Class 2 Platforms and Network Industries Spring 2019 The Post Office 5/20/2019 Class 2 Platforms and Network Industries Spring 2019 The Post Office Randal C. Picker James Parker Hall Distinguished Service Professor of Law The Law School The University of Chicago Copyright © 2014-19 Randal C. Picker. All Rights Reserved.

Communications Economics 5/20/2019 Communications Economics Hypo A wants to send B a message A values having B receive the message at $2; B values receiving the message at an additional $2 Social cost to transmit message is $3 Who should pay? A? B? Both? May 20, 2019

Key Point Communications Externalities 5/20/2019 Key Point Communications Externalities Both A and B may benefit from the message If A or B bears the full cost of the message, may have too few messages sent May 20, 2019

Key Point Simple Example 5/20/2019 Key Point Simple Example If we charge sender or recipient full-cost of message, if they can’t compensate each other, message won’t be sent even though doing so increases welfare May 20, 2019

Moving this to the Real World 5/20/2019 Moving this to the Real World Issues Symmetric benefits To what extent do we think sending and receiving are symmetric? Personal letters? Advertisements by businesses? May 20, 2019

Moving this to the Real World 5/20/2019 Moving this to the Real World Counting Costs How much more expensive is it to charge both senders and receivers as compared to just charging one or the other? May 20, 2019

Postal Strike May 20, 2019 NYT (19 Mar 1970)

1970 Reorg of Post Office USPS History Site May 20, 2019 5/20/2019 https://about.usps.com/publications/pub100/pub100_035.htm May 20, 2019 USPS History Site

1970 USPS Reorg Act May 20, 2019 Pub. L. 91-375 (12 Aug 1970)

U.S. Postal Policy “(a) The United States Postal Service shall be operated as a basic and fundamental service provided to the people by the Government of the United States, authorized by the Constitution, created by Act of Congress, and supported by the people. The Postal Service shall have as its basic function the obligation to provide postal services to bind the Nation together through the personal, educational, literary, and business correspondence of the people. It shall provide prompt, reliable, and efficient services to patrons in all areas and shall render postal services to all communities. The costs of establishing and maintaining the Postal Service shall not be apportioned to impair the overall value of such service to the people.” May 20, 2019 Current 39 USC 101

U.S. Postal Policy: Rural Areas “(b) The Postal Service shall provide a maximum degree of effective and regular postal services to rural areas, communities, and small towns where post offices are not self-sustaining. No small post office shall be closed solely for operating at a deficit, it being the specific intent of the Congress that effective postal services be insured to residents of both urban and rural communities.” May 20, 2019 Current 39 USC 101

U.S. Postal Policy: Employees “(c) As an employer, the Postal Service shall achieve and maintain compensation for its officers and employees comparable to the rates and types of compensation paid in the private sector of the economy of the United States. It shall place particular emphasis upon opportunities for career advancements of all officers and employees and the achievement of worthwhile and satisfying careers in the service of the United States..” May 20, 2019 Current 39 USC 101

U.S. Postal Policy: Rates/Letter Mail “(d) Postal rates shall be established to apportion the costs of all postal operations to all users of the mail on a fair and equitable basis. (e) In determining all policies for postal services, the Postal Service shall give the highest consideration to the requirement for the most expeditious collection, transportation, and delivery of important letter mail.” May 20, 2019 Current 39 USC 101

U.S. Postal Policy: Delivery Methods “(f) In selecting modes of transportation, the Postal Service shall give highest consideration to the prompt and economical delivery of all mail. Modern methods of transporting mail by containerization and programs designed to achieve overnight transportation to the destination of important letter mail to all parts of the Nation shall be a primary goal of postal operations.” May 20, 2019 Current 39 USC 101

U.S. Postal Policy: New Facilities “(g) In planning and building new postal facilities, the Postal Service shall emphasize the need for facilities and equipment designed to create desirable working conditions for its officers and employees, a maximum degree of convenience for efficient postal services, proper access to existing and future air and surface transportation facilities, and control of costs to the Postal Service.” May 20, 2019 Current 39 USC 101

U.S. First-Class Mail Volume 5/20/2019 U.S. First-Class Mail Volume Source: http://about.usps.com/who-we-are/postal-history/first-class-mail-since-1926.pdf May 20, 2019 Historian, USPS (Feb 2014)

Key USPS Stats, 2009-18 May 20, 2019 2019 USPS Postal Facts Companion

USPS Financial Health (Zoom) May 20, 2019 2018 USPS Form 10-K

U.S. Constitution Art. I, Sec 8: 5/20/2019 TTYN (1 of 2) U.S. Constitution Art. I, Sec 8: The Congress shall have Power … To establish Post Offices and post Roads How would you implement this given the broad goals of U.S. postal policy? May 20, 2019

Post Office Act of 1789 (22 Sept 1789) TTYN (2 of 2) May 20, 2019 Post Office Act of 1789 (22 Sept 1789)

Post Office as Obligation of the Gov’t May 20, 2019 House Report (15 May 1844)

Cross-Subsidization of Rural by Urban May 20, 2019 House Report (15 May 1844)

Impact of Cross-Sub on Organization of Competition May 20, 2019 House Report (15 May 1844)

Things Ignored by Private Actors May 20, 2019 House Report (15 May 1844)

Post Office Financial Problems May 20, 2019 House Report (15 May 1844)

Gov’t Monopoly Required May 20, 2019 House Report (15 May 1844)

Role of Railroads in Illegal Mail May 20, 2019 House Report (15 May 1844)

Understanding the Pricing and Quality Rules of 1845 Act 5/20/2019 Understanding the Pricing and Quality Rules of 1845 Act Neutral Pricing Key to distance and weight Not type of content But Newspapers completely free if within size and distance limit May 20, 2019

Understanding the Pricing and Quality Rules of 1845 Act 5/20/2019 Understanding the Pricing and Quality Rules of 1845 Act Magazines have lower rates compared to letters for same weights; rates independent of distance And Discrimination in Quality of Service Sec 4 contemplates different levels of quality of service of newspapers and magazines relative to regular letter service May 20, 2019

Next Steps I What other instruments of communication should the government own/control/regulate? Telegraph? Telephone? Radio? TV? Email? What is going on in Council of Greenburgh (US 1981)? May 20, 2019

U.S. Postmaster General Annual Report (1914) May 20, 2019 U.S. Postmaster General Annual Report (1914)

Create Gov’t Monop on Telegraph and Telephone May 20, 2019 U.S. Postmaster General Annual Report (1914)

Create Gov’t Monop on Telegraph and Telephone May 20, 2019 U.S. Postmaster General Annual Report (1914)

Create Gov’t Monop on Telegraph and Telephone May 20, 2019 U.S. Postmaster General Annual Report (1914)

Next Steps II Where should the U.S. post office go? May 20, 2019

Trump USPS Exec Order May 20, 2019 Executive Order (12 Apr 2018)

Task Force Report (Dec 2018) May 20, 2019 Task Force Report (Dec 2018)

Different Approaches to Universal Service May 20, 2019 Task Force Report (Dec 2018)

Dos: Sell Mailbox Access May 20, 2019 Task Force Report (Dec 2018)

Don’ts: No Banking May 20, 2019 Task Force Report (Dec 2018)