Chapter 3: Infrastructure managers and
railway undertakings |
18. The infrastructure manager is responsible
for providing and maintaining the rail infrastructure. In some
Member States, the infrastructure manager is also responsible
for capacity allocation, setting charges for the use of infrastructure
and providing access to other rail-related services, such as terminals,
sidings and marshalling yards (see chapter five for further details).
19. Article 6 of Directive 91/440/EEC, as amended
by Directive 2001/12/EC, provides for accounting separation between
infrastructure managers and railway undertakings. It says, "Member
States may also provide that this separation shall require the
organisation of distinct divisions within a single undertaking
or that the infrastructure shall be managed by a separate entity".
The setting of charges and the allocation of capacity must be
undertaken by a body that is independent in legal form and decision
making from any train operator. Member States have implemented
this requirement in different ways. For example, in Germany the
Deutsche Bahn Group includes the infrastructure manager, DB Netz
AG, and the dominant German freight operator, DB Schenker Rail.
In France there is a separate infrastructure manager, Réseau
Ferré de France (RFF). However, RFF has appointed SNCF,
the incumbent operator, as its "delegated manager" with
responsibility for many of the duties usually undertaken by the
In the UK the infrastructure manager, Network Rail, is prevented
by statute from owning an operator.
20. The majority of witnesses were in favour
of the recast requiring full separation of infrastructure managers
from operators rather than allowing the "distinct divisions
with a single undertaking" option. Lord Berkeley, Chairman
of the Rail Freight Group, identified the separation of the infrastructure
manager and the train operator as one of the two major principles
"that need to be got right" (Q 73).
21. Witnesses argued that separation is necessary
to ensure all operators have equal access to the infrastructure.
The European Rail Freight Association (ERFA) argued that accounting
separation alone cannot guarantee non-discriminatory access and
questioned the effectiveness of a "Chinese wall" between
infrastructure managers and incumbent rail operators where they
are part of the same organisation (p 61). Similarly, the
Belgian regulator, the Service de Regulation du Transport Ferroviaire
et de l'Exploitation de l'Aéroport de Bruxelles-National,
lacked confidence in Chinese walls between divisions, saying,
"sometimes a wall can collapse very quickly" (Q 267).
22. The Government were also concerned that the
Package "has not achieved the desired intention of ensuring
transparent, equitable and non-discriminatory access to rail infrastructure
for non-incumbent, independent operators" (p 137). Arriva,
a privately owned operator, put it bluntly: "the motivation
to retain the infrastructure is primarily an instrument to maintain
control over a monopoly asset and the operators using it"
23. European Rail Infrastructure Managers (EIM)
agreed that an infrastructure manager independent of any rail
operator is desirable because "if you want to open a market,
you have to make it easy for people to enter a market. By having
an independent infrastructure manager, it is very easy, because
his remit is to ensure that the infrastructure is used in the
most effective manner" (Q 44).
24. Witnesses also gave examples of how the problems
of integrated infrastructure managers manifest themselves. Lord
Berkeley said, "there is no transparency of the movement
of funds between an infrastructure manager and a train operator.
How can you have fair competition
if you think that the
incumbent train operator is being unfairly subsidised by the infrastructure
manager or one of the local authorities that is funding it?"
(Q 73) ERFA argued that this lack of transparency leads to
"a lot of suspicions about what has gone on internally"
25. Other problems include the flow of staff
between subsidiaries of a holding company (ERFA, Q 154, the
Belgian regulator, Q 266), the fact that some integrated
infrastructure managers deal with safety certification for their
subsidiaries as well as their competitor freight operators, and
potential confidentiality issues where the subsidiaries of a holding
company share the same IT system (the Belgian regulator, Q 266).
EIM identified safety certification in France as a problem because
the responsibilities of the regulator and safety body to approve
locomotives have been "re-delegated back to SNCF" (Q 45).
26. The Federal Network Agency, the German regulator,
said that "because Deutsche Bahn is still influenced by a
There is also a tendency to give preferential
treatment to their own subsidiaries" (Q 186). Whereas
other witnesses referred to informal collusion between divisions
such as "the quiet word in the ear" (Lord Berkeley,
Q 76) or operators "suspected to have the slightest
advantage" (ERFA, Q 154), the Federal Network Agency
cited the specific example of DB Netz AG offering a "special
rebate" which only DB Schenker Rail could take up (Q 186).
27. Some witnesses argued the result of separating
infrastructure managers from operators was increased competition
and promotion of the use of rail freight. The Office of Rail Regulation,
the UK rail regulator, said that since privatisation "the
rail freight market share of land transport has grown from around
8.5 per cent to 12 per cent in the last 10 years. There has been
a substantial amount of growth in rail freight and volumes of
freight moved are up by 60 per cent" (Q 133). Lord Adonis,
Minister of State, Department of Transport, said that the UK's
market structure was "one of the underlying reasons for this
growth" (Q 500). Other witnesses also cited the UK's
growth in rail freight as supporting the separation of infrastructure
managers from operators (Rail Freight Group p 21, Network
Rail p 2).
