The day after the PRC announced its unanimous decision to reject the rate increase requested by the USPS, I spoke with Chairman Goldway about what this decision means for mailer and the Postal Service.
Q: What kind of leadership does it take to develop a unanimous decision like we saw with the PRC rejecting the rate increase request?
A: I've been on the Commission for years, and I think the overall level of expertise and judgment of the commissioners the past couple of years is better than any group we've had before. I begin with a lot of basic respect for my colleagues. I think it takes a lot of patience to listen to everyone else's opinions and give them the support they need from the staff to get their ideas researched and discussed among everyone. It also takes a certain amount of discipline to hold back and say to myself, "Well I've already figured this out," and to let the other commissioners think through things and get the advice they need. So respect, patience, self-discipline, a focus on the outcome are all important,as well as a clear understanding that in a very controversial case like this, the strongest decision, even if it includes compromises, is a decision that is unanimous.
Q: Did you have an initial reaction when the rate increase was first filed as to which decision you thought was best?
A: I must admit that I began by thinking of how we could get the postal service some money. My initial feeling was that the request was going to be difficult for the mailing community, but that the USPS certainly needed to find additional revenue. So I looked carefully at the decision and tried very hard to find a way that we could justify providing additional revenue for the Postal Service. I looked at various options we thought we had under the law to perhaps adjust the rate request they had asked for. But it quickly became clear that we had to go through the basic steps the law required before we could get to that position, and in going through the basic steps, we came up against this real disconnect between what the law requires and what the Postal Service had submitted to us.
Q: What's next for the Postal Service?
A: They certainly have some options. They can take the advice and the analysis we provided in the decision and file again using a different method of argument to present their case; perhaps different calculations based on what we would suggest they have to do, which is relate the request for a rate increase with the exigent circumstance. They could file for a rate increase under the cap, which we estimated at about 1.6 to 2 percent at the moment. They could look at some other ways to save costs so that they wouldn't need to have a rate increase at all, and they can even ask the courts to review the decision, but that would take a long time to resolve and I don't think that would get them revenue very quickly. But those are there options and I'm sure they're considering all of them.
Q: So in your opinion, does this really force Congress's hand in regards to postal affairs?
A: The point of the decision was, whether we had given them [the USPS] the rate increase or not, they were going to be facing a liquidity crisis in September of 2011. What I think our decision does is clearly point to the health care retiree benefit funds prepayment as the major structural problem the Postal Service has. I hope the analysis we presented in our decision will help the Postal Service and help all of the other stakeholders in the postal community to argue for some adjustment to that payment in the future. If that's done, the Postal Service really does have an opportunity to plan for the future and adjust to changing technology and hopefully get back into the black. The Postal Service's cost savings this year are actually outpacing their volume loss. So they're really not doing badly this year. If you were to take out the $5.5 billion they had to pay to the retiree health benefit fund and the $2.1 billion they're allocating to adjust their workman's compensation fund, they're breaking even. The point is, the basic operations are improving again; they're bouncing back from the recession. If they didn't have some of these additional burdens, I think they'd really have the opportunity to get back in the black.
Q: What does this decision mean for mailers and shippers?
A: What I would say to the mailers and shippers is, almost every other supplier you're working with is raising their rates one way or the other. Here you have the extended opportunity to work with the Postal Service with no rate increase, and you should take the opportunity to mail as much as possible. And the best thing for mailers and the best thing for the Postal Service in the next six months is to increase the volume of mail and get the system more robust and take advantage of the opportunity to get rates that are more affordable.
Q: What role does the PRC have, if any, in assisting the USPS in their future direction?
A: The law we operate under actually gives the PRC several ways in which it can assist the USPS. The first is in our Annual Compliance Determination (ACD), in which we review the prior year's activities. We have a wide-ranging opportunity where we can discuss the USPS's problems and suggest areas where they can be improved. Traditionally, we've done that in a very narrow way with regard to adjusting their costs and some of the processing around different classes of mail. But in the last ACD, we did point out this financial crisis that was upcoming, and I think in the next ACD, we will take the opportunity to expand that discussion further to give the Postal Service some options to consider.
In addition, we are required in this next year to provide Congress with some suggestions for legislative changes to the law. So we'll be undertaking our own review of the current legislation and making our own recommendations, and the goal of those recommendations, of course, is to improve the Postal Service.
Finally, all of us--I as a commissioner and now as chair--try to use our position and ability to communicate with stakeholders to come up with new ideas and get support for new ideas and innovations. I am particularly proud of the forever stamp, which is something I worked on, but there are any other number of ideas that the commissioners and staff have discussed with the mailing community that moved forward through the Postal Service--slowly--but it did move forward. The Postal Service and the stakeholders are partners, but you're also in a situation in which you have to be a little careful of what you say to the Postal Service, because it is the monopoly supplier for you. You can be much more open with the regulator and provide us with information and ideas without any fear of retribution or concern about your ongoing business relationships. So we sometimes hear a lot more that we could circulate through the community than the Postal Service does.
Editor's Note: I spoke again with Chairman Goldway during a special, invite-only session at the PARCEL Forum on October 5, so look for that session's recap in an upcoming e-blast.
