CHAPTER VII. THE TELEPHONE AND NATIONAL EFFICIENCY

To say what the net profits have been, to the entire body of people who have invested money in the telephone, will always be more or less of a guess. The general belief that immense fortunes were made by the lucky holders of Bell stock, is an exaggeration that has been kept alive by the promoters of wildcat companies. No such fortunes were made. "I do not believe," says Theodore Vail, "that any one man ever made a clear million out of the telephone." There are not apt to be any get-rich-quick for- tunes made in corporations that issue no watered stock and do not capitalize their franchises. On the contrary, up to 1897, the holders of stock in the Bell Companies had paid in four million, seven hundred thousand dollars more than the par value; and in the recent consolidation of Eastern companies, under the presidency of Union N. Bethell, the new stock was actually eight millions less than the stock that was retired.

Few telephone companies paid any profits at first. They had undervalued the cost of building and maintenance. Denver expected the cost to be two thousand, five hundred dollars and spent sixty thousand dollars. Buffalo expected to pay three thousand dollars and had to pay one hundred and fifty thousand dollars. Also, they made the unwelcome discovery that an exchange of two hundred costs more than twice as much as an exchange of one hundred, because of the greater amount of traffic. Usually a dollar that is paid to a telephone company is divided as follows:

Rent ............ 4c Taxes ........... 4c Interest ........ 6c Surplus ......... 8c Maintenance .... 16c Dividends ...... 18c Labor .......... 44c - - $1.00

Most of the rate troubles (and their name has been legion) have arisen because the telephone business was not understood. In fact, until recently, it did not understand itself. It persisted in holding to a local and individualistic view of its business. It was slow to put telephones in unprofitable places. It expected every instrument to pay its way. In many States, both the telephone men and the public overlooked the most vital fact in the case, which is that the members of a telephone system are above all else INTERDEPENDENT.

One telephone by itself has no value. It is as useless as a reed cut out of an organ or a finger that is severed from a hand. It is not even ornamental or adaptable to any other pur- pose. It is not at all like a piano or a talking- machine, which has a separate existence. It is useful only in proportion to the number of other telephones it reaches. AND EVERY TELEPHONE ANYWHERE ADDS VALUE TO EVERY OTHER TELEPHONE ON THE SAME SYSTEM OF WIRES. That, in a sentence, is the keynote of equitable rates.

Many a telephone, for the general good, must be put where it does not earn its own living. At any time some sudden emergency may arise that will make it for the moment priceless. Especially since the advent of the automobile, there is no nook or corner from which it may not be supremely necessary, now and then, to send a message. This principle was acted upon recently in a most practical way by the Pennsylvania Railroad, which at its own expense installed five hundred and twenty-five telephones in the homes of its workmen in Altoona. In the same way, it is clearly the social duty of the telephone company to widen out its system until every point is covered, and then to distribute its gross charges as fairly as it can. The whole must carry the whole - that is the philosophy of rates which must finally be recognized by legislatures and telephone companies alike. It can never, of course, be reduced to a system or formula. It will always be a matter of opinion and compromise, requiring much skill and much patience. But there will seldom be any serious trouble when once its basic principles are understood.

Like all time-saving inventions, like the railroad, the reaper, and the Bessemer converter, the telephone, in the last analysis, COSTS NOTHING; IT IS THE LACK OF IT THAT COSTS. THE NATION THAT MOST IS THE NATION WITHOUT IT.