Mr. TEAGUE. Mr. Peterson, do you happen to have any information at all concerning the dividend records of your membership companies? Do any of them pay dividends at all, or are they all in such terrible shape that they cannot pay?

Mr. PETERSON. I think some companies are able to pay some dividends, but I do not have any figures on hand here on that.

Mr. TEAGUE. One other question. I gather you think it is not feasible at all to go in, as some electric companies do, and ask for an increase in rates to take care of necessary expansion and renovation.

Mr. PETERSON. That is correct. I think one of the things that the REA program has sought to accomplish is to, as much as possible, have a parity of rates between the urban telephone subscriber and the rural telephone subscriber. If the REA telephone companies had imposed upon them an interest rate that exceeded their present ability, it would only mean that the cost of telephone service to the subscriber would have to be increased and it would further increase the difference between what is now being paid in the urban areas of our country compared to the rural areas.

Mr. TEAGUE. Thank you.

Mr. JONES. Mr. Chairman, may I ask a question?

Mr. ZwACH. Mr. Chairman?

The CHAIRMAN. Yes, Mr. Zwach.

Mr. ZwACH. I want to commend this gentleman for his statement. He comes from my State. I served with him in the legislature years ago and he knows the problems of rural America and the telephone problems from the ground up. I just want to make this statement to the committee.

Mr. JONES. Mr. Peterson, in how many States are the telephone cooperatives under the immediate supervision of the utilities commission as to rates or expansion?

Mr. PETERSON. I think that all the States except the State of Texas have commissions which regulate the telephone industry.

The CHAIRMAN. Are there any other questions?

(No response.)

The CHAIRMAN. If not, we are very much obliged to you, Mr. Peterson, for your comprehensive statement.

Mr. PETERSON. Thank you, Mr. Chairman.

The CHAIRMAN. We now have Mr. Angus McDonald, director of research for the National Farmers Union.

We will be glad to hear from you, Mr. McDonald.

STATEMENT OF ANGUS MCDONALD, DIRECTOR OF RESEARCH, NATIONAL FARMERS UNION

Mr. McDONALD. Mr. Chairman, members of the committee, my name is Angus McDonald. I am director of research for the National Farmers Union. I have been employed by this organization for 21 years.

Twenty-one years ago this month, this committee heard testimony in support of a rural telephone bill introduced by the chairman of this committee. It was an historic moment when this committee, after testimony by the members of our organization, approved a bill which

would make it possible for farmers in sparsely populated areas to have available telephone service. During the following months in that year, 1949, efforts were made by certain Senators to change the 2-percent interest rate provision which had been incorporated in the legislation by Congressman Poage. Fortunately, these efforts were unsuccessful and a satisfactory bill was finally approved by the Senate and the House and signed by President Harry S. Truman.

It would perhaps be appropriate to comment that the Farmers Union was the only farm organization active in the fight to bring telephone service to farmers. One highlight in the testimony of the House hearing was a statement by one witness that had his family had telephone service he would not have lost his right hand which had been partially mangled by a farm machine. This was a dramatic moment in the hearings which came after a statement by Representative Andresen that no telephones were needed.

Over the years there has been a continuous attempt to take away the necessary low interest, long-term rate which makes it possible to bring both electric and telephone service to our members in sparsely populated areas, particularly in the States of Montana and North and South Dakota. We have fought shoulder to shoulder with many Congressmen to save the 2-percent rate.

Therefore, we are pleased to see in this bill on page 19 the following

comment:

Notwithstanding any other provision of law, all loans made pursuant to this Act for facilities for telephone systems with an average subscriber density of three or fewer per mile shall be made under section 201 of this Act; but this provision shall not preclude the making of such loans from the telephone bank at the election of the borrower.

We have no objection to the setting up of a rural telephone bank which would provide supplemental financing for those cooperatives who are financially capable of paying the going interest rate in the market. There is no question that such a bank is needed. We have read the summary statement of the Rural Telephone Cooperative Association and the figures in that statement are extremely convincing. Apparently there is a great backlog of rural telephone applications and it is difficult to see how these needs can be satisfied without the aid of supplemental financing. Therefore, we urge the approval of this legislation by the committee.

The CHAIRMAN. Thank you, Mr. McDonald.

Mr. TEAGUE. I have one question, if I may. Mr. McDonald, you state in your last paragraph that you have no objection to the setting up of a rural telephone bank which would provide supplemental financing for those cooperatives who are financially capable of paying the going interest rate in the market. You understand that about three-quarters of the beneficiaries of this legislation would not be cooperatives, they would be corporations organized for profit, do you not?

