§ Motion made, and Question proposed, "That the Agreement between Marconi's "Wireless Telegraph Company, Limited, Commendatore Gugliemo Marconi, and the Postmaster-General, with regard to the establishment of a chain of Imperial Wireless Stations, be approved."3206
§ The POSTMASTER-GENERAL (Mr. Herbert Samuel)
On behalf of my right hon. Friend (Mr. Masterman) I beg leave to move the Motion which stands in his name. I do not anticipate that the House will be ready to arrive at a decision on this matter to-day, but it is for many reasons desirable that without further posponement a statement should be made of the course of the negotiations that led to the conclusion of the contract with the Marconi Company for the erection of a chain of Imperial wireless stations, and that a fuller explanation of the terms of the contract should be given to the House than has yet been possible. On two points I think there will be no disagreement. The first is that the erection of long range wireless telegraphy stations at suitable points throughout the Empire is in itself desirable; in peace they will be useful for commercial purposes, and are likely to contribute to the cheapening of telegraphic communications between various portions of the Empire. In time of war—and however little we may anticipate war, it is of course the primary duty of the Government to make provision for Imperial defence—should war unhappily occur, cables are always liable to be cut, and of course it is for strategic reasons exceedingly desirable that some alternative means of communication should be provided, and, further, that it should be a means like this, which enables communication to be kept up with the Fleet and with merchant ships. The problem of our Empire is largely a problem of communications, and the more the Government is able to improve Imperial communications the better it is.
The second point with respect to which I think there will be no controversy is that these stations, when they are erected, ought properly to be in the hands of the Governments in the different parts of the Empire, and should not be in the hands of a private company. In March, 1910, the Marconi Company requested the grant of a licence for the erection of long range wireless stations at eighteen points throughout the Empire. They promised that they would charge low rates for telegraphic communications between those stations. They asked for no subsidy and for no payment of any kind, but that their licence should be for a period of twenty years, with the right of purchase at the end of that time to be in the hands of the Government. That offer naturally received the very full attention of the Government, and was considered for some time. It was an 3207 attractive offer. It involved no expenditure on our part; it would have enabled the rates for communication to have been reduced, but, on the other hand, it would have given the Marconi Company a monopoly of this form of communication throughout those parts of the Empire, for wireless telegraphy is in itself to a great extent a natural monopoly. It is impossible to erect a number of stations side by side with one another in a comparatively small area on account of the risk of mutual interference. If this request of the Marconi Company had been granted they would have had in their own hands during a period of twenty years the entire control of wireless telegraphy through large areas of our Dominions. Further, the Government would not have been able to have ensured that the most efficient system at any time could be adopted. They would not have had power to put into the stations newer inventions which might have been made available, and consequently they could never have been certain that the system would have been the most efficient possible at the time. Further, at the end of the period of twenty years, if the Government wished to purchase, they might then have to purchase at a very high price. For these reasons the Government came to the conclusion that the stations must be State-owned and could not be in the hands of a private company.
At the end of June there were three Committees which considered the matter—the Cable Landing Rights Committee, which is a Departmental Committee, representing all the various Departments interested in cables, with as Chairman the Parliamentary Secretary to the Board of Trade; a Sub-Committee of the Imperial Defence Committee; and the Imperial Conference itself, in June of last year, also had the matter before it; and all those three bodies, in the summer of last year, were unitedly of opinion that wireless stations ought to be erected at suitable points in the Empire, and ought to be State-owned and not in the hands of a private company. So far the House will be agreed that the stations are desirable and that they should be State-owned. When the Imperial Conference came to that conclusion, I took steps to form a Special Committee in order to work out a scheme, and that Special Committee was formed in the summer of last year. It consisted of representatives of the Treasury, of the Admiralty, of the War Office, of the India 3208 Office, of the Colonial Office, and of the Post Office. The High Commissioners of Australia, New Zealand, and South Africa were good enough to accept seats on the Committee and attend its meetings. All the Government experts in wireless telegraphy were also members of that Committee, which was a large Committee, consisting altogether of about twenty members. I acted as Chairman. The Committee first met on 9th August, 1911, and, after considering the question where the stations should be placed and in what way the Governments concerned could best cooperate, it proceeded to consider what steps could properly be taken in order to secure the erection of these stations. Three courses were open to the Government. It might have taken upon itself to erect the stations through its own engineers and officers; it might have invited tenders from any contractors who considered they were in a position to erect them; or it might have negotiated with the Marconi Company, which had previously made a further offer of a different kind, to which I will refer later.
