ISS22 Pronello

International Summer School on Regulation of
Local Public Services
Lecture 14 September 2022
Innovative models to fund local public transport

Cristina Pronello
Full Professor
Chair of TRIS – Transport Research for Innovation and Sustainability
Politecnico di Torino
Dipartimento Interateneo di Scienze, Progetto e Politiche del Territorio – DIST
The public transport: an interesting example of the evolution of the market
Public transport has been largely dominated by public control
▪ The evolution of the market has followed a similar trend across Europe (and not only)
▪ Italian case study is interesting to show the difficulty to change this particular market
and open to competition
▪ Facts and figure will support to understand the evolution of the market
Cristina Pronello – Innovative models to fund local public transport 14 September 2022
The evolution of public transport: Italian case study
Law n. 151/81 (10/04/1981):
▪ To re-launch the public transport, affected by a heavy crisis caused by the process of
making public the companies supplying services (started in the ‘70) that generated
important deficit:
▪ beginning of ‘60: the companies covered 80% of costs thanks to the revenues
▪ 1982: companies covered ≈ 20% of costs thanks to the revenues
▪ The law 151/81 asked:

▪ contributions if economic equilibrium was reached;
▪ contributions if: To exit from crisis an re-
▪ standard economic cost launch the development
→ failure
▪ revenues from minimal fares defined by region;
▪ objective parameters to cover the difference between standard costs and expected revenues
Law n. 151/81 (10/04/1981): causes of failure:
▪ Difference in the calculation of standard costs in the different regions and tendency
towards the historical costs;
▪ Continuity of mixing between the functions of regulations (public administration) and

functions of service management (company) → absence of control
▪ Failure of price systems in splitting up of National Fund of Transports (FNT) (established by

law 151/81 and lasted from 1981 to 1995):
▪ FNT had two sections: one for the expenses for exploitation; the other for the investments (vehicles and
infrastructures);
▪ 10% of FNT for the companies that improved the management indicators
▪ The low endowment of FNT and of resources, most linked to mechanisms of

reimbursement of real costs
The low endowment of FNT and the shortage of resources for PT (together with the
absence of actions to make effective the sector) generated extraordinary interventions of
public finance to fill the exercise deficit → further relaxation of companies’ management
(the State continues to pay: law 204/95, 195/98 and 472/99)
Evolution of resources for PT from 1981 to 2001 (index 1981 = 100)
The evolution of public transport regulation: Italian case study
▪ To overcome the limitations of law n. 151/81 → D.lgs. n. 422/97 (“Burlando”), to

promote the modernisation of sector and completing the coverage of companies’
deficit:
▪ decentralisation of state functions to regions (and from regions to local administrations under a logic of
subsidiarity);
▪ reintroduction of territorial programming (from Regional Transport Plans to Basin Plan, to the definition of
minimum services);
▪ efficiency of the sector;
▪ deregulation of sector through the assignment of services using the call for tenders.
D.lgs. n. 422/97 (“Burlando”):
▪ first innovation was the transformation of special companies and consortium in Public
limited liability company (SpA) or in Cooperatives with limited liability;
▪ attempt to stop mixing between regulator body and enterprise through:

▪ definition of role and competences;
▪ introduction of contract of service to:
▪ obtain a complete match between the costs of the services and resources available to cover the
balance sheet and to avoid the real costs;
▪ provide a progressive growth of the ratio between revenues and operating costs which – decreased
the infrastructure costs – should be at least 0.35 since 1 January 2000
▪ Ratio between revenues and operating costs: urban areas, 2002-2011
▪ Ratio between revenues and operating costs: extra-urban: from 28,7% in 2009 to 29,9%
in 2011
▪ The choice of the legislator to leave to the regions the definition of tariffs, without
introducing mechanisms of price regulation to follow the dynamics of the market (price
cup), caused to block the tariffs for several years
▪ Evolution of tariffs (urban areas, 2002-2012; index numbers)
▪ Evolution of revenues distribution (urban areas, 2002-2010; percentage on total value of production)
Over the years, costs, in relation to both vehicles*km (supply) and passengers (demand), tend to grow more than
revenues (more than 4 percentage points) being far from the desired efficiency wished by the legislator
The objective of opening up the market

