Posts tagged ‘usps’

USPS Problems Not All Their Fault

As much fun as it is to mock the US Postal Service, their inability to restructure their costs is not all their fault. Every time they try to close a facility, they get met by opposition from about everywhere.  Here is an example where Berkely, CA is doing all it can to prevent the USPS from selling a post office building.

The Postal Service over the summer began moving ahead with a plan to sell its 1914 Beaux-Arts post office in the heart of Berkeley near the old city hall and a park named after Martin Luther King Jr. The move drew howls from residents worried that the building would turn into condominiums or office space, even drawing dissidents to camp out for days by the columned building entrance.

Now, opponents are gaining traction with an unorthodox zoning restriction: that the mustard-colored building must remain open to the public

The Berkeley Planning Commission last month approved a measure that would restrict the use of the post office and adjacent government buildings to government agencies or public uses like a theater. Residential use and many other private functions would be banned by the action, which requires City Council approval.

This is simply bizarre.  What, do residents have so many fond memories of their time spent in the line at the post office that they want these golden memories preserved?    The assumptions made by local opponents are just bizarre -- they seem OK if the building is used for offices of the Social Security Administration but not if it is used for private offices.  Why would anyone possibly care.   From my experience, private urban office buildings tend to be cleaner and better maintained than government offices.

Government "Investment" Of the Day

Over the course of Lance Armstrong's career, the US Postal Service paid him over $40 million in sponsorship money (at least according to the radio report I heard this morning).

I don't necessarily begrudge advertising -- the USPS was nominally acting as a business enterprise, and businesses advertise to promote their services.

But I do find this expenditure odd in the extreme for a couple of reasons.

  • First, sponsorship money of this sort generally can only build name recognition.  Paying to name a ballpark "Chase Field" builds name recognition for Chase, but by necessity does not communicate anything else about its services or value proposition.  The same is true for putting one's name on Lance Armstrong's jersey.  Does the US Post Officer really need name recognition?  Are there people wandering around unaware of the US mail?  I could understand advertising such as "this is why our express mail is better than Fedex" or "you should send a real paper thank you note and not just an email to really thank someone."  But name recognition for the USPS?  "Oh, so that is what that funny box in front of my house is...."
  • Second, to the extent one did indeed feel the need to build name recognition, why in the hell would one do it in a sport primarily competed and followed in Europe?  This seems an odd strategy for a service that is essentially limited by statute to US operations.

The only thing I can guess is that someone in the USPS decided, "Hey, everyone hates us.  Let's sponsor someone (preferably in a tangential sport that we could actually afford) who is beloved so some of those positive feelings might transfer to us."   That worked out well, huh?

Apparently Obamacare is Better Because it Gouges Everyone

A number of people pointed out that the posted Obamacare rates in California are about twice what individuals are paying today at low-cost sites.  This was in response to a deceptive California press release that claimed they were much lower, but got this result only by comparing apples to oranges.

Rick Ungar has two responses, that seem to be the emerging talking points on the left:

  1. He found some bad Internet reviews of the low-cost source that Conservatives and libertarians used as a better point of comparison for Obamacare rates
  2. Some of the people had to pay up to 50% more than the published rates due to pre-existing conditions.

Avik Roy has a number of responses to Ungar (and Ezra Klein, who raises the same points as Ungar).  I would raise three points:

  1. Neither he nor Klein address the issue of the fundamental deceptiveness of the California press release.  I don't think anyone can defend comparing individual rates to business group rates as anything but apples to oranges.  If the Obamacare story is so great, why was the deceptiveness necessary?
  2. Everyone gets bad reviews on the Internet.  If one transaction out of a thousand goes bad, that one will write a negative review online and few of the satisfied will bother.  If sex were a product on Amazon.com, it would likely have some 1-star reviews.  That being said, it is amazing to me that government control is seen as the solution to customer service issues.  I could be wrong, but I would stack up the reviews of the worst health insurance company in America against the DMV and Post Office any day of the week.
  3. The published rates online are for the healthiest class of people.  I have never once had someone sell me health insurance and not make this clear.  Calling them teaser rates is a misnomer, particularly since, as Avik Roy notes, about 75% of the people who apply get these rates.  One in four have to pay 50% more today, so we are going to make 4 in 4 pay 100% more under Obamacare, and that is better?!?

To that last point, I will quote something I said years and years ago, long before Obamacare was passed:

The looming federal government takeover of health care as proposed by most of the major presidential candidates will be far worse than anything we have seen yet from government programs.  Take this example:  In the 1960's, the federal government embarked on massive housing projects for the poor.  In the end, most of these projects became squalid failures.

With the government housing fiasco, only the poor had to live in these awful facilities.  The rest of us had to pay for them, but could continue to live in our own private homes.

