Thursday, September 22, 2011

Courier, Express, and Postal Observer Has Moved

New Posts will be found in an easier to type url.  Nothing will change but WordPress is easier to edit and customize

Friday, September 16, 2011

The Proposed USPS Network: A Second Best Solution

Yesterday the Postal Service presented its proposal to restructure its processing and transportation network.   The proposal is a second best solution meaning that pricing,  financial, labor contract constraints prevented it from making a proposal that could provide better service or further reduce operating costs.

Pricing and Services

The change in First Class service standards mostly reflect the results of the constraints the Postal Service has on raising First Class rates to cover peak-load and transition costs.  Switching to a network of fewer than 200 plants would have some service impacts but would not require adding a day to the current service standards without changes to plant operating plans. An analysis of the proposed network could easily be completed comparing the cost difference of consolidating plants and consolidating plants and changing the operating plan to implement slower delivery standards.

A previous post illustrated that it is possible to retain current First Class service standards with higher single-piece rates. [Could First Class Mail Service Standard Be Retained?]  That post suggested that single-piece First Class Mail prices would have to go up by 6 to 10 cents over the next few years. However, pricing constraints prevented the Postal Service from evaluating whether higher First Class single-piece rates or slower service and lower costs is the more rational option for ensuring maximum contribution from this product as volume declines over the next decade.  In the review of the Postal Service's proposal, the Postal Regulatory Commission needs to evaluate both options as it is important to understand the impact that the pricing constraint has on potential contribution from single-piece First Class mail.   In addition, the Postal Regulatory Commission needs to clearly rethink its decision to maintain the link between single piece and bulk First Class mail rates. Both Congress and the Commission need to determine whether maintaining the Postal Service's First Class mail commitment should be retained at higher rates, a practice common in Europe, or whether First Class mail service should be allowed to decline.

Pricing Constraints and Rural Areas

The map of new facilities also raises questions about seasonal variations in First Class mail service quality.   Many of the areas that see significant reductions in mail processing facilities are in parts of the country with winter weather resulting in slower inter-city transportation  than in other seasons.  The seasonal difference in service quality needs study by the Postal Service and the Postal Regulatory Commission before it makes a final decision on an operating network.

Financial Constraints

The new Postal Service network represents a network that minimized capital spending.  It uses only existing facilities and existing mail processing equipment.  In addition by expanding processing windows, the Postal Service expands the use of its new letter sorting equipment and eliminates the need to replace its older automated sortation equipment.

The financial constraints have an impact on both the Postal Service's operating costs and the quality of service that the Postal Service can offer. 

The financial constraints affect the operating costs of a streamlined network in two ways.

  • First, the network must use existing facilities.  While some existing facilities are close enough to the cost-optimized locations for a 200 plant network that they would continue to be used, significant parts of the country would be better served by replacing an existing facility with one a significant distance from where existing facilities are located.  Also some plants in optimal locations may be too large or too small for its optimal service area and a less optimally located facility has the capacity in place.    Using facilities in locations that less than optimal eliminates the need for significant capital to build an optimal network but most likely will generate higher processing and transportation costs than would be found in an optimal network designed without the capital constraints.  Facility location has a big impact on decisions to transport mail by air or truck

    [Changes in the next few paragraphs reflect the first comment and presents a better understanding about the use of Postal Service sortation equpment. 9/16/2011 12:51 p.m.]
    Using existing facilities also limits the Postal Service to using the footprint of existing facilities.  This set the limit on the amount of sortation equipment that a facity can hold extending sortation times.   Longer sortation times may shift some mail from ground to air transportation to meet two and three day service commitments as wel as affecting mail processing costs.
  • Second, the network can use only a portion existing equipment.   The Postal Service operates multiple generations of automated sortation equipmen with varying levels of productivity.   The amount of equipment used reflects capital constraints that set limits on the amount of equipment that can fit into the proposed network   The focus on minimizing equipment use also focuses on improving capital utilization with an uncertain impact on labor utilization.   A network optimized to minimize total costs might be less constrained by the amount of equipment used and depending upon other constraints might require more equipment than is now in the Postal Service's inventory to minimize costs or sort mail over shorter periods of time in order to further reduce transportation costs.

    .  Most origination sortation is performed on older automation equipment while destination sortation and carrier route sequencing is performed on newer equipment.   The new operating plan minimizes the use of older equipment by using newer equipment over more hours in a day. 
    If the network was restricted by the amount of  newer equipment available, then some less than cost-optimal consolidations exist to accommodate the limits on available new equipment.  Capital to replace older equipment would have increased the flexibility of the network model builders to develop an operating-cost optimized network.
The financial constraints affect service quality in two ways as well. 
  • First, constraints on capital spending puts facilities in sub-optimal locations that result in increased transportation time between facilities and reduced time to sort mail to meet critical dispatch times in processing plants.   Combined, these factors will add a day or two to service in many locations that would not exist in a network not constrained by a lack of capital.
  • Second, restrictions on capital, combined with labor contract constraints, restrict the ability to reduce the time mail is not moving (i.e. transported, or being delivered) and total time from origin to destination.   Ideally, distribution networks, including networks of Deutsche Post, FedEx and United Parcel Service, minimize time spent at network nodes in order to maximize the distance between nodes and ensure overnight and two-day service commitments over geographic areas much broader than the Postal Service does now.   Their capital spending on plants and equipment accept the fact that its sortation facilities will be fully utilized only during limited peak periods and sit mostly idle for many more hours than the Postal Service plans to have its equipment remain idle.

    The difference between the network optimization approaches of Deutsche Post, FedEx and United Parcel Service and the Postal Service reflects the approach of companies with easy access to capital from retained earnings and private capital markets and an enterprise with no retained earnings or access to capital markets.  The difference in capital makes a significant contribution to the ability of these enterprises to offer better service than the Postal Service does now or will under the proposed operating plan.

Labor Constraints

Even with the new American Postal Workers Union contract, most employees working in processing plants have full time jobs.   The full-time job requirement constrains the optimization of network costs and origin-to-destination delivery times.   Also the full time requirement results in operating plans that use more labor relative to capital than would be optimal from both a cost and service basis. 

The labor contract constraint combined with the financial constraint on capital purchases results in the Postal Service having a higher proportion of its costs as labor than would be optimal.  In many ways, the proposed daily operating schedule that maximizes the use of sortation equipment over a 24 hour day illustrates a constraint driven by the combination of labor contract and financial constraints.

