Legislation intoduced to make railroads subject to antitrust laws.

[jeaton]

Market based solutions?

In addition to getting a refund, you ought to get the guy fired.

[Murphy Siding]

My honest guess would be that Future Model is a college student now. When I was in college, a lot of things looked differently than they do now!
Ed-poke fun at me any time. I'll revel in my ignorance too!

[edblysard]

Ouch, must have hit a nerve!

No, I would fall into the conservative democrat, or liberal republican category.
Railroads do compete; I get to see it every day.
And if you keep sour grapes bottled long enough, you can end up with some really nice wine.
House divided, hummm, sound like there is more than one of you in there,
right, Sybil.


Ed

QUOTE: Originally posted by futuremodal

To Ed B:

Enjoy your sour grapes, and revel in your ignorance.

PS - just because a word is more than two syllables doesn't mean it's made up. Have someone look up the hard words for you in a big book of words we call a dictionary (pronounced DIK-SHUN-AIR-EE). Of course, it will be harder to explain to you how a root word can be changed from a noun to an adjective, verb to an adverb, etc.

BTW - One cannot be an espouser of market based solutions to remedy socio-fascist monopolism, and at the same time be a de facto socialist. "A house divided against itself..........", etc. Given your rabid opposition to the idea of railroads actually engaging in true head to head competition, methinks it is you who bears the likeness of furrow-browed socialist.

[CSSHEGEWISCH]

FM is taking these arguments very personally and I'm sure that I'm not the only one who has noticed that any semblance of intellectual rigor in his responses is slowly fading away into the abyss of personal innuendo and attacks on me and others who dare to point out that what's happening in the real world does not always coincide with the theories to which he clings so tightly.

[gabe]

FM,

Why do you have to be that way? You are such a paradox for me, in that you say something that most people on here disagree with, and you have—some—rationality to your assertions. In that vein, I think you are very valuable to the forum—as we will learn a lot more and enhance our collective knowledge to a greater degree disagreeing with one another much more so than patting one another on the back saying how right one another is.

In the same breath, you get very rude when people do not accept your assertion that none of us know what we are talking about, and it seems completely lost on you that you are anything but an objective proponent of your ideas. You clearly have a dog in the fight in which you espouse, and it seems to me that your ideas do not follow a free-flowing intellectual argument—but follow your perception of self-interest.

Why don't you just say, “I like conservative ideals and minimum government interference, because my company and my position regularly use them to make a profit. But I do not like them when government involvement and regulation would allow my company to make a greater profit at the expense of other private enterprise.”

I may very well be wrong, but in my heart-of-hearts I believe that is your philosophy.

Also, you seem to intimate that you are in an energy/petrol-chemical industry. I hope the humor is not lost on other members of the forum that someone from that industry is complaining about price fixing and monopolistic practices. Are you going to assert that railroads are too hard on Grandma Nelly next?

Gabe

[MP173]

Dave:

I would like to see your thesis for the local pickups, and how that would occur.

To me, an open access system would require open access to all for all. And the "for all" would be difficult. Note the low density line that generates very little business but does have a grain elevator that will ship a few cars per year. At some point the open access intrastructure company (OAIC) will be required to either close the line or raise the rates for that customer to cover fixed costs.

At that point Michael Sohl (or similar proponents for the grain elevator) will charge "FOUL" because either the rates are too high or the line is being abandoned.

It really cant be sold to another line...since that line would also require "open access."

Confused? I am. Help me see the light.

Promise I wont call you any names, but please try to keep the number of syllables to a minimum!

ed

[Anonymous]

To all:

I apologize for allowing myself to get drawn into the personal attacks. I'll try to keep my posts above the sea of insults from now on.

RE: The "numbers" thing - As I've stated before, I don't believe there are any publicly accessable studies that analyze the prospective comparison of converting the current U.S. rail picture into some form of open access vs leaving things as they are and/or reregulating railroad rates and services. I have scanned all the Class I websites, the AAR website, the FRA website, the STB website, and have not found any studies on the issue. Trust me on this, I truly wi***he AAR or FRA would come out with some initial analysis of open access, even if it was (predictably) skewed to discount any positive effects, either on the railroads or on the U.S. economy. At the very least, it would be something to critique beyond the current dependence on logic and reason. Perhaps some of you might want to ask them why they have no numbers to prove once and for all that open access won't work.

Gabe - I have a fundamental disagreement with the way you have framed your last post, and I won't go to much into your assertion that I am the one being rude (brings to mind the little analogy about a pot and a kettle.....). The only one on this forum to whom it can legitimately be said that I was rude would be Ed B. Needless to say, the real major point of contention between the two of us seems to exist not in any debates about railroad operations or regulations, but of the role a representative democracy-type government is supposed to play in an ostensible free market environment. If I read your words accurately, you do not believe that a true conservative would be in favor of any government oversight of markets to ensure a maintenance of competitive markets, thus anyone who favors some form of check and balance regarding monopolistic behaviour would be labeled a socialist in your book. I know this is probably going to exasterbate your patience, but could you please tell me if you favor the Electoral system for electing a president or do you favor direct popular vote? Do you favor each state having two Senators irregardless of population, or do you feel the number of Senators a state has should be based more on the population of that state? The reason I ask is that I recognize that in order for Democracy to work (and by association a free market), there has to be some checks and balances in place to prevent Democracy (and/or the free market) from imploding into mob rule.

