Tag: mail monopoly

U.S. Mail Monopoly Wants Rate Hike

The long-term prospects for the U.S. Postal Service monopoly are bleak. To help stem the flow of red ink, the USPS intends to seek a rate increase. Only a government monopoly would try to raise prices when the demand for its services is plummeting. The rate increase will only push its already declining customer base to use cheaper, more efficient electronic alternatives.

The USPS is in need of drastic reform, but instead of looking at big picture, Congress is hung up on the USPS’s request to eliminate Saturday mail delivery service. In contrast, countries around the world are continuing to liberalize their postal markets by embracing competition and private sector involvement.

Britain is a good example.

In 1969, the British Post Office transformed from a government agency into a corporation, which would come to be known as Royal Mail. However, the company’s shares are owned by the government. In 2006, Royal Mail’s regulator removed its monopoly and opened British mail delivery to full competition, which the postal unions opposed.

Like their counterparts in the U.S., the British postal unions are a hindrance to effective and efficient postal management. With email and other technologies undermining traditional mail, neutering the inflexibility caused by unions is paramount for mail operations here and abroad.

According to the Daily Mail, the British government is now prepared to take the next step: privatization. In doing so, the government is considering transferring a portion of Royal Mail’s shares to its employees. Giving the employees ownership stakes would inhibit the unions’ ability to extract concessions that would negatively affect the company’s bottom line.

A popular argument against mail privatization in the U.S. is that an important service can’t be entrusted to self-interested capitalists concerned only with making a profit. But public officials are just as motivated by self-interest. The difference is that public officials aren’t subject to market forces, which compel private businesses to adapt and economize to survive.

For example, the third-ranking official at the USPS stepped down in May after it came to light that he awarded six-figure, no-bid contracts to former colleagues at various companies.

From the Washington Post:

A 64-page report by the Postal Service Office of Inspector General found that [Robert F.] Bernstock clashed with Postal Service lawyers over whether he could conduct outside business by using agency computers, e-mail and staff… Bernstock also used office telephones to conduct teleconferences and other meetings related to his private business holdings and also instructed staffers to conduct private work for him, investigators found.

The report details how Bernstock awarded non competitive contracts to five former business associates and a $1.5 million consultant deal with Goldman Sachs. He also violated company policy by negotiating a holiday bulk stamp sale agreement with Costco while owning $30,000 in company stock. The Postal Service requires officials owning more than $15,000 in a company’s stock to recuse themselves from any official dealings with the company.

Thoughts on Five-Day Mail

The USPS has taken the first step toward reducing mail delivery to five days a week by sending a request to the Postal Regulatory Commission. However, it will be ultimately up to Congress whether or not Saturday delivery is eliminated.

The USPS, which is in a death spiral, views the elimination of Saturday mail delivery service as a step toward regaining its financial footing. Not surprisingly, the decision is proving controversial among some members of Congress.

Here’s a better idea: give Americans the freedom to choose the mail services they want by repealing the USPS monopoly. That way consumers and businesses could choose to provide and use mail services zero days a week or seven days a week.

Online movie rental services like Netflix offer a small example. A lot of folks time their Netflix rentals so that they have movies for Saturday night. Eliminating Saturday delivery will necessarily degrade the quality of online movie rental services that people are paying for. With competition, Netflix could offer Saturday (or even Sunday) delivery through a private alternative. Perhaps there would be a surcharge, but at least consumers would be allowed to make that choice.

Supporters of the government mail monopoly regularly cite their amazement that they can drop a letter in a mailbox and it will arrive unharmed in another mailbox clear across the country. As a $70 billion operation with the largest workforce in the country, I would hope the USPS can pull off such a feat.

I find it more impressive that I can go into a grocery store almost anywhere in the country and be met with an incalculable number of choices. Take Coke products for instance. I recently made a list of the various Coke products available to me at a local grocery store. The following is just a sample: regular Coke, Diet Coke, Caffeine-Free Coke, Diet Caffeine-free Coke, Coke Zero, Coke with Splenda, Coke with Lime, Coke with Lemon, and Diet Coke Plus. Don’t like Coke?  There’s a similar array of Pepsi products. Don’t like either? The grocery stores also offer pricier micro-brands with all sorts of unique flavors.

These choices reflect the awesome power of the market, which provides nearly all the goods and services people want without any direction from officials in Washington. It would interesting to see what sorts of innovations and products private mail deliverers would come up with if the government’s mail monopoly didn’t exist. Instead, Americans are stuck with a government operation whose floundering business model will require it to raise prices while simultaneously reducing its services. So much for freedom of choice.

Privatize the Post Office

Another day, another story on financial troubles at the federal government’s mail monopolist.  We don’t expect the government to make our blue jeans, transport fruits and veggies from the farm to the market, build computers and IPods, or manage the manufacturing of automobiles, so why must it continue to deliver first-class mail?  The quality of the USPS’s “services” has been a punchline in my family since I learned to walk.  But with technology rendering it’s clunky business model increasingly moot, Government Mail’s bottom line is looking uglier and uglier. It would cost me 44 cents to mail a letter to California, and it would cost me the same amount to mail that letter to the next town over.  What sense does that make?

As today’s editorial in the Washington Post leads off:

THE POST office may be the next too-big thing. If it continues on its present course, the U.S. Postal Service stands to post $6 billion to $12 billion in losses by the end of the fiscal year. By the end of the second quarter of fiscal 2009, it had racked up an operating loss of more than $2 billion, almost equal to its total losses last year. So far, the Postal Service has depended on loans from the Federal Financing Bank, a federal borrowing agency, to help make up the difference, but it is fast approaching its $15 billion credit limit. Something has to give.

Kudos to the Washington Post for proceeding to acknowledge that the rest of the western world has been trending toward privatization of it’s government mail monopolies for years.  My colleague Chris Edwards recently touched on the issue of privatizing the USPS as part of a larger piece on privatizing a plethora of federal operations:

The mammoth 685,000-person U.S. Postal Service is facing declining mail volume and rising costs. The way ahead is to privatize the USPS and repeal the company’s legal monopoly over first-class mail. Reforms in other countries show that there is no good reason for the current mail monopoly. Since 1998, New Zealand’s postal market has been open to private competition, with the result that postage rates have fallen and labor productivity at New Zealand Post has risen. Germany’s Deutsche Post was partly privatized in 2000, and the company has improved productivity and expanded into new businesses. Postal services have also been privatized or opened to competition in Belgium, Britain, Denmark, Finland, the Netherlands, and Sweden. Japan is moving ahead with postal service privatization, and the European Union is planning to open postal services to competition in all its 27 member nations.