Government health care will be different.  Under most of the plans being proposed, we all are going to be forced to participate.  Using the previous analogy, we all are going to have to give up our current homes and go live in government housing, or least the health care equivalent of these projects.

Postscript:  Citizen Kane has over 100 1-star reviews.  Some are about the packaging or this particular version but many are about the movie.   The novel Gone with the Wind has dozens.

Postscript #2:  A sample Yelp review of a local USPS office

This place is the pits.

There are no supplies in any of the racks unless you want to send something Express Mail. All of the Priority Mail stuff is constantly gone and they don't have any more. Not that there's anyone to stock the racks even if they did.

People used to leave reviews complaining that there were "only two" workers. Those days are long gone--there is now ONE counter person at all times. That means if you get behind someone that has questions, or can't understand a customs form, or wants to argue about mail being held, you are just stuck.

Why not use the automated machine, you ask? Because its printer has been broken for two weeks and you can't actually print the postage that you might buy. Not that there's a sign telling you this--you have to spend a few minutes going through the process only to be told at the end that the transaction can't be completed because the printer isn't working.

I know they are making cuts because they are out of money, but it's a vicious cycle they'll never get out of because they've now effectively made it impossible to patronize the postal service.

Stay far, far away.

I would not be at all surprised if California banned online reviews of health care exchanges.  One department of the CA state government threatened to revoke all my contracts unless I took down a blog post simply linking to negative Yelp reviews of one of the department's facilities.

Crony of the Month

In barely a month, Dianne Feinstein's husband has scored 1) The first ever national exclusive real estate broker's contract to sell USPS buildings and 2) The multi-billion dollar contract to construct the first leg of California "high speed" rail.

Spam Masquerading as Official, Important Mail: Paramount Merchant Funding

It's been a while since I have received a fake "check" whose cashing obligates me to a four year contract, or a deceptive yellow pages solicitation, or even my favorite, the board minutes services that masquerade as an official government form.  So I will highlight Paramount Merchant Funding for this over the top message on the front of their envelope they sent me, again in an apparent bid to masquerade as some sort of official mail that must be opened.

paramount-merchant-funding

The scam here is clever -- I don't have time to bother looking it up, but my guess is that this message is literally true - for all mail sent through the USPS.  But it is obviously meant to virtually force someone to open it thinking it is official, which I was dumb enough to do.

They seem to have a perfect 1-star review record over at Yelp, a fact I could have called in advance sight unseen.  They have more BBB complaints in the last year (5) than my company has in our whole history (0).

Big Amazon Prime Disapointment

I have been an Amazon Prime customer for years, and have been very satisfied to get the free two-day shipping.    And they have always done a good job with this, and in the past I have had literally hundreds of shipments in a row arrive on time.

However, two of my last three orders have been late, and the last order, which should have been here on Thursday, still, two days later, has not arrived despite the fact the system says it was delivered June 23 at 12:54.

But it is actually fairly easy to figure out why the service has deteriorated.  On both these late orders, Amazon used the USPS to deliver the package.  That explains a lot.  The USPS has awful, unreliable service and has absolutely no package tracking capability.  Not only is it my package missing, but neither Amazon, myself, or the USPS have any way to find out where it is.

This is awful service.  I am not only a pretty high-volume customer, but I have paid an annual fee to get premium shipping -- and I can tell you that there is likely no one on Earth who considers the USPS a premium shipping option.  If they keep sending my 2-day packages snail mail, there will no longer be any point to being a prime member.  Maybe they will offer a super-prime membership sometime in the future that guarantees they will not use USPS (though I suppose I can get this now by clicking the one-day shipping button and paying the $3 or whatever it is extra).

Post Office: Mail Delivery or Welfare?

The management of the Post Office is a joke, and it is hardly worth the electrons to write more about it.   But I did find this factoid in Tad DeHaven's commentary on the Post Office's hopeless efforts at cost reduction interesting.

Traditional post offices, which number about 27,000, cannot be closed “for solely operating at a deficit” and the closure process is burdensome.

Wow, that is a bad law (though no worse than 10,000 others like it).  This sounds similar to the military base problem, where every facility that needs closure has a Congressperson desperately trying to keep it open against all economic reality, merely as a jobs/welfare program once its true utility is over.   Apparently, the Post Office has an overcapacity problem that rivals the US Military's after the Cold War (and really to be honest after WWII)

Full post offices are more costly to operate than other means of serving customers. The average post office transaction cost 23 cents per dollar of revenue in 2009 while the average transaction at a contract postal unit cost just 13 cents. Post offices used to generate almost all postal retail revenue, but 29 percent is now generated online through usps.com and other alternative channels.

In 2009 post offices recorded 117 million fewer transactions than in 2008. Four out of five post offices are operating at a loss. However, the postal network’s overcapacity has drawn little corrective action from Congress. In fact, legislation introduced in the House with 102 cosponsors would apply the burdensome procedures for closing post offices to other postal outlets as well. Congress is actively working against the modernization of the U.S. postal system.

