TELEPHONE CHARGES

Otago Daily Times, Issue 18764, 18 January 1923, Page 8

TELEPHONE CHARGES

HEW RATING SYSTEM INCREASE IN CITY RATES. NEW COUNTRY SERVICES, STATEMENT BY POSTMASTEUGENERAL. The following statement by the Post-master-general (the lion. J. G. Coates) was made available last night through the Post Office for publication : WELLINGTON. January 17. ‘On several occasions during the past year or ,o the question of altering the rating system for telephone exchange connections has been referred to in the House, cud I intimated last session that 1 proposed to place the matter before Cabinet as soon as possible after the prorogation of Parliament. As announced a few days ago, the ■Government approved of the proposed new scheme being submit ted to the Chambers of Commerce and other organisations interested for an expression of opinion thereon. I now .propose to deal with the scheme which I tiust will, on the whole, be acceptable to all concerned. First of all. 1 must refer to the department's commercial balance sheet. For the year ended March 31 last tbe_telephone branch showed a net loss of £73.523, and the telegraph a- loss of £346,958. On investigation I now find that the telegraph branch has been debited with an unfair allocation of the workmen’s wages, etc., and for this reason the telephone branch will be debited with a further £IOO.OOO for the current year, and the telegraph branch correspondingly credited with a similar amount. Taking last year’s figures as a basis the position is, therefore, that the loss on the telephone branch should he £175,943. and the loss on the telegraph branch £244,545. The latter loss cannot bo avoided. 'I? 0 rates for the telephone service proposed in the new- schedule will, it is just about recoup the loss on telephone business. It. is recognised in most countries that the Government Telegraphs are generally run at a loss, and I am looking forward to the loss cn the telegraph service in New Zealand being reduced if the people make greater use of the service at the recently reduced “The position as regards the telephone branch is entirely different, and the present telephone charges must bo increased so that the users of the telephone will pay subscriptions which will permit of this branch becoming self-supporting. Last year a sura of £750,000 was voted on the Public Works Estimates for telegraph and telephone cx tension, and £360,000 of this amount has already been expended on telephone extension, while the small sum of £2OOO lias been devoted to telegraph extension. Naturally with this heavy expenditure for the development of the telephone service in the country as well as in the city, a largo amount of interest on capital cost 15 ciuircd, and as already intimated the proposed increase in the charges is being made in order to place the telephone service on a self-supporting basis. The proposed charges arc designed to reduce the telephone deficit as revelled in 'he accounts. Fncy are further designed with a view to being a reasonable charge, against tire ■user, instead of the general taxpayer bearing a portion of that loss, and at the same time to encourage the use of telephones. If the postal side of the department is to continue to make up the loss of telephone extension, so much longer will we be in getting back to the penny postage. Finally, are we justified in spending capital moneys to the extent of £750,000 per annum ■when the income from this expenditure does not pay the interest on capital ? Generally speaking, I believe the public have had the impression that the telephone service is a profitable one to the State. This is not the case, and the fact that a continual loss has been shown will not be surprising when I state that the present schedule of rates in New Zealand is ridiculously lower than that of any other country in the world. Even the proposed traiff will be lower than that of any other country even in pre-war times. The telephone ad-

ministrations in the manufacturing countries could not feel sure they would show a credit 'balance in their commercial balance sheets if a schedule of rates similar to that existing in New Zealand was in vogue. Doubtless the loss on the telephone service m Jsew Zealand prior to the war was but 20 per cent, of what it is now. Since then, however, the cost of providing a telephone service in New Zealand has shown a considerable increase, ami I may say that this is a world-wide experience of telephone administrations, and the number of exchange subscribers has more than doubled. These two features in themselves would account for the increased loss on the service. As an indication of the increased cost I should mention that the average initial cost of providing a subscriber with a telephone exchange connection in 1913 was £32, whereas to-day it is not less than £SO. Tt may be said that if the number of subscribers under the present rates has more than doubled over a given period, the cost of the telephone service may be expected to fall—i.e,, as the system expands there should be a relative reduction in cost, and therefore that the present high prices should bo the means of stimulating the development of the service instead of causing the tariff to be raised, and _ so it may be argued, tending to restrict the service. Experience shows, however, that the effect of development upon cost is altogether pecu-

