Here is a detailed analysis of the whole range of options to introduce more competition to railroad shipping. I would say that the devil is in the details:
http://www.cato.org/sites/cato.org/files/serials/files/regulation/1997/4/reg20n2g.html
This quote strikes me as particularly brilliant:
“The justification most commonly given for such a pervasive new regulatory regime is "competition." But regulation is not competition. Regulation is governmentally administered prices and operations. Open access schemes that require regular regulatory attention would help revitalize the regulatory industry rather than the railroads. But they would do nothing for most consumers except add the cost of more regulation to their freight bill.”
Bucyrus There have been a lot of analogies to explain reciprocal switching, and some very short definitions, but I am not sure I understand how this works in practice. Say a shipper is captive to one rail line (line A) between the shipper and a connection with another rail line (line B) ten miles away. Say the shipper feels his line A is overcharging him. What exactly does the shipper do to get a competitive price and service from line B for his shipping under the concept of reciprocal switching?
There have been a lot of analogies to explain reciprocal switching, and some very short definitions, but I am not sure I understand how this works in practice.
Say a shipper is captive to one rail line (line A) between the shipper and a connection with another rail line (line B) ten miles away. Say the shipper feels his line A is overcharging him.
What exactly does the shipper do to get a competitive price and service from line B for his shipping under the concept of reciprocal switching?
I believe under the concept of reciprocal switching there is a fixed rate, probably much the same whether it is 1 mile or 25 miles. Say it is $500 a car. Railroad A quotes a rate of $4,000 to move that car across the country. Railroad B offers him a rate of $3,000, plus the $500 reciprocal switching, so the shipper would save $500. This has nothing to do with the shipper "feeling" he is being overcharged; he has an actual better deal.
One option is to truck his goods over to a loading point on the competing railroad. That indeed happens quite often because the cost of the multiple truck hauls required is less than the reciprocal switching charge.
The argument claiming reciprocal switching is confiscating private property does have some weak points. While the railroads are in many senses private corporations, the fact remains that in other respects they have powers very close to a public utility. What other company can obtain permission to expropriate land, or be immune from the opposite? The local village may pass a bylaw to make Sunday train traffic on the mainline on Sunday against the law, or prevent the passage of dangerous goods, but the railroad can ignore it due to federal jurisdiction. Those powers are necessary; the flip side is that some limited oversight is also justified. Requiring reciprocal switching is a very limited interference, and as long as the charge is compensatory, it is encouraging true competition.
Of course one obvious, though not realistic, solution would be for the government to buy the trackbeds and let all railroads freely use them, just as the government owns the road network and any trucker can use them. Then the issue of reciprocal switching would be moot. Just use the existing tax the railroads pay for diesel fuel "cover" the costs, just as the truckers claim!
John
I would not be against reciprocal switching if the charge were reasonable. Remember that is costs a whale of a lot more than $500 just to move one railcar ten feet if there would not otherwise be a crew and power assigned to do the job with other business. I suggest that if the charge were reasonable there would not be a saving for the customer.
The issue will also be which railroad gets to use whose tracks and at what time?
Basically, who gets to go first and who waits?
Let’s say business A and business B are side by side on a single main line, and both want a daily spot and pull between 10 am and 11am, business A want to ship on the UP, business B likes BNSF…who decides which carrier gets to use the main first?
It takes 2+ hours to work either plant, so someone is going to get worked late, maybe not at all, who decides?
Let’s say the mainline was owned by KCS, and during the day, UP goofs up, derails and plows out 100 yards of ROW.
Who pays for the repair and the lost business to KCS, the other shippers on the line, so forth and so on….who pays the property tax on the ROW?
Dave, a crew start on most class 2 and 3 roads runs between $1800.00 to $2200.00, and you are correct, it cost a lot more than $500.00 to move a car any serious distance.
23 17 46 11
cx500I believe under the concept of reciprocal switching there is a fixed rate, probably much the same whether it is 1 mile or 25 miles. Say it is $500 a car.
Well you can create actual competition that will result in a fair rate by allowing one competing railroad to share the track with the track owner. Or you can just set a fair rate for both railroads to use where they do not compete by mutual access to the shipper. But then we are back to the government setting rates, which many have said will not be good.
