parity PPP) 

Germany 

Great Britain 

Sweden 

Source: Merkert et al. (2012) 

€0.08 

€0.08 

€0.02 

Again, the results must be interpreted with particular caution, since the Member States do not 
align  with  either  the  existing  requirements  or  the  separation  options  under  consideration.  In 
addition, given the qualification offered by the authors of the study and for other reasons, the 
findings  may  understate  or  overstate  true  enforcement  costs  within  each  Member  State.  For 
example: 

– 

The  costs  reported  for  Germany  relate  only  to  rail  specific  organisations,  the  Federal 
Network  Agency  (BNetzA)  and  the  Federal  Railway  Authority  (EBA),  and  do  not 

118 

 
 
include  the  cost  of  court  action  in  response  to  discriminatory  behaviour  (an  important 
channel of enforcement in the absence of institutional separation according to the study 
by Merkert el al. (2008). 

– 

– 

The costs reported for Great Britain include the staff employed by the Rail Safety and 
Standards  Board  (who  account  for  37.5%  of  the  cost  per  train-kilometre  shown  in  the 
Table  7)  who  would  arguably  undertake  similar  functions  whether  institutional 
separation had been implemented or not. 

The level of enforcement costs would be related to the volume of application, access and 
congestion on the network, which may change considerably under future conditions of 
domestic market opening. 

Regulatory costs of Scenario 3 
The  difference  in  cost  estimates  for  Germany  and  Sweden  reported  in  Table  7  suggest  that 
enforcement costs per train-kilometre could decline by up to 75% as a result of institutional 
separation  as  suggested  by  Scenario  3.  This  is  consistent  with  a  lower  incidence  of 
discriminatory or other anti-competitive behaviour on the part of an IM under Scenario 3. 

Regulatory costs of Scenario 2 
As in the case of transactions costs, the cost estimates provided in Table 7 do not provide a 
basis for estimating the impact of Scenario  2 on regulatory enforcement. Under Scenario 2, 
monitoring  of  the  enforcement  of  the  new  "Chinese  walls"  should,  in  comparison  to  the 
Baseline, increase moderately the cost of regulatory oversight. These costs concern only MS 
where these safeguards have not yet been fully applied (categories 2 to 6 in Table 1 of the IA). 
On  the  other  hand,  extending  requirements  in  respect  of  independent  decision-making  to 
maintenance  planning  and  investments  (as  introduced  by  SF  options  -  Functions  Subject  to 
Separation) could reduce allegations of discrimination relating to these functions. Furthermore, 
experience of the competitive entry in Member States with holding structures, such as Austria, 
Germany  and  Italy,  has  gone  hand-in-hand  with  increasing  complaints  by  new  entrants 
concerning  access  to  infrastructure  and  an  increasing  need  for  regulatory  decisions.  For 
example, since it introduced new intercity services in Austria, the new entrant WESTbahn has 
raised  complaints  about  pathing  priorities,  the  use  of  infrastructure  to  provide  real  time 
information on onward connections, promotion of services through on-station advertising and 
alleged  cross-subsidisation  of  ÖBB  services  from  a  PSO  contract  awarded  without 
competitive tender.89 It could be concluded that need for regulatory intervention would have 
been  less  had  these  Member  States  adopted  the  institutional  separation  of  infrastructure 
management and rail operations required under Scenario 3. Given these considerations, it is 
not expected the costs of regulatory enforcement under Scenario 2 to be substantially lower 
from those arising in the Baseline Scenario. 

Creation  of  IM-users  coordination  bodies  under  Scenario  1  will  imply  limited  reporting 
obligation (which can be considered being administrative burdens) for IMs and infrastructure 
users  which  are  already  involved  in  ad  hoc  consultations.  The  establishment  of  a  European 
IMs' network is not expected to create important enforcement costs. 

3.4.  Other costs and the benefits of separation 

The  core  benefit  of  vertical  separation  is  related  to  elimination  of  discrimination  in  gaining 
access  to  infrastructure  leading  to  the  development  of  competition  and  being  the  means  for 

89  

Cf. Appendix K ‘Country fiches’ of the IA support study. 

119 

 
                                                 
more  efficient  railway.  Separation  is  also  expected  to  help  reducing  the  asymmetries 
information and improve financial transparency in the railway business. 

Discrimination 

By  reducing  or  even  eliminating  the  scope  for  discriminatory  behaviour,  vertical  separation 
would  evade  opportunity  costs  of  potential  operations  of  new  entrants  omitted  due  to 
discrimination  in  gaining  access  to  infrastructure.  Equal  access  to  infrastructure  would  also 
provide  for  the  development  of  competition  for,  and  in,  the  market,  in  particular  if  coupled 
with market opening initiative. 

Already in the Baseline Scenario any discriminatory practices are prohibited by existing EU 
law and regulatory bodies are competent to act following an appeal or on their own initiative. 
However, as presented in the problem definition of the IA, the discrimination in infrastructure 
access, preventing the smooth functioning of Single European Railway area, still occurs. 

In case of Scenario 2 the scope of oversight of regulatory bodies is extended to verify that the 
detailed  independence  requirements  in  organisational  and  decision-making  terms  are 
respected. However, without full institutional separation and without guarantees for financial 
transparency, an opportunity and motivation for discrimination remains. Moreover, actions of 
regulators  would  be  mostly  reactive,  rather  than  preventive.  Even  if  the  case  for 
discrimination  is  later  established,  the  damage  created  to  new  entrant  operators  could  be 
irretrievable  (see  Section  3.2  of  the  IA  for  evidence  and  further  discussion).  Such  damage 
could  be  illustrated  in  terms  of  'opportunity  costs'  expressed  as  loss  from  non-running  of 
services  as  well  as  lost  return  on  investments.  Whilst  such  costs  can  be  significant, 
quantification is challenging being each time dependent on the circumstances and the nature 
of  services  involved.  For  instance,  one  of  the  discrimination  cases  quoted  in  the  IA  report 
refers to hurdles the Italian new entrant NTV experienced during the homologation procedure 
for  its  AGV  trains.  The  process  took  45  months  between  July  2008  and  March  2012  main 
reason  for  delays  being  the  infrastructure  manager's  RFI  (subsidiary  of  the  Ferrovie  dello 
Stato) refusal to grant the train paths necessary for testing purposes. The excessive duration of 
the procedure led to a lost return on its €1 billion investment for the development of its new 
rail transport services. 

Scenario  3  would  imply  a  structural  change  by  introducing  full  institutional  separation  and 
thus  prevent  (rather  than  correct/react  on)  the  occurrence  of  discriminatory  behaviour. 
Therefore  this  Scenario  is  much  more  efficient  in  terms  of  evading  discrimination  related 
opportunity costs. 

Cross-subsidisation 

Separation  would  also  reduce  the  risk  of  cross-subsidisation  embedded  in  integrated  and 
holding structures. Complex bundle of services offered over the same network and potentially 
by the same or closely linked companies has inherently implications for cost-accountancy and 
transparency  even  if  account  separation  requirements  are  in  place.  In  these  terms  only  full 
institutional separation, as foreseen under Scenario 3, would reduce and ultimately eliminate 
the  risk  of  cross-subsidisation  between  different  rail  services.  Improved  transparency  would 
provide the decision-makers within the relevant competent authorities with more transparent 
financial information about asset values and cost structure, allowing improving the allocation 
of  public  funds  to,  and  within,  the  rail  sector.  However,  likewise  the  opportunity  costs, 
transparency  linked  benefits  would  not  be  easy  to  quantify.  In  any  terms  Scenario  3  is 
considered much more effective, given that institutional separation would structurally prevent 
the case for cross-subsidisation, while Scenario 2 would still allow the persistence of cross-

120 

 
subsidisation through the use of complex accountancy tools which are difficult for regulators 
to monitor and control. 

Scope efficiencies 

The negative impacts related to separation concern above all the so called 'misalignment' costs 
resulting from breaking the scale economies between the IM and incumbent operator, which 
in rail  industry can be significant due to loss in system integration. There is no quantitative 
evidence available to assess such costs consequences, but their scale and nature much depends 
on the circumstances of the national context and the way in which the system is managed. As 
a matter of principle, such economies of scope would anyway be applicable only to incumbent 
operator,  creating  further  frustration  in  terms  of  uneven  playing  field.  However,  to  mitigate 
any  negative  consequences,  while  ensuring  equal  access  to  infrastructure,  separation  and 
liberalisation measures will need to be supplemented by complementary initiatives designed 
to  ensure  that  the  IM  is  in  a  position  to  play  the  role  of  system  integrator  in  rail  network. 
Therefore,  all  three  policy  scenarios  proposed  by  the  Commission  foresee  creation  of 
coordination  bodies  between  IMs  and  operators  which  include,  in  a  non-discriminatory 
manner, representatives from all infrastructure users and should ensure that their interests are 
duly taken into consideration. 

4. 

SUMMARY OF SEPARATION COSTS AND BENEFITS 

The Table 8 below summarises the findings of the analysis. '+' indicates positive impacts, and 
'- ' negative impacts. As explained above, a full cost benefit analysis has not been feasible and 
the  scores  therefore  compare  the  impacts  within  a  row  but  are  less  telling  in  expressing  the 
relative importance of impacts between different rows. 

Table 8 

Comparison of the costs and benefits of further separation 

Impacts compared to the 
Baseline 

Scenario 1 (only 
efficiency measures) 

Implementation costs 
(one off) 

0/– 

Limited costs related to 
establishment of 
coordination bodies in 
many MSs and unifying 
IM functions in some MS. 

Transaction costs 

+ 

Regulatory costs 

Some improvement due 
to better coordination. 
Impacts to all MSs. 

0 
It is not expected the 
costs of regulatory 
enforcement under 
Scenario 1 to be 
materially lower than 
those arising in the 
Baseline. 

Scenario 2 (efficiency 
and enforcement of 
separation) 
– – 
Potential scale of costs 
€0.17 billion 

Related to the costs of 
internal reorganisation 
necessary to put in place 
"Chinese walls". 
Impacts the MSs having 
integrated or holding 
structures. 

– 
Potential cost range €0.05 
bn and €0.16 bn per 
annum 
At least 0.15% of 
operating costs. 
Impacts the MSs having 
integrated or holding 
structures. 

0 
It is not expected the 
costs of regulatory 
enforcement under 
Scenario 2 to be materially 
lower than those arising in 
the Baseline. 

Scenario 3 (efficiency 
and institutional 
separation) 
–  
Potential scale of cost 
€0.24 billion – 

~0.9% of yearly 
operating costs.  
Impacts the MSs having 
integrated or holding 
structures. 

– – 
Potential cost range 
€0.05 bn and €0.16 bn 
per annum 
~0.3% of operating 
costs. 
Impacts the MSs having 
integrated or holding 
structures. 

+ 
Regulatory costs per 
train-kilometre could 
decline by up to 75% as 
a result of institutional 
separation. 
Impacts the MSs having 
integrated or holding 
structures. 

121 

 
 
 
 
 
Other costs and 
benefits, linked to: 

Discrimination 

0 
No impact 

Cross-subsidisation 

0 

No impact 

Scope efficiencies 

+ 

0/+ 
The scope of oversight of 
regulatory bodies is 
extended, but remains 
mostly reactive thus only 
partly evading 
discrimination related 
opportunity costs. 
0/+ 

Transparency issues and 
cross-subsidisation risks 
remain inherent in 
integrated and holding 
structures even if account 
separation requirements 
are in place. 
0/- 

++ 
Full institutional 
separation would 
eliminate opportunity 
and motivation for 
discrimination. 

++ 

Full institutional 
separation would provide 
necessary transparency 
and eliminate 
opportunity for cross-
subsidisation. 

– 

All policy scenarios foresee creation of coordination bodies between IMs and 
operators to mitigate the misalignment issues resulted from the loss of scope 
efficiencies, which are considered of being higher for full institutional separation. 
Therefore, Scenario 1 improves the situation slightly compared to the Baseline, 
while the other 2 scenarios, implying additional separation, would worsen it 
(though Scenario 2 only marginally). 
Scenario 1 impacts most MS, while Scenarios 2 and 3 only those having integrated 
or holding structures. 

In  terms  of  scale,  the  implementation,  transaction  and  regulatory  costs  are  relatively  less 
significant  than  (induced  or  direct)  costs  linked  to  discrimination  and  lack  of  financial 
transparency.  Misalignment  costs  could  also  be  significant.  However,  given  that  market 
opening  and  vertical  separation  are  already  the  chosen  policy  path  in  EU  rail  reform,  the 
conclusions  should  be  drawn  on  the  basis  of  which  separation  method  has  the  potential  to 
provide a level playing field in access to the infrastructure costing most effective and efficient 
manner,  while  mitigating  to  the  extent  possible  any  misalignment  consequences.  In  these 
terms  full  institutional  separation,  as  by  Scenario  3  seems  to  be  the  preferred  way 
forward. 

5. 

SYNERGIES OF SEPARATION WITH MARKET OPENING 

Finally, the ultimate goal of separation is to create more competitive and efficient rail sector 
and thus encourage service offer, while improving the use of public funds fed via subsidises 
into  railways.  The  institutional  separation  envisaged  under  Scenario  3  is  an  important 
precursor to the delivery of the full benefits of market opening,  as already implemented for 
rail  freight  market  and  international  passenger  rail  market  and  further  proposed  by  the  4th 
Railway package for domestic passenger market. This can be demonstrated by comparing the 
estimated outcomes of a specific form of market opening with and without separation, which 
has been developed by the IA support study. 

