The Great Train Race

Where do you stand in regards to the Great Train Race? Are you rooting for Amtrak? Or for Brightline?

These two commuter rail organizations are racing against the clock to fully operationalize their networks by the end of the summer. And the stakes are high, potentially determining the future of American train travel.

Amtrak, of course, is the national rail system of the United States. It is leading a federally funded effort to repair the tunnels under the Hudson River, and to restore full service on its northeastern lines.

Brightline, on the other hand, is a privately funded initiative that plans to connect the Floridian cities of Miami, Fort Lauderdale, West Palm Beach, and Orlando with environmentally friendly biodiesel trains. It is promising a late summer launch date.

So how are these projects progressing? Suffice it to say that both are experiencing challenges. Amtrak’s customers, for instance, are referring to its construction period as the “Summer of Hell.” And Brightline may need to postpone its opening date to the fall because of various legal and operational issues.

Nevertheless, if both projects succeed, a publicly funded entity and a privately funded system would each demonstrate that its ownership model is suited for our modern economy. Instead, if one succeeds and the other fails, the survivor would prove the superiority of its model.

And what if both fail? Given the poor physical conditions of America’s roads, and the “filled to capacity” status of its airports, there aren’t many palatable alternatives for rail travelers.

And so we all have a strong incentive to wish for Amtrak’s and Brightline’s success. If you’re not sure which system to root for, perhaps you could root for both to prevail.

Amtrak’s Nightmare Scenario

On the one hand, it’s difficult to argue with American citizens who believe that their national rail system should provide fast and frequent service between major cities. Metropolises like New York and Boston, for instance, are national engines of economic growth; smaller cities like New Haven and Providence provide similar benefits at the regional and local levels. Such municipalities certainly do need, and deserve, timely commuter service.

But on the other hand, it’s also difficult to argue with individuals who believe that the natural environment shouldn’t be sacrificed on the altar of economic growth. Connecticut and Rhode Island, the small states that occupy the geography between New York and Boston, possess magnificent beachfront shorelines, deep bays, and mighty rivers. The lands and waters that are now preserved for fishing, farming, eco-tourism, and passive environmental uses may be irretrievably harmed by massive transportation construction projects.

When urban cities exist side-by-side with suburban and rural communities, Amtrak is faced with the nightmare scenario of serving both interests simultaneously. Last month, when the Federal Railroad Administration (FRA) unveiled its vision for the northeastern United States rail corridor, it tried to meet this challenge.

Did it succeed? It attempted to please both constituencies by vowing to maintain its existing scenic (but structurally outdated) rail line along the shoreline of the Long Island Sound while building a massive new high-speed rail tunnel further inland. According to its vision, the existing line would continue to serve waterfront communities between New Haven and Providence, while the tunnel would facilitate dramatically faster travel times in a visually unobtrusive manner.

Perhaps predictably, constituencies attacked Amtrak from both directions. In Connecticut, for instance, urbanists at the Business Council of Fairfield County complained that the proposal did not visually enhance the Stamford train station, “which is an eyesore to the community.” Likewise, the city of Hartford failed to receive a direct rail line to its airport.

Environmentalists were similarly critical of the proposed pathway of the new inland tunnel, which would slice through many small towns. According to Connecticut Senator Richard Blumenthal, “A rail line that … proceeds through historic and environmentally sensitive areas is a non-starter — dead on arrival.

If you are optimistically presuming that the release of the vision statement may settle this debate in the near future, Rhode Island Senator Jack Reed has corrected your impression. He “… noted that the FRA expects detailed engineering and environmental (studies) … on the various pieces of the new plan … (to) take many years if not decades …

Decades? In that case, northeasterners won’t experience the economic benefits of modern rail service between New York and Boston any time soon. Of course, with the possible threat of a massive construction project lingering over the farms and villages of rural Connecticut and Rhode Island, environmentalists won’t be able to attract any new projects either.

In other words, both constituencies will find themselves locked in a continuing state of perpetual gridlock. It’s simply another reason why many Americans feel so frustrated about the dysfunctionality of their government agencies.

