GIFT OF 
 
LEWIS -SYLVAN DEBATE 
 
 ON 
 
 GOVERNMENT OWNERSHIP 
 OF TELEPHONES AND TELEGRAPHS 
 
 Giving Speech of Mr. T. P. Sylvan, Assistant to Vice-President, 
 New York Telephone Company, in Debate with the Hon. 
 David J. Lewis, Representative from Maryland, 
 before the Providence Economic Club, Provi- 
 dence, Rhode Island, April 22, 1914. 
 
 / 
 
 rt? : 
 
 
 American Telephone and Telegraph Company 
 
 Commercial Engineer's Office 
 New York 
 

 
Following is the address of Mr. T. P. Sylvan, Assistant to Vice- 
 President, New York Telephone Company, in a debate 
 with Congressman David J. Lewis, of Maryland, held be- 
 fore the Providence Economic Club, Providence, Rhode 
 Island, April 22, 1914. Owing to the limitation of time, a 
 number of quotations given here in full were merely re- 
 ferred to in the abstract in the actual delivery of the address: 
 
 Mr. President and Members of the Economic Club: 
 
 I trust you will bear with me because I have got somewhat of a 
 cold, but I shall try to make myself heard. It is indeed a pleasure to 
 come to a gathering of this kind and see so many people interested in 
 this subject, because, from my way of looking at it, all that we need is 
 a careful consideration of this question. Like Mr. Lewis, we too, are 
 content to appeal to the good sense of the people. We have got to 
 approach this thing in a calm and deliberate manner. There is no 
 necessity of becoming excited. The country is not particularly suffer- 
 ing in the meantime. 
 
 No Stockholders' Brief 
 
 I do not come here tonight with a brief for the stockholders of 
 the Bell System. Our organization, as Mr. Lewis himself has stated, 
 in his address before the Republican Club in New York City last Jan- 
 uary, is one of the few in the country whose securities are free from 
 water or inflation. 
 
 His words were: 
 
 "Be it said for the Bell System that it is the one great corporation in our 
 country that has not issued tons of counterfeit capital. Its stocks and bonds 
 to-day represent the actual contributions of its shareholders in money to a 
 great common enterprise, and we will not have that unfortunate circumstance 
 to deal with in the valuation of their properties." 
 
 The capitalization of the Bell System is based upon honest invest- 
 ment, and the actual value of the property is considerably in excess of 
 the par value of the securities ; so that if, after a calm and painstaking 
 investigation, the Government should decide to take over the property 
 of the Bell System, it would have no trouble from that score, nor would 
 the stockholders suffer any loss save the temporary inconvenience of 
 reinvesting their funds, which would be returned to them intact. 
 
 3 
 
 347521 
 
Legal Objections Not Considered 
 
 Nor do I approach this subject from the legal standpoint. To be 
 sure, the legal problem involved is by no means unclouded, and pre- 
 sents a number of very grave questions whose determination is far 
 from simple. Are the State of Rhode Island and the City of Provi- 
 dence, for instance, ready to give up their control and supervision 
 over so important a part of their affairs as the telephone, and allow 
 the Federal Government to step in and silence their authority forever, 
 eliminating, at the same time, the important source of revenue from 
 taxation, which is now being derived from the telephone property? 
 However, I do not propose to take up this and other similarly import- 
 ant questions, because, I am sure, a consideration of the purely eco- 
 nomic aspects of the subject will decide this case in favor of the present 
 system of regulated private ownership, and make unnecessary the con- 
 sideration of the legal or other objections. 
 
 Efficient Service the Main Question 
 
 I approach this subject from a far broader point of view; from 
 the standpoint of service efficiency of service. That is the basis upon 
 which this whole matter of government ownership must be settled. 
 And when I say "efficiency," I mean, of course, the quality of the 
 service and the price of the service, for, after all, these are the ques- 
 tions in which the public concerns itself in its attitude toward the 
 telephone. 
 
 Now in this question of efficiency of service, the interests of the 
 public, of course, very properly take first place ; and we, the employees, 
 for I number myself one of an army of 150,000 who are serving the 
 public in this matter must necessarily take the second place. From 
 my way of looking at this telephone proposition, it is not a question of 
 ownership so much as it is a question of the organization itself a 
 great big machine that is serving you to-day ; and that machine consists 
 of this army of employees, and anything which will make that machine 
 more efficient and which will permit it to work more efficiently and 
 more economically than it does to-day, is to be commended, but any- 
 thing which will make that machine run more slowly or with more 
 difficulty, must be discarded. To show how important a factor is the 
 personnel of the organization, as distinguished from the owner the 
 stock and bond holder I might mention that the Bell System to-day- 
 pays out, in the form of salaries and wages, 50 % of the money it 
 receives from the public, and the amount paid out in the form of inter- 
 est and dividends represented, during the last year, but 4.92% less 
 than 5% upon the actual plant in service. Now, I say, gentlemen, a 
 lot of credit is due to great men like Mr. Vail and Mr. Lewis is will- 
 ing to and does give him a measure of that credit when you stop to 
 think that, in reducing this interest charge to 4.92%, he has done so by 
 taking advantage of the credit of our Company. More than $26,- 
 000,000 has been turned into the treasury of the American Telephone 
 and Telegraph Company by the use of convertible bonds at times when 
 our credit warranted getting prices in excess of par. It is by this 
 
 4 
 
means that we have been enabled to cut down the interest charges on 
 investment to the low figure of 4.92% on the value of the plant in 
 service. While it is true that &% is paid on some of our securities, less 
 is paid on bonds and other securities, and nothing at all on the $26,- 
 000,000 just mentioned. 
 
 Public Service Motive Qualified 
 
 Mr. Lewis lays great stress upon the "public service motive" as 
 distinguished from the "private service motive," and attempts to show 
 how the "public service motive" has dominated the administration of 
 the Post Office Department. Now I say that the "public service mo- 
 tive," in its narrower sense, which absolutely ignores questions of cost 
 or distribution of cost burden, is inherently wrong, and I am glad that 
 our present Postmaster General, unlike Mr. Lewis, has had the dis- 
 cernment to temper and qualify the "public service motive" as he did 
 in his last annual report, when he brought out the fact that the experi- 
 ment of free mail delivery in villages had been abandoned, because he 
 found that more just and equitable results could be obtained by having 
 the people call for their own mail, rather than having the underpaid 
 carriers brin^ it to them. On page 34 of his last annual report, the 
 Postmaster General says: 
 
 "The results attained during the year are believed not to warrant the con- 
 tinuance or extension of village delivery. There is no such need or demand 
 for free delivery of mail in small towns and villages as there is in cities and 
 rural districts, and its establishment does not occasion any appreciable increase 
 in the use of the mails. An economical administration of such a service would 
 require the limiting of delivery in nearly every instance to one a day and the 
 employment of carriers at salaries lower than those paid to city and rural 
 carriers. Such service is regarded as inferior by the patrons, who in such com- 
 munities live near the post office and are in the habit of calling two or three 
 times a day for their mail. The low salaries of the carriers, moreover, would 
 not conduce to efficient service." 
 
 Public Insured Proper Treatment by Regulation 
 
 On the other hand, the so-called commercial motive, in its narrow- 
 est sense in the sense that it looks merely to the immediate profit and 
 disregards those considerations of public service which make for per- 
 manency and secure the establishment of good will is equally wrong. 
 We, and all other progressive concerns, have long since learned that 
 our most valuable asset is not an immediate and excessive profit, dic- 
 tated by any narrow or selfish policy to which Mr. Lewis refers in his 
 exposition of the "private service motive," but a continuous fair profit, 
 and a contented public. A significant factor, however, which Mr. 
 Lewis, in all his remarks, seems to have ignored, is that the public 
 itself has recognized this principle, and, instead of leaving it to the 
 good sense of the corporation to enforce it, has enforced the principle 
 itself ; has instituted a system of proper public regulation of utilities, 
 to the end that there may be a blending of the "public service motive" 
 with the "private service motive," whereby the best results can be and 
 have been most happily obtained. The public has taken up, if you 
 
 5 
 
please, that principle which Mr. Adams pronounced way back in 1887, 
 and which Mr. Lewis appears to have only just discovered, and has 
 said that these large institutions that serve the public must not be left 
 unregulated. The public has not taken it up as a measure of ill-will 
 toward the companies, nor as any evidence of a crying necessity, but 
 with the idea of equal protection to public and public utility alike. It 
 said, in substance, "We are going to protect the utilities in the exercise 
 of their functions, so long as they properly serve the public." In prac- 
 tically every State of the Union to-day, we have these regulative bodies 
 as a part of the fundamental law. As an instance of protection to the 
 utility, you have got to prove "public necessity" to the Commission, 
 before you can enter a field already served, in the proper meaning of 
 the word. As an instance of protection to the public, you have the 
 Interstate Commerce Commission, with its tremendous power, illustra- 
 ted to-day in its control of the railroad situation, with the railroads 
 appealing for an increase in rates not a cent of which can be granted 
 without the approval of the Commission. 
 
 Now, I say that the public has taken this matter in hand, and 
 decided that these public regulative bodies shall first be considered 
 and consulted, before the utility can take any step affecting the rights 
 of the public. They can be made use of by every citizen. There is 
 absolutely no red tape. You do not have to employ an attorney. You 
 write a letter and get a hearing. And that is all there is to it. The 
 Commission sits as a public tribunal and metes out justice in exact pro- 
 portion as is merited by the complaint. 
 
 So that, in all this talk about "public service motive" and "private 
 service motive," we must remember that the public has recognized, and 
 has enacted into its fundamental laws, the principle that a "public serv- 
 ice motive" which runs counter to good business sense, which ignores 
 questions of price and cost, (without which you cannot determine how 
 efficiently and economically your property is operated), is just as wrong 
 as the "private service motive," which recognizes immediate profit, 
 and that alone. 
 
 Furthermore, we have something to-day that I am glad we have, 
 and that is potential competition, and it is something that the people 
 want, and must retain, because I can conceive how there may come a 
 time when a utility, governmental or private, by reason of a change in 
 personnel, may lose public support and confidence. In such a case, 
 under our present laws as they stand to-day, the public has recourse to 
 the ever present competition which may be changed to actual competi- 
 tion when the community feels that matters have come to such a pass 
 as to make such a change desirable, and this potential competition is 
 one of the strongest weapons which the public has to defend itself 
 against any such emergencies as may arise in the course of time. 
 
 Regulation Should Be Given Fair Trial 
 
 Now, the only way Mr. Lewis or any one else can ignore this 
 question, is by saying, fundamentally, that regulation has proven a 
 failure. And how can any man in this country, with regulation prac- 
 
 6 
 
tically a new thing, take that stand? To adopt this stand, one must 
 entirely ignore the present tendency of our administration; must say 
 that all the efforts now being directed by the public in improving and 
 strengthening our machinery of public regulation are purely so much 
 wasted effort ; that Congress, itself, is wasting the public funds upon 
 a fruitless task in its work, begun a short time ago, through the Inter- 
 State Commerce Commission, of undertaking the valuation of all tele- 
 phone and telegraph companies in this country, a task which the 
 Commission is now engaged upon, and for which a great deal of time 
 must necessarily be expended. To take such a stand, one must be 
 ready to condemn the whole scheme of public regulation at its very 
 inception ; declare that, although in its formative stage, it has failed in 
 its mission. That is something I cannot understand. Mr. Lewis knows 
 that in his own home State, the Public Service Commission is to-day 
 engaged in a state-wide rate investigation, to determine upon the pro- 
 priety of the scheme of state-wide telephone rates, and that the same 
 is being done in the State of Pennsylvania, and elsewhere, and that an 
 honest effort is being made, with the cooperation of the Telephone 
 Company and the Public Service Commission, to determine upon a fair 
 valuation, and to reach an adjudication of what is a proper and reason- 
 able rate for reasonable service. On the part of the Company there is 
 nothing but an honest effort to submit to a question of justice, nothing 
 but the laying of the cards on the table so that the public may see and 
 judge, and, on the part of the Commission there is nothing but a pains- 
 taking and scientific effort to base action upon knowledge, and knowl- 
 edge alone. Will Mr. Lewis say that all this is idle and fruitless? 
 
