QUOTE: Originally posted by futuremodal Having studied John Bitzan's "Railroad Costs and Competition" study and his associated works in that area (thank you Michael Sol), here's his opinion in a nutshell. It should be noted that this is not an open access study per se, but rather a more specific analysis of railroad costs and societal benefits resulting from other railroads being allowed to use the lines of a home railroad (e.g. no corporate separation of infrastructure from transporter operations): 1. Railroads are "natural monopolies", meaning he thinks they function best when they have monopoly power.
QUOTE: 3. Introducing competition to rail shippers will result in societal benefits providing the reduction in prices for those shippers is relatively high (for BNSF shippers the prices would have to fall by 19 to 27% to justify introducing competition, easily achievable since captive rates are often 100% higher than competitive rates - Table 6, page 223).
Thanks to Chris / CopCarSS for my avatar.
QUOTE: Originally posted by Murphy Siding FM: Why would the infrastructure companies have to be regulated? If the aim is to let the market set the price as it relates to the TOC's,shouldn't the infrastructure companies be allowed to set their rates(and profits) as low,or as high as the market dictates? If it's done otherwise, it's just another form of market manipulation in my opinion. And that idea about distributing the wealth(!) from one guy's pocket to another-that's not right.
QUOTE: Originally posted by futuremodal The fact that railroading still only has about 35% of the market and 15% of the revenues should be a red flag...
QUOTE: Originally posted by futuremodal Greyhounds - Keep in mind those assumptions posted regarding societal benefits and natural monopolies are Bitzan's, not mine. On the societal benefit question, most people recognize that rail shippers represent a larger segment of society than railroads, so if you have significant reductions in the prices rail shippers pay for rail service, in aggregate society benefits, even if railroads ostensibly do not.
QUOTE: Did C&NW's/UP's entry into BNSF's PRB domain greatly complicate things, or was it a minor complication? Either way, it is a subjective judgement, a judgement that could be objectified if real-world comparison numbers could be had regarding multi-use vs single use of the Orin line.
QUOTE: Originally posted by CSSHEGEWISCH FM: What are the "natural" shares of each mode for the transportation market and how were these figures determined? Since open access is supposed to eliiminate captive shippers, how would you guarantee that at least three operators (your "triopoly") would be in every market without regulation? Why would long-haul trucking firms leave what is to them a lucrative market in favor of setting up a rail operating company, an area in which they have little to no expertise?
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QUOTE: Originally posted by futuremodal QUOTE: Originally posted by CSSHEGEWISCH FM: What are the "natural" shares of each mode for the transportation market and how were these figures determined? Since open access is supposed to eliiminate captive shippers, how would you guarantee that at least three operators (your "triopoly") would be in every market without regulation? Why would long-haul trucking firms leave what is to them a lucrative market in favor of setting up a rail operating company, an area in which they have little to no expertise? 1. "Natural shares" is a subjective point. It is my belief that if all modes had thier ROW's financed in an equalized way, and the potential shippers had access to competitive rail choices, railroading's share of the freight transportation market would double. Railroading had at one time a 70% share before highways evolved into cutting edge open access transportation corridors while railroads devolved into an over-regulated closed access system. It is not hard to conceive that an open access rail system with equalized ROW support would own all long haul and medium haul freight prospects outside of highly specialized truckloads. You'd be suprised at how many entreprenuers could find opportunities that are missed by satiated entities, given the chance. 2. There is no "guarantee" that at least three transporters would respond to every market opportunity, or even two. All that can be guaranteed is the opportunity to serve without exclusion. 3. Trucking firms face a long term problem with driver shortages and turnover. Anytime they can move multiple truckloads in concentrated consists (even as small as 10 or 20 at a time), they will alleviate that over the road driver conundrum. If given the opportunity, you would see the larger trucking firms running TOFC and bi-modal consists on their own terms, because to them that serves the bigger picture, a picture which the railroads cannot see with their Rose-colored glasses.
"We have met the enemy and he is us." Pogo Possum "We have met the anemone... and he is Russ." Bucky Katt "Prediction is very difficult, especially if it's about the future." Niels Bohr, Nobel laureate in physics
QUOTE: Originally posted by jeaton Yes. It is very easy to see how the present system has forced the likes of UPS, Schneider National and Hunt to have to struggle each day to avoid bankruptcy as they are crushed under the heel of the price gouging railroads who are totally unresponsive to their service needs.
