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Digital postage almost a reality

September 22, 1998
Web posted at: 11:00 AM EDT

by Michelle Rafter

(IDG) -- A venerable hardware manufacturer that's long enjoyed a near-monopoly on a lucrative market thanks in large part to a close relationship with a major government agency faces a major challenge from start-up companies wielding flexible, Internet-based software solutions.

Is this, perhaps, a classic tale of technology-driven upheaval in telecommunications? Or maybe specialized defense department information systems?

No, it's about postage stamps and the lowly postage meter.

At least four companies are perfecting products that let customers buy and store postage electronically and print it to a home or office printer. In the past month, two firms Stampmaster and NeoPost have launched beta trials, and a third, E-Stamp, recently expanded its 6-month-old test to include 500 businesses in San Francisco and Washington, D.C. If all goes as planned, the first commercial e-postage products could reach consumers early next year.

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These upstarts say they're targeting small businesses that don't do enough mailing to justify the cost of mechanical postage meters, which have been a fixture of corporate mailrooms for decades. But Pitney Bowes, the mail-meter king, isn't taking any chances: The company is developing its own e-stamp technology, and at the same time is asserting broad patent claims that create some legal risks for its new rivals.

The United States Postal Service gave its blessing to e-postage in 1996 but, rather than sell it directly, opted to create the Information Based Indicia Program to regulate third parties that wanted to get into the business. "We've played the role of catalyst, and it's our responsibility to see that products developed are secure and easy for our customers to use," says Monica Hand, a USPS spokeswoman.

Ideas about the best way to offer e-postage vary. E-Stamp, the early leader, opted for a system that enables customers to buy stamps on the Internet, then store them in a tiny hardware device E-Stamp calls it an "electronic vault" attached to their PC's parallel printer port. E-Stamp expects to charge $200 or less for the software and device, adding a 10 percent transaction fee on top of the cost of the postage.

Rival Stampmaster bet that most people wouldn't want to add hardware to their PCs to store stamps. The Westlake Village, Calif., start-up has developed a Web-based solution: Customers download a free Stampmaster software program and use it to log onto a central Stampmaster-run Web server to buy and store postage. Stampmaster expects to charge a monthly service fee of $10 or less on top of postage and transaction fees.

The software-only concept has attracted enough attention to prompt E-Stamp on Aug. 31 to announce its own Web-based solution although the company won't say when it will be ready for beta trials. "For customers who value desktop integration and want to print [stamps] offline, our software products tested well. But those who buy lower volumes and frequently connect to the Net indicated they preferred a browser-based service," says Milton Howard, E-Stamp product marketing director.

Early reports indicate the U.S. subsidiary of NeoPost, a 70-year-old French company that sells postage meters and mailroom equipment internationally, will offer e-postage through a non-Internet, proprietary dial-up service.

Not surprisingly, Pitney Bowes was late out of the blocks. The company is now developing an e-postage application that has yet to enter beta testing. In August, though, Pitney Bowes played another card: It revealed it had 15 patents dating back to the early 1980s covering electronic metering services and said it was initiating licensing discussions with would-be rivals.

Officials at E-Stamp and Stampmaster say they aren't negotiating licensing agreements because they're confident their technology doesn't infringe upon Pitney's patents. They maintain Pitney is throwing its legal weight around to make up for being late to market. "It's clear they've ended up behind the pack in this space," says Stampmaster President John Payne. Pitney Bowes officials didn't return phone calls for this story.

If there's doubt about which company will dominate the market, there's none about whether putting stamps online is a viable business venture. E-commerce analyst Vernon Keenan predicts demand will boost e-postage sales from $1 million this year to $127 million by 2000 and $1.9 billion five years from now. And early adopters love it.

One convert is Marla McCormick, corporate administration director at Digital Access, a 14-person software engineering firm in Woodbridge, Va. Before McCormick began testing E-Stamp in April, postage was a pain. Stocking up meant sending a receptionist to the post office a couple times a month. Often the company paid extra to send packages via UPS or FedEx, just to avoid the hassle of another trip.

Digital stamps changed that. The company's postal expenses are down, and clients think the digital stamps and watermarks printed on the envelopes are tres chic. "Being a technical company, it gives us a good image," McCormick says.

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