On the question whether or not the Government should itself erect the stations it was at once clear that the Post Office was not in a position to do so. Although we have a number of comparatively small wireless stations around our own coasts, the Post Office has no direct experience of the working of long range telegraphy, and although it is carefully watching its developments throughout the world, its engineers and officers themselves have not had direct experience of the actual direction and management of long range stations. Further, we have not the staff which could possibly undertake so vast an enterprise as this. The Admiralty might have been in a position to erect the stations, and were prepared to do so if it was necessary, but they were very reluctant to undertake the work for the reason that it would have meant devoting the whole of their expert staff to this enterprise during a period probably of some years, and diverting them from their proper and normal duties of looking after the wireless telegraph system of the Navy on board ship and on land. It was, however, decided that, if necessary, the point should be further considered. The natural course, no doubt, when any Government Department or Departments undertake any enterprise of this character, which is to be carried out by outside contractors, would be to throw the matter open to public tender, 3209 and at the first meeting of this large Committee to which I have referred, that course was fully discussed. It at once appeared that there was no company in any part of the world which had practical experience of continuous long distance working of wireless telegraphy. That was stated to the Committee by the expert representatives of the Admiralty, of the War Office, of the India Office, and of the Post Office, and all agreed that there was no company in any part of the world which had that experience except the Marconi Company. It is true that there were one or two syndicates and companies which were working and had worked various forms of wireless telegraph systems, and which occasionally had covered very considerable distances.
It is a well-known fact in the science of wireless telegraphy that remarkable distances are from time to time—atmospheric and other conditions being favourable—reached by comparatively low power stations. Our own Post Office station at North Foreland, which has a normal range of regular communication of 250 miles, has occasionally exchanged messages with the Mediterranean, but that is rare. The Marconi station at Clifden, which is in regular day by day communication, for very many hours per day, with Glace Bay, in Canada, which is a range of 2,000 miles, has transmitted signals as far as Buenos Ayres, which is a distance of 6,000 miles. There are certain systems, which are now being experimented with, which occasionally have covered what experts call "freak distances." That is a very different thing from being able to maintain continuously, through atmospheric and other interruptions, a commercial service day and night at all times of the year. It was impossible in this matter to go into the market and to ask various firms, "How much are 2,000 miles' wireless telegraph stations per half-dozen?" The science is now, its operation is of extreme difficulty, and the Committee came to the conclusion that it was not advisable for that reason to throw the contract open to public tender.
I should like in this connection to put this point to hon. Members. Suppose we had invited tenders from those syndicates which are now experimenting with various inventions, and suppose they had quoted a comparatively low figure, and that I had presented a contract with them to the House of Commons, what would hon. Members have said then? They would 3210 have said, "Have you tested this system; do you know that it is capable of carrying out this service which it undertakes to carry out? Have the promoters of it got the engineers and the staff and the experience which would enable them to perform properly the contract into which the Government has entered with them." And if those questions were not satisfactorily answered I venture to say that, the House would blame, and would properly blame, the Government of the day for having entered into a contract with some syndicate or company which had not been able to show to the world that it was capable of carrying on a service of this character. For those reasons, and for those reasons alone, the Committee on the 9th August, 1911, decided that it was desirable that the Government should consider in fuller detail the offer which had been made in April, 1911, the second offer of the Marconi Company. The company were then aware that the Government would probably resolve not to give them licences such as they had asked for. They therefore offered to erect stations which would become the property of the Government itself. They offered, in April, 1911, to erect as many stations as might be required at a price per station, which was higher than was ultimately agreed to, and the equipment of the station was to be in several respects less than what was ultimately agreed to. They asked for a much higher royalty than was ultimately conceded and for a longer period. They also offered to sell for a very considerable lump sum all the rights in present and future Marconi patents, for the use for non-commercial purposes of all Government Departments, both here and in the Dominions which had adhered to the Agreement, and also in India. For this lump sum they were willing to give the right to use the Marconi patents to the Admiralty, the War Office, the Board of Trade, and for other similar purposes practically throughout the Empire.
