142 VALUATION, DEPRECIATION AND THE RATE-BASE 
some predetermined interest return on his investment, the in- 
centive to improve the service falls away, because, if the owner 
succeeds in economizing, in producing his output at a lower 
cost, the immediate result will be lower rates and less earnings. 
The gross income may be reduced though, perhaps, the value of 
the service to the rate-payer may remain unaffected or may even 
be increased. Rates should not therefore be subject to change 
too frequently. If there must be a term during which the 
established rates will apply, let it be at least 5 years. 
Control and Regulation. — The acceptance of the privilege to 
operate a public utility carries with it a submission to such 
regulation as may be demanded by the public which grants the 
privilege. This regulation must be reasonable. The public 
utility owner is in business for profit. He invests his capital 
and applies his ability and experience to the development of 
enterprises that would otherwise remain dormant for a longer 
or shorter period. He brings within reach of the community, 
means of transportation, an adequate water supply, light, power 
and heat, telegraph and telephone facilities which all contribute 
to the growth and prosperity of the community. He does this 
because he considers his enterprise a good business venture. 
In the case of the commercial and industrial enterprise, too, a 
tendency may be noted toward monopoly which is likely to lead 
in time to regulation and control similar to that of the public 
utility. Whenever the operation of any concern acquires such 
magnitude that it can and does destroy the business of its com- 
petitors, it becomes monopolistic in character and the state is 
bound, sooner or later, to exercise its right to regulate and con- 
trol not only the method of conducting business, but in the end, 
perhaps, the prices to be charged for its output. 
Excessive and Fictitious Profits. — Where, in the rapid tran- 
sition from a frontier region to a state with stable industrial and 
commercial conditions, the advance in the value of real estate 
has been rapid and the opportunity for profit in many lines of 
business has been large, the owner of the public utility has fre- 
quently taken advantage of the opportunity and has capitalized