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distance or wages, and the efficiency of labor is greater in the Western Union system than in the English-more messages per employee here'-then, what is the reason for the 25-cent minimum and the 31-cent average?
The vice-president says that the Baltimore and Ohio telegraph (which maintained a 10-cent rate on 19 long routes and other low rates averaging 16 cents a message on the whole system) became bankrupt in consequence of its low tariff. But Mr. D. H. Bates who was manager of the Baltimore and Ohio telegraph system, testified at the Bingham hearings, that the Baltimore and Ohio made a profit in spite of its low rates, and that the Western Union succeeded in buying up the Baltimore and Ohio lines, not because they proved unprofitable, but because disaster overtook the road in other departments, and it sold its telegraph business as the most available source of realizing the funds necessary to right itself.
Speaking of the charge that inventions have been suppressed by the Western Union, the vice-president says: "If the person or persons who make that charge will kindly name the apparatus I should be very glad to know it." The gentleman will find a list of inventions on pages 144-146 of Wanamaker's Argument on the Postal Telegraph, 1890, in respect to which the Postmaster-General said (p. 11): "I have had enumerated, perhaps, a score of devices already patented for the purpose of cheapening and quickening the telegraph service, which find no use and no profit under the present conditiou. I am not an expert in electrical matters, but I know that all of these inventions can not be wholly bad. I am sure that many of them are good, but they can not be got into operation with the field monopolized. The public can not have the benefit of this rare class of American brains, nor can the inventors find a deserved remuneration for their work. The Western Union Company, having the control of the telegraph business, has no use for devices which cheapen and quicken the telegraph service and warrant a claim for reduction of rates. The public, not knowing what it misses, can not become aroused to the defects in methods now in vogue. If once a break is made in this rampart of telegraph monopoly, not only will the men and women who build and use the telegraph wires find a better market for their fidelity and skill, but inventors, knowing that their cases are to be tried before an impartial court, will also find a spur to better efforts."
The statement about the potential pressure for the withdrawal of the postal telegraph bill of 1890 made to me by Mr. Wanamaker, in the presence of several others, is said by the vice-president to be without justification. Mr. Wanamaker's high honor and excellent judgment make me feel otherwise, but I suggest that the correctness of Mr. Wanamaker's information is not incompatible with Mr. Clark's belief in the matter. The witness does not seem familiar with this side of the company's affairs. He even says that the giving of telegraph franks is entirely a personal courtesy, and that the company does not expect any favors, nor get any. But the president of the Western Union, in his report some years ago, said that the judicious use of complimentary franks among Government officials had been the means of saving the company many times the money value of the free service performed. It is admitted that the franks are still given to the same class of beneficiaries, and I submit that the purpose and results are probably similar to what they were when the above confession appeared.
The vice-president gives a table of the deficits in England footing up $37,600,000, but the estimates of deficiency are made by including the cost of new construction, extensions, and improvements every year in the expenses to be subtracted from income, whereas they belong in the capital account and are so included by the vicepresident in another part of his testimony, making them do duty on the deficit and on the capitalization also. Suppose a manufacturer operates at a cost of $50,000 and sells his product for $60,000 and builds a new mill costing $15,000, has he made a profit of $10,000, having cleared that amount above expenses of operation and maintenance, or has he made a deficit on the year's business by building the new mill? It seems clear that he has made a profit. The cost of the mill belongs in the capital account, and he has the mill to show for the expenditure. The difference caused by the wrong use of construction cost is very great, turning a small deficit into a big one, and in some years changing a profit into a deficit. For example, in 1880, the vice-president's statement gives a deficit of £29,909, whereas there was a profit of £7,187 above all cost of operation and maintenance and interest on the debt.
Senate Doc. 65, Fifty-sixth Congress, first session, pp. 18, 19, n. 3, giving the facts from the Tenth Census.
