Open access: competition on the railways
The UK rail industry is dominated by big franchises, holding the rights to large swathes of track, potentially for many years. However, what role do privately financed organisations, known as open access operators, have in the network’s future?
When discussing open access rail services – privately owned self-financing organisations that are not subject to franchising, instead purchasing individual slots on the mainline – one man knowns more than most. Ian Yeowart, a railway man since the 1970s, says it was at the end of 1999 when things really started to takeoff.
It was around that time he started working with the open access operator Grand Central, sparking a passion that continues to this day. “I'm convinced it works,” he says.
“Without [open access], people in various places up and down the country would have a far worse rail service than they currently do. We listen to people and then put our money where our mouth is - not taxpayers' money, our money.”
That is essentially what open access is – creating something that it is either completely new or is different in some way to an existing service. “You start with an idea, looking at places poorly served, or ignored, because of economic conditions,” says Yeowart.
He argues that economic models and theories say these routes won't work “and that's why you end up with swathes of the country ignored”.
“Our view is that models can only tell you so much,” he adds. “If everything worked on the model, there would be no entrepreneurs.”
Yeowart is now managing director at Alliance Rail Holdings, which in November started industry consultation on proposals to launch an open access passenger service on the Southampton to London Waterloo route, using surplus rolling stock. The consultation will finish in early December, after which Alliance will make a submission to the rail regulator, the Office of Rail and Road (ORR).
Yeowart is hopeful that the ORR will make their decision by spring, giving Alliance “a fighting chance” of starting seven off-peak services a day in December next year. Alliance also has approval to introduce new services from Blackpool to London Euston – through its subsidiary Great North Western Railway – although this application has experienced some delays.
This is the process which all open access hopefuls have to go through. First they consult with industry, such as Network Rail, before moving to the ORR for a decision on approving or rejecting a proposal.
In a statement, a spokesperson for the ORR says: “Analysis has demonstrated the passenger benefits open access competition can bring, such as lower fares, direct services to new destinations, and service quality. The rail regulator has a statutory duty to promote competition and we continue to welcome open access entrants to the market – where it is in the overall interests of customers and taxpayers.”
This support from the ORR can be seen in the number and breadth of open access services, from the likes of Grand Central, Hull Trains, Eurostar, and Heathrow Express.
Grand Central, which celebrates its tenth birthday next year, connects Yorkshire and the North East to London, with services running through cities such as Sunderland, Hartlepool and York, down to London King’s Cross – “there was a market there,” says the company’s managing director, Richard McClean.
“It takes a lot of hard work, perseverance and quite a lot of time,” he adds. “The support we get is, people say 'you are doing something that someone else is not', and it provides benefit to those communities, and therefore the nation.”
Hull Trains, meanwhile, can trace its origins back to 1999 and currently operates up to six daily return services between Hull and King’s Cross.
Support from passengers, but what about industry?
The statistics say those using open access are some of the happiest in the country. Transport Focus’ 2016 national rail passenger survey shows 96% of Grand Central passengers are satisfied with their service; Hull Trains scores 94% - the two highest.
When asked about value for money, 73% on Grand Central and 65% for Hull Trains agreed they were satisfied. The 2016 Which? train customer satisfaction survey, which covers the whole of the UK, produced similar results: Grand Central and Hull took first and second place, with scores of 79% and 73%, respectively.
“It's not rocket science; it's about listening,” says Yeowart. However, could this success be viewed as a threat to the franchise model?
“No, not at all,” insists McClean. “We're in completely different markets. The franchise operators have a monopoly of peak operations and between the major cities. They operate on a large scale, running, for example, five trains an hour, whereas we have five trains a day on some routes.
“We provide services that the franchise operators have chosen not to invest in. The two operations are entirely complementary. They do one thing, we do something different.”
"The franchise model… it's the same sort of model every time,” says Yeowart. “The fact is, on the day you have no choice.”
A spokesperson for the Rail Delivery Group, which represents train operation companies, says the industry “is actively engaged” in what they call the “debate over how to harness the best aspects of competition to deliver even better services”.
The spokesperson adds: “We will continue to work with governments and the regulator to balance the opportunities for more competition in rail with the wider complexities and practical challenges of running this vital public service.”
For the Department for Transport (DfT), rail minister Paul Maynard says open access “can play a role [in] delivering better journeys [in] a competitive market” and adds that the department is working with the ORR to deliver “important reforms in this area”.
A future for open access?
In March, the Competition and Markets Authority (CMA) released a wide-ranging report into how greater competition could benefit passengers. In summary, it concluded that more “on-rail” competition could lower fares, push operators to improve service quality and innovate, produce greater efficiency and make more effective use of network capacity.
The CMA also outlined how open access operators should be able to make more of a contribution than at present, in terms of track access charges and “through a public service obligation levy to contribute to the funding of important but unprofitable services, such as those in rural areas”.
“We’ve found that there is strong evidence, both here and abroad, of the benefits that the introduction of competition on mainline intercity routes can bring,” said Alex Chisholm, the then CMA chief executive, in March. “There are legitimate concerns about the impact that greater competition might have on the income received by government from franchise operators but so far that concern has been tackled in a way that hinders new entrants.”
Some of the concern has come from campaign groups. In May, the Campaign for Better Transport told how it was “not convinced moves to increase the number of open access rail operators will benefit either rail users or the taxpayer”.
Their stance has softened somewhat in the intervening months, as Lianna Etkind, one of the group’s public transport campaigners, explains: “The promise of open access is that it will bring new ways of doing things that will benefit passengers… [but] delivering these benefits is a challenge to bigger operators - can they match these passenger-friendly innovations?”
“We'd like to see the government simplify fares and enforce standards so passengers could get good value, comfortable journeys, whichever operator they travel with.”
McClean and Yeowart both argue the need for a sensible debate. McClean adds: “I think it's a misplaced observation. The services we operate could have been operated by the franchises, but they chose not to,” while Yeowart wants to see any evidence “that we've had an impact on the funds that have been made available to the Secretary of State, and I'll listen”.
“Give me the evidence and you can hang me with it. But there's no point speculating,” he adds.
So, could we see more of it in the future? There are certainly barriers for aspirant open access operators, such as investment in rolling stock, as they aren't part of any DFT rolling stock cascade, and the putting together of a successful proposal that demonstrates the need for a new service.
However, McClean remains confident. “My personal feeling is yes [we will see more], because passenger volumes and the revenue levels on the core intercity flows are large enough to support more than one operator.”
“If I want to fly somewhere I have a choice. For some reason rail is sort of sacred,” says Yeowart. “Can you think of any other part of your life where you don't have a choice? There has to be room for them [open access operators].”