Amtrak High-Speed Rail Intercity Rail President

A generational failure: As the U.S. fantasizes, the rest of the world builds a new transport system

Tomorrow, two high-speed rail lines open in France, providing new corridors for trains to slice through the countryside at 200 mph (320 km/h). One is a 302-kilometer link that will connect Paris to Bordeaux in the southwest part of the country. The other is a 182-kilometer line connecting Paris to western France. They’ll provide riders the equivalent of linking Washington, D.C. to Charlotte in just over two hours (versus an eight-hour Amtrak trip today), or Dallas to San Marcos in less than an hour and a half (versus a seven-and-a-half-hour Amtrak trip).

What’s remarkable about the completion of these projects is not so much their scale (though at €7.8 billion and €3.4 billion, respectively, they’re hardly a drop in the bucket), nor the improvements in connectivity they’ll provide (though they’ll slash travel times in western France for millions of riders every year). What’s remarkable about them is, frankly, just how unremarkable they are; for people in most of the world’s wealthy countries, high-speed rail services of this sort have become commonplace.

The U.S., of course, is the world’s notable exception. Over the past thirty years, almost two dozen countries have built up networks of collectively thousands of miles for trains traveling at least 150 mph. Since 1976, for example, France, Germany, Italy, and Spain slowly but steadily built up large networks, under varying political and economic environments (Japan had started opening such lines in 1964; see the bottom of the post for a similar graph including China). Americans upgraded a route between Boston and New York and created 34 miles of track capable of such speeds.

In face of the difficulties inherent in investing in large infrastructure projects that have the potential to transform the travel experience, the U.S. has been unable to advance. Over the course of an entire generation, American society has proven itself incapable of pooling either the sustained motivation or the resources to complete a single major high-speed intercity rail project. Not that the country has committed itself to other forms of transportation, either; an automobile-centric place we may be, but our road network has hardly grown since 1980 in the face of massive population growth, congestion has worsened, and our airports are notoriously awful.

In this failure, high-speed rail encapsulates the American experience in general: A nation now fundamentally unprepared to change, whether in terms of transport, climate change, or healthcare.

My indictment of the U.S. is not founded on a claim that Americans are bereft of “ideas,” or that other countries’ populations are smarter, or wealthier, or more risk-taking than them. It’s just that our society suffers from a malaise resulting from its dysfunctional, irascible political system that is woefully unprepared to commit to anything particularly significant.

In early 2009, the U.S. and China were, in an odd sort of way, in a similar place when it came to transport investment. Propelled into office by a wave of voters who suggested they wanted change, President Obama’s administration released a visionary proposal for high-speed rail that suggested the potential for major new fast train corridors criss-crossing the country. He convinced Congress to pass a stimulus bill with very significant new funds to pay for such lines. He seemed to be promoting a way forward. At the same time, China had just begun developing its rail network; in terms of truly fast trains, it had little more than a short link between Beijing and Tianjin open. But the Chinese government also had big proposals to expand its network into a nationwide system.

What happened in the intervening years suggests the difference between the two countries. In the U.S., President Obama’s initiative was met by Republican governors elected in 2010 who, for reasons that had little to do with sanity, resisted free federal money to fund the completion of intercity rail projects their (Democratic) predecessors had developed. Lines in Florida, Ohio, and Wisconsin were scuttled. Republican members of the House of Representatives fought new appropriations for rail and instead pointed to what have been so far unfulfilled hopes for the private sector’s magic touch to bring fast trains to America.

The federal government, hand-in-hand with willing state governments, invested in dead-end studies of maglev projects. Commentators suggested that high-speed rail was “pointless” in the face of slower self-driving cars, a technology that, by the way, remains to be genuinely proven. Now, we’re being told by the president and the mayor of Chicago that the Hyperloop, another underdeveloped technology, is the transport of the future.

When it comes to intercity transportation, the attention span of the American mind, it seems, is little different than that of a child suffering from ADHD. Perhaps it is no surprise we have elected a president more interested in Twitter than policy.

Meanwhile, the Chinese government, committed to a long-term project, built the world’s largest high-speed rail network. It now carries more than a billion and a half passengers each year. It has reconfigured the nation’s geography such that high-speed rail is the most cost- and time-effective way to get around between most cities.

In the face of significant economic growth and mass migration to its urban centers, the Chinese government constructed a new transportation system. Yes, its roadway network and air travel systems have grown dramatically over the past ten years. But the largest growth in intercity travel has occurred on the high-speed rail network, which accounted for just a third of the passenger numbers of China’s airlines in 2007 but now is carrying almost two times as many riders, and many more than the U.S. air system as a whole.

