**Comments of the Computer & Communications Industry Association to the
President's Commission on the United States Postal Service**

On behalf of the Computer & Communications Industry Association (CCIA),
I submit the following comments to the President's Commission on the
U.S. Postal Service. In particular, we would like to express our deep
concerns about the Postal Service's forays into electronic commerce and
other commercially competitive ventures, which we believe are beyond the
scope of the Postal Service's mission and are contrary to the
traditional role of government in the United States.

**Introduction**

CCIA is the industry association representing Internet, computer,
telecommunications, software, and electronic commerce companies ranging
from small, entrepreneurial firms to some of the largest in the
industry. CCIA's member companies employ over a half-million people and
generate annual revenues exceeding \$300 billion. We are the industry's
leading advocate for free and open markets and fair, dynamic
competition. Our industry has found that this principled approach to
information technology and electronic commerce is a significant reason
why the high-tech industry in the U.S. has experienced such rapid growth
in recent years, to the distinct benefit of American consumers and
workers.

The United States has become the world\'s dominant provider of
Internet-based services, including electronic financial services. Some
governments have been far less enlightened in the governance of
e-commerce and have pursued a heavy-handed, regulatory role, or even
sought to manage and direct competition in the industry. Other
governments have continued to intrude into their domestic commercial
markets by offering government-sponsored goods and services, thus
distorting their economies and stunting their economic growth.

With the rapid growth of electronic commerce, the Internet, and
computing, opportunities for new businesses and services have exploded.
Increasingly, sophisticated and scaleable digital communications and
e-commerce tools have minimized barriers to entry into new markets,
allowing a wide range of competitors to participate. However,
corporations, small businesses, and Internet startups are not the only
enterprises looking for opportunities to expand their reach into new
markets with e-commerce offerings: Federal and State governments are
increasingly viewing the Internet and electronic commerce as a new
platform for government-provided products and services for consumers in
direct competition against private sector market participants. These
e-commerce ambitions by government entities are separate and distinct
from e-government initiatives to digitize and modernize traditional
governmental functions, which are an appropriate and important part of
government reinvention and reengineering.

CCIA has viewed with great trepidation the growing efforts by government
to launch competitive e-commerce initiatives and has worked on Capitol
Hill, with the Administration, and in various States, to rein in these
activities. While we support the government\'s efforts to modernize
operations, improve citizen services, and utilize the tools and
technologies of the Information Age, we do not believe the government
should be a commercial competitor in the U.S. economy, whether in
nascent, emerging industries or even thriving, private-sector commercial
markets. Such activity is antithetical to our nation\'s economic history
as the most successful free market, capitalist society ever created, and
unfair to both American taxpayers underwriting such activities as well
as to the shareholders of private businesses forced to compete with
publicly-funded government entities for customers. Simply put, the
United States Government was created to perform certain essential
functions and services for our nation and its citizens, but one of these
purposes was not to become a commercial market enterprise.

**United States Postal Service Plunges into E-Commerce**

CCIA has identified a number of areas in which the Federal and State
governments have expressed interest, or launched initiatives, as
publicly funded market competitors against our members and other private
companies. Perhaps the most egregious example has been the Postal
Service, which has become quite bold in its efforts to leverage its
Postal Monopoly into other markets, cross-subsidizing and broadening its
range of services into a myriad of e-commerce enterprises.
Notwithstanding its efforts to present itself as a commercial
enterprise, the U.S. Postal Service is in every significant respect an
arm of the United States Government. Indeed, in the aftermath of
September 11^th^ and the anthrax crisis, President Bush correctly stated
that our Postal workers are part of the uniformed service of the United
States.

In CCIA\'s view, monopoly abuses by government entities such as the
Postal Service are no less repugnant to a free marketplace than any
similar anticompetitive abuses by private-sector companies. In fact, a
government monopoly is actually far worse and more dangerous because the
anticompetitive and monopolistic behavior of a government agency or
government-sponsored institution is beyond enforcement actions or
private causes of action under the Sherman and Clayton Antitrust Acts
and other statutory limitations on private firms. Precisely because it
was never anticipated or intended that the national sovereign would act
as a commercial enterprise, the capacity for anticompetitive abuse by
such activity is without institutional checks and balances.

