December 2, 2011
On Friday the White House announced that President Obama was nominating Tony Hammond as the fifth commissioner on the Postal Regulatory Commission (PRC). No offense to Mr. Hammond, but that’s probably not good news for communities trying to save their post office or processing plant, and it’s not good news for postal workers either.
The PRC is supposed to have five commissioners, but for months now, there have been only four, and we’ve been waiting to hear who the President would nominate to fill out the term of Commissioner Dan Blair, which runs to November 2012. According to US Code, "Not more than three of the Commissioners may be adherents of the same political party." Currently there are two Democrats — Ruth Goldway and Nanci Langley — and two Republicans — Mark Acton and Robert Taub. Obama could have appointed a Democrat, but instead he chose Hammond, a Republican.
It’s not that Hammond is ill equipped to be a Commissioner. He was on the PRC from 2002 to 2010, and he served twice as its Vice-Chairman. He obviously knows the ropes.
Still, with all those years on the PRC, you wouldn’t say Hammond brings a fresh perspective to the Commission, and he is definitely hard-core Republican. For much of his career, he was a Republican political operative. From 1989 to 1994, he was the director of the Missouri Republican Party, and in 1998 he was Director of Campaign Operations for the Republican National Committee. Hammond was involved with postal matters during the ten years he served on Capitol Hill on the staff of Southwest Missouri Congressman Gene Taylor, the Ranking Member of the Post Office and Civil Service Committee.
Hammond also learned about the Postal Service when he worked as the VP of a direct marketing business. That experience has probably given him a particularly sympathetic understanding of issues facing direct marketers, who play a big role in influencing postal policies, rates, and so on.
Politics shouldn’t matter in PRC decisions, but they do. Since Commissioners perform in a manner similar to judges, they are supposed to make rational decisions based solely on the evidence, independently of their politics. But as we’ve seen with the Supreme Court, justices are human and inevitably influenced by their political persuasion.
Nothing’s more political than postal business. Efforts to downsize the Postal Service are greeted with applause by anti-government, anti-union Republicans, while Democrats have shown more interest in protecting postal jobs. Since Republicans don’t like government regulation of business, they’re less inclined to favor a strong role for the PRC than Democrats might be.
But the Postal Service is not a private business, and postal politics often make strange bedfellows. In the case of the exigent rate increase, for example, the mail industry actually found itself — at least for a moment — siding with the PRC when it turned down the Postal Service’s request for a rate hike last year.
Preserving post offices is another unique case. Elected representatives on both sides of the aisle have been hearing it from their constituents about post office closings. That’s why proposed legislation coming out of a bipartisan committee in the Senate has an amendment that would make it harder to close rural post offices.
The consolidation of processing plants is yet another case where geography often matters more than politics. Many Republicans, who generally favor cost-cutting measures like closing plants, have been fighting to save the plants in their districts.
Generally speaking, though, Republicans are pushing harder than Democrats to make the Postal Service act “like a business” rather than a public service. The bill that comes out of the Republican-dominated House will give the Postal Service much more power to close post offices and slash jobs than the Senate version. It’s Republicans who want to see the the union workforce drastically reduced in size and power, and there aren't many Democrats talking about privatizing the Postal Service.
With a Republican-dominated PRC, it’s hard to imagine many appeals on post office closures winning a “remand” decision. It’s been hard enough getting a victory with two Democrats and two Republicans. Of the last twenty decisions, just two were remanded, and only Chairman Goldway has issued dissents from decisions to affirm the closing.
You can get an idea of how Hammond feels about remanding decisions by looking at the dissenting opinion he co-authored on the case of the post office in Rentiesville, Oklahoma. That office was closed for an emergency suspension in 2004, six years after the discontinuance process had been initiated. In 2010, the Postal Service moved to formally close the post office based on data and public comments that were by that time twelve years old. For that reason, the PRC remanded the decision for further consideration.
In his dissent Hammond wrote, “Remanding this determination requires the Postal Service to engage in a process which will most likely yield the same result as the one it came to in this current case.” As unusual as the Rentiesville case was, that kind of thinking could be applied to any closing decision the Postal Service makes, and it doesn’t bode well for future appeals.
