Giving away the store: The Postal Service discounts the mail

April 20, 2014

MARK JAMISON

In her book Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age, Susan Crawford describes how the American public has been imprisoned by monopoly arrangements in the delivery of broadband and wireless Internet services. Using pricing and discount strategies, communications corporations have colluded to circumvent competition and make private fiefdoms out of what should have been public infrastructure.  

It’s not a new strategy.  Back in the 1870’s, J.P. Morgan and the railroad barons worked with John D. Rockefeller and Standard Oil to use preferential pricing schemes and discounts to corner markets and consolidate their monopoly powers.

In its quest to act more like one of these giant corporations, the Postal Service has been using similar strategies, like fighting off regulation, making secret deals, manipulating prices, and offering discounts to become more competitive. 

Worksharing is probably the most notorious example of a discount of dubious merit.  Since the practice began in 1976, worksharing has grown dramatically.  Now about 80 percent of the mail arrives at the Postal Service pre-sorted to qualify for discount rates (as discussed in this OIG report).  Worksharing has spawned a huge private-sector consolidation industry that profits off the $15 billion (or more) in discounts that the Postal Service gives out each year.  As repeatedly documented in compliance determination reports by the Postal Regulatory Commission, many of the discounts are so large that they don't even cover their avoided costs.  Worksharing has led to the loss of tens of thousands of postal jobs.

Worksharing is not the only type of discount to be concerned about, however.  For large mailers, there are discounts for bar coding and an ever-increasing number of Negotiated Service Agreements.  For average customers, discounts are available for going online instead of going to the post office.  Now we’ve learned that the Postal Service is apparently giving discounts to Staples as part of the plan to put postal counters in big box stores.

Through the use of such discounts, the Postal Service has transferred large parts of its operations to the private sector.  Besides undermining postal jobs and the postal network, these discounts also threaten to create significant unregulated monopoly power in the communication, mail, and package delivery sector.

The Postal Service may say that the discounts are just good for business and that going online or using a postal counter in Staples is just more convenient for customers, but the real goal is to get rid of post offices, postal workers, and postal infrastructure.  From worksharing to Staples, the discounts mean one thing: The Postal Service is giving away the store. 

 

Discounts to Staples

Putting postal counters in Staples stores is clearly intended to replace postal workers in brick-and-mortar post offices.  The only way the deal can save the Postal Service any money is by reducing the number of clerks at nearby post offices and then closing post offices completely.  Maybe that’s why one of the provisions in Darrell Issa’s postal reform legislation removes the right to appeal a post office closure to the PRC if there’s a Contract Postal Unit within two miles of the post office.  There are over 1,200 post offices within a couple of miles of a Staples store. 

But there’s another aspect to the Staples deal that hasn’t got much attention.  The Postal Service is apparently giving Staples discounts on Priority and Express mail, domestic and global. 

These discounts have not been discussed publicly by the Postal Service, and the details are a closely guarded secret.  The APWU filed a complaint against the Postal Service and requested more information about the deal, including a copy of the Staples contract.  It received a long document of 58 pages, almost all of it blacked out.  (The APWU posted it here.)

Not everything in the document was redacted, however, and there was enough left to allow us to do a little detective work, which led to two PRC dockets covering Negotiated Service Agreements.  In comparing the APWU version and the PRC version of the documents, it seems almost certain that these NSAs involve the Staples counters.  (You can see some of the points of comparison here.)

Docket CP2013-84 covers an NSA for reselling Global Priority and Express mail, and CP2014-3 deals with an NSA for reselling domestic Priority and Priority Express.  If these indeed are the NSAs for the Staples deal, they tell us that one of the ways Staples is making money on its postal counters is by receiving commercial-based discounts on Priority and Express items.  We don’t know how much those discounts are, but one might reasonably conclude they are even more generous than those offered Click-N-Ship customers on the Postal Service website, which can be as much as 16 percent off retail. 

ACHP to report on disposal of historic post offices this week; the sales go on

April 13, 2014

On Thursday of this week, the Advisory Council on Historic Preservation is expected to release a report on the Postal Service’s compliance with the National Historic Preservation Act when it disposes of historic post offices. 

The Council was directed to prepare this report by a provision in the annual appropriations bill passed by Congress earlier this year, thanks to the efforts of Representatives Barbara Lee of California and José Serrano of the Bronx.  The provision reads as follows (p. 75): 

Last year, the National Trust on Historic Preservation placed historic post office buildings on its list of most endangered historic places. The Committee  [on Appropriations] is concerned that although the Advisory Council on Historic Preservation has been working with the United States Postal Service for almost two years to develop a consistent, transparent, consultative process to preserve these historic properties, no such comprehensive process has been forthcoming.  The Committee directs the Council to provide, within 90 days of enactment of this Act, a report on the action plan for ensuring USPS compliance with Section 106 responsibilities during the divestment of historically significant properties. 

Representatives Serrano and Lee also succeeded in getting a second provision added to the bill.  This one expresses similar concern over the sale of historic post offices and says that  the Postal Service “should refrain” from relocating postal operations out of historic post offices and "suspend the sale" of any historic property until the Office of Inspector General completes an audit investigation on the disposal and preservation of historic post offices (p. 75).  

