"Open Access" and regulation of railroad freight rates.

[MStLfan]

So, suppose that somehow everybody involved agrees that open access is the only way out. How can this be accomplished? I have my ideas about it but first I would like to hear yours.

Let us set these limits: no government involvement in this process, if possible (they have just about admitted that they don't know how to run a business so let businesses try it themselves first). No taking away of right of ways from railroads by the government (not really necessary if it is done right but it is always an option of last resort in order to maintain and increase capacity if Wall Street is uncooperative).

greetings,

Marc Immeker

[Datafever]

So, suppose that somehow everybody involved agrees that open access is the only way out. How can this be accomplished? I have my ideas about it but first I would like to hear yours.

The only way out of what?  If OA is to be implemented, I would suggest that one knows what goals are going to be accomplished.  Is the whole purpose of OA to reduce the rates that some shippers pay?  Is the purpose of OA to introduce competition as a means to force railroads to become more efficient?

What would be your reason to implement OA?  Once that question is answered, then it is possible to investigate possible implementations to see if they will accomplish the goals set forth.

[Anonymous]

Wireless.  AT&T was heavily invested in land lines for the long distance revenues.  So even though prefunctory wireless technologies were technically available, there was no incentive to push such technologies, thus wireless broadband and cell phones (and subsequent innovations based on real time market research) would not be as prevalent as they are today.  Remember, it's one thing to have a neat invention sitting in the lab, it's quite another to have to adapt that invention to meet market demand.

Former TRAINS columnist John Kneiling made mention many times of his observations that railroads were slow to adapt to new changes due to their heavy investments in older technologies.  There was no intra-industry competition to force such changes for each company's survival.

So your claim is that Ma Bell's monopoly in the area of landline telephony caused a lack of innovation in mobile telephony - an area in which they did not hold a monopoly.  Wireless needed advances in technology in many other areas, including advances in miniaturization.  These technological advances were not always driven by the communications industry, but became available to that industry after they had been developed to drive other industries.

As wireless was a technology that Motorola was industriously pursuing back in the 1970s, one would have to believe that the wireless industry was competitive unless you feel that Motorola had a monopoly on that industry and was therefore not trying very hard to make major inroads.

Wireless needed customers. AT&T had the monopoly on households until dereg.  If you do some research, you will see that's when cell phones took off.  They got 'em after deregulation.  I suspect you know quite a few people who have dispensed with land lines altogether in favor of cell technology and wireless broadband.

You mean trucking innovations that would not be around today had trucking been a monopoly?

Yes.

I honestly have no idea, but I can take some subjective guesses:  The 53' trailer, the b-train, the container chassis - does anyone really think that a trucking monopoly would have gone for the domestic container over the dry van? 

[Anonymous]

So, suppose that somehow everybody involved agrees that open access is the only way out. How can this be accomplished? I have my ideas about it but first I would like to hear yours.

Let us set these limits: no government involvement in this process, if possible (they have just about admitted that they don't know how to run a business so let businesses try it themselves first). No taking away of right of ways from railroads by the government (not really necessary if it is done right but it is always an option of last resort in order to maintain and increase capacity if Wall Street is uncooperative).

greetings,

Marc Immeker

How can there be no government involvement in establishing OA, given that there is plenty of government involvement or oversight in the current spate of rail regulation (and the lack thereof )?

There is no such thing as complete government unregulation in any transport sector.

Also, it may be that some of the pro-competition caveats contained in the Staggers Act may themselves (with some harsh interpretations) provide the framework for OA without further government meddling.

[Datafever]

Wireless needed customers. AT&T had the monopoly on households until dereg.  If you do some research, you will see that's when cell phones took off.  They got 'em after deregulation.  I suspect you know quite a few people who have dispensed with land lines altogether in favor of cell technology and wireless broadband.

Okay, you are going to have to explain this a little bit slower cuz I seem to be stuck on stupid.  Ma Bell had a monopoly on households?  So are you trying to say that people could not buy cell phones because they had a landline phone?  As ownership of a cell phone has never (to my knowledge) been connected with ownership of a landline phone, I'm having a little trouble following your logic here.

And since call phones "took off" before dereg, what does that imply?

If I find other things that "took off" at about the same time, can I claim that the Ma Bell breakup was responsible for that too?  (Say, didn't Microsoft release its first version of Windows back then?)

BTW, it is probably just me, but I do not know of any households that do not have a landline phone.  I do know of some that don't have cell phones though.

[n012944]

Wireless needed customers. AT&T had the monopoly on households until dereg.  If you do some research, you will see that's when cell phones took off.  They got 'em after deregulation.  I suspect you know quite a few people who have dispensed with land lines altogether in favor of cell technology and wireless broadband.

