America’s Post Office Challenges The Digital Age

This article appeared in Bridge News on November 19, 1999

Try to think of good reasons why the U.S. Postal Service should be a government-owned monopoly. In reality, there are none.

The private sector has shown it's willing and able to providedelivery and communication services far more efficiently.

When the government set up the Post Office Department in 1789, communication between far-flung Americans was difficult, to say theleast.

But a lot has changed in the past two centuries to make communication better. In the digital age, a government-owned postal service makes no economic sense.

Digital "communicators" will soon be so inexpensive that everyAmerican can afford one. Messages and documents will be sent for afraction of a cent--compared with the 33 cents the Postal Service chargesfor first-class mail.

These devices will come in both wireless and wired models, buteventually wireless capability will be everywhere.

Screen technology is rapidly improving, too. In a few years, digitalscreens will offer higher resolution than high-quality printing, whichmeans most people will prefer to read electronic screens rather thanprint.

Most of us already receive our really important and time-sensitivemessages by phone, e-mail or fax, and our packages through FederalExpress, United Parcel Service and the other private delivery services.

For those who still want first-class mail service, plenty of privatecompanies stand ready to provide it.

The only reason they do not is that the Postal Service has agovernment-granted monopoly. Private companies are prohibited fromcharging anything less than twice the post office's price for the sameservice.

The folks who run the post office understand that their share of thecommunications and delivery pie is shrinking. Hence, they are looking fornew products to offer. This would be just fine if the Postal Service werea private company competing on an equal footing with other privatecompanies.

But unlike private companies, the Postal Service is exempt fromfederal, state and local taxes and fees. Likewise, most zoning laws areof no consequence to this monopoly, and it can ignore parking tickets andvehicle licensing fees. The post office also has access to taxpayer-subsidized government credit and preferential customs agreements.

Meanwhile, most of the new products it is offering or has tried tooffer are already being satisfactorily provided by private competitors.

Despite its monopoly advantages, the post office lost $85 millionattempting to develop new products in 1995-97, according to theGovernment Accounting Office. If the post office had stuck to its slated mission,maybe its fees could have been lower.

In those areas where the Postal Service competes with the privatesector in delivering packages and express letters, it has been soundlybeaten (despite its government subsidies) by better managed and moreefficiently operated companies like Federal Express and United ParcelService.

Now, the Postal Service is trying to get into the electronic businessof transferring money digitally. Since it will soon be (and in some casesalready is) possible to transfer digital money over the Internet atalmost no cost, one can safely predict this is another area in which the postoffice will fail.

Ideally, the Postal Service should be privatized, its monopolyabolished and its subsidies ended. Given its extensive infrastructure andname recognition, if well managed it ought to be able to compete with theexisting private delivery companies.

Short of privatization, it should be strictly limited to deliveringthe mail and all of its subsidies ended. This, of course, would mean thePostal Service would become increasing irrelevant.

The nation will be better off when future generations of children aretaken to the Postal Museum and ask, "Daddy, what was a post office?"

Richard W. Rahn

Richard W. Rahn is an adjunct scholar at the Cato Institute and author of "The End of Money and the Struggle for Financial Privacy" (Discovery Institute).