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Universal Service and Postal Monopoly
Under current federal law, the Postal Service is required to provide universal service “as nearly as practicable [to] the entire population of the United States.” This universal service obligation (USO) is similar to obligations the federal government has placed on other services, including telecommunications, airlines, railroads and electric power. Generally, these USOs are funded through a variety of means, including government subsidies, assessments on customers or money made through a “reserved area” of products or services that is, to one degree or another, legally protected from competition (i.e. the area of services over which the postal service has a monopoly). In the case of thePostal Service, its operations are funded internally through differential markups and cost averaging.
In recent years, there have been calls for further examination and closer scrutiny of this system of internal funding. Some observers question whether the cost of the Postal Service’s USO is large enough to justify the monopoly restrictions. They support at least some degree of deregulation (as has occurred in the telecommunications and electricity industries) and greater competition for some of the Postal Service’s current functions. At the other end of the spectrum, some critics worry that increased delivery competition and the greater use of electronic communications will degrade USPS revenues to the point that reserved area funding will not be sufficient to cover the costs of the USO.
Several European nations have begun the processes of reducing or eliminating postal monopolies and contracting for universal service. As of this year, all member countries in the European Union have opened their postal markets for mail weighing more than 3.5 ounces or costing more than three times the price of a standard letter.
Beginning in 2006, the market will be further liberalized to allow for competition for all mail weighing more than 1.8 ounces or costing more than two and a half times the cost of a standard letter. After that, the European Parliament will initiate a review of the feasibility of opening the entire postal market to competition by 2009. However, it should be noted that much of this activity has been in response to attempts by the European Union to increase competition and to standardize postal services across Europe.
Outside of Europe, other western nations, including Australia and Canada, have done little to significantly decrease their countries’ respective postal monopolies or USOs. As far as PIA is concerned, postal privatization is a noble goal but, at this point, there is little political support for such efforts. The President’s Commission on the United States Postal Service said that some changes to the USO should be considered, but the concept of universal service requires a monopoly on mail delivery and sole access to mailboxes. Thus, PIA believes that what needs to happen is to move as much of the mail as possible into private hands and to narrow the Postal Service’s role in handling mail. When referring to USPS, the term “last mile” is often used, meaning that USPS does a good job providing the last mile of service (mail carrier to the door), but does not do such a good job with other things. Our hope is to move as much postal work up to the last mile into the private sector, with much of that business going to the printing industry.