Wrong McLeod; Wrong Case

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A recent decision in Oregon in the case of Frances McLeod, appellant, vs. Pacific States Telephone and Telegraph Company, respondent, is of particular interest Bell telephone people on the Coast. Miss McLeod, who is a stenographer at Marshfield, claims damages because she asserts she lost a lucrative employment through a mistake made by the Marshfield long distance operator. An attorney at Port Orford attempted to telephone her to secure her services in reporting a case in Port Orford. By mistake a Mrs. McLeod, a nurse, was called to the telephone and when the attorney asked her to take charge of the case she naturally presumed that he referred to a case of sickness and replied that she was busy and could not come. Thereupon the lawyer employed another stenographer whose fees, it happened, amounted to $1200. Judge L. T. Harris non-suited Miss Mc

Leod on the grounds that she was not a party to the contract between the attorney and the telephone company and therefore could not sue for breach of the contract. Chief Justice Bean of the Supreme Court holds, however, that where the addressee is to be benefited by the message and this fact is known to the Company, recovery may be had for failure to perform the contract. The evidence was that the Port Orford attorney had explained to the agent that the Miss McLeod to whom he wished to talk was a stenographer and that he wanted her to report a

case.

It used to be said that one could float almost any sort of enterprise in Los Angeles; certainly the southern field was popular among promoters of inde

Promotion at Portland.

pendent telephone companies. Portland appears now to have become a serious rival. Less than a year ago the Oregon Trust and Savings Bank, an institution which had an unusually large number of small accounts, closed its doors because the directors, being unable to dispose of the bank's very large holdings in the Home Telephone Company bonds, felt it unsafe to continue the institution.

The Portland papers within the past few weeks have contained articles regarding the financial troubles of the Washington Home Telephone and Telegraph Company. The Portland Journal on April 2nd printed what purported to be an expose of the record of Samuel V. Davidor, promoter of the Washington Home Company, and although Davidor made a long defense in a statement to the paper, the company was reorganized a week later and Judge W. W. McCredie of Vancouver, who had resigned as President, withdrew his resignation and announced his intention to "stay with the proposition and carry it forward." At the same time the Journal published a statement from Davidor in which it

vent piano playing in two-by-four flats would be certain to arouse intense enthusiasm among people who are looking for something to be aroused about. The municipal ownership delusion has been hugged by thousands of people, some of them perfectly sane in all other respects. There are municipal water works in many cities and these apparently are successful as long as the public can be induced to buy bonds so that money can be secured to keep the plants going, and various other municipal enterprises have been tried. The telephone business has so far not been bothered very much by municipal ownership cranks, because the people have been kept busy listening to the frenzied oratory of independent pro

aphorisms which need the power of the author's name to carry them along, but one or two remarks are worthy of quotation. For example, Mr. Hill says: "Always remember that next to honor, a quality that counts most is personality. While many will tell you that personality is a gift just as sure as is the art of composing music, let me assure you that nothing else can be acquired as easily as personality if one has the mind and inclination to acquire it." And in conclusion the railroad philosopher says: "Last but not least, remember that out of office hours your home deserves the most of your attention. The employer feels a high confidence in a young man or woman whose home is free from extravagance, enmity, contempt, wrath, strife and opposition. Keep happiness in your home and you will create strength and efficiency for your work."

In the annual report of the American Telephone and Telegraph Company, which has just been issued, President Theodore N. Vail gives some interesting figures and discusses at length several features of the telephone busi

ness.

The business has shown constant gain during the year, and at the close there were 3,839,000 stations connected to the system, with a total of 8,610,592 miles of wire. The total number of exchange and toll calls for the year was about 5,997,000,000. During the year, $52,921,400 was added to construction, and in the past eight years $351,835,655 has been so added.

At the present time there are outstanding 1,525,280 shares of stock of the company, 1,312,502 of which are held by 23,453 stockholders, an average of less than 56 shares each, the balance, 212,778 shares, being held by 16 shareholders, each with 5,000 shares or over. At the close of the year a valuation based on the replacement cost of the existing plant, without any allowance. for franchises or for unearned increment, showed $488,296,000. Against this there were outstanding obligations of the American Telephone and Telegraph Company and its associated companies, including capital stock at par in the hands of the public, of $554,939,000. These companies also had cash on hand, quick assets and investments of $101,074,000, so that the obligations against the plant were only $453,865,000, or $34,431,000 less than its appraised value. The book value of the exchange construction is $114 per exchange station, and the book value of all the property, including the long-distance lines, is $162 per station.

For the first time a statement of the operating companies (that is, those companies which directly furnish the telephone service) is given, with gross earnings for the whole country of $120,753,

200, operating and general expense of $53,242,300, and maintenance of plant $34,665,700. The balance available for dividends was $25,819,700, out of which dividends amounting to $19,206,100 were declared, which seems reasonable when the value of the plant is considered.

President Vail calls attention to the exaggerated stories of the profits made by early investors, and shows how these stories, coupled with the general business activity of the last few years, have made it possible for promoters to launch telephone companies pledged to low rates for exchange service and high dividends to investors. Many of these companies are asking relief from the conditions they readily accepted, and for increased rates, and reorganizations are now in progress.

