PUBLISHER'S NOTEBOOK: What is really killing the postal service?
Tuesday, March 12, 2013 7:52 AM
In response to a column I wrote a couple weeks ago on our efforts to work around the cuts in the postal service to deliver our newspapers on time, a reader sent me a note about a relative who is a retired postmaster and receives a pension.
This year, along with her 1099, she received a notice that said January 2013 will be the last time the Office of Personnel Management will send the 1099-R tax statements in the mail. The statements are to be viewed and printed electronically.
The reader's immediate thought was "aren't you shooting yourself in the foot" and figured I, too, would enjoy the irony.
I'm not sure if enjoy is the right word, but it did make me laugh. Then, it made me think.
Electronic delivery of mail is not the death of the postal service. Just as the Internet is being blamed for the incorrect assumption that newspapers are a dying breed, so is it being used as a reason why the postal service as we know it is on its last legs.
Yes, the electronic dissemination of information is changing the business model for newspapers and mail delivery, but there is still a business model there.
Someone who is quite familiar with business models analyzed the United States Postal Service in a blog recently and found it is a fundamentally sound business, although not without its challenges.
James Royal, a research analyst with The Motley Fool, a multimedia financial-services company (that despite multi-media in its description, still mails out a paper newsletter), found that there is "a concerted campaign to drive USPS out of business, despite the fact that it operates without government subsidies and, potentially, at a profit. It's being subjected to a politically manufactured crisis in order to ram through drastic change."
For instance, as I mentioned in my earlier column, a major portion of the losses by the USPS is the pre-funding mandate passed by Congress in 2006.
The Postal Accountability and Enhancement Act forces USPS to pre-fund the present value of 75 years of its pension and health-benefit fund in 10 years, something no other government agency, let alone a private company, must face.
Still, the assumption is that snail mail is dead, so the postal service is dying. Yes, mail volume has declined with the rise of email, but it is still up significantly from 20 years ago. Certain segments, such as parcels, are actually growing, likely a byproduct of electronic commerce as Amazon.com and eBay need someone to deliver their packages.
Royal argues that the postal service should be able to raise revenue to compensate for the decline in regular mail. After all, 46 cents is a bargain to send a letter anywhere in the United States; rates in Europe are more than double that.
The problem is that the postal rates are overseen by the Postal Regulatory Commission, which prohibits increases greater than the rate of inflation. That makes it hard to operate like a business when it is also mandated to deliver mail to places that lose money, such as rural locations.
A private company would just eliminate service to locations that didn't make a profit. Actually, private companies haven't left the locations - they just depend on the USPS to do it for them as UPS and FedEx have partnered with the postal service for "last mile" delivery.
The postal service has tried to diversify, with proposals for an online payment system, public copy machines, sales of phone cards or postage machine cartridges, but lobbyists for private companies always seem to intervene and kill the ideas.
Politicians are also enamored with privatization of the postal service, notes Royal, but not for the right reasons. He sees the push for privatization of public assets as the driving force.
In one scenario, the return would be busting the largest union in the United States, lowering wages and shifting the profit into investors' hands. In another, the well-funded USPS retirement account might be open for raiding.
The political shenanigans are maddening, but the consequences are even more so as they make a significant impact on people, particularly those living in rural areas. We haven't even seen the elimination of Saturday mail yet, as that is scheduled for August, but the closing of the mail processing center in Rochester is already slowing certain types of mail.
As mail delivery becomes slower due to these national "cost-cutting" decisions, we may find delays with magazines, bills, payments and other items are a concern. In short, we may just find that the United States Postal Service is a much more vital service than we give it credit for.