The Empire and the century/The Nerves of Empire
THE NERVES OF EMPIRE
By the HON. GEORGE PEEL
'These submarine lines are the true nerves of the Empire; they are the nerres by which all these Colonies are brought into simultaneous action with ourselves.'—Secretary of Treasury, Speech in House of Commons, May 22, 1900.
Everyone agrees that the telegraphic communications of the Empire should be as cheap as the circumstances of the case allow, should be efficient in point of speed and accuracy, and should be controlled by ourselves. It would be a waste of words to establish these obvious propositions, and accordingly I shall confine the following observations to a consideration of the Imperial policy best calculated to preserve, or to secure, such desirable results. Let me examine, then, the connections between Great Britain on the one hand, and the most important of her Colonies and possessions on the other; the connections between these Colonies and possessions, inter se; and also the connections between the British Empire as a whole and foreign nations. From the mere statement of the facts, certain conclusions will suggest themselves naturally, while hasty and ill-considered opinions will similarly disappear. There are twenty British cable companies. They own about 121,000 miles of cable. The market value of their capital is £22,300,000. I touch, therefore, upon a great and weighty subject.
Great Britain and Canada.
Europe, including Great Britain, is united to the North American continent by no less than sixteen cables. The actual cost of the most recent British cable laid across the Atlantic from Ireland to Newfoundland was £450,000, which works out at a cost of £220 per mile. This was, indeed, a somewhat expensive cable. The Pacific Cable Committee of 1897 reported that the average cost of cable in round figures was £200 a mile (Blue-book C. 9247; Report of Pacific Cable Committee, paragraph 54, dated January 5, 1897). But prices fluctuate, and the figures are only quoted with the object of showing how great a capital outlay is entailed in cable enterprise.
Besides the initial cost of a cable, there is the cost of its maintenance, repair, and replacement We have to consider not only the natural causes of decay, but also damage from external causes. No doubt the causes of faults and breakages, as well as the cost of repairs and maintenance, vary in every sea and with every cable. In the deep waters of the Atlantic 'the cost of the repair of a submarine cable may be from £20,000 to £80,000.' For, though the bed of that ocean is usually of a nature favourable to cables, yet there is a danger arising from banks, due to the deposit of great blocks of rock brought down from Greenland into the North Atlantic by the icebergs. As the icebergs pass Newfoundland they sail into warmer waters and melt, so that for hundreds of miles a new Ireland is being formed down below. To give, however, a general figure, the cost of maintaining and repairing a deep-sea cable was put by the Pacific Cable Committee at £70,000 a year for a cable 8,000 miles long. This works out at £8 15s. per mile. That is a somewhat high figure, since it makes provision for two ships, when perhaps only one may be sufficient. Perhaps £6 per nautical mile is a safe figure. Of course, all such figures are somewhat speculative. I give them merely as warning to those who forget what a vast expense is incurred in laying and maintaining cables, and what enormous risks have to be run by private persons who embark on that business.
The reason for the singular multiplication of sixteen cables in the North Atlantic is mainly, of course, the profit to be obtained by conveying the immense volume of commercial messages passing between the United States and the European world. This accounts entirely for the five British and the seven American cables. Of the remaining four cables, two are French and two are German. The reason for the laying of these four latter cables has been rather political than commercial. In other words, the Governments of France and Germany have heavily subsidized these cables, in order to provide that their communications with the United States shall be independent of any landing-place within the British Empire.
The point, then, which merits attention here is that of the sixteen North Atlantic cables only five are British, and that these British cables have to encounter a severe competition from American, French, and German enterprise, aided in the two latter instances by the funds of the State.
The next important point is as regards the landing-places of these sixteen cables. No less than twelve of them start in Great Britain and land on the shores of Newfoundland or Canada. Of these twelve, all go direct from Great Britain to Canada except one of them, which lands at the Portuguese islands or the Azores on the way. Five are owned by two British companies, and the remaining seven by two American companies.
The further point, then, which merits attention is that the telegraphic communications between Great Britain and Canada are singularly ample and direct. The question naturally arises, Why are American cables allowed to unite Canada and Great Britain in competition with British cables? The answer is threefold: (a) American cables landing on British shores fall, ipso facto, under British control in case of war, and therefore can only add to our strategic resources. (b) Our five British cables, though landing in Canada instead of the United States, only do so because the speed of a cable varies inversely as the square of its length. Stated mathematically, if a cable of 500 miles gives a speed of 120 letters a minute, the same cable prolonged to 1,000 miles would only give a speed of 80 letters a minute. Hence the cables are landed in Canada or Newfoundland, as constituting a convenient half-way house on the road to the rich American traffic centres. It is by being allowed to collect a portion of that traffic in the United States by the agency of their American connections that our five British cables chiefly maintain their power to live. In return for this privilege allowed us by the Americans, we must grant the Americans the privilege of landing their cables in Canada on the way to Europe, (c) No doubt if the American-owned cables were beating our cables out of the field, it would become a question whether, in spite of the above observations, our Government should allow such cables to utilize British territory for that purpose.The next point worth noticing is as regards the tariff charged over the Atlantic cables. A message from London to Montreal costs Is. a word. Of this the Government of this country receives about ½d. per word for transmitting the message from London to Ireland, and for rental of land-lines leased to the companies. The Canadian land-line rate is about 2d. per word, and thus 9½d. is left as the amount actually received by the Cable Companies out of the total Is. rate.
Cable tariffs, like other things, have their history and evolution. Although the permanent connection with Canada was established in 1866, it was not till 1872 that the system of charging so much per word was introduced. The tariff then fixed was 4s. per word. From 1872 up to 1888 the changes in the tariff were most bewildering; in those sixteen years there were no less than thirteen changes of tariff. But at last, in 1888, it was fixed at 1s., and there it has remained ever since.
The cause of these frequent fluctuations has been the more or less fierce struggle waged in the Atlantic, with some intermissions, since 1868, when the French entered the field in rivalry with the British. In 1881 American rivalry began under the auspices of Mr. Jay Gould, and became formidable in 1884, when the Commercial Cable Company, also of America, began operations. Finally, in 1896, the first really serious State competition was inaugurated by the German Government, though the German cable was not opened until 1900. Under stress of competition the rate fell to 6d. in 1886 until 1888. But this was found to be ruinous, and the rate was raised to Is. in the latter year. Moreover, to mitigate the undue competition a 'pool' was formed, and still exists, between the two English companies and one of the American companies.
On the whole subject of our connection by cable with Canada there seems no reason for disputing the conclusion of the Inter-Departmental Committee on Cable Communications, which sat in 1902 under the presidency of Lord Balfour of Burleigh. 'The Atlantic companies,' it stated, 'have received no subsidies; they provide, under the influence of competition, an efficient service at a low rate, which they have attempted. though unsuccessfully, to reduce still further, and no complaints against them have been laid before us.'
It has, indeed, been suggested recently by the advocates of State enterprise or State socialism that the Imperial Government should lay its own cable or cables across the Atlantic to Canada. This singular proposal, if adopted, would play directly into the hands of the foreigner—e.g., of Germany. For, if our existing British-owned cables are to be competed with by our own Government as well as by Germans and others, their profits would entirely disappear. The cables would be taken up or abandoned, the British capital would be lost, and British private cable enterprise would vanish from the North Atlantic. The German companies, who live on their State subsidies, would occupy the field abandoned by ourselves. I cannot imagine, therefore, a more ill-judged proposition.
My conclusions on this branch of the subject, accordingly, are that British private enterprise—(a) at no inconsiderable risk to itself, and (b) in the face of a severe and increasing competition, has provided (c) a reasonably cheap and efficient cable connection with Canada, (d) receiving in return a not undue remuneration.
