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L. 148]

As to the degree of stability of telephones remaining in service at a given location there is also a wide variation. In order to secure some accurate measurement of the relative frequency of demand of subscribers for the movement of their telephones from one location to another, we recently made a study of this feature in an exchange having 2,500 main stations and where conditions were thought to be typical. For the purpose of this study, the subscribers were divided into groups according to years of continuous service and a count made of the number of times the subscribers in each group had had their telephones moved. The results of this study, as shown in the following table, afford a striking illustration of the great variation in the demands of subscribers as to the movement of telephones.

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The most important fact disclosed by this study is that so great is the diversity of requirement among subscribers

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that one class of subscribers is responsible for the creation of over fifty times as much expense of this character as another class of subscribers.

It ought, therefore, to be agreed that subscribers differ materially in their requirements as to telephone service in ways which affect the amount of the costs involved in giving such service, and that for this reason some subscribers actually receive more service than other subscribers in this respect. It is obvious that if it costs substantially to install and remove telephones, the man who requires a telephone installed and removed every six months for ten years, has imposed a greater cost burden and is receiving a greater service than the subscriber who requires only one installation in the same period. That this is also true of subscribers who move frequently, even though no lapse in service occurs, has already been demonstrated.

The facts as to the movement of subscribers thus far disclosed, demonstrate the importance or recognition of the cost effect of such movement and also the necessity for providing somewhere in the system of charges for the special services performed. In other words, we are here concerned with the question as to how these special costs shall be charged for rather than the question of the amount of the charges to be made.

The question is, how these costs are to be charged for; whether those who receive the greater service and impose the greater costs are to pay the larger amounts, or whether all subscribers are to be treated alike, regardless of their requirements and the burdens that these requirements impose.

The method employed by the defendant company to meet these special costs is to require all subscribers to pay certain elements of the cost of telephone operation through a special payment made at one time, separate from the regular rates for services currently charged each month, which are proportionate to the amount of service rendered.

Under this method each subscriber pays a part of the

C. L. 148] cost which is involved in the establishment of service connection and commercial relations with him as an individual. If he retains service for a considerable period, this cost becomes distributed over a long period of service, and is relatively small as compared with current charges for the full period. If the subscriber retains service only for a short period, the special charges may be greater than the total amount paid under the regular rates, but properly so since these special charges are incurred on behalf of the individual subscribers paying them.

It may be well to illustrate this point by actual example. Assume the monthly service rate on a given telephone to be $3.50. The service connection charge is also $3.50. Assume that a number of telephones are put in today, and that the various subscribers desire service for various periods from one month to ten years. The total payments for service, including both the monthly service charge and the service connection charge, together with the average payments per month, would be as follows:

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The significant feature of this table is that while each subscriber pays the same service connection charge, and the same monthly service charge, the price of telephone service per month varies from $7.00 in the case of the man who only wants the service for one month, to $3.53 for the man who keeps it for ten years. As to the service connection payment considered separately, it varies in amount from $3.50 in the case of the man who retains service

only one month, to three cents in the case of the man who retains service for ten years. If the service connection charge were eliminated, each man would pay an equal amount per month. Then the man who kept the service for only one month would pay very much less than he does now; while the man who kept service ten years would pay considerably more. Yet, it is the man who keeps the telephone longest who should be given the advantage, if any advantage is to be given.

The present practice contains principles which overcome the weaknesses and disadvantages of the practices previously tried out and abandoned. Under this practice, the special charges are collected at the time of the application for service. The application and collection are completed as one transaction. Collection of the amounts due is automatically protected since the patron pays before service is established. Everybody pays, but pays proportionately. The amount of the charge is spread out in proportion to the period of service, and there is no objectionable point at which some subscribers are relieved of the payment of just charges at the expense of other subscribers. No records. need be checked to administer this plan. Collection work is reduced to a minimum and adjustment work is practically eliminated. Final bills are not required. This plan works without injustice to those who pay the charges when due. All these factors make for economies and reduce friction with subscribers.

It is true that the service connection charge originated during the period of federal control, but the inference commonly taken therefrom, that the charge is a war measure, is not sound. In principle there is no connection between the charge and the emergent conditions which existed at the time the charge was established. Former attempts to cover the connection service by special charges were unsatisfactory. The only effect the war had on this subject was to impel more intelligent study of the problem with the result that the present practice was inaugurated. The service connection charge is not an additional revenue

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L. 148] agent. It represents merely an attempt to require those who cause connection exchanges to bear the burdens of those expenses in proportion to the frequency of their changes and movements. It represents an effort to lift an expense penalty from the shoulders of those who do not occasion that expense. Like a good many other practices evolved during the war period, as a result of the strict study of the effect of conditions and practices indulgently tolerated in the easy days of peace, the present practice has so demonstrated its merit and its applicability to normal operations as to justify its continuance.

RATE OF RETURN.

There is a well recognized distinction between a rate which returns just more than enough to escape the charge of confiscation and a rate which is reasonable.*

We are commanded to establish reasonable rates and to our minds, this means just rates.†

*Collingswood Sewerage Company v. Borough of Collingswood, 102 Atl. 901 (affirmed 105 Atl. 209), at pp. 901 and 902; Illinois State Public Utilities Commission ex rel. City of Springfield v. Springfield Gas and Electric Company, 125 N. E. 891, at p. 895; Union Pacific Railroad Company v. Public Utilities Commission of Kansas, 148 Pac. 667, at p. 673; Detroit and Mackinac Railway Company v. Michigan Railroad Commission, 137 N. W. 329, at p. 333; Railroad Commission of Texas v. Houston and Texas Central Railroad Company, 38 S. W. 750, at p. 755.

Thompson v. Beacon Valley Rubber Company, 16 Atl. 554, at p. 557; Houston and Texas Central Railroad Company et al. v. Everett, 86 S. W. 17, at p. 18; People v. Rosenberg, 112 N. Y. Sup. 316, at p. 318; Homestead Company v. Des Moines Electric Company, 248 Fed. 439, at p. 443; Southern Pacific Company v. California Railroad Commission, 78 Fed. 236, at p. 257; Chicago, Milwaukee and St. Paul Railway Company v. Minnesota, 134 U. S. 418, at p. 459; Illinois State Public Utilities Commission ex rel. City of Springfield v. Springfield Gas and Electric Company, 125 N. E. 891, at p. 895; Public Service Gas Company v. New Jersey Board of Public Utility Commissioners et al., 87 Atl. 651, at p. 655 (affirmed 95 Atl. 1079); Collingswood Sewerage Company v. Borough of Collingswood, 102 Atl. 901, at pp. 903-904 (affirmed 105 Atl. 209); O'Brien v. New Jersey Board of Public Utility Commissioners et al., 105 Atl. 132, at p. 134 (affirmed 106 Atl. 414).

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