Cohenetal_DeliveryCost.txt

Delivery Cost Heterogeneity and Vulnerability to Entry*
Stephane Bernard
La Poste
Robert Cohen
Postal Rate Commission
Matthew Robinson
Postal Rate Commission
Bernard Roy
La Poste
Joëlle Toledano
La Poste
John Waller
Postal Rate Commission
Spyros Xenakis
Postal Rate Commission

1. INTRODUCTION
Virtually every post in an industrialized country delivers
monopoly products everywhere at a uniform price in spite of large
differences in the cost of serving different geographic areas. This
raises the possibility of an entrant competing successfully even
though it has higher costs than the incumbent. A simple example
illustrates this. Suppose a post serves a country composed of two
areas and its cost to deliver a piece of mail in one area is five
cents and is 15 cents in the other. A breakeven post with a uniform
tariff would charge its average cost of 10 cents a piece for
delivery throughout the country. If a less efficient entrant's cost
for serving the low cost area were six cents a piece, it could
charge less than 10 cents in that area and be profitable. Each
piece of mail that the entrant delivered would raise the average
cost of delivery in the country. Ceteris paribus, inefficient entry
means that the total resources required to deliver mail
increases.
*
The views expressed in this paper are those of the authors and
do not necessarily represent the opinions of La Poste or the Postal
Rate Commission
If in the above example the cost had been nine cents in the low
cost area and 11 cents in the high cost area, it would be much more
difficult for inefficient entry to occur. Delivery cost
heterogeneity is an essential condition for inefficient entry and
the degree of the heterogeneity would play an important role in
determining the vulnerability to inefficient entry.1
The delivery function is the most important source of inherent
cost differences between the geographic areas served by a post and,
indeed between posts themselves. This paper explores the reasons
that underlie differences in delivery costs among geographic areas.
We do this by comparing delivery costs in two diverse countries:
France and the U.S. We think that international comparisons can
lead to important insights.
We first present demographic and postal delivery characteristics
for the two countries. This leads us to develop the concept of
postal density as a measure that reflects the impact of these
characteristics on delivery costs. We examine differences in postal
density for rural areas and for densely populated areas to identify
the effect of different delivery practices in each country. A
comparison is then made of the heterogeneity in delivery costs for
France and the U.S. We proceed to explore the relative roles of
postal density and volume as delivery cost drivers. Finally, we
compare the engineering and econometric approaches used to estimate
unit delivery costs for France and the U.S., respectively, over
reasonable ranges of the delivery cost drivers. The data used for
the analysis are described in the Appendix.


2. SOME BASIC COMPARISONS
It would seem that the variation of delivery costs within the
U.S. would be greater than in France. Population density in the
former ranges from very high (New York City) to very low (Wyoming
and Montana). France, on the other hand, has densely populated
cities but no areas as sparsely settled as in the United States.2
Surprisingly, however, we will find that France has a greater
variation in delivery costs.
France has 109 persons per square kilometer and the U.S. has 30.
A greater percentage of the French population lives in cities,
while a larger percentage of the U.S. population lives in suburbs.
The distance between delivery points in France is much smaller than
in the U.S. and, consequently, the modes of delivery are very
different, as can be seen in Table 1.
1
The conditions for competitive entry depend on several other
factors as well [Cohen et al. (2000), Cremer et al., (2000)].
2
The population density (people per square kilometer) of the five
least densely populated states in the continental
U.S. are Wyoming 1.8, Montana 2.1, South Dakota 3.5, North
Dakota 3.6 and Nevada 4.2. The population density of the two least
populated departments of France, Creuse and Lozère, is 14 persons
per square kilometer.
Table 1: Comparison of Mode of Delivery by Route in France and
the U.S.

