Gleiman_EMASpeech.txt

Edward J. Gleiman

Speech before the
Envelope Manufacturers Association
Williamsburg, VA October 29, 2000
Good morning ladies and gentlemen.
The law provides that the Postal Service may, from time to time,
request that the
Postal Rate Commission recommend "rates and fees [that] shall
provide sufficient revenues so that total estimated income …to the
Postal Service will equal as nearly as practicable total estimated
costs of [operating] the Postal Service."
On January 12th the Postal Service submitted such a request
seeking an additional $3.7 million dollars in revenue to be
generated by an overall average rate increase of approximately 6.4
percent. After lengthy deliberations, during which the Commission
held 40 days of hearings to consider 178 pieces of testimony
presented by 122 witnesses representing 77 participants, including
the Postal Service, the Commission has concluded that the---- Wait
a minute, I think I picked up the wrong presentation on my way out
of the office yesterday.

Let me try again.
Good morning ladies and gentlemen.
When Maynard invited me to visit with you, I plumb forgot that
the Commission would be in the final throes of the R2000-1 rate
case in late October. So, while it would certainly be a pleasure to
be here under normal circumstances, I want to extend a special
thanks to you for having me here today. If for no other reason, it
has provided an excuse to escape for a day the pressure--cooker
atmosphere associated with putting the finishing touches on a major
rate case decision.
Good Lord willing and the creek don't rise, or perhaps I should
say if the computers don't crash, we hope to have that decision out
on Monday, November 13th.
Maynard suggested that I talk about the future-- about postal
reform, its impact on the Commission and other changes the postal
community may be facing. Before I whip out my somewhat cloudy
crystal ball, I thought you might be interested in a brief outline
of the process currently associated with postal rate making. And,
as I talk about the process, I will attempt to debunk a few myths
and set the record straight on what you may have heard at previous
get togethers. I will also talk about an issue that I believe has
greater potential to impact the future well-being of the Postal
Service and the postal community than the much discussed diversion
of transactional mail to electronic bill paying.
Prior to 1970, postage rates were set by the Congress. Rates,
generally, did not cover the costs of providing service, so
Congress appropriated tax dollars to make up the difference. The
Postal Reorganization Act of 1970 changed all that. It replaced the
Post Office Department with a new United States Postal Service and
charged it with operating in a more business-like fashion. Congress
would no longer set postal rates, but it wanted to ensure that the
public had an opportunity to be heard before the Postal Service
changed rates or services. Therefore, it simultaneously established
a separate, independent Postal Rate Commission to provide an open
process in which the public could participate in the development of
postage rates.
Myth Number One: Contrary to what you may have heard or read,
although the PRC was not among the 1968 recommendations of the
Kappel Commission---appointed by the President to study the future
of the Post Office Department---neither did it spring forth like a
phoenix from the ashes in some secret conference between House and
Senate legislators. Permit me, if you will, to correct the record.
The key elements were there the entire time. I read from the
conference report on the 1970 Act at page 84-
The House bill contained…a Postal Rate Board as an independent
agency not part of the Postal Service. The Senate amendment
contained…an independent Postal Rate Commission within the Postal
Service. The conference substitute adopts the House provision (for
a freestanding entity)…changing the name to the (Senate proposed)
Postal Rate Commission…

Perhaps there is a lesson or two here for those who yearn for a
new Kappel-type presidential commission as some sort of panacea to
make
recommendations to mold the future of the Postal Service.
Commissions study and recommend, the President proposes and the
Congress disposes---as it sees fit!
Congress intended that mailers should be able to use the Postal
Rate Commission's proceedings to assure that some mailers were not
crosssubsidizing other mailers and to assure that postage rates
reflected the costs actually incurred to provide service. Further,
by requiring the Service to justify rate and service changes,
Congress hoped to provide a check on inefficiency.
Each of you probably has your own point of view on how well the
system works to keep the Postal Service lean and efficient. But I
hope you would agree that if mailers participate, and if the Postal
Service is subject to public scrutiny, the result is likely to be
better than if proposals go entirely unreviewed. A case in point
can be found in the last omnibus rate case, the R97-1 case.


•
Mailer participation in developing the public evidentiary
record was responsible in part for enabling the Commission to shave
some $750 million---almost one third---off of the Service's request
for additional revenue. As a result, almost everyone received a
smaller rate increase than would have otherwise been the
case.


