It sounded like a great idea, but perhaps it was too good — at least from one perspective. Evan Baehr and Will Davis left their staff jobs on Capitol Hill and enrolled at Harvard Business School, hoping to find private-sector solutions to chronic inefficiencies in the public sector. They decided to rethink the US Postal Service model and came up with an innovative idea. Why not set up a scanning service to digitize mail and deliver it electronically, rather than continue to get mail hand delivered in an unsecured location?

Thus was born Outbox. They set up as commercial forwarders in a couple of local post offices (not a unique arrangement), advertised their service, and was amazed by the response. Customers loved being able to have their mail delivered electronically, and also found other services from Outbox invaluable, such as opt-out for junk mail. When Baehr and Davis got called to a meeting with the Postmaster General in Washington DC, they thought the USPS would jump at the chance to offer this to their hundreds of millions of customers.

As Derek Khanna informs us at Inside Sources, Outbox had miscounted what USPS considers its “customers,” and the two entrepreneurs ended up shocked — and out of business:

But once Outbox started to get successful and was covered on CNBC, Evan and Will got a call requesting them to come back to Washington to meet with the Postmaster General. Evan and Will thought about discussing how they could work with USPS nationally, perhaps even to provide some of their technology through a license for USPS to offer it directly to all their consumers.

They believed that their technology could actually save the Post Office money. If consumers started to opt-in to Outbox, or other services like Outbox, then the Post Office could receive the full benefits of the stamped envelope but never have to deliver those packages, which is one of the biggest costs for the Post Office. In fact, if properly implemented, when a customer sends a letter from Austin, TX to Alaska, if the Post Office knew that they weren’t going to receive the letter anyway, then the Post Office could forward the letter from Austin directly to Outbox, and never have to ship the letter across the continent. …

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.”

Digital is a fad. That reminds me of a panel discussion a few years ago in which I took part, ostensibly to discuss the power and reach of social media on politics. One panel member scolded all of us (and me in particular on an unrelated topic) for wasting our time on e-mail. That was a fad, and politicians ignore e-mails, this person told us; faxes were what drove politics. He, of course, ran a fax-broadcasting service.

Faxes. When was the last time anyone in the private sector sent a mission-critical message by fax? Probably just before they sent one by first-class mail.

Now, let’s be clear that Outbox may well have not worked out to be the savior of the USPS, too. The cost savings may well have been outstripped by the revenue losses from junk mailers, a possibility that Khanna overlooks a little in his piece. However, his main point is solid, and perhaps understated. The reason the USPS doesn’t work well for end users is because the USPS doesn’t consider us its primary customers. It’s oriented to delivery service for junk mail, and works for those firms ahead of us. Maybe those companies should be footing the bill for the chronic deficits run by the USPS, instead of the American citizens the Postmaster deprioritized in dealing with Outbox.

Update (AP, May 1st): The Postal Service finally e-mailed with a reply:

Contrary to recent assertions made by Outbox representatives that they were summoned to the Postal Service for a meeting with the Postmaster General, the fact is that the meeting was held at the request of Outbox.

It is because the Postal Service values innovation and new ideas that Outbox was given an opportunity to meet with postal executives. The principals of Outbox were allowed to present their ideas to postal management.

In the end, postal management was concerned that Outbox’s approach might compromise both the security and value of the mail. Ultimately, management concluded that Outbox’s business model was flawed – a conclusion that the market appears to have affirmed.

Outbox’s representations regarding the substance of the meeting, particularly the quotes attributed to the Postmaster General, are simply untrue.