The amazing thing is that they have tons of extra capacity and still provide poor service.  Just compare the process of mailing a package UPS vs. USPS.  I have a UPS account, I can print my own labels, I get billed automatically, I get package tracking, and I can send the package from the drop box downstairs in my building.

It is almost impossible to do this with the USPS.  To mail anything larger than 13 ounces, to buy postage without an expensive meter, to get a greatly inferior sort of tracking -- all require a grim trek to the post office.

My guess is that just like Pemex is not longer really about producing oil, the USPS mission is no longer primarily about delivering mail, its a welfare program.

PS - my USPS delivery guy is great.  Nicest guy in the world.  The mistake for years in criticizing the USPS has always been about criticizing the people.  Not only is that wrong, but it distracts from the problem.  By implying the problem is bad, surly people, it implies the problem is fixable with new people.  But in fact, the problem, as with all government, is information and incentives .... and in this case Congressional meddling in their mission.

Nobody Likes Having Competitors, but Only the State Can Ban Them

Private companies often come running to the government to protect themselves from competition.  Sometimes they are successful, and get government licensing and certification requirements that help create barriers to entry that protect incumbents  (if incumbents are lucky, they will actually get to control the licensing and certification board and testing process).

But whether or note private companies have the political muscle to get this kind of protection, the government almost always protects itself whenever it embarks on any sort of quasi-commercial enterprise.  The ban on first class mail delivery competition is one example (as an aside, when email began making an end run around this ban, the USPS actually made a [fortunately failed] play to be the monopoly email provider).  In Denver, there was a story a while back that after they built a new toll road, they added traffic lights and lowered the speed limit on a parallel free road to drive more people to the toll road.

Carpe Diem brings another example:

"When the old arena for the Orlando Magic opened 21 years ago, it was common for Parramore neighborhood residents who lived nearby to charge Magic fans and concert-goers to park on their property. But five weeks ago, the Orlando City Council approved standards that will likely keep most Parramore homeowners from profiting on parking near the Orlando Magic's new $480 million Amway Center (pictured above).

Among other things, property owners must pay a $275 application fee and provide a business tax receipt. Lots must have an attendant, signs, proper lighting and a paved, gravel or grass surface free of potholes or ruts. City officials also recommend hiring security. Even when all those requirements are met, temporary parking lots are allowed only during an event expected to draw at least 5,000 attendees. So far, five applications have been approved, but all are for large properties such as churches, not homeowners.

The city, meanwhile, has doubled its event-parking rate to $20 at the two garages closest to the Amway Center; elsewhere, event parking at city garages and lots is $10."

The last sentence explains the first two. They are trying to charge an above market price for parking, so must constrain supply to avoid being undercut.

Huh?

Kevin Drum observes that the Post Office is more efficient and effective than we give it credit because ... it fully accrues for future pension and medical costs.

Over at Jon Cohn's place, Alexander Hart explains why the post office is better run than you think. Go read it. I don't have any big axe to grind in favor of the USPS "” in fact, I'm pretty annoyed at how complicated it is to calculate postage these days on supposedly "odd" size envelopes "” but the fact is that they're actually pretty efficient and pretty cost effective. I'd welcome private competition for first class mail, but just go ahead breathe the words "universal service" and see how many private sector companies are still eager to compete with the post office for 46 cents an ounce.

Wow, I have been so unfair to the post office.  I commented:

Great - the post office is really efficient because ... it fully accrues for benefits plans that are way beyond anything paid in the private sector, and reliably pays these benefits to huge, bloated work forces.  I am confused Kevin.  I read the article you linked.  What the heck did you find in the linked article that had anything to do with "efficient" or "cost effective."  Postal rates have grown at something like twice the rate of inflation.  Even industries you demagogue against, like oil, have raised prices less than the post office.

I don't know much about Alexander Hart, but my suspicion is that this is somehow a broadside in the public-private battle.  If so, then his focus is awfully narrow.  The feds may have accrued for their pension and health benefits, but they sure have not socked away any assets besides government IOU's to pay for them.  At the end of the day, most private company health and retirement plans are actually backed with real, 3rd party assets.  If you want to talk about pension law, private companies are not allowed to invest but a small percent of pension funds in their own stocks and bonds.  Not so the Feds -- the Post Office is running the equivalent of the Enron 401K invested 100% in Enron bonds.

And oh by the way, if we turn our attention to the states or local governments, the situation is entirely reversed.  In fact, many US public entities have ZERO percent funding of health plans and ZERO accrual of future costs, taking retiree benefits entirely out of current cash flow.