Great Britain and India.
Turning next to our connections with India, it is clear from the map that the most direct route to India is by land-line across Europe to Constantinople, thence across Turkey in Asia to Fao, at the head of the Persian Gulf, and thence by submarine cable to Karachi in India. This route actually exists. The latter section of it consists of cables owned by the Indo-European Telegraph Department of the Indian Government, running from Fao to Karachi. This route to India was opened as long ago as February, 1865, when the first telegram reached our great dependency; but owing to the peculiarities of Turkish administration, 'it has never proved a really effective route.' It is the dream, or perhaps more than the dream, of Germany to make it effective. But let us pass to the really operative routes.
The first really operative route to India is a cable running from Lowestoft to Germany; a land-line across Germany to Russia, and across Russia to Teheran in Persia; and thence a land-line to the sea, and a cable to Karachi. This route was opened in 1869. Though managed as far as Teheran by an English company, the Indo-European Telegraph Company, and from Teheran to Karachi by the Indian Government Department, it is owned in its German section by Germany. The Russian section is controlled by Russia. Thus, of the two direct land-line routes to India, the first is ineffective, and the second, though well managed, is at the mercy in time of war of two powerful rival Governments.
Clearly, the only solution of this problem was for British enterprise to construct a line of submarine cables to India. Private citizens proved enterprising enough to attempt the task. It was accomplished in 1870. The first cablegrams were transmitted to India in June of that year. But no sooner had the route been established than a serious difficulty arose. How could the cable compete with the land-line? The land-line is 4,800 miles long. The route by cable through the Atlantic, Mediterranean, Red Sea, and Indian Ocean is 6,700 miles long. To build the land-line costs about £680,000 with new poles, or, assuming poles to exist already for half the way, £435,000—that is, £100 per statute mile. Against this, to lay a single line of cable by the sea route mentioned would cost, with expenses of insurance, stations, apparatus, and maintenance ship, about £1,500,000, or about £220 per knot. Thus the land route is immensely cheaper to construct, besides being about five times as cheap to maintain. Clearly, then, from a purely financial standpoint, a cable to India could be put out of existence by the land-line. Accordingly, between the Eastern Telegraph Company and the Indo-European Company a severe competition arose. The fortunes of the fight were various. In 1875 the cable route was totally interrupted in the Red Sea, and the land-line had won for the time. In 1876-1877 the land-line was totally interrupted, and victory inclined to the cable. But commercial as well as Imperial interests demanded the existence of both lines, and in 1877-1878 what is known as a 'joint purse' arrangement was established between the two routes. According to this agreement the gross receipts of the Indian traffic, whether earned by cable or land-line, less outpayments, are paid into a common purse; the sum thus obtained is then divided. Nearly 60 per cent goes to the cable, and the balance to the Indo-European Company and the Indo-European Telegraph Department of the Indian Government Competition ruinous to the shareholders, which in no short time would have become ruinous also to efficiency, has thus ceased, to the advantage of all parties concerned.
The advantage of the joint purse was that, thus guaranteed, the cable company could live, and Britain could begin to command her own communications. Consequently, between that day and this, a splendid system of cables has been built up between ourselves and India. At first, in 1870, it was a single line, except that it was duplicated between Malta and Alexandria. Serious breaks occurred, and for safety it became necessary to duplicate the line. So cables were laid in 1878 from England to Portugal, and in 1877 from Port Said to Bombay. The line, which had thus been mostly duplicated for safety, had now to be triplicated to cope with the growth of traffic, and not only triplicated, but quadruplicated, by cables laid in 1888 from Port Said to Aden; in 1887 £rom England via Portugal to Malta; in 1891 from Port Said to Bombay; in 1897 from Vigo in Spain to Gibraltar; in 1898 by a direct cable from England to Gibraltar; and in 1899 from Gibraltar to Alexandria. This constitutes a line, if we are to omit indirect connections, triplicate in the Mediterranean and Indian Ocean, but quadruplicate in the Atlantic and Red Sea.
There was another remarkable feature about this line of cables: it became progressively under British control So long as Egypt was in hands other than our own« Egypt was its weak point. Time And Lord Cromer have brought a remedy. Again, up to 1898 all our cables landed either at Vigo in Spain or at Carcavellos in Portugal There was little reason against this arrangement, certainly so far as Portugal was concerned. For we should not go to war with Portugal, and if we went to war with any other Power, Portugal, being a neutral Power, might preserve the cables landed on her shore intact against a belligerent. Nevertheless, for further security, a special cable, as mentioned, was laid in 1898 direct from here to Gibraltar and thence to Malta, at a cost of £806,000, while a land-line across France, over which the bulk of the Indian traffic used to pass to Marseilles, and thence by cable to Malta, was given up. An all-British connection was thus successfully established.
Against these high advantages conferred by the joint purse arrangement, there was a drawback, however. In the closing years of the nineteenth century, the time appeared to have come for reducing the rate to India. The system of charging so much per word had been established in 1876, the rate fixed being 4s. 6d. per word. In 1886 it was reduced to 4s. 0d., and remained at that figure. The number of words constituting the Indian traffic was singularly stable: 2,077,000 words in 1880, and 2,111,000 words in 1899. But about 1897 a certain increase began to appear in the number of words, which had risen to 2,457,000 in 1900. The prosperity of India was the cause of this growth. The companies thereupon agreed to reduce the rate to 2s. 6d. per word, and on May 22, 1900, the Secretary of the Treasury announced in the House of Commons that 'it is practically arranged that there should be at once a reduction to 2s. 6d., and if the 2s. 6d. rate brings in a certain number of messages, that rate will shortly be reduced to 2s. 0d.' It was, however, not until March 1, 1902, that this reduction was effected. What was the obstacle?
A certain article in the joint purse agreement provided that no alteration of tariff was to be made without mutual consent of the three contracting parties, one of which was the Indo-European Company. It now appeared that, under the terms of its concessions from Russia and Germany, that company cannot consent to any alterations of tariff, except with the consent of those Governments, and as these consents were withheld, Germany and Russia blocked the way to any reduction of rate between Britain and India. After long and complicated negotiations, the opposition of Russia and Germany was overcome by their being, broadly speaking, guaranteed against any loss in which they might be involved owing to the reduction of the rate, and finally, in March, 1902, the rate was reduced to 2s. 6d.
The receipts from the traffic between India and Europe and America, which in 1879 had been about £320,000, had risen very slowly up to an average of £352,000 by 1900. In view of the great capital outlay involved in the laying of new cables during that interval, this was not a high return. The reduction of tariff then arranged might mean a considerable reduction—at any rate, for a term—even in this revenue, such as it was. So the Indian Government agreed that if the receipts now fell below the 'standard revenue' of £852,000, India would make up one-third of the deficiency, provided this one-third did not exceed about £40,000 in any one year. If, however, the standard revenue was maintained, then the rate in due course was to be further reduced to 2s. 0d, This was done in the autumn of 1905. The rate to New York, which has been driven down to the lowest payable point by competition, works out at 3·4d. per 1,000 miles, while the cable rate to India, deducting the terminal rate paid to the Indian Government, works out at 2·55d.
