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Hemphill's January column - Government dole

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futuremodal: Which U.S. railroad is earning monopoly profit? ATT existed in its former state because of the great 1913 compromise: regulated monopoly returns in exchange for universal telephone service. Technological advances and "private carriage" (railroad telegrph/telephone systems morphing into de facto "contract carriers," etc.) rendered the old model obsolete, and the long-haul market was deregulated in 1984. Ironically, the railroad industry experience was almost a circus mirror image of that of the telephone industry: heavily rate- and service-regulated without monopoly returns, and with the explicit regulatory objective of fostering enhanced competition from pipelines, barges and trucks. Gradually, "umbrella" rate regulation was ended (1958 legislation), then service and route regulation substantially ended (1970's and 80's legislation). These belated actions were taken to save the railroad industry from the effects of misguided regulation, not to protect the public and enhance competition, as was the case in the AT&T breakup. Ironically, for "open access" proponents, the FCC has finally bowed to the will of Congress as expressed in 1996 legislation and has ended "open access" in local telephone markets. Investment and innovation had atrophied under a regime more aptly named "forced access." The practicalities of fragmented railroad network ownership (separating so-called infrastructure from the operating entities) are so daunting that only those posessing a blind faith in the wisdom of regulators would seriously propose it. The most recent real-world test of such a scheme with which I am acquainted is the debacle in England. And there, the split was of a nationalized system, not of private properties. Your idea of "prepaid" tolls compensating shareholders for the taking of right-of-way, track, structures, signals, dispatching centers, computer centers, and most importantly, franchise value, is simply not feasible. Who can possibly have the wisdom and knowledge to equitably (in the economic sense) divide these tangible and intangible values between two sets of owners? We are talking about a less than zero-sum game here, so who takes the loss?
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