Nevertheless, in the last few years the USPS has launched a suite of
USPS electronic financial and consumer services. Examples of these
services include:

• [USPS eBillPay and Send Money]{.underline} -- launched in April 2000
provides USPS-branded bill presentment services and person-to-person
transfers and bill payments with electronic cash transfers. These
services lost over \$10 million in FY 2000;

• [USPS Tax Center]{.underline} -- actively pursued at the planning
level in 2000 and 2001, the Postal Service attempted to get into the tax
preparation software and electronic filing online services business,
seeking to add web-based tax services to its eBillPay and Send Money
e-commerce portfolio to create an online consumer financial services
hub. At the present time, USPS has no announced timetable for
introducing these services;

• [USPS Electronic Postmark]{.underline} -- introduced in April 2000,
this application can be attached to Internet communications to protect
document integrity and provide a trusted time and date stamp. The USPS
has lost nearly \$9 million on this program since its inception;

• [Post Electronic Courier Service (PosteCS)]{.underline} -- started in
April 2000, this service was designed to track messages and receive
proof of delivery along with sender and receiver authentication. The
USPS announced in March that, after losing over \$7 million on the
program, it was terminating PosteCS;

• [NetPost CardStore]{.underline} -- initiated in December 2000, allows
users to create online greeting cards for e-mailing. NetPost CardStore
is among the most successful USPS online services, having lost only
\$19,000 since its inception;

• [NetPost Certified Mail]{.underline} -- launched in January 2001, this
service protects the integrity of electronic documents and ensures they
have been delivered securely to the intended recipients. This service
has actually earned a profit -- \$298.

Obviously, each of these service initiatives duplicates existing
commercial businesses in digital signatures, authentication, electronic
financial services, and related e-commerce technologies. The Postal
Service also has discussed plans to assign e-mail addresses to all
Americans or all physical addresses, to take control of the .us web
domain, and to deploy computer kiosks in all post offices for sending
and retrieving e-mail. These are rapidly emerging areas of e-commerce
and any information technology business or prospective entrepreneur
would certainly be eager to target these services as an opportunity for
growth. The USPS sees itself as aspiring to become an Internet portal
for e-commerce services \-- competing directly with Yahoo!, America
Online, or Excite \-- and is in fact explicitly describing itself that
way in printed in-house communications with its employees.

The position of the Postal Service has been that its proposed new
e-commerce service offerings are entirely within the scope of their
purview. Specifically, the explanation has been repeatedly offered that
since the agency delivers mail that contains bills and payments, it
believes it is appropriate to now get into the business of electronic
bill presentment and payment services. However, the same explanation
could take the Postal service from delivering mail that contains sales
literature about automobiles to instead opening USPS auto sales websites
and showrooms. The same analogy can be applied to the Postal Service
relationship to every American industry, whose mail it delivers, without
exception. However, the Postal Service cannot be permitted to define its
role and its monopoly as including the business content of the mail it
delivers. Such an assertion is an egregious overreach of the proper,
limited mission of the U.S. Postal Service, and its intended role in the
American economy as a part of the United States Government.

The Postal Service\'s efforts to shed its true U.S. Government identity
recently led it to change the universal resource locator (URL) of its
official Internet website from \"usps.gov\" to \"usps.com\". This
intentional blurring of its public identity flies in the face of the
fact that the Postal Service remains an independent establishment of the
Executive Branch of U.S. Government.

Clearly, these are not "postal" services as contemplated within the
statutory and regulatory framework established by Congress, the USPS
Board of Governors, and the Postal Rate Commission. Nor are these
"nonpostal" services performed on behalf of government agencies. Rather,
these are "extra-postal" activities being conducted without statutory
authorization and in violation of specific public policy mandates of
Congress and the Administration. We strenuously object to the Postal
Service, as a government establishment, engaging in these extra-postal
activities and servicing private sector e-commerce markets, injecting
itself into competition with established, competitive commercial
industries.

**The Postal Service's Vision: An American PTT**

Evidence has also emerged that the Postal Service\'s plans may even
extend beyond online consumer services into the provision of Internet
telephony and other telecommunications services. In a hearing on
September 7, 2000 before the Senate Government Affairs Committee\'s
Subcommittee on International Security, Proliferation and Federal
Services, the former Chairman of the Postal Rate Commission, Edward J.
Gleiman, speculated that the long-range strategy of the Postal Service
may be to transform itself from a postal and parcel delivery service
into a communications company:

