[HN Gopher] Big Tech is America's new railroad problem (2019)
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Big Tech is America's new railroad problem (2019)
Author : briandear
Score : 81 points
Date : 2021-01-16 14:56 UTC (8 hours ago)
(HTM) web link (www.ft.com)
(TXT) w3m dump (www.ft.com)
| Maledictus wrote:
| https://archive.is/791BY
| ur-whale wrote:
| https://archive.is/791BY
| sitkack wrote:
| Lol, this ironic because lots of Google owned backbone fiber is
| along rail routes purchased by google early on.
| peter303 wrote:
| Congress gave rail companies immense wealth of half the land in
| an adjacent ten mile swath as an incentive to build in remote
| hinterlands. Some companies leveraged this better than others.
| The modern analogy was to lightly regulate what was attached to
| the internet, so companies could construct vast virtual
| properties.
| bergstromm466 wrote:
| Many think that Silicon Valley tech corps are super special and
| mythological, yet they're just protocols dressed up with a fancy
| user experience.
| [deleted]
| dantheman wrote:
| If we are really concerned about 'monopolies', the easiest way to
| address that is to remove them is to just stop granting through
| software patents.
|
| Considering that the 'new monopolies' are websites that have very
| low switching costs, it's hard to see how the consumer is harmed.
| It's more that the media and politicians don't like the
| competition for power.
| Natsu wrote:
| Re: switching costs, the top story on HN points out right now
| that things aren't always that simple:
|
| https://gomox.medium.com/google-safe-browsing-can-kill-your-...
| ggreer wrote:
| I seriously doubt the story that government stepped in to stop
| railroads from colluding on prices. In _Railroads and Regulation:
| 1877-1916_ , Gabriel Kolko shows that before government
| regulation, more railroad companies were being founded over time,
| that freight costs were decreasing, and that government
| intervention happened because the largest railroads encouraged
| it. Once the Interstate Commerce Commission was granted authority
| (through the Elkins Act), one of its first actions was to
| prohibit railroads from offering rebates and other price
| discounts. This increased railroad revenue by approximately 10%.
|
| It's a similar story for airlines with the Civil Aeronautics
| Board. The CAB was given the power to regulate airline fares,
| routes, and to control whether a new airline was allowed to enter
| the market. From the CAB's founding in 1938 until airline
| deregulation in 1978, no new trunk airlines were founded. After
| deregulation, fares plummeted, new airlines flourished, and many
| incumbent airlines went out of business (either through
| bankruptcy or acquisition).
|
| To quote David Friedman: "If you do not believe that the
| Interstate Commerce Commission and the Civil Aeronautics Board
| are on the side of the industries they regulate, figure out why
| they set minimum as well as maximum fares."
| LatteLazy wrote:
| Minimum fees are often set because a well funded (large) player
| can operate a route at a loss, drive less well funded players
| bankrupt and then put the prices way up after they're the only
| provider left.
|
| It's called predatory pricing.
|
| https://en.wikipedia.org/wiki/Predatory_pricing
|
| I can't tell you whether the CAB or the ICC actually improved
| things or not and whether regulatory capture is possible/likely
| for Big Tech.
|
| I'm just saying minimum prices exist for a reason and don't
| necessarily hurt consumers in the long term.
| Aloha wrote:
| They did, the rebating prohibition was mostly to stop a carrier
| from offering favorable shipping rates to one shipper while
| charging higher rates to another. The ICC methodology was
| helpful in stopping the roads from abusing _shippers_ , however
| the ICC regulated the Railroads as if they were the only kind
| of transportation available, so when the rail industry wanted
| to lower rates, or reduce service once trucking appeared, they
| were denied the ability to respond to market conditions.
|
| The ICC was also known for its turgid yet protracted decision
| making process - the Union Pacific, Rock Island Merger case is
| a great example, the decision making process took so long that
| the RI basically was bankrupt by the time it was approved, at
| which point the UP no longer wanted a bankrupt (and 20 years
| maintenance deferred) road.
