IN THE MATTES OF THE POSTAL-TELEGRAPH BILL. 
 
 4 Washington, D. C., April 22, 1872. 
 Argument of Mr. Gardiner G. Hubbard, before the House Committee on 
 Appropriations, in favor of the Senate bill to reduce the rates of corres¬ 
 pondence by telegraph, and. to connect the telegraph with the postal 
 service, reported by Mr. Ramsey from the Committee on Post-Offices 
 and Post-Roads. 
 
 Mr. Hubbard said: 
 
 It is three years since I first had the pleasure of appearing be¬ 
 fore a committee of the House in relation to the postal telegraph. 
 Two years ago I appeared before a select committee of the House 
 on the subject. The bill which was then under discussion, and 
 of which the present is an amendment, proposed a great reduction 
 of the telegraph rates. It was so large that some gentlemen 
 thought that it must result in a loss. I will, therefore, state some of 
 the reasons then advanced why the rates could be so largely re¬ 
 duced. I stated that certain improvements had been made, which, if 
 adopted in the telegraph business, would greatly reduce the expenses. 
 One of those was “ the double transmitter,” by which messages are 
 transmitted both ways at the same time on a single wire. That proposi¬ 
 tion was then considered by the president of the Western Union 
 Telegraph Company as one of the fallacies of Mr. Hubbard, showing 
 that "he was a man of theories, without any practical knowledge of the 
 business. Mr. Orton asked, “How can it be done 1 ?” To which I re¬ 
 plied, “ How can the first message be sent over the wires !” which he 
 confessed his inability to answer. 
 
 On the first day of last November I weut into the office of the elec¬ 
 trician of the telegraphs of Great Britain, and almost the first thing 
 said to me was, “ We have to-day received a letter from Mr. Prescott, 
 the electrician of the Western Union Telegraph Company, in which he 
 says, 4 We have just introduced the double transmitter on^the lines be¬ 
 tween New York and Albany with great success.’” The first time I 
 met Mr. Orton, after my return, he said, 44 We have just introduced the 
 double transmitter on the lines between New York and Buffalo, but are 
 unable to work for a greater distance.” Four weeks ago yesterday I 
 met Mr. Prescott at the Arlington House, and he said, 44 Mr. Hubbard, 
 you have taken an interest in the double transmitter, and will be glad 
 to learn that within the last week we have introduced it' between New 
 York and Chicago, and that it is operating perfectly well. And now,” 
 said he, 44 whenever the business exceeds the capacity of our present 
 lines, instead of stringing new wires we shall use the double transmitters, 
 thus doubling the capacity of our lines.” * 
 
 I also stated three years ago that the wires were not properly insu¬ 
 lated or connected at the offices; that the lines between New York and 
 Washington were in such poor repair that one-half the number of wires, 
 properly insulated and connected, were capable of performing the entire 
 business between those two places $ and that consequently there was a 
 1 T 
 
2 
 
 double expense of operators and office expenses. There were then, I 
 think, thirty-one wires between New York and Washington, and about 
 the same number now, while the business has nearly doubled. Four 
 years ago 8,400 messages passed through the New York office every day, 
 now 10,500. There has been an improvement in the insulation and a 
 reduction of the expenses. 
 
 I referred to the feasibility of introducing half-rates for night-messages. 
 One of the pamphlets that were circulated by the Western Union 
 Telegraph Company, in regard to that suggestion, was headed “ Impos¬ 
 sibility of utilizing the telegraphic lines by night as well as by day.” Yet 
 to-day, gentlemen, all know that night-messages are used extensively 
 wherever they have been introduced, and this, although the business has 
 not been facilitated, by the Western Union Telegraph Company. For in¬ 
 stance, one of their rules provides that if a night-message is sent from a 
 main office to a small office and arrives on Saturday evening, it cannot be 
 delivered until Monday morning, although the man to whom it is directed 
 may go to the office and demand it; by another of the rules, if such a mes¬ 
 sage arrives at G or 7 o’clock in the evening,and the person to whom it is 
 addressed asks for it, and offers to pay the full rate, he cannot receive 
 it until the next morning. 
 
 I stated that the rates were irregular, often higher to the nearer than 
 to the remote place; that while the rates to Boston were 40 or 50 cents, < 
 the rates to Waltham, ten miles this side, were $1.75; and‘I said that 
 if those rates were reduced and made uniform for equal distances, the 
 business would be greatly increased. A new tariff has since been put 
 into operation with greater uniformity of rates, and the business has been 
 greatly increased. 
 
 I also stated that the office expenses on all telegrams were very great; 
 that by the adoption ot the postal-telegraph system they could be greatly * 
 reduced; that by the substitution of stamps, and invariable prepay¬ 
 ment, the present cumbrous system by which each message is required 
 to pass through sixteen different hands in being transmitted from one prin¬ 
 cipal office to another could be done away with, and the office business A 
 very greatly simplified and expenses reduced. I compared it to the differ¬ 
 ence between the old way of transmitting letters at a high rate of postage 
 and the present custom. Formerly every letter carried with it a way¬ 
 bill, stating from and to what place it went, the amount of postage, 
 whether prepaid or not, and the amount to be collected if unpaid, if 
 that system were in operation to-day the postal-service of the country 
 could not be performed, as it would require more clerks and time than 
 could possibly be given between the receipt of the letters and dispatch of 
 the mail. So great has been the reduction of expense that they are 
 no greater in proportion to the receipts than they were when the 
 rates were G, 18, and 24 cents for each letter. 
 
 I also stated that, as the telegraph business increases, the expenses 
 do not increase in a corresponding ratio. For instance, as I showed by 
 the statistics of the European telegraph lines and of the Western Union 
 Telegraph Company, if the business increased 100 per ceht., the expenses, 
 instead of increasing at the same rate, increased only about 55 per cent, 
 abroad and 37£ per cent, in this country; and that, if the rates were 
 reduced 33J per cent, and the business doubled, the net profits would 
 be increased; and that, consequently, a reduction of rates could be 
 made as the business increased.. I showed by the figures that in Belgium 
 and Switzerland, when the rates were reduced 50 per cent, there 
 was within the first year an increase of the business of oyer 100 per 
 cent., followed in the next year by an increase of 15 or 20 per cent., so 
 
23 «’MZ.r. 
 
 3 
 
 V L O ( 
 
 that after a few years the net receipts were nearly as large as under the 
 higher rates. 
 
 Most of these facts are stated either in the report of my friend, Mr. 
 Palmer, or that of the Senate committee. 
 
 Although these inventions have been adopted, although the wires 
 have been improved and the business greatly increased, yet there has 
 been no. corresponding reduction of rates. I have a statement of the 
 rates in 1868 and 1872 between the same offices. In 1868 the rates in 
 the East.were— 
 
 Under 250 miles, 34 cents ; they are now 37 cents. 
 
 Between 250 and 500 miles, 73 cents; they are now 62 cents. 
 
 Between 500 and 1,000 miles, $1.43; they are now $1.23. 
 
 Between 1,000 and 1,500 miles, $2.41; they are now $2.14. 
 
 I also stated then, what is as true to-day as it was then, that the rates 
 at the West are nearly twice as high for the same distance as they are 
 at the East. Thus, the rates at the West were then—- 
 Under 250 miles, 79 cents; they are now 03 cents; in the East, 37 
 cents; 
 
 From 250 to 500 miles, $1.33; they are now $1.17; in the East, 62 
 cents; 
 
 From 500 to 1,000 miles, $2.06; they are now $1.76; in the East, 
 $1.23; 
 
 making a reduction of from 15 to 20 per cent. only. 
 
 A statement is made in the “ Memorial of the Western Unioii Tele¬ 
 graph Company v that within the last six years the rates have been 
 reduced 50 iier cent. Now, although Iplo not know exactly what they 
 were six years ago, yet I think that a careful comparison would show that 
 between the principal cities of the country the rates are higher to day 
 than they were then. Six years ago the wires of the United States 
 Telegraph Company ran over the country, and the rates of telegraphing 
 were very, low between large cities. Mr. Orton was the president of 
 that company. The United States Telegraph Company was purchased 
 in 1866 by the Western Union at a cost of $13,000,000, and the rates raised 
 in many parts of the country. I stated that it was possible that such a 
 man as Commodore Vanderbilt, with a comparatively small expenditure 
 of money, could obtain the control of all the telegraph lines of the country. 
 What I then stated as a possibility was then actually taking place. Com¬ 
 modore Vanderbilt was then purchasing the stock of the Western Union 
 Telegraph Company, and within less than six months, at the next annual 
 election, the control of the company passed into the hands of the family 
 V. and friends of Mr. Vanderbilt, and it can be made subservient to their 
 V railroad or other interests. 
 
 A: Let us now consider the influence which this interest exerts over the 
 
 vs people of the country, and first on the press. The rates to the press 
 are regulated by the Western Union Telegraph Company. That com¬ 
 pany can raise or depress them, according to its own will; and it has, 
 
 . as these reports will show, in times past, so raised the rates as to 
 crush out more than one paper. There is nothing that presses with 
 - so great a weight upon the leading editors through the country as 
 this monopoly. I have conversed with editors of the leading papers 
 from different sections of the country, and know that they feel 
 the power of this company, and in secret pray that there may be some 
 deliverance from the weight under which they groan. I think it is 
 known to some of this committee that within a year past the Western 
 Union Telegraph Company issued a notice that if any paper undertook 
 to criticise any of the telegraphic news furnished to it such paper would 
 
4 
 
 be excluded from receiving news; and that a paper in a neighboring 
 city, which criticised the telegraphic news, was cut off and a notice of 
 that fact and of the cause sent to all the papers in that section of the 
 country. 
 
 Mr. Sargent. Does that refer to the criticism of the news ! 
 
 Mr. Hubbard. So I understand it. 
 
 Mr. Palmer. I think the criticism was, that the reports had been 
 directly manipulated by the operator or by the agent of the Asso¬ 
 ciated Press, or something of that kind. 
 
 Mr. Hubbard. We will next consider the influence it possesses over 
 the commercial news. The commercial news from Europe is received at 
 New York every morning, and, with the prices of that city, is sent over 
 the wires throughout the length and breadth of the country. The in¬ 
 stant that news is received at New York all other business over the 
 wires on which it is to be transmitted is suspended until this news is 
 sent. Thus it has preference over all the other business of the country. 
 
 I do not mean to say that this is not right; I merely speak of it as "a 
 fact that there is now preferred business. The present bill proposes to 
 legalize that which is now done contrary to law, and one of the argu¬ 
 ments made against the bill in this memorial of the Western Union Tele¬ 
 graph Company is that it allows preferred business. With what pro¬ 
 priety that argument is made can be seen when it is known that that 
 company uses its wires for its own benefit in preferring business. 
 
 All the telegraphic correspondence of the United States is preserved 
 and filed in the records of the company. Not only are the original mes¬ 
 sages preserved, but in the city of New York two steam copying-presses 
 are kept constantly at work, on which letter-press copies are made. 
 They object to the present bill, which provides for the destruction of the 
 telegrams within thirty days, that it will obliterate the evidences of con¬ 
 tract, and render impossible the gathering, after thirty .days, of the, 
 traces of crime; that is, this company has become the registry of the 
 contracts of the nation, and the great inquisition-house where all the 
 secrets of every one that uses the telegraph are filed and preserved for 
 future reference. What use has been made of these secrets, the walls 
 of some of these committee-rooms can answer. What use can be made 
 of them is, of course, evident to every one. These, then, are instances 
 of the power which this company possesses over the press, the com¬ 
 mercial news, and the private correspondence of the nation. 
 
 I admit that it is a necessity that this business can bq more economi¬ 
 cally managed by a single company than by many. It is one of the 
 tendencies of the present day to monopolize all business. The sales in 
 the retail store of Mr. Stewart average $75,000 a day, and are larger 
 in a week than were made in a year by any single firm in New York at the 
 time he commenced business. Formerly there were half a dozen railroad 
 corporations between New^ York and Buffalo, and as many more between 
 Buffalo and Chicago. Now there are only two between, and these 
 controlled by one man, Commodore Vanderbilt. Formerly separate * 
 telegraph companies were organized in every section of the country. 
 Now, one company has gradually gathered into its net all other com¬ 
 panies, until its ramifications extend all over the country, east, west, 
 north, and south, until it performs nine-tenths of the telegraph business 
 of the country; and as the business of the country extends from 
 the extreme east to the west, we must have these monopolies. The 
 question then is, how are they to be controlled? Shall they be 
 managed by parties for their own interests, contrary to the interests 
 of the people, or shall they be controlled and managed by the people for 
 
 i 
 
their interests? The pending hill proceeds on the assumption that a tele¬ 
 gram is like a letter, differing from it only in the means of transmission ; 
 and that, as the postal service has, from time to time, adopted new 
 methods of transmitting correspondence—now the steamboat, and then 
 the railroad—so it must adopt the telegraph as the latest and most 
 improved method. This bill proposes a system in analogy with the 
 present mail service. Two methods are now in operation for contracting 
 for the transmission of the mails. Where there is a fixed perma¬ 
 nent way, as in railroads, requiring a large investment in realty, Con¬ 
 gress fixes the compensation, and tbe Postmaster General contracts 
 at these rates. Where there is no fixed investment, but the mere use of 
 the roadway by coaches and horses, he contracts with the lowest bidder. 
 More than one-half of the mileage and three-fourths in bulk of the 
 mails are transported by contract at rates fixed by Congress. The 
 lines of telegraph are fixed and permanent, belonging to the realty. In 
 carrying out the policy adopted in such cases the seventh section 
 authorizes the Postmaster General to contract with the Postal Tele¬ 
 graph Company for the transmission of telegrams for a term of ten 
 years. 
 
 Over three-fourths of all the employes will be hired and paid by the 
 telegraph company. A large proportion of the remainder will be clerks 
 who are now employed by the Post-Office Department, requiring but a 
 few additional employes beyond those now engaged in the Department. 
 It has been said that the Department would incur a large expense for 
 office-room for the company. In Boston, New York, Chicago, Saint 
 Louis, New Orleans, and in very many cities of a secondary importance, 
 new post-offices are now being constructed. In Cincinnati, Philadel¬ 
 phia, and many others, new post-offices will soon be required. These 
 buildings are very high, in order to give them the proper architectural 
 effect j and as the upper part of those buildings will not be required 
 for the mail service, they' can be used for the operators of the telegraph 
 company. 
 
 The bill provides that every post-office shall be a postal-telegraph 
 office. It does not propose to supersede any of the existing telegraph 
 offices, but to add a large number to the existing offices. The present 
 system is substantially a railroad system, as was so forcibly explained 
 in the able speech of Mr. Palmer in the House. 
 
 The English system was substantially a railroad system; but on 
 the transfer to the post-office, it was found that although the num¬ 
 ber of offices are about equally divided between the railroads and the 
 postal-telegraph offices, yet only 10 per cent, of the telegrams are sent 
 • through the old offices—so much greater is the convenience of the post- 
 offices. 
 
 It is stated in opposition to the plan that it creates a company merely 
 to supersede an existing monopoly, and the question is asked, Why 
 should a new corporation be created? If the new corporation possesses 
 the same powers as the present one, there is no reason why it should 
 be created. Unless the new corporation is a creature of the law, and 
 its interests subordinate to the interests of the people, this bill should 
 not be passed. The Western Union Telegraph Company is incorporated 
 by the State of New York. Its lines extend throughout the country 
 into every State and Territory; yet the law of the State of New York, 
 by which it is incorporated and governed, does not extend beyond the 
 limits of the State. The powers of the company are subject to the same 
 limitations and its lines extend into other States only through the comity 
 
6 
 
 of such States. Therefore it cannot be under any general law. That 
 company is a law unto itself. 
 
 Mr. Clark inquired whether the Western Union Telegraph Company 
 had not permission from the States to pass through them with its lines. 
 
 Mr. Hubbard. Every State in the Union has enacted laws author¬ 
 izing any telegraph company to erect lines within its boundaries, but 
 there is nothing to prevent any State repealing such laws at any time. 
 There is no possibility of a general system under State laws. Under 
 the proposed system, the corporation will be a creature Of Congress, 
 subject to rules and regulations prescribed by the Postmaster General 
 for the government of the company. By its provisions, telegraph lines 
 are made post-roads. Every telegraphic message, according to the 
 opinion of the Attorney General, is a commercial communication, and, 
 as such, comes under the provisions of the Constitution which gives 
 Congress the authority to regulate commerce between the States. 
 Therefore, wherever the wires of this company extend, there the law 
 will follow. The company will be a creature of the law, subject and 
 subordinate to it. The Western Union Telegraph Company is one of 
 the few public corporations not required to publish any reports. All 
 railroad companies are obliged to publish their reports. I do not pre¬ 
 tend that Congress or the legislature of any State has the right to 
 inspect the concerns of private corporations. But a telegraph company 
 is not and cannot be considered a private company. The present bill 
 provides that regular accounts shall be forwarded by the company to 
 the Postmaster General; that the Postmaster General shall be a direc¬ 
 tor of the company, so that all its operations shall be known to the 
 representatives of the people and to the people themselves. 
 
 The capital of the Western Union Telegraph Company is only limited 
 to such an amount as it can float upon the market. The way in which 
 the capital has been increased is shown in the report of the Senate 
 Committee on Post-Offices. Gentlemen will find that there is no 
 instance of so large a capital with so slight a substructure of cash. The 
 largest percentage of stock dividend which that company has ever de¬ 
 clared was 414 per cent., and the largest in amount eleven millions of 
 dollars. Whether the gentlemen who now control this company will 
 be likely to make further stock dividends their course in the manage¬ 
 ment of the Hudson River and Rew York Central and the Lake Shore 
 Railroads will show. 
 
 The present bill fixes the capital at the actual cost of lines that 
 may be purchased or constructed, and there cannot be any stock divi¬ 
 dends. The present company can raise or depress its rates as its interests 
 dictate, whereas the present bill fixes the rates, both for ordinary and 
 for press messages. 
 
 The object of the directors of the Western Union Telegraph Company 
 is, primarily, to make money for its stockholders, then to subserve 
 whatever other interests they may have, and, lastly, the interests of the 
 public. I think that all the gentlemen of this committee will agree 
 that in the mail and telegraph the public interests should be primary, 
 and the interests of the stockholders secondary. Such, it is believed, 
 will be the effect of the pending bill. 
 
 We have already referred to the question whether the business will 
 pay at the greatly reduced rates. That subject was fully considered 
 two years ago, and the only objection my friend Mr. Beck then made 
 to the bill was the fear on his part that the rates were so low that the 
 company might fail, the Government take possession of the telegraph, 
 and that it would become a Government telegraph, and he thought 
 
7 
 
 such a monopoly was more to he feared than the present. To obviate 
 that objection the rates in this bill have been materially raised. Tne 
 rates then proposed were 25 cents for every circuit of five hundred 
 miles. Now they are 25 cents for a circuit of two hundred and fifty 
 miles, 50 cents for a circuit of five hundred miles, and 25 cents for every 
 added circuit of five hundred miles. These rates have been adopted for 
 Government telegrams,, after a very careful examination of the whole 
 subject by Mr. Whiting, the assistant attorney general for all matters 
 relating to telegraphs. In the last report of the Postmaster General it 
 is stated that these rates are a reduction of 45 per cent, on the previous 
 rates, and will yield a fair net profit. 
 
 The bill has been also changed in another respect and provides that 
 the entire property of the company shall be subject to the performance 
 of its contract. It will require some twenty or thirty millions of dollars 
 for the purchase and construction of the necessary lines, and that amount 
 of property must be exhausted before the Government can be called 
 upon in any way. The bill also provides that, if the company should 
 fail, the Postmaster General may take possession of the lines and lease 
 them to any responsible party who will perform the service at the rates 
 fixed by the bill. 
 
 Mr. Sargent. What would be the rates to San Francisco under this 
 bill? 
 
 Mr. Hubbard. Two dollars for a day and a dollar for a night-mes¬ 
 sage. The second section provides that the charges shall be uni¬ 
 form for equal distances at a rate not exceeding one cent a word for 
 each circuit through which it shall be transmitted, to be computed as 
 follows: u For distances under five hundred miles, two hundred and 
 fifty miles shall be deemed a circuit; for greater distances, five hundred 
 miles shall be deemed a circuit; for telegrams directed to be, transmit¬ 
 ted by night, one thousand miles shall be deemed a circuit; all words 
 shall be counted, and no communication shall be transmitted at a rate 
 less than 25 cents a circuit.” 
 
 Mr. Sargent. This makes a message of twenty-five words an ordi¬ 
 nary message? 
 
 Mr. Hubbard. Yes; counting the address and signature. The ordi¬ 
 nary message now is ten free words. The average length of the ad¬ 
 dress and signature is seven words, which will therefore allow, under 
 this system, eighteen free words against ten, an increase of 80 per cent. 
 
