A Holiday Gift: Post Office Going Private?


The holidays inevitably mean crowded post offices. But as you wait in thatline, inching along at a snail's pace with cards and packages to mail tofriends and family, take heart: Economic forces are quietly but inexorablypushing the U.S. Postal Service (USPS) toward privatization.

No, your friendly letter carrier is not going to disappear. But those longlines at the post office might as the last great federal monopoly is forcedto earn the patronage of its customers.

The Postal Service, the largest civilian government agency, has a monopolyon the delivery of first- and third-class mail and the use of mailboxes. Inthe past, a lack of competition gave it little incentive to provideconsistently good service while holding down its prices. Today urgentcommunications can be sent via a local messenger on a bike or a FederalExpress jet. Private carriers now handle some 90 percent of overnightdeliveries. Faxes, e-mails and the Internet have reduced the need to put astamp on an envelope to transfer documents from here to there. And companieslike Mail Boxes, Etc. offer private alternatives to government P.O. boxes.Unlike post offices, they have longer hours, accept deliveries from privatecarriers, and offer many processing and shipping services.

A General Accounting Office study has confirmed the fears of many postalofficials. Over the next decade annual USPS revenues, currently at nearly$65 billion, will decline by as much as $15 billion as more people pay billselectronically. That will mean fewer "the check is in the mail" excuses aswell as less income for the USPS.

The Postal Service wants to offer new business and e-commerce services toobtain needed revenue. It wants to offer e-mail and online security servicesand to coordinate business orders, shipping, billing and inventory. It iseven discussing alliances with rivals such as Federal Express and MailBoxes, Etc. These are the sorts of plans one would expect from any goodentrepreneur.

But the USPS' expansion into new markets threatens private-sector providersbecause the Postal Service enjoys unfair government-established advantages.The USPS pays no federal, state or local taxes. It can borrow from theTreasury, and if its new business ventures fail, it can make up losses withhigher stamp prices. In addition to being exempt from most governmentregulations under which private businesses must operate, the USPS is exemptfrom many of the constraints to which other government agencies are subject,even though it is government entity. Perhaps worst of all, the PostalService enjoys regulatory authority that it uses against competitors. Forexample, recently it has imposed costly new regulations on private mailboxcompanies, driving many customers away from those enterprises.

Such actions suggest inevitable clashes between private companies offering innovative e-commerce services and the Postal Service with all of its specialprivileges and powers. But while its advantages might harm its competitors,they do not help the USPS overcome its inherent structural problems. Forexample, it has an inflexible labor regime that prevents managers fromordering those postal workers drinking coffee in the back room to go out andhelp customers. Labor accounts for about 80 percent of USPS costs, the sameportion as 30 years ago, despite the introduction of new, laborsavingequipment.

Postal agencies in other countries recognize that e-mail, the Internet andprivate delivery companies make monopoly mail carriers obsolete. New Zealandand Sweden have lifted their mail monopolies. The largest mail carrier inEurope, Germany's Deutsche Post, has been reorganized as a joint-stockcompany under private management. It offers competitive services subject tothe same taxes and regulations as private competitors. It recently made aninitial public offering of stock. In 2003, its monopoly will be repealed.

The communications and information revolution will not eliminate the needfor the physical deliveries of products, as all Amazon.com and ebay usersknow. It will require a more diversified and flexible delivery system.

The United States should not move into the 21st century hindered by postalservice born in the 18th, operating on a monopoly model established in the19th, and found wanting in the 20th. Only if the U.S. Postal Service goesprivate will we receive efficient mail at the millennium.