|
| In addition to that one of the prime forces that led to the
| NYC/PRR merger, and later bankruptcy, was that because of the
| ICC price setting mechanism, and other changes to the trackside
| industries that they served, they were effectively regulated
| into bankruptcy (there are other contributing factors too, like
| usurious property tax rates in their operating areas, and
| inflexible outdated work rules, for example, that required
| three man crews on diesel locomotives).
|
| I don't mean to say that regulation is bad, but one should be
| careful how that regulation is crafted, and the regulation must
| be updated from time to time - the underlying methodology must
| be regularly renewed to ensure they are not girdling the
| businesses being regulated.
|
| That said, the regulatory model used by the ICC and CAB
| (Trains/Trucks/Busses and Airplanes Respectively) was
| beneficial early on, but failed to adapt to changing market
| conditions. Quite Arguably the Staggers Act (Railroad), the
| Motor Carrier Act of 1980 (Trucks and Busses) Airline
| Deregulation Act of 1978 (Airlines), left their regulated
| industries healthier and more competitive than before, and
| adjusted for inflation, rates for all of these industries are
| lower now than they ever had been, and all three are
| (generally) more profitable, while still providing lots of high
| paying decent jobs for folks.
| xg15 wrote:
| There are legitimate reasons to set minimum prices: It can
| prevent price dumping, where a company with deep pockets
| starves out competition and the hikes the prices once
| competition is gone (or otherwise abuses its now dominant
| status).
|
| Rebates can also be used to covertly raise prices: Just declare
| your current price a rebate, then at some point "return" to the
| regular price which is now higher. Also great for
| discriminating against certain groups or forcing a certain
| behavior: Just tailor the rebate to everyone _except_ the group
| you 're targeting.
| ggreer wrote:
| Sure those are possibilities, but how likely are they in the
| cases I described? If they were true, we'd expect the
| opposite trends before regulation: increasing freight prices,
| fewer railroad companies, less competition on routes. But
| that wasn't the case.
|
| It seems much more likely to me that this was more regulatory
| capture than benevolent governance. After all, if we assume
| the railroads wanted to make as much money as possible, why
| would they welcome a regulatory body? They must have thought
| that the regulations would help their business.
| pydry wrote:
| IIRC the railroads would pretty regularly engage in
| predatory pricing. It was a primary tactic in killing off
| or weakening competitors.
|
| A bit like Amazon did to diapers.com.
| mschuster91 wrote:
| > If they were true, we'd expect the opposite trends before
| regulation: increasing freight prices, fewer railroad
| companies, less competition on routes.
|
| Actually, pre-Coronavirus we _regularly_ saw such effects
| with Uber and "surge pricing". As soon as an entity has
| managed dominance in a market and squeezed out competition
| via VC-subsidized dumping, it _will_ raise prices and the
| customer service will degrade.
|
| For what it's worth this is even valid for entirely
| "virtual" market spaces. Google, Facebook, Twitter, PayPal
| and Amazon have no meaningful competition, they've managed
| to achieve sort-of dominance in their markets, and their
| customer service is atrocious at best. Amazon is
| interestingly a bit different because the ones that are
| getting the crap end of the stick are the third-party
| vendors who have to fight with co-mingling, AmazonBasics
| and fraud claims, while the end customers have a pretty
| decent offering.
| laddng wrote:
| Does anyone have any insights into how the railroad industry
| fared after it was broken up? I'm curious what the impact of the
| overall industry was as a result of the Sherman Act.
|
| Do we think that had the railroad industry remained monopolized
| that the US today would have more high speed railways or more
| advanced rail services?
|
| The author seems to draw a comparison between railroads and Big
| Tech, and I wonder if we can make the same guesses about what the
| outcome of the tech industry will be after more antitrust
| regulation?
| godzillabrennus wrote:
| I've read that the energy industry grew after standard oil was
| broken up and the standard oil shareholders did better as they
| owned parts of all the new companies.
| lotsofpulp wrote:
| How could that be validated? More energy was going to be used
| no matter what due to increasing population and technological
| advances leading to increased uses of motors, etc and the
| whole industrial revolution.
| tarboreus wrote:
| There was a lot of activity after they were broken up. Not
| conclusive, but in the short term it led to a lot of
| economic activity. My guess is that monopolies lead to
| stagnation in the medium to long term.
