Do you realize what private-wire service means to you? That probably 90 per cent of the country grain dealers in Iowa are supplied with information, necessary to keep them up-to-date in buying and selling grain by the private-wire houses, either directly or indirectly? This we are in a position to do for you any time and all the time.

This means to you an up-to-the-minute service, instead of being 12 to 24 hours behind the market, as would be the case were you compelled to depend upon the daily newspapers or mail for your market information.

Isn't it an advantage?

Our private wires reach every exchange in the country. Our market information is absolutely up-to-date and to-the-minute. Prices are at your command at the instant made, which would permit you to make intelligent purchases and sales, and not allow your competitor, or others, to take advantage of you. Are we not entitled to a share of your business?

Isn't our service worth something to you?

We buy cash grain on a brokerage only, and represent only the highest class firms on all exchanges.

We handle consignments to all markets, giving you by telephone the grade and sales price of our grain the same day it is sold.

Think this over and decide for yourself. Private wires are expensive, as is any high-grade service, but yield benefits to you impossible to be obtained by any other methods employed in the marketing of grain.

ALLEGED DISCRIMINATION IN TELEGRAPH LEASES.-One argument made against the private-wire systems by old-line receivers is that telegraph wires are properly common carriers and should not be diverted to exclusive private use. It is claimed that the use of private wires handicaps the service rendered by the telegraph companies to other receivers. It is even alleged that public-telegraph service has been intentionally slowed down to favor the private wires. There is more likely to be a conflict of interest in reaching the small towns, than the big cities. The small towns are the shipping centers in which the receiver is interested.

The receivers without wires have found the telegraph service to the small towns poor, possibly getting worse, and even made worse by diversion of lines to private-wire use. This situation is fundamentally due to the character of the small-town offices, which are railroad offices, where an employee of the railroad takes care of telegrams as an incidental matter, instead of being offices operated by the telegraph company. According to the auditor of receipts of the Western Union Telegraph Co.1 "this company had on December 31, 1914, 25,784 offices, of which 4,418 were independent or commercial offices maintained by the telegraph company, and operated by its own employees, and the remaining 21,366 were joint or railroad offices." The contract between the telegraph and railroad companies provides that "the railroad company's employees shall not be required to deliver or receive public messages where it will

Brief in I. C. C. case, p. 7.

1

interfere with their railroad duties." The great bulk of grain shipped, of course, originates at towns with railroad telegraph offices. The service is often doubtless bad. The receivers without private wires are apparently handicapped by this situation.

THE OTHER SIDE.-In reply to these allegations the wire-house men point to the fact that the contracts made with the telegraph companies provide for their taking back the private wires for general use on the briefest notice, so that the general requirements of the public need not suffer. The lease of the wires, furthermore, gives the grain houses the privilege of exclusive use only during limited hours. They are actually in use from about 8.30 a. m. to about 3.30 p. m. But these are the hours during which receivers, and business men generally, are interested to obtain maximum and efficient service. And it is quite possible that the telegraph companies tend to favor the private wires at the expense of the public service.

As regards the matter of taking public-service facilities away from public use, it is important to note that the greater portion of wires leased by grain houses for the use in question are obtained from the American Telephone & Telegraph Co. and are primarily telephone wires. It happens that the use of these wires for transmission of telegraphic messages does not interfere with their coincident use for telephone purposes. "Wires so used lose none of their effectiveness in telephone service." The telegraph service furnished by the American Telephone & Telegraph Co. is therefore, in effect, a byproduct of its telephone service, in no way interfering with public telephone service. The statistics of private-wire systems do not in

1 Receivers' brief, p. 46.

"It appears that after either the partial or complete prostration of telegraph wires the private-wire service is restored more rapidly than the public service. It also appears that public wires are appropriated for private use on such occasions." (50 I. C. C. 743.) But, as regards the American. Telephone & Telegraph, "wire prostrations do not have the same effect upon the service of the Bell Co. as upon the service of the other respondents. Telephone transmission requires a much more perfect electrical circuit than does telegraph transmission. An accident which will render telephone communication impossible may leave the wire substantially perfect for Morse service." (50 I. C. C. 744.)

