Parliament Nationalizes the British Telephone System Summary

  • Last updated on November 10, 2022

After many decades of rancorous discussion, Parliament nationalized the telephone service in the United Kingdom, putting its administration under the authority of the General Post Office.

Summary of Event

At the end of 1911, after years of debate, discussion, and argument, Parliament gave the General Post Office the responsibility for operating the United Kingdom’s national telephone system. Beginning in 1912, with minor exceptions, a single government institution provided all telephone service for the nation. Telephone industry;Great Britain Communications;telephone Nationalization;British telephone service [kw]Parliament Nationalizes the British Telephone System (Dec. 31, 1911) [kw]British Telephone System, Parliament Nationalizes the (Dec. 31, 1911) [kw]Telephone System, Parliament Nationalizes the British (Dec. 31, 1911) Telephone industry;Great Britain Communications;telephone Nationalization;British telephone service [g]England;Dec. 31, 1911: Parliament Nationalizes the British Telephone System[02920] [c]Government and politics;Dec. 31, 1911: Parliament Nationalizes the British Telephone System[02920] [c]Trade and commerce;Dec. 31, 1911: Parliament Nationalizes the British Telephone System[02920] [c]Communications and media;Dec. 31, 1911: Parliament Nationalizes the British Telephone System[02920]

Some hoped that this change from private to government ownership and control would result in more efficient and extensive service and increased technical modernization. Some predicted that the cost to consumers would decrease. Others hoped that business would benefit. Even many of those who favored nationalization, however, were not convinced that any significant improvement would suddenly take place. Instead, they saw no alternative, given the past failures of the existing system of telephone service in the United Kingdom in comparison with other countries.

The nationalization of telephone service in 1911 was not a sudden or radical departure. The telephone was introduced into the United Kingdom in the 1870’s, shortly after the first successful transmission by Alexander Graham Bell in 1876. Much publicity resulted, and even Queen Victoria wished to make use of the new technology.

Government takeover of telephone service had antecedents in the nationalization of the several privately owned telegraph companies, which had been placed under the auspices of the General Post Office. In spite of the prevailing laissez-faire liberalism of the time, by the 1860’s many politicians in both major parties supported government ownership of the telegraph. The reasons were varied. A government-operated monopoly could benefit from economies of scale. Some Post Office officials were inspired by their success with mail delivery and wished to venture into new areas such as the telegraph. Others claimed that lower and uniform rates for business and consumer users would come with government ownership. Still others noted the success of state-owned systems, such as those in Belgium and Switzerland. To many, it seemed obvious that the kingdom should have a unified telegraph system. The importance of such a system was made apparent by the American Civil War and the Austro-Prussian War. The spark that led to nationalization was an increase in rates by the private companies, which resulted in considerable public outrage. Parliament enthusiastically supported nationalization in 1869, not because the members approved of state ownership and control in principle but because it was the solution to the particular issues associated with the telegraph.

By the end of the 1870’s, the Post Office was concerned about the implications of the new telephone technology and its potential impact on revenues, particularly if it began to replace the telegraph. Private firms soon entered the field, some cooperating with the Post Office and some not. By 1879, it was decided to allow private development of the telephone under Post Office license. When several private companies objected to obtaining licenses, the government filed suit, winning a judgment in 1880 confirming that the telephone fell within the scope of the 1869 law establishing government ownership and operation of the telegraph. This would later be the basis for public ownership of the wireless (radio) and television.

Post Office officials saw the advantages of telephone development but differed in opinion regarding whether the initiative should remain solely in private hands, the Post Office should compete with business, or the new technology should be nationalized, as the telegraph system had been only a few years earlier. These three alternatives were discussed for decades. In 1880, the licensing system was adopted, with licenses to run for thirty-one years, with a clause allowing the government to cancel the licenses before that date. The issue of whether the Post Office should compete with the private companies was another matter. The decision was something of a muddle, with a small Post Office telephone operation and various private telephone companies all providing service.