> \[T\]he Postal Service cites four bases for viewing e-commerce
> products as appropriate for serving its institutional purposes. One
> rationale is that such services, in combination with its other
> functions and activities, should help to \"bind the Nation together,\"
> in keeping with the basic function prescribed in section 101 of Title
> 39 \[of the U.S. Code\].
>
> This is a plausible rationale, but only if you overlook the fact that
> the United States is already \"bound together\" electronically by the
> private sector---initially by the telegraph and telephone but now by
> an ever-expanding variety of telecommunications media, including the
> Internet. Is the Postal Service suggesting that there is an unmet
> national need for publicly provided electronic services? If so, this
> would represent a major national policy finding, and accordingly
> should not be acted upon before investigation and very careful
> deliberation by Congress.
>
> A second but related rationale is the Postal Service's suggestion
> that, since \"binding the Nation together\" is part of its basic
> function, initiatives such as e-commerce serve an appropriate
> objective in their own right by fostering national communications. The
> GAO report refers to this objective as \"expanded universal access.\"
>
> This justification provokes another question: at some point, would
> pursuing the objective of binding the Nation together through new
> media change the Postal Service from a delivery company to a
> communications company? This may be what the Postal Service has in
> mind. If so, this would be contrary to the trend elsewhere in the
> world, where national telecommunications authorities are being
> separated from countries' postal administrations and privatized.
>
> Looking at the Service's website the other day, I came across the
> Frequently Asked Questions section devoted to the PosteCS service.
> Here is the Q. and A. I found particularly interesting. Question:
> \"How does PosteCS fulfill U.S. Postal Service's primary mission?\"
> The first sentence of the answer: \"PosteCS fulfills the Postal
> Service's mission to 'bind the nation together through its
> communications'.\" I do not know what or whom this answer intended to
> quote, but it was not section 101. In any event, the diversification
> of the Postal Service from what has been a nationwide delivery service
> into a communications company would represent a major change in
> national policy, and as such should be decided publicly. If such a
> change is deemed appropriate, it might best be implemented through new
> legislation.

In 2001, Postmaster General William Henderson gave credence to Chairman
Gleiman's concerns when he described the Postal Service\'s vision in a
published interview.

> And the next \[strategy\] is to leverage our own electronic
> infrastructure for commercial purposes. We have on every -- on most
> every -- will have on most post offices that have POS, a point-of-sale
> machine, a backup satellite capability.... It now has voice and video
> capability, which makes it an enormous tool, a giant highway, and
> it\'s more reliable than optical fiber because we have optical fiber
> into the POS machines. So it\'s a huge asset that this organization
> has, that it\'s now looking and thinking about who -- and you say who
> could use it? Well, anyone could use it who has a data transmission
> need. It\'s completely secure. You would just lock into the post
> office, and you could transmit data anywhere in the world.

CCIA views even the remote possibility of a government-owned PTT in the
United States as a profoundly alarming prospect for our economy. We
believe that it is quite clear that the Postal Service has strayed far
from its mission and far beyond the statutory authority provided to it
by Congress -- in fact, far beyond any legislative or Constitutional
intent -- and is losing millions of dollars in the process. Furthermore,
the future, unbounded plans of the USPS appear to extend even farther,
and if implemented would bring about a fundamental change to the laissez
faire, free-enterprise economic model that has thrived in our country
since its inception. It is particularly ironic that such a shift would
occur just as American trade negotiators have begun to succeed in
convincing foreign government to deconstruct their government-owned
postal and telecommunications monopolies.

**USPS Funds Losing Competitive Ventures with Monopoly Revenue**

Notwithstanding the legal, policy, and macroeconomic issues raised by
these activities, it is fundamentally unfair for the American taxpayer
and the average citizen buying a stamp to be forced to become an
unwitting financial underwriter for the U.S. Government to launch
competitive ventures in commercial business. Without question, the USPS
is cross-subsidizing their new e-commerce enterprises with taxpayer
revenues from the Postal rate base, derived from selling stamps,
postage, and other mail delivery services under their statutorily
imposed Postal Monopoly.

In a report issued just over a year ago, the General Accounting Office
(GAO) blasted the Postal Service\'s e-commerce initiatives, finding that
financial information provided by the USPS on its e-commerce ventures is
inaccurate, incomplete, and inconsistent. The GAO also admonished the
USPS to address persistent concerns that USPS\' e-commerce initiatives
are being cross-subsidized by other postal products and services.
According to the GAO performance of USPS\' e-commerce initiatives has
fallen far short of expectations (e.g., FY 2001 projections for
e-commerce revenues was \$104 million; actual revenues through first
three quarters of FY 2001 were less than 1% of this). A full accounting
of the total costs of the Postal Service's failed commercial endeavors
has never been made, and so no one can accurately quantify how much of
the frequent postal rate increases imposed on American consumers and
businesses in recent years are directly attributable to the financial
losses created by these misadventures. Indeed, no deep and broad
accounting of waste, fraud, and abuse in the U.S. Postal Service has
ever been adequately performed, either to determine the actual causes
and sources of their continuous demands for rate increases, or as a
benchmark against which to make future financial or management
decisions. This is due in no small part of the absence of the kind of
adequate or complete financial accounting and management systems
necessary to do so.

Therefore, in many cases, the consumer and business customers of the
Postal Service are directly penalized by the ongoing lack of business
controls and accountability in the organization. Heavy users of USPS
mail service (e.g., banks, financial institutions, credit card
companies) are actually compelled to fund a new competitive entrant into
private-sector markets in which they compete. Likewise, every U.S.
citizen who buys a 37-cent stamp is actually an unwitting financial
partner for the agency\'s commercial market ventures.

