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IMO, what gives rural residents so much clout in the U.S. is their disproportionate representation in the U.S. Senate. Wyoming and Montana and Vermont have exactly the same number of senators as California and Florida and New York.

I haven't looked at international mail service, so I don't know which nations offer private mail service. If Great Britain does, it is not surprising that such a geographically small nation might be able to offer flat rate delivery pricing.

FedEx delivers priority mail to every zip code – at least every one in the continental U.S. Not positive about their current service, but I was once responsible for planning the expansion into remote zip codes. They accomplished this by offerring different levels of service to remote areas. Overnight delivery with early morning service was not available.

I have to concede that competition is what motivated tghe FedEx expansion. However, for the first 15 years, FedEx did not serve all zip codes. Only when UPS advertised coast to coast service did FedEx puch out to the boondocks.

The difference between priority mail revenues and standard mail revenues is huge. FedEx found a way to expand the delivery area of a $10 standard overnight letter. I don't see why they would do so for a 35 or 40 cent piece of standard mail.

I think ending the USPS monopoly would be followed by either price or service discrimination. The clout of small state senators may be enough to prevent that from happening.

Within the debate portion of this podcast, Schrum refutes the idea that rural routes, such as Deer Lodge to Six Mile, are necessarily subsidized by urban routes. Although not citing any specific studies, he argues that rural routes hold their own, so to speak. His opponent, Christopher Shaw, argued otherwise, explaining that it depended on which studies one chooses to highlight.

However, even if there is cross-subsidization of rural routes by urban consumers, I'm not convinced that the former would be worse off if the USPS monopoly were relaxed. For one, the process of price discrimination may not be cost effective. To impose such a scheme on consumers would require a way to charge for service based on origin and destination that would generate savings above and beyond charging everyone a simple, flat rate. Clearly, for large parcels, price discrimination makes sense. But for small, lightweight, often bulk-processed post???

Also, Schrum points out that other nations without a first class monopoly (he cites Britain specifically) have continued to offer universal service. Hence, I disagree with your assertion that a relaxed monopoly on first class mail would necessitate relaxed service to rural areas of the country.

Finally, assuming for the moment that cross-subsidization is a reality, I should ask the perhaps politically incorrect question of whether it is fair that urban consumers should have to pay a surcharge for postal service. Put another way, should the bulk of our population (urban, by definition) forgo improvements to their postal service so that rural customers can reap equal benefits (despite unequal costs). Your thoughts???

You know, this occurred to me, too. And I got to thinking about remote towns in Alaska. Food, shelter, sundries, etc. – everything else is brought to them by markets – usually at high expense, but all of life's necessities are available there. It seems funny to me that mail, which doesn't really rank as a necessity on the level of food & shelter, would be given this special status as the one thing that gets provided at a standard rate.

"Look, with food, drink, shelter, medicine, you're on your own. But, the MAIL – that is something we just have to get to you at no extra cost." It's kind of absurd when you think about it.

My hearing disability prevents me from listening to the podcast. Can you help me? I'm curious about whether Mr. Schrum had a suggestion for ensuring remote mail delivery. If the USPS monopoly is ended, then USPS can no longer be required to service all zip codes. Other delivery companies would certainly jump in and provide Boston to New York mail service. Who would want to handle the Deer Lodge, MT, to Six Mile, SC, letters?

Good point about the tax advantage USPS enjoys. Of course, UPS and FedEx only compete with USPS in package delivery and priority mail. Only USPS delivers standard mail.

FedEx is now a USPS supplier, moving official USPS mailbags around the country. But before they won that contract, FedEx executives complained often to Congressmen about the USPS cross-subsidization of package and priority mail delivery. USPS was accused of using standard mail monopoly profits to subsidize its non-monopoly products in order to offer lower rates. I'm no longer privy to FedEx executives' tactics, so I can't confirm that they still complain. My guess is that FedEx's $1 billion share of those monopoly profits has reduced the concern of FedEx execcutives..

That's at least an instant 30% financial advantage over any private competitor.

Just imagine the savings in fuel costs alone, without taxes… in such a transport-intensive business.

It's a wonder FEDEX & UPS can compete at all with the huge tax advantages enjoyed by the USPS — but it's indicative of how inefficient the USPS really is.

Nowadays, I'm down to about 2 letters a month away from not caring at all how much a stamp costs.

