TELEPHONE CHARGES.

Star (Christchurch), Issue 16943, 18 January 1923, Page 9

TELEPHONE CHARGES.

A SUBSTANTIAL INCREASE. The following memorandum was to the ” Star ” by the H.oh J. G. Coates, FostmasterGenetal:— On several occasions during the past year or so the question or altering the rating system for telepho»3 ex. change connections has been referred to in the House, and 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 submitted to < .'hambers of Commerce and other organisations interested for an expression of opinion thereon. 1 now propose to deal with the scheme, whicn 1 trust will, on the whole, be acceptable to all concerned. First of all L must refer to the Department's commercial balance-sheet. For the year ended March 31 last the telephone branch showed a net loss 'of £73.528, and the telegraph a loss of £346.958. On investigation 1 now find that the telegraph branch has been debited with an unfair allocation ol' workmen’s wages, etc., ami 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 ?s a basis, the position is, therefore, that** the loss on the telephone branch should be £175,943. and the loss on the telegraph branch £244.543. The latter lose cannot be avoided. The rates for telephone service proposed in the new schedule will, it -s estimated, just about recoup the loss on telephone business. It is recognised in most countries that Government telegraphs arc generally run at a loss, and I am looking forward to the loss on the telegraph service : n New Zealand being reduced if the people make greater use of the service at the recently reduced rates. 1 lie position as regards the telephone Branch is entirely different, and the present telephone charges must be increased so that the users of the telephone will pay subscriptions which will pernnt of this branch becoming selfsupporting. bast rear a sum of £/o().UKi was voted on the , Public* V* orks Estimates the telegraph and tele j phone extension : £350.000 ol this ! amount lias already expended on i telephone extension, while the small 1 >um ol £2OOO lias been devoted to tele- j graph extension. Naturally with this ! heavy expenditure for the development i ol the telephone service, in the . nun- I try as well as in the city, a large i amount on interest on capital cost .> j inquired, and as already intimated the * proposed increase in the charges is bo- j io& made in order to place *the telobas:!~° aerv,c ® a self-supporting t J he proposed charges are designed to i cm lice the telephone deficit as revealed ‘ ii! Die accounts. I hey are lurcher de- j signed with a view to being a reason- } ame charge against the user, instead I o. tu? general taxpayer bearing a por- ! 11011 ol t^,at loss, and at the same time to encourage the u*e ol telephones, if I in postal side of me department is to continue to make up the loss on'TeleP 1 -lie extension so much longer will i : Tnally m a fr«" K ju“tiLd° i!'* i. a . P »o“‘ m ' me ys to the extent “Ift a,mo “ "ll*-. site income !LSe« ca \ P ap“ e Uut ' Generally shaking, I believe the -übhe have had the impr«, ioll th “® the elephone service i. a profitable one to the State. This is not the ease and the fact that a continual loss has been shown will not be surprising when f state that the, present schedule of low -T Zealand is ridieulouslv ■ oner than that of urn other country the world liven the proposed tarift will be lower than that, of any other country, even in pre-war times. telephone administrations in the inajiutaituring countries could not. 1 1 eel sure, have shown a credit balance in their commercial balance-sheets if schedule Of rates similar to that existmt Ae "', /jealand was to vogue. Doubtless the loss on the telephone service in New Zealand prior to the " ar " a& -0 per cent of what it is now. Since then. however. the cost of providing a telephone .-crvice in New Zealand lias shewn i considerable increase and 1 may sav i mt tins is a world-wide experience of telephone administrations and the numoer of exchange subscribers has more than doubled. These two features in themselves would account t or the increased loss on the service. As an indication of the increased cost J should mention that the average j initial cost of providing a subscriber i !‘ll a Mtphm exchange connection j in 1913 was £32, whereas to-dav it is I not less than £6O. it may he said ! tuat if th«, number of subscribers under the present rates has more than | doubled over a given period the cost of i the telephone service may be expected to fall i■ e. ; as the system expand:, ! there should be a relative reduction in cos?, and therefore that the present high prices should l>o the means of .stimulating the development of the service instead of causing the tariff to lv raised and. so it mav be argued, tending to restrict the service Experience shows, however, that the effect of development upon cost is alto gether peculiar so far as the telephone .service is concerned, inasmuch as the usual business maxim—the greater the output, the less the cost per unit—does not apply, particularlv a t the larger exchanges, where development involves the extension of what is known as the multiple equipment. Administrative, accounting and other overhead charges do not. of course, increase in the same as the number of telephones or calls. Jt is also true that as the number of lines in qt\ area increases the unit cost, of the line plant tends to tall as soon as it becomes economical to replace overhead wires by unde, - ground cables carrying large numbers ot circuits with relatively small annual charges for depreciation and maintenance. and the larger the number of subscribers to be served the greater becomes the capacity of the cable system which can profitable he laid and the smaller the average cost per wire in the area. The savings under these heads are neutralised by the increased complexity and cost ‘of the exchange pliant and the operating arrangements required to give a large-number of subscribers inter-communication 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 9<X) subscribers there would be six multiple sections, each of which would contain 900 connecting points, while in an oxchange ‘with 3(500 subscribers tliero would he twenty-four multiple sections, each of u hich would contain 3600 connecting points. Therefore in xh»? .latter exchange there would Ik.* required sixteen times as much multiple ’ equipment n> in the former, although the number of subscribers would be only lour thirds as manv, Speaking generaM\ the economies in gih'nt construction that accompany development in nnv ir<m are neutralised th* expenditure whi-h results from