The projections were carried out by the consultant in cooperation with the Commission. There 
are high uncertainties linked to calculations of aggregated impacts, because of: 

─ 

─ 

─ 

limited empirical evidence; 

any effects are dependent on baseline situations in Member States; 

other principal uncertainties in the baseline developments and exogenous factors. 

122 

 
 
 
 
 
 
 
 
 
Therefore  the  quantification  results  were  not  used  for  comparison  of  options.  However, 
scenario  analysis  accompanied  with  sensitivity  tests,  as  presented  below,  should  give  a 
relatively  sound  idea  of  potential  outcomes  of  the  proposed  policy  in  different  situations, 
based on the most credible information available as of the date. The core features of analysis 
and  assumptions  for  the  assessment  are  summarised  in  the  Table  7  below.  For  the  detailed 
information  on  the  assessment  methodology  (which  covers  both  –  Market  Access  and 
Infrastructure governance initiative) see Annex 8 of the IA on Access to Domestic Passenger 
Rail Markets and Appendix I of the IA support study. 

1. 

TABLE 7 

ASSUMPTIONS  

Assumption 

Open access effects 
Sectors  High speed, long distance, medium/regional, international 
Effects 

New entrant’s open access train-kilometres 
as a proportion of current “commercial” train-kilometres 
Share of incumbents’ “commercial” services in this sector 
converted to PSC as a result of open access competition 
New entrant’s fares as a proportion of the incumbent’s 
Share of new entrant’s passengers taken from incumbents 
New entrants operating costs per train-kilometre 
as a proportion of incumbent’s 
Potential reduction in incumbent’s operating costs (A) 
Proportion of incumbent’s services 
stimulated to higher efficiency by new entry (B) 
(AxB) Resulting average reduction in incumbent’s costs 
in this sector stimulated by competition from open access 

3

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3% 

10% 

20% 

30% 

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70% 

80% 

20% 

10% 

15% 

20% 

2% 

3% 

4% 

Compulsory competitive tendering effects 
Sectors  All PSCs, including commercial services becoming PSCs because of open access 
Effects 
10% 
15% 
25% 
90% 
75% 
3.75%  11.25%  13.5%

Reduction in incumbent’s share of PSC train-kilometres 
Potential reduction in PSC service operating costs (C) 
Proportion of PSCs subject to effective competition (D) 
(CxD) Resulting average reduction in PSC costs 
Share of PSC cost savings invested rather than retained 
Scenario 1 - Focus on cost savings 
Scenario 2 - Reinvestment 

15% 

2% 

0.75%
0.75%

0% 
50% 
0.5% 
0.5% 

2019 

2025 
2019 

Quality-related rise: train-kilometres and capital expenditure 
Quality-related rise: passenger-kilometres and revenue 

0.1% 
0.1% 

Timescales and discounting 
Start 

End 

Implementation of Package, creation of open access rights 
and award of first competitive tenders for PSCs 
Last existing PSC contracts replaced in competitive tendering 
Base year for discounting purposes 

Table 8 below summarises the financial benefits for: 

• 

• 

the separation initiative only (column 1) 

the domestic passenger market opening only for two scenarios: 

123 

 
 
 
 
 
 
 
 
 
 
 
 
 
─ 

  Market  opening  Scenario  1  -  Focus  on  savings  (column  2)  -  In  this 
scenario  it  is  assumed  that  competent  authorities  would  focus  on  cost 
savings,  taking  all  the  reductions  in  PSC  tender  costs  as  cash  savings  and 
not reinvesting any of these in higher rail quality or capacity. 

─    Market opening Scenario 2 - Reinvestment (column 3)- In this scenario it 
is  assumed  that  competent  authorities  would  not  focus  on  cost  savings  but 
would  instead  implicitly  “reinvest”  half  the  potential  reductions  in  PSC 
tender  costs  by  specifying  higher  quality  or  capacity  in  PSCs.  In  terms  of 
monetary impacts this implies reduction in NPV, while the benefits appear 
in terms of increase in passenger km-s. 

•  combined impacts of both initiatives separating two different outcome scenarios: 

─  Combined impacts Scenario 1 – Focus on savings (column 4) 

─  Combined impacts Scenario 2 – Reinvestment (column 5) 

Table 8  Combined impacts of market opening and infrastructure governance 

policies – Summary of core financial estimates 

All changes are illustrative estimates 
NPVs (bil €) to 2035, discounted at 4% 
to 2019 

Transaction costs (mean estimate) 

Domestic service benefits* 

International service benefits 

Freight benefits 

Total NPV 

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1.00 

6.56

29.44

21.04 

43.35 

33.83

* 
profits of operators. 

The benefits encompass mainly savings for competent authorities, but also 

For freight, a lump estimation of €1 bn is added. It is based on consideration that EU-wide rail 
freight  market  has  a  turnover  of  around  €18  billion  but  has  long  been  subject  to  extensive 
competition  from  other  modes,  is  not  subsidised,  and  under  Directive  2004/51/EC  has  been 
completely  liberalised  since 1 January 2007.  Nonetheless,  effects  of  institutional  separation, 
where it does not already exist, and hence greater scope for new entry, might result in some 
further increases in entry and hence a combination of price reductions, quality improvements 
and  transfer  to  rail  from  other  modes.  If  the  combined  effect  of  extending  institutional 
separation  to  all  networks  resulted  in  benefits  equivalent  to  1%  of  rail  freight  industry 
turnover,  this  could  result  in  additional  benefits  until  2035  with  an  NPV  of  €1  billion 
(uncertainty  ±50%).  These  freight  benefits  are  additional  to  the  benefits  in  domestic  and 
international passenger markets calculated on the basis of assumptions in Table 7. 

Table 9 below presents a wider range of indicators for individual and combined policies. 

124 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table 9 

Impacts of market opening and infrastructure governance policies - 
range of expected outcomes 

All changes are illustrative 
estimates 

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Scenario 1 –Focus on saving 

Vertical separation90 

6.56 

Domestic passenger market opening 

29.44 

Combination of market opening and 
vertical separation 

43.35 

Scenario 2 – Reinvestment 

0.1 

0.3 

0.5 

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0.03 

0.8 

2 

0.1 

3.8 

0.5% 

3.8% 

6.4% 

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4.42 

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21.04 

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0.5% 

3.7% 

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vertical separation 

33.83 

1.7 

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16.4 

6.2% 

*  NPVs to 2035, discounted at 4% to 2019, the benefits encompass mainly savings for 

competent authorities, but also profits of operators. 

The  results  for  both  scenarios  demonstrate  existence  of  significant  synergies  between  the 
separation and market access measures as proposed in the 4th package. 16 billion passenger-
km potentially made available by implementing market opening and separation polices, while 
re-investing  half  of  efficiency  savings  back  to  railways,  would  result  in  6%  increase  of 
passenger-km  on  top  of  the  baseline  developments.  In  addition,  more  level  playing  field  in 
access to infrastructure, as provided by vertical separation measures, would enable to increase 
the market share of new entrants from 19% in the baseline to 25%. 

Further  burst  will  be  given  by  quicker  time  and  cost  to  market  for  rail  undertakings,  as 
provided by the revised scope of the European Railway Agency, also being the part of the 4th 
Package. 

90 

As foreseen by Scenario 3 of IA Governance IA. 

125 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
ANNEX VI 

ASSESSMENT OF SOCIAL IMPACTS 

In  a  guided  system  like  railways  with  quite  a  generalised  excess  capacity  on  the  tracks  the 
management  of  the  network  is  crucial  to  exploit  assets  as  much  as  possible,  thus  reaping 
economies  of  scale  and  improving  the  price/quality  relationship.  Neutrality  in  infrastructure 
management  will  improve  quality,  increase  the  attractiveness  of  rail  traffic  and  therefore 
traffic  numbers  which  in  turn  will  lead  to  more  employment  and/or  higher  productivity 
allowing wage increases and improvements in working conditions. 

Separation has an induced impact on employment in the EU, as the lower costs of transport 
will free resources to carry out other activities thus increasing the competitiveness of the EU 
and its production and employment. 

As to the direct employment deriving from organisational changes, separation will reduce the 
economies  of  scope  of  carrying  out  the  infrastructure  and  operation  tasks  within  a  single 
organisation. Therefore it will imply that more people will be required to do complementary 
tasks  in  the  infrastructure  manager  and  in  the  different  operating  companies  which  may 
increase  costs.  However,  the  transparency  brought  by  market  contractual  relationships  with 
independent companies will also reduce the costs of monitoring by the regulator. It will also 
help the government to better tailor PSO and investment subsidies to the real needs of society, 
breaking its "agency" dependency91 in respect of an integrated incumbent. 

The  current  system  where  certain  incumbents  are  partly  integrated  and  all  new  entrants  are 
fully separated from the infrastructure manager creates legal and functional insecurity giving 
rise to conflicts and litigation, which represent a waste of resources including human ones. It 
also deters investments in rolling stock. 

With unified infrastructure management, it is possible that a more specialised IM will have a 
greater interest in the better use and correct maintenance of the current infrastructure and the 
right dimensioning of the future one. But it is difficult to draw conclusions due to the role of 
governments themselves. 

Concerning  the  different  measures,  the  most  favourable  ones  from  a  social  viewpoint  are 
those that provide the infrastructure manager with a wider portfolio of competencies whether 
on  the  day-to-day  management  of  the  infrastructure  (paths  and  charges)  or  concerning  its 
maintenance and development over time. 

91  

A public agency always knows better the cost structure of its services than the public authority that 
controls it. 

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ANNEX VII 

GOVERNANCE AND ACCESS TO SERVICE FACILITIES 

1. 

INTRODUCTION 

Access to service facilities such as shunting and maintenance yards or passenger train stations 
is essential for the effective functioning of competition in railway markets. If new entrants do 
not  get  access  to  facilities  at  acceptable  conditions,  they  will  in  many  cases  not  enter  the 
market,  even  if  access  to  the  main  infrastructure  is  secured.  In  most  cases  it  would  be  too 
costly for new entrants to build their own facilities in the Member States where they intend to 
operate.  Moreover,  even  in  case  they  would  be  prepared  to  invest,  new  facilities  would  not 
necessarily have the same good connections to other modes of transport as those offered by 
existing facilities (ports, airports, bus stations etc.). New entrants may be private rail operators; 
however access problems also affect State owned companies wanting to enter markets other 
than their home market. With no new market entry, competition will fail and customers will 
continue  to  rely  only  on  the  services  of  the  former  monopolists,  which  will  not  improve 
through the lack of incentives to do so. 

The  degree  of  provision  of  rail  related  services  varies  significantly  across  the  EU.  In  many 
countries the state-owned rail undertaking not only controls the infrastructure itself, but also 
service facilities and therefore their access. This creates a natural conflict of interest. While 
the EU Directives oblige the operator of the facility to provide access to all railway operators 
(under  certain  conditions),  integrated  incumbent  operators  may  be  reluctant  to  provide  such 
services to new entrants, as the latter are direct competitors of their own transport subsidiaries. 
This  does  not  only  jeopardise  fair  competition  amongst  rail  operators,  but  it  is  also 
unacceptable when, as in most cases, the facilities were built with public funds, and their use 
should therefore not be reserved to specific companies who for historical reasons maintain a 
monopoly position. 

The  recently  adopted  Recast  of  the  First  Railway  package,  in  its  Article  13  and  Annex  II, 
addresses  problems  in  the  application  of  the  existing  legislation,  and  problems  which  the 
existing legislation is not able to solve. 

2. 

EXPERIENCES WITH THE APPLICATION OF COMPETITION LAW 

Currently,  complaints  on  access  problems  to  service  facilities  may  only  be  brought  to 
competition  authorities.  The  existing  Directives  91/440/EEC  (as  amended  by  Directive 
2001/12/EC) and 2001/14/EC do not give railway regulators any powers to control issues of 
access to rail-related services. According to the rules of competition law, access to a specific 
facility must only be given if this facility is considered to be "essential" for the operation of a 
market  entrant  and  thus  for  establishing  competition  in  the  market  ("essential  facilities 
doctrine"). 

The criteria that must be fulfilled for a facility to be considered as essential, and which have 
been in a number of cases brought before European and national courts, may be summarised 
in the following five points:  

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• 

• 

the facility must be controlled by a dominant firm 

access to the facility is indispensable in order to compete in a market which is related to 

the one in which the operator is dominant 

• 

the  competitor  must  be  unable  to  duplicate  the  essential  facility  under  reasonable 

economic conditions 

• 

• 

access to the facility is refused or granted under unjustifiably restrictive conditions 

it must be feasible to provide access to the facility. 

These criteria offer many possibilities for the operator of the facility to escape the obligation 
to  grant  access.  The  burden  of  proof  to  show  that  all  these  criteria  are  fulfilled  falls  on  the 
market  entrant.  This  is  difficult  because  a  new  entrant,  in  particular  when  coming  from 
another  Member  State,  does  not  necessarily  have  sufficient  information  on  available 
alternative  facilities  and  their  services,  while  in  most  cases  the  operator,  especially  if  it 
belongs to an integrated company, owns most of the facilities in the country and therefore has 
all the necessary information. 

