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The Honorable Mackenzie Bowell, Minister of Trade and Commerce, Canada (Delegate to the Australian Colonies and New Zealand),— Sir, Since I arrived in Sydney I have obtained through the courtesy of the Premier and Postmaster-General full statistics respecting telegraphy between the Australian Colonies and Great Britain. Thus enabled to present my views on the matter of the Pacific Cable, based on the latest ascertained facts, I beg leave to sul)mit the folloAving memorandum for the information of yourself and the several Governments. I have the honour to be, Sir, Your obedient Servant, SANDFORD FLEMING. Memorandum on the Pacific Cable. Sydney, New South Wales, October 11th, 1893. The printed nroceedings of the Postal and Telegraph Conference, held in Brisbane in March last, reached Canada a few weeks back. The resolution passed by the Conference, expressing the opinion that the time has arrived when a cable should be established to Vancouver, was welcomed with peculiar satisfaction by those who for years have looked forward to the prospect of having the two countries connected telegraphically. The debate, however, by Members of the Conference, together with letters attached to the proceedings, gave rise to misgivings, which were m no way lessened when a copy of the agreement between the French Government and the "New Caledonia Cable Company was subsetiuently received from Europe. As one who has long taken an active interest in the proposal to connect Australia and New Zealand with Canada by a Pacific Cable, I have been impelled by a sense of duty to visit these colonies at this juncture to inquire into all the circumstances, and, if the facts appeared to require it, to submit a respectful repre- sentation on the subject, and to appeal with all the earnestness I can command against a contemplated step which, if carried out, would, in my humble judgment, greatly lessen the commercial utility of the Pacific Cable, and render it comparatively valueless as a national undertaking. Before aii£89— U3 A _,-k i^' !-■'•■« V Upfore leaving Canada I gathered from tlio proceedings of the Postal Conference, and th(! papers appended thereto, and I learn from other public documents since my arrival in Sydney, in substance as follows : — (1.) It is designed that the cable from Queensland to New Caledonia shall form tlie first link of the Trans-Pacific Cable, and that it is the intention of the Company to proceed section by section as further subsidies are obtained. (2.) An opinion is expressed in some quarters that it is impossible to lay a cable through the Pacific Ocean from any part of Australia or New Zealand to Canada without landing at some places such as New Caledonia, Samop., and Hawaii, where British influence is not supreme. (3.) From the fact that the lines of the Eastern and Eastern Extension cable system touch foreign soil at several points, it has been urged that the Pacific Cable, landing at New Caledonia, would be in no worse position than the present line of telegraph between Australia and England. In considering these points, I would first direct attention to the character of the agreement betvvcen tlu; French Government and the Socicto Frangaise des Telcgraphes Sous-Marl ns, dated 3rd February, 1893, subsequently ratified by the Parliament of France. I bee leave to submit a translation of the following five articles of this agreement : — Working, maintonanre, and orRanioation to be aiibjo(;t t<> control of tho French I'ndcrSc'crctary ot State. Company to ImTe offli-ea in France, oalilc to be ninib* in Fraticc, and to be laid, worked, and controllwl etilirely l»y Frendi subjects. Society not to rede any of tbc rights of tbia agreement or to amalgamate witti other comi>an.v unlesH tlie ])ernii8Nion of tho i-'rt-lich Uovcrnment be hrst obtained. Transit rate, Auatraiia to Now Caledonia, Uihe fixed i»y the French flovcrnnient ancl the Society. Maxiniunt rate to e'lual iK) centimes per word. PIsputcg to he settled liy Council ol State. Article III. — As far as the establishment and maintenance of the proposed cable, as well as the organisation of the service, the fixing and collocting of rates, the control, the relations with the public and the connecting of tho new line at either end with submarine or land line systems is concerned, tho Societo Fran^aiso des Telugraphes Sous-Marina shall observe the table of rules and obligations approved by the Under Secretary of State for the Marine Department and the "Colonies, all tho clauses and conditions of which it accepts as having the same force as the terms of this agreen tnt. Article V. — The Society agrees to have its head offices in France, to engage Ftciu'Ii administrators only, to have the cable manufactured by French employees in works situated on French territory, and