TELEGRAPH CABLE SUBSIDY AND CHARGES (FURTHER PAPERS RELATING TO). [In Continuation of F.-2b, Sess. I., 1887.]

Appendix to the Journals of the House of Representatives, 1887 Session II, F-02

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Sesb. 11.—1887. NEW ZEALAND.

TELEGRAPH CABLE SUBSIDY AND CHARGES (FURTHER PAPERS RELATING TO). [In Continuation of F.-2b, Sess. I., 1887.]

Presented to both Houses of the General Assembly bij Command of His Excellency

No. 1. Memorandum by Sir Julius Vogel, Postmasteb-Gbnebal, re Telegrai>h Cables. 1. It is, I think, highly expedient that the various Australasian Colonies should come to a joint arrangement respecting telegraph cables. 2. A great deal of consideration, not to say gratitude, is duo to the private companies which have hitherto provided cable communication, but it is preposterous to continue to submit to the prohibitive charges which now prevail, and which, in more , or less degree, must prevail whilst these undertakings are monoplies in private hands. 3. The supposed riskiness of the business has enabled private companies to monopolize enterprise connected with cable communication. That reason no longer exists, for it is quite certain that cables can be safely laid and kept in repair, and, practically, the business is now no more risky than telegraph land lines. .4. I shall sketch out in this memorandum the plan by which the Governments can, and, in my opinion, ought to, absorb the whole business at oner : but, failing their being willing to do so, I shall advocate their gradually approaching the same result. This they may do by aiding a competitive company under conditions which will enable the Governments to buy up the catles when they desire to undertake the business. 5. I believe the Governments, if they own the cables, can charge a rate of Is. 6d. a word for urgent messages, and Is. for ordinary and Press messages, the whole way between the colonies and Europe, and soon make a profit on the transactions. Even if they do this great work at a loss, there are, I contend, few objects on which they can spend money with more advantage. 6. The benefits of cable communication are at least in proportion to the distances travelled, or, what is to the same effect, the time saved. lam inclined, however, to think that the proportion is more than simple —that is to say, for Example, that twice the distance would give to cabling relatively a more than double advantage. But, taking the proportion as a simple one, the meaning would be that the use of the cable is four or five times more advantageous to the colonists of Australasia than are similar facilities to the inhabitants of the United States. Yet it would be almost impossible to set a limit to the benefits which cheap Atlantic cabling has conferred on the people at both ends of the English-American cables. Financially and commercially the results are gigantic, and the social, literary, and educational purposes served are scarcely less important. 7. No one can question that, with cheap cabling, the development of the Australasian Colonies will increase enormously in speed, with less liability to reverses. 8. Supposing the Colonies entertained the idea of taking in their own hands the charge of cabling, they should endeavour to buy out the existing interests as far as they relate to Australasia, if the owners are willing to sell at a fair price, by which I mean something more than the value to reconstruct. If the owners be unwilling to make a reasonable sale, then the Colonial Governments will do better. But, up to a reasonable point, the companies should receive liberal treatment. 9. It is necessary to briefly consider the position of the Eastern and Eastern Extension Companies, which, to all intents and purposes, may be said to now have the sole charge of cabling between Australia and Europe. The occasional assistance of the Indo-European Company need not be taken into account, as it is of a reciprocal character. As I wish to make my remarks as little critical as possible, it will be better to refer to the Eastern and Eastern Extension Companies as if they were one concern. 10. These companies own between them 31,960 knots of cable, a few steamers, and a number

