on Mar 5th, 2012 in Five Elements of a Postal Solution | 24 comments
 
This is the first in our "Five Elements of a Postal Solution" blog series. Link to the blog by Richard Kielbowicz. Link to the blog by Steve Hutkins. Link to the blog by James Campbell. Link to the recap of the week. The Postal Service is at a critical juncture - over $20 billion in losses in the past 4 years and now facing a possible financial insolvency. In addition to trying to solve the immediate financial problem, there is a need to step back and take a deeper look at some unanswered foundational questions - one such question concerns the fundamental role of the Postal Service in the future: Is the Postal Service a competitive business or an enabling infrastructure? What’s the best structure for the Postal Service — a competitive business that maximizes profits or a national public infrastructure with a universal service obligation? The answer depends on the nation’s purpose for the Postal Service. Is profit maximization the best way to ensure that the Postal Service carries out its 21st century mission most effectively? Or is it better that the Postal Service’s first responsibility be to maintain an infrastructure that facilitates the nation’s communications and commerce? Competitive businesses can be extremely creative, capable of jettisoning failing product lines and transforming entire operations around new areas of opportunity. This innovation can bring great benefits, but a business is also focused on the bottom line and naturally puts shareholder value first. It may decide that, in a period of declining mail volume, it cannot afford to deliver as frequently as it does currently or that it should deliver only to lucrative locations and limit service to poor and remote areas. It may even move out of mail delivery into other business areas. If the Postal Service is a public infrastructure, it may have fewer incentives to innovate than a profit-oriented business. Instead, it will concentrate on maintaining its network and providing access to all customers regardless of size or financial profitability. It will remedy gaps and fill holes in existing service systems to ensure the broadest access possible. Universal service obligations would be better protected, but ensuring an effective level of financing and innovation would be an increased concern. Whether the Postal Service is a business, an infrastructure or has characteristics of both is a question at the heart of deciding how it should be financed and governed. It also sets the stage for determining the Postal Service’s responsibilities to its customers, relation to competitors, and obligations to society.

We’ve asked the following guest commentators to discuss this topic over the next three days:

  • Richard Kielbowicz, Associate Professor, Communication Networks, on Tuesday, March 6.
  • Steve Hutkins, Editor and Administrator, Save the Post Office Blog, on Wednesday, March 7.
  • James Campbell, Attorney and Consultant, on Thursday, March 8.
We hope you can join the debate. Please check in throughout the week for their thoughts, and share your comments along the way. On Friday, March 9, OIG will summarize and conclude the discussion on this important topic. Our Guest Bloggers
Richard Kiebowicz Steve Hutkins Jim Campbell
Richard Kielbowicz Steve Hutkins James Campbell

Richard Kielbowicz, who teaches in the Department of Communication at the University of Washington, has written a book and about two dozen research articles and technical reports about the history of postal policy.

Steve Hutkins teaches literature at the Gallatin School of New York University and runs the website savethepostoffice.com.

James Campbell is a lawyer and consultant on postal policy based in the Washington, D.C. area. He has advised numerous government agencies in the United States, the European Union, and other countries on postal policy and is the author of several books and many articles on express services and postal policy. Back to top


