housing in this country and want to talk about it and the populist agrees that something we should subsidize, then put on the ballot sheet and make it clear and make it evident and make everybody aware of how much it's costing. but what you deliver it through these third party enterprises, fannie mae and freddie mac, when you deliver the subsidy through a public company with private shareholders and executive who can extract a lot of that subsidy for themselves, that is not a very good way of subsidizing homeownership. >> christopher hitchens, have five are a few of the 41 -- anne appplebaum and gretchen morgenson in c-span sunday at night now available with your favorite bookseller. >> a house oversight and government reform subcommittee held a hearing recently assessing the future of u.s. postal service and examining new innovations and the postal delivery industry. witnesses testify on behalf of the postal service include chief

information officer james cochrane and inspector general david williams. of the witnesses include executives from outbox, stamps.com, m-pack systems and newgistics. this portion is just under 90 minutes. >> good morning. the committee will come to order. as is traditional within the oversight committee i like to start by reading our mission statement or we exist to secure to fundamental principles. first americans have a right to know that the money washington takes for them is well spent and second, americans deserve an efficient and effective government that works for them. our duty on the oversight government reform committee is to protect these rights. our solemn responsibility is to hold the government accountable to taxpayers because taxpayers have a right to know what they get from their government. we will work with citizens watchdogs to deliver the facts to the american people and bring genuine reform to the federal bureaucracy.

this is a mission of the oversight and government reform committee. at this point i'd like to recognize myself for an opening statement, which is in a different book. i edited it. the staffs just one that's not always 100% right. today we will examine recent efforts by a number of private sector companies and started to develop innovative postal products. while the internet has been a boon for the national and global economy, it's been a mixed blessing for the postal service. mail one is down more than 33% from its peak in 2001 and continues to draw. package fund is growing rapidly thanks to e-commerce. americans are rapidly changing of the committee with each other and the postal service struggles to adapt. that does not mean we are living in a post-u.s. postal service world. the postal service still has a vital role in our economy and our nation, affording and

connecting even -- affordably connecting even the most remote parts of the country. that's what innovation is so important. we need an infrastructure in this country for moving matter, not just decided to the postal service private sector companies have begun efforts trade 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 current operation and includes innovation into new mail designed, online postage purchased in e-commerce, greater consumer targeting for advertising. today i'm looking for dating from private sector companies to develop new postal products and services. specifically what problems have encountered a long way working with the postal service to develop and government these innovative products. now if ever is the time to

embrace innovation presented by private sector companies. private sector companies are more than willing to spend millions to test and implement new products and designs that can to bring future revenue to the postal service. in the text committed often use the word disrupted and disrupted is not necessary a bad thing. it's a change. my wife when she was in her junior league days used to refer to the -- we've got to be very wary of falling into the trap of that's the way we've always done. if companies continue to be shut down our steam rolled by the postal service. service. craddock redtape given a chance to get off the ground, future innovators will look elsewhere to present the fresh ideas. i hope to hear some success stories from private sector companies that work with the postal service and have future entrepreneurs and innovators can create more marketable and open environment in the postal service. there is need for innovation with its luster boxes for secure

package delivery or better access to postal databases like changes of address, there are many areas ripe for innovation. life is if the government watchdog and taxpayer without reform an innovative new postal products, the american people will be left footing the bill for taxpayer bailout for the postal service and that's the last thing we need. i look forward to hearing from our panel and believe there are smart ways they can lower cost, improve service and innovation in private partnership. i hope we can bring to light today and find a way to move the postal service closer to internet speed. and if i recognize mr. lynch for his opening statement, i ask unanimous consent our colleague from texas, mr. neugebauer, be allowed to produce but in a hearing. and without objection it is so ordered. mr. lynch, your opening statement, please. >> 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 usps. i would also like to thank our panel of witnesses, some very innovative individuals for helping to subcommittee with its work. in november of 2013 the postal service into into a strategic partnership with online retailer amazon.com to test sunday package delivery in select markets otherwise known as 70 delivered. the amazon program has proven widely successful and the primary reason why the postal service has really does have the ability to grow revenue in the face of the most difficult imagine conditions. in its quarterly financial report released on may 9 of this year, the agency record a revenue increase of $379 over the same reporting period last year. its third straight quarter of revenue growth due in large part to to budget 52 million or 8% increase in shipping and package revenue. in light of these results sunday package service is now expanded to several other cities across

the country and the agencies working to establish similar partnerships with other companies. this serves to illustrate that the agency can experience positive financial results when it capitalizes and build upon what it already does best. utilizing an unparalleled mail network that is derived -- excuse me, that is driven by high working dedicated workforce to deliver the mail to the american people now seven days a week. it as an example of innovation rather than degradation of existing postal products and services and we will be well served to take a similar approach as we continue to understate the critical task of reforming today's postal service. as evidenced by yesterday's market and our full committee, chairman issa continues to the fourth misguided proposals that presume we can enhance the financial viability of the postal service by degrading the very services that is, to the agency in the eyes american people. i do not agree we can reform the postal service for the better by eliminating the current 16 of

