USPS shipping services

If UPS has its way, it could cost more to ship a package through the U.S. Postal Service.

The shipping giant is petitioning federal regulators to force the Postal Service to adjust the way it calculates its costs, arguing that the agency is using the proceeds from its monopoly First Class mail to subsidize the delivery of the shipping services where it competes with private carriers.

UPS is alleging that in keeping competitive shipping prices artificially low, the Postal Service is violating the 2006 Postal Accountability and Enhancement Act (PAEA), which granted the agency more pricing freedoms, but barred it from using its monopoly in letter mailing to subsidize competitive shipping products.

"In recent years, " UPS wrote in its petition, "the Postal Service appears to have shifted its focus from delivering the nation's letter mail to competing against private companies to deliver parcels (such as packages from e-commerce retailers)."

The petition further asserts that the Postal Service has "gone beyond its regulatory mandate in order to compete head-to-head against private companies in unregulated markets."

Kara Ross, a UPS spokeswoman, explained that the petition is not a direct appeal for the Postal Regulatory Commission to force an increase in shipping rates. At the same time, higher rates seem a likely outcome were the PRC to affirm the claims in the petition.

"UPS does not take a position on its competitors' rates, " Ross said in an email. "Our focus, rather, is on whether or not costs that the U.S. Postal Services incurs with its competitive products (that compete with the private sector) are being covered with revenue from those competitive products, as the statute requires. We do believe there is evidence that First Class mail is subsidizing competitive shipping products."

The Postal Service doesn't see it that way. Spokesman David Partenheimer said, flatly, that "there is no recent shift in focus, " adding that the agency plans to "strongly contest UPS' proposals."

"The Postal Service's recent efforts to compete effectively in the parcels market have not detracted from our obligations regarding letter delivery. In fact, growing our competitive products is essential to financing the network that we use to provide prompt, affordable and reliable universal service for letters and packages alike, " Partenheimer wrote in an email.

"The Postal Regulatory Commission has consistently found that competitive products are not subsidized by market-dominant products, and that competitive products are making an appropriate contribution toward covering the Postal Service's institutional costs, " he added.

Also included in the announcement of those rate changes was the news that the Postal Service is intending to phase out the Commercial Plus category of discounted shipping. Instead, the Postal Service affirmed its interest in pursuing more negotiated service agreements (NSAs), the individual deals that the agency reaches with large mailers.