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Deregulate our streets!

Last Thursday, officials from the federal department of transportation closed down 26 bus operators who provide service in chinatowns along the East Coast, citing safety violations.


Photo by willandbeyond on Flickr.

If you've ever been a passenger on what is commonly known as "the Chinatown bus," regulators' concerns should come as no surprise. The buses are old, dirty and often lack basic amenities like air conditioning; their providers dismiss the idea of customer service and have been evasive with regulators in the past.

But while closing these bus companies may save lives (only 26 people died in bus accidents in 2009, compared with more than 13,000 in passenger cars and more than 10,000 in light trucks such as SUVs), the way we regulate transportation in cities results in a paucity of inexpensive and safe transit options that could save us all time, money and environmental costs.

The Chinatown buses were able to flourish for two reasons: A loophole in parking rules allowed buses to idle on certain streets in Chinatown, and Ronald Reagan's Bus Regulatory Reform Act of 1982, which made it easier for interstate buses to pick up passengers and set rates as they pleased. By eliminating the costs of infrastructure, amenities and marketing, the Chinatown buses only have to pay for a fleet of buses, a limited staff and gas; this translates into $10 fares from New York to Boston.

Major operators like Greyhound caught on, leading them to develop the BoltBus, which follows the Chinatown bus model and is nearly as cheap, seemingly a lot safer and has reliable wi-fi. This is how the market is supposed to work in favor of people: Increasing the options for consumers and thereby lowering prices.

But that's not how it usually works in transportation. As someone who believes that strong regulation is incredibly important for industries such as Wall Street, which is literally tied to the economy of the rest of the world, or the energy industry, whose impacts on the environment can be irreversible, I also believe that transportation regulation at all levels of government is holding our cities and our economy back.

In many cities around the country, people are marooned by public transit that is often unreliable, infrequent, unsafe or just nonexistent. Private providers find it nearly impossible to supply alternatives. A start-up website called Uber that allows people to hail a licensed black taxi, recently was set up in a sting operation in Washington, DC by the local taxi commissioner for failing to comply with District regulations. Regulation has zeroed out private alternatives to public transit in cities, forcing people to take transit into their own handsor, more accurately, into their own cars.


Photo by danielkaempfe on Flickr.
But what if there were other options? In New York, which has transit options that any other American city would envy, there's such great density that it supports many more niche transit options. "Dollar vans," which largely fly under the regulatory radar, are a popular service for many people in Brooklyn.

These kinds of systems called colectivos flourish in Latin and South America, as well as other regions of the world, where private cars and public transportation fail to meet users' needs.

A lack of competition in transportation options has caused all transit modes to be more expensive than they need to be. Why should an Amtrak from Philadelphia to New York routinely cost $45? A private Japanese company has just opened an office in Texas with plans to amass $10 billion to support a high-speed line between Houston and Dallas-Ft. Worthone imagines that will beat Amtrak not just in terms of price, but speed of completing the project.

If we opened our streets and rails more transportation operators, undoubtedly it would benefit our intertwined problems of high prices, congestion and slow service. But just last Friday, the New York State supreme court thwarted Mayor Michael Bloomberg's attempt to sell more than $1 billion worth of taxi medallions that would have increased taxi service in underserved boroughs and allowed for street hailing.

To be sure, the idea of deregulated transportation sounds bad. Deregulated transportation in many developing countries is notoriously unsafe and can have grave consequences. But there needs to be a middle ground between rolling death traps and a transportation system that is killing our economy. New York Sen. Chuck Schumer's proposal of creating a clearly posted letter-grade system to identify the quality of Chinatown bus services is a great one; this model could be applied to other kinds of new transit providers that serve niche markets. Auctioning off transportation licenses or city-owned property to support infrastructure for alternative transportation modes could be a new source of revenue in other cash-strapped cities.

The Chinatown bus companies emerged from strong immigrant communities with an entrepreneurial work ethic; while the practices that prompted government intervention seem shady, let's not forget this country needs this kind of ingenuity to survive and our government should be working its hardest to support those who have found ways to bring new, inexpensive transportation options to our roads and rails.

Cross-posted at Next American City.