Apart from this lack of information on the side of the market entrant, fulfilment of all the five 
criteria is objectively very difficult to prove. The market entrant must demonstrate that access 
to  a  particular  facility  is  indispensable  in  order  to  compete  within  the  relevant  market. 
Therefore  he  must  practically  prove  that  without  access  to  that  facility  he  has  no  access 
whatsoever to the market. This is difficult if the new entrant is already active in other parts of 
a national market, but needs access to a specific terminal to open a new service. Then it could 
be said that he does not need access to the specific facility, because he would not have to exit 
the market completely, given his remaining activities. If the new entrant is not yet active in 
the market, and has to give up its intention to enter the market because of the denial of access 
to  a  facility,  the  terminal  operator  may  argue  that  the  plans  were  not  realistic  anyway,  no 
sufficient  business  plan  existed  etc.  If  the  applicant  had  used  the  facility  previously,  and 
access  is  now  denied,  the  proof  that  this  criterion  is  fulfilled  may  only  be  made  once  the 
railway  undertaking  exits  the  market  definitively  However  in  this  case  even  a  positive 
decision of a competition authority would be of limited use for the complainant. 

Access  to  the  facility  may  also  be  deemed  not  to  be  indispensable  if  the  terminal  operator 
offers access to an alternative  facility. Even if this alternative terminal is far away from the 
railway line which the new entrant wants to use, and it does not make economic sense to use 
this facility, it may be difficult to demonstrate that the rail operator would not also be able to 
compete using the alternative facility. 

Fulfilment  of  the  third  condition  ("the  competitor  must  be  unable  to  duplicate  the  essential 
facility  within  reasonable  economic  conditions")  is  also  very  difficult  to  prove,  because  the 
notion of "reasonable economic conditions" is subject to interpretation. 

Finally, the criterion "granted under unjustifiably restrictive conditions" leaves a large margin 
of discretion for the facility operator to escape access obligations. It is sufficient to combine 

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access  with  unrealistic  conditions  (e.g.  limit  the  usable  space  in  a  shunting  yard  so  that 
shunting  operations  are  impossible).  The  applicant  will  have  to  prove  to  the  competition 
authority or the court why access needs to be granted in a specific technical way. This opens 
the  door  to  costly  procedures  involving  expert  opinions  etc.,  something  which  a  small  rail 
operator with limited resources would not be able to do. 

These difficulties in the application of the "essential facilities" doctrine explain why there is 
hardly  any  precedent  for  successful  court  cases  or  complaint  procedures  before  competition 
authorities  on  this  point.  Competition  authorities  are  aware  of  these  difficulties  and  try  to 
achieve  a  settlement  between  the  parties  in  such  cases.  However,  since  the  incumbents  are 
aware  of  these  legal  difficulties  in  terms  of  burden  of  proof,  their  readiness  to  settle  is 
normally limited. 

Since  Directive  2001/14/EC  takes  up  the  "essential  facilities"  doctrine  with  the  formulation 
that  access  may  not  be  denied  if  there  is  "no viable  alternative",  the  Recast  addresses  these 
problems with the introduction of more concrete rules on access to services. 

3. 

EXAMPLES OF ACCESS PROBLEMS TO SERVICE FACILITIES 

In  order  to  illustrate  the  problems,  the  following  overview  offers  some  examples  of 
discriminatory  practices  in  the  access  to  services  that  have  been  reported  by  new  entrants 
(sometimes themselves incumbents in their home state) in several Member States. This list is 
however by no means exhaustive. 

–  Discriminations in passenger railway stations: 

Incumbents  oblige  new  entrants  to  accept  ticket  distribution  agreements  which  give  the 
incumbent  the  exclusive  right  to  sell  tickets  at  rail  stations.  Therefore  competitors  have  no 
right  to  use  the  travel  centres  or  ticket  vendors  in  those  stations.  In  some  cases,  the 
commission  on  ticket  sales  is  larger  for  the  incumbent  than  for  external  competitors. 
Furthermore, competitors encounter problems with access to information displays, visual and 
oral  passenger  information.  In  some  cases  there  are  even  explicit  instructions  to  the  train 
station staff not to inform passengers about the competing offers. This results in difficulties 
for  the  new  entrants  to  inform  their  potential  customers  about  their  offers,  which  deprives 
customers of the benefit of choice between rail operators. 

–  Long-term leases of service facilities through the incumbent: 

Most  of  the  service  infrastructure  is  leased  to  the  incumbent  on  a  long-term  basis,  e.g.  all 
tracks  of  a  strategically  important  marshalling  yard.  In  many  cases  incumbents  also  tend  to 
block  side  tracks  by  renting  them,  although  they  are  not  needed,  for  the  sole  purpose  of 
preventing  access  for  their  competitors.  If  the  facility  is  built  to  meet  the  needs  of  the  new 
entrant, the costs charged to the new entrant by the infrastructure manager for the connection 
to the main line and to signalling equipment are often prohibitive. 

129 

 
–  High costs of shunting locomotives as a barrier to market entry: 

Since shunting yards are predominantly not electrified, shunting with mainline locomotives is 
technically not possible. Buying additional shunting locomotives means an increase in fixed 
costs for new entrants, which most of them cannot bear. 

–  Car transport – general access to the marshalling yards: 

Competitors do not have a general right of access to the marshalling yards to load their cars 
onto the trains of the incumbent. Offers of the incumbent to organize this on behalf of the new 
entrant are often subject to prohibitive prices. 

–  Massive capacity reduction and reactivation only on discriminatory conditions: 

Many  railway  operators  are  prevented  from  using  idle  facilities  by  terms  set  by  the 
infrastructure  manager.  The  infrastructure  manager  may  well  demand  to  cover  all  costs  of 
reactivation and/or to rent the facility for an excessively long period. 

–  Lack of transparency as regards the billing for the use of the service facilities: 

Operators of service facilities must  set  up a  price list but are not obliged to link services to 
specific  prices. Courts  in  some Member States have reached  this  conclusion on the basis of 
the wording of the Directive. 

–  Massive capacity reduction without viable alternatives under normal market conditions: 

In some Member States infrastructure managers close service facilities and offer competitors / 
market  entrants  access  to  alternative  stations  which  are  however  very  distant  from  the  lines 
they want to operate. In some cases availability is denied for the complete facility due to the 
alleged deactivation, although parts of the facility would still be available for the new entrant. 

–  Supply of traction current, usage of fuelling facilities 

Competitors  have  to  deal  with  unfair  pricing  and  usage  conditions  in  the  supply  of  traction 
current and when using fuelling facilities. In some cases transport companies belonging to the 
incumbent  operator  receive  considerable  rebates  which  are  not  offered  to  the  new  entrants, 
which creates serious competition problems. 

4. 

THE NEW RULES OF THE RECAST ON ACCESS TO SERVICE FACILITIES 

The  Recast  of  the  First  Railway  Package  addresses  these  problems  above  in  its  Article  13. 
Key elements of these provisions are: 

–  organisational and decision-making independence of the infrastructure manager required 

in case it belongs to an integrated company 

–  denial of access admissible only if there is a viable alternative for the proposed route 

– 

reservation of adequate capacity to competitors in case not all requests can be followed 

130 

 
– 

extension of the powers of the rail regulator to control all aspects of access to services. 

The new Recast Directive empowers rail regulators to decide about disputes on access to rail-
related services, as they know the rail market best and competition authorities do not have the 
necessary powers to enforce access to service facilities, as explained above. 

In view of the conflict of interest in companies which are operators of service facilities and 
have at the same time transport activities in competition with other railway undertakings, the 
Directive strengthens the independence of the facility operator in such situations. This is the 
case if it belongs to a body or firm which is dominant in a national railway transport services 
markets for which the facility is used. However, this does not concern maintenance terminals 
and maritime and inland port facilities which are linked to rail activities. 

As to the type of independence which the facility operator must have, it must be strengthened 
when it forms part of an integrated company. The Commission had originally proposed "legal, 
organisational  and  decision-making  independence".  However,  in  the  final  text  of  the  Recast 
only  "organisational  and  decision-making  independence"  were  adopted.  This  does  not  mean 
that separate bodies must be created for each facility. They could all be regrouped under one 
body,  or  be  included  within  the  infrastructure  manager  for  whom  the  Directive  already 
provides  the  same  description  of  its  necessary  independence  (and  in  addition  "legal 
independence"). 

As  to  the  new  provision  according  to  which  access  can  only  be  denied  if  there  is  a  viable 
alternative  which  allows  the  railway  undertaking  to  operate  the  freight  or  passenger  service 
concerned on the same or  alternative routes under economically acceptable conditions. This 
provision is meant to clarify what is a "viable" alternative and to avoid the situation where the 
rail operator would be sent to a remote terminal, which would make the alternative useless. 

The provision that an adequate capacity must be reserved for competitors is intended to avoid 
the claim by the facility operator that the whole infrastructure is in permanent and complete 
use  by  the  subsidiaries  of  the  incumbent,  a  claim  for  which  the  new  entrant  will  have  great 
difficulty to provide counter-evidence, due to his lack of relevant information. The proposed 
provision  should  in  principle  have  no  impact  on  the  revenues  of  the  facility  operator  and 
leaves a considerable margin of discretion to the rail regulator since it is impossible to say in a 
piece  of  general  legislation  what  "adequate  capacity"  corresponds  to  in  every  specific 
situation. 

To  address  the  difficulties  encountered  by  competitors  in  passenger  stations,  the  Recast 
includes the obligation for the operator of the station to offer a location for ticketing and to 
display  travel  information  of  all  railway  undertakings.  The  Recast  also  obliges  station 
operators to offer ticketing facilities to all operators, in case they offer these services to any 
railway undertakings. This is important in particular for smaller train operators running only a 
few trains and who cannot afford to provide permanent staff in railway stations to sell tickets 
for their own trains. 

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The recast also deals with the issue of idle facilities proposing that the service facility that has 
not been in use for at least two consecutive years by its owner must be offered for lease or 
rent. Another option could be to tender the sale of the facility, so that prospective rail users 
may make offers for purchasing it. 

The  numerous  problems  of  overpricing  or  non-transparent  pricing  encountered  by  new 
entrants are dealt with in the Recast by clear transparency provisions concerning the network 
statement and the rule that services are offered at full cost. This ensures on the one hand that 
facility operators are not obliged to make losses by granting access to their competitors. They 
will even be enabled to claim a reasonable profit for the relevant services. On the other hand 
the  reference  to  full  costs  allows  a  control  of  pricing  by  the  regulator  and  thus  avoids 
prohibitive over-pricing which is detrimental to the development of railway markets. 

POTENTIAL  OF  THE  NEW  RULES  OF  THE  RECAST  TO  SOLVE  THE  PROBLEMS  FOR 

5. 
ACCESS TO SERVICE FACILITIES 

The new rules of the Recast will go a long way in solving access issues for service facilities. 
They do not only provide for increased regulatory oversight, but also clarify access criteria. 
They  do  not  only  offer  ex-post  remedies  through  the  action  of  a  regulator,  but  also  contain 
some  structural  ex-ante  solution  by  obliging  undertakings  having  a  dominant  position  in  a 
service market to foresee separation of their facilities in organisational and decision-making 
terms. It is possible that this type of structural solution could be affected by similar problems 
as  the  existing  "legal,  organisational  and  decision-making  independence"  for  the  essential 
functions  of  an  infrastructure  manager  in  relation  to  railway  undertakings.  In  particular  the 
efficiency of the "decision making independence" may depend on whether and how the Court 
of Justice will clarify this concept in the context of the infringement procedures on the First 
Railway Package. 

Therefore the question arises whether it would not be useful to have a complete institutional 
separation  also  for  the  relation  between  facility  operators  and  railway  undertakings, 
respectively to integrate these facilities in the independent infrastructure managers. This could 
create  the  same  type  of  legal  certainty  as  a  complete  institutional  separation  of  the 
infrastructure  manager.  However,  while  the  rules  of  the  directive  on  decision-making 
independence for the essential functions of an infrastructure manager have been in force since 
2001,  the  reinforced  rules  on  access  to  the  service  facilities  have  just  been  adopted  after 
intense  discussions  in  Council  and  Parliament,  and  will  enter  into  force  only  in  November 
2012.  It  does  therefore  not  seem  to  be  suitable  to  propose  such  measures  already  in  the 
framework  of  the  Fourth  Package  proposal.  The  impact  of  the  new  rules  can  only  be  fully 
assessed after a certain time period in which they were applied. 

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ANNEX VIII 

SUMMARY DOCUMENT OF THE CONFERENCE  
“THE LAST MILE TOWARDS THE 4TH RAILWAY PACKAGE” 

HELD ON 24 SEPTEMBER 2012 IN BRUSSELS, BELGIUM 

Keynote addresses 

Mr Siim Kallas, Vice-President of the European Commission 

Vice-President Kallas welcomed all the delegates to the conference and explained that many 
challenges  lay  ahead  to  enable  the  trans-European  rail  sector  to  achieve  its  full  potential 
through the creation of a single European railway area. Plenty of progress has been made with 
recent  agreement  on  the  rail  recast  which  will  considerably  change  the  way  the  rail  market 
works, stimulating investment, improving market access conditions and reinforcing the role of 
national rail regulators. 

More reform was needed if rail was to achieve its full potential and compete effectively with 
other  modes,  by  breaking  down  barriers,  attracting  more  operators  to  the  market,  removing 
nationalistic  protections,  making  the  industry  more  efficient  and  raising  service  quality, 
punctuality and reliability. 

EU-wide  standards  are  required,  the  use  of  which  would  facilitate  a  move  to  a  single 
European approval system allowing  trains to be built and certified to run  everywhere in the 
EU  and  saving  money  in  the  process.  The  European  Railway  Agency  should  become  the 
primary  vehicle  to  issue  single  certificates  for  safety  and  authorisation  provided  there  is 
technical compatibility. 

Access needs to be granted to rolling stock, particularly for market newcomers, otherwise it is 
very  difficult  for  them  to  compete.  Only  a  few  countries  are  fully  open  to  competition,  a 
mixture  of  open  access  and  public  service  contracts  should  be  encouraged  to  provide 
competition in and competition for the market. 

