This is a good and interesting paper on this subject. It is not light reading.
http://www.transportation.northwestern.edu/programs/exec/RAIL04/papers/gallamorePanzarPaper.pdf
We've kicked these issues around a lot out here with a lot of emotion. The authors were faculty members (economics) at Northwestern University. I know that at least one, Gallamore, has retired. He was the Director of the Tansportation Center at NU. They bring some cold, hard, informed, analysis to the subject. And:
"We conclude that constrained market pricing under ICC and SB supervision has been the correct policy, and more radical measures such as 'Open Access' are not warranted."
"...importantly, the governing regulatory authority finds no firm evidence of a widening gap between exclusively-served and other rail shippers since 1984."
Unfortunately, this 2004 "study" has been upended both as out of date, and probably poorly researched, by the recent GAO report:
Washington Insight: GAO Finds Disparities in Rail Freight Rates
From Ag Commentary, by Jim Wiesemeyer, 10/17/2006:
Members of Congress asked GAO to review changes in the railroad industry since the Staggers Rail Act was signed in 1980, including changes in rates and competition. They also requested that GAO review actions taken by the Surface Transportation Board to address shippers' concerns, for a projection of future freight demand and capacity, and for potential federal policy responses to the projected changes.
Status of industry: According to the report, since the enactment of Staggers, the railroad industry's financial health improved substantially as it cut costs, boosted productivity and "right-sized" its networks. Rail rates generally have declined since 1985 for certain commodity groups and routes, but rates have not declined uniformly, and some commodities are paying significantly higher rates than others, says GAO. For example, from 1985 through 2004, coal rates declined 35 percent while grain rates increased 9 percent.
GAO notes lingering concerns about competition and captivity (dependence upon one railroad) in the industry because traffic is concentrated in fewer railroads. "It is difficult to determine precisely how many shippers are captive to one railroad," says GAO. "Nevertheless, our analysis indicates that the extent of potential captivity appears to be dropping, but that the percentage of all industry traffic running at rates substantially over the statutory threshold for rate relief has increased."
Furthermore, the report found that some areas with access to only one Class I railroad have higher percentages of traffic traveling at rates that exceed the statutory threshold for rate relief. "This situation may reflect reasonable economic practices by the railroads in an environment of excess demand, or it may represent an abuse of market power," GAO said.
The report found that a reduction in competitive options can have a significant effect on the rates railroads charge shippers. Comparing two routes for shipping the same commodity, but using a different number of rail carriers, can illustrate this effect. For example, GAO looked at two long-distance grain routes (from Minot, N.D., and Sioux Falls, S.D.) that both terminate at Portland, Ore., and found that both routes carry comparable tonnage, but the route originating in the Sioux Falls area is served by two Class I railroads, whereas the route from the Minot area is served by one Class I railroad. "The rates for the Minot route are roughly double the rates for the Sioux Falls route," said GAO.While competition between rail carriers is particularly important in some cases, in other cases, competition between rail and other transportation modes, such as trucks and barges, may be more important. Particularly for bulk commodities such as grain, when shipper locations can be served by barge transportation, rail rates will be lower relative to rail costs than on routes that are not conducive to barge competition, the study found.
To test this theory, GAO examined the costs and revenues for two routes, one (from Champaign, Ill., to New Orleans) with rail and barge options, and the other (from Champaign to Atlanta) with just a rail option. The agency found that although both routes have the same origin, for shipping the same commodity over a comparable distance, the route with the barge option has consistently lower rates than the route with just rail service.
Looking at costs to ship grain via railroad, GAO looked at 20 years' of cost and revenue data from Minot, N.D., and Billings, Mont., to Portland, Ore. The agency found that from 1985 through 2004, revenue from all grain traffic on the Minot to Portland route increased from approximately $18.4 million to approximately $30.8 million. Variable cost increased at a much slower pace, rising from approximately $12.2 million to approximately $12.4 million.For the route from Billings to Portland, grain revenue more than tripled, from approximately $11.2 million in 1985 to approximately $42.7 million in 2004. Variable cost also increased substantially — although still not as much as revenue — rising from approximately $5.5 million to approximately $15.1 million.
