Commissioners split over USPS bid to drop Saturday delivery

US regulators have revealed some disagreement over whether the US Postal Service should abandon Saturday deliveries in order to cut its costs. In a long-awaited advisory opinion issued today, the Postal Regulatory Commission did suggest the USPS had underestimated potential impacts from its proposals to move to a five-day delivery week, and estimated cost savings were “optimistic”.

But, individual Commissioners were split over their personal interpretations of the review, expressing advice to Congress “somewhat differently” over whether to allow the Postal Service the power to cut a day’s delivery service.

Writing to Congress today to express its formal opinion on the USPS proposal, the Commission said the USPS would likely save $1.7bn a year moving to five-day deliveries (including the lost revenue from mail volume reduction), rather than the $3.1bn claimed by the loss-making USPS.

The Commission also warned that the savings could take up to three years to emerge, not helping the USPS with its financial problems in the short term.

It said it believed the impact on USPS revenues from the declining mail volumes, attributable to the loss of a day’s delivery service, would be around $600m a year. This was three times the estimate of USPS, with Commissioners warning that the “hidden cost” could emerge as a price increase for customers.

While USPS proposals would not affect whether Post Offices are open on a Saturday, and would leave Post Office Boxes available on Saturdays, the Commission did warn that losing a day’s delivery service could mean a two-day delay for up to a quarter of First Class and Priority Mail items.

The advisory opinion also stated firmly that if Saturday deliveries are to be dropped by USPS, the Postal Service would have to do more to protect rural and isolated communities from the loss in services.

Disagreement

While the Commission’s advisory opinion refrained from a clear recommendation on whether the USPS should actually make the move to a five-day delivery week, the Commissioners themselves did issue separate statements expressing their personal views on the matter.

And, the Commissioners appeared to disagree over whether the USPS had done enough to state its case for losing Saturday deliveries.

Two Commissioners – including chairperson Ruth Goldway – advised against the dropping of Saturday deliveries. Two Commissioners suggested that they believed the benefits were sufficient to make the move worthwhile. The Commission’s vice chairman, Mark Acton, did not put a personal view forward.

Goldway stated in her view that the Postal Service’s proposal was against national postal policy, and “unfairly” discriminated against customers in remote and rural areas, and states like Alaska and Hawaii.

She said: “As the record of the Commission’s opinion shows, some 25 percent of mail will be delayed by two or more days, which is more burdensome to any population that has greater reliance on the mail.”

“Inevitable”

However, Commissioner Dan Blair argued that the USPS proposals would be a “dramatic step” toward bringing its costs in line with its income.

He cited witness testimony that a move to a five-day week was “inevitable” given the shift towards electronic forms of communications, and pointed to previous Commission views that a five-day delivery week could be considered a minimum requirement for a universal service obligation in the US.

Blair concluded in his personal view: “In proposing to reduce days of delivery, the Postal Service must balance service against solvency. A reduction in days of delivery will produce a significant cost savings, but the Postal Service must show Congress that these reductions help, not hurt, its future financial viability to sustain the needs of the Nation.”

Commissioner Tony Hammond suggested in his personal view that losing Saturday deliveries could be preferable to more “distasteful” alternatives such as the closure of post offices.

“Serious flaws”

However, Commissioner Nanci Langley said she believed there were “serious flaws” in the USPS proposals, agreeing with her chairperson that it would have significant impacts on rural and remote communities.

Langley also stated her belief that the USPS would miss out on a significant competitive advantage, particularly in the growing parcels segment, by being unable to provide deliveries on a Saturday.

She said: “The Commission found that currently, 21.2% of parcels are delivered on Saturday and that the elimination of Saturday delivery and processing would delay Package Services even more than First-Class Mail. Why forfeit the significant competitive advantage of six-day a week delivery in a 24/7 environment?”

In her letter to Congress, Goldway said the decision over the proposals ultimately rested with Congress and the USPS, but warned the nation’s lawmakers that “a decision to change the existing patterns of postal communications and delivery
should be made with care”.

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