Health Care and the Post Office

The recent bankruptcy of the USPS and the proposal to cut Saturday delivery has interesting implications for government and health care.  Everyone, from the GAO to the management of the USPS know that there are substantial productivity improvement that could be had with better labor deployment and employee accountability, but no one has the will to take on the union.  As a result, the only cost cutting idea they can propose is service cuts.  Which is further proof of what I have been saying for a couple of years -- that despite all the hopey changey talk, the only real idea anyone in the Obama administration or Congress can come up with for health care cost reduction is reduced services and/or price controls (which reduce supply and thus services).

Public Sector Unions

Readers of the site know that I do not generally join in with the Conservative bashing of unions, except to the extent that they feed at the public trough (e.g. at GM) where I will bash them equally with all other similar hogs.  Unions are perfectly acceptable associations of individuals in a free society for a generally rational purpose.  What upsets this equation is when the government attempts to intervene to tilt the playing field either towards employers or unions in their negotiations -- but this is a government intervention issue, not a union issue per se.

Far more problematic is the growing influence of public employee unions.  Union advocates talk about the need to help private unions in a power imbalance with large corporations, but talk about a power imbalance!  In the public sector, we have hugely powerful unions with absolutely no one willing to take them on.  Government leaders who supposedly should be advocates of taxpayers and pushing back against union demands are typically in bed with unions.  One might say it is a similar case to unions owning the private company in which they work, but in that case there are market dynamics that mitigate against overly high pay or indifferent customer service.  No such balancing mechanisms exist in government monopoly institutions.

There have been a lot of articles on this topic of late that I have been keeping in my reader but have not linked, so to do a bit of tab-clearing, here are some good recent articles on public sector unions.

Carpe Diem shows the direct relationship between increasing public sector unionization and public sector debt.  Chris Edwards appears to be the original source.

Chris Edwards followed up to show an inverse relationship between state management quality and unionization.

Bruce McQuain discusses the $500 billion California unfunded pension liability.  And this does not include the unfunded liabilities of all the state's cities and towns and counties, which typically don't book any liability at all for their future pension and medical commitments.

Steven Malanga on how public sector unions broke California.

The camera focuses on an official of the Service Employees International Union (SEIU), California's largest public-employee union, sitting in a legislative chamber and speaking into a microphone. "We helped to get you into office, and we got a good memory," she says matter-of-factly to the elected officials outside the shot. "Come November, if you don't back our program, we'll get you out of office.'

Traditionally, public sector unions have exercised a lot of power in elections, as evidenced by this example of the success of unions in fielding winning candidates in California school board elections.   Bruce McQuain reports that the SEIU has even formed its own 3rd party in North Carolina.  Its amazing that candidates whose main platform is to shift more taxpayer resources to the pockets of government workers has success.

Finally, according to the GAO, union contracts have a lot to do with why the USPS is failing  (as labor accounts for 80% of USPS costs).  They seem to have all the labor problems GM had, except there is even less pressure to correct the problems, since after all we can't get our mail delivered by Honda or Toyota.  Here is an example:

  • USPS workers participate in the federal workers' compensation program, which generally provides larger benefits than the private sector. And instead of retiring when eligible, USPS workers can stay on the "more generous" workers' compensation rolls.
  • Collective bargaining agreements limit the amount of part-time and contract workers the USPS can use to fit its workload needs, and they limit managers from assigning work to employees outside of their crafts. The latter explains why you get stuck waiting in line at the post office while other postal employees seemingly oblivious to customers' needs go about doing less important tasks.
  • Most postal employees are protected by "no-layoff" provisions, and the USPS must let go lower-cost part-time and temporary employees before it can lay off a full-time worker not covered by a no-layoff provision.
  • The USPS covers a higher proportion of employee premiums for health care and life insurance than most other federal agencies, which is impressive because it's hard to be more generous than federal agencies.
  • If the collective bargaining process reaches binding arbitration, there is no statutory requirement for the USPS's financial condition to be considered. This is like making the decision whether or not to go fishing, but not taking into consideration the fact that the boat has holes in its bottom.

That Great Public Service

Via Cafe Hayek:

American Postal Workers Union president William Burrus complains that "It is deeply troubling that Journal editors advocate ending the Postal Service's exclusive right to sort and deliver mail.  The Postal Service must remain a public service if we are to honor our nation's commitment to serve every American community "“ large or small, rich or poor, urban or rural "“ at affordable, uniform rates"


My family has  a ranch that is absolutely in the middle of nowhere in Wyoming - it is 30 minutes by dirt road from a town of 2,000.  The USPS delivers mail to a box 3 miles away from the ranch, and does it 3 days a week.  The USPS will not deliver overnight mail.   UPS delivers 6 days a week right to our door, including overnight mail.

The word "uniform" is the key -- what the USPS government protected monopoly buys us is a massive cross-subsidy, where city dwellers subsidize rural communities, Alaska, and Hawaii.   Further, because the USPS knows that these subsidized routes are cost black holes, they tend to cut back on service to try to save money.  The result is that no one is served well, as is often the case when a large cross-subsidy exists -- cities pay more for their mail, and everyone gets worse service.