aRounds to less than one percent
bPark and loop refers to a route where the carrier parks his or
her vehicle and serves a group of
houses on foot, returns to the vehicle and drives to another
location where the process is
repeated. cAutomobile includes small trucks.
The geographic concentration of the French population permits
much more efficient delivery by foot or bicycle than in the U.S.3
In France only carriers serving rural areas use automobiles but in
the U.S. it is the primary means of delivery. The quality of
delivery service is also higher in France where all delivery is to
a building. In the U.S. delivery is made to buildings and also to
curbside mailboxes (in cities and suburbs) and to rural roadside
mailboxes. This allows the carrier to place mail in the mailbox
directly from the vehicle. In addition, in U.S. rural areas
carriers serve principal roads only and residents who do not live
on the carrier's line of travel must place their mailboxes on that
road. This frequently results in roadside boxes being clustered
where the carrier's line of travel intersects with roads not on the
line of travel. These boxes are less expensive to serve than if
they were spread out along the intersecting road.
Unlike France the U.S. also makes extensive use of kiosks for
delivery.4 They allow more efficient delivery because the carrier
makes only one stop to deliver to several addresses (commercial or
residential). This requires recipients to walk some distance from
their homes or offices to the kiosk to collect their mail. Eight
and a half million addresses or seven percent of the total
addresses served have mail delivered to kiosks.


3. POSTAL DENSITY
The variable cost of delivery depends on volume delivered, thus
the comparison of variable costs between France and the U.S. is
straightforward. It might seem that population density could be
used to compare differences in the fixed cost of delivery. We have
seen, however, that population density is not the only explanation
for fixed cost differences. The fixed cost of
3
The smaller volume per capita for France (320 in 1999) in
comparison to the U.S. (739) also contributes to efficient delivery
by foot or bicycle.
4
Kiosks are free standing structures containing locked mailboxes
(as few as three or four and as many as sixty or so). They are
called "neighborhood delivery centralized box units."
delivery (called route time in U.S. delivery cost analyses),5 is
accounted for by the need for the carrier to move from one stop6 to
another whatever the mode of delivery. Therefore we use "postal
density" as the driver of fixed costs.
Postal density is the number of delivery points that can be
visited by the carrier in one hour of time, excluding loading time
and the variable portion of access time and the variable portion of
travel time to and from the route. It renders endogenous all of the
physical characteristics of the route including the mode of
delivery, the "grouping-ratio" (addresses per stop), and the
difficulty of accessing the buildings.7 This measure also makes
comparison possible in spite of the differences in quality of
delivery service.8
Delivery to a multiple address building or to a multiple address
kiosk means that the fixed cost of traveling to that stop is spread
among the several addresses which receive mail there. The concept
of postal density conveniently expresses the cost consequences of
both multi-address buildings and multi-address kiosks. We will see
below that the variations in postal density are different from
variations in population density. Postal density is a measure that
contains two dimensions: exogenous cost drivers such as geographic
and demographic characteristics of the areas served, and endogenous
drivers reflecting the quality of delivery service. On the
endogenous dimension, postal density could in principle be "tuned"
by the postal operator by adjusting quality of service. Of course,
an increase in postal density would require a reduction in the
quality of service that may not be compatible with the way
universal service obligations are defined in a country.9

3.1 Comparison of French and U.S. Postal Densities
Table 2 compares French and U.S. postal densities at various
quantiles. The French postal density is higher at every quantile,
but the ratio is strikingly high at the 95th and 90th quantiles
where it exceeds 3 to 1. On average the French postal density
exceeds the U.S. by a ratio of 2.5 to 1. This is somewhat less than
the ratio of population density between France and the U.S. which
is 3.6 to 1.10
5
See PRC Docket No. R2000-1.
6
A stop can serve one or more addresses.
7
It also gives a better view of the parts of the country that are
actually populated. Totally deserted areas are not
reflected in this driver.
8
We mean by "quality of delivery service" such things as door,
curbside or roadside line of travel delivery. The
term as used here is not meant to include frequency of
delivery.
9
The ability of an operator to adjust quality of delivery service
can be affected by the applicable postal law in each
country. For example, French law requires delivery to the door.
This level of delivery service, treated as a
universal service obligation in France, is primarily defined by
history and tradition. Thus, delivery quality (and
therefore postal density) can in theory be tuned by the operator
but in practice may be constrained by law.
10 Part of the reason that the U.S. postal densities have such
low values with a narrow range may be due to stale data.
The USPS determines the amount of current carrier time based on
the percentages of time spent in route and load
activities calculated with data collected in 1985. New data may
show an increase in variable load time to reflect
the increased use of kiosks and a decrease in route time. This
would produce higher postal densities.
Table 2: Postal Density Comparison with Routes Ranked by Postal
Density



