U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

88–825 PDF 2014

EXAMINING INNOVATIVE POSTAL PRODUCTS FOR 

THE 21ST CENTURY 

HEARING 

BEFORE THE

SUBCOMMITTEE ON FEDERAL WORKFORCE, 

US POSTAL SERVICE AND THE CENSUS 

OF THE

COMMITTEE ON OVERSIGHT 

AND GOVERNMENT REFORM 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

SECOND SESSION 

MAY 22, 2014 

Serial No. 113–118 

Printed for the use of the Committee on Oversight and Government Reform 

( 

Available via the World Wide Web: http://www.fdsys.gov 

http://www.house.gov/reform 

(II) 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM 

DARRELL E. ISSA, California, Chairman 

JOHN L. MICA, Florida 

MICHAEL R. TURNER, Ohio 

JOHN J. DUNCAN, JR., Tennessee 

PATRICK T. MCHENRY, North Carolina 

JIM JORDAN, Ohio 

JASON CHAFFETZ, Utah 

TIM WALBERG, Michigan 

JAMES LANKFORD, Oklahoma 

JUSTIN AMASH, Michigan 

PAUL A. GOSAR, Arizona 

PATRICK MEEHAN, Pennsylvania 

SCOTT DESJARLAIS, Tennessee 

TREY GOWDY, South Carolina 

BLAKE FARENTHOLD, Texas 

DOC HASTINGS, Washington 

CYNTHIA M. LUMMIS, Wyoming 

ROB WOODALL, Georgia 

THOMAS MASSIE, Kentucky 

DOUG COLLINS, Georgia 

MARK MEADOWS, North Carolina 

KERRY L. BENTIVOLIO, Michigan 

RON DESANTIS, Florida 

ELIJAH E. CUMMINGS, Maryland, Ranking 

Minority Member 

CAROLYN B. MALONEY, New York 

ELEANOR HOLMES NORTON, District of 

Columbia 

JOHN F. TIERNEY, Massachusetts 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

JIM COOPER, Tennessee 

GERALD E. CONNOLLY, Virginia 

JACKIE SPEIER, California 

MATTHEW A. CARTWRIGHT, Pennsylvania 

TAMMY DUCKWORTH, Illinois 

ROBIN L. KELLY, Illinois 

DANNY K. DAVIS, Illinois 

TONY CARDENAS, California 

STEVEN A. HORSFORD, Nevada 

MICHELLE LUJAN GRISHAM, New Mexico 

Vacancy 

LAWRENCE J. BRADY, Staff Director 

JOHN D. CUADERES, Deputy Staff Director 

STEPHEN CASTOR, General Counsel 

LINDA A. GOOD, Chief Clerk 

DAVID RAPALLO, Minority Staff Director 

SUBCOMMITTEE ON FEDERAL WORKFORCE, U.S. POSTAL SERVICE AND THE CENSUS

BLAKE FARENTHOLD, Texas, Chairman 

TIM WALBERG, Michigan 

TREY GOWDY, South Carolina 

DOUG COLLINS, Georgia 

RON DESANTIS, Florida 

STEPHEN F. LYNCH, Massachusetts, 

Ranking Minority Member 

ELEANOR HOLMES NORTON, District of 

Columbia 

WM. LACY CLAY, Missouri 

(III) 

C O N T E N T S 

Page 

Hearing held on May 22, 2014 ............................................................................... 1 

WITNESSES 

Mr. James P. Cochrane, Chief Information Officer and Executive Vice President, U.S. Postal Service 

Oral Statement ................................................................................................. 4 

Written Statement ............................................................................................ 7 

Mr. David C. Williams, Inspector General, U.S. Postal Service 

Oral Statement ................................................................................................. 18 

Written Statement ............................................................................................ 20 

Mr. Will Davis, Chief Executive Officer, Outbox, Inc. 

Oral Statement ................................................................................................. 24 

Written Statement ............................................................................................ 25 

Mr. Seth Weisberg, Chief Legal Officer, Stamps.Com 

Oral Statement ................................................................................................. 30 

Written Statement ............................................................................................ 32 

Mr. Patrick Eidenmiller, Director of Engineering and Technology, M-Pack 

Systems 

Oral Statement ................................................................................................. 40 

Written Statement ............................................................................................ 42 

Mr. Todd Everett, Chief Operating Officer, Newgistics, Inc. 

Oral Statement ................................................................................................. 53 

Written Statement ............................................................................................ 55 

APPENDIX 

May 8, 2014 Heritage Foundation Article, ‘‘Why the Postal Service Was 

Right to Side With Junk Mail Over Outbox.’’ Submitted by Rep. Clay .......... 76 

Exhibits from Patrick Eidemiller, M-Pack Systems ............................................. 81 

(1) 

EXAMINING INNOVATIVE POSTAL PRODUCTS 

FOR THE 21ST CENTURY 

Wednesday, May 22, 2014, 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON FEDERAL WORKFORCE, 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, 

Washington, D.C. 

The subcommittee met, pursuant to notice, at 9:00 a.m. in room 

2154, Rayburn House Office Building, the Honorable Blake 

Farenthold [chairman of the subcommittee], presiding. 

Present: Representatives Farenthold, Lynch, Norton, Clay, 

Neugebauer, and Issa. 

Staff Present: Molly Boyl, Majority Deputy General Counsel and 

Parliamentarian; Adam P. Fromm, Majority Director of Member 

Services and Committee Operations; Mark D. Marin, Majority Deputy Staff Director for Oversight; Jeffrey Post; Majority Senior Professional Staff Member; Sarah Vance, Majority Assistant Clerk; 

Peter Warren, Majority Legislative Policy Director; Kevin Corbin, 

Minority Professional Staff Member; Julia Krieger, Minority New 

Media Press Secretary; Juan McCullum, Minority Clerk; and Mark 

Stephenson, Minority Director of Legislation. 

Mr. FARENTHOLD. Good morning. The committee will come to 

order. 

As is traditional within the Oversight Committee, I would like to 

start by reading our mission statement. 

The Oversight Committee exists to secure two fundamental principles. First, Americans have the right to know that the money 

Washington takes from them is well spent. Second, Americans deserve an efficient and effective government that works for them. 

Our duty on the Oversight and Government Reform Committee 

is to protect these rights. Our solemn responsibility is to hold government accountable to taxpayers because taxpayers have a right 

to know what they are getting from the government. 

Our job is to work tirelessly in partnership with citizen watchdogs to deliver the facts to the American people and bring genuine 

reform to the Federal bureaucracy. This is the mission of the Oversight and Government Reform Committee. 

At this point, I would like to recognize myself for an opening 

statement. 

Today, we examine recent efforts by a number of private sector 

companies and startups to develop innovative postal products. 

While the Internet has been a boon for the national and local 

economies, it has been a mixed blessing for the Postal Service. 

2 

First class mail volume is down more than 33 percent from its 

peak in 2001 and continues to drop. Our package volume is growing rapidly thanks to e-commerce. Americans are rapidly changing 

how they communicate with one another and the Postal Service 

has struggled to adapt. However, that does not mean we are living 

in a post-U.S. Postal Service world. 

The Postal Service still has a vital role in our economy in our 

Nation affordably connecting even the most remote parts of the 

country. That is why innovation in the Postal Service is so important. We need an infrastructure in this country for moving matter, 

not just bits of data. 

The Postal Service and private sector companies have begun efforts to create new innovative postal products to preserve existing 

mail volume and create new demand for mail and possibly streamline the way mail is handled. 

Every aspect of the current operations of the Postal Service is 

targeted and includes innovations in design, online purchasing, ecommerce and greater consumer targeting for advertising. 

Today, I am looking forward to hearing from private sector companies and discussing with them their efforts to develop new postal 

products and services. Specifically, what problems, if any, have 

they encountered along the way in working with the Postal Service 

to develop and implement these innovative products. 

Now, if ever, is the time for the Postal Service to embrace innovations presented by private sector companies. Private sector companies are more than willing to spend billions of dollars to implement new products and designs that can help bring future revenue 

to the Postal Service. 

The tech community often uses the word disruptive. Disruptive 

is not necessarily a bad thing. It is a change. When my wife was 

in her Junior League days, she used to refer to that is the way we 

have always done it. We have to be very wary of falling into the 

trap of that is the way we have always done it. 

If companies continue to be shut down or steam-rolled by the 

Postal Service bureaucratic red tape before they have a chance to 

get off the ground, future innovators will look elsewhere to present 

their fresh ideas. 

In addition, I hope to hear success stories from private sector 

companies that work with the Postal Service and how future and 

how future entrepreneurs and innovators can create more marketable and open environments in the Postal Service. There is need 

for innovation, whether it is clusterboxes for secure package delivery or better access to postal databases like changes of address, 

there are many areas ripe for innovation. 

My fear is as a government watchdog and taxpayer, without reform and innovative new postal products, the American people are 

going to be left footing the bill for a taxpayer bale out of the Postal 

Service. That is the last thing we need right now. 

I look forward to hearing from our panel and believe there really 

are smart ways the Postal Service can lower its costs and improve 

its service through innovation and private partnerships. I hope we 

can bring them to light today and find a way to move the Postal 

Service closer to Internet speed. 

3 

Mr. FARENTHOLD. Before I recognize Mr. Lynch for his opening 

statement, I ask unanimous consent that our colleague from Texas, 

Mr. Neugebauer, be allowed to participate in the hearing. Without 

objection, so ordered. 

Mr. Lynch, your opening statement, please, sir. 

Mr. LYNCH. Thank you very much, Mr. Chairman. 

I want to thank you, first of all, for holding this hearing to examine the development of innovative postal products and services by 

the United States Postal Service. I would also like to thank our 

panel of witnesses, some very innovative individuals, for helping us 

with this work. 

In November 2013, the Postal Service entered into a strategic 

partnership with online retailer, Amazon.com to test Sunday package delivery in select markets, otherwise known as seven day delivery. The Amazon pilot program has proven widely successful and 

is the primary reason why the Postal Service has recently demonstrated the ability to grow revenue in the face of its most difficult financial position. 

In its quarterly financial report released on May 9, 2014, the agency reported a revenue increase of $379 million over the same 

reporting period last year, its third straight quarter of revenue 

growth due in large part to $252 million or eight percent increase 

in shipping and package revenue. 

In light of these results, Sunday package service has now expanded to several other cities across the country and the agency is 

working to establish similar partnerships with other companies. 

This serves to illustrate that the agency can experience positive financial results when it capitalizes and builds upon what it already 

does best, utilizing an unparalleled and universal mail network 

that is driven by a hard working, dedicated workforce to deliver the 

mail now seven days a week. 

It is an example of innovation rather than degradation of existing postal products and services. We would be well served to take 

a similar approach as we continue to undertake the critical task of 

reforming today’s Postal Service. 

As evidenced by the markup yesterday in the full committee, 

Chairman Issa continues to put forth a variety of misguided proposals that presume we can enhance the financial viability of the 

Postal Service by degrading the very services that have come to define the agency in the eyes of the American people. 

