However, Reisner developed practical ideas like a digital postmark that would certify e-mail just as the traditional postmark did with paper envelopes. He hoped it would enable law firms to file court documents online. The USPS also started a service allowing customers to create flyers and catalogs on their home computers and e-mail them to the USPS, which delivered them as hard copy. As far as Reisner was concerned, these things all fit the agency’s mission to bind the nation together by enabling citizens to correspond with each other. “I gave some speeches and talked about how the postal service has changed its technology many times,” he recalls. “We need to understand that we’re moving into an era in which correspondence isn’t going to flip from paper to electronic. It’s going to flip back and forth and we need to have an agile service.”
The USPS also tried to defend itself against the inevitable spread of electronic bill payment by purchasing, from American Express in New York, a company that opened envelopes with checks, scanned them with optical character readers, and sent them electronically to banks. “The core technology was ours. We bloody well invented it,” says Cathy Rogerson, the postal service’s head of new business at the time. “Reading a check is just like reading an envelope. There’s nobody better at that than the postal service.”
But others felt just as strongly that the USPS was straying from its mission. “This thing doesn’t need reinventing,” said Robert Setrakian, a USPS board member who clashed with Runyon. “Its mission is hard copy delivery, and all it needs to do is to be sure it gets there.” Edward Gleiman, chairman of the Postal Rate Commission, warned of another disaster like E-COM if the USPS wasn’t reined in. “It is at a crossroads with no signpost,” he testified at a congressional hearing. “Do we want the postal service to limit its focus to its historical mission—the delivery of hard copy mail? Do we want it to become a lean mean collection processing and delivery machine, which probably means little growth and eventual downsizing? Or do we want it to attempt to compete in new technologies and enter fields heretofore foreign to it? If it pursues new, competitive markets, will it be more or less likely to perform successfully?” Gleiman obviously didn’t think so.
After a rocky beginning, Runyon restored the USPS to financial health. The agency enjoyed three years of budget surpluses starting in 1995. In the third year, the USPS delivered 190 billion pieces of mail, meaning that the average person received 712 items. First-class mail was barely 50 percent of the volume now; junk mail was 40 percent. But at least the postal service was no longer awash in red ink.
Meanwhile, the dot-com boom was now in full swing. America Online, now known as AOL, had 13 million members in 1998 and inspired a hit romantic comedy entitled “You’ve Got Mail,” about two bookstore owners who fall in love while exchanging e-mail. New Web-based companies materialized, offering other digital postal services. Evite, iRSVP, and TimeDance provided online invitations. Internet users could sign up for e-card services offered by various online companies, and send digital postcards and Valentine’s Day and Christmas salutations.
Reisner was now the postal service’s vice president of strategy, and he was more convinced than ever that the USPS needed to be part of this revolution. But it seemed as though everywhere he turned, somebody was telling him to forget about it. The banking industry was adamantly opposed to the USPS’s check scanning project. The technology industry wanted the postal service to stay away from the Internet. “Silicon Valley had a pretty strong lobby,” Reisner says. “It was arguing that the postal service shouldn’t do it.” Federal Express and UPS joined the campaign to rein in the postal service, arguing that it was using money from its monopoly business of delivering letters to enter new markets where it didn’t belong.
Still, Reisner was stunned when the Government Accountability Office audited the USPS’s new services and issued a report in 1998, saying they had lost $84.7 million in three years. Reisner still gets upset talking about this. He says his projects were still in their infancy, and it wasn’t fair for anybody to expect them to be profitable yet. What’s more, the ruling came in a year when the USPS made $60 billion and had a surplus of $550 million. “You’re telling me that we shouldn’t have spent $84 million trying to better understand a technology that is going to ultimately cannibalize our core products?” Reisner asks.
The same year, Runyon resigned and, soon after, he joined the board of Stamps.com, a successful startup that allowed customers to purchase stamps online and print them from their computers. Its investors included Microsoft co-founder Paul Allen. This might have seemed like a natural business for the USPS, but it feared that private companies would complain that it was abusing its monopoly privileges.
