In the last two decades, private intercity buses have enjoyed something of a renaissance. The rise of entrepreneurial firms delivering deeply-discounted fares and point-to-point trips between major cities caused this mode of transport, once viewed as antiquated, to capture a higher market share.

These range from deeply discounted no-frills operations like Megabus and the “Chinatown buses,” to stalwarts like Greyhound, to luxury coach services. The recent U.S. entry by European transit dynamo FlixBus has only bolstered this inter-city bus momentum.

As Americans are hit with gas price increases and other inflationary pressures, it would be reasonable to think that intercity buses would grow even more in appeal. Unfortunately, they do not have fair competition with any other mode, as single-occupancy automobiles, passenger rail, airplanes and intra-city public transit all enjoy special government perks and subsidies. Federal, state, and local governments can level the playing field, however, through two policies: congestion pricing and deregulation. 

Congestion Pricing

Highways in the U.S. are in most cases free at point-of-use; this means that while gas taxes cover some interstate costs, a lot is taken out of the federal general fund. This is largely thanks to a provision from the creation of the Interstate Highway System prohibiting the addition of new tolls. The Northeast is an exception, where major routes such as I-95 have portions that predate the interstate network and were tolled beforehand. 

This makes it appear to the road user that driving is a better deal, but in fact, it exacerbates congestion by creating a classic “tragedy of the commons” problem. Road space is valuable while congestion is costly; the cost in terms of lost productivity in major U.S. metros like Los Angeles and New York City is well into the billions, and the money lost per driver in such areas via fuel consumption and car repairs ranges from $1,000-2,000 annually.

The concept of “congestion pricing” as a response to this is simple: drivers would pay for road use based on the demand level at a given time. It has been criticized because it would make driving more expensive, thus adding a significant expense to the day-to-day commuter’s life. Whether or not that expense is offset by the time savings will depend on the driver and how they value their time. 

But introducing tolls on interstates and other major state and federal roads would undeniably help inter-city buses, and not in a way that equates to favoritism, but that embodies open competition and free enterprise. That is: if road space is limited and usage is subject to market bidding, the dozens of people riding a bus could surely outbid single-occupants within cars. That, in hand, would buy these buses access to express lanes, rather than sitting in congestion as they do now.  

In a road toll paradigm, it is also possible that intercity-focused providers like Megabus could expand to “intra-city” operations, entering local markets to serve both dense suburbs and park-and-rides, or markets that existing transit providers have a hard time serving.  

Deregulation

But subsidies to solo driving (via underpriced roads) are not the only thing stopping a more robust inter-city bus market. The regulatory regime for private bus service is also prohibitive. 

When the publicly-run New York City Transit cut some express bus routes in 2010, the bus company Transport Azumah moved to replace three of them. But the city ordered the firm to cease operations because it technically did not have authority to operate scheduled service. 

A similar situation unfolded in California in the mid-2010s, when a firm planning to use school buses to provide late night transit between Oakland and San Francisco was blocked by the state’s public utilities commission. Leap Transit, a firm marketing an upscale bus service in San Francisco, met a similar fate with local regulators, ultimately getting its license revoked. 

There is one significant example of legal private transit in the United States—the minibus services or “jitneys” that run between New York City and the northern New Jersey suburbs. But they too are heavily-regulated or illegal, amounting to what Aaron Reiss of New Yorker calls the region’s “shadow transit.” 

Even intercity buses, which one might think would have fewer entanglements with local transport bureaucracies, attracts such scrutiny. Chinatown buses in New York and D.C. have long been targeted over questions about where they should park or whether they are safe. The safety questions in particular seem dubious, given that private automobiles cause around 40,000 deaths and over 1 million injuries annually in the U.S. 

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The bottom line is that there is clearly a market for both inter-city and intra-city private buses, and various reasons why governments should in theory prefer them to other transport. They are less capital intensive; provide point-to-point convenience; and are more environmentally-friendly than air travel or solo car trips. But to thrive, these bus services need specific market-based reforms, such as road pricing and curb space reform; and above all, just need permission to exist. 

This article was co-authored by Market Urbanism Report content staffer Ethan Finlan.