FedEx, UPS want fair package delivery market in US

Chief executives of package delivery giants FedEx Corp. and United Parcel Service have urged Congress to ensure that in future the U.S. Postal Service will not be permitted to leverage its mail monopoly to compete with privately run businesses.

Fred Smith, chairman and chief executive of FedEx, also told the Senate Governmental Affairs Committee the government should even consider steps to repeal that monopoly by the end of 2008 when similar government-supports in Europe are expected to end.

“This would be the single most important step that could be taken toward structural transformation and modernization of the postal service,” Smith said.

Smith and his counterpart at UPS, Michael Eskew, offered their views as lawmakers continue to draft legislation to further overhaul the 229-year-old quasi-government entity to function more like a business in an era increasingly dominated by e-mail and e-commerce.

“It’s clear the postal service faces serious challenges,” Eskew said of efforts to restructure operations, cut USD7.3 billion in debt and confront the alarming decrease in volume of its core first-class mail business.

“The choice is clear — you can either decide to liquidate the postal service or you can create an entity that can compete,” Smith said.

The chief concern of UPS and FedEx — among the biggest U.S. employers and most politically powerful U.S. companies — is the postal service’s government-enforced monopoly over nationwide mail delivery to ensure universal service.

The executives want Congress to make sure that any overhaul of its charter not enable the service to use revenue or other benefits of letter delivery to support other businesses, like package delivery, that compete with private industry.

“We believe package delivery is well served by the private sector,” Eskew said. “The government doesn’t need to be in it. But it needs to be a level playing field.”

Smith said “firewalls” built into proposed reform legislation are essential.

“FedEx will not support a bill that allows the postal service to raise rates in noncompetitive markets and use the funds to lower rates in competitive markets,” Smith said. “Nor will we support a bill that allows the postal service to use government status for commercial gain.”