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Intrastate trucking deregulation: have both the negative and positive impacts been overstated?

Deregulation of intrastate trucking is a public policy issue that has generated concern about the importance of states' rights, produced both support and opposition among the members of the trucking industry, and created concern from labor and citizens of small, rural communities. More than thirteen years after the Motor Carrier Act of 1980 substantially reduced federal economic controls over interstate trucking and nearly a decade and a half after the Interstate Commerce Commission (ICC) initiated regulatory reform through administrative actions, forty-one states continue to administer economic regulation of intrastate trucking service. The last state to deregulate its intrastate trucking operations was Maryland in 1992.(1) Although intrastate trucking deregulation legislation has been introduced in Congress for the past several years, none of the introduced bills were given much chance of becoming law.(2)

More recently, however, administrative and court decisions have been made which suggest that deregulation of intrastate trucking may soon become a reality in all states. For example, in a policy statement issued May 6, 1992, in Ex Parte MC-207, the ICC made it clear that almost any shipment that begins out of state is interstate traffic. The Department of Justice added significance to this policy statement by announcing that it was fully prepared to bring suit to enforce existing laws based on the supremacy clause in the Constitution, which gives federal laws precedent over state regulation.(3)

Furthermore, the U.S. Supreme Court, by letting stand a federal appeals court decision, essentially deregulated Federal Express (Fed Ex) from state regulation in California and the other eight states within the ninth circuit's jurisdiction. This decision is viewed as establishing an unfair advantage to Fed Ex, which is likely to shift its operations toward the LTL sector of the industry. The most likely solution to making the playing field level again is to remove all state regulation of intrastate trucking.(4)

In addition, several states moved toward deregulation or at least toward less regulation of intrastate trucking. The Michigan Public Service Commission took action recently which clearly suggests less regulation of intrastate trucking in Michigan.(5) The legislature took action earlier this year to deregulate, with few exceptions, virtually all intrastate trucking service. Deregulation in Maryland became official on July 1, 1992.(6) Finally, the staff of the House Public Works and Transportation Committee circulated draft legislation in August 1992 which would have the effect of deregulating intrastate trucking.(7)

The purpose of this article is to report the results of a research project which addressed the issue of the likely impacts of deregulation of intrastate

trucking. The premise underlying this study was that the impact of deregulation of intrastate trucking on the shippers and carriers in Iowa, Kansas, Missouri, and Nebraska would depend largely on how much of the trucking firms' behavior is now controlled by economic regulation. This study strongly suggests that cost savings from deregulating intrastate trucking might be less substantial than recent studies suggest. On the other hand, a key argument in support of maintaining intrastate regulation -- to maintain certain quality and quantity of trucking service in small rural communities -- is not supported by the study's findings. Before reviewing the results of the investigation of the actual administration of intrastate regulation in these four states, we will review significant studies of the effects of regulation and deregulation of intrastate trucking.

REVIEW OF STUDIES ON INTRASTATE REGULATION AND DEREGULATION

Over the last decade, numerous studies examining the effects of economic regulation and deregulation of intrastate trucking addressed issues focused on the effects of regulation or deregulation with respect to rate levels, amount of discrimination among shippers (particularly between shippers of different sizes and rural vs. urban locations), economic viability of carriers, and the quality and quantity of motor carrier service. Fourteen studies primarily addressing the impacts of state economic regulation of intrastate trucking and fifteen studies addressing the effects of deregulation at the state level were identified and reviewed. The list of studies reviewed is not exhaustive but does include the most significant research on the issue to date. This review will not discuss the variety of research methodologies and limitations of the studies, but will focus only on their basic findings with respect to carrier, shipper, and miscellaneous impacts.

Studies on the Effects of Regulation of Intrastate Trucking

The fourteen studies reviewed are listed in Appendix A. Two of these studies involved most of the forty-eight contiguous states. Most of the studies, however, involved one state, with five studies investigating the impacts in Texas and three studies examining the impacts of intrastate regulation in Oregon. Three other states -- Minnesota, Ohio, and Michigan -- were the foci of three different studies. Of the studies indicating funding sources, four were supported by the U.S. Department of Transportation while the Texas Agricultural Experiment Station supported two of the projects addressing the issue in Texas. A variety of research methodologies was utilized, ranging from reviews of previous studies to case studies, case analyses, and econometric modeling.

Impacts on Carriers. Seven of the studies directly addressed the issue of impacts of regulation on the motor carrier industry. The studies in Texas found that the state entry regulations made it difficult for firms, particularly new firms, to enter new markets (Pustay, 1983) and that profits appeared to have been enhanced (Schuster, 1983). One study involving Texas (Weinstein and Gross, 1987) and one involving Michigan (Morash and Wagenheim, 1991) found that traffic had shifted from regulated intrastate common carriers to unregulated private carriers or less regulated contract carriage. Morash and Wagenheim also reported that market concentration had not been prevented by intrastate regulation in Michigan.

