[00:00.91]2003 Text3
[00:04.44]In recent years, railroads have been combining
[00:07.46]with each other, merging into supersystems,
[00:10.59]causing heightened concerns about monopoly.
[00:14.53]As recently as 1995, the top four railroads accounted
[00:19.38]for under 70 percent of the total ton-miles moved by rails.
[00:25.22]Next year, after a series of mergers is completed,
[00:29.16]just four railroads will control well
[00:31.57]over 90 percent of all the freight moved
[00:34.72]by major rail carriers.
[00:37.65]Supporters of the new supersystems argue
[00:40.48]that these mergers will allow
[00:41.78]for substantial cost reductions
[00:44.57]and better coordinated service.
[00:47.09]Any threat of monopoly, they argue,
[00:49.20]is removed by fierce competition from trucks.
[00:53.36]But many shippers complain that
[00:55.16]for heavy bulk commodities traveling long distances,
[00:59.09]such as coal, chemicals, and grain,
[01:03.42]trucking is too costly and the railroads
[01:06.45]therefore have them by the throat.
[01:09.88]The vast consolidation within the rail industry
[01:13.51]means that most shippers are served
[01:15.64]by only one rail company.
[01:18.15]Railroads typically charge such
[01:20.14]"captive" shippers 20 to 30 percent more than they do
[01:25.08]when another railroad is competing for the business.
[01:29.11]Shippers who feel they are being overcharged
[01:32.13]have the right to appeal to the federal
[01:34.55]government's Surface Transportation Board for rate relief,
[01:38.78]but the process is expensive, time consuming,
[01:42.62]and will work only in truly extreme cases.
[01:47.14]Railroads justify rate discrimination
[01:49.86]against captive shippers on the grounds
[01:52.28]that in the long run it reduces everyone's cost.
[01:56.06]If railroads charged all customers the same average rate,
[02:00.49]they argue, shippers who have the option of switching
[02:04.12]to trucks or other forms of transportation would do so,
[02:08.06]leaving remaining customers to shoulder the cost
[02:10.79]of keeping up the line.
[02:13.41]It's theory to which many economists subscribe,
[02:16.85]but in practice it often leaves railroads
[02:19.22]in the position of determining
[02:21.03]which companies will flourish and which will fail.
[02:25.26]"Do we really want railroads to be the arbiters
[02:27.78]of who wins and who loses in the marketplace?"
[02:31.27]asks Martin Bercovici, a Washington lawyer
[02:34.70]who frequently represents shippers.
[02:38.03]Many captive shippers also worry
[02:40.35]they will soon be his with a round of huge rate increases.
[02:44.79]The railroad industry as a whole,
[02:47.11]despite its brightening fortuning fortunes,
[02:49.33]still does not earn enough to cover the cost
[02:51.82]of the capital it must invest to keep up
[02:54.44]with its surging traffic.
[02:57.46]Yet railroads continue to borrow billions
[03:00.19]to acquire one another, with Wall Street cheering them on.
[03:04.42]Consider the $ 10.2 billion bid by Norfolk Southern
[03:09.36]and CSX to acquire Conrail this year.
[03:13.70]Conrail's net railway operating income in 1996
[03:18.74]was just $427 million, less than
[03:22.87]half of the carrying costs of the transaction.
[03:26.60]Who's going to pay for the rest of the bill?
[03:29.31]Many captive shippers fear that they will,
[03:32.75]as Norfolk Southern and CSX increase
[03:35.74]their grip on the market.
