Postal Service Loses Out To Internet, Rival Shippers

The U.S. Postal Service is proposing changes to stem the billions of dollars in red ink it's accumulating. While it's trying to shore up its losses, people's preference for email and online bill-paying — along with competition from the likes of FedEx and UPS — is eating away at its core business.

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The United States Postal Service is proposing drastic cuts and a slowdown of its service to try to save money. The mail service is billions of dollars in the red. It's been losing money as mail consumers turn to the Internet. But the USPS also faces growing competition from other companies and it's not just FedEx and UPS.

NPR's Yuki Noguchi reports.

YUKI NOGUCHI, BYLINE: The proposed cuts would make snail mail a little slower. Overnight first-class delivery would become a thing of the past, arriving on average a day later. The savings would come from cutting more than half the postal service's mail-processing centers. And it would cut 28,000 employees - that's out of more than half a million workers.

At a news conference, Post Office vice president David Williams was straightforward in his assessment.

DAVID WILLIAMS: The fact of the matter is, our network is too big. We've got more capacity in our network than we can afford.

NOGUCHI: Services like FedEx and UPS dominate the guaranteed-mail market. Email and online billpay, meanwhile, eat away at the post office's core business. Ten years ago, it handled 104 billion pieces of first class mail. Last year it was 30 percent below that. And there's nothing staunching that flow. When questioned about the Post Office's competitiveness in a marketplace that values speed, Williams offered no defense.

WILLIAMS: They're already choosing speed. They're choosing electronic bill payment, they're choosing electronic communication via the Internet, and email, things like that. That's what's driving this reason for doing what we've got to do.

NOGUCHI: But the Postal Service is also limited in its ability to adapt. It's a quasi-governmental agency whose rates are set by Congress. Keith Schoonmaker is an analyst with the research firm Morningstar. He says UPS and FedEx could potentially benefit if Postal Service is slower. Those companies are expanding internationally and delivering more packages, even as the Post Office shrinks.

KEITH SCHOONMAKER: The Postal Service is somewhat at the mercy of Congress in that it has a formal mandate to execute first-class delivery reliably, and yet it can't set market prices.

NOGUCHI: Also, much of what it delivers few consumers want.

STEVE SHIVER: I had an epiphany one day when I went to my mail box and it was shoved full of junk mail and there's only two or three important things I needed in all of this three or four pounds of paper.

NOGUCHI: That is Steve Shiver, whose epiphany let him to found Doxo, a young company that helps consumers manage their bills and other documents online. As a consumer, Shiver says, he's come to think of his postman as the guy who delivers advertising.

SHIVER: I generally want my government services focused on things that are really both efficient and valuable for me as a citizen. And what's unfortunately happened incrementally over the years is a greater and greater proportion of physical mail is junk.

NOGUCHI: Back in Washington at the Postal Service's press conference, its executives acknowledged it's increasingly reliant on direct mail advertising for revenue. Appearing at the end of the press conference, U.S. Postmaster General Patrick Donahoe made his pitch to send something of perhaps more value.

PATRICK DONAHOE: Remember, mail plenty of holiday cards. We could certainly use them. Thank you.

NOGUCHI: The earliest the changes would take effect is April of next year. Yuki Noguchi, NPR News, Washington.

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