Congressman Ross Clarifies His Position on Retiree Obligations

In response to a comment on his Facebook Page, Congressman Ross clarified his position on prefunding and overpayments of retiree liability.

Doc Piper's Comment

Rep. Ross, if you truely denied the overpayment of USPS to OPM, you are intentionally lying. OPM collects it into their budget with no reguard to the overpayment. If you are an honest Representative you will admit the money paid and demand it into a trust fund, so that no taxpayer will have to supplement the USPS. But you canot deny the payment made and then refuse its return. That's a plain lie.

Congressman Ross's Response

Post #1

FERS, perhaps, but not CSRS. The prefunding requirements is in line with the number of retirees and the per person benefit cost per retiree. $11,000 per person at 500,000 retirees. The USPS IG says there is an overpayment, but the OPM denies the overpayment. I do not believe there is an overpayment into CSRS, especially since retiree numbers will continue to rise as will the obligations. As OPM correctly points out, it is easy for USPS to not want to prefund or claim an overpayment - if they are wrong, or do no prefund, and can't meet retiree benefit obligations, it isn't USPS that will go under, it is a liability of the taxpayer.

Post #2

In the end, if you eliminate taxpayer liability (which means from this day forward, no retiree cost or benefit will be backed by the taxpayer - since all current retirees are under the taxpayer umbrella), and the USPS stops prefunding, then. everyone who works for USPS today better hope their unions were telling them the truth about the financial solvency of the USPS. Because the only way you will ever eliminate prefunding, within the current failed USPS business model, is if unions and management agree to end the federal backstop.

Congressman Ross's first comment, "FERS, perhaps, but not CSRS" suggests that he would concede that there is a FERS overfunding.   This is a different position than what is contained in the Issa/Ross postal reform bill.   The difference needs to be clarified by Congressman Ross and Congressman Issa.

Congressman Ross's support of the OPM-IG's conclusions in the first Post over the conclusion of the USPS-IG and the Postal Regulatory Commission confirms that he supports measuring the liability in a a way that minimizes any overpayment and maximizes what the Postal Service must pay to cover its retiree liabilities.  As noted in a previous post this is a position supporting the interests of the creditor over all other stakeholders.  (See A Creditor's Plan for the Postal Service.)

The final sentence in Post #2, Because the only way you will ever eliminate prefunding, within the current failed USPS business model, is if unions and management agree to end the federal backstop is accurate.  Given the budget challenges, the only way the Postal Service would be able to fund its retiree health benefits at the same level as United Parcel Service and other firms that offer the benefit would be if they were no longer guaranteed by the Federal Government.  

 However, it should be noted that future Federal budgets and legislated levels of compensation could eliminate retiree health care benefits.   So it is not clear how secure retiree health benefits will be for postal or government employees who are starting a government career now right after high school or college.   (The Issa/Ross bill illustrates that Congress has the power to adjust wages and benefits of postal and federal employees so that if benefits offered federal employees now are eliminated in the future, they can be eliminated for postal employees either through law or arbitration decisions.

Congressman Ross's Response to this Post

My original tweet (the link takes you right back to this Post):

CEP_ObserverAlan Robinson

Did @RepDennisRoss change his position on #usps FERS overpayment? What else did he say about retiree payments? http://t.co/BWtXWlb

Congressman Ross's response.

RepDennisRossDennis Ross

@CEP_Observer didn't change positions at all. even OPM says FERS is a diff story than CSRS. still, FERS "overpmt" is not in hand.

My respone to his.
CEP_ObserverAlan Robinson

@RepDennisRoss Then why is a "FERS fix" not in your bill?

The Postal Service Should Default on its Retiree Healthcare Obligation

The Postal Service is broke.   It has expenses far above revenue and has contract agreements and accounts payables far above its ability to pay.    Besides payroll its largest obligations are to the Federal government and transportation companies like FedEx.  It cannot afford to offer the services it is required to provide.  A recent report from the USPS Office of Inspector General states that the Postal Service is even less likely to be financially viable under the current operating model if volumes continue to decline.

In this financial state, the Postal Service must default in its obligations to the Federal Government and force Congress and the administration to choose between restructuring and liquidation.  Clearly, liquidation is not an option as the economic impact of ending mail service would be catastrophic and shifting mail delivery to the private sector would require a significant gap in time when no service would exist.

Default would force OMB and Congress to act and should force changes both at the Board of Governors (BOG) and senior management.  As such, the BOG and Postal management need to take an action that could cost them their jobs.

