I know, I know, but before you roll your eyes and shout “not this debate again”,consider a few things.
Futuremodal’s take on this has always been that the (existing) railroad infrastructure should be seperated from the (existing) railroad operations. I have disagreed (a lot [;)]), because ,to me, it seems like almost punishing someone for being successful. DM&E might be a different kind of animal.
DM&E is dependant on federal guarantees of loans, in order to actually make this thing happen. I don’t see them having too many reservations about working with government people that they are beholding to.
After spending $2.5 billion on the infrastructure, they might welcome having some other company’s willingness to invest in locomotives, cars and personel.
We might be surprised who might be interested now, or in the future,to run trains over DM&E’s line. Conceivably, NS and CSX could operate one-railroad unit trains from the PRB to eastern power plants, couldn’t they? With all the talk about capacity issues, is it to far-fetched to see the day when BNSF or UP could be routing trains over DM&E lines?
**Please keep in mind that I’m not advocating this, per se, or trying to raise a ruckus. I have no set opinion, one way or the other on open access. I’m just curious as to what others might think about this. (So…there’s no need to call names…if you know what I mean[;)])
Actually that could be a good experiment to see if the open access thing will work. i personaly don’t think it will work, but then again why not give it a shot on a small scale and see how it does.
I’m sure the UP will give the DME a loan, or two [;)]. Then, they’ll buy some stock, buy some more stock [:-,] until one day the name of the railroad is UP.
Open access? How does CSX or NS plan on getting to/from Chicago to the DME? Oh, let me guess… the ICE, right? Right. Good ole Uncle Pete is just going to hand over a good chunk of business ($$$) to CSX and NS. Instead of UP moving coal from the PRB to Chicago, or other eastern connetions, the UP is going to be all for open access and allow the two big eastern railroads to move their own coal from the PRB??? Yeah, that sounds just like the UP. NOT!!! Open access to the UP is more like we buy you because you have a route that we need. I don’t think that the UP minds the DME (at least for now) because they’re a small regional railroad and the benifits of having the DME move a few coal trains out of the PRB might actually help the UP ease a little congestion in other areas.
Never say never but buyer beware. All of the operational and economic models for open access are based on goverment monopolies, in this case, railroads being owned and operated by a national government. All of these models come from the EU. This is comparing apples to oranges when it comes to the U.S. Britian has had freight traffic increase but track maintenance has suffered. As the EU grows in unification the cross channel rail connection to the continent now has other countries mulling this over. Russia is very cool to the idea of vertical seperation of track and trains for the following reasons:
The train is constantly physically connected to the track
The track is a one-dimensional, limited, dedicated resource
As railway control technology becomes more sophisticated, train/track controls become more integrated
Best practice railway operations depend upon deployment of this advanced integrated train/track control and safety technology - separate train/track ownership makes it very difficult to develop and implement this technology
How many proprietary integrated train controls systems are there in development now? Will they be become standardized? What is the incentive to convert for private operators outside of a short term capital infusion which must be weighed against standardization of systems? How many new markets represent how much more potential profit versus undercutting ones own traffic by having a franchise share your tracks?
DM&E is not a good candidate because it is spectulative in nature and is not built yet.
There is no real incentive for this to be taken seriously in the short term in my opinion because a reinvention of the wheel is unnecessary when traffic is booming. However a wild card might be a variant of open access as congestion is expected to increase perhaps as much as threefold in the next three years-so rerouting of trains on a run through franchise might be a possibility versus being granted a higher premium detour under current
Assuming that the Powder River extension is built (a very big assumption), “open” access by way of negotiated trackage rights sounds reasonable if DM&E is open to allowing overhead rights on IC&E to allow access to the Powder River Basin by Eastern carriers. The down side of such an arrangement would be that DM&E might be short-hauling itself out of a lot of coal revenue.
So does this mean that since I bought my home using one of those Federally gauranteed programs that if any of you come visit central Iowa, I have to let you stay (at reasonable rates of course) overnight?
(If so, you better like cats, cause one or two will probably be sleeping with you. They think the house is theirs.)
I guess my point there, was that on past discussions about OA, it was pointed out that some thought railroads would not be open to working with the governmental agencies. In this context, it would probably be safe to say that the railroad (DM&E) would be more willingto work with the government agencies, than a railroad that was forced into open accesss.
