The Pros And Cons Of The United States Postal Service

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The United States Postal Service is a natural monopoly in the delivery of first class mail, as the 1970 Postal Reorganization Act prevents any other firms from delivering letter mail (Jaag, 2014). The reason for this was to allow one firm to specialize in mail delivery; therefore being the most efficient way to ensure the rest of the country received their mail on time. After all, receiving mail in a timely manner is critical for society to function. Imagine if everyone received their bills and letters weeks late? However, the USPS has begun to face a dilemma in recent years, in that it is seeing a sharp decline in revenue (Carbaugh, 2011). As mentioned, the USPS is a natural monopoly. This means that it is more cost effective for only the…show more content…
In addition, the USPS is the only company that is allowed to place mail in consumers’ mailboxes. Critics argue that by allowing downstream access to the network, it means that there is more competition for upstream mail processes (Jaag, 2014). It is easy for competitors to enter the market, since they only have to produce the upstream processes. This is why the majority of the mail in the United States now experiences some form of worksharing (Jaag, 2014). The USPS does allow for other firms to access its large networks at intermediary points, and thus private firms often take advantage of this access in the transportation and sorting of mail (Jaag, 2014). This is what is known as worksharing, which allows competitors access to the networks of the USPS without overtaking them in production. Worksharing encompasses activities such as sorting and preparing mail (Carbaugh, 2007). Companies like State Farm perform these tasks that the USPS would otherwise be performing (Carbaugh, 2007). As a result it lowers the workload of the USPS, which in turn reduces the costs of production of the postal service (Carbaugh, 2007). Everyone benefits from worksharing. The mailers receive discounts, and total costs are reduced. This stimulates growth and because of lower costs the postal service can charge lower…show more content…
The goal is that by having no cap on products that are in competitive markets, it will encourage the Postal Service to try and effectively allocate its resources and to produce more efficiently. It will also benefit consumers by having smaller, predictable changes in rates. The legislation aimed to solve some of the issues within the Postal Service that has led to a reduction in revenue within the past few years. A key component of the legislation is that it allowed the Postal Service to continue operating without completely privatizing it (Carbaugh, 2007). However it fails to address important issues such as improving outdated facilities, workers rights, changing the collective bargaining agreement and implementing cost reducing methods of production (Carbaugh, 2007). Yet again, this shows how tough it is for legislation to have a direct impact on the Postal
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