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SOME FACTS
REGARDING
TELEPHONES
Issued by the New York Telephone Company for
the information of its employees, and to give
to the public helpful facts regarding the workings
of government-owned systems abroad, and the
privately-owned systems in the United States.
FEBRUARY 27th, 1914
[Second Edition]
GOVERNMENT OWNERSHIP
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Some Facts
Regarding
Government Ownership
Of
Telephones.
Issued by The Bell Telephone Company of Pennsyl-
vania and Associated Companies for the information
of their employees, and to give to the public helpful
facts regarding the workings of government-owned
*-systems abroad, and the privately-owned systems in
the United States.
MARCH 1st, 1914.
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EXPERIENCES UNDER GOVERNMENT OWNERSHIP
1—The Awakening.
2—Failures of Government Ownership Not Confined to
Europe.
3—No Novelty of Government Ownership of Railroads in
United States.
4—The Earperience of Our Neighbor.
5—World Wide Inefficiency of Government Management.
6—Character of Some Government Ownership Arguments.
7—The Opinion of an Earpert.
8—The Managers of Government Owned Systems have no
Illusions.
RATES
9—Misleading Information on Telephone Rates.
10—Comparative Costs of Service.
11—Comparative Costs of Service.
12—Service Determines Rate.
13—Facts About New Zealand.
SERVICE
14—Speed in American Service.
15—European Long Distance Service.
16—Rapid, Reliable, Continuous Service is Found Only in
America.
17—Part Time, or Continuous Service?
18—Service Delays.
19—Complaints.
20–The Mainstay of Business.
21—The Opinion of an American Abroad.
DEVELOPMENT AND EXTENSION OF THE SERVICE
22—Government and Private Operation in the Same Field.
23—Europe Over Twenty Years Behind.
24—The Most Successful Telephone in Europe Privately
Owned.
25—The Nearer to American Standards, the Better the Service.
26—Government Now in Telegraph Business—The Results.
27–Telephones for the Masses.
28–Eartending the Service.
29—Anticipating the Public Requirements.
30—Continuous Policy.
31—Public Telephones and Mail Boaves.
32—Would the Government Pay Commissions to Druggists and
Other Public Telephone Agents?
FINANCIAL ASPECT
33—The Cost of Government Inefficiency.
34—A Recent Canadian Earperience in Government Ownership.
35—Relative Costs of American and European Telephone
Systems.
36—No Water in the Capitalization of the Bell Companies.
37—Profits of Private Companies.
38—Public Utilities Are Now Largely Owned by the Public.
39—The Financial Aspect.
40—A Panama Canal Every Ten Years.
41—Emergencies.
42—Largest Printing Office in the World.
43—The Question of Taa’es.
WELFARE OF EMPLOYEES
44—Welfare of Employees.
45—Working Conditions.
46—How Another Great Department of the Government is
Conducted. sº
47—Telephone Employees in England say the Government is
not a Good Employer.
48—The Dilemma of Government Employment.
49—Discipline.
30—The Opinion of the Canal Builder on the Civil Service.
GOVERNMENT METHODS
51—Lack of Modern Methods in Government Enterprise.
52—Antiquated Methods on Government Owned Railroads.
53—The Parcels Post and Wire Systems.
54—No Analogy between Telephone and Mail Service as Now
Conducted. f
55—Failures in Government Ownership.
56—Some Ea'amples of European Long Distance Service.
THE AWAKENING.
The same siren songs we are now hearing from government own-
ership advocates were sung several years ago to the British public.
The service was to be better—rates less—working conditions
improved.
The awakening has come.
The service is worse.
Employees are threatening a general strike because of miserable
pay and poor working conditions.
The Postmaster General is apologizing to the public for failure
to make any reductions in rates.
Has the experience of other countries no lesson for us?
FAILURES OF GOVERNMENT OWNERSHIP NOT
CONFINIED TO EUROPE.
We cannot say that the government ownership failures in other
countries would not occur with us.
The disastrous results of municipal ownership of public utilities
in many of our cities, railroad operation by several of the states, the
dishonest and inefficient methods employed on New York State road
work, the faulty planning of the new Municipal Building in New
York City, all indicate what may be expected from the operation by
the government of the vast and far more complex telephone and
telegraph systems.
NO NOVELTY OF GOVERNMENT OWNERSHIP OF
RAILROADS IN UNITED STATES.
It has probably escaped the notice of its advocates that the idea
of government ownership and operation of public utilities in this
country lacks even the element of novelty.
At least three states, North Carolina, Maryland and Texas, have
tried it.
After fifty years of political management, North Carolina leased
its railroad lines to a private company.
Maryland sold what was left of the Western Maryland to the
Goulds about eight years ago; and Texas is now trying to unload its
road upon some private company.
Not only were these roads financial failures, but they utterly
failed to adequately serve the public.
Has the past no lesson?
On January 1, 1908, the Province of Manitoba purchased the
privately owned telephone system, and began operating it under a
Telephone Commission.
The Prophecy.
The Honorable R. P. Roblin, Premier, and Attorney General
C. H. Campbell had promised better service at half the cost.
The Fulfillment.
MARCH 1908—Rates in Winnipeg for certain classes of service were
increased 25 per cent.
FEBRUARY 1909—Inferior party line service was introduced and a
slight rate reduction made. *
MARCH 1910–Chairman of the Telephone Commission declared the
rural rates inadequate.
MAY 1911—Many Long Distance rates doubled and time limit de-
creased from 3 to 2 minutes.
