The limits of unbundling in rail and elsewhere
1 / 9

The Limits of Unbundling in Rail and elsewhere - PowerPoint PPT Presentation

  • Uploaded on

The Limits of Unbundling in Rail and elsewhere. Research question and arguments. This is a critical reflection on unbundling: are there limits to unbundling? If yes, which ones? This has not really been done so far, most of the literature focusing on the (positive) effects of unbundling

I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
Download Presentation

PowerPoint Slideshow about 'The Limits of Unbundling in Rail and elsewhere' - syshe

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.

- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
The limits of unbundling in rail and elsewhere

The Limits ofUnbundlingin Rail andelsewhere

Research question and arguments
Research question and arguments

  • This is a critical reflection on unbundling: are there limits to unbundling? If yes, which ones?

  • This has not really been done so far, most of the literature focusing on the (positive) effects of unbundling

  • Yet, unbundling is before all a theoretical (and even an ideological) construct; one may therefore ask how well unbundling does in practice

  • As such, it is part and parcel of the de-regulation (but not the privatization) agenda, i.e., a means to “kill the monopolist”

  • But there are some real problems when unbundling, must of them pertaining to the technological nature of the infrastructures

  • Mostly, these pertain to the fundamentally technological nature of the interfaces between the infrastructure and the services

  • So, the question is: how far can and shall we go with unbundling?

  • Railways is a perfect example, a paradigmatic case for this question


  • The idea (theory) of unbundling: whatwas/isunbundling for?

  • The practice of unbundling: doesitreallyhappen?

  • The problems of unbundlingiin the different network industries

  • Pursue or abandon unbundling?

  • Summary: the limits to unbundling

  • Are there alternatives to unbundling?

The idea theory of unbundling
The idea (theory) of unbundling

  • Originally an idea by institutionaleconomists: the sharpseparationof the monopolisticelement(s) of an infrastructure fromitscompetitiveelement(s) ( organizationpreventingmarkets) thisseparationwillallow for competitionwhere no competitionexistedpreviously ( marketcreation)

  • Once competitionexists(somewhat), unbundlingguarantees…- non-discrimination in the access to the infrastructure- non-biasedinvestments (development of the infrastructure)

  • The EU/EChas transformedunbundlinginto a politicalproject(e.g., Europeanintegration)- one seamlessEuropean infrastructure- one single European (infrastructure services) market

  • State of researchon unbundling:mostly on the effects of unbundling on competition, marketcreation (sustenance), services, investments, etc.

The practice of unbundling
The practice of unbundling

  • Quiterapidly, itwasrealizedthatunbundlingcannotbe put into practice (by the EC) from one day to the other, thus, the creation of an «unbundlingladder»: fromaccounting (imperfect) to functional to legal to ownership (perfect) unbundling

  • However, manyotherformsexist and firms are quitecreativewhenitcomes to twist the unbundlingnorms. For example:- ISO in electricity- EDF-RTE model- SNCF-RFF model- Swissgrid model- the numeroushldingmodels- others, yet to beinvented

  • Overall, itisclearthatfirms do not unbundle by theirownwill; rather, unbundlingis the result of political (EC) pressure:- via ownership- via regulation

The problems of unbundling
The problems of unbundling

  • Unbundling, in many cases, cannotbedoneproperly, owing to the technological nature of the infrastructures, i.e., the technicalinterfaces; examplesabound:- ERTMS (Rail)- smart meters (electricity)- ATC communication systems (air)

  • Regulatingthese interfaces does not alwaysmakeeconomicsenseand mayturn out to becounter-productive(costs of regulation > benefits):- ticketing, timetables (rail)- balancingenergy (electricity)- airport services (air)

  • Un-bundling leads to re-bundling, owing to economies of scale and scope in the infrastructures:- franchising (rail) (instead of accesscompetition)- implicitauctions (elecricity) (instead of explicit auctions)- vertical integration (ATC, airports)

Pursue or abandon unbundling
Pursue or abandon unbundling?

  • Once competition has been created, (some) market forces push for furtherunbundling:- new entrants (which are generally not perfectlyunbundledincumbents in theirown countries) findmarketaccesswithoutheavyinvestments- suppliersfind business opportunities in the problematic interfaces (e.g., safetysystems, smart meters)

  • The European Commission has no alternative than to push for furtherunbundling:- in order to realizeitspoliticalproject of an European infrastructure a Single Europeanmarket- regulation (of furtherunbundling) and strenghtening of regulatorsisitsonlypolicy instrument

  • But there are numerous forces (besidestechnology), resisting/revertingunbundling:- firms (seeabove)- nation-states (supporringtheirfirms)- nation-states worried about (national) security of supply and independence

Summary the limits to unbundling
Summary: the limits to unbundling

  • Technologicallimits: the existence of technological interfaces:- operational interfaces- safety, emergency interfaces

  • Politicallimits:- security of supply (national independence)- nation-states resisting «regulatory Europe»- power of regulatorstriggeringpoliticalreactions

  • Bureacratic/institutionallimits:- regulatorybureaucracy and procedures

  • Economiclimits:- regulatorycosts

  • Firmbehavior

Are there alternatives to unbundling
Are there alternatives to unbundling?

  • There isno way back (to monopolies)

  • However, competition in the network industries remains and willalwaysremainlimited

  • «Perfect» unbundlingisunattainable and pushing for itiseconomically and politicallycounterproductive

  • Can wesettle for:- a lessperfect (unbunding) model?- withlesspowerfulregulators?- a lessperfectmarket?