OAT : Open Access Thread

[Anonymous]

Nonsense! We all know that life keeps getting better as we all get older.

"The older the violin, the sweeter the music".

Back in the 70's, the "experts" were predicting another Ice Age, it looked as if socialism was the end game for the U.S., communism was dominant and growing, and the population bomb was about to explode (as it was "two minutes to midnight" according to Erleichmann, et al.)

What Fritz Kahn is predicting is what anyone who has studied transportation theory and history would conclude, namely that the idea of the proprietary closed access transportation system is an anachronism that dates back to the days of feudalism and slavery. All other transportation modes have now evolved into open access systems to one degree or another, and most rail systems in the world are now open access in some form. If history is any indication, our NA rail system will either evolve or go extinct.

[nanaimo73]

QUOTE: Originally posted by Murphy Siding

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by Murphy Siding

Michael Sol: 2033 is 28 years from now. Being the history minded person that you are, can you find any projections of the future of railroading written about 28 years ago? That might make for some interesting reading.

Oh boy, 28 years ago were the darkest days of post-WWII railroading. I can't recall anyone predicting anything positive.

Best regards, Michael Sol

I don't percieve the prediction for 28 years from now as looking too positive either.

Good answer Murphy.
28 years ago the forecasts were for nationalization in the USA. Amtrak and Conrail were owned by the Government, the CRI&P, CMSP&P, and the B&M were bankrupt and it looked like C&NW was going to join them.

[Murphy Siding]

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by Murphy Siding

Michael Sol: 2033 is 28 years from now. Being the history minded person that you are, can you find any projections of the future of railroading written about 28 years ago? That might make for some interesting reading.

Oh boy, 28 years ago were the darkest days of post-WWII railroading. I can't recall anyone predicting anything positive.

Best regards, Michael Sol

I don't percieve the prediction for 28 years from now as looking too positive either.

[MichaelSol]

QUOTE: Originally posted by Murphy Siding

Michael Sol: 2033 is 28 years from now. Being the history minded person that you are, can you find any projections of the future of railroading written about 28 years ago? That might make for some interesting reading.

Oh boy, 28 years ago were the darkest days of post-WWII railroading. I can't recall anyone predicting anything positive.

Best regards, Michael Sol

[Anonymous]

"By 2066, environmental concerns and fossil fuel shortages will force a 'great selectivity in the operation of trains' ".

Sounds like a great starter script for Fritz Kahn's version of "Metropolis".[8D]

[Murphy Siding]

QUOTE: [i]Originally posted MichaelSol

Here is Kahn's projected timetable. Read it and weep.:

* By 2033, the rail lines will be "unbundled" and "available to whoever can operate a train," breaking apart those who own the tracks from those who operate the (probably relatively short-distance) trains. Not exactly what those today calling for separation of operations from infrastructure have in mind. This would happen whether the infrastructure is in private or public hands.

* By 2066, environmental concerns and fossil fuel shortages will force a "great selectivity in the operation of trains" which will be very expensive. Amtrak? Doomed, says Kahn. There will be bidders... for the Northeast Corridor. And the rest of it (will be) a luxury the rest of the country (will not be) prepared to underwrite. Maybe some passenger service from Chicago to St. Louis and from San Francisco to San Diego, but not necessarily Amtrak, because "anyone can perform those" services. Long distance trains, with sleepers, lounges and diners? Out the door "certainly within 25 years time." Northeast operations will be "marginal."

Best regards, Michael Sol

Michael Sol: 2033 is 28 years from now. Being the history minded person that you are, can you find any projections of the future of railroading written about 28 years ago? That might make for some interesting reading.

Thanks

[MichaelSol]

I have spoken to Fritz Kahn maybe twice, three times, over a thirty year period, and have a couple of letters from him in the file, strictly on his perceptions and historical recollections regarding specific aspects of the BN merger conditions. I can't say from those brief contacts that I know him, or vice versa. However, my impression of him is distinct. Very well-informed, very sharp, very articulate, broadly experienced on railroad issues, but making a good living representing clients to the STB. Probably wouldn't want to give it up to serve on the STB. If he sees Open Access as the inevitable destiny of Class I railroading, those less informed and less experienced would do well to understand why, rather than merely critique.

