TELEPHONIC COMMUNICATION (CONSOLIDATED FUND).

HC Deb 06 March 1899 vol 67 cc1375-433

Considered in Committee.

[Mr. J. W. LOWTHBR (Cumberland, Penrith), CHAIRMAN of WATS and MEANS in the Chair.]

(In the Committee.)

Motion made, and Question proposed— That it is expedient to authorise the issue out of the Consolidated Fund of a sum not exceeding £2,000,000 for making further provision for improvements in the system of telephonic communication, and to enable local authorities to raise or apply money for telephonic purposes."—(Mr. Hanbury.)

THE FINANCIAL SECRETARY TO THE TREASURY (Mr. R. W. HANBURT,) Preston

The Resolution which I have to move is in two parts, and adapts itself to the two clauses of the short Bill which is to be founded upon it. The first portion of the Resolution is to enable the post Office to extend its means of telephonic communication by the extension of exchanges. I think the Committee will agree with me that the very first question which we have to ask ourselves is this: Whether the Post Office is perfectly free to undertake this task—I say free, not merely technically, but morally free—free not only in law, but in equity, in honour, and in good faith free. If it be so free, there is a public property of the taxpayers which we have to protect, a property which ought to be developed, in order to bring the telephonic communication of this country up to the level of what it is in other countries. At the present moment we in England are_ very much behind in this respect. In Norway and Sweden I find there is one telephonic line for every 145 of the population; in Switzerland, one for every 170; in Denmark, one for every 210; in Germany, one for every 450; and in the United Kingdom only one for every 636 of the population. Well, that, at any rate, is a sufficient indication of how far behind we in the United Kingdom are in respect to telephonic communication. Now, the Committee last year was perfectly unanimous against the claim put forward by the National Telephone Company. What was that claim It was a claim that they had the right to go everywhere all over the United Kingdom, but they also claimed the right to refuse to go anywhere. They claimed, in fact, to have rights without any corresponding duties. They claimed that they could go into these areas, and that, they being there, there should be no competition whatever with them, and that, even if the local authorities refused to give them way-leaves, that was not their fault, but the fault of the municipalities, and that they were still entitled to be there without competition. The Government, naturally, has been, and is, most anxious to be perfectly fair to the National Telephone Company. It would be mere folly not to recognise fully—and most unjust not to recognise fully—the work which the National Telephone Company has done. It has done a great deal in the country to develop telephonic com- munication. A great part of the work has been done by this Company; but while we want to be fair to it, our fairness must rest rather upon established facts than upon any preposterous pretensions, such as the Company has put forth. I believe in that respect the Company has been its own worst enemy. We want to base our treatment of the Company on established facts. What are these established facts? In the first place, the Company is working under the old licence of 1884, which was a licence granted in the very height of public competition, and almost directly after Mr. Fawcett changed the Government policy and decided that he would grant licence everywhere and to everybody that applied for them. The Company's is the only existing licence at the present moment which is not a purely local licence, and that licence enables the Company practically to set up areas everywhere. In addition to that, the Company has got all the old privileges attaching to the old licence—that is to say, it has now become a monopoly. In spite of that fact, it has got all the privileges which are denied even to the smallest local monopoly of gas and water. It has the right to refuse services; there is no limit to its maximum; and it is entitled to give preferences, and it does use that power. Let me quote the clause which stands in this old licence of 1884. It is a very stringent clause. It provided that— Nothing in these presents contained shall prejudice or affect the right of the Postmaster-General from time to time to establish, extend, maintain, and work any system or systems of telegraphic communication (whether of a like nature to the aforesaid business of the company or otherwise) in such manner as he shall in his discretion think fit, neither shall anything herein contained prejudice or affect the right of the Postmaster-General from time to time to enter into agreements for, or to grant licences relative to the working and user of telegraphs (whether of a like nature to those worked and used by the company or otherwise), or the transmission of telegrams in any part of the United Kingdom with or to any company, person, or persons whomsoever upon such terms as he shall in his discretion think fit. And nothing herein contained shall be deemed to authorise the company to exercise any of the powers or authorities conferred on or acquired by the Postmaster-General by or under the Telegraphs Acts or any of them. Well, that being so, what has happened since this licence was granted in 1884? One thing, of course, has happened; the Company has bought up all the other existing companies. It has done its best to defeat the policy of competition. But is that any reason why competition should cease forthwith. It does not in any way have the effect of preventing the Postmaster-General from exercising his full right to grant fresh or new licences. But something else has happened. A new agreement was drawn up in 1896—only two years ago—a very moderate agreement. And that new agreement retains the old clause of the licence of 1884. And that clause has the same meaning in the agreement of 1896 as it had in the licence of 1884, and that clause and that meaning have been carried on by a series of steps from 1884 to the present day. It was alluded to in the Treasury Minute of 1892; it was referred to in the Fergusson draft of 1892; it was again repeated in the Morley draft of 1894, and was inserted in the Norfolk agreement of 1896. These negotiations took four years, and they were based entirely on the Treasury Minute, which declared the new policy of the Government. And what is that Treasury Minute There are reservations contained in it in the strongest terms—so strong, that when articles appeared in "The Times" newspaper declaring the position of the Company, the strange compliment was paid to this Treasury Minute of leaving out the one important clause in connection with this question reserving the right of competition. What is that clause It reads— As to fresh licence, no further licence for the whole country will be granted; and, ever, for a licence to establish an exchange in a particular town no application will be entertained unless a formal resolution in its favour has been passed by the Corporation, or other municipal authority, and evidence given that there is sufficient capital subscribed to carry out the undertaking In this way, competition will not be excluded, but a check will be imposed on the formation of companies whose sole object is to force the existing licencees to buy them up. But, although this is the policy which commends itself to Her Majesty s Government, it must be distinctly understood that, should licences hereafter be granted on ether principles, no company now or hereafter to be licensed will have any ground to complain of breach of contract or want of good faith on the part of the Postmaster-General. Well, I think that makes the point quite clear, so far as the agreement goes. It reserves in the strongest terms the right of competition, and leaves no ground to complain of any breach of contract or want of good faith on the part of the Postmaster-General. But we were told constantly before the Committee that there was some understanding, some undertaking at the back of this public agreement. All I can say is that, when the agreement of 1896 was signed, neither the present Postmaster-General, nor anyone at the Treasury, knew of any such undertaking or any such understanding. We had before us on that Committee two ex-Chancellors or the Exchequer, and two ex-Postmasters-General, and they all denied that they had given any such assurance or entered into any such undertaking or understanding. And it was also disproved in writing. Confidential letters of great importance were produced on the last day of the Committee sittings, which showed that private negotiations had been going on, and that the National Telephone Company had tried to get this understanding, but that the Post Office had very properly refused to give any such undertaking. In addition to that, we have, of course, what really clinches the matter—the statement of Mr. Forbes himself before the Committee. I am now reading from the Keport— Before the same Committee Mr. Forbes himself was examined, as follows, as to this evidence:—Q. 46,430: Mr. Lamb, whom we examined, or who was a witness on behalf of the Post Office, said (think I can almost quote his own words) that the Post Office was certainly not in law, on the strictest interpretation or the agreement, in any way debarred from granting competing licences, and that it was under no obligation, even in honour, not to grant competing licences? A.: believe they are absolutely free. Q. 4,644: You agree with him that there is not even an honourable engagement on the part of the Post Office not to grant competing licences? A.: The Post Office are absolutely free. I will go a little farther, and say that in all the negotiations (which were prolonged) there never was the slightest suggestion, directly or indirectly, of any such cession on the part of the Post Office of a promise or pledge to lock up their own discretion."' Well, looking at it apart from the evidence I have read, ask would it not be perfectly monstrous that, in a public agreement of this kind, which is the only written agreement which the public could see, there should be at the back of it on the part of Ministers or of any Department, any undertaking to the effect that the agreement did not mean the whole of what it said I Bill Mr. Forbes himself, very properly no doubt, abandoned altogether any idea of any such an understanding of this kind when the whole purport was made plain to him. It is only fair to say with regard to Mr. Forbes that his voice is always the voice of a very simple person indeed, almost like the simple shepherd in Arcady; but the hands are the hands of a very able chairman of a Company in the City. And so, before us, he took a totally different stand. He said, with some fairness— I am not bound by a mere written agreement, such as binds ordinary men of business; the moral law alone is the thing for me. And from that point of view he enlarged with a certain suave satisfaction upon the great moral obligation of the assumed partnership between him and the Post Office, and the mutual delights which follow from a system of brotherly co-operation. Of course, one objection to a picture of that kind is this, that while our agreement is perfectly full, concise and clear, the moral law, when it depends on too simple-minded an interpreter, is apt to vary with the individual requirements of the interpreter, and sometimes with the varying conscience of the individual himself. That undoubtedly has been the case here. Take the case, for instance, of co-operation. Cooperation is a very pretty word, and no doubt it was mentioned in the Treasury Minute, that is to say, we were to put them in connection, as a rule, with our trunk lines, and no doubt there was a great similarity of interests between the two. But it never went to the extent of indicating that we were never in any circumstances to compete with them. Mr. Forbes's interpretation of co-operation, however, was that we were never to compete with him; we were to co-operate with him in all his exchanges. But when the Post Office has an exchange of its own, the National Telephone Company is to compete with it tooth and nail; and is to refuse to put itself in connection with its partner, with whom elsewhere it is anxious to be on such friendly terms. A further case was raised, and it was this— Oh, but, after all, the main point is that we abandoned the trunk lines. That plea is put forward as if this again was an instance of self-sacrificing, brotherly affection, as if nothing was received in return, as if it was a purely unrequited gift. But what are the facts of the case? In the first place at the present moment the trunk system and the messages sent along it represent only 3 per cent, of the whole. And at the present moment the messages sent along the local lines are 97 per cent, of the whole. We bought and paid for these trunk lines and we gave an ample price for them. After several years of use we not only bought them at the original cost price, but gave 10 per cent, in addition, which represents, I think, a very adequate recompense to the Company. With regard to the lines so taken over; they were alter all much the least important of the existing trunk lines, because they were mainly tie shorter trunk lines, where competition was possible and least expensive to lay, and the Government might have licensed another company to start trunk lines against them. Since we have taken over the trunk lines it has become a very different matter. We have had to lay long and expensive lines and, of course, as the House knows, the cost of these lines has been very considerable. But there is another thing. It is not as if the National Telephone Company had lost the use or the benefit of the trunk lines, for ever since these have been taken over by the State the use of the trunk lines has practically been monopolised by the subscribers of the National Telephone Company themselves. But in addition to that we gave them further advantages; we undertook that no more general licences extending over the whole country should be issued, and as a matter of fact, no more such licences have been issued to companies. The trunk system has been largely extended, and we have given them facilities for opening exchanges that did not exist before. We established a submarine cable between this country and Ireland, which threw the whole of Ireland open to the Company, and we gave them very important way-leaves under our agreement of 1896. These are very tangible advantages, which anyone would find it, even with a refined and superfine moral philosophy, difficult entirely to explain away. I hope I have shown to the satisfaction of the Committee that we are free both legally and morally to compete. But are we free to refuse to compete? About that, I admit, I am not so sure. There are two questions that have to be answered. We have to ask ourselves in the first place, "Is the service efficient?" and in the second place, "Is the service sufficient?" To both of these questions the Committee last year unanimously gave a negative reply. Now, on the question of efficiency—on what after all does me efficiency of a service like this mainly depend? It mainly depends, of course, on way-leaves, and way-leaves, undoubtedly, this Company has not got, and will not be able to get in the future to the extent it wishes. And why has it not got them I It has applied to Parliament time after time, but Parliament is not going to over-ride the local authorities, to impose everywhere and in every locality in the country a company on these local authorities without their permission. And so, backed up by Parliament, the municipalities are refusing to grant these way-leaves, and if they are not granted, you cannot have an efficient service. The Post Office sees the municipalities refusing these way-leaves, and naturally hesitates to use its own power to take them. If it did, the House of Commons would be the first to protest against it. What is the position of *he Company in regard to existing wires s it; has got 143,000 miles, of wire, and out of these 143,000 miles of wire, no less than 120,000 miles, on the admission of the manager of the Company himself, are on sufferance, and terminable at very short notice—at the utmost, in 12 months. Is it tolerable that the great telephonic system, so important to the trade of the country, should exist any longer on sufferance? What do these way-leaves mean? They are of three kinds. In the first place, there is the laying of the wires between the various exchanges of the Company in the same area. These are absolutely secured to them—I don't say they are important—by the written agreement with the Post Office. But there are two other kinds which are of much greater importance. There is the wire which connects the subscriber with the exchange. That means, of course, that as the number of subscribers increases, the Company is constantly taking up the streets, and it is against that that the municipalities protest very naturally. And if a company is not allowed to take up the streets for the purpose of connecting its exchanges with its subscribers, as far as any advantages given to the subscribers is concerned, the system falls to the ground. Then there is this further difficulty. What is called the single-wire system prevails in places like Glasgow, and is largely used over the rest of the United Kingdom. But it is impossible that the single-wire system should be an effective or efficient system. The Treasury Minute prescribed that no company hereafter licensed should have anything but the double-wire or the metallic-circuit system. It is absolutely essential to the efficiency of telephonic communication. But in order to lay the double circuit they would have to take up the streets again, and the municipalities refuse to grant any such permission. The result is that in Glasgow and other large boroughs where the single-wire system is in use, the service is an inefficient one. But then you may have a much more important consideration, and that is this: that the Post Office is under no obligation whatever to put them into communication with its trunk wires between the Post Office and the exchanges. The agreement of 1896 distinctly states that the Post Office is under no obligation whatever to do anything of the kind, that the company must provide its own way-leaves between post offices and exchanges: and those way-leaves are being refused by the municipalities. I am bound to say it is reasonable in a case of that kind that the Post Office, although under no obligation, should meet the wishes of the company, and it is as a matter of fact, using its powers to connect the company's exchanges with its own trunk wires. I pass from the question of the efficiency of the service to that of the sufficiency of the service. And here, again, I do not think any blame can be laid on the municipalities. It is entirely due to the licence originally granted to the company itself. Under that licence the company has got most unusual powers—powers never granted even to small localities or municipalities. In