Open Access and Re-regulation Editorial

[TomDiehl]

If hypothetical was a reason to avoid a rational response how would anyone ever have a discussion about changing the status quo?

     If hypothetical was a reason to avoid rational responce, how would anyone, for or against it, have a discussion about open access?

But the problem with FM is that he refuses to move beyond the hypothetical toward a practical plan. Probably because this is where the whole thing falls apart.

[Murphy Siding]

If hypothetical was a reason to avoid a rational response how would anyone ever have a discussion about changing the status quo?

     If hypothetical was a reason to avoid rational responce, how would anyone, for or against it, have a discussion about open access?

[oltmannd]

Don:

That was a very good analysis of the current situation. Control of one's situation allows for a better level of planning...and committment. 

ed

Well, then let's all go back to the days of Ma Bell and Standard Oil.  Hey, if it allows for a better level of planning......and committment, right?

Methinks most rail shippers would disagree with your "satisfactory" rating of planning and committment by the railroads.  Why else are railroads still stuck with less than 20% of all intercity revenue freight share, 25 years after Staggers?

Well, if shippers are upset with service planning and commitment now, they'd be down right suicidal with OA!

OA scenario: RRA has hot train at 10 AM by Podunkville.  RRB has hot train at 4PM.  Both are paying for their "slot" on the ROW.  ROW company decides it's time for a tie gang.  To be efficient, they need 10 hours a day of daylight.  Neither RRA nor RRB can move their slot since they have committed traffic with contract guarantees.  Working around one, screws the other.

Schenario #2.  ROW company maintains 50 mph track.  RRA wants to run a 70 mph train and is willing to pay the increment for it.  Does RRB also get to run 70 mph now?  Who pays what?   RRC all of a sudden buys a bunch of slots for some 40 mph 286K# coal trains that triple the cost of maintaining the 70 mph over 50 mph.  Who pays?

Answer these and I've got some more.

These are hypotheticals, and as such can be thrown right back at ya, Slick.  Both your scenarios can and do also occur with current multiple user arrangements, right?

Answer that and I've got some more.

Not where at least one of the train operating companies don't have control over the ROW.

If hypothetical was a reason to avoid a rational response how would anyone ever have a discussion about changing the status quo?

[mudchicken]

Why would FM care? - All he wants is cheaper freight rates because the the two main industries he champions cannot manage to function in the real world and need to plunder other people's assets by political edict. All the crass hyperbole he continues to inundate us with still continues to fail the smell test. As originally stated, OA remains "socialism, thinly veiled" and is a definate threat to the integrity of the railroad physical plant.

There may be a better path out there that benefits railroads and shippers, but OA fails to be that answer.

[MP173]

Got a couple getting pretty close.  I will admit their returns are nothing to brag about, in fact I believe you are confirming what I said. 

So, if the industry is in such a bad case as it is now, how will stripping the land based assets from the operating assets improve the returns  on both entities?

Bud

[Anonymous]

Dave:

The last time I looked, Justice Department has not decided that the railroads needed to be broken up, ala Bell or Standard.  In fact the government has taken the opposite view over the past 50 years and has approved nearly all mergers.

Is that situation going to change?  I believe that railroads have finally achieved a level of pricing power that has not been available and they need to be extremely careful in how they are to proceed.

Your proposal to move to an open access system is very interesting and provides an interesting amount of discussion and thought.  I personally never seeing the railroads giving up that right to own and control their own infrastructure, unless either Justice comes knocking on their doors or there is a very compelling reason for open access.  Take away the right of way and the infrastructure and what is a railroad left with?
Cars and locomotives, people and systems.  The ease of entry, which the trucking companies fight constantly will be open to a number of companies.

Will that foster competition?  Cant answer that.  On certain lanes it no doubt would, on others it probably would not.

Dave, the solution is simple.  If there is a demand for more railroad competition between points, then the investment dollars will flow to that project.  In other words land will be acquired, track laid, sidings built and trains will be run on those tracks.  A private company could build it's own ROW and open access could become a reality.  Expensive?  Very.  Likely to occur?  Probably not.  The projected returns on investment are not there. 

Look at DME's proposed expansion.  Government money is being used in the forms of loans.  Why?  There were NO PRIVATE LENDERS or INVESTORS willing to provide capital.

The current returns for railroads does not warrent massive expansion or massive investment.  Private capital is now heading in the direction of other companies as more and more publicly traded companies are being taken private.  The reason is very very simple.  The anticipated returns are high.

