History of the Atlantic Cable & Undersea Communications
from the first submarine cable of 1850 to the worldwide fiber optic network

The Atlantic Price War
by Stewart Ash

The Atlantic Price War

As explained in “Other Atlantic Cables”, by the time the Commercial Cable Company (CCC) was incorporated in 1883, telegraphy across the Atlantic was in the hands of four companies. These were the Anglo-American Cable Company, the Direct United States Cable Company, the P-Q Company, and Western Union operating over the cables owned by the American Telegraph and Cable Company. However, due to the commercial arrangements between these companies, pricing was effectively under the control of Anglo and Western Union.

Anglo-American were the owners of the original 1865 and 1866 cables, both of which had been repaired several times before the 1865 cable was abandoned in 1877. The 1866 cable had ceased to function in 1872 but in 1880, the major part of it was replaced by the Telegraph Construction and Maintenance Company (Telcon) and put back into service. So, at this time, Anglo operated four cables: the 1869, 73 & 74 cables inherited from the French Atlantic Telegraph Company, and the refurbished 1866 cable. The Direct and P-Q Companies each operated a single cable and Western Union ran the two American Telegraph owned cables.

Anglo-Amercan Cable Form

Due to the initial success of the CCC in attracting customers away from the other cable operators, three of these companies, Anglo, Direct and Western Union, approached the President of the CCC, John W Mackay (1831-1902), with an offer.  The proposal was that the CCC should join the revenue pooling arrangement that they enjoyed.  Mackay declined and chose to maintain a competitive relationship with these pooling companies. As a result, in May 1886, Anglo, Direct and Western Union dropped their Atlantic cable rate from 40 cents to 12 cents a word, in an attempt to put the CCC out of business. The CCC responded by reducing its Atlantic cable rate to 25 cents a word, a position it held until 15th September 1887. It then reluctantly reduced its rates to the loss-making level of 12 cents a word. At this rate all four companies were unable to make a profit and they were all losing considerable amounts of money.

This position could not be sustained for any period of time so, on 30th July 1888 the four companies met and agreed a fixed rate arrangement. The agreement allowed for messages between New York City, New England, the Canadian Provinces of New Brunswick, Newfoundland, Nova Scotia, Ontario and Quebec on the one side and France, Germany, Great Britain and Ireland on the other, to be 25 cents, 1 shilling or 1.25 Francs per word for ordinary traffic, with effect from 1st September 1888.

Commercial Cable Company Cable Form

In parallel with these negotiations, on 1st June 1888, the CCC had taken over the operations of the P-Q Company. Sometime earlier that year, Count Dillon (1812-92) had identified an opportunity to acquire, cheaply, a controlling interest in the P-Q Company and by so doing give the CCC another Atlantic cable. He convinced Mackay to purchase a majority of the shares, which he did, obtaining 20,000 shares at a cost of US$798,756.  An agreement was then made where the P-Q would continue to trade separately but CCC would transmit its messages over the P-Q cable during interruptions to CCC’s cables and in addition CCC would provide the funds necessary for the maintenance of the P-Q system.

In 1880, the P-Q Company had joined the pooling agreement between Anglo and Direct and in 1882 they were joined in this by Western Union. This pooling agreement was set to run for a period of 46 years. However, on 30th December 1886 the French Government demanded that the P-Q Company withdraw from the pooling agreement, because when P-Q obtained its landing rights in 1879 it had agreed not to combine with any other company, French or foreign, without the consent of the French Government. Such agreement had not been obtained, and accordingly, on 31st December 1886, P-Q notified the English companies that it would withdraw from the pool. Immediately, Anglo brought an action against P-Q in the French courts, claiming 5,000 Francs per day, with interest, for the period that P-Q remained out of the pool. In January 1889 the Court of Commerce of France found for Anglo and ordered P-Q to re-enter the pool and pay Anglo 2,000 Francs per day for the number of days that P-Q was out of the pool, effective from 31st December 1888. P-Q appealed the decision.

CS Pouyer-Quertier Hull Model

Things did not go much better for Western Union, because they were forced to withdraw from the pooling agreement after Congress passed the Sherman Anti-Trust Act.  This statute was signed into US law by President Benjamin Harrison (1833-1901) on 2nd July 1890.

In May 1892 hostilities broke out between the CCC and P-Q, when the Managing Director of P-Q, in France, a Monsieur Belleville, refused to allow the CCC to deposit it stocks with P-Q, which was common practice in France prior to voting at a shareholders meeting. Despite this, a shareholders meeting was held on 31st May 1892 at which Belleville and his associates were dismissed from the board and a new board elected. Belleville retained possession of the company’s books and records and refused to release them. In addition, he and his associate directors, dismissed when the new board was elected, sued the new directors for 100,000 Francs each, on the grounds that the meeting at which they had been elected was illegal.

On 12th July 1892, a meeting was convened between the rival factions, at which it was agreed that three members of the old board should be retained and that four new members should be elected. However, on 26th December 1992 the French Tribunal of Commerce rendered a judgment annulling the May and July meetings and appointed a Provisional Administrator of the P-Q Company.  At this point the CCC made a decision to take no further part in the affairs of the P-Q Company.

