>> to rein in spending from cuts to the retirement of the a-10 wart hog attack a jets.

that is from politico. president obama went to cooperstown to talk about increasing tourism in the united states. this is 15 minutes. the president: thank you so much. thank you. thank you. there must be some white sox fans here somewhere. it is great to be here in cooperstown. and i have to say that in addition to just wonderful people, those of you all across america and around the world who have not been here, this is a gorgeous place. we came in by helicopter and had a chance to see the landscape and it looks like a spectacular place to spend a few days, a week -- however long you want to stay. i'll bet people will be happy to have you. and although he is not here yet, i want to acknowledge the governor of new york.

he had a conflict and he's on his way up. but he is really focused on jobs in upstate new york -- your governor, andrew cuomo. i want to thank your mayor, jeff katz, for having me, and his great hospitality, and everybody who was involved in arranging the visit. we've also got, by the way, our deputy secretary of homeland security, ali mayorkas, who is here. and he's important because he's helping bring travelers to america. it is a great honor to be the first sitting president ever to visit the baseball hall of fame. the timing could not be better. first off, summer marks the 75th anniversary of the hall of fame. i also promised frank thomas i'd check the place out before he's

inducted in july. and i'm so glad i did. obviously i didn't have a chance to roam around as long as i wanted, but thanks to the wonderful hospitality here, i saw the ball that william howard taft threw at the first-ever presidential opening day pitch. i saw the "white sox locker" of memorabilia, and got to bask in the glory of the 2005 world series win. yes! at the hall's request, i contributed something of my own, which was the jacket i wore when i threw out the first pitch at the 2009 all-star game. i hear that with all the media attention about it, there was also some interest in the jeans i wore that night. but michelle retired those jeans

quite a while back. so i love baseball; america loves baseball. it continues to be our national pastime. and for any baseball fan out there, you've got to make a trip here. but as much as i'd love to talk baseball all day -- and with a chicago legend, andre dawson, the "hawk," here today, it's hard not to want to talk baseball all day long -- i'm actually here to talk about jobs -- good, middle-class jobs. and believe it or not, places like this institution, the hall of fame, have something to do with jobs and economic growth. it's been about five and a half years since the worst economic crisis of our lifetimes hit. and thanks to the grit and determination of the american people, we've been steadily fighting our way back. over the last four years, our businesses have created 9.2 million new jobs. we had an auto industry that was flat-lining; it's come roaring

back. a manufacturing sector that had lost about one-third of its jobs in the last decade is now adding jobs for the first time since the 1990s. and rather than create jobs in other countries, more and more companies are recognizing that it makes sense to invest right here in america. we've got great workers. we've got the largest market in the world. we've got a whole bunch of stuff going for us and we're starting to see insourcing rather than outsourcing of jobs. so we've made progress, but here's the thing -- too many americans out there are still working harder than ever and can't seem to get ahead. and so we have to do more to spur growth and economic development, and create more jobs that pay a good wage. we should be making it easier, not harder, for businesses to invest and create jobs here in the united states. we should be making sure that

people are rewarded for hard work and responsibility, rather than see their wages and salaries stagnate. and we should be making it easier, not harder, for striving young students to afford the higher education that's going to be the key to a lot of 21st century jobs, and make sure that they can repay that loan debt that too often they're taking on when they go to college. there's a new bill, by the way, being introduced in congress in the coming weeks that's going to really do more to make sure that college students are getting a fair shot. of course, unfortunately, we've got a congress that all too often spends a few days blocking initiatives to create jobs and raise wages and help young people go to college. they seem to be more interested in politics right now than performance. and that's a challenge. i'll work with anybody who's focused on what we need to be

focused on and what all the people who sent us to washington are focused on, and that is how do we improve the economy and create more jobs. but if congress isn't going to act, then i'm going to do whatever and any steps i can take to create jobs and opportunity for more working families. so far, we've seen, for example, the house republicans blocked legislation that would raise america's minimum wage. so i've been working with states and cities and businesses to go ahead and raise their minimum wage anyway. and i issued an executive order making sure that if you are contracting with the federal government, you've got to pay your workers a higher minimum wage -- at least $10.10 an hour -- because i believe that if you work full-time you shouldn't be in poverty. we saw senate republicans block an up-or-down vote on ensuring equal pay for women.

i went ahead and took action on my own to make it easier for women to find out whether they're being treated fairly at the workplace and to be able to take action. and when it comes to creating jobs, last week i was down in tarrytown, where workers were able to break ground on the replacement of the tappan zee bridge ahead of schedule because my administration fast-tracked that project and a lot of major projects across the country. on tuesday, i met with ceos from around the world who are investing and hiring in america because we've made our country more competitive. and today, i'm here in cooperstown to talk about some new steps that will lead to more tourism not just within america but getting more folks to come and visit the treasures, the national treasures that we have all across this country, including the baseball hall of

fame right here in cooperstown -- because tourism translates into jobs and it translates into economic growth. when visitors come here, they don't just check out the hall. they rent cars; they stay in hotels; they eat at restaurants. and that means for upstate new york, the baseball hall of fame is a powerful economic engine. last year alone, travel and tourism were responsible for $1.5 trillion in economic activity across the country. think about that -- $1.5 trillion supporting nearly 8 million jobs in communities like this one. and when tourists come from other countries and spend money here, that's actually considered a type of export. we don't always think about it that way, but we should. nothing says "made in america" better than the empire state building or the hoover dam. folks who work at restaurants and hotels that serve fans in cooperstown have the kinds of jobs that can't be offshored.

and obviously it's tough to ship the rocky mountains or the grand canyon overseas. you can't do it. when it comes to tourism, the good news is we've got a great product to sell. people want to come here. i was reminded of that yesterday. i took a walk from the white house to the department of the interior building. keep in mind, i don't get a chance to take walks very often. secret service gets a little stressed. but every once in a while i'm able to sneak off. i'm sort of like the circus bear that kind of breaks the chain, and i start taking off, and everybody starts whispering, the bear is loose! so i got out, take a walk -- it was a beautiful day. and even though i went for several blocks -- it was probably about a 10-minute walk -- in that little span of time, i met tourists from germany, and israel, and brazil, and china, and ukraine on the national mall. the fact that people come from all over the world to see our

parks, to see our monuments, is something we should take great pride in as americans. and it's good for our economy. so just like we're helping our businesses to sell more goods made in america in markets all across the world, we're spending a lot of time and focus trying to make it easier for folks from around the world to come see america and spend money here. four years ago, i signed a law that set up a nonprofit organization with one mission, and that is to pitch america as a travel destination. and two years ago, i went down to disney world to announce new action to make it simpler for travelers to visit america, without compromising security at our borders. and those efforts are paying off. since its low point after the recession, our travel and tourism industry has added nearly 580,000 new jobs. last year, a record 70 million tourists visited america from other countries -- more than the

populations of texas, florida, and new york combined. and they spent their money here. no country on earth earns more money from international tourism than we do. and the growth of international tourism created about 175,000 new jobs over the last five years, and helped drive american exports to an all-time high. so we're making great strides in welcoming more visitors to america in places like cooperstown, but we can do even better. i want to turn the 70 million tourists that came last year into 100 million each year by the beginning of the next decade. and meeting that goal is going to help create jobs here in new york. and that's why, earlier today, i took new actions to meet that goal. i met with several ceos of travel and tourism companies, and building on the progress that we've made, i directed my administration to work with airports, airlines, hotel groups, states, and cities to do more to improve the traveler

