The burden of the defense therefore falls upon the railroads, and the railroads assert that the policy of quoting low rates to meet the force of water competition is necessary if the comparatively moderate rates to intermountain territory are to be continued. Unless—said Mr. Spence of the Southern Pacific, in his recent testimony before the House Committee on Interstate Commerce—the rail lines are permitted to make rates which will hold the through business, the terminal roads will lose all of the net revenue derived from the port rate upon what is a very large volume of traffic. The millions of dollars involved cannot be withdrawn from the net revenues of the railroads without impairing their efficiency and usefulness, while to compel the carriers to apply sea-compelled rates to all traffic would yield an inadequate revenue, because it would mean that the traffic as a whole would be carried at rates which were not sufficient to cover all the elements of cost, including fixed charges and other similar expenses.[407] Further Comments The most casual description of any basing system such as the one which the railroads apply to transcontinental freight, suggests at once several matters in respect to which special defense and justification are required. One just cause of complaint arises out of the fact that the through rate to any point except to a basing point is made up by the addition of two rates, each of which includes an allowance for the cost to the carrier of providing terminal facilities, or four terminals in all, whereas no actual shipment makes use of terminal facilities at more than two points, namely, the place of origin and the place of destination. A second cause for criticism of a basing system is due to the striking disregard of distance which is inherent in it. Shippers are not only apt to feel that for reasons of natural right rates for transportation should vary with the distance moved, but, as we have seen, they are usually quite incapable of being convinced that the costs of shorter hauls are not less than the costs of longer ones, so that for this reason also the nearer places should enjoy the lower rates. Again, and this also has been suggested in the preceding discussion, a basing system is attacked because it is said to centralize business unduly by forcing the distributing business into the control of a few localities such as the Pacific Coast terminals, to the exclusion of outlying cities which could handle it more cheaply and more conveniently under a proper adjustment of rates, by reason of their greater nearness both to centers of supply and of consumption.