Franchise the Post Office

By Cate Long
December 12, 2011

Since the news came out that the United States Postal Service lost about $10 billion in the last fiscal year, various proposals have been swirling around to make it profitable going forward. Some have called for the closure of half of the mail processing centers, the elimination of Saturday home delivery, and the possible closure of about 3,650 rural post offices.

But instead of closing those 3,650 rural post offices, how about we convert them to franchises using the model of United Parcel Services?

The USPS undertook a large review in 2010 about how it is organized to deliver mail. It engaged Boston Consulting Group to provide forecasting expertise; Accenture to put together an analysis of the revenue sources used by foreign postal services; and McKinsey & Co. to carry out a feasibility and impact study on cost-cutting and revenue options. The USPS is a massive organization employing over 600,000 workers with locations in every American city. Given legislative and union constraints the review created an excellent menu of options for restructuring postal services, and although these consulting firms came up with a lot of good ideas they didn’t propose a mini-privatization by franchising the rural post offices.

Full-service (read unionized) post offices are much more expensive to operate than post offices that are run as adjuncts to other operations like grocery stores. From the United States Postal Service,”Ensuring a Viable Postal Service for America: An Action Plan for the Future,” March 2010, page 8:

Full post offices are more costly to operate than other means of serving customers. The average post office transaction cost 23 cents per dollar of revenue in 2009 while the average transaction at a contract postal unit cost just 13 cents.

Post offices used to generate almost all postal retail revenue, but 29 percent is now generated online through usps.com and other alternative channels.

If rural post offices could be franchised to citizens, jobs would be created; local services would be maintained; and a vital hub for the community would remain in place. Most vitally, franchising these facilities would assuage the objections of members of Congress who represent the rural places.

This would not be uncharted territory the USPS. In fact, it would represent a return to how the postal service operated before the Civil War. From the Cato Institute:

Members of Congress whose districts would be affected by a post office closure often raise a big fuss. Last year, for example, the USPS proposed consolidating 3,200 postal outlets, but following a congressional outcry, the number under consideration was reduced to a paltry 162.17 That is no way to run a business.

[...]

Prior to the Postal Act of 1863, intercity letters were either held at the destination post office for pick-up or delivered by an independent contractor. The Postal Code of 1872 extended the postal monopoly to the delivery of local letters, banning intracity private carriers. These private carriers, which numbered 147 at one time, had been innovative: for example, they introduced stamps before the Post Office did.

We need more small businesses and rural resources in America. Why not develop a fair and open process to franchise rural post offices so they could serve as anchors for an array of services for rural Americans? There would be a lot of details to work out, but it’s a project that could light over 3,000 small businesses.

3 comments

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FINALLY a serious proposal for fixing the USPS that is something other than “we’re being outcompeted, so we need to stop offering expensive services like ‘dependability’ and ‘convenience.’ ”

Your plan is almost certainly not the be-all, end-all solution to USPS’s problems, but I think it would be a big help. Even if it did nothing, though, it still would be infinitely better than ending Saturday delivery or lowering the standards of delivery speed. Because, you know, it wouldn’t be killing off the last shreds of competitiveness USPS has going for it.

You should be postmaster general..

Posted by spameroo | Report as abusive

This will work only over a pile of of overpaid; over pensioned union bodies (who have a no lay off contract no less!)

Posted by kehenalife | Report as abusive

… jobs would be created….” Maybe you can help me understand how a post office integrated into an existing business would create jobs. The business will simply be handled by someone earning minimum wage and selling lottery tickets and beer as their main occupation. Of the 3650 rural post offices threatened, how many are in a community where a suitable business base exists? The population density of Loving County, TX is less than 2 per square mile. I doubt there is a critical mass there.

Posted by RichardNYC | Report as abusive