Cato Conference: “The end of the postal monopoly?”

March/​April 1999 • Policy Report

The phrase “You’ve Got Mail!” doesn’t conjure up images of the U.S. Postal Service in the minds of most Americans. The communications revolution, which has given us overnight delivery, faxes, and e‐​mail, has put pressure on the USPS to improve service, hold down costs to customers, and reduce its staff of nearly 900,000 mostly unionized workers.

Murray Comarow, architect of the U.S. Postal Service, discusses how the Postal Service’s collective bargaining process gives unions too much power and the USPS too little flexibility.

Those challenges were addressed at a Cato Institute conference, “Mail @ the Millennium: The Future of Private Postal Service,” held on December 2. Postmaster General William Henderson conceded that the USPS is likely to lose its monopoly status within the next decade. “Deregulation of the postal monopoly is likely to occur, and the competitive environment will become more dynamic.” He warned, however, that attempts to privatize the USPS could endanger its ability to ensure universal mail service. Henderson, who said, “I probably e‐​mail as much as any person in America,” contended that the USPS must become an efficient enterprise to compete. “We need to be so operationally excellent that it simply won’t matter whether or not we have a monopoly. No one is standing still and neither can we.”

Concerns were expressed, however, about the way the USPS is attempting to generate more revenue. “Electronic communications are undermining what the postal service does,” said Edward Hudgins, director of regulatory studies at the Cato Institute, “so it is expanding into other areas in search of the new revenue streams that compete with the post office.”

Frederick W. Smith, founder and CEO of Federal Express and a Cato Board member, argued that the USPS should not “be allowed to diversify into the private sector and do things that taxpaying entities can do.” Smith pointed out that the USPS is unfairly exempt from zoning, customs, and tax laws by which its private‐​sector competitors must abide. It has used its monopoly to offer messaging services, bill processing for private companies, and prepaid telephone cards.

Postmaster General William J. Henderson discusses the impact of the Postal Service’s eroding monopoly at Cato’s December 2 conference, “Mail @ the Millennium: The Future of Private Postal Service.”

Michael J. Critelli, chairman and CEO of Pitney Bowes, warned that various forms of electronic communications mean that the delivery of physical mail itself is being challenged. “Physical mail will ultimately succeed only to the degree that postal authorities can continue to improve mail delivery systems to ensure that mail is delivered reliably, securely, and within a time frame that meets mailer expectations, particularly as new media become universal.” With that challenge sure to grow in the future, Critelli said, “the U.S. Postal Service cannot take its formidable customer loyalty for granted.”

The USPS’s “market grab” is nothing new, said Michael A. Schuyler of the Institute for Research on the Economics of Taxation. More than eight decades ago, the Post Office attempted to gain a monopoly over telegraphs and telephones, which Schuyler compared with the USPS’s contemporary attempt to expand into private markets. James P. Lucier of Prudential Securities added that the USPS’s attempt to grab control of the Internet “is an open invitation to privacy violations, invasive government, and much other mischief besides.”

The overriding theme of the conference was that the USPS must be privatized. Thomas Duesterberg of the Hudson Institute noted that in the past 30 years the real price of a first‐​class stamp has quadrupled, while the cost of a long‐​distance telephone call has fallen 88 percent. James Campbell of International Express Carriers pointed out that numerous other countries have already struck down their postal monopolies (Sweden and New Zealand) or are moving toward privatizing their mail delivery services (Germany and the Netherlands) while the USPS continues to resist reforms.

More than 180 people attended the conference, held in the Cato Institute’s F.A. Hayek Auditorium. The conference, broadcast live on the World Wide Web. The papers prepared for the conference will be published as a book later this year.

This article originally appeared in the March/​April 1999 edition of Cato Policy Report.
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