29.7.13

PERFECTING THE CARTEL.

Reason have been covering a Federal Motor Carrier Administration (one of the saplings under the trunk of the now-toppled Interstate Commerce Commission) safety order that put Fung Wah Bus out of business.  We're no longer in the era of pure-dee Regulation In The Public Interest, under which the incumbents could block the entry of new carriers by arguing in the alternative.  The existing service is adequate.  If additional service is required, the existing carriers are capable of providing it.  The applicant is not competent to provide service.

Some things never change.
The government initiative also fits the classic pattern in which regulation destroys politically weak businesses to the benefit of the politically strong like Greyhound, Coach USA, and Peter Pan, which have seen their market share grow. Most of Fung Wah’s employees and its owner were Chinese immigrants lacking the language skills and legal muscle required to navigate all the red tape. And Fung Wah is only the best-known victim of this onslaught. On May 31, 2012, the Federal Department of Transportation shutdown 26 bus companies in a single day, and since then it has forced an additional 15 closures. Many of those companies were owned by Chinese immigrants. The American Bus Association, a trade association that primarily represents the large corporate carriers, has cheered the government on.
The startup bus companies could have taken a page from the playbook of the startup bus companies at the beginning of the motor age.  Look at this 1936 timetable cover from the Cold Spring Shops research archives.


In 1936, Maine Central and Boston and Maine had a common management, thus the Flying Yankee and Constitution-class Pacific on the right panel.  In those days, the New England rail carriers also operated airliners (precursors of Northeast Airlines; Trans-America Transportation was a Pennsylvania Railroad creation that became Trans World Airlines) and their own motor buses, and the timetable notation "bus service in substitution" took on more than one meaning.

The railroad's bus services competed with an earlier generation of curbside-pickup carriers.
The long-distance busing industry was originally dominated by small scrappy companies competing fiercely to win over customers, only to become a government-protected cartel with declining ridership and all the competitive spirit of Ma Bell. A half-century later, busing returned to its glorious origins, but today it’s in danger becoming a ward of the state once more.

In the 1910s, the very first American bus companies started picking up passengers on main streets all across America. There were few barriers to entry; entrepreneurs without much capital could buy or lease a motorcoach and then start doing regular pick-ups in front of a hotel or on a street corner.

Within a few years, local governments intervened to protect established companies from new competition. By 1925, most states required that bus companies apply for permission to service particular routes. The Motor Carrier Act of 1935 put the federal Interstate Commerce Commission (ICC) in charge of regulating bus travel. The ICC did everything from set ticket prices to grant established companies the exclusive right to operate between certain cities.
That regulation, some of it at the behest of railroads seeking protection of their revenues from ruinous and destructive, or unfettered, or unfair competition, included restrictions on the air and bus divisions of railroad corporations.
Protected from competition, bus companies grew indifferent to the changing tastes of their customers. Americans relocated to the suburbs, while car and air travel exploded in popularity. As inner-city depots became dangerous and decrepit, bus companies failed to alter their business models. After World War II, U.S. bus travel fell by half in just a decade and then it kept declining.

The industry languished for the next half century. In 1982, President Reagan deregulated intercity bus travel, which cleared the way for new companies to get into the business and start fighting to win back passengers, but for the next decade and a half not much changed. Then in the late 1990s, a group of immigrants from Fujian Province, China reinvented the bus industry in New York City's Chinatown. These entrepreneurs brought busing back to its roots of picking up passengers right off the street instead of from a traditional station. (The Chinatown bus companies became known as curbside carriers.) Once again, pretty much all you needed to start a bus company was a bus.

The Chinatown operators also figured out a way to win over customers that had eluded the established carriers for decades: charge really low prices. In short order, companies like Greyhound, Peter Pan, and Coach USA started opening their own curbside services, and today intercity busing is the fastest growing form of intercity transit in the U.S.
It helps to be computer-savvy and flexible in your travel plans, as the latest generation of 'bus companies eschews printed timetables, let alone stations with helpful agents to sell tickets and check your baggage.

This Reason TV commentary includes archival footage of the early 'bus operators, including the Hibbing, Minnesota establishment that became Northland Greyhound.



Greyhound might have been the upstart in the 'Twenties, it's now part of the establishment.

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