> Executive Summary
>
> February 12, 2003

Despite common perception and unsupported assertions, the Postal Service
has a business model that is NOT BROKEN. In fact, it is far healthier
than many large corporations. Since 1971, it has been a self-supporting,
independent establishment of the executive branch. Its volume has grown
in good times and fallen far less than many companies in bad times. Its
major problem is to ensure that its management stays focused on the
financial integrity of the Postal Service and shows less concern about
the pressure for lower rates coming from its larger customers. All
postal customers concerns need to be considered but not at the expense
of the financial health of the organization.

The Business model is not one that requires an ever-expanding volume,
although that has been the case for over 200 years and will likely
continue. It does not require that rates be frozen. It does not require
a host of new products or services. (The last significant new service
was the creation of money orders as mandated by Congress during the
Civil War.) It does not require that the Postal Service compete against
E-mail, for there is no price cheap enough to make it valuable for a
customer to choose mail over E-mail. It does not even require that the
Postal Service lose money to placate the large mailers who influence its
Governors to support excessive discounts, delay the implementation of
rate increases, and put off the filing of rate case requests.

While low cost and efficient operations are important, the Postal
Service already has the lowest price service of major countries. Other
factors are more important than cost in its governing legislation. First
among these is service to Rural and Urban America. The factors of trust,
convenience, safety, security and customer satisfaction are more
important than the absolute lowest cost. Available pricing flexibility
has not been used and postal decisions to delay price changes have
subverted the stated goal of small predictable price increases.
Discounts have been used to unfairly subsidize large mailers at the
expense of individuals and small businesses. These discounts exceed the
cost saved by the Postal Service for presorted mail and far exceed the
cost to the customer for the work.

The concerns regarding the cost of the growing Postal network and the
alleged inability of the Postal Service to continue to financially
sustain this network growth are not supported when one examines the
data. As long as mail volume grows faster than delivery points, the
ratio of pieces per possible delivery will not decline. This simply
means that the new delivery points on average are getting as much mail
as all previous delivery points did. This also means the new delivery
points are bringing with them the same revenue as all other delivery
points. In FY 1971 the number of pieces per possible delivery stood at
1,074 while in FY 2000 it had grown to 1,529. Despite the combined
negative impact of the economic downturn, the horrors of 9/11/01, and
the anthrax scare, the number stood at 1,454 in FY 2002. In FY 1997,
while the Postal Service was earning significant net income/surpluses,
that number was at 1,457. If that number of pieces per possible delivery
allowed a net income in 1997, it should allow that same net income today
-- in spite of the temporary volume decline.

The Postal Service has asked for moderate legislative change. However,
it already has the freedom it seeks in most areas. Its constraints are
mostly self-imposed and its view of business as being uninhibited by
government regulation is naive. The Postal Service has long and loudly
complained about its lack of control over pricing, markets, and labor.
Large companies all face similar problems and they have the added burden
of taxes and class action law suits that the Postal Service does not
face.

It has kept price increases to inflation for the individual and below
inflation for the large customers. It started with over 20 percent of
its budgets from appropriated funds, and still managed to significantly
over fund its retirement plan. Postal executives deserve great credit
for their pursuit of the truth about this issue over many years.

The Governors have for many years declined to ask for appropriations,
still authorized, to cover the costs of the small postal facilities that
it now wishes to close because it says it can't afford them.

The Postal Service has an excellent record in its operations with very
dedicated people. However, its Governors have made decisions that have
led to financial crises. The combined effects of 9/11, the recession and
the Anthrax attacks have resulted in a two-year volume decline of only
2.5 percent. The Postal Service is not yet broken and does not need a
legislative change to survive and prosper. It does need to apply good
business principles.

## ***[Introduction]{.underline}***

Many of the comments made at the formation of the President's Commission
on the Postal Service are inaccurate, misleading and based on
conventional wisdom that is demonstrably wrong. The charge to this
Commission is about the future of the Postal Service. In determining the
future, it is imperative to begin with a full understanding of the
Postal Service and its problems. The fundamental problem facing the
Postal Service have been caused by the Postal Service itself, and the
Postal Service can solve those problems.

This paper will first attempt to deal with false assumptions that seem
to underlie the Commission's formation. These include the cessation of
mail volume growth, the effect of the Internet on First-class mail
volume growth, the root causes of the Postal Services current financial
condition, the capacity of the Postal Service to increase revenue by
raising prices, the need for discounts, and the desirability for new
products and services. The Postal Service is doing the public a
disservice by allowing these misconceptions to continue when its own
data show the true facts. This paper will also focus on public policy
choices and wise business models.[^1]

**[The Postal Service has been successful:]{.underline}**

The Postal Service has been reasonably successful in its mission. It has
taken the Post Office Department from poor service and heavy subsidies
to greatly improved service without subsidies. It is not yet broken and
does not require a law change to return to the path of prosperity upon
which it had been traveling prior to 1998.

The Service's major problems are the direct result of decisions of its
Board of Governors and the Postal Rate Commission. In the past other
Boards have made decisions that led to good finances, paying off debt,
improved customer service, and investment in automation that has saved
billions and improved information flow.

The Postal Service 's proposals for addressing its problems are set out
in its Transformation Plan. Most of the proposals in the Transformation
Plan, described as needed changes, are currently available to the Postal
Service. Those that involve additional authority are at best modestly
positive but without the ability to significantly improve the Postal
Service's financial results. Some features of the Plan, if enacted,
would threaten the future existence of the Postal Service**.**

### **[Exaggerated, Misleading and Overly Pessimistic Assumptions]{.underline}**

Several reasons are advanced by the Postal Service for change to the
current business model and these reasons are echoed frequently by
others. They extrapolate short-term phenomena that will fix themselves
or can easily be fixed into dire predictions. These include: falling
volume, smaller contributions to the bottom line from non-presorted mail
and an ever increasing mail delivery network that can no longer be
financially supported from mail revenues. All of these dire predictions
underlie the alleged need for change, and are not likely to come true in
the foreseeable future if the Postal Service uses the existing tools
available to it and manages the finances of the Postal Service as is
required under present law.

In his remarks to the Commission on January 8, 2003, Treasury Under
Secretary Peter R. Fisher said the following:

> ***New technology, declining volume, and continued expansion of the
> delivery cost base, combined with competition from the private sector,
> pose a fundamental challenge to the Postal Service. You need to help
> us identify a new business model that will create the Postal Service
> for the 21^st^ Century.***[^2]

These basic premises are either false or subject to great debate due to
the lack of hard evidence. A small and unusual volume decline in a
terrible time should not overshadow a strong, long-term, steady
increase. Importantly, volume has begun growing again. The lack of
financial support to continue the expansion of the delivery cost base is
misleading because it implies that something has fundamentally changed.
Neither new technology nor competition from the private sector is a new
challenge in this century much less in the last few years. In fact the
case can be made that the Postal Service is winning the war for
advertising. This paper will address each of these four items.