and the introduction of tenders is still far
▪ Comma 301 of law n. 228 of 24 December 2012 (legge di stabilità 2013) established the National
fund for the state financial aid to public transport costs (also railways) and defined – for regions
with ordinary statute – that 10% of fund has to be distributed according to criteria to be defined in
detail within a DPCM, able to stimulate regions and local administrations to rationalise and make
efficient the programming and management of services thanks to:
▪ a more well-suited, efficient and cost-effective service supply to satisfy demand (in the first three years the objective is
verified through the 2.5% increase in the number of passengers transported on a regional basis)
▪ the progressive reduction of the services offered in addition to the demand and the corresponding increase in the
quality and quantity of high demand services
▪ the progressive increase of the ratio between revenues and operating costs (improvement on an annual basis of at least
0.03 for baseline ratio less than or equal to 0.20 or 0.02 for baseline ratios greater than 0.20 until obtaining the ratio of 0.35,
or maintain or increase the same ratio for higher ratios);
▪ the definition of an appropriate level of employment (maintaining or increasing employment levels in the sector or,
where necessary, thanks to their reduction)
▪ REGULATION OF PUBLIC TRANSPORT:
▪ D.Lgs. n.422 of 19 November1997
▪ Article 16 – bis D.L. n. 95 of 6 July 2012
▪ Authority of Transport Regulation (Autorità Regolatrice dei Trasporti - ART)
NEW PROPOSED SOLUTION: STANDARD COST
▪ In the markets dominated by large operators – in France the first four companies offer
65% of the services – there are higher operating margins in relation to the markets with
small companies (dwarfism) (Italy, but also Germany)
The evolution of public transport regulation : Italian case study
EBITDA (Earnings Before Interest, Taxes,
Depreciation and Amortization)
The evolution of public transport regulation : Italian case study
In Italy production costs of service are largely
greater as compared with the European
average (3.5 vs 2.7) and → in part for the lower
number of travelled km in average by each
driver (17,060 vs 19,763).
The price of ticket is about the half (0.84 vs
1.63), affecting the revenues per km (1.08 vs
1.34) →
the combined result of such factors is that the
level of coverage of costs in Italy is largely
lower than in Europe (30.7% vs a 52.1%).
The reorganization of the payroll towards

productivity levels that are more in line with
European standards has led to a progressive
decrease in the number of employees, either
in absolute terms or in relation to the resident
population, and to a growth of vehicles*km
guaranteed by each employee:
approximately 18,900 vehicles*km in 1995 to
more than 21,200 in 2011
▪ In Italy, the first 5 companies cover 30% of the market, better than the first 5 in Spain
(21%), but less than French market (65% the first 4) and German market (55%).
▪ In Italy, 2.8 places*km/inhabitant and a demand of 0.6 pax*km (filling of 22%); in France
the same indicators are: 1.9 places*km/inhabitant and 0.8 pax*km/inhabitant (42% load
factor)
▪ Companies as First Group and Transdev have inconceivable sizes for Italian companies, they are
operating not only in the domestic market, but in several continents, employ tens of thousands of
employees and offer integrated services (road, rail, urban, extra urban, short/medium/long, etc.).
Cristina Pronello – Transport market liberalisation, tendering and competition 14 September 2022
Cristina Pronello – Innovative models to fund local public transport
▪ Italy PT is far behind the other European countries:
▪ complex structure of PT governance;
▪ excess of Free Riding (> 20%);
▪ excessive socio-political value in relation to economic-financial value attributed to tariffs,

completely managed by public administrations «Enti pubblici»
▪ excessive incidence of public subsidies in relation to revenues of PT companies
The evolution of public transport regulation: the key questions
To enable the internal market to function efficiently and to ensure economic, social and
territorial cohesion as well as better accessibility in a metropolitan area:
▪ How much does it cost (direct and indirect costs) → which supply for which demand?
▪ Who pays (public, private, PPPs)?
▪ What market (what kind of competition)?
▪ What does the user want (speed, comfort, price...)?
The evolution of public transport regulation: the key questions
▪ Public, private or mixed (PPPs) ?
▪ Monopoly
▪ Natural monopoly
▪ Competition
▪ Example: connection Torino-Lyon → competition in the market

