Broadcasting Telecasting (Jan-Mar 1956)

Advertisement Greater reliance on competition in rates among the different types of carriers, subject always to essential safeguards of ICC regulation, would make for more efficient use of our transportation plant, and more economical service for all of us. This key recommendation in the report of a special Cabinet-level Advisory Committee named by the President is here discussed by Mr. Faricy. THE RIGHT TO COMPETE Cornerstone of Modern Transportation Regulation by WILLIAM T. FARICY President, Association of American Railroads Three outstanding facts about transportation in the United States today are: 1. that "within the short span of one generation this country has witnessed a transportation revolution"; 2. that "during this same period, government has failed to keep pace with this change"; and 3. that "in many respects, government policy at present prevents, or severely limits, the realization of the most economical use of our transportation plant." These statements are not mine. They are from a report made by a special committee of Cabinet officers and other high ranking government officials established by President Eisenhower in July, 1954. The report, made public by the White House in April, 1955, was unanimous, being concurred in by all seven of the Cabinet-level officers who composed the Committee.1 The key recommendation of the Cabinet Committee is that in today's competitive transportation world, where the user has his choice of many means of carriage, greater reliance should be placed on competition in pricing as among the various modes of transport. This is what the Committee regards as the "cornerstone" of a modern system of regulation designed to bring about a more effective use of our transportation resources. Regulation, Yes, But Not Allocation As matters now stand, one of the principal tests applied by the Interstate Commerce Commission in its control over rate competition among the different types of carriers is the concept that the government's power to regulate rates should be used to see that each form of transportation gets what the Commission deems to be its "fair share" of the available traffic. Thus, when the railroads proposed to reduce rates upon tank-car movements of 1 Revision of Federal Transportation Policy: A Report to the President, April, 1955. U. S. Government Printing Office, Washington, pp. iv. 20. Members of the Committee are Sinclair Weeks, Secretary of Commerce, Chairman; Charles E. Wilson, Secretary of Defense; and Arthur S. Flemming, Director, Office of Defense Mobilization, and, as Ad Hoc Participating Members, George M. Humphrey, Secretary of the Treasury; Arthur E. Summerfield, Postmaster General; Ezra Taft Benson, Secretary of Agriculture; and Rowland E. Hughes, Director, Bureau of the Budget. The report and recommendations of the Committee are unanimous. petroleum products in California and Oregon as a means of regaining some of the traffic which had been lost to barges and trucks, the Interstate Commerce Commission found that the proposed rates, while yielding revenues which would "contribute substantially to the overhead burden and profits," should nevertheless be rejected because they were lower than the cost to the shipper of using the competing barge-truck routes and thus "lower than is necessary fairly to meet the competition." Moreover, from the Oregon points, the ICC ordered the rates cancelled because they would "affect adversely the maintenance of competitive motor-carrier transportation."2 For like reasons, the Commission has refused to allow railroads to make competitive reductions which they have proposed in rates on sugar from ocean ports to Cincinnati and Louisville, on tinplate from Alabama to New Orleans, on petroleum products from Whiting, Indiana, to Illinois points, on coffee from Los Angeles and San Francisco Bay points to Northern Utah and Idaho, on magazines from Philadelphia and Darby, Pennsylvania, to Texas, on sulphur from Texas to Wisconsin, on scrap rail from Gulf ports to Chicago and on aluminum articles from Texas to Illinois and Iowa — to name a few other instances. Such a policy of attempting to allocate business among the different types of carriers requires, in effect, that one form of transportation hold an "umbrella" over the rates and traffic of its competitors by another form of carriage. But if one form of transportation, because of its inherent nature, is able to move a given commodity between given points at a lower rate than competing forms, to do so at a profit, and to do so without discriminating against other shippers, then why should not the low-cost carrier have the business and why should not the public have the saving? That, in essence, is what the Cabinet Committee's report proposes — namely, that the law should make it clear that through its power of rate regulation neither the Interstate Commerce Commission, nor any other governmental body, should undertake to allocate and divide business among the different types of carriers. The position of the Cabinet Committee is that "the market" — competitive pricing along with competitive service — can do this job better than it can be done by any sort of government allocation. •284 ICC, pp. 287, 296, 304, 306. Essential Rate-Making Standards Maintained In taking this position, the Presidential Committee did not recommend, and no one contemplates, doing away with the power of the Interstate Commerce Commission to regulate rates. Rates would still have to be published in tariffs filed by the carriers with the Interstate Commerce Commission, as they now are, and still would have to be adhered to as published. Rates still would not go into effect ordinarily until 30 days after filing, and there still would be opportunity for shippers or other carriers to protest or for the Commission to act on its own motion. The Commission would still have responsibility and power to see that rates are neither unreasonably high nor unreasonably low — a principal test being that they shall be compensatory to the carrier proposing them — and that they do not unjustly prefer or discriminate against any person, any community, or any region. But within these limitations, the recommendations of the Presidential Committee contemplate that competitive pricing, as well as competition in service, should prevail. Such a result could be accomplished by a simple change in the statutory standards to be applied in determining whether a proposed rate is lower than a reasonable minimum, without affecting the other standards presently applied by the Interstate Commerce Commission. The essential standards would continue as they now are except that in determining whether a proposed rate would be less than a reasonable minimum the Commission shall not consider its effect upon the traffic of any other mode of transportation, nor its relation to the charges of any other mode, nor whether it is lower than necessary to meet the competition of any other mode of transportation. Such a proviso would make it perfectly clear that the Interstate Commerce Commission is not expected to undertake an artificial and arbitrary apportionment or distribution of traffic among the several forms of transport. With traffic distributed in accordance with the natural capabilities and advantages of each kind of carrier, a better balanced development of our national transportation plant would follow. In such a development, each mode of surface transport — rail, highway and water — would take its proper place and part, performing those services which it can do better and more economically than the other modes, with both rates and serv Page 13 • March 5, 1956 Broadcasting • Telecasting