| Aloha wrote:
| The Rail Industry was never broken up, it instead was regulated
| by the Interstate Commerce Commission (ICC).
|
| The ICC regulated all manner of their businesses:
|
| Pricing - Maximum Rates, Minimum Rates, and rates per
| commodity/freight type.
|
| Quality of Service - Adding New Service, Modifying, Reducing,
| or Abandoning Existing Service.
|
| Safety - hours of service rules, equipment and inspection
| standards.
|
| Mergers - All Mergers, Divestments, etc needed ICC approval.
|
| The issue is the ICC regulated the Railroads as if they were
| the only kind of transportation available, so when the rail
| industry wanted to lower rates, or reduce service once trucking
| appeared, they were denied the ability to respond to market
| conditions, The ICC was also known for its turgid yet
| protracted decision making process - the Union Pacific, Rock
| Island Merger case is a great example, the decision making
| process took so long that the RI basically was bankrupt by the
| time it was approved, at which point the UP no longer wanted a
| bankrupt road.
|
| In addition to that one of the prime forces that led to the
| NYC/PRR merger, and later bankruptcy, was that because of the
| ICC price setting mechanism, and other changes to the trackside
| industries that they served, they were effectively regulated
| into bankruptcy (there are other contributing factors too, like
| usurious property tax rates in their operating areas, and
| inflexible outdated work rules, that required three man crews
| on diesel locomotives).
|
| I don't mean to say that regulation is bad, but one should be
| careful how that regulation is crafted, and the regulation must
| be updated from time to time - the underlying methodology must
| be regularly renewed to ensure they are not girdling the
| businesses being regulated.
|
| That said, the regulatory model used by the ICC and CAB
| (Trains/Trucks/Busses and Airplanes Respectively) was
| beneficial early on, but failed to adapt to changing market
| conditions. Quite Arguably the Staggers Act (Railroad), the
| Motor Carrier Act of 1980 (Trucks and Busses) Airline
| Deregulation Act of 1978 (Airlines), left their regulated
| industries healthier and more competitive than before, and
| adjusted for inflation, rates for all of these industries are
| lower now than they ever had been, and all three are
| (generally) more profitable, while still providing lots of high
| paying decent jobs for folks.
| laddng wrote:
| Thanks for this answer - this is what I was looking for. I
| think you make a great point that the regulator needs to
| constantly adapt to the changing market, and this may be the
| case with Big Tech if it becomes more heavily regulated it
| seems. Otherwise companies may become regulated into
| bankruptcy maybe because the regular cannot keep up with the
| pace of change in the industry.
| bobthepanda wrote:
| Railroads did well into the '30s, and really declined by the
| '50s and '60s. This kind of decline happened everywhere in the
| world, except maybe Japan. But the introduction of HSR in Japan
| was done by government railways and actually bankrupted them,
| forcing them to split the debts into a "bad bank" and privatize
| JR Group.
|
| Railways were going to decline because we spent a half trillion
| dollars building a competing highway system, which had several
| distinct advantages:
|
| - by and large highway travel in the US is not charged a toll,
| which makes the per-mile marginal cost much easier to deal with
|
| - highways are not charged property tax and railways are. Many
| a railroad during the decline ripped out tracks and
| electrification to reduce the value of their property and to
| goose up their balance sheet before potential mergers.
|
| - in addition to not paying tolls, the amount of subsidy for
| highways from the general funds is much higher; compare that to
| Amtrak, which is so poorly funded a lot of its trains don't run
| more than once a day.
|
| - minimum parking regulations are pretty much everywhere in the
| United States, and the requirements are generally much higher
| than what's needed, so last-mile is not a problem for cars; you
| have to arrange a journey to and from the train station
|
| The main difference between here and countries that survived a
| railway decline is the absolute lack of interest from the
| government in keeping it alive. Amtrak was founded by Nixon
| with the intention of letting it die.
| bergstromm466 wrote:
| > Railroads did well into the '30s, and really declined by
| the '50s and '60s. This kind of decline happened everywhere
| in the world, except maybe Japan.