NovKMBER 1911—Chairman of Telephone Commission reported a
loss for the year of $150,000, without making any provision
for depreciation.
DECEMBER 1911—Announcement of increase in rates aroused a storm
of protest.
MARCH 1912–Citizens’ Committee of Winnipeg made an investiga-
tion, and reported that the proposed increase was inequitable.
JUNE 1912—Public distrust of the Telephone Commission and sus-
picions of graft forced the appointment of a Royal Com-
mission, which condemned the proposed increases on the ground
that “the system has generally been administered extrava-
gantly and that a very large saving could be made by economi-
cal management.” Telephone Commission resigned.
JULY 1912—Increases of 20 per cent. in rates for business and resi-
dences were announced, establishing a higher schedule than
that of the Bell Company before purchase by the government.
Commenting on the situation the Montreal Gazette said: Some
of the advocates of government ownership seem to have thought
that, having gotten the government to take over the service, it
would be easy to get cheap telephones by putting a part of the cost
on the general taxpayers. It is not well to put the cost of a personal
service for some of the people upon all the people.”
Has this a familiar sound?
— 4 —
WORLD WIDE IN EFFICIENCY OF GOVERNMENT
MANAGEMENT.
The trail of inefficiency in the management of state enterprises
leads from Western Canada to the British Isles, through every
country on the Continent, across Asiatic Russia, Japan, Australia,
and finally South Africa.
Moreover, the lack of success is entirely independent of the char-
acter of the enterprise.
Grain elevators and electric power plants in Canada, telephones
in England, matches in France, tobacco in Italy, coal and iron mines
in Germany, and railroads in Russia, Australia and South Africa,
are examples of inefficient government management. Even the mar-
velous efficiency of the Japanese is powerless to overcome the
handicap of government management. 35,000 citizens are today
unable to obtain service from the government telephone system
in the Japanese Capitol, and “rights” for the next vacant line are
regularly traded in upon the floor of the Tokio Stock Exchange.
In New York City, during 1913, 42,000 telephones were installed
with an average elapsed time of four and one-half days and without
installation charge to subscribers.
ARGUMENTS.
In an effort to show that our Post Office is the most efficient in
the world and our telephone system less efficient than some of the
government owned systems in Europe, Mr. Lewis resorts to the most
amazing use of statistics.
The total number of pieces of mail is divided by the total number
of government employees in the various countries. He utterly
ignores the fact that a large part of the work of handling the mail
in this country is done by employees of contractors, while abroad it is
handled by the post office employees directly. Naturally, it is not
surprising that the number of pieces of mail handled per government
employee is greater here than abroad.
The method of using the telephone statistics is equally astonish-
ing, even assuming that the statistics themselves are correct. The
total number of messages, say in Norway and this country, is divided
by the total number of employees, not only operators, but men en-
gaged in building pole lines, conduits and other construction work,
agents engaged in soliciting new business, and a large maintenance
force looking to the upkeep of the property — something sadly
neglected in government owned systems.
Again, the method of computing calls may vary widely. In
some countries every request for a telephone connection is counted;
in others, if a subscriber has talked three minutes and wants to con-
tinue the conversation he has to get another connection when he can,
and this is again counted; some countries also count the message going
through two exchanges as two messages, one for each, although it
would be one and the same conversation. Some countries compute
the number of calls per subscriber's line; others, the calls per tele-
phone station. In American statistics only actually completed con-
nections are counted, and the same conversation is counted only once,
no matter how many exchanges it may pass through, or how long its
duration. * *
Of course, in all of this talk about efficiency, not one word is
said about the quality of the service rendered. The American idea
of efficiency is that the operator be waiting to serve you—not you
waiting for the operator.
It is upon such fallacious arguments that the American public
is asked to decide this great question of government ownership of
telephone and telegraph systems.
— 6 —
THE OPINION OF AN EXPERT.
In 1906, James Dalrymple, Manager of the Glasgow Municipal
Tramways and an ardent advocate of government ownership, made
a study of conditions in this country. Upon the completion of his
studies, he reported as follows:
“I came to this country a believer in public owner-
ship. What I have seen here, and I have studied the
situation carefully, makes me realize that private owner-
ship under proper conditions is far best for the citizen
of American cities.”
THE MANAGERS OF GOVERNMENT OWNED
SYSTEMS HAVE NO II, LUSIONS.
The men who have no illusions about government ownership, as
applied to telephone business, are those engaged in operating the
government owned and European systems.
A prominent government official connected with the telephone
administration of one of these countries, recently said:—
“After my inspection of the equipment and obser-
vation of the system and the personnel of the Telephone
Company in New York, I am in a position to know
that the telephone business is not a government, but a
commercial enterprise.”
MISLEADING INFORMATION ON TELEPHONE
- RATES.
Quotations of rates for telephone service are bound to be mis-
leading when the maximum rates alone are quoted without further
explanation, leaving it to be inferred that the quoted rate is the only
rate, or is the average rate.
For example, advocates of government ownership and others
have frequently quoted the rate for a single telephone line in New
York City as $228.00.
An analysis of payment made by the subscribers for direct and
party line exchange service in New York City shows—
Less than one-half of 1 per cent. paying $228.00 or
more, and these are the very large users.
50 per cent. pay $48.00 or less.
A similar analysis of rates given for such cities as Boston, Phila-
delphia, Baltimore and Washington discloses the same condition.
