Cross subsidies and integration versus sectorisation

[mikeg]

Following on from the discussion in the post about fare hikes, what do you think is better, financial separation of intercity and local services, or cross-subsidy of local services by intercity services?
Also is it better if local and intercity franchises are kept separate (effective cross subsidy can still be attained using franchise premium payments) or should they be combined?
Edit: Does this belong in this section or the General section? I'm not sure now.

 

[shinkansen1966]

If you want a national rail network, accept that some bits make money and others do not. A national rail network allows passengers to make national journeys. From Inverness to Ingastone and from Bristol to Barmouth.

At a local level, there is scope for local authorities setting service levels and then funding them as necessary. Funds for these service in the first instance, should come from intercity services, which are generally profitable. Government, via a national rail company, can then direct investment in national infrastructure like high speed lines, electrification, upgrades, bigger stations. In turn the national rail comany can offer national products like railcards, a one stop web site and ticketing for all.

I quite the German model. You have (profitable ?) intercity products providing a national service. In turn these are fed by local services, determind by, and also financed by the areas in which they operate.

 

[WatcherZero]

You cant assume that if you give an operator profitable and unprofitable route combinations they will look after the unprofitable ones just as well. At the end of the day their out to make money and know which part of their network makes it, all it does is make it harder for the taxpayer to see how much subsidy they really need, ordering equipment and resources as an expense for the subsidised routes then it mysteriously appearing on the profitable ones several months later.

Seperation has its merits, an operator with pure profitable routes has all the incentive to invest while those with loss making are incetivised to make the most efficent use possible of their resources to supplement the subsidy (note for this to work their must be incentives to make a sucess of a line not just run it for a set subsidy, e.g. if they get 10% more revenue they only lose 3% of their subsidy, diminishing subsidy, but where at every stage its more profitable to be a success).