By now, you’ve been told all about what railroads accomplished thanks to the passing of the Staggers Rail Act of 1980.
But what did this monumental legislation mean not for the legislators or the railroads, but for the customers themselves? Shippers — anyone from your local logistics company, to agricultural producers and UPS to national automotive manufacturers — are the lifeblood of the American economy. Perhaps the best way to understand the impact of the Staggers Act is through the eyes of these rail customers and the resulting successes they’ve seen in their own businesses.
A Day in the Life of a Shipper
The year is 1975, and you work for a company that relies on the rail network to move your goods across the country. The consequences of overbearing regulation are all too familiar to you and your colleagues — the negative impacts of antiquated regulation have left railroads less competitive and, as a result, less able to earn revenues needed to maintain a healthy network. The industry is unable to attract capital and improve infrastructure, resulting in unfortunate levels of safety and service that hurt your bottom line.
Other modes of transport are thriving; since 1970, you have witnessed the construction of the interstate highway system, investment in waterways and pipeline innovation. Rail has been left behind, however, due to decades of legacy regulation and pricing restrictions that are driving railroads to financial ruin, making it more dangerous and less reliable for your business to move its goods. From mountainous Appalachia to bustling Chicago to rural Texas, the effects of the failing rail system are ever-present. Change is needed, now more than ever.
Putting Customers First
In 1980, the implementation of the Staggers Rail Act sets railroads on a path towards economically sound regulation, a system that protects shippers while unleashing market forces for the railroads. With enough revenue to reinvest back into their networks, your business and its customers can finally rely on strong network service. Thanks to Staggers, you’re optimistic about the future of the network — and, most notably, your business — for the first time in years. Three aspects of the legislation catch your eye:
- Railroads can now negotiate contracts and provide new services. This means you can get terms and services tailored to your individual needs and receive discounts for long-term commitments. Contracting provides you and your customers greater certainty.
- Railroads will be able to effectively compete in the changing marketplace and grow market share. This means they can drive long-term investment plans, improving service and safety for customers like you.
- Class I railroads can shed low-density lines, allowing Class II and III railroads to thrive. The result is short line railroads can focus more keenly on smaller segments, moving goods during the first and final miles of their travel. Smaller and rural customers are now even better connected to the national rail network. For many customers in the broader network, short lines offer an efficient way to access the entire rail network — and global economy — regardless of location.
The Staggers Act changes your entire outlook as a rail customer; it’s clear right away that better days are ahead for your business. These improvements mean you can move your shipments from point A to point B more efficiently and reliably. Your customers now place more trust in you; you now place more trust in the rail network.
Launching into the Future
A few years down the line, railroads are opening new markets. For example, the introduction of intermodal — the transportation of shipping containers and truck trailers by rail — allows railroads to create new revenue streams that lead to even more network reinvestment. For your business, these new markets mean that you can ship goods with a newfound flexibility —one that was previously only available to trucking shippers.
Further, railroads are charging different rates to different customers and entering into long-term contracts. This drives the development of a larger customer base, which lowers overall shipping costs. For you, these changes allow more service options and lower prices.
Fast forward to today’s vantage point: 2020. Though forty years have passed, time has only made the benefits of the Staggers Act clearer for customers. Since 1981, average rail rates (measured by inflation-adjusted revenue per ton-mile) have declined by 43%, meaning the average rail shipper can move much more freight for around the same price it paid four decades ago. In other words, as a rail customer today you can now move more freight for less.
As new technology is introduced, railroads can actually invest in those advancements and achieve even further safety, service and sustainability gains, keeping pace with today’s hyper-competitive freight market. Freight railroads have invested more than $710 billion of their own dollars back into the network since the passage of Staggers. With new solutions, including autonomous inspections and freight tracking systems, customers can count on the network’s transparency and safety, propelling their businesses forward.
Learning from the Past
Walking a mile in the customer’s shoes illuminates how the Staggers Act has uniquely positioned the rail network to meet modern demands, which ebb and flow at the whims of supply chain infrastructure, e-commerce trends and most recently, the COVID-19 pandemic. History proves that success is shared; a thriving railroad industry is good for railroad customers, the economy and the general public alike.
History also shows us, however, where mistakes were made and how we can avoid repeating them. Before the passing of the Staggers Act, overregulation hurt shippers across the country, making it difficult for them to bolster their businesses and reach customers because of underinvestment in rail. Though we don’t have a crystal ball, imagining the past from the eyes of a customer also makes the breadth of the harm clear. Re-regulation that imposes similar pre-Staggers limits on today’s railroads would ultimately harm customers as railroads could not reinvest in their networks, nor compete for business with the evolving trucking industry.
There is a never-ending list of things that have become more efficient in the last 40 years: streaming your favorite movie (“Back To The Future,” anyone?), ordering packages for delivery and keeping in contact with family, to name a few. Thanks to the Staggers Act, shipping freight belongs on that list as well.