Wednesday, December 12, 2007

The Square Surcharge: USPS Favors Rectangles

BUFFALO, N.Y. -- The square has four equal sides and four right angles. It is a regular shape. To the U.S. Postal Service, however, the square is "unusual." Its sorting machines, built for oblongs, can't find the address on a square envelope. People have to do it. That's why the post office imposes the square surcharge.

(Alternative link to the article here.)

How would UPS handle it?

13 Comments:

At 12/12/2007 10:07 AM, Anonymous holymoly said...

Are you implying that UPS would NOT charge P=MC?

 
At 12/12/2007 10:37 AM, Blogger Walt G. said...

Does UPS ship anything weighing an ounce for 41 cents?

 
At 12/12/2007 11:35 AM, Blogger Mark J. Perry said...

Walt: The USPS has a monopoly on first-class mail, so I'm not sure that's a fair or relevant question. If UPS and other carriers could deliver first-class mail in a competitive market, rates would probably fall way below 41 cents per ounce. Look what's happened to cell phone prices and long distance prices...

 
At 12/12/2007 12:06 PM, Anonymous spencer said...

There is nothing in the law that prevents UPS or Fedex or anyone from delivering the equivalent of first class mail and calling it a package.

As a matter of fact they do it every day.

But they do charge several dollars more to deliver this equivalent material than the post office does.

 
At 12/12/2007 12:31 PM, Anonymous Dano said...

Spencer wrote: "But they do charge several dollars more to deliver this equivalent material than the post office does."

True -- and usually I have used the Postal Service instead of FedEx or UPS because it is more convenient -- but look at the guarantees. Postal Service may actually take 2 days to get express mail to the destination or up to a week to deliver the 2-3 day priority mail. If the distance is more than a couple hundred miles the 41 cent first class mail takes several days.

 
At 12/12/2007 12:34 PM, Blogger Walt G. said...

We just mailed Christmas cards out. We paid 41 cents to mail a card to our next door neighbor, and we paid 41 cents to mail one to an old friend in California. The USPS sure has a strange pricing structure.

I feel like we received 82 cents’ worth of service. I can’t imagine how any company, monopoly or not, could beat that price. Although, if I were in a hurry, I might opt for another shipping method.

 
At 12/12/2007 1:36 PM, Blogger Thomas Blair said...

Spencer,

Apples and oranges. Package deliveries require face-to-face exchanges (or a note of intent for the driver to leave the package unattended). This requires people, and people cost money.

The USPS holds a statutory monopoly on "non-urgent" first-class letters, outgoing international letters, and holds the exclusive right to put mail in private mailboxes. While UPS and Fedex can get around this by delivering "urgent" letters and packages, they are statutorily required to charge the greater of $3 or twice the U.S. rate. Other restrictions, such as max delivery times and parcel placement, allow the USPS to take advantage of the statutory monopoly.

 
At 12/12/2007 1:39 PM, Blogger Thomas Blair said...

Also, though it is inherently difficult, the Postmaster General has prosecuted companies for sending "non-urgent" materials using UPS/Fedex/DHL. Bellsouth and Equifax come immediately to mind.

 
At 12/12/2007 1:45 PM, Blogger Thomas Blair said...

And:

In addition to monopoly powers, government ownership gives the Postal Service an array of special privileges and implicit subsidies. It is exempt from taxation. Because it can borrow from the Federal Financing Bank, it enjoys an explicit government debt guarantee. Because it is government-owned, it is exempt from paying investors an expected rate of return on their invested capital. The absence of an obligation to pay a competitive return on invested capital lowers the cost of funds that a state-owned enterprise can use to subsidize losses in non-core markets.



USPS is not subject to a bankruptcy constraint. It has, at various times, received direct cash subsidies. It has the power of eminent domain. It is exempt from a host of costly government regulations, including antitrust law and SEC disclosure requirements. It is immune from parking tickets for its vehicles or from paying for vehicle registrations. It does not have to apply for building permits or conform to local zoning regulations, and so on. All of those government-granted benefits are valuable, and allow the USPS to artificially reduce its prices below those of more-efficient rivals.


http://www.aei.org/publications/pubID.17488/pub_detail.asp

 
At 12/12/2007 2:03 PM, Blogger Thomas Blair said...

Source for comment about private postage must be the greater of $3 or twice the USPS rate:

http://www.usps.com/cpim/ftp/pubs/pub542.pdf

(PDF)

Section 443.

 
At 12/14/2007 4:24 PM, Blogger juandos said...

E-mail doesn't care if the note is square or rectangular...

 
At 12/14/2007 8:49 PM, Blogger Matt said...

Solution:

Fold it in half. Now you have your oblong envelope.

 
At 12/27/2007 11:06 PM, Anonymous Anonymous said...

I've read the same pub on the usps website. From what I read, it seems that the private carriers, ie. UPS/FEDEX have to pay the going rate for that package they picked up for delivery. So U pay UPS, UPS pays USPS (their cut)
Sounds like organized crime....

 

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