In an electronic age, the letter endures

Where is Rowland Hill when you need him? In the mid-19th century, a time when postal service around the world was expensive and spotty, the British educator reinvented it with up-front delivery charges (the postage stamp) and simplified pricing. Sir Rowland's ideas were so logical and appealing that they eventually became the standard everywhere.

But that was before the Internet.

Today's postal systems are staring over a precipice. Unless they reinvent themselves, some observers say, they won't last two decades - let alone a century. Can hand-delivered paper survive in the world of e-mail and instant messaging?

Despite ominous trends, the answer, surprisingly, is almost certainly yes.

The death of the letter can be likened to the myth that people wouldn't travel once they could communicate on the Internet, says Paul Saffo, director of The Institute for the Future in Menlo Park, Calif. In reality, he says, "the more you communicate electronically, the more you travel."

The same holds true for letters and packages. "The more you communicate electronically, the more you're going to move physical stuff around," says Mr. Saffo, who has been tapped by the United States Postal Service (USPS) and the private sector for insights into what's going to happen to mail delivery.

To be sure, postal services face big challenges. Private package-delivery firms continue to eat away at generally profitable parcel-post services. E-mail is catching on. People already receive 25 times as much e-mail as letter mail - an estimated 31 billion e-mails a day. That total could double by 2006. Most worrying of all: The volume of letter mail delivered worldwide dropped 2.5 percent in 2002 (the latest figures available) after peaking the year before.

In many ways, the US - which accounts for some 45 percent of the world's mail - is leading the charge into the abyss for postal systems, experts say.

"There are reasonable economic projections that suggest that if no reform legislation is passed that the [US] Postal Service as we know it will not be able to last beyond 2011," says Ben Cooper, executive vice president of the Printing Industries of America, part of the Coalition for a 21st Century Postal Service, a group of more than 150 businesses and associations.

Double-digit rate increases could be requested as early as next year, observers say. Some see the USPS as dangerously close to being sucked into a "death spiral" of ever lower volumes that will trigger ever higher prices. Last year marked the first time since the Postal Service was reorganized in 1970 that first-class mail represented less than half of the total volume.

Unless some kind of changes are made soon, even "universal service" - the idea that every American with an address can get mail - is "in jeopardy," Postmaster General John Potter told a congressional hearing earlier this year. Even the most optimistic USPS projections show first-class mail volume dropping from 102.4 billion pieces in 2002 to 100 billion in 2008. At the same time, the number of addresses that USPS must deliver to increases each year by 1.5 million to 1.7 million.

But others see the reports of the imminent death of snail mail as greatly exaggerated. In the 1990s, for example, greeting card companies worried that e-mailed greetings would destroy their business. Instead, they've seen modest growth. "There are times when e-cards aren't really appropriate," points out Valerie Cooper, executive vice president of the Greeting Card Association. "You probably wouldn't send your mom an e-card for Mother's Day." The Internet has allowed people to make and maintain a wider circle of relationships, she points out. When someone reconnects on the Web with a long-lost high school buddy, for example, that person may join the list of those receiving a birthday or holiday greeting card.

"I don't see first-class [mail] disappearing. I don't see the post office getting out of it," adds Mr. Saffo. One reason is that the millions of postal patrons in the US are also voters. And while so-called junk mail may be a moneymaker, people tolerate it only because they still get important letters as well. "If you can't get first-class mail, you're not going to keep your mail box up just to get junk mail," he adds.

Research by the USPS backs him up. Some 80 to 90 percent of first-class mail is immediately opened and read as soon as it's brought in from the mailbox, says Gregory Whiteman, manager of marketing research at USPS. In a sense, it's a prestige "brand" that consumers separate from the junk. Even junk mail is considered more trustworthy than Internet spam.

Whether the "death spiral" takes hold may depend on banks and credit-card companies, Mr. Cooper says. The bills and statements they send out, and the checks customers send in return, account for about 25 percent of the mail stream. If these transactions move to the Internet, the result would be "devastating," he adds.

Already, USPS estimates that about 15 to 20 percent of such transactions are online. Within the next two or three years, most banks will begin to return only images of checks, Saffo says, which could trigger a domino effect. Once people don't get the actual checks back, they may say, "Oh, what the heck, I'll start paying my bills electronically," he adds.

Meanwhile, the USPS is fighting back with better service and more imaginative products. It announced in July that 96 percent of its local first-class mail was delivered overnight, an all-time high. Stamps are now available not only at 38,000 post offices but at some 200,000 other locations as well, including the Internet. Unmanned automated postal centers, similar to ATMs, allow 24-hour mailing. And a test program in partnership with the private firm stamps.com allows customers to create real postage stamps with their own photos on them.

Other postal networks are also innovating. The Swedish post office set up one of the first Yahoo-like online services in the early 1990s. Germany's Deutsche Post is privatizing (it owns package-delivery service DHL); Japan plans to privatize its system by 2007. In 15 years or so, postage stamps may contain RFID chips that track when and where they've traveled.

"We're in for some wrenching changes," Saffo says. Either postal services will morph into organizations that can afford to deliver letters, or private firms will jump in. "But something will fulfill that function."