Telephone to Washington

A year ago last week Congress instructed the Federal Communications Commission to find out all there was to find out about American Telephone & Telegraph Co. Among reasons cited in support of the Congressional resolution ordering the investigation was the fact that the Bell System had hitherto been entirely overlooked as a subject for a high-powered New Deal inquiry. That omission was in itself an extraordinary tribute to the company's management, for a more likely object for Congressional scrutiny could hardly be imagined.

A. T. & T. is a virtual monopoly, accounting for nearly 14,000,000 of the country's 17,000,000 telephones. It controls practically all long-distance lines. It touches the daily lives of more U. S. citizens than any other U. S. corporation. It is the biggest private enterprise in the world, with more than $5,000,000,000 in assets, 270,000 employes, 1,000,000 security holders. State regulatory bodies have investigated its operating subsidiaries for 20 years. The Interstate Commerce Commission exercised a nominal control over the parent company's long-line operations before the Communications Commission was formed. But between these two points of public supervision lies a vast void which includes the mysteries of inter-company relations. Congress wanted to know "the effect of monopolistic control upon the reasonableness of telephone rates and charges" and why rates were not lowered during the past few "years of declining prices."

Armed with a fat $750,000 appropriation, the Communications Commission set out to find the answers. During the past year it had more than 250 accountants, lawyers and engineers in the field, ransacking files, reading letters, photostating documents, copying reports, questioning telephone officials. Commissioner Paul A. Walker, who is personally directing the investigation, accused A. T. & T. of lack of cooperation. President Walter Sherman Gifford said he was giving all the assistance he could, maintained, as he has from the start, that A. T. & T. had no skeletons to hide.

Last week, having already spent about $430,000, the Communications Commission began to reveal its findings in a series of open hearings which will continue for weeks. To give the hearings a special telephonic flavor, a luxurious courtlike hearing room in Washington's new Interstate Commerce Commission Building was equipped with an elaborate recording device which made a complete transcription of the proceedings, preserving for posterity even the whispered advice of counsel to witness.

For its own counsel the Commission planned to get Ferdinand Pecora, but that able inquisitor, who is now a New York judge, was unable to oblige. Last week's quizzing was done by a restless, brilliant New Dealer who celebrated his 33rd birthday the day before the hearings opened. Counsel Samuel Becker, like many on the Commission's telephone staff, is a graduate of the La Follette school of Wisconsin liberalism. Though he did not participate directly in Wisconsin's famed telephone inquiry, which resulted in three rate reduction orders during Depression, he became executive counsel to Governor Philip Fox La Follette in 1931, went to PWA in 1933. After graduation from the University of Wisconsin (Class of 1922), he romped through Harvard Law School, where he became friends with Felix Frankfurter. After teaching law at Tulane University, he practiced his profession in his home town, Milwaukee. Occasionally Counsel Becker leaps from his bed in the dead of night, scurries to his office to perfect an idea that struck him suddenly. Just as suddenly he sometimes drops his work, heads for the nearest pool parlor for relaxation. Young though he is, Counsel Becker made even self-possessed Mr. Gifford squirm on the witness stand last week. President Edgar Selden Bloom of Western Electric, big A. T. & T. manufacturing subsidiary, complained that Mr. Becker "shut him off" every time he started to talk.

After Mr. Becker elicited the well-known fact that Mr. Gifford receives $206,000 annually, he asked the dapper, round-faced witness if he worked the regular A. T. & T. five-day week. "That's correct," replied President Gifford, adding, "plus the other two days. I don't suppose there is a day in the year that I don't devote some time to the telephone business."

To involved questions about A. T. & T.'s connections with the cinema, Mr. Gifford finally laughed: "You're getting in over my depth. I don't know." Another angle plugged by Counsel Becker was the relationship between Western Electric and Graybar Electric, another telephone equipment company, which Western Electric sold to Graybar employes in 1928. Contending that Graybar was still in fact controlled by Western Electric, the inquisitor implied that the price of telephone equipment was too high. Mr. Gifford countered that A. T. & T. got into manufacturing to see to it that the prices were "reasonable."

Becker: You mean that the public relies on your integrity, etc.?

Gifford: No, the public relies on our not being stupid.

Diversion. While this line of attack was significant, it made few headlines. Forthwith, Counsel Becker ordered a flank diversion, trying for two days to "smear" A. T. & T. with revelations about teletype service furnished to racetrack tipsters and their gambling clients. A. T. & T. revenues from this source amounted to only $43,000 per month. Smart Counsel Becker knew its news value to be much greater.

Big boss of the tipster trade is Moses ("Moe") Annenberg, tall, cadaverous brother of hard-boiled Max Annenberg, circulation director of the New York Daily News. In addition to a string of tipster sheets (Racing Form, Morning Telegraph--), Moe Annenberg owns Nationwide News Service, which furnishes track information by A. T. & T. teletype to some 200 U. S. and Canadian cities. According to Miami's Andrew W. Kavanaugh, head of the International Association of Chiefs of Police, Moe Annenberg's "News" service takes in $6,000,000 annually, a figure which has caught the eye of enterprising racketeers and unemployed bootleggers.

A. T. & T. cannot discriminate against customers on moral grounds, has to furnish service under most circumstances if requested. Its real trouble, as Counsel Becker last week adduced, was in rescuing its costly teletype machines after a gambling joint has been raided, since high-minded judges are apt to order destroyed all equipment seized on the premises.

For close co-operation between telephone employes and public officials a special feather went to Jamestown, N. Y. There a teletype was seized in a gambling raid, but the judge was not disposed to give it up. The local telephone manager went to City Attorney James A. Hughes, who wangled the machine away from the police. Meantime the arrested gambler reopened for business under another name at another stand, where the same teletype was promptly reinstalled. In a candid report an A. T. & T. agent noted: "Called upon Mr. Hughes and received his statement for $25 for legal service. Besides, I gave ... a small box of cigars to the police department." The report also related that the case against the gambler was dropped after he forfeited bail and that he was also a client of City Attorney Hughes. That, said Counsel Becker, completed a "triple play on the part of Mr. Hughes."

A. T. & T. admitted that its "loyal" employes had been "overzealous" in promoting the company's interests. President Gifford thought it was all pretty "messy," though he was taken aback when it was announced that G-men from the Department of Justice were also going to investigate. "We certainly don't want this business," Mr. Gifford declared. "We want to get rid of this character of service, but, frankly, we don't know how to do it. . . . If a rule could be drawn, which would eliminate this service without making the telephone company and its employes part of an espionage system, we would certainly welcome it."

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