IP: Railroads and forsight I suggest you read BOTH notes-- the

[Dave Farber <farber () cis upenn edu>]

To: Dave Farber <farber () cis upenn edu>
Date: Mon, 18 Nov 1996 11:53:15 -0800
From: "John L. King" <king () wang-wei ICS UCI EDU>




Richard Solomon wrote:


> Eventually the RRs went bankrupt, to be reinvented 60 years later,
> but with a tiny share of freight, and no share of passenger traffic.


Not true on either count.  Rail now accounts for about 1/3 of freight
traffic by weight in the US, and it is growing.  A significant fraction
of small-parcel "2-day express" shippment goes at least part way by
rail.  Rail is the one sector of land freight movement that has shown 
dramatic productivity improvement over the past decade.  Passenger rail is
a marginal player in the long-haul intercity routes, but it is a 
significant player in the heavily-traveled intercity routes (e.g., 
Northeast Corridor) and in many intra-regional commuter networks.


Note as well that the railroad world played major roles in key 
developments in telecommunications. For example, developments in 
radio communications for rail transport were key in the development of
the concept of cellular radiotelephony.  Also, one of the first major 
breaks in the armor of the AT&T Bell System's monopolistic hold on 
long-distance communication, which arguably bootstrapped the telecom
deregulations of the 80's and 90's, occurred when a railroad won the
right in court (after being sued by the Bells) to run its own long-
distance interstate telephony network over its rail right-of-way.
This preceeded MCI's microwave end-run of the Bell System by a couple
of decades. 


John King, UCI


John King




Date: Mon, 18 Nov 1996 22:22:32 -0500
To: "John L. King" <king () wang-wei ICS UCI EDU>
From: rjs () rpcp mit edu (Richard J. Solomon)


I like railways, too. They comprise two chapters of historical perspective
in my forthcoming book on telecom re-regulation, "The Gordian Knot" (MIT
Press, 1996). However, the facts are simple: railroad corporations as a
whole ignored the technological changes and gave up the lion's share of the
value-added to freight forwarders, truckers and airlines. Peter Lyons' "To
Hell in a Day Coach" (Lippincott, 1969) did a good job documenting how
asinine they were about politics -- that was when the National Railroad
Passenger Corporation was being debated in Congress. A flock of recent
books takes the story up to date.


Weight doesn't count; very little coal is shipped on 747s. Even stack
trains don't count. The RRs came in so late, that they gave the bulk of the
profits over to the shipping industry. Matson Lines revolutionized the
American railroads, but mostly to the profit of its Japanese shipowners,
since the Japanese needed the land-bridge more than we did. Today, to quote
the CEO of CSX in his recent announcement to merge with Conrail, railroads
receive a small fraction of the freight value shipped in the U.S., despite
their recent growth trends and despite the shift to containerization,
especially over the Rockies. And that took 60-70 years to reverse. But
value-added is what counts in business, not bulk, and the value-added
doesn't go the people who own locomotives. The Santa Fe is the only
railroad controlling its own stack train freight forwarding, and they don't
have a very large share of the traffic. Who can we blame for this but
management excesses and blindness for decades?


Sad, but true.


As for passenger traffic, Amtrak's figures aren't even on the radar.
Cutting out 1/4 of their recent service doesn't exactly count as growth.
Another sad story, when you see TGVs, Bullets, ICE trains all making money,
and all based on pre-war U.S. technology taken to the extreme. Not that the
Europeans or Japanese manage their railroads any better, but the highspeed
services have reversed downward trends


> From my point of view, the railroads did themselves in, helped, of course,
by their competitors. The telephone companies will do the same, but this
time there won't be any rights of way, old steam locomotives on museum
trips, or stone arch bridges to remind us that Ma Bell once existed. No one
collects old Western Electric Central Office buildings, just W.E. wooden
crank telephones.


I don't see the relevance of the S.P. disinvestment in microwave towers to
form Sprint They surely didn't understand the telecom revolution. If
anything, the U.S. Air Force should be given the most credit for pushing
the Long Lines microwave growth in the late 1950s, for SAGE and follow-ons.
One hell of a giantic subsidy to AT&T.


Richard Solomon