Impact on Shippers. Eight of the studies directly examined the effects of intrastate regulation on shippers. Three of the studies examining the shipper impacts in Texas (Schuster, 1983; Fuller, Makus, and Lamkin, 1983; and Weinstein and Gross, 1987) concluded that rates tended to be higher than they would be under a deregulated environment. One study of agricultural shippers in Texas (Schuster, 1983) found that all of them, especially meat and poultry producers, were hurt by regulation. The other study in Texas (Makus and Fuller, 1981) found no difference between the quality of service provided by regulated carriers and unregulated carriers based upon a survey of fruit and vegetable shippers. Loss and damage was the only service characteristic on which regulated intrastate carriers outperformed unregulated intrastate carriers. The study conducted on the Michigan regulatory system (Morash and Wagenheim, 1991) found that interstate rates with discounts were lower than intrastate rates on more than 90 percent of the shipments. The interstate rate advantage was most prevalent on larger shipments involving longer hauls and lower rated commodities having greater product density. In a study of the Minnesota intrastate trucking regulatory system (Harper, 1984), more than 40 percent of the manufacturers surveyed found the results of rate regulation of intrastate carriers to be satisfactory and only 25 percent found them to be unsatisfactory. On the other hand, almost half of the grain elevators found rate regulation to be unsatisfactory. In a comprehensive study of the effects of intrastate trucking regulation (Allen, Preechemetta, Shao, and Singer, 1990), interstate rates were found to be lower in twenty of the thirty-seven states analyzed. In the other seventeen states, no statistically significant differences between intra- and interstate rates were found.

Miscellaneous Findings. Several of the studies estimated the costs to the state or nation of regulation of intrastate trucking. The comprehensive study of thirty-seven states (Allen, Preechemetta, Shao, and Singer, 1990) estimated the aggregate impact of state regulation in the twenty states in which intrastate rates were determined to be higher than interstate rates on comparable movements to be $2,863 billion per year.

One study of intrastate trucking regulation in Texas (Schuster, 1983) estimated that deregulation in that state would increase the incomes of agricultural producers by nearly $40 million. Most of that income would be a transfer from the providers of the transportation service. In another study in Texas (Weinstein and Gross, 1987), the total annual burden of intrastate regulation to businesses and consumers was estimated to be $1 billion. This study suggested that thousands of jobs in wholesaling and distribution have been relocated in states bordering on Texas because of the lower interstate trucking rates.

The study of Michigan's intrastate trucking regulation (Morash and Wagenheim, 1991) concluded intrastate regulation may actually deter producers from locating in the state. Furthermore, because of the competitive pressures from the less regulated interstate motor carriers, intrastate regulation has not been successful in protecting the state trucking industry in terms of employment.

Two Oregon studies have substantially differing conclusions. One study (White, 1988) estimated the total costs of intrastate regulation to be more than $100 million when transportation plus inventory costs are included in the estimate. The other study (Dolan, 1988) concluded that continued growth of the Oregon economy was dependent, in part, on intrastate regulation.

Studies on the Effects of Deregulation of Intrastate Trucking

Of the fifteen studies reviewed, eight involved examining the effects of the deregulation of intrastate trucking in Florida. Arizona was addressed in three of the studies. California, which partially deregulated and then re-regulated intrastate trucking during the 1980s, was the focus of two of the studies. South Dakota, which implemented substantial regulatory reform of intrastate trucking in the early 1980s, was examined in another study. Five studies were supported by the U.S. Department of Transportation, one by the American Trucking Associations, Inc., and one in part by the University of Kentucky. As in the studies of the effects of regulation of intrastate trucking, a variety of research methodologies was employed, including surveys to obtain carriers' and shippers' views on the impacts of deregulation.

Impacts on Carriers. Eleven of the studies directly addressed the issue of impacts of deregulation on carriers by examining all or at least one of the following: effects on profitability, rate-making practices, rate structures, and service offerings. Several of the studies in Florida and Arizona (Freeman, 1982; and Freeman and Beilock, 1984) -- which deregulated totally in 1980 and 1982, respectively -- found that deregulation had increased the amount of trucking competition and that most of the increased competition came from new or out-of-state carriers.

