Rail Reform

Giger-Baumann <giger.baumann@...>

The following question and the answer might be of interest to SwissRail members. It gives an idea of the actual state of the rail reform in Switzerland.

Markus Giger

"What needs to be done to enhance competition in railway services through free access to the railroad network, given that so far, the market share of competitors of the state-owned CFF remained minuscule (less than 0.1 per cent)?"

For the time being, free access to the (standard gauge) rail network is only granted to freight haulage by Swiss railways. Free access on the European level will be introduced as soon as the bilateral agreement on land transport between the EU and Switzerland comes into force.

However, the railway networks operated by the individual companies differ widely with respect to technical standards, electricity supply, signalling systems etc. Some of these characteristics are true non-tariff barriers to interoperability. That is why the Federal Office of Transport (FOT) now requires that the future signalling standard be a train protection system which is harmonised throughout Europe, the European Train Control System (ETCS). The interoperability of the railways is strongly promoted by this international harmonisation.

A second element to be considered is the fact that, in the past, the railways were organised strictly territorially. A considerable change of mentality, therefore, has to take place which takes time. A new approach of "co-operation in competition" has to be found involving all major national and foreign railway companies. With the exception of the Swiss Federal Railways (SFR), the Swiss railway companies are comparatively small and only regionally established. It is not easy for them to market their service away from their home base. They need encouragement and advice, but also the necessary marketing and management capabilities in order to succeed in the market place. The FOT encourages closer co-operation between companies of complementing or similar capabilities which could improve their situation. Another promising measure could be the promotion and creation of rolling stock companies (ROSCOs) because smaller train operating companies (TOCs) often meet shortages in locomotives and wagons when trying to submit competing offers for freight haulage.

Finally, the opening of the markets causes tariffs and special operational services to become the normal instruments in competition. Sometimes concealed, others applied quite openly, these weapons are difficult to control. Official complaints by defeated competitors can, of course, be followed up and analysed. In most cases, however, no explicit complaints are articulated. This makes it virtually impossible to apply remedies. On the international level, there are signs of misuse of market power. Some European railway companies seem to apply infrastructure tariffs that are unreasonably high and push competitors out of the market. Future EU directives are expected to contribute to fair solutions.

It is not surprising, therefore, that under these circumstances the share of smaller companies in the rail freight market is not very high. Before the Swiss railway reform, i.e. before the introduction of Swiss internal open access, the (so-called) private railway companies performed 5 –7 per cent of rail tonne kilometres. However, it is not Switzerland’s goal to transfer freight from one railway company to another. The primary objective in transport policy is transferring freight from road haulage on to the railways thus alleviating road traffic and reducing environmental impacts. The measures, most of them already explicitly approved by the electorate, include building new rail capacity (Rail 2000, two New Rail Links through the Alps etc.), a mileage-related heavy vehicle tax, the bilateral agreement on land transport with the EU, a Traffic Transfer Act (transferring road freight traffic to rail), the railway reform, subsidies on train path prices for combined transport etc. The Swiss authorities are confident of their success.