wiped out by such a reduction; and where deficits are already shown, it necessarily follows that such a deduction will increase the deficit for such roads on purely domestic business.

PURELY INTRASTATE BUSINESS ONE-THIRD OF THE WHOLE.

The result obtained by separating the interstate from the intrastate business, in obedience to the mandates of the law, is shown in table tnree, which shows the per cent earned by the roads therein mentioned upon purely domestic business.

After careful investigation, we have found that in no case does the intrastate business exceed one-third (1-3) of the entire business of the several railroad companies under consideration. In many instances the proportion of such business to the whole is materially less than onethird (1-3). But for the purpose of convenience, and for being safely within correct limits, we have taken one-third (1-3) of the entire business to ascertain the earnings from instrastate or domestic business. This brings us then easily to the conclusion that the per cent earned upon intra-state business is one-third (1-3) of the per cent earned upon the combined business shown in tables one and two.

Per Ct. Earned Upon Domestic Business. 2 Pr.Ct. Prox. .1 1-3 Pr.Ct. Prox. 7-12 Pr.Ct. Prox, 1-60 Pr.Ct. Prox. 1 1-3 Pr.Ct. Prox. 1 Pr.Ct. Prox. 1 1-3 Pr.Ct. Prox. 1 1-3 Pr.Ct. Prox. 1 1-3 Pr.Ct. Prox. 3-4 Pr.Ct. Prox. 7-12 Pr.Ct. Prox.

2 Pr.Ct. Prox. 1-3 Pr.Ct. Prox. 4-15 Pr.Ct. Prox.

1 Pr.Ct. Prox. Deficit of $9,062.00 Prox. Deficit of

415.00 Prox.

. Deficit of 4,880.00 Prox.

COST OF LOCAL BUSINESS TEN PER CENT HIGHER.

It further appears beyond controversy that the cost of doing local or domestic business is greater than the cost of interstate business. The eidence as to this additional cost is varying, but we can safely adopt the percentage sanctioned by the Supreme Court of the United States in the Ames case, namely, lu per cent for the additional cost of local business. This rule necessitates the further reduction of the percentage of earnings upon domestic business shown in table 3 by ten per cent, and we have then arrived at the basis which the law and the courts declare to be the correct one for determination of the action of this commission.

But were we permitted to view the case in the more favorable light of the earnings from the combined interstate and intrastate business, the question would still arise as to whether those earnings reveal that the railroad companies operating in Alabama are deriving from their business more than "a fair and just return on their value, including appurtenances and equipments."

In this connection it is significant that while the average capitalization per mile of railroads in the United States as a whole is about sixty-four thousand ($64,000.00) dollars, the highest capitalization in Alabama is that of the Southern Railway Company at about sixty-one thousand ($61,000.00) per mile, upon which it earned for 1902 1 3-4 per cent. upon its entire business, and about seven-twelfths of one per cent. upon its domestic business.

WHAT IS FAIR AND JUST RETURN?

As to what is "a fair and just return," there may be and is some latituede for variation of opinion. One phase of the question which can not be ignored is, what interest is capital legally permitted to earn in Alabama. It is well understood, however, that large capital is satisfied with small returns. The larger the capitalization, the smaller the return to be expected. The funded debt, stocks and bonds of railroad companies, representing their cost of construction, improvements equipments, earning capacity, the amount necessary to reproduce the road, and the actual value of all the property used for the convenience of the public, mounts easily into the millions, and it can not be contended that this amount of

capital should reasonably expect to earn a per cent, which it would be just and proper for smaller sums to earn.

ONLY TWO ROADS EARN OVER HALF LEGAL INTEREST ON ALL BUSINESS IN ALABAMA.

With the exception of two roads- however, that of the Louisville and Nashville, and Western of Alabama, no railroad within this State, as it appears from the above tables, one and two earned for the fiscal year 1902 upon its entire business in the State more than one-half of the legal rate of interest which obtains in Alabama. Only five others shown an earning of as much as one-half of the legal rate of interest. on 4 per cent. A few show actual deficits, and the remaining earnings vary from the fractional part of one per cent. to less than four per cent.

TWO PER CENT HIGHEST EARNING ON DOMESTIC BUSINESS.

