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to the valuation of the company's property fixed by this Commission at $246,000,000, and that the Commission's finding in this respect has never been contested. The Attorney General of the State was specially authorized by statute to represent the people in the Commission's State-wide case and the Corporation Counsel of the City of New York was an active participant in the entire proceedings. It is reasonable to suppose that if there were any valid objection to the valuation fixed by the Commission it would have been clearly the duty of the Attorney General and the Corporation Counsel to have asked for a court review of the valuation found, as this is the foundation of the earning base of the company. No action to review the valuation was ever even suggested, nor was a rehearing before the Commission itself asked upon the subject of valuation.
On the rate structure and schedules set forth in the Commission's orders a general level of rates was fixed which can be lowered as economies are effected or costs of labor and materials are reduced; or can be increased in the same manner if costs of production and operation should increase. Future decreases or increases in rates can be applied to the entire schedule of the company so as to produce an harmonious level of rates without discrimination against individuals or communities.
The new rates for the entire State went into effect on March 1, 1923. The orders of the Commission affecting these rates in New York City and in the State outside of New York City contained identic provisions which require that the New York Telephone Company make and file with this Commission monthly statements of its revenues and expenses covering service rendered in New York City and in other parts of the State. In accordance with this requirement, the company has been submitting monthly statements showing its revenues and expenses.
The results of operations for the months of March to November inclusive, indicate that in the State outside of New York City, the company's earnings have been in excess of the net return of 7 per cent allowed by the Commission and that in the city of New York, the company's earnings have been below that percentage. The cumulative results of operations for the period referred to (March to November inclusive), show an earning of 4.99 per cent in the city of New York and 7.91 per cent in the State outside of New York City, or an average return to the company for its operations within the entire State of 5.84 per cent. The following statement gives the results of the earnings by months and the cumulative effect of those earnings by months.
An examination of the returns made by the company shows that the revenues for the year 1923 (December estimated) are in excess of the anticipated revenues fixed by the Commission, but that the expenses are also appreciably in excess of the expenses anticipated. The company has submitted to the Commission and we now desire to submit to Your Honorable Body, the following statement showing the estimated revenues and expenses of the New York Telephone Company for the year 1923, assuming that the rates prescribed by the Commission had been effective during the entire
REVENUES AND EXPENSES
ESTIMATED REVENUES AND EXPENSES FOR YEAR 1922 ASSUMING RATES PRESCRIBED BY COMMISSION HAD BEEN EFFECTIVE JANUARY 1, 1923
NEW YORK TELEPHONE COMPANY
Net telephone revenues. Add: Difference between actual depreciation expense and Commission's allowance at 5% per
Difference between licensee revenue Dr.. and Commission's allowance at $2.00 per station.
Less: Increase in Federal income taxes due to above adjustments..
Net telephone revenues adjusted to Commission's allowance for depreciation and licensee revenues Dr.
Return at 7% on Commission's rate base for 1923: $174,466,134
New York City.
New York State outside New
New York State.. Difference between actual net telephone earnings and 7% return on Commission's rate base. Difference between adjusted net telephone earnings and 7% return on Commission's rate base..
New York State
$33,702,000 11,835,000 2,854,000
The foregoing statements appear to show, if the company's claims are correct, that there has been a shortage of $3,460,629 in its earnings in the city of New York under the 7 per cent return permitted by the Commission, that in the State outside of the city of New York it has earned in excess of that 7% return $488,855, resulting in a deficiency for the State as a whole of $2,971,774.
The company has informally advised the Commission within the past few days of its intention to apply for such readjustments in rates as will enable it to earn the percentage of return allowed by the Commission of 7 per cent.
TELEPHONE SERVICE IN THE METROPOLITAN DISTRICT
In its annual report for the year 1922 the Commission called the attention of your honorable body to the conditions relating generally to telephone service existing in the city of New York. At the Commission's request, the New York Telephone Company had submitted a statement showing particularly the facts regarding delays in installing new services, which statement was included as
part of the annual report for 1922. The Commission believes it is important that the facts regarding present conditions be placed before you, and submits the following letter:
NEW YORK, December 24, 1923. Honorable WILLIAM A. PRENDERGAST, Chairman, Public Service Commission of New York, 30 Church Street, New York, N. Y.:
DEAR SIR.- In response to your request for information respecting the present condition of the list of deferred applications for telephone service in the City of New York, and supplementing the similar report made under date of December 21, 1922, I am writing this letter.
