Open Access and Re-regulation Editorial

[Murphy Siding]

.  And that's just for existing business.  Trying to plan new service takes the whole deal to another level.  To think otherwise, is ignorance, stupidity or stubborness.

And I would suggest "Myopic" also.

     And narrow-minded

[MP173]

Don:

That was a very good analysis of the current situation. Control of one's situation allows for a better level of planning...and committment. 

ed

[Anonymous]

Don:

That was a very good analysis of the current situation. Control of one's situation allows for a better level of planning...and committment. 

ed

Well, then let's all go back to the days of Ma Bell and Standard Oil.  Hey, if it allows for a better level of planning......and committment, right?

Methinks most rail shippers would disagree with your "satisfactory" rating of planning and committment by the railroads.  Why else are railroads still stuck with less than 20% of all intercity revenue freight share, 25 years after Staggers?

[Anonymous]

.  And that's just for existing business.  Trying to plan new service takes the whole deal to another level.  To think otherwise, is ignorance, stupidity or stubborness.

And I would suggest "Myopic" also.

     And narrow-minded

Yep, those German, Italian, Australian et al OA operators are obviously in a fight with *reality*.

Funny how mention of the OA successes only brings omission from the rail monopoly apologists.  Not to mention ignorance, stupidity and stubborness.

And I would suggest "myopic" as well.

   And narrow-mindedness

 

[oltmannd]

Don:

That was a very good analysis of the current situation. Control of one's situation allows for a better level of planning...and committment. 

ed

Well, then let's all go back to the days of Ma Bell and Standard Oil.  Hey, if it allows for a better level of planning......and committment, right?

Methinks most rail shippers would disagree with your "satisfactory" rating of planning and committment by the railroads.  Why else are railroads still stuck with less than 20% of all intercity revenue freight share, 25 years after Staggers?

Well, if shippers are upset with service planning and commitment now, they'd be down right suicidal with OA!

OA scenario: RRA has hot train at 10 AM by Podunkville.  RRB has hot train at 4PM.  Both are paying for their "slot" on the ROW.  ROW company decides it's time for a tie gang.  To be efficient, they need 10 hours a day of daylight.  Neither RRA nor RRB can move their slot since they have committed traffic with contract guarantees.  Working around one, screws the other.

Schenario #2.  ROW company maintains 50 mph track.  RRA wants to run a 70 mph train and is willing to pay the increment for it.  Does RRB also get to run 70 mph now?  Who pays what?   RRC all of a sudden buys a bunch of slots for some 40 mph 286K# coal trains that triple the cost of maintaining the 70 mph over 50 mph.  Who pays?

Answer these and I've got some more.

[edblysard]

You wave the magical governmental wand…sprinkle some OA pixy dust, click your heels together three times, and it all solves itself…

[TomDiehl]

You wave the magical governmental wand…sprinkle some OA pixy dust, click your heels together three times, and it all solves itself…

You forgot, while you're clicking your heels, you have to close your eyes and chant: "There's no place like open access, there's no place like open access."

[MP173]

Dave:

The last time I looked, Justice Department has not decided that the railroads needed to be broken up, ala Bell or Standard.  In fact the government has taken the opposite view over the past 50 years and has approved nearly all mergers.

Is that situation going to change?  I believe that railroads have finally achieved a level of pricing power that has not been available and they need to be extremely careful in how they are to proceed.

Your proposal to move to an open access system is very interesting and provides an interesting amount of discussion and thought.  I personally never seeing the railroads giving up that right to own and control their own infrastructure, unless either Justice comes knocking on their doors or there is a very compelling reason for open access.  Take away the right of way and the infrastructure and what is a railroad left with?
Cars and locomotives, people and systems.  The ease of entry, which the trucking companies fight constantly will be open to a number of companies.

Will that foster competition?  Cant answer that.  On certain lanes it no doubt would, on others it probably would not.

Dave, the solution is simple.  If there is a demand for more railroad competition between points, then the investment dollars will flow to that project.  In other words land will be acquired, track laid, sidings built and trains will be run on those tracks.  A private company could build it's own ROW and open access could become a reality.  Expensive?  Very.  Likely to occur?  Probably not.  The projected returns on investment are not there. 

Look at DME's proposed expansion.  Government money is being used in the forms of loans.  Why?  There were NO PRIVATE LENDERS or INVESTORS willing to provide capital.

The current returns for railroads does not warrent massive expansion or massive investment.  Private capital is now heading in the direction of other companies as more and more publicly traded companies are being taken private.  The reason is very very simple.  The anticipated returns are high.

So, in summary...Justice Department has not deemed BNSF, UP, NS, CSX, CN, CP to be on the same level of Bell, Standard or even Microsoft.  Until there is a movement by either Justice or STB there is no motivation for the railroads to implement the OA plan.  At this time there is not a groundswell of private capital to invest in purchasing land for ROW, and building an infrastructure.  Only a government funded load has been provided to expand the railroad system and the parties are mixed as to whether or not that debt can be serviced.  There are other capital improvements which are government based such as the NS tunnel clearing and the Southern California project but for the most part the government is pretty silent regarding public funds for the railroad industry.

