ֹֹֹֹEUCLID, THERE ARE ALWAYS TRURCKS!!!!
"Oh, boy, the opportunities of model-train operation after reading this thread are growing by the minute. Now tell, which editor over at Model Railroader do you recommend that I pitch an article on "Incorporate the Surface Transportation Board's Proposed Competitive Switching Rule Into Your Next Operating Session for Even More Model Railroading Fun!"
-Paul Milenkovik
Well with the disagreements expressed so emphatically on this thread and occasionally on others, you would wonder what the outcomes would be with an actual physical presence of the opposing parties. However, I'm sure they are all really fine gentlemen.
Mind you I've attended a few N-Trak meets where all hell broke loose...I've seen entire trains sailing off the "end of track" and to the floor with a disgruntled party pulling out a module.
Euclid What I described above would be two railroads working in a competitive way without any monopoly. And their competing relationship already has the rate as low as either one wants it, so the competition is 100% effective in forcing the lowest possible rate. The shipper has choices, but neither choice offers a rate lower than the other. What is wrong with that?
What I described above would be two railroads working in a competitive way without any monopoly. And their competing relationship already has the rate as low as either one wants it, so the competition is 100% effective in forcing the lowest possible rate. The shipper has choices, but neither choice offers a rate lower than the other. What is wrong with that?
Without access through reciprocal/competive switching, the customer has no choice of rails. It's a captive market.
C&NW, CA&E, MILW, CGW and IC fan
Euclid Mac, I understand what you said about my paragraph 2, but not what you said about paragraph 1. My illustration using railroads A and B is what you offered when you began this explanation. You had a customer located on railroad A in your example. How did the customer get closed as you say in your last post?
Mac,
I understand what you said about my paragraph 2, but not what you said about paragraph 1. My illustration using railroads A and B is what you offered when you began this explanation. You had a customer located on railroad A in your example. How did the customer get closed as you say in your last post?
He did not get closed, he was never open.
A bit of history and some conjecture. As I mentioned before, I think the USRA (the Federal Government) invented reciprocal switching when they controlled the railroads during and after WW I. If so some bureaucrat said something like 'I decree that all customers in the NAME terminal area will be open to reciprocal switching, and the terminal area is defined as anything less than X miles from Y point'.
It is also possible, even likely, that the railroads agreed to reciprocal switching among themselves in the era when if it moved it moved by rail and there were multiple railroads in many towns. Better to get a switch charge than nothing when you did not serve the destination, but did serve the shipper. Either way there was/is a line, customers inside the line were/are open to reciprocal switch, outside they are not. In this case both the customer and the station are said to be closed to reciprocal switching.
That does not mean that the closed customer can not get to an interchange point, but he will have to pay a combination of line haul rates, and line haul rates for short moves tend to be high on a per mile basis for rational economic reasons that are beyond the scope of this discussion.
The NITL has only one goal which is cheaper freight rates. The railroads do not want to lower their rates. That is all this is about.
Mac
PNWRMNM Euclid Mac, Okay, I can see that. Basically what you are saying is that reciprocal switching is dead on arrival because the relationship between competing lines is already sufficiently competitive to preclude the need for reciprocal switching to seek a lower shipping charge. The premise of reciprocal switching is that rates are too high due a lack of competition. So when reciprocal switching is mandated, the shippers expect rates to drop due to the added competition. So what happens when reciprocal switching does not bring rates down and a shipper thinks both railroads have their rates too high? As to paragraph 1 the customer is currently closed, so railroad B can not offer a rate so there is no RAIL competition. Odds are there is lots of other competition, but I am not in the mood to explain all that. As to paragraph 2, the NITL/SHIPPERS' perception is that the rate is too high, despite the fact that it is low enough for the incumbent carrier to have the traffic. What happens IF nothing happens is that the NITL will loudly and longly accuse the railroads of collusion. The STB may or may not investigate. More work for the lawyers and lobbyists. More waste in overhead. Mac
Euclid Mac, Okay, I can see that. Basically what you are saying is that reciprocal switching is dead on arrival because the relationship between competing lines is already sufficiently competitive to preclude the need for reciprocal switching to seek a lower shipping charge. The premise of reciprocal switching is that rates are too high due a lack of competition. So when reciprocal switching is mandated, the shippers expect rates to drop due to the added competition. So what happens when reciprocal switching does not bring rates down and a shipper thinks both railroads have their rates too high?
Okay, I can see that. Basically what you are saying is that reciprocal switching is dead on arrival because the relationship between competing lines is already sufficiently competitive to preclude the need for reciprocal switching to seek a lower shipping charge.
