Apologies to Paul Simon for borrowing his song title, but it seems to fit our favorite federal agency. Just as Simon had moved from nostalgia into colder emotions, the Postal Service has evolved from an unquestionably essential service into one that’s slowing being marginalized by factors beyond its control. And like Paul Simon, it’s still burdened with baggage from its earlier days.
As every civics student learns, the US Constitution includes a clause (Article I, Section 8, Clause 7) empowering Congress “to establish post offices and post roads.” Over the 23 decades since it was written, that seven-word phrase has become the basis for developing, first, the cabinet-level Post Office Department, and then, as of 1970, the independent Postal Service, but the fundamental assignment remains unchanged.
As now codified in Title 39, US Code, section 101: “The Postal Service shall have as its basic function the obligation to provide postal services to bind the Nation together through the personal, educational, literary, and business correspondence of the people.” This principle, combined with other statutory provisions, is expressed in the Universal Service Obligation. Though there’s no verbatim explanation of the USO in federal law, it’s commonly interpreted to mean delivery of mail to all addresses in the nation, and physical access to postal services for citizens everywhere: six-day delivery and post offices in all communities.
Obviously, America in 2022 isn’t as it was in 1789 – or even in 1989 – and the biggest difference that’s impacted the USPS is changes in communication. Smartphones now put every user in touch with not only every other user but with all the information available through the internet – virtually instantaneously. Texting, email, and other electronic exchanges of information have seriously undermined the use of admittedly slower paper correspondence. In turn, this has reduced the volume of mail being carried and, accordingly, the revenue being generated – especially by higher-margin First-Class Mail – that’s needed to pay for USO services. Meanwhile, the delivery of packages – only recently a serious focus for the Postal Service – has become well-served by private sector companies built specifically for that function.
Usually, the postal monopolies are seen as the corollary to the USO. Revenue generated by the Postal Service’s exclusive rights to carry “actual and personal correspondence” (usually interpreted as addressed letter mail, like First-Class Mail) and to access recipients’ mailboxes was supposed to offset the costs of the USO – especially providing the required services even if they’re not self-sustaining.
Unfortunately, it’s arguable that the equation that worked for decades isn’t any longer, and is getting increasingly unbalanced.
So What Happened?
Today, there’s less mail, representing less postage revenue, being delivered to more places; access to postal services – or any services for that matter – no longer means going to a physical outlet (shopping during the pandemic proved that). Nonetheless, the USO remains in place, even as the mechanism to finance it is becoming less relevant and effective. In turn, this is undermining the ability of the Postal Service to be self-supporting.
The majority of the mail in the USPS system is commercially-produced, paid for by transactional mailers, advertisers, or shippers sending items to individuals. The majority of the cost is for the infrastructure to process and deliver that mail. None of it is borne by the people who get the mail – delivery is free. The volume of mail being sent by individuals – full-rate First-Class or packages – is far too small to support the system that gets it to addressees.
The problem for the Postal Service is simple: commercial mailers now have alternatives to sending hard-copy messages that didn’t exist – or weren’t sufficiently robust – 30 or 40 years ago. As their postage spend decreases, it’s not supplanted by other funding sources – certainly not by retail mailers – yet the cost of the postal system continues and grows over time.
Every year, as part of its annual report to Congress, the Postal Regulatory Commission estimates the costs of the USO – things required of the USPS that would not be done by a private business – and the value of the postal monopolies. In its report for fiscal 2021 (October 2020 through September 2021), the PRC stated that, for FY 2020 (the most recent year for which the data was available), the USO’s cost was $5.9 billion – up from $5.78 billion in FY 2019 and $5.41 billion in FY 2018. At the same time, the PRC estimated that the postal monopolies’ value as $4.68 billion in FY 2020, down from $5.66 billion in FY 2019 and $5.56 billion in FY 2018. These figures strongly suggest that, while the USO and monopolies once served their public policy purposes, the formula is failing.
In a business sense, it would be logical to rethink the continued need for a USO and the utility of the monopolies, but business has nothing to do with any of it. The USPS is a service established as a governmental function that was assumed would be supported by its customers. What it’s become, however, is a mandated function supported by a subset of senders of mail, not by the recipients. Worse, those senders have alternatives whose use further drains away revenue needed by the USPS to pay for the costs of what it’s required to do. No matter who looks at this situation, it’s clearly not sustainable.
The solution being implemented by the current postmaster general is to simply raise prices, but such an approach assumes – fatally to its objective – that ratepayers will comply, and not move their messages out of the mail (see the note in your next credit card statement about getting your bill electronically). Having that non-mail alternative undermines the Postal Service’s ability to cover its costs.
Looking at all of this justifies consideration of a fundamental question: has the USO/postal monopolies equation become obsolete? Ending or modifying either would, presumably, require ending or modifying the other. In the end, however, it might be best to go back to the start: the postal system was established as a public service. Therefore, should the cost of that service not be borne in some part by the public? As it is now, the majority of the cost is being carried by commercial senders who have alternatives to the mail, and who are increasingly incentivized to leave it as the PMG pushes postage costs higher. Obviously, these are trendlines heading to serious problems.
It's reasonable to believe that mail volume will continue to shrink, USPS costs will grow, and postage – if seen as the only source of revenue – will be increasingly unaffordable and unattractive to commercial mailers. A tipping point is unavoidable – and then what? Perhaps it’s time, if not to rethink the USO and the monopolies, at least how to support a Constitutionally-established public service. Whether America’s leaders will ever have the courage to face that challenge remains to be seen.
Leo Raymond is Owner and Managing Director at Mailers Hub LLC. He can be reached at lraymond@mailershub.com.
This article originally appeared in the March/April, 2022 issue of Mailing Systems Technology.
