There have been rumors for years about the threat of privatizing the Postal Service. Now we have a President who has stated on more than one occasion that he thinks it would be a good idea. Whether he really has the authority to do it, and whether he really would remain to be seen. That aside, how would you privatize the Postal Service? What would that look like?
With its current limitations, no sane individual or company would want to buy USPS. It loses billions of dollars a year and is required to fulfill its Universal Service Obligation (USO). So, whether you live in a high-rise apartment in New York City, or at the end of a dirt road in Podunk, you get mail from the Postal Service, six days a week.
One thing that could be done, although it would almost certainly require the action of a reluctant Congress, is to modify or eliminate the Private Express Statutes (PES). The PES grants USPS a monopoly on mail delivery with few exceptions. No one else can put a letter in the mailbox.
If those laws were eliminated, or altered, private companies could begin offering delivery to the more lucrative segments of the country – high-density locations where they could deliver more cost effectively. They could create their own schedules – delivering, say, three days a week. They could choose not to deliver in less dense areas, where it is not cost effective. Private companies in this scenario could almost certainly deliver mail for less than the Postal Service. You could see multiple companies offering services to certain cities. Direct marketers would likely flock to these services where they could find far lower prices and better service.
This approach offers certain advantages, but creates a more complicated system, possibly with multiple carriers going to the same addresses. And someone still needs to deliver to those less desirable locations. Mail delivery is enshrined in the Constitution, and essential to the American People – and their elected representatives. And I think it is reasonable to believe that a physical connection to all homes in the US has national security implications as well. It’s tough to email vaccines or Covid test kits. It is hard to imagine the elimination of the USO.
And where would this leave the Postal Service? With their volume dramatically reduced and their obligations unchanged, their financial position would be even more precarious. So, what are some possible approaches to at least some privatization?
- “Franchise” some cities to selected companies, with the stipulation that they need to meet the USO for the area they are assigned. They need to deliver six days a week to all the addresses in their territory. Other than these franchised areas, the PES would remain in place.
- Contract the operations of the USPS network – facilities and transportation. You could still leave the last mile to USPS, but upstream functions may be better managed by the private sector.
- Privatize certain functions within the system, as was done with remote encoding of mail pieces by contractors. The unions do not seem enamored with this approach.
- Sell off the more lucrative delivery addresses – again requiring the USO be met. This would leave the USPS to service the more remote areas, clearly at a loss. Still, with this reduced network and volume, it may be more efficient. This would need to be subsidized by Congress.
The Postal Service cannot make a profit. Its mission makes that impossible. Nonetheless, its mission is essential. And there are some powerful stakeholders involved:
- Congress. Their constituents want good service, they want their letter carrier, and they want a nearby Post Office. Congress also holds the purse strings for any subsidies of the Postal Service.
- The Postal Unions. The Postal Unions are powerful and not shy about sharing their opinions. They will fight hard against any move that will hurt their members.
- The direct mail industry. Direct mail fuels more than a trillion dollars in commerce and employs millions. Like them or not, that’s who keeps the carrier going to each door every day.
- The American people. Folks may complain about it, but poll after poll shows the Postal Service to be the most admired and trusted branch of government.
Make the Postal Service more efficient? Of course! Chop it up and sell it to the private sector? I’m not sure that accomplishes what anybody wants.
It should be fun to watch.