. Using your analogy, you wouldn’t have to let me stay there,(at a reasonable fee of course),but you just might be more willing to do so than some others on the block.[:)].
I wouldn’t expect to get much sleep,as we’d bring our 3 cats along-just for the fun of it.[:-,]
Now, Murphy, why would you go and ask a loaded question like that?[:D]
That being said, the answer is “no” for this reason: DM&E has to operate in a closed access environment. Yeah, they could (and may very well) rent access to CSX and NS, and make more money doing that than running their own coal trains to a CSX and NS connection. But they also have to “play ball” with the other railroads including BNSF and UP for other interchange traffic, and if they went OA you can bet BNSF and UP would put the screws to them on that interchange traffic, since both corporate entities have a vitrolic reaction to any mention of OA. Remember, DM&E is still totally dependent on either BNSF or UP for their westbound grain trains.
Now, if the DM&E project extended well beyond the PRB to the West Coast, I believe they’d be more willling to consider the revenue prospects of renting their line to others rather than running all their own trains. With a west coast extension (aka a revived PCE) they now are no longer dependent on BNSF and UP for forwarding that Pacific Rim traffic.
Of course, the other OA factor rests with the feds. If the feds make this loan contingent on an OA option, then DM&E (and any other railroad dependent on federal aid) will grudgingly accept the OA caveat. Free money can change attitudes!
Interesting. I always kind of felt BNSF and UP had sort of a vitrolic reaction to any mention of DM&E also.[:)]
I’m not quite sure I see the line between “open access” and “rented access”. Don’t you forsee UP or BNSF as being a potetial renter at some future point?
You have to understand the railroad mentality. OA is indoctrinated as a threat to the current healthy state of Class I railroading. Anything that might prove otherwise ruins their credibility on the issue.
Of course, open access is a threat to the financial well-being of railroads. The rates they could charge would diminish but it wouldn’t have too much effect on costs, both fixed and variable.
Look at domestic air transportation, you have theoretical open access which is making it almost impossible to charge a profitable fare as airlines race to the bottom to try to maintain market share.
CSSHEGEWISCH: Your airline example is a fair analogy, based on “oversupply” of air transportation capacity, I think. Would the tables be turned in a railroad envireronment with capacity constraints? If there was a fair demand for DM&E’s extra capacity, couldn’t that drive up the price? Sort of like gasoline?[xx(]
Pricing to maintain market share is a standard market strategy in an open market system. There are rationales for doing it, but it is almost always a short term strategy, not always a good strategy, and can be in some instances, an indicator of strategic failure.
GM, for instance, has been market share pricing on and off, mostly on, ever since 1978 after a whole series of marketing and production blunders, Chevy engines in Cadillacs, diesel engines that fell apart, highly automated robot plants that could only produce one model of car, interchangeable parts between its model lines to the extent that model lines became indistinguishable, and on and on.
High investment, followed by extremely poor execution, required market share pricing to sell inventory (and still does at GM) in order to not lose even more than they already were (and are). When Chrysler finally abandoned its market share pricing strategy (a strategy thought to be necessary in response to GM’s), and decided it might as well try selling exciting, well-engineered cars, it not only increased its market share, it turned around and by 1996 became the most profitable car company in the world, humiliating both mighty GM and Toyota. It did so only by abandoning market share pricing as it’s key strategy.
And increased its market share when it finally did.
Economists have a “deregulated industry” model. Airlines and railroads have pretty much followed the standard model, and the model is not filled with a lot of positive outcomes.
All of this is a red herring. Open access, as I hear it defined, means anyone can run trains anywhere like cars on highways or planes in the air. I dont think so. Not unless you have a nationalized rail system. Even then, these trackage rights are leases, sometimes franchises in the EU and the public via the government owns the rails. A quite different circumstance here and a big distinction.Nationalizing railroads aint gonna happen. A twist of of the plot I like-is that DME ceases to be an operating company because thats what we are talking about. They charge a fee. Will their fee be cheaper than the big guys using their own infrastructure? Can they make enough money to maintain their asset and make a return to pay off a hefty loan? Speculation on a highly speculative venture with regulatory issues looming like a storm cloud on the horizon. Dont hold your breath. Or as Yogi Berra said: Its not over till its over.heres another question: Can you make enough profit by being the landlord rather than owning your own house? Or for that matter, being a tenant?
