Implications of Electronic Mail and Message Systems for the U.S. Postal Service

74 . Implications of Electronic Mail and Message Systems for the U.S. Postal Service

of total volume while UPS delivered 77
percent.2
Thus, the so called "postal monopoly" pro
vided to USPS under the PES is limited to
only a few of the many classes of mail service
offered by USPS. Available evidence suggests
that even among these protected services
USPS market power is eroding in the face of
competitive alternatives, both electronic and
nonelectronic.'Nonetheless, the Department
of Justice (DOJ), among others, believes that
there is a significant chance that a USPS EMS
offering (such as E-COM) could be subsidized
by revenues from the USPS monopoly on de
livery of first class letter mail.
If E COM were priced artificially below
what it costs, DOJ believes that E COM
might be used at the expense of both conven
tional first class mailers and the taxpayers (to
the extent that USPS continues to receive
public funds appropriated by Congress). DOJ
also argues that underpricing of E-COM might
discourage other firms from offering a similar
service, thereby decreasing competition. In
general, the DOJ position is that the existing
regulatory structure and oversight process do
not provide adequate safeguards against the
impacts of E-COM that could be anticompeti
tive and discriminatory.
With respect to taxes, as an independent
Federal Government agency USPS is not le
gally subject to Federal or State income taxes.
Whether or not this is a real competitive ad
vantage is a matter of dispute. USPS argues
that under the Postal Reorganization Act and
current ratesetting procedures it is effective
ly prohibited from making a profit; thus, even
if it were subject to income taxes USPS gener
ally would pay none because it would have no
taxable net income. Also, while USPS does not
pay property taxes on USPS owned property,
some State and local property taxes are paid
indirectly when USPS is the lessee rather than
the owner. Finally, USPS points out that it
does not benefit from tax advantages (such as
accelerated depreciation) available to private
'Ibid., p. 25.
'Ibid.

firms, and that any advantage from tax ex
empt status is more than offset by the costs
of service and regulatory requirements im
posed on it by the Postal Reorganization Act.4
Still, to the extent that private EMS firms are
profitable and pay income and other taxes,
such taxes represent a cost not incurred by
USPS. Some firms believe that nonprofit
status offers USPS a price advantage over
private competitors.
On the subject of access to the U.S. Treas
ury for investment purposes, the Postal Reor
ganization Act authorizes USPS to issue and
sell obligations not to exceed $10 billion out
standing at any one time. As of September 30,
1980, USPS long term debt totaled about
$1.84 billion, consisting of $250 million in
Postal Service bonds and $1.59 billion in notes
payable to the Federal Financing Bank.
USPS observes that "private industry obtains
various forms of financial aid including loans
from the Treasury. Moreover, private firms do
not operate under the same statutory or prac
tical limits on their borrowing authority as
does the USPS."'In addition, the Secretary
of the Treasury has the option not to pledge
the full faith and credit of the U.S. Govern
ment for USPS bond issues if the Secretary
determines that it would not be in the public
interest, although the Secretary has never ex
ercised this option. Clearly, USPS competitors
do not have comparable access to the U.S.
Treasury for purposes of long term borrowing,
a factor that becomes even more significant
when money is tight and interest rates are
high.
USPS also receives annual appropriations
from the U.S. Government as authorized by
the Postal Reorganization Act. In fiscal year
1980, the annual appropriations totaled $1.6
billion, which included $828 million for public
service costs and $782 million for revenue for
gone due to free and reduced rates for certain
mail services.'Some USPS competitors have
'Sept. 18,1980,letter to OTA from Charles R. Braun, USPS
Assistant General Counsel, pp. 11 12.
Annual Report of the Postmaster General fiscal 1980, p. 21.
'Letter from Braun, op. cit., p. 11.
'Annual Report of the Postmaster General fiscal 1980, p. 24.

United States. Congress. Office of Technology Assessment. Implications of Electronic Mail and Message Systems for the U.S. Postal Service. UNT Digital Library. http://digital.library.unt.edu/ark:/67531/metadc39480/. Accessed October 1, 2014.