TELEGRAPH CABLES (FURTHER PAPERS RELATING TO).

Appendix to the Journals of the House of Representatives, 1896 Session I, F-08

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1896. NEW ZEALAND.

TELEGRAPH CABLES (FURTHER PAPERS RELATING TO).

[In continuation of Paper P.-8, presented on the 30th September, 1895.]

Presented to both Houses of the General Assembly by Command of His Excellency.

NEW ZEALAND AND AUSTBALIAN CABLES. No. 1. The Secbbtary, General Post Office, Hobart, to the Secretary, General Post Office, Wellington. Post and Telegraph Department, General Post Office, gjß ( _ Hobart, 29th May, 1895. I have the honour to enclose herewith a statement showing amount due by your office to this department on account of the guarantee to the Tasmanian and Victorian cable for 1894. You will notice that the amount due by you is £143 15s. 10d. I have, &c, The Secretary, General Post Office, Wellington. H. V. Bayly, Secretary.

No. 2. The Secretary, General Post Office, Wellington, to the Secretary, General Post Office, Hobart. Post and Telegraph Department, General Post Office, (Telegram.) Wellington, 12th June, 1895. You have in error claimed proportion Victoria's loss Tasmanian cable for 1894. Colonies understood liability not commence until first last month.

No. 3. The Secretary, General Post Office, Wellington, to the Secretary, General Post Office, Hobart. Post and Telegraph Department, General Post Office, Sm _ Wellington, 20th June, 1895. 1 have the honour to acknowledge the receipt of your letter of the 29th ultimo, forwarding a claim for £143 15s. 10d., on account of the Tasmanian-Victorian cable guarantee for the year ended 31st December last. . My telegram of the 12th instant will have informed you that it was understood by the Post-master-General of New Zealand, and, as far as known, by those of the other colonies, that liability for any loss on account of the guarantee was not to commence until after the Ist ultimo, and was to be based on the business transacted on and after that date. I have, &c, The Secretary, General Post Office, Hobart. W. Geay, Secretary.

No. 4. The Secretaby, General Post Office, Wellington., to the Seceetary, General Post Office, Hobart. Post and Telegraph Department, General Post Office, g m _ Wellington, 16th October, 1895. Eeferring to your telegram of the 12th instant [not printed], asking for a reply to your letter of the 29th May last stating that £143 15s. 10d. was due by this department to yours on account of the guarantee in respect of the Tasmanian-Victorian cable for the year 1894, 1 have the I—F. 8.

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honour to inform you that, on the 12th June, I replied that the amount had been claimed in error, as it was understood that the liability in connection with the Tasmanian-Victorian cable would not commence until the Ist May last. I also telegraphed you on the 14th instant to the same effect [not printed], stating further that the Postmaster-General adheres to the opinion that the understanding was as quoted above. I have, &c, The Secretray, General Post Office, Hobart. W. Gray, Secretary.

No. 5. The Deputy Postmaster-General, Sydney, to the Secretary, General Post Office, Wellington. Postal and Electric Telegraph Department, General Post Office, Sir, — Sydney, Bth November, 1895. Adverting to your cablegram dated the 11th June last, and my reply of the following day [neither printed], I am directed to inform you that the Postmaster-General has decided, so far as this colony is concerned, to admit the claim of Victoria to have the Tasmanian cable guarantee (for the period 1894 and first four months of 1895) included in the general pooling agreed to in 1892, and he has approved of the payment by New South Wales to the Hobart office of the sum of £262 11s. 6d. as this colony's share of the loss under such guarantee for 1894. It is ascertained from Hobart that the receipts for this year are expected to more than cover the guarantee. I have, &c, S. H. Lambton, The Secretary, General Post Office, Wellington. Deputy Postmaster-General.

No. 6. The Secretary, General Post Office, Wellington, to the Deputy Postmaster-General, Sydney. Post and Telegraph Department, General Post Office, Sir, — Wellington, 19th December, 1895. I have the honour to acknowledge the receipt of your letter of the Bth ultimo, stating that your department had decided to admit, in respect of New South Wales, the claim of Victoria to have the Tasmanian cable guarantee for the period 1894 and the first four months of 1895 included in the general pooling agreed to in 1892. In reply, I have to inform you that, as already advised, the Postmaster-General of this colony is unable to accept any liability for loss on account of the guarantee in question prior to the Ist May last. The Hobart Post Office has also been informed to this effect. I have, &c, The Deputy Postmaster-General, Sydney. W. Gray, Secretary.

PEOPOSED PACIFIC CABLE. No. 7. The Deputy-Minister of Trade and Commebce, Ottawa, to the Hon. the Premier, Wellington. Sib, — Department of Trade and Commerce, Ottawa, 9th November, 1895. ' I am directed, in the absence of the Minister, to transmit for the information of your Government copies of two communications on the subject of the Pacific cable, addressed to the Premier by Mr. Sandford Fleming. (1.) Letter dated 11th October, 1895, respecting the present position of the project. In this Mr. Fleming points out very clearly the critical stage which the project now appears to have reached, and he submits suggestions well worthy of consideration. (2.) Letter dated Ist November, 1895, referring to a report by Mr. Lambton, Deputy Post-master-General of New South Wales, controverting Mr. Fleming's estimates. I will only add that, by reason of Mr. Fleming's well-known reputation, his views should be given consideration, and are entitled to due weight. I commend both documents to your kind attention. I have, &c, W. G. Parmelee, The Hon. the Premier of New Zealand. Deputy-Minister.

