Telegraph Company in the East. Their managers became conscious of the inherent evils of a system formed of segregated and competing lines, and saw the necessity of a change of plans and concert of action. The Western Union Company occupied the territory from New York west to the Pacific Ocean, with the exception of four or five States, where two allied companies maintained an independent existence. The American Telegraph Company controlled the sea-coast and cotton States. These companies formed an alliance offensive and defensive, and seemed to be all powerful, and the era of prosperity for the stockholders and increased rates for the people began.

A short history of the Western Union Company will illustrate the rise of these corporations. It was incorporated in the year 1851; but it paid no dividends until the year 1858, the profits being used in extensions, and purchase of other lines, and, it is said, in the purchase of the stock of parties who had become tired of waiting for dividends, either directly, or by loaning money on the stock purchased. Then the few remaining stockholders began to reap the fruits of their selfdenial in a very rapid increase of the capital.

Subsequently, stock was issued for the following purposes: 1858-1866. For cash at different times

the

[In 1866 it swallowed the two other principal lines,
American Telegraph Company, occupying the Eastern
States and the seaboard route South, and the United States
Telegraph Company, a new line, competing with both the
Western Union and the American Telegraph.]

1866. Stock for United States Telegraph Company
and United States Pacific Telegraph Com-

$3,833,100

1866-1872. Net earnings from July 1, 1866 to July 1, 1872, $17,116,694.00

These earnings average 7 per cent a year, divided as fol

Besides all this increase of capital, a bonded debt of $5,198,295 was incurred in the purchase of the Russian Extension Telegraph and other lines. In the years 1864-65 Mr. Collins, on behalf of himself and other stockholders in the Western Union, began to build an overland line to Europe by Behring Straits and Siberia. The work was begun without adequate knowledge of the difficulties to be encountered, through a barren, mountainous country, inhabited only by a few Indians and wild animals, with an almost polar climate; and the attempt encountered unexpected difficulties. It was well under way when its necessity was superseded by the laying of the Atlantic cable. If it had succeeded, the separate organization would have been continued for the benefit of the corporators; as it was a failure, the loss was thrown upon the people, and the bonds of the Western Union Telegraph Company were issued for $2,500,000,- a sum supposed to be equal to the entire loss. This system was for a time a great financial success; but it served the stockholders much better than

the public. Much of the correspondence required to be transmitted over the lines of several companies, necessitating repetitions, inaccuracies, and delays. If the customer complained, it was impossible to determine which company was responsible for any error or delay, and he was left without redress. The elements of a national system were lacking. The companies themselves were sensible of the inherent defects, and efforts were made at different times to effect a union of the large companies, but without success.

In 1864 the United States Telegraph Company was organized, with its head-quarters at New York, for the purpose of establishing a national company, with wires extending north and south, from Maine to Mexico, and from the Atlantic to the Pacific. It was the first company started on a broad basis, and provided for the economical, prompt, and accurate transmission of all telegraphic correspondence. With capital, skill, and time, its success was assessed at the expense of the other companies.

The Western Union and American Telegraph Companies realized the power of this new rival even more fully than did its originators; for they knew its strength and their own weakness.

The new company soon began to pay dividends, supposed to be from earnings, but in reality from capital. Both of the old companies made overtures to it: the Western Union was successful in its negotiations, by offering many times its cost or value.

It was merged into that company in 1866, each stockholder receiving two shares of stock in that company for every three of the other, which required an issue of $7,000,000 of stock for the purchase "of a few thousand miles of almost worthless lines."

This forced the American Telegraph Company into a consoli dation with the Western Union, which immediately followed the other. Its capital stock of $4,000,000 was exchanged for $12,000,000 of stock of the Western Union to equalize the nominal value of the two. The Western Union system thereby became national.

It is often said that, as competing lines can be constructed

at a small expense, the public have a remedy for any evils belonging to the present system in their own power.

This suggestion has even been made by officers and stockholders of the Western Union Telegraph Company. The results of past experience show the entire fallacy of such a remedy. Telegraph correspondence, like the mail service, is with all sections of the Union, and no company can be successful that is not national.

In this respect it is entirely unlike our railroad service, where a small local road may pay large profits, and serve its immediate constituency better than a large company could. The recent history of opposition companies confirms these views.

At the close of the war this company required the aid of the government in recovering and establishing its lines upon the railroads of the South. It therefore procured the passage of an act of Congress in 1866, which gave it the right to construct, operate, and maintain lines of telegraph upon all the post roads of the country. Foreseeing that the time might come when it would desire to sell its lines to the government, a provision was inserted in the bill that Congress should have the right to take them at any time after 1871 at an appraised valuation. The Western Union Telegraph Company was now for the first time without a competitor, and was apparently secure. But its lines were poorly constructed and equipped, and but little business could be transacted upon them in comparison with the same length of European lines. According to a report made by Mr. Cromwell Varley, an experienced electrician, who came over from England in 1868' to examine their lines, the insulation was scarcely one tenth as good as that of the English lines, and "it is the favorable climate which permits such insulation to pay." In conclusion, he said: "Your insulation is horrible in wet weather, and getting worse. Take in hand those lines which earn most of your money, the Boston and Washington wires, for example, -reinsulate one half or one third of these wires, and I expect you will find them sufficient for your present traffic."

At this time the corporation was in a critical condition; its lines were poor, and its capital out of all proportion to its prop

erty or business. With the same capital it now has, it then had less than one half its present length of wire or business. Its rates were nearly twice as high, the average being $1.40. It could easily have been fatally crippled by rival lines, if parties who had the means and the skill, and who were willing to look for their profit to the investment, had constructed them. New rivals entered into the field; but they all inherited the errors of the Western Union, and were started on wrong principles, with capitals even larger in proportion to the length of their lines or their business. In one of these companies each mile of wire was represented by $800 of capital, while the cost was probably not much over $100. The principal of these were the Franklin, Atlantic and Pacific, the Pacific and Atlantic, the Bankers and Brokers', and one or two other smaller associations. Competition was renewed, rates were reduced, dividends fell off, and, according to the assertions of the Western Union Telegraph Company, "These competing lines have not made money enough to keep their lines in repair." They have never paid any dividends, and their stock, it is said, has no market value. Combination naturally followed. When a business, from requiring large capital or other circumstances, falls into the hands of a few persons, they are sure, in the end, to avoid competition by combining. Hence, it is said with truth that "where combination is possible, there competition is impossible." Accordingly, the President of one of these companies has recently testified that he had agreed with the Western Union Telegraph Company to raise the rates, thus putting an end to competition. This result may have been brought about in consequence of large stockholders in the Western Union Telegraph Company having become interested in the other lines. The business, therefore, is now controlled by the Western Union Company, which performs nine tenths of it. The management of this company has not been retained in the hands of its original stockholders, nor is it controlled by those who have invested in telegraph stock solely with a view to profit by the development of its business, but by the same parties that operate the New York Central line of railroads, a combination which wields the most extensive railroad and telegraph systems in the world. This statement does