Released: October 15, 2002

Call for Postal Rates Accountability

Contact: Linda Sherry or Ken McEldowney, Consumer Action, (415) 777-9648

Consumer Action and the Office of the Consumer Advocate want assurance that monopoly postage revenues aren’t bankrolling bad business decisions

Oct. 15, 2002 — Today Consumer Action and the Office of the Consumer Advocate asked the U.S. Postal Rate Commission (PRC) to regulate Postal Service forays into unauthorized commercial ventures. Click here for a PDF version of the actual filing. They also asked that the Postal Service be required to turn over development and revenue figures for such products and services, so that a judgment can be made as to whether they contribute to higher rates for monopoly mail and other regulated postal services. The Postal Service contends that it does not need the approval of the PRC to offer non-postal products and services.

Ken McEldowney, executive director of Consumer Action, said, "The Postal Service has moved aggressively, unsuccessfully and perhaps blindly into competition with businesses in offering non-letter delivery and communications services. We’re concerned that mail customers are paying for Postal Service failures through higher postal rates. To fulfill its role in regulating postal rates, the PRC should make the Postal Service provide concrete figures on the costs and returns of non-letter products."

"The Office of the Consumer Advocate is pleased to be working alongside Consumer Action to bring a joint request to the Commission for immediate review of largely loss-producing services that have never been examined in a public proceeding," said Shelley Dreifuss, director, Office of the Consumer Advocate, Postal Rate Commission.

"The Postal Service’s decision to sell these services to the public without first obtaining recommendations from the Postal Rate Commission is based on an incorrect interpretation of the Postal Reorganization Act," contended Dreifuss. "Furthermore, the Postal Service’s inadequate accounting and reporting practices for unreviewed services necessitate the establishment of rules that will require the Postal Service to submit detailed cost and revenue information to the Commission. Detailed financial information is the only way to ensure that the purchasers of postal services—particularly first class services—will not have to pay for the costs of, and losses from, services that have never been authorized by the Commission."

In 1970, Congress created the Postal Service out of the Post Office Department and continued its monopoly on non-urgent letter delivery. The Postal Service has since developed and marketed competitive non-letter products such as electronic bill payment, electronic document exchange, merchandise and prepaid phone cards. But instead of bringing innovations to the marketplace, the Postal Service has established an alarming track record of losing money on new ventures.

The Office of the Consumer Advocate is the federal office charged with assuring that postal rate increases are fair for consumers and is part of the Postal Rate Commission. When the Postal Service wants to change postal rates, it must file a request with the PRC. The mission of the Office of the Consumer Advocate is to be a vigorous, responsive and effective advocate for reasonable and equitable treatment of the general public in proceedings before the Commission.

By law, rates must provide sufficient revenues to cover Postal Service costs for the delivery of "letter mail." However, Consumer Action charges that consumers have been forced to accept three rate increases over the past three years while the Postal Service allows money to leak away on costly ventures that are greeted with little interest by consumers. One discontinued service called PosteCS that was used to deliver documents electronically cost the service $7 million to bring to market, but generated only $8,000 in new revenue. Another product—the Electronic Postmark™ for e-mail—cost $8.6 million to develop and does not show signs of great popularity.

"This enormous drain of funds is disturbing enough in itself," said McEldowney, "but when coupled with the arrogant attitude of the Postal Service in refusing to turn over development and revenue figures, it spells disaster for consumers’ pocketbooks."

Consumer Action and the Office of the Consumer Advocate contend that the laws governing the Postal Service require that all services and products offered to the public must be subject to public hearings before the PRC. The organizations insist that at the hearings the public must be presented with solid costs and revenue estimates for all new offerings.

The Postal Service takes the position that it does not need the approval of the PRC to offer new "non-postal" products and services. In filing their request with the PRC, Consumer Action and the Office of the Consumer Advocate roundly denounced that view, arguing that Congress has seen fit to give the Postal Service many advantages over private-sector business with its monopoly status—for instance it pays no property taxes on land, buildings or equipment it owns and, if it ever becomes profitable, it would not be required to pay income taxes. With these advantages comes a need for accountability.

Consumer Action and the Office of the Consumer Advocate urged the PRC to assume its rightful power to ensure that the non-postal business decisions of the Postal Service are sound enough to prevent the misuse of monopoly revenues.

Consumer Action, founded in 1971, is a national non-profit education and advocacy organization based in San Francisco, CA.