So, in summary...Justice Department has not deemed BNSF, UP, NS, CSX, CN, CP to be on the same level of Bell, Standard or even Microsoft.  Until there is a movement by either Justice or STB there is no motivation for the railroads to implement the OA plan.  At this time there is not a groundswell of private capital to invest in purchasing land for ROW, and building an infrastructure.  Only a government funded load has been provided to expand the railroad system and the parties are mixed as to whether or not that debt can be serviced.  There are other capital improvements which are government based such as the NS tunnel clearing and the Southern California project but for the most part the government is pretty silent regarding public funds for the railroad industry.

With very little private investment, other than retained earnings and very little public investment (DME) there is simply not the returns to justify further investment at this time.  What will trigger that further investment?  Higher returns.

ed

Ed,

Look closely at all the high falutin' finance data coming from the Class I's, and you will see that even 25 years after Staggers, massive retrenchment, monopolistic pricing power, et al, the railroads still are nowhere near being able to recover their cost of capital.  I've got new for ya, Bud - such will never happen with a continuation of the integrated model.  The lack of intramodal competition inherent with all monopolies equates to very little generation of new business.

The history of US railroads is one of massive federal aid from the get go to the present.  Always has been, always will be, because we are dealing with an anachronism.  Demand for new rail service has always been implicit, but the integrated model squelches the desire for potential shippers to invest their time and money in such a venture.  Because let's face it - who but a masochist wants to be subjected to monopolistic abuses?

[Anonymous]

Don:

That was a very good analysis of the current situation. Control of one's situation allows for a better level of planning...and committment. 

ed

Well, then let's all go back to the days of Ma Bell and Standard Oil.  Hey, if it allows for a better level of planning......and committment, right?

Methinks most rail shippers would disagree with your "satisfactory" rating of planning and committment by the railroads.  Why else are railroads still stuck with less than 20% of all intercity revenue freight share, 25 years after Staggers?

Well, if shippers are upset with service planning and commitment now, they'd be down right suicidal with OA!

OA scenario: RRA has hot train at 10 AM by Podunkville.  RRB has hot train at 4PM.  Both are paying for their "slot" on the ROW.  ROW company decides it's time for a tie gang.  To be efficient, they need 10 hours a day of daylight.  Neither RRA nor RRB can move their slot since they have committed traffic with contract guarantees.  Working around one, screws the other.

Schenario #2.  ROW company maintains 50 mph track.  RRA wants to run a 70 mph train and is willing to pay the increment for it.  Does RRB also get to run 70 mph now?  Who pays what?   RRC all of a sudden buys a bunch of slots for some 40 mph 286K# coal trains that triple the cost of maintaining the 70 mph over 50 mph.  Who pays?

Answer these and I've got some more.

These are hypotheticals, and as such can be thrown right back at ya, Slick.  Both your scenarios can and do also occur with current multiple user arrangements, right?

Answer that and I've got some more.

[Anonymous]

I see the debate rolls on.

Whatever happened to the old saying "If it ain't broke...

"If it aint' broke.........

.......you ain't lookin' hard enough!"

[Anonymous]

I see the debate rolls on.

Whatever happened to the old saying "If it ain't broke...

[MP173]

Marc:

Well stated.

The US financial markets are pretty sophisticated at recognizing opportunities and creation of instruments to fund those opportunites.

I seriously doubt if the railroads will be able to invent new methods of financing.  Most of their management attention is directed towards operations, not financing.

ed

[MStLfan]

Dave:


Look at DME's proposed expansion.  Government money is being used in the forms of loans.  Why?  There were NO PRIVATE LENDERS or INVESTORS willing to provide capital.

The current returns for railroads does not warrent massive expansion or massive investment.  Private capital is now heading in the direction of other companies as more and more publicly traded companies are being taken private.  The reason is very very simple.  The anticipated returns are high.

DME was not alone in that, around 2000 Wall Street yanked Krebs at BNSF back pretty hard after spending too fast in double tracking the former Santa Fe Transcontinental line (did he in hindsight?). Soon after he was gone. These days capacity increases at BNSF are much harder to get through.

In the Netherlands we have a saying that translates as follows: you have to invest in order to get a return. Perhaps railroads have to invent new ways of financing in order to get the necessary capital.

greetings,

Marc Immeker

[MStLfan]

What keeps me wondering in these discussions is this: where is the true money in running trains. Is it in the infrastructure part or in the running the train over the railroad part?

Presumably railroads have a way to calculate the cost of running a train over the track (including maintenance, dispatching, depreciation and fund forming for future upgrades that must be charged to the track component) and what to charge the competion when granting trackage rights.