The Surface Transportation Board (STB) has scheduled a Nov. 2 public hearing to examine grain transportation issues raised by the GAO report. According to STB, the hearing will focus on the market conditions that led to report's conclusion that grain rates have diverged from industry trends
Ohhhhhh-K. Here we go again...
LC
"Unfortunately, this 2004 "study" has been upended both as out of date, and probably poorly researched, by the recent GAO report:" (From above)
So you are saying that the GAO report is a model of exemplary research? Bet you the entire group of GAO staffers doing their study wouldn't come close to matching the credentials of either of the authors orf the NU study.
You really are great at picking out statements you claim to make your point. The line you quote from the NU report says: "...importantly, the governing regulatory authority finds no firm evidence of a widening gap between exclusively-served and other rail shippers since 1984." You can argue that the governing regulatory authority is wrong with this view, but it is, in fact their view. Should the paper state that the regulatory authority has a different view?
Unless there is much more in the full report by the GAO, it appears that they have just presented examples of the railroad's differential pricing-a condition few will dispute. The NU study undertakes to address "Open Access" as a solution to any differential pricing conditions that may exist. They accept that differentials may go away, but seem to make a good case that open access would significantly erode the ability of the railroads to maintain or expand the service with a consequent impact on the quality or availability of the service for shippers.
Seems to me that any comparison of the two studies is like comparing coal and grain.
"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
jeaton wrote: "Unfortunately, this 2004 "study" has been upended both as out of date, and probably poorly researched, by the recent GAO report:" (From above) So you are saying that the GAO report is a model of exemplary research? Bet you the entire group of GAO staffers doing their study wouldn't come close to matching the credentials of either of the authors orf the NU study. You really are great at picking out statements you claim to make your point. The line you quote from the NU report says: "...importantly, the governing regulatory authority finds no firm evidence of a widening gap between exclusively-served and other rail shippers since 1984." You can argue that the governing regulatory authority is wrong with this view, but it is, in fact their view. Should the paper state that the regulatory authority has a different view? Unless there is much more in the full report by the GAO, it appears that they have just presented examples of the railroad's differential pricing-a condition few will dispute. The NU study undertakes to address "Open Access" as a solution to any differential pricing conditions that may exist. They accept that differentials may go away, but seem to make a good case that open access would significantly erode the ability of the railroads to maintain or expand the service with a consequent impact on the quality or availability of the service for shippers. Seems to me that any comparison of the two studies is like comparing coal and grain.
I do not comment on the open access portion of the paper. However, the authors do note that, regarding differential pricing "it is important to note ..." and they offer nothing to disagree with the STB position as it existed prior to 2004. I simply take them at their word that they think it is important to note that there is no widening gap. In fact, captive shippers being charged over 300% R/VC have increased from 4% to 6%. Whatever you want to call it, I call it a "widening gap."
Multiple threads have examined whether or not wheat tariffs went down or up. I certainly was gratified to see that the GAO agreed with my analysis when it concluded earlier this month that the price railroads have charged for wheat has not followed the general trend of declining rail transportation charges since Staggers but has, in fact, gone up.
A lot of arguing and name-calling accompanied those discussions, and particularly and most vociferously by people who claimed they knew all about rates, claimed that they had relevant degrees, and claimed that they knew how to read charts and graphs.
Certainly, the GAO Report is an interesting denouement to that discussion and to the credibility of those posters.
That the STB has felt compelled to begin hearings on the issue next week certainly underscores your comments about what the "governing regulatory authority" is doing in response to an objective government analysis. It certainly raises the question as to comments in a 2004 NU study that seems to have been turned on its head on these specific issues on the basis of a study of the data, as opposed to a reliance on the conclusions of the STB.
If nothing else, it underscores the risks of taking a position based on someone else's homework which is what the NU study in essence does when it accepts the conclusion of the STB uncritically.
I am very familiar with Rob Gallamore and his work. I obtained a copy of his doctorate thesis in 1972 [Gallamore, Robert, "Railroad Mergers: Costs, Competition, and the Future Organization of the American Railroad Industry," Harvard University, Ph.D. Dissertation, 1968] and I still have that copy. I thought it was a very good work and I have cited to it on several occasions.
However, currently the data does not support the position taken by his "important" reference to the STB. Had he stated that the STB's position was important because it showed that the STB was not taking the situation of captive shippers seriously, then my comment would be different, but he didn't, and so I can only conclude he believes what the STB said, and that happens to be wrong on that specific point.