But What Keeps McDonalds From Charging $100 for a Big Mac?

Jesse Jackson, Jr. is freaking brilliant.   When Larry King challenged him (well, not really, King never challenges anyone, particularly on the left) that people see the public option as health care by the Post Office, Jackson replied:

Look at it this way: There's Federal Express, there's UPS, and there's DHL "¦ The public option is a stamp; it's email. And because of the email system, because of the post office, it keeps DHL from charging $100 for an overnight letter, or UPS from charging $100 for an overnight letter.

This is really a weird view of the world, particularly given the history of how Fedex started.  It's amazing, given this logic, that McDonald's doesn't charge $100 for a Big Mac, given that there is no government competitor in that market.

The reality of course is that the relationship works the other way around - Fedex and UPS keep the Post Office in check.  Many of the Post Office's most recent service offerings were copied from UPS and Fedex.  After decades of trying, the USPS still can't emulate these companies' most basic service offerings, such as offering door-to-door tracking of packages.

By the way, here is a graph of the USPS keeping a lid on the industry's costs (via Carpe Diem):

stamps
It should be noted that the Post Office is still losing money at the current stamp price.

Also from Carpe Diem is this little service parable

The stamp vending machine at the downtown Flint Post Office no longer sells stamps, it sits there empty. Right next to the dark, empty vending machine for stamps sit two fully operational, bright and shiny vending machines, one for soft drinks and one for snacks, presumably owned and operated by a private, for-profit vending machine company (see photo above).

What if the Interstate Highway System Became Obsolete Every Five Years?

Tim Wu believes he has diagnosed the problems of public Wi-fi.  Public wi-ife is a great idea, he says, but the problem is that municipalities have not recognized they need to spend real money on it.

It's hard to dislike the idea of free municipal wireless Internet
access. Imagine your town as an oversized Internet cafe, with invisible
packets floating everywhere as free as the air we breathe....

Not quite. The basic idea of offering Internet access as a public
service is sound. The problem is that cities haven't thought of the
Internet as a form of public infrastructure that"”like subway lines,
sewers, or roads"”must be paid for.

It could be, however, there are a few tiny differences between public wi-fi and public roads:

  • Any wi-fi system you install today will be dated in three years and obsolete in five. In fact, given the long delay in public projects between design (and presumably technology selection) and deployment, the system may well be obsolete on the day it gets turned on.  Would we have made the same public highway investment we did if roads went obsolete every five years?
  • Roads don't tend to have private competitors.  And when roads are constructed by private entities, say in a new housing development, you can absolutely bet that the municipality doesn't feel the need to invest in "public" roads to run beside them.

Wu admits that both cable and DSL have a much lower cost to serve urban customers, which is why private efforts for urban wi-fi tend to fail.  Free municipal wi-fi will therefore be more expensive to build and operate than if you just provided direct public subsidy payments to poorer people to use existing private solutions.  Further, a huge part of the investment will go towards giving away free access to people who already have internet service from a private supplier and are willing and able to pay for it.

Note that Wu never actually names a goal for municipal wi-fi or a
problem it is solving, just this beautiful vision of a city-wide
internet cafe (are we going to provide municipal coffee too?)  This fascination with municipal wi-fi reminds me of nothing so much as a similar fascination with light rail.  You can see it in his opening comment about the "oversized internet cafe."  This is an aesthetic, not an economic, vision.  Our light rail project here in Phoenix is the same way.  It will haul passengers more expensively and at a far higher investment and with less flexibility than our bus and road system.   With the investment we are putting into the system we could have instead bought cars for every rider and had money left over.  It makes zero sense for the density and commuting patterns of this city, but still we are doing it, because there is a subset of people who love light rail as some sort of pleasing aesthetic vision.  Name any goal either one is trying to solve (e.g. access to transportation or internet) with public investments in light rail or municipal wi-fi and those goals could be solved more cheaply some other way. 

Postscript:  A while back, I wrote about another danger of municipal wi-fi:  That bureaucrats in charge of the system will try to protect their jobs by blocking new competitors:

[the municipal wi-fi authority] can use its government authority to block new entrants. ...  Take another large government network business: The Post
Office.  The USPS tried like hell to get the government to block Fedex,
and almost succeeded.  The government continues to block competition to
the USPS for first class local mail.  Heck, the USPS has tried at
various times to argue that it should have authority over email and the
Internet.  The government blocks new cigarette manufacturers to protect
the settlement money it gets from the old-line tobacco companies and it
blocks usage of Love Field in Dallas to protect D/FW airport.
Bureaucracies never, ever let themselves die, and there is no way a
municipal broadband business will ever let itself be killed by a
competitor - that competitor will be blocked, even if that likely means
that local broadband consumers have to stick with higher costs and
outdated technologies.