A similar but not convincing argument is made by the straight telegraph companies. "The efficient operation of respondents' telegraph lines requires them to provide and maintain wire facilities in excess of the maximum demand therefor; or, in other words, these facilities must be more than sufficient to accommodate the peak of the load of business each day. It necessarily results that the carrier has surplus facilities at all times, the surplus, of course, varying during the day as the business fluctuates. The telegraph companies assert that the circuits leased for private use are these surplus facilities and that the leasing thereof does not in any way reduce the facilities necessary for the transmission of the maximum amount of public business at all times." (50 I. C. C. 742.)

4"A somewhat different situation obtains with respect to the Bell company's leases for Morse service. That company's principal public service is to provide the means for transmission of intelligence by telephone. It has been found that telegraphic circuits dan be superimposed upon telephone wires. Thus, the Bell company can secure a Morse circuit on each telephone wire, and practically all its Morse private-wire circuits are su perimposed upon the wires used for telephone purposes. Wires so used lose none of their effectiveness in telephone service and in long-distance service are highly economical. The Bell Co. designates the facilities leased by it for Morse service as a by-product rather than as surplus facilities." (50 I. C. C. 743.)

dicate that there is a decisive advantage in the use of telephone wires, rather than telegraph wires, for the special private-wire service, but the availability of substitute telephone service in the first case may make a difference. The partner of one wire house that uses some Western Union wires has expressed a preference for the service obtained from the telephone company. It may be that the Western Union wires now leased are chiefly those that were leased some time ago, before it was discovered that telephone wires would serve the same purpose without involving special construction or the taking of wires away from the ordinary service of the company leasing them.

In the recent case before the Interstate Commerce Commission on the question of whether the leasing of wires substantially impairs the service to the public furnished by the common carrier telegraph companies and involves unjust discrimination against grain dealers without private wires, that Commission, while pointing to minor abuses to be rectified, decided adversely to the contentions of the complainant, the Grain Receivers' Association of Chicago, but it concluded that "in rendering Morse private-wire service and the public message service at their present rates respondents are rendering the more valuable [private wire] service at a relatively lower charge, contrary to recognized principles of classification."2 From the viewpoint of cost, on the other hand, a by-product service might naturally be expected to be cheaper than standard service, and the by-product service of the American Telephone & Telegraph Co. perhaps cheaper than the surplus service of the regular telegraph companies.

COMPARATIVELY LITTLE CONCENTRATION OF THE CASH-GRAIN COMMISSION BUSINESS AS YET.-The tendency to concentrate cash-grain business in the hands of the private-wire houses has of course not gone so far as in the case of the futures business; indeed, the tendency is of comparatively recent origin in one case and in the other concentration is an accomplished fact. One witness in the Interstate Commerce Commission case, a solicitor of a cash-grain house, said that the cash-grain business of Iowa was concentrated in the hands of six firms having private wires. It is said that the receivers without private wires have the advantage in the competition near Chicago, but farther away the result is different.

Section 8.-Board of Trade control of private wires.

POSSIBLE USE OF THE 66 COMMISSION RULE.' "It is possible by interpretation of the commission rule to obstruct the building up of cashgrain business by private-wire houses. This appears to be the situa

1 No. 5421, Private Wire Contracts, submitted Mar. 1, 1917, decided Aug. 3, 1918, 50 I. C. C., 731, 766.

250 I. C. C. 732, 765.

tion at Minneapolis.1 On other exchanges there are no wire houses. that might be factors in the cash-grain market. At Chicago the rules expressly provide that "free telegraphic communication shall not be construed as a violation of this [commission] rule." An explanation of this provision assigns as its purpose to enable commission men without private wires to compete with those who have them. At present that is the nature of its effect, but it may have been originally drawn rather to authorize the use of private wires where there was some doubt as to the legitimacy of granting the use of this facility without cost to a customer. As interpreted by resolution of the directors, it does not permit allowing a customer the exclusive use of a wire without direct charge-a correspondent, evidently, for this purpose, not being considered a customer.

