The years of 1927 and 1928 will pass into history as very important ones _ in the development of communications, not only for the United States, but also from the point of view of world interests. In the technical field of communications, there have been no outstanding inventions, but much has been accomplished in connection with the consolidation of advances made in the art in preceding years. There have been many minor improvements and refinements in equipment, making for cheaper and more efficient transmission and reception of message traffic; and this remark applies with special force in connection with the use of different forms of radio transmission. While the different technical features of the forms of communication are of great interest, it is in the field of activity of the engineer that there will be found an extensive literature; but, in connection with the political and economic features of communications, information is not so widely disseminated in the United States, and, as a result of this situation, its importance is often little appreciated by the country at large.
However, there are evidences of awakening interest in the subject, and the importance of American control in communications is being realized by an increasing number of professional and business men in the United States. It has been said, somewhat aptly, that transportation and communications are the handmaids of commerce. Transportation, especially overseas transportation, is beginning to be understood by the American people, and, during the last year, attempts at developing a proper policy for an American merchant marine have been in process of formation through the Jones- White Law recently enacted by Congress. In connection with communications, a different situation exists, as there is apparently no national policy or program. There seems to be no national thought on communications, and no American writers or American associations devoted to the education of the country in communications. Different companies, operating systems of communication, may have plans for future developments, but from a perusal of reports of debates in Congress, statements of the Radio Commission, and such articles as have appeared in magazines and periodicals, it would appear that there is little developed American thought, tending to coordinate such efforts toward a common national purpose in the field of communications. Some beginnings have been made, but compared with similar efforts abroad, American efforts appear somewhat meager.
Except for the cable to Alaska, it has been the American practice to leave the development of cables to private initiative, and, in connection with this statement, it may be said that American private enterprise has done very creditably in this field. But there are limits to what private enterprise can do unaided by the nation. Private enterprise will not and should not go where there are no profits in sight; and if one looks beneath the surface, another serious restricting factor appears, for, in order to make headway, American private enterprises have become tangled up in the meshes of contracts, stock ownership, and agreements with foreign corporations and, in some cases, with foreign governments, making it possible, to some extent, for foreign governments or their citizens to be in a position to exert considerable pressure on American communication companies.
As in the case of the cables, the radio has been left to private enterprise, unaided by subsidy. In the case of the radio, the American government has developed, through the Navy, an extensive system of high- and medium-power radio stations. They were mainly taken over or erected during the World War period. With the development of private radio enterprises, the corporations have looked with suspicion at this system, fearing the Navy radio as a possible competitor. But, following the policy enunciated by Congress, it will be noted that the Navy has withdrawn from the commercial field, turning the business over to private companies as fast as such companies have been able adequately to serve the public and preserve national interests. These remarks apply to overseas communications that have been served by the Navy radio, and, at present writing, the Navy radio supplies commercial communication only to outlying possessions, where private enterprise does not exist.
Neither the government nor the American cable and radio companies seem as yet prepared to get together to work out a policy meeting American needs, as envisaged by all interests. The companies seem to look upon transoceanic communication as a private domain, with which the government should not meddle. Neither do American cable or radio companies seek subsidies. They apparently only ask to be let alone. The general attitude of the government may be said to be opposed to subsidies, or to governmental ownership, and after a study of different acts of Congress, it can be readily deduced that the present policy only extends to participation of the government at present, exercised through the Navy Department, in communication activities of a pioneering nature, and to withdrawal when such business is sufficiently lucrative to attract private capital. Without criticizing this policy, it is apparent that it can be successful only in developing local American communication activities between portions of the United States and its dependencies. In extending American efforts to alien lands, more substantial measures of participation may be necessary, as the difficulties appear to be so great that a private corporation may not, unaided, be able to surmount them.
In general, it may be said that foreign nations take a more realistic view of national interests, and, in studying the communication activities of foreign nations, it is at once apparent that national aspirations are perhaps more developed than in the United States. In other countries there is a welding of government and private interests toward a nationalistic development of communications, wherein private enterprise is compelled to submerge its independence and operate to a common purpose. Difficulties often arise with this policy, for even foreign communication companies at times resent governmental interference. Controlled by such national policies, foreign private companies have valuable governmental support, not only in the form of subsidies and monopolies, but also in a very real way, in a diplomatic form, in dealing with aliens. It will be found that the active force behind this alien governmental assistance is the power of a developed public opinion.