COMPARATIVE COSTS OF SERVICE.
In comparing cost of service here and in Europe, advocates of
government ownership make no mention of the following:
1. Wages and other conditions of labor.
2. Absence of taxation in the case of European Gov-
ernment System.
3. Deficit resulting from operation. (British service
last year showed a loss of $5,700,000.)
4. Character of service.
Part time, instead of 24-hour service, and long delayed toll
service, such as is furnished in most of the European government
owned systems, can be furnished in America at cheaper rates than are
now necessary, IF the American public wants that class of service.
Even ignoring these very important factors, the cost to the pub-
lic here and abroad is very little different, as the latest figures, com-
piled from official sources, show:
Toll and Earchange Earchange
Earnings Earnings only
Per Station Per Station
Average State owned in 7 leading Eu-
ropean countries . . . . . . . . . . . . . . $36.89 $26.78
Average Bell Companies. . . . . . . . . . . . 41.75 30.45
Deduct taxes and make allowances for differences in purchasing
power of money here and abroad and American rates are actually
lower.
— 10 —
COMPARATIVE COSTS OF SERVICE.
The advocates of government ownership in their comparisons of
European government owned systems with those under private man-
agement fail to mention the absence of taxation in the case of the
government systems, and of course the question of the quality of the
service is treated as entirely irrelevant.
As shown by the following figures taken from official records,
the average earnings per station, here and aboard, are not materially
different: $
Total Earnings Earnings per Sta-
per Station, tion, Eachange
Country Toll and Earchange Service only
Austria . . . . . . . . . . . . . . . . $34.13 $24.96 (1912)
Belgium . . . . . . . . . . . . . . . 50.40 39.05 (1911)
France . . . . . . . . . . . . . . . . 40.77 28.61 (1912)
German Empire . . . . . . . . . 34.57 22.69 (1911)
Great Britain . . . . . . . . . . . 39.09 32.60 (1912)
Hungary . . . . . . . . . . . . . . . 41.50 30.81 (1912)
Switzerland . . . . . . . . . . . . 29.37 18.43 (1912)
Average State Owned . . . . 36.89 26.78
Bell Companies . . . . . . . . . 41.75 30.45 (1913)
This slight difference is practically made up by the one item of
taxation alone.
— 1 1 —
SERVICE DETERMINES RATE.
In no case can it be said that European users pay lower rates
and get the same service that we do. In no case does the service
measure up to the American standard, and this is true even when
the whole people are taxed for the benefit of comparatively few tele-
phone users.
— 12 —
FACTS APOUT NEW ZEALAND.
Mr. Lewis states that a twelve word telegram in New Zealand
costs 12 cents, instead of 25 cents, as with us. He did not tell you
that the 12-cent rate was for “ordinary” messages, probably corre-
sponding to our Day Letters. A cable inquiring as to rates in New
Zealand brought the following reply:—
“New Zealand Government tariffs for telegrams
within New Zealand are—(A) for urgent messages one
shilling for twelve words or less, additional words one
penny; (B) for ordinary messages sixpence for twelve
words or less, additional words one-half penny. Ad-
dress and signature counted and charged for.”
The National Debt of New Zealand, due to Socialistic schemes,
of which the government owned telegraph is a part, is $400.00 per
capita. At the same rate the National Debt of the United States
would be thirty-nine billion instead of about one billion dollars.
— 13 —
SPEED IN AMERICAN SERVICE.
A factor of good telephone service which has been most marked
in America, is promptness. To be of the greatest benefit to mankind,
it is necessary that the telephone should not only annihilate distance
but also annihilate time.
In local or intra-city service especially, the usefulness of the
telephone is impaired by delay. If a telephone connection can be
had in a few seconds, which is standard American practice, the tele-
phone will be employed ten times as often as it is used in countries
where delays of many minutes are common. The American standard
of promptness is justified by the volume of traffic it has helped
build up.
EUROPEAN LONG DISTANCE SERVICE.
Toll rates in Europe and in America can be compared as to
cheapness only after a consideration of the extent, quality, accuracy
and rapidity of communication afforded.
A long distance call in France can be made only after arranging
for an appointment. A time is set for the call. If not on hand, the
subscriber loses his place in the appointment list and must make a
new appointment. If he exceeds his time limit, the connection is cut
off while he is still talking. In many countries if a business man
wants “special service,” which compares to our regular long distance
service, he pays three times the regular toll price.
A Frenchman wishing to make an important toll call recently
had to rise at 6 o'clock in the morning in order to get a good position
on the appointment list. On another day he sought the appointment
a few hours later and was confronted with a 14-hour delay.
— 15 —
RAPID, RELIABLE, CONTINUOUS SERVICE IS
FOUND ONLY IN AMERICA.
An ideal of the American system is continuity of service.
To be most useful the telephone service should be available at all
times both day and night, and accidental breaks should be so infre-
quent and so quickly repaired, that the general reliability of the serv-
ice becomes an accepted fact. In the eyes of our foreign neighbors,
all-night telephone service is distinctly an American extravagance.
Yet when the importance of a large proportion of the night calls is
considered, the protective value of telephone service would be more
than cut in two if the exchanges were closed at night. Part time
instead of twenty-four-hour service, and long delayed toll service,
such as is furnished in most of the European government owned sys-
tems, can be furnished in America at cheaper rates than are now
necessary, if the American public wants that class of service.