Substantial progress has been made in reducing the number of deferred applications in this City, notwithstanding the fact that the demand for service has continued at a rate exceeding all prior years. It was pointed out in the report of December 21, 1922, that in the City of New York, except that part of the Borough of Manhattan south of Chambers Street in which there never had been any deferred applications for service, the number of applications for new service had grown from 8100 per month in 1920 to 14,400 per month in 1922. The 14,400 applications received per month in 1922 call for the installation of 18,600 stations. During 1923 the average number of stations applied for per month has been 19,600 in the same territory, so that the demand for service has been somewhat greater this year than last year.
Nevertheless, the total number of deferred applications for service in Greater New York on December 1, 1923, was 45,104 as compared with 63,090 on December 1, 1922.
NEW YORK TELEPHONE COMPANY
During the eleven months of this year we have connected in Greater New York 212,459 new stations and it is estimated that in the remaining month of December we will connect more than 22,000. The distribution by boroughs follows:
Comparing these with the figure in the report of last year it will be seen that the gain in gross connections has been materially greater during the current year.
During the year 1923 the gross expenditures for new plant have been $62,082,000, and in addition thereto more than $1,000,000 has been spent for general equipment.
It is estimated that the gross additions to the property accounts in 1924 will be in excess of $66,000,000 for New York City.
I am attaching addenda showing the new buildings completed during 1923 and those in course of construction at the end of year; also the switchboards completed during the year and in progress at the end of the year. The cost of buildings completed during 1923, including both new structures and extensions and additions to existing buildings, is $5,400,000. A similar total for those under construction at the end of the year is more than $21,000,000.
The conduit installed during the year (one month estimated) is 5,803,000 duct feet or 1100 duct miles. The cable installed (two months estimated) reaches a total of 4,975,000,000 conductor feet, which is equivalent to about
4700 miles of 200-wire cable. These figures are substantially in excess of those of 1922.
Such progress has been made during this year that we have practically eliminated the deferred application list in the Borough of Manhattan, except for applications in apartment houses now having P.B.X. service, and it is expected that during 1924, in the Borough of Manhattan, the deferred application list will be eliminated, except for the substitution of individual line service for the present apartment house private branch exchange service in the northern part of that Borough.
In the Bronx, unless there should be an abnormal growth in the outlying sections, during 1924 we expect to remove all restrictions upon applications, except the conversion of apartment house private branch exchanges.
In Brooklyn and Queens the progress has been slower, but we expect that substantial progress will be made during 1924, and that during 1925 we should be able completely to satisfy the demand for service. In certain sections of Brooklyn and Queens construction of dwelling houses has been proceeding at an extraordinarily rapid rate. Much of the heavy demand for new service has been in these sections where there has hitherto been no tele
phone plant whatever. The furnishing of facilities to meet this demand involved not only new central office buildings and switchboards but the construction of a large amount of outside plant; i. e., the digging of trenches, the laying of conduits, the installing of cables, interior block distribution, etc. Much of this work requires a longer time than the construction of the type of dwelling houses which have been erected in these sections.
Recovery from the conditions which have caused delay in furnishing service to all who applied for it has been retarded by the greatly increased demand for such service. The great volume of applications is no doubt traceable to the fact that a high level of wages in all classes of industry has enlarged the class of possible telephone subscribers. This fact is indicated by the relatively large increase in applications for residence service. The Company's aim is to regain its old position where service is furnished as applied for but the great construction programme made necessary by the unprecedented demand for service has taxed to the utmost the ability of the manufacturer to furnish equipment and the ability of this Company to do the construction and installation work required. The necessity of raising funds to provide for the enormous capital expenditures has imposed upon the Company a serious financial burden. Nevertheless the Company has, during the past year, been able to make a material advance in reducing the deferred application list and by the end of next year it is hoped that the situation will have been largely overcome, even though the present demand for service continues.
President. BUILDING WORK COMPLETED DURING 1922 IN GREATER NEW YORK New Buildings Location
Coney Island No. 2... Avenue R and Coney Island ave.. Brooklyn..
Fordham No. 2..
191/201 Ninth st.. Long Island City..
Yours very truly,
Extensions and Additions
(Signed) H. F. THURBER,
$70,000 60,000 400,000 80,000
450,000 350,000 1,250,000 350,000