The US Postal Service is my favorite example of a monopoly. Unlike IBM, Microsoft, Google, and other companies that have market power for awhile and then lose it, the USPS gets its monopoly power (it's illegal for others to put mail in your mailbox) from the government and has since 1775.
Now, I am not going to debate the value of the USPS over time, but I will say that the USPS is leaning harder on its power in recent years. Why? As the USPS has lost HUGE market share to private delivery (UPS, FedEx), fax, and email services, its revenue has not grown as fast as its costs. In 2007, the USPS lost $5 billion.
So why am I writing about the USPS on a water blog? Because postage rates are going up today. Why are they going up? Because when the USPS loses money, it can raise prices and avoid cutting costs.
Aside: The USPS employs 785,000 people, which is only 1.7% less than 20 years ago. The only US company with more workers is WalMart (2.1 million worldwide), which has five times USPS revenue. That works out to nearly double USPS revenue/worker.
So, besides that parallel with water utilities (monopolies that can raise rates instead of cutting costs), there's another interesting parallel between mail service and water service: "postage stamp pricing" (the name is used in both industries).
PSP means that customers pay the same rate for delivery, no matter where they live. Put differently, PSP means that everyone pays the average cost of delivery everywhere -- not the actual cost of delivery to them. In postal terms, that means that urban customers are subsidizing rural customers. In water terms, that means that people in city centers are subsidizing people in the suburbs.
[Note how "equity" is flipped. With postal service, city people subsidize rural people, which is similar to rich people subsidizing poor people. With water service, people in the inner city (until recent trends, poorer people) are subsidizing rich people in the suburbs.]
But that's not the worst part -- PSP subsidizes sprawl because new connections only pay the average -- not the marginal -- cost of water. (I know of one exception where I live. People who live in the hills pay a "pumping surcharge" for their water.)
So that's the water angle. Now here are my suggestions on how the USPS can reform itself:
- Cut employment by delivering on alternating days.
- Sell a new service -- "no junk" -- that stops delivery of unwanted junk mail. I'd pay $20/year to stop junk. The US has 100 million households, and the USPS has $75 billion in revenue, so this is not a big number, but it would lower the USPS footprint by reducing weight, printing costs, waste, etc.
Bottom Line: Monopolies don't have to be efficient -- they just take your money.
4 comments:
Paying a fee to block junk mail might hurt, not help, USPS revenues.
A large chunk of revenues is from bulk mail deliveries.
Help out the USPS by returning a nice note saying that you wish to be removed from solicitation... in the pre-paid addressed envelope provided by the solicitor. Make them pay more.
Alternate days are good--half the mail carriers are now gone. Also, remove the restriction on using mailboxes--let other companies use the boxes, ending part of the monopoly.
I thought I saw something recently about the postal service cutting 60000 jobs over the next few years and telling us that most people won't notice a difference in service. Seems odd to me that, if true, they hadn't done this already.
I could be wrong, but I believe you can request to NOT receive junk mail. I did this a while back with my PO Box as it was getting filled too quickly.
@ Anon -- I once asked a USPS rep (head office) if they would stop the "junk mail". She was appalled: "Our bulk business PAY for delivery to your box, and we can't fail them..."
[hand to forehead...]
Post a Comment