Okay, you are going to have to explain this a little bit slower cuz I seem to be stuck on stupid.  Ma Bell had a monopoly on households?  So are you trying to say that people could not buy cell phones because they had a landline phone?  As ownership of a cell phone has never (to my knowledge) been connected with ownership of a landline phone, I'm having a little trouble following your logic here.

And since call phones "took off" before dereg, what does that imply?

If I find other things that "took off" at about the same time, can I claim that the Ma Bell breakup was responsible for that too?  (Say, didn't Microsoft release its first version of Windows back then?)

BTW, it is probably just me, but I do not know of any households that do not have a landline phone.  I do know of some that don't have cell phones though.

 

Data, let it go, its not worth it.  When FM thinks something is true, no amount of logic will change his mind.  Never mind the fact that when the Ma Bell empire was around the smallest cell phone had to have a bag the size of a briefcase to work.  Never mind the fact that cell phone companies, that had NO connection to Ma Bell, charged over 1 dollar a min on those first cell phones.  Never mind the fact that cell phone coverage was spotty at best in those early days. Its was all Ma Bell and her magical powers that kept cell phones down in those days

 

Bert

[greyhounds]

But the history books I've read all agree that customers on branchlines without the alternative of another depot nearby (i.e. captive shippers) had to pay premium rates for less than satisfactory service. Why? Because the RRs had to make up for the profit losses elsewhere in their system. Don't forget, the rail network wasn't as dense as during the first half of the 20th century, so RRs had enough branchlines to make this strategy effective.

OK, what "history books".  In Iowa you couldn't get more than six miles from a railroad.  Silly, but true.  I'll read your source.  What is it?

 

[daveklepper]

I do not believe innovation would have been held back if MA Bell's regulated monopoly had continued in long distance telephone service.  I base this on a month's experience as a visiting scientist at Murrey Hill Laboratories in June 1971, and the development work I saw both there and at Homdel (Spelling?).

 

If fact, we would probably two way communication with pictures right at our TV sets.   Now. of course, we have it on the web.  Those who want it.

 

The Transistor was developed at Bell Labs.   Bell Labs essentially provided the USA with a national laboratory that was not tax-supported but supported by telephone customers.   A lot of the technologicaly superiority of the USA during WWII came from Bell Labs.

[MStLfan]

So, suppose that somehow everybody involved agrees that open access is the only way out. How can this be accomplished? I have my ideas about it but first I would like to hear yours.

The only way out of what?  If OA is to be implemented, I would suggest that one knows what goals are going to be accomplished.  Is the whole purpose of OA to reduce the rates that some shippers pay?  Is the purpose of OA to introduce competition as a means to force railroads to become more efficient?

What would be your reason to implement OA?  Once that question is answered, then it is possible to investigate possible implementations to see if they will accomplish the goals set forth.

I have kept that deliberately vague. Everybody on this forum has his / her own ideas about it and it will reflect in their solution. Mostly I want to see ways how this could be accomplished rather than the ceaseless bickering between the ususal parties. They do provide a lot of fun but the endless quoting and fingerpointing is tiring.

As for not involving government, I think there may be a way within the current rules / legislation. Introducing new rules / regulation / laws will be a long process with uncertain outcome, not to mention riders and pork barrels attached.

 

My idea is that you can get a long way on the road to open access by using the system of trackage rights differently than it is done today.

The current North American system can be described as limited closed access. Limited in that  no railroad serves the whole continent and closed access because it is very difficult for outsiders to get in.

Let us take BNSF as an example.

BNSF gives UP unlimited trackage rights on its system including the right to serve any and all customers. UP does the same to BNSF.

Now we are in a position that shippers located on those 2 railroads have an alternative railroad for their railroad transportation needs. In practice not all shippers will get service from both railroads due to low volume and distance from the regular operations of the railroad companies. Probably only unit trains will benefit at first.

In order to avoid complaints from UP BNSF needs to install procedures for fair access to its tracks (think dispatching and a slot in time on the tracks) and accountability of expenses for infrastructure and dispatching. Otherwise both will end up in court / before the STB fairly soon.

If this works this system can be implemented across North America with all major and many smaller railroads involved. Now we are in a system of limited open access as outsiders still can not run trains.

Final step would be to grant ousiders the same rights as the railroads have. Then it would be possible for the UPS's, Maersk's and utility companies of this world to run their own trains. This would then be unlimited open access.

However, I think it would be very difficult to implement at this time because of all the capacity problems. Maybe it would have been easier to do this in the 70's when many railroads were down and almost out. They did not have to lose much at that point and there were more alternative routes.