Amtrak, whose government support has hardly changed over the past decade, still carries about 1/26th of the daily passengers of the nation’s airlines. Its negligible role in the nation’s intercity transport system—outside of the Boston-to-Washington corridor—remains entrenched, even as other countries have dramatically expanded the railroad’s role in their societies. The problem isn’t that trains aren’t popular to Americans. The problem is that American rail service is terrible, and we’ve done nothing to improve it.

It is true, of course, that the Chinese government is autocratic and that its ability to invest in rail does not face the same bureaucratic or democratic resistance as the U.S. does.

But such concerns didn’t prevent the French, Italian, and Spanish government from completing more than 2,000 kilometers of high-speed rail lines since 2009. Moreover, American claims from early in the Chinese development period that “the Railway Ministry still can’t get anyone to ride its trains” now seem irrelevant given that millions of people ride the system each day. And though it is certainly true that the rail system was, in part, built on corner-cutting, over the six years since 40 people died in the terrible 2011 Wenzhou train crash, more than 160,000 Americans died on their precious roadways.

It turns out that it’s actually not that complicated to conduct transport policy in a manner that adapts to change. You don’t need competitions to gather the input of “geniuses.” You don’t need magical new technologies when we have systems that work today. You don’t need to encourage speculation from the private sector, whose primary interest is in making high returns on their investment, not the public interest. You need a (reasonably) long-term commitment to individual projects, across political lines and among multiple political jurisdictions. You need to amass the public resources to pay for them. And then you need a competent workforce to design, construct, and operate the lines. American society has not shown itself capable of any of those things.

President Trump’s claims over the past year have suggested significant interest in supporting improved infrastructure for the U.S. Democrats were willing to compromise, for better or worse, to make such projects happen. But then the administration revealed its budget, which cut a gaping hole in existing infrastructure programs. And the president has failed to even propose an appointment for the head of the Federal Railroad Administration, among many other positions.

The U.S. lost an entire generation of potential investment in high-speed rail to half-hearted proposals and political back-and-forths over whether to fund better services. There’s no evidence we’re any better off because of it; while other countries have developed new transportation systems that truly improve the ability to get between their cities, we’ve just become further mired in traffic, whether at the airport or on the highway. The current president gives us little reason to believe the coming years offer anything different.

There are, thankfully, still reasons for hope. Florida’s Brightline project, a private initiative that would be difficult to replicate elsewhere because it is being completed by a private company that already owns the right-of-way, nonetheless suggests that it is possible to develop what appears to be a competent, well-run new railroad in the U.S., though it is not truly high-speed rail. And California’s high-speed rail line, though years from completion and under continuous barrage from congressional Republicans, is actually under construction and it retains significant political support. Change could yet be on its way.

Sources for graphs: Wikipedia, U.S. Bureau of Transportation Statistics, World Bank, Amtrak. Photo at top: TGV near Bordeaux, from Flickr user Adrien Sifre (cc).

Commuter Rail Congress DOT Finance High-Speed Rail Intercity Rail President

The Administration Refreshes Its Push for a Major Infusion of Funds into the National Rail Program

» The Obama Administration hopes to invest almost $40 billion in new and improved passenger rail infrastructure over the next five years. Good luck getting that through Congress.

It’s an annual spectacle. The President releases his budget. The budget proposes a huge expansion in spending on surface transportation, particularly in high-speed rail. Administration figures testify on Capitol Hill, hoping to raise the specter of infrastructure failure if nothing is done. The Congress responds lackadaisically, with Democrats arguing that something should be done and Republicans doing everything they can to prevent a cent more from being spent, and ultimately no one agrees to much of anything other than a repetition of the past year’s mediocre investments.

Will things be different this year?

The question is particularly relevant because the U.S. Government’s rail investment program — its authorization for allocating funds to the Federal Railroad Administration (FRA) will expire this year. Legislation supporting the FRA, as well as Amtrak, the national passenger rail corporation, and improvements to freight rail, is necessary to ensure continuity of funding. Previous bills have authorized funding over five-year increments. In effect, the bills set out how much Congress expects to expend over the next few years, and allows the House and Senate to avoid debating the issue for years at a time.

The Obama Administration has responded to situation by proposing a massive infusion of funds for passenger rail and the creation of a “National High-Performance Rail System.”

Total funding for rail activity, both for operating funds and capital projects, would increase from about $1.8 billion in 2013 to more than $6.5 billion in fiscal year 2014. Over the course of five years, about $40 billion would be devoted to rail improvement across the country, a massive expansion paid for with funds “saved” from ending military operations overseas. This would be headlined by a $5 billion “jump-start” stimulus for rail, part of a $50 billion infrastructure package the Administration is hoping Congress will pay attention to.