 I have used the telegraph freely in Europe, where they pay for all the 
 words, and all superfluous words are omitted from the address and sig¬ 
 nature. The signature frequently contains nothing but the last name. 
 
 Mr. Sargent remarked that he had received a cable dispatch the 
 other day without any signature, knowing by the contents from whom 
 it came. 
 
 Mr. Hubbard. Those who correspond by the cable often omit every¬ 
 thing but the address. 
 
 The committee know that another plan for the union of the postal and 
 telegraph service has been proposed by the Postmaster General, that of 
 a Government telegraph. That proposition is opposed by Mr. Beck and 
 others on the ground of the great expense which it w r ould occasion to 
 the Government, as tire lines cannot be purchased for less than their 
 market value, between thirty and forty millions of dollars, and on account 
 of the great power conferred upon the Executive. The committee will 
 observe that in the plan proposed by this bill there is no additional power 
 conferred upon the Executive, and that the power possessed by 
 the present telegraph companies is divided between the post-office and 
 
8 
 
 the company, so that, without a combination between those two interests, 
 there can be no great political or any malign influence exerted through 
 the telegraph. 
 
 It was said that it would increase the patronage of the Government. 
 That objection also is obviated by the present plan, which will probably 
 require an addition not exceeding one per cent, to the post-office ein-„ 
 ployes. 
 
 The present bill provides that the Post-Office Department shall furnish 
 the stamped paper on which the telegram is written, the office-room for 
 the operators, and the batteries ; that it shall deliver the telegram to 
 the operator at one end of the line, and that the receiving operator ^hall 
 write it out and deliver it to the postmaster, who is to furnish the envel¬ 
 ope, inclose, direct, and deliver it. 
 
 The Chairman. Does this bill contemplate a surrender of sufficient 
 space in the post-offices to the telegraph company, so that the company 
 can control it for all purposes or only for postal purposes? 
 
 Mr. Hubbard. Only for postal purposes. 
 
 The Chairman. Do you suppose that the company will have offices 
 besides thcfse which the Host-Office Department will furnish? 
 
 Mr. Hubbard. They can have offices if they please. The expectation, 
 of course, is that the present post-offices will accommodate the public 
 sending telegrams, as they now do those sending letters. 
 
 Mr. Niblaok. If I understand you, your proposition is that the tele¬ 
 graph companies are simply to furnish the Government with facilities 
 for transmitting telegrams and to transmit them under contract, just as 
 railroads now furnish transportation for the mails. 
 
 Mr. Hubbard. Yes, sir. 
 
 Mr. Clark. There are now three or four telegraph offices in Wash¬ 
 ington. Do you mean to say that there shall be but one office here, 
 and that that shall be at the post-office? 
 
 Mr. Hubbard. The bill provides that the Government shall furnish, 
 wherever it is for the public interest, postal-telegraph offices. It also 
 provides that the company may have offices at other places at its own 
 expense. It is not contemplated to decrease the offices in any place. 
 
 Mr. Hale. In the same towns and cities where there is a jiostal tele¬ 
 graph » 
 
 Mr. HubbIrd. Yes, sir. 
 
 The Chairman. How will that work where there is an office outside 
 of the posboffice ? How are you to distinguish between those messages 
 that are controlled by the Post-Office Department and those that are 
 not? 
 
 Mr. Hubbard. All the telegrams sent over the wires of the company 
 are to be prepaid by telegraph stamps. 
 
 The Chairman. So that even those offices which are not post-offices 
 must use the stamp ? 
 
 Air. Hubbard. Yes, sir. 
 
 Mr. Hale. Let me state what seems to me a practical difficulty. In 
 my district, a country district, there are thirteen post-offices, where the 
 amount of receipts would be above $500, as fixed in your bill. I think 
 that there are not more than one or two of those offices in which there 
 is more than one room used as a post-office. That is customary in 
 these small places. Now, the bill provides that the Postmaster General 
 shall furnish suitable and convenient accommodations at every postal- 
 telegraph office for the office employes, the instruments, and the battery 
 of the company required for its business. How, shall the operator of 
 the telegraph company be put into the post-office, (where at present 
 
9 
 
 there is nobody but Government employes, appointed by the Govern¬ 
 ment and responsible to the Government,) and do his work there as an 
 employe of the company, or shall the Post-Office Department furnish a 
 room outside'? Has that difficulty occurred to you; and, if so, how do 
 you answer it ? 
 
 Mr. .Hubbard. The bill provides that every postmaster may act as 
 a telegraph operator. Practically speaking, in the case to which you 
 refer, there will be a little machine in one corner occupying but two or 
 three feet of space, and the postmaster himself, or, more commonly, one 
 of his sons or daughters will act as operator. 
 
 Mr. Clark. Section 13 provides that the company may, at its own 
 expense, establish and maintain offices independent of those established 
 by the Postmaster General for the reception, transmission, and delivery 
 of telegrams prepaid by stamps, and that any postmaster may act as 
 operator under an arrangement by the telegraph company with, the 
 Postmaster General. 
 
 Mr. Hale. That is the point. This bill provides that the Postmaster 
 General shall furnish accommodations for the telegraph office, its em¬ 
 ployes, instruments, and batteries. Now, supposing that the company 
 sees fit to send an employe of its own to a given office and will make 
 no arrangement with the Postmaster General, what is to be done in that 
 case ? The bill provides that the Government shall furnish room in its 
 offices for the telegraph employes. 
 
 Mr. Dickey. I suppose the Postmaster General is not bound to fur¬ 
 nish room unless the company makes an arrangement. 
 
 Mr. Clark. The bill provides that u in case any question should arise 
 between the company and the Postmaster General, it shall be referred 
 to the decision of three arbitrators, to be appointed by the Attorney 
 General of thq United States on application of either of said parties, 
 and their decision shall be final and binding.” 
 
 Mr. Hubbard. I do not suppose that the Postmaster General will be 
 bound in that case to establish a postal-telegraph office at that place. 
 
 Mr. Clark. Suppose the Postmaster General should not supply you 
 with an office, and should not allow any of his clerks or postmasters to 
 act as operators, and that the company itself employ them; if, by reason 
 of this, their receipts are such that the company does not receive 10 per 
 cent, dividend, then you have a right to raise your rates so that you will 
 be able to pay that dividend? 
 
 Mr. Hubbari}. Unfortunately there is no provision in the bill for that. 
 
 Mr. Clark. There is a provision that you may raise the rate so as to 
 pay the dividend. 
 
 Mr. Hubbard. No, sir; excuse me, there is a provision of this kind: 
 that if the rates be reduced so low that they will not pay 10 per cent., then 
 the rates can be raised to the amount from which they were reduced. 
 They can be put back again, but not above the rates fixed in the bill. 
 
 Mr. Clark. If that is so, I should like to know who would take the 
 stock in the company. 
 
 Mr. Dickey. That is a practical question. 
 
 Mr. Clark. If you are not to receive over 10 per cent., with all the 
 hazards of the whole property being forfeited to the Government, the 
 stock will not be very desirable. 
 
 Mr. Sargent. It seems as if these telegraph people were driving a 
 very hard bargain against themselves. The question is whether it is a 
 good bargain for the Government. 
 
 Mr. Clark. I want to know whether we are getting up something 
 that will probably succeed or not. 
 
10 
 
 Mr. Hubbard. That is a legitimate question—whether the rates fixed 
 in this bill will pay. I think the memorial of the Western Union Tele¬ 
 graph Company will answer that point. It says: u Upon .what princi¬ 
 ple and for what reason the particular persons named in this bill are 
 proposed to be made the recipients of a franchise never granted by Con¬ 
 gress before, and of immense pecuniary value P We have, therefore, the 
 opinion of Messrs. William Orton, Horace F. Clark, E. D. Morgan, Moses 
 Taylor, Alonzo B. Cornell, and Augustus Schell, that this franchise is 
 of great value, and those gentlemen are competent judges. I think that 
 if Mr. Orton was here he would not say the Postal Telegraph Company 
 would not make money. Mr. Whiting, from his examination, is of the 
 opinion, already given by him, that those rates will yield a profit of 30 
 per cent, on the business. * 
 
 Mr. Clark. I am of opinion that the rates can be made to pay, but I 
 also am of opinion that, with a limitation of dividend to 10 per cent., 
 people will not be willing to invest in the stock. Take the Western 
 Union Telegraph Company: its capital is now forty millions, but the 
 real value of the property is not more than ten millions. It is its busi¬ 
 ness that makes it so valuabfe, just as the good-will of a newspaper 
 establishment. 
 
 The Chairman. I want to ask you whether there is any provision in 
 this bill that Congress may hereafter diminish the rates. 
 
 Mr. Hubbard. The bill is made subject to any modifications that Con¬ 
 gress may make. 
 
 The Chairman. It is not at all unreasonable to suppose that in the 
 wonderful progress of inventions and discoveries, like that which you 
 have mentioned—the double transmitter—some invention may be devel¬ 
 oped in the course of a few years which will reduce very greatly the 
 present cost of telegraphing. 
 
 Mr. Dickey. The tenth section provides that Congress may at any 
 time alter and amend this act. 
 
 The Chairman. Yes; that meets the question. 
 
 Mr. Hubbard. I can say to Mr. Clark that men of means in the coun¬ 
 try are ready to embark in this enterprise at those rates. 
 
 Mr. Clark. Then that is all right. 
 
 Mr. Hubbard. The dividends are limited, but the parties believed 
 that with a fixed 10 per cent, dividend it will be a good paying stock ; 
 and in Hew England thatjevery railroad that pays a regular dividend of 
 10 per cent, is 40 or 50 per cent, above par. 
 
 We will compare the office-work required of a post-office on telegrams 
 with that on letters. The Department furnishes the stamps, delivers the 
 letters to the railroad or other carriers, receives and delivers them two- 
 thirds by special carriers and one-third by the general delivery. There 
 is more office work done for telegrams than for letters. The office ex¬ 
 penses on each letter are 1J cents. The Department is to receive on 
 every telegram 5 cents, which is 3J cents for the extra service performed, 
 and which, it is believed, will be an ample compensation. It is already 
 in contemplation to have an hourly delivery of letters within the Busi¬ 
 ness portions of the large cities. Telegrams then will be sent to the 
 post-office, and delivered by carriers every hour. Any one acquainted 
 with the present telegraph system and with the delays and vexations 
 caused by the messenger boys, will understand that it will be much .more 
 prompt than the present delivery. 
 
 What will be the future of the telegraph ? I have stated the increase 
 of business at Hew York City since 1868, from 8,400 to 16,500 messages 
 
11 
 
 a day. That, gentlemen, is but a mere beginning. Tlie great difficulty 
 under the present system is that where the telegraph is most.needed 
 there it is. the least used. The rates between remote places are so high 
 as to be prohibitory. Under the present bill California will be brought 
 as near New York as Chicago now is. • The rates to Chicago are $1, and 
 will then be the same to San Francisco by night. When telegrams can 
 be sent for 25 cents by night between places one thousand miles apart, 
 the business will receive such an impulse as has never been seen. The 
 mail delivery, which, under the reduced rates of postage, increased from 
 45,000,000'letters a year to about 000,000,000,000, is an indication of 
 the great increase when the postal telegraph is brought within the 
 reach of all. 
 
 The invention of the double transmitter has been already referred to. 
 There is a line between here and New York known as the automatic 
 telegraph, by which messages are transmitted, it is stated, at the rate 
 of six hundred words a minute. 
 
 Mr. Clark. I have seen that machine at work. 
 
 Mr. Whiting. Bo you refer to the stock machine f 
 
 Mr. Hubbard. No ; the automatic instrument. General Dodge has 
 told me that it has transmitted messages for him at the rate of six hun¬ 
 dred words a minute. The great difficulty with it is receiving the mes¬ 
 sages. There seems to be no limit to the speed with which it can be 
 worked. Although this invention is not perfected here, others on some¬ 
 what similar principles are perfected in England ; and there I have seen 
 messages sent at the rate of one hundred and fifty to two hundred and 
 fifty words a minute. I believe the time will speedily come when every 
 merchant will have in his counting-room a machine for punching 
 messages, worked with keys as you play upon a piano; that he will 
 punch his messages, send them to the telegraph office, and have them 
 transmitted by the automatic machine. If Mr. Orton were here he 
 would say that that is another of our theories; but it is no more im¬ 
 probable than the double transmitter seemed four years ago. 
 
 The question then is, Shall the telegraph, which promises boundless 
 prospects for the good of the nation, be controlled and managed by 
 one man, or shall it be controlled and managed by the people and for 
 their benefit? # 
 
 Mr. Clark. It is claimed on the part of the W T estern Union Telegraph 
 Company that they have the exclusive right of all the patents and in¬ 
 struments that are now in use. 
 
 Mr. Hubbard. There are few patents of great value, except this, 
 double transmitter, and there are two or three patents for that. 
 
 Mr. Clark. How is it in regard to Page’s patent ? 
 
 Mr. Hubbard. That was granted by Congress three years ago. That 
 patent was offered to me. I examined it carefully and satisfied myself, 
 greatly to my regret, that it could not be sustained, and therefore I 
 declined to purchase. Since then the Western Union Telegraph Com¬ 
 pany has purchased it. Mr. Page could not obtain a patent from the 
 Patent Office, as he was one of the examiners, but just before his death, 
 and after he left the Patent Office, he applied for a patent and Congress 
 granted it. 
 
 Mr. Clark. And that he has transferred to the Western Union Tele¬ 
 graph Company. 
 
 Mr. Hubbard. Yes; It was offered to me for a sum which I would 
 gladly have given if I had not believed that it was of no value. 
 
 The further hearing was adjourned till 10 o’clock April 23d. 
 
12 
 
 Argument of R. R. Lines before the Committee on Appropriations , United 
 States House of Representatives , Tuesday , April 23, 1872. 
 
 Mr. Lines, said: 
 
 Mr. Chairman and Gentlemen of the Committee: Tlie gentlemen 
 who have preceded me in the discussion of this subject, before tliis com¬ 
 mittee and elsewhere, have presented so fully the views which they 
 respectively hold that, were they the only parties to the issue, and theirs 
 the only interests involved, I should certainly not feel warranted in tres¬ 
 passing on your indulgence. 
 
 The friends of the present system of telegraphs can find no more elo¬ 
 quent advocate than Mr. Orton, and the great consideration which Mr. 
 Hubbard’s plan has received, both here and in the Senate is sufficient 
 evidence of his ability. 
 
 There are two points of views, however, from which the question has 
 yet to be considered—first, as affecting the interests of the Government 
 and of the people at large, (which interests, although rather prominently 
 brought forward on both sides of the discussion so far, are yet of neces¬ 
 sity a secondary consideration to the corporations now transacting, or 
 which it is proposed to create for the purpose of transacting, the tele¬ 
 graph business;) and, secondly, as affecting the interests of a large class 
 whose future numbers, compensation, and relations to the community 
 will be, to a great extent, determined by the action which you may take 
 here—I mean the telegraphers of the country. 
 
 I have no especial authority to. speak for either of these interests, but 
 some study of the subject from each of the stand-points to which I have 
 alluded, both as*a citizen desirous of the welfare of my country, and as 
 a telegrapher anxious for the prosperity of a class with which I have 
 long been connected, has led me to the conviction that the absolute 
 ownership and control of the telegraphs 1 by the Government is the only 
 true and wise, and that it must be the ultimate, solution of this question * 
 and it is to this view, which I understand to be the view presented in 
 that portion of the President's message which you are considering, and 
 which I know to be favored by the majority of disinterested and intelli¬ 
 gent telegraphers throughout the- country, that I desire to call your 
 attention. 
 
 I leave to others the discussion of the abstract question as to how far 
 the control of the means of transmitting correspondence between differ¬ 
 ent sections of the country forms part of the proper functions of Gov¬ 
 ernment, though this is the only, country where that question remains 
 an open one. 
 
 Whether and how far interests acknowledged to be public can be 
 safely delegated to private combinations—how much longer we are to 
 intrust rights and privileges which belong to the whole people to these 
 vast corporations, which, though in theory intermediary between the 
 people and the Government, are yet practically oftentimes beyond and 
 behind governments, less accessible and easy of control by the people, 
 public in their nature when asking the public aid, and standing upon 
 their private rights when it is attempted to regulate their management 
 by law—this question, I say, although a living and a vital one, need 
 not be discussed here. 
 
 Whatever general views may be held on that subject, it is. impossible, 
 it seems to me, to deny that the post-office and the telegraph have but 
 
13 
 
 one object, and that tlieir management should, in all reason, be in one 
 and the same hands. You cannot, with safety, discriminate between 
 the two methods of transmitting correspondence, and say that that shall 
 remain in the hands of the Government, whose prime object is the wel¬ 
 fare of the people, and this be delegated to a private corporation whose 
 first and principal aim—naturally and inevitably—is its own aggran¬ 
 dizement. 
 
 Not only in theory, but in practice also is this true. United in pub¬ 
 lic or in private hands, these two means will work together and harmo¬ 
 niously toward the same end, whatever that end may be. Separated, 
 they are competitive and antagonistic. The telegraph in private charge 
 is the rival of the post-office, and such a rival as will, at no distant pe¬ 
 riod, utterly defeat the wise provision of the Constitution which gave the 
 Government complete control over the interchange of public correspond¬ 
 ence. 
 
 I am told that as yet the serious effects of this rivalry have not been 
 felt at the Post-Office Department, and I suppose that the entire tele¬ 
 graphic business of the country last year, if sent by mail and paid for 
 at letter rates, would probably not have brought in a revenue of over 
 three-quarters of a million. 
 
 But, Mr. Chairman, we are often reminded, and I know that you all 
 appreciate the truth of the remark, that the art of telegraphy is still in 
 its infancy. It is not yet thirty years since the first forty miles of wire 
 were erected, and now we have 130,000 miles, representing millions of 
 capital, and sending from fifteen to twenty millions of messages per 
 year, with a steady annual increase. 
 
 We have scarcely ceased to lament the death of the illustrious Morse, 
 to whose utilization of one only of the properties of the electric current 
 these great results are due; but the time is not far distant when the 
 achievements of Morse will be looked upon as are now those of Yolta 
 and Galvani, and the host of scientific men who have succeeded 
 .them—merely as steps toward a greater and more perfect result. The 
 name of Morse will never be lost to the world, but his invention will 
 soon be superseded by other and improved systems. The practical 
 knowledge of the men who operated his instrument has long since ren¬ 
 dered almost useless his only distinctive claim to originality in the re¬ 
 cording or graphic portion, and the sounder has taken the place Of the 
 register at all important offices. 
 
 The electro-magnet itself has been put to uses in connection with the 
 telegraph of which Morse never dreamed, and the galvanometer and 
 chemical systems have accomplished results of which the magnetic is 
 incapable. 
 
 'There now needs but the simplification and cheapening of the auto¬ 
 graphic system of Caselli, now in use between Paris and Brussels, 
 w r hich scientific talent at work in this country and in Europe must 
 inevitably and soon accomplish, and not only will the present telegraph 
 be thrown aside almost entirely, but the whole system ©f communication 
 at a distance will be revolutionized and transmission by mail in time 
 altogether superseded. 
 
 When you can send a message direct from Washington to Chicago 
 without repetition or the intervention of repeaters at intermediate 
 offices, (as any electro-chemical telegraph will admit of your doing,) you 
 have accomplished a great object not practically attainable by the Morse 
 system under present conditions. But when that message, no matter 
 what its length, is transmitted instantaneously, and a facsimile of your 
 own handwriting delivered at the other end, you have reached almost 
 
14 
 
 the perfection of the art. Your dispatch answers every possible pur¬ 
 pose of a letter, with the greatest possible advantage over a letter in 
 point of rapidity of transmission. It is a draft, a promissory note, 
 a money-order, a contract, a receipt ; in short, all the business and official 
 correspondence of the country to which time is of importance, but which 
 requires the signature of the sending party to make it valid, will be 
 ‘transacted by telegraph. 
 
 When that time comes, and come it must within the next thirty years, 
 even under the unprogressive management of the companies, the Post- 
 Office will either become a mere competitor with the express companies 
 in the carriage of books, papers, and other packages of bulk, or it will 
 die a natural death, and leave the control of our correspondence alto¬ 
 gether in the hands of private monopolies. 
 
 It is perhaps a wild prediction, but I venture it, that in less than fifty 
 years, if the telegraph is not absorbed by the Post-Office, the Post- 
 Office will have been absorbed by the telegraph. 
 
 To my mind, with the conceptions'! have of what the telegraph is to 
 be, and the extensive and intimate relations if is destined to bear to every 
 department of commercial and social life, reasons of future policy alone 
 seem sufficient to induce the assumption of its control by- the Govern¬ 
 ment. 
 
 There are, however, other and more immediate and pressing reasons 
 why such action should be taken in the public interest. 
 