delivery, by mandating a wholesale door delivery addresses to curbside cluster box on the sidewalk to limit or by asking postal customers to pay a so-called legacy the in order to retain their door delivery service. such proposals will place the postal service at a greater business to the bench and damage its long-term viability. instead we can encourage the postal service to build upon its existing postal products and services in order to further set itself apart in the mailing industry. i commend ranking member cummings for his leadership in this area and a proud to sponsor, cosponsor this legislation, h.r. 2692 innovative the delivery act. this thoughtful approach to post reform would establish cheap innovation officer to lead element of innovativinnovativ e postal products and services that fall in line with american information technologies and changing market trends. it would require the office to

ensure that such products maximize revenue for postal service. postal individual be a key and necessary component for any reform package and understandably to understand that the i variety of perspectives on how best to facilitate the innovation in a manner that will place them on a more solid footing. i very much look forward to discussing the issues with eyewitnesses. i look forward to your input on the you back the balance of my time. >> members will have seven days to submit opening statement for the record and we will not recognize our panel. mr. james cochrane, chief information officer and executive vice president for the united states post office. and mr. david williams, inspector general of the united states post office. mr. will davis, chief executive officer of outbox.

mr. seth weisberg, chief legal officer, stamps.com. mr. patrick idol is director of engineering and technology at m-pack systems and mr. todd everett, chief operate officer of newgistics incorporated. pursuant to committee rules all witnesses will be sworn in before they testify. would you please rise and raise your right hand? [witnesses were sworn in] let the record reflect all witnesses answered in the affirmative. thank you. you may be seated. just a little housekeeping matters. it's my understanding that the house will have votes around 10:40 and it would be a rather long series of votes. i want to get everything covered, if we can get it done by 10:40 you all don't have to sit around her her for over an r while we go vote. i might be able to make an

earlier flight back to texas. that would be a win-win if you abide by the little timer here that gives you five minutes for your testimony. we would then ask questions. your anti-written testimony is a part of the record and it is available for this committee and others to review. we'll start with mr. cochrane to your recognized for five minutes. >> good morning, chairman farenthold, ranking member lynch and members of the subcommittee. thank you for calling the string on examining innovative postal products for the 21st century. my name is james cochrane at a service chief information officer and executive vice president of the united states post office. iowa city integration of technology, innovation and all specs of our business. during my 39 years with the postal service i've developed a broad perspective on the business, how we so the marketplace, and our customers. this business acumen is essential as technology no place a foundational role in virtually every postal product and service. emerging technologies while

exciting often times challenges with a potentially disruptive effect. effectively traversing this emerging disruptive continue is my response build and a matter of survival for the postal service. the postal service operate for the largest technology infrastructures in the world. it is supported by some the most respected technology companies as well as the small businesses that bring fresh insight. our goals are simple. everyday we focus on how we can innovate with technology and new partnerships to generate revenue, reduce expenses, deliver consistent reliable service and a world-class customer experience. our goals are simple, business model is both complex and diverse. for nearly four years the postal service works your program has just responsibility for efficiency and innovation with business partners. this collaborative model is kind of buy the premise that our profits and brand are enhanced when a partners are profitable at a joint customers receive an increased value proposition.

printers, software vendors, mail service providers, transportation companies and partial integrates all play a vital role, and together we built an industry around the market needs. disruption in the highly competitive package market is an excellent example of how customers demand evolves and we adapt. driven by e-commerce and particular free shipping, there's been a dramatic shift to more ground-based solution. it's a work your program that leverages the world-class processing and transportation network of consolidators such as newgistics with the unmatched reach for our delivery network providing a great customer solution. parcel select enable that the concept of competition or ups and fedex our traditional competitors provide network logistics and the postal service price of the last mile service creates a win-win for shippers and consumers. that package market is continuing to change. the new norm and fall same day delivery, sunday deliver, delivery customization and

constant real-time tracking. consumers are demanding these new services that increase in cost requiring that we again adapt. the postal service is helping businesses make mail more valuable and engaging and interactive. through barcodes have financial incentives, mobile optimized know, great in both a digital reflection for hardcopy at the digital action or response. we are building new digital products that will leverage our brand of privacy, security and trust. we welcome creative ideas from individuals, companies and entrepreneurs regarding new business concepts and technologies. out on super bowl is a program provides a public venue for new ideas, advanced the mailing industry. to know to be a doctor 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 product or service.

the postal service receives a disorder variety of sources. some of these ideas are not new concepts, some are already being pursued and some cannot be adopted because of restrictive laws. the role of the postal service and american life and business is changing at a rapid pace. more than ever citizens using a wide range of technology taking decades, transact business and shut the every changing to does bring us the postal service with opportunity but our success is dependent on part on how bes ths weekend if all. we remain guided -- upon which american businesses and consumers depend. the postal service continues to make a great strides and adapting to the country's changing mailing and shipping is. are ever just a very limited but an outdated legally restricted business model. we have the responsibility to provide and fun universal service for our nation but we didn't have sufficient authority or flexibly to efficiently carry out that 90.

