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Should the post office become Radio Shack?

I'd like to read this Monocle article on how the Swiss postal service is successfully reinventing itself as "a global media and technology company," as that appears to be what our Postal Service wants to do. Apparently, there's a lot of opportunity at "the intersection of data networks and the old-fashioned letter routes" and the Swiss have tapped it. Our Postal Service wants to do the same, with plans to "sell banking, insurance and cellphone services through post offices."

But I don't understand why we'd want it to do the same. The Postal Service exists because reliable and affordable delivery of mail was too important to leave to the market. People in rural areas, for instance, had to be able to communicate with the rest of the country, even if delivering mail to them wasn't very profitable. But I'm not sure how that argument applies to selling banking, insurance and cellphone services.

The government presumably won't be developing such products directly. Instead, the plan seems to be to take advantage of the fact that we've got post offices all over the place by having them sell things that are more profitable than selling mail delivery. That might make a bit of money for the post office, but I'm not sure it's a good idea for the government to start opening Radio Shacks. A more obvious evolution would be to start providing broadband services in rural areas, as that would be fulfilling the service's initial mission. But that would obviously require a whole different workforce with an entirely different skill set and so probably isn't very useful so long as the question is "how do we make the post office profitable?"

By Ezra Klein  |  March 3, 2010; 10:15 AM ET
 
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Comments

I understand that several European postal services began offering banking services because it was something that couldn't be reliably left to the market. Commercial banks wouldn't serve all customers - particularly those with bad credit or small account balances and those in remote areas.

Posted by: GrandArch | March 3, 2010 11:02 AM | Report abuse

>>The Postal Service exists because reliable and affordable delivery of mail was too important to leave to the market. People in rural areas, for instance, had to be able to communicate with the rest of the country, even if delivering mail to them wasn't very profitable.>>

Tell me again why I should subsidize someone who chooses to live a rural area.

Posted by: fuse | March 3, 2010 11:04 AM | Report abuse

Well, they clearly have to adapt... It's better to move in a positive, more services and products, direction than jumping into the death spiral (cut services, lose more business).

Japan post was privatized, but not for the reason you might think. It was the nations biggest insurance firm and the nations biggest bank, who delivered mail. In fact, both were one of the world's biggest insurance and banking firms, under the same gov roof. They wanted to free those operations for private ownership, but had virtually no plan for mail delivery at the time.

See, the network of store-fronts could have immense value, but our post is limited to very few responsibilities by law. Clearly, they want to preserve the network and add services/goods. I'd agree w/ that approach. The USPS has a reach (especially into rural areas) that virtually no other org has in this country.

It could be an opportunity for companies, and doesn't have to be seen as a competitor. Cell phones could get more retail floor space at little cost (USPS won't MAKE phones, just sell them -- and the money is in the plans anyway.)

But, our congress is run by people obsessed with simple ideas. And, I'm not sure they'll give the rope to allow USPS to fix things. We'll see, I guess.

Posted by: rat-raceparent | March 3, 2010 11:06 AM | Report abuse

Dear fuse: You eat, don't you? How much of your food is truly locally grown, say within 25-30 miles of your house?

Ezra is quite right about government subsidizing services that aren't proifitable but are necessary. One of the major pourposes of our government is to "provide for the common welfare". Gov't is not supposed to make a profit, but to make people's lives better. Private coimpanies, cheif example banks and other financial services companies, just try to screw people every way they can to make a profit. I certainly don't think that is the model that we should all be trying to adopt. People who sayu the govl;t can;t do anything conveniently forget the highway system, for example, and the railraiods, which were heavily subsidized wioth land grants to get them built, that make commerce possible. So does the post Office. Many internet companies use USPS, especially to rural areas. What, those people shouldn't be able to shop unless they build themselves a highway system? Who subsidized the public transit system in urban areas? Everyone benefits in one way or another from government services.

Posted by: Mimikatz | March 3, 2010 11:17 AM | Report abuse

A good model to follow would be Australia Post. (I'm an expat aussie) In Australia, they privatized the post OFFICES, while the postal service is still government run. This means the postal workers that the public interacts with, often the small business owner of the franchise, are pleasant, personal and interested in making your stay at the post office as happy as possible. Post offices in Australia also sell other services like calling cards, bill pay services, and memorabilia. That way you can have the "important govt service" and have a private organization that actually runs the shops

Posted by: ChicagoIndependant | March 3, 2010 11:21 AM | Report abuse

"A more obvious evolution would be to start providing broadband services in rural areas, as that would be fulfilling the service's initial mission."

This does make sense, much like the rural electric cooperatives were created to facilitate getting electricity to rural areas that the established utilities wouldn't connect because of the costs involved of reaching more isolated rural residents. And certainly, connection of many of these same isolated rural residents to the Internet (the so-called "last mile" of extending the Internet) is similar.

However, any movement by the postal service to do anything like this will be met with howls of protest by private industry, since they regard it as their potential market, and think government should not be competing. Rural telephone companies and cooperatives and satellite Internet providers are already trying to tap this market. If the postal service was to offer better broadband connections at a lower cost, the lobby for these companies would go nuts.

In Iowa, we have a state owned-and-operated fiber optic network that provides Internet and phone services to state government, and is also largely used by rural schools to provide two-way video conferencing to offer distance learning. However, there is a perennial battle in the state legislature to limit the entities that can access these services (for example, local governments currently can't hook into to the network) because the rural telephone companies and satellite providers see this state network as encroachment upon their market. In fact, there is also a perennial push to force the state to sell the network, to eliminate the potential competition (an appeal which is increasing in acceptance as Internet videoconferencing and VOIP services increasingly become available in outlying areas, and the state fiber optic network services become less "unique"). These lobbyists have a stronger voice and greater numbers than you would first think.

