Opinion

Why Retailers Are Supporting USPS’ Affordable Package Delivery Services

By John McHugh
August 9, 2018 at 5:00 am ET

Earlier this year, President Donald Trump erroneously claimed that the U.S. Postal Service was significantly undercharging for its package delivery business, giving sweetheart deals to large mailers to the financial detriment of the Postal Service itself.

This concern is not new. When I was chairman of the House postal subcommittee in 2006, we passed the most recent, major postal reform legislation. In that legislation, we deliberately set up requirements to make sure that USPS package deliveries covered their direct costs and a share of overhead costs. These requirements would ensure that package delivery services contribute to the overall financial health of the Postal Service and protect private carriers against underpricing from USPS. And we established an independent Postal Regulatory Commission to review USPS pricing to make sure these standards were met.

The truth is that package delivery is one of the only bright spots in the Postal Service’s financial picture. Revenues from other services, like first-class mail and marketing mail, continue to decline due to lost volume. But revenues from package deliveries increased almost 12 percent year-to-year. In 2017, package deliveries contributed over $20.7 billion to USPS, $7 billion more than it cost USPS to provide the services, helping to financially stabilize the Postal Service.

The growth in USPS package deliveries has both enabled and benefited from the explosion in e-commerce. The Postal Service, in fulfilling its universal service obligation, provides “final mile” delivery service to over 157 million delivery addresses in every corner of every state, every day, supporting millions of jobs and contributing over $1.4 trillion to the U.S. economy.

The ability of the Postal Service to deliver in hard-to-reach rural areas is unmatched in terms of price and reliability, which is why online businesses and even private-sector competitors choose to rely on USPS to deliver to rural zip codes. Without USPS, the reliability, timeliness and affordability that U.S. consumers have come to expect simply would not happen.

USPS has built an extensive network in every corner of America through its many decades of serving America’s postal needs. Private-sector competitors do not have this infrastructure, which explains why private carriers already levy “rural surcharges” in over 23,000 zip codes.

When I was in Congress, I represented the most rural district east of the Mississippi. My constituents, and the current residents of my New York State district, live and work in a district that covers 11 counties, stretching from Oneida County to the Canadian border. The residents of my former district are heavily reliant on affordable, reliable package delivery services provided by USPS.

I have seen firsthand how the Postal Service provides a lifeline that connects rural consumers and businesses to the e-commerce economy. This new economy allows hundreds of thousands of entrepreneurs that sell through online platforms like Amazon, eBay and Etsy, as well as the numerous small and medium businesses that directly sell online, to keep their customers satisfied with affordable, easy mailing and return options. Over 7 million small businesses rely on the Postal Service for mail and package delivery services. Affordable, universal, seven-day-a-week package delivery services are essential for consumers and businesses to share in the benefits of the digital economy.

It is because of my experience that I am proud to lead an advocacy group, The Package Coalition. This coalition, made up of some of America’s leading retailers and logistics companies, supports legislation and policies that preserve and strengthen reliable and affordable package delivery services via the U.S. Postal Service. We believe that the U.S. Postal Service provides an invaluable benefit to consumers and businesses, particularly those in rural areas.

In April, the president created an administration task force to review the Postal Service’s operations and finances. He specifically called for examining “the expansion and pricing of the package delivery market and the USPS’s role in competitive markets.” But if the task force is a thinly veiled attempt to force increases in USPS package prices, then it is misguided and would be harmful, especially to rural businesses and consumers who do not have reasonable alternatives.

 

John M. McHugh is a former Secretary of the U.S. Army and a former member of the U.S. House of Representatives, representing northern and central New York., and he serves as chairman of the Package Coalition, whose members include Pitney Bowes, Columbia Sportswear, Amazon, Express Scripts and QVC.

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