You see something very similar with municipal water systems trying to get the government to limit the growth of bottled water.  It happens all the time.  Already, examples exist of municipalities trying to shut down wi-fi competition from private companies.

Boston's Logan International Airport is attempting to pull the plug on
Continental Airlines' free Wi-Fi node, which competes with the airport's
$7.95-a-day pay service.

In an escalating series of threatening letters sent over the last few weeks,
airport officials have pledged to "take all necessary steps to have the (Wi-Fi)
antenna removed" from Continental's frequent flyer lounge....

Problems with Amazon Prime

Up until the last month, I have been very happy with Amazon Prime, the service where you pay $80(?) for a year of free 2-day delivery.  I am sure I have ordered more stuff from Amazon because of it, and I know I order it faster because I don't wait weeks with things in the shopping cart to group shipments.   

However, in the last month, I have had not one but two orders show up in 7-8 days instead of two.  The first was a Batman Begins DVD, pre-ordered to ship on its release date (which it apparently did).  It was shipped USPS, so there was obviously no hope that it would arrive in 2 days.  The second was a new Nikon D50, which was back-ordered for about a week.

I never really got an explanation for the DVD shipment (maybe they don't apply Amazon Prime to pre-orders?), but I did get some explanation for the Nikon D50.  After writing Amazon, asking them why my item shipped UPS Ground with a 7-8 day delivery time instead of 2-day, which I had paid for with Amazon Prime and was listed as the shipment method on the order page, I got this response  (greetings, apologies, etc. omitted):

After your order leaves our fulfillment center, we may use any
appropriate ground or air shipping service necessary to ensure that
your order is delivered within one or two days, depending on the
delivery option you selected.  These delivery options do not
directly correspond to any carrier-branded shipping services.

I have researched the order in question, and it appears your package
will arrive on time.

We understand that customers who select Two-Day or One-Day delivery
want to receive their orders faster, and we will only use an
alternative shipping method when we know your order will arrive by
the estimated delivery date.
 

This is obviously not very clear, but here is what I infer:  When the item was back-ordered, they gave me an updated delivery date range, something like "estimated delivery Nov 2-10".  What I infer from this email is that once they give you an estimated delivery date range, they feel like their obligation to ship 2-day is voided.  The only obligation they now feel they have is to hit that date range.  So, despite the fact that my camera shipped on Nov 2 and I paid for 2-day shipping, they feel they are meeting their obligations if it gets to me by Nov 10, the back end of their estimated range.

The conclusion is not to feel sorry for me that I have to wait to play with my new toy, but that this may be the first sign of a program that is being gutted under profit pressure.  When lawyers looking for loopholes take over the customer service and fulfillment department, things can go downhill pretty quickly.  Note that the "est. delivery date" dodge really gives them carte blanche to get out of the 2-day obligation any time they want, since they set the estimates. 

As a note, I tried to confirm my interpretation with Amazon and have been unsuccessful.  In the tradition of making itself one of the hardest companies in America to actually contact, one can't reply to their customer service email so I can't get an easy confirmation or clarification.  I actually got and called their customer service phone number, which you will never find on their site (write this down:  1-800-201-7575).  The person on the other end of the line was useless, not understanding that I wanted a clarification of the Amazon Prime rules rather than some resolution of a particular order.  She couldn't access the emails I had sent to customer service or had received from them, and didn't seem to understand Amazon Prime rules, so she was no help.  The only funny part was that as I kept trying to clarify what I wanted from her, she kept upping the gift certificate amount she offered me as compensation, despite the fact that I kept saying "I don't want money I want to know what the rules are".  I think I ended up with $20 without even wanting it.

Which makes me wonder why I can't reply to Amazon's customer service emails.  I don't have a problem getting customer support via email rather than the phone, but to make this work I really need to keep working through to resolution with the same person, and the Amazon process makes this impossible.

Worlds Most Expensive Printer Ink

Today I bought what may be the most expensive consumer printer ink available.  We have a small Pitney-Bowes postage meter that has a little built in ink-jet printer to print out the metered postage symbol (that sort of red looking stuff that replaces the stamp).  One of their little print cartridges doesn't last more than at most a thousand envelopes, which represents at most the equivalent of 50 pages of text for a normal printer.  For this little cartridge with its smidgen of ink, I paid $39.99.  At the same time, I bought two-paks of the HP cartridges I needed (no bargain themselves) for $25 per cartridge, and these cartridges last for hundreds of pages.  I can't directly compare the volume of ink, but my sense is that the P-B cartridge is priced such that it would be over $500 with an equivalent amount of ink to an HP cartridge.  Insane.  And its worse because the P-B postage meter has this annoying tendency to announce the cartridge is almost out of ink before it is even half empty.  We have gone weeks with the meter telling us the cartridge had to be replaced soon.