I simply do not agree that we can reform the Postal Service for 

the better by eliminating the current six day mail delivery, by 

mandating a wholesale conversion of door delivery addresses to 

curbside, clusterbox or sidewalk delivery or by asking postal customers to pay a so called legacy fee in order to retain their door 

delivery service. 

Such proposals would only place the Postal Service at a greater 

business disadvantage and severely damage its long term viability. 

Instead, we can encourage the Postal Service to build upon its 

existing postal products and services in order to further set itself 

apart in the mailing industry. I commend Ranking Member 

Cummings for his strong and continued leadership in this area and 

I am proud to co-sponsor his legislation, H.R. 2690, the Innovate 

Delivery Act. 

4 

This thoughtful and alternative approach to postal reform would 

establish a chief innovation officer within the Postal Service to lead 

the development of innovative postal products and services that fall 

in line with emerging information technology and changing market 

trends. 

It would also require the chief innovation officer to ensure that 

such products maximize revenue for the Postal Service. Postal innovation will be a key and necessary component to meaningful 

postal reform package and mail delivery. I understand there are a 

variety of perspectives on how best to facilitate that innovation in 

a matter that will place the Postal Service on more solid financial 

footing. 

Accordingly, I very much look forward to discussing the issues 

with our witnesses. I look forward to your input. 

I yield back the balance of my time. 

Mr. FARENTHOLD. Thank you, Mr. Lynch. 

Members will have seven days to submit opening statements for 

the record. We will now recognize our panel. 

Mr. James P. Cochrane is the Chief Information Officer and Executive Vice President of the United States Postal Service. Mr. 

David C. Williams is the Inspector General for the United States 

Postal Service. Mr. Will Davis is Chief Executive Officer of Outbox, 

Inc. Mr. Seth Weisberg is Chief Legal Officer of Stamps.com. Mr. 

Patrick Eidenmiller is Director of Engineering and Technology at 

M-pack Systems. Mr. Todd Everett is Chief Operating Officer of 

Newgistics, Inc. 

Pursuant to committee rules, all witnesses will be sworn before 

they testify. Please rise and raise your right hand. 

Do you solemnly swear or affirm that the testimony you are 

about to give will be the truth, the whole truth, and nothing but 

the truth? 

[Witnesses respond in the affirmative.] 

Mr. FARENTHOLD. It is my understanding the House will have 

votes around 10:40 and it will be a rather long series of votes. I 

want to get everything covered. If we can get it done by 10:40, you 

all do not have to sit around here for over a hour while we go vote 

and I might be able to make an earlier flight back to Texas. 

It would be a win-win if you abided by the timer that gives you 

five minutes for your testimony. We will then ask questions. Your 

entire written statement is placed in the record and available for 

this committee and others to review. 

Mr. Cochrane, you are recognized for five minutes. 

WITNESS STATEMENTS 

STATEMENT OF JAMES P. COCHRANE 

Mr. COCHRANE. Good morning, Chairman Farenthold, Ranking 

Member Lynch and members of the subcommittee. 

Thank you for calling this hearing on examining innovative postal products for the 21st century. 

My name is Jim Cochrane and I serve as Chief Information Officer and Executive Vice President of the United States Postal Service. I oversee the integration of technology innovation in all aspects 

of our business. 

5 

During my 39 years with the Postal Service, I have developed a 

broad perspective on the business, how we serve the marketplace 

and our customers. This business acumen is essential as technology 

now plays a foundational role in virtually every postal product and 

service. 

Emerging technologies, while exciting, oftentimes also challenge 

us with their potentially disruptive effects. Effectively traversing 

this emerging disruptive continuum is my responsibility and a matter of survival for the Postal Service. 

The Postal Service operates one of the largest technology infrastructures in the world. It is supported and co-developed by some 

of the most respected technology companies, as well as many small 

businesses that bring fresh insights. 

Our goals are simple. Every day we focus on how we can innovate with technology and new partnerships to generate revenue, reduce expenses, deliver consistent and reliable service, and a world 

class customer experience. 

Though our goals are simple, our business model is both complex 

and diverse. For nearly 40 years the Postal Service workshare programs have shared the responsibility for efficiency and innovation 

with business partners. This collaborative model is guided by the 

premise that our profits and brand are in hand when our partners 

are profitable and our joint customers receive an increased value 

proposition. 

Printers, software vendors, mail service providers, transportation 

companies and parcel integrators, all play a vital role and together, 

we have built an industry around the market needs. 

Disruption in the highly competitive package market is an excellent example of how customer’s demand evolved and we adapted. 

Driven by e-commerce and in particular, free shipping, there has 

been a dramatic shift to more ground-based solutions. 

Parcel select is an innovative product developed to answer that 

market demand. It is a workshare program that leverages the 

world class processing and transportation network of consolidators 

such as Newgistics with the unmatched reach of our delivery network providing a great customer solution. 

Parcel select also enabled the concept of coopetition where UPS 

and FedEx are traditional competitors, provide network logistics 

and the Postal Service provides the last mile service, creating a 

win-win for shippers and consumers. 

The package market is continuing to change. The new norm involves same day delivery, Sunday delivery, parcel lockers, delivery 

customization and constant real time tracking. Consumers are demanding these new services without an increase in costs, requiring 

that we adapt or face irrelevance. 

The Postal Service is helping businesses make mail more valuable, engaging and interactive through intelligent mail barcodes 

and financial incentives for mobile optimized mail for creating both 

the digital reflection for hard copy and a digital action for response. 

We are building new digital products that will leverage our 

brand of privacy, security and trust. We welcome creative ideas 

from individuals, companies and entrepreneurs regarding new 

business concepts and technologies. 

6 

Our unsolicited proposal program provides the public a venue to 

submit new technologies and ideas to advance the mailing industry. In order to be adopted, these ideas must align with the Postal 

Service mission, have a clear path to profitability and generate 

postal revenue. They must not damage our respected brand or conflict with existing products or services. 

The Postal Service receives ideas from a variety of sources. Some 

of these ideas are not new concepts, some are already being pursued internally and some cannot be adopted because of restrictive 

laws. 

The role of the Postal Service in American life and business is 

changing at a rapid pace. More than ever, systems are using a wide 

range of technologies to communicate, transact business and shop. 

Ever changing technology presents the Postal Service with opportunities. But our success is dependent in part on how fast we can 

evolve. We remain guided by our charter to bind the Nation together and our commitment to provide the value and service upon 

which American businesses and consumers depend. 

The Postal Service continues to make great strides in adapting 

to the changing mailing and shipping needs of the country. However, our efforts are severely limited by an outdated, legally restrictive business model. We have the responsibility to provide and fund 

universal service for our Nation but we do not have sufficient authority or flexibility to efficiently carry out that mandate. 

We therefore absolutely need comprehensive postal reform legislation to return us to financial viability. Such legislation should 

provide us with clear authority to offer new products and services 

that allow us to take full advantage of our current infrastructure 

and competencies. 

Further, we urge Congress not to make the Postal Service task 

even more difficult by placing further restriction on our ability to 

innovate and compete. The Postal Service competes vigorously but 

we also compete fairly consistent with our legal obligations. 

Mr. Chairman, we look forward to continuing to work with you 

and the subcommittee to accomplish meaningful postal reform legislation and continue to deliver innovation to the American public. 

I would be pleased to answer any questions you might have. 

Thank you. 

[Prepared statement of Mr. Cochrane follows:] 

7 


Insert offset folio 1 here 88825.001
8 


Insert offset folio 2 here 88825.002
9 


Insert offset folio 3 here 88825.003
10 


Insert offset folio 4 here 88825.004
11 


Insert offset folio 5 here 88825.005
12 


Insert offset folio 6 here 88825.006
13 


Insert offset folio 7 here 88825.007
14 


Insert offset folio 8 here 88825.008
15 


Insert offset folio 9 here 88825.009
16 


Insert offset folio 10 here 88825.010
17 


Insert offset folio 11 here 88825.011
18 

Mr. FARENTHOLD. Thank you. 

Mr. Williams. 

STATEMENT OF DAVID C. WILLIAMS 

Mr. WILLIAMS. Mr. Chairman, Mr. Lynch and members of the 

subcommittee, the postal industry has a long history of working 

with the private sector and others to spur innovation. 

Historically, mail transport fueled the fledgling railroad and airline industries. Postal applications also stimulated advances in 

handwriting recognition technologies. They acted as a platform for 

the private sector innovators in the electronic postage, presorting 

and mail order industries; and the Postal Service imposed the overlay of the Zip Code across the country to the benefit of businesses 

and researchers. 

Innovation is even more important in todays age of digital globalism of today. The ungovernable Internet has changed the world, 

but great opportunities and enhanced capabilities exist alongside 

awkward new systems and unfamiliar risks. Lastly, the forces of 

creative destruction have ravaged traditional communications and 

logistics systems. 

In this environment, the job of an infrastructure like the Postal 

Service is to support citizens and businesses as they try to compete 

and position themselves, while it also takes care to assure that efficient market forces prevail and are not undermined. 

To continue in this role, understanding the changing world and 

rapid adaptation are increasingly critical endeavors. The Postal 

Service faces the tricky challenge of modernizing traditional products as it provides support services for emerging technologies. Success will largely depend on its ability to innovate and embrace the 

innovations of others. 

As a result, the continual strengthening of the Postal Service’s 

processes for innovation will be needed that include: seeking to understand the frustrations and supporting emerging needs of people 

and commerce; developing a comprehensive innovation strategy; 

clarifying the entry point for innovators and providing staff to join 

innovators in navigating the huge postal structure and remain with 

them until the proposal is resolved; strengthening its skills in assessing the financial viability of proposals; developing the ability to 

engage in rapid proto-typing of new products and operational innovations; and protecting its intellectual property and respecting that 

of others. 

When pursuing innovation, partnerships with the private sector 

and the government are important in bringing in new ideas and 

specialized competencies, for sharing risks and for leveraging the 

costs of research and development investments. 

There are several areas where innovation opportunities seem 

particularly rich. One is support for e-commerce, e-health and egovernment transactions, at the front end by providing a portal for 

identity verification for individuals and e-businesses and providing 

access to digital currency exchange instruments and at the back 

end, by assisting with packaging and shipment of parcels. 

Second is using micro-warehousing, virtual post office boxes and 

e-platform services to help small businesses and innovators with logistics and shipping solutions. 

19 

Third is providing seamless physical and digital access to Postal 

Service network for the public and commerce by linking together 

its website, post offices and digitally-enabled carriers. 

Fourth is conducting digital analysis of the vast data now generated throughout the network for operational efficiencies, new revenue ideas and business intelligence. 

Together, these opportunities can tighten the integration of data 

streams and their supporting matter streams. 

The Internet, smart devices, search engines and cloud storage 

have laid the foundations for a changing world. An aspect of what 

will come next, atop this foundation, will likely be an ecosphere 

that continues to be ungovernable and chaotic with endless challenges, learning curves, and substantial creative destruction. 

