The Austrian Federal Railways (ÖBB) now offers a complete door-to-door parcel service, combined with other logistical services ("ExpressCargo"). In doing so, they have intensified competition with private haulage contractors. By contrast, the Swiss Federal Railways (SBB) and the German Railway (DB) abandoned this line of business at the end of 1996 and the end of 1997, respectively, owing to insufficient earnings. DB and SBB now concentrate their activities on the core sectors of rail transport and have withdrawn from services which are also offered on competitive markets. The ÖBB, on the other hand, pursue a strategy of extending their operations with the goal of raising the utilization of existing capacities. With regard to the parcel service, the government payments to the ÖBB might distort competition between the ÖBB's "ExpressCargo" and the general rail shipment provided by private haulage contractors. In 1997, the federal government paid ATS 16.4 billion to the ÖBB to reimburse the ÖBB for the costs of operating the railtrack and of expanding the railroad infrastructure as well as for the costs of providing public services. These payments are covered by the general social consensus in Austria and are intended to help the "environmentally friendly" railways compete with road transportation. The environment argument is, however, irrelevant for competition between "ExpressCargo" and general rail shipment provided by haulage contractors because these services do not differ in their impact on the environment. Market distortions my also result from the enterprise structure of the ÖBB. The ÖBB are a vertically integrated firm, with activities ranging from the operation of the infrastructure to rail transport, to logistic services. The ÖBB, moreover, have the monopoly of "environmentally friendly" rail transport. A vertically integrated firm is likely to support strategically important lines of activity if this support is necessary for strengthening its overall market position or maximizing profits. Such cross subsidies are, however, problematic for the entire economy, if such subsidies are drawn from monopoly rents and from business activities subsidized by the government. In this particular case, the possibility should be ruled out that the competitive position of "ExpressCargo" vis-à-vis the competing haulage contractors is strengthened by cross subsidies and that the ÖBB render access to rail services more difficult to competing rail parcel services. Monitoring of the infrastructure balance sheets and of the use of funds for public services by public accountants and the Ministry for Science and Transportation may reveal undesirable cross subsidies and market distortions ex post. The establishment of independent enterprises for the business segments of rail infrastructure, transportation, and logistic would, however, rule out market distortions ex ante.