In an effort to improve this state of affairs and to bring the processing and disposition of claims more into harmony with the public interest, we adopted in that proceeding sweeping claimsprocessing regulations. We also ordered carriers to publish their claims rules and practices in their tariffs. Furthermore, we proposed that the Congress grant us the statutory authority to adjudicate disputed claims and to set cargo insurance standards for railroads, express companies, and water carriers in the same manner we now do for motor carriers and freight forwarders. Our adjudication of claims disputes would provide an effective remedy where none now exists. It would also make available to us a vast data bank from which we could fashion claim-prevention measures, and make judgments with respect to service, including the quality thereof, managerial effectiveness, and other matters of significance from the standpoint of economic regulation of surface transportation generally. But until we are given those requested powers and our regulations have been in effect for a longer period of time, we must rely upon what is really a paucity of essential data on claims. Therefore, we cannot measure realistically or on a national scale the precise effect of loss and damage claims.

We do not know and presently have no means to learn the total direct cost of claims nor what their full effect is upon commerce and the carriers we regulate. The lack of data on freight claims initially prompted us to require class I and class II motor carriers to file quarterly reports on their claims experience. Quarterly Report of Freight Loss and Damage Claims, 339 I.C.C. 678 (1971). More often than not the information which is available reveals only the amounts carriers pay claimants for lost and damaged property. Payments vary from carrier to carrier and these amounts do not reflect costs of processing claims and the maintenance of claim-prevention programs where such programs exist. Likewise, the effects of currently inadequate legal remedies and upward trends of insurance premiums are not fully known. Therefore, the magnitude and influence of claims on the quality of the industry's service as a whole are impossible now to define with any degree of precision. For our purposes in this proceeding, it is nevertheless sufficient to note the existence of this factor, call attention to its importance as a motivational force in the operations conducted by those carriers subject to our jurisdiction, and to point out that when claims get out of line-as they generally appear to be today-the needed balance among the primary factors can no longer exist.

d. Traffic flow.-The many variables which are involved in traffic direction, and the impact on service of the availability and tender of additional traffic for movement in one or another traffic lane are, at best, extremely difficult to measure. In terms of cost alone, the direction of tendered traffic can seldom be measured or estimated accurately. For example, if a carrier has an unbalanced volume of traffic moving between points A and B, the tender of more traffic may or may not be desirable from the carrier's standpoint. If that additional traffic tends to balance or reasonably spread the overall volume, it generally will be desirable. If what is offered, however, is for movement in a lane where lane where there already is an existing overbalance in volume, that same traffic will be less desirable or, perhaps, undesirable altogether to the carrier to whom it is offered. Traffic originating at a given point will often be destined to many points. Thus, working out the balance problems usually involves many other factors including the availability of suitable empty equipment, the cost of moving such equipment to more dominant traffic sources, and other tangible and intangible factors, all of which can and do produce additional costs.

Greater concern over immediate and identifiable costs is apparent in many of the decisions made by carrier management. Concern over the prospects for additional revenue seems in many cases to be secondary. Even the time that equipment becomes available must be considered in solving traffic balance problems. This is because a delay at one point-although it is for the purpose of receiving or delivering additional traffic which will tend to balance a carrier's operation and thus would seem to produce more revenue—may actually interfere with that carrier's ability to protect the interests of other shippers and defeat its own self-interest in retaining equally desirable or more desirable traffic at other origins.

e. Quality of service.-The quality of service provided by a carrier is a factor which is usually of utmost concern to shippers and receivers of freight. In the main, shippers consider service quality along with equipment supply and total transportation cost and make their selection of carriers on the basis of an overall service concept. Service quality, therefore, lies close to the heart of any inquiry such as this. It also attracts the attention of carrier management who must, for example, weigh achievable improvements in service quality against the cost of producing them in order that the other factors of revenue, costs, claims, and traffic direction can be kept in balance.

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It is very tempting to think of service quality as a result. It is, to be sure, but the point here is that it also is a factor which management must keep reasonably symmetrical with the others described above. Management may often be able to improve service quality but be unwilling to do so. At some point, further service improvements pass a point of diminishing return and generate a cost or other imbalance. In such a case, carrier management is unlikely to implement possible service improvements. Whenever the point of diminishing return is passed, or is about to be passed, carrier management is less inclined to act to improve service quality. Thus, if any contemplated action seems likely to cause one or more of the basic factors to be thrown out of line, that management is more apt to maintain or bring about a balance among them than it is to consider the narrower benefits of a particular service improvement. We hasten to point out that when an item such as overtime is reduced to save costs, or when freight is held at an origin point while additional tonnage is sought to improve a carrier's load factor," carrier management should review its priorities to determine whether its service is thereby adversely affected. Merely considering overtime hours on the basis of cost, or load factors on the basis of revenue, will lead eventually to a breakdown in service quality and the possible, if not eventual, loss of traffic.

