Government ownership of telephones

Government
Ownership g

Telephones

h

MITCHELL MANNERING

Reprint from

NATIONAL MAGAZINE

Boston, July, 1914

tA:

Government Ownership
of Telephones

Mitchell Mannering

Experience in other countries, where the telephone service is under government control,

warns that retrogression from American high standards would result, were the government

to assume ownership of the telephone system

CELEPHONE statistics are like
astronomical calculations in their
immensity. More than twenty
million miles of wire are used
in the construction of the telephone lines
in the United States, a gain of nearly
fifteen million miles during the last decade.
Nine million telephones are jingling every
hour of the day in this country; twelve
years ago there were only three million.
During 1912 nearly fourteen billion mes-
sages or talks were sent over the wires of
telephone companies having an income of
more than five thousand dollars. This
includes all kinds of conversations, long
or short, counting as one call the fifteen-
minute gossip of the neighbors in the early
evening, to say nothing of the lingering
love chats. These figures do not include
the messages carried over the million and
a half telephones operated by smaller
branch companies, which were not required
to make a report.

In the light of these facts, talk of govern-
ment ownership of telephones does not
appeal to millions of telephone subscribers
who know what real telephone service
means. Evidence accumulates that the
solution of industrial problems depends
more upon internal evolution than upon
external legislation, just as the medical
profession has learned that a mere applica-
tion of soothing liniment, or "cupping and
bleeding," does not cure or prevent disease.
While there is nothing basically wrong
with the proposition of public ownership,

it has its uses and abuses, despite the fal-
lacy that public ownership is indicative
of progress. Russia and India, two of the
most undeveloped countries in the world,
have the most extensive government owner-
ship. The experiences of the last decade,
sharp and harassing as they have been,
suggest 'that the government could better
own, regulate and check abuses of private
corporations after proving efficiency in
operating what it already possesses. Before
the government seeks further to extend
ownership activities logically, it should
first prove that it can conduct public
affairs more efficiently and profitably in
the interest of the people than can private
corporations. Has this been done hitherto?

OELF-INTEREST has always been a
^ cohesive factor in society, and naturally
inspires efficient management of a private
enterprise— where a management under
mere government control grows indiffer-
ent, ineffective and too often arbitrary.
Officials, appointive and elective, usually
have not the requisite training to manage
an industrial undertaking, and to place the
country's most vital method of communi-
cation— the telephone — in the hands of
political adventurers, with appointees in
prospect, is retrogression rather than
progress. The necessary training and
experience of an army of employees in
corporation service requires years of con-
centrated control, with an opportunity to
assimilate and care for the recruits added

347249

GOVERNMENT OWNERSHIP OF TELEPHONES

from time to time. Chaos in government
telephone management would result in an
outburst of public indignation that would
find speedy expression with a universal
blast from telephone trumpets.

A vital point often overlooked in the
discussion of public ownership is that the
state and nation sacrifices the present large
income derived from taxation, which is
usually in excess of any possible profit
to be realized by public management,
thereby throwing the burden of deficits
and mismanagement back upon the people
without recourse. The necessities for
future development anticipated by private
corporations in the natural expansion, if
left dependent upon the log-rolling methods
of the Rivers and the Harbors Pork Barrel
Appropriation in Congress, would reflect
sectional bias and political power. The
real success that has commended the
admiration of the world in American
industrial operations has been due to a
freedom of action, not possible from public
officials who, with their ears to the ground,
are naturally first concerned in protecting
their political life. The best men for man-
agement could not be secured under such
conditions. Public accounting of public
ownership operations seldom reflects the
true state of affairs, for government de-
partments naturally perform free service
for one another without charge, making it
difficult to compute actual cost and defi-
nite expense, but it all shows up when the
government revenues begin running behind
millions of dollars every day, as at the
present time. Even the highest type of
government official often sees no harm in
making political capital by skimping
needed repairs and improvements, only
to pass a possible defeat on to his successor,
while the public suffers as a consequence.