Best regards, Michael Sol

[Anonymous]

I nominate Fritz Kahn to preside over the STB! He has it exactly right regarding the eventuality of open access, and that OA might actually save the stature of rail transportation.

He does seem to ignore how clean coal applications can be utilized in locomotive propulsion to keep rail operations practical. At least then we won't have to worry until 2200. By then nuclear power and massive catenary will keep the trains rolling, hopefully 'til the next Ice Age.

[samfp1943]

Very interesting conversation, quite a wish list for technologies, both existing and in the future..What is needed is a place with a grove of those trees such as the NS uses in its advertisement to transfer trailers[containers] from the road to railroad..What this whole thread seems to prove that there is probably a need for open access and it may eventually happen but not without an awful lot of discussion such as contained in this thread..some of this is pretty deep stuff..Good Reading and thought provoking[^]

[MichaelSol]

Ran across this from Fritz Kahn, former General Counsel ICC, regarding his view on Open Access, and other interesting thoughts as well:

From the National Corridors Initiative Newsletter Vol 1:35, December 18, 2000.

Author of Railroad Mergers Frank Wilner had asked Fritz Kahn Kahn to let his imagination "run wild" as to the 21st Century.

"In a nutshell, Kahn serves up two doses of good news and one serving of bad news for 100 years from now. The good news is commuter trains, subways and light rail systems will still be around, perhaps more heavily than ever. On the other hand, the tracks that carry the current Class Is will be in their last days, and of course, Amtrak will be long gone.

First, the man's credentials: Kahn has been a transportation lawyer all of his professional life. At one time, he was general counsel for the old Interstate Commerce Commission (ICC). In private practice, he has represented the D&RGW, C&BW, P&LE, and Monongahela. More recently, he has represented shippers and shortline railroads.

In our own discussion with Kahn, he noted that most modes of transportation inherently last no more than 200 years. "Take a look at the carriage. Take a look at (barging on) the canals."

Right now, he said, the decline of railroads is foreseeable and will be certain by the end of the 21st Century.

The veteran rail lawyer said the long-predicted "running out of oil" will finally begin to materialize in 30, 40, or maybe 50 years. And since railroads have chosen to be carriers of bulk freight, grain, coal, and chemicals, including plastics, the Class I carriers will suffer because the very scarcity of these products will cause consumers to be more selective in the use of them. Most plastics and chemicals, as carried by railroads, are derived from oil and gas.

Another factor at play here is that, "if you don't like the service you get from one trucker, you can call up another trucker." Not so easy to do in the case of railroads. And Kahn believes that will continue to backfire on railroads.

Nuclear, solar, and thermal energy sources will not be conducive to rail transport. These fuels have not completely proven themselves to be efficient or economic so far. But, hey, when you're letting your "imagination run wild," one can postulate that someday, nuclear fuel, an energy source now in relative infancy, will ultimately be free of "radiation problems." Our futurist raises the possibility of rocket-propelled sky ships for passengers and subterranean vacuum sleds for freight, if and a big "if" it is, a way can be found economically to burrow beneath the ground for long distances.

Ah, you laugh now. But remember 100 years ago, they were laughing at the Wright brothers.

150 mph tilt trains?

"That's nothing," said Kahn with a shrug of the shoulders. Europe and Japan have been way past that for years, and the Northeast corridor is not in track shape to accommodate trains up to 200 mph consistently from Washington to Boston. He doubts the political will is there to make it happen, even though "the technology is there."

Here is Kahn's projected timetable. Read it and weep.:

* By 2033, the rail lines will be "unbundled" and "available to whoever can operate a train," breaking apart those who own the tracks from those who operate the (probably relatively short-distance) trains. Not exactly what those today calling for separation of operations from infrastructure have in mind. This would happen whether the infrastructure is in private or public hands.

