Vertical or horizontal separation? - Alive2green

Rail as a network economy
What characteristics make rail a network economy?
• The cost of building a rail network is very high in proportion to the
operating costs per trip
– the more volume that network does, the easier it is to cover the costs of
the initial investment in the track
• The usefulness of the rail network to freight customer increases as
interconnectedness increases
– the more destinations offered, the more likely customers are to use rail,
and the easier it is to get the volumes necessary to operate profitably
• Everybody who uses a piece of track affects everybody else
– have to coordinate speeds, maintenance, signalling, etc or the system
grinds to a halt
• Given these characteristics, running rail as a monopoly makes
intuitive sense
– but the cost is the loss of price and quality competition
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