we need comprehensive postal reform legislation to return us to financial viability. such legislation should provide us with clear authority to offer new products and services that allow us to take full advantage of our current infrastructure. further we urge congress not to make the postal service task even 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 our legal obligation. mr. chairman, but look forward to continue to work with you the rest of the subject to accomplish meaningful postal reform legislation and detentions deliver innovation to the american public. either place to answer any questions you might have. >> mr. williams. >> mr. chairman and mr. lynch been -- >> could you bring the microphone a little closer to your mouth ask they don't pick up as well as -- >> members of the subcommittee, postal in his has a long history of working with the private sector and others to spur innovation.

historically, mail transport fueled the fledgling railroad and airline industries are coastal applications also stimulate advances and inviting recognition technologies. they acted as a platform for the private sector innovators and the electronic postage, presorted and mail order industries. and the postal service impose the overly of the zip code across the country to the benefit of businesses and researchers. innovation is even more important today's age of digital globalism. the ungovernable internet has changed the world, but great opportunity and enhanced capabilities exist alongside awkward new systems and unfamiliar risks. lastly the forces of creative destruction have ravaged traditional communication and logistics systems. in this environment the job of an infrastructure like the postal service is to support citizens and businesses as they try to compete and positioned themselves, one also takes care

to assure that efficient market forces prevailed and are not undermined. to continue in this role, understand the changing world and 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. success will largely depend on its ability to innovate and embrace the innovations of others. as a result, continual strengthening of the postal service's processes for innovation will be needed. they include seeking to understand the frustrations and supporting emerging needs of people and commerce, develop a comprehensive innovation strategy, clarifying the entry point for innovators and providing staff to join innovators in navigating a huge postal structure and remained with them until the proposal is resolved, strengthening its skills in assessing the financial viability of

proposals, developing the ability to engage in rapid prototyping of new products and operational innovations, and protecting its intellectual property and respecting that of others. when pursuing innovations, partnerships with the private sector and the government are important for bringing in new ideas and specialized competencies, for sharing risks and for leveraging the cost of research and development investment. there are several areas where innovation opportunities seem particularly rich. support for e-commerce, e-health at the front end by providing a portal for identity verification for individuals and the businesses and providing access to digital currency exchange instruments, and at the backend by assisting with packaging and the shipment of parcels. using microware housing and virtual post office boxes to help small businesses and innovators with logistics and shipping solutions. and providing seamless physical and digital axes to the postal

service network for the public and commerce by linking together its website, post offices, and digitally enabled carriers. and connecting digital analysis of the vast data now generated throughout the network for operational efficiencies, revenue ideas and business intelligence. together these opportunities can tighten the integration of data streams and their supporting matters dreams. the internet, smart devices, search engines and cloud storage have laid the foundation for a changing world. an aspect of what will come next, i thought this foundation, will likely be an ecosphere that continues to be ungovernable and chaotic with endless challenges, linkers, and substantial creative destruction. the inability of society to propel rather than retard progress in these areas will depend on the competency of the postal infrastructure to support american commerce and citizens

through the coming era that will combine and deploy major new technologies that include additive manufactured, also known as 3-d printing, the internet of things linking ubiquitous sensor nets, augmented reality and smart devices, big data analytics, advanced robotics in a corporate machine learning, and nanotechnology. the world oppose were slow to grasp and adapt their role in the early phases of the digital age, ever partially constrained from doing so legally. and next faces of this age of technology will likely be more disruptive than we've seen to date. the postal service must be highly agile and develop an intuitive sense of change caching of its changeable and the new challenges facing american as is his and citizens. a key aspect of the ability transform must include stronger competencies for embracing and implementing innovations. thank you, mr. chairman. >> thank you, mr. williams.

will now move to our private sector folks, mr. davis outbox, you are up. >> thank you, mr. chairman. innovation, it's in the title of today's hearing. we parted spoken about at least a dozen times in earlier testimony. and i feel the need to go a bit off script and a movie is only thing that comes to mind but it's one of my favorite, one of my daughter's favorites, princess bride. and there's a theme in there were the ceos caught up with a band of criminals and there's a criminal mastermind and he keeps using the word inconceivable, inconceivable when all of his plans don't go as planned. and he says you keep using that word but 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 that 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 of a statement, consider this fact. in 1926, the s&p index was formed. the average index was 20 years. today it is less than 15. in fact, since its inception there's only one company that remains on the s&p index, and that's a general electric. one single company. all those other companies are gone. they are destroyed. but for all of it, destructive capabilities, there's almost an effect of pursuing innovation to it is a narrow road, a narrow path of putting off old business

model and secure cash flows and grasping for something that is uncertain. and the promise of innovation comes in the form of new jobs, new marketplace is. for every job, every company fro,every market that's destroyd through embracing innovation, to more pop up in its place in markets and and ideas and new concepts and new workforces that simply could not have been thousand. but what happens in that disruptive process is incumbents usually fail. they usually die off. they go away. and so as we're talking about innovation in the postal service come with to understand that truly embracing it means a fundamentally different postal service. it means that in 10 years it

looks almost unrecognizable from the postal service today. but that doesn't mean it is worse off. in fact, it doesn't mean that jobs have to be destroyed within the postal service but it means new ones 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. and so as we talk about innovation and embracing it, we need to understand that it means hard, fundamental core changes to the business model, embracing it means the destruction but it also means new markets, new jobs, new opportunities, thank you. >> thank you. mr. weisberg. >> thank you, mr. chairman. i am from stamps.com, the leading -- pc postage is