 Complete Unregulated Monopoly Proposed by Mr. Lewis 
 
 But if we change all this change our fundamental and painstak- 
 ingly w r orked out plan, which the public, in its wisdom has set up 
 where do we land? We not only lose this scheme of control and regu- 
 lation but see what we substitute. Not long ago, the Attorney Gen- 
 eral, with a great deal of pride, pried apart the telephone and the tele- 
 graph on the sole assumption that those two were competitive services, 
 and should not be under one head. This cost the American Telephone 
 and Telegraph Company a good deal, but, as decent citizens, we obeyed 
 the order without protest. We separated. And the President of the 
 United States came out in a hearty public commendation of this action. 
 Now comes our friend Mr. Lewis and seeks, not only to re-unite the 
 telephone and the telegraph into one agency, but to amalgamate the two 
 with the postal service, so that the three agencies, which, according to 
 the views of the administration, are to-day in a measure competing 
 and I might say competing in the sense that to-day you have the choice 
 open to you to send your communication by first-class mail, telegram 
 or telephone, as you please these three conveniences are to be lumped 
 together into one service, and what was wrong on the part of private 
 companies, is to become right on the part of the Government. You are 
 to have absolutely no chance for protest or appeal to commissions or 
 
 7 
 
courts. If you are dissatisfied with the mail and want to use the tele- 
 gram, you go to the Government ; if you are dissatisfied with the tele- 
 gram, and want to use the telephone, you go to the Government ; and 
 if a condition of public service arises where, from a series of accumu- 
 lated abuses, the public is seeking relief, nothing short of a political 
 revolution will secure the necessary attention. 
 
 Deliver Us From Politics 
 
 Gentlemen, I have worked for many years in telephoning, and I have 
 never yet had my "boss" ask me what my party was or which way I 
 intended to vote. I tell you it is a serious matter if we are to add to 
 the many questions before the public to-day, such as the monopoly 
 question, the tariff question, the money question, and many others, on 
 top of them the question of local telephone service of your telephone 
 service, for instance, here in Providence. So that you find yourself in 
 a situation, say, where, if the man whom you have sent to Washington 
 to represent you because he stands for all you hold dear on questions 
 of tariff, does not happen to suit on the post office and telephone propo- 
 sition, you have just got to take the telephone and let the tariff go, or 
 take the tariff and let the telephone go. To say the least, this is an 
 exigency which may arise if the Government of the United States 
 claims a monopoly on all means of communication. 
 
 Present Conditions Right 
 
 Now I say that, in the face of present conditions, Mr. Lewis and 
 everybody else must acknowledge that rates in this country and con- 
 ditions of telephone service are right. If they are not right, he has 
 access to the Interstate Commerce Commission, and practically every 
 State commission in the country, to see that they are made right. This 
 is not merely his privilege, it is his duty as a citizen and it is anybody's 
 duty that has any complaint against telephone rates or telephone serv- 
 ice, to go before the Commission to secure a proper determination of 
 the matter. So I say I do not care what comparison Mr. Lewis makes 
 as to foreign rates, the rates here should be assumed to be right until 
 otherwise determined. They have been filed with the Commission by 
 the Company, and the Company stands ready to-day to meet any criti- 
 cism manfully and fairly and to make or accept any change or pro- 
 vision that is proven just and reasonable. Now, gentlemen, remember 
 that in your public service regulation you have been clean, fair and 
 decent. You have insisted that whatever action is taken shall be taken 
 only upon thorough investigation, to the end that no action shall be 
 taken except as it is preceded by exact knowledge. You have said that 
 our earnings shall not be based on water, on error, mistake, on ineffi- 
 cient management or excessive cost, but that they shall be based upon 
 the fair value of the property used and useful in the service. Can any 
 one claim a basis fairer than that for rate making? 
 
Public Approve Service 
 
 Not only are telephone rates and conditions of service as they 
 should be, sanctioned by the public, through its regularly constituted 
 public service tribunals, but the public has shown, by the best test 
 possible the use of the service the extent to which the telephone 
 service has met with its approval. I mean by this that when it conies to 
 development, the United States is so far in the lead over countries 
 where government ownership obtains, that comparisons of telephone 
 development are almost laughable. You will remember very clearly 
 that Mr. Lewis made the statement just before he sat down that it was 
 our great and noble general, Theodore N. Vail, who laid down the 
 slogan for his army to follow, that he would not rest content with the 
 development of our telephone service until there was a telephone in 
 every man's house. That was the slogan of our system long ago ; that 
 is the goal we have been trying to reach for years. That is to-day our 
 aim, and I propose to show you that we have come nearer to this goal 
 than any other country on the face of the earth. 
 
 United States Telephone Center of World 
 
 There are, to-day, in this country, upwards of 9,000,000 telephones. 
 The United States, with less than 6% of the world's population, has 
 more than 65% of the world's telephone development. Europe, with 
 four times the population of the United States, has less than one-half 
 the number of telephones. Not so bad, Mr. Lewis, for private enter- 
 prise. 
 
 The United States, according to the census just published, has nine 
 telephones per hundred inhabitants, and has gained, during the last 
 year, nearly as many stations as Great Britain has to-day in its entire 
 system. Great Britain, by the way, has \y 2 telephones per hundred 
 inhabitants, or one-sixth of our telephone development. Germany has 
 two telephones per hundred inhabitants; Netherlands two telephones 
 per hundred inhabitants; Switzerland two telephones per hundred; 
 Belgium four-fifths of a telephone per hundred ; France four-sixths of 
 a telephone per hundred. The entire country of France has about the 
 same number of telephones as we have in New York City alone. Not 
 so bad, Mr. Lewis, for private enterprise. 
 
 United States Service Diversified 
 
 And, mind you, this development has not been obtained by skim- 
 ming the cream off the milk, as has been done by governments in the 
 foreign countries, under the "public service motive." Let me show you 
 how we, actuated, as Mr. Lewis would say, by the modern "private serv- 
 ice motive," have taken care of the outlying and rural districts, as well 
 as our big cities. There is a gentleman with me here to-night who 
 formerly worked in Indianapolis, and who, years ago, tramped through 
 Indiana, and his sole mission was to open up outlying sections and to 
 establish rural telephone business long before the Post Office Depart- 
 ment thought these sections worthy of rural mail routes. And, mark 
 
 9 
 
this, Mr. Lewis, in the United States, with our so-called "private serv- 
 ice motive," 19J^% of our exchanges have from 50 to 100 stations; 
 25.8% have from 100 to 200 stations, and 13.1% have from 200 to 300 
 stations. In other words, about 60% of our telephone development is 
 to be found in exchanges of 300 stations or less. Compare this, if you 
 will, with the urban and rural development of foreign governmental 
 telephone systems, where the average rural development represents but 
 21.2% of the corresponding urban development. How about this, Mr. 
 Lewis, as an example of your "public service motive?" Why, in our 
 State of Iowa, which is highly rural, the density of development is 
 greater than in any other part of the United States. How about this, 
 Mr. Lewis, as an example of your "private service motive?" 
 
 Universal Service Slogan 
 
 Now we have been accused not by Mr. Lewis, I am glad to say, 
 but by some of his friends that we have been remiss in connecting 
 with other companies. I want to say that for fifteen years I have been 
 out making connecting contracts with other companies, and now, as a 
 part of our scheme of universal service, which some thoughtless people 
 have mistaken for monoply which we have never desired I say we 
 connect with nearly 3,000,000 stations operated independently and not 
 controlled by the Bell Company. We have been striving, as I say, for 
 universal service, not universal ownership. The song Mr. Vail has 
 sung from the start has been "universal service ;" in other words, one 
 system, the idea being that every telephone in the United States may 
 be the center of a system, and that isolation shall be wiped out as 
 rapidly as is humanly possible. Through the aid of our friend, the 
 Attorney General, this movement, in the direction of one complete 
 system of universal service, has received a new impetus by the new 
 arrangement agreed upon for connection with the so-called competitive 
 exchanges. We shall soon, therefore, realize the grand spectacle of one 
 system with universal service to more than nine millions of telephones. 
 Not so bad for private enterprise. 
 
 Relative Use of Telephone a Good Test 
 
 Now with nine million telephones in service in this country, Mr. 
 Lewis will have to admit that we have a pretty fair basis of comparison 
 with foreign countries, and I am afraid Mr. Lewis would find it rather 
 hard to fit this condition into his theories of "public service motive" 
 and "private service motive." But this is not all : you can talk as much 
 as you please about figures and foreign lands, but there is one com- 
 parison which, to me, seems very significant : when considering first- 
 class mail matter, telephones, and telegraphs as alternative means of 
 communication in Europe, what do we find? We find that in Europe 
 71.2% of all such communication travels by mail. The corresponding 
 figure in the United States where competitive conditions prevail, is 
 39.4% by first-class mail. And when we come to the telephone, we 
 find that of the total communications in Europe, 27.3% go by telephone. 
 In the United States the percentage of total communications that go by 
 
 10 
 
telephone is 60.2%. Not so bad, Mr. Lewis, for the poor despised 
 "private service motive" telephone. After all, Mr. Lewis, it is service 
 that counts ; not theories. The proof of the pudding is in the eating 
 is it not, Mr. Lewis? 
 
 There is one more point about Mr. Lewis' theory of "public service 
 motive" and "private service motive" that I should like to touch upon, 
 if I had time, and that is Mr. Lewis' example of the Chicago and Mil- 
 waukee rate case. I am rather surprised that Mr. Lewis should have 
 mentioned this case again, in view of the fact that he must have seen 
 how utterly unfair this example was, if he read the last annual report 
 of President Vail. Here is the true story, as it appeared in President 
 Vail's last annual report, of The Chicago & Milwaukee Telegraph Line, 
 which Mr. Lewis picked out as an example of the viciousness of the 
 "private service motive" : 
 
 "The Chicago & Milwaukee telegraph has been set up as an example of the 
 evils of private operation. Why this single line of some fifty miles in length 
 should have been selected is difficult to understand. Any line situated under 
 such favorable conditions, doing business only between two large cities, should 
 and could be operated at rates which could not apply to lines or systems which 
 take business from and to all points, while the peculiar conditions under which 
 this particular line operated put it absolutely outside of comparison whether 
 with other lines or with any system. The history of this company is well 
 known, and if not known to those who have used it as an illustration, it could 
 have been obtained with little effort. 
 
 "Built in 1878 by some linemen as a speculation, it was sold to some mem- 
 bers of the boards of trade of Chicago and Milwaukee and incorporated with 
 a stock of $50,000. The business of this line was confined almost exclusively 
 to messages from floor to floor of the two boards, to news service and to leas- 
 ing private lines. While it accepted other service, it had no organisation to, 
 and did not deliver or collect messages except by telephone. The company ap- 
 parently made large profits, but it must have been at the expense of mainte- 
 nance and depreciation, for later on the company was reorganized with a capi- 
 tal stock of $50,000 and $50,000 of bonds, and the lines reconstructed. This 
 new company operated until 1905, when it went into receivership and the lines 
 were operated by the receiver until 1907, when it was offered for sale, and the 
 Chicago and the Wisconsin Telephone Companies needing additional lines, pur- 
 chased it in connection with the American Telephone and Telegraph Company, 
 for toll and long-distance business. This was five years before an interest in 
 the Western Union was acquired or contemplated. 
 
 "The lines are now used for telephone business principally. The commer- 
 cial experience and history of this line are not such as make it a good argument 
 for lower telegraph rates, either under private or government operation, and 
 even under such favorable auspices its experience was certainly not such as 
 would encourage private enterprise in another attempt, although the field is 
 open to all." 
 
 Not Yet Through Growing 
 
 Now we have been accused of having reached the zenith of our 
 development; that under private ownership we won't go any further. 
 I want to say to Mr. Lewis that we are only beginning to unfold the 
 possibilities of our development. Last year we expended on the Bell 
 System $55,000,000 for additions to plant; this year our budget calls 
 for $60,000,000. And we are going to keep right on developing, going 
 forward, if only the public will let us by continuing their encourage- 
 ment. 
 
 11 
 
Lewis Figures Analyzed 
 
 And now as to the comparisons of efficiency and rates which Mr. 
 Lewis has made. You yourselves know how easy it is to prove any- 
 thing by stretching statistics this way or that. Figures are rather dry 
 at best, but I want to say for your information that we have compiled 
 a study of the comparisons which Mr. Lewis has made as to efficiency 
 and rates between the United States and foreign countries. If you care 
 to, you can obtain copies of this at the close of this discussion. You 
 will see, I think, how misleading and unwarranted are the statistics 
 which Mr. Lewis has presented, and upon which he has attempted to 
 make his case for Government Ownership ; you will see how artificial 
 and unreliable is the fabric of statistics which has been constructed, and 
 you will find that our exposition of this fact is not merely controversial, 
 but is based upon official information of the highest sort, and this in- 
 formation is not only cited in each case in this study, but we are ready 
 to have anyone who desires, including Mr. Lewis, verify the informa- 
 tion by recourse to our files. 
 