I am not sure I fully understand the relationship Pitney-Bowes has to the US Postal Service, but to all appearances, they have been handed a virtual monopoly for decades.  For years business have been forced to pay egregious rental rates for P-B equipment with long, long minimum lease periods because the USPS does not seem to be comfortable with competition.  Only the advent of Internet postage in the late 1990's forced P-B to come out with a small business postage meter that you could purchase at relatively low cost.  I am flabbergasted that the US government continues to give them this monopoly.  It is ironic to me that several of the abusive monopolistic practices used by Pitney-Bowes and encouraged by the US government are the same practices Xerox got busted (under anti-trust litigation) years ago by... the US Government.

More "Government Coersion = Freedom" Arguments

The other day, I posted on a NY Times editorial that attempted to make the point that a coerced and conscripted army was more consistent with freedom and democratic values than an all-volunteer army.

This aggressively ridiculous position is none-the-less repeated by statists every day in many contexts.  Today I will focus on a post by David Sirota on the Huffington Blog.  Its premise is that government ownership of commercial assets is more conducive to freedom that private ownership.  I could probably have found a more serious writer to Fisk, but I am bored this afternoon and needed some fun.  Besides, its fun to see someone actively channeling some of the minor characters in Atlas Shrugged.

First, to be fair, I have to start with a strong point of agreement with Mr. Sirota:  Both of us are frustrated with the corporate welfare, subsidies, eminent domain land grabs, new stadiums, and incumbent protection laws handed by all levels of government to various corporations.  Mr. Sirota cites the stadium example in particular, which has always been a pet peeve of mine as well:

Usually, government is in the business of handing over huge amounts of
our taxpayer money to corporations, so that the corporations can just
take all the profits, and charge whatever they want to the customers.
That's been the backbone of the recent spate of high-profile stadium
deals, whereby city and state governments just fork over cash to private pro sports teams,
while getting no share of the massive profits in return, and letting
those teams charge higher and higher ticket prices to the fans whose
tax dollars are supporting them.

I feel fairly well protected on the price angle by the fact that I can just choose to not go to the games, but he is right that the government is handing over stadium money with little to show for it in return.

But this is where he and I diverge.  My answer is to stop crony capitalism, and to stop using government money and regulatory authority to support favored businesses.  Mr. Sirota goes the other direction, which one might call "in for a penny, in for a pound", of having the government continue investing in businesses but to do so on the government's own account.

ordinary Americans are realizing that there's an alternative path,
whereby community ownership of certain economic institutions and
businesses are a pretty good deal. Instead of allowing Corporate
America to reap the windfalls of everything, more and more communities
are trying to get a piece of the action "“ all while making sure the
public is adequately served, and not abused.

The highest profile example of this is in municipal broadband, where city governments are developing taxpayer-owned high speed Internet networks.
Instead of allowing Verizon or other corporations to control Internet
access and rake in all the profits from it, these communities are
making Internet access a public utility and sharing in the profits.
These communities can make some money at it, while doing the public a
service by keeping rates low.

I will accept his chosen example of broadband networks. I will also, for today, give the author a break and not challenge the bizarre notion that replacing a private company like Verizon who has a 5-10% profit margin with an inefficient government bureaucracy can yield substantial cost savings for customers AND fat profits for the municipal government.  In fact, I will leave the obvious efficiency arguments behind entirely and only discuss the morality, the right and wrong involved in his proposition.

Ownership and Capital Investment
Corporations like Verizon are owned by communities of millions of ordinary people through a mechanism we call "stocks".  Even the few large shareholders of Verizon tend to be investment funds, which are really just vehicles for aggregating ownership of many many ordinary people via mutual funds and/or the pension obligations they back.  Owners of Verizon provide capital to the company through their stock investment in an uncoreced transaction and of their own free will.  Their ownership is evidenced by actual paper shares, and is portable, such that they retain ownership anywhere they live, even overseas.  Investors at any time, if they don't like the company's performance or prospects, are able to cash out at the market price, and companies routinely return a portion of their surplus to them in the form of dividends.  Investors elect a board of directors to steward their investment in the company, and can throw these directors out any year with a 51% vote.  The company they have invested in must provide them clear reports quarterly using GAAP accounting rules about how their investment is fairing.

Contrast this to a municipal-owned broadband network.  In some sense, all members of the municipality have an ownership interest in the network, but they receive no documented evidence or guarantee of this ownership.  Local citizens are required by law to contribute capital to the enterprise via their taxes.  Their investment is mandated by the state, is not optional, and non-investment (via non-payment of taxes) is met with a prison sentence.  Once their money is invested, they may not sell their interest or in any way recover their investment.  History has shown that surpluses in municipal owned business seldom exist, but when they do, they are never returned to the citizens, but are spent in other government functions at the whim of the local authorities.  If the citizen moves, he loses any benefit of his investment.  Municipal authorities seldom produce financial statements for these enterprises, and, when they do, they would never pass GAAP muster.  Since the author mentions Enron, I will say that Enron had cleaner financial statements than most government entities.

