US FedEx chief urges federal reforms
FedEx chairman Frederick W. Smith told a Senate panel looking at postal reform Thursday that it has two choices: Liquidate the Postal Service as technology encroaches on its primary business or force it to compete.
Smith, whose Memphis-based package delivery and logistics company is both in partnership and in competition with the 750,000-employee government mail-delivery giant, laid out a list of proposals aimed at improving service, adjusting Postal Service pricing structures and ending the USPS monopoly by 2008.
The Senate Governmental Affairs Committee is considering the first comprehensive overhaul of the Postal Service since the early 1970s while assuring universal service at affordable rates. It heard Thursday from major competitors and users of the Postal Service.
In addition to Smith, members heard from Michael Eskew, chairman of Atlanta-based United Parcel Service, and later received testimony from representatives of the Newspaper Association of America and direct-marketing mailers concerned with postal rates for standard mail delivery.
"FedEx favors allowing the USPS to compete because, at the end of the day, it's politically not feasible to simply ignore three-quarters of a million U.S. citizens employed by the Postal Service, and the management of such a decline and liquidation would be extremely difficult,'' Smith said.
The Postal Service has 2,539 employees in Memphis.
Smith said serious consideration should be given to transforming the USPS into a corporation with an independent board of directors.
In addition, the service's noncompetitive and competitive product lines need to be separated and accounted for without the trappings of monopoly that protect them from unrealistic overhead costs and anti-trust exemptions, he said.
"The USPS cannot learn to compete unless it is required to compete,'' Smith said. "A monopoly is dispiriting and enervating."
Smith listed postal reforms that would level the playing field among competing delivery services, including permitting private companies' access to private mail boxes, giving the Postal Rate Commission subpoena power, exempting business letters from the requirement of a uniform postal rate and charging a competitive price for delivery of foreign mail.
"Universal service should be preserved but allowed to evolve with changing times," Smith said. "No political or economic reason whatsoever, in our opinion, remains to require a uniform rate for bulk business mail."
In written testimony submitted to the committee, Smith said, "The basic principle should be that the postal monopoly should be no more extensive than necessary to finance universal service.''
After Smith and Eskew testified, a second panel discussion involved delivery of bulk-mail advertising and direct mail and included a lively discussion of the fairness of new calls for price flexibility and negotiated rates.
H. Robert Wientzen, president and CEO of the Direct Marketing Association, urged the panel to implement significant modernization to assure price stability so that his members' bulk mail and catalogs can continue to be delivered profitably by mail.
He urged the senators to authorize customized service and rate agreements – known as negotiated service agreements – to individual customers.
But Gary B. Pruitt, chairman, president and CEO of the McClatchy Co., owner of 30 daily and weekly newspapers, said the Postal Service's governmental and public service role precludes it from having the same pricing freedoms as private companies.
Speaking on behalf of the Newspaper Association of America, Pruitt said the 2,000-newspaper trade association is opposed to the Postal Service offering special rates for individual bulk mailers in the form of negotiated service agreements that are not available to other, competing mailers.
Pruitt pointed out that newspaper advertising, including preprinted inserts, competes with direct bulk mailers seeking lower mail-delivery charges.
He added that the Postal Service itself has advanced the misperception that it is in the direct mail and advertising business by making sales pitches to newspaper advertisers encouraging them to use direct mail.
In addition, Pruitt suggested that the 37-cent first-class stamp is overpriced and has been used to subsidize "preferential rates for saturation mailers using standard mail."
Governmental Affairs chairman Susan Collins, R-Maine, said a joint Senate-House hearing will consider the recommendations of a presidential postal commission and take up additional postal reform issues at a hearing on March 23.