THERE are some public utilities that
naturally and logically should be
owned by the government, but this does
not mean invasion of the fields of general
business, on the ground that the govern-
ment can obtain capital at lower rates of
interest than private corporations for
expansions. It should be remembered
that in this case the government would
pledge the property of all citizens, no
matter whether they objected or not.
Money so raised is simply forcing a

mortgage, indirect though it may be, on
every man, woman and child without his
consent or vote, and means an increased
amount of outstanding government bonds,
with a tendency of higher rates, for when
the government enters the field as an
increasingly big borrower, the rates gradu-
ally go up. Interest on the capital and
fixed charges must be paid by the govern-
ment, whether earned or not, which is not
true of private corporations, which often
operate many years without a dividend.

The labor question, too, is involved in
every question of public ownership. What
has the experience of other countries taught
us? In France and elsewhere, strikes have
not been eliminated by public ownership.
On the contrary, labor disturbances have
been aggravated, and in striking against
the government the laboring man is met
with the stern edict of the bayonet. There
is no appeal or industrial "goats" to shear.
Rather than alleviating the relations be-
tween labor and capital, government
ownership tended to make the strained
conditions of the laboring man more and
more hopeless. This personal equation
is not to be overlooked. Contrast today
the employee of a well-managed corpora-
tion with the -employee of the government.
In one there is hope and aspiration, in the
other the lethargy of governmental red
tape. The government employee's one
hope of advancement comes from political
influence, or from promotion after the
death of someone ahead — and initiative
effort is not inspired — for, as they see —
what's the use? — when higher up officials
have their records first to serve.

D ECENTLY I came upon a memoran-
*^ dum of conclusions carefully prepared
by a public ownership. librarian, who had
begun his work with a firm belief in public
ownership. The result of his study of the
matter is interesting, even to the casual
reader:

"If I were to sum up, in a single word,
the object lesson to be derived from a com-
pilation and study of public ownership
literature, I should say that 'inadequacy'
appears to be the one dominant character-
istic of all publicly -owned utilities; in-
adequacy to satisfy the public need with
anything like the completeness of which
private management is capable. The de-

GOVERNMENT OWNERSHIP OF TELEPHONES-

5

gree of inadequacy varies with the country
and the character of its government. It
also varies with the utility. In the tele-
phone service, public management has
shown itself to be particularly inadequate.

" Adequacy in telephone management,
to my mind, means primarily two things:
dependability of service, and extent of
service. In both these particulars public
ownership has shown itself to be distinctly
a failure. Dependability, for instance,
is almost wholly lacking in the French
telephone system. The French subscriber,
if he has an urgent message, with much
depending upon prompt communication,
will not infrequently prefer a messenger,
or his own legs, to his telephone instrument.
Previous experience has taught him that
the chance of a ten or fifteen-minute delay
in reaching his party — indeed, of not
reaching his party at all — is not altogether
remote. The same is true, in a measure,
of the other European countries with
government telephone service. The Hon.
C. S. Goldman, M. P., has described the
British telephone as 'the get-them-when-
you-can-service.' Remarkable testimony
was given in a German court some time
ago by a Commissioner in Lunacy, to the
effect that the exasperation from getting
no reply from 'Central' was sufficient to
make men actually mad; and in the long
distance service, it is not an uncommon
occurence, in Germany, to wait in line
for hours for an out-of-town call, only to
be told by a government official, at the
end, that the trunks are all engaged.
Dependability, to the extent enjoyed by
the American telephone subscriber, is
wholly unknown to the publicly -operated
telephone system of Europe.

"Extent of service is equally important.
A single telephone, however perfectly
constructed, can be no more than a me-
chanical curiosity. A million isolated
telephones are no more useful than a
million isolated orators talking to the sands
of a beach. Two telephones, with a con-
nection between them represent the small-
est unit of service. The efficiency and
value of the service increase in geometrical
proportion with the number of telephones
capable of being reached. A restricted
telephone service is, therefore, more than
in any other business, a commercial
tragedy.

