There are some things about having this blog that I would not have predicted before we started it. One such item is what search terms would get readers to this site. Among the terms that people actually search on is “usps inefficient.” That phrase and variations on it is one of the top ten phrases that get readers to our site because of Gady’s post way back in August. The question of whether the post office runs “well enough” is relevant at this time of year as people send off presents and card. The LA Times ran an article recently on whether it is time to privatize the post office (Time to privatize the Postal Service?, Dec 20). One can also hear an interview with the article’s author David Lazarus on Marketplace Morning here.
One of the interesting things that Lazarus does is actually ask FedEx and UPS whether they find the idea of privatizing the postal service appealing:
I called FedEx and asked if they wanted to take over the postal service. “That’s not something we would comment on,” a company spokeswoman, Ann Saccomano, cagily replied. “It’s speculative.”
A UPS spokesman, Norman Black, was more forthcoming when I put the same question to him. “We believe that the government plays a role in terms of ensuring that every mailbox is reached every day,” he said. “That is not a responsibility that UPS would want.” …
“If the system was privatized, it might cost 44 cents to get a letter across Los Angeles but $5 to get it to Connecticut,” said Maher, the postal service spokesman. “When you think about a network that delivers to all homes every day — it’s huge,” he said. “Would a private company be able to do that? I don’t think so. I think we would lose universal service.”
As the article notes, UPS’s answer is not surprising. Taking on universal service — serving every house on every back road — is immensely resource intensive and hence expensive. The government goes to great lengths to assure everyone in America can get phone service and wants to do the same with Internet broadband access. There is no way that they would allow private providers to “under-serve” rural markets relative to urban areas. FedEx and UPS do that now. There are locations sufficiently remote that FedEx simply won’t promise overnight service. Yes, it will get their eventually but it won’t promise Friday by 10:00AM. Such two tiered service would simply be political poison given established practice
Lazarus has one suggestion I don’t quite get:
It seems to me that the only privatization scheme that stands even a remote chance of working would be to break the postal service network into hundreds of regions and territories, and then have local companies compete for mail-delivery rights in each area. But you’d still have to wonder how any such private-sector players would be more successful at the game than a long-established heavyweight like the postal service.
In urban areas this might work. Indeed, we could have multiple firms serving each address (much like UPS and FedEx do now for packages) and count on competition to keep prices down. But rural routes still pose a problem. If having a quasi-governmental behemoth handle all the traffic is inefficient, how is splitting the volume between multiple firms going to make it better? A better plan might be to pair urban and rural areas. If a firm wants to serve Cook County, maybe they should have to take a stretch of central Wyoming. Of course, that is just replicating the current system of low-cost urban areas subsidizing high-cost rural areas.
Lazarus does have one suggestion I have never consider that may have some promise:
Why limit the system’s network of post offices to stamps and boxes? Why not have the post office deal in all manner of communications, from book and cellphone sales to DVD rentals? Heck, why not sofas, lattes and Wi-Fi access?
In the Marketplace interview, he refers to USPS’s network of post offices as an asset and that really is true. It’s got broad reach with some good locations. There is non-uniform performance as the NY Times recently reported (Bad Post Office. Good Post Office. Dec 18) but there seem possibilities for increasing what is earned from that base. Indeed, the solution of the USPS’s woes may not be FedEx but Starbucks.