▪ Connection through the train (offered by SNCF)
▪ New service offered by train (FS) thanks to opening of the market
▪ Road connection Starshipper (Courriers Rhodaniens) → discontinued
▪ Road connection iDBUS (SNCF) (http://it.idbus.com/) → discontinued, now Bus BlaBlacar:
https://www.blablacar.it/bus
▪ Flixbus https://www.busbud.com/it/bus-torino-lione/r/u0j2qu-u05kq2
Rationale
▪ The increasing liberalisation of the transport market is part of the current economic and
international transport policy and the legal and institutional framework of the different
transport modes in Europe.
▪ Following the liberalisation of air transport and freight transport, local public transport is
now also subject to competitive tendering for the provision of services.
▪ In addition, as of 2020, national high-speed routes were liberalised and, as of 2023,

public services will also be opened up to competition, with exceptions but subject to
conditions for unprofitable ones.
▪ Finally, in 2033 all existing contracts will be terminated.
European single market and liberalisation of services
▪ In the ‘50s and ‘60’ public intervention was widespread in all Europe to better manage
the post-war reconstruction and the big national infrastructures:
▪ nationalisation of economic sectors related to services (energy, transport, etc.) and to manufacturing
industry (steel industry, construction of transport means, etc.) to build national giants (exploiting
economies of scale and bearing the burden of universal service;
▪ big companies working in monopoly regime, under state control to produce goods and services
considered essential or strategic for the country.
▪ In 1957, the European Community was born:

▪ political will of public intervention in the economy;
▪ art. 90 Treaty of Rome: State assigned (concessione) exclusive or special rights to enterprises.
▪ Since the beginning of EC tolerance towards public monopoly, then attenuated and
reversed since ‘90s
▪ United Kingdom was the first country (Thatcher government), since ‘70, starting a
privatisation process, then followed by all the other countries.
▪ Since the ‘80s, the direct intervention of the State in supplying public goods and services
has been strongly reduced across UE → less importance of the State in the productive
system
▪ Turning point was 1985 with the White Book, produced by Delors commission, to favour
the completion of full competition internal (EU) market:
▪ the positive effects of the process of elimination of non-tariff barriers are amplified by free competition,
and thus by the elimination of monopolies and licenses (concessioni) to national public enterprises;
▪ with low barriers to market entry and free movement of productive factors (labour, capital, technology,
energy, etc.) consumers and enterprises can benefit, respectively, in terms of increased consumer surplus
and of increased sales and purchasing opportunities.
▪ The first step is to change the monopoly into a regime of free competition or competitive
oligopoly, achieved through:
▪ privatisation: the public company in monopoly regime is transformed into a joint stock company and its shares are sold to
private investors, usually by listing the new company on the stock exchange;
▪ the sector is regulated in order to favour the entry of other competitors, so as to achieve a competitive oligopoly.
▪ Then, EC Directives in the ‘90s going towards progressive obligation to open the markets of
services, so far under the public monopoly:
▪ the market must be created by eliminating or containing monopolies and privatising companies. Privatisation becomes
interdependent with market liberalisation: it is essential to prevent the public monopolist from simply becoming a private
monopolist;
▪ it is necessary to prevent liberalisation from being hampered by the presence of a public company which puts private
activities out of bounds (e.g. through cross-subsidisation between publicly licensed and freely competing activities).
The public service
▪ Public service is:
▪ what is produced from a public body (subject);
▪ what is of public utility (object);
▪ the set of activities, oriented towards satisfying the needs of the community, which require coordination
for social purposes by public institutions → collective needs that would not be satisfied simply by using free
market forces;
▪ The state chose two directions:
▪ direct management of public service: creation of a public company, directly focusing on management
of productive resources (Italy and some EU countries) → important when there is incompatibility between
public interest and profit purpose of private companies and market regulation cannot solve this conflict
▪ regulation of the market (UK and USA)
Privatisation versus competition and market regulation
▪ Where there is competition, also where public companies operate, public company is
more efficient
▪ Regulation is a supplementary element to the market and consists of imposing rules to

