intermodal and intramodal coordination through the establishment of general guidelines and principles for the carriers to apply to specific areas on a voluntary basis. Our decision in Ex Parte 2306 is a major example of this approach. Only in exceptional cases has it been necessary to resort to our compulsory powers.

Policy issues involving coordination arise in many areas of the Commission's work. Some of these are discussed elsewhere in this report in the context of a larger subject such as small shipments and mergers 7. Others are mentioned in the following discussion:

a) Domestic Coordination.

This section summarizes recent developments in coordination among regulated domestic carriers and our role in these developments.

1. Piggyback and Container Services (Rail, Motor Carrier, Freight Forwarder).— Piggyback service continues to develop under rules prescribed by the Commission in Ex Parte 230. While the piggyback cars loaded in 1967 increased less than 5 percent, a 10 percent rise in 1968 increased piggyback loadings to 1,337,000 cars, as reported by the AAR. The 915,000 trailers and containers in rail piggyback, reported to the Commission for the first half of 1968, represented an increase of 9 percent over the same period of 1967. Class I motor carrier trailers and containers likewise increased for the same 6-month period. Freight forwarder units, however, declined slightly.

Railroads and forwarders reported increasing use of rail oriented plan II for the first half of 1968. Under this plan rail rates include pickup and delivery, but shippers exercise an option to perform either or both local services. Motor carriers are decreasing use of substituted rail service plan I, which still makes up almost two-thirds of the mode's rail piggyback. Reports for the first half of 1968 show increasing use of "other arrangements.' Other arrangements include rail open tariff piggyback in plans II and III and variations, which was opened to motor carriers in August 1967 under a rule prescribed by the Commission in the 1964 proceeding cited above, and which was subsequently litigated.

Two railroads have reported substantial domestic container movements as have a few water carriers. Water carrier domestic container movements outnumber trailers 3 to 1, with reported container movements reflecting decreased services on certain trade routes.

In the first half of 1968 railroads and motor carriers reported increased container movements, almost certainly associated with import and export movements.

The Commission encourages coordination among the several modes, as exemplified in piggyback and containerization, and has taken steps to facilitate its growth in the areas of Commission jurisdiction. Rules for its orderly development were prescribed in the 1964 decision cited above. Steps are taken by our field forces to see that rate, tariff and other requirements under the Interstate Commerce Act are observed in piggyback movements.

In order to keep itself informed on piggyback growth, the Commission set up a reporting system for all modes under No. 34364, Piggyback Traffic Statistics (1963), effective with reporting for the first quarter of 1964. Statistics collected under the order have been useful to the Commission for regulatory purposes, to carriers of the several modes, Government agencies, as well as research and academic groups interested in transportation planning. Because of the changes in piggyback practices since 1964, and the development of international containerization, the Commission's economic staff is undertaking a review of this reporting system to make it more useful.

2. Water-Rail Coordination.-Coordination of domestic water carrier and railroad services may be improving. There is evidence of increased interest on the part of shippers who discern the possibility of transport savings and by the rail and water carriers themselves.

New joint barge-rail rates have been filed with the Commission and it is understood that more are being studied and negotiated among the carriers. Recent examples of coordinated service are the movement of phosphate rock from Florida to Louisiana using a combination of rail and oceangoing barge service, and a combination of rail and barge movement of corn from northern Mississippi Valley points to the Gulf for export, which is said to benefit farmers who had previously been too far from the river to use water carrier service.

• Substituted Service-Charges and Practices of For-Hire Carriers and Freight Forwarders, 322 I.C.C. 301.

7 See Chapter II, Section A (Mergers) and Section B (Small Shipments), pp. 36–77 supra.

Our interest in obtaining a more precise ascertainment of carrier costs in ratemaking underlines the possibility of added use of coordinated rail and barge services when these two modes in combination permit lower rates to the shipper than would be possible in all-rail service. The need for the best use of transport resources to meet the anticipated increase in industrial demand for transportation over the next few years is a basic criterion of the Commission's regulatory policy. Hence it must continually take into account coordinative innovations which promise lower costs, lower rates to shippers, and eventually a sounder base for capital outlays which each mode must make to remain competitive. Increased efficiency-an important ingredient of the national transportation policymay be fostered by careful consideration by the Commission of the relative advantages of all-rail and coordinated rail-barge services, and increased economy in the transport system may be possible from expansion of economically sound services provided jointly by the rail and barge lines.

