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Tuesday, 12 July 1910

Sir JOHN QUICK (Bendigo) .- I do not propose to occupy time in debating the general policy enunciated in the Governor-General's Speech. I think that the Vice-Regal deliverance has been fairly discussed by representative speakers of both sections of the House, and I entirely agree with the honorable member for Dalley that to further debate the outlines of a policy which will have to be submitted in detail at a later stage, would be so much waste time. But I desire to avail myself of this opportunity to direct the attention of the House to a question which threatens to become a burning one - I refer to the imposition by the Postmaster-General of the proposed new telephone charges. In doing so, 1 wish to emphasize what appears to me to be an anomaly, viz., that, whilst under the existing law the PostmasterGeneral has no power to impose postal or telegraphic rates, he is, by a general authority under the Post and Telegraph Act of 1901, apparently empowered to formulate and bring into operation telephonic rates. Why Parliament, in passing that Act, reserved to itself the authority to levy postal and telegraphic rates, whilst giving the Postmaster-General full power to impose telephonic rates, .1 cannot say. It must have been an oversight. It could scarcely have been intended that Parliament should delegate to the Executive Government the full power to deal with so important a branch of taxation as telephonic rales. When 1 entered upon my duties as PostmasterGeneral in the Deakin Government, one oi the first things into which I inquired wa; as to the constitutionality of this power, which has been reserved to, and exercised by, the Postmaster-General, because it occurred to me that, as the power of taxation is vested in Parliament itself, it might be open to question whether Parliament could delegate that power to a subordinate officer.

Mr Webster - But the honorable member would not call the power to levy telephonic rates a power to tax?

Sir JOHN QUICK - Up to a certain stage telephonic charges, I think, may be regarded in the light of a fee for services rendered, but beyond that stage, they may become a tax. However, I was advised by the Crown Law authorities that the power to impose telephonic rates was perfectly constitutional, and that the PostmasterGeneral could be vested with the necessary authority. I hope that Parliament will soon assert its right to assume full control over this question. When the Postmaster-General was challenged this afternoon to afford the House an opportunity of debating it, he replied that he could not prevent that being done. But, unfortunately, the matter cannot come before us in such a way that honorable members will have a free hand to deal with it upon its merits. I venture to say that if it were dealt with upon its merits, and if honorable members had a free hand, the regulation known as 7A, which relates to what are popularly known as the " Thomas rates " would not become the law of the land on ist September. I wish to assure my honorable friend, the PostmasterGeneral, that I do not approach this question from a party stand-point, and that I am not prejudiced against the regulation to which I have referred. In this connexion, I would remind him that when 1 assumed the office of Postmaster-General, although there was a big clamour raised against that regulation, I did not advise my colleagues summarily to abolish it, as I might have done. I did not resort to that extreme step, because I was impressed with the necessity which existed for giving the whole subject thorough and comprehensive consideration, and for dealing with it in a judicial manner and free from Ministerial or party bias.

Mr Webster - The honorable member desired to get more light upon it?

Sir JOHN QUICK - I did. Consequently I did not see my way to recommend that it should be summarily wiped out. I merely suggested that if the rates in question were not regarded as satisfactory by my colleagues, the question should be dealt with by suspending the notices which had been issued to subscribers, that those rates would come into operation upon a certain date. I was not in any way biased against the measuredrate system - that is the toll system. Entering the Department as I did with a free hand and an open mind, I was bound to consult the officers of the Department upon the more important methods of administration, and as to the best means of giving effect to those methods. One of the very first statements submitted to me was of an alarming character, viz., that it was estimated by witnesses who appeared before the Postal Commission that under the partial-toll system the loss sustained by the country in connexion with our Telephone Department amounted to from £50*000 to £60,000 per annum.

Mr Webster - Upon whose evidence was that statement based?

Sir JOHN QUICK - I was informed that that statement had been made in evidence before the Postal Commission. I am not in a position to say by whom it was made. I was also informed that Mr. Hesketh, in his evidence, declared that a service worth £5 had cost the Department £6 to carry out, exclusive of operating charges. I was further assured that no precise figures were available in respect of the loss sustained under the flat rate, but it was considered that such loss must be very heavy. One witness affirmed that a service which yielded a revenue of from £5 t0 £9 Per annum was sometimes worth £100 a year to the customer. These were some of the considerations which were placed before me in support of the necessity which existed for revising the toll rates with a view to increasing them and to abolishing the flat rate. As I proceeded with my investigations, I thought that it would be just as well to ascertain whether any information had been submitted to the Postal Commission, or whether any was in the possession of the Department itself, tending to show that the telephonic rates previously authorized by law were not sufficient, and, if so, to what extent loss had occurred, as had been suggested by witnesses who appeared before the Commission. One of the first questions that I asked was whether there were any books in the Department showing the capital charges and working expenses in connexion with the telephone system of the country. I found that no accurate accounts had been kept concerning the capital invested in this branch of the service. There might be rough estimates or generalizations as to the cost, but there were no figures to show how much money had been spent on telephones and how much on telegraphs. The figures were all mixed up together. I desire to refer to the officers of the Department with the greatest respect, and I am not saying anything hostile or adverse to any of them. But I wish to explain my attitude, and the reasons why I advised my colleagues to suspend the operation of the regulations made at the instance of my predecessor. When I made these inquiries, I was informed that the Victorian Electrical Engineer had stated that the capital expenditure on telephones in Melbourne amounted to £63 per subscriber's line. I asked for particulars. I was then informed that it was by no means certain that that figure was accurate, but that, for the purpose of advising the Postmaster-General as to these new rates, it was to be assumed that the amount of capital expenditure on the . telephone system in Melbourne was £39 per subscriber's line. I said, " What is the meaning of assumed ' ? " I was then informed that it had been " assumed " that the cost was so much under the heading of lines, poles, equipment, and so forth, and that in this way it had been calculated that it had cost £39 per line to construct the various telephone lines in Melbourne. Honorable members can see the dangerous ground upon which the officers were proceeding when the Minister was asked to " assume" a certain expenditure, and was told that he could not rely upon its being actual.

