A report issued last week by the Federal Trade Commission found that the US Postal Service faces an overall economic disadvantage due to its status as a government entity compared to private companies that provide similar products and services, such as UPS, FedEx and DHL.
According to the FTC, the cost of federally imposed restraints on the USPS’ competitive products operations ranges from approximately $330 million to $782 million a year while its competitive products operations receive an estimated implicit subsidy of between $39 million and $117 million a year.
The FTC report, which was submitted to the President, Congress and the Postal Regulatory Commission in compliance with the Postal Accountability and Enhancement Act in December 2006, also made several recommendations for alternative business models for the USPS.
Meanwhile, in its comprehensive statement released earlier this month the USPS looked at the enactment of PAEA — the most extensive legislation affecting the agency since 1970 — noting that the establishment of the new law ended its previously mandated “break even” business model.
Looking ahead, the USPS said it will continue to work on the revision of its service standards for all of its mailing services. Final service standards are due to be published by mid-December of this year.
Another milestone in 2007, according to the statement, was the USPS board of governors’ approval of the initial purchase of 100 Flats Sequencing System units, which are designed to further automate the sorting of flat mail. After testing is completed, the USPS said it plans to install the first Flats Sequencing Systems in 2008. Also during 2007, the USPS successfully negotiated new labor contracts with three major unions, while one contract was resolved through arbitration.
The PAEA also separated postal products and services into market dominant and competitive categories, thereby increased pricing flexibility. In addition, it increased the authority of the PRC.
Following the USPS’s Board of Governors announcement in November, future postal rates for market dominant products will be set using the new regulations recommended by the PRC. Moving forward, the average increase for a given class of mail, excluding competitive products like Express Mail and Priority Mail, will not be able to exceed the rate of inflation.