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6
ANSWER AND REMONSTRANCE If
Oi' TIIF.
mtxitm lekpaph €i0mptt|
TO THE
M E M K I A L
OF THE
4-^
ag««ti( ieUgaph €«mpttg.
AND THE
NEW ENGUND UNION TELEGRAPH COMPANY, k^
If
APRIL 20, 1858
ANSWER AND REMONSTRANCE.
To THE Senate and House of Representatives of the United
States of America, in Conouess assembled.
The answer and remonstrance of the American Telegraph Com-
pany, to the " Memorial " of the Magnetic Telegraph Company,
and the New England Union Telegraph Company, and the supple-
ment thereto, which memorial bears date, March 10th, 1858, and
is signed by Amos Kendall and others. Committee, <fec., respect-
fully represents :
That said memorial prays for the passage " of a general law
" which shall prevent combinations between citizens or companies
" in the United States, and monopolists or companies out of the
" United States, for the purpose of oppressing Telegraph Compa-
" nies and monopolizing the business of telegraphing in the United
" States, and shall enable all telegraph lines in the United States
" to form connections with all telegraph lines approaching their
" borders, on terms of perfect equality."
Your remonstrants find it difScalt to believe that Congress
could, in any event, be induced seriously to contemplate the pass-
age of such a law, striking as it would, without cause, at the or-
dinary business arrangements of companies acting under, and
amenable to the laws of the States or Governments by which they
»re created ; and as your remonstrants believe, interfering unne-
cessarily, to embarrass communication with other countries, to dis-
courage enterprise, and to give to one the fruits of the labor and
expenditure of another.
Your remonstrants hf'g leave to submit tlio following reasons
against tlie ])assjigo of such a law.
It is asked for by tivo only of the ten or twelve leading Telegraph
Companies of the Unite<l States.
The grievance complained of is, that the pecuniary interests of
tlicse two crviupanies are not to bo benefited to the extent tliey
liad anticipated, in the event of the successful completion of the
Atlantic Telegraph ; while it is a fact that the meniorialiste,
though repeatedly invited, have refused to contribute any part of
the capital required for such Atlantic Telegraph, but on the con-
trary have oj)posed the enterprise before Congress, and through the
public presses under their control, as well covertly as openly.
Tlie injustice of such a law will be apparent when it is considered
that parties, who by the expenditure of millions in an undertaking
of the greatest hazard, should establish communication from the
political or commercial capital of the United States to Europe,
would find themselves compelled, in the event of success, to turn
over at the frontier an equal share of the business to those who
had incurred no risk, who might be wholly irresponsible, and who
could perform the service only in a most inferior manner, without
forfeiting their claim to equal consideration with the best.
It is worthy of consideration also whether a Telegraph Company
receiving important dispatches in a foreign country for transmission
to Washijigton, or to New- York, and transferring them at the
frontier to another, in whose hands they should be delayed, altered^
or lost, would not be held responsible for the damage resulting
from such delay, error or loss, and be themselves without remedy.
And if it be proper that telegraph lines crossing the boundary
of the United States should be compelled to transfer at that point
to other parties a portion or all of the dispatches which are des-
tined for places in the United States, it would appear to be within
the province of each State through which telegraph lines may
run, to make a like provision relative to all lines approaching their
borders.
If such a law be proper in relation to telegraph lines, it would
3
he equally so if .applied to niilroa<l, steamboat, express and trans-
portation companies.
The law souijht by the memorialists is desiojned solely for their
benefit, all of the other leadintr teleujraph companies of this (ron-
tinent being entirely satisfied with their arrangements for connec-
tion with the Atlantic line.
It would, therefore, thouj^h professing to be general in its char-
acter, liave the most obnoxious features of special legislation.
Although the memorialists profess to be prompted only by a
desire to share in the business coming over the Atlantic line, they
ask for a law which would equally embarrass communication with
Canada or the other British Provinces, or with Cuba or Mexico.