The trend of diminishing levels of carrier service has become increasingly troublesome in recent years. In its reply statement, the National Industrial Traffic League (NITL) expressed the concern of its members as to the growing reluctance among carriers to provide fully responsive services. We need not detail in this report those other services, the curtailment of which we and the shipping public find so troublesome. We feel compelled, however, to state here our informed judgment that carriers which actively seek to rid themselves of what they consider undesirable traffic (and we have difficulty accepting the notion that there is any such thing), often find that the revenues formerly derived from the discarded traffic are not so readily replaced. The keen level of competition in surface transportation in this country frequently does not allow such a transition to occur fast enough. If, for example, some 10 or 20 percent of a carrier's traffic falls into a so-called "undesirable” category, the refusal to transport that traffic is an over-simplified, and wholly inappropriate and misleading response.

"The term "load factor," which in the parlance of the industry has several meanings, is used here in the sense that it describes the management objective of having the heaviest load on each vehicle that can reasonably be expected in efficient operations.

Many carriers deceive themselves into believing that such refusals represent a logical solution to the problems they encounter and must overcome in order to conduct profitable operations. But once the traffic has been discarded, it often is at that time that carrier management first begins to realize that its fixed costs and overhead expenses continue. The reduced revenues which follow curtailments in service, in the absence of a prudent and well-reasoned pairing of the carrier's facilities and/or equipment, usually cannot support those fixed costs or the resulting overcapacity. To offset this, rate increases are sought. Frequently, the net result is that a poorer quality of service is provided to the public at a higher cost. Such an unwitting squandering of resources by the publication of service restrictions in tariffs, or by imposing such imitations without the benefit of tariff publication, raises not only serious questions of carrier motivation but also grave issues as to their lawfulness in a regulated industry so deeply affected with the public interest as is the surface transportation industry subject to our regulatory jurisdiction.

Mindful of this background and the interrelated factors which tend to motivate carrier management in its decisional processes with respect to providing or withholding services, we will now turn to the positions advanced by the various parties to this proceeding. Those positions and the supporting evidence adduced by the parties are set forth at considerable length in appendix B to this report

POSITIONS OF THE PARTIES

The primary purpose of this summarization is to facilitate the framing of the issues we should resolve in this proceeding. Understandably, the parties who submitted initial representations and statements in reply follow lines of self-interest in their accounts of various service problems and the solutions they recommend to us. Their representations have been exhaustive and of great value to us in our present effort.

Shippers and shipper associations" generally oppose the publication by carriers of tariff rules by which such carriers would require the prepayment of all freight charges. Some say that inflation will be aggravated by the full implementation of this requirement.

"In the past this Commission has found that the right to service is conferred equally upon both shippers and receivers of freight. Williams Motor Transfer, Inc., Extension-Granite, 67 M.C.C. 735, 739 (1956); and Dallas & Mavis Forwarding Co., Inc., Ext.-Galion, Ohio, 72 M.C.C. 653 (1957). We have accorded equal weight to the evidence submitted by such parties and largely have ignored any distinctions as between consignors and consignees which may have been made in the evidence.

C.O.D. AND FREIGHT-COLLECT SHIPMENTS

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Most of them object also to the publication of restrictions upon the provision of c.o.d. and order-notify services. Few offer comments upon the refusal or contemplated refusal of motor common carriers of property to provide service on shipments transported under combinations of rates unless such shipments are tendered on a prepaid basis. However, their general positions against the mandatory prepayment of freight charges can accurately be said to embrace this more specific type of service restriction.

Carrier respondents and their organizations, on the other hand, initially challenge our jurisdiction to act affirmatively on their exercise of asserted options to curtail certain types of services. They rely mainly on common law principles and prior decisions of the courts and this Commission to support their position that the discontinuance of certain services is optional with them and therefore lawful. Somewhat secondarily the carriers rely upon disparities in their operating costs that assertedly are attributable to the provision of those services which many of them now seek to limit.'

Governmental interests generally stress the public interest in the involved services and the dominant role which it should be given in the disposition of this proceeding. Basically, the position of the governmental bodies is that serious impediments to commerce are likely to follow further reductions in the quantity of available transportation services. Their recommendations to us generally follow a more conciliatory theme than those positions taken by shippers and respondents. The Department of Defense, however, maintains that limitations upon freight-collect service (which consistently has been available and provided in the past on commercial bills of lading) affect the national defense in an adverse

way.

Other concerned parties, such as Chase Manhattan Bank and Educational Resources, Inc., criticize accounting and other control methods currently employed by or required of carriers. They recommend that we act in this proceeding to bring about a modernization of these methods.

Mandatory prepayment of freight charges.-Shippers and shipper associations direct most of their attention to carriers' proposals to require the prepayment of all freight charges. They claim that the

Although it may seem premature at this point, our first impression of what is in issue in this proceeding is whether rising costs attendant to particular services which were not required to be provided under the common law can today form the basis for the abolition of such services by carriers subject to economic regulation under the Interstate Commerce Act.