Just my thoughts on the matter.

Greetings,

Marc Immeker

 

[Flint Hills Tex]

greyhounds wrote:

" 'Lee Koch wrote: But the history books I've read all agree that customers
on branchlines without the alternative of another depot nearby (i.e.
captive shippers) had to pay premium rates for less than satisfactory
service. Why? Because the RRs had to make up for the profit losses
elsewhere in their system. Don't forget, the rail network wasn't as
dense as during the first half of the 20th century, so RRs had enough
branchlines to make this strategy effective.'

OK, what "history books". In Iowa you couldn't get more than six miles from a railroad. Silly, but true. I'll read your source. What is it?"

May I quote:
"The Story of America: Freedom and Crisis from Settlement to Superpower" by Allen Weinstein and David Rubel. DK Publishing, Inc., 2002. pp. 356-7.

"As late as 1865, the United States had only 35,000 miles of track; by 1890, that figure had soared to 164,000 miles...railrods such as the Central Pacific and the Union Pacific received from Congress allotments of public land adjoining their routes that matched the amount of transcontinental track each company laid. (The ratio was ten square miles of land to each mile of track laid in a state and double that for track laid in a federal territory.) Ths land was then marketed to settlers, who became freight customers...For a time, however, the railroads were their own worst enemies. They overconstructed and then engaged in destructive competition that put many of them out of business. As an economic system, the industry was absurdly inefficient: On most of the competitive routes, railroads offered below-cost rates to lure business away from their rivals. On routes where no competition existed, customers were routinely gouged to recoup losses elsewhere."

This is the reference book I have easily at hand, though I remeber having read similar information in my American history textbooks at both school and college.

Now, on to another aspect:


Marc Immeker wrote:

"So, suppose that somehow everybody involved agrees that open access is the only way out. How can this be accomplished? I have my ideas about it but first I would like to hear yours.

Let us set these limits: no government involvement in this process, if possible (they have just about admitted that they don't know how to run a business so let businesses try it themselves first). No taking away of right of ways from railroads by the government (not really necessary if it is done right but it is always an option of last resort in order to maintain and increase capacity if Wall Street is uncooperative)."


As Datafever noted, we need to agree on what goal(s) we wish to achieve through implementing OA. Is it to put railroading on a par with interstate trucking, or to enhance competition among RRs themselves, thus spurring efficiency and innovation while at the same time lowering costs to customers? Or is it to protect the so called captive shippers? Could OA truly accomplish any of the above better than what we currently have?

Don't get me wrong, I am a big proponent of OA, but I just can't see any way of making it work in NA. Okay, Marc, no government involvement other than industry regulation, and no confiscation of ROW by a state entity. Then, I suppose, if you could get all the RRs to sit down at one table, you could, perhaps, get them to form an industry consortium to manage the rail network (MOW, new construction, dispatching and usage fees) under the auspices of a company similar to Airbus in Europe. As for capital investment in infrastructure, it could be made directly proportional to the number of tons per mile transported by a railroad, or you could just take it out of the usage fees.

I believe you would have to prove to the RRs that such a solution would be to their mutual benefit before any of them would agree to surrender control over any portion of their ROW, though. And that means, you would have to know which goals OA is meant to achieve. To put this all in a nutshell, everyone has to agree on the "why" before we try to solve the "how". Otherwise, OA will forever remain the brain child of theorists.

[Anonymous]

Wireless needed customers. AT&T had the monopoly on households until dereg.  If you do some research, you will see that's when cell phones took off.  They got 'em after deregulation.  I suspect you know quite a few people who have dispensed with land lines altogether in favor of cell technology and wireless broadband.

Okay, you are going to have to explain this a little bit slower cuz I seem to be stuck on stupid.  Ma Bell had a monopoly on households?  So are you trying to say that people could not buy cell phones because they had a landline phone?  As ownership of a cell phone has never (to my knowledge) been connected with ownership of a landline phone, I'm having a little trouble following your logic here.

And since call phones "took off" before dereg, what does that imply?

If I find other things that "took off" at about the same time, can I claim that the Ma Bell breakup was responsible for that too?  (Say, didn't Microsoft release its first version of Windows back then?)

BTW, it is probably just me, but I do not know of any households that do not have a landline phone.  I do know of some that don't have cell phones though.

You do know that cell companies access land lines, right?

Look, let's just drop it.  Most of the retorts on this particular subject are seemingly convinced that telecommunications were better under the Ma Bell monopoly than under the current competitive dereg.  I'm not sure why that is, other than some will cling to Ma Bell as an example of why monopolies are a benefit to society and not a curse, ergo the current railroad monopoly aspects are also a benefit.  It is a subjective analysis, one in which "what would have been" cannot be objectively scrutinized due to the lack of a crystal ball.  Still, we do have logical dissemination, but that has never flown on this forum.