**Volume has Grown not Declined:** As the graph below shows, First-class
mail volume has grown steadily over the past 30 years (averaging 2.24
percent) despite various elements of the electronic revolution. The
basic business of delivering the mail has been only modestly affected
both positively and negatively by the fax, the cell phone, overnight
delivery, the Internet, cable and satellite television, and E-mail.
Throughout the last three decades, total mail (which is largely letter
mail and advertising mail) grew at a healthy rate averaging 2.78
percent. Total mail grew 1.5% in the first quarter of Fiscal Year 2003,
which shows that the recovery is not far away. As the economy recovers,
so will First-class and total mail volume. The slowing economy and the
combined effects of 9/11/2001 and the anthrax in the mail scare would be
expected to slow the growth of both First-class and total mail volume.
The small degree to which such mail has declined during these major
impacts attests not to the USPS's weakness, but to its good health. In
this difficult time for business, the Postal Service has suffered far
less volume decrease than most major service industries. Airlines,
hotels and even Internet advertisers have experienced dramatic declines
that dwarf the 2.5% seen in Mail.

![](media/image1.wmf)Since the creation of automation discounts for
First-class mail there has been a continuous movement from single piece
into lower priced discounted categories.

The character of the mail has changed as individuals have replaced many
letters with alternatives. But mail remains as a viable alternative for
use by the public. Mail has continued to fulfill its original mission to
facilitate commerce and help people start and grow their businesses. It
is used for advertising because it works.

**Growth in Delivery Points offset by Growth in Mail and Revenue:**
There is concern that for some unspecified reason, the continued growth
in delivery points cannot be financed. The implication is that the new
delivery points bring no new volume and no new revenue to finance them.
That implication is false.

Total Delivery Point Growth has averaged 1.78 percent per year over the
past 31 years and has been consistently under that rate in the past five
years. In contrast mail volume growth over the same 31 years has
averaged 2.78 percent per year with the understandable exception of the
past two years. Mail volume growth has rarely been negative and more
often exceeds two and even three percent per year. Annual mail volume
growth was even accelerating over the most recent five-year period until
a combination of unusual circumstances occurred. The combined impact of
the 9/11/01 disaster, the anthrax in the mail scare, and a weakening
economy has resulted in the rare but temporary volume decline of the
recent past. Since Postal Quarter I of Fiscal Year 2002, the trend in
total mail volume by Postal Quarter has consistently demonstrated
strength and recovery. As stated above in Postal Quarter I of FY 2003
mail volume actually increased by 1.5 percent over the same period the
previous year. It is very likely we will continue to see this growth in
the future.

The relationship of mail volume to possible deliveries results in a
measure referred to as pieces per possible delivery. The concerns
regarding the cost of the growing Postal network and the alleged
inability of the Postal Service to continue to financially sustain this
network growth are not supported when one examines the data. As long as
mail volume grows faster than delivery points, the ratio of pieces per
possible delivery will not decline. This simply means that the new
delivery points on average are getting as much mail as all previous
delivery points. This also means the new delivery points are bringing
with them the same revenue as all other delivery points. In FY 1971 the
number of pieces per possible delivery stood at 1,074 while in FY 2000
it had grown to 1,529. Despite the combined negative impact of the
economic downturn, the horrors of 9/11/01, and the anthrax scare, the
number stood at 1,454 in FY 2002. In FY 1997, while the Postal Service
was earning significant net income/surpluses, that number was at 1,457.
[If that number of pieces per possible delivery allowed a net income in
1997, it should allow that same net income today]{.underline} -- in
spite of the temporary volume decline. Once mail volume growth overcomes
the effects of the recent past, pieces per possible delivery will
continue to grow. Thus the benefits of a growing delivery network will
not harm the Postal Service finances in the future.

The graph below uses available data to compare the growth in delivery
points and volume. We lack the series showing total delivery points
except for the most recent 6 years and 1971. However, the number of
total possible deliveries, which exclude Post Office Box and highway
delivery points, is a reasonable substitute and is available to us. It
clearly shows that new delivery points generate new mail. And since new
home and new apartment construction occurs primarily in middle and upper
income areas, it should be no surprise that these are very desirable
targets for advertisers as well.

![](media/image2.wmf)

**Neither New Technology nor Electronic Diversion will Destroy Mail
Volume Growth:** Over most of the past ten years, Postal Managers have
been deeply worried about the ability to survive in the new electronic
world. The tradition of worrying that "the sky is falling" has persisted
for over a century not just the last decade. In the 1872 report of the
Postmaster General, he reported great concern about the telegraph and
the invention of the fax.[^3] (Of course, it took over 100 years for fax
technology to progress to the point where it has become an inexpensive,
reasonably reliable but not a secure way to transmit documents.)

Today "everyone knows" that E-mail and the Internet will weaken or
destroy the Postal Service. Yet in a horrible year, dealing with the
effects of 9/11, Anthrax, and a recession; the Postal Service lost only
\$676 million. As a comparison, AOL Time Warner had a bad year and wrote
off nearly \$100 billion, and it was not because E-mail was eroding
AOL's volume.

It would be a tragic mistake to assume that the temporary decline in
mail, that almost always occurs during a recession, is cause to believe
that the Postal Service's business model is broken and the world has
changed in such a way that mail volume will never again increase.

Looking carefully at technical data, we conclude that the allegations of
electronic diversion of mail volume, while real, are not as dire as
alleged. On page 3 of its Transformation Plan, the Postal Service
states, "Postal Service models indicate that electronic diversion is the
largest contributing factor driving the decline in First-Class Mail,
single-piece letters." It cites Dr. Tolley for this claim and this is
misleading to say the least. It refers to Postal Rate Commission Docket
No. R-2001-1 Testimony of Dr. Tolley, page 37. Dr. Tolley explains
trends over the five-year period 1996 to 2001, with 9 factors that tend
to drive First-Class single piece volume both up and down. The biggest
factor was an 8.9% down from "Other Factors" which appear to be the
shift to discounted First-Class Mail. The remaining factors are the
following: 5.1% Income, Long-run; +2.3% Own Price; +4.5% Adult
Population; +3.4% Rule Change; (8.6%) Internet Service; (0.6%) Cross
Pieces; and (0.3%) Income, Short-run. This reveals that the shift of
First-class mail to presort/discounted from single piece played a more
prominent role than the effect of Internet conversion.

