Shaffer v. Public Service Commission

74 Pa. Super. 597 | Pa. Super. Ct. | 1920

Opinion by

Keller, J.,

When our present State Constitution was adopted, the telephone had not been invented. Several years passed after its invention before its possibilities in commercial and home nse were at all recognized. When it was desired to create corporate organizations in Pennsylvania to take advantage of these possibilities, it was found that there was no law which permitted the incorporation of telephone companies and the only way then open by which the benefits resulting from the new invention could be widely enjoyed by the public was to make use of the likeness existing between certain parts of the physical apparatus — poles and wires — common to both systems and incorporate the new companies as telegraph companies, and so this was done and many telegraph companies were chartered whose only purpose was to carry on the telephone and not the telegraph business. It followed as a necessary result that corporations chartered, (and thereby securing the right to exist), as telegraph companies, were subject, no matter what their actual operations, to the disabilities attached to telegraph companies and as the Constitution expressly forbade the purchase or acquiring of a telegraph company by a competing company (article XVI, section 12), the same disability attached to companies furnishing telephone service that had no legal existence except as telegraph companies. Hence when application was made by these same companies, then existing as telegraph companies though devoted solely to telephone operations, to the Public Service Commission for approval of their merger, the commission although finding “that the merger and consolidation of these competing companies would be for the service, safety, accommodation and convenience of the public, if it were not contrary to law,” felt constrained to refuse the application because of the constitutional inhibition against the merger of competing telegraph companies, and its action was affirmed by this court, (70 Pa. Superior Ct. 212), and the Supreme Court (263 Pa. 506).

Since that decision the legislature has by the Act of July 22, 1919, P. L. 1123, supplemented the general corporation act so as to authorize the formation and creation of telephone companies and has provided therein for the acceptance of its provisions by corporations theretofore incorporated under the laws of the Commonwealth and engaged in the business of furnishing telephone service. By its terms, authority is given to competing telephone companies created under said' act, or having accepted its provisions, to merge and consolidate subject to the approval of the Public Service Commission. The present application is in pursuance of said act.

By the Act of 1919, telegraph companies theretofore incorporated but carrying on the telephone business may do either one of two things. They may elect to continue to enjoy the rights and remain subject to the disabilities attaching to them as telegraph companies, and they are, in that event, not affected by the passage of the act; or they may formally accept the Act of 1919 by following the course therein prescribed, as these companies did, and become telephone companies, thereby losing, by necessary inference, the rights, privileges and immunities previously enjoyed by them as telegraph companies, as well as the disabilities which were inseparably annexed to them as such.

The report of the Public Service Commission, which will be printed with the report of this case, justifies the action of that body in the premises and is convincing as to the desirability, as well as the validity, of the legislation invoked by this application. There is no reason why the legislature should not do now what it might legally have done when the telephone was first invented, nor, why it may not, by general statute, provide that a corporation may, by complying with certain prescribed formalities, divest itself of certain powers and privileges and assume others in their place and stead: Tyrone Gas & Water Co. v. Tyrone, 195 Pa. 566.

The commission has found that the merger of the applicant companies is necessary to their continued existence and will result in a greatly improved service, inuring to the accommodation and convenience of the public. The expert testimony produced at the hearing demonstrates the essential differences now existing between telegraph and telephone companies. They are summarized by Mr. Grace, an engineer of twenty years’ experience, as follows: “1st. The two systems are electrically different in that one uses a very low frequency and the other a relatively high frequency electrical current. 2d. One system requires the use of trained operators to place and receive messages in code, whereas the other provides a direct means of personal conversation. 3d. Because of the difference as shown in (2), the telegraph system has developed only as a trunk-line plant connecting cities. On the other hand the telephone has developed most largely as a system of local exchange service, with a distribution wire network ramifying through all the streets and reaching every house and place of business.” The differences with regard to the policy of competition were also clearly set forth by this witness: “Telegraphic systems consist almost entirely of trunk lines connecting cities and the extent of their local wire distribution within cities is very limited. Generally speaking, the telegraph company will establish one or at the most a relatively small number of central transmitting offices and their customers must take their telegrams there for transmittal. Potentially, every one has the use of the telegraph companies’ facilities. In order, however, that any individual may send a telegram it is necessary to take or send Ms message either to the central transmitting station or to some one of the branch offices. If there is enough business between two cities to warrant two competing telegraph trunk-line plants with associated terminal offices, the economic loss in such a case may not be of a high order. Railroad competition between adjacent cities can be cited as being frequently in this class......A telephone company, in furnishing an adequate personal intercommunication service must have direct wires reaching each individual subscriber in his home or business place. So great in extent has become this network of local lines that to-day approximately 80 to 85 per cent of the telephone companies’ investment is represented by exchange plants and only the small balance of 15 to 20 per cent is in trunk-line plants, analogous to the trunk-line plants of the telegraph company......If a second telephone company is to furnish competition, it must have its own wires on every street and be in a position to furnish service to every subscriber on short notice. This means a duplication in all city streets, of the intricate network of conduits, cables, poles and wires that are necessary for telephonic intercommunication. Moreover, competition in telephony means that every common patron must have two sets of instruments available for his use subjecting him to very considerable inconvenience regardless of the economic loss involved......To' sum up it may be said: 1st. While competition between telegraph companies can be tolerated in some instances without serious economic waste, in the case of competitive telephone companies economic waste is inevitable because of the tremendous loss entailed by the duplication of the distribution system. 2d. Because one is chiefly a trunk-line system and the other chiefly a distribution system the duplication of one results in no inconvenience to the patron, while the duplication of the other produces the serious inconvenience of two telephones upon every common patron. 3d. Because of their distribution plants, competitive telephone systems impose an encumbrance upon highways very much greater than that imposed by competitive telegraph systems.”

These excerpts are sufficient, in our opinion, to show a fair basis for distinction and classification between telegraph and telephone companies, a natural differentiation which the legislature was justified in recognizing.

This court has already sustained such differentiation in legislation on this subject. In Consolidated Telephone Co. v. Public Service Commission, 73 Pa. Superior Ct. 110, this court upheld the differences between telegraph and telephone companies contained in the Public Service Company Law relative to the connection of lines, (see article II, section 1, clauses U. and Y. respectively; and article V, sections 8 and 9, respectively), and refused to require a connection between the lines of two telephone companies, notwithstanding the provisions of article XVI, section 12, of the Constitution granting such right, thereby holding that the legislative distinction between the two kinds of companies was such a reasonable regulation as was contemplated by the Constitution, even though at the time both companies were organized as telegraph companies.

The inherent differences between telegraph and telephone companies are at least as great as, if not greater than those between railroads and street railways, — as railroads adopt electricity as motive power and street railways occupy private rights of way and haul freight and express, the differences are becoming even less,— yet it has been held that the provisions of the Constitution prohibiting consolidation of parallel or competing lines of railroads (article XVII, section 4), should not be extended so as to include street railways: Gyger v. Phila., etc., Ry. Co., 136 Pa. 96. We think a similar construction should be employed here, and that the prohibitions of the Constitution relative to telegraph companies should not be extended to a new class of corporations not in contemplation when the Constitution was adopted and inherently differing in vital respects from telegraph companies, when the rights of the public are sufficiently guarded by the provisions of the Public Service Company Law.

The order of the Public Service Commission is affirmed at the costs of the appellant.