Comments on: High-Speed Rail Competition Between Trenitalia and SNCF Coming in 2010

By: Maclondon

Maclondon — Mon, 20 Apr 2009 08:04:41 +0000

Some competition could be welcome – as MRig states different companies could offer different services (like premium business services like Eurostar offers but other HSR operators tend not to do) or more flexible prices, etc.

I agree that private companies can have the effect of squeezing cash that is effectively used to subsidise loss making services but provided the infrastructure operator is in public hands and charges similar access fees to any operator, much of this can be avoided. In the UK, the biggest problem with open access operators is that they tend to only pay the variable rates rather than a share of the fixed charges which is the far higher fee.

Of course, the biggest competitor to high speed rail in Europe are the airlines – so all in all the impact in terms of improved service, lower prices, etc is likely to be small.

By: Mark Jaroski

Mark Jaroski — Sat, 18 Apr 2009 19:39:44 +0000

Living in Lausanne, which is a major stop between Milan and Paris I suppose I kindof like the idea of being able to hop either a TGV or a Cisalpino to Paris. Like you I do worry that this will wind up screwing things up: I’ve traveled by train in England and seen how competition can screw things up.

By: Alon Levy

Alon Levy — Sat, 18 Apr 2009 17:14:48 +0000

Well, in the 10-15 years after the US deregulated the airlines, prices went down overall.

By: MRig

MRig — Sat, 18 Apr 2009 16:39:57 +0000

@Dominic: I must confess I don’t know too much about the French system. Is the issue that these commuter and rural routes are not profitable, or that they are simply less profitable? I do know that the German system is more expensive than it needs to be, and I’d be very surprised if DB’s monopoly didn’t contribute significantly to that.

@Deacon: We didn’t try privatizing, the railways were already private until Amtrak.

Perhaps RFF should require private competitors to either contribute some of their profits to the rural and commuter routes, or run trains on some of them, as a condition for using its rail infrastructure on the more profitable routes. This could (potentially) split the losses between the public and private sectors while still allowing competition. And quite frankly, if there’s a hard-to-see way to make something profitable, I trust business over government to find it.

You’re both making strong arguments. My dissent is based upon the premise that, though government should control the rail infrastructure, competition should allow the market to find an equilibrium in the daily running of the trains. If this liberalization adventure is a failure, I’ll take it all back.

By: Deacon

Deacon — Sat, 18 Apr 2009 12:01:28 +0000

The current European model works. It has worked for decades. Prices may drop on the Competing International Lines but the rural lines will ultimately suffer because in the current scheme they are subsidized by the busier lines and in so doing everybody wins. Corporate enterprise wants money so naturally to satisfy their WANT they will go all out to get it. This meaning they neglect the lesser used lines and with that they neglect the NEEDS of the people in the greater scheme of things.
As Dominic said “Effectively it’s privatising profit and nationalising loss.” Privatization in this instance makes no sense and would be to the detriment of a great system. We tried it here in the US and it went tits up in a hurry. See what led to the creation of Amtrak.

By: Dominic

Dominic — Fri, 17 Apr 2009 20:38:12 +0000

But, what you;re saying doesn’t make sense, MRig, currently TGV routes generate several hundred million dollars a year of profit for SNCF that they use to subsidise services on less profitable but still essential commuter and rural services. The private companies that will compete will inevitably significantly reduce this, meaning either a reduction of service on the non TGV French network or a very large increase in public subsidy.

Effectively it’s privatising profit and nationalising loss.

By: MRig

MRig — Fri, 17 Apr 2009 19:09:39 +0000

On the contrary, this is potentially quite good news. In a monopoly, the lone provider is the sole arbiter of the price and thus they set it quite high. Since the rail infrastructure will remain in public hands, safety is protected. Existing national providers can keep the less-traveled routes at their current price, while competition will drive price down at the more-traveled routes. The for-profit corporations probably won’t even bother to compete in routes they don’t think will be profitable, so the status quo will probably be preserved in some places.

But what of the busier routes? Perhaps the national corporations will keep their current prices and offer premium service, while the private operators offer the rail equivalent of low-cost airlines. Or, it might be the other way around, where government money can keep prices for existing service low but private sector efficiency can give premium first-class travel for those willing to pay, like business travelers. Who knows what we’ll see? Conference rooms, high-speed internet in every car, cheaper food in cafe cars? We don’t know yet, because, satisfactory as they are, existing rail services in Europe have not had pressure to improve, until now. And, if it turns out that I’m right, it’s fantastic news for the United States, where we’ll be provided a model of successful HSR that better fits our entrepreneurial culture than Europe’s current model.