In many ways, the Administration’s bill is similar to past attempts at legislating major increases in funding for rail. In 2011, for instance, the government promoted a $53 billion plan to “win the future” with rail lines funded across the country. Yet Congresspeople reacted to the proposal with little interest — and members didn’t have to, because there was no authorization bill expiring. That’s what makes this year different.

The Administration’s proposal practically boils with ambition. Grants for new and improved rail lines would be heavily oriented (70 to 85%) towards “core express” alignments, which include only corridors where electric trains operating hourly at speeds of 125 mph and above run on their own, dedicated tracks. This says a lot about the Administration’s interest in focusing its energies on the “true” high-speed corridors, which at this time are only in development for California and the Northeast.

Grants in the proposal’s “rail service improvement program” would add up to $3.66 billion in the first year of activity but grow significantly over the course of five years, eventually reaching more than $6 billion a year. This would provide a substantial base of funds for serious rail projects.

But the initial allocations of funds would also ensure support for current rail lines. $2.7 billion in the first year of allocations would be dedicated to operating subsidies and projects that bring the Northeast Corridor to a state of good repair by 2025. Operating funds for Amtrak’s long-distance trains would be maintained, but those for state-supported (short-corridor) train lines would be eliminated after five years, in line with the existing law, to be replaced by profitable operations or more state support (or elimination). Amtrak’s fleet, which is on average 27.7 years old, would be upgraded, particularly in the Northeast, by 2018.

Some funding would also be provided for expanding freight capacity, reducing congestion (such as in the Chicago area), implementing Positive Train Control (which theoretically prevents trains from running into one another), and expanding access for the disabled. Much of the support would be dedicated to corridors owned by private freight rail companies.

All of the funds the Administration has proposed for an expansion of passenger rail service would do wonders for the nation’s train network. Yet even $40 billion committed over the next five years would hardly make a dent in the cost of the California High-Speed Rail project ($70-100 billion) and a new, high-speed Northeast Corridor ($150-200 billion). If the government committed similar funds over the course of five-year increments into the future, it would take a minimum of 27.5 years to complete these projects alone, with no spending on anything else. That’s 2041 before there’s true high-speed service on both coasts — at the earliest!

It’s true, of course, that any investment in new rail service will require financial and planning aid from local stakeholders, and these projects could be completed far more quickly if they were infused with local and state funds (as is the case in California).

Between Boston and Washington, the Northeast Corridor Infrastructure and Operations Advisory Commission (NEC Commission) is tasked with developing a framework for allocating costs along the corridor. As part of that program, it has created a document that demonstrates the rail line’s critical needs and it will be looking to help Amtrak and the states better coordinate their contributions to the line.

If upgrades are going to be made to the line, it will be necessary to ensure that states along the corridor all benefit, and that they all contribute. Determining the best way for them to do that is an incredibly important task that has yet to be fully laid out. Should New Jersey, for instance, aid Amtrak in paying for a new line, if that clears capacity for New Jersey Transit’s commuter rail division? Should Delaware contribute to the cost of a new corridor if no fast trains stop in the state? How much should the states and cities along the line pay to run local trains down the intercity tracks? Before any serious aid is provided to the Northeast, there must be an agreed-upon system for Northeastern stakeholders to answer these questions.

If the FRA reauthorization provided increasing funds to a better managed railroad, assuming increasing funding from other sources (presumably including private players), there is reason to think that Obama’s program could provide substantial improvements to the nation’s foremost passenger rail corridor.

Ultimately, however, the question of whether the Administration’s proposal has any technical merit is irrelevant when there is no political backing for an increase in appropriations for rail service in the United States.

The White House’s claim that its reauthorization would be “paid for” is, quite frankly, a specious argument. To pay for infrastructure, the government wants to use money (“savings generated by capping Overseas Contingency Operations”) that it “would have spent” on foreign wars but that is no longer necessary because the country is pulling out of Iraq and Afghanistan. Yet when the government is operating with a massive deficit, it’s hard to argue that that money is being shifted from one government use to another. It’s debt, pure and simple.

There are plenty of reasons to argue about the benefits of deficit spending, particularly in the midst of the continued recession, but let’s at least be honest about where the money is coming from.

There was an alternative — the Administration could have proposed a new source of revenue to pay for the program, such as an expansion in the fuel tax or the creation of a vehicle-miles travelled fee. That’s needed all sorts of transportation: The Congressional Budget Office reported last week that the Transportation Trust Fund (sourced from fuel taxes) will have a more than $90 billion shortfall by 2023 (and be operating in a deficit by 2015), imperiling any new spending on highways or urban transit.