the first place the company can pick and choose the localities it will serve. It may, for instance, choose one locality and refuse to serve another locality. Naturally, of course—I don't blame it for that; it is what everybody would do under similar circumstances—it chooses the more profitable areas and leaves, the less profitable areas for the Government to undertake. But more serious, I think, than this choice of localities is the fact that even in the same locality it has the right while it gives telephonic communication to one man to refuse it to his neighbour. That is our principal objection; that is a power which ought not to be in the hands of any private company whatever, of discriminating between two tradesmen engaged in the same trade, and in keen competition. Similarly it has the right to levy different rates from different localities, and even from different persons within the same locality. Then, again, we have the further fact disclosed by Mr. Forbes, that the company has no intention whatever of extending its system after 1904. If that is to be the case, and their licence expires in 1911, it is absolutely necessary that some other competitors should come into the field to supply the void between 1904 and 1911. There is another important fact connected with this want of sufficiency of the service, and that arises out of some very important evidence given by Mr. Gane himself. I was almost astonished that he should have given such evidence. This evidence was given in connection with the present system. Let me describe to the House what the present system of subscription to the National Telephone system is. I will illustrate it by the parallel case of telegraphs. If the Post Office were to say that nobody should send a telegraphic message who did not subscribe £10 or £15 a year, and that nobody should receive a message unless he also subscribed £10 or £15 a year, and were to further say that, having paid that subscription, they might send as many messages as they liked—that is the system which the National Telephone Company is applying at the present moment—I say it is an absurd system, and it has had the effect of limiting the advantages of telephonic communication to rich subscribers. Mr. Gane himself was the very first to admit very frankly that it is an absurd system. I will read his own words— There is no doubt whatever, as far as my judgment goes, that not only this country, but nearly all other countries, commenced this telephonic service on wrong principles. The essential principle is, in my opinion, the payment per message; that is, according to user; but how to get back again to that is the difficulty. … I say most frankly to the Committee that, in my humble judgment, the whole principle on which these charges have been founded is a wrong principle. Indeed, Mr. Gane says that the National Telephone Company was anxious to go back to the proper system, which is not the subscription system, but the throwing the telephone open to the public on the toll system—that is to say, you pay for each message you send, and any person may send a message. The company tried this system in Sheffield, and what was the result, according to Mr. (Dane's own evidence! He held a public meeting in Sheffield, and he stated to the people that he was anxious to do away with the subscription system, and go back to the tolls. But he was mobbed by the rich subscribers, and he told us that at one time he thought he had very little chance of leaving Sheffield alive. That being the case, this service is naturally limited to a small class of rich subscribers. It is not right that a means of communication of this kind, so essential to the trade of the country, should be limited to its subscribers. What, then have we to do We have to introduce competitors who will, in the first place, be assured of their way-leaves, and, in the second place, will be perfectly free to introduce a system which will popularise telephonic communication. It is for this reason, therefore, that we are bringing in this Bill. What do we propose to do tinder this Bill? This Resolution proposes to ask for two millions of money to develop telephonic communication on the part of the Post Office. The first place to which our operations will extend will be London itself. Of course we shall have over a large amount of money for the work in the smaller municipalities. I shall probably be asked if two millions is enough. I do not say that it is enough, or that that is the final sum we shall spend, but it will enable us to carry on for a considerable time. I have been considerably abused for a statement I made in this House that for two and a half millions we might be able to replace the whole of the whole of the National Telephone Company. But that statement was confirmed by Mr. Gane himself before the Committee. A large portion of the company's lines consists of private wires. Now, with private wires we have nothing to do, as they are outside the monopoly of the Postmaster-General, and there is nothing to prevent the National Telephone Company, or individuals constructing private wires. Private wires, therefore, have to be left aside. We have to deal entirely with public wires. And of these Mr. Gane in his evidence said there were only 96,000. I was astonished to hear there were so few. Mr. Gane told us that the cost to the company of these wires had been on an average £40 per wire. It was also admitted that there was something like a million and a quarter of capital on which dividends were not being paid. It was admitted by Mr. Forbes that the capital was watered. Well, 96,000 wires multiplied by 40 gives a little under four millions—£3,800,000. If you deduct from that £1,250 000 of watered capital, on which Mr. Forbes admits dividends have not been paid, it leaves us a little over £2,500,000—the very figure that I gave to the House last year. When, however, Mr. Gane gives us, his figure of £40 per wire I am bound to say that that seems a very large sum indeed. £40 is the price for which wires can be constructed in London, which is the most expensive place in the world for constructing telephonic communication. But in Glasgow actual tenders have been received at an average considerably under £19 per wire. I say if you take an average of £30 per wire throughout the whole country you are taking an average very much in excess of what is necessary for telephonic communication. If you multiply 96,000 by 30 you get a very different result indeed. So far, then, from being wide of the mark in my estimate of two and a half millions, it should on this calculation be con-considerably over two millions. Now, I may be asked why London has been picked out from among the other large towns. It has been chosen for two reasons. In the first place, the area of the London exchange is something enor- mous. The boundary line of the London exchange area is 634 square miles, with a population of 6,000,000. The public wires number 19,000, representing more than one-fifth of the whole of the wires of the country. In that large area the Post Office is determined' to compete at once. It may be said, "Why are you not entrusting these powers to the London County Council or the other local bodies?" Well, in the first place, the area is enormously larger than anything controlled by the London County Council, and even if it had been a more limited area the London County Council would have much preferred that the Post Office should undertake the work. But the plain reason why, in London above all other places, the Post Office is to take the work itself, arises out of the question of way-leaves. The London County Council is not a road authority, and it would not be able to exercise way-leaves, and it would, therefore, have been almost impossible for the London County Council to work the telephonic system over that large area. Then it may be asked: "Is the Post Office fit to undertake a work of this kind?" Well, you know the way in which the Post Office has hitherto done its work. The Post Office has got the trunk lines, and I do not think anybody will deny that the trunk wire system in London is, perhaps, the best in Europe. The evidence was to that effect. The Post Office does its work thoroughly even under present conditions, and shows a considerable profit. I do not deny that the Post Office has hardly had a fair chance. There has been a tradition that it ought not to oppose the National Telephone Company, and that has, no doubt, had its effects. But the Post Office has been hampered much more by certain Treasury regulations framed in the year 1884, which seem to me perfectly ridiculous. Though we started the Post Office and told it to work a telephonic system in the metropolitan area, we tied its hands behind its back, so to speak, and made it impossible for any effective system to be carried on—hampered as it was by these Treasury regulations. But these Treasury regulations have been withdrawn, and I hope that in the future, with its own exchanges, it will do its work as any business firm would do it, and that the competition will be a real and genuine competition. I also ought to say that we do not propose to work on the system of subscriptions only —which is the present system—but we propose to adopt the system prevalent in Switzerland, by which you pay a very small subscription—I believe the subscription for London will be about £3 a year—and after that you pay a small fee for every message that is sent, as you do for every telegram sent. We mean to popularise the system and throw it open to the whole country—to rich and poor alike. And I am bound to say that when we have got the double currents, it will not only tend to popularise the system, it will prevent any unfair competition with the National Telephone Company. I believe there is work for both the Post Office and the company in London, and, indeed, in all exchange areas. I believe we shall not draw away to any great extent the pre sent subscribers to the National Telephone Company, but we shall draw our clientele from a totally different class of subscribers, and that the two systems will work satisfactorily side by side. In addition to that, we are going to establish a system by which the Post Office will arrange, by means of express letters and otherwise, to work more harmoniously with the telephonic system than hitherto. That is a portion of the agreement of 1886, which has not yet been carried out. The result of enabling a telephonic message to be delivered by express messenger and the toll system we are about to inaugurate, will be that anybody, whether a subscriber or not, will be able to use the telephonic system. That will be of advantage to the public, and will go a long way to ease off the competition of the National Telephone Company. So much for what we are going to do in regard to the Post Office system. I now come to deal with the question of municipalities. What we propose to do is to enable certain large municipalities—we have fixed the population limit at 50.000, which corresponds roughly with the county boroughs—to start a municipal telephonic system of their own, and, at the same time, we hope that they will be able to start at once. We are not going to nut them to the trouble and cost of a Provisional Order. All that is necessary is by a clause of the Bill to enable them, if they receive a licence from the Postmaster-General, to work a telephonic system themselves at the cost of the borough rates. It may be said, Why do you not extend the system further, to the smaller municipalities? There are two reasons for that. In the first place, of course, we shall have a large amount of money over, even after London has been dealt with; and I am sorry to say that so many large areas have been granted by the Post Office that, granted the fact that it is absolutely necessary that the municipalities should work over the whole of the areas, it would be impossible for any but large municipalities to work over the whole of the large areas which have been conceded to the National Telephone Company. That, therefore, goes a long way to make it difficult for the small municipalities to engage in this work themselves. I ought to have added that we not only enable the municipalities to work within the area of their own jurisdiction, but we enable them to work outside that jurisdiction if they can make private arrangements with the local authorities for way-leaves. Well, again—because I want to be absolutely fair to the Company—I ask, Is this fair to the National Telephone Company? They have raised, I know, special objections to the granting of licences to municipalities. They have said, "We can compete against a company, and, of course, can buy up a company, but we do not like to compete against—we can hardly compete on fair terms against—a municipality." Well, again I say there has been no understanding whatever that licenses should not be granted to municipalities. These confidential letters, to which I have referred, do disclose the fact that the National Telephone Company had a very hard battle with the Postmaster-General of the day. They did everything they possibly could, by every scheme they could devise, to prevent the Postmaster-General granting any such licences. They endeavoured, to the very best of their ability, to extract such a promise from him, but he absolutely and finally refused to give any undertaking of the sort whatever. In fact, he said it would be grossly unjust to give it, and as I said just now, no such undertaking was ever given; it all. Still. I do recognise the fact that competition with a municipality may be a very serious competition for the National Telephone Company; I will take two cases. There is the case of the way-leaves. It is perfectly true that a municipality will be able to grant itself way-leaves which are refused to the National Telephone Company. Of course, it will be equally able to grant way-leaves to a rival company and still refuse them to the National Telephone Company. But what we do propose—and, of course, arrangements of this kind will be put in each licence—is that if the National Telephone Company will be reasonable, and if, in the interests of the public service, it will connect its system with that of the municipality, then it ought to have exactly the same way-leaves as the municipality. Then, again, with regard to the purchase of the plant at the end of the period at 1911. We quite admit that we shall get no municipality to undertake this work, unless it has some promise that, under certain conditions, its plant will be purchased, and we perfectly admit that it would not be fair to give that concession to the municipality and refuse it to the National Telephone Company, even though at the present moment we are under no obligation whatever to buy one single pennyworth of plant from the National Telephone Company in 1911. But we admit that it will not be quite fair to be under an under-taking to buy the plant of a municipality and not purchase that of the National Telephone Company. Therefore, we shall be perfectly willing, in accordance with the recommendation of the Committee, when there are these two systems in competition in any respect, to give a pledge to purchase the property of both; that is to say, all that is good and useful, giving, of course, a preference to the municipality, because it will be the last in the field. I think that is a perfectly legitimate and fair arrangement as between the two. Well, one other point I should like to mention, and it is this. Again I ask with regard to the municipalities what I asked in regard to the Post Office, Are they fit to undertake this work? Undoubtedly we have the Report of the Treasury Commissioner from Glasgow reporting against their fitness in two respects. He said that, in the first place, he would have refused the grant of a licence to the Corporation of Glasgow, because, he said, the area was not sufficient; and, unfortunately, at that inquiry the Glasgow Corporation only asked for a licence for their own area. Of course, it would have been absurd to grant a license to them only within the area of their jurisdiction, and not enable them to work in the larger area around them. That difficulty of the Treasury Commissioner has been got over by allowing them to work, as the National Telephone Company does, outside their own areas, of course, as the result of private agreement with the local authorities. Then the Commissioner said that the telephone was not of common advantage, and, therefore, it ought not to be constructed at the cost of the rates. But nobody would maintain that the telephone system, as it is worked in this country, is for the common benefit. It is limited almost entirely to a particular class of rich subscribers. Under the system which we intend to introduce, it will be popularised, and we shall require the municipality to bring their wires into our own Post Office exchanges, and we shall require the system to be thrown open to everybody within that municipality, so that question of common benefit is got over. Well, of course, there is one other question we shall have to consider at the present stage, and that is with regard to the limitations to be imposed upon these local authorities. We shall, of course, reserve our right to purchase at the then value of the plant, and we must insist, in the interests of the general public, that there is the most absolute right of free inter-communication between all these rival systems all over the country. That, I think is an absolutely necessary and reasonable condition to impose; and coupled with that will also be the limitation that they are not to impose terminals against one another and against the Post Office itself. I hope the Committee will agree that by this arrangement, which I have described at, perhaps, too great length, we have done our best to do two things; we have done our best to extend and popularise a system of communication in which this country is behind-hand at the present moment, but which I think is vital to the trade and commerce of this country; and at the same time I hope that even the National Telephone Company itself will recognise that we have done our best in this competition, which must come, to ease it off, and establish it on the fairest possible practical terms, so far as the company is itself concerned. There is only one other result that I should like to mention, which I hope will follow from the system we propose to establish, and it is this. Hitherto what I believe might be a great trade in this country has gone abroad. All the principal appliances for the telephonic communication have to be purchased in Sweden, in Norway, and, I believe, in Holland. I hope that if we have competitors in the field, if we have a large extension of our telephonic system of communication, if we have these three services working side by side, we shall get such competition that a trade for making these telephonic implements, wires, and the rest of it will be established in this country, and we shall not any longer have to make these purchases abroad. If we can do that, then I think some very useful results may probably follow from this small but, I hope, very useful Bill.