to guarantee the laying of the cable by a French ship and creM'. Article \i. — Tho Society shall not, without the expressed written consent of the French Government, cede any of the rights resulting from tho present agreement, nor lease its lines or amalgamate its interest; with those of any other company. Article X. — Tho transit rate over tho cable between Australia and New Caledonia shall be mutually agreed upon by the French Government and the Society. Tho maximum rate shall bo 90 centimes a word. Article XII, — Any dispute as to the interpretation or the non- performance of these presents arising between the Government, of the one part, and the Societe des Telegraphea Sous-Marins, or persons claiming under them, of the other part, shall be decided by the Council of State. These provisions of the agreement make it plain that the telegraph from Queensland to New Caledcnia will be under the absolute control of the French Government, and hence no parallel can be instituted between the new line across the Pacific, as contemplated by its promoters, and the Eastern and Eastern Extension system. The lines of that system certainly pass over portions of foreign soil, but it cannot be held that any foreign Power controls the administration and management of the Company's affairs. Moreover, if, owing to unavoidable geographical reasons, the wires of the Eastern and Eastern Extension Telegraph Company necessarily touch territory which is not British, the more is it to be desired that Australia should be connected with the mother country by a line of communication which nowhere would pass over the soil of another nation, or in any sense be subject to the dictates of a foreign Power. The Pacific cable, as originally projected and advocated for many years, has been designed to connect the two greatest divisions of the British Colonial Empire — Australia and Canada — by a route substantially British throughout. Unless such a route be physically impossible, it would, in my judgment, be unwise in the last degree to place the first section of this undertaking absolutely under the control of a foreign Power. 3 I venture to think it can be in(li.s|)iital)ly established that there is more than one route from Australia and New Zealand to Canada elii^ible for a Britisli cable ; that th(!re is no necessity whatever for landini^ at New Caledonia, .Samoa, or Hawaii, or, indeed, at any island occupied l)y natives who are not already wholly under British protection. I be{» Ieav(! to describe several of such routes or combination of routes : — Route No. 1. Commencing at Vancouver Island, the cable would extend to Fanninti; Island, thence to the nearest island of the Fiji Group. From Fiji it may run direct to New Zealand, and thence to the Australian Continent ; or it may run first to Norfolk Island, and from that point bifurcate to the northern part of New Zealand, and to a convenient point near the boundary between N(nv South Wales and Queensland. Route No. 2. From Vancouver Island tlu; cable would be laid to a small unoccupied island indicated on the charts as Necker Island, favourably situated about 240 miles west- ward from the Hawaiian Group. From Necker Island the cable would extend to Fiji, and thence as in route No. 1 to New Zealand and Australia. Route No. 3. As in route No. 2, the cable would extend from Vancouver Island to Necker Island, thence to Onoatoa or some one of the eastern islands of the Gilbert Group, From this station in the Gilbert Group two branches would extend, one to Queens- land and the other to New Zealand. The Queensland branch would touch at San Christoval Island in the Solomon Group, and terminate at Bowen, connecting at that point with the land lines easterly to Brisbane and Sydney, westerly to the Gulf of Carpentaria, Avhere a connection may be formed with the Port Darwin- Adelaide Trans-continental telegra})h, leading to Victoria, Tasmania, South and West Australia. The New Zealand branch of this route would find a mid-station on Viti Levu, the southern island of the Fiji Group. Route No, 4. As in routes Nos. 2 and 3, the cable would be laid from the northern terminal j)oint to Necker Island. From Necker Island it would extend in a direct course to Bowen, touching at Apamana — a central island of the Gilbert Grouj) — and at San Christoval, of the Solomon Group. At Bowen, this route may, as in the case of route 3, connect with Melbourne, Adelaide, Tasmania, by the South Australian over- land line. Route No. 4 is probably the shortest possible line that can be draAvn on the surface of the globe between any part of Canada and any part of continental Australia. It has the disadvantage of excluding from its telegraph service the Fiji Islands and New Zealand. To connect the latter colony a special cable from Queensland or New South Wales would be required. The Fiji Islands, hoAvever, would remain without a telegraph by this route. The distance by each route is ascertained to be as follows (details are appended) : — Route No. 1 — Including both branches from Norfolk Island to New Zealand and Australia ... ... ... ... ... 