Is Alta Velocidad Fast?

Awaiting Fast AVE

This essay analyses and explores the regional passenger fare structure of Renfe, Spain’s national railway operator. The question, “Is Alta Velocidad Fast?”, derives from Renfe’s tradition of pricing slower trains cheaper. The question asks whether, in the era of yield management (balancing current patronage to current capacity by modifying price), the traditional fare structure should be applied to high speed, AV, operations? The journey provides an insight into the structure of modern transport geography, the haphazard strategic development and exploitation of Alta Velocidad, the management of national inequalities through fares, the conflation of public and commercial roles within single shared operations, and, from a perspective other than infrastructure, the contemporary challenges to Spain’s railways.

The introductory section describes the current trend toward Temporal Ticketing, with a reflection on how this alters transport geography and state: While the growing reliance on algorithms challenges established operator dominance, it is not necessarily incompatible with societal behaviour, especially for less familiar journeys. A brief history of Avant follows, the Regional Alta Velocidad funded as a public service obligation (OSP), with extensive analysis of fares on Avant corridors, including an assessment of the selective use of yield management on parallel commercial AV services. Avant is placed in context by a similarly detailed analysis of fares on slower regional services, those on which passengers are Paying to Go Faster. The strong relationship between fare and speed is confirmed, but with a balanced structure of revenue-to-cost that equalises quite different styles of operation.

Fare’s Fair exposes the differences in fares and speeds between Spain’s regional Autonomous Communities, demonstrating how fares have apparently been used to manage the inequalities between regions. Unfortunately the same structure has not been adequately deployed to counter AV‘s inequalities, ultimately because AV pricing has been defined by commercial aviation markets: By matching, not taxing, aviation, the cascade effects (of inflated expectation) to lesser classes of transport can only be addressed through subsidy – the flawed policy that is exposed by AV Cercanías, a theoretical high speed suburban railway – Avant being the closest non-theoretical product to AV Cercanías. Inter-City probes how Renfe has evolved the management of marginal longer-distance trains, especially over non-AV routes, where the same train may share regional public service and inter-regional commercial roles. The conflation of pricing models is highlighted, and evidence is presented that suggests the state is subsidising the train, and not specifically the seats upon it – a pattern that might concern the European courts, were it to continue after 2020.

The concluding section takes a contemporary journey From Extremadura to Catalunya Nord – the origin exemplifying the political impact of AV‘s inequalities, the destination actively challenging the idea of region as strictly administrative. Along the way, how transport geography relates to the source of its finance, how the preoccupation of the Spanish political state with infrastructure inhibits behavioural policy interventions, and ultimately, how Renfe transpires to be a better manager of state than state. The Postscript provides an intense reflection on an otherwise somewhat long and technical analysis of what may seem quite a trivial topic, but actually explains much about the state of contemporary Spain.

Temporal Ticketing

The curious case of railway ticketing is one that invariably embeds and perpetuates cultural biases to the perennial question, what is value? For example, the pre-privatisation British Rail ingrained its primitive yield management strategy, that return fares were “cheaper after 09:30”, so deeply into the state psyche that decades later concessionary fares policy was still formulated to protect “the morning peak”, even though the late afternoon had long since become the busier period for many regional public transport networks in Britain. Britain’s railways are still stuggling with the issue, although Britain seems unlikely to shift away from a model that emphasises the temporal capacity of the transport system to handle the intending passenger, and prices journeys accordingly. In parts of Europe, not least Spain, the temporal capacity of the transport system is traditionally not a consideration in pricing. Indeed, every “salida”, the busy days for longer-distance travel at the start and end of holiday periods, the mere possibility that the capacity of Spain’s transport system might have been temporally exceeded, can be rendered a national preoccupation – the media routinely broadcasting reassuring images of half-empty roads and passengers boarding trains like normal. The underlying presumption is that the system accommodates the passenger, even if that means some time periods are far busier than others, and some operational assets lay idle during quieter periods. For example, Barcelona’s metro currently has no fare variation by time of day, even though its patronage is far from constant across the day. The idea of introducing such a variation has been considered only recently, as a means of managing peak overcrowding, and that was only triggered by the post-Independència financial realisation that increasing demand could no longer be met with extra capacity. For state-provided systems, the implicit presumption is that the state will provide. The reasoning is indubitable: State, in its broadest sense, is perpetual, as stable a constant as can be reasoned – not a facet that alters at 8 o’clock just because other people also want to travel then.

Where transport systems are liberalised, most obviously in European aviation, yield management has become the accepted norm. The price of a flight might double or halve from day to day, as airline operators try to fill every seat in every plane – managing their supply, which is largely fixed in the short run, by altering price. Likewise, few will be surprised to discover a flight from Madrid to Berlin (2300km) that today just happens to be cheaper than a flight from Madrid to Barcelona (600km) – in stark contrast to the state-centric model, where fares typically retain a strong correlation to distance. Just two examples of how liberalised transport systems are shifting geography from the spatial to the temporal, and, perhaps more alarmingly, de-humanising geography: Not only by emphasising the economy of the carriage over that of the passenger, but also by encouraging travel specifically when others are not, in opposition to many natural group dynamics. It is in the midst of this tumult that we find the contemporary “Alta Velocidad”, Spain’s high speed passenger railway – a state-implemented network operating in an increasingly liberalised market.

The question posed by this essay, “Is Alta Velocidad Fast?”, is not just the question it may first seem, that which begets the retort, compared to what? Traditional Iberian railway fare structures differentiate between trains based on their speed, where those that complete their journey faster cost more to travel upon. Thus, to quote Franklin, time is money – but here the value of time is constant over time, not varying within time (from hour-to-hour or day-to-day) as is more common in Anglo-Americanised markets. AVE, and similar long distance inter-regional public transport services, are forced by their increasingly competitive liberalised environments to adopt fare structures which undermine the base understanding of state: The national in Spain thereby becomes the liberalised global. Yet within Spain’s regions the traditional fare structure still predominates, and thus perhaps regions better retain their state. Spanish railway liberalisation implicitly acknowledges this by opening up most inter-regional services to competition in 2020, while likely retaining state control (via Public Service Obligation) of services within regions. An analysis that might confer the dominance of regional politics over national, but more specifically, that regions are more knowable among their own populations than the nation of “Spain”, and thus regions evoke greater protection of their state. The strategic counter-balance, that the national will, by dint of improved asset utilisation and reduced reliance on new assets to deal with insufficient capacity, become relatively more efficient economically. However as this essay explores, while local juxtaposes to national, regional is not necessarily aligned to local.

