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Governmental Policy and the Domestic Telegraph Industry*

Published online by Cambridge University Press:  03 February 2011

H. H. Goldin
H. H. Goldin
Affiliation:
Washington, D.C.
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Extract

On June 4, 1946, the Federal Communications Commission approved the request of Western Union for an increase in rates. In the same breath the commission declared:

That such increased rates provide no assurance chat the Western Union Telegraph Company will now be able to furnish a rapid, efficient, nation-wide communication service with adequate facilities at reasonable charges, and that serious questions are presented as to the company's ability to continue in operation as a solvent enterprise, providing satisfactory service on a comprehensive nationwide basis, in the absence of some further relief.

A plant that is largely obsolescent, a rate structure requiring thorough overhauling, deteriorated quality of service, high unit labor costs, failure to withstand severe competitive pressures–these are some of the ills that currently beset Western Union. And many of these ills, as I shall indicate, have their origin in the development of the industry over many decades.

Type
Articles
Information
The Journal of Economic History , Volume 7 , Issue 1 , May 1947 , pp. 53 - 68
Copyright
Copyright © The Economic History Association 1947

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References

1 Order of the Federal Communications Commission, “In the Matter of Interstate Telegraph Communication Service,” Docket No. 7618 (June 4, 1946).

2 Congressional Globe, 27th Congress, 3d Session (February 23, 1843) 339; 5 U. S. Statutes (1843) 618. For Morse's report of the project, see 28th Congress, 1st Session (June 6, 1844), House Executive Document No. 270; Prime, Samuel Irenaeus, The Life of Samuel F. B. Morse, LLD. (New York, 1875), pp. 507–9.Google Scholar See also Vail, Alfred, Description of the American Electro Magnetic Telegraph (Washington, 1845).Google Scholar

3 Prime, Life of Morse, pp. 508, 510–11, 513–14; Morse, Samuel F. B., His Letters and Journals, ed. Morse, Edward Iind (Boston: Houghton Mifflin Company, 1914), II, 84–88, 228–29, 235–36Google Scholar; 28th Congress, 2d Session (December 23, 1844), House Executive Document No. 24.

4 The House Committee of Ways and Means urged a government telegraph system.—28th Congress, 2d Session (March 3, 1845), House Report No. 187. For a discussion of the proposal, see Congressional Globe, 28th Congress, 2d Session (1844) 328, 341, 366.

5 Royal E. House of Vermont patented his printing telegraph system in 1846; Alexander Bain of Edinburgh obtained an English patent on an electro-chemical telegraph in 1846 and an American patent in 1848; David Hughes invented a printing telegraph in 1855.

6 Robert L. Thompson has prepared a comprehensive scholarly account of the early history of the telegraph industry under the title “Wiring a Continent: The History of the Telegraph Industry in the United States from 1832 to 1866,” to be published early in 1947 by the Princeton University Press. Mr. Thompson very kindly gave me access to the manuscript.

7 The New York and Mississippi Valley Printing Telegraph Company was organized under an act of the New York Legislature of April 12, 1848, providing for incorporation and regulation of telegraph companies. Subsequently, on February 21, 1854, the company was reorganized and reincorporated. The present name of the company was established by an act of the Wisconsin Legislature, March 4, 1856, and by an act of the New York Legislature, April 4, 1856.

8 For biographical information on Sibley, see Dictionary of American Biography; Hiram W. Sibley, “Memoirs of Hiram Sibley,” Rochester Historical Society Publications, II, 127–34.

9 Federal Communications Commission, “Corporate History of the Western Union Telegraph Company,” 1915Google Scholar; 73d Congress, 2d Session, House Report No. 1273, Part III, No. 4 (1935) 3967–74, hereinafter referred to as the Splawn Report; Thompson, “Wiring a Continent”; Harlow, Alvin F., Old Wires and New Waves: The History of the Telegraph, Telephone, and Wireless (New York and London: D. Appleton-Century Company, 1936), pp. 212–14, 251, 255Google Scholar; Reid, James D., The Telegraph in America (New York, 1886), pp. 455–507Google Scholar; 48th Congress, Report of the Committee of the Senate Upon the Relations Between Labor and Capital (Washington, 1885), II, 881–82, 883–84, 898–99, 921–25.

10 Congressional Globe, 36th Congress, 1st Session (1866) 494, 668, 1292–93, 1343–45, 1413, 1562–63, 1693–97, 1813. 2249–52, 2279–81, 2328–29, 2856–57, 3022, 3032, 3038–40, 3063, 3113; ibid., 39th Congress, 1st Session (i860) 3482; 48th Congress, 1st Session, Senate Report No. 577 (May 27, 1844) 4.

11 Splawn Report, 3979.

12 Coon, Horace, American Tel. & Tel.: The Story of a Great Monopoly (New York and Toronto: Longmans, Green and Company, 1939), p. 31Google Scholar; Telegraph and Telephone Age, January 1, 1912, p. 16; 48th Congress, 1st Session, Senate Report No. 577 (May 27, 1844) 277. See also Plum, William R., The Military Telegraph During the Civil War in the United States (Chicago, 1882), II, 347–50, 359–75.Google Scholar

13 Annual Report of the President of the Western Union Telegraph Company to the Stockholders, 1873, p. 22.Google Scholar

14 Congressional Globe, 39th Congress, 1st Session (1866) 979–80; 39th Congress, 1st Session, Senate Executive Document No. 49 (June 4, 1866).

15 Congressional Globe, 39th Congress, 1st Session (1866) 1773, 1843, 3007, 3427–30, 3490, 3734, 3759, 4116; 14 U. S. Statutes (July 24, 1866) 221. On the basis of this statute, government telegrams enjoy a 20 per cent lower rate than commercial telegrams. Congress is currently considering abolishing this differential.

16 See Official Report of Proceedings before the Federal Communications Commission, Docket No. 7445 (June 4, 1946), “Memorandum of Law on the Post Roads Act.”

17 See testimony of President William Orton of Western Union, 41st Congress, 2d Session, House Report No. 114 (July 5, 1870) 118.

18 Annual Report of the President of Western Union, 1893, p. 7.

19 Ibid.

20 Ibid., 1900, p. 7.

21 41st Congress, 2d Session, House Report No. 114 (July 5, 1870); 41st Congress, 2d Session, House Report No. 115 (July 5, 1870); 42d Congress, 3d Session, House Report No. 6 (December 19, 1872); 43d Congress, 2d Session, House Report No. 125 (February 4, 1875); 46th Congress, 3d Session, House Report No. 137 (January 27, 1881); 47th Congress, 2d Session, House Report No. 2004 (March 3, 1883); 48th Congress, 1st Session, House Report No. 1436 (April 30, 1884); 50th Congress, 1st Session, House Report No. 955 (March 8, 1888); 41st Congress, 2d Session, Senate Report No. 18 (January 31, 1870); 42d Congress, 2d Session, Senate Report No. 20 (January 22, 1872); 42d Congress, 2d Session, Senate Report No. 223 (June 1, 1872); 42d Congress, 2d Session, Senate Report No. 242 (December 19, 1872); 43d Congress, 1st Session, Senate Report No. 242 (April 2, 1874); 48th Congress,1st Session, Senate Report No. 577 (May 27, 1884). See also Parson, Frank, The Telegraph Monopoly (Philadelphia: C. F. Taylor, 1899), pp. 11–13Google Scholar; An Argument in Support of the Limited Post and Telegraph by the Postmaster General (Washington, 1890).Google ScholarWells, David A., The Relation of the Government to the Telegraph (New York, 1873)Google Scholar presents a defense of Western Union.

22 Ibid.

23 48th Congress, 1st Session, Senate Report No. 577 (May 27, 1844) 6.

24 Ibid., 5; Splawn Report, 3979; Annual Report of the President of Western Union, 1889–99.

25 Hoddin, William, comp., Laws of the United States and the Several States and Canada, Relating to Telegraphs (New York, 1884)Google Scholar; American Telephone and Telegraph Company, Comparative Summary of Laws Relating to Regulation of Telephone and Telegraph Companies by Commission, in Force November 1, 1913 (3d ed.; Boston, 1914).Google Scholar

26 It is reported that in 1876 Western Union was offered the Bell patents for $100,000 and refused I—Casson, Herbert N., The History of the Telephone (Chicago: A. C. McClurg and Company, 1910), pp. 58–59Google Scholar; Rhodes, Frederick Leland, Beginnings of Telephony (New York and London: Harper and Brothers, 1929), p. 51.Google Scholar

27 76th Congress, 1st Session, House Document No. 340 (June 14, 1939) 3, 123–25; Federal Communications Commission, “Special Investigation Docket No. 1,” Exhibit 2096-F (June 15, 1937), pp. 13–27, 29–31; Federal Communications Commission, “Special Investigation Docket No. 1,” Exhibit 1360-C, III (June 15, 1937), Appendix 7.

