Postal Policy Panel
Day Two March 16th 11:00 – 12:00 noon

Session Overview

Discussions around the future of America’s postal ecosystem would not be complete without touching on legislative issues governing the USPS in the U.S.  This esteemed panel will be moderated by PostCom’s Exec. Vice President Jessica Lowrance, and will include John Kane, senior governmental affairs advisor under Senator Tom Carper, U.S. Senate Committee on Homeland Security and Governmental Affairs; Joe Murphy, Deputy Director, U.S. Department of State Bureau of International Organization Affairs; Jim Sauber, Chief of Staff, National Association of Letter Carriers (NALC); Robert Taub, Acting Chairman, Postal Regulatory Commission (PRC); Lori Rectanus, Government Accounting Office (GAO), and Tammy Whitcomb, USPS Deputy Inspector General.

Our Favorite Postal Visionary Moments from this session:

“As the Postal Service continues to try to be responsive to consumer demands, it needs financial resources, whether it be for new vehicles, or maintaining the network.  Though the USPS has shown a net loss since the passage of PAEA in 2006, in the last two years it has had controllable income of over one billion dollars.”  Jessica Lowrance, Association for Postal Commerce (PostCom)

“We have to innovate and use the existing network to help the USPS grow.  The private sector is good at innovation – the Amazon grocery delivery through USPS is an innovative use.  Customers need to help drive innovative use of the network.”  John Kane, U.S. Senate

“It’s not just growth in ecommerce driving these changes, it is the decline in traditional letter mail which is happening internationally, and posts are looking to ecommerce to make up for that lost volume.  But different countries have different revenues so not all can make up that loss.  The rate of cross-border volume growth lags significantly behind that of domestic, for many reasons.”  Joe Murphy, U.S. Dept. of State

“The Postal Service in PAEA was given a very unique and onerous burden to pay about $5.5 billion a year, hardwired into the law, to pre-fund retiree health benefits.  No other company or agency in the country pre-funds its retiree health in that way. So 89% of the USPS’ $55 billion in losses over the past 10 years is attributable to this pre-funding requirement.” Jim Sauber, National Association of Letter Carriers (NALC)

“Shipping and parcels are a growth area for the Postal Service right now…however at the end of the day it is still only a small part of the Postal Service’s overall revenue and volume, but it underscores the enormous strength of the system.” Robert Taub, Postal Regulatory Commission (PRC)

“There are lots of opportunities, but also opportunities for mis-steps.  The USPS ‘PostalProud’ initiative emphasizes how important than customer connection is and how to make it more valuable.” Tammy Whitcomb, USPS Office of Inspector General

“The Postal Service is on the GAO high risk list because the fundamental business model we are trying to achieve right now in being self-sustaining is no longer working.  It needs to be able to align its costs and revenues.  Until we have a vision of the future business model, we will keep arguing about what way to go.”  Lori Rectanus, Government Accountability Office (GAO)

 

Session Presentations

No Slides Were Used in this Panel Discussion

Check out the Video of this session on the PostalVision YouTube Channel

In-Depth Session Coverage:

Postal Policy-Makers Engage at PostalVision 2020/6.0

PostalVision 2020/6.0 (held March 15-16, 2016 just outside Washington, DC) once again featured that nation’s leading postal policy-makers, engaged in a lively discussion about the future of the U.S. postal system.

The panel was moderated by PostCom’s President Elect Jessica Lowrance, and included the Hon. Robert Taub, Acting Chairman of the Postal Regulatory Commission (PRC); John Kane, Senior Governmental Affairs Advisor for Senator Tom Carper, Chair of the U.S. Senate Committee on Homeland Security and Governmental Affairs; Joe Murphy, Chief, International Postal Policy Unit, Office of Specialized and Technical Agencies, U.S. State Department Bureau of International Organizational Affairs; Tammy Whitcomb, Acting USPS Inspector General; Lori Rectanus, Director, Physical Infrastructure Team, U.S. Government Accountability Office; and Jim Sauber, Chief of Staff, National Association of Letter Carriers (NALC).

B2Me and the USPS 

The overall theme of the PostalVision 2020/6.0 event was “B2Me” and how growing consumer empowerment and demands are changing the global postal ecosystem.   How is the U.S. Postal Service (USPS) responding to the B2Me phenomenon and can it continue to handle the ever-increasing ecommerce parcel volume, Lowrance asked the panel.

Sauber said the USPS has an unmatchable network served by NALC’s members, who visit 152 million delivery points, 6 days per week, with extended Sunday and early morning delivery in some markets.  “Our members are poised to help the USPS succeed,” he said, noting that the economies of scale and scope and the relationships carriers have with both residential and business customers make the USPS uniquely positioned to respond to consumer demands.  He noted that about 18 million Americans are running a small business out of their home and said USPS carriers have relationships with those people.  The NALC wants to work to leverage the value of that asset, Sauber said, as it has through programs like CustomerConnect which helped the USPS build its package and Priority Mail volume.  He said if time was built in on delivery routes for carriers to sell small businesses on the value of direct mail, for example, it would be a very successful way to build small business volume and help all in the retail market.

Whitcomb agreed that the USPS’ infrastructure of employees is unmatched and presents lots of opportunities, but cautioned that there are also many opportunities for missteps.  She said customer connections are critical and noted the recent #PostalProud initiative emphasizes the importance of those connections and how USPS employees are part of something bigger.