Guest Blogger Richard Kielbowicz - March 6, 2012

Richard Kiebowicz
Almost everyone who follows the fortunes of the U.S. Postal Service points to competition from the Internet and other electronic media as the major reason for plummeting revenues. In one sense, though, little is new. As the original information highway, the postal system has operated in a communication environment with competing and complementary private services since the mid-1800s, if not earlier. The institutional history of the postal system suggests that it exists to contribute to universal communication service. It has pursued this goal by providing unique services, filling gaps in private offerings, facilitating private-sector communication, and occasionally even competing with private firms. The USPS’s predecessor, the Post Office Department, added, dropped and adjusted its services in response to competing offerings by the private sector. Like today, earlier innovations in telecommunication prompted postal changes. The Post Office discontinued important news-gathering aids for the press in 1874 once telegraph-based wire services matured. When phone use became more efficient than letter mail for some timely communication, the Department cut the frequency of mail delivery for businesses and households. At other times, the Post Office launched services to complement or selectively compete with private firms. Parcel post—highly controversial at its birth in 1913—delivered packages in rural areas underserved by private firms, and government competition provided price discipline for private carriers. For similar reasons, Congress authorized the Post Office to offer a non-mail service, postal savings (1911-1967), structured to augment private banking rather than fundamentally challenge it. As these historical snapshots imply, the overarching goal of postal policy is to assure that vital services are provided to society one way or another, often with a mix of public and private enterprise. Accordingly, policymakers might consider the postal system’s universal service obligation together with similar policies for private communication networks, notably the Internet. Regulatory mandates for the public mails and private-sector telecommunication express identical purposes. The 1970 Postal Reorganization Act directs the USPS to “provide prompt, reliable, and efficient services to patrons in all areas and . . . render postal services to all communities.” The Telecommunications Act of 1996 directs the FCC to devise regulations mindful that “[a]ccess to advanced telecommunications and information services should be provided in all regions of the Nation.” Thus, maintaining rigid boundaries between public and private services, postal and electronic communication, ignores history and frustrates efforts to maximize the benefits of modern communication networks. Lawmakers could craft comprehensive policies that transcend media sectors. Such policymaking would entail reaching across jurisdictional boundaries in Congress and between administrative agencies. One modest possibility: subsidies for upgrading broadband in rural areas could be targeted to compensate for adjustments (probably cutbacks) in mail service. More far-reaching lessons for the postal system’s future can be learned by looking across technological and regulatory domains. If, for instance, lawmakers allow private carriers to enter fields now dominated by the USPS, the firms could be required to contribute to universal postal service in much the same fashion as private telecommunication firms, subject to the FCC’s jurisdiction, contribute to universal telecommunication service. Back to top
Guest Blogger Steve Hutkins - March 7, 2012

Steve Hutkins
What kind of a Postal Service do you want? Most Americans probably don’t care if the Postal Service is a “competitive business” or “enabling infrastructure.” Many don’t even know that the Postal Service is self-supporting and doesn’t use tax dollars. Americans just want the Postal Service to function properly. They don’t want to see their post office close, and they want enough workers at the windows so the lines aren’t too long. They don’t want their mail to get lost in the ozone, and they want it delivered in a timely way, six days a week. But what are Americans getting instead? The Postal Service’s new business plan will close half the country’s post offices, eliminate Saturday delivery, slow down First Class mail, and raise postage rates for average Americans while keeping them low for big bulk mailers. That’s not a business plan. It’s a plan to dismantle the Postal Service. The forces behind the plan are private corporations that stand to reap larger profits and free-market ideologues who oppose workers, unions, and government services. Their goal is to turn the Postal Service into a lean, mean, profit-making machine, unencumbered by what they view as a large, overpaid workforce, a network of money-losing post offices, and the drag of a universal service obligation. Once they’ve turned the Postal Service into their idea of a successful business, they can go looking for investors, using the huge surpluses in the postal retirement funds as an irresistible enticement. The dream of privatization will become a reality. So instead of asking whether the Postal Service should be a competitive business or enabling infrastructure, perhaps we should pose the issue this way: Do you want a Postal Service that’s shaped to serve its hundred biggest customers, or one that serves the country as a whole? Do you want a Postal Service that’s a delivery system for ad mail, or do you want a postal system that offers innovative products and services designed to benefit the many rather than the few? Do you want a Postal Service that guts the workforce while it outsources $12 billion to private businesses like FedEx, or do you want a postal system that values worker morale and focuses on job creation? Do you want a Postal Service whose leaders disingenuously blame the Internet for the postal deficit, or do you want leaders who accept responsibility for their lack of vision and find creative ways to adapt to the digital era? Do you want a Postal Service that turns a deaf ear to communities suffering the loss of a post office or processing plant, or do you want a Postal Service that views serving American citizens as its number-one priority? Do you want a Postal Service committed to dismantling itself so that private corporations can buy it, or do you want a Postal Service that honors its past and shows a commitment to its future, a Postal Service that continues to help build the country and bind it together? Back to top
Guest Blogger Jim Campbell - March 8, 2012

