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Wednesday, 6 December 1905


Senator STANIFORTH SMITH - I shall come to that point immediately. We gave to the Eastern Extension Telegraph Company a special line between Melbourne and Adelaide, which there was no occasion to do, and which I think we had no right to db, and by an Executive act the Ministry allowed them to open two offices in Melbourne, in face of the fact that the Commonwealth Parliament had refused to ratify the agreement. Senator Playford has just said that the Government have not refused to give the Pacific Cable Company similar advantages. Seeing that the various telegraph offices are receiving depots for the Pacific Cable Company, it Avas quite competent for the Government to give them a special wire from Melbourne, to Sydney, and from Sydney to Southport, to be reserved for cables sent over the Pacific route. But that has not been done.


Senator Playford - Did they ever ask for it?


Senator STANIFORTH SMITH - They may not have asked for it, but we, as the largest partner in the Pacific Cable, should have treated them with common fairness. Why did we grant the use of a special wire to the other company ?


Senator Playford - Because it was asked for.


Senator STANIFORTH SMITH - Simply because a special wire was asked for, it was granted.


Senator Playford - Not necessarily.


Senator STANIFORTH SMITH - Why should we give to the one company a very valuable privilege, which we have withheld from the company in which we own a third interest?


Senator Playford - We have not withheld it.


Senator STANIFORTH SMITH - A special wire should have been reserved for the use of the Pacific Cable Company. I understand that when Mr. Reynolds was here he asked for a special line from the Government.


Senator Playford - I saw Mr. Reynolds, and anything in reason that he wanted could have been got.


Senator STANIFORTH SMITH --By our action we have practically injured the Pacific Cable Company, and given gratuitous advantages to the other company, which they had no right to demand, and which, I venture to think, if we had been loyally carrying out our partnership arrangement, we had no right to give. If we take an impartial review of the whole situation, we are forced to conclude that, even under the disadvantages to which I have referred, the Pacific Cable has proved a great boon to Australia, and has more than justified its construction. As Senator Playford has admitted, for the first time, to-day, the reduction we have had in cable rates is solely due to the construction of the Pacific Cable. It is interesting to remember that before the Colonial Conference of 1887 sat, but after the invitations were sent out by the Secretary of State for the

Colonies, Sir John Pender, who was then chairman of the Eastern Extension Company^ made an offer to the PostmastersGeneral of the Australian Colonies to reduce the cable rate from 9s. 4A. to 4s. per word. Clearly, his object in doing that was to prevent the construction of the rival cable. I can produce a number of authorities to prove that, but I shall not weary the Senate with what Senator Playford hasalready admitted, except to direct the attention of honorable senators to this extract from a speech made by Mr. Deakin, the present Prime Minister of the Commonwealth, at the Colonial Conference which was held in 1887 -

Whether the Pacific Cable Company succeeded or not in entering upon active operations, it had already conferred considerable benefit upon the Australasian colonies by bringing the Eastern Extension Company to a much more liberal frame of mind.

Sir EdmundBarton, speaking in July, 1903, and referring to the Eastern Extension Company, said -

They maintained the higher rate while they had the opportunity of doing so, in the absence of competition, and it is a fact which must be placed to the credit of the account of the Pacific Cable, that undoubtedly it was the expected competition of that cable which largely led to the reduction of rates- by the Eastern Extension Company.

I am glad to find that honorable senators generally admit that ; but I question whether they realize the advantage which the Pacific Cable has conferred upon Australia by the reduction of rates referred to. Last year, 2,403,112 words of ordinary messages were sent by cable from Australia. The difference in the cost of sending those words as represented by the difference between 9s. 4d. and 3s. per word is equivalent to .£750,000 per annum.


Senator Best - The same number of words would not have been sent at the higher rate.


Senator STANIFORTH SMITH - I think the honorable senator is mistaken- in that, because I can show him a report of the Eastern Extension Company, in which they say that the traffic has not increased to any very great extent. Last year, Government messages representing 107,527 words, and press messages representing 274,851 words, were also sent, and in connexion with them a very large saving was made. So that we can say, and be well within, the mark, that the Pacific Cable enterprise has saved to the people of Australia not less, than £800,000 per annum.

That means that we are richer every year by that amount, and that so much less wealth annually leaves Australia as the result of the reductions in cable charges due to the construction of the Pacific Cable. Another very important benefit conferred by the Pacific Cable is that it has given us direct communication with the great Englishspeaking continent of North America, and with the British community in South Africa. I say this because it is admitted that the Eastern Extension Company built their line to South Africa to forestall the construction of the Pacific Cable. We are, therefore, in this, position - that as a result of the construction of the Pacific Cable we have secured a saving of , £800,000 a year to the people of Australia, and direct telegraphic communication with every continent in the world, with the exception of South America.