§ Mr. HERBERT SAMUEL
All present and future Marconi patents. They vary. Some of them have been operative for some time and others quite recently patented, and there are some inventions that have not yet been patented. The Committee resolved to negotiate with this company. In the autumn and winter of last year there were a scries of interviews with the managing director of the Marconi Company. I myself had two 3211 interviews with him, and the secretary and assistant secretary to the Post Office had other interviews. The Government offered very much lower terms than the company had tendered. We offered a lower price per station; we offered a very moderate royalty indeed; and we offered a much smaller lump sum for the purchase of the right of use of the Marconi patents. The negotiations continued for some time, and finally the company made a revised offer in, I think, November or December of last year, and substantially in the form of the terms as they now stand in the contract, except that for a large lump sum payment, they would give the right of user to which I have referred. The company definitely and categorically declined to accept lower terms. They said that for many years they had been carrying on experiments, very costly experiments, and during all that time their shareholders had received no profits of any kind, and that now, when they had developed their system and made it of real commercial value, they were not prepared to enter into a contract unless they considered it would be remunerative to them. It was stated that the price per station would leave them a small margin of profit and that they depended for their profit in this enterprise and for recoupment for past work on the sums that might come to them by way of royalty. On that I summoned a further meeting of the Committee on 15th December, 1911, and I reported to the Committee that negotiations had resulted in an impasse, and that the company had definitely stated they would not erect stations for lower terms than those which they had finally stated. The Committee at once formed the opinion that the lump sum payment which the company had asked for the user of their patents by the various Departments was too high, an opinion with which I entirely concurred, and indeed I should not have made myself responsible for the payment of any such sum for such a purpose. And on those lines negotiations with the company were broken off, and it was agreed to drop altogether the question of purchasing the right to use Marconi patents by the various Government Departments, and each Government was to be left to make what bargain it could, if it desired to do so. These negotiations therefore concluded and were abortive.
With respect to the erection of the wireless stations for the Imperial chain, the 3212 Committee resolved that a technical Subcommittee should be formed, which should go in detail into the cost of erecting stations on the assumption that they were to be erected by the Government and not by the Marconi Company. That technical Committee consisted of six members—three Admiralty experts on wireless telegraphy, one War Office expert, and two Post Office experts. After a minute examination of the whole subject they ultimately reported that, without entering into any question of royalties and dealing only with the cost of the erection of the stations themselves, they estimated that the cost of their erection by the Government would average £60,300 each, excluding, as the Marconi estimate excluded, the sites, but including, which the Marconi estimate did not include, buildings and foundations. On the other hand, while they included the cost of buildings and foundations, they made no allowance for general office charges. Further, these stations were to be simplex or single stations, while the Marconi Company have recently developed a duplex system, which enables wireless telegrams to be sent and received in two directions at once. Their stations were to be duplex stations, and in many respects double those which were contemplated by the Government Committee had Government stations been erected. So that the Marconi Company estimated £60,000 for duplex stations, excluding buildings and foundations, and the technical Sub-committee reported that the cost of Government stations would be £60,300, including buildings and foundations but, being stations of only a simplex character. Therefore it was obvious that so far as the cost of stations was concerned, there was no very great difference either way.