correct the excesses of monopolies, or to correct negative externalities and various
forms of opportunistic behaviour, through:
▪ norms as self-regulation, directly assigning to associations of private companies the task to guarantee the
respect of rules (e.g. in case of advertising or quality certification) or introducing taxes to induce the
operator to reduce negative externalities (e.g. pollutants emissions);
▪ contracts related to license (concessione) to the company supplying the public service → constant
monitoring of market evolution and need of changing the rules according to technology change:
authorities have been created
▪ The “intensity” of regulation can be stronger or weaker according to circumstances and

the will to correct the market mechanisms, oriented to eliminate the rules fixing prices
and limiting the entry of new enterprises in the market:
▪ US, Australia and UK deregulation of air transport, long distance road transport, railway transport, banks,
television and telephone;
▪ cases of barriers through creation of professional associations
▪ In Europe and, particularly in Italy, the process of transition towards the market has
started late and it has been slowed down (see natural monopoly as energy, water,
transport):
▪ interventions on social (protection of consumers and workers) and administrative (workforce market)
regulation are necessary
▪ The factor supporting competition:

▪ power in the market of the operator (weight of the company of total sales);
▪ number of operators (small numbers favour agreements on prices);
▪ possibility to entry in the market: natural monopolies related to services of public utility (energy, water,
local transports) are still conditioned by technology. Competition can be introduced guaranteeing the
possibility of entry when assigning the license (concessione) and when it has to be renovated → through
a public tender at international level
▪ If market shares are divided among more operators, the condition of final consumer improves thanks to a
reduction of prices
▪ The competition requires attention:

▪ a model to assign public licenses has to be chosen, being the tenders complex: analyse the impact of
technological evolution on each step of the supply chain; new technological paradigm can substantially
modify the level of contestability of the markets (e.g. for telecommunication: satellite, optical fiber or
conventional copper pair)
▪ need to guarantee the universal service so that all the users can use the service at reasonable prices
The European railway market
▪ The European rail industry generates turnover of €73billion and has 800,000 employees,
to guarantee the universal service (everyone can use the service at reasonable prices)
▪ In most EU Member States (MS), public payments and subsidies have increased
substantially (more than doubled in six years in the newer EU Member States) while the
growth in passenger-kilometres has been more moderate (pax*km + 4.3%, 2005-2010)
some reasons
▪ inability to curb operational inefficiencies caused by a lack of appropriate competitive incentives;
▪ in some MS, public funding is awarded directly without competitive tender;
To establish an internal market for rail and thus a more efficient and customer-responsive
industry
▪ early EU legislation laid down the basic principles guiding the improvement of rail
efficiency via progressive market opening, establishment of independent Railway
Undertakings and Infrastructure Managers (IM) and separation of accounts between
them.
Since the 1990s, the rail transport sector in Europe has undergone a process of liberalisation
aimed at introducing elements of competition in a sector traditionally characterised by
monopolistic structures and a strong presence of the public operator
Foutrh
Package
Directive Recast
34/2012 December 2016: approval of “The Fourth
Third Railway Package”: opening of competition of
package national railway transport (already opened in
Italy), and strenghtned the governance of the
Second
Package
infrastructure management to guarantee per
ensuring fair and non-discriminatory access
First
conditions for new entrants
Package
Directive
91/440
1991 2001 2004 2007 2012 2016
Infrastructure governance
▪ Most of the EU's network was designed at country level to be a single network and is a
natural monopoly
▪ Existing EU legislation therefore requires a degree of separation between IMs, which run
the network, and RUs which run the train services on it, with the aim of ensuring fair and
equal treatment of all RUs
▪ Full independence of charging and capacity allocation is required, as these were seen
as key to ensuring equal access
▪ Transport Regulation Authorities control the independence of IMs. Several infringement