Which Agency Survives: Amtrak or the Postal Service?

One traces its lineage to a golden spike, driven into a rail in 1869, that linked the eastern and western coastlines of the United States. The other was formed in 1775 and was explicitly institutionalized by the United States Constitution.

To which organizations are we referring? To the Amtrak railroad service and the United States Postal Service, government agencies that have existed for decades and even centuries. Each is deeply ingrained in the American way of life, and each now faces a similar existential threat.

A more detailed analysis, though, reveals a significant difference between the competitive positions of the two entities. And because of this difference, it is indeed possible that one of the organizations may long outlive the other.

Antique Technologies

Amtrak is America’s public railroad transportation service, operating from northern New England to southern California. Although the service was officially formed during the Nixon Administration in the early 1970s, the network considers itself the heir to the nation’s earliest transcontinental railroad service, an entity that was born with the driving of a ceremonial golden spike in Utah that linked the Central and Union Pacific rail lines together.

A century earlier, the Postal Service was formed shortly before the thirteen colonies declared their independence from Great Britain in 1776. Its first Postmaster General, in fact, was Benjamin Franklin, who had previously halved service delivery times between Philadelphia and Boston by modernizing and standardizing mail shipment procedures.

Each of these services, though, was eventually threatened by more efficient emerging technologies. The rail system lost large numbers of passengers to automobiles, buses, trucks, and airplanes after the Second World War. And the postal system continues to lose significant business volume to internet-based email, merchandise purchasing, bill payment, and coupon distribution services.

In other words, industrial advances have forced each service into a position of technological obsolescence. But does this mean that each service is equally likely to fade away after generations of public service?

Competitive Positions

Although the services are each facing similar threats, they differ markedly in terms of their strategic market positions. Specifically, each service confronts a different mix of competitors, with differing abilities to attract customers with more efficient levels of service.

Amtrak, for instance, benefits from the competitive reality that the nation’s highway grid and air space are saturated with traffic. Such congestion has helped make Amtrak’s northeastern Acela service competitive (in terms of both time and cost) with air and land vehicle alternatives.

On the other hand, as the Post Office’s first class mail business continues to gravitate to the internet, and as its package delivery business continues to migrate to for-profit firms like Federal Express and UPS, the federal agency has been forced to face the prospect that its entire line of business may be vulnerable to poaching by rivals. Of course, no other firm would be interested in poaching its grossly unprofitable rural delivery system, which it plans to streamline in the near future.

Thus, based on its competitive strengths, Amtrak appears to be much better positioned to survive than its sister agency the Postal Service. But do their respective financial positions support this assertion as well?

Government Subsidies

Regrettably for Amtrak, the financial positions of the two government agencies are mirror opposites of their strategic positions. In other words, although Amtrak is the stronger entity from a competitive perspective, the Post Office is the stronger one from a financial perspective.

How can that be true when the Post Office has relentlessly increased the price of a first class stamp from 37 cents as recently as January 2006 to 45 cents in January 2012? In essence, its ability to raise its prices has actually helped bring it the necessary revenue to phase out government subsidiaries. And because Congress is now proposing to allow it to implement various cost efficiencies, the Post Office has been able to manage (and subsidize) its costs effectively.

On the other hand, United States Congressmen who fear watching their home districts lose access to the national rail transportation system are loathe to permit Amtrak to reduce, eliminate, or spin off rail lines. As a result, Amtrak is unable to engage in the types of restructuring activities that can improve its financial position, and thus it has needed over $40 billion in public subsidies in order to remain solvent. Since it initiated service under the Amtrak moniker, the agency has never broken even or earned an annual profit.

Nevertheless, the growing public need for a national rail service recently led Amtrak to announce an all-time record 30 million tickets sold last year, at the same time as the Postal Service declared that it is hiring a former Obama Administration automobile “czar” to study its restructuring options. As long as the railroad is strategically positioned to serve a growing public need, it may thus survive long after Ben Franklin’s postal system closes down, despite its financial shortcomings.