Diana Lind is the editor-in-chief of Next American City

Comments

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How exactly is the regulation of Chinatown buses "killing our economy?"

by dcdriver on Jun 5, 2012 12:51 pm • linkreport

Agree in part, but how do you keep the dollar vans from poaching the ridership out of the bus system's busiest routes, and degrading system revenue so that it requires even bigger operating subsidy to exist, or perhaps has to suffer rounds of service cuts in order to keep operating?

by Michael Perkins on Jun 5, 2012 12:52 pm • linkreport

Michael Perkins nails it. The problem with opening transit up to so-called "competition" is that all you're really doing is poaching the profitable routes (yes the transit authority makes a profit on these routes too) and giving them to private operators. So you've traded away greater oversight, and now you have worse transit service for people (dollar vans don't exactly have free transfers do they?) Not to mention the fact that private companies can't really offer useful transit service on their own at a profit, they still need the backbone of the subsidized transit system so they actually have transit-dependent customers.

There was a brief crackdown on Uber but it seems for now that the TC is letting them do their thing. But in DC we actually have a relatively low barrier to entry for taxis and little regulation compared to medallion systems. And what have we gotten for that? Antiquated taxis, a cash-only system for the foreseeable future, and the "choice" between a regular taxi that sucks compared to other cities or Uber, a taxi that costs nearly twice as much. Awesome choices!

Amtrak is definitely stifled by FRA regulations that require heavy trains. They can't buy off-the-shelf stuff from overseas and the train market in the US isn't big enough to support rail companies. That makes their costs higher. As for your counter-comparison, that high speed rail line in Texas is a pie in the sky idea at this point, so I don't think you can speculate on what a ticket will cost.

On the taxicab medallion front, really the New York City Council thwarted the attempt to issue more medallions. Bloomberg then tried to get the state Senate to help him out, and the supreme court slapped it down since it's really a city matter.

by MLD on Jun 5, 2012 1:24 pm • linkreport

Twenty six people were not killed in commercial bus accidents in 2009, 254 were.

Additionally, there were not twenty six companies that were shut. There were three companies operating as twenty six, to avoid having to comply with safety rules.

They were not shut down due to having filthy buses without amenities. They were shut down for having drivers without Commercial Drivers' Licenses, failing to implement drug and alcohol testing programs, using unsafe vehicles, and having drivers operating their vehicles for unsafe periods of time.

None of these violations have anything to do with using unclean buses. The regulations cited, despite the author's suggestion, reference very real safety issues, and failing to comply with the same regulations that every other interstate motor carrier has to comply with.

These carriers were singled out because every time they had previously been cited for safety violations, they changed their names, stayed open, and did not solve existing problems.

Eliminating the regulation would do absolutely nothing to lower prices or increase competition. The regulations that were enforced also apply to trucking companies. The combined lives lost due to vehicles that comply with these regulations was 3,619. Clearly many more than 26, and clearly more than 254.

by Brian on Jun 5, 2012 1:36 pm • linkreport

Great points by MLD. The idea that we just need more competition amongst operators is overly simplistic. For one, those operators do impose costs (curbside buses don't have terminals, but that doesn't mean there aren't negative externalities for their loading/unloading sites - and they need to be regulated on those and pay appropriate fees). Two, you can't forget the network structure and the benefits of that (MLD and Perkins highlight that). Three, you can't ignore the rules of economics. The train price is more expensive because people will pay it - the trains are more comfortable than buses for intercity travel, and marginally faster. If you want to really lower the cost, then make the case for improving the infrastructure that would provide the extra capacity for such competition.

Finally, the word 'deregulation' has lost a lot of meaning - the real question should be if the regulations make sense. Reforming FRA regulations for intercity rail would make a ton of sense, but I'm not sold that the inter-city buses actually need less regulation.

by Alex B. on Jun 5, 2012 1:36 pm • linkreport

Yep, like many progressive economic ideas, the concept of "more competitiors = lower prices for consumers" is bunk.

Amtrak charges as much as it likes for Acela service because it can. It's not compeition. It is gouging. They own easy entry in Manhattan which planes can not. Helicopters can but they are 10x as expensive.

