Sam Ryan
Wednesday, July 13, 2005

Story Continues Below

  The Postal Service articulated its position in a 2003 letter to the Postal Rate Commission, which it wrote in response to complaints from a consumer protection group. The debate continues to drag on, as lawmakers consider the postal reform bills pending in both houses of Congress.

If a USPS donut store sounds as crazy as, say, a CIA lemonade stand, it is.

The USPS is a government-owned bureaucracy with a clear-cut mandate to deliver the mail, a monopoly to keep out competitors, and a host of advantages that private businesses do not enjoy.

It's exempt from most taxes (including real estate), borrows from the Treasury at below-market rates, and is immune from anti-trust law despite the fact that it competes against private companies and destroys American jobs in non-postal ventures.

In 2002, the prominent California activist group Consumer Action petitioned the Postal Rate Commission to review 14 non-postal products that the USPS had launched in the nineties when new technology began to cut into the letter-delivery business.

In recent years the USPS has offered customers everything from prepaid telephone cards to online bill-payment services to assorted merchandise, including bags, teddy bears and mugs.

In its petition, Consumer Action noted, "Many of these services operate at a substantial loss, generating large operating expenses but virtually no revenues."

The USPS response? These services were not "postal" in nature. Thus, it argued, they were not subject to review by the Postal Rate Commission - the very agency designed to oversee it.

For instance, in its rebuttal to Consumer Action's petition, the USPS wrote this about its phone cards:

"Mail service is not involved, and it was determined that a Commission filing was not required." The Postal Service maintains that because federal law governing USPS operations does not "explicitly exclude any type of service," USPS may delve into as many non-postal activities as its little heart desires.

The Postal Rate Commission shot back that by the Postal Service's logic, the law "authorizes it to engage in any type of commercial, non-postal activity. Thus, it could operate, for example, donut shops or car dealerships as they are obviously non-postal."

The Postal Rate Commission calls the USPS's interpretation "utterly unconvincing" and clearly believes that the Postal Service should provide only services involving "the receipt, transmission, or delivery by the Postal Service of correspondence, including, but not limited to, letters, printed matter, and like materials; mailable packages; or other services supportive or ancillary thereto."

Nevertheless, the Postal Service continues to engage in extraneous activities, while keeping the Postal Rate Commission out of the loop.

That leaves the Postal Service's non-postal offerings in an oversight-free no-man's land. It can go on experimenting willy-nilly, with misguided ventures like the discontinued Online Payment Services, which lost $10.4 million in FY 2001. Or Mailing Online, which lost $30 million from FY 2001 to 2003.

Since the American people ultimately own the USPS, you would think they deserve some accountability. But no: The Postal Service has claimed time and again that it should not have to disclose details about the costs and revenues of its products (or NASCAR sponsorships, for that matter) citing "commercial" sensitivity.

Lawmakers have an opportunity now to improve the Postal Service's murky practices by requiring all of its business activities - postal or non-postal - to be subject to the regulatory oversight of the Postal Rate Commission.

An even better idea would be to bar USPS from venturing into non-postal businesses altogether. Such measures would be a critical step toward fending off more stamp price hikes, like the one expected to take effect early next year.

USPS should also be required to meet SEC-style financial disclosure standards for publicly traded companies. This would include Section 404 of Sarbanes-Oxley, which calls for outside audits of a company's internal controls. As a government agency, USPS should be held to a higher - not lower - level of financial transparency than that of a private company.

As of today, the USPS still sells a slew of products - including, for example, the Electronic Postmark, which has lost over $2 million since 2002 - that have nothing to do with its core mission of delivering the mail. The Postal Service also maintains that such non-postal activities are subject to review by no one.

To be sure, not everyone at the USPS believes it should sell non-postal services. Jim Miller, chairman of the USPS Board of Governors and a champion of postal reform, believes it should refrain.

For the moment, though, nothing can stop a USPS business scheme.

Private sector firms that pioneered services like online bill-pay learned the hard way: If the USPS spies a business opportunity it thinks might work, it can take its monopoly profits, tax breaks, and extensive real estate holdings and jump right in.

Dunkin' Donuts, beware.

Sam Ryan is a senior fellow at the Lexington Institute in Arlington, VA. He can be reached at ryan@lexingtoninstitute.org.

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