QUOTE: Originally posted by MichaelSol Originally posted by jeaton A takeover of Southern Pacific Railroad in 1997 leaves Union Pacific as the owner of most of the rail lines through Houston. Several shippers have joined with Burling ton Northern to propose the creation of a new line in the Clear Lake area. A court ruling blocking this proposal has is being appealed. Best regards, Michael Sol Not that that means OAT would work for them since the infastructure is overload (I am assuming) means instead more or new track is being seen as the answer, be it BNSF or UP or someone else. So how would Michael's response apply to OAT FutureModal? Not a sarcastic question, just wanting to try and understand this idea better. Reply Edit daveklepper Member sinceJune 2002 20,096 posts Posted by daveklepper on Tuesday, August 9, 2005 4:06 AM It would be possible to imagine an all-rail economy, a railfans dream world. Suppose there was no such thing as personal automobile transportation. None. I'm not saying I'd like this anymore than any of you. I'm just saying suppose. Farmers would have trucks to get things to market. Other than that. rail rail rail. All roads of any importance would have an interurban line at the side of the road and all major streets in all cities and towns of any size whatsoever would have streetcar service. Amtrak would be running possibly 100 times the number of trains they are running today. And in addition, what the South Brooklyn Railroad did on the streets of Brooklyn and the Manufacturer's RR (a NYNH&H subsidiary of course) did on Connecticut Company streetcar tracks in New Haven would be done in every city. The number of private owner sidings would be about 1000 times the number that exist today. Such an economy could exist and might provide a high standard of living. But it aint so. Highway transportation is here, here to stay, is the main way most people and most goods get about, and the questions is how most usefully to benefit the entire economy can rail transportation fit in this picture. We we look at the question of open access from that angle we might make some progress. Any change should benefit the whole economy, including most of those providing barge and truck and bus services. Reply CSSHEGEWISCH Member sinceMarch 2016 From: Burbank IL (near Clearing) 13,540 posts Posted by CSSHEGEWISCH on Tuesday, August 9, 2005 7:57 AM To FM; 1. Where would the money come from for the "equalized" right-of-way funding of which you speak? Tax funding to a private operation (the infrastrcuture owner) would not sit too well in the current political climate. Also, how do you determine when such right-of-way funding is "equalized"? 2. Since the operating companies would be unregulated, how would you control rates if a particular line has only one operator? 3. Most trucking operators have elected to deal with driver shortages and high turnover as part of the cost of doing business. Why would they choose to deal with the devil they don't know (rail operations) instead of the one they do know (truck operations)? The daily commute is part of everyday life but I get two rides a day out of it. Paul Reply bobwilcox Member sinceDecember 2001 From: Crozet, VA 1,049 posts Posted by bobwilcox on Tuesday, August 9, 2005 8:08 AM QUOTE: Originally posted by MichaelSol Several shippers have joined with Burling ton Northern to propose the creation of a new line in the Clear Lake area. The Clear Lake (rail station Bayport) shippers working with their politicians, the UP and the BNSF have gained access to the BNSF. They are now served by two railroads. Montana should borrow some Texas politicans and give their current batch time on the bench. Bob Reply jeaton Member sinceSeptember 2002 From: Rockton, IL 4,821 posts Posted by jeaton on Tuesday, August 9, 2005 9:46 AM I am not going to say that railroad capacity problems, however caused, don't have an impact on the economy. However, Harris County Judge Eckels' statement of the impact on the national economy may be a little over the top. The following is from the Federal Reserve's Industrial Production Index showing the percentage increases of the index for the indicated period. 2002 0.88% 2003 2.10% 2004 4.00% 10/1/04 to 6/1/05 2.58% I am just not going to accept the idea that the rates and charges of railroads or any other mode have much if anything to do with the movement of manufacturing offshore. This is anecdotal, but I know of one company that moved its manufacturing to China, but still distributes its product from their central US location. In other words, freight from China to their distribution point is an incremental addition to their total freight bill. I guess they must have found some other reductions in cost to make the deal work. My point was that the suggestion that the larger trucking companies are currently blocked from efficient use of intermodal service because of the arbitrary behavior of the railroads is just not consistent with reality. 