2. Other regions

While New England has been the principal subject of discussion this does not mean that there are no difficulties in rural service elsewhere. While the statistical comparisons do not clearly indicate an equally severe problem in any other region, two special reports reveal the nature of rural service problems in Michigan and Iowa. In 1956 a special legislative committee of the Michigan House of Representatives made a study of bus company failures. 50 The committee found that the five principal intrastate bus companies were losing money at that time and had been continuously losing for the previous 5 or 6 years. They further found that:

Both the local and intercity divisions of the common carrier bus industry of this State are in dire financial straits and that if the government of this State as well as local units of government do not take immediate, progressive and objective action, through the medium of tax relief, ** the public interest * will be irreparably injured and eventually destroyed.

In 1958 the Governor of the State of Iowa appointed a committee of 13 leading citizens to investigate the condition of intercity bus service to Iowa's smaller cities.51 The committee found that the same postwar transportation developments described earlier in this report had produced a situation in Iowa wherein, due to declining traffic and increasing expenses, 41 percent of the bus companies in the State operated at a loss in the 1955-57 period. The problems of serving small communities located off of main highways are great. The buslines derive the major portion of their revenues from through passengers who are annoyed and delayed when the bus makes loop trips back off the main highway. Some of the bus companies reported that it cost them about $80 a month to operate stations and stops which produced as little as $8 a month in revenue. The Iowa citizens committee found several instances where businessmen and business organizations had been paying part of the cost of maintaining bus service on a voluntary basis. However commendable this may be, it does not form a stable basis for providing public service. The community governments are willing to pay buslines to provide service under a contract but in Iowa public money cannot be spent for such purposes.

There is no doubt that the situation reported in Michigan and Iowa also exists in other areas. The report of Robert Purcell to the Governor of New York in 1959 has similar general statements regarding intrastate rural bus service in New York. 52

No similar documentary evidence on truck service has been located. Members of the staff of the Post Office Bureau of Transportation stated that common carrier truck service had disappeared in a number of large areas, particularly in the west central and northern Middlewest. The recent ICC "gray area" report (supra, E-2) tends to confirm these observations.

E. MAJOR DEVELOPMENTS AND PROBLEMS IN SYSTEMS SERVING RURAL AREAS

1. Railway labor and management attitudes

It is impossible to review the many local and interstate train discontinuances in New England and elsewhere without taking note of the policies pursued by the railway labor groups. It is clear that the national unions have preferred to accept continuing employment losses rather than to compromise certain uniform nationwide positions on working rules and practices. If this attitude continues much additional rural service will be abandoned, although in many cases this could be avoided. Union policymakers should give careful consideration to differentiating between working standards and practices required in the past on high volume main line operations, which standards are now applied everywhere, and those practices which are actually necessary for the efficient and safe conduct of rural operations with shorter trains and reduced traffic density. A rationalization of national policies in these matters will tend to preserve more jobs and to preserve the publicly needed service.

Two recent actions by State regulatory commissions are important in relation to railway labor practices. In February 1960 the New York Public Service Commission presented a report to the Governor on the necessity for the railroad "full-crew" laws in the State.53 The Commission's principal conclusion was:

There is no reasonable need from the viewpoint of the safety of railroad operations, the employees engaged therein, and the public for continuing in existence the statutory enactments mandating the minimum crew requirements. The Commission further found that at least 644 railroad employees in that State with an annual payroll of $4,400,000 were required solely and unnecessarily because of these "full-crew" laws.

54

In a New Hampshire case, the commission made the continued operation of a service contingent upon reducing the number of crewmembers on motorcars and further upon eliminating certain crew changes at the boundaries of rail operating division. The local union's acceptance on its own initiative of the revised working conditions saved train services needed by the public and jobs needed by nolonger-young employees.

In the interests of labor, management, and especially the public, train discontinuance cases should be settled on the basis of what the costs could be rather than what they have been. If public necessity exists, and there is any possibility of solvent operation, every concession should be made by all parties to continue operation especially in the area of work rules and State and local taxation. We have seen that, in a few instances, such an approach shows promise of success. The public service and career rail employees deserve more careful consideration and more conciliatory treatment than forcing decisions purely on the basis of existing cost levels.