2 House Committee on Post-Office, hearings in reference to the Wanamaker bill, 1890. The following are examples of the Baltimore and Ohio tariff: New York to Portland, Me., and intermediate points, 10 cents: New York to Philadelphia, Baltimore, and Washington, 10 cents; New York to Chicago, 15 cents; New York to St. Louis, 20 cents; to New Orleans, 50 cents; to Galveston, Tex., 75 cents. The average charge on all messages was 163 cents (Bingham Hearings, pp. 21, 62, 76, and Senate Doc. 65, Fifty-sixth Congress, first session, p. 21).
See full citation, verbatim, and references, in my testimony.
Here are some other instances of the same sort, taking my figures from Mr. Morley's returns to the House of Commons:
1882. 1883. 1884.
Deficit by vice-president's statement.
£984 112, 524 142, 234 346, 114
Profits by returns to Commons, putting new construction in the capital account.
£125, 048 31, 442
36, 611 4,418
The postal statements put the deficit sufficiently high without magnifying it. The Government believes the country gets more than a full return for the deficit in the development of business, etc., through low telegraph rates, while experts say that if a fair division of expenses were made between the mail and the telegraph there would be no deficit at all-a 2 per cent change in the line of division would do it. If the telegraph had remained in private hands the service would have cost the people many millions more than the total governmental cost, deficit and all.
The English deficit is no argument against public ownership of the telegraph, any more than the postal deficit here is an argument against public ownership of the post, or the political condition of Philadelphia or New York is an argument against government by the people. There are plenty of countries that do not make any such deficit with the telegraph, and we can follow their example until it is deemed wise to throw the electric wires open to public use, just as the roads are now, the whole cost of which is a deficit, but a most beneficial one, which brings me to my last point in this connection, viz, that a deficit is not necessarily a bad thing-it depends on what you have to show for it.
The vice-president states the Western Union stock and bond capitalization at $645 per mile of line and $130 ($129.80) per mile of wire, and compares it with the British capitalization, which he estimates at $1,530 per mile of line and $216 per mile of wire, by adding to the outstanding capital debt the whole cost of extensions and improvements from the start (although these were included in current expenses in an earlier part of his testimony dealing with the English deficit) and making no allowance for depreciation. "Men may come, and men may go, but I go on forever," is the song of capital when a monopolistic corporation writes the music. Private monopoly does not believe in burying its dead capital, but keeps it on the register as a basis for taxation, not of itself, but of the people. Monopoly's census of capital includes as present population all the inhabitants who have ever lived in the building since it was put up. Besides this gratuitous inflation of the British capital, by applying corporation methods to its estimate, it is well known that England paid the companies at least four times the value of the lines, and probably five or six times their value. I suggest that it would be better to take for comparison the capitalization in some country that has not made such a dropsical purchase-France, or Belgium, or Germany, making due allowance of course for difference of wages, etc. Better still, to compare the $645 a mile with the cost of construction in this country, or with the Western Union's claim in recent tax litigation in Ohio, that its whole property in that State did not cost over $103 per mile of line. ?
1 Western Union reports show cost of construction varying from $75 to $100 per mile of line and $21 to $70 per mile of wire, on an average for large blocks. For the year ending June 30, 1894, President Eckert reported the construction of 1,300 miles of new poles and 22,000 miles of new wire, one-half of it copper, at a total cost of $557,021, or $21 a mile of wire. In the report of October, 1895, President Eckert says that $574,639 was spent during the year in putting up 15,784 miles of new wire, two-thirds of it copper, and part of it on new poles (817 miles)-about $75 per mile of single line and $36 per mile of wire. Colin Fox, a Western Union builder, testified that he had built lines for the company from 1868 to 1876, constructing 500 to 800 miles of poles in Michigan (some of it 2 or 3 wire, but generally 1-wire line) at a cost of $75 a mile and $30 a mile of additional wire. (Senate Report 577, Forty-eighth Congress, first session, p. 6.) In 1884, Dr. Green, president of the Western Union, testified that the average cost of the Western Union lines was about $45. (Ibid., part 2, p. 227.) During the year ending June 30, 1895, 2,684 miles of poles and 20,370 miles of wire that constituted the American Rapid Telegraph Company has been bought by the Western Union for $550,000 in its stock at par, or $27 a mile of wire (Western Union Reports 1894, 1895, and United States Statistical Abstract for 1894, p. 363.) The actual market value of the stock payment was $22 a mile, and the Rapid lines were among the very newest and best the Western Union has ever bought.