 Peculiar Methods 
 
 The funny thing about these statistics is, that the method Mr. 
 Lewis adopted in figuring efficiency, was to take the total number of 
 messages and divide that by the total number of employees engaged 
 in each service, and then to call the result the showing of efficiency 
 on the part of the service. You can see for yourself how impos- 
 sible such a method is, in order to get a true showing for 
 efficiency. For one thing, we, in this country, unlike the government 
 systems^ of foreign countries, as you will see later, are constantly 
 modernizing our plant, and looking ahead into the future, and by this 
 fact alone we have been penalized by Mr. Lewis' efficiency methods, 
 because we have a lot of engineers and a lot of men constantly en- 
 gaged in this advance construction. Mr. Lewis had no difficulty in 
 picking out the number of our people working, and he said, "We will 
 count you all." I suppose if we had dropped this large force of men 
 who are engaged in advance construction, who are engaged in work 
 which will not show up, perhaps, for years to come, we could have 
 shown, according to Mr. Lewis, a much higher "efficiency," because 
 the fewer people you have on the job, the higher the efficiency. If we 
 could cut down all our employees, during the coming year, for instance, 
 who are not engaged directly in telephone operating, we would then, 
 according to Mr. Lewis, show a marvelous efficiency. 
 
 But when Mr. Lewis came to foreign countries, he found a pecu- 
 liar situation. If you will look at the report which was prepared by 
 the Post Office Department recently, and submitted by Mr. Burleson 
 to Congress, you will find that the figures for foreign telephone and 
 telegraph and post office systems are presented with barrels of salt, 
 by way of foot notes, and these foot notes practically say, in effect, that 
 you cannot determine anything as to the results of operation or the 
 number of employees in the service, because the post office and the tele- 
 graph and the telephone are operated jointly, and their results cannot 
 
 12 
 
be shown separately. For instance, in Norway, most of the telephone 
 employees also perform mail and telegraph duties, and a very small 
 portion of the whole are engaged solely in telephone work. Now to 
 give you an idea of how simple Mr. Lewis found the job of measuring 
 efficiency under such circumstances he simply took the total number 
 of telephone messages for Norway, and then divided that by the 
 number of employees who did telephone work exclusively and the 
 result purported to show what Government Ownership does for the 
 people. 
 
 Our Economy Shown by Construction Cost 
 
 Well, gentlemen, despite the fact that we have been keeping up pur 
 plant all the time, that we have been engaged in advance construction, 
 far into the future, that we have changed from the grounded to the 
 aerial circuits, and from the aerial to the underground as fast as we 
 could, and that we have not, as they did in European countries, forced 
 the aid of municipalities to help in the matter ; despite the fact that we 
 have kept in advance of the march of progress, that great changes have 
 been made in cable construction, cables being laid underground all the 
 way from Boston to Washington; despite the fact that we could not, 
 like foreign countries, confiscate property and rights of way, but had to 
 pay good hard dollars for them, let us see how our real efficiency shows 
 up in the way of costs in this country, including all the long distance, 
 underground and spare plant because we have a good bit of spare 
 plant. You would not have to do, for instance, as they do in Tokio, 
 Japan, where there are 20,000 poor Japs seeking telephone service, who 
 have to get in line and wait their turn in order to get the privilege of 
 subscribing to the government service, and who, so valuable has be- 
 come the right to the first positions in the line, are trading these rights 
 to subscribe for telephone service on the stock exchange and, in some 
 cases, bequeathing them as valuable assets in their wills. For you see, 
 Japan has no money at present for telephones ; she needs battleships 
 battleships come first in Japan. But as I say, despite all this prepared- 
 ness of the telephone in this country, and the fact that we have attended 
 to telephone needs, present and future, to a far greater extent than has 
 been possible under the foreign governmental systems, the plant of the 
 Bell System, the American Telephone and Telegraph Company and its 
 subsidiaries, including long distance lines, stands us to-day at $153 per 
 station. Australia stands at $163 per station $10 higher; Germany, 
 $178 $25 higher; Switzerland, $192 $40 higher; Hungary, $193 
 $40 higher ; Austria, $213 $60 higher ; France, $253 $100 higher, and 
 Belgium, $278 $125 higher. Not so bad, Mr. Lewis, for the efficiency 
 of private enterprise. 
 
 Some Exchange Rate Comparisons 
 
 Now, Mr. Lewis has had quite a bit to say about telephone rates. 
 The question of rates is one of the most involved and technical in con- 
 nection with the telephone business. I have already shown you how the 
 public has dealt with the telephone in regard to rates, through public 
 service regulation, and the stand we have taken on the subject. We 
 
 13 
 
9 
 
 are willing, at any and all times, to change our rates to conform to any 
 basis demonstrated by investigation to be more reasonable than the 
 present. We are just as interested in a proper solution of this question 
 as any one, and I submit that I have made it clear that, so far as in- 
 vestigation has shown, rates in this country are as they should be. But 
 now what sort of rate comparisons have been made with foreign coun- 
 tries ? Well, some of the rate statistics used by Mr. Lewis came from 
 a source pretty badly tainted. I think he knows what I mean. And 
 a favorite method of making comparisons is to take a big city, say like 
 New York, and take your maximum business measured rate, and then 
 stick that up on your flag and wave it around as the New York rate, 
 and compare that rate with the smallest possible rate in other cities, 
 and then talk about extortionate and unfair rates. Now what is the use 
 of comparing rates this way ? It is not fair ; it is not honest, because 
 the idea is not, What is the rate for one particular kind of service? 
 but, What do the people of that city pay for telephone service? You 
 have got to take into account not only the size of the exchanges, but 
 the number of subscribers using the service, and above all the average 
 rate paid. And if you do that, you find some such comparisons as these : 
 
 The minimum rate in The Hague is $24. In San Antonio, Texas, 
 an exchange of about the same size, it is $18. 78% of the San Antonio 
 subscribers pay not more than the minimum rate in The Hague, and 
 most of them pay less. 
 
 The Omaha, Nebraska, exchange has about the same number of 
 subscribers as Tokio (you will remember Tokio). 79% of the sub- 
 scribers pay less than the minimum rate in Tokio. 
 
 Amsterdam, Holland, has about the same number of subscribers 
 as Rochester, New York. 77% of the Rochester subscribers pay less 
 than the minimum rate in Amsterdam. 
 
 Rotterdam has about the same number of subscribers as St. Joseph, 
 Missouri. 81% of the St. Joseph subscribers pay less than the mini- 
 mum rate available in Rotterdam. 
 
 Budapest has about the same number of subscribers as St. Paul, 
 Minnesota. 94% of the St. Paul subscribers pay less than the only 
 rate available in Budapest. 
 
 Now Paris has been mentioned and compared, for example, with 
 New York City, an exchange about five times as big, and, of course, 
 the $228 rate, the highest possible, was picked out for New York. It 
 doesn't matter that only % to % of 1% pay the rate quoted or more, 
 or it would not matter if nobody paid the rate quoted use it just the 
 same, because it sounds bad for the Bell. Well, now, suppose we 
 compare Paris with New York. The only rate available in Paris is 
 $77.20 and don't forget you have got to buy your instrument in 
 addition. 79% of the subscribers in New York City pay less than the 
 Paris rate. 90% of the Philadelphia subscribers, and 91% of the 
 Chicago subscribers pay less than the only rate available in Paris. 
 
 Now if you get down to the smaller places of this country and 
 abroad, you would find practically no comparison. The foreign rates 
 are, as you will see if you look into that study that I have men- 
 tioned to you before, for the smaller places, much higher than the 
 
 14 
 
corresponding rates in this country. In fact, they are abroad, in many 
 cases, practically prohibitive, which explains the impoverished rural 
 telephone development in the foreign countries which have govern- 
 ment telephone systems/ 
 
 Unfairness of Price Comparisons Without Considering Quality 
 
 Now, of course, I have not told you the whole story in rate com- 
 parisons. What good are rate comparisons if you do not consider what 
 you get for your money? I am not talking now about the quality of 
 service, which, as anyone knows who has traveled abroad, is for the 
 most part much inferior to American telephone service. I am talking 
 now about the length of hours during which the telephone service is 
 available to the public abroad. Take Switzerland, for example the 
 country with which Mr. Lewis is so in love for statistical purposes. 
 96% of the exchanges in Switzerland close at 9 o'clock P. M. 46% 
 operate from 7 A. M. to noon; then close two hours for lunch; then 
 open again until 6 P. M. ; then close two hours for tea ; then, to show 
 that they are not so bad after all, they open at 8 and stay open until 
 8 :30 P. M., then put up the shutters for the night. I am afraid Provi- 
 dence would not stand for that kind of "public service motive." 
 
 Or take New Zealand, where the Government has reduced things 
 to so beautiful a basis, and where, incidentally, they have a debt rate 
 of about $400 per capita ; 84% of all their telephone exchanges are not 
 open on Sundays ; 80% are not open on holidays ; and 60% are open 
 on week days only from 9 A. M. to 5 P. M. 
 
 In Belgium, with rates averaging $10 higher than the Bell Sys- 
 tem, for comparable towns in what is known as the Brussels Group, 
 which includes the City of Brussels and environs, and contains more 
 than one-third of all the telephones in the country out of a total of 
 23 offices, 21 operate only from 7 A. M. to 9 P. M., and but two of them 
 operate day and night. 
 
 Plaintive Appeals from Germany 
 
 Or listen to this sad plaint from one of the official representatives 
 in Germany, Herr Wendel, in his speech in the Reichstag, in February, 
 1913: 
 
 "I cannot forego to speak here about the wish expressed by one of our 
 Electoral Districts. I refer here to Freiburg. There the entire telephone serv- 
 ice is interrupted at 9 o'clock P. M. Five minutes after 9 o'clock it is impos- 
 sible to obtain a telephone connection. Now the Town Council of Freiburg 
 has addressed the Postal Administration and asked for the introduction of 
 night telephone service. The Postal Administration has refused the request. 
 It is true that Freiburg is a very pretty, idyllic, and quiet town, and I am glad 
 of it ; moreover, the night is not man's friend. I admit this ; but it must also 
 be remembered that not all citizens of Freiburg go to roost with the chickens, 
 and a sudden sickness, accident, fire any kind of trouble may require a quick 
 telephone call for a physician, or a fire brigade, just as much after 9 o'clock 
 P. M. as prior to that time. It seems to me indefensible that a city of some 
 30,000 inhabitants should be deprived of telephone service at 9 P. M., and it is 
 the duty of the Postal Administration to get quickly in touch with the Postal 
 Direction of Freiburg or the Upper Postal Direction of Dresden, in order that 
 this justifiable request of the inhabitants may be granted." 
 
 15 
 
And when the telephone subscribers of Germany became so unrea- 
 sonable as to expect telephone service during lunch hours, here is the 
 assurance they received from the Secretary of the Imperial Postal 
 Administration, who is in charge of the service : 
 
 "I have listened to the wish that our telephone exchanges should also be 
 kept open during the noon hours. I wish to state that the various authorities 
 have been instructed to exert themselves along this line. In accordance with 
 the reports which are before me, I can state that 70 per cent, of all our tele- 
 phone exchanges give service between 12 A. M. and 1 P. M." 
 
 Toll Rate Comparisons 
 
 Now about toll rates. Our plant in this country is built and oper- 
 ated on the "No delay" basis. Our rates in this country cover the best 
 service only we have no different kinds of service as they have abroad. 
 Abroad they classify rates as "urgent" and "ordinary." By "urgent" 
 they mean something like the long distance service we give in this 
 country, and for which they charge from two to three times as much 
 as the regular rate which Mr. Lewis quoted. We have only one kind of 
 long distance telephone service, and that is the best that we know how 
 to give. This "ordinary" telephone service in foreign countries is 
 funny. Say you live in Germany: If you want to talk with a friend, 
 you get an assignment. They tell you you can talk with him at 10 
 o'clock perhaps that day, perhaps the next day, if the appointments 
 are all taken up. It is put up for you at ten. If you are not there to 
 talk, you are charged. If you are there, you talk three minutes; then 
 you are cut off, and you cannot talk again until your turn comes around 
 again. 
 