I do not believe there are any realistic checks on the monopolistic characteristics of the current Class I railroad oligarchy when it comes to captive shippers. I think it is unrealistic to avow that trucks are any viable form of competition for today's railroads, rather that as things stand now trucks are the primary feeder system for railroads, and without the willing participation of the trucking industry today most railroads would go under in short time. And for the record, I honestly do not have any dogs in this fight, and yes I am currently working for an energy company.

CSSHEGEWISCH: I do not believe I have personally attacked you in any way, rather I have issued a challenge to you to provide evidence of any trucking firm providing a real challenge to a current rail haul between two terminals. I know that you can't provide the sufficient number of examples to completely blow my assertion out of the water, but I expect you to be able to come up with at an example or two to at least buttress the long standing myth of trucks being de facto competition for railroads. Keep trying.

Ed aka MP173: I have said this before, but I'll repeat it for your benefit. I do not believe an open access infrastructure company could make it on it's own without some form of ROW cost equalization to better reflect the aspects of public support for highways and waterways beyond user fees. That being said, if a rail line has insufficient usage to continue under private operation, I believe that line should go to the local government by default, and that way the decision to continue operations or to abandon the line falls on the shoulders of the local government. I do not believe that any rail company that receives some form of government support should be allowed to liquidate that line (e.g. no more scrapping of the rails and ties), that should be one of the caveats of public support for railroads whether they convert to open access or not.

Murphy: Thanks for the compliment, but my college days are long gone. However, I do still get carded at grocery stores if I wear a hat.

[Anonymous]

Oh, yeah, regarding the "moral obligation" statement I made - On reflection I admit it is in error for me to say that the railroad companies have a moral obligation to provide payback to the public in exchange for the land grants into perpetuity. Corporations are amoral, thus not inclined to moralisms one way or the other. For that statement I deserve the criticism.

What I should have said (and will probably still get criticism) is that the government has a moral obligation to the public to make sure railroads give payback to the public in exchange for the land grants, and should do so into perpetuity, e.g. there is no time limit for return consideration. The land is gone from the public coffers forever, why shouldn't the return favor also last forever?

[Murphy Siding]

Future Model: Would you entertain the idea of a seperate thread started to calmly discuss the ideas and challenges that pertain to any kind od open access system?

[edblysard]

RE: The "numbers" thing - As I've stated before, I don't believe there are any publicly accessable studies that analyze the prospective comparison of converting the current U.S. rail picture into some form of open access vs leaving things as they are and/or reregulating railroad rates and services. I have scanned all the Class I websites, the AAR website, the FRA website, the STB website, and have not found any studies on the issue.

They did, and found it wouldn’t work. No, they don’t publish it, or offer it publicly, why would they, does your industry release to the public any study that doesn’t promote it or create a positive response, like the correct amount of hazardous discharges, or the true amount of overcharges?

Gabe - I have a fundamental disagreement with the way you have framed your last post, and I won't go to much into your assertion that I am the one being rude (brings to mind the little analogy about a pot and a kettle.....).
You mean you don’t like his question?

The only one on this forum to whom it can legitimately be said that I was rude would be Ed B.
That was you being rude?
No, really, you need to practice more.

Needless to say, the real major point of contention between the two of us seems to exist not in any debates about railroad operations or regulations, but of the role a representative democracy-type government is supposed to play in an ostensible free market environment.
You mean we have different political views.

I know this is probably going to exasterbate your patience, but could you please tell me if you favor the Electoral system for electing a president or do you favor direct popular vote?
Spell check works really well.
Was that a Freudian slip?

Ed aka MP173: I have said this before, but I'll repeat it for your benefit. I do not believe an open access infrastructure company could make it on it's own without some form of ROW cost equalization to better reflect the aspects of public support for highways and waterways beyond user fees.
You mean a federal subsidy?.

Murphy: Thanks for the compliment, but my college days are long gone. However, I do still get carded at grocery stores if I wear a hat.
Try Groucho glasses and a funny hairdo…
EdB
-------------

[MP173]

Wow...we are all sorta getting along again, kinda like a big family.

Or, at least being civil.

For the record, I will take this kinda topic and the disagreements that go with it over favorite paint schemes or locomotives (nothing wrong with those topics...for the record my favorites would be E7's or 8's in Erie Lackawanna paint).

Dave, I think you are looking at things thru the energy company's eyes. Open access would work GREAT for them. Nice movements of unit trains in which they could own their own equipment and bid down the rates. Who ever is most hungry gets the business.

I really like what Ameren has done in a couple of cases and invested in Open Access by building out to reach competition.

You guys really are losing me on the economic/political discussions. I always thought I was for less government and felt I was a conservative, but at times labels get blurred.

ed

[jeaton]

Futuremodal

Even if you don't like to be placed with people of that ilk, I think that most experts in the fields of political and economic systems would put you, with your open access concept, pretty far to the left.