I am tired of "progressives" trying to use market ideology to reach their ends. Markets are great a price setting. Everything else -- not so much.

by charlie on Jun 5, 2012 1:45 pm • linkreport

The problem with opening transit up to so-called "competition" is that all you're really doing is poaching the profitable routes

And what is wrong with poaching the profitable routes? I know some people will say that the profitable routes are used to subsidize the unprofitable routes. That is, the profit from the profitable routes, instead of being used to lower tax rates or payoff debt, is instead plowed back into other government spending.

Why is this necessarily the optimal scenario? If it is optimal, why shouldn't the government declare a monopoly on providing other profitable services and used those profits to fund other government operations. For example, the government could declare a monopoly on electricity generation and use those profits to fund the EPA or Dept. of Commerce. Or, the govt could declare a monopoly on the sale of gas at gas stations and use those profits to build roads. This is similar to how they do things in China with state owned enterprises.

by Falls Church on Jun 5, 2012 1:50 pm • linkreport

Does anyone have more information on the story of the bicycle courier who was struck downtown? Some info in the link below: http://www.wusa9.com/news/article/206938/158/Bicycle-Courier-Struck-By-SUV-In-DC

Obviously, this is a concern for me as an urban biker, since getting hit by an SUV is a worst case scenario...

by wylie coyote on Jun 5, 2012 1:51 pm • linkreport

Yep, like many progressive economic ideas, the concept of "more competitiors = lower prices for consumers" is bunk.

Amtrak charges as much as it likes for Acela service because it can. It's not compeition.

Don't your first and second sentences contradict each other? In the first you're saying that competition won't necessarily lead to lower prices. In the second, you're saying Amtrak overcharges for its services because there's no competition.

by Falls Church on Jun 5, 2012 1:53 pm • linkreport

[Deleted for violating the comment policy.]

A lack of competition in transportation options has caused all transit modes to be more expensive than they need to be. Why should an Amtrak from Philadelphia to New York routinely cost $45?

The reason why we have Amtrak and no other inter-city rail operators is because the private operators WENT OUT OF BUSINESS BY 1970! [Deleted] running passenger rail involves very large initial capital costs; exceptionally high barriers to entry.

Now, the Northeast Corridor is expensive because it's the only place that Amtrak can make any operating profit. They charge as much as they can and still sell tickets because they use the profit to offset all the red ink from every other line they operate. It's not enough to operate all of Amtrak in the black but it's better than nothing.

by Cavan on Jun 5, 2012 1:53 pm • linkreport

[Deleted for violating the comment policy.]

Major operators like Greyhound caught on, leading them to develop the BoltBus, which follows the Chinatown bus model and is nearly as cheap, seemingly a lot safer and has reliable wi-fi. This is how the market is supposed to work in favor of people: Increasing the options for consumers and thereby lowering prices.

Greyhound didn't start Boltbus to compete with the Chinatown buses. Boltbus was was started to compete with Megabus. The Chinatown buses existed since the 1980's while Boltbus didn't start until the mid-2000's. Megabus started because demand for bus rides between the Northeast Corridor cities exploded in the mid-2000's as all the historic walkable urban cores revitalized. All of a sudden, Greyhoud simply couldn't keep up with the demand. Couple in Megabus's new ideas about ticketing and streetside service and you have a new sub-market. Greyhound would naturally want to compete while also expanding its aggregate service.

[Deleted for violating the comment policy.]

by Cavan on Jun 5, 2012 2:00 pm • linkreport

@FallsChuch; a bit. But there is plenty of "competition" for DC/NYC travel. Between cars, buses, planes and trains, Amtrak has maybe 20% and Acela maybe 12. We know Amtrak has about about 1/3 of the market when compared just to the shuttles.

But the devil is in the details. Business travel -- to Manhattan -- for meetings -- is what commands premium pricing.

As with all antitrust, it is how you define the market. I'd guess Acela might have 60% of the business travel market wrapped up. I know some execs that hire a black car to drive to NYC -- more reliable and better service.

by charlie on Jun 5, 2012 2:10 pm • linkreport

@charlie
Yep, like many progressive economic ideas, the concept of "more competitiors = lower prices for consumers" is bunk.