* By 2066, environmental concerns and fossil fuel shortages will force a "great selectivity in the operation of trains" which will be very expensive. Amtrak? Doomed, says Kahn. There will be bidders... for the Northeast Corridor. And the rest of it (will be) a luxury the rest of the country (will not be) prepared to underwrite. Maybe some passenger service from Chicago to St. Louis and from San Francisco to San Diego, but not necessarily Amtrak, because "anyone can perform those" services. Long distance trains, with sleepers, lounges and diners? Out the door "certainly within 25 years time." Northeast operations will be "marginal."

Best regards, Michael Sol

[Murphy Siding]

Man, I'll swear sometimes I don't pay enough attention![:)]

[Anonymous]

QUOTE: Originally posted by Murphy Siding

What the heck is a Slice and Dice Seminar?[:)]

*See Paul's last post.

[Murphy Siding]

What the heck is a Slice and Dice Seminar?[:)]

[Anonymous]

QUOTE: Originally posted by Murphy Siding

That incentive would be an almost guarranteed ,set profit number,a business with a long track history, limitations to make sure competition is limited, and a very great desire for several levels of government to make sure my lights come on when I flip the switch?

Why do you want to limit competition? Or are you refering to the natural limitations imposed by physical and geographic constraints engendered into infrastructure placement?

Long track history? Every utility had to start somewhere with a clean slate (no track record) yet that didn't stop those initial investment opportunities. You could argue that railroads as established have the necessary track record, all that's happened is a corporate split.

I have to go now and prepare for my Slice and Dice Seminar presentation. I'll try and not cut them down too much.

[Murphy Siding]

That incentive would be an almost guarranteed ,set profit number,a business with a long track history, limitations to make sure competition is limited, and a very great desire for several levels of government to make sure my lights come on when I flip the switch?

[Anonymous]

QUOTE: Originally posted by Murphy Siding

I'm not sure how many different ways I can ask the same question: What incentive would an investor have to invest in an IO that can only earn a predetermined profit?

I'm not sure how many different ways one can provide the same answer: The incentive to invest in a regulated IO is the same as the incentive to invest in a regulated utility.

[CSSHEGEWISCH]

QUOTE: Originally posted by futuremodal
Why a top end to what an IO could earn? The user fees would have to be regulated to prevent the very bottleneck rates being scammed on us now. Allowing an IO to charge differential rates would defeat the whole purpose of OA.

Why shouldn't an IO be allowed to charge differential rates? The operator of a high-speed intermodal train would obviously put a higher value on his operating slot than that of the operator of the local freight. Also, the intermodal operator may be willing to pay more to obtain priority in dispatching by the IO.

Since futuremodal is so absolutely certain that OA is THE solution to transportation problems, the balance of trade deficit, etc., perhaps he should submit his proposal to a symposium or seminar of academics and business professionals where it could be sliced, diced and analyzed with much more rigor and objectivitiy than is possible on these forums.

[Murphy Siding]

I'm not sure how many different ways I can ask the same question: What incentive would an investor have to invest in an IO that can only earn a predetermined profit?

[Anonymous]

QUOTE: Originally posted by Murphy Siding

ameliorated? You're expecting the *government* to level the playing field ? [:)]. The question, plainly is- Why would there be a top end of what an IO could earn? If the idea is to make for more competition, why would you want to limit how well an IO performs?

That is the whole idea of implementing OA into the nation's rail system, taking the anachronistic devolution of the closed access system (or if it pleases you, dragging the railroad companies kicking and screaming out of the last vestiges of a Feudal mentality), and bringing it forward into an evolved state where the operational characteristics of railroading is in a similar vein as the other transportation modes. I doubt that it would happen voluntarily, to risky for those who might vs those who absolutely would not, thus the need for governmental oversight of the transistion. Don't forget, it is the railroad companies (and TRAINS columnists) who constantly complain about the "unfair" advantages highways and waterways have over railways. They are the ones who want a level playing field, asking for government aid to help pay for the selective capacity expansion projects, but without the added competition those other modes exhibit. A great example of the "wanting to have the cake and wanting to eat the cake too" is such.