As much as you have convinced yourself that what you propose would have a good outcome, I think you are missing at least one key element. Even if any operating company could use the tracks and facilities of the infrastructure company and accordingly could compete for traffic with any other operating company that wanted to work the same market, the infrastructure company, in the vast majority of cases, would now be the monopoly. What do you think would keep your friends at BNSF Infrastructure Co, Inc from charging anything they felt like for an operator that wanted to do business between Wolf Point and Cut Bank? Last I looked, nobody has tracks running anywhere near those points. So where is the is the competition as the necessary "rational pricing" constraint for that element of the service? Should we extablish regulations to control the price for the use of tracks? As much as you would like, absent a good dose of government socialistic type regulation, you are not going to have something that will automaticly be fair to every shipper at every location.

By the way, with my limited vocabulary, the only way that I can describe your assertion that the railroads have been a big cause for the shift of manufacturing overseas is stupid.

Jay Eaton

[MichaelSol]

QUOTE: Originally posted by edblysard


RE: The "numbers" thing - As I've stated before, I don't believe there are any publicly accessable studies that analyze the prospective comparison of converting the current U.S. rail picture into some form of open access vs leaving things as they are and/or reregulating railroad rates and services. I have scanned all the Class I websites, the AAR website, the FRA website, the STB website, and have not found any studies on the issue.

A couple of observations, well, OK, six , well, eleven....

1. Futuremodal researches his ideas, and generally formulates very good arguments on his topics.

2. The inevitable namecalling -- "pretty far left", "socialist," "stupid",etc., -- really isn't much of an argument, is it? The last refuge of a scoundrel is to accuse someone of being a college student ....

3. There are tons of econometric studies of open access systems, starting with the highly successful Interstate Highway System. Equating one's own [internet-based] knowledge with state of the art understanding is quite a howler.

4. I don't have an opinion on the topic because I am of an older generation of Class I railroading when that had a particular competitive meaning that no longer exists, although I happen to think it needed tweaking to be successful, not destruction.

5. For a start, "Railroad Costs and Competition," by John D. Bitzan, Journal of Transport Economics and Policy, vol. 57, part 2, May, 2003, pp. 201-225, presents an extensive economic analysis of open access and, while he concludes it would not be cost effective, it is by no means the final word on the topic.

6. Total ignorance of topical studies does not mean they do not exist. It's your fault, not their's, that you are completely unaware of them. Probably because this is a technical field in which everyone with an opinion does not necessarily mean they have any basis for offering them to the world...

7. Railroads have always been subject to anti-trust principles, through Congressional directives beginning with the Transportation Act of 1920. Taking railroads out of the jurisidiction of the Sherman Anti-trust Act only removed the private cause of action available therein, it did not remove anti-trust oversight.

8. Congress has continually, since 1920, emphasized "competition" among carriers as overriding National Rail Policy.

9. The Department of Justice vigorously promoted the anti-trust language of the Transportation Acts until finally, in the 1970s, after a series of Supreme Court rebuffs on the topic, they frankly gave up.

10. The ICC staff during that era almost always gave strong deference to the competitive language of the Transportation Acts, while the Commissioners almost always more typically sided with the industry which claimed that mergers -- studies to the contrary -- were good. Of course, ICC staff rarely went on to become railroad presidents, while ICC Commissioners such as Darius Gaskins did.

11. The last four points are based on my own perspective obtained through personal experience during that era as well as my personal discussions and correspondence with Warren Magnuson and Frtz Kahn on the topics. Those of you with strong opinions on everything in sight including the Laffer Curve, will know who the gentlemen are.

Best regards, Michael Sol

[daveklepper]

May I enter the debate on the side of what I claim is real honesty and real objectivity? (Note, I claim it, but there is the possibility that one of you may prove me wrong.)

The railroad industry made a decent profit under regulations that guaranteed fair competition and precluded monopolistic practrices until

Transportation planning, spending, and taxation, were skewed to benefit the industry's competition and not the railroads.

This led to giant reduction of railroad mileage, locations served, optional routes, industry sidings, etc., and

prevented advances in technology and business practices except where suppliers (like EMD and Union Switch and Signal (CTC) could see a market that would provide a profit for themselves.

I really don't think open access BY ITSELF would do anything except lead to nationalization of a whole bunch of bankrupt railroads. Open access would have to balanced for the industry by the restoration of a level playing field where over the road trucking and river and canal and offshore shipping and air freight begin to pay a true price of what their operations cost the public. Again, only the freight railroads support schools and hospitals and police by the real estate taxes on their rights of way. Over the road trucking pays 1/3 to 1/2 the true expenses of the highway maintainance the trucks as opposed to private cars require. ETC.

Then, the question is, if there were truly a level playing field again, would Open Access be needed? Wouldn't then the return on capitol be sufficient so railroads would be willing to expand their capacity and really go after business again? Not all, perhaps, but the savy ones would and that would bring up the whole industry.

[edblysard]

Dave,
Ownership of "the land" is a legal concept...in reality, you can't own it, any more that you can "own" the air above it.
I would suggest you think about how the people who ended up "owning" the land in question got there in the first place.
Your assumption that the land was part of the public coffers in the first place is in error...
Who, in fact, did the "public" buy it from?
Or, are you assuming that because it was there for exploitation, and no one was sitting on it using it, it was "public property"?
That’s a pretty arrogant assumption, as it negates the rights of the "native Americans", who did live on the land before the "public" decided it was theirs to do with as they saw fit...such as claim ownership, divide it up, and sell it.
Should not following your "fair business practices" logic mean anyone who "owns" those lands now has a "moral and a financial debt" to the original, and now displaced, land users?
Or do you infer that the government, as the elected representative of the people, has the right to just claim any lands they see fit, when ever and where ever they choose, and call it "public" property?

