TELEPHONE CHARGES.

Press, Volume LIX, Issue 17707, 8 March 1923, Page 9

TELEPHONE CHARGES.

pfiO GRESS LEAGUE'S ATTITUDE. LEASED BATES SOT NECESSARY. .-port on the proposed increase by Government in th, telephone & ffas submitted to Inst night's £.* f the executive of the Car.terLeague by tho select comV»top for th ° p,,rprso ' \ report rend as follows::- * herewith submit for your con- • ,t : on onr report in response to the of tho executive appointing , '*,eommittee to consider the PostirGeneral's proposals to increase frttes charged to tolephono sub•taj gnd tho incidence of such intud charges. held five meetings, •«ieb sub-committees to collect the *£« data, and fully discussed the ffin all its bearings. It had SWt of the cordial co-operation sthe Department, which supphod as Jh of tie information applied for Shad atiti disposal. The thanks j\u eommittee aro particularly due i£t-L Shrimpton, Mr A. T. MarkMr J. McDermott.

Considerations. .'■j, (puidering a question such as Lt before the committee, there aro SU Kaeral considerations affecting jjjfewZealand finance that ought to fa borae in mind, "»jj ffiole population of Now ZeaSsd Is really much poorer than it wns W«» the late Great War. The isttifgni stress of it have had their tftf oa >H sections of the commun- % able-bodied men of the Dojminiji»e suffered by death, wounds, atoiand the interruption of thsir Sot industry. Tho women of the flagon of all classes have striven with them. net Public Debt has increased 55fc£91,689,835 on March 31st, 1914, n?#M>2tt,l2l on March 31st, 1922. »ilenet local authorities debt has l fintsed from £21,189,986 on March miMj to £28,138,025 on March | : .jwate .indebtedness has greatly inSauk, as indicated by the infettie/' of registered mortgages from ffltfuaW on March 31st, 1914, to jUJLMOjIOL on March 31st, 1922. r-m total Government taxation has atrjutu from £5,918,034 for the yoar i&Maiea 31st; 1914, to £16,370,516 pin's-year ended March 31st, 1922. authorities' taxation has infjaued from £2,187,534 for the year Stffi; March '3lst,', 1914, to £3,813,910 ptfo'year ended March 31st, 1921. Mo'number of sheep in the Dominion Ifefeased from 24,798,763 on the !tp'3lst, 1914, to '22,222,259 on M 31st, 1932. ' , Mi number; of cattle (including wtfi eows)' in" the Dominion has indued in : 1922. ' -Tho population has increased from '-in 1914; to 1',223,901 in 1921. t.The prices' Of all goods and services ire. soared above all priceß hitherto ithin the experience of the Dominion. lis/' tiers is a-general send'griiwl recovery if such )t interfered with by bad ind by artificial means op extraordinary prices, mediate Question, tion rates for telephones lira the end of November, its which over all telented an average increase t. for every direct cont business telephones in ires, however, bore the itage of increase, viz., ster-Oeneral now states tone services, in spite of srease in charges toade, 6 years ago, cannot be ibscribers throughout the fepresent prices charged ry great loss to the taxly, and at a time when tlyV hoping for a return iditions, he asks sub'increased charges yield»,ooo additional revenue Is that the accounts of [Branch of the Post and jtrtment for the year endand previous h /showing a margin of 'aying 5 per cent, interIt eiriployed, wer'e' incor-i-iin.Bo far that no dethe undertaking was alii that the salaries of en whose services should arged. against the Tele- ' wore, in fact, charged elegraph Branch, st to the year ended ,922, he claims that the iorial expenditure was mrncj-iHi < !'•• 107,906 2 7 IBpStMlaries im|®M.6mit'ted, in .. 100,000 0 0 ||fl|p' ; '•"■ ..£207,906 2 7 Splonyetts a profit of £33,393 a^Pi«^ S ' et of accounts into a Slliliren . 2s 7d > or in round H||Pwj^ q of telephone subscripto produce £150,000 ■Hggi|M|l3ditional revenue from subscribers, and frdm private tcleHK^lt" 8, 0f the total tele " Zealand, practically telephones and HBrl^#-- e P hones ( th e actual M&llsA^fB 1 < Business 52 per cent.), so that the business tele■wjwffi.a whnin would be three tim g g for private teloagrees, as it believes the general prinsuch as the telenot b ,, carried on B^MSjS ? general taxpayers, and at least be charged ■Ki.Su °P«ating expenses, innß^sP?f employed in the serof the underi|S. d !?TOiiftion. ■1 ■% Telegraph Department, ■K> <*»ef Telegraph Engineer HlK«r c . omn »ittee that the in■SK* » aot designed to reKIIK! 8 ' t0 P rovide f «ids for ■H|||£raprovement, or extension ■PsS"* 66 ! in its enquiry into Wmml , LPWPoaals for increased HRlfwS r °- set before itßeM extent, if any, is it BiPffiK tho telephone subiiß^Srf^ennl? of the Telephone ■ilffiaiiiiZVT Post and Telegraph ■kfß»a-'i»«,r lncr cased to pronffgsjf&?; I> >g expenses, interest maint enance against increase in such 9tßs£!ss**W> various subHHH^^^^^. 118 must be evident ■HHHl^^p?^ that every De-

