Whatever the justice of those complaints may have been, I think that this situation wouldn't be operative in Alaska trade because we don't have parallel railroads and water carriers. So it might be that it would work out much better here.

I would assume, without having sure knowledge on the subject, that if this were done the law sooner or later would contain provisions for certificates of necessity-would almost have to-which wouldinferentially at least-confer grandfather rights upon existing carriers. How does that strike you?

Mr. CHAPADOS. It would appear to be the only fair way to approach the problem. I am in no position to judge the number of carriers and the services that are being performed. But certainly with any growth in the State of Alaska, of the type that we project now, there will be a need for practically any carrier that is in existence today to carry on the traffic that will be available in the future. So perhaps not too much harm would be done by going along with the granting of grandfather rights to the various carriers that are now operating.

Senator BARTLETT. You think it would be in the public interest to arrange a situation whereby a fellow couldn't lease a barge, we will say, and go around to the shippers and say, "I'm going to go up on Wednesday of next week and I will quote you a rate 30 percent below that offered by the existing carrier, and you arrange for your shipment."

It comes up and you save this money. Then he comes to you again and you give him your business likewise, only to discover that he hadn't got a full load that time and doesn't make the trip. I have heard these complaints, in other words, that certain services are offered on an irregular, infrequent basis that aren't always performed. Sometimes the carrier doesn't go from Seattle or from another port on the coast at the time promised, all of which leads to this question: Do you believe it would be better for the public, the consuming public I mean, to have regular, dependable service at established rates which are known in advance, rather than to subject the trade to the intense competition which has been present in some cases now and which may occur with increasing frequency by the kind of service described? Mr. CHAPADOS. I certainly do. I think that the situation that you describe does exist to some extent and that it is very harmful to the general development of the transportation system to the State of Alaska.

I think the public suffers and I think that generally it would be a very, very poor situation to permit that to continue.

Senator BARTLETT. Mr. Chapados, I heard-and this generally is by way of hearsay-that a talk was made at the State chamber of commerce at Ketchikan the other day relating to transportation, and the principal recommendation made in that speech was that we are new here, we ought not to rush pellmell to regulation in respect to all forms of transportation, that we ought to take time and have a good, long look and perhaps wait 5 years before regulation of any kind-State regulation or Federal regulation.

Mindful of the fact that I have disclosed to you that I don't know whether this actually occurred, but assuming that it did, would you have any comment to make on that?

Mr. CHAPADOS. I certainly would. My feeling is that we need regulation and we need it now. But I think that it should be taken in steps, and that in the beginning we should establish the right of the various carriers to operate in the State, and that they should be limited in numbers in such a way as to provide adequate services at reasonable rates to the public, and that at such time if this is not the case that additional carriers should be given the opportunity to operate.

I think it is very important that right in the beginning we should establish this right. Because to try and go beyond the establishment of the right to operate, to prepare the tariffs, and to try to regulate, is almost an impossible job to begin with. I think some very basic approaches should be taken in regulation and that you should grow into this matter of the refinements of the tariffs and many of the other considerations involved. Basically we certainly should determine who is entitled to operate and make sure through our regulatory body that the public is protected in that there are enough carriers and that the average level of rates is such that they are compensatory but not creating a hardship to the public, and that at such time as a need for additional carriers is recognized, that then the carriers be given the opportunity to participate.

But unless carriers can operate in the State or in any place for that matter, and make a living at it or pay their bills and expect to get a reasonable profit, we are never going to have a good transportation system.

I feel that if we were to restrict the numbr of carrirs to an insufficient number, then the public is going to suffer because they are going to offer poor service and the rates are going to go up. I think there is a delicate balance there, that the regulatory group should handle. And I think this is the time in Alaska when it should be done. If we wait 5 years we are going to have a situation where we will never be able to get to the point where we can even begin to regulate, because I think there will be too much opposition against it by those that have already dug in.