7,145 knots. Route No. 2 — Including branches to New Zealand and Australia 7,176 „ Route No. 3 — Including both branches to Queensland and New Zealand from the Gilbert Group ... ... ... ... 8,264 „ Route No. 4 — Vancouver to Bowen ... ... ... ... 6,244 „ Route No. 4a — Vancouver to Bowen, with a si)ecial cable from the mainland to New Zealand 7,310 „ Cost. In estimating the cost of a cable there are various circumstances that require to be considered. One of the most important is the allowance for slack. It is customary to add an allowance to the ascertained superficial distance of 20 per cent., in order that the cable may be safely laid at all deptlis and under all conditions likely to arise. This practice has been followed in estimating the cost of establishing a § Route No, 1, est i mated cost coiliplctcil i> 2, 11 >) •^1 n II II •1| It II 4 A, 11 ii cable by oacli routo. In tlio case of I'oute No. 1 a i^pccial allowaiuro is ma(l<' on account of the umiiurilly Ioiil,' section Ijctwceu Viuieouver imd Fanniuj^ Island. In each case tlu; estinnite is iutitntled to cover the cost ol' cables of the best type manufactured : — i:i,(i78,0()() l,585,()()0 1,825,000 1,380,000 1,610,000 Having pointed out that there is a choice of rout(!s for an essentially Rritish cable across the Pacilic, and presented estimates of cost, which I believe to be fairly reliable, I ask permission to add a few remarks bearini? on the means which may be taken to carry out the imdertakins;. Tiiere arc two ways by whi(^h the object may be accomplished. First, through the agency of a company liberally subsidised. Second, as a public work under Government control. I have given this (piestion much consideration, and year by year I have become more ami more tirinly convinced that if economy, low rates for telegraphy, and the highest efHciency be desired, the latter means of establishing the cable is the best. Promoters of companies generally desire to make large sums of money. The policy of companies is to ol)tain froni the public as large profits as possible, while that of Governments is to accommodate and benefit the public in every possible manner by reducing the rates to the lowest practicable point, and by giving the most eflicient service. The principle of ownership of telegraphs by Government is not new. It has long been adopted in the United Kingdom, in India, in these colonies, and elsewhere, and in every case I am aware of, where the principle has been tried, the public has derived the gn^atest advantage. Various efforts have been made during the past ten years to have the Pacific Cable established by a subsidised company, but no company has offered to carry out the undertaking for a l(!ss subsidy than ,C75,000 a year, continued for a period of twenty-ftve years. It can be indisputably shown that under the plan of Government ownership, a nuich less annual payment, for a very much shorter period will suffice. Moreover, when established, the cable will be public property, controlled by Govern- ment for the public benefit. The proposal then is that Australia, New Zealand, Fiji, and Canada, should be joint owners of the Pacific Cable, and that it should be established and M'orked as a public undertaking for the common good. There is one difficulty to be met at the outset. Certain of the Australian Governments are under obligations to pay an annual subsidy of £32,400 to the Eastern Extension Company until May, 1899, and, in consequence, they may not consider themselves in a position to co-operate on e(iual terms with the other Governments concerned in establishing the new line. This ditficulty is not, however, insuperable, and in my judgment it can most readily be over- come by providing out of capital an annuity to meet the subsidy as it annually becomes due. By this arrangement the liability of New South Wales, Victoria, South Australia, and Western Australia to the Eastern Extension Telegraph Company would 1)0 practically removed, and these Colonies would be free to enter with Queensland, New Zealand, Fiji, and Canada into a joint agreement to accomplish the establish- ment of the Trans-Pacific telegraph. As will hereafter beseen,the annuity so provided to extinguish the subsidy of £32,400 a year would be met by profits accruing from the new cable. Meanwhile, all liability incurred in the raising of capital would be borne in equitable proportions by all the co-operating Governments. To illustrate the proposal set forth, let us assume that the cable itself, say on route No. 2, requires an expenditure of . . . ... ... ... £1,600,000 To this capital add the sum needed to purchase an annuity to meet the annual subsidy of £32,400 from May, 1894, to May, 1899— five years ... 