The seas through which the cables pass from England to India are, on the whole, fairly well adapted to cables. Reckoning anything over 1,000 fathoms as deep sea, the Atlantic, the Mediterranean, and the Indian Ocean are deep seas in the parts mostly traversed by this route. Deep sea suits cables, because the globigerinous ooze deposited in those depths covers and protects the wire, though faults and breakages are by no means unknown in such depths, the causes of which are somewhat obscure. On the other hand, the Red Sea is shallow, and so are the waters near Malta and Gibraltar. The danger of a shallow sea is that tides may reach the bottom, scour the rocks, and chafe the cable till it is broken. Besides, the anchor is the enemy of the cable laid in a shallow sea. Another danger is the south-west monsoon blowing for several month each year in the Indian Ocean. This prevents the mending of the cable during that period.
Meanwhile, subsidiary to this main line, a multitude of short cables began to radiate from the trunk route, uniting every important European nation. 'Concessions from foreign Governments and understandings with foreign companies were obtained which the Imperial Government could never have secured.'
From 1870 to the present time, Germany, Spain, Portugal, Morocco, Tunis, France, Italy, Austria, Greece, Tripoli, Crete, Cyprus, Turkey, and Russia have allowed British capital and British enterprise to connect them with our system, in complete reliance upon the proved international uprightness and fair dealing of our citizens. It is sometimes said that the Imperial Government should buy up British cables and manage them itself. But, obviously, if the main route were State-owned by us, foreign nations would seek their own connections, to the detriment of the British capital sunk in all these subsidiary cables, and to the detriment also of the important influence indirectly entrusted to us under the present system. Indeed, the talk and writing in this strain indulged in occasionally here has already had a bad effect abroad. Germany, becoming anxious for an independent connection, has established a land-line route to Kustendji on the Black Sea, and has laid a cable thence to Constantinople. From Constantinople she has planned a route across Turkey in Asia to the Persian Gulf, and so on to the East. Similarly, France has contemplated a line from Marseilles to Jaffa in Syria, thence to the Gulf of Akabah, and so down the Red Sea to Madagascar southwards, and Cochin-China in the East. 'We wish to say,' said the Cable Committee of 1902, 'that we are strongly opposed to any scheme for the general purchase of private cables by the State.… No serious attempt has been made to prove that submarine cables would be more efficiently managed by the State than by private companies, and we ourselves are decidedly of a contrary opinion. Many of the cables touch on foreign territory, and it is evident that serious difficulty might arise if the British Government endeavoured to work them by its own operators.'
Nevertheless, the same Committee felt it to be its duty to add that the cable communications between Britain and India are not strategically satisfactory, as long as a cable is not laid by the Eastern Telegraph Company from Southern India to Cocos, a British island south of India. From Cocos a cable runs to Australia in one direction, and to South Africa in the other. Thanks to these all-British routes, India would escape being cut off if both the European land-lines and the cables in the Mediterranean were cut.It should, however, be added that India is already connected with Australia viâ Java. From Australia two all-British routes go to Britain. That consideration modifies, to some extent, the urgency of the need for the Cocos route.
Great Britain and the West Indies.
Directly south of Halifax in Nova Scotia lie our West Indian possessions. Halifax is united by cable with Great Britain, and from Halifax a line of cable runs via Bermuda and Turks Island, which are both British possessions, directly to Jamaica. Since Jamaica is the most important of our islands in that region, and is in close touch with the others, strategic requirements appear to be reasonably satisfied by this all-British connection.
The Cable Committee of 1902 did, indeed, report that 'the Admiralty have for some time advocated the construction of an all-British cable to St. Lucia for strategic reasons, and in our opinion it is highly desirable that such a cable should be laid.' This cable would have run direct from Jamaica to St. Lucia. It has not been constructed because, since that time, the views of the Admiralty have totally changed, the important works at St. Lucia have been stopped, and the policy of the Empire has been turned towards the withdrawal of our naval forces from Halifax, Bermuda, and the West Indies, so as to admit of concentration elsewhere. In these circumstances, the existing Halifax-Jamaica line, built under subsidy from Halifax to Bermuda in 1890, and from Bermuda to Jamaica in 1898, appears adequate to the needs of the case. The agreement for the construction of the latter section provided that the rate to Jamaica from Britain is not to exceed 8s. a word. That is the existing rate. The previous rate was 5s. 10d., which rate and other West India rates were reduced in 1898.
But while the strategical position is fairly satisfactory, the commercial situation is not The West Indian Islands, stretching like a twisted cord from the point of Florida to the mouth of the Orinoco, are owned by several nations. But their resources, with the exception of those of Cuba, are so limited that one set of cables under one control would amply suffice for them, uniting them to each other and to the North and South American continents. Instead, there are four companies, or six, if the two companies working the Halifax-Bermuda-Jamaica line be included.
The only line, however, which needs our attention is that duplicate sequence of cables, given on the accompanying map, owned by the West India and Panama Company, and running from Jamaica right through our British Islands to Demerara on the South American continent. It is a British company, and unites all our possessions with Jamaica through the medium of Porto Rico, owned by the United States, and of a pair of small Danish islands. It also touches at the French islands of Guadeloupe and Martinique. A few words must be devoted to its manifold misfortunes. It is the Job of cable companies.
To begin with, Cuba provides the bulk of the West Indian traffic, but Cuba is now a republic under the dominion of the United States, so that the West India and Panama Company has never benefited from the Cuban traffic, because the natural outlet for that traffic is through Florida. Next, there is French competition. A line of French cables, largely subsidized by the State, unites New York to San Domingo, and from San Domingo radiates on all sides, south, east, and west to Venezuela, Cuba, and the French possessions of Martinique and Guadeloupe. Such, to begin with, is the serious competition with which the West India and Panama Company has had to contend since it linked up our islands in 1871.But these evils from outside sources are as nothing compared with the domestic evils from within. The cables from Trinidad to Demerara are constantly deteriorating in the peculiar mud of that sea-bed. Elsewhere the sea-bed is volcanic and destructive to cables. The cable-ship was lost in the cataclysm of St. Pierre. The West Indian Islands, themselves impoverished, constantly diminish the subsidies which they pay to the Company. The French Colonies of Martinique and Guadeloupe have transferred their subsidies, naturally enough, from the British to the French cable company. The traffics are miserable—16s. a day to and from St. Vincent, and 50s. a dav to and from Grenada.
The action of the State in causing a heavily subsidized cable to be laid in 1898 from Bermuda to Jamaica not only deprived the West India and Panama Company of a large part of its Jamaica traffic, but also penalized it in another manner, in virtue of its existing traffic arrangements with the companies carrying traffic to the United States. The company pays nothing on its ordinary stock, and only part of the dividend on its preference stock.
There is a good deal of instruction to be drawn from the above facts. People who urge the State to compete in laying cables against its own private citizens forget that this may result in the ruin of the private enterprise, already hard pressed by foreign rivals; so that the State itself will have eventually to embark upon that business at great expense. It is to be hoped that such an outlay of public money may be avoidable in this case. 'We do not think,' said the Cable Committee of 1902, 'that the remedy lies in Government intervention. The real obstacle to the prosperity of the West Indian companies is the lack of through traffic, and we anticipate that the problem will ultimately be solved by treating the West Indian cables as part of a larger whole.'
Great Britain and Africa.
No sooner had the cable route to India along the north coast of Africa been established in 1870 than British enterprise began to turn its attention southward to the problem of communication with our African Colonies. But the risks and cost of that enterprise were so serious, and the traffic likely to be obtained so small, that it was found impossible to act without State assistance. Years passed, and nothing could be arranged. At last, at the crisis of the Zulu War, the Colonial Minister, Sir Michael Hicks-Beach, in February, 1879, announced 'the excessive and urgent importance upon political and military, as well as commercial grounds,' for cables to Natal. He added that 'it is useless, and would be wrong, for us to wait in the hope that such communication should be established by private enterprise, and it would be right for the country to take some share in the burden of establishing it upon itself.' A line of cables was accordingly laid in 1879 from Aden down the East Coast of Africa to Natal, touching on the way at Portuguese stations. The Imperial Government agreed to pay £35,000 a year for twenty years, receiving in return a rebate to the extent of one-half the ordinary tariff on its official messages. The Governments of Natal, Cape Colony, and Portugal also gave subsidies on similar terms. As an instance of the risks of cable-laying, it is worth mentioning that the section between Zanzibar and Mozambique had to be duplicated at the cost of £117,000, owing to breaks constantly caused by the Rovuma River.
