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crypto and public policy

Getting on the Bandwagon of Sane Regulation

Filed under: Policy — July 2, 2003 @ 7:24 pm

In May, I took the the TGV (Train a Grande Vitesse = Very Fast Train in French) from Paris to Aix-en-Provence. A very smooth, comfortable, 900km ride in 3 hours flat, all thanks to billions of euros spent building the TGV’s high-performance rails while respecting dozens of environmental regulations. The TGV is also one of the safest means of transportation ever: over its 20 years in operation, the TGV has caused zero direct passenger casualties (some people sitting on the tracks have died – a 300km/h impact with a few tons of metal is quite unforgiving). Of course, the company that runs the TGV, the SNCF, is a state-owned behemoth of a monopoly that receives significant government preferential treatment and subsidies and has no competitors.

Meanwhile, over here in the US, where we value market competition, we have Amtrak’s Acela. If you’re lucky, an Acela train will get you from Boston to New York a tad more quickly than the Peter Pan bus – almost twice slower than the Delta Shuttle, or 3 times slower than the TGV. No wonder there is a ranking engrained in the American psyche: planes, cars, buses, trains, closely followed by horse buggies, in that order.

TGV’s 1980’s technology could comfortably shoot passengers from Boston to New York in 1 hour and 30 minutes, from New York to DC in just over an hour. Why are we so far behind?

Some say the US’s size makes trains unworkable for many trips. That’s true, but why not have trains on the coasts? Some say the French train system is financially workable only because of huge government subsidies. That’s also true, though the recent airline “bail-out packages” indicate this isn’t an isolated situation. I have a theory: trains are not popular in the US because they require a common, shared resource that seems incompatible with a true market economy: railroad tracks.

Imagine a world where the US government designates a company, Fastrax, to build and maintain high-performance railroad tracks. Fastrax then rents out track times to Amtrak and its many competitors. A customer who has sworn off Amtrak can still take the train with a competitor, US Trainways. US Trainways is on equal footing with Amtrak because Fastrax is obliged, by law, to offer equal contracts to all asking parties. Fastrax can never engage in building and operating trains on its railroad network, and USTrainways and Amtrak can never vie for Fastrax’s job. Competition becomes possible because starting a train company is a workable investment: buy or rent a train, hire some staff, rent some track time, sell tickets. Throw in a regular re-confirmation process to ensure Fastrax has a reason to remain competitive, and you have a near-sane system for building and maintaining a massively better, faster transporation infrastructure.

Meanwhile, back in France, a push for true cross-Europe train and track interoperability saw the 1997 creation of a separate entity, RFF, to manage the railroad system. SNCF keeps the trains and passengers but must sign standard agreements with RFF. The SNCF retains a government-sponsored monopoly on French passengers. That said, the architecture for competition is in place and may very well allow SNCF competition in the next few years.

We could stand to learn from this. Sheer monopoly is no good, but a well-regulated, common platform may well enable entirely new competitive markets.

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