internet-based software that allows customers to prin put thr own postage using the existing computer and printer. stamps.com serves over 500,000 registered customers, primarily small businesses. in 1999, we became the first company to offer a software only pc postage solution, enabling customers for the first time ever to print real postage from any internet connected pc and standard printer. just seven years ago, pc postage accounted for one quarter billion dollars in annual postage sales. last year it accounted for over $3.25 billion in posted so. stamps i come postage growth alone was more than 35% year over year. that is consistent double-digit growth every year even through the heart of the recession. virtually all the priority and

express growth surge in recent years is generated through the pc postage industry channel. a recent study showed revenue through the industry pc postage channel costs 2 cents per dollar of revenue compared to 47 cents per dollar to a usps owned retail outlet. pc postage produces secure, sender identifiable mail which is important for security has biological or other attacks. pc postage provides customers with cutting edge technology without the postal service having to pay for research, development, support or maintenance. stamps.com is launched an enterprise service targeted to organizations with multiple geographic locations. it features advanced reporting that allows a central location such as a corporate headquarters, greater visibility and control over postage expenditure across the entire network publications.

and e-commerce merchant with multiple stores can use stamps.com to consolidate all their orders so they can ship them out with these. with one click they can directly import all of the order data from the most popular online marketplaces and shopping cart software and automatically print the shipping label. all the shipping data, including usps tracking, automatically post back to their web store. stamps.com also automatically keeps the buyer informed, ma or is that kerry pickup, since an electronic manifest to the postal service and generates a stamp forms all the carrier does is scan the form once and all of the packages are automatically in the postal service computer system. pc postage is based on a public-private partnership with the postal service regulating industry participants.

our products must complete extensive usps testing and evaluation in the areas of operational reliability, financial integrity and security. the postal service also partners with the industry to achieve mutual win-win goal of improving the customer experience, increasing revenue and minimizing cost. kpmg, the cio sitting on this panel and summit of the dedicated postal veterans who have ably worked with us for many years deserve much credit for the success story that is the partnership between the postal service and the pc postage industry. we believe public-private partnerships are the best path forward as technology innovation becomes increasingly important for the future. having the postal service create its own technology is not the best approach. instead, it should provide incentives for industry

innovation. this allows customers to pick the best technology solutions for their needs. pc postage provides jobs both in industry and the postal service. every package produce is ultimately delivered by a city or rural letter carrier. growth npc postage means more packages to deliver, more letters to deliver, more volume to serve. thank you for the invitation to testify today. >> thank you, mr. weisberg. mr. eidemiller, ally pronounce integrity speak with that's correct. it gets mangled quite often. thank you and good morning, mr. chairman and members should miners patrick eidemiller a director of m-pack system. the future prescription packaging. and back was event by 71 year old navy veteran from a small

town, i'll can a population california, 85. this is m-pack. the flat pharmacy. this is a traditional box. this is our box, this is traditional. m-pack has many advantages, the most important our this vile is tamper evident. this bottle of water is tamper evident. this prescription is not. so anti-drug supply chain we have more security in this then we do in this. hard to believe. we also a lot more label space so it's much easier to read. and lastly, much more compact. in back is made in the united states in erie, pennsylvania. we are adamant about u.s. prevention -- fraud has another adventure in this letter today. the usps provides a federal rate what's called a machine the bull flat.

this is a machine the bull flat. this is a partial. over-the-counter rate for this is $2.22 since. be overcome great for this is $1.56. 29% savings to the taxpayer for every prescription medication, if it's classified as flat. so realizing what we have with a flat file and considering the us government is one of the largest users of prescription flat malcolm we sent opportunity with two save taxpayers money and provide better, safer while through the mail to the post office. so working with henry and the manufacture in new york, we develop this envelope which is all the mechanical requirements of mechanical flat. we tested it on the machine test equipment on fort worth, verified it worked and we received our approval on

june 17, 2011, that our mail piece had been approved. over the next 18 months we continued to improve our product. and refined and refined. we came back to her product that looks like this. smaller, lighter, cheaper. more weight is more costly. the two ounces out of this envelope. we put a package together, we could do 50 a second. this one is 15 permanent. we put a lot of work on 18 months of work completely not, go from this to this. we resubmitted our package. this package plus some the intro improvements that we also went to retest. our packages were rejected. not only this new package but the existing form as well. we were shocked. this had been approved once. for simply different reason. and it was not the fact it doesn't meet the mechanical requirements of machine the bull flat which is like this, that like this. dimensions and with, it was a

box in an envelope, not machine flat. that's why we were rejected. we were surprised, shocked. but already been approved. we went back. we solicited. i sent a letter to the father of the flat box. i love the flat rate box. i use them all the time. we felt ready sympathetic ear. we refer back to me instead ever got a very curt response. that basically said, and i quote, thank you especially -- a force of a piece with its current content qualifies as a partial. if you change the content, please contact us again. if we change the content from this to this, though contactors can put the entire point -- i'm sorry, is not just to the point is this. this is a better safer file but because of its shape and you can

send it is now for 29% cheaper. that's the point. after really feeling very frustrated with our entire expense with the post office, and we went to the post office for a reason to the post office provides. the post office is the only agency that can legally put prescription drugs through mailslot in a mailbox. and not leave it on your doorstep it that's an important factor in safety, important factor in the drugs on the doorstep. we want to work with the post office. we asked, we beg and we pleaded. we will change our package. we will tested at our expense. we want to use the post office. it fell on deaf ears. completely fell on deaf ears. we went to the private sector, ups. we will take it. no questions asked. because we know how many of these can fit in an airplane, second a service, 1 dollar apiece. that's why i'm here. thank you.