If it is an important premise to the remainder of his paper and the conclusions he reaches, then the remainder of the paper, no matter how well written, may well be irrelevant. A false premise does not yield a good analysis no matter how good the analysts.
Hearings begin November 2.
Ignoring the caution of the second quote in my signature, I will predict that the STB will find that there are some conditions of market dominance. ( For the benefit of others who might look at these posts, "market dominance" is the condition that must be proven and the existance of a rate over 180% of variable cost or even a much greater ratio of rate to variable cost does not automaticly prove that the market dominance condition exists.)
Having made my prediction, I will also predict that relief will come on the basis of existing laws and regulations, and not on some big revision of the law. And further, the relief will fall far short of the level some hope for.
By the way, the fact that the number of shippers (not number of shipments) subject to rates over 300% of variable costs has increased from 4% to 6% does not prove that their is a growing gap between rates paid by "non-captive" and "captive" shippers. Can you come back with numbers showing that "non-captive" shippers are being subject to rates with less, more or the same revenue to variable costs ratios as in the past. Seems to me that to argue a growing gap of some kind has to show an increasing spread between the high and low. Otherwise it is comparing apples to nothing.
greyhounds wrote:This is a good and interesting paper on this subject. It is not light reading. http://www.transportation.northwestern.edu/programs/exec/RAIL04/papers/gallamorePanzarPaper.pdf
jeaton wrote: Having made my prediction, I will also predict that relief will come on the basis of existing laws and regulations, and not on some big revision of the law. And further, the relief will fall far short of the level some hope for.
It's a safe prediction since the captive shippers have, themselves, only asked for enforcement of the existing law. I don't think there is effective support for a major revision by anyone. Interpretation and enforcement has been the topic of the essential debate, not the law itself.
This is pretty shaky reasoning.
If more shippers are paying over the 300% R/VC rate, and since variable costs have increased over the past five years, then revenue from captive shippers paying over the 300% R/VC rate will be 1) higher, 2) lower, 3) the same?
Those shippers will be paying 1) the same, 2) less, 3) more than they were paying before their rates went over the 300% level?
If shippers are paying more to transport their wheat than they were ten years ago, but most other rates are lower than they were ten years ago, is the rate spread between wheat and general rates 1) the same, 2) wider, 3) narrower?
The quiz will be graded.
Can you come back with numbers showing that "non-captive" shippers are being subject to rates with less, more or the same revenue to variable costs ratios as in the past.
?
That's what the GAO report did -- it examined the relative proportions of shippers and whether or not those shippers paying various relative rates had increased or decreased -- it found that the number of shippers subject to rates between 180% and 300% R/VC has declined, for instance.
The "gap" between the relative levels of R/VC rates has increased. I would have to go back and look, but I believe it also specifically said that more shippers ship at rates below 180%.
If you are looking for a means of defining "gap" or a "widening" gap to meet some predisposed view that is contrary to the data, why don't you simply say you don't believe the data, and refuse to believe any data that is contrary to your professed belief system?
That will shorten the discussion, minimize the hostility that invariably erupts, and clarify your position immensely.
So Ken, you're in favor of reregulation of rates, rather than implementing intramodal competition combined with public/private support for infrastructure?
Let me explain something to you to put this and other such studies into perspective. An econ study you get today is based on past econ studies, which themselves are based on further past econ studies that are responsible for constructing the template of analysis. All our academic studies of the US rail system is based on over 100 years of studying an integrated private system. All the terms used in analysis (aka "natural monopoly") is based on this integrated model. Trying to construct a brand new template for the analysis of competitive access is subsequently difficult for these academics - they just can't seem to imagine a rail system where infrastructure operations are separated from transporter operations, such as we have with our highway and waterway transportation systems:
1. The Ivaldi and McCollough study mentions the open access analogy to telecommunictions and utilties as being not apt, yet they make no similar comparative analogy to highways and waterways! Hmmmmmmm.......