With very little private investment, other than retained earnings and very little public investment (DME) there is simply not the returns to justify further investment at this time.  What will trigger that further investment?  Higher returns.

ed

[Suburban Station]

Telecom open access was a failure. While it did provide low cost dial up competition, verizon was light years behind cable because it was unwilling to invest serious money to upgrade it's network when the benefits would simply be passed on by some bureaucrats definition of cost. I hear a lot of comparisons to Europe but to my knowledge, a realtively small portion of freight is moved by rail in Europe. And certainly not all rail is the same. Try riding Amtrak's SW Chief and then hop on the sunset or crescent to see how different rail can be. While rail suffered through nearly a scentruy of government idiocy and arrogance, it has started to recover due to changes in fuel costs and shipping routes. Strong pricing power has led to rail investment not scene since your grandfather's time. BNSF is adding a third track to its main line in some places no? To me OA woudl doubtlessly lead to politicizing rail investment and serious bottlenecks.

[MStLfan]

What keeps me wondering in these discussions is this: where is the true money in running trains. Is it in the infrastructure part or in the running the train over the railroad part?

Presumably railroads have a way to calculate the cost of running a train over the track (including maintenance, dispatching, depreciation and fund forming for future upgrades that must be charged to the track component) and what to charge the competion when granting trackage rights.

Maybe the answer will surprise us and the real money is in owning tracks not operating trains over it.

greetings,

Marc Immeker

[MStLfan]

Dave:


Look at DME's proposed expansion.  Government money is being used in the forms of loans.  Why?  There were NO PRIVATE LENDERS or INVESTORS willing to provide capital.

The current returns for railroads does not warrent massive expansion or massive investment.  Private capital is now heading in the direction of other companies as more and more publicly traded companies are being taken private.  The reason is very very simple.  The anticipated returns are high.

DME was not alone in that, around 2000 Wall Street yanked Krebs at BNSF back pretty hard after spending too fast in double tracking the former Santa Fe Transcontinental line (did he in hindsight?). Soon after he was gone. These days capacity increases at BNSF are much harder to get through.

In the Netherlands we have a saying that translates as follows: you have to invest in order to get a return. Perhaps railroads have to invent new ways of financing in order to get the necessary capital.

greetings,

Marc Immeker

[MP173]

Marc:

Well stated.

The US financial markets are pretty sophisticated at recognizing opportunities and creation of instruments to fund those opportunites.

I seriously doubt if the railroads will be able to invent new methods of financing.  Most of their management attention is directed towards operations, not financing.

ed

[Anonymous]

I see the debate rolls on.

Whatever happened to the old saying "If it ain't broke...

[Anonymous]

I see the debate rolls on.

Whatever happened to the old saying "If it ain't broke...

"If it aint' broke.........

.......you ain't lookin' hard enough!"

[Anonymous]

Don:

That was a very good analysis of the current situation. Control of one's situation allows for a better level of planning...and committment. 

ed

Well, then let's all go back to the days of Ma Bell and Standard Oil.  Hey, if it allows for a better level of planning......and committment, right?

Methinks most rail shippers would disagree with your "satisfactory" rating of planning and committment by the railroads.  Why else are railroads still stuck with less than 20% of all intercity revenue freight share, 25 years after Staggers?

Well, if shippers are upset with service planning and commitment now, they'd be down right suicidal with OA!

OA scenario: RRA has hot train at 10 AM by Podunkville.  RRB has hot train at 4PM.  Both are paying for their "slot" on the ROW.  ROW company decides it's time for a tie gang.  To be efficient, they need 10 hours a day of daylight.  Neither RRA nor RRB can move their slot since they have committed traffic with contract guarantees.  Working around one, screws the other.

Schenario #2.  ROW company maintains 50 mph track.  RRA wants to run a 70 mph train and is willing to pay the increment for it.  Does RRB also get to run 70 mph now?  Who pays what?   RRC all of a sudden buys a bunch of slots for some 40 mph 286K# coal trains that triple the cost of maintaining the 70 mph over 50 mph.  Who pays?

Answer these and I've got some more.

These are hypotheticals, and as such can be thrown right back at ya, Slick.  Both your scenarios can and do also occur with current multiple user arrangements, right?

Answer that and I've got some more.

[Anonymous]

Dave:

The last time I looked, Justice Department has not decided that the railroads needed to be broken up, ala Bell or Standard.  In fact the government has taken the opposite view over the past 50 years and has approved nearly all mergers.

Is that situation going to change?  I believe that railroads have finally achieved a level of pricing power that has not been available and they need to be extremely careful in how they are to proceed.

Your proposal to move to an open access system is very interesting and provides an interesting amount of discussion and thought.  I personally never seeing the railroads giving up that right to own and control their own infrastructure, unless either Justice comes knocking on their doors or there is a very compelling reason for open access.  Take away the right of way and the infrastructure and what is a railroad left with?
Cars and locomotives, people and systems.  The ease of entry, which the trucking companies fight constantly will be open to a number of companies.

