fact that these bills will not be acted upon, but will be discussed and rediscussed and resubmitted for further discussion and possible action in 1963 or later. We cannot accept the premise that Congress will delay. The situation, which we have outlined as to rate regulation, is one under which this Congress and this committee should promptly approve legislation now before you. Too much delay and two much study from here on out is endangering continuance of essential public transportation of freight.

We reiterate, therefore, our belief, that the present regulatory situation, as it applies to bulk grain, needs to be changed now, not later. And that competition in the transportation market should be allowed to become a greater significance in the setting of rail rates on grain. The recommended legislation does, as you know, closely follow recommendations by the President in his message on transportation released April 4. It is difficult to see how another year's investigation and study can be justified.

Thank you very much.

Mr. ROGERS of Florida. Thank you, Mr. Harriss. We appreciate your appearance before the committee. Mr. Younger?

Mr. YOUNGER. Thank you, Mr. Chairman. Mr. Harriss, you made a very excellent contribution to the committee's hearings. You are one shipper who uses all modes of transportation, as I understand it. Mr. HARRISS. Yes, we do. This is shown in my percentages. We operate about 40 barges.

Mr. YOUNGER. Yes; you use the barge and rail and trucks?

Mr. HARRISS. Yes.

Mr. YOUNGER. Is it your conviction or feeling that if H.R. 11583 were enacted that it would put all of the truckers out of business and all of the bargelines out of business?

Mr. HARRISS. Certainly not, sir.

Mr. YOUNGER. That is all, Mr. Chairman.

Mr. ROGERS of Florida. Mr. Devine?

First, Mr. Kornegay.

Mr. KORNEGAY. I just want to commend Mr. Harriss for a very fine statement and to say I have appreciated it. And I want to ask a very pertinent question, that is, whether or not the passage of this legislation would result in the railroads forcing all other modes of transportation out of business?

Mr. HARRISS. No, sir; I do not think that. I just want to add this, it seems to me it is a rather bad situation when rates cannot be lowered. I think that free competition should be allowed. As an example of lower rates being held up, if you please, I live in New Jersey, and would cite a New Jersey happening. I think it was just last week there was a press item from Governor Hugh's office and I am not criticizing anyone here as to this fact-that, as the result of a request made by the State of New Jersey, and by the U.S. Department of Agriculture upon the Interstate Commerce Commission they were glad to announce, for the drought stricken farmers of New Jersey, that the Interstate Commerce Commission had issued an order allowing the railroads to cut their rates on hay 25 percent-allowing them to do that. If a carrier by rail can cut rates, why can't he be allowed to do it, without an ICC order? Well, this situation at present just does not seem, to a businessman, believable, but, of course, it is true. Mr. KORNEGAY. No further questions.

Mr. ROGERS of Florida. Mr. Devine?

Mr. DEVINE. No questions, Mr. Chairman.

Mr. ROGERS of Florida. Mr. Harriss, it is interesting to note your testimony. On page 2 you have quoted figures of the shipment of grain. You say that grain unloaded by rail is 64.19 percent, I believe, 21.95 by truck, and 13 percent by water. And grain loaded out on water transport jumps up to 25 percent, and the trucks go down to 7 percent. I wonder if you would expand on that just a little, why there would be that difference?

Mr. HARRISS. In the first place, these are the only figures that I could accurately give you, and they reflect the consolidation of all of our major terminal plants. I left out the country elevators.

Secondly, in answer to your question I might say that this reflects water locations operated by us, sizable elevators, which bring grain in by motortruck and ship out by barge. That would reflect that situation that you spoke of.

Mr. ROGERS of Florida. Would these figures be affected greatly, do you think, if this bill were enacted, taking off the rate regulation of the railroads?

Mr. HARRISS. I do not know. This is a difficult question-I do not know.

Mr. ROGERS of Florida. Thank you very much, Mr. Harriss. Your testimony has been helpful to the committee.

Mr. HARRISS. Thank you.

We shall

Mr. ROGERS of Florida. The next witness is Mr. Robert Corber, counsel for the National Association of Motor Bus Owners. be glad to hear you now.

STATEMENT OF ROBERT J. CORBER, COUNSEL, NATIONAL
ASSOCIATION OF MOTOR BUS OWNERS

Mr. CORBER. Mr. Chairman and members of the committee, my name is Robert J. Corber. I am appearing as counsel for the National Association of Motor Bus Owners.

