This is the first in our “Five Elements of a Postal Solution” blog series.
The Postal Service is at a critical juncture – over $20 billion in losses in the past 4 years and now facing a possible financial insolvency. In addition to trying to solve the immediate financial problem, there is a need to step back and take a deeper look at some unanswered foundational questions – one such question concerns the fundamental role of the Postal Service in the future: Is the Postal Service a competitive business or an enabling infrastructure?
What’s the best structure for the Postal Service — a competitive business that maximizes profits or a national public infrastructure with a universal service obligation? The answer depends on the nation’s purpose for the Postal Service.
Is profit maximization the best way to ensure that the Postal Service carries out its 21st century mission most effectively? Or is it better that the Postal Service’s first responsibility be to maintain an infrastructure that facilitates the nation’s communications and commerce?
Competitive businesses can be extremely creative, capable of jettisoning failing product lines and transforming entire operations around new areas of opportunity. This innovation can bring great benefits, but a business is also focused on the bottom line and naturally puts shareholder value first. It may decide that, in a period of declining mail volume, it cannot afford to deliver as frequently as it does currently or that it should deliver only to lucrative locations and limit service to poor and remote areas. It may even move out of mail delivery into other business areas.
If the Postal Service is a public infrastructure, it may have fewer incentives to innovate than a profit-oriented business. Instead, it will concentrate on maintaining its network and providing access to all customers regardless of size or financial profitability. It will remedy gaps and fill holes in existing service systems to ensure the broadest access possible. Universal service obligations would be better protected, but ensuring an effective level of financing and innovation would be an increased concern.
Whether the Postal Service is a business, an infrastructure or has characteristics of both is a question at the heart of deciding how it should be financed and governed. It also sets the stage for determining the Postal Service’s responsibilities to its customers, relation to competitors, and obligations to society.
We’ve asked the following guest commentators to discuss this topic over the next three days:
We hope you can join the debate. Please check in throughout the week for their thoughts, and share your comments along the way. On Friday, March 9, OIG will summarize and conclude the discussion on this important topic.
Our Guest Bloggers
|Richard Kielbowicz||Steve Hutkins||James Campbell|
Richard Kielbowicz, who teaches in the Department of Communication at the University of Washington, has written a book and about two dozen research articles and technical reports about the history of postal policy.
Steve Hutkins teaches literature at the Gallatin School of New York University and runs the website savethepostoffice.com.
James Campbell is a lawyer and consultant on postal policy based in the Washington, D.C. area. He has advised numerous government agencies in the United States, the European Union, and other countries on postal policy and is the author of several books and many articles on express services and postal policy.
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Almost everyone who follows the fortunes of the U.S. Postal Service points to competition from the Internet and other electronic media as the major reason for plummeting revenues. In one sense, though, little is new. As the original information highway, the postal system has operated in a communication environment with competing and complementary private services since the mid-1800s, if not earlier.
The institutional history of the postal system suggests that it exists to contribute to universal communication service. It has pursued this goal by providing unique services, filling gaps in private offerings, facilitating private-sector communication, and occasionally even competing with private firms.
The USPS’s predecessor, the Post Office Department, added, dropped and adjusted its services in response to competing offerings by the private sector. Like today, earlier innovations in telecommunication prompted postal changes. The Post Office discontinued important news-gathering aids for the press in 1874 once telegraph-based wire services matured. When phone use became more efficient than letter mail for some timely communication, the Department cut the frequency of mail delivery for businesses and households.
At other times, the Post Office launched services to complement or selectively compete with private firms. Parcel post—highly controversial at its birth in 1913—delivered packages in rural areas underserved by private firms, and government competition provided price discipline for private carriers. For similar reasons, Congress authorized the Post Office to offer a non-mail service, postal savings (1911-1967), structured to augment private banking rather than fundamentally challenge it.
As these historical snapshots imply, the overarching goal of postal policy is to assure that vital services are provided to society one way or another, often with a mix of public and private enterprise. Accordingly, policymakers might consider the postal system’s universal service obligation together with similar policies for private communication networks, notably the Internet.
Regulatory mandates for the public mails and private-sector telecommunication express identical purposes. The 1970 Postal Reorganization Act directs the USPS to “provide prompt, reliable, and efficient services to patrons in all areas and . . . render postal services to all communities.” The Telecommunications Act of 1996 directs the FCC to devise regulations mindful that “[a]ccess to advanced telecommunications and information services should be provided in all regions of the Nation.”
Thus, maintaining rigid boundaries between public and private services, postal and electronic communication, ignores history and frustrates efforts to maximize the benefits of modern communication networks. Lawmakers could craft comprehensive policies that transcend media sectors. Such policymaking would entail reaching across jurisdictional boundaries in Congress and between administrative agencies. One modest possibility: subsidies for upgrading broadband in rural areas could be targeted to compensate for adjustments (probably cutbacks) in mail service.