Over that same time period **[total First- class mail volume
grew]{.underline}** approximately 5.5 percent and **[total mail volume
grew]{.underline}** 12 percent. Although growth has slowed for reasons
that are unclear, the Postal Service still has healthy growth for a 200+
year-old institution.

The alleged loss of "contribution" to the bottom line that threatens the
Postal Service's ability to maintain it's network due to the reduction
of Single Piece First-class letter volume is a self inflicted wound of
the Postal Service's management and it's Board of Governors. The
absolute decline in Single Piece First-class mail volume has ordinarily
been more than offset by the increase in automation (presort) volume
with the single exception of FY 2002. Because the Postal Service insists
on granting discounts for this automation (presorted) mail that are
larger than the Postal Service's costs that such mail avoids, it makes
sense for mailers and presort bureaus to convert non-presorted mail to
automation (presort) mail. The Postal Service points to a falling
"contribution" from this First-class mail as the reason the Postal
Service will not be able to maintain and fund the continued growth of
the postal network and its expansion is thus threatened. The solution to
this problem simply requires the Postal Service to properly set its
automation (presort) discounts so that the net contribution of each
First- class mail piece is essentially the same whether it enters as a
presort piece or as a non-presort piece.[^4]

**Competition from the Private Sector is not New and Will not Mean the
End of the Postal Service:** The Postal Service has lost the battle for
parcels and overnight delivery a long time ago. Some, who are currently
in top management of the Postal Service, conceived of an overnight mail
delivery network many years ago. The Postal Service created Express Mail
in the early 1970's only to have FED-EX take away virtually all of the
business. Unfortunately, preoccupation (by the Governors of that day)
with cost minimization strategies prevented the Postal Service from a
successful implementation of this smart, business strategy. United
Parcel Service and FED-EX have succeeded in taking away virtually all of
the parcel and overnight business by using superior service, better
information technology, convenience, and skillful marketing.[^5] The
Postal Service has always focused on the strategy of using price as its
only weapon in this fight.

In any case, the competition that should matter is for delivery of
letter mail and advertising mail. The Postal Service has shown that it
delivers at prices well below other countries and with better service
than many. It has held its own in advertising while most other
participants have seen their market share decline with new entrants from
Telemarketing, Cable TV and Internet firms.

# ***Current Business Model***

The basic business model currently in place is one of compromises. It
has some advantages and some disadvantages. The Postal Service pays no
income, property or excise taxes. Its regulations and purchasing manual
carry the weight of law in many cases. It is authorized to request, but
chooses to not request, funds approximating \$450 million to help pay
for its universal service obligation. It is required to fund the Postal
Inspection Service and the Inspector General who have authority to
enforce laws dealing with the mail. It has a requirement for compulsory
arbitration in labor matters, something the managers of bankrupt
airlines can only dream about. There is a bill in the U. S. Senate to
create a Postal Service like compulsory arbitration process for
airlines. The Postal Service is required to provide the mail service
that Americans need regardless of whether volume increases or decreases
and to fund its operations from its revenues.

This business model appears to be misunderstood. For example,
Undersecretary Fisher's comments to the Commission show a lack of
appreciation for the robustness of the current situation. He states:

> ***I like to think of the Postal Service as the ultimate network
> business, and an important value of any network is the scope of its
> reach. One question that the Commission might consider is how the
> network could be leveraged to ensure that it is operated in the most
> efficient manner possible and at the lowest cost.***[^6]

**USPS has Low Prices:** The U. S. Postal Service is able to price its
First-class mail far below that of most other countries. This strongly
suggests that the Postal Service is already very efficient. It is likely
the most efficient Post in the world, public or private.

**Service to the Poor in Rural and Inner Cities More Important than
Cost:** From its inception as the Post Office Department through the
creation of the Postal Service, the goal has been to serve all people
with special emphasis on the poor in both urban and rural settings. In
the book, [Spreading the News,]{.underline} Richard R. John argues that
the U. S. Mail, by serving all, was a major reason for the superior
economic growth and political development of the United States. He
notes, "By 1828, the American postal system had almost twice as many
offices as the postal system in Great Britain and over five times as
many as the postal system in France." (Both countries were much larger
in population.)

In the Postal Reorganization Act, Congress explicitly reaffirms this 200
year old obligation to provide service to bind the nation together even
in small towns where post offices are not self-sustaining.[^7]

Trust is Greatest Asset: The Postal Service has become a trusted and
well-liked arm of the U. S. Government. Trust is the greatest asset of
the Postal Service. While adding to the cost, the Postal Inspection
Service is a national treasure that adds immense value. The success of
the Postal Inspectors has limited mail fraud to levels far below other
countries. Good employees, who take an oath of allegiance to the
Constitution, add greatly to the public's high regard for this
institution. Trust lies at the heart of the public's favorable
perception of the mail.

**Convenience, Safety, Security, and Customer Satisfaction Very
Important:** In a service business, price matters but usually
convenience, safety, security, service, and treatment of customers
matter more. As an example, customers and employees reacted extremely
well to businesslike service enhancements such as the introduction of
credit and debit card acceptance at all retail locations. This change
added cost, but delighted employees and customers with its added
convenience.

> ***You will need to explore the delicate balance between pricing and
> cost flexibilities in a monopoly business and whether the Postal
> Service could use additional flexibility in these areas.***[^8]

**Available Pricing Flexibility not Used:** While Regulation is at the
top of the list of changes desired by the Postal Service, the Postal
Service has freedom that it does not use. It has filed 12 major rates
cases in the past 32 years. It could file a rate case every year or even
every 10 months were that necessary. It espouses the goal of small,
predictable price changes that mirror inflation. Yet, it frequently
delays filing and implementing price changes. This action directly
subverts the goal of small, predictable price increases as well as
earning a positive net income.

The Postal Service identifies four areas in which it believes the Postal
Rate Commission can accommodate its identified needs. These include:
Negotiated Service Agreements, (one of which is currently being explored
at the PRC), Targeted Pricing Incentives, Experimental Classifications,
and Phased Rates. It should be emphasized that all of these initiatives
are deemed possible by the Postal Service under existing law.

