>> but if we don't set up the enforcement side the enforcement side brings media attention. i mean, so if we are going to say -- the only thing we can rely on to make these universities and colleges do what they should be doing is for them to get a bad story. first of all, that is a lot of victims. >> yes. >> and, you know, that, to me, would be a depressing conclusion so we have got to figure out some way to up the ante that is short of waiting for another tragedy day at the front pages. >> i would almost say less the dollar amount more folks with the department of bed to do the work. a 13 person team cannot do it. the changes i have seen institutions are to make they

can find their own enforcement. i think every survivor will back that up. >> this weekend on c-span center requirement gaskell, the first of several discussions on combating rape and sexual assault on college campuses in the morning attendees in. on book tv, the wife of former vice president dick cheney and senior fellow at the american enterprise institute exam as a political philosophy and presidential tenure of james madison some morning and 11:00 on c-span2 as -- american history tv, the life and work of american red cross founder clara barton will visit her missing soldiers office followed by questions -- on c-span three. >> president obama travel tech

cooperstown to deliver remarks at the national baseball hall of fame and museum. the president spoke about increasing travel and tourism in the united states. this is 15. >> i have to say that in addition to just wonderful people, those of you all across america and around the world you have not been here, this is a gorgeous place. we came in by helicopter and had a chance to see the landscape. it looked like a spectacular place to spend a few days, zero week gala however long you want to say. people will be happy davit. -- not here yet to my want to acknowledge. the governor of new york and a conflict. he is on his way up, but he is focused on jobs in upstate new york. your governor, andrew cuomo.

i wanted thank your mayor for having me. his great hospitality, and everyone was involved. we have also done, by the way, our deputy secretary of homeland security a smidgen -- is important because he is helping bring travelers to america. [applause] it is a great honor to be the first sitting president ever to visit the baseball hall of fame. [applause] the 75th anniversary of the hall of fame. i also promised that would check the place out before he conducted it. and i am so glad did. obviously had it not have a

chance to roam around as long as i wanted. faugh -- retired those genes. [laughter] quite a while back i love baseball. america lows as wall street continues to be our national pastime, and for any baseball

fan out there, you have to make a trip here. but as much as i would love to start baseball day and with a chicago legend, andre dawson, the hawk here today, it is hard not to want to talk baseball all of a long. i am here to talk about jobs. good, middle-class jobs. believe it or not places like this institution, all fan is trying to do with jobs and economic growth. from what we have been steadily fighting our way back. over the last four years our business has created over 9 million new jobs. we have an auto industry that was flat line in and has come right back. in manufacturing sector that has lost about one-third of its jobs in the last decade and is now

adding jobs in the first time since the 1990's. rather than create jobs in other countries, more and more companies are recognizing that it makes sense to invest right here in america. we have great workers, the largest market in the world, all bunch of stuff and are starting to see in sourcing rather than outsourcing. we have made progress. but here's the thing. to many americans are still working harder than ever. 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 a higher education that is going to be the key to a lot

of 21st century jobs and make sure that they can repay all of that loan debt that too often is taken on when they go to college. they're is new bill, by the way, the interest in congress and the coming weeks that will really do more to make sure that college students are getting a fair shot of course, unfortunately we have got a congress that all too often spends a few days a week 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 that performance. and that is a challenge. i will work with anybody who is focused on what we need to be focused on and what all the people who sent us to washington are focused on. how to improve the economy and create more jobs. but if congress is not going to act, then i am going to do whenever -- in the steps i can take to create jobs and

opportunity for more oregon -- more working families. so far we have seen, for example , the house republicans block legislation that would raise americans' minimum wage. i have been working with states and cities and businesses to go ahead and raise the minimum wage -- went ahead and took action on my own to make it easier for men to find out whether there were being treated fairly at the workplace and take workers were able to break down their replacements. ahead of schedule because my administration fast-track that project and a lot of major projects across the country.

on tuesday i met with ceos from around the world to or investing and hiring in america because we have made our country more competitive. and today i am here in cooperstown to talk about new steps that will lead to more tourism, not just with an american but getting more folks to come and visit the national treasures that we have all across this country. tourism translates into jobs pulled ahead. of. this then hotels. this day -- rita restaurants, and that means for upstate new york baseball hall of fame, a powerful economic engine. last year alone travel and tourism were responsible for over one half trillion dollars in economic activity across the

country. think about that. one half trillion dollars supporting nearly 8 million jobs in communities like this one. and when tourists come from other countries and spend money here, that is actually considered a type of export. we don't always think about it that way, but we should. made in america better. the empire state building or the hoover dam. folks to work at restaurants, hotels that surf bands in cooperstown and have the kind of jobs that can't be outsourced. and the rocky mountains or the grand canyon's overseas, they cannot do it. when it comes to tourism the good news is, we have a great product to sell. people want to come and. i was reminded of that yesterday i took a walk from the white house to the department of interior.

of -- go and take a walk and a beautiful day, and even though i went for several blocks -- probably about a 10-minute walk, and that will span of time my mentors from germany, israel, brazil, china, ukraine on the national mall. the fact that people come from all over the world to see our parks, to see our monuments of -- just like real big to sell more goods made in america were spending a lot of time and focus

trying to make easier provokes marron the world comes to america has been money. four years ago i signed a law that set up a non-profit organization with one mission, and that is to pitch america as a travel destination. two years ago went down to disney world to announce new action to make it simpler for travelers to visit america without compromising security and our borders. those efforts are paying off. since the low point after the recession and our travel and tourism industry has added nearly 580,000 new jobs. last year record 79 enters floor -- international terrorism. the growth of international terrorism. about 175,000 new jobs over the

last five years and helped of american exports to an all-time high. so are making great strides like cooperstown, but i want to turn the 70 million tourists that came last year and to 100 million each year by the beginning of the next decade. meeting that goal -- [applause] 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 we have made i directed my administration toward with airports, airlines, hotel groups , states, cities, to do more to improve the traveler experience and reduce wait times revokes entering into the united states without compromising our security. we have some folks here today who are already showing us what is possible. scott donahue is ceo of the