— 16 —
PART TIME, OR CONTINUOUS SERVICE 2
Part time, instead of 24-hour service, and long delayed toll
service such as is furnished by most of the European systems, can be
provided for the American public at lower rates than at present, if
that class of service is desired. The constant use of the telephone as
a quick medium for transacting business and social matters makes
the change undesirable in this country where the public is used to
rapid service.
— 17 —
SERVICE DELAYS.
Rush hours in American telephone service bring to bear tremend-
ous pressure upon personnel and equipment, yet the service is un-
interrupted and is conducted as smoothly as under ordinary condi-
tions.
Post office service has no such rush hour facilities. Long lines
of people waiting impatiently for the privilege of buying a stamp
are daily sights in our post offices. Yet the post office is compared
for efficiency with privately owned telephone systems.
— 18 —
COMPLAINTS.
How effective would be complaints under government owner-
ship? The private companies investigate complaints promptly and
thoroughly, for by removing their causes, better service and more
business is possible.
There now are public service commissions as courts of resort for
complainants. Under government ownership, Congress or the Post
Office Department would be a court of last resort beyond which ap-
peal could not be taken.
The strong motive of self interest in rendering service would
be removed.
— 19 —
THE MAINSTAY OF BUSINESS.
It would be hard to find a line of business where progress would
not be seriously retarded by an impairment of the present telephone
efficiency. Each man, whatever his business may be, can very quickly
determine what it would mean to him to do without the telephone
or to put up with a service that does not measure up to the American
standard.
— 20 —
THE OPINION OF AN AMERICAN ABROAD.
A Philadelphia business man, residing this winter near Nice,
France, says in a letter to an American newspaper:
“I feel satisfied if any of the gentlemen who are advocating
government control of the telephone and telegraph lines in the United
States would come and live in France for a few months, that he would
pray for any ownership rather than that of the government.”
Americans who have had experience with the government owned
systems abroad are strong supporters of the privately owned tele-
phone systems in this country. “Ask the man who has used both.”
— 21 —
GOVERNMENT AND PRIVATE OPERATION IN THE
SAME FIELD.
The best managed railroad in France is the privately operated
Paris, Lyons and Mediterranean, and the worst, the Western, a gov-
ernment operated system. The service on this line was so bad a few
years ago that the Transatlantic Steamship Companies threatened
to abandon the port of Cherbourg.
The Swedish government operates a telephone system in Stock-
holm. So does a privately owned company. Rates for both services
are practically the same.
The government system has 25,000 subscribers.
The private system has 56,000 subscribers.
As Mr. Post would say: “There's a reason.”
— 22 —
EUROPE OVER TWENTY YEARS BEHIND.
It was an epoch in the world’s history when the Bell system
opened a long distance line between New York and Chicago and
demonstrated that speech could be transmitted for 1,000 miles across
country. Today these cities are connected by a number of such lines
and any one of the 500,000 telephones in New York can be connected
with any one of the 300,000 Bell telephones in Chicago. These
American cities were linked by the Bell system at the time of the
World's Fair, twenty years ago. The first 900 mile line in Europe
has been opened within the last year, nearly a year after the 2,000
mile line between New York and Denver was in operation.
— 23 —
THE MOST SUCCESSFUL TELEPHONE IN EUROPE
PRIVATELY OWNED.
It is a significant fact that the most successful telephone system
in Europe is operated by a private company in the capital of Den-
mark. Note the following comparison between it and the State owned
companies in other European cities of the same size:—
Telephones per
Population 100 Population
Copenhagen, Denmark . . . . . . . . 608,000 8.4
Munich, Germany . . . . . . . . . . . 606,000 5.5
Leipsic, Germany . . . . . . . . . . . . 617,000 4.6
Dresden, Germany . . . . . . . . . . . 558,000 4.3
Marseilles, France . . . . . . . . . . . . 565,000 1.4
Lyons, France . . . . . . . . . . . . . . 547,000 I.3
Antwerp, Belgium . . . . . . . . . . . 487,000 I.6
Naples, Italy . . . . . . . . . . . . . . . . 723.000 .5
Budapest, Hungary . . . . . . . . . . 880,000 2.8
— 24 —
THE NEARER TO AMERICAN STANDARDS, THE
BETTER THE SERVICE.
Sweden, Norway and Denmark have given more freedom to pri-
vate initiative than the other important European countries, so that
the American standard of telephone practice has been more closely
approached, and the telephone development in proportion to popula-
tion is greater than in any other countries of the Old World.
The development of the telephone in Sweden is not due so much
to the progressiveness of the state as to the genius of Henry Ceder-
gren, who founded the Stockholm General Telephone Company in
1882, and remained at its head until his death twenty-seven years
later. This company, now the Stockholm Telephone Company, still
operates in Stockholm and vicinity in competition with the state
system, and the company not only has twice as many telephones in
Stockholm as has the state, but it has about one-third of all the tele-
phones in Sweden. It is further worthy of note that the govern-
ment has twice petitioned Parliament for authority to acquire the
company, but each time Parliament withheld its consent on the
ground that the transaction would not be a paying proposition.
GOVERNMENT NOW IN TELEGRAPH BUSINESS—
THE RESULTS.
Many people are not aware that the government has operated a
telegraph system of 4,600 miles in Alaska for the last ten years.
