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Hub AI
Public service obligation AI simulator
(@Public service obligation_simulator)
Hub AI
Public service obligation AI simulator
(@Public service obligation_simulator)
Public service obligation
In the context of European Union law, a public service obligation or PSO is an obligation imposed on an organisation by legislation or contract to provide a service of general interest within EU territories. PSOs may operate in any field of public service, but postal services, social services, energy, transport and banking are specific sectors where the concept is relevant.
In EU transport law, a PSO is an arrangement by which a governing body or other authority offers subsidies in an auction, whereby the winning company will be obliged to operate a specified service of public transport for a specified period of time in return for the subsidy. This usually leads to the winning bidder having a monopoly on the route, as competing services would not be viable without subsidies. PSOs are aimed at routes which are unprofitable in a free market, but where there is a socially desirable advantage to transport being available.
The use of PSO can be applied to many modes of transport, including air, sea, road or rail. In many cases, the introduction of PSO has been a way to privatize government-owned transport. Infrastructure is often separated from operations, and may be owned by a governing body or a third party. The authority may also maintain the ownership of the vehicles, such as ferries or rolling stock.[citation needed]
Traditionally, public transport has been operated by a company wholly owned by the state with a monopoly, like a national railway company. Alternatively, private companies were granted privileges (with or without subsidies) granting them a monopoly. In recent years, many markets have been deregulated, especially in Europe, by paying the lowest bidding operator to carry out services.[citation needed]
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 responsible for some form of transport in an area. To put sérvices out to tender, an authority must have an interest in subsidizing the transport. It must also have the authority to prevent other interests from operating competing services on parts of or all of the system.
The auctioneer will specify a number of terms of the service, such as frequency, size of vehicle, timing of services, the maximum permitted fare, and/or other specifications related to service and quality. The auctioneer can specify either a net or gross contract. In the latter the operator bids for the full operating costs, and all revenue goes to the authority; with net contracts the operator will be granted all revenue, and will bid only for the difference between fare revenue and that needed to make the desired profit. The use of gross contracts reduces the risk of the operator since they do not need to estimate the ridership and will normally result in lower bids since there is a lower risk premium in each bid. This option also makes it easier to create free transfer between operators and modes.
Net contracts give the operators an incentive to increase ridership and reduce risk to the auctioneer. Gross contracts tend to have higher administrative costs for the authority administrating the fares. Urban public transport with transit authorities is most commonly operated with gross contracts, while airlines and ferry routes are typically operated on net contracts.
Typical uses of PSO include regional airline services in Northern Norway or Ireland, where the airlines serve low-population areas not profitable for the carriers without subsidies. Rail services can be unprofitable even on major routes, and government subsidies are sometimes offered through PSO. This has been very popular in Germany. Most cities subsidize their public transport, and in places where the transport is provided by private companies, that may be awarded through PSO. Other common PSO services are ferries, such as the routes to Gotland in Sweden, or car ferries along Norway's road network. Ferry routes serving outlying islands in Hong Kong are also subsidised, as a result of rising oil price and therefore the cost of operation.
Public service obligation
In the context of European Union law, a public service obligation or PSO is an obligation imposed on an organisation by legislation or contract to provide a service of general interest within EU territories. PSOs may operate in any field of public service, but postal services, social services, energy, transport and banking are specific sectors where the concept is relevant.
In EU transport law, a PSO is an arrangement by which a governing body or other authority offers subsidies in an auction, whereby the winning company will be obliged to operate a specified service of public transport for a specified period of time in return for the subsidy. This usually leads to the winning bidder having a monopoly on the route, as competing services would not be viable without subsidies. PSOs are aimed at routes which are unprofitable in a free market, but where there is a socially desirable advantage to transport being available.
The use of PSO can be applied to many modes of transport, including air, sea, road or rail. In many cases, the introduction of PSO has been a way to privatize government-owned transport. Infrastructure is often separated from operations, and may be owned by a governing body or a third party. The authority may also maintain the ownership of the vehicles, such as ferries or rolling stock.[citation needed]
Traditionally, public transport has been operated by a company wholly owned by the state with a monopoly, like a national railway company. Alternatively, private companies were granted privileges (with or without subsidies) granting them a monopoly. In recent years, many markets have been deregulated, especially in Europe, by paying the lowest bidding operator to carry out services.[citation needed]
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 responsible for some form of transport in an area. To put sérvices out to tender, an authority must have an interest in subsidizing the transport. It must also have the authority to prevent other interests from operating competing services on parts of or all of the system.
The auctioneer will specify a number of terms of the service, such as frequency, size of vehicle, timing of services, the maximum permitted fare, and/or other specifications related to service and quality. The auctioneer can specify either a net or gross contract. In the latter the operator bids for the full operating costs, and all revenue goes to the authority; with net contracts the operator will be granted all revenue, and will bid only for the difference between fare revenue and that needed to make the desired profit. The use of gross contracts reduces the risk of the operator since they do not need to estimate the ridership and will normally result in lower bids since there is a lower risk premium in each bid. This option also makes it easier to create free transfer between operators and modes.
Net contracts give the operators an incentive to increase ridership and reduce risk to the auctioneer. Gross contracts tend to have higher administrative costs for the authority administrating the fares. Urban public transport with transit authorities is most commonly operated with gross contracts, while airlines and ferry routes are typically operated on net contracts.
Typical uses of PSO include regional airline services in Northern Norway or Ireland, where the airlines serve low-population areas not profitable for the carriers without subsidies. Rail services can be unprofitable even on major routes, and government subsidies are sometimes offered through PSO. This has been very popular in Germany. Most cities subsidize their public transport, and in places where the transport is provided by private companies, that may be awarded through PSO. Other common PSO services are ferries, such as the routes to Gotland in Sweden, or car ferries along Norway's road network. Ferry routes serving outlying islands in Hong Kong are also subsidised, as a result of rising oil price and therefore the cost of operation.