The heavily loss-making US Postal Service should be fundamentally reformed and the universalpostal service should be modernised, according to the US Congress’ public spending watchdog
organisation.US lawmakers should consider three options for restructuring USPS’s business model in responseto declining mail volumes, the Government Accountability Office said in a report into postal trendsand USPS’ business model compiled for the US Senate’s Committee on Homeland Security and GovernmentAffairs.
The report’s findings will be used as the basis of a cross-party postal reform bill that thecommittee is drawing up following its high-level public hearing last month, and will contrast withthe existing Postal Reform Act introduced by Rep Darrell Issa into the House of Representativesthat would permit cuts to Saturday deliveries and the postal network.
The GAO said that USPS expects its total mail volumes to drop 25% by 2020 to 127 billion pieces,putting them back to levels last seen in the mid-1980s. First-Class Mail, the mainmoney-earner, is expected to decrease by 50% while cheaper Standard Mail volumes are projected toremain flat. USPS revenues could drop from $67 billion in 2010 to $59 billion in 2020.
But even these “dire” projections could prove optimistic if communication continues to move todigital technologies as quickly as in the recent past, the watchdogs wrote. In 2010, 59% of allmail to US households was advertising compared to 22% for bills and financial correspondence, 9%for private letters and 10% for other items.
“These trends underscore the need for USPS’s business model to undergo fundamental changes toreduce personnel and network-related costs,” the GAO wrote.
Essentially, there are three possible future business models for the US Postal Service,according to the organisation: a government-subsidized federal agency, the current structure withadditional flexibility, or a private-sector business. But the GAO did not specifically recommendany of the three.
With the USPS as a subsidised federal agency, the USO might have to be revised, subsidy levelswould have to be fixed and the organisation would still have to optimise its operations and networkaccording to service and subsidy levels.
Under a more flexible version of the present structure, USPS should restructure operations andnetwork to reduce costs, revise pay “to reflect either private or public sector standards but not ahybrid of both” and should be given “greater flexibility to partner and compete with private firmsin providing delivery and retail services”, the GAO said.
The radical option of privatising the postal service would mean eliminating the USPS monopoly,allowing private firms to compete in mail delivery, deciding how to retain some form of USO andreorganising the USPS in line with private sector structures, pay and benefit levels, andoptimising the network, according to the spending watchdog.
By the end of fiscal year 2011, with a projected net loss of about $10 billion, the U.S. PostalService (USPS) was expected to become insolvent. To mitigate this, the US Congress temporarilydeferred USPS’s required $5.5 billion retiree health benefit payment. Over the previous 4 years,USPS experienced a cumulative net loss of just over $20 billion.
