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I can assure you that before arriving at this decision my board gave the matter the most careful consideration, and sincerely regret that no other course appeared open to them in all the circumstances of the case ; they trust, nevertheless, that their inability to concur in the views of your Government will not in any way impair the friendly relations which have so long subsisted between the Australian Governments and the company. By the terms of the Postmaster-General's letter of the 12th March, 1903, I recognise that the Government are now at liberty to terminate the tentative arrangement by which the company has direct dealings with the public in Melbourne and the use of a special wire on the Government line between that city and Adelaide, and I am fully aware that your Government have been frequently urged to withdraw these facilities, and to assist the Pacific Cable Board in competing with the company more actively than heretofore.- I would, however, venture to suggest that, apart from any loss which the closing of the company's public offices in Melbourne and the withdrawal of the special wire might entail upon the company, a graver loss would be inflicted upon the commercial community of Melbourne; and, putting aside for the moment the interest of the company, may I venture to consider this matter from a purely Australian point of view? One justification for my doing so is that as pioneers the company linked up Australia and the outer world by its cables at great risk to the capital involved, and that ever since, as owners of a great British-Australian enterprise, the company has been, and is, profoundly interested in Australia's prosperity and commercial development. I would ask, then, can it be an advantage for Australian commerce that the Melbourne offices should be closed ? These offices and the special wire were provided with the concurrence of the Government in order to strengthen and improve the telegraphic service between Melbourne and the British Empire, and to put Melbourne in the same position as Sydney and the other capitals by insuring that any errors and delays due to the handling of messages by different Administrations should be as much as possible eliminated. It is universally admitted as a result that there has been marked improvement in the service, and that the average speed of transmission between Melbourne and all parts of the world has been greatly accelerated. . If, then, these desired objects and advantages have been attained, what is the ground on which the requisite facilities are to be withdrawn ? Is it in order that by some hoped-for deterioration of the company's service the telegraphing public which has now two routes at. its disposal should be more or less compelled in future to use only one—viz., the Pacific—and the present competition in efficiency be enfeebled or destroyed ? If this be the aim, I would with all respect point out that in itself such a result cannot be for the advantage of Melbourne. Possibly the Commonwealth Government may reply, " However this may be, we are financially interested in the Pacific cable. It is losing us £30,000 a year. For the sake of our finance we are bound to cripple the company as much as possible and close its Melbourne offices in order to endeavour to get more business for the Pacific cable, and so reduce our loss." Dealing with that position, and again merely from the Australian standpoint, is it not possible to arrive at a reasonable solution ? The object of Australia in engaging in the Pacific cable enterprise was evidently twofold. First, Australia at that date was served by only one cable system. She wanted another, and two separate systems now exist. Secondly, Australia considered that the rates charged were too high. She now enjoys lower rates—rates, indeed, so low that both systems are suffering severely. So far, then, Australia appears to have obtained all that she really wanted. It can scarcely be within her real aims and needs to close the Melbourne offices, and, as not obscurely hinted during the debates in the Senate, perhaps at a later date to exclude us from the other great cities altogether. By so doing Australia would, as I have stated, defeat her primary object of obtaining alternative services, and lose the advantages and guarantees afforded by the company's extensive cable system. Consequently I venture to say that the question which has assumed such large proportions for Australia is one properly and strictly limited to the problem of how to reduce her loss of £30,000 a year from the Pacific cable. Two methods have been suggested for attaining this object: first, that of withdrawing the special wire and closing the Melbourne offices, and entering into more active competition than ever with the company. But, as already stated, this would be clearly detrimental to the vast commercial interests of Victoria, and the further expenditure involved in the opening by the Pacific Cable Board of their own public offices and in canvassing on a larger scale might, after all, while injuring the company, not prove remunerative to the Pacific Cable Board. Another course still remains, but all that I can now venture to say about it is that it should not be beyond the resourcefulness of the Federal Government and the company in consultation to devise some scheme honourable and satisfactory to all parties which would diminish, and perhaps in due time extinguish, the financial loss now accruing to Australia from the Pacific cable, and at the same time guarantee the Pacific cable enterprise against the results of possible interruption. In this connection may I be permitted to refer to the statement reported to have been made by the Minister of Defence in the Senate on the 6th December last, in regard to the pooling arrangement which has been proposed between the Pacific Cable Board and the company, that " The Eastern Extension Telegraph Company said they would not entertain the proposal except for a period of thirty years or more, and then only on the distinct understanding that at the end of the term all the State agreements into which they had entered—the agreements made with South Australia, Western Australia, Tasmania, and New South Wales —should be revived." I would respectfully point out that if the Minister be correctly reported he must have been misinformed as to the negotiations, seeing that what the company required was that the arrangement should, in the absence of other conditions, continue for the reasonable period of thirty years ;