There remained the question of royalties. If we used the patents of the Marconi Company, or other patents, we-should necessarily have to make a reasonable royalty payment. We could not tell beforehand precisely what it would be, but some payment there would necessarily be. Further, the Marconi Company offered to give us the use of all future patents and all future inventions without any further payment beyond the royalties. We thought that the Marconi Company, being now in a sound financial position, were just as likely as anybody else, and probably more likely, to be able either to evolve or to buy future patents or future developments of wireless telegraphy. In addition, the Marconi Company 3213 have had now some years' experience of long range stations, both in the tropics and elsewhere. Lastly, and this is a point which weighed greatly with the Committee and with myself, if the Government put up these stations, they would have run the risk of the stations not being successful. It might be found, after all, that however skilful we might have thought our experts to be, these stations in certain seasons of the year, or from other circumstances, would not be able to maintain the thoroughly efficient and continuous service which is desired. One of the conditions of the arrangement with the Marconi Company was that nothing at all should be paid for their stations until they had been erected and had shown that they were capable of maintaining the service. Nothing was to be paid on account, which is a most unusual condition in any contract. Nothing was to be paid until the stations had been completed, and then two-thirds of the cost was to be paid on account, and that was to be repaid if during the test of six months it was found that the conditions had not been fulfilled.
Those were the conditions and circumstances with which the Committee had to deal. About the same time an offer had been received from one of the syndicates at work on other inventions—the Poulsen Syndicate—who said that they would put up the stations for a considerably lower price. The Post Office was well aware that this invention had been in existence for some years and had been in an experimental state during that time, and was still in an experimental state, so far as long distance telegraphy was concerned. The Poulsen system has not maintained a continuous long distance service, so I am informed. However, I summoned a third meeting of the Committee, which met on 17th January of this year, and the Committee was generally of the opinion—unanimously, I believe—that the Government could not possibly accept an offer such as that of the Poulsen Syndicate without a complete test being made as to the capacity of the system to fulfil the purposes required. We decided that if that test could be made within a comparatively short period we would postpone the matter until it had been effected; but, if not, it was decided that the agreement should be concluded with the Marconi Company, with a number of comparatively minor modifications suggested by various members of the Committee. I then had an interview with the 3214 representative of the Poulsen Syndicate, who told me that they could not give us a complete test over a long range of 2,000 miles in less than twelve months, and that they might be able to make a partial test with communications one way only in six months. Of course, there was the possibility that that test when made would not have been satisfactory, and the delay of six, or more probably twelve, months, might have proved to be fruitless. The negotiations in these circumstances were continued with the Marconi Company and were concluded early in March, when a tender from the company in general terms was accepted. [An HON. MEMBER: "What was the date?"] March 7th.
I submit to the House—I am not speaking now of the actual terms agreed—that the course followed by the Government to arrive at the best result in this matter was a perfectly proper course, and was indeed, in the circumstances, the only possible course. It was necessary to call into conference all the various Departments concerned and the expert advisers who were at the disposal of the Government. It was not possible to adopt any system which had not proved itself by actual test to be capable of performing the service required. I may mention here that within the last few days I have had an opportunity of conversing on the subject with the Postmaster-General of the South African Union, Sir David Graaff, who has been in London, and he told me that in his view the Imperial Government acted quite wisely in concluding the arrangement with the Marconi Company, who have had great experience, and that for his part he would have strongly deprecated coming to an agreement with one of the systems which was still in an experimental state. The South African Government, I may add, has stated its readiness to erect on the conditions of this contract one of the stations of the chain within the territories of the South African Union.
§ Major ARCHER-SHEE
Have the Marconi Company given any proof whatever that they can carry out automatic transmission?
§ Mr. HERBERT SAMUEL
I was coming to that. The company have undertaken in this contract to give efficient and continuous service capable of dealing with commercial traffic by day and night, and at all seasons at a speed, duplex of twenty words per minute, and simplex of fifty words per minute, automatic, and after 3215 allowing for repetitions. I would emphasise this latter point, because in wireless telegraphy it is frequently necessary to repeat words. These speeds are to be effected, after allowing for whatever repetitions are necessary in order to render the messages effective. That is stated in the contract. If not fulfilled, as I have already intimated, the company are to receive no payment at all. It is on the principle of goods returned if not satisfactory. The hon. and gallant Gentleman (Major Archer-Shee) asked me with regard to the automatic service. The company has been engaged for some time in experimenting with automatic apparatus, but they have not yet practically demonstrated that they can use it. They are now engaged in the manufacture of further automatic apparatus; therefore it has not been actually tested. But an automatic speed of fifty words simplex is not very much greater than a speed of twenty words duplex. Consequently it will make no very great difference if the automatic appliances are not used. In view, however, of the past record of the company and their achievements in the sphere of wireless telegraphy, of the fact that Mr. Marconi himself is perfectly confident that he will be able to use automatic apparatus, and that his system is in every way suited for automatic apparatus, the Government do not think that this point need be an obstacle.