Infrastructure  management  functions  such  as  charging  and  the  allocation  of  rail  capacity, 
financial transparency, maintenance, renewal, upgrade and development of the infrastructure, 
day-to-day traffic management and the provision of real-time information must be kept apart 
from the operation of transport services and be exercised independently through a separated 
structure. 

This conference is not about having competition for competition's sake but about providing a 
better service and ensuring rail  is able to  fulfil its underused potential. We hope to hear the 
views of a wide audience of stakeholders to develop our options for reform. 

133 

 
 
Mr Dominique Riquet, Member of the European Parliament (PPE-FR) 

Mr Riquet echoed a warm welcome to all the attendees and explained that the creation of an 
integrated  transport  system  had  proven  difficult  with  a  continued  need  to  overcome 
bottlenecks of physical and organisational problems. Updated guidelines on connectivity and 
the  compatibility  of  regulations  have  started  to  clarify  some  of  the  complex  issues  but  rail 
needs  to  compete  with  other  modes  such  as  road  and  solving  some  of  the  interoperability 
issues will start to assist this. 

There is an enormous amount to do and in some cases there has been considerable national 
resistance,  however  the  freight  industry  has  demonstrated  the  benefits  of  opening  up  the 
markets. It is time to start to adapt to single European market ways of thinking and embrace 
interoperability,  transparency,  create  the  right  fare  conditions  and  vitally  open  up  the 
infrastructure. 

I  support  the  concept  of  the  European  Railway  Agency  (ERA)  taking  on  an  enhanced 
managerial  role  and  one  day  it  is  hoped  that  a  single  European  regulator  may  exist.  In  the 
meantime, rail can no longer be the outlier and must not escape the rules of the single market.   

Plenary I: Opening a new page in European Railways 

(Moderator: Mr Matthias Ruete, Director General - European Commission, DG MOVE) 

Ms Catherina Elmstäter-Svard, Swedish Minister for Infrastructure 

Ms Elmstäter-Svard presented how deregulation had taken place in the Swedish market since 
1988 following a financial crisis. Despite attempts at a financial overhaul, the quality of rail 
transport  and  infrastructure  could  not  be  maintained.  Railway  transport  was  not  customer 
driven.  There  was  a  lack  of  funding  for  investment  in  rolling  stock,  and  in  new  service 
concepts. The incumbent had become a powerful but impenetrable “state within a state” that 
asserted  its  own  interests  at  the  expense  of  common  interests.  Radical  measures  had  to  be 
taken. 

Real  reform  came  based  on  separating  the  responsibility  for  infrastructure  management  and 
the  operation  of  rail  transport,  both  in  terms  of  organisation  and  decision-making  through 
increased  transparency  (helping  various  previously  excluded  bodies  influence  the  railway 
system),  increased  competitiveness  (making  the  split  between  taxpayers  and  passengers  to 
develop  railway  infrastructure  more  financial  stable)  and  providing  rail  transport  on  a 
commercial basis (based on customer requirements). 

These  and  other  reforms  such  as  diversifying  the  supply  of  rail  transport  services  within  a 
competitive procurement system were aimed to create and open up more markets to effective 
competition, to provide better conditions while still maintaining high levels of railway safety. 
In return, demand for rail transport began to increase, investment in railway infrastructure and 
rolling  stock  also  increased.  More  rail  companies  were  established,  and  so  competition 
increased  too.  Both  railway  freight  transport  and  railway  passenger  transport  increased 
capacity and efficiency. Had new market entrants not been convinced that they could use the 

134 

 
railway infrastructure on non-discriminatory terms, the positive stimulus would simply never 
have happened. Entrusting the management of the infrastructure to an independent entity with 
competitive  neutrality  and  non-discrimination  removed  any  suspicion  that  the  state  could 
place  effective  barriers  to  entry.  A  vertically  separated  railway  system  considerably  reduces 
the need for any detailed regulation which is neither efficient nor sufficient. European railway 
legislation must require vertical separation clearly within the framework. 

Some difficulties will remain which will need to be resolved in a way that does not damage 
competition,  for  example  how  to  deal  with  the  introduction  of  ERTMS  in  a  neutral  way 
without  specifying  the  equipment  to  be  purchased  but  ensuring  interoperability?  Having 
ensured  that  the  Infrastructure  Manager  (IM)  behaves  in  a  non-discriminatory  way,  how  do 
we ensure it operates efficiently, and on the basis of the demand of rail companies for capacity 
so  that  they  can  offer  transport  services  that  correspond  to  customers’  requirements? 
Sufficient incentives need to be provided to ensure it effectively fulfils its remit. An effective 
and consolidated rolling stock market is urgently required. Rolling stock is expensive and has 
its risks. New and smaller rail companies have difficulties entering the market due to a lack of 
access to rolling stock on reasonable terms. 

The  challenges  we  face  in  realising  railway  policy  both  in  Brussels  and  at  home  must 
ultimately be about the benefits for rail customers. 

Mr Mauro Moretti, Chairman - CER 

Mr Moretti considered that despite the implementation of three railway packages at EU level, 
there  was  still  need  for  change  in  the  mindset  of  managing  rail.  As  each  change  passed, 
productivity  increased,  ever  more  independence  from  public  budgets  was  possible  and 
competition against other transport modes and within rail increased. 

The rail sector needs a fair and stable regulatory framework, not one that changes every two 
or three years. Rules must be homogenous and valid for everybody to create a sound business 
environment,  to  attract  private  and  public  investments  and  to  create  a  Single  European  Rail 
Area. 

We must streamline the certification and authorisation processes that constitute huge barriers 
for  market  entry  and  consider  the  efficiency  gains  that  an  enhanced  ERA  may  benefit  the 
sector  with,  such  as  centralising  some  functions  currently  performed  by  national  safety 
authorities (NSA), speeding up the processes for rolling stock authorisation and placing on the 
market,  safety  certification  of  railway  undertakings  (RUs)  and  the  development  and 
application  of  the  legal  framework  (regarding  safety,  interoperability  and  technological 
development).  Control  may  then  take  place  through  one  body  and  replace  today’s  non-
transparent procedures applied by different NSA's. Since there is a common and widespread 
agreement  on  this  point,  the  Commission's  proposal  should  be  “fast  tracked”  through  the 
legislative procedure in the case of ERA. 

Consideration  must  be  given  to  the  best  way  to  open  domestic  markets.  Free  interplay  of 
supply and demand and competitive pressure should push companies towards new efficiencies 

135 

 
while understanding that the rail network benefits all customers only if good rules are applied. 
Open access services must therefore not develop to the detriment of services provided under a 
regime of public service contracts. 

A  European  legal  framework  should  be  drawn  up  to  recognize  that  national  and  regional 
competent  authorities  must  have  enough  room  to  find  a  good  match  between  EU  legal 
obligations and the specificities of their territories and of their customers’ needs in terms of 
tendering. 

The  best  structural  way  to  organise  our  systems  and  our  companies  should  be  considered, 
ensuring  we  guarantee  a  fair  competitive  environment  for  operators  while  and  at  the  same 
time  minimising  the  costs  for  the  industry  as  a  whole.  Stronger  national  regulatory  bodies 
would certainly help and constitute an essential tool for a fair functioning of the market. 

Evidence  on  the  impact  on  the  market  of  different  organisational  models  (where  the 
incumbent operator is or is not fully separated from the IM), show mixed results and suggest 
that  other  variables  (such  as  system  cost,  modal  share,  and  State  funding)  partially  count 
towards  explaining  performance  outcomes.  CER  conducted  a  study  at  the  beginning  of  this 
year  which  suggested  that  different  structures  work  best  in  different  circumstances  and 
therefore a flexibility of structural models may be beneficial. 

Mr Philippe De Backer, Member of the European Parliament (ALDE-BE) 

As Member of the TRAN Committee, Mr De Backer stated that during his first full year as 
MEP, rail policy was one of the most discussed items in the Committee. The 4th package has 
not  yet  emerged  but  has  already  been  broadly  discussed  in  the  European  Parliament  as 
elsewhere. Experience with the recast of the 1st package has shown that emotions can run high 
and that lobbying will become more intense, approaching adoption of the EC proposals and 
afterwards, when discussing them in Parliament. 

The  first  Directive  (approved  in  1991)  established  that  Member  States  would  separate 
infrastructure and services so trains could be used for cross border journeys. The aim was to 
increase  the  attractiveness  of  transporting  goods  by  rail.  The  results  were  disappointing 
because most of the Member States did not want to give up their national monopolies. 3 rail 
packages have followed, 21 years later we are still discussing the issue. The single European 
rail market is still not in place or working as it should be which is unfortunate as rail has the 
potential  to  relieve  the  over  congested  European  roads.  Eurostat  data  shows  rail  share  of 
passenger and freight transport in still low for the EU27 at 6.3% and 10.2%. 

A  single  European  rail  market  will  have  enormous  added  value  for  Europe,  encouraging 
companies to transport their goods and helping to reach the 60% GHG emission reduction by 
2050 as laid down in the White Paper on the Future of transport. 

Member States must put interoperability into practice, allowing cross acceptance and a single 
process  of  placing  vehicles  into  service.  Unreasonable  discriminatory  demands  on  foreign 
railway companies wanting to enter national markets are unacceptable. Transparent rules (thus 
monitoring  and  control)  are  needed  and  most  importantly  Member  States  must  implement 

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them and the EC take infringement action as required. It's unacceptable to let years pass by 
before taking any action.  

Safety is and should stay the main concern for every railway company and is often linked (not 
in a good way) to liberalisation. Trade unions claim that liberalisation leads to less safety on 
rail which is completely untrue and unproven (rather the contrary) and the EC should provide 
information in order to inform Citizens properly. 

Thanks  to  the  recast,  national  regulators  will  receive  more  competences  and  have  more 
responsibilities.  The  European  Railway  Agency  works  well  and  it  is  accepted  by  all 
stakeholders in the rail sector so should be made the one stop shop that is needed. In the future 
national technical and safety rules should no longer exist. There should be one authority that 
gives out licences, gives vehicles authorisation and monitors and controls the market. 

It is very difficult to convince Member States of the added value an open market brings, as in 
most cases national passenger transport is in the hands of the State-owned historic companies. 
They  are  often  not  ready  to  cope  with  efficient  competition  as  they  are  funded  with  State 
money  and  are  in  most  cases  accumulating  debts.  However  the  advantages  if  done  in  a 
consistent manner are that it will give the passenger greater choice and lead to better quality 
of service. Market liberalisation should be accompanied by a legal separation between the IM 
and the RU. Unbundling should be the standard. The debts many companies are bearing now 
are the result of the existing inefficient integrated structure. Efficiency gains are desperately 
needed, also for the public purse. 

Further discussion on this subject will no doubt become very intense but the EC should put 
Citizens  in  the  driver  seat  and  come  forward  with  an  ambitious  proposal  for  a  4th  railway 
package. 

Mr Mark Hopwood, Managing Director - First Great Western, First Group 

Mr Hopwood described his train passenger operating business, the largest in the UK with over 
25% of the market and the experience gained through the franchise bidding process, winning 
tenders to operate intercity long distance, regional and commuter services across a geographic 
range.  He  also  described  how  an  open  access  operation  within  the  same  country  had  been 
established since 2000 and how the company had some European exposure from open access 
in freight. 

The  UK  already  operates  with  a  certain  level  of  decentralisation  with  some  contracts  being 
contracted  by  local  rather  than  national  authorities  either  solely  or  as  co-signatories. 
Privatisation in the UK had been born from British Rail not delivering, with poor performance 
and  low  passenger  satisfaction  and  with  government  focus  at  the  time  on  other  areas  of 
expenditure. Innovation came from the introduction of market competition which has been so 
successful  that  significant  growth  has  now  led  to  a  change  of  political  context  (all  UK 
political  parties  support  rail  investment),  limited  support  for  returning  to  public  sector 
operation and a continued move to funding from the fare payer rather than the tax payer. 

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In  London  and  South  East  demand  is  already  10%  above  forecasts  with  TfL  projecting 
demand by 2020 as high as 33% above 2007 expectations. Similarly passenger journeys in the 
West Midlands show significant year on year increases. Targeted marketing campaigns help to 
increase patronage for leisure customers and along with the creation of new partnerships with 
tourist  associations  and  promotion  on  websites  led  to  increases  in  revenue  and  return  on 
investment of 3.9:1 with 10% increases in customer numbers. 

A  number  of  local  service  case  studies  were  described  demonstrating  how  private  operators 
had  worked  with  local  councils,  IMs  and  development  funders  to  create  and  implement 
schemes  for  infrastructure  enhancements  leading  to  the  provision  of  additional  services  or 
improved station services and accessibility and thus also benefiting the social railway.  

The customer experience is vitally important, railway decision making cannot be a theoretical 
exercise. Twice yearly National Passenger Surveys conducted by an independent organisation 
(Passenger  Focus)  provide  a  focus  of  passenger  perception  with  a  number  of  aspects  of  the 
service  provided.  This  is  in  addition  to  four  weekly  customer  services  monitoring  to  ensure 
the service provided is appropriate to the needs of the passenger. 

Transparency  of  cost  and  performance  data  is  important  because  it  helps  the  industry,  its 
customers  and  its  funders  to  understand  the  real  story  around  what  the  rail  sector  costs  and 
how  it  performs,  and  whether  they  are  getting  value  for  money.  The  next  step  is  to  make 
customers and taxpayers much better informed. 

