Thursday, September 20, 2007

26¢ Emails – Regulated by the FCC

Have your received the email alerts about the FCC charging a modem tax? Or about the US Postal Service starting to charge for stamps for email? These are of course hoaxes. One great hoax I remember had to do with a member of Congress Schnell (German for “Fast”) who introduced a legislative proposal 602P (legislative proposals are either “S” for Senate or “HR” for House of Representatives – there’s no “P”) proposing a 5¢ email tax. According the official USPS website,

Some rumors refuse to die-no matter how many times they have been put to rest. . . The fictional Congressman Schnell is making the Internet chat room circuit again, proposing a 5-cents surcharge on e-mail messages. This was a hoax when it first circulated several years ago, and is still a hoax today. There is no Congressman Schnell, and there has never been a Bill 602P. In addition, the USPS has already said it would not support this type of legislation.

And if you don’t believe the USPS, then you should believe the Dept of Energy (after all, they are charge of nuclear power).

Of course, the punch line is that the fee was not 5¢, it was 26¢! And it wasn’t proposed by Schnell - it was proposed by the US Postal Service itself.

Time to use the Way-Back Machine. The time is 1977. The country is in a tailspin. Saturday Night Live is singing carols about killing Gary Gilmore for Christmas. President Carter takes the Oval Office, and pardons Vietnam War draft evaders. The Clash releases their debut album. And the USPS is scared.

The USPS has learned about this thing called electronic mail and electronic transactions. It occurs to the USPS that if everyone were to use these electronic thingies, First Class mail would get wiped out and so would all that revenue. After some careful strategic planning, the USPS launched an attack on email with a classic pincer movement: on the left flank, the USPS initiated its own email service known as E-COM; on the rank flank, the USPS considered banning all private email service.

E-COM was a simple concept. The USPS would set up a network where a message would originate electronically. It would then be sent to one of a handful of participating postal offices that had terminals, where it would be printed out. The hard copy of the message would then be delivered to its destination – essentially in the same manner and with the same speed as first class mail. USPS launched this service in 1981.

Before E-COM could get off the ground, however, it was mired in controversy. The US Postal Commission, the Department of Justice, private companies, and even the FCC, objected. The first objection was that it was against government policy for a government agency to compete with the private sector. Private commercial email services were nascent and promising, and did not think much of a government monopoly using its government bankrole to pay for a competing email service. The FCC made a particularly interesting objection. The FCC said, “we have jurisdiction over all wireline and wireless services. That jurisdiction has been interpreted broadly. And there is no dispute that the transmission of a message over a communications network is communications, under the Communications Act, and under our jurisdiction.” “Not only that,” the FCC was heard to say, “but its common carriage.” Using an actual quote, the FCC stated:

With respect to the relevant judicial decisions defining the nature of common carriage, we note that none of the parties to this proceeding appears to dispute that ECOM service would constitute a common carrier offering if it were to be provided by an entity other than the Postal Service. [Oh really?!?!?!] We also conclude independently that ECOM is a quasi-public offering of a for-profit service which affords the public an opportunity to transmit messages of its own design and choosing. Based on those judicially defined criteria, we find that, in offering ECOM, the Postal Service is engaging in a common carrier activity.

In re Request for declaratory ruling and investigation by Graphnet Systems, Inc., concerning the proposed E-COM service, FCC Docket No. 79-6 (Sept 4, 1979).

In other words, before E-COM could get launched, the FCC said, “if you are going to do this, then you are under our jurisdiction, and you are going to have to file a tariff for the offering of your common carriage service” (do you hear that?!? The FCC said that email, whether from the USPS or privately offered, is a form of common carriage – they don’t say that anymore).

Well, the USPS would not accept “no” for an answer, tinkered with its network in order to weasel out of FCC jurisdiction, and launched E-COM in 1981. A message was priced at 26¢ - and for each email message, the USPS was said to lose around $5. They had apparently estimated that the service would be a raging success; it was not and, with the low message volume, the cost per message was rather high. And by the way, if you used the service you had to send at minimum 200 messages. The service was one directional; if you got an error message, you would receive it in the mail two days later. When the E-COM messages were printed out, it would take two days more to be delivered. And it cost the same as First Class mail.

For some reason, E-COM was a failure (one Senator called it a turkey). Three years after service was initiated, USPS terminated the service and tried to sell it off.

Some what’s the punch line? Congressman Schnell was going to undercut the USPS offering by 21¢ - and deliver you messages two day faster! Vote Schnell!

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