POSTAL REGULATORY COMMISSION

Washington, DC 20268-0001

Michael M. Kubayanda

Chairman

The Honorable Carolyn Maloney

Chairwoman, Committee on Oversight and Reform

U.S. House of Representatives

Washington, DC 20515

The Honorable James Comer

Ranking Member, Committee on Oversight and Reform

U.S. House of Representatives

Washington, DC 20515

February 23, 2021

Dear Chairwoman Maloney and Ranking Member Comer:

I am writing to you on behalf of the Postal Regulatory Commission (Commission). As a 

separate and independent federal regulatory agency, the Commission determines the 

legality of the Postal Service’s prices and products, adjudicates complaints and fair 

competition issues, and oversees the Postal Service’s delivery performance consistent 

with statutory requirements. Its mission is to ensure transparency and accountability of 

the Postal Service and foster a vital and efficient universal mail system. The 

Commission is composed of five commissioners, each appointed by the President and 

confirmed by the Senate.

I have served on the Commission since January 2019, and was designated chairman in 

January 2021. I have assumed my new position at a critical time in the history of the 

Postal Service. On one hand, over the past year the Postal Service served its critical 

mission of binding the nation together during the pandemic. Postal workers kept 

Americans connected during extensive lockdowns, allowed large and small businesses

to reach their customers, enabled citizens to safely receive crucial supplies, and served 

an essential role in the fall elections. The growth in ecommerce over this period 

uncovered upside potential for the Postal Service and other organizations. Analysts 

have estimated the total addressable market for ecommerce to be in the trillions of 

dollars – far above even its presently elevated level, and providing opportunities for 

continued growth in the package delivery market. In order to keep the nation connected 

through the pandemic and help the Postal Service capture these new opportunities, the

postal workforce persevered through unique and unprecedented challenges and upheld 
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a tradition of service as old as the nation itself, dating back to Benjamin Franklin, our 

first Postmaster General. 

On the other hand, the same time period has brought troubling issues in the postal 

network under a harsh spotlight. On-time service performance was uneven in the spring 

and summer, and has reached historically poor proportions since the holiday season. 

Anecdotes regarding woeful performance are becoming ubiquitous, and quantitative 

evidence is confirming the situation. Financial instability continues to haunt the postal 

system and has delayed needed investments including, but not limited to, replacing the 

aging fleet of delivery vehicles, which have been in service for as long as 30 years.

Pursuant to the 2006 Postal Accountability and Enhancement Act (PAEA), the 

Commission addresses service issues primarily through its annual compliance process. 

The Postal Service is currently in the middle of this process. The Annual Compliance

Determination (ACD), due at the end of March, will include detailed analyses of the 

Postal Service’s compliance with a number of legal requirements in the prior fiscal year,

including performance in on-time delivery of market dominant mail against published 

service standards. The upcoming ACD, for example, will address compliance for FY 

2020, which concluded on September 30th of last year. The Commission has previously 

provided remedies for noncompliance in the ACD, including requiring corrective action, 

increased transparency, and ongoing monitoring. 

Following the release of the ACD, the Commission also issues an annual Financial 

Analysis of the Postal Service, in which the Postal Service’s financial position is 

analyzed in terms of profitability, solvency, and stability using tools such as trend 

analysis and financial ratios. The Commission also issues a separate annual review of 

the Postal Service’s performance plan for the current fiscal year and whether the Postal 

Service met its performance goals for the prior fiscal year. This document provides a 

customer-centric view, evaluating Postal Service surveys that measure customer 

experience. While the law directs management of operational and pricing matters to the 

Postal Service’s Governors, the Commission’s role in providing transparency and 

accountability remains vital as we are faced with new, acute challenges.

Stakeholders have called for the Postal Service, the Commission, and policy makers to 

act on postal matters, and have demanded greater transparency of the postal network. I 

should note here that the Postal Service, after prodding from the mailing community, 

announced that it will create a dashboard to provide up-to-date information on facility 

backlogs and operational issues, in addition to ongoing communications on pandemic 

related matters. These measures could allow postal customers to adjust their own 

operations and assist in relieving some of the bottlenecks in the postal network. I 

consider these to be positive steps and encourage further measures to provide 

transparency and assurances to stakeholders.
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Reform and Remedies

From the Commission’s perspective, a key priority is addressing the astonishing 

asymmetry between the resources of the Postal Service and the Commission, and 

preventing this situation from creating negative repercussions. The Commission is a 

$17 million micro agency overseeing a complex $80 billion behemoth and its 

interactions with numerous stakeholders. The Postal Service has over 600,000 

employees and more than 200 lawyers, while the Commission regulates the Postal 

Service with 73 full time equivalent employees, including administrative and support 

staff.

In 2008, during the early days of the Postal Regulatory Commission, which the PAEA

created from the old Postal Rate Commission, the agency’s budget was $14.985 million. 

