Canceling the Postal Monopoly

By simultaneously proposing a 19-percent postage increase and a series of service cutbacks, the U.S. Postal Service has inadvertently fueled the fires for postal privatization. Supporters of deregulation are looking closely at New Zealand's competitive postal service; privatization critics would rather ignore it.

New Zealand "corporatized" and deregulated its postal service in 1987. The government maintained ownership of the corporation but ceased subsidies and ended its monopoly on letter delivery. This forced the postal service to operate profitably while facing competitors. The law requires the postal service to continue serving every address in the nation.

To restructure its postal service, the government closed more than two-thirds of its post offices and allowed private retailers to set up contract stations. Since decontrol, the net number of post offices has increased by 17 percent. On-time delivery of first-class letters has increased from 84 percent to 99 percent, while automation and contracting out operations have reduced the postal workforce by one-fifth.

Postage rates went up by 40 percent in the two years prior to decontrol; they have been stable since. Yet the postal service has gone from annual losses of $37 million to yearly profits of $76 million.

Will studying New Zealand's experience provide lessons for the United States? In the Wall Street Journal, Postal Rate Commissioner John Crutcher said: "U.S. Postal Service officials who go to New Zealand return chastened and silent. The U.S. post office is not the cheapest or the most efficient in the world; it's only the biggest."