In two of the studies on the impacts of reduced regulatory oversight in California (Frey, Krolick, and Tontz, 1986; and Frey, Krolick, Nidiffer, and Tontz, 1985), competition was found to have increased with a greater variety of rates being offered. A substantial number of carriers reported a decrease in their nominal rates. More carriers reported lower profits than higher profits after the regulatory change. Some carriers also reported delaying maintenance procedures and switching to their own employees for maintenance work.

Impacts on Shippers. Most of the studies addressing the shipper impacts of deregulation in Florida found that intrastate rates had decreased and services had either remained the same or improved for the majority of shippers. The studies using econometrics to measure the effect on rate levels in Florida concluded that deregulation resulted in lower intrastate rate levels. One study of the impacts in Florida (Bolten, Conn, and Smith, 1983) found that the shippers had no change in their degree of satisfaction with the rates charged after deregulation compared with before deregulation. In one study of the impacts in Arizona (Freeman and Beilock, 1984), a majority of shippers saw increased competition in the trucking industry but fewer service options. About 50 percent of the shippers did indicate an overall service improvement after deregulation.

The two studies of the experiences after regulatory reform in California (Frey, Krolick, and Tontz, 1986; and Frey, Krolick, Nidiffer, and Tontz, 1985) reported increased shipper satisfaction with their motor carrier services and rates after deregulation. Many shippers faced decreases in nominal rates after deregulation. Twice as many shippers indicated that overall service had improved as the number of shippers reporting a decrease in service (measured by promptness and availability).

Miscellaneous Findings. The studies addressing the California experience (Frey, Krolick, and Tontz, 1986; and Frey, Krolick, Nidiffer, and Tontz, 1985) found that the larger shippers and shippers located in urban areas received more of the benefits of regulatory change, in terms of both decreased rates and improved service, than did the small shippers and shippers located in rural areas. In the studies of Arizona and Florida (e.g., Beilock and Freeman, 1987), both large and small shippers were found to have been treated the same under deregulation, as were rural and urban shippers. Although shippers in urban areas might have received slightly larger discounts, service to small, rural areas was found not to have been eroded under deregulation in Florida or Arizona.

Two studies (Winston, Corsi, Grimm, and Evans, 1990; and Allen, Berardino, Phillips, Preechemetta, and Shao, 1990) estimated the annual benefits of deregulation of intrastate trucking to be $1.2 billion (in 1977 dollars) and $2.7 billion, respectively.

Summary Observations on Results of Studies

Although problems can be found with both the methodologies and samples used, the results tend to support certain conclusions. Clearly, for-hire carriers have felt increased competition as the result of deregulation, which has resulted in lower rates and lower profit levels. Shippers overall have benefitted from the lower rates. Conclusions about service levels and differential treatment of rural and urban shippers are more difficult to infer from these studies.

ADMINISTRATION OF ECONOMIC REGULATION OF INTRASTATE TRUCKING IN IOWA, KANSAS, MISSOURI, AND NEBRASKA

This group of states provides a diverse set of experiences upon which to draw inferences about what might happen if all states were deregulated. In order to better understand the nature and degree of economic regulation of intrastate trucking, regulatory staff members in Iowa, Kansas, Missouri, and Nebraska were interviewed to determine how the economic regulation of intrastate motor carriage was actually administered. As has been noted with the implementation of the Motor Carrier Act of 1980, the degree and nature of regulatory reform at the federal level depended somewhat upon the attitudes of the ICC commissioners and the resources available to the ICC to administer and enforce the remaining regulations. By examining the actual practices in these four states, and the resources allocated to them, the differences between the economic regulation that is actually being administered and the economic regulation suggested by the statutory law and regulations can be identified and analyzed. This examination allows a better understanding of the benefits and costs of the current regulatory practices and the potential impacts, both positive and negative, of changes in the regulatory policy of intrastate trucking. Since 1980, both Kansas and Missouri have formally evaluated the need for continued economic regulation but reached different conclusions. Kansas moved to re-regulate in line with the ICC's current regulations while Missouri adopted certain pro-competitive features with the overall intention of continuing economic regulation. Iowa and Nebraska had few substantive statutory changes. Iowa has modified its administrative rules and practices, however, resulting in the relaxation of its regulatory stance, while Nebraska continues its traditional approach of maintaining a highly regulated intrastate trucking environment.

Degree and Nature of Regulation Administration

The interviews of state officials were structured to address the nature and scope of economic regulation of trucking with respect to (1) entry and exit, (2) rates, (3) service, and (4) compensated intercorporate hauling. In addition, the interviews explored selected areas of regulation that are outside these traditional areas of economic regulation.