2. This same study does mention the returns to density of an infrastructure owner as being the key to track owning profitability - with separation and subsequent transparency of cost accounting, you will find that profits are related to hosted volume. "(Open) Access proponents might argue....that the newcomer's aggresive marketing would result in more economies of density." It is suprising that these same economists do not take more time to study the relationship between integration and intra-operational market skewing, as dispatchers push for reduced maintenance windows while trackmen push for more maintenance windows. I guess we'll leave it to more government regulation to force more track inspections via the FRA....
http://www.trains.com/trn/print.aspx?c=a&id=1004
3. The Bitzan study (which we parsed a while back in another OA thread) builds it's case on the acceptance of his "natural monopoly" definition as being an inelestic definition, e.g you can't dissect a natural monopoly, ergo introducing competition does not jive with cost considerations. Of course, he completely ignores the existence of multiple user rail lines in the US, and the ability of those firms to co-exist in a competitive market in seemingly good corporate health. Evidence of multiple user lines would suggest that the inelastic natural monopoly is a false premise, and I would suggest that the natural monopoly exists soley due to government sanction rather than market naturalization. Again, his study does not analyze track ownership cost in a transparent setting, prefering (as all these referenced economists) to accept the fuzzy accounting of the integrated firms.
4. The grad-student thesis disguised as an economic study (Candell and Kalt) is much of the same, arguing that the separation of infrastructure from transporter operations would result in intra-firm manipulation, rather than taking the separation as a de facto splitting of the firm itself into separate entities. The analogy of the factory building being forced to accept the production needs of a competitor (not explicitly referenced, but that's where it was heading anyway) is the most egregious error an economist could commit, since the infrastructure of the railroads is a utility function, not a plant production function. This is where the transmission analogy is a better fit, with energy companies now hosting competitors' electric production over their private transmission lines, yet the electric production itself is still off limits to competitive intrusion.
Again, Candell via Kalt ignores the existence of multiple user lines, arguing for integration as being more "promising" for rail access coordination. Again, if current rail dispatchers can coordintate access with multiple transporters in trackage rights situations, et al, then the whole conclusion of Candell is blown away. Someone might also point out to Candell that those negotiated contracts have fallen out of favor - so much for counteracting the inefficiencies that arise from price discrepency aka differential pricing aka monopoly pricing. (p 16)
What?!? One of these cited references actually admit that differential pricing is an "inefficiency"? Well, yes and no - yes it's an inefficiency when the example is used in passing to buttress some other talking point, but somehow not when the topic is the focus of study. Hmmmm.......
The problem with all these studies is that very little attention is paid to the unintended consequences of the antiquated private integrated model for rail operations (aka, the contribution of the US integrated rail system to the US trade deficit via the differential pricing conundrum), and the *** dychotomy of railroad companies resisting "forced" access, yet accepting "forced" government regulation.
The clear failure of Staggers is that it is focussed on buttressing the financial situation of the railroad companies, not on what's best for the US transportation system. US shippers want and deserve widespread rail access (even out here in the boondocks) and competitive rail rates, and you can't get that with the condensed integrated model. What's best for the Big Six is not necessarily what's best for rail shippers' needs.
BTW - anyone notice that Staggers has not appreciably improved the ratio of net available reinvestment funds to capital expenditure needs? Well, what do you expect with a rail system anachronism that is the moral equivalent of Feudalism?
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...
Quoting Michael Sol: "In fact, captive shippers being charged over 300% R/VC have increased from 4% to 6%. Whatever you want to call it, I call it a "widening gap.""
As I said, if you are going to suggest that some sort of gap is widening, in making your point it is useful to identify the two points which are separated by a gap.
Beyond that, it might be a good idea to drop the suggestion that the increase relates to the number of captive shippers. The 4 to 6 percent numbers actually is reported in Figure 17: Percentage of Tonnage by R/VC, 1984 and 2004. In that the following is presented:
1985
% of total tons moving at R/VC greater than 300: (1985) 4 (2004) 6
% of total tons moving at R/VC between 180 & 300 (1985) 36 (2004) 25
% of total tons moving at R/VC less than 180 (1985) 60 (2004) 69
Now you can make some comparisons between then and now if you want, but first it should be well to note that the table reflects all tonnage, not just tonnage from captive shippers.
