March 23, 2000

March 23, 2000 | Commentary on

Stamping Out Monopoly

You have to hand it to the U.S. Postal Service: With its Elvis stamps and rock 'n' roll television commercials ("I want to fly like an eagleā€¦"), it may be the hippest government agency in the country.

It may also be the most ruthless. The only reason the U.S. Postal Service has fashioned a new image is to help it compete with companies like FedEx and United Parcel Service (UPS) in the express-mail delivery business.

Make that destroy FedEx and UPS.

Testifying before Congress a few years ago, Postmaster General Marvin Runyon actually bragged about his agency's prowess at running small delivery companies out of business. Now he wants to go after the big boys of speedy delivery. And why not? As a government agency, the U.S. Postal Service has a killer advantage: It can never go out of business. The federal government will be there to prop it up if it loses money-as it did for 208 years until 1983.

Think about this: The Postal Service spent about $265 million on advertising in 1998, mostly to convince consumers that its express-mail service is just as good as that offered by FedEx and UPS. Yet the agency, facing a lawsuit, had to drop the ad campaign. It seems the Postal Service forgot to mention that under federal law-Code of Federal Regulations, Title 39, Chapter 1, Sec. 320.6, paragraph (c), if you really must know-its competitors are required to charge twice as much for the same enhanced services. "Yes, the Postal Service actually sets our rates," says UPS spokesman Tad Segal.

Meanwhile, the cost of a first-class stamp, now 33 cents, edges up a penny or two every year or two and may go to 37 cents before the decade is through (anybody remember the five-cent stamp?). This from an agency that had a net income of $1 billion from 1995 to 1998. One would expect these profits to be passed down to the consumer, but stamp rates have gone up and the mail arrives no faster than it did in 1970. The fact is, the U.S. Postal Service could raise stamp prices to $10 and get away with it because we have no choice-and choice, as anyone who's had Econ 101 can tell you, is an essential component of a truly competitive business environment.

The Postal Service enjoys other advantages that make the playing field about as level as Mt. Everest. For example, private companies have to pay property taxes; the Postal Service does not. And the Postal Service is exempt from parking tickets, a business expense that FedEx and UPS must budget for each year. American companies shouldn't have to compete against their own government-especially when the government has all the advantages.

At the very least, the government should be consistent. If Washington broke up AT&T in the name of fair competition and free markets, and is threatening to do the same to Microsoft, then surely the Postal Service's monopoly also deserves to be eliminated.

It's understandable why the U.S. Postal Service wants to compete against FedEx and UPS in the lucrative express-delivery business. But at the same time, these private companies ought to be allowed to compete against the Postal Service in delivering first-class mail. Fair is fair, and monopolies are supposed to be illegal, no matter how hip they try to be.

Edwin J. Feulner, Ph.D. is president of The Heritage Foundation, a Washington-based public policy research institute.

About the Author

Edwin J. Feulner, Ph.D. Founder, Chairman of the Asian Studies Center, and Chung Ju-yung Fellow
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