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of stations. Their capital, as shown by securities still current on the Stock Exchange in July last, amounts to over £11,350,000. The reserve funds amount to about £900,000, so that the companies have about ten and a half millions capital outstanding. After deducting the value of steamers and stations, the cables must stand the company in at more than £300 a knot, a price which is about double that for which the Governments could obtain fully suitable cables. But although, if the Governments were to assume the charge of ocean telegraphy, the goodwill of the companies' business between Australia and England would not be worth anything, the same cannot be said with respect to the many other places the companies serve outside those with which the Colonial Governments would concern themselves. With some, at least, of these, competition is not to be feared, and the goodwill of the business of the companies may represent a considerable value, fairly to be credited as a set-off to the reduced value of the cables. I hope it is so. It would be sad that the huge edifice of commercial activity and enterprisa built up by these companies should not prove remunerative to those who have embarked in it. 11. The Australian lines form only a part of tb.3 total cables possessed by the companies. It is difficult to determine the exact length of that part, as a great deal of the way is duplicated by different routes, serving other purposes than those of mere duplication. For example, there is more than one cable route from England to Malta and to Lisbon. There is a duplicate between Bombay and Suez, and there is more than one route between Java and Singapore. There is also a duplicate between Australia and Java. A single line from Australia to Palmouth, along the present line of route —say, from New Zealand to Sydney, from Tasmania to Victoria, in duplicate, and from Darwin to Java, Singapore, Penang, Madras, Bombay, Aden, Suez, Alexandria, Malta, Gibraltar, Lisbon, and Falmouth—would take 11,703 knots of cable, to which must be added the land lines (not, I believe, owned by the company) between Madras and Bombay, and the Egyptian land lines, together about 650 miles. It would be important, if the company's system wore purchased, to acquire also about 1,100 knots, duplicate, between Darwin and Java ; soma 600 knots between Batavia and Singapore ; some 300 knots, for a second route, between Singapore and Penang ; and some 850 knots between Penang and Eangoon. There is also some duplicate cable of about 3,000 knots between Bombay and Suez, but the companies probably would not pare with it. They would prefer to retain it, and to agree to lend mutual aid in case of disaster. Excluding the 3,000 knots there would be 2,850 knots to be added to the length of 11,703 knots already given, making a total of 14,553 knots. Some of the lines are sheathed with brass tape, which adds to their cost; but there is no room to doubt that the whole could be replaced at an expense of less than two and a half millions sterling, and it is to be observed it includes the Australian, New Zealand, and the duplicate Australian-Tasmanian lines. The South Australian land lines—Adelaide to Darwin— <jost £480,000. It would be fair to estimate half at least of this as an expenditure made on behalf of all the colonies. 12. I have submitted these figures to give an idea of the expenditure that might be necessary if it were decided to purchase out the existing companies. The remarks lam about to make are based on the proposal that the Colonial Governments should start with the possession of any two lines out of the three practicable routes—namely, first, the present route ; secondly, the route by the Pacific, Vancouver, Canada, and the Atlantic ; thirdly, the route by Ceylon, Mauritius, Natal, Cape of Good Hope, and St. Vincent. 13. Taking a fair payment to the companies into account, a compensation to South Australia, and a second line throughout by either the Canadian or Cape route, I am persuaded that the cost would not exceed five millions, with all the requisite repairing steamers ; whilst if the companies were not dealt with two lines could be obtained for considerably less. 14. My proposal, then, is that the Colonial Governments start with two lines and the necessary steamers at a cost not exceeding five millions sterling. If the money is obtained under their joint guarantee it can be borrowed at 3-| per cent., or with an Imperial guarantee at 3 per cent. Taking the former and larger rat?, of interest the annual charge would be £175,000. 15. As soon as the use of the two lines of cable warranted it a sum of £150,000 should be set apart yearly for maintenance and for laying new cables, at about the rate of an additional through line each fifteen years. But for some time, until the traffic developed, £50,000 yearly (with the use of the repairing steamers, the annual charge for which is included in the working expenses) would be sufficient to put apart for maintenance and new lines. As the revenue increased the larger sum could be dedicated to the purpose. Ido not propose redemption of the capital. The construction of new lines would stand in the place of amortization. 16. I have had a careful estimate made of the yearly expenditure. By the present route it would amout to £125,680. This includes the annual cost and insurance of five repairing steamers, and the cost of nine stations between Falmouth and Bombay inclusive, seven between Madras and Nelson inculsive, and twelve land stations between Madras, Adelaide, and Sydney inclusive. The annual cost of the steamers is set down at £15,382 each. The cost of the land stations is set down at £1,500 each, and the cost of the cable stations at £1,500 each, with 20 per cent, added. Provision is also made for special electricians, besides the ordinary officers at the stations. The salaries are estimated at less than the rates that the companies give, but the Governments would not require to pay on the liberal scale the companies adopt. The working expenses of the Eastern and Eastern Extension Companies amounted, for the latest year of which I have return, to £272,361 for all their stations, whilst on repairs and maintenance they expended £132,967. 17. By the Cape route the estimate of annual expenditure is £73,300, which includes the cost ■of twelve stations, seven special electricians, 20 per cent, for contingencies, and three repairing steamers. The annual expenditure by the Pacific route as far as the mainland of British Columbia is estimated at £48,200, which includes seven stations, six electricians, 20 per cent, for contingencies, and two repairing steamers. I have not calculated the expenses across Canada and thence to England, because so much depends on the nature of the arrangement to be made.