December 1, 2011
Back in the day (circa 1755), it could take six weeks for a letter to go from Philadelphia to Boston if the weather was bad. “It having been found very inconvenient to persons concerned in trade” for the mail to take so long, Postmaster General Ben Franklin gave orders to pick up the pace, and the delivery time was cut in half. Thanks to innovation — from the Pony Express to auto-trucks and airmail — the speed with which the mail is delivered has improved year after year for the past two and a half centuries. But if the current Postmaster General has his way, that’s going to change, and the mail is going to slow down.
Postcom reported yesterday that “the Postal Service will be filing its service changes with the PRC on 12/5. Among the changes -- an adherence to the principle of servicing mail in strict accord with delivery standards, and the abandonment of the targeted ‘in-home day of delivery’ practice within Standard Mail.”
The somewhat cryptic note presumably means that next week the Postal Service will submit a request to the Postal Regulatory Commission (PRC) for another Advisory Opinion. Given the reference to "service changes," this one will apparently be about the Postal Service’s proposal to consolidate the mail-processing network and about the effects this will have on how fast the mail is delivered.
The announcement came at a meeting of the Mailers' Technical Advisory Committee (MTAC), a group of representatives of the direct-mail business, who protect the interests of the industry by making recommendations to the Postal Service. These meetings, we learn today, will apparently henceforth be restricted to industry insiders. (More on that to come.)
Expect a press release from the Postal Service early next week and maybe an interview with the Postmaster General about how relaxing delivery standards is regrettable but inevitable because mail volumes and revenues are dropping through the floor. There will probably also be a response from the unions about what a disaster the whole plan is.
One Advisory Opinion almost done, so it’s time for another
Since consolidations on the scale the Postal Service is envisioning will inevitably result in slower delivery of First-Class mail and periodicals, with impacts on standard mail as well, the Postal Service is required by law to go to the PRC for an opinion about whether the changes comply with laws like Title 39 (e.g., section 3691) and the Postal Accountability and Enhancement Act (PAEA, e.g., Title III). (The PRC’s role in setting “service standards” is discussed in this George Mason study on the “Universal Service Obligation,” pp. 240ff.)
This new request for an Advisory Opinion follows the March 2010 “Advisory Opinion Concerning the Process for Evaluating Closing Stations and Branches” (the SBOC initiative); the March 2011 “Advisory Opinion on Elimination of Saturday Delivery,” and the Advisory Opinion on the Retail Access Optimization Initiative to close 3,650 post offices, due out in a couple of weeks or so.
It’s been clear for a while now that the Postal Service had already begun consolidating the processing network, so it was only a matter of time before it would go to the PRC for yet another Advisory Opinion. It probably should have done so months ago, but it may have been waiting for the RAOI opinion to be completed.
The brief note in Postcom doesn’t say how the Postal Service will articulate its Request (and it's possible the "service changes" referenced in the Postcom note aren't directly related to the plant consolidations), but in September of this year, the Postal Service gave a pretty good indication of where things are headed. In a press release and in a notice published in the Federal Register under the title “Proposal To Revise Service Standards for First-Class Mail, Periodicals, and Standard Mail,” the Postal Service explained what it wanted to do.
The Postal Service proposes cutting its network of processing facilities by more than half, from 500 to around 200. It estimates that this would save up to $3 billion a year. Some of that cost saving would come from not needing to pay rent, maintenance, and utilities for the 300 facilities it closes, but most of the savings would come from cuts to the workforce — the changes would eliminate “as many as 35,000 positions.” In its notice in the Federal Register, the Postal Service concludes by saying that should it "decide to move forward with the Proposal . . . it would request an advisory opinion from the Postal Regulatory Commission," so it looks like that time has come.
Impacts on Service Standards: Slow and Slower
The consolidation plan will have a direct, observable impact on how fast the mail is delivered, and First-Class mail would be the most affected. Currently, 40% of First-Class mail is delivered overnight — it gets where it’s going the next day. About a fourth of First-Class mail is delivered in two days, the rest in three days. According to the new service standards, no First-Class mail would be delivered next day. Instead, half the mail would arrive in two days and the other half in three days. In other words, instead of a 1-to-3 day window, the new standard would become 2-to-3 days.
