WASHINGTON -- Tough new U.S. rules on railroad mergers have stalled further consolidation for now and the industry is set to focus on improving service and winning back customer and investor confidence, two top North American railroad executives told a Senate panel on Thursday, according to a wire service.

Chief executives John Snow of CSX Corp. (NYSE:CSX - news) and Paul Tellier of Canadian National Railway Co. (Toronto:CNR.TO - news) told the Senate surface transportation subcommittee that the industry is poised to enter into alliances that provide many of the benefits of mergers without the regulatory hassle and disruptions in service.

"This is a time when railroads ought to be focusing on serving customers better, on reducing their costs, improving their balance sheet and improving their earnings power," said Snow who said it would be at least three years before another wave of mergers occurred.

Added Tellier: "We don't see anyone planning to merge at this time, but it is hard to forecast the future. We are keeping an open mind."

The Surface Transportation Board (STB) issued tougher merger rules earlier this month that required merger applicants to submit plans for increased competition and back-up strategies in the event a combination causes service to deteriorate.

"Service is being discussed up front in a way it never has before," said STB chairperson Linda Morgan. "We will be looking for (customer assurance) for whether a plan has validity or not," she added.

STB developed the new rules during a 15-month moratorium on mergers that was prompted by worries that the six remaining major North American lines would be reduced to just two transcontinental networks in a flurry of merger activity.

Last year Canadian National tried to overturn the moratorium in order to merge with Burlington Northern Santa Fe. Corp. (NYSE:BNI - news), but abandoned its plans after losing the case in court.

Several Senators and shipper groups testified on Thursday that while the tougher rules have "raised the bar" for future mergers, past consolidation has indefinitely reduced shipping options for consumers.

The moratorium allowed the STB "to step back and take a look at the whole picture, but I am a bit concerned that it comes a bit too late," said Sen. John Breaux, a Louisiana Democrat who chairs the subcommittee.

In many areas of the country rail competition is already extinct. In North Dakota, for example, 97 percent of grain elevators have access to only one railroad.

The railroad industry was plagued with delays following the mergers of Union Pacific Corp. (NYSE:UNP - news) and Southern Pacific Corp. in 1996 and the 1998-99 purchase and division of Conrail Inc. by Norfolk Southern Corp. (NYSE:NSC - news) and CSX.

Morgan said that the STB "went as far as it could legally go" in requiring railroads to prove a merger would enhance competition.

Railroads could improve competition by sharing their tracks or engage in switching agreements, but the STB stressed that each merger would be judged on a case-by-case basis.