145,000 Total £1,745,000 This total capital raised on the joint guarantee of the Australian Colonies, New Zealand, and Canada could be placed at the low rate of 3 per cent., making a total charge of £52,360 per annum. This % This interest charcfc is less than the lowest suhsidy nsked hy a company, and I shall establish, by the strons^est possible evidence, that unlike a subsidy for a lixed period ol' twenty-five years, lonij before the expiry ol" that period, the whole interest will bi! met by surplus re' 'jnue. Cost op Working. I have obtained estimates from the best authorities, of the cost of workinpf the I'aciflc cable under (jovernment. These estimates range from L'15,()()0 to £60,000 per annum, and include the salaries of superintendents, electricians, and operators, two steamers for current repairs, and all necessary expense at terminal and mid-ocean stations. As it is djsirablo to have adequate allowance for every service, it is expedient to base our calculations on the highest estimate (£00,000) as the total cost of working the cable. £00,000 will accordingly be a first charge on the revenue, and it will remain a constant charge whatever the volume of business, whether five million words per annum or half a million only. Renewal Fund. Next to working expenses there should be an annual charge on revenue for renewals. It is [)roposed, therefore, to place to a cumulative^ reserve the sum of £32,000 a year, equal to 2 per cent, on tlu^ entire cost of the cable. This provision is considered ample until the earning qualities of the cable come to be thoroughly established. Eevenle. In many cases it is difficult, owing to the lack of information, to form estimates of the i)robal)lc revenue of a projected un(hjrtaking. In this instance, however, the best data is available for our guidance. We have the published statistics of telegraph 1)usiness by the existing line bctAveen Australia and Europe for a number of years, and it is fair to assume that on the establisliment of the Paeihc cable, rates and all other things being equal, the business will bo equally divided between the two lines. I am imable to ascertain the bu' -ss for tho past year, but I gather from the published returns that the number of Wi^rds transmitted in tlu; year ending May 1st, 1892, was 1,275,191. If we divide this into equal parts, we have (537,596 ords as a basis for estimating the revenue of the Pacific cable. In examining the returns for previous years some striking peculiarities are apparent. Duiing the eight years from 1882 to 1890 the telegraph business between the Australian Colonies and Great Britain increased on an average 51, 141 words each year, equal to 14 per cent, per annum. This may be viewed as the normal increase under a high tariff, inasmuch as throughout these eight years the charges on ordinary messages were never less than 9s. 4d. per word. On May 1st, 1891, the rate was reduced from 9s. 4d. to 4s. per word, and within tlu^ twelve following months the business increased by 418,913 words — an increase of 54 per cent, on the business of the previous year, and 831 per cent, over the normal annual increase during the preceding eight years. The further expansion of business will no doubt for the present be disturbed and retarded by an increase in the charges: on messages on the Ist January last ; but there remains the experience of the year 1891-2 to establish the remarkable effect of a low tariff in stimulating telegraphy. In that single year the increase in the number of words transmitted under a 4s. rate was greater than the growth of the business during the Avhole of the preceding eight years under a 9s. 4d. rate. One of the direct benefits to the public fi'om the Government ownership of the Pacific cable will be the reduction in charges for ti'ansmitting messages. I have already mentioned that with a full and efficient staff, such as the estimate for working expenses provides for, it will cost no more to do a large business than a small. There will, therefore, be no reason for preventing the freest expansion of telegraphy by the new line by lowering the charges. In my huTul/le opinion, the rates across the Pacific should be lowered to 2s. per word immediately on the cable being laid, in order that the public may have the advantage of cheaper communi- cation at the earliest moment. The 8a 200— B I 6 The proposed rate of 2s. per word for trarsmitting messages across the Pacific would reduce charges between Australia and England to 3s. 3d. in place of 4s. 9d. as at present. Moreover, messages from Australia received at Vancouver would be forwarded to all parts of Canada and the United States for an average charge not exceeding 2s. 3d. per word in place