A higher proportion of part-time employees would allow the Postal Service to more easily substitute capital for labor.  Plants would likely be larger and further apart as part-time employees allow the Postal Service to sort mail over short processing windows.   The shorter processing windows would allow the Postal Service to more easily increase distance between facilities without affecting service quality.

Opportunities for Improved Profitability and Service Quality

The constraints illustrated show that a Postal Service operating without these constraints could offer better service at lower costs that generate profits.   The Postal Service's proposal to allow layoffs may have some impact on its labor contract constraints.  It would allow it to increase its proportion of part-time workers to contract limits more quickly but would not give the Postal Service as much flexibility as would be needed to operate an optimal network.

Neither the pricing or the capital constraints are adequately addressed in either the Postal Service's proposal or in any legislative proposal.  

Discussion of increases in Postal Service prices is limited to mail that travels at rates below costs or receives a legislatively mandated discount.   No one has raised removing the constraint on First Class single piece rates in order to minimize service disruptions as the Postal Service downsizes it network.

The capital constraint illustrates the significant investments in plant and equipment could reduce costs and increase profits.   The capital constraint illustrates than maintaining the current payment schedule for retirement obligations, or adding more debt to cover those obligations would not help the Postal Service develop a netowrk that optimally minimizes cost or sets a the capital/labor ratio.  The capital constraint hints that the Postal Service, cleared of the disputed portion of its retirement obligations, would be attractive to private investors who could use their capital to make network improvements that the Postal Service could not afford as long as it remains a government enterprise. 

Tuesday, September 13, 2011

A Financially Self Sufficient Postal Service

Three recent articles and blog posts illustrate why any postal reform measure has to go beyond fixing retiree obligations or restructuring operations to reduce costs.   If the White House Postal reform bill does not deal with these three issues than Congress will likely have to revisit the Postal Service Business model again in three or four years.

The Postal Service Cannot be Self Sufficient Unless it is Profitable.

Andrew Gelman, a professor of statistics at Columbia University and a prolific writer on statistics and its use in public policy and political campaigns illustrated that the financial problem facing the Postal Service is a legacy of the regulatory structure and financial objects of the Postal Service under the Postal Rate Commission. While not familiar with the current debate, his post in Statistical Modeling, Causal Inference, and Social Science, states what should be clear for anyone who has studied business.  An enterprise will find profitability difficult if not impossible if its customers have more market or political power than it has.
Basically, the post office is always broke because it’s legally required to be broke. It’s not like other utilities which are regulated in a gentle way to allow them to make profits. Looking at this from a political direction, things must somehow be set up so that the Postal Service’s customers have more clout than the Postal Service itself. I don’t really have a sense of why this would happen for mail more than for gas, electricity, water, etc.
Rates charged by the Postal Service need to reflect rates that a profitable well managed firm would charge.   The Postal Service cannot afford to offer lower rates to customers that have political clout.   This will likely result in higher rates for single piece First Class, Periodicals, and non-Profit Standard mail.

The Postal Service Cannot be Self Sufficient Unless it is Independent.

Felix Salmon, in a Reuter's op-ed focuses his attention on freeing Postal Service from Congress.  His solution is deregulating the Postal Service to free it from the shackles that Congress has created.
It seems to me that a significant part of the problem here lies with Congress and that a massive bout of deregulation could be just the solution that the Post Office is looking for. Congress is micromanaging the Post Office, telling it how much it can raise postage rates, telling it that it can’t offer financial services (despite its huge business in money orders), telling it that it can’t get into all manner of other businesses either and telling it that it has to deliver mail on Saturdays. Astonishingly, amid all these rules and regulations, the Post Office is losing billions of dollars.
I see a lot of scope for bipartisan agreement here — unshackle the Post Office so that it has a hope of serving the country indefinitely into the future. Republicans like deregulation, right?
His idea of deregulation goes further than any bill before Congress.  His focus is on commercial freedoms that includes a significantly reduced role for the Postal Regulatory Commission.

He also offers the suggestion that the Postal Service expand into financial services like Australia Post, La Poste (France) and Poste Italiane.   Even without expansion into financial services, expansion of the Postal Service's business interests could include the sale of non-postal products through both its corporate-staffed and franchised outlets as Australia Post does, or the provision of secure e-mail boxes as both Canada Post and Deutsche Post do.

Deregulating the Postal Service is a different direction than any bill in Congress is now taking.   Part of the reason is the political challenge that Mr. Salmon clearly understands. 
The problem, I think, is that for all that Republicans like deregulation, they really hate the idea of a state-owned organization competing with the private sector. Of course, the Post Office does that already — it competes with FedEx and UPS. But the USPS, as a government-subsidized organization with thousands of locations nationwide and a massive reserve of public trust, could be a formidable competitor in all manner of different markets and none of the incumbents in those markets would welcome the competition.

A Self Sufficient Postal Service Requires a Corporate Business Model and Possibly Privatization.

Privatization is a dirty word in postal policy.    However, privatization is the 800 pound gorilla in the room that cannot be ignored.
Two articles by economist Gary Becker and Judge Richard Posner in the Becker-Posner Blog make a strong case for not only political independence but also financial independence from the Federal Government.  
Gary Becker's commentary focuses on privatization and elimination of the monopoly.  
The solution: completely privatize the postal system, and allow other carriers to make daily mail deliveries using business and residential mailboxes. There are now enough actual and potential competitors, including the Internet, to make delivery of mail a highly competitive industry.
His thoughts on competition in the market and the mailbox monopoly represent a naive understanding of competition in the delivery of mail and parcels.  It also ignores security issues that are important for differentiating delivery by the Postal Service from delivery by a newspaper carrier or other hand delivery service.  However his discussion as to why privatization should be considered is worth listening to.

In particular are these points that he makes:
    • Defenders of the postal service correctly point out that part of its troubles is due to regulations that significantly raise its costs of operation.
    • Nevertheless, the efficiency of the postal service still lags far behind that of Fed Ex and UPS. Part of this lag is due to regulatory restrictions, but some is due to its own mismanagement. As in prior discussions on our blog I refer again to the small town on Cape Cod where I have a summer home. Since its population expands 8-10 times during the summer, first class and other mail rises enormously during the summer. Fed Ex adjusts to this peak load problem in many ways, including renting trucks from Enterprise rental, delivering packages during longer hours, and shifting some employees from other locations. The local post office, by contrast, hardly adjusts at all. It has exactly the same hours as during the low volume winter months, which includes closing from 12-1 on weekdays, and only being open until noon on Saturdays. Since there is no mail delivery in this small town, most residents have mailboxes at the post office. Even though these boxes are in a separate room, which could be kept open when there is no other mail service, this room is closed too at about the same times when other mail service at the post office is closed.
    • Government enterprises, even quasi-independent ones like the USPS, are notoriously inefficient because of political and regulatory inefficiencies.
The example that he gives regarding the Cape Cod Post Office is exactly what the new contract with the American Postal Workers Union should allow the Postal Service to deal with.   Hiring seasonal summer employees or even transferring employees from other offices for a few months to expand operating hours during the summer should be normal operating practice in seaside towns and other communities with a large number of snow-birds or sun-birds.

