I am most interested are unprofitable and would be terminated. troubles me a great deal, but I do not know the answer to it.

It

Certainly there is a great deal of suburban passenger service that is unprofitable, is that not right?

Mr. FORT. Suburban commuter service, that is right. There is a great deal of commuter service that is thought to be unprofitable, yes,

sir.

Mr. HALE. What has happened, for example, to our old friend the Long Island Railroad, that suffered acutely from its commuter service, I remember?

Mr. FORT. I think the Long Island has been permitted to increase its rates and as you know many things have been going on with respect to the Long Island Railroad. There are many developments that have taken place with respect to the Long Island Railroad, and while I am not familiar with the situation as a matter of personal knowledge, I understand things are looking better on the Long Island than they have for a long time.

There have been various arrangements made there with respect to taxes, fares, and other things. I am not familiar enough with them to talk about them. But I do understand that the Long Island-or the prospects on the Long Island-are better now than they have been.

Mr. HALE. I am gratified to hear it. It is not a railroad that enters into my own life particularly, and I seldom use it. Nevertheless, it means a lot to a lot of people.

Mr. FORT. That is right.

Mr. HALE. I think that that is all, Mr. Chairman.

Mr. HARRIS. Mr. Flynt, do you have any questions?

Mr. FLYNT. I want to join with the other members of the committee, Mr. Fort, not only in complimenting you but thanking you for this information that you have brought us in your statement. I regret that I had to miss a part of it.

On this question as you have suggested, following up the questioning by the gentleman from Maine, Mr. Hale, of the deficit problem, I notice you suggest that we defer action on that particular phase of it until we receive the report of the ICC investigation. That, of course, we probably should do.

In the meantime, to what extent do you think that this committee or any other group should go into the question of making possible action by the carriers themselves toward the elimination of these routes or schedules which necessarily operate at a deficit, and, of course, the more you would raise the fares the greater that deficit will become? Mr. FORT. You mean whether the Commission should do something to override the State authorities?

Mr. FLYNT. Yes.

Mr. FORT. My suggestion was, and I think that Mr. Ray made the same suggestion for the Department of Commerce, that your committee might wish to hold in abeyance consideration of legislation of that kind pending these developments that are now underway.

Mr. FLYNT. While, of course, we probably will withhold any definite action on it, your own thoughts on that might be of some value to us. I am sure they would be. They might aid us in consideration we might give to it before we go into the more thorough consideration of it.

Mr. FORT. As I stated in my paper, the railroads have repeatedly stated their position as being in favor of giving the Interstate Commerce Commission, a body charged with overall responsibility, certain authority with respect to the discontinuance of passenger trains which are losing money and burdening interstate commerce. We have thought that that was a sound doctrine, and we have been for it.

The Cabinet Committee was for it. However, in view of this investigation that the Commission has started, and since the thing has waited this long, we thought that perhaps it would be proper for your committee, with so much to do, and such an enormous scope of proposed changes before it, to let the matter rest pending developments in this investigation before the Commission.

It may well be, Mr. Flynt, that you will decide that you should have legislation of that kind. On the other hand, as I indicated in the paper, the State commissioners have a committee that is very much. aware of the seriousness of this deficit situation and that has made the individual State commissions much more aware of it than they have been in the past. I believe they are doing better than they have done in the past.

Mr. FLYNT. Referring to page 14 of your statement, Mr. Fort, where you say you agree with the Commission and with the Advisory Committee, you state that wherever for-hire carriage is performed under the guise or subterfuge of private carriage, it ought to be restrained or regulated. Which do you think would be preferable, to restrain it entirely or regulate it?

Mr. FORT. The Interstate Commerce Commission has had more experience with this subterfuge than I have or any of us have in this room. In its report to your committee it makes definite recommendations as to what should be done and suggests statutory language which I think deserves the consideration of your staff and of your committee. I think it is a difficult thing to reach, a very difficult thing to reach. I think that they should be regulated in the event that their services are in fact the services of contract carriers or of common carriers. They should be regulated like any other contract carriers or like common carriers are regulated.

Now whether it is necessary to go further and have some form of prohibition in the statute, I would not undertake to say. The Commission apparently thinks that there should be some form of prohibition in the statute.