28 Annual Report of the President of Western Union, 1881.

29 48th Congress, 1st Session, Senate Report No. 577 (May 27, 1844) 145–47, 323–29.

30 In 1883 Mackay and James Gordon Bennett established the Commercial Cable Company, which, in 1897, acquired the stock and property of the various Postal Telegraph companies. In 1920 the International Telephone and Telegraph Corporation, a holding and managing corporation, was set up and in 1928 it incorporated the Postal Telegraph and Cable Corporation to acquire the interests of the Mackay companies, including the Commercial Cable Company and Postal Telegraph-Cable System.— Splawn Report, 3721, 3723; 71st Congress, 2d Session, Hearings before the Committee on Interstate Commerce… on S. 6 (1930) 1665–67.

31 Annual Report of the President of Western Union, 1881 and 1892.

32 76th Congress, 1st Session, House Document No. 340 (June 14, 1939) 88–91, 102–3, 139–40; Federal Communications Commission, “Special Investigation Docket No. 1,” Exhibit 2096-A (June 15, 1937), pp. 32–50, 71–75, Appendices 7 and 14; Federal Communications Division, “Special Investigation Docket No. 1,” Exhibit 1360-C, III (June 15, 1937) Appendix 18. SeeAnnual Report of the Directors of American Telephone and Telegraph Company to the Stockholders, 1909–1914; Annual Report of the President of Western Union, 1909–1914; Jones, Eliot and Bigbam, Truman C., Principles of Public Utilities (New York: The Macmjllan Company, 1931), pp. 560–62Google Scholar; Western Union Telegraph Company, A Brief Outline of the Technical Progress Made by the Western Union Telegraph Company, 1910–1934 (1935' available in mimeographed form in F.C.C. Engineering Files), II, 22–28.

33 36U. S. Statutes (June 18, 1910) 544.

34 Commissioner Joseph B. Eastman testified before a Senate committee that the Interstate Commerce Commission had no departments, bureaus, or divisions that dealt exclusively with telegraph, telephone, or cable, and that few cases involving these services had ever been heard by the commission.—71st Congress, 2d Session, Hearings before the Committee on Interstate Commerce… on S. 6 (1930) 1566, 1572–1585.

35 Government Control and Operation of Telegraph, Telephone and Marine Cable Systems, August 1, 1918, to July 31, 1919 (Washington, 1921).

36 77th Congress, 1st Session, Appendix to Hearings before a Subcommittee of the Committee on Interstate Commerce… Pursuant to S. Res. 95—76th Congress, Part 2 (1941) 243. The figures cited in this table include Western Union's cable revenues.

37 Ibid.. 239.

38 Ibid., Part I, pp. 14–15.

39 48U. S. Statutes (June 19, 1934 ) 1064. See 71st Congress, 2d Session, Hearings… onS. 6 (1929–1930); 73d Congress, 2d Session, Hearings before the Committee on Interstate Commerce… on S. 2910 (1934); 73d Congress, 2d Session, Hearings before the Committee on Interstate and Foreign Commerce… on H. R. 8301 (1934); 73d Congress, 2d Session, Study of Communications by an Interdepartmental Committee (1934).

40 74th Congress, 1st Session, House Document No. 83 (January 21, 1935). The problem of the merger of the domestic carriers, as well as that of the international carriers, was extensively discussed by Congress in connection with the establishment of the Federal Communications Commission.