In fact, if one moves on to Table 20 of the report there is some indication that some area served by more than one rail carrier may have seen increases in tonnage moving at rates with a R/VC exceeding 300%
Even the GAO report notes an uncertainty about the number of captive shippers. From Page 19 of the report:
"Concerns about competition and captivity in the railroad industry remain because traffic is concentrated in fewer railroads, although there is disagreement on the state of competition in the industry. It is difficult to determine the number of captive shippers, because proxy measures can overstate or understate captivity, but our analysis of available measures indicates that the extent of captivity is dropping. At the same time, the percentage of all industry traffic running substantially over the statutory threshold for rate relief has increased from about 4 percent of tonnage in 1985 to about 6 percent of tonnage in 2004. Furthermore, some economic areas with access to one Class I railroad have higher percentages of traffic traveling at rates that exceed the statutory threshold for rate relief."
Italics are mine.
bobwilcox wrote:Here is a link to the GAO report : http://www.gao.gov/new.items/d0794.pdfSuggest all read this and Bob Galamore's report before plowing ahead.
In addition to that one should also pay attention to the posting of FM as he has an undergraduate degree in economics from some school that doesn't even show on the charts and a certified genius IQ.
jeaton wrote: bobwilcox wrote:Here is a link to the GAO report : http://www.gao.gov/new.items/d0794.pdfSuggest all read this and Bob Galamore's report before plowing ahead. In addition to that one should also pay attention to the posting of FM as he has an undergraduate degree in economics from some school that doesn't even show on the charts and a certified genius IQ.
You might want to differentiate between the growth in import intermodal and the loss of domestic production when you analyze those "reductions" in the less than 300% R/VC rail rates. Import intermodal has no captivity, and has been the largest volume growth sector for railroads - shouldn't suprise you that the 180% R/VC and below catagory has grown.
But of course, leave it to Jay to start with the flame war, even after an explicit request not to do so.
jeaton wrote: Even the GAO report notes an uncertainty about the number of captive shippers. " It is difficult to determine the number of captive shippers,.."
Even the GAO report notes an uncertainty about the number of captive shippers.
" It is difficult to determine the number of captive shippers,.."
Difficult? Sure, if one is too lazy to go out and make a physical count of all the rail shippers who have physical access to only one railroad. I think if those beauracrats would get off their fat **** and make the physical counts, we'd find actual captive shippers to be much, much more than what the GAO is willing to admit.
Memo to GAO: It's easy to find an actual count of captive rail shippers- any rail shipper with only one physical connection to a Class I rail service provider is captive. Doesn't matter if they "can" ship by truck or barge, or use multiple modes, or not, or if they can modify production to fit the lack of desired rail service, or not. Having only one physical connection is captive, period.
Take a look at the gist of the Gallamore et al study, namely the example of the "stylized rail network" (p 18). In this example, the authors try to recreate the nuances of a captive shipper using various options for attaining some aspect of competition (e.g. SARR, et al). Their example shows two parallel railroads between Points B and C, and a captive customer of Railroad A on a line connecting Point A with Point B. With this example they make the point of Railroad A "needing" to charge captive rates to cover not only incremental costs of the line from Point A to Point B, but also the fixed cost of maintaining the line from Point A to Point B.
Make sense....
Except for the fact that most captive customers are actually located on active mainlines, which have plenty of traffic density to cover the network's fixed costs. A more appropriate example then of a captive shipper would be one located on one of the two railroads' mainlines between Point B and Point C. Therefore, there are no added fixed costs for serving the captive shipper. So why do these apologist economists allow for captive rates if the captive shipper in question does not add anything more in costs other than incrementalism?
That's the gist of the Montana problem - BNSF has two busy mainlines through Montana, yet because of the government sanctioned fiefdom, BNSF is allowed to charge those 300%+ rates without a corresponding justification for covering fixed costs, because there are no added fixed costs of shipping products in and out of Montana. All Montana rail shipments add nothing more than incremental costs to the system, yet those Montana rates seem meant for covering incremental and fixed costs of maintaining the BNSF rail network across Montana. Correspondingly, rates of the import intermodal traffic passing right through Montana are not even covering the incremental costs (e.g. <180% R/VC).
