United States Postal Service

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United States Postal Service

founded: 1971

Contact Information:

headquarters: 475 l'enfant plz. sw
washington, dc 20260-0010 phone: (202)268-2000 fax: (202)268-2392 url: http://www.usps.gov

OVERVIEW

Many people think of the United States Postal Service (USPS) as just another part of the Federal Government, like the Department of Agriculture or the FBI. But in fact, the USPS, although an independent agency of the Federal Government, is largely self-supporting financially; and though it enjoys a monopoly in some areas of its services, particularly First-Class mail, it faces competition in other areas, especially package delivery.

The USPS is the planet's largest postal system, delivering 41 percent of the world's mail. By contrast, the second-largest system, Japan's, handles only 6 percent. It also delivers the mail more cheaply than the postal systems of industrialized nations such as Germany and Japan, whose citizens pay $.58 and $.63, respectively, for First-Class postage, as opposed to the $.32 rate in effect in the United States in 1997. According to the USPS, it delivers more mail in one day than its chief competitor, Federal Express, delivers in a year.

COMPANY FINANCES

The USPS saw soaring income from 1995 through 1997. In fact, 1997's income, $1.26 billion, was the third straight year of income over $1 billion for the USPS (1995: $1.77 billion; 1996: $1.56 billion). Total USPS operating revenues in 1997 were $58.2 billion. To put that performance in perspective, 1997's income ranked the USPS eighteenth on Fortune magazine's list of the top 20 U.S. companies, and eighty-second on its list of the world's top 500 companies. The 1997 revenues of the USPS would make it the tenth largest company in America, according to Fortune.

The operations of the USPS are so massive that even portions of it, standing alone, would qualify as Fortune 500 companies based on yearly volume: correspondence and transactions ($33.0 billion), business advertising ($12.2 billion), and expedited delivery ($4.1 billion).

With three-year earnings of $4.6 billion, the USPS had largely erased the memory, if not the effects, of $9.0 billion in losses recorded over the preceding 23 years. During 1997, the USPS committed more than $3.0 billion to capital investments, aimed at improving its equipment and facilities. In fact, the USPS instituted a five-year investment program, ending in the year 2002, to invest $17.0 billion in its equipment and facilities.

ANALYSTS' OPINIONS

In 1997, a war of words between the USPS and competitor Federal Express began an ongoing battle, a battle that the USPS may have won in the short term. Federal Express had complained about USPS television commercials that stated that the USPS's Priority Mail was far cheaper than comparable services of Federal Express or United Parcel Service (UPS). The complaint said that the ads were misleading, because the USPS "can't match their delivery record or track a piece of priority mail from shipper to receiver," according to Time magazine. In January 1997, the National Advertising Review Board rejected the complaint, but the two rivals continued to face each other in lawsuits. In an interesting side note to the Federal Express controversy, the Postal Service executive who created the highly popular ads resigned in October 1996 when it was discovered that he had exceeded his $140-million budget by some $85 million.

Another controversy surrounded the USPS's attempt in 1997 to secure an increase in the price of a First-Class stamp. Although the USPS had not gotten such an increase since 1995, and although the increase was only to be for $.01, arguments against it were raised. With record profits in the ledgers of the USPS, competitors such as UPS said that an increase amounted to unfair competition by the USPS against rival companies. Although the price increase was approved, it was offset by decreases in other areas. The independent commission approving the increase reportedly did so reluctantly, because it may have felt misled by previous dire warnings by the USPS that the increase was needed to keep the USPS from drowning in "red ink," warnings that never came to be.

HISTORY

The ancient Greek historian Herodotus wrote admiringly of how Persian messengers of his day got the mail delivered: "Neither snow/nor rain/nor heat/nor gloom of night stays these couriers from the swift completion of their appointed rounds." These lines were inscribed on the front of New York's central post office.

