July 30, 2019

It is de rigueur these days to bring up the Postal Service’s Universal Service Obligation and its cost.  The most accurate USO definition is the cost of everything USPS does now that it would not do in a competitive, non-monopoly environment.  The USO covers the “public goods” the postal system creates and maintains for society.  The most frequently examined elements include: ubiquitous access to mail delivery or pickup, access to collection and counter services, uniform prices, six-day delivery, and current services and standards.

Some leaders, such as Postal Regulatory Commission Chairman Robert Taub, have emphasized the necessity to clearly define, and agree upon, the definition of the USO we want the USPS to practice.  He sees it as the necessary first step in reforming our postal system to be healthy for years to come.  Others have proposed, as cost-saving measures, diminution of some of the elements of USO, such as days of delivery, number of post offices, hour of post offices, and curb-line or centralized delivery instead of door delivery.

Of course, the USO is getting more attention because of the financial losses suffered by the Postal Service.  But it also is a more prominent policy issue because the general public that benefits most from USO services is no longer spending much on postage.  Most consumers are nearly free riders on our postal system.

The vast majority of USPS revenue comes from organizations and businesses that mail large quantities.  Many mailers could achieve the needs and goals of their use of USPS with less USO services.  For example, when the Postal Service has proposed five-day delivery of mail, many mailers have been alright with that, as long as USPS realized significant savings.

Policy makers should be careful about who they ask about what they want from the future USO.  Households and consumers often complain that they do not want post offices closed, delivery centralized, or frequency reduced.  Politicians listen to their constituents and declare that USPS will not be allowed to cut back services.  Public surveys will show strong support for continuation of current USO levels.  Even if you threaten to raise postage, many will not object, because they don’t use much anyway.  Political and survey-based definitions of USO run the major risk of requiring heavy USO without a mechanism to fund it.

The only accurate way to determine the optimal level of future USO is to let people know that they will have to contribute fees or tax dollars.  That is how we usually fund the public goods provided by our government.  It is a mistake to assume that businesses and organizations, that have alternatives to mail and must operate in their own competitive environment, will continue to pay higher prices to support a generous, growing USO to benefit the general public.