*SIR J. FERGUSSON (Manchester, N.E.)

I think that as the right honourable Gentleman has throughout his speech, in almost every sentence, referred to the National Telephone Company, the House will not think it improper that, being a director of that company, I should rise at once, and offer some remarks upon what has fallen from the right honourable Gentleman; and perhaps the House will also: allow me to say that I do possess a great knowledge of this question, because I was the Postmaster-General to whom he referred just now, who made the agreement with the National Telephone Company in 1891—an agreement which certainly did not lack strictness. I entirely agree with the right honourable Gentleman in what he said about the absolute discretion reserved to the Post Office—that the Government of the day was most careful to maintain, and it had had no idea of doing anything else. The right honourable Gentleman took some time in main- taining the absolute right of the Post Office to compete with the National Telephone Company. I think he must have had some misgivings in his mind whether his scheme was so absolutely fair as he asserted, or he would not have excused himself so profusely. I never should have thought of questioning for a moment the absolute right of the Postmaster-General to compete with the National Telephone Company in every town in the country where the National Telephone Company had an exchange, or his absolute right to license any other company, and wherever the companies failed to do their duty to undertake this work himself or to license a municipality to do it. But, Sir, the right honourable Gentleman has indicated that telephony has made imperfect progress in this country, and has not gone as far as might be expected. Well, Sir, there is no doubt of that. It has not gone as far as its best friends could have wished, and certainly not as far as the National Telephone could have wished, because they have made constant and active endeavours to push the system all over the country, and I think I may say that wherever 12 or a score of persons can be got to become subscribers, there an exchange is immediately open. Still, it has not done so badly, if you consider at this moment that, with nil the powers of the State behind the Post Office, there were only 75,000,000 telegraph messages sent in the year, while there were 450,000,000 telephone communications—450,000,000, as compared with 75,000,000, which does not look as if nothing had been done—and if you consider that for every 12 words in a telegram the sender has to pay sixpence, whereas in a telephone communication two persons are placed in connection and speak on an average about 100 words at a cost of about ½d. I am now obliged to stand, to a considerable extent, on my defence. The right honourable Gentleman has treated the National Telephone Company as a criminal to some extent, as an enemy of the public, and especially of the Post Office. From the time that the agreement was obtained in 1892, and especially since it was completed in 1896, until the right honourable Gentleman himself took office, the Post Office and the National Telephone Company had been in the most complete harmony; they had been co-operating together, in the words of the Minute, and there had been no sort of difference between them. The National Telephone Company sometimes thought that the Post Office was hard upon them, but no allegation was made on the part of the Post Office that the National Telephone Company was not doing its duty. And, in fact, before the Committee of 1895, the scientific advisers of the Postmaster-General told the Committee that the company was doing its work extremely well, that the system was the very best that could be introduced, and that they were pushing their business as far as they could. Well, Sir, the right honourable Gentleman says that the company has this evil feature in it, that it holds a monopoly, but it has not been, like gas and other companies, limited by restrictions placed upon it, and it has unlimited power to charge what it likes. Sir, I do not quite understand how the right honourable Gentleman could make such a statement as that. What is the reason why the company is not restricted in its charges? It is because it has no rights, no powers. Gas and water companies and others have compulsory powers; they can place their undertakings where they like by using the powers given under their Acts, just as the railway companies can, and where there are such powers, naturally there are corresponding restrictions. The National Telephone Company has absolutely no right to put a wire across any public road or property or anywhere else, except with the leave, in the one case of the local authority, and in the other of the individual whose house is crossed. Well, of course, there is a very great distinction between the two. But the check upon an abuse of their powers by the company, where there are no statutory restrictions, is that the Postmaster-General retains in his own hands the power to give licences in competition wherever, as the Chancellor of the Exchequer said in 1892, the company is not doing its duty. Now, Sir, the right honourable Gentleman quoted the terms of the licence of 1884, and also the Treasury Minute respecting1 the full right of competition by the Postmaster-General, in proof of the fairness of what the Post Office are now proposing. I am sorry to spend so much time, but let me point out, as I am entitled, I think, to do, what were the terms upon which this licence was obtained. Now, in the first place, the right honourable Gentleman rather ridiculed the idea of the brotherly cooperation. Well, Sir, the blessed word co-operation was not coined by us, but it is in the forefront of the Treasury Minute of 1892, which laid down the principle upon which the Government were going to make agreements with the telephone companies— The proposals of the Postmaster-General will enable the telephone companies and the Post Office to co-operate in services to the public. It is distinctly to be a co-operative service. Any honourable Member who chooses to refer to the Treasury Minute will see that it is a true description of it to say that it was the intention of the Government of the day, and the Government which succe8eded it, that the Government should assume the trunk wires for the protection of the telegraphic revenue and the control of the whole service, while the companies were to operate in the areas. Well, Sir, the present First Lord of the Admiralty, when Chancellor of the Exchequer, pointed out very plainly that it was in friendly co-operation that it was intended to act, though the Government should retain the power of competing or giving licences for competition in certain circumstances. The right honourable Gentleman, on 29th March 1892, said— It had been suggested that the local authorities themselves might be willing to undertake the telephone business, and he saw nothing to contradict the Government's policy in such a proposal. If there was a town in which a telephonic system had not been established and in which the local authority wished to undertake the system, there was no reason against such a course. Then later on he says— The licensees had been warned that the Government retained the power of issuing licences. He thought that it would be an evasion of the spirit of the licence if during the continuance of the licence they took the whole of the telephonic arrangements into their hands to the detriment of those who on the faith of the licences had been extending the system up to the present moment. Therefore I say, without any fear of contradiction, that the intention of the Government was to co-operate with the companies in the trunk wires, and to give the companies freedom in these areas, holding over them the power of the Government at any time to introduce competition if the companies were not doing their duty. Then the right honourable Gentleman said that the company had fought the Post Office tooth and nail. Did he mean to imply that the company tried to get subscribers from the Post Office exchanges by under-cutting Post Office rates? That is really not the case. I will beg the right honourable Gentleman's attention for one moment. What did he mean by saying that the National Telephone Company pressed into competition, tooth and nail, with the Post Office? I say they did no such thing. I say that the Post Office for the most part withdrew their competition, and the company did nothing more than push their business in the areas respecting which they were licensed.

MR. HANBURY

What I meant was, that the Post Office had several exchanges—at Newcastle, Cardiff, and 20 other places. The National Telephone Company came in afterwards and fought those to whom we had given licences tooth and nail.

*SIR J. FERGUSSON

Cardiff was one of the areas sanctioned to the National Telephone Company. Why did they sanction that area if the company was not to go and supply every house: n the town if it could with telephones? And how can the Post Office complain of the company operating effectively in this area when they expressly licensed that area to them?

MR. HANBURY

The Post Office does not complain at all. All we say is that that was not co-operation.

*SIR J. FERGUSSON

There was no idea that the company was not cooperating. The right honourable Gentleman has mentioned the solitary case of Cardiff. There were similar exchanges in Newcastle, and, I suppose 20 other places. Does he say there was not cooperation at Newcastle?

MR. HANBURY

I meant in every exchange of the Post Office.