Mr Bamford - Was that the average?

Sir JOHN QUICK - Yes; that is to say, if you take a certain amount of capital and divide it among a certain number of subscribers, an average is reached. Then I had presented to me a little balancesheet, the figures of which I shall quote. iii ne net working cost per line was set down at £4 15s. ; depreciation and interest at £3 6s. 3d. ; total working cost, depreciation, and interest on each subscriber's line in Melbourne, £8 is. 3d. The revenue amounted to £7 9s. 7d. per subscriber's line, leaving a shortage per line on what is termed the mixed or Chapman system of us. 8d. These figures were for the year 1908. At that time there were about 11,000 subscribers in the Melbourne metropolitan area. Multiplying ns. 8d. by that figure, the total annual loss estimated as having been realized in connexion with the metropolitan telephone system in Melbourne for the year 1.908 was £6,416. It occurred to me that that was not a very big loss - certainly not such as to justify the increase in the new rates proposed by my predecessor - who is now my successor - under regulation 7A.

Mr Webster - Did that loss cover maintenance, and so forth?

Mr Tudor - Did it include the expenditure upon the tunnels?

Sir JOHN QUICK - Yes, it covered the whole cost up to date. I apprehend that Mr. Hesketh was not the man to leave out such a large item as, for instance, the capital cost of the tunnels. I then asked for similar information in regard to the Sydney metropolitan area, for the purpose of making a comparison. I was told that the Department was in a position to give more ample information as to that capital expenditure than could be supplied with reference to the Melbourne metropolitan area. I was informed that the actual capital expenditure in connexion with telephones in the Sydney metropolitan area was £35 per subscriber's line. The details, setting clown interest, depreciation, and working expenses at 8A- per cent., were as follow : - Working costs, £4 9s. 7d. per subscriber's line ; interest and depreciation, £3 ; total, £7 9s. 7d. per subscriber's line. The annual revenue for the year 1908 was £7 5s. per subscriber's line. The total shortage was, therefore, 4s. 7d. per subscriber's line. Those figures are to be found in papers which I left behind on the file when I quitted the Department. The discrepancy between ns. 8d. per line shortage in Melbourne and 4s. 7d. per line shortage in Sydney was sufficient to arouse grave doubts in my mind as to whether there was such a great deficiency and loss on the telephonic system of the country, as was represented in the figures given before the Postal Commission, and apparently concurred in by the advising officers of the Department. I caused an analysis to be made of the increases that would be caused in the proposed new rates to the various subscribers, classing them according to the number of their calls per day. I did not take a copy of that paper, but I had a similar table prepared yesterday to read to the House. It shows what would be the increases or decreases under the Thomas rates, as compared with the Chapman rates. Under the Thomas rates there are three grades of fixed charges coupled with charges for calls from the very beginning,that is, without any free calls. It appears then that a subscriber using his telephone for an average of one call per day will have an advantage of 5 per cent., as compared with the Chapman rates. But that subscriber is the only one who can possibly have any advantage or reduction. A subscriber using his telephone twice a clay throughout the year will have to pay increased rates amounting, to 10 per cent. Any one who uses the telephone three times a day will have to pay increased rates amounting to 25 per cent. ; with four calls per day the increase is 40 per cent. ; five calls per day 56 per cent. ; and six calls per day 58 per cent. That marks the high water mark of increase. At seven calls per day the subscriber will have to pay an increased rate of 57 per cent.; at eight calls per day an increase of 46 per cent. ; nine calls 41 per cent. ; ten calls 38 per cent.; 15 calls 28 per cent.; "twenty calls 27 per cent. ; twenty-five calls 28 per cent. ; thirty calls 28 per cent. ; forty calls 30 per cent. ; and 50 calls also 30 per cent, increase. Honorable members will, therefore, see the enormous increases involved by the proposed new regulations - increases which, in my opinion, were not justified by the comparatively small loss per line which I was told by the officers of the Department took place in Sydney, or by the loss per line which took place in Melbourne.

Mr Thomas - Will the honorable member tell us how much more a person who had 18,000 rings in twelve months would have to pay under my charges?

