We have not the statistics to show what proportion the legitimate number of messages sent bears to this fictitious number; but by referring to the Belgian table it will be seen that 692,536 inland and 306,596 international messages were sent in 1866, in a total of 1,128,005. Taking this as a fair average for the whole of Europe, we shall find that only 14,012,795 messages were sent in 1866, at an expense, in United States currency, of $15,286,911.61, or about $1.09 each.
LABOR THE PRINCIPAL ELEMENT OF EXPENSE IN OPERATING TELEGRAPHS.
The principal element of expense in our business is the cost of labor.[[24]] If we can do our work as cheaply as another party, it is clear that rates can never be reduced below the point at which receipts and expenses are equal. Any material increase of business, no matter what the rates may be, must be attended with increased expense. And when the capacity of the wires provided for a particular service is exhausted, a new question is presented by the necessity for providing additional facilities. By the extension of our lines this year west of Chicago, and by the moderate increase in the volume of our business in that section of the country, it will probably become necessary during next year to provide two additional wires between Chicago and the Atlantic coast. The cost of these wires, if erected on poles now standing, will be about $120,000. We shall also be obliged to put up an additional wire between Washington and New Orleans, and between the latter place and Louisville. The cost of maintaining the lines will be somewhat increased by the addition of these wires, and the cost of operating at each end, and looking after them at intermediate points, must also be included. How is the additional capital necessary to provide such increased facilities to be raised? By reducing rates, the result of which is, that, even if gross receipts are not diminished, the expenses are increased? Is it not by gradually increasing lines out of current profits, and as gradually reducing rates after facilities for an enlarged business have been provided?
[24]. The Western Union Telegraph Company expended $2,573,434.80 for labor for the year ending June 30, 1867. See comparison of cost of labor in Europe and the United States on page [26].
PREVAILING ERROR OF ALL THEORIZERS ON THE BUSINESS OF TELEGRAPHING.
All theorizers upon the subject of the telegraph fall into the error that the amount of business which may be done at any point (the rates being low enough) is in the ratio of population. An investigation of the subject will show this to be entirely erroneous. Three years ago, when the subject of telegraphic communication between the Eastern and Western continents was discussed by those most intimately connected with the enterprise, no one estimated the number of messages which would pass between the two continents, daily, at a rate of $50 gold for ten words, below 500. But few placed the figures so low. Most of them estimated the number at two or three times this minimum.
In 1863 Mr. Cyrus W. Field made the following remarks before the Chamber of Commerce of New York, in relation to the probable amount of business that would be done between Europe and America when communication by telegraph should be established: “To express my own opinion, from pretty large experience on the subject, I do not believe that ten cables would begin to do the work which would, in a short time, be given to it.”
At the banquet given in London, in 1864, to inaugurate the renewed attempt by the Atlantic Telegraph Company to unite Europe and America by means of the Atlantic cable, Mr. Cromwell F. Varley made the following remarks touching the amount of business that would be offered for transmission over the cable: “I feel great confidence that, when once a cable is successfully laid across the Atlantic, the demands upon it will be so great that you will have to lay one or two per annum for the next twenty years, or even more.”
Their disappointment was, therefore, very great when, after the Atlantic Cable was in operation, it was found that the daily average at the $100 tariff was but 29 messages, and at the $50 tariff, which was in operation thirteen months, it was but 64. At the $25 rate the average advanced to 131; and although the rate has been still further reduced to $16.85, the average is but 201. This illustration is sufficient to prove the fallacy of all reasoning concerning telegraph business based merely upon population. We venture the prediction that, at the rate of $5 between Europe and America, the number of messages which would pass per day would never equal the number exchanged daily between New York on one hand, and Philadelphia and Boston on the other. The reason is simply this: The number of messages which will pass within a given time between two points depends, first, upon a reasonable charge for transmission,—a charge conveniently within the means of those having occasion to communicate; and secondly and mainly, upon the number of people at either extreme having intimate business relations with those at the other. The vast commerce of the Old World and the New is not exchanged in detail, but in bulk. A few banking houses on each side make all the exchanges for both continents, and the agricultural products and the manufactures of both are also exchanged in substantially the same manner.
We have shown how fallacious is the claim that the increase of business is dependent upon the tariff, by the statistics of our own and foreign countries, by which it appears that business has sometimes largely increased at an advanced rate. We do not desire to be understood, however, as saying that low tariffs, under similar circumstances, will not bring more business than high ones. But we do say that it is susceptible of proof, that the minimum rate is undoubtedly much higher than most of those who theorize upon this subject are willing to believe. Take the case of the Atlantic Cable as an illustration. During the three months at which the tariff was $100, and the daily average of messages 29, the receipts per day were £505. During the thirteen months, at the average of 64 messages daily, the receipts were £579. During the nine months, at the average of 131 messages per day, the receipts were £635. And for the two months since the rates were reduced to $16, the daily average has been 201 messages, and the average receipts £596.