**Gives Discounts Beyond Costs Saved:** The Postal Service asks for the
ability to give discounts to attract new customers. Yet, it already
gives discounts to large mailers equal to about 25% of the price that
individuals and small businesses pay for first class postage. It is
especially troubling that these discounts exceed the costs that the
Postal Service saves in its system and that these discounts are for mail
that has no alternative delivery service. The current rate setting
mechanism forces single piece users to subsidize large mailers and
presort bureaus. This causes the Postal Service to lose contribution on
each piece that switches to excessively discounted rates. As more mail
takes advantage of these excessive discounts and switches to a presort
category, this hurts profitability even more.

**Price has Little Effect on Volume:** The Postal Service has detailed
economic studies that show that letter mail volume changes very little
with price changes. Even with large percentage price increases, mail
volume is relatively unaffected. In economic terms this mail is price
inelastic. This also means that lowering your price does nothing but
lower your bottom line. Few new pieces enter the mailstream at the lower
price but all other pieces in the mailstream now also generate only that
lower price.

Parcel volume is much more sensitive to price. However, as we have
mentioned earlier the Postal Service has studies that show that factors
other than price have historically been the reason for the dominance of
United Parcel Service and FED-EX. The Postal Service has a very small
market share of parcels and overnight deliveries. Priority Mail, Express
Mail and Package Services had combined revenue of approximately \$7.7
billion out of total revenue of \$66.5 billion in Fiscal Year 2002. The
Postal Service's parcel revenue of \$7.7 billion pales in comparison to
the combined revenue of \$52 billion of FED-EX and UPS. Any price
reduction to attempt to grow this business would reduce an already slim
margin.

> ***The Postal Reorganization act of 1970 and subsequent legislation
> require the Postal Service to operate in certain ways that increase
> the cost of doing business and imbed inefficiencies into the
> operating, cost and governance structure. Examples include
> prohibitions, or effective prohibitions on post office or other
> infrastructure realignments, requirements that place financial or
> structural burdens that have the effect of increasing the liabilities
> of the Postal Service as well as a break-even mandate that eliminated
> the financial cushion necessary to withstand economic cycles.***[^9]

**There is no effective prohibition on post office realignments:** The
2002 Annual Report of the Postal Service shows that from 1998 to 2002
the following occurred:

-   Contract Stations and branches decreased 15.9% from 2974 to 2500

-   Community Post Offices decreased 5.1% from 1572 to 1492

-   Post Offices decreased 0.6% from 27,952 to 27,791 despite opening
    new Post Offices in new towns around the country

-   Classified Stations and branches **[increased]{.underline}** 4.2%
    from 5,661 to 5,900.[^10]

> The Postal Service has had a process in place for some time for
> dealing with Post Office closings. This process explores more than
> just the absolute dollars saved and it has worked reasonably well. It
> must be understood that as a network each node is not independent and
> should not be viewed as a separate profit center.

The Postal Service is like a telephone network where the value to the
heavy user is the access both to and from the light user. Further, since
the Postal Service does enjoy a monopoly position with a significant
portion of the mail, some of the responsibility for binding the nation
together should influence the decisions for closing Post Offices. The
Postal Service should also be aware of its responsibility as a major
business, as are many other large corporations in this country who often
make responsible business decisions in the best interest of their civic
responsibility. If this proves burdensome, then the Postal Service
should request the Public Service Appropriation authorized for that
purpose. This added cost, in some measure, offsets the advantage that
the Postal Service has in its immunity from taxes. Many business people
would happily make such a trade-off. This does not preclude working with
the Postal Rate Commission, which has jurisdiction, to find better ways
of serving the public need in a rational manner as they have in the
past.

**Break-Even Mandate is a Myth:** The break-even mandate is widely
accepted and quoted by most people in the Postal Service and the mailing
community. In fact, the law has no such mandate. The requirements of the
law are to set prices that allow the Postal Service to "maintain and
continue the development of postal services".[^11] The law requires that
rates and fees be set to cover all costs, including some that do not
appear on an income statement as expenses, e.g. provision for sinking
funds. Further, the law provides that prices cover contingencies and
emergencies.[^12] Finally it requires "sufficient revenues" so that the
total revenue will "equal as nearly as practicable total estimated costs
of the Postal Service." Since it is not practicable for the Postal
Service to do all that it is asked to do with losses, the Postal Service
can and should earn profits each year. Clearly there is room to earn
profits and the Postal Service has done so in a number of years.

**USPS Can Earn Profits** The chart below shows that the Postal Service
can earn sufficient profits to provide the financial cushion necessary
to withstand economic cycles. Postal Service Financial problems have
arisen when the Governors delayed price increases as they did in 1998.
The Board of Governors accepted a Postal Rate Commission recommendation
to raise prices 2.9 percent instead of the 4.5 percent requested and
then delayed the implementation for six months. At the same time they
authorized significant spending increases at the request of management.
Mailers argued that the law requires the Postal Service to "Break-Even"
and that any profit was not appropriate. The Governors yielding to this
pressure effectively reversed their Policy about earning profits and set
the stage for large losses and the current financial crises as the debt
sky-rocketed. ![](media/image3.wmf)

The Postal Service dramatically escalated spending for tangential
services such as call centers that divert calls from local Post Offices.
At the same time that expenses were increasing dramatically, the
Governors delayed the implementation of rates from June 1998 to early
1999, they moved a needed rate case from 1999 to 2000, and filed for an
amount below what was needed to cover costs. The Postal Rate Commission
added to the problems by cutting the size of the contingency reserve
requested by the Postal Service. The PRC recommended far less than
requested in both cases; yet they now criticize the Postal Service for
having insufficient reserves.

If the Postal Service had gone into 9/11/01 with the profits of 1997, it
would not have faced the financial disaster that was narrowly averted by
draconian cost cutting and an unprecedented, shortened, rate case
hearing and recommendation.

The Postal Service, by choosing to eschew profits, eliminated its
financial protection against recession and the business results of the
attacks on our country. This was nearly a mortal, self-inflicted wound.

This myth of required "Break-Even" has become so widely accepted as to
threaten the financial security of the Postal Service. It serves as the
focus of Postal Ratemaking, although the Service requests and the Postal
Rate Commission approves amounts for the recovery of prior year losses
and contingencies neither of which ever appear on the Postal Service's
Profit and Loss statement. This alleged break-even requirement is often
at odds with good business practice and works against the law's mandate
to maintain and continue the development of postal services.

**Debt Levels Controlled by Postal Service:** The Postal Service has
been threatened more by its own choices than by requirements of the law.
Decisions about capital spending and the timing of price increases have
at times driven debt dramatically upward. At other times, policies and
decisions by the Governors have allowed significant debt repayment.
Putting the desire of large customers for "Break-Even" ahead of business
management considerations has deprived the Postal Service of the cash
needed to fund needed capital expenditures and to provide the service
that the public needs and expects. Further, it has driven up borrowing
to the point where the Postal Service neared its \$15 billion borrowing
limit. In the past, good financial discipline has allowed periods of
debt reduction as the chart below shows.