>> thank you very much. mr. everett. >> good morning. today i will describe to the subcommittee happiness is postal service has partner with and helped make it possible for my country, newgistics, to develop innovative products responsive to the needs of direct to consumer retailer, manufacture, distribute and logistics service providers. thank you, mr. chairman and members of the subcommittee for allowing me to speak on behalf of newgistics at today's a big my name is todd ever, i'm the chief operating officer the chief operating officer of newgistics, a privately-held company raised in austin, texas, with over 400 people on their payroll. we were formed in 19 a net on the premise that we could develop a better way for consumers to return merchandise to retailers. today we are a leading provider of technology enabled solutions for direct to consumer retailers, manufactures, distributes and logistics service providers. our success is due in no small part to the postal service and

its willingness to listen to and work with private entities like newgistics to develop innovative solutions. we offer a national integrated parcel delivery and return service for our customers. we are able to provide cost-effective, reliable and convenient shipping solutions by working with the postal service to provide last mile delivery and for smile pick a. when newgistics was then we get ourselves as a technology company. that would provide information to retailers regarding returned packages. soon however we evolved into a returns logistics company, handling returns retailers, making use of innovative technologies. we concluded customers want to be able to returned packages easily and we can't want to make their returns more efficient and cost-effective. we developed a proprietary intelligent returns solution, making use of barcodes embedded in our newgistics smartly the. those barcodes provide us and our customers with detailed information that quickly enables our customers to manage their transportation and returns

processing resources. as we evolved we discussed with the postal service the possibility of creating a new convenient process for handling returns of large shippers of merchandise that made use of the newgistics smartly the. based upon our collaboration with the postal service, the usps develop one of its most innovative product, the parcel return service, also known as prs. is a program under which approved providers like newgistics are not retrieve returned parcels directly from designated postal service facility. early retrieval enabled us to fight advanced data and customize returned services to retailers. we found the postal service was are receptive to working with us. beginning in late november 2001 with numerous meetings with the postal service. following those meetings in may 2003, the postal service sought permission from the postal rate commission t-test prs. approval is granted in september 2003 at the syndicate

of october 2003. after two years of successful testing in october 2005, the postal service sought permission or prs to become a permanent class of mail. lef..

>>íy handled more than 50 million packages generating more than $120 million of revenue.ç mr. chairman 84 that opportunity to testify before you today. >> we will break with tradition normally i would ask the first round of questions but mr. lynch has the votes in another committee but i will allow him the and i will take my opportunities.

>> fate you for your indulgence. in i thank the members for their help it has been interesting discourse but when i think about the next generation of the postal service i tend to think about switzerland. pitney bowes has the system that they will doubt that is called a digital males stand wear and i can pull up my mail as it arrives, i can go on my website a and deceive my mail before it is delivered. if i don't like what is there i can say do not deliver. if you say john smale is coming, not necessarily it is not as inevitable as we think.

we can tell them not to deliver it. that is the new way the postal service that is out there. that will be coming to the united states at some point. that is really disruptive it is great for the environment because of the huge drop of mail volume because people will not get mail that they don't want into their mailbox but samite apartment that is 90 percent twitches the circulars. if my wife and girls could get that sale information i would be saving a ton of money. but the volume will drop which is good for the environment but terrible for the united states postal service national letter carriers.

to drop in volume but that is a disruptive change but that is what we have to deal with that some point. what the chairman of the full committee has in mind is to put out about 1. 5 million of these steel boxes in neighborhoods all over america in urban areas, the town's comments to change 50 million door delivery addresses to a postal box so even if there is 100 addresses id one box is saving 1.5 million that you could drop that as 7,050,000 but that is a huge expense even where it is feasible. once we have 750,000 or steel boxes how much

flexibility do we have? in light of those technological changes to put the steel box in the middle of the neighborhood to what go quarter of the while to get your mail? it is disruptive in a way but that is not innovation. put that is to win back word in time. for me to walk down to a steel box. that is not creative it is inefficient and reduces our flexibility in terms of what we do next. >> would the gentleman yield ? >> i have to leave. you can talk about me when i am gone. >> it is a pleasure. [laughter] >> i am sure it is. when i take about that idea

of the five day delivery which is a another popular idea, most innovation and tries to tie in with what society is doing to answer a need to that is out there. and where i live which is uncommon in america today we live on the seven day schedule. all the stores used to be open five days long ago went to the seven days. so now in the spirit of innovation that will close two days every week? i think that is the wrong direction. >> you had a fabulous example of citizens in switzerland to unsubscribed from junk mail and that technology existed in the

