The problem with this analysis is that the volumes that FedEx reports for its SmartPost product exceed the total Parcel Select volume reported in RPW. Here is the data for the Postal Service's most recent fiscal year and the closest period for FedEx.
- USPS October 2008 – September 2009: 222.9 million Parcel Select Parcels
- FedEx September 2008 – August 2009: 267.2 million Smart Post Parcels
- USPS October 2009 – December 2009: 79.7 million Parcel Select Parcels
- FedEx September 2009 – November 2009: 67.2 million Smart Post Parcels
Given that United Parcel Service and numerous regional parcel carriers are known to use the Postal Service then the total volume that these carriers provide the Postal Service would far exceed the volumes of parcel select. The difference most likely reflects one of the following two scenarios:
- The Postal Service handles a significant number of parcels for FedEx Ground, UPS and other consolidators that are priced at Standard Class parcel rates. The rates for up to one pound Standard parcels are below rates for Parcel Select for items dropped at a destination NDC and the difference is greater if the parcels can be dropped closer to destination.
- The RPW measures of parcel select volumes are wrong.
The first scenario is troubling for a number of reasons:
- There is reason to believe that Standard Parcel rates may be below costs based on the 2009 Annual Compliance Report. If that is true, than the Postal Service is providing a delivery service for FedEx and UPS because it offers the service not only at a price less than UPS and FedEx Ground's costs but also its costs as well. It does not make sense for other mailers to subsidize private sector parcel delivery companies if this is true.
- Under the current regulatory scheme that has some regulated and some unregulated parcel products, the Postal Service can not follow the price increases of its private sector competitors for parcels under 2 pounds. Over time, this means that the differential between Postal rate and the costs of FedEx Ground and United Parcel service using their own resources to deliver these parcels will grow over time as this anomaly continues to exist.
The solution is clear, all parcel products need to be considered competitive products. If they were competitive products, the Postal Service would not be prevented from charging rates closer to market rates that other carriers set for parcels under 3 pounds or in the case of parcels that they deliver for other carriers, the costs of these carriers for handling the delivery of these parcels themselves.