Ylf/E can readily see this when we real-
** ize that the whole fabric of Ameri-
can civilization is, to a large extent, built
around the telephone. In the cities, for
instance, the telephone has made possible
the skyscraper's airy accommodations, the
closely-knit, time-saving offices, the apart-
ment house and hotels, which raise people
above the noise and dust of the street.
Outside the city, it has made suburbs
blossom out of waste places; where the
business man might before have balked at
suburban life, with the distance it throws
between business and home, he now knows
that, aided by a shining instrument and
two wires, he can be put in instant touch
with the business world. Beyond the
suburbs and into the rural districts, the
telephone has made its way, furnishing
the American farmer and his family facili-
ties for communication unknown in any
other part of the world. It is safe to say
that no other influence has stimulated the
'back to the farm' movement, as has the
telephone. It is rapidly banishing the
loneliness which, in the past, so discouraged
the rural population, and drove people
from the large and solitary areas of Ameri-
can farms and ranches. Politically, too,
the telephone has made its influence felt;
wiping out the local prejudices imposed by
state lines, county lines and township
lines, knitting the country together, and
relegating the roorbach to the limbo of the
past. The Bell Telephone System lays
claim to a total of 7,500,000 telephones,
but this is no adequate indication of the
extent to which the telephone has worked
its way into the warp and woof of American
life. In the cities, particularly, there are
thousands of public telephones, many of
them used by hundreds of different people
a day. Money is moved by telephone;
trains are moved by telephone; buildings,
bridges, tunnels, reservoirs and all sorts
of public works are built by telephone;
carriages and cars are called, employees
secured, emergency help summoned — the
whole machinery of American civilization
kept going by the use of an instrument
which many a Frenchman and Englishman
today refuses to use in place of his legs.

WHEN we consider what an intimate
part of American civilization the
telephone utility has become, we can see

GOVERNMENT OWNERSHIP OF TELEPHONES

what an advantage we have over those
countries where the telephone has been
made to wait at the government's door,
and beg for such financial sustenance as
political expediency can afford to throw it.
There are now, in this country, nine
million telephones. The United States
has sixty -five per cent of all the telephones
in the world. It has only five and five-
tenths per cent of the population of the
world. We have, per inhabitant, ten times
as many telephones as Europe, where
government ownership is the rule rather
than the exception; and this despite our
comparatively sparse and widely -scattered
population.

"Great Britain has but seven hundred
.thousand or one and five-tenths telephones
for every hundred Englishmen, as against
eight and eight-tenths telephones for
every hundred Americans. The American
can reach by telephone six of his fellow
citizens, where the Briton can reach one.

"In all France, there are only slightly
more than the number of telephones in
New York City alone.

"In Germany there are but one and
eight-tenths telephones per hundred popu-
lation, so that the American instrument is
five times as useful in reaching people as
the German.

"Sweden, Norway and Denmark have
given more freedom to private initiative
than any other of the important European
countries, so that the telephone develop-
ment, in proportion to population, is
greater than in any other country of the
old world.

"In Stockholm, the Stockholm Telephone
Company operates in competition with a
State system, and the Company not only
has twice as many telephones in Stockholm
as has the State, but has about one-third
of all the telephones in Sweden. Even at
that, the influence of State development is
so far felt that the total development of
the country is but three and six-tenths
telephones per hundred population, making
its telephone facilities not half as great
as those of the United States.

"In Norway, the development of the
telephone service was originally left en-
tirely to private initiative. About fifteen
years ago, however, the government de-
cided to adminster the telephone service,
but instead of seeking to develop new

fields, it confined itself chiefly to absorbing
exchanges of the more populous and profit-
able areas. This threw the burden of the
less profitable rural development upon
private parties, a serious handicap. And
yet the State has, today, only about one-
half of all the telephones in Norway, the
rest being private. The total development
of the country is two and seven-tenths
telephones per hundred of population, or
less than one-third the development of the
United States.

"In Denmark, public ownership is
confined solely to inter-company long
distance lines, exchange service being
entirely operated by private ownership
under public supervision. Danish condi-
tions are, therefore, in part comparable
to those in the United States, and it is
not surprising to find that the telephone
development of Denmark is three and
nine-tenths telephones per hundred popu-
lation, which, although less than one-half
that of the United States, is nevertheless
higher than anywhere else in the world,
except in Canada.

