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Infrastructure and Information in the United States and Britain, 1840s–1890
This chapter starts with the introduction of the telegraph into the domestic economies of Britain, the European continent, and the United States. The expansion into international communications then came about largely as a result of domestic factors. At a time when it took three weeks for a letter to cross the Atlantic and six months to reach Australia, the desire for fast communications was such that, even in a free-trade era, governments were prepared to offset the risk to those entrepreneurs prepared to undertake the engineering feat of laying and operating submarine telegraph lines. Behind this public-private cooperation lay a demand for international links with major trading partners and colonial dependencies, as well as a desire to control international communications. Commercial and strategic interests joined to push the technology; by 1890, when this chapter ends, the infrastructure of the international submarine cable network had been laid, and Reuters, the British news agency, dominated economic and political news.
Throughout the period, however, tension between the international companies and their own, and other, governments was apparent. Governments attempted to regulate the companies' domestic and foreign activities and to gain ascendancy through national and international regulation. Often modeled on railway regulation, those domestic regulatory attempts were limited by the administrative capacity of governments, the financial interests of parliamentarians, and, in the case of Britain, free-trade ideology. Whereas Britain solved its domestic regulatory problems by following Continental tradition and nationalizing the telegraphs, it relied on multilateral international regulation to control international cables. In contrast, the Americans allowed a private monopoly at home but used cable landing licenses to unilaterally open up the international market, allowing cartels only where they favored domestic U.S. companies.
Domestic Development of the Telegraph in Britain
The England into which the telegraph was introduced in the late 1830s was primarily agricultural. Although the first Reform Act of 1832 had given the vote to some male property owners, hereditary peers and landed gentry still dominated the government. Manufacturing was largely based on Midlands iron and northern cotton, and there was little communication between northern and southern England (Scott 1958:18).
In fact, because the new technology was in competition with the postal services, reorganized in 1830 by Sir Roland Hill to offer a one-penny post for overnight delivery, the telegraph's widespread development under private ownership in Britain did not begin until 1843. Then its financing relied heavily on single-track railway systems and their need for signaling (Scott 1958:28). In contrast to the distance-related tariffs of private telegraph ownership, the penny post uniform tariff for any distance subsequently provided a model that linked state ownership with low uniform tariffs in the public mind.
Even with the invention in its infancy, there were indications of the ideological struggle to come, between those who considered that the telegraphs should be run by the state and those who argued that private enterprise should be free to exploit the new technology (Kieve 1973:76). Although affected by voting reform that gave the growing middle class a political voice, and by political struggles to regulate the expanding railways, the concept of private property was sacrosanct in the Britain of the 1840s. Because any retrospective restriction on profits was considered an infringement of private property rights, such regulation was difficult to implement. The private financial interests of members of Parliament further hampered parliamentary regulation. Large up-front fixed costs, if not as large as the railways', created similar pressures on competitive telegraph lines to form cartels to keep tariffs high. By the late 1850s the Electric and International Telegraph Company and the British and Irish Magnetic Telegraph Company had established a domestic cartel.
By setting up an "intelligence service" to supply news reports to the provincial press, the Electric and International Telegraph Company attempted to convert its dominance of infrastructure into dominance over the information content transmitted. But because the service collected most of its information from the London press, the provincial papers were a day late with the news (Storey 1951:29). Although the owners of provincial papers set up their own press agency, the Press Association, they could not evade high transmission tariffs (Kieve 1973:71–72). By the 1860s demand for nationalization came from within the government bureaucracy, from chambers of commerce, and from the press.
Despite the importance of manufactured exports to its economy—cotton goods accounted for 30 percent of exports—by the mid-nineteenth century much of Britain's wealth already rested in its service and financial sectors (Foreman-Peck 1995:22–23). The financial reward available through the international linkage of stock and commodity exchanges was what would provide a major impetus to submarine cable technology. As early as 1840, Charles Wheatstone, who had patented an early telegraph with William Cooke in 1837, proposed to a House of Commons committee that England and France could be linked by telegraph across the Straits of Dover. But lack of a suitable insulation for the wire core meant that it would be ten years before that link could become reality (Scott 1958:26). By then the liberalization of agriculture following the Corn Law of 1846 had increased imports of wheat (mainly from France), making wheat importation second only to imports of raw cotton (mainly from the United States), and brought growing interest in the price of commodities.
The necessary insulating material was found in gutta-percha, a substance extracted from tropical trees in Malaysia and first used by Walter Siemens to insulate telegraph cables for the Prussian army to carry signals across the Rhine. Following this 1847 success, the German telegraph manufacturing company Siemens & Halske was established (Scott 1958:24). However, in 1848 British inventors claimed the extrusion patent for gutta-percha (Kieve 1973: 102). By 1861 Britain was importing more than one thousand tons from Malaysia each year (Lawford and Nicholson 1950:54). Control of the raw material and its extrusion patent, and lack of an alternative insulating material, created British hegemony of submarine cable manufacture.
