Directorate General of Telecommunications History

Company History:

Initially developed as a telegraph service for the military over 100 years ago, Taiwan's Directorate General of Telecommunications (DGT) is a state-owned and operated enterprise that is the major supplier of phone and other telecommunication service throughout Taiwan. The DGT is also branching out into international telecommunications including satellite communications.

The history of the DGT begins with the introduction of telegraph service to China during the 1880s. Telegraph service was first proposed in 1874 to improve military communications in the face of increasing Japanese military harassment. In July 1877 the government began laying a submarine cable between the Chinese mainland and its island province Taiwan, which the Japanese had claimed as their own.

Although this connection was not completed until nine years later, additional lines were started in 1881 for military communications between other Chinese marine bases. These links helped the military to respond to attacks from other foreign armies and domestic warlords. Until these telegraph lines were installed, crucial battlefield communications were delivered on foot and subject to long delays.

Local officials later won grants from the imperial government to establish a public telegraph service, initially linking Shanghai and Tianjin. This line, which included seven switching stations along its route, took eight months to complete. But, because the Chinese language is based on pictographic characters rather than on an alphabet, it was impossible to transmit Chinese words using standard Morse code dots and dashes. Instead engineers developed an ingenious method of dots, and dashes that indicated the position and number of strokes of each radical in a given Chinese character. In this way a character could be described with Morse code. And, in time, this method grew into such a highly efficient shorthand that telegraph operators could transmit messages almost as fast as their English-language counterparts. This same method remains in use in China today.

To help establish this new electronic language, and to assist in the growth of telecommunications in China, the government established a school at Tianjin which it staffed with foreign engineers and teachers.

The network was plagued by frequent outages. Where weather or poor workmanship was not to blame, peasant farmers were usually responsible. Many did not trust those who operated the system, seeing it as an aid to bureaucrats and tax collectors. Others simply didn't want the poles on their farmland and yet others found better uses for the wood and wire. As a result, farmers became a major hazard to the system, taking down what workers spent months putting into place.

In 1890, as officials continued to struggle with telegraphy, the telephone was introduced to China. The first service was set up by a telegraph office in Nanjing connecting 14 customers--all of them government offices. This system and others like it expanded rapidly as businesses and then wealthy residents requested their own lines. Often growth outstripped the capacity of switching offices, forcing Chinese operators to handle hundreds of connections at a single station.

In 1896 China lost a war with Japan and was forced to cede Taiwan to the Japanese government. As a result, the excellent communications established for the defense of Taiwan was now in Japanese hands.

The Japanese military began construction of large telephone networks during 1897 in the areas of China that it occupied, but these were primarily for administrative use. By 1900, however, the Japanese began offering telephone service commercially, including local and long distance services. At this time there were only about 30,000 telephone customers in all of China, and 80 percent of them were Japanese.

After the establishment of the Chinese Republic in 1911, demand for telephone lines exploded. As more customers requested telephones, the average costs of providing services were reduced, making the telephone affordable to even more customers.

By 1927 every large city in China had Strowger-type switches, which allowed calls to be placed automatically by dialing a customer's number. At this time, telecommunications authorities had completed a major long distance network connecting more than 7,000 customers in seven provinces. In addition, the government took over international services, which had previously been offered only by foreign companies operating in China. New connections were established from the Northeastern city of Shenyang to Germany and France. By 1930 backbone construction of the national telephone network was completed.

Telegraphy, however, was not dead. In 1905 the first wireless telegraph system was installed. While restricted mainly to military applications, the wireless gained widespread commercial application in the late 1920s. A decade later, after the Japanese invasion of Manchuria, the wireless became essential to military operations, as wireline networks were easily and frequently destroyed by enemy action. A wireless telephone service between China and the United States was inaugurated shortly before the outbreak of full-scale war between China and Japan.