 The press demands a reduction of tariff for its news reports, and re¬ 
 lief from the combined monopoly of the telegraph and the Associated 
 Press; the interests of the Government demand the entire control of the 
 wires for the proper transmission of the weather-reports and other public 
 business; and the interests of the people demand the extension of facil¬ 
 ities, impartiality in the transmission of dispatches, and the reduction 
 of tariffs to the minimum consistent with profitable working. None of 
 these are attainable to the fullest extent except through a purely Gov¬ 
 ernment system. , 
 
 With regard to the first point, there is a x>opular error—shared to some 
 extent by the newspapers themselves—that press dispatches are sent, 
 if not at a loss to the companies, on much more favorable terms than 
 private messages. 
 
 As far as the individual newspapers are concerned, they undoubtedly 
 have the advantage of much lower rates than the general public are 
 compelled to pay. But the question of whether a tariff is profitable to 
 the companies or not depends upon the amount of business done under 
 it, or in this case upon the number of words sent daily to the newspa¬ 
 pers, and also upon the number of papers taking the same dispatches; 
 and when you consider the aggregate amount of work performed by the 
 companies, (one transmission over a combination of circuits frequently 
 serving from five to fifteen newspapers,) and the aggregate compensa¬ 
 tion per word which they receive for it, you will find that there is little 
 if any sacrifice on their part to the public intelligence. 
 
 On this point I beg leave to refer to the report of General G. C. Wash¬ 
 burn, of the last House, (page 4G, House report —, 41st Congress, 
 2d session,) which is a document from which 1 shall have frequent 
 occasion to quote, and which contains, though with a somewhat differ¬ 
 ent arrangement, many of the arguments which I shall endeavor to pre¬ 
 sent to you. I have seen no attempt at refutation of any of those argu¬ 
 ments by the companies. I think I may assume, therefore, that the facts 
 . on which they are brtsed are admitted. 
 
15 
 
 To illustrate the oppressive policy of the Associated Press and tele¬ 
 graph monopolies, I have only to refer to their course toward the New 
 York and San Francisco Heralds, and to their contract with the Western 
 Asssociated Press, the details of which are, I believe, familiar to most of 
 you, (jtege 104, Washburn’s report.) 
 
 Mr. Orton has commented with some severity on the Government cen- _ 
 sorship of the French lines. Admitting that to exist, although it is indig¬ 
 nantly denied by the director general, (page 28, Washburn’s report,) 
 thereis some excuse for it in the political condition of that country, but 
 for this absolute despotism of the telegraph over the press in this coun¬ 
 try there is none whatever. It is the selfishness of a great corporation 
 wielding its power to control, for its own ends, what should be the free 
 agent of public opinion. 
 
 That such an evil as this can be remedied by legal restrictions upon 
 the present companies, I do not believe, nor would it be by those pro¬ 
 posed by Mr. Hubbard's bill to be placed upon his company. Certainly, 
 the rates for press dispatches there laid down afford ample margin for 
 favoritism, and are no lower than the present ones, (section 5, Hubbard’s 
 bill.) 
 
 Mr. Garfield. No lower than the present rates? 
 
 Mr. Lines. ]No lower than the present rates as to the greater part of 
 the dispatches. 
 
 Mr. Hubbard. I think you are mistaken. If you look at the bill you 
 will see that our rates are 75 cents for every hundred words by night 
 and $1 by day. 
 
 Mr. Lines. Very true; that is, for each circuit of two hundred and 
 fifty miles, and for special dispatches. A little further down you say, 
 (line 14,) “The rates for press associations shall not exceed those now 
 paid by the Associated or American Press for similar service.” I think 
 ytu will admit that those dispatches comprise nine-tenths of the news 
 received by the press. 
 
 Mr. Hubbard. I should not like to admit that they comprise one- 
 'half. 
 
 Mr. Lines. Their proportion to the aggregate number of words de¬ 
 livered, for which you receive pay, is about nine tenths. There is no 
 reduction for that service. 
 
 I have said that the Government needs, at times, the entire control 
 of the wires for its own business. With the discussion of the signal- 
 service question so fresh in your memories, it will not be necessary for 
 me to enlarge upon this branch of the subject. 
 
 It was shown on the one hand that the officers to whom the making 
 up of these reports is intrusted must have the absolute use of the cir¬ 
 cuits until they are all received. On the other hand, it was shown, and 
 very clearly to my mind, that the surrendering of the same circuits, 
 day after day, and at certain fixed hours of the day, to officers of the 
 Government who cannot be familiar with the hourly changing necessi¬ 
 ties of the ordinary business of the companies, must often be product¬ 
 ive of very great inconvenience and delay. The last wire between 
 important points will sometimes be taken, and the plans of the compa¬ 
 nies’ chief operators for the arrangement of their circuits seriously 
 interfered w ith. 
 
 If the companies could do the business in their own way, which, of 
 course, they cannot, or if the Government had the entire management 
 of the lines, these difficulties could be avoided ; but under the joint au¬ 
 thority of the Government and any telegraph company whatever, no 
 matter how well disposed it may be, they are inevitable. 
 
16 
 
 Again, in times of war or of rebellion, tbe possession of the telegraph 
 would be of inestimable value; in fact, it would be a necessity to the 
 Government, and yet, as the case stands at present, congressional ac¬ 
 tion would have to be procured, and much precious time would be lost 
 before the proper measures for the transfer could be effected; while 
 with a Government system the necessary precautions could be taken at 
 once. 
 
 Clearly, the interests of the Government, if they can, for the sake of 
 argument, be for a moment dissociated from those of the i>eople, de¬ 
 mand the adoption of a purely governmental system. 
 
 The first point to which 1 have alluded as being comprised in the 
 wants of the people at large is t^eir demand for greater telegraphic 
 facilities, and by this I mean not only the increase of facilities between 
 offices already established, (which could, perhaps, be doubled without 
 the erection of another wire, by re-insulation and consolidation of the 
 present lines under one management,) but also the extension of the 
 wires to all parts of the country, making the telegraph eventually co¬ 
 extensive with the post-office. 
 
 Neither of these results can, in my opinion, be attained for many 
 years, whether the present system be retained or one similar to that 
 proposed by Mr. Hubbard adopted. 
 
 As long as the present state of things continues, the opposition com¬ 
 panies, hoping to cdhie in under Mr. Hubbard’s bill, (and I must say 
 that it is a very high proof of that gentleman’s energy and talent that 
 he has succeeded in inspiring and so long sustaining such a hope,) will 
 not sell their lines to the Western Union Company at the ruinous prices 
 which the latter are in the habit of paying for unproductive property, 
 (see Washburn’s report, p. 123,) but will go on doing their own business 
 at a loss, and, according to Mr. Orton, u dividing the receipts, and 
 more than doubling the expenses” of the whole telegraph service. 
 
 On the other hand, supposing Mr. Hubbard’s bill to pass—if we are 
 to judge from the utterances of the president of the Western Union 
 Company—the new combination, notwithstanding its connection with 
 the Government, will have, for a long time, certainly, (if it lives a long 
 time,) to fight the Western Uuion Company with its more extended 
 lines, greater capital, and the prestige of an established business. 
 
 The immense gain, therefore, in facility and economy of administra¬ 
 tion which would result from the consolidation of existing lines, is not a 
 near prospect, except through the adoption of a Government monopoly. 
 
 In the second place, with respect to the extension of lines to points 
 not yet reached, I think I may safely assume that the present com¬ 
 panies will, as heretofore, establish no non-paying offices, except for 
 testing or repeating purposes; for, while the ultimate benefit from the 
 building up of a business is readily apparent, stockholders cannot afford 
 to wait for their dividends long enough to enable the companies to 
 make such extensions as the interests of the people really require. 
 
 Again, let the plan of Mr. Hubbard’s bill be adopted, and the only prom¬ 
 ise we have from him is that u as soon as practicable” (which is a phrase 
 susceptible of somewhat liberal construction) the system of telegraphs 
 shall be extended to all places within ten miles of a telegraph circuit when 
 the receipts of the post-office are over $500 per annum. (Hubbard’s bill, 
 line 7.) To show how much of an extension this would be, I beg leave 
 to call attention to some figures derived from official sources. There 
 are now some 32,000 post-offices in the United States, at 5,607 of which 
 there are telegraph offices. At 556 of these the receipts are over $3,000; 
 
17 
 
 at 772 the receipts are more than $1,000 and less than $3,000; at 810 
 they are between $500 and $1,000; and at 3,469 they are less than 
 $500. At only 825 offices, where the receipts are over $500, are there 
 no telegraph offices, and probably one-half of these are more than ten 
 miles from any existing telegraph circuit. This is certainly an insig¬ 
 nificant number compared with the 3,441 telegraph offices at points 
 where there are no post-offices, and for which Mr. Hubbard’s bill makes 
 no provision. 
 
 In regard to impartiality in the transmission of dispatches I need 
 only refer you to the allusions to that subject in Mr. Washburn’s report, 
 
 (p. 10.) 
 
 The establishment of the Commercial News Bureau and the priority 
 given to its messages over the lines of the Western Union Company 
 are, in the first place, a violation of the general law under which that 
 company was organized, which says, (Laws of New York, 1848, chapter 
 265:) the said telegraph companies “shall transmit messages with im¬ 
 partiality and good faith, under penalty of $500and it shall also be 
 their duty “ to transmit all dispatches in the order in which they are 
 received, under a like penalty of $500.” 
 
 This bureau is next a usurpation of the functions of the press, and 
 an overstepping of the legitimate province of the company as a common 
 carrier only of news. 
 
 Lastly, it is a gross infringement on the rights, first, of merchants 
 whose private dispatches as to the state of the markets, although 
 through the energy of their correspondents filed in the sending office 
 earlier than those of the commercial news department, are yet postponed 
 to the latter; secondly, oppdsition bureaus, such as Davis’s, whose dis¬ 
 patches were sent in a roundabout way to delay them ; and, thirdly, the 
 senders of messages not pertaining to the markets, who have as good a 
 right to their turn as any others. 
 
 That is the present system. Under Mr. Hubbard’s bill, Mr. Orton has 
 shown that the clause providing for registered messages to have priority 
 would be seized upon at once by the mercantile community, to whom 
 the reduction of tariff would offer very little inducement to use the tel¬ 
 egraph more than they do now, and the prime object of the reduction, 
 viz, the popularization of the telegraph and its use as a means of social 
 intercourse, would be defeated. 
 
 It has somewhere been stated that the percentage of telegrams of a 
 social nature to the whole number of dispatches is from five to ten times 
 as great in European countries as here. The last Swiss report, I believe, 
 places the proportion in that country at over sixty per cent., while in the 
 United States it is estimated to be less than ten. With the proper facil¬ 
 ities in this country for social business, these proportions ought to be 
 reversed; for certainly no people in the world have such widely extended 
 internal intercourse, under unfavorable circumstances as to slowness of 
 mail communication. 
 
 While it makes but little difference to a merchant, whose transactions 
 involve hundreds of thousands of dollars, whether his message costs 
 fifty cents or a dollar, to the poor man, or to the man whose convenience 
 only is in question, it is of great importance, and in a thousand cases, 
 when speed of communication is desirable, the consideration of cost 
 steps in and finally decides him to use the mail. 
 
 Our largest increase of business under a bona-fide reduction of tariff 
 would undoubtedly be of a social character. 
 
 Now, it may be said that if the social message is of importance the 
 sender will pay the registered price, and, if not, he will be willing to let 
 2 T 
 
18 
 
 it wait until commercial business is over. To this I oppose the argu¬ 
 ment that the very knowledge that his message is to wait indefinitely, 
 nutil the hooks are cleared of dispatches of a more favored class, because 
 paid for at a double rate, which is higher than even the present rates 
 (Washburn’s report, p. 152,) would tend rather to prejudice the sender 
 against the new system than to induce him to take advantage of the 
 low tariff for social messages. The bill should therefore fairly be called 
 u a bill to increase the rates of correspondence by telegraph.” 
 
 The third, and perhaps the most important, pressing public want in 
 connection with the telegraph is a cheap and, as far as may b.e, a uni¬ 
 form tariff. On this point I do not propose to go into a lengthy com¬ 
 parison of American with European rates, or to lead you through the 
 mazes of European statistics, of which there are no reliable American 
 counterparts. So far as they can be shown, the relative extent and cheap¬ 
 ness of telegraphic facilities in this country and in Europe are shown 
 in the report of General Washburn’s committee and the official tables 
 presented by Mr. Hubbard. The latest statistics for w hich I have sent 
 abroad have not yet been received. 
 
 I assume, liow r ever, that there are circumstances in the enterprising 
 character of our people, in the freer spirit of our internal commercial 
 relations, the uniformity of our language, and the less frequency and 
 celerity of our mail communications, that lead to a much greater use of 
 the telegraph, and would permit of a lower comparative tariff here than 
 the average rate—internal, international, and transit—throughout a 
 section in Europe of equivalent area to the United States. 
 
 The following table will serve to illustrate this point: 
 
 The area of the United States is a little over three millions of square 
 miles, which is equal to that of all the countries of Europe, less Turkey 
 and one-third of Kussia. The number of dispatches sent in that area 
 during the year 1868 was 27,549,434 ; the receipts, $12,837,082 ; average 
 receipt per message, about 47 cents. Of course the rates have been 
 largely reduced since 1868, especially in England, where the telegraph 
 is more freely used than in any other country. 
 
 Now, according to the best authorities, the average price of living in 
 those countries, which affords the broadest basis for calculation, is about 
 three-fourths of that in the United States. 
 
 It must be remembered, however, that the cost of building lines in 
 Europe is comparatively greater, on account of their superior quality ; 
 and, if Mr. Orton’s figures are correct, (Washburn’s report, pages 129, 
 note t, and 137, note *) the cost of operating them is also greater; and 
 these considerations, added to those above mentioned, would certainly 
 authorize an average tariff, under Government management, of 50 
 cents in this country. 
 
 Or, take another view, and without any reliable statistics from the 
 American companies as to their average tariff, w 7 e can yet see how and 
 to what extent that tariff can be reduced below the lowest point which 
 can be reached by private companies. 
 
 Take the Western Union figures given you some days ago by 
 Mr. Orton—gross receipts for 1871, $7,923,566.02; gross expenses, 
 $5,327,402.37. 
 
 It is admitted that by the consolidation of all the lines under one 
 management, the total expenses of the opposition offices, which furuish 
 no greater facilities than the Western Union, could be saved, and their 
 entire receipts ($1,000,000, according to Mr. Hubbard) placed to the 
 profit account of the latter company. (Washburn’s report, pp. 93 and 
 149.) The receipts of the consolidated system would then stand at 
 
19 
 
 $8,923,506.02, arid the expenses as now, or say, in round numbers, re¬ 
 ceipts, $9,000,000; expenses, $5,400,000. 
 
 Now, when this consolidation is accomplished, a great saving still re¬ 
 mains to be effected by uniting the greater number of these offices with 
 the post-offices. To determine exactly to what offices this further con¬ 
 solidation could be applied would require a careful consideration of the 
 number of wires passing through each,and their relative importance on 
 the circuits, which I have not had time to go. into. I am not so san¬ 
 guine as Mr. Hubbard as to the saving in large cities, and I think that 
 by the time .the new post-office in New York is ready for occupancy it 
 will not be found too large for the postal service, and the Government 
 will need the Astor House for telegraph headquarters. 
 
 However, it will be very far within bounds to say that arrangements 
 can be made at all post-offices where the receipts are less than $3,000, 
 for the accommodation, without extra expense, of the telegraph. I need 
 instance only such towns as Ravenna, Ohio; Los Angeles, California ; 
 Muscatine, Iowa; Geneva, New York ; Lancaster, Pennsylvania; War¬ 
 saw, Indiana; Ellsworth, Maine; and Frederick, Maryland, the receipts 
 of the majority of which are over $3,000. This class of post-offices, 
 where the receipts are less than $3,000, and at which there are now 
 telegraph offices, numbers some 5,151. The rent of the telegraph offices, 
 at the very low average of $100 per year, (Washburn’s report, p. 153,) 
 would reach say $500,000, which, deducted from the working expenses, 
 would leave $4,900,000. I make no account of the number of larger 
 offices, wherein accommodations could be provided for the telegraph at 
 a very slight cost, preferring to deal only with those where I believe 
 the rent of offices could be entirely saved. 
 
 Again, by combining the duties.of postmaster and telegraph operator 
 at all points where the postal receipts are less than $1,000 per annum, 
 (numbering 4,279,) one-third, at least, of the average salary of the oper¬ 
 ator can be saved. Supposing that salary to be $450 per annum, which 
 is about the lowest paid by the companies, the reduction expense would 
 be $650,000, leaving the working expenses $4,250,000. 
 
 By this course, as you will readily see, the operator would get a bet¬ 
 ter salary, hence you would have a better operator; the postmaster 
 would receive more pay, and you would get a better postmaster; and yet 
 by combining the duties in one and the same person, the Government 
 would save money over the present rates on both accounts. I do not 
 mention the saving in the larger offices from the operation of the tele¬ 
 graph by the clerks of the postal department, where the postmaster 
 himself is unable to attend to it. Nor have I taken into account any 
 saving from the non-employment of book-keepers, &c., with whom Mr. 
 Hubbard proposes to dispense, although his bill provides for a system 
 of reports from the head of the Bureau, for which the data must come 
 from the books of the separate offices. 
 
 By taking pay for $500,000 worth of dead head messages, now sent 
 under private frank, the receipts would be increased to $9,500,000. 
 
 Now, there is a legitimate profit of $5,250,000 at the present rates of 
 tariff. To what should it be applied? First, to the payment of inter¬ 
 est on the purchase-money; next, to the extension of facilities; and 
 next, to a reduction of tariff. 
 
 I must now assume, what I hope to be able to establish, that the Gov¬ 
 ernment can procure the lines of the companies by the simple enforce¬ 
 ment of an existing contract, and reconstruct them thoroughly at a cost 
 of not ‘more than $12,000,000. Five per cent, on this cost would be 
 $600,000. 
 
20 
 
 Letting the increase of business on the present routes take care of 
 the increase of facilities on the present routes, and we shall have to 
 provide for the extension of the lines to new offices only. Five per 
 cent, additional on the cost will allow us to build five thousand miles 
 of line annually on new poles. I have some statistics in course of pre¬ 
 paration, tending to show how long it will take, by a judicious arrange¬ 
 ment, to reach all the post-offices in the country, but the complicated 
 nature of the calculations prevents my producing them here. I shall 
 ask the privilege of filing them with the committee hereafter. However, 
 this increase is considerably greater than the annual average of the 
 companies. 
 
 Adding these amounts together anti deducting the sum ($1,200,000) 
 from the net profits as above, we have (for the first year after the recon¬ 
 struction) $4,050,000, or 45 per cent, of the total receipts to be applied 
 to a reduction of tariff. 
 
 The lowest average rate claimed by the Western Union Company is 
 about 50 cents; the highest with which Mr. Hubbard charges them is,I 
 believe, 64 cents. (Washburn’s report, p. 145.) Taking the latter 
 amount and reducing it 45 per cent., the average rate for a Government 
 system would be 35 cents. 
 
 Now, this is evidently too high a tariff to be made uniform, and the 
 question as to how the different rates should be proportioned is one that I 
 think must be left open for a while. It certainly should not be hastily 
 decided by legislation without a careful study of the check reports and 
 other statistics of the present companies as to the established course of 
 business. In fact, no reduction at all should be made until the lines 
 have been in the possession of the Government for at least a year, and 
 all the conditions to which I have alluded as authorizing the reduction 
 are fully attained. The wires of the companies are in no better condi¬ 
 tion to-day than they were when examined by Mr. Varley, to w hom 
 reference is made in Mr. Washburn’s report, (pp. 42 and 154.) 
 
 Mr. Prescott. Where do you get that information % 
 
 Mr. Lines. From my own observation and from the telegraphers 
 themselves. You have in some places, between here and New York, 
 twenty-four wires on a pole, and in wet weather the cross-currents are # 
 such that you cannot work more than five. Any experienced operator 
 will tell the committee that it would be madness to make a great and 
 sudden reduction of the tariff at present. 
 
 What Mr. Hubbard’s rates will be, when finally fixed, I do not know. 
 
 I am glad to see, however, that he has taken counsel of the fears of 
 Mr. Beck, and raised them within the last few days so that his wires 
 would not be so much crowded. However, as long as registered mes¬ 
 sages held out, he could keep the others back—say for Sundays. 
 
 Mr. Chairman, there is no necessity for taking any other than a purely 
 business view of this subject. The Government can do the business 
 better and cheaper than any private company, and make a profit. I do 
 not advocate the undertaking of anything by the Government which 
 cannot be safely attempted by a well-organized and well-directed private 
 monopoly, possessing the same facilities and desiring the same public 
 end—although I should think the money well expended were every 
 cent of the cost of operating the telegraph to be raised by a tax as 
 general and direct as a tax for educational or for any other admitted 
 public purpose. • 
 
 Should the average rate of a Government telegram be fixed by law, 
 it should be placed sufficiently high for the first year, and the discretion 
 left with the Postmaster General to regulate the rates within certain 
 
21 
 
 limits, according to the course of business as shown by the books of the 
 companies. 
 
