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Top executives from package delivery, newspaper and direct-mail companies urged lawmakers to give the U.S. Postal Service more leeway to function in the marketplace during a Senate committee hearing on Thursday.

Fred Smith, chairman and chief executive officer of FedEx, told members of the Senate Governmental Affairs Committee to shut down the Postal Service or make changes that allow it to compete.

"The Postal Service must be transformed into a fundamentally more flexible and responsive organization if it is to survive and prosper in the shifting social, commercial and technological conditions presented at the start of the 21st century," Smith said.

The hearing was the sixth held by the committee, which is reviewing recommendations for overhauling the Postal Service. A final hearing is scheduled in conjunction with the House Government Reform Committee, after which Sens. Susan Collins, R-Maine, and Tom Carper, D-Del., plan to introduce reform legislation.

Among the problems facing the Postal Service are the growing reliance on electronic communications, tough competition in parcel delivery, insufficient funding for emergency management and substantial pension obligations.

While the executives who testified generally agreed the Postal Service needs greater flexibility and control over its operations, there were disagreements over what shape the reform should take - especially in terms of when and how it should be allowed to compete with the private sector.

Michael Eskew, chairman and chief executive officer of UPS, recommended the Postal Service focus on its essential services rather than competing in parcel delivery. "We believe the package business is well served by the private sector," he said.

Robert Wientzen, president and chief executive officer of the Direct Marketing Association, disagreed. "A large number of our members really do depend on the parcel delivery of the Postal Service," he said. "They find that their services are adequate and cost competitive."

Smith and Eskew both objected to the Postal Service's competitive products benefiting from the postal monopoly on first-class and standard mail. "Steps should be taken to ensure that the Postal Service does not leverage its monopoly network to compete inappropriately with private sector companies," Eskew said.

Following that point, Gary Pruitt, speaking on behalf of the Newspaper Association of America, objected to negotiated service agreements, under which the Postal Service competes with newspapers for advertising dollars. By offering low rates, the Postal Service gives clients the opportunity to send their ads directly to consumers, rather than inserting them in newspapers.

"Newspapers do not believe that the Postal Service - an agency of the federal government - should take sides in the marketplace competition between one mail customer and another," Pruitt said. The Postal Service should not use revenues from its monopoly services to subsidize direct mail, he said.

COMMENTS

• I'm at a loss about the Postal Service. Private companies are constantly pointing out that the Postal Service isn't flexible enough to compete, then turn around and complain about how they can't compete with its monopoly. Direct mailings have been around since before the Post Office was semi-privatized. Direct mailing companies have just as much right to be in business as newspapers - it's not the Postal Service that's in the wrong - but they're the ones taking the heat. The same with package service. If UPS and/or FedEx won't deliver a certain type of package or into an area that they don't service (and there are such instances and places), then they can't complain that the Postal Service can and will - but they do! Perhaps, instead of privitizing our mail service, we should let the government reabsorb the Post Office and let them do the job they were designed to do - Deliver the mail to every man, woman, and child as necessary in this country. Somehow, that seemed to work for years before the semi-privitization. Michelle Zellich Posted March 12, 2004 8:43 AM
• I agree that it is imperative that the USPS get into the 21st century with the rest of us. One of the highest costs associated with the postal increases is always the workers compensation losses. The postal service has a higher loss ratio than any police organization in the country. The Federal Employee Compensation Administration (FECA), that administers the postal compensation program, is exceptionally liberal in its application of the program. The postal service has tried repeatedly to avoid these costs by withdrawing from the FECA program but has been stifled but congress and the influence of the unions. The first step in improving the flexibility of the USPS would be to allow the agency to withdraw from this compensation coverage and become self insured or covered by a private contactor subject to the state laws where the work related injuries occur. KT McCall Kt Mccall Posted March 12, 2004 8:38 AM
• Let's see, we've got the execs of FedEx and UPS telling Congress the postal service should be shut down or run differently. What's wrong with this picture? GovExec.com reader Posted March 12, 2004 8:02 AM