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[N. that by reason of the increase, all of the farm lines connected with the said exchange have been disconnected either voluntarily or otherwise; that the service furnished by said exchange was very unsatisfactory, and the Commission is petitioned to determine an equitable rate to be charged by said exchange, or in lieu thereof, to permit the rural companies to install and operate another exchange in Sheyenne.

The matter came on for hearing at Sheyenne on January 8, 1924, the following appearances being entered: II. P. Halvorson, president, Henry G. Hendrickson, secretary, Axel Erickson, Charles Erickson, Albert Erickson, Swan Anderson, Adam Anderson, on behalf of the complainant; H. S. Grinde, secretary, on behalf of the respondent; 4. Tomlinson, H. J. Vandergon, M. A. Erickson, John Nyland, C. W'. Fine and C. A. Leigberg, on behalf of Lone Tree Telephone Company; Campbell Anderson, H. C. Hall and A. G. Sonderstrom, on behalf of Sheyenne River Telephone Company; Nels C. Myhre and Christ Carlson, on behalf of Divide Telephone Company; C. W. Johnson, secretary, and A. G. Nelson on behalf of EdenSouth Telephone Company; M. C. Stensby on behalf of Northwest Telephone Company; P. I. Nelson on behalf of North Telephone Company; Olaf Berglund, president, and d. Samuelson on behalf of Sheyenne and Eastern Telephone Company.

The Sheyenne Telephone Exchange Company is a corporation, owning and operating the exchange and distribution system in the village of Sheyenne. The testimony of the officers indicates that the exchange was established about twenty years ago for the purpose of providing telephone service to the inhabitants of the village and to perform switching service for rural telephone companies in the territory adjacent to the village. The testimony of the officers of the Sheyenne company is to the effect that the corporation was not organized for profit. It appears that at the time the exchange was established, the rates for service switching were fixed at $3.00 per year, per sub

7. L. 147]

scriber. These rates continued in effect until October 1, 1920, when the officers of the Sheyenne company notified the connecting companies that the rate would be increased to $6.00 per year. Notice to this effect was published in the local newspaper, and it is contended that the rates were also filed with the Commission. After the rates were increased, some of the rural companies experienced difficulty in collecting rentals and gradually became in arrears to the Sheyenne company. In July, 1922, the officers of the Sheyenne company notified the rural companies that unless the accounts were paid up in full by a certain date their lines would be disconnected. Many of the lines did not pay up, and on or about August 1, 1922, most of the lines were disconnected by the Sheyenne company. Later, the remaining lines voluntarily disconnected, the reason assigned being that it was practically impossible to obtain service through the exchange and that the rate of $6.00 per year for such service was unreasonable.

Prior to August 1, 1922, there were 8 farm lines con nected with the Sheyenne exchange. At the time of the hearing, there were no rural lines connected with the exchange, and only 17 subscribers in Sheyenne were receiving service, 4 residence telephones and 13 business telephones. The rates in the village of Sheyenne are $2.75 for business telephones and $2.25 for residence telephones.

A large number of petitioners, representing the various farm lines formerly connected with Sheyenne exchange, and now seeking service, testified in support of their application. All of the rural companies involved in this proceeding are mutual companies not organized for profit and their revenues are derived by assessment. The testimony of the witnesses appearing on behalf of petitioners is conclusive that the service received at the Sheyenne exchange was very unsatisfactory, and that the subscribers of the rural companies would not pay the rate of $6.00 per year for the quality of service furnished for several years prior to the time they were disconnected. The rural companies are willing to pay the rate found reasonable by the Com[N. ] mission, providing the Sheyenne Telephone Exchange Company equips itself so that it can render efficient service.

It is obvious that the exchange cannot long be maintained on the revenue received from 17 subscribers, and the commissions on long distance messages. In fact, the owners of the exchange stated that unless the farmers' lines are reconnected, it will be necessary for the exchange to cease operations. An exhibit showing the operating revenues and expenses for the year 1923 was offered and received in evidence. This exhibit is of little value to the Commission in determining the revenues and expenses for the future, for the reason that none of the farm line companies were connected during that period, and the statement of expenses includes items which are not, strictly speaking, operating expenses. However, the Commission may determine from the record, with a reasonable degree of accuracy, the estimated operating revenues and expenses for the future.