A firm framework with flexibility for innovation and partnership working needs to be created 
to  allow  private  companies  such  as  FirstGroup  to  grow  in  Europe  post  liberalisation.  The 
obstacles to new entrants must be tackled, such as directly awarding in some so-called “open” 
markets. Competitive tendering levels the playing field as long as all entrants have access to 
full  transparency  of  information.  Without  leasing  companies  state/regional  authorities  will 
need  to  absorb  financial  risks  or  new  entrants  will  not  be  able  to  lease  or  acquire  stock. 
Through ticketing arrangements should be managed alongside a "clearing house" mechanism 
run by an independent body to ensure fairness and reimburse operators quickly. 

Mr Vicenzo Cannatelli, Vice President – NTV 

Mr  Cannatelli  explained  how  NTV  entered  the  Italian  rail  market  following  the  advent  of 
liberalisation and explained some of the difficulties that saw it take 6 years from incorporation 
to starting to run services. 

Railway  companies  can  be  capital  intensive  businesses  with  very  high  fixed  costs.  The 
financial  turbulence  since  2008  has  also  made  funding  within  European  markets  more 
difficult. 

When entering the Italian market this year, as it is not fully liberalised many constraints exist 
such  as  a  no  complete  and  independent  separation  between  IM  and  incumbent  national 
operator, as both the IM and train operators are 100% owned by the same companies. The cost 
of high speed access was one of the highest in Europe at more than € 13 per train-km and the 
homologation process not well defined and continuously thwarted by the incumbent operator. 

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The  approvals  process  is  way  too  long.  It  took  45  months  from  request  of  homologation  to 
commercial service operation. 

No national body has overall ability to grant permission, which is very inefficient. The NSA is 
technically independent from the railway operator and is supervised by Ministry of Transport 
while  the  regulatory  body  has  different  tasks  including  supervision  and  monitoring  of 
competition and the degree of market contestability. 

Furthermore  the  Italian  Government  announced  in  January  the  creation  of  an  independent 
Transportation Authority which will have to introduce fair competition in all railway sectors, 
have  power  to  constrain  uncompetitive  situations  and  possibly  analyse  the  benefits  of 
unbundling in the upcoming months. 

NTV's introduction in the market has had a major impact on economic and social structure in 
Italy.  NTV  have  invested  over  €  1  billion  in  25  trains,  depots,  IT,  training  and  staff.  The 
benefits  have  spread  to  the  customer  as  the  advent  of  NTV  has  improved  the  incumbents' 
proposition and customer service to compete. Prices  have decreased while higher frequency 
and  additional  services  are  now  running  leading to  growth  taking  place  far  in  excess  of  the 
wider  economy.  Marketplace  innovation  has  also  led  to  a  new  more  efficient  mix  of  sales 
channels  with  70%  coming  from  the  internet.  This  all  demonstrates  the  vital  benefits  of  the 
liberalisation agenda. 

Plenary II: Railways - an agenda for growth, innovation and employment in Europe 

(Moderator: Mr Karel Vinck, ERTMS coordinator) 

Mr Melchior Wathelet, Minister of Mobility – Belgium 

Mr Wathelet spoke about independence of the RU and IM and that it was clear that this was a 
sensitive subject and that work is not yet complete. Some barriers exist, some of which were 
wished for. Rail has an enviable record on safety and respect of the environment. Rail demand 
is continually growing. Technological renewals are more sustainable, ecologically beneficial 
and  economically  better  for  all.  Mobility  leads  to  growth  (estimated  to  be  2%  GDP)  and 
therefore we  need  to remove the bottlenecks, harmonise  interoperability rules  and  introduce 
ERTMS. 

Non-discriminatory  access is needed for all operators. Competition raises not just economic 
but also political issues. The changes are giant steps when you consider the historical level of 
protectionism we have come from. Rights of access, financial stability and independence have 
been created along with the establishment of tariffs, separation of accounting functions, safety 
and interoperability requirements, certification of train drivers and liberalisation of the freight 
market. 

We  are  making  the  sector  more  dynamic,  however  when  we  view  the  sector  objectively  we 
must  admit  that  the  work  is  not  done.  Rail  is  not  the  preferred  mode  of  transport  for  most 
Europeans  or  for  key  businesses  such  as  logistics  and  haulage  companies.  To  achieve  such 
changes  requires  the  opening  up  of  a  single  European  rail  market  providing  non-

139 

 
discriminatory  access  to  all  operators  and  encouraging  an  increase  in  the  predictability  of 
major investment. Tariffs are still too high for consumers and the density on some networks 
could  lead  to  different  solutions  being  sought.  Greater  clarity  is  required  on  the  unbundling 
package.  Member  States  must  take  the  responsibility  to  develop  a  corporate  long  term 
infrastructure development plan.  

The  ERA  could  be  seen  to  signal  a  detriment  to  NSA's,  however  we  must  not  find  new 
barriers  to  undermine  liberalisation.  Sometimes  we  have  been  guilty  of  deciding  on  the 
direction of travel without giving ourselves the means to make the full journey and therefore 
get  stuck  in  the  mire.  We  must  not  allow  that  to  happen  again.  The  sector  needs  a  specific 
dynamic approach which should be looked at objectively together by the EC, Member States 
and the industry. 

Mr Svend Leirvaag, Vice - President Industry Affairs - Amadeus 

Mr  Leirvaag  presented  how  his  company  Amadeus  grew  out  of  the  supply  chain  from  the 
deregulation and liberalisation of the aviation sector and how they are now a global European 
player, employing 59 different nationalities and represented in 195 countries. 

Amadeus started the migration to open systems 15 years ago and has invested over € 2 billion 
in research and development since 2004 proving that you never stop learning and this is why 
we  should  say  that  this  is  the  "next  km"  in  rail  deregulation  rather  than  the  "last  mile".  Its 
main  focus  is  as  a  cost  efficient  outsourcing  provider  connecting  travel  providers  with 
consumers through choice and transparency. 

Connecting  Railways  and  other  modes  of  transport  will  become  the  number  1  priority  for 
European  consumers.  The  future  of  the  integrated  European  transport  system  needs  to  be 
sustained by a robust Inter-modal system that enables any traveller to plan, book, pay for and 
collect  their  ticket  seamlessly.  The  sector  needs  to  start  preparing  for  deregulation  and 
increased competition. 

Following  discussion  with  railways  and  industry  stakeholders,  the  three  main  challenges  in 
today’s rail industry are the importance of the traveller and satisfying their evolving needs, the 
role  of  the  opening  of  the  rail  market  in  Europe  with  its  opportunities  for  increased 
competition  and  the  need  to  generate  efficiencies  and  to  look  for  new  revenue  streams. 
Technology will be the key to remaining competitive and driving innovation. 

An efficient and competitive European railways sector will strengthen the competitiveness of 
Europe  and  their  enterprises  but  this  requires  changes.  Currently  the  dynamics  of  the 
marketplace  mean  that  high  price  variation  exists  and  sharing  of  technology  to  drive 
expansion  and  keep  costs  down  is  not  yet  widely  undertaken.  One  example  of  such 
inefficiency  is  distribution  channel  ticketing  bonds.  These  are  required  with  each  and  every 
Rail Undertaking rather than a single European bond to cover them all.  

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Mr Johannes Mansbart, Chief Executive Officer - GATX 

Mr  Mansbart  explained  that  rolling  stock  was  the  key  sector  asset  and  determines  the 
performance of the rail industry. It is vital that entrants have availability of rolling stock on 
reasonable terms. 

Challenges currently exist around slow industry integration. ECM responsibility requires solid 
vehicle operating data and there is still much to be done on the availability and consistency of 
such data. An automated data exchange should be developed in a standardised format between 
workshops, keepers, RUs and customers. 

New regulations such as vehicle noise emission standards have a material impact on the life 
cycle costs of rolling stock and as they deliver economic (public), rather than any commercial 
payback  benefits,  providers  are  not  commercially  driven  to  seek  the  best  solutions,  instead 
choosing where applicable to pass the costs onto the RU. 

Maintenance concepts need to be fine-tuned with unified rules and standards, optimised spare 
part  logistics,  shared  services,  component  swaps  and  more  preventive  and  less  reactive 
maintenance. 

The ERA should be given a stronger European role including the rights to enforce common 
rules on the market and bring clarity to a single information database. 

Mr Stefan Roseanu, Chief Executive Officer - CFR Călători (RO) 

Mr Roseanu presented how CFR Călători the national railway passenger operator in Romania 
had been created in 1998 by splitting the former national railway in line with EC directives 
and  how  the  key  challenges  were  a  very  old  train  fleet,  poor  infrastructure  and  a  lack  of 
investment funds. 

Rail travel has been decreasing with 20% reduction in train kilometres travelled and 60% less 
passengers, with a corresponding increase in car  and  road usage. This is  partly down to the 
quality  of  rolling  stock  offer,  the  new  found  accessibility  of  private  car  ownership,  the 
increasing  competition  from  the  recently  deregulated  bus  market  and  a  change  from  bulk 
manufacturing  plant  commuters  (very  efficient  for  rail)  to  a  service  industry  economy  to 
which rail services have not yet adapted . 

Strategic focus in Romania will be on short-distance, long-distance and cross border services, 
the introduction of regular-interval timetables, integrating rail in metropolitan transport offers 
to  develop  suburban  services  and  the  acquisition  of  new  rolling  stock  and  modernisation  of 
the existing fleet. 

Access  to  the  rolling  stock  market  is  important  with  lead  times  being  so  long  and  lessons 
should be learned regarding the requirements of long term infrastructure from the aviation and 
ports  sectors.  Generally  supportive  of  the  idea  of  open  access  operation  supporting  public 
service contracts which are awarded through competitive tendering to improve value. 

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Workshop 1 – Rolling stock: reduced time-to-market 

(Moderator: Mr Marcel Verslype, Director - European Railway Agency) 

Mr  Verslype  introduced  the  panel  of  speakers  and  then  invited  Patrizio  Grillo  from  the 
European Commission to present some initial thoughts on the implications of the 4th railway 
package and how it could lead to a simplified authorisation process. 

Some  of  the  key  problems  identified  in  the  sector  relate  to  differing  interpretations  and 
implementation  of  EU  law  by  Member  States.  In  some  cases  national  rules  are  unclear, 
inappropriate,  non-transparent  (including  incumbent  staffing  seconded  to  NSA's)  or  overlap 
with  existing  TSIs.  The  authorisation  process  is  long  (up  to  2  years),  uncertain  and  is 
expensive due to multiplicity and unnecessary repetition of tests and verifications. It has been 
observed  that  the  cost  of  a  safety  certificate  and  for  additional  vehicle  authorisation  can  be 
hugely variable. 

As part of the impact assessment different options have been assessed in terms of costs and 
benefits. These include looking at an enhanced role for the ERA in the safety certification of 
RUs and in monitoring and control of NSA's along with migration towards a  single vehicle 
authorisation (a European "passport"). 

The  most  cost-effective  option  was  that  the  final  decision  on  RU  certification  and  vehicle 
authorisation should be taken by ERA in cooperation with NSA's and national authorities. In 
this way a single vehicle passport reflecting compliance with rules, confirmation of technical 
characteristics  necessary  and  checked  compatibility  with  the  network  would  be  issued  by 
ERA  valid  in  all  Member  States  with  the  RU  responsible  for  verifying  route-specific 
compatibility. 

Mr Alan Bell, Head of Railway Safety Policy - ORR UK 

Mr Bell spoke about the issues related to market opening and how removing barriers to entry 
would  increase  efficiency  for  the  railway  sector  while  ensuring  that  the  level  of  safety  was 
maintained or improved. It was however important to identify practical measures to achieve 
improvements  in  realistic  but  short  timescales  including  the  proper  implementation  of 
interoperability and safety directives. 

There is a problem with the length of time to get new vehicles into service in some Member 
States leading to increased capital costs and hampering innovation by slowing developments 
in  the  market.  Inconsistent  implementation  of  processes  and  rules  and  bureaucracy  where 
nationalistic interests take priority over a collective commitment to a single market also delay 
the process further. To speed up the authorisation process clear guidelines need to be provided 
including early and consistent engagement by NSA and clarity on what needs authorising or 
not.  Availability  of  information  (through  a  document  management  system),  differences  in 
national  laws  and  the  constituents  of  interoperability  need  to  be  addressed  along  with  the 
competence and consistency of national bodies. 

142 

 
ERA  role  should  be  enhanced  to  a  ‘partner’  role  promoting  harmonisation  and  ensuring  the 
current  structure  works  as  it  should  by  monitoring  the  implementation  of  directives  and 
resolving  disputes  as  well  as  enhancing  processes  such  as  responsibility  for  a  single  safety 
certificate. The advantages of the NSA should not be lost including the knowledge base and 
feedback loop at a local level. 

Mr Philippe Citroen, Director General - UNIFE   

Mr Citroen explained that there was a need for a drastically simplified European authorisation 
process as the current situation where European and national rules & processes both have to 
be  applied  was  the  worst  possible  situation  with  the  results  of  this  complexity  being  that  it 
takes  on  average  600  days  to  gain  authorisation  and  the  process  is  tying  up  €  1.4  billion 
capital that could be utilised for other benefits. 

There has only been a partial transposition of the safety & interoperability directive, allowing 
a number of national processes to survive. UNIFE, CER, UIP and ERFA therefore all strongly 
support the enhancement of the role of ERA to become the European Railway Safety Agency. 
They should also become an appeal body and have  decision-making  powers  in the event of 
disputes about vehicle authorisation processes and/or safety certificates 

The EC should strongly encourage Member States to implement the present directives, which 
offer  the  best  possible  basis  for  quick  convergence,  so  as  to  eliminate  unnecessary  rules.  In 
this respect ERA should identify the unnecessary and superfluous national rules and be able to 
request their removal as is done by the Aviation (EASA) and Maritime (EMSA) agencies. 

