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4. Concluding Remarks

Introduction

4.1 As demonstrated by the case summaries, the services offered in each of the EU countries vary widely - as do the organisational structures put in place by government. Given the different histories of support to ferry services, and the relative importance of ferry transport across the different countries, it is taking some considerable time for the structures of maritime cabotage regulation in each country to converge under EU law.

4.2 It is difficult, therefore, to provide a completely systematic appraisal of each of the aspects of the PSO/ PSC structure. Instead, we can identify a number of key issues around which the present operating practices have been developed.

4.3 These we define as:

• The definition of PSO services, and the licensing of operators on the routes
• The definition of PSC services

4.4 We discuss each of the aspects in the following sections.

The Definition of Lifeline Services

4.5 The concept of lifeline services exists in each of the countries we have investigated (where there are domestic ferry operations). It is recognised that island communities depend on the ferry links connecting them to the mainland - and that it is within the proper locus of the government to intervene to ensure that these services are offered with an adequate level of service (with an adequate frequency across the year), at a fair price, and with an adequate level of quality. In the case of Sweden and Denmark, the ferry services appear to be broadly regarded in the same light as the highway network itself.

The Introduction of PSOs or Minimum Service Requirements

4.6 Having established the concept of lifeline services, governments can impose minimum services requirements and rules on certain routes, applicable to all operators that wish to operate on the designated "public service" routes. Governments can then regulate market entry, as well as the performance of those operating services on those routes.

4.7 In many countries, ferry companies seeking to operate on routes covered (formally or informally) by PSOs are required to register their interest - and, in a number of cases, indicate the services that they propose to offer, and the fares that they will charge. Generally, there will be no restriction on ferry companies registering services - so long, of course, as the companies are properly registered within the EU and the fleets, and crews etc. satisfy all relevant safety requirements. However, in a number of cases, any company seeking to operation on a PSO service is required to undertake that they will supply a service above a specified frequency and with access all year round.

4.8 In Greece they also require that such operators offer guarantees, and indicate how back-up services will be provided during scheduled maintenance periods.

4.9 Through PSOs, governments can seek to ensure that ferry companies schedule year-round operations, and secure services that would not always be commercially optimal. Specifically, such arrangements prevent third party operators from 'cherry-picking' the profitable peak season services.

Introduction of Differential Pricing
4.10 As part of the recognition of minimum requirements on certain routes and services, it is a common practice for governments not only to set the schedule price of such ferry services, but also to require operators to provide discounted tickets for island residents. In most cases, such a concession is reimbursed to the operator by the government.

4.11 The following table sets out the position on differential pricing between island residents and non-residents in each of the EU countries which have been surveyed.

Table 4.1 Differential Pricing Policies in Surveyed Countries

4.12 We have noted that the government in Estonia believes that geographically based concession is unacceptable under EU regulations. Under Article 87.2 (a) ¹ of Commission Decision of 22 June 1987 ( OJEC 87/359/ EEC), direct aid reserved to certain social categories, including island residents, is allowed.

4.13 The legislation, however, prohibits any discrimination with respect to the nationality of the residents, and the transport aid granted to residents of an island must be open to every citizen of the European Union residing on this island, not only nationals.

The Introduction of PSCs

4.14 We have noted that in a number of countries where minimum service requirements are imposed on lifeline services, the national, regional or local government makes a significant financial contribution to the ferry services through the support of a local concessionary fare scheme. However, with many routes and services the commercial market does not provide adequate services and the government is forced to intervene further.

4.15 The following table summarises the situation regarding lifeline services, PSOs and PSCs in the surveyed countries.

Table 4.2 Lifeline Services Arrangements in Surveyed Countries

4.16 The general position across Europe is diverse. There remains a significant number of services that are operated either directly by government or by wholly government owned operators. Currently, the Baltic governments, which have historically provided domestic ferry services, are drawing up formal tendering processes, allowing potential operators to compete against each other for the right to operate subsidised services.

Tendering of Contracts

4.17 Again, amongst countries that have established public service contracts, significant differences exist in terms of:

• How the tendered services are defined; and
• The basis of the contract.

4.18 The definition of tendered or contracted services often depends on past experiences, which have been very divergent. Due to the history behind the present patterns of operation, very different definitions exist for the island ferry services offered. Some governments are becoming aware that some currently subsidised services should no longer be subsidised.

4.19 Historically, under negotiation and now through tendering, agreements have been reached as to what services should be operated, and contracts drawn up for the commercial operation of these services. It does not yet seem to be the case in all countries that any formal process is put in place to define the required service or service level, in order to identify which part of the service should be provided without subsidy and which part with subsidy in order to develop a proper tender for these services.

4.20 In Greece, the government is required to identify which services are to be provided commercially and which will not at the beginning of each year. Tendered services are defined as those that are not applied for by commercial operators in the free market. Lifeline services are determined similarly in Schleswig Holstein, Germany.

4.21 Although this mirrors very closely the position with the tendering of bus services in the UK, we understand that the Commission believes it creates potential for cross-subsidy and limits the opportunities for potential new entrants. However, it does overcome the problems with the identification of non-commercial and commercial schemes.

Table 4.3 Tendering Status of Surveyed Countries

Allocation of Risks under Contract

4.22 A central issue in the development of subsidised contracts for tendered services across all forms of transport concerns the treatment of risks and responsibilities.

4.23 We will discuss and analyse these in further detail in Deliverable Two.

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