What would a restructuring look like?

• Introduction of a financial target requiring revenue greater than what is needed to ensure accounting break even as that target does not ensure financial self sufficiency.
  
• Immediate implementation of the Office of Inspector General's plan to cut area and district level employees.   Even if the plan is not perfect, there is not the money available to wait for a better plan.
  
• A new operating plan for handling bulk flats and sorting them to carrier route sequence order using a network of between 50 and 100 facilities.
  
• Streamlined review of network consolidation proposals under consideration.   The goal would be to implement consolidation proposals already announced in the second and third quarters of FY '11.  This cuts the normal time needed to implement consolidation efforts by six months or more.
  
• A second set of consolidations would be introduced for FY '12 by July of 2011.
  
• Increases in rates.   Rates would rise immediately on single piece mail to generate revenue to cover severance and other costs of reducing the workforce for this rapidly declining product and parcel services to both cover costs and/or match rate increases of UPS and FedEx.  Increases in rates for advertising focused mail would likely follow both the timing and size in increases in rates that other traditional advertising media charge as advertising rebounds with the pick-up in consumer spending that appears to be accelerating.
  
• Introduction of geographically based prices for drop shipped mail and parcels.   This will raise rates in low density areas and lower them in high density areas.  On average this will not affect rates and could expand mail use in areas that have lower delivery costs.
  
• All labor contracts would expire with the restructuring.    New contracts would show limited deference to work rules, compensation and other provisions in existing contracts.
  
• Consolidate retail services into fewer locations open for longer hours and self service locations by the end of FY 2012.

What would the Federal Government have to cover?

•  Most if not all of the retiree heath care costs.   Congress would have to accept modifications in the CSRS calculation and use the overpayment to pay off most of the retiree health care
  obligation and accept modifications in retiree health care calculations in order to reduce the remaining liability.
  
• The costs of early retirement incentives and severance payments to reduce the work force.
  
• All capital costs to rapidly expand self-service to retail using proven technology.  
  
• All capital and other transition costs associated with consolidation and closing facilities.

This is not a pretty picture.  Statements from members of Congress do not suggest that they are yet ready to give current management another year of relief from retiree health care payments, and forcing receivership of the Postal Service goes far beyond that step.  However, Postal management should eschew their self interest and default on the retiree health care payments to force Congress's hand. Then and only then, will Congress look for solutions that go beyond tweaking the status quo.


9/30/2010 - Two changes were made in this post from the original version to correct errors.   Accounts payable replaced accounts receivable in the first paragraph.  Both are bad but as the USPS collects revenue up front it has minimal accounts receivable.  It does have substantial accounts payable and other liabilities that need to be paid for which it does not have needed revenue.  The paragraph on geographically oriented rates would was changed to correct an error regarding rates to high density areas.   Rates there would go down not up.  Geographically oriented rates are used outside of the US by postal operators for providing only last mile services as a means to prevent cream skimming either in terms of creating a competing delivery service or exploiting anomalies in the rate structure as compared to the cost structure in ways that would cause the Post to handle substantial volumes below costs

Fixing the Retirement Liability Calculation

Congress has begun to move on the Postal Service's retiree obligation issues.   The House Committee on Oversight and Oversight and Government Reform will mark-up H.R. 5746, The United States Postal Service’s CSRS Obligation Modification Act of 2010 on Wednesday, July 21 at 1:30 p.m.

Given the limited number of legislative days involved, any action on retiree issues has to move at a pace far faster than what is common in Congress.  While passage in the house in an expedited fashion would appear possible, passage in the Senate in a timely fashion is less certain.   Senator Carper has indicated that he is preparing his own comprehensive reform bill which may go beyond the retiree benefit fix and would have to be reconciled with the House language.  In addition, objection by any one Senator can hold up passage.

To understand how fast this is moving, at least in terms of legislative speed  here are some relevant dates.

• January 20th, 2010 -- The USPS-IG report, The Postal Service’s Share of CSRS Pension Responsibility released.
• March 2, 2010 -- Request from the Postal Service made to Postal Regulatory Commission for actuarial report.
• June 30, 2010 -- Civil Service Retirement System Cost and Benefit Allocation Principles (Segal Report) is released by Postal Regulatory Commission
• July 16, 2010 -- Congressman Stephen Lynch on Friday introduced H.R. 5746, The United States Postal Service’s CSRS Obligation Modification Act of 2010.  The legislation follows the USPS-IG methodology.
• July 21, 2010 --  House Committee on Oversight and Oversight and Government Reform marks up H.R. 5746, The United States Postal Service’s CSRS Obligation Modification Act of 2010.  After mark-up, the agreed upon language is sent to the Committee on Rules to set the parameters of debate on the House floor.

