Murphy Siding henry6: Actually my question is more offbeat: when did the system become overbuilt? When built and propsering or when traffic dissapeared and rust appeared? The system became overbuilt when the market changed, and government regualtions would not allow the system to scale back operations to profitably deal with those market changes.
henry6: Actually my question is more offbeat: when did the system become overbuilt? When built and propsering or when traffic dissapeared and rust appeared?
Actually my question is more offbeat: when did the system become overbuilt? When built and propsering or when traffic dissapeared and rust appeared?
That, I hope, is the first of many good observations and ideas.
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henry6 Murphy Siding: henry6: First, Degesty, since the government elected to establish the post office and post roads, it accepted the responsiblity as per the Consititution, therefore, it will take an amendment of some kind to eliminate what has been practiced since 1776. I disagree with your line of thinking. "Congress shall have the power ...To establish Post Offices and post Roads ..." If the government is given the power to do something, it also has the power not to do the same thing. It doesn't seem to say, that the government WILL establish a Post Office and Post Roads, and maintain them in their most recognizable form forever. Yes, but once the Government acts and continues a practice for 235 years it is not easy to change. I could actually take a Constitutional amendment (read: many years) to make the change.
Murphy Siding: henry6: First, Degesty, since the government elected to establish the post office and post roads, it accepted the responsiblity as per the Consititution, therefore, it will take an amendment of some kind to eliminate what has been practiced since 1776. I disagree with your line of thinking. "Congress shall have the power ...To establish Post Offices and post Roads ..." If the government is given the power to do something, it also has the power not to do the same thing. It doesn't seem to say, that the government WILL establish a Post Office and Post Roads, and maintain them in their most recognizable form forever.
henry6: First, Degesty, since the government elected to establish the post office and post roads, it accepted the responsiblity as per the Consititution, therefore, it will take an amendment of some kind to eliminate what has been practiced since 1776.
First, Degesty, since the government elected to establish the post office and post roads, it accepted the responsiblity as per the Consititution, therefore, it will take an amendment of some kind to eliminate what has been practiced since 1776.
"Congress shall have the power ...To establish Post Offices and post Roads ..."
If the government is given the power to do something, it also has the power not to do the same thing. It doesn't seem to say, that the government WILL establish a Post Office and Post Roads, and maintain them in their most recognizable form forever.
Yes, but once the Government acts and continues a practice for 235 years it is not easy to change. I could actually take a Constitutional amendment (read: many years) to make the change.
Pragmatisim is out the window! Emotional attachment takes hold! If it were so easy, then we wouldn't have Saturday USPS deliveries today, hundreds of Post Offices would already be closed, and your Congressman or his agent would be knocking on your door daily at worst,, weekly at best without his franking privliges. The USPS, as successor to the United States Post Office, is an entrenched in our lives as Mom, apple pie, and baseball. Kick it around, call it names, threaten anything you want against it, and you will be kicked around, called names, and threatened as being unAmerican. As with anything in America, be careful what you wish for, because it just might happen and you may not really like what it is like..
henry6 Murphy Siding: henry6: Actually my question is more offbeat: when did the system become overbuilt? When built and propsering or when traffic dissapeared and rust appeared? The system became overbuilt when the market changed, and government regualtions would not allow the system to scale back operations to profitably deal with those market changes. That, I hope, is the first of many good observations and ideas.
Murphy Siding: henry6: Actually my question is more offbeat: when did the system become overbuilt? When built and propsering or when traffic dissapeared and rust appeared? The system became overbuilt when the market changed, and government regualtions would not allow the system to scale back operations to profitably deal with those market changes.
The first cause was that rail construction in the 19th century, particuarly after the Civil War, became a huge speculative "bubble", like the interurban railroad "bubble" of the early 20th century, the "dot.com" bubble of the late 20th century, and the real estate "bubble" of the early 21st century. Many railroads were built in the late 19th century which probably shouldn't have been built even then (much of the narrow gauge network, which once ranged far beyond the mountains of Colorado, is a good example). This was exacerbated by the popularily of railroad "pools" like the Iowa Pool. These differed in their details, but conceptually, they worked by dumping the earnings of all of the competing rairloads in a territory into a big pot and then distributing the money to the pool participants based on some agreed formula. The immediate effect of a successful pool was to increase the earnings of the participants by surpressing competition. But, in those days, there were no legal or other significant barriers to entry. The super-competitive profits being generated by the incumbents (because of the pools) induced other firms to enter the market by constructing new rai lines. New entry weakened and eventually destroyed the effectiveness of the pools, but the excess rail network they encouraged was in place. I'm most familiar with the Iowa Pool, and there's no question that it had a lot to do with the number of railroads that were built in the Chicago - Council Bluffs/ Sioux City corridors, which cursed the railroads in these corridors for the next century.