 And then, in foreign countries, they have another difference, a 
 vastly important one, between their method of charging and our meth- 
 od of charging here in this country. Our rates, except as to nearby 
 points, are got up on what is known as the "particular person" basis. 
 In other words, if you want a long distance call, except to nearby 
 points, you are charged only if you get the party you want. This is not 
 true of the foreign government telephone systems. They have there 
 what is known as the "two number" basis that is, they give you the 
 connection, you do the talking if you can and whether you talk to 
 the party you want, or the office boy, or the janitor, or the stenographer, 
 or to no one at all, they charge you, because they have given you the 
 connection. They sell you the connection, but they do not guarantee 
 to sell you the conversation you want. 
 
 Peculiar Comparisons 
 
 And here's another point about the rate comparison Mr. Lewis has 
 made. Unfortunately, the gentlemen who prepared the table for Mr. 
 Lewis took the one-hundred-mile rate as the magic point, and then pro- 
 ceeded to show up some beautiful discrepancies between our rates for 
 long distance telephone service, and the corresponding rates abroad. 
 Well, now, it is a fact that 70% to 80% of all toll traffic moves within 
 a radius of from 30 to 50 miles, and within this radius it is found that 
 
 16 
 
our toll rates are, even on a nominal basis, taking into account the dif- 
 ferences I have mentioned, lower than in Europe, and if you consider 
 the international toll conversations in Europe, of which there are many, 
 and which Mr. Lewis completely ignored, you find that the foreign 
 rates are from three to four times as high as the rates in this country 
 for corresponding distances. Now when you get out into much longer 
 distances, I grant you that the European systems can quote much lower 
 rates for the service, because they know no one will call their bluff. The 
 service is not a commercial service, and even if some one should take 
 them up, they could afford to charge almost nothing for the rare conver- 
 sation for long distances if they could charge three or four times as 
 much for the short distances where the bulk of the traffic falls. In 
 European countries they have the magnanimity to make a very cheap 
 rate which covers long and short distances, and you get the short occa- 
 sionally, but you never get the long. It is true that to distant points our 
 rates are higher, but we quote rates for a commercial service, and we 
 have done a remarkable thing in this country which they cannot do in 
 European countries; we have let the telegraph take its natural place. 
 We realize that for short distances the telegraph cannot compare for 
 direct utility with the telephone service, and that for long distances the 
 telegraph cannot be approached for economy by the telephone, because 
 of the terrific cost of tying up lines. When you have a property costing 
 several hundred thousand dollars, you must quote a rate which bears 
 some proportion to the cost of furnishing the service. But we have an- 
 other means in this country of taking care of this kind of traffic a 
 thing I want particularly to call to Mr. Lewis' attention: We do not 
 simply sit down and say we cannot give a man a cheap rate for long dis- 
 tances and let it go at that, but we have these lines that are used for 
 long distances, and we lease them to people who will guarantee a fairly 
 continuous service, or who will take the service for a half -hour or an 
 hour a day, and we quote rates that will move traffic. The American 
 Telephone and Telegraph Company has, tied up, 214,000 miles of line 
 under lease. Now, Mr. Lewis, what have you done with these lines? 
 You have not counted one message on them. I dare say you do not 
 know they exist. We do not parade them ; we saw no need of parading 
 them ; we did not need to make any defense of our efficiency, etc., until 
 you came along with your example of the Norwegians and the Luxem- 
 burgers, but just the same, we keep that plant in repair, we furnish the 
 wires, we maintain the plant, but we get no credit for it in your show- 
 ing of efficiency. We are interested solely in giving service ; and if we 
 give the service, we are satisfied to let it go at that. 
 
 Europe an Armed Camp 
 
 Now, Mr. Lewis was kind enough, in his remarks in Congress, 
 to make a statement that, I think, goes far to explain the situation. 
 European governments never took over the telephone because they 
 could do the job better; on the contrary, the people who were running 
 the telephone service were doing the job so well that if the govern- 
 ments had not taken the service over, and stopped competition with the 
 
 17 
 
telegraph service which the governments had from the start, they would 
 have gone bankrupt, and Mr. Lewis knows that that is true. We 
 know that Europe is one armed military camp ; we know that when the 
 telegraph came in under the Governments in Europe, it was not as a 
 commercial service, but as a military agency. For the European Gov- 
 ernments, the one overwhelming purpose is military necessity and pro- 
 tection. Now we have not this situation here. Our country, fortu- 
 nately, is not an armed camp. 
 
 Prof. Holcombe's Caution 
 
 One other thing about the statistics that Mr. Lewis has used. Mr. 
 Lewis has mentioned Professor Holcombe's book on telephones in 
 such a way as to lead one to believe that Professor Holcombe and Mr. 
 Lewis are in accord on the foreign telephone statistics which Mr. 
 Lewis has used. Let me quote you this from Chapter 23, Page 420, of 
 Professor Holcombe's book on "Public Ownership of Telephones" : 
 
 "'A judicious man/ says Carlyle's 'crabbed satirist,' 'looks at Statistics, 
 not to get knowledge, but to save himself from having ignorance foisted upon 
 him' Statistics have improved somewhat since Carlyle's day. Those published 
 by the International Bureau of Telegraph Administrations at Berne, Switzer- 
 land, are carefully compiled and edited. Yet they are no better than their 
 source, the reports of the various governmental administrations. A judicious 
 man will still be careful what he tries to prove by them." 
 
 And while we are on the subject of toll rates, I want to remind 
 you that in many of the countries abroad, the governments refused ab- 
 solutely to build toll lines until the returns on these lines were guar- 
 anteed by the local authorities in the cities and villages through which 
 the lines were to be constructed, so that, in many cases, the toll rates 
 charged by the governments do not represent the actual charges, but 
 have been supplemented by the guarantees required by the authorities. 
 For instance, I wonder if Mr. Lewis has seen this in Professor Hol- 
 combe's book with regard to Switzerland : 
 
 "After another five years of more or less constant negotiations with the 
 commercial interests north of the Alps, they undertook to give on their own 
 sole responsibility the required guarantee. In 1900, a line was opened between 
 Lugano and Zurich, and a second between Bellinzona and Lucerne. 
 
 "During the first year after their opening, the traffic over these two lines 
 averaged only thirteen messages a day. Consequently, the receipts amounted 
 only to a bare third of the guaranteed income, and the real cost of the connec- 
 tion to the interests which had demanded it was nearly thrice the nominal rate. 
 Yet the guarantee did not suffice to cover the costs to the administration, for 
 the construction over the Alps proved to be exceptionally expensive." 
 
 The same condition prevails in France, where the actual financ- 
 ing of the long distance telephone lines had to be undertaken by local 
 authorities, and sometimes by the private interests in these localities, in 
 addition to the guarantees which were required in return for the in- 
 vestment. That is one of the ways that the foreign government tele- 
 phone systems (operating, no doubt, in response to Mr. Lewis' law of 
 "public service motive") discouraged the building of lines to what they 
 thought might not be profitable sections. 
 
 18 
 
Toll Line Delays Abroad 
 
 Now then, after all I have said about telephone toll rates, what 
 kind of service do you get for your money? I wish I had time to give 
 you some adequate indication of the almost universal dissatisfaction 
 in Europe with the kind of toll service that the governments furnish. 
 I will mention one or two instances I am not exaggerating these in 
 the slightest I am going to quote to you from official sources. Here, 
 for instance, is a quotation from the speech of Herr Haberland of the 
 German Reichstag: 
 
 "Thus, complaint is made of the long time that a subscriber must wait in 
 order to get long distance connections, especially connections between the West 
 and the more central parts of the country, and in particular between Dussel- 
 dorf and Berlin. For years the Imperial Post Office has been acquainted with 
 these complaints. In 1907 the Dusseldorf Chamber of Commerce made an in- 
 vestigation and found that the waiting time exceeded two hours. In 1910 it 
 was proved that the average time of waiting to be connected by telephone serv- 
 ice between Dusseldorf and Berlin (about 400 miles) was still over one hour, 
 and the average time between Dusseldorf and Mannheim, Dortmund, and 
 Cologne was forty-four, thirty-nine and thirty-four minutes respectively. 
 Later, conditions again grew worse. The average time required to get a con- 
 nection with Berlin is now one and one-half hours. According to reports from 
 a number of firms, if the operator be requested to get Berlin, the general reply 
 is that unless the conversation is classified as 'Urgent/ the connection will take 
 several hours. In fact, the Administration recommends a scheme of 'Urgent' 
 conversations to overcome the trouble. This remedy, however, is often too ex- 
 pensive for the less wealthy concerns, and, furthermore, it is to be remembered 
 that this forced increase in urgent conversations tends to make the waiting- 
 time still longer in the case of ordinary conversations." 
 
 The toll service in France is even more ridiculous. I quote from 
 a few of the many complaints of the French Chambers of Commerce: 
 
 Chamber of Commerce of Alms (population 25,000): 
 
 "As regards telephone communications, for example, several establish- 
 ments have indicated that it has been impossible to obtain connections with 
 Marseilles (85 miles) and Lyons (115 miles), even after waiting four hours." 
 Chamber of Commerce of Rouen (population 125,000): 
 
 "We place in the first rank the reforms which we wish for the improve- 
 ment of the telegraph service, and especially in the telephone service which 
 leaves much to be desired. It takes an average of 55 minutes to secure a con- 
 nection with Paris (70 miles)." 
 Chamber of Commerce of Chambery (population 23,000): 
 
 "Telephone communications with Geneva (50 miles), Lyons (60 miles), 
 Paris (280 miles), Grenoble (30 miles), are practically impossible during the 
 greater part of the year, and it is necessary to wait hours for a connection. In 
 the case of Paris one gets the connection the day after the call has been filed." 
 
 In other words, if you live in Paris, and happen to be detained in 
 Chambery, you call your home to-day, you get it to-morrow, and you 
 tell your wife that you won't be home last night. Why, Aviator Gilbert 
 recently flew in an aeroplane from Paris to Rheims, one hundred miles, 
 and he arrived at his destination before the news of his departure could 
 be telephoned. 
 
 Peculiar, if not Questionable, Methods of Showing Toll Efficiency 
 
 Now, despite this situation, and it is a serious one, and I have a lot 
 of friends who could interest you and give you instances much more 
 
 19 
 
ludicrous than those I have read I say, despite all this, Mr. Lewis has 
 worked up figures showing a higher efficiency for foreign countries than 
 for the telephone in this country. If the people of this country would 
 only wait, would only take their turn, would file your message, and wait 
 for your chance to talk, we could build up a showing of "efficiency" 
 that would tickle the heart of Mr. Lewis, by putting up just enough 
 circuits to carry the messages filed in a day. We would not have to use 
 so much copper, we would not have to use so much equipment, and we 
 could economize wonderfully on the number of people we have to em- 
 ploy. But do the people want that kind of service? Mr. Lewis, in his 
 comparison of what he calls "adequacy" of telephone facilities, made a 
 great showing for foreign countries by simply dividing the number of 
 messages from toll terminals by the number of telephone stations. 
 Well, just see how ridiculous such a comparison is! If we were to 
 come to Providence to-day and cut down the number of telephones by, 
 say four, so that we had only one-fourth of all the telephones here that 
 you have now, we know we would lose some long distance business, but 
 think what a wonderful quotient you would get for long distance mes- 
 sages per phone ! For Mr. Lewis' statistical purposes, your town would 
 be ideal, but I am frank to say that, for telephone purposes it wouldn't 
 be much. Now, it is this very fact that shows our superior develop- 
 ment in this country. People do not have to leave their homes to tele- 
 phone. Suppose you put an extension station upstairs in your home. 
 Originally, with one telephone in your home, you had ten calls a day ; 
 with your extension station, you may have a total of twelve calls a day. 
 Before you put in your extra station your quotient of "adequacy" was 
 ten ; after you put in your extra telephone, it became only six ; so that, 
 according to Mr. Lewis, your facilities have become approximately one- 
 half as efficient as they were before. Now, what is the sense of punish- 
 ing us by this kind of comparison ? We don't want to stop growing in 
 order to show that brand of "efficiency." 
 