28. However, NewRail, a research centre based
in Newcastle University, said that some of the growth in rail
freight could be accounted for by the changes in the coal sector.
As more coal has been imported, the amount needing to be carried
by rail freight from Scottish ports has increased (Q 95).
Lord Adonis agreed that the increase in coal being carried by
rail freight was "a big factor in the increase in rail freight
in Britain" but insisted that market liberalisation was another
significant influence (Q 530).
29. In contrast with other witnesses, Deutsche
Bahn argued that the development of railway markets in Europe
does not provide evidence that full ownership separation is required
to achieve market opening (p 152). They cited the Rail Liberalisation
Index 2007, which
scores countries in terms of the degree of their market opening
(p 152). The Index gave high scores to countries with holding
structures like Germany and Austria as well as those with fully
separated markets like the UK and Sweden. In the Community of
European Railway and Infrastructure Companies' (CER) view, "rail
freight growth is not directly linked to the opening up of the
market. We do not have such evidence". They argued instead
"that rail traffic growth is much more related to the investments
into the infrastructure and the track access charging schemes"
30. Some witnesses argued that integration was
an effective model provided there was a strong regulator. The
Federal Network Agency said that the holding company system works
in Germany because they have sufficient powers. Their regulatory
remit covers not only the railways but also the energy, telecommunications
and postal markets. According to them, there is strict separation
of functions in the energy market but no such requirements for
telecommunications. However, despite these different structures
"success is open to every model" because they are able
to regulate the markets effectively (Q 184). The Office of
Rail Regulation agreed that integration may be acceptable when
there is a strong regulator (Q 141).
31. Network Rail, the UK infrastructure manager,
argued that if a strong, independent regulator is established
the legislation does not need to require the separation of infrastructure
managers from operators. They explained that the history of independent
regulation of markets in the UK shows that "regulation in
itself has forced that separation and actually forced the companies
to want that separation" (Q 19). Similarly, the Office
of Rail Regulation said that effective regulation would encourage
an integrated infrastructure manager to "move towards wanting
to separate itself anyway" (Q 141).
32. However, ERFA disagreed. They argued that
even "a very, very strong regulator will never be able to
counterbalance a bad market" (Q 155). They said that
in an integrated market the regulator needs to intervene "very
early in the processes, the earlier the better
risk of him coming too late is extremely great because he does
not have full transparency on all the processes". They also
argued that the regulator would need to "mirror all the processes
that are going on" and would therefore become over-staffed
and inefficient. Finally, ERFA argued that the consequence of
needing such a regulator would be "over-intrusive" regulation
33. Other evidence also suggests that strong
regulation is not sufficient to counter integrated infrastructure
managers and operators. The Belgian regulator said that they were
aware that some operators had difficulties accessing rail-related
services (see chapter five) and "although we are able to
deal with such complaints we have not received any formal complaints"
(Q 238). Arriva said that in Germany they had often opted
for dealing with problems "in a co-operative way", rather
than going as far as lodging a formal complaint (QQ 367-369).
This lack of formal complaint may be explained by the dominance
an integrated infrastructure manager can have in a national market.
We would expect independent operators to be reluctant to lodge
formal complaints against integrated infrastructure managers for
fear of damaging their relations with the infrastructure managers
on whom they rely to operate.
34. We conclude from the evidence that the full
separation of infrastructure mangers from railway undertakings
has not been the only factor contributing to rail freight growth.
It is clear from the evidence that factors such as funding and
changes to other markets are also important. However, we believe
that the growth of rail freight has been restricted by the fact
or suspicion that some freight operators have received preferential
treatment from infrastructure managers. The evidence of the Federal
Network Agency demonstrates that even where there is a strong
and active regulator, placing infrastructure management and freight
operation in different divisions of the same company is not sufficient
to guarantee an open market where operators can be confident of
non-discriminatory treatment. We believe that this approach,
no matter how well regulated, leaves room for unfair practices.
Full separation is much more likely to remove that possibility
and create the conditions necessary for increased rail freight.
We recommend the Commission include in the recast a requirement
for the full separation of infrastructure managers from railway
35. We conclude that the lack of formal complaints
to regulators in some Member States is evidence of the practical
constraints on market opening. We believe this demonstrates the
need for the Commission to press ahead with the proposed recast,
to bring about a genuine free market that operates without fear
23 See RFF's website: http://www.rff.fr/pages/connaitre/sncf_rff.asp?lg=en Back
Rail Liberalisation Index 2007: Market opening: comparison
of the rail markets of the Member States of the European Union,
Switzerland and Norway, IBM Back