Public service obligation

In transport, public service obligation or PSO is where a governing body or other authority offers an auction for subsidies and permit the winning company a monopoly to operate a specified service for a specified period of time. This is done in cases where there is not enough revenue for routes to be profitable in a free market, but there is a socially desirable advantage in this transport being available.

Traditionally, public transport has been operated through a company wholly owned by the state with monopoly, like a national railway company. In later years this market has been deregulated, especially in Europe, paying the lowest bidding operator to carry out the traffic.

pecification

Normally the auctioneer will specify a number of terms of the service, such as frequency, size of vehicle, timing of service, the maximum permitted fare paid by some or all the available seats and/or other specifications related to service and quality. The use of PSO can be applied to many mode of transport, including air, sea, road or rail. In many cases the introduction of PSO has been a way to privatize former government owned transport. The infrastructure is often separated from the operation, and may be owned by the governing body or by a third party. The authority may also maintain the ownership of the vehicles, such as ferries or rolling stock.

Typical uses of PSO include Regional airline services in districts of for instance in Northern Norway or Ireland. Rail services can be unprofitable even on major routes, and government subsidies are sometimes offered through PSO on unprofitable routes, for instance this has been very popular in Germany. Most cities subsidize their public transport, and in places where the transport is provided by private companies this may be awarded through PSO. Other common PSO services are ferries, such as the routes to Gotland in Sweden.

The authority issuing the auction may be a ministry of transport, county, province, state, municipality or other regional or local authority, or it can be a transit authority or other ad hoc organization responisble for some state of transport in an area. To be the auctioning part the authority must have some vested interest in subsidizing the transport in addition to the authority to ban other interests from operating competing services on parts or all of the system.

European Union

In the European Union, route PSOs are governed by Council Regulation (EEC) No 2408/92. They must be offered for tender in the Official Journal of the European Union and be open to any transport operator registered in an EU member state. There are limitations in the number of passengers which can be carried where the route can remain eligible for PSO. The winning tenderer usually receives a monopoly on the route, but may have to conform to one or more conditions of service, such as the type and size of vehicle, the timing of services, the maximum fare paid for a portion or all of the seats offered, membership of a common reservation system, quality of service measured by a maximum percentage of cancelled services, etc.

Examples of air transport PSOs currently in operation in Europe are routes from Dublin to Knock, Galway, Kerry, Sligo, Donegal and City of Derry, routes between the Italian mainland and Sardinia, routes between the French mainland and Corsica, certain domestic routes within Norway and Sweden, and routes to the Scottish Highlands and Islands.

Among ferry routes supported through PSOs are those to Gotland in Sweden.

International routes are usually not supported by PSO. This is because of a political principle that people should pay for international travel themselves, not through tax money. This is especially evident in Scandinavia where there is very little air traffic between them other than through the capitals, where connections are commercially profitable.

External links

* [http://europa.eu.int/eur-lex/lex/LexUriServ/LexUriServ.do?uri=OJ:C:2005:225:0015:0016:EN:PDF Example of PSO Tender Notice in the EU Official Journal]