30 years ago, UPS was being very specific as to the train service they required, when to depart and when to arrive, and wouldn't hesitate to point out that a suggested rate was too high to get the business. I am sure they are now no less demanding and I am also sure that many other large truckers, beside those I mentioned, are using rail service on terms that they have defined. "We have met the enemy and he is us." Pogo Possum "We have met the anemone... and he is Russ." Bucky Katt "Prediction is very difficult, especially if it's about the future." Niels Bohr, Nobel laureate in physics Reply MichaelSol Member sinceOctober 2004 3,190 posts Posted by MichaelSol on Tuesday, August 9, 2005 11:24 AM News Item, March, 2004 "UP Screwing up UPS' Bullet Trains and shipping by Truck "The word is starting today and going for at least four weeks UPS on UP will be operated as follows: "Hot day traffic between Little Ferry, NJ and Los Angeles will be trucked at UP expense in both directions. That would be the Tuesday bullet trains on UP and CSX. "Hot day traffic between Memphis, Dallas and Los Angeles will be operated over the highway at UPS expense. "Cold day traffic between Los Angeles and Bergen (20 to 40 trailers per day, four days per week) will be handled by BNSF. "BNSF is almost at capacity on its transcon and does not want this business back. The business growth is overwhelmingly China boxes and U.S. truckload stuff - not high priority goods. With more and more of these 8000-foot double stack trains running on the Transcon, it's harder and harder to keep them moving when the Z trains are overtaking them every hour. The UPS NYC-LA business that BNSF is again hauling for at least the next four weeks will be added to existing Willow Springs-Los Angeles trains. "This is all happening because UP is having another meltdown on the Sunset Route in and out of LA in general. On Sunday it is reported that 55 trains - 30 westbound and 25 eastbound - between El Paso and Long Beach that were either sitting on sidings or waiting for a chance to leave Long Beach. Is the Alameda corridor not working. Yet they can get engineering specials over the road in record times." Mark is correct that the shipping costs are low. They have fallen from an average of 5.5 cents per ton-mile during the decade prior to the Staggers Act passage, to an average of 2.2 cents per ton mile today. The cause of this is not an entirely positive one. Railroads have not engaged in equilibrium pricing, but rather market share pricing. This continually locks them into permanent price wars which, ultimately, hurts both the railroads and the customers. The railroads because they cannot earn cost of capital, and the customers who cannot obtain reliable service, while at the same time being subject, as Mark says, to market and capacity distortions offered by artificially low rail rates (for some) which discriminate against those customers who might otherwise build factories and maintain local employment. By implication, this damages the US economy as a whole, as artificially low rates on existing traffic beget more traffic operating against existing domestic industry, which in turns begets more rail traffic as domestic industry after industry falter and fail because of market distortions perpetuated by the US Rail industry and its pricing policy, not by China. Yes, "we have met the enemy ....and he is us." For 40 years, GM used market share pricing. The ultimate result was failure. Toyota used equilibrium pricing. The ultimate result was success. If there is an advantage to OA, it might be that it permits (imposes) a more rational pricing model. Best regards, Michael Sol Reply tree68 Member sinceDecember 2001 From: Northern New York 25,008 posts Posted by tree68 on Tuesday, August 9, 2005 11:39 AM QUOTE: Originally posted by CSSHEGEWISCH 2. Since the operating companies would be unregulated, how would you control rates if a particular line has only one operator? In theory, any particular line would not have just one operator. Even if it did, the threat of another operator potentially coming in should help keep haulage rates in check. The cost to operate over the track should be equal for all users. That's why they would be regulated. It's essentially the same as a toll highway - my car pays the same as your car, no matter who either one of us is. In practice - it's hard to say how things would play out. Larry Resident Microferroequinologist (at least at my house) Everyone goes home; Safety begins with you My Opinion. Standard Disclaimers Apply. No Expiration Date Come ride the rails with me! There's one thing about humility - the moment you think you've got it, you've lost it... Reply CSSHEGEWISCH Member sinceMarch 2016 From: Burbank IL (near Clearing) 13,540 posts Posted by CSSHEGEWISCH on Tuesday, August 9, 2005 12:20 PM The