Rectanus noted that while USPS parcel volumes are growing, the pieces are not as profitable as declining product lines such as First-Class Mail.  The USPS has to process these pieces in a cost-efficient manner, she said, noting that the GAO has identified some high level ways the USPS could become more efficient and manage how it identifies costs.

Taub agreed that Competitive Services parcels are a growth area for the USPS, but said at the end of the day it is still a small part of the overall USPS volume, with total profits that are much less than the margins the USPS sees from declining product areas. “Keep in mind,” he said, “the enormous strength of our postal system, which touches businesses and households every day and in every key sector, acting as a cog in the economy and consumer interaction.”  Taub said he is optimistic that if the USPS’ financial situation can be improved and honest discussions can be held to define the USPS’ universal service obligations, there is enormous strength in the system for the future.

Sauber said that integration and coopetition have been part of the delivery environment for years, noting that the USPS performs last mile delivery for UPS and FedEx, but also is a big customer of FedEx for air transportation services.  “We think direct mail has a long term future and integrating with the ecommerce boom is the next step,” he said, “and we can build a good business model around direct mail, packages and ecommerce delivery.”  “We are seeing the First-Class Mail volume decline has moderated and is slowing down with an overall flat volume last year,” he said, “so we should not ignore the opportunities there, and should be promoting things like vote by mail and other uses of First-Class Mail.”  “Our challenge is to overcome the policy constraints and find ways to stabilize the USPS’ finances,” he said, “and come up with sensible reforms.”

“Innovation and use of the existing network to allow the USPS to grow,” must occur, said Kane. He noted that the USPS is still a government institution at the end of the day, however, and typically government institutions are not as good at innovating as the private sector.  But the USPS has shown innovation in initiatives such as the use of its delivery network for Amazon Fresh, he noted.  “It’s up to the private industry to come up with ideas and collaborate with the USPS,” he said.

How are Other Posts Responding to the Changing Mail Mix?

When asked whether the American postal system is being affected differently than other posts, Murphy said that letter mail volumes are declining internationally as well as in most domestic markets, and posts are looking for parcels to make up for lost lettermail volumes and revenue, but different countries use different pricing regimes and while some can make up the lost revenue, others can’t.  International trends are different than domestic, he noted, but in general the international growth rate lags well behind the growth rate in most domestic markets for many reasons, not the least of which is are customs challenges.

Murphy reported that the Universal Postal Union (UPU) has started an initiative to modernize the products/services to use different divisions of postal products, moving from a system primarily based on weight to differentiate between packets and parcel post, to a more content-based system (goods versus documents).  The changes will be a slow evolution, he cautioned, because ultimately the UPU has to coordinate 192 countries, each with its own government regulations, but the changes would help resolve much of the controversy around terminal dues.  In the short term, the UPU will work on improving the terminal dues structure, he said, noting that last month a terminal dues proposal was recommended that would make critical changes starting in 2018 to the rates that China and other rapidly emerging export countries pay for terminal dues. Murphy said the final decisions will be made at the UPU Congress scheduled to be held in Istanbul later this year.

Legislation on the Table

In response to the question of actual postal legislation being considered right now in the U.S., Kane said there are many special interests competing in the legislative discussions and Sen. Carper and his staff are working on how best to balance the needs of all stakeholders.   He said the root cause of the problems with the USPS needs to be determined, as well as defining its Universal Service Obligation (USO). He said every stakeholder group has a different opinion on what it means.  The USPS has a mandate to deliver to every person in the country, he said, but does the USO mean all get the same delivery standards, frequency and time frame?

Senator Carper has been a strong advocate for the USPS his entire career, Kane said, and he wants to get the USPS’ debts paid off.  “We are on board in considering anything that can make that happen,” he said, but said there needs to be balance and the solution can’t make a big debt for taxpayers under the Congressional scoring process.  “Whatever we pass in Congress won’t be a totally comprehensive package,” he said, “but we hope to come up with a stabilization package and then continue to work on it long term.”  “This is not a political issue,” he said, “it is a business, union, urban, and rural issue.”  He said the Carper iPOST legislation would present a “bandaid’ for the next 10 years, then a “sustainable stitch” would need to be put in place “so the USPS can heal and move forward.”

Taub said that in a perfect world, we would go back to the basics and fundamentals in defining the USPS’ universal service obligation, the cost of that, then flow from there and structure. “But the house is on fire financially,” he said, “so it is key to resolve that.”

In response to the question of what can be done to help with the Congressional process, Kane said “we need your support and work with us, collaboration, and discussions with your Congressional representatives.”  “We are very concerned about the time,” he said, “we have to get something done in this Congress, we’ve been working on it since 2008.”  “The iPost bill may not be perfect,” he said, “but we are open to changes.”  “We are not open to letting the USPS fail,” Kane emphasized, “so we have to fix this.”

 

In the News

Postal Service Forced to Take Nearly Unprecedented Step of Cutting Prices

Whatever Reform Brings the USPS Still has to Fund Benefits 

Postal Reform Bill Earns Bipartisan Support in Congress 

NALC president tells Senate committee consensus postal reform is possible 

Calls for postal reform grow louder 

Restructuring the U.S. Postal Service to Achieve Sustainable Financial Viability