experience, and reduce wait times for folks entering into the united states, all without compromising our security. we have some folks here today who are already showing us what's possible. scott donohue is the ceo of the dallas/fort worth airport. where's scott? there he is, right here. we've got, from my own hometown, rosie andolino, the aviation commissioner from chicago. rosie is right there. the two of them are responsible for two of the busiest airports in america. but the average wait times through customs and passport control at dfw and o'hare has fallen to just 15 minutes. you get off your plane, it's takes you 15 minutes to get through if you're an international traveler. and that is a big deal. if folks spend less time at the airport, they're more likely to come back for a return trip. and when they go back home they tell their friends, you know what, america was there to greet us. and i've made it clear that national security remains our

top priority, and that's not going to change. but there's no reason we can't replicate the success stories of places like dallas and chicago all around the country. we can automate passport controls. we can bring in top talent from the private sector to find best practices to help move lines faster. we can add new staff at customs. we want to bring in more visitors faster and more jobs faster. if they come into jfk faster, they come into la guardia faster, then they can get to cooperstown faster. and they can start seeing joe dimaggio's glove faster. they can see babe ruth's bat faster. so creating good jobs isn't always easy. but standing here and looking back on more than 150 years of our country's history, baseball describes our history in so many ways. we're reminded of all the obstacles that we've overcome to get there. this hall has memories of two world wars that we fought and

won. it has memories of color barriers being broken; jackie robinson's uniform, the record of his first season as a dodger. it shows us the history of communities that we built across a new continent and the ways that we connected with our country and our world, and how women athletes started getting the recognition that they deserved. so we've faced challenges before, but we don't respond with cynicism and we can't respond with gridlock. every generation faces tough times. but, in the words attributed to the great yogi berra, they're just "déjà vu all over again. we know we are up to these challenges. and just as our parents and our grandparents faced challenges a lot tougher than the ones we face, and just as they went

ahead and built an economy where hard work was rewarded and responsibility was rewarded, and opportunity was open to all people, we can do the same. they passed those values on down through the generations. they passed them down to us. and when you come to the baseball hall of fame, part of what you're learning is that there is some eternal, timeless values of grit and determination and hard work and community, and not giving up, and working hard. those are american values -- just like baseball. and there's no reason we can't do the same. that's what i'm going to be working on as long as i'm president of the united states. i'm going to be fighting to make sure that those values live out in better jobs, higher wages, stronger economy, stronger communities. and i hope you'll join me. thank you, everybody. god bless you. god bless america

>> john boehner said he is getting closer to calling for the resigning of the veterans affairs director but remains unconvinced that it will solve the problems. he lacks confidence they have

the capacity to root out the source of problems that led to the allegations that va medical centers were covering up long wait times for veteran care appointments. that again from a roiters story. more from boehner. >> i call for the general to resign. but this isn't about one person. this isn't about the secretary. it is about the entire system underneath him. you know, the general can leave and we can wait around for months to go through a nomination process and get a new person. but the disaster continues. and so i don't want people to get confused about what the shiny ball is. it is a systematic balls.

the reports are appalling. these are men and women who served our country and we haven't just let them down but we have let them die. this is awful stuff andtion ought to be held accountable for it. >> c-span live covering the senate floor. and every weekend booktv, devoted to non-fiction authors and books. c-span 2 is created by your local network and brought to you by your local cable or satellite provider. next, a congressional panel looks at the future of the u.s. postal service and innovation in postal delivery.

>> good morning. the committee will come to order. i would like to start by reading our mission statement. americans have a right to happen to know the money taken from them is well spent and americans deserve an efficient government that works for them. our duty is to protect these rights. our responsibility is to hold the government accountable to taxpayers because they have a right to know what they get from the government. we will work with citizen watch dogs to deliver the facts to the people and deliver reform to the organization. i would like to recognize myself for an opening statement at this statement which is in a different book. i edited it. the staff suggested one that is not always a hundred percent

right. today we will examine efforts by a number of private sector companies to develop innovative postal products. the internet have been a boom for the economy but has been a mixed blessing for the postal office. mail volume is down but package volume is growing rapidly. americans are changes how they communicate and the postal service is struggling to debate. but we have are not living in a post-u.s. postal service world. it still has a vital road affordablely connecting even the most remote parts of the country. that is why innovation is so important. we need an infrastructure to move matter not just data.

we are creating new products to create new demand for mail and possible streamline the way the mail is handled. these efforts target every aspect and include new mail design, ecommerce, return lo logistics. and today i am looking forward to hearing about the new products and what problems, if any, have they encountered along with the way with the postal service. now, if ever, is the time for the postal service to embrace these innovations. in the text community the world disruptive is used and that is not necessarily a bad thing. but it is a change.

when my wife was in her junior league used to refer to the the phrase that is way we have always done it and we have to be leery of falling into that trap. if companies continue to be shutdown or steamrolled by the red tape before having a chance to get off the they will look else where to present ideas. i look forward to hearing from the private companies that work with the postal service and how entrepreneurs can create more innovation whether it is better access to data like changes of address or whatnot there are many areas ripe for renovation. the american people are going to be left footing the bill for a

bail out if we're not careful. i look forward to hearing from the panel and believe there are smart ways they can lower their cost and improve innovation with private-partnerships. and before i recognize mr. lynch for his opening statement i ask consent that our colleague from texas be allowed to participate. mr. lynch, your opening statement. >> i want to thank you for holding this hearing to examine the postal products and i would like to thank the panel of witnesses. innovative individuals helping the subcommittee with their work. in november of 2013, the postal service partnershipped with

amazon to test seven day delivery and the pilot program has been proven to be successful and is the primary reason they are growing revenue. in their quarterly report released on may 9t, $379 million increase and that was the third straight growth due to the 8% increase in shipping and package revenue. sunday package service is expanding to other cities and the agency is working to establish similar partnerships with other companies. this serves to illustrate the agency can experience positive results when it builds on using a network that is drive n by a

high working dedicated workforce to deliver the mail to the american people seven day as week. it is an example of innovation and we would be well served to look at the approach. as evidence by the markup yesterday, chairman isa continues to put forward misguided proposals that degrades the services that have come to define the service in the eyes of the american people. i don't agree we can make the postal service for the better by eliminating ways. by mandating it to cluster box or sidewalk delivery or asking postal customers to pay a legacy fee to retain door to door service.

such a proposal would only place them at a greater disadvantage. instead we can have them grow on products and set themselves apart. i commend ranking members for the leadership in this area and i am proud to sponsor hr 2690 the innovate to deliver act. this thoughtful approach would establish an officer to lead the process of innovative process and services with changing market trends. it would require the chief officer to make sure products maximize revenue to the postal service. package reform and mail delivery is needed and i understand there are a variety of perspectives on how best to facilitate that in a

manner that will place them on a more solid footing. i look forward to discussing the issues with our witnesses. i look forward to your input and yield back the balance of my times. >> members have seven days to submit opening records. we will recognize our panel. james cochrane is the chief executive officer for the postal service. david williams is the inspector general of the united states postal service. will davis is chief executive officer of out box inc. seth weisberg is chief legal officer to stamps.com. and patrick elderman is the package developer. pursuant to committee rules all

witnesses will be sworn before testifying. will you please rise and raise your right hand. [swearing in] right hand? do >> let the witness reflect that all witnesses answered in the affirmtive. it is my undering the house has a vote around 10:40 and it will be a long series of votes so i want to get it covered and if we get it done before then you don't have to sit here for an hour while we vote and i might make an earlier flight back to texas. it will be a win-win if you abide by the timer that gives you five minutes for your testimony and then we will ask questions. your entire written testimony is a part of the record and is available for this committee and others to review.