3.2 Rural Areas
Postal densities in rural areas of France and the U.S. are very
different owing to the quality of service. We have found that the
postal density in France of the 10 percent of addressees with the
lowest population density is 46 while it is 89 in the equivalent
areas of the U.S. This is remarkable in light of the much lower
population densities in the U.S. Addresses in the most rural areas
of France are much closer together than in the equivalent areas of
the U.S. A French carrier must, however, turn into the farmer's
driveway and proceed to the dwelling. Once there, he or she must
alight from the vehicle and proceed to the mailbox, then return to
the vehicle, turn it around and proceed to the road. In the U.S.
the carrier remains on the road, stops at a roadside mailbox and
places mail in it without leaving the vehicle.11 This contributes
to the affordability of postage in the U.S. Each country has made a
different cost/service tradeoff, which is reflected in each
country's concept of universal service.
Within the U.S. it is surprising that the average postal density
of the bottom quartile of routes (ranked by cost) is lower than the
postal density for the rural routes serving the least densely
settled 10 percent of the population (50 versus 89). This is
because rural routes in the U.S. have a higher postal density than
most park and loop city routes and business routes. This in turn
indicates the greater efficiency of delivering mail to roadside
mailboxes compared to walking to the front door of a detached
dwelling or business. Park and loop routes serve cities and their
inner suburbs while curbline routes serve the outer suburbs. Thus,
the postal density of carriers' walking between nearby stops is
lower than that of carriers' driving between greatly separated
stops. The postal density of 89 addresses per hour for the most
rural population corresponds to roadside mailboxes that are 280
meters apart (on average). Many detached houses in cities are as
close as 20 meters apart. In France, the bottom decile of routes
ranked by population density averages 46. The average distance
between two stops is around 400 meters, and the delivery to the
door increases time between two stops.
11 Moreover, on many roads served by rural carriers, mailboxes
must be placed on only one designated side of the
road. This relieves the carrier from the need to travel back
down a road to serve curbside boxes on the other side
of the road.


3.3 Densely Populated Areas
At the extreme, U.S. population densities are as high as French
population densities. For example, Table 3 shows that the inner
area of New York has a higher population density than that of
Paris. But on average U.S. population densities are much lower as
indicated in Table 3 which shows that the urbanized area of Paris
is much more densely populated than that of New York.
Table 3: Population and Population Density in New York and
Parisa

aData Source: Demographia 2001 bVille de Paris for Paris and the
borough of Manhattan for New York
This is reflected in the ratio of multi-address stops to single
address stops in the two countries. Figure 1 displays this
relationship.12 It shows the ratio of delivery points to stops
ranked by cost. At the left side of the graph where volume is least
costly to deliver we find the most multiple address stops. As the
ratio of points to stops decreases, mail gets more expensive to
deliver. La Poste has a much higher ratio of multiple address stops
than the USPS.
Figure 1: Ratio: Delivery Points to Stops

5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
55%
60%
65%
70%
75%
80%
85%
90%
95%
100%
Semi-decile of Volume (Routes Ranked by Increasing Delivery
Costs)
12 Figure 1 contains data for USPS city carriers only.


3.4 Comparison of Variation in Postal Density and Volume
Figure 2 displays the range of postal density and annual volume
per address that encompass approximately 90 percent of the routes
in France and the United States. It shows much greater variation in
French postal densities than for the U.S. and much smaller
variation in volume per address in France than in the U.S. The area
of overlap is quite small relative to the ranges for each country.
The greater variation in volume per address in the U.S. is probably
due to the fact that mail volume and income are highly correlated
and the fact that the U.S. has a much larger variation in income
per household than France.13 The smaller variation in U.S. postal
densities is due to differences in the quality of delivery service
which dampen the impact of low population density on many routes.
Because France has a uniform quality of delivery, its postal
density differences are much greater.

Figure 2: Range of Postal Densities and Volumes for France and
USA
3500
3000
USA 2500
2000
1500
France 1000
500
0
0 100 200 300 400 500 600 700 800 900
Postal Density (Possible Deliveries Per Hour)
4. HETEROGENEITY AND RELATIVE VULNERABILITY TO INEFFICIENT
ENTRY
Figure 3 displays the distribution of normalized French and U.S.
delivery costs for each semi-decile of volume (or traffic) when
routes are ranked from least to most costly. To protect
commercially sensitive data and to facilitate comparison we display
normalized costs and not actual unit costs.14 All unit costs are
displayed relative to the mean of the distribution of unit costs.
For purposes of this analysis we discard the first and last
semi-deciles for each country because the observations upon which
they are based contain data of questionable accuracy.
13 See Cohen, et al., (2002).
14 Unit costs refer to carrier street time measured in seconds
per delivered piece. Time is an international currency and
facilitates cost comparisons.
Volume (Annual Pieces per Address)


