F.—l.

TELEGRAPH SERVICE. The steady increase in telegraph traffic recorded since 1935 continues, the paid telegrams last year exceeding those for the previous year by 336,139 in number and £16,835 in value, increases of 6-57 per cent, and 5-38 per cent, respectively. The number of telegrams sent per head of population was 3-46, a figure which retains for the Dominion its pre-eminence in this respect among the countries of the world. The programme of mechanization of the telegraph network adopted by the Department in 1933 has now been completed. Some extensions to this network will be necessary in the near future to meet the increased volume of traffic now being dealt with at a number of offices. Five multi-channel voice-frequency telegraph systems for installation on the more important telegraph routes in the Dominion are being manufactured in England. The equipment is due for delivery in July, and it is hoped that the installations will be completed before the end of the next financial year. Multi-channel voice-frequency telegraphy is one of the most recent developments in communication engineering, and its introduction into this country will mark the commencement of the second stage of the modernization of the New Zealand telegraph system. The adoption of this new development has been made practicable by the recent extensive application of the carrier-telephone system throughout New Zealand and by the laying of the new coaxial telephone cable across Cook Strait, and it forms part of a comprehensive plan for the modernization and extension of the Dominion network for both toll and telegraph services. With a carrier-telephone system it is possible to superimpose three additional speech-channels over a single pair of open aerial wires and by the application of the multi-channel voice-frequency telegraph system any one of these carrier-speech channels can be utilized for the further superimposing of as many as eighteen two-way teleprinter or Morse telegraph circuits. INTER-ISLAND TELEGRAPH AND TELEPHONE COMMUNICATION CHANNELS. Special carrier-current-telephone equipment installed during the year at Wellington, Seddon, Ivaikoura, and Christchurch, in conjunction with the new Cook Strait coaxial telephone cable, has enabled the Department to provide four additional telephone channels for the handling of inter-Island toll traffic. Further equipment is being installed at all four stations to increase these additional channels from four to seven. It is expected that this work will be completed at an early date. When these further channels become available it is proposed to allocate eight telephone channels for the Wei 1 ington Christchurch toll traffic, two for the Wellington-Blenheim traffic, and one as a direct toll outlet between Wellington and Nelson. TELEPHONE TOLL SERVICE. The steady increase in traffic which has been a feature of the toll service in recent years was well maintained during the year, the total number of toll calls handled being 14,480,207. This represents an increase over the previous year's traffic of 1,337,036, or 10-17 per cent. In my last report it was stated that, to enable the Department to cope with the ever-increasing demands for improved toll facilities, twenty-one three-channel carrier telephone systems had been ordered for installation on major sections of the trunk-line system. The greater part of this equipment has now been received and is being installed as rapidly as possible. The remaining portion is expected to arrive from England at an early date, and it is anticipated that the twenty-one systems will be in operation before December next. To provide for further improvements, particularly in regard to the grade of transmission and the range of communication, it was decided during the year to order equipment for six additional systems. When all of the equipment has been installed the Department will have a total of thirty three-channel carrier systems in operation throughout the Dominion. With these, together with an equal number of single-channel systems already in use. it will be practicable to eliminate a large amount of intermediate switching, to improve

7