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PUBLIC RECORD OFFICE

Reference :-

CEPERNIC.O. 885

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PUBLIC RECORD OFFICE, LONDON

ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC- COPYRIGHT PHOTOGRAPH-NOT TO

16 November 1896.]

Chairman-continued.

Mr. SIEMENS.

words per minute? No, I do not think so; I think the Atlantic cables were all 15, or some- thing like that supposed to be.

556. And the cable for which you tendered would have given L5, I understand you to say? -Yes, it would give 15 easy.

557. How many letters per word ?---That is all according to custom; that is five letters per

word.

558. As regards Forms B and C, your firm did not tender at all. Well, what I want to know is if you are willing to inform the Com- mittee why your firm did not tender at all under Band C-Well, we could not induce financiers to make us definite proposals or interest them in that; and moreover, I think personally, if that cable is to be made at all it should be made as cheaply as possible, because, from the nature of it, it cannot count on a traffic like the Atlantic cable, although the traffic will develop, and therefore it should be laid as cheaply as possible. There is nobody who can borrow money ascheaply as the English Government, and, therefore, the interest on capital, which is always the heaviest charge in the cable enterprises, would be kept as low as humanly possible, and would give it a chance.

559. But you might have tendered under the Form C, might you not, which asks for a guarantee? Well, even then you see we could not find the money for that ourselves; we should have to ask other people to find the money, and they would be sure to ask to have a guarantee of a great deal more than 24 per cent.

560. In fact, do I understand that it amounts to this, that your firm's business is laying, not working, cables? - We are not financiers.

561. You are not financiers ?-We are not financiers, we are only manufacturers; but I mean, apart from that, I think Form A is so dis- tinctly preferable, so obviously preferable, that it would have been rather waste of time to have tried to form a financial combination for making proposals. As a matter of fact I did ask one or two people and they all declined.

562-3. You did tender for Form A, all routes. Taking Route I, under Form A your tender was 2,170,0002, ?—Yes.

564. That was from Vancouver to Fanning Island? Yes.

565. For the whole route; it was for the route that goes via Fanning Island ?-Oh, yes,

for the whole route.

566. If you were tendering now, has there been any great change in prices that would make a great difference in your tender ?- Well, you see I think I had better put it perfectly frankly. We could see from the whole circum- stances of the case and from the wording of the invitation to tender that the Canadian Govern- Inent was not prepared to place the order, so we tendered very high, very much higher than we would tender now. In addition to that, I have found out that we cannot obtain the steel for sheath- ing which I had contemplated in 1894. Just with the view of overcoming unforeseen depths, I thought it would be best to take only steel that could stand 120 tons per square inch; simply on the same principle that we wished to be on

Chairman-continued.

[Continued.

the safe side. I thought we could get that, but I have since found out that we could only get that at the rate of 10 tons per week, and as there are 11,000 tons wanted for that route it would take too long a time; so we would now substitute wire which can stand 96 tone per square inch, and that is a wire on which the figures are based which I gave just now of the weight of No. 1 type being 23 ewt., and that it has over 10 tons breaking strain. But, at the same time, the cost price of that pliable wire is 50% per ton, and this wire is about 12., so I mean you can multiply this: 40 times 11,000 is nearly 500,000, a difference on that score alone. Another point where we had to take care is the price of gutta- percha. A difference of Is, per lb. on gutta- percha makes in these cables, I mean on this route, a difference of close upon 100,0007, so if we could get the gutta-percha now 21. cheaper than we esti- mate in our estimate to the Canadian Govern- ment, that would make an additional 200,0007, difference. It is so very difficult in all these cable estimates if you cannot keep the matter very quiet beforehand; the materials are raised against you, and therefore in an offer which we knew would be published afterwards, and would not lead immediately to business, we put every- thing very high.

567. Am I to understand that if it was a question of your tendering a firm offer at the present moment, an offer which you would be ready to translate into immediate action, you would probably be prepared to tender at a lower sum than the estimate you gave in 1894 ?-Oh, yes, and a considerably lower sum. I mean as I have given you there, I could not say that we could get the gutta-percha 25. cheaper, but we certainly would get the steel wire, which alone makes 500,0007.

568. What materials had you before you to make your estimate? Well, we had the different charts, to get the exact distances, and then our experience of former cables to make the right size of wire and the proper kind of sheathing.

569. Would you be prepared to divide your tender into that portion which was for making and laying that portion which was for stations and equipment, and that portion which was for repairs and maintenance for three years? - Certainly, and, to a certain extent, I think we have done it already, but I mean we can divide

it up.

570. Can you give me the division now ?- Well, I handed in this pamphlet that gives to a certain extent the information on page 9. There are the buildings and instruments there, of course not exactly for the same stations, but they are practically the same. You see the buildings are about 30,000. We had made a maintenance offer, saying that it would not cost more than 90,000l. per year, and that we had included 270,000%. for maintenance in our tender, so that you can take that. There is, I think, one more station, but you can take it that the buildings and instruments would be about 30,000%, that the maintenance was 270,000, and that the cable itself, I think, therefore, would be

1,870,000%.