Yet the Obama White House has shown itself hostile to any tax increase program that would affect lower- and middle-class families, and the Congress has certainly not pushed back with its own proposals. Thus the use of money “that would have” been spent on the wars to pay for the new transportation proposals. With little interest in increasing deficit spending, unfortunately, that proposal, too, is likely to go nowhere. The status quo will be reinforced.

This is a particularly sad state of affairs because the need is there, particularly in the Northeast. The FRA is currently developing a rail investment plan for the Corridor through a public consultation process, and a preliminary alternatives report was released this month, indicating a series of at least possible improvements. Amtrak, too, is desperately pushing for funds, arguing in recent weeks that the Corridor is suffering from an “investment crisis.”

Moreover, many Republicans in Congress have argued repeatedly that they are interested in funding improved rail service on the Northeast Corridor. Former House Committee on Transportation and Infrastructure Chair John Mica (R-FL) said in 2011 that “We have to redirect our efforts to having at least one success in high-speed rail in the nation. And that high-speed rail success needs to be here in the Northeast Corridor.” Though he didn’t propose any specific way to pay for those improvements, his interest is indicative of the GOP’s willingness to compromise. (And indeed, current Committee Chair Bill Shuster also has been a supporter of Amtrak.)

Perhaps the Administration’s policies should recognize this? On the other hand, the government clearly has no interest in shutting out three-fourths of the nation from rail grants.

Anthony Foxx, who will be nominated as the government’s next Secretary of the Department of Transportation this week, has proven to be a strong supporter of rail transportation in his position as mayor of Charlotte. But his ability to promote the Administration’s rail reauthorization bill has yet to be proven. Current DOT Secretary Ray LaHood, formerly a Republican Congressman from rural Illinois, has failed to produce bipartisan consensus in favor of more transportation investment over the past four years. How can Mr. Foxx, a strong urban Democrat, do so? The House remains controlled by the GOP and the Senate may shift in that direction after next year’s midterms.

There’s a lot to be excited about the rail reauthorization bill the Administration has proposed, but there is more to be skeptical of. We have a long way to go before there is solid support in Washington for more spending on rail transportation.

France High-Speed Rail

In France, a Truly Low-Cost High-Speed Rail Option


» To convince even more passengers to take the train, the SNCF national rail carrier plans to offer very cheap tickets.

France’s SNCF national rail service has, since the introduction of the TGV in 1981, held to the belief that fast trains should not be segregated to serve only higher-paying passengers. As a result, fast trains have replaced all slow-speed service on most long-distance travel throughout the country; passengers are able to take advantage of fare deals that allow them to journey between cities hundreds of miles apart at €25 or less, as long as they book in advance.

This dedication to opening up speedy trains to people across the income spectrum is unique compared to most other European and Asian countries. In Germany, for instance, train service between major cities is often available at two speeds — fast Intercity-express and slower InterCity, at very different prices. In the U.S., too, a trip on Amtrak’s Acela “high-speed” service in the Northeast is routinely $50 or more than a similar journey on the slightly slower Regional.

SNCF has now extended the principle further with the introduction of its OuiGo* service this week. Attempting to spur more train ridership, particularly among car owners living in the eastern suburbs of Paris, OuiGo will offer 300 km/h TGV speed at very low prices, starting at €10 for journeys between the Paris region and the Mediterranean coast (Montpellier and Marseille, via Lyon), a trip of about 500 miles (10% of overall tickets will be as low as that, with the rest increasing to a maximum of €85). SNCF claims that these ticket prices are the lowest available in the world for high-speed trains. Current TGV tickets start at €19 for similar journeys, but generally are above €50. OuiGo tickets will always be cheaper than equivalent TGV tickets on similar journeys.

OuiGo brings the aviation low-cost concept to high-speed railways. In exchange for a cheap ticket, customers will be charged for a second carry-on bag; they’ll pay more for the use of an electrical outlet; they’ll be unable to change their tickets without a fee. There will be fewer conductors — only four per train, who will also be tasked with some maintenance. Double-decker trains will seat 1,268 passengers, not because seats have been compressed (unlike the airlines, thank god), but rather because the first class and dining car spaces have been replaced by economy-class areas. Trains themselves will be scheduled to run more often than typical TGVs, traveling about 80,000 kilometers per month, double the normal rate.

OuiGo is SNCF’s second lower-fare offering; the first, idTGV, was introduced in 2004 and has regular TGV amenities though trains generally travel at less convenient times and certain extras, like video games, are sometimes offered. The agency, though, has been planning a more full-scale incursion into the low-cost market since 2009 and OuiGo is its offering. There are currently no rail competitors to SNCF in the domestic market,** and it holds something close to a monopoly on the air-rail market on the city pairs it is planning to serve with OuiGo, but there remain a substantial number of people who make the trip by car, and that is the group SNCF hopes to target here.