Mr. FLYNT. But leaving aside for the time being, at least, the question of complete restraint or prohibition of it, it is your position and that of those whom you represent here today that it should have definitely been regulated whenever they engage in interstate commerce? Mr. FORT. Yes, sir.

Mr. FLYNT. That is all.

Mr. DOLLIVER. Mr. Fort, I join in the sentiments of the other members of the committee as to the excellence of your statement and I shall not be long in my questioning.

I refer you to page 24 of your statement which is your summary of conclusions. These questions are designed to clarify my own mind as to what your aim is and the implications of it. As far as the private carriage of goods or passengers is concerned, the Interstate Commerce Commission has no authority whatever, does it?

Mr. FORT. No, sir, not for legitimate private carriage. They have no authority for economic regulation. They have certain authority with respect to safety regulation.

Mr. DOLLIVER. So anyone that wants to can get in his car and carry a piece of furniture from here to any place he can get to with this without any interference except on the matter of safey and proper conduct on the highways.

Mr. FORT. That is right.

Mr. DOLLIVER. The place where you are asking for relief and where the Interstate Commerce Commission agrees with you is where this private carriage steps over into a for-hire carriage.

Mr. FORT. That is right.

Mr. DOLLIVER. And you're seeking a definition in the statute as to where that line is crossed.

Mr. FORT. That is exaclty right.

Mr. DOLLIVER. As to the contract carriers, what is the situation that they are in with respect to licensing or control economically by the Interstate Commerce Commission?

Mr. FORT. In the first place, the contract carrier may go into business under a less stringent requirement than those that are applicable to a common carrier. A contract carrier may get a permit if he is fit, willing and able, and if it is consistent with the public interest that he be granted a permit. A common carrier must get a certificate of public convenience and necessity, so that you start with that difference in the case of a contract carrier. In the second place, the common carrier must publish its rates and must not discriminate, whereas a contract carrier does not have to publish anything except its minimum rates and it does not have to publish its actual rates and it is free to discriminate as it sees fit.

Mr. DOLLIVER. And charge whatever he can get.
Mr. FORT. Yes; above the minimum.

Now, you can see that if the contract carrier is, in effect, a common carrier in that it undertakes to carry for anybody who wants the goods to be carried, and some of them have a great number of contracts, it has a great advantage over the person who is openly a common carrier, the other motor vehicle who as a common carrier is subject to more stringent regulations and requirements.

Mr. DOLLIVER. As I understood your testimony in the main body of your statement, the common carrier by truck carries a relatively minor part of the truck traffic in this country.

Mr. FORT. I would not say a minor part. The part of the truck transportation, intercity truck transportation, regulated by the Interstate Commerce Commission is substantially 32 percent.

Mr. DOLLIVER. And the rest of it is unregulated?

Mr. FORT. That includes both contract carriers and common carriers within that 32 percent. Now, I think some 3 percent is contract carriage. I would not undertake to say how much is contract.

Mr. DOLLIVER. So that the bulk of that kind of traffic by truck under the control of the Interstate Commerce Commission is unregulated.

Mr. FORT. It is not under control.

Mr. DOLLIVER. Now, what you are asking for then in connection with contract carriers is to get a closer definition of the meaning of that term in relation to common carriers, is that correct?

Mr. FORT. Yes, sir, and we prefer the definition suggested by the Interstate Commerce Commission in its letter to you to the definition suggested by the Advisory Committee. That is one thing. Another thing we want as to contract carriers is that they be required to publish the rates and make public the rates they actually charge or else file their contracts and make them public. The third thing we want as to contract carriers is that the Commission be authorized in granting permits for contract carriers to limit the number of contracts or shippers that they are to carry for, so that they will not grow into what are in effect common carriers. That is in keeping with the recommendation of the Interstate Commerce Commission.

Mr. DOLLIVER. In other words, there would be a certain number of contracts they could enter into without getting into the category of

common carrier.

Mr. FORT. That is correct.

Mr. DOLLIVER. Do you have any suggestion as to the number or the scope of those contracts or are you prepared to say?

Mr. FORT. I think that that would have to be left to the discretion of the Interstate Commerce Commission in the particular case. That is, depending upon the circumstances of the case.