dallas and fort worth airport. where is god? there he is right here. we have from my own home town, rosie and l.a. know, the aviation commissioner from chicago. they -- rosie is right there. the two of them are responsible for two of the busiest airports in america, but the average wait times their customs and passport control at the f.w. and nowhere has fallen to just 15. and that is a big deal. as a vote -- folks spend less time at the airport they're more likely to come back. when they talk to their friends they say, you know what, america was there degree is. national security remains a top priority, and i will not change, but there is no reason we cannot replicate the success stories of chicago and dollar on the country and automate passport

controls, bring in top talent from the private sector but find best practices, help move lines faster, add new staff and customs. they come into jfk faster. they come into laguardia faster and can get to cooperstown faster. make them see babe ruth faster. standing here and looking back on more than 150 years of our country baseball describes our history in so many ways somewhat we describe the obstacles we have overcome to get here. this all has memories of two world wars that we fought and won. it has memories of color barriers being broken. jackie robinson's uniform. his first season as a dodger.

it shows us the history of communities that we built across a new congress and the ways to connect with our country and our world and how female athletes started getting recognition. we face of the -- we don't respond with cynicism or gridlock. every generation faces tough times, but in the words of the great yogi berra, it is deja vu all over again. we know we're out to these jobs flow -- they went ahead and build an economy where hard work was rewarded and responsibility was rewarded and the opportunity was open to all people. we can do the same. they passed those values on down through the generations.

it past them down to us, and when you come to the baseball hall of fame part of what you're learning is, there is some internal, timeless values that grit and determination and hard work and community and not giving out and working hard, those are american values, just like baseball with. there's no reason we can do the same. that is will we will be working on. celeste plot -- thank you, everybody. god bless you. [applause] ♪ ♪

web. [inaudible] >> and, you know, that, to me, would be a depressing conclusion so we have got to figure out some way to up the ante that is short of waiting for another tragedy to hit the front pages. >> i would almost sailors the

dollar amount and more focus with the department of that do the work. a 13-team person cannot do it, but, again, i think it changes i have seen institutions are to make our when they are immediately under investigation. no fine yet. 35,000 or upwards of a million, so i would almost rather see that investment in a bigger -- >> in all fairness the fines will be paying for this. we have an issue of budget and our government. where does that come from? we cannot just handed out. they can find their own enforcement. i think that is justice, and i think every survivor would back that up. >> this weekend on c-span senator claman's castle on the first of several discussions on combating rape and sexual assault on college campuses saturday morning at 10:00 eastern. on book tv lynn cheney, the wife of former vice president dick cheney and see it -- senior fellow at the american enterprise institute examines the political philosophy and tenure of president james

madison sunday morning on c-span2. american history tv saturday attack clock >> next, a congressional panel looks at the future of the u.s. postal service and innovations and postal delivery. an hour and 40 minutes. >> good morning. the committee will come to order as is traditional, would like to start by reading our mission statement. we exist to secure two fundamental principles. first, american has a right to know the money washington takes from them as well spent. second, americans deserve an efficient and effective government that works for them. our duty is to protect these rights. our solemn responsibility is to

hold government accountable to taxpayers because taxpayers have a right to know what they get from their government. we will work tirelessly and partner said -- partnership with the somewhat stocks to deliver the facts to the american people and bring general -- genuine reform to the government bureaucracy. at this point i would like to recognize myself for an opening statements. this is in a different book. >> i added it. statement. which is in a different book. ttaff >> today when we examine the recent efforts by a number of private companies and start-ups to develop innovative products, while internet has been a boon to the global economy, has been boom for the national and global economy, it's been a mixed blessing for the postal service. first class mail volume is down more than 33% from its peak in 2001 and continues to drop.

however, package volume is growing rapidly thanks to e-commerce. americans are rapidly changing how they communicate with one another and the postal service has struggled to adapt. however, that does not mean we're living in a post-u.s. postal service world. the postal service still has a vital role in our economy, in our nation affording and connecting -- affordably connecting even the most remote parts of the country. that's why innovation in the postal service is so important. we need an infrastructure in this company for moving matter, not just bits of data. efforts to create new innovative postal products to preserve existing mail volume or create new demand for mail and possibly streamline the way mail is handled. these efforts target every aspect of the postal service's current operation including innovations into new mail piece design, online postage purchasing, e-commerce return logistics and greater consumer

targeting for advertising. today, i'm looking forward to hearing from private sector companies and discussing with them their efforts to develop new postal products and services. specifically, what problems, if any, have they encountered along the way working with the postal service to develop and implement these innovative products. now, if ever, is a time for the postal service to embrace innovations presented by private sector companies. private sector companies are more than willing to spend millions of dollars to test and implement new products and designs that can help bring future revenue to the postal service. in the tech community often is used the word disruptive. disruptive is not necessarily a bad thing. it's a change. my wife when she was in her junior league days used to refer to the -- that's the way we've always done it. and we've got to be very wary of falling into the trap of that's the way we've always done it. if companies continue to be shut down or steam rolled by the postal service bureaucratic red tape before they have a chance to get off the ground, future

innovators will look elsewhere to present fresh ideas. in addition i hope to hear from success stories from private sector companies that work with the postal service and how future entrepreneurs and innovators can create more marketable and open environments in the postal service. there is need for innovation, whether it's cluster boxes for secure package delivery or better access to postal databases like changes of address, there are many areas ripe for innovation. my fear is as a government watchdog and as a taxpayer without reform and innovative new postal products, the american people will be footing the bill for a taxpayer bailout of the postal service. that's the last thing we need right now. i look forward to hearing from our panel. and believe there are really smart ways the postal service can lower its cost and improve service to innovation and private partnerships. we hope to bring them to light today and find a way to move the postal service closer to internet speed. and before i recognize mr. lynch for his opening statement, i ask