His last point is similar to the conclusions of Andrew Gelman and Felix Salmon.  As a government enterprise, the Postal Service cannot compete on either service quality or price effectively and efficiently due to political and regulatory inefficiencies imposed by the Postal Service and the Postal Regulatory Commission.

Judge Richard Posner concurs with Dr. Becker's conclusion that the Postal Service should be privatized.
Becker is certainly correct that the U.S. Postal Service should be privatized. Although government is probably more efficient at providing some services than private enterprise is, such as the military, national security intelligence, the police, the judiciary, the central bank, and prisons, because the output of these services is so difficult to measure, there is no reason to think it any more efficient at providing postal service than it would be at providing telephone service or airline service. Its origins as a public service reflect government concern with conspiracies (and its desire therefore to be able to read letters in transit), the natural-monopoly character of postal service (multiple postal services would require duplication of delivery trucks, post offices, and sorting stations), and the desire to provide universal service at flat rates in order to improve information flow throughout the entire society (i.e., to achieve network externalities).
However, he uses his more practical experience as a Court of Appeals Judge who has dealt with economic regulatory issues as well as his understanding of universal service obligations that exist in the provision of telephone, electricity, natural gas, and water services to develop a practical method of considering both freeing the Postal Service from the shackles of Congress and regulatory precedent and still ensure the provision of universal service.

Judge Posner notes that neither outright sale of the Postal Service with the current restrictions imposed by the Congress and the Postal Regulatory Commission nor the sale of the Postal Service without these restrictions are not acceptable solutions.
The federal government could no doubt sell the postal service, just as states are busy selling turnpikes and bridges. If it sold it subject to the buyer’s assuming the universal service obligation, it would have to convey along with the postal service's physical assets its monopoly protections against cream skimming—the monopoly of first- and third-class mail and exclusive access to post boxes. But then little would have been achieved by the sale—not nothing, because the buyer would be more strongly motivated than government to seek economies, but not a lot.
A sale without conditions would be different—the results would be radical: a large reduction in post offices and delivery trucks, and correspondingly large reductions in numbers of employees. But then what of the people living in remote areas? Email and fax are not a complete answer, because there is still a demand for letters, magazines, advertising brochures, and other items of snail mail. All these are things that can be delivered by Fed Ex or UPS, but the price for pick-up and delivery in remote areas might be quite high. There is no good economic reason to subsidize people who decide to live in remote areas, but there would be political pressures to do so.
As neither of these options seems realistic, Judge Posner proposes a third one.  This option reflects a fairly straightforward and traditional  economic approach to handling the transition to privatization while still ensuring rural service and is based on a traditional public utility model.
As a practical matter, reform of the postal service should I think proceed in three stages over a period of years. In the first stage, the postal service should be allowed to charge double postage for mail to or from designated remote areas and to terminate Saturday mail service to and from those areas. In the second, the postal service should be sold to private enterprise but with the legal restrictions (universal service, in its modified form with double postage and no Saturday delivery in remote areas, and exclusive access to post boxes) intact. And in the third the legal restrictions should be removed and all postal service be open to competition.
His proposal to double rural mail delivery prices  is absurd.  It indicates both a lack of understanding of both Postal Service costs and the competition that faces the Postal Service for hand-delivery of communications and parcels.  However it identifies a key point.  To survive, the Postal Service needs to have pricing freedom to price its commercial letter, flat and parcel services based on regional cost differences and regional competition differences. 

His second point on privatization reflects the current public utility model.  This model requires that regulated utilities are governed by laws that ensure that universal service is provided within their service areas.

His third point suggests that eliminating all competitive restrictions, including elimination of the mailbox monopoly, depends on more careful study of the delivery market than has been done to date.  

Three Keys to Successful Postal Reform

Postal reform has to both serve the citizens of the United States both in urban areas and the most rural parts of the Great Plains and Appalachia.  It must also ensure that business customers that now generate 90% of mail volume will continue to see the Postal Service as an attractive delivery service in 5 and ten years.  These four individuals who have limited understanding of the details of the Postal Service's problems identify three critical elements that have to be part of any postal reform that ensures both universal service and the Postal Service's survival as a self-sufficient entity. They are:

  1. Profit must be an explicit goal for organization and profit must reflect a sufficient operating margin to ensure cash is generated to make capital investments needed to improve service once the current financial difficulties pass.  There is no excuse for the Postal Service to be the only large national post suffering major losses in the Euro Zone, North America, and Oceana and Australia. 
  2. The Postal Service has to be granted significant relief from both Congressional and Postal Regulatory Commission oversight.   To the extent that either law or regulatory precedent freezes the status quo and prevents market-based pricing and market-based service quality that law and those regulations must be removed.  In particular both restrictions on distance based and regional pricing for commercial mailers need to be lifted in order to develop market-based and not cost-based prices.
  3. Transition of the Postal Service to an entity that operates under standard corporate business, employment, and contract law must occur within a reasonable period.  During this period, the privatization of the Postal Service as a public utility providing delivery services must be examined serious.

Postal Service Plans to Cut More Post Offices

In an interview with Kelly Holmes of My Print Resource, Deputy Postmaster Ron Stroman indicated the Postal Service's retail optimization initiative before the Postal Regulatory Commission was just the first phase of a muti-phase plan.   In the interview he indicated that the the next phase will look at another 4,000 Post Offices, stations and branches.

Given the current review process that includes both the current Postal Regulatory Commission review of the Postal Service's proposal as well as review of possible appeals, The next phase of the retail optimization will likely occur sometime in mid to late 2012.  

Upon completion of these two phases, as well as retail closure efforts already progressing, the Postal Service will be examining nearly 9,000 Post Offices or as much as one-quarter of all retail facilities.

