Public Policy Team Analyzes U.S. Postal Service Operations

Posted: February 19, 2009 at 1:00 am, Last Updated: November 30, -0001 at 12:00 am

By Jocelyn Rappaport

Lee Fritschler
Lee Fritschler

When the Postal Regulatory Commission was required to submit a report to the president and Congress on universal postal service and the postal monopoly of the United States, it relied on a team headed by the School of Public Policy’s Professor A. Lee Fritschler and Research Assistant Professor Christine Pommerening.

The scope of the project was so great it required the assistance of legal experts, economists, historians and international researchers. After nearly nine months of research and analysis, the team provided the commission a 1,500-page document in November 2008.

The study’s goal was to analyze the current scope and standards of universal service obligations and the postal monopoly under which the U.S. Postal Service (USPS) operates.

The study considers how these obligations and monopoly rules might change in the future. The results consist of separate analyses of legal rules and statutes, historical trajectories, international experiences, economic and econometric models, public needs and expectations and policy options regarding the USPS, universal service obligations, and letter and mailbox monopolies.

The full study can be accessed at the Postal Regulatory Commission web site.

“One of the fundamental questions resulting from the study is whether the USPS can ensure its future under the current legal structure simply by increasing its operational efficiency,” says Fritschler.

The report states that, assuming declines in mail volume, approximately $1.9 billion could be saved if the number of days of mail delivery was reduced from six to five. The savings amounts to 2.5 percent of USPS total cost, which was $77 billion in fiscal year 2007.

The team has identified the current cost for fulfilling the universal service obligations (a set of mandates to provide mail delivery service at uniform and reasonable rates to the nation) to be $7.6 billion.

The study also looks at other countries that have eliminated postal monopolies or plan to do so.

According to the report, a government monopoly may constrain the USPS more than it benefits it in terms of efficiency, profitability and innovativeness.

“During our research, we were somewhat surprised at how vague and how little-understood the scale and scope of the actual service obligations are — some are statutory, some are regulatory, some are self-imposed, some are politically expected, but few are clearly defined and thus not quantifiable in terms of cost or revenue implications,” says Pommerening.

The study indicates that the USPS and Congress need to reconsider some of the traditional elements of postal policy, such as six-day delivery, to deal with the decline in mail volume and avoid further financial troubles.

This article originally appeared in the February 2009 School of Public Policy Currents, a monthly online newsletter.

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