The year of wishful thinking: The market research on Network Rationalization

July 23, 2012

At the end of last week, the participants in the Advisory Opinion on Network Rationalization submitted reply briefs that address the issues and arguments in the initial briefs filed a couple of weeks ago.  Much of the debate about the advisability of proceeding with the consolidation plan hinges on the market research conducted last year to determine how big the revenue losses caused by the change in service standards might be.

As those who have been following this story know well, there were two phases of quantitative research.  The first round was conducted last August.  When the results came in, the Postal Service estimated a total volume loss of 7.7%, a revenue loss of $5.3 billion, and a net contribution loss of $2 billion.  That net loss would have nearly wiped out all of the $2.6 billion in operational savings from the consolidations. 

The Postal Service decided it needed to have the research firm re-do the survey, and the results of the second phase, done in October, were presented as testimony with the Request for an Advisory Opinion in December.  The Phase 2 survey showed a total volume loss of 1.7%, a revenue loss of $1.3 billion, and a net contribution loss of $500 million.  (All the numbers for the two surveys are here.)

The Postal Service didn’t mention the existence of the Phase 1 research in its initial testimony, but after a number of interrogatories were posed concerning the market research, the Postal Service revealed there was an earlier phase.  The Postal Service claimed the earlier round of research had been “abandoned” and left “incomplete.”  This research was “flawed” and “unreliable” because the concept statement read to participants to initiate interviews had mentioned other initiatives on the table — closing post offices and eliminating Saturday delivery — and this led customers to overestimate how much less mail they would send if service standards were changed.  

Several participants in the Advisory Opinion have argued that the Phase 1 research was valid, probably more valid than the Phase 2, and the Postal Service is seriously underestimating how much revenue it will lose.  In its Reply Brief submitted a few days ago, the Postal Service responds to those arguments. 

This section of the Reply Brief is entitled: “Opposition to reliance upon the Phase 2 quantitative market research estimates of the impact on mail volume caused by MPNR [Mail Processing Network Rationalization] is based on wishful thinking, not science: The only valid estimation of impact upon mail volume of changes in service standards derives from the Phase 2 research.”

The tone of that title pretty much captures the Postal Service’s attitude.  This section of the brief is really a piece of work, and it’s worth a closer look.

Revised POStPlan list with APOs

July 21, 2012

A couple of days ago the Postal Service gave the Postal Regulatory Commission a revised list of the 17,752 post offices impacted by POStPlan.  The new list includes the Administrative Post Office (APO) that will manage each Remotely Managed Post Office (RMPO). 

You can download the entire new list on the PRC website here.  An abridged list (with some of the columns omitted) is available more readily online as a Fusion Table here, and as an Excel spreadsheet here.  These lists show the APO for each RMPO, as well as the distance between them. 

The new list also shows that the new EAS Level under POStPlan has been changed for about three dozen post offices. You can see a list of these changes here.


APOs and Distances from RMPOs

There are about 4,500 post offices identified as APOs.  It’s difficult to determine exactly how many because the list provided by the Postal Service last week includes only the post office’s name, not an address or identification number, and several post offices share the same name. 

The Postal Service’s witness for POStPlan, Jeffrey Day, said in his testimony that approximately 4,561 post offices will be upgraded to Level 18, and of these approximately 3,907 will serve as APOs.  That means there are probably about 600 post offices that will serve as APOs that have not appeared on a POStPlan list until now.

There are 12,690 RMPOs assigned to an APO.  The average distance between an RMPO and an APO is 11 miles, and the median is 9.7 miles. 

More than 2,841 RMPOs are more than 15 miles from the APO, and over 400 RMPOs are more than 25 miles from the APO. 

The driving distances range from 0 to 57 miles, but as the zero indicates, there are problems with the distance numbers on the spreadsheet.  Seven RMPOs are listed at 0.0 miles from the APO.  For example, the post office in Colp, Illinois, appears as 0 miles from its APO in Herrin, but on Google maps, the distance is 3.4 miles.

As a random check of the new list indicates, there are many such discrepancies.  For example, the post office in Monticello, New Mexico, is supposedly 10.9 miles from its APO in Truth or Consequences, but Google maps and the USPS locator both show it at 21 miles.  The post office in Custer, Kentucky, is listed as 10.9 miles to its APO in Irvington, but Google maps says 13.1 miles and the USPS locator, 13.3.

