The Plymouth tribune. (Plymouth, Ind.) 1901-1911, 1906-12-27
0nY or THE INDEPENDENT
TELEPHONE.
tsyracuse, N. Y, Jorrnal.)


who knew anything about the telephone
business predicted at that time that the
new companies would soon meet imam
cial disaster. Their predictions were
then ridiculed as the croakings of pes
sfmism and partisan prejudice, but they
have nevertheless been Verined In the
experience of hundreds OF companies.
With many of them, the renewal period,
which, it was foretold, would be the
time of reckoning, has arrived. Many
have gone to lrretrievable ruin. Some
have been temporarily rescued by the
heavy investment of fresh capital while
others are now making strenuous ef-
forts to induce investors to put up more
money and save them from certain
failure.
1t is favorite assertion of the indie
pendents that they entered the tele-
phone field at the behest of the people
who had been subject TO high rates and
poor service from a telephone monopoly
which refused to fully develop the bust
ness. II is true that the telephone neld
was not highly developed ten years ago
and il is not fully developed today. 1t is
also true that higher prices for service
than prevailed then are charged today.
The business was new, and improve
ments in apparatus were so rapid that
equipment put in one month was liable
to be obsolete the next. Under such
business conditions telephone companies
were obliged to charge rates hign
enough TO insure safe margins of proht
But the actual independent movement
was fathered by shrewd promoters who
foresaw a chance TO make fortunes by
appeals to prejudice, mistaken notions
and local pride and patriotism When
the primary Bell patents expired, con-
Germs were already organized to begin
the manufacture and sale of telephone
instruments. The next thing was to Sc
cure the market. Here was the promo
He might make a big profit on equip
mem and, through the liberal methods
by which the local companies were or
ganized. would also make heavy profit
by the manipulation of their stocks and
bonds.
Having for their principal aim the de-
ceptiOn of investors and the consequent
realization of quick profits, hundreds of
companies over the country have been
organized by promoters.
The history of these concerns is al
most uniform. A promoter representing
some manufacturer of telephone appa-
ratus goes into town or city and
He declares that for years the people
have submitted TO a grinding extortion.
The most intense superlatfves are used
to describe the alleged arrogant man
been maintaining high dividend rate
at the expense of the suffering tele-
phone users. The public mind is prone
to accept such assertions as facts when
directed against what is called a mo-
nopoly and it is seldom difficult for the
promoter TO find credulous and willing
ears into which to pour his stories.
Having tuned public prejudice to the
proper pitch, the promoter organizes
company. In most cases the organiZa-
ton is composed of men living away
posed TO locate the plant. sometimes
two or three local men are admitted, or
induced to accept nominal shares In or
der to give the promoted concern To-
cal appearance. tt increase the illusion
the organization is usually. styled the
Home comPany;; The Citizens 81 Some some
such catch title. Franchises have. not
usually been hard to secure, though, of
late. city councils and town trustees
have been more careful in granting
them
The franchise secured, "construc-
tion company" composed of the promo
ment makers who sent him out, is or
ganized. The purchase OF equipme It
from the proper concern, at a price
sured and one of the main objects of the
promotion is accomplished. The plant is
Installed. Sometimes 1t Is good, but
oftener IT is poor tn9ge the nv Iaf fb th in
experienced local members of the COM
pany. The construction company ae
cepts in payment the stocks and bonus
OF the promoting company
Operating begins and the service is
usually fairly good. The subscribers. of
whom a large list has been secured by
Offering cheaper rates than those quoted
by the existing company, are enthusiasts
tic and collections are easy: The nrst
years show good profit, interest or
dividends declared Then the promote.
does his real smooth work He places
his stocks and bonds carefully upon tho
market. He offers as a reason that he IL
a construction man, not an operator.
and is satisfied with moderate profit.
Dazz1ed by the appearance of 1arge
earn ngs investors buy these securities
at high prices When they are unloaded
the promoter departs for another fertile
held He has made profit on the equip
ment, another on the construction and
i'd In ma a a n
Then the local company. reorganized
among those who have bought the Sc
curities. takes charge of the business:
wear and tear and natural decay have
ALREADY begun TO tell on the integrity of
newais must be made and that the
money paid out as profits should have
been set aside for these renewals
reach f'n such ma a condition that additional
capital must be provided, low rates
raised and a large part Of the equip
be done or the entire investment will be
lost. 1t only remains at this stage for
the inventors to perpetrate upon some
body else the tricks Played pP }Se them them
ent time some attempts are being made
to reSrganiZe companies and buy out
present owners who for various osten-
sib1e reasons wish to retire. There are
more ruses TO recover money sunk In
hopeless investments
The telephone merger" Is now the
only remaining stage through which the
business can be put. and the country is
full of merger schemes today. This viii
be the opportunity for another call by
the telephone high fnanciers upon the
purses of the people and one of the
most dangerous and subtle yet made
The investor who is tempted to axe
bear in mind that another promotion fee
is to be made from the proceeds OF his
purchase of stock or bonds and that
these stocks and bonds are only remote
liens upon operating profits If there are
The failure of independent companies
to accomplish the success promised by
reasons. some of which were within the
power of the company to control, and
others entirely beyond IL.
One of the reasons for failure Is over
capitalization In order to insure their
profits, the promoters almost invariably
had bonds issued to themselves for so to
100 per cent more than the actual value
of the plants. This made it reasonably
sure that they would sell out at a good
figure, but left heavy bonded debt up
on the shoulders Of the operating COM
Another reason is depreciation. The
depreciation in a telephone plant Is
from i've TO ten per cent, annually on
actual profits can be figured, this per-
centage must De set aside TO provide Tor
these renewals. Eagerly pOcket1ng
profits when the business first started
and the depreciation was not noticeable.
was the mistake most commonly made
by the Independent companies
order TO secure business the Independent
companies have usually furnished SER
vice at rates too low to make profit
and take care of the depreciation In
many cases these low rates have been
fastened upon the companies by city
and town ordinances which were ac-
cepted by the companies in the enthu-
siasm of the start, and which the pro-
moters did not oppose as they expected
to withdraw from the operating compa-
MES long before the rate question
should become embarrassing.
In figuring rates the awkward mis-
take was often made that the more tele-
phone subscribers secured, the less the
cost of operation per subscriber.
There are any number of cities that
are disguised with dual telephone ser
vice 1t has been proven conclusively
that IL is a burden instead of a benefit
on the public, and according to many 1t
will be only a matter of time when
there will be but one telephone service.
Her Complaint.
Nell-Oh. he makes me tired. He's
ALWAYS trying to kiss me.