The Changing Nature and Cost of the USO and the Value of the Monopoly

Ruth Y. GoldwayChairman, U.S. Postal Regulatory Commission

UPU Conference of Postal RegulationNovember 13, 2013Bern, Switzerland

2

Role of the Postal Regulatory Commission

Establish more modern system of rate making

Monitor quality of service

Provide detailed, transparent information on Postal Service’s operations

Provide Open Review of Post Service Proposals for Changes in Nature of Service

Hear appeals from citizens on post office closings

Offer assistance in resolving rate and service inquiries

Hear customer complaints and provide redress if appropriate

Ensure level playing field between mailers (e.g. decide over allegation of rate

discrimination)

Assure universal service six days a week

3

U.S. Postal Monopolies

The Two Postal Monopolies

Letter Monopoly (Private Express Statutes)

Mailbox Monopoly

4

U.S. Postal Monopolies (cont.)

Estimating the Value of the Two U.S. Postal Monopolies

Combined Letter and Mailbox Monopoly (Status Quo)

Mailbox Monopoly

5

USO Components for the U.S.

Elements Included in the USO Cost Estimate (FY2012) Six-Day Delivery instead of Five-Day Delivery ($2.5 Billion) Nonprofit Mail Discounts ($0.974 Billion) Unzoned Media/Library Rates ($0.071 Billion) Losses on Market Dominant Products ($0.708 Billion) Maintaining Small Post Offices ($0.529 Billion) Alaska Air Subsidy ($0.122 Billion) Uniform Rates for First-Class Mail ($0.117 Billion) Group E Post Office Box Service ($0.03) Not Included – Services that would otherwise not be

provided if there was not a USO

6

Comparison of the Value of U.S. Postal Monopolies and Cost of the USO

FY 2007

FY 2008

FY 2009

FY2010

FY2011

FY2012

0.00

1.00

2.00

3.00

4.00

5.00

6.00

4.41 4.795.20

4.94 5.095.10

3.513.86

3.34 3.04 2.89 3.26

1.35 1.28 0.88 0.810.7 0.85

Cost of USO Cost of USO Trend Combined MonopolyCombined Monopoly Trend Mailbox Monopoly Mailbox Monopoly Trend

Billi

ons

$

Cost

Value

Value

7

Legislative Activities

PENDING POSTAL REFORM LEGISLATION

S. 1486 - Postal Reform Act of 2013

Awaiting Committee Action

H.R. 2748 - Postal Reform Act of 2013Approved by the House Oversight & Government Reform Committee

Awaiting Floor Action

8

Legislative Activities

Key Issues Under DiscussionPotential Service Changes

Temporary moratorium on service standard changes and post office closings Exploring moving from 6 to 5 day delivery schedules Increasing cost effectiveness of delivery , including centralized and curbside delivery

Encouraging New Streams of Revenue and Innovation Potential Changes to the current rate-setting process Employee Healthcare Benefits & Healthcare Pension

Benefits

9

www.prc.gov