The DC Appeals Court has thrown out the US Postal Service’s appeal of a PRC decision that found that the USPS had been too generous in the “workshare” discounts it gives mailers for presorting their mail. The USPS had argued, somewhat bizarrely, that the law limiting workshare discounts to costs actually avoided didn’t apply to first class presort because it is a different “product” than regular first class. As the court pointed out, however,

… the statutory language governing workshare discounts does not refer to products. We think the correct statutory analysis here is extremely simple and supports the Commission…

Read the rest of this entry »

From PostCom:

Join PostCom President Gene Del Polito and Postal Regulatory Commission Chairman Ruth Goldway in a discussion about the PRC’s recent issuance of its Annual Compliance Determination.

Click here to download the interview as an .mp3 file, or click the play button below to listen online.

Audio clip: Adobe Flash Player (version 9 or above) is required to play this audio clip. Download the latest version here. You also need to have JavaScript enabled in your browser.

Association for Postal Commerce.

The Postal Regulatory Commission apparently didn’t get any advance notice of the USPS plan to cut Saturday mail delivery- here’s the PRC’s statement:

Washington, DC – Today, the Postal Regulatory Commission learned of the Postal Service’s plans for a new Saturday delivery schedule, to be implemented this August. Under the Postal Service’s revised delivery schedule, mail delivery to street addresses will occur Monday through Friday. Packages will continue to be delivered six days a week, Monday through Saturday. Mail addressed to post office boxes will also continue to be delivered on Saturday. Post offices currently open on Saturdays will remain open on Saturdays. Read the rest of this entry »

The DC Circuit Court of Appeals has ruled in favor of Gamefly in its dispute with the US Postal Service and the Postal Regulatory Commission. The Court ruled that the USPS gave special treatment to Netflix DVDs, while refusing GameFly the same level of service for its DVDs. The Court summarized the dispute:

Because the disks are small and light, they qualify for mailing in one ounce letters through the Postal Service. Unfortunately for GameFly, but as it develops not Netflix, the Postal Service’s automated mail processing often damages the DVDs— particularly on the return trip. Conversely, DVD mailers tend to jam the Postal Service’s automated letter sorting equipment. Again, this has been to the detriment of GameFly but not Netflix. The Postal Service has saved Netflix— apparently its biggest DVD mailer customer— from this crippling otherwise industry-wide problem by diverting Netflix mail from the automated letter stream, shifting it to specially designated trays and containers, hand culling it, and hand processing it. Rather obviously, this is not without cost to the Postal Service. Nonetheless, the Service provides it to Netflix free of charge.

GameFly has requested that the Postal Service extend to its mailings the same treatment afforded Netflix. The Postal Service has refused…

Gamefly asked the Postal Regulatory to intervene in 2009. The Commission, known for its sluggish decision making process, took two years to come up with a fairly incomprehensible decision that basically said GameFly was right, but failed to eliminate the discrimination:

The Commission rejected both of GameFly’s proposed remedies and fashioned one of its own instead. First, it ordered the Postal Service to waive the 20-cent second-ounce charge for DVDs mailed as flats. Second, it ordered the Postal Service to refrain from imposing a nonmachinable surcharge on any qualifying round-trip DVD mailer that is sent as letter mail and that weighs one ounce or less. The Commission acknowledged that its order could still require GameFly to “continue to generate more than double the contribution per piece than Netflix mail,” but it explained that “the remaining rate disparity is reasonable in light of the differences between the letter-shaped and flat-shaped roundtrip DVD mailers.” GameFly petitioned for review of the Commission’s order.

Not surprisingly, the Appeals Court has found the PRC’s decision to be “arbitrary and capricious”, because it did nothing to remedy the discriminatory practices of the USPS.

