Evening star., 1901-05-17
CHARGES
Further Comments by Prof Frank
Parsons Of Boston.
WASHINGTON RATES ANALYZED
Judge Barnard's Decision Regarded
as Judicial Blockade.
STOCK WATERING AND RATES

STOCK WATERING AND RATES
In pursuance of a custom established by
the industrial commission, the testimony
given before that body in January last by
Professor Frank Parsons of the Boston
University Law School on the subject of
telephones and other public utilities has
been considerably revised for the final
publication and in it's latest form it con-
tains much new matter of interest to the
people of the District, bearing as it does
directly upon the controversy over the
local telephone rates caused by the legisla-
ton of 1898. Professor Parsons testified
before the commission that he thought 1t
possible for a corporation to furnish a
house or business phone in Washington
for $40 or $35 unlimited He went on as
follows:
"One of the reasons why the Bell COM
panies think they cannot furnish service
at such rates is the state of their capital
ization. The water in their system is hard
to deal with. For example, the New Eng
land Telephone Company Operating in
Boston and other cities and towns of
Massachusetts and New England) is capi
talized at more than $500 line, whereas
President Holbrook finds that the system
could be duplicated for less than 500
line, there is an excess charge of $40 or S12
per phone year. Then the general expenses
salaries of managers and officers, and
other office and general expenses amount
to sum almost as great as the whole sum
put down to operating expenses proper.
For each subscribers station in the New
England Company the average receipts
are sos per phone year: at least $40 must
be deducted on account of over capitaliza-
ton; and 81 or Sc more on account of eX
cessive office charges. The operating ex-
penses' proper are stated at about $1l per
station and maintenance at $24. The re-
port does not state just what items go to
make up this maintenance account and it
is so out of proportion to the cost of main
tenance in public systems as to indicate
that it is affected by the common corpor
alton custom of charging up to mainten-
ance large amounts that ought to go into
the extension and Improvement account.
maintenance charge that would dupli-
cate the entire system in about four years
is certainly very high. The proba bilities
are that an allowance of $11 for average
operating expenses per phone year, $4 for
general expenses. sl5 for maintenance in
Guiding depreciation, and S5 for interest,
making a total of $50 per year, constitute
sufficient charges even in very large
city.
Judge Barnard's Decision.
II am aware that In Manning V Chesa-
peake and Potomac Telephone Company
Court of the District of Columbia has held
unconstitutional an act of Congress fixing
maximum telephone charges in Washing
ton at 500 year, with one telephone on a
wire. $40 with two telephones on a wire,
$50 with three telephones on a wire and
SO with four or more on the same wire GO
United States Statutes at Large, 537. 53S
chap. $40, June 80, 1888, but a careful
reading diScloses sufficient evidence on the
face of the opinion to invalidate the decis-
ion when the case comes before the court
of last resort, the supreme court of pub
lie opinion. The ground of decision was
that the rates fixed by Congress We're un-
reasonably low, the evidence being the tes-
timOny and accounts of the Chesapeake
and Potomac Telephone Company doing
business in Washington. In 1898 the COM
pany had little over 1900 telephones in
use. 1t had been receiving s135 for a bus
mess phone and had averaged 800 in
come for every phone in use. 1t was es-
timated that the new law would reduce the
company was paying about $40 per phone
in interest and dividends and $50 per
phone to the Bell Telephone Company
and the Western Electric for receivers and
transmitters used by subscribers, drops on
the switchboard in the central office and
the use Of patents the Bell company may
hereafter acquire. 1t claimed an average
annual working expense of S71.2O per
phone. The capitalization was $40 per
phone $500 bonds and 1910 stock).
Now, let us look at these items in the
li6ll VI OlieT IdClS Sldteu IN the opinion.
The actual value of the plant was found to
be $441 1876 as against $95O,OOO capitaliza-
ton. or less than $500 real capital per
phone instead of the s47O of existing
stock and bonds, making the fair capital
charge not over 80 per phone instead of
500 But further, very large part of the
500 was due to the fact that the plant
was not used anywhere near up to it's ca
pacty, and this in turn was probably due
to the high rates maintained by the COM
pany. A large part of the capital outlay
was for underground construction putting
In vitrified terra Gotta ducts under asphalt
pavements. The court said that the cost
o. additional ducts to provide for future
growth of business is very trifing and 1t Is
in evidence that some three or four thou
sand subscribers could be served by cables
to be drawn in the vacant ducts now MAIN
tanned. That is, the business could be
doubled or trebled without more ducts and
even further increase could be provided
for at trif1ing expense. If the rates enact
ed by Congress had been put in operation
the subscription lists would doubtless have
expanded greatly. and it is quite probable
that the real capital per phone would have
been speedily reduced to the neighborhOOd
of 500, or $3.50 at most, in spite of the fact
that Washington is city of magnificent
distances l know the judge doubted any
substantial increase of ST ,scribers through
lower rates, but the facts prove that the
doubt was not well based. The following
table presents a few of the facts bearinp
on the relation between rates and the use
of the telephones: