Time again to tame the postal monopoly

Email versus snail mail: That pretty much sums up the current crisis facing the U.S. Postal Service. But sadly, even as the USPS seeks new revenue sources, a recent Postal Regulatory Commission ruling allows it to compete unfairly with private providers, harming them in the process. Here’s the story.

Monopoly mail

The Postal Service has a legal government monopoly on delivering first-class mail. There is a special exemption that allows private companies like FedEx to deliver urgent items. But they are required by law to charge a high minimum price and cannot undercut USPS rates. Set up a business offering same-day delivery for $1 of seasonal greeting cards in your neighborhood, and government agents will show up at your door and make you stop.

The USPS has regulatory authority that it has used against legitimate competitors like private mailbox outlets and express delivery companies. The Postal Service, unlike private companies, pays no taxes and is exempt from many government regulations. And while it is supposed to be self-financing, in a pinch it can go to the government for lines of credit and taxpayer bailouts.

Death spiral

But the Postal Service is in a death spiral and desperate for cash. Because more people now communicate, pay bills, and transact business through electronic media, mail volume has fallen by 30 percent over the past decade. Revenues fell from $75 billion in 2008 to $65.7 billion in 2011. The USPS now bleeds $25 million every day. Its cumulative losses from 2007 to 2011 are over $25 billion. Its projected 2012 deficit is $14 billion.

Private firms in such a situation might offer new products in order to earn money. But since the Postal Service is a government monopoly with special privileges and protections, private firms rightly insist that it not make such offerings, which would constitute unfair competition. There’s the dilemma.

Declining government agencies can do desperate things. Thus, in 2006 Congress passed the Postal Accountability and Enhancement Act to confine the USPS to its core public service function — “the delivery of letters, printed matter, or mailable packages.” That law also sought to bar the USPS from offering new “nonpostal” services. But it did allow the USPS to continue to offer, subject to regulatory approval, preexisting nonpostal services that were deemed to meet a “public need” that the private sector could not. But the devil is in the definitions. That narrow grandfather provision has been turned into an expansive grant of new authority for the USPS to compete in private markets.