The road to liberalisation in the United States?
Beginnings
It all began in 1639 at Richard Fairbanks’ tavern in Boston where the first postal office of exchange was established as a repository for international mail, followed in 1775 by the appointment of Benjamin Franklin as the first Postmaster General.
Today, the United States Postal Service delivers to over 141 million homes daily, has over 700, 000 career employees (congressional votes), over 27,000 post offices and a total yearly revenue exceeding US$ 66 billion.
In 1781 the Continental Congress ratified the Articles of Confederation which established congressional powers over the postal service: “The United States in Congress has the sole and exclusive right and power of establishing or regulating post offices from one State to another throughout all of the United States”. An Ordinance of October 1782 revised and codified all previous postal laws and regulations. It established the reserve area of the mail and granted to the federal government a monopoly on mail by banning private carriage of “letters or packets”. An Act of September 1798 established the office of Postmaster General subject to the direction of the President of the United States. This legislation, with only slight modifications, existed for over 181 years until the Postal Reform Act of 1970 when the postal service began another journey towards reform and modernization.
The 1970 Reform: the USPS is born
In the mid-1960’s the postal administration faced major problems due to years of financial neglect and fragmented control of employees and infrastructure. This postal environment forced Congressional hearings in 1967. In the testimony of PMG Lawrence O’Brien, the Post Office was in a “race with catastrophe”. President Lyndon Johnson appointed a Commission on Postal Reorganizations. The members of this commission came from major private sector corporations, unions, and educators, and was known as the Kappel Commission. It clearly rejected political management of the postal administration but also rejected the privatization of the postal administration at that time.
In 1968 the Commission made its recommendations with the support of President Nixon. After major debate, controversy and postal strikes, in August 1970 a new law reorganized the Postal Administration and set the stage for future reform and transformation. The Postal Administration was transformed from the Post Office Department into the United States Postal Service, an independent establishment of the executive branch of the U.S. government. The legislation also established a Postal Board of Governors appointed by the President, and a Postal Rate Commission to provide oversight advice to the Board of Governors.
Reform in the 21st Century
The new millennium saw the term transformation come again to the foreground of postal discussions. In April 2002 the USPS, during its annual report to congress, presented to the legislators and the American public the first phase of a Transformation Plan that would serve as the road map for moving the Postal Service forward into the new century. The plan identified the need for moderate, short-term legislative changes as well as a long-term structural change to the Postal Service to ensure continued services to the following generations of Americans.
The route was now set for the United States Postal Service to embark on another journey towards postal reform. This journey would follow the same path as in the past and involve many of the same issues that have haunted the postal service over the 229 years it has been serving the citizens of the United States. In 2002, after the submission of the Transformation Plan by the USPS, there began to develop a coalition of interests including the USPS management, the USPS board of governors, the General Accountability Office and most stakeholders. May 2002 saw the Comptroller of the United States state within his congressional testimony that the “Postal Service’s current course is unsustainable”.
The members of this coalition began to seek a revision of the 1970 Act, to create a new and viable business model for the USPS. This and other pressures led President Bush to announce a “blue-ribbon” Presidential Commission on the USPS. This commission presented its report to the President in July 2003.
Making the Tough Choices to Preserve Universal Service
The report contained 35 recommendations of which 18 would require congressional action. One key recommendation was to keep the basic governmental corporation mode. This recommendation is similar to the 1967/8 Presidential Commission report and stated that liberalization would not take place during this reform period. It must be noted that a great many recommendations of this commission have been enacted by the USPS and are contained within its new report to Congress and the American public, “Transformation Plan 2006 – 2010”.
Action within Congress began to gain momentum. The House Government Reform and the Senate Governmental Affairs Committees began to concentrate their attention on postal affairs. In 2004, the House of Representatives began the movement of a bill on postal reform, while in the Senate two bills were introduced. These bills were not similar to the House Bill and reform was moved to the next session of Congress. In the House, a new Bill was introduced. This passed the House in July 2005 by a 410 to 20 vote of the legislators. Postal reform was now 50 % enacted.
In the Senate a proposed bill introduced in March 2005 contained many changes to the House Bill and was enacted in March 2006. These changes were mainly due to the concerns expressed by the Bush Administration relating to the fact that the House legislation did not reflect five principles established by the President to guide comprehensive postal reform: best practices of corporate governance; transparency; flexibility; accountability; and self-finance.
Next steps
The next major step in the enactment of postal reform will involve a conference committee and negotiations between the House and Senate to sort out the differences between the House and Senate bills and ensure the final bill (the Postal Enhancement and Accountability Act) moves to President Bush for his signature. Talks are also taking place with administration staff to achieve potential compromises to prevent a Presidential veto of this necessary postal reform legislation.
It is apparent that this legislation will move quickly from committee and be presented to the President for signature prior to the summer recess of Congress and prior to the November 2006 congressional elections
The Impact on the USPS
With the enactment of this legislation, the USPS will continue towards a liberalized organization similar to other countries. Although two Presidential Commissions have ruled out, for the time being, full liberalization, there is still the possibility of ultimately removing this roadblock.
The Postal Reform Act of 2006 once enacted will find the postal administration facing many new challenges:
- A true regulator established within the body of the Postal Rate Commission.
- Rate revisions based upon a specific formula and tied to the Consumer Price index.
- Continuation of Worksharing and Specific Negotiated Service Agreements with oversight by the regulator.
- Rate setting procedures based upon the distinction between “Market-Dominant” and “Competitive” products.
- Formal delivery and performance standards, monitored by the regulator.
- A reduction in the role of the Postal Board of Governors.
- A formal complaint process involving the regulator.
- A regulated international area for products, rates and interaction within the international arena.
- A formalized redesign to the postal network, accountability and oversight.
These challenges will ensure the growth and continued success of the postal service within the United States. The only big question that remains is the financial burden of employee retirement costs.
As in 1970, the financial position of the postal administration has played a key role in forcing review. We can see many similar issues and actions throughout the history of postal reform in the United States. Over 367 years of mail delivery and the four periods of regulation, we have seen environmental pressures shorten the periods when reform became necessary.
