How Network Rationalization speeds up Standard Mail and hastens the demise of First-Class

April 18, 2012

Sometime over the next few days, the Postal Service is expected to publish the final rule implementing the service standard changes that are the foundation for the Network Rationalization plan to consolidate over 220 mail processing plants.  First-Class Mail that is currently delivered overnight will be delivered in two days, and much of the mail delivered in two days will take three.  Periodical mail will slow down as well.

When it published the proposed changes in service standards in the Federal Register in December, the announcement stated, “The Postal Service is not proposing any revisions to the service standards for Standard Mail and Package Services pieces mailed within the contiguous forty-eight states.”

That’s only partly true.  The service standards for Standard Mail will remain 3 to 10 days for the continguous US, but the plant consolidations will lead to some significant changes in delivery times for most Standard Mail. 

The changes are probably not what you’d expect.  The Postal Service is actually planning to speed up Standard Mail. 

The Postal Service hasn’t said much about this, but the big customers who send a lot of Standard Mail are probably well aware of what’s going on.  The changes, after all, are being made for their benefit.

The reconfiguration of the processing network is not simply about eliminating “excess capacity” — like sorting machines that run eight hours instead of twenty — or about adapting the system to declining volumes of First-Class Mail.  It is also about reconfiguring the network to better serve the big mailers.

The Postal Service’s biggest customers — its National and Premier accounts — have been among the staunchest advocates of downsizing because they see it as key to keeping postal rates low.  At the same time, these customers are concerned about relaxing service standards for First-Class Mail and Periodicals, as we saw in their responses to the marketing survey that showed slowing down the mail would cost the Postal Serive $5 billion worth of business. 

It turns out that the reconfiguration of the processing system may have an effect no one has been talking about: faster delivery for Standard Mail.

 

Changes in Service Standards for Standard Mail

You can see the changes in the service standards for Standard Mail on the USPS website.  There’s a page on the site called the “National Customer Support Center,” which provides information primarily useful for big mailers and members of the MTAC — the Mailers' Technical Advisory Committee, a group of important industry stakeholders.  The Support Center has a page called “Modern Service Standards,” with links to database tables for the current and future service standards.  You can also see a visualization of the data on a map page.

Looking at the maps for a particular three-digit ZIP code, it’s easy to see how First-Class mail will be affected.  The website provides a map of current standards and a second map for the future standards.  in comparing them, you can see the area for one-day delivery disappears, and the area for two-day gets smaller; the area for three-day takes over most of the map.

 

Mid-Island, NY (005)

If you look at a pair of maps for Standard Mail, however, something much different happens.  Here, for example, are the maps for Mid-Island, New York.  The first map shows the service standards for Standard Mail under the current system, and the second map shows how things would change with the Network Rationalization plan.

As the first map shows, in the current processing system, there’s a checkerboard pattern with the area nearest the Mid-Island facility getting the mail in five days (light blue); regions in the northeast get delivery in six days (dark blue) or seven (yellow); the Midwest and most of the West, seven or eight days (brownish-red); and the Northwest, eight or nine (dark green). 

Under the new system, as seen in the second map, the checkerboard disappears, and there are basically three homogenous zones, with delivery ranging from six to eight days (for the continental US).  The three-day area close to the facility gets a little bigger as well.

It was sad when that great ship went down: The Postal Service heads for an iceberg

April 14, 2012

A hundred years ago this Sunday, the Titanic collided with an iceberg and sank in the icy waters of the North Atlantic, causing the deaths of over 1500 people.  Researchers have recently announced a new theory on the cause: Unusual weather conditions produced a false horizon that hid the iceberg from view.  In other words, a mirage

Whatever the immediate cause, the disaster could have been avoided if the ship’s captain had listened to warnings and sailed more slowly in those dangerous waters.  But he and his officers believed the great ship was "virtually unsinkable," and it was ultimately their own hubris that sunk the Titanic.

The leaders of the Postal Service are under the influence of their own form of hubris.  They’re always right “because they said so," and they’ve convinced themselves that the only way to deal with declining mail volumes is by radically downsizing the workforce.  They are even willing to cause self-inflicted damage by implementing plans they know will drive away billions of dollars of business.  

The officers at the helm seem determined to sink the Postal Service.  Their business plan will send the Postal Service into a downward spiral of falling revenues and deeper and deeper cuts.  But it's full speed ahead, and nothing will steer them in another direction, even though it's clear they are heading straight toward an iceberg of their own creation.  