Enclosure 1 in No. 7. Mr. Sandpobd Fleming to the Hon. the Premier of Canada. Sir,— Ottawa, 11th October, 1895. In deference to your wishes I have the honour to submit for your consideration the present position of the projected Pacific cable. I ask leave to direct your attention to the memorandum of 11th October, 1893 [vide F.-5, 1894, No. I], delivered by me two years ago to you in Sydney, New South Wales. It forms part of the report on your mission to Australia as the delegate of the Canadian Government (page 66). I take this course, for it will be necessary for me in the statements which follow to refer to the introductory paragraphs of that memorandum respecting the establishment of the cable by a company controlled by the Government of France.

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In the conference of delegates from the several colonies held in Ottawa in June and July, 1894, in which the Imperial Government were represented, the subject of the Pacific cable was discussed at length. Agreeably to the resolutions passed the Canadian Government assumed the duty of taking the necessary initiative steps to promote the establishment of the undertaking, and to ascertain its cost. In consequence of the acceptance of this obligation by your Government a special commission was despatched to Honolulu to enter into negotiations with the Hawaiian Government for the possession of a neutral landing-station for the cable. This mission, although aided by the Home Government, was unsuccessful; consequently there remains but the one route for the cable to follow— by way of Fanning Island. Cable-manufacturers were invited, by public advertisement, to state on what terms and conditions they would be prepared to undertake the work, and tenders for furnishing, laying, and maintaining the cable for three years were received. By this means the practicability of obtaining telegraphic connection between Great Britain, Canada, and Australasia without touching foreign soil was established; moreover, it was ascertained that the cost would be much less than any estimate previously formed. Early in the present year it was proposed that a joint commission should be appointed for the arrangement of some workable plan of co-operation, subject to the approval of each separate Government, in each case to be submitted for parliamentary concurrence ; the commission to consist of three members—namely, one on the part of the Imperial Government, one to represent the Dominion of Canada, one to act for the Australian Colonies and New Zealand conjointly. The Government of New South Wales, on the 24th April, saw no prospect of any united action ; but the Premier stated that this view cannot be understood as evincing a feeling unfriendly to the project. The Government of New Zealand, on the 24th April, awaited the return of the Hon. Mr. Ward from England before taking definite action. Mr. Ward passed through Ottawa in June, and expressed himself strongly in favour of the cable. In a letter from him, dated Wellington, Bth August, he expressed a hope that a Bill would be passed through the New Zealand Legislature giving the Government authority to take the steps necessary to the establishment of the undertaking. The Premier of Queensland stated (28th May) that his Government is very favourably disposed towards the project; that instructions had been sent to the Agent-General for the colony in London to do everything in his power to bring about a satisfactory settlement of the question ; that Queensland is prepared to co-operate with the other colonies, or such of them as actively sympathize with the project, in the appointment of a joint commission; and that the Government of Queensland is decidedly in favour of the cable being constructed on the principle of State ownership. " The Government of Victoria (11th June) consider the undertaking a most important and desirable one, and is prepared to do its part with the other Australasian Colonies in assisting in the proposed object." The appointment of a joint commission meets with the approval of the Government. The Premier sent the following telegram to the Agent-General for the colony in London :— " Melbourne, 10th June, 1895. "Impress upon Imperial Government importance of Pacific cable; urge .early meeting of joint commission—lmperial Government, Australasian Colonies, Canada —to arrange plan, subject to approval, as stated in Fleming's letter of sth January to Minister Trade and Commerce, Canada. Secure full information as to construction. Endeavour to secure co-operation of all AgentsGeneral." Owing to the great distance between Australasia and Canada, together with the infrequency of the mail-service, there has been much delay in communicating information. Meanwhile, the opponents of the contemplated telegraph between Canada and Australasia have been ceaseless in their vigilance and untiring in their efforts to defeat the project. Having the Eastern Extension telegraph at their command, they possess the means of communicating hourly, free of cost, between opposite sides of the globe—an incalculable advantage, which it may be inferred they have not failed to use in order to obstruct in every possible way the intercolonial project, and advance their own ends. Early in June Mr. Audley Coote, the agent of the company owning the cable from Queensland to New Caledonia, arrived in Honolulu. In my memorandum of 11th October, 1893, I alluded to the design of this company —viz., that the New Caledonia cable should constitute the first link of a trans-Pacific cable, and that it is the intention of the company to proceed section by section as further subsidies shall be obtained. The avowed object of Mr. Coote's visit to Honolulu was to negotiate for landing privileges and for a subsidy towards laying a cable from San Francisco to Honolulu. The company represented by Mr. Coote is a French company under the absolute control of the French Government. (See memo., 11th October, 1893.) Early in July I learned from a private source in England that the cable-manufacturing firm (the Telegraphic Construction and Maintenance Company) of the Eastern Extension Telegraph Company had received orders to manufacture a cable to lay between San Francisco and Honolulu. In no way doubting the accuracy of the statement, I deemed it proper to communicate the information to the Australasian Governments, and pointed out the probability that a coup de main was contemplated to capture a commanding position in the Pacific, and, if possible, put an end to the establishment by Canada and"the Australasian Colonies of a State cable. I pointed out that Mr. Audley Coote was in Honolulu probably in connection with this scheme, and that if Canada and the colonial Governments remained inert there would be great danger of a British trans-Pacific cable being indefinitely postponed and a telegraph monopoly perpetuated between Australasia and the outside world.

