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Postmaster defends proposed FedEx alliance

As members of a House subcommittee voiced antitrust concerns about a proposed alliance between the U.S. Postal Service and Federal Express at a hearing Tuesday, Postmaster General William Henderson defended the idea.

"There's no exclusivity in this," Henderson told the House Government Reform Postal Service Subcommittee. "Anyone who wants to come to the table and talk can come to the table."

The proposed deal has drawn criticism from United Parcel Service, which competes with the Postal Service and FedEx. UPS has accused the Postal Service of using its "$40 billion government-granted monopoly from first class mail ... to compete unfairly in the marketplace."

Rep. Henry Hyde, R-Ill., has asked the Department of Justice to launch an investigation to verify that antitrust laws would not be violated by a USPS-FedEx partnership.

On Tuesday, Henderson told subcommittee members that discussions about partnering with FedEx began some time ago, but lay dormant until the shipping and delivery company decided to revisit the idea.

"We're happy to talk to UPS," Henderson testified. "The phone is silent, though."

"We can't get them to go on a date, more or less marry them," Henderson continued, drawing chuckles from subcommittee members.

Henderson provided details of the proposed alliance, which include the Postal Service carrying some of FedEx's residential ground deliveries in rural areas while FedEx handles distribution of some Postal Service Express Mail packages.

"The cornerstone of our discussions revolves around using FedEx's air transportation network, which is the finest and most extensive in this country," Henderson explained. "We did talk to FedEx about the possibility of selling retail, allowing postal operations to sell FedEx products."

Rep. Steven LaTourette, R-Ohio, questioned Henderson about the possibility of FedEx delivery boxes standing in post office lobbies. "The devil is in the details," Henderson said. "How much money can we make off it?"

Saying that USPS expects to lose $100 million to $200 million in net revenue this fiscal year, Henderson stressed that changes must happen if the Postal Service is to survive.

"It's going to be very hard to break even next year; right now it's dim from my point of view," Henderson said. "We're going to have to raise prices or cut to the quick."

Another issue affecting postal operation revenues and making a USPS-FedEx partnership more attractive to postal officials is the potential for change in daily mail delivery service in rural areas. USPS has been traditionally lost money in rural areas and is looking at ways to stop the trend.

"In general terms, urban areas are subsidizing rural areas," said Rep. John McHugh, R-N.Y. "If we allow this to continue, there are going to have to be made some particularly painful decisions, and they are going to affect rural areas."