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18. I have shown, I think sufficiently, that £200,000 may be taken to fully cover annual working expenses, and this added to £175,000 for interest, and £50,000 (to commence with) for maintenance and new lines, will give together £425,000 as the yearly expenditure. There will, besides, be for a few years the cost of existing subsidies amounting to about £37,000 annually, including the Tasmania cables subsidy. 19. The work that two cables can perform on the duplicate system, supposing every minute of the year to be occupied, and that the cables are up to the standard usually required, amounts to over twenty-one millions of words a year. There would be no difficulty, if the demand required it, in getting through ten millions of words on the two lines, besides a very large number of words between the intermediate stations. Whatever the routes taken may be, there will be many intermediate stations on which there will be a large demand for communication. I estimate the intermediate communication to be worth a third of the through communication ; and in taking ten millions of words as the capacity of the through communication I have left a large margin for intermediate traffic. 20. In the estimates I am about to make I take the through traffic at five millions of words, leaving a margin of five millions capacity for increases. The question now arises, Will there be a demand sufficient to overtake five millions of words ? It evidently means a large amount of matter. To give a better idea of it, I may say it represents somewhat less than seven closely-printed newspaper columns each day, Sundays included. It represents, moreover, about seven times the present through traffic between Australia and Europe. It represents about a seventh of the Atlantic yearly cabling since the late reductions in rates. It represents a little over an eighth of the number of words telegraphed yearly within New Zealand. It must be borne in mind that lam not estimating only the through messages between Europe and Australia. If the line go by the Cape there will be through messages to and from Europe and Ceylon, Mauritius, Natal, and the Cape, to say nothing of less important places. If the line go by the Bed Sea there will be Java (which lam informed uses the cable largely), Singapore, and, possibly, according to the nature of the agreement made, some other important stations for through traffic. If the line go by the Pacific there will be' Fiji, Honolulu, and probably branches from New Caledonia and Tahiti, and possibly branches from China and Japan. Irrespective of these reliefs, lam strongly of opinion that, with the great reduction in cost, cabling between Australasia and England will soon become as common as it is now rare, and that it will be used for numberless purposes to anticipate correspondence, as also to carry on large financial transactions such as have grown up between the United States and England, and are unknown to Australasia. 21. I will give an estimate of receipts on the basis I have indicated (exclusive of Australian land charges) as follows : — Estimate with Tariff of Is. 6d. and Is., and Intermediate Traffic. 2,500,000 words at Is. 6d. ... ... ... ... £187,500 2,500,000 words at Is. ... ... ... -... 125,000 Intermediate traffic ... ... ... ... 100,000 £412,500 This estimate shows a small loss at first, which divided between the Governments would be inconsiderable. It would be covered by the saving which would be effected if the Imperial Government guaranteed the loan, or by the subsidy which it should give in lieu of a guarantee. In any case the development of traffic between the large number of important centres concerned would soon convert the deficiency into a surplus. The above estimate only absorbs about half the capacity of the cables. I have purposely not taken into account the competition of the existing companies if they fail to come to terms with the Governments. Any opposition of theirs will be only temporary. They cannot with their costly arrangements afford such low rates, and, if the Governments do not buy them out, there will be much less money on which to pay interest. 22. The responsibility should, in my opinion, be divided in such manner as might be agreed on, based either on population or on the use of the cable, or partly on both, or possibly it will be found easier to fix the division by mutual agreement. 23. It would be very desirable that the Postmasters-General of the various colonies should meet and discuss the whole question. If a combination of the kind I have indicated cannot be arranged, then the Governments should consider what is the next best course to pursue. The existing companies are anxious to make arrangements, but all their proposals lead to maintaining the present monopoly and to depending only on one route. If the colonies are not inclined to undertake the charge of the business, they should aid another company by another route, so as to secure two routes, and competition. 24. If care be taken in any agreement entered into with a new company to give ample power to the Governments to buy out the cables constructed, an arrangement with such company might be made the stepping-stone to the absorption by the Governments of two cable systems as proposed in this memorandum. 25. I may, in conclusion, express the hope that weight will not be attached to the usual arguments which, on behalf of the existing companies, will be put forth in opposition to the proposals herein sketched out. It will probably be alleged that cheapness will not materially increase traffic, that the business is risky, that cables cannot safely be laid in deep waters, and that competition has a weakening effect. It may also be argued that the Indian Government will throw obstacles in the way. The companies always seem unmindful that the Government of India might do a great deal more for English Colonial Governments than for commercial companies, whose operations concern not only the colonies but other countries, such as China and Japan. The arguments referred to have misled many people—myself, I confess, amongst the number. It is owing to belief in them that