The ability of society to propel rather than retard progress in 

these areas will depend in part on the competency of the postal infrastructure to support American commerce and citizens through 

the coming era that will combine and deploy major new technologies that include: additive manufacturing, also known as 3–D 

printing; the Internet of things, linking ubiquitous sensor nets; 

augmented realities and smart devices; big data analytics; advanced robotics that incorporates machine learning; and 

nanotechnology. 

The world posts were slow to grasp and adapt their role in the 

early phases of the digital age and were partially constrained from 

doing so legally. The next phases of this age of technology will likely be more disruptive than we have seen to date. 

The Postal Service must be highly agile and develop an intuitive 

sense of its changing role and the new challenges facing American 

businesses and citizens. A key aspect of the ability of the Postal 

Service to transform must include stronger competencies for embracing and implementing innovation. 

Thank you, Mr. Chairman. 

[Prepared statement of Mr. Williams follows:] 

20 


Insert offset folio 12 here 88825.012
21 


Insert offset folio 13 here 88825.013
22 


Insert offset folio 14 here 88825.014
23 


Insert offset folio 15 here 88825.015
24 

Mr. FARENTHOLD. Thank you. 

We will now move to some of our private sector folks, Mr. Davis 

with Outbox. 

STATEMENT OF WILL DAVIS 

Mr. DAVIS. Thank you, Mr. Chairman. 

Innovation is in the title of the hearing today, heard of, and spoken about at least a dozen times in earlier testimony. I feel the 

need to go a bit off script. A movie is the only thing that comes 

to mind. A favorite of my daughter is the Princess Bride. 

There is a scene in there where Inigo Montoya is caught up with 

a band of criminals and there is a criminal mastermind that keeps 

using the word inconceivable, inconceivable when all his plans 

don’t go as planned. Montoya looks at him and says, You keep 

using that word. I do not think it means what you think it means. 

That is a bit how I feel today about the word innovation. I do 

not think it means what you think it means. The reason for this 

is because innovation, at its heart, is disruptive. It destroys things. 

It kills jobs. 

If you think that is too bold a statement consider this fact. In 

1926, the S&P Index was formed. The average ten year at that 

time of companies on the Index was 60 years. Today, it is less than 

15. In fact, since its inception, there is only one company that remains on the S&P Index and that is General Electric one single 

company. All those other companies are gone or destroyed. 

But for all of its destructive capabilities, there is almost a salvific 

effect of pursing innovation. It is an even, narrow road; it is the 

narrow path of putting off old business models and secure cash 

flows and grasping for something that is uncertain. 

The promise of innovation comes in the form of new jobs, new 

marketplaces for every job, every company. For every market that 

is destroyed through embracing innovation, two more pop up in its 

place in markets, ideas, new concepts and new workforces that simply could not have been fathomed. 

What happens in that disruptive process is incumbents usually 

fail. They usually die off and go the way of all those other companies on the S&P 500. So as we talk about innovation of the Postal 

Service, we have to understand that truly embracing it means a 

fundamentally different Postal Service. 

It means that in 10 years, it looks almost unrecognizable from 

the Postal Service today but that does not mean it is worse off. In 

fact, it does not mean that jobs have to be destroyed within the 

Postal Service. It means that new ones can be created. 

Make no mistake, innovation will come, disruption will come. In 

that regard, it is a bit like junk mail, it is coming whether you like 

it or not. As we talk about innovation and embracing it, we need 

to understand it means hard, fundamental core changes to the 

business model, embracing it means destruction but it also means 

new markets, new jobs and new opportunities. 

Thank you. 

[Prepared statement of Mr. Davis follows:] 

25 


Insert offset folio 16 here 88825.016
26 


Insert offset folio 17 here 88825.017
27 


Insert offset folio 18 here 88825.018
28 


Insert offset folio 19 here 88825.019
29 


Insert offset folio 20 here 88825.020
30 

Mr. FARENTHOLD. Thank you. 

Mr. Weisberg. 

STATEMENT OF SETH WEISBERG 

Mr. WEISBERG. Thank you, Mr. Chairman. 

I am from Stamps.com, a leading PC postage company. PC postage is Internet-based software that allows customers to print their 

own postage using their existing computer and printer. Stamps.com 

serves over 500,000 registered customers primarily small businesses. 

In 1999, we became the first company to offer a software only PC 

postage solution, enabling customers for the first time ever to print 

real postage from any Internet-connected PC and standard printer. Just seven years ago, PC postage accounted for $250 million in annual postage sale. Last year, it accounted for over $3.25 billion 

in postage sold. Stamps.com postage growth alone was more than 

35 percent year over year. That is consistent double digit growth 

every year, even through the heart of the recession. 

Virtually all the Priority and Express growth surge in recent 

years is generated through the PC postage industry channel. A recent study shows revenue through the industry PC postage channel 

costs two cents per $1.00 of revenue compared to 47 cents per $1.00 

through a USPS-owned retail outlet. 

PC postage produces secure, sender-identifiable mail which is important for security against biological or other attacks. PC postage 

provides customers with cutting edge technology without the Postal 

Service having to pay for research, development, support or maintenance. 

Stamps.com has launched an enterprise service targeted to organizations with multiple geographic locations. It features enhanced 

reporting that allows a central location such as a corporate headquarters greater visibility and control over postage expenditure 

across their entire network of locations. 

An e-commerce merchant with multiple stores can use 

Stamps.com to consolidate all their orders so they can ship them 

out with one click, they can directly import all their order data 

from the most popular online marketplaces and shopping cart software and then automatically print the shipping label. All the shipping data, including the USPS tracking, automatically posts back 

to their web store. 

Stamps.com also automatically keeps the buyer informed, orders 

the carrier pick up, sends an electronic manifest to the Postal Service and generates a scan form so all the carrier does is scan the 

form once and all the packages are automatically in the Postal 

Service’s computer system. 

PC postage is based on a public-private partnership with the 

Postal Service regulating industry participants. Our products must 

complete extensive USPS testing and evaluation in the areas of 

operational reliability, financial integrity and security. 

The Postal Service also partners with the industry to achieve 

mutual win-win goals of improving the customer experience, increasing revenue and minimizing costs. For PMG, the CIO sitting 

on this panel and so many of the dedicated Postal veterans who 

have ably worked with us for many years deserve much credit for 

31 

the success story that is the partnership between the Postal Service and the PC postage industry. 

We believe public-private partnerships are the best path forward 

as technology innovation becomes increasingly important for the future. Having the Postal Service create its own technology is not the 

best approach. Instead, it should provide incentives for industry innovation. This allows customers to pick the best technology solutions for their needs. 

PC postage provides jobs for the industry and the Postal Service. 

Every package produced is ultimately delivered by a city or rural 

letter carrier. Growth in PC postage means more packages to deliver, more letters to deliver and more volume to service. 

Thank you for the invitation to testify today. 

[Prepared statement of Mr. Weisberg follows:] 

32 


Insert offset folio 21 here 88825.021
33 


Insert offset folio 22 here 88825.022
34 


Insert offset folio 23 here 88825.023
35 


Insert offset folio 24 here 88825.024
36 


Insert offset folio 25 here 88825.025
37 


Insert offset folio 26 here 88825.026
38 


Insert offset folio 27 here 88825.027
39 


Insert offset folio 28 here 88825.028
40 

Mr. FARENTHOLD. Thank you, Mr. Weisberg. 

Mr. Eidemiller. 

STATEMENT OF PATRICK EIDEMILLER 

Mr. EIDEMILLER. Good morning, Mr. Chairman and members of 

the subcommittee. 

My name is Patrick Eidemiller and I am Director of Engineering 

and Technology for M-pack Systems. 

We are a small startup company that produces a better pharmacy package called m-pack, the future of prescription packaging. 

M-pack was invented by 71 year old navy vet named Dick Lee. This 

is m-pack, the flat pharmacy box. This is a traditional ground box. 

M-pack has many advantages but most important are this vial 

is tamper evident, this bottle is not. This bottle of water is tamper 

evident; this prescription is not. Our entire drug supply chain has 

more security in this than we do in this. 

We also have a lot more label space so it is much easier to read. 

Lastly, it is much more space efficient and much more compact. Mpack is made in the United States in Erie PA. We are adament 

about U.S. production. 

We have another advantage and that is the reason I am here 

today. The USPS provides a favorable rate for what is called a machinable flat. This is a machinable flat; this is a parcel. The over 

the counter rate for this parcel is $2.20. The over the counter rate 

for the machinable flat is $1.56, so there is a 29 percent savings 

to the taxpayer for every prescription medication mailed in the 

United States if it is classified as a machinable flat. 

Realizing what we had with the flat vial and considering the U.S. 

Government is one of the largest users of prescriptions by mail, we 

saw an opportunity really to save the taxpayers’ money and provide 

a better and safer vial through the mail and through the post office. 

Working with the Henrietta manufacturer in New York, we developed this envelope which meets all mechanical requirements of 

a machinable flat. We tested it on test equipment in Ft. Worth, 

verified that it worked and received our approval on June 17, 2011 

that our flat mail piece had been approved. 

Over the next 18 months, we continued to improve and refine our 

product to look like this, smaller, lighter, and cheaper. More weight 

is more costly, we took two ounces out of this envelope. We put together a package that we could 50 a second; this one was 15 per 

minute. We put in 18 months of work to go from this to this. 

We resubmitted our package plus some of the internal improvements that occurred to us. We also wanted to retest. Our packages 

were rejected, not only this new package but the existing one as 

well. We were shocked. This had been approved once. It was for a 

completely different reason. It was not the fact that it doesn’t meet 

the mechanical requirements of a machinable flat which is bent 

like this, bent like this. It was that a box in an envelope was not 

a machinable flat. That is why we were rejected. 

We were shocked. We had already been approved. We went back, 

I sent a letter to Gary Reblin. I love the flat rate box and use them 

all the time and we thought we had a sympathetic ear. We were 

referred back to Mail Standards and got a very curt response that 

41 

basically said, ‘‘Thank you especially for your persistence. Unfortunately, this piece with its current content qualifies as a parcel. If 

you change the contents, please contact us again.’’ 

If we change the contents from this to this, please contact us 

again. The entire point, I’m sorry, is not this; the point is this. This 

is a better, safer vial but because of the shape it is 29 percent 

cheaper. 

We felt frustrated by our entire experience with the post office. 

We went to the post office for a reason. The post office provides 

value, the post office is the only agency that can legally place prescription drugs through a mail slot or in the mailbox and not leave 

it on our doorstep. That is an important factor. 

We want to work with the post office. We asked, we begged, we 

pleaded. We will change our package, we will test it at our expense. 

We want to use the post office and it fell on deaf ears. 

We went to the private sector, UPS and they said, you know 

what, we will take it, no questions asked, because we know how 

many of these we can put on an airplane, it is very safe, a second 

day service at a dollar apiece. That is why I am here. 

Thank you, members of the committee. 

