Adam Fularz
The problem of many developing
countries, such as CEEC countries transforming their economies away from
central plannig is the decline of public transport ridership. On one hand such
decline is caused by intermodal shifts- cars are becoming more affordable to
the public with the improvement of economies. On the other hand, public
utilities such as bus and railway systems are often left in public hand, which
results in lack of market forces that could drive enterpreneurs to innovations,
better quality of services, cost reductions etc.
Decisions to liberalise or
privatise such sectors are difficult, even if economicaly justified. There are
various fears that block or prevent changes: argumetns of public service, or
levels of service. There is a tendancy to overemphasize such concerns, to
protect political or economical interests. On the other side, those willing to
privatise utilities, often intend to sell unregulated monopolies, hoping to
achieve higher price for such transaction, forgeting however that this will
reduce public welfare in the future (Bobińska 2000).
Lots of discussion was spent on
the issue of market liberalistation. However, little was discussed on the
borders to such liberalistation, such as the existence of shallow markets (like
for example rural areas) where forces of competition might not occur.
Regulation, seen as a remedy, might be a good solution in such case, but is it
a good solution in deep markets where free competition of many operators could
serve the demand without problems? Will free, unrestricted competition produce
even better results? Such question is important especially in countries where
corruption could be a potential problem. Introduction of a regulated system
could, in case of corrupted procedures, have rather inverse effect on the level
of prices.
I.
Research objectives
Will the modal split change
towards increased public transport use if increased competition would take
place? How do the institutional changes affect the level of services? What are
the institutional mechanisms that stand behind competition in such networks?
How shallow has the market to be that a monopoly would occur? How deep must be
the market to be freed from regulation? Given the case of Japan: a regulated
monopoly- is it a worse solution? Can the infrastructure business be
efficiently separated from operations business without loosing innovativity and
elasticity of private capital?
II.
Thesis
An efficient competition can
reduce costs of providing such services, but not necessarily prices for
customers. Only a mixture of free market approach in deep markets- those with
capacity for real competition and a regulation of monopolies in shallow markets
can help to achieve best results. Infrastructure business can also be operated
by private operators, given that the public wil be protected from abuse of
their monopoly power.
III.
Literature review
1. Environment of public
transport
Transport is an area of immense
state interventionism, thus many economic processes are deeply distorted. State
intervenes in infrastructure provision- it owns and builds road and railway
networks. In the past many roads and railways have been constructed as private ventures.
Over time, roads and railways become nationalised. Pricing mechanisms for their
use are often highly inefficient, for example unitary charging via petrol usage
completely distorts the situation in city centres, where costs of provision of
such services are extremely high and road space is scarce. Thus, road charging
schemes were introduced in several towns in the world. However, quick general
shift towards such practice is unprobable due to political resistance, high
capital costs and technical complexity of such systems. Problems of public
transport in keeping its market share might be to a large extent caused by
state interventionism. It is hardly possible to trace how the market would look
like if users were charged real costs of infrastructure provision. Especially
in urban areas public transport could dominate.
2. Organisational forms of public
transport
2.1. There are several different
forms of organisation of public transport in the world. They vary greatly from
country to country. Such forms are: relatively unregulated competition (UK),
unregulated competition with restiricted entry (Poland long distance),
franchising (Sweden, London), public monopolies (France, Poland, Germany) and
other combinations (for details see Wyszomirski 2007).
2.2. In contemporaty railway
industry we have a plethora of different organisational forms. Switzerland and
Japan are two countries in the world, where many private passenger railway
companies have never been nationalised, they coexisted in the market together
with nationalised main lines (Batisse
2003). Today these two countries have currently the highest railway
ridership per capita in the world.
Most countries nationalised their
railways in the past, but in the beginning of 21. century private ownership and
competition partially returned to many of these markets. However, direct
competition was mostly restricted to some overlapping destinations, and
indirect competition (franchising) is the dominant method. Private railway
monopolies that exist for example in Japan, are regulated (yardstick
competition, maximal levels of profitability) (van de Velde 2001). Large
private railway undertakings in Japan combine their core business with property
businesses along their lines. They
provide “total community services which, include rail services” (van de Velde
2002, p.280).
In developing countries railways
are often still run as public monopolies. The monopoly power of railways
results from mixture of technical superiority of railways over busses (for
example higher commercial speeds) and subsidies that were often used to reduce
ticket prices below the profitability levels of the competitors (such as bus
operators) while keeping poor service quality.
IV.
Research methods
Costs of provision of railway and
bus services will be examined. Data of various operators will be collected by
the author, basing on examples from tendering processes and franchising
procedures discussed in the literature (some examples of such data from Polish
bus market and their analysis: Tomanek 2003).
Comparison will be made with
unregulated bus markets where urestricted competition exists. Cost functions
and price levels on „deep market” routes will be examined. Routes with more
competition will be compared with routes with less competition.
Operators often accused other
competitors on cherry-picking: picking out profitable slots from a large base.
Operators are known to cross-subsidize costs of running off-peak services with
the profits made in peak-time, in order to provide better service. This
question will be researched, as the level of protection should depend on the
depth of the market. This deepth of the market will be at least estimated given
the technical constraints such as various loads of the fleet or rolling stock.
Levels of services on routes in fully liberalised markets will be analysed with
respect to availability of services in off-peak times. Analogies with
commercial avaition will be drawn. In this market there is no regulation of
competition (except of granddfather rights to slots on popular airports), and
cherry picking might occur.
Given the availability of
literature and data, Japanese experience with public transport will be
discussed as an alternative approach to the above mentioned.
V.
Selected literature
Batisse F., „La decentralisation dans les
chemins de fer, un fait mondail qui n`est pas nouveau”, in: Revue Generale des Chemins de Fer
2003 nr 2, pp. 45-58
Wyszomirski
Olgierd, „Ewolucja systemów organizacji transportu miejskiego w Europie”, in:
Przegląd Komunikacyjny 7/2007
„Liberalizacja
i konkurencja na rynku transportowym w Europie", Praca zbiorowa pod red.
S. Dziadka i M. Michałowskiej, Prace naukowe, Akademia Ekonomiczna im. K.
Adamieckiego Katowice 2001.
R.
Tomanek: ‘Organizacja miejskiego transportu zbiorowego w Polsce na tle
liberalizacji rynków transportowych w Europie’ in: Transport Miejski Nr 2/2003
„Liberalizacja
transportu w warunkach transformacji gospodarczej”. Praca zbiorowa pod red. G.
Dydkowskiego i R. Tomanka. Prace naukowe, Akademia Ekonomiczna im. K.
Adamieckiego, Katowice, 2003.
Tomanek
R.: Ekonomiczne uwarunkowania rozwoju transportu miejskiego - wybrane
zagadnienia, w: "Uwarunkowania rozwoju transportu publicznego na obszarach
zurbanizowanych", Materiały konferencyjne XXIX Krajowego Zjazdu
Komunikacji Miejskiej, IGKM w Warszawie, Warszawa 2002.
Kazushige
Terada, „Railways in Japan Public &
Private Sectors“, w: Japan Railway and Transport Review nr. 27, 2001.
D. van de Velde (ed.) (2002)
„Changing Trains. Railway reform and
the role of competition, The experience of six countries”, Ashgate
:Aldershot
F.Mizutani,
K.Nakamura, „Privatisation of the Japan National Railway: Overview of
Performance Changes“ in: Interntional Journal of Transport Economics, XXIV (1),
1997.
