CO885-5 — Page 270

PUBLIC RECORD

OFFICE

C.O.

Reference —

885/5 PUBLIC RECORD OFFICE, LONDON

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

114

Opinions have been frequently expressed by leading colonists and by the public and Press that a large reduction of rates would lead to a correspondingly large increase of traffic. If these views should prove to be well founded the suggested guarantee would be practically nominal. I cannot, therefore, help thinking that the guarantee proposal submitted by the Eastern Extension Company would be the solution of the tariff question most beneficial to the telegraphing public generally, and well worthy of the consideration of the Imperial Government and the Australasian Colonies.

** service

As I am anxious that your Government should have the fullest possible information on the subject which the Company, from their long practical experience, can furnish, { have instructed the Company's agents to accept from you and transmit ag messages "all telegrams you may wish to forward to the Company bearing upon this particular question.

To the Honourable the

Postmaster General of

I am, &c., (Signed)

JOHN PENDER,

('hairman.

MEMORANDUM relative to proposed PACIFIC CABLE,

My attention has been drawn to a proposal for the establishment of submarine telegraphic communication between the Australasian Colonies and Canada, viâ the Pacific.

As a scheme having this object in view has been for many years contemplated, and has received the careful consideration of the telegraph companies of which I am chairman, I may perhaps be permitted to state the grounds on which it has been regarded as one not calculated in the long run to attain the objects for which it is advocated, viz. :~~-

A substantial and permanent lowering of the tariff; and,

Secondly, the providing of a reliable alternative route, especially in time of war. It is not disputed that to provide a single line of cables only between Australasia and Vancouver would require a capital of 2,000,0001,, but to put the line on the same footing of security as the existing telegraphic service, which is duplicated and in some places triplicated, a capital of over 4,000,0007. would be required.

On the other side will be seen two estimates, one based on the figures said to be given by the promoters of the Pacific cables, and the other on the experience of the several submarine telegraph companies with which I have been for many years connected, and which, I have no hesitation in stating, are figures that can be confidently relied upon.

Assuming for a moment the accuracy of the first, or promoters' estimate, it will be seen that in consideration of a subsidy of 100,000, the tariff is to be fixed at 4s. a word. But the Companies which I have the honour to represent have offered the same tariff in consideration of a subsidy of 75,000 a year, and on the guarantee principle suggested by the Companies a 4s. rate might be established on still more favourable conditions to the Colonies.

Let me now examine the promoters' estimate with a view to ascertaining how far the figures set forth in it are likely to be realised. Judging by the light of the experience gathered during many years of submarine telegraph management, I cannot estimate the expenses of working a single line of cables connecting Australia and Vancouver Island at less thau 135,000l. a year, or 85,000l. a year in excess of the promoters' estimate. Again, the estimate of receipts seems to be greatly exaggerated. Assuming that a Pacific cable would take half the existing traffic, with 100 per cent. increase, in consequence of the reduced tariff, the result would be a net revenue of 175,000l. a year, or only just sufficient to meet debenture interest and working expenses.

From the above statement I think I am entitled to say that the establishment of telegraphic communication by the Pacific would merely operate to saddle the Colonies for 25 years with an annual payment of 100,0001., at the same time augmenting the total capital invested in providing telegraphic communication between the Colonies and Great Britain by the large sum of 2,000,000l. in the case of a single line, or 4,000,0007. if it were duplicated.

It is urged, however, that admitting in time of peace the present means of communi- cation are adequate, in time of war the existence of an alternative route would be a

115

great advantage. The reply I would make to this is that it would be impossible for the British Government, however anxious to do so, to provide the necessary means of protection in the case of cables laid across the Pacific, far away from the routes followed by merchant ships, and at immense distances from coaling stations. Moreover, the Pacific line would necessarily consist of long stretches across enormous and practically unsurveyed depths, terminating on coral reefs, and would, consequently, be exposed to constant interruptions, which would render its maintenance most costly and difficult.

Instead of a Pacific cable benefiting the Colonies, I believe that the laying of such a line would only benefit its promoters, and would be inimical to the interests of the telegraphing public, as it would inevitably lead to a war of tariffs which would eventually impoverish both the Pacific and the existing cables, and result in a starved and inefficient service, the only remedy for which would be higher tariffs or much larger contributions from the Colonies.

If the principal object which the Colonies have in view is to obtain a cheaper tariff, it would, I submit, be more profitable to apply the amount asked for by the promoters of the Pacific scheme, or whatever other sum the Colonies may be prepared to expend, towards enabling the Eastern Extension Company and its allied companies to make a substantial reduction in the present cable charges.