The "overbuilding" of railroads in the late 19th centry did not pass unnoticed. It was seen as a great evil and eventually resulted in federal legislation (the Transportation Act of 1920) which required ICC approval for new line construction or extension. But, by the time this was enacted, the heady days of rail construction were already over. Another case of the government barring the barn doors after the horses have all bolted..
.The second cause is very definitely the one mentioned in the prior posts. Markets changed. Rail lines which were once reasonably profitable, or even very profitable, turned into dogs. Changes in traffic (particularly the rise of truck transport and the decline of passenger transport) made many once important lines unimportant and redundant. For example, large parts of the rail network in the midwest were supported (and did very well) on passenger and freight traffic which moved 200-400 miles. In the early part of the 20th century,some of the midwest roads were much more prosperous than roads like UP (which ran through vast areas devoid of on-line traffic). This type of traffic was virtually wiped out by trucks and automobiles, so large parts of the rail network that once lived by it began to die by it. The situation became even worse following WWII as industries in once vibrant industrial areas (like the areas served by PRR) simply disappeared. The rail networks in these areas may well have been necessary - even vital - when built but, by the time PC and other northeastern railroads collapsed, that was clearly no longer the case. As mentioned in another posts, the rail network would probably have shrunk much earlier than it did had "exit" been unregulated, and it should have.
henry6 Pragmatisim is out the window! Emotional attachment takes hold! If it were so easy, then we wouldn't have Saturday USPS deliveries today, hundreds of Post Offices would already be closed, and your Congressman or his agent would be knocking on your door daily at worst,, weekly at best without his franking privliges. The USPS, as successor to the United States Post Office, is an entrenched in our lives as Mom, apple pie, and baseball. Kick it around, call it names, threaten anything you want against it, and you will be kicked around, called names, and threatened as being unAmerican. As with anything in America, be careful what you wish for, because it just might happen and you may not really like what it is like..
The question of whether it's "easy" is different. It's a political question. Even though Congress may have the power to sweep USPS away, how likely is that they will do so?. There is no question that it is very difficult for a political body to get rid of an institution that has become so ingrained in peoples' lives. Consider how difficult it's been for Amtrak's detractors to get rid of Amtrak , even though the majority of today's population has probably never used it. Postal delivery, on the other hand, until very recently, was a vital part of almost everyone's life. I don't think the political branches of the government are going to be able to get rid of USPS anytime soon - at most they wil be able to starve it a little, and get it to cut back some of its services.. It's demise won't occur until the generation fo people who grew up with it (like me) dies off.
Falcon...look up the word "pragmatic". Then comment.
henry6 Falcon...look up the word "pragmatic". Then comment.
Thanks to Chris / CopCarSS for my avatar.
The system became overbuilt when there were too many railroads chasing too little business to begin with, regardless of any regulations.
Iowa for example. At one time you were no more than 12 miles from a railroad. Every town wanted, and many had two railroads. Many of those towns, even back then, could barely support one railroad.
Jeff
I'm sorry. "Pragmatic" is a common, everyday word and its meaning should be known by everyone who is smart enough to be on here. I am not teaching 5th grade English but discussing topics. If one does not know what "pragmatic" means, then they should look up the meaning, then ask questions. I think my statement was clear and concise and I cannot explain it any better than I stated. What else can I say?
henry6 I'm sorry. "Pragmatic" is a common, everyday word and its meaning should be known by everyone who is smart enough to be on here. I am not teaching 5th grade English but discussing topics. If one does not know what "pragmatic" means, then they should look up the meaning, then ask questions. I think my statement was clear and concise and I cannot explain it any better than I stated. What else can I say?
THIS WAS MY STATEMENT....
I am led to believe several did not understand the statment because they don't know the word "pragmatic". The statement stands with no apologies or explanations needed to anyone. If it is not understood, then a dictionary should be consulte befor assailing me for what I said.
henry6 I may be wrong.......
I may be wrong.......
Murphy, I use a common word which has not been comprehended by one or two to the posters. You don't seem to understand what I said in the first place, the word pragmatic, nor what the objection raised was about. I am not trying to be high and mighty or lofty. I have used a common word to make a statement. The application of the word to the discussion has been misued by several because they don't know the word. They object to the argument or statement not on the merit of the statement but on the fact they don't know what the word means. I am not going to explain it because I believe a majority of those on this forum are intllegent enough to know what I said and meant. Those who don't have made acccusations and assertions and statements against me, not my statement because they don't know or understand what I said. Others, are just running away. That's ok, too, I guess. I hope they are reading thier Funk and Wagnals.