Postal Policy: Now its Congress's Turn

Now that the Government Accountability Office report is out it is time for Congress to get down to the serious business of re-evaluating the current business model and regulatory framework.  Congress is starting this process with hearings in the House and Senate, this week and next. In preparing for these hearing, members on the relevant committees have a significant challenge preparing for the postal and other governmental witnesses.
Both hearings will focus on reports by the Postal Service, Government Accountability Office and the USPS Office of Inspector General.

• Federal Budget Treatment of the Postal Service by the USPS OIG
• The Postal Service’s Share of CSRS Pension Responsibility by the USPS OIG
• Final Management Advisory Report – Estimates of Postal Service Liability for Retiree Health Care Benefits by the USPS OIG
• Ensuring a Viable Postal Service for the Postal Service: An Action Plan for the Future by the U.S. Postal Service
• U.S. Postal Service: Strategies and Options to Facilitate Progress toward Financial Viability by the Government Accountability Office
• The U.S. Postal Service’s Financial Condition: Overview and Issues for Congress by the Congressional Research Service

In addition to representatives of the entities that produced these reports, members of Congress will hear from the Office of Personnel Management and the Postal Regulatory Commission who have an interest in many of the suggested changes in law that the reports discuss.

The three reports by the USPS Office of Inspector General cover technical actuarial and accounting issues over which there is a dispute between the Postal Service and the Office of Personnel Management as well as a critique of Congressional budgetary actions relating to the Postal Service. The CRS, GAO and the Postal Service have recognized the importance of the resolving the CSRS accounting and retiree health care funding issues in their reports. The critique of Congressional budgetary actions provides some context as to how Congress and the Office of Management and Budget has historically viewed their responsibility for the Postal Service and how the Postal Service’s cycles of strong and weak financial performance can be used as part of the solution of meeting budget goals.

The Postal Service’s report provides an action plan for operating its business within the current business enterprise business model. The modifications requested are changes from current financial, operating, employment, and marketing efforts that Postal Service management and the Board of Governors are sufficient to return the Postal Service to financial stability.The Postal Service’s report does not address the overarching mail industry policy, corporate governance and regulatory framework issues in any detail. Nor does the Postal Service report provide a vision for the Postal Service’s role in the US economy in 2020 that is much different than what now exists with the exception that its impact will be much smaller.

The GAO’s report, like the one produced by the Postal Service, provides strategies necessary to improve Postal Service operating, and to a lesser extent revenue management, and highlights Congressional action necessary to allow those improvements to occur. The GAO report goes beyond previous reports in its examination of the Postal Service’s cost structure and the legal impediments that prevent it from adjusting its costs to match current and projected revenue. The GAO report, like the Postal Service report does not address in detail the mail industry policy, corporate governance and regulatory framework issues that affect the Postal Service’s ability to implement operating, and marketing plans to best meet the needs of mailers and parcel shippers.Neither does the GAO report provide Congress with information that would help it understand the role that the mailing industry, and the Postal Service as the core of that industry could have in the US economy in 2020 and beyond.

The Congressional Research Service (CRS)report focuses on a “number of ideas for incremental reforms have been put forth that would improve the USPS’s financial condition in the short term so that it might continue as a self-funding government agency, all of which would require Congress to amend current postal law.” The ideas that the CRS reviews are those previously presented by the Postal Service and the USPS OIG and include many included in the GAO report as well. The CRS notes the objections of the Office of Personnel Management to the changes in retiree benefit obligation calculation or funding schedules. CRS’s description of the report’s focus nicely summarizes the overall tenor of all of the reports that Congress will review in upcoming hearings.

Before developing their approach to questioning the witnesses, members of Congress have to first understand what the reports that the witnesses are presenting to them are and what they are not. The reports that Congress has before it present:

• Incremental reforms that proponents suggest would improve the Postal Service’s financial condition in the short term; and
• Incremental reforms that retain the current model of the Postal Service as a self-funding government agency

What Congress does not have before it is a framework for understanding the broader policy context within which these incremental reforms fit. As CRS notes, the incremental reforms in the various reports do not answer the question: “Is the USPS, as currently constituted, incapable of responding to a shifting, and possibly declining, market for its products and services?” It is this question that raises the fundamental questions about postal industry policy, governance of the Postal Service, and the regulatory framework that makes sense for the postal industry. If the answer to this question is yes, then the incremental reforms make little sense unless they are steps in the direction required to create an entity capable of responding to a shifting and possibly declining market for its products and services.

