rosa: regulation of natural monopolies 203 



class of corporations known as public utility companies, chief 

 among which are the steam railways of the countn\ city and inter- 

 urban electric railwaj-s. gas and water companies, electric hght 

 and power companies, and the telephone and telegraph companies. 

 The federal government through the Interstate Commerce Com- 

 mission has of course taken a leading part in this development, 

 particularly -u-ith respect to the railways of the country, but the 

 work done by some of the state pubhc ser^^ice coromissions, promi- 

 nent among which are the commissions of ^Massachusetts, Wiscon- 

 sin, and Xew York, is of far-reaching influence and importance. 



The attitude of the pubhc regarding public utihties has been 

 undergoing a profound change in recent years. Formerly a 

 franchise for a street railway or gas companj'. for example, was 

 usually granted \^-ithout compensation to the citj', with few, if 

 any obhgations on the company, with no control by the city over 

 prices or service, and with extensions of the ser\'ice into new terri- 

 tory optional viith. the Company. Competition was sometimes 

 sought by granting a francliise to more than one company, but 

 generally such competition, if any, made the ser^dce poorer to the 

 pubhc as well as the profits less to the stock holders. If the busi- 

 ness \\as profitable and the franchises valuable, city councils 

 would be corrupted, if necessary, to get what was wanted. And 

 if the dividends were large, as thej' often were when no standards 

 were set as to the quality of serAdee and no limit set as to price, 

 the capital would be sufficiently watered to keep down the diAi- 

 dends (capitahzing the value of the francliise. it was called). 

 Occasionally a city became so dissatisfied with its gas or water 

 or electric light company (either as to prices or ser\dce, or both) 

 that in despair it built a new works, and two plants were oper- 

 ated where one. if rightly managed, would have ser\-ed the pubhc 

 better. 



Advantages of a monopoly. The change from this condition to 

 the present (at least in certain states) is nothing short of revolu- 

 tionark\ It is now coming to be recognized that competition 

 cannot regulate rates in pubhc utilities, and that one company 

 can generally give better and cheaper service than two. It is a 

 waste of capital and a disadvantage to a city to have two sets of 



