Volume V, No. 2 Summer 1998 Newsletter

PRC Recommends New Priority Mail Rates: Some Increase, Some Decrease

On May 11, the Postal Rate Commission released its Opinion and Recommended Decision in the recently concluded omnibus rate case, Docket No. R97-1. With respect to Priority Mail, highlights of the Commission's recommendations are as follows:

The Commission rejected UPS proposals (see the Spring 1998 APMU News) for (i) a 32 percent average increase in Priority Mail rates, (ii) a surcharge on Priority Mail parcels, and (iii) higher fees for delivery confirmation (see related story below). In addition, the Commission recommended that the maximum weight for First-Class Mail be increased from 11 to 13 ounces. Under this change, some pieces now mailed as Priority Mail will divert to First-Class Mail.

The Governors of the Postal Service are expected to review the Commission's recommendations at their meetings on June 1-2 and June 29-30. It is generally anticipated that the Governors will approve the Commission's rate recommendations. At the same time, the Postal Service continues to report profits well in excess of its dire forecasts. For Accounting Period 8 (ended April 24), the Postal Service reported a profit of $131 million, despite a budgeted loss of $47 million. Year-to-date, the Postal Service has a cumulative profit of $1,488 million. In view of the Postal Service's continued fiscal success, the Governors may delay implementation of higher rates until a later date, however, there is strong support within the Postal Service for quick implementation.

Bill Henderson Appointed New PMG

On May 12, one day after the PRC released its Opinion and Recommended Decision in the rate case, the Governors of the Postal Service announced that they had selected the Postal Service's Chief Operating Officer, William Henderson, to be the next Postmaster General. This is the first time in 13 years (since Paul N. Carlin) that the Governors have reached inside management ranks of the Postal Service to appoint a new PMG.

PRC Approves Delivery Confirmation Service for Priority Mail

The PRC's Opinion and Recommended Decision in Docket No. R97-1 also approved initiation of the delivery confirmation service proposed by the Postal Service. For Priority Mail, electronic delivery confirmation will be provided at no additional charge, while the cost for delivery confirmation obtained by calling an 800 number will be an additional 25 cents.

Regardless of when new rates take effect, nationwide delivery confirmation service will not be available immediately. The Postal Service is in the process of acquiring almost 400,000 scanners for its carrier force. According to John Kelly, Vice President for the Postal Service's Expedited and Package Business unit, deployment to the field is not expected to be complete before the end of February 1999. Implementation of free electronic delivery confirmation service for Priority Mail could be phased in early. With respect to delivery confirmation service that will be subject to a fee, however, full implementation actually could be delayed beyond next February if more testing is needed, since the Postal Service plans to charge for this service.

Priority Mail Processing Centers Update

The last of the ten Phase I Priority Mail Processing Centers ("PMPCs") will soon be operational -- Boston is scheduled to be up and running by the end of June. For Priority Mail pieces that originate within the network, Emery's performance in meeting its 2-day standard is reported to be running at 94 percent. Readers of APMU News will recall that 2-day performance by Emery does not constitute 2-day end-to-end delivery performance (see related story below).

Emery is said to be utilizing 18 aircraft to provide on-time delivery of Priority Mail to destination SCFs throughout the country. These aircraft are not part of the Eagle network, nor do they only carry mail. Other freight, when available, is also carried by Emery.

Priority Mail End-to-End Performance Data Published

The Postal Service implemented an external system for measuring time-in-transit from entry to delivery for Priority Mail in January 1997. Priority Mail End-To-End Measurement ("PETE") provides a better measure of actual Priority Mail performance than the Origin-Destination Information System ("ODIS"), which measures time-in-transit only from the postmark/meter date to arrival at the delivery unit, and which was the only Priority Mail performance measurement system previously made available. In response to APMU discovery during Docket No. R97-1, a Postal Service witness stated that there were no plans to make the data public. However, the Postal Service's 1997 Comprehensive Statement on Postal Operations published PETE results for Postal Quarters 2-4 of Fiscal Year 1997 (i.e., January-September 1997). As APMU members are well aware, Priority Mail's overnight and second-day delivery standards are met far less often than the highly-publicized First-Class performance standards. Results for overnight and two-day Priority Mail are reproduced below:

Update o n Postal Reform Bill

Congressman William McHugh (R-NY), Chairman of the House Subcommittee on the Postal Service, under the House Government Reform and Oversight Committee, intends to offer a revised version of his postal reform legislation during June. The redraft of H.R. 22 will take into account the many comments that were filed by interested parties. APMU has been approached by the Subcommittee, as well as representatives of the Postal Service, and asked to comment on the original bill and the proposed revisions.

Postal Service Marketing Plan -- Expedited Product Vision

The Postal Service's 1998 Marketing Plan was admitted into evidence in Docket No. R97-1. That document candidly describes the current weaknesses of the Postal Service's expedited package services ("EPS"), including Priority Mail:

Facilities and processes do not support market/customer based requirements. Product service commitments are not clearly defined within the USPS network and existing service commitments are not consistently met, particularly with Priority Mail and Package Delivery Services. Ineffective metrics and process controls throughout the EPS network, along with a lack of consistency in logistics, contribute to the hit-or-miss performance.

The Postal Service also identifies as weaknesses: (1) the lack of management information systems providing reliable cost and performance information; (2) the customer perception of USPS as "inflexible, unreliable, and lacking service orientation," and (3) the lack of competitive features, including day-certain delivery, track-and-trace, and flexible payment options. The Marketing Plan also includes a "2002 Expedited Product Vision," in which Priority Mail should, by 2002, include: 99 percent service standards for next-day Priority Mail, a 97 percent service standard for 2-day Priority Mail, near real-time track-and-trace, a money-back guarantee, free pick-up, basic insurance, a toll-free help line, electronic manifesting and free shipping software.

Don Allen (1946-1998)

Don Allen, one of the most able rate design experts ever to serve at the Postal Service, and a true gentleman, has died from cancer. He joined the Postal Service in April 1975 as General Manager of Rate Development Division in the Office of Rates. From 1986 to 1992 he served as Director of the Office of Rates. In Docket No. R90-1 he was the rate design witness responsible for Priority Mail. In 1992, he took early retirement and traveled extensively. Prior to joining the Postal Service, he was manager of domestic pricing at TWA. At the time of his death, he was residing in Arizona.

1998 Calendar

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