Support Commercial Development of Intercity Passenger Transport Services

Intercity bus services have played an important role in American transport since the early twentieth century, connecting thousands of people between cities via regular bus services accommodating rich and poor alike. Prior to U.S. road infrastructure improvements, railway dominated long-distance transportation. By 1930, roads had improved, allowing the intercity bus industry to grow and compete with the rail sector. This prompted Government to enforce strict regulations for bus and truck operators to shelter the important rail industry. Consequently, intercity bus traffic was strictly regulated for the next 47 years following the Motor Carrier Act of 1935. The Act granted power to individual states to control market entry for bus operators, and regulate routes and rates. Tight regulations reduced competition and encouraged bus mergers, which led to the formation of Greyhound Bus Lines, which acquired many small bus companies and became the market leader. At first Government supported this monopoly in the intercity bus sector because it made the industry financially stronger and reduced the need for more infrastructure (bus terminals) in inner cities. In 1947, the U.S. government decided to create competition within the sector by merging several bus companies to form Trailways Bus Lines, which had a 20 percent market share by 1970.

During the post-1960s, the intercity bus sector slumped due to (i) weakening consumer demand due to highway infrastructure improvements such as interstate highways; (ii) increased car ownership (by 1970, 80 percent of Americans owned car); (iii) deteriorating downtown business districts in major cities; (iv) affordability of air travel as a long-distance option due to discounted airline fares, which followed the airline sector boom. As a result, the intercity bus industry was deteriorating fast and tight regulations exacerbated its decline. In an attempt to resurrect the intercity bus sector, Government passed the Bus Regulatory Reform Act on September 22, 1982, which provided bus operators relief from federal pricing and route restrictions and offered a mechanism to appeal state-imposed regulations on intrastate routes. Unfortunately, this attempt to revive the industry through deregulation had limited success and failed to generate more traffic, unlike the effect of deregulation on other transportation sectors such as rail, trucking and air. Industry decline caused big players such as Greyhound Lines and Trailways, to undertake severe cutbacks and reorganization.

After 14 years of deregulation, the intercity bus industry had resurgence in 2006. Rising highway congestion made travel in private vehicles less appealing and the spike in oil prices made driving personal vehicle less economical. As a result, a new breed of innovative intercity bus operators emerged (such as Megabus) that offer cheap tickets available through the internet using a concept known as “yield management,” and providing a level of service comparable to that available on express rail travel competitors such as Amtrak. Consumer demand has shifted towards low-cost good-quality service for intercity transportation, which is convenient, safe and less harmful to the environment. Modern intercity buses carry an estimated three times as many passenger miles and use 60 percent less energy than railway operators. In addition, data show that intercity bus transportation is now the safest land transportation available. Therefore, it is not surprising that the intercity bus sector is the fastest-growing passenger transport mode in America, reporting 22 percent growth during 2007-2010, compared to 12 percent for railway passenger transportation.

Intercity bus companies remain subject to federal and state regulations. Two main regulatory policies that affect competition relate to curbside parking and safety. Today, few intercity buses operate out of bus stations; instead, they pick up and drop off passengers at parking lots in strategic inner-city locations. This innovative practice has prompted state governments to regulate bus parking in urban areas. Operators must get permission to use curbside areas and may have to pay for the privilege. This regulation restricts the number of bus stops en route and may be a deterrent for potential bus passengers who live far away from the transit hub. In relation to safety, Government has regulatory policies for vehicle operating standards (regular bus inspections are carried out by a government agency), driver licensing (including training on safe driving) and passenger safety per se. Recently, the National Highway Transportation Safety Administration (NHTSA) called for all buses to be equipped with seatbelts. Although seatbelts are proven to reduce fatalities by 77 percent, it is speculated that this regulation is not economically viable and should be considered carefully to ensure that competition in the industry is unaffected.

Government also subsidizes intercity bus companies by collecting lower federal fuel taxes (7.3 cents per gallon compared to 18.4 cents paid by other motorists) and through grants to help companies comply with the Americans with Disabilities Act and national security needs. Still, these grants are equal to just 1.0 percent of railway subsidies, which has created unfair competition in some states because rail can offer such low subsidized fares to its customers.

Since long-distance coach service was almost completely deregulated in 2003, Norway has been commercializing its intercity bus sector by transferring responsibility to the private sector. Local authorities must still approve route authorizations before market entry, but restrictions are usually limited and apply only if other subsidized transport needs protection.

Boston’s historic South Station is legendary in USA transport history. The railway station was built in 1899 when it was one of the largest stations in the world, serving about 40 million passengers each year. Not only did it accommodate trains and passengers, but also provided consumer amenities such as shops, restaurants and hotel services. Over the years, the station has had numerous renovations and attracted multiple investors. In 1975, the station was suffering extensive deterioration and the owner was bankrupt so there were plans to demolish it. Instead, South Station was sold to the Massachusetts Bay Transportation Authority (MBTA) in 1978 for US$6.1 million. The MBTA completed restoration in 1989 at a cost of US$195 million. Funding was provided by MBTA, Amtrak, Federal Railroad Administration, Urban Mass Transit Authority, Equity Office Properties, and private development corporations, and included reconstruction of 11 railway tracks, construction of a new bus terminal and parking garage. South Station now caters for passengers with multiple transportation modestrains, metro and busesand many consumer amenities that provide an excellent source of revenue for investors.