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Abridged version
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Reference no. HKS1533.3
Authors: T Gomez-Ibanez
Published by: Harvard Kennedy School
Published in: 1998

Abstract

This case describes the first four years of John Swift''s tenure as Britain''s Rail Regulator and the issues he faced in the fall of 1997. The post of Rail Regulator had been created by the Railway Act of 1993, as part of a plan to break up and privatize the national railway, British Rail, into approximately 70 companies; these included one infrastructure company, 25 passenger train operating companies (TOCs), seven freight TOCs, and over a dozen rolling stock and maintenance companies. The Regulator''s primary job was to review the access charges and agreements between the monopoly infrastructure company, Railtrack, and the TOCs. In the fall of 1997, the Regulator was trying to get Railtrack to live up to some investment promises that it had made during its first access charge review and was preparing for the next access charge review. In addition, the Labor Party had won control of Parliament in the May 1997 elections, ending 18 consecutive years of Conservative Party rule, and the Regulator was trying to establish a working relationship with the new Labor government. The case is intended to support a discussion of the analytical challenges and political pressures facing a regulator of a newly privatized industry. The instructor may focus the class discussion on the difficulties that the regulator faces in determining the appropriate access charges, including strategies for gathering the information he needs. Alternatively, the instructor can focus on the extent to which the regulator is insulated from politics in practice, and what his political strategy should be. The case can also be used to discuss the practical difficulties of vertically unbundling industries, particularly if students have been exposed to cases on other vertically unbundled industries, such as electricity or telephone companies, which they can compare with railroads. Distributed with permission of the Economic Development Institute of the World Bank.

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Abstract

This case describes the first four years of John Swift''s tenure as Britain''s Rail Regulator and the issues he faced in the fall of 1997. The post of Rail Regulator had been created by the Railway Act of 1993, as part of a plan to break up and privatize the national railway, British Rail, into approximately 70 companies; these included one infrastructure company, 25 passenger train operating companies (TOCs), seven freight TOCs, and over a dozen rolling stock and maintenance companies. The Regulator''s primary job was to review the access charges and agreements between the monopoly infrastructure company, Railtrack, and the TOCs. In the fall of 1997, the Regulator was trying to get Railtrack to live up to some investment promises that it had made during its first access charge review and was preparing for the next access charge review. In addition, the Labor Party had won control of Parliament in the May 1997 elections, ending 18 consecutive years of Conservative Party rule, and the Regulator was trying to establish a working relationship with the new Labor government. The case is intended to support a discussion of the analytical challenges and political pressures facing a regulator of a newly privatized industry. The instructor may focus the class discussion on the difficulties that the regulator faces in determining the appropriate access charges, including strategies for gathering the information he needs. Alternatively, the instructor can focus on the extent to which the regulator is insulated from politics in practice, and what his political strategy should be. The case can also be used to discuss the practical difficulties of vertically unbundling industries, particularly if students have been exposed to cases on other vertically unbundled industries, such as electricity or telephone companies, which they can compare with railroads. Distributed with permission of the Economic Development Institute of the World Bank.

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