Western Union vs. B & O Telegraph

[Trade Journal]

Publication: Electrical Review

New York, NY, United States
vol. 3, no. 23, p. 8-9, col. 2-4,1

Western Union vs. Baltimore and Ohio.

The purchase of the National Telegraph Company's lines by the Baltimore and Ohio Telegraph Company, and the plan of general extension which the last-named Company has conceived and is about to execute, may fairly be said to solve the problem which for some time has been prominently before Congress for solution. If the Baltimore and Ohio Telegraph Company was an insignificant organization, whose directors were little better than stock-jobbers, anxious to make a valuable property, only that the price of their treachery to the people, to be exacted from the Western Union should be enhanced, it might expect nothing from the REVIEW but exposure. But such is, happily, not the case. The Baltimore and Ohio Telegraph Company is of the most reliable kind. It is supported and controlled by the Baltimore and Ohio Railroad, and should it carry out its plans, will constitute the first genuine rival to Western Union that has appeared in the telegraphic field.

There are no Jay Goulds behind the new competitor with Western Union, but, on the contrary, men of well known integrity, who are not known, as Jay Gould is, for stock-jobbing, hypocrisy, and unblushing rascality.

If the new company fulfills the promise of its Spring, there will scarcely be any need of either a government telegraph that is for general business or for government control.

For the new company, unencumbered with a load of eighty millions of dollars to pay interest on, will, likely enough prove, when fairly started, more than a match for Western Union, with its load of stock and its stock-jobbing management.

The new company proposes, so soon as the frost is out of the ground, to begin building its main and adjunct lines, but besides these and still more important, are the arrangements which it has already made with a number of railroads for leasing their telegraph lines when their contracts with Western Union shall have expired. In accordance with this, the New Jersey Central Railroad notified the Western Union that the contract between them which is about to terminate will not be renewed.

It looks as though the coming year is going to be a somewhat unfortunate one for telegraph and cable monopolies. If we read the telegraph horoscope correctly, we should predict that very heavy weather will prevail in the vicinity of Western Union, and that the old hulk, unless very skillfully managed, will get into the trough of the sea, or, as the sailors say, athwart seas on account of her being so top-heavy.

Should this be the case, some of the crew will be compelled to unload. Flurries of unfavorable weather, and a painful frequency of black squalls and uncanny weather, have already been reported from abroad, where the Anglo-American Cable Company, which may be looked upon as a co-conspirator with the Western Union against public interests, is having a shocking time. It is only a short time ago that they adopted Jay Gould's tactics, and they were scarcely over congratulating themselves upon their immense success in the little game of extortion their stock having been in active demand at ridiculously high rates when, lo! the Bennett-Mackay storm caught them with all their sails set, and was like to have overturned them entirely. The party righted their old hulk, however, the color gradually got back again into their faces, the nervous twitching of the knees ceased, and, making up their minds that it was only a passing squall, demanded of each other, "Who's afeard?" But Mackay writes to the London Times that the Bennett-Mackay Cable Company could not be induced, under any circumstances, to sell out, and propose to carry on a cable business in good faith with the public. This is really too much, and the Nine Cables Monopoly Company's stock again has the bottom knocked out of it.

But the worst is not yet come. Another cable is to be laid by the Merchants' Cable Company, The Merchants' Telegraph and Cable Company have filed articles of association in the County Clerk's office. The incorporators of the new line are Thomas L. James, Anderson Fowler, C. D. Borden, Edward A. Quintard. David Bingham, William A. Cole, Edwin R. Livermore, Henry W. Edye, Adolph D. Strauss, John H. Herbert, John F. Plummer, Edward H. Tobey, and Vernon H. Brown. The immediate purpose of this company is to lay a cable line from this city to London. The line will be a direct one, though the point of landing it on the English coast has not yet been selected. The organization originated in the Produce Exchange, and is principally intended to supply the needs of the members in the way of direct international communication. The articles provide for the future construction of lines to France and Germany. The capital stock is $13,000, in 130 shares of $100 each. Provision is made for an increase of the capital to an amount not exceeding $20,000,000. Active operations will be begun at the earliest practicable date.

Failing in an attempt to buy out the Bennett-Mackay scheme, or, at least, to dissuade its projectors from entering the cable field by all kinds of cable facilities, Gould determined to buy out the Nickel Plate telegraph lines, in order to keep them away from the Baltimore and Ohio people. Foiled here, he had himself interviewed, and said that the new additions to the Baltimore and Ohio Telegraph Company, viz., the National and the Nickel Plate, would have no effect upon the Western Union Telegraph Company, and that the latter-named company did not pay expenses. But such reckless falsehood was to be expected from Gould, who, only a few weeks before, had been doing his best to purchase this same line, as has been seen.