of 6s. — the present charge. T wish to avoid extravagant statements or too sanguine estimates. I would, in submitting my ideas, particularly desire to keep strictly within reasonable pro- babilities. If we base estimates on the existing volume ot business merely, \,e must anticipate that there will be no great advance over the business of 1891-2 for a few years if th(; charges on messages are again raised, as they already have been to some extent. In the calculations which follow, I shall, therefore, assume the business to be at a standstill for three years ; that is to say, I shall assume that the business in 1894 will not be greater in volume than it was in 1891-2, and that thenceforth the normal increase of not more than 14 per cent, per annum shall apply. The number of words transmitted in 1891-2 was 1,275,191. It is assumed that the Pacific cable would, if in operation in 1894 obtain one-half of this business. ^'e»r. Number of words per annum. Earnings of the cable at 2a. per word. Year. Number of words per annum. Earnings of the cable at 2s. per word. lSi)l 1895 1896 1897 1898 1899 637,595 726.85S 816,122 905,386 994,649 1,083,913 £ 63,759 72,686 81,612 90,539 99,465 108,391 1900 1901 1902 1903 1904 1,173,176 1,262,439 1,351,703 1,440,967 1,530,230 £ 117,318 126,244 135,170 144,097 153,023 It is scarcely likely that tlie Pacific cable will be established before the year 1896. The above estimate shows that ir. the year following (1897) the revenue from the cable would bo £90,539, a sura equal to the whole working expenses, together with £30,539 for tlie renewal fund. In the five following years, the revenue, in addition to paying working expenses and providing for gradually reducing the interest charges would finally in 1903, within about seven years after tlie completion of the undertaking, be sufficient to meet every current charges and the contributing Governments would practically be relieved from further liability. Not only would all fixed charges be then met, but in succeeding years the productive capacity of the undertaking would yield an annually increasing surplus, to be dealt with as the co-operating Governments may determine. If instead of a 2s. rate we reckon the same business for each year at an additional 6d. per word, or 2s. 6d. in all, a charge on messages across tlie Pacific, which would stUl be considered comparatively low, we have as folIoAvs : — Year. Earnings of the cablp at 28. 6d. per word. The fixed Charges, including working expenses, renewal fund, and interest, being in all £144,350 per annum. Deficiency. Surplus. 1897 £ 113,173 124,331 135,489 146,647 157,805 168,963 180,121 191,279 202,437 213,595 £ 31,177 20,019 8,861 £ 1898 1899 1900 2,297 1901 13,456 24,613 1902 1903 35,771 1904 46,929 1905 58,087 1906 69,245 This last estimate gives the result for the first ten years operation of the ealile based on a 2s. 6d. rate and a low normal increase. It sliows that the revenue for the first year would be insufficient to pay the whole interest on capital in addition addition to working exponsos and provision for renewal fund, and that tlio co- operating Governments would together require to pay £31,177 to make up interest. In the following year tlie deficiency to he made good would he .C20,01J) ; in the third year, £8,801. A small surplus would result in the fourth year, and at the end of ten years there would he an accumulated surplus of over £250,000 after meeting interest on cost and every otlier charge. Comparison with present Subsid*. If we compare these estimated results with the sums now paid for tho temporary use of the existing telegrapli at lower rates than formerly, we shall find everything in favour of an independent cahle owned and controlled hy Government. "J'here is fii'st a lixcd annual suhsidy of £32,400 paid to tho Eastern Extension Cahle Company hy five of the colonies. In addition to this annual payment I find in the Postmaster-General's (N.S.W.) Keport for 1892 (page 25) that further sums have heen paid to the; same Company, for the past tAvo years, to ohtain a reduction in charges from 9s. 4d. to 4s. and 4s. Dd. Under the heading " Cahle Guai-antee," I find that £27,520 was paid for the year 1891-2, and 21,778 for the year 1892-3. If we add this guaranteed payment to tlie suhsidy, we find the payments in each case to have heen — Colony. Subsidy and Qimmntpe paid For year 1891-2 1 For year 1892-3. By Vii'toria ... „ New South AN'alfs „ South Australia ... „ Tasmania „ "Western Australia Total sums jjaiil... £ £ 25,730 23,787 7,9G(! 