Murphy, I use a common word which has not been comprehended by one or two to the posters. You don't seem to understand what I said in the first place, the word pragmatic, nor what the objection raised was about. I am not trying to be high and mighty or lofty. I have used a common word to make a statement. The application of the word to the discussion has been misued by several because they don't know the word. They object to the argument or statement not on the merit of the statement but on the fact they don't know what the word means. I am not going to explain it because I believe a majority of those on this forum are intllegent enough to know what I said and meant. Those who don't have made acccusations and assertions and statements against me, not my statement because they don't know or understand what I said. Others, are just running away. That's ok, too, I guess. I hope they are reading their Funk and Wagnals and reviiewing 5th grade English..
henry6 Murphy, I use a common word which has not been comprehended by one or two to the posters. You don't seem to understand what I said in the first place, the word pragmatic, nor what the objection raised was about. I am not trying to be high and mighty or lofty. I have used a common word to make a statement. The application of the word to the discussion has been misued by several because they don't know the word. They object to the argument or statement not on the merit of the statement but on the fact they don't know what the word means. I am not going to explain it because I believe a majority of those on this forum are intllegent enough to know what I said and meant. Those who don't have made acccusations and assertions and statements against me, not my statement because they don't know or understand what I said. Others, are just running away. That's ok, too, I guess. I hope they are reading their Funk and Wagnals and reviiewing 5th grade English..
Since I'm the one to whom Henry6's question about the word "pragmatic" was originally directed, let me say that I am not illiterate and that I fully understand what the word "pragmatic" means. I suspect everyone who has been following this thread does as well.
When I said in response to Henry6's note of 1/10 that I wasn't sure what "this" means, I was referring to his note, not to the word "pragmatic" (which should have been perfectly clear from my note). In rereading Henry6's 1/10 note, I still don't understand what it was trying to say and his later notes, while increasingly strident (another word to look up), don't provide any clarification. Nevertheless, my reply to his 1/10 note addressed both the "legal" issue of whether Congress "could" get rid of USPS without a Consitutional amendment (they can) and the "pragmatic" issue of whether they are likely to do so anytime soon (unlikely). What more was there to say?
I didn't respond to Henry6's next note asking me for my definition of "pragmatic" because I didn't understand why he was asking such a seemingly pointless and silly question. After reading the exchange that it generated, I still don't understand why he was asking this question. Does anyone? And can anyone explain the latest Henry6 note shown above and what it has to do with USPS, railroads or the price of tea in China? I can't. I'll bet no one else can either.
Others may disagree with the views I express in these forums. I expect that, and that's fine. That's how we all learn. But let's cut out the meaningless word games.
wanswheel
Uhhh, yyyyyyeeeaaaahhhhh....thatsssss.... kinda.... sorta....., maybeeeee.... about.... excaclty what I meant.. Thanks for clearing that up for me(?!!!)).
Interesting about the man and that squirrel. Obviously, the man did go around the squirrel in both pragmatic and metaphysical terms.
Post Office Department, Washington, D. C, November 25, 1913
Hon. A. S. Burleson, Postmaster General.
Sir: In pursuance of your order No. 7187, dated June 7, 1913, the undersigned committee has the honor to submit herewith its report and recommendations on the desirability and practicability of extending the Government ownership and control of means of communication.
RELATION OF TELEGRAPH AND TELEPHONE SYSTEMS TO THE POSTAL SERVICE.
The founders of this nation were keenly alive to the importance of keeping exclusively under Government control all means of communication, and therefore provided in the Constitution that "the Congress shall have the power to establish post offices and post roads."
The framers of the Constitution probably never dreamed of postage stamps, railway postal cars, canceling machines, pneumatic tubes, telegraphs, telephones, aeroplanes, and radio equipment. They specified nothing concerning means of transportation or methods of distribution, but wisely left to future generations a broad provision under which they would have the right to avail themselves of such improved means of communication as might be discovered and developed. It was clearly their intention that the Government should control all means for the transmission of intelligence.
Under Government control the Postal Service of our country has prospered, expanded, and developed to its present high state of working and economical efficiency, adopting in the course of its growth practically every means of transmitting intelligence except electricity. The service has gone hand in hand with the advance guard of civilization. Its facilities have been extended to the smallest and remotest towns and villages in our land, not with regard to cost or with an eye to profit, but with the sole purpose of serving the needs of the people irrespective of wealth or position.
The United States alone of the leading nations has left to private enterprise the ownership and operation of the telegraph and telephone facilities.
In 1843 this Government aided in the construction and assumed as a part of its postal duties the operation of the first electric telegraph. But on March 4, 1847, because of the unwillingness of Congress to authorize any extension of the service then in operation and because of a deficit in the postal finances, the control of this facility was surrendered to private hands. However, in 1866, Congress, aware of the danger of permitting this service to remain under private control in view of its intimate relation to the postal service, asserted that the facility was within the purview of the constitutional provision for the postal establishment, and enacted legislation looking to the acquisition by the Government of all telegraph lines.
With an indecision that is to be regretted the fulfillment of this commendable purpose was deferred for a period of five years in order that the telegraph monopoly might during that time be indemnified by the continued enjoyment of its exorbitant rates for the loss of its grip upon the public means of transmitting intelligence.
