MORNING ENTERPRISE, THURSDAY," SEPTEMBER -11,-1913:
5v
MUTUAL RELATIONS, AND INTERESTS
OF THE BELL SYSTEM AND PUBLIC
0
The suit brought by the United
States questioning the purchase of cer
tain telephone properties in the north
west, as well as the pending Interstate
Commerce Commission telephone in
vestigation, have caused many inquir
ies. Without taking up anything go
ing to the merits of these proceedings,
it has seemed to us proper to state
generally what has been our policy and
purpose in the conduct of our busi
ness. We have found, or thought that we
had, that our interests were best
served when the public interests were
best served; and we believe that Buch
success as we have had has been be
. cause our business has been conduct
ed on these lines.
We believe that our company lias an
interest as vital as that of the public
in the proper administration of the
nmhlems of electrical inter-communi
cation. The success and prosperity of
nnr pomtianv detend upon a solution
nf thse nroblems which shall be
sound from both the standpoint of
the company and the public which it
. serves
Following our own best judgment
supplemented by the best obtainable
mercial value can only be attained by
one system under one common control
and that it cannot be given by inde
pendent systems unless that are oper
ated 'uder agreements which result in
one common control and one common
interest, in effect making them a
single system.
We believe ut rates should be so
adjusted as to afford the company
sufficient revenue to pay such wages
and compensation as will secure the
most efficient service; to maintain. the
very highest and most advanced stand
ards of plant and apparatus, to carry
on such scientific and experimental re
search and inventions as to apparatus
and methods as to insure the highest
standards, and to carry to reserve and
depreciation such amounts as will en
able the company at any time to re
place old plant- and old methods with
new plant and new methods as fast as
they may be developed and found to
be to the advantage of the service.
We believe that in addition, such fair
charges should be paid upon the in
vestment in plant as will enable the
company at any time to obtain money
necessary to provide the planti r
quired to meet the continuing demands
advice, we have endeavored to do what 'of the public; and in order that waste
would best serve the public interest; land duplication of effort may be avoid-
wherever possible our plans have been , ed and uniformity of purpose and eom
, disclosed to the public in advance, and mon control be enforced, that there
i what has been done in carrying them should be a centralized general admin
: out has been along ordinary business , istration in close communication with
lines, with the implied, and generally, and having general authority over the
with the expressed approval, authori- whole on matters common to all or
zation or consent 01 me municipal auu matters ot general policy.
state authorities directly mterestea.
Our effort has been not only to obey
the law, but to avoid everything which
might even have the appearance of an
attempt at evasion.
Our business methods and policy,
and practically all of the details as to
the transactions of our business, are
matters of common knowledge and
are, and for many years have been,
well known to the government. We
will willingly furnish the government
any additional information which is in
our possession or under our control,
and will cordially co-operate with it in
obtaining such further information as
it may require. Every possible assist
ance will be given by us to the courts
in their effort to determine whether
our policy is or has been inimical to
the public interest. We desire that
anything wrong be corrected; we will
voluntarily rectify any wrong that
may be pointed out to us; and, so far
as it may be determined that our pol
icy or any act under it is against the
public interest, we will promptly con
form to such determination.
We believe that if each of our ex
changes were made an independent
unit and if each connecting line were
put under a separate control, the ef
fect upon the telephone service of the
country would be a condition so intol
erable that the public would refuse to
submit to it and would immediately
require such physical connection and
common control of these various units
as would amalgamate them into a
single system. Physical connection in
the case of telephone or telegraph
does not mean transfer of messages
from one line to the other. It means
such a connection as will permit one
person to have the actual possession
of the particular- line of communica
tion from one end of it to the other
and this can only be given efficiently
by exchange systems and connecting
lines under a common control; and
that is what the Bell System is.
In this connection, and for general
information, we will restate the policy
which controlled the building up of
the Bell System, and our belief as to
what a telephone system should be,
and what are its relations to the pub
lic. We believe in and were the first to
advocate state or government control
and regulation of public utilities; that
this control or regulation should be by
permanent quasi-judicial bodies, act
ing after thorough investigation and
governed by the equities of each case;
and that this control or regulation, be
yond requiring the greatest efficiency
and economy, should not interfere j
with management or operation. We
believe that these bodies, if they are
to be permanent, effective and of pub
lic benefit, should be thoroughly rep
resentative; they should be of such
character and should so conduct their
investigations and deliberations as to
command such respect from both the
public and the corporations that both
will without question accept their con
clusions. We believe that the public would
in this way get all the advantages
and avoid all the manifest disadvan
tages of public ownership.