NAMBO is the national trade association for the intercity motorbus industry. It serves as spokesman for nearly 1,000 carriers which account for about three-fourths of the intercity motorbus transportation in the United States.

The members of NAMBO are both large and small and they are found in every part of the country. They serve all the major cities in the United States. A large part of their operations are also devoted to furnishing the only means of public passenger transport in thousands of small communities which, for economic reasons, the railroads and airlines do not serve. I might add, parenthetically, that the bus lines serve more communities and carry more passengers than the railroads and airlines combined. Their service includes small package express and pouch mail operations as well as passenger transportation. The objectives set forth in the President's message on transportation, dated April 4, 1962, for a strong, dynamic public transport system capable of providing safe transfortation at low cost to the public, clearly recognize fundamental problems in the industry today. As a vitally interested member of the public transport system the intercity bus industry welcomes the efforts of Government to deal with these

problems with a view to reaching the goals expressed in the President's It is in this light that we have reviewed H.R. 11583 and 11584. Some of the proposals in these bills strongly reinforce the President's goals and should, we believe, be adopted. In this category are proposals for greater use of commercial facilities by Government and encouragement of through routes and joint rates. However, our experience over the last quarter century and more leads us to the conclusion that four of the proposals in these bills would not serve the desired goals. Accordingly, we urge that they be rejected by your committee.

First, we think the proposal for elimination of minimum rate regulation for passenger operations is objectionable. Several times within the past 5 years Congress has considered proposals to restrict minimum rate regulation by the Interstate Commerce Commission. The attempt to establish the "three shall nots" in H.R. 5523 and H.R. 5524 in the 85th Congress is an example of this approach to new forms of rate regulation. Congress found that idea for reduced minimum rate protection undesirable and we believe it should, a fortiori, reject this proposal for total abolition of minimum rate control with respect to passengers.

Mr. ROGERS of Florida. Excuse me, a minute. Does this legislation propose to take off all minimum rates?

Mr. CORBER. Insofar as passengers are concerned, Mr. Chairman, it would eliminate the authority of the Interstate Commerce Commission to regulate minimums there.

Mr. ROGERS of Florida. Thank you.

Mr. CORBER. The antitrust laws, suggested in this legislation as the alternative to minimum rate regulation, are not adequate protection against unfair competitive practices. The laws would presumably prevent fare and rate reductions for predatory purposes. But this is an uncertain standard by which to judge the propriety of rates and fares. And even if it were capable of precise definition, it leaves open the important question of cost standards. In the absence of predatory intent there would probably be no restriction on the cost level which could be used to support rate and fare reductions.

There could well be a return to the disastrous rate wars which plagued transportation prior to enactment of the regulatory statutes if the powers implicit in minimum rate control were transferred from the ICC to the courts under the antitrust laws. No carrier should be relegated to tribunals lacking the experience, expertness, and procedures for dealing effectively with complex rate issues that are available to the Interstate Commerce Commission for protection against the consequences of below cost rates published by competitiors, much less for protection from rate wars.

The financial makeup of bus companies leaves them unable to absorb losses from below-cost fares to the same extent as rail carriers. Bus companies can, for this reason, be at a tremendous disadvantage with rail carriers if fares are not based on fully distributed cost of the service.

The typical bus company is highly sensitive to revenue changes. This stems from the fact that the bus industry is primarily a service industry-I mean by that it depends upon the service which it sells for survival more than it does on the property which is devoted to

the service-its investment in property is small compared to services performed. Attached hereto as appendix A is a table showing the value of property owned by bus carriers in relation to revenues. As the table indicates, the property required for bus operations averages less than 50 cents for each annual dollar of revenue.

Appendix B shows similar information for rail carriers. Their investment in property averaged $2.83 in 1960 for each dollar of revenue over five times that of the bus carriers.

The corollary of these figures is that a much higher proportion of bus company costs of operations are variable or out-of-pocket costs than is true of railroads. Stated differently, the fixed costs attributable to investment are much greater in the case of railroads than they are in the case of bus companies. Over 90 percent of bus company costs are directly assignable or out-of-pocket costs. Rail passenger service has about 75 percent of these costs which are directly assignable, and the figure is even lower in the case of the airlines. Thus, if passenger fares or express rates were based on out-of-pocket costs instead of full costs, bus companies would be at a competitive disadvantage of more than five to one.