One of the justifications for allowing business to take the lead was the belief that government operations were costly and not as efficient as private enterprise. Competition among numerous private firms was expected to advance the progress of the telephone, both in use and technology. The hoped-for developments through government licensing did not occur. The companies resented paying royalties to the government. In addition, private competition soon gave way to a private monopoly when a number of companies were brought together in the National Telephone Company National Telephone Company (Great Britain) (NTC). Some critics predicted that with no competition there would be no improvement. The options were competition from the Post Office in order to spur the NTC into greater progress and the creation of a government-owned monopoly. A parliamentary proposal to nationalize the telephone was defeated in 1892 by a vote of 205 to 147, but much of the opposition to nationalization was based less on philosophy and principle than on the financial cost, particularly if nationalization occurred before the licenses expired in 1911.

In the 1890’s, a new factor complicated the situation. Certain municipalities wanted to establish their own telephone systems, relying neither on the private NTC system nor on the possibility of a government monopoly run by the Post Office. Critics of these plans argued that local development would never result in an efficient national system, which could come about only through a monopoly, either public or private. Inasmuch as many critics claimed that the NTC was failing to provide adequate service, nationalization seemed to be the inevitable alternative to either private monopoly or municipal control.

There was no great enthusiasm for government ownership and operation. In the 1860’s, British optimism saw the nationalization of the telegraph as a great step forward in progress. By the beginning of the twentieth century, many feared that Great Britain was falling behind in technology as Germany and the United States advanced. This widespread pessimism led some critics to argue that there was no rational choice except nationalization, because the existing private monopoly was not working and something had to be done.

In 1902, in a compromise measure, the government agreed to take over the NTC’s London operations when the license expired in 1911. In the interim, the Post Office and the NTC would cooperate in meeting London’s telephone needs. The final step was taken in 1905, when it was decided that the government would nationalize the National Telephone Company when its license expired at the end of 1911.

That decision was made not in any hope or expectation that there would be great improvement and rapid development of the telephone in Great Britain. There simply seemed to be no satisfactory alternative. The NTC was failing to provide the minimum service necessary, even in the eyes of the numerous critics who saw little future in the telephone except as a novelty for the upper classes. The agreement was ratified by the House of Commons in August, 1905, by a vote of 187 to 110. On the last day of 1911, the Post Office was given control of telephones throughout the United Kingdom.

Significance

Government ownership and control of telephone facilities, beginning in 1912, led to little change. Some critics of the NTC had hoped that quick progress would result, benefiting both business users and those using the telephone for personal matters. Most people who favored and who had urged the nationalization of telephone service had not envisioned a radical departure from the past. They saw nationalization as a necessity brought about because the existing system was inadequate, not because of any utopian transformation expected to occur.

Many politicians still saw the telephone as a novelty rather than as a necessity. There was little of the enthusiasm that had existed when the telegraph was nationalized, concerning the benefits that would accrue to all social classes, how economic prosperity would result, or how the telephone could further unify the country. Some business organizations hoped for an expansion of telephone service and a reduction in rates, but most Post Office officials and their political colleagues in Parliament lacked the vision to see the crucial significance of the telephone, and were more concerned about the costs to the government than about the benefits to business. Members of Parliament often represented rural interests and were themselves members of old landed families; business and trade were still suspect in the British ruling class.

Critics frequently complained about the slow progress made after nationalization, pointing out that the system was failing to assist commerce and contrasting the British system, which had changed little after 1911, with the telephone facilities available in the United States. The American telephone systems were largely private, but the issues for most critics involved not public versus private ownership and operation but service, efficiency, and development.

The problems facing the Post Office after nationalization were formidable. The prevailing attitude among politicians and Post Office administrators was caution, not boldness. The most notable change was financial. The costs involved in the takeover of the National Telephone Company were significant, not so much for payment for the resources of the NTC but for wages. When former NTC workers transferred to the Post Office, their salaries increased, fulfilling a prediction by some opponents of nationalization. In addition, most of the facilities bought from the NTC were outmoded or in need of replacement.

World War I delayed telephone development in the United Kingdom. The war emergency did not allow planning of telephone facilities, and thirteen thousand telephone workers joined the military. There was little concerted progress even after the war ended. Secretary to the Post Office George Evelyn Murray, Murray, George Evelyn the director of the system from 1914 to 1934, saw the responsibility of the Post Office as merely meeting existing needs, not pursuing developmental opportunities. The result was that by 1921 there was only one telephone for every forty-seven persons in the United Kingdom, in contrast to one for every eight persons in the United States.