 Special Service Ignored by Mr. Lewis 
 
 I mentioned before our enormous carrying business on leased lines. 
 Well, we have gone further than that, we have got tie lines. New 
 York City is full of them. We lease you a line from your factory to 
 your office, and you handle the traffic between such places more effi- 
 ciently; we do all the maintaining, etc. We have got thousands and 
 thousands of these lines in this country, and for that traffic we get no 
 credit in statistical showing, and we want none; we are satisfied that 
 that is good efficient engineering. But these things have got to be con- 
 sidered by any student who wants to arrive at a proper conclusion. 
 
 More Niggers in the Woodpile 
 
 I am not going to take up in detail all the "niggers" in that exten- 
 sive woodpile of statistics presented by Mr. Lewis. And these "nig- 
 gers" are wonderfully numerous. For instance, in counting toll mes- 
 sages, the figures used by Mr. Lewis have been frightfully inflated. 
 Many of these messages, for instance, are counted twice and three 
 
 20 
 
times, as, for instance, international messages. They are counted in 
 the country where they originate, in the country where they terminate, 
 and if they pass through more countries, they are counted in all the 
 countries they pass through. The next time Mr. Lewis makes up a 
 report on this situation, he might look into that. Of course, we haven't 
 got that kind of proposition in this country. We have here enough of 
 a job getting one toll message counted once. And then, again, in many 
 cases, Mr. Lewis' toll messages aren't toll messages at all ; for instance, 
 in Germany, Mr. Lewis has used a large number of messages as toll 
 messages which are only, as we are advised by the German Govern- 
 ment, a species of no-charge suburban trunk calls, and the number of 
 these improperly included messages for Germany alone is greater than 
 the total number of toll messages in the United States. 
 
 Private Ownership the Cause, not the Effect, of our Prosperity 
 
 But I am not going to bother with all this. After all, you know 
 that the best test of efficiency and rates is the relative development of 
 the service, and you know how that has worked out. But Mr. Lewis 
 didn't like these facts, they didn't fit in with his theory of public serv- 
 ice motive and the law of diminishing returns. So he said the figures 
 didn't mean anything. He said that our superior development was 
 not due to superior efficiency and better rate schedules, but was simply 
 due to our prosperity. Now, isn't that putting the cart before the 
 horse ? Is it not true that our magnificent prosperity is due precisely to 
 the manner in which he have handled our affairs ? I have gone down to 
 the Battery in New York City many times, and watched the immi- 
 grants come in, clad in their quaint garments and carrying their old 
 carpet bags, and I have watched them open their eyes in wonder, and 
 I thought I could see in many of them our future police officers and 
 our car line conductors, and our operators. Why, in Buffalo they have 
 hired a girl to lecture to us in one of our public demonstrations of the 
 telephone. She was an Italian girl who came over to this country with- 
 in the last few years. Her mother and father still wear the quaint 
 foreign clothes of Italian custom. She was picked out of our operating 
 rooms because she had the most perfect English enunciation of any 
 girl there, and she is now illustrating, in her rich Italian voice, the 
 proper way to use the English tongue. That little instance meant much 
 to me; it was only an illustration of the extent to which opportunity 
 in this country has spelled our wonderful success. Why, it is precisely 
 because of our methods of railroad building, trolley, electric light and 
 other developments, and the development of our magnificent telephone, 
 which has spread itself throughout the country, that we have prosperity 
 in this country. I say our development of the telephone and other en- 
 terprises has antedated and been the cause of our prosperity in this 
 country. No, indeed, Mr. Lewis cannot explain away the situation. 
 Our superior telephone development is a fact, and can be accounted 
 for only by the way we have handled it. For see, suppose you go to 
 Europe and take the countries where the telephone is in private hands. 
 See what has been done in that little European country of Denmark, 
 
 21 
 
where most of the telephone development is private. In Denmark they 
 have twice as many telephones per one hundred inhabitants as in Ger- 
 many, 2^ times as many as in Great Britain, 3 times as many as 
 in the Netherlands, 5 times as many as in Belgium, and 6 times as 
 many as in France. Sweden and Norway, which have some private 
 operation, but not as much as Denmark, rank next, and in the city of 
 Stockholm alone, which is mostly private, they have a larger telephone 
 development than in any other city of the world, with the exception of 
 San Francisco. 
 
 Opportunities Abroad 
 
 Why, gentlemen, the starved condition of telephone development 
 in the European countries, where the governments operate the service, 
 would offer to American telephone enterprise a most wonderful field ! 
 They have not in Europe the disadvantages we have here; they have 
 towns thickly settled ; they have not the vast distances that we have to 
 contend with ; they have greater possibilities of producing a full volume 
 of traffic, and yet, see where they have landed under government man- 
 agement. It was probably this which Major O'Meara, the Government 
 Consulting Engineer in Great Britain, had in mind when he wrote to 
 us recently, acknowledging a copy of Mr. Vail's annual report. Here 
 is what he says : 
 
 "I am writing to thank you for the copy of the Annual Report of the Di- 
 rectors of the American Telephone & Telegraph Company for 1913. I have 
 been much interested in the part of the report dealing with Government Own- 
 ership and Operation. After spending over sixteen years out of my thirty-two 
 years public service in the British Post Office Department I have come definitely 
 to the conclusion that a Government Department is, as- a rule, an unsuitable 
 organization to manage services of the character of the telegraphs and tele- 
 phones. And the people in this country have been finding this out for them- 
 selves during the past two years." 
 
 Is the Post Office Department Really Efficient? 
 
 Now I approach that part of the subject that is not very pleasant 
 to me, and that is the question of comparing the efficiency of the Post 
 Office Department with that of the telephone in this country. We tele- 
 phone people have been busy in the past. We have not had much time 
 to worry about whether or not the Post Office Department was as effi- 
 cient as it should be. We have been busy enough trying to be as efficient 
 as we could. We have appreciated that the Post Office was properly a 
 government institution, and that part of the burden of this enterprise 
 could very properly be charged to general taxation, because it is placed 
 at the disposal of all, and is used by all alike, and, being a matter of 
 common concern, it is very properly a matter subject to common sup- 
 port. But now, when the Post Office is used as a criterion by which to 
 judge our progress, when, by some mysterious method of computing 
 efficiencies in these services, Mr. Lewis has done something that no- 
 body on earth has ever attempted to do, that is, has not only compared 
 the telephone in one country with the telephone in another by arbitrary 
 
 22 
 
unit equivalents, but has compared the postal service in this country 
 with the utterly dissimilar telephone service in this country, then, I 
 say, we have to sit up and take notice. Now the telephone fraternity 
 does not want to be understood as criticizing the personnel of the Post 
 Office Department as such. On the contrary, there is a bond of sym- 
 pathy existing between the telephone officials and those in the postal 
 service. The Post Office personnel has had in the past, and has now, 
 many good and faithful men. We pity them. They have been tied to 
 a post. They have been "postalized" for years that is my interpreta- 
 tion of "postalization." Men come into that service full of ambition 
 and energy, and a keen desire to accomplish, and they find, before long, 
 that they are up against a stone wall, that they are hampered on all 
 sides by restrictions and the rigidity of a system which forces them 
 either to get out or float with the stream. Don't take my word for 
 it, this is not my opinion. In February, 1908, a Joint Commission, 
 which had been appointed by Congress to investigate the Business 
 Method of the Post Office Department, and of which the Hon. John 
 A. Moon, present Chairman of the House Committee on Post Offices 
 and Post Roads, was a member, submitted its report to Congress. I 
 wish I had time to read you some of the extracts of this report, as a 
 commentary on the alleged efficiency of the Post Office Department, 
 but I mention this, here, as indicating how the defects of the service 
 are not attributable to the personnel, but to the system: 
 
 "We also desire to point out that our criticisms are directed at methods, 
 and not at individuals. The higher officials, at any rate, and the best of the 
 staff, are keenly alive to the necessity of reforms ; but the service has grown 
 from small beginnings over a long period of years, hampered by restrictive 
 laws which may have been necessary in the past, and may even now be con- 
 sidered necessary to some extent for a government department, but which 
 would render it practically impossible for any private business to survive." 
 
 Initiative and Efficiency Destroyed 
 
 How thoroughly the initiative and efficiency of the employee be- 
 come dissolved into the inertia of their surroundings the moment they 
 enter the Department is indicated in another portion of this report : 
 
 "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 pre- 
 vious years, and many reforms which might otherwise be instituted are hin- 
 dered if not entirely prevented by appeals to the decisions of the Comptrol- 
 ler, 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 econ- 
 omy 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 rou- 
 tine which existed prior to his appointment will be left undisturbed and will 
 receive credit by performing his duties with even a slight degree of efficiency 
 and accepting without comment methods which have been handed down from 
 earlier generations." 
 
 23 
 
Absence of Accounting Methods 
 
 Think of it! Mr. Lewis takes the Post Office Department and 
 constructs efficiency statistics, which he compares with the telephone, 
 when this Joint Commission, which secured the services of some of the 
 most expert firms of accountants in this country, made the following 
 statement in its report to Congress : 
 
 "Past experience had disclosed the lack of such a central system of ac- 
 counts in the Post Office Department as rendered the determination of the 
 cost, profit, or loss in connection with a given line of service impracticable. 
 For more than one hundred years the great and stupendous business of the 
 Post Office Department has been operated without being overhauled or looked 
 into from the standpoint of critical, expert scrutiny of its business methods." 
 
 Lack of Cooperation 
 
 The following examples, taken haphazard from this official report, 
 will indicate how vast and deep-seated have become the accumulated 
 defects of nearly a century of mismanagement. For instance, as to the 
 total lack of standardization in methods and co-operation between the 
 various branches of the Department, the report says: 
 
 "In the course of our investigation into the main subject referred to, we 
 have necessarily had occasion to observe the general methods of administra- 
 tion throughout the Department and service and have been particularly im- 
 pressed with the divergencies therein in different bureaus, divisions, and sec- 
 tions in handling transactions of a similar character, and we shall show in this 
 report, how, under the present system of administration, these appear to have 
 grown up over a long period of years without any very definite plan. There 
 exists an independence and lack of co-operation not only between different 
 bureaus and different divisions, but even between different sections of the same 
 division, and in identical field operations which must undoubtedly do much to 
 hamper the service and increase its cost." 
 
 Evils of Bureaucracy and Over-Centralization 
 
 The Commission further calls attention, in the following language, 
 to the effect upon efficiency exercised by the fatal influence of bureau- 
 cracy and over-centralization: 
 
 "Every request of even the smallest post office, for allowances for any 
 purpose whatever has to be made to the headquarters at Washington. Allow- 
 ances are, in a large number of cases, for amounts less than $1, and it would 
 seem that if there were a district superintendent in the field who could pass 
 on such matters it would save a large amount of routine work and consequent 
 expense in the Department at Washington. From the fact that it has to deal 
 with nearly 65,000 postmasters scattered over a vast area of territory, it cannot 
 be in a position to determine intelligently or efficiently upon the needs of each. 
 
 "The bureau chiefs appear to spend an increasing amount of their time in 
 the mere routine work of signing formal documents and passing upon requests 
 of various kinds for allowances, or otherwise, which could be intrusted to 
 properly qualified officials in the field without detriment to the postal service. 
 This point recurs at every stage of the inquiry, and appears to call for some 
 radical change in administrative methods if, by the continual growth of the 
 postal business, the Department is not either to lose control over the service 
 or to exercise its control in such a perfunctory manner as to make it practically 
 useless." 
 
 24 
 
Lack of Labor-Saving Devices 
 
 Indeed, even in the most simple and rudimentary requirements of 
 efficient administration, -the use of labor-saving devices, the Com- 
 mission discloses a surprising condition in the Post Office Department, 
 calling attention to it in the following language : 
 
 "There is a lamentable lack of labor-saving devices practically throughout 
 the whole Department and service. Even for such an elementary machine as 
 a typewriter, we are informed that there are hundreds of applications on file 
 which the Department has been quite unable to fill. Of the more valuable 
 machines, such as arithmometers, book-typewriters, and calculating machines, 
 there are few in use, and even in the field post offices such scales as are pro- 
 vided for the special weighing of mails now in progress are of a very inferior 
 grade, and from the information we have gathered it would appear that with 
 few exceptions there are no mechanical conveying devices in any office for ex- 
 peditiously handling and weighing the mails." 
 