•
Another example: periodicals mailers, stung by sharply
rising costs associated with the processing of their mail, insisted
that postal officials join them in an effort aimed at finding
answers and ferreting





intervenor told us on the record---a rocket shot compared to
most rate-type proceedings. Moreover, when the Commission does
attempt to shave some time off of the 10 months provided in the
law, representatives of mailers both large and small object.
Mailers want as much time as possible to examine the reams of data
the Postal Service provides in support of its proposals. With their
money at stake, Mailers prefer that things be done right rather
than fast! By the way, the original 1970 law contained no time
limit on rate cases. The 10-month limit was added after one of the
early cases, overseen by an administrative law judge, recruited
from another agency, seemed to go on forever.
Some think that we ought to go back in time, ought to get rid of
the Commission and replace it with not one but three administrative
law judges to be borrowed from some other government agency. Bad
idea! But don't take my word for it. Shakespeare wanted me to
remind those who prefer a return to Admin Law Judges that "What's
past is prologue." And, Santayana asked me to add that "Those who
cannot remember the past are condemned to repeat it."
I mentioned that the Commission also has other responsibilities
which impact the postal community. These include: 1) approving both
changes in existing services and the establishment of new
services---those are known as classification cases; 2) adjudicating
complaints from anyone who believes the Postal Service is not
providing rates or services as required by law; 3) issuing advisory
opinions when the Postal Service proposes a substantially
nationwide change in the nature of its services; and, 4) our mostly
recently assigned task, providing Congress with annual reports
about the costs and revenues of international mail.
Finally, the Commission is given 120 days to consider appeals
from those who contend the Postal Service has proposed closing
their local post office without following the safeguard procedures
Congress wrote into law.
This brings me to Myth Number Three: The Postal Service cannot
close a post office without first obtaining the approval of the
Postal Rate Commission, which supposedly takes four years.
The facts are that the PRC gets involved in only appeals of
closings and then for only 120 days. That's four months. Not four
years! You can't get four years out of the equation even if you use
Washington fuzzy math!
And how many closings have been appealed? According to a 1997
GAO report only 296 of 2,614 closings were appealed over a 20-year
period. I make that to be about 11 percent. And, what was the
disposition of those appeals, you ask? USPS affirmed in 170 cases;
31 cases dismissed; and only 58 remanded on grounds that the USPS
had not complied with the procedural requirements of the law.
Number of times the Commission took more than 120 days to rule on
an appeal, Zero! Number of cases in which the USPS was told by the
Postal Rate Many years ago, when I was just starting my government
career, one of my mentors gave me some advice, in the way of a
quote purportedly from one Petronius Arbiter in 210 B.C.


Actually, I'm not opposed to change---to postal reform. During
my time at the Commission, we've made quite a few changes. We've
issued rules to encourage experimentation by the Postal Service and
established procedures for expedited treatment of non-controversial
cases. We've established a website on which we post overnight every
document filed with the Commission, and we've created a search
engine that enables everyone to word search these documents.
Want to find out how many times and in what context the aspect
ratio of envelopes was mentioned in the current rate case? How
about in each and every case all the way back to 1971? Try our
website!
Change is not the problem. The problem is---my concern is---
that much of what has been on the table in the way of postal reform
over the past several years is tantamount to an uncontrolled and
uncontrollable experiment. Maybe it is my training in the sciences
coming to the fore, or maybe it's my belief that the Postal Service
is too important to our economy and too intertwined in our everyday
lives and livelihood to leave too much to chance.
Let me make clear at this point that I have a great deal of
admiration for Representative John McHugh and his staff. In the
almost 17 years I spent on Capitol Hill I cannot remember more than
a handful of instances in which a member invested more of him or
herself in an issue. And, although I took issue with a number of
provisions in his bill, I consider it unfortunate, that the
Chairman has run out of time in his search for the "Holy Grail" of
postal reform. It is unclear who, if anyone, will take up the
challenge in the 107th Congress.
In the event that someone does take up the McHugh gauntlet and
seeks your support, I think it is important that you, that mailers
not just blindly endorse a bill simply because its title includes
the phrase "postal reform."