More far-reaching lessons for the postal system’s future can be learned by looking across technological and regulatory domains. If, for instance, lawmakers allow private carriers to enter fields now dominated by the USPS, the firms could be required to contribute to universal postal service in much the same fashion as private telecommunication firms, subject to the FCC’s jurisdiction, contribute to universal telecommunication service.
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What kind of a Postal Service do you want?
Most Americans probably don’t care if the Postal Service is a “competitive business” or “enabling infrastructure.” Many don’t even know that the Postal Service is self-supporting and doesn’t use tax dollars.
Americans just want the Postal Service to function properly. They don’t want to see their post office close, and they want enough workers at the windows so the lines aren’t too long. They don’t want their mail to get lost in the ozone, and they want it delivered in a timely way, six days a week.
But what are Americans getting instead? The Postal Service’s new business plan will close half the country’s post offices, eliminate Saturday delivery, slow down First Class mail, and raise postage rates for average Americans while keeping them low for big bulk mailers.
That’s not a business plan. It’s a plan to dismantle the Postal Service.
The forces behind the plan are private corporations that stand to reap larger profits and free-market ideologues who oppose workers, unions, and government services. Their goal is to turn the Postal Service into a lean, mean, profit-making machine, unencumbered by what they view as a large, overpaid workforce, a network of money-losing post offices, and the drag of a universal service obligation. Once they’ve turned the Postal Service into their idea of a successful business, they can go looking for investors, using the huge surpluses in the postal retirement funds as an irresistible enticement. The dream of privatization will become a reality.
So instead of asking whether the Postal Service should be a competitive business or enabling infrastructure, perhaps we should pose the issue this way:
Do you want a Postal Service that’s shaped to serve its hundred biggest customers, or one that serves the country as a whole?
Do you want a Postal Service that’s a delivery system for ad mail, or do you want a postal system that offers innovative products and services designed to benefit the many rather than the few?
Do you want a Postal Service that guts the workforce while it outsources $12 billion to private businesses like FedEx, or do you want a postal system that values worker morale and focuses on job creation?
Do you want a Postal Service whose leaders disingenuously blame the Internet for the postal deficit, or do you want leaders who accept responsibility for their lack of vision and find creative ways to adapt to the digital era?
Do you want a Postal Service that turns a deaf ear to communities suffering the loss of a post office or processing plant, or do you want a Postal Service that views serving American citizens as its number-one priority?
Do you want a Postal Service committed to dismantling itself so that private corporations can buy it, or do you want a Postal Service that honors its past and shows a commitment to its future, a Postal Service that continues to help build the country and bind it together?
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Guest Blogger Jim Campbell – March 8, 2012
Should the Postal Service be a competitive business, an enabling infrastructure, or something in-between? Although this question has framed postal policy debates since the end of World War II, it no longer sheds much light on the path forward.
Instead, I believe the key question is, “Should Congress give the Postal Service the tools and the incentives to manage the Postal Service efficiently?” Other issues are important, but secondary. Unless the Postal Service is managed efficiently and effectively, there will be no quality universal service, no fix for financial hemorrhaging, and no protection of postal jobs. Without a healthy horse, it does not matter where the cart is placed or what it carries.
What happened? New technologies have rent the ground beneath the Postal Service. Not only is the volume of mail declining drastically, but the nature of the demand for mail is shifting. Today, 90 percent of mail is posted by businesses (including organizations); another 7 percent is posted to businesses who increasingly prefer electronic responses via the internet. The Postal Service has ever fewer customers that it can count on. Even mailers, like catalog companies, who have no alternative, adjust the frequency and size of mailings items based on a fine calculation of whether the service is worth the cost. The Postal Service of the future will have to be smart and nimble to satisfy the needs of mailers who will use — or refrain from using — the mail based on its value to them. This new dependence on winning and retaining customers represents the critical break with the Postal Service’s past.
So what is the way forward? More detailed statutory requirements? More Congressional oversight? More scrutiny by the Commission? More political pressure from mailers and unions? More outside studies? No. Such measures cannot substitute for capable management. The only potentially viable approach is to reform the Postal Service’s statutory charter so that, while still a government corporation, it has both the tools and the incentives to manage inputs (employees, machinery, facilities, contracts) and outputs (prices, classes of service, delivery frequency, delivery modes, retail services) efficiently and effectively so that they satisfy the fast changing needs of business mailers.
What about Aunt Minnie? Universal service and other public services? Unjust discrimination and anticompetitive practices? For the foreseeable future, the Commission must remain the guardian of such public interest concerns, guided by clear instructions from Congress. And as the Postal Service gains managerial flexibility, the Commission must take over governmental functions now exercised by the Service. In short, governmental and operational functions must be separated and clarified.