Unfortunately for GameFly. the remedy provided by the Court is to send the case back to the PRC- and it didn’t set a deadline for coming up with a better decision…

Washington, DC – Today the Postal Regulatory Commission approved the U.S. Postal Service’s request to raise prices for market dominant products finding that the new prices are at or below the Consumer Price Index (CPI) cap of 2.570 percent and meet all other statutory requirements.

There is one exception. In reviewing the price proposals for compliance with Commission directives and orders, the Commission found that the Postal Service’s proposed Standard Mail Flats prices fail to satisfy the applicable directives given to the Postal Service in the FY 2010 Annual Compliance Determination. The Commission has remanded the Standard Mail rates to the Postal Service for compliance with its longstanding Order.

The Commission has granted the Service 10 days to decide on its own how to modify its Standard Mail prices. The Commission will also allow an opportunity for the public to provide comments on the revisions the Postal Service proposes.

Price increases will affect rates for all market dominant products: First‐Class Mail, Periodicals, Package Services, and Special Services. Single‐piece First‐Class Mail will increase from 45 cents to 46 cents. The price of a postcard will increase from 32 cents to 33 cents. The new International Forever Stamp will cost $1.10. The Commission also approved several mail classification changes that primarily affect Special Services.

In a separate decision on November 8, 2012, the Commission gave approval for increases in mail products that compete in the market place. Priority Mail products will rise an average of 6.3 percent and Express Mail will increase 5.8 percent overall.

The new prices will go into effect January 27, 2013.
The Commission’s Order is available on the PRC website at Order No. 1541 and includes a partial dissent by Commissioner Robert Taub.

PRC Chairman Ruth Goldway expressed her concerns about the USPS’s network changes and service cutbacks in a “separate view” published along with the PRC’s advisory opinion:

Separate Views of Chairman Goldway

The Postal Accountability and Enhancement Act (PAEA) established a complex balance of responsibilities between the monopoly postal operator and the independent government regulator. This Advisory Opinion meets our obligations and recommends to the Postal Service how it should address its obligations. Read the rest of this entry »

Washington, DC –The Postal Regulatory Commission today issued its analysis of the Postal Service’s Mail Processing Network Rationalization (MPNR) initiative, a plan to capture net savings of $2.1 billion (later revised to $1.6 billion) by closing and consolidating 229 of its 461 processing plants to better match declining mail volume. The Commission’s range of potential net savings estimates is lower than that projected by the Postal Service. The Commission’s Advisory Opinion concludes that the Postal Service could significantly reduce its network and realize substantial cost savings while preserving most current service levels.

The Postal Service plan would modify existing service standards for First-Class Mail, Standard Mail, Periodicals and Package Services. Overnight delivery service for single-piece First-Class Mail would be eliminated and much of current First-Class Mail 2-day delivery would be delayed to 3-day delivery. Eighty percent of all First Class Mail would be delayed by at least one day. In July 2012, the Postal Service proceeded with a phased implementation plan that included interim services standards until January 31, 2014, preserving overnight First-Class Mail service (with the exception of First-Class Mail that is handled by more than one processing facility) and consolidating 140 plants.

“The Commission believes that the phased implementation of MPNR provides an excellent opportunity for the Postal Service to study the effects of service standard changes; to inform its decisions on how to preserve as much of the current services as possible; and to make adjustments before full implementation,” says Ruth Y. Goldway, Chairman of the PRC.

The Commission’s analysis focuses on network modeling, cost savings estimates, and estimates of potential volume loss.

