Art & Taxes

As monopolies go, American Telephone & Telegraph Co. is probably the best run and most benevolent in the U. S. Nonetheless, Congress in the last three years has appropriated $1,500,000 for an A. T. & T. investigation. Hearings ended last summer and last week the Federal Communications Commission report was in the hands of Chairman Frank R. McNinch, almost ready to be submitted to Congress. Therefore, in making his annual report last week, A. T. & T. President Walter S. Gifford took care to get his word in first. "This country," observed Mr. Gifford, "is entitled in good times and bad to the best possible telephone service at the lowest possible cost." Referring to the FCC report: Said he: "This investigation . . . has been one-sided throughout. The company was denied not only the right to cross-examine investigation witnesses and to be heard in its own behalf, but was denied the right to have included in the record written material which it had prepared and considered necessary to point out serious and important errors affecting most of the investigators' reports. . . ."

Aside from this subdued snort of annoyance, President Gifford's report was confined to a dispassionate summary of the activities of the world's largest communications company. Excerpts: In 1937 it earned $182,342,866 ($9.76 a share) against $184,744,464 ($9.89 a share) in 1936. It thus barely covered the $9 annual dividend it paid last year for the 16th successive year. Total operating revenues increased 5.7% to $1,051,379,343 , but total operating expenses increased 7.5% to $708,479,450. This fact, plus the gradual dwindling of business toward the end of the year, accounted for the drop in net earnings. More than two-thirds of the increase in costs was in wages and taxes. In the past two years A. T. & T. taxes have increased $43,100,000, or 46%. Warned Walter Gifford: "In the long run the Bell System looks to development and research to reduce the cost of furnishing telephone service. If, however, expenses, including wages and taxes, continue to rise, telephone rates must follow, unless the increase in expenses is so gradual and within such limits that improvements in the art can be made fast enough and productive enough to create offsetting economies."

If this seemed like bad news to the owners of the 15,300,000 Bell telephones now in service in the U. S., another of Mr. Gifford's statistics was more reassuring. During 1937, after much conferring with various regulatory bodies, telephone rates were cut a total of some $22,000,000 a year.

Last week A. T. & T. stock was selling for around $135 on the New York Stock Exchange, having broken sharply from its recent 1938 high of $149.75 (T937 high: $187). Noting this and also that Bell Telephone Co. of Canada, which last year earned only $7.72 a share was last week selling at $161, the New York Times remarked: "Investors weighing the proper market value of a particular security presumably also consider political situations as well. . . ."

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