Copyright 2000 P.G. Publishing Co.
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June 18, 2000, Sunday, TWO STAR EDITION
SECTION: BUSINESS, Pg. C-1
LENGTH: 1956 words
REINVENTING THE MAIL;
THE U.S. POSTAL SERVICE IS PUSHING A LAW THAT WOULD
ALLOW IT TO BE MORE;
EFFICIENT AND OFFER NEW SERVICES. SOME PRIVATE CARRIERS
FEAR THE GOVERNMENT;
AGENCY WILL USE ITS MONOPOLY POSITION TO COMPETE
BYLINE: FRANK REEVES, POST-GAZETTE STAFF
The U.S. Postal Service, with
roots that go back to the days of Benjamin Franklin, the nation's first
postmaster general, is trying to reinvent itself for the digital age. v Postal
customers can now buy stamps via the Internet. Indeed, online stamp sales for
the first six months of this year are expected to total $ 12 million, more than
twice what they were in all of 1999. v The Postal Service also operates USPS
eBillPay, which offers customers a Web site for paying bills, and @ease, an
electronic merchandise return service that provides prepaid mailing labels for
returning catalog and online purchases. v Vendors certified by the Postal
Service now can even download postage from a personal computer and print it onto
an envelope or mailing label. And collectors can get rare items, including full
press sheets of Marilyn Monroe and James Dean stamps signed by the stamps'
designers, via the Internet auction site eBay. vBut this, the Postal Service
hopes, is only the beginning.
The independent government agency, in
addition to expanding online services, is pushing for legislation that would
free it to set its own prices and offer new services without prolonged reviews.
Without these changes, its supporters say, the Postal Service will confront a
sharp decline in future business that will jeopardize its ability to meet its
primary mission -providing universal mail service throughout the country.
But the legislation is stalled in Congress, where opponents have waged a
fierce counter- campaign. They include the Newspaper Association of America,
which represents 1,700 newspapers in the United States and Canada, including the
Pittsburgh Post-Gazette. The association fears proposed reforms
would allow the Postal Service to undercut a substantial source
of newspaper advertising revenue, preprint Sunday inserts, by offering retailers
and other major advertisers deep discounts to use the mail instead.
of the Postal Service's major competitors, notably United Parcel Service, also
are fighting the proposed legislation. UPS, the world's largest express carrier,
whose brown trucks are ubiquitous on any weekday, and other private carriers
complain that the Postal Service uses its monopoly position as the sole handler
of first-class mail and its other perquisites as a government agency to unfairly
undercut its competitors.
So far, the opponents of the Postal
Modernization Act, as the legislation is called, have succeeded in preventing
the bill from coming up for a vote in the House Government Reform Committee -- a
key hurdle the bill must leap before it can be considered by the full House of
Representatives. With Congress expected to recess for the summer sometime next
month, supporters fear any action could be delayed until the fall, next year or
The debate highlights what has long been a deep fissure in
American politics: What is the proper role of the government in a market
economy? To what extent should government agencies be allowed to compete with
private firms in providing goods and services?
For decades, the lines
were clearly drawn. But in recent years, they have blurred considerably as both
Democrats and Republicans alike have embraced the cause of privatization and
deregulation in industries ranging from airlines and railroads to utilities and
Established in 1970, the U.S. Postal Service is a
direct descendant of the United States Post Office Department, which the
Continental Congress created in July 1775 -- a year before declaring
independence from Britain.
By 1970, Congress and the Nixon
administration were convinced that the old U.S. Post Office Department, which
hadn't been overhauled in decades, could no longer handle the increasing volume
of mail. In 1966, during a widely publicized incident, the Chicago post office
ground to a virtual stop under a logjam of mail.
But these days, for the
first time in postal history, the Postal Service faces a new problem -- the
prospect that the volume of mail the agency handles will significantly decline.
First-class mail delivery to 134 million addresses in the United States,
including 20 million post-office boxes, is the Postal Service's core business
and primary source of revenue.
But faced with competition from private
delivery companies and the increasing popularity of the Internet, the volume of
first-class mail handled by the Postal Service is expected to decline in the
next decade. This could result in a 27 percent decline in the Postal Service's $
63 billion in annual revenue -- or about $ 17 billion a year, according to the
General Accounting Office, a congressional watchdog agency.
occur, the [Postal] Service will likely face unprecedented challenges as it
seeks to fulfill its primary mission of providing universal postal service at
reasonable rates while remaining self-supporting from postal revenues," the
General Accounting Office has warned.
Those concerns were echoed by U.S.
Rep. John McHugh, R-N.Y., the chief sponsor of the Postal Modernization Act.
"Americans should expect even more postage increases as well as cuts in
service unless Congress takes action to reform and modernize
the nation's outdated postal system," McHugh said after the
Postal Service's governing board proposed an increase in postal
rates, effective in January 2001. "The growth of e-commerce and e-mail is
already having a huge impact on first-class mail volume, and huge rate increases
and drastic cuts in service are inevitable under the current framework."