 In the time I have I cannot pretend to elaborate any scheme, or do 
 more than make a few suggestions. Perfect justice would require a sepa¬ 
 rate calculation for each separate message. The greatest convenience 
 to the public would require a uniform tariff like that for letters. A 
 compromise between the two might be effected by a form of tariff simi¬ 
 lar to that proposed by Mr. Hubbard, which I would base upon air-line 
 distances, and give complete publicity to by posting up everywhere 
 maps laid off in concentric circles, the center being the point from 
 which the tariff is calculated. 
 
 Having given, not I hope at too great length, the principal reasons 
 for Government assumption of the telegraph, and having, I trust, de¬ 
 monstrated that, with the good management we have every right to 
 expect from the men of scientific and technical ability and experience 
 who alone could by possibility be intrusted with the care of the system, 
 these requirements would be met, and the system would be a success, I 
 now propose, with your permission, to answer some of the objections 
 urged against the project. 
 
 The most prominent are, the large amount of money which it is sup¬ 
 posed will be required to make the purchase; the terrible addition to 
 Government patronage which it would involve; and the inefficiency with 
 which the service would be performed were the employes to receive 
 their appointments from the Government' instead of from the com¬ 
 panies. 
 
 On these points I have noticed, wherever the question has been dis¬ 
 cussed, that the imagination usually gets control of those whose inter¬ 
 ests are affected, and the result is speculation of the vaguest and wildest 
 kind; figures actually run crazy, and the number of millions of dollars 
 and thousands of employes that will be added to the burdens of the 
 country seems to depend altogether upon the exuberant fancy of the 
 party making the estimate. 
 
 Now, of course, whether the Government pays five millions for the 
 telegraph lines or fifty, the amount will not be appropriated from moneys 
 in the Treasury. No loan that could be placed on the home market, 
 through the national banks, for instance, would have greater popularity 
 than a loan for the acquisition of the telegraphs, whether its amount be 
 large or small. 
 
 I do not think there is any difficulty in computing the amount nearly 
 enough to report a bill at this session, if it were expedient (which it 
 certainly is not) to take such early action. But, if the committee are in 
 doubt, I submit that there is a very simple way to settle the question of 
 price, and that is to suggest to the Postmaster General that he appoint 
 his appraisers under the act of 1866, which would not at all commit the 
 Government, and inform the committee of the result of their appraisal. 
 If the amount is considered too large to add to the debt of the country, 
 adopt Mr. Hubbard’s plan, or let the matter drop; if not, the companies 
 are bound to sell at the price fixed by the appraisers. In fact, as the 
 United States is the legal reversioner of this property, both under Mr. 
 Hubbard’s bill (section 13) and the present system, it is certainly im¬ 
 portant, before taking any action which may commit you to a particular 
 valuation, in behalf even of a private corporation, to ascertain what the 
 property is really worth. 
 
 There is one point raised by the Western Union Company, and sus¬ 
 tained by Mr. Hubbard, as to the basis of appraisal, whidi contains the 
 whole of the position of the companies on the question of a Government 
 telegraph, and which must be settled before even preliminary action is 
 
22 
 
 taken. If the Western Union Company is allowed, in this case also, to 
 make a contract as a party, and then construe it as a judge, there is not 
 much use in trying to control it. We had better give up, thankful if 
 the companies do not compel us, under their construction of the act of 
 1866, to take their property nolens nolens, and at their own valuation. 
 
 To show the different views of the Western Union and the proposed 
 new combination on this subject, I beg leave to read a few extracts from 
 the report of the select committee. On page 115 we find the following: 
 
 Mr. Washburn. The idea before this committee is, that the Government should buy 
 existing lines; consequently it is a matter of some importance for the committee and 
 for Congress"to know how large an expenditure the Government would have to incur 
 should it decide to carry out that project. 
 
 Mr. Orton. In that connection I will say that, while we have accepted the provisions 
 of the law of 1866, and therefore are estopped from making any objection to the pur¬ 
 chase of the lines by the Government, further than such criticisms as every citizen has 
 a right to make, we. do not. propose to be a party to a sale of our lines upon a basis 
 which estimates the value of our property simply by so many thousand poles and so 
 many tous of wire. I do not admit that the cost of our lines or the value of our prop¬ 
 erty is a proper subject of investigation by this committee. Whenever Congress de¬ 
 cides to purchase, we are entitled to select half the jury which is to decide the question, 
 of value. When that time arrives we shall claim that all our facilities, contracts, and 
 franchises, as well as our poles, wire, and apparatus, shall be treated as property, and 
 valued with reference to their united capacity to earn money. The question of cost 
 need not be raised at all. If you were going to buy us out on the basis of so many 
 miles of poles and of wire, would you give no higher price for a line doing a large 
 business, and making a heavy profit, than for another working at a loss, and bank¬ 
 rupting its owners ? ’ 
 
 Again, on page 119: 
 
 Mr. Washburn. What do you mean by the “cash value” of your property ? 
 
 Mr. Orton. I mean the value to be ascertained precisely on the basis we were dis¬ 
 cussing—not merely the cost of so many poles and so many miles of wire, but what 
 this property is worth, in its present condition, as a means for conducting a business. 
 
 Mr. Washburn. As a means for earning money ? 
 
 Mr. Orton. Yes, sir; for making fair, legitimate, reasonable profits. 
 
 Mr. Washburn. That is, if it earns you profits on '$50,000,000, and the Government 
 will guarantee you 10 per cent, on $50,000,000, you are satisfied on that principle? 
 
 Mr. Orton. Yes, sir ; but why make your supposition so extravagant and impossible; 
 why not come down to the domain of xwobabilities ? 
 
 On page 138: 
 
 Mr. Washburn. Would you be willing to take the value of your stock in the stock 
 market as a basis? 
 
 Mr. Orton. I Avould not. The quotations of the stock market seldom give the true 
 value of the property of any corporation. The present price of our stock in the market 
 is about 33—the par value being 100. I hold a little, however, for which I paid, more 
 than three years ago, 58. Since that time we have expended, in enlarging and im¬ 
 proving our property, more than three millions of dollars in cash, taken from current 
 earnings. Intrinsically, therefore, our property is worth three millions more when its 
 stock is selling at 33 than when it sold at 58. It is probable that had we divided the 
 three millions among our stockholders, the price of the stock would be much higher to¬ 
 day than it is, although it would be actually worth considerably less. You will see by 
 ( this illustration how unjust it would be to ask our stockholders, a majority of whom 
 have paid very much more for their stock than it will now bring in the market, to 
 abandon all expectation of ever getting their investment returned in full, as well as 
 all hope of any future profit. 
 
 And on page 148 are Mr. Hubbard’s views in full. 
 
 You will say, I think, that all that is indefinite enough, but it gives 
 us a vague conception of the very large claims that may at some future 
 time.be made upon the Government, when the necessities of the people 
 have driven it to the purchase of the telegraphs.’ 
 
 Mr. Orton says, in one place, that the cost of his lines has nothing to 
 do with the price the Government should pay; in another, that he would 
 not be willing to take the market value of his stock as a basis of sale, 
 (though, since the stock has gone up from thirty-three tp nearly seventy- 
 
23 
 
 five cents on the dollar, be bas, perhaps, changed bis mind on that point;) 
 and yet, again, be says that the Government shall go into the question 
 of cost, and value the stock and franchises, as well as the poles and wires 
 of bis company, u with respect to their united capacity to earn money. 77 
 
 Now, if there were a competing company, with all the facilities of the 
 Western Union, there would be no difficulty at all, for neither company 
 would ever let the other earn more than 10 per cent, on its bona-fide 
 capital, and the “productive value 77 of the property would be just equal 
 to the capital invested. The excess now is due to the monopoly, for 
 which it is proposed to charge the Government. 
 
 There is to be no compensation, however, for this excessive valuation 
 of Western Union property. The opposition companies, though losing 
 money, are not prepared to pay the Government for relieving them of 
 their lines. On the contrary, Mr. Hubbard, while he agrees to the pro¬ 
 ductive value of the Western Union Company’s property, proposes, in 
 reference to the ir c s which have proved such a bad investment, anotner 
 basis of apprai sr 1.equally vague, but probably equally remunerative to 
 the companies he represents. 
 
 Mr. Hubbard. I do hot represent those companies. 
 
 Mr. Lines. I beg your pardon if I have misstated your position.* I will 
 modify my statement, and say that those companies are probably inter¬ 
 ested in your representations. 
 
 This mode, says Mr. Hubbard, with what authority, except as to one 
 company, I am unable to discover, was the just and discriminating 
 course pursued by the English government. As we are discussing the 
 present or remote propriety of following the example of the English 
 government in the acquisition of the lines, I desire, with the permission 
 of the committee, to review briefly and compare the relations between 
 the government and the telegraph in Great Britain and in this country. 
 
 The British government has always exercised the right of eminent do¬ 
 main over the telegraphs in acts incorporating and from time to time reg¬ 
 ulating the different companies which formerly existed. I have not yet 
 received copies of the acts of incorporation, which are not published in 
 the general statutes, but I think I may safely say that from the time the 
 telegraph was first introduced in England, as a part of the railway sys¬ 
 tem, there has not been a single subsidy granted except to a foreign 
 cable company. Government priority and other control has always 
 been exacted as a matter of right, and attached to every grant of in¬ 
 corporation. 
 
 The idea that a charter of incorporation is of itself of no value, with¬ 
 out the addition of special privileges, has not prevailed over there. Qn 
 the contrary, we find such acts as the 26 and 27 Yictoria, chapter 112, im¬ 
 posing numerous and severe restrictions on the power of the companies 
 as against private rights—regulations as to the immediate transmission 
 of Government messages and the compulsory erection of such lines as 
 the Government might deem necessary, and provisions for their assump¬ 
 tion by the Grown in case of emergency; all this without corresponding 
 concessions to the companies of any kind. 
 
 When the telegraph act of 1868 was passed, therefore, and the post¬ 
 master general was authorized to take bodily possession u of the whole 
 or such parts as he shall think fit of the undertaking of any telegraph 
 company, 77 it would not have been surprising if this principle of “ con¬ 
 sequential damages 77 had found a recognition. 
 
 The companies were under no obligation to the government except 
 for their bare existence, and the seizure was as arbitrary in spirit, so 
 
 * See Washburn’s report, page 9*2, extract near close of this argument. 
 
24 
 
 far as previous consent of the companies was concerned, as could well 
 he imagined. 
 
 In the final debate on the bill (see Hansard’s Parliamentary Reports, 
 vol. 193, p. 1598) great stress was laid on this point as influencing the 
 course of the government in its avowedly liberal agreement. 
 
 The chancellor of the exchequer said: 
 
 As regarded what had been said about the extravagance of the price, he hoped the 
 committee (of the whole) would bear in mind that the transaction was one in the 
 nature of a compulsory purchase. * * * He had never asserted that the terms 
 
 whi«h the government had agreed to werfe not liberal; what he had asserted was that 
 they were not too liberal. * * * As to the comparison that had been made 
 
 between the price in this case, and that provided in the case of the railways, by the 
 act of 1844, the committee would remember that under the provisions of that act the 
 government w T ere enabled, at the expiration of twenty-one years after the completion 
 of a line of railway, to take it into their own hands. But this provision only applied 
 to railways constructed after the passing of the act of 1844; and consequently the 
 parties who made those lines did so knowing that they were liable to have that act 
 put in operation against them. Those parties had, therefore, no right to complain; but 
 there was no such act as that of 1844 applying to telegraphs. 
 
 Yet it does not appear that it was intended, even by the government, 
 to pay tbe companies so extravagant a bonus as they did in the end 
 receive—sufficient to send stocks up from 200 to 400 per cent, in tbe 
 market. 
 
 Tbe act itself provides for tbe payment, except, as I bave said, in tbe- 
 case of tbe United Kingdom Company, of u twenty years’ purchase 
 of tbe net profits of tbe companies ” during tbe fiscal year 1867-’68, 
 and out of these sums, contrary to tbe course which Mr. Hubbard 
 thinks our Government should pursue, tbe companies were required to 
 pay their own debts. 
 
 Now, when we reflect that a reliable stock which pays 5 per cent, in 
 England is a very good investment, (4J per cent, being all that tbe gov¬ 
 ernment would guarantee to its favorite project, tbe Red Sea and India 
 Cable Company,) and when we further consider bow easily the compa¬ 
 nies could bave misled tbe government as to tbe value of their prop¬ 
 erty, it will not require a great stretch of imagination to suppose that 
 gentlemen in Parliament really thought that by paying twenty years’ 
 purchase they were only giving 100 per cent, on tbe paid-up capital, 
 with probably a slight advance for the compulsion. That, I say, is a 
 possible supposition. 
 
 The telegraph companies in England had only a lease-hold interest in 
 their lines, the freehold being in the railways; and the average duration 
 of their leases being twenty-five years, the government claimed it was 
 doing well to get the terms for twenty years’ profits. Many members, 
 however, did not take the same view. 
 
 It will be remembered that the companies at first violently opposed 
 the measure, but became, as soon as they found what favorable terms 
 they were likely to get, its strong supporters. Their stock took a sud¬ 
 den rise toward the close of the session, which attracted the suspicion 
 that they were getting too much money. Allusions were made to the 
 fact in the house. 
 
 Mr. Gladstone said, (Hansard, vol. 193, p. 1586:) 
 
 That at all events, at that time (before the companies knew of the proposed terras) 
 the companies treated the proposed purchase as a disadvantage. The price of the Elec¬ 
 tric Telegraph Company’s shares was then £153; on the 23d of June, just after the 
 reference in, committee, the shares had risen to £i65. The rise might be taken to rep¬ 
 resent the normal, fair, and legitimate improvement in the value of the property con¬ 
 nected with the approximate realization of the plans of the government. But what 
 were they to say when, instead of a rise of £12 between the 2d of January and the 
 ..23d of June, they found a rise of £41 between the 23d of June and the 21st of July ? 
 
 A 
 
25 
 
 \ 
 
 And would the reasoning of the honorable and learned gentleman account for that? 
 He had set up an iugenious theory that there was something so delightfully scientific 
 in the possession of telegraph property that it attracted to itself, quite irrespective of 
 vulgar calculation, what was known as a prctium affectionis ; but he was afraid that the 
 change which had occurred during the last few weeks must be attributed to consider¬ 
 ations of a different character. The Electric Telegraph Company’s shares were £153 
 on the 2d of January, £165 on the 23d of June, and £203 on the 1st of July; and 
 the Magnetic Company’s shares were £115 on the 2d of January, £125 on the 23d 
 of June, and £150 on the 21st of July. In the former case the increase was one- 
 fourth, and in the latter it was one-fifth, between Juno and July. Comparing the 
 case of the telegraphic companies with that of the landed proprietors, he could not 
 see any reason for a deviation from the established practice of resorting to arbitra¬ 
 tion. In the case of railways, we could not do without the land required for them, 
 but we could do without the property of these telegraph companies, and it was not 
 necessity, but it was equity and policy which led us to think it necessary to ac¬ 
 quire them. It was / only a sense of equity that prevented the state competing with 
 the companies, as it was open to private persons to do at any time. Therefore, he did 
 not see any ground of a high order for foregoing arbitration in the case of these com¬ 
 panies. The position was, undoubtedly, an anomalous one. It was the misfortune 
 and not the fault of the right honorable gentleman that the house was called upon 
 to give something in the nature of assent to a presumptive bargain made by the gov¬ 
 ernment, and which had received the parliamentary sanction of a committee at a time 
 when it was impossible for the house to complete the operation by passing another 
 . bill; first, because they did not know the facts ; and second, because the right honor¬ 
 able gentleman would not, under the circumstances, enter upon such a financial oper¬ 
 ation. That would be a matter of comparative insignificance, if the question were to 
 be considered by the same body next year; but unfortunately a dissolution intervenes 
 and the case must be referred to an entirely different tribunal. The honorable and 
 learned gentleman stated that the new Parliament must come to a free and unfettered 
 judgment with regard to the terms. Now, there were certain occasions in which, 
 while Parliament was not legally bound, it was bound by the strictest laws of honor ; 
 and this Parliament had no right to put the members of the new Parliament in the 
 position of having it said to them, “ You are not free ; you are bound by the assent of 
 those who have gone before you.” The new Parliament would not, could not, and 
 ought not to admit that it was bound. It must have not only a legal but a moral free¬ 
 dom of choice. No doubt, it would give due respect to the authority of the govern¬ 
 ment, of the department, and of any vote of the House; but these would come before 
 it as the elements of the case for its final decision, and not as laws determined before¬ 
 hand. 
 
 It was of the greatest importance, it should he thoroughly understood, that this Par¬ 
 liament was not attempting to fasten on the new Parliament an obligation that would 
 be ultra vires, and it was desirable that this should be placed on record by the unequiv¬ 
 ocal declarations of members of Parliament. 
 
 However, the time was short, and the bill was passed; the stock went 
 up enormously, as I have said, and, when the money bill came up at the 
 next session, the fears of Gladstone and others were fully realized, and 
 the estimate, which had grown from £2,200,000 to over £7,000,000, was 
 passed as a matter of course, to carry out an existing contract. 
 
 In fact, the government which made the preliminary agreement had 
 bound up the next government and Parliament so tightly by arranging 
 for indefinite compensation of the companies in case the money bill 
 should not pass, that it was a question of serious importance whether 
 it was not the best way out of a bad bargain to go straight through 
 with it. 
 
 Expressions of regret, however, were not wanting. Mr. Crawford, a 
 strong opponent of the original bill, said, (Hansard, vol. 198, p. 759:) 
 
 He confessed the terms now proposed to be given to the companies were, in his 
 opinion, exorbitant and preposterous beyond all reason. Still he thought the house* 
 was bound by its bargain. Parliament undertook last year to pay these companies 
 twenty years’ purchase, and if it could be shown that the profits amounted to the sum 
 set down, the house could not help itself without breaking faith with the companies. 
 He thought the bargain a very bad one, but he was afraid it must be carried out. 
 
 Now, it is such a precedent as this that we are asked to follow. 
 
 Mr. Orton tells us, if we take the lines, to throw away the advantages 
 we have already acquired by contract with the companies, and buy him 
 
26 
 
 out on the principle of constructive damages. Mr. Hubbard agrees to 
 that, but asks us to let the opposition companies in also, and by a pre¬ 
 liminary act (for this bill is only the prelude to a game in which you 
 will be called upon in a year or two to take a hand) to commit ourselves 
 to a valuation which Mr. Scudamore, with all his ability, could not keep 
 the English companies from fixing to suit themselves. 
 
 With all respect to these gentlemen, we ought not-to agree to any 
 such arrangement, especially when we can do so much better. I do not 
 wish to be understood as admitting, in any degree, the doctrine of com¬ 
 pulsory damages adopted by the British government. In fact, it has' 
 been settled in Massachusetts and the decision affirmed by the Supreme 
 Court of the United States (Charles River Bridge Company vs. Warren 
 Bridge Company, 11 Peters, 420) that where a government possesses the 
 right to erect public works and chooses instead to purchase, under its 
 right of eminent domain, works erected by a corporation under its license, 
 it is bound only to pay for the cost of such works and not for the profits 
 which may have accrued to the corporation, its creature. 
 
 However, even if we admit the British doctrine abstractly, the United 
 States stand in an entirely different relation to the telegraphs from that. 
 occupied by Great Britain. 
 
 With the same right of eminent domain over the subject as had the 
 British government, derived, as I hold, from the two clauses of the Con¬ 
 stitution providing for post-roads and regulating commerce between the 
 States, our Government has, by repeated liberal enactments, placed 
 itself in a much more favorable position for the acquisition of the tele¬ 
 graph. 
 
 The first line was built and for some years maintained at Government 
 expense, avowedly as an auxiliary to the Post-Office, and only aban¬ 
 doned through the short-sightedness of those who could not appreciate 
 its importance, and thought it too great a burden on the Treasury. 
 From that time to this, however, Congress and the States have always 
 dealt in the most liberal manner with the companies. 
 
 In February, 1855, parties proposing to build a line to the Pacific 
 were granted the right of way and protection on public lands. 
 
 In March, 1857, the Atlantic Telegraph Company received consider¬ 
 able aid. 
 
 In June, 1860, the Secretary of the Treasury was authorized to 
 advertise for proposals, “for the use. by the Government/ 7 of a line from 
 the Missouri River to Salt Lake, and to offer the parties constructing 
 such line the right of way nnd other franchises on public lands and a 
 bonus of $40,000 per annum for ten years, provided that if the Govern¬ 
 ment business should in any one year exceed that sum, the excess 
 should be reported to Congress. On the other hand, the rates were 
 limited to $3 for ten words between the points named. Priority for 
 Government messages was reserved, and the free use of the line by the 
 Observatory, &c., for scientific purposes. 
 
