Copyright 1999 The Buffalo News
The Buffalo News
January 10, 1999, Sunday, FINAL EDITION
SECTION: BUSINESS, Pg. 7B-
LENGTH: 1262 words
HEADLINE:
WHY THE PENNY INCREASE?;
POSTAL SERVICE RUNS A SURPLUS BUT NEEDS TO
MODERNIZE
BYLINE: BRIAN MEYER; News Business Reporter
BODY:
MAILING A first-class letter costs an
extra penny starting today, but that penny will add up to some $ 1.6 billion in
new revenue this year for the U.S. Postal Service.
Postal officials said
the revenue generated by the rate increase will be used to invest in equipment,
facilities and services designed to help it prosper in an era of unprecedented
competition from faxes, e-mail and other forms of electronic communication.
"If there has ever been a rate case that is good news for the consumer,
this is it," said Vic Laudisio, spokesman for the Postal Service's Buffalo
region.
But some critics said it's really about a federal agency taking
advantage of a monopoly at the expense of the private sector. Indeed, a major
rival of the postal service claimed last week that the $ 1.6 billion rate hike
unfairly asks businesses and individuals to subsidize the agency's foray into
money-losing ventures.
According to United Parcel Service, the Postal
Service uses its highly profitable first-class mail service to compensate for
losses on dozens of new products and services that compete with the private
sector.
The allegations lodged by UPS triggered countercharges by
officials from the Postal Service that employee-owned UPS is engaged in a
crusade to mislead the public.
United Parcel Service and its Coalition
Against Unfair USPS Competition launched a national campaign to convince
Congress that it should force the Postal Service to limit itself to its core
business of delivering mail.
"The Postal Service is abusing its
letter-mail monopoly at the expense of consumers and businesses," said Tad
Segal, director of public relations at UPS.
Segal visited Buffalo last
week as part of the national lobbying blitz aimed at galvanizing public support
for sweeping postal reforms. He said increasing the price of a
first-class stamp to 33 cents comes at a time when the Postal Service has racked
up $ 5.3 billion in profits over the past four years. In 1998, it made $ 550
million, he said.
Laudisio wouldn't comment on claims by UPS that the
extra revenue will tilt an already uneven playing field in favor of government.
"The Postal Service won't get into a war of words with our competitors. It's not
our style. We take the high road," he said.
However, the northeastern
spokesman for the Postal Service said he thinks the noisy dispute is driven
largely by competitors' fears that the agency is making significant inroads.
"We're no longer the resource of last choice for many people," he said.
"I think that's why our competitors are responding the way they are."
Segal acknowledged that UPS is worried about its ability to compete with
Uncle Sam five to seven years from now, but he said the concern has nothing to
do with any shortcomings in the private corporation.
"We think we could
eat their lunch if we only had a level playing field," said Segal.
The
private carrier employs 328,000 people and generated about $ 1 billion in
profits last year, up from $ 900 million in 1997, when UPS dealt with a
contentious strike.
Segal cited a report issued in November by the
General Accounting Office that found that the Postal Service lost nearly $ 85
million trying to develop 19 new products and services from 1995 through 1997.
Among the unprofitable ventures cited in the GAO study:
A
controversial foreign-package service called Global Priority Mail that lost $
5.4 million.
A prepaid phone card marketing plan that lost $ 3 million.
A bill remittance center that lost $ 6.1 million.
Electronic
commerce services -- including one that attached electronic postmarks to verify
when e-mail messages are sent -- that lost $ 20.3 million.
Postal
officials confirmed that part of the revenue generated by the 33-cent stamp will
be earmarked for developing Delivery Confirmation, a computerized system
designed to enable mail carriers to confirm that packages are delivered by
logging the activity on portable scanning devices.
"This is exactly the
kind of thing we're concerned about," grumbled Segal. "The Postal Service is
taking money from its first-class stamp and building an infrastructure similar
to our computerized tracking system. Why should customers who buy stamps be
saddled with this cost?"
Postal Service officials said there's a simple
response: If the service is to effectively compete into the 21st century, it
must take bold marketing steps and recognize changing trends. Put simply, the
volume of first-class mail is likely to drop in the coming decades as e-mail and
fax transmissions become more common. At the same time, Internet commerce and
catalog shopping is likely to fuel an increase in the number of parcels shipped.
"We're in a transition period and we're positioning ourselves to be a
player," said Laudisio.
Coincidentally, an Amherst company has been
involved in developing software for an Internet-based shipping system for the
Postal Service.
National Traffic Service developed a program that allows
postal workers to have products shipped to or from any location without
generating paper records. Instead, documents are forwarded to trucking companies
and then electronic bills are sent via the Internet to the mailing company. The
process is designed to save time and reduce errors.
Laudisio said other
technological innovations are also being launched.
Part of the revenue
generated by the 33-cent stamp will be used to install equipment that aims to
reduce the amount of time that customers stand in line. One such device is a
computer that enables postal employees to check customized requirements by
touching a screen, as opposed to leafing through bulky manuals.
"It's
all about making the Postal Service even more customer-focused," Laudisio said.
But critics see it very differently.
James Pagliaroli and Jeff
Jarosz serve as the area managers for Mail Boxes Etc., the largest packaging and
shipping franchise in the world. They own two local outlets and have 15 other
franchise stores in the Buffalo area.
"Over the last few years, the
Postal Service has started selling many of the things that we sell -- shipping
supplies, packaging items, even phone cards. They recently opened a Postal Store
on Sheridan and Hopkins. It even looks the same as our stores," Pagliaroli
lamented.
It's not the competition that's irksome, however. He explained
that the Postal Service enjoys many benefits that give it an upper hand,
including exemptions from most taxes, avoidance of some zoning laws and access
to cheap government credit.
"Post offices don't even have to charge
sales tax when they sell supplies to customers. That's an 8 percent pricing
advantage right there over their private competitors," said Jarosz.
The
business people complained that the higher-price first-class stamp will give the
Postal Service even more resources to devote to developing and marketing new
services. Mail Boxes Etc. is a member of The Coalition Against Unfair USPS
Competition, a group that has been lobbying for reforms.
The issue has
united some sparring partners -- Segal said UPS has been working closely on
Capitol Hill with Federal Express, another private package carrier that has
carved its niche in overnight shipments.
Postal officials are quick to
note that annual surpluses are used to pay down billions of dollars in debt
incurred in less-prosperous times. Laudisio said the agency still has a $ 4.5
billion accumulated deficit.
"We've been on a financial roll over the
past the several years. Now is the time to pay down that debt," he said.
GRAPHIC: JAMES P. McCOY/Buffalo News; "The Postal
Service is taking money from its first-class stamp and building an
infrastructure similar to our computerized tracking system. Why should customers
who buy stamps be saddled with this cost?" Tad Segal, director of public
relations for United Parcel Service.; Buffalo News; Graphic-A penny more
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