The station at Clifden which communicates with Glace Bay a distance of 2,000 miles has been inspected both by an independent expert and by the officers of the Post Office, and the reports are favourable. The Italian station at Coltano which keeps up continuous communication with Massowah, in Italian East Africa, an even longer distance—has also been reported upon and the report of that is also favourable. The company not only give us the use of all existing and future patents and inventions during the royalty period, but they also have agreed that any patents which are being used by the Government in the Imperial stations at the time the royalty period comes to an end—when this agreement is over—however new they may be at that date, may still be used by the Government for the purposes of those stations without any payment of any kind. There is a further provision which is annexed to this contract, although it does not form part of it. In 1903 the Admiralty made an agreement with the Marconi Company for the use of their patents, and 3216 the Post Office in 1909 made an agreement for their ship and shore stations. Both these agreements contain provisions that these Departments should not communicate any information with respect to the Marconi Company patents to other Government Departments. That has been found exceedingly inconvenient, by the War Office particularly, for they have found that they have been making experiments to solve problems which had already been solved by the Admiralty, and the Admiralty have not been at liberty to communicate to the War Office any improvements which they might have been able to effect by their experts in their Marconi apparatus. Those agreements, of course, have been honestly observed, but they have been found exceedingly inconvenient. Without any payment of any sort the Marconi Company, as a consequence of the conclusion of this contract, have released the Departments altogether from the restrictions imposed by these earlier agreements.
§ Mr. HERBERT SAMUEL
Yes; I mean an undertaking has been signed to release them. Now I come to the actual terms of payment. It no doubt seems to many hon. Members who are accustomed to see the small wireless telegraphy installations on board ship or on shore that £60,000 is a vast sum to pay for the mere erection of stations apart from the buildings, foundations, and site. But I am informed by my advisers that every addition that is made to the distance which the station has to cover in its range is costly, far disproportionately to the increase of distance. It is like the cost of running a ship. It costs much more than twice as much to run a ship twenty knots than ten knots, and it requires a far more than twice as powerful a station to cover the distance of 2,000 miles than to cover a distance of 1,000 miles. Indeed Mr. Marconi told me himself in conversation that his experience is that it is much easier to get from 100 miles to 1,000 miles than to get from 1,000 miles to 2,000 miles. It is out of proportion far more costly. The problem of covering a distance of 2,000 miles is a far more difficult one to solve than that of covering 1,000 miles. The area of these stations covers seventy-five acres. Each station has two aerials, one to transmit and one to receive. The intermediate stations, which are duplex, will have four aerials. The station in British 3217 East Africa, will have to communicate in three directions, one to Alexandria, one to Pretoria, and also to India. That station will require six aerials.
Each of the stations will cover the great area of about seventy-five acres. Some of those out of England may have a larger area. My engineers estimate, and the Admiralty engineers also estimate, that the cost of the masts alone will be more than half of the total cost of the stations. These steel masts have to be 300 feet high, and they have to be so constructed as to be able to bear a horizontal strain at the top of two tons. On the average there will be thirty of them, made of steel, and the cost of them per station will, including freight and the cost of erection, average about £32,500. These are not the estimates of the Marconi Company, but the estimates of our own officers. The power plant is in all cases to be duplicated, so that these stations will not be put out of action in case one of the engines breaks down. As to this duplex power plant to be established in the stations there is some disagreement among the experts, some saying the cost will be £12,000 and others £15,000. The apparatus itself will, my officers estimate, cost between £9,000 and £10,000. These three items alone, apart from the aerials, the cost of supervision, and all incidental expenses, are estimated to cost from £53,000 to £57,000.
