CO885-(6-7) — Page 390

PUBLIC RECORD OFFICE

Reference :-

C.O. 885

6

ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC-

COPYRIGHT PHOTOGRAPH-NOT TO

PUBLIC RECORD OFFICE, LONDON

22%

PACIFIC CABLE COMMITTEE:

Great Britain increased on an average 54,441 words each year, equal to 14 per cent. per annum. This may be viewed as the normal increase under a high tariff, inasmuch as throughout these eight On May 1st, 1891, years the charges on ordinary messages were never less than 98. 4d. per word. the rate was reduced from 9s. 4d, to is. per word, and within the 12 following months the business increased by 448,913 words-an increase of 54 per cent. on the business of the previous year, and 831 per cent over the normal annual increase during the preceding eight years. The further expansion of business will no cloubt for the present be di-turbed and retarded by an increase in the charges on messages on the 1st January last, but there remains the experience of the year 1891-92 to establish the remarkable effect of a low tariff in stimulating telegraphy. In that single year the increase in the number of words transmitted under a 4s. rate was greater than the growth of the business during the whole of the preceding eight years under a 98. 4d. rate.

"One of the direct benefits to the public from the Government ownership of the Pacific cable will be the reduction in charges for transmitting messages. I have already mentioned that with a full and efficient staff, such as the estimate for working expenses provides for, it will cost no more to do a large business than a small. There will, therefore, be no reason for preventing the freest expansion of telegraphy by the new line, by lowering the charges. In ny humble opinion, the rates across the Pacific should be lowered to 28. per word immediately on the cable being laid, in order that the public may have the advantage of cheaper coinmunication at the earliest moment.

"The proposed rate of 28. per word for transmitting messages across the Pacific would reduce charges between Australia and England to 38. 3d. in place of 48. 9d. as at present. Moreover, messages from Australia received at Vancouver would be forwarded to all parts of Canada and the United States for an average charge not exceeding 28. 9d. per word in place of 68.-the present charge.

"I wish to avoid extravagant statements and too sanguine estimates. I would, in submitting my ideas, particularly desire to keep strictly within reasonable probabilities. If we base estimates on the existing volume of business merely, we must anticipate that there will be no great advance over the business of 1891-92 for a few years if the charges on messages are again raised na In the calculations which follow, I shall, therefore, they already have been to some extent. assume the business to be at a standstill for three years; that is to say, I shall assume that the business in 1894 will not be greater in volume than it was in 1891-92, and that thence- forth the normal increase of not more than 14 per cent. per annum shall apply. The number of words transmitted in 1891-92 was 1,275,191. It is assumed that the Pacific cable would, if in operation in 1894, obtain one-half of this business.*

1894

1895

1896

1897

1498

1899

Year.

Number of

Words

Earnings of the Cable

Year.

per Annum.

at 28. per Word.

Number of Words per Annum.

Earnings of the Cable

* s. per Word.

£

637.595 726,858

816,122

1901 81,612 1902

63,759 1900 72,686

905,386

90;539 1903

994,649 1,084,913

99,465 1904 108,891

1,173,176 1,262,439

1,851,703

117,318 126,244 135,170

1,440,967

144,097

1,530,230

153.028

"In connexion with the estimates of revenue I have pointed out from statistical returns two elements of increase of business—(1) a normal increase under an exceedingly high tariff'; (2) a very much greater increa-e under a lower tariff. There will be a third increase which will be due to the development of traffic with Canada and in bringing the Australian Colonies into direct At present telegraphic telegraphic touch with the whole telegraph system of North America. intercourse is insignificant, but with a 28. or 28. 6d. rate across the Pacific in place of a fis. rate by a circuitous route, the circumstances will be favourable to the growth of telegraph business between the two continents, and in consequence the revenue to the Pacific cable from this source will rapidly develope to large proportions.

"In the foregoing estimates of revenue I have reckoned only the normal increase under a high tariff and take no account of the greater increase which certainly will result from the charges being lowered, as proposed. I have likewi-e added nothing from the Australasia-North American business, the whole of which would flow to the Pacific cable. I am quite warranted, therefore, in expressing the opinion that the estimates of revenue I have presented are not exaggerated or unreasonable, and that the Pacific cable established by Government in the manner proposed would affect very important results. It would practically extinguish all subsidies now paid and render guarantees unnecessary. It would permanently establish low rates for ocean telegraphy. It would yield a revenue which, after paying working expenses, and providing for maintenance and renewals, would make good, all interest charges on the whole cost of the undertaking from the beginning, and in a very few years would furnish large surplus earnings. I venture to think, then, that if the

At the date of going to press (May 1894) it has been ascertained that the traffic for 1898 between Europe and Australia consisted of 1,806,716 words, showing that Mr. Fleming's estimate is considerably within setual resulta. If merely the Lormal increase of 14 per cent. under a high tariff be added to existing business the number of words for 1894 in the table of estimated earnings which follows should be 744,828 in place of 637,599, and the earnings for the same year 74,483/. in place of $8,759. Thus establishing that the estimates of revenue presented in this memorandum are in no way exaggerated.

PAPERS.