Sir JOHN QUICK - I have not the figures for that, and wish to make my own speech in my own way. The question is complicated, and I may not be as smart at figures as my honorable friend, but I am endeavouring to put them before the House as well as I can. I wish to draw the particular attention of honorable members to the outstanding feature of this comparison of rates - that the heaviest increases under the new regulations will fall upon the moderately small users. The only small user who will have an advantage is the man who uses his telephone but once a day.

Mr Thomas - What about the subscriber who uses it 100 times a day?

Sir JOHN QUICK - The regulations could have been so framed, if necessary, as to hit him without penalizing the moderate users. My successor, if he looks over the file, will see that I did attempt to modify and reduce his scale of charges to a substantial degree, without wiping it out altogether. I submitted a reduced scale to the Cabinet, with a complete report on and analysis of the whole question./ 1 had no bias one way or the other. I submitted as alternatives either a modification of the Thomas regulation or an analysis of and inquiry into the accounts of the Postal Department to ascertain how much had been spent in telephones, how much ought to be charged to capital account, and how much to working expenses, enabling us to frame a fair and equitable scheme of telephonic rates and charges. My colleagues unanimously decided that they would not tamper with or endeavour to improve or wipe out the honorable member's scheme, but would have the whole question investigated by competent actuaries, in order that correct information might be rendered available for the preparation by the Postmaster-General for the time being, with the assistance of a . Committee of accountants, of a just and equitable scale- of charges. This Committee was accordingly appointed for that express purpose, and charged with the duty of collecting information and being prepared to advise the Postmaster-General as to the correct means and method of framing the telephonic rates.

Sitting suspended from 6.30 to 7.4.5 p.m.

Sir JOHN QUICK - As there is likely ' to be further controversy on this telephone rate question, and as there is some misapprehension as to the existing rates and the proposed new rates, I desire, for the information of honorable members, to have placed on record some of the particulars of those rates. The telephone charges in existence at the commencement of Federation were known as " flat " or fixed rates. These were divided into " business " and " residence," and in the several capitals were as follow : - Sydney, business £9, residence £5; Melbourne, business £9, residence £5 ; Brisbane, business £6, residence £6 : Adelaide, business £10, residence £5 ; Perth, business £7, residence £5 ; Hobart, business £6 residence £4 10s. In other towns the rates were as follow : - New South Wales, business £8, residence £5 ; Victoria, business £7, residence £5 ; Queensland, business £6, residence £6; South Australia, business £5 to £10, residence £5 ; Western Australia, business £7, residence £5 ; Tasmania, business j£$ to £6 ; residence £3 to £4 10s. Then came what are known as the Chapman rates, introduced by the honorable member for Eden-Monaro, and he made a compromise, providing for an alternative scheme of toll rates. In order to have it on record, I beg to lay before honorable members the following comparative statement of the toll-rate scheme under the Chapman regulations and the tions, together with suggestions which 1 toll-rate scheme under the Thomas regula-myself made to the Cabinet -

In order to make that statement complete I have included the tentative suggestions I made to the Cabinet for the modification of the Thomas scheme.

Mr Thomas - These suggestions have never before been published.

Sir JOHN QUICK - They are on a file in the Department.

Mr Thomas - But the honorable member is now making them public for the first time.

Sir JOHN QUICK - Yes, but they are on a file in the Department. They were submitted to the Cabinet in order that Ministers might have an opportunity of saying whether they would accept a modification of the Thomas rates.

Mr Webster - When were they submitted to the Cabinet?

Sir JOHN QUICK - On the 15th June, 1909.

Mr Thomas - This is the first I know of them.

Sir JOHN QUICK - My suggestion involved a reduction of 10s. per annum, with an incidental reduction for a twoparty service, and an additional grade of calls, namely, \d. per call, $d. per call, and \d. per call, according to grades. That was the new scheme I submitted, not in order to supplant the scheme of the present Postmaster-General, because I have no prejudice against the toll system, but in an endeavour to form a working scheme according to the information available. I thought that the ground _ rent charge and the fixed rate were too high.

Mr Thomas - But that scheme was " turned down " by the honorable member's Cabinet?

Sir JOHN QUICK - Certainly it was ; on the information I submitted the Cabinet thought it quite clear that there was not sufficient material for arriving at a satisfactory conclusion, and with that view I agreed. On the 19th June, 1909, I drew up a Ministerial memorandum, placing on record my objection to the rates then in existence. The memorandum was as follows : -

t.   That in my judgment Mr. Chapman's scale of charges ought not to have been disturbed until an account and valuation of the annual working costs and interest on capital expenditure with depreciation allowance in connexion with telephones had been made, as recommended by Mr. Hume Cook, Chairman of the Postal Commission.

2.   That although the toll system, with no free calls, has been authorized by Mr. Thomas' regulations without adequate notice or independent investigation, I cannot advise its entire suspension.

3.   That at the same time I think that the details of the charges under Mr. Thomas' toll system are open to criticism, and strong objections have been taken to their fairness.

4.   That it is by no means clear that the three grades of ground rent charges, viz., £4, £3 10s., and ^3, for each instrument, varying according to population in a given network, are based upon an approximate distribution of capital expenditure.