[Prepared statement of Mr. Eidemiller follows:] 

42 


Insert offset folio 29 here 88825.029
43 


Insert offset folio 30 here 88825.030
44 


Insert offset folio 31 here 88825.031
45 


Insert offset folio 32 here 88825.032
46 


Insert offset folio 33 here 88825.033
47 


Insert offset folio 34 here 88825.034
48 


Insert offset folio 35 here 88825.035
49 


Insert offset folio 36 here 88825.036
50 


Insert offset folio 37 here 88825.037
51 


Insert offset folio 38 here 88825.038
52 


Insert offset folio 39 here 88825.039
53 

Mr. FARENTHOLD. Thank you very much. 

Mr. Everett. 

STATEMENT OF TODD EVERETT 

Mr. EVERETT. Good morning. 

Today, I will describe to the subcommittee how the U.S. Postal 

Service has partnered with and helped make it possible for my 

company, Newgistics, to develop innovative products responsive to 

the needs of the direct-to-consumer retailers, manufacturers, distributors and logistics service provides. 

Thank you, Mr. Chairman and members of the subcommittee, for 

allowing me to speak on behalf of Newgistics at today’s hearing. 

My name is Todd Everett. I am the Chief Operating Officer of 

Newgistics. Newgistics is a privately held company based in Austin, Texas, with more than 400 people on our payroll. We were 

formed in 1999 on the premise that we could develop a better way 

for consumers to return merchandise to retailers. 

Today, we are a leading provider of technology-enabled solutions 

for direct-to-consumer retailers, manufacturers, distributors and logistics service providers. Our success is due in no small part to the 

Postal Service and its willingness to listen and work with private 

entities like Newgistics to develop innovative solutions. 

More specifically, we offer a national, integrated parcel delivery 

and return service for our customers. We are able to provide costeffective, reliable and convenient shipping solutions by working 

with the Postal Service to provide last-mile delivery and first-mile 

pickup. 

When Newgistics was founded, we viewed ourselves as a technology company that would provide information to retailers regarding returned packages. Soon, however, we evolved into a ‘‘returns’’ 

logistics company, handling returns for retailers, making use of innovative technologies. 

We concluded that customers wanted to be able to return packages easily and retailers wanted to make their returns more efficient and cost-effective. 

Therefore, we developed a proprietary intelligent returns solution, making use of bar codes embedded in our Newgistics 

smartlabel. These intelligent bar codes provide us and our customers with detailed information that quickly enables our customers to manage their transportation and returns-processing resources. 

As we evolved, we discussed with the Postal Service the possibility of creating a new, convenient process for handling returns for 

large shippers of merchandise that made use of Newgistics 

smartlabel. 

Based upon our collaboration with the Postal Service, the USPS 

developed one of its most innovative products, the Parcel Return 

Service, also known as PRS. PRS is a Postal Service program 

under which approved providers like Newgistics are allowed to retrieve returned parcels directly from designated postal service facilities. 

Such early retrieval of returned parcels enables us to provide advanced data and customized return services to retailers. 

54 

We found that the Postal Service was very receptive to working 

with us. Beginning in late November 2001, we had numerous meetings with the Postal Service. Following those meetings, in May 

2003, the Postal Service sought permission from the Postal Rate 

Commission to test PRS. 

Approval was granted in September 2003 and testing began in 

October 2003. After two years of successful testing, in October 

2005, the Postal Service sought permission for PRS to become a 

permanent class of mail. The Post Rate Commission approved PRS 

on or about March 3, 2006. From that point, we were able to implement our returns solution, including Newgistics smartlabel in conjunction with the PRS program. 

Our intelligent parcel return solution developed in collaboration 

with the Postal Service simplifies the return process by offering 

consumers pre-paid return via Postal Service pickup at their home, 

workplace or drop-off at any mailbox or post office. That is, via our 

solution, packages enter into our system through the Postal Service’s vast retail and collections network. 

Our solution also gives consumers returning their product confidence that their return will be handled expeditiously. 

In addition, our parcel return solution has enabled Newgistics to 

expand its product offerings to include parcel delivery, fulfillment 

and e-commerce solutions to our customers. 

Put simply, the Postal Service has been and continues to be a 

willing and important partner in our efforts to develop innovative 

solutions that bring significant value to our customers and their 

consumers. 

Likewise, we understand that PRS also has been successful from 

the Postal Service’s perspective. Based on the most recent available 

data, the Postal Service’s parcel return service continues to grow. 

In the USPS’ fiscal year 2013, the Postal Service handled more 

than 50 million PRS packages, generating more than $120 million 

in postal revenue. 

Mr. Chairman and members of the subcommittee, thank you for 

the opportunity to testify at the hearing today. 

[Prepared statement of Mr. Everett follows:] 

55 


Insert offset folio 40 here 88825.040
56 


Insert offset folio 41 here 88825.041
57 


Insert offset folio 42 here 88825.042
58 

Mr. FARENTHOLD. Thank you very much, Mr. Everett. 

We are going to break with tradition a little bit here. Normally, 

I would ask the first round of questions. Mr. Lynch has to go to 

another committee, so I am going to allow him to ask his questions. 

Mr. LYNCH. Thank you, Mr. Chairman, for your indulgence. I appreciate that. 

I thank the members of the panel for their help. It has been a 

very interesting discourse thus far. 

When I think about the future, the next generation of the U.S. 

Postal Service, I tend to think about what they have going on in 

Switzerland. Pitney Bowes, one of our companies, has a system 

over there that they have rolled out. It is called a digital mail scan 

where I can pull up my mail. As it arrives at the regional mail facility, I can go on my secure website and see my mail before it is 

delivered. If I don’t like what is there, I can click on it and say, 

do not deliver. 

Mr. Davis when you say junk mail is coming but not necessarily. 

It is not as inevitable as you think. You can click on it and then 

tell it not to deliver it. That is a new iteration for the Postal Service that is out there. I think that will be coming to the United 

States at some point. 

It would be a great thing for the environment because of the 

huge drop in mail volume because people won’t be getting mail 

they don’t want in their mailbox. At my apartment in D.C., that 

is 90 percent of what I get, circulars and stuff like that. If my wife 

and girs didn’t get the sale information they get every day, I would 

probably save a ton of money. 

The volume will drop and that will be good for the environment. 

It will be a terrible thing for the Postal Service national letter carriers, it will drop the volume, but that is really constructive 

change. That is what we will have to deal with at some point. 

What the Chairman of the full committee has in mind is putting 

out about 1.5 million of these steel boxes in neighborhoods all over 

America, in urban areas, in towns that you must change 50 million 

door delivery addresses to clusterboxes so even if there are 100 addresses in a box, it comes to 1.5 million. 

If you make them bigger, put 200 in there, you can drop that to 

maybe 750,000. That is a huge, huge expense, even where it is feasible. Once we have 750,000 or 1.5 million steel boxes out there all 

over America, how much flexibility do you have in light of technological changes coming. 

Putting a steel box in the middle of the neighborhood and telling 

senior citizens, you can walk a quarter of a mile to get your mail, 

it is disruptive in a way but that is not innovation. That is going 

backward in time. Come on out and walk down to a steel box and 

get your mail. That is not creative. That is extremely costly and inefficient and it reduces our flexibility, I believe, in terms of what 

we are doing next. 

Mr. ISSA. Would the gentleman yield so I could respond? 

Mr. LYNCH. No, I am going to have to leave. You can talk about 

me while I am gone. 

Mr. ISSA. My pleasure. 

Mr. LYNCH. I am sure it is, Mr. Chairman. 

59 

When I think about the idea, as well, of going to five day delivery, another bad idea but popular around here, the President supports it, the Chairman supports it, I oppose it. 

Most innovation tries to tie in with what society is doing. It tries 

to answer a need that is out there. Where I live, which is common 

in America today, we operate on a seven day schedule. All the 

stores that used to be open five days, long ago they went to seven 

days and now the post office, in the spirit of innovation, is going 

to close for two days every week. I think that is the wrong direction. 

Mr. Davis? 

Mr. DAVIS. You had a fabulous example of citizens in Switzerland 

being able to unsubscribe from junk mail. In fact, that technology 

existed in the United States for two years We brought that technology to the States with Outbox. In fact, we unsubscribed over 1 

million pieces of junk mail for our users and were able to do it 

through the digital delivery and presentment of postal mail. 

We found even though they unsubscribed from volume, we can 

measure intent and intent is the holy grail for advertising. When 

we measured intent, we could know exactly what they wanted, 

what they preferred or not. That type of information is missing. 

That is why it is so unfortunate. 

Mr. LYNCH. Reclaiming my time, all I am saying is want to empower the customer. The taxpayer is not involved. This is the postal customer that is picking up the tab. We don’t give tax money to 

the Postal Service. They survive on the money they get from 

stamps. 

I want to empower the customer so they don’t have to go to any 

company, they can see their mail when it arrives at the regional 

postal center and click off on it if they don’t want it delivered. That 

I think is constructive change, it is innovative change and will take 

us to a whole new world. 

I think that would lower the cost and make it more efficient and 

improve the Postal Service. 

I am beyond my time. Thank you for your indulgence, Mr. Chairman. 

Mr. FARENTHOLD. Thank you very much. 

Mr. Clay, did you have votes as well coming up? 

Mr. ISSA. The gentleman from Missouri is always welcome to 

speak in this committee. 

Mr. CLAY. Thank you, Mr. Chairman and Chairman Issa, I appreciate that. 

In 2011, the Inspector General for the Postal Service released a 

two part report on the Postal Service’s role in the digital age. Included in part two of the report was the idea that the Postal Service expanding into hybrid and diverse hybrid mail services. 

Mr. Williams, can you briefly explain what the services and 

elaborate on why it may be beneficial for the Postal Service to expand into these areas? 

Mr. WILLIAMS. We believe that the ability to print the letter at 

the point of delivery would keep a lot of the mail out of the system—the idea of sitting on transports and fuel and crowding 

through the sorting plants would be a very good idea. It allows varVerDate Aug 31 2005 10:15 Aug 14, 2014 Jkt 000000 PO 00000 Frm 00063 Fmt 6633 Sfmt 6633 C:\DOCS\88825.TXT APRIL
60 

iation also among the regions where you could print different letters for different zip codes. 

Mr. CLAY. In your opinion, has the Postal Service put the cart 

before the horse by closing the distribution centers before they 

have a real plan to go forward to lessen the volume of mail? 

Mr. WILLIAMS. I do. I think there is excess capacity inside those 

sorting centers but I don’t believe it should, as you said, spring out 

in advance of seeing what the effect and impact of this. 

Picking the timing for innovation is devilishly difficult and if we 

present something that isn’t immediately embraced and we have 

burned the ships behind us and closed off the possibility of using 

the other network, it would be a very serious mistake. 

Mr. CLAY. The hybrid and reverse hybrid mail service sound 

similar to the business model of one of our witnesses here today. 

Mr. Davis, your company, Outbox, was a fee-based service that 

gave customers a choice to bypass physical mail, correct? 

Mr. DAVIS. Correct. 