![](media/image4.wmf)

> ***The Postal Service faces a large challenge with respect to human
> resource productivity and incentives at all levels of the
> organization. With over seventy-five percent of its costs related to
> human resources, the Commission should explore how the Postal Service
> can do an even better job of providing employees the appropriate
> incentives for continuous improvement in productivity.***[^13]

**Incentives have Worked:** During the years from 1995 to 1998, the
Postal Service achieved great success with Economic Value Added and a
balanced score card that initially included employee ratings of
managers, customer satisfaction and Economic Value Added, the
trademarked Stern Stewart system that encouraged wise business
decisions. The system was weakened to allow bonuses with losses as the
Governors succumbed to the desires of big mailers who railed against
profits.

> However, it is not all about costs. The revenue side is driven by a
> regulated pricing mechanism that is time consuming at best. You may
> want to consider whether current and future costs can be understood
> and communicated more clearly in the pricing of postal services. You
> could also consider whether it is possible or beneficial to introduce
> greater clarity and predictability into the postal rate setting
> process with the goal to enhance predictability and public
> confidence.[^14]

**Implementing rates 2 months earlier would have saved \$8 billion:**
Delays in the ratemaking process can be predicted and managed. Over the
past 32 years, reasonable timing that produced 1 percent more revenue
(and 1 percent higher prices) would have produced retained earnings in
excess of \$5 billion. An extra 1 percent pales in comparison to the 362
percent increase in the price of the first class stamp over the past 32
years. Indeed, the actual price per piece for a single piece of mail
would not need to be higher, only the timing of recommended and approved
price changes would have to have been a month or two sooner. If each of
the twelve price increases had been implemented 2 months sooner, the
Postal Service would have earned nearly \$8 billion more net income and
have \$2 billion in positive retained earnings.

Greater price flexibility would likely lead the Postal Service into a
price war given its historical reliance on price as its primary
marketing tool. **[No one wins in a price war.]{.underline}** And the
current rate-making process prevents the Postal Service from initiating
a destructive price war.

**Delays are the Choice of the Postal Service**: The reason for the
unpredictability has been the delays in filing and in implementing rate
increases. Waiting until losses threaten survival, also increases the
needed percentage increase. This is the direct result of giving in to
pressure rather than making decisions that recognize the fiduciary
responsibility of the Governors to protect the financial integrity of
the Postal Service.

> ***Competition with the private sector is also an important issue that
> this Commission should examine. This may encompass new and existing
> postal products and services or the monopoly status of access to the
> individual mailbox. You will also need to explore the issue of cross
> subsidies.***[^15]

Unfair Subsidies Exist: Intra-class subsidies exist within First Class
rates. Single piece mailers subsidize large businesses with discounts
well beyond the costs actually saved by the Postal Service. Banks,
utilities and credit card companies sort mail in their computers at
virtually no cost to themselves and receive discounts of as much as 9
cents off the 37 cent rate. Presort bureaus collect mail from smaller
businesses, commingle it, and receive similar discounts. These discounts
are so large in comparison to their own costs that presort bureaus pass
on the "lion's share" to the businesses that originate the mail
pieces.[^16] This places a burden of more than a billion dollars a year
on individual mailers and small businesses.

New Products and Services have not Helped: From time to time the Postal
Service and its critics suggest that new products and services will
provide the solution to some ill-defined problem. It is folly to suggest
that the Postal Service is powerless to develop new products under the
present law. In the mid-1990s, the Postal Service actively explored over
150 new products and services. Those that were implemented were
relatively insignificant. Most caused losses and the few profitable
initiatives, produced earnings so small as to be lost in the rounding of
overall financial statements.

**"Stick to your knitting":** Few service companies have successfully
offered new services and/or products. Those that have, like accounting
firms offering management advice, have proved to be problematical.
Fortunately, criticism from the public and Congress caused the Postal
Service to avoid the type of huge undertakings that have bankrupted some
large corporations. The Postal Service has in large part been forced to
heed that wise piece of business advice, "Stick to your knitting."

> ***Finally, the Commission will need to explore the type of financial
> transparency and corporate governance that would serve the Postal
> Service well for the 21^st^ century. This should include your review
> of the role of the Board of Governors, the role of the Postal Rate
> Commission, the role of Congress, the management team of the Postal
> Service as well as the reporting of postal finances.*** [^17]

It should be noted that the individuals on the Board of Governors have,
for the most part, no prior board or management experience with
organizations similar in size or complexity to the Postal Service. It is
likely that none would meet the requirements of recent legislation for
business, Sarbanes-Oxley, with respect to being financially
knowledgeable. The Postal Service's current management team has only one
officer with experience in a large business. The Postal Rate Commission
currently is structured to have five full time Commissioners. These
individuals typically have had no prior experience in the senior
management or the boards of very large companies or boards. Unlike other
regulatory commissions, the PRC members have no training or experience
to qualify them to perform their duties.

The caliber of this group should, at a minimum, include a knowledge and
appreciation of the financial aspects of running a large business. This
should include familiarity with costing and pricing of successful
businesses.

Further, the Office of the Consumer Advocate should pay heed to its
title and represent the consumer, not the presort bureaus and large
mailers as has been the case.

The Postal Rate Commission provides an opportunity for all parties to be
heard and provides a record from which it must make its recommendation
to the Postal Service. Although this process is time consuming and
costly to all interested parties, it provides for issues to be
thoroughly aired and recorded in a legal, reviewable record. One current
disadvantage is that the consumer, individuals, and small business
interests are not heard and are not represented by the Office of the
Consumer Advocate established for this purpose.

# ***The Postal Service is NOT BROKEN***

The Postal Service has a business model that is NOT BROKEN. In fact, it
is far healthier than many large corporations. Since 1971, it has been a
self-supporting, independent establishment of the executive branch. Its
volume has grown in good times and fallen far less than many companies
in bad times. Its major problem is to ensure that it's management stays
focused on the financial integrity of the Postal Service and be less
concerned about the pressure coming from its larger customers. All
customers concerns need to be considered but not at the expense of the
financial health of the organization.

