The History of the British Post Office

by Joseph Clarence Hemmeon

In all the above cases except Hull, the National Telephone Company had agreed to forego the granting of special favours to subscribers, had established intercommunication, and their licence was accordingly extended in those places to the dates of termination of the corporation licences. In Glasgow the National Telephone Company made several applications for permission to lay underground wires, but the corporation refused the concession on any terms. In spite of this advantage and the inability of the company to meet the low unlimited user rate of the corporation telephones on account of agreements with subscribers in other towns, the corporation found it advisable to sell its plant to the Post Office in 1906 for £305,000 at a capital loss of between £12,000 and £15,000. Brighton followed suit a little later for the sum of £49,000, at a loss of £2450. Swansea experienced considerable difficulty in borrowing money to extend its system on account of the refusal of the Local Government Board to grant the necessary borrowing powers. The Post Office offered £22,000 for a plant which had cost £27,173. This offer was refused by the corporation, and an agreement was concluded with the National Telephone Company in 1907 for the sale of the plant at a price sufficient to repay the whole capital. Offers were also made to Hull and Portsmouth by the department, but were refused, as they were not sufficiently high to cover expenditure.[836]

As a rule the local authorities offered an initial flat rate lower than that paid by the company's subscribers in competing centres, but most of the other rates of the corporation authorities were somewhat higher. The service offered by the public telephones was not so satisfactory as had been hoped, and the more numerous connections open to the company's subscribers formed an initial advantage which it was difficult to overcome. On the other hand, the corporations often had the advantage of underground connections which were denied to the company, but the relatively small number of the subscribers of the corporation telephones, the high cost of underground connections, the clumsy service offered in many cases, and the ability of the company to offer lower rates in competitive areas proved too much for most of the corporations which were granted licences.[837]

In the meantime the National Telephone Company had been experiencing considerable difficulty in getting permission to lay underground wires in London. In 1892, the Telegraph act of that year authorized the Postmaster-General to grant to his licencees the same way-leave powers which he enjoyed, subject to the conditions that the licencees should not exercise such powers in London without the consent of the County Council, nor in any urban district outside London without the consent of the urban authority, nor elsewhere without the consent of the County Council. In pursuance of this authority the Postmaster-General, in the agreement of the 25th of March, 1896, undertook, at the request of the company, to authorize them to exercise his way-leave powers in any exchange area. The company did not apply for the exercise of such authority in London, but an attempt was made by them to obtain the consent of the London County Council to allow their wires to be placed underground, and the work proceeded with the permission of the local road authorities in London. Negotiations with the council were fruitless, largely on account of the price asked for way-leave and the demand for lower rates. The Postmaster-General was advised that it was his duty to see that the act of 1892 was enforced, and the resulting correspondence with the company having failed of any satisfactory result, an information in the name of the Attorney-General was filed against the company, asking for a declaration that they were not entitled to proceed with their underground works in London without the authority of the Postmaster-General and the consent of the County Council. An order to that effect was made on the 24th of July, 1900. This seemed a favourable opportunity for the Postmaster-General to secure from the company certain concessions with reference to their London exchange system as well as privileges for the subscribers of the postal exchanges which had been established in London and an agreement with reference to the purchase in 1911 by the Post Office of the company's London exchanges. These concessions and privileges were finally embodied in an agreement made on the 18th of November, 1901, by which the Postmaster-General agreed to furnish such underground wires on the demand of the company as he might think reasonable and likely to be useful to the Post Office later, as well as underground wires connecting the exchanges of the Post Office with those of the company. When the subscribers of the London Postal Exchanges exceeded 10,000 in number, the company agreed to pay half of the rent of the latter wires. No terminal charges were payable for a message passing over these wires, or for a message over the trunk lines between the subscribers of the Post Office in London and those outside London, or between subscribers of the company in London and those outside London. In addition, the Postmaster-General promised to afford to the company's subscribers in London all such facilities with reference to postal, telegraphic, and telephonic communications as he granted to Post Office London subscribers and upon the same terms and conditions. He also agreed to consider all applications from the company for way-leaves on railways and canals where he enjoyed such rights, and the company promised to establish telephone communications without favour or preference. A decision was also reached fixing equal rates for the postal and company's subscribers in London, based primarily on the number of messages sent with an unmeasured rate lower than that previously in force, no revision to be made without six months' notice being given. Finally it was agreed that in 1911 or before—if the company's licence should have been previously revoked—the Postmaster-General should buy and the company should sell at its fair market value all such plant as should then be in use by the company in London and be suitable for the Post Office at that date. None of the plant was to be considered suitable unless installed with the written consent of the Postmaster-General, the question of suitability to be decided by arbitration if necessary.[838] The local authorities protested in vain against the agreement, their contention being that the committee of investigation had advised competition, whereas the government had on the other hand succeeded only in making very unsatisfactory terms with the company.[839]