With the interstate business eliminated from consideration, as this Commission is required to do under the law governing it, it will be readily seen that the above earnings where any earnings at all remain, will be reduced in the highest instances to 2 per cent.-or just one-fourth of the legal rate of interest in Alabama; and this Commission does not hold that such an earning is above the "fair and just return” guaranteed to the railroad companies doing business in this State by the Constitution of the United States, and the State of Alabama, as well as the act of February, 1903, clothing us with the powers which we possess, and to which we must look for guidance.

Especially would this seem to be the proper ruling at this time, when it is recalled that the above earning are taken from the records of admittedly the most prosperous year in the history of the railroad companies in this State, namely, the year 1902. If not exceeding a 2 per cent, earning upon the investment, in the highest case, is shown for the most prosperous year in the life of a railroad, it would be manifestly unjust to establish a rate which would yield a materially smaller per cent. should the present continuing prosperity not endure, and necessarily a much smaller per cent. under adverse business conditions.

RAILROADS NOT REQUIRED TO GIVE SAME RATES IN ALL STATES.

It is no sufficient argument nor answer to say that rates that can be mantained in Georgia can be maintained in Alabama. "Railroads may not discriminate against the people in any one State, but are necessarily bound to give the same rates to the people of all the State, as the kind and amount and cost of business vary in the several States." In thise connection it is interesting to note that, notwithstanding the higher rates prevailing in Alabama, the railroads in this State earned less money in the year 1902 that the Georgia railroads. If the Alabama roads upon a higher rate were unable to earn as lare a per cent. as the Georgia roads upon a lower rate, it would clearly follow that the disparity between the earnings of the roads in the two States would be further widened by placing Alabama upon a lower rate than that which now obtains, and if the Georgia earnings are to be taken as the correct and proper standard for this State, it does not seem that a general reduction in rates at this time will result in placing Alabama upon that basis.

This disparity in the earnings of the several railroad companies doing business in the State of Georgia and Alabama would further seem to emphasize the inference that the "kind and amount and cost of business" do vary in these States.

HAY AND GRAIN RATES.

In March, 1903, the Railroad Commission of Alabama ex mero motu cited the several railroad companies doing business in this State to appear before them at the May session of the Commission and show cause why the rates should not be reduced in Alabama upon hay, grain, and all the products of grain, including the home-raised and foreign products. Upon the day set for the kearing of this question,, the petition of F. S. White, B. B. Comer et als. in the present case under consideration was filed with this Commission.

This petition calling for a larger and wider consideration, and its scope embracing a discussion of the question involved in the case of the Railroad Commission of Alabama against the several railroad companies in the State, by consent of all parties concerned, the hearing for both questions was set

down for one and the same time, namely, June 16th, 1903. In the case of the Commission against the Railroad Companies an order has been made reducing the rates in Alabama upon hay, grain, flour, and all of the products of grain, constituting classed C, D and F in the freight classification of the various railroads, peas having been placed in class D; also fixing a very low rate on home-raised syrup and potatoes; and adopting a general rule providing for a reduction of 10 per cent from the sum of two locals. These orders will result in large and substantial savings annually in freight charges to the people of Alabama, and will also stimpulate the home production of the commodities embraced in these classes; in this way promote the agricultural development of the State; and thus increase the traffic in these articles to such an extent that the increased business will supply additional tonnage and thus compensate the railroads affected by the reduced rates.

FURTHER REDUCTIONS NOT JUSTIFIED.

Having made these reductions in the freight tariffs upon the necessities of life, where it seemed to the Commission that any reduction should first be made, this Commission is not of the opinion that it would be justified in making further reductions in freight charges at this time, and in granting the petition of complainants to establish in Alabama the Georgia classification as to commodities, and the freight tariffs which exist in that State, believing that to do so would prevent the several railroad companies in this State from earning “a fair and just return," according to the requirements of the law creating this Commission.

As to that portion of the petition which requests that reasonable joint rates be established between boats plying the Tennessee River and railroads which connect with them on shipments within this State, it is clear that the Commission has no jurisdiction in the premises. The act creating this Commission, and from which it derives its powers, vests it with no authority whatever over rivers and boats. Jurisdiction is confined exclusiely to railroads.

For the reasons above set forth, the Commission denies the