223

resolution passed by the Postal and Telegraph Conference in March last" be generally assented to in these Colonies, the Governments need not hesitate in incurring the comparatively small, almost nominal liability, necessary to secure a telegraph connexion across the Pacific, which every British subject will recognise to be of the greatest national and commercial value."

(c.)

Extract from Mr. Fleming's Letter to the Hon. Mackenzie Bowell, July 20th, 1894.

"With respect to the revenue. If it will take three years to establish the cable, 1898 will be the first year of its full operation. On pages 70 and 71 of the report on the mission to Australia will be found an estimate of the proportion of business which would fall to the share of the Pacific cable for that year, 1898. The estimate was made a year ago and based on the assumed telegraphic business for 1893 between Australia and Europe, which has been exceeded by actual results. See footnote, p. 71. Correcting the estimate in this respect, the business for 1898 may be set down at 1,105,000 words, which reckoned at 2s. a word would yield a gross revenue for the first year 3 operation of the Pacific cable of 110,000l. It will be borne in mind, moreover, that this estimate is for European business, and includes nothing for the business between Canada, the United States. and Australia, at present significant, but which, in a few years, with greatly improved facilities will undoubtedly develope to considerable proportions. For these reasons I am satisfied that the estimates submitted will be fully realised and more than confirmed by actual results.

r

Bearing on these estimates, a friend wrote me from London a few weeks back, as follows:-'I have been looking over the proceedings of the Colonial Conference of 1887, where a memorandum of yours is given, dated April 1886 (page 101). In it you show a probable traffic for the year 1893 of 133,000 messages, equal to 1,330,000 words. The actual business for the past year, according to Sir John Pender, was 1,306,716 words, and according to Australian returns, 1,401,292 ⚫ words.

I mention In either cases the prediction made eight years ago is approximately correct.' this merely to bring out the fact that the principles on which the estimates are formed are sound, and that the estimate themselves may generally be considered safe.

"With respect to the charges on revenue, viz. :—

1. Interest on capital.

2. Working staff and management.

3. Repairs and maintenance.

that the

"The first and second are constant, the third is variable. Experience goes to show that failure causes connected with laying, and interruptions in cables, due to defects in manufacture or

For this and other reasons I generally take place within the first year or two.

propose manufacturers should be asked to undertake to keep the cable in efficient working order for three years; we may thus eliminate from revenue account for that period all charges for repairs and

maintenance.

"Assuming that the cost of the cable and its maintenance for three years will be, in round figures, 2,000,000l., the revenue account for the year 1898 would stand as follows:-

Earnings as estimated

Interest on 2,000,000, at 3 per cent.

Staff and management

Surplus revenue

£

£

-

110,000

60,000 30,000

90,000

£20,000

"In the above I have taken Mr. Siemens's estimate of the cost of staff required for stations, and office expenses at each point, viz., 24,000l. I have increased Mr. Siemens's allowance for general This charge will be constant, management to 6,000l., the two making in all 30.0001. per annum.

and will suffice, as pointed out by Mr. Siemens, for & business more than six times greater than that estimated for the year 1898, and by introducing duplex working, for a traffic 10 or 12 times greater.

"I have pointed out elsewhere that the average normal increase of telegraph business between the Australasian Colonies and Europe was 14 per cent. per annum, during the period when the high rates charged for a period of eight years were in force, that is to say, under a tariff rate of 98. 4d. per word from 1882 to 1890. Manifestly under the low rates proposed to be charged by the Pacific cable, the normal increase will be greater than 14 per cent. per annum; more especially as the whole North American business will receive a great incentive from direct communication, and all this additional and constantly growing traffic must find its way by the Pacific cable to and from Australia. I venture to think that it would not be too sanguine an estimate to place the annual increase of business at 18 or 20 per cent., but to be perfectly safe I shall limit it to 15 per cent. in the calculations which follow, that is to say, only 1 per cent. more than the average annual increase realised under the high tariff for the eight years previous to 1890.

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224

PACIFIC CABLE COMMITTEE:

ESTIMATE

"of the business of the Pacific cable for 10 years after its completion, calculated on the basis of 1,100,000 words, for the year 1898, an average normal increase of 15 per cent. per annum thereafter :-

PAPERS.

The actual increase in the three years 1891-93 over 1890 was 574,015.

The number of words transmitted is taken from returns submitted to the Postal and Telegraph Conferences held in Adelaide in May 1890, in Queensland in March 1893, and in New Zealand în March 1894.

They show that during 15 years (1875-90) of high tariff (98. 4d. per word) the increase in the number of words was 251 8 per cent., and that during the three years 1891-92-93, in which period the rates were reduced to 4s. and 4s. 9d., the increase over 1890 was 69 · 2.

For the whole period covered by these statistics the increase is 496 per cent.

From these figures of per-centage it appears: 1st, that during the period 1875-90 the growth of business under a 98. 4d. tariff was equal to an annual average of 16 8 per cent.; 2nd, that under 48. and 48. 9d. tariff the average annual growth from 1890 to 1893 (three years) was 23 per

Your estimate of 14 per cent. increase appears, in the light of these facts, to be a very conservative

Greta Earnings.