The relation of the telegraph to the postal service can not be better described than by quoting the following clear and succinct statement of Postmaster General Howe in his report for the fiscal year 1882:
"The business of the telegraph is inherently the same as that of the mail. It is to transmit messages from one person to another. That is the very purpose for which post offices and post roads are established. The power to establish is not limited to any particular modes of transmission. The telegraph was not known when the Constitution was adopted. Neither was the railway. I can not doubt that the power to employ one is as clear as to employ the other."
Numerous other Postmasters General of the United States have advocated the acquisition of the telegraph and telephone systems of the country, and their comments and recommendations are epitomized in the historical resume which accompanies this report as Appendix A.
What has been said in favor of Government ownership and operation of the telegraph applies with equal force to the telephone service. As in the case of the telegraph, this Government might properly have taken up and operated in connection with the postal service the first telephone system of the country. This judgment is confirmed by the experience of the British Government.
Section 4 of the British telegraph act of 1869 provides that -
The postmaster general by himself or his deputies and his and their respective servants and agents shall have the exclusive privilege of transmitting telegrams within the United Kingdom of Great Britain and Ireland, except as hereinafter provided; and shall also within that Kingdom have the exclusive privilege of performing all the incidental services of receiving, collecting, or delivering telegrams, except as hereinafter provided.
In a lawsuit to determine the question the highest courts of Great Britain held, on December 20, 1880, that a telephone is a telegraph, and a conversation by telephone is a telegram within the meaning of the telegraph act, and that the authority enabling that country to operate the telegraph enabled it also to operate the telephone.
The telegraph and telephone systems have long been recognized as necessary adjuncts to a complete postal service. As with all other privately controlled public utilities, these facilities have been extended in our country only in proportion as the service to be performed has insured substantial dividends for the stockholders. Under private ownership, therefore, the telegraph and telephone are for the classes. Under Government ownership, through the postal machinery, which is conducted in the interest of the whole people and already reaches every man's door, the benefits of these facilities could be extended to the masses.
It is obvious that the longer the acquisition by the Government of these facilities is deferred the greater will be the cost. Moreover, it is economic waste to permit private enterprise to build up vast properties that must eventually be taken over by the Government in resuming its constitutional monopoly at a cost out of all proportion to the value of the parts of such properties that may be utilized to advantage in the postal system.
The study of this subject has disclosed that the telegraph and telephone systems of the country are so inextricably allied that any consideration of the one must necessarily include the other. Your committee has therefore been under the necessity of prosecuting its inquiry beyond the province contemplated by your order and accordingly its report covers both.
TELEGRAPH SERVICE.
According to the best available data, the telegraph plant of this country in 1912 included about 247,000 miles of pole line carrying about 1,800,000 miles of wire. The capitalization of the land wires, segregated, is estimated at $150,000,000; including the ocean wires and submarine cables, the capitalization probably would amount to $220,000,000. So far as the public generally is concerned, the entire telegraph service is owned and operated by two companies, their lines practically duplicating each other in most sections of the country.
Telegraph facilities have not been extended to the small towns and villages along with the Government postal facilities, nor has the cost of the service been reduced in the inverse proportion that would seem to be warranted by the increasing volume of business transacted. Neither has the volume of business in this country, in proportion to the population, been as great as in countries where this facility is owned and operated governmentally. This fact unquestionably is attributable to prohibitive rates and the failure of the companies to extend the service to territory which promises small profits.
An official report of the postmaster general of Great Britain in 1911 shows that between 1869 (the year the British Government took possession of the telegraphs) and 1900 the number of messages handled in that country increased thirteenfold, while the population increased but 30 per cent. During the same period the population of the United States increased 100 per cent, and yet the number of telegraph messages handled increased but eightfold.
In 1912 the number of messages handled in this country was barely in excess of one per capita; in New Zealand, where the telegraphs are owned and operated by the Government, the number was more than eight per capita.
Statistics show that although the United States outranks all other countries in postal transactions per capita, in respect to telegraphs it is outranked by eight other countries.
All of the important countries, the United States, Canada, and Mexico excepted, have bound themselves by an international agreement to observe uniform regulations in the administration of their telegraph service. These regulations, with a view to affording the people the most efficient service at the lowest cost, require the use of the latest and best improvements in the telegraphic art and prescribe the manner and method of receiving, transmitting, and delivering telegrams and the rates of tolls to be collected. The privately owned telegraph companies of the United States, Canada, and Mexico, to the detriment of the people, have remained outsiders to these international rules and regulations.
The United States recently became a party to an international agreement with respect to radiotelegraphy, and in this service bound itself to observe many of the rules and regulations governing the telegraph service in foreign countries. On account of the close relation which must exist between the land telegraph companies and the radio companies great confusion is now resulting from the fact that the United States is bound to observe modem rules and regulations in its radio service, but is compelled to use archaic forms and regulations in its land service because of the attitude of the commercial telegraph companies.
