Privatization


The corporatization of the Postal Service: Post office closures, suspensions, relocations, and reductions in 2013

January 7, 2014

One of the most persistent refrains in the debate about the Postal Service is that it needs to act more like a business.  That means different things to different people, but for many, the model for where the Postal Service needs to go is to be found in Europe.  In the EU countries, where the process of liberalization has been going on for fifteen years, the government monopolies have come to an end and the marketplace has been opened to more competition.  According to free-market doctrine, the competiton was supposed to lead to lower prices and better services, but things haven't quite worked out that way.

According to a new report on the recent history of postal systems in Europe, “liberalization has not improved services and reduced prices as promised by the European Commission and others.”  Instead, in countries where the postal systems have been deregulated and privatized, large corporations have come out the winners and average citizens and postal workers have come out the losers.

Consumers see their post offices close and get replaced by postal counters in private businesses.  The mail is delivered only two or three days a week and primarily in highly populated areas.  For postal workers, liberalization has led to lower wages and more part-time and self-employed contract jobs with little security and few benefits.

While consumers and workers get the short end, large mailers get their mail picked up more frequently, and in many cases their rates have gone down thanks to lower labor costs, cutbacks in postal services for the general public, and the special deals mailers can negotiate with the carriers.  The private shareholders in the former public monopolies and the executives of postal businesses are also coming out ahead.  Even with declining volumes in letter mail, there are big profits to be had in the mail industry.  

 

The corporatization of the Postal Service

The citizens of the United States have never voted to privatize the Postal Service, but the process of corporatization has been going on for a long time.  With each passing year, the Postal Service acts less and less like a public service and more and more "like a business." The scenario that has played out in Europe is playing out in the U.S., just in its own way.

Since 2000, the total number of USPS employees has been reduced by a third, and part-time workers now comprise over 20 percent of the workforce.  The Postal Service outsources wherever it can — over $12 billion of its $65 billion in annual expenses go to private contractors and suppliers.  Over half of the Postal Service's processing plants have been consolidated, while the workshare system has led to the creation of a huge private-sector consolidation industry, with companies like Pitney Bowes and Quad/Graphics reaping huge profits.

Consumers aren't seeing post offices closing by the thousands, but the hours are being reduced, sometimes to two or four hours a day.  A huge network of "alternate retail access points" has been developed to replace brick-and-mortar post offices.  Collection boxes are being removed from city streets, the speed and reliability of mail delivery are going down, more customers are getting cluster boxes, postal properties paid for by taxpayers are being sold off, and the lines at post offices are as long as ever, maybe longer.

The Postal Service and Congressional leaders typically blame the service cutbacks and downsizing on the big drop in mail volumes, but the transition toward a corporatized postal system predates declining volumes by a long time.  As Christopher Shaw tells it in Preserving the People’s Post Office, there’s nothing new about efforts to close post offices, reduce window hours, get rid of collection boxes, shift to cluster boxes, and everything else we’ve been seeing. 

The first big step toward corporatization was the 1970 Postal Reorganization Act, which turned the Department of the Post Office into the Postal Service.  The process got a big boost in 2003, when President Bush appointed a Commission on the Postal Service.  Its report, which seems to have served as a blueprint for Darrell Issa’s postal reform agenda, said that while the country wasn't ready for postal privatization the Postal Service should be run more like a private business.  The Commission recommended expanding retail services to private stores, making it easier to close post offices, outsourcing more to the private sector, offering more workshare discounts, setting up a BRAC-like commission to consolidate processing plants, “rightsizing” the workforce, and disposing of postal real estate to “provide benefits to the public in the form of moderated rate increases.”

Many of these recommendations were implemented in the 2006 Postal Accountability and Enhancement Act.  For example, PAEA directed the Postal Service to expand “alternate retail options” like vending machines, kiosks, the Internet, and “retail facilities in which overhead costs are shared with private businesses" (sec. 302).  These alternatives were not intended simply to improve consumers’ access to postal services.  They were about developing an infrastructure that would make it easier to close post offices.

Bush’s Commission came out with its report in 2003, when mail volumes were increasing. PAEA was enacted in 2006 — the year Shaw’s book was published — when mail volumes were at their peak.  Declining mail volumes thus had little if anything to do with the rationale for cutting services and closing facilities. 

The rationale then, as it is now, was about something else.  As Shaw makes clear in his book, the goal has always been to commercialize, corporatize, and eventually privatize the Postal Service in order to enhance the profits and wealth of the corporate stakeholders of the mail industry. 