The premise of reciprocal switching is that rates are too high due a lack of competition. So when reciprocal switching is mandated, the shippers expect rates to drop due to the added competition. So what happens when reciprocal switching does not bring rates down and a shipper thinks both railroads have their rates too high?
As to paragraph 1 the customer is currently closed, so railroad B can not offer a rate so there is no RAIL competition. Odds are there is lots of other competition, but I am not in the mood to explain all that.
As to paragraph 2, the NITL/SHIPPERS' perception is that the rate is too high, despite the fact that it is low enough for the incumbent carrier to have the traffic. What happens IF nothing happens is that the NITL will loudly and longly accuse the railroads of collusion. The STB may or may not investigate. More work for the lawyers and lobbyists. More waste in overhead.
Before someone chimes in "take this post to the Model Railroader forum", I am "wondering out loud" how a model railroad operating session would implement reciprocal switching?
The model railroad world has various levels at which participants in this hobby seek to replicate or simulate or represent various aspects of the 12 inch-to-the-foot scale world. Some people are satisfied to run trains "around in a loop" while indulging the fantasy that they are at the throttle of a locomotive. Other people want to more accurately conduct operations. The Model Railroader editorial staff has devoted considerable coverage to the model operations world and to tools such as card systems to direct the composition and breakup of trains to layout planning to give a model layout purpose in terms of where the trains go and where the cars are switched and why.
Apparently there are people who have planned and built model train layouts with "operations" in mind and are quite serious about this. I don't have such a layout, I don't know anyone with such a layout well enough to be invited to an "operating session" on their layout, and I have not seen such an operating session take place on a modular layout at a public model train show. If someone "operates" a layout at a show instead of merely runs trains around in a loop, this has never been apparent to me as an attendee of such shows.
But I have talked to a least one person who enjoys the "operations" side of the hobby. And Model Railroader, as I mention above, devotes considerable column space to this aspect.
Some of these operations sessions, I read, can get quite involved and quite specialized, with two-man train crews of driver and conductor, and with some hapless hobbyist sequestered in a windowless basement room where he can't see the model trains roll by, who is the "dispatcher" issuing "on-sheet" (OS) train orders to those train crews through a telephone headset.
The more I read about attempting to replicate real railroad operations on the model, the more it seems to me like work that someone would need to be paid to do rather than a recreational hobby.
But wouldn't the operations modeling people have twice as much model railroading "fun" if the layout were divided into two "railroad companies" connected by an interchange. And there were two dispatchers in windowless basement rooms, separated from everyone including each other apart from a telephone? And they had to coordinate everything.
And in addition to the two-man train crews and the sequestered dispatchers, one could enlist additional personnel from amongst one's inner circle of friends one invites to the house for these sessions. You could have "shippers", "railroad marketing guys", and yes, even "lawyers" and "government regulators." And if an operating session got heated, like the discussion on this thread, one could employ additional friends as "arbitrators" or "appeals-court judges"?
Oh, boy, the opportunities of model-train operation after reading this thread are growing by the minute. Now tell, which editor over at Model Railroader do you recommend that I pitch an article on "Incorporate the Surface Transportation Board's Proposed Competitive Switching Rule Into Your Next Operating Session for Even More Model Railroading Fun!"
If GM "killed the electric car", what am I doing standing next to an EV-1, a half a block from the WSOR tracks?
The 'Free Market' is free only when there are choices, i.e., competition, not monopolies. Capitalism 101.
Okay, I can see that. Basically what you are saying is that reciprocal switching is dead on arrival because the relationship between competing lines is already sufficiently competitive to preclude the need for reciprocal switching to seek a lower shipping charge. So the railroads just stick together and railroad B does not offer a haul rate lower than railroad A. So, agreeing on the reciprocal switching charge is beside the point if railroad B is not interested in taking traffic away from railroad A on the basis of the reciprocal switching law.
Euclid So why would railroad B then say they do want not the business?
Two reasons.
One, because not all business is good business. Good business is that which is profitable enough to support reinvestment and throw something to net earnings. Most of the time the business will be less attractive to the poacher than to the current line haul carrier, for at least two reasons, one the poacher has to offer a cheaper rate (buy the business), and then has to pay the switch charge. Odds are the poacher's car hire expense will be more than the incumbent's as well, due to the delay inhearent in the two interchange moves required to do the switch.
Two, what goes around comes around aka Mutal Assured Destruction. If B poaches A, A can also poach B.