Delivery of periodicals would also slow down: Instead of a 1-to-9 day window, the new standard would be 2-to-9 days. That probably won’t please publishers, since those periodicals are time-sensitive. But many may prefer slower delivery to an increase in rates — although they may get both.
The Postcom note mentions that the Advisory Opinion will encompass “the abandonment of the targeted ‘in-home day of delivery’ practice within Standard Mail.” That refers to the fact that the Postal Service currently offers bulk mailers an opportunity to designate the date they want their mail delivered to your house.
The Postal Service wants to abandon this practice, and it now looks like it won’t be waiting for the Advisory Opinion to implement the change. In a letter dated Nov. 29, the Postal Service advises mailers that “we will no longer be able to stage and deliver mail using In-Home-Date windows.”
Nov. 28, 2011
"It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair." — Charles Dickens, A Tale of Two Cities
HOW FAST are mail volumes falling, and what's causing the declines? If you've been listening to the Postal Service and reading the news, the answer is obvious: Faster than you can imagine, and all because of the Internet.
Postal Service managers have told that storyline at thousands of public meetings on post office closings and plant consolidations, and it's been reported in thousands of news articles. The line is repeated over and over again, like a magic mantra, and you'd be hard pressed to find anyone who doesn't believe it.
To question the dominant narrative at this point seems like lunacy. Does anyone really think that the Internet isn't putting the Postal Service out of business?
But there is more to the story. If you look closely at the projections the Postal Service is putting out, there are significant discrepancies, which suggests that they're basically just making up numbers. The Postal Service is also offering conflicting explanations for the declining volumes, which suggests that they're less interested in trying to explain what's happening than they are in furthering an agenda — an agenda that is not being fully revealed.
Over the past couple of weeks, the Postal Service has produced two documents — the Form 10-K Fiscal Report for 2011, which came out on Nov. 15, and the Integrated Financial Plan for FY2012, which was released on Nov. 23. Though issued a week apart, the two reports provide wildly divergent projections for mail volume in 2012.
The Form 10-K says, “Forecasting in the current economic environment is subject to significant uncertainties.” That doesn’t stop the K-10 from coming up with an estimate: “The operational plan for 2012 anticipates a reduction in mail volume of approximately 8 billion pieces from 2011 levels with an associated drop in revenue of approximately $2 billion” (p. 69, bottom of the page; Italics added.)
The Integrated Financial Plan (IFP) offers a much worse projection: “In 2012, we anticipate total mail volume of 158.0 billion pieces, a decline of 9.9 billion pieces or 5.9 percent from 2011” (p. 2). (Italics added.)
So what are looking at for fiscal year 2012 — a drop of 8 billion pieces or 9.9 billion pieces? Given how bad both projections are, that discrepancy might not mean much, but that’s a big difference. A couple of billion pieces comes to more than half a billion dollars — way more than the $200 million the Postal Service says it would save by closing 3,650 post offices next year.
How could the Postal Service issue two reports, a week apart, providing such different estimates? It seems as though the Postal Service is pressing so hard to show how bad things are getting, it’s not satisfied with one awful projection and has to come up with an even worse one a few days later. The Postal Service can’t even keep its own numbers straight.
And where are these predictions coming from, anyway? Last year, the Postal Service asked the Boston Consulting Group to make projections for the next ten years. In March 2010, the BCG report predicted total volumes would decline at a rate of between 1.5% and 3.4% a year, with First-class declining between 3.7% and 4.7% a year.
Now that the actual numbers for 2011 are in, we find that from 2010 to 2011, total mail volume declined 1.7% — near the low-end of the range projected by BCG (K-10, p. 18). Given that the economy is still bad and that BCG had assumed it would be better, one would have expected a much steeper decline.
On what basis, then, is the IFP now predicting a whopping 5.9% decline in total volumes for 2012? That is almost twice as bad the worst-case scenario predicted by BCG. The IFP says its projections are based on a "weak economic outlook," but it says nothing about falling back into a deep recession like the one that caused the earlier steep drop.