united states for two years we brought that technology to the states and we unsubscribed over 1 billion pieces of junk mail for our users in three or able to do that through the digital delivery. what we found was even though they unsubscribed but the intent is the holy grail for advertising in when we measure that you can do what they prefer what they did not prefer and that type of information is missing and that is why it is unfortunate. >> i am just saying i want to empower the customer. the taxpayer is not involved it is up postal customer we don't give tax money. they survive on the money from the steep so they don't

have to go to any company at the postal center when they don't wanted delivered. that is a disruptive change that would make it more efficient. >> did you have bothas well. -- boats as well? >> the gentleman from missouri is always welcome to speak. [laughter] >> thank you. the inspector general released the two-part report from the digital age

including after the postal service and experience into highbred in reverse hybrid mail service. can you briefly explain what those services are to elaborate why it may be beneficial to expand into these areas? >> the ability to print a letter to the point of delivery would keep the mail out of the system so the idea to save on transports and fuel through sorting plans is a very good idea. it allows variation among the region with the different letters for

difference of coats? if they put the cart before the horse with the josh regions before they have a real plan to go forward with the volume of mail? >> i do. there was excess capacity but i don't believe it should spring out in the advance of the effect in the impact of what this would be. taking the time being is difficult and if we have something that is not embraced to close off the possibility of the other network it would be a very serious mistake.

>> em the hybrid in reverse hybrid is similar to the business model of one witness today. >> that was the of the base service to give customers a choice to bypass physical mail? correct. >> if i am correct the business model was dependent of that infrastructure and customer participation. >> correct. >> now they said it is the additional mail operation after the of fox was shutting down the service in their new route showed that initial tests with signs of stress and operational simplicity.

but is still did not work out is that correct? >> absolutely. >> and the senior leadership as "mr. smith goes to washington" where senior leadership made it clear to ever participate in a project that would limit junk mail they were immediately shutting down the partnership. is that correct? >> were you aware that advertising now represented-- effective portion of the postal service volume? >> yes. >> so that has to generate revenue so you are aware it has the right to to choose on the bottom line? >> absolutely. >> the postal service is quietism anything you would like to bad?

-- ad? limit people i've been collecting mail and digitizing -- digitizing of the 10 years. the approaches when people will sign up through the commercial mail receive the agency that is very common in the business arenas from new york and washington. the challenge was that's the approach was all will different they did not want a receiving agency so that require them to go to the mailbox that there are companies sustaining a business model on a day-to-day basis. >> mr. chairman even though i commend mr. davis for the innovative solution it is not fair to criticize the postal service to not be innovative and operate with the business mind set.

in addition i ask for unanimous consent to enter into the record an article dated from the heritage foundation entitled why the postal service was right to to send out over the outbox. >> i would like to side with you in this case all the images a shame to see the for-profit entity close because they don't make up profit that the innovation and should be on the list because it is squarely within the basic requirements. just as it is innovation in that the post office a ignored to their peril. one of the things that we agree is that a minimum the

post office ought to do its job of revenue and revenue savings first. the most important innovation is to do the job well and we have to witness is here today but they are both core functions so we increase those innovation fund specifically the post office will innovate with him in its core in addition to the outside. >> sa to cry out for the public-private partnership? >> i believe, post office can and should use private enterprise as the contractors but i will say on the record here today

that what is proposed if embraced by the post office says a core function could mr. lynch disagrees with everything i stand for with postal reform apparently. [laughter] including from the electronics industry. [laughter] the fact is that when he talks about digital delivery in switzerland being inevitable he talks about of version of the business plan that switzerland is ahead of us if he says it is bad for the base that he cares about but he is right. these innovations will either happen within the postal service of -- system or they will miss it all together or be fighting for the core right to decide not to participate with the

business that may have already gone on long way. i agree that your point was right on. >> i may be having the outer body experience -- out of body experience to agree with you. >> rabil get back to the regular order here. >> mr. davis most of us lapierre know the story that you took your time to give a passionate speech but could you tell us what did outbox to agent the outcome? >> so whether the i followed or the ipad they could tell us exactly what they

wanted and did not want. it was a hybrid approach. and it is correct that this is a fabulous idea and should be adopted by the postal service in restarted to test in austin texas with the idea we would ask forgiveness before we asked permission because rules and regulations are so onerous we did so with great fanfare and we were shut down with the meeting with the postmaster general and with that meeting we had the a distending of who the customer is of the postal service he said your customer is not my customer. i said mr. general what do you mean? he said mike koesterer is the center of mail that pays me to place the mail of the kitchen tables of every american every day. while true, that is not the inherent value of the postal

service lies. of the value miles -- lives with a connection with every single american. so is my belief that a large organizations in government of which a postal service is does not naturally tend to adopt innovation because it does disrupt them. so it was our hope that we could test this on a small scale within the postal service but we were not allowed. the only way to 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 be testing new ideas and the ability to give choice lead to higher values and increased understanding of who the real customer is and