CONSENT OF DIRECTORS OF BOARD REQUIRED FOR NEW WIRE OFFICES.Since 1901 the establishment of additional private-wire offices has been made subject to the approval of the board of directors of the Chicago Board of Trade. The market reports committee of the directors recommends whether quotations may be furnished to an additional office or not. By this means duplication of service is prevented and aggressive competition in the establishment of branch offices or correspondents in small towns is hindered. The evils of an undue number of offices in the small towns result from the character of the solicitation. Too many may involve temptation to the managers to exert improper and misdirected zeal in obtaining speculative business, even where the Chicago partners are guiltless of encouraging speculation. It is alleged that no objection would be raised to establishing a new office in a town without an office, and that competition from an adjacent town through the use of the telephone is just as effective as is the establishment of an additional office. It is also said that the field is by no means fully occupied; that

1 An interpretative resolution of the board of directors as of Sept. 29, 1915, includes the following: "Telegrams sent from private-wire offices or private offices or by traveling representatives to members of the Chamber of Commerce in the ordinary course of business can not be considered as a violation of the commission rule. If telegrams are sent at the expense of the member of the Chamber of Commerce with the intent of relieving the shipper of the expense, this would be, in the opinion of the rules committee, a violation of the commission rule."

2 Rule XIV, sec. 9 F. This rule appears for the first time in 1905.

3 Mar. 1, 1917.

The rule now reads:

66

shall furnish by

On and after the 1st day of May, 1911, no member means of any telegraph or telephone wires the continuous market quotations of this Board of Trade to any office or place of business located in any city, town, or village where such service is not furnished at the present time, unless upon written application thereto the board of directors shall, by a majority vote, grant to said member, firm, or corporation permission to supply said continuous market quotations." (Art. II of Regulations for the Control of Market Records and Reports.) The interpretation put upon this rule makes "where such service is not furnished," etc., modify "office or place of business," not "city, town, or village."

profitable new private-wire systems have been built up quite recently. Some light on the policy of the directors in limiting the number of offices appears in the following quotation from a letter1 denying an application:

The number of offices at M- at the present time is, in the opinion of the directory, a full complement permissible in a town of that size, and for this reason your petition was denied.

The town in question already contained three wire offices and had a population at the census of 1910 of less than 4,000.

Such control of the establishment of new offices-though unquestionably in the interest of economy-suggests a question as to whether the so-called private wires are performing a service "affected with a public interest" in which some degree of monopoly power inheres and which, therefore, should be subject to public control.

THE ATTEMPT TO TAKE THE WIRES OUT OF SMALL TOWNS.-The practical program of the receivers in their opposition to private wires has now shaken down to a proposition to keep the private wires out of the small towns. This is the point specially emphasized. Attempts have been made to limit the wire houses in this respect by rule, but unsuccessfully. On June 3, 1914, an amendment prohibiting the use of private-wire connections with towns of less than 75,000 population at the latest Federal census was proposed to the board of directors by petition and by them rejected by a narrow margin of votes. In this connection the secretary of the Board refers to the legitimate object of such amendment as relating entirely to the speculative business, and says it is believed by many that in small towns inducements are offered to some who are without either the means or the knowledge of the probable course of values such as properly to qualify them to assume the risks involved, and that in the end affording opportunities to such to speculate reflects unfavorably on the reputation and standing of the Board. In fact, however, the cash-grain element is doubtless more interested in keeping the private wires away from too close touch with shippers than in the above-mentioned moral incidents of the presence of wire offices in small towns.

The degree of control exercised by the Board over the news and gossip sent out by the private-wire houses has been discussed in another connection. (See Ch. II, sec. 7.)

Section 9.-Private wires a future-trading facility.

THE CASH-GRAIN BUSINESS OF THE WIRE HOUSES A BY-PRODUCT.It is implied in some of the above remarks that the cash-grain busi

1 Dated Jan. 3, 1917.

Letter of June 12, 1914.