mr. cochran, you are recognized for five minutes. >> good morning chairman lynch and members of the subcommittee. thank you for calling this hearing. i serve as chief information officer and executive vice president of the crabs postal service. i oversee technology and all aspects of the business. during my 39 years with the postal service, i have developed a broad bases for how we serve the customers. emerging technology is exciting but challenge us with their potentially disruptive affect. it is my responsibility to deal with this and a matter of survival. the postal service is supported and code developed by some of the most respected technology

companies and many small businesses that bring fresh insight. our goals are simple. we focus how we can innovate with tonechnology and partnershs to develop a world class experience. for 40 years, the postal service workforce programs have shared the responsibility with business partners. this is guided by the premise that our profits are enhanced when our partners are profitable. printers, software vendors, mail service providers, transportation providers play a vital road and we have built an industry around the market needs. we are driven by e-commerce and

free shipping there is a switch to ground solutions. we are the answer to that demand. we have work share program that levages the companies with the unreached delivery network. parcel select works with our competit competitors to provide logistics and postal service does the final wing which is a win-win. we have same day delivery, sunday delivery and constant real time tracking. customers are demanding these without cost or we face loss of them. through bar codes and financial

incentives we are creating a digital reflection for hard copy and a digital action for response. we welcome creative ideas from individuals, companies and entrepreneurs. we have an open venue to submit ideas to enhance the postal service. they must have a clear path and generate revenue and must not damage the existing brand. we receive ideas from a variety of sources. some are not new concept and some can't be adopted because of restricted laws. the role of the piece postal service is changing at a rapid

place. every changing technology presents us with opportunities but our success is dependented in part on how fast we can evolve. we remain guided on the commitment to provide value and service upon when the americans citizens and businesses rely on. our efforts are limited by an outdated legally restrictive business model. we have the responsibility to provide this service but don't have mandated. we need reformed legislation that should provide us with clear authority to offer products and services that the allow us to take advantage of the infrastructure. and we urge congress not to place further restrictions on

the ability to innovate and compete. we compete vigorously but also fairly consistent with legal obligations. we look forward to work with you mr. chairman and the rest of the committee to continue to work on reform and deliver services to the american people. i will be happy to answer your questions. >> mr. williams. could you bring the mike closer to your mouth there? they don't pick up as well as -- >> members of the subcommittee, the postal service has a long history of working with the people. historically postal applications stimulated advances in hand writing technology and act as a platform for the private sectors and invasinovatoinnovators and

postal service overlayed the zip codes across the country. and innovation is more important in today's world. great opportunities and capabilities are there alongside. last year, the traditional communication and logistics system was ravaged. the job of the postal service is to support citizens and businesses as they try to compete and position themselves while it takes care to make sure market forces prevail and are not undermined. understanding the changing world and adapting are increasing endeavors. the postal service provides support services for emerging

technology. they depend on the ability to embrace others. the strengthening of the processes for fainnovation is - innovation is needed -- and providing staff to join innovators in navigating the huge postal structure and remaining with them until it is resolved. strengthening proposals and developing in rapid prototyping of products and innovation and protecting property and respecting that of other's. partnerships with the private sector and government are important to bring in new ideas and sharing risks and leveraging

the cost of research and development investments. there are several areas for innovation opportunities team particularly rich. support for e-commerce, health and government transactions by providing a portal for identifying individuals and currency exchange and at the back end by assisting with packaging and postal services. and to help small businesses and innovators with shipping solutions and providing digital access to the network by linking together its website and post offices and digital enable characters and conducting digital analysis of the vast data generated throughout the network for business and revenue

ideas and intelligence. these can tighten the innovation of data and their supporting matter streams. the internet, search devices and cloud storage have laid the foundation for a changing world. an aspect of what comes next and will lead to a situation with changes and learning curves. the ability of society to propel rather than rhet rhetor productl depend on the support of the citizens through the coming era that will combine technologies that include 3-d printing, the internet of things linking ken senior nets, advanced robotics

and nano technology. the world is slow to adapt their role in the early phases of the digital age and we are partially c constrained from doing so legally. the postal service must develop an intuitive sense of the changinging roles and the new challenges facing american citizens and businesses. a few aspect of the postal service to transform must have stronger compancy for embracing the changes. >> we will move to private sector folks now. mr. davis you are up. >> thank you, mr. chairman. innovation is in the title of today's hearing and we have heard it spoken about a dozen times in earlier testimony. i feel the need to go a bit off

script and a movie is the only thing that comes to mind. it is one of my favorites and one of my daughters favorite. it is the "the princess bride". there is a scene with a criminal mastermind and he uses the word inconcievable and they hooked at him and said i don't think that word means what you think it means. and that is how i feel about innovation. and that is because innovation is disruptive and destroys things and kills jobs. if you think that is too bold. consider this fact.

in 1926, the s&p index was formed and the average tenure on 60 years on the form and today it is less than 15. since its inception there is only one company that started out. and that is general electric. there is also an affect of pursuing innovation. it is the narrow road and path of putting off old business models and secure cash flows and grasping for something that is uncertain. and the promise of innovation comes in the form of new jobs,

new market places for every job and company or market that is destroyed through embracing invasion, two more pop up in its place and new workforces that could not be fathomed. but recumbents usually fail and die off and go the way of the other companies going the way of on the s&p 500. we have to understand that embracing the postal service means a fundamentally different postal service and in ten years it will look unrecognizable from the way it is today. but that doesn't mean it is worse off or jobs have to be destroyed. it means new ones can be created. but make no mistake. innovation will come, disruption

will come. it is like junk mail in that regard. it is coming rather you like it or not. as we talk about in -- innovation -- and embracing it, we need to understand it means changes to the business model and embracing it means destruction but it means new markets, jobs and opportunities. thank you. >> mr. seth weisberg. >> thank you, mr. chairman. i am from stamps.com. the leading pc postal company. that is internet based software that allows companies to print their own postage from their own printer. we serve over 500,000 registered customers primarily small businesses. in 1999, we became the first

company to offer a softwear only postal service solution enabling customers to print services from any printer. pc postage accounted for one quarter of a billion in postal service sales and last year it accounted for over 3 billion and growth was 35% year over year. that is consistent double digit growth every year even through the heart of the recession. virtually all of the priority growth surge is generated through the pc postal service channel. a recent study showed revenue cost 2 cents per dollar of revenue compared to 47 cent per

dollar from a postal outlet. it provides security from biological attacks and other attacks. we provide customers with cutting edge technology without the postal service having to pay for research, development, support or maintenance. we have launched an enterprise service targeted with companies with multiple locations with enhanced reporting that allows a central location, such as a corporate head quarters, greater visibility and control over the postage expending across the entire network. an e-commerce market with multiple stores can use our website to consolidate all of their orders and ship with ease. from one click they can import

