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Re: Another Assault on the Common Carrier Status of Railroads
Author: mook
Date: 10-22-2014 - 22:09
All very good points. Staggers did not explicitly repeal common carriage for railroads, but it deregulated things to the point where for practical purposes it doesn't exist. That was intended at the time to help them compete with the newly-deregulated truckers, but of course that never happened. Essentially, the survivors in the industry decided not to compete with other modes significantly, and instead to reduce their capacity to effectively support the much smaller piece of the transportation market they envisioned as most profitable. Certainly, the profitability has happened.
Competition between railroads had always been weak under regulation, and Staggers did nothing (and was intended to do nothing) about that - though if railroads wanted to compete with each other they could do so more freely. Instead, what happened was application of the old economic Rule of 2 1/2: in a sufficiently unregulated market where outright monopoly is prohibited, there will be at the end 2 1/2 competitors, 2 of about the same size and all the others adding up to about 1/2 of one of the big ones. We're almost there.
At some point, BNSF and UP will merge with CSX and NS in some combination, resulting in 2 transcontinental monsters. CP, CN, and KSU would have to make deals for inclusion in the Big Two, or would go out of business, though the Canadians might last a tad longer if their government helps them; it might be interesting to see a CP or CN combination with KSU, though, which might be a survivor as part the the group making up 1/2 of a big one. The gaggle of regionals and short lines would make up more like 1/4 or less, and declining as some regionals die or get assimilated into the two Borg. If the Final Solution were proposed now, the Current Administration might make noises against it, but if Congress and Senate say do it they will (Big Business always wins). If it waits for the Next Administration (which I think has at least an even chance of being Republican) the chances would be even better. By then, we would need to either change the Staggers structure to something like utility regulation (unlikely) or give up on railroading as a significant factor in general transportation. Note that in recent years even public utilities have been largely deregulated (has your phone or power bill shrunk?), so it's possible that nobody would know how to set that up right any more.
The prospect of a Final Solution is probably why CSX recently brushed off merger advances from CP. CSX probably sees itself as part of bigger things (BNSF or UP) which would result in more money for stockholders (full disclosure: I have a few shares of CSX, mainly for the dividends which are much better than bank interest on a few hundred $$), but they have not discussed any reasons beyond what's in the press releases.
That's a pessimistic view of the situation, for sure. But with the current combination of do-nothing in general in Washington, and a Big Business orientation there if something does happen, it certainly seems more likely than not. If it happens, common carriage by rail is certainly dead. Absent a fundamental revision of the Staggers minimal-regulation structure, what could be done to change it?
Competition between railroads had always been weak under regulation, and Staggers did nothing (and was intended to do nothing) about that - though if railroads wanted to compete with each other they could do so more freely. Instead, what happened was application of the old economic Rule of 2 1/2: in a sufficiently unregulated market where outright monopoly is prohibited, there will be at the end 2 1/2 competitors, 2 of about the same size and all the others adding up to about 1/2 of one of the big ones. We're almost there.
At some point, BNSF and UP will merge with CSX and NS in some combination, resulting in 2 transcontinental monsters. CP, CN, and KSU would have to make deals for inclusion in the Big Two, or would go out of business, though the Canadians might last a tad longer if their government helps them; it might be interesting to see a CP or CN combination with KSU, though, which might be a survivor as part the the group making up 1/2 of a big one. The gaggle of regionals and short lines would make up more like 1/4 or less, and declining as some regionals die or get assimilated into the two Borg. If the Final Solution were proposed now, the Current Administration might make noises against it, but if Congress and Senate say do it they will (Big Business always wins). If it waits for the Next Administration (which I think has at least an even chance of being Republican) the chances would be even better. By then, we would need to either change the Staggers structure to something like utility regulation (unlikely) or give up on railroading as a significant factor in general transportation. Note that in recent years even public utilities have been largely deregulated (has your phone or power bill shrunk?), so it's possible that nobody would know how to set that up right any more.
The prospect of a Final Solution is probably why CSX recently brushed off merger advances from CP. CSX probably sees itself as part of bigger things (BNSF or UP) which would result in more money for stockholders (full disclosure: I have a few shares of CSX, mainly for the dividends which are much better than bank interest on a few hundred $$), but they have not discussed any reasons beyond what's in the press releases.
That's a pessimistic view of the situation, for sure. But with the current combination of do-nothing in general in Washington, and a Big Business orientation there if something does happen, it certainly seems more likely than not. If it happens, common carriage by rail is certainly dead. Absent a fundamental revision of the Staggers minimal-regulation structure, what could be done to change it?