Regulation of Service. The fundamental question is whether there is a common carrier service obligation for intrastate trucking firms which requires more of the regulated carrier than what would be expected from an unregulated firm. Related questions are (1) Has either the regulatory agency or case law developed an operational definition of the service required by the service obligation? (2) To what degree does the regulatory agency enforce the common carrier service obligation? (3) What are the penalties to a common carrier for not meeting its common carrier service obligation?

The regulatory administrators interviewed in three states -- Iowa, Missouri, and Nebraska -- indicated that a common carrier service obligation existed. Regulators in Nebraska and Missouri cited explicitly the statutory foundation for such an obligation. Nebraska regulators provided the most precise definition and citation indicating that the regular route carriers are required to serve the points along their routes on a regular basis. Missouri regulators stated that a carrier has the responsibility for providing service. Iowa regulators indicated that certificated carriers are required to serve all points they have authority to serve. In contrast, regulators in Kansas indicated that there once was a common carrier service obligation, although nothing existed in the statutes which defined the obligation. Neither court cases nor regulations prescribing what the common carrier service obligation requires of the carrier were found.

Regulators in Iowa indicated that a regulation of frequency of service once existed, but no longer does. In fact, routes and schedules have not been filed by carriers for over thirty years in Iowa. Regulators noted that the frequency of service is set by the carrier based on the volume of freight moved from a specific point. The operating certificates in Iowa simply state that the carrier has the authority and responsibility to serve all points in Iowa. The Iowa Code references the service requirements set by the ICC, which never addressed the frequency of service before 1980.(8)

None of the four states are actively enforcing the service obligations of their intrastate motor carriers. Kansas reduced its service obligation when it moved to less stringent entry requirement. Essentially, Kansas has no service obligations to enforce. Each of the states either stated or implied that the lack of enforcement reflected the lack of need to enforce -- each state receives few or no complaints about carriers not serving particular communities.

The solution to service problems normally does not involve the application of penalties to the carriers. Three states (Iowa, Kansas, and Missouri) have the option of suspending or revoking (or threatening to do so) an operating authority if the carrier is found not to be serving its authorized points. None of the states had used this option, however. Missouri apparently has the additional option of assessing fines for the carrier although there never has been a situation when this has been needed. The normal resolution of service problems by a common carrier involved the informal handling of the situation by the regulator with the involved shipper and carrier. In a few cases, substitute carriers were brought in to provide the requested service.

Regulation of Entry. Kansas has the most liberal entry policy with respect to common carriers. As a matter of practice, entry into the trucking industry in Kansas is virtually unregulated. If the carrier has a line of credit at a bank and does not have a poor safety record, it will be granted authority. Protests by existing carriers are normally futile. Most less-than-truck-load (LTL) carriers applying for authority in Kansas are granted statewide authority for whatever commodity class for which they apply. Carriers not wanting statewide authority are granted irregular route authority from requested areas to all parts of the state. The Kansas Corporation Commission receives about 150 to 200 applications for authority per year. Almost all of the applications are approved either in part or in total. Before the change in the Kansas regulatory policy in the early 1980s, 20 to 30 percent were denied.

In practice, Iowa and Missouri appear to have developed liberal policies in the area of entry regulation. There are very few carriers that do not have statewide authority in Iowa. In the past, carriers did not have statewide authority and had to interline or illegally serve outside the territory of their operating certificates to meet their shippers' needs. Furthermore, of the very few applications by firms to serve intrastate traffic in Iowa, only one of the last ten applications was rejected. Information from Missouri regulators indicated a liberal entry policy based upon the percentage of applications which were granted. Unlike Iowa, most of the common carriers are regular route in nature. Some are irregular route carriers, however, which are granted authority on a county-by-county basis or even for parts of counties. Missouri regulators indicated that truckload (TL) carriers typically have statewide authority. In contrast, no LTL carriers are granted statewide authority but some more established carriers have obtained statewide authority by combining different operating authorities granted to them over time.

Entry regulations in Nebraska are the most strict of the four states and have not changed substantially since 1980. Only one carrier has authority to serve all commodities throughout the state. All other carriers have some type of restrictions, either territory or commodity specific. On the other hand, 80 percent of the carriers that apply for intrastate authority in Nebraska receive the authority sought.

Regulation of Rates. Nebraska has the most restrictive policy in the rates and ratemaking area. Iowa, Kansas, and Missouri allow discounting. Iowa and Kansas appear to have a policy of readily accepting discounts if they are filed with the state regulatory agency. Missouri's policy with respect to discounting has certain constraints. Discounting is not allowed in Nebraska.

