Post Office

We're from the Post Office, and We're Here to Help

The Post Office's impending bankruptcy is much in the news. My husband ridicules them for their belief that the right response to a drop in their customer base is to raise prices. That would indeed be a crazy strategy if they were losing customers to direct competitors with similar price structures. The Post Office, however, is a statutorily protected monopoly. Monopolies routinely raise prices until they can cover costs, knowing that the government will keep their customers safe inside the walled compound.

The Post Office's problem, of course, is that its monopoly is not complete. It has growing competition, not only from companies like Federal Express or UPS but also from the Internet. So I wondered why it wouldn't be a good idea to let the Post Office jack up stamp prices until either they could meet their costs or they went out of business in favor of their alternatives. My husband reminded me that private couriers are required by law to charge more than the Post Office, so the Post Office's competitors never would enjoy the benefits of having their own prices begin to compare favorably with those of Uncle Sam.

Although I've often heard that the mail monopoly is a Constitutional imperative, mail delivery has not always been a government monopoly:

In the early 1800s private railroads and steamboats gave rise to private companies offering mail delivery services. The Private Express Statutes of 1845 put an end to that service between cities. Private companies still delivered within cities until the Postal Code of 1872 barred them from doing so.

Today [the article pertains to the 105th Congress and therefore presumably refers to the late 1990s] the USPS is a $55 billion per year operation employing approximately 800,000 workers. Nearly half of the mail handled by the Postal Service is advertisements. A little over 30 percent is business-to-business correspondence. Some 15 percent is household-to-business mail, that is, payment of bills. Only around 8 percent of the mail is household-to-household, such as letters and greeting cards sent between families and friends.

At present, "it is a federal crime for private suppliers to transport and deliver messages on pieces of paper or other material media and charge prices as low as those of the U.S. Postal Service."

The "Private Express Statutes" leave it to the Post Office to decide what kind of competition it will allow. In 1979 it began to allow private delivery of letters marked "extremely urgent." The private couriers must charge the greater of $3 or twice the USPS rate, so this part would have to change in order to permit true competition. There are exceptions for cargo. All exceptions to the mail monopoly are subject to stringent standards and to Post Office inspection. I was surprised to find that there are picky rules even to prohibit companies from using special message services, unless they pay postage to the USPS anyway, or unless they don't charge the recipient, though the rules permit the USPS to jack with them if "barter" or "goodwill" is detected in the process.

Have you ever wondered why the powers that be in the USPS system didn't move fast to prevent the loss of their business model to innovative data transmission systems like the telephone and the Internet? It turns out they did try, though fortunately, being bureaucrats, they were way too slow on the uptake:

The Postal Service, for example, has gone into the business of marketing prepaid phone calling cards for long-distance calls, competing with private firms. That competition of a government monopoly with the private sector is manifestly unfair. Postal facilities and assets were acquired through monopoly power. The USPS now uses those facilities and assets to compete with the private sector.

The USPS has begun renting out space in the parking lots of its post offices for the erection of commercial antennas for cellular phone transmissions and other uses. In addition to running afoul of local regulations, that constitutes more unfair competition with the private sector. The Postal Service pays no property taxes on its real estate, whereas a private provider of space for broadcast operations would be subject to taxes.

In the early 1980s the Postal Service expressed initial interest in extending its monopoly over the emerging e-mail market. Fortunately, it failed at that attempt. Now, however, it is developing services to put electronic postmarks on e-mail and to guarantee e-mail security since mail fraud and tampering are federal crimes. Yet there already are private encryption software and services. And, no doubt, as the USPS uses its federal protection to keep e-mail secure, federal regulation of e-mail will follow.

The monopoly exceptions for cargo and urgent letters have worked so well that I don't see how expanding the exceptions to include letters would do much harm. The justification for the monopoly too often turns to the question of how terrific an employer the Post Office is. It's starting to sound like just another public program that's valued for the paychecks and retirement benefits it generates rather than the function it performs.