Blame it on unusual weather conditions.

           

Bad directions from the GAO

It didn’t help matters this week that the GAO issued a new report (GAO-12-470) on the Network Rationalization plan to consolidate over two hundred mail processing plants.  The GAO doesn’t make any new recommendations, but the title of the report says it all: “Mail Processing Network Exceeds What Is Needed for Declining Mail Volume.”  And that's what all the headlines are repeating.

The report, though it makes a nod toward being balanced by including dissenting voices, is an obvious endorsement of the Postal Service’s consolidation plan.  That’s why it's been warmly embraced by Congressman Darrell Issa, whose House bill would completely dismantle the Postal Service.  “We cannot allow political interests to trump our responsibility to restore the Postal Service to solvency and protect the taxpayer from picking up the tab for surplus facilities,” said Issa in response to the report.  Issa was probably also pleased to see that the GAO had some kind words to say about his proposal to create a BRAC-like Commission empowered to close post offices and processing plants without a lot of bureaucratic oversight or community input.

The GAO report doesn’t introduce new evidence that the processing network is too big, nor does it provide any analysis demonstrating that the Network Rationalization plan will actually help matters.  The report basically just reviews the Postal Service’s plan, and then goes over some of the objections raised by postal unions and mailers, along with the Postal Service’s responses.

The authors of the GAO report do not seem to have spent much time studying what the Postal Regulatory Commission has learned about the Network Rationalization plan.  The PRC's Advisory Opinion won't be completed until late summer, but if the GAO had looked at the testimony, interrogatories, and transcripts, the report would be a lot more useful.  Instead, as we learn in a footnote on page 14 of the report, the GAO says, "Since PRC is examining USPS’s proposal and cost estimates for revising its delivery service standards, we did not assess the reliability of USPS’s database used for estimating the cost savings."

Much of the report is a rehash of previous GAO reports.  For years now, the GAO has been arguing that the Postal Service needs to reduce costs by eliminating post offices, consolidating the processing network, and downsizing the workforce.  These earlier reports (almost all of them written, by the way, by Phillip Herr) include “U.S. Postal Service: Actions Needed to Stave off Financial Insolvency” (GAO-11-926T; Sept. 6, 2011); “Action Needed to Facilitate Financial Viability” (GAO-10-624T; April 15, 2010); "Strategies and Options to Facilitate Progress toward Financial Viability" (GAO-10-455; April 2010); and “Network Rightsizing Needed to Help Keep USPS Financially Viable” (GAO-09-674T; May 20, 2009).

Herr's reports develop one theme — downsize or else — and the latest GAO report, though not by Herr himself, is no exception.  Senators Tom Carper and Susan Collins, who requested the report, had to know what they’d get before they asked for it.  As Carper said in response to the report, “it confirmed much of what we already knew.”    

 

The Internet Mirage

The GAO’s argument on behalf of Network Rationalization spins the facts in numerous ways.  The report begins, for example, with a chart showing how the Postal Service has been running multi-billion dollar deficits since 2007.  It’s a familiar scare tactic, used countless times by the Postal Service and the GAO.  As we’ve heard so often, the Postal Service has wracked up a $25 billion deficit since 2006 because first-class mail is dropping fast due to electronic communications.

You’d need to go to page 11 of the report to find the word “recession,” and it appears only once in the entire document.  There we learn that “declining First-Class Mail volume is primarily attributed to the increasing number of electronic communications and transactions.  The recent recession and other economic difficulties have further accelerated mail volume decline.” 

It’s true that before the 2008, declines in first-class mail could be “primarily attributed” to the recession, but those declines were modest.  From peak first-class volumes in 2001 to 2007, before the recession began, first-class mail volumes declined from 103.6 billion to 96.3 billion — a total drop of 7%, or just over 1% a year.  From 2007 to 2011, first-class volumes declined from 96.3 billion to 73.5 billion — a drop of 23%, or about 6% a year. 

In other words, first-class mail has declined by 30% over the past ten years.  About 7% of that 30% happened in the six years before the recession, and the other 23% happened in the four years after the recession began. 

The Postal Service and the GAO thus have it backwards.  The Internet is not the “primary” cause of the volume drop; the recession is.  Looking at the average annual declines of 6% since 2007, it’s likely that about 1% was caused by the Internet, and the other 5% by the recession.