 Lack of Efficient Audit System 
 
 Examples of this anarchical condition of the postal service, as dis- 
 closed by the official report of the Joint Commission, are numerous, but 
 I have not the time to refer to them. I could mention, for instance, the 
 reference the Commission makes to the fact that there is a complete 
 lack of any audit system or any other system which would enable any 
 sort of check as to efficiency to be made. The Commission says, for 
 instance, "We have seen in different efficiency statements of work 
 done, that exactly the same class of work done by individuals has varied 
 in exceptional cases from under 2,000 to over 22,000 operations in the 
 same period of time." And again, referring to the accounting system in 
 this connection, "Our investigation has confirmed the impression gath- 
 ered from a study of it, that the whole of these methods are crude in 
 the extreme, and such as no private business concern or corporation 
 could follow without the certainty of loss, if not of financial disaster." 
 And yet these conditions in the postal service, which baffled the most 
 expert accountants of the Joint Commission, did not seem to worry 
 Mr. Lewis at all, but he blithely sailed through the whole gamut of 
 postal operations, simply selected his statistics, and, out of the nebulous 
 cloud of unknown and unknowable factors, he pulled forth a marvelous 
 model of efficiency, to shame forever the results of private operation. 
 It did not matter that the Post Office has no plant and practically no 
 equipment, except some mail bags, mail locks, mail boxes, and a few 
 other inconsequentials ; that the Post Office Department assumes no 
 financial responsibility for any but a small part of the operations in the 
 discharge of postal functions; that even in public buildings, it is the 
 tenant of the Treasury Department, the buildings being constructed 
 and paid for by appropriations expended by the Treasury Depart- 
 ment ; it did not matter that no rentals are ever collected or computed ; 
 that the Post Office expenditures for heating, lighting, repairs, janitor 
 service and supplies are paid for, not from postal, but from other appro- 
 priations; that the cost of the Post Office Department at Washington 
 and of the Auditor's office, embracing salaries of more than 1,000 offi- 
 cials and employees, are paid from appropriations known as legisla- 
 
 25 
 
tive, executive and judicial services, never appearing in the postal esti- 
 mates, accounts and balances. All Mr. Lewis had to do was to get the 
 number of mail pieces, and take the number of postal employees (and, 
 incidentally, Mr. Lewis used a figure for postal employees which is 
 less by 35,000 than the figure given by the Postmaster General three 
 years before in his Annual Report for the year 1909), then divide your 
 mail pieces (as if you could get an average mail piece) by your em- 
 ployees, and presto! you have your efficiency. Now, with us, in the 
 telephone business, there is no trouble about accounting. Our national 
 government knows very well the need of proper accounting, and recog- 
 nizes it so far as we are concerned. The Interstate Commerce Com- 
 mission has prescribed for the Bell System a scheme of accounts as 
 complete, minute and elaborate as any to be found within the whole 
 range of scientific accounting, and it has kept us going some, too, I can 
 tell you, to toe the mark. 
 
 Promised Efficiency of Peculiar Kind 
 
 There is just one other point about Mr. Lewis' scheme of efficiency 
 that I should like to touch upon, although my time is growing short, 
 and I can only refer to it very briefly. That is the great efficiency Mr. 
 Lewis is going to get by combining the telegraph with the postal serv- 
 ice, and eliminating all the so-called extra motions in sending a tele- 
 gram, by the simple use of a postage stamp. Now you will find all these 
 operations analyzed in the study that we have prepared, that I men- 
 tioned to you before, but here is an example of one of the motions that 
 Mr. Lewis is going to cut out by the use of the postage stamp. Under 
 the present system of sending a telegram, the operator has to put down 
 the time of sending and his initials, and the time of receiving and his 
 initials. In fact, this operation is required by law in several States. 
 This is one of the operations that, according to Mr. Lewis, is a useless 
 one, to be cut out by the use of a postage stamp. Think of it ! Getting 
 efficiency without knowing when your telegram has been sent, when it 
 has been received, and who sent it, and who received it, in case of delay. 
 And the Post Office system, which is to work this transformation of 
 efficiency well, I guess you have seen enough samples of the kind of 
 efficiency that the Post Office would inject into the telegraph service. 
 Why, in one of the portions of the Joint Commission's report, we find 
 a list of 19 different operations which are gone through for the simple 
 drawing of a pay warrant, not counting the operations while it is in 
 the hands of the Auditor, and these operations are finally wound up by 
 an office boy, over whom no supervision is exercised. 
 
 Is the Parcels Post Really Self -Sustaining? 
 
 Now Mr. Lewis, in his talk about "public service motive," dwelt 
 upon the way the parcels post has been working out ; how, by the simple 
 injection of the "public service motive" into the business, the parcels 
 post has done a great public work and, at the same time, has made a 
 neat little profit. Now all this would be fine, if it were only so, and I 
 
 26 
 
just want to call Mr. Lewis' attention, and I don't really need to, be- 
 cause he knows it himself, to the debates which have taken place, not 
 so long ago, in Congress, on just this very subject. Mr. Lewis knows 
 that Mr. Kindel I understand he professes to be a deep and profound 
 student of the parcels post has made the statement that no one to-day 
 knows what the parcels post costs, that no one knows what it is earn- 
 ing; and that other distinguished Congressmen like Senator Joseph 
 Bristow, of Kansas, who was Chairman of the Senate Committee on 
 Post Offices and Post Roads, which drafted the original parcels post 
 law, has said that there is no way on earth of telling whether the par- 
 cels post is making a profit or not. And Mr. Lewis probably knows 
 that Mr. Kindel complained to the Interstate Commerce Commission 
 against the recent changes in the parcels post, and that the only answer 
 he got from Chairman Clark, of the Interstate Commerce Commis- 
 sion, was that the parcels post was in the experimental stage anyway ; 
 and that, when Mr. Kindel wanted to find out from Postmaster Gen- 
 eral Burleson something as to the profit on the parcels post, Mr. Burle- 
 son could not furnish a single figure showing anything as to the real 
 cost. So, either Mr. Lewis is possessed of information as to the parcels 
 post which the people at Washington have been vainly seeking, or else 
 his figures on the parcels post profits are members of the same family 
 as his efficiency statistics. 
 
 Now I guess I have said enough to show you how the situation 
 stands as to the efficiency of our telephones in this country compared 
 with telephones abroad, and as to the comparisons which have been 
 made between the efficiency of the Post Office of this country and of 
 our telephone system. I have given you the facts, now I will give you 
 one or two reasons. 
 
 Permanency of Plan and Purpose Through Continuity of 
 
 Personnel 
 
 In the private telephone system of this country we have Mr. Vail, 
 who has been with the industry from its inception, being the first Gen- 
 eral Manager of the so-called Bell System, and now its head. Under 
 him, and holding important positions throughout the entire country, 
 are men who have been in the service for years, as your Mr. Potter, 
 Mr. Howard and others, whose sole recommendation for advancement 
 and continuance in the service rests upon their experience and fitness 
 for the positions they hold. Contrast this with the government-owned 
 Post Office, if you please. To quote again from the findings of the 
 Joint Commission: 
 
 "It appears too obvious to require argument that the most efficient service 
 can never be expected as long as the direction of the business is, as at present, 
 intrusted to a Postmaster-General and certain assistants selected without spe- 
 cial reference to experience and qualifications and subject to frequent change. 
 Before the Postmaster-General and his assistants can become reasonably famil- 
 iar with the operations of the service they are replaced by others, who, in turn, 
 are called upon to resign before they can, in the nature of things, become quali- 
 fied by knowledge and experience to perform their allotted task. Under such 
 a system a large railroad, commercial, or industrial business would inevitably 
 go into bankruptcy." 
 
 27 
 
' Or, to go one step back of this "to get behind the scenes" I 
 quote from a statement by our friend, Mr. Fitzgerald, Chairman of the 
 House Committee on Appropriations, in a special report appearing in 
 the "Congressional Record" of January 20, 1914, wherein he said : 
 
 "Under Republican administrations it had been the custom for some years 
 to appoint the chairman of the National Republican Committee Postmaster- 
 General, so that there might be no mistake as to the partisan character of the 
 men appointed as postmasters in the first and second class postoffices in the 
 country. The abuse became so great under Postmaster-General Hitchcock and 
 Postmaster-General Cortelyou that President Taft, a Republican President, 
 was compelled to cry out against the existing conditions and to admit that these 
 partisans not only did not give their time to the public service for which they 
 were paid, but that evidently he was helpless to compel them to do so." 
 
 Post Office Troubles of Long Standing 
 
 That this condition is not a recent development, but dates back 
 into the distant past, is strikingly illustrated by the comments Post- 
 master-General Howe had to make with reference to it. In his report, 
 dated November 18, 1882, with reference to salaries and allowances of 
 third and fourth-class postmasters, now amounting to $25,000,000, he 
 says: 
 
 "In theory these orders are made by the First Assistant Postmaster-Gen- 
 eral ; in practice they are made by a fourth-class clerk in the office of the First 
 Assistant. No matter by whom made, this distribution will not be well made. 
 Finite intelligence could not make a wise and just allotment of such a fund; 
 infinite intelligence can not be obtained in fourth-class clerks. Postmasters are 
 eager for large allowances. The most importunate are apt to be best served. 
 They ask earliest and oftenest. They employ every kind of entreaty, offer 
 every kind of influence, personal and political." 
 
 And the report of the accountants of the Joint Commission on 
 Business Methods of the Post Office, in commenting upon it, remarks 
 that: 
 
 "There is still no standard by which the economical administration of a 
 postoffice can be gauged. Appointments of postmasters are still made almost 
 entirely for political reasons and not by reason of the applicant's ability or 
 knowledge of the workings of the postal service. The criticisms made on the 
 compensation of third and fourth class postmasters still apply to those of the 
 fourth class. This report, reread after a lapse of twenty-five years, gives a 
 striking illustration of the stagnation that has pervaded the whole administra- 
 tion and perpetuated defects which, even at that time, were so glaring as to 
 need the strong condemnation meted out to it by the then Postmaster-General." 
 
 Shortness of Tenure the Rule in Post Office 
 
 This short and uncertain tenure of office of Postmasters General 
 and their Assistants, including the postmasters of the larger cities, 
 this series of political gusts which is apt to blow them into office in one 
 political wind, and blow them out in another, has so far made impos- 
 sible the introduction of any radical and necessary reform; for al- 
 though the person in office discovers the need, before he can effect the 
 necessary change, political fortune sweeps him out of office again. 
 Whatever progress in efficiency is claimed by one Postmaster-General 
 
 28 
 
is disclaimed by his successor. You are all familiar, for instance, with 
 the serious attempts Mr. Hitchcock made for his reform in his depart- 
 ment. Just about the time he began fully to appreciate the true im- 
 mensity of his task, a political change ended his Post Office career, and 
 such progress as he claimed to have made was promptly repudiated by 
 his successor. For instance, this is what Postmaster-General Burleson 
 had to say about the work of the Department, in a statement given 
 out to the public shortly after taking office : 
 
 " 'The all-absorbing programme of the last Administration was the placing 
 of the Post Office Department on a paying basis,' says the report. 'The policies 
 pursued in the effort to succeed at this plan were overworked and resulted in 
 defective administration and just criticism on the part of the public. 
 
 " 'That efficiency and economy should be substituted for wastefulness and 
 extravagance needs no argument, but the postal service affects so vitally the 
 interests of the entire population of the country that economy which means a 
 curtailment of postal facilities operates as a check to the social and industrial 
 progress of the country. The people are entitled to the best facilities adminis- 
 tered in the most efficient manner. That the facilities furnished during the 
 last four years were not the best is clearly established by the facts.' " 
 
 Post Office Inertia 
 
 As illustrating the difficulty of securing any reform under present 
 conditions, I would call your attention to a statement made by Mr. 
 Fitzgerald, Chairman of the Commission on Appropriations, appear- 
 ing in the "Congressional Record" under date of January 20, 1914, 
 wherein he makes the following significant statement : 
 
 "The so-called Economy and Efficiency Commission to which the gentle- 
 man from Iowa refers, and for which perhaps he has more respect than I 
 have, spent $260,000 in its work. I have challenged from time to time anyone 
 to point to a single original recommendation which that commission has made 
 which has resulted in the saving of a single dollar to the United States." 
 
