Broadcasting Telecasting (Jan-Mar 1956)

Adv ertisement ice always taken into consideration. And the public, the users of transportation, would get the benefit. This sound idea, so thoroughly in accord with the customs, the traditions and the thinking of the American people, has been met with bitter objection from spokesmen for some of the trucks — principally the heavy highway freight haulers — and some of the inland waterway barge carriers. They have objected to the composition and the procedures of the Cabinet Committee and the working group, or staff, by whom it was assisted. Attempts have been made to create an impression that the working group gave consideration to the views of the railroad industry alone, but the fact is that other groups also submitted their views and that representatives of the trucking industry submitted written recommendations and also discussed them with the chairman of the group. The insinuation that the seven high government officials who concurred in its unanimous recommendations, and also the group of highly qualified and disinterested private citizens who did the preliminary staff work, listened only to railroad representations is simply not true. The "Monopoly" Bugaboo According to assertions of trucking spokesmen, this recommendation for greater freedom of competition between different modes of transportation would turn transportation back to a state of "cut-throat competition" said to have existed before 1887, when the original Act to Regulate Commerce was passed. There isn't a chance of a return to the conditions of 1887, either in the physical facts of transportation or the legal terms under which the business is conducted. In 1887, the only effective competition was that among railroads. Since then, billions of dollars have been spent on building and improving waterways, and the waterways are here and will remain. Many more billions have been spent on improved highways, and the highways are here and will remain. These waterways and highways are used by tens of thousands of common and contract carriers by water and by motor vehicle. They are also open to the use of anyone who wishes to move his own goods in his own vehicle and vast tonnages are so moved. Indeed, nearly two-thirds of all intercity freight traffic on the highways and more than nine-tenths of inland waterway traffic is either of this character or is otherwise exempt from interstate regulation as to rates. The mere physical facts as to the extent of transportation facilities in this country, and the variety of their ownership and use, make any chance of general monopoly in transportation too remote to deserve consideration. From the standpoint of the laws, there has been an equally striking change. Prior to 1887 rates could be made in secret. Now rates are required to be published, with due public notice, and must be adhered to as published. Prior to 1887, there was no statutory prohibition against discriminations or preferences in rates. Now, rates of regulated carriers cannot discriminate against one shipper, or commodity, or community, or region, and cannot prefer another. There is no recommendation in the Cabinet Committee's report which would depart from these requirements. Adoption of the Committee's report would not authorize the making of secret rates. It would not do away with the requirements of public notice and of adherence to the published rate. It would not permit the making of rates which are either discriminatory or preferential. And the Interstate Commerce Commission would have power to enforce these principles, as well as to prohibit rates which are either unreasonably low or unreasonably high. No, with competition what it is and the laws what they are — and what they will remain if greater freedom of competition in pricing as among the different modes of transportation is adopted — there is no possibility that a transportation monopoly could be created or sustained. No Below-Cost Rates But motor and water carriers assert that to permit greater freedom in the making of competitive rates would enable the railroads to destroy highway and waterway competition. It must always be remembered, however, that under the Cabinet Committee's recommendation, as well as under present law, railroads could not make below-cost rates. If it be true, as claimed by spokesmen for trucks and barges, that they could not continue to exist in the face of competitive rates which are compensatory and nondiscriminatory, then it would follow that trucks and barges often would have no proper place in the transportation system and would exist only because the railroads are restrained from meeting their competition. Such an assertion is, of course, absurd. In transporting many kinds of freight, trucks and barges have advantages in service or cost or both. The report contemplates that trucks and barges should have complete opportunity to give full force and effect to their competitive advantages whenever they exist — the same opportunity, in fact, as is proposed for the railroads. Another assertion of opponents of the recommendation, equally baseless, is that greater freedom in competitive rate-making would burden shippers of so-called noncompetitive or "railbound" traffic. The assertion has repeatedly been made that if rail rates on competitive traffic are reduced it would be necessary for non-competitive traffic to pay higher rates to offset the revenue losses. Rates x Volume = Revenue Such assertions rest on a completely erroneous premise, namely, that lower competitive rail rates would reduce rail revenues. Railroad revenues are the product of two factors, rates and volume. The only motive or purpose the railroads would have in publishing reduced competitive rates would be to attract enough increased volume to more than offset the reduction in rates, and thus to produce greater net revenue. Such competitive rates, it should be borne in mind, would be required to be compensatory as well as non-discriminatory so that instead of hurting non-competitive traffic, they would benefit it by reducing the share of the necessary fixed overhead expense the non-competitive traffic is called upon to bear. What the shippers of non-competitive traffic have real reason to fear is that competitive traffic will continue to be drained from the railroads, thus increasing the burden of overhead and fixed expense which will have to be borne by the traffic remaining on the rails. How this works in practice was well stated by the Interstate Commerce Commission as follows: "It is a well-established and generally recognized rule that if additional business can be taken on at rates which will contribute at least a little in addition to the actual outof-pocket expense, the carrier will be advantaged to that extent and all its patrons will be benefited, to the extent to which such traffic contributes to the net revenue." The Competitive Principle The competitive spirit has been the driving force of progress in America; the competitive principle is the very foundation of our national economy. That greater reliance should be placed on this principle in the determination of rates as among the several kinds of carriers — always subject to the continuing limitations of essential ICC regulation outlined above — is the heart of the Cabinet Committee's recommendations. While spokesmen for trucking and barge interests object to the principle, it has received the endorsement of such major organizations of users of transportation as the American Farm Bureau Federation, the National Grange, the Chamber of Commerce of the United States, and the National Industrial Traffic League, which is the major nation-wide organization of men who, as shippers, deal daily with the practical problems of rate making and regulation. What this experienced body of transportation experts, who use the services of every kind of carrier and are concerned only with maximum transportation efficiency, has to say on the subject is particularly in point. On November 23, 1955, the League approved amendment of Section 15a(2) of the Interstate Commerce Act by adding the following proviso to the considerations to be taken into account by the Interstate Commerce Commission in "the exercise of its power to prescribe just and reasonable rates": "Provided, however, that in determining a minimum rate the commission shall not consider the effect of such rate on the traffic of any other mode of transportation, the relation of such rate to the rate of any other mode of transportation, or whether such rate is lower than necessary to meet the competition of any other mode of transportation." Without going into any of the technical details involved, President Eisenhower, in his message on the state of the Union submitted to the Congress on January 5, 1956, had this to say: "In my message last year, I referred to the appointment of an advisory committee to appraise and report to me on the deficiencies as well as the effectiveness of existing Federal transportation policies. I have commended the fundamental purposes and objectives of the committee's report. I earnestly recommend that the Congress give prompt attention to the committee's proposals." Fundamental among these proposals is that to allow greater freedom in pricing among the different types of transportation. Under such conditions, with each user of transportation free to choose the type of carriage which best meets his needs for any particular task, the transportation needs of the nation as a whole would be met with maximum efficiency and at minimum cost — and the producer, the shipper, the consuming public and the national defense all would benefit. We shall be glad to send additional copies of "The Right to Compete: Cornerstone of Modern Transportation Regulation" to those who request them. Address: Association of American Railroads, 803 Transportation Building, Washington 6, D. C. Broadcasting • Telecasting March 5, 1956 • Page 19