The next chapter in postal privatization: Post Offices inside of Staples

November 11, 2013

The Postal Service has rather quietly announced a pilot program to put post offices inside of Staples.  It’s part of what the USPS is calling the Retail Partner Expansion Program, and the first Staples to host a post office will be located in San Francisco and San Jose.

According to an article in the Burlingame-Hillsborough Patch, which was apparently based on a USPS press release of some sort (it’s not on the USPS website), the Postal Service and Staples are launching a pilot program to open postal retail counters inside select Staples locations, including 470 Noor Avenue in South San Francisco. (Update: Here are the press releases on San Jose and South San Francisco.)

Partnering with private retailers is nothing new for the Postal Service.  Over the past few years, the Postal Service has developed a network of partners that encompasses over 70,000 businesses, ranging from small convenience stores and banks to national chains like Costco, CVS, and Office Depot.  Nearly all of these locations, however, are authorized just to sell stamps and flat-rate boxes. 

The new arrangement with Staples is different.  The postal counter inside of Staples will sell stamps, First-Class Domestic and International Mail and package services, Priority Mail, Priority Mail Express, Domestic and International, Global Express Guaranteed and Standard Post.  The employees behind the counter, however, will not be USPS employees. They will be specially trained Staples employees.  

The arrangement with Staples sounds something like a contract postal unit, i.e., a postal site owned and operated by a private business under contract to the Postal Service.  CPUs offer most of the products and services of a regular post office, but they are staffed by the private business, not USPS employees.  There are about 3,500 CPUs, as well as about 400 Village Post Offices (VPOs), which are basically CPUs that just sell stamps and flat-rate boxes.

It’s not clear how the new arrangement with Staples differs from a regular CPU.  The news item on the story is titled, “USPS Will Pay Rent to Local Staples Store.”  But that’s probably not entirely accurate.  It’s not likely the Postal Service would rent a space inside a Staples and then staff it with Staples employees.  More likely, as with a CPU, the Postal Service will pay Staples a share of the revenues.  For a typical CPU, the Postal Service gives the host business 6% to 10% of gross "walk-in" revenues. 

But maybe the Retail Partner Expansion Program will involve some sort of new arrangement.  Perhaps the Postal Service will pay some rent and share the revenues.  Details are scant so far.  

What’s clear, though, is that the Postal Service remains committed to shifting its retail operations from brick-and-mortar post offices to partnerships with private retailers.  The Postal Service says it simply wants to make postal products and services more readily available, but it's not just about convenience for customers.  The Postal Service is also looking to cut costs by getting away from running its own post offices.  This strategy is encouraged by the big mailers — who don't use post offices and who see them as contributing to higher postal rates.  

Postal Vision 2020 looks at the future of "postal services" and sees privatization

April 22, 2013

The third annual Postal Vision 2020 conference will take place this week in Washington, DC.  The conference brings together speakers from a variety of backgrounds for what the Postal Vision website describes as a "provocative, candid conversation about what Americans should have in the way of ‘postal services’ in 2020 and beyond and who should provide them.”

More about postal privatization:

 
 
 

The title of this year's Postal Vision 2020 is "Positioning America for the New Millennium," and much of the conference will be about innovations in the mail industry, like digital solutions and eCommerce.  But that reference to "postal services" and "who should provide them" indicates that the conference may be about something else as well.  Judging by who's speaking at Postal Vision 2020, it's likely that one of the conference's main themes will be privatization of the Postal Service.

Three of the conference's big name speakers were recently involved with a study about a proposal to privatize half the Postal Service by creating a “hybrid public-private partnership.”  The study was conducted by the National Academy of Public Administration (NAPA) with funding from Pitney Bowes, one of the two platinum sponsors for Postal Vision 2020. 

The proposal calls for transferring the retail and processing operations of the Postal Service to the private sector, leaving the Postal Service with the delivery end.  Over half the Postal Service — $35 billion in operating costs — would be handed over to private companies — companies like Pitney Bowes.

The Postal Vision 2020 website doesn't say a word about the NAPA-Pitney Bowes privatization study, but you can be sure it's on the agenda.

 

The NAPA-Pitney Bowes privatization study

The NAPA study was conducted with financial support from Pitney Bowes, amount unknown.  The study purports to be objective and independent, but Pitney Bowes is anything but a disinterested observer of the country’s postal system. 

