Hopes run high for postal reform

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Direct marketers breathed a collective sigh of relief in December when President Bush, in a move that had long been anticipated, named a special commission to study postal reform.

"It’s a significant first step toward essential reform for the national postal system," said Michael Critelli, chairman-CEO of Pitney Bowes Inc. "Improving service, reliability and costs is crucial to business mailers."

Others echoed Critelli’s enthusiasm over the President’s Commission on the U.S. Postal Service, which held its first meeting Jan. 8.

"It’s a huge victory for direct marketers," said David Sable, president-CEO of direct marketing agency Wunderman NY.

Michael Weil, senior product manager at Boardroom Inc., a publisher of newsletters and books, said, "The Presidential attention is a big plus."

The USPS and the Treasury Department said the nine-member group would study the state of the postal system and make recommendations to improve efficiency and cut costs. Harry Pearce, chairman of Hughes Electronics Corp., and James Johnson, vice chairman of financial services company Perseus, will co-chair the commission.

Postmaster General John Potter applauded the creation of the group and its diversity, noting it would bring a "new perspective to the challenging and complex issue of postal reform."

The USPS has slipped into fiscal crisis as mail volume has dropped sharply, rates have increased frequently and outdated policies have remained in place. Rate increases have become the primary answer to the postal service’s woes, with three hikes in the last two years.

In the past seven years, no postal reform legislation has passed, despite efforts in Congress and intensive lobbying by business mailers. With the number of addresses continuing to grow and laws preventing postal leaders from implementing true reform, the crisis burgeons. The USPS had a $676 million net loss in fiscal 2002.

Issues to be addressed

Most stakeholders agree on the key issues that need to be addressed to enable the postal service to act more efficiently. "We all come together to agree on the fact that they need to have the power to transform themselves," Sable said.

H. Robert Wientzen, president-CEO of the Direct Marketing Association, said universal service is one of the issues that must be addressed. "What is the postal service required to deliver in the way of services in the next 20 years or so? That’s the big strategic question," he said.

Another key issue is labor costs. The postal service pays a larger share of its revenue to employees than do United Parcel Service of America Inc. and FedEx Corp., and the commission will review USPS agreements with its unions in what promises to be an extremely politicized process. "That’s probably the toughest question they’re going to have to deal with," Wientzen said.

Gordon Hughes, president of American Business Media, said, "It’s not the labor unions’ fault; it’s the system."

Critelli agreed. "They [USPS] don’t have a structured and streamlined labor relations environment," he said.

The commission will study the postal service’s overall business structure, which is less competitive than private enterprise structures, and seek alternatives to passing on labor costs to customers.

Question of privatization

The commission is also likely to address the question of privatizing the postal service, which has come up repeatedly in recent years. But outright privatization of the postal service is unlikely.

"Our goal is not to privatize the postal service," said Peter Fisher, Treasury under secretary for domestic finance. He suggested, though, that the commission would consider more outsourcing of delivery functions.

Industry representatives are wary of privatization.

"While a lot of people thought privatization was a great answer four or five years ago, few people are encouraged by other countries’ efforts to privatize," Wientzen said. "It doesn’t look like as easy a solution as we thought it would be."

Summing up the commission’s mandate, Fisher said: "There are just two things that are out of bounds. We don’t want the commission to come back and suggest that the existing business model should be left in place and the costs all rolled up on the taxpayer. We also don’t want them to come back and say that all of the existing costs should be rolled up on the ratepayer. Everything else is on the table, and we hope they come back with their best ideas."

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