Rail Competition Hearings Set

April 22, 2009
Public hearings are set for May 18 and 19, 2009 for the US Surface Transportation Board (STB) to consider issues related to access and competition in the railroad industry.

Acknowledging that it has been, “More than a decade [since], the Board conducted a comprehensive analysis of 'captive shippers' and their available remedies for rate relief, as well as the incumbent railroad’s rights and obligations, in a group of cases known as the 'Bottleneck cases,'” the STB said it was time to consider them again.

“A rail bottleneck rate issue arises when more than one railroad can provide service over at least a portion of the movement from an origin to a destination, but where either the origin or destination is served by only one carrier, i.e. the bottleneck carrier,” explained the STB.

In earlier decisions, the STB held that “it could not force the bottleneck carrier to quote a separately challengeable rate for the bottleneck segment unless the shipper had entered into a rail contract for the non-bottleneck segment.”

Further describing the issues before the STB, it added, “Competitive access can take the form of mandated reciprocal switching, terminal use, or trackage rights.” The STB has determined that reciprocal switching should not be ordered without a showing of competitive abuse, Also, STB precedent established that a shipper must show that such access [as is accorded by reciprocal switching, forced terminal use and trackage rights] is needed to remedy anticompetitive conduct by the incumbent railroad.

This hearing is intended as a public forum to allow interested persons to comment on the current issues stemming from the agency’s bottleneck and competitive access decisions, the continuing propriety of the STB's policies on competitive access, the effects on rates and service these policies have had, and the possible implications of changing these policies, said the STB. It urges parties to focus testimony and statements on ten questions:

What is the extent of movements affected by the Board’s competitive access policies?

Do carriers ever set separate bottleneck segment rates without the shipper having a contract on the non-bottleneck segment?

To what extent and under what circumstances do carriers voluntarily engage in reciprocal switching or terminal use arrangements, including trackage rights arrangements?

Under 49 U.S.C. 10101(6), it is the policy of the US government "to maintain reasonable rates where there is an absence of competition and where rail rates provide revenues which exceed the amount necessary to maintain the rail system and attract capital." Please comment on the relationship between revenue adequacy and bottleneck-rate and competitive-access relief. Should the Board’s competitive access policies be different for a carrier deemed to be revenue adequate? What would be the impact of such different policies on differential pricing and the ability of the industry to achieve adequate revenues?

Please comment on the benefits and costs of the current competitive access policies and the benefits and costs of changing those policies. How would the transportation world change if the bottleneck policy were modified to permit segment rate challenges, and if competitive access were mandated with incumbent carriers receiving access fees at or near the incremental cost level?

Should any requirement for a carrier to quote bottleneck segment rates be related to the length of the bottleneck segment?

Would changes to the Board’s competitive access policies require legislative changes such as overturning the Great Northern decision? Would such a change require accompanying changes to the Board’s regulations and procedures?

How would a carrier’s refusal to quote a bottleneck segment rate be analyzed under the federal antitrust laws? Would such conduct constitute an unlawful tying arrangement, tying the provision of one transportation service where the carrier has market power to another distinct service/product where there are competitive alternatives?

Since changes to existing “bottleneck” and access policy would likely increase the amount of interchange transactions, how should railroads be compensated for being required to handle a competitor’s traffic? How should the Board review complaints related to such compensation and related service issues?

What private property rights and “takings” considerations should the Board be aware of when considering new policies in these areas?

Information on the hearing is available from STB at www.stb.dot.gov and a link is provided for e-filing comments at http://www.stb.dot.gov/stb/efilings.nsf.

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