New technologies, competition and the postal service

The Postal Service confronts market structure issues faced by regulated monopolies in other industries, but changing technology raises other problems: nearly all the new technology is developing outside the Postal Service's monopoly market. A key question becomes whether the Postal Service should enter the new electronic communications market. For customers the impact of new technology will be felt in first-class mail rates; the Service will lose the financial and business message market to new services, and resultant decline in mail volume will increase unit costs and require higher rates. The outlook is for a rapidly changing market structure in which cream-skimming will occur on a grand scale; the protection of a regulatory commission to prevent entry into vulnerable markets is lacking. The alternative is to become a major supplier of electronic communications, yet the Service is unlikely to obtain cost advantages needed to succeed in competition with other suppliers. (Presented at American Enterprise Institute's Conference on Postal Services Issues, Washington, D.C., October 1978.).