To confine attention to the East Coast, this line, so far as regards the portion between Zanzibar and Durban, was gradually duplicated. In 1898 a cable was laid under subsidy from Zanzibar to Seychelles, and thence to Mauritius; and next Mauritius was united to Durban in 1901. Thus, the line is duplicated, except from Aden to Zanzibar, and is entirely all-British, viâ Durban-Mauritius-Seychelles-Zanzibar-Aden. Branch-lines unite certain French and German possessions in those regions to our main line, and the international character of our cable enterprise is preserved, while all-British communication is also provided.
The growth of the cable system on the West Coast of Africa has been somewhat complex. By 1870, as already stated, Lisbon had been united to Britain. By 1874 a line of cables had been run from Lisbon to the Portuguese stations of Madeira and St. Vincent, and so on to Brazil. Thus by 1874 we had cable communication already well advanced down the coast of West Africa from Britain to St Vincent The next step was to unite St Vincent with our Colonies on the West Coast of Africa, but this was not so easy as might appear.
On the shore immediately opposite to St Vincent the Colonies of Portugal, of France, and of England lay almost inextricably intermixed. By the year 1886 these Colonies were joined up to each other, and the whole united by cable to St. Vincent But to us this was unsatisfactory on two grounds: this system was mainly controlled by France and Portugal; and, next, it was so arranged that our Colony of Sierra Leone, for instance, could only communicate with the outside world through Conakry, a French possession. The situation called for the exercise of the powerful will or genius of the late Sir John Pender, who now secured the interests of England on this, as on so many other occasions.
Under his direction a transformation-scene occurred in 1886. The cable uniting St. Vincent to the mainland was bought and taken direct into our Colony of Bathurst, and forthwith a British cable was laid, under subsidy, from Bathurst to Sierra Leone, thence to Accra, and thence to Lagos, Brass, and Bonny. All these were British Colonies, and the question had thus been solved.
If the first transformation-scene in the West African system occurred in 1886, the second occurred in 1889. Bonny, as already stated, was the British station nearest to the Cape, and the cable had reached it already. But in 1889 a cable was laid thence to Principe, a Portuguese island to the south. From Principe a cable already ran to St. Thome and Loanda, and the control of this latter line of cable had already been acquired by us. Finally, from Loanda, in the same year (1889), a line of cable was laid viâ the Portuguese possessions to Cape Town itself. The great achievement had now been executed of a duplicate line, laid on either side of Africa, to Durban on one side and Cape Town on the other.
To revert to our West African Colonies, the rates to these have been high. The Cable Committee of 1902 reported against these rates, and these alone in the whole British Empire: *We are not prepared to say that any of the existing rates are excessive, with the exception of those to the Gold Coast and Nigeria.' These, however, have now been reduced. For instance, the rate to Sierra Leone, originally 6s. 9d., has been reduced by successive stages till it stands, according to the reduction of July, 1904, at 3s. 6d. Correspondingly with other rates.
There were two main reasons for these high rates. The expenses on that coast are heavy. Owing to its terrible climate, three operators have to be provided where two would suffice elsewhere. Then the cables lie near the shore, and are liable to be broken or to deteriorate more readily than deep-sea cables. The Congo River has constantly broken the cables, like the Rovuma River on the East Coast. Finally, though there was a brief-lived gold boom in 1901, the traffic of a country so undeveloped and so deadly to the white man is necessarily of a limited character. So, in spite of these high rates, the dividend on the ordinary stock of the West African cable companies averaged only 2½ per cent for the last five years of the nineteenth century.
Here, too, foreign competition has shown its strength. France, anxious, like ourselves, for an independent connection with her Colonies, has laid a cable direct from Brest to Dakar, whence a cable runs to Conakry. From this point there is internal communication by land-line to her other West African possessions. This is not all. France has planned a line of cables vi& Marseilles, Oran, Tangier, Cadiz, and Teneriffe to Dakar and St, Louis. The section from Cadiz to Teneriffe, however, is Spanish.
Nevertheless, though the line to South Africa had thus been duplicated'm 1889, even this position, as time passed, began to appear inadequate to the organizers of British cable enterprise. Should they duplicate the existing East Coast or West Coast route? In either event, at any rate, the cable, however expensive, would run into existing stations, and could be served and repaired by the existing ships. But, after mature deliberation, strategical conquered commercial considerations, the needs of the public, however costly, outweighed private interests, and they resolved to undertake the vast expenses of a new route. In 1899-1901 they laid a fine direct from England viâ Madeira, St. Vincent, Ascension, and St. Helena to the Cape in time to meet the requirements of the South African War. I well remember when in Ascension and St. Helena, shortly before that date, the enthusiasm with which the inhabitants of those remote outposts received the news that they were to have a cable. This line was nearly 7,000 nautical miles in length, and cost £1,400,000, or about £200 a mile. For a small subsidy a cable was laid to Sierra Leone from Ascension, thus providing another independent connection with our West African Colonies.
The African Connection.
About the same time (in 1901) the cable was laid fix)m Durban to Mauritius, and thence continued by an all-British route to Australia, thus furnishing another strategic route home from the Cape. Broadly speaking, therefore, South Africa is now possessed of four good routes to Britain, namely, two on the West Coast, one on the East Coast, and one viâ Australia.
Simultaneously with this large capital expenditure efforts have been made to reduce the rate to South Africa to the lowest possible figure. From its old figure of 8s. 11d. it has been reduced by successive stages to 2s. 6d. per word. Resort has been had in this case, as in that of India, to the system of 'standard revenue.' In other words, it having been decided that £300,000 was a fair return on the capital expended on African cables, it was settled that, subject to that receipt being realized from the messages, the rate should be reduced by successive stages to 2s. 6d. This latter figure is the actual rate. A subsidy was arranged at the same time, but this has not been operative since the last revision of the agreement in 1901.My conclusions upon this part of the subject are as follows: (1) Originally the risks of joining up South Africa were so great, and the derivable profits so small, that the State had to help with subsidies. These subsidies, however, are soon expiring. (2) Then the famous gold boom began, and the expansion of traffic thus caused has enabled a splendid quadruplicate system to be built up, uniting South Africa with the outside world. (3) In the future, foreign competition from Germany and France may be expected on both sides of Africa, and, indeed, has already begun on the West Coast. (4) In the future also South Africa may enter, as already appears to be the case, upon a period of stagnation, as is the case with Australia. (5) In all the circumstances, the time may be approaching when, in the words of the Cable Committee of 1902, private enterprise 'may require support,' although at present 'the competition to which we have alluded has not yet reached an acute stage,' and although, I may add, it is to be hoped that South Africa may recover her prosperity.
Great Britain and Australasia.
