Testimony of 

The Honorable Dan G. Blair, Chairman 

On behalf of the 

Postal Regulatory Commission 

Before the 

U.S. Senate 

Committee on Homeland Security

And Governmental Affairs 

Subcommittee on Federal Financial Management, 

Government Information, Federal Services, 

And International Security 

August 2, 2007
Postal Regulatory Commission Chairman Dan Blair 

Statement before the Senate Subcommittee on Federal Financial 

Management, Government Information, 

Federal Services, and International Security 

Thursday, August 2,2007 

Chairman Carper, Ranking Member Coburn, and members of the Subcommittee, 

thank you for the opportunity to testify. I am very pleased to update the Subcommittee 

on the steps the Postal Regulatory Commission is taking to implement Modern Service 

Standards as required by Title I11 of the Postal Accountability and Enhancement Act. I 

respectfully request that my full statement be entered into the Record. 

Before I begin my comments on service standards, I would like to summarize 

briefly the progress the Commission has made towards full implementation of the Postal 

Reform Act. 

First, the Act requires the Commission to establish a modern ratesetting process 

for market dominant products. While the law allows us until June of 2008 to develop 

this new system, the Commission is moving quickly to beat this deadline. We hope to 

have in place a basic ratemaking framework by October of this year. Such action would 

provide the Postal Service with the flexibility to use the new, streamlined system should 

it need to raise rates. 

Having this new framework in place - and the Postal Service operating under the 

new framework as early as practical - would allow both the Postal Service and the 
Commission to dedicate more resources to thoughtfully implementing other aspects of 

the reform legislation. 

In general, the mailing community is eager to move to a new system that will 

provide more stable and predictable rates, thus, avoiding another costly, litigious case 

under the old system. I know that you, Chairman Carper, and Senator Collins, are also 

very interested in seeing the new system set up as quickly as possible. You have my 

personal commitment to ensure that this goal is met. 

The Commission recognizes that the decision of whether or not a final rate case is 

filed under the old rules lies solely in the hands of the Postal Service Board of Governors; 

however, we believe that it would be best for both mailers and the United States postal 

system if another traditional rate case can be avoided. 

Over the past several months, the Commission has put into place what I call a 

“360 degree approach” to soliciting public input on both the new rate system and service 

standards. In February and May of this year, the Commission published Federal Register 

notices seeking public comments on how best to structure the new ratemaking system. 

The public response has been extremely gratifying. We received numerous thoughtful 

and helpful responses - approximately 100 separate responses in all. 

Second, the Act requires the Postal Service to consult with the Commission on the 

establishment of modern service standards for market dominant products. The statute 

sets forth objectives the new service standards should meet to include: 

Preserving regular and effective access to postal services in all 

communities, including those in rural areas or where post offices are not 

self-sustaining; 

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Assuring Postal Service customers delivery reliability, speed, and 

fi-equency consistent with reasonable rates and best business practices; and 

Establishing an objective system of performance measurements for each 

market dominant product based on external measurements unless the 

Commission permits the use of internal systems. 

To fulfill this requirement, and as part of our ongoing outreach, the Commission 

published a Federal Register Notice of Public Inquiry on June 13,2007, in which we 

solicited input on service and performance standards from the general public, postal 

stakeholders, specialty mail users, as well as businesses providing goods and services to 

mailers. The Commission received 35 comments in response to this Notice. 

We also reached out to the diverse community of postal stakeholders “outside the 

beltway” - through field hearings in Kansas City, Missouri, Los Angeles, California, and 

Wilmington, Delaware. Witnesses at the hearings shared with us their expectations for a 

new, better ratemaking system as well as their views on modern delivery service 

standards -the focus of today’s hearing. Both the formal comments received in 

response to our Notices and the testimony we heard during our field hearings have a 

number of common themes. I would like to take this opportunity to give you a sample of 

what we heard: 

0 Consistent and reliable mail service is critical to the postal community. 

Most mailers consider the existing USPS service standards acceptable, but 

insist that these standards should be a floor for all mail within a class. 

There needs to be a system-wide performance measurement that provides 

detailed information, available to the public. Specifically, we heard that 

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mailers, their customers, and the Postal Service would best be served by 

publicly available reports listing service performance regionally and 

possibly in greater detail. Moreover, detail, such as between specific 3- 

digit ZIP Code pairs or zones, should be available to mailers on request. 

These publicly available measurements of service should be web-based, 

real-time, verifiable, and subject to a third party audit. 