Figure 3: Comparison of Unit Delivery Costs of La Poste and
USPS
3.00
Indexed Unit Delivery Costs (Mean = 1.00)
2.50
2.00
1.50
1.00
0.50
0.00 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75%
80% 85% 90% 95% 100%

Semi-decile of Volume (Routes Ranked by Increasing Delivery
Costs)
We see that the range of the French distribution is greater than
the U.S. distribution. The former begins with a cost of 0.24
(relative to the mean) and ends with a cost of 2.57 (relative to
the mean). The U.S., on the other hand, begins with a cost of 0.33
and ends with a cost of 1.93. The standard deviation of the
normalized French distribution is half again as large as the
normalized U.S. distribution (0.67 vs. 0.44). Thus, the French
distribution is more heterogeneous than the U.S. distribution.
Vulnerability to inefficient entry can be addressed using
delivery cost heterogeneity. Some indicators of vulnerability are:
the percentage of the volume that has a unit cost less than half
the mean, the size of the area between actual costs and the average
cost, and the average slope of the cost curve. These are based on
the conjecture that an entrant would seek to compete where the unit
delivery cost was very low while using the uniform tariff as an
umbrella price. These measures of vulnerability make sense, of
course, only with a uniform tariff constraint, and more generally
when geographical cost oriented tariffs are not applied.
Figure 3 reveals that in France 33 percent of the volume has a
cost less than half the mean while in the U.S. only 20 percent of
the volume is below this threshold. Ceteris paribus, France is more
vulnerable to inefficient entry. Another relevant factor would be
the geographical concentration of the low cost volume. We believe
that the low cost volume is scattered over perhaps a hundred or
more U.S. metropolitan areas while in France the volume is
concentrated in relatively few cities. Thus, it would be far easier
for an entrant to market its alternative service in France than in
the U.S. In addition, France has about half the per capita volume
of the U.S. giving it less economies of scale. This means that the
consequence of volume erosion would be greater in France than in
the U.S. There are, of course, other relevant factors affecting
entry such as wage premium, efficiency of operation and
classification efficiency.15
15 See Cohen, et al., (2002).
Figure 4 compares French and U.S. traffic and French and U.S.
postal densities when routes are ranked by cost. We see that in
both countries the volume for the least costly areas is
approximately twice that of the most costly areas. Thus, the volume
range for both is about two to one. The range of postal density is
much greater for both countries. The maximum is eleven times the
minimum for France and 4.5 times the minimum for the U.S. The
greater variation in French postal density leads to a greater
variation in French unit costs relative to the U.S. As discussed
below, the lower French volume magnifies the impact on unit cost
from the variations in postal density.
Figure 4: Volume Per Delivery Point and Postal Density

10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% 80% 85%
90% 95%
Semi-decile of Volume (Routes Ranked by Increasing Delivery
Costs)
The different ranges in postal density and volume when routes
are organized by cost rather than organized by postal density or
volume (as displayed earlier in Figure 2) demonstrate the
interaction of postal density, volume, and delivery costs. In
particular the actual volume ranges shown in Figure 2 are much
greater than the two to one ratios observed in Figure 4.
Figure 4 displays an interesting phenomena in that for the most
costly 35 percent of the routes the postal density in France is
lower than in the U.S. This is due to the fact that in the
U.S. the most sparsely populated areas do not correspond to the
highest cost routes. This is partly explained by the line-of-travel
requirement, which greatly reduces the cost of delivery in areas
with low population density. Moreover, in the U.S. the routes with
the lowest postal density are not the routes with the lowest
traffic.16 In France, on the contrary, routes with the lowest
postal density have the lowest volumes. This also explains why
there is greater heterogeneity in costs in France than in the
U.S.
16 This is probably linked with a wealth effect, as volumes are
driven by the wealth of the recipient (see Kolin and Davis (1999),
Berthelemy and Toledano (2000)).