*SIR J. FERGUSSON

Every exchange! And the Post Office made no objections! They never intended the company not to do go, and they to a great extent benefited by its development. The right honourable Gentleman says there were ridiculous recommendations.

MR.HANBURY

Hear, hear!

*SIR J. FERGUSSON

I never heard a Secretary to the Treasury talk of the regulations of his own department as ridiculous before; but I suppose that in the right honourable Gentleman's opinion everyone who came before him was prejudiced and narrow-minded. I think we have a right to complain that the company have been put into competition with the Post Office, and virtually excluded from the areas in which they had established themselves. The Post Office, with the long purse of the State at their back, could, if they pleased, have put the company into a corner in several parts of the country, but they never attempted to do so, because cooperation of the company with the Post Office was the intention of the agreement, and was fulfilled up to the time the right honourable Gentleman came into office. Well, then, the right honourable Gentleman asks, "Is the service efficient?" Now it is a curious thing that he has never referred in any way, so far as I know, to a judicial inquiry held two years ago in Glasgow in consequence of the desire of the Corporation of Glasgow to have a telephonic system of their own. A very experienced and skilful judicial adviser, a Sheriff, was appointed to conduct this inquiry; able counsel were employed on both sides, and the first question put to the Commissioner was whether the service was efficient and sufficient? The right honourable Gentleman never referred to that. The Commissioner said the service was not bad.

MR. HANBURY

I beg pardon, he said it was not efficient.

*SIR J. FERGUSSON

He said it was not as good as it should be, and the main reason why it was not as good as it should be in Glasgow was because the municipality would not give facilities to the company which most other towns had done. The main reason why the service was not efficient in Glasgow was because the Corporation refused to the company facilities which were necessary to make the service efficient. It was found that many allegations that were made against it were not established. The right honourable Gentleman says, "Is it tolerable that a great system should exist on sufferance?" Well, the company can only work on the system that Parliament allowed. Parliament refused to give us compulsory powers. Put it is rather hard that the company should be blamed because their system only exists on sufferance, when that is the only term upon which they are able to work. The right honourable Gentleman really ought to ascertain the facts a little better before he addresses the House. Last year the right honourable Gentleman told the House that the whole of the plant of the company could be bought for about £2,000,000 or £2,500,000.

MR. HANBURY

I said it could be replaced for that.

*SIR J. FERGUSSON

Well, I took that first because it was not a fair description. Then he said that the single-wire system was still largely used over the United Kingdom. As a matter of fact it is now only used to about 25 per cent., and it is being replaced as fast as possible. He talked about watering the stock again to-night. Very well, now let me tell the House the facts of the case, and talk about watering the stock afterwards. There was no idea of purchasing any company at a fancy price: all that the National Telephone Company did was to purchase other undertakings at their market price, and that alone. But the actual expenditure of capital in the undertaking—that is to say, the actual construction cost—really amounted to £5,000,000 sterling. Now, it is not, of course, to be denied that some of the money has been spent twice over, because in every undertaking I suppose there are mistakes made. The National Telephone Company set up a single wire system all over the country. Then they had to put the wires under ground, and, no doubt, the capital expenditure was much greater than it would be for another company which started with the whole knowledge possessed by the old company, and it cannot be a reproach to the old company that it had spent capital in that way. Take any large railway company. The London and North Western Railway Company, for instance, has had to rebuild its stations and do its work twice over because the original constructions were not sufficient. Let me illustrate watering. I recollect quite well that when the London and North Western bought up the Lancaster and Carlisle Railway it guaranteed 9 per cent. I suppose that means that everybody who holds one of the original Carlisle Railway Company's shares at the present time could sell it at £300. The fact, however, remains that of £6,264,000 capital, over £5,000,000 has been spent in construction, and the annual gross revenue is equal to the amount of the "watered capital." The right honourable Gentleman has spoken as if £40 per instrument is a large capital expenditure, but that is the cost the company has found necessary from experience, and I do not believe that it can be done for less. No doubt the restrictive regulations imposed by Government to protect the public revenue tended to cripple the Telephone Company, and one object of the agreement I helped to carry through was to remove the restrictions, whilst safeguarding the public revenue. It is not the case that the company has been alone slow, and that the Post Office has done everything possible to extend the trunk wires. Would the Committee be surprised to hear that there are many places to which the Post Office has refused to make trunk wires, except on the guarantee of interest by the National Telephone Company? The right honourable Gentleman has said that the company claim to pick and choose where they should lay their lines. This I deny. As a matter of fact, wherever even 12 subscribers could be obtained, the company opened an exchange. Up to the time when they were so violently threatened the company was going ahead as fast as it could. I would further point out that the only reason why there have been different rates is that in some places the working cost is much greater than in others. The right honourable Gentleman has referred to Mr. Forbes' statement that after 1904 the company could not lay out any more capital. But Mr. Forbes added that the company could not after that date lay out more capital without the approval of the Post Office, because otherwise it would not be possible to get it back. There is not, I think, anything unfair in that. As to the propriety of charging a low subscription, with a sliding scale of payment according to the number of messages sent, the company was considering that before it was proposed to the Committee, but it was not carried out for fear of provoking violent displeasure in commercial communities, which are very jealous of any change. Indeed, one Chamber of Commerce has expressed a strong objection to such a scheme. The right honourable Gentleman is quite wrong in asserting that the present tariff of the company limits the use of the telephone to the richer classes. In London alone there are no fewer than 300 public call offices, at which anyone can send a message on payment of threepence, or can telephone a message and have it delivered by express messenger to a non-subscriber for an extra threepence. In fact, the general public have just as much access to the telephone as they have to the telegraph. I was glad to hear the right honourable Gentleman's statement with regard to a plan by which municipalities are to compete with the company. It would have been an injustice, too gross for any responsible Government to propose that a municipality should have a licence, and be able to take up their streets for wires, and yet refuse the National Telephone Company a similar power.

MR. HANBURY

We only give these way-leaves to the company where they consider the public interests can work hand in hand with the municipal system.

*SIR J. FERGUSSON

Does that mean that the few subscribers on a municipal system are to be put in connection with every subscriber of the National Telephone Company, not only in the same area, but all over the country?

MR. HANBURY

The right honourable Gentleman must see that, even supposing the municipal system is not in co-operation with the National Company's system, its subscribers have the right to ask for the trunk wires.

*SIR J. FERGUSSON

Most properly; but does the right honourable Gentleman mean that the municipal subscriber is to have the right of connecting, without any payment, with any subscriber of the National Telephone Company all over the Kingdom?

MR. HANBURY

The National Telephone Company will undoubtedly be able to charge terminals. The municipalities will not be allowed to charge terminals, but undoubtedly that right cannot be taken from the company.

*SIR J. FERGUSSON

I must express a doubt as to the perfect fairness of this proposal. The right honourable Gentleman has said that the Post Office will in 1911 purchase such of the properties of the National Telephone Company as are useful to the Post Office. I never for a moment imagined the Post Office would do anything else. I do not know who invented the idea of the company compelling a fancy price.

MR. HANBURY

May I explain to the right honourable Gentleman that at the present moment there is no obligation whatever for the Post Office in 1911 to buy one single pennyworth of plant?

*SIR J. FERGUSSON

Does the right honourable Gentleman suppose that I do not know that as well as he? That is exactly what I was saying. I never thought at any time that the Post Office would in 1911 take from the National Telephone Company anything but what suited them, and at its real value. The National Telephone Company have done nothing which should make them be treated as criminals and enemies of the public. Nothing is so much disliked as a monopoly. The force of circumstances has brought the whole system of the country into the hands of one company. It is only natural, when there are competing systems, and resulting confusion, that one should swallow up the other. That fact has been recognised by the predecessors of the right honourable Gentleman. They found it more convenient to have all the systems in one hand, but as long as they hold in terrorem over that company the power to give a new licence, it is absolutely impossible that the monopoly can be abused. I can assure the Committee that all the National Telephone Company desires is to have fair play and free competition. Cer- tainly, if the company is not strong enough at this time of day to compete on fair terms, it is very badly managed; but it is not fair to tie a man's hands behind his back. The company is now actually told that the Postmaster-General will not bring the company's subscribers into the Post Office in any area in which the Post Office competes. Moreover, although it was stated in the House at the time by the then Chancellor of the Exchequer that the grant of way-leaves for a nominal rent was part of the agreement of 1892, we are now told that the Postmaster-General will not grant way-leaves to the company in any area where he is competing.

MR. HANBURY

I explained to the Committee that the only way-leaves that the Post Office ever contemplated giving, the only way-leaves which they were bound to give by the agreement, were the only way-leave which they were change in the same area.

*SIR J. FERGUSSON

One of the chief conditions made in return for the surrender of the trunk wires was that way-leaves should be freely granted at a nominal rent, and the Chancellor of the Exchequer at the time actually made an apology for charging anything at all. This is grossly unfair competition, and I am surprised that any Government should be a party to it. I never thought in 1892 that such an interpretation would be put upon the agreement. I should be ashamed to belong to any company against which any just charges of unfair dealing could be brought; but the National Telephone Company, which has the greatest ability at its command, has endeavoured to make the telephonic system of this country as good as possible, and I am only sorry that a Minister should treat it with the hostility which the right honourable Gentleman has shown.

*SIR C. CAMERON (Glasgow, Bridgeton)

As one who has taken a great interest in telephone matters and moved a Resolution in this House a good many years ago on the subject of the expropriation of the company, and as an active Member of Mr. Morley's Telephone Committee, I may, perhaps, be allowed to say a few words on this question. In the first place, I have to con- gratulate the right honourable Gentleman upon the bold, comprehensive, practical, and statesmanlike statement that he has unfolded to the House. It is by far the most statesmanlike exposition on the question that has been made ince the invention of telephones. I have heard Lord John Manners, Mr. Fawcett, Mr. Raikes, and various other Postmasters-General on the subject, but I must say that the right honourable Gentleman has manifested a grasp of the question which surpasses anything which I have ever heard or seen in any of his predecessors. Now, Sir, the right honourable Gentleman who has just sat down (Sir James Fergusson) has shown a great deal of one admirable quality, and that quality is audacity. Audacity, audacity, toujours I'audace! The right honourable Gentleman depicts the company, of which he is a distinguished member, as a public benefactor, which had done so much to develop the telephone. Why, Sir, that company, from its initiation, has done nothing but try and prevent other companies from lowering their charges. A Friend behind me (Mr. Provand) got up a cheap telephone company in Manchester. But everything was done to stop that company, and finally it was bought up, though I do not know whether it was to his advantage or not. Again, there was the case of Dundee, where an independent £5 Telephone Company was established by a local company. That was got hold of by the National Company, and the price raised to suit its ideas. Take a more recent case. When the right honourable Gentleman was Postmaster-General he signed an agreement the day before he left office. But what was that agreement? Was it an agreement with the National Telephone Company? No; it was an agreement with two companies, giving no monopoly, but establishing competition. It was an agreement not only with the National Telephone Company, but with a company called the New Telephone Company, presided over by the Duke of Marlborough. The New Telephone Company was called into existence to meet the demand for an improved telephone service, especially in London, and pledged itself to let the public have the service very much cheaper than the National Telephone Company, and some 7,000 telephone users pledged themselves to subscribe to its system. But the moment the agreement was signed, under which equal privileges were granted to the competing companies, the National Telephone Company "squared" the New Telephone Company, left the subscribers in the lurch, and purchased the whole control of the new company. I do not blame the National Telephone Company for having adopted a policy of this kind. They wanted to make money, and they made money. The right honourable Gentleman has told us that the gross income of the National Telephone Company is five millions a year.

*SIR J. FERGUSSON

I did not say that. It is the actual cost of construction.

