economy for the people of America and the best earning position for the rail carriers. I will gladly exchange manacled regulation for supervised freedom.

Even with the legislation called for in this bill, railroads will still be hamstrung in the marketplace. As the bill is now written, all railroad rates must be published for 30 days before becoming effective, and are subject to suspension by the Interstate Commerce Commission at the whim of anyone on the grounds that the rate violates some other portion of the Interstate Commerce Act. The railroads would be the only carrier subject to this requirement. Accounting for only some 25 percent of the total intercity freight traffic bill and for only 8 percent of the Nation's total transportation bill, as railroads do, there is no reason why this unequal treatment, which results in discrimination, should be permitted to continue. This is the rankest kind of inequality and it should be removed in the interest of fairplay, if nothing else. No loopholes should be left through which the Commission can exercise discriminatory control of minimum rates.

Other carriers and other businesses are free to charge for their services or goods whatever the management chooses to charge. If such charges violate the antitrust laws, the proponent of the charge must suffer the consequences. On Southern we are prepared to take our chances on this. As a matter of policy we would not knowingly violate the law and, in my judgment, there would be no occasion for possible law violation to arise in connection with pubishing minimum rates. I say this since our policy is to publish only remunerative and nondiscriminatory rates. "Loss leaders" are not in our catalog of pricing. We do not seek special favor, nor do we ask for paternal protection from folly. We do ask for the right to compete on equal terms, a right to which we are entitled. We cannot have this opportunity in its fullest sense if we are required to give advance notice of our prices while our competitors, who handle the lion's share of the business, are not required to do so.

repeat that passage of this legislation can save the shippers of the United States hundreds of millions of dollars annually-excessive charges that are now adding unnecessarily to prices which consumers must pay.

Southern Railway System today could be and would be furnishing its transportation services at much lower cost to the public if the laws of this country would now permit us to do so. In the public interest, and in simple justice, those laws should be realistically modernized to eliminate discrimination, to promote competition and equality of treatment of the various common carriers, and to free all common carriers so they can meet the fast-growing threat of private carriage.

The need for changes in the regulatory pattern which would permit railroads to accomplish such an objective is clear and acute. Today, there is no real competition in the field of transportation. There is nothing but an unimaginative, unrealistic, and unproductive fixation of prices by regulation. The regulation approach as a solution has failed miserably. The time has come to try the fresh, realistic approach of competition offered by H.R. 11583. Therefore, I respectfully urge as strongly as I can that this committee approve and speedily report this bill to the House so that it may take prompt action.

Mr. Chairman, I heard some of the testimony here yesterday, and I have prepared a supplemental statement that I would like to introduce in evidence.

Mr. Chairman, you inquired yesterday as to the treatment of nonriver towns as compared to river ports. I would like to say a word on that.

With respect to so-called water competitive rates, my company is determined to give every inland town the rate advantages now enjoyed by waterway ports. We are doing this by extending to those inland towns rates that are comparable to and on the same mileage scale as the river port rates. For example, we maintain that Atlanta, Ga., Columbia, S.C., Anniston, Ala., or any other inland town, is entitled to the same low rates as any town on a river-the determinant of the charges to be the number of miles that the freight is hauled.

This basis is followed in our grain rate case, to which I have already referred. The same scale of rates applies from the Ohio and Mississippi River crossings to inland points as well as to the Tennessee River ports, and while our original publication did not have Chattanooga or any other Tennessee River port as origin points, we have offered and will apply this same scale of rates from any point on our railroad to any other point whether it is on a river or not.

W are extending this method of ratemaking to other commodities as rapidly as we can, although we do have difficulties here with regulation by the Commission under its minimum rate powers.

Because some town is located on a river is no reason why it should be accorded a lower rate than some nearby town which, by the accident of geography, is not located on a river. Only through this process can we extend the benefits of low-cost transportation throughout the area that we have the duty to serve, and give all of the public those benefits.