"As to Canada, the telephone service is
chiefly supplied by private initiative,
although in three western provinces the
service is a government monopoly. Cana-
dians have, in the main, the same char-
acteristics as Americans, so that their
telephone service is more like ours than
that of any other nation. Canada has
354,000 telephones, a development of
four and nine-tenths telephones per hun-
dred population, compared with eight and
eight-tenths telephones per hundred popu-
lation in the United States. Canadian
experience in government (provincial)
ownership has been of short duration, and
results have been far from convincing,
notably in Manitoba, where dissatisfaction
with the telephone service reached such
a stage last year, that it was necessary to
appoint a Royal Telephone Commission
to investigate the government's operations.

"In Switzerland the telephone system
is owned and operated by the govern-
ment, with the result that there are two
and two-tenths telephones per hundred
population.

"Italy has not quite as many telephones
as the city of San Francisco. The whole of
Russia has fewer telephones than Chicago,
and Greece has less than a single American

GOVERNMENT OWNERSHIP OF TELEPHONES

building — the Hudson Terminal Building
in New York City.

"The total number of telephones in all
the other countries of Europe is consider-
ably less than may be found in two Ameri-
can cities — Chicago and Philadelphia; the
whole of South Africa has less than Boston ;
and the remainder of the world, including
Asia, Africa and Oceanica, has less than the
single city of New York.

"The Imperial Government of Japan
has pointed with pride to its telephone
service, because its apparatus and operat-
ing methods follow those of the Bell Tele-
phone Company in the 'United States.
But Japan, with all her wonderful imita-
tive skill and thoroughness of execution,
has been unable to escape the inexorable
law of government operation, and the
service has been so restricted by govern-
mental policy, with its multitude of 'other
political exigencies,' that a Japanese
telephone subscriber considers himself a
privileged character, and can sell his
privilege at a good round premium.

•"THE fact that inadequacy is so univer-
* sal, as a mark of . government ad-
ministration of the telephone service, leads
inevitably to the conclusion that the one
is a result of the other. The cause is ob-
vious. Governmental machinery is itself
inadequate to handle the requirements of
a service so complicated as the telephone.
Xo government, for instance, is capable of
the financial prevision which has been
required to build up the American Bell
System. It is inconceivable, for instance,
that Congress would devote itself to an
accurate and scientific mapping out of
telephone requirements, twenty years in
advance — a practice which the present
high standard of telephone efficiency has
demanded in private initiative in this
country. The present stage of telephone
development in the United States would
have been impossible, but for an absolute
guaranty of stability for a definite period
of time in the future; a complete freedom
from the gusts of opposing policies, politi-
cal or otherwise, an atmosphere or reason-
able expectation that deliberate and pains-
taking planning would be followed by
equally deliberate and painstaking execu-
tion. What government on earth is
capable of this sort of management?"

As the people analyze some of the allur-
ing propositions which attracted them
during the past decade, they realize that
even a good policy, if pursued too far, may
become a mania. Such is the experience
of the good people of New Zealand, whose
public debt, after the government assumed
operation of the public utilities including
the telephone, amounts to the entire
capitalized values of all the railroad,
telephone and telegraphic interests in that
country; this shows that some of the wild
theories of socialistic legislation proposed
by political leaders lacked the saving
admixture of plain common-sense and
facts. And yet New Zealand telephones
can be used only from nine in the morning
to five o'clock in the afternoon, while
eighty per cent of the offices are closed on
Sundays and holidays. Imagine the
American people tolerating such a state
of affairs. If you ever watched the faces
of those obliged to wait upon a delayed
call, fancy what their expression would
be should any retrogression in customary
telephonic services occur. And were the
United States to take over public utilities,
it might be found expedient to lower the
rate of wages to the standard set in Eng-
land, were operators to receive only forty
per cent of the pay given Bell operators
in this country. How long would these
invidious conditions last?

OVERNMENT ownership of telephone
interests is advocated by Congressman
David J. Lewis of Maryland, who wants a
commission to consider and report on a
project for the national postalization of the
telephone network of the United States;
he set forth the details of his plan in a
report of thirty -five pages in the Congres-
sional Record, proposing a federal invest-
ment of nine hundred million dollars. His
argument in its minor premises and figures
is simply a glaring imitation of the ancient
methods of the politician who sought to win
votes by condemning corporations promis-
cuously without regard to facts or reason.

