As scrutiny intensifies over rail service quality, the U.S. Surface Transportation Board (STB) has extended the comment period for its proposed rule on reciprocal switching—a move that could reshape competitive dynamics in the freight rail industry. Stakeholders now have until December 20 to respond to Docket No. EP 711, which would allow shippers to access competing railroads when service standards aren't met.
Reciprocal Switching: The Heart of Rail Reform Debate
Reciprocal switching, also called competitive access, occurs when one railroad physically connects to a shipper's facility but another cannot. The connecting railroad transfers shipments to that facility, receiving compensation from the other carrier. This mechanism gives shippers access to multiple railroads, increasing competition and bargaining power.
The practice has long divided the industry. Proponents argue it enhances competition, improves service, and lowers costs. Opponents counter that it increases operational expenses, reduces efficiency, and could destabilize rail networks.
STB's Service-Focused Approach
The STB—Congress's designated arbiter for rail rate and service disputes—released this Notice of Proposed Rulemaking (NPRM) on September 7, 2023, amid growing shipper complaints about deteriorating service. Unlike a 2016 proposal requiring evidentiary burdens, this version establishes automatic eligibility when any of three performance standards aren't met.
"These standards reflect minimum service levels below which shippers deserve relief," the STB stated, noting they provide "clear, uniform benchmarks applied consistently to Class I railroads."
The Three Performance Thresholds
1. Service Reliability: Measures whether Class I railroads deliver shipments within 24 hours of their Original Estimated Time of Arrival (OETA). The proposal sets an initial 60% success rate (rising to 70% later) over any 12-week period.
2. Service Consistency: Tracks changes in transit times compared to the same period the previous year. If average transit times increase by 20-25% for loaded cars, unit trains, or empties, shippers qualify for relief.
3. Inadequate Local Service: Evaluates "industry spot and pull" performance—whether railroads successfully place and collect cars within service windows. Falling below 80% success rate over 12 weeks triggers eligibility, with service windows never exceeding 12 hours.
Transparency Requirements
The rule mandates that Class I railroads provide historical service metrics within seven days of shipper requests and standardize how these three metrics are calculated—a first for the industry.
Regulator's Perspective
"This proposal gives shippers predictable, objective standards for when reciprocal switching should occur," said STB Chairman Martin Oberman. "It reduces litigation costs and processing time while giving railroads clear notice about service expectations needed to retain customers."
Oberman noted that no shipper has successfully obtained a reciprocal switching order since 1990, despite consolidation reducing Class I carriers from 40 to just six since 1980.
Industry Reactions
At November's RailTrends conference, analyst Tony Hatch dubbed the NPRM "the STB Full Employment Act" for creating ongoing regulatory oversight of service issues, while acknowledging stakeholders share common goals.
Association of American Railroads CEO Ian Jefferies praised the shift from the 2016 proposal—which he called "backdoor rate regulation"—to this service-based approach. However, he cautioned: "The devil's in the details. Are the metrics right? Should contract traffic be included? Absolutely not."
As the extended comment period unfolds, the freight rail industry faces a pivotal moment—balancing competitive access against operational realities, with service quality as the ultimate measure.