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Government Use of the

Postal System: A ValuableUniversal Service Obligation

Component

Michael J. Ravnitzky and J.P. Klingenberg

The views in this paper do not necessarily reflectthose of the Postal Regulatory Commission.

It reflects the views of the authors only.

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Government Mailers are Key Postal

Stakeholders Why do governments use the mail?

How is government use of the mail different? Can the government mail more effectively?

How dependent is the government on the

mail?

How dependent is the government on the

Universal Service Obligation (USO)? How would liberalization and a change to

the USO affect a government mailer?

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Why do governments use the mail?

Government needs to communicate with

citizens and businesses Litany of official communications

Legal notifications, benefits, claims materials

Voting by mail, political information

Recalls, warning letters

Licensing, tax assessments Surveys, census forms, educational materials

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Why do governments use the mail?

Mailbox links physical address with identity

The mail provides forwarding and return

services, and the channel is ownedthroughout

The mail is the only communications channel

that delivers to the specific recipient In the U.S., the legal system obliges use of

postal service for many government

communications The gravity of government letter

communications

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How is government use of the mail

different from commercial uses? In many nations, citizens expect their

communications with government to be by

mail

Government-citizen relationships tend to be

mandatory, not discretionary Government agencies are subject to legal or

regulatory obligations requiring use of mail

Government face lessened competitivepressures compared with commercialmailers

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OECD Countries Average 25%

Broadband Internet Access

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Influence of Federalism

Federalism is a national structure where

independent states coexist with thenational government

Federalism creates layers of government -

- each needs to communicate

The degree of federalism in a country

may affect the quantity of mail sent andthe reliance on the postal system

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$-

$200

$400

$600

$800

$1,000

$1,200

$1,400

$31,000

$32,000

$33,000

$34,000

$35,000

$36,000

$37,000

$38,000

$39,000

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Millions

USPSFirstClassRevenue

Millions

Comparison of Total USPS First Class Revenue and U.S. Federal

Government USPS Expenditure

USPS First Class Revenue

US Federal Government USPS

U.S.Federal

Government

USPS

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Can the government mail more

effectively?

U.S. Federal government : > $1 billion customer

Federal agencies continue to send single-piece mail

Opportunity for presort savings: > $100 million

Potential for Negotiated Service Agreements

State mail usage data is not readily available

Some states have centralized operations

Based on four-state sample, states could be $1 billioncustomer States could realize $250 million in savings by centralizing mail

operations

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How dependent is the government

on the Universal Service Obligation? What is the USO?

Geographic scope Product range

Access

Delivery

Pricing

Service quality Enforcement mechanism

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How dependent is the government

on the Universal Service Obligation? Government mailers value these postal

characteristics:

An accurate central mail address system with a

timely address correction mechanism

The ability to mail everywhere in the nation

Geographically uniform rates for letter mail

Predictable and consistent delivery performance

Security and sanctity of the mail

Security screening of inbound mail

The existence of a common carrier of last resort

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How would liberalization and a change

to the USO affect a government mailer?

If the USO cost is not shared by allmailers, government may bear a largerburden for services it requires

Liberalization can lead to increased pricesfor single-piece mailers

The U.S. government acts as a single-piece

mailers The market power of the government will

play a role in the ultimate impact of postalliberalization

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Conclusions- General Governments are major mail users

The link between address and identity drives

use of mail Government cannot select their customers

Due to an obligation to communicate with

citizens, government mail demand isstructurally different than commercial mail

U.S. Federal Government mail expenditures are

increasing

Governments will require a carrier of lastresort for hardcopy communications for theforeseeable future

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Further Questions

What is the current market power for variousgovernment mailers?

Can they realize cost savings through presorting /price negotiations / liberalization?

Is mailing more expensive to meet unique USOrequirements?

How does governments reliance on the mail

influence postal liberalization policies? How does potential change in government postal

expenditure from liberalization compare tostakeholder effects from such a change?

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