America’s freight rail industry is a crucial element of the nation’s economic success. Many JOC.com readers, including intermodal shippers, enjoy the benefits of a competitive transportation marketplace. But when railroads have a monopoly over their customers and charge excessive rates by exerting inordinate market power over captive customers, the rules have to change to bring fair competition to that market.
Today’s federal regulations stifle rail-to-rail competition by blocking shipper access to a nearby competing rail line. These outdated and unfair regulations leave shippers with no choice but to pay the excessive rates of their sole railroad. The National Industrial Transportation League has advocated for quite some time to bring competitive choices to those now-closed markets.
We recently developed a detailed and conservative blueprint for a new approach at the Surface Transportation Board. Our new rule would not set rates for any railroad or shipper, nor is it a bid for unconstrained “open access” to rail lines. It would, however, create an opportunity for captive shippers paying the highest rates to seek a competitive bid for their business from another nearby railroad. Shippers would pay to have their railcars moved to the other railroad. The Association of American Railroads said shippers are trying to force “railroads to open up their tracks and facilities to other railroad competitors,” but the reality of our proposal is quite different.
Grounded in existing U.S. law, the rule we seek would expand the current practice of “competitive switching” by allowing companies with access to only one railroad the opportunity to “switch” their service to another nearby railroad in order to obtain competitive pricing and service.
The rule asks the Surface Transportation Board to exercise its existing authority to promote competitive switching arrangements that serve the public interest. The League’s rule also reflects the competitive access policy under which Canadian rail lines and their customers have prospered for decades, with one important difference: in Canada shippers can access a competing line as a matter of right.
Under our proposal, captive shippers would have to first pass a set of limiting tests. If successful, they could then negotiate with a second railroad just like their Canadian counterparts. The incumbent railroad rarely loses its customer to the other line in Canada. Why? Because they compete vigorously to keep their customers.
The League’s member companies want and need a financially strong rail industry. They compete for business and wouldn’t have it any other way. Competition is the cornerstone of the American economy, and American railroads should embrace it.
The Surface Transportation Board has the opportunity to promote competition in the freight rail industry by advancing the competitive switching rule we have proposed. We hope they seize that opportunity now.
Jennifer Hedrick is executive director of the National Industrial Transportation League. Contact her at JHedrick@nitl.org.