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Mark, I can barely keep up! But I'll try. Responses to you most recent post: 1. Well stated and I agree with you except your point about mode share shifts. The Southern Railway demonstrated to the industry how to manage the problem: build a competition matirix so that "general rate increases" become "selective rate increases." The "gospel" across the industry in establishing specific commodity rates was (rightly), "value of service" tempered by competitive reality. Having invested uncounted resources in developing a highly differentiated pricing structure, finely tuned to the market, how could it possibly make sense to wake up one morning and say, "I think I'll increase ALL rates by 12 % this afternoon. All that analysis was mere window dressing." I spent 10 years battling that kind of nonsense. 2. Enforcing pricing discipline: The threat of retaliation was implicit, usually, simply as a function of size and geographic coverage. The bureau processes were highly political in many respects, and all the tools of that trade were regularly used: facts, "facts," logic, persuasion, cajoling, horse-trading, bloc-voting, emotion, precedent, fear-mongering, ... you name it! 3. In a word, interdependence. Most traffic was intra-territorial and a high percentage of that was interline. So, sure, exert your leverage, but don't break the system. 4. Weak railroads were weak for a reason: poor franchise. (The ICC long recognized this and back in the 1920's put together a master merger plan for the nation to "solve" the problem. The Depression and bankruptcies ended that.) I believe the ICC always felt its primary role was to "protect" the public, not individual lines, strong or weak. (Again, I recommend "Enterprise Denied" by Albro Martin. The ICC was the first independent agency created by Congress and it had a long and proud institutional history. Some have suggested that like many agencies, it was captive to the industry it regulated, but if so, that was a development late in its life.) Rate bureaus "helped" weak lines in that their demise or merger was delayed by the tempered competition fostered by the bureaus. The 1958 Act gave little or no cost relief. (Some have observed that the needed cost relief should have come from changes in the Railway Labor Act.) 5. Reciprocal switching was/is nothing more than a recognition of mutual interest. Pennsy was "there" first in many areas, with good geographic coverage, so why "open" themselves to competition? 6. Yes. 7. State regulation: I should have included that earlier as a significant gain from the Staggers Act, both in regard to rates and abandonment. Railroad presidents complained that the ICC was slow, but the states were often glacial. Staggers essentially took the states out of the business of regulating railroads. 8. Contract rates in trucking: Good question. I believe it is because the market is atomistic; trucking industry assets are very short lived; virtually all costs are variable; and most importantly, those costs are universally known. To know truck costs is to know truck rates. (Back in the '70's I tracked truck rates and learned they reduced to a cost equation: $100 (fixed) + $0.70/mile (variable).) Service was and is the major point of differentiation. Isn't it ironic that before Staggers and the ru***o secret contracts, service was a major point of differentiation in the railroad business!
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