partment of the Government Service nas_ either a monopoly of its service. I or is tending to acquire a monopoly! j not by sheer merit of service, but by I legislative enactments from time to tunc.

Dealing with the first auestion. the committee finds that, as the result of public agitation for the keeping of accounts of Public Departments on th-3 lines of established accountancy practice for commercial businesses, the Government for the first time, with regard to the great majority of its 'Departments, has issued balance sheets in respect of them drawn up in commercial form as at March 31st, 1921!. Among these is the balance-sheet of tha Post, and Telegraph Department as at March 31st, 1922, which, as to profit and loss, makes a distinction between the postal branch, the telegraph branch, the telephone branch, and the wireless branch. It will be seen at once that ail these branches have one business in common, viz., the provision of communication from one individual to another, and that the alternative means of communication are comparatively subsidiary matters. It is evidently from a business point of view very hard to draw hard and fast lines between these branches, as the evolution of new services from the postal to telegraph, to telephone, and to wireless, while each time introducing a new service, introduces at the same time what is to a greater or less extent a competitor with the older form of service, whilo at the same time never wholly superseding the older form. Thus the telegraph, whilo introducing a new service as regards cases where only very speedy communication would be of use, at the same time competes with the older postal service in cases where the postal service would bo used if there were no telegraph. In the same way the.newer telephone service competes with both the postal and telegraph whilo the' new wireless, as yet in its infancy, may later competo with all three.

The true business problem appears to be the successful supply of all services in adoquato proportion to the needs of the community and the treatment of this combined service as one business.

However incomplete the form of the Post and Telegraph Department ac-_ counts in the past may havo been, this plan of treating the various communication services rendered to the public by tho Department as one business has been consistently followed, . and the introduction of any system dividing branches which aro largely alternative and competitive, if it is to be of any real value, needs the closest enquiry and the greatest nicety in apportioning capital, revenue, and expenditure between them, irrespective of their natural competition with each other. In subsidiary accounts, for many years, particulars have been prepared showing the revenue and expenditure of each branch, but it is only in tho new form of balance-sheet for the year ended March 31st, 1922, that each branch is considered- as an entirely separate business which should pay its way independently of the' results of other branches.

• With the cordial consent of the Minister, the committee has had interviews with the Chief Telegraph Engineer, the First Assistant Secretary of the Post and Telegraph Department, the Telegraph Engineer for Canterbury, and the Telegraph Engineer for Otago, and has received a great deal of valuable information from th'em. The committed asked also for other information, particularly . with regard to the financial side, but was informed that this would not. be available until the Department's balance-sheet at March 31st, 1923, had been compiled and approved. The Department finds itself in the following dilemma:—The accounts of past years, as regards the Telephone Branch, show a profit after paying operating expenses and . interest on capital. The present view of the Department is that a large amount of expenditure which should havo been charged to tho Telephone Branch has either not been charged at all or has been charged to tho Telegraph Branch. But the officers of the Department are not at present in a position to produce accounts to show to what extent the telephone accounts would be affected by a proper allocation of such expenditure.

