Cost–benefit Analysis, Planning and Innovation
Edited by Hugo Priemus, Bent Flyvbjerg and Bert van Wee
Chapter 13: Provision and Management of Dedicated Railway Systems: How to Arrange Competition
13. Provision and management of dedicated railway systems: how to arrange competition Didier van de Velde and Ernst F. ten Heuvelhof 13.1 INTRODUCTION Since the 1980s, an intensive debate has been going on about the optimal institutional design of the rail transport sector (train and metro). For decades, activities in this sector were organised in vertically integrated enterprises. ‘Vertically integrated’ means that the various links in the production chain, particularly infrastructure and transport services, were united in one hand. This gave rise to vertically integrated monopolists. Particularly in continental Europe, governments owned these vertically integrated monopolists. In the 1980s, doubts were cast on this arrangement. The absence of competition and the dominance of governments were no longer seen as a guarantee for reliable and cheap service delivery. Many argued that more competition and the introduction of private ownership would generate incentives to improve the performance of this industry. This argument was raised in many network-based industries. The idea is that productive eﬃciency will rise after the introduction of competition and privatisation (see, e.g., Winston, 1993; Megginson and Netter, 2001; Letza et al., 2004; Donahue, 1989: 57–78). One condition that was considered vital for changes of this kind was the unbundling of the various links in the production chain. Infrastructure and services should no longer be united in one hand as a matter of course. Unbundling would allow the introduction of competition in links that do not require monopolistic ordering. This unbundling would also allow the private sector more...
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