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NMa: ‘Set out specific requirements when tendering the main railway network concession’

The Netherlands Competition Authority (NMa) is calling on the Minister of Infrastructure and the Environment to sharply negotiate with parties in the upcoming negotiations for awarding the main railway network concession. Chris Fonteijn, chairman of the Board of the NMa, explains: ‘This is the time to act. With this tender, the Dutch government will commit itself to a rail company for at least ten years. More pressure must be exerted on the current concession holder, Dutch Railways (NS), in order for them to submit their most competitive bid.’ Mr. Fonteijn’s call comes in reaction to the release of the NMa’s Market Scan on Passenger Transport, which outlines the NMa’s view on the rail market from an economic point of view.

NS is the current holder of the main railway network concession, which will expire January 1, 2015. The Ministry of Infrastructure and the Environment is currently making preparations for the new concession. The NMa does not have any preference between awarding contracts directly and awarding them after holding a public tender, as long as the selected procedure is carried out carefully. That means that the rail companies’ performance levels should be specified more precisely in the new concession. Furthermore, an independent body should monitor such performance levels. Transparency of the rail companies’ performance levels can be increased if such figures are disclosed more often and in greater detail. In addition, the NMa believes it is important that the positions of regional transport companies vis-à-vis NS improve.

Dependent relationships among transport companies

NS and other rail companies are dependent on each other. When looking at various aspects, regional transport companies are dependent on NS as their sole supplier. That is why the NMa wants to investigate whether or not certain products and services should be regulated, products and services that regional transport companies are now more or less forced to buy from NS. Examples include passenger information, tickets, and ticket machines. Mr. Fonteijn adds: ‘Because of this dependent relationship, regional transport companies do not have enough room for bargaining vis-à-vis NS when prices and conditions of these products and services are set. Consequently, they work less efficiently. The NMa advises to introduce regulation of these areas in order to strengthen the regional transport companies’ positions.’

No synergy on regional routes

Local governments should find more ways to reap the benefits of synergy. For example, they could include in the regional concessions the right to engage in commercial activities related to the infrastructure, which is the case with the main railway network concession. Such activities include renting out space at the stations to third parties for retail activities, waiting areas, and restrooms. Tendering regional governments will be able to decide themselves what the station should look like, and what the level of its amenities should be. Local governments already have this power, but use it too little.

Investments in innovations pay off

Consumers are prepared to pay more, because they benefit from recent innovations in passenger transport. A few innovative examples that increase efficiency include: trains with reduced noise levels, installing WiFi on board trains, introducing a more advanced passenger information display system (Infoplus), and introducing e-tickets. Investments in these innovations will be recovered in a relatively short amount of time. Another recent innovation was the introduction of a national electronic public-transport ticket. Despite the fact that this national smart card regularly attracts negative reports in Dutch media, it seems there is enough margin that it will actually turn out to be an efficient innovation nonetheless. Looking from a purely economic point of view, this is less the case with regard to high-speed trains: demand appears to be too little, and travel distances within the Netherlands are too small to make this investment an efficient one.