All of the four states grant antitrust immunity to carriers participating in rate bureaus. A variety of rate bureaus exists in the four states to accommodate the needs of the different types of carriers. The general commodity carriers in Iowa, Kansas, and Nebraska use the Middle West Freight Bureau to publish many of their rates. In each of the states, however, regulators indicated that the carriers can and do file their own tariffs and bypass the rate bureaus. In Iowa and Nebraska, the majority of rates are filed individually, not through a rate bureau. Missouri regulators are of the opinion that rate bureaus did not provide much of a service to their state's carriers.

Intercorporate Hauling Regulation. The type of state regulation with respect to compensated intercorporate hauling can have a significant impact on private carriers' opportunities to improve the efficiencies of their fleets. The Motor Carrier Act of 1980 permits compensated intercorporate hauling between and among non-transportation companies within the same corporate family that operate private fleets. About half of the states, however, do not recognize compensated intercorporate hauling on intrastate traffic. If a movement is considered intrastate commerce, and takes place within a state that does not allow compensated intercorporate hauling operations, the private carrier is required to obtain authority from the state as a regulated for-hire carrier in order to serve its affiliated companies.

Iowa and Kansas each use a compensated intercorporate hauling regulation similar to that of the ICC. In contrast, both Nebraska and Missouri require that in any case in which funds are exchanged in an intercorporate haul, the private carrier must acquire the required operating authority and charge published rates.

State Regulatory Agencies: Resources and Foci

The degree and nature of economic regulation of intrastate trucking depend not only upon the statutes, regulations promulgated from these statutes, and the interpretation of these regulations by the regulatory agencies and the courts, but also on the resources and foci of the regulatory agencies. The regulatory agencies in each state have different spheres of responsibility. For example, motor carrier economic regulation and enforcement of economic regulation in Nebraska is managed by the Nebraska Public Service Commission. Safety, size, and weight, and registration enforcement in Nebraska are functions of other agencies. On the other hand, in Iowa, the Department of Transportation is the economic regulatory agency and is also in charge of safety, size, and weight, and registration enforcement.

The regulatory staff in each of the four states assigned to intrastate trucking is small. In three of the states, staffs have been reduced since 1980. A correlation was observed between the size of staff and the amount of intrastate regulation administered by the state.

Kansas, which has the least amount of regulation, has only one person assigned 40 percent of the time to rate regulation. This person's remaining time is allocated to rail line abandonment and motor carrier safety issues. The field staff in Kansas consists of three individuals who are mainly dedicated to conducting safety compliance reviews. These individuals are in charge of regulating 1,600 carriers that have intrastate authority in Kansas.

Iowa has five individuals who administer the economic regulations for intrastate motor carrier operations. The responsibilities of these five individuals are split among regulating the certificated carriers (including liquid carriers), truck operators (i.e., truckload carriers), and contract carriers.

The Missouri Division of Transportation employs seventy-five staff members; twenty-five are field inspectors who are primarily involved in safety inspections at terminals. With respect to motor carriers, there are nine regulatory auditors that check permits, operating authorities and rates, three administrative judges, three investigatory attorneys, three managers, and one division director. In the 1989-1990 time period, these individuals were in charge of regulating 852 purely intrastate carriers and 1,008 carriers having both intrastate and interstate operating authorities.

Nebraska has a staff of three to administer the regulation of rates. Seven deputy officers are in charge of enforcing rates and checking carriers which might be hauling goods without authority or beyond the scope of their authority. The chief enforcement officer has a personal staff of two.

In each of the states, the staff members of the agency in charge of administering economic regulation of intrastate trucking are becoming increasingly involved in related activities such as motor carrier safety regulations. Missouri involves its staff in safety regulations and sees a greater future role for its staff in this area. The commission in Kansas views its program as more safety-related than anything else. The staffs in Iowa and Nebraska attach the economic regulatory administration to the enforcement and administration of related activities such as insurance requirements, maintaining control over taxation, and vehicle licensing and permitting.

Summary Observations on Actual Administration

The examination of how economic regulation of intrastate trucking operations is actually administered in these four states produced three major findings. First, there is much less economic regulation of intrastate trucking in three of these four states in 1990 than there was in 1980. De facto deregulation has occurred because of budget reallocations. One of the regulators interviewed concluded that economic regulation of carriers is not being done anymore in the state because of the inadequate staff. Nebraska, with its more traditional regulatory environment, is an exception.

Second, regulation of service is virtually nonexistent. The statutory requirements are clearly stated in two of the four states; these requirements provide only minimal standards of behavior -- serving those communities listed in the operating authority. Even if common carrier service obligations standards existed, the states appeared to lack the staffs required to monitor and enforce the service obligations. Possibly most significant, it appears that shippers in these states tend not to complain about the motor carrier service they receive.