RUs  also  need  to  play  their  part  and  review  their  procurement  processes  to  support 
standardisation  amongst  the  manufacturers  as  such  initiatives  have  the  potential  to  reduce 
costs and time to market. 

Mr Vicenzo Cannatelli, Vice President - NTV 

Mr Cannatelli having already presented in Plenary I, discussed how liberalisation should lead 
to  better  efficiency  for  all  players  in  the  industry  and  cheaper  prices  for  the  consumer, 
however changes were required in order to get private investors to invest capital in the railway. 
The  most  fundamental  of  such  changes  was  the  need  to  set  clear  rules  that  are  non-
discriminatory, clear timings and ultimately a transparency of process. It is currently too easy 
for incumbents to create problems for new entrants. 

Mr Konstantin Skorik, European Business Development Director – Freightliner 

Mr Skorik stated that lots of regulation and control creates high complexity and low efficiency. 
In  the  freight  market  there  is  generally  reluctance  by  manufacturers  and  operators  to 
“experiment”  and  bring  new  innovative  products  to  the  market.  There  are  fundamental 
differences in complexity, timing and  cost of certification between locomotives  and  wagons 
with  the  later  generally  certified  to  run  on  the  entire  continental  network  and  the  former 
problematic due to different Member State requirements on safety and signalling systems, no 

143 

 
cross-acceptance, requirements for repetitive tests, unclear procedures and obstructive NSAs 
and IMs. In part this is because processes are not transparent with clear deadlines. 

ERTMS costs may be prohibitively high and burden rail freight operators making them less 
competitive  against  road.  No  clear  strategy  exists  on  who  picks  up  these  bills.  But  success 
stories  are  possible  as  has  been  demonstrated  by  the  certification  of  new  GE  Powerhaul 
locomotive in the UK which was delivered in less than two years through close cooperation 
between the parties involved during the design and build phases. 

There should be a single certification for rolling stock to the extent possible and a clear role 
for ERA as a facilitator of cross-acceptance or as a one-stop shop provided NSAs fully accept 
ERA rulings. NSAs should concentrate on national (safety systems) issues. Clarity of the time 
limits for various stages of the certification process must be made transparent. Both ERA and 
NSAs should be incentivised to work fast and adhere to the interoperability rules.    

Mr Michael Cramer - Member of the European Parliament (Greens-DE) 

Mr Cramer stated that we need fair rather than unfair competition between modes of transport 
and that a cross modal plan is required to start this process. Cross acceptance of rolling stock 
must  be  beneficial  and  more  efficient  however  a  more  precise  framework  is  required.  The 
wider European agenda should be to lead to the removal of EU regulations. We need a register 
of infrastructure so that all bidders have transparent access to the necessary information. 

The new Airbus plane cost € 1 million for acceptance worldwide before introduction, whereas 
rolling stock costs in some cases twice that amount for acceptance in just one country.   

Workshop 2 – The optimal Infrastructure Manager for the future 

(Moderator: Mr Jean-Eric Paquet, Director, DG MOVE.B) 

Mr  Paquet  introduced  the  panel  of  speakers  and  then  invited  Sian  Prout  from  the  European 
Commission to present some initial thoughts on the implications of the 4th railway package 
and how it could lead to changes in the governance relationship for IMs and RUs. 

The two biggest problems identified in the governance of IMs related to efficiency and equal 
access. Railway infrastructure is a natural monopoly and the current governance arrangements 
do not provide sufficient incentives to respond effectively to the needs of users. There are no 
incentives  for  European  cooperation  with  issues  existing  relating  to  path  allocation, 
maintenance  and  development  and  charging  regimes.  Efficiency  can  be  improved  by 
encouraging appropriate cooperation between IM and RUs on an equal basis and ensuring the 
IM has all the functions needed to run the infrastructure in an optimised, efficient and non–
discriminatory manner.    

The  existing  separation  requirements  do  not  prevent  conflicts  of  interests  or  discriminatory 
behaviour  possible  from  non-essential  functions.  Persistent  risk  exits  of  cross-subsidisation 
without  complete  financial  transparency.  Therefore  the  minimum  appropriate  degree  of 
separation of the IM from RU's should be defined to ensure that all IM activities which are 

144 

 
potential  sources  of  conflicts  of  interest  are  subject  to  separation  requirements,  this  may  be 
separation  which  guarantees  at  least  legal,  economic  and  financial  independence  from  RUs 
and sets as objective institutional independence. 

The proposed approach for the creation of common rules for the governance structure of IMs 
involves ensuring all RUs are on an equal footing including the setting of economic incentives 
and performance indicators, promoting cooperation between IMs, establishing a coordination 
body with IMs, RUs, customers, users and public authorities to ensure the proper involvement 
of public authorities and all users. 

Ms Debora Serracchiani, Member of the European Parliament (S&D-IT) 

Ms  Debora  Serracchiani  explained  that  the  trend  in  rail  passenger  transport  usage  had  risen 
slightly since 2000 with rail market share at around 6% and 10% in freight. These low levels 
are proof of the need for improvement. Adequate financing and charging for rail infrastructure, 
better  conditions  for  competition  on  the  railway  and  new  organisational  reforms  to  ensure 
appropriate  supervision  are  required  as  was  put  forward  in  the  Commission  proposal  of 
September 2010. 

Despite important elements of the recast ensuring greater competition between rail operators 
and  better  supervision  by  an  independent  regulator  to  ensure  fair  competition  along  with 
obligations on complaints handling, the primary goals have not yet been achieved. The new 
rules  should  provide  a  solid  basis  for  financing  of  infrastructure  contracts  but  it's  up  to 
Member States to guarantee the appropriate levels. 

If  we  want  to  create  a  single  market  in  railways,  non-discriminatory  access  to  rail 
infrastructure is essential. Member States must not use a one size fits all excuse to preserve 
their  current  model.  More  encouragement  should  be  provided  for  freight  transport  across 
Europe to ensure competitiveness and reliability when compared to road traffic. The goal is a 
system  where  a  train  can  access  each  station  in  Europe  and  circulate  throughout  the 
infrastructure and hence investment in the interoperability of the network, and also in rolling 
stock is required along with a real separation of the IM from the operator to remove cases of 
discrimination which exist in many countries. 

The conclusion of the Advocate General appears to be that the holding system is compatible 
with the existing law. But imagine if in the aviation sector, each domestic airline had to ask 
the permission of their counterparts in other countries before being able to make any flights, 
the  market  would  not  be  as  competitive  as  it  is  now.  Therefore  the  Commission  and  the 
Parliament must now act fast to achieve this goal. 

Mr Hubert du Mesnil, President - EIM 

Mr du Mesnil stated that a key role of separated IMs is to cooperate with their neighbours to 
form  the  backbone  of  European  transport,  over  and  above  strict  modal  or  national  interests 
and  is  one  of  the  main  differences  from  those  IMs  that  remain  structurally  linked  to  their 
national carriers. 

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Much focus has been given to equal access to rail networks but this does not guarantee good 
quality treatment. The efficiency and performance of our rail systems needs to be addressed 
and transparency is a pre-requisite for efficiency. 

The optimal IM needs to adapt to the customer needs, it needs to be entirely above suspicion 
and  must  stand  above  any  conflict  of  interest  as  well  as  being  safe  and  efficient.  This  will 
create  value  for  the  whole  system,  including  their  clients,  users  and  for  tax-payers  through 
control  over  efficiencies  on  costs,  prices  and  capacity  and  be  responsible  for  timetabling 
through to traffic management. 

Mr Garry White, Head of European and Strategic Affairs - Network Rail 

Mr White spoke about how the 4th package should contain  important  proposals intended to 
bring about full domestic liberalisation and that it should consider the optimal role for the IM 
including the activities of bodies around it such as regulators and ERA. 

Experience from the UK showed that liberalisation opened up valuable opportunities for new 
and  existing  operators,  promoted  new  services  and  investment  for  passengers  creating  a 
competitive market served by  over  20 passenger  operators, most having  won public tenders 
with no one controlling RU. A number of reports demonstrating a positive correlation between 
liberalisation  and  competitiveness  and  tendering  of  franchises  have  been  produced. 
Liberalisation  since  the  mid-1990s  has  led  to  major  growth  in  passenger  demand  (over  a 
billion more passengers each year now), good levels of safety, new levels of punctuality and 
one  of  the  highest  levels  of  passenger  satisfaction.  A  5-year  multi-annual  agreement  of  €43 
billion of funding to the UK infrastructure exists with over €10 billion for increased capacity 
and capability. 

The  challenge  is  to  deliver  the  live  railway  network  needed  efficiently,  sustainably  and 
transparently as noted in the McNulty study published last year which recommended a wide 
range of change and reform (e.g. franchises were seen as too short and prescriptive) to achieve 
potential  efficiencies  of  around  30%  through  evolution,  but  ruled  out  radical  legislative 
change as  disruptive and distracting. Flexibility for  industry to determine, under transparent 
and regulated conditions, how independently to work together will benefit passengers, freight 
users, and taxpayers who fund the industry. 

IMs  and  RUs  can  deliver  efficiencies  through  better  alignment  of  incentives,  higher  train 
utilisation, new technology, and stronger partnership working. Progress is being made towards 
building these strong partnerships through ‘alliances’ which are co-operative partnerships at a 
local level, based on transparently sharing information to create joint objectives with shared 
risk and reward benefits. Alliances are two separate organisations not the creation of new joint 
entities  with  both  sides  retaining  legal,  regulatory  responsibility  and  final  decision  making 
power if there is a disagreement. 

The 4th package should place the responsibility for levers of network and system performance 
in  the  hands  of  the  IM,  freeing  RUs  to  focus  on  short  term  operational  train  performance 
driven largely by the life of their PSCs. As the amount of tendering increases, the IMs become 

146 

 
critical in taking a system-wide long-term view, bringing together better use of infrastructure 
and ways of maintaining it, investing in it, and balancing demand. Asset management, on a 
whole-life system basis, requires the ability to determine how the railway is maintained and 
renewed and how costs need to be controlled on behalf of customers and funders. 

An independent IM becomes a natural system integrator transparently providing information 
to customers, coordinating research and development with suppliers, leading to innovation for 
the  benefit  of  the  industry  rather  than  any  one  specific  interest  in  a  transparent,  non-
discriminatory and whole network manner. Planning meetings already take place in the UK to 
coordinate  its  priorities,  innovations  and  making  its  planning  of  the  network  reflect  cross-
industry requirements. 

Encouraging the right behaviours and providing IMs with the tools and flexibility, backed-up 
by effective and appropriate regulation should be the key to achieving the Commission’s goals. 
Regulators  with  the  right  balance  of  powers  should  be  allies  in  opening  fair  and  efficient 
markets that are properly funded by Member States. Rather than re-inventing the wheel, the 
4th package could seek to support on-going work to improve access to the rail network and 
adopt  common  approaches  for  example  with  a  European  Passport  (although  it  may  not  be 
necessary if not crossing borders).  

Overall the challenge is clear. Europe needs a robust and clear legal framework for the role of 
independent IM and to create a transparent system that unlocks innovation and growth, drives 
investment, and grows the railway. 

Mr Rafal Milczarski, Managing Director - Freightliner Poland 

Mr Milczarski discussed the EC`s White Paper 2050 objectives of getting 30% of road freight 
over 300 km to shift to other modes such as rail or waterborne transport by 2030, and more 
than 50% by 2050. Given that current rail freight modal share in WE countries is 13% and in 
CEE countries is 22%, we are a long way from achieving these objectives. 

We therefore need changes to the IMs current functions which are railway traffic management 
and  path  allocation  along  with  maintenance  and  development  (this  could  for  instance  be 
excluded and be financed by the state) of infrastructure. 

IMs  should  be  non-discriminatory,  transparent,  efficient  and  adequately  financed.  There 
should  be  total  separation  of  IM  and  transportation  functions  across  public  infrastructure. 
Maintenance  of  rail  and  road  infrastructure  should  be  financed  by  member  states  by  equal 
proportions to eliminate modal discrimination (current proportions in Poland are 70% in road 
and 30% in rail). Rail share in EU cohesion fund spending should be at least 40% in the EU-
15  member  states  and  at  least  50%  in  new  member  states  in  the  period  from  2014-2020. 
Railway investments are mostly for passenger transport and don't focus enough on bottlenecks. 
Approval boards (operator`s representation) which will make strategic decisions (maintenance 
and  investments  priorities,  costs  level,  access  charges,  etc.)  should  be  established  and 
empowered. 

147 

 
Basic loading and discharge infrastructure and sidings must be made available by default by 
infrastructure owners. Access must no longer be restricted. 

Mr Ludger Sippel - BAG-SPNV 

Mr Sippel stated that rail authorities in various countries across Europe have good experience 
of  competitive  tendering  of  regional  services  and  have  been  able  to  reduce  the  level  of 
subsidies on rural, suburban and interregional lines by up to 15%, 23% and 47% while also 
improving  the  level  of  quality  significantly.  However  infrastructure  fees  and  costs  for  staff 
and  energy  are  increasing,  while  public  budgets  for  financing  non  profitable  services  are 
becoming tighter. 

Railway infrastructure should be operated efficiently to provide the highest possible capacity 
at  the  lowest  possible  cost  with  fees  reflecting  the  costs  necessary  for  operating  the 
infrastructure only. The infrastructure framework should encourage competition between RUs. 
Infrastructure development should take account of regional passenger requirements regarding 
capacity and availability to improve the offer, attract additional passengers and maximise the 
use of public budgets. 