Tor instance, the Department has produced to us a published table submitted to Parliament showing tho capital cost, working expenses, and revenue of the Telephone Exchanges year by year from tho date of their establishment in 1882 to March 31st, 1922, i.e., for 40 years. This table shows that the gradually increasing capital expenditure on telephones during the 41 years amounted at March 31st, 1922, to £2,995,183; that 5 per cent, interest on capital was charged in working expenses, that depreciation at 5 per cent, per annum was also included from 1882 to 1897, after which it was discontinued, and that during the 41 years the net profits to the Consolidated Fund, less the net losses of some few years, after paving working expenses (including 5 per cent, interest on capital for 41 years, and 5 per cent, depreciation from 1882 to. j 1897), amounted to £466,063, while the | depreciation charged from 1882 to 1897 j amounted to £50,127, a total of ! £516,190. This £516,190 - in excess of working expenses and interest on capital must stand to the credit of the Telephone Branch against any loss which has been suffered by depreciation of the telephone undertaking during the 41 years. The Department now contends that these figures should bo amended in that 3$ per cent, per annum depreciation should have been written off in the years following 1897, and that a large amount of salaries of certain workmen which were charged against the Telegraph Branch should have been charged against the .Telephone Branch. It assesses these two items for tho year ended March 31st, 1922, at.— £ s. d. Depreciation •• 107,906 2 7 And Workmen's Salaries in round figures .. 100,000 0 0 Total .. •• £207,906 2 7 As regards depreciation, in many undertakings, depreciation of capital assets is met and counteracted by charging in working expenses the cost of labour and materials employed in their ropair and renewal, and the practical adequacy of this method over a j series of J'ears is tested by a valuation of such capital assets. If in an undertaking such as the telephone service a qualified engineer's valuation of its capital assets at the end of 41 years shows a value equal to the capital expenditure incurred on them, the inference is practically irresistible that depreciation has been met from time to time out of revenue by the cost of repairs and renewals included in working expenses. It is understood from the Departmental officers that such a valuation of the assets of the undertaking of the Telephone Branch has been made by engineer officers, and that although the full details and final figures are not yet available, they nevertheless approximate to the figures shown in the Post and Telegraph balance-sheet under the new'system as at March 31st, 1922. These are shown among the assets in that balance sheet as follows: — Buildings and Equipment. Telephone •• £3,141,057 ' 1 8 There is a foot-note in the balancesheet that the figures appearing in it as assets represent the recorded capital expenditure on buildings and works less depreciation, and that a valuation of all Departmental assets is now nearing completion. The telephone officers interviewed by us say that approximately £200,000 worth of buildings is included in the £3 141,057 Is Sd, which they also say ,wer'e not erected out of tho capital

funds of £2,995,183 expended bv the branch. Deducting this £200,000 from £3,141,057 Is Bd, leaves £2,941,05" Is 8d as the only valuation of the telephono undertaking (apart from buildings) which is available to us tor comparison with the £2,995,183 capital cost.

If the valuation is approximately correct, as it is stated to be, the only effective depreciation which has not been counteracted bv repairs and renewals during 41 vears is £2,990,153, less i.2,941,057 £-54,120 for 41 years. Against this there has been £50,127 depreciation specially provided up to 189". and £466,063 declared net profits during the 41 years. )\© are therefore at present of opinion that depreciation of the undertaking has on the whole, during the 41 years, been manifestly met by the practice of charging repairs and renewals in the working expenses of the branch from year to year, and that the Department's nresent claim that the working expense.? of past years have been understated by omission of provision for depreciation cannot be sustained. As to additional workmen's salaries, which are claimed to have been wrongly omitted from the working expenses ot the Telegraph Branch, it is stated thathese salaries for the year ended March .list, 1922, amounted in round figures to £IOO.OOO or more, and represent the salaries of telegraph linesmen and others who were engaged on the maintenance of telephone lines. We have been unable to ascertain exact details of the claim, and regard it, even as a claim by itself, as not presented in a satisfactory manner. Against this claim we have, on enquiry, learned from the Department that the only revenues credited to the Telephone Branch are the subscriptions of telephone subscribers, including public fees at slot machines, amounting in otoss for the year- ended. March 31st, 1922, to £614,367, while the total revenue from toll communications, i.e., fees for telephone communications paid by subscribers and the general public b'etween one telephone exchange and another, amounting for the same year to £268.753, were credited to the Telegraph Branch, nothing whatever being allowed by the Telegraph Branch to the Telephone Branch for the use of telephono plant or for the services of its operators and clerical staff in carrying on this very extensive and revenueproducing business. r

This failure to credit the Telephone Branch with any portion of tho. large revenue from toll communications', £268,753, shows the need which exists lor a far more careful apportionment of revenue and exnendituro between branches of the Post and Telegraph Department,- and may off-set any claim which can be substantiated by the Telegraph Branch for assistance rendered to the Telephone Branch by lts linemen and others.

