Postal Service wants limits on its universal service obligation (U.S)

The U.S. Postal Service wants to exempt its competitive products — like Priority Mail and package services — from the universal service obligation. Doing so would allow it to cut back on offerings in sparsely populated areas where business is thin.

The Postal Service argues that those services shouldn’t be treated differently than those of competitors such as FedEx, DHL and UPS. An exemption would allow the Postal Service to choose which competitive products it offers in a given market, and what standards of service to apply. Products covered by the universal service obligation — such as first-class mail — must be offered in a uniform fashion across the country.
But even if the agency gets approval from Congress to exempt those competitive services from universal service, an international treaty would create a paradox: The Postal Service would still be required to deliver mail and packages coming into the United States from overseas, even if it doesn’t offer the products in a given market.

The Postal Service made its request for the exemption in a lengthy set of comments submitted to the Postal Regulatory Commission last week. PRC has also solicited public comment on the universal service obligation; the commission will submit a final report to Congress in December.

Under the 2006 Postal Accountability and Enhancement Act, postal products were divided into two categories: market-dominant and competitive. Products in the former group — like first-class mail — are covered by the universal service obligation because the Postal Service has a monopoly over their delivery. But the latter group competes with products offered by commercial shippers like UPS and FedEx.

An exemption for the competitive products would be just one step toward restoring profitability at the financially troubled Postal Service. The agency posted a USD 706 million loss in the second quarter of 2008; decreasing mail volume and increasing fuel costs have squeezed its bottom line. And, the Postal Service can’t rely on market-dominant products to reverse that trend: Price increases for those products are capped at the rate of inflation.

That means an increased reliance on competitive products.

A spokesman said the Postal Service didn’t see a conflict because the responsibility for carrying out the UPU’s requirements falls on the U.S. government, not specifically the Postal Service.

Del Polito said an advisory committee of commercial mailers discussed the problem earlier this month with State Department officials, including Dennis Delehanty, a former postal employee who works on postal policy at State.
At press time, Delehanty was in Geneva meeting with UPU and was unavailable for comment.

Another postal observer, Murray Comarow, said the conflict showed how Congress was “trying to have it both ways” with the Postal Service — asking it to operate like its competitors without accounting for the differences between the Postal Service and commercial mailers.

“All the Postal Service has to do is look at the law and say, this is what Congress intended,” said Comarow, who served as executive director of the commission responsible for restructuring the Postal Service in 1971. “There’s not a word in the legislative history, to my knowledge, that casts doubt on what the law intended.”
Comarow said PRC would be better off not making any changes. The Postal Service doesn’t currently have a formal definition for universal service. That allows it to reduce its service in some areas — like remote parts of Alaska, which don’t receive six-day service — where it isn’t financially feasible to provide full service.