Last point. The days are gone when Congress can direct the Postal Service to offer politically popular services without regard to who pays the bill. It cannot be assumed that captured mailers will cover the costs of Congressional largesse. Congress may require a higher or lower level of public services, but what Congress requires, it must pay for.
The sky is not falling. The U.S. still has two or three times as much mail per capita as other industrialized countries. But the time for incremental political solutions has ended. Like other industrialized countries, the U.S. must face up to the fundamental nature of changes in postal markets and revise the legal charter for the Postal Service accordingly. A new charter must permit and motivate the Postal Service to manage its services for business mailers efficiently and effectively. At the same time, the new charter must protect universal service and other public services and control abuses of market power with appropriately focused regulatory controls and compensation for obligatory services.
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Recapping the week – March 9, 2012
To start our new blog series, we asked three experts to give us their opinions on a fundamental question of postal public policy: Should the Postal Service be a competitive business, an enabling infrastructure, or something in-between? Our guest bloggers were chosen for their articulate and insightful observations on the state of the Postal Service.
As expected, our guest bloggers disagreed on many aspects of the question before them. Still, they all agreed on one critical issue: America deserves a Postal Service that meets its needs. As Steve Hutkins so succinctly put it,”Americans just want their Postal Service to function properly.” There was also agreement that the Postal Service needs to be nimble and flexible in this ever-changing communications environment. Richard Kielbowicz pointed out that there is a long history of the Postal Service adapting to the changing needs of the American mailer. All agree that some amount of regulation is needed to ensure that the Postal Service continues to meet its universal service obligation to bind the nation together and, as James Campbell says “control abuses of market power”.
Our panelists disagree on where the public policy emphasis should lie. James Campbell believes that a priority must be placed on putting the Postal Service on a solid financial basis, “Without a healthy horse, it does not matter where the cart is placed or what it carries.” He believes that the Postal Service needs competent executive leadership with the flexibility to adapt inputs and outputs to the changing needs of mailers. Steve Hutkins believes that the Postal Service has lost touch with its broader social responsibilities of providing a sense of community, good middle class jobs, and reliable postal services to American households. He believes the current Postal Service business plan, instead of binding the nation together, will dismantle the postal system as we know it. Richard Kielbowicz sees the Postal Service as a part of a continuum of communications services, public and private, hard copy and electronic. He believes that postal regulation can be improved by borrowing concepts from telecommunications regulation.
We thank each of these bloggers for their insightful comments and will continue to keep these blogs open for additional input from the public.
Next week’s blog series will examine the question: What would an optimized Postal Service infrastructure look like in the 21st century and beyond?
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The Postal Service is one of America’s great institutions. It connects 150 million households and businesses and is the bedrock infrastructure of the American economy and society. Yet the Postal Service faces powerful and unpredictable forces. These forces – the economic downturn, the Digital Age, globalization, and statutory and regulatory demands – are fundamentally changing its outlook for the future. Actions are needed by postal management and Congress to assure that all Americans have universal access and the opportunity to take part in the emerging new world. But, what are those actions?
The OIG is pleased to announce that, beginning in March, we will host a series of five week-long blogs discussing the elements of a postal solution. The five elements will ask questions on the Postal Service’s mission, infrastructure, role in the Digital Age, and federal mandates. We will invite guest commentators with a wide range of views inside and outside the postal community to contribute to the series.
On the Monday of each week, the OIG will introduce the element of a postal solution and three guest commentators. On the Tuesday, Wednesday, and Thursday, one guest commentator will contribute an opening post. During the week’s exchange, the guest commentators will submit comments and replies. On the Friday, the OIG will summarize and conclude the discussion. Of course, we invite your comments on each topic at any time.
The Five Elements of a Postal Solution
Scheduled Guest Contributors
Please join us and invite others to participate. We look forward to hearing from you.
This blog is hosted by the OIG’s Risk Analysis Research Center.Read More
If you pay any attention at all to legislative efforts to address the Postal Service’s financial crisis, you’ll soon hear the phrase, “budget score.” Someone will say that a bill has a high score or a low score. But what is a budget score? What is the score for?
Budget scoring is part of a broader process to keep federal spending in check. The Congressional Budget Office (CBO) assigns scores to bills to show how they will affect the federal budget deficit. (Unlike most sports, a high budget score is usually considered bad.) Even though Congress placed the Postal Service off budget in 1989 and the Postal Service does not receive federal money for operations, the Postal Service often gets caught up in budget scoring concerns for two reasons: The first is off-budget spending is included in the overall measure of the budget called the unified budget. The second is that the Postal Service is required to pay in funds for pensions and retiree health benefits to certain on-budget accounts.Read More