First-class mail is suffering the most, and the actual drop from 2010 to 2011 — 6.3% — was worse than the worst-case scenario predicted by BCG (4.7%). But why is the Postal Service now predicting an even worse decline of 8.6% for 2012?
No one knows how things are going to go in 2012. The way the economy is looking, perhaps we’re in for a double-dip recession, and volumes will decline just as badly as the Postal Service is predicting — or worse. (The preliminary numbers for October 2011 do look bad.) But the Postal Service’s projections do not assume another steep downturn. They just seem to come out of nowhere.
Cyclical events and secular trends
The Postal Service is not just making up inconsistent projections. It is also offering two contradictory explanations for the drops.
These declines are being caused primarily by two factors — the ailing economy and the shift to the Internet for advertising, bill paying, email, tax returns, and so on. The first cause is considered a “cyclical event” — the economy is always going through periods of growth and recession — and generally speaking, companies try to ride out the bad times without resorting to permanent, large-scale downsizing. In contrast, the Internet effect, or what the Postal Service calls “electronic diversion” or “substitution,” is a “secular trend,” and it’s permanent, so you can’t ride it out, and you need to make more serious — but gradual — adjustments.
The question, then, is: How much effect is each of these two causes having on mail volumes and revenues?
November 27, 2011
A GUEST POST, BY SHERRI MADDICK
Every holiday season TV stations run the fabulous 1947 classic film, "Miracle on 34th Street," starring 9-year-old Natalie Wood. In the movie, there is a nice old man (Edmund Gwenn) who plays Santa at Gimbels Department Store in New York City. He says his real name is Kris Kringle, but he is threatened to be institutionalized because he really believes he is Santa. Only his friend (Maureen O’Hara), who works in the store, and her lawyer friend (John Payne) can save him only by magically proving that he really might be Santa Claus.
At the climax of the film, all the letters to Santa, written by children all over the world, are sent to the court house, where the trial of “Kris Kringle” is taking place. Not to ruin the ending for you, but the lawyer wins the case because the Post Office, "an official agency of the United States government," delivers the letters directly to the courthouse, thus proving Kris Kringle is the actual Santa.
So I am thinking about this Christmas and a possible meltdown of the postal system. Where are all the letters to Santa going to go? Are we going to tell children all over the United States that they now have to EMAIL Santa? You have got to be kidding.
Listening to the endless threats about firing postal workers and closing small and historic post offices around the country, I am hoping that people come to their senses, get creative, and do their jobs, before the childhood tradition of writing letters to Santa becomes extinct.
While I was thinking about “Miracle on 34th Street,” I also could not help but think about another holiday staple, the mailing of Christmas and Chanukah cards. I have been personally making my own cards for many years, using crafty items such as embellishments, stickers, and rubber stamping techniques. I sit for days making these cards, and no two are alike. I get giddy with the thought that people actually look forward to getting a holiday card from me. Often as I am creating them I think, “That one is perfect for my sister” or “Andy would love that one.”
I put a lot of time and effort into those cards, and it’s very personal. Each card is like a gift in itself because it comes from my heart. After all of them are complete, I decorate the outside of each one, checking the addresses of the recipient and placing the holiday postage stamps on them so they are not crooked. Each one is signed by me and bears a sticker for my card-business name that I never had the time to pursue full-time - Cards with Heart. In crafty circles, these kinds of creations are called "mail art," and there are many more people like me out there that do the same thing.
I do this all year long, for birthdays, anniversaries, and so on. People so appreciate a handmade card. I cannot imagine the world without real letters, real cards, and letters to Santa.
I want to know who is going to make the announcement that letters to Santa are over. What will they say? That there is no Santa? That he moved from the North Pole and has no forwarding address? Maybe Rudolph and the other Reindeer took a wrong turn?
Someone is going to have a lot of explaining to do. Not only will we have millions of upset children, but parents all over America are going to have to concoct stories about why letters cannot be mailed to Santa.
If anyone knows the real Kris Kringle, please ask him if he has any ideas to help out the postal system because it’s right about now that we truly need a Miracle — not just on 34TH Street but on every street in America.
(You can leave a comment for Sherri, or send a note of thanks to postal workers, on the ""Send the Love" comment page, here.)