Railroad Deregulation in Europe and United States
TLMT352 Distribution Systems
Dr. Carmen K. Mousel, PhD
Railroad Deregulation ins EU and US
Railways were the leading innovation in the early 19th century, and economic long cycle research (Ayres 1990) has argued it to have sullen the economic wealth in that time (industrialization, and especially steam power, iron and cotton textiles were the enabling factoring in the first approx. 55 year long wave). After the beginning of the 20th century the most relevant innovations, including diesel and electricity trains were invented, and finally put into mass production. Railways in the whole world framework are under great change due to privatization and deregulation; for example in US, New Zealand, Mexico and Japan the Government made the decision to keep companies vertically integrated (Gomez-Ibanez 2004), and railway companies compete from long-term contracts to operate particular lanes; the opposite happened in Europe, their decision was that freight and passenger infrastructure operations should be separated. Since early 2007, all of the EU member states are dealing with this situation; where railway transportation operations are open for free competition, starting with the most profitable segment of the business, freight transportation and the passenger portion later on. Deregulation is the removal or simplification of government rules and regulations that constrain the operation of market forces. Deregulation does not mean elimination of laws against fraud or property rights but eliminating or reducing government control of how business is done, thereby moving toward a more free market or competitive market. It promotes competition and should benefit the customer in terms of improve services and competitive prices. The amount of resources needed to offer intermodal rail-road transportation services are numerous and requires significant financial investment. Deregulation of this industry has changed the rule of the game in both the European Union (EU) and the United States (US). The service infrastructure has many interests involved and it is a for profit business. Therefore, some of the advantages of the deregulation are: increased competition, improved efficiencies, better level of services, lower costs, better communication infrastructure, and specialized cargo companies depending on the Intermodal Loading Unit (ILU). These improvements are based on demand and supply of specific geographical areas where volumes of ILUs is high and it is attractive to private investors to operate and this applies to EU and US. One of the downturns is that if in a certain geographical area there is not an attractive level of demand, there is no railroad link and cargo has to be moved by truck which is expensive and not environmentally friendly. Since this is now a for profit business, the investment required to build this type of infrastructure has to come with some warranties of demand. Deregulation has its disadvantages too. Small companies have to create alliances or agreements to remain on business because of the level of competition, it is an open market and anybody can start a new service. It has also brought a wave of mergers and acquisitions and also the creation of regional councils to regulate the service. In the US the story is pretty much similar and also different in its origins. The necessity to restructure the transportation industry was not optional because it was close to collapsing. Many companies were bankrupt or close to it and services were threatened. Change started with the Railroad Revitalization and Regulatory Reform Act of 1976) which simplified regulations on rates, line abandonment, and mergers. Four years later, when the political surge of deregulation was in its peak, Congress followed up with the Staggers Rail Act of 1980. The most important features of the Staggers Act were allowing better pricing...
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