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The Dark Side of Deregulation - Its Impact on Small Communities

In recent years, Congress has promulgated major legislation designed to reform the regulatory environment for the passenger transportation industry. These statutes include the Airline Deregulation Act of 1978, and the Bus Regulatory Reform Act of 1982. Almost two decades before these legislative measures of relatively recent vintage, Congress enacted the Transportation Act of 1958 which significantly liberalized the ability of railroads to respond to market forces, and discontinue passenger service. This comprehensive legislative agenda, coupled with the presidential appointment of individuals fervently dedicated to market theory to head the regulatory agencies (i.e.. the Interstate Commerce Commission [ICC], the Civil Aeronautics Board [C AB], and the Department of transportation [DOT]), has meant that deregulation has swept through this industry rather more comprehensively than it would have had less ideological agency heads been in charge of its implementation. Any responsible effort to develop prudent public policy with respect to an industry as important to the nation's economy as transportation must attempt objectively to assess the costs and benefits of the new legislative environment. Various forms of deregulation have had now about a decade to run their course (and rail passenger liberalization has had three). It would seem, then, to be an appropriate time to reflect on the impact of deregulation, not only upon the industries which have been deregulated, but also upon those members of the traveling public who rely upon their services. Unfortunately, the literature criticizing the previous regime of regulation, and applauding the benefits of deregulation, tends to gloss over one of deregulation's major costs - its impact upon individuals who reside in America's small towns and rural communities. Admittedly, the impact upon these constituencies has varied depending upon the mode of transportation involved. In part, these differences reflect the inherent characteristics of each mode, and the extent to which each has been deregulated. For these reasons, this analysis will segregate its findings among the several modes - railroads, airlines and bus companies - and in that order, since that is the order in which passenger service has been deregulated. Here and there, where appropriate, projections will be made as to the potential impact of telephone deregulation upon these constituencies. The question of telecommunications deregulation is an important one now being addressed by a number of state legislatures and Public Utility Commissions (PUCs)) The empirical evidence surrounding transportation deregulation may shed light on the potential impact of open entry in intraLATA toll and local telephone services upon the ability of telephone companies to fulfill their traditional rate-averaging and rural service obligations.