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Originally published Monday, June 23, 2008 at 12:00 AM

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Seattle startup Earth Class lets customers sort paper mail online

For many people, it's a daily ritual to rip open envelopes and sort the junk mail from the letters over a wastebasket. How many will prefer to flip through the mail online instead?

Special to The Seattle Times

Earth Class Mail, a small Seattle company with a big idea, tried for three years to get the U.S. Postal Service to listen to it. It had pioneered a system of sending postal mail over the Internet, a system it believed would cut costs and boost revenues at the government agency. It got nowhere.

But as Earth Class pressed on alone, inquiries began flowing in from Europe, Canada, India and New Zealand.

Last month, Chief Executive Ron Wiener was in Europe talking to the deregulated national postal services in France, Belgium, Switzerland and the Netherlands.

The response, Wiener said by telephone from Geneva, was "overwhelming." He said one European national post has agreed to run a pilot study. "That is exciting, The first olive out of the jar is always the hard part," Wiener said.

The 44-year-old CEO has taken on a monster of a job: changing consumer habits of a lifetime. For many people, it's a daily ritual to rip open envelopes and sort the junk mail from the letters over a wastebasket. How many will prefer to flip through the mail online instead?

Wiener believes the number is in the millions. The startup veteran sold his private plane in 2004 in order to form the company, then called Document Command.

Today, Earth Class runs an electronic mail operation in Oregon with thousands of customers. In January, it raised $13.3 million from backers, including venture capitalist Ignition Partners and angel network Keiretsu Forum. It's now raising $20 million to $30 million more from institutional and private investors.

Before his European trip, Wiener received requests for pilot proposals from six national posts. He expects two or three more pilot deals in short order.

A spokesman for TNT Post of the Netherlands confirmed the agency is in talks with Earth Class.

Wiener plans to move to Switzerland next year to be closer to Europe's competitive postal marketplace.

Earth Class Mail works like this: Customers use an Earth Class post-office box or one of the company's new storefronts in Seattle, New York, San Francisco or Los Angeles as their home address. Earth Class' Beaverton, Ore., facility bar-codes and scans each envelope, and e-mails the envelope image to the customer.

The customer can then choose to have the letter opened, scanned and e-mailed to them by security-cleared staff, or it can be shredded or sent to them unopened.

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The system appeals to traveling businessmen, military personnel, telecommuters and anyone on the move.

Naysayers

Rival U.S. mail-handling firms say Earth Class will never get far, because its service has limited appeal. But the market may decide otherwise.

The company and its 80 employees have made a promising start with the wireless network giant Sprint.

The industry newsletter ePostal News recently flagged a possible deal between the two after a presentation by a Sprint executive at a New Jersey forum in May.

Industry sources confirm a yearlong pilot study has been well-received, and Sprint is considering a rollout of the Earth Class system for inbound and interoffice mail to Sprint's 56,000 employees.

Sprint and Earth Class Mail declined to comment.

Implementing the system at Sprint's Overland Park, Kan., and Reston, Va., headquarters would involve sorting and delivering 3.7 million pieces of mail a year and be worth $2 million to $3 million in fees annually.

At the New Jersey forum, Bob Barrette, Sprint's manager of enterprise business services, said Earth Class' delivery system could save Sprint $10 million annually, as well as reduce paper and energy usage.

Talking with Army

If Earth Class seals this deal, it will have a better chance of winning other corporate clients. The 4-year-old company says it is in advanced talks with several companies and government agencies, including the U.S. Army.

John Davies, a sustainability analyst with AMR Research in Boston, said that though he was initially skeptical about Earth Class' service, he thinks after further research it could have a "really positive impact" on big organizations' mailrooms.

But getting into corporate mailrooms will not be easy. Big veterans of the mail industry, including Pitney Bowes, Xerox, Océ and Ikon, are not going to let a new kid into their corner without a fight.

It's here that Earth Class' strategy takes a twist. Cameron Powell, vice president of strategic development, said Earth Class doesn't want to compete with the big guys: It wants to persuade them to license its technology.

"We don't want a sales force, and we'd rather not have operations in every enterprise," he said.

Powell said talks with four major mail handlers are under way.

A spokesman for Pitney Bowes, which has 30 percent of the outsourced mail operations market, confirmed the company is talking with Earth Class, but would give no details.

Postal Service aloof

With this budding interest in Earth Class Mail, what about the U.S. Postal Service?

CEO Wiener said he met with Postal Service officials in 2004 and has spent four years of talking to its executives at trade forums.

"You'd think they would respond to a phone call from me," he said. "But they never do."

A U.S. Postal Service spokesman said it monitors Earth Class, but has no immediate interest in adopting the service.

There seems little doubt that the postal agency needs some new strategies.

Not only is it facing shrinking mail volumes, competition from e-mail and $58.5 billion in retiree health-benefit costs over 10 years, but it's paying $8 million extra annually for every 1-cent rise in the price of gas. Last year it lost $5 billion. In the first half of 2008, it lost $35 million.

"Long term, the existing system can't survive," said Charles Guy, a former director of the Office of Economics at the postal service.

Short term, he said, the $58.5 billion retiree obligation is a "big gorilla hanging on their shoulder," with no obvious solution.

The Postal Service spokesman said the retiree benefit will be paid, and that the service has survived many predictions of its demise in the past.

A new federal watchdog, the Postal Regulatory Commission, is investigating the postal monopoly and how to save costs. Its director of the Office of Accountability and Compliance, John Waller, said there is generally "a real concern about the financial viability" of the Postal Service.

In its search for new options, the commission asked Earth Class Mail to present its ideas at a recent hearing in Arizona.

But even Wiener doubts he'll make any progress soon. "For us [the Postal Service] would be the cherry on the cherry. We don't expect it to happen," he said.

Meantime, Earth Class' Oregon facility continues to process 250,000 pieces of mail a month for clients from 150 countries. Customers pay $25 up front, plus $10 to $60 a month.

Nancy Hafermann, a Seattle resident who moved temporarily to Singapore, said she finds the Earth Class system quicker and more reliable than mail-forwarding services.

In a phone interview she said, "Once I realized how easy it was, I loved it. The thought of going back to paper mail is horrendous."

Shirley Skeel is a free-lance writer based in Bothell.

Copyright © 2008 The Seattle Times Company

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