Bad package service in the United States
The stated mission of the United States Postal Service is to “provide the nation with universal, reliable and affordable postal service.” Although it has a legal monopoly on mail delivery and has exclusive access to public mailboxes, postal services have become a secondary problem for the public enterprise due to its financial losses and poor operational performance. . Instead, parcel delivery appears to have become its core business, an unregulated service that competes with the private sector.
As the USPS quietly refocuses its primary mission from mail delivery to parcel delivery, and as it turns resolutely to the lodge and Senate for a financial bailout, at what point does it no longer serve the public interest? In fact, a new report by two economists – Dr Robert Shapiro and Isaac Yoder of Sonecon – found that the USPS is subsidizing its unregulated parcel services at the expense of its monopolized courier services – a finding that should raise eyebrows among policymakers and that can explain why the post office is in such a bad financial situation.
Sonecon report notes the growing share of packages over courier and that packages now account for 39.0% of revenue and 60.9% of weight, meaning unregulated packages now take up most of the space delivery of postal vehicles. In fact, the Postal Service has announced a 10-year multi-billion dollar spending plan to purchase new trucks that can accommodate its higher parcel volumes.
Yet the USPS allocates only 8.8% of its considerable overhead and shared costs to its unregulated parcel delivery services. By doing so, the Postal Service is able to make its unregulated services more profitable while milking consumers to cover its courier services.
Indeed, the study suggests that the USPS artificially increases its monopoly costs while undervaluing its unregulated services, which compete with courier, FedEx, DHL, UPS and other parcel delivery services. Taking advantage of the monopoly to cover unregulated services is wrong and not legal.
Cross-subsidization of services could make its monopoly services appear unprofitable, giving the USPS an excuse to ask Congress for a bailout or to ask regulators for price increases on stamps and regulated services. similar. It also means that the USPS has really lost a lot of money because it has lost sight of its mission.
Specifically, according to the recent Government Accountability Office report, from 2007 to 2020, the USPS raised $ 87 billion net losses and nearly $ 190 billion in unfunded debt and liabilities. With the USPS on track to hit the 15th straight year of losses of over $ 1 billion, this fiscal year doesn’t look much better, given last quarter’s $ 3 billion loss.
As it continues to lose money, the quality performance of USPS has been appalling for the courier. For example, for its two-day delivery commitments, One-Piece First Class Mail met its delivery commitment 93.5% of the time in 2009, but fell to 85.9% for the second quarter of 2021. Likewise, for its three- to five-day commitments, One-Piece First Class Mail met its delivery target 90.8% of the time, but fell to 57.9% for the second quarter of 2021. In In contrast, parcel services reached 73.4% of its on-time delivery target, rising to 79.5% in the last quarter. In short, packages have performed a little better over time, but first class mail has dropped to excruciating levels.
To make matters worse, the USPS recently announced plans to slow the delivery of first-class mail and other services, and it will raise some monopoly prices just in time for the holidays. Perhaps parcel services should bear a proportional share of overhead costs and relieve postal services from an unfair financial burden.
While the data from the Sonecon report raises many questions about the potential for cost shifting between its unregulated and regulated services, the authors acknowledge that the actual extent and financial impact of cross-subsidization is uncertain. This is because the Postal Service is under no obligation to disclose any of its financial details about its unregulated service activities.
As the USPS continues to press Congress for a bailout, until it opens its books to everyone to see the true extent of profit and loss on its mail monopoly and competitive parcel services , perhaps Congress should consider letting the Postal Service wilt on the vine. . Alternatively, perhaps the Postal Service should be forced to part ways with its unregulated services. After all, why should taxpayer bailout services compete with services already available in the private sector?
Many questions need to be answered. However, Congress and the American people deserve to know if their postal services are really losing money, and by how much. More transparency is needed to get mail delivery back on track.
Steve Pociask is President and CEO of the American Consumer Institute, a nonprofit education and research organization.