Jim Surkamp - Flickr

“Open Access” Competition Can Improve Intercity Rail

European countries are turning to the market to run rail service. Can America follow?

October 8, 2021

Across Americaeven in the urbanized northeast—passenger rail struggles to capture strong mode share between major cities. Rail advocates often point to European countries, which have invested large sums in building and operating intercity rail, as models to follow. What they sometimes fail to mention is that European countries adopt various market-based privatization measures to achieve this higher mode share. One such example is their embrace of “open access” provision. 

Under the “open access” model, one entity owns the tracks and most or all other physical infrastructure, but multiple operators can run trains over them. This is in contrast to the vertical integration model, where the track manager also provides rail service; and the franchising model, where track owners lease out generally exclusive rights to rail operators on a contractual basis. Open access, by contrast, allows competition along the same track, based on operators’ own terms. It is much closer to a free-market model for an infrastructure type traditionally thought to benefit from monopoly provision.   

Open access is being tried in parts of Europe, and proponents point to evidence of higher customer satisfaction, lower prices, and increased ridership. 

Italy

In Italy, the firm NTV was established to compete with Trenitalia, the national operator, in 2006. According to Andrea Giuricin, a representative of the firm, the two operators combined provide a 5-10 minute frequency at peak travel times between Rome and Milan. On Amtrak, by contrast, the most frequent service between New York City and Philadelphia is about four trains per hour. 

The impact of competition, Giuricin told attendees at a recent webinar held by the High-Speed Rail Alliance, was a drastic increase in high-speed rail’s mode share in Italy. Italo, the brand name of NTV’s services, also has a lower per-seat cost than most of Europe’s discount airlines. Traffic is allocated through a “slot” system, similar to how airports allocate enplanements. 

By 2016, the firm transported 11 million passengers per year. Giuricin further states Italo offers cheaper fares than Amtrak’s Acela Express service by a factor of 5-6 (the company operates four distinct classes of service, with discount and premium fares). 

NTV has made considerable investments, spending $1.2 billion from 2008 to 2012 and building its own maintenance facility. But it has been able to optimize existing infrastructure; high-speed trains run through on conventional track, meaning trains can reach more destinations with less new construction. 

Citing the Competition and Markets Authority, a UK regulatory department, researcher Fernando Casullo writes, “competition in the market gives incentives for train operators to put pressure on the infrastructure manager to reduce costs in order to reduce access charges, and to use existing capacity more efficiently.” 

This is largely what happened in Italy: Italo trains have encouraged Trenitalia to improve their services, and the state-run infrastructure manager, RFI, which collects fees, is profitable (but receives subsidies in order to meet government-imposed goals).

Other examples

Along with Italy, the Czech Republic and Austria have a hefty share of rail service operated by private companies, attaining high market shares, according to Casullo; one Czech firm has a 40% share.

In Germany, discount intercity bus operator Flixbus acquired rail operator Locomore, rebranding it as Flixtrain. Flixtrain operates services on routes such as Berlin-Hamburg, and offers cheaper rates than the state operator, Deutsche Bahn (offering a fare of $18 for a trip two days out versus just over $41 on Deutsche Bahn). 

Britain, which until recently operated on the franchising model, nevertheless offers two examples of open access: Grand Central and Hull Trains. Each has the highest rider satisfaction rankings in the UK—96% of Grand Central passengers report satisfaction, and 94% for Hull Trains. (However, both of these companies have limited frequency, offering services in the range of 5-7 trips per day.)

Could open access work here? 

In America, three private rail projects are proceeding, but each is vertically integrated. Brightline, which operates in South Florida, is building a northbound extension, as well as a project connecting Las Vegas to metro Los Angeles. Texas Central will be built between Dallas and Houston. 

But in the Northeast Corridor, where most tracks are already owned by Amtrak, outright privatization under a single owner/operator is less realistic, and an open access model could be appealing. There is something of a template, as multiple commuter rail operators already traverse the tracks. Better yet, various foreign private inter-city rail operators have over the decades shown interest in serving the U.S., including Virgin Rail and Stagecoach Group. 

Moreover, the presence of an operator also serving as a dispatcher risks perverse incentives of the dispatcher prioritizing its own traffic. Introducing a separate “infrastructure manager,” as in Italy, while allowing private operators to compete for slots on intercity routes, would get around this. Overseas experience demonstrates that competing service is viable for intercity trips; it is worth trying in the U.S. 

This article was co-authored by Market Urbanism Report content manager Ethan Finlan

Scott Beyer is the owner of Market Urbanism Report, a media company that advances free-market urban policy reform.  Follow him on twitter: @sbcrosscountry