So go ahead, believe with all your heart that America would be better off if we had no interindustry competition in any sector.  Competition is bad for America.  Whatever.........

Monopolies rule!

All hail the great and wonderful Monopoly!

[Datafever]

It is a subjective analysis, one in which "what would have been" cannot be objectively scrutinized due to the lack of a crystal ball.  Still, we do have logical dissemination, but that has never flown on this forum.

I will agree that there does indeed to be a difference of opinion as to what "logical dissemination" produces on this forum.  There is also a significant difference of opinion as to exactly who is being hard-headed and stubborn.

So go ahead, believe with all your heart that America would be better off if we had no interindustry competition in any sector.  Competition is bad for America.  Whatever.........

Monopolies rule!

All hail the great and wonderful Monopoly!

Well, I suppose that turnabout is fair play.  Just as I used hyperbole to suggest that you were claiming a lack of technological innovation under Ma Bell's monopoly, you are now using it to suggest that since I disagree with your claims that I must therefore be wholeheartedly in support of monopolies.  You may not have noticed, but I did apologize to you.

[Anonymous]

It is a subjective analysis, one in which "what would have been" cannot be objectively scrutinized due to the lack of a crystal ball.  Still, we do have logical dissemination, but that has never flown on this forum.

I will agree that there does indeed to be a difference of opinion as to what "logical dissemination" produces on this forum.  There is also a significant difference of opinion as to exactly who is being hard-headed and stubborn.

So go ahead, believe with all your heart that America would be better off if we had no interindustry competition in any sector.  Competition is bad for America.  Whatever.........

Monopolies rule!

All hail the great and wonderful Monopoly!

Well, I suppose that turnabout is fair play.  Just as I used hyperbole to suggest that you were claiming a lack of technological innovation under Ma Bell's monopoly, you are now using it to suggest that since I disagree with your claims that I must therefore be wholeheartedly in support of monopolies.  You may not have noticed, but I did apologize to you.

Well, then I will have to clarify with due apologies. 

You seem to support the notion that current innovations in telcoms all or mostly have their roots in Bell Labs, and the current atmosphere of telcom innnovation would actually have been better off under the Ma Bell monopoly.  And by inference you may also support the notion that monopolies at the very least do not inhibit innovation, and at best are better suited than competitive industries to develop innovations.

Is that a fairer assessment of your POV on the whole monopoly vs competitive arguement?

[Datafever]

You seem to support the notion that current innovations in telcoms all or mostly have their roots in Bell Labs, and the current atmosphere of telcom innnovation would actually have been better off under the Ma Bell monopoly.  And by inference you may also support the notion that monopolies at the very least do not inhibit innovation, and at best are better suited than competitive industries to develop innovations.

Is that a fairer assessment of your POV on the whole monopoly vs competitive arguement?

Current innovations in telcoms all or mostly have their roots in Bell Labs?  No, I don't think that would be an accurate statement.  Wireless technology has been dominated by Motorola, so much so that one could almost say that Motorola has almost had an effective monopoly.  (At one time, I worked for a competitor of Motorola's.  We had a better product at a better price and hit the marketplace months before Motorola did, but Motorola had the name and the marketing power.)

I can't say that the breakup of Ma Bell produced any technological innovations at all in terms of long distance landline service.  (I don't care about local landline service, as that remained a monopoly).  What did Sprint or MCI bring to the game?  Better off?  I can't say that.  Worse off?  I can't say that either.

What are some innovations that have gained inroads?  Caller ID, fiber optics, ISDN, DSL, personal voicemail, etc.  How many of those would not have been innovated without the breakup?  Well, Caller ID was developed prior to the breakup.  Fiber optics was first tested for telephone service in the late 1970s.  ISDN was a protocol developed by a standards committee (CCITT, now ITU) and eagerly implemented by the baby Bells. 

I support the notion that monopolies do not necessarily inhibit innovation.  Can examples be found of monopolies that were pretty bad?  Yes, I dare say so.  In your original statement, you included examples of two monopolies.  I only took issue with one of them.  The breakup of Standard Oil happened well before my time so I have very little insight into that situation.  From what I have read, Standard Oil was the worst of what can happen in a monopolistic situation.  Conversely, Ma Bell could very well have been the best of what can happen.

I would like to add something here.  I am not anti open access.  If you have read my posts on the subject, then you know where I stand, and why I have taken that position.  If you feel like answering any of the many questions that I have raised, I'm listening.