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In September I learned from Honolulu that the Hawaiian Government had concluded a contract with Colonel Spalding under which a company would be formed for laying a cable from San Francisco to the Hawaiian Islands, the company to receive an annual.subsidy of $40,000 for twenty years, and the exclusive right to lay cables within the Hawaiian Bepublic. I have since learned that although the contract is in the name of Colonel Spalding, a citizen of the United States, Mr. Audley Coote is the chief promoter of the scheme, and is co-operating with him. They are given until May, 1897, to commence, and until November, 1898, to complete, the cable. Under this contract no cable can be laid from the Dominion to the Hawaiian Islands for twenty years ; and we are absolutely debarred from all telegraphic connection between Canada and Australasia by the way of the Hawaiian Islands, except through the Spalding Company. This contract further provides for the handing over of the control of the company to the United States on such terms as the contractors and the United States Government may determine. It can easily be understood that, with a cable laid from Queensland to New Caledonia in the south, and from San Francisco to Honolulu in the north, means will be taken to obtain from the Australasian Colonies subsidies or guarantees to assist in the construction of the middle section, from New Caledonia to Honolulu. A trans-Pacific cable so established would have its southern end under the control of the French Government, while its northern end would be under United States authority. I venture to suggest the possibility that the Eastern Extension Telegraph Company would at the same time have some voice in the business interests of the concern. As a monopoly of landing privileges on the Hawaiian Islands has been granted to the opponents of a British colonial cable, there only remains the route from Vancouver to Australia via Fanning Island to be followed. The testimony of eminent electricians and cable-manufacturers, together with the tenders received, establish beyond all question that this route is perfectly practicable. The lowest tender for laying a cable on the Fanning Island route and maintaining it in good working order for three years is £1,517,000, a sum which considerably exceeds the cost of a cable by way of Necker Island, at one time a possible mid-ocean station. The lowest tender for a cable by the Necker Island route is £1,068,000, the difference being £449,000. My letter of the 15th August, 1894, to the late Premier, Sir John Thompson, refers at length to Necker Island, and furnishes evidence to show how easily it could in 1893 and in the early part of 1894 have been made a British possession; that this rock in the middle of the ocean had no owner up to May, 1894 ; that Queensland, Victoria, New South Wales, and Canada each urged at different times the Imperial Government to secure it, but that owing to the policy followed its possession was lost. If, therefore, the cable from Canada to Australia will prove more costly than it would otherwise be, owing to the Imperial policy followed, it may be assumed that the Home Government will be willing in some form to recognise the cause for the additional expense. If, for example, the Imperial Government would grant a loan sufficient to cover the excess of expenditure by the Fanning Island route over the cost by the Necker Island route, the Australasian Colonies and Canada could with less difficulty complete the undertaking. With such a loan the whole sum to be raised would be but £1,068,000 for construction and maintenance of the cable for three years, an expenditure which would be perfectly justified financially, as I propose to show. In my letter to you of 20th July, 1894 [vide F.-sa, 1894, No. 2], I furnished estimates of revenue. - These estimates were confirmed by the written testimony of gentlemen in high official station in the Canadian and Imperial service. They were published at the time, and full opportunity has been afforded for their examination in Australia and in England ; so far as I know they have never been refuted. On the data of existing telegraph traffic and the natural increase of telegraph business during twenty years, I estimated that one-half the traffic passing over the Pacific cable at 2s. a word would yield a gross revenue in each year as set down in the following table. The operating staff and management is placed at £30,000, and the interest on £1,068,000 at 3 per cent, would be £32,040, say £33,000, making the total charge for interest and workingexpenses £63,000: — v r , T; , Interest and Surplus to meet Interest Veal - Gross Earnings. Working . expenses . O n Imperial Loan, &o. £ £ £ 1898 ... ... ... ... 110,000 63,000 47,000 1899 ... ... ... ... 126,500 63,000 63,500 1900 143,000 63,000 80,000 After three years' operation the cost of maintenance would become a charge against earnings. £50,000 is considered an ample allowance for this service, which sum, added to interest and workingexpenses, would increase the amount to be paid out of gross earnings to £113,000. Year. Gross Earnings. Interest and Surplus to meet Interest ° Working-expenses, on Imperial Loan, <Xa. £ £ £ 1901 ... ... ... ... 159,500 113,000 46,500 1902 ... ... ... ... 176,000 113,000 63,000 1903 ... ... ... ... 192,500 113,000 79,500 1904 ... ... 209,000 • 113,000 96,000 1905 ... ... ... ... 225,500 113,000 112,500 1906 ... ... ... ... 242,000 113,000 129,000 1907 ... ... ... ... 258,500 113,000 145,500 Surplus in ten years ... ... ... ... £672,000 The estimate shows a surplus in the first ten years of £672,000. On this surplus the interest and sinking fund payable on the proposed Imperial loan might be made a first charge, the balance to be carried to a cumulative renewal fund.