liar so far as the telephone sen-ice is concerned, inasmuch as the usual business maxim, ‘The greater the output the loss the cost per unit,’ does not apply, particnJarly at the larger exchanges, where development involves the extension of what is known as the multiple equipment. The administrative accounting and other overhead charges do not, of course, increase in the same ratio as the number of telephones or calls. It is also true that as the number of lines in an area increases the unit cost of the line plant tends to fall as soon as it becomes economical to replace the overhead wires by underground cables carrying a large number of circuits, with relatively small annual charges for depreciation and maintenance, and the larger the number of subscribers to be served the greater becomes (he capacity of the cable system, which can profitably be laid, and tho smaller the average cost per wire in the area. The savings under these heads are neutralised by tho increased complexity and cost of the exchange plant and tho operating arrangements required to give a large number of subscribers intercommunication with each other. This is due chiefly to the extension of the multiple equipment, the most costly element in a large exchange, which actually increases approximately as the square of the number of subscribers. Thus in an exchange with 900 subscribers there would be six multiple sections, each of which would contain 900 connecting points, while in an exchange with 3600 subscribers there, would bo ?A multiple sections, -each of which would con-

tain 3600 connecting points. therefore in the latter exchange there would be required 16- times as much multiple equipment as in the former, although the number of subscribers would be only four time? as many. “Speaking generally, the economics in plant, construction that accompany development in any area are neutralised by the expenditure which results from the increased complication of the plant, and the operating methods required to furnish intercommunication, so that as already slated the usual business maxim ‘the greater the output the loss the cost per unit’ does not applv to telephone business. The advantage" which the individual subscriber must look for from the development of the system lies not in a prospective reduction of his subscription, but in an increase in the number of persons with whom his telephone gives communication. “One of the chief reasons for an alteration in the telephone rating system is the introduction of suburban exchanges, and consequently tho creation of multi-office areas. When the telephone was first, established in New Zealand the sole medium whereby inter-communication with other subscribers could bo given was the central exchange, and consequently unduly long lines were required to connect tho suburban subscribers. Under those circumstances the cost of providing ft telephone sendee was almost directly proportional to the distance of the subscriber from the central exchange. With the introduction of the suburban exchanges at. Courtenay place (Wellington). South Kelburn, and Khand all ah in the Wellington area, at Ponsonbv. Mount Eden, and Remuera. as well as what may he termed the ‘loaded’ exchanges at Onohunga, TXwonport, and Takapuna in the Auckland area —1 should here add that ‘loaded’ means that the exchanges concerned will have areas of their own, and subscribers thereto desiring intercommunication throughout, the whole area will ho required to pay a slightly increased rate per month in addition to the Auckland rate—at Hereford street, Sydenham,

and St. Albans in the Christchurch area, and at Dowling street, South Dunedin, and Roslyn in the Dunedin area, unlimited inter-communication is provided for by means of trunk circuits, and as a consequence the length of subscribers’ lines in the suburbs is on the average the same as that of subscribers’ lines in the city. The conditions in the four chief centres have, therefore, completely altered, but the old rating system whereby subscribers at, such places ns Wellington South and Island Bay in the Wellington district, Mount Eden and Remuern in the Auckand oistriot, at Sydenham and St. Albans in the Christchurch district, and at South Dunedin and Roslyn in the Dunedin district, were required to pay from 50 to 100 per cent, more than city subscribers for I heir telephone exchange connections, still exists. It is a well-known fact that the department has had considerable difficulty during recent years in withstanding the demands hi’ too Wellington South subscribers for a rental based on their distances from the Wellington South exchange, instead of their distances from the city exchange. It has to bo admitted that there was some justification for the demands, hut to accede to the requests of these subscribers and others similarly situated without revising the system of rating to obtain increased rentals from the city subscribers who are at. present considerably undercharged for their telephone service, would involve the department in the loss of a largo sum annually. From the point of view of the number of calls also, the present rating system is inequitable, benefiting tlie city subscribers at tbo expense the residential subscribers in the suburbs. Take, for instance, a typical case of n business subscriber in the' city who makes on an average 20 effective calls on -300 days of the year, and the case of a residential subscriber, say, at Island Bay, who makes on the avorage three effective calls on 365 days of the year, and observe how anomalous is the charge per call. The annual rental of the city business subscriber is £9 10s, and the annual rental of the Island Bay residential subscriber is £l6 os. The city subscriber makes 6000 calls per annum for £9 10s, equivalent to .33d per call, and the Island Bay residential subscriber makes 1095 calls per annum for £l6 5s —equivalent to 3.65 d per call. lf len there is the case of subscribers at, say, Hawcra and Pacroa. The annual rental of the business subscriber at Hawera is £7, and the annual rental of the private residence subscriber at Hawera is £l3 15s. The business subscriber makes 6000 calls per annum for £7—equivalent to ,3d per call, and the private residence subscriber makes 1095 calls per annum for £l3 15s —equivalent to 3d per call. The annual rental of the business subscriber at Paoroa is £6. and tno annual rental of the private residence subscriber at Paeroa is £ll. The business subscriber makes 6COO calls per annum for £6—-equivalent to 2d per call, and the private residence ■subscriber' makes 1095 calls for £ll per annum equivalent to 2,-d per call. In short, the city business subscriber pays under the existing rating system per call, while the Island Bay residential subscriber has to pay at the rate of approximately per call. This is obviously an anomaly, and is an injuslice to the residential subscriber.