It is this market skewing, unmentioned in any such economic rail study, that is best remedied by introducing competitive access.
futuremodal wrote: jeaton wrote: Even the GAO report notes an uncertainty about the number of captive shippers. " It is difficult to determine the number of captive shippers,.." Difficult? Sure, if one is too lazy to go out and make a physical count of all the rail shippers who have physical access to only one railroad. I think if those beauracrats would get off their fat **** and make the physical counts, we'd find actual captive shippers to be much, much more than what the GAO is willing to admit. Memo to GAO: It's easy to find an actual count of captive rail shippers- any rail shipper with only one physical connection to a Class I rail service provider is captive. Doesn't matter if they "can" ship by truck or barge, or use multiple modes, or not, or if they can modify production to fit the lack of desired rail service, or not. Having only one physical connection is captive, period.
Ah yes, I see it now. Big fence around the plant with the only gate located where the tracks enter the property, railroad police prohibiting trucks from approaching, phone and data lines going only to the railroad offices, transportation buyer confined to his office. Maybe that is why one can find so many places where the rail siding has been torn out. Just got tired of being held captive by the railroad.
Your narrow minded defination of captive shipper, i.e. physical connection to only one railroad, could very well cover the vast majority of rail shippers and receivers. In the matter of making a determination of market dominance, such a defination is about as useless as certain appendages on a boar hog. Kind of reminds me of the days when the Interstate Commerce Commision thought the only possible competition for one railroad was another railroad.
jeaton wrote: futuremodal wrote: jeaton wrote: Even the GAO report notes an uncertainty about the number of captive shippers. " It is difficult to determine the number of captive shippers,.." Difficult? Sure, if one is too lazy to go out and make a physical count of all the rail shippers who have physical access to only one railroad. I think if those beauracrats would get off their fat **** and make the physical counts, we'd find actual captive shippers to be much, much more than what the GAO is willing to admit. Memo to GAO: It's easy to find an actual count of captive rail shippers- any rail shipper with only one physical connection to a Class I rail service provider is captive. Doesn't matter if they "can" ship by truck or barge, or use multiple modes, or not, or if they can modify production to fit the lack of desired rail service, or not. Having only one physical connection is captive, period. Ah yes, I see it now. Big fence around the plant with the only gate located where the tracks enter the property, railroad police prohibiting trucks from approaching, phone and data lines going only to the railroad offices, transportation buyer confined to his office. Maybe that is why one can find so many places where the rail siding has been torn out. Just got tired of being held captive by the railroad. Your narrow minded defination of captive shipper, i.e. physical connection to only one railroad, could very well cover the vast majority of rail shippers and receivers. In the matter of making a determination of market dominance, such a defination is about as useless as certain appendages on a boar hog. Kind of reminds me of the days when the Interstate Commerce Commision thought the only possible competition for one railroad was another railroad.
Ah yes, I see it now. If a man can push a wheelbarrow into the plant from an adjacent dirt road, then that represents *competition* for the one Class I connection, thus that plant *is not captive*. Hey, whatever it takes to keep the monopoly justification rolling along, huh?
You always ignore the modal differences that make the rail vs highway vs waterway debate so tangibly unique to each mode. Ergo, the only tangible competition for a railroad is another railroad or two.
10,000 tons of coal are not going to move by highway. 250 containers bi-weekly are not going to move by highway. A million bushels of grain bought on the market is not going to move by highway.
Why? Because if one tried to do so, they would be shut out of their market - you can bet their competitor isn't moving such tonnage by truck or wheelbarrow.
Even carload is a tangible requirement for a firm's survival in this day of global competition for products. Do you think the plastics plant can survive on truckload delivery alone while the other plastics plants are using carload service?
That's the real exemplification of what being a captive rail shipper is all about - survival.
It'd be like you running a factory using kerosene lighting while your competitors are using electric lights. Sure, under your ridiculously broad definition of *competition* the kerosene lights are viable competition for electric lights, yet we all know what will happen if you insist on using kerosene lighting. Your plant will shut down, your workers laid off, and you will be bankrupt.
Which brings us to your other statement, that of the removed siding. Got news for ya lefty, that siding was removed because (A) the railroad no longer would provide realistic service, and/or (B) the plant could no longer compete with those plants that have better rail rates and services, and thus shut down production or converted to some other (read: non-rail shipping) production.
Not too may server farms and outlet malls need a rail siding these days!
futuremodal wrote:10,000 tons of coal are not going to move by highway. 250 containers bi-weekly are not going to move by highway. A million bushels of grain bought on the market is not going to move by highway.
