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[quote user="greyhounds"][quote user="MichaelSol"] The interesting part of these exchanges is how Stawbridge attacks legions of reports and studies by professionals with all sorts of relevant backgrounds, and can never cite a number, analysis or study that supports what he says. It always a simple litany of "wrong," "dumb" "troll", etc, etc. "There is no rail monopoly." Both ICC and STB have handed down decisions that state the contrary in given markets. [/quote] All Right!  OK!  You want a citation, here's your sign: <A href="http://minneapolisfed.org/pubs/fedgaz/03-11/tracks.cfm">http://minneapolisfed.org/pubs/fedgaz/03-11/tracks.cfm</A> This is from the Minneapolis Federal Reserve.  It basically refutes everything you've said.   [/quote] No, it actual upholds the contention that 30% or more of rail shippers are captive: "Nationwide, as much as 30 percent of railroad revenue came from shipments transported at rates that exceeded the government threshold for warranting possible government review." "Nonetheless, various government and industry sources note that the top five railroads control about 90 percent of the country's rail traffic, and that has a lot of shippers claiming they are the victim of market power wielded by railroads that are often the only transport option for commodities." "...the GAO points out that “rail rates were generally higher in areas considered to have less railroad-to-railroad competition.” There is virtually no competition on the Great Falls line,.." [quote] And it pretty well trashes that revenue/variable cost thingy you have been using.  It specifically cites a STB study that finds that "on the whole, the railroad industry clearly operates in a competitive environment". [/quote] That 2000 STB study focusses on the parts of the country where there is an assumption of intramodal competition among railroads.  In fact, the only part of the country where there is de facto intramodal competition is in the Midwest, where most terminal sites have up to 6 Class I's actually competing.  Some parts of the Northeast have at least 3 Class I's.  But for the rest of the country, it is at best a duopoly situation, with UP/BNSF in the West and NS/CSX in the East/Southeast.  And as is clearly evidenced by the MFR report, the Northern Tier has virtually no intramodal competition, which is why the counter to Ken's ignorant claims is the focal point of the report. The problem with the STB's 2k report is that it assumes a drop in rates from two decades ago is *evidence* of an existence of competition, when in fact that so called drop in rates ostensibly provided for captive shippers is simply the threshhold of which a farm, co-op, or industrial production facility will have to cease operations altogether.  In that vein, the "competition" to which the STB refers is not true intramodal competition, but commodity price competition from overseas and the *competition* of potential shut down of the particular industry.  Since the STB is manned by rail industry hacks, it's spin on the analysis is not suprising.  But don't hold your breath waiting for Ken to admit this troubling fact. [quote] Here's a passage from the Federal Reserve paper: "The R/VC formula is also a crude measuring stick for determining market power, particularly given productivity improvements among railroads. For example, if revenue (from a commodity shipment) is $1.50, and the variable cost is $1, the R/VC is 150 percent. But if productivity enhancements are able to shave 50 cents off the carrier's variable cost, and that savings is passed on to shippers—and price trends suggest that has been happening for the last two decades—the R/VC ratio nonetheless goes over the threshold at 200 percent. [/quote] What the report doesn't say is that the initial productivity related rate decreases occured initially in the study period, then were subsequently jacked up to optimize the impact of the differential rate scenario.  To add insult to injury, the *productivity gains* mentioned may actually productivity decreases for the total Stateside supply chain.  Obviously, it is more *productive* to ship grain by unit train than by carload, at least for the railroad.  It is not more productive for the farmer, who now must truck his grain distances up to tenfold over that to the local elevator, as reluctantly cited in the article..... "This model does create certain hardships—some farmers might have to truck crops longer distances to elevators, and some elevators will go out of business."  Again, the article goes on to repeat the egregious falsehood that commodity price decreases to the consumer must be the result of railroad productivity gains, when in fact the drop in commodity prices to the consumer are the result of global competition, not railroad productivity gains "passed on" to the shippers. [quote] The STB's 2000 report states that “while there are clearly instances where railroads retain a certain degree of pricing power, nearly all of the productivity gains have been passed to rail customers ... evidence that, on the whole, the railroad industry clearly operates in a competitive environment.” [/quote] As I have shown above, it ain't intramodal competition, it ain't even intermodal competition that has resulted in ostensible rail rate reductions over the last two decades.  