But perhaps the greatest achievement was to connect Britain with Australasia. In 1870, while India was being joined up to Britain, a single line of cables was laid from Madras to Penang and Singapore, and thence to Batavia, in Java. In 1871 a cable was laid from Banjoewangie, in Java, to Port Darwin, on the north coast of Australia, completing the connection. This was a length of 8,500 miles, and cost slightly over £1,000,000, or about £280 a mile. Unfortunately, the centres of Australian population are in the south, and so a land-line of 2,000 miles had to be laid overland, across the deserts, from Adelaide to Port Darwin, in order to unite the principal capitals of Australia with London. This was accomplished in 1872, and Sir Charles Todd, the Postmaster-General of South Australia, deserves great credit for the resourcefulness and perseverance which he displayed in overcoming the many difficulties and delays encountered during the construction of this long land-line. I have seen him at one end of his land-line in Adelaide, and sent him a message from Port Darwin at the other.
No duplicate cable was laid as yet from Madras to Penang, but the sections from Penang to Port Darwin were duplicated in 1879-1880. There were two reasons for this duplication. The land-line across Java from Batavia to Banjoewangie worked badly, so that an alternative line had to be laid direct from Singapore to Banjoewangie. Next, 'between Singapore and Penang there were frequent interruptions,' as well as in the volcanic region between Banjoewangie and Port Darwin. Such are the dangers and expenses of cable enterprise. These cables, however, fortunately cost less than the former ones, or at the rate of under £220 per mile. This duplicate line was subsidized by some of the Australian Governments most concerned.
As time passed four important further steps were taken to strengthen the connection between India and Australia. First, in 1889, after negotiation with the Colonial Office, the section between Java and Australia was triplicated by a line to Roebuck Bay. Next, in 1891, the Madras-Penang section was duplicated. Then, in 1892, the line was triplicated between Penang and Singapore. Lastly, in 1894, the Netherlands-India Government assigned a special wire, worked by British operators, between Batavia and Banjoewangie for the special service of the international traffic.
Much had thus been done, but more remained to do. As time passed, the originators of this enterprise felt their work to be incomplete. There was the long landline through Australia. All traffic had to transit Java, a Dutch possession. The existing route was not only circuitous, but passed over a volcanic region, so that in 1888, and again in 1890, communication with Australia was wholly cut off. For these and other reasons they proposed, in March, 1897, to lay a cable from South Africa direct to Australia. This would bring in no fresh traffic. It would be immensely expensive. It would need costly stations to be built at Mauritius, Rodrigues, Cocos, and Perth on the way. It would require a considerable additional staff of highly-trained operators. It would necessitate the proximity of a ship to effect repairs. But, against all this, the Admiralty recommended the route strategically, and efficiency demanded it. It was laid, without subsidy, from Durban to Perth, in West Australia, in 1901; and in March, 1902, a cable was carried from Perth to Adelaide, right into the heart of Australia. The total cost was £1,750,000.
It was at this juncture that a most severe blow was inflicted upon British cable enterprise. The British Government, in combination with the Governments of New Zealand, Australia, and Canada, initiated, in December, 1902, a State-owned cable running from Australia to Canada, viâ Brisbane, Norfolk Island (whence a branch ran to New Zealand), Fiji, Fanning Island, and Vancouver. The length was nearly 8,000 miles, and the cost nearly £1,800,000, or at the rate of £225 a mile. The capital was raised at a cheap rate by the British Government, and the four Governments concerned agreed to share the loss or profit of the undertaking among them. It was decided to run it as 'a competitive line against the existing British private enterprise; and a Government Committee, composed of four Colonials and only two Englishmen, declared that, 'actuated by extreme caution,' they hoped to abstract upwards of one-half of the entire Australasian traffic from those British citizens who, during thirty years, had risked over £8,000,000 of British capital in obtaining it. No wonder that in June, 1901, the British Treasury declared itself * opposed to the venture. Nevertheless, to quote the same authority, 'opposition was overcome by various other countries interested.' At this point I must make a digression as to the Australian rate. It has a considerable bearing on the sequel.
As regards the rate to Australia, the system of charging so much per word was introduced in 1876, and fluctuated at first between 10s. 6d. or 10s. 8d. per word. In 1886 it was reduced to 9s. 4d., and thence to 4s. in 1891. Most of the Australian Governments, together with New Zealand, united to guarantee one-half of any loss of revenue which might arise from this latter reduction. The loss was, in fact, heavy, since it is but seldom that the telegraphing public responds early and adequately to reductions of rate. Consequently, in 1898, at the urgent instance of the guaranteeing Governments, who smarted under their share of the loss, the rate was raised to 4s. 9d. At that point it remained till 1900, when it was reduced to 4fS. At the same time, further future reductions were arranged, subject to the continued receipt of a minimum or standard revenue, as in the case of India and South Africa. Accordingly, at the opening of 1901 the rate was reduced to 8s. 6d., and to 8s. at the opening of 1902. This is the existing rate.
There is an instructive lesson to be derived from the facts of the Australian traffic. In 1896 the total number of words passing between Australasia and Europe and America was 2,225,000, and the yield to all parties concerned £383,000. In 1899 the rate had not been changed in the interval, and the words were 2,149,000, or practically the same. In 1902 the tariff had fallen from 4s. 9d. to 8s., or a reduction of 37 per cent It might have been expected that this would have immensely stimulated the number of words sent. By no means. In 1902 the number of words was 2,358,000; the yield in 1902, owing to the reduction of rate, being only £246,000, as against £383,000 in 1896. This demonstrates that reductions of rate do not necessarily produce increases of traffic. It was in December, 1902, after these serious reductions and losses, and when great increase of capital outlay had been undertaken by private enterprise, that the British Government entered the field against its own citizens.The result was, of course, disastrous. In 1908 and 1004 almost all the profit from the Australasian cables owned by private persons, and constructed after thirty years of labour and thought, was swept away. On its side, the British Government, with the Colonial Governments concerned, realized a loss of upwards of £200,000 on the working of its Pacific cable. Such are the results when Colonial financiers, acting with 'extreme caution,' direct the policy of the Empire! Meanwhile, a few words must be said as regards the connection of Tasmania and New Zealand with Australia.
A cable was laid between Tasmania and Australia so far back as 1869. It was duplicated in 1885. These cables have been laid by a British private company under a Government subsidy, the Tasmanian Government retaining the right to regulate the rate, which is now ½d. a word, in return for a guarantee of traffic revenue. But these arrangements expire in 1909.
New Zealand was connected to the mainland by cable in 1876 under a ten years' subsidy. Though this had expired in 1886, the British company, in 1890, duplicated the line, and further, to meet the needs of the case, reduced the tariff in 1898 from 8s. 6d to 2s. 0d. for ten words, the Government agreeing to bear three-quarters of any loss that might result. The loss was so serious that in 1895 the Government cancelled the above basis, and agreed to guarantee the sum by which the receipts should fall below £20,000 a year, provided that the amount payable did not exceed £9,000 in any year. This arrangement ended in 1900. In that year the company established a rate of 3d. per word. In 1902 the company was earning about 1·17 per cent, on the £450,000 invested in New Zealand cables. In that year British and Colonial Government competition, by the opening of the cable from Brisbane to Norfolk Island and New Zealand en route to Canada, reduced this modest yield by one-half.
My conclusion on the Australasian section of this subject is that British cable enterprise, while contending in all parts of the world against foreign rivalry, has received, in Australasia and the Far East, its severest blow from the Imperial Government, a policy directly contrary to the advice of the Committee on Cable Communications of 1902.
Great Britain and the Far East.
By the words 'Far East' I mean ten political aggregates: the Malay Peninsula, the Dutch Indies, Siam, North Borneo, Indo-China, China, Korea, the Philippines, Japan, and the Pacific Islands. It is impossible to explain the cable position in that vast region without a few words upon the factors governing its trade and politics, for trade feeds and politics regulate the number and nationality of the cables.
