In re PETITION OF ROCHESTER TELEPHONE CORPORATION FOR PERMISSION AND APPROVAL AND A CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY OF CONSTRUCTION; AND AS ΤΟ ISSUING CAPITAL STOCK, A MORTGAGE, MORTGAGE BONDS, AND AN AGREEMENT AS TO NOTES; AND NOTES; AND JOINT PETITION OF ROCHESTER TELEPHONE CORPORATION, ROCHESTER TELEPHONE COMPANY AND NEW YORK TELEPHONE COMPANY, AS TO TRANSFER OF LOCAL FRANCHISES FROM THE LAST NAMED Two COMPANIES TO THE ROCHESTER TELEPHONE CORPORATION. ALSO SUPPLEMENTAL PETITIONS.

Case No. 7701.

Decided April 17, 1924.

Issue of Bonds Authorized.

ORDER,

Now, therefore, upon the foregoing record,
It is ordered as follows:

*

1. That the Rochester Telephone Corporation is hereby authorized to issue $276,900 face amount of its 6 per cent. twenty-five year, Series A, gold bonds, under a certain indenture, deed of trust or mortgage, dated the first day of July, 1921, as amended by supplement thereto made July 2, 1923, given to the Union Trust Company of Rochester, as trustee, to secure an authorized issue of bonds to the aggregate amount of $10,000,000.

2. That said bonds of the total face amount of $276,900 may be sold for not less than 94 per cent. of their face value to realize net proceeds of at least $260,286.

3. That the proceeds of said bonds so authorized, which shall not be less than $260,286, shall be used solely and exclusively for the following purposes:

Omitted.

L. 149]

(a) Cost of consolidating Federal Telephone

and Telegraph Company

(b) An additional allowance for organization

expenses

$224,676 58

35,633 12

$260,309 70

AMOUNT UNPROVIDED FOR

$23 70

insofar as the same may be applicable, provided, that no expenditures from the proceeds of the bonds herein authorized for services or expenses incident to the organization of the company shall be charged to fixed capital until the details of such expenditures or proposed expenditures shall have been submitted to and approved by this Commission.

4. That the authorization to use proceeds of bonds for organization expenses totaling $85,633.12, is upon the express condition that the Rochester Telephone Corporation. shall agree to charge to an account entitled Suspense to be Amortized the said amount of $85,633.12, and shall amortize said amount over a period of twenty years by charging the account Other Contractual Deductions from Income according to the following schedule:

(a) For the year 1924..

$2,033 12

(b) For the years 1925 to 1943, inclusive, $4,400 per year. 83,600 00 provided, that said corporation may amortize the said sum more rapidly than herein provided, if it so desires, by crediting the account Suspense to be Amortized and debiting the account Corporate Surplus with the excess so credited over the amount required as shown by the foregoing schedule.

5. That the New York Telephone Company and the Rochester Telephone Company shall forthwith refund to Rochester Telephone Corporation any and all amounts paid for property in excess of amounts allowed in this proceeding, either by return and cancellation of securities issued or by an adjustment of an equivalent amount of existing liabilities owed by the Rochester Telephone Corporation to said companies respectively.

6. That none of the said bonds herein authorized shall be hypothecated or pledged as collateral by the Rochester

Telephone Corporation unless any such pledge or hypothecation shall have been expressly approved and authorized by this Commission.

7. That the Rochester Telephone Corporation shall for each six-months' period ending June 30, and December 31, file not more than thirty days from the end of such period a verified report which shall show:

(a) What bonds have been sold during such period.

(b) The date of such sales.

(c) To whom such bonds were sold.

(d) What proceeds were realized from such sales.

(e) Any other terms and conditions of such transactions.

(f) In detail the amount of the proceeds of the bonds herein authorized which has been expended during such period for the purposes specified

herein.

