Gambar halaman
PDF
ePub

phone and Telegraph Company lines. With regard to volume of business, there were 82,245,000 New York Telephone Company toll calls handled by the New York Telephone Company in 1921 as compared to 7,064,000 American Telephone and Telegraph Company toll calls originating at New York Telephone Company stations.

The investment cost of the Long Lines Department covering its property in New York state, as of December 31, 1921 (excluding Construction Work in Progress) was $8,954,754. Reproduction cost new of the same property was estimated at $14,712,556, and structural or present depreciated value (excluding Construction Work in Progress) was $13,139,877. During the year 1921 the total amount of revenue which the American Telephone and Telegraph Company had after the payment of commissions and prorates to the New York Telephone Company on toll business conducted entirely within the State of New York was $1,487,236.

The Long Lines Department does not make a separation of its expenses as between interstate and intrastate business. The ratio of expense to revenue for the operation of the Long Lines Department in the entire country was stated to be 63 per cent. Applying that ratio to the revenue derived from toll messages within New York state would give an expense figure of $936,959, leaving available for return $550,277. This indicates a return on the book cost of the property of slightly more than 6 per cent and a return on the structural value of the property of less than 4 per cent.

It has been suggested that the New York Telephone Company should own all the toll lines carrying intrastate messages. This would cause duplication of existing lines and would be of doubtful benefit to the New York Telephone Company. The net revenue involved is insufficient to make any appreciable difference in return to the New York Telephone Company and duplication of lines, with the confusion incident to a new system of routeing would have the effect of slowing up the service. On the financial showing of the American Telephone and Telegraph Company in its New York State business, as compared with its New York State investment, it is further apparent that such a proceeding would also not result in any economy so far as rates are concerned. The rates charged would be the same in either instance.

Is the division of toll revenue between the American Telephone and Telegraph Company and the New York Telephone Company such that the New York Telephone Company receives a fair compensation for the use of its plant and for the services rendered by it in billing and collecting for long haul toll calls? Approximately $7,500,000 was billed to subscribers of the New York Telephone Company on American Telephone and Telegraph Company calls in 1921. All of this sum was not retained by the American Telephone and Telegraph Company for it paid therefrom a commission and also a pro-rate to the New York Telephone Company and to other connecting companies as compensation for the use of plant and services involved.

The evidence here shows that within the so called 33 mile area (the area 33 miles in width around the city of Greater New York), the average New York Telephone Company toll call produced 15 cents. Outside of the 33 mile area the average was 25.3 cents. The average call, however, of the American Telephone and Telegraph Company originating within the 33 mile area, was $1.91, and where originating outside the 33 mile area, $1.21. Where the call originated at connecting company stations, the average was 90.8 cents. Applying the terms of the license contract, under which settlements are made with the New York Telephone Company, it appears that the average commission retained by the New York Telephone Company on all American Telephone and Telegraph Company calls within the State of New York averaged 16.6 cents, the average compensation for calls originating within the 33 mile area being 14.1 cents and for calls outside of that area 20.5 cents. The average compensation (pro-rate) paid the New York Telephone Company for the use of plant and services within the 33 mile area (including report charges) amounted to 28.5 cents per call. The same average for calls outside of the 33 miles area was 12.6 cents. If the commission received by the New York Telephone Company be added to the compensation (pro-rate) paid to it by the American Telephone and Telegraph Company, the result shows that on all American Telephone and Telegraph Company calls within the 33 mile area the New York Telephone Company received 42.6 cents and for all calls without the 33 mile area, 33.1 cents. As to the fairness of this, the record shows that the New York Telephone Company pays its four largest connecting (independent) companies, an average commission of 9.8 cents per message. The property within the 33 mile area is owned almost message. exclusively by the New York Telephone Company and the basis of compensation paid to it by the American Telephone and Telegraph Company includes reimbursements for allocated expenses together with an 8 per cent return on the cost of the property concerned. It is true that under this contract no specific payment is made for the use of the subscriber's line, or that portion of the exchange switchboard involved in the handling of a toll call, yet it is undisputed that it is the universal practice among telephone companies to base such payments on outgoing calls and the amount paid is almost universally held to cover both incoming and outgoing calls. If an attempt were made to allocate the use of plant on incoming calls, it can readily be seen, owing to the accounting involved, that no appreciable amount would be gained, and the amount of money remaining on the average call to compensate for the use of the small amount of line involved would be so small as to make no appreciable difference in return. As has been said, the commission paid on calls within the 33 mile area amounted to about 14 cents per message. If this were divided in two, and we assume the same number of incoming as outgoing calls, we have about 7 cents per message for each class. Dividing the average commission

paid by the New York Telephone Company to its connecting companies in the same manner gives us a figure of approximately 5 cents per message to compare with the 7 cents per message received from the American Telephone and Telegraph Company. On the evidence presented we find that the toll arrangements are fair and that reasonable compensation is paid the New York Telephone Company.

VALUATION OF PROPERTY

We are to determine just and reasonable rates, charges and rentals, "with due regard, among other things, to a reasonable average return upon the value of the property actually used in the public service and to the necessity of making reservation out of income for surplus and contingencies, (Public Service Commission Law, section 97.) It becomes necessary, therefore, to consider the value of the property of the New York Telephone Company within the State of New York.