By the 1860s four companies, all based in London, were manufacturing cables. Exports of wires and apparatus rapidly expanded, so that in 1873 the total value comprised about 1 percent of British manufactured exports (Kieve 1973:117–18). Established from existing companies in 1864, and chaired by John Pender, the Telegraph Construction and Maintenance Company (Telcon) gained its dominant position by becoming the cable supplier to Pender's operating companies (collectively referred to here as the Eastern). In 1897, of the 165,000 nautical miles of submarine cable laid, 120,000 had been manufactured and laid by Telcon, including nine Atlantic cables. Its major competitor, Siemens & Halske, had laid seven Atlantic cables (Bright 1898a:154). Restructured in 1865 as the Anglo-German Siemens Brothers, from then until the early twentieth century this British-based company acted as the cable manufacturer, layer, and operator for those companies and governments wanting to compete with Telcon and the Eastern's cables (Scott 1958:51–53).
Cable covered in gutta-percha had to be submerged in water to prevent deterioration of the insulation and therefore required that ships laying long lengths have large holds. In addition, sailing ships were not suitable for laying cable in straight lines for long stretches. The introduction of iron-hulled steamships by Isambard Kingdom Brunel was therefore crucial to the subsequent British hegemony of cable laying. In 1858 Brunel launched the Great Eastern, designed for the England-Australia run around the Cape of Good Hope. At first called the Leviathan because of its size, and made redundant by the opening of the Suez Canal, this ship was later to carry the successful transatlantic cable of 1866. The third important element in that hegemony was the availability of capital through the Joint Stock Company Registration and Regulation Act of 1844, which was extended to all enterprises in 1856 and 1862. It allowed entrepreneurial engineers to raise money from the public for submarine cable ventures, with each cable constituted as a company.
As early as 1845 the brothers Jacob and John Watkins Brett registered the General Oceanic Telegraph Company, the first company set up to provide "telegraphic communication from the British Islands across the Atlantic Ocean to Nova Scotia and Canada and [establish] electric communication by land and sea with the colonies." By 1851 they had already made a first unsuccessful attempt at a cross-channel cable (Garratt 1950:9). That year, a representative of Lord Palmerston, the British foreign secretary, attended the first meeting on international regulation of the telegraph that was called by Napoleon III of France. Faced with a Continental system in which the state owned the telegraphs, Palmerston is said to have threatened that, if the Bretts' second attempt were to fail, he was considering a government-owned cable across the Straits of Dover as well as laying government-owned cables to India and China (Barty-King 1979:xv).
In any event, the Bretts' second attempt in 1851, aided by the finance and design skills of Russell Crampton, a railway engineer, and by the loan of an Admiralty vessel, was successful. Horseback riders completed interconnection with the local end of the British domestic telegraph system several miles away (Lawford and Nicholson 1950:38–40). The commercial effect was immediate. "For the first time the prices of securities in Paris were known to the London Stock Exchange on the same day and within business hours" (Kieve 1973:51).
Two additional cross-channel cables, to Holland with its commercial centers of Rotterdam and Amsterdam, were laid before the engineers Charles Tilston Bright and Edward Whitehouse succeeded in linking the cross-channel cables with the domestic telegraph from London to Manchester in 1856. By transmitting a signal over two thousand miles, they proved that transatlantic communications were possible. By 1857 the Bretts' company had established direct telegraph communications with Holland, Germany, Austria, and St. Petersburg, Russia (Kieve 1973:105). Exclusive concessions on Continental traffic had already increased the profitability of domestic telegraph companies. The Electric owned cables to Ireland and Holland and ran domestic cables in Holland. The Magnetic owned cables to Ireland and had exclusive concessions on Continental traffic carried by the Bretts' company, including a virtual monopoly on Scandinavian traffic (Kieve 1973:89).
During this period the French, Spanish, Italian, and Portuguese governments all used British-manufactured submarine cable and British engineers to lay lines to their colonies. In the mid-1850s, using Lisbon as a hub, British engineers began to lay cables successfully in the deepwater—1,600 to 1,800 fathoms—of the Mediterranean, thereby gaining the expertise necessary for long-distance submarine cables.
Before the development of specific cable-laying ships, naval vessels actually laid the cables. The British and U.S. navies also played an important role in charting oceanic waters, necessary in order to locate sudden chasms in the ocean floor that could snap the cable. Naval involvement also reflected an element of strategic concern. The Bretts marketed their new company to the prime minister, Sir Robert Peel, as offering the advantage of "immediate communication of government orders ... to all parts of the Empire" (Garratt 1950:8). And Palmerston saw the strategic value of international cables "in affording the power of early explanation with foreign governments, on occasions when misunderstandings may have arisen" and in "the rapid conveyance of intelligence of a political and military nature from China and from our Indian and other possessions."
