Wednesday, February 18, 2004

FedEx's Stamp Act

FedEx chief Frederick W. Smith testified before Congress last week about reforming the U.S. Postal Service. It was quite a balancing act.

On one hand, Smith praised "the professionalism of Postal Service managers and the scale of its operations." Moments later, however, he berated the "inefficiencies and disincentives" accompanying monopolies such as the one the U.S. Postal Service (USPS) enjoys on the mailbox. "The biggest victim of the postal monopoly," Smith intoned, "is the Postal Service."

What gives? Private shippers such as United Parcel Service and FedEx compete with the Postal Service. Both companies have recently expanded their mail-related services and retail presence: UPS acquired Mail Boxes, Etc. in 2001, while FedEx completed its $2.4 billion purchase of Kinko's last week.

But they--and other big companies--don't want to cause too much grief for the Postal Service. FedEx, in particular, has a history of working with the USPS. Last fall, for example, reports emerged that FedEx had struck an arrangement with the Postal Service to create a "postal hybrid service." Under the arrangement, the USPS will deliver FedEx packages the last mile to homes, giving the company a foothold in low-density, single-parcel transactions that its business model would otherwise prevent.

As the long-simmering issue of postal reform heats up, other corporations that rely on the postal service, from Pitney Bowes to big magazine shipper Time Warner, are watching warily and are also trooping to the Hill to testify.

Full story at