Burlington weekly free press. [volume] (Burlington, Vt.) 1866-1928, 1913-11-06
DEFENDS PHONE
ARR ANCE
President Spalding Testifies to
Advantage of COmpany's
Connections.


with the Western Electric company was
an advantageous one and whether the
payment of IL per cent Of its gross rev
emo by the New England company to
the American Telephone and Telegraph
company in return for the rental of tele-
phones and for various engineering and
legal services was an equitable and eco
uomcal arrangement
The Western Electric company is con-
trpllcd by the American Telephone and
Telegraph company, which also owns a
controlling interest in the stock of the
New England company Mr.. Spalding
claimed that because of the tremendous
advantages Of the Western Electric COM
pauy as a purchasing and manufacture
Ing agency. the various Bell companies
were able to get their supplies much
cheaper than they could get them if they
purchased as individual companies. In
addition, he said, they also attained spc-
cial advantages in getting material need
"a in such emergencies as the Bangor and
Chelsea fires and, because of the exist
cuco Of this central agency, were not re-
uuircd to keep in stock moro than one
third of the supplies that otherwise would
be necessary.
He also defended the percentage ar
rangcment with the American Telephone
& Telegraph company, and claimed that
this arrangement was worth much more
than its cost to the various subsidiaries.
ACCOUNTING METHODS.
The cross-cXamination of President
Spading Of the New England Telephone
company at the public service commits
sion hearing this forenoon was contin-
ucd in further detail as to depreciation
charges and methods of accounting. The
latest accounting circulars, Mr.. Spuld-
Ing said, are based ON the requirements
Of the interstate commerce commission.
The next point of inquiry was the re-
lation Of the New England Telephone y
Telegraph company to the American
Telephone IL Telegraph company and also
to the Western Electric COMPANY. Mr.
Coos went very thoroughly into the
question of the payment Of ~ per cent.
of the gross receipts of the New Eng
land company to the American Telephone
company in an effort to ascertain Just
what was received for this payment
According to Mr. Spaldings testimony
the American company supplied all the
studies as applied to the design con-
struction ana operation of the telephone
property and business. made engineer
ing studies as to improvements or
sWitchboarde, provided construction spe-
cihcations and made studies on improved
traffic methods
The New England company hc said,
does not maintain an engineering force
10 do the investigation ana research
work necessary to keep up the business
and finds it more economical and salts
factory to Contralzc this work IN the
American company. one OF the biggest
improvements Of late years was the Pupin
coil, which increases the range of trans
mission. The savings from the use of
this coil represent millions of dollars a
year because by reason of its use a
smaller wire than would otherwise be
necessary can be used for long distance
lines, and more particularly because the
use Of this loading coil permits putting
long distance lines i'm underground cable,
SAYS 25c y YEAR ENOUGH
Mr.. Cook and Mr. Spading differed on
the point as to whether 10 cents year
Was fair price to pay Cor the rental
of telephones, Mr. Cook taking the ground
that &c was enough. In response to the i'm
plication that because of the American
Telephone Company's controlling interest
in both the New England Telephone COM
pany and the Western Electric company,
the New England company was com
peeled TO he a party to am ineuuitable
contract, Mr. Spading said this was not
true as matter Of fact, and when asked
II any companies not controlled by the
American Telephone and Telegraph com
pany had this ~ per cent arrange
mcnt, said he knew at least three such
'ompanies--the Providence Telephone
company, the Southern New England
Telephone company, which operates in
Connecticut and the Cincinnati IL
Suburban Telephone company These con-
Germs are not controlled by the Bell
interests, he said but they enter into
such an Arrangement because they think
Il is TO their advantage to do so
At the afternoon session Mr.. Cook went
into comparisons of construction and
Maintenance expenses for the different
New England States. President Spalding
said that Vermont would correspond in
these respects to the territory covered by
the smaller exchanges and farming dis
trlcts of other States III added that
these charges are higher in less thickly
settled territory largely on account of
the greater amount OF open wire,
Mr.. Cook then asked what the percent
nge of maintenance and depreciation
charges to gross income should be for
the New England company's plant in
Vermont if this percentage is 81 per
cent. for the Passumpsic company and
"a per cent. for the Vermont and Cham
plain Valley company Mr.. Spalding said
that he could not answer this question
IN this form and give an answer that
would have any significance He con-
tended that the depreciation and mainte-
nance percentage should be figured
against the value of the plant rather than
the gross Income. There was an extend
ed discussion over this point and later in
the day Mr.. Cook asked Mr.. Spalding to
work out some percentage figures along
inns llhe' These figures indicated that
the New England company as a whole
spent 33 per cent. of its gross income for
inc year ending June 80 for current main
tenahco ana depreciation, while in Yer
mont the percentage was As per cent. It
appeared that total of s3S2,OOO of rev.
enue was received for the year and that
SlS5,oO was charged to maintenance and
depreciation. For 1911. the percentages
for the New England company as n
whole and for Vermont were respect-
lively 80 per cent and 4S per cent. Mr..
Spalding said he was willing to work out
these or any other percentage figures,
but he protested that such a percentage
was not only misleading but without any
true significance.