Postmaster General takes over NTC                                          Click here for UK communications history

Cable and Wireless nationalised


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Liberalisation of the Network

On 22 March 1892 in the House of Commons the Postmaster-General, Sir James Fergusson, opposed Bills presented by the National Telephone Company and the New Telephone Company which sought extensive new powers. He then announced the Government's proposal to purchase the trunk lines of the National Telephone Company, the operations of which would henceforth be confined to local areas under new licences. The shift in policy was a consequence of complaints over the quality of the National Telephone Company's service and the accumulation of its overhead wires in towns. Of even more immediate concern to the Post Office was the increasing competition of the telephone which was now markedly affecting revenue from the telegraph services. The new policy was outlined in a Treasury Minute of 23 May which led to the Telegraph Act, 1892 - passed on 28 June - which made provision for the raising of £1,000,000 for the purchase and extension of the trunk telephone system.

In 1896 a detailed agreement between the Postmaster-General and the National Telephone Company regarding the sale of the latter's trunk telephone lines was signed on 25 March. On 4 April, 29,000 miles of cable in 33 trunk lines were transferred to the Post Office at a cost to the State of £459,114.3s.7d. The transfer was completed by 6 February 1897. Under the terms of the agreement, intercommunication was established between exchange subscribers of the Post Office in one area and those of the National Telephone Company in another area. There was no such facility, however, for subscribers to the two systems in the same area, the company claiming that any other telephone concern with very few subscribers should not benefit from the company's system in the same area.

A Telegraph Act was passed in 1899 to enable local municipalities outside London to set up their own local telephone systems. For some years there had been increasing agitation from local authorities as a result of the inefficiency and excessive cost of the National Telephone Company's local exchange services. The Municipal Corporations Association, representing most of the English boroughs, was in favour of State control of the company's system, whereas the Scottish municipalities led by the Glasgow Corporation (who had unsuccessfully applied for a telephone licence as early as 1893) supported municipal competition with the NTC. 

The Telegraph Act, 1899 embodied the Government's decision (following the investigations of a House of Commons Select Committee and other official enquiries) to set up a large telephone system in London, and to leave competition with the NTC in provincial towns to local authorities to whom licences would be issued. In rural districts not previously served by the NTC, the Post Office, which mostly had telegraph routes which could carry telephone circuits, opened small exchanges. Later in the year the Post Office began laying an extensive system of telephone lines in London.
The policy of municipal telephony in provincial towns would have seemed a natural development in adding to the already wide powers of local authorities in providing gas, water, electricity, transport and other public amenities. In the event, it was to prove a failure. Of 1,334 urban local authorities that might have sought licences under the Telegraph Act, 1899, only 55 applied for information. Of these, only 13 asked for licences, all of which were granted: Glasgow, Belfast, Grantham, Huddersfield, Tunbridge Wells, Brighton, Chard, Portsmouth, Hull, Oldham, Swansea, Scarborough and West Hartlepool. And only six actually opened telephone systems: Glasgow (1901), Tunbridge Wells (1901), Swansea (1902), Portsmouth (1902), Brighton (1903) and Hull (1904). Only the service provided by Hull continues to the present day. The remaining five services were all sold to the National Telephone Company or to the Post Office by the end of 1913.

The Postmaster-General and the National Telephone Company signed an agreement on 18 November 1901 to prevent unnecessary duplication of plant and wasteful competition in London. There was now free intercommunication between the two systems in London for the first time.
The agreement also provided for the purchase of the NTC's system on the expiry of its licence on 31 December 1911.

An agreement between the Postmaster-General and the National Telephone Company fixing the conditions for the transfer of the company's undertaking in 1912, was signed on 2 February 1905 and came into force on 1 September, having been ratified by the House of Commons on 9 August. From this time the Post Office and the National Telephone Company began to work towards the ultimate unification of their two systems. Intercommunication was possible between subscribers to both systems in the same local area throughout most of the country. The NTC installed call offices on Post Office premises and duplication of plant was avoided. Post Office underground cables henceforth largely met the development needs of the NTC's system on rental terms. These and other measures were to ease the changeover in 1912.

On 1 January 1912 the Postmaster-General took over the system of the National Telephone Company at a cost of £12,515,264, inheriting 9,000 employees, 1,500,000 miles of wire and 1,565 exchanges - of which 231 had more than 300 subscribers each. The National Telephone Company provided for 561,738 subscribers altogether. Just under 70 exchanges were of the Central Battery type; most of the rest were of the magneto type.
For the first time a unified telephone system was available throughout most of Britain. From this date the Post Office became the monopoly supplier of telephone services with the exception of the remaining municipal services in Hull, Portsmouth and Guernsey. There followed a period of rapid expansion. In the next three years no fewer than 450 new exchanges were opened in places where there had previously been no telephone service.