unanimous consent that our colleague from texas be allowed to participate in the hearing. and without objection it's so ordered. mr. lynch, your opening statement please, sir. >> thank you very much, mr. chairman. i want to thank you first of all for holding this hearing to examine the development of innovative postal products and services by the united states postal service. and also like to thank our panel of witnesses, some very innovative individuals for helping this subcommittee with its work. in november of 2013 the postal service sent into strategic partnership with amazon.com to test sunday package delivery in select markets, otherwise known as seven-day delivery. the amazon pilot program has proven widely success and is a prime reason why the postal service has recently demonstrated the ability to grow revenue in the face of the most difficult financial conditions. in its quarterly financial report released on may 9th of

this year, the agency recorded a revenue increase of $379 million over the same reporting period last year. it's third straight quarter of revenue growth due in large part to 252 million or 8% increase in shipping and package revenue. in light of these results, sunday package service is now expanding to several other cities across the country and the agency's working to establish similar partnerships with other companies. this serves to illustrate that the agency can experience positive financial results when it capitalizes and builds upon what it already does best, utilizing an unparalleled and universal mail network that is driven by a hard working dedicated workforce to deliver the mail to the american people now seven days a week. it's an example of innovation rather than degradation of existing postal products and services. and we would be well-served to take a similar approach as we continue to undertake the critical task of reforming today's postal service. as evidenced by yesterday's

markup in our full committee, chairman issa continues to put forward misguided proposals that presume we can enhance the viability of the postal service by degrading the very services that have come to define the agency in the eyes of the american people. i simply do not agree that we can reform the postal service for the better by eliminating the current six-day mail order by mandating wholesale conversion of door dresses to curb side or cluster box or sidewalk delivery or by asking postal customers to pay a so-called legacy fee in order to retain their door delivery service. such proposals would only place the postal service at disadvantage and long-term viability. instead, we can encourage the postal service to build upon its existing products and services in order to further set itself apart in the mailing industry. i commend ranking member cummings for his strong and continued leadership in this area. and i'm proud to co-sponsor his

legislation hr-2690, the innovate to delivery act. this thoughtful and alternative approach to postal reform would establish a chief innovation officer within the postal service to lead the development of innovative postal products and services that fall in line with emerging information technologies and changing market trends. it would also require the chief innovation officer to ensure that such products maximize revenue to the postal service. postal innovation will be a key and necessary component to meaningful postal reform, package and mail delivery. and i understand that there are a variety of pers pepectives onw best to facilitate that -- on a more solid financial footing. accordingly i very much look forward to discussing the issues with our witnesses. i look forward to your input. and i yield back the balance of my time. >> thank you, mr. lynch. members will have seven days to submit opening statements for the record and will now recognize our panel.

the chief information officer and executive vice president for the united states postal service. excuse me. mr. david c. williams is inspector general of the united states postal service. mr. will davis is chief executive officer of outbox inc. mr. seth wiesberg is chief legal officer at stamps.com. mr. patrick idamiller director of engineering and technology at impact systems. and mr. todd everett. all witnesses will be sworn-in before they testify. would you please rise and raise your right hand? do each of you solemnly swear or affirm the testimony you're about to give will be the truth, the whole truth and nothing but the truth? let the witness reflect that all witnesses answered in the

affirmative. thank you, you may be seated. just a little housekeeping matter. it's my understanding that the house will have votes arou .. 10:40. and it will be a rather long series of votes. so i want to get everything covered. if we can get it done by 10:40, y'all don't have to sit around here for over an hour while we go vote. and i might be able to make an earlier flight back to texas. it would be a win-win if you abide by the little timer here that gives you five minutes where your testimony will then come and ask questions. your entire written testimony is a part of the record and is available for this committee and others to review. so we'll start with mr. >> good morning chairman farenthold ranking member lunch and members of the subcommittee. thank you for calling this hearing on innovative postal products for the 21st century. a service chief information officer of the executive vice president of the united states postal service.

technology and vision all aspects of our business. during my 39 years with the postal service i developed a broad perspective on the business how we serve the marketplace and their customers. this business acumen is essential as technology now plays a foundational role in virtually every postal product we service. emerging technologies while exciting oftentimes posed challenges with their disruptive effect rate effectively traversing this emerging disruptive continuum is my responsibility and matter of survival for the postal service. the postal service operates one of the largest technology infrastructures in the world. it supported and codeveloped by some of the most respected technology companies as well as many small businesses that bring fresh insights. our goals are simple every day we focus on how we can innovate with new partnerships to generate revenue produced expenses deliver consistent reliable service and a world-class customer experience. though our goals are similar business model is both complex

and diverse. for nearly 40 years the postal service workshare programs to share the responsibility for efficiency and innovation with business partners. this collaborative model is guided by the premise that our profits and brand are enhanced with our partners are profitable and our joint customers receive value proposition. printer software vendors mail service providers transportation companies and parcel integrators play a vital role and together we have built an industry round the market needs. disruption of in the highly competitive package market is an excellent example of how customers demands evolve since we adapt. driven by e-commerce in a particular free shipping is the dramatic shift to more ground-based solutions. parcel select this innovative product developed innovative product about to enter that market demand. it's workshare program that leverages the world-class process and transportation network of consolidator such as logistics with the unmatched reach by delivery network providing a great customer solution.