the increased complication of the plant and the operating methods required to furnish inter-communication, so that, as already stated, ilio usual business maxim* ‘the greater the output the less the cost per unit.” does not apply to telephone, business. The advantage which the individual subscriber must loulj; 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 bis telephone gives communication. One of the chief reasons for an alteration in the telephone rating system is the introduction of suburban exchanges and consequently the creation of multi-office areas. When the telephone was first established in New Zealand the sole medium whereby inter-communication with other subscribers could be given was the central exchange. Consequently unduly long lines were required to connect the suburban subscribers. Under those circumstances the cost of providing telephone service was almost direct i.v proportional to the distance of the subscriber from the central exchange. With the introduction of suburban exchanges at Courtenay Place, Wellington Sr nth- Kelburn and Kliandallali, in the Wellington area ; at Ponsonby, Mount Kden. Remtiern. as well as what may be termed * A loaded ” exchanges at Onelinnga. Devon port, and Takapuna in the Auckland area. (1 should here add that “ loaded ” means that the exchanges. concerned vill have areas of their own and subscribers thereto desiring inter-communi-cation throughout the whole area will . Be 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-cormminieativm is provided for all the exchanges in a multi-office area by mcahs of trunk circuits, and as a consequence the length ot subscribers' lines in the suburbs is on the average the same as that or subscribers’ lilies in the city. The conditions in the four chief centres have, therefore, completely altered, but the old rating system whereby subscribers at such places as Wellington South and Island Day. in the Wellington district. Mount Kden and Remuera m the Auckland district, and at Sydenham and St Albans in the Christchurch district, and at South Dunedin and Ivy,slyn in the Dunedin district, are re qnired to pay from 50 to 100 per cent i n ore than city subscribers ioi their telej phone exchange connections alill exists, j lu i- a well-known fact that the depnrt- | men* Ims had considerable difficulty j during recent wars in withstanding j the demands bv the Wellington South subscribers for a rental based on their [ distances from the Wellington South ! exchange instead of their distances J from the city exchange. It has to he : admitted that there was seme justification for the demands but to accede J to the requests of these subscribers and i others similarly situated without rej vising the system of rating to obtain ! increased rentals from the city stihJ scribers. who are at present considerj ably nnderehatged for their telephone 1 service, would involve the department i in the losv of a larg> sum annually, j From the point of view of the mam her of calls also the present rating system is inequitable, benefiting the city subscribers at the expense <;ji' the residential subscribers in the suburbs. Take, for instance, a typical cave of a business subscriber in the city who makes on an average twenty effective calls oh -500 days of the year and the case of a residential subscriber, sr y at Island Ray. who makes on an average three effective calls on 365 days oi' the year, and observe how anomalous is the charge per call. Annual rental of city business subscriber. £9 10s: annual rental of Island Bay residential, subscriber. £l6 ss. ' Cit-«* subscriber makes 6000 calls nor annum for £9 10s, equivalent to 38d per call : Island Bay residential subscriber makes 1095 rolls per annum for £l6 ss, equivalent to 3 56d per call. Then there is the case of subscribers at. say. Hawera and Paoroa. Annual rental of business subscriber at Hawera. £7 annual rental of private residence subscriber at Hawera. £l3 15s. Business subscriber makes 6000 calls per annum for £*. equivalent, to .3d per call; private residence sub-, scriber makes 1095 calls per annum for £l3 15s, equivalent to 3d per call. Annual rental of business subscriber at Paeroa. £6: annual rental of private residence subscriber at Paeroa. £ll. Business subscriber makes 6000 calls per annum for £S. equivalent to Jd per call ; private residence subscriber ijiakes 1.095 calls for £ll per annum, equivalent to 2ld per call. In short, the city business subscriber pays under the existing rating system ai the rate of approximately 1 -3d per call, while the Island Bay residential i subscriber lias to pay at the rote of apI proximately 3sd per call. This is o!>- ! viously an anofnaly and an injustice t.i j the residential subscriber. PROPOSED NEW SCHEDULE, i In the proposed now rating schedule ! the residential rates at the larger exchanges arc approximately 50 per cent figures may also be used for the purpose of demonstrating the absurdly lowcharges in New Zealand, particularly in respect of business connections. In the Commonwealth of Australia a city business subscriber making 8000 effective calls per annum would be required to pay a ground rental of £5 per annum plus a fee of l£d 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 fee of lid for each effective call, equivalent to a rental of £34 los per annum. Summarised a city business subscriber making 6000 effective calls per annum nowpays per annum £ s. d. In New Zealand . 9 10 U In Australia . 31 5 0 In the United Kingdom 34 15 0 For the various reasons stated it is imperative that the existing Fating system should be completely revised to meet present-day conditions. Now 1 come to the question of telephones in country districts. The cost of providing 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 is highly developed one pole line carries a great number of wires, whereas in the country districts there are numbers of pole lines each- carrving only one pair of wires. It is not expected that the ordinary and rural line rates under the new scheme will he su 7 ' to meet the cost of establishing. maintaining and operating long-distance connections in country districts, but. development in rural areas will considerably enhance the value of and the demand for telephone service in the cities and towns, the proposed new rates for v hich have been computed on a. re imperative basis. The furnishing of telephone service to country and hack l lock subscribers subscribers at less than cost also represents a policy towards which town and suburban subscribers, to whom telephones are nut only u convenience but oft times a luxury. should contribute by paying higher rates, as the Department must continue the development of telephone service in th<* baokblooks. where telephonic communication is essentially a first neoessi t.y. I rhan .service <i e. individual twoparty and four-parly line service) will

