Rail commuter traffic in Germany has undergone substantial institutional changes since the railway reform of 1994 has come into effect. Short-distance rail passenger transport has been "regionalized". From 1996 onwards, regional authorities— either on the Länder-layer or even below on the county-layer— bear the responsibility for organizing rail commuter traffic and for ordering the provision of passenger transport services from rail traffic suppliers. The supplier's part is not necessarily played by the formally privatized successor company of the former public Federal Railways; equally, regional railway companies or even newly established rail service companies can provide rail commuter Services if being commisioned and paid for by the regional rail authority. The financial burden for these services is to a substantial part borne by the federal layer, whereby payments have been integrated into the public vertical financial transfer system. The new institutional and organizational structure of rail commuter traffic has given rise to concern and disagree on the one hand, culminating in the worry that it would speed up the railways' retreal from rural passenger services and would lead to a concentration of services to densely populated agglomerations. On the other hand, the new framework has been welcomed as a tool to enhance efficiency in short distance rail traffic having been chronicly in financial deficit in the past. The first part of the paper confronts and assesses arguments in favour and against both the spatial concentration and the efficiency hypotheses from the perspective of transport economics, spatial economics, and fiscal federalism. The second part presents the first empirical results on rail commuter traffic under the new framework for three spatial dimensions: for East- vs West-Germany, for the Länder, and for different types of regions and spatial settlement structures. So far, the spatial concentration hypothesis cannot be supported for Germany as a whole, though the formerly dense service structures in East-Germany are being adjusted to the thinned-out West-German level. In contrast, the new framework allows for innovative forms of rail commuter traffic also in sparsely populated regions. Concerning efficiency, not much can be said yet. but some pieces of casual empiricism point to an improved efficiency, even if functional deficiencies of the reform are accounted for.