 Well, this line, which is the one alluded to by Mr. Orton the other 
 day, was built, and Mr. Charles M. Stebbins, an old telegraph superin¬ 
 tendent and now a successful and respected merchant, doing business 
 in three or four cities of the country, was one of the builders. I call 
 attention to his sworn statement on page 82 of Mr. Washburn’s report: 
 
 Among others tliey (the Western Union Company)'bought the Missouri and 
 Western stock, paying some cash and some stock. They also built, in partnership 
 with myself, the Pacific telegraph from Brownsville, Nebraska, to Salt Lake, Utah, 
 some 1,100 miles, (Congress gave this line $40,000 per annum for ten years—in all, 
 $400,000 as a bonus,) which cost, by considerable financiering on the part of two of the 
 
27 
 
 Western Union directors, $147,000. Upon this expenditure, they issued $1,000,000 of 
 
 stock. 
 
 This $1,000,000 of Pacific telegraph stock (prominent men of the Western Union 
 Telegraph Company being the sole owners) was afterward taken into the Western 
 Union Telegraph Company by issuing therefor $2,000,000 of Western Union Telegraph 
 Company’s stock. After this the Western Union Telegraph Company’s stock was tripled , 
 by which manipulation an original expenditure of $147,000 (and a par£ of that not 
 honestly spent) came to represent $6,000,000 of Western Union Telegraph stock. 
 
 So that the Government paid in annual installments nearly three 
 times the cost of the line. 
 
 Mr. Orton intimates that the Government business, which was done 
 free, more than covered the entire amount of the annual subsidy. Now, 
 without going outside the limits of this discussion, the fact is the law 
 required the Secretary of the Treasury, on the motion of the company, 
 to report each year the excess of Government business over the $40,000, 
 with a view to its payment. The company was aware of this provision 
 of the law; their system of accounts was just as perfect then as it is 
 now^; yet the only time a report was made was in 18GG, just after the 
 war had closed, and Government telegraphing was at its height. 
 
 Suppose, however, the Government business had exceeded $40,000; 
 I think, Mr. Chairman, you would not object, if you owned the line, to 
 do the Government business for nothing, and to adopt a rate of $3 for 
 eleven hundred miles for private business and stick to it , if you could 
 be guaranteed 30 per cent, annually and in advance on your investment. 
 
 It more than believed, however, that the company did not keep its 
 agreement in regard to rates for private business; and, in fact, this is 
 one of the causes which led to the favoring of a Government telegraph 
 by gentlemen from the Pacific coast, and its advocacy by Gratz Brown 
 in the Senate, and Mr. Alley in the House, when the law of 186G was up 
 for discussion. f 
 
 The occasion of that law was, as you know', a proposition to incorpo¬ 
 rate a ‘‘national telegraph company,” with the special privileges which 
 were made general in the act as it passed. The Postmaster General 
 then discouraged the idea of a Government telegraph, and the Senate 
 committee, to which the subject had been referred, was obliged to turn 
 its attention elsewhere for relief from the Western Union. The Na¬ 
 tional Company appeared to offer it and agreed to accept a general law 
 and to submit to wholesome restraint. The original projet of the bill 
 contained a provision “that the United States may at any time purchase 
 such lines at the appraised value of the same,” but before it passed the 
 words were changed to conform to what it was supposed would be the 
 policy of the Government when the finances should be in better condi¬ 
 tion, and the provision of the law reads “ that the United States may 
 at any time, after the expiration of five years from the passage of this actf 
 purchase such lines at an appraised value, &c. 
 
 The ultimate object of the act was plainly the assumption of the tele¬ 
 graphs, at some future time, (after the limit fixed in the act,) by the 
 Government, and in this view it was fully discussed. The third clause 
 was certainly not intended as a mere check on the companies, something 
 to be held in terrorem over them as a penalty for the violation of the 
 other sections or other laws. If so, why postpone its operation for five 
 years? Why not let it go into effect at once? No, the five years were 
 given as a time for preparation. It was fair notice to the world that the 
 Government meant to assume the lines. The contract for sale was imme¬ 
 diate, but the right of £he Government \yas not to accrue until the 
 owners should have had time, at least, to close up their affairs. The 
 compulsion, if that can be calle‘d compulsion, which was so eagerly sub- 
 
28 
 
 mitted to by tbe companies, was in that act, and the damages therefor 
 were paid in the first sections. Now, when we exercise our right ot 
 entry and pay for the thing itself, are we to be told that we must pay 
 the damages over again? 
 
 Allow me, if you please, to analyze that law as briefly as possible. 
 
 On the part of the Government are the following valuable considera¬ 
 tions : 
 
 First, the privileges on public land of right of way, cutting timber, 
 &c., and the occupation of sufficient land at intervals of fifteen miles for 
 their stations, which privileges, although perhaps lightly esteemed by 
 the Western Union Company, were thought worthy of striving for by 
 the National. 
 
 Next, the right of way over all post-roads, which, under the act of 
 July 7, 1838, includes all railroads. 
 
 This is a franchise so highly prized by the Western Union Company 
 that they scarcely believe in their own good fortune, and, though the 
 law has been declared constitutional by the United States courts in the 
 Virginia injunction case, they have appealed it in order to have the 
 decree confirmed by a higher tribunal. To the opposition companies, 
 of course, this privilege is exceedingly valuable. 
 
 Not less important than these are the considerations implied in the 
 act. First comes the assistance of the military to enforce it in the South, 
 which Mr. Orton tells ns weighed very strongly with him, or whoever 
 was then president of his company. I remember the instance very well 
 when the lines in Georgia were torn down. 
 
 The second implied consideration is, that the Government would 
 abstain from entering into the telegraph business itself (which, of course, 
 it had a perfect right to do) for five years from the passage of the act. 
 This matter is referred to by both Mr. Orton (page 119) and Mr. Hub¬ 
 bard, (page 141, General Washburn’s report.) 
 
 The third implied consideration, also claimed by both these gentlemen, 
 is still more important; for while the Government had a perfect right 
 to go into the telegraph business independently of all the companies, it 
 had also the right, and the wording of this act and its acceptance 
 expressly confirm that right, to purchase the lines of any one or two of 
 them, and, with its facilities, to drive the others altogether out of the 
 field. The British act also reserved that right; but while that looked to 
 a forcible assumption of the telegraphs on the Government’s own terms, 
 our act received the full assent of the companies to all its provisions; 
 and only the finest sense of equity can restrain us from buying the lines 
 where we can get them the cheapest and going into the business. When, 
 therefore, the companies say that Congress agreed not to do the tele¬ 
 graphing for five years, when it does do the business to buy the lines 
 and not build, and when it buys to buy out everybody, it seems to me 
 that they ought, in honor to themselves, to show that they did not take 
 these and the other great gifts of a generous Government without rem 
 dering some equivalent. 
 
 What is there on the other side? A stipulation to give Government 
 messages priority; a stipulation to transmit them at rates to be fixed 
 by the Postmaster General; and a stipulation for the purchase of the 
 lines at an appraised value any time after five years from the date of 
 the act. 
 
 The first two of these stipulations lay entirely dormant until the five 
 years had passed, and the third stipulation became subject to enforce¬ 
 ment; and then, at the suggestion of this committee, the companies 
 
29 
 
 were gently reminded of what they had allowed to slumber peacefully 
 on the pages of the statute-book for all that time. 
 
 Like the Western Union Company, when it forgot to present its bills 
 for the surplus of Government business over the Pacific subsidy, the 
 Government made no claim for a refund on the rates for five years back; 
 but a special service having arisen, the Government rates were put in 
 operation. They have been in operation nearly a year, and now the 
 company principally affected proposes to abrogate the agreement unless 
 it is allowed to construe the law in its own way. 
 
 The third stipulation, according to Messrs. Orton and Hubbard, is 
 utterly void, and the contract, so far as it is concerned, a nudum pactum. 
 If not, what is its effect? Does it give the Government the abstract 
 right to enter upon the telegraph business? That is granted by the 
 Constitution. Does it convey to the United States the right o£ eminent 
 domain over the lines of the companies? If that is not inherent in the 
 United States, it is then merely a question of jurisdiction of the State 
 and national governments, and less power than a State can make the 
 concession. 
 
 The Federal Government acquires property in the States either by 
 purchasing it first and then procuring jurisdiction from the State legis¬ 
 lature, or by first getting the State to condemn it and then paying the 
 appraised value. In the one case the owner gets the contrac k t-price, and 
 in the other he may, perhaps, get damages; but in neither case can he 
 convey or receive compensation for any public right over the property. 
 
 What is, then, the value of this provision of the act of I86G, the 
 coming substance of this shadow that, for five years, was all the Govern¬ 
 ment had to show for the privileges it conferred and the obligations it 
 entered into by that act? Was it not expressly meant to get rid of all 
 questions of damage for want of notice, inconvenience to the owners of 
 the property, and the like, which might arise in an ordinary case of 
 condemnation and sale? 
 
 What are the words of the law ? “ Provided ., however , That the United 
 States may at any time, after the expiration of five years from the date 
 of the passage of this act, for postal, military, or other purposes, pur¬ 
 chase all the telegraph lines, property, and effects, of any or all of said 
 companies, at an appraised value, to be ascertained by five competent, 
 disinterested persons, two of whom shall be selected by the Postmaster 
 General of the United States, two by the company interested, and one 
 by the four so previously selected. 7 ’ 
 
 ‘‘Telegraph lines,” telegraph property, and telegraph effects. Not so 
 many poles and so many pounds of wire, I grant you, but a telegraph 
 system , equipped and ready for business. 
 
 What was the object of that provision ? Why, to secure to the Gov¬ 
 ernment a system of telegraphs without the trouble cf building it. The 
 Government bound itself not to build lines, and gave other valuable 
 considerations to the companies, for the purpose of securing certain 
 property; and yet we are told, when we come to enforce the contract, 
 that, to ascertain the value of that property, we must go into the stock 
 market, see how much each individual stockholder bought at, allow him 
 for all he has made, or reimburse him for all he has lost, and then, after 
 doing that, add to the sum so ascertained constructive damages to three 
 or four times the amount for which the Government could build lines of 
 equal extent and much better quality. 
 
 Mr. Orton wants thirty or forty millions for his lines, and says, “Would 
 you give no higher price for a line doing a large business and making 
 
30 
 
 a heavy profit than for another working at a loss and bankrupting its 
 owners ? ” 
 
 Well, as the Government gets precisely the same thing in both cases, 
 and precisely the thing it has contracted for, I do not see why you 
 should. 
 
 But Mr. Hubbard comes along and says, “ I agree with Mr. Orton as 
 to the value of his lines; that is what I would be willing to pay for 
 them in the stock of my company, and turn them in to the Government 
 for in cash. But when you come to this other telegraph system, made 
 up of poles, wires, and instruments, just like the Western Union, you 
 must take another view altogether. You must pay those companies 
 not only for the capital they have sunk in the enterprise, but for the 
 dividends they would have made if they had been more fortunate, an 
 additional sum for being compelled to give up this lucrative property, 
 and something besides for the benefit they have conferred upon the 
 public in reducing the rates between points where there is competition, 
 and increasing them between points where there is not. 7 ’ 
 
 Now, just look at the facts. Was there any coercion on the part of the 
 Government *to make fclie companies enter into this contract ? Has there 
 been any want of notice to the owners of the property that they are 
 under an obligation to sell to the Government % Hid not every man 
 who has bought or speculated in telegraph stock for the last six years 
 know the obligations and condition of the companies'? Ho not the men 
 who have run Western Union stock up from 33 to 70 cents within the 
 past year, and the men to whom they have sold, understand the relations 
 of that company to the Government; and whose fault is it if they do 
 not? 
 
 Mr. Chairman, I may not understand the attitude of the Western 
 Union Company with regard to this signal-service, but if the feelings of 
 the people should be so aroused by it as to demand that the Government 
 take possession of the wires, I hope you will take care that no chance is 
 left open for this immensely watered and inflated stock to come under 
 appraisement on the pretense of a compulsory sale, as part of the “tele¬ 
 graph lines, property, and effects” which the Government needs to 
 transmit the dispatches of the people. 
 
 A man buys a 5-20 bond, say in a foreign market. It is a good invest¬ 
 ment and he pays a good price for it, or there is a great demand for 
 American securities, and he pays a fancy price for it. At the end of 
 five years the Government pays him his interest and calls in the bond. 
 “ But,” he says, “ I bought this above par and you ought to reimburse 
 me for my loss. Besides, you have taken away my chance of investment, 
 and I may not be able to find another; now you ought to give me some¬ 
 thing for the profits I should have made if you had not enforced your 
 right of redemption.” 
 
 The Government would answer, “You bought the bond with full notice 
 of our right to call it in. You have got your interest and we are glad 
 of it; now take your principal and see if you cannot invest it elsewhere. 
 If you have lost by speculation, better luck next time.” 
 
 Now, when this matter of purchase comes up, what are you to do? 
 You cannot go into the exchange and buy the stock with its three- 
 quarters water, pay the individual losses of the stockholders, or the 
 debts which bad management, to say the legst, has saddled upon the 
 companies, and then add to that a bill of damages for twice as much 
 again. You cannot pay 400 per cent, on the capital of one company, 
 and pay for the lines of the other, as Mr. Orton says his company buys 
 
31 
 
 unproductive telegraphs, at so much per pole and so much per pound of 
 wire, “to be taken down and disposed of?’ What, then, can you do? 
 
 There are two courses equally just and generous to all the companies 
 which you can pursue, and which will, I apprehend, lead each to about 
 the same result. 
 
 First, let your appraisers take into account everything which has 
 entered into the cost of the telegraph property now existing; deduct 
 from that cost a percentage for the deterioration of the lines which the 
 Government would have to expend in reconstruction, and then add a 
 reasonable profit for the length of time which it would take the Govern¬ 
 ment to build the same lines. 
 
 The second course is to see for how much the Government could build 
 good lines over the same ground; deduct from that a percentage for 
 reconstruction of the present system, and add interest as before for the 
 time which the Government would need to build the lines. 
 
 I say I think both of these methods w r ould reach substantially the 
 same result, but I have reliable data, of course, only in regard to the 
 second. 
 
 Should the first method be adopted, however, I assert that the total 
 cost of the franchises owned by all the companies will not make up for 
 the good bargains which the Western Union Company alone has made, 
 both in purchasing lines of other companies and in building their own. 
 On the first point I will quote Mr. Orton again, (p. 123, Washburn’s 
 report.) 
 
 Mr. Washburn. I have a statement before me, which purports to declare that Gen¬ 
 eral Stager made a declaration, under oath, to the commissioner of telegraphs for 
 Ohio, of the value of lines in that State for 1868, which makes the value $35 a mile of 
 wire, not including branches. 
 
 Mr. Orton. If you will reflect, you will see there is nothing out of the way in that. 
 The taxation is by the State upon property estimated according to a custom existing 
 there, which has all the sanctity of law. That custom is to estimate property at what 
 it could be sold for, for instance, by the sheriff. Now, then, a telegraph line—and I 
 speak from experience, for we have been the largest dealers in second-hand telegraphs 
 in the country—is a pretty poor piece of property to be sold by the sheriff. Prima 
 facie it is good for nothing as a telegraph. It becomes simply a question of how much 
 a certain quantity of wire would be worth to take down and dispose of. 
 
 On both points I quote from Mr. Stebbins’s letter, [p. 82:] J 
 
 The Western Union Telegraph Cbmpany bought many lines very cheaply, by first 
 ruining the value of the line through the agency of competition or other means. They 
 got many lines for nothing, by inducing railroad companies to pay all the expenses of 
 construction and maintenance, while the telegraph company received all the benefits. 
 They built other lines with the aid of subscriptions to be paid back in telegraphing at 
 high rates, after the completion of the line. They absorbed many lin'es by giving in 
 lieu their own stock, which was then valuable, but which they afterward watered so* 
 that it has now become comparatively valueless. The original stock, as I have alleady r 
 said, has had eleven parts of water added to it. This is, of course, in some measrre 
 counterbalanced by the many valuable lines they have got for nothing, or for very 
 little. Their stock has been swelled by taking in, finally, all the other lines in the 
 country. 
 
 These statements, I may say, correspond with my own knowledge on 
 the subject. It has been a common thing among the division superin¬ 
 tendents of that company, when they meet, to compare notes and mutu¬ 
 ally chuckle over the advantageous terms they have made with the rail¬ 
 road companies. 
 
 Without full data, 1 am of course at the mercy of those who have 
 them, but I do not believe that there are a dozen contracts between the 
 Western Union or its predecessors and the railroads in which such a 
 thing as the right of way is even mentioned, and when mentioned it is 
 thrown in as the merest make-weight. 
 
 The considerations on either side are purely tangible; no “incorporeal 
 
32 
 
 hereditaments” among them. Services in transportation of material and 
 employes, distribution of poles, use of special cars and trains, and, in 
 many cases, actual aid in building the lines, are paid for by the use of 
 the wires 5 and since the accounts have been kept between railroad and. 
 telegraph companies, the balance is generally largely in favor of the 
 railroads. So I am told. Of course you will want to know all these 
 things positively before you act on either the Government or the Hub¬ 
 bard plan. 
 
 You will notice that the railroad company put up the poles and trans¬ 
 ports material and employes in return for having its messages sent free. 
 
 The few cases in which the opposition companies have built along rail¬ 
 roads and paid for the right of way, (unnecessarily of course, since the 
 act of 1866,) and the sums paid for patents and other franchises by all 
 the companies, will, I am sure, be more than balanced by the cases in 
 which the Western Union Company has bought out whole systems at a 
 fraction of their cost. Hence we come to very nearly the same figures 
 as we shall reach by taking the other mode of appraisal. 
 
 Now, suppose the other method of valuation to be adopted, what will 
 the lines cost ? 
 
 On pages 38 and 39 of General Washburn’s report some lengthy cal¬ 
 culations are gone into to ascertain the value of all the telegraphs iu the 
 country, but the estimates are, as you will readily see, unnecessarily 
 generous. 
 
 There is no need of going behind the official figures of the Western 
 Union Company, from which it appears that their best lines cost, on an 
 average, $115 per mile of single-wire line, and $32 per mile for each 
 additional wire. At these rates the Western Union lines would cost 
 $7,350,000, and all the lines of the country $8,909,000. 
 
 The instruments and apparatus are worth $300,0(30, making$9,209,000, 
 which the Government should pay—not, however, to the companies. 
 At least 20 per cent, of that amount should be deducted for deteriora¬ 
 tion and expended for re-construction, leaving $7,357,200 to be paid the 
 companies. 
 
 Now, if the Government were to build its own lines it could do so 
 probably at a much less cost than this, because, knowing the tele¬ 
 graphic necessities of the country it could arrange a comprehensive 
 plan, and save much in labor and construction by putting all the wires 
 on any route up at the same time, instead of adding wires from time to 
 time, to meet the increase of business, as the companies have done. 
 I do not know exactly how much this saving would be, and I hope there 
 will never be any occasion to know. It is not a matter which the Gov¬ 
 ernment should press, but it is undoubtedly one that would be, under 
 certain circumstances, entitled to consideration. 
 
 If the Government were to build lines, however, equal to the present, 
 for $7,357,200, it would have to borrow money, say at 5 per cent., and 
 it would take five years at a very high average to have the lines in a 
 condition to be worked as profitably as they are nowj These are out¬ 
 side figures, I think you will admit, but this interest might very pro¬ 
 perly be claimed by and paid to the companies. 
 
 This would add $1,839,300 to the $9,209,000 expended in purchase 
 and reconstruction, making $11,048,300—the amount which, at the most, 
 should be added to the public debt for the acquisition of the telegraph 
 system. That is the highest amount you can pay with justice to the 
 country. It will give the companies a liberal price for their property 
 
33 
 
 ami secure to the public a thoroughly refitted system of lines, capable 
 of doing at least twice the business they can now do. 
 
 I do not propose to go into the question of the capacity of the lines 
 for business, the fullest and latest information on that point being con¬ 
 tained in General Washburn’s report; but, as a practical telegrapher, I 
 think the capacity of the lines would be doubled without the erection 
 of a single wire. If the reduction of tariff occasioned, as I believe it 
 would, a more equal distribution of the business throughout the day, 
 by the introduction of a large class of social messages, the capacity 
 would \>e increased in still greater proportion. 
 
 The political objections to this measure now claim attention. I have 
 shown that in all of the post-offices, where the postal receipts are under 
 $1,000 a year, the labors of the postmaster and operator could be com¬ 
 bined and a better class of officials secured by the payment of a higher 
 salary and the requirement of something more than a political quali¬ 
 fication from the incumbent of the office. This is a low estimate, for 
 there are many points at which more than one hundred letters per day 
 are handled, where one man could attend to both services. 
 
