From crisis to continued growth

Increased influence for customers and public transport actors creates better conditions for the railway to enhance its competitiveness. Swedish railway reforms of the past 25 years have been based on this premise, together with state responsibility for management of the rail network run by an independent infrastructure manager. The result to date is that rail travel has increased by approximately 75% (measured in passenger kilometres), while goods transport performance is up by approximately 15%. The railway’s share of the passenger transport market has increased and the goods transport market has stabilised at almost a sustained level.

Twenty-five years ago, the Swedish railway (SJ) – then organised as a state administrative agency responsible for both traffic and infrastructure – was in crisis. Demand was declining and both rail traffic and infrastructure quality were deteriorating. There was a lack of funding for new investments and developing new service concepts such as high-speed trains.

Moreover, in the view of several public transport actors, SJ was a powerful but opaque ‘state within a state’, asserting its interests at the expense of important societal interests.

Responsible politicians at the time realised that the situation demanded radical measures, and also ventured to take them. They separated the responsibility for infrastructure and traffic. A completely independent state infrastructure manager was established, whose activities were financed by revenues from marginal cost-based track access charges and by appropriations from the national budget. SJ’s role was to operate rail traffic. This offered the freedom to operate traffic on a strictly commercial basis, but now without direct operating grants from public funds.

The regional and local political bodies and their competent authorities, which in Sweden are responsible for regional and local public transport, were at the same time provided with better conditions for influencing the supply of rail passenger transport services. The background to this was that they considered that their ability to influence had been too limited. They maintained that if just SJ used the rail network, their ability to influence the supply of services via traffic procurement would be inadequate. It was therefore decided that each railway undertaking, which met existing safety requirements laid down by law and whose transport services were procured by competent authorities, would have the right to operate on the rail network to the extent necessary to provide the services procured. SJ’s monopoly of access to the Swedish rail network was thus broken. Since then, there has been a gradual opening up to competition of all Swedish railway traffic markets, in which some 25 railway undertakings are operating today.

Neither at that time nor subsequently were the competent authorities given any right to offer providers of the procured services any exclusive rights nor in any other way protect the procured rail services from competition from other railway undertakings’ unsubsidised passenger traffic. Nevertheless, this has not stopped regional and local passenger traffic from accounting for the largest share of growth in rail passenger traffic growth since the launch of the reform policy. This has taken place at the same time as unsubsidised inter-regional passenger traffic has also increased.

The railway goods market also opened up to competition in the 1990s. In addition to railway undertakings, authorised applicants were also allowed to apply for and organise train paths. During the gradual implementation of the reform policy, demand for railway transport started to increase. Investments in railway infrastructure and rolling stock also increased, and more railway undertakings were established, thereby intensifying competition. One factor contributing to this development was that the supply of railway transport services was diversified relatively quickly. Within inter-regional passenger traffic, for example, high-speed train services were introduced in the 1990s. The competent authorities used their position on the newly opened market, within the framework of rail service negotiations, to begin financing the design and organisation of new local and regional commuter train systems, including rolling stock, based on identified local and regional needs. The opening of the railway goods transport market in 1996 served to increase interest in investments in and use of railways within the Swedish business sector.

This positive stimulus that the reform policy measures have to date given the Swedish railway sector would hardly have come about if its customers and other interested stakeholders had not been given real opportunities to influence its supply of transport services. This is an important experience that I bring to the table in the ongoing negotiations on the Fourth Railway Package. I am also convinced that it is easier to achieve such opportunities for influence if the railway is organised on the basis of the vertical separation model. This is particularly so when one considers the alternative: competition between railway undertakings, some of which combine a number of roles, including those of essential functions, thereby having good opportunities to treat competitors in a discriminatory way. This hardly leads to effective competition and customer influence. Rather, it leads to the need for authorities’ close, but likely both inadequate and effectivenesshampering, supervision on the basis of extensive detailed regulation. Through a vertically sep – arated railway system characterised by open markets and well thought-out and dedicated roles for the actors in the system, this problem is considerably reduced.