Third, staff members currently involved in the increasingly less demanding task of administering economic regulation of intrastate trucking either see their role as supportive of related missions of taxing, licensing, and permitting or regulating safety, or they are already involved in these areas. Both the agencies' missions and staff members appear to have been moving more and more toward the safety regulation area since 1980.

IMPLICATIONS FOR DEREGULATION

The examination and findings with respect to how economic regulation of intrastate trucking is actually administered suggest deregulation of intrastate trucking in these four states would have minimal impact on the size of state government bureaucracies in these states, service to small communities would likely be unaffected, and the overall positive impacts of deregulation might be less than several recent studies suggest.

Impact on Regulatory Bureaucracies

This research strongly suggests that only a few persons would be affected by dramatically changing the economic regulatory environment for intrastate trucking. Given the multiple responsibilities of most of the likely affected staff members in these states, and the expanded responsibilities in administering safety regulations in these states, the termination of economic regulation would not necessarily eliminate their positions. The social costs associated with the disruption and possible dislocation of the lives of the regulators most likely affected by deregulation would be minimal. The cost savings to state governments would also be limited.

Impact on Service to Small Communities

The concern expressed about the potential adverse impacts on the nature and cost of trucking service to small, rural communities in a deregulated environment is a legitimate one. This concern is based upon three premises: (1) much of the trucking service to rural communities is inherently unprofitable and thus rural towns would receive little or no service under deregulation; (2) carriers cross-subsidize their unprofitable service to rural towns with the excess profits on more profitable traffic allowed and facilitated by economic regulations; and (3) many small towns receive service only because the regulated carriers are fulfilling their common carrier obligation to serve.

This research on how Iowa, Kansas, Missouri, and Nebraska regulate intrastate trucking did not directly address the profitability issue. The information collected from the regulatory agencies on how they actually administer state economic regulations on trucking, however, strongly suggests that carriers have the opportunity to adjust their level of service in all four states and probably their rates in three of the states to make their service profitable. As noted above, Kansas has no service obligations, and the other states have very general service obligations. The service obligations in these three states allow substantial amounts of managerial discretion with respect to the quantity and quality of service (e.g., frequency of service) by motor common carriers. Iowa regulators reported that frequency of service is set by the carrier based upon the volume of freight moved from that specific point. Iowa regulators also suggested that carriers have the ability, under its current regulatory scheme, to charge higher rates to small communities through selective discounting to their shippers. In short, common carrier behavior required by the service obligations are not distinguishable from behavior by an unregulated carrier with respect to various dimensions of quality and quantity of service. On the other hand, in Iowa, Missouri, and Nebraska, the common carrier service obligation does require the motor carrier to serve all customers located at points on its operating authority. Thus, more is required of these carriers than would be expected from unregulated motor carriers.

These regulatory agencies have two basic mechanisms to promote trucking service to small, rural communities. First, the agency can enforce the common carrier obligation to serve, which apparently the common carriers in these states have as a quid pro quo for receiving operating authority. It does not appear, however, that any of these three states have adequate resources to enforce the service obligation to guarantee some type of trucking service by regulated carriers. The second mechanism for inducing carriers to serve rural communities is through the development of a cross subsidy scheme as implemented through rate regulation. Missouri regulators indicated that there are no efforts currently to require or encourage cross-subsidization. The essentially free entry policy in Kansas would not allow the regulatory agency to permit carriers' more profitable routes to cross-subsidize their services to small communities. As noted above, shippers have very few complaints about service by intrastate motor carriers in any of the four states. Kansas regulators, in fact, indicated that shippers do not submit complaints about service failures since they know that there are other carriers that want their business.

Positive Impacts of Deregulation

Given the limited extent to which three of the states (Iowa, Kansas, and Missouri) actually regulate intrastate trucking, it is likely that most of the trucking firms providing intrastate service currently are behaving as profit-maximizing firms. Accordingly, a change in policy in three of these states to enact total deregulation is likely to have a limited effect on the behavior of the trucking firms. Thus, the significant benefits that several researchers have projected if the states deregulate their intrastate trucking may not be realized in three of the four states -- Iowa, Kansas, and Missouri.(9) This is not to suggest that savings would not be realized because of some efficiency gains due to changes in both marketing and operations by for-hire and private carriers. The administrative cost savings, however, will likely be minimal since small staffs now exist and much of their time is allocated to cognate functions.