|
| Genuine question: have you recently taken a train in Denmark,
| Sweden, the Netherlands, Germany or anywhere else in Europe?
| bobthepanda wrote:
| Yes. Not in the mid 20th century though, that was decades
| before I was born.
|
| Generally speaking, the midcentury was a rough time for
| railroads. The big private railway companies in Europe were
| nationalized by then. For your examples, lifted from the
| wikipedia pages:
|
| - Denmark: World War II left DSB with a fleet of outdated
| and worn-out trains, and apart from a series of second-
| generation MO railcars and the class MT multi-purpose
| centercab engines built by Frichs, domestic industry was
| unable to provide the kind of motive power required.
| Instead, DSB looked to foreign suppliers. The 1960s were
| marked by an increasingly poor economy for DSB, leading to
| a steady staff reduction throughout the decade.
|
| - Sweden: Between 1937 and 1985 no new railway was built in
| Sweden, except for short industry tracks and similar.
| Instead many lines with little traffic were closed down.
| Their traffic was decreasing because the car and truck
| traffic increased.
|
| - The Netherlands: While the 1950s were a good time for the
| company, it started to decline in the 1960s, like most
| other railways around the world. Not only did the NS suffer
| from the competition of the car and other modes of
| transport, but it also suffered from a loss of income when
| natural gas started to replace coal as the main fuel in
| power stations and homes after a gas field was found near
| Slochteren. The NS had been involved in the transport of
| coal from the mines in Limburg to the remainder of the
| country.
|
| - Germany: Transport of goods also had to compete with the
| ever-increasing competition from trucks. Furthermore,
| traditional services such as coal and iron ore shipments
| declined with the changes in the overall economy.
| paganel wrote:
| As a European very interested in rail transport I found
| that to be an excellent round-up, thank you for the
| comment.
|
| I'd add France to the list of countries which railway
| system went decisively downwards starting with the mid
| 20th century. Everyone focuses on the success of the TGV
| but the country's regional rail network was almost
| entirely dismantled. Just by comparing this map [1] of
| the network as it looked in the interwar period to the
| present one [2] one can see that decline very easily.
|
| [1]
| http://p1.storage.canalblog.com/16/88/152398/30965632.jpg
|
| [2] https://en.wikipedia.org/wiki/List_of_railway_lines_i
| n_Franc...
| [deleted]
| peter303 wrote:
| Its amazing that China was able to significantly develop both
| road and rail infrastructures this centuries. It looks like
| many other countries prefer one or the other.
| bobthepanda wrote:
| Outside of America most of the developed world has fine
| networks for both. It's just that the rails are optimized
| for passenger travel and the road is generally where
| freight goes. China is kind of odd in that they have both
| heavy freight and passenger traffic on their railroads; the
| HSR network was built in part to free up the traditional
| railway network to serve more freight trains.
|
| Part of it is that China has a lot of money. Part of it is
| that right now China doesn't really care about debt (China
| Railways has $770B in debt). And part of it is that the
| population is so large that they can afford to essentially
| build a second whole railway network and a highway network.
| There's also a difference in strategy; European and
| Japanese rail development is slow, requires working with
| communities, and HSR is directly routed to city centers,
| whereas China for its HSR networks prefers connecting
| megahub stations outside of the city center, more similar
| to how airports work.
|
| There's also the question of if they can actually afford to
| maintain this network long term; it features many more
| viaducts and tunnels than equivalent rich country networks,
| even in flat terrain. And some design decisions are
| questionable; it's not uncommon to see, for example,
| strange merging patterns for lanes or a lack of shoulders
| on the highway network.
| sacredcows wrote:
| Rail in the U.S. is the best freight rail system in the world.
| Europe boasts a great passenger network but fares poorly when
| it comes to freight. For America to be great in both sectors,
| busy corridors should be dedicated to one use or the other
| (e.g. Northeast corridor, California, etc.). Success in having
| highly efficient freight systems and highly efficient passenger
| systems are pretty much orthogonal.