This is the result:
Mile for mile charges are 280 per cent., or nearly three times
those charged by private companies in the United States; as for ex-
ample:
Distance Charge for
System Miles 10 Words
Seattle to Nome . . . . . . . Government 2,340 $3.80
Seattle to New York. . . Private 3,000 I.00
Seattle to Berlin. . . . . . . Private 5,000 2.90
Even at the high rates charged, the financial results of the gov-
ernment owned Alaska telegraph system for 1911 were as follows:
Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $344,300
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 372,800
— 26 —
TELEPHONES FOR THE MASSES.
It is argued that government ownership will extend telephone
service to the homes of the masses.
Sydney Brooks, in a London daily newspaper, contrasts the
American and European systems in this way:
“In the whole United Kingdom there are only about as many
telephones as there are in New York and Chicago.
“In all France, less than Chicago.
“In all Austria, less than Boston.
“In all Russia, less than Philadelphia.
“In all Italy, less than Los Angeles.”
During the year 1913, the net increase in just two Boroughs of
New York City was 28,000 stations, or within 1,000 of the net gain
for the year ending March 31, 1913, in the government owned system
covering the whole of Great Britain.
Which system of ownership and operation is providing telephone
service for the greater proportion of the population? .
— 27 —
EXTENDING THE SERVICE.
Widespread publicity, advertising and canvassing by private
companies, have done much to develop the use of the telephone in the
United States. The value of the service has been driven home to the
public. New ways of using the telephone have been exploited and
the people have been taught to depend more upon it with a resulting
expansion of telephone utility.
The government neither advertises nor canvasses for business.
Under federal ownership, telephone growth, which naturally makes
the service more and more valuable to all users, would proceed less
rapidly.
— 28 —
ANTICIPATING THE PUBLIC REQUIREMENTS.
In order to provide a comprehensive telephone plant to meet the
growing needs of the country served, it is necessary to make plans
years ahead. This means a permanent management and a fixed policy.
Because of the absence of this in government owned systems
we find—
35,000 citizens unable to obtain service in Tokio, and 5,000 in
Budapest.
CONTINUOUS POLICY.
The growth and development of any large public utility depends
in a large measure upon the continuous policy that takes into account
the consistent building up of the business by making careful provision
for the future.
The tenure of office of executives in the government employ is
largely controlled by the political fortunes of the party in power.
What assurance has the public that a government owned tele-
phone system would be guided by a continuous policy?
— 30 —
PUBLIC TELEPHONES AND MAIL BOXES.
If the city of New York were as inadequately supplied with
public telephone stations as it is with mail boxes, and the Telephone
Company did not provide additional facilities upon complaint of the
public, the company would be properly ordered to do so by the Public
Service Commission. But what redress has the public in the case of
the post office? Complaints of lack of letter boxes have been frequent
enough during the past years, but no result is apparent.
— 31 —
WOULD THE GOVERNMENT PAY COMMISSIONS TO
DRUGGISTS AND OTHER PUBLIC
TELEPHONE AGENTS?
In New York City the Blue Bell public telephone signs stare
one in the face wherever one may turn. In many sections of the city,
on the other hand, block after block must be traversed before one can
find the facilities for buying a stamp or mailing a letter.
By paying a commission to druggists and other retailers, the
Telephone Company has provided extensive and handy telephone
facilities for the general public.
For the neighborhood sale of postage stamps, the government
relies upon the good nature of the average corner druggist. For his
trouble the druggist receives no compensation. If the government
were to extend the same “no profit” policy to the druggist and others
who would have public telephones, a mighty shrinkage in the present
development of public telephone facilities would take place.
— 32 —
THE COST OF GOVERNMENT IN EFFICIENCY.
A few years ago a distinguished senator made the statement
which has not been seriously challenged, that the Federal Govern-
ment wasted through inefficiency $300,000,000 in the annual expendi-
ture of $1,000,000,000.
It is a part of this same government organization which the ad-
vocates of government ownership claim can operate the complex
telephone and telegraph system at a saving of one-third over the pres-
ent costs.
— 33 —
A RECENT CANADIAN EXPERIENCE IN GOVERN-
MENT OWNERSHIP.
The Canadian people were induced several years ago to consent
to the construction by the government of the National Transcon-
tinental Railway, 1,300 miles long. Recently an Investigating Com-
mission has been holding an inquest on the project, and these are
its conclusions:
1—We find that without including the money unneces-
sarily expended in building the railway east of the
St. Lawrence River, $40,000,000, at least, was
needlessly expended in the building of this road.
2—No member of the Railway Commission had any
experience or knowledge of railway building or
operation. The road standard was decided on with-
out any knowledge as to whether or not it was suit-
able for the country and on assumptions as to busi-
ness expected, which were unwarranted.
3.—The original estimate of the cost of the road was
$61,400,000.
The cost to September 30, 1911, $109,000,000.
Estimated total cost when completed $161,300,000.
The Commission finds that huge sums were made by sub-letting
and that the original forms of tenders restricted bidding to a few big
contractors, eleven firms having made about $9,000,000 without doing
a stroke of work.
— 34 —
RELATIVE COSTS OF AMERICAN AND EUROPEAN
TELEPHONE SYSTEMS.
In view of the statements of some of the government ownership
advocates that the Bell Company’s plant is overcapitalized, the fol-
lowing figures for European countries (State systems only) are signi-
ficant:
Average Investment
Country per Station Year
Austria . . . . . . . . . . . . . . . . $211.00 I912
Belgium . . . . . . . . . . . . . . . 276.00 I912
France . . . . . . . . . . . . . . . . 257.00 I912
German Empire . . . . . . . . I78.00 I9 II
Hungary . . . . . . . . . . . . . . I92.00 I912
Switzerland . . . . . . . . . . . . . I90.00 I912
U. S. Bell. . . . . . . . . . . . . . . I53.00 1913 (Jan. 1)
This in spite of the fact that labor and all material, except cop-
per, is much higher here than abroad.