the services from the shopping cart and print the shipping labels. it post back to their web stores and stamps.com keeps the buyer in formed and orders the carrier pickup and sends a letter to the postal service and generates a scan form so all the carrier does is scan the form once and all of the packages are automatically in the postal service system. it is based on a public-private partnership. our products must complete extensive testing in the yaz of up rationale, financial and integrity. we partner with the industry to achieve goals of improving the

customer experience, increasing revenue and minimizing cost. the pmg, the cio sitting on this panel and many of the dedicated postal veterans deserve much credit for this partnerships. we believe that public-private partnerships with the best path forward as technology innovation becomes increasingly important for the future. having the postal service create its own technology isn't the best approach. instead, it should provide incentives for industry innovation. this low a -- allows customers to pick what meets their needs. every package is delivered by a city or rural letter carrier. it means more packages to

deliver, more letters to deliver and more volume to service. thank you for the invitation to today. >> and our next guess -- can i pronounce our name correctly? >> it gets butchered all of the time. thank you for having me. we are a small start up company that produces the future of prescription packaging. it was created by a navy vet named dick lee. this is our vile, this is the traditional. impact has many advantages. one is this is tamper evident

and this isn't. this bottle of water is tamper evident and this prescription isn't. we have more security in this than we do in this. hard to believe. we also have a lot more label space so it is easier to read. and lastly, it is more space efficient and compact. we are made in the united states in pennsylvania and we are add minute about staying in the united states. this is a musheen flat and this is a parcel. the overthe counter rate for this flat is 29% savings to the taxpayer for every prescription medicine that is mailed out in the united states if it is

classified as such. every prescription medication that gets mailed out in the united states if it's classified as realizing what we had with a flat vial and considering the united states government is the largest user of prescriptions by mail we save opportunities for provide saving for the taxpayer and provide better vials. we developed this envelope that meets the requirements of the shipping and we tested it in fort worth and varified it worked and we received our approval on june 17th, 2011 that our mail piece was approved. over the next 18 months we continued to improve the product and refine it and refine it and came back to a product that looked like this. smaller, lighter and cheaper. we took two ounces out of the

envelope and put a package together we could do in 50 per second. we put 18 months of work to go from this to this. and we resubmitted the package plus some of the internal improvements. our packages were rejected. not only this new package but the existing form factor as well. we were shocked. this was approved once for a totally different reason and it wasn't the fact it doesn't meet the mechanical requirements of the flat which is bend like this and dimension to width. it was that a box in an envelope isn't a machine flat. we were shocked. we had already been approved. we went back and solicited and i sent a letter to the father of

the flat rate box. and we thought we would have an ear. we were referred back to mail standards and got a curt response that basically said and i quote thank you especially for your persistent. unfortunately the piece with its current contents qualifys as a partial. if you change the contents, contact us again. if we change from this to this contact us again. the entire point, i am sorry, isn't this. it is this. this is a better, safer vial and because of its shape it is 29% cheaper. that is the point. after really feeling very frustrated with our entire experience with the post office. and we went to the post office for a reason. they provide value and they are the only agency that can legally

put prescriptions in our mail slot and not your door step. we want to work with the post office. we begged and pleaded we would change the package but we want to use the post office. but it fell on deaf ears. the private sector said they will take it because we know how many we can put on an airplane and save space at a dollar a piece. and that is why i am here. thank you members of the committee. >> thank you very much. mr. everett. >> good morning. i will describe how the postal service has made it possible to

develop my company with manufactures and distributors and logistic providers. thank you for allowing me to speak today. i am todd everret. we have a private owned company in austin, texas with over 400 people on the payroll. we were formed to develop a better way to return items to providers. we are a direct retailer to consumer and manufacture and logistics. our success is due to the postal service to work with us to develop innovative solutions. we offer a parcel delivery service and provide cost-effective shipping services by working with the postal

service for first mile pick up and last mile delivery. we evolved into a return logistics company and handle returns for retailers. we concluded that customers wanted to be able to return p k packages easier and developed a return solution making use of bar codes embedded in our labels. those bar codes provide us and the customer with detail information that allows them to quickly handle the transportation. as we evolved, we discussed the possibility of creating a new convenient process for handling returns of large shippings of m items. the postal service developed one

of their most innovative products, prs, postal return service. people are allowed to retrieve items from agencies and that allows us to provide advance data and customize returns to retailers. the postal service was receptive to working with us. we had numerous meetings with the piece postal service and they sought commission to test us and approval was granted in september of 2003 and testing started in october of 2003 and in after three years the postal service sought for us to be a product of mail. and we were approved. we were able to implement the

process in conjunction with the program. it simpleifies the return by offering prepaid returns at their home, work place or drop off at any mail service. our packages enter through the network and our solution gives consum consumers confidence it will be handle with speed. and we have been able to expand to include parcel delivery and e-commerce services. the postal service web has been a willing partner to deliver the solution to the customers: and this is based on the most recent

data as the service continues to grow in the fiscal 2013, they handled more than 50 million prs packages and generated more than $120 million in revenue. thank you again for the opportunity to testify before you today. >> thank you very much. we will break with tradition because normally i would ask the first round of questions but mr. lynch has a vote so i will allow him to ask and then i will take my opportunity. >> thank you, mr. chairman. thank you for your endullgence. i appreciate that and i thank the members of the panel for their help. it has been an interesting discourse thus far. when i think about the future or iteration of the postal service i tend to think about what they have got going on in

switzerland. there is a system over there that has been rolled out where it is called a digital mail scan. i can pull up my mail as it arrives at the mail system and if i don't like what is there i can click on it and say don't deliver it. so when you say junk mail is coming, that is not necessarily true. you can click on it and tell them not to deliver it. so that is sort of a new iteration of the postal service that is out there. ... sort of a new iteration of the postal service that's out there. and i think that's going to be coming to the united states at some point. and that is really destructive. it would be a great thing for

the environment because of the huge drop in mail volume because people won't be getting mail that they don't want in their mailbox. and down here in d.c., you know, at my apartment that's 90% of what i get is, you know, circulars and stuff like that. you know, if my wife and girls didn't get the sale information that they get every single day, i'd probably be saving a ton of money. so the volume will drop because people will be able -- that will be a good thing for the environment. it would be a terrible thing for the united states postal service national letter carriers. it will drop in volume. but that's really disruptive change. and that's what we're going to 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. he wants to change 50 million door delivery addresses to cluster boxes so that we'll have to -- even if there's 100 addresses in a box, it comes to 1.5 million. if you make them bigger, you can put 200 in there, you can drop that to maybe 750,000. but that's a huge, huge expense. huge expense. even where it's feasible. and once we have 750,000 or 1.5 million steel boxes out there all over amica,uch >> how much flexibility do we have in light of the technological changes that arepg coming, you know, putting the steel box in the middle of theci neighborhood and that is not -- that is disruptive in a way and way. that is not innovation.

