The time was 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.
While there is disagreement on how fast EMS and EFT may develop, it seems clear that two-thirds or more of current mainstream could be handled electronically, and that the volume of USPS - delivered mail is likely to peak in the next 10 years. Any decline in the volume of mail has significant implications for future postal rates, USPS service levels, and labor requirements.
A key policy issue requiring congressional attention is how USPS will participate in the provision of EMS services, both in the near term and in the longer term. If USPS does not attract and keep a sizable share of the so-called Generation II EMS market (electronic input and transmission with hardcopy output) and conventional (especially first-class) mail volume declines, USPS revenues will probably go down, with the likelihood of an unfavorable impact on rates and/or service levels. If USPS does develop a major role in the Generation II EMS market, and if Generation II EMS costs are low enough, the effect on USPS rates and/or service could be favorable. [USPS, p. ix, 1982]
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 January 4, 1982; [USPS, p. 3 1982] [USPS 2008] on the right 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.
After arriving at the serving Post Office, the messages were processed and sorted by ZIP Code, then printed on letter-size bond paper, folded, and sealed in envelopes printed with a blue E-COM logo. [USPS 2008]
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. [ECPA 1985 Report p 45] [USPS, p. 3 1982 (stating that the service was initiated January 1982)]
Before E-COM could get off the ground, it was mired in controversy. [CATO] [USPS, p. 3 1982] The US Postal Commission, the Department of Justice, the Department of Commerce, 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. [USPS p. 17 1982] Private commercial email services were nascent and promising, and did not think much of a government monopoly using its government bank role to pay for a competing email service. 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." 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. 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." The FCC said that email, whether from the USPS or privately offered, is a form of common carriage - they don't say that anymore.
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 1982. A message was priced at 26¢ - and for each email message, the USPS was said to lose around $5 [CATO]. 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. If you used the service, you had to send at minimum 200 messages. [USPS 2008] 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.
In fiscal year 1984, 23 million E-COM messages were sent. E-COM service had 1,046 certified customers, 528 of whom were communication carriers. That year, the Postal Rate Commission responded to the Postal Service's 1983 request for a 31-cent rate for the first page by recommending a rate of 52 cents for the first page and 15 cents for the second page of E-COM messages. The Governors of the Postal Service, who decide rates and postal policies but can overrule a Postal Rate Commission decision only by a unanimous vote, rejected the Commission's recommended decision and asked for reconsideration. The Commission responded in June with a recommendation of a 49-cent rate for the first page and 14 cents for the second page. The Governors rejected these rates as well, essentially because they priced E-COM out the market, and recommended that the Postal Service dispose of the E-COM system by sale or lease to a private firm or firms. [USPS 2008]For some reason, E-COM was a failure (one Senator called it a turkey). On September 3, 1985, three years after service was initiated, USPS terminated the service and tried to sell it off. [Aide p 8] [ECPA Report 1985 p 46] [USPS 2008]