WASHINGTON, Oct. 22, 2015 /PRNewswire-USNewswire/ -- Robert Shapiro, internationally-known economist and economic advisor, and the chairman of Sonecon, today released "How the U.S. Postal Service Uses Its Monopoly Revenues and Special Privileges to Subsidize Its Competitive Operations." The study examines the range of government-based advantages enjoyed by the United States Postal Service (USPS), and how USPS leverages these privileges to cross-subsidize and thereby unfairly support its private sector operations.
The study reports that the U.S. Postal Service's special benefits include its exclusive access to residential mailboxes and mailrooms of apartments and office buildings, a privilege which USPS uses not only for letter mail but also for package deliveries in its competitive operations with private firms. These privileges saved the USPS an estimated $14.9 billion in 2013, while private delivery companies are barred from using mailboxes and mailrooms and must therefore bear the cost of leaving all deliveries at each customer's door.
The analysis also calculates that the USPS's special legal exemption from state and local property and real estate taxes, including property and real estate used by the USPS in its competitive as well as monopoly lines of business, saved the Postal Service more than $1.5 billion in 2014. Similarly, the USPS also is exempt from state and local vehicle and registration fees, road tools, sales tax on fuels, and parking tickets, again covering both the competitive and monopoly business lines.
By drawing on its vast monopoly-supported network of postal facilities, workers and equipment, USPS artificially reduces its costs in its competitive operations. It does so, because consumers have no choice but to use USPS to deliver letter mail, even when rates go up; while higher costs in its competitive operations would drive away customers. "A one percent increase in the price of USPS's competitive products leads to a reduction in demand for those products 6.7 times greater than a comparable increase in the price of its monopoly products," Dr. Shapiro notes in the study. "As USPS's costs have risen, this disparity has led the Postal Service to increase the price of its monopoly products and to use additional revenues to cross-subsidize its competitive products so their prices remain less than their actual costs."
The study calculates that these arrangements have produced current subsidy rates in USPS's competitive operations of at least 10.8% for international mail, 27.2% for priority mail, 29.3% for ground shipping, and 30.1 % for first class package delivery.
"The Postal Service's hybrid model has serious structural problems that distort the competitive delivery market by discouraging new entrants and greater investment by firms currently providing those existing services," writes Dr. Shapiro. "The ultimate losers are American consumers who pay too much for USPS's monopoly products and have to put up with less efficient and innovative markets for private deliveries of packages and express mail."
The full report is available here.
Robert Shapiro is the Chairman of Sonecon, LLC, a private firm that advises U.S. and foreign businesses, governments and non-profit organizations on economic and security-related issues. Dr. Shapiro is a former U.S. Under Secretary of Commerce and has advised President Clinton, Prime Minister Tony Blair, numerous members of the Obama cabinet and White House staff, members of Congress, senior government officials in Europe and Asia, and many Fortune 500 companies. He founded Sonecon in 2001, and it has earned the trust of policy and decision makers around the world. To learn more about Sonecon, visit www.sonecon.com.