Postal Service Cannot Avoid Layoffs

The Postal Service seeks to cuts its full time employees by 228,000 in the next two to three years.  A review of attrition rates over the past three years indicates that layoffs are unavoidable.  Even with early retirement incentives, layoffs will likely be between 120,000 and 130,000.  Without these incentives they would be even higher.
Attrition of Employees over 50
Attrition of Postal employees over 50 comes from retirement, death, and voluntary and involuntary separation from the Postal Service  Early retirement incentives were offered to different groups of employees in 2009 and 2011. So the attrition rates below include the impact of these incentives.
Regarless of the reason an employee over 50 left the Postal Service, about 27% of the Postal Service employees over 50 in 2008 had left by 2011.  Similar percentages for over 55, 60 and 65 are shown in the following table.

Comparison for Pay Period 18 for 2008 and 2011

Assuming that the Postal Service offers similar incentives to eligible employees, it should see a reduction in full time career employee among employees who are 50 or older today by around 94,000.  The Postal Service should see total full time employee count by 100,000 if those under 50 leave Postal Service employment at historical levels.   This quick analysis confirms Postal Service statements that it would have to lay off at least 120,000 employees in the next few years as it restructures its service.

The Importance of Early Retirement Incentives

By looking at one-year attrition rates, the importance of incentives becomes clear.  Attrition rates of those over 50 rose between 2009 and 2010 reflecting the impact of the early retirement incentives for 150,000 employees that went into effect in the fall of 2009.  As could be expected attrition rates fell in 2010-2011 as early retirement incentives pushed up retirement by a year for some employees. 

Attrition rates for employees over 65 appears to suggest that the incentive may have had a real impact for these workers as it induced more retirements than would otherwise occur without having much impact on retirement decisions of employees who continued to work after the incentive expired.

Attrition rates for those between 50 and 60 actually dropped after an early retirement incentive was offered which suggests that the incentive may have only had the effect of convincing employees who were likely to leave for other employment to leave a year earlier and may not have had much of an impact on the number of Postal employees in that cohort over a longer period.  

Comparison for Pay Period 18 for 2008 through 2011

If this estimate is correct, offering early retirement incentives could boost attrition rates for those over 50 by 3%.  If these incentives were offered to all Postal Service employees over 50, the Postal Service would see its employee count cut by retirements increase by around 11,000 more than it would otherwise.

Statements Implying that Cuts in Postal Service Employment Can Occur Without Pain Are Wrong.

Yesterday, the Hill reported that Representative Darrell Issa stated on the Morning Joe on MSNBC,
"You can get the 200,000 or so excess workers off the payroll without having to use punitive measures."
In the same interview, Mr. Issa talked about forced retirements and implied that a forced retirement was not a punitive retirement.  Even if you accepted that forced retirements did not violate age discrimination law and was not a punitive measure, forced retirement of Postal employees would still require a significant number of layoffs.

 If one assumed that every employee over 65 could be forced to retire, then forced retirement would cut Postal employment by 17,000 more than normal attrition.  If one assumed that every employee over 60 could be forced to retire than forced retirement would cut Postal employment by71,000 more than normal attrition.  So forced requirements would still require layoffs of between 50,000 and 100,000 employees.

Cutting Postal Service Employment by 220,000 Requires Major Service Change

Cutting Postal Service employment by 220,000 requires that it cut its processing capacity, the number of delivery days and retail network significantly.  These changes reduce service levels for both individual and commercial mailers retail customers is affected depends on the effectiveness of the Village Post Office concept and other efforts to switch retail services to franchisees and contractors.

The changes in service standards and delivery days represent a change in the Postal Service's universal service obligation.   The changes in service standards represent a change in what the Postal Service promises its customers and do not reflect a specific obligation set in law. The change in delivery days represents a specific legal obligation that can be considered to be part of the Postal Service's universal service obligation.

The Postal Service's service standard obligation is similar to common carrier obligations that FedEx and United Parcel Service have to meet published delivery standards.  Therefore this obligation can be changed at will by the carrier who is only obligated to provide the service that it promises.   So technically the change in the service standard could be argued is not a change in the Postal Service's universal service obligation as it is a change in its common carrier obligation.  Either way, the change in standard is a reduction in the Postal Service's commitment to its customers.

Congressman Issa in his interview stated that "Universal service is part of the [Postal Service's] mandate, and we think that's extremely important." As cutting employees would require changes in delivery days and service standard,   Congressman Issa's understanding of the Postal Service's Universal Service Obligation does not appear to be fixed with the obligations that now exist.


Cutting 228,000 Postal Service full time jobs will eliminate jobs of people who wish to continue working.   As forced retirements are most likely illegal, the Postal Service will have no choice but lay off 120,000 to 130,000 employees over the next few years.  

In order to cut this number of employees, the Postal Service needs to change its way of doing business.   Retail services will need to be increasingly performed by contractors and franchisees.  Days of delivery would need to be reduced.   Service standards would have to be relaxed.   The latter two changes represent a major change in the Postal Service's commitment to its customers and a change in the understanding of the Postal Service's universal service and common carrier obligations. 

Monday, September 12, 2011

100 Years of New Yorker Covers Illustrates How America's Connection with the Postal Service Has Changed

The New Yorker in its current issue has an article that shows covers with postal themes over the past 84 years.   The covers show the gradual shift of the perception of mail and the Postal Service.

Looking at the covers, the illustrators clearly show the changes and present a fairly scary picture of the future of the Postal Service.

  •  Covers from the 1920's through the 1970's show the Postal Service as the critical communications link between households and other households. 
  • A cover from 1973 illustrated mail as a critical part of political campaign communications with voters.   Today's campaign mailings are a significant step beyond volunteers hand-addressing and stamping envelopes as shown in that cover.
  • In 1976, a cover by Edward Sorel, illustrated how the combination of lower Postage rates and computerized lists created the catalog and direct mail industry that generated a deluge of catalog deliveries that became as much a sign of Autumn as falling leaves.
  • In 2004, a cover illustrated the growth of growth of computers and e-mail.   This cover coincided with the early years of the decline in First Class mail.

  • Finally, the current cover, suggests a rather ominous future for the Postal Service.   The stone cutters chisel  new words on the New York Post Office that continually modify the unofficial slogan of the Postal Service as service diminishes.  Even more ominous are the tourists on the double decker bus which suggests that we are not far of that the the Postal Service and printed communications are viewed by tourists looking at a historical monument and not a living, breathing enterprise.  

Thursday, September 8, 2011

Flooding in Pennsylvania will Delay Shipping

Flooding in eastern Pennsylvania will have a big impact on e-commerce shipping in much of the eastern United States.   The area facing record level flooding is home to fulfillment centers of nearly every large e-commerce company.  With roads closed, these centers will have difficulty both getting products delivered to the centers and shipments to customers out.   Among the e-retailers that will be affected is Amazon which has three fulfillment centers in the region.

