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February 12, 2003

President's Commission on the United States Postal Service

1120 Vermont Avenue, N.W.

Suite 971

Washington, DC 20005.

The Printing Industries of America is pleased to express its views to
the Presidential Commission on the United States Postal Service. PIA and
its association partner, the Graphic Arts Technical Foundation,
represent more than 13,000 printing and graphic arts companies and their
suppliers, many of whom depend on a uniform nationwide mail system to
serve their customers. PIA members produce virtually every type of
printed product; however, a substantial amount of the printing produced
by our members is intended for the U. S. mail. Conversely, other than
parcels and handwritten letters, virtually every piece of mail handled
by the U. S. mail is a printed product.

The nation's commercial printing industry had shipments valued at more
than \$156 billion in 2002 with over one million employees. As such it
is one of the nation's largest manufacturing businesses. It would be
accurate to state that an ineffective or overly expensive nationwide
mail delivery system would be devastating to the U. S. printing
industry.

We thank you for your willingness to serve on this important Commission
and look forward to continuing the discussion to improve the U. S.
Postal Service.

Sincerely,

Benjamin Y. Cooper

Executive Vice President for Public Policy

<Bcooper@printing.org>

## Summary of Concerns 

The following represents a summary of the issues we believe should be
addressed by the Commission to improve the U. S. Postal Service:

-   The concept of Universal Service should be supported;

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-   The Postal Service should focus on the "last mile" concept since it
    the basis of the positive relationship and success the service has
    had with the nation's businesses and households;

-   The use of the mailbox should continue to be restricted to the U. S.
    Postal Service;

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-   The rate setting process needs to be changed significantly from a
    cost of service model to a business model designed to attract new
    business to the Postal Service;

-   The Postal Service should be encouraged to seek private sector
    partners through work sharing, negotiated service agreements, and
    other mail related services to both attract business and reduce the
    cost of operations;

-   The Commission should recommend a strategy to enable the Postal
    Service to begin the process of closing and consolidating retail and
    mail processing facilities;

-   The Postal Service should remain focused on its core mission and
    resist the temptation to enter new enterprises, which are not
    directly related to delivering the mail;

-   The Commission should make recommendations about the agreements
    between the Postal Service and its unions to assure the USPS has the
    flexibility to enter work share agreements and other programs to
    improve efficiency and reduce costs; and,

-   The Postal Service should develop plans to promote the use of
    printing and mailing and seek to recapture markets lost to
    alternative technology;

# 

# The concept of Universal Service should be supported

One of the reasons competitive services to the Postal Service have not
evolved beyond electronic communications, express service or parcel
delivery is the inability of private carriers to provide universal
service. The universal service concept assures that the nation's
citizens, wherever they are located, will receive mail delivery from the
U. S. Postal Service. We continue to believe this principle is valid and
urge the Commission to support its continuation.

# The Last Mile of Service

The U. S. Postal Service provides excellent service in the "last mile."
Carrier service is very good in urban and rural areas and remains a
success with the public. As the Commission addresses alternatives for
the future of mail delivery, we would encourage support for this aspect
of the service. We also believe the opportunities for cost reductions in
the postal system are in the processing prior to the carrier.

# The use of the mailbox should continue to be restricted to the U. S. Postal Service

As long as the U. S. Postal Service is a government entity at any level,
it should have exclusive use of the mailbox. This restriction provides a
level of confidence and security for businesses and households alike.

The rate setting process , work sharing, and negotiated service
agreements

In our view, the survival of the Postal Service as a universal service
capable of reaching the nation's households and businesses requires a
more private sector model of rate setting aimed at generating mail
volume rather than setting rates to meet costs. The current model in its
simplest form, forces the Postal Service to constantly seek rate
increases even when volume is dropping, often discouraging the use of
the mail. In fact, the model appears to be based on a belief that mail
volume would constantly increase. Perhaps it was contemplated that a day
would come when the Postal Service would have to seek business.

