Wednesday, February 10, 2010

Leaving the Mailstream - Mail Systems Technology

There is no better example of the impact of digital documents than what is happening to trade publications. This shift is particularly hard on the Postal Service as it removes from the delivery network mail going to high density business addresses.   Now the trade publication for the mailing industry is now shifting from print to digital publication.   If a journal targeted to companies that produce mail no longer use the mail, then which ones will in the future?


Check out the digital edition of Mail Systems Technology.  When you flip through the pages on your computer think about how this would look on an iPad, Kindle or other tablet computer.  Looks like a good fit.

Note:   You can see how blogs like this one are changing trade journalism.   The November 24th post The Future of the Document is the Future of Mail, is reprinted on page 24 in the issue linked above.   Those who read this blog learned about the link between types of documents and mail over two months before subscribers to the magazine.

Tuesday, February 9, 2010

UPS Buys USPS

Just in case you have not seen it.  Catch the latest news on this merger from Red Tractor. USA

Rethinking The Value of Postal Regulatory Policy

I have never been much of a fan of old regulatory process of setting postal prices.   The contradictions among the competing objectives of pricing policy in the law created a zero sum game that resulted in mailers and the Postal Service spending millions to litigate prices that could be set in a much less constrained litigious environment. 

Currently, the Postal Regulatory Commission is in the middle of a proceeding to see whether what the Postal Service presented in its Annual Compliance Report puts it out of compliance with requirements in postal law in regards to financial stability and requirements in regards to pricing workshare discounts.

As stated in previous posts, I agree that postal stakeholders, and in particular Congress, the Office of Management and Budget, and the U.S. Treasury acting as shareholder and creditor, need to know whether the Postal Service has a business plan, working under existing law, that will ensure financial stability.  If such a plan does not exist, then those parties representing the shareholder and creditor interests in the Postal Service need to see a set of alternative plans with hard numbers that would produce financial stability under alternatives that require changes in existing law.

While the PRC, with its knowledge of postal data and operations can provide assistance in this effort, its forte is not evaluating business plans.  Its strength is examining in a legalistic manner whether a particular plan follows regulatory precedent in meeting the objectives of postal law.

The problem with the PRC's attempt to evaluate the Postal Service's business plans is seen in the language that the parties use to discuss the issues that the PRC's review of the Annual Compliance Review generates.    The first paragraph of the summary of the Comments of Time Warner on Issues raised in Commission Information Request No. 1 illustrates this point.


In these comments, we explain why Time Warner believes that § 3622(b)(5) does not, and cannot, raise  an issue of "compliance" within the meaning of § 3653(b).We review Time Warner's previous comments on the scope of § 3653(b) and the Commission's discussion of those comments, and we conclude that the Commission has as yet made no statement responsive to the two major points of our analysis: (1) that it is impossible to make a determination of Postal Service noncompliance with the "objectives" and "factors" of § 3622(b) and (c) because those factors and objectives are not addressed to the Postal Service but to the Commission, relating to the Commission's design of a new ratemaking system; and (2) that it is impossible to make a determination of Postal Service noncompliance with the "objectives" and "factors" of § 3622(b) and (c) because a set of nine mutually competing "objectives," "each of which [is required] to be applied in conjunction with the others" (§ 3622(b)) and fourteen mutually competing "factors," which are required only to be "take[n] into account" in designing the new system (§ 3622(c)) are not conceptually susceptible to a "determination of noncompliance" (unless all that is meant by "noncompliance" is that they are disregarded completely).

Remember, this language is the first paragraph of the summary of document presented in a proceeding designed to look at what is necessary to make the Postal Service a financially stable business. I cannot imagine anything being further from the language of business than what Time Warner's lawyers wrote in that paragraph and leads me to two questions. 
  • How did we get here?
  • How and when do we stop spending our time and resources in activities that do not ensure that mailers continue to use the Postal Service to advance economic activity?