it enables the concept of competition for ups and fedex are traditional competitors provide network logistics in the postal service provides the last service creating a win-win for shippers and consumers. the market is continuing to change. the new norm involves same-day delivery sunday delivery parcel lockers delivery customization and constant real-time tracking. consumers of our demanding new services without increasing cost requiring they adapt. the postal service is helping businesses make more male valuable engaging and interactive. though intelligent barcodes and financial incentives for mobile optimized mail we are creating a digital reflection or hard copy and a digital action for response. we are building a digital products that will leverage our brand of privacy security and trust. we welcome creative ideas and individuals companies and not to partners regarding new business

concepts and technologies. our unsolicited proposal program provides a public venue to submit new technologies ideas to advance the mailing industry. in order to be adopted these ideas must align with the postal service mission have a clear path to profitability and generate postal revenue and they must not damage our respected brand or conflict with existing products and services. the postal service receives ideas from a variety of sources. some of these ideas are are not new concepts some already being pursued internally and some cannot be adopted. the role of the postal service in american life and business is changing at a rapid pace. citizens are using a wide range of technologies to communicate transit business and shop. ever-changing technology presents a postal service with opportunities that our success is dependent on part on how fast we can evolve. we remain guided by her nation to get in a commitment to provide the value and service upon which american businesses and consumers depend. the postal service continues to make great strides in adapting

to the country's changing mailing and shipping these however are pritzer severely limited by an outdated legally restricted business model. we have a responsibility to provide an fund universal service for a nation but we do not have sufficient authority or flexibility to efficiently carry out that mandate. we therefore absolutely need conference of postal reform legislation to return us to financial viability. such legislation should provide us with clear authority to offer new products and services that allow us to take full advantage of our current infrastructure. further we urge congress not to make a postal service task more difficult by placing further restrictions on our ability to innovate and compete. the postal service competes vigorously but we also compete fairly consistent with their legal obligations. mr. chairman we look forward to continuing to work with you the rest of the subcommittee to accomplish meaningful postal reform legislation and continue to deliver innovation to the american public. i would be pleased answering

questions you might have. >> thank you very much mr. williams. >> mr. chairman and mr. lynch- >> can you bring the microphone a little bit closer to your mouth there are? >> the postal industry has a long history of working with the private sector and others to spur innovation. historically mail transported fuel to pledging railroad and airline industries. postop patients invited advances in handwriting recognition technologies. they act as a platform for the private sector innovators and electronic postage pre-sorting and mail order industries and the postal service impose the overlay of the zip code across the country for the benefit of businesses and researchers. innovation is even more important in today's age of digital globalism. the ungovernable internet has changed the world but great opportunities and enhanced capabilities exist alongside our

organ systems and unfamiliar risks. lastly the forces of. destruction have ravaged communications and logistics systems. in this environment the job at an infrastructure like the postal service is to support citizens and businesses as they try to compete and position themselves while it also takes care to assure that efficient market forces prevail and are not undermined. to continue in this role understanding the changing world in rapid adaptation are increasingly critical endeavors. the postal service faces a tricky challenge of modernizing traditional products as it provides support services for emerging technologies. successful will depend on its innovations. as a result continual strengthening of the postal service processes for renovation will be needed. that's bats include seeking to understand the frustrations and supporting emerging needs of people and commerce developing a comprehensive innovation

strategy clarifying the entry point for innovators and providing staff to join innovators in navigating the huge postal structure and remain with him until the proposal is resolved strengthening skills in assessing the financial viability proposals developing the ability to engage in rapid prototyping of new products and operational innovations and protecting intellectual property and respecting that of others. when pursuing innovations harder ships with the private sector and the government are important in bringing in new ideas specialized competencies per curiam risks and for leveraging the cost of research and development investments. there are several areas where innovation opportunities seem particularly rich. support for e-commerce at e-health and transactions at the front and by providing a portal for identity verification for individuals that need businesses and providing access to digital currency exchange instruments

and at the backend by assisting with packaging and the shipment of parcels. using microwarehousing and virtual post office boxes and new platform services to help small businesses and innovators with logistics and shipping solutions. by providing seamless access to postal service networks for the public and commerce by linking together its web site post offices and digitally enabled carriers and conducting digital analysis of the vast data now generated throughout the network for operational efficiencies revenue ideas and business intelligence. together these opportunities can tighten integration of data streams and their supporting streams. the internet smart devices search engines and cloud storage have laid the foundations for a changing world. an aspect of what will come next atop this foundation will likely be in the ecosphere that

continues to be ungovernable and chaotic with endless changes learning curves and substantial creative destruction. the ability of society to propel rather than progress in these areas will depend in part on the competency of the postal infrastructure to support american commerce and citizens through the coming era that will combine an employee major technologies that include edited manufacturing also known as 3-d printing the internet of things making ubiquitous sensor augmented realities and smart devices data analytics advanced robotics that incorporate machine learning and nanotechnology. the world was slow to adapt the early phases of the title digital age and are partially constrained from doing so illegally. the next phases of this age of technology will likely be more disruptive than we have seen to date. a postal service must be highly

agile and develop an intuitive sense of the changing role and the new challenges facing american business and citizens. the key aspect of the postal service's ability to transform must include stronger competencies for embracing and implementing innovations. thank you mr. chairman. >> thank you mr. williams. we will now move to some of our private sector folks mr. davis from outbox you are up. >> thank you mr. chairman. innovation. it's in the title of today's hearing. you have heard it spoken about at least a dozen times and earlier testimony and i feel the need to go beyond script and a movie is the only thing that comes to mind. it's actually one of my favorites and my daughters favorites the princess bride. there's a scene in there where abe l. montoya is caught up with a band of criminals and is a criminal mastermind and he keeps using the word inconceivable

when all of his plans don't go as planned. montoya looks at him and he says you keep using that word. i do not think it means what you think it means and that's a little bit how i feel today about the word innovation. i don't think it means what you think it means. the reason for this is because innovation at its heart is disruptive. it destroys things. it kills jobs. if you think that's too bold a statement consider this fact. in 1926 the s&p index and the average tenure at that time of companies on the index was 60 years. today it's less than 15. in fact since its inception there is only one company that remains on the s&p index and that's general electric. one single company.

all those other companies are gone. they are destroyed but for all of its destructive capabilities there is almost a -- effect pursuing innovatioinnovatio n. it's indeed the narrow road. it's a narrow path of putting off old business models and secure cash flows and grasping for something that is uncertain and. and the promise of innovation comes in the form of new jobs, new marketplaces for every job, every company and market this destroyed through in bracing innovation to more pop up in its place and markets and ideas and new concepts in new workforces that simply could not have been fathomed. but what happens in that destructive process is incumbents usually fail.