[ocr errors]
[ocr errors]
[ocr errors]

The New York Telephone Company presented a complete inventory of its property in the State-wide case. For convenience this inventory was divided into two parts, one covering property situated in the city of New York, and the other the company's property in the State of New York outside of the city. It was in three separate volumes, the first covering the Hudson, Central and Western divisions of the company; the second, the Westchester and Long Island Elsewhere divisions; and the third the property in Greater New York. The company also furnished an inventory by divisions, by counties and by tax districts. In the 22 volumes of this inventory, the property is divided as it exists in the 1355 tax districts of the State.

This inventory was the result of an actual count of the units of physical property so far as central office equipment, land and buildings, general and miscellaneous equipment were concerned. About 55 per cent of the entire property in the State was actually counted. The inventory of the remainder (for the most part consisting of outside plant) was obtained from the plant records of the company. These plant records are based upon what is known as the 1914 inventory.

In 1914 the New York Telephone Company employed a committee of engineers and accountants to inventory and appraise its entire property. A large force was employed and the work done was carefully checked and rechecked and the number of units of plant found as the result of the work was entered on the plant records of the company, forming the basis of the present inventory.

From January 1, 1915, new property has been added and the units of property retired have been subtracted, the object being to have plant records which would accurately reflect, at any given time the number of units in the plant.

In the year 1919 the New York Telephone Company made a check of the plant measurement records by actually counting the property in about 5 per cent of the tax districts of the State (Exhibit

No. 32). It was found by this check that the plant measurement records with regard to outside plant exceeded by 3.59 per cent the property found by actual count in the tax districts checked. In the instant cases a check of the inventory was made by the City of New York in the Borough of Brooklyn. The particular accounts covered were main underground cable, toll and exchange. The company's cable diagrams were compared with the cable maps and after adjustments had been made to bring the cable diagrams up to date, a spot check was made. After the work was done it was entirely rechecked and another comparison made with the property in the field. The inventory was found to exceed the cable diagrams by 117,105 feet. Priced out into dollars the inventory exceeded the cable by approximately 2.26 per cent. If the same ratio were applied to all cable accounts in New York city, and the dollar figures of book cost compared, the amount by which the inventory exceeds the property in the field is still about 3 per cent.

In 1919 a somewhat similar check of the company's inventory was made in Buffalo and in Syracuse in connection with rate cases tried before the former Public Service Commission. In the Syracuse case the inventory exceeded the plant records for the classes covered by about 3.68 per cent. A complete inventory was not made in the Buffalo case, but the check showed substantially the same difference between the records and the inventory. The data and evidence offered in these two cases were received in evidence in the present cases.

An inventory check was made in this case by the Commission. A force consisting of 18 valuation engineers directed by the Chief Engineer of the Commission, made a spot check of the physical property of the company in selected tax districts of the State. The actual field work was done during the months of June, July, August and September, 1922. Certain local exchange areas of the company within the State were covered, including one first class city, three second class cities, one third class city, two villages and three towns. A complete check of all the physical property of the New York Telephone Company was made in each such district, except in the city of Buffalo, where (because it had been previously checked in the Buffalo rate case) only underground cable and conduit main and subsidiary were checked. The districts in which these checks were made by the Commission were selected at random and were believed to be typical of the various exchange districts of the company within the State. The results showed that the company's inventory exceeded the actual physical property within the different tax districts by percentages varying from 30.1 per cent for aerial wire to 4.6 per cent for underground conduit and 0 per cent for submarine cable. When reduced to dollar figures, using the same unit retirement prices as the company in 1921, the amount by which the plant records exceeded the inventory was about 6 per cent.

It is significant that in all these investigations, so far as outside plant is concerned (pole lines, aerial and underground cable, conduit and aerial wire), the inventory has exceeded the property in the field by an amount varying from 3 per cent to 6 per cent.

New York City Case.

In support of its application for increased telephone rates in New York city, the New York Telephone Company submitted early in Case No. 4089, a valuation of its property based upon the figures used in the 1914-1915 rate case. In that case practically a compromise settlement, by which rates were to be reduced, so as to decrease the net income of the company by $3,000,000 was had. In making such reduction, $83,796,685 was used as the valuation of the property in New York city, an amount which was accepted as the basis in that case, but which was expressly stated not to represent a finding for any other purpose than the then pending proceeding. (Order Public Service Commission, Second District, March 30, 1915.)

There was no separation of the property into accounts, and no statement by the former Commission or the conferees as to how the figure $83,796,685, agreed upon in that proceeding, had been determined.

In the present case (No. 7720), the New York Telephone Company added to this amount the net increase in Fixed Capital and in Construction Work in Progress up to August 31, 1920, and estimated the most of property that would be added up to the end of 1921. From the total thus obtained, the increase (partly actual and partly estimated) in depreciation reserve account was subtracted and by this process $148,574,495 was at that time estimated as the value of the property in New York city as of December 31, 1921.

The City of New York introduced in evidence the book value of the property and added an allowance for working capital (Maltbie Record, City case 3551). It then deducted therefrom, the balance in the depreciation reserves. According to the city's contention these figures brought down to December 31, 1921, may be summarized as follows: (City case, Exhibit No. 219, T-227).

Book cost of fixed capital (a)....
Working and construction capital (b)

[blocks in formation]

....

..

......

Book cost of telephone property...
Less balance in depreciation reserves.

Book value of telephone property

....

..

$147,491,313 4,893,585

$152,384,898 44,718,546

$107,666,352

(a) Omits Construction Work in Progress and Intangible Capital. (b) At $5 per station.

The city also undertook to show that the actual cost of the property in New York city was not in excess of the cost as shown by the Company's books; and further presented evidence to show what it claimed the investment cost had been, distinguishing what

« SebelumnyaLanjutkan »