 The impossibility of accomplishing, under present conditions, any 
 improvement or reform in the service, is true of any of the Govern- 
 mental Departments handled similarly to the Post Office Department. 
 It is interesting, for instance, to note the report of Mr. French, who, 
 under the administration of President Roosevelt, was commissioned to 
 examine into the condition of the Government Printing office. Mr. 
 French's statement, appearing in the New York Times under date of 
 October 10, 1913, reads as follows : 
 
 "I never got beyond a preliminary report after about three weeks' work. 
 The work was never finished. The expenditures committee faded away, when 
 a new Congress came in, and there was nothing at all left as evidence that it 
 had existed, except some incomplete and generally irrelevant papers some- 
 where in dusty pigeon-holes and sundry entries on the ledger of the disbursing 
 clerk of the Senate. My report was among those dust-gathering papers. I 
 doubt if any member of the committee ever read it. It was wholly abortive. 
 My work was entirely useless. The money paid was absolutely wasted. The 
 committee accomplished nothing, and I have often doubted if it ever intended 
 or wished to accomplish anything. It is against the Washington idea to do 
 anything to check expenditures. Yet I was able to show that at least $1,500,000 
 a year could be saved in the operating of the Government Printing Office, with- 
 out disturbing the condition of the workers as to their pay or privileges." 
 
 29 
 
Encouragement of Permanency in Private Enterprise 
 
 Efficiency, under such circumstances, is, of course, impossible. 
 Permanency and continuity of personnel are essential to the very heart 
 of an enterprise, and it is precisely because private enterprise recognizes 
 and enforces this principle, that it is so much better equipped than pub- 
 lic enterprises to produce satisfactory results. As emphasizing this 
 effort on the part of the corporation to make for loyalty, efficiency and 
 permanency in its personnel, I wish to bring out the treatment of the 
 employees of the telephone interests, in the adoption of its magnificent 
 pension, sickness, disability and insurance plan. The entire plan, aside 
 from the accident feature, which, of course does not take tenure into 
 consideration, is arranged with a view to encouraging and rewarding 
 permanency in employment. The plan provides for the care of em- 
 ployees during sickness and accident, and the pensioning of employees 
 when they reach an age when they cannot render the service necessary 
 to conduct the business of the company. It makes provision for the 
 payment, to the beneficiary, of insurance in cases where the employees 
 die after five years in the company's service, all of this, without any 
 contribution on the part of the employee other than faithful and con- 
 scientious service. The amount of the payments increases with the 
 term of employment. Contrast this with the treatment by the Govern- 
 ment of its postal employees. Although continually agitated, no ade- 
 quate provision has been made for the relief or care of its employees. 
 To refute any notion that the employees in the Government's service 
 are not subject to all of the ills incurred in private employment, it is 
 interesting to note the comment of Mr. Reilly on the floor of the House, 
 as reported in the "Congressional Record" of January 16, 1914: 
 
 "It was not until I became a member of this body that I learned that old 
 worn-out letter carriers and other superannuated employees of the Government 
 were not retired on part pay, but, on the contrary, were dismissed from the 
 service when they could no longer keep up the pace. One of the first letters I 
 received after being elected a Member of Congress was from an old postal 
 employee, who had received an official notice from his postmaster informing 
 him that he had been off duty the allotted number of days in the year allowed 
 by the department and that his resignation would be accepted. The simple 
 statement of that heart-broken man asking me to assist in having him kept on 
 the rolls made my heart ache. He had spent 34 years of his life pounding the 
 pavements in all kinds of weather and at all hours of the day and night, and 
 was known and loved by the citizens of the community he served, composed of 
 all classes and creeds and political affiliations. He had not only given the best 
 years of his life to the Government in building up the Postal Service, but was 
 at an age and in such a condition that he could not hope to find employment of 
 any kind. He was in such financial straits that if thrown on the world he 
 would have to depend on the bounty of relatives or friends, or else become a 
 public charge." 
 
 And in the same issue of the "Record" we find the following state- 
 ment by Mr. Griff en: 
 
 "The employees in the Postal Service, and particularly the city and rural 
 carriers, post-office clerks, and laborers, are paid only for the actual time they 
 are employed. When overtaken by sickness or if they meet with an accident 
 and become incapacitated for duty their pay ceases at once. It matters not if 
 an accident was caused by the grossest negligence on the part of the Govern- 
 
 30 
 
ment, these employees have no redress for damages, not even for the loss of 
 salary. They are laid off without pay until they are able to assume their official 
 duties, and should the sickness or accident be of a nature to confine them for 
 a period of more than 150 days they are notified to hand in their resignation, 
 because a department rule provides that no employee will be excused for a 
 longer period, no matter what the cause may be. * * * And now, Mr. Chair- 
 man, what is the reward for these men and women who give the best years 
 of their lives to the public service? Well, it is hard for me to say it, because 
 I detest ingratitude, governmental or otherwise, these employees are forced to 
 resign when they become superannuated, unceremoniously kicked out, and told 
 that they are inefficient and can no longer do the work required of them 
 outlived their usefulness. It is one of the saddest incidents of our govern- 
 mental life. Thrown out with the flotsam and jetsam of humanity who have 
 no aim or object in life, because years of ardent labor have used up their 
 energy and vitality. Yes, Mr. Chairman, like an obsolete piece of machinery 
 or a broken piston rod, they are thrown on the scrap heap." 
 
 How, under these circumstances, can we expect that the efficiency 
 of the Postal Service will in any way approach the present efficiency of 
 the telephone company? 
 
 Permanency of Plan Through Continuous Financing 
 
 But there is another and very important fundamental difference 
 in the method of management which distinguishes public enterprise 
 from private, and that is, Permanency of plan and purpose through a 
 proper scheme of financing. No enterprise under the sun can be run 
 with a proper regard for the needs of the service, unless there be a 
 continuity of plan and scheme of financing which will not only take 
 care of the present immediate needs, but which will look far enough 
 into the future to assure constant readiness on the part of the utility to 
 serve the needs of those coming after. 
 
 There is on file in the Engineering Department of the Bell Sys- 
 tem, and there is a large corps of employees constantly engaged in the 
 work, a comprehensive series of plans which are known as fundamental 
 development plans. They cover every city of the country in which the 
 system operates, and the studies from these plans anticipate and make 
 provision for growth for 10, 20 and, in some cases, 30 years in ad- 
 vance. The service which is to-day being rendered in many of our 
 cities has been made possible only because, years ago, plans were made, 
 and rigorously followed up by the necessary investment, throughout a 
 continuous period. As an example of anticipating future needs, and as 
 controverting the notion that we have reached the end of our devel- 
 opment, there are under way to-day studies and preparations for the 
 future, directed by a staff of 550 expert engineers, scientists, former 
 professors, post graduates, students and scientific investigators, the 
 graduates of over 70 universities. The budget for this year calls for 
 the expenditure of upwards of Sixty Million Dollars for the additions 
 to and betterment in the plant, and provisions have been made to take 
 care of the physical and financial side of the telephone needs of the 
 country for the next year, the year following, and so on, and when the 
 time arrives for the maturing of these plans, there is an absolute cer- 
 tainty that these plans will be followed by the necessary investment 
 and by the necessary execution. 
 
 31 
 
Familiar Log-Rolling Methods of Public Enterprises 
 
 Contrast this with the way in which public enterprises are financed 
 in this country. Congress, upon assembling each year in December, re- 
 ceives a "Letter from the Secretary of the Treasury." This "letter" is 
 a document of no mean bulk, full of statistics purporting to show how 
 much money the government will have to spend during the coming year 
 to run its business. The document is technically referred to as the 
 Annual Estimates. Now, no Congressman imagines for a minute that 
 these estimates represent the Secretary of the Treasury's mature and 
 deliberate judgment of what it should cost to run the Government for 
 the coming year. Every Congressman knows just how the formidable 
 array of statistics presented to Congress was got up. He knows that 
 the imposing tables of figures were prepared by the various depart- 
 ments at the beginning of their various tasks shortly after July 1st; 
 that the bureaus proceeded solely upon the basis of the current year to 
 guess at their probable needs for a financial year which was not to be- 
 gin for twelve months to come, and not to end until almost two cal- 
 endar years had elapsed after the time when the work on the estimates 
 began. He knows, what is more, that the Secretary of the Treasury 
 has practically no say whatever in getting up the estimates, that, for 
 instance, if the War Department should multiply or divide by ten its 
 previous estimate for river and harbor expenditure, the Secretary must 
 remain silent, and embody the estimate in his "letter." 
 
 Running the Appropriation Gauntlet 
 
 It is not surprising, therefore, that when the estimates are passed 
 on to the House Appropriation Committees, they are treated as a mere 
 collection of guesses, not to be taken seriously, and to be used as a 
 guide the roughest of guides only when political considerations are 
 absent. But political considerations are rarely absent. Only too often, 
 when the needs of a service have become exceedingly pressing, special 
 estimates are compiled after long and scientific study, after laborious 
 and expensive research, to be lightly tossed aside by the Appropri- 
 ation Committee, because political expediency at the time happens to 
 run counter to the needs of the service. But this is not all. When the 
 nominal needs of the service have adventured through the commit- 
 tees and are presented to the House, they are subjected to the fire of 
 new influences, new opinions, new and extended possibilities of political 
 pressure. And when, in their modified, battered or distorted form, they 
 have pased through the House, they must run the gauntlet of the Sen- 
 ate. Then the Executive approves or disapproves. 
 
 The results, of course, are natural. Take a few simple illustrations 
 actual occurrences in the Post Office Department: 
 
 A printing plant in Cincinnati, Ohio, belonging to the City Post 
 Office, shuts up shop. There is plenty of work on hand to keep it busy. 
 But the appropriation happens to have run out. Result : No work for a 
 considerable period but the salaries of the employees run on as usual, 
 to be paid months later, when a new appropriation can be secured. 
 
 32 
 
Two time-recording clocks in New York City, belonging to the 
 Post Office Department, lie idle for months. Reason : The appropria- 
 tion has run out. Ten dollars would probably repair the clocks. But 
 not a cent can be spent on the clocks until, several months later, an 
 appropriation can be secured. 
 
 The traveling railway mail officials charged with investigating the 
 postal efficiency in the various parts of the country are forced to stop 
 work before the close of the year. Reason : The appropriation has run 
 out. And the salaries are later collected by the officials for the work 
 they didn't and couldn't do. 
 
 Uncertainty of Appropriation Bills Constant Menace 
 
 These are only a few of the minor illustrations of what is taking 
 place, on a vastly larger scale, in practically every Government Depart- 
 ment. Under our system of government, a small majority of either 
 house, or the Executive, may, by cutting off financial support, starve 
 or temporarily paralyze any important public need. Take so vital a 
 branch of government activity as the Federal Civil Service Commission. 
 Not only its vigorous administration, but its very existence, is being 
 threatened annually, not by the repeal of the law under which it exists, 
 for that would not be tolerated by the sentiment of the country, 
 but by a small crowd in one house temporarily securing sufficient power 
 to jeopardize its fiscal support. It takes constant lobbying on the part 
 of its friends to keep it from this form of submersion. This is even 
 true of State Legislatures. In the State of Colorado, a few years ago, 
 the Civil Service Commission was absolutely abolished by a failure of 
 the Legislature to provide the necessary appropriation. The recent 
 failure of Congress to appropriate money for the Secretary of War 
 with which to equip the militia with artillery, is another case in point. 
 Picture Mr. Potter going down to Washington and pleading with the 
 Government for a new telephone office on the assumption that he is 
 going to get it, and the Government telling him, "No, Mr. Potter, you 
 will have to wait a while, because the program for this year is five 
 battleships." 
 
 Why only recently in a debate in Congress, Mr. Mapes called the 
 attention of the Chairman to the deplorable condition existing in the 
 Supervising Architect's Office, as a result of this financial constriction 
 which obtains in our fiscal system. I quote from the Congressional 
 Record of April 7, 1914, pp. 6807 ff. : 
 
 "MR. MAPES : Mr. Chairman, I desire to call attention to a few facts in 
 regard to the work of the Supervising Architect's Office. The question of the 
 gentleman from New York is answered very definitely in the hearings page 
 J06 by the Supervising Architect. It appears from the hearings that the office 
 is behind from five to six years in its work. It takes between three and four 
 years from the time a building is authorized before the Supervising Architect's 
 Office can even begin to prepare the plans and it takes about six years from 
 the authorization of the building before the building is completed. 
 
 "The appropriations for this office for the last few years furnish a striking 
 illustration of the evil effects upon the public service of penny-wise and pound- 
 foolish economy. The appropriation bill passed in 1911, after our friends on 
 the other side of the aisle got control of the House, reduced the number of 
 employees in the Supervising Architect's Office by 66, in spite of the fact that 
 
 33 
 
the work of the office was far behind, the number of public buildings authorized 
 was steadily increasing, and the work of the office was getting more and more 
 behind as time went on. The inauguration of the parcel post made it necessary 
 to enlarge old post-office buildings and to build new ones. The Architect's 
 force should have been increased instead of decreased. 
 
