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First Class Mail is a Zombie - Kill It Off

Over the past two days I've spent some time talking with friends, both online and offline, about the fate of the US Postal Service and, in particular, its first class mail service. Much of this was prompted by last week's New York Times article on the USPS' woes, and I'm sure we'll be hearing more about the topic in the news this week.

The more I consider the situation, the more alarming the idea of further subsidizing first class mail service becomes. I'm not anti-government, but I think the situation illustrates one of the big downsides to public services vs. privatized ones: it's easy to grow them, but very hard to phase them out and downsize them.

First class mail - in particular, the physical delivery of paper documents in letters from one individual to another - is an end-of-life technology by any reasonable definition. It's a highly mature delivery system that runs very efficiently, but it's not really getting better or more efficient any more (in fact, it's getting less efficient, which I'll cover later.) Meanwhile, its primary competitor, electronic delivery, is a nascent technology that's faster and cheaper, scales more smoothly and is better for the environment.

Companies and consumers have already realized this: first class mail usage has declined by over 20% in the past five years, and it's just continuing to accelerate. It's starting to feel like the only personal letters folks get are wedding invitations and Christmas cards (Facebook long ago took over birthdays.) And companies are doing everything they can to move their customers off of mailed bills - many offer discounts if a customer is willing to sign up for paperless billing.

As that decline continues, it's going to amplify the weaknesses of physical delivery, in particular the difficulty of scaling its infrastructure down to serve smaller volumes of senders. If email volume dropped 50%, you could reduce server allocations, etc to match. Good luck cutting 50% of the costs of physical mail delivery - even if you have half as much mail arriving, it's still going to take your letter carrier just about the same amount of time to put it in your mailbox. Declining volume and fixed overhead mean growing losses, unless you let them raise prices - but that just makes volume decline faster.

(Not to mention the environmental implications of first class mail: billions of pieces of paper, printed and shipped repeatedly, most of which end up in the trash. Billions of miles of mail truck movement. Forests cut down, oil burned, pollution created. Almost 100% of the mail I receive ends up in the bin within a week of delivery. Is that really something we want to sustain?)

All of this means that throwing more money at the problem is just a waste. It's not going to make first class mail competitive with electronic delivery. It's a losing game.

Instead, we need to view this as an opportunity: accept that times are changing, and build better Internet infrastructure to allow electronic delivery to serve as a better substitute for mail delivery, especially for folks who might not be able to afford it today. Provide terminals, scanners and printers to people in rural locations. Public terminals at post office locations. Free email accounts for all individuals. 

I realize there are corner cases here: people want to send kid's artwork to grandparents, printed wedding invitations, etc. But so far, nobody's shown me one that isn't just that - a corner case. If you wouldn't build out a physical delivery system to support one of those corner cases, you shouldn't subsidize the current one, either.

Rather than fighting the tide to preserve first class mail, let's lean into the future and make our country more efficient, and more modern, by being the first to provide universal net access and embrace electronic delivery as a replacement for document mail. Not only will it be more cost efficient than keeping mail on life support for another 10-20 years, but it will provide huge ancillary benefits to education and communication, and make us more competitive with the rest of the world.



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Nate Finch

My wife has an online business selling individual Lego parts. About half her shipments are first class - it's amazing how much you can fit in 13 ounces. Everyone thinks about letters, but packages can go first class as well. That's not to say it doesn't still have problems - but it sounds like the problem is subsidizing the deliveries. Why not just stop subsidizing them? Yes, prices would go up - and they should.

As for the problem of less mail with delivery people staying the same, this is exactly what UPS and FedEx do, and they're ok. They're just more expensive.

Tom Karlo

The problem is that the cost structure is broken - it's not going to scale with the rapidly declining volume of first class mail overall. So this year they're 9bn short, next year they might be 20bn short... and so forth. It's not like they're having a bad year and they need things bridged: their business model is fundamentally no longer aligned with where the market is going. Throwing more money at them won't fix that; changing the business model itself - moving from physical delivery to electronic delivery - would. It's like Netflix killing their own DVD business to switch to streaming because they see that the DVD-by-mail biz is going to die in a few years anyway.

UPS and Fedex, by comparison, use about 1/3 the people that the post office does per volume of packages delivered - they're almost 3X more efficient from a labor standpoint.

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