8.—6

XII

Prom this it was dear that the members intended that no contract should be finally completed without first being authorised by the House. The position at present is that the contract for the renewal of the San Francisco service, which was entered into in 1898 and expired on the 31st March of this year, has been renewed with the Union Steamship Company of New Zealand until the 31st March, 1901. The Oceanic Steamship Company, better known as the J. D. Spreckels Company, has been associated with the Union Steamship Company in carrying out the contract. The Oceanic Steamship Company has now secured from the United States Government a ten-years contract for a service between San Francisco and Australia. It is stated, though not officially, that the subsidy to be paid is £50,000 a year. The steamers more than comply with the conditions set down by the House of Eepresentatives, being of 6,000 tons and specially built for the service. Messrs. Spreckels and Co. have offered to perform a seventeen-days service between Auckland and San Francisco, and a twenty-days service between Sydney and San Francisco, every three weeks each way, for the payment of £30,000 per annum from Australia and New Zealand, an essential condition being that the service should be performed exclusively by vessels registered in the United States. This being the case, the offer could not be dealt with, seeing that it conflicts with the resolution passed by the House, which provided that at least one British-owned steamer should be employed in the service. Further complications exist, inasmuch as Honolulu, being now a port of the United States, vessels trading there are subject to the provisions of the American maritime laws, which prohibit the conveyance of passengers or cargo to ports of the United States, except in vessels owned or registered in that country. At the present time the net cost in carrying our mails by weight is about ,£II,OOO a year. I understand that the Australian Governments have not yet agreed to accept the terms offered by the Oceanic Steamship Company. What proportion of the £30,000 per annum asked by the Company was to be paid by this colony was not defined. What the position will be, owing to the disinclination of the Australian Governments to agree to the terms, I cannot forecast, but it is quite clear that, favourable as this colony is to the San Francisco service, it would be too great a luxury to pay for, if it were to cost us much more than we are paying at the present time. As no definite action has been taken by the Australian Governments in reference to the proposals of the Oceanic Steamship Company, the matter, so far as we are concerned, is surrounded with difficulty; and, owing to the conditions stipulated by the American Government, the resolution of the House passed' last session cannot be complied with. Later on, when the Government are in a position to better define the situation, proposals will be submitted by my colleague, the Postmaster-General, to meet such circumstances as may arise. The papers and correspondence in respect to the matter will be laid before you. PACIFIC CABLE. The position of this great Imperial and colonial work is not of an altogether satisfactory character. The prospects, however, are much more favourable than they were some little time ago, for it looked as though Victoria and New South Wales were prepared to accept the offer made by the Eastern Extension Company, which would have prejudiced the construction of the Pacific cable. I am glad to say that these Governments are again in line with Great Britain, Canada, Queensland, and New Zealand. This being the case, there is every reason to anticipate that the construction of the work will soon be put in hand. Since the matter was last brought under your notice a committee of representatives of the colonial and other Governments interested in the cable met in London, and have gone very carefully into details, the nature of which has not been published, the report being confidential. From what I can gather, tenders will soon be called for by the board appointed by the committee for the manufacture and laying of the cable. Owing to the increased cost of copper, guttapercha, &c, it is estimated that