*SIR C. CAMERON

I understood the right honourable Gentleman to say that that was the gross income, but that point is immaterial. The company has managed to fairly recoup itself, and if it finds itself in an unpopular position, if it finds itself brought face to face with the representatives of the people and obliged to submit to strict justice dealt out to it with a strong hand with the present public demand, it has itself to thank for having been a little too greedy. The right honourable Gentleman told us that if any man in the street were to go into the public call office and to telephone to another man on the Telephone Exchange, he would be in an equal position with a subscriber. Here you have to telephone to have it written down, and the other man has to telephone his message again, which has again to be written down and sent off, so that there is all this delay and much more delay than there would be by telegraphing, and at twice the cost.

*SIR J. FERGUSSON

How can you telephone to a man who is not a subscriber unless there is a charge for delivery?

*SIR C. CAMERON

Of course, I am perfectly aware of that, but I do not imagine that the Post Office will charge him 6d. for a single message and 6d. for the reply, or the man would do just as well by telegraphing. Now the right honourable Gentleman talked about terminal charges. I would warn the company, when this Bill is passed, not to be too greedy, as they have been in the past. What will the result be? When Edinburgh and Glasgow have exchanges of their own they will not set up terminal charges against each other; and if the National Telephone Company tries to make terminal charges extortionate it will find itself underbidden, and will lose its business. I do not want to take up the time of the Committee further. I congratulate the right honourable Gentleman again upon the most admirable scheme which he has propounded, and the boldness with which he has dealt with this question, and I think I may assure him, on behalf of my colleagues on this side of the House, that if he proposes to expend public money, even to the extent of millions, in a manner so beneficent, so useful, and which promises to be so profitable, he will have the warmest support—and certainly not the opposition—of honourable Gentlemen on this side of the House.

*MR. BOSCAWEN (Kent, Tunbridge)

Like the honourable Member who has just sat down, I desire to congratulate my right honourable Friend upon his statement, and upon the scheme which he has propounded this afternoon, which I feel sure will be very gratifying to all those who have held that the country has suffered very much from the unregulated monopoly of the National Telephone Company. We are all glad to find that the recommendations of the Committee, made last Session, have been adopted almost en bloc, and I hope that, partly through the Post Office and partly by municipal competition, we shall be able to get rid of that monopoly which has been such an incubus on the country for the last few years. We have heard to-night a very interesting defence of the National Telephone Company by my right honourable Friend behind me, but in that defence he has really given us all we ask for, because, although lie tells us in the case of Glasgow that the service given by the National Telephone Company was very good, he added that it is not good enough, and I am quite prepared to admit that not only in Glasgow, but in other places, the National Telephone service is very good, but it is not good enough. It is because we want something better than what the National Telephone Company consider "very good" that we are supporting the Secretary to the Treasury in his proposals.

*SIR J. FERGUSSON

I said it was very good considering, because it was only a single wire.

*MR. BOSCAWEN

Yes, that is so, but my point to-night is that, although it may be very good, yet it is not good enough. I simply want to put to my right honourable Friend, with reference to the National Telephone Company, this one question: How is it that whereas in almost everything else—in telegraphs, in railways, and in the general application of scientific machinery—this country is ahead of almost every other country, yet in telephone matters we are behind almost all? How is it that in Norway and Sweden one in 147 of the inhabitants are on the telephone, whereas in England there is only one in 636? Surely, the fact that we are so far behind other countries is abundant proof of the fact that the service provided by this company, though it may be very good, is not good enough for the people of this country. Now, I can say, in a very few words, what is the reason why the telephones are behind in this country. It is because, owing to this monopoly, the price charged is prohibitive to all except the richer classes. The right honourable Gentleman tries to make a point against that by saying, "Oh, that is not so, because in London there are 300 public call offices, where anybody can come and send a message for threepence." Well, what are 300 call offices in an enormous city like London? But, as a matter of fact, the number given in evidence before the Committee was not 300, but 237, and you have in London in the telephonic area six millions of people to 237 public call offices. Now in Stockholm, with only a quarter of a million people, there are no less than 700 public call offices; so I think that under the system adopted at Stockholm you get something a good deal better than what is afforded by the "very good" of the National Telephone Company in London. Then my right honourable Friend disposes of what was said by the Secretary to the Treasury by saying that the figures which he gave last year as to the amount which will be necessary to replace the plant of the National Telephone Company were wrong, and he says that the statement about the watered stock is inaccurate. But that was not the statement of an opponent of the company, but of Mr. Forbes himself, for he told the Committee of 1895 that at the date when the rival companies had been absorbed by the National Telephone Company— The total amount of money spent in the actual construction of the thing was £1,813,000; but the amalgamation value and purchase value was £3,105,000. The difference (what some people are pleased to call the water value) was £1,292,000. Therefore, Mr. Forbes himself, the chairman of the National Telephone Company, admitted that £1,292,000 did not go into the construction of the thing at all, and, therefore, I contend that my right honourable Friend is absolutely right when he deducts that amount before he arrives at the actual cost of the construction of the Telephone Company. There are two other points I should like to refer to in the speech of the right honourable Gentleman. He seems to think that there is some idea in the mind of the Secretary to the Treasury, or of those who, like myself, acted with him upon the Committee, that we are not dealing fairly with the company. Now I should be the last man in the world to ask this House to deal unfairly with any company; but, as a matter of fact, we claim that we are dealing absolutely fairly with this company, and I take it that the only reason why my right honourable Friend thought it necessary to explain this point in detail was because Mr. Forbes, before the Committee last Session, set up a most ridiculous plea that there was some sort of moral undertaking that we were not to compete with the company, a plea which he never attempted to take up when he gave his evidence, and a plea which is disposed of by all the parties who were parties to the agreement with the National Telephone Company. Mr. Forbes chose—most unwisely, I think—to pretend that there was some moral ground, some point of honour, by which we were not at liberty, consistently, to compete with the company; but it was necessary that we should brush that away and make that point clear to the public. Then there was another point. My right honourable Friend seemed to think that we had brought a very unfair charge in our Report against the company by saying that one of their strong points which they relied upon is that they can pick and choose their subscribers. Now we hold that in the public service there should be no picking and choosing of subscribers.

*SIR J. FERGUSSON

I did not say so> and I said nothing of the kind.

*MR BOSCAWEN

But if the company has the power to refuse new subscribers, which it has, it is perfectly clear that they have the power to pick and choose and refuse as much as they like; and we contend, and we contended before the Committee, that a public service like this should be open to everybody, and that there should be no power whatever on the part of anybody conducting such a service to pick and choose, or to refuse anybody who is anxious to come on and make use of the telephone. Well, now, there is one other point of my right honourable Friend—he says that we have conjured up a fancy idea that in 1911 the Post Office will be forced to buy up the undertaking of the National Telephone Company at a fancy price. I must say that I do not think that there is any idea of them buying out the undertaking, the only question is of their buying out the plant; but the Post Office are bound to consider this—that unless they take some steps in the meantime, they will inevitably be put in a very difficult position. In 1911 either one of two things must happen—that the Post Office must buy the plant of the National Telephone Company at a price to agreed on between the company and the Post Office, and that will probably be a very high price; or else the whole telephone system of the country must come to a dead stop, which is a state of affairs which nobody can contemplate for a moment. Unless precautions are taken now, in the years which elapse between now and 1911, and unless the Post Office begin to set up their own system, the price of the Telephone Company will be forced up to a very much greater figure than it is really worth in 1911.

*SIR J. FERGUSSON

What grounds have you for saying that?

*MR. BOSCAWEN

My grounds are simply these: the Post Office cannot re- new the licence in 1911, and they cannot put a stop to telephony at that date. They will have to come to you and buy your plant, and the National Telephone Company will be their masters, and they will have a very strong say as to what the price of the plant is to be. In the interests of prudence the Post Office would be very wise indeed to take some precautions in the meantime, and either set up a plant of their own or else enable municipalities to set up a competitive service wherever they are willing to do so. My right honourable Friend reminds me that the plant might be bought by the Post Office under the Arbitration Clause in 1904, when arbitration may take place between the parties; but I happen to know that one party, the National Telephone Company, have a very inflamed idea of the value of their plant. I venture to think that there would be a very enormous waste of public money if the Post Office bought the plant in 1904 at a price which would be much higher than it is really worth. Well, I think that at the Committee—which performed very arduous duties—it was proved up to the hilt that, first of all, the present telephone service is absolutely inadequate; secondly, that competition is immediately wanted; and thirdly, that the only two possible forms of competition were, firstly, by the Post Office, and secondly, by municipalities. Now as to these two forms of competition, both of them are proposed by the right honourable Gentleman the Secretary to the Treasury. As far as the Post Office goes, I think every member of the Committee realised the force of the words which were inserted in the Report to the effect that though they might have confidence in the Post Office in this question of telephones in the future, they had no confidence in the manner in which the competition of the Post Office had been conducted in the past, which had been ineffectual. Nor would people have confidence that the Post Office would do any better in the future than in the past unless they set up an entirely new telephone department, as is intended, to compete with the National Telephone Company, under which the Post Office would start an effective service and not repeat its old practice, which consisted in never attempting to get new subscribers and granting to its rivals every possible concession and advantage. Then as to municipalities, I personally think that if the Post Office can avail itself of the assistance of those municipalities which are willing and able to undertake to provide telephone services, as they have provided gas, and water, and the electric light, and so on, I think that will help the Post Office to bridge over the interval between now and 1911 very effectively indeed. But you cannot expect municipalities to undertake to provide a service of this kind, considering the very short period which their licences would have to run, unless they got a really effective guarantee from the Post Office that what is valuable of their plant will be taken over by the Post Office when their licences expire; and, therefore, until we see the words of the Bill it will be impossible to see what the Government propose in this respect. I think what the right honourable Gentleman the Secretary to the Treasury said to-day on this point will give a great deal of satisfaction, for he stated that it is intended to take over this plant wherever it is useful and wherever it can be turned to good account by the Post Office service later on. There is one point, however, which I wish to criticise in the scheme of my right honourable Friend. He said that the municipalities or local authorities to whom this power would be extended, and who are to enjoy the right to carry on these services, will be limited to towns of over 50,000 inhabitants—in fact, to county boroughs. Well, I confess that I cannot see any reason for drawing that minimum. I think that there is every reason for allowing any local authority, provided that it shows certain guarantees that it is willing to do this service, and able to do it—I think under such circumstances any local authority ought to be allowed to do it. I would point out that in making this limit my right honourable Friend is departing from the recommendation of the Select Committee itself. The Select Committee recommend this— We further consider that when in an existing area in which there is an exchange the local authority demands a competing service, the Post Office ought either to start an efficient telephone system itself, or grant a licence to the local authority to do so. In that case there is no question whatever of any limit to the number of inhabitants. In the next paragraph, which speaks of areas where they have got no exchange it states that— In such cases the Post Office should either start a service of its own or should grant licences to the local authorities to do so, subject to proper regulations. Therefore, it is clear that the Select Committee intended that any local authority that showed that there was a reasonable demand for a service, and gave a reasonable guarantee, should have the right to establish one. I must point out also that there are extra reasons for this. My right honourable Friend has told us that 97 per cent, of the messages sent on the telephone are local messages, and that they ended in the same area in which they originated. If that is so, surely it is a very strong reason in favour of a local service being granted to every local authority which applied for it. I think that everybody on the Committee will agree that there is no doubt about it that what the company most feared was not so much Post Office competition as municipal competition. I am sure there are many places, perhaps just under 50,000 inhabitants, which would feel that they can compete far better against the company by themselves than they could through the Post Office. I may mention that Sir Spencer Walpole, the late Chief Secretary of the Post Office, admitted in his evidence before the Select Committee of 1898 this. He said— I do not think that a Government Department is likely to prove a very active competitor. A Government Department, from its very nature, will not so actively compete as a private competitor who has a pecuniary interest in the matter. I do not think that great public departments move with rapidity and efficiency in competition. Well, Sir, I am not arguing in the least against Post Office competition, because I recognise, in the end, that the telephone system must come to the Post Office. But I do say that in the meantime, if you want competition started effectually, the more opportunities you give to local authorities the better, and I should very much regret if the Government adhere to their intention of limiting these powers to places of 50,000 inhabitants. That is the only point in which I am in disagreement with my right honourable Friend. I thank the Government for having taken this matter up in the way they have done, and I earnestly believe and hope that in the course of the present year we shall see the end once and for all of the monopoly of the National Telephone Company.