Such protection of the more local state is not arbitrary. The more locally and the more frequently a transport service is used, the more that use is considered normal by the user, the more the consistency of its state is appreciated. The hassle, what economists call shoe leather cost, of navigating a complex ever-changing fare structure may be acceptable for exceptional journeys, but surely not for a daily commute or a trip to the shops. The differing acceptance, based on geographic familiarity, of transaction costs – the cost of making a trade – evokes modern behavioural concepts such as bounded rationality: That decision-making is a pragmatic reflection on users’ perceived reality, that the terms of this “geography” are not as universal as the word might imply. The physical, spatial geography that makes the whole that science calls nature, may be reasoned universal. However societies in both Britain and Spain have strong “virtual” components – the British predictive analytic routinely juggles time across a wide spectrum of past-future, while the Catalans (and, dare I suggest, other Spaniards) emphasise social knowledge through “knowable groups”. In both societies the physical geography continues to play an important role, but analysis of only that role omits these virtual themes, which can be important when trying to understand modern societal behaviour. So instead of presuming a flawed universal notion of geography, derive geography from the perspective of those within their respective societies: An alternative model where transport geography is expressed in terms of users’ familiarity, rather than a specific absolute notion such as time or distance. For example, a regular or local journey is typically more familiar to the person making that journey, than an occasional or long-distance journey. The familiarity of each person is first and foremost a function of “knowing” – of, in the broadest sense, state. This relationship between knowing and geography is especially obvious in video game world design, a theme developed from my Adventures in the Invisible Tent: The scale of such a world, a hybrid of time and distance, is optimised for knowing that world. Game worlds are far more compact than planet earth because even complex games contain far less to know.

Optimisation for knowing differs from optimisation for analytic efficiency – and herein lay much of the tension between contemporary society and computational optimisation: Since (and arguably before) Euler tried to cross the 7 bridges of Königsberg, transport has been posing computationally challenging problems, from network route planning to supply chain logistics. But it is perhaps only in the last two decades that the average traveller has become directly exposed to such computational optimisations. In the mid-1990s the apocryphal tale was told of an Operational Researcher who commuted each day to his workplace in London Transport’s headquarters near St James’s Park, central London. Upon arrival in the capital at Paddington railway station he was faced with two potentially viable Underground (metro) routes – direct on the Circle line, or via Bakerloo and Victoria lines. For the casual user, the direct Circle line would be the obvious choice, both requiring no change of trains and, based on the stylised London Underground network map, of similar distance. However those distances are actually a lot less similar than the stylised map betrays, and the Circle line had a far lower effective frequency than the alternative route via Bakerloo and Victoria lines. The calculation of optimal route, at the precise moment our expert commuter arrived at Paddington, originally would have relied on train service predictions, but could now be improved with live-time data delivered to a mobile phone application. The optimisation rarely saved more than a few minutes. In the 1990s these were games played by mathematically-minded transportation planners. Now they are becoming the norm among regular travellers, those whose behaviour is optimised by their “smart” mobile phones. The domination of this technology over its human users is clearest among those that happily walk or drive round in a circle, simply because the underlying dataset is missing a network node or link – and thus cannot calculate the direct path that should be obvious to the user, had they not placed absolute trust in their (sadly fallible) device. In the final analysis, these users have become so optimised that they have ceased to know.

This trend is not new: In the spirit of Kuhn, the Enlightenment West has progressively expanded the complexity of its worldview by simplifying every-thing within that world. And given such apparent acceptance of technology over human, yield management of the most familiar of journeys should now seem entirely reasonable: Blind user trust in journey-planning algorithms readily extends to ticketing. In practice the algorithms taking users’ fare decisions would compete with the operator algorithms setting prices, a computer-vs-computer model already successful (except when dealing with the unexpected) in financial market trading. The economic efficiency implied would liberate humans to obsess about something else – and ultimately the minutiae currently associated with transport ticketing would be replaced by trust that the system tends to offer “best value”, with any user interaction reduced to broad concepts such as brand. Transport operators traditionally consider themselves to be the sales channel of their product, and even in the most entrepreneurial arenas (Ryanair vs Skyscanner in 2007) operators are naturally hostile to any optimisation they don’t control. Aside from exerting ownership over data (a battle largely lost), the operators’ only logical defense is to simplify their ticketing structure – logically opposing the yield management that is inextricably driven by market competition. Thus operators in open transport markets will ultimately be reduced to supplying a service sold by technology platform providers (such as Google) or travel metasearchers (such as KAYAK) – a keenly fought technology market that has not yet peaked or consolidated. And once again, in the midst of this tumult that we find the contemporary AVE, its state-owned operator, Renfe, accustomed to a national prominence that it will not yield easily – even if, as discussed in Arriva Celta, Renfe’s role as the provider of national “presence”, beyond mere journey utility, is easily taken by state track owner ADIF, leaving Renfe vulnerable.

Continue reading “Is Alta Velocidad Fast?”

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Arriva Celta

Talgo Shunt

Arriva Spain Rail’s announcement of a new cross-border railway service from A Coruña (La Coruña) in Galicia to Porto (Oporto) in northern Portugal took some in the railway industry by surprise. The first proper phase of the liberalisation of Spain’s national passenger railways was widely expected to be focused on the high speed AVE network, a somewhat commercial near-aviation market, theoretically serviceable with trains acquired outside Spain. Even interest in cross-border services had hitherto focused on the high speed route from Madrid via Barcelona to the south of France, which judging by its latest search for 15 new cross-border drivers, state operator Renfe intends to respond to competitively. After all, the Spanish government had declared every regional railway service to be “Obligación de Servicio Público” (Public Service Obligation, OSP), to be financially supported as a Renfe monopoly, likely well into the 2030s. Add the difficulty of acquiring and operating uniquely Iberian gauged and signalled rolling stock in an environment where almost all the relevant assets are held by state operators, and one might dismiss the whole A Coruña-Porto scheme as an ill-conceived dream of a multinational that had not yet understood the local railway environment. Except the Arriva Group have been operating buses in Galicia since 1999 and Portugal since 2000, and so should know the territory as well as anyone. Perhaps more importantly, while Arriva’s British rivals sought liberalised markets for their initial forays “overseas” in the 1990s, Arriva learnt to work with whatever competitive environment it found on mainland Europe. That combination of local experience and competitive adaptability makes Arriva’s approach to Spanish railways unique. That Arriva’s first instinct is A Coruña-Porto, and not head-to-head competition on flagship intercity routes such as Madrid-Barcelona, reveals much about Spanish railway liberalisation. As explored in the following paragraphs, Arriva’s competitive strategy is contextualised by the need to:

  1. Address an underlying commercial market, not the “railway” market Renfe is structured around.
  2. Expose Renfe as no longer a “national” entity, thereafter making its role contestable.
  3. Exploit the structural weakness between national Renfe and regional government.