Because if they do, then they also have the right to “give” or “grant” it to whomever they choose, for what ever purpose they choose.

If such a grant is in the interest of the public, such as creating opportunities for westward expansion, then even better.

I would suggest you consider that, with the exception of the coastal areas, the land west of the Mississippi was pretty barren and unpopulated, and with out the railroads presence, would still be so today.
Any moral and financial obligation for the relatively small ROW and the adjacent land grants has been more than retired by the fact that the very existence of most of the major cities west of the big muddy is due to the railroad bringing their base population, building material, fuel, water, food, just about everything needed to create and maintain these cities, to the area in the first place.
Bluntly, with out the railroads, these places would still be wilderness.

Ed

QUOTE: Originally posted by futuremodal

Oh, yeah, regarding the "moral obligation" statement I made - On reflection I admit it is in error for me to say that the railroad companies have a moral obligation to provide payback to the public in exchange for the land grants into perpetuity. Corporations are amoral, thus not inclined to moralisms one way or the other. For that statement I deserve the criticism.

What I should have said (and will probably still get criticism) is that the government has a moral obligation to the public to make sure railroads give payback to the public in exchange for the land grants, and should do so into perpetuity, e.g. there is no time limit for return consideration. The land is gone from the public coffers forever, why shouldn't the return favor also last forever?

[gabe]

7. Railroads have always been subject to anti-trust principles, through Congressional directives beginning with the Transportation Act of 1920. Taking railroads out of the jurisidiction of the Sherman Anti-trust Act only removed the private cause of action therein, it did not remove anti-trust oversight.

I am not sure where this point leads me; but I will note that this is a really good point that adds a lot to my understanding of the debate.

Gabe

[Anonymous]

Gabe -

I have been far too busy to get into this argument, but Mike is correct. Witness the Justice Department's approval being required in all Class 1 rail mergers in addition to that of the STB (and in the past the ICC).

LC

QUOTE: Originally posted by gabe

7. Railroads have always been subject to anti-trust principles, through Congressional directives beginning with the Transportation Act of 1920. Taking railroads out of the jurisidiction of the Sherman Anti-trust Act only removed the private cause of action therein, it did not remove anti-trust oversight.

I am not sure where this point leads me; but I will note that this is a really good point that adds a lot to my understanding of the debate.

Gabe

[CSSHEGEWISCH]

Declaring that long-haul trucking cannot provide competition to railroads does not make it so. Railroads ignore trucking competition at their own peril. Several years ago in TRAINS in an article about Wisconsin Central, WC's management that they respected Schneider National as a competitor, which would suggest that this major trucking firm was indeed providing real competition to WC.

To FM: What sort of right-of-way cost equalization do you suggest for your open access infrastructure companies? Property tax abatement might not fly since it would be a federal vs. state question and I'm sure that the school districts, municipalities and other government units that would lose that property tax income would not appreciate the reasoning behind such an abatement.

[Anonymous]

QUOTE: Originally posted by futuremodal

Geez, so many off the wall retorts, so little time.....

Mark in utah - was that plant built pre-Staggers or post-Staggers? Makes a huge difference, since most rail dependent plants were built back when rates were still regulated, thus the investors believed they would retain relatively low shipping costs.

The IPP plant was completed in the early 80's, which means that the planning and construction was done in the '70's. Not being that heavily involved in the RR business, I'm guessing that the freight rates were regulated and reasonable at the time. Utah coal costs were quite reasonable, and still are to a degree even though they've gone up almost 50% over the last few years as eastern utilities gobble up all the clean coal they can.

As for the "problems" associated with open access, these can be solved by adding more capacity. Right now utilities are scared to add more capacity because of the uncertaintities around de-regulation. They're waiting for the other shoe to fall. The problem is that NOBODY has talked about deregulating the entire electrical supply system, only the generation plants. The transmission and distribution system would continue to be heaviliy regulated.

This is closely akin to regulating the rates charged for trains to use the tracks, but deregulating the train owners to charge what they wish. UP would be free to charge what they wish for hauling coal, but Utah Railway or BNSF could step in and run coal trains to IPP and pay the same trackage rates that UP has to charge itself, plus a reasonable margin for profit (regulated rate of return).

Mark in Utah

[Anonymous]

QUOTE: Originally posted by up829

Shared access to utilities is a joke and does the opposite of what's intended. For example in my area we have power outages about twice a month, the power company has never heard of ANSI or any of the Power Quality organizations and makes up it's own standards instead. Next year we will be able to 'buy' electricity from another company but they will be using the same rotten infrastructure so my service will be no different. It's also likely that competitive rates will result in even less maintenance to the system. Thanks to power company deregulation we got Enron.