The postal systems of Herodotus' time, and those of the Roman Empire (by far the most advanced in the ancient world) were chiefly for the use of governments and influential persons. This was also the case with major non-Western postal systems of ancient and medieval times, notably those of the Chinese, the Mongols, and in the New World, the Aztecs and Incas. Even when Europe emerged from the Middle Ages and the postal system, like many other aspects of daily existence, came back to life, usage of mail was confined to those who were very wealthy. And in fact, prior to the invention of the printing press and the spread of reading, there were few literate persons outside of the nobility and the clergy.

FAST FACTS: About United States Postal Service

Ownership: The United States Postal Service is an independent agency in the executive branch of the U.S. Federal Government. As such, it is not owned in a traditional way by shareholders, but is managed with a corporate structure similar to that of large U.S. companies.

Officers: William J. Henderson, Postmaster General & CEO, 50; Michael S. Coughlin, Deputy Postmaster General; Michael J. Riley, Sr. VP & CFO

Employees: 765,174

Chief Competitors: By law, the United States Postal Service (USPS) has a monopoly on the transport and delivery of First-Class letters. In all other areas of its operation, however, especially in package and parcel delivery, the USPS faces increasing competition. Some competitors are: United Parcel Service; Federal Express; Airborne Express; Burlington Air Freight; DHL Worldwide Express; Emery Worldwide; and Republic Package Express.

But the British postal system that began to develop in the 1600s, particularly with the establishment of the London Penny Post, was more democratic and accessible. In America, a country founded on British-inspired ideals of government, the postal system was from the beginning conceived as a cheap, efficient means for all people to communicate with other people throughout the country. Before the age of electronic communications and rapid transportation, this was a particularly necessary facet of life; but even in the era of the Internet, America would be handicapped without its postal system. In the 1990s, the USPS continued the tradition of efficient delivery, for a cost much lower than the postage in other developed countries.

America's postal system had its roots in the British postal system. In the 1600s, the British colonies in America got their first postal operations, which at that time were still privately operated, though under authority of the British monarch. As the colonies matured into a larger unit that would eventually be called the United States, Benjamin Franklin became their Deputy Postmaster General in 1753. Twenty-two years later, when the colonies revolted against England, they made Franklin the first U.S. Postmaster General.

It was not until 1847, however, that Congress actually issued the first postage stamps, an indication of how haphazard the new country's postal system remained. The era before railroads often required heroic means of delivering the mail, such as the fabled Pony Express, which only operated for a period of a few months during 1860 and 1861, prior to the completion of the transcontinental railroad. Railways greatly enhanced the efficiency of the postal system, and by the first year of the twentieth century, the United States had 77,000 post offices.

In 1911, the first airmail flight took mail between two towns in New York, introducing a major innovation in mail delivery. New systems of designating addresses also enhanced the efficiency of delivery. In 1943, the Post Office began dividing major cities into numbered postal zones, and 20 years later it introduced the much more comprehensive Zoning Improvement Plan (ZIP) Codes for the entire country.

Slightly less than 200 years after its founding, the Post Office Department, whose postmaster general had been a member of the President's Cabinet, ceased to exist. On August 12, 1970, President Nixon signed legislation creating the United States Postal Service, an independent agency in the executive branch of the federal government. Established in 1971, the USPS continued to enjoy some government subsidies, but it no longer held a monopoly over delivery of packages. Thus the 1970s saw the emergence of competitors, primarily UPS and Federal Express; in the decades that followed, competition would become a significant theme for a "company" that had not previously had to face it.

STRATEGY

In 1997 the USPS created a Five-Year Strategic Plan. Its goals mirrored the risks and challenges that lay ahead for the world's largest postal service. The plan aimed to improve customer service, enhance the work-place for its employees, and improve relations with business. The plan acknowledged that electronic mail may substantially cut into the First-Class mail delivery of the USPS; at least 38 billion e-mails now sent would previously have been posted by mail. The plan also looked toward important congressional legislation to reform the USPS. If passed by Congress, the way that the USPS sets prices would change dramatically.

From 1997 through 2002, the USPS was to spend $17 billion for capital improvements. The money would be spent on new technologies to produce labor savings, and on customer service programs that would increase revenue or enhance their competitiveness.

