Is a competitive Postal Service good business?

The rapid pace of change in computing, telecommunications and imaging
technologies—and their imminent convergence—has a cadre of proud and powerful
federal agencies sweating their future.


Several are charting courses of self-protection through legislation, while others are
adopting a strategy inclined toward increased competitiveness with the private sector, in
many cases through heavy investments in information technology. The issues are of greater
importance than mere tinkering with the procurement system. Both courses present serious
policy issues that need to be debated in a broad context. The themes will influence
legislative activity in the new Congress.


A case in point is that of the Postal Service, which today is in better shape, both
financially and in operational efficiency, than it has been for years. By many
measures—balance of current revenue vs. expenses or deployment of technology, for
example—USPS is looking sharp.


But the Postal Service, and more important, its congressional authorizing and
appropriating committees, believe the current snapshot does not reflect what they believe
this is a fundamental, long-term threat to the Postal Service’s profitability or
ability to break even.


It’s no secret that the growth of the Internet and e-mail is quickly reducing the
business community’s reliance on first class mail. The projected trend is downright
discouraging for USPS.


Take, for example, people like me, a Johnny-come-lately to the cyberworld. I’m
doing a lot of communicating with clients by e-mail. Now even lawyers, typically a stodgy
bunch, are switching from mailing bills to enabling electronic payment.


The Postal Service was already competing with Federal Express Corp. and DHL Inc. and
other private overnight services for fast delivery of packages—and incidentally
building the IT infrastructure to make such competition possible.


But e-mail stabs at the heart of the service’s first class mail revenue. USPS
claims the cost of its duty to provide universal delivery service to remote, unprofitable
locales justifies its policy of competing for lucrative services. What else is it to do?


Enter Congress. Rep. John McHugh (R-N.Y.), chairman of the House Government Reform
Subcommittee on Postal Service, has reintroduced a bill that was the subject of a
half-dozen legislative hearings during the last Congress. At its core, HR 22 would permit
USPS to compete with the private sector in unspecified ways. In return for receiving that
permission, the service would be required to turn a profit.


McHugh’s bill remains unclear about how this profit would be measured and by whom.
McHugh obviously believes such permission to compete is necessary to get the government
out from under subsidizing universal snail-mail service.


It’s likely that Postal Service executives like this portion of the bill but have
doubts about other parts. The postal unions, two of the most successful public employee
unions in the country, have their doubts about aspects of the bill as well.


I believe an open-ended permission for an agency such as the Postal Service to compete
is a real danger to the private sector. I don’t believe in blank checks for such
governmental expansion. Given the open-ended nature of the blank check, I further believe
the IT community, including the nascent Internet business community, should pay close
attention to the issue. I would urge the bill’s proponents to modify it so that
Postal Service is required on a case-by-case basis to justify why its entry into a sector
where private business is already providing goods and service is truly in the public
interest.


The Canadian Postal counterpart appears to be going into competition with the private
sector to provide bill payment services. Mammals in the private sector have little chance
of surviving the thrashing around of a government-fueled dinosaur with money from its
postal monopoly. Canadian citizens may be more accepting of government competition, since
the Canadian government has always played a larger role in their society. But I question
whether the Canadian economy can succeed if government is allowed to embed itself in the
new economic areas.


Stephen M. Ryan is a partner in the Washington law firm of Brand, Lowell &
Ryan. He has long experience in federal information technology issues. E-mail him at smr@blrlaw.com.



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