We believe that centers of business
and population exist for the conveni
ence of the public as a whole, and that
no such center can prosper without
sufficient and efficient means of Inter
course with other centers, and tribu
" tary territories; that such means can
only be afforded by prosperous util
ity and service companies and that
, fair rates are essential to prosperous
companies. We do not believe that
any public either desires or can ob
tain, nor can any service or utility
furnish, permanent and efficient ser
vice at less than cost, including capi
tal charges. We believe that ultimate
ly the public either directly or indi
rectly pays the losses involved in the
. efforts to furnish such service at less
We believe that any surplus beyond
that necessary to equalize dividends
on a fair basis should be used by the
company for the benefit of the public
and should be inalienable for any
other purpose, and should be either in
vested in revenue-earning plant until
necessary to substitute plant which
may become inadequate or obselete:
or should be used to make the service
cheaper or better.
We believe that under proper gov-
ernmentar control and regulation the
profits from promotion or operation
allowed to be distributed should not
be so large as to warrant or tempt
complete duplication of plant and or
ganization, with its duplication of its
capital charges and its organization.
operating, maintenance and deprecia
tion expenses; and we do not, believe
that utilities giving at fair rates an
efficient and sufficiently comprehen
sive universal service should be sub
ject to limited competition, not giving
such service. Competition which ,
nores the obligation to furnish a com
plete and comprehensive service is not
competition, is not for the benefit of
the public in that it does ;ot reach
the whole public interested.
If, therfcfore, complete dupi..a.tion,
with its dual exchange connection and
dual bills for service, is a prerequis
ite to complete competition, govern
ment control and regulation cannot go
hand in hand with competition.
We believe that the record of the
Bell System will be accepted by the
public as fully in accord with these
declarations. Consistent adherence to
this policy has given the public of the
United States the best, most compre-
nensive and cheapest telephone ser
vice in the world and made the Bell
standards the standards of all nations,
To remove any possible excuse for
misapprehension on account of the
many misleading statements which
have been circulated as to the alleged
unnecessary and overcapitalization
and excessive charges of the Bell Sys
tem, the following statistics are given.
Except where stated, the figures are
for the Bell System; that is, the
American Telephone and Telegraph,
and its Associated Companies.
The entire Bell System on June 30,
1913, had outstanding in the hands of
the public obligations (i. e., notes,
open accounts, bonds and shares! to
the par value of $776,000,000. '
The book value of the total tangible
assets, which is considerably less than
their replacement value, amounted to
$960,000,000. Many appraisals of
property included in these assets have
been made, and most of them under
tne direction of public authorities. In
no case has the value as it stands on
the books failed to be sustained, and
in most cases it has been very lareelv
exceeded.
The total dividends and interest Daid
during the year 1912 amounted to on
ly 6.1 per cent, on the average of its
outstanding obligations, and to less
than 5 per cent on the average value
or its assets.
The actual cash which has been paid
into the treasury of the American
Telephone and Telegraph Company on
account of the capital obligations now
outstanding amounts to $22,000,000
more than tliB par of such outstand
ing obligations.
The Associated Companies collected
from the public and paid back in
taxes over $10,000,000 during the year
1912.
The steadily increasing necessities
of the public not only for additional
but for new telephone service can only
be met by new construction, involving
capital outlay. To meet these de
mands during the six and one-half
years from 1907 to June, 1913, inclu
sive, the increase in telephone plant
was as iouows: Toll line wire in
creased from 1,160,000 miles to 2,242 -
vvu iiuies; excaange wire inorfiaspri
than its fair o.r.Rt. Pithpr thrnnorh trio
from 6,000,000 miles to 13.000.000: thP
loss of the capital involved, the losses i numb?'5f exchage stations increased
lnf?idnt tn nnnr servion nr tho nvnc ! froIn 2,730,000 to 5,200,000: the numher
sarr increase in charge required to,0' statlons of independent companies
pay for duplication of capital. connected with the Bell System in-
W helievfi that the highest, nnmmer-1 creased from 343,000 to 2,620.000. The
cial value of the telephone service de-1 numer of independent companies con
pends on its completeness on t'Ae ex-1 nctsi with the Bell System is about
tent and comprehensiveness of the fa- 2000. Tne nunber of employees in
cilities for intercommunication, not I tne Bel1 system, not including the em
only between individuals but between 1 Payees of connected companies, on
centers of population; that no isolated j December 31, ,1912, was 141,000.
section can be considered independ-1 Durmg this same period the number
ently of any other section or of the ' shareholders of the American Tele
whole; that rates must be so adjusted I ? , and TeleSraph Company, not
as to make it possible to obtain the including either the associated or con
. maximum development by making it i nected companies, increased from 17,
possible for every one to be connected , 2 ? about 64,000: About 47,000
who will add to the value of tha sys- shareholders hold less than 100 shares
tern, thus giving the greatest value to each; 6,500 shareholders hold from
the greatest number; that the inter-!00 t0 1'000 shares each; 347. share
dependence of the telephone service ho'.d-ers hold from 1,000 to 5,000 shares
and the value of complete and uni- eaca- wnile there ar only 16 share
versal intercommunication justify and j holders of o,00o shares or over In their
require some service partly at the wn rtSht A majority of the share
expense of the whole for the bene-' holders are women. .
fit of the whole. . American Telephone and Telegraph Co.
We believe that this highest com- THEO. N. VAIL, President.
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