CHRONOLOGY: Key Dates for United States Postal Service

1639:: First official postal system is established in Boston, Massachusetts
1753:: Benjamin Franklin becomes Deputy Postmaster General in Colonial America
1775:: Franklin becomes the United States' first Postmaster General
1794:: Letter carriers begin delivering mail in cities
1800:: The Post Office headquarters is moved from Philadelphia, Pennsylvania, to Washington, DC
1847:: Congress issues the first postage stamps
1860:: The Pony Express begins operations
1861:: The Pony Express ceases operations
1863:: Introduces standard postage rates; began free city delivery
1896:: Introduces free rural delivery
1911:: First airmail flight delivers mail in the state of New York
1913:: Introduces parcel post
1920:: First transcontinental airmail is delivered
1935:: Regular trans-Pacific airmail begins
1939:: Regular trans-Atlantic airmail begins
1943:: Post Office begins dividing cities into numbered postal zones
1950:: Residential deliveries cut from two to one a day
1963:: Introduces the Zoning Improvement Plan (ZIP) Codes
1970:: President Nixon signs legislation to make the United States Postal Service (USPS) an independent agency
1971:: The USPS is established
1977:: Introduces express mail service
1982:: Government subsidies are no longer given to the USPS
1995:: Introduces Global Package Link
1998:: Postal Rate Commission approves a $.01 increase in first class postage

Central to any strategy of the USPS is the cost of stamps. In 1998, the independent Postal Rate Commission approved the USPS's request for a $.01 increase in First-Class stamps. Because of record income of the USPS, however, the Commission recommended cutting other costs. The Commission also delayed the implementation of the increase until 1998. In total it cut $2.4 billion in requested increases by about one third. The penny increase would bring in about $1 billion a year to the USPS.

Key to the automation strategy of the USPS is bar coding, the coded addition of address information to a letter. In 1997, 82 percent of First-Class letters were bar coded. The USPS's goal was to be the first completely bar coded, fully automated carrier. Also important to that goal was the continued development of handwriting recognition technology, vital to an agency that is at the mercy of handwritten addresses.

INFLUENCES

Though the Postal Service is no longer a full part of the U.S. Government, it is still highly influenced by Federal Government policy, in part because Washington still plays a role in reimbursing some Postal Service activities—that is, paying for cost overruns. This is particularly the case with mail other than First-Class—which costs more to deliver than the sender actually pays for postage—as well as congressional and other government mail; hence the government pays for the difference. Also, the Postal Service has authorization to borrow as much as $10 billion from federal funds.

Obviously these are advantages that most businesses would envy, as they would envy the USPS' continued monopoly over many aspects of mail delivery, including First-Class mail. However, the present USPS setup reflects a sharp turn toward privatization of the service, beginning with President Nixon's signing into law the Postal Reorganization Act in 1970. In the years since then, particularly in the 1990s, the USPS has seen heated competition from private enterprise, because companies that have to make a profit have a greater incentive to move packages quickly and treat their customers well. Hence the Postal Service has worked to adopt many of the methods of private enterprise, and it proudly touts the fact that unlike government agencies, every year it takes in as much as it spends.

The USPS is governed by a Board of Governors, nine members of whom choose the tenth, the Postmaster General. These 10, in turn, choose the Deputy Postmaster General. In addition, the Postal Service Board of Governors and the five members of the Postal Rate Commission set costs. As a result of privatization, costs of postage—which were once kept artificially low by government subsidies—have steadily increased. In 1974 the price of a First-Class stamp jumped from $.08 to $.10; in 1985, from $.20 to $.22; and in 1995, from $.29 to $.32—four times the cost 21 years before.

Postal rates will increase on January 10, 1999, bringing the price of a First-Class stamp to $.33. Overall, the average increase across all classes of mail will be 2.9 percent, the smallest ever. The modest increases will represent the longest period of rate stability in the 27 years of postal service. In effect, the prices are down by 7 percent when compared to what they would be if they rose at the rate of inflation.

CURRENT TRENDS

Facing increased competition from private enterprise, the Postal Service has worked harder in the 1990s to present itself as an ordinary business—one which has to worry about the bottom line. Symptomatic of this was an article in Industry Week about the furor former Postmaster General Marvin Runyon caused among the American Postal Workers Union with his declaration that the USPS would hire more private-sector labor, because it is cheaper and more efficient.