3. Air-Truck Coordination.-Increases in air cargo traffic and the prospective introduction of low unit cost "jumbo jets" suggests that airlines may soon compete more effectively with surface carriers of property over the longer hauls. These developments indicate that air-truck coordination must inevitably become more crucial to the development of air cargo enterprises, for air cargo depends heavily upon motor truck lines for carriage of traffic to and from airports. Such coordination is relatively less essential to overall trucking development, although a growing number of motor carriers are concentrating wholly or to an increasing extent upon traffic destined for line-haul air movement.

Neither the air cargo nor the trucking industry until recently has been particularly active in promoting coordination between the two modes. Nor is the shipping public fully aware of the problems and potentials of air-truck coordination. Our staff has worked with the ĈAB staff in such joint interest matters as terminal zones in which air and truck shipments may be legally interchanged without Commission regulation. Also, the Commission's economic staff prepared a report on the problems and prospective developments in air-truck coordination.

Air-truck coordination has significance in both the domestic and international fields. Developmental problems common to both fields are the role of the air freight forwarder. For example, the CAB recently granted several motor carriers authority for air freight forwarding. Other matters include the use of containers as a coordinative mechanism, specific plans for expanding air-truck coordination through joint planning regarding rates, services, and facilities, and policy determinations in respect to the extent to which air carriers may utilize for-hire motor carrier transportation without coming under ICC regulation.

The CAB believes the entrance of motor common carriers into the air freight forwarder field will stimulate air freight. We are following this development closely, particularly in respect to the "monitored entry" approach to be used by the Board in acting on the applications of additional truck lines for air freight forwarding authority. The Commission is also interested in the effect of this activity on the overall operations, service standards, and profitability of the motor carriers concerned, the possible benefit of the Board's decision in stimulating exports through truckline access to potential exporters not directly served by airlines, and the relations of trucking lines' freight forwarding activity to their handling of small shipments. Although the Federal Aviation Act authorizes the establishment of airtruck joint rates and through routes and the creation of a joint ICC-CAB Board to regulate such coordinated transportation, carriers have made little use of this procedure.

We believe that the existing law and our administration of it have enhanced the advancement of coordination of all modes within our jurisdiction. However, there are still a number of major problems in this area, some of which result from gaps in existing law. The most serious is the lack of complete and effective regulation over coordinated through routes and joint rates by regulated motor carriers, As mentioned elsewhere in this report, we have recommended legislation to close this gap.

8

4. Common Ownership of Competing Modes.-As an alternative to coordination between individual carriers, coordination can also be accomplished by merger, consolidation, or control of one or more carriers by another. While the control, merger, etc., of a carrier by another of the same mode is well accepted, the control of a carrier of one mode by that of another is highly controversial, particularly in the case of acquisitions by railroads of competing modes. Congress has indicated

8 Chapter II, Section B (Small Shipments), pp. 66–77 supra.

Cf. Chapter II, Section A (Mergers), pp. 36–65 supra.

its particular concern in this area by including in specific sections of the Act, such as section 5(2)(b) which governs rail acquisitions of motor carriers, strict limitations on intermodal common ownership. In this connection, it is commonly and mstakenly held that the Commission has impeded the development of such intermodal relationships. The facts do not support this. On the contrary, the Commission's recent administration of the Act has been to permit common control or operation of carriers of different modes whenever consistent with the public interest and otherwise in compliance with the specific provisions of the Act itself. To the extent that carriers of one mode have been hindered in their acquisitions of carriers of another mode, that result has been dictated by the explicit terms of the Congressional enactment itself.

(b) International Coordination

The increasing international container movement is bringing problems of intermodal coordination between ocean carriers and the rail or motor carriers into sharper relief.

Interchangeability and free movement of containers is not all it should be. First, standardization of equipment, including hardware as well as dimensions, has not progressed far enough to assure full interchangeability from a physical viewpoint. Adequate transfer facilities also are necessary. Inland carriers, too, may have to secure special equipment, as bogies or container cars, to handle the steamship line units.

Even if physical barriers are overcome, inland movement may not be economical to either rail or motor carriers. The railroads often have to deadhead empty containers to or from the inland point, as water carrier units ordinarily may not be used for inland domestic movements. Motor carriers also have the empty haul problem, and schedules for ocean arrivals or departures may require movements at times when equipment is fully utilized. The motor carriers also often have to join together 20-foot units, and to place various size units on bogies for road hauls. In addition, the tare weight of maritime vans constructed to withstand the stresses of ocean transportation often is proportionately much greater than for highway trailers, tending to make over-the-road operation uneconomical. Conceivably the tare weight could result in loaded units exceeding legal weight limits. Mid-Atlantic motor carriers late in 1968 filed with the Commission increased rates associated with maritime van movements. The rates were suspended and investigated but on petition the order was vacated and the schedules were permitted to become effective. Railroads also have had under consideration what might be termed premium rates for transportation of ocean-carrier container units. At the present time, railroads, motor carriers and domestic forwarders have some freight all kinds rates (FAK) for container movements but ocean carriers are opposed to such publication. They prefer their specific rates on different types of freight, and spaceweight adjustments. The international shipper by inland and ocean carriers also faces different degrees of loss or damage liability by the respective modes.

