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Too Big to Mail?
The U.S. Postal Service, losing business and money, must take radical steps to survive in the 21st century.

Monday, June 22, 2009

THE POST office may be the next too-big thing. If it continues on its present course, the U.S. Postal Service stands to post $6 billion to $12 billion in losses by the end of the fiscal year. By the end of the second quarter of fiscal 2009, it had racked up an operating loss of more than $2 billion, almost equal to its total losses last year. So far, the Postal Service has depended on loans from the Federal Financing Bank, a federal borrowing agency, to help make up the difference, but it is fast approaching its $15 billion credit limit. Something has to give.

The Postal Service has asked Congress to omit a rider on an annual appropriations bill that mandates six-day service, opening the possibility of five-day delivery as a cost-cutting measure. It has also requested a temporary relaxation of its obligation to its pension program, enabling it to put nearly $2 billion toward breaking even.

Both these short-term fixes fail to address the challenges facing the Postal Service. Before computers, people depended on the mail to maintain relationships and conduct business. No longer. Overall mail volume has been in a nosedive for seven years. It plummeted 14.9 percent in the last quarter alone, outpacing the service's grimmest forecasts. Postal officials blame the economy. But the recession has only accelerated a transition to newer forms of communication that was already underway. For instance, one of the biggest declines in first-class mail last quarter was from people filing their taxes online.

The Postal Service has made valiant efforts to improve customer service and build its market share in shipping. But all its recovery plans revolve around increasing the volume of traditional mail. Suggestions for how to "Use the Full Potential of the Internet" in its Vision 2013 plan were limited to steps such as revamping its Web site and encouraging business sites to offer to mail information to customers. The service must adjust to changing times -- and fast.

Europe's increasingly privatized mail services offer exciting examples of postal possibilities in the 21st century. They are leaner and greener than the U.S. service because they work with, not against, the Internet. Switzerland's Swiss Post, for example, employs green technology, providing customers with secure, address-linked online mailboxes where they can view scanned images of their mail and decide whether to virtually "open" it, discard it or have it physically mailed to them. This system has greatly increased efficiency, promoted recycling and decreased junk mail.

Such are the steps the U.S. Postal Service might take if it were a real company and not a hybrid hamstrung by a large and heavily unionized workforce, congressional management, and an antiquated business model. Instead of its short-term cost-cutting measures, it needs to reduce its giant fixed costs to continue its appointed rounds. The Postal Service must reinvent itself for the 21st century, starting with a plan that doesn't rely on the resurgence of traditional mail. To do this will require innovative leadership, freedom from congressional micromanagement and an understanding of the possibilities of new technology that goes beyond building a better Web site.

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