Jim Campbell
Should the Postal Service be a competitive business, an enabling infrastructure, or something in-between? Although this question has framed postal policy debates since the end of World War II, it no longer sheds much light on the path forward. Instead, I believe the key question is, “Should Congress give the Postal Service the tools and the incentives to manage the Postal Service efficiently?” Other issues are important, but secondary. Unless the Postal Service is managed efficiently and effectively, there will be no quality universal service, no fix for financial hemorrhaging, and no protection of postal jobs. Without a healthy horse, it does not matter where the cart is placed or what it carries. What happened? New technologies have rent the ground beneath the Postal Service. Not only is the volume of mail declining drastically, but the nature of the demand for mail is shifting. Today, 90 percent of mail is posted by businesses (including organizations); another 7 percent is posted to businesses who increasingly prefer electronic responses via the internet. The Postal Service has ever fewer customers that it can count on. Even mailers, like catalog companies, who have no alternative, adjust the frequency and size of mailings items based on a fine calculation of whether the service is worth the cost. The Postal Service of the future will have to be smart and nimble to satisfy the needs of mailers who will use — or refrain from using — the mail based on its value to them. This new dependence on winning and retaining customers represents the critical break with the Postal Service’s past. So what is the way forward? More detailed statutory requirements? More Congressional oversight? More scrutiny by the Commission? More political pressure from mailers and unions? More outside studies? No. Such measures cannot substitute for capable management. The only potentially viable approach is to reform the Postal Service’s statutory charter so that, while still a government corporation, it has both the tools and the incentives to manage inputs (employees, machinery, facilities, contracts) and outputs (prices, classes of service, delivery frequency, delivery modes, retail services) efficiently and effectively so that they satisfy the fast changing needs of business mailers. What about Aunt Minnie? Universal service and other public services? Unjust discrimination and anticompetitive practices? For the foreseeable future, the Commission must remain the guardian of such public interest concerns, guided by clear instructions from Congress. And as the Postal Service gains managerial flexibility, the Commission must take over governmental functions now exercised by the Service. In short, governmental and operational functions must be separated and clarified. Last point. The days are gone when Congress can direct the Postal Service to offer politically popular services without regard to who pays the bill. It cannot be assumed that captured mailers will cover the costs of Congressional largesse. Congress may require a higher or lower level of public services, but what Congress requires, it must pay for. The sky is not falling. The U.S. still has two or three times as much mail per capita as other industrialized countries. But the time for incremental political solutions has ended. Like other industrialized countries, the U.S. must face up to the fundamental nature of changes in postal markets and revise the legal charter for the Postal Service accordingly. A new charter must permit and motivate the Postal Service to manage its services for business mailers efficiently and effectively. At the same time, the new charter must protect universal service and other public services and control abuses of market power with appropriately focused regulatory controls and compensation for obligatory services. Back to top
Recapping the week - March 9, 2012 To start our new blog series, we asked three experts to give us their opinions on a fundamental question of postal public policy: Should the Postal Service be a competitive business, an enabling infrastructure, or something in-between? Our guest bloggers were chosen for their articulate and insightful observations on the state of the Postal Service. As expected, our guest bloggers disagreed on many aspects of the question before them. Still, they all agreed on one critical issue: America deserves a Postal Service that meets its needs. As Steve Hutkins so succinctly put it,”Americans just want their Postal Service to function properly.” There was also agreement that the Postal Service needs to be nimble and flexible in this ever-changing communications environment. Richard Kielbowicz pointed out that there is a long history of the Postal Service adapting to the changing needs of the American mailer. All agree that some amount of regulation is needed to ensure that the Postal Service continues to meet its universal service obligation to bind the nation together and, as James Campbell says “control abuses of market power”. Our panelists disagree on where the public policy emphasis should lie. James Campbell believes that a priority must be placed on putting the Postal Service on a solid financial basis, “Without a healthy horse, it does not matter where the cart is placed or what it carries.” He believes that the Postal Service needs competent executive leadership with the flexibility to adapt inputs and outputs to the changing needs of mailers. Steve Hutkins believes that the Postal Service has lost touch with its broader social responsibilities of providing a sense of community, good middle class jobs, and reliable postal services to American households. He believes the current Postal Service business plan, instead of binding the nation together, will dismantle the postal system as we know it. Richard Kielbowicz sees the Postal Service as a part of a continuum of communications services, public and private, hard copy and electronic. He believes that postal regulation can be improved by borrowing concepts from telecommunications regulation. We thank each of these bloggers for their insightful comments and will continue to keep these blogs open for additional input from the public. Next week’s blog series will examine the question: What would an optimized Postal Service infrastructure look like in the 21st century and beyond? Back to top

24 Comments

Definitely an enabling infrastructure.

I love the Postal Service, but I just don't think it's cut out to be a competitive business. That's not in its DNA. It's DNA is delivering the mail as a public service. If you privatized you'd have to completely change the entire organization.