The following set of questions represent examples of the types of questions that Congress needs to ask witnesses in order to develop the framework within which incremental reforms make sense.   While some of the government entities can answer these questions, many of them go beyond the scope of the studies that they have just completed or their role in developing postal industry policy.
It may be time for Congress to begin the process of framing these questions so that GAO, CRS, the USPS OIG, the USPS or entities in the executive branch responsible for economic development, communications and transportation policy answer them.  After they are answered, Congress will be able to move forward on the incremental steps that the various reports suggest with an understanding of the broader policy context within the individual steps fit.

General Postal Industry Policy

1. What should the overall objective of postal industry policy over the next decade and beyond and where does the Postal Service fit into that objective?
2. Is that objective different from the objective of either the Postal Reorganization Act or the Postal Accountability and Enhancement Act both written when digital competition was less pervasive?
3. Is a self funding government enterprise, the best way to employ the postal market to generate economic growth and jobs in the United States or do other models provide greater opportunities to grow the US economy?
4. What impact do restrictions on entry of private sector entry into mail delivery and the Postal Service into non-postal products have on economic growth and jobs in the United States?
5. What benefits are generated by these restrictions and how do the benefits compare to the impact on economic growth and jobs?
6. What impact do current postal pricing law and the Postal Regulatory Commission’s interpretation of that law have on U.S. economic growth and jobs?  How would different postal pricing law affect or regulatory policy affect economic growth and jobs?
7. How does Postal Rate Commission regulatory responsibility affect economic growth and jobs and how does that compare to the benefits of regulation?

Postal Governance

1. Is the USPS, as currently constituted, incapable of responding to a shifting, and possibly declining, market for its products and services?
2. Is the USPS as currently constituted handicapped in responding to a shifting and possibly declining, market for its product and services?
3. How does the current governance structure as a government sponsored enterprise affect the Postal Service’s ability to manage the types of changes that the GAO, the CRS and the Postal Service describe?
4. How does the governance structure affect the speed at which the Postal Service reacts to changes in the postal market?
5. Does the current Postal Service board have sufficient experience in managing similar enterprises?
6. What would be required to ensure that it does?
7. How does the choice of a governance model (i.e. private sector vs. government enterprise) affect the choice of regulatory policy for the industry?

Financial Objectives

1. What is the financial measure that determines whether the Postal Service’s action plan or for that matter any action plan succeeds?
2. Is that financial measure sufficient to ensure that the Postal Service is self sufficient?
3. What is the financial measure that determines that a government enterprise is self-funding and is that the same measure that would determine if it is self sustaining?
4. Does self sustaining require only accounting break even or does it require a positive operating margin and rate of return?

The Postal Market

1. What is the fundamental role in the US Postal Service in the US communications and goods distribution infrastructure today?
2. By 2020, what proportion of mail will contain advertising whether in the form of direct mail, inserts in bills and statements or periodicals? How much greater is that from today?
3. How will the increased importance in revenue from advertising change the fundamental role of the Postal Service?
4. What impact does digital delivery of transaction documents, advertising, and personal communications have on the value of the Postal Service monopoly?
5. How should that impact be measured?
6. How does the existence of digital alternatives affect the price competitiveness of mail?
7. In particular, which industries using mail to distribute periodicals, send documents and correspondence, handle business transactions or advertise of customers are most sensitive to competition from electronic alternatives?
8. How does the proposal to eliminate a day of delivery affect individual vertical mail markets (i.e. personal correspondence, weekly newspapers, real estate advertising, supermarket advertising, utility bills and payments, etc.)?

Employee Costs

1. How do Postal Service wages and benefits compare with those offered by private sector firms in the postal industry such as FedEx, United Parcel Service, and Pitney Bowes?
2. What was the difference in the retirement rate of early retirement offers using voluntary early retirement authority and the incentives granted last fall?
3. How many months prior to normally planned retirement date do those that retire with an incentive retire and how much does that save the Postal Service?
4. What is the difference in net present value cost of offering an early retirement incentive to an employee as compared to retaining an employee whose position is excessed and paying them a salary above what their new position normally calls for?
5. How does attrition rate affect the decision to reduce network capacity?

