Railway Track & Structures - December 2008 - (Page 52)

CHICAGO PERSPECTIVE STB competition study W e’ve come a long way from the stultifying regulation of the Interstate Commerce Commission, which almost destroyed the railroad industry, yet there are still those out there who would drag us back through reregulation. This is amazing to me, but I realize there are all too many people out there much younger than I am who have no memory of the ICC days or the calamitous mess they made of our industry. With all the charges flying around, shippers with clout leaned on elected representatives, who in turn leaned on the Surface Transportation Board to do a study on so-called lack of competition in the railroad industry and its effects on shipping rates. The STB hired Christensen Associates, a Madison, Wis.-headquartered economic consulting firm, which completed its 14month, independent report titled A Study of Competition in the U.S. Freight Railroad Industry and Analysis of Proposals that Might Enhance Competition. What are the results? It depends on which party you ask. I saw a press release from a reregulation group that sees it one way. “STB Study Shows Consumers, Agriculture Hit Hard by Railroad Monopoly Power, Highlights Need for Rail Reform,” screams the headline on the press release. “A study commissioned by federal railroad regulators provides solid evidence of the abuse of monopoly power by the freight rail industry resulting in higher prices for American consumers, the agricultural sector and rural America, representatives for rail shippers said today,” the release states. “The study, which was commissioned by the Surface Transportation Board, provides evidence previously denied by the freight railroad industry that they are abusing their unique exemption from antitrust law to exert anti-competitive business practices–by charging shipping rates 500 to 700 percent above cost and refusing to provide adequate service to freight rail shippers who are captive to only one railroad,” it goes on. Wow, that’s terrible! Or is it? Let’s see what folks on the railroad side have to say. “New Rail Competition Study Rejects Reregulation,” says the headline of the AAR press release. Quoting from the release, “A new study for the Surface Transportation Board on competition in the freight railroad industry says that ‘both railroads and their customers benefited’ from the partial rail deregulation introduced by the Staggers Rail Act of 1980. “The study also rejected the principal proposals for reregulation of the railroad industry, saying they could harm the industry or would otherwise be inappropriate,” according to the release. “We’re pleased that this independent study has affirmed key economic principles on which the STB has relied for many years in its regulation of the railroad industry,” said AAR President and CEO Edward R. Hamberger. “It concludes that most of the reregulation proposals put forth recently would do economic harm both to shippers and carriers.” Hamberger noted that the “industry is still examining the report and will submit comments to the STB this month.” Specifically, the study said: • Railroads must earn sufficient revenue to maintain their privately funded rail networks, but their revenues since 1980 generally have not reached the level of revenue sufficiency. Only now are a few railroads reaching that threshold. • There is little room to provide significant rate relief to certain groups of shippers without requiring rate increases for other shippers or threatening the railroads’ financial viability. • Rate increases during the most recent study period were consistent with changes in railroad costs and productivity and did not evidence any exercise of market power. • There is no evidence that railroads have used capacity constraints to exercise market power. “The study also rejected claims by some special interest groups that rail profits are excessive, pointing out that the industry’s earnings are similar to those of public utilities,” AAR said. I know which report I believe. How about you? George S. Sokulski Associate Publisher 52 Railway Track & Structures December 2008 www.rtands.com http://www.rtands.com

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Railway Track & Structures - December 2008 Contents On Track Industry Today Supplier News AREMA News NRC News TTCI R&D Hand-Held Tools Continue Big Role in Railroad Engineering AREMA C&S Moving Ahead Optimizing Winter Speed Restrictions RTA 2008 Conference Makes Splash in Savannah, Ga. Products and Literature People Calendar Sales Representatives Advertisers Index Website Directory Professional Directory Classified Advertising Chicago Perspective

Railway Track & Structures - December 2008

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