CONCLUSION

As noted above, in general the studies of state regulation and deregulation of intrastate trucking indicate that substantial savings may accrue if regulation of intrastate trucking is eliminated. Interestingly, compensated intercorporate hauling, an area where meaningful cost savings may be realized by deregulating intrastate trucking, received little attention in these studies. Deregulation would allow private carriers to provide intrastate compensated intercorporate hauling in all states and to realize the cost savings associated with the resulting increased efficiencies of their fleets. On the other hand, fears of shippers and receivers in small, rural towns that their trucking service would be jeopardized or at least hindered are cited frequently by those opposing elimination of state regulation. The findings of this study of four midwestern states suggest that both the positive and negative impacts of the deregulation of intrastate trucking might have been overstated.

ENDNOTES

1 The states that have deregulated trucking since 1980 are Florida (1980), Arizona (1981), Maine (1982), Wisconsin (1983), Alaska (1984), Vermont (1986), and Maryland (1992). Delaware and New Jersey were virtually unregulated before 1980.

2 See John D. Schulz, "Bush administration weighs in on latest push for truck deregulation," Traffic World, April 6, 1992, pp. 21 and 23; and John D. Schulz,"Motor deregulation bill reintroduced; two TL carriers announce their support," Traffic World, March 4, 1991, pp. 10-11.

3 See Robert P. James, "ICC pledges more vigorous fight against intrastate truck regulators," Traffic World, May 11, 1992, pp. 11-12.

4 Robert P. James, "High court move seen giving Fed Ex major boost in intrastate trucking," Traffic World, June 15, 1992, pp. 9-10; and Thomas M. Strah, "California Assn. Seeks Decontrol," Transport Topics, July 6, 1992, p. 3.

5 Thomas M. Strah, "A Whiff of Deregulation in Michigan," Transport Topics, August 24, 1992, p. 3.

6 Thomas M. Strah, "Maryland Makes Decontrol Official," Transport Topics, August 31, 1992, p. 3.

7 "House Floats Regulatory Reform," Transport Topics, August 24, 1992, pp. 1, 26.

8 Dennis A. Breen and Benjamin J. Allen, "Common Carrier Obligations and the Provision of Motor Carrier Service to Small Rural Communities," Quarterly Review of Economics and Business, Vol. 20, No. 4 (Winter 1980), p. 90.

9 For current estimates of savings if all states deregulated intrastate trucking, see Bruce Allen, Arayah Preechemetta, Gang Shao, and Scott Singer, The Impact of State Economic Regulation of Motor Carriage on Intrastate and Interstate Commerce (Washington, D.C.: U.S. Department of Transportation, May 1990).

Appendix A. Studies of Economic Regulation of Intrastate Trucking

Allen, W. Bruce, Arayah Preechemetta, Gang Shao, and Scott Singer, The Impact of State Economic Regulations of Motor Carriage on Intrastate and Interstate Commerce. Washington, D.C.: U.S. Department of Transportation, May 1990.

Beilock, Richard, and James Freeman, "Motor Carrier Perceptions of Intrastate Motor Carrier Regulations and Regulators." ICC Practitioners' Journal, Vol. 51(3), March-April 1984, pp. 240-244.

Dolan, Dick, Benefits of Economic Regulation of Oregon Intrastate Motor Carriers. Salem, Oregon: Oregon Public Utility Commission, November 1988.

Fuller, Stephen, Larry D. Makus, and Jack T. Lamkin, Jr., "Effect of Intrastate Motor Carrier Regulation on Rates and Service: The Texas Experience." Transportation Journal, Vol. 23(1), Fall 1983, pp. 16-30.

Harper, Donald V., "Economic Regulation of For-Hire Trucking in the 1980s: The Case of Minnesota." Transportation Practitioners Journal, Vol. 52(1), Fall 1984, pp. 69-92.

McMullen, B. Starr, and Philip Schary, "Intrastate Regulation and Interstate Motor Carriers." Proceedings of the Annual Meeting of the Transportation Research Forum, Vol. 27(1), 1986, pp. 193-197.

Makus, Larry, and Stephen Fuller, "Motor Carrier Regulation and Its Impact on Service: An Analysis of Texas Fresh Fruit and Vegetable Shippers." Southern Journal of Agricultural Economics, Vol. 15(2), December 1983, pp. 21-26.

Morash, Edward A., and George D. Wagenheim, "State Regulation of Motor Carriers in a Deregulated Transportation Environment." Transportation Journal, Vol. 30(3), Spring 1991, pp. 39-56.

Pustay, Michael W., "Intrastate Motor Carrier Regulation in Texas." Logistics and Transportation Review, Vol. 19(2), 1983, pp. 141-162.

Pustay, Michael W., "Regulation of the Intrastate Motor Freight Industry in Ohio." ICC Practitioners Journal, Vol. 50(4), May-June 1983, pp. 415-432.

