132 Years of Regulation and Counting

Way back in 1888 the Interstate Commerce Commission (ICC) was born. It was era of limited competition, increasing consolidation and rapidly increasing rates for interstate transport. Sound familiar?

Although the ICC was initially formed to control railroad pricing and services, it grew to include highway transport in 1935. Later, the Maritime Commission and Federal Aviation Administration were added. Today all these are under the Department of Transportation (DOT), a presidential cabinet level agency.

And although all of these agencies and commissions have “deregulated” rates, they still have jurisdiction and the right to start and stop business activity through regulatory actions aimed at safety and the free flow of interstate and international commerce. At the end of the day, they make an impact on pricing because they make an impact on costs for operators.

Some of us more senior transportation folks remember when the ICC limited entry into the market by specifying the routes and territories a motor carrier or railroad could serve. General price increases were subject to challenge before the commissions, and the impact was to grant monopoly positions and price protection to carriers in the name of ensuring that there wasn’t ruinous competition in a market resulting in carrier bankruptcies.

It wasn’t until the late 1970s and early 1980s that the transport markets became “deregulated” in the area of market entry. It was much later that joint rate-making was prohibited. Some would argue that with one or two major carriers serving a location today, and the regular simultaneous announcement of price increases in parcel, rail, ocean and air cargo markets, that we have simply exchanged monopolies for oligarchies.

The current regulatory philosophy is to be “hands off” on market entry and pricing. The focus is on increasing competition to moderate pricing and adding resources—more labor, driverless vehicles—and government subsidized infrastructure—ports, highways, airports—in order to lower barriers to entry.

A case in point is the proposal to reduce the driving age, currently 21 years of age, for interstate truckers. The argument for this change is that with driver license ages being as low as 16 in some states, an 18-year-old would be ready to train for a big rig. Further, many states permit intrastate truck driving at 18.

One advocate stated recently that anyone who can operate a video game at high intensity with multiple distractions could handle a truck on a highway. Of course, this assumes the individual is not playing the video game on their phone while driving.

A second consideration is health. Industry insiders often list the average age and health of today’s operators as concerns, noting that attracting younger, healthier men and women would improve the sustainability of carrier operations.

The counter argument comes from insurance companies and safe driving advocates that contend that the younger demographic is more accident prone, easily distracted, and more apt to be texting and social networking while operating a vehicle.

In order to determine which side is right, the DOT Federal Highway Administration proposes a pilot be conducted for 60 days to see what happens—keeping in the tradition of trying out ideas that regulatory bodies have been doing for over a century. It’s hoped that by increasing resources and supporting innovations the transport market can counteract the anti-competitive forces of consolidation and price coordination. I do wish them good luck.