Transportation Regulation

Transportation Regulation

Transportation regulation is administered by all levels of government (federal, provincial, municipal) and covers prices, conditions and levels of service, and the operating authority of transport units. The purpose of regulation is to ensure that transportation services are provided adequately and that users of these services are protected from excessive prices or unfair practices. Regulation can also be used to assist certain regions, industries or user groups.

Canadian transport regulation began with the establishment of a Railway Committee of the Privy Council in 1868. In 1903 the regulatory powers of the committee were transferred to the Board of Railway Commissioners, an independent, quasi-judiciary regulatory agency. Subsequently the board was given jurisdiction over express, telegraph and telephone companies (1908); government-owned railways (1923); international bridges and tunnels (1929); abandonment of railway lines (1933); Hudson Bay Railway (1948); and Newfoundland Railways. The Transport Act of 1938 changed the name of the board to the Board of Transport Commissioners for Canada and gave it regulatory powers over transportation by air and water. In 1944 the regulation of civil aviation was transferred to the Air Transport Board. The National Transportation Act (1967) created the Canadian Transport Commission (CTC), entering a new phase of transportation regulation.

The CTC replaced the Board of Transport Commissioners, the Air Transport Board and Canadian Maritime Commission. The CTC was also granted regulatory powers over commodity pipelines, and the sectors of highway transport placed under federal control. Initially the CTC also had regulatory powers over TELECOMMUNICATIONS, but these were transferred to the CANADIAN RADIO-TELEVISION AND TELECOMMUNICATIONS COMMISSION in 1976.

Under the National Transportation Act, 1967, the structure of railway regulations followed the principles proposed by the MacPherson Commission: overall reliance on market forces except for regulatory interventions related to the protection of "captive shipper" and prohibition of noncompensatory rates: CTC also dealt with specific cases where the rates imposed a burden on shippers or regions not justified by the existence of specific cost conditions. In air transport the regulatory activities of CTC largely reflected government policies. In the 1970s the degree of competition had been gradually increased through granting competing airlines operating authorities over major scheduled routes and by permitting a substantial increase of competition by nonscheduled (charter) airlines in the discretionary travel market.

The National Transportation Agency (NTA) was created in 1987 as part of the move to deregulate parts of Canada's transportation sector. Until the 1970s, "public utility" type transport regulation had gone unquestioned in North America. Although Canadian thinking on regulating transportation had always been influenced by the US model, Canadian policies and practices were quite distinct. Canadian railways had a wide degree of pricing freedom, unlike US railways, and interstate highway transport was also controlled, a situation with no parallel in Canada. Air transport regulations were also different. However, the concept of regulation was seriously questioned in the 1970s, resulting in a virtual transport deregulation in the US. In Canada, a policy paper called "Freedom to Move, "put forth by Minister of Transport Don Mazankowski in 1985, outlined extensive reforms to regulatory practices, forming the basis of the legislation that created the NTA.

The National Transportation Act acknowledged that safety issues and economics should be treated separately. Responsibility for transportation safety was assigned to other specialized groups. The Act also recognized that many of the federal transport modes were not public utilities, but were active participants in a competitive marketplace. Whereas the CTC employed upwards of 1000 people in 1986, the NTA employed about 500 initially and streamlined its operations down to about 200. The agency, as Canada's economic regulator of federal transport industries, was responsible for issuing licences for railways and resolving or determining rate and service matters when necessary; standards-making and regulatory functions with regard to access to transportation for persons with disabilities; and regulating the domestic and international airline sectors in Canada, with the exception of granting special licences for air carriers intending to operate in Canada's north. The agency's role as a quasi-judicial tribunal involved applying policy to individual cases and leaving policy development to elected representatives. The agency operated on a cost recovery basis, with the ability to levy fees for matters brought before it, such as issuing air licences or resolving rail disputes.

Recognizing that large segments of Canada's transportation system were overbuilt, inefficient and heavily reliant on subsidies, Transport Minister Douglas Young proposed a comprehensive strategy to modernize Canadian transportation and prepare it for the 21st century. As the Bill was being developed and reviewed, efforts were made to strike a balance between what the parties can and should do themselves in the marketplace, what should be matters of government policy left for Parliament to decide, and what must remain a matter where the regulator is to be involved. The main consideration was that economic regulation be used only where commercial forces are inadequate.