Since when is this a progressive idea? Because I'm pretty sure it's a free market idea.

@Falls Church
This already does happen in electricity generation (which used to be more heavily regulated) and plenty of other markets. Government builds infrastructure to far-flung places that then makes it possible for private companies to make a profit. I think it's OK in some markets but not necessarily in transportation.

Public transportation is part of a transportation network. Public subsidy of the entire system (profitable and unprofitable parts) help guarantee public support for the entire system. Taking profit away from government and giving it to the private industry would result in worse service at other times (less overall support for government spending since choice commuters use "private" options that are indirectly supported by government spending), leading to more car use, more traffic, decreased transit ridership overall, which impacts the "private" companies until they can no longer make a profit.

I see where you're going with the comparison to state-owned industry, but I don't think you can make a direct comparison from "means of production" to a service provided.

by MLD on Jun 5, 2012 2:12 pm • linkreport

Totally agree with MP, MLD, Brian, and Alex B.

by Adam L on Jun 5, 2012 2:13 pm • linkreport

@Charlie

"Amtrak charges as much as it likes for Acela service because it can. It's not compeition. It is gouging. They own easy entry in Manhattan which planes can not. Helicopters can but they are 10x as expensive."

I don't disagree with you but it is not as simple. Amtrak in the NE corridor is competing against airlines. They can charge a premium over airlines because they often have shorter trip times (door-door) with no security hassles and they put you right in the center of the city as opposed to airports far away from the center of the city.

But, if Amtrak increases their price above a certain point (and I'm sure there are economists working for Amtrak who know this figure), people will start flying more as the time/convenience won't be worth the extra dollars.

So, I would not phrase it as "gouging" but rather as "what the market will bear". Except when I want to go to NYC by train. THEN it is gouging! ;-)

by Biker on Jun 5, 2012 2:14 pm • linkreport

Totally unrelated to my comment but... how does one make text italic when commenting? Is it as simple as using italic</> tags? Thanks!

by Biker on Jun 5, 2012 2:15 pm • linkreport

Biker: <I>ITALIC TEXT</I> becomes ITALIC TEXT

by Gray on Jun 5, 2012 2:19 pm • linkreport

In the future, I recommend playing around with formatting by using preview so it doesn't have to be a comment for everyone.

by selxic on Jun 5, 2012 2:42 pm • linkreport

For anyone interested in curbside/Chinatown busses, Prof. Schweiterman at DePaul has several interesting articles.
http://las.depaul.edu/chaddick/ResearchandPublications/index.asp

by Bill Cook on Jun 5, 2012 2:43 pm • linkreport

Government builds infrastructure to far-flung places that then makes it possible for private companies to make a profit. I think it's OK in some markets but not necessarily in transportatiion.

I assume you think its ok for airlines to be privately run and they're part of the transpo system. And you have airlines like southwest that carves off profitable portions of the major airlines service network but that seems like good competition that has resulted in lower consumer prices.

by Falls Church on Jun 5, 2012 3:40 pm • linkreport

@MLD
Public subsidy of the entire system (profitable and unprofitable parts) help guarantee public support for the entire system. 

I don't think you can take it as given that having larger government by including the entire network as part of the subsidy system increases support. There are plenty of people who would like to see government operate at the minimum efficient size that's needed to provide inherently governmental services.

by Falls Church on Jun 5, 2012 3:47 pm • linkreport

I assume you think its ok for airlines to be privately run and they're part of the transpo system. And you have airlines like southwest that carves off profitable portions of the major airlines service network but that seems like good competition that has resulted in lower consumer prices.

Sure, but that's a very different situation. And despite airline deregulation, airline service is far from free of regulation.

No, a new airline can't just decide they want to start operations at a constrained airport like LGA or DCA, just as a train operator can't just decide they're going to now run some trains between DC and NY.

There's a key difference between privatized operations and publicly provided infrastructure and network connections.

And no, I don't have a problem with private airline operations at all, but I would note that it sure doesn't a appear to be a particularly profitable business. Tons of bankruptcies left and right.

by Alex B. on Jun 5, 2012 3:47 pm • linkreport

I assume you think its ok for airlines to be privately run and they're part of the transpo system.