In reading more about this, I conclude that reciprocal switching and other types of anti-monopoly schemes almost defy a clear and simple explanation. They all are forms of reregulation based on the premise that railroads are using monopoly power to the detriment of society.
The link I posted above makes an excellent point about largest objective being that REGULATION SERVES THE REGULATORS. I believe we are entering an era in American history where that painful lesson may finally be learned, although too late.
edblysard The issue will also be which railroad gets to use whose tracks and at what time? Basically, who gets to go first and who waits? Let’s say business A and business B are side by side on a single main line, and both want a daily spot and pull between 10 am and 11am, business A want to ship on the UP, business B likes BNSF…who decides which carrier gets to use the main first?
Ed -
You are describing Open Access, not Reciprical Switching. In Reciprical Switching a single carrier does the switching for all industries on that carriers area of service. The actual switching carrier gets a switch charge for their efforts in receiving the car in interchange, spotting and pulling the industry and returning the car to interchange. The Other Carrier receives the line haul revenue from the shipment.
Open Access is also a dream for some shippers. I wonder if those shippers would like their competition to use their tools of production?
Never too old to have a happy childhood!
Well durn, you “pulled the plug” before I could set the hook…look at who and where I work and you can see where I was going with it….
In the instance of the PTRA, the concept works, quite well in fact, to the point we are spending a lot of capital on new long receiving tacks for unit train, one of them will hold two 125 car coke, coal or grin trains nose to tail.
Open access is a pie in the sky idea, as was pointed out, what company would voluntarily allow the competition to use their “plant” for do business?
http://www.ptra.com/
go to customers, then tariff to see how much some of this can cost.
Quite interesting, Ed.
Johnny
edblysard Well durn, you “pulled the plug” before I could set the hook…look at who and where I work and you can see where I was going with it…. In the instance of the PTRA, the concept works, quite well in fact, to the point we are spending a lot of capital on new long receiving tacks for unit train, one of them will hold two 125 car coke, coal or grin trains nose to tail.
Do you smile when the grin trains come in?
Oh yeah, thems easy money!
Guess I should have run it through spell check, huh?
What if it had been a gin train!
edblysard What if it had been a gin train!
You would have had to beat the old time Boomer railroaders away from it with a stick!
capitalism is all about free choice right?
http://www.railwayage.com/index.php/blogs/frank-n-wilner/shippers-ask-stb-to-deliver-a-free-lunch.html
What about the fact that monopoly's tend to provide lousy service as the case of the black phones of AT&T
Shippers would move more freight by rail or shippers that are served by a lousy rail carrier as in the case of Guilford could have there freight moved by a another carrier that otherwise go by TRUCK
Bonas capitalism is all about free choice right?
Bonas http://www.railwayage.com/index.php/blogs/frank-n-wilner/shippers-ask-stb-to-deliver-a-free-lunch.html What about the fact that monopoly's tend to provide lousy service as the case of the black phones of AT&T My old rotary AT&T phone worked great, in 40 years never had a single issue with it. Shippers would move more freight by rail or shippers that are served by a lousy rail carrier as in the case of Guilford could have there freight moved by a another carrier that otherwise go by TRUCK In english please....
My old rotary AT&T phone worked great, in 40 years never had a single issue with it.
In english please....
edblysard Bonas Shippers would move more freight by rail or shippers that are served by a lousy rail carrier as in the case of Guilford could have there freight moved by a another carrier that otherwise go by TRUCK In english please....
Bonas Shippers would move more freight by rail or shippers that are served by a lousy rail carrier as in the case of Guilford could have there freight moved by a another carrier that otherwise go by TRUCK In english please....
Thanks to Chris / CopCarSS for my avatar.
Bonas is talking about busting monopolies, which is the aim of reciprocal switching. Bonas says that if you get rid of the monopolies in railroading, the rates will drop to what is fair, and thus more people will ship by rail.
Murphy Siding edblysard Bonas Shippers would move more freight by rail or shippers that are served by a lousy rail carrier as in the case of Guilford could have there freight moved by a another carrier that otherwise go by TRUCK In english please.... I think I can help. I speak a little bit bogas. Let me give it a whirl. Let's see: Shippers would move freight by being served by other shippers with lice, otherwise Guilford moves a truck. -Shakespeare.
Bucyrus Bonas is talking about busting monopolies, which is the aim of reciprocal switching. Bonas says that if you get rid of the monopolies in railroading, the rates will drop to what is fair, and thus more people will ship by rail.
