The Honorable Edward J. Glehm, Chairman 

Postal Rate Commission 

Before the 

Subcommittee on the Postal Service 

Committee on Government Reform and Oversight 

U. S. House of Representatives 

March 2,1995 

Mr. Chairman and Members of the Subcommittee 

I am Ed Gleiman, Chairman of the Postal Rate Commission. With me today are Vice 

Chairman "Trey" LeBlanc, and Commissioners George Haley, Edward Quick, and Wayne Schley. 

Together the five of us comprise one-tenth of the 50 people who work at the Postal Rate 

Commission. While we are small, we play a very important role in postal affairs. The 

Commission was created by a Congress that by 1970 had grown weary of the political brawls 

involved in setting postal rates. The Commission was charged to ensure equitable, reasonable and 

suf6cient rates and to prevent the unfair exploitation of the monopoly afforded the Postal Service 

under the Private Express Statutes. 

Our primary responsibility, is recommending postal rates. By law, a rate case should be 

decided in 10 months. I am proud to report that the Commission issued its Recommended 

Decision in the last case (R94-1), five weeks ahead of the IO-month statutory deadline, enabling a 

financially strapped Postal Service to implement new rates that much earlier and to realize an 

additional $500 million in much-needed revenue. On Tuesday the Postmaster General reported to 

the Treasury-Postal Appropriation Subcommittee preliminary net income of $53 1 million through 

the first five months of the current fiscal year. Mr. Runyon's good news is due in large part to the 

Commission's early decision. 

We have responsibilities other than rate cases. Among them are mail classiication 

proceedings, which determine the groupings or classes and subclasses to which rates are assigned. 

We expect the Postal Service shortly to request a substantial overhaul of the mail classification 

system -- postal officials have been promisiig to do so for more than a few years now, 

Additionally, persons who believe that postal rates or services do not meet the 

requirements of the Postal Reorganization Act may file complaints with the Commission. 

Complaints can result in a general rulemaking inquiry as was the case when, in 1992, a number of 

major mailers petitioned the Commission to investigate why about a quarter of mail processing 

costs were classified by the Postal Service as "non-productive time." Unfortunately, the Postal 

Service refused to participate in this inquiry which was initiated on behalf of some of its largest 

customers and the effort was terminated. 
Similarly, the Postal Reorganization Act gives the Commission an advisory responsibility 

with respect to proposed nationwide or substantially nationwide changes in postal services. Ifthe 

Postal Service proposes to make such a change it must submit the proposal to the Commission. 

The most recent advisory effort took place in 1989 and pertained to the Postal Service's lowering 

of delivery standards - some previously one day delivery areas became two day delivery areas, 

two day areas became three day and so on. Senator David Pryor, then chairman of the Senate 

postal subcommittee, likened this action by the Postal Service to cutting the top off the flagpole 

when the flag gets stuck part way up, so that people will think the flag is really at the top of the 

pole. I think we all need to remember that current reports on service -the good and the bad - 

are measured against these new, lower standards. 

Another of our responsibilities, is the review of post office closings when we are requested 

to do so by af€ected townspeople. Approximately 10 percent of post ofiice closings - about 250 

- have been appealed. And finally, fiom time-to-time the Congress requests the Commission to 

conduct studies of particular subjects. The most recent request resulted in a report on incentives 

for mailers to use recycled materials. Another recent study of the adequacy of international rates 

requested by the Senate subcommittee is in limbo because the Postal Service, yet again, refbses to 

cooperate. 

The Ratesettina Process 

Only the Postal Service may initiate a rate case - it decides when and it decides for how 

much additional revenue. 

The law requires that "each class of mail or type of mail service [shall] 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. . ." Much of our time is devoted to analyzing postal 

operations to assure that we identify those costs which can fairly be said to have been caused by a 

particular class of mail or type of mail service. About two-thirds of the costs of the Postal SeMce 

can be causally related to classes and services. Those costs which cannot be attributed, the 

remaining one-third, are assigned pursuant to statutory guidance. 

The ratesetting process is heavily dependent on information collected and provided by the 

Postal Service. This information is essential to establish fair rates and classifications for the Postal 

Service. 

Both intewenors and the Commission have become increasingly concerned about the 

quality and quantity of information presented by the Service. Deficiencies in the W-1 

proceedigs ranged tiom the virtual absence of special studies to reflect changes in operations, to 

serious overstatement of the costs. 

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The stakes in an omnibus rate case are enonnous, probably involving more money, directly 

and indirectly, than any other regulatory proceeding, federal, state, or local. And, a rate case is a 

zero sum game--each subclass must provide enough revenue to cover its attributable costs and 

make a reasonable contribution to overhead. There is a great deal of money at stake, about $54 

billion, and parties perceive themselves as Winners or losers. In this regard, the situation we face, 

the criticism some level at the Commission, is very much akin to the pressures the Congress faces 

in its effort to balance the budget. 

Criticisms o f the Current Svsta 

Some have argued that the ratesetting process takes too long ("setting rates takes longer 

than having a baby!") and is too cumbersome. In a recent speech, the Postmaster General 

described the process as "trench warfare." 

