Want real rail reform? Build the Iron Highway

By James Aaron Cooke, Executive Editor -- Logistics Management, 6/1/2005

Small steps are encouraging, I suppose. They let us take heart that we're making progress, even if it's only a step or two toward our goal.

That's probably how most rail shippers view the Railroad Competition Act of 2005. The legislation, filed in both the House and the Senate, would require the nation's "Big Four" railroads to quote rates for moving freight a short distance to reach a trunk line, where another railroad could offer service. That would result in at least two competing railroads bidding for business that in many cases had been "captive" to a single carrier.

It would be an improvement, but it wouldn't go far enough. Shippers need real competition, where several carriers vie for their freight. That's why I've long been a champion of the "Iron Highway" concept.

Under the Iron Highway system, any qualified operator would pay a fee to run its trains over the tracks of the major railroads. Railroads would be divided into two units: one that would operate tracks that would be open to all toll-payers, and a second unit that would operate freight or passenger trains. The Surface Transportation Board (STB) would take on new duties, overseeing what essentially would become a public utility to ensure that fair rates are charged for track usage. In addition, a national rail-traffic control system could be established under the aegis of the STB.

The need to implement the Iron Highway takes on more urgency in light of the long-term problems that bedevil the rail industry. As more shippers (especially importers) take advantage of rail transportation, the tracks and intermodal yards have become clogged with boxcars and containers. The railroads will have to invest massive amounts of capital to upgrade and expand trackage to accommodate the anticipated rise in rail traffic over the next decade. Those upgrades and additions will cost billions of dollars, and the railroads have raised the issue of whether they will get an appropriate return on their investments.

Under the current system of private ownership of the track, it is not appropriate for taxpayers to contribute to rail-infrastructure improvements. However, should the railroads become a regulated public utility, as they would under the Iron Highway, then U.S. taxpayers could help pay for such improvements. For instance, Congress could use public funds to build new track from a seaport to a trunk line. Since the taxpayers would own the track, train operators would not pay a fee to use those portions of public infrastructure.

If the nation wants to remain competitive in international commerce, America will need a viable rail system to move its goods to market. Abraham Lincoln made that argument back in the 19th century when he proposed building a national railroad as a matter of public policy. That still holds true in the 21st century, where a high level of competitive rail service is necessary for shippers to move their goods in today's dynamic global economy.

James Aaron Cooke, Executive Editor