It gives me pleasure to say that our railroad more than a year ago publicly announced this principle. In a press release dated July 3, 1961, more than a year ago, I said, with respect to our grain rates:

No distinction has been made in the rate level to points reached by water, as compared to points inland from water, because we feel that Southern has an obligation to haul to off-river points on the same basis as it hauls to on-river points. The accident of location should not cause an inland area to be penalized in the matter of freight rates. That is why we have extended the rates to the entire territory so that the whole area will get the benefits of modern railroad technology.

We consider this principle a sound one and we will continue to expand its application as rapidly as possible. Enactment of H.R. 11583 will be a great help to us in this effort.

There have been several questions asked by members of the committee indicating a concern about possible below-cost rates being published by the railroads. As I have said, we will not publish such rates. We are not interested in any business that we cannot handle at a profit. Furthermore, the word "cost" is one that is thrown about pretty loosely by the barge people and some truckers who have a monetary interest in keeping rail rates regulated at high levels so that they can keep their charges up.

The mumbo-jumbo that these people, especially the barge operators-common carrier and private-are peddling to the effect that railroad rates do not reflect fully distributed costs is self-serving and

camouflages their extraction of higher than necessary charges from the public. The fact that this occurs is another clear indication of the evils of overregulation.

There is no such thing as a fixed cost per ton or ton-mile for any railroad. Costs vary with volume-the lower the volume of business, the higher the cost. An increase in volume reduces the costs per unit of transportation.

For a regulatory agency to average out a lot of figures to produce railroads' costs is as meaningless as the average depth of a river. You can drown in the deep holes of a river that average just 2 feet in depth, and the railroads have all but been drowned for the want of business caused by the enforcement of high rates from this kind of regulation.

Due to the 5-day week in industry and the necessity for 7-day rail operations, the volume of business varies sharply from day to day of every week. It would be ridiculous to say that we could not haul business on slack Mondays or Tuesdays because the revenues from the fewer cars hauled on those days would not cover the so-called fully distributed cost. This makes as much sense as those cases where the Commission has required rates to be canceled or raised on the grounds that they did not cover fully distributed costs.

Higher than necessary rates make the railroads noncompetitive. This dries up business, and slack business automatically raises costs. per car. So this vicious circle can lead only to the poorhouse for the railroads and to higher prices for the public. This unrealistic "formula" approach to costing is the very essence of minimum rate regulation, and so long as the Commission is empowered to fix minimum rates the public is going to pay higher prices, the rapid growth of private carriage will continue, and the position of the railroads and for that matter all of the common carriers-will worsen.

Mr. Chairman, that concludes my statement.

Thank you for permitting me to appear.

The CHAIRMAN. Mr. Brosnan, I am very much interested in your statement, and I am greatly impressed by it. I am sure other members of the committee are, as well.

You have, in my judgment, given from your own viewpoint a very frank opinion of the position from your own experience and your own company and, at the same time, you have challenged, it seems to me, the transportation industry, as such.

I want to compliment you on the initiative that you have taken with reference to eliminating what seems to me to be a continuous discriminatory practice over the years between communities in the same area with reference to rates.

It is my firm hope that your great, able, and highly efficient president, who testified before this committee yesterday, might see it clear to revise his expressions of views on the principle in order that the railroads might follow the lead which you have enunciated here with reference to such practices.

I have never been able to see why the transportation industry, providing service to the public, feels that it is in the best interests, and that it was fair and equitable, to provide a rate under given circumstances, when precisely the same apparent cost, distance, facilities, and so forth used a different rate to another area.

I have just never been able to see that.

Now, may I ask you one question out of a situation that came to my attention here not too many years ago. First, I would say: Is this policy of yours, which you announced in 1961, applicable only to agricultural movements?

Mr. BROSNAN. No, sir.

We adopted and announced that policy at the time that we published these rates.

We have since then been extending that principle to other commodities other than bulk commodities and other than agricultural commodities.

We have a lot of work left to do to clean up old tariffs, upgrade them, bring them up to date.

We are going to have an awful howl, and do have an awful howl, every time we go to the ICC with some of these things, to bring them into this picture. We run into a lot of opposition usually from the bargelines.