Which rates would be lawful in this scenario? The capped rates
that do not cover cost or the rates that exceed the cap but cover
costs? What's a Postal Regulatory Commissioner to do? More to the
point, what's a mailer really likely to experience in the way of
rate increases?
By the way, it's not altogether clear that this price cap regime
would achieve one of its other principle objectives, that is, to
put downward pressure on future cost increases. Why? Because the
bill has an "exigencies" escape clause and another provision that
prohibits the PRC from taking any action that might impact labor
negotiations. No, I'm not suggesting that the last provision I
mentioned be drop from any future bill. I do think, however, that
some consideration should be given to a statutory revenue cap as
one means of adding a bit of starch to the spine cost containment.
Without an effective cost containment program---and I have yet to
see one---the Postal Service, reformed or not, cannot be what
mailers want. It cannot be a low cost, efficient provider of
service.
These examples are just a couple of the problems in the reform
bill that many in the community wanted to put on a fast track
through Congress.
Everyone talks about how it has been 30 years since the Postal
Reorganization Act was enacted; that the postal landscape is very
different; that now is time to change the law. Again, I am not
opposed to legislative reform, but, if we are going to put our
money on legislative reform, we had better get it right, because
once that next major postal bill---a reform bill---is enacted, it
may be another 30 more years before we get a shot at fixing things
again.
And, what would legislative reform mean for the PRC? If
something akin to
H.R.22 were enacted, the Commission would be neither
strengthened norweakened. It would be different! It would be
relegated largely to after the fact audits as opposed to its
current pre-approved role. And, it would grow to perhaps three or
four times its current complement of 55 bodies.
Now, while we are figuring out what should be done in the way of
legislative change, we---the postal community, the Postal Service
and the Postal Rate Commission---should not just sit back and wait.
There is much to explore; much that can be done within the confines
of current law. We need to push the edges of the envelope---all
them!
The EMA is already working on a number of forward-thinking
projects. As one of the world's slowest and worst typists---I guess
they call it keyboarding now---I especially like the idea of
envelopes carrying information I can scan into my computer to
connect with a vendor's website or with an information source.
Let me throw out a few of my ideas for change that are not
conditioned on congressional action:
• NSAs, or negotiated service agreements, have been a hot topic
in the legislative equation. NSAs are, for all intents and
purposes, not very different from narrowly drawn classification
proposals; a number of which the Commission has received and
approved over the past few years. If the Service has any such
proposals on the drawing board, it ought to send them over. If
mailers have ideas, they ought to submit them. If someone thinks we
need to modify our regulations to encourage niche classification
cases, let us know. NSAs are doable under current law! Why wait for
legislation, if we can act now to drive costs out of the system and
lower rates for qualified mailers?
• -Just before the R97 case was filed, when many in the
community were concerned about the size of the Service's request, I
suggested that a case calling for rates to be phased--in over time
might help avoid the rate shock that comes with large, double digit
increases. This was not an entirely new idea. It was a take--off on
a joint USPS-PRC task force recommendation in the early '90s for a
four-year rate cycle with a mid-cycle adjustment. These proposals
reflected the purported desire of mailers for smaller and,
implicitly, more frequent rate increases. We now seem to be in a
two-year rate case cycle. Mailers are, however, understandably
concerned over the cost of litigating these more frequent cases.
But by phasing in rates, they may be able to have their cake and
eat it, too-- smaller periodic increases and fewer cases to
litigate. It is time, I believe, to dust off the task force
recommendation and/or to give some serious thought to the phased
rate approach.
• -I mentioned our website a bit earlier. We've been told that
getting documents posted overnight and providing a search engine
has resulted in substantial savings to intervenors and the Postal
Service. The Commission can and should do more in this area. With a
little cooperation from the community, I think we can implement
electronic filing and service of documents.
I've already made several suggestions in the package services
area:
• When I spoke to the Parcel Shippers Association in June of
last year I suggested that, given the Service's economies of scale
in delivery, alliances with other transportation or delivery firms
to carry their parcels the last mile
made sense---and would make dollars for the Postal Service. This
is
happening already.
• I've also suggested that the Service explore making low weight
Parcel Post a wholesale, only, product and pushing low weight
over-the-counter retail parcels into Priority Mail. The price
differential between Priority Mail and single piece parcels is very
small. For just a couple of cents more, an individual can send a
package Priority, and, if the individual purchases delivery
confirmation, it becomes actually less expensive to use the faster
Priority Mail service! Faster service at a lower price means
satisfied customers!
Speaking of delivery confirmation, it is currently available for
Priority and Parcel Post. The USPS has proposed extending this
service to Standard mail. My thought here: Why stop with Standard?
There are roughly a quarter billion pieces of First--Class mail for
which individuals purchase the more expensive Certified Mail
option. Delivery of a Certified Mail piece is more costly to the