**Appropriated Funds:** When it was founded, it had over 20% of its
budget come from appropriated funds. A major part of these appropriated
funds were to reimburse the Postal Service for charging preferential
rates to non-profit organizations and certain publications. These, in
effect, were subsidies provided to these organizations at the request of
the Congress and were simply reimbursements to the Postal Service for
the difference it would have received if there were no reduced rates.
The remainder of the subsidy amounting to some \$900 million was to
finance the universal service commitment. Over the years, the Postal
Service assumed responsibility for paying for universal service and
stopped requesting appropriations to fund this mandate. The PRA still
allows for approximately \$ 450 million, were the Postal Service wanting
to request these funds.

**Inflation:** It has raised prices paid by individuals equal to overall
inflation and less than service sector inflation. At the same time it
favored large mailers with discounts and price increases far below
inflation and below levels justified by cost savings to the Postal
Service. Even with appropriately sized discounts, the large mailers
would still have had price increases well below inflation. Its
accumulated deficit of \$6 billion is less than ½ of 1 percent of its
\$1+ trillion in revenues over the period. And, this deficit is the
direct result of decisions by the Board of Governors to delay filing for
and implementing price increases.

Some mailers have complained that with the productivity improvements
from its automation program, price increases should have been less than
inflation over the existence of the Postal Service. In this regard that
the Postal Service has done well compared to UPS and FED-EX over the
past 10 years. The Producer Price Index for ground couriers shows that,
from December 1992 to December 2002 rates went up 44%. During that same
period postal rates went up only 29%. Furthermore, FedEx raised shipping
another 3.9 percent effective January 6, 2003.

**Over Funded Retirement Plan:** Recent reports have shown that unless
current law is changed, the Postal Service will overfund its CSRS
pension obligation by \$70 to \$100 billion.

This amount would be in excess of 6% of total revenue since 1971 and far
exceeds the accumulated deficit since reorganization. Congress is
considering legislation that would correct the problem and save the
Postal Service more than \$5 billion in the next two years.

**It Can Function Well:** Experience has shown that the Postal Service
can function well and earn consistent profits. In the period from 1982
to 1984 and again from 1995 to 1999, the Postal Service earned profits
and used the money to maintain and continue the development of postal
services as required by the law.

This included improving service to its customers. Customer Satisfaction
improved with the improvement in financial condition. Long needed
improvements to plant and equipment were begun using the cash from net
income. The debt was reduced by \$4 billion.

It is worth noting that the American people are the real customers of
the Postal Service. Big mailers make choices based on what works with
people. Presort houses sort mail for mailers and serve as
intermediaries. The Postal Service and the PRC seem to confuse presort
houses with postal customers.

**Economies Of Scale:** The Postal Service delivers mail six days each
week and does it for an average price of a little more than 30 cents per
piece. Package delivery services, e.g. FED-EX and UPS, deliver other
items for a price per piece in excess of \$4.00. The business model
allows great economies of scale and economies of scope because of
universal service and huge volume to a regularized network of delivery
points each day.

**Financial:** Prices are well below those of other countries and the
size of the United States and the Postal Service network is larger than
most.

The Postal Service has been able to finance much of its capital spending
because its customers pay in advance for postage and it collects in
advance for expenses, such as workers compensation, to be paid in the
future.

The Postal Service has four legal advantages: it is the only
organization that can put anything into a mailbox, it has the exclusive
right to deliver letters, it pays no tax and it has immunity from most
lawsuits.

It has obligations to charge uniform prices to all, keep open Post
Offices in remote locations, and deliver mail even when it is not
profitable to do so. Like any network, there is value to the ability to
reach any individual even if you choose not to do so. This negates the
argument that customers in rich suburbs unfairly pay costs belonging to
poor customers in urban or rural locations.

The Business model is not one that requires an ever-expanding volume,
although that has been the case for over 200 years and will likely
continue. It does not require that rates be frozen. It does not require
a host of new products or services. (The last significant new service
was the creation of money orders as mandated by Congress during the
Civil War.) It does not require that the Postal Service compete against
E-mail, for there is no price cheap enough to make it valuable for a
customer to choose mail over E-mail. It does not even require that the
Postal Service loose money to placate the lobbyists that wander its
halls and influence its Governors regarding discounts, delaying the
implementation of rate increases, and putting off the filing of rate
case requests.

The model is one in which the Postal Service is to charge prices that
allow it to provide service 6 days each week to all Americans and
maintain and continue the development of Postal Services. There does not
appear to be any reason to believe that it cannot do just that,
currently, and with a profit.

**Postal Service Seeks Moderate Regulatory and Legislative Reforms.**

The Postal Service appears to believe that ultimately it will need some
moderate regulatory reforms. Certainly, it is necessary for the Postal
Service to earn a positive net income, and build positive retained
earnings. Since technological change might ultimately prove to be a
problem in the distant future, it would be prudent to pay off its debt
and provide for future obligations. However, the Postal Service can do
all of these without changing the law. It takes only the courage and
foresight to plan to accomplish these goals. While it is possible that a
change in the law might reduce some of the lobbying efforts advocating
losses, it should not be necessary.

**Seek the Maximum Flexibility Consistent with the Current Rate-Making
Process:**

Changes to speed the implementation of new rates may be beneficial, but
the Postal Service has not used the flexibility that it has. It has
applied discounts in a manner that has harmed its financial position and
regularly contradicts its own expert analysis with naive comments about
gaining financial health through more discounting. Flexibility cannot
overcome a tendency to pander to presort bureaus and big mailers at the
expense of prudent business decisions. Certainly its competitors in the
parcel business have not been shy (or even subject to influence by
lobbyists) in raising prices yearly. They seem to understand that
lowering price reduces their bottom line. No one wins a price war.

**Rationalize Retail Network Facilities**: The Postal Service needs to
continue its earlier work with the Postal Rate Commission to find
efficient ways to accommodate the needs of all its customers with proper
consideration to its network of delivery points and mail entry points.
Cost is only one factor and should be considered along with the other
considerations contained in the Postal Reorganization Act.

**Modernize Purchasing Procedures:** Purchasing is an area where the
Postal Service already has freedom beyond most government agencies. It
has developed a professional staff that has numerous accomplishments and
an excellent reputation. Despite structural annoyances in its
constraints, Purchasing has, by all measures, done an excellent job for
the Postal Service. The Postal Service has no constraints about
accepting the lowest bid. It is however subject to certain constraints
designed by Congress to achieve public policy goals. These add
complexity and some additional cost. In any case, changes to the
purchasing law are unlikely to make any meaningful financial difference.