The law sought for would interfere with contracts that have been
in force for many years between Telegraph Companies, the pro-
priety of which has never been called in question, and for some of
which valuable considerations have been given.
Your remonstrants do not comprehend why such a law should
be made applicable to telegraph lines approaching the hnrders of
the United States, any more than to those which are wholly within
the United States ; and yet the memorialists admit in said memo ,
rial that they have " combined together for mutual defence for
thirty years, and made contracts of the same duration with other
parties."
The business of telegraphing has hitherto been left to private
enterprise, and to the regulation of the several States ; can it now
be transferred constitutionally to the jurisdiction of the General
Government ? A provision of the Constitution confers upon Con-
gress the authority " to regulate commerce with foreign nations
and among the several States." Does the word *' commerce," for
which the memorialists have strangely substituted the terms " trade
and intercourse," apply to telegraphing ?
But if, in the wisdom of Congress, it should be determined that
they have the power, under this or any other provision of the Con.
stitution to legislate upon this subject, your remonstrants respect-
fully submit that no sufficient cause for the exercise of this power
ts
has boen ahown ; iin<l that Iho effect of such an application of it as
the memorialists HCck, would not only be of no benefit to the com-
munity at large, but an absolute injury to their interests.
Havini^r presented some of the considi^rations opposed to the
passai^e of such a law as is sought in the prayer of the memo-
rialists, your remonstrants beg leave to reply to the more promi-
nent charges and representations of said memorial, omitting, how-
ever, to notice mucdi that is irrelevant, but to all of which they
declare their ability to present a complete answer.
The principal charge of the memorialists is that your remon-
strants have entered into a combination with the New- York, New
foundland and Ltmdou Telegraph Company, and the Atbmtic Tele-
graph Company, and have made arrangements, the object of which
is to use the power anticipated from the control over the Trans-
Atlantic correspondeiiee, for the injury, and if practicable, the de-
struction of the lines of the memorialists.
Your remonstrants aver, and are prepared to prove, that the
only ground whatever for the charge of combination, above-men-
tioned, is the fact, that having the only lines extending east from
Boston and to Nova Scotia, your remonstrants have entered into
contract w'th the Newfoundland Telegraph Company for an inter-
change of messages ; and upon condition of receiving from said
Newfoundland Company all of the dispatches it may have for
transmission westwardly, your remonstrants have agreed to for-
ward dispatches between Nova Scotia and New-York at rates sixty-
five per cent, lower, the difference in distance being taken into
account, than those charged upon the lines owned by the memo-
rialists between Washinirton and Boston.
No other contraQt or understanding whatever exists, or has ever
existed, between your remonstrants and either the Newfoundland
or Atlantic Companies.
The contract above-mentioned is precisely similar to those which
have been for many years almost universal between the telegraph
lines in the United States, and is much less a " combination" than
that admitted in said memorial to exist between the memorialists
themselves, wherein they have "c-onihined tonrother for niutuftl
protection for thirty years, and have nmdo contracts of the same
duration, for conn(!ction with otiior lines."
Such exclusive connection has existed for more than ton years
past, between tlio two companies unitinir in said memorial.
Previous to any arrangement being made between the New-
foundland and the American Companies, an agreement was entered
into conditionally by the former with one of the memorialists,
the New England Union Telegraph Company, in which it was
agreed that an exclusive connection sliould exist between tliose
companies for twenty years, with the further obnoxious provision —
{Extract from the contract, dated May 9, 1865,)
" That the Newfoundland Company shall exert themselves, to
connect with the New England Union Line, at Boston, so that all
business from and to Europe shall (tome first to, or start last from
New-York, over the lines of the New England Union Company."
