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1201 F, St, NW, Suite 200, Washington, DC 20004

\(202\) 554-9000

> February 12, 2003

President\'s Commission on the United States Postal Service

1120 Vermont Avenue, N.W., Suite 971,

Washington, D.C. 20005

**Re: Comments on the United States Postal Service Transformation Plan**

To the Members of the Commission:

On behalf of the 600,000 small-business owners represented by the
National Federation of Independent Business (NFIB), I am writing to
offer comments on the April 2002 \"United States Postal Service
Transformation Plan (USPSTP).\" Our comments are divided into three
sections: (1) revenue and cost-saving options; (2) rates and small-firm
advertising; and (3) E-Commerce and mail delivery for small business
owners.

NFIB is always concerned about changes to government policies that will
have impacts on small businesses. In the instance of postal services,
our members are particularly sensitive to any measures which will drive
up costs, especially when (according to our own polling data), they are
ill-equipped to find viable less-expensive alternatives to their local
post office. Our comments reflect these concerns.

# **I. Revenue and Cost-Saving Options**

As noted in the USPSTP, there is a need to maintain service for small
business owners across the country, especially in rural areas where a
post office box may be the only means of receiving mail and/or new
orders. In fact, in a recent NFIB National Small Business Poll (see
Attachment 1), 25 percent of owners expressed a \"serious negative
impact\" from closing the Post Office nearest them. This also means,
however, that 75 percent of surveyed owners believe that closing the
nearest post office---usually in an urban area---would cause only a
minor hardship. Allowing the USPS to close some duplicative post offices
in urban areas where there are good small business alternatives would
save much of the money needed to subsidize rural service. In addition,
if some of the assets could be sold from the duplicative services in
urban areas, additional funds could be raised to stabilize the postal
rate structure.

Understanding that in addition to a change in service arrangements,
price increases are also being considered, we would want to caution the
commission against raising the price of stamps and services. An increase
in the price of first class stamps from 34 cents to 40 cents would cost
small firm owners about \$2.3 billion, according to NFIB\'s Regulatory
Impact Model (see Attachment 2). Small firms cannot afford such cost
increases, and they are captive to increases in the price of first class
mail. Unlike larger firms, they cannot readily turn to alternative mail
services to keep costs down. Take the service of bulk-rate, presorted
mail. Most small businesses do not have the size of mailings to take
advantage of these rates directly, or do not have the personnel required
to pre-sort their mail. And in the case of first-class mail rate
increases, there is a direct relation between such increases, and the
drive by small owners to increase their use of e-mail, a fact noted by
the USPSTP. Clearly, this results in a reduction in postal revenues.

If the Postal Commission is concerned about making up revenue
shortfalls, they should consider an examination of excessive
contributions to the Postal Workers Retirement Fund that have occurred
in the past. Proper configuration of the amount paid into the retirement
fund will save the Postal Service considerable amounts of money in the
future, and the transfer of monies which were overpaid in the past into
the general operating fund for the Postal Service will give it their
needed influx of cash. Taken together, the two options will allow stable
postal rates for at least the next several years. The Commission should
recommend that the bill in Congress that would allow the transfer of
these funds to postal operating funds become law.

An additional cost-saving measure might be to eliminate Saturday
deliveries, except for retailers in selected areas. In the NFIB Postal
Rate poll attached, 61 percent of business owners reported that
eliminating Saturday deliveries would have no impact on their
businesses, while 14 percent reported a \"large, negative impact.\"
Therefore, why not give the USPS the opportunity to eliminate Saturday
deliveries, with the exception of retailers that request it. This will
also allow the USPS to cut back its use of vehicles and vehicle costs.

## II. Rates and Small Firm Advertising

One area which the NFIB is particularly concerned about is the possible
increase in rates for "saturation mail," such as that found in
mass-mailed coupon books or "valpaks". Many small firm owners are wholly
dependent upon this type of advertising in marketing their products and
services through this method, as it enables them to cheaply reach their
market area simply and effectively. Some of them simply cannot afford
any other form of direct mail advertising. We therefore believe it is
imperative to maintain a low and reasonable rate for this kind of
service.

There is ample evidence to demonstrate that a vast majority of consumers
look at advertising type mail in some form about 80 percent of the time.
[^1] Thus, this kind of advertising not only performs a vital service to
businesses that depend on it, but to consumers who might not otherwise
be informed about the prices and products of millions of local small
business owners as well. This kind of mail also encourages competition
in an era increasingly dominated by larger firms in many markets. Thus,
it is good for the economy and for consumers in general that this kind
of competition be encouraged. And the role of the USPS in keeping rates
modest so that this kind of saturation advertising be continued into the
indefinite future is critical.

Additional anecdotal evidence indicates that the customers of small
firms are not all uniform. In particular, there is some evidence that
Hispanic and African American consumers particularly like this form of
advertising and are more likely to use it to become informed about the
products of new small firms. [^2]

# **III. E-Commerce and Mail Delivery For Small Businesses**

The USPSTP indicates the positive relationship between e-commerce and
small business. E-Bay is perhaps the best example of this phenomena.
Small firm owners advertise goods and services for sale on E-Bay and
then proceed to mail them to customers via first class or priority mail.
Some growth in USPS services has occurred as the Internet has expanded.
[^3] . As more small firm owners turn to the Web to hawk their wares,
they will be choosing between the USPS or competitive services to
deliver their orders, catalogues, etc. It is important therefore that
the USPS foster this growing market sector by developing reasonably
priced products and effiective and efficient services. The economy's
benefit will be the USPS' financial benefit as well

In order to raise additional revenue to keep mailing costs as low as
possible for small firm owners, NFIB encourages USPS to become a
competitive provider of global mailing services to the fullest extent
possible. Many of these services are already provided by private
companies, and there is no reason why the USPS should not compete with
these firms.

## IV. Conclusion

NFIB appreciates the opportunity to submit these comments. Clearly,
there are many issues which need to be addressed by the commission in
order to help bring the postal service into the marketplace realities of
this century. We have offered up several suggestions of importance to
our members---the overarching concern being the maintenance of
inexpensive postal services, while still providing high quality products
to consumers. Hopefully, the commission will find our ideas helpful.

Feel free to contact us if you have any questions or require additional
information.

> Sincerely,
>
> ![](media/image2.png){width="4.054166666666666in"
> height="0.8222222222222222in"}
>
> Dan Danner
>
> Senior Vice President for Federal Public Policy

DD/aml

Attachments:

NFIB National Small Business Poll

The Rising Postal Rate and Its Strain on Small Business

[^1]: Study by NFO WorldGroup, 4,016 respondents, February, 2001.

[^2]: NFO WorldGroup, op. Cit.

[^3]: Pitnry-Bowes, Inc. \"The Role of Mail in E-Commerce: A Research
    Study: Executive Summary, August, 1999