Mr. CLAY. If I am correct, your business model was dependent on 

the participation of the Postal Service, its infrastructure and customer participation, correct? 

Mr. DAVIS. Correct. 

Mr. CLAY. This year, Outbox announced that it would terminate 

its digital mail operation through a bar code. You informed customers why Outbox was shutting down its service. In the post 

signed by you and your business partner, you mentioned that initial tests with the Postal Service showed positive signs of success 

and operational simplicity but the deal didn’t work out. Is that correct? 

Mr. DAVIS. Absolutely. 

Mr. CLAY. Additionally, you described your visit with the Postal 

Service’s senior leadership as a Mr. Smith goes to Washington moment where senior leadership made it clear they would never participate in any project that would limit junk mail and that they 

were immediately shutting down your partnership. Is that correct? 

Mr. DAVIS. Correct. 

Mr. CLAY. Mr. Davis, in developing your business plan, were you 

aware that advertising mail represented a significant portion of the 

Postal Service’s volume and revenue? 

Mr. DAVIS. Yes. 

Mr. CLAY. As a self sustaining entity, that has to generate revenue, were you aware that the Postal Service has a right to choose 

who it works with it based on its bottom line? 

Mr. DAVIS. Absolutely. 

Mr. CLAY. Mr. Cochrane, the Postal Service has been quiet on 

this issue. Is there anything you would like to add? 

Mr. COCHRANE. The concept of people collecting mail and 

digitizing has been out there for almost ten years. There are other 

companies in that space. The approach is one where people sign up 

and go to what we call commercial mail receiving agencies. It is 

very common and happens in buildings all over town here. It is 

very common in the business arena in New York and Washington. 

I think the challenge was that Outbox approached it a bit differently. They didn’t want to have a commercial mail receiving 

agency, so that required them to go to the mailbox and pick it up. 

61 

There are companies out there sustaining that business model 

and providing a digital image of mail pieces for their clients on a 

day to day basis. 

Mr. CLAY. Thank you. 

Mr. Chairman, although I commend Mr. Davis and his company 

for the innovative solution, I think it is unfair to use this hearing 

to criticize the Postal Service for not being innovative and at the 

same time insist that it operate with a business mind set which is 

what it was doing in this case. 

In addition, I ask for unanimous consent to enter into the record 

an article dated May 8, 2014 from the Heritage Foundation, the 

Foundry Blog, entitled, Why the Postal Service was right to side 

with junk mail over Outbox. 

Mr. FARENTHOLD. Without objection, so ordered. 

Mr. ISSA. Would the gentleman yield? 

Mr. CLAY. Yes. 

Mr. ISSA. I would like to side with you in this case, surprisingly, 

that although it is a shame to see a for profit entity close because 

they are not making a profit, I do agree with you that when this 

is an innovation that should be on the list of innovations to the 

Postal Service because it falls squarely within their basic requirements, just as Stamps.com is an innovation the Post Office ignored, 

to their peril, one of the strange things you and I agree on is at 

a minimum, the Post Office ought to do all of its core jobs of revenue and revenue saving first, that the most important innovation 

in the company is to do the job they are paid to do well and innovatively. 

I think we have two witnesses here today from two for profit 

companies, one that is still thriving and one that isn’t in this space, 

but they both are core functions of the Post Office that suffer from 

neglect. 

I share with you that in the Comprehensive Postal Reform Bill, 

we increase the innovation fund specifically because we hope the 

Post Office will innovate within its core in addition to outside its 

core. 

Mr. CLAY. In your opinion, does it cry out for a public-private 

partnership? 

Mr. ISSA. I believe there are some core businesses the Post Office 

can and should own. They may use private enterprises as their contractors but I will say on the record here today that the job that 

Outbox proposed, if embraced by the Post Office as a core function, 

could far exceed the benefit. 

I think Mr. Lynch, although he disagrees with everything I stand 

for apparently in postal reform, including I have become a Luddite 

from the electronics industry, that is a first for my colleagues, but 

the fact is that when he talks about digital delivery in Switzerland 

being inevitable, he talks about a version of Mr. Davis’ business 

plan that Switzerland has gotten ahead of us on. 

He seemed to muse that it would be bad for the base that he so 

much often cares about, but the fact is he is right. He is absolutely 

right that these innovations are either going to happen within the 

postal system or the postal system is going to miss it altogether 

and then be fighting for, as you said, its core right to decide not 

62 

to participate for the business that may already have gone a long 

way. 

I couldn’t agree with you more that your point was right on. 

Mr. CLAY. Mr. Chairman, I think I may be having an out of body 

experience by agreeing with you so much lately. 

I see my time is up. I yield back. 

Mr. FARENTHOLD. Thank you very much. 

We will kind of get back to the regular order here. I will go 

ahead and start with some of my questions. 

Mr. Davis, I think most of us up here know the story of Outbox. 

You took your time to give a very passionate speech about innovation which I enjoyed listening to. Can you in roughly a minute or 

so tell us what Outbox did and what happened? 

Mr. DAVIS. Absolutely. Outbox enabled our users to view their 

postal mail from anywhere, whether it is their I-phone or I-pad and 

they could tell us exactly what they wanted and what they did not 

want physically. It is a hybrid approach in that regard. Mr. Issa 

is correct in that. 

This is a fabulous idea, it should be adopted by the Postal Service. We started testing it in Austin, Texas with the idea that we 

would ask forgiveness, so to speak, before we asked permission because the rules and regulations are so onerous. We did so with 

great fanfare and we were shut down in that meeting with the 

Postmaster General and the senior team. 

In that meeting, we had a fundamental misunderstanding of who 

the customer is of the Postal Service. He said, your customer is not 

my customer. I said, Mr. General, what do you mean? He goes, my 

customer is the sender of mail that essentially pays me to place 

mail on the kitchen tables of every American every day. 

While true, that is not where the inherent value of the Postal 

Service lies. The value lies with its connection with every single 

American. 

It is my belief that large organizations and government of which 

the Postal Service is in part both, do not naturally tend to adopt 

innovation because it does disrupt them. It was my hope and my 

business partner’s hope that we could test this on a small scale 

within the Postal Service but we were not allowed to. 

The only way we can do this is that we have a safe harbor, something within the Postal Service that allows it to be disrupted on a 

small scale in localities around the country to test new ideas. As 

I mentioned, our ability to give customers choice led to higher 

value, led to increased understanding of who the real customer is, 

the American people, and led to value opportunities that were beneficial for the end user and beneficial for our company and ultimately, the Postal Service. 

Mr. FARENTHOLD. Thank you very much. 

Mr. Eidemiller, you mentioned that you were unable to get your 

product classified as a machinable flat and it actually became a 

parcel? 

Mr. EIDEMILLER. Yes, it was unclassified as a machinable flat 

and magically became a parcel. 

Mr. FARENTHOLD. That is more of a competitive service for the 

Post Office. I think you mentioned the amount of postage a flat 

would take? 

63 

Mr. EIDEMILLER. Yes. As an example, these are over the counter rates. This is a parcel rate for about four prescription vials, $2.22. 

This is the over the counter rate for a machinable flat which is 

$1.56. 

Mr. FARENTHOLD. You went to UPS with your new redesign and you said they are delivering them for $1.00? 

Mr. EIDEMILLER. They made an offer and put it on the table of roughly $1.00. The challenge we have, when I brought them up, is 

we are a young startup and we are investing our effort where we 

have opportunities to generate revenue. 

While we think this is a great and wonderful idea, and year ago 

put a lot of emphasis in this, our business has pivoted slightly from 

that. After getting stonewalled by the Post Office a year ago, we 

got a lot of interest in bringing this to market and have had discussions with potential customers. 

UPS won’t officially put a contract on the table until they have 

volumes, units and costs. They say, yes, we believe in the package, 

we know we can do it for about $1.00. I asked them to submit 

something for the record; they declined to submit something for the 

record. We have it orally. 

Mr. FARENTHOLD. I get the impression you would rather use the 

Postal Service? 

Mr. EIDEMILLER. I would much rather use the Post Office. The 

Post Office has the infrastructure, the Post Office has the trucks, 

the Post Office can print this envelope into every mailbox in the 

United States, legally, safely, securely. UPS cannot do that; they 

put it on the doorstep. The volume is there, the business is there. 

This is a regular standard business sized envelope. As a machinable flat, this is 90 cents over the counter, drugs by mail for 90 

cents—$2.22. There are hundreds of millions of dollars on the 

table. 

The only plausible reason I can see the Post Office has that we 

want it classified as this versus this is top line revenue because the 

top line revenue of a parcel is higher than a flat. In last year’s strategic plan in 2013, I got this online, it says the Post Office makes 

three times more money on a flat than a parcel, three to one. 

The Post Office actually makes more money, if these numbers 

are correct, doing this at lower cost than doing this, three times 

more revenue. Why? It is very simple. It is easy to automate. We 

have proven we can automate this. Their only case is that a square 

box in an envelope is not a machinable flat. It meets every mechanical requirement of a machinable flat. We have tested it. We volunteered to work with the Post Office to prove it. 

Mr. FARENTHOLD. I appreciate it. I am not going to draw you into 

the debate of whether or not it is a secure delivery location for your 

parcel would be of benefit to your company or not. 

Ms. Norton, we took two on your side of the aisle first, so if you 

don’t mind, we will recognize Chairman Issa and then come back 

to you. Mr. Chairman? 

Mr. ISSA. Thank you. 

This is an interesting and I won’t use out of body as Mr. Clay 

did but it is an interesting turn of events when Mr. Lynch called 

me a Luddite and says there is an inevitability that we are going 

to do what Switzerland has done. 

64 

Mr. Williams, I was madder than hell at your proposal. The idea 

that you are trying to be the Chief Innovation Officer and promoting banking within the IG’s office is reprehensible. I am 

shocked that an Inspector General would go from the waste, fraud 

and abuse and inefficiency to promoting a specific agenda. I am disappointed. 

Notwithstanding that, the Post Office has every right to propose 

innovative activities, including postal money orders and other 

items, some of which are historic within postal systems here and 

around the world. 

However, I would hope that in the future you would be much 

more of an advocate, including people like Mr. Lynch who seem to 

find everything that reduces cost and allows the Post Office to 

break even and be more efficient for its customers, which as stated 

earlier, are the shippers. 

Mr. Lynch is not here and he proudly said I would talk about 

him after he left. Mr. Lynch is never going to be my partner in 

anything that reforms the Post Office and makes it more efficient 

because that is going to reduce labor. I am sorry to say but I think 

he is a lost cause on that. Mr. Clay and others are not. 

Let’s go through the numbers quickly. Anyone can weigh in but 

Mr. Williams, you are a little bit in the hot spot here. The fact is 

six day to five day is in the shippers’ best interest because it avoids 

another three cents per letter price increase and similar cost across 

the board, doesn’t it? 

Mr. WILLIAMS. I am uncertain as to the three cents but I understand the principle. 