At the International Radio Conference at London in 1912 the delegates from the United States signed the treaty only with the humiliating condition in the protocol that, as the telegraph lines in the United States were owned by private companies, this country must abstain from all regulations concerning tariffs.
It will thus be seen that during the decade to which the foregoing figures relate, while the population of our country was increasing approximately 18 per cent (actually 17.8 per cent), the average daily telephone connections increased 287 per cent and the number of telegraph messages only 18 per cent. The use of the telephone in all walks of life is steadily increasing, while the use of the telegraph is relatively stationary, and therefore decreasing.
(Statistics showing the traffic of the independent telephone companies and the Postal Telegraph Co. are not available, but investigation indicates that the figures used above represent fairly the relative importance of the telephones and telegraphs.)
The telegraph companies have already lost for the most part the short-distance business owing to the development of the toll-telephone service, and they probably will lose much of the long-distance business when the toll rates become adjusted on a cost basis. Statistics of the telegraph and telephone traffic in foreign countries show that the number of long-distance telephone communications greatly exceeds the number of telegrams. In Germany, for example, the ratio is 6 to 1. Certainly the general trend in the use of wire communication favors the telephone at the expense of the telegraph.
This was undoubtedly foreseen by the telegraph companies some years ago, for it is understood that before the acquisition of the Western Union Co. by the American Telegraph & Telephone Co. the former contemplated improvements in its system whereby the telephone would be added to the telegraph service, and this attitude on the part of the Western Union Co. was an underlying reason why its property was acquired by the Bell interests.
Telephone circuits generally consist of two wires, known as metallic circuits. It is a simple and inexpensive operation to superimpose the telegraph feature on each wire. On the other hand, the telegraph circuit in this country is commonly a single wire with earth return. A large percentage of this is iron wire, which can not be used satisfactorily for long-distance telephone purposes. Therefore, to add the telephone feature to such a circuit would necessitate not only the duplication of the entire wire equipment in order to provide the required metallic circuits, but the substitution of copper wherever iron wire is used. It will thus be seen that although it is practicable and economical to superimpose the telegraph feature on existing telephone circuits, the cost would be prohibitive to do the reverse.
On many of the long-distance telephone lines owned by the American Telegraph & Telephone Co. the telegraph feature has been superimposed and the same wires are today carrying both telegraph and telephone communications simultaneously.
TELEGRAPH SYSTEMS INADEQUATE FOR POSTAL NEEDS.
The acquisition of the telegraph service of the country would necessitate taking over the duplicate plants of the two companies controlling this service with their duplicate expenses of maintenance. Unquestionably one could be made to serve the same territory. Furthermore, and of great importance, is the fact that even the entire plants of these two companies would be inadequate for the purpose of the Government, because their facilities have been extended only to profitable territory. Should the Government resume control and operate this service, it would be with the object of extending the facilities in the interest of the people, and hence regardless of profit.
Assuming that the poles of the present telegraph systems would sustain the increased number of wires necessary to superimpose the telephone feature, the expense of constructing, equipping throughout with copper wire, loading the same, and providing the extra circuits required could not be estimated at less than $75,000,000. Add this to the estimated value of the telegraphic land lines ($150,000,000) and it will be seen that the cost would be equal to $225,000,000, or $25,000,000 in excess of the estimated value of the interurban and long-distance telephone network. The expense of equipping the latter system for telegraphy would involve only the cost of the instruments, and would therefore be negligible.
In view of the foregoing it is the opinion of your committee that it would be unwise from a commercial standpoint for the Government to acquire the telegraph systems of the country.
TELEPHONE SERVICE.
The Scientific American Reference Book for 1913 contains statistics showing that in 1912 there were about 18,179,000 miles of telephone wire in operation in this country, serving 8,362,000 telephones. About 2,800,000 miles of this were interurban and long-distance wires and the remainder, about 15,400,000 miles, served the city and town exchanges. Over 70 per cent of this entire mileage is controlled through stock-majority ownerships by an association known as the American Telephone & Telegraph Co. These (Bell) lines constitute about 12,421,000 miles of exchange wires and about 2,189,000 miles of toll wires. More than half of this system is underground.
Mr. Theodore N. Vail, president alike of the Western Union Telegraph Co. and the associated Bell telephone companies, in his announcement of policy states:
"There is a road to every man's door; there should be a telephone to every man's house... Under common control... it must be sufficiently strong to constitute practically one system, intercommunicating, interdependent, universal."
This statement is merely a concurrence in the accepted economic doctrine of the monopolistic tendency of the telephone business. The history of this business clearly establishes the futility of competition as a means of regulating its conduct in the interest of the people. Mr. Vail, therefore, naively agrees to the preamble of the economist and fails to follow the line of thought to its inevitable conclusion. The division of opinion between him and practically all of the economists who have given this subject their attention is upon the question whether the monopoly should be public or private. The decision of this question must rest upon which is better for the public welfare.