Maybe the answer will surprise us and the real money is in owning tracks not operating trains over it.

greetings,

Marc Immeker

[Suburban Station]

Telecom open access was a failure. While it did provide low cost dial up competition, verizon was light years behind cable because it was unwilling to invest serious money to upgrade it's network when the benefits would simply be passed on by some bureaucrats definition of cost. I hear a lot of comparisons to Europe but to my knowledge, a realtively small portion of freight is moved by rail in Europe. And certainly not all rail is the same. Try riding Amtrak's SW Chief and then hop on the sunset or crescent to see how different rail can be. While rail suffered through nearly a scentruy of government idiocy and arrogance, it has started to recover due to changes in fuel costs and shipping routes. Strong pricing power has led to rail investment not scene since your grandfather's time. BNSF is adding a third track to its main line in some places no? To me OA woudl doubtlessly lead to politicizing rail investment and serious bottlenecks.

[MP173]

Dave:

The last time I looked, Justice Department has not decided that the railroads needed to be broken up, ala Bell or Standard.  In fact the government has taken the opposite view over the past 50 years and has approved nearly all mergers.

Is that situation going to change?  I believe that railroads have finally achieved a level of pricing power that has not been available and they need to be extremely careful in how they are to proceed.

Your proposal to move to an open access system is very interesting and provides an interesting amount of discussion and thought.  I personally never seeing the railroads giving up that right to own and control their own infrastructure, unless either Justice comes knocking on their doors or there is a very compelling reason for open access.  Take away the right of way and the infrastructure and what is a railroad left with?
Cars and locomotives, people and systems.  The ease of entry, which the trucking companies fight constantly will be open to a number of companies.

Will that foster competition?  Cant answer that.  On certain lanes it no doubt would, on others it probably would not.

Dave, the solution is simple.  If there is a demand for more railroad competition between points, then the investment dollars will flow to that project.  In other words land will be acquired, track laid, sidings built and trains will be run on those tracks.  A private company could build it's own ROW and open access could become a reality.  Expensive?  Very.  Likely to occur?  Probably not.  The projected returns on investment are not there. 

Look at DME's proposed expansion.  Government money is being used in the forms of loans.  Why?  There were NO PRIVATE LENDERS or INVESTORS willing to provide capital.

The current returns for railroads does not warrent massive expansion or massive investment.  Private capital is now heading in the direction of other companies as more and more publicly traded companies are being taken private.  The reason is very very simple.  The anticipated returns are high.

So, in summary...Justice Department has not deemed BNSF, UP, NS, CSX, CN, CP to be on the same level of Bell, Standard or even Microsoft.  Until there is a movement by either Justice or STB there is no motivation for the railroads to implement the OA plan.  At this time there is not a groundswell of private capital to invest in purchasing land for ROW, and building an infrastructure.  Only a government funded load has been provided to expand the railroad system and the parties are mixed as to whether or not that debt can be serviced.  There are other capital improvements which are government based such as the NS tunnel clearing and the Southern California project but for the most part the government is pretty silent regarding public funds for the railroad industry.

With very little private investment, other than retained earnings and very little public investment (DME) there is simply not the returns to justify further investment at this time.  What will trigger that further investment?  Higher returns.

ed

[TomDiehl]

You wave the magical governmental wand…sprinkle some OA pixy dust, click your heels together three times, and it all solves itself…

You forgot, while you're clicking your heels, you have to close your eyes and chant: "There's no place like open access, there's no place like open access."

[edblysard]

You wave the magical governmental wand…sprinkle some OA pixy dust, click your heels together three times, and it all solves itself…

[oltmannd]

Don:

That was a very good analysis of the current situation. Control of one's situation allows for a better level of planning...and committment. 

ed

Well, then let's all go back to the days of Ma Bell and Standard Oil.  Hey, if it allows for a better level of planning......and committment, right?

Methinks most rail shippers would disagree with your "satisfactory" rating of planning and committment by the railroads.  Why else are railroads still stuck with less than 20% of all intercity revenue freight share, 25 years after Staggers?

Well, if shippers are upset with service planning and commitment now, they'd be down right suicidal with OA!

OA scenario: RRA has hot train at 10 AM by Podunkville.  RRB has hot train at 4PM.  Both are paying for their "slot" on the ROW.  ROW company decides it's time for a tie gang.  To be efficient, they need 10 hours a day of daylight.  Neither RRA nor RRB can move their slot since they have committed traffic with contract guarantees.  Working around one, screws the other.

Schenario #2.  ROW company maintains 50 mph track.  RRA wants to run a 70 mph train and is willing to pay the increment for it.  Does RRB also get to run 70 mph now?  Who pays what?   RRC all of a sudden buys a bunch of slots for some 40 mph 286K# coal trains that triple the cost of maintaining the 70 mph over 50 mph.  Who pays?

