Page:Popular Science Monthly Volume 71.djvu/441

that this amount might be spent for necessary improvements and extensions on the part of the local companies.

Following many of the numerous consolidations, the parent company granted to the consolidated companies a perpetual license covering the exclusive use of Bell equipment in specified territory, in exchange for the short-term licenses that had expired or were about to expire. In return for these perpetual exclusive rights the local companies issued to the parent company from 20 to 33 per cent, of the capital stock of the new organizations. Thus parent and operating companies became joint partners having every reason to protect each other's interests, even after the expiration of the fundamental patents.

Owing to the stress of financial conditions, early in 1885, the parent company decided to call a conference of the operating companies to ascertain what mutual action was advisable, in order to restore confidence among the shareholders of the consolidated companies, as well as to awaken an interest in telephone securities on the part of prospective purchasers. With that end in view it invited all local companies to send one or more representatives to a meeting to be held in Boston, June 8 to 13.

During the sessions of this conference all phases of relationship were broadly discussed and many perplexing problems thoroughly threshed out, several important concessions were made, and a further reduction in royalties announced. At the closing session the delegates tendered to the parent company a vote of thanks

for the substantial benefits resulting from the conference and its disposition to strengthen our hands in developing the business; (and assured) a continuance of our hearty support and cooperation, with renewed vigor and confidence.

In its annual report for 1885, the parent company referred to the results of this conference as follows:

With longer experience the telephone companies have learned that the cost of maintaining and reconstructing their plant has been generally underestimated, and many of them have in consequence been forced to recognize that the profits upon telephone business are less than they had expected and believed. For this reason they have appealed to us to make certain concessions in their contract relations, and we have given this subject careful consideration. . . . We have met our licensees; first, by agreeing when desired, that our share of net earnings, jointly with theirs, may be used for construction purposes, so that we in these cases are sharing the cost of developing the business; second, we have made a reduction in the royalties on telephones used in small places where the rates are low. This reduction involves a loss of royalty amounting to about $200,000 per annum on our present business.

While comparisons are rarely pleasant to present, yet it is interesting to compare this voluntary action on the part of the Bell company, with the resolutions passed by the licensees of another parent public utility company. This latter parent company was not in the telephone business, but it made arrangements

by which these local companies had the exclusive and absolute right to the sale of apparatus in their respective territories. In return for this they gave to the company a certain percentage of their capital stock, not for one year or two