USPS should stick to postal products, says Congressional advisory

The US Postal Service should not be allowed to expand into non-postal products and services to raise revenue – because its track record in non-postal areas is not good enough. That’s the view of a new Congressional advisory from the right-wing Washington-based think tank the Institute for Research on the Economics of Taxation (IRET), published yesterday.

The report came just two weeks after another white paper from the USPS Office of the Inspector General that once again stressed that providing more products and services not directly related to the delivery of letters, documents or parcels would help Postal Service revenues and the community at large.

The IRET studied non-postal products at foreign posts and found some potential for generating revenue, although it suggested the posts were making “below-average” profits and displacing private sector businesses from markets.

But in particular, report author and senior economist Michael Schuyler said the “long history” of abandoned non-postal commercial ventures meant USPS would not achieve success if Congress repealed its 2006 ban on USPS providing non-postal products and services.

“USPS’s record of failure largely explains why its nonpostal presence is so small today,” said Schuyler in the IRET report. “USPS’s past disappointments… helped persuade Congress to include language in the Postal Accountability and Enhancement Act of 2006 banning USPS from introducing new nonpostal commercial products.”

USPS did provide non-postal products like photocopying and prepaid phone cards before it received its ban from Congress six years ago.

However, with the collapse of USPS revenues since the 2006 postal law, Congress is now looking again at whether it should be allowed to offer new products and services not directly related to the delivery of letters, printed matter or packages.

The Office of the Inspector General (OIG) said in its 16 July report that offering non-postal products and services would increase the value of Post Office retail facilities and address community needs.

It would also increase revenue and enhance the Postal Service brand, said the OIG.

Product suggestions

In the past, the OIG has recommended various non-postal products for the USPS to try, including use of its facilities to help expand broadband coverage in the US, the offering of payment services for the underserved – such as through prepaid credit cards – and the expansion of government and e-government services.

The OIG said surveying 90 US postmasters saw them suggesting new services including faxing and photocopying services, notary services, more government services, passport services, greeting cards and Internet or wireless provision.

While USPS has suggested in the past that its foot traffic in post offices is too low to profitably offer non-postal products and services like banking and insurance at its retail locations. Foot traffic in US post offices fell 13% between 2010 and 2011 as popularity of the USPS website increased.

OIG said offering things like government services and payment services could increase foot traffic, but that USPS would have to determine how much foot traffic would be needed for a non-postal product to be successful.

In its advisory note, the IRET said USPS should stick to value-added postal products if it wants to improve its finances.

“Because they directly tap into the Service’s expertise and infrastructure, they are more likely than nonpostal products to help the Service and mail users without burdening taxpayers and the general economy,” it said, suggesting as an example that Congress allow USPS to deliver alcoholic beverages.

However, the IRET did suggest one nonpostal area where USPS could “usefully” increase its involvement was in providing more government service access, although it insisted on a rule requiring full compensation for running such services, to protect mail users from higher postal rates.

Lessons from foreign posts

The OIG has also studied foreign posts and non-postal products and services offered by posts in other countries. Its research of posts including Swiss Post, Poste Italiane, Japan Post, Royal Mail and SingPost has suggested product lines ranging from financial services and insurance to online shopping, phone services and storage services.

The OIG did note, however, that many of these products and services within foreign posts took time to produce results.

The IRET cited an Accenture study showing that for 25 top foreign postal services, diversified products (including package services) accounted for as much as 63% of revenue in 2008, up from 49% in 2003.

But the IRET claimed that foreign posts “often extract large sums from postal ratepayers and the government… to cover start-up costs”, suggesting a move by USPS to offer non-postal products would see postal rates in the US increase.

The IRET also suggested that non-postal products and services made below-average profits at foreign posts, and also displaced private sector businesses from such markets.

Congress

In the plethora of legislative proposals that have emerged and died in Congress since USPS asked Congress to change the law so it could offer non-postal products and services, suggestions for such offerings have included public Internet services, notary services, advertising on USPS properties, financial services and facility leasing and warehousing.

The 21st Century Postal Service Act, which was passed by the US Senate back in April, proposed setting up a commission to decide on ways to raise revenue.

Since April, however, the much-needed postal reform legislation has met an immovable barrier in the form of the Republican-controlled House of Representatives, which has not moved forward with its version of a postal bill since it was passed out of committee nine months ago.

US lawmakers are currently distracted by the upcoming Presidential elections, which has seen the postal bill slipping off the debate schedule in the House this month.