— 35 —
NO WATER IN THE CAPITALIZATION OF THE BELL
COMPANIES.
That there is no water in the capitalization of the Bell Com-
panies is admitted even by the opponents of private ownership. Rep-
resentative Lewis, of Maryland, in his speech before the Republican
Club of New York City, on January 31, 1914, said:
“Be it said for the Bell Telephone System, that it is the one
great corporation in our country that has not issued tons of counter-
feit capital. Its stocks and bonds today represent the actual contri-
butions of its shareholders in money to a great common enterprise,
and we will not have that unfortunate circumstance (overcapitaliza-
tion) to deal with in the valuation of their properties.”
Not only is there no overcapitalization, but the value of the
property greatly exceeds the stocks and bonds outstanding against it.
The earnings for the year 1912 produced the moderate return of 6
percent. on this investment.
*
— 36 —
PROFITS OF PRIVATE COMPANIES.
One argument heard in favor of government ownership is the
alleged large profit made by privately owned telephone and telegraph
companies.
The reports of the Bell System for 1912, based on the method
of accounting prescribed by the Interstate Commerce Commission,
show earnings of 6 per cent. On the actual investment.
The telephone business has produced no millionaires.
— 37 —
PUBLIC UTILITIES ARE NOW LARGELY OWNED BY
THE PUBLIC.
Advocates of government ownership seem to overlook the fact
that public utilities are now largely owned by the people.
For example, more than 56,000 stockholders, men and women,
own the Bell System, and of these stockholders more than 49,000
hold less than 100 shares each. The same condition holds true in all
the large railroad systems and public utilities.
It is an axiom that “everybody’s business is nobody’s business.”
Then why assume that a telephone system owned by all the people
through their government would be more efficiently and economically
conducted than would be a system owned by a responsible group of
stockholders who are, after all, a substantial part of the general
public?
— 38 —
THE FINANCIAL ASPECT.
A federal bond issue of approximately $2,000,000,000 would
be required to purchase the telephone and telegraph system.
The federal government, it is stated, can borrow money at 3 per
cent. Its present 3 per cent. bonds are selling around par only be-
cause the issue is small. A federal bond issue of $2,000,000,000 would
be likely to place the credit of the government on a 4 per cent. basis.
It is for similar reasons that—
3 per cent. French Government bonds sell at 82.
3 per cent. German Government bonds sell at 76.
A PANAMA CANAL EVERY TEN YEARS.
The Bell System plans to spend $60,000,000 in 1914 in extend-
ing its lines and plant. Since work began on the Panama Canal in
1904, the Bell System has spent more money to extend its lines and
plant than the United States Government has spent to dig the big
ditch and buy the right of way.
Would Congress duplicate the appropriations for the Panama
Canal every ten years for the purpose of extending the telephone and
telegraph service? Has any country owning its wire service made
proportionate appropriations for this purpose?
— 40 —
EMERGENCIES.
In the winter of 1913, a severe sleet storm swept over the lake
region from Chicago to Buffalo, causing damage amounting to a
half million dollars.
It was vitally necessary for the business interests of this section
that services should be restored at the earliest possible moment.
Thousands of men and trainloads of material were at once rushed
to the affected territory. The situation was quickly met and the
services restored.
Wire using companies meet such crises every year. No red tape
has to be unwound. There is no wait until Congress passes an emer-
gency appropriation.
If the government takes over the telephone and telegraph sys-
tems, will Congress delegate authority to the Post Office Depart-
ment to spend millions for emergency demands without the customary
debate and delay in sending appropriations through the usual
channels?
— 41 —
LARGEST PRINTING OFFICE IN THE WORLD.
The Government Printing Office at Washington spent
$6,000,000 for labor and material during the fiscal year ending June
30, 1912. The official report shows that the government spent just
$18,812.35 during the same period for new and improved equipment
in the largest printing office in the world. Yet we are told by some
advocates of government ownership that the government is more
progressive than private corporations in adopting new and improved
methods.
— 42 —
THE QUESTION OF TAXES.
During 1913 the Bell System alone paid $11,300,000 in taxes to
the federal government and to the various states and municipalities.
The government pays no taxes, even on its real estate.
Government ownership would mean that the $11,300,000 now
contributed by telephone companies to the government and to the
various cities, towns and villages, would have to be raised by additional
taxation of the whole people, whether they are telephone subscribers
or not.
Deficits in a government owned system must be met by taxation
of user and non-user alike.
— 43 —
WELFARE OF EMPLOYEES.
The federal government is far behind the privately owned tele-
phone enterprises in caring for the welfare of its employees. It pro-
vides no comprehensive plan, as does the Bell System, for:-
Old Age Pensions.
Sick Benefits.
Death Benefits or Insurance.
What effect will government ownership of the telephone enter-
prise have upon the thousands now benefiting from these welfare
provisions?
— 44 —
WORKING CONDITIONS.
The Bell Telephone Company alone has been awarded four
medals by international expositions, for providing healthful, pleasant
working conditions for its employees and caring for their present and
future welfare.
Recently the Postmaster of New York City, in replying to criti-
cisms that women were not given employment, stated that the condi-
tions, sanitary and otherwise, in the New York Post Office building,
made it an unfit place for women to work in.