Like Ryanair, Europe’s foremost low-cost airline, OuiGo will not serve the more convenient passenger terminals where most TGVs board and alight. Rather, the Paris region stop will be located 20 km east of the city in Marne La Vallée (the location of Disneyland Paris); Lyon’s, instead of being in the center of the city, will be out at the St. Exupéry airport. One major reason for this service pattern is that the public agency that owns the tracks (RFF) charges SNCF (also a public agency) more for the use of tracks and stations in center city areas than those in the suburbs. Labor represents for only about 20% of TGV operations costs, while track fees, which are becoming increasingly onerous (they will be augmented by €200 million in 2013 alone) and which pay for maintenance and upgrades, account for a large potion of expenditures.

It’s an innovative approach to providing train service at lower costs, one that sacrifices convenience to the city center for easy access for suburban automobile users, who, despite France’s rather well-developed transit networks, nonetheless constitute a large portion of the population. For them, an easy-to-access train station in the suburbs — combined with cheaper-than-normal tickets — may be enough to induce them to switch to the train.

But the service remains an experiment, with only a few destinations announced thus far and only four trains dedicated to the service, painted in bright light blue paint and outfitted with rose-colored seats. It will be interesting to see whether this fare and service model is appreciated by customers, or whether they will instead continue to either shell out a little more for seats on standard TGVs or drive long distances in their private cars.

Unions have denounced OuiGo as “third class” service, and while I wouldn’t go that far, it is certainly true that compared to the historic TGV approach, this low-cost model is a downgrade. Nonetheless, OuiGo will make it possible for a large group of the population that had previously avoided the train to hop on board at speeds just as fast as those offered by normal TGVs; shouldn’t that be considered a good thing?

The question is, if OuiGo is successful in attracting a customer base, will SNCF increase its segmentation of services by price range? Will service on regular TGVs increase in cost and become more luxurious, as the less wealthy segments of the population are subjected to something approaching the cattle car?

Update, 27 February: G. Hughes describes on his blog (in French) price differentials in track charges between the OuiGo service and a regular TGV on trips between the Paris region and Lyon. In 2014, SNCF will be charged about €10,900 per TGV train trip but €7,400 per OuiGo train trip because of OuiGo’s use of less-used stations and less-used track. These savings can then translate into cheaper fares.

* “OuiGo” is a franglais expression, combining the French “oui” (yes) with the English “go.” The name is intended to be read “we go,” fully in English. I won’t comment on the state of contemporary French marketing.

** The French rail market will be opened up to some competition from other rail providers later in the decade, and this is surely one explanation for the agency’s decision to move into low-cost services now. SNCF and several other companies do offer intercity bus connections between some French cities, though those trips are much slower and, if booked in advance, more expensive than TGV trips, so they account for a far small market share.

Amtrak Finance High-Speed Rail Intercity Rail

Revisiting Privatization in Intercity Rail

» Amtrak, as always, is being targeted for privatization by conservatives. But what approach leads to optimized public benefit?

Over the past few weeks, U.S. House Transportation and Infrastructure Committee Chairman John Mica (R-FL) has convened a series of hearings on the failures of Amtrak, America’s independent — but fully federally owned — national rail operator. Mr. Mica has used the meetings to wage an ideological crusade against the railway, arguing that it is too inefficient and expensive to continue receiving subsidies. Republican Presidential nominee Mitt Romney has also advocated selling Amtrak.

Democrats have mostly shot back, arguing that privatizing the agency would result in a significant reduction in services provided and increase ticket costs.

Here is the confusing truth about Amtrak, however: The rail agency, fully government-owned, is in many ways already a privatized operation that receives federal subsidies. The organization does not seem to have the larger public’s interests in mind in setting policies: It has some of the highest fares in the world for services in the Northeast Corridor, it provides no discounts for people of lesser means, and it actively promotes the use of intercity buses for people who want to pay less, in effect strategically reducing its market share. These are not the actions of a government enterprise acting in the public interest; these are the actions of a private corporation attempting to maximize profit.

Amtrak is an agency that, in its existing form, can satisfy neither the left nor the right.

And of course, Amtrak is not making a profit — it operates at a considerable deficit every year. But “privatization” can mean many things — and is a private alternative any better than the current circumstances?