There is a radical difference between the policies of a public and a private monopoly, both as regards the extension of service and the fixing of rates. In the extension of service the determining factor with the Government is the needs of the people; with the private monopoly, the consideration of profit. The effect of the application of these two policies to similar public utilities is shown by comparison between the present universal extension of the mail facilities and the limited extension of the telegraph and telephone facilities. The private monopoly has no incentive to extend its facilities to unprofitable territory, but the Government must serve all the people. This universal service is accomplished by the equalization of rates. In fixing rates, the policy of this Government is to superimpose no charge for taxation, but only to see to it that the service as a whole is self-supporting. The private monopoly, on the other hand, must make a profit, and in providing for this tends to increase its rates to the highest point that will not, by so greatly restricting the volume of business, impair the aggregate profit. The effect of the policy of private monopoly is aptly described by Prof. Holcombe in his Public Ownership of Telephones on the Continent of Europe. He states:
The forces of demand and supply will operate under a regime of monopoly, as under one of free competition, but the results will not be the same. In the latter case the interests of the monopolist will ordinarily lead him to fix his rates at a level which is intended to yield him the maximum of profit. Having adopted a tentative schedule of rates, he carefully observes the extent of the demand for his services at those rates and readjusts them, if need be, until the actual sale of his services verifies his calculations. Its purpose always is to make as large at possible the surplus that remains after deducting from his gross receipts all the expenses of rendering the service. Consequently, under a regime of unregulated private monopoly, rates are certain to be exorbitant.
In the telephone business, to this disadvantage from the viewpoint of the community of monopolies in general, must be added further special disadvantage. Not only is there no protection against exorbitant rates, but also there is no security that the distribution of the total charges between the different classes of telephone users mil be made on a basis calculated to promote the widest utility of the service, such as it is. For the criterion of a sound monopolistic rate policy is not the greatest utility of the service, but the greatest profit of the monopolist. Unfortunately, the two do not coincide. There will, for example, be no incentive to extend the service to wider circles of users, unless such an extension will increase the gross receipts more than it will increase the operating expenses. The enhanced profits, therefore, which the monopolist will obtain from those users whose demand for the service is least elastic will not be put into extensions for the benefit of those whose demand is more elastic, and to whom, consequently, a small reduction in price would mean a great increase in satisfaction. Monopoly rates will not enable the community at large to derive from the telephone service the maximum of satisfaction. Therefore they are not reasonable rates.
The Bell companies, under the guidance of the American Telephone & Telegraph Co., whose president has been quoted, are working assiduously toward their admitted object-a nation-wide monopoly of the telephone business. This company avails itself of every means of stressing the desirability of having this immense project under the control of one organization, and the necessity for uniform equipment, uniform engineering, and uniform operating practices is scrupulously observed. Only one make of equipment is authorized for use on all of these Bell lines, that manufactured by the Western Electric Co., one of the Bell properties.
In extending their system the Bell companies have refused to connect with other companies on the ground that this would incorporate into their service telephones, switchboards, wires, and other apparatus not in uniformity with those used by them and that such dissimilarity of equipment would result in poor service. They have likewise refused to make such connections on the ground that one central organization must have control over the entire system. This attitude on the part of the Bell system has deterred the development of independent systems and has seriously crippled those which have been started.
Unquestionably, from the engineering viewpoint the attitude of the Bell companies is proper, for it is very necessary in the interest of the most efficient service that the entire telephone network be under one management. In the interest of the people, however, it is highly desirable that this management be vested in an unselfish agency like the Postal Service, where the policy would lie universal extension at cost rather than limited extension at the maximum of profit.
It is needless here to enter into the manifold advantages and benefits that would accrue to the people from a universal telephone service. The telephone has now become an indispensable aid to business and a means of social intercourse to which all classes properly aspire. As it has done with the mails, it is the duty of the Government to make this facility available to all of its citizens without discrimination.
There is only one other alternative: The enforcement in accordance with law of a condition of competition in the telephone and telegraph business. Without considering whether this could be done effectually in the case of an enterprise inherently so monopolistic, it is sufficient to note that while the execution of such a plan would be fraught with difficulty, its effect would not be to improve service and reduce rates, but the reverse. Competition applied to this public utility has clearly been shown to result in waste and inefficiency due to duplication. Not artificial restraint, but natural development under Government control is the true policy for the public interest.
Maps showing the routes and stations of the telephone systems and those of the Postal Service in this country are strikingly similar, except as regards extent. Hence, in the profitable territory we have three agencies - the mail, the telegraph, and the telephone - engaged in the business of transmitting intelligence and differing only in the modes of transmission.