5.   That such charges should, in my opinion, be differentiated, not according to population within a network, but according to the actual number of subscribers within the network. This view is supported by a paragraph in Mr. Hesketh's. valuable report of 1906, in which he states that the rates in small centres should be from 25 to 20 per cent, lower than those in metropolitan networks, such as Melbourne and Sydney.

6.   That graded charges based on the number of lines and instruments at work within a district would give a more approximate test of capital expenditure than population apart from lines and instruments.

7.   That it is not clear the details of capital expenditure and depreciation in connexion with telephone works have been sufficiently ascertained and analyzed to enable a determination of the charges which should be made under those headings to be arrived at.

8.   That in the absence of such information and determination, subscribers should have the benefit of any doubt until the doubt has been removed by investigation.

9.   That in the new scale of toll rates, a charge is made of1d. for two calls up to 2,000 per half year, and above 2,000 three calls for1d.

10.   That I cannot see on what principle the line is drawn at 2,000 calls per half year, which gives an increased revenue of 70 per cent., and why it is not drawn at 1,460 calls, which would give an increased revenue of 45 per cent.

11.   That I think there should be three grades of calls, instead of two, reducing the charges proportionately, according to the increased number of calls and use of instrument, and that the reduced charge should begin with calls over the average number.

Those were the considerations that I submitted to my honorable colleagues, and thev concluded that on this statement there was not sufficient material before the Government to justify them in arriving at a decision as to what would be a fair rate : either so much per call or so much for ground rent. Although I laid before them an alternative scheme, which they could have adopted, they said that, on the whole, there was not sufficient material to allow the Government to arrive at a conclusion, and they accepted a suggestion by me that the whole question should be referred to a committee of independent accountants. Admittedly, the accounts of the Department at the time were in an un- . satisfactory position. There was no capital account; there were no books distinguishing capital from working expenditure, or telephone expenditure from telegraph expenditure; and the Cabinet therefore considered that the Government, as well as the people of the country, were entitled to an independent investigation. They refused to appoint officers of the Department to make that investigation, and to sit, as it were, as judges in their own cause.

Mr Thomas - Was the honorable member's minute written before or after he submitted his scale of charges to the Cabinet ?

Sir JOHN QUICK - The whole of the papers were submitted together.

Mr Thomas - His minute and his scale of charges were submitted side by side?

Sir JOHN QUICK

Mr Thomas - Yet. notwithstanding that minute, the honorable member had proposed those other charges? He had come to certain conclusions despite the advice he gave the Cabinet in his minute? He submitted to the Cabinet a certain scale of charges.

Sir JOHN QUICK - A tentative scheme, certainly. It was obvious that it was not wise to accept a modified scheme, or in any way to deal finally with the question. This shows conclusively that the Government and I, as Postmaster- General, had no prejudice one way or the other against my honorable friend's scheme, that we had no prejudice against the toll rate or any of his propositions, but that on the materials before us we thought it was not safe or satisfactory to adopt any new scheme at that time.

Mr Thomas - And yet the honorable member submitted one.

Sir JOHN QUICK - In framing a scheme I did my best, but I felt that I was groping in the dark. It was mere guess work so far as capital expenditure and cost of calls were concerned. Like the honorable member's own scheme, it was a mere rough generalization, not based on any financial or reliable data. My colleagues very properly decided that it would he best to refer the whole question to a Committee, so that it might be investigated, and details of the conflicting views presented in a form with which the Government could finally deal. Accordingly a Committee, consisting of Mr. Percy Whitton and Mr. Holmes, was appointed. Mr. Whitton was then an officer of high grade and credit in the Audit Department. He has since been appointed to the responsible position of Collector of Customs in Victoria, and his capacity as an accountant, as well as his independent judgment and freedom from bias, was admitted. Mr. Holmes, a distinguished actuary outside the Public Service, was associated with Mr. Whitton in this work. In the course of collecting information and receiving deputations as Postmaster-General I had presented to me by a deputation an objection to the toll-rare system as proposed to be introduced, based not merely on the ground of the inequality of the proposed charges or on account of the increased charges, but on the ground that there was no proper means of recording and counting calls at the command of the Department. That was an objection to the scheme for the universal introduction of the toll-rate system which was brought under my attention. At the time I did not realize its importance;I did not understand, until later on, the strength of that objection and its formidable character. As the Committee of Accountants went on with their investigations, however, they proceeded to inquire, not merely into the state of the accounts, but as to the practicability of introducing a general system of toll rates or measured rates, according to calls, and they found that there were grave doubts as to the practicability of introducing generally such a system. I shall now refer to some of the conclusions arrived at by that Committee in reports as presented to the PostmasterGeneral on 7 th December and 23rd December, 1909. Honorable members, looking at these documents, will realize how thoroughly and scientifically the Committee conducted the investigation, and will see how they dealt with the various objections to what is called the flat rate or fixed rate system, and the objections also to the Thomas rate scheme. One of the stock objections taken to the flat rate, or the fixed rate system, the details of which I have already given, was that under it an enormous loss was suffered by the Department, that subscribers generally were getting the best of the Department, and that it was not receiving a sufficient revenue from the services it rendered to them. In the first report submitted by the Committee, dated 7th December, 1909, the following paragraph occurs : -