l»p available also to those persons who are located just outside the base rate area, and to rural subscribers upon payment, of the base rate plus mileage charges, the latter being assessed for that position of the line which extends beyond the base area boundary. This class of service will not, however, he encouraged as the demands «of individuals in rural areas can usually he sufficiently well met by multi-party lines, i.e., rural line service anrl combined rural and private lines known as private station sc rvioe. RURAL LINE SERVICE. Rural line service is a common method oi serving subscribers in rural areas through facilities owned and maintained wholly by the department, the scope of the local service being the same as that available to subscribers in the base rate area. Within certain limits rural line service is on a fiat rate basis, i.e.. all subscribers 'on a line pay a common rate iirespective ol their distances from the eschange. In furnishing rural line service the department will construct lines to the subscribers’ premises and instal telephones ns in the case of urban subscjibers, but all poles on private roads and private property .wilt require to be furnished and maintained at. the subsenbers’ expense. Rural line service oiners from urban service onlv in that u is furnished on a multi-pa rtv basis (from five to ten subscribers being served by the same central office, imo) and that a stated number of subscribers is required for a stated unit ol distance, vix.. one subscriber per mile. The multi party line serves the purpose of reducing the cost* involved m rendering rural line service to the. lowest point compatible with making the services sufficiently available and dependable. Under the new system tin- prospective subscribers will bo relieved within certain limits of the necessity of providing capital for constructing lines, as in other words the department will go much further out with its lines than it hitherto has done Provision is also made for what may be termed Ihe further back hackblock .settlers, where they ma.v construct their own lines, lending them to a suitable centre within their block, and the Government will provide them fice with a trunk line to the nearest telephone exchange or the nearest tele phone, bureau connected with an ex change. This class of service is designed to meet back moc-ks and long distance subscribers who are able t-> construct telephone circuits and main tain the same the telephones more economically than can the department It is more economical from the standpoint of both the department and the subscriber for u number of reasons, among which mnv be mentioned the fact that the subscribers can provide ana maintain these lin.es and telephones with less labour cost, less loss of time and less transportation expense, than the Department, due to their proximity to the telephones and the lines As in the case of rural line service the service is on a flat rate basis and the scope of local nerviee is the same as that provided .to sulxwribera in the base rate area. Private station service will not he furnished unless there is a given number ol subscribers connected wito the line (say six subscribers;, or in thevent ot a fewer number of subscribers being connected, unless they pay an amount equivalent to that which would be secured if the specified number were connected. This will allow of a rare being quoted as low as £1 10s per subscriber per annum for each two mile* of circuit wholly provided by the Department. the minimum rate being a four-party rate for the relative base area. The maximum number, of subscribers per line for private station service will probably bo twelve for each trunx line provided by the Department. Private station service is really an alternative tor rural line service, and is not an uncommon method of developing rural areas. It is not expected that the rural line and private station service will be paying propositions, but development in rural areas should con siderably enhance the value ol and the demand for telephone service in the base areas, where the proposed new rates We fixed on a remunerative basis. The following tablo will give a lairlv clear indication of the charges under the new eystem MONTHLY RATES PER . . SUBSCRIBER. No. 1. CLASS'. (Multi office exchanges, Wellington, Auckland, Christchurch and Dunedin, anrl exchanges within multi office areas).