 "Since that time the office has continued to get more and more behind in 
 its work, until now it is practically six years behind. If no other public build- 
 ings were authorized, it would take six years for that office to catch up with 
 the work already assigned to it. It takes from three to four years from the 
 time a public building is authorized by Congress before the Supervising Archi- 
 tect's Office can even commence to give any consideration to the plans for it. 
 
 "The Supervising Architect, in the hearings before this committee, on page 
 106, says: 
 
 " The public-buildings act approved March 4, 1913, gave us about four 
 years' work at our present rate of progress. We will not commence work on 
 that bill for one and a half or two years. You might say that we have five 
 and one-half or six years' work ahead of us.' 
 
 "Again, he says : 
 
 (< 'That at our present rate of progress it will not be until the beginning of 
 the calendar year of 1916 that we will commence work on the public buildings 
 act, approved March 4, 1913.' 
 
 ********** 
 
 "The Supervising Architect again, on page 107, says : 
 
 " 'We find that our clerical force available for the administrative work 
 incident to the construction of new buildings is not in balance with the tech- 
 nical force. * * * It seems unwise to have so many buildings under construc- 
 tion when we are unable to handle the enormous correspondence and adminis- 
 trative work which naturally follows. Letters accumulate for two or three 
 weeks before they receive attention and the work of construction is delayed; 
 there is complaint all along the line, and we are criticized on the floor of the 
 House. However, it is a condition that we cannot ameliorate under existing 
 circumstances unless you can help us by this balancing of the force.' 
 
 "There is not a man here who would tolerate a system in his private 
 business that made it necessary to hold up the progress of building operations 
 for two or three weeks, as testified to by the Supervising Architect, on account 
 of not having enough help to answer the correspondence promptly. It is un- 
 businesslike and wasteful in the extreme to allow such a condition of affairs 
 to exist. 
 
 ********** 
 
 "The distinguished chairman of the Committee on Public Buildings and 
 Grounds, the gentleman from Florida (Mr. Clark), in a speech on the floor 
 of the House on February 20 of this year, page 3985 of the Record, corroborates 
 the statement of the Supervising Architect. * * * 
 
 " 'There is probably not a Member upon this floor who has been here for 
 six years or more, unless he represents a district in one of our large cities, 
 who has not a building authorized for his district which has been pending for 
 three or four years and which to-day appears no nearer being built than it 
 did the day the bill which provided for it passed Congress. Under the methods 
 obtaining, after a building is authorized, the patience of the community is worn 
 threadbare before construction on the foundation is begun. In one place in 
 my district, where I secured an authorization for a post-office building, some 
 of the older inhabitants are beginning to date things back to "the time when 
 Clark got a building for us," and yet not a shovel of dirt has been thrown 
 toward preparing for the foundation/ 
 
 "I do not know how far back into ancient history the act was passed au- 
 thorizing the public building in his district to which the distinguished chairman 
 of the Committee on Public Buildings and Grounds refers, but he has described 
 a situation that exists all over the country, and yet the Supervising Architect's 
 Office is obliged to get along with an inadequate force. The work continues 
 to pile up and the public service continues to suffer." 
 
 34 
 
Troubles of Foreign Governments 
 
 Nor is this condition peculiar to the United States. We find pre- 
 cisely the same principle operating in every foreign government. Take 
 France, for example. The head of the telephone service will submit 
 to the Chamber of Deputies a hundred chapters of minute and elab- 
 orate statistics. "We must have so and so many francs for construc- 
 tion and improvement, or the telephone service will continue to deteri- 
 orate." The appropriating body will receive the demand, and with it, 
 perhaps, hundreds of chapters of statistics from other departments. 
 Nearly 800 chapters are sometimes submitted by the twelve ministers 
 who constitute the department heads in France. The Budget Com- 
 mittee is literally swamped with statistics. Even if the members were 
 entirely free from political considerations, they could not possibly 
 frame a proper business judgment on the needs of each service. The 
 outcome is only natural. The telephone administration may ask for 
 an appropriation of a hundred million francs to carry out a wise plan 
 of construction and equipment, which would result in annual economies 
 and bring the telephone service up to the requirements of the public. 
 The call is simple : "A stitch in time, to save ninety and nine." But 
 if the appropriation body considers it better, politically, to expend 
 money for warships, or waterways, or public buildings, the telephone 
 budget will be cut in two, and the Telephone Department must shift as 
 best it can on "short rations." This may mean no rations at all, for a 
 hundred millions may be an absolute minimum, without the expenditure 
 of which the proposed construction would be useless. Year in and 
 year out, the official Budget Reporter calls attention to this fatal gap 
 between the public purse and the public plant, and efforts have been 
 made in the past to beseech the Chambers of Commerce to supply the 
 needed investment, because the money could not be obtained in time or 
 at all, from the Government. 
 
 A striking example of the results of this policy is furnished by the 
 case of the Gutenberg Exchange, Paris. After a dozen years of tele- 
 phone stagnation during which period there were years in which no 
 telephone appropriations were made at all, and years when appropri- 
 ations were so large that they could not be used before they were with- 
 drawn the Government installed the "common battery" system in the 
 Gutenberg Exchange. This system had long since been adopted in 
 America, but in France it was still regarded as a new improvement. 
 No sooner was the system installed, than the French Government was 
 warned that unless it provided connections of greater electrical capa- 
 city, it would have trouble from the higher voltage. But the warning 
 fell on deaf ears. The Government felt that it had spent enough. The 
 result was a conflagration, which completely reduced the exchange to 
 junk and ashes, and left a large section of the city stranded without 
 telephone communication. 
 
 It will be seen, therefore, that some radical change in our method 
 of "financing public enterprises not to be accomplished in one day or 
 one year is necessary, before we can hope, in tte management of our 
 Post Office Department to approach the efficiency and service af- 
 
 35 
 
forded by private enterprise ; some reform which will insure a complete 
 freedom from the gusts of opposing policies political or otherwise 
 some system which will provide a reasonable guaranty that deliberate 
 and painstaking planning will be followed by equally deliberate and 
 painstaking execution. 
 
 American Optimism Would Not Save Us from Fate of Europe 
 
 Of course, we quite naturally must take a great deal of pride in the 
 achievements of American industry (the unfortunate exception being 
 the advocates of Government ownership), and, when looking at our 
 telephone development, it may be that some will say that if this Gov- 
 ernment undertakes an enterprise of this kind we can avoid, by experi- 
 ence, the pitfalls of foreign nations. However, to steer clear of this 
 erroneous assumption, we only have to consider the wonderful progress 
 which European nations have made in what everyone concedes to be 
 purely governmental enterprises. Take the road-building of France, 
 Germany, England, the canal construction, town planning, magnificent 
 public buildings, drainage, etc., which have served as models for many 
 of our State and municipal enterprises in this country. Consider the 
 unfortunate experience in this country in similar undertakings, with 
 charges of inefficiency, graft, etc., notably the canal and road-building, 
 without mentioning any State. We thus see that, where the govern- 
 ments abroad have confined their efforts to governmental functions we 
 may learn much from them, but where they have departed from that 
 field and entered fields of private enterprise, they have dismally failed 
 where we, retaining private management, have magnificently succeeded. 
 
 An Earnest Appeal to Mr. Lewis 
 
 In order that this and similar discussions may prove of some con- 
 structive value, I want to make an appeal to Mr. Lewis and his friends. 
 Certainly, neither he nor any other right-thinking person, after con- 
 sidering what we have been discussing, would wish to plunge the coun- 
 try into an experiment which, if it should fail, would cripple the busi- 
 ness interests and practically destroy any hope of a continuation of our 
 magnificent growth. To remove, so far as possible, any element of 
 danger, will they not at once start a movement for the establishment of 
 efficient business in the Government service ? Will they not do the very 
 self-evident and proper thing; compel the adoption by the govern- 
 mental departments of adequate and modern means of accounting so 
 that every item of expense and income may have its proper place and 
 be considered in determining the relative efficiency of departments one 
 with the other, or with similar departments elsewhere? Will they not 
 actively start a campaign to bring stability into the organization which 
 has charge of our enormous governmental undertakings? Will they 
 not try to make merit alone a determining factor in promoting new 
 officials and retaining old ones? 
 
 In doing this, they will have the support of every conservative per- 
 son and interest in the country, particularly organizations such as the 
 
 36 
 
Providence Economic Club and the Merchants' Association of New 
 York, which, at present, occupies a peculiar position. That organiza- 
 tion was foremost in its determination to secure a revision in the 
 express rates, and, under our magnificent plan of governmental con- 
 trol, secured relief for the business interests of the country in the pro- 
 mulgation by the Interstate Commerce Commission of a new rate 
 schedule and zone system. That same organization was strong in its 
 support of Mr. Lewis and others in connection with the adoption by 
 the Government of the parcels post feature of our postal system. They 
 readily recognized the proper place for this new and valuable service. 
 But that same organization is to-day waging an active fight to prevent 
 the absolute destruction of the express system, a service which is 
 needed by every business interest in the country. That same organi- 
 zation is to-day waging this same campaign which we are asking Mr. 
 Lewis, with his great ability, to father, namely/ one which will result 
 in the elimination of ignorance and guess in measuring the true results 
 of postal operations, whereby the service may be reconstructed and 
 placed upon a modern and efficient basis. 
 
 The Time to Seriously Consider the Question 
 
 When Mr. Lewis and his friends have brought about the result 
 that the Post Office Department of this country is managed on an 
 economical and scientific basis ; when the Postmaster-General is secure 
 in his tenure, so long as he is efficient and active ; when his subordinates 
 are appointed solely on account of ability ; when they are retained and 
 promoted as a reward for faithful service; when the Government has 
 adopted a fair and equitable scheme of pension and benefits for its 
 employees; and when the Government has brought about a condition 
 where appropriations are made the result of careful and conscientious 
 study by its officers, and not, as at present, made a football for am- 
 bitious and unscrupulous politicians, subject to all of the evils of log- 
 rolling and political bickering, then, I say, and not until then, will we 
 be in a position for a proper and judicious discussion of the effect of 
 so radical a movement as Mr. Lewis proposes. At that time we, as 
 employees, will have no objection to the serious consideration of such 
 a question, perfectly secure in the thought that this service, the thing 
 we are all striving for, will be reasonably safe. 
 
 President Wilson's Conservative Position 
 
 As showing that the task I am asking Mr. Lewis and his friends 
 to assume is worthy of his mettle, I want to quote from President 
 Woodrow Wilson, in his work, "The State": 
 
 "But the proposition that the government should control such dominating 
 organizations of capital may by no means be wrested to mean by any necessary 
 implication that the government should itself administer those instrumentalities 
 of economic action, which cannot be used except as monopolies. Government 
 regulation may in most cases suffice. Indeed, such are the difficulties in the 
 
 37 
 
way of establishing and maintaining careful business management on the part 
 of the government that control ought to be preferred to direct administration 
 in as many cases as possible in every case in which control without adminis- 
 tration can be made effectual." 
 
 I feel confident that the "difficulties in the way of establishing and 
 maintaining careful business management on the part of the Govern- 
 ment" will not prevent our good friend Mr. Lewis from tackling the 
 problem, and I wish to say that if he is a big enough man, should he 
 fail in his efforts to establish proper business management on behalf 
 of the department to which he wishes to entrust the future of this im- 
 portant industry, he would undoubtedly be the first to demand that 
 further attempts at extending the functions of the Post Office Depart- 
 ment be suspended until, with the support of some new movement, 
 there is first established such efficiency in management on the part of 
 the Government as will insure continuance of "good service" the 
 thing which alone counts. Gentlemen, I thank you. 
 
 38 
 
AN INITIAL 
 
 25 CENTS 
 
 WILL INCREASE TO S c THE PE *ALTY 
 
 "AY AND TO *1 00 ON T^ " THE FOU "TH 
 OVERDUE. N THE SEVENTH DAY 
 
 LD 21-loOm-7,'33 
 
Gaylord Bros. 
 
 Makers 
 
 Syracuse, N. V. 
 WT. JAN. 21, igoj 
 
 UNIVERSITY OF CAUFORNIA LIBRARY