The economic regulation of French highways: Just how private did they become?

The French highway system is mainly managed by franchises and financed by tolls. It underwent major changes from 2000 onwards. The most obvious change was the privatization of the companies holding the franchises. Nevertheless, the most important was the transposition of a European directive that led the French government to open the competition for new franchised projects. This resulted in a new form of economic regulation of toll highways involving various economic tools. Indeed, economic regulation in this case implies the coordinated use by public authorities of five fundamental instruments of infrastructure policy: –the organization of the market for franchises thus switched from the almost monopolistic management of highways by public regional companies to systematic competition between candidates for the franchises; –the financing of the extensions of the network previously ensured by these regional companies is now ensured by the private franchise selected with, if necessary, an extension of the term of the franchise and a share financed by subsidy; –the pricing imposed by the new franchises places greater demands on users, reducing the need for subsidies; –the evaluation methods that placed a premium on socioeconomic profitability give greater importance to financial profitability; and –lastly, the choice of investments was no longer that of decreasing socioeconomic internal rate of return but that of value for money, with a progressive decrease of the Net Present Value/subsidy ratio. This article proposes a presentation of these changes followed by a theoretical analysis of the new mechanisms of economic regulation, involving on the one hand funding and tolls, and on the other the evaluation criteria applied and the choice of investments. Finally, it will highlight that in spite of the growing role of private finance, the new economic regulation of these infrastructures finally remains an affair subject to government decision.