Arriva’s current parent group, Deutsche Bahn (DB), has already been burnt by the (non) liberalisation of Spanish railfreight: DB was fined 10.5 million euros by the Spanish competition authority, CNMC, for anti-competitive agreements to control the supply of traction – at rail-freight liberalisation in 2005, only Renfe Mercancías (its freight division) and DB subsidiary Transfesa (which had, exceptionally, operated privately since 1943 on RENFE‘s network) had freight locomotives that could operate across Spain. The case was emblematic of Renfe Mercancías’ anti-liberalisation strategy of asset control – from a non-auction of life-expired rolling stock that was all but useless for new operators, to a driver training paralysis that resulted in Renfe hiring competitors’ drivers (Renfe’s employment offer more favourable because of its public status). Renfe Mercancías’ approach was exceedingly traditional – defending the body of workers using the assets of the company – with scant regard for what those workers and assets were functionally there to do – move goods: Between its regular state-subsidised operating loses and its minimal impact on the national economy, Renfe Mercancías arguably lost track of its own importance and risks irrelevance. Yet even now the railway has few commercial logistics-orientated operators, and practical asset liberalisation is still dependent on the regulator forcing Renfe’s hand – hardly the panacea of free market liberalism envisaged by European Union policy. Even if this were the beginning of the end for Renfe Mercancías, it might also be the beginning of the end for freight on Spain’s railways: The underlying model (from the Spanish, not European Union, perspective) assumes the mercantile elite test the resolve of the national railway – the railway as a strategic entity of the nation – and only once that resolve has been broken does the national railway structure begin to yield actual liberalisation. However as simple transport utility, Spain’s internal freight was already somewhat liberalised on the roads, which convey the vast majority of Spain’s domestic goods traffic. Consequently it may have been easier to test the resolve of the national railway by capturing its freight market from the road, than compete on the railway itself: Renfe is easily blind-sided by functional competition that focuses on the market for moving goods, since Renfe’s organisational focus is “trains”, especially the staffing of trains.

While the problems of freight liberalisation have ensured intending commercial passenger railway operators are better prepared, for example establishing their own driver training schools and acquiring their own rolling stock, the underlying structure of Spain’s passenger railway liberalisation remains rather similar to that of freight. The baseline assumption, if only by historical pattern, is the emergence of a dominant commercial duopoly, plus Renfe: Perhaps a market similar to Spanish terrestrial television, where two dominant but counter-balancing commercial broadcasters co-exist with a state broadcaster. However, the dominant state actor is surely ADIF, the state owned provider of railway infrastructure: Commercial liberalised operators will rationally focus only on passenger “utility” (delivering a functional transport service), so, as discussed in The Expectations of Competition, the only unfilled role is that of “presence” (the physical manifestation of authority). While the original unified RENFE provided both utility and presence, on the modern railway presence can effectively be achieved by ADIF alone building and maintaining railway infrastructure: Exactly who operates the trains would not matter strategically, only that they were operated by someone. That cripples Renfe (specifically Renfe Operadora, its passenger division) as the strategic national entity it was, and explains Renfe’s desire to merge back with ADIF and thus remain part of a true national entity. Assuming Spain does not follow Poland and merge its national operator and infrastructure company back together, it will be incumbent on commercial operators to break Renfe’s monopoly position on track, so that Renfe can no longer be considered a national entity, thereafter allowing other operators to take Renfe’s role in subsequent non-commercial (typically regional and local) liberalisations. Mere dilution of Renfe’s patronage by indirect competition, such as by alternative modes, will not break Renfe as a national entity. Even competition only on high speed routes risks fostering a liberalised environment that cannot subsequently transfer to older (primarily) Iberian gauge networks, thus cannot compete effectively in whatever contractual regime eventually emerges for state-supported regional and local services, and hence maintains Renfe as a monopoly operator of much of the Spanish railway network.

If Renfe’s status as a national entity has been admonished by the time its OSPs are due for review (a maximum of 10 years after they are awarded), it will surely be politically impossible for Spain’s national government to continue to determine regional railway services: If there is a genuine choice of operator, the relevant Autonomous Community governments can scarcely be denied that choice for their own internal services. This is presumably the main aim of Arriva in Spain: To open up the large, but historically often uncontested, contractual market for public transport. A rather different aim to those market entrants focused on a handful of commercial near-aviation markets, such as Madrid-Barcelona. The hostility of regional government in Spain to Renfe is well documented in Catalunya, but from Aragon to Madrid to Extremadura, none has much love for Spain’s national railway operator. Regional government theoretically counters centralist Spain, representing a powerful ally against Renfe, even if the Catalan example suggests that such power is no guarantee of success. In some regions, Renfe could become vulnerable at much the same time as the local bus concessions that were last extended without contest in the 2000s: In Galicia, law 5/2009 extended most until the end of 2019. The metropolitan concession in A Coruña is already under intense pressure from the CNMC to be modified for compliance with European state aid rules. While all this raises the possibility of multi-modal contracts, especially attractive to an operator with the breadth of Arriva, the more immediate outcome should be greater clarity on the costs of delivering different services: As demonstrated in Catalunya, even apparently “fair” funding mechanisms can disguise substantial cost differences. In a similar vein, the Spanish government’s blanket OSP allocation is eminently challengeable as a policy: Aside from mocking its intended methodology by waving efficiency and utilisation targets for every service that didn’t meet them, INECO’s “rubber stamp” analysis ignores other transport modes, offering no reasoned assessment of Renfe’s contribution to policy objectives such as local mobility: Why support a train between Ferrol and A Coruña with an average of just 16 passengers a trip, when the route is more-or-less mirrored by a faster and more frequent bus?

As explored in The Art of Public Competition sequence of essays, Ferrol-A Coruña does not pose the rational economic question it may seem. The implicit long-run expectation is that the railway service will be improved to compete effectively as a balanced duopoly – although with up to a billion euros of investment required, those improvements may be a long time coming to Ferrol. Liberalisation implies the transformation of the societal model of competition, such as where discrete local duopolies maintain balance, to a more economic model of competition, where factors like cost and demand determine balance across a whole. A Spanish legislature devoid of absolute power can only expose the new model to an environment defined by the old – Spanish policymaking is necessarily structured in a way that lets its society test new legislation, successful EU “directives” included. The challenge for liberalised market entrants is thus to transform the old environment into a new model. Being more operationally efficient or market orientated than the status quo should be straightforward for veterans of open public transport markets. But if the terms of that competition don’t gain state (in the widest sense, of knowing) acceptance, then the theoretically liberalised market might be overwhelmed by attempts, however irrational, to the maintain prior “competitive” balances. As the operator of the Ferrol-A Coruña bus, Arriva presumably have some understanding of the challenge posed by Spanish railway liberalisation, and some strategy for addressing it. The three contexts outlined above – market redefinition, operator contestability, culminating in a regional endgame – give some clues as to why Arriva’s first foray into Spanish passenger railways is on familiar territory for Arriva as a bus operator (both in Galicia and northern Portugal). But is Arriva’s A Coruña-Porto passenger railway service a feasible commercial proposition, or is its purpose more… strategic?

Continue reading “Arriva Celta”

On the Wings of Hope

AVE at Sants Station

This essay ponders the interplay of risk, debt and optimism, with specific reference to the expansion of Spain’s high speed railway network. It summarises the renaissance of AVE expansion, reconciling different approaches to risk in the construction of transport infrastructure. The interaction of external finance within the Spanish societal structure is hypothesised as reliance on external debt with no internal counter-balances – a virtual economy characterised as Gross Domestic Optimism. The postscript asks what it means to invest in state, with reference to two evolving models – people and perception.