Upon similar premises, it is apparent that there is a need of a crystallized public opinion on the part of Americans and, coincident with the development of such national opinion, a proper policy suited to American needs will evolve itself. It is to be remembered that Americans are late arrivals in the field; others are deeply entrenched, and barrier walls, analogous to tariff walls, have been erected that are well-nigh insurmountable to American companies attempting to enter the international field of communications.
This is a very important year in communications. Plans are on foot which will crystallize into policies which will govern communications for many years to come, and this remark applies to foreign countries as well as to our own. Abroad, in Great Britain, some remarkable events have been occurring, and a review of them will, perhaps, not be out of place.
For several years, it has been growing apparent that radio communication would be a serious rival of the cable companies; but, during 1928, matters came to such a pass that an adjustment between the rival systems became necessary. The installation of the Marconi beam system by the General Post Office of Great Britain, especially the service to Australia, brought matters to such a crisis that the British government decided to hold an imperial conference on communications in London. This conference met during the winter and spring under the presidency of Sir John Gilmour, Secretary of State for Scotland.
In order to gain some conception of the competition between radio and cable transmission, the situation of the Marconi beam radio system and the Pacific cable to Australia will be related. The British-Canada-Australia cable, operated by the Cable Board, has been a lucrative enterprise, and over two years ago, owing to its satisfactory financial condition, the Cable Board decided to double the cable. This work has been going on, and the spans between Vancouver Island and Fanning Island and between Fanning Island and Suva, have been completed. Prior to the completion of the second span, the General Post Office installed the London-Melbourne beam radio system. The latter was very successful from inception of operation, and immediately the returns from the Pacific cable were considerably reduced. The radio beam, it was found, could operate at a profit at rates which meant eventual financial ruin to the cable. It also produced a situation of one government agency in sharp competition with another. To some degree, similar situations existed in other parts of the empire.
The competition of the radio was felt at once by the private cable companies, earnings falling off slightly. As far as the private cable companies were concerned, their future prospects appeared to be very uncertain, although, up to the present time, the actual injury to their earning power through the competition of the radio has not been great. It is to be pointed out that these different cable companies while operating independent companies, nevertheless have always been closely associated through traffic and other agreements. In the accounts of the different British company meetings, it is apparent that these enterprises are not only interested in making dividends, in common with the usual run of commercial companies, but also the directors feel a patriotic interest in the well-being of the empire and its economic advancement.
In calling this conference, it is obvious that the imperial government appreciated that something more was in jeopardy than the earnings of a few cable companies. With cable communication, it may be safely stated that the British have long enjoyed a predominant place, but with the rapid development of radio, and especially short wave transmission, communication enterprises can be initiated at a ridiculously low capital investment. A serious situation was presented and, for a nation that looks upon communications as second to shipping in the fostering of its world trade, it is not surprising that there were assembled representatives of the empire to study this question, and to formulate a solution through which the outstanding position attained through cables would be retained in the newer radio.
Before the report of the conference was promulgated to the public, in March, 1928, the Eastern Telegraph Company and its associated companies, with its world-wide cable net, formed a merger with the Marconi Company, and, among other things, stated in the announcement that the basis of the combination was premised on the consideration that the cables were enterprises of the past, and that all indications pointed to the future as belonging to the radio, because of its cheapness. The cable companies are deeply entrenched and hold many valuable privileges and monopolies with a net enmeshing the world. British cable holdings amount to approximately 170,583 miles, of which 18,093 are government- or dominion-owned. There is reason to believe that their holdings are much greater than the above figures indicate, through stock ownership in cables nominally listed as belonging to other companies. The radio will share in the privileges of these companies, and the cables will have a share in the development of radio. Best of all, the cable companies have large surpluses, being one of the best investments on the London Stock Exchange. It has been stated that the merger will have a capital of $265,000,000 and cash assets of $100,000,000, which will make it financially capable of purchasing outright imperial and dominion cables and other cable property necessary for a complete empire net.
The next move, following the merger, was the purchase of the West Indian Cable and Wireless System by the Eastern Telegraph Company, thereby adding 8,000 miles of cable from Canada to the West Indies; wireless stations in Bermuda and Jamaica; and some valuable connections with communication companies in the United States.
Before the adjournment of Parliament, the report of the imperial conference was submitted to the government. Apparently the plan recommended by the imperial conference is the formation of a communication company, to which the merger will sell all their communication assets in exchange for shares. The capital at inception is not to exceed £30,000,000. The communication company is to acquire by purchase the Pacific Cable Board’s cables, the West Indian Cable and Wireless System (already accomplished), Imperial Atlantic Cables and the leasing of the beam radio system from the General Post Office for a period of twenty-five years. The rental charges for the Marconi beam wireless system and the service of the Pacific Cable Board’s debt will be guaranteed by the merger company. Certain directors of the communication company must have the approval of the government, and both merger and communication company will have identical boards of directors, to insure uniformity of policy. Additional safeguards laid down are predominant British control, and the right of the government to commandeer all communication facilities during war or national emergency. An advisory committee is set up to regulate rates and to preserve the public interest of the empire and the dominions.