Then there are a few howlers, like the post office in Ewell, Maryland, which is said to be 57 miles in driving distance from its APO in Crisfield.  Maybe so, but Ewell is on Smith Island, and you’ll need to do your driving by boat.

A day with Mr. Day: Cross-examining POStPlan at the PRC

July 17, 2012

USPS Manager of Retail Operations, Jeffrey Day —  the Postal Service’s one and only witness for POStPlan — testified before the Postal Regulatory Commission last week.  He was there to be cross-examined about the details in the plan to reduce hours at 13,000 post offices. 

There wasn’t much in the way of Perry Mason moments, and judging by the questions from the Commissioners and the PRC’s Public Representative, there doesn’t seem to be a lot of opposition to POStPlan.  With the two postmasters associations both on board, it appears that only the APWU is interested in challenging the plan, and its concern seems to be who’s going to be staffing the POStPlan offices.

One of the more interesting things about the hearing was the appearance of a new participant.  Attorney Elaine Mittleman, who has been helping to save post offices after her office in Pimmit, Virginia, was closed last year, was in the hearing room to ask questions of the Postal Service witness.  Whatever flaws there may be in the Advisory Opinion process, the fact that an average citizen, officially representing just herself, could join the Commissioners in the questioning says a lot about the Commission’s commitment to transparency and public participation.  


In the beginning there was POStPlan

We’ve known for some time that POStPlan got started as early as December 2011 or January 2012, when the Postal Service met with the postmasters organizations to discuss the plan.  The foundations of POStPlan go back months before that, however.  In March 2011, the Postal Service proposed changes in federal regulations that redefined “consolidation” and “postmaster” in ways that made it possible to staff a post office with someone other than a postmaster and to downgrade independent post offices into Remotely Managed Post Offices (RPMO) under the authority of an Administrative Post Office (APO).

The Postal Service itself, however, has not had much to say about when POStPlan was actually conceived.  In his testimony last week, Mr. Day gave us a clue. 

The APWU attorney was asking Mr. Day if the Postal Service had given any consideration to a different set of assumptions for calculating the savings under POStPlan.  (That was apparently a reference to using union workers rather than Postmaster Reliefs.)  In response, Mr. Day said that he had seen a presentation, made “months before” he came on board at postal headquarters, “that did show a couple of different options.” 

A little later in the hearing, Mr. Day was asked explicitly by the APWU attorney — it was her final question — if he knew when POStPlan was conceived.  Mr. Day replied that he didn’t know; he just knew that when he arrived it was at a “very early stage.”

As Mr. Day says in his testimony, he started in his job at postal headquarters in January 2012.  “Months before” would push the origins of POStPlan back into the fall of 2011. 

Relocating Redmond: A promise the Postal Service didn't deliver

July 15, 2012

Redmond, Washington, is a town of 54,000 located just 16 miles east of Seattle.  It’s best known as the home of Microsoft and Nintendo, and it’s one of the most affluent communities in the state.  The town’s biggest problem seems to be growing pains — the economic boom of the past two decades has been causing a lot of traffic and sprawl.

The city has been trying to address the problems by promoting Downtown Redmond.  They’re encouraging walking, biking, and public transportation, and they’re investing in capital improvement projects to make the downtown more vibrant with retail businesses, restaurants, apartment buildings, and recreation destinations.

The whole plan is described in a brochure called “Redmond: Creating Choice, Connecting Community.”  It calls attention to downtown Redmond’s small-town feel and sense of history.  It’s a place “oriented to pedestrians and bicycles, with attractive ‘local’ streets appropriate for a destination environment.” 

Redmond is also known as the “Bicycle Capital of the Northwest,” thanks to an annual bike race, and there are numerous bike shops, sculptures and paintings of bicycles dotting the streets downtown, and bike lanes and unusual bike racks everywhere.

Downtown Redmond has just about everything — lots of restaurants, shops, parks, historic buildings, a pedestrian-friendly streetscape, and a booming economy.  As of July 28, however, downtown Redmond will be lacking one essential civic amenity — a post office.

In a couple of weeks, the post office, which is currently located in the middle of downtown (A on the map), just a few blocks from city hall and the library, will be relocated to a large mail distribution center (the Seattle DDC-East) on the outskirts of town (B). 

The new location couldn’t be worse for a retail business.  It’s on an industrial strip without a shop or home in sight, and it’s separated from downtown by the freeway that goes to Seattle.  No one will be walking to the new Redmond post office, and not many will be biking to it either. 

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