Prior to 2006, the Postal Rate Commission, on average, reviewed major postal rate 

cases about once every three years. In 2008, the reconstituted Postal Regulatory

Commission approved 17 specialized contracts, known as negotiated service 

agreements (NSAs), between the Postal Service and its customers such as businesses 

and nonprofit organizations. By FY 2020 the Commission was approving over 250 

NSAs each year, while generally overseeing two annual rate cases, and managing the 

exhaustive annual compliance process, among other matters. The Commission has 

undertaken several massive and statutorily-mandated rulemakings, such as the tenyear review of the price cap on market dominant products, during which the 

Commission carefully considered thousands of pages of detailed and highly technical 

comments. The Commission also regularly reviews the rules governing the quantitative 

and qualitative data in reports filed by the Postal Service. During FY 2020, the 

Commission considered 16 proposals to update the “analytical principles” used in the

reports. The Commission also is involved in reviewing regulatory petitions regarding 

service, and litigation brought by the Postal Service and postal stakeholders.

The consequences of meeting this robust agenda with such limited funds include 

delayed and unmet hiring needs; delayed or canceled investments in technological 

upgrades; and training needs that were not addressed for several years. The delayed

and truncated priorities are troubling, as the Commission is a regulator in a fastchanging postal industry that overlaps with the communications, transportation, 

ecommerce, advertising, and retail markets. Postal stakeholders increasingly combine 

hard copy mail with utilization of the Internet, and the postal ecosystem has been 

bolstered by sophisticated organizations leveraging data analytics and application 

programming interfaces to facilitate transactions between the Postal Service and its 

customers. Meanwhile, the Commission perseveres, out of necessity, with older and

more basic technologies to support its relatively tiny but hardworking staff. 

The premise of the PAEA was to update postal regulation by building on the success of 

modern incentive regulation which had been deployed in other network industries such 

as telecommunications and electricity, with the Commission leading implementation of 

the regulations. Staying apprised of developments in regulatory economics, finance, 

and law, as well as changes in the market that the Commission is regulating, is not 
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optional. My predecessors and colleagues at the Commission, together with a dedicated 

staff, have been diligent and conscientious in working to meet the standards of a 

modern regulator despite essentially flat funding since passage of PAEA. As a new 

chairman, however, I would be remiss if I did not note that the Commission’s lack of 

resources is another source of systemic risk to the postal system and its stakeholders. 

The most immediate route for addressing this resource asymmetry is through the 

appropriations process. For FY 2021, the Commission requested $19.2 million, but the

final appropriation fell far short of this mark. A longstanding priority of the Commission 

under my immediate predecessor as chairman, current Commissioner Robert Taub, is 

to revert the Commission to its pre-PAEA funding methodology, aligning the treatment 

of the Commission with that of the Postal Service by pulling the Commission out of the 

appropriations process. Under the pre-PAEA approach, the Postal Rate Commission 

presented its budget request to the Governors of the Postal Service, with significant 

procedural protections for the Commission. For example, the Governors could only 

adjust the total amount of budget request through a unanimous written decision. These 

provisions worked well and were not abused from the creation of the Postal Service and 

the Postal Rate Commission in 1970 through the enactment of the PAEA in 2006. I 

agree with this priority and want to renew the call for aligning the Commission’s budget 

framework with the agency it oversees, especially since the Commission’s funding is 

drawn from Postal Service revenues (and thus postal ratepayers) rather than taxpayer 

revenues in the General Fund of the Treasury.

During the 2018-2019 federal government shutdown, the Commission ceased 

operations for two weeks while the Postal Service continued its operations. This 

disparity allowed the Postal Service to operate temporarily without regulatory oversight

by the Commission. Moreover, the situation was damaging to the Postal Service as it 

was unable to file contracts or petitions with the Commission. The Commission’s 

shutdown caused a backlog of NSAs, harming both the Postal Service and its 

customers who had agreed to mutually beneficial (and often commercially urgent) 

contracts. The Postal Service immediately filed for approval of several emergency NSAs

following the shutdown. The shutdown also delayed the FY 2018 ACD, which is 

required by law to be completed within 90 days of the Postal Service reporting on its 

compliance.

The Postal Service and its stakeholders have long sought substantive legislative relief, 

and legislation will be necessary to right the ship and address the totality of the Postal 

Service’s issues. This Committee is familiar with requests to address the pension and 

health care liabilities of the Postal Service through means such as reducing the 

prefunding targets, addressing the split of responsibility for pension obligations between

the Postal Service and the pre-1971 Post Office Department, and integration with 

Medicare. These measures would help provide financial stability for the Postal Service, 

which should be a top priority alongside restoring service quality.

As part of comprehensive legislation, my immediate predecessor as chairman 

recommended that Congress grant the Commission authority to define the postal 
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universal service obligation. In the long term, a unified definition of universal service can 

provide coherence in postal policy, underpinning an alignment between resources and 

the needs of the American public. The issue is especially notable as disparate

stakeholder groups have recently called for public service appropriations for the Postal 

Service, which would imply a need to define the types of services that would receive 

such funding. The Commission currently provides and updates annually an evaluation 

of the cost of universal service, which provides valuable information for policy makers.

Thank you for the opportunity to submit comments for this critical hearing.

Sincerely,

Michael Kubayanda

Chairman, Postal Regulatory Commission