A competitive business, an enabling infrastructure, or something in between? I say all three. The Postal Service should take a cue from other network industries that have been deregulated, including telecom, natural gas, electric power and freight rail. These industries have had disparate service elements “unbundled” so that welfare-enhancing market solutions can be applied individually. The Postal Service is likewise characterized by disparate service elements. The comprehensive retail and delivery network has elements of a natural monopoly and has been supported over time by certain privileges granted to the Postal Service so that it can meet its universal service obligation. Both aspects argue for a public-service rather than competitive stance. The Postal Service’s delivery mission should be to enhance social welfare and to facilitate – not compete with – American commerce. On the other side of the coin, mail processing and transportation seem well suited for competition in the private sector and therefore privatization. Already, the Postal Service does not own major transportation inputs, and the mail mix is trending inexorably to “drop-ship” entry which avoids upstream processing by the Postal Service. Pursuant to unbundling, therefore, part of the Postal Service could be placed squarely in the regulated public utility realm, part could be subjected to the disciplining rigors of free-market competition, and overall the solution can be considered a hybrid that is somewhere “in between.”

With each passing day I have less need for hard copy message delivery that is the main service of the USPS.I do not support tax dollars spent to prop up it's current business model.Citizens who reside in rural areas where USPS service is a necessity,should pay a surcharge for the more expensive service.I do not believe universal mail service should be supported equally among all users.Users of this service should pay for what they need.

Another question is the Postal Service's strategy for the future. Does it look to find new uses for its Post Offices? Look at strategies beyond its physical infrastructure? Some combination of the two?

The postal network and the accompanying commitment to universal service is fundamentally enabling infrastructure. Look where the Founders mentioned the postal service in the Constitution, with other entities that create both intellectual and physical infrastructure like patents and copyrights.
During the current "crisis" the discussion has been shaped around losses but the fact remains that operations of the postal network have remained essentially fiscally sound - it is the mandates under PAEA that have created the financial problems. The fact that operations have remained essentially break even is important especially when one considers the focus of senior management on fostering and enflaming the controversy.
I've written extensively on Dr. Hutkins' Blog STPO and I would refer you to those posts for a more in depth discussion of these issues.

Mark, I'm familiar with your writing and I just wanted to take this chance to thank you for all you've written on behalf of all postal workers. From your computer to Obama's ears! I love Steve Hutkins, as well, you two really have a handle on this mess created by postal big shots, who earn way too much money, by the way. The Postal Service should be exactly that.. a service for all Americans.

I think it is time someone foramlly survey the American public and ask the kinds of questions Mr. Hutkins is asking. We still live in a democracy, right?

Abolish PAEA, trim the increased salaries it provided in section 105 at the headquarters level and increase postage costs for large mailers that are discounted. Postage is still less than any other country in the world. Do not cut service standards, or Saturday delivery, close offices, or reduce staffing. The USPS must serve the "people" and at least break even.

I have the feeling that the privatization question, to the extent it is lurking somewhere behind this oddly worded blog question, is a dead issue, the nail having been driven into the coffin of the disco era deregulation heyday by the utter failure of financial deregulation to bring us anything but the worst recession since the big one. The glory days of deregulation for its own sake happily behind us, the tough question now is how and where we can use competition to increase public welfare and where not. So I come down on the side of ‘enabling infrastructure.’ All of that notwithstanding, I do agree with the gist Mr. Campbell’s post that no enterprise, irrespective of its ownership, could be successful without the ‘tools and incentives’ to manage its resources effectively.

Not trying to be smart here, but...

Didn't the money you guys gave Booz Allen answer that question?
Bureaucracy.. You guys are worse than the AG's office.
When you start asking the "academics" how to walk, you're in deep trouble. I remember Potter's gang testifying to Congress.
"We simply didn't see the collapse of FCM coming." Or, thereabouts....
Where were they?, on a desert island?

I must apologize. I did not mean to identify Booz Allen in my comment, and I meant McKinsey & Company.
Back on point, I would highly, and urgently recommend the USPS maintain it's focus as a "redundant" communications network. Please take the time to watch and consider the following congressional hearing.
However, I must warn you, it is disturbing and troubling
and you may not choose to post this tag.

http://www.c-spanvideo.org/program/Cybersecurityan

I find the disdain for seeking help from academics (parenthasized, for goodness sake) to be sadly short-sighted. This Santorum-like disgust for education is a bad sign in any debate. Especially one that is as complex and troubling as the present and future status of the USPS. A smart man looks for help wherever he can get it, and if it comes from people who have spent decades studying the issues, he invites them into the debate.