Therefore, with regard to the cost of the station, £60,000 is not an unreasonable estimate. With regard to the royalty, the master or main patent of the Marconi Company expires in 1914. The company will make an application for renewal, which may or may not be successful. They have also purchased the Lodge-Muirhead patent, which has lately been renewed for the period of, I think, seven years. The company have a number of other patents which will be of extreme value in the conduct of this service, and, as I have already stated, they have some inventions—particularly in relation to duplex working I understand, though I am not quite sure—which are quite new and which have not yet been patented. If the company had asked for no royalty they would certainly have required a very much higher price for the erection of the stations themselves. My own view was that it was better to pay a royalty and a moderate price for the stations than a high price for the stations and no royalty, because the royalty will maintain the interest of the company in the scheme, and make it worth their while to 3218 give us the advantage of every development which they can secure in the sphere of wireless telegraphy.
The royalty is to be on gross revenue, not on net, because we are anxious that the Government should retain complete control of the amount of the rates charged for transmitting telegrams. If we had said the company shall be paid so much on not revenue, the company would be entitled to say that the rates should not be reduced without their consent. They might have said it would absorb the whole of the profits and that there would be no net revenue, and therefore it would destroy the whole of their royalty if we reduced the rates; consequently, as the Government is anxious to retain the entire control of the rates charged in its own hands, the other system was preferred. Of course, I should greatly have liked to have agreed for the payment of a much lower royalty than 10 per cent., and my first offer to the company was a mere fraction of that, but we were in this position, that the company categorically, definitely, and finally informed us that they would not undertake the erection of the stations for a less sum than that which was ultimately sanctioned by the Committee and myself. I should like to make it perfectly clear to the House that the company has not been granted a monopoly. Many mis-statements have been made, or, rather, misunderstandings have arisen in this respect. The company has not been granted a monopoly.
We reserve the right to introduce any new invention that we choose into the working of these stations. If we hear of any improvement which is the property of any syndicate, and we can make terms with that syndicate for the use of that improvement, we are at full liberty to introduce that improvement into our stations. The hon. Member for Launceston mentioned to me that we had, however, undertaken to consult the Marconi Company, that the introduction of these improvements by any other company should be subject to their advice, and this would mean that no secret improvements would be introduced, because the owners would not wish them, or would not permit them, to be made known to the Marconi Company. That objection, which would be a serious one if it were valid, is not well founded. We do not so read the Clause, and the company have clearly been given to understand that they will not have a right to inspect any such patents at all. What is 3219 meant by the Clause is this: that if we hear of some improved appliance we should have a report upon it by our own experts; that we should communicate in general terms to the Marconi Company what the nature of the improvement is, and that the Marconi Company should be given an opportunity of saying "that they know this invention or that they know what its general nature is, and that they think it inadvisable, and as our advisers they suggest it should not be introduced"; but we are not bound to take their advice, and it has been clearly stated to the company that they are not, under the contract, to have any right to inspect any secret invention we may think it advisable to introduce into those stations. Further, we reserve to ourselves the right at any time—within a year, if we like, after the stations are erected or at any time later— if we can obtain the use of some better system altogether, to get free of the Marconi patents entirely We reserve to ourselves the right to discontinue the use of the Marconi system and to introduce any new system we prefer, and the moment we do so the royalty ceases altogether.
§ Mr. HERBERT SAMUEL
No, Clause 3 does not deal with these stations, it deals with any fresh stations that may be erected after the first six. My advisers inform me if for example we were to wish to convert the stations later on and to adopt the continuous are system instead of the spark system, if that is found to be more satisfactory, the cost of the conversion would be about one-sixth of the original cost of the stations, and of course it may be worth while to go to that expense in order to get that new system; while to convert it to the Telefunken system, which is another spark system, on the same lines as the Marconi system, would cost much less. Of course we do not at present contemplate conversion.