Such reports shall continue to be filed until all of said bonds shall have been sold and the proceeds expended in accordance with the authority contained herein, and if during any period no bonds were sold or proceeds expended, the report shall set forth such fact.

8. That the authority contained in this order to issue bonds is upon the express condition that the New York Telephone Company, Rochester Telephone Company and Rochester Telephone Corporation accept and agree to comply in good faith with the provisions hereof, and before any bonds are issued pursuant hereto and within thirty days of the service hereof, said companies shall advise the Commission whether or not they accept the same with all its terms and conditions, and such order shall be of no force or effect until such acceptances have been filed.

Finally, it is determined and stated, That in the opinion of the Commission the money to be procured by the issue of said bonds herein authorized is reasonably required for the purposes specified in this order and that such purposes are not in whole or in part reasonably chargeable to operating expenses or to income.

April 17, 1924.

NORTH DAKOTA.

Board of Railroad Commissioners.

In re PETITION OF THE GRAFTON RURAL TELEPHONE COMPANY FOR A DECREASE IN THE SWITCHING CHARGES PAID TO THE NORTHWESTERN BELL TELEPHONE COM

PANY.

Case No. 1838.

Decided April 9, 1924.

Complaint as to Exorbitant Switching Charges Dismissed.

REPORT AND Order.

On February 5, 1923, a petition signed by stockholders and subscribers of the Grafton Rural Telephone Company was filed with the Commission, alleging that the service switching rates of the Northwestern Bell Telephone Company, at Grafton, North Dakota, were exorbitant, and petitioned the Commission to hold a hearing to determine the reasonable charges for this service. A copy of the petition was served upon the Northwestern Bell Telephone Company, to which answer was made denying that the present service switching charges of $6.00 per annum net were exorbitant, and alleging that the present charge does not cover more than two-thirds of the actual cost of operation at the Grafton exchange. The Commission caused its accounting department to make an analysis of the operating statements of the Northwestern Bell Telephone Company filed monthly with the Commission, from which it was determined that the Northwestern Bell Telephone Company was earning at that time 2.51 per cent. upon the book value of its property. The Commission endeavored to adjust this matter informally, feeling that there was no showing that the present rate was unreasonable. The matter was held in abeyance until the early part of 1924, when certain petitioners renewed their request for an

investigation. Notices of hearing were thereupon issued and the matter came on for hearing at Grafton, North Dakota, on Saturday, March 20, 1924, the following appearances being entered: T. 1. Dahl, of Grafton, North Dakota, appearing as attorney for the Grafton Rural Telephone Company; E. A. Prendergast, attorney, of Minneapolis, G. H. Pratt, vice president, of Omaha, Nebraska, H. A. Livermore, statistician, of Omaha, Nebraska, and L. D. Richardson, district manager, of Fargo, North Dakota, appearing for the Northwestern Bell Telephone Company.

[N. I

The record shows that there are 26 rural telephone companies who receive switching services at the Grafton exchange, including the petitioners in this proceeding. Notices of hearing were served upon all of the connecting companies, but appearances were entered by only two companies. The petitioner's case consisted purely of oral testimony, complaining that the present service switching charges of $6.00 per annum net were exorbitant, and that the farmers were not in a position to continue to pay that rate. It was stated that prior to the war, the service switching rate was $3.00 per annum and that during the period of federal control, the rates were increased to $6.00 per year. Witnesses for petitioners contended that prices of materials and supplies had been substantially reduced; that prices of farm labor were reduced; that the farmers were not receiving adequate revenue from the sale of their products; that there should be a reduction in the service switching rates, because of their inability to continue to pay the present rates.

While the only issue involved in this proceeding is whether the service switching rates are reasonable for future application, the Commission will take into consideration the total operating revenues and expenses at the Grafton exchange. The Commission required the Northwestern Bell Telephone Company to prepare statements showing the operating revenues and expenses at the Grafton exchange, for the period January 1 to December 31. 1923, inclusive, which statements were offered and received