The CHAIRMAN. I am impressed by your explanation of the experiences you have had, but what led me to make the inquiry is that you said that the announcement you made in 1961 was with respect to grain movement.

Mr. BROSNAN. I made that announcement, sir, when we announced or published our grain rates.

The CHAIRMAN. But, as you have stated here, it is your policy in order to try to extend this principle on an equitable basis insofar as possible as you proceed?

Mr. BROSNAN. We have since that time extended it; where we make a water competitive rate, if you call it that, we have extended it to the inland territories.

The CHAIRMAN. Now, what I wanted to inquire about, here a few years ago was there not a situation that arose that created a great deal of concern among the people whereby the movement of cotton over your railroad in the Southeast brought about a great deal of attention to certain people that if the cotton came from the west side of the Mississippi River, it would cost $1 or $1.25 a bale more for the movement than if the cotton moved on the east side of the river? Mr. BROSNAN. Well, sir, let me say, in the first place, I am not an expert on the intricacies of rates.

I can deal with principles and did establish this principle: equality

of treatment.

The CHAIRMAN. Yes; I appreciate that.

Mr. BROSNAN. I did that.

The CHAIRMAN. I compliment you for it.

Mr. BROSNAN. Now, the intricacies of these catalogs of rates can get me lost.

I, frankly, have no knowledge of those cotton rates, but I will be very happy to get the facts about that and bring them back here, sir, or send them to you by letter, or however you might want it.

The CHAIRMAN. I think the matter has been resolved, and amicably so, but it took a long time to do it. I have never had anyone explain to me why a transportation company such as yours would have made such a decision: that merely because there was a body of water that separated two States or two areas, that that which comes on one side of the river would have a higher transportation cost to the same places than that which was produced on the other side.

Mr. BROSNAN. Mr. Chairman, I very frankly do not have enough knowledge about that matter to discuss it in detail.

The CHAIRMAN. As I say, I think it has been resolved.

Mr. BROSNAN. Yes.

The CHAIRMAN. I do know that there was great concern expressed by the organizations involved in the movement of cotton back at that time.

You see, I hope you will pardon me and others who come, but I have had accumulation of these things over the years as to certain discrimination, and this gives me an opportunity to bring them out.

Mr. BROSNAN. Yes, sir.

The CHAIRMAN. I think it should help to try to understand some of the problems and try to get some answers. Others, I know, have had similar experiences from their own constituents that I have had, and we might be able to do something about this whole problem in this generation.

Mr. BROSNAN. Mr. Chairman, I would be the last man to attempt to say to anyone that the railroads have not had their sins, and a lot of big sins, and that we will not make some mistakes in the future.

The CHAIRMAN. I do not want to indicate here that I am one of those who is going to start throwing rocks, because I know it can go both

ways.

But this is a highly important thing, and there are some things that I have been involved with that, as I told Mr. Loomis yesterday, that I

want some answers to.

You have given very good answers to one of them here, and I hope that the entire industry will give serious consideration to your leadership in this field.

I applaud it.

As I say, I hope we get somebody representing the Southwestern part of this country. I want to ask him about a certain transportation organization down there with reference to certain other rates affecting certain other industries in Ohio, Mississippi, and Arkansas.

If there is anyone who is going to testify from that area, why, I am putting him on notice now that he is going to be asked about it.

I am for the principle of giving the right of transportation industries to serve the public, but all my life I have heard about these discriminatory practices. They have been tied up in zones and areas and the Supreme Court, the Interstate Commerce Commission, and so forth, and I think that we have progressed in this country enough now that we ought to work out, all together, something that would be advantageous to all of our people, and not on the basis of giving one area or one group or one company or one transportation mode advantages over another.

I am very strong for that principle.

I hope my colleagues will pardon me for taking this much time at this point, but I wanted to ask you about that car. I have heard a great deal about that car. I have never seen one of them.

Mr. BROSNAN. That is the aluminum

The CHAIRMAN. This all-aluminum car you are talking about in the movement of such products as you claim. I have been pretty critical of the railroad industry over the last years as to its lack of progress and new techniques, and you make me feel very good that you are moving into an area to meet these problems.