Is It Time for a Postal Service 2.0?

Some say the U.S. Postal Service, awash in red ink, needs a tech revamp. Electronic delivery companies like Earth Class Mail and Zumbox are ready to help

By Arik Hesseldahl

Calls for an overhaul of the U.S. Postal Service are getting louder. They'll only increase in volume in the runup to a 2¢ increase in the price of a first-class stamp, scheduled for May 11.

The extra postage is needed to cover the rising costs of a sprawling operation that employs 685,000 people, operates 37,000 retail locations, and in fiscal 2008 delivered 202 billion pieces of mail in every state, city, town, and village in the U.S. and its territories. The U.S. Postal Service (USPS), which relies on postage-stamp sales and not Uncle Sam for revenue, is operating at a large loss. Last year's $2.6 billion shortfall, on $75 billion in revenue, is expected to widen to $8 billion this year.

In an effort to rein in costs, Postmaster General John E. Potter last month floated before a Senate subcommittee the idea of cutting back on mail delivery to five days a week from six.

But what USPS may need most is a technological revamp. So say two startups that specialize in digital document delivery. Earth Class Mail provides mail-scanning services for consumers and small businesses. The company's CEO, Ron Wiener, says it's cheaper to deliver a document over a computer network than by hand, especially when the recipient lives in a remote area, and so much of what is delivered via mail begins its life as an electronic file.

Delivering Mail, Digitally

Wiener's plan is to get national postal services in the business of delivering documents digitally and securely using an approach he calls "trusted postal e-mail." The idea is to replace the printer with a secure e-mail server operated by the postal service that can then deliver a digital equivalent of your paper phone bill or investment statement to a personal, secure online mailbox. "Everything that gets printed and sent to you starts out electronically, even the junk mail," Wiener says. "It could be e-mailed, but e-mail is not considered legally delivered, and it's not secure." The approach has been embraced by Swiss Post, Switzerland's national carrier which operates in 16 countries.

When paper mail is delivered to an Earth Class Mail box, customers get an e-mail saying they have mail waiting for them. After reading it, they can elect to have the document stored on the postal carrier's servers, or have the original forwarded to their home mailbox where they can save it themselves, or they can ask that it be shredded. Each document is assigned a unique numeric address and so can be tracked throughout the handling process, and employees are given a thorough background check and work under constant video surveillance to ensure security of documents.

On Feb. 10, Swiss Post announced plans to license ECM's technology and to launch a service called Swiss Post Box in six countries—Switzerland, Germany, France, Austria, Italy, and Liechtenstein—beginning in the second quarter, with more countries to follow. ECM hopes to persuade postal services of other countries to embrace the approach, eventually creating an international network.

ECM's system makes sense for Swiss Post in part because one-third of the country's mail customers live in rural areas—some of them mountainous—where delivery is more expensive. It could appeal to USPS for the same reason: Rural delivery stops accounted for 27% of its network last year. "There's a lot of mail going to places in Alaska and Guam where it costs more than 42¢ to deliver," Wiener says. "We're saying why not use an Internet connection to get the job done at much lower cost?"

The Volume Problem

USPS has toyed with electronic delivery systems in the past. In the late 1990s it launched a series of electronic services, including an "electronic stamp" meant to prove when an e-mail was sent and that it arrived unaltered. The agency later proposed to Congress a way to tie street addresses to electronic mailboxes, a system not unlike what Earth Class Mail is proposing.