Senator BARTLETT. Mr. Chapados, the other day the Matson Steamship Co., serving Hawaii, according to the papers, filed for a rate increase, the third substantial increase in less than 2 years. This relates directly to a broad inquiry made by this committee earlier this year into the whole proposition of so-called domestic offshore shipping, where it is going and how and why and what, if anything, should be done by Government in consideration of the fact that to all intents and purposes not only Puerto Rico and Hawaii, literally islands, but Alaska, in respect of transportation, is one, too, and that the people of Puerto Rico, the people of Hawaii, and the people of Alaska, small, comparatively, in number in each case, are required to support separate merchant marines.

Much testimony was offered to the effect that appropriate development of these areas could not occur with constantly increasing maritime transportation costs.

This leaves aside entirely the argument of whether the rate increases are justified. They are coming, they have been experienced. The committee was told that the increases of the past since the end of the war are fractional to those foreseen during the next 10 or 20

years, when, among other things, existing fleets will be worn out and the ships will have to be replaced.

Consideration has been given to Federal Government assistance of one kind or another. The formula whereby this may be done is not easily arrived at. Indeed, it is most difficult. Furthermore, coastwise shipping has never in the history of the United States Government had financial support of any kind.

There is, of course, a substantial body of opinion which holds and would continue to hold that it is unnecessary and undesirable for the Federal Government to intervene in a matter of this kind.

My view is exactly to the contrary. I feel very positively that Alaska, for example, cannot develop its resources and create a healthy economy with a constantly accelerating maritime transportation increase in rates.

Have you considered this matter, Representative Chapados, and if so would you have any comments you might care to make?

Mr. CHAPADOS. It is certainly true that continual increases in freight rates to the State of Alaska are going to have an effect on the development of the economy. They will slow it up and reduce the interests of outside capital and other activities that might help with the development because of the cost involved. There are many other costs, of course, that are high in the State, and all of these things contribute to an overall problem of trying to operate within the State of Alaska.

As far as the transportation goes, or any activity for that matter, to my mind these activities have to stand on their own two feet. They have to be able to provide a service that in turn people are willing to pay for to the extent of what that service is worth so that it is producing revenue that is compensatory.

It would appear to me that if subsidy were suggested to carriers between Alaska and the United States-the continental United States that we would just be helping out perhaps during a period of time that it might take for the proper type of development to take place which would permit carriers to return loads from Alaska into the continental United States and other points, whereby they could then reduce the rates that they have one way at the present time.

I think that eventually transportation and the flow of traffic, if it goes in both directions, will adjust this situation to the point where the rates will be reasonable.

But it just costs a certain amount of money to operate a carrier between the States and Alaska and it costs any business for that matter, depending on the conditions under which they have to work. I think one of the things that perhaps comes into this thought is the fact that modern methods of handling and new types of equipment, and that sort of an approach, is one that must not be overlooked. I think that all carriers have a responsibility to recognize the trends and to try and adjust their operations in such a way as to be competitive with the use of improved handling methods and improved equip

ment.

Certainly this is not as easy as it might sound. A company with an investment for example in a large fleet of ships just can't put the ships in drydock and go out and buy barges or some other method that might be less expensive to operate. But I think that in the course of the regulating by the regulating agency that we are going to have to

take these things into consideration, and that they are going to have to think in terms of approving rates that eventually are going to cause these people within a time limit, within a reasonable time and within their means, to adjust themselves to the change in the manner of operations in such a way as to produce a lower level of rates.

There is no question about the fact that if rates continue to increase, they are going to have an effect on the economy here in the State of Alaska.

Recently the rates-I think they are the rates between the Far East and Alaska-have been reduced considerably. That in itself is an example of the kind of thing that can really give the economy of Alaska a shot in the arm because it puts us in a position to be competitive in a foreign market.

If we can't reduce our freight rates into the State and out of the State, then we are going to have that in addition to many other problems to overcome.