Senator Best - What follows from that ? We admit all that.


Senator Stewart - Let the honorable senator show us how to get out of the net.


Senator STANIFORTH SMITH - It will be admitted that these are immense advantages to the Commonwealth. I have gone into the question of the advantage derived by the Commonwealth from the construction of the Pacific Cable, because of the constant press misrepresentation to the effect that the Eastern Extension Company voluntarily reduced the cable rates, irrespective of the Pacific Cable. Now what do these immense advantages cost the Commonwealth ?


Senator Playford - About £28,000 a year.

Senator STANIFORTHSMITH.This year, we paid £25,283 6s. 2d. The cost is being, reduced as time goes on.


Senator Best - What does that sum represent?

Senator STANIFORTHSMITH.Our share of the annual cost of the Pacific Cable. I point out that so far as we are concerned, this is only apparently the cost to us of the Pacific Cable, because reallv it has not cost us one penny. Until we decided to lay the Pacific Cable, we were forced by the Eastern Extension Company to pay them heavy subsidies, greater than we have ever had to pay for the Pacific Cable. From 1879, when the Eastern Extension Company laid their cable from Banjoewangie to Broome, in Western Australia, up to 1891, Victoria and New

South Wales paid in subsidies to the Eastern Extension Company £34,000 a year. From 1891 to 1899, the six States continued the subsidy. So that for twenty, years Australia has paid , £34,000 a year to the Eastern Extension Company, or a total of £680,000. Further, when the company reduced the cable rate to 4s. per word, we guaranteed them against loss, and had to pay £35,489 under that guarantee. It will, therefore, be seen that the payment which we at present make towards the cost of the Pacific Cable is merely a transfer of a subsidy, though at a reduced amount, from one company to another, whilst by this means we are building up a valuable asset for the Commonwealth, whereas the subsidy which we previously paid passed into the coffers of the Eastern Extension Company.


Senator Best - How does that affect the question? The whole question is whether this is an advantageous agreement.

Senator STANIFORTHSMITH.I am coming to that.


Senator Stewart - Then let the honorable senator come to it quickly.

Senator STANIFORTHSMITH.I shall take my own time, and Senator Stewart . is not bound to remain to listen to me. I have shown that the Pacific Cable, instead of increasing the burdens of the Commonwealth, has considerably reduced them, since we have effected a considerable saving in expenditure as the result of its construction. I wish now to go a step further andto show that we participate largely in. the revenue of the Pacific Cable Company, as none of the other partners in the company do. We charge terminal rates, whereas New Zealand, Canada, and Great Britain charge no terminal rates, andonly the ordinary telegraphic rates on internal messages.


Senator Matheson - The Pacific Cable Board object to terminal rates, and they will have to be discontinued.

Senator STANIFORTHSMITH.We do not intend to discontinue them.


Senator Matheson - Why does the honorable senator agree with the Board in one thing and not in another?


Senator STANIFORTH SMITH - The Board may not be right in everything. The Board is not unanimous on the point to which Senator Matheson refers. The fact; remains that we do charge terminal rates, and so actually participate in the revenue received from the cable, whereas the other partners in the company do not. For even' ordinary word sent by the Pacific Cable at the rate of 3s. per word, the Pacific Cable Board takes 2s. 7d., and the Commonwealth takes 5d. On Government messages, the Commonwealth takes 4d., and on press messages 2d. per word. This is not done by any of our partners, and if these terminal charges which we make are calculated, it will be found that we participate in the revenue derived from the Pacific Cable to the extent of something like £18,000 a year, which must be set against the payment we have to make of £25,000 a year towards the cost. Now, I propose to compare the Eastern Extension Company's Cable with' the Pacific Cable. The working expenses of the Eastern Extension Company are equal to three times, the working expenses of the Pacific Cable Company, because they have three lines, three sets of stations, and officers, and a number of canvassers, whom we do not employ.


Senator Best - That is expense incurred to create revenue, and can hardly be called working expenses, in the ordinary way.

Senator STANIFORTHSMITH.That expense is accurately described as working expenses. The working expenses of the Eastern Extension Company come to something like £150.000 a year, whilst the working expenses of the Pacific Cable Company are £51,000 a year, or one-third of the expenses of the other company.


Senator Mulcahy - What is the relative proportion of business done by the two companies ?


