The Worst Monopolist: Uncle Sam

Concentrations of wealth and power are what keep liberals awake at night, but just once I’d like to hear a liberal notice, even glancingly, that the biggest unchecked concentration of wealth and power is the government.  Except the government doesn’t directly create much wealth itself (sell off federal assets—go ahead, make my day—and see how little of the total national debt it would actually retire), and increasingly it grabs power by means intended to skirt the consent of the governed, which it then usually uses to confiscate more wealth for itself, or prevent new wealth from being generated.

As mentioned here once before, about 15 years back I recall reading an article in Barron’s about when the FAX machine was first being brought to market, the U.S. Postal Service argued to the FCC that since FAX machines would be used to transmit the equivalent of first class mail, the legal monopoly of the Postal Service to deliver first class mail meant therefore that FAX machines could only be located and operated in Post Offices (for a fee in addition to phone charges, of course). In other words, to send and receive fax, you’d have had to go to a Post Office.  Oh goody.  Fortunately the FCC was not amused at the idea.

This is prelude to the latest installment of the Postal Service’s anti-competitive behavior.  The Fiscal Times noted recently how the Post Office decided to squash a startup called “Outbox” that would collect your first class mail, scan it for you, and deliver it to your smart phone or tablet.  Here’s the business model:

They wanted to allow consumers to digitize all of their postal mail so that individuals could get rid of junk mail, keep important things organized and never have to go out to their mailbox again. They set out to “redefine a long cherished but broken medium of communication: postal mail.” Customers would opt-in for $5 a month with “Outbox” to have their mail redirected, opened, scanned and available online or through a phone app.  Consumers could then click on a particular scanned letter and ask that it be physically delivered, or that certain types of letters not be opened (e.g., bills etc.).

They started out small, testing their hypothesis that consumers would want to limit or eliminate their junk mail, save a copy of their mail forever like e-mail, and be able to access their most recent mail anywhere in the world while traveling.

And they were right.

The Launch
They launched in Austin, Texas, and grew quickly. They were limited mainly by their ability to expand and meet demand. Users were gushing with positive reviews and Outbox had hundreds of paying users signing up and loving their service.  Once customers had experienced digital mail, they didn’t want to go back. As one customer, Marcia Navratil, explains “I don’t know why anyone wouldn’t get their mail this way, unless you just really like having paper delivered to your house.”

The whole story is worth reading, but this is the heart of the matter:

When Evan and Will got called in to meet with the Postmaster General they were joined by the USPS’s General Counsel and Chief of Digital Strategy. But instead, Evan recounts that US Postmaster General Patrick Donahoe “looked at us” and said “we have a misunderstanding. ‘You disrupt my service and we will never work with you.’” Further, “‘You mentioned making the service better for our customers; but the American citizens aren’t our customers—about 400 junk mailers are our customers.  Your service hurts our ability to serve those customers.”’

According to Evan, the Chief of Digital Strategy’s comments were even more stark, “[Your market model] will never work anyway. Digital is a fad. It will only work in Europe.”

I always love it when the government is so much smarter than the marketplace.  And good thing Ubercars isn’t trying to carry any letters.

P.S. Despite early customer enthusiasm, opposition from the Post Office has caused Outbox to fold.  As the Fiscal Times notes, “In February 2014, the same month that Outbox shut down, the Post Office incurred a net loss of $354 million, following a fiscal year 2013 loss of $5 billion. With comments like “digital is a fad,” it’s no wonder that the USPS is bankrupt.”