lock4244 wrote:If the railroads were regulated then it would be a level playing field... but it isn't. There are millions of customers of telecom services, but few for RR's in comparission. Statistically, telcoms can afford to loose a certain percentage, and that is offset by the new business they are allowed to enter. Now let's say that CP were given forced access to Halifax and scooped most of the business from the port? CP has all the customers and CN gets to pay to maintain the track? What incentive is there for CN to maintain the trackage? It is entirely likely that a tenant RR could get 90% of the business and leave the host with 10%. You then get a sitiation where the host lowers rates to get the business back, and rates keep dropping and margins slip. Innovation requires investment. Instead of innovation you get deferred maintenance, loss of investment. There is a limit to how much costs can be cut before it becomes pointless to continue to function. The industry I'm in is there now, and nobody is making their cost of capital. When you can't invest in your industry, your industry becomes outdated and service goes down the tubes. Atleast the telecoms can rely on getting a certain amount of $$$ for a given service.
Again I can pick those points apart:
First to suggest or assume that a tenant RR would get 90% and leave 10% for the host is entirely fabricated. It could work out to 50/50, it could work out to 10/90 in favour of the host....it all depends on who offers the most value for the dollar, with value being in the eyes of the shipper/customer not you, me or the RRs.
There is not millions of RR customers, but there is a few customers with millions of stuff to move, versus millions of customers with only a few 'stuff' to sell to. So 10 x 10,000 = 10,000 x 10.
If CP was given access to CN, they would have to pay a substantial rental costs.....and since they would be essentially starting fresh in the market again those first few months, upwards towards 12 will not bring in a lot of revenue yet they still have to pay that whopper fee to CN customers or none....so right there CP will be in a neagtive cash position for a while.
Rates only go so low and then they level off....this is the benefit of competition. If a company can't find that sweet spot between being competitive and profitable then let em go under I say. Besides CN is a publically traded company, there mind set is 3 month quarters so maximum profits to the shareholders come first.....reinvestment into the company is a low priority.
And if you know any thing about telcom then you know that margins are thiner then thin, and VoIP is threatening the very concept of charging revenue to make the phone go ding a ling. Imagine, a telephone company saying "we will charge you $40/mth to make your phone work" when you the customer know that Vonage will make it work for $19.99 plus a ton more features (and they can do so cause they are using VoIP on the Internet) and in a matter of a few years when MSN, Yahoo, ICQ, Skype, FWD, and more to come all offer free VoIP/telehone service. What are you going to tell the telecom company? "Nope".....and what is the telecom company going to do? What ever they do it better be pretty innovative and valueable cause otherwise the market will tell em to go stick it in their pipe.
I know telecom very well, and I know RR pretty good too. I think I can compare the two in a very good light.
PS, as of very recently the CRTC announced that they are loosening the telecom market in Canada even more with VoIP being the catalyst. The industry is already very unregulated compared to what it was before the mid 90s.......the next few years will spell death for many, and success for the few who have the vision and can execute it.
If CN needs a monopoly in a market to survive in that market then that tells you already how innovative their business plan is.