USPS to fade away?

Neither Rain nor Hail nor E-Mail
By Kendra Mayfield

2:00 a.m. June 7, 2001 PDT

No one writes letters anymore, or so it seems. Instead, people are turning to e-mail, faxes and the Internet to conduct business, pay bills and keep in touch.

That's not good for the U.S. Postal Service, which is facing a $2 to $3 billion deficit this year and a drop in volume of first-class mail.

So how is the 225-year-old independent government agency — which is supposed to meet its own costs while also providing "universal service" to every address in the United States at an affordable, uniform price — competing in the electronic age?

That could be the billion-dollar question. Some say the Postal Service is using innovative new technology to stay competitive, while others insist the agency lags behind and is erroneously expanding beyond its core mission to deliver the mail.

Electronic communication could have a huge negative impact in the next decade. The Postal Service could lose up to $17 billion in annual revenue — or one-half of the first-class mail volume, according to USPS estimates — as consumers go online to pay bills.

"The growth of the Internet, electronic communications and electronic commerce has the potential to substantially affect the service's mail volume," said Bernard Ungar, director of government business operation issues for the General Accounting Office in testimony (PDF file) before the Subcommittee on the Postal Service.

First-class mail is projected to grow at an average annual rate of 1.8 percent until 2002, and then decline at an average annual rate of 2.5 percent in fiscal years 2003 to 2008, according to GAO estimates.

"Such a decline would be unprecedented in the service's history and would likely create financial and performance challenges," Ungar said.

The Postal Service is competing aggressively in certain areas of e-commerce.

It switched its domain from a dot-gov address to a dot-com last year and has since launched a number of new e-commerce initiatives. The agency is offering NetPost, an online mailing service that sends certified mail and letters; Post Electronic Courier Service (PosteCS), an electronic, secure courier service; and eBillPay, a service that allows customers to pay bills online.

It has launched other e-services such as PC postage to electronic merchandise returns, electronic postmarks, digital signatures and smartcards.

"The Postal Service is, and always has been, one of the most high-tech companies in the world," Susan Brennan, spokeswoman for the USPS, said.

That may seem surprising, coming from the agency whose core service has been deemed "snail mail" because of its delivery method.

But somehow the Postal Service delivers more than 200 billion pieces of mail annually, with about 2 million new addresses cropping up every year.

"The coordination of 700 million pieces of mail between 136 million U.S. locations each and every day is anything but (low-tech)," said Stephen M. Kearney, senior vice president of corporate and business development for the USPS, in a recent speech.

But what about e-mail? If people write fewer letters, won't that hurt the bottom line even more?

"E-mail is not a threat," Brennan said.

Much of the content of many e-mails, from jokes to chain letters, would not have been sent via the U.S. Mail, said Tom Wakefield, president of PostalWorkersOnline.com. Many of these short communications would instead be conducted by telephone.
But others think e-mail attachments and other messages are having an effect.

"E-mail has had at least some kind of impact on what people put in the mail," said Edward Hudgins, director of regulatory studies at the Cato Institute.

Rick Merritt, founder of PostalWatch, said he hasn't seen e-mail hurt it, yet. "If (electronic commerce and the Internet) are impacting the Postal Service at all, it's just now starting to," Merritt said.

But online billing is a threat because its potential for acceptance hasn't been realized yet, Brennan said.

Brennan believes the Postal Service's reputation for delivering the mail expeditiously, securely and privately will be a boon for its e-commerce endeavors.

"First-class mail is enormously secure," Brennan said. "People trust the Postal Service."

Some question whether the USPS can compete with private e-commerce services that are nearly identical, such as PayMyBills, Paytrust and PayPal.

"People are as likely to trust PayPal as they are the U.S. Postal Service — which does not have a highly favorable opinion with the public," Wakefield said.

Critics say that the USPS, which is exempt from taxes and can borrow from the U.S. Treasury, should concentrate on improving its core business, rather than expanding into e-commerce.

"Why should a government monopoly that pays no taxes, and is not subject to the same regulations that private companies are, be allowed to compete against the private sector?" Hudgins said. "It is inherently unfair."

In the three decades since the Postal Service reorganized out of the Post Office Department in 1970, its efficiency has increased only 12 percent, Hudgins said.

If these e-ventures lose revenue, it could end up costing ratepayers and damaging the private sector.

"They're not offering anything that the private sector isn't already offering," Merritt said. "It can't help but have a chilling effect on the flow of capital to private companies."

"I believe that USPS missed its opportunity online about five years ago," Wakefield said. "Now it is playing catch-up in a field of nimble and savvy competitors…. In effect, technology, automation, and e-initiatives have only added delivery costs for the USPS."

But advocates say the Postal Service is both competing online and enabling e-commerce.

"Our monopoly is for first-class mail and first-class only," Brennan said. "That monopoly is shrinking every day. For every other class of mail, we compete and we are competing aggressively."

Many say the solution is for the Postal Service to privatize (PDF file) its business, like Germany's Deutsche Post, which has been reorganized and is now privately managed.

As e-paper, online journals and other electronic-communications emerge, "it may be that the Postal Service sees its business taken away in new areas," Hudgins said.

But just as the Postal Service survived the telegraph, telephone and television, the demise of mail is nowhere near, advocates say.

"There are other, faster ways to communicate," Brennan said. "But some things will never change. There will always be some type of mail delivery."

"(Postal mail) is universal. The Internet is not."

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