Saturday, February 6, 2010

President Obama and 6 Day Delivery

Both the National Association of Letter Carriers (NALC) and American Postal Workers Union (APWU) report on their respective websites that President Obama supports 6-day Delivery.   Both postal unions use the following line from the 2011 budget that President Obama presented to Congress to support their argument that President Obama supports 6-day delivery.   "That 6-day delivery and rural delivery of mail shall continue at not less than the 1983 level."

If this line implies that President Obama supports 6-day delivery, then it is a peculiar way to say it given that it is written in a form that follows the legislative language written by Congress.  The language is similar in structure to language in the budget that describes provisions relating to child support enforcement, and closure of small rural post offices.  The identical language is in the budgets of President Bush. 

More likely, this language is nothing more than a statement of the law relating to uses of the Postal Service Fund and Congressional appropriations to that fund.   So in fact, rather than a statement in support of 6-day delivery by President Obama, this line is nothing more than a restatement of the law as passed by Congress

So if President Obama has not staked a position in regards to 6-day delivery, what does the budget say about its position in regards to Postal Policy.    The only indication comes from the language in the budget that was not part of 2010 budget submitted by President Bush.

The Postal Service faces a serious financial crisis due to unprecedented reductions in mail volume. These reductions, in turn, reflect greater reliance on the Internet (a.k.a., "electronic diversion") and the effects of the business cycle, including cost-cutting by businesses and consumers during the recession. The Administration will work with the Postal Service, its employee unions, the Congress, and other stakeholders to make sure the Postal Service has the tools and authorities it needs to remain viable as a pillar of the American economy and a vital public resource through the current crisis and over the long haul.

This statement does nothing more than state that the Obama administration plans to work with all postal stakeholders to ensure that it remains viable over the long haul.   This statement provides no indications if President Obama's positions on postal policy are similar to those of any stakeholder.  At best all stakeholders, including the APWU, or the NALC, can expect that they will have a seat at the table as more serious discussions about the future of the Postal Service begin this Spring.

Thursday, February 4, 2010

Is 5-day Delivery Inevitable?

The Postal Service's presentation of its 5-day delivery proposal appears to be on a fast track for presentation to the Postal Regulatory Commission.  In announcing the MTAC agenda, the Postal Service has included a 90 minute briefing on 5-day a week delivery on February 17.   The Postal Service will repeat this presentation on the web four additional times in February.
  • Friday, February 19, 2:00 - 4:00 p.m.
  • Tuesday, February 23, 2:30 - 4:30 p.m. 
  • Wednesday, February 24, 2:00 - 4:00 p.m. 
  • Friday, February 26, 1:30 - 3:30 p.m. 
Mailers interested in attending the webinars on 5-day delivery should send an e-mail to Connie.Totten-Oldham@usps.gov with the date you prefer.  She will send an invitation along with instructions for viewing the presentation and joining the conversation.
    These presentations could represent the Postal Service's last outreach effort prior to a PRC filing.  Given, the scale of this outreach effort, it is possible that the Postal Service management will present a proposed PRC filing to the Board of Governors after this outreach effort is completed.  Then the process is out of the Postal Service's hands.

    For mailers trying to plan for 5-day delivery, the following schedule seems realistic.   
    • March, 2010 - The USPS files a service change request with the Postal Regulatory Commission.
    • March 2010 through November 2010 - The PRC conducts the review of the change in service to 5 day a week delivery.  (This time frame would be an aggressive schedule for the PRC to meet and it is possible that it could run as long as a year.)
    • November 2010 - February 2011 - Congress holds hearings on the Postal Service's proposal and the PRC report.   These hearings would occur during either a lame duck session of Congress or within the first month of a new Congress and are unlikely to happen until after the PRC completes its analysis of the Postal Service's proposal.  
    • February 2011 - September 2011 - Congress passes a law allowing the Postal Service to offer 5-day a week delivery.  It is possible for Congress to act quickly, but eliminating the 6-day delivery requirement may not come outside of a more comprehensive postal reform bill that would take the full first legislative session of the next Congress.
    • Summer 2011 or January 2012 - Implementation of 5 day a week service.   As the Postal Service does not usually implement major operating changes in its first fiscal quarter, the shift to 5-day delivery will begin either before the fall mailing season begins or after the new year.  The summer implementation would occur only if Congress acts within the first month or two of the new Congress.
    This schedule has some interesting implications for the Postal Stakeholders.
    • The PRC will review elimination of 6-day delivery during the 2010 midterm elections.  The publicity from hearings on the Postal Service could force every Congressional candidate to take a position on 6-day delivery and other issues relating to the Postal Service.
    • The Postal Service has to manage its business for at least another 15-24 months as a 6-day a week operation.   During this period the Postal Service will continue to accrue operating losses that it believes could be avoided by reducing the number of delivery days.
    • The reduction in delivery days will occur at a time the requirement to coordinate digital communications with mail requires a level of service quality for Standard Mail from the Postal Service higher than what is now offered.    

