As indicated by this data, the industry is one which is dominated by a small fraction of the total participants. The vast bulk of the carriers in the industry contribute less than one percent of the aggregate revenues. All major household goods carriers employ agents to sell their services and to provide most of the services associated with the transportation of household goods. There are approximately 8,000 agents engaged in interstate operations. As of January 1, 1982, the five largest carriers employed collectively 3,254 agents. The average operating revenue for these 3,254 agents was, in 1981, $384,000. Industry wide the average revenue per agent is believed to have been 300 to 325 thousand dollars in the same year. Appendix A contains the findings of a study made in November, 1975 of the distribution of agents by State in relation to the population of each State. The data used were the notices of Agency Relationships which the carriers were required at that time to file with the Commission. As indicated by the study findings, there was at that time one agent for every 26,904 persons in the total population. It is believed that substantially the same number of agents represent the industry at this time. The household goods industry relies heavily on purchased transportation to accomplish the intercity movement of traffic. Although some of the smaller carriers utilize carrier owned vehicles and salaried drivers, the vast bulk of all intercity household goods transportation is accomplished using trucks and drivers acquired under lease arrangements, either with agents or with independent owner-operators. During 1981 the ten largest carriers reported that they collectively operated 648,581,447 miles in the performance of their operations. Only two of the ten, Atlas Van Lines and Burnham Van Service, reported any mileage attributable to carrier owned equipment and overall 98.84 percent of the total mileage was operated by leased equipment. One view of the household goods transportation industry is that the larger carriers in the industry are essentially retailers of a transportation service which they purchase from the estimated 8,000 agents and 12 to 15 thousand owner-operators and which they sell to the general public. This situation materially impacts on how the industry functions and, influences how the carriers respond to fluctuations in the market and opportunities to amend their traditional industry practices by the adoption of innovative price and service options. The intercity revenue realized from the transportation of first proviso traffic is divided between the carrier, the agent and the owner-operator in substantially the following manner. Agent The agent usually receives around 20 percent of the intercity revenue as a commission for selling the carrier's services and for registering (booking) the shipment with the carrier, preparing the initial paperwork (the estimate, Order For Service and bill of lading) and for over-seeing the conduct of the transaction up to the time that the shipment is turned over to an owner-operator for transportation. Owner-Operator The owner-operator receives between 55 In and 65 percent of the intercity revenue for performing owner-operator also provides, within certain limits, Carrier The balance of the intercity revenue, from 15 to 20 percent, is received by the carrier and compensates for the providing of a variety of services essential to the overall operation. Included are the providing of operating authority, the publishing of tariffs, the securing of insurance, central dispatching and coordination of the routing of vehicles consistent with the availability of additional shipments, claims investigation and disposition, national marketing and national advertising. In addition to the intercity revenues the carriers also realize substantial revenues from the performance of non-transportation accessorial services. These revenues normally go to the agent or owner-operator as compensation for providing shipping cartons and crating, for packing and unpacking, for providing extra labor, extra distance, stair and elevator carries and for handling pianos or bulky items. Also the agent derives revenue from the performance of local transportation and for providing storage in transit services in relation to the handling of intercity shipments. The foregoing descriptions of how the household goods industry divides revenues between the carriers, agents and owner-operators is, of necessity, very general. Actually, no two carriers operate in exactly the same manner and the divisions of revenue between the three parties varies from carrier to carrier. The purpose at this time is to provide a general understanding of how the industry functions to assist in an evaluation of how and why the industry is responding to the changing regulatory environment and the changing demands of the market place. PART IV Impact of Legislation and Regulatory Changes on the Household Goods Transportation Industry and Market "During the years between 1936 and 1980, the household goods industry conducted its operations pursuant to the former Interstate Commerce Act, 49 U.S.C. subtitle IV. While the industry developed significantly during that period, there was little innovation in pricing or service. Congress enacted the Household Goods Transportation Act of 1980 with a threefold policy in mind--the reduction of unnecessary regulation, the strengthening of consumer remedies and protections, and the establishment of maximum carrier flexibility in pricing their services and meeting the needs of their shippers.1/ Like the Motor Carrier Act, the bill stressed competition and reduced regulation as means of achieving a better and more effective motor carrier system". As result of enactment of the Household Goods Transportation and Motor Carrier Acts of 1980 and an amended regulatory philosophy, the industry is now operating in a new and different environment which is bringing changes to the way it functions and which promises even greater change in the future. Up to this time the relaxation of restraints against entry has produced no major reshaping of the industry. The transportation of household goods is a highly specialized undertaking requiring a considerable investment of money, effort 1/ H. Rep. 96-1372, 96th Cong. 2d. Sess. 5 (1980). |