That is a most significant criticism of, and answer to, the objection that the inflated losses alleged to have occurred in the Department were owing to the flat-rate system. This report refuted that contention, and set forth that the losses were owing entirely to the measured-rate system. In other words, had the flat-rate system been allowed to continue, instead' of there being a loss in 1908-9. there would have been a gain. The Committee went on to observe -

Honorable members, perhaps, will be interested to learn of the primitive and expensive methods of recording calls by subscribers which are in vogue at present. Except where they have established the common battery switchboard, where by touching a button a call is mechanically recorded, a call has to be recorded by the hand of the attendant. In other words, when the attendant establishes a communication between the subscriber who rings up and the person with whom he wishes to communicate, he takes a pencil, and jots down on a card the numbers of the two subscribers. Honorable members can imagine that the process of recording calls in that manner would be not only troublesome, but likely to lead to mistake and error, and very often the error might be in favour of the subscriber, or against him. The system was objected to on the grounds that it was an imperfect one; that it could not be relied upon, and that it was expensive, crude, and unsatisfactory.

Mr LAIRD SMITH (DENISON, TASMANIA) - Is not the common battery system being universally adopted ?

Sir JOHN QUICK - I shall come to that point presently. With that system there is a mechanical arrangement which, when the attendant presses a button, records the call ; but in that case, as in the case of the card system, the subscriber has no protection.

Mr Page - Why cannot a subscriber keep his own record ?

Sir JOHN QUICK - Supposing that a subscriber did keep a record, it would be practically valueless, and would probably have no force or effect, because the Department would assert its own right and present its own account, and he would not be heard. The subscriber might not be prepared to accept the departmental account. If he objected to or challenged it, he would be told, " That is our account, and if it is not paid, we will cut you off." The bill of a butcher or a baker may be challenged but in the case of a telephone bill from the Government, backed up by the authority of the Postmaster-General, nobody would have the means of successfully challenging it. That is the fundamental objection to the system.

Mr Thomas - The honorable member himself brought down a toll rate, and submitted it to the Cabinet.

Mr Fisher - Does the honorable member suggest that there would be any attempt to mislead?

Sir JOHN QUICK - I do not suggest that the attendants would attempt to mislead, but there might be accidental mistakes. It is well known that in the big exchanges in Melbourne and Sydney, the attendants are pressed very heavily with work. In the case of many exchanges, it is admitted that the attendants are overworked. They carry an excessive load. Complaints have been made of attendants not having time to answer all the calls of subscribers. It is quite enough to have to attend to the calls of subscribers without having to keep accounts of calls. The representation made to me was that the system was unsatisfactory, and that the subscribers ought to have some protection. At the time when it was first presented to me, I did not give to that objection the same amount of weight as the investigating Committee has attached to it. If honorable members will read their report, they will see that they lay great stress on the inadequacy and the imperfection of the system of recording calls. They say that whatever objections there may be to the flatrate system, and I think that they imply - at any rate, their statement is open to the inference - that the toll-rate system, based on a measured service, is the ideal one-

Honorable Members. - Hear, hear.

Sir JOHN QUICK - I am not challenging that view, but the difficulty is to bring the system into operation under existing circumstances.

Mr West - Had we not better make a start early?

Sir JOHN QUICK - We cannot make a start until we have the mechanism for recording the calls, and the strongest part of the objection to the scheme submitted to the present Minister by the investigating Committee was not that the measured rate itself was seriously assailable, although there might be advantages in one way or the other, but the absolute inadequacy and unreadiness of the Department to give effect to the system with satisfaction to the Department or to the subscribers. What they recommended was that arrangements should be made as soon as possible to introduce a perfect meter system. If such a system can be invented and adapted to existing exchanges, they suggest that it should be done, that as the result of a six months' test the Department would be able to know the average number of calls of various classes and groups of subscribers, and that then it would be quite time enough to go in for the general adoption of the measured-rate system. In the meantime, however, they report that, in their opinion,, it is a physical impossibility for the officers, under the existing system, to record the calls with any degree of accuracy or reliability, or with any degree of justice to the Department or the subscribers.

Mr Thomas - The Department says no to that.

Sir JOHN QUICK - I am not so sure about that. I know, from the reports which reached me when 1 was PostmasterGeneral, that there were complaints from the attendants in the Melbourne and Sydney exchanges that they were overloaded1 with work, and when I asked whether additional hands could not be employed, I was told that the position would not permit of that being done. In other words, on account of the design and construction of the switchboards, and the situation of the various wires, that suggestion could not be adopted.

Mr Thomas - That is not the recording of calls, but the attendants making, calls, which is a different thing altogether.

Sir JOHN QUICK - I am now dealing with the suggestion that additional handscould be put on to reduce the load. The reply was that it could not be done, because the switchboards were already overcrowded.