**Reform Labor and Employment Provisions**: The Postal Service has
stated that it would its prefer that labor relations be governed by the
Railway Labor Act, instead of Chapter 12 of the Postal Reorganization
Act. The APWU opposes amendment of the labor provisions of the Postal
Reorganization Act. Application of the Railway Labor Act to the Postal
Service would be tantamount to the elimination of free collective
bargaining. Under the Railway Labor Act, where a labor dispute threatens
to disrupt an essential service, the dispute is placed before a
presidential emergency board. This would inevitably happen whenever
postal unions and management failed to reach agreement. The dispute
would be dumped in the lap of the President and Congress. No strike
would be permitted. Postal management could simply abdicate its
collective bargaining responsibility.

We also observe that neither the railroad industry nor the airline
industry is a model of business success. Industries covered by the
Railway Labor Act have been having substantial trouble in labor
relations. So much so, that bills have been introduced in Congress to
amend the Railway Labor Act to provide for mandatory arbitration.

**New Products:** The Postal Service is not configured to sell or
produce merchandise nor is it amenable to offering services such as
consulting that have been offered by other countries' Posts. Any new
products should build on its traditional strengths which include Trust
and Convenience. The Postal Service can offer new services, but it has
been difficult to find any that have been significant. Care must be
taken to avoid getting carried away with the latest trends.

# ***Postal Problems were the Direct Result of Its Decisions***

The Postal Service cites the GAO observation that there had been losses
for three straight years and volume declines over the past eighteen
months as questioning the current business model. The losses are clearly
the result of the Postal Service's delaying a rate request far longer
than sound business practice would dictate. The Postal Service was
anticipating net income below that which the Postal Service had
requested and the Rate Commission had recommended for recovering prior
years losses. Had a rate request been filed in FY 1998 rather than
waiting till FY 2000 and had the Postal Service not delayed
implementation of R97-1 rates, the problem would not have occurred.

Postal problems have not been caused by massive diversion of advertising
and letter mail to electronic transmission. It has suffered small volume
decreases during recessions, but mail volume grew steadily from 87
billion pieces to 203 billion pieces during its 32-year existence.

**Net Income and Retained Earnings:** Financial problems have been the
result of decisions by the Board of Governors of the Postal Service.
They have declined to request an appropriation for the cost of universal
service to cover rural and inner city areas. They have delayed needed
price increases causing profits to become losses. This creates a need
for larger price increases to erase the self-inflicted large losses.
They have failed to plan for financial emergencies with adequate
contingencies in rates and fees as permitted by the law. There has been
no recognition that consistent profits provide the contingency funds for
emergencies. The result has been periodic financial crises that have led
to dramatic cuts in capital spending thereby delaying economic and
service related investments.

**After 2 Centuries Still Twelfth Largest Company in the U. S.:**
Despite these decisions, the Postal Service has a business model that
still works. Its customers need it and trust it. It is number 12 in
revenue on the list of large companies headquartered in the United
States in 2001.

The Postal Service needs better planning and better decisions about when
to change prices. However, it has accumulated a deficit of \$6 billion,
less than 1% of its revenue during its existence.

Finally, it should be noted that the Postal Service moved from an era in
which over 20 percent of its budget was a subsidy from the federal
government to the position of being completely self-sufficient.

###### Conclusion

The basic assumptions behind the charge to this Presidential Commission
are inaccurate, misleading and based on conventional wisdom that is
wrong. The Postal Service has been successful. Its major problems have
been the result of its Governors giving in to the mailing industry at
the expense of the Postal Service and the American public. Most of the
desired changes offer minor benefit and are mostly available to the
Postal Service without a change in the law.

Rather than needing a change in its business model to survive, the
Postal Service should be proud of its long-term success and take the
advice of that anonymous business sage, "If it ain't broke, don't fix
it." The Business Model of the Postal Service is not broken.

**Appendix**

Title 39

Sec. 101. -- Postal policy

**(a)** The United States Postal Service shall be operated as a basic
and fundamental service provided to the people by the Government of the
United States, authorized by the Constitution, created by Act of
Congress, and supported by the people. ***[The Postal Service shall have
as its basic function the obligation to provide postal services to bind
the Nation together through the personal, educational, literary, and
business correspondence of the people. It shall provide prompt,
reliable, and efficient services to patrons in all areas and shall
render postal services to all communities.]{.underline}*** The costs of
establishing and maintaining the Postal Service shall not be apportioned
to impair the overall value of such service to the people.

**(b) *[The Postal Service shall provide a maximum degree of effective
and regular postal services to rural areas, communities, and small towns
where post offices are not self-sustaining. No small post office shall
be closed solely for operating at a deficit, it being the specific
intent of the Congress that effective postal services be insured to
residents of both urban and rural communities.
]{.underline}***\[Emphasis added\]

Title 39

Sec. 2009. - Annual budget

The Postal Service shall cause to be prepared annually a budget program
which shall be submitted to the Office of Management and Budget, under
such rules and regulations as the President may establish as to the date
of submission, the form and content, the classifications of data, and
the manner in which such budget program shall be prepared and presented.
***[The budget program shall be a business-type budget, or plan of
operations, with due allowance given to the need for flexibility,
including provision for emergencies and contingencies, in order that the
Postal Service may properly carry out its activities as authorized by
law.]{.underline}*** The budget program shall contain estimates of the
financial condition and operations of the Postal Service for the current
and ensuing fiscal years and the actual condition and results of
operation for the last completed fiscal year. Such budget program shall
include a statement of financial condition, a statement of income and
expense, an analysis of surplus or deficit, a statement of sources and
application of funds, and such other supplementary statements and
information as are necessary or desirable to make known the financial
condition and operations of the Postal Service. Such statements shall
include estimates of operations by major types of activities, together
with estimates of administrative expenses and estimates of borrowings.
The budget program shall also include separate statements of the amounts
which the Postal Service requests to be appropriated

under subsections (b) and (c) of section
[2401](http://www4.law.cornell.edu/uscode/39/2401.html) of this title.
The President shall include these amounts, with his recommendations but
without revision, in the budget transmitted to Congress under section
[1105](http://www4.law.cornell.edu/uscode/31/1105.html) of title
[31](http://www4.law.cornell.edu/uscode/31/index.html) \[Emphasis
added\]

Title 39

Sec. 3621. - Authority to fix rates and classes

Except as otherwise provided, the Governors are authorized to establish
reasonable and equitable classes of mail and reasonable and equitable
rates of postage and fees for postal services in accordance with the
provisions of this chapter. **[Postal rates and fees shall be reasonable
and equitable and sufficient to enable the Postal Service under honest,
efficient, and economical management to maintain and continue the
development of postal services of the kind and quality adapted to the
needs of the United States. *Postal rates and fees shall provide
sufficient revenues so that the total estimated income and
appropriations to the Postal Service will equal as nearly as practicable
total estimated costs of the Postal Service. For purposes of this
section, \'\'total estimated costs\'\' shall include (without
limitation) operating expenses, depreciation on capital facilities and
equipment, debt service (including interest, amortization of debt
discount and expense, and provision for sinking funds or other
retirements of obligations to the extent that such provision exceeds
applicable depreciation charges), and a reasonable provision for
contingencies *]{.underline}**\[Emphasis added\]

Title 39

Sec. 3622. - Rates and fees

**(a)** From time to time the Postal Service shall request the Postal
Rate Commission to submit a recommended decision on changes in a rate or
rates of postage or in a fee or fees for postal services if the Postal
Service determines that such changes would be in the public interest and
in accordance with the policies of this title. The Postal Service may
submit such suggestions for rate adjustments as it deems suitable.