Shipments from United Parcel Service, FedEx and the Postal Service that travel by ground through this region will need to find circuitous alternative routes as some major Interstates may remain closed for a few days.   The delay in opening highways in Pennsylvania is due to the task of inspecting 100's of bridges over flood swollen creeks and rivers.  UPS shipments may also face delays if the flood affects rail service that transports United Parcel Service trailers.

The Pennsylvania Department of Transportation has urged that travel in eastern Pennsylvania be curtailed.  Flooding in the Susquehanna, Schuylkill and Delaware watersheds are at or near record levels not seen since Hurricane Agnes in 1972.   Mandatory evacuation of areas flooded in 1972 is occurring in nearly all communities along the Susquehanna River.

The flooding has already closed both I-80 west of I-81 and I-81 north of Harrisburg as well as numerous U.S. highways and state roads.   Later today Harrisburg is expected to be isolated as I-81 and I-83 entrances to the city are closed.  

Wednesday, September 7, 2011

Senator Coburn on the Postal Service: Free Management

CNN interviews Senator Tom Coburn on the Postal Service.   In his answers to John King's questions his focus is on freeing management to run the Postal Service with the same flexibility any other business would have to meet market demand.  He does not indicate support for any approach to Postal reform but clearly states that operating subsidies are out of the question as far as he is concerned. 

Senator Coburn clearly shows his support for the current Postmaster General and appears to indicate that he would trust him to run the enterprise if he had the freedom to run it.  He also clearly states that there is no money to return the Postal Service to a government taxpayer supported model. 

Why he indicates his support for greater management flexibility in negotiating labor contracts, he does go further to suggest that existing contracts should be broken.

I apologize for the commercial at the beginning, but that was the only way to get the intro and the full interview.  It is worth a listen as it provides another clue as to what a bi-partisan postal reform bill might look like.

Comparing the Postal Service and Canada Post in Advertising

Today, I received the following e-mail   It shows how a company that sells envelopes, mailers, and folders is using the Postal Service's problems to sell its products.  What is striking in the copy is how it contrasts the management of the Postal Service with Canada Post.  This has got to hurt at L'Enfant Plaza.  It shouldn't as the difference between the two reflects not management ability but the business model that the enterprise most operate under.  The Postal Service still operates closer to a government department model than it often admits publicly.  Canada Post operates under a business model that is very close to the standard Canadian corporate model.

While Canada Post may not really be "a model of corporate efficiency," it has maintained its profitability as it handled the growth of electronic communications.   In doing so, Canada Post is the North American example of corporatized and privatized national posts that provide universal service profitably while facing increases physical and electronic delivery competition.

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Tuesday, September 6, 2011

Amazon Preparing For Postal Service Shutdown

On September 2, 2011, The Daily reported that Amazon is now preparing to test a locker based system for parcel delivery in the Seattle, Washington.   The lockers, to be placed in 7-11 gives Amazon an alternative means of delivering shipments that avoid home delivery and the issue of repeated delivery attempts.  If Amazon puts one in every 7-11, it will have 8,200 parcel pick-up locations nationwide.

Seattle is one of the markets that Amazon currently offers local express delivery. Items eligible for local express delivery can be ordered as late as 1 pm for delivery that day.   The parcel lockers allow Amazon to cut the delivery time on its shipments by reducing the number of locations where parcels need to be delivered. This should allow Amazon to expand its same day delivery service and possibly reduce shipment times for other shipments.
7-11 Seattle, WA
Geekwire published pictures from a 7-11 in the Capitol Hill section of Seattle.

The picture shows a set of lockers taking up a small portion of the 7-11's floor space.   7-11 most likely is leasing the space to Amazon.  The lease will likely cover all utilities and may include a requirements regarding how the area around the parcel locker is to be maintained  Putting the parcel locker in a 7-11 helps reduce security concerns that would exist if the lockers were put outside which is common in other applications.

The close-up photographs show lockers of different sizes that could fit everything from a book to a small appliance.
Amazon Parcel Locker
According to The Daily, a source with knowledge of the project, the idea is simple: these nondescript boxes will be in 7-Eleven stores across the country and act as a sort of P.O. box for Amazon purchases. Once a customer makes a buy on Amazon’s website he can select a 7-Eleven close to work, or on the way home and have the package dropped off there.
Once the package is actually delivered, the customer receives an email notification along with a bar code to his smartphone and heads to the 7-Eleven. There he’ll stand in front of the locker system, which looks like the offspring between an ATM machine and a safety deposit box. The machine will scan the bar code on his handset to receive a PIN number. He’ll punch that PIN number and retrieve the package.
DHL Packstation

This is similar to how DHL describes the use of its Packstation: 1) register for the service; 2) choose a packstation; and 3) pick-up a parcel when notified by e-mail or text message.  DHL now has 2,500 Packstations in urban, suburban and rural areas.   Packstations have been installed in many small rural towns in Germany, with some of these towns as small as 7.000.
The difference between the Packstation and Amazon's kiosk is that Packstations are designed for shipping parcels as well.  The credit card reader in the Packstation is missing as well as the slot for printed shipping labels.  Also as most Packstations are located outside, they also include a canopy to allow use in inclement weather.

The front-on picture of the Amazon kiosk provides a better image of what are likely a touch-screen interface and the lockers of various sizes designed for small parcels.
Amazon Parcel Locker
According to the Daily's source, Amazon is testing the system now and could begin roll-out by next summer.
The look of the Parcel locker clearly shows that it is a direct threat to the parcel business of the Postal Service.   The size of the lockers fit smaller parcels.  This  includes parcels that United Parcel Service and FedEx deliver using the Postal Service's Parcel Select or Standard Parcel products, as well as shipments that fit into any of the Postal Service's Priority Mail flat rate boxes.