The transfer of government-owned properties will require approval of the imperial government and the dominions. There is no doubt that the report of this conference is an epoch-making document and commences a new era in empire communication. It represents quite a task unifying so many divergent and conflicting interests and it is especially interesting to an American how the spirit of patriotism for the empire runs like a thread throughout the entire plan. It is superfluous to state that a stupendous organization is planned, and its effect upon the world will be far reaching.
One outstanding feature of the report of the imperial conference is the recommendation for a departure from the policy of governmental ownership. It has obtained to a considerable extent in the cable net of the empire since 1902; but with the radio the government-ownership policy persisted until 1923, when private enterprise was permitted to enter the field. Now a policy of private ownership and operation is submitted to the empire and the dominions. It is needless to say that there will be an active political opposition from many quarters when Parliament and the Dominions proceed with the enactment of necessary legislation to put the plan into execution.
The formation of such a gigantic trust in London was bound to set up repercussions in the United States. Within a few days of the above merger of British cable and Marconi interests, the combination of the International Telephone and Telegraph Company and the Mackay Companies was announced in New York. The plan contemplates formation of a new Commercial Postal Company under the chairmanship of Mr. Mackay, which would operate the present Mackay system of cables and land lines running from Europe to Asia through America. An International Cables Company will be formed to operate the Commercial Cable System. No public financing has been announced and the combination will be made by exchange of stock. Said to have a $300,000,000 capital, it is readily seen that the combination is a parallel with the British merger. Plans include the establishment of wireless communication to Honolulu and to Manila, paralleling present cables, and enlargement of cable service to South America and the West Indies. The public announcements in connection with this merger are meager, and whether it will eventually be an actual or nominal American company remains to be seen.
There are some other items of interest in communications which have occurred during the year. A spectacular advance of the Radio Corporation of America on the New York Stock Exchange has taken place, the price of the common stock advancing from $82 to $450 per share, approximately, although no dividends are paid on this class of stock. It is said that different companies, notably the International Telephone and Telegraph Company, or the Western Union Telegraph Company, would not be averse to the purchase of the communication business of the Radio Corporation of America, but such rumors are probably Stock Exchange gossip. The Western Union stock also has had large increases in price. This company has failed to make satisfactory arrangements with the Japanese government for laying a cable from the United States to Japan. Another interesting item is the allocation of certain high-frequency channels of communication to the Dollar Steamship Company, which company probably intends entering this field as an adjunct to the shipping interests. The newspapers have also been allocated channels of high frequency and may enter actively in the communication business.
With the background of the foregoing description of the development in world communications, some observations will be made in the Pacific Ocean situation. The original method of communication across the Pacific was by the cable of the Pacific Commercial Cable Company. This cable is nominally part of the Mackay system, prior to its absorption by the International Telephone and Telegraph Company. The Mackay system owned the entire capital stock of the Commercial Cable Company and the telegraph companies of the Postal system. The last authentic statement in connection with the ownership of the Pacific Commercial Cable was made to a Senate committee in 1921, from which it appears that approximately one-fourth of the capital stock of the Pacific Commercial Cable Company is owned by each of the following: the Mackay Company, the Great Northern Telegraph Company, the Eastern Extension-Australasian Telegraph Company, and Eastern Telegraph Company; of these the first is an American company, the second a Danish company and the last two British. A short time prior to the Spanish War, the British Eastern Extension-Australasian Company acquired from Spain certain rights in the Philippines, and in view of the above statement in connection with the Pacific Commercial Company’s cable, it would appear that these rights of this company, and Eastern Telegraph Company; of part of the world system now in the merger. Rates over the Pacific Commercial cables are high, making it often cheaper for customers located on the western shores of the Pacific to use either the Danish or the British cables. The Pacific Commercial Cable runs from San Francisco to Honolulu, Midway, Guam, Manila, and Shanghai. It connects at Manila and Shanghai with the Eastern Extension and with the Eastern for a south-about route to London, and with the Great Northern which operates land-line connections, north- about through Siberia, Russia, Scandinavia, to London.