Why a top end to what an IO could earn? The user fees would have to be regulated to prevent the very bottleneck rates being scammed on us now. Allowing an IO to charge differential rates would defeat the whole purpose of OA.

[Murphy Siding]

ameliorated? You're expecting the *government* to level the playing field ? [:)]. The question, plainly is- Why would there be a top end of what an IO could earn? If the idea is to make for more competition, why would you want to limit how well an IO performs?

[Anonymous]

Murphy - BTW, you said something to the effect that BNSF's rates in Montana are set by the competition. Look again. There is no competition for hauling grain out of Montana. The nearest waterway is 500 miles to the west. The CP is hundreds of miles up north in a different country. The UP line into Montana is so convaluted and roundabout that UP really cannot put up any competition. That's why BNSF's rates, even by BNSF's own admission, are monopolistic rates, where the price set is equal to the "deadweight loss" between demand and where marginal costs equal marginal revenue for a given quantity. If true competition were introduced, price would be set more toward that point where demand equals marginal costs, as competition causes price taking. If you think BNSF is low-balling itself, look at the differential between what Montana farmers are charged and what Nebraska farmers are charged for the same relative costs to the railroad. (See the thread on Montana grain pricing for reference).

If you want, you can say that maybe conservation set-asides are the competition for BNSF in Montana, as farmers find it's less expensive to set land aside rather than produce a crop wherein the transporter gets half the proceeds from the sale.

[Anonymous]

Murphy - Let's try this again. What you are asking is why would someone invest in an IO with no guaranteed minimum of return? In other words, what if an IO has all this immaculate trackage and no one shows up to run trains over it? It could happen on some stretches (see the fallback to state and regional ownership post), but the facts are rail service is needed, is wanted, and will be used. If the base costs are ameliorated to give the IO's the upper hand over public support for highways and waterways, and given the huge efficiency advantages trains have over trucks, it seem unlikely that any mainline IO woult be wanting for customers. Those customers in return are paying a fee that both covers all the associated costs, and provides a percentage profit margin.

Say for example TOC's are charged an average of $5000 dollars to run over an IO's tracks. 10% of that is $500. If the IO is hosting as few as 20 trains per day, then thats over 3.6 million in net earning per year for that one line. If an IO owns 10 such lines in the country, they're averaging $36 million in profits per year on the low end. If that's divided among 10 million share holders, that's $3.60 in earnings per share. Not bad. Granted, that is a simplistic example, but when you look at the number of current trains per day running over the nation's rail system, and average that out over all trackage, mainline and secondary, you can see that the numbers favor the IO's. If OA results in shorter faster trains, then the number of annual users will go up. On the surface, it seems like a win-win for current shareholders.

If however, there is no attempt at ROW cost equalization among the modes, instead forcing the IO's to go it on there own in competition with the public support for highways and waterways, then your negative scenario is much more likely to play out.

[Anonymous]

QUOTE: Originally posted by jeaton
[Frankly, I don't care if open access is labeled socialistic, communistic, capitalistic or any other label that exists or might be invented. My oposition to the concept is, for all the reason that have been noted on this forum, due to the fact that the only place where it will exist as a viable transportation option is in your dreams.

Your last sentence shows you have no grasp of reality. OA in the railroad sector exists and is growing all over the world exept for NA. OA exists for highway, waterway, airway, transmission, telecommunications, and pipelines in the US. Railroads are but the last remnent of an anachronistic approach to transportation development via the closed access system, and it's only a matter of time before the pressure being put on Congress forces them to act in some manner to address the negative consequences of current U.S. railroad policy.

The likely result of that congressional action will be a return to rate regulation, so you are correct in implying that OA is less likely to see the light of day. Which is too bad, because something WILL happen, so in effect if you are not for OA, then by default you are for re-regulation.