An article in Postal Life magazine, found on the USPS web site, indicated that labor-management problems were still dominant in 1998. In 1996, the General Accounting Office, the investigative arm of Congress, found that persistent labor problems "generally contributed" to tense working conditions and decreased production. Unresolved employee grievances against the USPS rose from 68,000 in 1996 to 108,000 in 1998.

But if the Postal Service trend toward imitating private enterprise attracted the ire of unions, it had features that were bound to win the approval of customers. In the wake of feverish competition, particularly with Federal Express and UPS, the Postal Service has attempted to make its deliveries quicker, and to encourage its personnel to treat customers as though they have a choice of doing business elsewhere.

Another trend facing the USPS was the increasing use of electronic mail. Seeking to capitalize on the boom and to stem its losses, the USPS created postmarks for e-mail, which, for a fee, could certify that an e-mail was delivered.

PRODUCTS

In October 1996, Advertising Age reported that the USPS was working to increase its stamp collectors' market, particularly among children between the ages of 8 and 12. In April of that year, the USPS launched its Global Priority Mail service through its International Business Unit. This put the USPS into a heavily contested market, the global courier business. Also, in January 1997, the USPS announced an experimental plan to test the market for bulk usage of nonletter-size business reply mail.

The USPS has several types of delivery service, though most persons receive mail either through city delivery or rural delivery. (Persons without a permanent address may receive their mail via general delivery at the nearest post office—e.g., "John Smith, General Delivery, Atlanta, GA 30303.") Persons sending mail can choose from a number of services. First-Class mail is for written material such as letters and postcards, and Priority Mail is for First-Class material weighing from 11 ounces to 70 pounds. Periodical-rate mail is for magazines and newspapers whose delivery is subsidized by the U.S. government because it costs more for the USPS to deliver it than the sender pays for postage. Standard Mail (A) includes all packages and printed material not included in either of the two preceding classes. (In order to qualify for a periodical-rate designation, the sender has to prove that printed material is not primarily for the purposes of advertising, whereas Standard Mail (A) includes advertising circulars.) Standard Mail (B) is for packages that weigh more than one pound but are not considered Priority Mail. Express Mail is the fastest form of mail, usually guaranteed for next-day delivery.

In addition, the Postal Service sells stamps, both for mailing and for collectors; money orders; and a variety of forms of protection against losing valuable items, such as insurance and certificates of mailing. Some facilities also rent post-office boxes, and perform other functions for their customers.

CORPORATE CITIZENSHIP

The USPS is involved in several different public issues, as evidenced by a visit to its web site. From the USPS site, users can be linked automatically to sites for the Bone Marrow Foundation or the National Center For Missing and Exploited Children. There is also information about breast cancer, for which the USPS issued a breast cancer awareness stamp in the mid-1990s.

For at least three years, the USPS has hosted the Environmental Stakeholders Conference, which promotes environmental awareness. The USPS has long been a leader in recycling programs and in the use of alternative fuel vehicles.

THE FABLED PONY EXPRESS

In March of 1863, the following advertisement appeared: "Wanted. Young, skinny, wiry fellows not over 18. Must be expert riders willing to risk death daily. Orphans preferred." And so was born the Pony Express. Mail to the western coast was notoriously slow, often taking months to get there. The Los Angeles Star had mournfully asked, "Can somebody tell us what has become of the U.S. mail for this section of the world?" The Pony promised to change all that—and it delivered. The first run, began on April 3, 1963, in St. Joseph, Missouri, ended in Sacramento in under 10 days, a then unheard-of feat. It was accomplished by an amazing relay of riders and horses. A rider would gallop full tilt for 15 miles, then at a relay station switch to a fresh horse in under two minutes and dash on. He would continue like this for 75 to 100 miles, at which point he was relieved by a rested rider who would gallop on.

