There’s no such thing as a free lunch, especially in the postal world. Someone has to pay for mail to come to your door 6 days a week and for post offices to be open and accessible throughout the country.
Those services are part of the universal service obligation (USO), a set of requirements that ensure all users of the mail receive a minimal level of postal services at an affordable price. While the USO is not defined explicitly in law, it is understood to mean the Postal Service – as the postal operator – will deliver a specified number of days a week, offer a range of products, cover the entire nation, and provide quality service.
So who pays for the USO? You, me, and anyone else who buys postal products and sends letters or packages through the mail. Congress granted the Postal Service a monopoly on letter mail and sole access to the mailbox to ensure the Postal Service has adequate revenues to cover the costs of providing the USO.
However, declining letter mail volumes and the current price cap on postage are making it harder and harder for monopoly revenues to cover the cost of the USO.
In our recent report, we looked at alternatives for funding the USO, including a review of European posts, most of which have already reduced their monopolies. In lieu of revising the current level of services, our white paper suggests three main options for funding the USO. They can be used alone or in combination:
- Allow the Postal Service greater pricing flexibility so it can earn more money from the monopoly products.
- Allow the Postal Service to diversify and earn revenue from non-mail products and services.
- Have the government subsidize the Postal Service for specific obligations that policymakers deem necessary.
Pricing flexibility alone may be enough to earn sufficient revenues to cover the USO, but the industry may have little appetite for price increases. The other two alternatives would help mitigate price increases.
Do you agree policymakers need to rethink how the Postal Service funds the USO? Or do you think the USO should be redefined to reflect the changing nature of communications? Please answer our poll question and then share your thoughts on your answer with a comment.