Congratulation on having some stupid management (along with most of the rest of the US) for your power company. As I noted before, ALL of the deregulation talk was to deregulate the generators, but NOT to deregulate the wires. Most all companies cut line work to SUBSIDIZE the cuts in the generation rates. This was a grossly stupid thing to do, as it actually CUT the allowable rate of return for their stockholders, and cripled the system. The quicker they start to understand this simple fact, the sooner they'll start to invest again into the infrastructure to better serve their customers. This is ALSO where the money is to be made. They did this in Australia (deregulation), and those companies that kept the wires are making money, and those that are generating power are scratching out a living.

Same thing goes for RR's. In a deregulated environment the money to be made is in the rails, and NOT in the freight they haul. Surprise!!!!! Want to make more money? Build more rails to relieve the congestion and improve through-put. Run as many trains as possible over the rails as quickly as possible. Keep a few of your own trains on the tracks to compete, but keep the two parts of the business seperate. Make the rails AND the trains both pay their seperate way. You'll be surprised how quickly management thinking changes.

Mark in Utah

[Murphy Siding]

Future Model: Any thought to that seperate thread idea yet?

[Anonymous]

MP173 - You are correct that I look at this issue through the eyes of rail shippers, not limited to energy companies but all captive rail shippers. As I've stated before, the segment of the national economy represented by rail shippers is far larger than that represented by the rail transporter half of the railroad companies. Even if one buys the contention that rail transporter companies would be hurt by open access competition, from the macro perspective the econony would gain. That counts for a lot in my book.

jeaton - I had mentioned previously and will mention again, in addition to recieving a portion of an Intermodal Infrastructure Trust Fund (which would replace the Highway Trust Fund, and all modal forms would contribute) and getting tax incentives (property tax exemptions and maintenance tax credits, not taxpayer subsidies out of the general fund) for ROW maintenance to better balance the cost structure of highway and waterway maintenance, rail infrastructure companies would then be closer to the characteristic of a public utility and thus should probably have their charges and maintenance schedules regulated. Being the apparent political hypocrite that I am, I usually oppose regulation of competitive markets, but not specialized markets such as private ROW's. In my view there is a net gain for the economy when you regulate pathways for the sake of unregulated transporter service providers. The former would fall into the catagory of a safe investment, while the latter are the higher risk/higher return investments. A nice balanced portfolio.

For the record, when one thinks of a leftist political philosophy one does not include a competitive market. That's why monopolists seem to thrive in socialistic settings, they've gotten some type of protection from potential competitors by government action, which then tends toward fascism. It is frankly implausible for one to be labeled a leftist whilst he supports increased market competition. But the whole thing is probably a subjective argument anyway.

daveklepper - When speaking of interstate traffic, trucks do pay most of the cost of the highway, but when local road maintenance is considered then your 1/2 to 1/3 estimate is more in line. Makes me wonder if publicly owned railroad ROW's would be supported by property taxes instead of contributing to them.

CSSHEGEWISCH - most local governments can be made to understand the link between a loss of rail infrastructure and a resultant domino effect on other industries. When presented as an option of either continuing to have viable rail service without being able to assess property taxes on the rail ROW, or losing the rail service and a bunch of local industries with THEIR property tax contributions, then they understand that exempting the railroad ROW from property taxes is the lesser of two tax base erosion scenarios. If anything, a percieved guarantee of long term rail service will result in industrial additions to the tax base in the long run.

The WC example is a good one, but of limited support for the truck competition myth, since WC was a regional with short home rail hauls. And yet, if all the railroad had to do was offer the service, it seems they always won out. It is only when the railroad declines the service or reduces the quality of the service that truckers can snatch the crumbs from the table. Truckers in that vein aren't competitors so much as they are the option of last resort after business has been rejected by the railroads. It's analogous to the idea that vultures are the competition against wolves, which is fallacious because vultures only get what the wolves leave behind, they don't do the actual stalking, killing, and initial feasting. Barge lines are more akin to being a true competitor to railroads, because no matter what the railroads do to keep the non-time sensitive business, the barge lines can undercut them at every turn. Of course, barge lines are very limited in their market reach. The bottom line is this - when railroads do things the way they are supposed to do things, truckers cannot compete, thus they are not true competition in my view. Truckers can only work in partnership with barge lines or other railroads to be a part of a competitive option to a railroad.

Michael Sol - Isn't the right to private action against alleged monopolistic abuses the heart and soul of all antitrust laws? Without that right to private action, antitrust laws are frankly impotent, otherwise Congressman Green wouldn't need to have introduced his legislation in the first place. Makes a big difference if all a monopolist has to do is to lobby DC vs having to lobby against private interests. If I read this legislation correctly, this will allow those affected industries to bypass an impassive Congress and take direct action regarding the rate abuse.

Mark-in-Utah - Thanks for the report.

BTW - for anyone interested, there is a rail infrastructure trade show this fall in Great Britain. I'd love to attend but work obligations, travel costs and my aversion to flying will keep me stateside, yet even so I hope some report is posted to add data to this great debate:

http://www.infrarail.com/if_page.asp?articletypeid=59

[Anonymous]

QUOTE: Originally posted by Murphy Siding

Future Model: Would you entertain the idea of a seperate thread started to calmly discuss the ideas and challenges that pertain to any kind od open access system?

Absolutely. I notice you started one pertaining to the British open access experience. Did you want to expand beyond that, e.g. asking our Aussie friends their opinions on open access in Australia? Or even analyzing other transportation modes as Michael Sol suggests?