“On the Wings of Hope” is the final essay in a sequence of four titled, “The Art of Public Competition“, which together explore the competitive model underlying Spanish public transport. An anthropological analysis of the tension between this internal model and that of globalised economics, reveals the distortion of external finance on the internal workings of the art of public competition. The first essay in the sequence establishes the policy context for the liberalisation of public transport in Spain. The second explores the workings of the art of public competition using the example of interurban buses around Barcelona. The third examines how the art of public competition functions when one of its most important competitors is absent, using the case of post-Independència Catalunya.

AVE or Bust

Given all that has so far been described in this sequence of essays, it should be self-evident that grand public infrastructure, of the type Catalans and Spaniards came to expect in the early 2000s, can no longer be funded publicly. That the Generalitat de Catalunya’s post-Independència hiatus merely emphasised a reality first exposed by the 2008 Crisis. There is some evidence that the Generalitat, the regional government of Catalunya, had already shifted policy prior to the Referèndum, for example its 2017 proposal to replace the tolls levied on users of recently built strategic roads (those still under concession), with an annual “vignette” (tariff) paid by motorists for access to all such roads – which would generate a constant revenue stream with which to fund subsequent network development. With half these roads still administered centrally by Spain, Catalan policy would have to be shared with the Spanish government, which is itself deciding whether to maintain tolls when concession periods end. The 131st President of the Generalitat‘s personal commitment to the non-payment of tolls during 2012’s #NoVullPagar campaign, highlights how road tolls are a thorny issue in Spanish politics, not least in the wake of the recent financial failure, and consequent government rescue, of several high-profile highway concessions around Madrid. Funding the construction of new roads via private toll-raising concessionaires is broadly accepted (even if only by historic precedent), while perpetuating tolls on roads that are ostensibly already paid for resembles state taxation (even if the proceeds are hypothecated into transport projects). The resulting shift between private and public sectors has complex, long-term socio-political connotations. In the meantime, the evidence suggests that, unlike the Generalitat de Catalunya, the government of Spain has not accepted the “reality” that grand public infrastructure can no longer be funded publicly, and that it only need better risk management to achieve its pre-Crisis policies, as best illustrated by its current approach to high speed railways:

For several post-Crisis years Spain pursued ugly engineering compromises to maintain the illusion (in its Anglo-Castellano meaning of both ambition and deception) of a high speed railway building programme it could no longer afford. For example, by re-using historic railway alignments, even where those alignments mock “high speed”, as is the case for the ongoing integration of the 30 km/h Loja curves (on the line to Granada) into a network intended to reach 300 km/h. The “AVE” from Valencia to Castellón epitomised the problem: Implemented by dual-gauging (Iberian and International) one of the existing two tracks, (International gauge) AVE trains operated no faster than other trains on the same track, thus offered no additional utility beyond what could have been achieved by simply passing the AVE rolling stock through a gauge-changer. The claim that Castellón had been added to Spain’s high speed railway network was met with a good degree of Valencian cynicism, and did nothing to assuage the view that the government in Madrid ascribed a low priority to the Mediterranean Corridor (along the east coast).

2018 heralded a return to pre-Crisis high speed railway building, particularly in the north of Spain where none of the intended network had been completed beyond Valladolid – the Crisis having left an eclectic mix of disconnected infrastructure in its wake, from stations served by no trains, to depots maintaining no rolling stock. Works agreed in 2018 include Bilbao station, the most expensive railway station project in the history of Spain, a 720 million euro investment that makes the 240 million euros lavished on the temple to AVE that is Zaragoza Delicias, look cheap.

Compared to Castilla, the geology of northern Spain increases construction costs, as the Norte discovered in the 1860s – its route from Madrid to Irun cost around 550 thousand Pesetas per kilometre, compared to 208 thousand Francs per kilometre from Madrid to Zaragoza (the two currencies directly comparable because the Peseta and Franc maintained parity via the Gold Standard – although it should be noted that the Norte was actually dealing in “Reales de Vellón”, in a decade when the Spanish currency changed twice). Modern engineering techniques, such as the New Austrian tunneling method, may make many AVE route alignments possible, but such construction carries increased geological risk, as epitomised by the Pajares tunnels on the route to León and Asturias: Construction costs have more than tripled, to over 3 billion euros, as has construction time, from the five years anticipated in 2003 to perhaps twenty – while water leaks from punctured aquifers, and relentless landslides, raise doubts as to whether the line will ever open to its intended specification.

Risk is not necessarily so visual: For example, in the case of the failed highway concessions around Madrid, land purchases were budgeted on the assumption the land was categorised as rural, however that land was ultimately judged urban, greatly inflating the cost of acquiring it. Similarly, project management, even of relatively unambitious projects such as Girona’s concrete box of an AVE station, can get bogged down in local political disputes – not to mention the equivalent project in Barcelona, which was stalled for several years by anti-corruption audits. That ADIF-AV budgeted half a billion euros in 2017 to deal with litigation by its own construction contractors paints a dismal picture.

In 2017 the Spanish government legislated to moderate risk in public contracting: To spread risk across more contractors by encouraging the participation of smaller contractors through the contesting of more minor contracts, splitting large contracts, and measures such as ensuring prompt payment and improving transparency. And in parallel, to transfer risk to contractors, notably by limiting the modification of contracts with the private sector to no more than 50% of the original bid price. On genuinely risky projects, this dual policy of spread and transfer naturally tends to contradiction, since only larger companies can carry larger risks. Mid-sized construction companies remain unconvinced that the Spanish government’s approach to procuring transport infrastructure has actually changed. That the new legislation is simply patching up the cracks in the original (internal societally structured) model, is borne out by the counsel of the larger Spanish construction companies, who consider risk as a far more fluid, flexible component of project financing than the government: Shifting risk to reflect the capacity of each sector to manage it, adding value through the private sector management of projects over a longer period than the political electoral cycle, and conversely reacting faster than the public sector to offer short term flexibility. Not least because of their temporality, these are unmistakably lessons from the external, globalised environment in which these companies now operate.

Since the Crisis of 2008 Spanish construction companies have learnt to thrive in markets outside of Spain, their global dominance now second only to China: Their technical competence is not in doubt, nor is their ability to work effectively in different societal and administrative environments. Which makes their domestic environment all the more intriguing. Spanish national transport infrastructure is theoretically ripe for the application of externalised risk models:

  • The Spanish construction industry are both willing and able to adjust to more external organisational models. That adjustment does not necessarily suppose a radical change in epistemology. Rather that the internal societal model of knowable groups has the potential to be arranged differently, should it be exposed to a different environment.
  • The existing internal societal model has never worked well at the scale of national transport infrastructure, as described in The Expectations of Competition. Indeed the purpose of such transport infrastructure’s “presence” is precisely to bind groups that cannot know one another through the base societal “family” model.
  • The theological root of infrastructure presence – the boundary at which the state manifests the external (God) in nature – is surely just as capable of delivering alternative external concepts.