While container movements by ship are generally considered to be more economical than similar trailer movements, some maritime industry groups make use of them. One basis for this approach relates to the container problems discussed above, especially the special transfer equipment sometimes needed. Another is the greater adaptability of trailers to relatively heavy or outsize loads. Trailer ships or vessels adapted to so-called roll on and off operations are in service between Atlantic ports and either Puerto Rican or Central American ports. The European nation consortium, the Atlantic Container Line, is expanding its fleet of vessels equipped for both container and roll on and off operations.

Three "Seabee" vessels are under construction for use between Louisiana and European ports, with delivery expected later this year. These vessels are designed to carry loaded inland waterway barges. Another California based service is expected to be in trans-Pacific operation by 1971; when fully established, it will utilize 6 LASH (lighter aboard ship) vessels. Five LASH vessels will be placed in North Atlantic-Mediterranean service. The Maritime Administration is providing subsidy support for Seabee and LASH ships but not for the barges. One LASHtype vessel is being constructed in Japan for an unsubsidized operation in the Gulf

area.

The combined ship and barge operations will make possible movements between points on inland waterways and overseas ports, avoiding not only the usual cargo handling and attendant delays, but also the necessity for entering congested areas. If manufactured goods or other nonexempt traffic should be carried, interstate movement within the United States would be subject to the Commission's jurisdiction.

We have discussed the developments in this area in some detail because they raise very difficult and complex issues of regulatory policy and administration.

The 90th Congress considered legislation, the Trade Simplification Act of 1968, S. 3235 and H.R. 16023, proposed by the Department of Transportation which would have authorized the voluntary filing of tariffs containing joint rates and through routes for international transportation by surface, water and air carriers subject to the jurisdiction of the Interstate Commerce Commission, the Federal Maritime Commission and the Civil Aeronautics Board. This legislation was not enacted. It was apparently predicated on the assumption that none of the three transportation regulatory agencies possessed jurisdiction under existing law to accept tariffs for filing containing international joint rates and through routes. Since that time the Commission has reexamined its position in this matter and particularly certain past decisions and found that, in its opinion, the prior interpretation of the statute was erroneous and that the relevant provisions of the existing law do confer upon the Commission jurisdiction to accept the filing of tariffs naming international joint rates and through routes. In letters dated April 1, 1969, to Chairman Magnuson and Chairman Staggers, we advised the Congress of this decision.

We are now reviewing the rules in our tariff circulars for the purpose of revising or eliminating any rules which may be set forth therein which might hinder or bar the acceptance of tariffs naming joint international rates and through routes. Beyond this initial step, however, further effective regulation in this area will involve many novel questions to which we are presently giving careful study.

E. DEREGULATION

Over the last decade, many proposals have been made to reduce or to eliminate certain portions of our economic regulatory jurisdiction. In general, calls for a substantial degree of deregulation have focused on a reduction in the degree of regulation exercised over the railroads, in particular, the regulation of minimum rates. Two basic arguments have been offered to support deregulation in this area. First, it is argued that the regulatory framework established by Congress dates back to an era when the railroad industry possessed substantial monopoly in the filed of surface transportation, a premise which has become obsolete with the development and growth of other competitive modes. Second, it is pointed out that substantial segments of the traffic carried by competing modes are exempt from economic regulation by the Commission. The most important of these are the exemption for the transportation of agricultural commodities by motor carriers under section 203(b)(6) of the Act, and the exemption for the transportation of bulk commodities by inland water carriers under section 303(b) of the Act. Since similar traffic carried by the railroads is fully subject to Commission regulation, it is argued that fairness and equity among competing modes requires either the elimination of the exemptions or a corresponding exemption for the railroads.

