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:

  1. Allow the Postal Service greater pricing flexibility so it can earn more money from the monopoly products.
  2. Allow the Postal Service to diversify and earn revenue from non-mail products and services.
  3. 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. 

Comments (10)

  • anon

    I wish I could check 2 and 3 only -- 2 because postal banking would raise revenue and be a public service, and 3 because i would also support a return to the use of government subsidy for the post office to support its public mission of facilitating communication in ways that might not raise revenue, like the use of post offices for public internet services.

    Mar 29, 2016
  • anon

    I favor federal subsidy for U. S. P. S. Requiring the Postal Service to pay pension obligations into the future for employees who are not yet hired is unreasonable. No other public or private entity has such an obligation. It's a guarantee for fiscal failure. Policy-wise, the U. S. P. S. administration should to the extent possible mount a compaign of education and action to remove that impediment.

    Mar 26, 2016
  • anon

    USPS should revert to a direct government service and forget the failed public-private system. It should not attempt to make a profit, or even break even. It is an essential service. Ask Ben Franklin who advocated free postage for periodicals. For additional revenue, the PO should return to a new and improved postal savings bank as done in earlier years. it should also be the free public source of internet connections and other communication platforms as is done in many other nations. It should also aggressively get back into the package business. it should also vigorously, along with the post an unions and sections of the concerned public and retiree groups, fight the continued imposition of the pre-funding mandate for retirement benefits which is imposed on no other federal agency, though it has reared its ugly head in some states and localities. It is just a way to starve public services and screw retirees too. Basically, my view is expand services, (including reopening post offices and restoring hours) and fight fir adequate public funding, in coalition with the unions and other public service agencies that have also been starved and forced to become "businesses" to survive (like education, health care, other social services, etc.). Thanks for your attention. Joe Berry

    Mar 25, 2016
  • anon

    For the last 2 months, my mail service has not met the congessional mandate of reliable. I have no issue with rates, but see no reason to pay any rate for mail that is not delivered correctly and promptly. Price services according to the act, especially junk mail. Don't expect people to stand in your eternal lines for non-monopoly goods and services, but do add conveniences for the monopoly side. And don't ask me to vote to subsidize it.

    Mar 24, 2016
  • anon

    Returning postal banking to the premises of the Post Office will provide critical services to the thousands of people who are "underbanked," and also provide additional revenue.

    Mar 23, 2016
  • anon

    I am in favor of diversification into postal banking.

    Mar 22, 2016
  • anon

    Postal banking, which has a history of being good both for the postal service and the nation's economy (and internationally as well) is a clear positive path forward here.

    Mar 22, 2016
  • anon

    By "non-mail" products and services I mean a PO bank. I do not mean mugs and T-shirts, which are a retail waste of time and just clog up the lines at the window. The best thing the PO could do to improve its service is hire more workers to deal with customers. People avoid the PO because of the long lines, but when you go there, you see windows that are closed and sometimes only one person working the counter. So people call a private service becaue "I don't want to stand in a long line at the PO."

    Mar 22, 2016
  • anon

    Why don't you try reading US Code Title 39 Section 101 sometimes. I'd include the link, but it triggers the Mollom spam filter which is apparently designed to prevent anything resembling the truth from being posted here. 1st class letter mail is the number one revenue generator for the postal service, accounting for 28% of its profits. The 'decline' stopped last year. We have approx. $10 billion cash-on-hand. The 'exigent' increase, which is being reversed, tracks inflation perfectly. Please stop lying to the public we were created to serve, all without ANY tax dollars since 1983, to serve your own agenda...

    Mar 22, 2016
  • anon

    Postal Banking is one way to branch out into non-mail products and should be the primary goal. It will both raise revenue and provide a tremendous social good. Having the government subsidize mandated services is also very sensible. It is important to keep the cost of services low so that those with little means can afford these services.

    Mar 22, 2016


How should the universal service obligation be funded?

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