Mr. Robert Garrett, president of the Baltimore and Ohio Telegraph Company, when questioned concerning this Gould interview, said: "I am very glad to get an opportunity to say a few things to you about telegraph properties in this country. I was asked by Mr. Gould to become a director in the Atlantic and Pacific properly, and before deciding not to become one I went carefully over the books of that concern, and it will probably surprise the public to know that the total amount of cash put into the Atlantic and Pacific by Gould and his friends was less than a million of dollars. Mr. Gould afterward sold this property to the Western Union for I believe, $8,000,000. I did later on become a director in the American Union Telegraph Company. This property cost, I believe, about $4,000,000, although some additional sum in money may have been turned over to the Western Union when it purchased the American Union Company for $15,000,000, and upon the acquisition of these two most valuable properties an extra dividend of $15,000,000 of Western Union stock was declared. In other words, about $40,000,000 of Western Union capital to-day is represented by a cash expenditure of $5,000,000. Since that the Western Union has guaranteed, I believe, some $10,000,000 of the bonds of the Mutual Union Company, and I have never heard it asserted that the face of those bonds went into the property. They have, I believe, also guaranteed the stock of the Mutual Union, this latter concern, I understand, being largely composed of turnpike lines. They have also guaranteed 5 per cent. upon $14,000,000 cable stock, thus throwing on the Western Union the burden of paying the interest on $7,000,000 or $8,000,000 unexpended money. I know about the cables, since I was interested in them. Mr. Gould stated, when the Atlantic and Pacific was started, through his agencies, that the Western Union Telegraph was the most vulnerable property in the United States. He further said, later on, that a mistake had been made about the Atlantic and Pacific lines, that they were inferior, and that for this reason he had sold out; but, he said, at a price which puts Western Union in a still more vulnerable position than it was ever before. It was vulnerable, and proved to be so, for by the expenditure of about $4,000,000 Mr. Gould added about $3,000,000 additional to the stock of the Western Union. I do not understand how, to-day, after a lapse of a very brief period, even allowing considerably for the growth of telegraph business in this country, the Western Union is, as Mr. Gould says, the strongest telegraph company in the world. I am informed by the most competent authority that of the country from which the entire revenue of the Western Union Company, including foreign cable business, is derived, 50 per cent. is to-day covered by the Baltimore and Ohio lines. An additional 15 percent, is covered by the lines of the West Shore and Nickel Plate, which we have just acquired, and an additional 10 per cent. will be covered by the line between Boston and New York, which we are now actively engaged in pressing forward toward completion. It will thus be seen that fully 75 per cent. of the entire business of the Western Union is to-day, or will in a very short time be, subject to our active competition. While Mr. Gould is running down the value of property, I would like to ask him how much of the debt of the Wabash he has wedged in ahead of the stock, and if he was not a short time ago advising people to buy Wabash stocks, which have since depreciated so enormously, with just as much energy and activity as he now displays in advising people throughout the country to buy Western Union. That this stock is as weak as water that is, as water can make it and, instead of being the strongest property, I agree with Mr. Gould's logic that it is the weakest property of the kind in the United States. On the other hand, the Baltimore and Ohio Co., with lines reaching the leading cities from which the great aggregate of paying telegraph business is derived (which to-day reaches the greatest number of these cities, and has only to string additional wires to make its lines thoroughly effective, and which is not being weighed down with non-paying lines), expects to derive satisfactory revenues from its telegraph investments. Mr. Gould lost the Nickel Plate simply because we topped him on his bid. We feel very grateful to him for his solicitude about the legal status of those lines, but we are satisfied on this point. I was surprised very much surprised at Mr. Gould's views about the Nickel Plate and West Shore properties, but I know he frequently and rapidly changes his views. When he first started the Atlantic and Pacific and American Union with the Western Union he wrote to me saying it would be unwise to educate the people to too cheap telegraphy. In other words. I do not attach much importance to Mr. Gould's opinion about the Western Union and Nickel Plate lines, but the future will determine. I have this to say, however, that, if the public attach much importance to his opinions in these matters, they may be financially left."

Thus, as will be seen, the Baltimore and Ohio Telegraph Company will soon have lines in operation to all paying points throughout the country. Its opposition with Western Union is like to be bitter and long-continued, and the cutting of rates, which always follows such a condition of competition, is likely to bring them down to a popular point; besides, and, what is more to the purpose, insuring a first-class service.

With such a condition of things, it would be both useless and unnecessary, even if it were constitutional, which has by no means yet been proved, for the country to go into the telegraph business. Both companies would be compelled to employ intelligent, painstaking operators, and to use diligence in the transmission of messages.

Again, it is useless to talk about the relative rates of this country and Europe. The conditions are altogether dissimilar. No matter what the prevailing rates are there when small lines of telegraph are operated, we must have cheap yes, very cheap rates here; and where such an immense system is operated, any honest company, which does not look to the general public to pay interest on its watered stock, can, we are convinced, earn good dividends with small rates, while, at the same time, encouraging the use of the telegraph. Besides this, we have only the word of the Western Union Telegraph Company lo assure us that the rates are cheaper here than abroad.

In France you can send twenty words for twenty cents of our money, and the average in European countries is only one-half a cent a word. You can send twenty words from France to Algiers, a distance of two thousand miles, for twenty cents of our money. Surely, this is much cheaper than the rates which now rule in this country.


Keywords:Baltimore and Ohio Telegraph Company : Western Union Telegraph Company
Researcher notes: 
Supplemental information: 
Researcher:Bob Stahr
Date completed:March 24, 2009 by: Bob Stahr;