Italy taught Europe about rail competition. Now it is blocking it on Intercity services

Italy risks falling behind the competition. The very country that set the standard in Europe with the liberalisation of high-speed rail is now putting the brakes on opening up the Intercity market. On the Intercity issue, the government has once again slowed down, just as the National Recovery and Resilience Plan (PNRR) was calling for the market to be opened up. The crux of the matter concerns the forthcoming award of the national service contract: the commitment made to Brussels was to move away from the idea of a single large national tender, instead dividing the service into several lots. The aim is simple: to allow other operators, whether Italian or foreign, to compete on at least part of the network, thereby preventing the scale of the tender from automatically favouring the incumbent monopolist, Trenitalia. The changes discussed in recent weeks, however, risk further delaying this transition, as well as causing the country to lose part of the final instalment of the NRRP.

It is worth noting that this is by no means a minor service. Intercity services operate over 120 journeys a day, cover around 25 million train-kilometres each year and, according to the Ministry of Infrastructure, by 2025 they had already exceeded pre-pandemic demand levels. These are the services that connect dozens of towns not served by high-speed rail and, after regional services, represent one of the main national rail networks.

The point, however, is not just the mess in Italy. It is that, when rail competition is allowed to operate freely, the results are clear to see. Italy already knows this from its high-speed rail sector, where, since 2012, the arrival of Italo has forced Trenitalia to compete on prices, frequency and service quality. Economic studies on the Italian case show a reduction in fares, an increase in services and new investment in fleet renewal. Competition has even had an impact on air travel, prompting airlines to reduce prices on routes open to competition. It is no coincidence that the Italian model has become a European benchmark and is now being exported: Trenitalia already operates in France and Spain, whilst Italo has announced its entry into the German market with an investment of 3.6 billion euros.

On Intercity services, the mechanism is different. Here, it is not a question of having two companies operate on the same route, but of putting operators in competition with one another during the tender process to secure the public service contract. The operator offering the best terms wins the contract. It is precisely for this reason that dividing the service into several lots increases the number of potential competitors and makes the competition more credible.

The evidence gathered across Europe paints a consistent picture. In the Czech Republic, the entry of RegioJet and Leo Express onto the Prague–Ostrava route triggered a price war, with ticket prices falling by up to 46 per cent in the initial phase, alongside an increase in service frequencies and enhanced on-board services. Once the most aggressive phase of the competition had ended, the main benefit remained a greater number of trains on offer and a wider choice for passengers. In Sweden, when MTR began competing with SJ on the Stockholm–Gothenburg route, the incumbent operator’s average fare fell by around 13 per cent. In Germany, however, where FlixTrain competes with Deutsche Bahn on only a few routes, the effects have been more modest. The lesson is quite clear: competition does not solve the network’s problems nor does it work miracles when it comes to punctuality, but it tends to increase supply, improve service quality and reduce prices.

It is therefore surprising that Italy, of all countries – the very nation that was the first in Europe to demonstrate the benefits of railway liberalisation – continues to hold back when it comes to applying the same principle to Intercity services. For years, successive governments have been passing increasingly cautious competition laws. The risk is that the country that taught Europe how to open up the railway market will end up being one of the last to have the courage to see it through to the end, even on its own doorstep.