Newspaper article St Louis Post-Dispatch (MO)

Fax Stamps out Old Monopoly at Post Office

Newspaper article St Louis Post-Dispatch (MO)

Fax Stamps out Old Monopoly at Post Office

Article excerpt

Monopolies are great while they last. But eventually, even the sturdiest of them can be brought to their knees by market forces and technological innovation.

It happened a decade ago to Ma Bell in the long-distance telephone market. Now even the greatest monopoly of them all, the U.S. Postal Service, is showing some cracks in its armor.

The Postal Service still has its statutory monopoly on first-class mail, to be sure. But it no longer has an unfettered ability to raise prices.

That was apparent in last week's announcement that the price of a first-class stamp will jump to 32 cents. The three-penny increase amounts to 10.3 percent, but the Consumer Price Index will have risen about 13 percent between 1989, the last time postal rates went up, and 1995, when the 32-cent rate goes into effect.

So mailing a letter is getting cheaper in real terms. Not only that, but the Postal Service spent an unprecedented amount of time negotiating with business mailers before announcing the rate increase.

In the old days, Post Office officials merely calculated how much their costs were going up and gave customers a take-it-or-leave-it rate.

The problem is that today, too many customers are able to leave it. Second- and third-class mailers (magazines and junk mail) can leave the postal system for various alternative-delivery companies. If those were the only competitive threats, the Postal Service wouldn't be so worried. It could simply load bigger rate increases onto first-class mail, a strategy that it pursued for a while in the 1970s and 1980s.

But the statutory first-class monopoly means much less today. With fax machines becoming ubiquitous in the business world and starting to show up in homes, letter writers have a faster, and often cheaper, alternative to the mail.

Richard McKenzie, an economist at the University of California-Irvine, noted that the Postal Service defends its first-class monopoly vigorously, going so far as to prosecute companies that use private express-mail services for routine business correspondence. "To some extent, they have fortified efforts to retain their monopoly even as it's crumbling all around them," he said. …

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