A new model can certainly accommodate the need to meet the cost of a
particular type or class of mail while providing adequate incentives in
the rate structure to develop new business and increase volume. It would
be difficult for anyone observing the system to understand the
complexities of the cost models used to set rates. In fact, often the
two major parties in the rate process -- the USPS and the Postal Rate
Commission -- do not agree. This alone likely demonstrates that the cost
issue is somewhat open to interpretation.

In this context it is certainly appropriate to expand the use of
negotiated rates as an incentive for customers to use the mail and to
allow businesses in the printing, publishing and other mailing concerns
to develop cost savings.

The current rate-setting process is costly to the Postal Service and
mailers. The process is slow and especially challenging for smaller
companies. Also, rate-setting has been plagued in the past by the
balkanization of the mailing industry. The setting of rates creates
winners and losers forcing the classes and sub-classes of mail to battle
before the Postal Rate Commission. While competition is healthy, the
competition in this case is not aimed at improving USPS competition with
other media, which should be the overriding objective.

Consideration should be given to the idea of a limitation on any postal
rate increase to an accepted index such as the Consumer Price Index..

The Commission should recommend a strategy to enable the Postal Service
to begin the process of closing and consolidating retail and mail
processing facilities

It would be our hope that the Commission would recommend the reduction
of a significant number of postal facilities. Facilities should be
located strictly on a service and delivery model. Obviously, facility
decisions should not be based on political or other
non-business/delivery concerns. For retail facilities, the Commission
should investigate contractor arrangements. Under the Post Office
Department, private retail establishments, for example, could contract
with the Postal Service to provide retail services including sales of
philatelic products and acceptance of mail and parcels. Such
arrangements might serve as an option for the future to provide service
to more customers at a reasonable price.

The establishment and location of postal facilities still reflect the
old Post Office Department in that political decisions are part of the
process. A strong recommendation from the Commission to establish a
business model for facility decisions would be a significant cost
reduction step for the Postal Service.

Mail processing facilities should also be examined for closing or
consolidating and such decisions should also be based on a business and
service model; however, it is important to link such decisions to
customers of the Postal Service and the availability of reliable
transportation. Absent a solid recommendation and implementation plan
dealing with postal processing and distribution services, it will be
difficult to reduce the significant fixed costs that currently plagued
the Postal Service and limit the advantages of work-sharing with the
private sector.

The Postal Service should remain focused on its core mission and resist
the temptation to enter new enterprises, which are not directly related
to the core mission of delivering the mail

The Postal Service has experimented with various retail and service
programs that were not directly related to mailing. Generally, these
ventures have not been successful. In addition, the ventures tended to
create animosity among private companies that were in those particular
lines of business. We raise this concern because the Transformation Plan
developed by the Postal Service suggested an interest in using its
retail facilities for other commercial activities. As tempting as this
may be, it should be resisted. Philatelic services and products related
to mailing and philately are appropriate. Other services and products
may not only be unsuccessful, but divert resources from the core
mission. Additionally, the unique connection between the Postal Service
and the public in the form of universal service and the monopoly on the
use of the mailbox has a reciprocal expectation that the Postal Service
will limit itself to its core mission.

The Commission should make recommendations about the agreements between
the Postal Service and its unions to assure the USPS has the flexibility
to enter work share agreements and other programs to improve efficiency
and reduce costs

We have no particular expertise in the agreements between the USPS and
its various unions; however, it is predictable that significant changes
involving private sector work share agreements and other arrangements
with contractors may create challenges in the postal workforce.
Flexibility to develop arrangements that will improve overall operations
and efficiency will aid employees in the long term but may create labor
challenges in the short term.

The Postal Service should develop plans to promote the use of printing
and mailing and seek to recapture markets lost to alternative technology

The Postal Service and its commercial partners, including printing,
publishing, direct mail, and other postal services should explore
methods to generate additional business for the system. While the Postal
Service conducts an active marketing program (for example, sponsorship
of the Postal Service cycling team), these initiatives are aimed at
positive public relations but not specifically at generating increased
"sales." We would ask the Commission to explore changes in law and
policy to enable the Postal Service to pursue marketing and
communications initiatives to generate mail volume.