Could we make it a simpler POD by just moving railroad regulation over to the pre DOT as part of being included in the interstate highway act? You'd still have the ICC doing it's damage up to '56, but there would presumably be more room to breath afterwards (which is also, conveniently, when things started getting really bad). I guess the real question is what kind of standard would they apply, assuming that there was still a basic requirement that passenger service be provided...
Yes, that's possible. I had that very idea in my Transport America TL. In the post-Interstate world, the ICC's regulation of railways was far too stringent, and the railroads' inability to raise additional revenue was what ultimately doomed a lot of them. As far as what standards and where does the money go, that's easy. You co-ordinate such efforts with the Aassociation of American Railroads and the ICC, and go from there.
That said, the real crisis hit the railways years after the interstate funding started I think the realistic speculation would be what happens with OTL regulations, but accompanied by the same 90/10 capital funding the highways got becoming available for railroad projects? The financial problems seem like they would happen, but in certain (especially northeastern) cases would be delayed by not having an infrastructure collapse compound things. Meanwhile the government would seem less likely to be willing to step in with an Amtrak like bailout, or at least more willing to give Amtrak teeth to access the publicly supported network...
Truthfully, if you have funding support for capital projects, many of the biggest problems in American railroadign can be easily avoided. But in the Northeast, there was too many railroads, and short-haul traffic was just not there for them to make it.
Me, I think that something like Conrail is pretty much inevitable, even if you dodge Penn Central and keep the Pennsy and NYC apart. Best way to go on that one is to have the NYC and Erie Lackawanna deal with the Chicago-New York runs, where the EL has the shortest route but the NYC's Water Level Route through the Mohawk Valley is better for grades. The Pennsy focuses on coal hauling and picks up the pieces of what is left in New England. None of the New England or Coastal Plain lines - New Haven, Boston and Maine, Reading Lines, Central of New Jersey, Lehigh Valley, Delaware and Hudson - are large enough to survive on their own, with the short haul market moving to trucks. The Pennsy picks up the pieces of these in the late 1960s and early 1970s, making its primary rival Chessie System rather than the New York Central or Erie Lackawanna. That makes more sense considering their route network anyways.
In the south, the Seaboard Coast Line merger is probably inevitable as well - the two lines were after the same market. Norfolk and Western is gonna have a bear of a time with both Chessie System and the Pennsylvania aiming for its market and probably is forced to merge, which makes Norfolk Southern a probable inevitability. CSX doesn't need to happen - between the Seaboard Coast Line, Louisville and Nashville and Chessie with their own markets and concerns, that merger, and all of the problems it spawned, doesn't have to happen. (CSX is getting infamous for maintenance problems. Not Penn Central bad, but they have had way too many fuckups, from the train burning under Baltimore to bridge collapses to the runaway in Ohio that inspired the movie
Unstoppable.)
Midwest has the same problem as the Atlantic States. A couple companies could make it by focusing up and down the Mississippi River valley, with Illinois Central Gulf and Kansas City Southern best placed to do that. North of Chicago, Burlington Northern is another inevitability (The Great Northern, Northern Pacific and Burlington Route had been run out of the same building since the 1920s) and the best thing to do here is have the Milwaukee Road not abandon its Pacific Extension, taking advantage of the fact that its route is lower and shorter than BN's lines, particularly the one over Stevens Pass.
Across the plains, Union Pacific rules the roost for a reason. The Santa Fe and Southern Pacific are to its south, with only smaller competitors like the Rio Grande and Western Pacific in the area. However, that alone could toss a curveball. The two aforementioned lines largely run from Denver to San Francisco, and they could hook up with somebody at Denver to go to Chicago, with either the Rock Island or Missouri Pacific able to do that, and then hand off traffic to the eastern lines. Santa Fe and Southern Pacific would be handling the southwest.