The U.S. Surface Transportation Board (STB) proposed a rule yesterday that would allow shippers to switch cargo among large railroads if the shippers can show the arrangement is “practicable and in the public interest,” or “necessary to provide competitive rail service.”
What results if this proposal becomes reality?
Probably not too much. The article on the News Wire mentioned that the STB will look at these requests on a case-by-case basis, suggesting that a shipper is going to have to jump through a lot of hoops to obtain reciprocal switching rights.
It is amazing it has taken so long, as some form of reciprocal switching is in the Staggers Act (Sec. 223), but never carried out by first the ICC and then the STB.
Sec. 223
RECIPROCAL SWITCHING SEC. 223. Section 11103 of title 49, United States Code, is amended by adding at the end thereof the following new subsection: "(c)(1) The Commission may require rail carriers to enter into reciprocal switching agreements, where it finds such agreements to be practicable and in the public interest, or where such agreements are necessary to provide competitive rail service. The carriers entering into such an agreement shall establish the conditions and compensation applicable to such agreement, but, if the carriers cannot agree upon such conditions and compensation within a reasonable period of time, the Commission may establish
Rather than let a competing railroad run on your lines to access a customer on your line for the purpose of fair competition, why not just have the government set a fair rate for the company with the customer to switch the load over to the competing company? It seems like that would be a lot simpler and less costly than allowing a competing company to run over your lines to access a customer on your line.
Already tried that once. Danged near sent all the railroads in the country to ruin.
Amazing how the AAR acts like competitive switching is something without a basis, They love Staggers. Competitive switching is in Staggers, just never acted on.
What are you referring to that was already tried once?
Really?
Three letters - ICC.
I was going to ask if he had ever heard of the Interstate Commerce Commission, but you beat me to it.
Well that’s fine and dandy, but do you really think I was proposing the re-establishment of the I.C.C.? If you are going to quote me, please don’t take it out of context just so you can rebut a point I never made.
All I was saying is that it seems silly to mandate railroads to allow competing companies to operate on their lines in order to induce competition. Is it really competition if it is mandated by the government?
So if the government is going to mandate this, then why not simplify it and mandate the rate that is expected to result from the mandated sharing of operations? I am quite sure that would be the far less costly mandate of the two.
Isn’t that pretty much what the ICC did? Mandated rates?
Some people just don’t get it, do they?
I am not talking about mandating rates across the board. I am only suggesting mandating rates that would contain the charges for switching a car from the company where the car originated to a competing company. This is opposed to the new rule that would mandate that the originating company allow the competing company to run on the lines of the originating company to pick up the car from the customer of the originating company. That seems like an awfully complex system of insuring that the originating company does not gouge the receiving company.
But don’t get me wrong. I am opposed to the reciprical switching mandate and a cap on the switching rate I offer as an alternative. But between the two, I think the latter would be cheaper. So if there must be a mandate, I am just trying to make things easier.
Before you go any further, I would suggest you actually read the NITL proposal.
It has absolutely nothing to do with allowing another carrier to operate on a railroads lines. Its reciprocal switching, that is establishing a single line rate for a car essentially originating on another railroad. The NITL has proposed removing a restrictive condition from the requirements to establish such a rate (I think the term was “competitive abuse”) thus making it easier to establish a single line rate.
Class 1’s already use reciprocal switching on trackage rights routes. I presume the NITL’s position is changing the requirements would make it easier to establish reciprocal switches and result in lower rates.
The Staggers Act authorizes reciprocal switching but ended rate-setting. So what you are suggesting would require an act of Congress, as opposed to an STB decision.
You might all be better off if you knew what reciprocal switching is now.
In simple terms where there are two or more line haul carriers with an interchange at a point, each opens the customers on its line to the other. That is where the word and concept reciprocal comes from. Each will publish the reciprocal switch charge applicable at each terminal.
Assume a customer on railroad A wants to make a shipment via railroad B. Shipper orders car from railroad B. B supplies car to A at the interchange point. A spots and pulls shipper. A delivers car to B.
The money flow, setting car hire aside, is that Customer pays B its through rate. B pays A its switch charge. Most of the time B absorbs the switch charge to maintain a competitive rate.
I suspect, but can not prove, that this whole concept came when the government controlled the railroads during and after WW I. ALL rates were regulated then. Railroad B had to absorb the switch charge to maintain rate parity with A.
Schlimm’s claim that the STB has somehow been negligent about reciprocal switching is not accurate. Been there long before Staggers is still there. The provision he cites retains STB regulation of reciprocal switching which is what enables them to consider the action the NITL wants, which is to expand the physical limits of reciprocal switching and at a STB mandated, presumably sub market rate. If not sub market what would be the point?
Lets consider the current situation of a NITL ‘captive’ shipper 29 miles from the interchange point and not now open to reciprocal switching. He has access to railroad B today, but at a line haul rate, and that rate is higher than he wants to pay. The shipper’s theory is that railroad A is charging them a “too high” rate, that A’s line haul rate to the interchange is too high, B will not absorb A’s line haul, the STB will mandate cheap reciprocal switching, and railroad B will want to steal A’s traffic by offering the cu
By Jove! I think you’ve got it! Great call! Why stop there? Why not have the government set all the rates. That way, there would be no politics or bureaucracy involved. Better yet- simply have the shippers set the price. That way we could be assured that it’s a competitive price.
Whatever, the mandate has been there for 36 years right in the acclaimed Staggers Act. But the AAR wants to cherry pick. And you have distorted what the Staggers Act says about reciprocal switching.
How, pray tell have I done that?
Mac
I suggest you re-read Section 223 and compare its words with the words you wrote claiming what the STB would do.