Australian Radio Service

Politics behind the Australian Radio Service

Skyway Robbery!

Article by Lance Sharkey and Ernie Campbell, 1945

A witty point much favoured by the older school of socialists was to the effect, that if the capitalists could succeed in bottling the air we breathe and retailing it to us at a profit they would do so. Which, of course, is true. While this stage has not actually arrived, the plutocracy have, nevertheless, succeeded pretty well in bottling up the international means of communication by air and thus keeping up the cost of wireless services to stratosphere levels. The Commonwealth Government, which set out in 1912 to control the cupidity of these skyway robber ended up in 1922 by becoming their paramour. The Wireless Telegraphy Act, of 1905, gave the P.M.G. exclusive rights to receive and transmit wireless messages in Australia.

Four years later the Deakin Government placed £10,000 on the estimates to develop wireless throughout the Commonwealth. At that time the two main systems in use were the Marconi, British controlled, and the Telefunken, German controlled. The Government called for tenders for the erection of two transmitting stations. The Marconi tender was £19,050 for each station. The lowest tender came from the Australian Wireless Co., which was prepared to build the stations for £4,150 each.

This company was formed with a capital of £5,000 by the German agents of Telefunken in Australia, who had drawn in Denison of the Tobacco Co. and McLeod, of the Sydney “Bulletin” to give the company an Australian facade. The object in tendering so low was to secure the contract, establish the Telefunken system firmly, and then recoup losses on the other 20 stations which it was known the Government was contemplating.

The Australian Wireless Co. got the contract alright and the first part of the plan was realised. But then the Defence Department and the Admiralty objected to the sites chosen by the Company and insisted that the stations be built further inland from the coast. The Company used this as a lever to extract even more money from the Government and was successful in getting another £2,000. Further trouble arose over the Fremantle site and the company sold out for £65,000 to a larger concern.

In 1911, the Marconi and Telefunken interests merged and the new monopoly submitted extortionate terms for the construction of further stations. These were refused by Fisher, who engaged Balsillie, a young Australian wireless engineer, to build the new stations and to install a new system which be had perfected. By the end of 1912, the Government had 8 stations in operation, of which only the original two used the Marconi-Telefunken system.

Marconi then brought action against the Commonwealth Government for infringement of patent rights and summoned for permission to inspect the Government stations to verify this. W.H. Irvine, K.C., appeared for the Marconi Co. The Court on two occasions refused to grant permission for the inspection of the Government stations by Marconi engineers and mechanics. But in 1913, the Cook Ministry came into power and Irvine became Attorney-General. In the meantime, the Marconi Co. had amalgamated its Australian Branch with the Australian Wireless Co., and again made application to the Court. This time it was granted and Marconi experts swarmed into the Government stations taking photos, moulds and casts of the Balsillie system.

During the course of the protracted litigation, Irvine brought a wireless expert, called Swinburne, from England to determine whether Balsillie’s system infringed any of Marconi’s patent rights. The report was contrary to what the monopoly expected. Swinburne proclaimed that not only did the system fail to infringe any existing patent rights but that it was at least 33% more effective than any other system then known. The Cook Government shelved this report and paid Marconi £5,000 for the cancellation of patent rights which patently didn’t exist.

In September, 1914, Cook went out and Fisher came in again, the wireless services were transferred from the P.M.G.'s Department to the Naval Department. In 1916, after Hughes had become the leader of the Government the Commonwealth purchased the plant of the Shaw Wireless Co. Ltd, Randwick, for £55,000. This was a serious blow to Amalgamated Wireless, which had hitherto enjoyed a monopoly of Government orders.
The “Sun” newspaper, one of whose directors was also a director of Amalgamated Wireless, launched a campaign against the Government for its purchase. A Royal Commission was held in 1917, to inquire into the whole transaction and it was established that some members of the Government were less interested in the commonwealth than they were in deriving pecuniary advantages for themselves. At least one senator, as well as the Minister for Trade and Custom had received a “gratuity” from the vendor, the Reverend Father Archibald Shaw. However, since the factory was considered to be a useful acquisition, the transaction was allowed to stand.

In 1920, the wireless stations were retransferred from the Navy Department to the P.M.G., and since certain installations had been made during the, war which were no longer serviceable in peace, these showed a loss of £35,000 per year. The Marconi Co. took advantage of this to make the Government an offer. This was discussed with Hughes when he was in London attending the Imperial Conference. On his return to Australia, Hughes produced a draft agreement whereby the Commonwealth would hand over all its radio stations to A.W.A. plus a sum of £500,000, and in return would gain the right to hold a bare majority of shares and have three directors on a board of seven. A Select Committee was set up to examine this proposal and certain minor alterations were made, after which the deal went through.
One of the terms of the agreement was that the A.W.A. would take over the existing 20 Government stations at a valuation to be agreed upon by a committee composed of two representatives of the Government, two from the Company and an independent chairman. Two and a half years later, no valuation had been arrived at owing to the failure of A.W.A. to appoint its representatives. But the Government had paid A.W.A. over this same period £88,000 to make good the losses alleged to have been incurred in maintaining the stations.

Once A.W.A. had securely established its monopoly, it began to levy tribute right and left. So extortionate were its demands for royalties, that the “B” Class commercial stations, revolted in 1927, and forced a Royal Commission. The Commission found that the discontent and dissatisfaction in the trade arose from the acts and omissions of A.W.A. It recommended that the Government reacquire its own stations on the same terms as these were taken over by the A.W.A. And that in default of this it take over all privately held shares in A.W.A. at a just valuation. However, the Bruce-Page Government ignored this report of the Royal Commission. Not only that, but it entered into arrangements giving A.W.A. monopoly control of Beam Wireless when that was perfected.

When it became apparent that wireless telegraphy was going to become a. serious rival to cable systems, the monopolists in the latter field moved heaven and earth to buy shares in wireless companies and to effect mergers to protect their mutual interests and keep up the costs of communication. In 1928, a merger company, Imperial and International Communications Limited, (since renamed Cable and Wireless Ltd.), took over Pacific Cables, The Eastern Extension Cable Co. and the Marconi Wireless Co. This coincided with a widespread demand for a penny a word service. The rates were then about 1/8 per word. In 1929, a Select Committee was set up to investigate the possibilities of the penny a word scheme and it reached the conclusion that it would pay handsomely.

The lowest Rate at present is 5d. per word. Furthermore, the Committee reported that Imperial Communications only protected the interests of the cable companies and would retard cheap communication with other countries.

This Committee also recommended that wireless stations should be owned by the Government and that all overseas telegraphic communications should be under Government control. But again nothing was done to implement its findings.

In 1933; a balance was struck of the Government’s gains and losses through its participation in A.W.A., and it was found that the Commonwealth paid the Company royalties (valued in the Company’s books at £93,000) amounting to ... ... £296,625
That it paid in the form of subsidies for the coastal stations ... ... £358,000
Total ... ... £654,625
That it received in dividends ... ... £152,058
The net loss to the Commonwealth being ... ... £502,701

From the foregoing it can be seen how the Government controls this particular radio monopoly like the hunter controls the bear which he has embraced. It provides just one more object lesson, and it’s the last we shall draw from the Commonwealth sphere, which should be well noted by Mr. Curtin and Dr. Evatt, and above all by the people of Australia, whose will must be the final and decisive factor deciding the course of post-war reconstruction.