cifi is going backward in time. flexthat was extremely costly inefficient and it reduces our flexibility, i believe, in terms of what we are doingiberms that. you >> you can talk about me when i am gone when i'm gone. >> pleasure. >> i'm sure it is, mr. chairman. so when i think about the idea as well of going to five-day delivery, which is another bad idea, but it's popular around here. the president supports it, the chairman supports it, i oppose it. most innovation tries to tie in with what society's doing. it tries to answer a need that's out there.

and where i live, and which is common in america today, we operate on a seven-day schedule. no one's -- you know, all the stores that used to be open five days long ago they've gone to seven days. so now the post office in a spirit of innovation is going to close for two days every week? i just think that's -- i think that's the wrong direction. mr. davis, you seem bursting with an urge to answer. >> well, 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 we were able to do it through the digital delivery and presentment of postal mail. and what we found was even

though they unsubscribed from volume, we could measure intent. and intent is a holy grail for advertising. and when we measured intent, we can know exactly what they wanted, what they preferred, what they did not prefer. and that type of information is missing. and that's why it's so unfortunate that we were unable -- >> all i'm saying is i want to empower the customer. >> exactly. >> the taxpayer is not involved here, you realize that. this is the postal customer that's picking up the tab. we don't give tax money to the postal service. we don't. they survive on the stamp, the money they get from the stamp. that's the way they're supposed to. but 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. and that, i think, is disruptive change. it's innovative change. and it will take us to a whole new world.

and i think that would lower the cost, that would make it more efficient and improve the postal service. i'm going to yield. i've gone beyond my time. i apologize. thank you for your indulgence, mr. chairman. >> thank you very much. i normally would come back -- mr. clay, did you have a vote here coming right up? okay. you guys over here -- >> the gentleman from missouri is always welcome to speak in this committee. >> all right. >> thank you, mr. chairman. and chairman issa. appreciate that. let me -- 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 of the postal service expanding into hybrid and reverse hybrid mail services. mr. williams, can you briefly explain what the services are and elaborate on why it may be beneficial for the postal service to expand into these

areas? >> we believe that the ability to print a letter at the point of delivery would keep a lot of the mail out of the system. and so the idea of saving on transport and fuel and crowding through the network of sorting, plants would be a very good idea. it allows variation also among the regions. so you could do -- you could print different letters for different zip codes or different parts of the country. >> well, 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? >> i do.

i think that there's 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 the impact of this would be. the picking the timing for an innovation is devilishly difficult. and if we present something that isn't immediately embraced and we've closed off, we've burned the ships behind us and closed off the possibility of using the other network. it would be a very serious mistake. >> and the hybrid and reverse hybrid mail services sounds similar to the business model of w one of our witnesses here today. mr. davis, your company outbox, was a feed based service that gave customers a choice to bypass physical mail, correct?

>> correct. >> and if i'm correct, your business model was dependent de the participation of the postal service, its infrastructure and customer participation. correct? >> correct. >> this year, outbox announced that it would determiterminate digital mail operations through a blog post. you informed customers about why outbox was shutting down this 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? >> absolutely. >> additional, you describe your visit with the postal service's senior leadership as a "mr. smith goes to washington" moment. where senior leadership made it clear that they would never participate in any project that

would limit junk mail and that they were immediately shutting down your partnership. is that correct? >> correct. >> mr. davis, in developing your business plan, were you aware that advertising mail represented a significant portion of the postal service's volume in revenue? >> yes. >> and as a self-sustaining entity, that h that has to gene revenue, were you aware that the postal service has a right to choose who it works with based on its bottom line? >> absolutely. >> mr. cochran, the postal service has been quiet on this issue. is there anything you would like to add? >> well, the -- 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 through a commercial -- what we call a commercial mail receiving agency. it's very common. it happens in buildings all over town here. very common in the businesses

arenas of new york and washington. i think the challenge was that outbox approached it a little bit differently. they didn't want to have a commercial mail receiving agency. and so that required them to go to the mailbox and pick it up. but 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. >> thank you for that. mr. chairman, although i commend mr. davis and his company for their innovative solution, i think it's 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 mindset. 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 8th, 2014, from the heritage foundation. foundry blog entitled "why the postal service was right to sign

with junk mailers over outbox." >> without objection, so ordered. >> would the gentleman yield? >> yes. >> i'd like to side with you in this case surprisingly, that although it's a shame to see a for-profit entity close because they're not making a profit, i do agree with you that when -- this is an innovation that should be on the list of innovations of the postal service because it falls squarely within their basic requirement. just as stamps.com is an innovation that the post office ignored. to their peril. one of the strange things you and i, i think, agree on is at a minimum the post office ought to do all of its core jobs of revenue and revenue savings first. the most important innovation in the company is to do the job they're paid to do well and innovatively. and i think we have two witnesses here today from two for-profit companies. one that's still thriving, one

that isn't in this case, but they're both core functions of the post office that suffer from neglect. so i share with you that, you know, in the comprehensive postal reform bill we increase the innovation funds specifically because we hope the post office will innovate within its core in addition to outside its core. >> so in your opinion does it cry out for a public/private partnership? >> 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 -- and i think that mr. lynch, although he disagrees with everything i stand for, apparently, in postal reform, including apparently i've become

a lutite from the electronics industry, that's a first from 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's business plan that switzerland has gotten ahead of us on. and he seemed to muse that it would be bad for the base that he so much often cares about. but the fact is, he's right. he's 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 to participate with a business that may already have gone a long way. so i couldn't agree with you more that your point was right on. >> mr. chairman, i think that i may have -- be having an out of body experience by agreeing with you so much lately. and i see my time is up. i yield back. thank you.

>> thank you very much. we'll kind of get back to the regular order here. i'll go ahead and start with some of -- 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. but can you in roughly a minute or so tell us about what outbox did and what happened, just an elevator speech version? >> absolutely. outbox enabled our users to view their postal mail from anywhere. whether it's their iphone or ipad. and they could tell us exactly what they wanted and what they did not want physically. so it's 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. and 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. and we did so with great fanfare. and we were shut down in that meeting with the postmaster general and his senior team. and in that meeting, we had a fundamental misunderstanding of who the customer is of the postal service. and he said, your customer is not my customer. and i said, mr. general, what do you mean? he goes, well, my customer is a sender of mail that essentially pays me to place mail on the kitchen tables of every american every day. and while true, that is not where the inherent value of the postal service lies. the value lies with its connection with every single american. and so it is my belief that large organizations in government, of which the postal service is in part both, do not

naturally tend to adopt innovation because it does disrupt them. so 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. and so the only way that we can do this is if we have a safe harbor. something within the postal service that allows them 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. it 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. >> thank you very much. mr. heitmiller, you mentioned that you were unable to get your product classified as a machineable flat. and it actually became a parcel.