There are other -considerations discounting tho claim of the Department that its Telephone Branch cannot in future .be carried on without loss except with a largely-increased revenue from telephone subscribers. These considerations are:— 1. The year of ; expenditure selected by the Department as a basis for its estimate of loss was that ended March 31st, 1922, a year in which it was shown to us that tho cost of labour was at the peak, as also was the cost of material as charged to the Department. 2. Since then, tho Department's officers inform U3 that the cost of salaries and wages is less than that of the year ended Marc"h 31st, 1922, by 10 per cent., and they have shown us that though some classes of materials have not yet decreased, yet important classes, such as bronze wire and cable.3, havo considerably decreased in cost. 3. The officers of tho Department admit that the coming extensive installation of automatic telephones will reduce operating expenses within the next three years, though they are at present unable to say to what extent; but it is obvious that if the change is justified, tho annual saving funded will pay off the cost of such change.

Wo therefore consider, on the information available to us, that it should be quite practicable for the Department, while paying interest on capital and providing against depreciation, to profitably carry on its telephone business on its revenue based on the already substantially increased charges of the last two years, without asking more from telephone subscribers as a whole than they at present pay. The second question addressed by the committee to itself with reference to the fair apportionment of increased charges between various subscribers needs no answer as such, as the committee at present considers no increased charges necessary,.but various information has come to the committee which leads it to the conclusion that without increasing the total charges to subscribers as a whole, good work may bo done by the Telephone Branch in:— 1. Ascertaining some really distinctive classification between business and private telephones. 2. Classification of all telephones into a few distinctive grades according to -manifest grade of use, and S. Extension of flat rate areas, as already proposed by the Department. The method of charging measured' rates for telephone service involving the necessity of keeping account of the number of calls on each telephone throughout the year has been frequently referred to during the sittings of the committee. On this question the committee unqualifiedly agrees with the Chief Telegraph Engineer that the advantages of measuring rates are enormously outweighed by the disadvantages of heavy additional cost of operating and accounting which they must involve.' THE DISCUSSION. Mr J. A. Flesher, in moving the adoption of the report, as chairman of the Select Committee, said that since its inception the telephone service Had made £510,000. "What had the Government done with that money? Taking everything into consideration, the Department's proposals did not seem warranted. The conclusion the committee had come to was that the Department should be able to carry on its services profitably, based on the increased charges of tne last two years or so. The conclusion come to was that the Department had not so far substantiated its case that the public should provide another £200,000. After going into everything, the committee thought that depreciation had been met by charges and renewals. In seconding the motion for the adoption of the report, Mr W. M. Tyers said that after 41 years the Department was only £4OOO short, after having declared profits of £466,000. Depreciation had been provided against bv renewals and repairs. *Mr A. G. Henderson submitted that while the telegraph branch of the service was justified in charging rentals, etc., for toll services and so on, it was not justified in taking all the profits. Mr H. J.. Marriner expressed the opinion that it was one of the most astounding statements that he had ever heard, that a Minister should say there was a £200,000 lossper year, that an increase of about 50 per cent, in charges was necessary; and that such statements, on a Department's own figures, should fall wholly to the ground. 3lr H. T.. Armstrong, M.P., said that the Post and Telegraph Department and the Railway Department were for the convenience of every

part of the community, and everyone benefited from the expansion of those services. It would be absurd to tax users of the railways, for instance, to allow for the development of that service. Part of the cost should be paid from the consolidated funds. Ine proper idea was not to increase the charges but_to increase the business ii a Denartmeiit did not pay. _ Mr" 11. F. Herbert said that in lace of such a report, he thought Mr Coates would verv seriously consider the aspects of the case included in the report, which he thought would assist very materially in stopping the proposed increased charges. Mr J. Starry said that the Lyttelton Harbour Board had decided to support anything the League might do to oppose the increased charges. In reply, Mr Flesher said that a sound, broad principle was that people who used services should nay for them. To say thai Australia and K upland paid higher for any such service than New Zealand was not a sound argument : a country should charge for a service just what was necessary, and tho charge should be evenly distributed. The report was ad.-mt-ed, and the committee was heartily thanked and conaratulntcd for its report, copies of which it was decided-to forward to all members of Parliament. Progress leagues, and Chambers-of Commerce in New Zealand. A GENERAL REVIEW. Mr Climie submitted the following additional report:— The Departmental figures show that during the year 1922 no less than 1572 new direct telephones, together with 310 new extension telephones, were installed in Canterbury. In tiie same period 478 subscribers discontinued and 1003 removals or transfers were effected. The year's increase in telephone connexions necessitated the erection of 186G miles of wire and 8175 poles. The following table shows the growth of business for the Canterbury district for the last five years:—

