The Wheeling daily intelligencer. [volume] (Wheeling, W. Va.) 1865-1903, 1900-01-23
TELEPHONE CONSOLIDATION.

Bell Company Absorbs Nearly All the
Independent Subscribers In l(iehi-
gan.
DETROIT, Jan. ia gigantic tele-
phone consolidation has been consum-
mated. Ten thousand independent tel
ephone subscribers, located in forty-six
cities in Michigan. including Detroit,
5000 miles of Independent long distance
lines, 100 long distance stations.
representing fully seventy per cent
OF the entire independent telephone
business in the state OF Michigan, pass
ed into the hands Of the Michigan Tel
ephone Company. Charles ]. Glidden,
president, and Hon. John G, Burke,
general counsel, OF the Michigan and
Erie telephone systems, have been, at
the Russell House the past few days in
consultation with the managers OF the
independent companies.
John Stuart Mil clearly explained to
our Grandfathers how foolish people
were who expected the price OF any pro
duct would be permanently kept down
10 the cost OF production through war
OF competition. And now the good cit
IEens Of Detroit have practical illus
tration OF Ahe same lesson our grand
fathers learned seventy years ago, and
which has also been practically illus
trated every few years since the open
ing of the sixteenth century. The press
dispatche inform US that 1.-THE Michigan
(BelD Telephone Company has closed
the deal for Gbe control Of the two lnde-
pendent companies that were pioneers
and leaders in the independent tele-
phone movement, the Detroit Telephone
Company and the New State Telephone
COMPANY. governor Plngree and sew
eral Of his political and personal friends
were prominent In the organization OF
the Detroit company.
The Detroit Telephone Company was
organized on February 20, 1885. under
circumstances that led the citizens to
believe that It would prove strong ana
probably successful competitor OF the
Bell. It was capitalized at $1,0OOO0
Published reports show that the initial
working capital was obtained through
gently persuadlng many an ofioe-hoider
In the various departments Of the mum
lcipality, the policemen and the firemen:
to invest. on one or more shares of
stock on the installment plan. An ele-
CANT prospectus was then issued, show
Ing that on basis Of 5000 subscribers
there would be a certainty OF 10 per cent
annual dividends, together with an an
nual surplus Of more than 10000. after
paving ali fixed charges, Including 8
per cent on SlO0, 600 In bonds and all costs
OF operation and maintenance.
But there never was any surplus, ana
the company never earned dividend.
For the cost OF operating an exchange
far exceeded all expectations, and II was
sooE. found that tiiV cost OF mainten-
ance. fxed Charge and the outlay re-
duired for replacementB were aggregat-
ing more each quarter than the sub
scribers were paying In. So II became
necessary to adopt a new plan to rescue
the publlc-Bplrited gentlemen who had
benefited the good people OF Detroit by
giving them a competing telephone sys-
TEN. These good and loyal men owned
much capital stock that they generously
preferred should be owned by others.
But II II could not be shown that the
Detroit plant was a profitable Invest
ment how could the people be inyeIgled
into buying the stock? Thus these
generous gentlemen reasoned that II a
new telephone company could be organ
lied with the avowed object OF connect
ing up all independent exchanges in the
state, and connecting every farmer with
telephone lines TO the county seat. Its
stock could be easily disposed Of among
farmers and villagers. Then the pro-
ceeds of these sales could be applied 10
bearing the burden OF the cost of main
talning and operating the Detroit ex-
change. In this manner favorable
showing could be made for the Detroit
company, so that inexperienced inVes-
tors could easily be influenced into buy
Ing the stock. And the scheme worked
admirably, the villagers swapping at the
bait with the same Rvidlty that q Reu-
ben buys the gold brick" or the pack
age Of green goods.
The new State Telephone Company
was organized on February 8, 1897, with
capital Of 100000. The company
was organized for the purpose Of estab-
fishing an Independent toll line system
throughout the state Of Michigan, and
OF absorbing or building the necessary
local exchanges to compete with the
Bell plants. The stock was placed on
the market as perfectly safe invest
ment, and the financial prospectus
showed that when the company secured
$4,000 subscribers in small towns, at an
average annual rental OF $40 each, 1t
would have an income Of 5000. 900; that
only 100000 would be required to meet
all possible requirements, hence there
would be a balance Of 10000. or AN
assured 10 per cent dividend" yearly.
II was also stated that proceeds from
stock Bale0 will be Immediately utilized
IN the construction Of exchanges and
connecting toll lines, and in such man
ner rs to make the earning ability OF
funds secured commence at once. All
stock will be sold at It's par value only"
It was also stated that "a net annual
Income OF 10000 would be received
from certain toll stations" making the
total annual net earnings for dividends
$3.50, 000-an assured annual dividend OF
Is per cent for shareholders"
The final chapter as outlined In the
press dispatches shows that the "as-
sured annual dividend Of Is per cent"
never materIallEed, and that the con-
fiding shareholders did not receive all
OF the principal back, to say nothing Of
any interest for the three years use
OF their money.
After this company had been In op-
Grafton for some months the Sault Ste.
Marie (Mich.) News pertinently said:
"The New State Telephone Company
builds no exchanges with its own
money. It trades Its stock for so-called
Independent exchanges when the people
who have tried to make them pay be-
come tired Of the effort and are ready
10 sell out for anything, even for hand
somely printed stock certificates that
have no value. Does any reasoning per-
son suppose these shrewd people would
be peddlinE to clerks, seamstreRses,
frenen and policemen on the INSTALL
ment plan Is per cent investments with
the Detroit banks overlooking with
money, begging investments at per
cent?"
The good citizens Of Michigan natur-
ally concluded that tho Detroit Tele-
phone Company WOH MOI and sever had
been a splendid sueeeRs. either from
telephone or an investment standpoint
Lhn,,rh n Ind hnnn q Rnccnna from the