Don't Blame the Web for Postal Service Woes

usps_smalluseThe United States Postal Service is in dire straights. The second-largest employer in the country (behind only Wal-Mart (s wmt)) is facing a massive fiscal crunch amid falling mail volumes and rising expenses. The GAO estimates total mail volume will fall to 175 billion pieces in 2009, a massive, unprecedented drop to levels not seen in more than 15 years. In a release today, the USPS blamed the drop on the “trend of letter mail and business transactions being replaced with electronic alternatives” and anticipated “continued downward pressure into coming years.” In other words, email is killing the USPS. But it’s not that simple.


Surely more business is being done online, but there is no correlation between Internet adoption rates and a drop in mail — both have been generally rising over the past 15 years, at least until mail service fell off a cliff over the past few months. It’s likely that the Internet is playing a role, but I don’t think all the blame can be placed on technology. A look at the history of total mail volumes shows that declines around recession years are not uncommon, with particularly large drops occurring in the 1930s.

Additionally, the service’s package delivery competitors, like FedEx (s fdx) and UPS (s ups), don’t show a comparable drop in revenue, though it’s not a great comparison as those company’s routes have traditionally been more profitable than the Postal Service’s — plus, as a publicly traded company, FedEx has more of an obligation to be profitable than the government-run USPS. Though, as one of the few legal monopolies, shouldn’t the post office, with no competitors in most of its market (federal law states the USPS is the only organization that can deliver “non-urgent” letters like First Class and bulk mail), be able to make a profit? So we leave it up to you, dear readers. Why is the Postal Service in such a state?