For a man in private bigness to figure
on a venture with an arbitrary assumption
of the value of private* property, or by
guessing at the value of what he wants to
"absorb" would seem a hazardous pro-
ceeding. But Mr. Lewis sketches with
a free hand, his logic based on figures

8

GOVERNMENT OWNERSHIP OF TELEPHONES

marshalled under the subtle phrase "it
is assumed" — a rather shifty way of predi-
cating the value of the telephone proposi-
tion at nine hundred million dollars. Of
course, he covers weak points by suggesting
a final appraisal by the Interstate Com-
merce Commission. He proposed to leave
out at present the farmers, and other co-
operative telephone exchanges or telegraph
properties, because, as he explained it,
such telephone and telegraph service can
be provided by means of telephone wires,
a suggestion that seems to him to pave the
way for the ultimate extermination of
everything that looks like a corporation.
When he asserts that the service of the
United States telephone and telegraph
companies is inadequate and that the rates
are higher compared with those of other
countries, his whole flimsy plea falls to
pieces because it is not founded on truth.

PVO-THIRDS of the telephone mileage
wire in the world is operated in the
United States, and anyone who has had
experience abroad knows that American
telephone service is unsurpassed, and the
best service can never be the cheapest.
Three thousand miles being the maximum
length of telephone wires in the United
States, the average distances covered per
message are immensely longer here than
in other countries where it runs low —
sixty-five miles in Belgium, and a little
over five hundred miles in New Zealand.
More than thirty per cent of the business
of the Western Union Telegraph Company
is carried eight hundred miles, nearly
twice the average of other countries, and
more than one-half of the telegraph
messages in this country exceed two hun-
dred miles. It is very plain that the short-
distance messages of Great Britain must
be necessarily much lower than the long-
distance messages of the United States.

Further, as every traveler knows, an
address is not charged for in this country
as in European countries, and, as an
ordinary direction requires twelve words,
this large percentage of a message carried
free in the United States should not be
ignored, as it is in the Lewis comparisons.
The immense sums paid out by England
and France in supporting the government
telegraph are not considered by Mr. Lewis,
but they do appear in reports on the tele-

graph business of foreign countries — for
instance, $4,600,000 in England; in France,
$1,800,000; in Germany, $3,500,000, and
so on, trifles which the Congressman has
overlooked.

HPHE figures given as to telephone opera-
* tive efficiency do not take into con-
sideration the joint telephone and tele-
graph service. In summarizing the calls
made per employee, a foreign paper has
pointed out that Mr. Lewis' report gives
the figures of sixty-seven thousand, while
thirty-eight thousand is the correct basis,
and in the case of the Bell organization,
the efficiency (including all employees)
was about seventy-two thousand calls per
employee, against thirty-eight thousand
named by a foreign authority, or fifty- j
eight thousand as claimed by the Lewis
report. This discounting by useless figures j
of the efficiency of the American telephone
girl is justly resented by the operators.
It is not so much a question of rates with
the American people as it is of service.
The leadership maintained and developed j
by American energy is due in great measure
to the individual enterprise that distin-
guishes America from all other countries.
It is coming right down to the question
as to whether this quality shall become |
obsolescent and atrophied.

Carried to this logical conclusion, the!
people are beginning to realize that regu-J
lation as conducted by the Interstat
Commerce Commission in the case of
railroads is as far as the government can]
go, if a Republican form of governmenl
is to be maintained. There can be a|
popular tyranny in going too far alon^
these lines that will tend to uproot Ameri-
can representative government, and sub-
stitute the stern rule of-monarchial Europe;
but when the efficiency of American tek
phone operators is misrepresented,there
will be a dispute from centrals that will
ask for real figures, even if it only be
gentle "Number, please?" The people ar
getting the real number in some of theii
alluring demi-semi-ex-official Congressional
reports that do an injustice to the efficiency
of American employees, and of the servk
they have rendered through the mediui
of well-organized corporations that under-
stand what is demanded in Americ
public service.

GaylordBros.

Makers
Syr,r.use, N-

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