[Murphy Siding]

up829: It appears to me that the rates in Montana are what they are because BNSF can charge what they do ,based on competition.

fururemodal: No, you still haven't answered the question. Consider that the price one can sell a potato for is based on supply and demand. The potato seller doesn't get to say "My potato is priced at cost, plus a *reasonable* 10% profit. He has to sell at somewhat near the going market price-even if it's below actual cost! It happens all the time. You're saying there would be a top end limit on what an IO company can earn. But there would be no *bottom end* on what they could earn OR LOSE. What is the incentive for an investor?

[Anonymous]

FM
Federal regulation puts us right back where we started. Electric utilities and other businesses such as insurance are largely regulated by the states. Federal regulatory agencies are much too partisan. Under the current administration, virtually every business crisis we've had involves a Federal agency being in bed with the industry they're supposed to regulate. Under the other party, the consumer activists get control and try to suck the blood out of the industries they regulate. Insurance companies generally dislike having to deal with 50 states, but it's actually better than the boom bust cycle in Washington. Many states have at least partially independant regulatory bodies. In Washington, they're all part of the Executive branch, so whoever buys the Presidency largely controls the regulators. IF the STB were doing it's job and Montana wheat farmers were getting the same rate as those in Texas, would we be having this discussion? Did Montana vote for Kerry or Bush??

[jeaton]

futuremodal

Obviously you misunderstood my post, so to clarify, I do not oppose government programs that are are socialist, ostensively or any other way.

On the other hand you seem quite frightened by it. Appearantly socilaism causes you so much discomfort that you will deny that a particular government program is socialistic, even though it may be clearly is defined as such.

At any rate, my post may have been clearer if I had explained that the the statement begining "I oppose socialism...." is not my view, but shows the illogical approach that some will take to explain support of socialistic programs while at the same time emphaticly claiming they oppose socialism.

Frankly, I don't care if open access is labeled socialistic, communistic, capitalistic or any other label that exists or might be invented. My oposition to the concept is, for all the reason that have been noted on this forum, due to the fact that the only place where it will exist as a viable transportation option is in your dreams.

[Anonymous]

jeaton - You ostensibly oppose socialism. You state that you oppose anti-trust law. Therefore, anti-trust law must be socialist. And so on, and so on,........

Let's not forget, that in this debate it is your side that always brings up the accusation of socialism when discussing OA. There is no sliding down the slippery slope until someone takes the first plunge.......

Murphy - Did I answer your question or not? As usual, Mac takes it upon himself to speak for others, and I just can't assume that he speaks for you as to whether you thought the question was answered. But since you posted a further need for clarification, I'll take a stab at it.

Whether other utilities have a long track record or not is irrelevent to your question pertaining to why someone would want to invest in an IO company, in so much as any new type of investment security with a regulated return would be a causal factor for hesitency on the part of investors unless there is some type of security backing by the feds during the transition stage. Take it in it's most basic inquiry: Are shippers willing to pay a user fee to use railroad tracks the way they do highways? Despite the innacurate myth of highways being "heavily subsidized", the truth is that at the federal level most interstate-type highways are paid for with user fees via fuel taxes and other various trucking fees. Since the highway version of TOC's pass this cost onto shippers, the answer is yes. However, as publicly owned ROW's highways do have certain advantages pertaining to public ownership, even with the user fee system, and such is an equivalency to a regulated private utility. With railroad technology's superiority in moving bulk commodities at speed, there is an opportunity for profit in owning railroad infrastructure that is not present in highways or waterways (outside obvious bottlenecks such as the Panama Canal or the remaining privately owned toll bridges), and in terms of public support all we need is to emulate a user fee system combined with a public-ownership by proxy (no property taxes) to "equalize" the playing field among modes. I would include certain tax incentives as part of the user fee alignment, since the social benefits of railroads are not as transparent to the public as electric utilities, and railroad maintenance needs are more crucial to sustained access than the maintenance needs of highways.

BTW, the government does not regulate the electric utilities' profit margins to "protect them from competitors", they do so knowing full well the need for a minimum level of return to attract investors. And investors are attracted to the regulated utilities, despite the introduction of OA competition to that sector. Right now regulated utilities are the darlings of Wall Street, so some how the seeming incompatibility of competition and regulation has managed to take the industry to a higher level on all counts.