How long would a privately owned public utility be permitted
to maintain such conditions?
— 45 —
HOW ANOTHER GREAT DEPARTMENT OF THE
GOVERNMENT IS CONDUCTED.
Those who are interested in the matter of government manage-
ment should read the article by William Hard, in “Everybody's
Magazine” for February, 1914, dealing with the conduct of the great
patent office. Here are a few of his conclusions:
“The (Patent) Office is undermanned, underpaid, under-
equipped, and vilely housed, thwarted in its supreme service to Ameri-
can business and even perverted from that service by the costly
economy of the Congress of the United States.
“The money Congress ought to spend and does not spend in the
Patent Office is one of the heaviest burdens it lays on the business
of the country.”
The building in which the Patent Office is located is so bad
that the Commission on Economy and Efficiency said: “Any perma-
nent improvement in the work done by the office must wait upon the
provision being made for adequate office accommodations.”
“Next, having done our best to depress the Patent Office staff
by bad air and by bad light and by lack of space, we turn our atten-
tion to finding a way to disrupt it. The staff of examiners in the
Patent Office is the most important one single human element in the
whole Patent System. We reward it so meagerly that each year a
large section of it resigns to go to work for the heartless private ex-
ploiters of labor.” *
The highest reward a Patent Examiner has to look forward to
is the position of Principal Examiner. He seldom reaches this in less
than eight or ten years—more frequently twenty or thirty, and his
salary then would be just $2,700 per year.
— 46 —
TELEPHONE EMPLOYEES IN ENGLAND SAY THE
GOVERNMENT IS NOT A GOOD EMPLOYER.
Telephone workers taken over by the British Government when
it purchased the National Telephone Company met recently at Man-
chester, England, to protest against their experiences as government
employees. They declared that the government touted as the “ideal
employer,” has broken its promises to them, has underpaid them
and has made promotions on the ground of favoritism and not service.
The Manchester (Eng.) Chronicle says: “The ‘ideal employer’
is in many cases demanding lower wages and longer hours than the
old company found necessary to successfully work the system.
“When the company's employees were taken over, promotion
was promised on the basis of work done, but despite the fact they
had had in their hands an overwhelming proportion of the telephone
exchanges and lines throughout the country, very few of the superior
positions have been given to them. Out of 357 appointments in the
engineering department alone, all but 44 have been given to men
previously employed by the Post Office. Here, again, we have an
example of broken promises and favoritism unworthy of this ‘model
employer.’
“The hardship in this case is increased by the fact that the com-
pany’s employees had no say in the matter of transfer and the ma-
jority would have been delighted if the state had not annexed them.
Neither are the public any better pleased with the change, and the
net result of the transfer has been another proof of the unsatisfactory
character of the much-vaunted state service.”
Have we any reason to believe that telephone workers in this
country would be treated any better by the government as employer
than the English Government has treated their telephone worker?
— 47 —
THE DILEMMA OF GOVERNMENT EMPLOYMENT.
Government employees must either be protected by civil service
or become the prey of predatory politics. With all its merits civil
service tends to destroy individual initiative, lessen the sense of re-
sponsibility and generally makes for inefficiency.
This is a fundamental defect in the management of all govern-
ment enterprises, whether municipal, state or federal.
— 48 —
DISCIPLINE.
It is a recognized principle of good business management that
strict discipline must be maintained by executives over the force.
A large body of office holders, protected by civil service, report-
ing to executives who owe their appointments to political preferment
and who are unable to remove subordinates except by means of round-
about charges and red tape, would create a condition where it would
be difficult to maintain discipline.
A lapse in discipline in a large public utility like the telephone
system would be harmful to the rendering of the best possible service,
and under government ownership there are few safeguards against
frequent insubordination, where employees of different classes and
rank receive their appointments by different methods.
THE OPINION OF THE CANAL BUILDER ON THE
CIVIL SERVICE.
Colonel Goethals, in his letter of January 14th, addressed to
Mayor Mitchell, regarding the Police Commissionership of the City
of New York, points out the vital weakness of trying to obtain results
without the power to compel service.
“Attractive as your offer is I would be obliged to
decline it so long as the present law remains in force by
which removals from the police force are subject to re-
view, with decision based on legal evidence. In public
work of any kind efficiency can be secured only when the
service of those engaged in it is satisfactory to superiors,
and while I fully believe in the right of every man to
have a hearing, the decision of the superior as to the
character of the man’s service should be final.
“In cases where a man whose services have not been
satisfactory can be reinstated by a court of review the
effect on discipline and efficiency is most injurious. It
undermines authority, leads to insubordination, tends to
destroy the loyal co-operation which the executive au-
thority must have to secure results and makes his tenure
of office impossible.” *
This fault is inherent in the management of all government
enterprises and would itself be sufficient to wreck the service of a
government owned telephone system.
— 50 —
LACK OF MODERN METHODS IN GOVERNMENT
ENTERPRISE.
It has been suggested that the government would be quicker to
adopt new inventions and methods than would a private company.
The following extract from the preliminary report of the Joint
Commission on Business Methods of the Post Office Department and
Postal Service, February 10, 1908, is enlightening on this point:
“The work of the Department and its development
is hindered all along the line by slavish adherence to old
methods and to precedents created in previous years, and
many reforms which might otherwise be instituted are
hindered—if not entirely prevented—by appeals to the
decision of the Comptroller, made perhaps many years
ago under entirely different conditions. Then, again,
the conservatism of government officials is a generally
admitted fact. There is no inducement to employees
to suggest improvements in the service for the reason
that if these improvements result in greater efficiency
or economy of administration, they will receive little
credit, and, on the other hand, if new methods are not
successful they will be charged with the whole blame.
