[I. C. in Texas Midland Railroad, 75 I. C. C. 45, which includes the finding now held by the majority to be erroneous.

A telegraph line is necessary in the conduct of the business of the carrier, and for the purposes of estimating cost of reproduction new of its property it is assumed that it would equip itself with this facility in the same manner that it did originally. Therefore, the carrier would be obliged to perform the same amount of work in a theoretical reproduction of the property as it did in original construction. Such work estimated at prices prevailing on valuation date would amount to $8,715. This amount will be added to the cost of reproduction new as stated in the tentative valuation. [Italics mine.]

In a theoretical reconstruction of the carrier's property which assumes the non-existence of all of the property to be reproduced, it is necessary to include in the estimated cost of reproduction all costs that would be incurred in creating the entire property as it exists on valuation date. There is nothing in the majority opinion indicating a reversal of the conclusion in the Texas Midland report that "A telegraph line is necessary in the conduct of the business of the carrier."

That conclusion being sound, it follows that the cost to the carrier of creating such property as exists on valuation date should be included in the reproduction estimate.

he principles supporting this view are most clearly set forth in a brief filed by counsel in our behalf in the Court of Appeals of the District of Columbia, No. 3713, United States of America at the Relation of The Western Union Telegraph Company, Appellant, v. Interstate Commerce Commission, being an appeal from the Supreme Court of the District of Columbia in a proceeding involving this same contract, wherein the Western Union failed in its attempt to compel by mandamus the very treatment of this matter which is now afforded by the majority opinion. From that brief I quote the following:

A telegraph or telephone line, complete and ready for use, is an essential facility in the operation of every railroad and the expenditure by the railroad company in securing a telegraph or telephone line, or the use of such a facility, enters into and becomes a part of the cost of constructing a railroad ready for the operation of trains. The only way by which a railway company can obtain telegraph wires, insulated

C. L. 144]

and carried upon poles, with operating instruments at the train dispatcher's offices and at several railroad stations, to direct the operation of trains, is (1) by constructing and owning a telegraph line, or (2) by an arrangement with a commercial telegraph company by which the latter company constructs a telegraph line upon the right-of-way of the railroad and gives to the railroad company the exclusive use of one or more wires on the line for the operation of trains. The railroads named in the petition elected the latter method and entered into contracts with the appellant by which such telegraph lines were constructed.

In arriv

ing at the cost of reproducing the railroad new, ready for operation of trains, the expenditures in obtaining the necessary telegraph facility for the road became a part of such cost. The appellee does

*

not, in either report, undertake to give to the railroad company any part of the physical property of the appellant. It is stated in each ease that the telegraph line is owned by the appellant; but the appellee allowed to each rail company, in the "cost of reproduction new" of its railroad, the amount respectively paid out in securing telegraph facilities to operate trains. The ownership of the telegraph lines in each case is determined by the contracts between the railroad company and the appellant. These contracts provide that the title to the telegraph lines, ready to operate, shall be in the appellant. The appellee in no way or to any degree attempts to change the ownership or title to the telegraph properties. If the item paid out for common labor in securing telegraph facilities were omitted from the cost of reproducing the railroad property ready for the operation of trains, the true cost of reproduction of the completed railroad wou'd not be stated. This expenditure by the railroads is a capital expenditure the accounting for which is provided for in Account No. 26, Telegraph and Telephone Lines, in the Interstate Commerce Commission's Classification of Investment in Road and Equipment of Steam Roads.

I am convinced that the finding in the Texas Midland Case is correct and should stand.

The majority opinion further finds that:

Treating the contract as an entirety and apparently this is the manner in which it must as a matter of law be treated we conclude that the expenditures incurred by the Texas Midland in connection with the construction of the telegraph line simply constituted a partial payment in advance on account of services to be performed and facilities to be furnished under the contract to the Texas Midland by the Western Union during the life of the contract.