[Anonymous]

You seem to support the notion that current innovations in telcoms all or mostly have their roots in Bell Labs, and the current atmosphere of telcom innnovation would actually have been better off under the Ma Bell monopoly.  And by inference you may also support the notion that monopolies at the very least do not inhibit innovation, and at best are better suited than competitive industries to develop innovations.

Is that a fairer assessment of your POV on the whole monopoly vs competitive arguement?

Current innovations in telcoms all or mostly have their roots in Bell Labs?  No, I don't think that would be an accurate statement.  Wireless technology has been dominated by Motorola, so much so that one could almost say that Motorola has almost had an effective monopoly.  (At one time, I worked for a competitor of Motorola's.  We had a better product at a better price and hit the marketplace months before Motorola did, but Motorola had the name and the marketing power.)

I can't say that the breakup of Ma Bell produced any technological innovations at all in terms of long distance landline service.  (I don't care about local landline service, as that remained a monopoly).  What did Sprint or MCI bring to the game?  Better off?  I can't say that.  Worse off?  I can't say that either.

What are some innovations that have gained inroads?  Caller ID, fiber optics, ISDN, DSL, personal voicemail, etc.  How many of those would not have been innovated without the breakup?  Well, Caller ID was developed prior to the breakup.  Fiber optics was first tested for telephone service in the late 1970s.  ISDN was a protocol developed by a standards committee (CCITT, now ITU) and eagerly implemented by the baby Bells. 

I support the notion that monopolies do not necessarily inhibit innovation.  Can examples be found of monopolies that were pretty bad?  Yes, I dare say so.  In your original statement, you included examples of two monopolies.  I only took issue with one of them.  The breakup of Standard Oil happened well before my time so I have very little insight into that situation.  From what I have read, Standard Oil was the worst of what can happen in a monopolistic situation.  Conversely, Ma Bell could very well have been the best of what can happen.

I would like to add something here.  I am not anti open access.  If you have read my posts on the subject, then you know where I stand, and why I have taken that position.  If you feel like answering any of the many questions that I have raised, I'm listening.

Would you at least agree that there is a difference between the creation of a basic invention, and subsequent adaptations to that invention in order to optimize it's commercial value?  If so, then what is it that turns a basic invention into a marketplace player?  Somewhere in the process, there has to be a certain amount of "fear" that forces minds to manipulate the base item into the optimized selling item. 

There's two areas that might force this "fear" in my view - (1)competition, aka survival of the fittest, or (2) fear of government intervention or repression (aka, fear of being "Enronized" before a Senate panel).

Otherwise, research labs of monopolies are basically a collection of pet projects or politically correct PR schemes, kind of like university research labs. 

The other thing to mention here is sales and marketing innovations - you get such in competitive arenas, not in monopolistic fiefdoms.

[Datafever]

Would you at least agree that there is a difference between the creation of a basic invention, and subsequent adaptations to that invention in order to optimize it's commercial value?  If so, then what is it that turns a basic invention into a marketplace player?  Somewhere in the process, there has to be a certain amount of "fear" that forces minds to manipulate the base item into the optimized selling item. 

There's two areas that might force this "fear" in my view - (1)competition, aka survival of the fittest, or (2) fear of government intervention or repression (aka, fear of being "Enronized" before a Senate panel).

Otherwise, research labs of monopolies are basically a collection of pet projects or politically correct PR schemes, kind of like university research labs. 

The other thing to mention here is sales and marketing innovations - you get such in competitive arenas, not in monopolistic fiefdoms.

Sure, there is usually a big gap between "ivory tower" idealists and practical application.  You've probably heard of Einstein's Theory of Relativity.  Can you think of any ways in which that theory has been implemented in a practical application?  If you can't, don't worry because there really aren't too many practical applications of the theory in the commercial world.  One such application is in the GPS system which has to take relativistic effects into account in order to obtain optimal accuracy.

Bell Labs was certainly not an "ivory tower" research lab.  Besides the development of the transistor and the LED, Bell Labs also developed the UNIX operating system, the C programming language, electronic speech synthesizers, electronic music, handheld calculators, and even computerized switching systems for telephone traffic.  The list of inventions that resulted in practical applications goes on and on.

Of course, one could say that they produced all of these innovations in an extremely competitive environment.  You see, AT&T agreed to give up their monopoly so that they could be allowed to compete in the computer field.  And I can say with a high level of confidence that our world would be much worse off (in terms of electronic technology) if it had not been for the innovations developed at Bell Labs.

Do I agree that "fear" is the only source of innovation?  I would have to say no.  Is it the most prevalent source of innovation?  Probably, but I can't say that I am really qualified to answer that question as I have very little experience in working with monopolies.

