This paper presents a dynamic model of transportation mode choice and evolution of public transportation service based on some simple assumptions of individual behavior and economic necessities for providing transportation service. Critical values are shown to exist for the fares charged, for the cost of providing service, for the demand and supply of transportation, and for other parameters at which the system will bifurcate to different possible states of the system; critical thresholds must be reached in the quality of the network to observe its growth. Also shown is the role of history and the role that fluctuations in individual behavior and mode strategy play in the way the system structures, that is, in the evolution of the relative number of users of each mode and in the level of service obtained.