In 1905, the Postmaster-General and the National Telephone Company concluded an agreement for the purchase of the company's provincial plant based upon much the same principles which had governed the London agreement. The question of purchase in the provinces was complicated by the fact that in some towns there were competing municipal telephones, a resulting duplication of plant, and an extension of the licence period beyond 1911. By the terms of the agreement, the Postmaster-General on the 31st of December, 1911, shall buy and the National Telephone Company shall sell (a) "all the plant, land, and buildings of the company brought into use with the sanction of the Postmaster-General and in use on the 31st of December, 1911, for the purpose of the telephonic business of the Company, (b) any licensed business of the company in towns where there are municipal exchanges and where the licence extends beyond 1911, (c) the private wire business of the company (for which no licence is required) in use after the 31st of December, 1911, with buildings, plant, etc., (d.) all stores and buildings suitable for use in accordance with specifications contained in the agreement, (e) all spare plant and works under construction if suitable for the telephonic business of the Post Office." The plant, land, and buildings were deemed to be brought into use with the sanction of the Postmaster-General if they were in use or being brought into use at the date of the agreement; in the case of plant to be installed, if constructed in accordance with specifications contained in the agreement and of land and buildings, if acquired or constructed with the consent of the Postmaster-General. With reference to plant not constructed in accordance with the specifications, and plant and buildings of any kind in competitive areas, the Postmaster-General reserved the right to object to buy such plant or buildings, the question of suitability in competitive areas to be settled by arbitration. The value to be paid for the company's undertaking, not in the competitive areas and not being private wire business, shall be the value on the date of purchase exclusive of any allowance for past or future profits or any consideration for compulsory sale or any other consideration. The value in competitive areas is to be determined by agreement, regard being had to net profits and to the circumstances and conditions under which the company would carry on such business after the date of sale. The value of the private wire business (apart from the plant, land, and buildings used therein) is to be three years purchase of the net profits on the average of the three years ending 31st of December, 1911. Any other property or assets of the company may be purchased by the Postmaster-General, the price to be determined by arbitration, if necessary, and, after the date of sale, the telegraphic business of the company will be carried on (whether by the company or the Postmaster-General) at the expense and for the benefit of the Postmaster-General. In the meantime the company agreed to maintain its plant in good and efficient working order, not to show favour or preference among its subscribers, to accept minimum and maximum rates, to allow intercommunication without terminal charges between their and the Post Office subscribers in the same area, and not to collect terminal charges for messages sent over the trunk lines between subscribers of the company and those of the Post Office. The Postmaster-General agreed to extend to subscribers of the company all such telegraphic and postal facilities as his own subscribers enjoyed, and to undertake underground works for the company elsewhere than in London under the same conditions as in London. An agreement was also reached that similar rates should be charged where the Postmaster-General and the company maintained competing systems. As a result, measured rates were, as a rule, substituted for the old flat rates, much to the indignation of various Chambers of Commerce in the Kingdom. In the case of complaint as to inefficient service, if the charge is held to be proved before a person appointed by the Board of Trade, and if it is not the result of a refusal to grant way-leaves, the Postmaster-General may require the company to remedy conditions in the particular area concerned or may call upon them to sell the inefficient system to him. In the first case if there is no improvement or if the second alternative has been adopted, the Postmaster-General may require immediate sale under the same terms that would have held if it had not taken place until the 31st of December, 1911.[840]

The income received by the Post Office for the fiscal year 1906-07 from the London and provincial exchanges and trunk-line business was £908,246, working expenses, £456,459, balance for depreciation, interest, etc., £451,787, leaving a balance of £19,061 over and above an estimated amount of £432,726 for depreciation and interest at three per cent on the capital expenditure. The London exchange, with a gross income of £330,512, showed a surplus of £25,586 over and above depreciation fund and interest on capital expenditure, the provincial exchanges a deficit of £15,758, and the trunk lines a surplus of £9333. The number of subscribers to the Post Office provincial exchanges (excluding Glasgow and Brighton) was 10,010. Including the Glasgow subscribers (11,103) and the Brighton subscribers (1542), the total was 22,655. Arrangements were then being made for local intercommunication between subscribers of these exchanges and those of the company in the same places. Hull and Portsmouth were the only towns maintaining municipal telephonic systems in 1907, Hull having 2128 telephones in use and Portsmouth 2553. The number of telephones in the London Post Office telephone service was 41,236, including 425 public call offices. The agreement of 1905, providing for similar rates in the provinces between exchanges of the Post Office and those of the company, was followed after considerable discussion by the announcement of the adoption of a new scale in May, 1906. The rates are now based on the principle of a measured service under which each subscriber pays according to the quality and quantity of the service desired. He may contract for any number of calls from four hundred upward, and he may share a line with another subscriber at a reduced rate, or he may rent a line for his own exclusive use.[841]

CHAPTER XII

CONCLUSION

The important points in the history of the British Post Office are necessarily somewhat obscured by the great mass of less important characteristics which accompanied its development. Organized at the beginning of the sixteenth century as a means for the conveyance of state letters, its messengers, by tacit consent, were allowed to carry the letters of private individuals. The advantage so afforded for the control of seditious correspondence led to the monopolistic proclamations of the closing years of the sixteenth and the opening years of the seventeenth century. Before 1635 the state obtained no direct revenue for the conveyance of private letters. The messengers or postmen who were supposed to be paid by the state, derived the larger part of their income from the postage on these letters and from letting horses to travellers.

The object in retaining for the Royal Posts the sole right to carry the letters of private individuals assumed a new form in the seventeenth century. Witherings showed that by diverting the postage on private letters from the postmen to the state the Post Office might be made self-supporting. Legal rates were imposed, letters were carried at a much higher speed, and the system of packet posts was extended over the great roads of England. The supervision of private correspondence became a matter of only secondary importance. The struggle between the King and Parliament resulted in securing popular control over the posts of the kingdom. At the same time, during the political unrest, competing systems of posts were repressed with difficulty. The inability of government officials to meet the increasing needs of a growing metropolis led to the establishment of a Penny Post in London by Dockwra, a private individual.