they usually die off. they go the way of all the other companies on the s&p 500. so as we are talking about innovation in the postal service we have to understand the truly embracing it means a fundamentally different postal service. it means in 10 years it looks almost unrecognizable from the postal service today but that doesn't mean that it's worse off in fact it doesn't mean jobs have to be destroyed within the postal service. it means no one can be created but make no mistake innovation will come. disruption will come. in that regard it's a bit like junk mail. it's coming whether you like it or not create so as we talk about innovation and embracing it we need to understand that it means hard fundamental chord changes to the business model, embracing it means destruction but it also means new markets

and new jobs and new opportunities. thank you. >> thank you. mr. weisberg. >> thank you mr. chairman. i'm from stamps.com the leading pc postage company. pc postage is an interface -- internet-based software that allows customers to print their own postage using their existing computer. stamps.com serves over 500,000 registered customers primarily small businesses. in 1999 we became the first company to offer a software only pc postage solution enabling customers for the first time ever to print real postage from any internet connected pc and standard renter. just seven years ago pc postage accounted for one quarter of a billion dollars in federal postage sales. last year accounted for over

three and one quarter billion dollars soul. stamps.com postage was alone was more than 35% year-over-year. as consistent double-digit growth every year even through the heart of the recession. virtually all the priority and express growth surge in recent years is generated through the pc postage industry channel. a recent study showed revenue through the industry pc postage channel costs 2 cents per dollar of revenue compared to 47 cents per dollar through a usps retail outlet. pc postage produce a secure identifiable mail which is important for security against biological for other attacks. pc postage provides customers with cutting-edge technology without the postal service having to pay for research development support or maintenance.

stamps.com's is launched an enterprise service targeted to organizations with multiple geographic locations. it features enhanced reporting that allows a central location such as a corporate headquarters greater visibility and control over postage expenditures across their entire network of locations. e-commerce merchant with multiple stores can you stamps.com to consolidate all their orders so they can ship them out with ease. with one they can directly import all of your order data for the most popular on line marketplaces in shopping cart software and automatically print the shipping labels. although shipping data including usps tracking automatically posts back to their web stores great stamps.com also automatically keeps the buyer informed orders a carrier pickup since electronic manifest to the postal service and generates a

scan scam form so while the carrier does it scan the form once and all of the packages are automatically the postal service's computer systems. pc postage is based on a public-private partnership with the postal service regulating industry participants. our products must complete extensive usps testing testing d evaluation in the areas of operational reliability financial integrity and security the postal service also partners with the industry to achieve mutual win-win goals of improving the customer experience increasing revenue and minimizing costs. kpmg the cio sitting on this panel and so many of the dedicated postal veterans have ably worked with us for many years deserve much credit for this success story that is the partnership between the postal service and the pc postage

industry. we believe public-private partnerships are the best path forward is technology innovation becomes increasingly important for the future. having the postal service create its own technology is not the best approach. instead it should provide incentives for industry innovation. this allows customers to pick the best technology solutions for their needs. pc postage provides jobs both in industry and the postal service. every package produced is ultimately delivered by a city or rural letter carrier. growth in pc postage means more packages to deliver more letters to deliver more volumes to serve. thank you for the invitation to testify today. >> thank you mr. weisberg and mr. eidemiller? in my pronouncing that correctly? >> that's correct. he gets mangled quite often. my radio days come back to save me.

>> good morning mr. chairman and members of this committee. i'm the director of engineering and technology for impact systems. we are small startup start up company that produces a better pharmacy called impact. the future prescription packaging. called impact. invented by a 71-year-old navy vet named dick lee from a small town population 85. this is impact. it's a flat pharmacy bottle. this is the traditional round bottle. this is our bottle. this is tradition. impact has many advantages, the most important are this file is tamper evident. this file is not. this bottle of water is tamper evident, this prescription is not. our entire drug supply chain we have more security in this than we do in this. hard to believe. we also have a lot more label space. so it's much easier to read. and lastly, it's much more space

efficient, much more compact. m-pack is made in the united states in eerie, pennsylvania. we're adamant about our production and producing it. another reason i'm here today, the usps provides a favorable rate what's called a machineable flat. this is a machineable flat. this is a parcel. over the counter rate is a 29% savings to the taxpayer for every prescription medication that gets mailed out in the united states if it's classified as machineable flat. so realizing what we had with the flat vial and considering the u.s. government is one of the largest users of prescriptions by mail, we sent opportunity to provide taxpayers money and provide a better safer

vial through the mail. so working with the henriette ta manufacturing in new york, we developed this envelope that meets all the requirements of a machineable flat. we tested it on the siemans test equipment in ft. worth, verified that it worked. and we received our approval june 17th, 2011, that a third mail letter piece had been approved. over the next 18 months we continue to improve our product and refine it and refine it. and we came back to find it looked like this. smaller, lighter, cheaper. more weight is more cost. we took two ounces out of this envelope. we put a package together that we could do at 50 a second. this one was 15 per minute. so we put a lot of work -- 18 months of work believe it or not to go from this to this. we resubmitted our package. this package plus some of the internal improvements that appeared in this we also wanted to retest in this.

our packages were rejected. not only this new package, but the existing form factor as well. we were shocked. this had been approved once. for a completely different reason. and it was not the fact that it doesn't meet the mechanical requirements of machineable flat, which is bend like this, bend like this, dimensions of width. it was that a box in an envelope is not a machineable flat. that's why we were rejected. we were surprised. we were shocked. we'd already been approved. we went back, we solicited, i sent a letter to the father of the flat rate box, we thought we had a sympathic ear. we were referred back to mail standards and we got a very curt response, that basically said and i quote "thank you especially for your persistence. unfortunately the piece with its current contents qualifies as a

parcel. if you change the contents, please contact us again." if we change the contents from this to this, please contact us again. the entire point, i'm sorry, is not this. the point is this. this is a better, safer vial that because of its shape can ship through the mail 29% cheaper. that's 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. the post office provides value. the post office is the only agency that can legally put prescription drugs through a mail slot in a mailbox and not leave it on your doorstep. that's an important factor in safety. it's an important factor in leaving drugs on a doorstep. we want to work with the post office. we asked them, we begged, we pleaded. we will change our package. we will test it as our expense. we want to use the post office. and it fell on deaf ears. completely fell on deaf ears.