See further Senate Document 65, Fifty-sixth Congress, first session, pages 27-30, where many data on construction cost are collected from various sources-public, private, domestic, and foreign-al. tending to confirm the drift of the figures given above.
2 Western Union Telegraph Company v. Auditor of Ohio, 61 Fed. Rep., 447; State v. Jones, 51 Ohio St., 492; 165 U. S., 194, Feb. 1, 1897; and see 64 Fed. Rep. 9, reversing the decision of 61 Fed. Rep., and holding the Ohio law constitutional, the State supreme court n 51 Ohio, and the United States Supreme Court in 165 U. S., having sustained the validity of the statute.
Even this contrast probably does not show the real inflation in Western Union capital, for the vice-president took the whole mileage of poles and wire reported by the company, which, as we have seen. there is reason to believe is the sum of all the lines bought and built from the start, many of them now in the junk heap. Allowance for this would make the divisor smaller and the quotient larger.
The vice-president says that the "capital of the Western Union Company has resulted from the amalgamation of a large number of telegraph companies from the beginning," and every business man knows that when companies amalgamate the resulting capital is usually a good deal more than the sum of the former separate capitals. What the people want to know in this connection is the relation between capitalization and the real value of the plant. The practice of heavily capitalizing franchises given by State and city, thereby compelling the people to pay dividends on legislation and interest on abstract privilege, is a very questionable practice. Labor and capital actually invested are the only things that ought to draw income. It is so with the ordinary merchant and manufacturer, and it ought to be so with a telegraph company. The merchant can not make the people pay interest on a blue book, or on dead capital; neither should a carrier. Equal rights to all. Fair exchange, service for service. No charge for wind, and no tax on the dead.
I solemnly swear that the matters in the above statement made by me of my own knowledge are true, and that all other matters contained therein I believe to be true. FRANK PARSONS.
Subscribed to and sworn before me this 6th day of August, 1901. [SEAL.]
MAUD M. CRANE,
STATEMENT OF ROMYN HITCHCOCK,
Consulting Chemist and Technologist, New York City.
Arguments in favor of Government ownership of the telegraph have been ably presented before this commission and from time to time before other committees of Congress appointed to investigate the subject. The general and specific facts concerning the telegraph business in this country and abroad have been set forth in detail by different authorities before such investigating committees. There is no reason why any person of an inquiring disposition should be deceived by ambiguous or erroneous declarations concerning matters of fact in the telegraph business.
Objections to Government ownership and management of the telegraph, based upon considerations of political patronage and abuses, have been repeatedly put forward, but they are more theoretical than real. If the people want Government ownership they will also demand efficient and economical management. This can not be had if political influence controls the selection or discharge of employees. The operation of the telegraph is a technical service and employees should work their own advancement. Civil-service rules should be applied rigidly; promotions should depend upon efficiency and skill and the results of special examinations, with no discharges except for cause. Life positions and a pension system should be the reward of faithful service.
But it is unprofitable to spend time over matters already well thrashed out. What the people desire they should have. It is the duty of the Government, imposed by the Constitution, to utilize the best available means for the transmission of correspondence. It is unconstitutional for the telegraph, which should be a part of the postal system, to be operated as a private monopoly. Among the more important nations, the United States stands alone for its shameful neglect in the matter of telegraph communication. This condition is anomalous. The most active and progressive people on earth are unable to enjoy the telegraph as a public utility. Yet the popular demand for it, expressed in many ways, is indisputable. Doubtless on no other single question are the people so united. More than 75 bills have been before Congress advocating a postal telegraph. Sixteen investigating committees have reported in its favor. Of 75 countries the telegraph is owned and operated by the respective governments in all except Bolivia, Cuba, Cyprus, Hawaii, Honduras, and the United States.
