Silent Bell

Last week for the first time in 40 years Illinois Bell Telephone passed its quarterly dividend. Since 1909 the company has been ringing out a $2 payment four times a year. To American Telephone & Telegraph which owns over 99% of Illinois Bell's stock, the action means a loss of nearly $3,000,000 for the quarter, or at a rate of 63-c- per year on each & every share of A. T. & T. stock.

Illinois Bell's President Floyd Orlin Hale blamed the action on a U. S. Supreme Court decision last April in which Chief Justice Hughes upheld an Illinois Commerce Commission order for the reduction of coinbox telephone rates in Chicago. The company secured an injunction against the order shortly after it was issued in August 1923, contending that the lower rates were confiscatory. The case hinged upon the question of depreciation. By charging against operating expenses large reserves for depreciation, the company was able to show that:

1) its income under the lower rates would be much less than the usual "fair" return;

2) the old rates should therefore be allowed to stand.

The conclusion Chief Justice Hughes drew from these depreciation figures, however, was that they proved the old rates confiscatory as well as the new. The financial history of the company, wrote the Chief Justice, "repels the suggestion that during all these years it was suffering from confiscatory rates. . . . Elaborate calculations which are at war with realities are of no avail. . . . Proving too much, they fail of the intended effect." The Court ordered the injunction dissolved, the company to refund to telephone subscribers a total of nearly $20,000,000 approximately the company's entire surplus and more than twice the cash & securities in its treasury at year end.

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