Would we ever have just one Class 1 railroad?

David, perhaps you could point to a freight rail network outside of the US that is 'better.'

Ok, you say you don't advocate nationalization (I must have misinterpreted: "i think they should nataionlize (sic) the track , and make it open access.")

Open access is not a free market approach, but a form of expropriation. There is no argument that railroads, in general, DO charge higher rates and make higher contributions on closed stations than those open to rail competition. But there's also modal, source, and substitute product competition that also comes into play to keep rates in check. Your expectation for the "current owners to be well compensated" is naive and your statement about the owners enjoying a windfall to plow back into other areas leaves out a couple of tiny points: 1) Who's going to be paying all this money, and 2) How's the track to be maintained once it's nationalized? PS: Your comment about railroads "struggling to get enough capital to keep up with traffic increases." Are you in 2010? Capacity is NOT an issue now and railroads are not "struggling" to raise capital. In fact, carriers are being creative by investing now in technologies and operating practices that will avoid unnecessary capital outlays in the future. PPS: The only significant capital issue facing carriers over the next few years is adoption of PTC. And broad reaching open access would exaccerbate that.

RE your comments on regulation: not sure how you assumed I was comparing US regulatory burdens to those of other countries. But pre- and post-dereg comparisons (in all modes) should tell all but the most obtuse that in the case of US transportation More regulation = bad, less regulation = good.

RE your critical comments on standardization... sure, different railroads have different operating rules, etc. Standardization has typically centered on issues associated with interline activities. It's all about the network.

And your final comment on intermodal... is this a non sequitur?? Ireally hope you're not suggesting open access for intermodal terminals!

Bottom line... there are inequities to be acknowledged in the current system to be sure... but it works - extremely well. Open access would reduce operational efficiency and increase costs, while driving down carrier profitability. Net result: deterioration of service, disinvestment, and resumption of modal shifts away from rail.

Uprr engineer , i dont think you would see a all out price war . you would see some competition , for the more profitable traffic , but it wont be open warfare . the high capital cost of locos , cars , terminals etc , would keep every tom , dock and harry form providing rail service . i would expect to see shortlines extending their runs onto class rails , where it makes sense to do so . you would possibly see larger customers and utilities running their own unit trains , and perhaps companies like railex doing the same .
i would not expect to see ( presuming the federal govt or state govt buy the tracks ) immediate open access on all lines .i would expect to see any lines been abandoned or sold off , been brought by the govt . then , i would imagine runnng right lines , then lines with customers who complain , etc .

There's already competition between carriers, and as Cowford stated there are many dimensions of competition above and beyond the "network". I know of many cases where railroads will employ or partner with other modes to gain service access into markets for which they do not directly serve via rail. It's within those commodities that are most suited to rail, heavy/high-volume/long-distance, where pricing abuses are more-likely, but even in those commodity markets there's only so much one can do. Take coal, one of those commodities where the railroads have strong pricing powerr, for example. Eastern carriers are seeing declines in their utility coal traffic as natural gas-fired power has become more competitive. The Powder River Basin of coal, from what I gather, might be facing greater competition from Southern Illinois for upper Midwestern power generation. So this competitive issue is not so simple and has been managed with deregulation and some subsequent tweaking.

The other piece of the puzzle with open access is that there is only so much capacity without capital expansion. So, even if you open up the rail lines to open access, in the end, though with a huge, convulsive (and expensive, no doubt) change to the system, won't the result be pretty similar to what we have today? The basic characteristics of railroading which drive the business will not change with open access.

Just one last note, David, on your 2 days/week service example that you've used a couple of times. IIRC, that service was for a steamship line and really doesn't reflect the railroads' service for domestic traffic. What you'd find is that for merchandise traffic moving intermodally the service is daily in dedicated trains between most mid- and large markets with big improvements being made to make the system more efficient.

Cowford , i would say Australia springs to mind as having done better in similiar circumstances .

Cowford wrote:

Open access is not a free market approach, but a form of expropriation. There is no argument that railroads, in general, DO charge higher rates and make higher contributions on closed stations than those open to rail competition.

Mr. Cowford is 100 per cent correct,in the sense that some forms of economic activities are naturally monopolistic, and in some cases, such as performing artists, our economic system champions that monopoly via patents, copyrights, etc.

But when that scenario is applied to an extremely capital-intensive industry, with huge amouts of investment in a physical plant which is largely immovable, the potential for abuse, at least as much by a misguided public as by the participants, increases. And the nature of rail operation, as most convincingly demonstrated by BNSF's gains in traffic due to superior grades, followed in turn by UP's upgrade of the former Golden State route, serves as a demonstration that no new competitors can arise in this market without some adaptation of the principle of open access.

Better to give a little, afrer careful negotiation, than to be confronted by interference guided only by political expediency, short-sight, and blunt force. Paired-track arrangements have existed in a couple of markets for decades, for example. And within those constraints, those who got there first have every right to seek the highest possible compensation for the shrinkage in their monopoly power, which will still be retained in some markets.

While the circumstances of the AT&T breakup might not have sat well with the most strident free-market advocates, the actions themselves might just as easily have been viewed as an agreement by all but a handful of the parties involved to resolve an impasse with minimal disruption. And it was a major factor in a wave of technological advances.

So let it be with the Big Four (or is it Seven)?