If you are B, are you willing to work cheap and risk starting a rate war that will bleed both you and A dry for the benefit of the shippers? It would make more sense to light your cigars with hundred dollar bills.
PNWRMNM Euclid Mac, I have no idea what they will do. But all I am asking is this: Are the railroads free to refuse to establish a rate for, and refuse to haul freight when they consider it to be poaching, as you describe it? What I mean is, are they free to do this without invoking government intervention that forces a rate be adopted and the forces the poaching freight to be hauled? If you as railroad B do not want the business you can simply say so, you can say you do not have the equipment, which the poacher would be obligated to supply, or you can offer a non-competitive rate. That is what (partially) deregulated means. Mac
Euclid Mac, I have no idea what they will do. But all I am asking is this: Are the railroads free to refuse to establish a rate for, and refuse to haul freight when they consider it to be poaching, as you describe it? What I mean is, are they free to do this without invoking government intervention that forces a rate be adopted and the forces the poaching freight to be hauled?
I have no idea what they will do. But all I am asking is this: Are the railroads free to refuse to establish a rate for, and refuse to haul freight when they consider it to be poaching, as you describe it? What I mean is, are they free to do this without invoking government intervention that forces a rate be adopted and the forces the poaching freight to be hauled?
If you as railroad B do not want the business you can simply say so, you can say you do not have the equipment, which the poacher would be obligated to supply, or you can offer a non-competitive rate. That is what (partially) deregulated means.
Well railroad B is the one who is asking to haul the load for a customer located on railroad A. Railroad B would therefore be the poacher. Railroad B is the one who is asking for the haul business. This requires railroad A to switch the car to railroad B as part of the reciprocal switching agreement. So why would railroad B then say they do not want the business?
There are two answers. The first is that as a common carrier the railroads must haul any freight offered that is in proper condition for transportation.
The second answer is since they are (largely) deregulated as to rates. This means they can offer any rate they want subject to R/VC ratio tests not to exceed certain thresholds, and the customer's willingness to challenge the rate as too high.
Euclid PNWRMNM It is not about the switch rate, it is about the line haul rate. Okay, I see. So are they free to refuse to establish a haul rate, and to refuse to do the hauling? Other than losing the haul, are there no downsides to this tactic?
PNWRMNM It is not about the switch rate, it is about the line haul rate.
Okay, I see. So are they free to refuse to establish a haul rate, and to refuse to do the hauling? Other than losing the haul, are there no downsides to this tactic?
Let us reason together.
Assume shipper is on line to railroad A. Assume shipper is opened to reciprocal switching by the STB. Assume railroad B could access the shipper via their newly acquired reciprocal switching rights at a cost of $400 per car. Assume line B has no rates in effect for the involved traffic. What would you do if you were railroad B?
The NITL wants you to poach A's traffic. Without some real numbers we can not determine how attractive this traffic is to you as B. This is kind of like shooting pool, the first shot is obvious, setting up the second is the mark of a skilled player.
The shipper will tell you what rate he wants and usually what he is paying, since he is trying to entice you with his traffic. He may or may not lie in this negotiation. You decide what rate you will offer and run your costs against it. Your costs may or may not be higher than railroad A's, you do not know. What you care about is your contribution margin, which is Revenue minus Variable Costs, which include A's switch charge if you absorb it. The first decision is whether or not the traffic is attractive, that is has a 'high enough" contribution margin. Lets assume it is. Should you take the shot at railroad A?
If you are smart you will remember that you too are exposed to poaching by railroad A. Maybe not this town, this commodity, this customer, but you are exposed, and probably about as much as A is to you on a system basis. This is analogous to the second shot in pool.
My point is that since line haul rates are generally not regulated the railroads as a group would be wise not to take the shot, since you should expect retailiation and all of the money you are saving the customers comes out of your collective pockets.
My hope is that the railroads do not step into the trap the NITL is trying to lay for them.
As to consequences if carriers are smart, the NITL, say the subject customers which is the same thing, get pissed off that the carriers avoided the trap. That is no change since they are pissed off now. No change. NITL could lobby to repeal Staggers. They have been doing that since 1980. I do not see any down side to the railroads being smart.
Whether they will or not is another question and your guess is as good as mine.
PNWRMNMIt is not about the switch rate, it is about the line haul rate.