• The Commission’s Opinion includes alternative rationalization options that would preserve most current service levels and result in significant savings. The Commission expands upon the Postal Service’s model and demonstrates the benefits of a more robust modeling effort. The Postal Service uses modeling to develop an initial list of facilities to be consolidated given the decision to reduce service levels. The Postal Service rejected much of the model results; more than half of the plants identified using modeling tools were replaced based on management insight before local studies were performed.
• The Commission recommends starting with a baseline model that is validated against known conditions, including actual plant productivities. The Postal Service’s model uses workhours per square foot as a measurement of productivity; however, productivity is best measured by comparing workhours to the volume of mail processed. Empirical evidence demonstrates that it is generally more expensive to process mail in larger plants than smaller ones.
• The Commission concludes that in order to capture the anticipated cost savings upon full implementation of MPNR, the Postal Service would have to improve average system-wide productivity by over 20 percent. Improvements of this magnitude are ambitious and involve some risk.
• The Commission estimates that MPNR cost savings may be as low as $46 million annually assuming mail processing productivities remain at current levels, or as high as $2 billion annually if all proposed assumptions prove correct.
• These cost savings may be offset by volume losses and resulting contribution losses from mailers who believe the service levels no longer meet their postal needs. The Postal Service initially estimated lost contribution as $500 million upon full implementation of MPNR. The Commission is unable to replicate the Postal Service’s analysis, and the Postal Service now concedes that there are problems with the estimate. In order to balance the risk of achieving projected savings with the risk of possible volume and revenue loss, the Commission encourages the Postal Service to better measure potential volume losses associated with its multiple recent proposals for altering service.
• The Commission advises the Postal Service to develop a plan to better inform all customers of the service they can expect to receive.
• The Commission advises that a transportation hub plan be developed and made known to mailers.

“I want to give special recognition to the economists and statisticians in our Office of Accountability and Compliance for their rigorous analysis of the testimony presented in the case. I urge the Postal Service and the mailing community to study each chapter and the appendices so that we can work together to improve the Postal Service,” Chairman Goldway concluded.

The Commission’s complete Advisory Opinion may be found on the PRC website: www.prc.gov.

The Postal Regulatory Commission has denied a request from the Newspaper Association of America (NAA) to stay the implementation of the US Postal Service’s discounted rate deal with Valassis.

The newspaper group claims its members will be “irreparably harmed” because they “would be unable to take advantage of the discounted rates granted only to Valassis” by the PRC.

The PRC found that

The NAA’s hypothetical loss is based on the unrealistic assumption that all current newspaper revenue for advertising that might be eligible for inclusion under the Valassis NSA will disappear… If some newspapers have to adjust their advertising rates (and/or attempt to negotiate lower private carrier distribution rates) this is not unreasonable harm. It is a consequence of fair competition.

Finally, the PRC challenged the NAA’s claim that Valassis was getting favored treatment in the first place, noting that:

Should newspapers now decide that they wish to deliver FSIs (“free standing inserts”) through the mail, it would seem that they could qualify as similarly situated to Valassis as they would be bringing new FSI business to the Postal Service.

Postcom responds to Ruth Goldway’s “cash cow” comment:

Here’s a quote: "The Postal Service has been a kind of cash cow for the federal government for the last 40 years," says Postal Regulatory Commission chairman Ruth Goldway." Now, let’s improve on the message. No, it isn’t the Postal Service that has been Congress’ cash cow, it’s been the customers of the Postal Service, and business mailers in particular. THAT’S where the Postal Service’s money comes from. In short, for several years mailers have been paying more in postal rates than what actually is necessary to keep the Postal Service self-sufficient. When government dips into the private sector’s pocket for reasons of its own, it’s a TAX, plain and simple.

From: PostCom: Postal News and Information from Around the World.

Washington, DC – The Postal Regulatory Commission (Commission) today issued an Advisory Opinion on the Postal Service’s Post Office Structure Plan (POStPlan), an initiative to match post office retail hours with workload, Docket N2012-2.

The Postal Service is required to seek an Advisory Opinion if its actions constitute a nationwide change in service levels. The POSTPlan reflects a determination by the Postal Service to explore options to adjust its retail window hours without closing post offices. Retail window hours of operation at more than 13,000 post offices nationwide will be reduced to 6, 4, or 2 hours per weekday, and in approximately 73 locations, hours of operation will increase. Read the rest of this entry »