The Board of Governors didn’t want to bring in another headstrong outsider like Runyon so it elevated William Henderson, USPS’s chief operating officer. Henderson must have seemed like a safe choice. An affable 50-year old who had a priestly forehead and wore bowties, Henderson was a lifelong USPS employee and a second generation one at that. His father had been a railway mail clerk in North Carolina. “He was very devoted,” Henderson says. “Those were the days when the trains would come along and pick up mailbags, and he would come home raving mad if a postmaster forgot to leave his out.”
Henderson had distinguished himself in the 1990s as the postmaster of Greensboro, North Carolina where he promised customers that they wouldn’t have to wait in line at post offices for more than five minutes. He also sent supervisors out to bring them their mail if it was delivered to the wrong address; Henderson says it didn’t happen very often. “The carriers are pretty damn accurate,” he says. “We did have a carrier who was dyslexic and transposing numbers, but there was no rampant issue.”
As it turned out, Henderson was more enamored with the Internet than his predecessor. He could see that online shopping was boosting the USPS’s package business. So Henderson struck up a relationship with Jeff Bezos, chief executive of Amazon.com. The USPS promoted Amazon in its television ads and talked about building a distribution center across the street from its Seattle headquarters, but UPS was able to move faster and grabbed the site instead.
Henderson had a plan for every American to get a free e-mail address with the suffix .us tied to the physical address. “It would have been a great opportunity for the postal service,” Henderson says. “If we could control millions of mailboxes in the United States effectively, we can certainly control e-mail addresses.” (The USPS also briefly entertained the idea of giving its customers e-mail addresses composed of their first initials, their nine-digit zip code, and the last two numbers of their street address. Here’s how it would have worked for President Bill Clinton. His address at the White House was 1600 Pennsylvania Avenue, Washington, DC 20500-0003. That would have made his e-mail [email protected].)
Technology lobbyists and their allies in Congress vehemently objected. Representative Christopher Cox, a California Republican, introduced an amendment prohibiting the USPS from using the suffix .us. “The U.S. Postal Service won’t become the U.S. Portal Service,” his office said. There was a similar uproar when the USPS started an online bill-paying venture with a company called CheckFree. The Computer and Communications Industry Association, a lobbying group representing companies such as Yahoo and Netscape, said the private sector should handle this. “We don’t need a big, heavy, stifling competitor, subsidized by public funds, trying to compete in some of the most dynamic areas of our economy,” said Ed Black, the association’s president. “They could have a big negative impact.”
Ultimately, Henderson decided that the only way for the postal service to survive and prosper in the Internet era was to give up its letter monopoly and become a private company. “It was my belief that the monopoly was worthless,” he says. “It was really an impediment to making changes.” At this point, he says, nobody could process letters as efficiently as the USPS, which was now feeding two-thirds of them through optical character readers.
There was an example to follow overseas. Germany had decided to privatize Deutsche Post, its government-operated postal service. But rather than simply stripping the Deutsche Post of its letter monopoly, the German government allowed it to use cash flow from its traditional mail business to finance its transformation. Two years earlier, Deutsche Post purchased 51 percent of DHL, which enabled it to become a global delivery service. Then in 2000, it conducted its first public stock offering, selling 30 percent of its shares and raising $5.6 billion. (Two years later, Deutsche Post would spend $568 million for an additional 25 percent of DHL.)
At Henderson’s request, Reisner drew up a privatization plan referred to as “the endgame strategy.” Reisner began talking to Gary Gensler, the Treasury Department’s undersecretary for domestic finance, about how it might work. In 2000, Henderson and Reisner met with Elaine Kamarck, a senior staff member in the Clinton administration. Kamarck listened as Reisner talked about the USPS’s challenges and raised the possibility of privatization. Then she reminded them that Vice President Al Gore was running for president. “Well, we would have to ask our union friends,” she said. “You know, they are critical to the upcoming campaign.” Soon after, Gensler called Reisner and told him there would be no more discussions about privatization. “We’re putting this on the back burner,” Gensler said.