Deggesty Bucyrus Bonas is talking about busting monopolies, which is the aim of reciprocal switching. Bonas says that if you get rid of the monopolies in railroading, the rates will drop to what is fair, and thus more people will ship by rail. Isn't that dreaming?
It depends on whether the monopoly is real or imagined.
But does the railroad want that business? Remember a while back I mentioned how a certain railroad wasn't interested in business with the potential volume of 50 cars per week. Business that could be handled by an existing yard job.
I think when we talk about customers being at the mercy of the big bad railroads, we tend to think about the smaller customers. I think we lose sight that the ones behind forced reciprocal switching, open access and/or rate regulation are the large customers. Those that (IIRC) CSX's Ward said had more monopoly power in their respective industries than the railroads did. Those customers are finally paying for the full value of rail transportation, instead of "give away" rates to get their business, and they don't like it.
The aim of forced reciprocal switching isn't to bust "monopolies." (Railroads already offer reciprocal switching in many places. It's forced or mandatory reciprocal switching they are fighting.) It has a 30 mile limit from the nearest interchange. That's not going to bust any "monopoly" for some company 31 miles from the nearest interchange. (You don't suppose that the biggest backers of this just happen to have all their operations within 30 miles of a second railroad?) The aim is to benefit certain companies at the expense of someone else. Mostly the railroads, but possibly also a competing company within their industry. One who's facility is 31 miles from the nearest interchange.
Jeff
It just shows how subjective the whole debate about monopolies is. A monopoly can be seen wherever one believes it exists. Whether the sighting is validated depends on what the regulator has to win or lose by validating it. A large part of what they have to win is the advancement of the regulating community which happens with any new regulation. Regulators feed at the public trough. They are very hungry these days and have lost their fear of the producers.
I assume that Resiprocal switching means that the class one main line acts as a class 3 switching railroad to take the cars to the nearest "Rule 260" interchange. Here where I stand in Albany the D&H/NS- Erie route is twice as long as the direct New York Central route to Buffalo. I dont see many perishables on the D&H. Every hour that a reefer or reefer container is burning gas to keep the produce cold costs $$$$
Please don't make me laugh like that while I'm eating....it could cause problems.
Benny
No business is "held hostage" to a single railroad. If the situation you describe occurs, the business has other options - move to another location served by multiple railroads, shift to trucks, start its own shortline, etc. Nobody is literally or figuratively holding a gun to the head(s) of management to keep them from seeking alternatives.
If a second railroad went out of business, most likely it was for lack of enough business to sustain the operational costs, resulting from having to lower its freight charges to compete with the other RR. Economic models have demonstrated time and again that "monopoly power" does not exist in the form most people think of it. If the remaining RR tries to leverage its position with excessive rate increases it risks losing that business altogether when the shipper either switches to another mode, or goes out of business due to the high costs of shipping.
Make no mistake about it the NITL is not "small shippers". These are the giant industrials, most of which have proprietary products (allowing them to charge what the market will bear). That is how you make serious money in anything...it's called many things including "value added".
Railroad's version of proprietary property is their ROW. It allows them to charge "what the market will bear". Recently, the past 10 years or so, railroads have begun to aggressively price their services, as they gained "pricing power." Take a look at railroad's annual reports and look at the average price per carload for various products and see how those prices compare to the ability to railroads to move at higher prices. Grain rates are fairly high, as are chemicals. Intermodal costs are lower, but moving higher as the trucking industry has capacity and pricing issues.
BTW, many of the NITL members are chemical companies. The movement of hazmat products at high rates is an issue with them. Railroads understand the risks involved with hazmats and have moved those prices up rather aggressively.
