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With a new administration in D.C., it's time to think outside of the box because passenger rail's survival just may depend on it

Saturday, August 28, 2010

Intercity Rail Competition Part 2

America's intercity rail system needs a major overhaul because what we now have not only doesn't work but risks becoming dysfunctional. There needs to be a realistic vision that combines conventional and high speed rail as well as corridors and long-distance trains. The zero-sum mentality has got to stop!  We don't necessarily have to “start over,” however, monopoly control must give way to multiple operators.
I offer five alternatives to the status quo:
1. Return all passenger routes to the host railroads (aka the Wilner Solution).
Benefits
  • Before the dark days of the 1960s, passenger service was a natural fit for the railroads
  • With BNSF going private, Warren Buffett could fire an opening salvo in the Class I railroads resuming passenger service as a business model
Drawbacks
  • Congress opened up a big Pandora's Box in 1970 when it created Amtrak. Not all host railroads—specifically, Union Pacific—would want to resume intercity service
  • Passengers would have to change trains if an existing Amtrak route is on more than one railroad line
  • Corridor service would be more expensive to run than longer routes
  • Since most railroads opted to hand their trains over to Amtrak in 1971, they would have no experience of how to handle passenger crews. As a result, the Class Is would have to rely on foreign operators for advice since Amtrak would no longer exist in this scenario
2. Return all long-distance routes to the host railroads. Amtrak to continue operating corridors.
Benefits
  • The hosts would be able to better coordinate long-distance routes with each other than with Amtrak
  • The odds of a profit being made on overnight trains increase
  • Frequencies can be added to popular routes like Chicago-Albuquerque-Los Angeles and New York-New Orleans and could easily lead to branch routes like Flagstaff-Phoenix or Meridian-Dallas-Fort Worth
  • Amtrak would no longer be able to force states to pay up for overnight service
Drawbacks
  • The problems of passengers having to change long-distance trains would resurface
  • There could be a potential monopoly in the HSR market, which would kill innovation. If that happens, the bidding process would become a big waste of time for not only Amtrak's various competitors but also for the railcar manufacturers  
  • Congress may get involved and demand that the hosts keep certain routes and harm any possible innovative measures the railroads could conjure up
3. Amtrak retains operation of long-distance routes and the Northeast Corridor. All other corridors would be operated by domestic transit agencies and foreign rail operators. (the worst possible outcome out of the five)
Benefits
  • Some states would welcome the chance to work with another company because they would no longer feel that their voice is being ignored by a company that has its main focus elsewhere
  • These competitors will be given the chance to revolutionize the U.S. Intercity rail industry
Drawbacks
  • Some hosts may like the foreign operators even less than Amtrak and could impose crippling restrictions
  • Amtrak could retain a near monopoly in the overnight travel market with only a couple of hosts competing
  • Amtrak may be subject to scorn from Congress over losses from certain long-distance routes
  • Current Amtrak management has already stated that it has no plans to expand their long-distance routes. Even with predominately overnight routes, future management could still primarily focus on the NEC
4. Assign operators of corridors to several regions.
Benefits
  • The move would randomly allow the world's best operators to demonstrate what they're all about
  • Amtrak and its competitors would all be on equal footing
Drawbacks
  • This model is akin to the pre-1978 airline system as well as the current setups of cable and telephone companies where competitors are limited to specific regions
  • The hosts would have to deal with many operators in particular regions like the Midwest
  • Foreign operators may have route coordinating issues with each other and/or Amtrak
And, finally, my preferred option
5. Open up all long-distance routes and corridors to everyone—Amtrak, hosts, transit agencies, foreign rail operators. (the best)
Benefits
  • Amtrak would be forced to demonstrate why it should operate new routes and why it should continue operating existing routes
  • Monopoly rule would end as other companies innovate
  • Competitors can freely select where they want to operate
  • The best companies will stand out from the rest
  • Via a consortium, the hosts would work out a partnership with other operators that outbid Amtrak
  • There would be no congressional scrutiny over long-distance routes not operated by Amtrak
Drawbacks
  • Strange bedfellows—railfans and highway lobbyists—may squash this option mainly because it's the best of all solutions, and it may not fit their ideologies
  • Based on the December 2009 article Don Phillips wrote for Trains Magazine, the hosts may pull enough strings on Capitol Hill to the point that Congress appoints them as the only operators of the trains. Such a move would avoid the hosts dealing with other passenger companies on U.S. soil  



4 comments:

  1. You keep imagining the host railroads have any interest at all in operating varnish. They don't. Ideally, in their eyes, all pax rail would go away, and short of that, they want to keep it as small as possible. If there was private capital interested in it, it would have happened.

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  2. I agree. Passenger rail does not make money anywhere in the world. In fact, it seems that the less pressure an individual rail company has to make money, the less of a subsidy that they need.

    My personal preference would be to make Amtrak a private non-profit like Korail (or the BBC).

    I like that you have several alternatives. Probably the best solutions have not been thought of yet.

    (Thanks for linking to my blog.)

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  3. To David:
    Times are different. What was deemed feasible 40 years ago is obsolete. The days of the entire railroad industry being in survival mode are over. The generation that thought passenger rail was on its way out is itself retiring and is being replaced by more forward thinking people.

    As far as no private capital goes, that is changing. With the PRIIA of 2008 as law, there are already private investors lining up to spend money on HSR. So, it's not at all impossible to believe that just one or two hosts could bid on existing routes. Any railroad not named Union Pacific could wise up and use passenger service as an expansion of its business plan. After all, the railroads can't stagnate. As a matter of fact, I'm working on an upcoming entry on how public-private partnerships could make the hosts get back into the operating side of things.

    To Helen:
    " In fact, it seems that the less pressure an individual rail company has to make money, the less of a subsidy that they need."

    If anything, Warren Buffett's acquisition of BNSF may actually lead to that company deciding to operate an overnight route, even if it's temporary thing. After all, Matt Rose only has to report to Buffett rather than a bunch of impatient stockbrokers on Wall Street.

    As far as turning Amtrak into a nonprofit, I'd rather see the company broken up into a few pieces so that way each part of the country would get the special attention it deserves rather than it having to wait its turn.

    Thanks for reading this entry and I appreciate your comments.

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  4. #6 put all the infrastructure of passenger corridors in the public hand

    This probably means buying a bunch of class1 freight railroads, splitting up infrastructure and operations, then putting the operations back into private companies -- these may actually be worth more now, because these new freight companies don't have to maintain tracks.

    Then create bidding processes for every line of passenger operation, giving multi year operating contracts to private railroads.
    Amtrak can stay as is, but they have to start competing for reals to continue operating lines. The railroads would get subsidies for unprofitable routes; whoever can run the service with the least subsidies gets the contract. Profitable routes don't have to be bid out. All operators have to pay track fees that helps keep the infrastructure in a state of good repair, and expanding.

    With some remaining public control, expansion and ticketing can be planned better than with private railroads operating passenger service on their own tracks, which they probably don't wanna do, anyway. Freight makes more money right now.

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