Schuster, Allan D., "The Effects of Intrastate Motor Carrier Regulation Upon the Texas Agricultural Industry." Proceedings of the Annual Meeting of the Transportation Research Forum, Vol. 24(1), 1983, pp. 461-472.

U.S. Department of Transportation, Impact of State Regulation on the Package Express Industry, September 1990.

Weinstein, Bernard L., and Harold T. Gross, "Transportation and Economic Development: The Case for Reform of Trucking Regulation in Texas" (mimeo). Center for Economic Development, University of North Texas, February 1987.

White, Evan D., Economic Regulation of Oregon Intrastate Trucking: A Policy Evaluation. Salem, Oregon: Oregon Public Utility Commission, November 1988.

Appendix B. Studies of Impacts of Regulatory Reform at State Level

Allen, W. Bruce, Frank J. Berardino, Joseph Phillips, Arayah Preechemetta, and Gang Shao, "Measuring the Impact of Intrastate Deregulation of Motor Carriage on the States." Journal of the Transportation Research Forum, Vol. 30(2), 1990, pp. 406-414.

Allen, W. Bruce, Steven Lonergan and David Plane, Examination of the Unregulated Trucking Experience in New Jersey, Washington, D.C.: U.S. Department of Transportation, December 1979.

Beilock, Richard, and James Freeman, "Carrier and Shipper Perceptions of Motor Carrier Deregulation in Florida." Proceedings of the Annual Meeting of the Transportation Research Forum, Vol. 23(1), 1982, pp. 250-257.

Beilock, Richard and James Freeman, "The Effect on Rate Levels and Structures of Removing Entry and Rate Controls on Motor Carriers." Journal of Transport Economics and Policy, Vol. 21(2), May 1987, pp. 167-188.

Beilock, Richard, and James Freeman, The Impact of Motor Carrier Deregulation on Freight Rates in Arizona and Florida, Washington, D.C.: U.S. Department of Transportation, April 30, 1985.

Blair, Roger D., David L. Kaserman, and James T. McClave, "Motor Carrier Deregulation: The Florida Experiment." Review of Economics and Statistics, Vol. 67(1), February 1986, pp. 159-164.

Bolten, Steven E., Robert L. Conn, and Jay A. Smith, "Florida Motor Carrier Deregulation: The Immediate Effect of Sudden Deregulation From the Perspective of Shippers/Receivers in Small Communities." Preprint Papers -- Conference on Regulatory Reform in Surface Transportation, Washington, D.C.: U.S.Department of Transportation, June 1983, pp. 48-78.

Dempsey, Paul Stephen, "The Empirical Results of Deregulation: A Decade Later, and the Band Played On." Transportation Law Journal, Vol. 17(1), 1988, pp. 31-100, with pages 81-92 devoted to intrastate economic deregulation issues.

Freeman, James W., "A Survey of Motor Carrier Deregulation in Florida: One Year's Experience." ICC Practitioners Journal, Vol. 50(1), 1982, pp. 51-83.

Freeman, James, and Richard Beilock, The Effects of Transportation Deregulation on Motor Carrier Service in Florida and Arizona, Washington, D.C.: U.S. Department of Transportation, May 8, 1984.

Frey, N. Gail, Reuben H. Krolick, and Jay L. Tontz, "The Impact of Motor Carrier Deregulation: California Intrastate Agricultural Products." Logistics and Transportation Review, Vol. 22(3), September 1986, pp. 259-276.

Frey, N. Gail, Reuben H. Krolick, Leone Nidiffer, and Jay L. Tontz, "Effects of Re-regulation of the California Intrastate Trucking Industry." Transportation Journal, Vol. 24(3), Spring 1985, pp. 4-17.

Pustay, Michael W., "The Small Community Service Issue: The Impact of State and Federal Regulation." Proceedings of the Transportation Forum, Vol. 26(1), 1985, pp. 350-356.

Pustay, Michael, "Intrastate Motor Carrier Regulatory Reform in South Dakota." Transportation Practitioners Journal, Vol. 52(1), Fall 1984, pp. 93-107.

Winston, Clifford, Thomas M. Corsi, Curtis Grimm, and Carol A. Evans, The Economic Effects of Surface Freight Transportation. Washington, D.C.: The Brookings Institution, 1990, p. 59-60.

Mr. Allen, EM-AST&L, is distinguished professor of business, Iowa State University, Ames, Iowa 50011; Mr. Maze is professor of civil engineering and director, Midwest Transportation Center, Iowa State University; and Mr. Walter, EM-AST&L, is associate professor, Department of Transportation and Logistics, Iowa State University.
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Author:Allen, Benjamin J.; Maze, T.H.; Walter, Clyde K.
Publication:Transportation Journal
Date:Sep 22, 1993
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