The inhibiting factor is elementary: The nation of Spain, by Westphalian definition, cannot be global. Spain, like other sovereign nations, is predicated on its ability to differentiate itself from the global whole. Since every element of the external that Spain accepts weakens itself as an entity, it is crucial that it uses external elements to strengthen itself as an entity. Since losing the European intellectual hegemony to the Dutch Republic, the question of what strengthens itself as an entity has plagued Spain, because its internal strength manifests in a different manner to the way the external (at least northern European) world measures strength. AVE is a contemporary example – its presence strengthens the internal idea of Spain, while its utility strengthens the external notion of economy. In practice a compromise between these internal and external assessments which perhaps satisfies neither adequately. A relentless tension – here between presence and utility – rather than a happy equilibrium be found, with respite ominously implying isolation. Given the stakes, exposure to externalised risk is moderated by the state: Unfettered external finance could weaken Spain more than it strengthens her, or might negatively alter the balance between presence and utility.

Continue reading “On the Wings of Hope”

Public Competition in Post-Independència Catalunya

Camp del Ferro

This essay examines how the art of public competition functions when one of its most important competitors is absent. The suspension of policy-making within the Generalitat de Catalunya, following the region’s failed bid for independence, provided an almost unique opportunity to observe the strategic processes and limitations of the art of public competition. The optimistic finances of metro line 9/10 set the context, followed by analysis of the reactions of the city and metropolitan area of Barcelona to the Generalitat’s hiatus. That analysis exposes vast differences in the funding models of higher and lower tiers of Spanish government, which can be traced to the availability of externally-financed debt.

“Public Competition in Post-Independència Catalunya” is the third in a sequence of four essays titled, “The Art of Public Competition“, which together explore the competitive model underlying Spanish public transport. An anthropological analysis of the tension between this internal model and that of globalised economics, reveals the distortion of external finance on the internal workings of the art of public competition. The first essay in the sequence establishes the policy context for the liberalisation of public transport in Spain. The second explores the workings of the art of public competition using the example of interurban buses around Barcelona. The final essay ponders the strategic interplay of risk, debt and optimism, using the example of Spain’s high speed railway network.

Beyond Line 9/10

Like many of Spain’s regional Autonomous Community governments, the Generalitat de Catalunya’s initial reaction to the 2008 financial crisis was to maintain many prior expenditure commitments by borrowing, with debts rapidly rising from a baseline of around 8% GDP to around 35% of GDP by 2014. Roughly half this borrowing now occurs through the nation of Spain, using a mechanism called the “Fons de Liquiditat Autonòmic” (Autonomous Liquidity Fund, FLA) which allows regional government to borrow on broadly similar terms as the parent country, and thus benefit from Eurozone rates, which in this period were close to 0%. FLA funds come at the cost of fiscal autonomy, since the autonomous community’s plans for debt reduction must be approved by the Spanish government. The other half of the debt is sourced directly, commonly from commercial banks, which in Spain have traditionally had a strong civic investment function. The biggest single debt within the Generalitat’s total is that of Ifercat, the Catalan agency tasked with new public transport infrastructure: 4 billion euros of debt, roughly 5% of the Generalitat total. Half Ifercat’s debt is owned by the European Investment Bank, a non-commercial EU institution.

Aside from a 45 million euro project to rejuvenate the Lleida-Pobla de Segur railway, a line historically notable as the epitome of politicised infrastructure, Ifercat’s only practical project was Barcelona’s Line 9/10 metro route. Over-ambitious from the outset, both technically and financially, the “longest metro line in Europe” followed an all too familiar pattern of costs spiralling out of control in an environment of inadequate risk management. Ifercat pursued increasingly desperate funding mechanisms to keep their project alive in the face of the worst global financial crisis in a generation. Instead of using the private sector to mitigate construction risk, or using the private sector to deliver the desired transport system as a single build-and-operate concession, Ifercat sought short term liquidity simply to keep construction underway. And ultimately the money still ran out, leaving an incompete tunnel right in the middle of the route – a tunnel which is still inhabited by a pair of Tuneladores (TBMs) that haven’t moved since 2011. Such an incremental approach to funding inevitably led to poorly structured debt, notably creating many “hidden” liabilities, above and beyond the headline of 4 billion euros.

In 2014 Independents de Qui attributed Ifercat with another 1.8 billion euros of future guarantees to public companies, but that value transpires to be a fraction of the total additional liabilities: Between 2008 and 2010 batches of Line 9/10 metro stations were sold as 30-year concessions, typically to consortia of those companies building the stations, with the money raised by the sale ostensibly used to keep paying the builders to build those stations. The concessionaires levy an annual charge for providing and maintaining their stations – totalling around 250 million euros annually, an anticipated 7.6 billion euros in total. That figure seems infeasibly high, equivalent to the fare revenue of the entire Barcelona metro system. For context, in 2016 (including the first 10 months of passenger service to the airport) Line 9/10 conveyed just 4% of all metro passengers. The exceptional cost of these concessions is partly explained by concessionaires funding their initial purchases through commercial banking – the rates of such loans were inevitably less favourable than the Generalitat might have achieved itself, had it been able to raise the money through the FLA. This difference was accentuated by the political vacuum in the wake of the Catalan independence process: FLA finance reflected the overall stability of Spain, while the commercial loans of the concessionaires reflected the future ability of the Generalitat to pay the concession fees: Not only was the Generalitat less politically stable (and thus more risky) than Spain overall, but its Line 9/10 concessionary payments were somewhat less integral to the institution of the Generalitat, hence more risky, than Spanish bonds to the nation of Spain. Concessionaires consequently found themselves unable to refinance their debts, adding to the overall precariousness of the Line 9/10 finances.

Operator “Ferrocarril Metropolità de Barcelona”, Transports Metropolitans de Barcelona’s (TMB) metro, also carries a significant burden – in so far as it clearly identifies in its accounts, 75 million euros annually for leasing trains and a further 53 million in Line 9/10 “fees”. The lease presumably includes all the 9000 Series trains built for Line 9/10, in spite of only 28 out of 55 trains currently operating there, so presumably only half of the lease cost should be apportioned to Line 9/10, giving a total of 90 million euros annually. As documented in Interurban Buses in Public Competition, TMB‘s budget is managed through ATM, which is funded from roughly equal parts fares revenue and government support, with about half of that government support coming from the Generalitat. Such accountancy primary serves to shift the Generalitat’s past capital budgetary excesses into the current revenue stream, and in the process makes TMB’s metro look far more dependant on government support than it would be if it hadn’t been saddled with Line 9/10. That arrangement surely serves wider political agendas, but as we shall highlight later, TMB metro’s dependency on the Generalitat is broader than just Line 9/10.