Ed
Murphy Siding tree68 Murphy Siding If railroad #2 wants to haul the widgets, maybe they should invest some of their own capital, and build a line to that widget manufacturer. What's that you say? There's not enough potential profit there to justify building a new line? Then maybe railroad #1 should be getting that business after all. If there was enough business to justify a new line, like say, into the Powder River Basin, wouldn't someone like CNW and/or UP find the investment money to do it? We're probably not talking business at the level of PRB. More like a grain elevator that has exactly two choices for shipping - rail or truck. And the nearest rail competition may be dozens or more miles away. So the scenario is this - it's a 25 mile haul from the shipper to the nearest interchange, then another 1500 miles to the destination in question. Traffic, as mentioned, isn't at PRB levels - more like cyclical/seasonal, and not just one or two cars on occasion. No railroad is going to spend the money to build out just to provide the competition (the ROI would be measured in decades), but there is, after all, existing infrastructure, perfectly capable of doing the job. The shipper would love to ship all the way on their serving railroad, but said railroad has them over a barrel and can pretty much charge what they want. RR #2 offers a significantly better rate from the interchange point to the destination. The glitch is that last 25 miles. Should the serving railroad be able to say "ship it all the way with us, at our inflated rate, or find another way to move your product"? Or should they be made to handle the traffic from origination to interchange at a reasonable rate? It seems like any government that could make railroads handle traffic at a *reasonable* rate, could also make you and I work for a *reasonable* wage. Who gets to decide what's reasonable?
tree68 Murphy Siding If railroad #2 wants to haul the widgets, maybe they should invest some of their own capital, and build a line to that widget manufacturer. What's that you say? There's not enough potential profit there to justify building a new line? Then maybe railroad #1 should be getting that business after all. If there was enough business to justify a new line, like say, into the Powder River Basin, wouldn't someone like CNW and/or UP find the investment money to do it? We're probably not talking business at the level of PRB. More like a grain elevator that has exactly two choices for shipping - rail or truck. And the nearest rail competition may be dozens or more miles away. So the scenario is this - it's a 25 mile haul from the shipper to the nearest interchange, then another 1500 miles to the destination in question. Traffic, as mentioned, isn't at PRB levels - more like cyclical/seasonal, and not just one or two cars on occasion. No railroad is going to spend the money to build out just to provide the competition (the ROI would be measured in decades), but there is, after all, existing infrastructure, perfectly capable of doing the job. The shipper would love to ship all the way on their serving railroad, but said railroad has them over a barrel and can pretty much charge what they want. RR #2 offers a significantly better rate from the interchange point to the destination. The glitch is that last 25 miles. Should the serving railroad be able to say "ship it all the way with us, at our inflated rate, or find another way to move your product"? Or should they be made to handle the traffic from origination to interchange at a reasonable rate?
Murphy Siding If railroad #2 wants to haul the widgets, maybe they should invest some of their own capital, and build a line to that widget manufacturer. What's that you say? There's not enough potential profit there to justify building a new line? Then maybe railroad #1 should be getting that business after all. If there was enough business to justify a new line, like say, into the Powder River Basin, wouldn't someone like CNW and/or UP find the investment money to do it?
If railroad #2 wants to haul the widgets, maybe they should invest some of their own capital, and build a line to that widget manufacturer. What's that you say? There's not enough potential profit there to justify building a new line? Then maybe railroad #1 should be getting that business after all. If there was enough business to justify a new line, like say, into the Powder River Basin, wouldn't someone like CNW and/or UP find the investment money to do it?
The same kind of pattern happens with coal and utilities. Railroad A may solely serve a utility. But that utility is in competition with utilities located on other rail lines to supply power to the power grid in its service territory. If Railroad A sets its rates too high for its solely served utility, the utility will lose business to other utilities located on other rail lines, and Railroad A will lose traffic. Again, railroads are well aware of this. The CNW, when it entered the Powder River, deliberately priced its traffic to increase its customers' competitiveness in sellling to the grid.
One final comment on reciprocal switching. I haven't read all of the posts, but I haven't seen anything in the ones I've read about the operational consequences of mandatory reciprocal switching. The fact is that the reciprocal "switching" carrier usually has very little ability to control the movement of the traffic going to or from it and the line haul carrier. This can (and often has) resulted in a deluge of incoming traffic or empties that swamps the switch carrier's local network. The line haul carrier has the ability to meter this traffic by various means - the switch carrier does not. But the line haul carrier usually has no incentive to meter traffic due to operational issues on the switch carrier.
Options, albeit expensive ones do exist.
Ameren built a connection with Indiana Railroad at Newton, Il to give itself options rather than stick with CN (former IC) for deliveries of PRB coal. I believe Ameren is aggressive in such buildouts or buying out otherwise abandoned lines.
Based on what's been presented on this thread, it appears to me that the term should be not so much as mandatory reciprocal switching as mandatory trackage rights.
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