let's you value opportunities that are beneficial for the end user and for our company and all to believe the postal service. >> mr. eidemiller you mentioned you could not get your product classified as the flat the and it became a parcel -- parcel civic that is more a competitive service for the post office. you mention in the amount of postage it would take? >> these are over the counter rates and parcel rate for prescription files $2.22. over the counter rate $1.56. >> but use said they deliver them $1 of bottle? vivid they put an offer on the table roughly $1. the challenge we have is we

are a young start up investing where we have opportunities to generate revenue while this is a great idea our business has changed slightly after not getting stonewalls we have interest to bring this to market but we have potential customers a and ups will not put a contract on the table until they have volubility of it and cost then they say yes we can to live for about $1 and i asked them to submit it for the record but they declined to make a get the impression you would rather use the postal service given guy would much rather. it has the superstructure and the trucks and they can put this envelope into every mailbox in the united states safely in and secure the. ups cannot do that without

endorsement. the volume is there a of the businesses there. this is day regular standard size business envelope is $0.90 over the counter. to dollars $0.22. there are hundreds of millions of dollars on the table. says the only plausible reason i can think they say we want to classify as this instead of this is topline revenue because topline revenue of the parcel is higher than a flat. last year strategic planning 2013 this is online it says the post office makes three times more money on a flat ban a parcel. three over one. said the post office makes more ready if these numbers are correct in doing this out lower-cost then doing this.

three times more revenue. by? very simple it fits in the flat trade is easy to audibly we approve and we cannot make this that a square box is not a machinable flat we have tested we have volunteered to work with the post office. >> i appreciate it. i will not draw you into the debates of that is as secure delivery location with the benefit your company or not but they took on your side of the ideal first we will recognize the chairman then, back to you. >> this is interesting and will not use out of body but when mr. lynch says it is

the inevitability to do what switzerland has done. i was madder than hell your proposal to be the chief innovation officer to promoting king with the ig office is reprehensible. i am shocked that inspector general would go from the waste fraud and abuse and efficiency to promoting a specific agenda and i am disappointed not was standing post offices have the every right to propose innovative activities including postal money orders and other items court and others in our historic here in and around the world. however i would hope in the future you would be much more of an advocate including to everything the reduce his costabile while the post office to breakeven to be more efficient for its customers which stated

earlier, are the shippers. and mr. lynch is not here but he will never be my partner in anything that reforms the post office to make it more efficient because that reduces labor. i am sorry that is a lost cause of that. so go through the numbers quickly. mr. williams you were in the hot spot. the fact is five days and the shippers best interest because it avoids the $0.3 price increase doesn't it? >> i don't understand the three since. >> is about $2 billion purses that price increase digest use those but even if it is only $0.2 isn't it true that a reduction of cost that allowed should not have the increase in place is more likely to avoid

production of fall you because it is cheaper ultimately how often it is sensitive to price? >> that is the good proposition we need to find out what happens in reality but i have following that trade of thought -- trade of thought. >> mr. lynch spent a lot of time bashing steel containers but a factual standpoint doesn't 91 billion holmes did not receive inventory of 37% due? including apartment and condominium owners cover rural delivery 91 million do not get it to their door but only 37 billion to? >> i believe that could be

the ratio. >> it is amazing for that ratio for two out of every three that already a part of those savings to not have to have less labor that has been proven it calculated that was less than one-third of americans for billions of dollars it ultimately it was a modest of those being converted those $20 billion savings so go through the numbers. your customers agree if you like it or not. the shepard gets a value of to avoid it.

where is the negative side that with your storage or individuals under the disabilities act can still get door to door delivery? of vitamin role america of there is no cost is that true? >> is. we did a study as well we saw the amount of savings if you picked the extreme model or a very modest one there is a huge amount to a savings. your proposal is on the moderate side. >> we toned it down a lot that if they don't believe that's the go see a change in the first 10 years we

believe the communities will not necessarily cluster boxes but in fact, yesterday we specifically chose those because we want to be fair in the neighborhoods where it is hard to place the box to place larger boxes but in suburban neighborhoods it is easy to do two or four of them. >> most of the places are for people with special needs we thought there was a model we do think it could be a game changer with that amount of money.

>> gay couple of quick things. the fact is in my opinion it is late position to provide a digital delivery system to the shipper in other words, you may not know where they lived but to have as much

leave system and the deliverer can choose to have a paper copy delivered and i do that is a variation technologically is completely doable? >> yes it is. we have the test from northern virginia so to get any mail each day to get an image from the pieces to arrive in your mailbox that day. that doesn't give opening envelopes so to give a digital image of what is coming into their box. but this is what is discussed earlier bid if you

disrupt that it does threaten extensive revenue streams for us. >> but this is a hypothetical if the shipper says i will give you x amount landed the person declines i will pay half as much if they pay half as much it could be the of did when i could deliver two-thirds as many pieces that would be visible for half the price but if delivered let's say by paid the full price but to your customer you expand that it must be delivered. those options are not available today. but i would love to know digitally everything so i

