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Part-privatise US mail system, says second Washington think tank

Wednesday, June 5th, 2013

Tech policy think tank ITIF has suggested that the US Postal Service should focus only on delivering mail over the final mile.

The Washington DC-based Information Technology and Innovation Forum suggested in a report issued this month that the rest of the US mail system should be opened up for private sector companies to operate.

The report, Postal Reform for the Digital Age, echoes a similar proposal put forward by another nonpartisan think tank, the National Academy of Public Administration, in March.

Both white papers suggest that the answer to the multi-billion dollar annual losses currently being made by the Postal Service, and the ongoing yearly decline in mail volumes in the United States with the emergence of the Internet, is to privatise much of the mail system.

The ITIF report, written by ITIF president Robert Atkinson, suggests that USPS should set a price for carrying the mail along the last stage of delivery to the final address, allowing private firms to provide all mail collection, transportation and processing before entering the mail in the USPS final mail network.

“Some advocates have argued that the Postal Service can be saved by allowing USPS to get into new lines of business or giving USPS government subsidies, while others have argued the entire system should be privatized. Neither of these is in the best interests of taxpayers,” Atkinson said.

“We should ensure that all citizens have access to mail delivery, something the USPS does best, but also recognize that in the digital era the Postal Service as it now exists needs to be systemically transformed.”

The ITIF president argues against allowing USPS to provide more products and services to subsidise its mail business, and on the other hand suggests that complete privatisation of the US mail system is “not workable” if a universal postal service is to continue.

But he says instead of working to modernise the entire US mail system, USPS should keep its monopoly on the final mile delivery system while withdrawing from collection, transportation and processing activities upstream. He said it would be “inherently inefficient” for more than one company to prepare and deliver mail over the final mile, although last mile sorting could be contracted out by USPS.

Such a proposal would even see USPS pulling out of its retail network, leaving private companies to run post offices.

Companies like FedEx and UPS would bid for transportation and sorting contracts, the ITIF suggests, while locations like pharmacies would replace “underutilized” post offices.

Private companies do already perform these functions as part of the USPS “workshare” system, but Atkinson argues that incentives should be provided to expand this, phasing out the Postal Service’s role in the upstream process.

Uncertainty and risk

Atkinson states that his vision for the Postal Service will mean substantial job losses at USPS, and he concedes that turning over the upstream system to private companies could add uncertainty and risk to the postal system.

“Some new players in the postal system will surely fail,” he said, but added: “We should not put our faith in USPS or any particular competitor, we should have faith that competition will lead to a better, more efficient system, and that competition will spark innovation and new competitors.”

The ITIF report suggests that law-makers could move to the new semi-privatised system simply by requiring USPS to work with regulators to set a delivery price for mail items distributed over its final mile network.

Congress would also have to give USPS the powers to close any of its facilities, post offices and lay off workers without providing large severance of retirement packages, the report states.

Any change would not happen overnight, the report notes.

Commenting on his report, Atkinson said: “As the Internet has transformed how we communicate, from E-cards to electronic bill payment to document transfer, the traditional postal model is outmoded.

“Continued digital migration will mean continued financial challenges for USPS unless Congress drives systemic reforms that allow the Postal Service to focus on what it does best, delivering the mail, with all other services opened up to competition.”

Source: Post&Parcel/ITIF

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