Q: What kind of leadership does it take to develop a unanimous decision like we saw with the PRC rejecting the rate increase request?
A: I've been on the Commission for years, and I think the overall level of expertise and judgment of the commissioners the past couple of years is better than any group we've had before. I begin with a lot of basic respect for my colleagues. I think it takes a lot of patience to listen to everyone else's opinions and give them the support they need from the staff to get their ideas researched and discussed among everyone. It also takes a certain amount of discipline to hold back and say to myself, "Well I've already figured this out," and to let the other commissioners think through things and get the advice they need. So respect, patience, self-discipline, a focus on the outcome are all important,as well as a clear understanding that in a very controversial case like this, the strongest decision, even if it includes compromises, is a decision that is unanimous.
Q: Did you have an initial reaction when the rate increase was first filed as to which decision you thought was best?
A: I must admit that I began by thinking of how we could get the postal service some money. My initial feeling was that the request was going to be difficult for the mailing community, but that the USPS certainly needed to find additional revenue. So I looked carefully at the decision and tried very hard to find a way that we could justify providing additional revenue for the Postal Service. I looked at various options we thought we had under the law to perhaps adjust the rate request they had asked for. But it quickly became clear that we had to go through the basic steps the law required before we could get to that position, and in going through the basic steps, we came up against this real disconnect between what the law requires and what the Postal Service had submitted to us.
Q: What's next for the Postal Service?
A: They certainly have some options. They can take the advice and the analysis we provided in the decision and file again using a different method of argument to present their case; perhaps different calculations based on what we would suggest they have to do, which is relate the request for a rate increase with the exigent circumstance. They could file for a rate increase under the cap, which we estimated at about 1.6 to 2 percent at the moment. They could look at some other ways to save costs so that they wouldn't need to have a rate increase at all, and they can even ask the courts to review the decision, but that would take a long time to resolve and I don't think that would get them revenue very quickly. But those are there options and I'm sure they're considering all of them.
Q: So in your opinion, does this really force Congress's hand in regards to postal affairs?
A: The point of the decision was, whether we had given them [the USPS] the rate increase or not, they were going to be facing a liquidity crisis in September of 2011. What I think our decision does is clearly point to the health care retiree benefit funds prepayment as the major structural problem the Postal Service has. I hope the analysis we presented in our decision will help the Postal Service and help all of the other stakeholders in the postal community to argue for some adjustment to that payment in the future. If that's done, the Postal Service really does have an opportunity to plan for the future and adjust to changing technology and hopefully get back into the black. The Postal Service's cost savings this year are actually outpacing their volume loss. So they're really not doing badly this year. If you were to take out the $5.5 billion they had to pay to the retiree health benefit fund and the $2.1 billion they're allocating to adjust their workman's compensation fund, they're breaking even. The point is, the basic operations are improving again; they're bouncing back from the recession. If they didn't have some of these additional burdens, I think they'd really have the opportunity to get back in the black.
Q: What does this decision mean for mailers and shippers?
A: What I would say to the mailers and shippers is, almost every other supplier you're working with is raising their rates one way or the other. Here you have the extended opportunity to work with the Postal Service with no rate increase, and you should take the opportunity to mail as much as possible. And the best thing for mailers and the best thing for the Postal Service in the next six months is to increase the volume of mail and get the system more robust and take advantage of the opportunity to get rates that are more affordable.
Q: What role does the PRC have, if any, in assisting the USPS in their future direction?
A: The law we operate under actually gives the PRC several ways in which it can assist the USPS. The first is in our Annual Compliance Determination (ACD), in which we review the prior year's activities. We have a wide-ranging opportunity where we can discuss the USPS's problems and suggest areas where they can be improved. Traditionally, we've done that in a very narrow way with regard to adjusting their costs and some of the processing around different classes of mail. But in the last ACD, we did point out this financial crisis that was upcoming, and I think in the next ACD, we will take the opportunity to expand that discussion further to give the Postal Service some options to consider.
In addition, we are required in this next year to provide Congress with some suggestions for legislative changes to the law. So we'll be undertaking our own review of the current legislation and making our own recommendations, and the goal of those recommendations, of course, is to improve the Postal Service.
Finally, all of us--I as a commissioner and now as chair--try to use our position and ability to communicate with stakeholders to come up with new ideas and get support for new ideas and innovations. I am particularly proud of the forever stamp, which is something I worked on, but there are any other number of ideas that the commissioners and staff have discussed with the mailing community that moved forward through the Postal Service--slowly--but it did move forward. The Postal Service and the stakeholders are partners, but you're also in a situation in which you have to be a little careful of what you say to the Postal Service, because it is the monopoly supplier for you. You can be much more open with the regulator and provide us with information and ideas without any fear of retribution or concern about your ongoing business relationships. So we sometimes hear a lot more that we could circulate through the community than the Postal Service does.
Editor's Note: I spoke again with Chairman Goldway during a special, invite-only session at the PARCEL Forum on October 5, so look for that session's recap in an upcoming e-blast.
