Sunday, June 3, 2012

Why Does the Postal Service Cling to a Money-Losing Monopoly?

The U.S. Postal Service and American publishers are locked in a lose-lose relationship. Maybe they should consider a divorce.

For every dollar it spends on delivering newspapers and magazines, USPS claims it only receives 75 cents in postage. Meanwhile, notes the Columbia Journalism Review (in Postage due: The USPS is running out of money. Where does that leave magazines?), magazine publishers are growing worried about the increase in customer complaints regarding lost, damaged, and late issue. They fear coming changes will only make matters worse.

New interest in bypassing the Postal Service by using private delivery services was much in evidence at a recent magazine-industry summit, CJR reports.

But publishers also pointed out a major barrier to private delivery: Their subscribers want “to get their magazines in their mailboxes, rather than tossed at the end of the driveway like a newspaper. By law, only the USPS can put mail in mailboxes.”

Maybe the Postal Service would be better off loosening its grip on the mailbox monopoly by granting an exception for periodicals. (After all, whoever heard of a money-losing monopoly?) Not only would the agency lose unprofitable customers, it could actually charge the publishers a fee for each mailbox they use.

Allowing delivery only to paying subscribers and restricting the use of loose inserts could prevent the mailbox privilege from siphoning off profitable postal business.

A tougher problem to control would be cherry picking – publishers using private delivery only for densely populated neighborhoods that are easy to serve, leaving the high-cost areas to the Postal Service.

Then there’s the question of what “cost” means in Postalspeak. If the Postal Service says it costs 35 cents to deliver a particular magazine, how much will it save if it doesn’t have to handle that magazine?

Probably much less than 35 cents. A lot of that 35 cents is an allocated portion of expenses that exist regardless of whether the magazine is delivered.

But permanently losing a sizeable chunk of the labor-intensive Periodicals Class business might be enough to move the cost needle. That's especially true as USPS downsizes and shifts toward a flexible workforce, which should make its costs more sensitive to mail volumes.

What's clear is that the current arrangement is not working for the Postal Service or for many publishers.

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Anonymous said...

"Whoever heard of a money losing monopoly?" Try social security and medicare for starters...
But the fact is the postal service has NOT been losing money. Congress has been stealing money out of the post office faster than the P.O. can generate it and that's where the 'loss' comes in on paper.
In 1996 the postal reform act (passed by congress) required the postal service give to the government enough money to pay for their retiree health care cost for the next SEVENTYFIVE years but do it in 10 years. Almost $6 BILLION a year has been pulled from the P.O. by congress and, like social security, the money is not invested for those postal workers retiring over the next 75 years. It's immediately spent by the federal government.
Imagine if the government came in and told you "we're going to tax you in an amount the will leave you with insufficient money to meet your basic costs for your mortgage, food, etc." You'd go broke and everyone would blame you for not working hard enough or eating less food when the root cause would be the huge tax from congress. Theses are the same people who are now beating the drums and telling the post office to not change it's business model until they can 'fix' it. They 'fixed' it in 1996 and that's why it's broken. And broke. :-(

Anonymous said...

The law was passed in 2006, not 1996, but I do agree with everything you have said. Its a shame its on deaf ears.

Anonymous said...

If an exception is granted for periodicals companies will define periodicals to suit their needs.

Anonymous said...

TWO major reasons for a money losing monopoly. first, postal management is and has been totally incompetent, unethical, and sometimes fraudulent in their operating the usps. however, there is no accountability for postal management. second, a bigger group of incompetent knuckleheads, called the u s congress, decided that the usps should fund all their health care expenses for the next 75 years, and to send uncle sam that money in a ten year period. this is bilions and billions upon dollars every year! no other gov't agency or company is required or has funded their healthcare expenses going forward 75 years!! this would bankrupt every business in america. i demand that congress REQUIRE EVERY BUSINESS AND GOV'T AGENCY TO PREFUND THEIR HEALTHCARE EXPENSES FOR THE NEXT 75 YEARS AND THEY MUST DO IT IN THE NEXT TEN YEARS!!
no company could survive. but this exactly what the congress has done to the post office and now they want try to privatize it or eliminate collective bargaing for its employees rather than admit their sleezy deal of requiring the post office to prefund healthcare for 75 years is a major cause of the postal losses.

Anonymous said...

Anonymous is right!It is the GOP party that loves stories like this because they would like nothing better than to see the USPS privatized. Also, remember: the USPS is MANDATED to hold costs down, whereas a private company is not! You may get delivery cheap at first, but I guarantee the price for delivery will rise and rise and those companies, which will no doubt be owned by GOP members will reap the benefits! People are forgetting one thing: The USPS was created to deliver, that means to SERVE the American People, all of these cuts in post office hours, closures of processing facilities and post office will mean longer delays in the delivery of the mail, and Congress knows it and so DO ALL OF CONGRESS! They are just fighting for the RURAL offices so that they can use it for their re-election purposes, never mind the processing facilities that actually GET THE MAIL to the rural offices and the delays it will cause if they are consolidated or closed! And the loss of tax revenues and community revenue to those cities! Congress and the PMG are playing games with a national institution that was NEVER created to make money! Congress could care less about the millions of jobs lost as long as the USPS remains profitable and they can keep taking money from the USPS! It is high time the American people stood up against Congress and voted all GOP members of the House and Senate out of office!

biscuit said...

