The US Postal Regulatory Commission has given the go-ahead for USPS to move its ‘single-pieceParcel Post’ service from its ‘market dominant product’ list into its less-regulated ‘competitive’
list of products, where it will be free to raise prices and compete with similar products offeredby private operators such as FedEx and UPS.Transferring to the competitive list will allow USPS to set its own prices for the product,instead of being limited by the inflation-based price cap that limits rate increases for itsmarket-dominant services.
Based on data from 2011, the Commission said its review showed that Parcel Post required anoverall 15% price increase just to cover its costs, so that it was no longer subsidised by USPS’smonopoly products. USPS estimates that Parcel Post rates are 24.1% lower than UPS ground retailrates and 14.7% percent lower than FedEx ground rates.
Single-piece Parcel Post is a ground package delivery service for less-than-urgent and oversizepackages, which USPS argued already competes with comparable products offered by other shippers.The Postal Service successfully argued that its single-piece Parcel Post product fulfills all thecriteria for competitive products under US postal regulations.
The Commission conditionally granted the proposals, which will see single-piece Parcel Postremoved from the market dominant product list and a similar product called ‘Parcel Post’ to addedto the competitive product list. USPS said that the proposed competitive Parcel Post product wouldbe nearly identical to single-piece Parcel Post, except that its ‘Alaska Bypass Service’ wouldremain on the market dominant product list. The Alaska Bypass Service allows shippers to sendshrink-wrapped pallets of goods within Alaska at Parcel Post rates, to and from designatedpoints.
USPS said its single-piece Parcel Post product had a 17.6% share by volume of the ground packageretail market and only 1.1% of the overall ground package market. It said that its market sharesremained low even though its prices were lower than those charged by UPS and FedEx for comparableproducts. USPS added that a comparison of the service standards indicates that UPS Ground and FedExGround provide faster day-certain delivery times than those currently offered by single-pieceParcel Post.
For these reasons, it argued that current single-piece Parcel Post customers “would have viablealternatives if the Postal Service were to raise prices, degrade service, or decrease output”,concluding that the Postal Service does not exercise de facto monopoly power in these markets.
