Dressed up as comedy, John Oliver dedicated an entire segment of his “Last Week Tonight” HBO program to focus on the ills of America’s freight rail industry.
A self-professed train aficionado, Oliver had choice words for our commercial railroads on the matter of dangerous cargo loads, labor concerns, and an overall lackluster attention to safety. However, he doesn’t compare the industry to the troublesome safety records of the trucking or pipeline industries, which also face similar issues in transporting hazardous goods. In the end, Oliver’s analysis points predictably toward government regulation as a would-be savior of the rail industry.
As is usually the case in a John Oliver monologue on rather niche public policy, there is one blaring fact that Oliver neglects to mention: Unlike other industries, private train companies are required by law to carry anything and everything that customers may bring their way. It’s a policy known as the common carrier obligation.
The common carrier obligation, a cornerstone of the freight rail industry, is often hailed as a mechanism to ensure fairness and accessibility to American railways. However, a closer look reveals that this regulatory mandate, intended to benefit the public, may inadvertently impose significant costs on consumers. The seemingly noble commitment to nondiscrimination and universal service is, in reality, a double-edged sword that hinders efficiency and drives up prices for the very consumers it aims to protect.
In telecommunications, it is similar to the Title II classification we know as net neutrality, which would force Internet Service Providers to treat all internet traffic as equal while boosting the bureaucracy around its enforcement. This principle is rooted in the idea of promoting fair competition and preventing monopolistic practices. However, the unintended consequence of this method of regulation translates into a heavier financial burden on consumers.
To maintain a level playing field and ensure fair treatment for all shippers, regulatory bodies often scrutinize rate-setting practices. This scrutiny stifles the ability of railroads to adjust rates in response to market conditions and operational costs. As a result, rail companies find themselves hamstrung by regulations, unable to adopt competitive pricing strategies that would ultimately benefit consumers by prioritizing efficiency and timeliness.
Mandatory nondiscriminatory services mean that rail companies must accommodate a wide array of shipping demands, leading to potential congestion and logistical challenges — the same ones Oliver lamented in his segment. The government is already highly involved in rail policy. That’s the problem.
The Reliable Rail Service Act (S. 2071), penned by Sens. Tammy Baldwin (D-Wis.) and Roger Marshall (R-Kan.), is just another example of a well-intentioned policy that risks stifling the very dynamism within the industry that it seeks to create. The fact of the matter is, it’s been over a hundred years and U.S. lawmakers have yet to try a regulatory scheme that reduces mandates and micromanagement of rail. It’s way past time to reassess the common carrier obligation imposed on rail companies.
Simplifying or outright eliminating this requirement would empower rail companies to operate with greater flexibility and pursue the kind of safer practices that John Oliver no doubt wishes to see adopted. It’s harder to prioritize safe loads when the law requires rail companies to carry everything thrown at them.
Baldwin and Marshall’s Senate colleagues should reject the Reliable Rail Service Act. Less central planning would go a long way toward improving the industry.
Another pivotal piece of the puzzle is the regulatory structure for the Surface Transportation Board. The STB Reauthorization Act should be revisited to clarify the board’s role, emphasizing its position as a remedial agency tasked with dispute resolution and the promotion of a competitive environment. This revision would curtail the STB’s tendency to formulate its own policies and create a regulatory status quo that is more harmonious between government oversight and private sector innovation.
A new year approaches, and with it a fresh opportunity for a paradigm shift within the U.S. freight rail industry. John Oliver was right to point out all the shortcomings of rail, but we have yet to try a 21st-century approach to regulation that sets the industry free to innovate. On our current trajectory, freight rail will continue to look and function like a relic of the past.
Consumers have deserved better for a long time.
Yaël Ossowski is deputy director at the Consumer Choice Center and author of “The Consumer Case for Reimagining and Innovating Railroad Policy.”