5. INTERACTION OF THE COST DRIVERS
In this section we examine the impact of changes in postal
density and volume per address on the average cost in each country.
French average costs are derived from an engineering model
mentioned in the Appendix and described in detail in Roy
(1999).
The U.S. average costs are derived from an econometrically
estimated translog equation of street time.17 The equation relates
street time to volume per address, postal density, and the number
of addresses. The number of addresses is set as a "control"
variable in the equation, allowing us to develop average costs.
Table 4 presents La Poste and USPS normalized street delivery
costs for each combination of quartiles of low, medium and high
postal densities and volumes per address. Data for each country are
presented, with the U.S. values immediately below the French
values. Postal density in France is higher than in the U.S. in all
quartiles and ranges from 78 addresses/hour at the low quartile to
256 addresses/hour at the highest quartile. This range of postal
densities is much greater than the corresponding U.S. range of 67
to 140 addresses per hour. The annual volume per address is higher
in all quartiles, and its range is wider in the U.S.
Table 4. 1999 La Poste and USPS Index of Average Costs*
Low Postal Density (PD) Medium Postal Density High Postal
Density % Change La Poste (78 Addresses/Hour) (135 Addresses/Hour)
(256 Addresses/Hour) in AC USPS (67 Addresses/Hour) (94
Addresses/Hour) (140 Addresses/Hour) (due to PD)
Low Volume La Poste (673 Pieces/Address/Year)
1.81 1.09 0.62

-66% USPS (1,090 Pieces/Address/Year) 1.76 1.28 0.92
-48%
Medium Volume La Poste (767 Pieces/Address/Year)
1.64 1.00 0.58
-65% USPS (1,448 Pieces/Address/Year) 1.35 1.00 0.73
-46%
High Volume La Poste (946 Pieces/Address/Year)
1.40 0.87 0.52
-63% USPS (1,919 Pieces/Address/Year) 1.04 0.79 0.59
-43%
La Poste % Change in AC (due to Vol) -23% -20% -16% USPS %
Change in AC (due to Vol) -41% -38% -36%
* Street Time only (Seconds per Piece) Note: Low = 25% Quartile;
Medium = 50% Quartile or Median; and High = 75% Quartile.
17 The specification of the estimated translog equation is:
ST=β0+β1lnQ+β2(lnQ)2+β3lnD+β4(lnD)2+β5lnB+β6(lnB)2+β7(lnQ)(lnD)+
β8(lnQ)(lnB)+β9(lnD)(lnB)
Where: ST = Street Time
Q = Volume (Pieces per Address)
D = Postal Density (Addresses per Hour of Fixed Time)
B = Addresses
The translog equation was estimated using 1999 data from 39,737
rural routes and a stratified sample of 8,300 city routes.
Table 4 shows that in both countries volume is a more important
cost driver at low postal density than at high postal density. This
is because, ceteris paribus, at low postal density the fixed costs
are higher and the potential for scale economies is therefore
greater. Conversely, at high postal densities the fixed costs are
lower and thus the potential for scale economies is not as
great.
Similarly, postal density is a more important cost driver in
both countries at low volume because at low volume the savings in
fixed costs realized from increasing postal density are spread to
fewer pieces. Conversely, postal density is a less important cost
driver at high volume because the savings from an increase in
postal density are spread across a greater number of
1300

pieces.
2200 44
It should be noted that the impact of postal density on cost is
greater in France than in the
U.S. since France has a wider range of postal densities and
lower volumes. In contrast, the impact of volume is greater in the
U.S. than in France because the U.S. has lower postal densities and
a greater variation in volumes. Finally, postal density appears to
be a more important driver of unit street delivery costs than
volume over the actual ranges in France and the U.S.


6. UNIT COST BEHAVIOR
The La Poste simulation model and the cost function developed
for the USPS, described above, provide alternative means of
estimating average unit costs over a range of volumes per delivery
point and postal densities. Figure 5 displays average costs
generated with the La Poste
Unit Delivery Cosst (sec/piece)
simulation model and data for French postal activities. Figure 6
displays the average unit costs generated with the cost function
for the USPS.
Figure 5: Unit Delivery Costs as a Function of Volume and Postal
Density Derived from La Poste Delivery Cost Simulation Model
90
60
30
Yearly Volume per Address
Possible Deliveries Per Hour)
Figure 6: Unit Delivery Costs as a Function of Volume and Postal
Density Derived from a Translog Model with USPS Data

The remarkably similar shapes of the two surfaces demonstrate a
convergence of simulation and regression approaches to estimating
the behavior of delivery costs with postal density and volume per
address as cost drivers. The difference in unit delivery costs
values reflect different input prices in the two countries.
The figures visually demonstrate the relationship between low
postal density and/or low volume and high average unit costs; and
conversely the relationship between high postal density and/or high
volume and low average unit costs. Also, the figures exhibit the
rapid change in unit delivery costs as either volume or density
increase. However, once either high volume or high density is
achieved, the opportunities for further reductions in average unit
costs by increases in either volume or density are minimal.