*MR. PROVAND (Glasgow, Blackfriars)

I think I ought to congratulate the Government upon the admirable Bill which has just been introduced. It is a matter of general knowledge that our present service of telephones is very inadequate, and it is notorious that if we compare it with the systems of other countries we are very much behind them. Why, even Switzerland, Sweden, and Norway, and a number of other foreign countries have a much better and cheaper telephone service than we have. Although these countries do not collectively transact as much commercial business as we do, yet their telephone service is infinitely better than ours is. A cheap, effective, and adequate telephone service is as necessary to the commercial community as a railway or steamboat service, and commerce is as much handicapped by inadequate telephone service as by inadequate railway service. In the United States and Canada, where materials cost a great deal more, and even where labour in some American cities cost twice as much as in this country, they have cheap telephone service where they have no monopoly. It is in some towns as low as 15 dollars a year, and I believe we shall have it for 15 dollars a year here within two or three years if the Government encourage the muncipalities to go ahead and compete as rapidly as they possibly can. Now, the right honourable Gentleman spoke of creating a Post Office telephone exchange in London. Well, unless he is going to make a fresh departure altogether in Post Office competition, it will be a very disappointing exchange, because the past history of the Post Office competition with the National Telephone Company has been a melancholy failure. As a matter of fact, in towns where the Post Office and the National Telephone Company were in competition, the Company have shut up the Post Office exchanges. This has hap- pened in Hull, Leicester, Derby, and other places. The Company has also taken away many of the subscribers to the Post Office exchanges even in such places as Newcastle, where the Exchange is still open. The determination of the Government to give municipal licences is a genuine, large, and substantial concession, but I agree with the last speaker in desiring that the Government shall not limit the licences to municipalities which have more than 50,000 inhabitants. I think there are only seven or eight towns in Scotland which have more than 50,000 inhabitants, and I am sure there will be two or three times that number of towns desirous of applying to the Government for municipal telephone licences—indeed, I expect to see Scotland entirely municipalised so far as the telephone service is concerned in the course of a few years. I hope the restriction which limits the Bill to places of over 50,000 inhabitants will be withdrawn, and that the power will be granted to any local authority which can comply with the conditions. If the Treasury will do that I am sure that we shall have Scotland better telephoned than any country in the world in a very short period. Now, we had the right honourable Gentleman opposite on his defence with regard to the National Telephone Company, and he spoke of Glasgow. Well, I have not one word to say against the National Telephone Company in regard to the defence which the right honourable Gentleman makes. Their duty was to make all the money they could, and they have done so from the very first day when the company was organised, in 1882, down to the present moment. If they ever lost an opportunity of making all they possibly could they have succeeded in keeping it a most profound secret, for nobody ever heard of it. But what the right honourable Gentleman has said about Glasgow requires a little explanation. He blames us there for not having a better service, and gives, as his reason, that the municipality would not give the telephone company the right to lay the wires under the streets. Why, the worst thing about the Glasgow service is that it is a single wire instead of a double wire. The municipality of Glasgow have never interfered with the company as regards their wires. They might reconstruct their whole system if they liked to-morrow, but they have never put up double wires, which no one objects to their doing. The Glasgow service is the worst in this country for a large city. We all understand what the National Telephone Company want, for we all know that their idea of co-operation with the Post Office in the future, as it has been in the past, is that they desire the Post Office to act as the agent of the company. The Post Office has done nothing for the public service since 1892, but everything they could for the National Telephone Company. No licences were given and competition was suppressed. What the Company desire is to have their monopoly, which they have now, maintained down to the year 1911, and then to sell it at a monopoly price to the Government. I am sorry the right honourable Gentleman said that they could not force the Government to buy it in 1911. Why, the Government would be unable to help itself. Whether they purchased the telephones by private contract, or whether they bought them under the clause of the licence—the clause which I may call the arbitration clause—and they must purchase under one of these two conditions—I have no doubt that if they allow the monopoly to continue until 1911 before they purchase, they will lose quite 20 millions sterling by so doing. Buying the telegraphs was not anything like so bad as would be allowing the company to have a monopoly until 1911, and then buying them out. But the courage of the Government has caused them to take this matter in hand, and we shall have, I hope, in consequence, in a few years, the full advantage of a good telephone service. Now let me show what the difference will be to the city of Glasgow, because a single fact is sometimes very much more striking than a considerable amount of argument. At the present time we are charged from £10 to £25 for service, and the municipal telephonic exchange will supply the same service for about £5. That is to say, we shall pay just about half the amount of the lowest price service we now receive, and about one-fifth of the highest price. The advantages to Glasgow, therefore, obviously, will be enormous, and I do not see why the advantages to other cities should not be equally as great. The right honourable Gentleman has told us that they are going to make the rate in London £3, but he does not say how many "calls" he will give us for £3.

MR. HANBURY

No "calls." You will pay your subscription of £3, and pay for your "calls" afterwards.

*MR. PROVAND

In that case the £3 will be merely entry money. Are subscribers to get no "calls" except by paying for them?

MR. HANBURY

No; it gives you no "calls" at all.

*MR. PROVAND

Then I hope we shall have some particulars in the Bill, when it is circulated, as to the "call" rates. There are also one or two questions I should like to ask the right honourable Gentleman. I should like to ask him whether he will give us with the Bill a copy of the licence which it is proposed to give the municipalities—a draft copy; and if there will be any terms in the Bill with regard to telephone manufactories. He alluded to them before he sat down. He suggested that at the present time there was hardly any part of this quesion more important than that. The largest manufactory in the world—I am speaking of foreign manufactories—has recently, by an agreement made with the National Telephone Company, agreed that it will not sell to any licencee of the Post Office. Therefore, when any municipality gets its licence it will not be able to buy its instruments from that firm—I speak of the foreign house—and, therefore, I do think that some condition ought to he made, in order to enable the municipalities to do so. The last question I should like to ask the right honourable Gentleman is, When shall we have the Bill before us? Will it be within the next few days?

MR. HANBURY

The Bill will be circulated directly we get the First Reading.

*SIR J. LUBBOCK (London University)

As I was one of those who took a part in the introduction of the telephone to this country, perhaps I may be allowed to say a few words upon the subject now before the House. I may say at once that I am not a director of the National Telephone Company, but I have watched the proceedings of the company very carefully, and I must say that the comparatively slow progress in the use of the telephone in this country cannot, I think, be charged to the company. I believe it is due, in the first place, to the difficulties made by the municipalities, and, in the second place, to the heavy payments that the company have had to make to the Post Office. I do not complain of the officials of the Post Office, because I suppose they were bound to insist on these payments, but it is obvious that the Company is heavily handicapped by them. It is paying £100,000 a year to the Post Office, and if this was not the case, of course the charges could be reduced considerably. Those are the main reasons that have kept the telephones back in this country, and they also account for the fact that the charges are somewhat higher here than they are abroad. Of course, when we come to a place like London, the charge must be higher than in smaller cities, because, as the honourable Gentleman the Member for Manchester pointed out, it is much easier and cheaper to work a small system than a large one, which receives so many more "calls." Honourable Gentlemen who have spoken on the subject this evening have given the House the impression that the fortunate people who have taken the telephone up are making very large profits. It is not necessary for me to point out to those who know anything about this subject, because they know it perfectly well, that this patent has been one of the most successful, and it is only fair that those who have embarked their capital in it should have a fair return for the money which they have invested. I believe the original investors are only receiving 7 per cent, for their money, and where you have to deal with a highly successful patent that is a very moderate return, after all. And when you consider that nine patents out of ten come to nothing, and return no profit, it is obvious that no one would take up any new inventions unless there were some patents which came out well and gave a fair return for the money they invested. That is a reason why we should ask the Government to deal fairly and even liberally with patents of this kind; though I cannot say that the Government have done so in this case. I have listened with great attention to what the Secretary to the Treasury proposed, and I am bound to confess that, in my judgment, there is a great deal of force in what my honourable Friend the Member for Manchester said upon that subject; but I do not want to go into that part of the question, because it is rather intricate, and although the right, honourable Gentleman's explanation was extremely lucid, it is better to wait till we see the Bill. I confess that I very much doubt whether we shall find, in the long run, that the acquisition and the working of the telephones by the Post Office instead of by the company will yield the profit that is anticipated, or will cause the telephones to be more efficiently worked. What is our experience of the telegraph and the telephone? The telegraph is worked by the Post Office, and before it was taken over we heard a good deal as to the inefficiency of the companies which were managing it; it was taken over, and now we find that the expenses of managing it far exceed the expenses of its management by the company, and that the use of telephones which are managed by a company has far outstripped the use of telegraphs which are in the hands of the State. If we are behind in telephones, we are still more behind in telegraphs, and yet you are going to take the business out of the hands of the company which has been more successful and place it in the hands of the State which has been less successful. The Secretary to the Treasury admits that there are places where the postal telegraph and the telephone company have come into, I will not say conflict, but certainly into competition, and in all these cases the company has driven the Post Office out of the field. We have heard some observations from honourable Gentlemen as to profits, and it appears to be a general impression that the Post Office is going to make very great profits by taking over this business. I remember perfectly well that the same was said when the Post Office took over the telegraphs; but if honourable Gentlemen take the trouble to look up the telegraph returns they will see that, so far from having made any profit, the loss on the telegraphs has been £8,000.000, and is increasing. Last year the loss was £600,000, and I shall be very much surprised if 10 years hence the Post Office authorities, instead of having made the profit which they anticipate, do not find that the balance is largely on the other side of the account. The Government are now encouraging municipalities to go into another class of enterprise, and it was only the other day that they announced the appointment of a Joint Committee of the Lords and Commons to inquire into what were to be the limits of municipal enterprises, and what businesses were to be undertaken by municipalities; and at this very present moment, when the Chambers of Commerce throughout the country are complaining of the tendency upon the part of municipalities to take up and engage in private enterprises, the Government are giving them under these proposals encouragement to embark in an entirely new line of business. Even towns with 50,000 inhabitants are to be encouraged to set up telephonic operations. If they have skilled advice this will be very expensive, and if not they will make mistakes and lose money. The system will be much more expensive than if the telephones were managed by a great institution like the National Telephone Company. If municipalities are really to undertake all the different matters which it is now suggested that they should take up, the work of the local authorities will be enormously increased, and their indebtedness will not only equal the National Debt, but very far exceed it. Honourable Members who advocate these proposals say that the Telephone Company has not been conducting its business properly, yet it has a Board of very able men, and I greatly doubt whether the municipalities will conduct it as well. I am very much afraid in the long run that the tendency of these proposals will be to check telephonic communication still further, and to increase still further the local indebtedness. If I understand the proposals rightly, they are very hard on the shareholders, and will tend to deter any others from endeavouring to develop any new invention. I hope, however, that the Government will deal fairly with the Telephone Company. I regret that they should encourage municipalities to undertake the responsibility of carrying on a new branch of industry which I am afraid will, far from resulting in the large profits that are anticipated, add to the amount of municipal indebtedness, and to the ever-growing burden of our rates.