(a) Viewed very broadly, the foreign trade of the majority of those countries is less expansive than enthusiasts suppose. As the best authority. Sir Robert Hart, has said, 'China needs neither import nor export … the sanguine expectations … have never been realized.' The Chinese have the best food, rice, the best drink, tea, and the best clothing, cotton, silk, and fur, so that foreign trade is not a necessity to them. Similarly with several of the other Eastern peoples.
(b) Another great obstacle to trade expansion has been, and still is, currency. I find that the gold exchange of the silver Haikwan tael fell steadily, with the exception of five short upward fluctuations, from 6s. 6d. in 1870 to 8s. 8d. in 1894. In the next ten years, up to date, it has fluctuated violently, but, on the whole, in a downward direction, attaining its minimum of 2s. 4¾d. in March, 1908. If silver, the wholesale currency, thus varies in relation to gold, so copper, the currency of the people, varies in relation to silver. Hence a double-lever state of disturbed equilibrium exercising a prejudicial effect on foreign trade.
(c) Against this, no doubt, is the miraculous expansion of Japan with her gold standard. It would seem from the Japanese trade returns that her foreign trade doubled decennially from 1868 to 1888, and septennially since then. Thus her trade, which was £2,700,000 in 1868, was £54,000,000 in 1902, and, reckoning at the same ratio of progress, will be £109,000,000 in 1909. But here, again, the adverse point for Englishmen is that Asia will deal principally with the Asiatic. Dividing up the Japanese imports and exports into Asiatic, European, and American, the Asiatic come easily first, while the American and European about balance each other. But how, in the long-run, can we compete against the Americans, with their Philippine base, their Pacific seaboard, and their boundless resources?
(d) Assuming, however, that China and Japan, together with uie other Eastern nations, do maintain a fair trade with ourselves, the telegraphic route from the East appears to be either across the Pacific to America and thence to Europe, or else across Siberia by land-line and thence to Europe. But neither of these through routes is controllable by us. We can only run our cables down the coast of China to Singapore, and so home vi& India, a circuitous route.
(e) So far, then, the conditions of trade and the facts of geography in the Far East appear to suggest that (1) the expansion of its European trade may be limited and slow, and that (2) whether expansion be slow or fast, the nearest telegraph routes homeward are otherwise than British.
(f) The politics of the Far East point in the same direction as regards British cable enterprise. During the decadence of the Ming Dynasty two European nations established themselves in the Far East—Spain, since succeeded by the Americans, in the Philippines, and Holland in the Dutch Indies. The succeeding, and still reigning, Manchu Dynasty stopped further European aggression for two centuries, until the Treaty of Nanking in 1842. By the latter date the Manchu Dynasty, which had been, in the persons of Kangshi and Kienlung, more politic than the Moguls and more successful than the Cæsars, was decadent Since then feeble Princes have sat on the dragon throne. So France seized the south and Russia the north, and Germany acquired her existing possessions of 80,000,000 inhabitants in the centre of China. But Americans, Dutch, Germans, Russians, and French all want their own cables and telegraphs. Japan, and China herself, naturally emulate these exemplars. How was it possible for British citizens, now actively attacked and depleted by the Pacific cable enterprise of their own Government, to make headway against the conditions of trade, the facts of geography, and the ambitions of foreign nations thus briefly enumerated above?
Nevertheless, they have made a good struggle. It was in 1871 that British cable enterprise entered the Far East. In that year a cable was laid from Singapore to Cape St. James, near Saigon, in French Indo-China, and thence carried to our possession of Hong Kong. From that date till 1888, however, no more cables were laid by us on the coast of China, for at Hong Kong our passage up the coast was barred by a formidable rival, the Great Northern Telegraph Company of Denmark.
As soon as the Trans-Siberian route had been finished, connecting Russia by land-line with Vladivostok, this Danish company undertook to unite Vladivostok by cable with Japan, and Japan with Shanghai. Tins was done in 1871. As if this was not enough, they laid cables in the same year from Shanghai to Amoy, and thence to Hong Kong. The Asiatic coast was thus linked up continuously in 1871 from Vladivostok to Singapore, and the Danes had filled the area north of Hong Kong. In 1888 they duplicated their Vladivostok-Japan-Shanghai cables.
But as the years passed after 1871, it became more evident that, as the seat of government was in North China, the Danish company could not fail to exercise a preponderating influence with the Son of Heaven. Accordingly, ia 1888-1884, the British company decided at all hazards to make a move north, and laid cables from Hong Kong to Foochow, and thence to the Danish stronghold of Shanghai. I remember, when proceeding on the magnificent waterway of the River Min to Foochow, seeing the place where our cable, when first laid, had to be worked from a hulk in the river, owing to the refusal of the Chinese officials to provide a landing-place for so mysterious an intruder. In the same year, 1884, some cable-laying of minor interest was done by us for Portugal at Macao, and for France—Tonquin to Saigon.
Ten years again passed away, and meantime it had begun to be felt that Hong Kong was only imperfectly united to Singapore by a single line of cable, touching at the French possession of Saigon; so in 1894 a line was laid from Singapore to the British island of Labuan, off North Borneo, and thence to Hong Kong, providing a splendid all-British route.
So much for the main British cables on the actual coast of China. But this account does not quite exhaust the matter. In the year 1900 the Chinese Government became anxious to possess a line of cables from Taku, the port of Pekin, to Chefoo, and thence to Shanghai. The root of their anxiety was that foreign nations would lay those cables if they did not undertake it themselves. British interests coincided at this point with the interests of China, so we laid those cables on behalf of the Chinese Government This was not an insignificant service. The Chefoo-Taku section was duplicated next year. Hardly had this been done in 1900 than Chefoo became a most important centre, significantly enough, of foreign activities. Russia procured a cable from Chefoo to Port Arthur, and Germany a cable from Chefoo to Kiau-Chau, and thence to Shanghai. Britain herself arranged for a cable under subsidy from Wei-Hai-Wei to Chefoo. So far I have dealt with the great struggle which has been in process since 1870 for predominance on the coast of China and possession of the China traffic. Great Britain has not been beaten, though, of course, an overwhelming victory was impossible without more State support than that afforded by the British Government. But let us now step from the coast eastward into the waters of the Pacific. Here British private enterprise, now so sorely bestead by the competition of its own Government cable, has had to cope also with the strenuous rivalry and national ambitions of Holland, Germany, France, and America.
In the Dutch Indies Holland possesses one of the finest empires in the world. It was acquired by the Dutch early in the seventeenth century, when they evicted us wholly from that vast region, inflicting a blow from which we have never recovered in the Far East Since that date they have always looked suspiciously on England, and opposed her progress in those waters. It was this deep-seated feeling, stimulated by the Boer War in South Africa, and skilfully fomented by Germany, which has induced Holland to obtain cable connection with her Indies viâ America and the Pacific, in assertion of her independence of the British cables viâ India.
In accordance with this design the Dutch have laid cables from Java to Banjermassin, in Borneo. Borneo is traversed by land-lines, and thence another cable runs to Kwandang and Menado, in the north of the Celebes. Up to Menado these cables are wholly Dutch. At Menado, however, Holland has combined with Germany to lay cables to Yap, and thence to Guam, where a junction is effected with an American cable, to be mentioned later, which runs to San Francisco. Thus the much-desired independence of Holland has been effected, but only by exchanging the control of one nation ifor the control of two. These two, however, were, in her view, her friends.
From Yap, again, a German-Dutch cable, so-called, but purely devoted to German interests, runs to Shanghai. Thence a German cable, laid in 1900, goes to Kiau-Chau, the headquarters of the German Empire in Shantung. Thus Germany, too, has accomplished her desire of obtaining cable connection with the Far East independently of British cables.
