Germany and the Netherlands offer relevant case studies. When they partially privatized, they initially maintained the government monopoly but eventually progressed to complete privatization and complete removal of the monopoly. Currently, Germany and the Netherlands are two of the most effective international posts on at least one important the benchmark’non-domestic revenue. These countries were number one and two, respectively, in Accenture’s analysis of “non-domestic revenue” as a percentage of total revenue among 24 international posts in 2008 (69 percent and 68 percent, respectively,). Given the state of technology, privatization is probably the only long-term solution for the Postal Service. However, the USPS is currently so burdened with government interference that investors likely would not touch it. Simply put, the governance structure of the USPS is flawed, and its ability to realize commercial success is very limited. A better approach would be for U.S. lawmakers to follow the example of countries which have rejected the concept of government-enforced monopoly on mail delivery and exposed their former monopoly mail providers to competition. If the U.S. government were to eliminate onerous regulations and if the Postal Service were to revise its business model along the lines recommended by former postmaster general John Potter, then privatization might become more feasible, and investors might as well become more interested. However, complete removal of the monopoly does not necessarily need to occur at the onset of privatization. Alternatively, the postal monopoly can be eliminated over time. Such a policy alleviates the concerns of the public, politicians, and capital markets about the successful continued operation of the USPS. This increases the acceptance of privatization by each of these essential groups.
While the post-war years were characterized by a series of nationalizations of large parts of American infrastructure, since the 1980s and 1990s many key state-run industries have been privatized.
The most important part of privatization is that the private sector capital would bring with it ‘private sector disciplines’, and result in a service which efficiently run and is effective in service delivery. In addition, the private sector capital would be more flexible than government funding. It can be raised more quickly and does not require lengthy State Aid clearance – which can take up to 18 months – from the European Commission.
In many of the major privatizations of the 1980s and 1990s, the government opened up the sale to members of the public by selling shares on the Stock Exchange market. Historically these sell-offs have been hugely popular with the public, but, in the long run, most individual investors have been selling their shares to the institutions. The government has a choice to either float USPS, although this type of sale is very expensive to administer. The other option is for the government to sell USPS to another company. This could be a sale to a national mail provider. Alternatively USPS could be sold to a private equity group. However, private equity firms are often regarded with some suspicion as many financial reporting regulations do not apply to them. Private equity has had a bad press over the years, Market liberalization, which results in a shift away from the traditional government-run monopoly model of postal operations, is the best model for USPS. In this model, the postal service flexibility is increased as well as competition due to opening up the postal market for other players.
The liberalization process should, however, go hand in hand with a continued government regulation of postal markets after the reform. Typically the regulator not only mandates that universal service obligations are met, but also requires that markets previously dominated by an incumbent postal operator remain competitive. In addition, the government mandates service standards and pricing. The idea of liberalization is fraught with fears of post-office demise, a decline in either the quality or universality of the postal service, and/ or a significant increase in postal prices. However, these fears have not materialized in the countries which have liberalized their postal services such as the Royal mail in the UK which was recently liberalized by passing the Postal Services Act 2011. The Act allowed for up to 90% of Royal Mail to be privatized, with at least 10% of shares to be held by Royal Mail employees. The liberated Royal mail has continuously shown the ability to offer its customers an affordable, reliable, universally accepted and increasingly efficient postal delivery services with Share prices rising by 38% on the very first day of conditional trading, About a half a year later, the market price was as high as 58% more than the sale price and peaked as high as 87%. (Royal Mail Privatization (August 2011) “What it Might Mean for Subpostmasters and the Public”, The Subpostmaster).
The USPS has faced many problems over the years, challenged by technological advancements in communication such as online transactions and e-mail and competition from private delivery companies, and being hit hard by the recent recession.
Former postmaster general John Potter has acknowledged that technology has rendered obsolete many aspects of his business model and that technological innovation is not going away.
Although former postmaster general Potter attempted to commercialize the USPS by slowly costs cutting and increasing the company’s revenue, those efforts have fallen short. (Robert Carbaugh and Thomas Tenerelli -Restructuring the U.S. Postal Service Cato Journal, Vol. 31, No. 1 winter 2011).
There are several keys to successful liberalization of the USPS. First, it must be given the flexibility to adjust and adapt to market forces in the most cost-efficient and profit enhancing ways possible. To achieve this, USPS operations must be de-politicized and government influence over the USPS must be eliminated by a larger margin if not completely. While the idea of corporatization has consistently achieved this goal in many international posts that have successfully liberalized such as the Royal Mail, the idea does not provide fully other additional benefits of privatization, as discussed in the following paragraphs.
Corporatization does not provide sufficient incentives for postal executives to take full control of the flexibility gains. Generally partial-to-complete privatization (nongovernmental ownership of a stock company) creates incentives for profitability for several reasons: privatization creates a publicly traded stock whose price creates a barometer of corporate effectiveness. It also creates shareholders who apply pressure on executives to perform and who can punish executives who do not. In addition, privatization increases public scrutiny of postal operations. While partial privatization creates some of the needed incentives, the greater the degree of privatization (public versus government ownership of the stock) the greater will be the incentives received. (Robert Carbaugh and Thomas Tenerelli -Restructuring the U.S. Postal Service Cato Journal, Vol. 31, No. 1 winter 2011).
Though full privatization is the best idea that can be adopted by USPS, the idea of partial privatization is an attractive initial option for it tends to be politically well received and, it therefore has a greater chance of being
implemented. Moreover, for the inevitable full privatization to take place it has to start with partial privatization as voters and politicians increasingly realize that the benefits of privatization far exceed any costs in terms of price and/or service reliability. Liberalization will definitely result in the elimination of many regulations leaving only a few in place, the remaining regulations, however, should be restricted to satisfying a few key goals. The first goal being to maintain certain priorities and principles embraced by the population’candidates include the universal service obligation, service standards, and price caps. The sole purpose of this first goal is to alleviate any concerns about postal liberalization and privatization. The second goal is to have effective antitrust regulation of the newly private post. The large size of the post office, diversification into new markets, and any maintained postal monopoly will create the potential for unfair business practices which must be vigorously monitored. The third goal is that any remaining postal monopoly must be clearly delineated and lastly, the postal monopoly must be removed at the end. The action of removing the postal monopoly will create an added incentive for effective operation of the USPS. Combined efforts by both the government and the postal service should be directed towards rescuing the U.S postal service which has over the years played a key service delivery role to the citizens. The U.S. government should make the effort towards eliminating onerous regulations and the Postal Service should make an effective effort towards revising its business model along the lines recommended by former postmaster general John Potter. With these combined efforts in place, privatization might become attainable, and investors might thereafter become more interested.

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