By this arrangement, all messages coming froia Europe for
Boston, or any other place east of N^w-York, were first to be
transmitted to New- York, and thence returned to the place of
their destination — thus securing to the New England Union Com-
pany double tolls; and in like manner, every message from Boston
or other places in New England, destined for Europe, was to be
first sent to New- York, and thence forwarded to Europe. This
agreement was cancelled by notice which the Newfoundland Com-
pany had reserved the right to give. Tf this contract had con-
tinued in force, it is not probable the New England Union Com-
pany would havti made any complaints of the impropriety of ex-
clusive connection with the Newfoundland Company ; and the
Magnetic Company, the other memorialist, between whom and the
New England Union Company an exclusive combination exists, and
who would, therefore, have enjoyed a portion of the advantages,
appeared to see no objection to such connection.
Said Magnetic Company has always maintained its right to con-
nect with such liiK^s as it pleased, and at this time refuses to re-
6
turn to the Waslnnj/tori and New- York " Hoiimj" line any incssnges
from the W.-ishington and New Orleans lino whic^i is under its
control.
'J'hey have jilso for many years refused to accede to the demand
of the Baltimore anil Whecliiif? line, that dispatches from Wash-
injrton, or points south thereof, destined for Cincinnati, Louisville,
St. Louis, and other points, should be forwarded from Baltimore
by that line ; and have connected exclusively for tlie West with
lines leading' from l'hiladelj)lua, via .l'ittsburi,'h — altliouu^h the for-
mer was the most direct route, and, as its proprietors claimed, was
entitled to such business by the terms of the conveyance of patent
received from Prof. Morse through the gentleman who stands at
the head of the memorialists.
The gentleman most prominent among the memorialists in be-
half of the New England Union Telegraph Company — who owns
more than one-half of its stock, ta\d who formerly owned most of
the line between Boston, Mass., and Portland, Maine, then the only
15ne betvreen those points — took the responsibility, for purposes of
his own, of refusing to allow the transmission over said line of any
messages whatever coming from, or destined to pass over, the lines
in the Province of Nova Scotia ; and continued in this high-handed
manner to embarrass communication with that Province, until other
parties, to whom your remonstrants have succeeded, bought said
line of liim on his own terms.
As further evidence that the complaints of the memorialists are
not founded in the sincere belief that the arrangements of your
remonstrants for connection with the Newfoundland Company, or
with companies in the United States, are of an improper charac-
ter, your remonstrants charge that the memorialists have them-
selves perseveringly sought to effect perpetual arrangements more
stringent in their character than those which are made the ground
of their complaint.
In July last, at the invitation of the gentleman first among the
memorialists, a meeting of ten of the principal Telegraph Compa-
nies of the United States was held, and a proposition was then sub-
mitted b>/ him, which contained, among other provisions, the fol-
lowing^ : —
" Tho several companies, parties hereto, bind themselves (o each
other to connect exclusively, as far as practicable, with the lines
of such existing comj)anies as may bocorao parties to this agree-
ment, and in no event to connect with any new lino whi(rh may bo
gotten up in opposition to, or to the obvious injury of any existing
line."
"This agreement shall take effect as soon as ratified by any
three of the companies, and shall be perpetual."
Your remonstrants were present at said meeting, and were in-
vited to join in this agreement. Their lines extended then, as they
now do, to tho Province of Nova Scotia. Had they acceded to the
propoh,ition, the memorialists would have been content ; but any
parties who might hereafter have extended lines to the frontier,
would have bad the very same ground of complaint against the
memorialists, that they now claim to have against your remon-
strants.
The patriotisin and solicitude of the memorialists are only ex-
cited when they regard their pecuniaiy interests as likely to be
afiected.
At the time of the meeting above-mentioned, and directly there-
after, it became evident to your remonstrants, that unless they
would accede to terms dictated by the memorialists, their design
was to effect a combination in opposition to your remonstrants,
and to certain Western and Southwestern companies. As the propo-
sition above quoted shows, the agreement was to be binding upon
the companies signing it, as soon as any three should ratify it.
For twelve years the memorialists have made every effort to pre-
vent competition in the business of telegraphing, and have enjoyed
the protection of a patent which has been in force eighteen years ;
and, having been notoriously wanting in the spirit of progress, they
now ask for legislation which would compel the enterprising to
share with them the well-earned reward of their risk and expendi-
tures. And this they presume to ask, when they have not oidy
.tl
■V
8
declined to participate in the hazard and outlay of the enterprise,
but liave eiiileavoretl, by ceaseless opposition, to embarrass its pro-
jfress.