Mr. DOLLIVER. And the magnitude of their operations?

Mr. FORT. Yes.

Mr. DOLLIVER. Now, the next thing you mention in your summary is the bulk commodity exemption, which refers specifically to the drybulk commodity exemption for water carriers. Under the statute at the present time that is not regulated at all, is that correct?

Mr. FORT. That is correct.

Mr. DOLLIVER. Now, would it be your expectation that if it were regulated which I understand you recommend, you could obtain part of that traffic for the railroads?

Mr. FORT. You mean, would all of it go to the regulated water carriers or would we get some of it?

Mr. DOLLIVER. To put it very bluntly and perhaps impolitely, would this repeal of the bulk commodity exemption give you some of that traffic for the rails?

Mr. FORT. We think that it would. It would at least give us a chance to get some of it which we have not got now.

Mr. DOLLIVER. Under present circumstances, is that door closed as far as the railroads are concerned?

Mr. FORT. That is right.

Mr. DOLLIVER. So you would expect to get some of that.

Mr. FORT. We would; yes.

Mr. DOLLIVER. If that exemption were repealed.

Mr. FORT. Yes.

Mr. DOLLIVER. Is it true that under present circumstances where you try to get some bulk commodity traffic, in competition with the water carriers, they can always undersell you? Is that the fact at the present time?

Mr. FORT. Well, I would not know whether I could say "always" or not, but I think what you have in mind is certainly substantially correct. We have no fair chance to compete with them for that traffic. Mr. DOLLIVER. Of course, you do have a greater rapidity of service

78456-56-pt. 1-38

than the water carriers and that is the advantage that you can offer for your type of transportation.

Mr. FORT. Many times that is not any particular advantage with some of these bulk commodities.

Mr. DOLLIVER. Now, the final thing you mentioned, Mr. Fort, is the question of passenger service deficits. As you have said, that that is a very grave problem. What is the status as to the accounting in railroads with respect to the cost charges that are made against passenger traffic? Is that a setup of the Interstate Commerce Commission, or does each railroad set it up for itself? How do we know what the proper costs are that are charged against passenger traffic?

Mr. FORT. The Interstate Commerce Commission has provided a formula for dividing the costs between the passenger business and the freight business. Some of those costs that are assigned to the passenger business are direct costs to the passenger business.

Mr. DOLLIVER. Such as the costs of passenger cars.

Mr. FORT. Others are allocated or common costs, that are divided. Now, the whole question of whether that formula is a correct or reasonably correct formula will be under review in this investigation by the Interstate Commerce Commission. Now, of course, the results from that formula with the allocated costs do not reflect at all what the out-of-pocket loss to the railroads is from operating passenger service. Those common costs would still remain in large part even if there were no passenger service. So that when you see those tremendous amounts like $700 million a year that is produced by this allocation and the use of the Commission's formula, you must bear in mind that that does not at all represent out-of-pocket loss by the railroads on account of the passenger service.

Mr. DOLLIVER. Actually there are some railroads in the country that would be glad to abandon completely their passenger service, is that not true? That is, from the standpoint of profit.

Mr. FORT. I suppose that there are. It becomes very complicated as to what you can abandon and what you cannot and what you have got to have in the way of passenger facilities as a security measure and matters of that kind.

Mr. DOLLIVER. Are there not actually some railroads that run no passenger trains whatever?

Mr. FORT. I think that the Virginian, if I am correct, does not run any passenger service. I understand they run 1 or 2 trains. I do not know any large railroad that does not. I am told that the Elgin, Joliet & Eastern Railroad does not.

Mr. DOLLIVER. How about the Toledo, Peoria & Western?

Mr. FORT. The D. T. & I. does not run any passenger trains at all. Mr. DOLLIVER. With respect to the abandonment of trains, this question that comes up very often in my own congressional district and State, and all through the wide open spaces. The abandonment of these passenger trains has an impact not only on the passenger business which is a very low minimum, but affects the mail service in these smaller communities. Do the railroads get any relief from the Post Office Department by way of keeping these trains on the rails, these passenger trains on the rails?

Mr. FORT. You mean special dispensation or charges from the post office?

Mr. DOLLIVER. Yes.