That’s almost exactly what the Postal Service has told the Postal Regulatory Commission in its case for an exigent rate increase.  In that context, the Postal Service argued that for fiscal years 2008 and 2009, the height of the recession, the economy was responsible for 67% to 97% of the losses, as well as a large part of the losses since then.

The reason the GAO and the Postal Service don’t like to mention the recession is simple.  If you want to permanently dismantle the Postal Service, you need a permanent problem — like the Internet — and not a temporary, cyclical one like the recession.  The GAO might have noted that were it not for prepayments to the retiree health care fund, the Postal Service has basically broken even for the past few years, despite the recession.  But that wouldn't have helped with its case for consolidation.

 

First-class volumes, not falling fast enough

The GAO report has a chart projecting first-class mail volumes through 2020, and of course, it shows that volumes will continue to drop precipitously.  It says that first-class mail volumes in 2020 will be 40 billion pieces, which represents an annual decline of about 5%.

The source for this chart is labeled as “GAO analysis of USPS data,” so it’s hard to know how they came up with the numbers or why they’ve decided that first-class mail will continue to decline at a rate comparable to the past four years.  That represents a pretty pessimistic view of the economic recovery.  The estimate is also worse than the one provided to the Postal Service by the Boston Consulting Group, which said 2020 first-class mail volumes would decline at about 3.5% a year.  

But BCG was only looking at the effects of Internet diversion on mail volumes.  Perhaps the GAO estimates take into consideration the volume losses that the Postal Service will inflict on itself by implementing service cutbacks. 

It’s crazy when you think about it.  The Postal Service is worried about declining first-class mail volumes, and what does it do?  It comes up with a plan specifically targeted at reducing service standards for first-class mail — as well as raising first-class postage by 11% to fifty cents.  It’s as if the Postal Service can’t wait to get out of the business of delivering first-class mail.  

 

Gone Postal: A work in progress

Saturday, April 14, 2012
See video

 

Filmmakers launch documentary film trailer for Gone Postal in anticipation of Occupy the Post Office events scheduled across the nation on April 17th.

With the US Postal Service caught in the national spotlight, now more than ever, Americans deserve the truth behind the headlines.  The documentary Gone Postal will uncover what brought America’s most trusted institution to its knees.

The film is the result of a 4 year, cross-country investigation.  It explores a workplace rife with fear and mistrust, from the voices of the men and women on the front lines, battling a management that rewards fraud, retaliation, and abuse at the highest levels.

Filmmaker Jay Galione was inspired to take a deeper look at the United States Postal Service by his father’s experiences as a career Postal Clerk and Union Shop Steward who was targeted for standing up for the rights of his fellow workers.  Collaborator Sheila Dvorak draws upon her dedication to grassroots activism to rally communities around this indispensable public service, and the dedicated American workers who deliver for us all each day.

Appeals in vain: The long odds on success at the PRC

April 9, 2012

Over the past fifteen months, more than two hundred communities have tried to save their post office from being closed by appealing to the Postal Regulatory Commission (PRC).  For nearly all of them, the effort was in vain.  

Between January 1, 2011, and April 6, 2012, the PRC issued orders on 180 appeals.  Only thirteen of them were successful, meaning the PRC remanded the Final Determination to close the post office back to the Postal Service for further consideration.  In the other 167 cases, the PRC affirmed the Postal Service's decision to close the post office.  Those aren’t very good odds for people trying to save their post office.

 

Ties favor the Postal Service

The PRC is supposed to have five commissioners, but the Commission is awaiting the Senate confirmation of Tony Hammond, and for the past several months, there have been only four commissioners.  Since December, when the moratorium on post office closings went into effect, every PRC order affirming a Final Determination to close a post office has ended in a split decision, two votes to two.  

Commissioners Mark Acton and Robert Taub have consistently voted to affirm the decision to close the post office, and Chairman Ruth Goldway and Vice-Chairman Nanci Langley  have consistently voted to remand the closing decision back to the Postal Service.   (For what it’s worth, Acton and Taub are Republicans; Goldway and Langley, Democrats.)

There's nothing in the PRC's written rules about how to handle tie votes, but the Commission has determined that in the absence of a majority, the Final Determination stands.  All of the tie votes have thus led to the Commission issuing an "Order Affirming Determination," that is, a ruling affirming the Postal Service's Final Determination to close the post office.  Whether or not the Commission has the authority to issue such orders may eventually be challenged in court.

In the meantime, with their votes, Commissioners Acton and Taub have sealed the fates of about 127 post offices — all those for which appeals were decided during the moratorium.  Unless Congress intervenes or the Postal Service changes its mind, these post offices will close in late May or early June, soon after the moratorium ends on May 15.