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I have the greatest confidence in these estimates. I firmly believe that if the undertaking be carried out on the principle of State ownership the.estimate of net'revenue will be exceeded by actual results. The reasons for my belief are given in the letter to the Hon. Mr. Ives, Minister of Trade and Commerce, dated 28th December, 1894, which I append [vide F.-8, 1895, No. 32, XL] . I have in these few pages endeavoured to place before you the present position of this longprojected intercolonial undertaking. I have pointed out, as far as I have been able to gain information, the designs of its opponents and the active measures taken by those who are directly hostile to the interests of Great Britain, Canada, and the colonies on the Pacific. I have shown beyond all question that a British trans-Pacific telegraph from Vancouver to Australasia can be established as a profitable Government work, if the necessary steps towards that end be not postponed. I feel intensely, however, that only prompt and decisive action will render futile the schemes of its antagonists. I cannot doubt, from the correspondence in my possession, that the four wealthiest colonies— New South Wales, Victoria, Queensland, and New Zealand —will each be ready to unite with Canada in this important national work. Naturally they will look to Canada at this juncture to initiate some practical measure for carrying it out. In view of all the circumstances presented, I venture to suggest that Canada and the four principal colonies enter into an agreement jointly to establish the cable, sharing the liability equally, and that the Imperial Government be asked to grant a loan for any excess over £1,100,000, the interest on the loan and sinking fund to be a charge on surplus earnings. Under this arrangement, the five Governments of New South Wales, Victoria, Queensland, New Zealand, and Canada would each incur a liability of £220,000, the interest on which, at 3 per cent., is £6,600 per annum. I have indisputably shown that the revenue from the first would pay the whole interest, and leave an ample surplus. It is obvious, therefore, that the liability would be little more than nominal. I respectfully submit that there are reasonable grounds for looking to the Home Government to advance a loan to make up the necessary cost over £1,100,000. There have been objections raised in some quarters to the Imperial Government granting a subsidy to assist in establishing the Pacific cable. The same objections will not obtain against a loan to aid the colonies in completing an undertaking of Imperial importance, with every prospect of the loan, principal and interest, being eventually returned. I have, &c., The Hon. Sir Mackenzie Bowell, Premier. Sandford Fleming.

Enclosure 2 in No. 7. Mr. Sandfoed Fleming- to the Hon. the Pbemiee of Canada. Sir, — Ottawa, Ist November, 1895. In my letter of the 11th ultimo which I had the honour to address to you I stated, as I believed I was justified in doing, that my estimates of the revenue to be derived from the Pacific cable had never been refuted. I had then no idea that the general soundness of my calculations had been challenged in Australia, and that unfavourable criticisms had been officially made. "Within the last two days I have received letters from Australia by which I learn that the Deputy Postmaster-General of New South Wales, Mr. S. H. Lambton, in a report dated the 27th August, 1895, dissents from my views, and expresses the opinion that, in place of the surplus revenue which I have shown as the result of the undertaking, a large annual deficiency would arise. As the estimates prepared by me many months back have never until now, as far as I know, been seriously called in question, and as they are disputed by one holding an official position, I feel that the duty is entailed upon me to examine the grounds upon which this dissent is based. If Mr. Lambton has discovered my calculations to be based on error, or that the principles by which I have been guided are false, it becomes my duty frankly to acknowledge that I have erred, and unhesitatingly make the necessary corrections. If, on the other hand, I can establish that Mr. Lambton himself is at fault, it is equally incumbent upon me to show where he is in error, and to justify my own calculations. My task is rendered the more easy by the course followed by Mr. J. S. Larke, the commercial agent of the Canadian Government in Australia. This gentleman, on receiving a copy of Mr. Lambton's report, addressed a letter to the Postmaster-General of New South Wales (11th September), and conclusively showed that the estimates of revenue which had been made were substantially correct, and that, instead of the annual loss, according to the opinion of Mr. Lambton, the receipts from business would prove sufficient to meet every demand, comprising interest on capital, workingexpenses, and cost of maintenance, and that in addition there would be a large surplus to accumulate yearly until at the end of twenty years it would reach one and a half million pounds. This is not Mr. Lambton's view. According to the estimates which he has submitted to his Government, the expenditure of the year would not only not be met by receipts but there would arise a great annual deficiency. The following is the estimates for four years furnished by him: — Expenses. Receipts. Deficiency. £ £ £ 1897 ... ... ... ... 179,000 81,000 98,000 1898 ... ... ... .. 163,000 85,000 78,000 1899 ... ... ... ... 163,000 88,600 74,400 1900 ... ... ... ... 213,000 92,000 121,000 In examining the details of Mr. Lambton's calculations of expense set forth in the second column, I find that almost the whole difference between his estimates and my own is traceable