Newspapers everywhere praised the Pony and printed sensational stories about it. The populace was captivated. Mark Twain, while on a stagecoach in Nevada, once saw a rider speed by. "A hurrah from our upper deck, a wave of the rider's hand, and a man and horse burst past our excited faces and go swinging away like a belated fragment of a storm." Writes historian David Nevin, "The Pony was an ongoing story of thrill, speed, and lone daring."

Make no mistake, there was danger enough, between the vicious snowstorms of the mountains and various native North American Indians, some of whom had conflicts, often violent, with white settlers. One rider was waylaid by Indians in the Utah Territory, but he completed his run even though his jaw was broken by an arrow and his arm shattered by bullets. Another rider struggled for more than a day through a raging blizzard in a mountain pass that took him usually just a few hours to transverse. Only once did a rider lose his life to an Indian attack—and his horse escaped, finishing the run.

Heroics like the above made the riders romantic figures. The image of the daring horseman captivated the people's imagination. Young women adored them, and young men wished that they, too, could taste some of that adventure and danger.

With the completion of the transcontinental telegraph in October of 1861, the Pony was doomed. With the last run in November of that year, a colorful and heroic chapter in U.S. Postal history came to a close. The California Pacific wrote a fitting epitaph: "A fast and faithful friend has the Pony been to our far-off state. . . . Goodbye, Pony! We looked to you as those who wait for the morning, and how seldom did you fail us! When days were months, and hours weeks, how you thrilled us out of our pain and suspense, to know the best or know the worst. You have served us well!"

Postal employees also do their part. Letter carriers in more than 10,000 cities collected food donations in May 1998. This was billed as the largest single-day effort to end hunger. In 1997, they collected 73 million pounds of food.

GLOBAL PRESENCE

U.S. mail can be delivered to any of the 170 countries that participate in the Universal Postal Union, or UPU. The UPU, a United Nations organization, oversees mailing agreements between nations, and sets international law regarding the postal service.

EMPLOYMENT

With more than 765,000 stateside employees, the USPS is one of the largest employers in the United States. Based on payroll figures for May 1995, the average postal employee made $33,095 a year; the USPS pays out about $1.6 billion in salary and benefits every two weeks. A December 1996 Government Executive article cited the Postal Service as having the most advanced violence prevention program of any government agency, perhaps in response to instances of postal employee violence. "Going postal" has become an expression for violent, irrational behavior as a result. Despite these efforts, the number of unresolved grievances by employees was at an all-time high in 1998.

SOURCES OF INFORMATION

Bibliography

Blackmon, Douglas A., and Glenn Berkins. "Advertising: Post Office Ads Worked, But Creator Is Out of a Job." Wall Street Journal, 22 October 1996.

Bradley, Sam. "USPS Launches First Global Courier Service." Brandweek, 1 April 1996.

"Complaint Rejected On Postal Service." New York Times, 29 January 1997.

Fehr-Snyder, Kerry. "New Postal Centers to Lighten the Load." Arizona Republic, 8 May 1998.

Greenwald, John. "Zapping the Post Office." Time, 19 January 1998.

Hodges, Jane. "Postal Service Thinks Young to Interest Kids In Stamps." Advertising Age, 7 October 1996.

"How the Postal Service Plans to Stop 'Going Postal'." Government Executive, December 1996.

Knutson, Lawrence L. "A Penny Not Saved: Stamp to Rise to 33 Cents." Associated Press, 12 May 1998.

"A Looming Battle?" Industry Week, 3 February 1997.

"Postal Service Files Experimental Case For Business Reply Mail." Direct Marketing, January 1997.

U.S. Postal Service Home Page, May 1998. Available at http://www.usps.gov.

"William J. Henderson Named 71st Postmaster General." U.S. Postal Service Press Release, 12 May 1998. Available at http://www.usps.gov/fyi/welcome.htm.

Zvirgzdins, Ilze. "Labor-Management Peace?" Postal Life, May/June 1998. Available at http://www.usps.gov/history/plife/pl041698/labor.htm.

For an annual report:

on the Internet at: http://www.usps.gov/history/anrpt97/or write: United States Postal Service, 475 L'Enfant Plz. SW, Rm. 10431, Washington, D.C. 20260-3100