It was noted that New England was the only region wherein the decline in rail passenger car-miles of service offered was greater than the decline in rail passenger-miles. This is factually indicative of the publicly expressed management views of many New England railroad

Reported in Traffic World, Feb. 6, 1960, p. 20.

New Hampshire Public Utilities Commission, Boston & Maine R.R. Passenger Service, docket No. T3768, order No. 7382, Oct. 25, 1959.

executives who have been making every effort to discontinue all passenger service. There have been many reported acts of noncooperation with connecting railroads, with regulatory bodies, with labor, and with passengers. These complaints collectively show a negative and defeatist attitude on the part of management that would doom any business. Railroad management has a great stake in the re-creation of a financially sound rail passenger business, which may be attained through the cooperation of regulators, labor, management, and other agencies as will be recommended hereinafter.

An action recently reported in testimony before the Senate Interstate and Foreign Commerce Committee (S. 3020 on June 6, 1960) appears to typify the attitude of many railroad officials in relation to the passenger business. The chairman of the Minnesota Railroad and Warehouse Commission stated that the Milwaukee road (Chicago, Milwaukee, St. Paul & Pacific RR. Co.) had actually discontinued the operation of an interstate train (La Crosse, Wis., to Austin, Minn.) the day after the regulatory authority to do so became effective. The railroad's sudden action had serious results which were described in Chairman Rasmussen's statement, to wit:

It was necessary for the Interstate Commerce Commission and for the Minnesota commission as well, to issue emergency orders to the American Railway Express Co., authorizing it to transport express by motor vehicle.

No notice was given to the Post Office Department as to the exact time that the trains would come off because the Milwaukee road had no advance notice of what decision the Interstate Commerce Commission would make. This order was a permissive order; not a mandatory order.

The Milwaukee road, as a matter of good public relations and ordinary decency in dealing with its patrons, should have given at least a 10-day notice to the people along the right-of-way, notifying them that the trains would be taken off, and giving them and the industries that patronized the railroad a little time in which to make the necessary adjustments (p. 5).

The Post Office Bureau of Transportation reports several similar actions by the Milwaukee road and several by other railroads.

A very significant comment on the attitudes of railroad labor and management was made in the recently released (June 8, 1960) report of the Presidential Emergency Board in the labor dispute between the railroads and their nonoperating employees. The report was quoted as follows in the June 11, 1960, issue of Traffic World, page 27:

This Board has a further responsibility: to clarify the public interest in the private collective bargaining between these parties in this vital transportation industry * *. The pace of events has been so rapid that both parties are tending to look backward rather than forward ***. The parties seem to agree that the industry is in "retreat." The organizations say it is a retreat to "monopoly" and the carriers say it is a retreat to "extinction," "pursued by excessive and unreasonable labor costs." The American community expects more from both labor and management in this industry than retreat.

The Emergency Board went on to criticize the lack of "adequate national policies for the railroads and for a coordinated transportation system." 2. Motortruck service-The flight from regulation

Trucks provide the only publicly available freight service in those rural locations not served by railroads. While class I common carrier trucking has been found increasing in all but the northeastern regions it has also been found that private, contract, and unregulated trucking has grown even faster. While many so-called motor common carriers restrict themselves to certain commodities and routes, and control the offering of small shipments and light bulky freight with high mini

mums and high rates, a number of large carriers do provide generally available public service and hold themselves reasonably in readiness to render that service. The contract, private, and unregulated carriers serve only selected shippers at agreed times and rates and do not represent a service available to all shippers. A recent Interstate Commerce Commission report sets forth the principal facts about the development of unregulated truck transport for the first time.55

Private carriage is an old and sacred right of a property owner to move his own property in his own vehicle and has traditionally not been subject to economic regulation. Due to the difficulty of defining and enforcing various types of carrier operation in today's complex economy a body of transportation has grown up outside of regulation which may or may not be legal. Several types have been found illegal by the Commission. These operations are made to appear private but many are clearly a form of for-hire transportation which is by law subject to regulation either as common or contract carriage. The most important "gray areas" are those involving the leasing of vehicles and drivers, particularly where owner-drivers are the lessors and the buying and selling of commodities for the purpose of transportation rather than as a part of a business dealing in that commodity. The ICC study identifies a number of other operations of more complex nature that may also be illegal depending on detailed circumstances. These problems arise in large part from a recurring oversupply of truck transportation and resultant rate cutting abetted by th "auctioning" of traffic, especially seasonal, by small- and mediumsized shippers.