The fact that the Pacific Commercial Cable runs to Shanghai indicates that it must be in accord with the interest of the Eastern Telegraph Company and its associates. These latter cable companies have exclusive rights in China until December 31, 1930. It is somewhat out of place in this paper to go into all the devious negotiations and agreements in Chinese communications, but for those who would peruse the subject, an excellent account can be found in Chapter 38, Volume 2, Foreign Rights and Interests in China, by Westel W. Willoughby. The cable routes are set forth in Hydrographic Office Charts of World Communications, Nos. 2180, 2180B, and 2180C, issued by the Navy Department.
The Radio Corporation of America maintains radio circuits to Honolulu, Japan, and Manila, with connections in the Dutch Indies and to Saigon. It has acquired the rights of the old Federal Telegraph Company of Delaware to erect a radio station in China, but has never been able to proceed, owing to the objection from the British, Danes, and Japanese. Lately, the matter has come up again, and it is hoped that the Americans will be able to enjoy the advantages of direct communication with China. Late advices indicate that this will be consummated. Without going into details, the United States has a very good claim based upon a treaty of long standing with China.
The Pacific cable, owned jointly by Great Britain, Canada, and Australia, and operated by the Cable Board, connects Vancouver Island with Australia and New Zealand, with relays at Fanning Island and Suva. In Australia, connection is made with the Eastern Extension to London. Much of the business of this cable originates in the United States.
Australia has beam radio connection with Canada and England. The Radio Corporation of America has recently established a circuit from Rock Point (Long Island) to Montreal, from whence there is beam radio transmission to Australia.
Recently the Mackay Company acquired the communication service of the Federal Telegraph Company of California, and is now proceeding with the establishment of a radio circuit to Manila. The annual statement of the Mackay Company describes the plan of using radio to support the cable, thereby insuring service during cable breaks. However, as this plan contravened Section 17 of the Radio Act, some corporate changes became necessary to divorce the cable companies from the radio company. This action of the Mackay Company in acquiring radio service bears some analogy to recent events in London.
The Navy maintains a military radio circuit from Washington to Manila, relaying at San Francisco and Honolulu. Connection is made with Samoa, Guam, and Peking. This service is open to commercial business to Samoa only. Commercial press dispatches may be handled to Manila. In 1921, at the arms conference, the United States agreed not to permit the Peking station to transmit or receive commercial press dispatches. A very valuable privilege was given up by this action.
Compared to the Atlantic, there is a paucity of communication facilities in the Pacific, but as time passes increases will come, especially since short-wave transmission is cheap. However, the difficulties lie in other quarters, as American penetration stops with its own dependencies.
With the cable net, it will be readily understood that messages are signaled between cable stations over an insulated wire laid on the ocean floor, connecting the respective cable stations. In radio, transmission takes place through the air; consequently, any receiver properly tuned, placed within the circle of audibility of a transmitter, as a center, will receive the signals sent out by such a transmitter. Comparing this radio situation with that of the cables, it will be seen that the cable is secret except to the operator, while the radio message may be intercepted by anyone who may have a proper receiver tuned to the sending frequency of the transmitter and sufficient skill in reading the continental code of signals. To make radio more secret, several expedients have been evolved, namely, use of the beam which reduces the audible circle to a narrow sector, use of automatic sending at high speed, requiring special equipment for reception, and photographic sending, where a whole message is sent simultaneously.
Although audible to all listeners, radio message traffic is transmitted from point to point in a manner analogous to the operation of the cable, and, on this principle, the different companies have evolved communication routes. Even the cables have routings laid down for the expeditious handling of message traffic. Not only are these routes designed for company profit, but they usually support national aspirations, economically and politically.
A few years ago commercial houses transacted practically all of their business through the medium of the mails, the use of cable and telegraph for such messages being the exception, reserved for urgent orders. But times change, and one of the noticeable changes, especially in overseas business, is the increasing use of telephonic and cable orders. As there is a demand for fast freight, there is an analogous demand for swift communications.
This paper on “Communications” has been prepared from various articles appearing from time to time in American and foreign newspapers and periodicals. These different articles tell piecemeal of the gigantic movements in the communication world that occurred last year. When these accounts are placed side by side and written as a complete story, it becomes an amazing narrative. It takes no stretch of the imagination to see that there is need of American communication contacts, in peace time, in developing trade and proper friendly intercourse with foreign nations; and, in war, in strengthening the national defense and protecting the morale of the American people. As in several other international matters, Americans are newcomers in the communication activities of the world; but their value is beginning to be understood by the country at large, and one of the signs of the times is the increasing number of Americans who feel the need of a crystallized American policy for the development of American communications.