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to the rate of interest on capital, and to the addition of £80,000 which he claims should be added to the yearly expense over- and above interest, working, and maintenance, for what he terms amortization :in other words, that provision should be made to the 'extent of £80,000 a year for the purpose of creating a fund to re-lay the cable after the interval of twenty years. In the remarks submitted by me at the Colonial Conference held in Ottawa last year I referred to this consideration (see "Proceedings," page 84). I pointed out that it is bad in principle to burden the infant revenues of an enterprise heavily in order to build up a fund which cannot be required for a long period. Moreover, I stated that cables of the best modern type are not so short-lived as is asserted by many, the opinion prevailing among those best informed on the subject that perfectly constructed cables laid in deep water, and imbedded in the soft ooze of the bottom of the ocean, will remain undisturbed and serviceable for generations. I may refer to a pamphlet published within the last few weeks in England, entitled " Notes on Submarine Telegraph-cable Work," by Walter Goodsall, late commander of the Eastern Telegraph Company's s.s. " Chitten," and navigating oflicer s.s. "Great Eastern," &c. The writer's knowledge of the subject is based on his long service and experience. He expresses the view that " the most favourable conditions in promoting the life of a cable are secured by laying it at a great depth —in great depths there is a certainty of finding an ooze bottom for the cable to rest on. On such a bottom there is no movement, and consequently no friction ; therefore no wear-and-tear of the outer covering of the core of the cable. The core is practically indestructible in the even temperature found at the bottom of the ocean. On such a bottom the life of a cable is unknown; it may be nigh to a century, if not longer." I cannot, therefore, recognise that Mr. Lambton is justified in adding £80,000 to the annual expense for the purpose of renewing the cable at some indefinitely remote period—first, as I have explained, that the principle of the charge is objectionable ; chiefly, however, because I dispute its necessity. With regard to the rate of interest, Mr. Lambton reckons per cent, per annum. In my humble judgment, money borrowed on the security of the Home Government, of Canada, and of the Australasian Colonies could be obtained on more favourable terms. Such I conceive will be the opinion with all who have knowledge of financial matters. There is a-wide difference in the estimates of the receipts between Mr. Lambton's views and those which I hold. He certainly does not take a hopeful view of the future of the country in which he lives. We differ in our estimate of the extent or degree of expansion of cable business year by year, and likewise of the proportion of telegraphic matter ■which may be assumed as the fair share of the Pacific line. It has to be borne in mind that the existing telegraph connection between Australasia and Europe has been in operation for twenty years, and that the tariff charges on messages have varied. Up to the Ist May, 1891, they were high—9s. 4d. per word; from the Ist May, 1891, to the Ist January, 1893, they were 4s. per word; since the last-named date the rate has been 4s. 9d. per ■word. Before the Ist May, 1891, under a uniform tariff, although a very high one, there was a steady increase in the volume of cable business. It reached 251 per cent, in the whole period from 1875 to 1890. During this period of fifteen years the tariff was 9s. 4d. per word, and the average annual increase was over 16 per cent. The immediate consequence of the lowering of rates from 9s. 4d. to 4s. per word, on the Ist May, 1891, was that the business increased during that year enormously. Since then there has been a continuous advance —an advance which has fluctuated owing to various causes, among others to the bank failures, to the great depression in business which has prevailed for some time in Australia, and likewise to the fact that the tariff rate was increased from 4s. to 4s. 9d. on the Ist January, 1893, and has so continued. Naturally there is a close relationship between the rates charged on messages and the number of words transmitted during any given period. The statistical returns show that the reduction from 9s. 4d; to the 4s. rate increased the volume of the business at a bound—s4 per cent, for the first year. No one could expect that this ratio of increase would be maintained. I for one expected a reaction, especially in view of the raising of the rates from 4s. to 4s. 9d. above mentioned. In my memorandum of the 11th October, 1893, prepared in Sydney, I referred to this point (see " Mission to Australia," page 71), and anticipated that there would be no great advance in business for a few years. I wrote :" In the calculations which follow I shall therefore assume the business to be at a standstill for three years: that is to say, 1 shall assume that the business in 1894 will not be greater in volume than it was in 1891." It is not therefore a matter of surprise to me that the cable business during the past three years has not increased more than 6 per cent, per annum. It was not expected that the increase of 54 per cent, of the year 1891 would be maintained. I would not, indeed, have been astonished had there been a decrease in the business during a portion of the period; but there has been no decrease in any one year, although in 1892, immediately following the great advance, the increase in business fell to less than 4 per cent. In January, 1893, as I have stated, the tariff of charges was raised. Naturally this would have a tendency to diminish the number of words transmitted, nevertheless the business increased 6 per cent, during that year, and nearly as much the following year, 1894. It is in contemplation to lower the charges on messages on the completion of the Pacific cable from 4s. 9d. to 3s. per word ; obviously the effect would be an increase in the business. Mr. Lambton recognises that such would be the case. He thinks that within the first year it would increase 25 per cent., but, for some reason incomprehensible to me, he reckons that the development of business under a 3s. tariff will be less than it has been during the last three years under the peculiar circumstances which I have explained, and still less than under the 9s. 4d. rates which were exacted before 1891. I shall presently point out that the average annual increase of business for the eight years preceding 1891, when the charges were never less than 9s. 4d. per word, was 14 per cent. It is