PNWRMNM Murphy Siding You're making it too difficult. It's not practical to gouge the other guy today, because he would then feel obligated to gouge back tomorrow and payback's a...banana. I think you are looking at the wrong end of the transaction. The big deal is not whether the new switch charge is $300 or $500, but the NITL will want it as low as they can con the STB into. Likewise the carriers will want it be as high as possible to help them resist the temptation to poach the newly open traffic from the other guy. The point I was trying to make is that the carriers have the ability to nullify this whole production simply by refusing to establish a rate to poach the other guy's traffic. They can do this without any illegal conspiracy simply by keeping the knives sheathed, which is what NITL obviously does not want.
Murphy Siding You're making it too difficult. It's not practical to gouge the other guy today, because he would then feel obligated to gouge back tomorrow and payback's a...banana.
You're making it too difficult. It's not practical to gouge the other guy today, because he would then feel obligated to gouge back tomorrow and payback's a...banana.
I think you are looking at the wrong end of the transaction. The big deal is not whether the new switch charge is $300 or $500, but the NITL will want it as low as they can con the STB into. Likewise the carriers will want it be as high as possible to help them resist the temptation to poach the newly open traffic from the other guy.
The point I was trying to make is that the carriers have the ability to nullify this whole production simply by refusing to establish a rate to poach the other guy's traffic. They can do this without any illegal conspiracy simply by keeping the knives sheathed, which is what NITL obviously does not want.
If the carriers have the ability to nullify by refusing to establish a rate, why would they not do that? If the carriers refuse to establish a rate, will the govnerment set the rate and bind them to perform the reciprocal switching at that rate?
Murphy,
The NITL wants expanded reciprocal switching for just one reason, they want to be able to threaten to divert line haul traffic from the newly opened facilities to DRIVE THEIR RATES DOWN. If threats fail then they will divert. Either way the incumbent carrier looses and the shipper gains, just like taking candy from a baby.
The point I was trying to make is that the carriers have the ability to nullify this whole production simply by refusing to establish a rate to poach the other guy's traffic. They can do this without any illegal conspiracy simply by keeping the knives sheathed, which is what NITL obviously does not want. Think about the Cold War doctrine of Mutual Assured Destruction. Logically the NITL plan is to set up that game. The question is whether the railroads will be smart enough NOT to play.
In the regulated days this plan to separate the railroads from their money would not work since the rates on every commodity from every point to every other point were equalized regrdless of route AS A MATTER OF LAW. In those days reciprocal switching enabled shippers to reach points not on the origin road, or to use a route with supperior service, and enabled the rail system, taken as a whole, to provide the economy with a wide variety of route options. Since there were so many customers and routes, I suspect in most cases it was not worth the clerical effort to identify "reprisal" switches and find out what the customer's issue was. Of course the carriers had field marketing guys who could take a customer out to lunch. No such thing now.
Euclid But I get the impression from the piece in Progressive Railroading that the two terms are interchangeable in discussions about reciprocal switching.
But I get the impression from the piece in Progressive Railroading that the two terms are interchangeable in discussions about reciprocal switching.
Euclid,
I can see how you would conclude that from the article.
Reciprocal Switching is the long established term of regulatory and railroad art.
I do not know where competitive switching comes from. I suspect in came from NITL regulatory filings or press releases, presumably as an effort to put lipstick on a pig. If is also possible that the magazine writer invented the term, but I doubt it.
schlimm Murphy Siding ergo, you've just proved that the term competitive switching does not appear in the section. Not literally, of course, but in context it his the heart of the matter.
Murphy Siding ergo, you've just proved that the term competitive switching does not appear in the section.
Not literally, of course, but in context it his the heart of the matter.
So in context distortion is the same as lying. Thank you for proving my point!
Norm,
I said the two terms mean the same thing. But maybe it is more accurate to say competitive switching includes reciprocal switching as one component; and that reciprocal switching is entirely composed of one form of competitive switching.
EuclidThe terms, reciprocal switching and competive switching mean the same thing because the point of reciprocal switching is to create competition.
Do they? How about companies like Railserve who can switch big industries for less than than a railroad would charge? Perhaps not reciprocal but decidedly competitive.
Norm
The terms, reciprocal switching and competive switching mean the same thing because the point of reciprocal switching is to create competition. This article linked to the original post here says this:
The rule involves "reciprocal" or "competitive switching," which refers to a situation in which a railroad that has physical access to a specific shipper facility switches rail traffic to the facility for another railroad that does not have physical access, according to the STB. The second railroad pays the railroad that has physical access, typically in the form of a per-car switching charge.
schlimm 1. I know nothing of Sol.
1. I know nothing of Sol.
That is a shame. I think you two would have gotten along....
An "expensive model collector"
Murphy Sidingergo, you've just proved that the term competitive switching does not appear in the section.