Problems exist linked to the operation of the infrastructure by integrated railway companies. 
Station  and  infrastructure  fees  (which  are  not  transparent  and  include  high  overhead  costs) 
paid by regional rail transport are too expensive compared to the costs they incur to the IM. 
Some  package  deals  have  led  to  overcompensated  direct  awards  of  PSCs  and  regional  IMs 
may be more efficient than the incumbent company in some circumstances. 

Infrastructure development projects to improve regional rail transport are difficult to initiate 
by passenger rail authorities, even if economically viable as often the incumbent IM focusses 
on the needs of RUs within the incumbent holding. 

It is necessary to fully unbundle RUs and IMs in order to solve the structural problems of the 
integrated  railway  companies  including  transparency  concerning  business  target  planning, 
cash-flow  management,  terms  on  internal  funding,  financial  flows  across  the  group,  cross 
subsidisation,  domination  and  profit 
the 
development of the infrastructure based on incumbent RUs needs.  

transfer  agreements  and  discrimination 

in 

Workshop 3 – Rail and the value for society 

(Moderator: Mr Alain Flausch, Secretary General – UITP) 

Mr  Flausch  introduced  the  panel  of  speakers  and  then  invited  Eddy  Liégeois  from  the 
European Commission to present some initial thoughts on the implications of the 4th railway 
package and how it could lead to domestic rail market opening. 

Problems  of  poor  service  quality  and  operational  performance  exist  in  the  domestic  rail 
passenger transport market driven by low intra-rail competition, lack of competitive pressure, 
inefficient use of public funds and a variety of national approaches to the provision of access. 
The objective is to now improve the competitiveness of rail by further developing the single 

148 

 
European  rail  area  to  open  domestic  rail  passenger  markets,  getting  better  value  for  money 
spent on public rail transport services and creating more uniform business conditions. 

Initial  thoughts  suggest  generalised  open  access  with  possibility  to  limit  access  when 
"economic equilibrium" of public service contract is compromised would be a sensible way to 
proceed along with mandatory tendering of public service contracts. 

Member States, competent authorities and RUs should also be encouraged to set up integrated 
ticketing  schemes  at  national  level  subject  to  non-discrimination  requirements  and  use 
existing provisions on transfer of staff if deemed necessary. 

Mr Philippe De Backer, Member of the European Parliament (ALDE-BE) 

Mr  De  Backer  explained  that  the  perspectives  of  the  4th  package  (as  was  the  recast  in  the 
process of reforming the railway market) have already been heavily discussed in the Transport 
committee. 

Improving  the  level  of  service  offered  by  RUs  increases  the  attractiveness  of  transporting 
goods and passengers by rail. Passengers often prefer the car because rail transport has poor 
service,  is  not  punctual  and  has  limited  inter  modal  connection.  For  freight,  cross  border 
transport is made difficult by Member States by different entry barriers, causing unreliability 
and delay so customers choose road instead, despite congestion. A move away from the one 
mode  approach  to  focus  on  the  multimodality  for  goods  and  passenger  transport  is  now 
required. 

Passengers and clients should be the first priority of the IMs  and RUs again  by  opening  all 
markets, separating RUs from IMs and being stricter on Member States so they implement the 
existing  European  interoperability  and  safety  rules.  The  necessary  European  legislation  on 
interoperability  is  already  in  place  but  there  is  a  gap  between  theory  and  practise.  It  is 
unacceptable  that  Member  States  often  create  barriers  to  entry  by  making  unreasonable 
demands for new market entrants. National regulators need to take action. The ERA should be 
the one stop shop that is needed to create a single market where national technical and safety 
rules no longer exist, and where only European law applies. 

Opening  the  market  will  give  passengers  more  choice  leading  to  better  service  quality  but 
needs to be accompanied by sufficient infrastructure financing and establishment of a cross-
modal level playing field. A European framework should be established allowing robust RUs 
easier access to the open market. Such RUs should have their own corporate governance and 
be  able  to  pursue  their  own  Human  Resource  policy  including  regarding  the  transfer  of 
workers from one company to another. 

Member States play a vital role in the financing of infrastructure, and should make sure PSOs 
are  in  place  and  are  efficient  and  effective,  but  should  not  interfere  with  RUs.  Legal 
separation  between  the  IM  and  the  RU  is  the  best  way  to  create  a  level  playing  field  with 
transparency, clarity and no more cross subsidies, leading to more efficient railway companies 
requiring less state funding. 

149 

 
Freight  transport  activity  is  projected  to  increase,  with  respect  to  2005,  by  around  40%  in 
2030 and by over 80% by 2050. Passenger traffic would grow slightly less at 34% by 2030 
and 51% by 2050. To cope with this increase, actions are necessary now such as high speed 
rail which is a sustainable alternative for shorter flights. 

The  TEN-T  network  aim  is  to  create  a  unified  transport  network,  removing  bottlenecks, 
upgrading infrastructure and streamlining cross border transport operations for passengers and 
businesses on an intermodal basis. Railways are the backbone for these corridors. 

Mr Christopher Irwin, Vice President - EPF 

Mr Irwin stated that by 2050 the majority of medium distance passenger transport should go 
by rail and over 50% of road freight should shift to other modes such as rail and waterborne 
transport  and  demonstrated  what  this  would  mean  in  terms  of  changes  to  modal  shift  in 
passenger kilometres and rail tonnage.   

Relative  consumer  satisfaction  with  rail  services  in  the  EU  is  relatively  poor  with  many 
passengers  considering  rail  travel  a  distress  purchase  rather  than  the  mode  of  choice. 
Consumer needs must be addressed using market opening and the advent of competition as a 
driver,  measuring  satisfaction  and  monitoring  outcomes  and  considering  end-to-end  journey 
requirements. 

Public transport and spatial planning must be considered to address congestion. Investment in 
capacity  needs  to  be  enabled  by  providing  dependable  services  offering  integrated  seamless 
interfaces between modes. Users must be empowered through effective information provision 
and beneficial market opening (TAP-TSI) opportunities to facilitate collective transport inter-
availability,  co-modality  and  through  ticketing.  The  ERA  should  be  reinforced  to  deliver 
interoperability  with  appropriate  authority  and  resources  to  tackle  some  of  the  national 
duplication  and  reduce  the  cost  base.  Cost  benefit  analysis  appraisals  should  be  used  as  the 
lodestar for interventions to ensure the correct priorities are delivered. 

Mr Michel Quidort, Director Institutional Relations - Veolia Transdev - EPTO 

Mr Quidort explained that the development of a competitive market structure was vital for the 
supply  of  public  transport  services  and  that  his  members  (9  largest  private  public  transport  
companies in Europe) support the opening of the passenger transport markets for competition. 

Since  market  liberalisation  a  number  of  countries  have  seen  considerable  benefits,  the  UK 
(additional 450 million passenger journeys, 20 billion passenger kilometres between 1987 and 
2009), the Netherlands (20–50% gains through competitive tendering efficiencies), Germany 
(28% increase in train kilometres, 26% reduction in subsidy paid, 43% increase in passengers, 
500 kilometres of re-opened lines and 300 re-opened and new stations), France (RhônExpress 
55%  increase  in  passengers  in  19  months),  Sweden  (20–30%  subsidy  reductions  through 
tendering  and  much  higher  customer  satisfaction).  Competition  does  not  impact  safety  and 
employment conditions are not an issue. In the UK, train drivers appear to earn some 50,000 
EUR per year, while in Germany the drivers of private operators appear to earn 86-94% of the 
wages of DB, the German incumbent. Sustainable working conditions are required with lean 

150 

 
management,  empowerment,  local  responsibility  and  an  ability  to  match  the  working  time 
needs of local employees. 

Competitive  awarding  procedures  must  become  standard  to  provide  value  for  society.  This 
should  be  through  a  general  obligation  to  tender  for  PSCs  with  a  clear  scope  and  no 
impairment of open access to ensure no restriction of market opportunities for new entrants. 
Direct award should remain an exception restricted to specific situations for limited duration. 
Tenders should be defined at local level and be coherent territorially and economically. Strong, 
independent and properly resourced national regulatory authorities should be maintained and 
co-ordinated through an EU network. 

Mr Hans-Werner Franz, Managing Director - VBB 

Mr  Franz  spoke  about  the  social  benefit  of  railways  with  a  need  to  consider  improving  the 
regional  economy,  environmental  aspects  and  synergies  through  networks.  Competition  for 
the regional and local rail market in Germany is still dominated by DB Regio with 76% of the 
market even though 91% of awards were made by competition. 

Where  competition  exists  benefits  have  included  increases  in  patronage  of  up  to  30%, 
improvements  in  quality  and  customer  satisfaction,  lower  prices  (market  entry  prices)  and 
similar or reduced financing through cost reductions of 10-50%. Contracts should be at least 8 
years (maximum of 15) with gross incentive contracts by taking risk preferred. Employment 
rises by competition by ensuring social standards and improvements in quality through more 
staff. However there is a potentially negative dynamic in the cost of open competition when 
compared to functional tendering. 

Infrastructure monopoly is a barrier to market entry. The dominating role of DB in nearly all 
tending  procedures  creates  a  large  distortion  in  the  market.  Interest  in  vehicle  financing  is 
slowly on the increase again but most banks possess little understanding of the SPNV market 
and therefore take a conservative approach which plays to DB's advantages of being a federal 
enterprise  and  therefore  having  strong  credit-worthiness  with  more  favourable  credit 
conditions, plenty of transport contracts, low residual-value risks and direct access to financial 
markets. 

The EU should improve interoperability, strengthen regulation and regional responsibility for 
infrastructure and improve open access competition to markets. 

Mr Tim Gilbert, President – EPTOLA 

Mr  Gilbert  expressed  the  views  of  the  European  Passenger  Train  &  Traction  Operating 
Lessors’ Association, representing the interests of (private) train leasing companies that invest 
in and lease locomotives, passenger trains and wagons across Europe.  

With an asset life of typically 30 – 35 years, lessors are long-term investors in the market who 
provide flexible access to rolling stock throughout the competitive process. What the market 
really needs is clarity, consistency and stability to allow continued growth. 

151 

 
Mr Ton Spaargaren – Gelderland province (NL) 

Mr Spaargaren described how his province of Gelderland is able to grant concessions for train 
services and the experiences of competitive tendering of rail PSCs that have been gained. 

There is a difference between liberalisation and market forces relating to Government control 
of market forces through tendering concessions. 

This debate took place in the Netherlands when it was decided that the Dutch Rail Company 
should  operate  profitably.  32  train  services  (6  in  the  province  of  Gelderland)  didn’t  fit  the 
business case so decentralising to the region under the precondition that these train services 
would be awarded by tendering took place. The province vision relates to sustainable mobility 
that  supports  the  economy,  prosperity  and  stimulates  social  integration.  Decentralisation 
contributed  to  this  vision  by  placing  more  focus  on  passengers  by  developing  successful 
products  for  existing  and  new  customers  such  as  commuters,  business  travellers,  peak 
accessibility, schoolchildren, tourists and leisure shoppers.  

The province invested about € 100 million during the last 10 years leading to an increase in 
train kilometres of 26% and yet still there is a lot of complaining about public transport which 
doesn’t help, instead innovative and surprising solutions should be sought. 

The  tenders  are  not  awarded  exclusively  on  lowest  price  but  are  awarded  to  the  most 
economically-  advantageous  tender.  They  are  net  cost  contracts,  i.e.  responsibility  for  the 
industrial risk as well as the commercial risk is for the operator. The higher the income, the 
higher  the  reward,  the  lower  the  income,  the  more  effort  is  needed  by  the  operator.  Criteria 
relating  to  the  concession  include  quality,  sustainability,  price,  travel  information  and 
marketing strategy. 

A  transport  plan  rather  than  a  production  plan  is  required  with  a  creative  marketing 
implementation  plan  (backed  by  the  RUs  money)  to  deliver  innovative  programmes  for 
growth. 

The  management  of  the  PSC  is  based  on  output  criteria  such  as  punctuality,  reliability  or 
complaints.  Both  the  Province  of  Gelderland  and  the  Arnhem  Nijmegen  city  region  have 
awarded intermodal concessions for train services that serve the same route. Agreements have 
been  reached  between  the  contracting  bodies  about  cooperation  in  relation  to  passengers  on 
product development, safety, marketing and fare offers, facilities including social safety and 
priority for solving bottlenecks. The 

As the market becomes more dynamic, customers become more demanding and performance 
levels  as  well  as  quality  increase.  Cultural  change  relating  to  attitude  and  skills  is  required 
such  as  being  decisive,  using  initiative,  passion,  perseverance,  optimism  rather  than 
pessimism, market focus and willing to invest. 

An intermodal public transport network is desirable with the train as the back bone and bus 
transport feeding in (easier if trains and busses are in the in the hand of one single operator) at 
transfer points such as Park and Ride facilities. 

152 

 
Plenary III: Presentation of Workshop findings 

(Moderator: Mr Keir Fitch, Deputy Head of the Cabinet of Vice-President Kallas - European 
Commission) 

Mr Fitch stated that having been in a number of the workshops it seemed clear that there was 
a  desire  to  get  the  structure  of  the  railway  right  once  and  for  all.  An  interactive  and 
competitive  railway  across  all  of  Europe  was  in  the  best  interests  of  everybody. 
Interoperability is vital to allow innovation through liberalisation and a level playing field is a 
pre-requisite for encouraging new market entrants. 

Mr  Fitch  thanked  all  the  delegates  for  their  involvement  in  the  workshop  sessions  and 
introduced the moderators who would summarise the key points debated in each session. 