41 57U. S. Statutes (March 6, 1943) 5. See 75th Congress, 3d Session, Hearings before a Subcommittee of the Committee on Interstate Commerce… on S. Res. 247 (1938); 76th Congress, 1st Session, Hearings before a Subcommittee of Interstate Commerce… on S. Res. 95 (1939); 76th Congress, 1st Session, Senate Report No. 529 (1939); 76th Congress, 3d Session, Senate Report No. 1614 (1940); 77th Congress, 1st Session, Senate Report No. 769 (1941); 77th Congress, 1st Session, Hearings…Pursuant to S. Res. 95— 76th Congress, Parts 1 and 3 (1941); 77th Congress, 2d Session, Hearings before a Subcommittee of the Committee, on Interstate Commerce…. on S. 2445 (1942); 77th Congress, 2d Session, Hearings before a Subcommittee of the Committee on Interstate and Foreign Commerce…Pursuant to S. 2598 (1942); 77th Congress, 2d Session, House Report No. 2664 (1942); 77th Congress, 2d Session, Senate Report No. 1490 (1942); 78th Congress, 1st Session, House Report No. 69 (1943),; 78th Congress, 1st Session, House Report No. 142 (1943); 78th Congress, 1st Session, Senate Report No. 13 (1943); Congressional Record, 78th Congress, 1st Session (1943) 35, 196, 338–54. 395. 507. 768, 793, 824–25, 884, 1089–96, 1141–46, 1193–96, 1274, 1277, 1461, 1685.

42 Report of the Federal Communications Commission, “In the Matter of the Application for Merger of The Western Union Telegraph Company and Postal Telegraph, Inc.,” Docket No. 6517 (September 27, 1943).

43 National War Labor Board, In the Matter of Western Union Telegraph Company and National Coordinating Board, American Federation of Labor (Case No. 111–17763-D) (December 29, 1945); idem, In the Matter of Western Union Telegraph Company and American Communications Association, C.I.O. (Case No. 111–8474-D) (December 29, 1945).

44 “Official Report of Proceedings before the Federal Communications Commission,” Docket No. 7445 (June 4, 1946) pp. 54–55. The estimate of the cost of the modernization program was subsequently revised to $72,600,000.— Ibid., p. 2439.

45 Report of the Federal Communications Commission, “In the Matter of the Western Union Telegraph Company Petition for a Rate Increase,” Docket No. 7445 (June 4, 1946).

46 The estimate of savings was subsequently revised upward by Western Union to a level of $72,600,000 by 1952.

47 Ibid.

48 U. S. Department of Labor, Report and Recommendations of the Fact Finding Board Appointed by Order of July 11, 1946, in the Dispute between The Western Union Telegraph Company and the National Coordinating Board, A.F.L.; idem, Recommendations of the Fact Finding Board Appointed by Order of July 11, 1946, in the Dispute between The Western Union Telegraph Company and the American Communications Association, C.I.O.

49 Regarding any further general wage increase, the A.F.L. union agreed to maintain labor peace until August 15, 1947, unless in the interim there is a substantial change in national wage stabilization policies, directives, or legislation, in which event, after March 1, 1947. the question of a general wage adjustment may be reopened on thirty days’ notice. The A.F.L. union also agreed to co-operate with the company in seeking a further reasonable increase in telegraph rates, in obtaining federal legislation abolishing reduced telegraph rates on government messages, and in urging repeal of the 25 per cent excise tax on telegrams. The C.I.O. union agreed to forgo any further general wage demands until April 1, 1947.

50 In the course of Western Union's history, there developed city-to-city special rates and city-to-state special rates which have been lower than the applicable standard rates by a substantial per cent. These special rates represent one aspect of the company's anomalous and chaotic rate structure which the commission is seeking to correct. See “Official Report of Proceedings before the Federal Communications Commission,” Docket No. 7445 (1946) pp. 1726.

51 After the wage awards of December 29, 1945, and prior to the more recent increases, the ratio of labor cost to total operating revenue for the domestic part of Western Union operations was 73.4 per cent; the ratio of labor cost to total operating expenses (excluding depreciation, taxes, and uncollectibles) was 81.6 per cent.

52 “Official Report of Proceedings before the Federal Communications Commission,” Docket No. 7445 (1946). PP. 53–55. 753–57. 772–808, 2061–62, 2401–3, 2428–43.

53 In June 1942 the domestic operations of radiotelegraph carriers were ordered suspended by the Board of War Communications as a wartime measure.

54 See the Proposed Report of the Federal Communications Commission, ‘In the Matter of Us: of Recording Devices in Connection with Telephone Service,” Docket No. 6787 (August 8, 1946).

55 As of December 31, 1945, Western Union reported some 30,000 offices of which 15,000 were operated jointly with railways and 11,000 were agency or commission offices.

56 President Joseph Egan also suggested a fourth alternative, namely, receivership.