Mr Webster - The load was reduce.! from 100 to 70 in Sydney

Sir JOHN QUICK - That was done in the case of certain switchboards, but not generally. The Deputy PostmasterGeneral in Sydney said that unless certain improvements were carried out the load could not be reduced. The question is. what is to happen on the 1st September, when the innovation introduced by the present PostmasterGeneral comes into force ? Assuming that the new regulations take effect then, we shall have upwards of 20,000 flat-rate subscribers transferred to the measured-rate system. There are now 40,775 toll-rate subscribers and 21,189 flat-rate subscribers. What will be the position on 1st September next,, when the attendants are required to record the calls of the present flat-rate subscribers, in addition to those of the present toll-rate subscribers? How is it to be done? According to the accountants it will be a physical impossibility. Tn any case, it will be possible only in a degree by means of a makeshift arrangement. What is needed is an automatic recording instrument. Such an instrument would be satisfactory from both the Departmental and the subscribers' point of view, but, until it has been devised, the present method of recording calls must continue. Therefore, bad as the existing service is, and numerous as are the complaints, the efficient administration of the Department will be much more difficult after 1st September than it is now, and, under the circumstances, I do not envy the PostmasterGeneral the task which confronts him. He said the other day that he laid the report of the accountants on the table with " grim satisfaction." What is satisfactory in it from his point of view? According to the accountants, the net profit made by the Victorian telephone system between March, 1901, and 30th June, 1909, was £142,000, allowing for a loss of £7,700 in the year 1908-9. The flat-rate system, under which subscribers can use their telephones from morn to eve, for purposes of business or social intercourse, without restriction, has been much abused and ridiculed. I admit that it is open to objection on the score of inequality, as the scheme of the honorable member is also imperfect. But the flatrate system was on the whole satisfactory to both the Department and the subscribers, and, according to the accountants; in 1908-9 there would have been a profit of £20,000, instead of a loss of £7,700 had the flat-rate system continued general in that year. The present PostmasterGeneral framed regulation 7A on the information then submitted to him by his officers. I do not say that he framed it entirely on the advice of the Department.

Mr Thomas - I take all responsibility for it.

Sir JOHN QUICK - I have read the balance-sheet presented to me as PostmasterGeneral, showing the loss on the Melbourne metropolitan exchanges during 1907-8. That balance-sheet was prepared on the assumption that the capital cost of each subscriber's line was £39. According to the accountants, however, the capital value of each subscriber's line in the year 1907-8 was £30.27,, and, instead of there being a loss that year of £5,000 or £5,500, there was a net profit of £5,541 17s. 8d. Obviously, therefore, the information on which the Minister originally framed regulation 7A was incorrect. Had he known the capital value of each subscriber's line to be only £30.27, and that there was a profit of £5,500 odd, instead of a loss of about £6,000 on the year's working, he would have been justified in reducing rates. I ask him, now that he proposes to revive regulation 7a, if he has considered the report of the accountants appointed by the Government, with the concurrence of Parliament, to investigate the whole matter. If he has not, he should do so before making any alterations. The figures presented by the accountants do not justify the higher ground rents and fixed charges which the Minister proposes in addition to making the toll rate universal. The Minister has stated that, as a good Socialist, he does not wish to make profit out of the telephones. Seeing that the data on which his regulations were originally framed have been shown to be imperfect, because belter was not then available, ought he not, as a good Socialist, to recognise the fact, and reduce his rates in accordance with the later and more reliable information presented in the accountants' report? The accountants, not finding all the information they required in the books of the Department, called for vouchers for the whole of the capital expenditure. Having a voucher before them they had toseparate the various items, in order to see how much should be charged to the telephone, and how much to the telegraph branch. Their task was a most laborious one. It was a work of drudgery, anr! it is impossible to regard it without admiration for their industry and skill. Their work, a work authorized by Parliament, 1* to be disregarded by the present PostmasterGeneral. He has not condescended to revise the regulations in the light of the information presented in the report of these experts with respect to the position of af-fairs in Victoria. We have available inthese reports only information with reference to the State of Victoria. We have no information respecting the great and important telephone system of New SouthWales, which is more extensive, complicated, and expensive than even that of theState of Victoria. If mistakes have beenmade with reference to the capital expenditure in Victoria in the rough-and-ready estimates of officials in the Department 3ni this State, is it not likely that similar mistakes have been made in the roughandready official estimates for New South: Wales, although their estimated capital expenditure and estimated loss is not so serious as in the case of Victoria?

Mr Thomas - Did not the honorablegentleman himself ask the accountants tofix charges for the whole of Australia after their inquiry into the condition of affairs in Victoria alone?

Sir JOHN QUICK - I asked the Telephone Committee, on the information and data they collected in Victoria, whether they could advise me, as Minister] as to how I should frame a scale of Commonwealth telephone rates. I was not in a position to decide. Honorable members will see, from their report, that they submitted very cautious advice. It is practically non-committal.

Mr Thomas - But did they do it?

Sir JOHN QUICK - They did, at my suggestion. They submitted a certain rough and tentative scheme about which there is no finality.

Mr Joseph Cook - Why should the Postmaster-General make all these pinpricks? There is nothing in them.

Mr Thomas - That is so; there is no thing in them.

Sir JOHN QUICK - Evidently the honorable gentleman is viewing the situation with "grim satisfaction."