we went to the private sector. u.p.s. said we'll take it. no questions asked. because we know how many of these we can put on an airplane and space and second day service at a dollar a piece. and that's why i'm here. thank you members of the committee. >> thank you very much. and mr. ever ret. >> good morning. thank you. today i will describe for the subcommittee how the united states postal service has partnered with and help make it possible for my company to develop innovative products of the needs direct to consumer retailers, manufactures, logistic service providers. thank you mr. chairman and members of the subcommittee for allowing me to speak on behalf of new gistics. we are a privately held company based in austin, texas. we have over 400 people on our

payroll. we were formed in 1999 on the premise we could develop a better way for consumers to return merchandise to retailers. today we're a leading provider of technology-enabled solutions for direct-to-consumer retailers, manufactures, reand logistic service providers. -- more specifically, we offer a national integrated parcel delivery and return service for our customers. we're able to provide cost effective, reliable and convenient shipping solutions by working with the postal service to provide last mile delivery and first mile pickup. when we were founded we viewed ourselves as a technology company that would provide information to retailers regarding returned packages. soon however we evolved into a returns logistic company handling returns making use of innovative technologies. we concluded customers wanted to be able to return packages

easily and retailers wanted to make returns more efficient and cost effective. therefore we developed a proprietary return system making use of bar codes embedded in our label. they provide us and our customers with information that quickly provides information and resources. as we evolved we discussed with the postal service creating a new -- for handling returns of large shipment merchandise of making use of the new label. based upon our collaboration with the postal service, the usps developed one of it most innovative products, the parcel return service, also known as prs. prs is a pose sal service program under which approved providers like ours are allowed to retrieve returned parcels from designated postal facilities. early retrieval enables us to provide advanced data and customized return services to

retailers. we found the postal service was very receptive to working with us beginning in late november of 2001 we had numerous meetings with the postal service. following those meetings in may of 2003 the postal service sought permission to test prs. approval was granted in september of '03 and testing began in october of '03. after two years of successful testing in october 2005 the postal service sought permission for prs to become a permanent class of mail. postal rate commission approved prs on or about march 3rd of 2006. from that point we were able to implement return solution including our smart label in conjunction with the program. developed in collaboration with the postal service simplifies the return process by offering consumers prepaid returns via postal service pickup at their home, workplace or dropoff at any mailbox or post office. that is via our solution packages enter into our system through postal services vast

retail and collections network. our solution also gives consumers returning their products confidence their return will be handled expeditiously. in addition, our parcel return solution is abled us to expand our product offerings to include parcel delivery, fulfillment and e-commerce solutions to r put simply the postal service has been and continues to be a willing and important partner in our efforts to develop innovative solutions that bring significant value to our customers and their consumers. likewise prs has been successful in the postal service's perspective based on the most recent data the pr service continues to grow and the postal service fiscal 2013 handled more than 50 million prs packages and generated more than $120 million in postal revenue. mr. chairman and members of the subcommittee thank you for the opportunity to testify before you today. >> thank you very much mr. edward. we are going to break with

tradition a little bit here. normally would ask the first round of questions. mr. lynch has a vote in another committee so i'm going to allow him to go ahead and ask us questions and then i will take my opportunity. >> mr. chairman. thank you for your indulgence. i appreciate that. i thank the members of the panel for the help. it's been a very interesting discourse thus far. when i think about the future the next iteration of united states postal service i tend to think about what they have got going on in switzerland. pitney bowes one of our local companies has a system over there that they have rolled out where it's called a digital mail scan where i can pull up my mail as it arrives at the regional mail facility i can go on my web site secure web site and see my mail before it's delivered.

if i don't like what's there i can on it and say do not deliver. so mr. davis would you say junk mail is coming? it's not as inevitable as you would think. you can on it and then tell them not to deliver it so that's sort of a new iteration of the postal service that's out there and i think that it's going to be coming to the united states at some point. that's is really disrupted. it would be a great thing for the environment because of the huge drop in mail volume because people won't be getting the mail that they don't want in their mailbox and down here in d.c. in my apartment that's 90% of what i get is circular's and stuff like that. my wife and girls didn't get the sale information that they get every single day i would

probably be saving a ton of money. so the volume will drop because that will be a good thing for the environment or they'll be a terrible thing for the united states postal service national letter carriers. it will drop in volume but that's really disrupted change and that's what we are going to have to deal with at some point. with 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 and towns. he wants to change 50 million door delivery addresses to cluster ox is so even if there's 100 addresses it comes to 1.5 million. you make them bigger and put 208 can drop that and it would be

750,000. but that's a huge expense, a huge expense even where it's feasible. once we have 750,000 or 1.5 million steel boxes all of america how much flexibility do we have in light of the technological changes coming? putting a steel box in the middle of a neighborhood and telling senior senior citizens okay you can walk a quarter of a mile to get your mail, it is disruptive in a way but that's not innovation. that's a luddite idea. that is going backward in time. come on out and walked down to a steel boxing get your mail. that's not created. that's extremely costly and inefficient and reduces our flexibility of belief in terms of what we are doing next. >> would the gentleman yield so i can respond? >> i'm going to have to leave

areas you can talk about may me while i'm gone. >> what a pleasure. >> i'm sure it is mr. chairman. when i think about the idea of going to a 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 is doing. it tries to answer a need that's out there and where i live which is common in america today we operate on a seven-day schedule. all the stores that used to be open five days long ago have 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 the wrong direction.

