Sunday, August 17, 2003

In July, sports fans were treated to the spectacle of Lance Armstrong racing to his fifth straight Tour de France victory. The event, improbably, brought widespread attention to the U.S. Postal Service, whose logo was plastered across Armstrong’s jersey. It remains to be seen whether Armstrong’s victory was worth the $40 million sponsorship fee USPS paid. Is a guy on a bicycle the best image for a 21st-century delivery service?

The Tour de France, however, was not the most important news in the postal world last month. On July 30, a presidential commission recommended a wide set of reforms for the Postal Service. It was hardly front-page news: no exciting finish with hands outstretched in victory to plaster on the front page. Yet the results may affect Americans much more than any bike race.

It has been clear for some time that the Postal Service is in trouble. Over the past several years, mail volume has been melting like a popsicle in August, leading to deficits three years running for USPS (though a surplus is expected this year). The reason is not hard to find: the Internet. Americans have increasingly been turning to e-mail and other electronic communication rather than go to the Post Office, a trend that is expected to accelerate.

According to the presidential commission, the Postal Service must change substantially to remain viable in this new environment. In short, the famously inefficient USPS of Cliff Clavin must become a modern 21st-century business. And the commission provided mailbags full of worthwhile ideas on how to do this. Among them:

cEstablish a “Postal Network Optimization Commission,” modeled on the highly successful military base closure commission, to reduce the “sprawling and cumbersome” postal infrastructure, including Post Offices.

cProvide more postal services at non-Post Office locations, such as banks and grocery stores.

• Reform procurement rules to reflect commercial best practices.

• Bring bloated work force levels down through attrition.

• Restructure management to eliminate redundant positions and clarify job functions.

In addition to these much-needed improvements, the commission also proposed creation of a “Postal Regulatory Board” with broad powers over USPS activities. This would be a welcome change. Given its government-owned status, and its legal monopoly on letter mail, USPS enjoys perquisites and powers unlike that of any private company and is sorely in need of more oversight.

Yet, more oversight alone is not enough: The Postal Service’s very status as a protected government monopoly should be reconsidered. Among other things, this means privatization, a step already taken by several other nations. The commission, however, quickly dismissed this important reform. It cited the disruption privatization could cause, but more likely the concern was political, not economic, fallout.

A second, perhaps even more important step would be to repeal USPS’ statutory monopoly on letter mail. Few companies enjoy this sort of legal protection. Potential competitors can literally go to jail if they carry letters. Allowing such competition would be good for USPS as well as for consumers. After all, the Postal Service’s insulated status fostered much of its famous inefficiency in the first place. The fundamental culture of the organization needs to change, and that would be fostered by more competition, not continued protection.

The commission, however, stopped well short of recommending repeal of the monopoly. Instead, it did recommend that the extent of the monopoly be redefined and narrowed by the new Postal Regulatory Board. The changes would be modest — with the rules remaining considerably more restrictive than even those of the European Union, a place hardly known for its deregulatory fervor. Nevertheless, the suggested reforms would be a step in the right direction and could perhaps open the door to more substantial change.

While certainly not perfect, the commission’s report provides a quite a few good ideas for reform. Unlike Lance Armstrong, however, postal reform is nowhere near the finish line. It’s now up to Congress (and USPS itself) to implement change. That won’t be easy — change will be fiercely resisted, not least by the powerful postal unions. And Congress in the past has shown little appetite for postal reform — considering it both too dull and too controversial. But this time — with the Internet breathing down the postman’s back — the issue may be harder to ignore.

James Gattuso is a research fellow in regulatory policy at the Heritage Foundation.

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