[Datafever]

Oh, I forgot to mention.  Bell Labs did an awful lot of ivory tower research too.  But that's another discussion...

[daveklepper]

Again, a lot depends on who is running the monopoly and what the regulators who have government supervision do in their regulation.   Ma Bell did very well by the USA.   They did operate a research lab (actually several) that eventually benefited many industries.  Along with RCA, who had a near monopoly on broadcast equipment, Western Electric's Laboraties that became part of the Bell Lab System, perfected talking pictures.  If fact, the entire public address industry today, uses technology first developed by people associated one way or another with AT&T.   Even the deciBel was an AT&T innovation in thinking and mathematics.

 

Similarly, Cleveland Railways as a streetcar and bus company provided notibly better service at lower cost than would have occured if more than one company operated in the city.   New York had some interesting competition between the IRT and BMT, and then the city owned and subsidized IND later, but anyone will tell you the BMT was the best of the companies in terms of equpment comfort and general service, although the IRT covered far more neighborhoods and probided the most extensive system.   Streetcar service in New York was hampered by a forced low fair and punitive regulations, and still there was competition.

 

The real question of open access is what would the future bring?  Who would make the investments to increase capacity and insure good repair?

 

A wise prophet once declaired:   Bewair, you might get what you are asking for!

[Flint Hills Tex]

Please, oh please, get off of your high horses and stop bickering about "Ma Bell"! I thought that this thread was about railroading. And in case you haven't noticed, most of the other participants have dropped out.

As for pricing after deregulation, in Germany, my telephone bill has doubled, after accounting for inflation, even though I've got one of the lowest rates in the industry for a land-line based hookup.

As for innovation, I believe that the railroading renaissance as well as the great strides made in the broadcasting industry would have brought enough innovation, even if they wouldn't have broken up AT&T. How about UP doing all their dispatching from Nebraska and Texas? Don't tell me that wouldn't have happened if the government had left AT&T alone!

[oltmannd]

The "Ma Bell" monopoly raises an interesting question:

Since their rates were regulated to provide a fair return to the owners, why did they did they invest in R&D?  What was in it for them?

Was it that the excess profits could be plowed back into the company as R&D spending, so better to do that than have the gov't cut the rates?  RRs did a lot of capital investment with their "excess profits" that might not have occurred otherwise.  The RDG built a huge coal processing plant in the waning days of anthracite and the DL&W gold plated their RR with excess profit (OK, maybe not gold, but concrete)

Was it that some of the results of the R&D could be marketed and sold outside of the regulated environment?  Sort of like RRs using their natural resource subsidiaries to keep the RR afloat.

Was it that the inovations could be brought on line faster than the regulators could chop the rates so that profitability was enhanced?  Big John anyone?

And finally, how is it that Bell got away with charging more for touch tone all those years when it was cheaper for them?  Did they snooker the regulators?  I thought regulated rates were supposed to be cost based?  Maybe more Big John?

[Datafever]

The "Ma Bell" monopoly raises an interesting question:

Since their rates were regulated to provide a fair return to the owners, why did they did they invest in R&D?  What was in it for them?

They recognized early on that system capacity was going to be a major problem.  Bell Labs was founded to pursue the technology that would expand capacity and automation for both local and long distance switching.  Even a monopoly will recognize revenue constraints and seek to remove them.

Fortunately for us, Bell Labs also included a couple of researchers just to do ivory tower research, and it paid off handsomely.

[Datafever]

Please, oh please, get off of your high horses and stop bickering about "Ma Bell"! I thought that this thread was about railroading.

I'm sorry, I didn't realize that I was on a high horse.  Nor did I feel that I was bickering.

But you are correct, this thread is about railroading.  As near as I can tell, futuremodal is trying to establish that innovation only happens in a competitive environment.  (FM: If I am putting words in your mouth, I apologize.)  If that point is established, then the next step is to conclude that since railroads are not competitive, then they are not innovative.

But it can not be said that railroads are not competitive.  They compete with many other forms of transportation.  In some areas, they compete very well.  In other areas, they compete poorly.

In addition, they also compete against each other in a very high stakes game - the buyout.  Railroads that fail to be economically productive are at risk of being bought out by another railroad.  Sure, there are some railroads that get bought out or merge even though they are doing very well for themselves.  In such cases, the parties involved see a synergy that can be produced.  But a poorly run railroad is usually not getting bought out because of possible synergistic effects.  Instead, it is probably a last resort prior to declaring bankruptcy.