While Amazon is installing these parcel kiosks, the lack of branding raises some interesting questions about Amazon's long-term strategy for this significant capital investment.
  • Are the kiosks only going to be available to only Amazon and Amazon marketplace sellers or will they be open to all shippers of parcels?
  • If they are open to all shippers, what brand will Amazon chose to give it universal appeal?
  • Could Amazon license the Postal Service brand to give it universal appeal? 
  • Who will have access to the lockers to put parcels in? 
    • Will Amazon have a single local carrier handle this or will the parcel lockers be open to UPS, FedEx, Postal Service and other parcel carriers? 
    • If they are open to all carriers, will Amazon charge a fee for their use, turning parcel pick-up into a profit center?
  • Will Amazon open these parcels in all states or will its fight over sales taxes determine where it puts them?
  • If the sales tax issue creates problem would Amazon operate these parcel lockers through a subsidiary with which it has an arms-length relationship?
Post Danmark (Denmark)
Outside of the United States, investments in parcel lockers have been made by the national post because the national post is the largest parcel carrier delivering parcels, and in particular small parcels to residences.   The United States Postal Service has known about the Packstation, which is made by Keba, AG  and parcel locker solutions from other vendors for at least the last two years that they have been mentioned on this blog.  [Should the Postal Service Close all Post Offices?]  However, it had neither the available capital nor the willingness to make hard choices about its retail strategy to choose what will likely be the small parcel delivery method of the future.

Investments of this type take a fairly long time to consider and an even longer time to implement.  Amazon's decision to make this investment clearly indicates that it needed a different way to deliver to smaller and in particular smaller high-value parcels than what FedEx, United Parcel Service or the Postal Service now offer or appear to be likely to offer in the future.

Most importantly, the Postal Service's financial problems, legal and regulatory constraints, and Congressional meddling made it impossible for the Postal Service to provide the service that Amazon receives from the national post in every country where the national post has been corporatized or privatized.  Furthermore, the seriousness of the Postal Service's financial condition has resulted in proposals that could add an additional day for drop-shipped parcels or eliminate delivery on Saturdays, options that make Amazon less competitive with stores like Walmart and Best-Buy that offer in-store pickup in an hour or less.

The risk that the Postal Service may not be able to meet Amazon's delivery needs in the future coupled with the high price of alternatives from FedEx and United Parcel Service that forced Amazon's hand.  Given that the investment in a network of parcel lockers will be in hundreds of millions if not billions of dollars range, the size of the risk that the Postal Service could close or offer lower quality parcel delivery services clearly was material to revenue growth and profit prospects of Amazon.   This made the investment both prudent for Amazon and a great concern for Postal Service, postal stakeholders, and lawmakers trying to rewrite the law to ensure a future for the Postal Service and the customers it serves.

Postal Service Seeks 7% Cut in Contract Spending

The following article from behind the Bloomberg paywall identifies how the Postal Service's plan to cut contract costs will affect a wide range of contractors.  The cuts in capital spending, which come off of severely constricted levels reflect a short-term focus of an enterprise focused only on survival.   Other cuts, including those to truck transportation contracts will likely open up transportation of mail to firms that provide dedicated fleets to multiple customers and reduce the number of Postal Service contracts that firms that now get all or most of their business from the Postal Service receive.

Northrop May Feel Squeeze of Postal Service $1 Billion Cost Cuts

2011-09-06 04:00:01.3 GMT

 By Angela Greiling Keane

     Sept. 6 (Bloomberg) -- The U.S. Postal Service, which spends about $15 billion a year on products and services, is pressing its more than 20,000 suppliers for $1 billion a year in cost cuts as it faces possible insolvency as soon as Sept. 30.

     Postmaster General Patrick Donahoe on Sept. 15 is scheduled to announce a plan to eliminate mail processing facilities and cut transportation and equipment costs. Donahoe is slated to testify today before the Senate Homeland Security and Governmental Affairs Committee, which is probing proposals to prevent a postal shutdown.

     “It’s becoming more competitive to do work for us and it’s going to have to be done at slimmer margins from a standpoint of our supplier base,” Chief Financial Officer Joseph Corbett said in an interview. Corbett said he wants to cut at least $1 billion a year from supplier spending.

     The cost-cutting has implications for many of the largest Postal Service contractors, said David Hendel, a Husch Blackwell LLP partner who specializes in postal contracting. He compiles a list of top service contractors from documents obtained through the Freedom of Information Act.

     Companies at risk of losing postal revenue range from Northrop Grumman Corp. and Siemens AG, which supply sorting equipment including barcode readers; to FedEx Corp., the largest contractor; to closely held trucking company Pat Salmon & Sons, which doesn’t list any business line on its website other than hauling mail.

 ‘Stark Reality’

      The Postal Service’s mail volume has declined 20 percent since peaking at 213 billion pieces in 2006. It has said it may lose $9 billion in the fiscal year ending Sept. 30 and run out of money by that date to make all payments required by law.

     The service has asked Congress to let it delay a $5.5 billion payment for future retiree health benefits and shift what it says are over payments to federal pension funds to cover that payment. It wants to end Saturday mail delivery, cut 220,000 jobs by 2015 and close 3,700 post offices.

     Corbett is continuing an initiative he started after becoming financial chief in 2009 by sending a letter to suppliers explaining the “stark reality” of postal finances and asking for “significant price reductions on both existing and future work.”

     The service is bidding contracts for services from transportation to custodial work, renegotiating existing contracts “wherever it makes good business sense,” simplifying its requirements to suppliers and lowering use of consumable products, Douglas Glair, the service’s manager of supply chain management strategies, said in an e-mail.

FedEx Tops List

      FedEx, which operates the world’s largest cargo airline, is the largest Postal Service supplier, receiving $1.4 billion in the 2010 fiscal year, according to Hendel’s list. Hendel has compiled the list annually since 2001.

     FedEx’s postal revenue is more than twice the $495 million of No. 2 Northrop Grumman Corp., according to the list. Most of FedEx’s postal revenue comes from a seven-year, $1 billion-a- year contract to fly about 4 billion pounds of mail per day until 2013, an agreement the service negotiated “from a position of extreme weakness,” Hendel said.

     FedEx’s mail volume will decrease after the contract runs out as the service moves more mail on the ground, Corbett said.  The service will continue to use FedEx to transport priority mail and some first-class mail, he said.

     FedEx receives about 3.5 percent of its revenue from the Postal Service, based on Hendel’s listed amount as a percentage of the company’s last-reported annual revenue. The company, based in Memphis, Tennessee, declined to comment on whether it’s under Postal Service pressure to cut costs.

     “FedEx values its alliance relationship with USPS, both as a supplier and a customer,” Maury Donahue, a FedEx spokeswoman, said in an e-mail.

 One-Way Pay

     From 2009 to 2010, the service cut transportation expenses $148 million, or 2.5 percent, and non-transportation supplier expenses by $60 million to $9.2 billion, or 12 percent of its operating expenses, according to a regulatory filing.

     In a 2009 letter from transportation contract managers to trucking suppliers, the service proposed rate reductions, a request it called “extreme” while also saying contracts without rate reductions may not be renewed.