It is not denied by your remonstrants tliat all of the companies
represented at the ineetini^ in July, excepting only the memorialists,
have united in an agreement for their mutual benefit, md for the
more prompt interchange of business, but without increasing rates,
or otherwise (combining to the disadvantage of the public.
And your remonstrants respectfully represent that, as they be-
lieve, none of the arrangements made by them in any way violate
tiie legal or moral rights of any parties; and they aver that no
parties have more readily entered into such arrangements than the
memorialists who now ask at your hands legislation for their pro-
tection.
Your remonstrants deny that they have, either alone or in com-
bination with others, endeavored to force the memorialists to sur-
render their property ; and aver that they have had no desire to
bring about a connection with the lines of the memorialists for any
other purpose than that, in the legitimate and proper extension of
their own lines, they might avoid a co'lision of interests with tho"
memorialists, and, at the same time, have lines extending to Wash-
ington, in ^rder to facilitate communication from their other lines;
to adopt iuij- \>ved systems of telegraphing, more rapid and more
perfect ; and to reduce the rates between New- York and Washing-
ton, now higher than in any other part of America, in order that
their other lijies might be bencifited and their patrons better served.
For this end they have repeatedly sought to effect an fjnicable
arrangement with the memorialists.
In November last your remonstrants proposed to lease the
property of the Magnetic Company for ten years, paying to them
a" annual rent equal to thirty per cent, upon the cost of new pro-
perty, superior in every respect to theirs, and covering the same
routes ; but the otfer was rejected.
Snbsequeiitly negotiations were opened between the memorialists
and your remonstrants, for the purpose of doing away with the
p
prospective antagonism, by a union of interests ; and on the 23d of
December last the following memorandum was agreed upon : —
" Memorandum of an understanding between the Rfagnetic,
American, and New England Union Telegraph Companies, subjv^ct
to ratificftion.
" Let each of the three furnish to the other two a statement of
the proportions of a given amount of stock — say, for example,
$1,200,000 — which they think it right for them to claim in a con-
solidated company, with the statistics of their receipts and expenses,
and every fact on which their claim is bjised, with proofs.
" Let each appoint a committee of one, with full power to con-
sider and adjust the amount to be assigned to each.
" If the committees cannot unanimously agree, each company to
select a disinterested person, and the unanimous decision of the
three shall be final. No person to be selected as an arbiter who is
objected to by either of the companies.
(Signed.)
" For the Americaii. Company,
"PETER COOI'ER, President.
" For the Magnetic Company,
" AMOS KENDALL.
" For the N. E. Union Company,
"JOHN McKESSON.
" New-York, Dec. 23c?, 1857."
Three days afterwards, your remonstrants, by one of their
directors, sent the following communication to the representative
of the Magnetic Company : —
" New-York, Dec. 26th, 1851.
" Hon. Amos Kendall :
" Dear Sir : — Permit me to hand you enclosed a copy of the
memorandum of the 23d inst., and a letter addressed to Wm. M.
Swain, Esq., President, &c., which I send to you, as we understand
Mr. Swain is absent at the Fouth."
[The letter referred to was open, and contained an official copy
of a resolution of the directors of the American Company, ap-
V
10
pointini^ one of their number a committee, in accordance with the
above memoriinclum.]
" I am cnnfaac<l in the preparation of the schedule to he fur-
nished to the other two companies, and shall be pleased to receive
tht'irs at thi'ir convoiiience.
" As the committee, on the part of this company, to meet with
like committees from the others, I shall be prepared to meet them
at any time they may agoee upon."
The Secretary of the American Company received in reply the
following : —
"Washington, Dec. 30th, 1857.