Mr. ISSA. Looking at about $2 billion versus what the exigent 

price increase did, I am just using those, but even if it only saved 

two cents or one cent, isn’t it true that in fact a reduction in cost 

that allows you not to have an increase in price is more likely to 

avoid a reduction in volume because the shipper ultimately, although sensitive to how often you deliver, is most sensitive to price, 

isn’t that true? 

Mr. WILLIAMS. I think that is a very good proposition. We would 

need to find out what happens in reality but I certainly follow the 

train of thought. 

Mr. ISSA. That is why the President has proposed that. 

Mr. Lynch spent a lot of time bashing steel containers. From a 

factual standpoint, isn’t it true that 91 million homes do not receive in the door delivery, while 37.8 plus or minus a million do? 

That is the curb-cluster including apartment and condo owners all 

over America, rural delivery and so on, that 91 million plus or 

minus do not get it to their door while only 37.8 do? 

Mr. WILLIAMS. Yes, I agree that is the ratio. 

Mr. ISSA. It is amazing for that ratio of more than two out of 

every three who were already part of the savings of not having to 

walk all the way to the door, simply less labor and that has been 

proven and calculated both by the Post Office and CBO, that labor 

savings for less than one third of Americans is billions of dollars 

and ultimately, question for you, those billions of dollars per year, 

a modest 15 million less than half of those being converted, is 

scored at over $20 billion in savings in cost to the Post Office. 

65 

Let’s go through the numbers. Your customer is the shipper, you 

all agree to that, whether you like it or not. The shipper gets a 

value both in secure storage and in avoiding cost increases? 

Mr. WILLIAMS. Correct. 

Mr. ISSA. Where is the negative side, assuming it is a reasonable 

distance to go, that in fact these are secure storage and that individuals under the Americans Disability Act and the like will always be able to still get to the door delivery which is already based 

in law. If I am out in rural America but I am a shut-in, I can with 

no cost have the Post Office deliver to my door today, isn’t that 

true? 

Mr. WILLIAMS. It is true. We did a study as well on this topic. 

We saw that the amount of savings was enormous depending on 

whether you picked an extreme model or one that was very moderate, there was a huge amount of savings Your proposal, as I understand it, is on the moderate side. 

Mr. ISSA. We toned it down a lot so that we could say that more 

than half of all Americans who now get it to the door, if they don’t 

believe it is feasible for them, would not see a change in the first 

ten years. We believe that communities will over time rush to have 

secure storage, not necessarily clusterboxes of a dozen or more. 

Often there would be two or four in a cluster, just practically at 

your front door. 

In fact, the ones we showed yesterday during our hearing, we 

specifically chose ones that ganged and a little larger because we 

want to be fair. In neighborhoods where it is hard to place a box, 

you will tend to have larger boxes while in suburban neighborhoods, it is pretty easy to do two or four at the curb between your 

neighbors. 

Mr. WILLIAMS. Both for places where the model is difficult to fit 

and for people with special needs, we saw there were considerations for a waiver. We think that is important to do. We think it 

could be a real game changer and save an enormous amount of 

money. 

We also want to know that those 37 million you pointed out 

aren’t designed for people with special needs or special requirements or in places that are difficult to deliver. It is a historic accident. 

We like the fact that this imposes a comprehensive plan for the 

placement of those and the facilitation for people with special needs 

and neighborhoods where the model can’t work in the classic. 

Eleanor, can I have your indulgence for about two more minutes? 

Thank you. 

Mr. FARENTHOLD. Without objection. 

Mr. ISSA. Thank you, Mr. Chairman. 

A couple of quick things. Mr. Cochrane, I think from your end 

the fact is that the Post Office, in my opinion, is uniquely positioned to provide a postal digital delivery system as an additional 

feature for a fee to the shipper. In other words, you may not know 

where they live but if I can pay half as much for a digital delivery 

only system and then the digital deliverer can choose to have a 

paper copy delivered and I only pay if that paper copy is delivered, 

that is a feature that is a variation of Mr. Davis. 

66 

Technologically, from your experience, that is completely doable, 

isn’t it? 

Mr. COCHRANE. Yes, it is and we have a test right now in northern Virginia where all of our letter and flat sorting equipment involve cameras and we can take pictures of mail pieces. In our active test, you can get an email each day with an image of the actual pieces that we saw in our sorters that are going to arrive in 

your mailbox that day. 

That doesn’t get into opening envelopes and opening but it is a 

first step towards giving people a digital image of what is going to 

come to their box. 

The risk side of that is what was discussed earlier. You have 

catalog mailers that are paying to get into the mailbox. If you are 

disrupting that to use the term, it does threaten a very extensive 

revenue stream for us. 

Mr. ISSA. For example, these are hypotheticals, Mr. Williams, 

you have looked at a lot of the efficiencies. If a shipper says, I am 

going to give you x amount of these things and if a person declines, 

I am going to pay half as much. If the person accepts it, I am 

happy to pay the full fee. It could be a win-win. I could deliver you 

two-thirds as many pieces of printed material, it would be visible 

and usable by somebody digitally for half the price, while if delivered, let’s say I want the coupon or whatever, I pay the full price. 

Actually to your customer shipper, you are expanding his options. You could also have a no delete option that it must be delivered and he would pay full price. Those options aren’t available 

today. 

I am not in northern Virginia in my local home when I am in 

the District, it is in the District but I would love to know digitally 

everything that is proposed to be sent to me so that I know to expect it and if it doesn’t come, and it is an invoice or something, I 

would be prepared to say, I have a lost piece of mail. There is a 

huge advantage to that. 

I happen to be a to-the-door delivery in the District and I often 

get my next door neighbor’s mail. I don’t know what causes it but 

it happens pretty regularly. I take the mail and walk over and put 

it in my neighbor’s chute. 

The reality is my neighbor doesn’t know that she is missing her 

mail until it shows up and I am gone, as you know, for weeks at 

a time because I don’t actually live here. They lose three or four 

weeks sometimes of mail. If they had a digital picture, they would 

know they didn’t get it. 

All of these and more are what this hearing is about, Mr. Chairman. I want you to continue pushing for this innovation. Our broad 

proposal has additional innovation dollars. 

I would like to close, Delegate Norton, with one thing. I was in 

business for more than two decades exclusively and then I have 

been in business very modestly by comparison over the last 14 

years. The one thing I know about business is the top and bottom 

lines are not uniquely different. 

You can increase top line but if it doesn’t flow to the bottom line, 

it is of no value. You can make cuts and never get to a profit but 

it is a combination of the two. 

67 

The Post Office has its current volume, billions of dollars of excess inefficiency that we all know can cut. Innovation, in the case 

of your product and others, depends on efficient delivery and the 

more efficient it is, the more promising it will be for innovative 

products. 

It amazes me that brown trucks go to any rural or suburban 

areas. I think they go there because they can’t quite get as good 

a deal as they will be able to get from the Post Office if these innovations happen. 

Ms. Norton, I appreciate the extra time. There is nothing more 

important to me than to try to have all of you be a part of it. 

Mr. Davis, I appreciate your showing the way. My hope is even 

if they don’t take it from you, they will in fact see the direction you 

gave as having value in some derivative product. 

Thank you, Mr. Chairman. 

Mr. FARENTHOLD. Thank you very much. 

We now recognize the gentlelady from the District of Columbia. 

Ms. NORTON. Thank you very much, Mr. Chairman. 

I must say I welcome this hearing on innovation in the Postal 

Service. I particularly welcome the private businesses who work 

with the Postal Service. 

I have often wondered about the perpetual identity crisis we 

keep the Postal Service in. It is a little bit private or maybe mostly 

private, chained to the Federal Government whereas the essence of 

being a private business where the government doesn’t give you 

anything and you can go out and build for yourself all arise. 

Most of the downsizing that has been done in the Postal Service 

has been done by cuts. I would much prefer, as the Chairman just 

indicated, innovation to be the role to the future of the Postal Service. I don’t believe there is any way out of that. 

Frequently, I see on television an innovative tool that the Postal 

Service is using, and I say, wow. I hadn’t become used to that as 

a kid growing up and yet I do see those. I would like to ask about 

some of those, the new products in particular, since some of you 

have been involved with those products. 

One of the success stories has been the every door direct mail. 

I was interested that it apparently has helped the Post Office generate more than a billion dollars. Mr. Cochrane, is that correct? 

Mr. COCHRANE. That is correct. 

Ms. NORTON. Apparently this product has been a great success 

with the business community. I would like to know how the Postal 

Service understood that this was a product that would catch on 

with the business community and why it has caught on with the 

business community, and what they are doing to enhance a product 

that has had this success? Mr. Cochrane, are you the person who 

can best answer that? 

Mr. COCHRANE. I am. Thank you for the opportunity to talk 

about a product that we are certainly very pleased with. 

It is an innovative product that was created to really leverage 

technology in some way. Though it is a hard copy piece of mail, 

what we have done is facilitate the ability for a customer to go to 

our website and literally pick a neighborhood. 

68 

If you are a dry cleaner or restaurant, you can actually pick the 

neighborhood and the routes you want to see your piece of mail delivered to so you don’t have to deliver it to an entire zip code. 

You can pick the neighborhood you know your customers live in. 

It has mapping that allows you to click on the routes, look at the 

streets and highlight the streets you want the mail to be created. 

There is a commercial version and a version that you can walk 

into a post office and pay right there at the point of service terminal, drop off the mail and we will deliver it in the next day or 

two. 

Ms. NORTON. I take it you have a competitive advantage over 

your competitors with this particular service because of your own 

infrastructure? Do you have any competition with this service? 

Mr. COCHRANE. With mail going into the mailbox, no, but there 

are maybe more sophisticated mailings, direct mail in particular, 

that place. I think that was some of the initial concern of our business partners, that this EDDM would force people to buy down 

from a more traditional mail piece. 

Our findings are actually the opposite. It has created an on ramp 

where someone begins with the very simple EDDM product and 

morph themselves up into more sophisticated mailers and start 

seeing the value of mail. They get a creative agency, start working 

with the commercial printer and expand where they are sending 

mail. 

It is really like a first step into mail in a very easy way that actually in many cases has helped mailers move into a much broader 

mail stream. 

Ms. NORTON. Do they contract also where they send mail based 

on what they learn by going online? 

Mr. COCHRANE. I think that is the issue, that they can pick 

where they want it to go to. It is a saturation type mailing when 

they pick a carrier route with 500 deliveries in that route will receive it. 

Ms. NORTON. So it saves business money as well? 

Mr. COCHRANE. Absolutely. Sometimes you will get a mail piece 

and it is from a dry cleaner three towns over, you might drive by 

five dry cleaners to get to the person that sent you the mail piece. 

This becomes a lot more targeted. Neighborhood mail is a good 

way to describe it. It really focuses on the area you are trying to 

reach. 

Ms. NORTON. The Post Office has had fair success collaborating 

with others. Mr. Everett, Newgistics developed a product with the 

Postal Service, correct? 

Mr. EVERETT. We have worked extensively with the Postal Service. 

Ms. NORTON. Did they reach out to you? 