    Tuesday, February 2, 2010

    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. 

    Monday, February 1, 2010

    Mail as Art

    It is hard to think about mail as art, but it is.   The National Postal Museum has featured exhibits on the art of the stamp, probably the smallest canvas imaginable.  But art in mail goes beyond that and includes the design of typefaces used in every piece of mail delivered, as well as the design of greeting cards, invitations, advertisements, and even bills and solicitation.

    I mention mail as art because the first Postmaster General, Benjamin Franklin gained his start as a printer and publisher in Philadelphia.   It is Franklin's and Philadelphia's connection with printing that generated the idea an international festival celebrating print in contemporary art.   The festival, Philagrafika 2010  started last Friday and will run until April 10. 

    The festival is divided into 3 components:

    The Graphic Unconscious  is the core exhibition  and includes works by 35 artists from 18 countries displayed across five venues: Moore College of Art & Design; Pennsylvania Academy of the Fine Arts (PAFA); Philadelphia Museum of Art; The Print Center; and Temple Gallery, Tyler School of Art, Temple University; with significant installations by different artists on view at each site.

    Out of Print pairs five artists with five historic institutions in Philadelphia: the American Philosophical Society (APS) Museum; the Historical Society of Pennsylvania; the Independence Seaport Museum; the University of Pennsylvania Museum of Archaeology and Anthropology, and the Rosenbach Museum & Library. Each artist created new work for the festival inspired by the extraordinary collection with which they were matched.

    Independent Projects are exhibits organized by seventy-five additional cultural institutions in Philadelphia, include a huge variety of monographic, group, and thematic exhibitions in which the printed image plays a central role.

    While Philagraphika focuses on contemporary art, the topics explored at the festival's venues are the heart of the challenge that designers of mail and other documents face in trying to make their designs, and the content that they contain effective.

    Pattern and Ornamentation: The multiplication/repetition of an image or text to produce patterns that are applied to various surfaces as ornamentation or embellishment.

    Accessibility and Dissemination: The long-standing appeal of inexpensive, mass-produced prints, in the form of posters, broadsides, flyers, etc., as an effective means of raising public interest in social and political struggles and recent innovative adaptations as developments in production and communication technologies have continued to evolve.

    Collaboration and Community:  The often shared production of printmaking (an artist working with one or more printers, publishers, etc.) that has attracted numerous artists working as collectives, ideally suited to their ambitions to create a sense of community through collaboration.

    The Authority of the Print: The use of existing printed images and texts as iconographical or inspirational sources; the appropriation of printed images; and the implied validation of a text or an image by virtue of its existence “in print.”

    Craftsmanship and Aesthetics: The significance of the choice of medium, its intrinsic qualities and the skilled craftsmanship with which it is executed  in relation to the artist’s expressive goal; and the translation of the inherent aesthetics of one medium into another.

    The Print in the Public Sphere: The key role of print forms and conventions in the circulation of ideas and images that create a public realm and help construct consensus forms such as histories, authorities and individual and community identities.

    I urge readers of this blog who live within reasonable distance of Philadelphia to take a trip and check out this exhibition.