These companies found that repairs and reconstruction, which with a new plant are at a minimum, steadily increase, and that many times while the plant is growrapidly these charges are lost in construction. Sooner or later these charges must be provided for out of current revenue, and if dividends have been paid without first making adequate provision for maintenance there can only be an end in disaster. Under these conditions it would seem as if any gain to the public by competition based on low rates has not made up for the loss of capital.

The problem of rates and rate regulation is discussed at length, and it is shown that the policy of the Bell companies in any controversy as to rates is to make a complete showing of the cost and value of plant and service, and that there is nothing to conceal. Fair rates are all that is asked for, and the belief is expressed that with full knowledge of all the circumstances the public will readily acquiesce in such rates. Fair rates are defined as those which maintain the plant in a state of high efficiency, provide fair wages for employees, give a fair return. on money invested, and promise a fair return on new money needed. Any revenue beyond these requirements could, after allowing for proper reserve, be used for the benefit of the public, but the company should be allowed to retain a part sufficient to stimulate the most efficient and economical management.

As regards public control in the absence of competition the report says: "It is not believed that there is any serious objection to such control, provided it is independent, intelligent, considerate, thorough and just, recognizing, as does the Interstate Commerce Commission in its report recently issued, that capital is entitled to its fair return and good management or enterprise to its reward."

The value of telephone service to the subscriber is analyzed, and it is shown that while a connection with the exchange may be termed a convenience for that subscriber, it is a necessity for all

other subscribers. It is the ability to communicate with others which makes the exchange valuable. It is the use of other circuits than your own. The value of any exchange depends on the area covered and the maximum number of desired individuals who can be reached, and the measure of the value depends upon the use of the exchange system as a whole. Rates must be so adjusted that no rate shall bear unjustly on particular individuals or classes, and that at some rate connection with the exchange is within reach of anyone who can add to the value to others of the service, and that, as a whole, the revenue shall be enough to operate and maintain the plant. efficiently and give a sufficient return on the capital.

In discussing long-distance service the report calls attention to the fact that during each conversation the circuit is devoted exclusively to the service of the user. Long-distance communications require the presence of the two individuals. concerned at the ends of the line, and they are therefore confined largely to the hours when it is certain that each can be definitely located. The result of this is that the long-distance business is crowded into a very small part of the day, and that much of the time the facilities provided are lying idle. There is no way of crowding the business during the times of heavy demand, as but one message can pass at a time. Diagrams are given showing how irregularly the business is distributed throughout the day, and the statement is made that if business could be subjected to a half hour's delay the facilities required could be reduced one-third at least.

Attention is called to the universality of the Bell system and its occupation of the field, first in the urban districts, keeping pace with the demand, then later in the semi-urban and rural districts. These smaller communities are being developed both directly by the operating companies, and indirectly by local companies connected by toll lines.

In Great Britain the telephone business is under government control. The Post-Office department manages telephone exchanges in the smaller cities, while in the large towns the National Telephone Company, a corporation which operates under license from the PostOffice department, operates the systems. Due to the conservative spirit of the English people, the development of telephony in England, compared to that in America, has been slow. England has just come, for instance, to understand the equity of the measured-service rate. The new tariff is discussed capably in a recent issue of the London Times. In substance, the Times says:

THE NEW TELEPHONE TARIFF.

Great interest and in some influential quarters a strong feeling of hostility have been aroused by the new tariff which has recently been adopted by the National Telephone Company and the Post-Office.

When the telephone service was inaugurated, some 27 years ago, there was not sufficient data from which to determine the unit of cost of the service, and the unlimited service, or "Flat Rate" system of charge, under which a fixed amount is paid for a telephone by each subscriber, irrespective of the use made. of the telephone, was adopted.

From a subscriber's point of view the flat rate system is, on the whole, an extremely convenient method of charging for the use of the telephone, one of the most important advantages of this system being that a subscriber knows the extent of his liability in respect of the service.

The Post-Office and the company, however, contend that the flat rate is unscientific, and that under it large users are getting their service for less than cost at the expense of the small users, and both the Post-Office and the company have issued memoranda pointing out the defects of the flat rate system.

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THE CAUSE FOR THE CHANGE.

It is maintained that the great development of the telephone system which has taken place in this country and the much larger development of recent years in United States have established desirability of provision being made for the varying requirements of the services. Provision must be made for the small users, who require one call a day or less; for the moderate users, who make ten or twelve calls a day; and for the large users, who may, perhaps, make several hundred calls per day.

It is further maintained that the existence of the flat rate system, based upon an average of wide extremes, is an obstacle to the development of the telephone system, inasmuch as it compels small users to pay a relatively higher rate than they would pay under a graded rate based upon the cost of the service; and attention is drawn to the fact that while there are about six millions of

telephones in use in the United States there are only about 520,000 in the United Kingdom.

The jealousy of the Post-Office, the onerous royalties exacted, and the obstacles which the municipalities have in the past placed in the way of the National Telephone Company have probably had much more to do with the com

paratively slow development of the telephone in this country than has the existence of the flat rate.

As the number of subscribers grows in any telephone exchange system the cost of the service is said to increase even more rapidly and the average cost per line for the construction and maintenance of exchange apparatus becomes greater as the exchanges increase in size. Subscribers have to be connected with a number of exchanges, instead of with a single exchange, and the number of calls which have to be dealt with by more than one operator is a constantly increasing quantity.