[Anonymous]

QUOTE: Originally posted by mark_in_utah

QUOTE: Originally posted by up829

Shared access to utilities is a joke and does the opposite of what's intended. For example in my area we have power outages about twice a month, the power company has never heard of ANSI or any of the Power Quality organizations and makes up it's own standards instead. Next year we will be able to 'buy' electricity from another company but they will be using the same rotten infrastructure so my service will be no different. It's also likely that competitive rates will result in even less maintenance to the system. Thanks to power company deregulation we got Enron.

Congratulation on having some stupid management (along with most of the rest of the US) for your power company. As I noted before, ALL of the deregulation talk was to deregulate the generators, but NOT to deregulate the wires. Most all companies cut line work to SUBSIDIZE the cuts in the generation rates. This was a grossly stupid thing to do, as it actually CUT the allowable rate of return for their stockholders, and cripled the system. The quicker they start to understand this simple fact, the sooner they'll start to invest again into the infrastructure to better serve their customers. This is ALSO where the money is to be made. They did this in Australia (deregulation), and those companies that kept the wires are making money, and those that are generating power are scratching out a living.

Same thing goes for RR's. In a deregulated environment the money to be made is in the rails, and NOT in the freight they haul. Surprise!!!!! Want to make more money? Build more rails to relieve the congestion and improve through-put. Run as many trains as possible over the rails as quickly as possible. Keep a few of your own trains on the tracks to compete, but keep the two parts of the business seperate. Make the rails AND the trains both pay their seperate way. You'll be surprised how quickly management thinking changes.

Mark in Utah

Whether public or private, there are plenty of dis-incentives to building excess-capacity into infrastructure. Just enough to meet peak demand is probably the best use of capital. Build more and the stockholders or voters will complain capital is being wasted. Build significantly more in a competitive environment and price wars, defered maintainence, and eventually consoldidation will occur. We're near the end of this phase with the railroads.

On the other hand, if there's too little infrastructure or a crisis occurs due to some unforseen event, the owner gains a tremendous amount of pricing power, more than enough to compensate for lost business. As with the energy bill, a crisis prompts government action, incentives, and tax breaks. Virtually all forms of infrastructure are at or below meeting peak demand. Water, sewer, highway, bridges, electric transmission, refining capacity, ports, canals, airport landing rights and now rail. Some of these are public, some private, some regulated, some shared, it doesn't seem to make any difference.

I suspect the problem is our very short term expectation for return on investment. in the private sector, and limited funds due to budget deficits and the inability of governments to raise capital using bonds.

IMHO the problem FM's shippers face is lack of pricing power due to the global economy. Railrroads now have some pricing power and are an attractive target to blame. Large industries faced with global competition have done the same. Detroit has been leaning on suppliers and outsourcing parts for almost a decade now. Farmers and small domestc producers usually don't have the same options.

[CSSHEGEWISCH]

I'm not sure that Community High School District 200 would appreciate the loss of tax revenue if the property taxes on Clearing Yard were abated. There is not a whole lot of vacant land suitable for industrial development within the school district's boundaries so any offset of lost taxes by increased valuations due to industrial development would be minimal. In most urban areas, vacant land suitable for industrial development is relatively rare and much of it is being rezoned residential or commercial anyway. Shipping by truck is a viable option for many of the remaining industries, too.

Question for FM: In your scenario for open access, the infrastructure would be owned by a separate firm, which presumably would be responsible for its maintenance and possible upgrading. Since this firm would have a monopoly on the rail infrastructure, what devices would be in place to prevent this firm from charging whatever it pleases for access to operate over its line?

[Anonymous]

QUOTE: Originally posted by CSSHEGEWISCH

I'm not sure that Community High School District 200 would appreciate the loss of tax revenue if the property taxes on Clearing Yard were abated. There is not a whole lot of vacant land suitable for industrial development within the school district's boundaries so any offset of lost taxes by increased valuations due to industrial development would be minimal. In most urban areas, vacant land suitable for industrial development is relatively rare and much of it is being rezoned residential or commercial anyway. Shipping by truck is a viable option for many of the remaining industries, too.

You are correct, except that in today's economy industrial development in one locality tends to extend economic benefits to adjacent areas. Our great highway system has allowed people to commute farther and allowed support industries to spring up even several hundred miles away, so if County A does it's job and preserves a rail line that serves an industry that may be endangered otherwise, the benefits will also be felt in Counties B, C, D, etc do to increased retail development and population growth, and that will serve those taxing districts. If said rail line also passes through Counties B, C, and D to get to County A, even if there are no direct rail customers in B, C, and D they would still benefit by contributing to preserving that line via tax exemption in return for the greater regional dollar turnover.

QUOTE: Question for FM: In your scenario for open access, the infrastructure would be owned by a separate firm, which presumably would be responsible for its maintenance and possible upgrading. Since this firm would have a monopoly on the rail infrastructure, what devices would be in place to prevent this firm from charging whatever it pleases for access to operate over its line?

It is logical that said entities should be governed as regulated utilities in the same vein as electric utilities. That was(is) part of the problem with past railroad regulation, the whole kit and kaboodle was regulated including the transporter parts. That ended up hurting the ability to adjust to market forces, and almost killed the railroad companies.

Separate and regulate the infrastructure, and keep the transporter services unregulated.

