The Paducah sun. [volume] (Paducah, Ky.) 1898-1906, 1905-09-14

than those in Europe. and in Amer
lea those in large cities much higher
than those in small cities. The sub
ject is an extremely complex one,
and the difficulty is to find factors in
different places which are similar. SO
great are the variations in almost
any item which may be selected for
comparison. For example, There
are differences in the quality. range
and quantity of service rendered,
and particularly in the methods of
charging for the service. There are
differences also in the number of
subscribers who take different grades
of service. In the eighty American
cities having a population of over
$4,000 the ratio of residence tele-
phones varies from 10 per cent to
Il per cent; of party line telephones
to total telephones from 4 per cent
to 81 per cent; of private branch ex-
change telephones to total tele-
phohcS iioih PEI N'hA w II pci
cent: and of extension telephones to
total telephones from per cent TO
IS per cent.
In view of these variable factors
il Is impossible to select any item of
plant. which may be intelligently
used. in reducing costs or charges In
various places to common terms. II
is obvious that the fairness of the
rates of charge in specific city must
be determined by the fair cost of
service in that city. and not by the
rates of other cities where the condi-
tons are never Identical and seldom
equal.
This committee holds that the fair
cost of service to the consumer
should comprehend:
CAD Operating outlays necessary
to the highest efficiency Including
an ample allowance for replacement.
and
(B) A reasonable return on the
actual investment necessary to full
est efficiency of service, including
fair allowance for contingencies.
Careful consideration was given
o the matter of depreciation or re
placement, this being. in the opinion
If the committee. an element of very
great Importance in the safe manage
ment of telephone investments. I'm
provements in the art of telephony
have been numerous, frequent. and
often radical. and at rapidly recur-
ing intervals. it has been necessary
o discard as obsolete, equipment in
air physical condition installed but
4 few years previously at great cost.
Safe financiering requires that the
rates should be so fixed as to pro-
vide for this necessary replacement.
Us well as for the ordinary deprecia-
ion due to natural wear and tear.
"a grave mistate frequently made
n telephone iinanciering is the fail.
ire to provide by sufficient rates of
sharge for the heavy OUTLAWS newt
sble for replacement A striking in
stance is the case of the former
Home Telephone Company of Balti-
| more. That company was organ
lzed in 1896, to provide service of
he best standard at rates less than
one-half those of the local Bell COM
pany. Its contracts were based upon
he best equipment of that day. The
-ates of charge adopted were purely
arbitrary, and without foundation in
experience. They proved insufficient
oven to meet ordinary operating ex-
)enses, which steadily increased pro
ride any fund for replacement of
obsolete equipment.
In four years the company became
nsolyent. and its plant was sold to
new company. The purchasers
ioon found that the plant was prac-.
ically obsolete. chiefly because of
| apid and important advances In the
| lrt. In recent suit, the court rec
Drds of which were inspected by this
committee, the president of the
Maryland Telephone and Telegraph
company testified that within a-year
liter acquiring the plant of the
Home Telephone company the new
company was forced 10 raise ST.
100000 for replacement, and that
'urther investments were immediate
y compulsory until $2,155,000 had
been expended to properly equip the
system for the Immediate use OF
about 5000 subscribers, with rea-
sonable provision for expansion. He
stated that practically all the origi-
nal plant. after being in service but
ave years. was disposed of as junk
This testimony was given in justif-
cation of an increase of 81 per cent
m the cOmDanys average rate.