proceedings are now pending before the Court of Justice of the European Union.
Removal of risks of conflicts of interest and possible distortion of competition is difficult
and there is a need for further legislative intervention.
▪ Appropriate cooperation between the IM and all RUs using would ensure alignment of interests of
an increasing number of players in an open market
▪ Integrated rail companies can achieve significant growth in the market, but rail companies with
dominant positions protected by integrated structures in their "home“ market could obtain
financial benefits giving them an unfair competitive advantage when competing elsewhere in
the EU or even domestically against new market entrants”.
▪ “Maintaining national markets as systems dominated by integrated incumbents will also hinder
the development of long distance pan European services”.
▪ Where existing holding structures with infrastructure manager's ownership are maintained, strict
safeguards to protect the independence of the infrastructure manager with a process of
verification by the Commission are ensured.
▪ Markets for rail freight services have been fully opened to competition since January
2007 and those for international passenger transport services as of 1 January 2010,
▪ However, national markets for domestic passenger transport services by rail remain
largely closed and are the bastions of national monopolies
▪ Most domestic services are covered by PSCs (public service contracts), thus
competition on domestic markets should be addressed at two levels:
▪ competition 'in the market' for those services that can be provided through open access;
▪ competition 'for the market' to allow the transparent and cost-efficient award of PSCs
Opening of the market for domestic passenger transport services by rail
▪ Markets for rail freight services have been fully opened to competition since January
2007 and those for international passenger transport services as of 1 January 2010
▪ However, national markets for domestic passenger transport services by rail remain
largely closed and are the bastions of national monopolies
▪ Most domestic services are covered by PSCs (public service contracts), thus
competition on domestic markets should be addressed at two levels:
▪ competition 'in the market' for those services that can be provided through open access;
▪ competition 'for the market' to allow the transparent and cost-efficient award of PSCs
▪ Access to rolling stock (trains) is a major constraint for new entrants
▪ Limit the access when economic equilibrium of the PSC is compromised

▪ The Commission introduced mandatory tendering of public service contracts as of

December 2019
▪ To avoid excessive geographic scope of contracts being used to foreclose markets, the
Commission proposes a flexible definition of maximum contract volume
▪ A minimum threshold below which contracts may be awarded directly will enable
competent authorities to avoid organising a tendering procedure, if the expected
savings of public funds would not exceed the costs of tender
▪ Contracts directly awarded after the adoption of this legislative package will not be
able to continue beyond 31 December 2022.
▪ To ensure maximum transparency, competent authorities will be required to provide certain

operational, technical and financial data to all potential bidders for a public service contracts,
enabling them to prepare a well-informed offer, thereby enhancing competition and enabling benefits
for citizens to be achieved (see case of SFM Torino)
▪ To realise the potential of the single market → higher level of harmonization at EU level, revising the ERA
(European Railway Agency) Regulation and transferring competence for issuing vehicle authorisations
for placing on the market and for safety certification for RUs, working in close cooperation with the
relevant NSAs (National safety Agencies):
▪ the aim is to achieve a 20% reduction in the time to market for new RUs and a 20% reduction in the cost and time taken
to authorise rolling stock → €500 million savings over five years
▪ To provide the necessary safeguards to workers after market opening → mandatory transfer of staff
when a PSC is awarded and assets such as rolling stock are transferred to another RU.
The holistic approach of 4th Railway Package
▪ All measures facilitate the entry of new operators into the market
▪ To lower the access barriers for new entrants, synergies are expected through reducing discrimination in
access to infrastructure and providing simplified procedures for issuance of safety certificates for RU
and vehicle authorisations for placing on the market
▪ These changes will raise the level of competition, guarantee full financial transparency and remove any
risk of cross-subsidisation between (often publically funded) IMs and train service provision by RUs
▪ Increasing competitive pressure and specialisation of the market players will also have a positive effect
on productivity and efficiency and lead to increases in investment into rail transport infrastructure
The holistic approach of 4th Railway Package
▪ A combination of 'open access' and competitive tendering of PSCs will allow further market opening as
has already been achieved in the freight and international passenger market
▪ Increased competition should enhance the attractiveness of rail and make the sector more responsive
to customers' needs, allowing rail operators to compete with other modes
▪ Growth of rail activity will increase the demand for qualified rail workers in RUs and operators of rail
services facilities but also the demand for rolling stock, therefore creating new jobs in rail manufacturing
▪ Making the safety certification and vehicle authorisation processes more efficient, ensuring that safety
certificates and vehicle authorisations are granted and recognised on a non discrimination basis across
the EU and making national legal frameworks more consistent will help to ensure that the time to market
for new RUs is shorter and more responsive.
Accounting separation
European legislation (4th railway package) provides that
Member States may choose between two options: Corporate separation (holding)
1. Ownership separation
2. Holding model with specific constraints aimed at Ownership separation
guaranteeing the effective impartiality of the IM and