Over the past month, Stephen Smith has published articles on the failure of Britain’s rail privatization, the success of Japan’s effort, and the potential for privatization of Amtrak services. The overall conclusion from the articles seems to be that there may be benefits from the movement of rail services out of the public sector, but that without vertical integration — in other words, single-company control of both tracks and services — difficulties are likely to ensue, as in the case of the U.K. Smith points to the structure of Japanese National Railways (JNR), in which six private companies control services in different parts of the country.*

Smith suggests that with privatization, Amtrak could radically improve its efficiency. The biggest problems with the rail agency, he argues, are related to low worker productivity. Despite Amtrak’s privately motivated interests that I pointed out above, much of its labor rules remain affected by politics and can be altered by Congressional action. Are we willing to accept reducing the influence of democratic actors in agency decision-making? It would mean restructuring labor agreements — reducing the income and health benefits that unions have fought for decades to acquire — and firing huge numbers of workers (a third in the case of JNR’s privatization).

If privatization slashes the number of workers needed to do the same job, rail in the U.S. could indeed become profitable, since most of Amtrak’s costs are labor related. For the transportation public, that could produce cheaper ticket prices and fewer subsidies. But it means, fundamentally, that we are bringing private companies in to do the dirty work that the government is politically incapable of doing.

Assuming that some privatization is accepted as “needed” to improve American rail service, in what form should it be implemented?

In general, there are four rough frameworks for such privatization:

  1. Publicly owned tracks with competition for services. This is being implemented in mainland European countries under E.U. regulations; public sector track owners (such as RFF in France) allow operators — both public and private — to run competing services on the same lines.** This allows riders to choose operators on journeys with the same origins and destinations, just as can be done for airline journeys.
  2. Publicly owned tracks with competition for contracts. This is the network organization in the United Kingdom; public Network Rail owns the tracks but then leases the rights to operating rail corridors to private companies. In general, contracts last around seven years and give each operator close to monopoly rights over each corridor.***
  3. Privately owned tracks with competition for contracts. This was the system previously operated in the U.K.; the privately controlled Railtrack owned all tracks in the country between 1994 and 2002. The tracks were moved into the control of a public operator, as described in the second alternative.
  4. Privately owned tracks with one private operator. This is how intercity rail operations are managed in Japan.

Smith and other critics have argued that separating track ownership from rail operations — that’s what happens in alternatives 1-3 described above — result in inefficiencies and potential competing motivations. The U.K.’s attempt to privatize both tracks and operations (alternative 3) produced a number of failures, reducing the safety of the services provided. These difficulties led to the nationalization of the track ownership (a switch to alternative 2), but the contractual relationships between the track owner and the rail operators continue to be a cause for concern. In both cases, the U.K. government has subsidized capital upgrades and in some cases it has subsidies operations.

The problems have expanded over time. Operators have failed to follow through on their commitments. In some instances they have promised too much. In the case of services on the East Coast Main Line, operator National Express East Coast gave up its contract following higher costs and lower revenues than expected; the result was that the government took over operations directly through publicly owned (but supposedly temporary) Directly Operated Railways. National Express’ promises to the government for fees it would pay over the years were abandoned.

The government announced that FirstGroup (owner of Greyhound and BoltBus) would in December take over operating services from Virgin on the West Coast Main Line, Britain’s most popular, and profitable, railway line. But Virgin, which was hoping to renew its contract, warned that the deal was a “recipe for bankruptcy” because of FirstGroup’s inflated estimates of future ridership, which were used to determine how much FirstGroup would pay National Rail over the next few years to use the tracks. Last week, the government admitted it had made a serious mistake, revoked FirstGroup’s winning bid, and refunded all four bidders for their work upwards of £5 million. This was an unnecessary loss of taxpayer funds and will force the contract to be re-bid in the next few months.

These circumstances are revealing of the problems with separating ownership of tracks and operations. Track owners want to maximize the amount of money they can charge companies to run their services there, and so in places with profitable operations, they will accept the highest — and potentially riskiest — bids. Meanwhile, operators have an incentive to maximize profits — either in terms of inflating estimates of future performance in order to win a bid (in the case of the current U.K. system) or skimping on services or maintenance — in order to pay the operation charges to the track owners.

It is hard to see how mainland Europe’s approach, the first alternative, would be much better. The track owners are setting standard prices for track use by each individual train, which will likely encourage intense competition on the heaviest-traveled routes but a lack of interest in operating services on lines with less passenger travel. This will reduce revenues per train on the popular corridors, making any kind of cross-subsidies currently instituted by national operators less likely and probably requiring increasing government aid for the continuation of services to less popular areas.

Thus the explanation for Stephen Smith’s call for privatizing in the mode of Japan’s railway; by integrating track ownership and passenger services, conflicting incentives can can be negotiated, rather than fought out. Ed Glaeser, the Harvard economist, wrote Sunday that potentially profitable lines in the densest sections of the U.S. — including the Northeast Corridor and parts of California — should “follow Conrail into unsubsidized privatization.” This implies, like in Japan, giving one company rights over both tracks and the trains that run on them.