Postal officials contend that improvements in the efficiency of their
operations can't make up for the steep decline in revenue they expect if mail
volume drops off. Their best alternative is to develop new products and services
and flexible pricing mechanisms.
In April 1999, the House Government
Reform Committee's subcommittee on the Postal
Service, which McHugh heads, approved a postal reform bill and
urged the entire committee to pass it. But the bill has sat in committee since
then, and, as of last week, the panel's chairman, Rep. Dan Burton, R-Ind., had
not scheduled the bill to come up for a vote.
McHugh and his staff are
still trying to craft a bill that a majority of the House
reform committee could support. But so far, that appears to
have eluded them.
The postal reform bill was supposed
to have satisfied the major parties who have a stake in the
Postal Service's future: businesses, such as magazine and
newspaper publishers who rely on the U.S. mail to deliver their products;
companies, such as UPS, that directly compete with the Postal Service; and the
Postal Service itself, which has been pressing for more ways to compete
For example, the legislation streamlined the way rates are
set for the Postal Service's noncompetitive services -- services few if any
other companies provide, such as first-class mail and parcel post. But the
legislation placed a cap on postal rates, tying increases to increases in the
U.S. Consumer Price Index, the government's main inflation gauge. The bill also
allowed the Postal Service to give bulk mailers a discount on rates.
Postal Service would have gotten the flexibility it claims it needs to set
rates, which, as currently established, can take up to a year because of
independent reviews and public comment periods. The provision was also designed
to answer a persistent charge that the Postal Service purposely inflates rates
on first-class mail and its other monopoly services in order to keep rates on
its competitive services artificially low.
In addition, the legislation
set rules for the Postal Service's competitive services, in which it vies with
UPS and other private companies for customers. These services include priority
and expedited mail -- the Postal Service's answers to overnight and rapid
delivery services, as well as international bulk mail.
Under the bill,
the Postal Service would have been prohibited from setting the rates for its
noncompetitive services below cost. And its markup for competitive services
would have to be equal to the average markup that it charges for its
Under the bill, the Postal Service also would
no longer have carte blanche to borrow money from the U.S. Treasury. Instead, to
finance its competitive services, it would have to go to private markets and pay
market interest rates, as does any private company.
And, like other
private firms, the Postal Service would be subject to antitrust and fair
competition laws in areas where it competes with private companies.
postal reform bill was backed by a wide coalition of businesses
and nonprofits, including America Online, Time Warner, the parent of Federal
Express and Moon-based FedEx Ground, the Magazine Publishers of America, and the
National Newspaper Association, which represents about 3,600 community
But the Newspaper Association of America, which represents
the major dailies, continues to oppose the bill.
In testimony before
McHugh's congressional subcommittee, John Sturm, the association's president,
said his organization objects to the basic thrust of the bill, "which allows a
government agency with a [legal] monopoly to compete with the private sector.
NAA believes that government entities should offer commercial services only
where there is market failure -- that is, where the private sector either cannot
or will not offer such services. This is clearly not the case here."
Last week, Sturm was again lobbying on Capitol Hill, trying to make sure
the bill doesn't come up for a vote before the full House Government Reform
He said the association in particular objects to a provision
in the proposed bill that would permit the Postal Service to negotiate special,
presumably lower, rates, with bulk mailers. Sturm said such price arrangements
would simply result in the Postal Service's shifting the cost of the services it
is required to provide, such as first-class mail and periodical delivery, to its
The newspaper association also is angry over what it
sees as the Postal Service's attempt to grab newspaper advertising revenues.
"Although newspapers are among the Postal Service's largest customers in
any local area, the Postal Service has come to view newspapers as competitors
and has targeted newspapers' advertising revenue for diversion to direct mail
advertising," Sturm testified during hearings on the bill. "The Postal Service
has engaged in extensive marketing efforts to achieve this goal, even noting in
its 1998 marketing plan that one of its objectives was to 'create the platform
for moving substantial revenues from preprinted newspaper inserts to the mail.'
This was certainly not the goal envisioned by Congress when it reorganized the
Postal Service in 1970."
UPS also continues to oppose the bill,
particularly provisions that would allow the Postal Service to expand into areas
that bring it into direct competition with private companies.
Kelly, chief executive officer of UPS, claims the agency's move into retailing
and marketing undermines free enterprise and competition.
Service hasn't been silent. In the face of these attacks, it has mounted a
counteroffensive. Last month, Postmaster General William Henderson addressed
dozens of major customers at a meeting in Providence, R.I. Federal law prohibits
him from lobbying Congress.
So Henderson did the next best thing: He
arranged for a live interview with Rep. John McHugh to be broadcast into the
Not surprisingly, McHugh urged postal
customers to press their representatives in Congress to support his
postal reform bill.
INFORMATIONAL GRAPHIC, PHOTO: Pittsburgh Post Office, 1955.; INFORMATIONAL
GRAPHIC: Steve Thomas/Post-Gazette; U.S. Postal Service; United; Parcel Service;
Lorant, Stefan, Pittsburgh: The Story of an American City:; (How they deliver)
LOAD-DATE: June 22, 2000