Moreover, to suggest improvements which will result
in economy is to create hostility among other members
of the organization, whose services may thereby be
rendered unnecessary. On the other hand, a clerk who
adheres to the routine which existed prior to his appoint-
ment will be left undisturbed and will receive credit by
performing his duties with even a slight degree of effi-
ciency and accepting without comment methods which
have been handed down from earlier generations.”
— 51 —
ANTIQUATED METHODS ON GOVERNMENT OWNED
RAILROADS.
How many people in this country know that cars are still coupled
by hand on the government railroads of Europe, and that an Inter-
national Commission this year reported against automatic couplers,
such as have been used on the American roads for many years, on
account of the expense of making the change?
Yet we are told that government management would be more
progressive than that of private ownership.
THE PARCELS POST AND WIRE SYSTEMS.
The analogy has been drawn between the Parcels Post and the
telephone and telegraph systems.
No equipment is provided by the government to handle this mail
matter. The public carries the packages to the Post Office, a private
company operates the mail wagons and delivers the packages to the
railroads, which furnish the cars and other equipment and carry them
to their destination.
The government merely sorts and routes and distributes the
packages at the receiving end.
The Post Office lacks any organization or equipment for provid-
ing telephone and telegraph service. This analogy applied even to
the telegraph business would mean that the public would deliver its
telegrams to the Post Office where they would be turned over to a
private company to be transmitted to the Post Offices at their destina-
tions. Messenger boys would deliver the telegrams.
The government could furnish the messenger boys.
NO ANALOGY BETWEEN TELEPHONE AND MAIL
SERVICE AS NOW CONDUCTED.
The Bell Companies alone own and operate, in connection with
its business, equipment to the value of $797,000,000.
The Post Office Department does not own even the post office
buildings it occupies; the mail cars belong to the railroads; the
pneumatic tubes, in cities like New York, and even the mail wagons,
are owned and operated by private companies. &
The construction and operation of the vast and complex tele-
phone system is an entirely different problem from collecting and
delivering the mail.
— 54 —
In the New York Sun of February 17th, Albert R. Gallatin
Wrote:
“Since the French Government took over the West-
ern Railway its service has depreciated and the number
of employees has greatly increased. New Zealand pur-
chased the railways with 4 per cent. bonds and the in-
vestment under government ownership has never re-
turned more than 3 per cent. This service is also miser-
able. The Italian Government is planning a large loan
to reconstruct its railways, which are a joke. It has just
come to light that $40,000,000 has been wasted by the
Canadian Government in building the eastern extension
of the Grand Trunk Pacific. The Intercolonial Railway
is operated at a loss. The Prussian Government grants
special rates to the Silesian mine owners in order to com-
pete with Welsh coal at North Sea ports. The Panama
Railroad, controlled by the United States Government,
charges more for service than any other railroad in the
world. The New York Municipal Ferry annually
shows a deficit.
“In spite of the fact that the Post Office Depart-
ment charges no interest against its investment and is
underpaying the railways for carrying the mails, it is
trying to advance the rate for carrying magazines; an-
other branch of the government is attempting at the
same time to prevent an advance in rates on our pri-
vately owned railroads, which are under the necessity
of remaining solvent. The telephone and telegraph
systems under private management in this country are
vastly superior to those owned and operated by the gov-
ernment in England and on the Continent.
“Are these facts which I have cited to be advanced
as arguments in favor of government ownership of
public utilities? Favoritism, rebating, graft, ineffi-
ciency, financial loss and depreciated service are every-
where the result of government ownership of railroads,
telephones and telegraphs.
“Will this country profit by the experience of
others? I am inclined to think it will.”
*
— 55 —
SOME EXAMPLES OF EUROPEAN LONG DISTANCE
SERVICE. *
The kind of long distance service generally furnished by Euro-
pean countries would never be tolerated by Americans.
The average time to get a connection between London and Paris
is one hour.
The average time to get a connection between Dusseldorf and
Berlin (400 miles) is 11/2 hours.
The Chamber of Commerce of Alais (France) complains that it
is impossible to obtain telephone connection with Marseilles (85
miles) and Lyons (II.5 miles) even after waiting four hours.
If the city of Chambery wants to reach Paris, the connection is
made the day after the call has been filed.
A Parisian wishing to make an important toll call to Saint-Malo
recently, rose early in the morning to get a good position on the “ap-
pointment list.” The operator told him he would have to wait 18
hours and 10 minutes to be put through—about the same time it takes
to make the journey to Saint-Malo and back on the railroad.
Aviator Gilbert, last September, flew 100 miles from Paris to
Rheims in 55 minutes. He arrived at his destination before the news
of his departure could be telephoned.
For this kind of service furnished by European countries, the
average charge, considering differences in labor and material costs
and distances covered, is greater than in the United States, where
the average time from filing an order for a long distance conversa-
tion to completion of the connection is not in excess of 5% minutes.
On two-number service between New York and Philadelphia, it is
about 70 seconds.
In some cases, in Europe, a speedier service can be obtained,
more nearly like the regular long distance service in America, but the
*
governments charge double and triple rates for the “special” pri-
vilege—far in excess of the rates charged in the United States.