The Chinese government evacuated Guangzhou (Canton) to Japanese forces and later moved a thousand miles inland to Chongqing, capital of Sichuan province. It was here that the ruling Nationalist government reorganized administrative organs, creating a Ministry of Transportation and Telecommunications. Within this ministry, on May 19, 1943, the government established a Directorate General of Telecommunications, whose mission was to develop telephone and telegraph communications in China.

During World War II China suffered tremendous damage at the hand of the Japanese. So complete was Japan's scorched earth policy that occupation authorities ordered all telephones impounded and destroyed. In the waning days of the war, as Japan's defeat became inevitable, Japanese authorities on Taiwan ordered the total destruction of the telecommunications network, much of which it had developed over the previous 50 years.

After Japan's surrender in 1945 the DGT inherited a system that was in complete ruin. Even lines that could be salvaged were nearly unusable because they were built with inferior war-grade Japanese wire. Rehabilitation of the network was extremely difficult and costly.

Shortly after the war the communists under Mao Zedong and the ruling Nationalist faction under Chiang Kai-shek ended their anti-Japanese cooperation. Subsequent hostilities between the parties later escalated into a destructive civil war.

In 1948, amid the battles raging throughout the country, the government's DGT introduced telex service, and telephone subscribership in China peaked at 167,000 customers. The Guomindang, however, began losing to the Communists and it 1949 was forced off the mainland to take refuge on Taiwan. At that time the government had to abandon the entire telecommunications network on the mainland to the Communists.

Repairs on Taiwan's telephone system began as soon as Chinese control was re-established on the island in 1945. But after 1949, with the newly arrived government in exile, thousands of refugees and hundreds of businesses from the mainland, public demands on the network continued to outrun what the service could provide. In 1949 Taiwan had only five international circuits.

The government on Taiwan struggled to arm itself against a "final" offensive from the mainland. This required highly taxing investments in local industry and infrastructure, which drained commercial financing. With investment prioritized for shipbuilding, steel, and heavy machinery, little was left for modernization of the telephone network.

One major accomplishment, however, was the establishment of rural telephone service along the Taiwanese seacoast. These new rural lines, constructed for military use in 1949, brought telephone service to thousands of farmers. But it wasn't until 1952 that reconstruction of the basic network was declared complete.

During the remainder of the 1950s the state-run telecommunications agency struggled to keep its network operating with the most modern technology it could afford. Emphasis was sifted from merely getting lines strung to improving signal quality. In 1957 the company introduced FM-band telegraphy and in the following year it perfected a Chinese-language telegram typewriter. These breakthroughs extended the life of telegraphy in Taiwan and greatly increased telegram traffic.

Gradually, by the mid-1960s, after basic industries had been firmly established in Taiwan, funding for improvements in the telephone network became available. Under government direction, the Taiwanese economy was designed to generate wealth from export earnings. Export-led growth began in certain sectors of the economy during the 1960s and exploded in the early 1970s.

Led by small manufacturers of toys, machinery, and handicrafts, Taiwan's strong growth provided tremendous personal income. This income created further demand for telecommunications services, fueling a period of extremely strong growth for the DGT.

In 1969 DGT began widespread automated switching, eliminating all operator-connecting calling. that year the company also completed construction of a modern satellite communications facility that greatly expanded the capacity for international calls. Microwave communications systems were also established between Taiwan, the Philippines, and Hong Kong. This had a great effect on Taiwanese commerce, as exporters now found it much easier to remain in contact with their customers.

By 1971 DGT had nearly 400,000 telephone customers with 600,000 telephones--about twice the number on the entire Chinese mainland. Again, strong demand lowered average costs, making the telephone affordable to even more people.

The DGT placed several thousand public telephones throughout Taiwan during the 1970s. First introduced shortly after World War II, DGT's first public phones collected charges only after a call was completed. In 1955 credit accounts were introduced. By 1976, however, the company had installed nearly 27,000 standard coin-operated phones and had introduced paging services.

