I have a question re: something on pg 6, second paragraph, talking about Buffett’ & BNSF. It says, …“that no new railroad systems can suddenly be built as competitors, …” What does that mean? Is there regulation for this, I’m assuming then. (Oops, there’s that word! [swg]) Thanks…
It means you ain’t gonna wake up some morning and find a parallel railroad…what exists today is what going to exist for quite a while and there will actually not be a competing railroad built against anything running now
I’ll add, that the reason that is, is because it would be virtually impossible, and unaffordable to build a competing rail line near one of the existing lines.
Even if you could buy the land, by the time you had waded throught the Required Gov’t Reports and various studies, enviormental impact statement and lets not forget NIMBY’s and folks just desd set against anything in their enviroment. You’d probably have to go back and restructure your finances or reapply all over again.
Look at a couple of recent examples of proposed completely new lines, DM&E’s extention and reconstruction of its own lines ( Rochester Brewhaha, etc.) and the proposed Tongue River line. Their probvlems and travails have been documented in this FORUM on more than one occasion.
RMW and Mudchicken as well,have more than one time commented on the hoops needed to jump through just to add a line on an existing route, or major construction to existing rail structure. Nothing is easy when you try to be ‘green’ nowadays.[%-)]
The gist of it is this: the barriers to entry are too high when compared with the potential returns. Environmental impact statements and the like certainly do factor in, but if you were proposing to build in a populated area, I’d suspect land acquisition costs would do you in before you even got to the EIS stage. DM&E and Tongue River both passed environmental hurdles, but so far, the potential for return on investment hasn’t pushed them into being. And consider that with those two, we’re dealing with proposals to build lines in some of the most sparsely populated (read: low land values, few landowners) regions of the country. Now imagine building a new line into or near a major city.
Don’s point wasn’t to suggest that building a competing railroad isn’t theoretically possible. It’s that the barriers to entry are so high that even if a new operator became convinced he could win shipments away from current players (a big if), where is he going to find investors to front that kind of money?
There have been a few new lines built: Signal Peak Mine being the most recent example. But building a 30-mile branch in ultra-rural Montana to serve a 15-million-ton-per-year coal mine is vastly different from building a brand-new route between two major cities. Idn’t gonna happen.
Best,
''Upon this point a page of history is worth a volume of logic . . . ‘’ - U.S. Supreme Court Justice Oliver Wendell Holmes, Jr.
The ‘barriers to entry’ of new competitors as specifically named by Andy Cummings above - and alluded to by most of the other posts - is the core concept here. If you think about the local pizza shop or Chinese restaurant - how many of them open up and then change owners/ operators or go out of business in your nearest town of any size in the span of a couple of years ? Because the barriers to entry are so low, those business proliferate and compete with each other - coincidentally, across those 2 categories, as well as within each one - and as a result it is not a high-margin or particularly remunerative line of business.
Back in the day - like 120 to 150 years ago - while building a new railroad line wasn’t easy, it was a lot easier than now. Particularly, such key aspects as lining up local financial support - ‘subscribing’ or ‘underwriting’ - and purchasing or trading/ bartering for R-O-W, etc. Also, without good roads and trucking that we now take for granted, there was a real need for several railroads between major cities, and at spacings of from 6 to 20 miles between lines. And, a common ploy was to propose and maybe even actually start building a ‘nusiance’ line parallel to an existing railroad, which would present an ostensible competitive threat. That was then usually dealt with by either purchasing the interloper rail line at a handsome profit from its promoters, or cutting rates so low as to drive it out of business, among others. None of those options were particularly good for the bank books of the previously existing railroad.
…And sections of partially finished ROW of the South Penn Railroad are still visible near the route of the Pennsylvania Turnpike after so many years…Construction was stopped back in 1885. Some parts of the original alignment are where the Pennsy Turnpike is now. Including some tunnels.