Senator BARTLETT. Representative Chapados, I want to thank you for a most informative and enlightening statement. You have painted a broad picture here and have made recommendations which will be very helpful to the committee.

Mr. CHAPADOS. Thank you very much, Senator Bartlett. I enjoyed very much being here.

Senator BARTLETT. Mr. Vogt.

STATEMENT OF GEORGE VOGT, FAIRBANKS, ALASKA,

REPRESENTING CHECKER AND YELLOW CABS

Mr. VOGT. I am an attorney, Senator Bartlett. My name is George Vogt; my address is 319 Cushman, Fairbanks, Alaska.

Ordinarily I only represent the Yellow Cab. Recently, however, we have had certain problems come up in which, because of the unified attitude of both companies, I have been representing both Checker and Yellow in this town.

The problem that I have to deal with doesn't deal with the larger and broader areas of transportation in Alaska, and yet it does. Your cab companies are more or less of a public utility in Alaska. At least in my experience of having been around Alaska some 12 years it has always been rather unfeasible for bus type transportation to serve the communities because of the fact that in the winter you will find a larger number of people who seek transportation than do in the summer, and if bus companies can make a go of it, they have only peak load hours and they might be helpful during those hours, but the result of it is that they inevitably, so to speak, fall on their face during the rest of the day.

The practical results of this has been that the cab companies have developed into what is in essence the only public transportation system in the community.

We have at the present time two, I would say, rather peculiar problems. One of them has to do with the Army base at Fort Wainwright. When the Air Force had control of the base, of course, at Ladd, we had fares set up on zones established, that sort of thing. Senator BARTLETT. Zones within the military reservation?

Mr. VOGT. Yes. And, of course, these fares ran from the town to certain areas on the base and return. Then we would have within the post itself certain specific fares, particularly fares running from certain areas, residential areas of the base, to the commissary, for example.

Actually it had been some 17 years since the cab companies had obtained or asked for a raise in fares to what is presently called Fort Wainwright.

The Army came in. They had a change in personnel and at this point we were suddenly faced with a problem. The Army told us there are no zones in existence here now; you are operating on a courtesy basis only. This is the Army; this is not the Air Force. And we faced what I would call a somewhat military attitude.

We had several negotiations regarding the possible setting up of new fares, new zones, and that sort of thing. Among other things that they wanted, for example, was a taxicab operating entirely on base, on base stands. From prior experience both cab companies had known of other people who had tried this particular operation and inevitably it had turned out to be disastrous financially.

Naturally, of course, under those conditions the cab companies did not want to comply with that particular request of the officials at Fort Wainwright.

We actually gave in considerably. We had offered to reduce the fares from the living quarters, officers quarters, and I forgot from what area, I believe we offered to reduce from $2 to $1.75 plus a change in the package rates.

Senator BARTLETT. From where to where?

Mr. VOGT. This would have been the officers quarters, 4100 area, the housing area, to the commissary. We had offered to reduce that fare from $2 to $1.75.

Senator BARTLETT. That is from the officers quarters to the commissary?

Mr. VOGT. Yes; it is.

Senator BARTLETT. How far is that?

Mr. VOGT. That would be from Ladd housing, general housing, not the commissary.

That would be about a mile and a half or a mile and a quarter, approximately. The problem involved, however, is that the cab must come from town. This would make a total trip of approximately, certainly roughly, 9 miles.

The fare for that has been $2.

On a recent trip to Detroit, less than 2 weeks ago, I was checking the mileage rates there. Their rates run approximately 17 cents, something in that area.

Nine into $2 comes to a little over 20 cents.

Considering the high maintenance costs up here in the winter, et cetera, and also the fact that you inevitably have a dead load coming back, we were obviously, I think, considering it unreasonable.

Senator BARTLETT. What do you mean by package rates?

Mr. VOGT. Ordinarily what you get is the housewife going shopping, that particular situation. We had arranged for the first two packages to be, as I recall, free.

Senator BARTLETT. What is a package?