When a Monopoly Is No Longer What It Was Meant to Be


Once upon a time, there was a company that was given an exclusive charter to build and operate a railroad between two cities that were quite far apart.  That charter required certain levels of service to the cities and to each town along the route and, in exchange, afforded the company the exclusive right to carry certain types of freight and passengers.  To be sure the fares the company charged weren’t excessive, an independent panel was established to review the company’s income and costs.

For decades, the railroad thrived, with more passengers and freight every year.  Even though it was the only railroad allowed to operate the route, the company’s customers still were satisfied with its fares and service.

Then a big change occurred. 

Airlines opened, and the cities and towns built airports so people and goods could be moved by air.  A trip that took days by rail then could be completed in a few hours, and a train ride that took hours instead could be a quick, short hop by plane.

The railroad’s business began to suffer; passenger loads decreased, and freight shipments dwindled – but the railroad was still required by its charter to operate the route and make all the stops.  Trying to stay in business, the railroad asked the panel overseeing its fares to grant an increase, but its customers complained.  The railroad was a monopoly, they said, and it was abusing its power over customers who had no other railroad available.

Meanwhile, new air carriers set up shop, drawing more passengers and more freight from the railroad, causing its business to steadily decline.  Even though it was still the monopoly provider of rail service, people and businesses had other ways to travel and move goods that didn’t involve a railroad at all.  Times had changed.

Translation

It’s likely anyone reading this far has already seen through the foregoing tale as an analogy for the Postal Service.

It, too, is a monopoly, in its case being the sole legal carrier of addressed letter mail and the only entity having the right to access addressees’ mailboxes (see 18 USC 1696 and 1725, respectively).  Any individual or company who wants to send something by mail has to use the Postal Service.  (Yes, there are exceptions for “urgent letters,” which is why services like the original form of Federal Express began, and the law does not prohibit the private carriage of newspapers and parcels, so newspaper delivery and UPS operate legally.)

Like the fictional railroad, when the USPS wants to increase its prices for its monopoly products, it must seek approval from an outside panel – the Postal Regulatory Commission – that reviews postal costs and revenues and other statutory criteria before approving a rate change.  Postal customers can argue against a price increase – and regularly do – claiming with good reason that they and their mailed products are the captives of a monopoly – one that some claim exercises its control over the mail to its customers’ detriment.

While it’s true that anyone wanting to send hard-copy mail must use the Postal Service, just as anyone wanting to ship or travel by rail had to use the chartered railroad introduced in the opening paragraphs, those monopolies are only as good as the absence of alternatives will enable.

A monopoly on rail travel does not apply to air travel and other modes of travel, just a monopoly over carrying hard copy messages does not apply to telegrams, telephone calls, faxes, email, and text messages.  In each case, the monopoly isn’t as comprehensive – or, as a result, as valuable  – as the term might imply.  In the analogy, no-one was required to use the train; by the same token, no-one is required to send hard copy messages.  A toll booth in one lane of an expressway is relevant only to those who use that lane.

The point

The point of this story is not that either of the postal monopolies should be lifted.  Doing so would remove a critical source of revenue for the Postal Service, and make it even more financially unstable unless significant cost reductions in services (such as the Universal Service Obligation) or other mandates (such as prefunding future retiree pension and health costs) were removed as well.

Rather, the point is that the value of the postal monopoly over addressed letter mail has been severely diminished by the emergence of robust electronic alternatives.  Direct competition in the carriage of letter mail may be illegal, but direct competition for the messages contained in those letters is both real and substantial.  Thus, describing the Postal Service as a monopoly may be technically accurate, and still very real for users of hard-copy mail, but the practical value of the monopoly is much less than what the term might suggest.

With that in mind, it might be useful for many who exist within the postal bubble to consider that, in some ways, their definition of messages has remained stuck in the days before the internet.  Yes, there’s a postal monopoly, but it’s not as universal, relevant, and valuable now as it once was, and it certainly isn’t now what it was meant to be.

Electronic media are competitors of the Postal Service; they may not be hard-copy services, but that distinction often is meaningless.  The USPS’ monopoly is over hard-copy messages, not over messages generally.  If the message can be sent electronically, having the monopoly over how it would have been sent forty years ago isn’t much good.

Unfortunately, while many in the mailing industry continue to focus on the USPS monopoly over hard-copy letter mail, they fail to realize that, in the larger communications picture, the postal monopoly is hollow.  It’s the toll booth in one lane of the communications expressway that most senders of messages can and do easily avoid using.

The disconnect between what the postal monopoly is assumed to be and what it really is manifests itself dangerously when Congress legislates burdens and obligations to be paid by hard-copy mail users, when the PRC views price increases on such mail as the solution to USPS financial instability, and when the postal unions seek compensation and benefits analogous to those that were appropriate in better times.

Most senders of messages – postal ratepayers – have alternatives for messaging that bypasses the monopoly, and that removes the revenue stream that the monopoly once assured.  Times have changed.

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