7. CONCLUSIONS
The analysis of delivery costs for France and the U.S.
demonstrates that street delivery costs are more heterogeneous in
France than in the U.S. Ceteris paribus, France is more vulnerable
to inefficient entry than the U.S.
The heterogeneity of delivery costs is driven by differences in
volume, geographical characteristics and quality of delivery
service. The concept of postal density captures the nonvolume
factors in a single measure. Rationalizing street delivery cost by
decreasing the quality of delivery service can have a profound
impact on the postal density and consequently, on delivery
cost.
Due to this rationalization of delivery cost in the U.S., the
postal densities of the most sparsely populated areas are higher
than the densities of the most sparsely populated areas of
France.
Postal density appears to be a more important driver of unit
street delivery costs than volume over the actual ranges in France
and the U.S. Furthermore, high postal densities reduce the impact
of volume on unit street delivery costs, and high volume reduces
the impact of postal density.
APPENDIX:
Delivery Data
France
The delivery data for La Poste are obtained for each delivery
area. A delivery area represents a postcode (or several postcodes
in some cases). The territory is divided into nearly 6000 delivery
areas. Each area averages 12 routes (with of course a very high
deviation)18. The unit costs (expressed in seconds and normalized
as explained) are estimated by an engineering model19 to allow for
simulations over variations of traffic. They are obtained the
following way: The information system allows the description of
each area with geographic characteristics (population, number of
stops, number of delivery points, surface, length of streets or
roads) and traffic. The delivery model constructed by La Poste uses
hundred of parameters, and allows the calculation of the unit costs
of street delivery with an error of less than three percent in each
area. At this stage, one unit cost is calculated for each area. It
gives a quite aggregate view of street costs compared to the
fineness of U.S. costs. In reality, each area is quite
heterogeneous: it generally consists of a small town and an
outlying area with different geographical characteristics. To have
a more precise view of unit costs (and to have a better level of
comparison with U.S. costs which are by route instead of by
geographic area), the costs are then divided into two groups per
area. We finally obtain 12,000 unit costs in 12,000 areas.20 The
subareas are then ranked on the criteria of increasing unit costs.
They are re-aggregated into increments of five percent of traffic:
the first five percent of traffic delivered is reached with 23
areas, and the last five percent of traffic is obtained with 900
areas.


U.S.


U.S.
delivery data are from the City Carrier Cost System and
the Rural National Mail Count System.21 City carriers make up 72
percent of the routes and rural carriers make up the
remainder.22


The City Carrier System contains a stratified sample of 8,300
routes and the 1999 Rural National Mail Count System provides data
on 39,737 rural routes. The data elements used in this study are:
the number of addresses served; the number of stops; (for city
carriers only) volume per address, and address per kilometer (for
rural carriers only). City carrier time is derived from the USPS
Cost Segments and Components Report for FY 1999 and the average
time is
18 Paris has 20 delivery areas and more than 1000 routes, and
many delivery areas, like in Lozère only have one route.
19 See Roy 1999 "A Technico Economic Analysis of the Costs of
Outside Work in Postal Delivery". This model is used in the cost
accounting system to determine costs by products.
20 These sub-areas represent an average of six routes per
area.
21 See PRC Docket No. R2000-1.
22 Approximately 30 percent of rural routes serve non-rural
urban suburbs.
calculated and used for all city carrier routes. Rural carrier
time is included in the rural mail count system.
Variable and Fixed Costs
We divide out-of-office delivery costs into their components
using the method developed by the U.S. Postal Service.23 Load time
is included in the variable costs. For simplicity the variable
portion of access and travel to and from the beginning of the route
are ignored. The remaining time is fixed and includes the time
between stops (route time and the fixed portion of access) and the
fixed portion of travel time.
23 See PRC Docket No. R2000-1.
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