Sustainability of Universal Postal Service Under New
Market Conditions
Chairman Ruth Y. GoldwayCommissioner Nanci E. LangleyU.S. Postal Regulatory Commission
Postal Regulatory Dialogue – Brussels, Belgium
June 8, 2011
Postal Regulatory Commission (PRC)
Independent U.S. Government Agency
Regulates only the U.S. Postal Service
Strengthened by the Postal Enhancement and Accountability Act (PAEA) of 2006
Five Commissioners appointed by the President and confirmed by the U.S. Senate
Our mission: “Ensure transparency and accountability of the United States Postal Service and foster a vital and efficient universal mail system”
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2006 Postal Accountability and Enhancement Act (PAEA)
Greater transparency and accountability
Greater flexibility for operator
Greater oversight by more formal regulator
Limited products and services to those related to the physical delivery of hard-copy postal items
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The Role of the PRC
Develop a modern system of rate regulation
Monitor U.S. Postal Service finances and service
Consult with Postal Service to establish service standards and measurements on delivery and access
Report to Congress annually on Postal Service’s compliance with regulations and adequacy of service
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The Role of the PRC
Adjudicate complaints from mailers and the public
Special reports and studies
International engagement
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Universal Service
USPS strongly emphasizes no specific, measurable requirements in the law
No quantification of universal service• Fastest possible service• One class sealed against inspection offered at same rate
to everyone• Fair and efficient at reasonable rates• Comprehensive service everywhere, especially rural
areas• Access provided- no post offices closed for solely
economic reasons• Recognizes education scientific and social benefits when
setting rates Specifics – non-profit standard mail at 60% regular rates
and maintain delivery at 6 days per week
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Seven Aspects of Universal Service
Geographic scope Range of products Access to postal facilities Prices/affordability Quality of service Users’ rights to redress Delivery frequency
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Cost of Universal Service andValue of the Monopolies
Cost of Value of Net
Universal Service Monopolies/(Mailbox)
2009 $4.9 b $2.1 b (0.8 b) ($2.8 b)
2008 $4.8 b $3.0 b (1.0 b) ($1.8 b)
2007 $4.4 b $3.5 b (1.3 b) ($0.9 b)
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Social Value of the Mail
Universal connection
The face of government
Lever of democracy
Enabler of social progress
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The U.S. Postal Service Today
Declining volumes and revenues
Growing deficit
2010 - $8.5 billion
2009 - $3.8 billion
2008 - $2.8 billion
2007 - $5.4 billion
$11.56 billion in debt to federal Treasury
$15 billion debt limit
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Structural Challenges
Future Retiree Health Benefits Fund $5.5 billion annual payment under PAEA for 10 years $21.9 billion paid already Commission study estimated $3.4 billion annual payment
as more appropriate
Pension Fund Overpayment identified by Commission and Postal Service
Office of Inspector General Commission estimates overpayment between $50 and $55
billion
Congressional action required for change
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Sustaining Universal Service
Cut costs
5.1 % in 2010
Reduction in work hours (6.2% in 2010)
Grow revenue
New products and service tests
Negotiated Service Agreements
Increase productivity
2.2% in 2010
Follows two years of productivity decline
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Request for Exigent Rate Increase
PAEA – exigent rate increase above price cap allowed under “extraordinary” or “exceptional” circumstances
Postal Service request for average rate increase of 5.6% for market dominant products
Negative consumer price index Public process for input Commission found recession not sufficiently
demonstrated as cause for increase Postal Service lawsuit
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Six vs. Five Days of Delivery
Postal Service request for Advisory Opinion Six days of delivery currently required by law Proposal to eliminate Saturday delivery, collections
and processing Public process for Commission to solicit input Postal Regulatory Commission
Cumulative $1.7 billion savings by third year $600 million loss in revenue from volume loss
Postal Service $3 billion savings annual from first year $200 million loss in revenue from volume loss
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Consolidation of Stations and Branches
Postal Service request for Advisory Opinion List of potential post offices for closing reduced
from
3,200 to 162 Definition of “post office” Commission recommended changes to process
to ensure customer notification and input Postal Service issued regulations on procedures
for closing post offices Final regulations still to be issued
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Looking Ahead
PRC Legislative Review
Process for public input launched in January 2011
Consensus on Retiree Health Benefits Fund and Pension
Fund
Due in December, but completion expected this summer
President’s proposed budget for FY2012
Pending legislation
Continued efforts by Postal Service to cut costs,
grow revenue and increase productivity
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www.prc.gov