FM
You are so squirrely that your comments go beyond funny. Your knowledge of the history of and the reasons for the shift of business from railroads to other modes is non-existent. The simple truth of the matter is that a huge portion of the modal shift came because rail carload based distribution had higher costs even though the rail rates were often well below the rates of the competing modes. A competent distribution manager doesn't see himself as buying some form of container-rail freight car, truck van, barge or air cargo hold. Rather he is buying space to hold his freight and move from one point to another at a speed and for a price that meets his needs. That is why your notion that there is no competition between modes is so bizarre.
I suppose you will now tell me that with the tremendously enhanced competition that would come from open access rail would produce such great advancements in efficiency that rail service could match truck service. When you have it figured out just how one or several freight cars can make a passing move around another car or set of cars at any point along the rail line, let me know. I'll put up my farm to get the cash to invest in the system.
This response is so "Sol".
First, he slings mud and makes a false statement....
MichaelSol wrote: Unfortunately, this 2004 "study" has been upended both as out of date, and probably poorly researched, by the recent GAO report:
There's nothing in the GAO report that "Upends" the Northwestern paper. It doesn't say that Open Acess is desireable or would be benificial. And to accuse the authors of "probably poorly researching" the study is frankly, disgusting. They didn't get to where they were by doing poor research.
Then he goes off in another direction trying to misdirect the discussion:
MichaelSol wrote: Furthermore, the report found that some areas with access to only one Class I railroad have higher percentages of traffic traveling at rates that exceed the statutory threshold for rate relief. "This situation may reflect reasonable economic practices by the railroads in an environment of excess demand, or it may represent an abuse of market power," GAO said. The report found that a reduction in competitive options can have a significant effect on the rates railroads charge shippers. Comparing two routes for shipping the same commodity, but using a different number of rail carriers, can illustrate this effect. For example, GAO looked at two long-distance grain routes (from Minot, N.D., and Sioux Falls, S.D.) that both terminate at Portland, Ore., and found that both routes carry comparable tonnage, but the route originating in the Sioux Falls area is served by two Class I railroads, whereas the route from the Minot area is served by one Class I railroad. "The rates for the Minot route are roughly double the rates for the Sioux Falls route," said GAO.While competition between rail carriers is particularly important in some cases, in other cases, competition between rail and other transportation modes, such as trucks and barges, may be more important. Particularly for bulk commodities such as grain, when shipper locations can be served by barge transportation, rail rates will be lower relative to rail costs than on routes that are not conducive to barge competition, the study found. To test this theory, GAO examined the costs and revenues for two routes, one (from Champaign, Ill., to New Orleans) with rail and barge options, and the other (from Champaign to Atlanta) with just a rail option. The agency found that although both routes have the same origin, for shipping the same commodity over a comparable distance, the route with the barge option has consistently lower rates than the route with just rail service.
Well, Duh!
The Norhtwestern paper went into the desireability and need for such rail pricing in detail.
What would Sol have the government do?
Prohibit the railroad from competing with the barges to New Orleans? This would deny railroad service to the shippers and harm society.
Or, would he require the railroads serving the market to Atlanta (not the same company) reduce their rates because a different company made a different pricing decision?
What Gallamore and Panzar of Northwestern University clearly point out is that the railroads need to price some of their business at below average costs, but can not price all their business at below average costs. This is benificial to our society.
It extends the availability of rail service to customers who would otherwise not be able to use it while it generates the revenues the railroads need to keep operating. No one really gets hurt by this. There is no cross subsidization from one rail customer to another. This pricing method maximizes the benifits to our society as a whole.
And Gallamore and Panzar are very clear, we allow this benificial pricing system to continue or we eliminate private secor railroading the the U.S. Is that what Mr. Sol wants?
Open Access / Captive Shippers
... as long as the trains run!
greyhounds wrote: This response is so "Sol". First, he slings mud and makes a false statement.... MichaelSol wrote: Unfortunately, this 2004 "study" has been upended both as out of date, and probably poorly researched, by the recent GAO report: There's nothing in the GAO report that "Upends" the Northwestern paper. It doesn't say that Open Acess is desireable or would be benificial. And to accuse the authors of "probably poorly researching" the study is frankly, disgusting. They didn't get to where they were by doing poor research. Then he goes off in another direction trying to misdirect the discussion: MichaelSol wrote: Furthermore, the report found that some areas with access to only one Class I railroad have higher percentages of traffic traveling at rates that exceed the statutory threshold for rate relief. "This situation may reflect reasonable economic practices by the railroads in an environment of excess demand, or it may represent an abuse of market power," GAO said.
