The Fourth Railway Package - National Regulatory Body ’ s Perspective

1. The Fourth Railway Package - National Regulatory Body’s Perspective European Parliament, Public Hearing of the Committee on Transport and TourismBrussels, 7 May 2013 Dr Iris Henseler-Unger, Federal Network Agency, Vice President

2. Outline • Domestic Passenger Market • Infrastructure Governance

3. Opening of domestic passenger markets • Bundesnetzagentur (BNetzA) welcomes market opening. • Germany has already opened its markets with positive impact on the rail system. • There is a positive correlation between competition, market growth and price development (see next slide). • Open access forms the basis of non-discriminatory market access. • Number of rail passenger service operators has increased from 107 (2009) to 116 (2011). • Share of rail passenger service in the modal split also has constantly increased. • Some concern:Proposed economic equilibrium test might be misused as a means for closing national markets.

4. Opening of domestic passenger markets Correlation between competition, market growth and price development Market share competitors Percent, 2011 Market growth* Annual, 2005-11 in percent Development of prices (real)** Difference 2011 vs. 05 in percent Segment Freight Competition Short-distance pass. rail Long-distance pass. rail No / Little competition Depending on the RUs‘ operating performance Network (2010) Natural monopoles Falling prices Rising prices * Basis: tkm for freight, pkm for short-distance and long-distance rail passenger transport ** Price level calculated as revenue per tkm or revenue per pkm or revenue per tpkm in the respective market segment, real development (adjusted for inflation) Source: Bundesnetzagentur, Destatis

5. Public Service Obligations • Mandatory competitive tendering of public service contracts creates improvements for efficiency and quality of offered services. • BNetzA has an interest in a functioning competition for public services. • But: Proposed legislation transfers competences regarding the planning of traffic towards the regulatory bodies. Procurement of public service contracts does not fall into the scope of our business and should be left to the competent bodies with the relevant expertise.

6. Infrastructure Governance • Unbundling in itself is not a silver bullet for vivid competition. • BNetzA has a pragmatic approach towards unbundling, derived from experiences in other sectors: • In telecoms, unbundling rules are more soft-gloved, yet competition exists. • In energy, unbundling rules do not provide for ownership unbundling, but we have it; not without problems (i.e. lacking financial strength, lacking synergetic effects, transaction costs …) • The stronger regulation the lower the necessary level of unbundling. • BNetzA‘s position: Non-discriminatory access to infrastructure can also be guaranteed by the existing holding model, if regulation is strict and the regulator strong and independent.

7. Infrastructure Governance • Legal framework must ensure that infrastructure managers grant access to its infrastructure on a transparent, non-discriminatory and objective basis. • Legal framework must lay grounds for strong and independent regulators in order to safeguard these principles. But: • Suggested rules on unbundling might go too far. • They also apply to small infrastructures. One size does not generally fit all. • Oversight of unbundling compliance should be concentrated on strong NRBs and not be divided between national and European level (e.g. prevention of diverging case law). • Denial of access as a means of ensuring compliance with unbundling rules appears to be counterproductive: The objective is market opening, not market closure. And: Only cross-border business is affected. • Imposing sanctions when requirements have been fulfilled by undertaking or examination is still in progress would not be appropriate.