Network Optimization

1. (For the GAO) How long have you presented recommendations that the Postal Service take effort to reduce its operating network?
2. What are the impediments in the Postal Service’s governance structure, labor agreements, cash flow, or culture that has prevented it from acting on network realignment faster?
3. How do attrition rates affect the decision to restructure the network?
4. How would the restructuring differ if the proportion of part-time employees increased?
5. How would the speed of the processing network optimization change if retirement incentives were readily available to handle the reduction in the need for employees?
6. What would be the upfront cost of using retirement incentives as part of a network restructuring?
7. What should the overall objectives of a postal network / retail network realignment commission be set?
8. Should a postal network / retail network realignment commission have the authority to make recommendations in regards to policy, governance, or regulatory impediments to the development of an efficient and effective network of processing and retail facilities?

Retail Access

1. What should the metric be for determining retail access to the services the USPS offers?
2. What proportion of users of retail customers of households and what proportion of users are non-households?
3. How often do households on average use a retail postal outlet? Does it vary by age, geography, or rural area?
4. What is the difference in access to retail services today in urban, suburban and rural parts of the United States?
5. How does access to USPS retail services compare to access to retail services of UPS and FedEx in urban, suburban and rural parts of the United States?
6. How have UPS and FedEx managed with primarily a contract/self-service model and are there differences in their retail customers that could affect the use of that model by the Postal Service?
7. What is the experience in other countries with their satisfaction with postal retail services before and after a switch to self-service and contract models?

Pricing

1. Is the issue of money losing products more an issue of cost levels or price levels?
2. What impact would only solving the problem with raising price have on the volumes handled and the ability of the Postal Service to meet its policy objectives?
3. GAO in its list of highlights for revenue generates suggests that the Postal Service revise pricing for market-dominant products, such as First-class Mail and Standard mail?
4. What revisions does the GAO suggest the Postal Service make?
5. How does current regulatory precedent and pricing objectives affect the ability to make the changes that GAO would suggest?
6. How do pricing objectives in the law and PRC precedent affect the ability of the Postal Service to implement the pricing flexibility that GAO and others suggest?

Who will brief Obama on the nature of the mail market?

At a You Tube forum, President Obama was asked, "'Mr. President, our deficit (national debt) is higher than ever at $12 trillion. Will you consider allowing the private sector to buy and take over the most troubled government-run agencies such as the U.S. Postal Service?"

The President's response suggests that his administration has left him poorly prepared for questions about the future of the Postal Service.   As questions about the future of the Postal Service will likely be on his plate over the next 9 months, it is time for his staff to do the legwork that will have him better prepared.   This post reviews information that he needs so that he can develop the level of understanding necessary to direct his staff in regards to future of the Postal Service.

Competition with FedEx and UPS
FedEx and UPS do not have the "high end" business-to-business portion of the postal market.  They serve the parcel side of the parcel market.   Yes they dominate business-to-business parcel delivery, but that is not to say that they do not also deliver a substantial volume of parcels to households, including households in the most rural sections of the Great Plain and Mountain West states.  They make these deliveries at a profit, just like they make profits in their business-to-business parcel deliveries.

Where FedEx and UPS compete with the Postal Service is in portions of the parcel market that fit the capability of the Postal Service's network.   The Postal Service is the specialist in handling, and more importantly delivering parcels under 5 pounds.  In this role, the Postal Service not only delivers small parcels that are dropped at a Post Office, but also an increasing share of the light weight ground parcels that FedEx and UPS picks up from its customers.  In fact, both FedEx and UPS are doing their best to convince their customers to shift light weight ground parcels to their products that use the Postal Service for delivery as a way to both lower the shipment price and provide service to that customer at a profit.  (It is not known what portions of the profits from delivering these parcels are received by UPS and FedEx or the Postal Service.)

The Postal Service is also the specialist in handling the parcel shipping needs of households. Households are a very tiny portion of the parcel delivery business.   Household shippers generate most of the Postal Service's heavier parcels.  The preference that household mailers have for the Postal Service makes the Postal Service an ideal provider of return services, as the new joint Postal Service-UPS service shows.  Households are the Postal Service's best customers because 100 years of marketing parcel delivery services to households creates a level of comfort that is tough to shake.  

Businesses in general use FedEx and UPS for their parcels, even if the Postal Service does the actual delivery, because the service levels and prices are better.  In addition, business customers find the characteristics of the customer relationship, from methods of payments to tracking capabilities, to the responsiveness of both telephone and in-person sales people are better at UPS and FedEx than the Postal Service.