16 November 1896.]

Chairman-cont⚫nued.

Mr. SIEMENS.

571. Can you tell the Committee what you estinate the working expenses were likely to come to ?—Well, the working expenses are also referred to in this pamphlet which I wrote for the conference, and I do not think that the expenses for the staff and office would exceed 24,0007. per year, and the expenses for the repairing and main- tenance of the cables themselves by the steamers is to be divided into fixed expenses and variable ex- penses. The fixed expenses would be, roughly speakin, 17,000 for the maintenance of the steamers and of the crew, and the variable ex- penses depend, of course, on the repairs. That brings me back to thing which you have not asked me about, and that is the precautions which ought to be taken to prevent faults occurring,

572. I was going to come to that later.-Very

well.

573. I have purposely left that very technical part of the reference out I thought we had better Pover the ground we are covering now and come back to that. I am only asking you for the figures. Now, what do you put the working expenses at ? -We put the fixed expenses at 17,000, and the variable expenses, with the extra expenditure for stores and 200 nautical miles of cables for repairs and so on, would be about 73,000/

—

574. Making a total of-?-Making a total of 90,000 per annum. But that is also very high, because, as I say in this pamphlet, the variable expenses are usually estimated at 67 per nautical mile, which, in this case, would amount to about 45,000, instead of the 73,000 which I have estimated in my calculation.

575. If you would look at page 4 of the pamphlet we may summarize it by saying that the total gross working expenses are estimated by you at 119,000/- per annuin ?—Yes.

576. And in your tender you stated, I think, that if the repair, that part of it which was for repair and maintenance, 90,000 a year, that if that was not expended you would be prepared to make a corresponding reduction ?—Yes.

577. In your pamphlet you also dealt with the question of prospective revenue?—Yes.

578. Can you tell the Committee what gross revenue you estimated such a cable would earn? -Of course, it is a very difficult question. I thought the best thing was to base the figures on some information which had been obtained entirely independent of this inquiry and entirely independent of me either, as an interested party; and, as it happens, Mr. Henniker Heaton has collected statistics and published them as long ago as the 2nd April 1887, and there he made out that the submarine cables which were existing at that time had cost about 350 per mile on the average, and their annual revenue was 31. 15. per nautical mile. But he also gives in detail some of the bigger telegraph companies, and the Eastern Telegraph Company only ex- pended 2991. per nautical mile, but earned 351.; the Eastern Extension laid out only 2651. per nautical mile, and was earning 397. 10%.; and I know that one of the telegraphic companies has been earning more than 50% per mile. Of course that is in the high road of telegraphic traffic, and that could not be attained. But if you assume per mile you would earn 220,000 a year. If

301.

Chairman--continued.

[Continued,

you calculate that the Pacific cable would retain 2s. out of the tariff for its own use, that would mean a traffic of 2,220,000 words per year.

579. This calculation, I understand, is not yours, but Mr. Henniker Heaton's?—I mean the statistics are Mr. Henniker Heaton's, I make the deduction from them.

580. You have never examined independently the question of the probable revenue of this cable? No. Of course I have not got the statistics of what the telegraphic communication is, and I think it is unreliable. We had to judge too much heforehand. Like all other things, a commodity, if you can get it, will be used. I mean if the people know that they can telegraph quickly and comparatively cheaply from Canada to Australia, they will do it; and vice versa they will do it. Now the people will not telegraph because it costs too much money, and the business relations in conse- quence suffer. We had an illustration lately; we laid a cable on the Amazon river last winter; well, in the calculations which we made before hand everybody said, It will be quite in- possible to get much money out of the local traffic because there is practically no local traffic, they are only very small places and they will not have much to telegraph." When the cable was finished it turned out that the international telegrams were only 3 per cent., 97 per cent, of the whole traffic was local, and if anything it was assumed that the thing would be just the oppo- site. So that I mean to say you really cannot say beforehand, you can make no regular fore- cast, you can only do what I did there and say that the average of the cables which existed (and, mind, this is in 1887, that is nearly 10 years ago) they made over 301. a mile. If you count on your l'acific cable working under average con- ditions, it ought to earn about the average.

Mr. Gillies,

581. On the question of traffic, of receipts, what you have said, Mr. Siemens, with reference to the traffic which would probably be obtained by the construction of this cable, the grounds you have given, are they the only ones, what you might call yourself mere guesswork, going on the average, for instance, and taking the average receipts of all the cables, so many words a mile?-True, if you call that guesswork; I think if you construct a cable properly and lay it under average conditions, you are quite right to expect average receipts.

582. Do you not take into consideration where the cable is to be constructed; if you construct a cable that has population at neither end nor the middle you would expect to get none, and in proportion as you had population at each end, and some population in the middle through the countries through which it passes, you would expect to get more traffic, so that do you consider that you make a fair comparison with all the existing cables or even with a number of the existing cables? It would depend upon the locality in which you are constructing your cable and the people that are to be served by it!-Oh, certainly.

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