The cartoon at the right comes from 1986.  That was a period when a lot of post offices were closed — 111 in 1985, and 150 in 1986.  Appeals at the PRC (then the Postal Rate Commission) weren't usually successful either.  In 1985, twenty-four orders affirmed the closing, and there were only three remands.  Even those bad odds, however, were better than what we've been seeing lately.

In 2011, the Postal Service closed 430 post offices, and another 240 were issued Final Determinations — most of them will close when the moratorium ends.   Those kind of numbers are totally unprecedented.  With several thousand more closings on the horizon, what's that cartoon going to look like?

 

How the appeals have fared

Since the Postal Service was created in 1971, it has closed an average of a hundred post offices a year;  fewer than nine closings were appealed to the PRC each year.  In 2011, the Postal Service issued 671 Final Determinations.  A third of them were appealed.  

It's taken a while, but the PRC has rendered decisions on nearly all of the 225 cases that have been appealed.  There are thirteen cases still pending, and work on these appeals should be completed by May 3.  Here’s a summary of how the appeals have fared since January 1, 2011, along with some data on appeals going back to 1976, just to provide an historical perspective.  (The data for the past fifteen months comes from the PRC website; an unofficial list of the 2011-2012 appeals is here; information about the historic data is here.)

Period
1976 - 2010
Jan. 1, 2011 - April 6, 2012
Disposition
Number
% affirm vs. remand
Number
% affirm vs. remand
Affirmed
190
75%
167
93%
Remanded
62
25%
13
7%
Dismissed
39
 
8
 
Withdrawn
 
 
24
 
Pending
 
 
13
 
Total
291
 
225
 

As the table shows, for the thirty-five years before 2011, one out of every four appeals ended with an order remanding the closing decision back to the Postal Service.  Over the past fifteen months, the chances of winning a remand have been about one in 14. 

Communities actually had a better chance with the Postal Service, which decided to withdraw the Final Determination in twenty-four cases — almost twice as often as the PRC issued a remand.  (Why the Postal Service changed its mind in these cases remains unknown.)  A few cases were also dismissed, usually because the PRC decided the issue was out of its jurisdiction, as was the case with Venice, California, where a beautiful New Deal post office is being closed and sold, but that's considered a "relocation," not a "closing."

In early 2011, before the number of appeals began to increase significantly due to the step-up in post office closings, the decisions to affirm a closing decision were almost always unanimous.  Then last summer, Chairman Goldway issued dissents on the Freehold, New Jersey, and Fort Smith, Arkansas cases; she followed with several more dissents during the fall.   In November, Langley also began to issue dissenting opinions. 

By December, when the moratorium went into effect, Goldway and Langley were consistently voting to remand the Final Determinations back to the Postal Service.  Since November, they have dissented on 127 decisions. 

It’s not clear why Commissioners Acton and Taub have made it so difficult to win a remand.  Perhaps they believe the Postal Service should have the authority to close post offices as it sees fit, without too much interference from the PRC, which has very limited power over appeals anyway.

Perhaps they think the Postal Service has been doing a satisfactory job with the closing process so that there are rarely grounds sufficient for a remand.  Maybe they feel that unless the Postal Service has blatantly failed to follow the law or obviously demonstrated bad faith, the decision to close a post office should not be remanded on procedural grounds.

The hundreds of thousands of people who filled out questionnaires and attended four thousand town meetings last year probably have a different view of how well the process was conducted.  There have been countless complaints about the Postal Service getting its facts wrong, giving out misinformation, failing to follow its own guidelines, abandoning its obligation to provide a maximum degree of service to rural areas, demonstrating a lack of responsiveness to customer concerns, and giving people the impression that the decision to close the post office was a done deal long before the process was completed.  

Another possibility is that Commissioners Acton and Taub are concerned, like everyone else, about the financial situation of the Postal Service.  Perhaps they believe that if the Postal Service thinks closing post offices is a good way to save some money, it's not up to the Commission to second-guess the decision.   

Whatever their motives, Commissioners Acton and Taub apparently don't believe it is the role of the Commission to help communities trying to save their post offices.  Instead, the Commissioners have taken a very narrow view of what the law requires of the Postal Service when deciding to close a post office. 

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Also: Sarah Ryan's "Understanding Postal Privatization: Corporations, Unions, and the "Public Interest"

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Organizing to Save Rural Post Offices


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