     The Postal Service is asking trucking suppliers that have to make round-trips to haul mail to be paid for only the half the journey when the truck is full of mail, rather than for round-trip mileage, Hendel said. “If the contractor will not agree to this, the Postal Service is threatening to terminate their contract,” he said.

 Equipment Freeze

      In a plan the service circulated to lawmakers in August, it said it wants to cut its more than 500 mail processing facilities down to fewer than 200. It didn’t say how much money it expects to save.

     Among other things, the service “will not be buying mail processing equipment, period,” Sue Brennan, a Postal Service spokeswoman, said in an e-mail.

     Munich-based Siemens AG, the service’s fifth largest supplier in its 2010 fiscal year with $135 million in revenue according to Hendel’s data, is taking notice.

     “We’re affected by their budget and their spending,” Daryl Dulaney, chief executive officer of the Siemens Industry division, said in an interview at Bloomberg’s Washington office. “It causes us to react and adjust.”

     Randy Belote, a spokesman for Northrop Grumman, based in Falls Church, Virginia, declined to comment.

Cheaper Ads

      The Postal Service’s advertising spending increased 40 percent as the service promoted its profitable package-delivery businesses. Most of the increase went to advertise flat-rate boxes through a campaign created by Campbell-Ewald, making it the eighth largest USPS supplier according to Henkel.

     Jim Palmer, chief client officer for the advertising agency based in Warren, Michigan, said they understand the Postal Service’s requests for cost-cutting. He declined to discuss what cuts the service has requested.

     “When the Postal Service comes to us, we do our absolute best to react to their situation,” he said in an interview.  “As their business has ebbed and flowed, and it’s no secret that there are some challenging times, we react in kind.”

     While some of the Postal Service’s suppliers have diversified businesses, others are more dependent on the mail revenue for their livelihoods, Hendel said.

     One is Pat Salmon & Sons, the fourth-largest contractor with $143 million in revenue. The company was founded in 1946 to move mail in Arkansas and has more than 100 postal contracts and moves mail in 26 states, according to its website.

     “We wouldn’t be interested in commenting at all,” said a man at the company’s headquarters in North Little Rock, Arkansas, who didn’t identify himself before he hung up.

     The Postal Service may have a hard time squeezing more savings out of suppliers, Hendel said.

     “About the only thing left is for USPS to reduce the services and goods that USPS buys, or relax contract requirements and specifications so that the cost of performance is less,” he said.

For Related News and Information:

Postal stories: NI POS

For top government stories: GTOP

 --Editors: Bernard Kohn, Timothy Franklin

 To contact the reporter on this story:

Angela Greiling Keane in Washington at +1-202-654-1287 or

 To contact the editor responsible for this story:

Bernard Kohn at +1-202-654-7361 or

Newspaper Calls for Shutting Down the Postal Service

In an editorial, the Delaware County Daily Times called for the shut down of the Postal Service  The paper called the Postal Service "a prime example of a service the federal government in the very near future will longer need to provide. It should be planning for that day right now instead of looking for ways to prop up a huge and expensive bureaucracy that has served the country well but has been made expendable by progress."

The editorial illustrates why postal stakeholders have failed to explain why mail matters to the economy today and will 10 years from now.   This editorial, from a newspaper whose editorial page leans somewhat left of center, that public support for having a government entity deliver items consisting of some correspondence and transactions but mostly advertising and parcels may not be all that strong.

Monday, September 5, 2011

Senate Hearing Witnesses Suggests Retiree Benefit Fix Still on Table

The list of witnesses included testifying to the Senate Homeland Security and Governmental Affairs Committee on Tuesday includes a witness that is not one of the "usual suspects."  By including Thomas D. Levy, Senior Vice President and Chief Actuary, the Segal Company, the Committee signals that it believes that adjusting the retiree obligations will likely be part of legislation that the Committee proposes.

The Segal Company conducted the actuarial analysis of the Postal Service's pensions.  Mr. Levy's testimony will likely cover the conclusions of that report.  Given the primary focus of Segal Company, he may also be asked questions about actuarial issues relating to the Postal Service's retiree healthcare obligations.

Mr. Levy's appearance is designed to provide a legislative record to support the Senate Committee's legislative proposal.  As he will likely testify that changes to retiree obligations is logical and in concordance with actuarial standards, this would suggest that the Committee will likely include legislative changes that follow actuarial standards.

The Senate Committee's choice of witnesses shows a contrast with the House Oversight and Government Reform Committee.  The House Committee, in the last Congress had Jonathan Foley, Director of Planning and Policy Analysis, U.S. Office of Personnel Management testify in which he testified that OPM did not have the authority to change formulas used to calculate the Postal Service's obligations for retiree benefits.   The report of the Inspector General of the Office of Personnel Management which came out in February 2011,was entered into the record at a hearing held in the current Congress.  This report of the Inspector General of the Office of Personnel Management reinforces the impression that the primary concern of the House Committee is supporting the interests of the Office of Personnel Management over that of the Postal Service.  With this position set, the Issa-Ross bill therefore uses increased Postal Service debt to ensure that the Office of Personnel Management's financial interests are not adjusted.  [Italizized edits made 9/6/11 10:52 to clarify when OPM testified]

By the end of the hearing tomorrow, postal stakeholders should be clear that there will be two drastically different bills for solving the Postal Service's financial problems.  With only a limited number of legislative days between now and October 1, 2011, a path to agreement appears difficult at best.

Ensuring Access to Retail Services: Defining Effecting Access

The issue of retail access to services provided by the Postal Service is a two-part policy question.  The two questions are:
  • How much access to retail services should be included in the Postal Service's universal service obligation?  Answered below
  • What restrictions should the Postal Service face in meeting its obligation to provide retail access? (Answered in a subsequent Post)
Right now the debate over saving Post Offices involves communities concerned about the future of 4351 Post Offices.  For 728 of them, the Postal Service is currently progressing through the current process of meetings with communities which is increasingly followed by an appeal to the Postal Regulatory Commission.   The Postal Service proposes evaluating 3,653 post offices, stations and branches though a uniform approach in its Retail Access Optimization proceeding at the Postal Regulatory Commission.  

The emotional attachment to post offices is understandable  as the establishment of a post office signaled the establishment of a town.  The history of Ashflat, Arkansas describes how a town's identify is linked to its post office.  With increases in population and trade, Ash Flat became a town when a new post office was built in 1856.
Today Ashflat, a town of 1,082 is the county seat of Sharp County. The town is also a regional commercial center with a Walmart.