In 1913 the telephone system provided by the Corporation of Portsmouth was transferred to the control of the Post Office in Great Britain, leaving the Post Office as the only provider of a telephone service, other than Hull Corporation and the States of Guernsey.

The Bridgeman Committee was set up in 1932 under the chairmanship of Lord Bridgeman to investigate criticisms that the Post Office, as a large-scale commercial undertaking, should be run along the lines of a business concern rather than as an ordinary government department. This criticism had culminated in a submission to the Prime Minister of a memorial signed by 320 Members of Parliament asking for an enquiry into the status and organisation of the Post Office with a view to effecting any necessary changes in its constitution.

The Bridgeman Committee's report, published in the same year, found no change to be necessary to the existing Parliamentary control, but drew attention to defects in the organisation.

The original structure of the Post Office telephone service was modelled on that of the National Telephone Company. Thus, on the commercial side the local operational unit was the Surveyor's District of which there were 13, excluding London. The Surveyor was responsible for the postal, telegraph and telephone services: on the telephone side he was assisted by District Managers who, in conjunction with Head Postmasters, were responsible for the provision and the quality of the telephone service in their districts. Responsibility for the telegraph service was divided between the Surveyor's Office and the Head Postmasters.

However, none of these officials had any control over the engineering aspects of the telephone and telegraph services. The engineering field was the responsibility of totally separate Superintending Engineers Districts, each under the control of a Superintending Engineer who had a number of Sectional Engineers working to him. The organisation was further confused by the fact that neither the District Managers' and the Sectional Engineers' Districts, nor those of the Surveyors and the Superintending Engineers were conterminous. Moreover, the engineering and non-engineering sides were each responsible to separate headquarters in London: the Superintending Engineer to the Engineer-in-Chief and the Surveyor to the Secretary's Office. This centralisation of authority in London prevented real local responsibility, and the separate rigid hierarchies prejudiced effective co-ordination of operational and engineering effort.

A departmental committee under the chairmanship of Sir Thomas Gardiner was then appointed with the aim of promoting efficiency in Post Office organisation and to deal with the application of the substantially increased decentralisation recommended by the Bridgeman Committee.

The Gardiner Committee's recommendations, published in its report of 1936, led to the setting up of eight regions in the provinces, each in the charge of a Regional Director responsible for the control and co-ordination of all Post Office services within his region. Additional to these eight provincial regions, two further regions were set up in London - one for Posts and one for Telecommunications. The provincial regions were divided into Head Postmasters' districts for the management of the postal and the telegraph services (in practice these were already in existence).

The telephone service regions were divided into telephone Areas under Telephone Managers, of which there were ultimately 57 for the provinces and nine in London. Telephone Managers, with Head Postmasters acting as their agents on certain matters, were to be responsible for the day-to-day control of all aspects of the telephone service (engineering, traffic, sales and accounts). They were also to be accountable to the Regional Director for the overall efficiency of the telephone service in their territory. The first two regions (Scotland and North East) were set up in 1936, followed by the two London regions (Telecoms and Postal), and the changes throughout the country were in place by 1940.

With this large degree of devolution to the regions, there was now a need for central co-ordination and an overall scrutiny of Regional performance, as ultimate responsibility still remained with the Headquarters Administration. To deal with posts, telecommunications, buildings and staff pay, five committees were constituted when the earliest Regions were set up.
These were:-

  • Standing Postal Estimate Committee (SPEC)
  • Standing Telecommunications Advisory Committee (STAC)
  • Standing Factories Advisory Committee (SFAC)
  • Clerical Estimates Committee (CEC)
  • Standing Motor Transport Advisory Committee (SMTAC), which was set up the previous year in 1935.

The task of these committees was to scrutinise annual estimates, compare actual with estimated expenditure, and to study performance statistics. The committees were composed of representatives from relevant departments and each committee included representatives of the Accountant General's Department.

Cable & Wireless Ltd. was nationalised on 1 January 1947 by the Treasury’s purchase of the company’s shares, and by the Post Office’s acquisition of the company’s telecommunications assets in Britain (with the exception of its telegraph cables and terminal station at Porthcurno), including the return of the wireless stations previously leased to the company in 1929.