I now come to the five-year limitation to which the hon. Member has referred in Clause 3. The company originally pressed for the right to erect all future long range wireless stations throughout the Empire or any of the eighteen for which they had originally asked licences. That we declined, and as a compromise it was decided that during the next five years after the date of the signature of the contract any fresh long distance stations 3220 forming part of this general scheme should be erected by the Marconi Company on the same terms as are laid down in the contract. That is in the contract. It is true that that Clause would debar the Government within the next five years from erecting any additional stations in other places on other systems, and the Clause has been criticised for that reason. Within the last two or three days the Marconi Company have written me a letter in which they say they have observed this criticism, and for their part they have no desire to be protected against the competition of other systems, or rather that they do not attach serious importance to any protection against the competition of other companies. They say:—The company is confident of being able to retain its lead in long distance wireless telegraphy and does not fear the competition of other companies.And, therefore, they say, if it is thought desirable in the House of Commons that this five-year Clause in the contract should be omitted, on their part they would have no objection. I am very ready, and naturally glad to accept an offer of that character, because it removes a restriction limiting the Government, and future discussion of this matter can proceed on the assumption that Clause 3 of the contract is omitted.
§ Mr. HERBERT SAMUEL
Entirely, and if later on the Government think some other system is better, they may erect long distance wireless stations in different parts of the Empire on some other system. I confess I am sceptical that the Government will be able to avail themselves of that opportunity. I should like, finally, upon this point to say that within the last few days the German Government have entered into a contract for long distance wireless stations in certain parts of their dominions in the Indian Ocean and Australian seas. Four stations are to be erected. They have not adopted the are system, but they have adopted the Telefunken system, which is analogous to the Marconi system.
§ Mr. MITCHELL-THOMSON
May I ask the right hon. Gentleman whether that agreement of the German Government with other companies has been made public?
§ Mr. HERBERT SAMUEL
I believe not. I have the best information, but I have not the actual terms. I have been 3221 informed, on authority which I believe is reliable but which I cannot vouch for, that the cost per station is considerably more than the £60,000 which we pay, but I have no official confirmation of that. The Tele-funken Company, which is in very close touch with the German Government, is to receive an annual subsidy which would recoup them for their expenditure, and, in addition, a royalty not of 10 per cent., but of 25 per cent. on the gross receipts. The House must, however, remember that the gross receipts in an area such as that are likely to be considerably less than those which we should receive in our stations. However, the fact remains that the German Government is not adopting one of the new systems which several hon. Members have faith in, but are adopting a spark system, and are, I am informed, paying more for their stations than we are paying. Now I must come to a conclusion, but before doing so I wish to answer a complaint which has been made that the Government have not kept the House sufficiently informed of the conditions and the nature of this contract, and that while the company gave the public information last March, when the preliminary tender was accepted, only recently was the contract laid on the Table. I plead guilty to no disrespect to the House in that respect. I could not have acted otherwise. It would have been perfectly impossible for me to impose upon the company last March any pledge of secrecy that when their preliminary tender had been accepted by the Government they should not be at liberty to inform the public at large of that fact. The first opportunity that arose of informing the House of the nature of the contract which had been made was when the Post Office Estimates were before the House last May. Then I made a general statement giving to the House practically the same information as the company have given, with certain exceptions. I did not mention the period of the royalty or the conditions for its termination on which the contract had been made.
§ Major ARCHER-SHEE
It was stated in the "Evening Standard" of the 26th of October that the agreement had been signed.
§ Major ARCHER-SHEE
The "Evening Standard" of that date stated, that the company had come to terms with the Government.
§ Mr. HERBERT SAMUEL
It is quite incorrect. We did not come to terms with the company until last March. It was in January that we had a meeting of the Committee when there was further discussion about the possibility of the erection of stations by the Admiralty. If any such statement was made last October it was quite unfounded.
§ Mr. HERBERT SAMUEL
You cannot hold the Government responsible for what appears in the "Evening Standard."
§ Major ARCHER-SHEE
It got into the Press as early as October last, and the terms stated are the same as were made later.