The reason for this considerable success of Germany lay in her statesmanship. While the British Government is busy in competing with its own citizens, who in reality are fighting our battles in the Far East, Germany steps forward with a guarantee of traffic for the German-Dutch line of £76,250 a year, and persuades Holland to add another guarantee of £18,750 a year, making a total of £95,000 a year. I do not know whether those 'publicists' and 'Imperial thinkers,' of whom we have so many at home, realize that in urging our Government to lay cables against its own citizens they are, unconsciously no doubt, merely echoing the policy most desired at Berlin. For, clearly, every stroke at British enterprise, whether in the Atlantic or the Pacific, accrues to the profit of the Fatherland.
The next nation which cast eyes across the Pacific was France. The foundations of her Far Eastern Empire were laid in the eighteenth century. In the middle of that century we had evicted her from India after a struggle of a hundred years. Now she was determined to recoup that loss, and to find her Indies in the Far East. So, in 1787, Louis XVI. tried, by treaty, to acquire the protectorate of Cochin-China, and in 1789 a French army, commanded by a Bishop, invaded that country. After a struggle of another hundred years, the Franco-Chinese treaty of 1885 ratified her in possession. In the preceding year, to strengthen her strategy, she had procured a cable from Tonquin to Saigon; but from Saigon homewards the communications of her new Empire rested wholly in the hands of her old rival, England.
In order to remedy this danger, she built a cable from Tourane, in 1901, to Amoy, her policy being to proceed thence northwards and join hands with Russia. But this action was stopped by China, whose rights it infringed, and accordingly she now is turning her attention, eastward across the Pacific. Her plan is to lay a cable from Indo-China to the Dutch Indies, and so home viâ the German-Dutch and American cables to America and France.
But our most energetic rivals of all have been the Americans, who occupied the Philippines in 1898. That archipelago had previously been occupied for three and a half centuries by the Spaniards. In 1880 the British Cable Company arranged with the Spanish Government to lay a cable from Hong Kong to Cape Bolinao, near Manila, the capital of the Philippines. In 1897 a further step was taken. Immediately to the south of the great island of Luzon lie a number of smaller islands, the chief being Panay, Negros, and Cebu. These islands in that year were connected with the island of Luzon. I remember, when visiting those stations, in the profoundest depths of the Pacific, feeling that here was the utmost boundary and frontier, the ultima Thule, of British private enterprise.
But in 1898 the scene totally changed. For twenty years previous—since the negotiation of the treaty of 1878 with Samoa for an American coaling-station in the Pacific—the United States had been looking, ever more ambitiously, to the Far East. In 1848 she had evicted Spain from the Pacific slope: now she evicted her from the Philippines. Cable communication with the new American Empire was indispensable. Should the State undertake it, or should private persons? Her statesmen decided for private enterprise, and, accordingly, in 1908 the Commercial Pacific Company laid cables from San Francisco to Honolulu, thence to Midway and Guam, and thence again to Manila. The Philippine traffic, which previously had to pass wholly over the British cable to Hong Kong, now round an independent route direct to America. To tap the China traffic, the Americans further laid a cable from Manila to Shanghai.
Last new rival of all, Japan intends, naturally enough, to seek an independent connection in the direction of America, She has already her own cables to Formosa, and thence to Foochow, She is laying a cable to connect herself with Bonin, and thus with America.Prior to 1890 the China rate was from 7s. 1d. to 8s. 9d. per word, according to the different places touched on the coast. Now it has been reduced to 4s, 5d. uniformly, having fallen by three different stages. Of course, the British company carrying the traffic from China to Madras receive only a small proportion of this amoimt The Chinese take the large average terminal rate of 11d., and the Cis-Indian administrations take 2s. 2½., whilst India's share is 3½., or a total of 3s. 5d. Thus 1s. is left to the British company.
The lesson of the Far East is surely too obvious to need repetition. In that region, ss elsewhere, British cable enterprise is rivalled and assailed on all hands and in every quarter by foreign nations. It will survive if the British Government is reasonably friendly and helpful to its own citizens. But if the latter are to be competed with by their own Government, then our position, such as it is, in the Far East, will be fatally compromised. Our cables, become unprofitable, will be sold to our American and German rivals, and British enterprise will vanish from that ocean, which now, in the phrase of Gibbon, is the scene of the world's debate.
Commercial Codes and the 'Social Code.'
In discussing all questions of rates, it should be borne in mind that over 90 per cent, of messages transmitted by cable are commercial messages, and also that of these commercial messages 'somethmg like 95 per cent, are carried on by code.' Taking one of the small private commercial codes actually in use, I find that the whole code gives an average of 27·93 plain language words represented by one code word. Therefore, if the published rate, e.g., to India, is 2s., the actual cost to the merchant is only ⅞ of 1d. per word. For instance, the five code words, Crampoon, Acacia, Spring, Polvorillar, Rahtfen, represent a message which, if expressed in plain language, would consist of no less than 189 ordinary plain language words. This important fact should go far to modify criticisms as to the nature of rates.
As regards social messages, codes have hitherto been far less in use. An examination of ten pages of one of the most popular public codes of this nature, the A. B.C. code, shows that, on an average, nearly 5·95 plain language words are represented by one code word. But Sir John Wolfe Barry, Chairman of the Eastern Telegraph Company, decided a few years ago to afford the public considerably greater facilities than they had hitherto enjoyed as regards social messages. Accordingly he has arranged for the preparation of a social code of 16,000 words. A copy has been placed at each of the offices of the companies, in towns at home and abroad, in which they are permitted to deal directly with the public; and the officers of the companies have received instructions to assist the public in coding and decoding their telegrams. Also, wherever the companies deal directly with the public, receivers of telegrams are able to register their names and addresses free of charge. The full title of the volume is 'Viâ Eastern Telegraphic Social Code.'
The principles regulating the financial management of cables have almost always been widely misunderstood by the popular writers on such subjects. Indeed, I have heard an eminent statesman gravely rebuke the practice of maintaining large Reserve Funds. The maintenance of apparently large Reserve Funds is, however, absolutely vital. So fer from existing Reserve Funds being too large, when, in 1902, the Government inquired into the subject, it found that, taking the three leading cable companies, the reserve of one was 'about the right amount,' that of the next was 'considerably below what it should be,' while that of the third and leading company was 'barely half what it should be.' What, then, is the use and necessity of Reserve Funds?
Reserve Funds have three grounds of existence: The constant repairs in cables must be defrayed out of them. Next, after a certain number of years of life, a cable becomes unworkable, and, repairs being no longer . available, must be renewed out of the Reserve Fund. Thirdly, modem trade and strategy cry out for alternative routes of cables between points of importance. But alternative routes of cables create no fresh traffic between the points thus additionally connected. Hence, the new cables should be charged not to capital, but to reserve.
But a practical illustration is better than abstract statement. Let me construct from experience the finance of a cable system.
Certain cables were laid. Their length was 5,800 miles. The cables cost £1,154,000. The cost of the five stations on the route was £126,000. The total cost of laying was thus £1,280,000, or an average of £220 per mile.
No sooner was this done than it was found essential to duplicate this route. The new cables cost, like the first, £1,154,000. By a fortunate and unusual economy it was found possible to use all the existing stations of the first cable. They had to be enlarged and refitted at a cost of £82,000. Thus the total cost of the second cable was £1,186,000. The grand total for the two cables was thus nearly £2,500,000.