Correct, I should have been more specific. With airlines I book my trip weeks in advance so I can shop around for fares. With transit I want to be able to walk out my door and get on a vehicle. And be able to transfer without worrying about extra costs.

Of course, airlines are massively subsidized by government infrastructure and bailouts.

I don't think you can take it as given that having larger government by including the entire network as part of the subsidy system increases support. There are plenty of people who would like to see government operate at the minimum efficient size that's needed to provide inherently governmental services.

There is a subsection who believe that. And there is also a large(r) subsection of people called "transit riders" who think "hey, I ride WMATA and it gets me where I need to go, and gets people out of traffic, we should probably be throwing money that way." Throw in private operators and that changes to "hey I ride Bob's Jitney every day and pay a dollar for it, and I subsidize those freeloading poor people across town who have city bus service! F*** them!"

Transit service along high ridership corridors in big cities is good because EVERYONE rides it and demands support for it. Transit service elsewhere sucks (infrequent, old buses, terrible routes) because only people who HAVE to ride it.

by MLD on Jun 5, 2012 4:03 pm • linkreport

Ms. Lind fails to acknowledge the many negative externalities of unregulated use of streets in large urban areas. The so-called Chinatown buses created a number of problems with drop-off locations in NYC and DC. While other operators use and contribute to the cost of appropriate off-street bus facilities with waiting areas, bathrooms and safe boarding, the Chinatown buses freeload on the street. That is why DC, NYC and Boston have all advanced regulations to deal with the negative externalities.

As Michael Perkins has pointed out, "dollar vans" generally only want to skim passengers off of the best routes and peak hours in poorly insured vehicles. Yes, there is room for competition by bidding out transit services. This is the model of Ride On and DC Circulator.

Lastly, Amtrak has plenty of competition. One can travel from NYC to Philadelphia on commuter rail at a much lower cost and people do this every day. One can fly between NYC and DC at prices that are sometimes, but not always cheaper than Amtrak and of course one can take Bolt or MegaBus. The transportation market along the East Coast is highly competitive at a variety of price points and travel times.

by Steve Strauss on Jun 5, 2012 4:43 pm • linkreport

[Deleted for violating the comment policy.] Some of the best things on earth were brought about by private enterprise, and that no centralized planning could reap such a bonanza.

by Adam Sawyer on Jun 5, 2012 5:05 pm • linkreport

+100000 Brian, MLD, and Alex B.

I'm surprised that no one mentioned the fact that roadway is provided for bus use at a relatively low cost. That's ok, but it does put railroads (and airlines) at a disadvantage.

That being said, I think the Chinatown buses are great, but my wife hates them--too chaotic. (Note to Cavan -- the gambling excursion Chinatown buses might have been around since the 1980s, but it was not until around 2000 when awareness became more widespread outside of Asian communities.)

Boltbus may be a response to Megabus, I think it's a response to both for the Chinatown and CoachUSA operation, not unlike how the major airlines tried to create divisions to compete with Peoples Express/SW. But because airlines have much higher cost structures, mostly those attempts failed, while this isn't the case with BoltBus, especially because there is a market for a segment that doesn't like the chaos that is often associated with a trip on a Chinatown bus.

Yes, clearly, the crackdown and problems (including fiery death in Richmond) show the necessity of regulation for safety, and for the externalities of boarding/disembarking.

e.g., four died in a crash on I-95 near Richmond last year, http://www.nbc12.com/story/14752703/deadly-bus-crash-on-i-95

Bill Cook -- thanks for the DePaul cite.

by Richard Layman on Jun 5, 2012 5:06 pm • linkreport

Never mind the more theoretical issue of cross-subsidization and picking the low-hanging profitable fruit, with which i agree. I'm unclear how exactly the author thinks competition, in the case of the Chinatown buses, has been restrained. Safety regs are safety regs - it's not true competition if the value choice is creating false value by operating outside the rules. See Valujet. Is the author claiming selective enforcement? Does anyone doubt the value provided by the intercity buses, or the need for them to comply with safety regs for commercial operations?

by darren on Jun 5, 2012 6:15 pm • linkreport

@Rlayman; how is the road being provided at "low cost?" for buses. It is almost entirely tolled up to NYC (MD tunnels, MD turnpike, DE, NJ and then bridges). For a car it is almost $20 -- and I'm sure the tolls are a lot for more buses and trucks.

by charlie on Jun 5, 2012 7:05 pm • linkreport

Deregulating transit is a bad idea. A very bad idea. A good comparison is to deregulate building roads, and believe that the free market can provide for toll roads from and to anywhere the market will support a road.