The total number of exchanges in the Canterbury district is &i, and tho number of telephone or bureau offices between which and the telephone exchanges intercommunication is possibleis oOi. D'uring the year new exchanges were- opened at Cave, Hoiorata, and Mayfielu, -while exchanges at Hinds aii'i! Springburu have been authorised and preliminary work connected therewith already started. The aim of the Department, as expressed by the District ■i'telegraph Engineer, is to bring telephono communication within easy reach of everybody in the district, andwith that _ object in view the possibilities of opening exchanges at Lnnriston, Sheffield, Waddmgton, Rolleston, and Parnassus are at present being exploited. In the selection of exchange sites, consideration must be given to the question of location as well as the number of subscribers offering, so that as far as possible a radius of approximately nine miles is reserved for each exchange. With the increasing popularity of the • party line system, with its liJl-rcund economic benefits, any encroachment upon these exchange areas would prove both inefficient and economically unsound. An example of this can»be seen in the EUesmere district, where, in addition to Leeston, exchanges are in ojeration at Doyleston and Southbridge, a distance of H miles and 5 miles respectively. If all the subscril)ers of these exchanges were connected to the ono exchange at Leeston, they would not only derive" the benefit of extended hours; but would receive more expert attendance, as well as improved trunk line facilities. I understand that tho Department is at present endeavouring to bring this union about.

The most backward portion of Canterbury in respect to telephone development appears to be m the AsMyurton County, but the people are at last beginning to realise the benefits to be derived from the use of the telephone. The ,opening of the Mayfield exchange last year, with 150 subscribers,- and the prospective opening of similar offices at Hinds and Springburn, should, ao somo distance. towards making up tins deficiency in the Ashburton district. The Department is at present engaged in erecting two new metallic circuits between Christchurch and Ashburton in anticipation .of'increased traffic in the near future, while a metallic circuit between Christchurch and Greymouth via Arthur's Pass tunnel, is also under construction. It-will be necessary to rearrange several sections of the lino on the West Coast in order to permit of telephone communication between Chz-istohurch and such places as Hokitika. Reefton and Westport. This work is already in hand. The metallic circuit between ■Christchurch and Greymouth will enable wayside stations like Arthur's Pass, Cass, Craigieburn, a/d Avoca- to be brought into communication with the city'. In regard to. the di'ffieultv of securing telephone connexion, the following table, showing the number of applicants on the waiting list in each district, may be of interest:—' Number of Number of

Applicants Applicants District. End 1921. ■ End 1922. Auckland ... 2964 2438 Wellington ... 1607 818 Canterbury ... 1239 785 Otago ... 610 412

In respect to the Canterbury figures, no less than 1082 additional names made their axjpearance on the waiting list during tne same period, so that 253G new connexions were made in the year. The number of applicants on the list for exchange connexions in Christchurch is 500.

T!i3 most pressing difficulty connected with telephone exchanges in Canterbury to-day, is the serious congestion in the Christchurch exchange. From ah inspection made by your organiser, it was apparent that the difficulty was a real one requiring urgent attention. The exchange has accommodation for 2300 automatic and 4230 manual numbers. Owing to lack of space, however, and the type of equipment in use, further extensions under existing conditions are virtually impossible. The difficulty with which new subscribers have been connected with the exchange during recent years, has been accentuated by the age and resultant defects of the aerial cable in thocity. The ordinary useful life of many of the cables in use at present terminated early in v the war period, and since then, owing to conditions arising One of the war, it has been either impossible or inadvisable for economic reasons, to carry out replacements by underground cable, although the work itself has been fully authorised. No permanent relief need ,be expected in Christchurch until the complete automatic plant is installed in the new building in Hereford- street, and the aerial system replaced by underground cables. This work is estimated to cost over a quarter of a million pounds. The Department's efforts to maintain the cables in order, hasj been attended with reasonable success, hut not without complaint. The difficulty of obtaining materials is not confined to this country, but appears to be worldwide. In London, for instance, there arc no fewer than 100,000 people on the waiting list for exchange connexions. In addition to the waiting list of subscribers, the Department also has a waiting list of exchanges that require attention. The only exchange in Can-

(Continued at foot of nest column.)

terburv, however, requiring attention rt the"moment is Kaiapoi, and the Department expects to be in a position to make a start on this work within the next few weeks. On the manual switchboard at Christchurch the busiest period is between 9 a.m. and 10 a.m., when no less than one-ninth of the total number of calls are received. No fewer _ than 20,000,000 calls were received m tho Christchurch exchange during 19-2, while the average length of conversation amounted to one minute twenty S Mr Ciimie's report was received with little discussion.

Ko, of Year. .Subscribers. Increase 1918 8,73:5 — 1919 9/J07 871 1920 10.393 786 1921 io,y.o 582 11-22 12'069 1,004