Implications of Electronic Mail and Message Systems for the U.S. Postal Service Page: 5

Ch. 1-Summary .5

USPS mainstream might decline even faster.
OTA concluded that the most likely condition
would be continued economic recession or de
pression, which in the past (early 1970's and
early 1930's) has resulted in a flat or even
negative mailstream growth. This, coupled
with even faster than anticipated introduction
of all electronic Generation III EMS and EFT,
or escalation of USPS costs and rates above
the level of alternative conventional and elec
tronic delivery services, would accelerate the
decline of the USPS mainstream.
Regardless of the underlying mainstream
growth, the effect of Generation II EMS vol
ume is to "cushion" or offset some of the
decline in conventional mail, assuming USPS
delivers the Generation II hardcopy output.
Put differently, if Generation II volume
reached significant levels, USPS delivered
mail volume (conventional plus Generation II)
might be maintained at or above a given level
for an additional 5 years or so.
For planning purposes, it is reasonable to
assume that mail volume is likely to remain
strong for most of the 1980's, and decline
significantly in the 1990's. Under any plausi
ble scenario, USPS is still likely to be handling
a large volume (70 billion to 110 billion pieces)
of mail in 2000.
Independent of the total USPS mainstream,
the size of the potential Generation II EMS
market itself takes on considerable importance
with respect to decisions concerning USPS in
volvement. OTA has concluded that prior mar
ket estimates probably have been high. For ex
ample, RCA Corp. previously estimated a ma
ture Generation II market (20 years hence) of

25 billion pieces. However, this exceeds even
OTA's high but plausible Generation II pro
jection by roughly 40 to 80 percent, depending
on the underlying growth in demand for mail.
It appears that RCA was overly optimistic
about Generation II market development, ig
nored competition with Generation III EMS
services, or both. OTA also identified a slow
growth Generation II path that projects a vol
ume of about 40 million messages 5 years
hence, increasing to about 600 million mes
sages after 10 years and around 3 billion after
15 years. Given the highly volatile and unpre
dictable nature of the EMS market, it appears
that prudent planning should be based on a
maximum of one half of the RCA projected
volume on down to the OTA projected volume
for Generation II slow growth. This would
place the projected Generation II market 20
years hence in the range of 7 billion to 17 bil
lion pieces rather than 25 billion.
There are legitimate differences of opinion
as to how Generation II would fare after 2000,
which was beyond the timeframe of the OTA
study. Some analysts believe that Generation
II would taper off very slowly and remain sig
nificant for many years. Others are convinced
that Generation II might decline rather pre
cipitously. However, it is likely that Genera
tion III would surpass Generation II in ab
solute volume well before 2000. Indeed, unless
Generation II grows at a high or very high
rate, it is possible that Generation II would
never exceed Generation III. Various private
telecommunication carriers have indicated
that most research and development (R&D)
and marketing effort is going into Generation
III, not Generation II.

USPS Rates and Service Levels

USPS has some control over the way in
which changes in mail volume might be re
flected in rate and service level adjustments.
While USPS is not allowed to make a profit
overall, it need not "markup" all classes and
subclasses of mail by the same amount over

the costs specifically allocatable to each ("var-
iable" costs). Thus, individual classes and sub
classes make varying contributions to cover
ing common ("fixed") costs. For example, first
class mail, with high volume and relatively
high markup, historically has made the largest

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United States. Congress. Office of Technology Assessment. Implications of Electronic Mail and Message Systems for the U.S. Postal Service, report, August 1982; [Washington D.C.]. ( accessed July 28, 2017), University of North Texas Libraries, Digital Library,; crediting UNT Libraries Government Documents Department.