On 1 October 2010, the Wall Street Journal reported that the company Hibernia Atlantic plans to build a new communications line linking the financial markets of London and New York. Called Project Express, this communications channel will provide a latency (Round Trip Delay) of 60 milliseconds between New York and London. The heart of this connection will be a new undersea fiber optics cable across the Atlantic Ocean, from Somerset, England, to Halifax, Canada. Project Express marks the first high-speed communications cable to be laid across the Atlantic since the collapse of the 1998–2001 dot-com era nearly a decade ago. During the dot-com era, seven submarine fiber optic cables were laid. To date, the lowest latency in a cable across the Atlantic is 65 milliseconds. Most of the improved latency will come from making the new cable 310 miles shorter than shortest existing cable spanning the ocean. With the cost of this new cable to run in the hundreds of millions of dollars, why spend all this money just to gain 5 milliseconds, particularly when there is still considerable capacity in the existing cables? The answer can be found in the financial advantages that shaving a few milliseconds can bring to firms engaged in high-frequency trading. Lest one think that the obsession with speed is only an Internet-era phenomenon, consider the great amount of effort and money spent in the19th century to move vital data across the Atlantic Ocean.
It has become commonplace to call the business and technology of 19th century telegraphy the “Victorian internet.” The electric telegraph represented a dramatically new communications technology. The Morse Code, a key innovation in the development of telegraphy, with its dots and dashes, has a binary logic to it. For the first time in history, communication times over land fell dramatically; from days and weeks to seconds and minutes. The capacity to move news and data quickly over large geographic scales had profound political, military, economic, financial and social impacts. There was no shortage of speculative writing on the marvelous benefits that this new technology would bring to human interactions. One of the most tangible impacts of the telegraph was in business. The telegraph spurred the creation of nationally integrated commodity and equity markets in the United States. America’s U.S. capital trading centers, however, were still cut-off from London, then the world’s largest financial center. Information traveled across the oceans as any other commodity did — on ships. Though the Age of Steam was replacing the Age of Sail with faster vessels, moving over water was still done at a snail’s pace. So it was only natural that bold entrepreneurs and investors would start hatching plans to span the Atlantic Ocean with a telegraph cable.
In 1854, Frederic N. Gisborne, a Canadian inventor, traveled to New York to raise money for a project to link Newfoundland to the United States by telegraph. Part of this line was to include a submarine cable across Cabot Strait, the body of water which separates Newfoundland from Cape Breton, Nova Scotia. While in New York, Gisborne met Cyrus W. Field, a man who had made his fortune in papermaking, to explain his project. As Gisborne was describing the idea of a submarine cable across the Cabot Strait, Field consulted a large globe to understand the scale of Gisborne’s proposed enterprise. As he stared at Newfoundland on the globe, a much bolder enterprise came to Field. Looking at the great expanse of water separating North America from Great Britain, Field suggested to Gisborne that the telegraph line to Newfoundland be extended across the Atlantic Ocean to Britain. And so was born the 12-year project to span the Atlantic with a telegraph cable, and perhaps the greatest business and technological undertakings of that the 19th century.
Enormous sums of money had to be raised and a host of new scientific and engineering challenges had to be overcome. Could an electrical signal travel across such a long cable? Unlike the bare wires strung on poles over land, a single, long insulated cable immersed in sea water raised new scientific and technical issues about the movement of electrical currents. Large inductive and capacitive effects were discovered, and the theoretical and practical questions centered on whether these effects would seriously retard the flow of electrical signals. Great minds like Faraday and Lord Kelvin devoted their energies to finding an answer to this question. Unlike an exposed wire on a pole, the cable had to be well insulated. Werner von Siemens invented a machine to insulate wire. At the time, very little was known about the topography of the ocean floor. If the cable stretched across a deep canyon, it would eventually snap under the stress. People wondered about the effects of tides and currents on a cable as it lay on the floor. What about the composition of the sea bed. Would it destroy a cable that moved about? The greatest oceanographer of the period, U.S. naval officer Mathew Fontaine Maury, was brought in to provide data on the composition and topography of the Atlantic seabed. At the time, Maury was working on his landmark book, “The Physical Geography of the Sea.” Then there was the question of actually laying the cable across the vast expanse of the ocean. What kind of ship could hold the enormous amount of required cable? As the cable was paid out 10,000 ft down, would it snap under its own weight? New machinery had to be developed that could smoothly lay out so much cable. What would happen to the cable as the ship pitched, rolled and yawed in storms? Then there was the enormous navigational challenge of keeping the ship on the required course to match the desired track over the seabed.