Senator STANIFORTH SMITH - I am coming to that, if honorable senators will be patient. I compare how the traffic on the cables, owned by the two companies. Excluding press messages, which do not pay either company, in 1904, the Eastern Extension Company sent less than double the number of words that were sent by the Pacific Cable.


Senator Playford - Is the honorable senator taking into account telegrams sent by the Eastern Extension Company's lines to India, China, and so on ?


Senator STANIFORTH SMITH - I am dealing with the cable traffic to and from Australia. The working expenses, of the Eastern Extension Company were three times as, great as those of the Pacific Cable Company, whilst their receipts were less, than twice as great as those of the latter company.


Senator Best - Do the expenses include the press messages to which the honorable senator has referred?


Senator STANIFORTH SMITH - The press messages practically do not pay, and in any case they represent a very small amount.


Senator Best - I should imagine they would represent a large amount.


Senator STANIFORTH SMITH - No; they represent a total of 274,000 words, as against a total of 2,500,000 words of ordinary messages. The figures, I have given show that the Pacific Cable Company is absolutely in a better position under present conditions than is the Eastern Extension Company, so far as Australia is concerned. Of course, I am not dealing with the Cis- Indian and China traffic of the Eastern Extension Company. In proof of my statement, I can refer honorable senators to the half-yearly report of the Eastern Extension Company, dated 1st May of last year, in which it will be found that the chairman of the company, speaking of the Pacific Cable Company, said -

This severe competition, however, had entailed a considerable increased expenditure at all their Australian stations, with the result that the company's cable system in Australasia was scarcely remunerative. The receipts at the present time barely covered the working expenses, and the directors did not anticipate much increase in the volume of traffic in the near future.

I ask honorable senators to contrast that report with the results of the working of the Pacific Cable for the year ending 31st March; 1905, when the receipts were shown to be £82,000, and the working expenses £51.000 - a profit over working expenses of£31,000. sen ator Gray. - Is that on the Australian business ?


Senator STANIFORTH SMITH - On the whole of the business of the cable. That profit goes towards meeting interest and the very large sinking fund to which we are at present paying. Further, it must be remembered that two of the Eastern Extension Company's cables cross a volcanic belt, which necessitates constant repairs, and those cables are old, whereas the Pacific Cable is new. We have a line that fulfils our requirements. It is laid indeep water, it' passes over no volcanic belt, and is, therefore, not liable to breakages ; and I do not think there has been a single breakage in the cable since it was laiddown. It is also the speediest line of communication between Australia' and the old world. It is interesting to note that whenever it is necessary to transmit from Australia any specially urgent message, it is sent by the Pacific Cable. The results of the cricket test matches are always sent over the Pacific Cable, because it is faster. The result of the last test match played in Sydney was cabled from the Cricket Ground to England, even without any special clearing of the line, in three and a half minutes. That was a world's record for cabling, under ordinary conditions. Of course, on occasions when the lines have been specially cleared right through, messages have been sent in less time. I wish honorable senators to recognise that if we adopt this agreement we shall be absolutely bound and gagged by the Eastern Extension Telegraph Company for the next ten- years. We shall be hampered under an agreement, the terms of which are the most indefinite and badlyworded I have ever read. It is drawn in such a manner that I believe it must lead to an immense amount of litigation if we agree to it. We have the statement of the AttorneyGeneral that at the end of ten years the offices opened in the various States could not be revived. But according to the report of the Pacific Cable Conference, there is very grave doubt about that matter. Without any disparagement of our own AttorneyGeneral


Senator Playford - The Conference did not say that it had had legal advice.


Senator Higgs - It says : "We have been advised." That advice would surely be legal.


Senator STANIFORTH SMITH - The Conference surely meant that it had had legal advice on the point. This agreement obliges us to give no assistance to the Pacific Cable that we do not give to the Eastern Extension Telegraph Company's Cable. It allows the company to open offices in Melbourne. It exempts the company from taxation, except State income tax, and it gives considerations and privileges which are not given to the Pacific Cable.


Senator Turley - The company has no office in Queensland.


Senator STANIFORTH SMITH - But it can open an office if it likes, under this agreement.


Senator Keating - It has been exempt from taxation in Tasmania for thirty years.

Senator STANIFORTHSMITH.That does not show that it is advisable that the exemption should continue.


Senator Matheson - We do not even give such a privilege to the States.


