RURAL TELEPHONES

MONDAY, AUGUST 8, 1949

UNITED STATES SENATE,

COMMITTEE ON AGRICULTURE AND FORESTRY,

Washington, D. C. The committee met, pursuant to adjournment, at 10 a. m., in room 324, Senate Office Building, Senator Elmer Thomas (chairman) presiding.

Present: Senators Thomas, Ellender, Lucas, Holland, Gillette, Young, and Thye.

The CHAIRMAN. The committee will be in order. We resume hearings on the matters pending before the committee. The matters embrace two bills, one Senate 1254 and the second House bill 2960.. These bills are practically the same. We would like to have suggestions, recommendations with respect to the provisions of both bills. The first witness will be Mr. Barnes. Will you please state for the record your full name and your residence, business or profession. STATEMENT OF FRANK S. BARNES, PRESIDENT, UNITED STATES INDEPENDENT TELEPHONE ASSOCIATION

Mr. BARNES. My name is Frank S. Barnes. I reside in Rock Hill, S. C. I am a telephone man.

The CHAIRMAN. Now, just what do you mean by "telephone man”? Mr. BARNES. I operate with my brother and my three sons, a small telephone property in Rock Hill.

The CHAIRMAN. Does your statement describe the extent of your property?

Mr. BARNES. My property is around 4,000 stations.

The CHAIRMAN. What do you mean by "stations”?

Mr. BARNES. Telephones.

The CHAIRMAN. Boxes?

Mr. BARNES. Yes, sir; telephones. We serve the city of Rock Hill and the surrounding rural territory.

The CHAIRMAN. How large a town is Rock Hill?

Mr. BARNES. Rock Hill is a town of about 25,000 in population. It had a population of 15,000 in 1940.

The CHAIRMAN. And you serve areas adjacent to the city?

Mr. BARNES. Yes, sir.

The CHAIRMAN. How much territory do you serve outside the city limits proper?

Mr. BARNES. We have lines that radiate out from it to the adjoining exchanges from 8 to 10 miles.

The CHAIRMAN. Do you cover that territory completely or just partially?

Mr. BARNES. We have feeder lines, and we cover it I would say rather extensively.

The CHAIRMAN. And it is all served by your company?

Mr. BARNES. Yes, sir.

The CHAIRMAN. You have connections with other services, other companies?

Mr. BARNES. Adjoining us are other telephone exchanges which connect with toll lines.

The CHAIRMAN. For example, any citizen residing in that particular area, if he desired to phone his Congressman or Senator or anyone else at a distant point, can have reasonably good service provided for him?

Mr. BARNES. Yes, sir.

The CHAIRMAN. All right, you may go ahead with your statement. Mr. BARNES. My company has been a member of the United States Independent Telephone Association for nearly 30 years. I first became a director of that association in 1935. Last year the directors elected me president, and as such I am here to appear before your committee.

Several of your committee already have some knowledge of the independent segment of the telephone industry, but I believe it is pertinent to set forth its relation to the general communications business of this country. There are approximately 19,000 separate telephone exchanges in the United States; over 11,000 of these are owned and operated by independent telephone companies, while less than 7,000 are operated by the associated companies of the Bell System.

Independent telephone companies today provide service in 65 percent of the total area of the United States; but, because the Bell companies operate in most of the larger cities, the Bell system operates over 80 percent of all the telephones of the United States while the independent companies operate somewhat less than 20 percent of the total.

The independent segment of the telephone industry is in no way dependent upon either the associated Bell operating companies or. upon the Bell system's manufacturing subsidiary, the Western Electric Co., for equipment used in its operations. The independent segment of the industry has six principal independent telephone manufacturers which manufacture equipment and telephone apparatus for its use. Listed alphabetically they are: Automatic Electric Co., Chicago, Ill.; Federal Telephone & Radio Co., Clifton, N. J.; Kellogg Switch board & Supply Co., Chicago, Ill.; Leich Electric Co., Chicago, Ill.; North Electric Manufacturing Co., Galion Ohio; Stromberg-Carlson Co., Rochester, N. Y.

Neither the Bell system nor the Western Electric Co. controls the source of our telephone equipment or determines its price, its quality, or the quantity we receive. Independent operating telephone companies can, however, and sometimes do purchase equipment manufactured by Western Electric Co.

There are approximately 5,800 separate independent telephone companies providing telephone service in more than 11,000 cities and towns in the United States. These companies are called independent because they are not controlled by any company in the Bell system. However, there are physical interconnections of facilities for the inter

change of long-distance business between both groups.