In 1980 the DGT completed an eight-year campaign to bring telephone coverage to all rural areas in the Republic of China, including many offshore islands. This campaign also helped the company to achieve extremely high rates of growth, averaging 20 percent per year. During the 1970s, as investment in the network averaged a staggering 0.7 percent of the entire nation's gross national product, Taiwan's telecommunications industry moved from developing country levels to those of modern industrial nations. By 1981 the DGT served more than 2.7 million customers with more than 3.7 million telephones.

In 1981 the DGT introduced digital switching, which, in addition to allowing calls to be placed more quickly and accurately, enabled the company to introduce touch-tone service and, later, new "vertical" services such as call waiting and speed dialing. The company also began direct international dialing, high-speed telex, and data and computer services.

In 1989 the company introduced cellular service and began setting up large networks in each of its major urban markets. By 1992 cellular coverage was extended to the Chungshan Freeway and other trunk highways as well as to remote industrial parks and resorts, such as Sun Moon Lake, Kenting National Park, and Snow Dan International Park. Cellular subscription in 1992 exceeded 220,000 customers.

The DGT began installing fiber optic cable on major long distance and trunk routes during the late 1980s. These upgrades have allowed increases in switching capacity and improvements in signal quality. The fiber optic backbone has even been extended offshore to Kinmen, Penghu, and Matsu, an island immediately adjacent to the mainland which the Nationalists continue to control.

As a partner in several tran-Asian submarine cable projects, the DGT offers a variety of international services, including satellite communications. The company also maintains a radio-based maritime coastal communications system for the shipping industry and a computer-based videotex service that provides and array of information services.

The DGT is divided into three operating regions, encompassing northern, central, and southern Taiwan. Each of these regions contains a major metropolis (Taipei, Taicung, and Kaoshiung, respectively). Due to the high density of these cities, they are routinely targeted to receive advanced services before other areas. The company also operates an advanced telecommunications laboratory for network planning and product development.

While governments around the world are privatizing their state-owned telephone utilities, government proposals to privatize DGT have only recently surfaced. This is because privatizations are usually carried out to introduce competitive practices and increase the efficiency of an operation and the DGT is already viewed as an efficient operation. Perhaps in anticipation of "corporatization," the company is already run like an enterprise rather than a bureau. The company has begun a public identity campaign and even publishes annual reports.

DGT's logo is based on the Chinese character for electricity, which is used in the words for telephone and telegraph. But the logo symbol also resembles another work which means "to work hard." Such dual symbolism is extremely important and profound in Chinese society.

In addition the DGT contributes about half of its annual revenue directly to government coffers--an important source of revenue that the government will not easily give away. Privatization of DGT would most likely require a restructuring of the industry and the appearance of competitors modeled after Japan's DDI or Britain's Mercury.

After nearly 50 years in Taiwan, the DGT has helped to elevate the island's economy to one of the most powerful in Asia. While currently limited to serving Taiwan, it is plausible that the company may be allowed to participate in the development of telecommunications on the Chinese mainland. But, because the DGT is an agency of a government which is a rival to that is China, such participation would be contingent upon a wider political rapprochement.

Principal Subsidiaries: Data Communication Institute; Telecommunications Training Institute; Telecommunications Laboratories; Long Distance Telecommunications Administrations; Northern Taiwan Telecommunications Administrations; Central Taiwan Telecommunications Administration; Southern Taiwan Telecommunications Administrations;

Further Reading:

• "The Origin of Telecommunications in China" (in Chinese), Directorate General of Telecommunications, Taipei, 1981.
• "A Brief History of Telecommunication Development in Taiwan" (in Chinese), Directorate General of Telecommunications, Taipei, 1981.
• "Chairman's Speech on the 100th Telecommunications Day, December 28, 1981" (in Chinese), Directorate General of Telecommunications, Taipei, 1981.
• "Taiwan's Telecommunication: A Profile of Progress," Telephony, March 24, 1986.

Source: International Directory of Company Histories, Vol. 7. St. James Press, 1993.

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