Bill in Congress Pushes Postal Service In Direction of Competing with

As it eyes expansion into electronic commerce and other commercial opportunities, the U.S. Postal Service could be on a course to compete against banks and other financial service providers.

Congress is considering legislation that would let the postal agency form a subsidiary able to offer a wide array of nontraditional products such as electronic bill payment or digital certification.

The new company would answer to a new regulator and operate on a taxpaying, for-profit basis. It would raise capital from private markets rather than the U.S. government, though the Postal Service could voluntarily invest excess revenue from its nonmonopoly postal products.

The bill, the Postal Modernization Act, has had little momentum since it was first introduced in 1996, but that may be changing. The proposal cleared a House Government Reform subcommittee last year and was reintroduced in January by Rep. John M. McHugh, R-N.Y.

The subcommittee could mark up a revised version by the end of April and supporters say they hope to enact it within a year. Rep. Dan Burton, R- Ind., chairman of the House Government Reform Committee, is a co-sponsor.

The bill has been hardly a blip on most banker radar screens. Bank representatives were not among the two dozen "stakeholders" who testified at a March hearing, nor was the industry represented among the 50 groups that responded to a request for comment last spring.

"This legislation is not being taken terribly seriously by the banking industry," said Karen Shaw Petrou, president of the consulting firm ISD/Shaw Inc.

But an ISD/Shaw analysis found that "the new corporation could, for example, use its formidable operating advantages to establish itself as a 'trusted intermediary' for the handling of transactions associated with on- line commerce, supplanting private providers now investing billions (of dollars) to enter this business."

USPS Corp., as it is dubbed, could charter a thrift, Ms. Petrou said. The thrift could even establish retail outlets at post offices, she added, although she considers that development unlikely.

Supporters of the bill say the proposed company would not pose a grave threat to existing financial companies. On the contrary, they argue that the bill would make competition fairer by forcing the move of all of the Postal Service's nonpostal products into the for-profit subsidiary. The company then could not borrow money on the same favorable terms available to government agencies.

Some observers pointed out that the Postal Service already provides or has attempted to offer the described electronic services, even if its statutory authority was dubious.

A Postal Service entity, Remitco, expedites processing of customer remittances to billing organizations. In December 1996, the firm took over an American Express processing facility on New York's Staten Island. The Postal Service hopes to take the service nationwide.

The agency is also developing a digital signature service for placing time and date stamps on electronic mail.

"The (Postal) Service recognizes that some private companies are already marketing electronic postmarking services," said a November 1998 report by Congress' General Accounting Office. "However, the service believes it is in the best position to serve the public's need for an independent, third- party agent offering secure electronic mail."

Supporters of the bill agreed with Ms. Petrou that USPS Corp. would be permitted to seek a thrift charter. But they denied that the new company would easily be able to set up shop in post offices. They said the possibility of placing financial services in postal branches already exists and that any USPS thrift would be in no better position than any other financial company to strike such a deal with agency authorities.

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