Presidential Postal Commission Hears Day 1 Testimony

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WASHINGTON -- The Presidential Commission on the U.S. Postal Service heard testimony from three officials in its first public meeting held here yesterday.


Peter R. Fisher, the Treasury undersecretary for domestic finance; postmaster general John E. Potter; and Richard Strasser, USPS chief financial officer and executive vice president, spoke before the commission.


Fisher said declining mail volume, continued expansion of the cost to deliver mail and competition from the private sector pose fundamental challenges to the USPS. The commission also should examine whether changes are needed to the postal service's universal service obligation, its pricing methods and other areas, he said.


"You need to help us identify a new business model that will create the postal service for the 21st century," he said.


President Bush established the nine-member commission Dec. 11 to uncover problems with the current USPS structure and suggest legislative and administrative steps to ensure the long-term viability of postal delivery in the United States. The commission is to submit its report to Bush by July 31.


The only options not on the table, Fisher said, are keeping the current system and placing the financial burden entirely on the taxpayer or entirely on the postal ratepayer.


Potter said that 25 percent of postal revenue comes from bills and payments, the mail segment most vulnerable to electronic diversion.


"The potential significant diversion of letters to electronic medium challenges our basic business model," he said. "That model assumes that mail volume and revenue growth will finance the postal service's growing infrastructure of some 1.7 million additional delivery points per year. As new homes, towns and cities are built, the postal service must grow with them."


The USPS is already making changes where it can, Potter said, such as the possibility of phased-in rates, negotiated service agreements with major mailers and finding ways to improve current services.


Ultimately, he said, the primary issue is universal service. "The key question is how can we continue to provide the universal service to all Americans and still make it affordable in the face of potentially declining mail volume. That is the central public policy issue facing this commission."


Strasser said that when a previous presidential commission restructured the postal service in 1971, mail volume totaled 87 billion items delivered to 81 million locations. Last year, volume was 203 billion items to 139 million addresses.


The new addresses require 4,800 new mail carriers and about 80 new facilities a year, he said.


Each panel member had a chance to speak. Issues included e-mail and e-payments, long-term liabilities and obligations related to debt repayment, pension and healthcare costs for retirees, and privatization.


One panel member asked whether the agency planned to expand into electronic communications. Potter said that had been considered, "but that is a private sector world."


Potter also said that the USPS considered privatization when it developed its own transformation plan but concluded it was inconsistent with the requirement for universal service. Even partial privatization would be a problem, he said, because postal services cannot easily be separated. The same carrier brings letters and bills and magazines and parcels, and they all use the same postal transport.


Commission co-chair Harry Pearce, chairman of Hughes Electronics Corp., said that the USPS faces problems similar to many large businesses, including increasing competition and debt. James A. Johnson, vice chairman of Perseus LLC, is the other co-chair.


Mailers and postal officials seemed upbeat that the commission will put some changes into place that they couldn't get through traditional postal reform measures on Capitol Hill.


"They've been talking about reform on the Hill for six or eight years now, and that route just hasn't been very fruitful for us," said Ralph Moden, senior vice president, government relations, USPS. "And I think most people have come to the conclusion that to get something moving on reform, that perhaps [a] presidential commission is necessary."


Others were confident that the commission was on top of the important issues.


"I was very impressed with what I heard today," said Bob McLean, executive director of the Mailers Council. "They were prompt and organized, so it looks to me like they will meet their deadline, and they even had the postal lingo down."


Strasser also was impressed by their knowledge.


"We just sent them a copy of the transformation plan only two weeks ago, and it seemed clear to me that several of them had gotten deep into it," he said.


Strasser also said several commission members toured a processing distribution center in Virginia yesterday.


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