Interest and Working Expenses.

Surplus.

£

£

£

1398 -

110,000

90,000

20,000

126,500

90,000

,36,500

cent.

1899 -

1900-

143,000

90,000

53,000

1901-

159,500

90,000

69,500

1902.

176,000

90,000

86,000

192.500

90,000

102,500

1903

1904

209,000

90,000

119,000

1905-

225,000

90,000

135,500

242,000

90,000

152,000

1906

258,500

90,000

108,500

1907 -

one.

II.

PUBLIC RECORD OFFICE

Reference :-

TEC.O. 885

"As we have eliminated all but the fixed charges on revenue for the first three years, an examination of the above table will show that the surplus up to the fourth year will have accumu- lated to 109,500l., which sum together with the annually increasing surplus thereafter accruing, would be sufficient to meet all charges for repairs and maintenance and leave a balance to be carried to a cumulative reserve, for renewals at some future day.

"I may mention that I have submitted in outline this financial scheme to the delegates from New South Wales, Victoria, Queensland, and New Zealand, with whom I have had the avantage of frequent consultations since the Conference rose, and I have the satisfaction to stare that it finds favour with each of them. That feature of the scheine by which all the uncertain charges, for repairs and maintenance would be embraced in the contract with the manufacturers of the cable, would not only have a tendency to secure a cable of the very best make and character, but it would defer all charges against revenue, which revenue could not fully meet, until a date later than the payment of the last annual subsidy to the Eastern Extension Company. The Australian Governments now contributing to that subsidy could then with greater ease make up any possible shortage which may arise in connexion with the new cable. The estimate, however, shows clearly that under this scheme there is every prospect of the Pacific cable being self-sustaining from the tirst."

DEAR SIR,

(d.)

Letter from George Johnson, Esq., Dominion Statistician.

Office of the Statistician,

Ottawa, November 29, 1894. I HAVE examined your statements before the Intercolonial Conference in re the Pacific cable, and have the following remarks to make:-First, respecting the growth of business; and, second, respecting the proportion the new route could hope to secure.

I.

Taking the statistics of growth I find the following:-

How much of the business could a cable competing with the existing one hope to secure?

(a.) A telegram from Melbourne to London by the existing line has to travel 13,695 miles of wire, of which 2,704 miles is in Australia, and is, therefore, land wire. The land wire in Asia in, I judge, about 1,000 miles more of wire.

A telegram from Melbourne to London vid Canada would travel 14,414 miles, of which 3,764 would be land wire.

In respect to the greater danger of stoppage and delay from land wire, the two lines would be, practically, on an equality.

(b) Your estimate is that one half of the words sent by cable between Australia and the rest of the world would be sent via the line across Canada.

According to the return of 1892 there would be, on this estimate, 660,706. But some portion of the total of 1,321,412 words must be Asiatic business, since Australia imports of tea alone 33,000,000 lbs. a year, direct from Asia. From various data I estimate the Asiatic business at one-eleventh of the whole. Deducting this, we have 1,191,000 words to represent European I would, business, of which the new proposed route would stand a fair chance to secure one-half. therefore, place the estimate at 595,000 (or 600,000) words instead of 637,595.

Taking this estimate and applying to it the 16 8 per cent. increase, the estimate for 1895 would be 695,000 words, or 31,860 less than your estimate. For 1896 it would be 811,760 words, or 4,362 less. In 1897 it would be 948,000 words, or 42,000 more than your estimate. My calculation would give fewer words for 1895 and 1896 and more words for 1897, and still more in succeeding years.

I have taken the per-centage of the period when the tariff was 98. 4. per word. If the per-centage under a 48. tariff were taken, the growth would be much greater, and undoubtedly the result of a reduction in the rates would be an increase in messages, as the table above given shows.

I have not dealt with the development of business between North America and Australia, which must in the nature of things be very great when facilities are provided, and will also be tributary to the Pacific cable.

Sandford Fleming, Esq., C.M.G., C.E. Ottawa, Ontario.

Yours, &c.

GEORGE JOHNSON,

Statistician.

Increase.

Year.

No. of Words transmitted.

Tariff per Word.

Per Cent, for

Per Cent.

Actual.

Period.

Yourly.

1875

235,160

1880

353,848

118,188

1885

537,855

184,007

1890

827,278

289,923

1891

1,275,191

1892

1,321,412

1893

1,401,293

1883111

50

10.0

98. 4d.

11.0

Dr. 4d.

10.8

9s. 4d.

54.0

9r. 4d. and 45.

3.8

48.

6.0

4s. 9d.

(e.)

Letter from J. M. Courtney, Esq., Deputy Minister of Finance.

DEAR MR. FLEMING,

Department of Finance, Ottawa,

1st December 1894.

I HAVE read over very carefully and, I may say, with a great deal of pleasure the blue books and documents you left with me for perusal in connexion with the scheme for laying a Both from the fact that it is the pioneer Pacific cable to connect this country and Australasia. Pacific cable scheme and also from the magnitude of the work itself, the consideration of the subject is to me exceedingly interesting, especially as it has such an intimate bearing on the expansion of the Empire.