It was always clear to Henderson that the postal workers’ union had more political influence with the Clinton White House than he did. One time, Henderson was eating lunch in Washington with the NALC’s president Vincent Sombrotto. The labor leader interrupted their conversation to take a call from Clinton himself. “I mean, I couldn’t really remember [Clinton] ever calling me,” Henderson says.
After three years, Henderson resigned as postmaster general in 2001. “I had gone to the White House,” Henderson says. “ I had talked to Congress. The customers weren’t receptive either. They just wanted us to deliver mail.” (In 2006, he took a job as chief operating officer of Netflix, another Internet company that was a heavy user of the mail.) Reisner also departed that year and went back to the consulting business. Sometimes, he advised foreign posts about how to create new kinds of services in the age of the Internet. Unlike in America, people in European countries and Canada didn’t think that the government was intrinsically bad and the private sector was inherently good. So the postal services in these countries encountered less resistance as they moved away from solely delivering paper-based mail. They were eager to get ideas from Reisner who had held a high position at the world’s largest mail delivery operation.
The USPS would now take the approach that Reisner’s critics had advised. There would be no more risky digital initiatives. The postal service would focus on delivering the mail and forget about the Internet. It would also have to reduce its costs. In 2001 the USPS lost money, first-class mail started to decline and the GAO put it on its list of high-risk federal agencies, fearing that it might not be able to cover the health care costs of retired letter carriers and clerks in the coming decades. The GAO estimated that these expenses could be as high as $32 billion. That year, the USPS appointed Jack Potter, a hefty former letter carrier from the Bronx with a sonorous New York accent, as its new postmaster general. It would be up to him to streamline hard copy delivery and balance the budget.
Potter’s job was complicated by the terrorist attacks on September 11, 2001. That morning, he was at a board meeting at the USPS headquarters in L’Enfant Plaza. His secretary summoned him to take an emergency telephone call in his office. When he returned, Potter told the board that two planes had hit the World Trade Center in New York. Fifteen minutes later, everyone in the room watched through the window in disbelief as a third hit the Pentagon. The FAA grounded all planes. From an emergency command center in the basement, Potter and his aides hastily arranged for a fleet of trucks to keep the mail moving.
That afternoon, people in Brooklyn who had watched the Twin Towers fall were relieved by the sight of letter carriers stoically making their rounds, which gave them the sense that the country was still functioning. Potter himself emerged in October as an unlikely hero after a wave of anthrax attacks unnerved the nation again. A reporter at the National Enquirer in Tampa, Florida, received an anthrax-laced letter and died. Similar letters were sent to U.S. Senator Thomas Daschle and NBC news anchor Tom Brokaw. Two mail clerks who worked in a processing plant in the Brentwood neighborhood in Washington, D.C., died of anthrax inhalation.
Rather than tell the public that they had nothing to fear when they went to the mailbox, Potter admitted he wasn’t sure. “The chances are very, very slim,” he said. “Again, people should do things that are safe and when they handle mail, they should wash their hands.” Potter also worked closely with union leaders to assure workers, who were provided with gloves and facemasks, that everything would be OK. “It was Potter and Vince Sombrotto,” says George Gould, the NALC’s legislative director at the time. “You know, there was a lot of fear and if they hadn’t shown that kind of leadership, it would’ve been a disaster. They went around the country together and talked to groups of letter carriers and other postal employees and just let them know that they had a plan and they were going to work together and not let it happen again.” William Burrus, who succeeded Moe Biller as the APWU’s president that year, feels similarly: “I give Potter credit. He steered the institution through it.”
