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Though such a sprawling company is beyond the power of any one man to change it substantially, Kappel has made his mark on A.T.&T. Perhaps his signal contribution has been to increase earnings nicely by pushing through local rate increases and introducing myriad new efficiencies. Long-distance operators are now taught by programmed-instruction textbooks, which are much cheaper than human teachers; speed-reading courses have cut the average time that information operators need to look up a number from 37.6 seconds to 33.3 seconds, at an annual saving of $8,000,000. During Kappel's eight years, earnings have jumped 84%, to last year's $1.5 billion—after federal and state taxes of $2 billion. A.T.&T. habitually pays out 62% of its profits as dividends and invests the rest in capital spending.
Keeping the Reins On. Fred Kappel contends that A.T.&T. needs still higher profits to grow on, but he runs into opposition in Washington, where Government officials insist that his company is already too profitable and too powerful. In terms of return on net cost of plant, the usual gauge of profitability in utilities, A.T.&T. earns somewhat more than the average: 7.2%. The General Services Administration, representing the Government as a user in regulatory hearings, has recommended that Bell's return should be limited to 6.6%, and the staff of the Federal Communications Commission, which regulates the Bell System and its interstate rates, has suggested 6.5%. So far, the FCC's seven commissioners have refused to go along with this recommendation.
A.T.&T. aims at getting an 8% return whenever it can. It has to negotiate constantly not only with the FCC but with local commissions in the 48 states in which it operates (all except Alaska and Hawaii). In 47 of them, A.T.&T. hammers out local phone rates with state commissions, but in Texas it has to dicker with no fewer than 1,500 town councils. Rates vary widely, depending upon how much money A.T. & T. has invested in an area, how many numbers residents can call without paying a toll and what the local commission will allow. When commissions agree to give A.T.&T. increases, they sometimes find it politic to hold local rates steady but to raise the charges for phone installation and for such extras as color phones. Despite some increases, rates have not risen as much as the overall cost of living. While the U.S. consumer price index has gone up 59% since 1946, local telephone rates have increased 48%; interstate rates have actually dropped 20% since 1940, thanks to a combination of new efficiencies, higher volume of calling and pressures from the FCC.
Breaks for the Little. Last year the FCC forced the company to reduce some of its long-distance rates, so that anyone can now call anywhere in the continental U.S. after 9 p.m. for no more than $1 for the first three min utes. Two months ago, the FCC hit from the other side: it ordered A.T.&T. to raise rates on its "cheaper-by-the-dozen" Telpak service, which transmits printed as well