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PUBLIC
RECORD OFFICE
Reference :-
6
TINC.O. 885
6
ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC- COPYRIGHT PHOTOGRAPH-NOT TO
PUBLIC RECORD OFFICE, LONDON
PACIFIC CABLE COMMITTEE:
It was stipulated that under Forms B. and C. the maximum rates to be charged on messages to and from Great Britain and the Australasian Colonics shall be three shillings per word for ordinary telegrams, two shillings per word for Government telegrams, and one shilling and sixpence for press telegrams. Trans-Pacific messages to be charged at propor- tionate rates. These are the rates agreed upon at the Postal and Telegraph Conference held in New Zealand in March last.
My opinion as to the best means of establishing the Pacific cable has been long given, and as early as the Colonial Conference of 1887. I submitted my views again at the recent Colonial Conference, and on occasions before and since that date I have explained the principles which in my humble judgment in view of the public interest should be followed.
I do not think it necessary to repeat the arguments I have frequently used in favour of establishing the Pacific cable as a public undertaking, so that it may remain under Government ownership and control. I beg leave to refer to my remarks which the Minister of Trade and Commerce submitted in a memorandum, dated October 11th, 1893, to the Australasian Govern- ments, likewise to what I said at the Colonial Conference in June last (extracts are appended). On both occasions I pointed out that it would be unwise to subsidise a company, when the object could be attained more economically and far more advantageously to the public by other means. It has since been suggested as an alternative to a subsidised company (Form B.) to establish a company under a Government traffic guarantee (Form C.). That is to say, the company to be guaranteed a gross revenue from traffic for a terin of years; the deficiency between actual earnings and the guaranteed earnings to be made good by the Governments Let each year. To mind this plan is scarcely less objectionable than the first mentioned.
my us by way of illustration assume that a company is formed under a Government guarantee of What in this case would gross traffic equal to 200,000!, per annum for a period of 25 years. prevent the existing company and the new company entering into a secret pooling agreement by which it would be the policy of both to pass over the old line the great mass of the traffic, the object being to establish against the Governments each year of the 25 as large a claim as possible under the guarantee? I do not see that it would be possible to prevent the two companies amalgamating their interests in this or in some other way, and as a consequence a powerful monopoly would be built up to exact its own terms. Looking at the subject in all its bearings, the true plan, in my judgment, is to make the Pacific cable a public undertaking from its first construction. I am satisfied the more the subject is considered, it must become clear that only by the observance of the principle of State ownership will the greatest public advantage be permanently obtained. If, in establishing the Pacific cable as a public undertaking the co-operation of the Mother Country with Canada and the Australasian Colonies be secured, the most advantageous consequences will undoubtedly proceed from this arrangement. The first effect of co-operation would be in connexion with the initial cost of the work, as a joint guarantee would admit of the required capital being raised at the lowest possible rate of interest. I have only to point to the Intercolonial Railway of Canada as an illustration of the advantages attainable. In 1867 it was arranged between the Home Governinent and the Canadian Government to connect Quebec and Halifax by railway; for this purpose a loan of 3,000,000l. bearing the Imperial guarantee was effected at a low rate of interest, and by this means the Home Government rendered substantial aid in the construction of the National Railway of Canada without in any way drawing on the Imperial Exchequer. It can be clearly established that by the same principle of co-operation in the case of the Pacific cable undertaking, to which so much importance has been attached as a means of bringing in closer affinity the distant portions of the Empire with the Mother Country, it can be successfully effected without in any way taxing the people of Great Britain, of Canada, or the Australasian Colonies.
Assuming that the principle of co-operation and State ownership be assented to, the capital may be raised by one of three modes, viz. :—
1. The whole amount may be raised by the Canadian, the Australian, and New Zealand Governments, and the interest in each case guaranteed by the Imperial Government; the relative liability to be borne by the Imperial, Canadian, and Australasian Governments, to be apportioned by mutual agreement.
2. The whole capital may be raised by the Imperial Government; the payment of a sum equal to the interest on such portion of the capital as may be agreed upon, to be guaranteed by Canada and the Australasian Colonies in proportion to be determined.
3. The capital may be raised on securities issued through the medium of an Imperial Colonial Cable Commission; a joint guarantee for the payment of interest to be given by the Imperial, the Canadian, and the Australasian Governments.
It is obvious that by either of these modes, the whole of the capital may be obtained at the very lowest rate of interest. The interest would be a first charge against revenue, which it can be shown will be ample for all purposes, but as it is expedient to provide for every contingency, provision should be made for a deficit. The proportions in which any such possible deficit would be made up by each respective Government would be a matter to be determined by agreement.
