Since the passage of the Postal Reorganization Act in 1970, the Postal Service has proposed two changes in service that were significant enough to warrant their own regulatory proceeding. These two regulatory proceedings provide the precedent that will determine how the Postal Regulatory Commission will review the change in service standards that the Postal Service is proposing today.
In 1975, the Postal Service filed Changes in Operating Procedures Affecting First-Class Mail and Airmail. In this proceeding, the Postal Service proposed eliminating an archaic class of mail, “Airmail,” and upgrading some three-day First-Class Mail Standards to the standards of “Airmail,” which was two-day delivery. This proceeding set the regulatory process for filing and reviewing service change requests.
As this proceeding represented a service upgrade as well as a reduction in price for long-distance 2-day service, the major issue was the stock of airmail stationary, prepaid cards, and postage in the hands of the public. The Postal Regulatory Commission recommended that that the Postal Service allow continued use of airmail stationary, and accept returns of Airmail prepaid cards and postage so that patrons could purchase lower-priced First Class cards and postage.
In 1989, the Postal Service filed a major service proposal entitled A Proposed Change in the Nature of Postal Services. The proposal changed a significant number of origin-destination pairs from one to two days and others from two to three. In this proceeding, the primary issues were the cost savings that the Postal Service stated it would achieve from the change in service standards, the impact on mail demand, and the economic impact of the service standard changes on Postal Service customers.
Given that this proceeding dealt with a reduction in service quality driven by the demand to control costs, the issues addressed in this proceeding may be raised by the Postal Regulatory Commission. We will have to wait until later today to see whether the Postal Service files market research in support of its filing.
Based on the Postal Service’s presentations to date on the change in service and the reaction of the mailing community, the Postal Service should face limited opposition to its proposal. Most mailers of bulk First Class, Standard Mail, and parcels should have little problem with the changes. Standard and parcel mailers (including mailers of unregulated parcel services) will see no change in their service standards. Bulk First Class mailers can adjust their printing schedules or, in the case of presorters, adjust their sorting schedules, and get service about the same as they now receive.
Objections will likely come from four groups of mailers.
- Periodicals – weekly periodicals face the potential that delivery standards could reduce the viability of their print-based business model. These mailers often cannot adjust their printing schedule without affecting the timeliness of their publication and therefore the value to subscribers. Unfortunately, the alternative is higher postage prices that periodical mailers can ill afford.
- Consumer Advocates- The change in service standards affects consumers and small businesses more than any other type of mailer. Most mail that consumers send are payments with correspondence representing a small portion of what they send. The change in service standards means that consumers need to mail earlier in order to meet payment deadlines or ensure that cards arrive well before a birthday, anniversary, or holiday.Consumer advocates will also focus on the impact of the change on the cash flows of small businesses. Small businesses are more likely to both send bills by mail and receive payments by mail. The service standard change will add two days to the time between when they print a bill and In fact, even if a person pays a bill on-line to a small business, the payment is still likely to be received by mail as companies like Fiserv do not have the ability to make direct bank deposits to most small businesses.
- Rural mailers – Rural mailers face the greatest impact of this change as senders in rural areas are the furthest from processing facilities and will likely require earlier dispatch times in order to meet service commitments. A similar problem faces mailers whose recipients are primarily in rural areas
- Perishable mailers – mailers sending perishable items including live plants, bees, and crickets face a challenge in ensuring that what they send arrives in the condition that they desire. To the extent that these mailers have recipients in rural areas, they may see three-day service be the standard for most of their customers unless they are willing to pay for more expedited service.
As the Postal Regulatory Commission can only present an advisory opinion, the changes that the Postal Service proposes today will be implemented at the end of the first quarter of 2012. The PRC may recommend some modifications to minimize the impact on mailers who are most severely affected. While the Postal Service does not have to accept them, it will likely accept those that do not change the overall thrust of the service change.
The PRC may also request progress reports from the Postal Service on cost savings and service impacts. The Postal Service will likely to agree to prepare these reports, as they have done in the past. These reports will have only a marginal impact on current data collection efforts and management evaluations of its ability to control costs and would likely be required by Congress even if the Postal Regulatory Commission did not request them.
