|
With passage of the Interstate Commerce Act
in 1887, freight railroads became the first U.S.
industry to become subject to comprehensive federal
economic regulation. For the next 93 years, the
federal government, primarily through the Interstate
Commerce Commission, would control wide areas
of rail operations and management. As railroads
faced increasingly more efficient highway, waterway,
and pipeline competition, the government proved
to be a highly flawed surrogate for the free market.
By the 970s, archaic regulations, in combination
with strong competition from other modes and changing
shipping patterns, drove the rail industry to
the brink of ruin. Bankruptcies were common, investment
levels were insufficient to maintain rail infrastructure
in good condition, rates were rising, and service
levels were low. Serious consideration was given
to nationalizing the industry.
Fortunately, Congress passed the Staggers Rail
Act of 1980. In enacting this legislation, Congress
recognized that railroads faced intense competition
from trucks and other modes for most freight traffic,
but prevailing regulation prevented railroads
from competing effectively and earning adequate
revenues. Survival of the rail industry required
a new regulatory structure that allowed railroads
to establish their own routes, tailor their rates
and service to market conditions, and differentiate
rates on the basis of demand. In short, Congress
determined that railroads should be run by railroads,
not by government regulators.
The Staggers Act did not completely deregulate
the rail industry. In addition to retaining authority
over a variety of non-rate areas, the ICC retained
the authority to set maximum rates or take certain
other actions if a railroad were found to have
market dominance or to have engaged in anti-competitive
behavior. This act has been beneficial to railroads
and their customers. It has enabled railroads
to rationalize and upgrade their systems, reinvest
hundreds of billions of dollars in productive
rail infrastructure and equipment, greatly improve
service and increase traffic volume, dramatically
increase productivity, improve profitability to
more reasonable levels, and sharply improve the
safety of their operations-while at the same time
dramatically lowering their rates. Then, with
the passing of the ICC Termination Act of 1995,
the Surface Transportation Board succeeded the
ICC as the federal agency responsible for the
economic regulation of railroads.
> Back to Rail/Intermodal
|
