Postal Pricing

Electronic communication has little variable cost. Once the lines are laid, or the satellite launched, electrons fly for free. Not so postal communications where distance travelled matters. Sending a letter from Philadelphia to one of its suburbs costs far less than mail from Philly to Nome, Alaska. World wide postal services began eliminating distance surcharges in 1840 with Rowland Hill’s revolution in cheap postage. Before that, letter charges were based on how far the envelope had to go. In the United States, the distance price increased at over 300 miles in the early period and the reason that the United States issued two postage stamps simultaneously-the 5c and 10c 1847- was to pay the distance surcharge.

The reason behind the elimination of distance pricing was that the efficiencies of accounting, rating and collecting the different rates and the increased use of postal service would make up for the decrease in revenue caused by distance price reduction. These economies of scale were greater in a country like Great Britain which is relatively small and populous. But in a vast country like the United States, it meant that close-by urban routes have always subsidized the more rural. This was exploited as early as the 1850’s, when private local carrying companies would deliver intracity letters for less than the Post Office and were so successful that our Congress soon outlawed them. Today similar inequalities of pricing has helped United Parcel Service (UPS) in the package business. The Post Office must deliver all packages from Philadelphia to Nome for the same price that it delivers intracity Philly packages whereas UPS can price its service for each zone, skimming off the profitable intracity and close-by business and leaving the Post Office with the less profitable routes (when you next hear about rugged Alaskan individualism just remember this as yet another Federal goverment payout to them). And with its more profitable routes skimmed off, our Post Office loses even more money even more money because it is left with only  the long distance rural routes.

 The point is that the United States has had in place a policy that paper and package communication is to be priced the same no matter where an item is sent. Perhaps this is unfair to residents of New York who because of volume would probably qualify for lower postal prices. But, historically, Americans have always looked beyond their own immediate pocketbook in every transaction and often done what is best for the country.

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