Mr Thomas - I am.

Mr Joseph Cook - The honorable gentleman is having a hit at the Stock Exchange, as he said he would when he was over here.

Sir JOHN QUICK - The Accountants Committee submitted a scheme of fixed rates for merely tentative operation, pending final investigation, and the adoption of a proper system of measurement. That is all they did. They have not suggested their scheme as a final recommendation. They merely submitted it, in order, as they o say, to arrest the tendency on the part of fixed subscribers to take advantage of the Chapman toll rates.

Mi Thomas. - Is that all their scheme is intended for?

Sir JOHN QUICK - That is all. If the tendency displayed by fixed rate subscribers to transfer from the fixed rates of £so> j£,9> a"d £6, to the toll rates, under which they receive 2,000 free calls, could have been arrested, there would have been no loss, and the Accountants Committee suggested the adoption ot a temporary scheme, pending further investigation to ascertain whether some reliable system of measurement of calls could hot be adopted. They report that they have heard that there is, in some part of England, I think, an automatic meter, by which an effective call can be properly registered.

Mr Thomas - Where did they say it was?

Sir JOHN QUICK - Its existence is reported, but I do not remember where it is said to be in operation.

Mr Thomas - They do not mention the place.

Sir JOHN QUICK - I suggested that inquiry should be made in all parts of the world to discover whether such a means of registering calls is available.

Mr Fairbairn - We have heard of that automatic meter for years, but I do not think that it has yet been invented.

Mr Thomas - It has not been discovered yet.

Sir JOHN QUICK - I have stated some of the objections and the criticism which might be offered to the scheme for which the Postmaster-General accepts the responsibility. The objections may be summarized in this way : That assuming that the measured rate is the ideal and the most equitable system of charging toll telephone, the new scheme is not a measuredrate scheme pure and simple, nor is it a flat or fixed-rate scheme pure and simple. It is partly measured and partly fixed rate. That the minimum charge of £3, £3 10s., and £4 is collected whether a subscriber has a call or not; in addition to the minimum charge there is a special scale rate for calls, and subscribers complain that they get nothing for the minimum charge. A pure, that is an exact, system of measurement would not consist partly of a fixed charge or ground rate and partly of a charge of so much per call. A proper measurement system would be one which would provide for a charge for calls only, and would have no reference to a ground rent or fixed rate.

Mr Thomas - Is that possible?

Sir JOHN QUICK - That would be a true measurement scheme if we are to have the ideal system for which the honorable gentleman contends. We should charge only at per call.

Mr Thomas - Then every person in the community should have a telephone put into his house for nothing. Would the Treasurer agree to that?

Sir JOHN QUICK - At any rate, if we are to impose a fixed charge, it should not be so heavy as to be a burden upon the subscriber. The subscribers should be convinced that they will be getting something for what they pay. If a minimum charge be imposed, the subscriber might fairly claim that he should get a certain number of calls for it. I believe that Mr. Hesketh, in one of his preliminary reports, recommends that. In his first report, in 1905, Mr. Hesketh recommended a yearly rental of£7 with 600 free calls, which a departmental Committee subsequently modified by suggesting a yearly rental of £6 with 760 free calls.

Mr Thomas - Which is better?

Sir JOHN QUICK - The honorable gentleman must not cross-examine me too much when I am endeavouring to make a plain statement. I quote that as justifying my contention that if we have a certain fixed charge, and cannot secure an accurate measured rate, we should give the subscriber something for the fixed charge, however small it may be, and might give him two or three calls a day, as Mr. Hesketh suggested.

Mr Thomas - By raising the ground rent, that might be done most easily.

Sir JOHN QUICK - At any rate, under Mr. Hesketh's proposal the subscriber was to get something, whilst under the scheme proposed by the present PostmasterGeneral the fixed-rate subscriber will not get anything, though the man who makes only one call a day is given a slight reduction upon previous rates. The strongest objection to the general introduction of the toll-rate system at the present time is that there are no satisfactory means for recording calls. Under the present method of recording calls on a card or by pressing a button, we can have no assurance of accuracy for the protection of the revenue or the safeguarding of the subscribers' interests. Then there is the other ground of objection, that the cost of recording and counting the calls would be very great, and would probably absorb most of the increase in revenue. It is submitted, also, that it would be better to postpone the general introduction of toll rates until the Department is assured of a proper, efficient, and economical method of recording calls, and that, in the meantime, the loss of revenue under the Chapman mixed-rate scheme could be arrested by the temporary adoption of the fixed-rate scheme recommended by the accountants. This is purely a business matter. It is not a matter , of sentiment, and in placing these business considerations before the House I might remind honorable members that there are nearly 70,000 subscribers to our telephone system in Australia. It is a growing system : the subscribers are entitled to an assurance that their interests are being looked after, and will be watched and protected by this House, and that it is not left absolutely to the dic tation of any Postmaster-General, no matterhow powerful he may be, to determine these telephone rates. The Government have a right to view this question calmly and dispassionately. They should not be content to say, " We want to get at those fellows who make 18,000 calls a year." Inequalities may be associated with any system, but I maintain that we should view this question as a business proposition from every stand-point - from that of the small user as well as of the large user. According to the figures which I have quoted, the percentage of increased charges will press with greater severity on the average small user than it will on the large user who makes thousands of calls annually. Upon those subscribers who make between four and six calls daily it amounts to from 40 to 50 per cent. That is a very large increase, and some justification for it is needed. Subscribers have a right to know why it has been determined upon. The deputation which waited onme some time since said, in effect : " We want an assurance that these charges are justified by the necessities of the service."