The Postal Service maintains about 64,000 offices and stations and employs about 290,000 persons. The telephone service maintains about 50,000 offices and employs about 200,000 persons. Were these two services merged and operated under Government control it would be feasible to transfer a large number of the telephone offices to post-office buildings, and thus greatly reduce the aggregate expense for quarters. Furthermore, as the majority of the telephone employees are operators, who require no special technical training, the merging of the two forces would result in a material reduction in the total number of employees required. Furthermore, it is understood that the automatic and semiautomatic equipment is rapidly approaching perfection, and should this be accomplished the adoption of such equipment would bring about a still further reduction in force.
Your committee has no doubt that the institutional efficiency of the telegraph and telephone services in this country would be increased by Government ownership. The statistics in the appendixes hereto show that in the United States compared with other countries the number of telephone calls per employee is relatively low, while the number of mail pieces per employee is relatively high.
The magnitude of the telephone service has led your committee to consider the feasibility of gradually acquiring the network of the country in segments, leaving the remainder to be operated commercially under licenses issued by the Postmaster General. For this purpose the property has been divided into three groups, as follows:
(A) LONG-DISTANCE AND TOLL LINES.
The long-distance lines of the country are those which form the connection between important cities. They are owned and operated by the American Telegraph & Telephone Co. independently of the associated Bell companies. The failure of the independent companies to secure connection with these lines has been the principal reason for their inability to successfully compete with the Bell companies. This long-distance service was formerly kept quite separate and distinct in some places from the service of the associated Bell companies, but to-day the wires usually terminate in a separate panel on a main switchboard in the Bell offices.
Few engineering difficulties would be encountered in the acquisition and operation of the long-distance lines as a separate system. They are in excellent condition and are maintained and operated by skilled employees, some of whom it might be advisable for the Government to retain, at least until the consolidation of the post and telephone offices would permit the Postmaster General to make changes and adjustments in the personnel.
The acquisition of only the long-distance lines would necessitate immediate expenditures on the part of the Government to transfer their terminals from the Bell offices to the post offices. In cities where the local commercial telephone companies own the underground conduits it would be practicable and economical for the Government to lease sufficient pairs of wires from the local companies to lead the long-distance lines to the post-office switchboards. The local commercial telephone companies would run wires from their own exchanges to the Government board and thus secure their outlet to neighboring cities.
The toll lines are those centering in city exchanges and running therefrom to near-by towns and villages, to distant suburbs of the cities, and to factories or even residences some distance outside of the local exchange limits. These lines are connected with a separate section of the exchange switchboard. Their acquisition by the Government would be of great value in increasing the efficiency of the long-distance system. No unusual engineering difficulties would be presented in separating these lines from the commercial exchange plant, although they are more closely related to city exchanges than are the long-distance lines.
In some instances it might be difficult to distinguish between a certain toll line in the strict sense of the term and a part of the city exchange system. Therefore, it would be well to designate as "interurban" all long distance and toll lines, as is done abroad, and include in this class only such lines as really connect cities, towns, or distant communities. This would clearly define the scope of the transfer in the acquisition by the Government of all interurbans.
No trouble should be experienced in the villages and small towns in transferring the toll lines to the Government because the toll telephone is usually the only one in the village and the transfer would simply involve the removal of the instrument and wire from the general store to the post office.
In the community where a struggling little exchange is maintained, serving a few telephones in town and a few on near-by farms, the separation of the toll lines from the existing system would make the town exchange unprofitable and, therefore, the owners would desire to turn it also over to the Government. Provision should be made for the acquisition in such cases of these small exchanges. If the exchanges were not taken over it would be necessary to install switchboards in the post offices and lead the interurban wires thereto on poles. These small switchboards are simple and no great technical knowledge is required to operate them. The operator might perform other duties according to the number of calls per day. The lineman or inspector would keep the lines and equipment in working order and a post office employee could be easily taught to manipulate the board.
In cities where commercial companies are maintaining remunerative exchanges which involve a large number of instruments, cooperative relations would have to be maintained between the Government and the city exchanges. In such cities the toll lines, like the long-distance lines, would be connected with the post-office switchboards. This may or may not involve underground conduits, according to the municipal regulations.
The superimposing of the telegraph feature on the telephone service (both long-distance and toll) might be gradually brought about at small cost. The long distance lines of the American Telephone & Telegraph Co. can be, and in some instances actually are, used for telegraphy simultaneously with telephony. There is no reason why the toll lines should not be utilized in the same way. The addition of the telegraph feature to the interurban telephone system of the country would much more than duplicate existing commercial telegraph systems.
(B) EXCHANGE SYSTEMS.
The exchange systems are those which render exclusively local service. In the event it is deemed unwise to take over the telephonic network in its entirety, it is the opinion of your committee that the exchange systems should not be acquired until after the acquisition of the interurban lines. Meanwhile they should be permitted to operate under licenses issued by the Postmaster General.
(C) FARMER LINES.
