Deregulation of and mergers among American and Canadian railroads: A study of four decades

Abstract

Deregulation of the North American railroad industry continues to be controversial (Trunick, 2010). Class I American and Canadian rail carriers have exploited the policy environment, consolidated and prospered. However, some of their customers, the “captive” shippers, have complained about lack of competition, higher rates and deteriorating service. This paper reviews developments in the industry over the last four decades, and looks to the future in discussing policy implications. Each decade is characterized by an important event or development impacting the industry, as follows: 1970–1979 is the decade of deregulation; 1980–1989, the decade of intermodal growth; 1990–1999, the decade of mega-mergers; and 2000–2009, the decade of rising oil prices. The paper also draws on secondary data to analyze the impact of deregulation and other factors on rail freight rates, service and traffic volume. The industry faces new challenges and opportunities due to increasing demand for rail service, rising fuel costs and concerns about emissions. To meet the rising demand, rail capacity will have to increase. Given that rail is generally “greener” than trucking, an important public policy question is whether the government should facilitate further modal shifting via some sort of carbon tax.