" Dear Sir :— I deem it my duty, in courtesy to your company,
to inform you that letters received this day from Mr. McKesson,
render the accession of the New England Union Company to the
provisional articles recently agreed upon by Mr. Cooper, Mr.
Mi'Kesson and myself, entirely hopeless.
" Sincerely regretting that our labors have not led to a pacific
result, I must consider the projecit of the union of the three com-
panies at an end — at least for the present.
" Very respectfully,
" Your ob't servant,
" Amos Kendall."
It will, therefore, be evident that the representations of the
memorialists to the effect that your remonstrants have sought to
oppress them, are unfounded ; and that, on the contrary, the memo-
rialists have had every opportunity to participate in any advan-
tages your remonstrants may have secured, but have of their own
choice declined so to do.
Your remonstrants respectfully represent, that they are not
aware that tl c memorialists have any prescriptive right to the
telegraphing business between Washington and New- York, and
therefore do not feel the force of the complaint of the memorialists
that they are to bo deprived of their local business; although
your remonstrants admit, that if such local business should be
11
materially reduced, the Mac^netic Company could scarcely expect
to make dividends of twenty-four per cent, per annum, as tbey have
done in past years, upon the cash capital actually paid in.
They will experience from your remonstrants none but open and
fair competition ; and if their adherence to old systems of tele-
graphing, or their prudence or want of enterprise, shall prevent
them from sowing in new fields, your remonstrants see no reason
that they should be permitted to reap harvests therein.
Your remonstrants further respectfully deny that the Atlantic,
Newfoundland and American Companies are one in interest, or
that they have ever been one and were separated for any purpose
whatever ; though it is not denied that some of the stockholders in
the American Company are also owners in the others.
A large majority in numbers and in interest, in each of the com-
panies, has no interest in either of the others.
It is respectfully submitted, therefore, that the solicitude mani-
fested by the memorialists, lest one of the companies charged should
hold more than its just share of benefits, is needless.*
While your remonstrants might with propriety leave the
foreign companies complained of, to answer to the authorities by
whom they were created and are governed, yet they are unwill-
ing that a misrepresentation of those companies here, should be
made the ground of unfriendly legislation by Congress,
In 1853, a company obtained a charter from the Province of
Newfoundland, for the purpose of enabling them to erect telegraph
lines therein, and to connect them with the continent of America.
This company having been compelled, after the expenditure of a
large amount, to discontinue the work from wan{ of means, ap-
plied to the parties now composing the New- York, Newfoundland
and London Telegraph Company, and induced them to purchase
the rights acquired under ^aid charter, to pay about $70,000 to
cancel the indebtedness then existing, and to undertake the com-
pletion of the enterprise.
Incessantly since 1854, and in the lace of the greatest discour-
i
i .
I
I ?
12
agements, said Newfoundland Company has energetically pushed
forward the undeitakincf.
Tlioir lines through the Province of Newfoundland and the
Island of ('ape Bnston, were constructed with great difficulty, and
at an expense unavoidably exceeding, as your reinonstrants arc pre-
pared to sliow, by more than tenfold, the cost of lines of like extent
in tlie United States,
In 1855 their effort to lay a cable across the Gulf of St. Law-
rence was unsuccessful. A second cable was procured and laid in
the followihg year.
They have already expended more than $800,000, and have
realized no return from their investment ; but, on the contrary, the
line is now worked at a loss.
In 1856 the Atlantic Company was formed in England, through
the earnest efforts of one of the Directors of the Newfoundland
Company, who manifested his confidence in the enterprise by
incurring individual responsibility for more than $400,000 of its
stock.
This stock he offered at cost to any parties in America, but npt
a share was taken by the memorialists, who now demand that the
Government shall secure to them advantages likely to result from
the risks incurred alone by some among your remonstrants, and
otliers, with whom they are charged to be improperly con-
federating.
Your remonstrants beg leave to say that the Director above
referred to has, in addition to the sacrifice of his own valuable pri-
vate business, paid for and still holds no less than $130,000 of the
stock of the Atlantic Company, making his individual outlay,
including his investment in the Newfoundland Company, to exceed
$300,000 ; no part of which is as yet productive.