Will that foster competition?  Cant answer that.  On certain lanes it no doubt would, on others it probably would not.

Dave, the solution is simple.  If there is a demand for more railroad competition between points, then the investment dollars will flow to that project.  In other words land will be acquired, track laid, sidings built and trains will be run on those tracks.  A private company could build it's own ROW and open access could become a reality.  Expensive?  Very.  Likely to occur?  Probably not.  The projected returns on investment are not there. 

Look at DME's proposed expansion.  Government money is being used in the forms of loans.  Why?  There were NO PRIVATE LENDERS or INVESTORS willing to provide capital.

The current returns for railroads does not warrent massive expansion or massive investment.  Private capital is now heading in the direction of other companies as more and more publicly traded companies are being taken private.  The reason is very very simple.  The anticipated returns are high.

So, in summary...Justice Department has not deemed BNSF, UP, NS, CSX, CN, CP to be on the same level of Bell, Standard or even Microsoft.  Until there is a movement by either Justice or STB there is no motivation for the railroads to implement the OA plan.  At this time there is not a groundswell of private capital to invest in purchasing land for ROW, and building an infrastructure.  Only a government funded load has been provided to expand the railroad system and the parties are mixed as to whether or not that debt can be serviced.  There are other capital improvements which are government based such as the NS tunnel clearing and the Southern California project but for the most part the government is pretty silent regarding public funds for the railroad industry.

With very little private investment, other than retained earnings and very little public investment (DME) there is simply not the returns to justify further investment at this time.  What will trigger that further investment?  Higher returns.

ed

Ed,

Look closely at all the high falutin' finance data coming from the Class I's, and you will see that even 25 years after Staggers, massive retrenchment, monopolistic pricing power, et al, the railroads still are nowhere near being able to recover their cost of capital.  I've got new for ya, Bud - such will never happen with a continuation of the integrated model.  The lack of intramodal competition inherent with all monopolies equates to very little generation of new business.

The history of US railroads is one of massive federal aid from the get go to the present.  Always has been, always will be, because we are dealing with an anachronism.  Demand for new rail service has always been implicit, but the integrated model squelches the desire for potential shippers to invest their time and money in such a venture.  Because let's face it - who but a masochist wants to be subjected to monopolistic abuses?

[MP173]

Got a couple getting pretty close.  I will admit their returns are nothing to brag about, in fact I believe you are confirming what I said. 

So, if the industry is in such a bad case as it is now, how will stripping the land based assets from the operating assets improve the returns  on both entities?

Bud

[mudchicken]

Why would FM care? - All he wants is cheaper freight rates because the the two main industries he champions cannot manage to function in the real world and need to plunder other people's assets by political edict. All the crass hyperbole he continues to inundate us with still continues to fail the smell test. As originally stated, OA remains "socialism, thinly veiled" and is a definate threat to the integrity of the railroad physical plant.

There may be a better path out there that benefits railroads and shippers, but OA fails to be that answer.

[oltmannd]

Don:

That was a very good analysis of the current situation. Control of one's situation allows for a better level of planning...and committment. 

ed

Well, then let's all go back to the days of Ma Bell and Standard Oil.  Hey, if it allows for a better level of planning......and committment, right?

Methinks most rail shippers would disagree with your "satisfactory" rating of planning and committment by the railroads.  Why else are railroads still stuck with less than 20% of all intercity revenue freight share, 25 years after Staggers?

Well, if shippers are upset with service planning and commitment now, they'd be down right suicidal with OA!

OA scenario: RRA has hot train at 10 AM by Podunkville.  RRB has hot train at 4PM.  Both are paying for their "slot" on the ROW.  ROW company decides it's time for a tie gang.  To be efficient, they need 10 hours a day of daylight.  Neither RRA nor RRB can move their slot since they have committed traffic with contract guarantees.  Working around one, screws the other.

Schenario #2.  ROW company maintains 50 mph track.  RRA wants to run a 70 mph train and is willing to pay the increment for it.  Does RRB also get to run 70 mph now?  Who pays what?   RRC all of a sudden buys a bunch of slots for some 40 mph 286K# coal trains that triple the cost of maintaining the 70 mph over 50 mph.  Who pays?

Answer these and I've got some more.

These are hypotheticals, and as such can be thrown right back at ya, Slick.  Both your scenarios can and do also occur with current multiple user arrangements, right?

Answer that and I've got some more.

Not where at least one of the train operating companies don't have control over the ROW.

If hypothetical was a reason to avoid a rational response how would anyone ever have a discussion about changing the status quo?

[Murphy Siding]

If hypothetical was a reason to avoid a rational response how would anyone ever have a discussion about changing the status quo?

     If hypothetical was a reason to avoid rational responce, how would anyone, for or against it, have a discussion about open access?

[TomDiehl]

If hypothetical was a reason to avoid a rational response how would anyone ever have a discussion about changing the status quo?

     If hypothetical was a reason to avoid rational responce, how would anyone, for or against it, have a discussion about open access?

But the problem with FM is that he refuses to move beyond the hypothetical toward a practical plan. Probably because this is where the whole thing falls apart.