USPS Loses $84.7M on New Products

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The General Accounting Office, the investigative arm of the U.S. Congress, last week reported that the postal service lost $84.7 million from 19 products it launched between FY 1995 and FY 1997, including five widely used DM products.


The "Development and Inventory of New Products" report, initiated by the House Government Reform and Oversight Committee, is Congress' effort to evaluate USPS' entry into nontraditional postal markets. It marks the first time that financial figures were released on many USPS products.


The GAO said that five of the 19 products were dropped and that only one of the product lines -- merchandise carrying stamp images -- has proved consistently profitable, producing profits of $3.3 million during the three-year period. Postmaster general William J. Henderson announced, however, that the USPS will abandon efforts to sell merchandise at the nation's retail post offices. Other losses:


* Global Priority Mail, $600,000.


* Information-Based Indicia, which allows small businesses to purchase stamps online, $1.8 million.


* Post Office Online, which includes Mailing Online and is designed to help small businesses move money and messages and sell merchandise over the Internet, $4.5 million.


* Remitco, the USPS' new remittance processing center, $6.3 million.


The USPS still plans to move ahead with these programs, however, and has completed a standard procurement prequalification process for additional printers and suppliers in New York, Los Angeles and Chicago and will soon announce three additional printers for the program, said Lee Garvey, Mailing Online program manager. Currently, one mailing service company is being used.


USPS spokesman Roy Betts disputed claims from private enterprises and Congress that the agency is using its monopoly mail service to subsidize new ventures. "We're making investments in our customers' futures, making investments to meet our customers' needs," he said.


Currently, the postal service has authority to create and market new products. While postal products require the approval of the independent Postal Rate Commission, nonpostal products such as T-shirts and telephone cards don't require outside authorization. However, under the postal reform bill proposed by Rep. John M. McHugh (R-NY), such products would have to be paid for by a new private, nonprofit corporation run by the postal service and products produced by the corporation would be subject to antitrust laws and other regulations that private businesses face.


McHugh, who is chairman of the House Government Reform and Oversight Committee's Postal Service Subcommittee, said H.R. 22 would give the postal service the authority to provide the products it "deems appropriate, while at the same time ensuring such products stand on their own accord without leveraging its position as a government entity."


Henderson told an audience at a CATO Institute symposium on the future of the postal service in Washington last week said that the USPS is preparing for a deregulated environment in the long term.
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