The policy of drift continued throughout the 1920’s. Politicians and other critics frequently discussed the continuing inadequacies in telephone service and development, but to little avail. In 1932, twenty years after nationalization, Viscount R. C. P. Wolmer, a member of Parliament, noted that the history of the telephone system under government ownership “has been one of sedate development,” with increasingly slower rates of growth. He blamed inefficient management by the Post Office, a complaint similar to many made about the National Telephone Company in the era before telephone service was nationalized.

Little changed in Great Britain as the result of the 1911 nationalization. The British example had little impact elsewhere, particularly in the United States, where the use of the telephone was more widespread and the service more extensive, both for business and for private individuals. There was little support for nationalization in the United States. The Progressive movement was at its apogee when the British Post Office took over telephone service in the United Kingdom, but neither of the liberal reform presidents, Theodore Roosevelt and Woodrow Wilson, was enticed by public ownership. Roosevelt’s New Nationalism favored strict government regulation of business, and Wilson’s New Freedom looked to antitrust laws to make business responsive to the needs of the public. In 1913, the Wilson administration forced the gigantic American Telephone and Telegraph Company to agree not to acquire any existing telephone companies or facilities, thus placing some limits on its monopoly status. In retrospect, the nationalization of the telephone system in Great Britain offered some promise but had few consequences. It stands as an example and case study of nationalization, showing neither great harms nor great benefits, calming debates about other nationalization worldwide. Telephone industry;Great Britain Communications;telephone Nationalization;British telephone service

Further Reading
  • citation-type="booksimple"

    xlink:type="simple">Baldwin, F. G. C. The History of the Telephone in the United Kingdom. London: Chapman & Hall, 1925. Exhaustive work by a Post Office engineer provides comprehensive information on the development of the telephone in Great Britain from the perspective of an insider. Useful although dated.
  • citation-type="booksimple"

    xlink:type="simple">Crutchley, E. T. G. P.O. Cambridge, England: Cambridge University Press, 1938. Relates the story of the General Post Office from even before its inception in the nineteenth century. Includes a discussion of the development of the telephone within the wider context of the Post Office.
  • citation-type="booksimple"

    xlink:type="simple">Link, Arthur S. Woodrow Wilson and the Progressive Era, 1910-1917. New York: Harper, 1954. Tells the story of an important era of reform in the United States. Unlike in the United Kingdom, this reform movement did not use nationalization as a tool of government policy.
  • citation-type="booksimple"

    xlink:type="simple">Mowry, George E. The Era of Theodore Roosevelt, 1900-1912. New York: Harper, 1958. Covers Roosevelt’s presidency and includes a discussion of Roosevelt’s attitudes and practices regarding business monopoly.
  • citation-type="booksimple"

    xlink:type="simple">Murray, Sir George Evelyn Pemberton. The Post Office. London: G. P. Putnam’s Sons, 1927. Murray, secretary to the Post Office from 1914 to 1934, was the chief administrator under the postmaster general. Discussion of the telephone focuses on the years after nationalization, defending the accomplishments made during a difficult era.
  • citation-type="booksimple"

    xlink:type="simple">Perry, C. R. The Victorian Post Office: The Growth of a Bureaucracy. Rochester, N.Y.: Boydell Press, 1992. Illuminating work indicates how most decisions concerning the nationalization of the telegraph and telephone were internal matters relatively unaffected by outside pressures.
  • citation-type="booksimple"

    xlink:type="simple">Robertson, J. H. The Story of the Telephone. London: Scientific Book Club, 1948. Brief and readable history of the telecommunications industry in Great Britain carries the story of the telephone and its significance through World War II.
  • citation-type="booksimple"

    xlink:type="simple">Wolmer, R. C. P. Post Office Reform: Its Importance and Practicability. London: Ivor Nicholson & Watson, 1932. Extremely critical of Post Office operations, including the telephone system. Primarily blames the bureaucracy for the failure of the British telephone system to meet the standards and accomplishments of foreign systems, including those in the United States.

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