last time I looked, tolls per vehicle were not equal. Trucks and passenger cars pulling trailers pay by the axle, passenger cars pay a little less than a two-axle truck. At any rate, if all trains paid the same toll, that implies that a high-priority UPS Z-train would pay the same as a local handling non-priority carload traffic. Another issue that hasn't been addressed is the start-up costs involved in setting up an operating company. That could be quite a deterrent to setting up a competitor if you don't like the rate charged. The daily commute is part of everyday life but I get two rides a day out of it. Paul Reply tree68 Member sinceDecember 2001 From: Northern New York 25,008 posts Posted by tree68 on Tuesday, August 9, 2005 2:00 PM QUOTE: Originally posted by CSSHEGEWISCH The last time I looked, tolls per vehicle were not equal. Trucks and passenger cars pulling trailers pay by the axle, passenger cars pay a little less than a two-axle truck.Very true, but my the toll for my GMC is the same as for your Expedition, even though I'm a poor working *** from the boonies and you're a hometown business magnate.QUOTE: At any rate, if all trains paid the same toll, that implies that a high-priority UPS Z-train would pay the same as a local handling non-priority carload traffic. There was some discussion about that earlier - I think ton-miles was mentioned. You could use axles, for that matter. But yes, if the local carrying non-priority carload traffic was the same length and weight as the Z-train, then its toll between points A and B ought to be about the same. Special handling (which could be defined as either the Z train or the local) might have to pay a premium for special handling. QUOTE: Another issue that hasn't been addressed is the start-up costs involved in setting up an operating company. That could be quite a deterrent to setting up a competitor if you don't like the rate charged. New subtopic, but I'll throw in my opinion. It's no different than starting any other company. There will be capital costs, training, etc. You may very well find a booming market amongst the start-ups for leased equipment and retired RR men (and women). Since the rate charged for track use should be uniform (given the variables that have been discussed), that part should be one of the known values on the balance sheet. It would be nothing more than operating overhead. Not likely you'll see the big boys with immediate competition, but UPS didn't start out worldwide, either. On the other hand, it's already been opined that a JB Hunt or Schneider, or even someone like UPS or Fedex might foray into the business, which could open up some interesting situations. You could see the current big 5 gone, replaced by companies who have learned to work with the new paradigm. Larry Resident Microferroequinologist (at least at my house) Everyone goes home; Safety begins with you My Opinion. Standard Disclaimers Apply. No Expiration Date Come ride the rails with me! There's one thing about humility - the moment you think you've got it, you've lost it... Reply jeaton Member sinceSeptember 2002 From: Rockton, IL 4,821 posts Posted by jeaton on Tuesday, August 9, 2005 6:07 PM QUOTE: Originally posted by Mark_W._Hemphill Jay: Look at it the other way around: Rail rates (as well as logistics cost as a whole) have a great deal to do with moving manufacturing offshore, because they are so *low.* High rail rates encourages manufacturing to be located very close to the point of consumption. Low rail rates encourages manufacturing to be located in low-cost places, even those at a great distance from the point of consumption. Those who want even lower rail rates than we already have would encourage the offshoring of even more things that are still manufactured in the U.S. of A. Good point, Dusty One. That thought has not escaped the Asian state owned or subsidized steam ship lines either. At least ages ago, east bound Pacific rates were lower than westbound. Jay "We have met the enemy and he is us." Pogo Possum "We have met the anemone... and he is Russ." Bucky Katt "Prediction is very difficult, especially if it's about the future." Niels Bohr, Nobel laureate in physics Reply edblysard Member sinceMarch 2002 9,265 posts Posted by edblysard on Tuesday, August 9, 2005 6:24 PM Don’t let the word Judge fool you when referring to Harris County Judge Eckels...its is an elected position. Judge Eckels is a politician first, and a county commissioner and judge second. One of the reasons the Bayport terminal is having such a hard time is the NIMBYs in Clear Lake and Kemah, (home to Landry’s Kemah Boardwalk restaurant and entertainment complex). Clear Lake is an up scale, yacht club community, they don’t want trains, or big ships anywhere near their little piece of heaven. The Bayport has been tied up in several court hearings; don’t hold your breath... Ed 23 17 46 11 Reply Anonymous Member sinceApril 2003 305,205 posts Posted by Anonymous on Tuesday, August 9, 2005 7:23 PM QUOTE: Originally posted by Mark_W._Hemphill Jay: Look at it the other way around: Rail rates (as well as logistics cost as a whole) have a great deal to do with moving manufacturing offshore, because they are so *low.