§ Mr. HERBERT SAMUEL
At that time the company had made their offer, but certainly it had not been agreed to. It was still under consideration and negotations were proceeding. In fact, the negotiations only began effectively somewhere about October last year, but no conclusion had then been reached. On 7th March the preliminary tender was accepted, and on the same day a statement appeared in the Press which, on the face of it, stated that it had been communicated by the Marconi Company. A statement was made in May in the House. I did not go into details, because, having a great variety of subjects to deal with on that occasion, I was not anxious to keep the House too long, as I am afraid I have done to-day. I could not then lay the complete document, and owing to the necessary time that was taken in the solicitor's department of the Post Office and negotiations between the Departments, that contract was not concluded until July. The working of the system would be as follows: The British Government will erect and pay for four stations in England, Egypt, subject to the approval of the Egyptian Government; in East Africa, probably near Nairobi; and in Singapore or in the neighbourhood of Singapore. The Indian Government will erect one station on the Western Coast or not far away from the Western Coast. The South African Government will erect one station in the neighbourhood of Pretoria. The Australian Government has undertaken to erect a station communicating with Singapore, but has not yet decided what contractor to employ or whether to do it itself, or on what 3223 terms the station shall be erected. Telegrams can be forwarded from the Australian station along the Australian land lines to the wireless stations that are being erected to communicate between Australia and New Zealand. Later it is contemplated erecting a station at Hong Kong and possibly one in West Africa. Each Government will work and pay for the maintenance of the stations which it erects. Each Government will be credited with the receipts of the traffic which its own stations handles. The receipts will not be pooled. It is much simpler to deal with them separately in that way. The revenue will be divided on the same principles as the through telegraphic revenue between various countries.
The sum to be spent by the British Government, which will probably amount to £320,000, will be financed from the Post Office Vote, but the commercial accounts of the Post Office will be charged with interest and sinking fund annually. It is anticipated that we shall be able to effect a considerable reduction in rates of communication. But what the rates will be has not been settled, as it is necessarily a matter of agreement between the various Governments concerned. It is calculated that the cost of working the whole six stations, allowing for repayment of capital in eighteen years, and for interest and management expenses, will be about £106,000 per annum. The revenue must depend upon the rates charged and upon the amount of traffic obtained, and it is impossible to form an estimate of the revenue until we have decided what the rates will be. If we are able to secure enough traffic to enable these stations to be worked for twenty hours a day; if we are able to carry the traffic at a speed of twenty words a minute duplex; if one-third of the traffic is unpaid, that is Government traffic; if one-third is Press traffic, on those terms this system will be remunerative—indeed, quite profitable. Of course, we are allowing for a considerable reduction of rates. If we are not able to keep the stations employed twenty hours a day, or if any other of these conditions are not fulfilled, then the financial results will be modified accordingly. But even if they are not remunerative, the Government think it advisable to erect the stations if only for strategic reasons.
§ Mr. GEORGE TERRELL
Can the right hon. Gentleman state what the estimated royalty will be? I think he has some figures.
§ Mr. HERBERT SAMUEL
The royalty must necessarily depend upon the amount of traffic and the rates charged. It is only possible for me to give an estimate of the royalty by declaring what are the rates the Government propose to charge, and that I am not in a position to do, because I have not consulted the other partners to the agreement. This contract is the outcome of two years' work. It is the result of the best advice on these highly technical subjects at the disposal of the Government. I deeply regret that discussion has been postponed for so long; that the exigencies of public business have thrown this statement over to the last day of the Session, and that further delay is inevitable. The Committee of Imperial Defence as long ago as May last year expressed the opinion that the stations should be erected as speedily as possible. At the same time the Government quite recognise that on an important matter of this kind it is impossible to press the House to come to a decision on the last day of the Session, when many hon. Members cannot be in attendance. Therefore the Government cannot resist, if it is so desired, a Motion for the Adjournment of the consideration of this matter.
§ Lord BALCARRES
I thank the right hon. Gentleman for his statement, and in accordance with what he has just said, I beg leave to move, "That the Debate be now adjourned."
Debate adjourned; to be resumed upon Monday, 7th October.