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As have previous government monopolies, the U.S. Postal Service has been engaging in a pattern of business practices that appear anti-competitive, leveraging postal law to enable it to gain impermissible advantages over the private sector at the expense of consumers. It is not unusual for government monopolies to utilize their monopoly advantages to compete in services already offered by the private sector. The regulator of the monopoly is normally charged by statute with preventing such abuses.
Consumers of the Postal Service’s monopoly products and services have recently been required to pay increased costs, in terms of higher prices and clearly reduced quality of service. Other indicators, including cost coverage and service quality measures, also point to increased costs charged to monopoly consumers compared with consumers of competitive products.
Present accounting practices, including poor public transparency, exacerbate this situation. The Service’s Inspector General issued a 2013 management advisory urging the Postal Service to in effect start over and adopt a bottom-up costing methodology, a “Greenfield” approach which would generate more disaggregated and granular data to address cross-subsidy issues.
This paper examines how the cost burden assigned to regulated products is disproportionate to that imposed on competitive products, effectively giving the latter a financial boost, if not a free ride. Postal management has seemed intent upon focusing the agency’s priorities on competitive products, acknowledging this on numerous occasions, in seeming contradiction with federal postal statute calling unequivocally for the Postal Service to give highest consideration to the delivery of “important letter mail,” not competitive products.
Examples of terms of other U.S. monopolies have included legal and regulatory remedies based on structural separations, as well as accounting separations. Among those discussed in this paper include monopolies in the telecommunications, electric utilities and government research sectors.
Not just consumer welfare is at stake. The precarious financial condition of the Postal Service makes it all the more essential that its efforts to compete with the private sector can stand alone in the future without increasing risks of requiring multi-billion dollar bailouts from Congress. Regulatory experience from other monopolies suggests more than one way to ensure that result.
This document was submitted to the Postal Regulatory Commission under Docket No. PI2016-3, in response to its request for public comment concerning the operation of the amendments made by the Postal Accountability and Enhancement Act of 2006, and for recommendations to improve the effectiveness or efficacy of the postal laws of the United States.
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