Mr. EVERETT. I wasn’t with Newgistics when the initial meetings 

were held but my understanding is we had an idea, reached out to 

them and it was aligned with some of the product ideas they had 

as well. 

Ms. NORTON. Mr. Weisberg, your company has successfully collaborated with the Postal Service, I understand? 

Mr. WEISBERG. Yes, we have. 

Ms. NORTON. Who reached out to whom in that one? 

69 

Mr. WEISBERG. We reached out to the Postal Service initially? 

Ms. NORTON. Mr. Cochrane, do you find you are pursued by businesses like Mr. Weisberg’s? 

Mr. COCHRANE. It is very flattering and I think it is just recognition of the presence we have, the fact that we are at 153 million 

doors today. 

I was part of the early conversations with Newgistics and they 

did reach out to us and say, we want to do something with returns. 

They shared their business model with us and we were thinking 

of something in the same vein, so we went to a pilot, created a 

product over at the regulator, a temporary product and went for a 

regular full time product as parcel return service which at the 

time, ten years ago, was really when e-commerce was starting to 

take off. 

One of the real barriers to e-commerce was ease of returns and 

the studies in market research were showing that was the thing 

holding people back. It was in everyone’s best interest, the Postal 

Service, the retailers, to help facilitate a more easy return. We 

were proud to partner with them and I think it is a great success 

story. 

Ms. NORTON. Could I just ask Mr. Eidemiller? 

Mr. FARENTHOLD. Sure. 

Ms. NORTON. As I came in, you were describing difficulties with 

the Postal Service. Is it the case that you went to UPS instead? 

Mr. EIDEMILLER. We spent over two years really believing the 

Post Office was the best solution. We still believe the Post Office 

is the best solution. They offer service that nobody else offers. At 

a certain point, being a fairly self funded business with limited 

amount of runway, you put your resources in areas that you believe 

in. 

After reaching a dead end with the Post Office, we approached 

UPS and they said, great, we love the package, we know how many 

we can put on our plane, we will give you a great rate for it. They 

are talking about $1.00 from origin to destination, second day service at worse. 

Ms. NORTON. Mr. Cochrane, do you have a response to that? 

Mr. COCHRANE. I’d like to weigh in on it. Thank you for the opportunity. 

The fact is that we have different automation. We have over 

10,000 pieces of automation in our network. It is a very complex 

network as I said in my opening. We do delineate and differentiate 

letters from flat type mail, catalogs, magazines in particular, and 

parcels. It is important that they go into the distinct streams they 

are supposed to so that it is not creating problems on our machines. 

That the boxes are inside an envelope doesn’t necessarily make 

them a flat; it is a parcel and that is the reason why they were 

turned down to mail at flat rate because of the rigidity of the pieces 

and the need for these pieces to stay in the appropriate mail 

stream which is the parcel mail stream. 

We would welcome customers shipping those packages as designed. I think it is an innovative design. The whole concept that 

it secures the bottle and it is tamper resistant I think is a nice 

value set for pharmaceutical companies. We deliver well over hunVerDate Aug 31 2005 10:15 Aug 14, 2014 Jkt 000000 PO 00000 Frm 00073 Fmt 6633 Sfmt 6633 C:\DOCS\88825.TXT APRIL
70 

dreds of millions of pharmacy items on an annual basis. The issue 

is it is a parcel. At the end of the day, it has to be mailed as a 

parcel. 

Mr. EIDEMILLER. May I speak? 

Mr. FARENTHOLD. It is Ms. Norton’s time. 

Ms. NORTON. I think this dialogue is informative. 

Mr. EIDEMILLER. May I offer rebuttal to his testimony? 

Ms. NORTON. Yes, please. 

Mr. EIDEMILLER. My background is material handling and automation. Our two partners came out of Electric Com which was purchased by Siemens. 

The entire genesis around mpack was initially around their frustration with doing drugs by mail in a round bottle. They one day 

said, why don’t we do it square. At the time they had done industrial automation at Columbia Records, BMG, the Record of the 

Month Club, cassettes. They were handling those 25 years ago at 

300 pieces per minute, yet they couldn’t automate around a vial 

through the mail. 

We had a long term professional relationship with the folks at 

Siemens so when we started this process and came up with this 

mailer, the first thing we did because all of us come from an industrial automation background, we know what non-debatable means, 

we know what machinable means. I have built a hundred distribution centers in my life. 

The first thing we did was to prove this with run through flats. 

We ran this through flats. We had a video we submitted with our 

application showing this running through the Siemens optum sorters in Ft. Worth before we ever submitted our package. We provided this with our submittal. 

It passes every mechanical test of a machinable flat. It bends 

this way, it bends this access, it follows every mechanical test in 

the DML. It sorts on the equipment at 300 pieces per minute. We 

offered to retest at our expense, we have offered to change the mail 

piece at our expense. We want to partner with the Post Office. 

Hello, we have volume you can make money. Please work with us. 

I don’t know what to do. 

Mr. FARENTHOLD. Thank you very much. 

We have gotten to everyone. I have a few more questions so we 

will do a quick second round of questions and give Ms. Norton 

some more time if she wants it. 

Mr. FARENTHOLD. Mr. Williams, in some of the innovations you 

talked about, you mentioned a virtual PO box. Can you tell me 

what a virtual PO box is? At first blush, it sounds like what Mr. 

Davis was offering. 

Mr. WILLIAMS. Perhaps they are related to one another. Let me 

explain what it is. 

Today the Postal Service is limited in the number of post office 

boxes they can offer to our users. It is a small box and rigid so it 

is also limited in the number of things you could put in there. 

The idea we examined for the virtual post office box would allow 

people to—we can talk about classes of customers—it allows the 

customer to open a box that has no dimensions. It could be delivered to an address in the United States that people apply for. 

71 

There are a lot of foreign customers that would love to buy U.S. 

goods but can’t because they don’t have a U.S. address. The virtual 

post office box would allow it to go there and that post office could 

combine it with other things going to that country and send it at 

a discounted rate. We think that would be good for commerce. 

It would also provide for small businesses and small innovators 

the ability to almost operate their business out of that virtual PO 

box. It would be temporarily stored, the items could then be sent 

out as directed by that business. 

Mr. FARENTHOLD. You also talked about print at the destination 

of mail in response to an earlier question. Didn’t we try that with 

mail grams and didn’t FedEx try it with a fax type service? 

Mr. WILLIAMS. This is not something we have strongly advocated. 

We have followed its path more. It remains alive. It strikes me as 

a good idea and there are takers for it but this is also something 

I mentioned earlier in the meeting, picking the moment at which 

demand exists in this environment is very, very difficult. I would 

say it hasn’t come in a strong compelling way to hybrid mail. 

Mr. FARENTHOLD. I want to go to Mr. Weisberg for a second. You 

all are kind of a success story in working with the Post Office. Was 

UPS supportive when you started out and came with the product? 

Mr. WEISBERG. When we initially started, it took a process of 

years of speaking with the Postal Service by us and other companies that wanted to do PC postage to convince the Postal Service 

to approve it and allow it to exist. 

There were people within the Postal Service who were encouraging and there were others who were discouraging. 

Mr. FARENTHOLD. Do you have any suggestions for how we could 

change the process of getting innovative products like Stamps.com 

to be adopted by the Post Office? 

Mr. WEISBERG. We do think it would make sense to add some 

protections to companies that come with new innovations to the 

Postal Service to make sure the Postal Service doesn’t unfairly 

compete and launch its own products compared to what those companies do. We do very much support the concept of using publicprivate partnerships and having private industry players be able to 

come up with the best solutions that work. 

Mr. FARENTHOLD. The Postal Service is actually kind of competing with you with their quick to ship product. That has to be 

a bit awkward in that they are your regulator and your competitor. 

Mr. WEISBERG. It is a very difficult position to be in when you 

invest a lot of time and effort in an industry into launching products and you are regulated by the Postal Service. You have to provide the Postal Service detailed information about how your products work and then they launch a directly competitive product. 

That is difficult. 

Mr. FARENTHOLD. With respect to Outbox, Mr. Davis, one of the 

things a service like Outbox has the potential to offer is targeted 

ads. I am an avid Internet user and I will shop for some dress 

shirts online. All of a sudden just about every site I visit has an 

ad for dress shirts on it. Highly targeted advertising is valued by 

advertisers. 

The Postal Service talks about advertisers not getting their product delivered but wouldn’t a service like Outbox actually have more 

72 

value to advertisers? A random catalog, your best hope is something on the cover strikes somebody’s interest in the few seconds 

between mailbox and recycle bin? 

Mr. DAVIS. Absolutely. As I said earlier, intent spending, intent 

on brand affinity is the holy grail of all advertising so you can 

imagine a digital ad piece that is actually free to present so it is 

free to show that on a digital device to an end user and they can 

decide if they want to engage with that or not. 

We did some interesting tests with Kind Bar and with Starbucks 

Via packets, small sample sized products where we would present 

digitally an offer, would you like to try this new flavor of Kind Bar. 

In some of our tests, we had as much as 50 percent engagement 

which is astounding for any digital advertising piece. 

People would say yes, send this piece to me, I want to engage 

Kind Bar and I want to try this new product. We would deliver it 

to their front door the next day. 

To give you an idea how much that is worth to a CPG, they aver- age about $20 per sample product given to a new user of their 

product. There is an enormous amount of money currently being 

spent on sampling products. Right now they are untargeted. You 

see someone out in front of a grocery store or on the side of the 

road, here is a very powerful target tool. 

Mr. FARENTHOLD. That advertising would be revenue to Outbox 

and not the Postal Service? Is there a model for something like this 

where the third party does it or is it something you develop the 

technology and sell it to the Postal Service and they do it? Was 

that kind of the feeling you got in your negotiations? 

Mr. DAVIS. Right. Well it is hard to unpack such a complicated 

web of interested politics and business models and mandates. At 

the end of the day, there could be winners and winners. It does not 

have to be winners and losers. 

It was our hope that if the Postal Service could not create this 

on their own or was too slow to do that, an outside third party company could develop it, spend private dollars to develop it and then 

either white label it or be a third party contractor with the USPS. 

Mr. FARENTHOLD. Thank you very much. 

They have called our vote series. We have a little bit of time before we have to leave if Ms. Norton has some more questions. 

Ms. NORTON. Just briefly. 

I am interested in what keeps the Postal Service from developing 

new and innovative products as a matter of course. We have spun 

them off as a private business and not always allowed them to act 

as a private business. 

Are there any issues or impediments that stand in the way of the 

Post Office doing the usual work of seeking innovations, particularly given its unique infrastructure, Mr. Cochrane? 

Mr. COCHRANE. I think part of the challenge is the current law 

that we operate under. It is restrictive. 

Ms. NORTON. Speak a bit about that law. What about that law? 

Mr. COCHRANE. As an example, it says the products we are allowed to enter are postal products and it kind of put a bit of a box 

around things we can do. If we are approached by somebody with 

an innovative idea, some of these things are against the law, as I 

stated in my opening comments. Some of the things we are working 

73 

on don’t fit our model and some are just not legal in the current 

sense. 