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for so many years private enterprise has monopolized the control of the most valuable adjunct the material and intellectual improvement of, fche populations scattered over the globe. All that can be said of the Governments retaining the charge of land telegraphy can be repeated with greater force with regard to taking possession of the means of cable communication between the various portions of Her Majesty's dominions. To allow such communication to be taxed for private profits is more out of harmony with the spirit of the age than would be a renewal of a tax on window-glass-or printing-paper. Wellington, sth February, 1887. Julius Vogel.

No. 2. The Chairman, Eastern Extension, Australasia, and China Telegraph Company, Limited, to theHon. Sir J. Vogel, Wellington. Sib,— Winchester House, 50, Old Broad Street, London, E.G., 10th May, 1887. I have the honour to acknowledge the receipt of your letter of the 14th February last, and to enclose herewith full particulars of the amended proposition which I have submitted to the Conference, and of which I telegraphed to you the leading points on the 7th instant, for reducing the tariff for telegrams between Europe and Adelaide to 4s. per word, by the method of guaranteeing to the existing companies, for the unexpired term of the duplicate cable subsidy, their annual revenue based on the average of the three years ended 1886. The novel feature of the proposal, as I have pointed out in my telegram, is that, while the companies are prepared to take the whole risk of any falling off in the existing craffic, thereby enabling the maximum liability of the colonies to be fixed, they will also undertake to be partners with the colonies to the extent of accepting one-fourth of the guarantee risk. Your Government will perceive that the effect of this proposition would be to merge all the subsidies in the general contribution, and that your colony's proportion of the guarantee and subsidies combined, including the New Zealand cable subsidy, would be, if the traffic at a 4s. tariff increased 100 per cent., only £10,879. I trust the proposition will receive your Government's favourable consideration, and, having, regard to the nature of the proposal, requiring some time for communication between the variouscolonies, that your Parliament will be disposed to renew the New Zealand cable subsidy until it isdecided by the colonies whether they will adopt the guarantee scheme which I now communicateto you. I have, &c, John Pender, Sir Julius Vogel, K.C.M.G., &c, Postmaster-General of New Zealand. Chairman.