Railroads are far less vulnerable to revenue changes than bus operators. They operate with a greater margin of revenue over expenses. Further, their diversified transportation interests enable them to absorb losses from passenger service through revenues derived from freight operations. In fact, the rail carriers for years have underwritten passenger deficits with profits from freight operations.

Appendix C, attached hereto, shows that the revenue per passengermile is roughly similar for rail coach and bus services. It was 2.78 cents for buses and 2.86 cents for rails in 1961. While the railroads are nearly competitive with buses in passenger-mile revenues, the former have continued to incur large passenger deficits; insofar as their coach operations are concerned the former has continued to incur large passenger deficits. As set forth in appendix C, the passenger deficit of rails was $402.2 million in 1961. The deficit has been declining with the abandonment of passenger services. This is reflected in the comparison in appendix C of rail passenger-car-miles with the deficit during the period 1956 through 1961. Rail passengercar-miles have decline from nearly 890 million in 1956 to about 679 million in 1961. Although this decline in operations is reducing the deficit, these figures show that rail carriers are continuing to compete with bus carriers at below-cost fares.

The proposed legislation would encourage railroads to prolong this kind of competition in the passenger field and would cause them to step up passenger operations. They enjoy financial resources not available to bus lines. They can bring about fare reductions which cause ruinous revenue losses for bus lines without corresponding effects on their own overall financial situation. They would thus be in a position to make temporary, selective use of below-cost fares in areas of competition with bus operators with the effect of driving bus lines swiftly out of business, sustaining little damage to themselves. The legislation would also create further problems between bus companies and airlines. Section 5(d) of H.R. 11583 states the intent of Congress to reduce regulatory control over "minimum passenger fares of the air carriers *** to the greatest extent consistent with

the public interest." Today local service and trunkline carriers are reducing air fares below coach levels for a minimum service designed to take passengers from buses. One carrier calls its service an "airbus" operation even though it is in no way related to bus operations. The purpose is to divert busline passengers to air service. Bus companies could not complain of these new developments if the fares for the air service were based on cost. However, the fares are substantially below costs of operations. When the airline is on subsidy, as some are, the losses from these services are made up by the taxpayer. This is unfair competition for buslines. But companies receive practically no aid from the Civil Aeronautics Board-which prefers to promote the airlines-under present provisions for minimum fare regulation. The situation would be even worse under the proposed legislation. Accordingly, we oppose section 5 (d) of H.R. 11583.

Elimination of the exemption from the antitrust laws for joint action in regard to fares for passengers would be grievously injurious to the intercity bus industry. The development of efficient, safe and low-cost transportation for the thousands of communities served by intercity buses-many of which have no other form of public transportation service has depended, to a large degree, on joint rate action in the industry.

Prior to enactment of the Motor Carrier Act in 1935, the motorbus industry was in a highly unstable condition. There were incessant rate wars which were destroying the capacity of the industry to sustain safe and reliable service. And there was no system of traffic interchange-joint through-route arrangements-to provide an integrated and cohesive network of bus transportation throughout the Nation. The cooperative action allowed carriers under the Motor Carrier Act corrected this situation. There is now stability and uniformity within the industry which has assured the public of safe, reliable, and lowcost transportation all over the country. This could not have been achieved without rate regulation by the Interstate Commerce Commission and joint action by motorbus carriers.

In our industry joint rate publication has been undertaken through the National Bus Traffic Association which was established by the carriers and exists independent of NAMBO. Without NBTA, many carriers would be simply unable to effectuate joint service and rate arrangements.

Most intercity bus operators are small businesses. Of the more than 1,000 bus companies furnishing intercity service, only about 15 percent are class I carriers with annual gross revenues of $200,000 or more. A number of these class I carriers actually operate as few as 10 buses. The smaller carriers do not maintain, and could not afford, traffic departments or rate experts. They must rely on NBTA for these services.

It is estimated that intercity buses serve 40,000 communities in the United States that have no other form of public passenger transportation. As a practical matter, most intercity carriers would be physically unable to contact other carriers serving these thousands of places and go through the infinite detail required to prepare individual tariffs. And even if they were able to undertake such extensive operations, they would necessarily engage in conferences and agreements which would raise serious questions under the antitrust laws. Thus, it is