Intercity bus deregulation in Germany – Intramodal and intermodal effects after two years

At the THREDBO 12 Durban Conference in 2011, in a paper entitled “The Case for Intercity Bus Deregulation in Germany” (Knorr, Eisenkopf, Arndt and Burgdorf, 2011), we presented our ex ante assessment of the potential effects of intercity bus deregulation in Germany. This deregulation finally took effect January 1st, 2013. Our analysis led us to expect that substantial economic benefits were likely to accrue to the travelling public and society as a whole. In particular, we assumed that (potential) passengers – especially those from lower income brackets – would stand to gain massively from lower prices and a larger variety of travel options due to overlapping competing networks, at least on trunk routes (of which substantially more exist in Germany than in the UK, the USA or Sweden, given the country's polycentric economic geography, its high population density and very even spatial distribution of the population). Further, we expected that these economic benefits would not be limited to intercity bus travellers, as we also held that the imminent liberalization should force Deutsche Bahn AG to lower prices for their rail services and to improve the quality of its competing offerings. Last but not least, we stressed the crucial role of competition policy for these economic benefits to fully materialize. Our main concern then was that incumbent Deutsche Bahn AG might attempt to abuse the massive pre-liberalization dominance it had held on the regulated intercity bus market, in combination with its nearly intact de facto monopoly on long-distance railroad services, to stifle the genesis of this new market in its early stages with the aim to undermine the rise of potent intra- and intermodal competitors. In this paper for THREDBO 14, we contrast our 2011 projections with the observable intra- and intermodal effects in the two years since the German intercity bus market has been liberalized. In addition, we provide an overview of the corporate strategies of the new intercity bus operators and the strategic adjustments implemented by Deutsche Bahn AG.