eliminate the risks of conflicts of interest and possible
distortions of competition
Recent national legislation adopting EU one (Legislative

Decree 139/2018 amending Legislative Decree 112/2015)
has opted for the Holding model
▪ Group FS adopted holding model

▪ Also other European countries have opted for the
holding model, even in more complex and
developed railway systems
Funding mechanisms of Public Transport
France: the purpose taxes
Reference laws: “Grenelle 1” (Nov. 2009) and “Grenelle 2” (July 2010)
▪ Purpose tax applied to economic activities in tourist municipalities → Versement Transport, variable from
0,5 % to 1,75 % of sales of enterprises (public and private) according to the number of inhabitants
▪ Tax of “value capture” applied by transport authorities on lands and buildings close to transport
infrastructures
▪ Urban tolls for cities > 300.000 inhabitants having a urban mobility plan
The Versement Transport, in 2008, covered the 36% of investments’ costs for new rail
infrastructures
UK: private funding of infrastructures
Public-Private Partnerships (PPP)
▪ Construction of rail infrastructures (e.g. Train Northern Line, extension of Docklands Light Railway … )
▪ Construction and management on metros
NB: Contracts of PPP of London Underground provide the fulfilment of performance standards in terms of
regularity, capacity and quality of service
Value Capture
▪ Docklands Light Railway: PPP and sale of building areas in the vicinity
Private funding and application of purpose taxes
▪ Crossrail funded by private investors, “stakeholders” and “Business Rate” (surtax on economic activities)
PPP in Spain : the metro of Madrid
Responsibility for building the infrastructure given to operational agency MINTRA
▪ MINTRA is obliged to cover, at least, the 50% of its costs thanks to the revenues obtained by renting the
infrastructure to the transport operators
Four-year investments plans:
▪ The 3rd Plan 2003-2007 (4,8 bilion euros) was funded for 34% thanks to partnership contracts
Other innovative funding mechanisms:
▪ Investment of 45 million € to extend line 8 till to the new terminal of Madrid-Barajas airport private
dealership;
▪ PPP realised to build interchange parking;
▪ Parla tramway (8,2 km), project of municipality of about 138 million €, funded by a private group.
Toll road in Norway. Bergen case study
The Light Rail of Bergen is an application of road pricing:
▪ The construction cost of the infrastructure (about 5,3 billion $) has been shared by State (40%) and local
administrations (60%)
▪ The 60% has been mainly obtained through the revenues of the “toll ring”, active since 1986 in Bergen
→ 55% of revenues are given to develop local public transport
Pronello, C., Rappazzo, V. (2014). Road pricing: how people perceive a hypothetical introduction. the case of Lyon.
Transport Policy, vol. 36, p. 192-205, ISSN: 0967-070X, doi: 10.1016/j.tranpol.2014.08.005
Denmark : the metro of Copenaghen
Automated metro of Copenhagen
▪ Establishment of a governmental Commission (Wurtzen Committee) to define alternative funding

