USPS’s Parcel Problems

Competition over parcels, the real growth area of the air express business these days, has become a major sticking point on a law that restructure the way the USPS handles its business and its role in the marketplace.
Groups representing package shippers say the private express carriers successfully pushed a House committee to add new requirements on the USPS that would put the Postal Service disadvantage in the parcel delivery market.
"It's UPS's staging attempt to eliminate the Postal Service as any kind of competitor in the package business," said attorney Timothy May, who represents the Parcel Shippers Association and other shipper interests. "What we fear is this would raise the bar so far for the Postal Service that it would be impossible for them to compete in the package business."
The Postal Service also fears the bill as it stands would at least put a serious crimp in its parcel business and might put it out of the parcel business completely.
The change in the bill's language would give UPS or any other interested party a chance to delay rate changes for the Postal Service's competitive products. Backers of that provision say the procedure is necessary to allow the USPS to compete against the private sector. But opponents argue the change is a Trojan horse, effectively allowing UPS or other competitors to indefinitely delay postal rate changes.
Even with the argument over parcels, many longtime supporters of reform at the USPS say the effort stands its best chance in years of getting through Congress.
The House Government Reform Committee in May unanimously approved a postal reform bill sponsored by Rep. John McHugh, R-N.Y.
McHugh's chief of staff Robert Taub said substantive change seems within reach.
"This is not a post office-naming bill," Taub said. "This is affecting a huge part of our economy. It's certainly more wind at our back than in front of us. But on the other hand, this is still the legislative process."
The Postal Service is a 750,000-employee behemoth which, according to the General Accounting Office, faces a $7.3 billion debt to the U.S. government and $90 billion in unfunded liabilities and other obligations.
The USPS has seen faltering traffic in its core First Class letter business as fewer people are sending correspondence and bills through the mail.
But perhaps more damaging has been the dramatic decline in the expedited services where the USPS competes most directly with UPS and FedEx that the Postal Service had targeted as a growth area in the 1990s. Express Mail traffic, measured in pieces, fell 20 percent between 2001 and 2003 and Priority Mail was off 22 percent.
Congressional observers say House leadership plans to bring McHugh's bill to the floor for the full House to debate in late June.
"It's not a slam dunk," Taub said. "But on the other hand, getting his bill out of committee 40-0 is a major achievement. We'd never reached that point."
The Senate Governmental Affairs Committee was scheduled to mark up its postal reform bill last week.
Lobbyists and top executives for both FedEx and UPS have long been involved in the postal reform debate. Now, the companies are on opposite sides of the issue regarding the Postal Service's competitive products. FedEx has a contract worth more than $7 billion with the Postal Service to carry Express Mail and Priority Mail.
"We certainly were advocating for some change to let them have some more flexibility and to continue to lower the monopoly threshold," FedEx spokeswoman Kristin Krause said.
UPS spokesman David Bolger said his company is pleased so far with the pending bills.
"I think they strike a fair balance on flexibility as well as oversight," Bolger said. "That's what we at UPS feel is very positive about these bills."
The provision in dispute would allow outside parties to file complaints with a new postal regulatory agency, which would replace the Postal Rate Commission and would be similar to the Federal Trade Commission.
Under the House bill, the Postal Service would have to publish its proposed rates for competitive products at least 30 days before making changes.
Postmaster General John Potter told a gathering of Postal Customer Councils in late May that he is concerned about how competitive products will be treated in the legislation.
"The language will likely result in added costs being shifted to packages," Potter said. "That could result in significant upward price pressure, which could put the $2.5 billion in contributions that we gain annually from our package services in jeopardy."
Potter told postal shippers that they should be concerned about the proposed changes.
"What does that mean to you? Well, if we lose $2.5 billion in contribution to universal service costs, it will have to be found somewhere else, most likely in higher rates on other classes of mail," he said.

Shipper group says private carriers could cause havoc with USPS pricing under reform plan