Effective 1 July 1996, the Canadian Transportation Act created the CANADIAN TRANSPORTATION AGENCY (CTA) to replace the NTA. This body is responsible for air transportation regulations and rules; personnel training for the Assistance of Persons with Disabilities Regulations; railways costing regulations; railway interswitching; railway third-party liability insurance coverage regulations; and railway traffic liability regulations. In addition, the CTA shares responsibility with Parliament for the Atlantic Region Freight Association Regulations' Atlantic Region Selective Association Regulations; Atlantic Regional Special Selective Provisional Association Regulations; Carriers and Transportation's Undertakings Information Regulations; Jacques-Cartier and Champlain Bridges Inc Regulations; and Seaway International Bridge Corp Ltd Regulations.

Railway Rates Regulation

The railways have occupied a prominent position in Canadian transportation. Basic geographical considerations of distance and population density, combined with economical and political disparities, have created a complex transport situation for regulation policy. Establishing fair and reasonable rate levels that are nondiscriminatory has been difficult because of variations in financial structure and resources among railways, the degree of direct or indirect competition, the commodities being transported, alternative routings and the permissible rates of return. These variations have been further complicated by political and regional policy considerations.

An important class of railway rates, grain export, was outside regulatory jurisdiction until 1983. These rates were originally established by the CROW'S NEST PASS AGREEMENT (1897) between the Dominion government and Canadian Pacific, and were redefined by legislation in 1922.

Following WWII and the growth of road transport, railway regulators were faced with additional problems. A continual increase in costs led to periodic demands by the railways to increase rates, and the growth of competition led to competitive rate applications and to special contract rates. But the increase in road transport meant that the general rate increases applied to a diminishing part of the transport market. Furthermore, competition had uneven effects in different regions of the country.

Air Transport

The main concerns of air-transport regulation have been the structure of the industry and of the route network. The problems of price regulation, which at first were largely restricted to the maintenance of price stability, became more complex and important in the 1970s with the growth of charter carriers and the advent of "seat sales" and other marketing devices by scheduled airlines. In the immediate postwar period air-transport regulations had been based on the principle of route monopolies; major intercity routes were allocated to TRANS-CANADA AIRLINES (TCA, later renamed AIR CANADA), and regional and local routes were assigned to Canadian Pacific Airlines (CPA, later renamed CP Air) and to independent airlines.

An increased degree of competition was gradually introduced, starting with a deregulation experiment in the small aircraft charter field and with the granting to CPA of limited access to the transcontinental market in 1958. The regulation of air transport was administered initially by the Board of Transport Commissioners (1938-44). In 1944, when the Aeronautics Act transferred regulatory powers to the Air Transport Board, the government was given considerable powers of policy intervention. Following de facto deregulation of air transport in the mid-1980s the structure of the industry has changed drastically: a near duopoly of Air Canada and Canadian Airlines International emerged through a series of acquisitions of regional carriers by CP Air and of CP Air by Pacific Western Airlines. This development paralleled a trend towards concentration of the industry in the US which followed deregulation in that country.

In July 1994, the federal government established the National Airports Policy (NAP), under which the federal government maintains its function as regulator but changes its role from airport owner and operator to owner and landlord. The federal government retains ownership of the 26 major airports that handle the bulk of Canada's air transport, known as the National Airports System, and leases them to Canadian airport authorities under the NAP.

Highway Transport Regulation

Highway transport regulation is divided between the federal and provincial governments; the provinces have the right to regulate transport undertakings operating within the provinces, but interprovincial undertakings are subject to federal jurisdiction. However, federal regulatory authority has been delegated to the provincial boards (Motor Vehicle Transport Act, 1954). The National Transportation Act provides for the reassumption of federal regulatory powers over interprovincial road-transport undertakings, and provides certain authorities over some aspects of road-transport operations (mergers, Sunday operations). For all practical purposes the highway transport industry is provincially regulated.

The scope of licensing and rate regulation of the TRUCKING industry varies from province to province, from virtually no regulation in Alberta to comprehensive regulation in Québec. BUS routes are regulated by exclusive franchises, or route monopolies. Municipalities regulate courier and taxicab services.