mr. davis you seem her sting with an urge to answer. >> you had a fabulous example of citizens in switzerland being able to unsubscribe from junk mail and impact that technology existed in united states for two years they be brought that technology to the states. 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 postal mail and what we found was even though they unsubscribed from volume you could measure intent and intent is the holy grail or advertising. when we measured intent we could know exactly what they wanted and what they preferred and what they did not prefer and that type of information is missing. that's why it's so unfortunate unfortunate. >> we claiming my time. all i'm saying is that taxpayers

not involved here. this is the customer picking up the tab. we don't keep gift tax claims to the postal service. they survive on the money they get from the stamp but it 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 off on it if they don't want it delivered. that i think is disruptive change. its innovative change and it will take its toll on the world. i think that would lower the cost. that would make it more efficient and improve the postal service. i'm going to yield. i'm beyond my time. thank you for your indulgence mr. chairman. >> i normally would come back but mr. clay did you have a book coming out? you guys over here. >> the gentleman from missouri is always welcome to speak on this committee. >> thank you mr. chairman and

chairman issa i appreciate that. in 2011 the inspector general for the postal service released a two-part report on the postal service is rolled in the digital age included in part 2 of a report with the idea of the postal service was expanding into hybrid and reverse hybrid mail service. 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 various? >> 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 sending transporting fuel and crowding through the network of sorting

plans would be a very good idea. it allows, it allows variation among the regions so you could print different letters for different zip codes. >> in the postal service you put the card before the horse by closing the distribution centers. before they had a real plan to go forward to lessen the body of mail. >> i do. i think there is excess capacity inside those sorting centers but i don't believe it should as you said spring out in advance of seeing what the impact and effectiveness would be. picking the timing for innovation is devilishly difficult and if the present something that isn't immediately

embraced and we have closed off and burned those ships behind us and closed out 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. one of my witnesses here today mr. davis your company out ochs was a fee-based service that gave customers a choice to bypass physical mail. correct? >> correct. >> if i am correct the business model was dependent on the participation of the postal service its infrastructure and customer participation. correct? >> correct. >> is your outbox will terminate its digital mail operations through blog posts. you inform customers about why

outbox was shutting down the service in a post signed by you and your business partner. you mentioned initial tests with the postal service show positive signs of success in operational publicity but the deal didn't work out. is that correct? >> absolutely. >> additionally you describe the senior leadership as a mr. smith goes to washington moment where senior leadership made it clear they would never participate in a project and they were immediately shutting down your partnership. is that correct? >> correct. >> mr. davis in developing your business plan were you aware that advertising mail represent a significant portion of your services. >> yes. >> is a self-sustaining entity that has to generate revenue where the postal service has the

right to choose who it works with. >> absolutely. >> mr. cochrane the postal service has been quiet on this issue. is there anything you would like to add? >> the concept of people collecting mail and digitizing its been out there for almost 10 years. there are other companies in that space. the approach is one where people sign up and go do what we call a commercial receiving agency. it's very common and happens in buildings all over town. it's common in the business arenas in new york and washington. i think the challenge was outbox approached it differently. they didn't want to have a commercial receiving agency so that required them to go to the ballot box 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 in mr. chairman i commend mr. davis

and his company for an 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 insisted operate with the business mind-set which is what it was doing in this case. in addition i ask for unanimous consent to enter into the record an article dated may eighth, 2014 from the heritage foundation from a family -- entitled by the postal service was right to side with junk mail over outbox. >> without objection so ordered. >> would the gentleman yield? >> i would like to side with you in this case surprisingly. although it's a shame to see a for-profit entity clothes because they are not making a profit i do agree with you that this is an innovation that should be on the list of innovations of the postal service because it of 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 that you and i i think agree on is at that at minimum post office ought to do all of its core jobs of revenue and revenue savings first. the most important innovation and companies to do the job they are paid to do well and innovatively at i think we have two witnesses here today from to for-profit companies. one is still thriving and one isn't in this space that they are both core suffered from neglect. i share with you in the comprehensive postal reform bill we increased the innovatioinnovatio n fund specifically because we hope the post office within abate within its core in addition to outside its core. >> so does it cry out for a public-private partnership?

>> i believe there are core businesses that the post office can and should own and to use private enterprises as their contractors. i would say on the record here today that the job that out locks if embraced by the post office as a core function could far exceed the benefit and i think mr. lynch although he disagrees with everything i stand for apparently opposed the reform including apparently i have become a luddite from the electronics industry as a first for my colleagues. but the fact is when he talks about digital delivery and 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 use it would be bad for the base that he so often cares about but the fact is he is 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 the business that may already have gone a long ways. i couldn't agree with you more that your point was right on. >> i think i may be having an out of body experience and agreeing with you so much lately. i see my time is up. >> thank you very much. we will kind of get back to the regular order here and i will go ahead and start with some of my questions. mr. davis i think most of us up here know the story of out rocks. you took your time to give a 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 the elevator speech version? >> outbox enable their users to view their posts ago from anywhere so whether iphone or ipod 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. isiais correct. this is a fabulous idea and it should be adopted as a service. we started testing it in austin texas with the idea that we would ask forgiveness so to speak before we ask 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 opposed net -- postmaster general. in that meeting we had a fundamental misunderstanding of who the customer is in the postal service. he said your customers not my

customer. i said mr. general what do you mean? he goes my customer is a sender of mail that essentially pays me to place mail on the kitchen tables of every american every day. while true that is not where the apparent 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 and government of which the postal service is in part both do not actually tends to adopt innovation because it does disrupt them so it was my hope in my business partners hope that we could test this on a small scale within the postal service but we were not allowed to. so the only way we could 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 the ideas and as i mentioned our ability to give customers choice lead to higher value and led to a increased understanding of who the real customer is the american people and led to valued opportunities that were beneficial for the end-user and an official for our company and ultimately the postal service. >> thank you very much. mr. eidemiller you mentioned you were unable to get your product classified as a machine double flat and a parcel. >> was unclassified as a machine double flat. >> that is more of a competitive service for the post office. i think you mentioned the amount of postage a flat would take? >> yes. when these are over-the-counter rates this is a partial rate for four prescription vials, $2.25. this is the over-the-counter rate which is $1.56.