The establishment of a Post Office was important in the 19th century as mail delivery in rural areas was to a Post Office and not a home or farm.  Looking at maps of Northeastern Arkansas it is hard to imagine how far someone would have had to travel on horseback or carriage to get to the nearest town that already had a Post Office and mail delivery.

Times have changed.  Mail is delivered to homes and businesses and Post Offices for most people is not where mail must be received.   Post Offices serve one or two roles today.   First, they provide retail services.  Second, they may act as a carrier depot, or a central location where carriers get mail that must be delivered and complete any sortation needed to more efficiently deliver the mail.

The question about what level of access to retail services, would meet the Postal Service's Universal Service obligation leads to the two questions at the top of the post that I will present the available options in turn.

How much access to retail services should be included in the Postal Service's universal service obligation?

Postal policy relating to Post Offices can be found in two sections of U.S. Code

Title 29 39 Sec. 101 Postal Policy:
(a)....It shall provide prompt, reliable, and efficient services to patrons in all areas and shall render postal services to all communities.
(b) The Postal Service shall provide a maximum degree of effective and regular postal services to rural areas, communities, and small towns where post offices are not self-sustaining. No small post office shall be closed solely for operating at a deficit, it being the specific intent of the Congress that effective postal services be insured to residents of both urban and rural communities.
 Title 29 403. General duties
(b) It shall be the responsibility of the Postal Service—
(3 ) to establish and maintain postal facilities of such character and in such locations, that postal patrons throughout the Nation will, consistent with reasonable economies of postal operations, have ready access to essential postal services.
What is clear is Congress's intent, "effective postal services be insured to residents of both urban and rural communities."   What is less clear how the Postal Service and the Postal Regulatory Commission should balance the need for effective service and the restriction on closing post offices.  

Defining what is effective retail access requires understanding what transactions require an in-person retail transaction and which ones can be performed as or more effectively without a retail outlet.  The following table lists most Postal Service retail transactions.  The three types of outlets that involve local physical access identify options for providing Postal retail services at that type of outlet.  A 4 indicates that the service is offered at all locations.  The d indicates that the service is offered at Post Offices and may or may not be offered at contract stations.   The D indicates that the service is offered at Office Depot and not at banks or supermarkets.  Postal Services offered at Office Depot may be offered at pack and ship stores and other locations that offer Postal Service parcel services and stamp book sales but do not sell single stamps and Postal Service money orders or rent Postal Service mail boxes. 

Defining what is effective access to postal services that require an in-person retail transaction is both a business and political decision.

Effective access from a business perspective describes access that is sufficiently easy for customers to use.  An optimally effective level of Postal retail access would reflect the level of access that adding an additional access point would add more costs than the incremental sales of Postal products or services.  The addition of the phrase "consistent with reasonable economies of postal operations," reinforces the comparison of marginal revenue to marginal costs in assessing effective access.

The political aspect of the definition of access focuses on the access issue independent of the business case for having a retail postal facility in a particular location.   The law states that the Postal Service should provide a "maximum degree of effective and regular postal services to rural areas, communities, and small towns where post offices are not self-sustaining."  Because the maximum degree of effective postal services is not defined, the operating assumption for the Postal Service, the Postal Regulatory Commission, and Congress has been that the Postal Service provides a maximum degree of service as long as it does not close an existing Post Office for financial reasons.  The political aspect of retail access now also assumes that effective retail access requires access in an employee-manned Post Office.

Solutions from Other National Posts

 The charters of the Australia Post, Canada Post, and La Poste (France) provide three similar approaches of defining effective access that do a better job of ensuring effective service that a national operator can provide without subsidies than what is in current U.S. law.  What is common among all of the solutions below is a definite rule for defining access for both rural and urban areas.  A similar approach to defining effective access can be found in Germany, Denmark, Ireland, the Netherlands and Sweden.  All of these countries, except France allow the national postal operator to choose fairly freely among corporate, franchise, and self -service options in providing access.

Australia Post

Australia Post's Community Service Obligation describes its access obligation as follows:
Access - Maintain mail lodgement [access] points at 4,000 retail outlets (2,500 in rural and remote areas).
Retail outlets to be located so that:
  • in metropolitan areas at least 90 per cent of residences are within 2.5 km [1.55 miles] of an outlet
  • in non-metropolitan areas at least 85 per cent of residences are within 7.5 [4.65 miles] km of an outlet.
Canada Post

The Canada Post Charter has three provisions that describe access.
  • Canada Post will provide an extensive network for accessing postal services that includes retail postal outlets, stamp shops and street letterboxes, as well as access to information and customer service through the Canada Post's website and call centres.
  • Canada Post will provide retail postal outlets, including both corporate post offices and private dealer operated outlets which are conveniently located and operated, so that:
    • 98 percent of consumers will have a postal outlet within 15 km[9.3 miles];
    • 88 percent of consumers will have a postal outlet within 5 km[3.1 miles]; and
    • 78 percent of consumers will have a postal outlet within 2.5 km [1.55 miles].
  • The moratorium on the closure of rural post offices is maintained. Situations affecting Canada Post personnel (e.g., retirement, illness, death, etc.) or Canada Post infrastructure (e.g., fire or termination of lease, etc.) may, nevertheless, affect the ongoing operation of a post office.             
La Poste

La Poste is required to provide retail access to ensure that:
  • 99% of the national population and at least 95% of the population within each department [state] is less than 10 km [6.2 miles] from a post office branch
  • In addition, every community over 10,000 should have one post office branch per 20,000 inhabitants.


Providing effective access needs a better definition than what is current law.   Countries like Australia and Canada with rural areas as rural any part of the United States provide retail services in their most remote areas with rules that are logical.  Canada Post face greater limits as it serves numerous arctic and sub-arctic communities and significant political pressure to plant the flag of the government of Canada in all provinces given that country's challenge of dealing with a long-standing separatist movement when the charter was written. 

No National Postal operator has an obligation relating to access that goes beyond defining how far an outlet may be from any citizen.  They have not attempted to put into the service charter or universal service obligation any measure of effectiveness that relates to how easy it is to use the service at a particular access point. (This could be important as an access point may be theoretically accessible based on the distance to citizens but effectively not be accessible if it is not open more than a few hours a day.)

Current legislative proposals before Congress either provide no effective guidance for defining effective access or set that guidance at a level that is significantly higher than countries with both large urban centers and vast territories of sparsely populated territory have chosen.  In addition, the financial problems of the Postal Service cannot wait a year or more to implement a more rational definition of access.  Congress would be wise to choose an effective access definition closer to what Canada or Australia has than what is now on the table.