[MichaelSol]

QUOTE: Originally posted by futuremodal
[Michael Sol - Isn't the right to private action against alleged monopolistic abuses the heart and soul of all antitrust laws? Without that right to private action, antitrust laws are frankly impotent, otherwise Congressman Green wouldn't need to have introduced his legislation in the first place. Makes a big difference if all a monopolist has to do is to lobby DC vs having to lobby against private interests. If I read this legislation correctly, this will allow those affected industries to bypass an impassive Congress and take direct action regarding the rate abuse.

Well, in theory, practice and theory yield identical results. In practice, they don't.

Anti-trust litigation is phenomenally expensive. Only the big guys, with tons and tons of free cash, play the game. Oracle v. Microsoft, AOL v. Microsoft, etc.

Look at WordPerfect. WP12 is not just arguably better than Word. It is a far superior word processing program. And WPDOS6.2 is still the outstanding word processor of all time. As one nationally syndicated legal scholar recently wrote, "I will stop using WordPerfect for DOS when they pry the program from my cold, dead hard drive." Columbia University maintains a troubleshooting website so that current users of the DOS version can continue to function in today's Windows environment. When I need to work with complex documents -- lots of footnotes and graphics -- I still use WPDOS 6.2.

Did WordPerfect have a cause of action against Microsoft? Absolutely. But, once the slide begins, that means shrinking revenues, shrinking market share, no money for litigation. Novell, which sold off WordPerfect years and years ago, only recently launched an antitrust suit against Microsoft. Corel, which now owns WP, can't afford it.

And this underscores a certain reality of private causes of action. When they exist, federal and state agencies are far more reluctant to take on the burdens of litigation, usually responding, "well, you can file your own lawsuit, why don't you do that?"

So, legislation which includes alternative enforcement procedures, usually defaults to the private sector, which ordinarily does not have the resources to pursue that kind of litigation.

Already a victim of a violation of law, the victim is urged to spend their own money -- money they don't have because of the violation -- to seek justice. Even though it is, ultimately, the public that is being hurt.

Efffective antitrust litigation occuring at the company level last occured in the railroad industry with the SP/UP suit over the Overland route restrictions in the 1960s. At least, that is the last one I can think of off the top of my head. Very interesting piece of litigation.

The Northern Lines merger case was an anti-trust case at some levels. The US Department of Justice intervened on behalf of Milwaukee and CNW, but particularly Milwaukee, arguing that the merged Northern lines would create exactly what the Sherman Antitrust Act prohibited, and which prior proceedings had explicitiy prohibited.

When Milwaukee itself turned around and offered its Gateway conditions as a condition of its own approval, and the Northern Lines instantly accepted, DOJ was stunned, but refused to drop its opposition to the Northern Lines merger, all the way to the US Supreme Court. The theory being that railroad companies should not be permitted to negotiate their own suicides.

Of course the irony there illuminates the impact of effective management, even in the face of what bystanders sometimes call "market forces." Contrary to the expectations of most, Warren Ploeger's Gateway Scheme turned out to be hugely successful for the Milwaukee Road, pushing its PCE to record levels of traffic and profitability indeed, the premier railroad success story of the 1970s. All sorts of interesting schizophrenia resulted from that. Including photo captions in Trains that continually suggest that the PCE had no business [See Classic Trains this month, for example] which is just simply false history.

For the shipper, an antitrust suit is perhaps not even the proper approach. Antitrust is an action between competitors. High rates resulting from monopoly pricing power in limited areas is a different legal creature, and falls more to "Fair Trade Practices Acts" at the state levels, and Federal Trade Commission legislation at the Federal level.

In the case of railroads, STB legislation continues to regulate rates for key commodities, such as grain, but the regulatory procedure is nearly almost always at private initiative, which has in fact inhibited effective action. The McCarty Farms cases, dragging on for 17 years, are Exhibit A for the enormous obstacles to the private cause of action for unfair rate-making.

If there were not a private cause of action in that instance, only a federal cause of action, the outcomes of rate discrimination efforts might well be different.
Best regards, Michael Sol

[Murphy Siding]

MichaelSol Do you think there is any provision in state or federal law that would allow for the imposition of the Excess Profits Tax (?) that was put on oil companies one time, to be leveled toward a railroad?

[Anonymous]

Michael,

Your synopsis is apt regarding the difficulties of the small guy vs the big corporation, but it doesn't explain why the segment of the economy that can be represented by captive shippers, which is by far a much larger portion of the economy than that represented by the railroads, cannot exert much in the way of viable action to remedy those concerns, other than the fact that current antitrust law as it pertains to railroads effectively blocks such actions. If the Green legislation becomes law, I believe the rail shippers affected by differential pricing, bottleneck pricing, et al, will finally have a viable means to eradicate those market perversions.

Also, regarding Milwaukee's Gateway conditions, I will stand by my belief that the Milwaukee made a mistake in not including full access rights over the SP&S lines and the entire I-5 corridor, and access to Lewiston ID in addition to the Billings haulage agreement, to fully cover the PNW. I don't know if such inclusions would have made THE difference, but they certainly would have put the Milwaukee on a more even playing field.