As a letter carrier for almost 30 years, there are more reasons than "monopoly" to let only the Postal Service access private mailboxes.

People don't always get their mail every day, and we have to stuff mail into sometimes very small mailboxes.

They leave it there because they trust us to not mess with what is already in there.

That may not be the case for several other people per day that want access to your front door, front porch and of course, mail box.

I only want ONE person walking in my yard, rattling around at my door--my trusted mailman, that I know that has been vetted, trained, and is recognizable by his vehicle and uniform.

I don't want some nefarious person stuffing things in my mailbox and thinking, "hmmm, here are some credit cards, checks, bills, etc, in here...from ten minutes ago, or from yesterday...I'll take them and steal the money or at least his identity."

Do we want to place the actual keys into the hands of heaven only knows who? The same keys that open millions and millions of apartment boxes, "cluster boxes", and out-going mail collection boxes????

Apartment dwellers choose apartments for several is that there are centralized, SAFE, secure mailboxes that they may not have time to check every day.

Some of these people work overseas, offshore, drive trucks, and are away from home for days and weeks at a time. They trust ONE entity to access their box full of stuff: the United States Postal Service.

If private concerns want a piece of the pie, let them provide, install, maintain their own boxes, or let the private individual provide such a box on his own house, clearly recognizable as not being for postal mail.

No, these companies want to use what the postal service has already designed, approved, and often provided.

I think security of the mail, and restricted access to my front door are at least as important as any monopoly and its profits.

Unknown said...


Unknown said...

Maybe what seems most bothersome is when the media or Congress wants to talk business; they always parade out a Postmaster waving a white flag, rolling over and speechifying abdication through "postal reform." If management can't lead, then they should at least get out of the way. Or better yet, just get out. Leave your bonuses by the door and leave the workforce to handle the task ourselves. If Congress wants to save the Postal Service billions of dollars, then pack up all the Potter wannabes, and kite them out the door.

Unknown said...

Make the management craft a non-supervisory craft that will manage to improve customer service and improve sales and increase revenue. Make them work for their jobs and maybe they will have more respect for the crafts that actually do work. . The plant manager that sent the clerks to their deaths in the anthrax attack was recently promoted to 1 of the 47 high level VP positions under Donahoe. FIRE ALL POSITIONS THAT DON"T WORK THE MAIL! Let the crafts manage themselves. Make management increase the postal revenue and increase customer service for their salaries. Make the managers that violate the union contracts “that they agreed to” deduct the fines directly from their salaries. Then there will be no more violations of binding arbitration. It's the only fix to save our postal service. MAKE MANAGEMENT WORK NOT BULLY FOR BONUSES!

Round Tuit said...

The mailbox monopoly is a straw man. Nothing prevent publishers from having delivery services deliver their wares just as newspapers do, by adding a box below the mailbox or on a separate stake.
If magazine publishers think service through the USPS is deteriorating I wonder what they would expect from private services paying people minimum wage and cutting every corner possible.
The problem is that the management of the Postal Service has lost sight of its mission and its reason for being. The issue with periodical costs is at the heart of a defective pricing system.
A prime purpose for the existence of a national post is for the delivery of communications including what constitutes periodicals. By losing that focus and basically turning the network upside down to give preferential treatment to marketing and advertising mail we've put periodicals and newspapers at a disadvantage. Essentially we're subsidizing the wrong things for the wrong reasons.

Anonymous said...

As stated Congress only deals with issues that favor their reelection.
The demand for USPS services are declining and will further decrease revenue. Cost effective operations mean nothing to Congress, PRC and useless board of governors. Small neighborhood officies located within 5-6 miles of each other and a high level office in the city surrounding these non needed high wasted cost as all have Postmasters with salaries from $63000.-$72000 and sseveral have no type of delivery and pay a high wasted cost for a Postmaster to sell stamps and box mail. Another wasted cost is 6 day street delivery in the age of electronic paperless means of personal and business communication. Eliminating 52 days of 195,000 vehicle cost and delivery operation workhour cost would be cost effective and reduce loosing 25 million dollars a day.
If service is the issue, a joke, then subsidize and continue to play politics.

Anonymous said...

The mailbox monopoly is very overblown. Who buys the box? The homeowner. Who installs the box? The homeowner. Who maintains the box? The homeowner. Who claims exclusive right to access the box? The USPS. If vandals damage, or destroy the box who gets notified? If you said Postal Inspectors you are only partly right as they track the issue but take no direct action. Instead they advise the homeowner to contact local law enforcement as there are likely others similarly affected. Federal cases are prosecuted by U.S. Attorneys appointed by the President and they care little about mail box issues. The USPS does have a book full of requirements and regulations governing the mail box provided by homeowners. How high up, how far from the road, how big, etc. but should that confer exclusive usage?