methods of new transport infrastructures
The infrastructure has been entirely built using:
▪ the revenues of sales;
▪ the “value capture” of building areas and buildings in the vicinity
▪ municipality taxes on ownership;
▪ sales of building areas and buildings owned by the State thanks to the increase of value after the infrastructure
construction.
EMTA barometer 2017, 2018 and 2019
2017 2018
2019
The local public transport market in Europe (EMTA barometer 2020 - 2018 data)
EMTA barometer 2018
2018
EMTA barometer 2020
EMTA barometer 2018
EMTA barometer 2020 (data 2020)
EMTA barometer 2018
EMTA barometer 2018
EMTA barometer 2018
EMTA barometer 2019
EMTA barometer 2020
THANKS FOR YOUR ATTENTION
CONTACT:
Cristina Pronello
Politecnico di Torino
DIST - Interuniversity Department of Regional and Urban Studies and Planning
[email protected]

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International Summer School on Regulation of

Local Public Services

Lecture 14 September 2022

Innovative models to fund local public transport

Public transport has been largely dominated by public control

Law n. 151/81 (10/04/1981):

▪ 1982: companies covered ≈ 20% of costs thanks to the revenues

▪ The law 151/81 asked:

Law n. 151/81 (10/04/1981): causes of failure:

▪ Continuity of mixing between the functions of regulations (public administration) and

▪ Failure of price systems in splitting up of National Fund of Transports (FNT) (established by

▪ The low endowment of FNT and of resources, most linked to mechanisms of

Evolution of resources for PT from 1981 to 2001 (index 1981 = 100)

▪ To overcome the limitations of law n. 151/81 → D.lgs. n. 422/97 (“Burlando”), to

▪ efficiency of the sector;

D.lgs. n. 422/97 (“Burlando”):

▪ attempt to stop mixing between regulator body and enterprise through:

▪ Ratio between revenues and operating costs: urban areas, 2002-2011

▪ Evolution of tariffs (urban areas, 2002-2012; index numbers)

The objective of opening up the market

quality and quantity of high demand services

or maintain or increase the same ratio for higher ratios);

where necessary, thanks to their reduction)

▪ REGULATION OF PUBLIC TRANSPORT:

▪ D.Lgs. n.422 of 19 November1997

▪ Article 16 – bis D.L. n. 95 of 6 July 2012

▪ Authority of Transport Regulation (Autorità Regolatrice dei Trasporti - ART)

NEW PROPOSED SOLUTION: STANDARD COST

The reorganization of the payroll towards

▪ Italy PT is far behind the other European countries:

▪ complex structure of PT governance;

▪ excess of Free Riding (> 20%);

▪ excessive socio-political value in relation to economic-financial value attributed to tariffs,

▪ excessive incidence of public subsidies in relation to revenues of PT companies

▪ Who pays (public, private, PPPs)?

▪ What market (what kind of competition)?

▪ What does the user want (speed, comfort, price...)?

▪ Public, private or mixed (PPPs) ?

▪ Example: connection Torino-Lyon → competition in the market

▪ In addition, as of 2020, national high-speed routes were liberalised and, as of 2023,

▪ Finally, in 2033 all existing contracts will be terminated.

▪ In 1957, the European Community was born:

▪ Public service is:

▪ what is produced from a public body (subject);

▪ what is of public utility (object);

▪ The state chose two directions:

▪ regulation of the market (UK and USA)

▪ Regulation is a supplementary element to the market and consists of imposing rules to

▪ The “intensity” of regulation can be stronger or weaker according to circumstances and

▪ cases of barriers through creation of professional associations

▪ The factor supporting competition:

▪ number of operators (small numbers favour agreements on prices);

▪ The competition requires attention:

▪ in some MS, public funding is awarded directly without competitive tender;

1991 2001 2004 2007 2012 2016

▪ Transport Regulation Authorities control the independence of IMs. Several infringement

Opening of the market for domestic passenger transport services by rail

▪ Access to rolling stock (trains) is a major constraint for new entrants

▪ Limit the access when economic equilibrium of the PSC is compromised