New Study Examines How the U.S. Postal Service Uses Subsidies and Special Privileges to Support Its Parcel Business at the Expense of Universal Mail Service
WASHINGTON, Oct. 12, 2021 /PRNewswire/ — A new study by Dr. Robert J. Shapiro and Isaac Yoder of Sonecon LLC, a D.C.-based economic analysis and advisory organization, found that the leadership of the U.S. Postal Service (USPS) has expanded its share of the parcel delivery market by shifting resources and special rights from its universal mail service to its package delivery operations.
In this study, “The U.S. Postal Service’s Increased Focus on Parcel Deliveries and The Impact on Universal Mail Delivery and the Economy,” the authors show how significant privileges allotted to the USPS by Congress for mail service, including tax exemptions, Treasury loans, and its monopoly on mail box access, as well as the facilities, equipment, and personnel for mail deliveries, now also support its parcel business in competition with private delivery companies like FedEx, UPS, and DHL.
The study further explores the basis for these USPS cross-subsidies by analyzing the effects of declining mail volume and growing parcel volume on USPS revenues. The study also examines how the pandemic lockdowns intensified – not created – these dynamics, leading to serious consequences for universal mail service.
“Despite the formal commitment to prompt universal mail delivery, the leadership of the U.S. Postal Service has shifted its focus, resources, and operations away from its public mission and towards its competition for parcel deliveries,” said Dr. Robert Shapiro, founder and chairman of Sonecon, LLC. “This subsidized competition by a public enterprise on an increasingly large scale reduces industry incentives to invest and innovate as well as impairing the quality of universal mail service, even as the volume of mail continues to decline.”
The private transport and shipping industry accounts for the delivery of more than half of wholesale goods and more than one-third of retail goods. It also is the only industry in the economy in which private companies compete with a federal enterprise endowed with special rights and subsidies, USPS.
“Fortunately, Congress can restore well-functioning universal mail delivery and revitalize the critical parcel shipping and delivery industry by providing the resources needed for prompt universal mail delivery and ending USPS’s use of cross-subsidies for its competitive business,” Shapiro explained. The study concludes with three recommendations for Congress:
- Direct the Postal Regulatory Commission and USPS mission to set postal rates that cover postal costs or have Congress appropriate the funds necessary to restore universal, on-time mail service – and bar the use of those funds to support USPS’s parcel delivery operations in any way.
- Pursue established antitrust strategies that prevent the USPS’s monopoly over mail service from leveraging its exclusive resources to tilt the adjacent parcel market in its favor.
- Also in accordance with established antitrust operations, direct the FTC to ensure that private delivery companies have fair access to USPS last-mile services at the same cost and on the same terms as USPS for its own local deliveries.