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Wednesday, August 5, 2009

The U.S. Postal Service—When it absolutely, postively has to be closed overnight.

Hundreds of closed post offices? Didn’t see that coming. Their newest commercial being about as sexy as a Powerpoint on engineering schematics, I thought I’d dig out this oldie but goodie from 1986. Two main reasons:

1) Never caught up. Having a monopoly on the country’s mail for so long meant they didn’t have to worry about competition. No competition, no reason to innovate. Talk about bailouts. RUn out of funds? Up the cost of a stamp and Uncle Sam’s got your back. Cha-ching. And they sure aren’t “half” the going rate of others anymore either.

2) The net and email.

Lather. Rinse. Repeat.


Ben Kunz said...

Actually, I disagree, having spent three years of my career consulting for USPS.

USPS is hamstrung because it is prohibited from competing.

- FedEx and UPS cherry picked its most profitable business, shipping services. Note how neither competitor delivers letters for less than 50 cents. Hm. Wonder why.

- USPS is left forced to deliver to every address in the U.S. (and delivery points the size of Chicago are added every year).

- USPS by law can only raise rates tied to the rate of inflation, which means nothing. Think about that -- they can't give themselves any real lift in dough. And if fuel costs outpace inflation, USPS actually gets whacked with an effective decline in revenue vs. operating costs.

- When USPS tries to market itself to spur usage, say, by sponsoring Lance Armstrong, the world goes up in arms claiming waste -- the same world that glorifies $3 million Super Bowl beer commercials.

If USPS were allowed to operate like a real business, it would shut down many more unprofitable routes and raise postage significantly. If USPS could market itself like a real business, it might spur demand.

Frankly, people who complain about the Postal Service don't understand the bind it's in, being forced to deliver mail to your home. The truth is you, dear consumer, and your mailbox make USPS unprofitable. Here's a test: I'll give you 44 cents. Please start a business and deliver this letter to Oregon for me.

Ben Kunz said...

Good points. I'd say USPS is doing rather well -- $74.9 billion in revenue in 2008 with a loss of only $2.8 billion. Better than many investment banks. And a loss is not always the case -- in 3 of the past 6 years USPS made money, including almost $1 billion in profit in 2006. Not too shabby at all.

The U.S. government has kicked in money in the past three years, capital contributions of about $3 billion annually. USPS has approximately 150 million delivery points. So the "tax" or "bailout" burden on our poor nation works out to about $20 per mailing address.

For your mail service, that's 38 cents per week. Yep. Uncle Sam is charging you about a stamp a week, and you didn't even know about it.

If taxpayers got rid of the Universal Service Obligation, which requires USPS to deliver to your Aunt Ginger in rural Nebraska, then I'm sure USPS could cut costs without needing any Fed funds. But if we insist on forcing an organization to drive on dirt roads for pennies, we can't really complain if it doesn't break even.

(Sound of horse being beaten to death ;) )

mtlb said...

(had to repost)

Just did. Email to Oregon. FREE.


As for costs, I remember you consulted for them, but FedEx can’t go to the government for funds like the USPS can from taxpayers who foot the bill for everything, and who then have to pay postage on top of that to use the service.

As for delivery savings in their ads, I don’t see how they’re claiming a significant savings. I've paid $3-4 more per letterpack than with FedEx or UPS.

Donuts and Coffee said...

I have to agree with Ben Kunz. The value for a, secure, delivery of a letter to anywhere in the United States is unbeatable. Really, a uniformed representative of the Unites States Government will hand deliver your physical message to anywhere in the country reasonably quickly. You don't need to PAY the cable or phone company to allow the message to travel on their 'wire'. You just get the message. The USPS is the best government deal we have. And I do not work for or have family working for the USPS. I just see good value.

mtlb said...

“You don't need to PAY the cable or phone company to allow the message to travel on their 'wire'. ”

Sure you do. That price is factored into their monthly service charge to you.

As for the post office being a bargain, it's not just the .44¢. Taxpayers pay to run the post office as part of the national budget. That alone is comparable to the monthly ISP fee people pay to access the internet.