‘‘ln the proposed new rating schedule tho residential rates at the larger exchanges are approximately 50 per cent, less than the business rates.

“Thoso figures may also 1)0 used for the purpose of demonstrating the absurdly low charges in New Zealand, particularly in respect of business connections. In the Commonwealth of Australia A city business subscriber making 6000 effective calls per annum would be required to pay a ground rental of £5 per annum, plus a fee of for each effective call, equivalent to a rental of £3l 5s per annum. while in the United Kingdom a similar subscriber would have to pay a rental of £8 10s per annum, plus a. foe of lid for each effective call, equivalent to a rental of £34 15s per annum. Summarised, a city business subscriber making 6000 effective calls per annum now pays: In New Zealand, £9 10s per annum; in Australia, £3l 5s per annum ; and in the United Kingdom, £34 15s per annum. For the various reasons stated it is imperative that the existing rating system should be compeltely revised to meet present-day conditions. “Now I come to the question of telephones in country districts. The cost of providing a telephone service in country districts is relatively higher than that in the cities. This is due largely to the fact that in the cities, where the telephone system h highly developed, one polo lino carries a great number of wires, whereas in the country districts there are numbers of polo linos each carrying only one pair of wires. It is not expected that the ordinary and rural lino rates under the new scheme will bo sufficient to meet the cost of establishing, maintaining, and operating long-dis-tance connections in country districts, but development in rural areas will considerably enhance the value of and the demand for the telephone service in the cities and towns, the proposed new rates for which have been computed on a remunerative basis. The furnishing of n telephone service to country and back-block subscribers at, less than cost also represents a policy towards which town and suburban subscribers, to whom telephones are not only a convenience but of times a luxury, should contribute, by paying higher, rates, as the department must continue the development of the telephone service in the back-blocks, where telephonic communication is essentially a first necessity. “The urban service (that is, the individual two-party and four-party lino service) wilt bo available also to those persons who are located just outside the base rate, plus mileage charges, the latter being assessed for that portion of the line which extends beyond the base area boundary. This class of service will not, however, be encouraged, as the demands of individuals in rural areas can usually be sufficiently well met by multi-party lines—that is, a rural line service and combined rural and private lines, known as a private station service rural line. This service is a common method of serving subscribers in rural areas, through facilities owned and maintained wholly by the department, the scope of the local service being the same ns that available to subscribers in the base ratearea within certain limits. 'lhe rural lino ’service is on a flat rate basis—that is. .ill subscribers on a line pay a common rate, irrespective of their distances from the exchange. In furnishing the rural line service. the department will construct lines to the subscribers’ premises, and instal telephones. as in the case of urban subscribers, but all poles on private roads and private property will require to be furnished and maintained at the subscribers’ expense. The rural lino service differs from the urban service only in that il. is furnished on a multi-party basis (from five to 10 subscribers being served by the same central office lino) and that a stated number of subscribers is required lor a stated uni; of distance—namely, one subscriber per mile. The multi-party line serves the purpose of reducing the costs involved in rendering « rural line service to ihe lowcsl point compatible with making the services sufficiently available and dependable. •■Under the new system prospective sub scribers nil) be relieved, within certain limits, of the necessity of providing capital for constructing lines, or, in other words, the department will go much furl tier out with its lines than it hitherto mis done. Provision is also made Tr what may he termed the further-back hackblock settlers, where they rnav construct their own lines, loading them to a suitable centre within their block, and the Government will pro vide them free with a trunk line to Ihe nearest telephone exchange, or to the nearest telephone bureau connected with air exchange This class of service is designed to meet backblocks and long-distance .subscribers who are able to construct telephone circuits, and maintain the same and the telephones, more economically than can the department. It is more economical from the standpoints of both the department and tire subscriber, for a number of reasons, among which may be mentioned tire [act that, the subscribers can provide and maintain these lines and telephones with loss labour mid cost and wirii less loss of time and less transportation expense than the department. This is due to t ieu’ proximity to the telephones and the lines As in the case of the rural line sendee, the sendee is on a flat rate basis, and the scope of the local service is the same as that provided to subscribers m the base rate area . “A private station service will not no furnished unless there is a given number of subscribers connected with the line. say. six subscribers, or. in the event of a fewer number of subscribers being connected, mithey pay an amount, equivalent, to 1-hat. which would be scoured if .the snco.hed number were connected. 'Hus will allow of a rate being quoted as low as £1 por subscriber per annum for each two miles of circuit wholly provided by the department. the minimum rate being a fourparty rate for the relative base area. The maximum number of subscribers per hue for a private station service will probably bo 12 for each trunk lino provided bv the department. The private station service is really an alternative for the rural line sendee, and is not. an uncommon method of developing rural ureas. It is not expected that the rural line and private station services will lie paying propositions, but development in rural areas should considerably enhance the value of and the