In short, if you want to see internet lobbyists representing these rural areas descend upon Congress like we've seen health care lobbyists swarm in the last year, this is the kind of proposal that would do it.

If the postal service can identify a market whose needs are not being adequately serviced by present market forces, however, they might have a greater chance of success.

Posted by: reach4astar2 | March 3, 2010 11:52 AM | Report abuse

Since banking, insurance and cellphone service are all sectors where the marketplace pretty much sucks in terms of delivering what consumers actually want/need in an honest/transparent manner, this could be a great idea.

Posted by: paul314 | March 3, 2010 11:59 AM | Report abuse

I don't think even Radio Shack should be Radio Shack.

Posted by: slag | March 3, 2010 12:25 PM | Report abuse

In Japan, post offices are also the primary banks. It's not that strange of a concept. A good distribution network already set up can dole out services pretty easily. On the other hand, in Japan, the post offices are individual small businesses that are privately owned (IIRC).

Posted by: Asherlc | March 3, 2010 12:44 PM | Report abuse

Bring back Postal Savings Banks!

Posted by: leoklein | March 3, 2010 12:46 PM | Report abuse

I would argue that broadband internet access today is what postal service was when the post office was formed. The whole idea behind it was that people in all areas should have equivalent access to information. Why not guarantee service levels to everyone in the US? The "free" market has been promising this for 15+ years now and has failed to deliver.

Posted by: lkslongboarder | March 3, 2010 1:00 PM | Report abuse

I think you are making a huge error when you say it has to be profitable. No one is really asking it to turn a profit, we just want to be able to set rates at a point (if it exists) where the system can break even.

I agree that selling broadband services is way off target. People in densely populated areas pay a lot more for just about everything. Why should we pay for people in less densely populated areas to have broadband access? If they are willing to pay more for the lines to be placed, they can get it. If they won't, and you think people will pay for it, it's a business opportunity to prove them wrong.

Posted by: staticvars | March 3, 2010 1:10 PM | Report abuse

The whole point of the postal service when the country was founded was that is was NOT a viable business, but was essential to the success of the venture we call the USA. Essentially it was the glue that held our loosely coupled federation of states together.

I would argue that today providing high-speed broadband to ALL areas is not a viable business for a private entity, but is just as necessary today as the postal service was in the late 1700s.

I agree that such an effort would be met with much resistance from established players, but I don't think you would see the solidary of the business community that you see in the fight against health reform, for example. I could easily see major tech players getting behind this idea (ex. Google, Cisco, Microsoft). And I'm sure you would see almost universal populist support, even among those in already well served markets (i.e. people in the Bay Area won't shed a tear for Comcast).

Posted by: lkslongboarder | March 3, 2010 1:42 PM | Report abuse

Kind of of the mark, but in Switzerland you can also ride the postal delivery buses into rural areas, so they've also branched out into public transportation into the small mountain towns.

I think that the post office could introduce variable postage rates, depending upon where a letter is coming from/going. They do this now with their premium services, why not extend it to everyday delivery?

Aren't we already paying a tax on our phone bills to subsidize broadband in rural areas?

Posted by: Beagle1 | March 3, 2010 1:45 PM | Report abuse

>

Because if they don't you will. The rural areas are where most of our food comes from. Your ability to live NOT on a farm comes from rural folks choosing to live on a farm and help feed you. Be nice and help provide them with some of the niceties we have in populated areas, if you don't want to eat whatever grows in the city vacant lots.

Posted by: DirtyPinkoCommie | March 3, 2010 2:06 PM | Report abuse

Here's an interesting point of view. In USA, like in most economically successful empires before it, the postal service of one kind or another served as the communications infrastructure that was government funded and controlled, and that provided communication services that were beyond the grasp of the private enterprise at the time. This infrastructure invariably, throughout history, has proven to be an invaluable investment and an engine for commerce that frequently translated into an economic advantage for the society.

USPS was in the business of delivering mail when there were no other reliable means of communications, and pioneered air mail when there was nothing comparably fast commonly available. At the time when the majority of information is no longer in the written form, it makes sense for USPS to once again push new technologies. This should mean affordable and universally available broadband access, and perhaps wireless communications coverage. My personal pet peeve is that it is long past time for USPS to develop a "certified" email infrastructure that would be available to anyone, would uniquely identify the sender (current email infrastructure provides next to nothing in terms of guaranteeing that the sender is who they say they are) and would not allow SPAM. I think the time is coming when SPAM will threaten viability of email as a communications tool, and USPS could undertake an initiative to negate that threat

Posted by: DirtyPinkoCommie | March 3, 2010 2:39 PM | Report abuse

There are tons of other network and communications technologies that would benefit from a non-market benefactor. The internet itself owes its genesis to a not dissimilar situation.

What about providing Wifi to rural areas(and medium density areas)? Something that companies have been unable/unwilling to do. What about network integration services? It'd be pretty cool if I could go to a website, type in a message and then have the postal services deliver in hardcopy for a fee. Or vice versa? Not being tech-savvy, I send a letter and the post-office uses OCR to turn it into a digital message.

The postal service could scoop up the communications technologies that the private sector is unable or unwilling to take risks on because of #1 high one-time costs, #2 long development times, or #3 indirect profitability.

Posted by: zosima | March 3, 2010 2:46 PM | Report abuse

"USPS was in the business of delivering mail when there were no other reliable means of communications...."

That was the POD, not USPS.

Posted by: thehersch | March 3, 2010 3:58 PM | Report abuse

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