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difficult for me to understand, unless on the principle of " erring on the safe side," why Mr, Lambton should give it as his opinion that under the 3s. tariff proposed the annual growth of business will not exceed 4 per cent. It is quite proper that men in positions of responsibility should be governed by prudence and caution. I have the greatest sympathy with the feeling, having, as is well known to you, occupied for many years a position of trust and responsibility. But a public officer may carry the principle of " erring on the safe side "to too great an extreme. There may be such a thing as exercising caution beyond bounds, should it be carried to the length of impeding legitimate progress and of imperilling the public interests. In such a case it can no longer be classed with prudence ; it would more correctly be characterized as a grave failure of duty. I may instance a case in which this error on the safe side may with reason be so characterized. On the 3rd December, 1892, the Colonial Office, as appears by a document appended to your report on the mission to Australia (page 79), consulted the Imperial Post Office in London on the question of constructing a cable on the Fanning Island route. The authorities consulted did not arrive at any hasty conclusion. Seven months elapsed, when the Secretary sent a reply conveying the opinion of the Engineer-in-Chief of the department that the cable from Vancouver to New Zealand would cost £2,924,100; at the same time he expressed doubts if it could be either safely laid or maintained on such a distance as that involved by landing it at Fanning Island. Last year the feasibility of laying the cable in perfect condition was assured beyond all doubt by the ablest electricians, and the Canadian Government received tenders from responsible persons to lay the cable and maintain it in working order for three years for the sum of £1,517,000. What can be said of such a miscalculation, or error of judgment, or whatever it may be called? Does it not show very forcibly that men in the Government employ should be very careful not to mislead by an excess of caution those whom they serve, and that they have a higher duty to perform than to err on the safe side? If at this juncture your Government and the other Governments concerned relied on these reports of the Post Office authorities the prospect of a British cable across the Pacific might well be declared hopeless. In framing my estimates of revenue I have felt warranted in assuming that the Pacific cable would attract half the business between the Australasian Colonies and Europe. I may with propriety even urge that the new cable, established as a Government undertaking, would in all probability transmit far more than half the total European business. The co-operating colonies would have a direct interest in the financial success of the undertaking, and, as all the land lines in Australia and New Zealand'are public property, managed by the Post Office Departments, every Post Office would practically become an agency of the Pacific cable, and the several Governments at the sources of traffic would have it in their power to control the cable business and direct it as they may desire. Such being the case, one-half the business must be held to be a moderate share which would fall to the Pacific cable. Desiring that I should not be charged with overestimating the probable business by the Pacific route, I based my estimate on the new cable receiving only one-half the total business immediately on its being put in working order. I have added a percentage of yearly increase, but I have not picked out an abnormally high ratio of increase such as developed in 1890, nor an abnormally low ratio of increase, such as have resulted since 1890, from the causes to which I have referred. I have invariably taken as a basis for my calculations the actual business transmitted throughout the longest series of years of which I could obtain statistical returns. When I arrived at Sydney, New South Wales, on 9th October, 1893,1 immediately applied for the fullest information obtainable at the Government offices, and, in accordance with the statistics there obtained, I submitted the estimates which - will be found at page 71 of your report. It will be seen that I took the business during the eight years from 1882 to 1890, and this showed that during that eight-year period there was an increase each year, on an average, of 54,441 words, equal to 14 per cent, per annum. Such was the normal increase under the high tariff, for throughout' these eight years the charges on ordinary messages were uniformly 9s. 4d. per word. It has already been explained that 3s. per word is the contemplated rate when the Pacific cable shall be laid. Naturally the growth of traffic has a tendency to be greater under a low than a high tariff, and, as' the telegraph connection with North America would stimulate the development of new business which would be wholly tributary to the Pacific cable, I have, all things considered, felt warranted in reckoning 15 per cent, per annum as a moderate average ratio of increase. My estimates of revenue are based on this ratio, and they show a surplus each year from the first, so that, after paying interest on capital, working-expenses, and maintenance, it would accumulate in ten years to no less a sum than £742,000. The data upon which these estimates are based, and the estimates themselves, have been examined and confirmed by men of known ability occupying positions of responsibility—Mr. J. M. Courtney, Deputy Minister of Finance, Canada; Mr. W. Hepworth Mercer, of the Colonial Office, London; and Mr. George Johnson, Statistician for the Dominion. The latter, being in possession of Government returns, examined the statistics of Australian submarine telegraphy with great care, and submitted his views on the subject of probable revenue in a letter dated 29th November, 1894, which is appended to my memorandum on the Pacific cable of Ist December last. Mr. Johnson bears out my estimates, and he remarks : " During the period 1875-90 the growth of business under a 9s. 4d. tariff was equal to an annual average of 168 per cent. ; that under a 4s. and 4s. 9d. tariff the average annual growth from 1890 to 1893 (three years), was 23 per cent. Your estimate of 14 per cent, appears, in the light of facts, to be a very conservative one." It is no difficult matter to condemn any projected public undertaking, and to declare on high authority that it can never be made a commercial success. Such was said in no measured terms of the Canadian Pacific Railway, and of the Suez Canal; indeed, no great public works which have been successfully accomplished have escaped this criticism. In making estimates of revenue and expenditure of any undertaking, doubtless to a large extent we must argue from probabilities, but we are not justified in taking too gloomy or too sanguine a view ; we must endeavour to find a reason-

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able middle course. We are at least warranted in anticipating that the future, like the past, will have times of depression as well as periods of prosperity, and in basing calculations on past experience we are not warranted in being guided only by the business returns of one or two good years or of one or two bad years. The true course is to avoid extremes, and accept for our guidance the average returns of a long series of years. This course I have followed in estimating the growth of cable business which we may reasonably look for in the future. We know that in the year 1875 the total number of words transmitted was 235,160, and that last year the business had reached about 1,430,000 words —an advance indicating an amazing vitality, and which may, in some measure, be taken as an augury of what may follow in the next twenty years. Hitherto, owing to prohibitory rates, there has been little or no telegraph intercourse between North America and the Australasian Colonies. The Pacific cable will for the first time open up direct communication between the northern and southern continents for a business which has not hitherto existed. The charges on messages will be less than half what they now are between Australasia and Europe, and, unless all experience is valueless, we are justified in the belief that the relationship thus created will develop a submarine-telegraph business of large proportions. It is perfectly clear to my mind that, in addition to transmitting one-half or more than onehalf of the yearly-increasing European business, a trans-Pacific cable will command the whole of the telegraphic messages to be transmitted in the future between this continent and Australasia. In view of these facts and circumstances my faith is unshaken in the prospects of the projected undertaking, looked at purely as a commercial venture. Calculations may be made in various ways, and estimates may be differently formulated, but I see no reason for changing the general conclusions I have formed. lam thoroughly satisfied that the Pacific cable established as proposed will be self-supporting from the first, and in the end will prove abundantly profitable. I have, &c, The Hon. Sir Mackenzie Bowell, Premier. Sandpoed Fleming.

