USPS Draws Fire Over New E-Billing Service

Recent e-commerce initiatives by the U.S. Postal Service are raising concerns about unfair competition from some quarters.

In April, the USPS entered into a strategic alliance with Atlanta-based CheckFree by which CheckFree's Genesis 2000 electronic billing and paymentengine would power USPS' eBillPay service for consumers. To bring billers onto an EBPP platform, the USPS is also offering outsourced services for integrated print and electronic bill presentment from YourAccounts.Com, the e-commerce division of Output Technology Solutions, El Dorado Hills, Calif.

The USPS stands to lose up to an estimated $16.4 billion per year by 2008 if consumers switch from paper statements and checks to electronic bill presentment and payment (EBPP) systems. To prevent the potential hemorrhage of first-class mail revenues, the USPS is leveraging its reputation and infrastructure to tap into the online economy through alliances and joint ventures.

However, an October report commissioned by the Computer & Communications Industry Association (CCIA) outlined principles for government provision of goods and services in a digital economy that "appear to raise significant questions about whether the USPS eBillPay program is an appropriate activity for a government agency to undertake." The report, The Role of Government in a Digital Age, was written by Joseph Stiglitz, a Stanford University economics professor, along with Peter Orszag and Jonathan Orszag of Sebago Associates, Belmont, Calif.

Competing against such a well-known entity as the USPS may make it difficult for new entrants and existing competitors alike to raise funds and garner market share among a finite customer base, the report said.

The USPS sees its e-commerce offerings as providing a vital public function as well as bolstering its universal service mandate. "The number of Americans that conduct personal finance on the Internet is very small," said Greg Frey, media relations representative at the USPS. "Most of the organizations and telcos that are looking to encourage people to move online look at us as a way of legitimizing financial transactions on the Web."

"The USPS has been the preferred channel by which Americans receive their bills and make payments for the last 225 years. It's not a new industry for us," added Frey.

The report also warned that "the magnitude of the USPS as a client for CheckFree could influence the decisions of other billers to employ CheckFree as well, possibly distorting choices of firms in the EBPP service provision market."

CheckFree's largest competitor is Spectrum, a joint venture of Chase Morgan, First Union and Wells Fargo that has thus far attracted twenty additional bank participants. In August, Spectrum announced an alliance with Milwaukee-based Metavante to provide EBPP functionality from participating banks' Web sites.

"Banks will still have a very large percentage share, of customers viewing and paying their bills," said Jim Smith, senior vice president of Internet strategy and products at Wells Fargo. "There will be some portal sites that come in and take some of that volume, but I don't think it's going to be as sizable as they would have you believe."

"I haven't seen the USPS try to leverage their relationship with the government to gain an unfair advantage and I hope that would continue," he added.