REBUTTAL COMMENTS OF THE CONTINUITY SHIPPERS ASSOCIATION
SUBMITTED TO THE PRESIDENTIAL COMMISSION
ON THE UNITED STATES POSTAL SERVICE
The Continuity Shippers Association (CSA) comprises companies who mail small
parcels through the United States Postal Service. CSA members use ground
(non-priority) service to send goods to our customers' residences. Small parcels
weigh generally less than two pounds and are within the current classifications
of First Class, Standard Mail, Bound Printed Matter and Media Mail. The products
include books, CDs, cosmetics, videos, blank checks, etc. This small parcel
market represents over one billion parcels a year with the Postal Service. While
many of our comments apply equally to large parcels (e.g. Parcel Post, Parcel
Select), our focus is on the small parcel arena.
In these rebuttal comments, CSA replies to several assertions made in the Written
Statement of Mike Eskew, the Chairman and CEO of United Parcel Service (UPS).
A. The Postal Service's Mission Includes Parcels -- Both Small and
Large______
UPS asserts that the Postal Service should only support the "physical
delivery of letters, advertising and periodicals." Noticeably absent from this
list is parcels. The Postal Service is in the business of delivering physical
items. This includes communications (First Class), information such as news
(Periodicals) or advertising (Standard), and goods (Parcels). Thus, parcels are
and should continue to be part of universal service.
The natural monopoly of a postal system in delivering to every household
extends to parcels. The economies of scale in delivering letters and periodicals
apply equally to parcels: When a carrier goes to a mailbox to deliver letters
and periodicals, they can and do deliver parcels at the same time.
The natural monopoly, however, only applies to the delivery function. Other
activities of the Postal Service such as mail processing and transportation are
not subject to similar economies of scale. Because of this and other
considerations, like service, a potential customer may not choose the natural
monopoly to provide the service. For example, the cost to perform the other
postal functions of mail processing and transportation may be so high that it
offsets the lower delivery cost. Similarly, if the monopoly firm provides poor
service, a person may decide to pay more to obtain better service. This,
however, is not the case with CSA members.
The Postal Service has historically delivered parcels. The advent of companies
in the private sector to deliver large parcels, primarily business to business
(and not business to consumer) is a relatively recent phenomenon. This
phenomenon logically arose because the Postal Service either lost its natural
price advantage through inefficient behavior often associated with monopolies or
did not provide for other needs of mailers beyond price.
Since the natural monopoly is limited to delivery, we support efforts to provide
competition in areas such as mail processing and transportation. In fact, CSA
members and constituents utilize the worksharing opportunities available to
obtain the lowest combined cost to obtain delivery of their products to their
customers. We perform part of the mail processing work, and we drop ship deeper
into the Postal Service network because we perform these functions less
expensively than the Postal Service.
The Private Sector Does Not Serve this Market
UPS seeks to justify its deletion of parcels from the Postal Service's
mission by asserting that the private sector is currently meeting the needs of
the parcel market. UPS is wrong. Without regard to whether the private sector
is actually meeting the needs of large parcel shippers, UPS does not recognize
that the small parcel market (particularly the business to consumer market) is
currently within the monopoly sphere of the Postal Service. The Postal Service
price for the service provided to the small parcel market cannot be competitively
challenged by the private sector, especially where the cost of the goods being
delivered is less significant. In general, as the price for the goods being
delivered is lower, the relative importance of cost for shipping becomes higher.
The converse is also true. Thus, sellers of higher price items may be willing to
spend more for shipping.
UPS itself recognizes that the private sector does not serve this market. A
representative from a UPS company approached a CSA member this week to see if UPS
could perform the mail processing and drop shipping of small parcels for delivery
to the customer by the Postal Service. Further, UPS adds significant surcharges
when it provides the delivery function to households which effectively prices UPS
out of the market. Thus, UPS concedes that it cannot effectively compete with
the Postal Service in the delivery function of these small parcels to households.
Parcel delivery has been part of the Postal Service's mission and it should
continue to be within the definition of universal service. The Postal Service is
the only economically viable option presently available for small parcel mailers
to get their goods to their customers' households at a reasonable, affordable
cost.
Dated: March 13, 2003
Respectfully submitted,
CONTINUITY SHIPPERS ASSOCIATION
Coleman W. Hoyt Executive Director 2351 North Bridgewater Road Woodstock, Vermont
05091-9670 (802) 672-3634 cwhoyt@vermontel.net
Aaron Horowitz General Counsel 200 Corporate Woods Parkway Vernon Hills, Illinois
60061-3171 (847) 913-3360 ahorowitz@cosmetique.com