Answer these and I've got some more.

[Anonymous]

.  And that's just for existing business.  Trying to plan new service takes the whole deal to another level.  To think otherwise, is ignorance, stupidity or stubborness.

And I would suggest "Myopic" also.

     And narrow-minded

Yep, those German, Italian, Australian et al OA operators are obviously in a fight with *reality*.

Funny how mention of the OA successes only brings omission from the rail monopoly apologists.  Not to mention ignorance, stupidity and stubborness.

And I would suggest "myopic" as well.

   And narrow-mindedness

 

[Anonymous]

Don:

That was a very good analysis of the current situation. Control of one's situation allows for a better level of planning...and committment. 

ed

Well, then let's all go back to the days of Ma Bell and Standard Oil.  Hey, if it allows for a better level of planning......and committment, right?

Methinks most rail shippers would disagree with your "satisfactory" rating of planning and committment by the railroads.  Why else are railroads still stuck with less than 20% of all intercity revenue freight share, 25 years after Staggers?

[MP173]

Don:

That was a very good analysis of the current situation. Control of one's situation allows for a better level of planning...and committment. 

ed

[Murphy Siding]

.  And that's just for existing business.  Trying to plan new service takes the whole deal to another level.  To think otherwise, is ignorance, stupidity or stubborness.

And I would suggest "Myopic" also.

     And narrow-minded

[JSGreen]

.  And that's just for existing business.  Trying to plan new service takes the whole deal to another level.  To think otherwise, is ignorance, stupidity or stubborness.

And I would suggest "Myopic" also.

[oltmannd]

And if that is the case, then the GM/Ford analogy would still hold, as I would presume that GM would charge Ford for the lost production capability.  Therefore, GM really loses nothing by investing in new production capabilities that can then be used by Ford.  In fact, GM should be able to actually make money on the deal if it charges Ford enough.

No, because autos are not homogenous.  GM cars are designed and built to confidential GM standards, Ford cars to Ford standards, etc.  If all cars were of one standard design, you could in theory support the notion of a private auto plant builder hosting the production needs of various automakers.  Since they're not, it's misplaced speculation.

Faulty analysis of the analogy.  The AUTOs aren't homogenous, but the assembly plants COULD BE, to a very large extent.  All that would be needed were some industry standard for the material handling machinery interfaces, etc.  The cars and their components would remain proprietary design.

All analogies fall apart at the edges, but this one has a long way to go and actually demonstrates why control of the ROW is very important part of the total RR service product.

Totally out of reality there with your "autos could be" falacy.  Now you're just grasping at straws.

Control of ROW isn't an important part of the "total RR service product" so much as it is the key role in diminishing railroad's ability to provide a total service product.  Isn't it odd to you that each Class I railroad is limited to specific geographic service areas, rather than having the whole nation as the service area?

A trucking company can go nationwide, but a rail company can't.  And you call that efficient?

Not out of reality at all.  It's a concept already in place in the auto industry and elsewhere called flexible manufacturing.  GE's been doing it for years with machining the housings for their rotating electrical equipment.  They do traction motors, aux gens, main gens and bunch of other stuff on the same line - almost 100% automated, too.

.  Auto manufacturers often build similar, but substantially different vehicles on the same line.  A Ford F150 line can handle different frames, engines, transmissions, seats, axles, wheels, doors and bodies at the same time.  Not much of a stretch to mix in some Chevy trucks - just a little bit of tooling.  What Ford and GM would lose if they shared is control of the production schedule - which would be a deal killer for them. 

RRs sign contracts that contain transit and shipment performance guarantees all the time - sizable chunks of traffic - usually big net revenue producers.  They earn the RR big bucks because the service quality is there.  Being able to control the ROW and to schedule and operate trains in a mix of traffic and mishaps, and be able to control and work around maintenance windows, is a critical piece of the puzzle.  And that's just for existing business.  Trying to plan new service takes the whole deal to another level.  To think otherwise, is ignorance, stupidity or stubborness.

 

[Datafever]

Disclaimer:  The above info is not supported by any economic theory with a cool sounding name.  It is simply the opinion of an ordinary, smarmy, sophomoric, scoundrel/hack. (shrugs)

Sophomoric?  That word is much too cutesy for the likes of you.  I hereby promote you to junioric.

[Murphy Siding]

Obviously it is efficient. I seem to remember some poster in here crying about "captive shippers" which he defines as only having one railroad to ship with. But since you claim that trucking is more efficient, I guess these "captive shippers" don't have a road for the trucks to serve them.

