Making a mail call

The U.S. Postal Service is in dire financial condition. A primary reason, according to the recently released Postal Service Transformation Plan, is loss of profitable first-class mail, such as bill payments and letters, to the Internet. Of course, the Postal Service has taken advantage of the Internet and other information technology advances to increase its efficiency and contain cost growth. But most of the potential gains from IT investments have already been realized, according to the agency, so future investments in technology are likely to yield only modest returns.

By statute, the Postal Service is required to operate on a break-even basis. The Postal Service is also required by statute to provide universal service. That means that it must deliver mail promptly to all customers, wherever they are located, six days a week, at the same price to the customer, no matter what the actual cost of that service may be. The commitment to universal service necessitates the operation of many small, unprofitable facilities, the retention of thousands of otherwise unneeded employees and the maintenance of huge quantities of underutilized fixed assets.

Oddly, the Postal Service specifically excluded the issue of universal service from consideration in its transformation plan, because the issue was seen as too political and just too hard to deal with. Instead, the plan focused on the idea of converting the Postal Service to a government-owned corporation.

Under the Government Corporation Control Act, government-owned corporations may be exempt from specific federal laws. Otherwise, however, they are subject to just as much congressional control as traditional government agencies. The U.S. Supreme Court addressed this point in connection with another government-owned corporation, the Commodity Credit Corp., which makes agricultural crop loans to farmers. According to the court, "the Government Corporation Control Act...provides such close budgetary, auditing and fiscal controls that little more than a corporate name remains to distinguish it from the ordinary government agency."

The Postal Service is caught between the proverbial rock and a hard place. The rock is universal service, and the hard place is the need to break even. There are two ways to solve this problem — redefine universal service or increase the price for mail services.

Instead of viewing the Internet as a competitor, Postal Service officials should look at it as providing an opportunity to redefine universal service. The goal of daily mail delivery to every household and business made sense in earlier decades and centuries, when mail was the primary means of long-distance communication. But today, with so much communication taking place via the Internet — not to mention telephones, fax machines and private delivery services — it is hard to see why daily mail delivery should even be a goal, much less a mandate. The issue is at least worth considering.

Peckinpaugh is corporate counsel for DynCorp in Reston, Va. This column represents his personal views.