A monopoly is a market system where one supplier has command over the whole or nearly the entire market. The supplier therefore has the ability to dictate the market in his favor. The ability to dictate can be on prices, packaging and service delivery among others (Money, 2011). This paper discusses the United States postal service in its capacity as a monopoly.
The United States Postal Service
The United States Postal Service was established in 1775 by the then continental congress. A post master general was named who effectively coordinated the postal services in the interest the Americans’ welfare. The congress then later directed the expansion of the postal service to include the costal and western regions. The expansion of services continued later.
The access to the postal service was enhanced during the mid nineteenth century when the congress lowered the mailing rates making the service more affordable and accessible. This was followed by the introduction of mail deliveries to door steps at absolutely no cost. Another service, the parcel post was introduced by the “post office department” in the year 1913. The postal department was then awarded a monopoly by the congress to protect it from private firms which could selectively provide services on the basis of profitability.
Further legislations have since been made to enhance the service delivery of the department that is currently known as the United States postal service. The postal service became a monopoly under the legislation of the congress. This monopoly was formed by a legislative act and not by any merger. It can therefore be said to have been formed naturally (USPS, 2008).
Impact of the Postal Service on the Market
The postal service has had significant impact in the American market. Its extensive service that handles hundreds of billions of mails in a year has enhanced communication both in the social and economic aspects. The postal service provided a means of communication among entities ranging from mail deliveries to money transfers.
This had an impact of a fostered communication among people and entities especially before other modes of communications like the mobile phones and the internet were widely developed. It has also had negative impacts in its services. There have in the past been outcries over increased postal rates which can be attributed to lack of competition (Gale, 2011)
Being formed by a legislation of the congress, the postal service can be classified as a government monopoly. Government monopolies are those monopolies that are established as a result of legislation passed by a government to protect a given market. In its case the United States postal service was established as a monopoly to protect it from private investors who would be selective in service delivery with profit as the guiding factor and not provision of the necessary services to people (USPS, 2008).
The postal service can be seen to have an extensively distributed network all over the United States. The supply of its services is therefore not limited as one of its legal mandate is the service delivery to the citizens (USPS, 2008).
Geddes explains that as any state owned monopoly, the postal service at times offer prices that are bellow reasonable in order to force private competitors out of the market. This can be done even if its net effect is a loss to the state cooperation (Geddes, 2003). The postal service does not directly discriminate on prices but had in earlier years been accused of indirect discrimination of offering specialized services to second class mailers at no extra charge (FTP, n.d.).
FTP. (n.d.) Post Office. FTP Resource. Retrieved on 25 February 2011 from: http://ftp.resource.org
Gale. (2011). United States Postal Service. Business High Beam. Retrieved on 25 February 2011 from: http://business.highbeam.com
Geddes, R. (2003). Opportunities for Anticompetitive Behavior in Postal Services. American Entreprise Institute for Public Policy Research. Retrieved from: http://www.aei.org
Money. ( 2011). Monopoly. Money Terms. Retrieved on 25 February 2011 from: http://moneyterms.co.uk
USPS. (2008). Universal Service and the Postal Monopoly. United States Postal Services. Retrieved on 25 February 2011 from: http://www.usps.com