The following table shows the farm line companies an! the number of subscribers on their lines, who are now seeking service at the exchange:

Sub

scribers Greenfield Telephone Company

27 Sheyenne River Telephone Company

2 Lone Tree Telephone Company..

18 Divide Telephone Company....

13 Eden-South Telephone Company.

15 North Telephone Company....

15 Sheyenne and Eastern Telephone Company.

11 Northwest Telephone Company..

11

TOTAL.

132

Service is furnished from the hours of 7:00 A.M. until 10:00 P.M. Emergency service is provided for after ten P.M. It is contended by the Sheyenne Telephone Exchange Company that the rate for service switching at other exchanges is $6.00 per year. It is true that there are several exchanges in North Dakota which receive $6.00 per year

. L. 147]

for service switching. Analysis of the situation will reveal the fact that exchanges which receive $6.00 per year for service switching are located in larger commercial centers where twenty-four hour service is furnished. In determining and fixing rates, the Commission must take into consideration the value of the service rendered. Obviously, switching service in a city like New Rockford is of greater value than in a village like Sheyenne. The value of the service may be measured, to a certain extent, by the number of stations a subscriber may call. Giving consideration to the size of the exchange and the number of persons it is possible to reach through the Sheyenne exchange, the Commission is of the opinion that a rate of $6.00 for service switching is unreasonable.

At the conclusion of the hearing, the Commission inspected the property of the Sheyenne company. The switchboard is of an obsolete type, and appears to be completely worn out. From the testimony, it also appears that the switchboard was purchased many years ago second-hand, and we doubt if it can be repaired so as to enable the Sheyenne company to render efficient service. The cable leading into the exchange also appears to be in bad repair. The Commission will, therefore, require the Sheyenne Telephone Exchange Company to install a new switchboard and to repair the cable, to the end that adequate service may be provided. With improved service, the Sheyenne company will undoubtedly be in position to obtain additional subscribers and its revenues will be greatly increased by the farm connections.

Assuming that the revenues for the year 1924, including commission on toll messages, will be the same as for 1923, the company will receive a total of $844.60. The estimated operating expenses for this period, including depreciation, are $1,384.55. In order to provide for operating expenses and depreciation, which is all the Sheyenne company is seeking at this time, it would be necessary to raise an additional amount of $539.95 from the rural lines. There are now a total of 132 subscribers on the rural lines, and [N. D. at the rate of $4.80 per year for service switching charges, the company would receive a total of $633.60. This amount added to the revenues derived from the village telephones would more than provide for operating expenses and depreciation. An analysis of the service switching charges at other exchanges in North Dakota reveals the fact that the average rate for small exchanges is $4.80. Exhaustive studies have been made in other proceedings and this rate has been found reasonable.

The record shows that all of the rural companies who were indebted to the Sheyenne Telephone Exchange Company have, since they were disconnected, paid their accounts practically in full. This is evidence that the parties have acted in good faith and that they may be depended upon to carry out their agreements. In fact, the Commission is of the opinion that the Sheyenne company acted somewhat hastily in disconnecting a number of the companies, for the reason that it has destroyed the friendly relations with some of the connecting companies. Had the matter been brought to the attention of the Commission at the time of the controversy, we are of the opinion that it would not have been necessary to have disconnected the rural companies. By proper cooperation between the parties involved in this proceeding, we feel that adequate service can be provided and that the rates to be established in this order will develop sufficient revenue to provide for operating expenses, depreciation and a small return upon the investment. The telephone has become an absolute necessity to the farmer as well as to the residents of cities and villages, and only by cooperation can telephone property be properly maintained and good service rendered.

Having carefully considered all of the testimony in this proceeding, and being fully advised in the premises, the Commission is of the opinion, and finds, that the present service switching rate of the Sheyenne Telephone Exchange Company is unreasonable and that the reasonable rate is $4.80 per subscriber, per annum; that the Sheyenne Telephone Exchange Company should be required to in

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