Not literally, of course, but in context it his the heart of the matter. Where do you think the STB got the idea and basis for its proposal? From outer space? Are you even capable of inferential reading? It is a skill that is sadly in decline in our schools. But more likely, you are engaging in another of your silly games.
One thing stands out in this "discussion." Many folks have never read the Staggers Act itself, just about it.
If all that is needed is your idea of mutual interest, why does Section 223 say this?—
“The carriers entering into such an agreement shall establish the conditions and compensation applicable to such agreement, but, if the carriers cannot agree upon such conditions and compensation within a reasonable period of time, the Commission may establish such conditions and compensation.”
I agree that it may not be practical to gouge the other guy, but it is also impossible due to Section 223.
schlimm PNWRMNM schlimm Amazing how the AAR acts like competitive switching is something without a basis, They love Staggers. Competitive switching is in Staggers, just never acted on. Read Section 223. The term competitive switching does not appear in the section. PS - previous post to same effect failed to include the original statement, so it has no context. Mac In fact it does discuss reciprocal switching in the context of competition as its justification. "(c)(1) The Commission may require rail carriers to enter into reciprocal switching agreements, where it finds such agreements to be practicable and in the public interest, or where such agreements are necessary to provide competitive rail service. " Thus the term "competitive switching." Reciprocal switching necessary to provide competitive rail servive is, ergo, competitive switching.
PNWRMNM schlimm Amazing how the AAR acts like competitive switching is something without a basis, They love Staggers. Competitive switching is in Staggers, just never acted on. Read Section 223. The term competitive switching does not appear in the section. PS - previous post to same effect failed to include the original statement, so it has no context. Mac
schlimm Amazing how the AAR acts like competitive switching is something without a basis, They love Staggers. Competitive switching is in Staggers, just never acted on.
Amazing how the AAR acts like competitive switching is something without a basis, They love Staggers. Competitive switching is in Staggers, just never acted on.
Read Section 223. The term competitive switching does not appear in the section.
PS - previous post to same effect failed to include the original statement, so it has no context.
In fact it does discuss reciprocal switching in the context of competition as its justification.
"(c)(1) The Commission may require rail carriers to enter into reciprocal switching agreements, where it finds such agreements to be practicable and in the public interest, or where such agreements are necessary to provide competitive rail service. "
Thus the term "competitive switching." Reciprocal switching necessary to provide competitive rail servive is, ergo, competitive switching.
Thanks to Chris / CopCarSS for my avatar.
Euclid Murphy Siding tree68 Euclid What is to prevent the originating railroad from gouging the receiving railroad to discourage the request for reciprocal switching? It's probably in 223 somewhere... I suggest you re-read Section 223 and compare its words with the words...More to the point, what I get out of Mac's explanation is that the railroads have to tread softly so they don't end up on the receiving end down the road. For example, UP wouldn't want to gouge BNSF for reciprocal switching somewhere this week and then get gouged next week on a similar situation from BNSF next week. Well sure, the two competing railroads may agree on a price if they both are liable to be subjected to it. However, in a larger context, they have no choice in the whether or not to agree on a price because the government mandates that they must agree on it. If they don't agree on the price, the government mandates the price.
Murphy Siding tree68 Euclid What is to prevent the originating railroad from gouging the receiving railroad to discourage the request for reciprocal switching? It's probably in 223 somewhere... I suggest you re-read Section 223 and compare its words with the words...More to the point, what I get out of Mac's explanation is that the railroads have to tread softly so they don't end up on the receiving end down the road. For example, UP wouldn't want to gouge BNSF for reciprocal switching somewhere this week and then get gouged next week on a similar situation from BNSF next week.
tree68 Euclid What is to prevent the originating railroad from gouging the receiving railroad to discourage the request for reciprocal switching? It's probably in 223 somewhere...
Euclid What is to prevent the originating railroad from gouging the receiving railroad to discourage the request for reciprocal switching?
It's probably in 223 somewhere...
I suggest you re-read Section 223 and compare its words with the words...More to the point, what I get out of Mac's explanation is that the railroads have to tread softly so they don't end up on the receiving end down the road. For example, UP wouldn't want to gouge BNSF for reciprocal switching somewhere this week and then get gouged next week on a similar situation from BNSF next week.
Well sure, the two competing railroads may agree on a price if they both are liable to be subjected to it. However, in a larger context, they have no choice in the whether or not to agree on a price because the government mandates that they must agree on it. If they don't agree on the price, the government mandates the price.
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