The ICC report draws the following conclusions on the effects of gray area operations.

2. A field survey made by the Commission for this study indicates that, although a portion of the gray area operators' traffic would not or could not be handled by authorized carriers, a large part of that traffic is a direct diversion from those carriers.

4. A number of the larger motor common carriers of general commodities have experienced higher ratios of expense to revenue and losses of income as a result of gray area competition.

6. Authorized carriers serving small towns and the surrounding country have been seriously affected in some areas by gray area diversion of general merchandise and agricultural supplies formerly handled for local dealers and farmers.

8. Considering the longrun interst of shippers and the general public interest in transportation, the continued development of gray area transportation could be detrimental in terms of fewer authorized carriers available, less frequent schedules, reduction in scheduled carrier equipment-in general, a decline in the quantity and/or quality of regulated for-hire transportation.

In addition to these recommendations the ICC gives many examples in all regions and States of the specific commodities involved in gray area operations, why the situations arose and the impact on common carriers, both truck and rail.

65 U.S. Interstate Commerce Commission, Bureau of Transport Economics and Statistics, "Gray Area of Transportation Operations," statement No. 6010, July 1960. Ibid., p. 108.

There is an important body of motortruck traffic which has been exempted from regulation by law. Agricultural products moving before processing and the traffic of private shippers' associations are the most important exempt motor traffic, a category which amounts to 8.5 percent of all truck traffic moving on rural roads. Exempt traffic is described briefly in the ICC gray area report but no conclusion is drawn. Such traffic moves under rates negotiated between the shipper and common or contract carriers and may move as private carriage. Its importance is that a large body of traffic, including much agricultural produce, moves at rates less than those that would otherwise apply. This does not strengthen public carriers and where other carriers are used, the revenue is completely lost to companies providing public service. On the other hand some advantages of these exemptions, such as flexibility, undoubtedly contribute to successful marketing of the produce of many rural areas and they would be worse off without them.

A recent State regulatory case brings out another problem of the public carriers, that of the shifting of major segments of traffic to contract carriers and their resultant growth. A contract carrier performs transportation services exclusively for one or a few individuals under a contract for a continuing period of time and at rates which, though negotiated, are published and may be subject to ICC minimum level controls. Such carriers obviously do not serve the general public nor are their services legally available except to the contracting parties.

57

The Alabama case arose from the application of four contract motor carriers to move cement from the plant of a major producer to all points in the State. This cement is an important item of bulk freight traffic that has heretofore moved largely by rail common carrier. Both rail and motor common carriers protested the applications and made showings that adequate equipment and service had been and could be made available. The shipper supported the contract authority applications on the basis of surety of service and maximum convenience and control over the carriers. Examiner Black recommended denial of the applications and made the following comments in the body of the report:

That the common carriers are the "backbone of the transportation system" of the State is hardly debatable. Also, it goes almost without saying that, if the interests of the common carriers are adversely affected to any substantial degree by an action of this Commission, it would ultimately be the public that would suffer. With this understanding of our responsibility in mind, would it be consistent with the public interest to grant the contract carrier authority sought in these four applications? This is not merely an academic question but one which, as the examiner sees it, when resolved, may well affect materially the health and stability of the entire transportation system in the State of Alabama."

50

The examiner then proceeded to make as his first finding:

1. That the granting of these applications has not been shown to be consistent with the public interest, and in fact they would be injurious to the public interest, including existing common carriers, and would set up machinery for unfair and destructive competition.59

57 Alabama Public Utilities Commission, "Applications To Move Cement to All Points," docket Nos. 14861, 14825, and 14726, report of Examiner William F. Black, June 30, 1960. 58 Traffic World, July 9, 1960, p. 101. 50 Ibid.