     Tom!  You may have just single-handedly solved the captive shipper problem that's gripping America as we speak!  Hand each captive shipper a phone book.  Put in a bookmark in the yellow pages at "trucking".  Problem solved!  And to think we had the answer all along.  All we had to do was click our shoes together and say "There's no place like home".

 

Disclaimer:  The above info is not supported by any economic theory with a cool sounding name.  It is simply the opinion of an ordinary, smarmy, sophomoric, scoundrel/hack. (shrugs)

[Datafever]

Contrast that with the transportation sector, where we at least have trucks as the mode of last resort to provide a high cost alternative to the lack of true free market railroad services

A free market is a market in which prices are determined by unregulated supply and demand.

Do the railroads still face some regulations that prevent the industry from engaging in free market practices?  Yes.  One example is that DM&E must get government approval for its application.

But a monopolistic situation is still free market as long as the price is not regulated by government intervention.  What the industry "lacks" is open competition, which is not a requirement of a free market.

If you want to argue that free market theory has got some problems, you would find volumes of support for that position.

[TomDiehl]

And if that is the case, then the GM/Ford analogy would still hold, as I would presume that GM would charge Ford for the lost production capability.  Therefore, GM really loses nothing by investing in new production capabilities that can then be used by Ford.  In fact, GM should be able to actually make money on the deal if it charges Ford enough.

No, because autos are not homogenous.  GM cars are designed and built to confidential GM standards, Ford cars to Ford standards, etc.  If all cars were of one standard design, you could in theory support the notion of a private auto plant builder hosting the production needs of various automakers.  Since they're not, it's misplaced speculation.

Faulty analysis of the analogy.  The AUTOs aren't homogenous, but the assembly plants COULD BE, to a very large extent.  All that would be needed were some industry standard for the material handling machinery interfaces, etc.  The cars and their components would remain proprietary design.

All analogies fall apart at the edges, but this one has a long way to go and actually demonstrates why control of the ROW is very important part of the total RR service product.

Totally out of reality there with your "autos could be" falacy.  Now you're just grasping at straws.

Control of ROW isn't an important part of the "total RR service product" so much as it is the key role in diminishing railroad's ability to provide a total service product.  Isn't it odd to you that each Class I railroad is limited to specific geographic service areas, rather than having the whole nation as the service area?

A trucking company can go nationwide, but a rail company can't.  And you call that efficient?

Obviously it is efficient. I seem to remember some poster in here crying about "captive shippers" which he defines as only having one railroad to ship with. But since you claim that trucking is more efficient, I guess these "captive shippers" don't have a road for the trucks to serve them.

[Anonymous]

And if that is the case, then the GM/Ford analogy would still hold, as I would presume that GM would charge Ford for the lost production capability.  Therefore, GM really loses nothing by investing in new production capabilities that can then be used by Ford.  In fact, GM should be able to actually make money on the deal if it charges Ford enough.

No, because autos are not homogenous.  GM cars are designed and built to confidential GM standards, Ford cars to Ford standards, etc.  If all cars were of one standard design, you could in theory support the notion of a private auto plant builder hosting the production needs of various automakers.  Since they're not, it's misplaced speculation.

Faulty analysis of the analogy.  The AUTOs aren't homogenous, but the assembly plants COULD BE, to a very large extent.  All that would be needed were some industry standard for the material handling machinery interfaces, etc.  The cars and their components would remain proprietary design.

All analogies fall apart at the edges, but this one has a long way to go and actually demonstrates why control of the ROW is very important part of the total RR service product.

Totally out of reality there with your "autos could be" falacy.  Now you're just grasping at straws.

Control of ROW isn't an important part of the "total RR service product" so much as it is the key role in diminishing railroad's ability to provide a total service product.  Isn't it odd to you that each Class I railroad is limited to specific geographic service areas, rather than having the whole nation as the service area?

A trucking company can go nationwide, but a rail company can't.  And you call that efficient?

[Anonymous]

Contrast that with the transportation sector, where we at least have trucks as the mode of last resort to provide a high cost alternative to the lack of true free market railroad services

Gaacckkk.  What a complete perversion of the use of the phrase "free-market", and by someone who advocates regulation of such services.  The rail system is quite free-market.  Forcing a railroad to allow competition on its tracks is anti-free-market.

Question:  Is anti-trust action deemed to be anti-free-market by you?

History has shown us that breaking up monopolies is beneficial for the free market.  Perhaps you would prefer to go back to the days of Standard Oil and Ma Bell?