Have railroads been innovative?  Of course they have.  Look at the variety of cars that have been produced lately to meet shipper's needs.  Look at the machines that have been developed to automate trackwork / MoW.  Look at classification yard automation.

[oltmannd]

The "Ma Bell" monopoly raises an interesting question:

Since their rates were regulated to provide a fair return to the owners, why did they did they invest in R&D?  What was in it for them?

They recognized early on that system capacity was going to be a major problem.  Bell Labs was founded to pursue the technology that would expand capacity and automation for both local and long distance switching.  Even a monopoly will recognize revenue constraints and seek to remove them.

Fortunately for us, Bell Labs also included a couple of researchers just to do ivory tower research, and it paid off handsomely.

Amen!  But why inovate?  Why not just build out more of the same.  There was nothing that wasn't scalable about rotarty swithes.  They took up more space, but being regulated, they could pass the costs along.

[Datafever]

The "Ma Bell" monopoly raises an interesting question:

Since their rates were regulated to provide a fair return to the owners, why did they did they invest in R&D?  What was in it for them?

They recognized early on that system capacity was going to be a major problem.  Bell Labs was founded to pursue the technology that would expand capacity and automation for both local and long distance switching.  Even a monopoly will recognize revenue constraints and seek to remove them.

Fortunately for us, Bell Labs also included a couple of researchers just to do ivory tower research, and it paid off handsomely.

Amen!  But why inovate?  Why not just build out more of the same.  There was nothing that wasn't scalable about rotarty swithes.  They took up more space, but being regulated, they could pass the costs along.

Good question.  Ma Bell faced a lot of resistance in their automation process.  Switch automation put a lot of people out of work.  So why automate, and once automated, why continue to seek improvements?

For Bell Labs the answer was easy.  They established themselves as major players in the electronics revolution, and they had the excellent opportunity of actually being able to implement their ideas in an industrial/commercial setting.  Other players could only invent and try to sell to other customers.  Bell Labs could invent and implement, thereby proving the efficacy of their research.

[Datafever]

And finally, how is it that Bell got away with charging more for touch tone all those years when it was cheaper for them?  Did they snooker the regulators?  I thought regulated rates were supposed to be cost based?  Maybe more Big John?

WAG - The regulators recognized that the investment of development and installation of the new technology needed to be cost-recovered by higher fees.

[oltmannd]

The "Ma Bell" monopoly raises an interesting question:

Since their rates were regulated to provide a fair return to the owners, why did they did they invest in R&D?  What was in it for them?

They recognized early on that system capacity was going to be a major problem.  Bell Labs was founded to pursue the technology that would expand capacity and automation for both local and long distance switching.  Even a monopoly will recognize revenue constraints and seek to remove them.

Fortunately for us, Bell Labs also included a couple of researchers just to do ivory tower research, and it paid off handsomely.

Amen!  But why inovate?  Why not just build out more of the same.  There was nothing that wasn't scalable about rotarty swithes.  They took up more space, but being regulated, they could pass the costs along.

Good question.  Ma Bell faced a lot of resistance in their automation process.  Switch automation put a lot of people out of work.  So why automate, and once automated, why continue to seek improvements?

For Bell Labs the answer was easy.  They established themselves as major players in the electronics revolution, and they had the excellent opportunity of actually being able to implement their ideas in an industrial/commercial setting.  Other players could only invent and try to sell to other customers.  Bell Labs could invent and implement, thereby proving the efficacy of their research.

So, they could sell technology to unregulated markets?

[Datafever]

So, they could sell technology to unregulated markets?

Sell technology?  I guess that is what you could call it.  They licensed their patents.  It was their restrictive licensing agreements (mostly with RCA) that originally caused the DOJ to file an anti-trust lawsuit against AT&T/Bell Labs.  That lawsuit was settled in 1956 and resulted in AT&T being forced to license their patents to all interested parties.  In addition, AT&T was prevented from selling computers.

There was a subsequent DOJ lawsuit that was settled in 1982 that caused the breakup of the Bell system, but allowed AT&T to re-enter the computer arena.

From a business standpoint, AT&T did a very poor job of capitalizing on its patents, even though at its peak, it made about $300 billion a year in today's dollars.

[Anonymous]

   But it can not be said that railroads are not competitive.  They compete with many other forms of transportation.  In some areas, they compete very well.  In other areas, they compete poorly.

That's where I differ.  I believe that each mode has a particular niche not seen in the other modes, said modes will gravitate their energies toward maximizing that niche, and thus the only competition in this particular niche is intramodal.  I have pointed this out time and again to no avail, because some folks here are just stuck on the notion that "trucks are competition for rail" etc, without the slightest realization of the fallacy of such a blanket statement. 