 In the larger cities, neither the postal nor the telegraph service would 
 .gain much in point of economy or efficiency over their present status 
 by amalgamation, but in the country the improvement would be very 
 great. In the opinion of those whose views should carry the greatest 
 authority, a postal telegraph is a direct and long step toward true civil- 
 service reform. 
 
 I have made no account of the numbers of offices where the service 
 •could be performed by the clerks of the post-office, but taking simply 
 those where the receipts are under $1,000, we have 4,279 offices where 
 the postmaster could personally perform the duties of an operator, leav¬ 
 ing 1,328 offices where he could not. At an average of three operators 
 to each of those offices, we would have an army of four thousand office¬ 
 holders added to the sixty or seventy thousand now on the civil list. 
 
 Now, I will admit that if the telegraph system is to be controlled and 
 operated by men who know nothing of telegraphing, it will be an im¬ 
 mediate and disastrous failure. 1 do not see, however, how you can 
 extend the system of political appointments to a service that depends 
 so entirely on technical skill and education as the telegraph. 
 
 In the first place, you will require all the telegraphers in the country 
 to run the machine, no matter what their political opinions or affilia¬ 
 tions may be. Probably more than half of them are not legal voters, 
 and those who are are generally quiet, intelligent people, whose busi¬ 
 ness has given them too cosmopolitan a turn of mind to permit of their 
 ever becoming strong partisans. In fact, the only telegrapher politi¬ 
 cian I ever knew was an old comrade of mine in the military corps, now 
 a State senator in Alabama, and one of the corporators in Mr. Hubbard’s 
 bill. 
 
 I do not think, either, that you can induce the class of politicans who 
 are generally most anxious for office to go through six months’ or a 
 year’s study in order to get a subordinate position in the telegraph ser¬ 
 vice. The higher offices, requiring greater knowledge and longer 
 experience on the part of the officer, would be still more secure from 
 political influences. 
 
 In regard to the advantages possessed by a private company in point 
 of flexibility of administration and greater degree of interest on the 
 part of their employes, I have not much to say. I think Mr. Orton 
 once jocularly remarked that “ the telegraph was about as big as the 
 United States,” and one of liis employes told me not long ago that there 
 3 T 
 
34 
 
 certainly could not be more red tape in any department of the Govern¬ 
 ment than in the Western Union offices. 
 
 My own experience with his company and in three departments of 
 the public service confirms this statement. I do not think it disparag¬ 
 ing at all to the management of the Western Union Company, for this 
 much-abused red-tape is necessary to the machinery of all great concerns. 
 
 The employes will work the hardest generally for those who can af¬ 
 ford to pay them the most. They have no direct interest now in the 
 success of the companies beyond their own salaries, and their prospects 
 for promotion are no better than they would be in the public service. 
 
 The idea that telegrams would be more liable to violation under a 
 government system than now, is, it seems to me, utterly chimerical. 
 Where by previous arrangement ciphers are available, there is absolute 
 secrecy, and where they are not I do not see why operators or, say, if 
 you please, higher officers, should be more interested in the contents of 
 private messages than they are now as private citizens. The fact is, 
 the more messages a man has to transmit the less likely he is to remem¬ 
 ber any of them, and as a Government rate would produce a large in¬ 
 crease in the number of dispatches, the chances for a breach of confi¬ 
 dence would be greatly diminished. 
 
 I think the people, with the experience of the post-office department 
 before them, will have much greater confidence in a Government tele¬ 
 graph than in a private one. Leaving out the directors, the new system 
 will be managed by the same hands that control the present,one, and 
 if better pay and treatment than they now receive is going to demoral¬ 
 ize them, I say let them be demoralized. 
 
 To the assertion that there would be no redress against the Govern¬ 
 ment for delays, &c., in transmission of messages, I have only to say 
 that that rests entirely with you, the law-making power. Where indi¬ 
 vidual negligence is proved, the remedy stands on precisely the same 
 footing as any other individual action, and the reports show man 3 ^ cases 
 where recovery has been had against employes of the post-office for ne¬ 
 glect or malfeasance and against postmasters for the wrong-doing of 
 their subordinates. Where the amount is large I see no reason why 
 the party aggrieved might not be given standing in the Court of Claims, 
 for instance. There is nothing like the difficulty in obtaining proof in 
 these cases that there is in case of the loss of a letter, for on every mes- # 
 sage the time received from the sender, sent over the wires, received at 
 the terminal office, and delivered to the addressee are plainly marked, 
 and the log-book of the offices shows the condition of every wire at the 
 time. 
 
 Practically the case is this. When the reclamations are small the 
 companies pay them, and, if for faulty transmission, assess them on two 
 operators, one of whom is necessarily innocent—both are very fre¬ 
 quently if the weather is bad. If the amount of the claim is larger, it 
 goes through all the courts and costs a good deal before it is settled. 
 
 I think the Belgian or the English system will compare very favora¬ 
 bly with this, both as to the number of complaints and the manner of 
 settling them. You cannot think this point of lhuch importance how¬ 
 ever, if you pass the Hubbard bill, for half the complaints, at least, are 
 for non-delivery or delay in delivery, with which duty it proposes to 
 charge the Government. Suppose a postmaster, acting also as Mr. 
 Hubbard’s operator, to be sued for delaying a message as the agent of 
 the company, if he can throw the blame on himself as postmaster, he 
 suddenly becomes “irresponsible.” 
 
 I find that I have already touched upon most of the points I intended 
 
35 
 
 to bring forward to show that the interests of telegraphers would be 
 best served by the adoption of a Government telegraph. A few words, 
 however, will show their present position, and how it would be af¬ 
 fected. 
 
 Expert operators are always in demand in the cities, and the pay is 
 sufficient to support one person very well, but not more. If they are so 
 improvident as to have others depending upon them they have a pretty 
 hard time. Occasionally, one goes into the country and gets a railroad 
 agency in addition to his telegraphic duties, and manages to save a little 
 money. 
 
 But two inconveniences result from this course: He has to work more 
 hours, trains frequently passing in the night-time, and the public must 
 go to the depot, generally on the outskirts of tlie town, to send their mes¬ 
 sages. Both of these difficulties would be obviated by combining the 
 telegraph with the post-office. The hours required by the two services 
 are identical, and the removal of the offices to the centers of business 
 would cause a largely increased use of the telegraph. (In England this 
 increase was estimated at 15 per cent.) 
 
 Again, the standard of requirements has several times been very 
 much lowered by the establishment of mushroom companies, calling 
 into existence a class ' of poorly taught operators* who, when the con¬ 
 solidation comes, underbid the older and more competent, and render a 
 less efficient service for less pay. So much was this evil felt five or six 
 years ago, that a great many of those best fitted to conduct the service 
 left it altogether. With a Government monopoly the number of em¬ 
 ployes would increase only gradually, and their situations would be 
 more permanent. 
 
 An operator can learn in six or eight months to transmit and receive 
 correctly and quite rapidly by sound, and in the large offices, where the 
 chief operator is an electrician, that is all that is required of the sub¬ 
 ordinate. But at the way-stations the same electrical knowledge is 
 required of the operator that is possessed by the chief operator in the 
 city ; and yet, under the present system, no man who has given much 
 of his time to the study of electrics can afford to take a country office. 
 Much of the inefficiency of the telegraphs to-day is due to the ignorance 
 of the poorly paid way operators. 
 
 Now, I want, before closing, to enter a few objections to Mr. Hub¬ 
 bard’s bill. 
 
 First and generally, the Government has no right to make any such 
 arrangement. It may perform a public function "by doing the public 
 telegraphing over its own wires, but it cannot, with propriety, contract 
 a copartnership, and go into private business with or even loan its 
 credit to private parties for carrying on a business which is subject 
 to competition. It has been said that the bill does not propose a part¬ 
 nership, but simply an agency—but who is principal and who is agent 
 does not very clearly appear. It would be an interesting question in a 
 suit for damages from delay of a message. I think, however, that an 
 arrangement where one party furnishes the room and another the ma¬ 
 chinery for carrying on a business, where one collects and distributes 
 and the other operates upon the material, and where each has a share 
 of the profits contingent on the amount of business, may be fairly 
 described as a partnership. 
 
 The whole scheme is founded on a false analogy sought to be drawn 
 between it and the manner of contracting with railroads for the mail 
 service. A railroad is a common carrier of merchandise and passengers, 
 and the transportation of the mails forms a very small part of its busi- 
 
36 
 
 ness. A telegraph, however, has bat one purpose, and is good for 
 nothing else. 
 
 The Government owns and controls its mail-bags, its wagons, and 
 postal cars, as well as its offices, and employs its own route-ageuts and 
 messengers. In fact, it has control in the mail service of just what it 
 would have if it purchased the telegraph—that is, all the agencies 
 necessary to accomplish its purpose. It does not buy the railroads, be¬ 
 cause it cannot go into the freight and passenger business for the sake 
 of getting its mails transported. 
 
 My specific objections to the bill are the following: 
 
 To the first section [line 7J I object that there is not a sufficient in¬ 
 crease of facilities, and no provision for connection with offices at present 
 existing where there are no post-offices. 
 
 To section 2 I object that the rates are not properly graduated ; it is 
 too great a leap from 25 to 50 cents for the difference between two hun¬ 
 dred and forty-nine and two hundred and fifty-one miles. However, a 
 graver objection is that we do not know enough about American rates, 
 and cannot without inspecting the books of companies, to fix a definite 
 tariff in a jmeliminary bill. I need not again allude to the objection 
 against registered messages so forcibly presented by Mr. Orton. 
 
 Section 4 provides for telegraphic money-orders at the regular rates 
 in addition to the charge for registered messages. As priority does not 
 seem to be granted them, they might be allowed to go at regular rates. 
 
 Section 5 [line 1] is a little indefinite as to the character of the “ spe¬ 
 cial contracts” that may be entered into “with associations and the 
 press for the transmission of commercial and iiress news.” I see no 
 reason why the commercial news department could not be continued 
 under that clause, and priority given to all sorts of “ associations,” ac¬ 
 cording to the interests or preferences of the company. 
 
 Section 6, so far as taken from the bill of General Washburn, is good, 
 yet I hardly see how, if we are to dispense with the book-keepers, &c., 
 as Mr. Hubbard says, we can get the full statistics this section pro¬ 
 vides for. 
 
 The whole system of dual management provided for in section 7 is 
 impracticable, and the division of power and responsibility which it 
 contemplates would seriously impair the working of the system. With 
 even the closest amalgamation which this bill could effect between the 
 post-office and the company, the conflicts of interest and authority would 
 be incessant. Divide up any bureau of the Government in this way 
 and see the result; of ask Mr. Orton if he wall let any company in which 
 he is interested, and for which he is responsible, serve two masters. 
 
 The security in line 33 and the following lines is not sufficient for the 
 interests involved. The penalty is neither ascertained nor ascertainable. 
 
 What would the people say while the Postmaster General was look¬ 
 ing about for “some suitable party” w T ith whom to “contract” for the 
 business in case of the failure of Mr. Hubbard’s company to perform 
 its obligations? What is the meaning of “ bound?” Is it that the prop¬ 
 erty of the company shall be forfeited ; and, it not, how is the Govern¬ 
 ment to acquire it when the company has show n itself unable to do the 
 work and has control of all the lines and employes, and the people at its 
 mercy ? 
 
 Section 8, line 31, charges the Government with the prosecution of 
 all offenses by or against the company. 
 
 Section 9 provides for a payment of 5 cents per message to the Gov¬ 
 ernment, wdiich would hardly pay the rent, saying nothing of stationery 
 and delivery expenses. 
 
37 
 
 To the tenth section I scarcely know what to say. I suppose the 
 gentlemen there named are men of wealth ; hut if they propose to buy 
 the lines at Mr. Hubbard’s estimate in cash, I must believe that they do 
 not know what they are doing. Mr. Hubbard will not object, I suppose, 
 to my saying that he means to commence with the lines of the opposi¬ 
 tion companies. His own words on that subject are, [Washburn’s report, 
 page 92:] 
 
 Mr. Hubbard. Another suggestion in regard to that is this. There are various op¬ 
 position companies at present in existence in the country, which have rights as well 
 as the Western Union Telegraph Company, and which must be considered. These 
 leading opposition companies are represented among the corporators of this bill. Mr. 
 Woodbury Davis, of Maine, represents the International Telegraph Company of Maine, 
 in which the brother of the general (Washburn) is one of the directors. Mr. Sweet 
 and Mr. Hammond represent the Atlantic and Pacific Telegraph Company, which is 
 also oue of the large opposition companies. Mr. Mason, of New York, whose name is 
 to be inserted in the bill, is a representative of the Franklin Telegraph Company. The 
 other principal telegraph company, the Pacific and Atlantic, are not represented, al¬ 
 though they have at different times asserted to me and approved of the provisions of 
 the bill. It was thought by these opposition companies that it was better, and that 
 they would prefer to unite under a new and independent corporation rather than 
 under the wing of the Western Union Telegraph Company. 
 
 Now, Mr. Hubbard must be aware tbat bis companies cannot fight 
 the Western Union Company over the limited ground they cover at the 
 rates he proposes, and if they could do so he would not consent to use 
 his connection with the Government to bankrupt that noble institution, 
 and ruin their thirty millions of investment. 
 
 Hear him on this point, [Washburn’s report, page 141:] 
 
 It is generally conceded that some action by Congress is necessary; four plans have 
 been presented and are now before this committee. First, that of Senator Stewart, of 
 Nevada, by which Congress shall establish a postal telegraphic system, and let out to 
 the lowest bidder the privilege of erecting lines, keeping them in repair, and transmit¬ 
 ting telegrams. . This is substantially the plan presented to the Committee of *the 
 House on Post-Offices and Post-Eoads, a year ago, which was met by the objection 
 that, by the act of June, 1866, Congress had made a solemn compact with all the tel¬ 
 egraphic companies of the country by which it agreed that it would not compete for 
 the business within five years; that at the expiration of that period, if it interfered, 
 it should purchase the lines at an appraised valuation. This was the opinion of the 
 House committee ; and although doubts may be entertained in regard to the legality 
 of the proposition, yet, on further reflection, I became satisfied that, while Cod gress 
 might legally enter into the business of telegraphy without buying up existing lines, 
 it could not with proper respect to the equitable rights of others; for on the dis¬ 
 covery of the telegraph, Mr. Morse requested Congress to adopt it as a part of the 
 postal system. The offer was declined, and, from time to time, Congress has passed 
 laws aiding the construction of lines, regulating their use, and prescribing the terms 
 on which it should have the right to buy them. It has, therefore, offered inducements 
 to these companies to construct new lines and invest property in them ; and it would 
 l>e a breach of good faith to establish any system which should not contemplate their pur¬ 
 chase. 
 
 Of course, then, he means to buy up the Western Union, and he 
 has honorably bound himself in this bill to do so whenever the latter 
 asks it, either in cash or in stock—seller’s option; and if you strike out 
 this provision in order to attract the attention of practical men and 
 capitalists to the scheme, you will, to say nothing of the injustice to 
 the Western Union Comany, lose entirely the co-operation of Mr. 
 Hubbard. He must be counted out of any such arrangement. 
 
 I should like, if he will allow me, to make a suggestion to that gentle¬ 
 man, who has declared his first object to be the public interest. 
 
 When the people of Boston and Charlestown wanted a free bridge, 
 and the Charles Biver Bridge Company, whose property had cost $40,000, 
 but whose profits had grown to be more than that sum each year, 
 refused to sell for less than $500,000, the {State found and chartered a 
 
38 
 
 company of gentlemen, wlio built a bridge within a few rods of the other, 
 with the understanding that they were to pay themselves from the tolls, 
 and, at the end of six years, at farthest, turn the bridge over to the pub¬ 
 lic free of cost. 
 
 There is an example worthy of Mr. Hubbard’s emulation, and if he will 
 ask for such a charter as that, after the companies have refused to sell 
 to the Government at cost, I am certain no one will object. Of course, 
 however, until the Government has proposed to the jmesent companies 
 to buy their lines, and the proposition has been declined, neither such a 
 charter, nor any other which does not “ contemplate their purchase,” can 
 be thought of. 
 
 I fear, however, that Mr. Hubbard will not act upon this suggestion, 
 but will stand by his original proposition. In that case, as he has no 
 prior con tract, with the Western Union Company, requiring them to sell 
 a limited description of property, they can make their own terms. 
 Their stock is at 75 per cent., on a capital of over forty millions, and 
 their good-will (which the English companies charged 300 per cent, for) 
 is certainly worth twenty millions more to Mr. Hubbard and his asso¬ 
 ciates. That is a rather large amount of cash to be brought together 
 for any purpose. I think, really, that unless the Western Union Com¬ 
 pany agree to take Mr. Hubbard’s stock in payment for their lines his 
 scheme will fall through. Suppose they do take the stock, and are 
 swallowed up in this new combination—it is the frog swallowing the 
 anaconda. 
 
 Uow, Mr. Chairman, what is the effect of this bill. It is simply to 
 commit the United States, in the same way that England was com¬ 
 mitted, to the proposition that the telegraph lines of this country are- 
 worth fifty millions of dollars. 
 
 Pass this bill, and if the Western Union stays out Mr. Hubbard will 
 be back here next session, appealing to Congress to relieve him and buy 
 his lines on his plan of valuation. If the Western Union comes in, the 
 new company will work at an apparent loss for a little wiiile, and then 
 throw itself upon the generosity of the Government.' 
 
 What is the Postmaster General then to do 1 The telegraph business 
 of the country cannot stop for a day without throwing commerce and 
 everything else into utter confusion. This company has all the lines. 
 There is no other “ suitable party” with whom he can “contract.” 
 There is Ho other remedy but to take the lines; there is no other way 
 of taking the lines than by appraisal, and the Government has already 
 committed itself to a method of appraisal which will make each sep¬ 
 arate stockholder a millionaire. 
 
 Gentlemen, you cannot afford to take any action, least of all such 
 action as this, at this session. 
 
 The message of the President and the bill of Mr. Hubbard have been 
 referred to you, as the Committee on Appropriations. Whether Mr. 
 Hubbard’s plan succeeds, or the present system remains unchanged, the 
 people, under the act of 18G6, are the reversioners of this property. 
 Would it not be well, before you recommend any plan, to find out the 
 extent and nature of the property, and to count the cost to the Gov¬ 
 ernment, when it comes, as it surely must, to take it into its own hands. 
 
 I have gone over this subject very superficially, but probably at greater 
 length than I should have done in view of the short time you have to 
 devote to it at present. 
 
 I am extremely obliged for your patient attention. 
 
39 
 
 Statement of Mr. George B. Prescott, electrician of the Western Union 
 
 Telegraph Company. 
 
 \ 
 
 Mr. Chairman and Gentlemen of the Committee : During the 
 past six years various schemes have been devised for uniting the postal 
 and telegraph systems of the United States. The first measure of this 
 kind was proposed in the first session of the Thirty-ninth Congress, in 
 1865, by Hon. B. Gratz Brown, Senator from Missouri, who advocated 
 the construction of Government telegraph lines, to be worked in con¬ 
 nection with the Post-Office, for the transmission of messages through¬ 
 out the United States at a uniform rate of 3 cents per message. The 
 result of Mr. Brown’s efforts was the adoption of a resolution by the 
 Senate calling upon the Postmaster General for information as to the 
 expediency of making the telegraph a part of the postal system. 
 
 On the 2d of June; 1866, Hon. W. Dennison, the Postmaster General, 
 after conferring with the various telegraph companies and experts in 
 the United States, and ascertaining all the facts which he considered 
 necessary to enable him to form an intelligent judgment upon the mat-' 
 ter, made a report to the President of the Senate, of which the follow¬ 
 ing was the concluding sentence : u As the result of my investigation 
 under the resolution of the Senate, I am of the opinion that it will not 
 be wise for the Government to inaugurate the proposed system of tele¬ 
 graphs as a part of the postal service, not only because of its doubtful 
 financial success, but also its questionable feasibility under our political 
 system.” 
 
 No further efforts w T ere made to secure the establishment of a govern¬ 
 mental system of telegraphy in this country until 1868, when Hon. E. 
 B. Washburne, Representative from Illinois, in the second session of 
 the Fortieth Congress, introduced a bill for the construction of a gov¬ 
 ernmental telegraph line, under the direction of the Post-Office Depart¬ 
 ment, between New York and Washington, to be operated, as far as 
 practicable, by the employes of the Post-Office, for the transmission of 
 messages at 1 cent per word, exlusive of date, address, and signature, 
 in addition to 3 cents for postage and 2 cents for delivery. 
 
