The Mail Monopoly

by Gerard Emershaw

“Neither snow nor rain nor heat nor gloom of night stays these couriers from the swift completion of their appointed rounds.”

Herodotus describing the Persian system of mounted mail carriers circa 500 B.C.E. 

The United States Congress is notorious for exercising powers not granted to it in the Constitution. However, among the enumerated powers actually granted to Congress in Article I, Section 8 of the Constitution is the power “to establish Post Offices and Post Roads.” The first official Postmaster General of the United States was Benjamin Franklin who was appointed to the office in 1775 and was serving when the Declaration of Independence was signed. Two Postmasters – Abraham Lincoln and Harry Truman – later became presidents.

The United States Postal Service (USPS) enjoys a monopoly on the delivery of first class mail and on access to mail boxes. This monopoly on first class mail was once so profitable that it allowed the USPS to subsidize the rest of its services in order to make them less expensive for customers. The advent of e-mail has gradually turned the cash cow of first class mail into a burden for the USPS. It is estimated that the true cost of delivering a piece of first class mail is actually twice as expensive as the amount that USPS charges for the service.

The USPS lost an estimated $16 billion in 2012. The USPS is an independent federal government agency which gets no funding from tax dollars. The USPS has attempted to streamline and cut costs in recent years. Since 2006, it has reduced its annual costs by $15 billion, consolidated over 200 mail-processing centers, and cut nearly 200,000 jobs—28% of its workforce.

Despite not being funded by Congress, the USPS is subject to stringent federal regulation. The USPS must petition the Postal Regulatory Commission and sometimes Congress when it seeks to make any change to its business model – e.g. closing remote post offices. While a drop in volume of “snail mail” due to internet technology has adversely affected the USPS, Congress has been even more detrimental to its bottom line. Congress has mandated that the USPS must make advance payments to pay for the health benefits of future retirees. This requirement was responsible for $11.1 billion of the losses of the USPS in 2012.

Another problem that the USPS faces is a unionized workforce represented by the National Association of Letter Carriers (NALC) which is affiliated with the AFL-CIO. The USPS has over 600,000 workers – second to only Walmart among American employers, and over 85% of these workers are represented by the NALC. As a result of unionization, average competition for USPS employees is over $80,000 per year. Who knew that Cliff Clavin was doing so well? And why didn't he pay Norm's tab if he was doing so well financially?

In February, the USPS announced that it would be ending Saturday mail delivery in August. Congress is now considering ending all home delivery of mail in favor of curbside and cluster box delivery—which is already the norm for new housing developments. Many Americans who enjoy home delivery of their mail will not be happy if it is eventually eliminated. Senior citizens are likely to be most affected. Unfortunately, because of the monopoly that the USPS enjoys on first class mail, there is nothing that customers can do even if they would be willing to pay a premium for continued home delivery of their mail.

The answer, of course, is for mail delivery to be deregulated and privatized. While the Constitution grants Congress the power to establish a Post Office, this does not mean that it must do so. It also does not mean that the USPS must have a monopoly on first class mail. Private entities like Fed Ex and UPS already compete with the USPS in categories of package and letter delivery other than first class mail.

While privatization and deregulation of first class mail would initially make the service more expensive than it is now, it is not difficult to imagine competition eventually leading to innovations which will lower the price. Consider how relatively inexpensive long distance phone service has become since the Ma Bell monopoly was broken up and the resulting deregulation led to massive competition among providers. Private business entities always have a greater incentive to lower customer costs and to provide better service. This is simply the natural result that competition in a free market always produces.

Surprisingly, Western European nations are already far ahead of the United States when it comes to the privatization of mail service. All 27 member nations ofthe European Union have already privatized their mail service or will end government mail monopolies in the near future.

There will be many who will fight such privatization tooth and nail. The NALC for one. Unions never give up without a fight—at least until they drive an American industry out of business. There will also be resistance from mail customers in rural areas. The USPS at present must guarantee mail delivery for customers who live in remote areas. The rate for a first class letter is the same for the rural customer as it is for the customer living on Main Street in a densely populated city or suburb. However, reasonably priced first class mail service is not a right, and there is no reason why customers living in cities or suburbs must subsidize the first class mail service of those who wish to live in the middle of nowhere. 

While the USPS does not receive taxpayer funding, its massive yearly losses will ultimately affect taxpayers. According to the USPS itself, both UPS and Fed Ex have comparable rankings to the USPS when it comes to customer satisfaction with express and priority mail service. There is no reason to believe that UPS and Fed Ex would not also be able to deliver first class mail just as well if given the chance. These private entities would also be able to do this while earning a profit. Fed Ex made nearly $1.5 billion in profits in 2011. UPS projects that it will earn $4.5 billion in profits in 2013. There is simply no reason not to end the USPS monopoly on first class mail.