Several mailers listed measurement of what is called the “tail of the mail” 

as being especially problematic and noted that product delivery delayed 

beyond the expected timeframe results in decreased customer satisfaction 

and in increased costs of shipping of replacement goods. 

While mailers appreciate the low cost associated with the Postal Service’s 

plans for Intelligent Mail tracking, many point out that measurement 

systems will be needed for mail that bypasses automated processing, along 

with the other mailstreams that will not be tracked by barcode technology. 

Mailers also believe information beyond days-to-delivery are important 

components of service standards. For instance, the critical entry or cut-off 

time for business mail and the last collection time from neighborhood blue 

mail boxes are important, as well the length of the “tail of the mail.” 

Another area of discussion is whether there should be separate service 

standards for non-contiguous states like Hawaii and Alaska. 

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While the current performance measure for First Class mail - known as EXFC - 

External First Class - is generally considered an adequate system, measurement tools for 

other classes of mail are lacking. The Commission is very encouraged by the Postal 

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Service’s plans to implement its Intelligent Mail initiative over the next several years. 

This system of barcode scanning should greatly increase the Postal Service’s ability to 

track movement of the mail from drop-off to delivery, and in turn allow the mailing 

public greater access to performance information. 

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Until the Intelligent Mail initiative is widely operational, there is broad consensus 

among the mailing community that an interim system of measurement is needed. The 

Commission agrees. We do not believe that the PAEA envisioned modern service 

standards being enacted, but with a two to three year delay in their measurement. The 

efforts by large mailers or mailer groups to self-measure days-to-delivery are evidence of 

the importance mailers assign to performance measurement data. For instance, some 

periodical mailers already use a system of self-measurement, and the Commission 

recently held a public briefing by Red Tag News Publications, which provides tracking 

for periodicals. 

In addition to the Commission involving the public in the development of a new 

standards and measurement system, members of the Commission staff are observing 

Mailers’ Technical Advisory Committee (MTAC) meetings focused on developing 

recommendations to the Postal Service on delivery standards. 

The public’s input is aiding us in our meetings with senior officials of the Postal 

Service. To Postmaster General Potter’s credit, he has sent a strong team to work with 

the Commission and has designated the Deputy Postmaster General, Pat Donohoe, to lead 

these efforts. The Commission appreciates the cooperative tone of the meetings and the 

attention senior leadership is paying to this important issue. 

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To date, the Commission and the Postal Service have engaged in three substantive 

service standard-related meetings. We anticipate another meeting later this month, 

culminating in a final, formal “consultation” at the beginning of October. We have had 

an open and vigorous dialogue between Commissioners and representatives of the Postal 

Service. Based on the tenor of the meetings thus far, the Commission has every reason to 

believe that our input will be reflected in the final regulations adopted by the Postal 

Service. 

In closing, I would like to touch upon the relationship between Postal Service 

mail processing facility consolidations and service standards. Last year, the Postal 

Service requested an advisory opinion from the Commission on its planned nationwide 

realignment known as the “Evolutionary Network Development’, (END) process. Under 

section 3661 of title 39 of the U.S. Code, the Postal Service is required to seek the 

Commission’s advice before implementing nationwide service changes. 

When the proceeding started, very little was publicly known about the overall 

END process, and the Service’s vision of its future network was unclear. The 

Commission believes that the Postal Service should have the flexibility and authority to 

adjust its operations and networks to meet its business needs and create cost savings and 

efficiencies. However, the Postal Service must be accountable and transparent to postal 

customers, and be sensitive to the needs of the communities it serves. 

The Commission’s proceeding brought some transparency to the Postal Service’s 

network development plans. Questioning by the Commissioners and participants in the 

case shed needed light on the Postal Service’s network rationalization efforts. We expect 

the transparency achieved through our review of network realignment last year to 

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continue and improve under the new Act. Besides requiring the Postal Service, in 

consultation with the Commission, to establish service standards for market dominant 

products, the Act also directs the Postal Service and the PRC to consult on developing a 

facilities plan for meeting those standards, including any necessary changes to the 

Service’s processing, transportation, delivery and retail networks. This plan is due to 

Congress by June of 2008. 

Clearly, the Commission has its work cut out for it. The coming 12 months will 

be a time of intense work at the PRC as we move to carry out our new responsibilities. 

I hope I have given you a flavor for what we are learning from our field hearings 

and through our public comment process. Again, I thank you Chairman Carper for 

inviting me to testify. I welcome the opportunity to answer any questions members of the 

Subcommittee may have. 

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