Because of 9/11 and an economic recession, the USPS’s total volume fell in 2002 to 203 billion pieces, down nearly five billion from the year before. But it rose again to 206 billion pieces in 2004 as the American economy recovered and the real estate market took off. Banks flooded people’s homes with subprime mortgage offers and credit-card solicitations. In 2005, junk mail surpassed first class for the first time in history. It was a dubious milestone. For every piece of first-class mail that vanished, the USPS needed three junk items to make up the difference.
Still, Potter could boast that the USPS was delivering twice as much mail as it had twenty years earlier with the same number of employees. He introduced the Forever Stamp, which people would always be able to use to mail a letter no matter how much rates climbed. The Internet might have been hurting first-class mail growth, but it was rejuvenating the postal service’s package business. Potter appeared before 15,000 cheering eBay users in Las Vegas to express his gratitude. “I have one message today for the entire eBay community,” Potter said. “We, the Postal Service, we love you. We love every buyer, every seller, every power seller.”
It appeared that Congress might finally do something to help the USPS too. For years, the USPS had complained that it was supposed to operate like a business, but it had to submit every proposed stamp price increase to the Postal Rate Commission for approval, a process that would drag on for months. The USPS couldn’t offer discounts to the large companies as UPS and FedEx did, hindering its ability to compete with them.
In 2006, the Republican-controlled Congress passed the Postal Accountability and Enhancement Act, which granted some of Potter’s wishes. It shifted the $27 billion in pension liabilities for workers with military service to the Department of Defense. It allowed the USPS to raise its rates without the commission’s approval as long as they didn’t exceed the Consumer Price Index, and it allowed the postal service to negotiate special deals for packages that didn’t fall under its monopoly.
However, the new law strictly limited the USPS’s mission to “the delivery of letters, printed matter, or mailable packages.” In other words, the postal service was now legally forbidden to sell neckties in post offices, buy a check processing company, or create an e-mail service. The law also required the USPS to make annual payments of more than $5 billion a year for the next decade to build a fund to pay for the health care of its future retirees, which the GAO had estimated could cost as much as $32 billion. For some former postal service executives, it was a surreal moment. Essentially, Congress was making the postal service pay in advance for cost
s that it wouldn’t have to make for decades. But in the age of the Internet, the USPS’s future was uncertain, so the elected officials wanted to make sure it had the money in the bank no matter what.
Potter sounded ecstatic when President George W. Bush signed the bill. “We’re planning for the future right now,” he said. “Today, the postal service is operating in the black.” But privately, Potter was grim. “I called Jack and said, ‘Is this a good thing?’” William Henderson remembers, “and he said, ‘No.’”
The USPS had no trouble making the payment that year as it delivered 213 billion pieces of mail, its historic peak. Then the economy collapsed, and the postal service lost more than a fifth of its volume in four years. The great migration to electronic bill paying finally occurred as companies and businesses tried to save money in the recession, which also ravaged the junk mail industry. In such a climate, the yearly health care prepayment became unaffordable, and it contributed heavily to the $20 billion in financial losses that the USPS suffered during this period. And the postal service wasn’t alone. Hallmark shuttered greeting card plants and shed employees. Shares of Pitney Bowes, the postage-meter manufacturer, plunged. It seemed as if everybody in the mailing business was in pain.
At a press conference in Washington on March 2, 2010, a weary-looking Potter unveiled a plan to close rural post offices and end Saturday delivery. “We need to rethink everything and every approach to move the postal service forward,” he said, trying to sound optimistic. “There are no sacred cows.” But Potter didn’t have the stomach to carry out these reforms. Six month later, he announced his retirement.
Could anybody fix the USPS? Its own studies indicated that the lost mail would never return. That year, the postal service’s volume fell to 171 billion pieces, roughly what it had been in 1993. By 2020, the USPS predicted, it would decline to as little as 151 billion. Meanwhile, the number of addresses it had to service was steadily growing at a rate of one million a year as Americans built new homes and office buildings. That meant letter carriers were visiting more and more doorsteps with mailbags over their shoulders that were becoming lighter and lighter.
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