As an example, we have very restrictive privacy rules. We have 

a lot of data on what goes into the American household with things 

like IMB and for good reasons, there are privacy statutes that 

exist. 

Unlike a lot of other private sector companies, we are not allowed to data mine that information. That is a restriction on our 

ability to market. 

Ms. NORTON. That is a restriction that wouldn’t be as controversial I think here. The Chairman seemed to buy into this restriction 

to postal products when he admonished I suppose Mr. Williams for 

daring to suggest that non-banking products might be suitable. 

I disagree with the Chairman on that. It seems to me we have 

information that if you look historically for the first 60 years of the 

20th Century, the Postal Service actually had a banking service 

used mostly by immigrants. There were savings accounts, limits on 

the amount of the savings accounts. 

There are postal facilities where there are no banks. In fact, 

banks have pulled out of many neighborhoods because they do 

much more digital than the Postal Service does. I don’t see what 

is wrong with non-banking services. This is what I meant when I 

opened my last question with it is a little bit private. It is like a 

little bit pregnant. You just cannot do it in a market economy. 

Let me invite Mr. Cochrane and Mr. Williams to elaborate on 

some non-postal services that you think the Postal Service could 

enter into, thrive and fully compete with the private sector. 

Mr. WILLIAMS. With regard to the financial services, you are correct that the Postal Service was in the banking business for a large 

number of years worldwide. Many rural posts provide financial 

services. It provides about 14.5 percent of their income which helps 

them to continue to provide universal access and reduces the overhead for the post offices that are out there. 

We currently do provide financial services with money orders and 

other kinds of information services we do in remote areas for the 

customers. This idea was to update the money order into the digital age. We don’t think it is good for citizens or for e-commerce to 

be cut off from one another. 

You can’t use money orders to engage in e-commerce. As a result, 

as many as 68 million adults are cut off from commerce and commerce is cut off from them. 

It did look at what would happen if the U.S. Postal Service did 

as it used to do and as many other nations do today. 

Mr. COCHRAN. I would just say not on the financial sector but the 

Postal Service is in a period of significant change in our business 

model. I think that is well documented. As mail declines, particularly single piece, first class, we have shifted to do more and more 

parcel delivery. 

In the course of innovation, we have to take a look at ourselves 

and our network. We have a ubiquitous retail network. How do we 

use that in many ways to help us generate top line revenue. 

The last mile we have discussed a lot today but there are more 

things we can deliver. Think about the fact we have 217,000 people 

out there today driving the streets of the United States, working 

74 

hard and delivering product for mailers and shippers. There is a 

robust network of processing centers and transportation that I 

think you need to further leverage. 

Maybe the future grail is the one we talked about a lot today, 

the digital space. There are going to be places where the Postal 

Service needs to step forward and have a strong footprint in the 

digital space. In the information I sent in, we talked a bit about 

what we are doing with the government with FCCX to help authenticate. 

There is a lot of opportunity for the Postal Service to continue 

to leverage the brand, the trust, the security and the world class 

network that we have. That is where our innovation is focused, to 

use that infrastructure to generate revenue and keep providing 

great service to the American people. 

Mr. WILLIAMS. I do think it is probably important to add the law 

may be too restrictive and it might be good that you are looking 

at it, the 2006 law, but that law wasn’t put in there to be mean 

spirited or hurt anyone. It was put in there to make sure the Postal Service doesn’t drive the small businessman or innovator out of 

business. 

The challenge today is enormous and it is from horizon to horizon. The Postal Service doesn’t need to go in where it is going to 

harm private enterprise. 

Ms. NORTON. I would certainly agree when it comes to small 

business but I do not agree that the Postal Service shouldn’t harm 

competitors in the same business or in a live business. I think that 

is the whole point of competition in a market economy. 

Mr. FARENTHOLD. Maybe that is a topic for a future hearing in 

this subcommittee as to where we can go and find the right balance 

allowing the Postal Service to increase revenue without using some 

of their advantages I guess would be the right word as a government entity to harm the private sector. That would be a great hearing. We may do that in the future. 

I would like to thank our witnesses for being here. We were able 

to cover a very complex topic in a timely manner. I think we all 

have food for thought as to how we can move forward with modernizing and bringing new technologies to the Postal Service that are 

good for America. 

Thank you all very much for your time. 

We stand adjourned. 

[Whereupon, at 10:40 a.m., the subcommittee was adjourned.] 

(75) 

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

76 


Insert offset folio 43 here 88825.043
77 


Insert offset folio 44 here 88825.044
78 


Insert offset folio 45 here 88825.045
79 


Insert offset folio 46 here 88825.046
80 


Insert offset folio 47 here 88825.047
81 


Insert offset folio 48 here 88825.048
82 


Insert offset folio 49 here 88825.049
83 


Insert offset folio 50 here 88825.050
84 


Insert offset folio 51 here 88825.051
85 


Insert offset folio 52 here 88825.052
86 


Insert offset folio 53 here 88825.053
87 


Insert offset folio 54 here 88825.054
88 


Insert offset folio 55 here 88825.055
89 


Insert offset folio 56 here 88825.056
90 


Insert offset folio 57 here 88825.057
91 


Insert offset folio 58 here 88825.058
92 


Insert offset folio 59 here 88825.059
93 


Insert offset folio 60 here 88825.060
94 


Insert offset folio 61 here 88825.061
95 


Insert offset folio 62 here 88825.062
96 


Insert offset folio 63 here 88825.063
97 


Insert offset folio 64 here 88825.064
98 


Insert offset folio 65 here 88825.065
99 


Insert offset folio 66 here 88825.066
100 


Insert offset folio 67 here 88825.067
101 


Insert offset folio 68 here 88825.068
102 


Insert offset folio 69 here 88825.069
103 


Insert offset folio 70 here 88825.070
104 


Insert offset folio 71 here 88825.071
105 


Insert offset folio 72 here 88825.072
106 


Insert offset folio 73 here 88825.073
107 


Insert offset folio 74 here 88825.074
108 


Insert offset folio 75 here 88825.075
109 


Insert offset folio 76 here 88825.076
110 


Insert offset folio 77 here 88825.077
111 


Insert offset folio 78 here 88825.078
112 


Insert offset folio 79 here 88825.079
113 


Insert offset folio 80 here 88825.080
114 


Insert offset folio 81 here 88825.081
115 


Insert offset folio 82 here 88825.082
116 


Insert offset folio 83 here 88825.083
117 


Insert offset folio 84 here 88825.084
118 


Insert offset folio 85 here 88825.085
119 


Insert offset folio 86 here 88825.086
120 


Insert offset folio 87 here 88825.087
121 


Insert offset folio 88 here 88825.088
122 


Insert offset folio 89 here 88825.089
123 


Insert offset folio 90 here 88825.090
124 


Insert offset folio 91 here 88825.091
125 


Insert offset folio 92 here 88825.092
126 


Insert offset folio 93 here 88825.093
127 


Insert offset folio 94 here 88825.094
128 


Insert offset folio 95 here 88825.095
129 


Insert offset folio 96 here 88825.096
130 


Insert offset folio 97 here 88825.097
131 


Insert offset folio 98 here 88825.098
132 


Insert offset folio 99 here 88825.099
133 


Insert offset folio 100 here 88825.100
134 


Insert offset folio 101 here 88825.101
135 


Insert offset folio 102 here 88825.102
136 


Insert offset folio 103 here 88825.103
137 


Insert offset folio 104 here 88825.104
138 


Insert offset folio 105 here 88825.105
139 


Insert offset folio 106 here 88825.106
140 


Insert offset folio 107 here 88825.107
141 


Insert offset folio 108 here 88825.108
142 


Insert offset folio 109 here 88825.109
143 


Insert offset folio 110 here 88825.110
144 


Insert offset folio 111 here 88825.111
145 


Insert offset folio 112 here 88825.112
146 


Insert offset folio 113 here 88825.113
147 


Insert offset folio 114 here 88825.114
148 


Insert offset folio 115 here 88825.115
149 


Insert offset folio 116 here 88825.116
150 


Insert offset folio 117 here 88825.117
151 


Insert offset folio 118 here 88825.118
152 


Insert offset folio 119 here 88825.119
153 


Insert offset folio 120 here 88825.120
154 


Insert offset folio 121 here 88825.121
155 


Insert offset folio 122 here 88825.122
156 


Insert offset folio 123 here 88825.123
157 


Insert offset folio 124 here 88825.124
158 


Insert offset folio 125 here 88825.125
159 


Insert offset folio 126 here 88825.126
160 


Insert offset folio 127 here 88825.127
161 


Insert offset folio 128 here 88825.128
162 


Insert offset folio 129 here 88825.129
163 


Insert offset folio 130 here 88825.130
164 


Insert offset folio 131 here 88825.131
165 


Insert offset folio 132 here 88825.132
166 


Insert offset folio 133 here 88825.133
167 


Insert offset folio 134 here 88825.134
168 


Insert offset folio 135 here 88825.135
169 


Insert offset folio 136 here 88825.136
170 


Insert offset folio 137 here 88825.137
171 


Insert offset folio 138 here 88825.138
172 


Insert offset folio 139 here 88825.139
173 


Insert offset folio 140 here 88825.140
174 


Insert offset folio 141 here 88825.141
175 


Insert offset folio 142 here 88825.142
176 


Insert offset folio 143 here 88825.143
177 


Insert offset folio 144 here 88825.144
178 


Insert offset folio 145 here 88825.145
179 


Insert offset folio 146 here 88825.146
180 


Insert offset folio 147 here 88825.147
181 


Insert offset folio 148 here 88825.148
182 


Insert offset folio 149 here 88825.149
183 


Insert offset folio 150 here 88825.150
184 


Insert offset folio 151 here 88825.151
185 


Insert offset folio 152 here 88825.152
186 


Insert offset folio 153 here 88825.153
187 


Insert offset folio 154 here 88825.154
188 


Insert offset folio 155 here 88825.155
189 


Insert offset folio 156 here 88825.156
190 


Insert offset folio 157 here 88825.157
191 


Insert offset folio 158 here 88825.158
192 


Insert offset folio 159 here 88825.159
193 


Insert offset folio 160 here 88825.160
194 


Insert offset folio 161 here 88825.161
195 


Insert offset folio 162 here 88825.162
196 


Insert offset folio 163 here 88825.163
197 


Insert offset folio 164 here 88825.164
198 


Insert offset folio 165 here 88825.165
199 


Insert offset folio 166 here 88825.166
200 


Insert offset folio 167 here 88825.167
201 


Insert offset folio 168 here 88825.168
202 


Insert offset folio 169 here 88825.169
203 


Insert offset folio 170 here 88825.170
204 


Insert offset folio 171 here 88825.171
205 


Insert offset folio 172 here 88825.172
206 


Insert offset folio 173 here 88825.173
207 


Insert offset folio 174 here 88825.174
208 

Æ 


Insert offset folio 175 here 88825.175