That audit, which began last summer, is due out soon, but the Postal Service isn't waiting to hear the results, despite the urging of Congress to refrain.  Over the past few weeks, it has proceeded with the sale of several historic buildings, including those in Burlingame, California, Somerville, Massachusetts, and Princeton, New Jersey.  The Postal Service and the prospective buyer are also moving forward on the deal to sell and redevelop the post office in Stamford, Connecticut, despite the fact that the sale has been stopped by a federal court.  Here’s a rundown of the latest developments.

 

The ACHP meeting in Oakland

The Advisory Council held a meeting in Oakland on March 11 to hear from agencies and organizations about their experiences dealing with the Postal Service on sales of historic post offices.  Among those who spoke to the ACHP panel were staff members from Representative Barbara Lee's office, the California SHPO, National Trust for Historic Preservation, the Living New Deal, the LA Conservancy, and Save the Berkeley Post Office.

Here are some of the written statements submitted to the ACHP:

As part of her testimony, Jacquelyn McCormick also submitted comments from the Stamford Historic Neighborhood Preservation Program.  Yours truly, Steve Hutkins of Save the Post Office, has also submitted a report he wrote for the USPS OIG's audit on the preservation and disposal of historic post offices.

One of the main issues that comes up repeatedly in the comments is that the Postal Service has not been forthcoming about its plans, both in general and in the case of individual post offices.  The National Trust has requested a list of historic post offices under consideration for sale and received nothing.  No one even knows how many post offices may eventually be sold.

The L.A. Conservancy’s website says that over one hundred post offices in California have been slated for closure or “relocation” in California.  Not all of them are historic, but considering that the Postal Service owns 600 post offices in California and nearly 9,000 nationwide, at that rate we could be talking about 1,500 sales, with 300 or 400 of them being historic post offices.

Individual communities have had an equally hard time getting information from the Postal Service.  Rather than cooperating with communities, the Postal Service seems to think it can do whatever it wants.  For example, the La Jolla Historical Society said that its efforts to get involved with purchasing the post office were stymied at every step, even with members of Congress trying to help. 

Several of the speakers also complained about the covenants that the Postal Service has been creating to protect the murals after the building is sold.  The covenants offer inadequate protection and have various other deficiencies, and they need to be individualized for each case (rather than the one-size-fits-all boilerplate used by the Postal Service).  

The ACHP report that comes out this week will probably discuss these and many other problems in the disposal process.  Whether it will do any good is another question.  

PRC tells USPS Load Leveling not ready for prime time

March 29, 2014

Earlier this week the Postal Regulatory Commission issued its advisory opinion on Load Leveling, the plan to slow down delivery of some Standard mail to help redistribute the large volume on Monday.  The Commission has essentially told the Postal Service that its plan is not ready for implementation.  The advisory opinion says that it would be a good idea to do more testing in the field and to work more closely with the big mailers, the ones who will be most impacted by the changes.  The opinion is here, and the PRC press release is here.

As the Commission concludes, “The Postal Service’s Load Leveling Plan presents a potential means of leveling the daily delivery load of DSCF Standard Mail; however, the plan appears to need more development before being implemented on a nationwide basis.”

The advisory opinion recommends that the Postal Service do several things before proceeding with a national rollout: a cost-benefit analysis to ensure the plan is cost effective, additional field tests, some volume impact studies, and more extensive customer outreach.

Who knows what will happen now?  It has seemed for a while that the Postal Service intended to go ahead with the Load Leveling plan no matter what the PRC or anyone else said about it.  That’s how several of the big mailers felt anyway, and one of the biggest, Quad/Graphics, claimed that the Postmaster General told mailers in a webinar on January 10, 2014, that he planned to go ahead with the Load Leveling Plan regardless of the Commission’s opinion. 

That also seemed to be the tone of the Postal Service's Final Rule on Load Leveling, which was published in the Federal Register on March 5.  The Rule mentioned the advisory opinion only in a footnote and gave no indication that the Postal Service was waiting to hear from the Commission before proceeding. 

Instead, the Rule stated that the effective date of implementation would be April 10, 2014 — just a couple of weeks after the expected date of the advisory opinion.  The Postal Service thus left itself virtually no time to follow up on any recommendations the Commission might offer.

An article that appeared yesterday in Direct Marketing is entitled "USPS Delays Load-Leveling Plan," which seems to indicate that the Postal Service now plans to postpone implementation.  But the article offers no evidence for this.  In fact, it quotes Postal Service spokesperson Sue Brennan saying simply, "The Postal Service has received the PRC's Advisory Opinion and the recommendations are being reviewed."  Ms. Brennan says nothing about delaying implementation.

The advisory opinion does create a dilemma for the Postal Service.  Will it accept the Commission’s recommendations and do more work before deciding to move ahead, or will it tell the PRC, "Thanks for your advice, but management knows best and we're proceeding as planned"?  The answer to that question will say a lot about how the Postal Service views PRC advisory opinions.

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