The problem with this approach is clear: It is a recipe for monopoly control of a railroad by a private enterprise. Conservatives berate Amtrak and other government-owned enterprises for being “Soviet“-like (in the words of John Mica), but private monopoly control of rail services is worse — and market conservatives should agree on that fact. After all, monopolized services can inflate prices, provide poor service, and in general be unresponsive to customer concerns. Unlike Amtrak, which must respond to political demands in our democracy, private monopolies must respond only to their profit-seeking shareholders, who clearly have different demands than the public as a whole.

Some might argue that rail services in the U.S., even if controlled by one company, cannot constitute a “monopoly” since they are competing with air and road services, which are owned and operated by other entities. Yet if it is in the public interest to encourage fast, relatively inexpensive services on intercity rail lines (that is what we want, right?), we are effectively arguing on behalf of massively increasing rail share on specific intercity travel markets — and significant government subsidies dedicated to investments in new tracks would back this approach. Once we have done that, we do not want people to move back to cars or airplanes, and we will have made those alternatives quite unappealing — thus benefiting the monopoly. Japanese rail operators do not have to compete with air or auto travel for most of their services because of the extraordinary advantages of rail along their routes, allowing them to act as transportation monopolies.

The presumptive development of vertically integrated private enterprises for the provision of new rail services in Florida between Miami and Orlando and in the Southwest between Victorville and Las Vegas has led to excited speculation that there is a potential for future American private investment in intercity rail. These investments would produce rail monopolies, but their overall market shares — at least at first — would make them small enough to avoid the prospect of developing into transportation monopolies. So they offer considerable benefits and likely should be supported by the public sector if possible — especially since neither Florida nor Nevada seem likely to be promoting state-sponsored public intercity rail projects in the short term.

Yet as a national approach the vertical integration of railroads into privately controlled monopolies is problematic policy that could encourage higher ticket prices and little concern for the overall public interest. There is an argument to be made that effective regulation of such services, much as is done with private energy utilities in most of the country, could limit the profits and destructive effects of such monopolies. But utility regulation has hardly prevented price gouging among energy companies. Can we trust that private railroads in the U.S. would work as well as those in Japan?

Moreover, private companies will only be interested in operating lines that are profitable. The reason Amtrak continues to serve places like Montana and Kansas is not that the agency has fooled itself into thinking that these can be profitable routes, but rather that its political support from the federal government has been premised upon the continued operation of trains to places that do not “deserve” it. But there are few transportation options available for these areas, and there is a political concern for continuing operations there. Would it make more sense to continue having Amtrak operate those routes, and, as usual, privatize the profits and socialize the losses? Or should such routes be contracted out to the lowest bidder, knowing that such contracts may fall apart, as they have in the U.K.?

If there are significant reasons to be concerned about private monopolies on rail services and there is a consensus that separate control of infrastructure and operations causes more problems than desired, what, then, is the option? Amtrak’s role as a public enterprise with seemingly very little interest in the public itself does not set a particularly helpful precedent. But if a monopoly over all rail services in a specific area is the only reasonable option, is the public sector the more appropriate place to turn than profit-motivated private groups? There are no easy answers.

* The “private” nature of these companies is worth questioning. Of six railway companies, three (Hokkaido, Shikoku, and Kyushu) are fully owned by the government entity Japan Railway Construction, Transport and Technology Agency. In other words, they are public enterprises, like… Amtrak.

** It should be noted that in some countries, like Germany and Spain, the historic nationalized rail company (DB and Renfe, respectively) has a separate division that controls the tracks, on which competing operators can buy running rights.

*** One of the odd consequences of Britain’s privatization schemes (which extend beyond rail and into energy and other services) is a significant expansion of government-owned corporations from other countries entering the U.K. marketCertain bus services in London are provided by Paris Métro operator RATP; certain intercity rail lines are operated by Germany national railroad DB’s subsidiary Arriva. Meanwhile, the U.K. itself has no such state-owned enterprises that have the capability of competing for services in other countries.

High-Speed Rail Intercity Rail United Kingdom

UK Ramps Up Intercity Rail Investments

» Continued investment in the U.K.’s rail network comes at a considerable cost, but spending on existing services will complement planned high-speed rail route and further recent ridership increases.

Opposition to the United Kingdom’s second high-speed rail line, the £17 33 billion* connection between London and Birmingham called HS2, has been stewing for years. Critics of the line — much like opponents to rail programs in the U.S. — suggest that the project’s benefits do not justify its enormous cost (both monetarily and in terms of its effects on the rural landscapes trains will pass through) and that other investments on existing lines would be more effective.