>> yes. it was unclassified as a machineable flat and magically became a parcel. >> that's more of a competitive service for the post office. i think you mentioned the amount of postage your flat would take? >> yes, yeah. as an example, these are over the counter rates. this is a parcel rate. four prescription vials. $2.24. over the counter rate for michigan flat which is $1.66. >> you said u.p.s. is delivering them for a buck a pop. >> they made an offer to deliver at roughly a dollar. roughly. the challenge i have when i brought them up is we are a young startup. and we're investing our effort in where we have opportunities to generate revenue. while we think this is a great and wonderful idea and a year ago put a lot of our emphasis in this, our business has pivoted slightly from that. so we've not -- after getting stone walled by the post office a year ago we've not put a lot

of interest into bringing this to market. we've been in discussions with a couple potential customers. u.p.s. won't initiofficially pu contract on the table until they have volumes, units and cost. they said, yes, we believe in the package. we know we can do it for about a dollar. i asked them to submit something for the record. they declined to something something for the record. >> i give the impression you'd rather use the postal service. >> i would much rather use the post office. the post office has the infrastructure. the post office has the trust. the post office can put this envelope into every mailbox in the united states. legally, safely, securely. u.p.s. can't do that. they have to leave it on a doorstep. the volume is there. the business is there. i'll take this to the enth degree. is this a regular standard business envelope. as a machineable flat, this 190 ce -- 90 cents over the counter. drugs by mail for 90 cents.

$2.22. there's hundreds of millions of dollars on the table. now, as the only plausible reason that i can see that the post office says that we want to classify it as this versus this is top line revenue. because the top line revenue of a parcel is higher than a flat. well, in last year's strategic plan in 2013, i got this online. what this says is that the post office makes three times more money on a flat than a parcel. three to one. so 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? very simple. it fits in a flat tray. it's easy to automate. we've proven we can automate this. their only case is that a square box in an envelope isn't a

machineable flat. it meets every mechanical requirement of a machineable flat. we've tested it. we've volunteered to work with the post office to prove it. >> thanks. i appreciate it. i'm not going to draw you into the debate whether or not a secure delivery location for your parcels would be a benefit to your company or not. ms. norden, we took two on your side of the aisle first. if you don't mind we'll go recognize chairman issa then come back to you. mr. chairman? >> thank you. this is an interesting -- and i won't use out of body as mr. clay did. but interesting turn of events when mr. lynch calls me a lutite and says there's an inevident blt we're going to do what switzerland has done. now, mr. williams, i was madder than hell at your proposal. i think the idea that you're 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. and i'm 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 that you would be much more of an advocate, including when people like mr. lynch seem to find everything that reduces cost and allows the post office to get to break even, and be more efficient for its customers, which as stated earlier, are the shippers. mr. lynch is not here. and mr. lynch is never going to be my partner in anything that reforms the post office and makes it more efficient because that's going to reduce labor.

i'm sorry to say, but i think he's a lost cause on that. mr. clay and others are not. let's go through the numbers quickly. anyone can weigh in. mr. williams, you're a little bit in the hot spot here. the fact is six day to five day is in the shipper's best interest because it avoids another three cent per letter price increase and similar cost across the board, doesn't it? >> i'm uncertain as to the three cents. but i understand -- >> looking at about $2 billion versus what the price increase did. i'm just using those. 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? >> i think that's a very good proposition. we'd need to find out what happens in reality. but i certainly follow the -- the train of thought that you

present. >> that's why the president has proposed that. now, mr. lynch spent a lot of time, and i didn't plan on having this be a lynch/issa. but it looks like it will be. he 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 million, plus or minus, do? that that's the curb/cluster, including apartment and condo owners all over america, rural delivery and so on. but 91 million, plus or minus, do not get it to their door while only 37.8 million do? >> yes. i agree that that's the ratio. actually, i -- >> it's amazing for that ratio of more than 2 out of every 3 who are already part of the savings of not having to walk all the way to the door, simply less labor. that's been proven and calculated both by the post office and cbo, that labor

savings for one-third, less than one-third of americans is billions of dollars. and ultimately, question for you. those billions of dollars per year scored at just our modest 15 million, less than half of those being converted, is scored at over $20 billion in savings in cost to the post office. let's just go through the numbers. your customer is the shipper. you all agree to that, whether you like it or not. right? and the shipper gets a value both in secure storage and in avoiding cost increases. don't they? >> correct. >> so where is the negative side, assuming that it's a reasonable distance to go, that, in fact, these are secure storage and that individuals under the americans with disabilities act and the like will always be able to still get to the door delivery, which is already based in law?

if i'm out in the rural america, but i'm a shut-in, i can, in fact, with no cost have the post office deliver to my door today. isn't that true? >> it is true. we very strongly -- we did a study as well on this topic. and 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 the huge amount of savings. your proposal as i understand it is on the moderate side. >> we toned it down a lot so that we could say that more than half of all americans who now get to the door, if they don't believe it's feasible for them, would not see a change in the first ten years. we believe the communities will, over time, rush to have storage. not necessarily cluster boxes of a dozen or more. often it will be two or four in a cluster just practically at your front door. but, in fact, the ones we showed yesterday during our hearing, we specifically chose ones that are

ganged in a little larger because we want to be fair. in neighborhoods where it's hard to place a box, you'll tend to have larger boxes. well, in suburban neighborhoods, it's pretty easy to do two or four just at the curb between your neighbors. >> both for places where the model is difficult to fit and then for people with special needs, we saw that there was a waiver and a model of considerations for waiver. we think that is important to do. yeah, we -- we think it could -- it could be a real game changer. it could save an enormous amount of money. we also want to note that those 37 million that you pointed out aren't designed for people with special needs or special requirements or in places that are difficult to deliver. it's a historic accident. and we like the fact that this imposes a comprehensive plan for

the placement of those and the facilitation of people with special needs and neighborhoods where the model can't work in the classic fashion. >> eleanor, could i have your indulgence for about two more minutes? thank you. >> without objection. >> thank you, mr. chairman. a couple of quick things. mr. cochrane, i think for 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 -- to the shipper. in other words, there are people who may not -- you may not know where they live, but if i can -- if i can pay half as much for 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, for example, that's a feature that's a variation of mr. davis

technologically from your experience, that's completely doable, isn't it? >> yes, it is. and we have a test right now in northern virginia where we sort all of our letter and flat sorting equipment in cameras. we can take pictures of mail pieces. with can send a text with an image of the individual pieces we saw in our sorters that are going to arrive in your mailbox that day. it doesn't get into opening envelopes but it's a first step toward giving people a digital image of what's going to come into their box. the risk side of that is what was discussed earlier. you have catalog mailers that are paying to get into the mailbox. and if you're disrupting that, to use the term, it does threaten some of -- a very extensive revenue stream for us. >> but, for example, if -- these are hypotheticals. mr. williams, you looked at a lot of the efficiencies. if a shipper says, look, i'm going to give you x amount of these things.