As several distinct Governments will be concerned in the project, it may be advisable, in order to meet the difficulty of joint ownership, to create an organisation in which the trust, administration would be centralised; an Imperial Colonial Cable Commission or established by the authority of the several Parliaments. It might consist of three persons, representing the Imperial, the Canadian, and the Australasian Governments respectively, with
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authority determined by statutes, to obtain capital and to assume responsibility for establishing the work and carrying it on when completed.
Among the tenders received is an offer from an old-established and reliable firm to lay the cable on route No. 1, the all-British route by Fanning Island, for the sum of 1,517,0007. This price includes maintenance and repairs for three years after the whole line shall have been completed and put in operation; consequently there would be no disbursements for these services during this period to be met by the earnings of the telegraph. The cost of working, and interest on capital, would be the only charges against revenue during the first three years after the cable shall have been laid.
The cost of working has been estimated by Mr. Alex. Siemens at 24,000l. for the operating staff and office expenses at each station. If we add to this 25 per cent. for management, the whole cost of operating would be 30,000l. per annum.
The interest charges on the capital expended will depend upon the value the securities may obtain in the money market. These securities bearing the guarantee of the Imperial, Canadian, and Australasian Governments would certainly be rated in no way inferior to Consols. Admitting this view, the rate of interest may be estimated at 2 per cent.
Should the most costly of the several routes which have been spoken of be adopted, that is to say, the route by Fanning Island, with branches to New Zealand as well as Australia, I am unable to see with this tender before us, offering to complete it in every respect for 1,517,000/., that the capital to be raised need exceed 1,600,000l. This capital raised at 21 per cent. gives 40,000l. as the total interest to be met yearly. As it is advisable in forming an estimate of this kind to make full and complete provision for unforeseen contingencies of whatever kind, 10 or 12 per cent. may be added. In this view, 45,000l. may be considered the maximum interest charge, to which, if we add 30,000l. for working expenses, we have the sum of 75,000l. as the total fixed charges to be met by revenue in each of the three years after the cable shall have been opened for business.
REVENUE,
The next question which demands an answer is: What constitutes a fair estimate of revenue?
The subject of revenue has been diligently considered in all its bearings, and I have endeavoured to arrive at fair and reasonable estimates; these estimates have been based on carefully collated information respecting the existing telegraph business which has been steadily and rapidly growing for nearly 20 years. I have submitted the views formed to men of experienced judgment in such matters, and of perfectly unbiased minds. It is with confidence, therefore, that I refer to these estimates, supported, as they are, by the opinions of gentlemen in high official stations, whose sense of responsibility necessitates the utmost care and caution in arriving at conclusions. Along with my own views on the subject of revenue I have much satisfaction in appending letters referring thereto it from the following gentlemen
1. Mr. Geo. Johnson, Statistician to the Dominion Government, Ottawa.
2. Mr. J. M. Courtney, Deputy Finance Minister, Ottawa.
3. Mr. W. Hepworth Mercer, Colonial Office, London.
The Dominion statistician, after an examination of the official returns, gives precise information respecting the volume of telegraph business between Australasia and Europe; he likewise presents evidence of its rapid growth, of which the following is an indication:-
1875, total words transmitted
1875 to 1880, increase in words transmitted
1880 to 1885
1885 to 1890
1890 to 1893
do.
do.
do.
do.
do.
do.
1893, total number of words transmitted
235,160
118,188
184,007
289,923
574,015
1,401,293
This officer confirms my statements as to the volume of business, and more than bears
my estimate of the share of traffic which must become tributary to the Pacific cable.
out
It will be seen from the letters of the other gentlemen that, after a careful examination of the data, they fully substantiate, as far as it is possible to do so, the estimates of probable
revenue.
In my letter on this subject addressed to the Honourable the Minister of Trade and Commerce of the 20th July 1894, I have set forth in detail the reasoning which justifies the view I take with respect to the business to be done by the Pacific cable, and I venture to think that the estimates submitted will be considerably within the actual revenue when it comes to be ascertained. According to these estimates the gross earnings in 1898, the first full year that the cable could be in operation, reckoned at the low tariff of two shillings per word, would amount to 110,000; for the year 1899, 126,500l.; and for the year 1900, 143,000l. If from these estimated yearly earnings we deduct in each case the fixed charges for interest and working expenses of 75,000, we would have a surplus in 1898 of 35,000l.; in 1899 of 51,500l.; in 1900 of 68,000l., showing a total surplus of 154,500l. for the first three years the telegraph would be in operation. During the whole of this period the cable would be maintained by the contractor, and any expense incurred in effecting repairs would form part of the contract sum to be paid to him.
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