 In the same session of Congress two other bills for the construction 
 and operation of postal telegraphs were also introduced. One of these 
 provided that Congress should grant to Mr. Gardiner G. Hubbard and 
 his associates, an act of incorporation, under the name of the United 
 States Postal Telegraph Company, and confer upon it the right to con¬ 
 struct, maintain, and operate lines of telegraph over all post-roads 
 within the United States and Territories, and also providing for a part¬ 
 nership arrangement between the United States and the Postal Tele¬ 
 graph Company, by contract with the Post-Office Department, under 
 which the company was to be furnished with office-room, stationery, 
 lights, and fuel, and to some extent with clerks, operators, and super¬ 
 intendents, at the cost of that Department, and in return for these 
 advantages the company was to send messages at the rate of 25 cents, 
 (of which the Post-Office Department was to receive 5 cents,) for dis¬ 
 tances of five hundred miles, and of 50 cents for distances of one thou¬ 
 sand miles, reserving, however, the right to charge extra rates for 
 priority of transmission. 
 
 The third bill authorized James F. Hail and his associates, under the 
 direction and supervision of the Postmaster General, to construct lines 
 of telegraph between Boston and Washington upon any line of travel, 
 
40 
 
 and be protected in the use thereof, and that all necessary materials 
 required for constructing the lines be imported free of duty. 
 
 These three bills were referred to the House Committee on Post-Offices 
 and Post-Roads, which, after a thorough and exhaustive examination 
 of the subject, extending over a period of nine months, made a report, 
 in which they stated that, u after carefully examining and considering 
 the propositions contained in all the bills and papers submitted to them, 
 and giving much time to the hearing of parties interested for and against 
 the several measures presented, they were of the opinion that neither 
 of the bills ought to receive the approbation of Congress.” 
 
 The full and explicit disapproval of the various postal-telegraph 
 schemes, both by the* Postmaster General, in 18G6, and by the unani¬ 
 mous report of the Post-Office Committee of the House of Representa- 
 tives, in 18G8, was generally regarded as the probable termination of 
 the project; but in the second session of the Forty-first Congress, De¬ 
 cember, 1869, it was again revived by Hon. C. C. Washburn, Repre- 
 sentative from Wisconsin, at whose request the House authorized the 
 appointment of a Select Committee on Postal Telegraph, which sat for 
 several months listening to arguments for and against the several meas¬ 
 ures presented to them, but failed to agree upon a report. Two mem¬ 
 bers of the committee, however, Messrs. Washburn and Palmer, pre¬ 
 sented reports, which were ordered to be printed and recommitted. 
 Mr. Washburn’s report strongly urged the necessity for the purchase of 
 the existing lines, and the creation of a purely governmental telegraph, 
 and a bill was introduced by him for securing this result. 
 
 Mr. Palmer’s report advocated Mr. Hubbard’s scheme, and was accom¬ 
 panied by*his bill. 
 
 No further action was taken upon either of these bills, and the dis¬ 
 cussion of the subject of governmental intervention in the business of 
 telegraphing was not again renewed until the present session of Con¬ 
 gress. 
 
 Although all the facts and arguments which could be adduced in 
 favor of the governmental acquisition, interference, or control of the 
 telegraph have been ably presented, I think it must be conceded that 
 they have hitherto failed to produce a conviction of tiie expediency of 
 such measures in Congress, the public press, or any considerable num¬ 
 ber of private citizens. 
 
 As the subject has been so fully discussed heretofore and now pre¬ 
 sents no new features of importance, I will not occupy your time with a 
 restatement of the reasons why the Government should not intervene 
 in the business of telegraphing, but invite your attention to the pam¬ 
 phlets which I have in my hand, containing the argument of Hon. Wil¬ 
 liam Orton, president of the Western Union Telegraph Company, on 
 the bill to establish postal-telegraph lines, delivered before the select 
 committee of the United States House of Representatives in May, 1870, 
 and to the remonstrance of the Western Union Telegraph Company 
 against the postal-telegraph bijl, published February 13, 1872, as em¬ 
 bodying the views of the company which I represent upon the subject 
 now under consideration. 
 
 Mr. Dickey. I would like to know what proportion of their poles the 
 Western Union Telegraph Company actually owns. In my State the 
 telegraph poles along the lines of railroads are owned by the railroad 
 companies, while the wires are used by the telegraph company, under 
 a contract with the railroad companies. 
 
 Mr. Prescott. As a rule, the Western Union Telegraph Company 
 owns the poles upon which its wires are supported. There are a few: 
 
41 
 
 exceptions, however, and the principal ones are the Pennsylvania Rail¬ 
 road Company, over a portion of whose route oar company leases the 
 poles of that company. The Union and Central Pacific Railroad 
 Companies own the telegraph lines on one side of their road and the 
 Western Union Telegraph Company own the lines on the other side. 
 Many railroads are constructed through sparsely populated districts, 
 where the telegraph business is not sufficient to pay the operating ex¬ 
 penses, and in such cases the railroad companies contribute to the 
 construction of the lines and aid in their operation, receiving as com¬ 
 pensation a commission upon the public business which is done on them, 
 besides doing their own business free. 
 
 The Chairman. Are half the telegraph poles owned by the railroad 
 companies'? 
 
 Mr. Prescott. No, sir; only a small percentage of them. As a 
 general rule, the poles furnished by the railroad companies are contrib¬ 
 uted to the telegraph company as an inducement for building the lines, 
 and become the property of the latter. 
 
 The Chairman. How large a force of employes has the Western 
 Union Telegraph Company? 
 
 Mr. Prescott. It has 7,264 on its pay-rolls, but there are a good 
 many others connected with it indirectly. 
 
 Mr. Dickey. Is there any case where the railroad companies own the 
 telegraph poles and where the Western Union Telegraph Company does 
 not possess the right of way? 
 
 Mr. Prescott. There are a few railroad companies which own their 
 own telegraph lines and over whose routes the Western Union Tele¬ 
 graph Company does not possess the right of way, but on most of the 
 railroads our company has secured the right of way by contract. 
 
 Mr. Lines. I would like to ask about what proportion of these con¬ 
 tracts there is where there is any mention whatever made of the right 
 of way as a consideration. 
 
 Mr. Prescott. In all contracts the right of way is recognized and 
 constitutes a material consideration. 
 
 Mr. Dickey. The railroad company has got the right of way, and the 
 telegraph pole is an incident of that right of way. The right of way 
 must be in the railroad company ? 
 
 Mr. Prescott. Yes, the right of way is in the railroad company,, 
 and our company has never constructed a telegraph line upon any 
 railroad without securing from it a right of way, except in the case of 
 the Pacific Railroads, where the right of way was conveyed to the com¬ 
 pany by act of Congress. 
 
 The Chairman. I suppose that the railroad companies have not in 
 any case parted with that right of way, except temporarily % 
 
 Mr. Prescott. The right of way is limited to the duration of the 
 contracts, some of which are perpetual and others for a long term of 
 years. Virtually we consider the grant of the right of way as perpetual. 
 There is a marked difference between the relations of the telegraph and 
 railroad companies in this country and England in this regard. In 
 England, to a considerable extent, the railroad companies owned the 
 telegraphs on their roads and not only operated them for the perform¬ 
 ance of their own service, but sent and received messages for the public 
 at rates fixed by the railroad companies. 
 
 In this.country, on the contrary, the Western Union Telegraph Com¬ 
 pany as a rule owns and operates the telegraphs on the lines of the 
 various railroads, and not only performs the public telegraph business 
 but also that of the railroads. When the British government purchased 
 
42 
 
 the telegraph lines in the United Kingdom they had to purchase from 
 the railroad companies their telegraph interests, and at the date of Mr. 
 Scudamore’s last report, there yet remained forty-four railroad compa¬ 
 nies in various parts of the country with whom the post-office depart¬ 
 ment had not made arrangements as to the amount of compensation to 
 be paid to them for the purchase of their telegraph interests. 
 
 Mr. Dickey. Sometimes you have your offices together and some¬ 
 times have the same operator % 
 
 Mr. Prescott. Yes; very generally. In many cases the employes 
 of the railroad companies also act as agents of the telegraph and thus 
 enable our company to maintain telegraph stations at places where the 
 telegraph business would not pay the wages of an operator. Nearly 
 all railroad telegraph operators receive and transmit public messages 
 over the Western Union telegraph lines, the railroad companies receiv¬ 
 ing a commission upon such business. The result of this is not only 
 to enable the Western Union Company to reduce the rates, in con¬ 
 sequence of the saving in the expense of operating the lines by this co¬ 
 operative arrangement, but also to approximate more nearly than they 
 otherwise could to a uniform tariff of charges. 
 
 The Chairman. I wish to ask a question touching the amount of the 
 telegraph business of this country. I have here the English report for 
 the week ending March 23, 1872, and for the corresponding week last 
 year. The number of messages sent in England for the week ending 
 March 23, 1871, was 212,472; for the corresponding week of 1872, 
 273,643; being an increase over last year of 61,171. If this week is a 
 fair average they are now sending messages in England to the number 
 of 14,230,000 per annum, which is an increase of about 750,000 mes¬ 
 sages over last year. 
 
 Mr. Prescott. No single week can be selected as a fair average ff?r 
 the year. A variety of causes may increase the traffic of one week over 
 another. In Mr. Scudamore’s report on the reorganization of the tele¬ 
 graph system of the United Kingdom, he states that the total number of 
 messages forwarded in the nine months ending December 31, 1870, was 
 7,563,015. He also states that-the heaviest week in the nine months 
 was the week ending 23d July, when the war x>anic raised the number 
 to 234,194, and that the lightest was the week ending 31st December, 
 when the Christmas holidays brought the number down by 35,000 
 below the previous week. Undoubtedly there has been a large increase 
 in the telegraph traffic in England during the past two years, but it 
 must be borne in mind that there have been very large expenditures 
 and great increase of facilities. On page 84 of Mr. Scudamore’s report 
 
 he states that the— 
 
 Total number of instruments in use on 31st August, 1870, was.. 4,153 
 
 Total number of instruments before transfer.... 1,869 
 
 Additional number under the post-office. 2,284 
 
 On page 85 is a schedule of 50. new circuits in course of formation, 
 regarding which Mr. Scudamore says: “Large as the system now is, it 
 will be far larger and afford far more accommodation when the new cir¬ 
 cuits, now in course of formation, are completed.” These circuits em¬ 
 brace all the principal towns in England, Scotland, and Ireland. In 
 Mr. Scudamore’s report to the chancellor of the exchequer, dated June 
 3, 1871, he says : 
 
 The new wire circuits described at page 85 of ray report are on the very verge of 
 completion, but only some small portions of them are as yet earning money. When 
 
43 
 
 they are open throughout, our revenue will immediately and largely he increased, for 
 there is nothing more certain in telegraphic business than this, that the trade increases 
 with the speed of transmission. I could furnish many illustrations of this, but one 
 will, perhaps, suffice. For a long time we had no direct communication between Lon¬ 
 don and Dundee, the messages being repeated at Edinburgh. The complaints of delay 
 were great, and the complainants generally declared that they did not send half so many 
 messages as they should send if the speed were greater. In February last we contrived 
 to give London direct communication with Dundee, audiu the first week Die messages 
 were doubled, aud they have since gone on increasing. I could multiply instances 
 with ease. 
 
 Undoubtedly all of tlie important additional circuits, above referred 
 to, have long since been put in operation and are the priucipal cause for 
 the great increase in traffic, for, as Mr. Scudamore truly observes, u there 
 is nothing more certain in telegraphic .business than that the trade increases 
 with the speed! of transmission ,” and the speed of transmission depends 
 upon the facilities afforded. 
 
 The Chairman. Can you make an approximate statement of the per¬ 
 centage of increase of telegraphic business in this country ? 
 
 Mr. Prescott. The percentage of increase on the Western Union Tele¬ 
 graph lines since 1867 has been as follows: Prom 1867 to 1868,8.9 per 
 cent.; from 1868 to 1869,23.8 per cent.; from 1869 to 3 870,15.4 per cent.; 
 and from 1870 to 1871, 16.2 per cent. These are for the fiscal years be¬ 
 ginning July 1. The increase in the number of messages sent over our 
 lines during the past six months, as compared with the corresponding 
 time last year, was 19.7 per cent. 
 
 The Chairman. That very large increase in 1868-’69 was probably 
 the result of the consolidation ? 
 
 Mr. Prescott. There was no consolidation during this period, but a 
 considerable increase in the facilities. 
 
 Mr. Hubbard. Was that the year that you reduced your rates? 
 
 Mr. Prescott. We have reduced our rates every year since 1866, but 
 it was not during this fiscal year, but the next, that we made our great¬ 
 est reduction, when the uniform square rates and the transmission of 
 messages by night at half rates were introduced. The increase of the 
 business during the year when these great reductions were made was 
 only 15.4 per cent., while for the succeeding year, when there was no 
 very material diminution in the rates, the increase was 16.2 per cent., 
 thus demonstrating the fact that the increase in the number of messages 
 is due more to the increase of facilities than to the reduction of rates, 
 for during the last year there was a far greater increase in the means 
 for rapidly performing the service than at any former period. 
 
 The Chairman. Have you anything corresponding with those weekly 
 reports of the English government, showing the number of complaints 
 where mistakes are made? 
 
 Mr. Prescott. We may not have anything exactly corresponding to 
 it. We keep a record of all the complaints which are made to our com¬ 
 pany of mistakes or irregularities in the service. 
 
 The Chairman. This report shows these facts: They keep an ac¬ 
 count of mistakes such as, u from delay in transmission 11 non-deliv¬ 
 ery u inaccuracies f u overcharge u messages paid for and not 
 sent f or “ twice paid for,” and all other inaccuracies. 
 
 Mr. Prescott. Our record of complaints is accurately kept. 
 
 Mr. Dickey. But you have no account of mistakes where there is 
 no complaint ? , 
 
 Mr. Prescott. Not as a general thing, because we have no means of 
 knowing that a mistake has occurred unless some one makes a com¬ 
 plaint. When errors do occur we are very glad to be informed of them, 
 so as to enable us to prevent a recurrence. 
 
44 
 
 Tlie Chairman. Here is a statement of complaints for the week 
 
 ending March 23, 1872 : 
 
 Total number of complaints for the whole kingdom...225 
 
 For the corresponding week last year. . 317 
 
 I have been receiving these reports during the summer, and it has 
 been a very curious thing to me to see how slowly but steadily the com¬ 
 plaints have been decreasing. 
 
 Mr. Prescott. The English government is managing the telegraph 
 with a great deal of ability and success, and is improving the service 
 very rapidly. Nearly all the skilled employes of the old companies are 
 retained under the government, and there is no reason why, with unlim¬ 
 ited resources in skilled labor and money, the system should not be 
 equal to any in the world. 
 
 The Chairman. It indicates to me that during the past year they 
 have very greatly bettered the postal-telegraph service, and it seems 
 very remarkable to me that a thing done by the government should 
 have so much efficiency, on the general principle that I believe private 
 companies, or individuals, do work much better than a government can. 
 It seems to indicate that the government in England is doing the work 
 with remarkable accuracy. 
 
 Mr. Prescott. That is true; but yet those statements do not afford 
 conclusive proof that the number of errors is decreasing. Any person 
 who suffers from a mistake made on our lines can obtain redress from 
 us, or, if not satisfied with our treatment of his demands, can seek re¬ 
 dress through the courts, and we are obliged to pay whatever damage 
 is awarded. But if a mistake is made by the post-office telegraph in 
 England the postmaster may refund the shilling paid for sending the 
 telegram, but beyond this the complainant has no redress whatever, 
 and no man has any redress under any government telegraph system. 
 Now I cannot say what proportion of the English people would prefer 
 a formal complaint for a shilling, but I am very confident that there is 
 a very small proportion of the people who use the telegraph in this 
 country who would take that trouble for so small a sum. While, there¬ 
 fore, the number of complaints reported by the post-office department 
 may approximately represent the number of errors made by the tele¬ 
 graph and show the ratio of improvement, it cannot be regarded as 
 showing the maximum number. The complaints for errors and failures 
 to deliver messages, in which damages have been claimed from our 
 company during the past year, have amounted to only five hundred, or 
 about ten per week. 
 
 Mr. Palmer. How much in amount has the Western Union Telegraph 
 Company ever paid in the way of grievances f Can you give a general 
 estimate of the aggregate amount ? 
 
 Mr. Prescott. During the past five years our company has paid 
 $70,747.77, being an average of $14,149.55 per annum. 
 
 Mr. Dickey. I have brought several suits myself against the West¬ 
 ern Union Telegraph Company. 
 
 The Chairman. (To Mr. Prescott.) Do you think that the Western 
 Union Telegraph Company would be willing to take Mr. Hubbard’s 
 postal plan and execute it themselves? 
 
 Mr. Prescott. I do not thinly the Western Union Telegraph Company 
 would be willing to pay Mr. Hubbard the million dollars provided in 
 the bill for organizing his company merely for the purpose of engaging in 
 a business which they are already successfully performing; but with a 
 few immaterial alterations in the bill I think our company would be 
 
45 
 
 •willing to undertake the transmission of messages at the rates proposed 
 by him. 
 
 Mr. Lines stated that the chancellor of the exchequer was very 
 well satisfied with the price paid for the English telegraph lines. 
 Now I have here Mr. Scudamore’s report made to the chancellor of the 
 exchequer on the 12th of July, 1871, in which he states that they had 
 already paid for the British telegraph lines £7,518,955 for the plant. 
 That would amount to nearly $40,000,000 for about as many miles of 
 wire and only one-third as many miles of line as the Western Union 
 Telegraph Company alone possesses, and yet Mr. Lines says he thinks 
 $ 12 , 000,000 would buy all the telegraph lines in America. 
 
 Mr. Lines. That is admitting that the United States Government 
 stand in the same relation to the telegraph companies. But I propose 
 to show that they do not. What I read from Hansard was what the 
 chancellor of the exchequer stated before it was ascertained how much 
 money would have to be paid. It was when he supposed that twenty 
 years’ purchase would amount to £ 2 , 200 , 000 . 
 
 Mr. Prescott. Has there been any official complaint since then that 
 the British government paid too much ? 
 
 Mr. Lines. I have read a pretty strong opinion of that sort from a 
 member of Parliament. 
 
 Mr. Prescott. You stated also that this was the only country where 
 the telegraph lines were not under government control. Do you think 
 that is a true statement'? Are not the telegraph lines in the Dominion 
 of Canada, Newfoundland, and in some parts of Europe still under pri¬ 
 vate control? Are not all the principal submarine telegraph lines in all 
 parts of the world owned and operated by private companies ? If you 
 were to send a message to-day from any part of America to China, 
 Japan, or Australia, it w r ould pass over the lines of private telegraph 
 companies throughout the entire route, with a single exception of the 
 line from Bombay to Madras. There is more private capital invested 
 in telegraphs to-day throughout the world than there is governmental. 
 
 Mr. Lines. I do not know how to answer that unless Mr. Prescott 
 produces some statistics. 
 
 Mr. Prescott. I have the statistics here, and they are all open to 
 your inspection. 
 
 Mr. Dickey. I do not know that we have got the actual capital of 
 the Western Union Telegraph Company. Will Mr. Prescott please 
 state it ? 
 
 Mr. Prescott. The capital is about $41,000,000. 
 
 Mr. Dickey. We had Mr. Orton’s statement that the net profits of 
 the company were about 30 per cent, of the gross receipts. How much 
 are the gross receipts of the company? 
 
 Mr. Prescott. The gross receipts of the company for the fiscal year 
 ending June 30, 1867, were $6,568,925 ; for 1868, $7,004,560; for 1869, 
 $7,316,918 j for 1870, after we had made a great reduction in the day- 
 rates and introduced the night system of half-rates, $7,138,737; and 
 for 1871, $7,637,448. The net revenue for 1867, after paying the work¬ 
 ing expenses- 
 
 Mr. Dickey. It does not include anything for construction? 
 
 Mr. Prescott. It includes nothing for construction, nor for any other 
 purpose than the operation and maintenance of our lines. The net re¬ 
 ceipts for 1867 were $2,624,919 5 1868, $2,641,710; 1869, $2,748,801 $ 
 and for 1870, after the great reduction in the rates and the 
 introduction of the night half-rate system, $2,227,965. Here was a loss 
 in the net revenue of over half a million dollars in a single year, while, 
 
46 
 
 if the rates had not been reduced, the natural increase of the business 
 would have increased the net revenue by at least $200,000. The net re¬ 
 ceipts for 1871 were $2,532,601, being a decrease from 1869, before the 
 great reductions in the tariff, of $216,110, and a decrease from 1866-’67 
 of $92,258. 
 