and if the person declines, i'm going to pay half as much. if the person accepts it, i'm happy to pay the full boat. 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. well, if delivered, let's just say i want the coupon or whatever, i pay the full price. but actually to your customer shipper, you're 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, and i've got to tell you, i'm not in northern virginia, my local home here when i'm in the district is in the district. i would love to know digitally everything that's proposed to be sent to me so that i know to expect it. and if it doesn't come and it's an invoice or something, i would be prepared to say, hey, i got a lost piece of mail. huge advantages to that. and i happen to be a to the door delivery here in the district. and i often get my next-door

neighbor's mail. and it's -- i don't know what causes it. but it happens pretty regularly. so i take the mail and i walk over and i 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'm gone, as you know, for weeks at a time. because i don't actually live here. so they lose three, four weeks sometimes of mail. if they had a digital picture, they'd 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'd like to close quickly, eleanor, with one thing. i was in business for more than two decades exclusively. then i've been in business very modestly by comparison the last 14 years. but the one thing i know about business is the top line and bottom line are not uniquely

different. that you can increase top line, but if it doesn't flow to the bottom line it is of no value. and you can make cuts and never get to a profit. that it's a combination of the two. the post office has, at its current volume, billions of dollars of excess inefficiency that we all know can be cut. innovation, i think in the case of your product and others, innovation depends on efficient delivery. the more efficient it is, the more promising they will be for innovative products. including -- 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. so, ms. norton, i appreciate the extra time. there's nothing more important to me than to try to have all of you be part of it. and, mr. davis, i appreciate your showing the way. my hope is that even if they

don't take it from you, that they will, in fact, see the direction that you gave as having value in some derivative product. >> thank you. >> thank you, mr. chairman. >> thank you very much. we'll now recognize the gentle lady from the district of columbia. >> thank you very much, mr. chairman. i must say i welcome this hearing on innovations in the postal service. and i particularly welcome private businesses who worked with the postal service. i've often wondered about the identity of the perpetual identity crisis we keep the postal service in. it's a little bit private or maybe mostly private. chained to the federal government. whereas the essence of being a private business where government doesn't give you anything is that you can go out and fail for yourself. or rise, as the case may be.

most of the downsizing of the postal service has been done by cuts. i much prefer, as the chairman just indicated, innovation to be the road to the future of the postal service. i don't believe there's any way out of that. so i've been interested, every time i see on television an innovative tool that the postal service is using, i say, wow. because i hadn't become used to that as a kid growing up. yet i do see those. and i'd 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 -- one of the success stories has been the every door direct mail. and i was interested that it apparently has helped the post

office generate more than a billion dollars. mr. cochrane, is that not correct? >> that's correct. >> then apparently this is -- this product has been a great success for the business community. i'd like to know how the postal service understood that this was a product that would catch on with the business community, why it's caught on with the business community, and what they're doing to enhance a product that has had this success. mr. cochrane, are you the person who could best answer that? >> i am. thank you for the opportunity to talk about a product that we're certainly very pleased with. and it's an innovative product that was created to really leverage technology in some way. a hard copy piece of mail, what we've done is facilitate the

ability for a customer to go to our website and literally pick a neighborhood. if you're a dry cleaner or a restaurant, you can actually pick the neighborhood and the routes that 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 that you know that your customers live in. it's got mapping that allows yo u to click on the routes and look at the streets and highlight the streets you want the mail to be created. there's a commercial version and a version that you can walk right into a post office and pay right there at the point of service terminal. drop the mail off and we'll deliver it in the next day or two. >> i take it you have a competitive advantage over your competitors with -- with this particular service. because of your own infrastructure? do you have any competition with this service? >> not with -- with mail going into the mailbox, no. but there's -- there's maybe more sophisticated mailings that -- direct mail in particular that take place. i think that was some of the initial concerns of our business partners. that this eddm would force

people to buy down from maybe a more traditional mail piece. and our findings is actually dead opposite. it's created an onramp where somebody begins with a very simple eddm product. they morph themselves up into more sophisticated mailer. they start seeing the value of mail. they get a creative agency. they start working with a commercial printer. and they expand where they're sending mail to. so it's 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. >> well, do they contract also where they send mail to based on what they learn by -- by going on -- by going online? >> they can -- i think that's the issue. is that they can pick where they want it to go to. it's a saturation type mailing. when they pick on a carrier route, 500 deliveries in that route will receive. >> so it can save businesses money as well. >> absolutely. sometimes you'll get a mail piece, and it's 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 almost a good way of describing it. it really gets focused on the area that you're trying to reach. >> the post office has had fair success collaborating with others. mr. everett, nu gistics developed a process with the postal service, correct? you testified before i came. i regret that i did not hear the testimony as to your collaboration. >> we've worked extensively with the postal service. >> did they reach out to you? >> i wasn't with newgistics when the initial meetings were held. my understanding is we had an idea, reached out to them. it was aligned with some of the product ideas that they had as well. >> mr. weissburg, your company has successfully collaborated with the postal service, i understand? >> yes, we have. >> and who reached out to who in that one? >> we reached out to the postal

service initially. >> cochrane, do you find that you're pursued by businesses like mr. weisburg's? >> it is very flatter ing. i think it's just a recognition of the presence we have. the fact that we're at 153 million doors today. i was part of the early conversations with newgistics. they did reach out to us and say we want to do something with returns. they shared their business model with us. 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 then went for a regular full-time product as parcel return service. which at the time this was 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 and market research was showing that was the thing that was 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. i think it's a great success story. >> could i just ask mr. eidemiller. i came in, you were describing difficulties with the postal service. is it the case that you went to u.p.s. instead? >> well, we spent over two years really believing that the post office was the best solution. we still believe the post office is the best solution. they offer service that nobody else offers. and at a certain point, being a fairly self-funded business with a limited amount of runway you kind of put your wood behind the arrows that you believe in. and after reaching the end with the post office we approached u.p.s. and they said, great, we love the package. we'll give you a great rate for it. they're talking about a dollar from origin to destination. second day service at worst. >> mr. cochrane, did you have a

response to that? >> 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's a very complex network, as i said in my opening comments. and we do delineate and differentiate letters from flat type mail, catalogs, magazines in particular, and parcels. and it's important that they go into the distinct streams that they're supposed to so that it's not creating problems on our machines. though the -- the package, the boxes are inside an envelope doesn't necessarily make them a flat. it's a parcel. that's the reason why they were turned down to mail at flat rates because of the ridge jidty of the pieces and the need for these pieces to stay in the appropriate mail stream which is a parcel mail stream. now, we would welcome customers shipping those packages that's been designed. i think it's an innovative design. the whole concept it secures the bottle, that it's tamper resistant i think is a nice value set for pharmaceutical

companies. we deliver well over hundreds of millions of pharmacy items on an annual basis. but the issue is, it's a parcel. and at the end of the day it's got to be mailed as a parcel. >> may i speak? it's mrs. norton's time. may i speak? >> i think this dialogue is informative, so yes. >> may i offer rebuttal to his testimony? >> yes, please. >> at our own expense, and my background is -- automation. our founding partners came out -- the entire genesis around impa m-pact -- they one day said, why don't we do it square. at the time, they had done industrial automation at columbia records, bmg. you remember the record of the month club, cassettes. they were handling those 25 years ago at 300 pieces per minute. yet they couldn't automate a round vial through the mail. so we had a long-term personal

and professional relationship with the folks at seeman's. when we start third-degree ped the first thing we did, all of us come from an industrial automation background. we know what nonconveyable means. we know what machineable means. i've built 100 distribution centers in my life. the first thing we did was prove this would run through flats. we ran this through flats. we have video we submitted with our application showing this run through the seeman's sorters in ft. worth before we ever submitted our package. we provided this with our submital. it passes every mechanical test of a machineable flat. it bends this way . it follows every mechanical test in the dmo. it sorts on the equipment at 300 pieces per minute. we've offered to retest at our expense. we've offered to change the mail

piece at our expense. we want to be -- 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. >> thank you very much. all right. we've done -- gone through everybody. i have a few more questions. we'll do a quick second round of questions. we'll give ms. norton some more time after if she wants it. mr. williams, in some of the innovations you talked about, you mentioned virtual p.o. box. can you tell me what a virtual p.o. box is? i mean, at first blush it sounds like what mr. davis was offering. >> well, 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 it can offer to -- to our users. and it's a small box and rigid. so it's also limited in the