Mr. McDONALD. Yes, we are primarily concerned with the welfare of the cooperatives and I was thinking primarily of the cooperatives in areas where we have substantial membership who could not pay the going rate. As far as private business is concerned, as Mr. Poage has stated, it has been in the legislation all along and if the private profit companies can obtain a loan from this new bank, which I presume

will be set up, it is fine with us. We have no objection to that part of the program.

Mr. TEAGUE. But you do understand that the big bulk of the beneficiaries would not be cooperatives?

Mr. McDONALD. Yes, sir.

Mr. TEAGUE. Thank you.

The CHAIRMAN. Any other questions of Mr. McDonald? (No response.)

The CHAIRMAN. If not, we are grateful to you, Mr. McDonald. We appreciate the statement.

That concludes our witnesses scheduled for today.

Tomorrow we have three witnesses scheduled and Friday we have three more scheduled.

Mr. PETERSON. Mr. Chairman, I might ask one further question of the Chair. I neglected to do this at the close of my testimony. I understand that there will be further days of hearings on this particular bill. I am wondering if it would be possible, in the event that I feel it is necessary in view of what the testimony will be that will be brought to the attention of the committee in the remainder of the hearing, to submit a statement to the committee in the event that I feel it is necessary at the conclusion.

The CHAIRMAN. It has always been the practice of this committee to receive statements for the record where they are pertinent to the issues that are involved. I do not want to be put in the position of making a commitment to allow one witness to appear as often as he wants to, because we would never bring these things to a conclusion if we did that, but certainly if you want to file a supplemental statement for the record in connection with matters that have been brought out, we will certainly receive it.

Mr. PETERSON. That is all I am asking for, Mr. Chairman, thank

you.

The CHAIRMAN. The committee will stand in recess until 10 a.m., tomorrow.

I want to express my appreciation to you gentlemen who are here for your attendance.

(Whereupon, at 11:50 a.m., the committee recessed, to reconvene at 10 a.m., Thursday, February 20, 1969.)

RURAL TELEPHONE SUPPLEMENTAL FINANCING

THURSDAY, FEBRUARY 20, 1969

HOUSE OF REPRESENTATIVES,
COMMITTEE ON AGRICULTURE,

Washington, D.C.

The committee met, pursuant to recess, at 10 a.m., in room 1301, Longworth House Office Building, the Honorable W. R. Poage (chairman) presiding.

Present: Representatives Poage, McMillan, Abernethy, Jones, Montgomery, Sisk, Alexander, Burlison, Belcher, Teague of California, Wampler, Goodling, Miller, Zwach, Kleppe, Price, Sebelius, McKneally, and Mizell.

Also present: Christine S. Gallagher, clerk; William C. Black, counsel and John Knebel, assistant counsel.

The CHAIRMAN. The committee will please come to order.

We meet this morning for further consideration of the bills providing supplemental financing for a rural telephone program. Our first witness this morning will be Adm. William C. Mott executive vice President, United States Independent Telephone Association. He will be accompanied by Eugene Harmon, Harold Payne, and Hugh Wilbourn, Jr.

We will be glad to hear from you, Admiral Mott, and your associates.

STATEMENT OF ADM. WILLIAM C. MOTT, EXECUTIVE VICE PRESIDENT, U.S. INDEPENDENT TELEPHONE ASSOCIATION; ACCOMPANIED BY EUGENE J. HARMON, DIRECTOR, USITA; HAROLD PAYNE, PRESIDENT, TELEPHONE UTILITIES OF PENNSYVANIA; AND HUGH R. WILBOURN, JR., PRESIDENT, ALLIED TELEPHONE CO.

Mr. MOTT. Mr. Chairman, Mr. Harmon, who is with me on my left, is the director of REA matters for our association and Mr. Payne, who is a REA-is the president of the Telephone Utilities of Pennsylvania, and he also operates in West Virginia, and Mr. Wilbourn is the president of the Allied Telephone Co. in Little Rock, Ark.

My name is William C. Mott and I am executive vice president of the United States Independent Telephone Association (USITA).

I might say for the benefit of the new members of this committee before whom we have not heretofore had the pleasure of appearing, that the United States Independent Telephone Association is a trade association representing 93 percent of the independent, that is to say, non-Bell segment of the industry. We have over 1,000 member operat

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