Future of the Postal Service: End the Monopoly or Grow New Business?

Postal experts and economists sparred at a panel discussion Wednesday over whether the cure to what ails the U.S. Postal Service is more competition or new streams of revenue.

David Williams, USPS’ inspector general, was a strong advocate for growing postal services, calling for postal expansion in areas ranging from banking to Wi-Fi tower construction, during the Brookings Institution event. Robert Shapiro, however, founder and chairman of the economics firm Sonecon, said years of congressional protection of the Postal Service has prevented the agency from innovating and acting efficiently.

Shapiro’s argument was based on the notion that the benefits of the government subsidies USPS has received in recent decades far outpace official estimates. The Postal Regulatory Commission has said legislative protections of the Postal Service add up to about $4.5 billion annually, but Shapiro argued the figure is actually closer to $18 billion.

Shapiro pointed to the monopoly on mailbox delivery as saving USPS $14.5 billion annually alone. Additionally, exemption from state and local taxes, low interest rates on loans from the U.S. Treasury and federal corporate tax breaks are among the subsidies the government provides the Postal Service.

Postal failures are therefore not an “issue of mismanagement,” Shapiro said. “I think it’s an issue of responding to incentives.

He added: “The problem with any entity that enjoys effective insulation from competition…is the need to figure how to be more efficient, and in particular how it innovates. What kind of investments should it make, and what kinds of investments should it be pulling back on? Those incentives are absent.”

Williams agreed on the need for increased competition, but said the solution should be found in competing for new products rather than opening up existing monopolies to the private sector.

“The road ahead is not about encouraging consumption of efficiently managed but unwanted goods,” Williams said. “It’s about customer-valued creation.”

The core of the Postal Service should be to gain an “essential neighborhood role,” Williams said, which could include testing for gas leaks, storing data, micro-warehousing and 3-D printing centers. The rising popularity of mobile financial transactions has led to fewer brick-and-mortar banking facilities, creating a vacuum USPS could fill.

Former Postmaster General Patrick Donahoe, who left USPS in February, shied away from potential growth areas like postal banking, saying the agency should stick to what it knows. Williams said that attitude was simply a reflection of the Postal Service’s reality at that time, as the agency had to first downsize before it could begin to grow. Newly sworn-in postal chief Megan Brennan has already alluded to a greater willingness to expand postal business in new areas.

To Williams, history has proven USPS’ ability to adapt. When the railroad and telegraph attempted to disrupt the Postal Service, the agency became an early adopt of the new technology.

“We shouldn’t define postal service as literally envelopes and parcels,” he said. “We need to define the postal service conceptually as an enabler of communications and logistics services.”

The Postal Service would not be able to make many of Williams’ proposed changes on its own. Due to previous blunders in growing new business, Congress included a provision in a 2006 postal reform law restricting the agency to experimenting with new postal products. While USPS maintains some degree of wiggle room in what constitutes a postal product, any drastically new business development would likely require an act of Congress.

And if there was one area of agreement among all the panelists, it was that such an act has been hard to come by.