know to expect it and i would be prepared to said havilah lost piece of mail. i happen to be a to the door delivery and i get my next-door neighbors mail. so i take the mail to put in my neighbor's a shoe but they don't know that she is missing her mail until it shows up and i am gone for weeks at a time because i don't live here so they will lose three weeks of mail if they had a digital picture they could get it. to continue pushing for this innovation are broad proposal has dollars i'd like to close with one

thing. i was in business for more than two decades exclusively then very modestly by comparison but the of one thing that i know is that top and bottom line are you not uniquely different if it does not flow to the bottom you could make cuts never getting to a profit. with its current volume billions of dollars that we know could be cut. innovation in did in the case of your product and others it depends on the efficient delivery the more efficient the more promising it would be. it amazes me that the brown trucks will go to any suburban area but because they cannot quite get as

good a deal as they can from the post office if these innovations have been so i appreciate the extra time. nothing more important than to have you a part of it my whole is they will see the direction in you gave to have a derivative product. >> fake you very much. we'll come to this hearing on innovations with the postal service and in particular i will comes of businesses to work with the postal service i often wondered about the a identity crisis reaching the postal service/o% with a change

of a federal government where it does not give you anything. most of that downsizing of the postal service has been done by cuts as the chairman has indicated. i don't believe there is any

this bill negev thank you for the opportunity we are very pleased it is the innovative product to space leverage technology in some way but what we have done is facilitate the customer to go to the web site to literally pick a neighborhood whether a dry cleaner or a restaurant to pick where you want to your piece of mail delivered because that is where customers live that lois you to click on the route to highlight the streets you want the mail to be created a commercial version you could walk into the post office to pay right there and drop off the male then deliver. >> you have a competitive advantage with this

particular service because of the infrastructure do you have any competition it? >> not with mail into the mailbox but there is more sophisticated mailings that took place and that is some concern that he would force people to buy down from a traditional mail peace and our findings is dead opposite where somebody begins with the simple product to more for themselves up into a more sophisticated area to see the value of mail to work with a commercial printer to expand where they send a real. it is the first up to a very easy way that has helped mailers' go to a much broader mail stream. >> is that from going

online? >> that is the issue they can pick so it is a saturation in type of mailing carrying of 500 deliveries. >> so it can save money? >> absolutely to get the mail piece you may drive by five dry cleaners it comes a lot more targeted it is the could way to describe to get focused on that area that you tried to reach. >> to have clear success collaborating with others others, you have it developed comments from the postal service but i did not hear your testimony. >> did they reach out to you? >> i was not with logistics'

with the initial meetings of mike understanding is we headed an idea reached out with the product ideas we had as well as. >> to be successfully collaborated who reached out to prove? >> we reached out initially. >> do you find it would lack pursuit? >> it is flattering with the recognition of the presence to have 153 million doors i was part of the early conversation with logistic san they said to have something with returns to share that business model so we went to a pilot to create up product but that full time product and we're

holding back so for those retailers to facilitate of more easier return. >> is described the difficulties of the postal service and is this the case you went to ups instead? >> over two years we believe it is the best solution end at a certain point and to after reaching the post office ups said which will

give you a great rate. but they are talking about $1 from origin into a destination second days service at worst. >> thank you for the opportunity. it is different automation 10,000 pieces it is very complex so we need to differentiate letters and a lot of magazines in particular ended is important that they go into the distinct streams so does it create problems on the machines. the boxes are inside the envelope does not make them a flat. it is a parcel that is the reason got -- where there we're turned down because of the rigidity and the need

for the peace is to stay in the appropriate mail stream. we would welcome customers shipping those with battle whole concept that'd is to persistent for pharmaceutical companies we deliver well over pharmacy items on an annual basis but the issue is it is a parcel. >>. >> add to our own expense and my background they cannot conceive is that genesis surrounded pact was initially their frustration to do drugs by mail.

why don't we do is square? and then at 300 pieces per minute they cannot automate around that so we had a long-term personal and professional relationship this came from the industrial automation means we have built 100 distribution centers in my life we ran this and we had video that submitted with the application shilling's the team from fort worth before we ever submitted that package. every mechanical test of the

machinable flat and follows every mechanical test at 300 pieces per minute. we have offered to attested or spencer change the mail piece at our expense we want to partner with the post office. hello? we have volume. you can make money. work with us. i don't know what to do. >> thank you very much.

>> one of the reasons researchers likely investigate on in animals is the routine diseases in people are often traced back to animals. one of these situations occur 2003 something that had gone terribly wrong a three year-old girl who lived in wisconsin who developed very disturbing skin lesions. i am two young for smallpox this is the first generation that did not get the vaccine but but those who tried to eradicate the disease from the world and took one look and said it is smallpox so we were very worried when

the second case was reported a few days later from another part of wisconsin. -- to patients did not know each other. one was a three year-old girl and one was a businessman but they have both been bitten bisect pets -- by us sick pet

>> i decided to take it.

my concentration it started to be bored and stopped other people to be bored. so the answer is probably yes the would have quit to get away with the whole thing. it sounds irresponsible but i do say the truth is that would be hypocritical to say no. because i did not ever. >> the soviet union contained the seeds of its own destruction. many of the problems we saw in the end we saw in the very beginning i spoke of ready about the attempt to nt