Evening star., 1902-03-13
TELEPHONE RATES
Argument Of Appellees' Coun-
sci Before Supreme Court.
EXORBITANT CHARGES
DIFFERENCE BETWEEN FACE AND
ACTUAL VALUE OF STOCK.
Comparison Of Cost Of Service in Wash
ington With That in
Other Cities.

Other Cities.
In the case Of the Chesapeake and Po-
tomac Telephone Company VS.. Manning
and others, argued before the United States
Supreme Court, a very full exposition of the
profits Of the telephone company was made
by counsel for Manning and others to
show that the charges Of the company are
extortionate. Messrs. Arthur A. Birney
and John ]. Hemphill presented the case
for Manning and others, occupying several
hours by their arguments. Mr.. Henry r.
Woodard and Arthur Peter are also OF
counsel for the appellees.
In reviewing the facts in the case coun-
sci for Manning and others showed that the
total assets of the National Capital Tele-
phone Company which was succeeded by
the Chesapeake and Potomac Telephone
Company amounted to s16s, ,465.14, and for
this the latter company delivered stock to
the amount of $750OOO it's total capital
stock being $2,650,OOO. The cost OF
actual construction that entered into the
account Of the old company was S9l 1901.
At this time the Chesapeake and Potomac
Telephone Company acquired all the rights
of the Telephone Exchange Company.
West Virginia corporation then operating
in Maryland. The consideration was 81
peake and Potomac Company. or TINS
stock $500. 900 was delivered to the National
Bell Telephone Company and $1,21O,OOO to
the Telephone Exchange Company. or this
last amount 100000 was to be passed to
trustees for the use of the Chesapeake and
Potomac Telephone Company, and subse-
quently s62, 600 of the amount was assigned
to the National Bell Telephone Company
and the remainder, $37, 400, sold on the mar
ket for $24, 1861. The Chesapeake and Po-
tomac Telephone Company received for this
issue of $1,9OOO 900, cash, bills receivable
and supplies $77, ,334 93. and plant valued
at $3GO.O0O; total, s34o,045.24.
The difference between the face value OF
the stock $780, ,0GW, delivered to the Ma
tional Capital Company, and the actual
value Of the property received (s16S, ,465. 1D
is represented solely by the valuation OF
the Franchises Of the latter company at
s5S1 ,534.6O. The difference between the face
value Of the stock ($1,900,O0W delivered to
the Telephone Exchange Company G34o,-
N4524 is represented solely by the fran
chses of the latter company, estimated,
81 ,554, ,954.76
Business in Other Places.
The Chesapeake and Potomac Telephone
Company since taking over the property
and franchises Of the other corporations
has carried on the business in the District
of Columbia throughout Maryland and
small part Of West Virginia. In conduct
Ing this business, as explained by counsel,
1t has charged 40 per cent of its general Of
flee expenses against the plant operated in
the District, where it's general Office is
kept. Since 1891 it has issued and sold
s5OO,OOO of 9 per cent bonds two-thirds of
which are also charged against the District
plant
court follows:
THE accounts Of cost were stated in this
case to September 30 1898 To that time
the company claims construction has cost
A mn or
prior to August. 1883. s91 1921; amount ex-
peLded by present company to December
81, 1897, SAL ,42G.55: amount expended for
nine months. ending Septembere 30, 1898,
there has been contributed by stockholders,
at any time, only such sum, If any, as may
have been put into the business by the pre-
decessors Of the present company, the
amount which the witnesses for the COM
pany fail to remember or do not know.
Those predecessors charged to construc-
tion S91. .1302l; but they made large
profits and had paid dividends Of 6 per cent
on 500 coo from the beginning and accumu-
lated a surplus in four years of ST ,2::54 93
it is fair to assume that great part of
this construction was paid from receipts,
or, at least, so much as, with the ST. 22343 33,
would equal the cost Of the plant. 1t may
safely be said that the telephone users
have paid the entire amount OF the cost
Of construction Of the plant as it now
stands. besides SIG, 80 for real estate
ard dividends to stockholders.
Earnings Of Company.
Eve have no data from which to state
all the profits Of the company but the
statements submitted by its expert account
art shows that the Washington plant in
the seven years beginning January l. 1891,
earned for the surplus account, S24S, ,226. .93;
for dividends s13S,75O; for depreciation
s53S61 .2s for the sinking fund required by
It's mortgages, $4,000, and for interest on
bends, $4S,027.3O, a total OF receipts over
outlays for other purposes of SOS. .S65.31
The cost of duplicating the company's
Washington plant as 1t stood in December
1898. was estimated by the appellants wit
nesses at S42S,000. The claim of the ex
perts, sworn for complainants, is that the
plant could be rebuilt for about S110 per tel
ephone station or s22o,O0O for a plant to
serve = 600 subscribers. The admitted prof
its, then, in seven years exceed the total
investment by stockholders by the amount
which sos, ,S65. 81 exceeds sl6S, ,4G51 or
$500 4OO.37. Surely these figures were enough
u make telephone users think the COM
pahy'S charge eXtortionate. This great in
come has been derived from a rate of
charges averaging, according to Mr.. Has
kins' tables, $106.01 per telephone station.
When the Chesapeake and Potomac
Company became the owner of the tele-
phone plant in Washington, in August. 1883,
the actual cost of that plant was 91,230.
The amount charged to construction since
that time Is stated by Mr.. Haskns as
SAL 1860. Its average annual charge to
mainte enance during the six years from 1892
to 1897 inclusive, was $13,1G5. IL this be
taken as fair average of the amount
charged to maintenance during the fifteen
and one-half years prior to December 81,
1898. we have $S33307 charged to this item
which, with construction. SAL. 1860, and
dividends $323. S43, makes a total for these
three items only, of 81 sos, ,626 all of which,
together with the unknown totals of
charges to interest, sinking fund. surplus
and depreciation, has been paid by users of
the telephone, and all of which has been
earned on an investment of s16S, ,465. A. part
of which also came from subscribers.
Bonds Issued.
'It will be claimed that the company also
spent $4,000, the proceeds Of 100000 Of
bonds sold in 1891, and Mr.. Haskins so
states, but he admits there is nothing on
the books Of the company to prove that any
part Of this money was actually spent in
Washington, and Mr.. Tompkins the COM