Belatedly Ifercat (as the Generalitat de Catalunya) has been reduced to barter, trading land with the Ajuntament de Barcelona (the city government) to raise the money to complete a handful of stations on the Zona Franca branch. Line 9/10 was the final grand project of Jordi Pujol, who dominated Catalan politics through the “Olympic” Golden Age of the 1980s and 90s. However, post-Crisis, the Pujol agenda of grandiose (“pharaonic”) Catalan ambition evolved into a quite different hope of Catalan Independence, and for Pujol’s successors Line 9/10 became a slightly unnerving ghost from the past – albeit one still pending the traditional Spanish political exorcism called the corruption trial. The post-Referendum political hiatus in the Parlament de Catalunya stalled even the fig leaf of a new bid to the European Investment Bank for another 750 million euros to complete the central section of the line. However judging by his subsequent media appearances the holder of that fig leaf, Ricard Font, who is a common thread between many government transport interests within Catalunya, was not idle following the Generalitat’s fall from grace in November 2017. And he was not alone.

Herein lay the shifting sands of post-Independència Catalunya, an administrative void hitherto controlled regionally by the Generalitat, suddenly contestable, perhaps for the first time since the 1970s. While it is convenient to categorise the exercise of power through discrete organs of state, it is common for leading individuals to serve in many organisations. Indeed it is common for such individuals to shift between political, administrative and academic functions throughout their careers, in a way that, for example, the British civil service would not tolerate. It is therefore more instructive to understand the role of these individuals as an extension of Catalan society. Catalunya’s administrative institutions strongly reflect Catalan society, not least because they require their staff to be able to communicate in Catalá – which is not widely spoken outside Catalunya, so (for better or worse) affords substantial protection. At its higher echelons, Catalan society is virtual – where being seen to, to be in control of, these are the rewards – a monetary salary is almost incidental. The longer the Generalitat remained paralysed, the less important its civil service positions became within Catalan society, regardless of whether wages continued to be paid. And thus perhaps without even analysing their motivation, senior individuals within the Generalitat logically sought somewhat similar roles through other institutions. Given the pre-existing tendencies to switch and accumulate roles, their search was perfectly intuitive. That starts to explain why this sequences of essays is subtitled the art of public competition: For what at first looks like a power battle between institutions is far more subtle, far more human – and that in turn makes it harder to analyse and understand from an external perspective, especially an objective one.

Continue reading “Public Competition in Post-Independència Catalunya”

Interurban Buses in Public Competition

Exprés.cat

This essay explores the workings of the art of public competition, in search of the reasons for its conflict with liberalisation. It details the interurban bus “market” serving Barcelona’s hinterland, with reference to passenger usage, historical policy, administrative structure, and comparative costs. Analysis suggests a dualistic form of counter-balancing competition on key routes, regulated by the need to maintain equality between operators – albeit an equality bounded by the operators’ focus, which often masks an inequitable distribution of public funding within public transport overall. A pattern conflated by the tendency to emphasise only short run operating costs, and sometimes rely, almost blindly, on higher tiers of the state for fixed assets.

“Interurban Buses in Public Competition” is the second in a sequence of four essays titled, “The Art of Public Competition“, which together explore the competitive model underlying Spanish public transport. An anthropological analysis of the tension between this internal model and that of globalised economics, reveals the distortion of external finance on the internal workings of the art of public competition. The first essay in the sequence establishes the policy context for the liberalisation of public transport in Spain. The third examines how the art of public competition functions when one of its most important competitors is absent, using the case of post-Independència Catalunya. The final essay ponders the strategic interplay of risk, debt and optimism, using the example of Spain’s high speed railway network.

Exprés.cat

Given its thwarted railway ambition, it would be logical for the Generalitat de Catalunya (the regional government) to become more focused on (scheduled, public) interurban buses – which when combined with autopistas (motorways) can be competitive against railway journey times. The reality is not so simple. The Exprés.cat network was initiated in 2012 as a (peak-only) commuter service intended to make use of a new High Occupancy Vehicle lane on the C-58 autopista, a busy road that links the north side of Barcelona to Sabadell and Terrassa – territory already well served by both Renfe and FGC. Thereafter (Barcelona area routes e5 and later from 2013) Exprés.cat became largely a rebranding exercise (of marketing and vehicles) for pre-existing moderate-to-high frequency interurban bus services, albeit with some marginal improvements to frequencies or hours of operation. So while the Exprés.cat network does include key Renfe Rodalies destinations such as Vic, Mataró and Vilanova i la Geltrú, and covers the Mataró-Granollers-Sabadell corridor where the Generalitat had once hoped to build as a transversal railway, it also serves Igualada, an FGC terminus.

Expres.cat patronage data for 2017 can be be roughly compared to (the most recent) 2016 railway station usage data. FGC categorise journeys by station of origin, while Renfe provide separate totals for boarders and alighters. Renfe data for Rodalies line 3 exhibits significant differences between boarders and alighters – for example, twice as many passengers alight at Vic than board, while further up the line at Puigcerdà, ten times more people get on than off – skews not explained by underlying geography. To mitigate this error, Rodalies boarders and alighters have been summed and halved for purposes of comparison. While the nature of the Expres.cat network means almost all journeys counted will be to or from Barcelona, railway station data includes journeys involving intermediate stations. 34% of all Rodalies boardings (and 34% of all alightings) occur at Barcelona’s central stations, with a broadly similar proportion – a third – recorded by FGC. Assuming journeys between Barcelona’s central stations are negligible (such journeys will tend to use metro or bus), a third of all journeys board in Barcelona and a third alight in Barcelona, leaving a third that do not involve Barcelona at all. Ergo at any non-Barcelona station, half the journeys can be assumed to involve Barcelona. Assuming each of those boardings returns to its origin as a second journey, the total number of journeys between any non-Barcelona station and Barcelona is (conveniently) equal to the total number of boardings at the non-Barcelona station. While inevitably flawed in the detail, these assumptions allow rough comparisons of public transport mode share.

The table below compares Exprés.cat with the train on routes where both compete directly. Together these routes conveyed 6.3 million Exprés journeys in 2017, representing just under half of the Barcelona Exprés network’s ridership. The remainder of the Exprés routes do not match railway services sufficiently closely to warrant comparison (or in the case of Mollet del Vallès only started operation during 2017 and lack representative patronage data).

Annual Passenger Journeys (000s) by Exprés.cat and Train to/from Barcelona
Town Route Exprés FGC Renfe % Exprés Note
Sabadell e1 172 2190 3666 3 Exprés service is peak only.
Terrassa e2 89 3427 2705 1 Exprés service is peak only.
Universitat Autònoma via Cerdanyola del Vallès e3 839 1646 2820 16 FGC only serves Universitat Autònoma.
Igualada e5 872 191 82 Exprés patronage includes other services on the same corridor (see below).
Vilafranca e6 268 878 23
Mataró e11 1596 2378 40
Vic e12 541 736 42
Sant Pere de Ribes, Vilanova i la Geltrú and Sitges e14-6 1950 4391 31 Sant Pere de Ribes is not served by rail.

Igualada patronage includes other services on the same corridor, totalling over a hundred weekday departures in each direction, only about a quarter of which are Exprés services. However even a quarter of the quoted patronage would give Exprés a greater market share than FGC. This skew in favour of the bus is rational:

  • The railway station is on the east side of Igualada, not well sited for much of the town, in contrast to Exprés, which serves both east and west.
  • The Exprés travels to Barcelona in 70 minutes, while FGC takes at least 84 minutes, with broadly comparable frequencies.
  • Fares are identical for both modes (within the ATM system).

Vilafranca’s Exprés service is provided by the same operator, Monbus La Hispano Igualadina. It also has a small journey time advantage over rail, with broadly comparable frequencies in the peaks, but obtains a far lower market share – just 23%. The most obvious difference from Igualada is the location of the terminals – both rail and bus serve the centre of Vilafranca equally well. Indeed, the railway has generally better access to the centre of Barcelona, which for many journeys will offset the extra time spent travelling by train. On both these routes mode choice can primarily be explained by the transport economic logic of time minimisation, where the service associated with the lowest total (door-to-door) journey time tends to obtain the greatest market share.

The competition on the Mataró route is extremely mature – the railway is the oldest in mainland Spain, and the bus has been competing along the autopista since 1970. Journey time, frequency, terminal access and fare are close to identical for both bus and train – a pattern established by the Moventis group after buying Casas in 1996. The Rodalies secures the greater 60% of the market. A similar market share is achieved on the route to Vic, where the railway’s limited (single-track) infrastructure could make it vulnerable to high frequency bus-based competition – but in practice bus and train offer similar frequencies (with similar journey times) during the peak. Vic’s population is a third of Mataró, so neither the bus operator Sagalés, nor the rail operator Renfe, can expect to sustain Mataró-level frequencies from a much smaller base market. Short-run competition might lead one operator to attempt market domination by temporary over-supply of service (a form of competition seen in the early years of British bus deregulation), but with operations guaranteed in the short run (by a public mandate, such as a concession), competition can only occur in the long run. Where key competitive factors (fare, time, terminals) are similar for both competitors, a long run equilibrium emerges where each competitor offers a similar service and achieves a similar market share. Based on the Mataró and Vic routes, that equilibrium is currently slightly skewed towards Renfe, possibly by an intangible or irrational factor (such a social status bias towards rail travel). The equilibrium remains dynamic – for example an improvement by one operator, such as in vehicle quality, must be broadly matched by the other – and thereby competition serves to keep each operator “honest”, to keep their product offer current. As this sequence of essays progresses, it will become clearer that the “product” in this competition is more than just its transport utility, and that in turn makes this model of competition much more political and strategic than this initial economic introduction implies.

The Sabadell and Terrassa routes suggest that Exprés services that are unable to match the offer of the railways, risk achieving no tangible share of the market: Here journey times are similar (30 minutes from Sabadell, 45 from Terrassa), rail frequencies are better (typically every 10 minutes on both of two different railway lines, compared to 20 minute Exprés headways), and the railway has better access to the centre of Barcelona. On a rough calculation, vehicle occupancy on the Terrassa service averages just 7 passengers. Sabadell twice that, but still an underwhelming performance from one of the most highly trafficked interurban corridors in Spain. Cynically, these two routes serve only to justify the existence of the high occupancy vehicle lane they use. Neither route reflects well on its operator, Moventis Sarbus, which is apparently unwilling or unable to compete effectively. But since price and time are impossible to differentiate, they might reasonably retort – how? Well based on observations from other Exprés routes, match the railways by doubling or quadrupling the Exprés services’ frequency, and perhaps improve access to the centre of Barcelona. In theory both Sabadell and Terrassa have sufficient population (roughly 200,000 each, compared to Mataró’s 125,000) to sustain such high frequencies. Thus the question to ask is not how, but, why haven’t they?

In both Sabadell and Terrassa the competition between public transport operators has historically been between the two railways, FGC and Renfe’s Rodalies, as reflected in the patronage data presented above. Sabadell and Barcelona were historically also connected by bus, but only by a route intended to serve intermediate places – the A1’s one hour journey time and half-hourly frequency logically dissuades through passengers. FGC’s Sabadell service is less direct than Renfe’s, although the Generalitat has attempted to mitigate that by the 2016/17 extension of the FGC line within Sabadell, the results of which are not indicated in the (2016) patronage data. Thus to Sabadell and Terrassa, the competitive model outlined above functions as a railway duopoly. A third competitor, in the shape of a competitive Exprés service, adds nothing that the competitive model does not already achieve from its existing duopoly. That’s quite a statement to make, because a bus operator, whose buses typically have lower (full life) costs than trains, and whose infrastructure costs are distributed across many more users (especially private motorists), could compete here on journey time – and thus given a commercial market could challenge the (relative, monetary) inefficiencies of incumbant railway operators. But this market isn’t commercial: All this public transport is at the bequest of, and in substantial part paid for by, the public sector.

The Sabadell and Terrassa Exprés services are anomalies that logically will never be supported sufficiently to attain their (commercial) potential. That these routes were ever created is thus curious. As is the current intention to repeat the concept for Manresa – another strong railway duopoly and another peak-only Exprés service. The development of the Sabadell service may reflect the post-Crisis financial difficulty in completing FGC’s Sabadell extension – perhaps an attempt to try something different. Wider policy logic would seem to be utilitarian, although it can also be interpreted as the need to be seen to: The need to (be seen to) make use of the new High Occupancy Vehicle lane on the C-58 autopista, and the need to (be seen to) incorporate two of the largest cities in Barcelona’s hinterland within the coverage of the Exprés network. The utilitarian defense of transport that often isn’t, will become a recurrent theme of this sequence of essays – a function of an underlying tension between two different ways of societal organisation – of understanding, first touched on in earlier discussion of presence.

Continue reading “Interurban Buses in Public Competition”

The Expectations of Competition

Estació de França

This essay establishes the policy context for the liberalisation of public transport in Spain, with specific reference to the recent history of Barcelona’s railways. The text introduces three difficult policy areas for Spanish public transport competition – local system integration, the balance between nation and communities, and the understated role of presence. It questions both the applicability of super-regulatory structures to a state where power is not absolute, and the use of economic analysis to rationalise transport infrastructure that primarily serves a strategic function, instead suggesting a role for the state’s own form of internal competition, here called the art of public competition.

“The Expectations of Competition” is the first in a sequence of four essays titled, “The Art of Public Competition“, which together explore the competitive model underlying Spanish public transport. An anthropological analysis of the tension between this internal model and that of globalised economics, reveals the distortion of external finance on the internal workings of the art of public competition. The second essay in the sequence explores the workings of the art of public competition using the example of interurban buses around Barcelona. The third examines how the art of public competition functions when one of its most important competitors is absent, using the case of post-Independència Catalunya. The final essay ponders the strategic interplay of risk, debt and optimism, using the example of Spain’s high speed railway network.

Regulating Integration

To integrate transport is surely to promote a human antithesis. Integration implies one optimised model of transport provision akin to a perfectly engineered machine, where all the mechanisms mesh seamlessly. Integration is the thesis of a transport economics for which demand is derived, meaning transport is solely a means to an end. Its rational ideal is to eliminate transport completely, since all such transport activity is economically wasteful. Hence for economists, transport becomes a component of the economy which can be dehumanised without impact on the humans, flattened into one perfect mathematical form that supposedly liberates the wider economy to operate without the inefficiencies of its transport system.