While the U.K.’s Conservative-led coalition government, itself teetering and facing a double-dip recession, continues to maintain its support for the HS2 program, it has not limited its public investments just to that line, and this week it announced a £9.4 billion ($14.6 billion) scheme to electrify a number of routes throughout the country between 2014 and 2019. Certain of these projects were announced in 2009 under the then-Labour government. The improvements will provide for a significant expansion in capacity on existing lines, decrease operating costs, and allow the introduction of faster, more agile electric trains — in addition to clearing the way for more space for freight trains.

The spending, which will electrify routes from London to Cardiff, Manchester to Liverpool and York, and the Midland Main Line, is part of a £16 billion total investment in the National Rail route network planned for the five-year period, whose hallmark projects include the construction or improvement of two cross-London lines, Crossrail and Thameslink. It comes after fifteen years of £35 billion of concentrated investments in the U.K.’s rail system — spending in tracks, signals, stations and trains that has radically improved service and dramatically increased passenger counts.

A diesel East Midlands train running north from London on a line scheduled for electrification. From Flickr user Ingy the Wingy (cc)

Unlike HS2, the planned line electrifications are unlikely to see much opposition, in part because the investments made in the country’s rail network thus far have proven so popular despite their high cost. Though there is quite a bit criticism of the operations regime used in the U.K., in which private operators bid for routes (indeed, Labour is “flirting” with re-nationalisation), the publicly owned infrastructure has been improved to such an extent that the nation now boasts the second-most heavily used rail network in Europe, after Germany. Last year, 1.35 billion riders took to the rails, an increase of 50% over the past decade. Though Amtrak’s recent passenger growth has been impressive, its roughly 30 million annual passengers pale in comparison.** So there is cross-party support for projects that improve the U.K.’s railways.

This raises questions about the right approach for investment in rail systems in the United States. The only true high-speed rail project with any reasonable chance of even partial implementation in the U.S. currently is the California High-Speed Rail system, but that effort will require a significant infusion of future federal funds to move beyond an initial operating segment. On the other hand, there are major improvements being sponsored in states such as North Carolina and Illinois that will speed up existing passenger routes, improve freight operations, and expand the number of daily services. In many ways, those latter programs are much more like the British approach than the true high-speed investment proposed for California, and as the evidence has demonstrated, a serious effort to improve existing lines is likely to attract many more passengers.

Yet opponents have cried foul repeatedly in the U.S. Aaron Renn, whose view replicates that of many conservatives, wrote last week that Illinois’ investment in improving the corridor between Chicago and St. Louis represented little more than the implementation of “Toonerville Trolleys” because of the proposed trains’ relatively low 110 mph maximum speeds. He then bemoaned the high cost of the California plan and Amtrak’s Northeast Corridor project, while at the same time arguing that “high speed rail could play an important role in US transportation.” He suggests that supporters of high-speed rail will support every project with that name attached to it, but he himself does not seem willing to endorse any project of the type once it reaches the planning phase. Perhaps American supporters of rail are too enthusiastic, but half of that excitement is simply a reaction to the overwhelming, mind-numbing skepticism of opponents.

The fact is that there are reasonable quibbles to be articulated against most infrastructure projects, and it is possible that significant improvements to the U.S.’ existing rail system could be made at a lower cost. In addition, as Alon Levy has noted, improved cooperation between agencies is necessary; it is no surprise that the U.K.’s single rail infrastructure owner is better able to handle upgrades than America’s balkanized pattern of public and private track control. But it seems evident that working through problems where they exist and devoting money to improvements where possible will lead to increasing use of the country’s trains — as has been the case in the U.K.

Nevertheless, difficulties remain in Britain as well. Transport Secretary Justine Greening noted that the private passenger rail companies in the U.K. were operating with “waste and inefficiency” but that there was nothing to do in the immediate term. Meanwhile, because of inadequacies in government funding, passengers would have to take the fall for much of the cost of new spending, resulting in planned increases in fares equal to annual inflation plus 3%. That increase is probably worth it to riders, who will be getting better service as a result, but it will still take a toll on peoples’ finances and potentially limit future ridership increases. At the same time, a similar approach is nearly impossible in the U.S. because of the tiny number of existing passengers.

The U.K. has been a train-riding country for more than a century and it never abandoned its passenger services, unlike the U.S. So it has been easier — both politically and cost-wise — for it to build up passenger counts in recent years through systematic investment. Can the U.S. repeat its successes, despite the lack of existing riders (and related political will), the high construction costs necessary to improve services, and the lack of national control over rail infrastructure?

* The £33 billion cost quote includes links north from Birmingham to Manchester and Leeds.

** Though this figure does not include commuter rail services, of which many are included in the British number. However, even with commuter rail added to Amtrak, total intercity rail ridership in the U.S. is about 500 million a year — in a country five times as large as the U.K.