Private Sector Firms Would Deliver Only the Most Profitable Business
The Postal Service's delivery competitors outside of the parcel market all focus on either the Postal Service's lowest priced or lowest margin products.  

For over 25 years, the Postal Service has faced competitors in the delivery of periodicals, a product that the Postal Service's cost system currently indicates are handled by the Postal Service at a loss.   The Postal Service's competitors deliver periodicals to every business address in metropolitan areas from Boston to Los Angeles, and in New York to buildings with doorman.  These businesses limit their deliveries to points where there is no mailbox and therefore no need to violate the Postal Service's exclusive right to the mailbox access.  The firms also offer a better quality service, as the periodicals and newspapers that they deliver are delivered earlier in the day than the Postal Service and their delivery service often includes replacement copies if the original is not received by the recipient.  The longevity of these firms is a testament that the private sector can deliver at a profit a product that the Postal Service delivers at a loss.

Today, Valassis announced the expansion of its use of private delivery of advertisements to households. Valassis will have the private carrier, CBA Industries, deliver what the Postal Service calls Enhanced Carrier Route (saturation mail) to addresses that do not receive the Newark Star Ledger.  CBA Industries is offering Valassis a service equal to or better than the Postal Service's lowest priced product for commercial advertising mail.

Finally, rural communities have always had shoppers and other free advertising focused journals delivered to boxes nailed to the post that is there for the mailbox.     These products could use the Enhanced Carrier Route products that the Postal Service offers.   However, private delivery offers the producers of the shoppers shorter lead times between the sale of advertisements and actual delivery than what delivery using the Postal Service would offer.   The decades long success of shoppers suggest that firms offering delivery in rural areas can earn sufficient profits to maintain and grow this business. 

Universal Service Could Not be Provided by the Private Sector

The experience of foreign postal operators suggests that rural service, including service to Lapland in Sweden and Finland, the rural plains of Saskatchewan and Manitoba, as well as the Arctic regions of Canada, and the Outback in Australia can be provided under private sector business objectives.   These firms, while all currently owned by the national government all have a charter that requires universal service for both citizen and business mailers.  In the case of Australia, the charter requires many more postal outlets per capita than the Postal Service has now.  All of these enterprises operate at a profit and operated at a profit through the recession.

Sweden Post, which in many ways has distribution patterns that are not much different that states in the Mountain West, with a couple of big cities and a vast rural areas that have tiny villages hundreds of miles from urban centers, has shown that it can offer universal service at a profit even if you face a competitor that only delivers mail sent by large volume business mailers in Sweden's urban areas.   Sweden Post will soon become a private sector corporation as the government of Sweden will be selling shares to the public soon.

The reasons why these posts can profitably offer universal service are the same reasons that FedEx and UPS deliver to every address in the United States.   First, their largest customers demand it.     Large customers want the entire mailing delivered and look at the total delivery cost of the mailing in making their assessment of the value of the delivery service.   As such, these customers are likely to accept any pricing scheme produces a reasonable total delivery cost for a mailing.   If simplicity requires a uniform price, as it often does with letter mail, then the price offered for each piece must earn a profit for the mailing.  Single piece mail is similar in that a uniform rate is set to ensure that the product is profitable including items delivered and tendered to the most urban and rural areas


For higher priced items, like the parcels that FedEx and UPS handle, surcharges to rural areas that reflect cost differences ensure that each parcel is handled profitably. pieces going to the bottom of the Grand Canyon, and each of these customers business can be priced to insure that the entire mailing is profitable.  If there is a need for a subsidy, as there is for parcels to the Canadian Arctic, then there are specific government subsidies paid to Canada Post. 

Finally, what makes universal service work for postal operators, that work under private sector business objectives is the flexibility to change every aspect of how the services are provided, from the characteristics of retail outlets, to pricing of single piece and volume products, to extensive freedom to offer new services that customers want even if other firms in the private sector now offer them.   This flexibility and commercial freedoms are not available to the the Postal Service.   The Postal Service is not likely to gain this flexibility and commercial freedom under governmental models.

* * * * * * * * * *
The Obama administration is supposed to come up with a solution for the retiree health liability shortly.   Postal stakeholders know that resolving retiree health payment scheudle is only a part of the solution that is needed in developing a new business model and regulatory framework.   Let's hope that they take the time to fully understand the mail market and the unique needs of the Postal Service's customers, the processes of producing mail, the characteristics of the Postal Service's workforce, and  how postal operators outside of the United States provide universal service at a profit with private sector business objectives before that complete their analysis of the Postal Service's problems and potential solutions.