Unfortunately for transport economists, their presumption of the dominance of rationality is too often irrational: Modern behavioural economics is awash with examples of irrational transport decision-making, from the status value of automotive brands, to the role of the daily commute in pacing life. Ergo transport actually encompasses the fluidity of humanity. That fluidity is contemporarily expressed in duality, as a perpetual rebalancing somewhere between one collective perfectly integrated transport system, and the total flexibility of unfettered individual choice. Since neither extreme position can (by our definition of fluidity) be sustained, transport is not to be definitively solved, but to be constantly evolved. And if a perfectly integrated transport system can, logically, only evolve through a process of de-integration, perhaps an ultimate objective of transport integration is misguided?

The underlying pattern goes broader: As transport demands becomes more flexible, the environment is perceived as more complex. To counteract this sense of unknowable complexity, the transport solutions demanded are more stable, where stable is inevitably less flexible. From Personal Rapid Transit to App’-centric goods distribution, technology appears to be skewing transport towards individual choice, and thereby fostering a far more intense competition for physical space than when the issue was just individuals’ cars. Cynically, integrated transport is primarily being promoted not because it can be achieved, but because its promotion simply opposes the prevailing technological tide of individual choice: Such a crude counter-balance reflects a lack of strategy for proactively managing everything from hoverboards to automated flying delivery crates. Proactive management is often at odds with a profession inclined (ironically) to attempt to fix transport systems (in infrastructure and schedules), not to perpetually juggle them. Simply “swimming against the tide” is a pragmatic policy response that may deliver a mathematical balance, but it gradually polarises policy positions toward their extremes. That ultimately makes it very difficult for the polis to find compromises acceptable to all, engendering sudden, dramatic policy changes that half the citizens completely disagree with. Good, living, politics is the ability to accommodate the wills of all the people, not the arbitrary imposition of the will of a majority. Catalunya’s Procés provides ample evidence of how poorly “democratic” structures deal with excessively binary policy positions.

European Union transport policy exemplifies this conflicted balance between the collective and the individual, in promoting transport integration through market competition: For the EU, competition is the agent that will minimise the unwanted economic inefficiencies of the transport system. Yet because active competition requires an element of choice, the transport system cannot be completely integrated. Monopolies, even mere collusion on fares or schedules between commercial enterprises, are typically interpreted as anti-competitive – a pattern exacerbated by the natural tendency of the transport industry toward economies of scale, especially geographical and temporal. Integration requires a degree of regulation, even where transport provision is otherwise highly liberalised.

For example, integrated ticketing between British bus operators (except in London, which was never deregulated) rests on a specific opt-out from European-derived competition legislation, currently regulated by the Competition and Markets Authority (a government agency operating without direct political control). Integrated ticketing is typically delivered through joint companies (often owned by local government and bus operators), that offer multi-operator ticket products at higher fares than those sold by individual operators, so as not to impede commercial competition. In practice the development of integrated ticketing schemes must balance policy aims with commercial aims – and often the administrative complexities of integrated ticketing outweigh the tangible customer demand for it. Of course that formal argument is often underpinned by the long running battles for control of the public transport system – especially in conurbations, where local government typically regards the 1980s privatisation of its local bus operations as an unwelcome imposition by United Kingdom (central) government. UK integrated public transport ticketing may be better understood as a policy battleground in the ongoing conflict for the administrative control of Britain, broadly between centralism and localism – a recurrent theme of the governance of Britain throughout the 20th century.

Regulation is justified in the public interest – for the people the government represent. This role of deus ex machina supposes government an impartial observer, somehow above the fray of the very society that government is constituted by. In practice such a regulator also needs effective regulation, else risks inflating into a form of totalitarianism, especially where that regulator operates outside of the political system. The practical solutions to this dilemma reflect the societies they evolve from. For example, Britain’s mechanised social structure affords clear lines of transactional responsibility – although as the structure becomes more complex power rises inextricably towards the centre, which struggles to process such complexity, even with the numeric quantification of everything. Europe, as exemplified in its competition policies, can operate within pre-defined toolboxes built on economic theory – which theoretically perpetuate without political influence, but are constrained by their inevitably inadequate theory of living society. In contrast, Spain’s traditional “family” (for want of a better term) social model doesn’t scale into a mechanised state, nor is her policymaking inherently predictive. As explored in this sequence of essays, modern Spain’s solution to the need to regulate the regulator is, in effect, to foster a competitive environment between public bodies. This is particularly apparent in the arena of transport. As one of the most important physical manifestation of “the state” in Spain, transport expresses power of greater importance than its utilitarian function might suggest.

Continue reading “The Expectations of Competition”

Why Barcelona has no Uber

Mobile World Taxi

Barcelona is one of the few major European cities where Uber, the mobile phone application-based ride sharing and taxi service, does not operate. Of comparably populous cities only Hamburg is currently Uber-less. Doubly confusing as Barcelona prides itself as host of the world’s largest gathering of the mobile technology industry, the World Mobile Congress. An irony not lost on visiting journalists as they queued at the airport for insufficient taxis.

On the face of it this is classic schizophrenic Barcelona: An Olympic image marketed to the world, which becomes fundamental to the vanity of the city’s population, even when that image brings detriment to that very same population. Vanity is so deeply embedded in Barcelona’s social structure as to render a schizophrenia, not mere conflict or paradox which can at least be acknowledged and rationalised. A recurrent theme, most obvious in the inability of the Ajuntament (city government) to regulate AirBnB rentals to tourists, sold on an exported image of Barcelona, that has the consequence of forcing the actual residents of Barcelona out. The imposters from Silicon Valley are guilty of nothing more than exposing a social hypocrisy. And exploiting it ruthlessly, secure in the knowledge that the disaffected cannot turn on what they cannot acknowledge, hence only on each other. A heinous crime that cannot be fairly judged because both actions exemplify their own moral good: Silicon Valley is optimistically building a better tomorrow, its Disneyland reality disguising anything that isn’t. Much as Barcelona’s hopefulness has been wedded to becoming a global city, its schizophrenia its defense against the social threats inherent in globalisation.

Uber’s official response, which bears the same title as this article, predictably eschews all that political philosophy, opting instead to reinforce some familiar Anglo-American stereotypes about Spanish regulation, under-employment, de-emphasis on utility, and general lack of free market liberalism. Indubitable, but ostensibly fails to explain why Barcelona has no Uber when Español-centric competitor Cabify is present in the city. Which is a shame, because Uber España reveals a lot about how chaotically Spanish policymakers are managing this relatively new exposure to the external world. And for a State premised on stability, the accusation of chaos is high treason indeed. But any inquisition will have to join the queue, right behind a notoriously aggressive startup and some rather volatile Taxistas. What is it about the taxi business that fosters so much hostility?

This article describes the tech disruption of the taxi business, explores why Uber’s initial incursion into Barcelona failed, analyses the limits on VTC licensing, and finally makes time for change. Continue reading “Why Barcelona has no Uber”