MR. OLUROYD (Dewsbury)

I will not follow the honourable Gentleman into the discussion which he initiated as to the capacity of the municipalities to compete in the working of a matter like this connected with the operation of the telephones. But I think the honourable Baronet has overlooked, or forgotten, the fact that in connection with the working of telephones, whoever undertakes it will find it necessary to have access to the roads under which the lines are laid, and in dealing with the streets they are interfering with a matter which deeply concerns the municipal authorities, and one upon which they spend a consider able proportion of their income. Now, the right honourable Gentleman, in the very lucid and material statement which he made to the House just now of the intentions of the Government, intimated that the licences to municipalities were to be limited to boroughs of 50,000 in habitants or thereabouts. He was not very precise as to what boroughs he in tended to refer to—

MR. HANBURY

Oh, yes. I mentioned county boroughs.

MR. OLDROYD

However, he mentioned that the licences were to be limited to boroughs of 50,000 inhabitants. Now, I should very much like to join with my honourable Friend the Member for Tunbridge Wells, who called the right honourable Gentleman's attention to this point, and asked him to reconsider his suggestion. In the West Riding of Yorkshire, as is pretty well known, municipal government has been extremely popular for a very great number of years, and the right honourable Gentleman will find, if he inquires into the matter, that even in the same telephone area there are cases where there are several municipalities, each of which has fewer inhabitants than the 50,000 limit laid down by the right honourable Gentleman. Those boroughs are very often grouped together—in fact, in the case of the constituency which I have the honour to represent in this House, we have a case in which there are no less than three boroughs absolutely contiguous to one another, all in the same telephone area, in which it will be found that in each of the boroughs the inhabitants are considerably under the number named by the right honourable Gentleman. I desire very much to illustrate this fact, because it is undoubtedly of the very greatest importance that they should have telephonic communication one with another. It happens that in the case of these three boroughs to which I allude they are engaged pretty much in the same trade, and the amount of communication which takes place between them is absolutely enormous. In fact, the communication between them practically constitutes the whole employment and occupation of the district. Therefore, the right honourable Gentleman will see at once that telephonic communication between those places is of the very first importance, and I hope, under the circumstances, he will reconsider this point, and, at all events, will arrange, if possible, that licences shall be granted, if not to individual boroughs of this character, at all events to a combination of them. That principle is carried out with regard to water supply, and with reference to sewage disposal, and also isolation hospitals, and it is a plan which has been found in the past to work with great advantage to the boroughs concerned. I trust, therefore, without extracting an explicit promise from the right honourable Gentleman, that he will give us some assurance that he will reconsider this matter, and if, in his opinion, there will be an advantage to boroughs of this character by adopting the suggestion that I make, he will consider each case and give them the privilege of conducting this enterprise on their own behalf.

MR. BARTLEY (Islington, N.)

In the few remarks which I offer to the House upon this question I should like to speak more especially with regard to London and the constituency which I have the honour to represent, a small part of which does feel very keenly that there ought to be some change in the management of the telephonic system of communication m the metropolis. There is no doubt whatever that London is very far behind, not only what it desires, but what is required. At the present time many of the inhabitants in our district are unable to use the telephone because of the expense, and they feel the want of it very keenly indeed; and although I feel the force of the contention of my honourable Friend, it does seem to me that the Post Office is going to make an undoubted and proper step towards an improvement of the telephonic system in the metropolis, so as to meet the requirements of the smaller people. I have the honour to represent a district which is not rich, and one in which the telephone is not used very much, but there are a great many complaints as to it, and unless some change is made in the system it will not meet the requirements of the smaller people. The scale of payment which is in force now is not by any means a fair one; it is too cheap to those who use the telephone all day, and it is far too dear to those who only use it once or twice, or possibly only a few times during the day. The same amount is charged to those who scarcely use it at all as is made to those who use it in the extravagant manner to which I have alluded. Those who use it, say, 200 times a day, and use it constantly, get it almost for nothing; that is what it comes to; and a change in the system is absolutely necessary. The right honourable Gentleman has alluded to some privileges which are given to certain subscribers to the telephone, and the honourable Baronet behind resented the statement; but we must face the matter as it stands, and it has come to my knowledge that there are cases in which a preference is given which works very unfairly. One of the practices is this, that unless you give for some time most unreasonable facilities for posts on the top of your house, for instance, the company will not supply a telephone at all. What we want in London is a system by which one must accommodate another as much as possible, and by which everybody who wishes it can have an instrument applied as rapidly as possible. The right honourable Gentleman the Member for Manchester said the only reason why the Post Office had not competed before was because the company was doing its work in a proper manner, and they could not do it better. The evidence given before the Select Committee by Mr. Preece with regard to Plymouth gave a different version. With reference to Plymouth he said— Well, take Plymouth: in fact, f referred to Plymouth in my evidence before the 1895 Committee. We went to Plymouth—that is, the Post Office—not as a speculation, but in obedience to the requisition and at the request of a certain number of people in Plymouth, and we established an exchange of the most approved system; but having got our exchange to work, we excited the envy, the jealousy, or the malice, or I do not know what, of the Telephone Company; and they thought If the Post Office can establish an exchange in Plymouth, we may just as well do the same. Ho they went down there, and the first thing, or the earliest thing, they did was to go to every one of our subscribers and offer them telephones for nothing during the continuance of our five years' agreement, and they were supported there by extremely active and energetic people, especially one connected with the Press, by free service, and by other things. Oar exchange during the five years did not increase—theirs did; and at the expiry of the five years' agreement we lost our subscribers. Now that is not what I consider to be fair competition in any way. It is certainly not reasonable that the Telephone Company should go down to Plymouth, and actually beat out the Post Office in this manner and give telephones for nothing; and when unfair competition is talked of by the right honourable Gentleman the Member for Manchester it is only fair that I should give this instance of what came out in the Committee. Now, having referred to the localities, the Committee reported that the Post Office should have a right to establish telephonic exchanges where required. Now, I agree most heartily with the right honourable Baronet the Member for the London University in thinking that it is most undesirable to extend the limits of working and trading of the municipalities, and that they should be restricted as much as possible; but there are cases in which they must do the work if it is to be done at all; and considering that the telephonic system can only be conducted by means of underground wires, and considering the fact that the telephone is becoming, or rather has become, a necessity for business people, it seems to me that you cannot allow a private company to interfere with the streets and roads of any particular locality; and that being; so, the only way in which this work can be done is to give it over into the hands of the municipalities. I, for one, agree most heartily with the recommendations of the Committee. I should, however, be very sorry to see the company suffer any unreasonable or unfair hardship, because I think we owe it a great debt for its work in extending the telephone system. It has got a most able manager, who has done a great deal for telephonic communication, and we ought to treat it fairly and properly. But there are fair ways also of treating the public, and the time has now come to establish a real system of telephonic communication in London and the Provinces, and I sincerely trust that the result of this Measure will be to put it within the means of the trading classes of this country, especially the small traders, in whom we ought to be all specially interested, to avail themselves of the advantage of the telephonic system.

*MR. HEDDERWICK (Wick, Burghs)

I do not intend to speak on this Resolution at present, but I would like to ask the right honourable Gentleman a question. I gather from his statement that municipalities with a population of 50,000 will be allowed to supply themselves if they so choose, but I want to know, if the right honourable Gentleman will be kind enough to tell me, what will be the position of municipalities with a population of less than 50,000. Are they to be swept into the Bill, and if so, will the Post Office have authority to open streets without the consent of or application to the municipal authorities? To be frank with the right honourable Gentleman, if the Bill is to confer that power, then I am afraid that I, for one, and others also, however reluctantly, will have to oppose that proposal.

MR. HANBURY

The Post Office everywhere has the right to take up streets subject to the veto of the local authority, which veto is subject to appeal to a county court judge or other judge.

*MR. HEDDERWICK

Will that continue?

MR. HANBURY

Yes, that remains.

*MR. FAITHFULL BEGG (Glasgow, St. Rollox)

As two of my colleagues in the representation of Glasgow have spoken in favour of my right honourable Friend in reference to this subject, I am, therefore, all the more anxious to offer a few remarks, because I am thoroughly opposed to the opinions they have expressed, and I am strongly of the view that this new departure on behalf of the Government is a mistake, like all previous attempts they have made to deal with the question of telephones in this country. I agree as to the boldness of the proposal, but I think it will in all probability result in disastrous failure. It will, perhaps, be in the recollection of some Members of the Committee, when I call to mind the Debate which took place last year previous to the appointment of the Select Committee that I took a line then which, I think, was not taken by any other speaker in the Debate—namely, that the only cure for the trouble which had grown up around this great question was the immediate purchase by the Government of the interests of the Telephone Company, and the carrying on of the whole telephonic system of the country by the Post Office, and by no other means. Since then I have seen no reason to alter' that opinion. On the contrary, both the evidence taken before the Committee more particularly, and the opinions which have been expressed in the Press and throughout the country by local authorities, have led me to hold that view even more strongly now than I held it at the time to which I refer. Why, Sir, it is no exaggeration to say that the agitation which led up to the Debate in this House and the appointment of the Select Committee was not so much an agitation on behalf of municipalities anxious to participate in this business as an agitation against the Government for the neglect shown by it in the past, and for the incapacity it has displayed throughout in connection with its efforts in this matter. Even the Glasgow Corporation was of opinion, and is still of opinion, that what is wanted is not so much municipal licences and competition, but an efficient Government service—meaning by that, the inclusion under the Post Office of the whole telephonic system. I wish to draw the attention of the Committee to a matter which has not, as far as my recollection serves me, been referred to by any previous speaker; and if any member of the Select Committee is present, perhaps he will give us information on the point. I wish to ask why in its report this Committee went out of its way, if I may so speak, to report upon a branch of the subject not included in its reference: and why, on the other hand, it has neglected to give the House any information in the report upon an exceedingly important aspect of the question which was dealt with by the expert witnesses produced by the Government, and which was within the scope of the Enquiry? The reference to the Committee was undoubtedly limited to the question whether or not municipal and local authorities should be permitted to establish telephonic exchanges. There is not a word in the reference regarding any question of the Government undertaking competition, but the Committee in its wisdom included that matter in its report. It is quite true that in the proposals which have been made on behalf of the Government, the opinions of the Committee are being given effect to, and the Government can rest its policy on those. But my point is that a very much more important matter has been entirely omitted from that report, and it bears specially on the point which I desire to make. Some clear and unmistakable evidence was given before that Committee by expert witnesses on behalf of the Government. What are the facts? The evidence to which I wish to refer especially was that given by Mr. Lamb and Mr. Preece, who are both eminent experts. Mr. Lamb stated that in his opinion the telephone system was Post Office business, that it was against the public interest that there should be a competitive system of telephonic exchanges, and that the policy of the Department had been to take over the whole system; but he went on to explain that the Government had overruled the Department, and so on. He also said that if competition were engaged in it would result in very great waste, and finally, as a practical working consideration, he was in favour of a national system. As one illustration of waste, he gave the Committee a very good example; he mentioned a case in Newcastle, where the Government had a subscriber paying a rent of £500 a year. The National Telephone Company succeeded in getting him away from the Government, and the Government plant became useless. Later on the Government succeeded in persuading that subscriber that they could serve him better, and he came back. There was a case where there were three different installations for the convenience of one customer, and two-thirds of the money must have been wasted. That was the evidence of Mr. Lamb. The evidence of Mr. Preece was practically to the same effect. He said that the telephone service should be under one control—that is to say, that the State should boldly take up the matter and absorb all the telephone companies of the country. There was other evidence of experts from the Department also to the same effect. Now, with all deference, I submit that the Committee, which went out of its way to bring in questions of Post Office competition not included in its reference, should at least have given Members of this House, in a paragraph in its report, some inkling of the fact that leading experts called by the Government had given the evidence to which I have referred. I have said that nothing which has occurred since last year's Debate has altered my opinion. I should only, however, weary the Committee in giving them further expressions of opinion. I have here very numerous extracts from the public Press and from opinions of public bodies, and, without going into them in detail, I may say that Resolutions have been passed by the Council of the Associated Stock Exchanges and numerous other associated bodies. The same opinion is also given in the Press of the country, beginning with "The Times," and going through the whole provincial Press, that the only cure for the trouble and difficulty which now exists is that the Government should purchase the entire system. There is an idea that purchase would involve the expenditure of an extravagant sum. I do not think it need involve anything of the kind. In the first place, why should not arbitration suffice? We ought to be able to find men who, as arbitrators, would put a fair value on the Company's assets, taking into account all the considerations discussed to-day. All the expert evidence goes to show that competition in localities, by different systems ends in confusion and not in economy. What happens is that a subscriber is under the necessity of subscribing to both systems, and the difficulties are such that confusion and waste must inevitably follow. I for one consider it a very unfortunate thing that the Government should have decided to deal with this matter in this form. We shall have other opportunities of discussing the question in this House, and I will not detain the Committee at greater length, but it certainly seems to me that the Government have been exceedingly rash in their proposals. One result alone will be that the Government, with the money of the country, will be beating down the revenue from royalties, which now amount to about £100,000 a year. I have no doubt the Company will suffer. I am not concerned to defend it, it can defend itself; but it seems to me perfectly certain that, after engaging the country in futile competition with a well-organised system, you will, it may be, succeed in buying the Company's property for a less sum than at present, but you will have spent in the meantime in public money far more than the difference. You will have confusion in the telephonic system, and you will not effect your object, which is, I believe, to give an efficient system, and extend that system throughout the country. One point I should like to make before I sit down. It is with regard to the manner in which my right honourable Friend proposes to carry out his scheme—he proposes to deal with London first. In the Committee it was pointed out that what was wanted was an extension of the telephone system to rural districts, which cannot afford to pay high prices, and it seems to me that London is the very last place in which to begin. I know that there are few who take the view which I have expressed, but, having expressed it before, I desire to put it before the Committee at this stage of the discussion again, for the reason which I stated at the beginning of my speech.