The following organizations and many others have expressly favored a postal telegraph system:
The Farmers' Alliance, the National Grange, the Knights of Labor, the Railway Union, the American Federation of Labor, the International Typographical Union, the People's Party, the Prohibitionists, many boards of trade and commercial bodies. More than 2,000,000 votes have been cast for it.
Mr. Wanamaker declared in 1890 that the only visible opponent was the Western Union Telegraph Company.
Testimony has been given before this commission relative to discriminating freight rates on railroads and the demoralizing effects resulting therefrom. These things are only too familiar to students of economic conditions, but few people know that similar conditions have prevailed in the telegraph in regard to the distribution of news. Mr. S. H. Bell, representing the Typographical Union, used these words before the Senate Committee on Post-Offices and Post-Roads:
"Mr. Chairman, the news of this country is controlled by two great press associations, and in any place in which either has a footing no new journal can be established and secure a telegraphic news service except on such terms as may be prescribed by the paper or papers which already occupy the field. In England, on the contrary, all papers are on an equal footing; that is to say, all may receive the dispatches on payment of the charges of the news-gathering agencies and those of the Government for the transmission of the same. We believe that under governmental operation a similar condition would soon prevail here, which would be of untold benefit to all connected with the newspaper industry."
A great part of the testimony given at various times deals with comparisons. The experience of Great Britain and the continental countries, the reductions of rates invariably accompanying changes from private to public ownership, evidence that cheap rates enormously increase the use of the telegraph-all these facts have been admirably brought out. But the testimony has dealt almost exclusively with the telegraph as it has been and is. The time has come when we should seriously inquire whether the methods of the past, although they still prevail, are the best; whether there have not been improvements in telegraphy as in other arts, or if in this alone there has been stagnation for a generation.
Improvements have been made in the telegraph, but the great monopoly which controls it has opposed changes. The logical result has been realized-that we have in the United States the poorest, most inefficient, slowest, most antiquated and expensive telegraph service in the world. It is conducted on the basis of small business at high prices, regardless of the obvious teachings of experience that the opposite policy is the wiser and also, when largely developed, the most profitable.
To offset this humiliation, due to ignoble and shortsighted financiering, I propose to advocate before this commission the introduction of an American invention which represents the highest achievement in telegraphy as a foundation upon which to establish a Government postal telegraph service which shall be superior to any the world has known. This invention far outranks its nearest rival, the great Wheatstone apparatus. It is an invention not to be superseded, because it attains the limit of the working speed of a telegraph wire.
The question has always been, How shall the Government obtain control of the telegraph? How can it best do so with just regard to the vested interests which must be more or less affected? Important as these considerations are, they are subordinate to the larger interests of the people. If, as I believe, the time has come for a postal telegraph in this country, the people have a right to demand the best in the world. If it can be shown that the best is also the cheapest in first cost and maintenance, and that its adoption will improve, cheapen, and quicken the service far beyond what would be possible by any other method, there can be no question that this is what they should have.
It is my purpose to advocate such a system. it is thereby practicable to reduce the present are at present, with vastly improved service. rates could be still further reduced.
Under private management for profit telegraph rates to one-tenth what they Under Government management the
The system of which I shall speak is the high-speed automatic of Mr. Patrick B. Delany. The main features and possibilities of the Delany system were discussed before the Senate Committee on Post-Offices and Post-Roads in 1896. (Doc. No. 291.) Although at that time the Elliott Cresson medal was awarded to the inventor, the system is much improved and is even better adapted to the needs of a postal telegraph than it was then. The tapes are now punched by the ordinary operating of a Morse key, and the signals are recorded in Morse characters. The electro-static conditions of a telegraph line have hitherto imposed limitations upon rapid signaling by the ordinary methods. By a recent improvement Mr. Delany has succeeded in utilizing the static charge in the production of signals on the receiving tape.
There are two leading questions which must receive brief consideration here. First, what are the points of practical superiority in the Delany system? Second, if it is so extremely valuable, why has it not been adopted by the telegraph companies?
