Last month in Britain, her Majesty’s government made an initial public offering of shares in the British post office, raising $5.3 billion. The government is only retaining between 38 percent and 49.9 percent of the shares, meaning that the three-and-a-half century old state enterprise soon will be guided by private hands. The Royal Mail will no longer be so royal.
You might think this is a model to rescue the U.S. Postal Service, to help it complete with emails, tweets, and Facebook as means of communications. But not so fast. Politicians in Washington need to put the Postal Service on an equal footing with other private enterprises, sorting out which monopoly rights, mandates, and regulations stay and go. Further, the USPS needs to decide exactly what its core functions would be. Otherwise private investors would have little reason to sink their own money into the Postal Service’s sinking concern.
The U.S. Postal Service is now in a fiscal death spiral as the communications and information revolution has eaten into many of its profitable services. Mail volume peaked in 2000 and has dropped by almost one-third since then. USPS income peaked in 2008 at $74.9 billion and then declined to $65.2 billion last year. But the big problem was that expenses last year were $80.9 billion. While much of that $15 billion loss stemmed from the requirement that the USPS put aside money to cover future pension liabilities, it would still be losing money in any case.
The service’s favored status is actually what makes it unsustainable. It has a monopoly over delivery of first- and third-class mail, and over physical mailboxes. It’s mandated to provide universal service and uniform prices. And it enjoys special powers and privileges — e.g., it is tax-exempt. But all that means it’s overseen by a government-appointed regulatory board, which enforces strict regulations lest the USPS abuses its status. It doesn’t have the flexibility of a private company.
If the USPS wanted to go public, like the Royal Mail in Britain and the Deutsche Post in Germany, a lot has to change. To begin with, American policymakers would need to scrap the regulated government monopoly model and put the USPS on an equal footing with private companies. This could mean stripping it of many special powers and privileges. But the big question would be what to do with the universal service mandate as well as the monopoly. To dampen unfounded fears that rural or other costly delivery points might find their mail delivery cancelled, there will be political pressure to retain the mandate and monopoly at least during a transition period.