PUBLIC UTILITIES. Pub lic utility is a term which is not easy to define with precision. When used in a popular sense it applies to those services rendered to the public which are so intimately related to the welfare of the entire community that those who render them are subjected to varying de grees of public control, assume special obliga tions and duties to the public and enjoy special privileges. A public utility is commonly re ferred to as a "business affected with a public interest,* and one of its most obvious dis tinguishing characteristics lies in the fact that those in control must serve equally all who demand its services instead of remaining free, as the ordinary business man is free, to refuse its services to those for whose patronage does not care. Because of the many legal problems relating to public utilities it might be expected that a satisfactory definition of the term would be found in the literature of the law. We find, however, that lawyers and judges instead of developing an abstract defini tion have resorted to the familiar practice of marking out the meaning of the term by the process of judicial inclusion and exclusion, i.e., by determining in each concrete case whether or not the business in question is a public util ity. By this method it has been established in some or all of our States that the following are public utilities: common carriers of all kinds by land or water, water supply, gas, electricity, telegraphs, telephones, bridges, ware houses, grist-mills, saw-mills, sewers, cemeteries, hospitals, grain elevators, stockyards, cotton gins, docks, hotels, ice plants, markets and news service.
Distinguishing ex amination of the nature of the businesses just mentioned will reveal the fact that there is no single characteristic common to all except the general fact that each of them has the some what vague property of being "affected with a public interest." There is no universal dis tinguishing feature of a public utility. It is possible, however, to point out certain char acteristics, one or more of which will be found to mark every public utility. (1) Public utili ties frequently enjoy special legal privileges de nied to other kinds of business enterprises. The right of eminent domain is commonly dele gated by the State to corporations for the pur pose of constructing railways, pipe lines, irri gation ditches or of erecting voles and wires. Subsidies in money have sometimes been given to various public utilities on the theory that enterprises so vitally necessary to the public welfare might properly be supported or aided from the public funds. This has usually oc curred in cases in which it seemed unlikely that sufficient private capital could be relied upon to initiate the enterprise and was a com mon practice during the early and highly specu lative period of railroad development. Grist mills, saw-mills and drainage and irrigation projects have also received aid from the pub lic treasury from time to time. A third legal privilege is the right to use the public high ways in special ways. Concessions of this kind must be secured by public service com panies whose businesses require the laying of tracks, the embedding of pipes or wire conduits or the erection of poles and wires. (2) Legal monopoly is an attribute sometimes distinguish ing public utilities. There are many early examples of exclusive franchise grants made either as special inducements to the in vestment of capital or as a means of forestalling competition in fields where it would be impracticable or inconvenient. Legal monop olies are now generally regarded as contrary to public policy except in the case of those public utilities which are at the same time either natural or virtual monopolies. (3)
Many public utilities are natural monopolies. The several factors which may make a busi ness a natural monopoly are outlined by Mr. Bruce Wyman, perhaps the leading authority in this field. First, there may be a limitation upon the source of supply of the commodity or service. This may be the case with the water used for supplying the wants of a city or for irrigation. It is not infrequently true of natural gas and water power. T..e only avail able supplies of commodities or services of vital interest to the entire community cannot be regarded merely in the light of private prop erty. They become of necessity public utilities. Second, a natural monopoly may result from a scarcity of advantageous sites upon which to carry on forms of business in which the community as a whole has a paramount in terest. This is true of docks, wharves, freight sheds, warehouses of certain kinds, stockyards and grain elevators. Those who occupy the ground first enjoy the advantages of monopoly simply because there is no room physically for a competitor. A third basis for a natural monopoly may be the limitation of time inci dent to the service rendered. The service is not only necessary but it is immediately neces sary. The person who desires it cannot wait. He is not in a position to haggle over price or quality nor to hunt for a possible competitor. This sort of monopoly may be temporary but it is none the less effective. It is this posi tion of vantage which is enjoyed by the hotel keeper, the hackman, the commercial messenger and the telegraph company. In the fourth place the difficulty of distribution of services con stitutes in some cases effective limits upon cotnpetition and creates a natural monopoly. Fuel in the form of wood or coal may usually be brought to the consumer with an ease which encourages competition. Fuel in form of gas can be brought only through pipes and com petition is for all practical purposes precluded. Those who furnish electric light or power, steam heat, water and the like enjoy what is in effect a natural monopoly based upon this difficulty of distribution. (4) Another char acteristic of certain public utilities is their en joyment of what may be called a virtual monop oly, a monopoly which arises not from any of the causes which produce natural monopolies but rather from certain economic restrictions. In the first place, there are many public utili ties which represent a capital investment of many millions of dollars. The financial ob stacles in the way of competition are sufficient to preclude it. This is apt to be the case with the various transportation facilities, railroads, bridges, terminals, tunnels, pipe lines, ferries and the like. Every business instinct warns the capitalist not to undertake to duplicate the costly equipment already engaged in these enterprises, for the hope of dividing with a competitor a volume of business frequently no greater than can be readily handled by one system. In the second place, virtual monopolies are created .by the desirability or even neces sity of service on a scale too large to dupli cate. The value of the service rendered by a telegraph, telephone or express company de pends in large part upon the number of per sons, towns or places that are brought into touch with each other through one system. By reason of this fact they are practically sure to be free from competition when once well established. It was because of the virtual monopoly due to the size and complexity of its service that the Associated Press was held to be a pnblic utility.