Clearly the individual choices made by people dictates the expnse of receiving the service; in other words where I choose to live affects the ability of the mail courier to deliver my mail to my doorstep.

If I choose a remote isolated home site, then delivering my mail to me becomes a cost that may off-set any profit made by any particualr branch Post Office, or it would likely drag the balance to the negative side at the very minimum and make the branch Post Office operate at a loss that has to be made up somewhere else.

Individual choices in lifestyle affect our medical health in the same way.

The obvious, to me at least, answer is to convert the mail delivery system to a private for profit company so that individual choices would reflected in how much we value the service and how much we would be willing to pay for what level of service.

The American people were once served by a USPS that operated somewhat on a cost/benefit basis. The USPS delivered mail to the little remote town on a reasonable schedule, and the rancher or farmer then rode his horse, or drove his wagon in, and picked up the mail at the branch Post Office. The USPS did not, except in rare case, institute a rural delivery in those areas of vast distances between homesteads and ranches.

Daily delivery to your door, at a loss, subsidized even by the working illeterate, is a concept that could only come from the socialist mindset.

I didn't say they could do it for less. I said they could probably do it for more, particularly to remote areas.

My source was discussions with FedEx, UPS, and USPS managers many years ago when I was working in the intermodal business moving, among other things, mail and packages in ground transportation. I'm pretty sure that the FedEx manager I spoke to was not speaking from any business plan to take over snail mail, but from a basic sense of FedEx's capabilities for universal coverage.

I'm just being curious when I ask this, Mr. Hodak: Do you have a source for the FedEx claim that they could deliver standard mail to remote places for less? They probably could, but I would be surprised if they've investigated the idea.

I left FedEx 10 years ago, but before then I was closely involved with many service proposals and decisions for the company. As an industrial engineer, I planned the expansion of FedEx service to all zip codes in the Southwest and mountain states. As a strategic planner, I evaluated proposals for new product offerings, including FedEx Standard Overnight and a few delivery joint ventures.

I would be surprised if FedEx truly wanted to take over standard mail delivery. IMO, FedEx can offer several classes of higher value delivery simply because USPS is so inefficient. They would lose a key marketing advantage of they were competing with themselves rather than with a government-controlled monopoly.

The USPS goose has laid an additional golden egg for FedEx, a treasure my vice-president and I first proposed to Fred Smith 14 years ago. FedEx receives a billion dollars annually for moving USPS mail bags around the country through the existing FedEx network. So USPS is both a competitor and a valuable partner.

If a government-granted monopoly was more efficient than market competition, and prices were lower under the former, would that make it okay?

If the monopoly can deliver better service with government protection, then it can deliver better service without government protection.

The U.S. situation is less serious, but between the post office, air service, and bridges to nowhere, many people continue to live in places they should have long since left.

"I have never had to worry whether UPS, Fed Ex, or DHL was overcharging me due to political favoritism. When **** petitions Congress concerning the postal rate changes, I would hope you would ask for the right to send the magazines via the private carrier of your choice, thereby eliminating the problem of making a political battle out of the rather mundane task of mailing the magazine."

It really utterly depresses me when people insist on having the government deliver services, then when the inevitable problems with the program crop up, instead of questioning the wisdom of using the politically derived police powers of the government to manage the service, they just divide into factions to fight over whose special interests should win the political battle. And the process of fighting the battle, against those eeevil corporations just reinforces the leftist belief system that corporations, and therefore markets, are bad. I find it very frustrating.

I would have answered that economist should always think at the margin, and that in the absence of any other service to compare it to, there's no way to tell whether it is outrageous or not.

The USPS has no "operating" subsidy. That is, it's revenues are expected to cover their operating costs, and they generally do. However, the USPS is one of the most capital intensive operations in the world. They have processing centers for snail-mail and bulk mail. Within these processing centers are advanced sorting, labeling, packaging, etc. technologies that cost billions. All of these are funded by general bonds, over $13 billion as of the end of 2005. They don't have to pay the interest on these loans.

Furthermore, they have offices in every community in the U.S., nearly all of which are government-owned. While there is no current capital cost associated with these vast properties, there is a huge opportunity cost–all that fair-market rent they don't have to record on their income statement–that the taxpayers are bearing as well.

So, although they say they have no "operating subsidy," there is a significant capital subsidy–I estimate on the order of $3-4 billion per year (the entire profit of UPS in a good year).