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[quote]QUOTE: Originally posted by PNWRMNM Dave, I believe your sympathy for the shippers is misplaced. Remember it was the shippers that beat the railroads into rebates in the bad old days and then had the ICC hold rates down between 1906 and World War One. Read Enterprise Denied by Albro Martin for an excellent discussion of the failures of the ICC in that era. Staggers was designed to allow the carriers pricing flexibility, something every other business has. Yes that allows the carrier to price discriminate. I would argue that the problem is that in some cases the carriers have been too competitive. Powder River Basin coal rates, for example, are barely above long run variable costs. Price discrimination is in the carriers interest, in the shippers interest and in the public interest. The reason is that not all commodities can afford to pay the same rate. Expensive manufactured articles can stand a higher rate per ton or per ton mile than can lumber or coal. Charging the one more and the other less is price discrimination, just like the airlines charging 10 different prices for identical seats on the same flight. If the carrier could get the high rate for all products, or seats, of course he would and there would be no price discrimination. The carrier's problem is he can not get the high rates on the low value products so he takes a lower rate on them. So long as the lower rate makes some contribution to overhead and profit it is a good rate for the carrier. If is also good for the shipper of the low rated material, which can get to market now, but without the low rate it probably could not. It is also good for the high rated shipper as the low rated product is covering some of the carrier's overhead, or common costs. To the extent the low rated traffic has a contribution margin, the high rated traffic does not have make that contribution, and everyone comes out ahead. Price discrimination becomes a problem when the high rate payer convinces his politician that he should have the lower rate because if the carrier can give that guy the lower rate, I deserve the lower rate. This political logic has been the cause of untold economic harm to the railroads. As to flavor of open access you pick the one you like. Mac [/quote] Let's step back here for a moment and ask ourselves what justifies the existence of any business? It is to fill a customer's demand for a service or a product. If the customer is not being served to his satisfaction, then the business becomes subject to questions of why it should exists at all. I do not understand this attitude railroaders have toward shippers. It's as if shippers are some kind of nuisance, like a fly that begs to be swatted, and if we could just get rid of these pests, railroading would ride the high line to glory. Again, most rail shippers located on raillines at a time when rates were regulated, thus there was no thought toward site location of a plant in the vacinity of either two or more competing rail lines or a single line, the price differential was not that great. Then came along Staggers, which allowed extreme price discrimination without a corresponding pricing flexibility for shippers. That was followed by the mega-mergers, which went further to eliminate competitive rail access and created a whole new slew of captive shippers subject to a de facto monopoly setting. The effect has been twofold: Many shippers now have serious inflationary constraints to detract from their product competitiveness, and the monopolistic parameters have allowed service levels to suffer accordingly. The latter may be even more damaging than the former, since captive shippers and captive rail spinoffs have had a terrrible time trying to get the right cars ordered for thier needs in a timely fashion. I think we will agree that it is better if rates are set by the market, not be government fiat. I would be opposed to any type of reregulation of railroads to facilitate the implementation of lower rates for captive shippers. However, if open access created a newly competitive rail rate setting based on market forces, why is that a bad thing? As for which brand of open access, I prefer the separation of infrastructure from operations into separate private and private-public corporations, with a corresponding implementation of tax credits and other tax incentives to lower the capital costs, and a caveat that allows states and localities to invest in making capacity improvements to lines deemed vitatl by such authorities, and in allowing for new rail construction to meet future capcity demands. Under this scenario, I would even allow a portion of the highway trust fund to be used if it is based on a removal of trucks from highways to rails.
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