Replying to the first question, technical features are involved, which, however, it is perhaps advisable to pass over for the present. The practical aspects of the subject are just now of most importance. The one great feature of the system is the extreme speed of operating with reliability and accuracy. The second is the relative cheapness of line construction, maintenance, and operation.
The points of superiority of the Delany system over its nearest competitor, the Wheatstone, are these: More certain legibility of signals. Simpler mechanism, not liable to derangement, well adapted to army work in the field. Improved methods for handling a large volume of business. It will work without repeaters from New York to San Francisco. The receiving instrument is controlled by the operator at the sending instrument. The transmitter increases the efficiency of ocean cables.
The invention is a result of gradual development of a fundamental principle. The inventor is not only an expert practical telegrapher, but he is a member and ex-vicepresident of the American Institute of Electrical Engineers, member of the Franklin Institute, and the inventor of numerous telegraph devices His synchronous-multiplex system, whereby 1 wire is made to carry 6 messages simultaneously, one way or in opposite directions, has been in use by the British post-office for 15 years, and his system for cable transmission holds the record for high speed over Atlantic cables.
When it is considered that a great item of cost in ordinary telegraphy is the construction and maintenance of a large number of wires, it will be understood that if the practical speed of working is greatly increased, the number of wires or the amount of copper could be correspondingly reduced, with great resulting economy. Let me give one illustration of this from high authority. Mr. Norvin Green, formerly president of the Western Union, stated that the introduction of the "artificial” or "phantom" circuits of the quadruplex represented in value to that corporation $10,000,000. The quadruplex is used only on a comparatively few circuits, and it does not quite double their practical duplex efficiency. These are large figures, but a simplex Morse operator, sending at the rate of 15 words a minute, may monopolize a line which cost $20,000.
When we come to the Delany system, however, the economy is enormously greater. For while the quadruplex sends an average of 60 words a minute with eight operators, four sending and four receiving, and the Wheatstone automatic 125 words, or, if duplexed, about 200 words, the Delany sends over a single wire 1,000 words a minute for a distance of 1,000 miles. In other words, one Delany wire is equal to 60 wires worked simplex or to about 20 wires quadruplexed, and it operates 8 times as fast as the Wheatstone.
The money-earning capacity of a line which is able to carry messages at a speed of 1,000 words a minute demonstrates the desirability of speed for economical working. If we take 10 hours of constant operation for business and social messages and allow 20 per cent of the time for manipulating the apparatus, the practical working result will be 800 words a minute.
Assuming messages to comprise 50 words each, 16 messages could be sent each minute. For convenience, we will say 15 messages a minute. In 10 hours this would amount to 9,000 messages, which at 15 cents each would yield a gross income of $1,350.
An estimate of the profits of a line between New York and Chicago, fully equipped, at an assumed cost of $1,000,000, will indicate the immediate possibilities. This line is supposed to have two wires, with a speed capacity of 1,000 words a minute each, one for sending and one for receiving.
We will suppose these wires are operated at a speed of 500 words a minute each way, and that 15,000 messages of 50 words each are transmitted every day of 12 hours. The present telegraph business between the two cities at 40 cents for 10 words is 12,000 messages a day. Therefore, the estimate of 15,000 50-word messages at 15 cents each is conservative.
15,000 messages, at 15 cents, $2,250 a day, for 300 days
$8,000 117, 000
There is reserve capacity on the line. Only one-fourth of its working capacity is utilized. Press dispatches will occupy some of this. But no account is here taken of business from intermediate cities.
The figures do not include expenses of administration.
The question has been asked, How much cheaper can the Government conduct the telegraph service than the present corporations? I have not attempted to estimate that in a specific manner, but the select committee on the telegraph in 1870 estimated that the annual saving would be at least a million and a half a year. The receipts of the telegraph companies are now four times what they were in 1870, so that the saving under Government would be very much greater, without any improvement whatever in technical operation. It is probable that, taking account of dividends upon watered stocks alone, after deducting the probable value of the line equipments