The point of transit and roads and rails, i.e. infrastructure, is that it builds a network that works to the advantage of all, not just the happy few. Otherwise, there would be no roads in Alaska, and neither would there be MetroAccess.

Case and point: The New York City subway system. It was built by three competing companies that all tried to move people along the most important direction along the island (north-south) while ignoring east-west connections. The three companies ended up fiercely competing, and went bust because of simple price competition. The City had to take over the system, and unify it.

I believe that the DC bus system worked similarly, and that's why the bus numbers are still such a number-letter mess.

In short: free-market competition does not work for transit.

Now, are there silly government regulations? Yes of course. There will be as long as there is government. Will the world be better of without them? Of course.

But there is nothing silly about requiring bus drivers to have a bus driver's license. There is also nothing silly about closing companies that cause many accidents.

Finally, it is not good for bus transportation when for-profit services are allowed to undercut government subsidized services on profitable lines by providing lesser service.

by Jasper on Jun 5, 2012 8:28 pm • linkreport

Well charlie, I am not an economist, but I'd say that the cost of using a road by a bus is cheaper than the cost of using a railroad line by a train--far more users comparatively speaking, thereby collectively contributing, and keeping the cost to any one user, even commercial users, lower than would be the case for the use of railroad right of way exclusively for trains. Plus they pay for operating cost and capital cost (when paying tolls), but nothing for property tax, although Amtrak might not either. The tracks owned by freight railroads do pay property tax.

by Richard Layman on Jun 5, 2012 9:23 pm • linkreport

@Rlayman; I think you are expanding it out too much. My point is much simpler : from DC to NYC you've got some of the biggest tolled freeways in the world. A breakdown for buses:

Ft McHenry Tunnel: 8
i-95: 12
95 in DE: 6
DMB: 15
NJ Turnpike: 18
NJ tunnel: 10

Close to $70 in tolls -- or two passengers fare. Given not all of the tolls are both ways. I think it is possible that the buses do more damage to the roads that the tolls suggest, but then they are paying

gas taxes
tires/truck/bus taxes

on top of that.

by charlie on Jun 5, 2012 10:37 pm • linkreport

Case and point: The New York City subway system. It was built by three competing companies that all tried to move people along the most important direction along the island (north-south) while ignoring east-west connections. The three companies ended up fiercely competing, and went bust because of simple price competition. The City had to take over the system, and unify it.

Off topic, but the elevateds were built by private companies (though the city probably gave payments to them of some kind). The subway was entirely paid for and built by the city. The city contracted with the IRT to operate the first subway and about a decade later built more subways in Manhattan and Brooklyn and contracted again (The Dual Contracts) with IRT and BMT to operate them.

There was no price competition - the city set the fare at 5 cents and didn't raise it until after World War Two. Inflation during WWI took a lot of value out of the price and it ceased to be profitable, and the city took the subway over completely.

by MLD on Jun 6, 2012 8:20 am • linkreport

@ MLD: Thanks for the update. Did not know that.

by Jasper on Jun 6, 2012 11:12 am • linkreport

Charlie, what's the cost of building and maintaining two lanes of road 225 miles to New York City? Imagine if the bus companies were fully responsible for doing that for two lanes of road. Just a thought...

I know that MARC complains about the cost they are charged for electricity on the Penn Line, or even the cost of paying for use of seats on Amtrak trains. (E.g., I kept suggesting to them MARC ought to negotiate for later night access from trips from Baltimore, even since they dropped their 10:15pm train to DC. When I worked late because of public meetings in Baltimore County, I had to pay for Amtrak to get home.) Only once (getting a ride from a committee member) was I able to make that 9:15pm last train after a public meeting.

by Richard Layman on Jun 6, 2012 2:56 pm • linkreport

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