The procedures for developing rate recommendations are designed to maximize 

meaningful public participation. The Postal Service must provide evidence in support of any 

request for rate changes. Interested parties may intervene, question the Postal Service, and 

provide whatever evidence they consider relevant to the Commission's responsibilities. Written 

discovery of underlying facts is allowed. Evidence is presented under oath and is subject to crossexamination by interested participants. Time is allowed for the Postal Service to present rebuttal 

testimony, and for both the Postal Service and interested parties to prepare detailed written briefs 

and oral arguments. 

Yes, the process is technical and detailed in a fashion that some could call cumbersome. 

But, it is open and it affords an opportunity for all parties to protect their interests and their 

pocketbooks in dealing with a large government monopoly. 

We are certainly interested in streamlining and expediting proceedings and in providing the 

Postal Service with 

General and immediately after our rate decision last November, we invited public comments on 

improving the process. We also reissued rules giving the Postal Service the authority to expedite 

changes in Express Mail rates to meet market pressures. These rules, I should note, were 

previously in effect and, although designed to give the Postal Service flexibility in its most 

competitive area, went unused for five years. I have also suggested that, as a point of departure 

for future discussions, postal officials dust off the joint PRC-Postal Governor task force report 

which was shelved during the 1992 reorganization and downsizing. 

opportunity to experiment. To this end I have met with the Postmaster 

Let me note, however, that whatever its warts, the current process does uncover 

deficiencies in the Postal Service's proposals and result in fairer rates. There were three examples 

from the last rate case in my prepared text, only one of which I will mention today. 

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The National Newspaper Association challenged the Postal Service's proposed 34 percent 

increase for in-county, second-class rates -- rates paid by those relatively small but tremendously 

important community newspapers. In response to several interrogatories, the Postal Service 

reexamined its in-county proposal, found an error and revised its proposal. What had been a 

requested 34 percent increase became a proposed 1 1/2 percent decrease. However, this change 

and the others mentioned in my prepared statement would not have owed were it not for the 

procedural safeguards the ratesetting process provides. 

As I mentioned in my prepared statement, even the Postal Service has, perhaps 

unintentionally, touted changes the Commission made in its most recent recommended rates 

advising mailers in its January edition of Jvimo to M~II . erg to "make advantage of our varied 

services by making mailing decisions." Each of those "smart mailing decisions" involves a 

rate recommended by the Commission - a rate which is lower than what I guess are the "not-sosmart" rates originally proposed by the Postal Service. 

The Future 

I have tried to describe who we are and what we do. Now, the question is: "Where do 

we go?". 

With respect to cries for wholesale change to provide speed and flexibility, I urge you to 

remember, under current law these prodigs are designed to ensure fairness and allow all 

interested parties the opportunity to participate in a meaninghl way. We are dealing here with a 

government - granted monopoly -- a $54 billion dollar gorilla whose activities if not monitored 

closely and controlled in a reasonable manner could cause serious economic consequences for 

fiend and foe alike. Private companies could easily be put out of business and private citizens 

could easily wind up paying much more to mail a letter. 

Several corporations spend literally tens of millions of dollars on postage annually, and of 

course the general public spends billions. It is and will always be important that postal customers 

have an adequate opportunity to critically review Postal Service proposals in a public forum and 

present their concerns to an independent decision maker before rates are changed. 

As for the Postal Service, it is at a cross road with no sign post. As it did 25 years ago, 

Congress should provide direction. 

A major public policy question needs to be answered, and unless Congress acts I fear that 

by default it will be answered by Postal Service managers. The question is both simple and 

complicated. It is this: "What do we want and what can we reasonably expect from our Postal 

Service?" 

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The Postal Service's historical mission is the collection, processing, transportation, and 

delivery of hard copy messages. It has done that fairly well under the protection of the postal 

monopoly umbrella. But today hard-copy messaging faces growing competition from FAX, EMail, and other forms of electronic transfer. 

So, do we want the Postal Service to limit its focus to its historical mission - the reliable, 

prompt delivery of hard-copy mail? Or, do we want it to attempt to compete in the new 

technologies and enter fields heretofore foreign to it? 

There are a host of issues which must be considered if it is to compete and embark on new 

ventures. How will its non-monopoly and monopoly activities interrelate? Do we want 

First-class monopoly revenues to subsidize entry into new and risky ventures? Can a labor 

intensive organization operate in an entrepreneurial, capital intensive arena? And, Since it takes 

$1 billion dollars in profit to reduce the cost of a First-class stamp by a penny, are new ventures 

really worth the effort? 

I apologize for ending viith such weighty questions, but I want to thank you for the 

opportunity to share these thoughts. 

Shortly, we will hunker down in our offices, raise our ex parte walls, and begin hearing the 

Postal Service's reclassification proposal. But, I want to say publicly what I have said privately to 

many of you. Please do not hesitate to ask for our assistance as you proceed on your examination 

of our nation's postal system. 

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