The dotted

map in the middle of the seven-page pamphlet placed before you, marked "exhibit No. 1," shows the location of the various places where the independents operate exchanges and furnish outlets for long-distance service.

The CHAIRMAN. The committee will accept the little pamphlet containing the map, and make it a part of our records for reference purposes. We have no facilities for printing this in our report, but we will have it before us.

Mr. BARNES. Thank you, sir. Any additional copies that you might want we will be glad to furnish.

The CHAIRMAN. If you have enough copies to supply the committee, I think it might be advisable to either let us have them or send them to us. It is very interesting.

It shows us on its face the extent to which the telephone industry is developed already. Of course, in the more populated areas you have more telephones, naturally. Out in the far West there are great areas where there are no telephones at all. That is for the reason that the population is so meager, sparse, and so far apart that they cannot be reached economically.

Mr. BARNES. Yes, sir.

At the outset, I should like to make clear the large proportion of the independent industry which is represented by our appearance before this committee. There are approximately 5,800 independent telephone operating companies in this country. Of this number, 2,422 are members of the United States Independent Telephone Association. These 2,422 member companies own or operate 6,625 of the 11,000 independent exchanges. They-and this is the important thing to remember, gentlemen serve over 85 percent of all independent telephones. Affiliated with our association are 33 State telephone associations.

We know of no other organization which represents any group of independent telephone companies on a trade-organization basis. I say that advisedly despite numerous references in the testimony of certain proponents of this legislation-references to an organization known as the Independent Telephone Institute. I say it also despite the claim that this so-called institute speaks for a substantial number of independent companies in favor of rural telephone legislation.

The United States Independent Telephone Association is supported entirely by dues paid by its member companies on a uniform basis. The Bell System does not now, and never has contributed directly or indirectly, one single dime to the USITA in the entire 52-year history of our organization. Our bylaws provide that no company may be a member of our association if it is owned or controlled, directly or indirectly, by the American Telephone & Telegraph Co., or by any of the associate companies of the Bell telephone system, or by any company owned or controlled by or affiliated with said American Telephone & Telegraph Co., or any of its said associate companies, whether, in either case, said ownership or control be actual or contractual. The USITA is a trade association for service to and advancement of the independent segment of our industry. Its policies are determined by a 36-member board of directors composed of independent telephone men, elected by the members of the association. Statements made before you that the independent telephone companies or

the United States Independent Telephone Association are dominated or controlled by the Bell system could not possibly be farther from the facts.

We appreciate this opportunity to discuss with the committee the subject matter of the pending legislation. I shall in my own testimony offer comments of a general nature upon the subject matter of this hearing. I shall be immediately followed by the acting chairman of our association's committee on the problems of small companies, Mr. R. A. Lumpkin, who will furnish more detailed information and submit certain concrete suggestions.

At the outset we should like to state that the independent segment of the telephone industry is in no way opposed to the stated objective of the bill under consideration-that of furnishing or improving telephone service to persons in rural areas. That, gentlemen, in addition to furnishing service in urban communities is the purpose of the telephone industry.

The Chairman. Using your own area as an example, how could the service be improved to service more people, and of course the quality of service? That is always a local matter. What could be done to afford your people a wider extension of service? That is what the bill is intended for primarily.

Mr. BARNES. Senator, we went into the war with about 40 percent reserve capacity in our switchboards in the city of Rock Hill. It used up during the war the capacity that we had.

Immediately after the war we were faced with the problem of expanding our central office facilities, which takes about 2 years or more in normal times to do that. During that time there has accumulated a number of applications for service, the bulk of them being in the urban areas or the cities, but the same facilities there would be used to furnish lines.

We are hoping this fall to finish the installation, the building of a new building and central office equipment which would enable us to expand both the rural and the urban service to meet about 1,200 applications for service, of which only 180 are rural.

The CHAIRMAN. I was going to ask that question. applications have you on hand for new phones?

Mr. BARNES. We have between 1,200 and 1,300, sir.

How many

The CHAIRMAN. Well, for what reason have they not been given this service? Why have connections not been made?

Mr. BARNES. There were just no central-office facilities available to make connections on the board for them.

The CHAIRMAN. You mean your board is not big enough?

Mr. BARNES. Not big enough.

The CHAIRMAN. Could you get a larger board?

Mr. BARNES. In 1946 we started the engineering and placed the order in early 1947 for the new switchboard. It is now being installed, and that is as early as we could get in installation, due to shortages. That will be completed within the next 60 or 90 days, and at that time we will begin to make rapid progress upon the installation of the service for applicants for telephones.

The CHAIRMAN. Presuming that all applicants will be served, then how much surplus facilities will you have on the switchboard you are now installing?