No. 8, His Excellency the Governoe of South Australia to His Excellency the Goveenoe of New Zealand. (Telegram.) Adelaide, 20th November, 1895. Following telegram received from Secretary of State for the Colonies : " Meeting to-day with High Commissioner of Canada and Agents-General for Australasian Colonies, except South Australia and Western Australia. I propose to appoint a Committee to take into consideration the whole subject of the Pacific cable, Australasian Colonies to nominate two members, Canada two, Her Majesty's Government two. Agents-General are communicating with Colonial Governments."

No. 9. The Agent-Geneeal to the Hon. the Pebmiee. Westminster Chambers, 13, Victoria Street, London, S.W., Sic,— 27th November, 1895. I beg to transmit copy of letter received from the Colonial Office relating to the proposed Pacific cable. I also attach copy of joint cablegram sent through the New South Wales office reporting the result of the interview with the Secretary of State for the Colonies. The " terms of reference " mentioned in the cablegram have not as yet been received from the Colonial Office. I have, &c, The Hon. the Premier, Wellington. ' W. B. Pbbceval.

Enclosure 1 in No. 9. Sib, — Downing Street, 11th November, 1895. A proposal was recently made that a deputation of the Agents-General for the Australasian Colonies and the High Commissioner for Canada should wait upon the Secretary of State for the Colonies with the view of discussing the question of the Pacific cable; but it was arranged at the beginning of September that, having regard to the meeting of Parliament and the consequent pressure of business, the interview should be deferred to a more convenient season. Since then the position of the matter has been materially affected by the grant by the Hawaiian Government to Colonel L. S. Spalding, subject to certain conditions, of an exclusive franchise for twenty years to lay cables for commercial purposes. It is reported that Colonel Spalding, on obtaining this concession, entered into negotiations having for their object the continuance to Honolulu of the cable laid by a French association between New Caledonia and Queensland. If the whole project thus contemplated is carried through, San Francisco or some other point in the United States territory will be placed in direct communication with Australasia, and it need hardly be observed that in that case the position of the British project from the financial point of view would be very prejudicially affected. It seems therefore to Mr. Chamberlain to be highly desirable that no further time should be lost in considering the subject, and that some open step should be which will disabuse foreign promoters of the idea that no competition is to be feared from a British line, as recommended last year by the Ottawa Conference.

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For this purpose Mr. Chamberlain would suggest that the proposed interview should take place at an early date this month. If it then appears that there is a sufficient body of opinion in favour of considering the terms on which united action could be taken, Mr. Chamberlain would be glad to co-operate in the appointment of a joint commission, or to lend his assistance in any other way which may seem best. I am, &c, The Agent-General for New Zealand. John Bramston.

Enclosure 2 in No. 9. The Agent-Genebal for New South Wales to the Hon. the Premier, Sydney. (Telegram.) London, 19th November, 1895. High Commissioner for Canada and Agents-General for the Australasian Colonies, except South Australia and Western Australia, had interview with Secretary of State for the Colonies to-day, relating to Pacific cable. Mr. Chamberlain agreed to appoint a commission, as requested by colonies. Great Britain, Canada, and Australasian Colonies each to nominate two Commissioners, that is to say, six in all. Eepeat this joint telegram to other Colonial Governments, including New Zealand, and communicate here names of colonies' nominees. Prompt action desirable. Terms of reference will be forwarded to you to-morrow. Will include full inquiry into all details.

No. 10. The Agent-Genebal to the Hon. the Pbemieb. Westminster Chambers, 13, Victoria Street, London, S.W., g IE 3rd December, 1895. • Referring to my letter of the 29th November [not printed], I beg to transmit herewith copy of letters received from the Colonial Office, giving the terms of reference to the proposed Committee upon the Pacific-cable question. I have, &c, The Hon. the Premier, Wellington. W. B. Perceval.

Enclosure in No. 10. The Colonial Office to the Agent-General. g IE Colonial Office, Downing Street, 30th November, 1895. I am directed by Mr. Secretary Chamberlain to acquaint you that the terms of reference to the proposed committee upon the Pacific-cable question will be as follows : — To consider in all its aspects the proposal for laying a telegraphic cable between British North America and the Colonies of Australasia, and to report thereon to the Secretary of State for the Colonies. Besides the questions of route, cost, revenue, and other matters which will suggest themselves to the committee, special consideration should be given to the question whether the cable should be laid by Government or by a private company, and to the distribution of the cost or subsidy among the Governments concerned. This information has been communicated by telegraph to the Governor-General of Canada and the Governors of the Australasian Colonies. I am, &c, The Agent-General for New Zealand. John Bramston.

No. 11. The Hon. the Postmaster-General, Sydney, to the Hon. the Postmaster-General, Wellington. (Telegram.) Sydney, 9th January, 1896. It has been arranged to hold a Conference here on 17th instant, for the purpose of considering the question of the proposed Pacific cable, and I formally invite your attendance thereat. Hope you will be able to make it convenient to be present.