Postal Service than handling a delivery confirmation piece.
Certified mail requires the carrier to make a special trip to the
door. If the carrier is already equipped with a scanner for
delivery confirmation purposes, the Service has an opportunity to
avoid the time---and time is money---that it takes the carrier to
make that special trip to the door. Delivery confirmation provide
more information quicker at less cost to both the Postal Service
and the customer!
As an old vaudevillian might say, "I've got a million of
'em"---Well, maybe not that many, but it is, I think, time to move
on. I do want to assure you, though, that while I have been talking
trees, I have not lost sight of the forest.
Last October there was a congressional hearing at which the
General Accounting Office presented unverified Postal Service
estimates of the impact of the diversion of First--Class
mail---bills and payments---to new technologies. The lead on the
story was USPS volume to decline with a loss of $17 billion in
revenue. At 33 cents a pop, I make that to be just short of 50
billion pieces of mail. And, the price of a stamp, according to the
story, it would increase by 17 cents!
That is a pretty bleak picture! However, at the risk of being
labeled a troglodyte, may I suggest that if you scratch the surface
of that picture you might find that a few rays of sunshine still
remain for hard copy mail. While I have no doubt there will be
diversion, my uneducated guess is that the glide path will be
longer and the incline not so steep. Many believe that there will
be gains to offset losses in transactional mail volume. For
instance, Bob Wientzen of DMA reported just a couple of weeks ago
that high tech ventures are generating new volumes of hard copy
mail as what he called "pure play Web companies" launch catalogues
and direct mail campaigns to drive traffic to their Web sites.
Maynard expressed similar views in a news article this past summer.
Moreover, unless the Postal Service is incapable of shedding volume
variable costs or waits until 2008 before adjusting First--Class
rates, the price of a stamp does not have to go up by 17 cents.
Unless, it waits until 2008 to shore up its base, volume
declines
May not be so severe. What if I'm wrong? What if the worst case
scenario does come to pass? As I recall from the numbers in that
July 20th Atlanta Journal-Constitution article, there goes much of
that 8 percent of envelopes that currently carry bills and
payments. That is not a pleasant prospect, but it is a heck of a
lot better than the prospect of losing a big chunk of the remaining
92 percent of your business because an overreaching law restricts
the sharing of personal information and results in direct marketing
volumes going south.
Personal privacy, one's right to control the use of his or her
personal information, is a hot issue. It is a hard one to be
against. And, it is a dangerous one to ignore, either as an
individual or as a business person.
Elements of the postal or mailing community or whatever you
might call it have been engaged in the privacy issue at both the
federal and state levels. More often than not, those involved have
been the businesses that would feel directly the impact of
restrictions on the collection and sharing of person data---the
list companies, the direct marketers. Think about this: if the
direct marketers and list companies are forced to cut back because
of data restrictions, won't that impact the manufacture of goods
that are marketed? Might it result in printers printing fewer
catalogues? Won't it impact the envelope manufactures? And, could
it not result in a decline in Postal Service volumes
across--the--board?
Those members of the greater mailer-postal community who have
not been paying attention to the privacy issue must do so. They
must join with others in a broad-based coalition that ignores
differences they may have on traditional postal issues. If there is
less information and less prospecting, there will be fewer sales.
Fewer sales means fewer parcels to deliver, whether by white trucks
with an eagle or big, brown trucks. The community needs, as a
whole, I believe, to be proactive in pursuing of a rational,
nation-wide approach that addresses both the concerns, the rights
of individuals and the needs of the business community.
I cut my teeth on information policy and personal privacy issues
about 25 years ago, as project manager at the then Department of
Health, Education and Welfare I worked directly on implementation
of the federal records Privacy Act of 1974 and the 1974 school
records access law. I support the cornerstone concept of these
laws, known as fair information practices. And, I submit that the
federal privacy law, governs the collection and use of personal
data by federal agencies and which provides agencies a modicum of
flexibility, is a reasonable point of departure for future
discussions of either industry selfregulation or legislation.
I had best stop at this point, since I've taken more time and
spouted off more than I should have. But let me leave you with a
thought to keep in mind, in the event you are asked to evaluate my
presentation.
This fellow is flying a hot air balloon and suddenly realizes he
is lost. He cuts back on the hot air, descends and yells to a man
he spots on the ground.
"Excuse me, can you tell me where I am?"
"Sure," the man yells back, "you're in a hot air balloon about
30 feet above this field."
'The balloonist yells back, "You must work in information
technology."
"I do," replies the man, "but how did you know?"
"Well," shouts the balloonist, "everything you told me was
technically correct, but it's of no use to anyone."
The man on the ground thinks for a moment and yells back, "You
must work in management."
"Why, yes, I do," replies the balloonist proudly, "but how did
you know?"
"Well," says the man on the ground, "you don't know where you
are or where you are going, but you expect me to be able to help.
You're in the same position you were in before we met, but now it's
my fault!"
Thank you for having me here this morning.