It is global commodity price competition and the subsequent spector of domestic industry shut down potential that has on average resulted in lower rail rates.  Of course, when it comes to drawing conclusions, the STB conviently muddles the stark contrast in rates presented by the differential pricing model. As I've pointed out time and again to no avail, it makes no matter to a captive shipper that his real rail rate may have dropped by 10%, 20%, or so, when (1) the rates for his competitor who happens to have real intramodal rail competition available has dropped by much more than his did due to the inequities of differential pricing, (2) his total transportation costs Stateside have actually increased due to the need to have to truck his product longer and longer distances to the nearest service provided railhead, and (3) global pricing pressures on his cultivated product have forced said commodity price to go down. These are facts that Ken and others with similar tunnel vision do not have the intellectual capacity to grasp.  Relativity analysis is not in their lexicon. [quote] Basically what happened was that after the railroads were deregulated they were able to make themselves much more efficient.  Beause they clearly operate in a competitive environment nearly all the productivity gains were passed on to rail customers. [/quote] Clearly, you do not get it.  It is not intramodal competition that has resulted in ostensible rate reductions.  It is (1) global commodity price competition, (2) the spector of industry shut down due to exceeding the skin of the teeth threshhold, (3) a muddling of the differential between those who have access to true intramodal competition and those 30% (give or take) who don't. BTW - the introduction of said railroad productivity actions is not the result of intramodal competition, since economic theory of oligarchy industries clearly shows that cost reduction strategies will be shared rather than kept confidential.  The biggest mistake being made by the railroad cheerleaders is assuming a productivity gain in an area where the reality is an asset reduction program, nutured by a lack of risk associated with the presence of an intramodal competitor.  It is market skewing at it's worst - the consolidation of grain collecting terminals for example, can only happen because there is no intramodal competitor there to fill the void.  The customer desires the most localized railhead, but since no other competitor is allowed to take over service on lines that are abandoned due to the monopolistic nature of US railroading, in the end he has no choice but to truck his grain farther and farther.  If in fact there actually was the presence of true intramodal competition, the railroads would be reluctant to forego carload facilities in favor of unit train facilities. Thus we have an axiom ignored by the AAR greased palms of the feds - Consolidation of terminals is proof of an inherent lack of true intramodal competition.  To somehow equate the subsequent interindustry productivity gains from consolidation as an evidence of intramodal competition is sheer idiocy. [quote] This widespread improvement in productivity and resultant (due to the competititve environment) rate reductions caused this absolutely stupid revenue to variable cost ratio measurement to go up, not down.  The more efficient the railroads got, and the more savings they passed on to their customers, the higher the ratio went. [/quote] The one thing Ken is actually correct about, albeit because it is simple math pertaining to an abstract.  Of course, if the STB included all the variables in determining revenue adequacy, most of these guys' heads would explode.  Thus we have to keep it simple, like R/VC.  Hey, how about simply contrasting rate differentials for similar commodities haul similar distances in determining the presence of revenue adequacy?  It's called "mileage based rates" - if BNSF wants to haul grain from Minnesota to Portland at $X dollars, then the rate from Montana to Portland should be $X - the mileage difference.  After all, if the Minnesota to Portland rate is "revenue adequate", then taking that per mile rate and pro-rating it for the Montana to Portland haul should be a snap, even for guys like Ken.  All the productivity gains are built in, so there's no need to spin the stats to try and prove to captive shippers that they are not being discriminated against.  How about it STB?  Are you lackies willing to do the logical thing? [quote] Then people like Michael Sol come along and try to falsely say that because the asinine ratio is high, the shippers must be "captive" and the railroads a "monopoly".  Well, the reason the ratio is high is that the railroads reduced their costs of doing business and passed nearly all their savings along to their very fortunate customers.  They didn't pass those savings along because they're really nice people and didn't need the money, they passed the savings through because they clearly operate in a competitive environment. [/quote] Well, I guess some people are just hopeless, aka Ken.  Clearly, he thinks there are ghost railroads operating in Montana and North Dakota right now that are forcing BNSF to lower it's rates from two decades ago.  "They clearly operate in a competitive environment."  [(-D]   [(-D]   [(-D]
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