Enclosure in No. 2. Proposition of the Eastern Extension Company to the Australasian Colonies, subject to the Approval of all the interested Administrations. That they should guarantee to the companies carrying Australasian telegrams—viz., the Eastern,, Indo-European, and Eastern Extension Companies—their annual revenue, based on the average of the three years ended 1886, for thirteen years,* the unexpired term of the duplicate cable subsidy,, and make the through tariff 4s. per word. Average annual traffic receipts of the three companies from Australasian telegrams, exclusive of existing subsidies, viz.: — £ £ Eastern ... ... ... ... ... 52,300 Indo-European ... ... ... ... 7,700 Eastern Extension .... ... ... ... 125,000 185,000 Estimated revenue at a 4s. tariff between Europe and Adelaide, based on present traffic, and assuming that South Australia accept a transit rate of sd. per word (see table below) ... ... 80,000 £105,000 The companies will take the whole risk of any falling off of traffic receipts below £80,000, and also accept one - fourth of the guarantee risk, viz. ... ... ... ... 26,250 Leaving as the maximum liability of the colonies, if no increase of traffic takes place ... ... ... ... 78,750 £105,000 If the traffic receipts increased by 25 per cent, the colonies would have to make up £63,750 ; 50 per cent., £48,750 ; 75 per cent., £33,750 ; 100 per cent., £18,750—distributed as follows :—

* At the end of the term the question would have to be reconsidered, with a view to a fresh arrangement.

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Guarantee.

If the subsidies were pooled, and distributed over all the colonies according to population, the result would be as follows: —

Subsidies.

The following table shows the contribution of each colony if subsidies and guarantee combined and distributed over all colonies according to population on basis of 1885 statistics : —

Subsidies and Guarantee combined.

Present Traffic, showing Proportions at 4s. Tariff.

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Population based on 1885 Statistics.* Amount to be made up, exclusive of Subsidies, if Traffic increased by Colony. 25 per Cent. 50 per Cent. 75 per Cent. 100 per Cent. Victoria... New South Wales South Australia ... Western Australia New Zealand ... Queensland Tasmania 991,869 957,914 313,423 35,186 575,226 315,489 133,791 £ 19,029 18,379 6,012 676 11,035 6,050 2,569 £ 14,552 14,055 4,597 517 8,439 4,626 1,964 £ 10,074 9,730 3,183 358 5,842 3,203 1,360 £ 5,597 5,406 1,768 199 3,246 1,779 755 Total ... 3,322,898 63,750 48,750 33,750 18,750 * These are the most recent statistics in thi r ould, of course, form the basis of the calculations. company's pi isession, but thi latest ascertained populations

Colony. Existing Contributions in respect of Duplicate Cable on 1881 Census. Contributions in respect of New Zealand and Tasmanian Cables. Contributions if Subsidies spread over all Colonies on Basis of Population, 1885. £ 14,479 12,617 4,805 499 £ £ 13,164 12,714 • 4,159 467 7,634 4,185 1,777 Victoria few South Wales south Australia Western Australia few Zealand Queensland ... Casmania 2,500 5,000 4,200 Total 32,400 11,700 44,100

Colony. 25 per Cent. 50 per Cent. 75 per Cent. 100 per Cent. Ictoria Tew South Wales iouth Australia Vestern Australia few Zealand jueensland ... 'asmania £ 32,193 31,093 10,170 1,143 18,669 10,235 4,347 £ 27,716 26,769 8,756 984 16,072 8,811 3,742 £ 23,239 22,444 7,341 825 13,476 7,388 3,137 £ 18,760 18,121 5,926 666 10,879 5,965 2,533 Total 107,850 92,850 77,850 62,850