| jabl wrote:
| It has been claimed that Japan has the best privatized
| passenger railway system in the world; certainly it worked
| out much better than the UK experience. One reason being that
| the railways own the tracks and the stations (renting out
| some of the space, and having things like restaurants and
| hotels), and in built-up areas they can thus capture some of
| the value the railway provides through increased land values
| close to the stations. Apparently only about 50% of the
| income is from tickets.
|
| Railway people also often say that railways are different
| from roads in that the advantages of vertical integration
| between the tracks and the rolling stock is much larger, and
| thus a privatization scheme where a single railway company
| owns both the tracks and the trains is better than the UK
| (and now EU following in the UK footsteps) model of splitting
| the ownership.
| jcranmer wrote:
| The railroads generally weren't broken up. Instead, they faced
| heavy regulation, especially in regards to setting prices and
| passenger routes. Post-WW2, the passenger traffic collapsed due
| to airlines and highway traffic, while the regulator generally
| required railroads to continue running money-losing routes.
|
| The Pennsylvania RR's merger with New York Central in the 70s
| proved to be a disaster. The result of the Penn Central
| bankruptcy was the removal of several of regulations, and the
| transfer of passenger traffic to local commuter rail agencies
| and Amtrak. Freight companies consolidated like mad afterwards,
| ending up with what are now 7 major railroads (UP, BNSF, CSX,
| NS, CP, CN, KCS), and they invested in intermodal and double-
| stacked container freight, which is why the US has better
| freight traffic than Europe.
| mschuster91 wrote:
| > and they invested in intermodal and double-stacked
| container freight, which is why the US has better freight
| traffic than Europe.
|
| The US has the scale both financially and in terms of sheer
| area that makes freight traffic work well and profitable. In
| Europe, you have a _lot_ of things making rail expensive -
| there 's infrastructure like bridges or tunnels everywhere
| which means you can't double-stack, and there's millennia
| worth of villages and cities that you have to build around.
|
| Add to that that most US freight is done with diesel-fueled
| locomotives which means that the US saved a lot of the money
| that Europe spent on electrification.
| jabl wrote:
| A problem in Europe is also that rail freight tends to be
| more competitive the longer the distance, but European
| railways are national carriers concentrating on in-country
| operations. To the point that for inter-country traffic is
| dominated by trucking.
|
| The EU has been trying to fix it by imposing common
| signaling standards, opening access etc. but it's slow
| going as all the national operators lobby hard to protect
| their home turfs.
| mschuster91 wrote:
| > The EU has been trying to fix it by imposing common
| signaling standards, opening access etc.
|
| That's not much of a problem any more with the advent of
| multi-system locomotives - you can go from the
| Netherlands (=Rotterdam port, central entry for Chinese-
| origin container ships) to Italy with a single Siemens
| ES64F4 VE locomotive, for example. All that's needed is
| regular exchange of the operating staff.
|
| The real problem rather is that European railways are
| built with "passenger first" in mind, which means that
| during the day freight trains get set aside and during
| the night capacities are limited because of (very valid,
| fwiw) noise complaints.
|
| The US prioritizes freight trains first, and there are
| not many complaints of noise because the trains are in
| rural areas with no human (or protected animal) closer
| than a dozen kilometers.
| Nomentatus wrote:
| It's a misconception that The Sherman Act was the beginning of
| the restraint on monopolies. It's more the other way 'round.
| Common law concerning restraint of trade goes back hundreds of
| years before, and could really pinch, with no limits on
| remedies. John Sherman's act LIMITED how much a railroad (etc)
| could be fined for it's misbehavior, rather than introducing a
| legal risk. That risk already existed under common law under
| the rubrik "restraint of trade" [1] and could be extremely
| potent, in the years before the Sherman Act existed. The
| advantage of a statute was that statutes overrule common law,
| sending the strong and expansive existing common law vs
| "restraint of trade" into the dustbin of history. To the great
| benefit of railroads, etc. It's relevant that his brother
| (General) William T. Sherman was the President of a (urban)
| railroad when the Civil War started. The Republican party (of
| John Sherman) was a strong proponent and friend of industry and
| infrastructure, not an enemy of it.
|
| [1] https://en.wikipedia.org/wiki/Restraint_of_trade
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