* High rail rates encourages manufacturing to be located very close to the point of consumption. Low rail rates encourages manufacturing to be located in low-cost places, even those at a great distance from the point of consumption. Those who want even lower rail rates than we already have would encourage the offshoring of even more things that are still manufactured in the U.S. of A. Mark, Do you have a source for that theory, because it seems out of kilter with the basic rail transportation picture in the U.S. Don't forget, back here in the States we have a two-pronged rail system, one with captive shippers and one with at least duopoly-style competition. Most new rail dependent manufacturing dedicated to staying in the U.S. are opting for locations with competitive rail rates rather than locations that are captive to one rail system, all other things being equal. That's not suprising, given that captive rail rates can be double the rates of competitive rail rates. It's just that so many plants still operating in the U.S. were sited at a time when differential pricing was either not yet in existence or in it's tenative infancy. Most captive shippers now rue the day they chose their particular locations, but there's not much they can do about it given the investments already in place. Most captive shippers are U.S. producers for the export and domestic market. Hardly any importers are subject to rail captivity, and most of the big consumer markets in the U.S. are located in areas where at least two Class I's are competing. I think you are putting the cart before the horse in saying lower rail rates leads to manufacturing flight. It is differential pricing/captive rail rates that are the topical reason manufacturers/producers are leaving or shutting down. Since all overseas importers are free of rail captivity, whatever incentive for locating overseas would not be bolstered in any way by the U.S. rail system converting to OA. To state it again for posterity - overseas importers are already free of U.S. rail captivity. One cannot make them more free of captivity via OA. Rather OA provides a way for currently captive U.S. producers to better compete with imports in the domestic market as well as bolster U.S. exporters in the global market. At least you acknowledge that OA would lead to lower rates. Stay cool! 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Originally posted by jeaton A takeover of Southern Pacific Railroad in 1997 leaves Union Pacific as the owner of most of the rail lines through Houston. Several shippers have joined with Burling ton Northern to propose the creation of a new line in the Clear Lake area. A court ruling blocking this proposal has is being appealed. Best regards, Michael Sol
QUOTE: Originally posted by MichaelSol Several shippers have joined with Burling ton Northern to propose the creation of a new line in the Clear Lake area.
QUOTE: Originally posted by CSSHEGEWISCH 2. Since the operating companies would be unregulated, how would you control rates if a particular line has only one operator?
Larry Resident Microferroequinologist (at least at my house) Everyone goes home; Safety begins with you My Opinion. Standard Disclaimers Apply. No Expiration Date Come ride the rails with me! There's one thing about humility - the moment you think you've got it, you've lost it...
QUOTE: Originally posted by CSSHEGEWISCH The last time I looked, tolls per vehicle were not equal. Trucks and passenger cars pulling trailers pay by the axle, passenger cars pay a little less than a two-axle truck.
QUOTE: At any rate, if all trains paid the same toll, that implies that a high-priority UPS Z-train would pay the same as a local handling non-priority carload traffic.
QUOTE: Another issue that hasn't been addressed is the start-up costs involved in setting up an operating company. That could be quite a deterrent to setting up a competitor if you don't like the rate charged.
QUOTE: Originally posted by Mark_W._Hemphill Jay: Look at it the other way around: Rail rates (as well as logistics cost as a whole) have a great deal to do with moving manufacturing offshore, because they are so *low.* High rail rates encourages manufacturing to be located very close to the point of consumption. Low rail rates encourages manufacturing to be located in low-cost places, even those at a great distance from the point of consumption. Those who want even lower rail rates than we already have would encourage the offshoring of even more things that are still manufactured in the U.S. of A.
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