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The American telephone has become universal because, allowing for the high standard of wages and of living prevailing, it is by far the cheapest telephone in the world. Besides, it is extraordinarily efficient. In the towns connexion is secured as a rule in a few seconds. Its universality may be seen by the fact that in most American towns the Post Office Directory has disappeared. People who require an address refer to the Telephone Directory, which contains the names of practically all the residents.

The American telephone is so cheap and so efficient that it has put the telegraph into the shade and has replaced, to a large extent, the letter post. After all, it is much less trouble to talk to a man than to write to him. Practically every room in every better-class hotel has a telephone. It is to be found in every shop and in every factory and workshop. A workman unable to go to business or requiring the doctor uses the telephone. Even the poor do a great deal of their shopping over the wire. In many shops telephones are kept under the counter. A woman telephones to a friend while trying on a pair of gloves. The telephone is brought to one's table while one is dining at a restaurant. One can telephone from one's carriage in the better-class trains and from one's state-room on board ship. The foreman at the bench gets his orders by telephone from headquarters, and the engine-driver finds finds a telephone apparatus close to his engine in most stations.

In most American towns the policeman on point duty has a telephone at his elbow. The ambulant inspector is unnecessary. At odd times the policeman is rung up by the station to make sure that he is on duty. If anything of importance occurs, he reports by telephone to his inspector or he is told over the telephone to look out for a runaway horse or a fleeing criminal. Telephonic connexion between headquarters and all the policemen on point duty vastly increases the efficiency of the American police and leads to an economy in men.

The telephone has rendered invaluable services to the American farmers. While English farmers send their produce to market and are at the mercy of the salesman and of the momentary fluctuations of the produce market, the American farmer inquires over the

telephone about prices and sells his produce by wire at the chosen moment. The American crops are liable to sudden destruction by the weather changes to which the country is exposed. In many cases the harvest has been saved by the telephone. Local representatives of the United States Weather Bureau telephone to all the farmers around if floods, sudden frosts, or heavy rains are to be expected. On receipt of such a message the farmers call up by telephone all available hands and rescue the cattle, secure the dykes, gather the fruit, or make fires in the orchards.

While in England it takes hours to put through a longdistance call, it takes, as a rule, only minutes in the United States. The American telephone is managed with the utmost fairness to the public. The bureaucratic tyranny which is generally found in Government-managed services is absent on the other side. With regard to costly long-distance traffic the 'particular person principle' is applied. If one wants to speak by longdistance telephone to a friend and one can obtain connexion only with his wife or with his office, no charge is made. If one wants to talk to Mr Smith at Buffalo and does not know whether he is at his home, at his office, at his club, or at a certain friend's, the telephone exchange will search for him free of charge in all the places mentioned until he is found, and then connect you with him. Such facilities would be inconceivable in a bureaucratically managed service. The rapidity of connexion is such that a man arriving at his hotel asks from the telephone in his bedroom to be connected with his family hundreds of miles away, and talks with them while dressing.

The telephone was invented by an Englishman, Dr Alexander Graham Bell, who had migrated to America. He had a firm affection for England and wished to introduce it into his native country. He went to England with this object in view as soon as his invention had made a fair start in the United States. Unfortunately those before whom he placed the apparatus lacked vision. For a long time Englishmen refused to consider the telephone as anything but a scientific toy. So late as 1882 Herbert Spencer wrote: The telephone is scarcely used at all in London, and is unknown in the

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other English cities.' Private enterprise at last took up the development of a telephone service in England. Unfortunately the British Government owned the telegraphs. It feared that the new invention would cause a loss to the telegraphs, and therefore resolved to suppress it, or at least to hamper its development to the utmost. Mr Herbert Casson, a Canadian engineer, wrote in his excellent 'History of the Telephone':

'Just as a few energetic companies were sprouting up, the Postmaster-General suddenly proclaimed that the telephone was a species of telegraph. According to a British law the telegraph was required to be a Government monopoly. This law had been passed six years before the telephone was born, but no matter. The telephone men protested and argued. Tyndall and Lord Kelvin warned the Government that it was making an indefensible mistake. But nothing could be done. Just as the first railways had been called toll-roads, so the telephone was solemnly declared to be a telegraph....