So with the transportation cross-modal cost base "equalized", we now need to prevent the very monopolistic tendencies that we see now in the closed access rail system. That's the other side of regulation, and it fits nicely into the separated regime of an OA rail industry, e.g. it makes sense to regulate infrastructure, but not services. Remember, the downside of past railroad regulation was that services were regulated, which prevented market dynamics, yet there was no transparency of how railroads maintained their ROW's, which allowed deferred maintenance to undercut the longevity of so many fine Class I's.

So now we have IO's with tracks that go from one market to another. The shippers line up, pay their user fees which cover associated maintenance costs and the regulated 10% profit margin, and off they go. If the shippers can garner savings from using this user fee system to run multiple boxes at a time as opposed to the highway user fee system with it's one or two boxes at a time, then they will use OA rails. If OA rails get enough use, investors will see it and participate by purchasing the OA securities. If OA rails do not get enough use, investors will see it and invest elsewhere.

To recap, you asked why anyone would invest in an IO with regulated characteristics if there is no long term track record. It's kind of a rhetorical question, since IO's would be new to the market. It is my guess that there would have to be some sort of federal backing during the transition period to attract the investors until a track record can be established. After all, at one time electric utilities were new, in fact every type of investment was at one time new to people. Since our economic way of life is well established, any new investment scenarios that would have significant impact on society if something went awry would need backing to ameliorate such fears.

[jeaton]

QUOTE: Originally posted by bobwilcox

QUOTE: Originally posted by jeaton
...some of the information needed for accuracy is proprietary...

Compared to the 1970s a Class Is data is so detailed and dynamic it will curl your hair. The day of Form A system averages is like the Shasta Daylight at 9:06 AM-long gone.

We could actually get pretty good numbers for unit trains because relative to loose car business, operating expense could be quite well observed. EMD had provided fuel consumption sims, we could work up crew cost based on the number of districts that were involved and given the going price for new equipment, just use whatever formulation the Finance people wanted to use to define daily cost. Take departmental cost data from the annual report to the ICC, make a reasonable allocation of indirect and overhead expenses and it came pretty close to as good as it gets.

Of course then, the costing of the loose car business typically went by the regulatory costing method-Form A- but our system people were trying to get a car costing program that would reflect the real life activity of the shipment of a car of widgets from point A to B. Somehow a million lines of COBAL coding rings a bell. I do know that a print of the program was at least a foot thick before the project was abandoned. A big part of the problem was capturing and processing movement data. Like everybody else at the time, we had car location data and revenue data on each shipment, but given the state of data storage and processing speed at the time, converting the information to something that could be put into a "shipment profit program" just was not doable.

Time change. It took an entire floor at Illinois Center to hold the machines needed to produce the storage and processing power that now sits on my desk. Similar "slight" improvements in program structure. Heck, those young kids that run things nowadays have NO IDEA just how hard it used to be. Given today's tools I probably could have gotten may day's work done before the Shasta Daylight actually left town. RIIIIGHT.


Jay

[bobwilcox]

QUOTE: Originally posted by jeaton
...some of the information needed for accuracy is proprietary...

Compared to the 1970s a Class Is data is so detailed and dynamic it will curl your hair. The day of Form A system averages is like the Shasta Daylight at 9:06 AM-long gone.

[jeaton]

QUOTE: Originally posted by MichaelSol


If you have Excel, I can email the model. It's a rough first draft, but it's interesting.


Best regards, Michael Sol

Michael

This is to acknowledge your offer, with thanks, but I don't think I would be able to make much use of the program. Not that those kinds of models can't be useful. I used a quite good program to forecast unit train costs when I worked in the Marketing Department at the ICG. It did not have a revenue module, but it was easy to work that and the profit margin on paper.

Frankly, since I have no professional need for such a program, I am really not interested in doing the research that would be necessary to get accurate numbers to put in the formula. And of course, some of the information needed for accuracy is proprietary. Absent any reasonable confidence in the results, I would not be comfortable even using the numbers for discussions here.