Commercialising highways

Most people consider the modern auto-highway system a great success. In the United States, automobiles provide 95% of all individual surface trips, and trucks transport an ever-larger majority of all freight. Moreover, the U.S. highway system is more than self-supporting via user taxes. Yet I’d like to suggest that our highway systems are in trouble.

In the US, the first of those problems is traffic congestion. We now have pretty definitive figures showing that in the 68 largest metro areas of the United States, motorists waste $72 billion a year in fuel and time due to traffic congestion; if you extrapolate that further to the other metro areas, it’s probably close to $100 billion a year. And yet, despite this huge opportunity to do something to make people’s lives better by fixing it, we have great difficulties adding capacity to the highway system.

Another reason why we’re not building is that there is an increasingly powerful anti-highway coalition in the United States, consisting of an alliance among some urban planners, a number of environmental groups, the transit advocacy community and so forth, that has put forward ideas such as, ‘we cannot build our way out of congestion, and therefore we shouldn’t try.’ They think the best solution is that we should shift these limited and declining user-tax revenues that are paid by drivers into massive expansion of transit systems instead of doing anything about the highway system.

'True freedom meant doing it the right way'

My conclusion is that it’s time for a new approach.

It is very instructive to compare the highway sector to the telecommunications industry.

Telecommunications and highways are both network utilities, they have a number of providers, and they’re all interconnected, people can move fairly seamlessly from one to another, but that's about where the similarity stops. The ownershipin telecommunications is now increasingly by investors almost everywhere, certainly in developed Western countries, but the highway system is almost entirely in the public sector. For payment, there are user-fees (basically prices paid for services
received) in telecommunications but user taxes at best in the highway system. New investment gets made based on commercial considerations in the telecommunications sector but, as I said, largely on political considerations (at least in the United States) in the highway sector.

I think that a commercial approach to transportation infrastructure, similar to the kind of market–driven structure telecommunications organisations employ, offers great promise of creating a level playing field where we have as much roads as people are willing to pay for and as much transit either as users are willing to pay for or as government decides it is willing to more explicitly and transparently subsidise. Then the choice between driving and transit will be more of a clear cut level playing field choice, with the automobile system providing the level of capacity and the level of choices that people actually want when they pay explicitly at each point of use.

'True freedom meant doing it the right way'

So that kind of an argument may get further with some of the people who have now decided that they are very anti-highway. We actually find in the US a few environmental groups are starting to support highway pricing because they see it in terms of creating a more level playing field, and of making sure that drivers pay what it really costs to use the highways.

One thing we need to do is create enabling legislation that allows for the private concession model to make add-ons to the existing system, to build to fill in the missing links, to add tolled lanes to free highways so that people have a choice. I think that those kind of steps will make these ideas more acceptable. And they will give both the public sector and private sector more experience in using the new approach.

Let me close by reminding you of the analogy between highways and telecommunications. The highway sector has been so neglected in terms of both technology and organisation, it’s been so insulated from the market that’s it no wonder that a powerful coalition now exists that is anti-autos, anti-trucks, and anti-highways. But by coming up with a new paradigm that is very much market driven, that utilises the power of pricing and the creativity of the private sector, I think we could create a 21st century highway system that will be every bit the equal of the telecommunications system—in innovation and in customer friendliness.

Robert W. Poole is President of the Reason Foundation, USA, which he founded in 1979.   This article is an edited transcript of an Occasional Seminar he delivered for The Centre for Independent Studies, titled Commercialising Highways: Turning Highways into Customer-focused Business’, in Sydney on 20 November, 2000.