The corporation received over $30 million from the USPS in 2012, and it's number 49 on the list of Top USPS Suppliers for 2012.  Besides benefiting from direct payments for services rendered, Pitney Bowes profits off the Postal Service in other ways.  PB is the country’s largest presort corporation.  It consolidates, processes, and transports mail, which then qualifies for workshare discounts with the Postal Service.  The system ends up giving private companies work that could be done (and used to be done) by postal workers, and many of the deals cost the Postal Service money because the discounts are larger than the costs avoided 

If the hybrid public-private model were implemented, something on the order of $30 billion in mail processing costs would be transferred from the Postal Service to the private sector.  Pitney Bowes stands to make billions off such a privatization scheme.  No wonder it was happy to fund the NAPA study and to provide generous support to the Postal Vision conference, where the study can be discussed in a high-profile way.

Privatizing the post office: The NAPA/Pitney Bowes study on reinventing the retail network

April 1, 2013

About three weeks from now, postal insiders and innovative outsiders will convene in Washington DC for the PostalVision 2020/3.0 conference to discuss the future of the Postal Service.  Called "Positioning America for the New Millennium,” the event will focus on "a constructive approach to re-inventing today’s broken Postal Service model for future generations."

Among the headliners speaking at the event will be David M. Walker, a former Comptroller General, the first President and CEO of the libertarian Peter G. Peterson Foundation, and currently Founder and CEO of the Comeback America Initiative, which promotes fiscal responsibility (by cutting social programs).

Mr. Walker will probably devote much of his talk to discussing the privatization of the Postal Service.  That’s because he is the chair of a five-member panel that the National Academy of Public Administration (NAPA) asked to review a recent proposal on privatization. 

The proposal is called “Restructuring the U.S. Postal Service: The Case for a Hybrid Public-Private Partnership.”  It describes a postal system in which the private sector would take care of the “upstream” — the retail and mail processing work — while the public sector would remain responsible for the “downstream” — delivering the mail through its network of “trusted letter carriers," the “feet on the street,” as the proposal puts it.

NAPA has a long-standing interest in postal matters, and its President and CEO is Dan Blair, a former member of the Postal Regulatory Commission, so it’s not surprising that NAPA would focus on the Postal Service right now.  With funding support from Pitney Bowes, NAPA assembled a panel to subject the proposal to what it describes as a “rigorous evaluation.” 

Despite the apparent conflict of interest involved with taking money from a key player in the mail industry, a company that would profit significantly from privatization (as discussed in this earlier post), the NAPA report is officially titled “An Independent Review of a Thought-Leader Concept to Reform the U.S. Postal Service.” 

When the panel was first announced, the NAPA website provided brief biographies for the participants, and in the bio for one member of the study team, the review was referred to as “the Pitney Bowes study.”  That bio was subsequently revised and the reference to Pitney Bowes purged.  In the discussion that follows, we’ll refer to the original proposal as the Thought-Leader Concept, and we’ll refer to Mr. Walker’s review of the proposal as the NAPA/Pitney Bowes study.

 

The retail end of the upstream

The NAPA/Pitney Bowes report runs to over 50 pages, but very little of it examines one of the key parts of the Thought-Leader Concept — the privatization of the retail end of the Postal Service’s operations.  All told, there are maybe two pages’ worth of discussion on this topic. 

The Thought-Leader Concept says that “the new postal system” being envisioned “will reinvent the concept of retail access for consumers.”  Under the new system, “there will be an explosion of options for the public to conduct postal business.”  You’ll be able to do postal business at retail stores, gas stations, schools, coffee shops, movie theaters, or any other location that is interested and meets USPS requirements. 

The proposal also suggests that the Postal Service would continue to operate a small number of retail centers, for locations where no other postal options are available or where it is more beneficial to maintain the USPS offices.

In its review of the proposal, the NAPA/Pitney Bowes study has little more to say about this reinvention of the retail system.  It explains that Contract Postal Units (CPUs) and Village Post Offices (VPOs) are postal operations housed in private businesses, and it provides a few numbers (drawn from a recent GAO report) about how many there are right now.  There's also reference to the fact that some people have recommended creating a BRAC-like commission to help close facilities (it adds, in bold, “Congressional action would help”).

But that’s about it.  There’s no discussion of how much money privatization of the retail network might save, nothing about how postal services might decline and push away revenues, nothing about how small businesses might suffer, and so on.  We're just supposed to imagine an "explosion of options" that will make it much easier for people to do postal business.

 

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Also: Sarah Ryan's "Understanding Postal Privatization: Corporations, Unions, and the "Public Interest"

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