 Now, during this time we nearly doubled the number of messages sent 
 over our lines, and, in order to satisfactorily handle this great increase 
 in the traffic, we were obliged to add very largely to our plant, as will 
 be seen by a statement of the number of miles of wire annually owned 
 by the company. In 1866 we had 75,686 miles; in 1867, 85,291; in 1868, 
 97,591; in 1869, 101,581; in 1870, 112,191; in 1871, 121,151. Thus, from 
 1866 to 1871, there was an increase of 15,165 miles of wire, or about 60 
 per cent. We have also during this period expended about $2,000,000 
 in the reconstruction of our lines, so as to greatly increase their working 
 capacity. 
 
 Mr. Dickey. Is there anything that will show how much of that was 
 an extension of your business, and how much of it was absorption of 
 rival lines over the same routes? 
 
 Mr. Prescott. The only absorptions by our company during this 
 period were the Caton lines, in Illinois, and a line between Washington 
 and New York, which was sold at auction to pay the debts incurred in 
 working it, and which came under our control last year. 
 
 Mr. Clark. What line was that? 
 
 Mr. Prescott. The Bankers and Brokers’. Those are the only lines 
 of importance which came into our possession by lease or purchase 
 during that time. 
 
 Mr. Hubbard. And the California lines ? 
 
 Mr. Prescott. The California lines came in previously. 
 
 Mr. Clark. And the lines of the American and United States com¬ 
 panies ? 
 
 Mr. Prescott. They were consolidated with the Western Union Tel¬ 
 egraph Company in 1868, and are included in the statement already 
 given for that year. During the past six years we have put up over 
 60,000 miles of new wire, which is a quarter more than the increase in 
 our wires shown by my recent statement, notwithstanding the absorp¬ 
 tion of the Bankers and Brokers’ and Caton lines. Every year we are 
 compelled to replace a considerable amount of ^wire which has become 
 worn out. 
 
 Mr. Dickey. That is repair ? 
 
 Mr. Prescott. Yes, that is repair, although it is generally termed 
 reconstruction. That reminds me that Mr. Scudamore places this kind 
 of repair to construction account. In his report, dated July 12, 1871, 
 he says: 
 
 Tlie analysis of our accounts for the fourteen months ending the 31st March last is 
 not sufficiently advanced to enable us to state positively the exact proportions in which 
 the total sum expended shopld be distributed between capital and revenue. Through¬ 
 out the fourteen months we have constantly had large gangs of men engaged, at one 
 and the same time, in putting in order the property which we have bought and in con¬ 
 structing fresh lines, (the cost of which two operations is properly chargeable to capi¬ 
 tal,) and in ordinary maintenance work, such as the repairs of casual damage, the 
 taking off of faults, and other work of the kind, the cost of which is properly chargeable 
 to working expenses. We could not avoid this in the first year of our work; but our 
 reconstructions are now nearly complete, and when our present scheme of construc¬ 
 tions, which are also approaching completion, is finished, further constructions will 
 no doubt be provided for by annual vote. 
 
 Mr. Scudamore lias apparently yet to learn that reconstruction, like 
 construction is something which is never finished. A telegraph line is 
 
47 
 
 scarcely built before decay begins ; and its reconstruction is as necessary 
 an item to be considered and provided for as the ordinary working ex¬ 
 penses of the wire. 
 
 If the Western Union Company should charge its repairs to construc¬ 
 tion account, it would apparently increase the net revenue over three- 
 quarters of a million of dollars annually. 
 
 The Chairman. Do you doubt the correctness of the report of the 
 chancellor of the exchequer, that the net profits for the last year were 
 £50,000 ? 
 
 Mr. Prescott. I have not seen the report you allude to. 
 
 The Chairman. I refer to the statement made in a cable dispatch, 
 given some weeks ago. 
 
 Mr. Prescott. I do not question the accuracy of the report of the 
 chancellor ofi.the exchequer, or of any other British official; but I think, 
 in making up their telegraph accounts, many important items which 
 we should charge to ordinary working expenses the British post-office 
 telegraph carries to construction account, and thus their net revenue is 
 made to appear greater than the facts warrant. I have here Mr. Scud¬ 
 amore’s report to the chancellor of the exchequer, dated June 3, 1871, 
 which includes a statement made by George Chetwynd, receiver and 
 accountant general, showing the amount of telegraph revenue collected 
 from the commencement up to March 31, 1871, and the expenditures 
 for the same period. The total receipts are stated at £798,580, and tbe 
 total expenditures as £1,397,389. The expenditures are divided into 
 two classes, namely, capital expenditure £926,891, working expenditure 
 £470,495. 
 
 Under the head of capital expenditure are £346,794 for poles, arms, 
 wire, insulators, instruments, batteries, and tools, none of which items 
 are to b^ found under the head of working expenses. And yet, how could 
 a telegraph of the magnitude of the British system be worked fourteen 
 mouths without requiring a heavy necessary outlay for these articles ir¬ 
 respective of construction ? 
 
 Under the head of capital account £377,449 are also placed for en¬ 
 gineering salaries and traveling expenses, alteration of buildings, pre¬ 
 liminary instruction, bonuses to learners, office-fittings, examining ac¬ 
 counts of telegraph companies, law expenses, &c., none of which items 
 appear under the head of working expenses, although just such ex¬ 
 penses must continue to be made every year as long as the telegraph is 
 maintained. 
 
 Now, I do not doubt the correctness of these figures at all, but I think 
 a considerable portion of them would be much more properly placed 
 under the head of working expenses than capital account. This matter 
 of the proper division of the expenditures, however, I regard as of small 
 importance. There is no reason why, at the rates charged, the English 
 telegraph should not be self-sustaining ultimately, if it is not now; 
 and there is no room for doubting the fact that it has greatly improved 
 since it passed under the control of the government. The opening of 
 1,350 new offices and the erection of 30,000 or 40,000 miles of wire could 
 not fail to vastly improve the capacity and value of the system. The 
 plans adopted by Mr. Scudamore for carrying out the work were admir¬ 
 able, and evince great judgment and ability on his part. The work of 
 reorganization and extension was intrusted to the officers of the com¬ 
 panies which were bought out, and the position of engineer-in-chief of 
 the post-office telegraphs was given to Mr. Culley, the former electrician 
 of the Electric and International Telegraph Company. While I see no 
 reason, therefore, why the British post-office telegraph system should 
 
48 
 
 not equal any other in the world, I do not consider its success as in any 
 manner due to its subordination to the post-office authorities, but regard 
 it as mainly due to the unification of the system by uniting all the lines 
 under one control, and by the extension of its lines so as to afford prompt 
 telegraphic communication between all parts of the United Kingdom. 
 The reduction of the tolls in Great Britain since the lines were placed 
 under the control of the government has been no greater than in this 
 country since October, 1869. 
 
 The tariff between London and many important places where the 
 bulk of the business was done was a shilling before, while the rates 
 throughout the metropolis have been raised by the government from six 
 pence to a shilling per message. The advantage of having a uniform 
 rate is indisputable, and in small compact countries can be maintained 
 without difficulty, but in a country so extensive as the United States it 
 would be impracticable, except at rates which would be unsatisfactory 
 to those who wished to send over sflort distances. 
 
 Mr. Hale. You have given your gross receipts and your net receipts; 
 what were your dividends during those years ? 
 
 Mr. Prescott. The Western Union Company has not made any divi¬ 
 dend since January, 1870. The dividends, when they were made, were 
 two per cent, semi annually. Occasionally the dividend was passed. 
 The company has never paid over four per cent, since 1866. 
 
 Mr. Dickey. I recollect when I got four per cent, a quarter. 
 
 Mr. Prescott. Not from the Western Union Telegraph Company, 1 
 think. I have been a stockholder in the company for eight or nine 
 years, and 1 never got any such dividend as that. 
 
 Mr. Dickey. 1 don’t speak of that being the dividend on the capital 
 stock, but on the cash put in. 
 
 Mr. Hale. What is the stock selling at? 
 
 Mr. Prescott. It was selling at 76 yesterday. 
 
 Mr. Hale. What was it selling at two years ago? 
 
 Mr. Prescott. I think it sold from 35 to 40. 
 
 The Chalrman. How is it that the prices have doubled within two 
 years when there has been no dividend ? 
 
 Mr. Prescott. It is evident enough that if we make a profit of 
 $2,500,000 per annum and, instead of paying dividends, put the earnings 
 into new lines, the stock ought to become more valuable. 
 
 The Chairman. Not for the stockholders. 
 
 Mr. Prescott. That depends upon how long the stockholder keeps 
 his stock. 
 
 The Chairman. It may be that there will be a pretty big dividend to 
 come. Do you know whether anything of that sort is intended? 
 
 Mr. Prescott. It would not surprise me it there should be, although 
 I do not pretend to know anything about it. As for the reasons for the 
 fluctuations in the price of the stock, you might as well ask me why 
 Erie sold at 18 two years ago and 65 now. 
 
 The Chairman. 1 think that the Erie ring and the late explosion ex¬ 
 plain that. 
 
 Mr. Prescott. I bought Western Union Telegraph stock at par 
 seven years ago and hold the same certificates now. There have been 
 no stock dividends since, and yet the actual property value has been 
 very greatly enhanced by the construction of new lines and the recon¬ 
 struction of the old. The temporary depression of the stock two or 
 three years ago was no criterion of its value, as the action of the present 
 
 Mr. Lines. I would like to ask Mr. Prescott whether he is perfectly 
 
49 
 
 satisfied that there will be no redress under the management of the 
 Post-Office for malfeasance in any of the telegraph employes ? 
 
 Mr. Prescott. I do not know what sort of justice might be dealt out 
 to the employes of the Post-Office, but I am very sure that the public 
 would have no remedy. 
 
 Mr. Lines. Cannot there be action in court for the malfeasance of a 
 postmaster, clerk, or operator ? 
 
 Mr. Prescott. Suppose you send a valuable letter through the post- 
 office and it is stolen by one of the employes ? If the fact could be 
 proven the employe would doubtless be punished, but that would not 
 reimburse you for your loss, and you could not get any redress from 
 the Department. 
 
 Mr. Dickey. Mr. Prescott is correct about that. 
 
 I do not consider it necessary at this time to criticise Mr. Hubbard’s 
 argument in favor of his bill, but I deem it proper to say that the greater 
 portion of his remarks relating to our company are incorrect, and that 
 there is no foundation, in fact, for any of the following statements, viz: 
 
 1 . That the rates at the West are twice as high as those at the East. 
 
 2. That the rates are higher between the principal cities now than 
 they were six years ago. 
 
 3. Tliat the amalgamation of the United States and the Western 
 Union Companies raised the rates in many parts of thecountry, and they 
 have nevgr been reduced between the large cities. 
 
 4. That the Western Union Company has raised the rates so as to 
 crush out more than one newspaper. 
 
 5. That the Western Union Company has issued notice to exclude 
 any paper from receiving news which undertook to criticise it. 
 
 6 . That within a year this company has cut off a paper for criticising 
 reports. 
 
 7. That commercial news is sent over our lines to the exclusion of all 
 other business, by priority. 
 
 I have already stated that the rates have been constantly reduced 
 every year since the consolidation of the United States and American 
 lines with the Western Union, in 1866. In no instance was that consoli¬ 
 dation followed by an increase in the tolls. As our gross revenue for 
 1871 shows an increase over that of 1869 of less than 5 per cent., while 
 our net revenue decreased in the same time over 8 per cent., how can 
 Mr. Hubbard’s statement, that we have doubled the number of messages 
 transmitted, be reconciled with his assertion that we have only reduced 
 our rates from 15 to 20 per cent.? Of course, if we have doubled our 
 business and only decreased the rates 20 per cent., our gross revenue 
 should show an increase of 60 per cent, instead of 5. 
 
 A great deal of importance has been attached to the proposition to 
 unite the postal and telegraph systems of the country, and European ex¬ 
 perience is referred to as evidence of the benefits to accrue from such a 
 union ; but while it is true that the aerial telegraphs in continental Eu¬ 
 rope are, for the most part, owned and controlled by the governments of 
 the respective States through which they run, the assertion that they 
 form a part of the public postal system is erroneous. England is the 
 only country in Europe where the telegraph and postal systems are 
 united. In North Germany, which comprises twenty-two states, the 
 administration of the telegraphs constitutes a distinct department under 
 the government of the confederation, Major General De Chauvin being 
 director general of telegraphs, assisted by ten directors, having their 
 headquarters at Berlin, Breslau, Cologne, Dresden, Frankfort, Halle, 
 Hamburg, Hanover, Kcenigsberg, and Stettin. The telegraphs in Aus- 
 4 T 
 
50 
 
 tria, Hungary, Bavaria, Wiirtemberg, Baden, and Holland form one 
 system under the head of the South German Telegraph Union, and in 
 the several States are managed as distinct departments by their re¬ 
 spective directors general. In Bussia, France, and Spain, the telegraphs 
 constitute a distinct department under the minister of the interior; in 
 Belgium, Italy, and Portugal, under the minister of public works; in 
 Denmark, Norway, and Sweden, under the Minister of Finance; and 
 in Switzerland the administration of the telegraph constitutes a distinct 
 department under the federal council. In fact, in all the continental 
 countries of Europe the telegraph constitutes a distinct department, 
 and, although the post-office, railways, and customs, as well as private 
 establishments, supply the elements of an auxiliary staff, all the persons 
 employed in the transmission and delivery of the telegrams depend upon 
 the administration of telegraphs for their compensation, and in the 
 annual budgets appropriations are made for that service distinct from 
 the post. 
 
 As, therefore, none of the telegraph systems in continental Europe are 
 under the control of or are united with the post-office departments, all 
 considerations of value or exj^erience based upon the theory of such a 
 connection should be eliminated from any estimate which may be made 
 in reference to the proposed union, in whole or in part, of the telegraph 
 and postal systems in the United States. 
 
 The question, however, as to what department of the government the 
 telegraph is attached is of no great importance. It is a service in every 
 branch of which skilled labor is required, and whether it be under 
 the control of the minister of the interior, finance, public works, or the 
 postmaster general, it can only be successfully managed and operated 
 by telegraphists especially educated for this peculiar service. Whether 
 the telegraphs are as well managed in Europe under the various govern¬ 
 ments as they might be, or as they j>robably would be in those countries 
 by private companies, 1 do not feel called upon to discuss. Neither do 
 I regard the extent of the telegraphic facilities furnished in Europe, or 
 the price at which messages are transmitted, as of any particular conse¬ 
 quence in considering the comparative merits of governmental apd pri¬ 
 vate control of the telegraph, since the government may send messages 
 at any tariff it chooses to establish, and furnish such facilities as it deems 
 best, totally irrespective of the important question as regards private 
 companies as to whether the revenue shall equal the cost of the service. 
 
 I think, however, I may very properly compare the telegraphic facili¬ 
 ties furnished in Europe under governmental control with those in this 
 country, where the construction and operation of the telegraphs have 
 hitherto been left to private enterprise. 
 
 In Europe the telegraph system embraces 175,490 miles of line, 475,007 
 miles of wire, 21,146 sets of instruments, and 15,503 offices. 
 
 In America the telegraph system embraces 85,583 miles of line, 165,875 
 miles of wire, 8,655 sets of instruments, and 6,755 offices. 
 
 The ratio of telegraphic facilities to population in Europe is as fol¬ 
 
 lows : » 
 
 Number of inhabitants to each mile of line. 1,744 
 
 Number or inhabitants to each mile of wire. 642 
 
 Number of inhabitants to each office.19,687 
 
 Number of inhabitants to each message sent. 91 
 
 The ratio of telegraphic facilities to population in America is as 
 follows : 
 
 Number of inhabitants to each mile of line. 486 
 
51 
 
 * 
 
 Number of inhabitants to each mile of wire.. .. 250 
 
 Number of inhabitants to each office. 6, 161 
 
 Number of inhabitants to each message sent. 2 T % 5 ¥ 
 
 It will thus be seen that, as regards the facilities furnished in propor¬ 
 tion to population, America is far in advance of Europe. 
 
 The tolls for the transmission of messages are not the same for any 
 two countries in Europe, nor are they uniform for all classes of mes¬ 
 sages in any one country. Telegraphic correspondence in Europe is 
 divided into two general classes, called internal and international mes¬ 
 sages. The internal messages are those which are received, trans¬ 
 mitted, and delivered in the same country$ the international messages 
 are those which are received in one country and transmitted into 
 another. As a general rule, a low rate of charges is adopted for the 
 transmission of internal messages, while a higher tariff is imposed upon 
 international messages. 
 
 The telegraphic tolls in continental Europe in 1869 averaged 36J 
 cents for internal messages, and $1.01 for international messages, which 
 is a higher average charge than is imposed in this country, although it 
 is well known that skilled labor is much more expensive here than in 
 Europe. 
 
 The Western Union Telegraph Company has for the past six years 
 been successfully striving, by the improvement of its lines and machinery 
 and by the employment of the most skillful operators, to secure the 
 most prompt and satisfactory telegraph service in the world, and I be¬ 
 lieve the results will show upon investigation that it has fully succeeded. 
 
 The claim that the Western Union Telegraph Company is now, or 
 may hereafter become, a dangerous monopoly is entitled to no consider¬ 
 ation whatever, since, in the first place, the telegraph business is every¬ 
 where in this country open to free competition, no one company having 
 any advantage over another, except what it legitimately acquires by 
 the greater skill with which it performs the service; and, in the second 
 place, the act of 1866, which constitutes a compact between the Govern¬ 
 ment and the Western Union Telegraph Company, provides that the 
 United States may at any time, after the expiration of five years from 
 the date of the passsage of the act, purchase all the telegraph lines, 
 property, and effects of the company at an appraised value, to be ascer¬ 
 tained by five competent* disinterested persons, two of whom shall be 
 appointed by the Postmaster General of the United States, two by the 
 company, and one by the four so previously selected. 
 
 In conclusion, permit me to say that as the success of Mr. Hubbard’s 
 scheme would inevitably depreciate the value of the property of this 
 company, which the Government can at any time take at an appraisal, 
 not of its cost, but of its value, I submit that Congress cannot consist¬ 
 ently and in good faith confer such a franchise upon Mr. Hubbard with¬ 
 out first releasing this company from the obligations of the above act, 
 and providing a just measure of compensation for the depreciation of 
 its property which would result from the granting of such extraordinary 
 privileges to a competitor. - 
 
52 
 
 3 0112 062005407 
 
 Electrician’s Office, 
 
 Western Union Telegraph Company, 
 
 New York , April 26, 1872. 
 
 Dear Sir: I have just received your favor of the 25th, together with! 
 the balance of proof of the first three days’ proceedings, which I shall 
 revise at once and promptly return to you. I will very cheerfully make 
 any suggestions, if any occur to me, which can improve the making up 
 of the paper. 
 
 I shall esteem it an especial favor if you will forward to me, as early 
 as possible., a proof of the proceedings of last Tuesday. 
 
 Since my return to New York, one question asked by the chairman 
 has recurred to me which 1 may have misconceived. The purport of 
 the question, as I recollect it, was whether our company would accept 
 the provisions of the Hubbard bill; that is to say, whether our company 
 would dispose of its property to Mr. Hubbard, in case he should be in¬ 
 corporated under his proposed postal-telegraiih act; to which I an¬ 
 swered “No.” 
 
 Upon reflection I have thought it possible that I misunderstood the 
 question and that the chairman might have asked whether our com¬ 
 pany would accept of an act of incorporation such as Mr. Hubbard 
 desires. This, of course, would be quite another thing, and I would 
 esteem it a favor if you would ask Mr. Garfield which of the two ideas 
 was presented in his question. 
 
 Yours, very truly, 
 
 GEO. B. PRESCOTT, 
 
 Electrician. 
 
 Robert J. Stevens, Esq., 
 
 Cleric Committee on Appropriations , 
 
 Washington , D. C. 
 
 Committee on Appropriations, House of Representatives, 
 
 Washington , D. O., April 28, 1872. 
 
 Dear Sir : Your favor of 26th duly received. To your question as 
 to the possibility of your having misunderstood his interrogatories, the 
 chairman replies, after perusal of your letter, that according to his 
 recollection he had asked if the company would accept of either of the 
 propositions named in your letter, and if either, which; the proposi¬ 
 tions being, “Whether our company would dispose of its property to 
 Mr. Hubbard in case he should be incorporated under his proposed 
 postal-telegraph actor, “ Whether our company would accept of an 
 act of incorporation such as Mr. Hubbard desires.” 
 
 I will forward to you, at the earliest moment, the proof you desire. 
 It is not yet ordered to be printed, nor is the manuscript in, except that of 
 Mr. Lines, which, by the way, is the greater part of the proof already sent. 
 I commend to your especial attention the appendix, but it will have left 
 your hands before this reaches you, as, upon reflection, I remember 
 that I am informed by Mr. Orton’s telegram of yesterday. 
 
 Truly yours, 
 
 ROBT. J. STEVENS, 
 
 Cleric Committee on Appropriations. 
 
 Geo. B. Prescott, Esq. 
 
 Note. —By the Hubbard bill the writers mean the postal-telegraph 
 bill introduced into the House by Mr. Palmer, of Iowa.