'Having captured this new rival, what next? The Postmaster-General did not know. He had, of course, no experience in telephony, neither had any of his officials in the telegraph department. There was no book and no college to instruct him. His telegraph was then, as it is to-day, a business failure. It was not earning its keep. Therefore he did not dare to shoulder the risk of constructing a second system of wires, and at last consented to give licences to private companies. But the muddle continued. In order to compel competition, according to the academic theories of the day, licences were given to thirteen private companies. As might have been expected, the ablest company quickly swallowed the other twelve. If it had been let alone, this company might have given good service, but it was hobbled and fenced in by jealous regulations. It was compelled to pay one-tenth of its gross earnings to the Post Office. It was to hold itself ready to sell out at six months' notice. So, as soon as it had strung a long-distance system of wires, the Postmaster-General pounced down upon it and took it away.

'Then, in 1900, the Post Office tossed aside all obligations to the licensed company, and threw open the door to a freefor-all competition. It undertook to start a second system in London, and in two years discovered its blunder and proposed to co-operate. It granted licences to five cities that demanded municipal ownership. These cities set out bravely, with loud beating of drums, plunged from one mishap to another, and finally quit. Even Glasgow, the premier city Vol. 236.-No. 469.

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of municipal ownership, met its Waterloo in the telephone. It spent $1,800,000 on a plant that was obsolete when it was new, ran it for a time at a loss, and then sold it to the Post Office in 1906 for $1,525,000. The story of the telephone in Great Britain has been a "comedy of errors.'

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Government interference and Government management have, according to Mr Casson, been fatal to the telephone not only in England but in other countries as well. His opinion is confirmed by the highest American authorities. The yearly reports of the American Telephone and Telegraph Company are of the greatest value to the student of practical economics because they do not merely give detailed accounts of the progress of the company and of its financial position, but also because the principal problems of the telephone service are discussed in it and because criticisms levelled at the American organisation are answered. The Bell organisation is a gigantic trust. It is one of the greatest and most powerful trusts in the world. Consequently it has many enemies, although the principal creators of the American telephone system have not become multimillionaires like the creators of the Standard Oil Company, the United States Steel Corporation, and other great undertakings, but have remained relatively poor.

Some of the critics of the Bell Company have advocated that it should be dissolved into its component parts, that free competition would provide a cheaper and a more efficient service. Others have urged that the telephone should be taken over by the Government and should be managed by it either as an independent department or as a branch of the Post Office. Others, again, have been in favour of leaving the telephone in private hands, wishing to combine private ownership with Government supervision. It is worth while to learn the views of the telephone company on these proposals. The directors and managers of that concern believe that competition is unsuitable in the case of the telephone, that the creation of a monopoly is unavoidable owing to the very nature of the undertaking, and that that monopoly should be in private hands because of the inefficiency of bureaucratic management, but that Government supervision is to be welcomed as long as that supervision is

impartial. In their opinion party-political influences would be fatal to the service. This is only natural; still it is worth while to quote some of their reports. The report of 1918 stated that

'Competition, so far as the public utilities are concerned, is costly, unsatisfactory, undependable; that as an incentive to development or improvement it has passed its period of usefulness, if indeed it ever had any. . . . Competition involves duplication of plant, equipment, administration and investment, with the consequent duplication of overhead charges, operating costs and greatly increased commercial

expenses.

'Control and regulation should provide the best service at the lowest possible cost. It should be sufficiently liberal to encourage development of latent resources and not so restrictive as to impede or retard the extension and expansion needed to meet the wants of a growing country, Only through the application of these principles can the public get the best service. Best service can be rendered only by prosperous enterprises. Any contest for corporate existence consumes the capital and human energy which could be better devoted to quality and economy of service. Any public control and regulation that does not do this is in the end destructive, not constructive. It is not even protective, for the public will some day realise that inadequate, inefficient public service is tremendously costly-directly, in the lack of value; indirectly, in discomfort and inconvenience to the public and in the insidious deterioration of prosperity and progress, of the individual and of the community.'

Again, in the report of 1919 we read:

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'Much, if not most, of this development (of the Bell organisation) was done under unrestricted, unrestrained operation and promotion. It could not have been done otherwise, for without the incentive of adventure, without speculative capital, without unrestricted possibilities, the risk never would have been taken. . . . Control and regulation should be divorced as far as possible from partisan or class influence, and the influence of misinformed or interested public prejudice. It is impossible for any body to be judicial or equitable if its decisions are subject to hostile criticism and public condemnation without any other reason than prejudice based on misinformation or ignorance.'

The controllers of the American telephone service are

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