Business: Lower Rates, More Talk?

Giant American Telephone & Telegraph Co. last week reminded the Government of the ancient law of economics, that lower prices tend to increase demand. The reminder was a perfect answer to Government summons for a cut in telephone rates.

The skirmish started when FCC charged the company had “excess earnings,” should therefore slash “burdensome rates” on long-distance calls. Retorted A.T.&T. : lower rates would “stimulate traffic at a time when such stimulation would be contrary to public interest.” With business running 33% above last year, the company’s lines are already so talkpacked that additional calls could be handled only with more scarce equipment, more hard-to-get manpower. Besides, said A.T.&T., profits are down, not up — FCC “erroneously treated as earnings” over $50,000,000 which the company must pay in Federal taxes.

But stubborn FCC was not to be shaken off; it ordered the company to appear for rate hearings in mid-December.