**(b)** Upon receiving a request, the Commission shall make a
recommended decision on the request for changes in rates or fees in each
class of mail or type of service in accordance with the policies of this
title and the following factors:

**(1)** the establishment and maintenance of a fair and equitable
schedule;

**(2)** the value of the mail service actually provided each class or
type of mail service to both the sender and the recipient, including but
not limited to the collection, mode of transportation, and priority of
delivery;

**(3)** the requirement that each class of mail or type of mail service
bear the direct and indirect postal costs attributable to that class or
type plus that portion of all other costs of the Postal Service
reasonably assignable to such class or type;

**(4)** the effect of rate increases upon the general public, business
mail users, and enterprises in the private sector of the economy engaged
in the delivery of mail matter other than letters;

**(5)** the available alternative means of sending and receiving letters
and other mail matter at reasonable costs;

**(6)** the degree of preparation of mail for delivery into the postal
system performed by the mailer and its effect upon reducing costs to the
Postal Service;

**(7)** simplicity of structure for the entire schedule and simple,
identifiable relationships between the rates or fees charged the various
classes of mail for postal services;

**(8)** the educational, cultural, scientific, and informational value
to the recipient of mail matter; and

**(9)** such other factors as the Commission deems appropriate.

**(c)** Regular rates for each class or subclass of mail that includes 1
or more special rate categories for mail under former section
[4358](http://www4.law.cornell.edu/uscode/39/4358.html) (d) or (e),
[4452](http://www4.law.cornell.edu/uscode/39/4452.html) (b) or (c), or
[4554](http://www4.law.cornell.edu/uscode/39/4554.html) (b) or (c) of
this title shall be established by applying the policies of this title,
including the factors of section
[3622](http://www4.law.cornell.edu/uscode/39/3622.html)(b) of this
title, to the costs attributable to the regular rate mail in each class
or subclass combined with the mail in the corresponding special rate
categories authorized by former section
[4358](http://www4.law.cornell.edu/uscode/39/4358.html) (d) or (e),
[4452](http://www4.law.cornell.edu/uscode/39/4452.html) (b) or (c), or
[4554](http://www4.law.cornell.edu/uscode/39/4554.html) (b) or (c) of
this title.

**(d)** Compliance with any provision of the Occupational Safety and
Health Act of 1970
([29](http://www4.law.cornell.edu/uscode/29/index.html) U.S.C.
[651](http://www4.law.cornell.edu/uscode/29/651.html) et seq.) shall not
be considered by the Commission in determining whether to increase rates
and shall not otherwise affect the service of the Postal Service

**[Annual Report of the Postmaster General]{.underline}**

**[of The United States]{.underline}**

**[1872]{.underline}**

Pages 29 & 30

"But improvements in telegraphy render it by no means certain that in
future the telegraph will not to a very great extent supersede the mail
as a means of correspondence. The introduction of the duplex
transmitter, doubling the capacity of lines for through business, and of
the 'Fast" or automatic system, by which one wire can be made to do the
work of six; ***[the probable simplification of the fac-simile system of
Caselli, by which an exact copy of anything that can be drawn or written
may be instantaneously made to appear at a distance of hundreds of miles
from the original; and the countless other applications of electricity
to the transmission of intelligence yet to be made,- must sooner or
later interfere most seriously with the transportation of letters by the
slower means of the post."]{.underline}***

Jno. A. J. Creswell

Postmaster General

Post Office Department

Washington, D. C.,

November 15, 1872

\[Emphasis added\]

[^1]: The APWU wishes to express its appreciation to Michael Riley and
    Harold Orenstein of Riley Associates, LLC, 9404 Starlit Ponds Drive,
    Fairfax, VA 22032, for their assistance in the preparation of this
    testimony.

[^2]: From the remarks of Treasury Undersecretary Peter R. Fisher to the
    President's Commission on the United States. Postal Service (January
    8, 2003).

[^3]: See Appendix for excerpts from 1872 Annual Report of Postmaster
    General Creswell

[^4]: The volume of mail that would leave the postal system, were these
    higher automation rates placed into effect, would be minimal
    according to the Postal Service's volume expert Dr. Tolley.

[^5]: Recently it conceded an important convenience item to FED-EX when
    it allowed FED-EX to put pick up boxes in prime Postal locations.

[^6]: From the remarks of Treasury Undersecretary Peter R. Fisher to the
    President's Commission on the United States. Postal Service (January
    8, 2003).

[^7]: See the appendix for the two paragraphs, 101 (a) and (b).

[^8]: From the remarks of Treasury Undersecretary Peter R. Fisher to the
    President's Commission on the United States. Postal Service (January
    8, 2003).

[^9]: From the remarks of Treasury Undersecretary Peter R. Fisher to the
    President's Commission on the United States. Postal Service (January
    8, 2003).

[^10]: Classified stations and branches are subsidiaries of main Post
    Offices. Many large Post Offices have large numbers of such
    subsidiaries reporting to them.

[^11]: See paragraph 3621 in Title 39, U. S. Code in the Appendix.

[^12]: See paragraphs 2009 and 3621.

[^13]: From the remarks of Treasury Undersecretary Peter R. Fisher to
    the President's Commission on the United States. Postal Service
    (January 8, 2003).

[^14]: From the remarks of Treasury Undersecretary Peter R. Fisher to
    the President's Commission on the United States. Postal Service
    (January 8, 2003).

[^15]: From the remarks of Treasury Undersecretary Peter R. Fisher to
    the President's Commission on the United States. Postal Service
    (January 8, 2003).

[^16]: Witness Gillotte, R2001-1, February 26, 2002 representing presort
    bureaus

[^17]: From the remarks of Treasury Undersecretary Peter R. Fisher to
    the President's Commission on the United States. Postal Service
    (January 8, 2003).