1,447 990 £ 23,048 21,120 7,213 1,102 ,S74 59,020 53,303* * XoTB : — This docs not include £H15 piiid by Now Zealand. Thus it appears that five Colonies have paid, in each of the past two years, to the Eastern Extension Cahle Company, sums in excess of the interest (£52,350) on the Avhole capital required to estahlish the Pacific Cahle. I do not know that it is at all necessary to carry the comparison any further. I will only remark that in the case of the Pacific Cahle the lial)ility for interest would not he confined to tho present five contrihuting colonies, the intention is that it sliall he home in equitahlo proportions 1)y all, including New Zealand, Queensland, Eiji, and Canada, and in consequence would fall lightly on each. Moreover, it is perfectly clear from tho estimates of revenue, that while at no time would the interest charge, distrihuted over nine Governments, exceed £52,350, so soon as the cahle goes into operation tho payments on interest account would graduaJy he reduced, and in a very few years would he wholly covered l)y surphis revenue. It is quite true that in the case of the Eastern Extension Cable the guarantee may cease any year by giving notice, and the obligation resting on five colonies to pay the annual subsidy of £32,400 will in any event terminate in 1899 ; but, Avithout an alternativ(^ line under Govern- ment control, is there any certainty that the Eastern Extension Company may not raise charges to the old high rates unless an extension of the subsidy be granted them ? Conclusion. In connection with the estimates of revenue I have pointed out from statistical returns two elements of increase of business — (1) a normal increase under an exceedingly high tariff ; (2) a very much greater increase under a lower tariff. There will be a third increase Avhich will be due to the development of traffic with Canada and in bringing the Australian Colonies into direct telegi-aphic touch with the whole telegraph system of North America. At present telegraphic intercourse is insignificant, but with a 2s. or 2s. Gd. rate across the Pacific in place of a 6s. rate by a circuitous route, the circumstances will be favourable to tho growth of telegraph business between the two continents, and, in conseciuence, the revenue to the Pacific Cable from this source will rapidlv develop to large proportions. In • S^i^'i 8 In the foregoing estimates of revenue I have reckoned only the normal increase under a high tariff and taken no account of the greater increase which certainly will result from the charges heing lowered, as proposed. I have likewise added nothing for the Australasia-North iVmerican business, the whole of which would flow to the Pacific cable. I am quite warranted, therefore, in expressing th(! opinion that the estimates of revenue I have presented are not exaggerated or unreasonable, and that the Pacific cable established by Government in tlic manner proposed would effect rery important results. It would practically extinguish all subsidies now paid and render guarantees unnecessary. It would pcnnauently establish low rates for ocean telegraphy. It would yield a revenue which, after paying working expenses, providing for maintenance and renewals, would niak(^ good, all interest charges on the whole cost of the undertaking from the beginning, and in a very few years would furnish large surplus earnings. I venture to think, then, that if the resolution passed by the Postal and Telegraph Conference in March last be generally assented to in these colonies, the Governments need not hesitate in incurring the comparatively small, almost nominal, liability, necessary to secure a telegrapli connection across the Pacific, which every British subject will recognise to be of the great(!st national and commercial value. APPENDIX. Distances by the several routes or combinations of Memorandum of Mr. Satidforr/ Fleming^ October Cable. routes referred to in the nth, 1893, on the Pacific Route No. 1. Vnucouver Island to Fanning Island Fanning Island to Fiji, North Island Fiji to Norfolk Island Norfolk Island to North Cape, New Zealand ... Norfolk Island to Tweed moutli, near boundary New South Wales and Queensland ... ... ... Knots. 3.232 1,715 1,022 415 7()1 Total 7,145 Route No. 2. Vancouver Island to Neckor Island Neeker *3land to Fiji Fiji to Norfolk Island Norfolk Island to North Cape, New Zealand ... Norfolk Island to Tweed mouth ... 2,431 2,546 1,022 415 761 Total iX< Route No. 3. Vancouver Island to Nocker Island Necker Island to Onoatoii (in the (xilbcrt Group) Onoatoa to S. W. Viti Levu (Fiji Group) Viti Levu to North Cape, New Zealand Onoatoa to San Christoval (Solomon Group) ... San Christoval to Bowon, Queensland ... 2,131 i.mr !)80 1,001 953 07!) Total S,204 Route No. 4. Vancouver to Neeker ... ... ... ... Necker to Apaniana (Gilbert Group) ... Apamana to San Christoval (Solomon Group) ... San Christoval to Uowen, Queensland ... 2,131 1 ,805 009 979 Total (i,24t Route No. 4 a. Vancouver to Bowen, Queensland (same as No. 4) Tweed mouth to North Cape, New Zealand (1.2 H 1,006 Total ,310 .Sydney : Charles Potter, Uovcrnniont Priiiler.— 189iJ.