In addition, the Postal Service sits in a conflicted role of regulator
as well as competitor in the marketplace, with an ability to control and
shape markets that would not be lawful for any private company with
comparable monopoly dominance. Indeed, the USPS regulates all
\"mail-related\" activities of the private sector, and if it desires to
do so, could easily deign to regulate the entire private sector -- while
it acts as a competitive market participant -- in any market it chooses
to target as potentially fertile ground for its ambitions and revenue
needs.

It is important to note that while the GAO and others have been able to
conjecture about the magnitude of the losses incurred by the Postal
Service in these ventures, their figures are at best rough estimates of
these shortfalls. In its report on these services -- "Update on
E-Commerce Activities and Privacy Protections" -- the GAO severely
admonished the USPS for its failure to report fully all costs related to
the development and execution of its e-commerce initiatives:

> \[F\]inancial information related to USPS' e-commerce and
> Internet-related activities is still not complete, accurate, and
> consistent.
>
> \* \* \*
>
> USPS does not have clear and comprehensive policies and procedures
> that would address how all of the direct and indirect revenues and
> costs, including those mentioned above, associated with its ecommerce
> and other new products and services are to be reported.

It is essential for the Postal Service's accounting and finances to be
open and transparent, for all costs and revenues to be reported fully
and accurately, and for such comprehensive financials to be the basis
for an accountable approach to the future disposition of revenues
generated in, and expended from, the Postal rate base. Otherwise, the
public can have no certainty that postal rates have a sound financial
basis, and competitors of the Postal Service will be unprotected from
the USPS' monopoly on First Class mail as a cross-subsidizing funding
mechanism for competitive ventures.

**Postal Service commercial ventures contravene established Federal
policy directives**

In the 1950\'s, President Dwight Eisenhower established a policy
directive, known as OMB Circular A-76, which has been updated or renewed
by each president since. Among other basic principles, Circular A-76
states: \"In the course of governing, Government should not compete with
its citizens. The competitive enterprise system, characterized by
individual freedom and initiative, is the primary source of national
economic strength.\"

Pursuant to Circular A-76, CCIA has urged the government to respect the
private sector\'s leadership in creating diverse goods and services and
robustly competitive markets and not to attempt to move into or take
over those markets, merely because it is possible to do so. The very
nature of the Internet has succeeded in lowering barriers to competitive
market entry, but government need not avail itself of these
opportunities. CCIA continues to believe that government can and should,
however, fill the white space and voids in society, where no other
player can effectively serve or is serving and where there is grave
public need, such as delivering First Class mail.

The Postal Service denies the relevance of Circular A-76 to its
activities, and flouts the clear terms of this important Federal policy.
It is deeply disturbing that the Postal Service attempts to distinguish
itself from the rest of U.S. Government, while enjoying the privileged
and protected position it holds as an independent establishment of the
Executive Branch with a statutory monopoly. As a uniformed service of
the United States, the Postal Service is very much a governmental
institution and plays an important role in our homeland security
infrastructure.

Given the clearly governmental and public service role of the mission of
the Postal Service, it is very important to maintain clear distinctions
between e-government and e-commerce activities, delineating the policy
considerations that government agencies should take note of when
contemplating new ventures that might compete against private-sector
enterprises. Toward this end, we commissioned a study by the most recent
Nobel Laureate for economics, Dr. Joseph Stiglitz. We believe this
study, [The Role of Government in a Digital Age]{.underline}, would be
instructive to the Commission as it evaluates the activities of the
Postal Service and considers the propriety of its electronic commerce
ventures. A copy of the study is attached to this filing.

**Conclusion**

The Postal Service and other government agencies certainly need to keep
pace with technology and the evolution of the Internet, but that need
not entail injecting the government into the thriving private
marketplace of electronic commerce. The technology and
telecommunications industry has created incredible new products and
services and is delivering them to consumers by creative and efficient
methods unheard of even five years ago. These offerings will continue to
proliferate and compete with each other in a dynamic environment so long
as the government and government-sponsored institutions play a limited
and noncompetitive role. With an infrastructure established though the
U.S. Treasury, taxpayer subsidies, statutory protections, and the
government-sponsored Postal Monopoly, the Postal Service's entrance into
these markets is both unfair to private companies and consumers, as well
as detrimental to competition and innovation.

We urge the Commission to approve recommendations to limit the
activities of the Postal Service and refocus the USPS on its fundamental
mission of delivering the mail. CCIA looks forward to working with the
Commission and its staff on this very important matter.

Ed Black February 7, 2003

President and CEO

Computer & Communications Industry Association

666 Eleventh Street N.W.

Suite 600

Washington, D.C. 20001

\(202\) 783-0070

eblack@ccianet.org