Senator STANIFORTH SMITH - We actually put the company in a better position in this respect than the sovereign States of the Commonwealth. Even at the end of the time, there is some doubt as to whether the agreement would not be revived. If there had not been a doubt in the minds of the Government, the opinion of the Attorney-General would not have been obtained. The Government would not adopt the recommendations of the Conference, and yet it asks us to accept an agreement drawn up by the company. It allows the Eastern Extension Company practically to squeeze the Pacific Cable to death for ten years, when there may be costly litigation, with an appeal to the Privy Council, which will be enormously expensive. If there is any doubt about the matter, why not adopt the proposal of the Conference, and say that the company shall enjoy its privileges for ten years and no longer? A great deal has been made by Senator Playford of the point that if we do not adopt this agreement the company will for all time have offices in four States. Even if that be so, the company would have no rights and privileges that the Commonwealth has not got at the present moment, if it chose to exercise them.


Senator Playford - And the companywill have special wires from Sydney and Melbourne to Adelaide.


Senator STANIFORTH SMITH - On the other hand, the Pacific Cable has certain rights and privileges which the Eastern Extension Telegraph Company will not have if we refuse to ratify this agreement. We have the power to close the company's officesin Melbourne, and to prevent it from opening an office in Queensland. The Pacific Cable Board can open offices in every State,, whilst the Eastern Extension Company can have offices in only four. Then again, the Pacific Cable can adopt some of the methods of the Eastern Extension Company by employing canvassers. In New Zealand canvassers have been employed, with the result that three times the number of messages are sent over the Pacific Cable as are sent over the Eastern Extension Company's cable. Let me point out what privileges are offered to clients who send their messages via the Eastern Extension Company which are not afforded to those who send by the Pacific Cable : (1) All messages to Europe, except Great Britain, are sent by the Eastern Extension Telegraph Company from 6d. to is. 6d. per word cheaper than by the Pacific Cable. Surely that is a matter which ought to be rectified at once. (2) A promise under the proposed agreement that if the company's traffic shows a certain increase, a reduction to 2!s. 6d. per word for ordinary messages will be made. This offers an inducement to people to patronize the Eastern. Extension Company, in order to get a cheaper rate. (3) They have been allowed special lines from Sydney and Melbourne to its cable station in South Australia, under the control and management of its own officers, who are specially selected men. Cables via the Pacific have to be sent over the ordinary Government lines, which are clogged by State and Inter-State traffic. (4) The Eastern Extension Company will take cheques from reputable firms, and, in many cases, allow a monthly account, neither of which privileges is allowed to those using the Pacific Cable. The advantage of these privileges, especially after banking hours, is manifest. (5) The Eastern Extension Company has practically exclusive rights in Tasmania for the next four years, as it has an absolute monopoly of the cable between Tasmania and the mainland. (6) It's offices are more central, and employs a number of canvassers, (7) The company's cable forms are free, and are left at all leading hotels, stock exchanges, &c, marked "Via Eastern.;" while the Commonwealth charges 4d. per 100 for Pacific forms, and they must be obtained from the post-offices. (8) All repetitions of mutilated words, whether the fault" of the sender or of the company, are obtained without charge. By the Pacific route, a cash deposit' has to be lodged in any case, and if the word repeated comes back the s,ame, the cost has to be paid by "the recipient. (9) The Eastern Extension Company would! telephone messages received after office hours to the receiver's private residence. If will also receive short messages by "telephone, in order to save time; or it will send one of its own messengers round for the cable. The Government offices refuse to do any of these things. (10) The company will code messages for the senders in any public code, which the Government offices refuse to do. (11) The company allows a person to register as many indicators as he likes, whereas the Commonwealth makes a charge of, I think, 10s. for each indicator in respect of cables via the Pacific line. Under these circumstances, it does seem to me to be a remarkable thing that while we have given no assistance whatever to the Pacific Cable - while we have practically said that we will not put ourselves out of the way to induce the public to send messages by the Pacific route, and have placed facilities in the hands of our rivals that we have withheld from our own company - nevertheless, we have sent half as many messages from Australia by that route as the Eastern Extension Telegraph Company has done. I believe that if we did the same* as New Zealand has done, and adopted the same system as the Eastern Extension Telegraph Company adopts, to induce cablers to patronize the Pacific route, we should be in a position to get at least half the total traffic of the Commonwealth for the Pacific line. For my own part, I do not think we should desire more than that. I have no ill-feeling against the Eastern Extension Telegraph Company. It came to Australia thirty years ago, and conferred great benefits upon the people of this country. But, at the same time, it has made an immense profit from its monopoly. With a subscribed capital of £1,500,000, the company has made profits to the amount of ,£6,500,000 during the thirty years. It charged 9s. 4d. per word for between twenty and thirty years, whereas, enjoying a monopoly of the Australian business, it could have made a reasonable profit by sending messages at 3s. per word. But while I have no desire to deprive? the Eastern Extension Telegraph Company of the whole of its business, I certainly think that the Pacific Cable should at least take one-half of the cabling of the Commonwealth, and I am satisfied that that could be done if business-like methods were applied to this great international undertaking.