Winchester House,

50, Old Broad Street.

London, EC., 23rd December 1886.

JOHN PENDER, Chairman of the Eastern and Eastern Extension Australasia and China Telegraph Companies.

PACIFIC CABLE SCHEME.

As said to be put forward by Promoters :-

Length, about 8,300 nautical miles. Capital, say 2,000,000/-

1,000,0007. in 107 shares. 1,000,0007. in 4 per cent, debentures.

Tariff, 4s. per word. EXPENSES

Estimated cost by Eastern Extension Company, based on actual experience of cable working :--

Length about 8,300 nautical miles, Capital, say 2,000,0007,

Tariff, 4. per word (38. for Pacific cables, and 1s, for Atlantic cables and land-lines).

EXPENSES.

Cost of working estimated at Interest on debenture capital at 1 per cent

£ 50,000 40,000

£

Cost of working stations and Lon-

dou expenses

£

·

20,000

Two steamers and unintenance of

cables

40,000

Amortization to renew cables in

20 years

75,00)

135,000

Interest on debenture capital at 1 per cent.

40,000

90,000

175,000

RECEIPTS.

RECEIPTS.

Traffic estimated at - Subsidy

£ 150,000 100,000

£

Half existing traffic with 100 per cent, in- crease, say 500,000 words at 3s, per word Subsidy required to cover expenses

75,000

100,000

250,000

175,000

Leaving a balance of 160,000/., or 16 per cent. interest on the share capital.

Leaving nothing whatever for interest on the share capital, which at 5 per cent. would require an additional subsidy of 50,0007.

NOTE.-The 6d. per word calculate for Atlantic cables would probably be increased to Is. or 18. 6d., in which case balance for Pacific cables would be 2s. 6d. or 2s. respectively, which would reduce the estimated receipts from 75,000l. to 62,5001, and 50,000% respectively.

T 2

JPage 271

PUBLIC RECORD OFFICE

Reference :-

11 11 C.O. 885 / 5

ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC-

COPYRIGHT PHOTOGRAPH-NOT TO

PUBLIC RECORD OFFICE, LONDON

116

If the Australasian Colonies granted the subsidy of 100,000 asked for by the promoters of the Pacific cable. the amount required from each Colony on basis of population, as compared with the Eastern Extension Company's guarantee proposal (assuming that traffic increased 100 by reduction of tariff) would be as follows:-

Subsidy

for

c'nteng. ★

Haile Schoon

Proposed Gunnanve

on.

to existing panies for 4. Tariff,

£

Victoria -

29,731

¿ 16,353

New South Wale-

28,497

15,072

New Zealand -

17,454

9,599

South Australia

9,674

5,321

Queensland

-

9,585

5,274

¡Tasmania

4,037

2,221

Western Australia

1,019

560

100,000

55,000

No. 35.

TELEGRAPH CABLES to AUSTRALIA.

MEMORANDUM by SI JULIUS VOGEL, POSTMASTER-General, NEW ZEALAND.

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 due 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 monopolies 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.

1. 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 once; 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 cables when they desire to undertake the business.

5. I believe the Governments, it' they own the cables, can charge a rate of 1s. 6d. a word for urgent messages, and 1s. 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. I am 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 ou 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 n.BL something more than the value to reconstruct. If the owners be unwilling to make a

117

reasonable sale, then the Colonial Governments will do better. point, the companies should receive liberal treatment.

But, up to a reasonable

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 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 10,500,000l. capital outstanding. After deducting the value of steamers and stations, the cables must stand the company in at more than 3007. a knot, a price which is about double that for which the Govern- ments 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, com- petition 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. hope it is so. It would be sad that the huge edifice of commercial activity and enterprise 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 the total cables possessed by the com- panies. 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 dupli- cation. 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 Falmouth, 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 impor tant, if the company's system were purchased, to acquire also about 1,100 knots, duplicate, between Darwin and Java, some 600 knots between Batavia and Singapore, some 300 knots, for a second route, between Singapore and Penang, and some 850 knots between Penang and Rangoon. There is also some duplicate cable of about 3,000 knots between Bombay and Suez, but the companies probably would not part 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 2,500,000%, 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, cost 480,000/, It would be fair to estimate half at least of this as an expenditure made on behalf of all the Colonies.

12. 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 I am 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; thi lly, 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 5,000,0007,, 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 5,000,000. If the money is obtained under

T 3