No Simple Exchange: Details of Mutual Switching on US Railroads

One of President Joe Biden’s Executive Orders issued in July call For the chairman of Surface Transportation Board Consider mutual switching as a way to pursue competitiveness in the freight railway industry.

NS Freight Waves wrote in August, Mutual switching occurs when the shipper has access to one freight railroad but wants to access nearby competing freight railroads to foster a competitive pricing environment. Shippers can get that access at the interchange between the two railroads. Shippers argue that switching between them benefits captive shippers, or shippers who have access to only one railroad.

In Canada, reciprocal switching has been an option for many years and is known as interswitching.

However, for mutual switching to be widely available in the United States, regulators must consider the operational and financial implications for the freight rail industry.

According to Jim Blaze, a railroad economist and Railway Age contributor editor, reciprocal switching may be feasible in the United States, but its implementation depends on the business case and location.

“Open switching is neither a magic drug nor a railroad neck dagger,” Blaze said in an email to Freight Waves.

Some US railroads actually have mutual switching agreements as a concession resulting from the merger of railroads. There are also some legacy agreements between the shipper and the railroad before the merger.

However, there are many problems with the possibility of deploying reciprocal switching where it does not yet have that capability.

First, there is the operational aspect. Mutual switching may employ a complex series of automotive interchanges with time dilation and many series movements, but an alternative way to achieve possible second carrier access to the shipper. there is.

Second, there is the question of whether it is economically meaningful for railways to deploy mutual switching. Depending on the situation and how the railroad can benefit from it, switching between them can be economically meaningful, Blaze said.

For example, the second railroad could access the shipper by paying a major railroad company a fee to cover wear and tear maintenance due to the use of the railroad track, as well as compensation for the railroad’s own time. Blaze says there is. He said it would act like a pursuit train movement that requires payment of tolls and bridge-like tolls.

“A smart businessman can understand how to make it work, and a second rail user with such access cannot board a shipper in such a switching area for free. No. The second carrier has to pay a series of fees (use of assets such as truck use), “Blaze said. “Some shippers receive service because the rate of return to reach them is too low and it is not worth the second carrier to reliably repeat on a” accurately scheduled “criteria. I can’t. The result is a mixed bag. “

However, “smart operations and marketers can sit down and make it work if there is such an instruction or” incentive “. For this old railroad economist, just hearing “no help, no help” is intellectually boring. … You need to create a pay-as-you-go model (spreadsheet) and apply it to the candidate site. There’s something balanced in terms of both revenue changes and user expense reimbursement, “Blaze said.

However, the potential operational complexity of reciprocal switching is one of the main rationale for it.

According to Nimesh Modi, CEO of Drage Technology, the steps involved in switching can increase the time it takes for a cargo to arrive from its origin to its destination. BookYourCargo.. For example, travel time from New York to Los Angeles could increase from 15 to 21 days, he said, taking into account the time to implement all operational and safety measures associated with reciprocal switching. ..

The process is “not as easy as it looks … [since] It takes 68 steps for a vehicle to complete a mutual exchange, “says Modi. “I don’t even count the processes of track maintenance, compliance, safety inspections, etc. It’s a very tedious process.”

He goes on to say: “Supporting management requires operational coordination or agreement. It often takes a long time, if not now, to come out. That’s my feeling now … a little time. It will take. “

Infrastructure is important

Mutual switching can cause congestion and operational delays, but it also gives customers additional purchasing options because they have access to more vendors. So, “the question is which option is better.” Modi said.

Mutual switching may be an option in the future if the railroad is committed to building and setting up the physical and logistic infrastructure to do so.

“Infrastructure is the biggest problem. First of all, does the railroad have enough infrastructure to handle this,” says Modi. “Second, they have to find a way to put all these railroads together to work towards this goal. It’s a big challenge because you’re dealing with railroads that have worked on their own for many years. Now they have to coordinate all those railroads together.

“In my opinion, [reciprocal switching] “If we can do this efficiently and properly, it will be useful in the long run,” he added, but “it doesn’t make sense if the infrastructure isn’t being developed in parallel with this idea.” ..

Measuring the long-term impact of mutual switching on railway competitiveness

According to Clifford Winston, a senior researcher in economic research at the Brookings Institution, a think tank, how this practice can make long-term competitiveness of freight railroads because STBs can address the issue of reciprocity. You need to consider whether it will affect you.

According to Winston, freight railroads’ main competitors are autonomous trucks, so STBs need to do everything they can to allow railroads to compete with autonomous trucks in the future. This means that we do not pursue the obligation to require mutual switching.

Autonomous trucks can drive [the railroads] Forever down. Believing it is not a big deal. Trucks have far greater advantages over railroads in terms of labor savings. They can take the driver off the seat and run these fleets. … The truck can say, “We’ve become autonomous and much safer, so it really makes sense to start thinking more ambitious about productivity.” Like a rail. And we want a driveway. We finance it, and once we get the driveway, we can do whatever the railroad can do, “Winston said.

“Sure, autonomous trucks are important for intermodal transportation, so railroads may exist, but my point is that railroads will automate and operate rather than manage them in detail over the next 20 years or so. I think it’s time to focus on the autonomous trucks. ” Winston, who also assists in the dismantling of the STB, believes other federal agencies have the ability to act as antitrust and anti-competitive regulators.

Winston added: “The fundamental problem with railroads is just interconnection. Every time they have to move freight and trade with another carrier, something happens. At the same time, if it’s autonomous, it can run all night. There are trucks. They are not limited to a 12 hour shift … it only makes them much more competitive and improves service. To the extent that the railroad can go that way. , And when we think of North America, I think they can do it with a much wider network. “

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Click here for more Freight Waves articles by Joanna Marsh. No Simple Exchange: Details of Mutual Switching on US Railroads

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