Residential (four party) 0 f> •; In addition to the above there will be a smali monthly rental for miscellaneous service and extra equipment. For instance any extension telephone within the same building and wiring up to a length of 110 yards will cost 2s. 6d per month.. An extension bell of an ordinary type including ordinary wiring up to a length of 110 yards within- the same building wiil cost 9d per month. A head receiver as auxil iary to hand receiver will cost Od per month and so on. THE MONTHLY COLLECTION SYSTEM Under the scheme it is' proposed to collect subscriptions monthly in a way similar to say the gas and electric light accounts In addition to the subscription an account will be rendered for the amount due for toll calls. In event of the toll account for the preceding month not being paid with the amount for the tap-rent month’s rental, the telephone will be disconnected In other words credit for one month will be given lor toil calls, but the amount due therefor mush be paid at the same time as, the current subscription or the subscriber will be deprived of the use of the telephone While on this point, t may

quests, to pay their toll accounts and a great deal of time and effort is spent m endeavouring to obtain payment-. It ha*, been the desire of mv principal departmental officers fo’r some considerable _ time to provide an efficient and popular telephone service to equitably meet all conditions, and with them I look forward to these amended regulations and charges materially assisting in that direfuon. 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 j to place the matter before those in- ' teres ted 1 am telegraphing this statement free to nil newspapers throughout the Dominion, and if any further information is required representations should be made fo my administrative officers in Wellington, who will assist the public in every possible way.

Business (.one party) Monthly rate. £ s. d. 1 10 0 Business (two party) in same town block 10 0 Residential (one party) 0 1 o 0 Residential (two party) 0 12 6 Residential (four party) 0 11 3 Xo. 2 CLASS. (Of over 150 paying subscribers. Single office exchanges with co ntinuous attention. Examples- —Gisborne. Hamilton, Hawera. Xapier. "\V nnganui, Dannevirke. Business (one party) Month h rate. £ K. d. 1 1 8 Business (two party) in same town block 0 15 0 Residential (one party) 0 13 l Residential (two party) 0 11 0 Residential (four party) 0 10 o Xo. 3 CLASS. (Single office exchanges with restricted attendance. Examples.Foxton. Grevmoutli. Levin. Milton. Paeroa. Waihi). Business (one party) Monthly rate. £ s. '1. 0 lo 0 Business (two party) in same town block O 1 2 <3 Residential (one party) 0 10 0 Residential (two party) 0 7 -