Farmer lines are certain independent lines built in rural communities by private organizations, mutual associations of farmers, or by individuals for the purpose of connecting the farms with the nearest town or village. These lines involve about 600,000 miles of wire and are owned by about 19,000 different organizations, associations, or individuals. Generally they are not well built or efficiently maintained. In some localities the Bell companies have encouraged farmers to build these lines themselves, permitting them to string the wires on poles, trees, fence posts, etc., and furnishing them with connections with Bell switchboards and toll lines under the condition that they purchase Western Electric equipment. The desirability of the Government's acquiring these lines in their present condition is seriously questioned. It is believed that it would be preferable to license them under regulations prescribed by the Postmaster General.
If it be deemed wise for the Government to take over at the outset only a part of the telephone structure, this should be done with the fixed policy and expressed intention of eventually acquiring the whole commercial network.
There are two clear and sufficient reasons, both from the viewpoint of expediency and desirability, for acquiring the complete network at the outset. Universal extension of service and equitable adjustment of rates can be attained only when the entire service is under one management.
1. A movement toward the acquisition of only a part of the plant - the toll lines, for example -would meet with all the opposition the Bell companies could bring forth, and it would be supported by the strongest possible arguments-the engineering and economic principles referred to. The toll fines and the exchange service are so intimately associated that in many places the same employees serve both. To separate these services would be uneconomical. Furthermore, the separation of the toll and long-distance lines from the exchange service would entail an immediate expenditure for new switchboards, cables, poles, etc.
2. The operation of only a part of the plant is fraught with the obstacles encountered by the British Government when it endeavored to do this. The private companies, realizing that it would be only a question of time when the entire plant would become Government property, would assume an apathetic attitude and allow their plants to run down and become inefficient. Or they might assume a hostile attitude and use every possible means of preventing the efficient conduct of the service in order to discredit the postal management. This attitude could well be assumed even while operating under licenses issued by the Postmaster General.
COST AND PAYMENT.
According to the best available data the capitalization of the long-distance and toll lines represents approximately $200,000,000 and the capitalization of the entire commercial network (exchange service, toll, and long-distance lines) approximately $900,000,000. The cost to the Government would be less than the appraised value, since it would be undesirable for the Government to purchase the real-estate holdings of the telephone companies, such as exchange and office buildings, etc. Sufficient space in these buildings for the exchanges could be leased until accommodations could be provided in the post offices and stations.
While it would be necessary to acquire title and possession of the network by a single process of statutory appropriation, and on the same day, it by no means follows that payment for the properties would or could be made in the same total or single manner. There are altogether some three thousand companies or distinct legal proprietorships of the telephone service. Even the Bell companies, whose holdings comprise approximately three-fourths of the entire network of the country, number more than 200. Therefore, as many distinct payments would be made as there are different proprietorships. Moreover, these payments would extend over a sufficient period in which to make the appraisals and enable the courts to adjust such legal questions as may arise. The payments would be distributed throughout a period of several years, and thus ample time and opportunity to market the bonds would seem to be assured.
It is not believed that any serious difficulty would be encountered in financing the proposition, as the extinction of the securities of the superseded companies by Government acquisition would be likely to create a demand for an equal amount of other securities, and it would be but natural that a large amount of the bonds issued from time to time by the Government would be purchased by the former holders of telephone securities. In this connection attention is directed to the financing of the United States Steel Co., the Panama Canal, and the acquisition of railways by Japan and by Switzerland.
The data assembled by the committee in the course of its investigation, which constituted the basis of its study and conclusions, are set forth in Appendixes A to H, inclusive, that accompany and are hereby made a part of this report.
RECOMMENDATIONS.
Your committee has reached the conclusion that the only way to afford to the people the complete and modern postal facilities that the Constitution makes it the duty of the Government to provide is to put into effect the following recommendations:
1. That Congress declare a Government monopoly over all telegraph, telephone, and radio communication and such other means for the transmission of intelligence as may hereafter develop.
2. That Congress acquire by purchase at this time at appraised value the commercial telephone network, except the farmer lines.
3. That Congress authorize the Postmaster General to issue, in his discretion and under such regulations as he may prescribe, revocable licenses for the operation, by private individuals, associations, companies, and corporations, of the telegraph service and such parts of the telephone service as may not be acquired by the Government.
Respectfully submitted,
Daniel C. Roper, First Assistant Postmaster General
M. O. Chance, Chief Clerk, Post Office Department
J. C. Koons, Superintendent, Division of Salaries and Allowances
Wanswheel's post is interesting. i wasn't aware there had been a movement for government ownership pf communications. But, since here was a lot of interest in public ownership of railoads in the era just before and after WWI, I suppose it's not real surprising that there would be a similar interest in communications. But it didn't happen either as to railroads or communications, and for that we should all be eternally grateful. Imagine the reaction of a government communications monopoly to the internet.
Wanswheel should be thanked for a thoughtful and instructive posting.
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