On 10th July 1894, the Court of Appeal of France passed down a decision requiring the P-Q Company to pay damages and interest to Anglo for withdrawing from the pool, and appointed arbitrators to fix the amount of such damages. The P-Q was unable to pay these damages and so the affairs of the company were wound up and it was dissolved.

The Direct United States Cable Company had come under the control of Anglo-American in 1877, although it continued to operate under its own name. The company was acquired by the British General Post Office (GPO), in 1920, but when the Eastern and Associated Telegraph Companies merged with Marconi’s Wireless Telegraph Company in 1929, the Direct Company cable was transferred to the new company, Imperial & International Communications Ltd. This company became Cable & Wireless Ltd. in 1934. The Direct Cable failed in 1943 and was not repaired until 1952. This was the last telegraph cable that Cable & Wireless operated across the Atlantic and it was removed from service in the early 1960s.

Direct Cable Company Cable Sections

In 1894, the CCC contracted Siemens Brothers to manufacture and lay another Atlantic cable over the same route as its original cables. To improve transmission performance, this was the first cable to feature a large-diameter core constructed of a central copper strand (0.122 inch) surrounded by twelve stranded cooper wires (0.041 inch). In 1900-01, a further Atlantic cable was laid for the CCC by Siemens Brothers. This time the route was from Nova Scotia to the Azores and then on to Waterville. This was the last of eight Atlantic cables to be supplied by Siemens Brothers. The CCC continued as an independent company until 1928, when it amalgamated with All America Cables and Mackay Radio and Telegraph to form the American Cable and Radio Corporation, the controlling shareholder of which was the International Telephone and Telegraph Corporation (ITT).

In 1908, Western Union came under the control of AT &T and it became possible to order a telegram by phone. However, it was only possible to order Western Union telegrams. This had a negative effect on the business of Western Union’s main competitor, the Postal Telegraph Company, and both AT&T and Western Union were in danger of government censure under the Sherman’s Anti-Trust Act. In 1912, Western Union overcame one of its problems with the Sherman Act by leasing all of the Anglo-American cables and the two cables owned by the Direct Company, making it the only real competitor to the CCC. The other problem was resolved in 1913 by AT&T and Western Union separating completely.

Wester Union 1892 Frank (free message pass)

 In 1945, Western Union began a merger with its main competitor in the USA, the Postal Telegraph Company. A condition of this merger was that Western Union should separate national and international operations. However, it wasn’t until 1963 that an independent company, Western Union International Inc., was incorporated to run the international cable operations and the merger with the Postal Telegraph Company completed. In December 1961, Western Union appeared before the Federal Communications Commission (FCC) with a request that a favourable response to an application by the CCC to abandon trans-Atlantic telegraph cables be extended to cover a similar Western Union proposal, if and when made.  In December 1965, the FCC finally gave Western Union International permission to lease circuits on trans-Atlantic telephone cables and so, with FCC approval, WU abandoned its Atlantic telegraph cables in 1966. At that time, the only cables in working order were between the USA and Horta in the Azores.

In 1894, Anglo-American had a new Atlantic cable manufactured and installed by Telcon. This 1,847nm cable had a heavier conductor design similar to that of the CCC Siemens cable. They continued to operate well into the 20th century; the 1912 leasing agreement with Western Union was final terminated in 1963, with Western Union paying substantial compensation. Anglo finally went into liquidation on 10th December 1968.

In 1921, the British General Post Office (GPO) acquired the Direct United States Cable Company's telegraph cable, and because of the troubles in Ireland during the summer of 1922, the eastern landing was moved from Ireland to Cornwall that November (see “Other Atlantic Cables”). The cable was then renamed Imperial No.2 and the ownership was transferred to Imperial and International Communications Ltd on 4th September 1929. The cable failed on 4th October 1943 and attempts to repair it were unsuccessful.

In 1952, four breaks were identified in the transatlantic section, and 800nm of the original cable was replaced by polythene insulated cable. At the same time the 400nm link from Grace Harbour to Halifax was replaced by the same polythene insulated cable. The cable was manufactured by Telcon using its proprietary product ‘Telcothene’ and was installed by the GPO ship HMTS Monarch (4), the work being completed by 6th August.

The following year, the entire 1,525nm of the transatlantic cable was upgraded to Telcothene-insulated cable, and at the same time the Newfoundland landing was moved from Harbour Grace to St John’s. This made it the first transatlantic telegraph cable to be entirely made of polythene insulated cable. The change to polythene insulation gave significant improvements in transmission performance and for a while this cable continued to be profitable, but the advent of TAT-1 in 1956 and the GPO’s desire for ‘convergence’ (see Technology Convergence) soon sounded the death-knell of submarine telegraphy.

Article text copyright © 2016 Stewart Ash

Return to the index of Stewart Ash’s Back Reflection articles

Last revised: 9 October, 2016

Return to Atlantic Cable main page

Search all pages on the Atlantic Cable site:

Research Material Needed

The Atlantic Cable website is non-commercial, and its mission is to make available on line as much information as possible.

You can help - if you have cable material, old or new, please contact me. Cable samples, instruments, documents, brochures, souvenir books, photographs, family stories, all are valuable to researchers and historians.

If you have any cable-related items that you could photograph, copy, scan, loan, or sell, please email me: [email protected]

—Bill Burns, publisher and webmaster: Atlantic-Cable.com