FEDERAL EXPRESS president/CEO Frederick Smith sent a jolt through a congressional subcommittee meeting recently when he suggested Congress seriously consider abolishing the U.S. Postal Service or turn it into a private delivery company for packages and mail.

The USPS “is inexorably losing its status as a provider of last resort,” said Smith during the hearing on postal reform.

Could Split Services Legislation sponsored by House postal subcommittee chairman John McHugh (R-NY) would permit the USPS to split its products and services into competitive (operated by a private corporation) and noncompetitive categories, while increasing the Postal Rate Commission’s supervision of the USPS.

Smith told the panel the USPS “must be confined to noncompetitive markets and dismantled as these markets shrink.

“Closing down the USPS…is an option that ought to be considered seriously. “

In contrast, the Mailers Coalition for Postal Reform all but called the proposed legislation a guarantee for survival.

“The burden will be upon postal management and labor to improve the competitive edge of the service by increasing productivity and providing products that meet the needs of the marketplace,” said Direct Marketing Association senior vice president for government affairs Jerry Cerasale on behalf of the Mailers Coalition.

The coalition includes the DMA, Advertising Mail Marketing Association, American Express, Magazine Publishers of America, the Mail Order Association of America, and the Parcel Shippers of America.

Calls for Changes Cerasale termed the overall structure of reform legislation “sound,” but said the measure allowing the USPS to split its operations needed some changes to protect mailers from sudden rate increases.

The postal service, he said, should legally be prohibited from shifting products and services between competitive and noncompetitive categories. Such shifting, he said, “would be unfair to competitors.”

Saying the group believes the PRC-not the USPS-should set base-line rates, Cerasale urged the panel to change a provision in the bill requiring minimum markups between competitive and noncompetitive services to be equal.

Keeping that provision in the bill, he said, would cause rates for competitive classes of mail “to go up as much as 10%…suggesting the PRC erred in its most recent decision,” and resulting in the Jan. 10 rate increase averaging just 3%.

Mail Advertising Service Association chairman Michael Dzvonik strongly opposed the creation of a private corporation to oversee the postal service’s competitive products and services.

Dzvonik noted there was no justification for it, and that it would put the USPS in direct competition with MASA members, most of whom serve as printers and service bureaus for the direct marketing/mail industries.

John Estes, executive director of the Main Street Coalition for Postal Fairness, urged the panel to remove a provision in the bill allowing the USPS to negotiate service agreements with high-volume mailers because there was no public hearing on that specific matter.

Federal Express president and CEO Frederick Smith suggested Congress seriously consider abolishing the U.S. Postal Service or turn it into a private delivery company for packages and mail.

Smith jolted everyone at a Thursday Congressional subcommittee hearing on postal reform legislation when he suggested Congress seriously consider abolition of the USPS because it “is inexorably losing its status as a provider of last resort.”

That legislation, sponsored by House postal subcommittee chairman, Rep. John McHugh (R-NY), would permit the USPS to split its products and services into competitive, operated by a private corporation, and noncompetitive, while increasing some of the Postal Rate Commission’s oversight over the USPS.

Smith told the panel that the USPS “must be confined to noncompetitive markets and dismantled as these markets shrink. Closing down the USPS…is an option that ought to be considered seriously.”

In contrast, the Mailers Coalition for Postal Reform all but called the proposed legislation a guarantee for survival. “The burden will be upon postal management and labor to improve the competitive edge of the service by increasing productivity and providing products that meet the needs of the marketplace, ” said Jerry Cerasale, senior vice president, government affairs, the Direct Marketing Association, on behalf of the Coalition.

The Coalition includes the DMA, Advertising Mail Marketing Association, American Express, Magazine Publishers of America, Mail Order Association of America, and the Parcel Shippers of America.

Michael Dzvonik, Mail Advertising Service Association chairman, strongly opposed the creation of a private corporation to oversee the postal service’s competitive products and services

Dzvonik said there was no justification for it and it would put the USPS in direct competition with MASA members, most of whom serve as printers and service bureaus for the direct marketing/mail industries.

John Estes, Main Street Coalition for Postal Fairness executive director, urged the panel to remove a provision in the bill allowing the USPS to negotiate service agreements with high-volume mailers because there was no public hearing on that specific matter.