USPS Offers Transformation Plan to Congress

The U.S. Postal Service is looking for regulatory and legislative changes so it can close unprofitable post offices and possibly lower rates for major mailers under a Transformation Plan it presented to Congress and the Bush administration last week.

The transformation would generate an additional $5 billion through 2006 and make it so the USPS wouldn’t have to raise rates again until 2004 if its Board of Governors approves the current rate case. The board meets today and tomorrow to discuss that and other issues.

The 450-page plan was developed at Congress’ request to address both near-term and long-term efforts. Postmaster general John E. Potter unveiled details to the public at the National Press Club in Washington on Friday.

“We have been a valuable asset to this great nation, and we can and will be an asset for decades to come,” Potter said. To do that, “we need to go through a transformation — perhaps one of the most important in our history. It's a transformation that will help us secure the future of universal mail service at affordable rates and give us the tools to protect regular mail and ensure a sound national system well into the future.”

The plan outlines three alternative business models that the USPS could morph into over the next two to three years: government agency, privatized corporation or commercial government enterprise. Each would require structural legislative reform. Potter said the postal service has not found much support for a privatized corporation that would reduce universal service, and a governmental agency would take it back to the days of federal subsidies and taxpayer support.

A commercial government agency, however, would best allow integration of the postal system into the modern economy while preserving the USPS’ ability to fulfill its mission of universal service.

“Instead of breaking even, our financial goal would be to generate reasonable returns,” Potter said. ” Earnings would finance capital projects instead of having to resort to increasing our debt load. Retained earnings would carry us through tough economic times, instead of always resorting to rate increases.”

As a commercialized government enterprise, Potter said the agency also could introduce flexible pricing, possibly giving breaks to large mailers.

“Prices for postal products would still be subject to regulatory review,” he said, but we would have the flexibility to adjust prices based on market demand.”

The transformation plan also outlines steps that the postal service can take now. Most immediately, USPS would lift the moratorium on post office closings. It also may cut back on six-day mail delivery.

“This doesn't mean there will be wholesale closings. We will restart the process to close post offices that have been suspended,” he said, though he did not specify which post offices would close or how many.

Potter said that the USPS and Postal Rate Commission chairman George Omas agreed recently to conduct a joint summit of all stakeholders — from large direct marketers, to publishers of small magazines, to individual consumers – to share what “they believe our industry needs to advance and modernize rate-making.”

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