David Benton wrote:Uprr engineer , i dont think you would see a all out price war . you would see some competition , for the more profitable traffic , but it wont be open warfare . the high capital cost of locos , cars , terminals etc , would keep every tom , dock and harry form providing rail service . i would expect to see shortlines extending their runs onto class rails , where it makes sense to do so . you would possibly see larger customers and utilities running their own unit trains , and perhaps companies like railex doing the same .
i would not expect to see ( presuming the federal govt or state govt buy the tracks ) immediate open access on all lines .i would expect to see any lines been abandoned or sold off , been brought by the govt . then , i would imagine runnng right lines , then lines with customers who complain , etc .

Sounds like the capital would be sucked right out of the railroads, then what? If you were gonna plan the destruction of the railroads, your plan would do it dude.

If anything , capital would flow into the railroads . if the govt brought the track , then it would pay them for it . if another company brought the track , then you would expect compensation for the loss of monopoly .
Or , the railroas could be compensated in other ways , by the provision of PTC , electrification or other benefits .
similiar to the way Amtrak compensates railroads ( building extra sidings ) for running thier corridor trains .
Public / private partnership .

I think we're pretty much broke over here buddy. The only thing Washington does well over here is defence. Everything else they touch... It sounds good to you, i think something like that would never work. You would have to hand the whole thing over to the Government, or else the wheels would rust to the rails.

Thank god the power in congress is getting ready to change hands so something like this wont happen here anytime soon.

UPRR engineer wrote:
Thank god the power in congress is getting ready to change hands

1. Didn't know you were a pundit.

2. If it happens, god won't have anything to do with it.

3. Do you really think it matters which set of hands is squeezing the nutsacks of the American people?


Ocala Mike

David, maybe you could provide some examples as to how the Aussie roads have excelled? A few points (though I'm not that well versed in their network): Queensland Rail does an admirable job hauling coal, no doubt, but these are somewhat isolated branches that run mine to dock and don't have to mix with a substantial batch network. I'm unaware of any other service standouts. The national network is hampered by gauge issues, they've imported American technology for signalling, locomotives, large-scale acid moves, etc. and there has been significant American management oversight/investment in the network's development.

Oh, and I don't believe they have (widespread) open access.

Id rather take the republican path then a democrat one there Mike. The change that needs to happen in this country wont be pleasant for any of us.

My use of the word god didnt have any religious relevance, just a way to express my relief.

Thing to ask yourself when you try to mash the government and business together, would this work in my house? Something to think about there David.

It's been said in many forms that the only constant is change,

And unfortunately for the American rail industry, the majority of the changes I can foresee over the next few years have a large negative potential. Barring some new technological breaktrough, the Amercan population seems doomed to "tread water" for a long time, operating under stricter environmental constraints and similar double standards while the emerging industrial economies catch up with us. The finite, and dwindling, supply of easily-recoverable petroleum within our borders seems guaranteed to act as a damper on any major economic recovery.

I lost my primary job a year ago, and have been knittiing a series of short-term opportunities together, and while the prospects have slowly been improving, having attained the age of three score, I expect to join the ranks of "permanent part-timers" juggling interim jobs, a modest pension, Unemployment, IRA withdawls and eventuially, Social Security ...... whatever works, stretches the bank account, and keeps life varied and interesting.

I spend a fair amount of time at employment sites, and those geared to exchanging information among the unemployed and underemployed. Due to some wise decisions, I find myself among the luckier members. There are a lot of people out there who are close to exhausting the 70-99 weeks of maximum benefits. For those well into their forties and beyond, and especially, it seems, for women who seldom consider anything other than office jobs in the customary 9-to-5 range, prospects seem dimmer than ever.The pop wisdom of blaming all our troubles on the previous Administration has blown itself out, but the belief remains among too many that anyone who can rub two coins together has attained that status by exploiting someone else.

And most frightening of all, the tendency of a lot of the unemployed to blame it on international trade is intensifying. From the time I was a junior high-schooler in the early 60's, teachers of economics, whether conservative or Keynesian, have stressed the positives of open markets, and until a few years ago, the disastrous Smoot-Hawley Tariff bill was often cited as the prime cause of the intensification of the Great Depression in 1931. But apparently, Bob Dylan's "Union Sundown " is striking a responsive chord among the beer-to-beer crowd.

The functionaries and influence-peddlers who dominate life within the Beltway have shown no signs of being weaned away from their desire to extend Federal influence over every sector of our economy into which they can sink their claws, and the rail industry's return to profitability only makes it a more tempting target. It is time to develop a plan to both reduce the appearance and mitigate the effects of perceived monopoly power, for reasons of simple self-defense.

Yep, grim indeed.

2nd Trick and UPRR, how do you square your pessimism about our nation, its politics and railroading with Warren Buffett's $44 billion investment and complete purchase of BNSF?

If you get the chance, take a look at the 3/10 issue of Trains magazine which has an article about Buffett, world's 2nd richest man, and Rose, BNSF's CEO, take on the future of railroads. There's also a column by Don Phillips that follows up on the article.

To sum it up, they are not threatened long-term about the domestic demand for coal and should domestic demand decline feel strongly that Asia will take up that demand. Rose isn't concerned about the Panama Canal diverting Asian traffic away from West Coast ports and MLB. Buffet isn't concerned about regulation and notes, quite accurately, that the current Congressman, Rockefellar, who is pro railroad, is the point person on the current legislation. And, lastly, they see issues with highway system expansion and trucking industry problems which presents opportunities for the railroads.

Doesn't that give you some optimism about the future of our country, how it will be governed and its railroads?

QB, the article states that Rockefeller is pro-railroad??? I'd call him a lot of things, but pro-railroad is not one of them. He's been an advocate of rail re-regulation for years! Of course, he hails from a coal-producing state. Coincidence? I think not.