International Handbook of Network Industries
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International Handbook of Network Industries

The Liberalization of Infrastructure

Edited by Matthias Finger and Rolf W. Künneke

This extensive, state-of-the-art Handbook provides a comprehensive overview of the various experiences of liberalization across different sectors, regions and disciplines.
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Chapter 13: Reforming Railways

Marc Laperrouza


Marc Laperrouza INTRODUCTION While railroads initially started as private undertakings in many countries, most were nationalized in the late nineteenth century. Railway companies thus remained integrated public monopolies for most of the twentieth century and it is only towards its end that the industry’s landscape started to change. Yet, technical, economic and domestic political factors have and still severely limit the potential for a radical restructuring of the sector. Problems of interconnection and interoperability, the idea that the sector operates as a natural monopoly or the defensive attitude of governments towards ‘their’ rail infrastructure have largely hindered the scope, the scale and the speed of reforms. In addition, there has been little change in basic operational and cost characteristics. The sector remains characterized by heavy capital investment and an important part of the value chain remains a natural monopoly. These substantial investments – terminals and in rolling stock usually considered as sunk costs since they are not easily tradable1 – not only limited the entry of new actors in the sector but also the possibilities and modalities of restructuring. At the same time, pressures for reforms originated from many sides: deregulation of competing sectors (airlines and trucking), profound transformation of the state’s role and broad ideological trends favouring liberalization all participated in one of the major upheavals the sector is undergoing in its history. The restructuring of the sector has been accompanied and sometimes driven by additional factors. There have been some advances in technology and performance, including the size and speed...

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