Bridge over ocean
1 September 1966 Financial Analysts Journal Volume 22, Issue 5

The A.T.&T. Case in a Changed Economy

  1. Alexander Sachs

This testimony describes basic changes of the American economy, especially in the last twenty years, which affect administrative rate regulation, as applied particularly to the Bell System.

• The development of national concern with economic welfare has been expressed by the Employment Act of 1946 and the adoption of growth policies by the Federal Government.

• Technological advance has become a leading force supporting our advanced industrial economy. Research and Development has increased tremendously in the past decade and is a major contributor to economic growth. It has extended the time horizon required for business planning.

• The community of investors’ interests has widened. There has been also an improvement in investment knowledge and professionalization. Investment standards now rate growth prospects for a stock higher than income stability.

The Bell System has been a leader in Research and Development and has made outstanding contributions to industrial and economic growth. It will need higher earnings and a secure earnings prospect in order to obtain the financial resources to carry out its mission.

The changed national goals and the new orientation of our advancing economy to research, growth and forward planning require in turn new attitudes by the regulatory bodies to permit the regulated industries to fulfill their obligations to society. Although the law may not have changed, the facts to which the law applies have altered. Flexibility in outlook and a broader viewpoint is needed in regulation to adjust to the changed economic needs and standards.

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