The price of escaping Norfolk

I recently made an interesting discovery about ticket prices for trains in the UK. As I live in the middle of Norfolk I am in the fortunate position to have a choice between two train operators when travelling down to London. First Capital Connect (FCC) services the King’s Lynn – King’s Cross line, and National Express East Anglia (NXEA) covers the Norwich – Liverpool Street line. For some reason I always preferred the former one as it is quieter and seems to be more punctual (although I found later that on record NXEA is more punctual than FCC and in 2010 only FCC finished behind NXEA in terms of passenger satisfaction). Anyhow, it was not until a few weeks ago that I actually compared the prices of the two services – schoolboy error I know – but I did not think that there was much room for price variation in the presence of regulation and pervasive subsidies.

For illustration here are a few of the prices that I found using www.nationalrail.co.uk. To allow for a wider comparison, similar length routes (between 1h45m and 2h) supplied by First Great Western – FGW between Bristol and London, and East Midlands Trains – EMT between Nottingham and London are also given):

Price of tickets to London (in GBP)

Price of tickets to London (in GBP)

The advance single tickets are normally the cheapest option in the UK, but they are only valid on the train it was bought for, therefore it mostly appeals to flexible passengers (such as students) with huge faith in the punctuality of all other services. Return tickets on the other hand give passengers more flexibility and choice over times and dates.

The price difference seems large enough to make one suspicious as these journeys are approximately the same length. Then I thought that this is surely to do with demand, but I had to realise that commuters, who probably provide the main source of demand for these train journey, are just as frequent between Norwich and London as between Cambridge (which is on the King’s Lynn line) and London.

And then I finally found it, courtesy of the Office of Rail Regulation freely accessible database, and reports from www.passengerfocus.org.uk:

Usage and infrastructure

NXEA operates an infrastructure that is around twice as large as that of FCC (in terms of length of routes and number of stations), whilst only having about 20 percent more passengers. Both companies supply one crucially important and busy route (Norwich – London and Cambridge – London respectively), but NXEA covers much more in terms of underused rural lines. Despite receiving more than three times as much in terms of state subsidies, the magnitude of cross-subsidies from the busy routes to under-used routes is much larger for NXEA, which explains the price difference.

Based on this extremely crude analysis, it appears that competition seems very limited in much of the UK (most people in Norfolk would not consider the King’s Lynn – London and the Norwich – London lines as substitutes), and even where alternatives are less scarce than in Norfolk (such as the Midlands), competition still does not seem to have much effect on the prices, which are primarily determined by components of fixed costs such as the size of the infrastructure.

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