MichaelSol wrote: Furthermore, the report found that some areas with access to only one Class I railroad have higher percentages of traffic traveling at rates that exceed the statutory threshold for rate relief. "This situation may reflect reasonable economic practices by the railroads in an environment of excess demand, or it may represent an abuse of market power," GAO said.
Alas, Sol did not go "off in another direction" -- the quote is from someone else.
The quote is, to greyhounds' ultimate dismay, from other objective readers of the GAO report, which show, in fact, that greyhounds has been intentionally misreading and misrepresenting the GAO report and its conclusions. He has done nothing else in his career but misrepresent facts.
If he were correct, then no hearings would be set for November 2, and the GAO would not have issued its report.
doghouse wrote: Open Access / Captive Shippers ... as long as the trains run!
Doghouse,
Although I do appreciate your aparent offer of a house, I am troubled by your attitude.
That's not the objective. I think trains are one of the most interesting things on the planet. But one of the things that makes them interesting to me is their wonderful efficiency. I don't want trains for trains sake.
When I look at a stack train or a shuttle grain train I admire its usefulness and productivity. There are people who want to turn trains into vehicles of subsidization for farmers and other elements of our society. I'd then look at them they way I look at any other government waste of our hard earned money.
MichaelSol wrote: greyhounds wrote: This response is so "Sol". First, he slings mud and makes a false statement.... MichaelSol wrote: Unfortunately, this 2004 "study" has been upended both as out of date, and probably poorly researched, by the recent GAO report: There's nothing in the GAO report that "Upends" the Northwestern paper. It doesn't say that Open Acess is desireable or would be benificial. And to accuse the authors of "probably poorly researching" the study is frankly, disgusting. They didn't get to where they were by doing poor research. Then he goes off in another direction trying to misdirect the discussion: MichaelSol wrote: Furthermore, the report found that some areas with access to only one Class I railroad have higher percentages of traffic traveling at rates that exceed the statutory threshold for rate relief. "This situation may reflect reasonable economic practices by the railroads in an environment of excess demand, or it may represent an abuse of market power," GAO said. Alas, Sol did not go "off in another direction" -- the quote is from someone else. The quote is, to greyhounds' ultimate dismay, from other objective readers of the GAO report, which show, in fact, that greyhounds has been intentionally misreading and misrepresenting the GAO report and its conclusions. He has done nothing else in his career but misrepresent facts. If he were correct, then no hearings would be set for November 2, and the GAO would not have issued its report.
Well, you did use the quote. To take us off in a different direction. And I don't know what makes you think they're "objective" other than that anyone who agrees with you will be considered "objective" by you.
As far as the hearing...Anybody can get a hearing. It's how lawyers get rich and politicians get publicity/votes.
greyhounds wrote: And I don't know what makes you think they're "objective" other than that anyone who agrees with you will be considered "objective" by you.
Of course, the fact that the GAO suggests exactly what captive shippers have been arguing makes it only subjectively "objective." GAO is transparently not "objective".
And when does this charade end?
MichaelSol wrote: greyhounds wrote: And I don't know what makes you think they're "objective" other than that anyone who agrees with you will be considered "objective" by you. Of course, the fact that the GAO suggests exactly what captive shippers have been arguing makes it only subjectively "objective." GAO is transparently not "objective". And when does this charade end?
The GAO doesn't "suggest". It just presents facts and opinions from both sides. Trying to lay it all on the table so to speak.
It certainly doesn't contradict the Gallamore/Panzar paper as you falsely claimed.
wrote:...greyhounds has been intentionally misreading and misrepresenting the GAO report and its conclusions. He has done nothing else in his career but misrepresent facts.
Not quite Mikey. The STB hearings are a product of political pressure created by shippers seeking lower rates at the railroad's expense. Ditto the GAO report. Such reports are requested by Congressional Committees or staff or both. The report merely codifies the political view it supports. Far from an objective academic study which tends to be much more balanced. What a surprise that the academics don't support your thesis...LOL...
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