Anonymous said...

Oh wow, NO BUT HELL NO, I do not want unknown non-professional delivery people running the neighborhood at will and messing around my mailbox. I don't even want those people in my yard, at least the USPS, FedEx and UPS have a professional delivery staff and have a much better handle on who they let loose in my neighborhood. Sorry but NO, I will never accept anyone but the USPS to deliver to my mailbox.

Anonymous said...

Don't you just love it when someone writes something like this that doesn't get their facts straight.
How can a company keep someone on their payroll with comments like this.

Anonymous said...

Perhaps the losing monopoly is required by law ! Can you say constitutional mandate ? The only problem is congress was not suppose to STeal from the public through one of the most trusted entities. Oh but wait they have been doing just that for decades through postal properties and leases !
Oh wait you weren't suppose to know about that either ,,,

Herod Lowery said...

I subscribe to about 15 magazines but in the last year or two, the service has gotten worse. Instead of the magazines and catalogs arriving spaced out though the month, I get 5-7 magazines and catalogs all at once! I asked my post office about this and they said at the sorting facility 60 miles south of me, to save money, they wait until they get a full pallet of magazines and catalogs and then send them all at once. Sometimes the magazines are nearly a month late.

Anonymous said...

Never ending disfunctionality, unfortunately. If this were a company like any other, it would have went bankrupt. Government run, of course not, unlimited spending, unlimited dept. Good luck to all of us who do not make much money, we are getting more and more money squeezed out of us for less and less in return, with things cut out left right, snip, snip, snip. Pretty scary how things are going.

Anonymous said...

As said by previous commenters, there is a very good reason for the mailbox monopoly! as a Rural Carrier I have opened mailboxes that are a half mile or more from the house only to find it stuffed with a new phone book or a package from a lazy ups or fed ex driver! Guess where that stuff ends up? On the ground next to the box!

Obie Greenway said...

The U.S. Postal Service and American publishers are locked in a lose-lose relationship.

Hold on a minute. First-off, U.S. Postal Service was set-up to SERVE THE AMERICAN PUBLIC and not greedy businessman.

Newsboy said...

Keep in mind that the postal service, like all of government, is a public service. There is a huge difference between public service and private service and there's a reason for that. Public service is supposed to serve ALL of the public. Private service is in the business to make a profit and service only the most profitable.

This whole "let's run government like a business" meme is just that. A meme. Guaranteed to get low information voters to vote for you.

Private business is not necessarily better than any branch of local or federal government. Enron anyone? Or, in the publishing business: Anderson News, KIII, Primedia, Source Interlink, Ziff Davis (after the 3rd or 4th billion dollar leveraged buy out)...

Unknown said...

The Postal Service is NOT A MONOPOLY!

It has the exclusive right to deliver only ONE PRODUCT, First Class Mail! And exclusive access to your mail box. And this is for security purposes only.

All other types of mail can legally be delivered by ANY OTHER SERVICE!

The PO completes with UPS, FedEx, and other delivery services for all other products and services.

The magazines publishers attempted alternative delivery services in the 80's and 90's but found they couldn't match the PO's delivery standards or price per piece and people didn't like having their periodicals throw in their driveway, so the gave up.

It seems like this MYTH of a monopoly never dies, the same as the MYTH that the PO is operated using tax dallars.

The misinformation about the PO is staggering.

John O'Brien said...

You can't lump all publishers into the same category.

I publish a small, business-to-business magazine with a controlled circulation of about 15,000 in the U.S. This means that subscribers recieve the magazine free of charge. Over 30 years ago we earned and qualified for Periodicals class mailing (it used to be called 2nd class mail). A publication does have to meet a number of requirements. The discount we receive by mailing in Periodicals class compared to first class mail basically allows us to stay in business. Like us, most b-2-b publications rely on advertising to pay the bills, and print advertising certainly isn't what it used to be.

Th USPS does a pretty good job getting copies of our magazine where they're supposed to be. Periodicals class may not be the fastest delivery program to some regions in the country, but it gets the job done at a cost a publisher (especially a small one)can afford.

I don't know if the USPS actually loses money delivering Periodicals class pieces of mail. The USPS's fees are based on weight and regions, so there is a formula in place to create a profit margin.

The structure of the Post Office may need to be revamped, but I wouldn't be too quick to blame Periodical class mail for its financial woes.

bob komar said...

The postal service clings to a money losing monopoly because It STILL LINES THE POCKETS OF ALL MGMT...FROM TOP TO BOTTOM.. INVESTIGATE PROVE ME TO BE A KLOWN!I hardly DOUBT YOU WILL!

Anonymous said...

The Postal Service is being manipulated by large mailers who buy off certain members of congress. These large mailers (such as Val Pak) only want mail to be delivered in large cities and to end deliver for small town USA. Look up "Alaska bypass mail". The state of Alaska would have to pay a yearly large fee to continue to receive mail for the entire state. This is the future for rural America is certain large companies have their way.