The essential parts of the contract referred to are reproduced in the majority opinion. There is nothing in the contract, in my opinion, that could warrant any such con

[I. C. C clusion. The contract is mutual in its terms and under it each party agrees to perform services for the other, either free or at reduced rates, in consideration of the expense incurred by each of the parties in creating a property to be used for their joint benefit. Considering the mutuality of the contract, the majority, to be consistent, must find that like expenditures incurred by the Western Union simply constituted a partial payment in advance on account of services to be performed and facilities to be furnished under the contract to the Western Union by the Texas Midland. The absurdity of such a conclusion would be made manifest when we come to value the Western Union property, because all of those expenditures, being payments in advance for services, etc., would have to be excluded from cost of reproduction, leaving little, if anything, to be reported as cost of reproduction of that part of the property of the Western Union covered by this contract and other contracts similar in terms.

November 6, 1923.*

In re JOINT APPLICATION OF THE MOUNTAIN STATES TELEPHONE AND TELEGRAPH COMPANY AND THE IRON COUNTY TELEPONE COMPANY FOR A CERTIFICATE OF ADVANTAGE AND PUBLIC INTEREST.

Finance Docket No. 3274.

Decided November 6, 1923.

Acquisition of Property Approved.

REPORT.

The Mountain States Telephone and Telegraph Company and the Iron County Telephone Company, hereinafter called the Mountain company and the Iron company, respectively, on October 10, 1923, filed a joint application

* Commissioner Cox also dissents, and Commissioner Aitchison, who was necessarily absent, previously indicated his intention to vote against adoption of the above report.

"C. L. 144]

under Section 407 of the Transportation Act, as amended, for a certificate that the acquisition by the Mountain company of all the telephone properties of the Iron company will be of advantage to the persons to whom service is to be rendered and in the public interest. No representations were made by State authorities. A hearing was held and no objection to the granting of the application has been presented.

The Mountain company, which is one of the so-called Bell companies, owns and operates telephone exchanges and toll lines in Colorado, Wyoming, Utah, Idaho, Montana, Arizona, New Mexico, and northwestern Texas.

The Iron company owns and operates exchanges at Cedar City and Parowan in Iron County, Utah, with 77 miles of toll lines extending from Cedar City to Paragonah, New Harmony, and Lund. It serves 418 subscriber stations.

The Iron company owns and operates exchanges at the points served by the Iron company, but has toll line connections with the latter company's exchanges at Cedar City and Parowan.

On August 28, 1923, the applicants made a tentative contract, effective as of September 1, 1923, whereby the Mountain company agreed to purchase all of the properties of the Iron Company, excepting some parcels of real estate, for $18,000 cash.

No securities will be issued to effect the proposed acquisition. The plant superintendent and plant engineer of the Mountain company have appraised the properties and found their reproduction cost and present structural value to be $36,041 and $14,416, respectively. In making the appraisal, the amounts of the various units were taken from a list prepared for 1923 taxation purposes without an actual survey, but are believed to be reasonably correct. Revenues of the Iron company for 1922 were $12,606.71, and operating expenses and taxes totaled $11,353.91. No change in existing rate schedules is in immediate contemplation.

[I. C. C.

It is represented that most of the plant of the Iron company was constructed approximately fifteen years ago; that it is necessary to practically rebuild the plant and to make large additions and extensions to meet the increasing demand for service; that the Iron company has no adequate facilities or organization with which to meet this demand, and can not raise the money for rehabilitation purposes upon any basis consistent with sound finance. The Moun tain company proposes to make the improvements and extensions required to provide a satisfactory service, and it appears that it is able to finance the expenditures for such

purposes.

Communications from the mayor of Cedar City, the president of the Cedar City Chamber of Commerce, and other representative telephone users, were introduced in evidence, all favoring the proposed acquisition. The Mountain company is, and after the consummation of the proposed transaction will be, subject to the Interstate Commerce Act.

Upon the facts presented, we find that the acquisition by the Mountain company of the telephone properties of the Iron company, in accordance with the contract described in the application, will be of advantage to the persons to whom service is to be rendered and in the public interest. An appropriate certificate will be issued.

CERTIFICATE.

A hearing and investigation of the matters and things involved in this proceeding having been had, and said Division having, on the date hereof, made and filed a report containing its findings of fact and conclusions thereon, which said report is hereby referred to and made a part hereof,

It is hereby certified, That the acquisition by The Mountain States Telephone and Telegraph Company of the telephone properties of the Iron County Telephone Company in accordance with the contract described in the application and report aforesaid, will be of advantage to the persons to whom service is to be rendered and in the public interest. November 6, 1923.