Delivering Change at the Post Office

By Stephen Barr
Monday, March 26, 2007

Nearly 7,000 representatives of companies and organizations that have a stake in the U.S. mail system will gather in Washington this week for a glimpse of their future.

A lot of attention will be paid to Dan G. Blair, the new postal regulator who will be a key partner with Postmaster General John E. Potter in the first overhaul of the U.S. Postal Service since 1971.

Blair is the chairman of the Postal Regulatory Commission, which has a big agenda: Write a new set of rules on how to establish mail rates; ensure compliance with the new rules; act on complaints about postal rates and poor mail delivery; review whether mail delivery is meeting the needs of the nation; and, if necessary, use subpoena power to get information from the Postal Service.

Blair calls the upcoming changes "a brave new world for the commission."

Blair and Potter are scheduled to appear before the National Postal Forum at the Washington Convention Center today. The briefings will focus on the law revamping the Postal Service and on the recent decision to raise the price of a first-class stamp to 41 cents, effective May 14.

Congress ordered the overhaul of postal operations near the end of last year, and new rules are to be in place by June 2008. The legislation to reshape postal operations has been debated for more than a decade, as members of Congress worried whether the Postal Service could fend off losses to the Internet, e-mail and parcel delivery competitors.

Retailers, advertisers, banks and other industries that rely on the mail also wanted changes at the Postal Service. The process for raising mail rates usually took 10 months and required companies to hire lawyers and economists to write counter proposals. Companies often found it difficult to predict when the Postal Service would move to raise its prices and by how much.

While Congress debated, Potter began cutting costs -- saving about $5 billion since 2001. But the savings were not a fix. The postal business model "is broken," Potter told a conference sponsored by American University this month. A core line of business -- first-class mail -- "is not growing with the population," he said.

Under the new law, the Postal Service will continue to provide universal mail service across the nation -- about 146 million addresses six days a week -- but will no longer have to break even. Instead, the law envisions that the Postal Service will be able to adjust rates annually, use contracts to customize rates for big mailers and keep the profits to build high-tech mail-processing plants and buy new equipment.

To provide catalogue, credit card and other companies with more predictable rate increases, the new law divides the mail into two categories -- market-dominant and competitive.

The market-dominant category includes first-class letters, magazines, advertising and parcels mailed as single pieces. For each class of mail in this category, rate increases cannot exceed the increase in the consumer-price index for the previous 12 months, but price increases for specific groups of mail in the category can vary, with some above the cap.

The Postal Service will have to give the regulatory commission 45 days' notice of the increase, so that the prices can be reviewed to determine whether they fall within the inflation cap.


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