Class of Traffic. Number of Words. Companies' Proportion of 4s. Tariff. Out-payments. Total Tariff. )rdinary rovernment ... ... 489,000 41,000 70,000 54,000 s. d. 2 51 2 5 1 11 3 0 s. 1 1 0 1 d. 6i 6| 9 0 s. d. 4 0 3 1U 2 8" 4 0 'ress jocal (including India) Total 654,000

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The above proposition is based upon a continuous service, and freedom from competition. In the event of the communication being totally interrupted, the guarantee to continue for a period of one month. Since the Australian cables were duplicated, in 1880, the service with Australia has been interrupted for only twenty-six days, or on an average of less than four days annually. April, 1887, Winchester House, 50, Old Broad Street, E.C.

No. 3. Dr. Lemon to the Chaieman, Eastern Extension, Australasia, and China Telegraph Company, Limited, London. Sir,— General Post Office, Wellington, 30th June, 1887. I have the honour, by direction of the Hon. the Postmaster-General, to acknowledge the receipt of your letter of the 10th ultimo, and of the printed paper which you enclosed therewith, ■containing the proposition of your company to the Australian Colonies, subject to the approval of all the interested Administrations, for reducing the tariff for telegrams between Europe and Adelaide to 4s. per word, by the method of guaranteeing to the existing companies, for the unexpired term of the duplicate-cable subsidy, their annual revenue, based on the average of the three years ended 1886. I have, &c, C. Lemon, Superintendent. The Chairman, Eastern Extension, Australasia, and China Telegraph Company, Limited, Winchester House, 50, Old Broad Street, London.

No. 4. The Agent-Geneeal to the Hon. the Postmasteb-Geneeal, Wellington. Sib, — 7, Westminster Chambers, London, S.W., 14th May, 1887. In my letter to the Premier on the 6th instant, upon Conference affairs, I referred to the proposals made by the Eastern Extension Company before the Conference. Since then I have received from Mr. Pender copies of certain telegrams he has addressed to yourself and to the Post-masters-General of the Australian Colonies, and I beg to enclose these telegrams* herewith. I have, &c, The Hon. the Postmaster-General, Wellington. F. D. Bell.

Enclosure in No. 4. The Chaieman, Eastern Extension Company, to the Hon. the Postmastees-Geneeal of the Australian Colonies. (Telegram.) 6th May, 1887. Assuming that the question of reducing the telegraph tariffs will be relegated for discussion in the colonies, I beg to communicate the accompanying amended proposition which I have submitted to the Conference for reducing the tariff between London and Adelaide to 4s. per word by the method of guaranteeing to the companies, for the unexpired term of the duplicate-cable subsidy, their annual revenue based on the average of the three years ended 1886. The novel feature of the proposal is that, while the companies will take the whole risk of any falling off in the existing traffic, thereby enabling the maximum liability of the colonies to be fixed, the companies will also undertake to be partners with the colonies to the extent of accepting on their own account one-fourth of the guarantee risk. Your Government will perceive that the effect of this proposition would be to merge all the subsidies in the general contribution, and that your colony's proportion of the guarantee and subsidy combined would be, if traffic at a 4s. tariff increased 100 per cent., only £10,879. I trust the proposition! of which I wire you the principal points, posting full detail, will receive your Government's favourable consideration.

No. 5. The Postmastee-Geneal to the Agent-Geneeal, London. Sir,— General Post Office, Wellington, 30th June, 1887. I have the honour to acknowledge the receipt of your letter of the 14th ultimo, and to thank you for the printed copies of telegrams from Mr. Pender to the Postmasters-General of the Australian Colonies and myself which you therewith enclosed. I note your reference to the proposals made by the Eastern Extension Company before the Conference, in your letter to the Premier. I have, &c, Sir P. D. Bell, K.C.M.G., C.8., C. Lemon, Agent-General for New Zealand. (for Postmaster-General.)

* Telegram of 7th May to the Hon. Sir J. Vogel, printed in F.-2b, Session 1., 1887. t See No. 1 in P.-28., Session 1., 1887.

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