>> you win to ups and they said they are delivering them for about? >> they made an offer of roughly a dollar. the challenge we have and i brought them up is we are a young startup and we are investing our effort where we have opportunities to generate revenue. while we think this is a grade a wonderful idea are business has pivoted slightly from that's so after getting stronghold at by the office we have and have a big interest in bringing this to market. we have a couple potential customers. ups won't officially put a contract on the table until they have volumes in units per cause but they say yes we believe in the package. we know we can do it for about a dollar. i asked to submit something for the record. we have it orally. >> i get the impression you'd rather use the postal service.

>> i would much rather use the post office. the post office has the trust. the post office can put this envelope into every mailbox in the united states. safely and securely. ups can endorse that. the volume is there and the businesses there. i would take this to the integrate. this is a regular business sized envelope. as a machine double flat this is 90% over counter. it goes through the mail for 90 cents. $2.22. there are hundreds of millions of dollars on the table now. the only plausible reason that the post office says we want to classified as this versus this is topline revenue because the topline revenue of a parcel is higher than a flat. in last year strategic plan in 2013 hike up this on line.

what this says is the post office makes three times more money on a flat than a parcel. 321. so the post office safely makes more money if these numbers are correct. doing this at lower cost than doing this. three times more revenue. why? it's very simple. it fits of a flat tray. it's easy to automate. we have proven we can automate this. the only case is that a square box in an envelope is a machine able flat. we have volunteered to work with the post office to prove it. >> i appreciate it and i'm not going to draw you into the debate whether or not a secure delivery location for your parcel would be a good fit to your company or not. ms. norton we took to one your side of the aisle first so if you don't mind we will go to --

and then come back to you. mr. chairman. >> thank you. this is interesting and i won't use out of body like mr. clay did but an inch sing turn of events when mr. lynch calls me a luddite and mr. williams i was better than hell at your proposal. the idea that you are trying to be the chief innovation officer and promoting banking within the ig office is reprehensible. i am shocked that it an inspector general would go from 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 around the world. however i would hope that in the

future that you would be much more been of an advocate including with people like mr. lynch does seem to find everything that reduces cost and allows the post office to break even and be more efficient for its customers which as stated earlier are the shippers. mr. lynch is not here and probably said i talk about them after he left. mr. lynch is not going to be my partner in anything that makes the post office more efficient. i'm sorry to say i think it's a lost cause on that. mr. clay and others are not so let's go to the numbers quickly. anyone can way and that mr. williams you are a little bit in the hotspot here. the fact is six day to five days in the shippers best interest because it avoids another 3 cents for or letter price increase and similar costs across-the-board. >> i am uncertain as to the 3 cents. >> looking at about $2 billion

versus with the exigent price increase did. even if it only safe it only save 2 cents or 1 cent isn't that in fact a reduction in cost that allows you not have to have an increase in price is more like we to avoid a reduction in volume because the shipper ultimately although sensitive to how often it you deliver his most sensitive to price. it's not true? >> i think that's a very good proposition and we would need to find out what happens in reality but i certainly follow the train of thought. >> that is why the president has pros that. mr. lynn spent a lot of time and i didn't have planas being a lynch issa. he spent a lot of time bashing steel containers. from a factual standpoint isn't true that 91 million homes to not receive in the door delivery while ready 7.8 +-plus-or-minus-sign 1,000,002? that's the cluster including

apartment and condo or nurse all over america. 91 million plus or minus two not get into their door while 37.82. >> yes i agree that that's the ratio. >> it's amazing for that ratio of more than two out of every three who are already part of the savings of not having to walk all the way to the door and simply less labor and that it's been proven and calculated by the post office in cbo that labor savings for less than one third of americans is billions of dollars in ultimately a question for you those billions of dollars per year in just her our modest 15 million less than half of those being averted is scored to go over $20 billion in savings in cost to the post office. let's just go to the numbers.

your customers a shipper. you all agree to that whether you like it or not, right? the shipper gets a value both in secure storage and in avoiding cost increases, don't they? >> correct. >> so where's 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 rural america and i'm a shut-in i can with no costs at the post office delivered to my door today. is that true? >> it is true and 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 a huge

amount of savings. your proposal as i understand it is on the moderate side. >> we toned down a lot so we could say more than half of americans get to the door. if they don't believe it's feasible for them would not see a change in the first 10 years. we believe communities will over time rush to have secure storage not necessarily cluster boxes of a dozen or more. often there'll be to two or four in a cluster tactically at your front door but in fact the ones we showed during our hearing we specifically chose ones that are larger because you want to be fair. in neighborhoods where it's hard to place a box you tend to have larger boxes. in suburban neighborhoods it's easy to do to war for between your neighbors. >> both places where the model is difficult to fit and then for people with special needs. we saw there was a waiver and a model considerations for a

waiver and we think that's important to do. yeah we think it could be a real game-changer and save an enormous amount of money. we also want to note that those 37 william 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. we like the fact that this imposes a comprehensive plan for the placement of those in the facilitation of people with special needs and neighborhoods where the model can't work in the classic. >> can i have your indulgence for a few more minutes? thank you mr. chairman. a couple of quick things. mr. cochrane the fact is the post office in my opinion is uniquely positioned to provide a

postal digital delivery system as an additional feature for a fee to the shipper. in other words there are people who who you may not know where they live but if i get half as much for a digital delivery only system and the digital deliver 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 is a variation of mr. davis. technologically from your experience that's completely doable is that? >> yes it is and we have to test right now in northern virginia where we sort all of our flats in bald cameras and we can take pictures of male pieces. you can get an e-mail with an image of the pieces that we saw that will arrive in your mailbox that day.

that doesn't get into the opening envelopes but it's a first step towards giving people a digital image of what's coming to their box. the risk side of that is what was discussed earlier. you have catalog mailers that are paying to get into the mailbox and you are just rapping to use the term. it does strain a very extensive revenue stream for us. >> but for example and these are hypotheticals. mr. williams who have looked at a lot of the efficiencefficienc ies. if a shipper says look i'm going to give you x amount of these things and if a person declined i will pay half as much and if a person accepts a time happy to pay the full thing. .. 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.