It sure looks as if the railroads work well together as partners…Here in Ontario I see BNSF and CSX locomotives on CN trains regularly…partnerships can be a good thing…but…so are competitive pressures that work in favor of the customer. The regulators approve mergers based on a number of factors including maintaining a competitive balance. Maybe the railroads have de facto merged their operations informally through partnerships…thereby eliminating the need for mergers?
Railroads are very competitive with one another. Their franchise extends only as far as their tracks. As locating new customer facilities on the railroad can takes an average of seven years railroads have to fight hard for every new customer and extend their franchise carefully through partnerships with others. It is the only way we can work as a system of transportation.
LC
That’s a relative question. From coast to coast, and north to south, the answer is very competitive. But inside smaller markets and routes, not at all. Mergers in fact eliminated virtually all competition in geographical areas so that the choice is rail or truck. Using the Conrail scenerio for example: from seven railroads to one, first consolidate or abandon duplicated and competing lines, then sell off the shell to two other railroads. Even where shortlines were formed to facilitate terminal and localy swithcing, they still had to rely on CR for cars and movements in interchange. I am sure there are similar stories of UP and BNSF in the west, CP and CN in the midwest, and CSX and NS in the south ( and leading to today’s northeast railroad layout). Pan Am provides some in and out competiton in New England against CSX but has had to partner with NS to boost such traffic; still rarely is CSX and Pan Am in the same city or market. Most of today’s competition is for coast to coast and coast to midland and midland to coast intermodal traffic plus from some mineral (coal) pockets in the Apalachains and Powder River areas. Local competition in small towns and limited geographical areas, as I said, is either the railroad of the area or truck.
Wasn’t Conrail Shared Assets (or perhaps better said, the portions of Conrail that remain) – wasn’t it created specifically so that “strategic alliances” and trackage rights and whatnot could create favoritism for the dominant Class I into big competitive cities?
When you go to employee or hiring meetings management states that although other RRs compete with them in locating customers the biggest competition is also their best customer which is the trucks. It is said that trucking must always be considered whenever making any tactical decision.
Conrail Shared Assets is, in effect, a joint terminal subsidiary of NS and CSX. It was determined that it would be overly difficult to divide Conrail equitably in North Jersey, the Philadelphia area and the Detroit area so Conrail Shared Assets was established to provide access for both NS and CSX to the trackage and customers in those areas.
I believe Conrail Shared Assets Operations (CSAO) has a two fold purpose. As stated above, a joint terminal subsidiary of the two roads for customer access since the customers were a one road customer going out…or coming in…from various sources; this eliminated the arguement, and in effect long run competition at the break up of CR. But it also serves another purpose: that of being an entity to absorb terminal costs, taking those costs away from the immediate bottom line of both CSX and NS. If memory serves me correctly, at the inception of CR it was deemed that virtually any operation east of the Delaware River (i.e.: the state of New Jersey encompassing the metropolitan areas of NY and Philadelphia) was not profitable, that if operations could cease within 30-50 miles of the city there would be no problem.
Even though there may be “less” railroads in some geographic areas today than there once were, railroads are, in fact, far more competitive with each other than they ever were in the 20th century. People forget something. In the good old days when there were"more" railroads, there were also rate bureaus. In other words, all of the “competing” railroads in a region got together in a room and voted on their rates, just like OPEC votes on oil prices. It was all quite legal - in fact, when the Department of Justice started going after railroad rate bureaus in the 1940’s, Congress passed a law expressly legalizing them over President Truman’s veto (the Reed-Bulwinkle Act in 1948). The reason the rate bureau system was tolerated and encouraged was that, in the heyday of regulation, maintenance of “rate structures” was considered far more important than intra-railroad competition. Cartel ratemaking allowed reasonably stable regional and national rate structures to be maintained. Unbridled competition would have destroyed these rate structrues (as, in fact, they were destroyed when the rate bureaus were dismantled).
I used to work for for one of these organizations (the Western Railroad Traffic Association), so I’m very familiar with how they worked and how they stifled rail competition. They essentially held up rates to protect the least efficient railroad in any market and created a powerful cartel mentality among railroad pricing personnel. Calling this a competitive system is a little like calling the Soviet Union under Stalin a republic The 1980 Staggers Act killed the rate bureau system, although they staggered on (bad pun) in reduced form until about 1984. After that, they became tariff publishing houses with no price making functions. They were eventually all merged into a tariff publishing organization called Railroad Publication Services, which was dissolved around 1997.
conrail is still around and kicking. conrail has her own engines like GP15-1’s,38-2. after CR breakup conrail beacame conrailcorp.
You are correct, Falcon48, and your credentials certainly validify your answer. But in terms of today’s railroading, you rarely have more than one railroad in a market if not a whole county or half a state. The major railroads do compete from coast to coast, coast to mid America, and even border to border in some cases. But the majority of shippers are usually faced with an either rail or truck choice. Most shortlines are nothing more than former big road branches thus still offer only one line choice… Rates do play a major part of competition but today that rate comparison is not between or among railroads but between one railroad routing and various trucking companies.
Soooo, are the above reasons some people are talking about “reregulation”? I don’t really understand what “reregulation” means or what issues people take up when they advocate reregulation. - a.s.
You know, in a sense, the answer is “yes”. I believe it was Don Phillips who reported on that a couple of months back when talking about reregulation. He mentioned that at least one sponsor of deregulation in the first place is contemplating reregulation because he and others at the time went along with deregulation because the railroads assured them that it would increase competition. Since then the major First Class roads have dwindled to two in the East and two in the West while encompassing the same trackage. As been discusse here, Al, rates are the biggest issue of regulation and deregulation as shippers feel squeezed by monopolistic choices and price gouging when it comes to rail choices. That also addresses the issue of competition, or lack of, by the virtaually unregulated megamergers that have evolved. It kinda simplistic answer, but I think the gist is there.