The annual outlay on the working of these two cables was as follows: Cost of working the five stations was, for the one cable, £88,700; add £8,000 for working the second cable. Total working cost £41,000. But to maintain a cable in good repair, experience directs to lay aside annually in reserve 2^ per cent, on the original cost of the cable. This, for two cables, comes to an annual allocation to reserve of £57,680.
Next, the cables will probably perish altogether in thirty years. Hence the need to carry to reserve another 2½ per cent, annually, calculated to replace the capital in thirty years. This means a further allocation to reserve of £52,550 annually. Total allocation to reserve £110,200.
Lastly, on a capital outlay of £2,500,000 a return of interest is necessary; otherwise no one would engage in so serious an enterprise. 'We remain firmly convinced,' said the Cable Committee of 1902, 'that it is of paramount importance to the country so to direct its telegraphic policy that the great network of Britishowned submarine cables which extends over the world shall continue to be remunerative to those whose enterprise has created it.' For the elementary fact is that otherwise business men would not lay new cables, but would take up and sell their existing ones. A fair figure for interest would be £150,000.
Thus we finally arrive at the conclusion that the two cables cost annually, and must earn accordingly: For working, £41,700; for reserve, £110,200; for interest, £150,000—total, £301,900; or, say, £300,000.
As regards the rate, let us assume, as the route is 5,800 miles long, a rate of 2s. per word. That means that to earn the above £800,000 a year there must be traffic over the cables to the extent of 8,000,000 words. This is an amount of words greater than the entire Australasian traffic with Great Britain, Europe, and America. Thus it is evident that if cable enterprise is to be conducted on anything approaching business Principles, reductions of rate are not to be accomplished y a mere stroke of the pen, and are, in fact, largely dependent on the prosperity of the communities connected by cable.
The only safe and practical method to reduce rates systematically, apart from any question of Government assistance, is for arrangements to be made that, subject to earning a fair return on the capital outlay, or in this case £300,000, the rates shall be reduced at stated periods. This method is already in satisfactory working order, as already shown in the case of South Africa, India, and Australasia. Under it great reductions of rate have been effected.
The Right Imperial Policy and the Wrong.
From this somewhat long and complex narrative the reader will now have been able to form his own opinion as to the real position of British cable enterprise in every region of the world. Without presuming to dictate to others, let me say that all the facts radiating and converging, as it were—whether from Canada, or the West Indies, or India, or Africa, or Australia, or the Far East—point to one and the same conclusion of the most vital import. That conclusion is that, whereas formerly British cable enterprise had to contend with few rivals, now it is actively assailed, and will undoubtedly be still more actively assailed in the future, by a host of able and ambitious competitors. That stem fact must dominate and direct our views as to what the policy of this country should be in this connection. I must state with the utmost deliberation and the utmost emphasis at my command, that if British cable enterprise is to be further competed with by its own Government, it will disappear from the oceans. If, while Germany and France use the funds of the State to subsidize and support German and French cables, Great Britain similarly uses her national credit, as is the case of the Pacific cable, against her own people, then British enterprise, hopelessly overweighted by such an overwhelming combination, will roll up its cables and sell them for what they are worth.
Turning from that policy as being utterly disastrous, there is a second policy to be considered—namely, that the State should acquire the cables of the Empire by purchase. The committee of 1902, presided over by Lord Balfour of Burleigh, after careful inquiry into that proposal, came to the conclusion that 'we are strongly opposed to the general purchase of cables by the State. The reasons for that opinion apparently were that private companies do business 'more efficiently' than Governments (paragraph 98); and also that in the innumerable dealings with foreign nations, private British citizens being relatively unhampered by negotiations other than those of their own business, and being of necessity experts, are decidedly more effective than ambassadors and plenipotentiaries. Thus a purchase of the cables by the State would result inevitably in a deterioration in the cable service and in a diminution of the international influence of Britain.
There is a third policy to be mentioned, and this is the right one. Clearly, though the State should not itself compete with, or embark upon, cable enterprise, yet, on the other hand, that service is of such extreme importance to the Empire that the State cannot stand aloof from its supervision. On the contrary, it has two instruments in its hand capable, if moderately employed, of controlling the cable companies with complete effect. When it grants landing rights, or when it grants a subsidy or guarantee of revenue, the State has a right to stipulate, among other regulations:
(a) That the cable shall be of an agreed efficiency as regards specification, construction, and power of transmitting words.
(b) That the landing-places in British dominions shall be approved by authorities specified, and shall, where thought necessary, terminate within the circle of the local defences.
(c) That the staff shall be controlled by competent British subjects.
(d) That the line shall be worked subject to the provisions and regulations of the International Telegraph Convention.
(e) That the rates charged to the public, when sufficient for a proper return on the capital at stake, and the provision of a proper reserve fund, shall not exceed a specified maximum, and that Imperial and Colonial Government messages shall have priority, and be sent at half the ordinary rates.
(f) That in case of war, rebellion, or other emergency, the Government shall have power to take possession of and work the line on its own account for so long as it shall see fit, paying compensation.
(g) That the agreement shall not be assigned, or underlet, without the consent of the Treasury.
These powers, judiciously and temperately exercised by a committee of all the Government departments concerned—viz., the Treasury, Foreign Office, Admiralty, War Office, India Office, Colonial Office, Board of Trade, and Post Office—are ample to secure the interests of the public against the interests of any section of the community.
Such, then, is the marvellous and world-wide system organized, in somewhat more than a generation, by private citizens of Britain. Viewed in its broadest light, their enterprise has been during modem times the prime agent in that adjustment of men's passions which is called diplomacy, and in that equilibrium between the works and wants of man which is called trade. So much the world owes them. But if the nation asks what they have done for her, they can say that, annihilating time and space on behalf of her, they have given unity to the disunion of her unfettered peoples, and substance to her dream of an Imperial commonwealth; and that, identifying our own good with the good of others, they have served all nations for the sake of their own.
- Paragraph 6 of précis of evidence given by the Anglo-American Telegraph Cable Company before the Committee on Cable Communications, 1902, Blue-book, p. 160.
- Cf. evidence of Sir W. Preece, answer 1331, before Pacific Cable Committee, November 24, 1896.
- Paragraphs 54-60 of Report.
- I take this figure from answer 1931 by Sir J. C. Lamb, formerly the chief executive officer of the Telegraph Department of the General Post Office, given before the Cable Communications Committee of 1902.
- Second Report, paragraph 60.
- First Report of Committee on Cable Communications, 1902, p. 5.
- Cf. answer 2258, Minutes of Evidence of Committee on Cable Communications, 1902; see also answer 2814.
- Cf. answer 1738 of Minutes of Evidence of Committee on Cable Communications, 1902.
- Second Report of Cable Committee, paragraph 67.
- Second Report, paragraphs 96 and 98.
- Second Report, paragraph 37.
- Second Report, paragraph 46.
- I have not dealt with the important British system of cables connecting South America and Britain, because South America is not a part of the British Empire.
- Second Report, Summary, Section XI.
- Appendix G to Report of Cable Committee, 1902.
- Second Report, paragraph 52.
- Answer 1749, Pacific Cable Committee, Blue-book, 1899.
- Report of Cable Committee, 1902, Appendix F, p. 69.
- Report of Pacific Cable Committee, 1899, paragraphs 68 and 77.
- Evidence of Cable Committee, 1902, answer 3119.
- 'China and her Foreign Trade' (chapter ii. of 'These from the Land of Sinim; p. 60, 1903).
- Speech of Sir John Wolfe Barry, Chairman of the Eastern Telegraph Company, July 17, 1901.
- Answer 8170 of Representative of Treasury before Cable Committee of 1902.
- Second Report, paragraph 50.
- Second Report, Summary, Section X.