Senator Walker - What about competition from the Marconi system ?

Senator STANIFORTHSMITH.There is very little fear of the Marconi system being a competitor in respect of longdistant cables, at present. That is a statement which was made by the chairman of the Eastern Extension Telegraph Company at their last meeting. We have only to adopt a business-like arrangement in order to so increase the receipts from the Pacific

Cable as to make that enterprise not a burden, but rather a source of revenue. We ought to follow the example of New Zealand, and send the bulk of our messages over the Pacific Cable; because if that cable is not made a success, it will be the last of all joint undertakings. Seeing that this matter was held in abeyance until the Conference, I do not blame the present Government for any delay ; but I do blame the Government, now that the Conference has been held, for asking us to ratify the agreement. If we do ratify the agreement, we shall be acting contrary to the wishes of the other partners, who have all asked that it shall not be carried into effect. It was in deference to the wishes of New Zealand, Canada, Great Britain, and the Pacific Cable Board that the Conference was held ; and yet it is now proposed to flout every recommendation made by that Conference. We shall be practically telling our partners, that, while we allowed the Conference to be held, we had no intention to be bound by its findings; that we shall force through this agreement, which the Conference condemned in the absence of vital alterations. That is not the position which this Commonwealth should take up. If we have entered into a great international agreement, we should do nothing to vitiate the letter or spirit of a single undertaking made or implied". We shall, however, vitiate in both letter and spirit the undertaking we entered into if we ratify this agreement as it stands. Surely' this would be a bad commencement for the system of Empire cables which has been outlined. At present, Great Britain and Canada are being urged to lay a cable between Vancouver and the old country, as an instalment of Empire cables which shall girdle the planet. If we show that we regard the partnership arrangement as unsatisfactory, and that we desire to feed the Eastern Extension Telegraph Company at the expense of the Pacific Cable Board, there will be proof that confidence cannot be maintained between the different parts of the Empire, and that the great scheme I have indicated must fall through. In time of war, it would no doubt be a great advantage to the Empire if there were State-owned cables. At present there is nothing to prevent the Eastern Extension Telegraph Company from selling their undertaking to anyforeign nation.


Senator Playford - According to the agreement, the Eastern Extension Company cannot sell their undertaking without first offering it to us.


Senator STANIFORTH SMITH - At their own price.


Senator Playford - At a price to be fixed by arbitration.


Senator STANIFORTH SMITH - The company need not, unless they like, sell their undertaking under any circumstances,. If every one of the shareholders of the Eastern Extension Telegraph Company is now British, every one could be made French, German, or Russian, while it would still remain the Eastern Extension Telegraph Company. There is always the danger that any foreign Government which desired to isolate Australia, and thereby obtain some advantage, could afford, for national reasons, to give a larger price for the undertaking than would be justified by commercial reasons. It is necessary, for the integrity of the British Empire, that there should be these State-owned cables encircling the globe.


Senator Playford - The Pacific Cable is not an AlURed line now.


Senator Higgs - It is, so far as it goes.


Senator STANIFORTH SMITH - The Pacific Cable is All-Red, with the exception of a very small piece of land owned by the "United States, in the State of Maine.


Senator Playford - Then there is the cable across the Atlantic.


Senator STANIFORTH SMITH - I am astonished that Senator Playford, who has occupied so many important positions, should take up an. attitude hostile to this great international enterprise.


Senator Playford - I am not hostile; I am merely correcting misstatements of the honorable senator.

Senator STANIFORTHSMITH.Senator Playford has, from its inception, opposed the Pacific Cable. I ask the Senate to grant the prayer of every one of our partners. I ask the Senate not to flout the wishes of those partners, but to refuse to ratify this agreement, and to take up the same position as that assumed by New Zealand - to appoint canvassers and make use of the advantages presented by this cable. We should then be able to give such a good account of the Pacific Cable that it would cease to be a financial burden on the partners within the Empire. That would be something towards the inauguration of a larger system of reciprocity throughout the Empire. If, however, we continue to favour the Eastern Extension Telegraph Company at the expense cf the Pacific Cable, the latter will be injured, and continue to be a burden, thus presenting a bar to joint enterprises of a similar nature in the future.







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