The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1886-03-10
TELEPHONE CHARGES.
An Effort to Show that Profit Can Be Made
at the Month Rental

An Effort to Show that Profit Can BE Made
at the Three-Doilars-a-MonthR Rental
Chicago Tribune
The Central Union Telephone Company has
adopted bold tactics in Withdrawing its service in
Indiana in order to make the people suffer pen
atty for the law enacted by the last Legislature
limiting telephone rentals to 1886 per annum.
The pretense is made that the service cannot be
rendered at the legal rates without loss but in
view of the light recently thrown ON the tele-
phone business, il will be difficult to find any
candid personiwho will credit such statement.
The exorbltant charges made by these companies
heretofore will not be accepted as standard for
the future. The closing of the telephone ex-
changes in Indiana is not caused by fear that
fair profits cannot be made but is part
of a bluff game to secure the repeal
of the Indiana statute and prevent the
adoption of similar laws in other States The
local company is no doubt acting in this matter
under the direction of the Bell corporation,
which can suspend its service without any dan
ger of a competitor entering the field, and hence
feels privileged to allow the people telephone ia.
cilities only on condition that no limits are put
to the profits. The telephone company proposes
to enforce a sort of boycott against the people of
Indiana, in the hope that the Legislatures of
other States may profit by the example
In the contract between the Western Union
and the Bell company the former allows the lat.
ter 30 per cent of its receipts for commissions
and expenses, indicating that the two corpora
tions expected to divide profit amounting to
about 20 per cent. OF the revenues. According
to all appearances nearly the same rule of calcu-
lation was adopted by the local com panes, and
many of them have been able to Sc
cure profit of 80 per cent, after
paying royalties to the Western Union
and the Bell corporation. A well-informed cor
respondents of the Tribune in recent commune
cation, estimated that the telephone plant now
in use In Chicago cost $44 600. This does not in
clude, however the cost of wire connections.
At a rental of $l25, the annual receipts would be
$496 $40, after allowing 49, $50 interest on the
original investment. What amount of profit
does this representa- The telephone service calls
for cheap labor and inexpensive mechanism, and
the companies pay low rents. The cost of keep
ing up the lines is not known to the public, but
it cannot be great After full allowance is made
for expenses and the heavy ROYALTIES paid the
Western Onion and the parent telephone com
pany, it seems clear that many of the local ex-
changes must be making from so to 100 per cent
on the investment. In large cities it is claimed
that the great extent of the system justfes high
rates, but 1t is plain that the do not in
crease in the same ratio as the number of instru
ments in large exchange secures great
revenues with very little increase in the cost of
service, and it furnishes its patrons but few adj
ditional facilities. The average subscriber in
Chicago seldom makes frequent or customary
calls for more than fifteen or twenty places, aud
has very infrequent use for the remainder of
the 4000 possible connections.
At the rate fixed by law in Indiana the Chi
cago exchange could secure $144, 600 per annum,
which would represent fair profit on an invest
ment estimated at $44 000 exclusive of the cost
of strngng wires and putting in instruments,
and in business where the expenses are light.
All the facts seem to show that the Indiana Leg
islature figured carefully, and allowed the COM
panies a wide margin in permitting charge of
$50. But the government suit may relieve the
local companies of the royalties now paid the
Bell and the Western Union, and in that event
telephone charges may be lowered still further
But If these companies persist in resisting
reasonable regulation, interesting question
may arise as to whether they do not forfeit their
franchises when they cease to devote them to
public uses The days of telephone monopoly
drawing to close, and the companies had
better submit to fair regulation rather than run
the risk of worse thing coming upon them.