Mr Thomas - Hear, hear. I am doing my best to give them that assurance.

Sir JOHN QUICK - In the information which is before the House, there is nothing to show that the increased charges are justified. The inquiry into them has only just commenced. It is true that during 1908-9 there was a loss of£7,000 in Victoria. But there is a great difference between that loss and the exaggerated loss referred to by certain witnesses before the Postal Commission, which they declared amounted to from£50,000 to£60,000 annually. If there be a loss, let it be calmly investigated. But how can the PostmasterGeneral say what is the loss in New South Wales, or whether a loss is being sustained there? I challenge him to say whether a loss or a profit is accruing from the telephonic charges in that State. No officer in the Commonwealth service can say that. Rough guesses may be made, but no officer can tell with the accuracy with which the Telephone Committee have tabulated their report for the world to criticise, whether a profit or a loss is accruing there. When the question was raised as to whether that Committee should continue their investigations in States other than Victoria, I was harassed in this House as to the expenditure which would be incurred by the adoption of that course. In view of the criticism to which I was subjected, I felt a certain amount of hesitation in sanctioning further expenditure, and finally the question of whether the Committee should visit New South Wales was postponed until after the general elections.

Mr Tudor - I thought that their report was to be presented within two months from the date of their appointment?

Sir JOHN QUICK - So it was. But the work which they undertook was a gigantic one. They had to make a balancesheet for every telephone subscriber's account in Victoria. It was a big job. Had books been available showing the capital cost and working expenses of the lines, the report of the Committee would have been forthcoming within the period indicated. But as no books were available, they had to get down to bedrock - they had to examine vouchers from tradesmen and contractors who supplied material to the Department before they could arrive at any definite result: I say that if similar work were carried out in the various States as satisfactorily and exhaustively, as calmly and judicially, as it was in Victoria-

Mr Webster - How long would it occupy ?

Sir JOHN QUICK - The Committee undertook to complete the work in New South Wales within another five or six months. Had they done so, they would have solved the whole problem, because I think that, in most of the other States, the loss is scarcely perceptible. 1 have been assured by the Deputy Postmaster-General of Tasmania that no loss is being sustained there, and the people of that State naturally wish to know why they should have to pay increased charges. I am also informed that there is no loss suspected in Queensland.

Mr Webster - Upon what data ?

Sir JOHN QUICK - That is the information which I have elicited as the result of personal inquiry. It is merely in the nature of an estimate.

Mr Tudor - That is what the honorable member would not accept in the case of Victoria.

Sir JOHN QUICK - It is quite plain that it would not have been safe to do so. But the issues involved in the other States are not so serious as they are in Victoria., In Victoria the loss, if there be one, will be very great. I do not hold a brief either for the flat-rate system or any other system. I am merely advancing reasons why the Postmaster-General should not have revived regulation /a, without first having examined the Telephone Committee's report. Had he done so, he would have seen that the data upon which he framed the regulation in question was unsatisfactory and unreliable, and as an administrator he would have been bound to give effect to the findings of the,. Committee.

Mr Thomas - Why did not the honorable member give effect to them?

Sir JOHN QUICK - I had not time to do so. The Committee's report was presented on the eve of a general election. I could not deal with a complicated telephonic controversy upon the eve of a general election, when my colleagues were scattered all over the Commonwealth. But the Postmaster-General has ample opportunity to deal with it. He has three years of office ahead of him. There is no urgency in this matter, and, in justice to the 70,000 subscribers throughout the Commonwealth, he should examine the Telephone Committee's report with a view to seeing whether any reduction of the ground rent charges is justifiable. He has informed the press that he is open to receive deputations and representations on this subject. I hope he will not feel prejudiced against that view by anything which I have said to-day. I ask him to listen to any representations which may be forthcoming, to consider any arguments which may be advanced in this Chamber, and, if he feels convinced that those representations are sound, to reconsider the details of his scheme. It would not be fair to ask him to reverse his decision upon matters of principle, but I think that he ought to reconsider matters of detail. If he does so, I am sure he will reduce some of the ground rent charges. 1 would also suggest that he should add a new grade of charges, establishing onn grade at a Halfpenny per call, another at a third of a penny per call, and a third at a farthing per call.

Mr Thomas - We already have a grade of a halfpenny per call.

Sir JOHN QUICK - But th& PostmasterGeneral does not propose to levy charges of a third of a penny per call, or a farthing per call.

Mr Thomas - We have one grade of a third of a penny per call.

Sir JOHN QUICK - If the PostmasterGeneral does that, and makes reasonable arrangements for bringing into operation the new rates, he will not then have the trouble, uproar, and dissatisfaction which is now threatening from one end of the Commonwealth to the other.

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