Mr Verslype summarised the discussion that took place in Workshop 1 on the proposals for a 
European  passport  for  rolling  stock  approvals.  Lots  of  questions  had  been  raised  and  in 
particular 5 key points had come out of the lively debate that ensued. 

Firstly there was an essential need for immediate action to prepare for the target vision of a 
single  certificate,  but  also  specific  attention  must  be  given  in  the  short  term  to  the  better 
implementation of the current regime. 

Secondly there was general agreement from all participants on the reinforced role of ERA but 
different possible solutions such as a one-stop-shop, partnership with NSAs or ERA as single 
authorising  body.  Thirdly  the  current  legislation  is  generally  considered  sufficient  by  all 
participants  (only  one  dissenting  voice)  and  therefore  should  be  "tweaked"  rather  than 
completely "re-written". 

Fourthly  an  appeal  body  and  procedure  to  settle  conflicts  regarding  vehicle  authorisation  is 
required  with  appropriate  responsibility  ensured  and  fifthly  the  transparency  of  rules  and 
processes should be improved and monitored. 

Finally it was noted that there is a genuine enthusiasm in defending a Commission proposal 
which  does  not  exist  yet  and  indeed  some  participants  lobbied  for  even  more  ambition  and 
faster delivery.   

Mr  Paquet  summarised  the  discussion  that  took  place  in  Workshop  2  on  the  governance 
proposals for IMs. The debate had been lively with a healthy number of participants and the 
structural debate on bundling / unbundling was the most contentious of the issues discussed. 

A broad consensus was agreed on the needs of a better governance relationship for optimal IM 
containing efficiency drivers. 

How the IM relates to market signals and all RUs was discussed, as was whether incumbents 
are  better  placed  to  bring  forward  operational  efficiencies.  Arguments  were  raised  about 
equality, impartiality and the vital need for a level playing field. In this respect it is difficult to 
foresee how one RU in the shape of the incumbent, can make fair decisions on others. 

153 

 
The  EC  now  needs  to  make  a  proposal  ensuring  stability  for  the  medium  to  longer  term 
bearing in mind the dynamics of the potential tensions between equality and efficiency. 

Mr  Flausch  summarised  the  discussion  that  took  place  in  Workshop  3  on  improving  the 
competitiveness  of  rail  and  further  development  of  the  Single  European  Rail  Area  which 
involved mainly representatives from  the UK,  Netherlands and Germany,  all  of whom were 
broadly  in  favour.  SNCF  highlighted  that  backtracking  took  place  when  attempting  to 
deregulate the US rail market and that it should not be forgotten that rail is a capital intensive 
industry. Where RUs have invested important sums on money in railway infrastructure they 
should be rewarded. 

Domestic  regional  and  local  rail  accounts  for  90%  of  the  market  and  as  such  changes  to 
elements  such  as  through  ticketing  to  allow  a  doubling  of  ridership  by  2025.  High  quality 
efficient  transport  is  required  from  a  sustainability  viewpoint  and  a  move  to  mandatory 
tendering  of  contracts  with  some  open  access  provision  would  provide  improved  value 
through a reduction in public subsidies and benefits through improvements in service quality, 
infrastructure use and patronage. 

Tendering  should  not  only  be  dependent  on  price,  otherwise  if  operators  fail  to  make 
significant  money  by  overbidding,  loss-leading  ,  or  failing  to  deliver  their  initiatives,  the 
market disappears with all other players and contracting authorities losing value. Barriers to 
proposed cross-border tenders should be removed. 

There is a need to kill off some of the iconic myths such as social dumping or safety issues in 
liberalised markets as these are simply untrue. 

Access to rolling stock is vital for market entry as is the need for consistency and clarity of 
regulations  and  stability  in  the  marketplace.  In  addition  the  rules  that  already  exist  must  be 
implemented.  Integrated  ticketing  and  workforce  integration  could  lead  to  increased 
productivity. 

Plenary  IV:  Presentation  of  the  Eurobarometer  survey  and  Conclusions  of  the 
Conference 

Mr Matthias Ruete, Director-General - European Commission, DG MOVE 

Mr Ruete thanked all the speakers and participants who shared their important thoughts and 
contributions  on  the  Fourth  Railway  Package  throughout  the  day.  He  introduced  Olivier 
Coppens who presented some high level findings from the Eurobarometer survey which had 
been conducted across 25 Member States (EU27 except Cyprus  
through 
approximately  26000  (around  1000  per  country)  face-to-face  interviews  in  the  respondent’s 
homes. 

and  Malta) 

The  survey  was  designed  to  assess  satisfaction  with  rail,  attitudes  towards  competition  in 
railways and the effects of competition. 46% of respondents were satisfied with the national 
and  regional  rail  systems  in  their  countries,  with  36%  unsatisfied.  However  significant 
variation  exists  between  individual  countries  ranging  between  67%  and  18%.  71%  of 

154 

 
Europeans  supports  more  competition,  with  only  21%  opposing.  Again  variations  exist 
between individual countries ranging from 90% to 46%. However the overarching support is 
consistent across regular and occasional users. 

The most important factors that could encourage Europeans to use the train are lower prices 
(43%  of  all  respondents),  better  network  with  more  routes  and  stations,  more  frequent  and 
faster  journeys,  more  reliable  services  and  better  rolling  stock.  Respondents  believe  for  all 
these areas and for the safety of the railway network (which showed the highest variation of 
76% to 21% between countries) that more competition in the rail market in their country will 
have a positive effect. There is also a very strong belief that more competition would lead to 
more innovative ways of buying tickets. 

49% of respondents felt that public funding of the rail sector will increase or remain the same 
if there is more competition in the rail market whereas 34% believe it will decrease. The full 
survey is now available at http://ec.europa.eu/public_opinion/archives/ebs/ebs_388_en.pdf 

Mr  Ruete  then  summarised  the  three  key  workshop  issues  discussed;  reducing  the  time  of 
placing  new  rolling  stock  in  the  market;  optimal  IM  for  the  future;  and  the  value  of  public 
services by rail for society, will be properly addressed following a robust impact assessment 
and in-depth stakeholders’ consultation. 

The  consultation  has  now  concluded  with  questionnaires  sent  to  more  than  400  interested 
parties,  several  workshops  organised  involving  the  main  market  players  and  the  European 
associations. A high level outline of the Eurobarometer passengers’ survey across the EU with 
more than 25,000 respondents was presented earlier. All of these along with the conclusions 
of this conference will be considered when finalising the legislative proposals. 

Despite  its  comparative  advantages  versus  road,  rail  is  not  considered  reliable  enough, 
flexible  enough,  innovative  enough  and  affordable  enough.  There  is  evidently  a  problem  of 
efficiency  which  needs  to  be  addressed.  All  stakeholders  appear  to  realise  that  current 
regulatory  arrangements  are  not  optimal.  Long  and  costly  procedures  and  discriminatory 
access barriers have caused a lack of new market entrants across many Member States. 

Stakeholders also seem to agree that a new concept of a single vehicle "passport" valid in all 
Member States issued by the European Railway Agency (in conjunction with national safety 
authorities) would improve efficiency. The ERA may also be tasked with the facilitation of the 
deployment  of  ERTMS,  strengthened  communication,  improved  economic  evaluation  and 
cost-benefit analysis, and an enhanced role in international relations and research. 

Further improvement of non-discriminatory access to rail infrastructure through clarifying the 
relations between IMs and RUs (unbundling) are required to create the Single European Rail 
Area.  We  are  finalising  proposals  for  a  regulatory  framework  for  the  market  opening  of 
domestic rail passenger services covering open access services and rail transport under public 
service contracts as well as their mutual co-ordination. 

The costs savings from public tendering for competent transport authorities have been in the 
order of between 20% and 30% in the countries that have opened their doors to competition. 

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Taxpayers expect that rail infrastructure usage will be optimised rather than restricted to the 
benefit of specific commercial interests for historical reasons. 

The  discussions  at  the  workshop  made  it  also  clear  that  domestic  market  opening  requires 
integrating ticketing schemes and access to rolling stock to enable new RUs to participate in 
tender procedures. 

At this stage, the Commission is listening to all ideas from all parties and has not yet adopted 
its own position. Once the various options are examined, we will publish our impact analysis. 

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ANNEX IX 

GLOSSARY & ACRONYMS 

The following definitions are based on existing EU law but do not have any legal value and 
only  aim  to  provide  a  simplified  explanation  of  the  concepts  used  in  the  impact  assessment 
and its annexes. These definitions only serve for the impact assessment. 

'railway undertaking' means any public or private undertaking licensed according to EU law, 
the  principal  business  of  which  is  to  provide  services  for  the  transport  of  goods  and/or 
passengers by rail with a requirement that the undertaking ensure traction; this also includes 
undertakings which provide traction only; 

'infrastructure manager' means any body or firm responsible in particular for establishing, 
managing  and  maintaining  railway  infrastructure,  including  traffic  management  and 
control-command and signalling; the functions of the infrastructure manager on a network or 
part of a network may be allocated to different bodies or firms; 

'infrastructure  users'  means  a  railway  undertaking  or  an  international  grouping  of  railway 
undertakings or other persons or legal entities, such as competent authorities under Regulation 
(EC) No 1370/2007 and shippers, freight forwarders and combined transport operators, with a 
public-service or commercial interest in procuring infrastructure capacity; 

'railway infrastructure' means an area comprising railway ground area, tracks and track bed 
(including  inter  alia  embankments,  goods  platforms,  passenger  platforms,  crossings), 
engineering  structures  (covering  inter  alia  bridges,  tunnels,  underpasses),  level  crossings, 
superstructure (covering inter alia rails sleepers, traversers), access ways for passengers and 
goods),  safety  installations,  signalling  installations,  telecommunication  installations,  lighting 
installations, catenaries, contact wires and buildings used by the infrastructure department. 

'infrastructure capacity' means the potential to schedule train paths requested for an element 
of infrastructure for a certain period; 

'network' means the entire railway infrastructure managed by an infrastructure manager; 

'train  path  allocation  '  means  the  allocation  by  an  infrastructure  manager  of  the 
infrastructure capacity needed to run a train between two places over a given period; 

'operator of service facility' means any public or private entity responsible for managing one 
or more service facilities or supplying one or more services to railway undertakings; 

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List of acronyms 

ARAF 

Autorité de Régulation des Activités Ferroviaires 

ARF 

CEF 

CER 

Association des Régions de France (French Regions' Association) 

Connecting Europe Facility 

Community of European Railway and Infrastructure Companies 

CLECAT 

European association for forwarding, transport, logistics and customs services 

DB 

Deutsche Bahn AG (German railways) 

DG CLIMA  Directorate-General for Climate Action 

DG COMP  Directorate-General for Competition 

DG ECFIN  Directorate-General for Economic and Financial Affairs 

DG ELARG  Directorate General for Enlargement 

DG EMPL  Directorate-General for Employment, Social Affairs & Inclusion 

DG ENER  Directorate-General for Energy 

DG ENTR  Directorate-General for Enterprise and Industry 

DG ENV 

Directorate-General for Environment 

DG MARKT  Directorate-General for Internal Market 

DG MOVE  Directorate-General for Mobility and Transport 

DG REGIO  Directorate-General for Regional Policy 

DG SANCO  Directorate General for Health & Consumers 

DG TRADE  Directorate General for Trade 

DGCCRF 

Direction Générale de la Concurrence, de la Consommation et de la Répression 
des Fraudes 

ECJ 

European Court of Justice 

EEAS 

European External Action Service 

EEIG 

EIM 

European Economic Interest Grouping 

European Rail Infrastructure Managers 

158 

 
 
 
EPF 

European Passenger's Federation 

EPTO 

European Passenger Transport Operators 

EPTOLA 

European Passenger Train & Traction Operating Lessors’ Association 

ERA 

European Railway Agency 

ERFA 

European Rail Freight Association 

ERTMS 

European Rail Traffic Management System 

ETCS 

European Train Control System 

ETF 

EU 

FIF 

European Transport Workers' Federation 

European Union 

Fédération des Industries Ferroviaires 

FNAUT 

Fédération Nationale des Associations d'Usagers des Transports 

FS 

Ferrovie dello Stato 

GHG 

Greenhouse gas 

IA 

Impact Assessment 

IASG 

Impact Assessment Steering Group 

ICA 

Italian Competition Authority 

IM 

LS 

NS 

NSA 

NTV 

OBB 

Infrastructure manager 

Legal Service 

Nederlandse Spoorwegen (Netherland Railways) 

National Safety Authority 

Nuovo Trasporto Viaggiatori 

Austran railways 

OECD 

Organisation for Economic Co-operation and Development 

PPP 

PSC 

PSO 

PZB 

Public-Private Partnership 

Public service contract 

public service obligations 

Punktförmige Zugbeeinflussung 

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RFF 

RFI 

Réseau Ferré de France (French Railway Network) 

Rete Ferroviaria Italiana 

RMMS 

Rail Market Monitoring Scheme 

RNE 

RailNetEurope 

RU 

SG 

Railway undertaking 

General Secretariat 

SMEs 

Small and medium enterprises 

SNCB 

Belgian railways 

SNCF 

Société Nationale des Chemins de fer Français (National Community of French 
Railways) 

TAP-TSI 

Telematics Applications for Passenger Services Technical Specifications for 
Interoperability 

TEN-T 

Trans-European Transport Network 

TFEU 

Treaty on the Functioning of the European Union 

UIC 

UITP 

UK 

International Union of Railways 

International Association of Public Transport 

the United Kingdom 

160