Franchising and refranchising of passenger rail services in Britain

The franchising of passenger rail services in Great Britain that occurred in 1996-1997 and the refranchising of these services are under review. The initial impact of franchising has been broadly beneficial and demand is rising, whereas the costs to government are declining. However, important issues relating to service performance, customer satisfaction, and investment in rolling stock have emerged. Refranchising is designed to address these problems and is under way. The franchising and the refranchising processes appear to have been successful in stimulating competition for the passenger rail market, but contract design issues concerning franchise length, size, and structure have not yet been satisfactorily resolved. Furthermore, there are important issues regarding the extent to which service quality is contractible and verifiable. There are also dangers of adverse ratchet effects and regulatory capture occurring. Some lessons for other countries are highlighted.