The Postal Service is not a vestigial appendage of the Executive Branch or an organization ready for an IPO...it is an infra-structure critical to the country's commerce, irreplaceable in rural and many other communities. Its potential in the digital sphere is significant. The role of the Postal Service in national or regional disasters has been recognized in government and private sector studies.
However, without a very quick turnaround in postal leadership strategies, including a thoughtfully planned reorganization rather than the current inconsistent and ill-considered efforts, there won't be much left for debate in the near future.
Current management plans to close retail outlets and plants should be put on hold. And internally, low employee morale needs to be addressed. Regardless of the specific organizational strategies employed, worker performance can make or break any business.
The integrity and vision of leadership is essential to keeping the Postal Service - and all it can offer the public - alive in the 2010s.

Enabling infrastructure. As per the United States Constitution.

I won't be redundant, I will just say Steve Hutkins' piece really nails it. What Steve said, totally.

Serious, I agree. The PO needs a dream team including Steve Hutkins, Mark Jamison, Dr. Steve Mussaco and Eric Wattree! Greed has clouded the eyes of our current leaders, who have run out service into the ground for their own benefit.

Sorry, Serious, I meant to comment to Online Seller.

is a good infrastructure and is consistent with the constitution ...

The record on competitive postal services is mixed. Private postal operators in Latin America are thriving, while in the U.K. they are lagging. Theoretically, competition increases efficiency. However, the U.S. postal service can now deliver cheaply because it visits every house and every office in the U.S>. six days a week using regularly scheduled routes. Splitting the volume among competing carriers would dramatically increase the cost of delivery per piece, perhaps forcing operators to go to on-demand delivery, like the parcel and express companies.

The Postal service has successfully opened its infrastructure to mailers through work-sharing. To continue to deliver value, extend the useful life of the mail, and bring volume back to the USPS network, the Postal Service should further open its infrastructure (distribution network, data, real estate) to innovative, entrepreneurial private activities that will generate mail. As we show in a recent Mail and Express Review article, these activities could include parcel stations operated by private operators, targeted, customized multi-media campaigns that capitalize on the mail moment, government services, and other innovative uses of the mail yet to be discovered. They key for the Postal Service is to open its infrastructure and make it attractive for the private sector to innovate and invest in the mail.

Maybe the question is not phrased in the proper tense. Instead of asking what the Postal Service "should be", maybe one should ask ask what "has it become"? From my point of view it has become a political pawn with the promise of a keeping a post office in a dead or dying community, one that may only employ one person for 2-4 hrs a day, and brings in revenue of a few dollars a day, is now exchanged for a votes in a political season. I see guest bloggers writing eloquent pieces on their opinions on how the Post Office should "continue" without the knowledge that there are employees in mail processing centers slated to close that are stil being paid but have nothing to do--all because of archaic rules and political pressure. I see other employees working 10-12 hrs per day because their offices are understaffed, waiting on these employees to move into the vacant positions--all the while, paying overtime to some, and paying others to do little or nothing. Please go back and ask some real questions, and not from those hiding behind pre-payment of benefits and see what the real problems are.

The USPS is here to serve the citizens of this country with a means of basic communication.

It is NOT here (and does not) to use taxpayer dollars.

It is NOT here to compete with private business (the government or, quasi-government institions should not do that).

It is a service that is here to serve you, the public of this country.

The insolvency problem is a created one.
Operationally speaking, the USPS nets profits every year. The financial problem it faces now comes from a 2006 Congressional mandate that requires the agency to “pre-pay” into a fund that covers health care costs for future retired employees. Under the mandate, the USPS is required to make an annual $5.5 billion payment over ten years, through 2016.

Amazingly, no other agency is mandated with such nonsense at this degree. I wonder what congress will do with the money for those "future" employees when the USPS isn't even around.........?

answer: Probably the same thing they have been doing with all the other money the USPS gave them since it technically can't be a money making agency.

Way to go Washington....wreck another self-supporting service to the citizens of this country for your own greed and agendas!!!

Dear Katy,
Please dont's suggest that the world's single most resourceful, and respected Global Business Management Consulting firm, didn't consult the academic community, for assistance, in the development of a 2030 business model for the USPS.
Perhaps my post's were unclear. I often do that on various blog's because of the lack of time I have.

I can share our international expirience with USPS. When we send packages from Bosnia to USA they arrive in 48 hours to New York parcel center.After that,it takes about 3 weeks for the parcel to be delivered to the final destination. That's too slow!

The Postal Service is exactly that, a service. It has and still does enables the business community to provide goods and services to the public at a rate of almost a trillion dollars a year. Its like the highway system. No individual business can build or maintain such of a system, but it enanbles all Americans the opportunity to utilize this great country of ours. The USPS has been self sufficent until Congress enacted the 5.4 billion dollar annual payment to prefund health care. No other agency has this burden.

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