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Opening and Digitalizing the Finnish Logistics Market – Transport Code

The Government of Finland has in late 2016 proposed to enact a new Transport Code, an ambitious plan to round up and overhaul various pieces of legislation covering passenger transport from taxis to public transportation as well as parcel and cargo logistics on the roads. The first phase is planned to enter into force after a transition period on 1 July 2018. In a second phase to follow, the new Transport Code is planned to be complemented with provisions regarding air, sea and rail transport.

At the crux of the initiative is the digitalization and opening of transport market data. Incumbents as well as new entrants will be obliged to offer their data via open interfaces in an interoperable way for free use. In the case of passenger transport, the data would have to contain, at minimum, data on routes, stops, timetables, prices, availability and accessibility. Also computerized access to ticket sales and payment system interfaces is mandated. In the future, the scope of these requirements could be flexibly extended to other data as well, such as real-time data on the movement of the transport vehicle on its route.

The second important aspect of the new Transport Code is the removal or reduction of silos between different markets. While the current legislation has not specifically prevented operators from engaging in e.g. both parcel and passenger logistics, differing requirements under separate regulatory regimes have made it unnecessarily difficult or even prohibitive in practice. The new Transport Code would harmonize the requirements for transport service providers.

The third important aspect of the new Transport Code is the simplification and easing of the permit requirements for operating on these markets. For example, the taxi permit system, which limits the amount of permits issued, would be abolished.

Transport is an area where society – individuals, corporates and public entities – invest a lot in hardware and infrastructure, while the utilization rate of many vehicles, and most roads, remains very low. For example, cars held by individuals are used less than 5 % of the time. This is an area ripe for a potentially huge increase in efficiency as a result of a strong flow of data between operators, intermediaries and users enabling digital services, removal of the silos and healthy competition of both new entrants and existing players. The new Transport Code enables Mobility as a Service (MaaS) and digitalized parcel logistics, which could create considerable opportunities for businesses and the society at large.

Sharing economy would also be boosted, as would Uber-like services. Currently Uber, the platform, is considered legal, but driving requires a taxi license. As taxi licenses are not amply available and not acquired by Uber drivers, the drivers have been tracked down by the police and proactive taxi drivers, and fined by courts. With the new Transport Code, almost anyone could get a license for passenger transport, and parcel transport with vehicles below 3,500 kg would be subject to registration only.

The Transport Code proposal goes in partial synchrony with the new amendments to the Postal Act, further enhancing the possibility for competition in the letter and parcel market. For example, under the new Postal Act, a company providing postal services will be obliged to offer up-to-date data on postal delivery addresses at exit cost. This will further enhance the efficiency of e.g. parcel deliveries and enable different value added services. The data could be used by platforms (Uber style) or by market entrants to create totally new services. However, this will first require the current monopoly operator to apply the new amendments on reasonable terms. It can be envisaged that the operators in the market could create a structure similar to that already in use between telecom operators for sharing subscriber contact details for directory use.

At the moment, the Government Proposal for the Transport Code is under the scrutiny of the Finnish Parliament, and it will be interesting to see what form the ambitious plan will take in the end. One of the three coalition partners, The Finns Party, has been unsympathetic to liberalizing the taxi permit system and the described proposal is supposed to reflect an agreement of the coalition members. Due to the agreement the taxi system would still be based on permits, although the amount of permits is not limited and the requirements for the permit are quite relaxed. Further, early 2017 saw the Minister of Transport and Communications, Anne Berner, stumble slightly after the coalition government openly scuffled over a related but more tentative Ministry report on the long term development of transport infrastructure. However, the Transport Code is labelled as one of the top projects of the Government, so its enactment is to be expected and normally subject only to minor modifications and adjustments.