As the Subcommittee is aware, this highly controversial area has been before the Congress many times in one form or another. Particularly detailed consideration was given to the deregulation of rail minimum rates on agricultural and bulk commodities by the 87th and 88th Congress in 1962 and 1963 in connection with President Kennedy's 1962 Transportation Message which, among other things, recommended enactment of this proposal.10 In the alternative, the President recommended that the two exemptions mentioned above, be repealed in the interest of competitive equality.11

Our position on this matter has been to favor the repeal of these two exemptions in the interest of intermodal competitive equality rather than to effect a corresponding exemption for the railroads. The basic reason for the bulk commodity exemption for inland water carriers at the time of its enactment was that such traffic was not ssbstantially competitive with railroad traffic. Faced with the loss of much high-rated traffic to other modes, bulk commodity traffic is now a major and important part of the railroads' business. Furthermore, with improvements in the Nation's inland waterways, the railroads are far more vulnerable to diversion on this traffic than was the case in 1940 when the exemption was enacted. Similarly, the original basic purpose of the exemption for motor carrier

10 For a complete discussion of this subject, including the detailed views of the Commission, see Proposed Amendments to Federal Transportation Laws, Hearings before the Senate Committee on Commerce, on S. 3242 and S. 3243 (87th Cong., 2nd Sess.), (1962), and Transportation Act Amendments-1963, Hearings before the Senate Committee on Commerce on S. 1061 and S. 1062 (88th Cong., 1st Sess.), (1963).

11 1963 Hearings, p. 2.

transportation of agricultural commodities was to afford the Nation's farmers an economical way to transport their products to market.

The growth of a modern highway system together with a number of judicial decisions liberally interpreting this exemption have resulted in its having an economic impact far beyond that anticipated when the exemption was enacted in 1935. Although reduced in scope by section 7(c) of the Transportation Act of 1958, the continued existence of this exemption represents a serious case of competitive inequality.

Our belief that Congress should flatly repeal these two exemptions rather than extend them to the railroads is based on the following general considerations. First, there are great economic differences between the railroads and other competing modes. In particular, the substantial volume of fixed costs and excess capacity in the railroad industry tend to dictate a pricing policy that will cover the avoidable costs of the traffic involved plus some contribution to fixed costs. Absent some measure of regulatory control, the effect of such a policy, applied generally, could only lead to destructive competition between modes. It could also lead to a deterioration in the financial well-being of the proponent carriers. In this connection, it should be borne in mind that one of the principal reasons for conferring the minimum rate power on the Commission in 1920 was the prevention of excessive, and often ruinous, railroad rate reductions because of the effect of such reductions on the carriers. Given the present low level of railroad earnings, reflected in the two recent requests in Ex Parte 256 and Ex Parte 259 for general increases in railroad rates, this consideration would still seem to be relevant.

Second, while the forces of intermodal competition are intense and widespread, they are not universal. Many shippers still depend heavily on rail service, in many cases on one railroad. Again, absent any check on excessive competition, the likely result would be undue discrimination and other monopolistic abuses. Third, most deregulation proposals do not contemplate retention of other regulatory provisions such as those dealing with discrimination, rebates or other forms of abuses which harm both competing carriers and the public. Rather, reliance would be placed on the provisions of the antitrust laws for this purpose. Aside from the doubts which we and other have expressed as to the application of certain provisions of the antitrust laws, such as the Robinson-Patman Act, dealing with price discrimination, we have never been wholly convinced that the antitrust laws, the enforcement of which requires recourse to a judicial rather than an administrative tribunal, would provide a fair and adequate remedy in a complex technical area such as transportation ratemaking. In this area, there is an overriding need for a special procedure that assures relief before, rather than after injury has occurred.

Many of these same considerations apply to more recent proposals for substantial deregulation. For example, it has been suggested that motor carrier entry and rate controls be eliminated on all shipments below 500 pounds as a solution to the high rates and service deficiencies in the small shipment area. The nature of the small shipment problem has been discussed previously in Section B of this Chapter. 12 As discussed therein, we have pointed out that this problem is often most acute for the small or occasional shipper whose traffic is not economically attractive to the carriers. In that section, we have also set forth the steps we are taking to solve this problem. Deregulation in this area in the manner proposed would seriously impair our ability to assist the public in resolving this problem. While deregulation of small shipment traffic might benefit large volume shippers of this traffic between major points, we fail to see how it would improve the situation for those whose traffic is not desirable under the present regulatory

law.

In our opinion, neither the Act nor our administration of it unduly restrict the carriers' right to initiate such service or rate innovations to meet the competition of another carrier or another mode. However, we believe that the national interest in maintaining a strong and viable transportation system requires a measure of public oversight to prevent excessive competitive zeal from harming the public interest.

CHAPTER III-ADDITIONAL MATTERS NOT SPECIFICALLY COVERED IN THE SUBCOMMITTEE LETTER

The subjects discussed below in this chapter were not specifically listed in Chairman Hartke's letter of May 16, 1969. However, all of them involve basic 12 See pp. 290–294 supra.