No. 12. The Hon. the Postmaster-General, Wellington, to the Hon. the Postmaster-General, Sydney. (Telegram.) Wellington, 10th January, 1896. Much obliged for your arranging meeting Cable Conference. Hon. Mr. Eeeves has just left by " Wakatipu " and will represent this colony. I could not possibly get over.

No. 13. The Hon. the Postmastee-Gbnbbal, Sydney, to the Hon. the Postmaster-General, Wellington. Sm, — Postal and Electric Telegraph Department, Sydney, 21st January, 1896. I have the honour to state that, as the Hon. Mr. Beeves was not able to remain long enough in Sydney to have the opportunity of signing the report of the Intercolonial Conference, to which he was a delegate, I, at his request, have signed the document for him, and as President of the 2—F. 8.

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Conference forward a copy thereof for your information. I would be glad if you would place the report before your Government, and move your Premier to communicate his approval to our Premier, especially as to the choice of representatives, so that no time may be lost in making an official intimation to the Colonial Office. I have, &c, Joseph Cook. The Hon. J. G. Ward, M.H.E., Postmaster-General, &c, Wellington, New Zealand.

Enclosure in No. 13. [See F.-3, 1896, Postal and Telegraph Conference, pp. 1-5.]

No. 14. The Hon. the Pbemieb, Melbourne, to the Hon. the Pbemieb, Wellington. (Telegram.) Melbourne, sth February, 1896. Pacific cable : On receiving resolutions recent Conference, Sydney, I wrote Premier New South Wales, suggesting, in order avoid unnecessary expenses in telegraphing, he should, when authorised by all Governments, send joint cable on behalf of colonies informing all Agents-General, and asking them advise Colonial Office that Sir Saul Samuel and Mr. Gillies elected as representatives of Australasian Colonies on commission to be appointed in Kngland, on distinct understanding that in all important matters they consult general body of Australasian Agents-General. Also that route suggested at Conference was from Vancouver via Fanning Island to Fiji; from Fiji to Norfolk Island; bifurcating there, one branch going to Moreton Bay, Queensland, the other to. convenient landing-place in north of New Zealand. And, further, that text of Conference resolution sent by post. Premier New South Wales expressed his willingness to telegraph as suggested on receiving authority from colonies concerned, and I then wired him, saying that this Government concurs in Sydney Conference resolutions re cable, but must reserve right of refusing to join in the scheme when English Conference furnishes full details, and authorising him, so far as Victoria is concerned, to cable to Secretary of State to that effect, and also in terms of my letter above mentioned. If you also concur, please so advise New South Wales, in order that joint cable may be sent without delay.

No. 15. The Hon. the Premier, Wellington, to the Hon. the Premier, Sydney. (Telegram.) Wellington, 10th February, 1896. This Government concurs in Sydney Conference resolutions re Pacific cable, but it must be understood that we reserve the right, after the receipt of full details of the English Conference, of either assenting to or refusing to join in the scheme.

No. 16. The Hon. the Postmasteb- General, Sydney, to the Hon. the Postmasteb-Genebal, Wellington. (Telegram.) Sydney, 18th February, 1896.' Pacific Cable Commission: Governor has cabled Secretary State that colonies nominate Samuel and Gillies as Australasian representatives. Proposals to be reserved for approval Colonial Governments. Samuel has also been supplied with Conference resolutions, and told that representatives should on all important points consult other Agents-General.

No. 17. The Agent-Genekal to the Hon. the Pbemieb. Westminster Chambers, 13, Victoria Street, London, S.W., Sib,— 10th June, 1896. I regret to have to inform you that I understand that the Pacific Cable Conference has been adjourned for six weeks in consequence of the Australasian delegates, Sir Saul Samuel and the Hon. Duncan Gillies, having to attend the Telegraph Conference at Buda-Pesth. Up to the present time, the resolution passed at the Sydney Conference requesting the Australasian delegates to confer with the Agents-General on the matter has not, so far as 1 ana aware, been acted on, and consequently I have no official knowledge of any proceedings which may have been taken respecting it. My only knowledge concerning the Conference is derived from newspaper reports, one of which, taken from the Times of the 9th instant, I herewith transmit [not printed.] As New Zealand was not allowed a representative at the Conference, I have not been able to act in accordance with the instructions contained in your cablegram of the 28th April last [not

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printed.] No doubt the Australasian delegates will later on confer with the Agents-General, and then opportunity will present itself to me to make known the wishes of New Zealand, and of obtaining precise information concerning the position. I understand that the Canadian delegates feel considerable regret and vexation at the delay caused by the adjournment of the proceedings of the Conference. I have, &c, The Hon. the Premier, Wellington. W. P. Beeves.

No. 18. The Hon. the Peemiee to the Agent-Genekal. (Memorandum.) Premier's Office, Wellington, 31st July, 1896. I have to acknowledge the receipt of your letter of the 10th ultimo, in reference to the Pacific Cable Conference in London, and covering an extract from the Times on the subject. I note the adjournment of the Conference for six weeks through the absence of the Australasian delegates at Buda-Pesth, and that Sir Saul Samuel and the Hon. Duncan Gillies have not yet conferred with the Agents-General on the subject of the Pacific cable. The Hon. W. P. Beeves, Agent-General for New Zealand, London. B. J. Seddon.

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