From that date Cable & Wireless operated no telecommunications services in the UK until 1982, and conducted its overseas business as an independent entity entirely separate from the Post Office. In many ways, nationalisation did not dramatically affect the way the company operated. Successive Governments left it largely to its own devices, though with strict limits on its ability to spend and expand. Government control of its day-to-day affairs was limited to Treasury oversight of its investment plans and the appointment from time to time of Post Official officials to the company’s board of directors. From 1974 the company was allowed rather more commercial freedom, so long as it agreed to consult with the Government over any major programmes which might be politically or financially sensitive.

In 1950 the control of the overseas services of Cable & Wireless Ltd from the United Kingdom was transferred to the Post Office. At the same time, the radio beam stations leased to Cable & Wireless were returned to the Post Office.

In 1951 a Telephone Act became law in August which enabled the Postmaster-General to set rental charges and so forth by statutory regulation. The passing of the Act was the first recognition in law of the telephone as a separate instrument from the telegraph. It was also the first Telephone Act passed by Parliament, 75 years after the invention of the telephone.

Until this time the Postmaster-General conducted the telephone service under powers conferred by a number of Telegraph Acts, because of the court decision in 1880 that a telephone was a form of telegraph under the telegraph acts then in force.

The objective of the legislation was to simplify the provision of a telephone service by replacing the existing system of individual contracts between customers and the Postmaster-General for providing apparatus and equipment with a system of Statutory Regulations.

The General Post Office ceased to be a Government Department on 1 October 1969 and was established as a public corporation under the Post Office Act of this year.
The idea of converting the Post Office into a nationalised industry had first been raised as early as 1932 when a publication by Lord Wolmer entitled 'Post Office Reform' made references to the subject. There was at the time widespread criticism of the existing organisation of the Post Office and one proposed improvement was that the Post Office, as a large commercial undertaking, should be run along the lines of a business concern rather than an ordinary government department. A committee under the chairmanship of Lord Bridgeman was set up, also in 1932, to investigate these criticisms.
In the event it was not until 1965, following a Labour victory in the parliamentary election of the previous year, that Postmaster-General Anthony Wedgewood-Benn put into motion the process that finally culminated in the creation of the Post Office as a public corporation. After much study and deliberation the Post Office Act, 1969, was passed and this laid down the structure of the new organisation, the Corporation being split into two divisions - Posts and Telecommunications - which thus became distinct businesses for the first time. Under the Act, the Post Office had the exclusive privilege of running telecommunications systems with limited powers to authorise others to run such systems.

In 1977 the Carter Committee, in one of a series of reports commissioned by the Government on public corporations, recommended a further separation of the postal and telecommunications services of the Post Office, and for their relocation under two individual corporations. The findings contained in this report led to the introduction of the British Telecommunications Act, 1981 and the creation of British Telecom as a public corporation in its own right.

A distinguishing name was given to the telecommunications business of the Post Office - British Telecom - following a Government decision to separate the major Post Office operations in 1980. Sir Keith Joseph, Industry Secretary, had announced in the House of Commons in July the Government's intentions to restructure the Post Office and relax the monopoly over terminal equipment and value-added services. However, British Telecom remained part of the Post Office until the following year.

British Telecommunications, trading as British Telecom, severed its links with the Post Office under the British Telecommunications Act, 1981 and became a totally separate public corporation on 1 October 1981. They were now two separate organisations with their own chairmen and boards of directors.
It was also at this time that the first steps were taken to introduce competition into the United Kingdom telecommunications industry. In particular, British Telecom lost its monopoly of the supply of customer premises equipment (CPE) except, as an interim measure, providing the first telephone at an address. In practice, it had become increasingly difficult in the years leading up to the Act to exercise this monopoly as more and more unauthorised equipment was added to the network.
The Act introduced an independent approval regime for CPE. Before 1981, the Post Office and then British Telecom had alone decided what could and could not be connected to its network. The 1981 Act established an independent procedure to set standards and approve equipment for connection to the network. Standards were now set by the British Standards Institution (BSI), while the British Approvals Board for Telecommunications (BABT) issued approvals based on independent evaluations. This was the first step in separating regulatory and operational activities which was essential if private suppliers were to be able to compete with BT on equal terms.
The 1981 Act permitted further liberalisation by allowing network competition. The Secretary of State for Trade and Industry was empowered to grant licences to operators other than BT to provide network and value added services. This was a recommendation of the Beesley Report, published in April this year, which suggested full freedom for private suppliers to use the national network to provide Value Added Network Services (VANS) at a flat rate.

Taken from BT archive material

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Last revised: February 18, 2021