number of things you could put in there. the idea that we examined for the virtual post office box would allow people to -- we can talk about classes of customers. but it allows the customer to open a box that has no dimensions. and it would be -- it could be delivered to an address in the united states that people apply for. there are a lot of foreign customers that would love to buy u.s. goods, but they 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 -- 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 p.o. box. it would be temporarily stored,

the items, and could be sent out as directed by the business. >> and then you also talked about print at the destination mail in response to some earlier questions. didn't we try that with mailgrams? didn't fedex try it with a fax type service? >> i think this is not something we've -- we've strongly advocated. we've more followed its -- its path. it remains alive. it strikes me as a good idea. and there are takers for it. but this is also something, as i mentioned earlier in the meeting, picking the moment in which demand exists in this environment is very, very difficult. i would say that it hasn't come in a strong, compelling way to hybrid mail yet. >> all right. and i want to go to mr. weisburg for a second. y'all are kind of a success story in working with the post office.

was the u.p.s. supportive when y'all started out and came with the product? >> 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 more discouraging. >> so 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? >> yeah. we do think that it would make sense to add some protections to companies that come with new innovations to the postal service. to make sure that the postal service doesn't unfairly compete and launch its own products compared to what those companies do. and we do very much support the concept of using public/private

partnerships and having private industry players be able to come up with the best solutions that work well. >> the postal service actually is now kind of competing with you with their click to ship product. that's got to be a little bit awkward in that they're your regulator and -- and your competitor. >> it is a very difficult position to be in when you invest a lot of time and effort in an industry, into launching products. you're 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. >> all right. let me get here to the other -- a couple more questions to go. with respect to outbox, mr. davis, what are the things that a service like outbox has the

potential to offer is targeted ads. i'm an avid internet user. and i'll go shop for some dress shirts online. and all of the sudden just about every site i visit has an ad for dress shirts on it. and this is, you know, highly targeted advertising is valued by advertisers. and the postal service talks about advertisers not getting their product delivered. but wouldn't a service like outbox actually have more value to advertisers than, you know, a random catalog that your best hope is something on the cover strikes somebody's interest in the few seconds between mailbox and recycle bin? >> absolutely. as i said earlier, intent spending, intent on brand affinity, is the holy grail of all advertising. and so you can imagine a digital

ad piece that is actually free to present. so it's free to show that on a digital device to an end user. then they can decide do they want to engage with that or not. we did some very interesting tests with kind bar, with starbucks via pacts. small, sample size products where we would present digitally an offer. would you like to try out this new flavor of kind bar. and some of our tests we had as much as 50% engagement. which is astounding for any digital advertising piece. and people would say, yes, send this piece to me. i want to engage kind bar. and i want to try out this new product. and then we would deliver it to their front door the next day. to give you an idea on how much that's worth to a cpg, they average about $20 per sample product given to a new user of their product. so there's an enormous amount of

money currently being spent on sampling products. but right now they're untargeted. you see someone out in front of a store or grocery store, maybe on the side of the road. here is a very powerful targeting tool. >> of course, that advertising would be revenue to outbox and not the postal service. i guess the issue becomes, is there a model for something like this where a third party does it? or is it something that you develop the technology, then sell it to the postal service and they do it? was that kind of a feeling you got in your negotiations? >> right, right. well, it's hard to unpack. it's such a complicated web of interest and politics and business models and mandates. but at the end of the day, there can be winners and winners. it does not have to be winners and losers. and it was our hope that if the postal service could not create this on their own or were too slow to do that, then an

outside, third-party company could develop it, spend private dollars to develop it, and then could either white label it or be a third-party contractor with the usps. >> all right. 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. >> just briefly. i'm interested in what keeps the postal service from developing new and innovative products as a matter of course. we spun them off, of course, as a private business. and then, of course, have not always allowed them to act as a private business. are there any issues that -- or imb impediments that stand in the way of the post office doing the usual work of seeking innovations, particularly given its unique infrastructure? mr. cochrane? or mr. williams? both of you. >> if i could real quickly, i

think the challenge is, part of it is the current law that we operate under. it is restrictive. >> speak a bit about that law. what about that law? >> well, as an example, it says that the products that we're allowed to enter in are postal products. it's put a bit of a box around things we can do. if we get approached by somebody with an innovative idea, it -- some of these things are against the law, as i talked in my opening comments. some of the things we're working on, some of them don't fit our model. some are just not legal in the current sense. as an example, we have very restrictive privacy rules. and we have a lot of data on what goes into the american household with things like imbs. but -- and for good reasons, there's privacy statutes that exist. but unlike a lot of other private sector companies, we're not allowed to data mine that information. and that is a restriction on our ability to market. >> well, that's a restriction that wouldn't be as controversial, i think, here

as -- the chairman seemed to buy into this restriction to postal products when he -- when he admonished mr. williams for daring to suggest that nonbanking products might be suitable for the postal service. i disagree with the chairman on that. it seems to me we have information that, if you look historically, for, say, the first 60 years of the 20th century, the postal service actually had a banking service. used mostly by immigrants. it was for savings accounts. there were 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 know, i don't see what's wrong with nonbanking service. this is what i meant when i opened my last question was saying a little bit private. it's like a little bit pregnant. you just can't do it in a market economy. do you -- so let me invite mr. cochrane and mr. williams to elaborate on some nonpostal services that you think are not -- that you think that the postal service could enter and thrive and truly compete with the private sector. >> well, dave, you want to go? >> well, actually, with regard to the financial services, you're correct, ma'am, that the postal service was in the banking business for a large number of years. worldwide, the average -- many world posts provide financial

services. it provides about 14.5% 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're currently -- we currently do provide financial services with money orders and other kinds of informal 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's 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 -- are cut off from commerce and commerce is cut off from them. so 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. >> i would just say, not on the

financial sector, but in the postal services really at a period of significant change in our business model. i think that's well -- well documented. as mail declines in particular, single piece, first class, we've shifted to do more and more parcel delivery. but in a 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've talked about a lot today. but there are more things we can deliver. if you think about the fact that we have 217,000 people out there today driving the streets of the united states, working hard and delivering product for -- for mailers and shippers. and then there's a robust network of processing centers and transportation that i think can be further leveraged. and then maybe the future grail is the one that we've talked a lot about today is the digital space. and there are going to be places where the postal service needs to step foot forward and have a strong footprint in the digital

space. in my preinformation i sent in, we talked a little bit about what we're doing with the government, with fccx to help authenticate. there's a lot of opportunities for the postal service to continue to leverage the brand, the trust, the security. and this world-class network that we have. that's where our innovation is focused, is to use that infrastructure to generate revenue and keep providing great service to the american people. >> i do think it probably is important to add that this law -- 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 to hurt anyone. it was put in there to make sure that the postal service doesn't drive a small businessman or an 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's going to harm private enterprise. on the other hand, it does need to come to the -- >> could i just say, mr. chairman, 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's the whole point of competition in a market economy. somebody's going to be -- >> this topic for a future hearing of 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. it will 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. and with modernizing and bringing new technologies to the postal service that are good for america. thank you all very much for your time. and we're adjourned.