A regular feature looking back at what was being printed more than 100 years ago in the former Bucks County Gazette. This week’s entry comes from the June 19, 1902 edition of the newspaper.
The Telephone Situation Of Today As Explained By An Expert
In all of the telephone discussion in the daily newspapers and class journals very little space has been devoted to deterioration of telephone plants. The importance of this fact cannot be overestimated. It is a wing of the telephone business that has escaped, apparently, critics and the subject has unquestionably genuine and special interest. How it escaped thorough review before, it is difficult to imagine. That changes, etc., make a telephone plant obsolete within few years is too important a statement be taken lightly.
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A prominent engineer, speaking authoritatively with a single eye for the facts, and with an expert knowledge of the subject of telephone properties recently made the following statement. What he has to say is more than important, the statement is entitled to the widest publicity. He said:
“The rapid deterioration of a telephone plant is generally not appreciated. This is especially true in the case of investors interested in small companies. Most of the Bell Companies have had experience in this respect, and those who have failed to appreciate it stopped paying dividends five or eight years ago.
“As a general rule the plant must entirely renewed once every ten years. This figures out about as follows:
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THE CASE MADE ENTIRELY CLEAR.
“Suppose a plant was bonded at the’ rate of $200 per station. Every year $20 out of earnings must be set aside as sinking fund to redeem the bonds, or the same amount of money must be expended m the plant in addition to ordinary maintenance and repair. If this not done then the bondholders are in position of simply having part of the purchase money each year in the guise of interest. Then at the end of ten years bonds are worthless. If in the case proposed, where $20 per annum per station must be set aside as a sinking fund, operating expenses are taken at a figure all reasonable, say even as low as $12 or $15 per year, it will be seen that the average rate per telephone for services be more than $35, or there is nothing over for dividing among the holders of stock or paying interest on bonds.
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After an experience of several years Maryland Independent Telephone Co. is now asking permission of City council Increase the rates of all subscribers; the present rate of $18 for business, and for residence telephones, it is claimed, less than the cost of the service.
“There was a recent example in Jersey of a telephone company where management did not appreciate the effect of deterioration and the large amount of money that must be devoted each year the keeping up and replacement of the plant.
“The experience of the “Bell” companies has demonstrated that the life telephone plant is not over ten years–this means that reconstruction of the entire plant must be made during this period. The first three or four years show little depreciation, but an allowance of per cent, per annum they find necessary cover this invisible, but none the less necessary, part of the cost of operation.
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“Taking the figures as they are obtainable they seem to indicate clearly that securities of all telephone companies ci not be scrutinized too closely.”
THE PEOPLE CAN PROTEOT THEMSELVES.
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“Much money has been wasted in telephone fight and the end is not The Erie Telephone Company stock has lately sold at 17, and less than a year It sold at 119. The Central Union has hardly been above 10 for a year and not paid a dividend in six years. Like wise there are plenty of independent companies which are financially weaker than they were three years ago.
“The telephone fight has been a good and necessary thing for the country. It has been a great educator in the use the telephone. War is waste, however, and should never last beyond the point settling the question of principle? at stake. ‘ “We think these have been pretty fixed. It seems that the following points are so well settled that The are hardly debatable by fair-minded men, to wit:
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“That the telephone service is a monopoly and that one telephone system reaching everywhere, at a right rate, is better than two.
“That the average rate is lower than good service can be furnished for, permanently.
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“That no company can establish a monopoly at excessive rates. The people can protect themselves. The telephone business is exceedingly fascinating. It has many allurements to the investor. country towns and small cities the subscribers come without asking–on the endless chain plan. They pay in advance at least with regularity, and all in all business has many points of advantage over ordinary mercantile pursuits.
“Yet taken as a whole the telephone business of the country is in a more chaotic condition than that of any other public service. I am well aware that the professional bond seller will not like this statement.
“Some steps must be taken to bring the war to a close before the conservative investor will enthuse over telephone securities.”
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An advertisement from the June 19, 1902 edition of the former Bucks County Gazette:
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