After the sacrifices he has made, and the risks he lias taken to
secure the success of this most important undertaking of the age,
the fate of which is still uncertain, it is most unjust that ho should
be assailed, as he is in said niomorial, and that unworthy insinua-
13
tions of mercenary motives should be thrown out in regard to him,
when he so richly merits distinn^uished honor.
His individual investment in the hazardous experiment of estab-
lishing telegraphic communication between the coitinent of
America and Ireland, is greater than the actual cost of the whole
of the lines owned by the memorialists.
Your remonstrants respectfully submit that the representations
of the memorialists, that inordinate gains are to be reaped by in-
dividuals from the Atlantic line, are based wholly on estimates of
probable profits, and form no good reason for legislation likely to
embarrass the euterpi-ise, at a time when the result is uncertain,
especially as the governments have reserved the right to regulate
the tariff of rates.
Your remonstrants are aware of the great benefits conferred
upon the enterprise of the Atlantic telegraph by the governments
of Great Britain and the United States, in permitting the use of
vessels of their navies to assist in the great work ; but neither
government has been called en to contribute anything further
towards the cost of the work ; and the annual sum which they
have agreed to pay for the transmission of their dispatches does
not begin to accrue until the line is in successful operation. And
so soon as the enterprise yields a return of six per cent, to the
company, the amount which each government is bound to pay is
limited to fifty thousand dollars per annum.
The Atlantic Company hi j, as yet, received no appropriation
of money in aid of its undertaking, from any source.
Shares of the Atlantic Company which cost the subscribers
£1,000 each, have been freely oflfered as low as £600, and many
of the original shares are now upon the market at a price far be-
low their cost.
It is not known to your remonstrants that any underwriter of
responsibility in the world will insure upon the next attempt to
lay the cable.
Your remonstrants beg leave further to state, that while indi-
!■
:i
14
vidiials amoiii); their nninber have mad(i great exertions to secure
the succfssfui completion ot' the Atlantic lino, there have been
parties, encouragcil, as your remonstrants believe, by tlie memo-
rialists, who have souii^lit first from the Lerrislature of the State of
New- York, and subsequently from the Provincial Parliament of
Canada, a charter for a rival Atlantic line.
Your remonstrants do not deny, that, under thes3 circumstances,
and the impossibility of ol)taininiT the necessary capital without
some such arrangement, the Newfoundland and Atlantic Compa-
nies did obtain from Eastern States and Provinces, assurances,
which were cheerfully granted, that they should enjoy alone for a
specified period, the right of connecting an ocean line to the coast,
in ord(!r that their investment might bo saved from utter destruc-
tion, if haply a successful issue should crown the Atlantic enter-
prise.
To this extent only are the Companies named open to the charge
of monopoly so prominently set forth in said memorial.
Your remonstrants respectfully submit that it is not unreason-
able that a work of such vast cost as the Atlantic Telegraph, being
wholly of an experimental character, should receive at least as
much encouragement as an invention for whicti patents are granted.
The memorialists are in the enjoymint of a patent which has
been made to cover a period of twenty-one years.
The lines of the memorialists extend eastwardly, only to Boston,
and were erected many years ago, with no reference whatever to a
connection with Europe.
Having hazarded nothing in the experiment of the Atlantic line,
or in the costly constructions of the Newfoundland Company, but,
on the contrary, having opposed the former to the limit of their
power, the memorialists now demand, for their protection, that they
shall be permitted to share in the prospective benefits of these un-
dertakings.
Confidently believing that Congress will regard the general con-
siderations first presented, to which others equally forcible might
15
be added, as in themselves amply sufficient to require the denial of
the prayer of the memorial, your remonstrants respectfully submit
that the peculiar circumstances of the case aftbrd important addi-
tional reasons in opposition to the desired enactment.
April 20, 1858.
PETER COOPER,
WILSON G. HUNT,
Committee of the American Telegraph Company.