*MR. COLVILLE (Lanark, N.E.)

The honourable Member speaks of the confusion and waste which would arise under the competitive system, but, so far from confusion and waste having arisen in Stockholm the reverse has been abundantly proved to be the case. The rates have greatly fallen, and the system is admitted on all hands to be as nearly as possible perfect. He has also told us that Glasgow has expressed itself in favour of a national system conducted by the Post Office, but he overlooks the fact that the Corporation of Glasgow ap- pointed two1 of its most responsible members to urge on the Select Committee the desirability of granting municipal licences for telephones. I daresay, however, he may have been referring to> the opinion that the Chamber of Commerce at Glasgow had expressed by a majority of its members that there should be a Post Office telephonic supply. That must not be taken as representing the general opinion of the community in Glasgow. The only question, raised that really seems to me unsettled is whether it is possible to set up a municipal system which can be brought within the reach of the great masses of the community. It is admitted on all hands that the present rates in this country do not compare with Continental rates, and that our high rates make it impossible for the poorer classes of the community to avail themselves of what is becoming in many places an absolute necessity. Therefore, the need for municipal competition has been growing. Surely the House has not been accustomed to hear such speeches as that which the right honourable Baronet delivered to the Committee in favour of the Telephone Company. I cannot conceive that the electors of North-East Manchester would agree with the arguments which he adduced in support of maintaining this monopoly which has for years failed to satisfy the requirements of the public, despite repeated advantages granted by different Postmasters-General for reasons best known to themselves. His contention is that this monopoly should be maintained, notwithstanding the fact that in the course of a few years the Government would have to buy out, at its own price, the plant of the Company, or set up, as is now proposed, a competitive system in London, and other municipalities. I cannot congratulate the right honourable Gentleman too heartily on the way in which he has taken the case up, after the unanimous report of the Committee last year. In the Provinces, as well as in London, there is a very strong body of opinion in support of the action of the Government, in this matter.

*MR. C. McARTHUR (Liverpool, Exchange)

It is the opinion of the community of Liverpool that it is desirable that tthe present monopoly should be put an end to; but it is considered that the only satisfactory solution of the question lies in the acquisition of the entire telephonic system of the country by the State. This is generally admitted to be inevitable in a few years. In 1911 the licences granted to the National Telephone Company -will cease, and it has been already pointed out in the course of the Debate that it would be impossible to defer the settlement of the question to that year, because, if that were done, the plant and staff of the National Telephone Company would have to be taken over at its own valuation unless the business of the country, so far as it might depend upon the telephone service, were to be dislocated. If it is desirable that some settlement should be made before, it seems desirable that it should be made as soon as possible, in order that the difficulties incidental to the present situation should be put an end to. There are two ways of doing this—one by competition, and the other by absorption. The right honourable Gentleman, in his scheme, has proposed the method of competition. He has indicated that a Bill will be brought forward for the purpose of enabling, not only the Post Office, but also certain municipalities, to compete with the National Telephone Company. So far as the Post Office is concerned, we have; ill along thought that this is the proper Department to entrust this work to, and we shall be very glad to see it occupy the held. I was also very glad to hear the proposal of the right honourable Gentleman to popularise this system. I think that will satisfy a great want, but, on the other hand, I did not hear with equal satisfaction his proposal to endow municipalities all over the country with a population of 50,000 and upwards with power to establish telephonic systems of their own. I quite agree that would tend to cause great confusion. At the present time there is a want of harmony between the National Telephone Company and the Post Office. That is not likely to be obviated when the Post Office enters into active competition with the company. It also seems to me that there is great danger of these municipal districts overlapping each other, and also of smaller districts between the municipal districts being neglected. The feeling entertained in Liverpool with regard to the National Telephone Company is this—it is recognised that it has done good work in the past to the best of its ability, but it is felt, however, that no additional powers should be granted to it that would have the effect of confirming its position and making it more expensive to buy it out. On the other hand, it is felt that the company ought not to be treated in a niggardly or oppressive manner, and that the best thing to be done under the circumstances would be to endeavour as soon as practicable to purchase it for a reasonable amount, to be ascertained by arbitration. Experience shows that four conditions are absolutely necessary for the proper working of the telephone system of the country: Firstly, centralisation of management raid administration; secondly, uniformity in system and method; thirdly, complete command of public facilities; and fourthly, complete intercommunication between subscribers. Those advantages cannot be obtained, as far as I can sec, by any municipal system, or by any competing system, such as was suggested by the right honourable Gentleman in his statement, and if his proposal is adopted I hope it will be regarded as only temporary until it is possible for the State to acquire the entire telephonic system of the country on favourable terms.

MR. WEIR (Ross and Cromarty)

It is not very often that I have occasion to congratulate the Front Bench, but I am pleased to-night to be able to express my thanks to the right honourable Gentleman the Secretary to the Treasury on the able way in which he has dealt with this matter, and for having agreed to deal with London first. The telephone system in London is, in my opinion, disgracefully mismanaged. I know of a case in which a gentleman who removed from one house to another was three weeks in his new abode before, he could get his telephone transferred. Some time ago the same gentleman was two months without any telephonic communication because some of the wires had got out of order, and because it did not suit the convenience of the National Telephone Company to put them right. If the system were in the hands of the municipality, or, better still, in the hands of the Post Office, I do not think there would be delays of this character. Hitherto the National Telephone Company have been in the habit of giving honourable Members of this House telephonic communication at their residences for£2 per month. When I, myself, asked for it, I was informed that the company had ceased to make this arrangement, and that a contract must now be entered into for five years at £10 to £12 per annum. The company has been evidently trimming their sails in anticipation of something coming. I am glad to see that the something has come through the medium of the Secretary to the Treasury, who, I believe, will have sufficient determination of character to push the matter forward, and not allow one of the worst monopolies in London to get the better of him.

MR. CALDWELL (Lanark, Mid)

As the mover of the Motion which led to the Telephone Committee being appointed, I rise to express my thorough satisfaction at the manner in which the subject has been dealt with by honourable Members of that Committee, and also with the manner in which it has been brought before this House by the right honourable Gentleman the Secretary to the Treasury.

*SIB J.FERGUSSON

Before the Question is put, I should like to suggest to the Government that an interval of at least two weeks should be allowed before the Second Reading is put down, so that the Bill in its details may be thoroughly considered.

MR. CAWLEY (Lanes., Prestwich)

I am glad that the right honourable Gentleman the Secretary to the Treasury has laid a sensible and workable scheme before the Committee. Honourable Members opposite have said that there would be some confusion under the new proposal, but a new system will develop an entirely new clientele. The cheaper you can get the telephone the more subscribers you will have, and the better it will be for the country at large. It is positively absurd to say that telephonic communication will be checked by being made cheaper. The telephone system has hitherto been a monopoly, and the public resent monopoly. Municipalities, in many cases, have, refused to have their streets taken up for the laying of telegraph wires simply because they resent the monopoly. It is confidently felt that telephonic communication can be secured for subscriptions of £5 or £6, instead of £8 or £10, as is now charged; and the public resent having to pay this high sum when, with competition, they could get it much cheaper. I do not think the cooperation of the Post. Office with the National Telephone Company has been of the slightest service. In fact, as far as. I can see, the co-operation between the Post Office and the National Telephone Company has been the continuance of monopoly to the National Telephone Company. The Post Office is merely helping the National Telephone Company to maintain a monopoly which has been against the general interest of the public. Another honourable Member opposite said he was afraid municipalities would not be able to maintain the telephone system properly. All the large municipalities manage their gas, water, and electric light supplies, and it does seem absurd, at this time of day, to say that they could not establish a telephone exchange. I have nothing more to say, except that I am very glad to think the right honourable Gentleman has been able to bring some sort of solution to this difficult question. I was a Member of the Committee, and I confess that I did not myself quite see the solution of it. The right honourable Gentleman, how-ever, has brought forward a scheme which, I am sure, will prove a workable one.

MR. STUART (Shoreditch, Hoxton)

I do not wish to prolong the discussion, but having taken a great interest in the work of the Committee, of which I am a Member, I wish to mention one point which I have not heard emphasised, at any late during the present Debate. I remember no Committee which met together on more varied points of view, who have paid more unremitting attention to their work, and who departed with a more unanimous decision. There was absolute unanimity in the Report of that Committee, and if you look at the names of those who formed the Telephone Committee, and consider the interests they represented, I think you will find that its Report makes a firm bed-rock upon which the Secretary to the Treasury can erect his superstructure. At this stage of the Bill it is rather a mistake to endeavour to deal with it as if the Bill was before the House, and I will reserve my criticism and views upon the details of the Bill. All I will say now is that the right honourable Gentleman has honestly endeavoured to carry out the recommendations of the Committee. But, Sir, there was one thing which, though not in the recommendations of the Committee, was in the mind of every Member of the Committee—namely, that while vigorous Post Office action was necessary, it was felt that the Post Office, if it intervened, could only effectively intervene, if I may say so, "with the gloves on," and take the matter up from a thoroughly business point of view with the determination to go into the matter as business people would. I think the right honourable Gentleman will bear me out in saying that that was present to the mind of many of us. We felt that the Post Office in the past had largely failed because of the Treasury regulations by which it was beset, and it is to the Treasury, as well as the Post Office, that we have to look for the success of any scheme brought forward. As the right honourable Gentleman is himself connected both with the Treasury and the Post Office, let us hope that that is at any rate a good omen that a thorough business competition, with the necessity for which I feel sure the right honourable Gentleman himself is thoroughly impressed, will be carried on.

Question put.

Resolution agreed to without a Division.

House resumed.