In 1866, some 12 years after Field suggested the idea to Gisborne, and after several failures, a commercially viable transatlantic telegraph service was in place. In the end, the largest steel ship ever built, the Great Eastern, was needed for the project. The construction of this ship was in itself a great accomplishment for British technology. Britain’s industrial might also supplied all the cabling. The transatlantic cable enterprise required far more money than ever expected. Britain, the world’s largest capital market at the time, had to supply all the financing. But the principal visionary behind the project remained the American, Cyrus Field.
Failed attempt to launch Great Eastern in 1858. The huge ship proved
far more difficult to launch than expected
As the reader will conclude, the story of the transatlantic telegraph is as much a story about the sea as it is a communications technology story. Heroic maritime efforts, both intellectual and physical, were needed to make telegraphic communications across the sea possible. Soon, other submarine cables where spanning the world’s seas and oceans. Mostly set up under British control, the global network of submarine telegraph cables added to the “command and control” capability needed to maintain an economic and political empire in which the sun never set. With its new undersea links, telegraphy also had dramatic impact on world maritime shipping. For thousands of years, when ships set out to sea to carry on long distance trading, it would be a long time before they returned, often months and sometimes more than a year. During this time, the there was no communication with the ship. The owners had no knowledge of the fate of their ship. Merchants had no way of knowing the commercial fate of their cargoes until the ship returned home. With no knowledge of the quality and quantity of goods arriving on inbound ships, buyers and sellers negotiated in relative ignorance. With submarine cables, traders had a more realistic understanding of the availability and pricing of commodities and products in the markets around the world. Better knowledge also allowed the shipping companies to redirect ships in response to changing opportunities in different parts of the world.
The rate of communication over the submarine telegraph cables began with 8 words per minute and improved quickly to 17 words per minute. At $5 a word, this mode of communication was very expensive. Based on the 1880 U.S. census data, the average skilled worker would have had to work one to two full days to send one word across the Atlantic. By today’s standards, these communication speeds are ludicrously slow and outrageously expensive. And yet, in the 19th century, the transatlantic cable provided an enormous economic and political advantage to those able to afford it. Hibernia Atlantic’s Express Project, with its 5 millisecond advantage, does show that timely access to intelligence still commands a premium price. As the Wall Street Journal article put it, “the driving factor here is that there’s intense competition to harvest profits from often tiny movements in the price of securities and derivatives. This new transatlantic cable offers a window into how this sort of arbitrage is increasingly global rather than regional in scope, and is limited only by technology and the laws of physics.”
For additional readings see
Doug Cameron and Jacob Bunge, “Underwater Options: Trans-Atlantic Cable Targets High-Frequency Traders”, The Wall Street Journal, 1 October 2010, p. C3.
Bern Dibner, The Atlantic Cable, (Norwalk, Conn.: Burndy Library Inc., 1959)
Daniel Headrick and Pascal Griset, “Submarine Cables: The Business and Politics, 1838 — 1939,” Business History Review, 75 (Autumn 2001), pp. 543 — 578.
Byron Lew and Bruce Cater, “The Telegraph, coordination of tramp shipping, and growth in world trade, 1870 — 1910”, European Review of Economic History, 10 (2006), pp. 147 — 73.
Ronnie Phillips, “Digital Technology and Institutional Change From the Gilded Age to Modern Times: The Impact of the Telegraph and the Internet”, Journal of Economic Issues, 2 (June 2000), pp. 267 — 89.