To sum up the evidence from Belgium, Switzerland, and France, submitted by Mr. Scudamore in 1866 to 1869: This evidence was that rates of 20 cents and 10 cents for 20 words, applied to inland messages, developed an enormous inland traffic, but that that traffic was unremunerative. So long as the rates on foreign messages and transit messages had remained very much higher than the rates on inland messages, the Belgian and Swiss State telegraphs had paid handsomely. But as soon as the latter rates had approached the level of the former rates, the net revenue had tumbled headlong; and there was, in 1868 and 1869, no certainty that it would not disappear entirely, or be reduced to such proportions as no longer to afford an adequate return upon the capital invested in the telegraphs. In the case of France, no evidence was presented that the State telegraphs ever had paid their way, though the prices obtained for the transmission of foreign messages and transit messages were between three and four times the returns obtained from the transmission of inland messages.
English Companies’ Experience
While the evidence from Belgium, Switzerland and France, presented by Mr. Scudamore, did not support the proposition of a low uniform rate, irrespective of distance, the evidence furnished by the experience of the telegraph companies of the United Kingdom pointed strongly to the conclusion that a uniform rate, irrespective of distance, of 24 cents for 20 words, addresses not counted, was not remunerative in the then state of efficiency of the telegraph. In this connection it must be borne in mind that at this time messages had to be retransmitted at intervals of 200 or 300 miles; and that, while the maximum distance a message could travel was only 160 miles in Belgium, and 200 miles in Switzerland, it was 600 miles in the United Kingdom.
In 1861 the telegraph business of the United Kingdom was in the hands of two companies which had been organized in 1846 and 1852 respectively: the Electric and International Telegraph Company, and the British and Irish Magnetic Telegraph Company. In that year, 1861, a new company, the United Kingdom Electric Telegraph Company, invaded the field with a uniform tariff, irrespective of distance, of 24 cents for 20 words, addresses free. The established companies had been charging 24 cents for distances up to 25 miles; 36 cents for distances up to 50 miles; 48 cents for distances up to 100 miles; 60 cents for distances up to 200 miles; 96 cents for distances up to 300 miles; and $1.20 for distances up to 400 miles.[13]
The United Kingdom Company began operations in 1861 with a trunk line between London, Birmingham, Manchester, Liverpool and intermediate and neighboring towns. Shortly afterward it opened a second trunk line from London to Northampton, Leicester, Nottingham, Sheffield, Barnsley, Wakefield, Leeds and Hull; and across through Bradford, Halifax, Rochdale, and Huddersfield to Manchester and Liverpool. Subsequently the company extended its line to Edinburgh and Glasgow, thus lengthening to upward of 500 miles, the distance over which messages were transmitted for 24 cents.[14]
In July 1865, the Board of Directors reported as follows to the stockholders: “The Directors much regret to state that, notwithstanding their earnest efforts to develop telegraphic communication so as to render the shilling [24 cent] rate remunerative, the company has been unable to earn a dividend. The system of the company consists of trunk lines almost exclusively embracing nearly all the main centres of business, telegraphically speaking, of the country. Seeing that the company was working under the greatest possible advantages, and that upward of four years had elapsed since the formation of the company without the payment of any dividend to the proprietary, the directors conceived that they would not be justified in continuing the shilling [24 cent] system, and arrangements were therefore agreed to for its alteration. The directors waited until the last moment before reluctantly adopting this step, but having sought publicity in every way, having persistently canvassed in every department of business, and having endeavored by personal solicitations of numerous active agents to attract trade, they at last saw themselves compelled to agree to a measure that was greatly antagonistic to their personal wishes, but absolutely essential for the well-being of the company, and requisite, as they believe, for the premanentpermanent interests of the telegraphing community.”
In 1865, the United Kingdom Telegraph Company joined with its competitors, the Electric and International Telegraph Company, and the British and Irish Magnetic Telegraph Company, in the following rates for 20 words, addresses free: 24 cents for distances up to 100 miles; 36 cents for distances between 100 and 200 miles; and 48 cents for distances beyond 200 miles.
In July, 1866, the directors of the United Kingdom Telegraph Company reported that in the last half-year “the company earned an amount of profit equal to 6 per cent. dividend over the whole of its share capital.”
When the United Kingdom Company had entered the field, in 1861, with the 24 cent rate, the old established companies, the Electric and International and the British and Irish Magnetic, had been compelled to adopt the 24 cent rate between all points reached by the United Kingdom Company. In February, 1863, the directors of the Electric and International Company reported that the 24 cent circuit between London, Liverpool, Manchester and Birmingham still was unremunerative. The company was losing money on every message transmitted, though the 24 cent rate had increased business to such an extent that the company had been obliged to add two wires to the circuit in question. Since the business done by means of the additional wires did not pay, the directors had charged the cost of those wires to operating expenses, not to capital account. The company did not care for the business, but could not refuse to take it. In July, 1865, the directors reported: “After a trial of four years, the experiment of a uniform shilling rate [on certain circuits] irrespective of distance, has not justified itself.”
The half yearly reports of the British and Irish Magnetic Company from 1862 to 1865 reported that “for any but very short distances,” the 24 cent tariff was “utterly unremunerative.” The effect of the rate was to absorb in unavoidable additional expenses a very large portion of the increase in revenue coming from the increase in business.