demand for the telephone service in the base areas, whore the proposed new rates are fixed on a remunerative basis.

“The following table will give a fairly clear indication of the charges under the new system, monthly rate per subscriber: — No. 1 Class, multi-office exchanges—(Wellington. Auckland, Christchurch, and Dunedin—and exchanges within multi-office areas): Business (one party). 30a; business (two party), in same town block, 20s; residential (one party). 15s; residential (two party). 12s 6d; residential (four partv), 11s 3d.

No. 2 Class (of over 150 paying subscribers), single office exchanges, with continuous attendance (examples, Gisborne, Hamilton, Hawera, Napier, Wanganui. Dnnnevirke) : Business (one party), 21s 8d; business (hvo pitrlyl, in same (own block. 16s; residential (one party). 13s 4d; residential (two party). 11s; residential (four partv), 10s.

Xo. 3 Class, single office exchanges with restricted attendance (examples, Foxton, Groymouth. Levin. Milton, Pacroa, Waihi. Business (one party). 15s; business (two party) in same town block, 12s 6d; residential (one parly), 10s: residential (two party), Is 8d ; residential (four partv), 6s Bd.

‘Tn addition to (he above there will he a small monthly rental for miscellaneous services and extra, equipment. For instance: Extension telephone, within the same building, and wiring up to a length of 110 yards, 2s 6d per month; extension bell of an ordinary type, including ordinary wiring up to a length of 110 yards, within the same building, 9d per month ; head receiver. as auxiliary to hand receiver, 9d per month; and so on. ■‘Under the scheme it is proposed to collect subscriptions monthly in a way similar toq, say, the gas and electric light accounts. In addition to the subscription, an account will be rendered for the amount duo for toll calls. In (he event, of (he toll account for the preceding month not being paid, with the amount for the current month’s rental, the telephone will he discontinued. In other words, credit for one month will he given for toll calls, but the amount due therefor must he paid at. the same time as (he current subscription, or the subscriber will be deprived of the use of the telephone. While on this point I may mention that a number of subscribers neglect, in spite of repeated requests, to pay (heir toll accounts and a great ileal of time and effort is spent, in endeavouring to obtain payment. “It has been the desire of any principal departmental officers, for some consideraolo time, to provide an efficient and popular telephone service to equitably meet all conditions, and with (hem I looked forward to these amended regulations and charges materially assisting in that direction. Further, within a reasonable space of time New Zealand subscribers can expect an exchange service at least, equal to that in the United States of America, which is recognised as the most efficient service in the world. It is desired to bring about the altered conditions at an early date. In order to place the matter before those interested I am telegraphing this statement free to all newspapers throughout the.dominion, and if any further information is required representations should ho made to my administrative officers in Wellington, who will assist the public in every possible way,"