Intramodally, railroads do compete somewhat (mostly duopoly, the rest triopoly or better) between the major terminals - all major ports, cities such as Chicago and St. Louis - but line haul customers tend to be stuck with the connection they got.  That's why all overseas importers are free of rail captivity, while most US producers are physically captive to one Class I (even if the GAO only counts R > VC over 180% as captive).  It is in these intergeographical locales that the opportunities for "innovate or die" are lost, and where OA in some form would be far superior to harsher regulation enforcement.

In addition, they also compete against each other in a very high stakes game - the buyout.  Railroads that fail to be economically productive are at risk of being bought out by another railroad.  Sure, there are some railroads that get bought out or merge even though they are doing very well for themselves.  In such cases, the parties involved see a synergy that can be produced.  But a poorly run railroad is usually not getting bought out because of possible synergistic effects.  Instead, it is probably a last resort prior to declaring bankruptcy.

This is where government oversight has failed miserably.  It would have been better to fix the problems of the loser railroad and thus keep the competitive balance, rather than "saving" the railroads by merging them into bigger and bigger monopoly sectors.  Because let's face it - a railroad being poorly run isn't necessarily a function of that railroad being a lesser property in comparison to others.  Case in point - NYC/Pennsylvania vs N&W/Chessie/et al.

Have railroads been innovative?  Of course they have.  Look at the variety of cars that have been produced lately to meet shipper's needs.  Look at the machines that have been developed to automate trackwork / MoW.  Look at classification yard automation.

Question for the experts - If railroads ran with the shorter faster model, would we even need massive classification yards?  Could a modern day Class I function today by eliminating massive centralized yards in favor of decentralized mini-yards, e.g. focus on unit trains/shuttle trains for all commodities, while keeping carload volumes at a 25 car + or - train length limit?  Wouldn't such decentralization enable a more customer oriented system?

I have read in past TRAINS various takes on that theme, and in some aspects the automated classification yard seems more of an albatross rather than an innovation.  Other so-called innovations, aka air brakes, seem to be well past their time in this day and age - aka holding on to out dated technologies seems to be an unintended consequence of monopolism.

[Murphy Siding]

 

This is where government oversight has failed miserably.  It would have been better to fix the problems of the loser railroad and thus keep the competitive balance, rather than "saving" the railroads by merging them into bigger and bigger monopoly sectors.  Because let's face it - a railroad being poorly run isn't necessarily a function of that railroad being a lesser property in comparison to others.  Case in point - NYC/Pennsylvania vs N&W/Chessie/et al.

     Say what?  *Fix* the loser railroad?  Reward a railroad that is getting beaten by the competition, so it make *compete* with the stronger competitor?  Did you have to read Hairrison Bergeron in high school.

[Anonymous]

 

This is where government oversight has failed miserably.  It would have been better to fix the problems of the loser railroad and thus keep the competitive balance, rather than "saving" the railroads by merging them into bigger and bigger monopoly sectors.  Because let's face it - a railroad being poorly run isn't necessarily a function of that railroad being a lesser property in comparison to others.  Case in point - NYC/Pennsylvania vs N&W/Chessie/et al.

     Say what?  *Fix* the loser railroad?  Reward a railroad that is getting beaten by the competition, so it make *compete* with the stronger competitor?  Did you have to read Hairrison Bergeron in high school.

I have no idea what that last sentence is doing in this forum.

That said, say you have three quasi-competitive parallel railroads.  One is the worst of the lot but has massive land grants to fall back on.  One got it's start with land grants, but needed to merge with the first one to survive.  The third has the best alignment but had no land grants - it either needs retroactive land grants (e.g. equal footing) to survive as an independent, or it either is merged and/or abandoned. 

Now you are the federal government, charged by your constituents to maintain both railroad health and intramodal competitiveness.  What do you do?  Do you:

1.  Let the one with arguably the best alignment but worst financial standing fail while the other two merge, thus guaranteeing financial health of the sole remaining merged railroad but eliminating all hope of intramodal competition?

2.  Provide a form of federal aid to the at risk railroad equivalent to the land grants it's merged competitor inherited, thus guaranteeing health to both railroads (but of course lesser health to the merged line than if they had sole control of the territory) and some intramodal competition

3.  Make all three railroads merge, then break them up into two new and improved competitors (e.g. now both will have access to all major rail markets and the best routings).

4.  Take the worst of the three (the one with the massive land grants at hand), divvy it up between the two better lines (aka akin to Conrail being divvied up to NS and CSX) including dividing up the unsold land grants to allow supplemental financial health for the remainders?

5.  Nationalize the whole lot?

6.  ___________________?