The author clearly prefers the latter.  Does someone who chooses the latter over the former really care about freedom and individual rights?

Competition and Evolution

A private company, particularly in an industry like broadband with rapid technology change, is constantly subject to getting beaten by a competitor with better technology or a lower cost position.  In the absence of government intervention, the private company has to constantly match competitive technology changes and cost improvements, or die.  Its interesting that the author would choose broadband, because the corpses of literally hundreds of failed broadband companies litter the American landscape.  Broadband has historically been a brutal business, with most companies failing to repay their investment in their infrastructure.  I will confess that many of the major communications players have been slow to move in this area, but in large part it has been government incumbent protection, not market incentives, that have slowed progress.  Wireless broadband providers and equipment producers have to move rapidly -- they have already migrated from proprietary designs to A to B to G and now to N in just five years or so.  A private company without government protection in this environment is faced with two choices:  constantly upgrade, or die.

Now, lets look at municipally-owned broadband company.  Like the private company, it will have to make a large start-up investment to get the infrastructure in place.  Also like the private company, repaying this investment (and thereby avoiding hitting their taxpayers with new charges each month for operations, ala Amtrak) will require putting a lot of volume on the network.  Finally, also like the private company, it will be facing new technologies and new potential competitors almost before the network is complete.  So what does it do?  It could begin to reinvest in the infrastructure, earning the ire of local citizens because it goes back for yet more taxes for the development.  It could cut prices and drive for market share, lengthening the time before it breaks even and eliminates the tax subsidy it will require. 

Or, it has a third option that the private company does not have:  It can use its government authority to block new entrants.  I will tell you right now - the government will use this third option every single time.  Take another large government network business: The Post Office.  The USPS tried like hell to get the government to block Fedex, and almost succeeded.  The government continues to block competition to the USPS for first class local mail.  Heck, the USPS has tried at various times to argue that it should have authority over email and the Internet.  The government blocks new cigarette manufacturers to protect the settlement money it gets from the old-line tobacco companies and it blocks usage of Love Field in Dallas to protect D/FW airport.  Bureaucracies never, ever let themeselves die, and there is no way a municipal broadband business will ever let itself be killed by a competitor - that competitor will be blocked, even if that likely means that local broadband consumers have to stick with higher costs and outdated technologies.

Gee, that sounds great, huh?

Pricing
My sense is that this is what gets the socialists and community ownership guys excited.  You can see from the quotes above, the author sees the world of private enterprise as this enormous price gouging domain, with no accountability on prices.  Though he does not say it explicitly, I am sure if asked he would say that private corporations have no accountability to the public (ie consumers)on pricing, whereas the local municipal government would.  This pricing issue is I think at the heart of his support for public over private ownership:

People know corporations right now have far too much power
and far too much leeway to rip off ordinary citizens - but there is a
feeling that that's "just a fact of life." The Community Ownership
movement shows it doesn't have to be a fact of life, and that there is
an alternative

The obvious response is that private companies have a tremendous accountability on price, from two directions.  First, consumers, if prices are too high, can choose not to buy.  Second, if prices remain "too high" for long, then competitors emerge to undercut them.  Like most socialists or "progressives", the author doesn't understand or trust these mechanisms - he prefers top down rather than bottom-up accountability.

In this sense, he prefers the comfort of the municipal business where elected officials that the consumer votes for set prices, and trusts these elections to provide more accountability than the market  (how ). Even forgetting that government inefficiency will make price savings impossible in such a thin margin business, how can anyone look at Congress or this administration and believe that electoral accountability is stronger than the market.  Do you really feel that you can do more about to affect government set rates like local sales tax rates than you can in response to say rising cell phone rates?  If I don't like my cell phone rate, I can switch plans, switch companies, or switch to other technologies (land lines, VOIP, etc).  If I don't like the sales tax rate, the best I can do is move to New Hampshire.

Conclusion

Wow, this piece really went on for a long time, and certainly far longer than Mr. Sirota's article deserved.  As a final comment on the author's grasp of reality, note this quote, where he refers to:

the out-of-touch confines of the Beltway where free market extremism reigns supreme

LOL.  I would love to find even a little bit of free market extremism inside the Beltway.  And if by free-market extremism he means crony capitalism of the sort I described at the top of the post, well, he should be more careful with his word choice. 

For too long, our side has rolled over and died when it comes to
questions about how to manage the free market so that it works for
ordinary people.

Here is a hint - if you want to participate in the profits of the free market just like the fat cats, try this.