[jeaton]

Futuremodal

I am going to first state that I do not particularily care whether an idea falls to the left or right on the political spectrum. I try to base my argument on whether the idea will solve the problem and I think that contending that an idea is wrong just because it is too conservative or too liberal is pretty shallow.

You are certainly correct that the our more conservative government representatives have been the proponents of conditions that can allow for open competition, but I submit that their primary objective is to reduce or eliminate government regulations of business. Increased competition is not the end but rather a justification and a good one at that. There are other very good justifications, such as a business environment that is undencumbered by regulation leads to faster economic growth and, not to be over looked, can also produce greater returns for the owners.

The thing that the deregulation advocates have either choosen to ignore or not mention is that a deregulated environment can lead to market dominance or even a monopoly. Conservative economists will argue that monopolies can not last because the profits generated by a business with a monopoly will be great enough to attract capital to form a competing entity. That may be true in the long run, but as you certainly realize, for a highly capital intensive business such as railroading, the amount of capital that needs to be acquired and the investment risk presents a very formidable barrier to entry into the rail market.. Not that it can't be done. I'd make a pretty good wager that the DM&E will get into the Powder River Basin. On the other hand, I don't see anybody chomping at the bit to build another rail line to your downtrodden friends in the grain business in Montana.

Not withstanding Congressman Green's grandstanding, your proposal still is in a very opposite direction of what the rather conservative folks now in power are willing to take.
If you think otherwise, you just haven't paying too much attention to what the Bush administration and congress has been up to the last few years. And it certainly hasn't just been the last four or five years. The Clinton administration wasn't any slouch in coming up with pro-business legislation and policies. The decline in the Justice Department's anti-trust enforcement didn't just come about in 2001. (As an aside, you have complained that the cost of going to the STB is prohibitively high. Do you think a civil anti-trust case is going to be less expensive?)

So my first point is that you are faced with a government that has philosophical objection to adding regulation. You might be able to overcome that objection by getting powerful support for a change, but where would that come from? The infrastructure companies would probably be OK with the rate regulation as long as it allowed a rate of return a couple of points above the cost of capital and had those nice tax benefits. And yes, the shippers that consider themselves severly damaged by the "monopoly" will be there. On the other hand I doubt there will be much in the way of strong support from the general public. Unlike charges for phones and electricity, they don't get a bill from a railroad and unlike the use of other "ways" they aren't very likely to be able to slap a hi-rail rig on the family car and go off for a Sunday drive. On the negative side, your suggestion for property tax abatement brings the whole deal very close to the public. Maybe there are no property taxes in Idaho, but I have never met a home or business property owner that didn't go ballistic over anything that might increase his or her bill. And that, even if there are very positive overall benefits for the deal. Throwing all the gas revenue into a common transportation trust fund? I can see a trucker now. "They will have to pry that fund out of my cold dead hand". User fee? I am sure UPS is not going to like paying X extra bucks for there loads to help out a Montana grain farmer. Tax credits? I don't see any difference between getting some of my tax money sent back to me or getting to keep it in the first place. Somebody else is going to have to kick in taxes to cover my benefit.

OK, so in spite of all the obstacles, let assume that the whole deal gets through. (Note that I have not argued that an order to railroads to make the split is not unconstitutional). My view is that it may not solve the problem of some shippers getting stuck paying rates assumed to be too high. Even though the threshold for the minimum capital need to become a competitor in the market is much lower, it is still a factor, and there is no certainty that any considerable number of new operator companies are going to jump into the fray. For one thing, we know that the total profits of the class one railroads only get close to the cost of capital threshold. Clearly margins are going to decline and to offset that situation there either needs to be tremendous traffic growth or substantial efficiency improvements. You have argued that lower rates would vastly increase market share and total profits, but you have totally discounted the value of of the service level that can be provided by trucks, who are the things with the lions share of the total market. If you think that shorter trains will overcome that disadvantage, you just have no clue as to how railroads work. I have been in the business of buying transportation services for a number of companies and I can assure you that the modal decision is not just based on price. Of course the other way to improve profit is to increase efficiency. I am not sure there is very much to get for that. One prospect is to reduce labor costs, the one man crew and all that, but given the difficulty that railroads have getting qualified personnel at existing wage rates, I doubt that there is much chance of getting lower rates.

In spite of that some operate companies will come in, but I suspect there are much more attractive markets than the business of hauling seasonal freight that moves in loose car consignments. So it is now an open market with competition and winners and loosers, and with that you will still have managers striving for market domination as a profit strategy. That can lead to mergers and acquisitions and even monopoly conditions, especially when there is only enough business in a market to support one carrier. To you propose to establish regulations that force at least two carriers to serve every market?

I am not going to go into all the possible operational problems, but for a good example of what can happen when one railroad is responsible for the maintanence of a track also used by another, check out page 10 of the September Trains. And if you think there aren't going to be major hassles over which train gets priority when there are conflicts, I still have that bridge to show you.

I have two more comments. I don't think Hunt and Schneider National and many others are likely to agree with you that trucks just get the crumbs off the railroad table. UPS either. They just laid out $1.5 billion for Overnite just so they could get into the LTL market.

Your statement that that Socialistic countries supports monopolies runs a little counter to the European experience. Just ask Jack Welch or Bill Gates.

And I know what the Laffer Curve is all about.

Jay Eaton