Security considerations provided the occasion for using public-private finance initiatives to lay cable on behalf of defense interests, for example, the financing for one of the first lines between the Admiralty in London and the naval base at Portsmouth (Kieve 1973:37–38). In 1854, after the British and French governments declared war on the Russians, the British and French had the first government-owned international cable laid to the Crimea. The cable allowed the first direct contact between commanders in the field and politicians (Standage 1999:146). The Crimean War was also the first war to be covered by journalists using cable to send reports back quickly. Press criticism of British generals and the perception that the Russians gained an advantage from reading British news reports later contributed to the direct censorship of news reports during the Boer War (Hudson and Stanier 1997:19; United Kingdom 2000:3–4).
Eventually, the British government succumbed to commercial pressure and in 1869 nationalized the domestic, Irish, Channel Island, and cross-channel cables. The government paid £11 million ($71.3 million) for the private telegraph cables, not the £2.5 million ($16.6 million) it expected. The nationalization released something like £8 million ($52 million) in private capital to be invested in submarine cables (Bright and Bright 1898:162). After the nationalization the government introduced uniform telegraph tariffs, and allowed the press substantial discounts as well as to rent lines overnight (Kieve 1973:72). These concessions to the newspapers were to cause the domestic telegraph to register annual losses until the 1920s and to bias the Treasury against further nationalization.
The model of the British telegraph nationalization was to influence the first attempts to regulate international telegraphs. The British legislation regarded "rented lines"—what we know today as "leased lines," for which companies pay an annual charge rather than a message-based tariff—as being outside the "public" network. Thus rented lines were subsequently excluded from international regulation if two states that were members of the International Telegraph Union (ITU) wished to reach such agreement. In addition, press discounts and the obligatory rental of leased lines to the press became a feature of the European agreement on tariffs, made in 1875, features that would contribute to the dominance of European press agencies. Also, the 1869 nationalization legislation did not include "oceanic" (long-distance submarine) cables. This omission, later explained as necessary because only nongovernment-owned cables would be given foreign concessions, allowed private ownership to flourish. To give the public wider access to telegraphy, the Post Office agreed to collect overseas telegrams at its offices on behalf of the cable companies. It was also important to later domestic regulatory attempts that, faced with opposition to the nationalization act from the transatlantic cable companies (Atlantic Telegraph and Anglo-American Telegraph), the Post Office agreed to continue the practice, begun in 1868, of using British-owned cable to send any telegram that entered the system with no specification of the company to be used.
At first no licenses were required to land a cable, but cable companies did need permission from the Commission of Woods and Forests. This commission was responsible from 1866 for all Crown rights to the shore and seabed. It was not obliged to consult other departments and seems not to have done so, although the Board of Trade also had the power to license. In fact, after it took over the cross-channel submarine cables in 1869, the Post Office paid a remittance for certain of its licenses to the commission.
The British landing-license procedure became codified only after signing the international agreements of 1875 and after an increase in the administrative capacity of the central government. Although the Anglo-American Telegraph Company's transatlantic cables were laid in 1866 and 1867, those cables and those of 1873 and 1874 were licensed retrospectively by the Board of Trade only in 1880. From 1880 until 1899 cable landing licensing was the responsibility of the Board of Trade on the advice of the Post Office.
During this period the British concept of free trade prevailed, with nonexclusive landing licenses given for thirty years on any particular route. Elsewhere, the norm was for a company to seek a twenty- or thirty-year monopoly concession that might include payment to or from the destination government. Because British companies were often first in the field, they gained what economists now call "first mover advantages" from these concessions, enabling them to lock out potential competitors.
Omission of leased wires from the British telegraph nationalization created a favored position for privately run business-to-business communications that enabled new technologies to evade the Post Office monopoly. Under this exemption the American Alexander Bell was first able to introduce the telephone in 1878 in the London financial district. In contrast to other European countries, where both technologies were state run, in Britain private telephone companies at first competed with the Post Office's domestic telegraph service.
To regulate these private telephone companies and to limit competition with the Post Office telegraphs, in 1882 the Treasury introduced licenses to constrain the introduction of telephony into local areas and to prevent the interconnection of private telephone lines with either the Post Office's telegraph lines or long-distance telegraph services. In addition, to keep the companies in check, the Treasury allowed the Post Office itself to establish a limited telephone service. Using a method that later became a model for regulation, the British government used competition from its Post Office to control potential private monopolies.
Excerpted from The Struggle for Control of Global Communication by JILL HILLS. Copyright © 2002 by Board of Trustees of the University of Illinois. Excerpted by permission of UNIVERSITY OF ILLINOIS PRESS.
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1. Infrastructure and Information in the United States and Britain,
2. Following the Flag: Cable and the British Government.................... 68
3. Wireless and the State.................... 93
4. The United States, Trade, and Communications, 1890s–1917................ 133
5. South America: Prewar Competition in Infrastructure and Information..... 153
6. The United States: Competition for Infrastructure in the Interwar
7. British Communications, 1919–40.................... 220
8. Cultural Production and International Relations.................... 244