June 19 2008 04:07 PM


The Universal Service Obligation: What Does It Mean to Us?

In some ways, universal service is like the famous quote from Justice Potter Stewart about obscenity: "I may not be able to define it, but I know it when I see it."


It's interesting that we in the mailing industry use the terms "universal service" and "universal service obligation" in our discussions of the postal system, but there is no statutory definition of the terms. Universal service has been understood over the years to mean the Postal Service will deliver to all parts of the country at a reasonable price. The universal service obligation (USO) is thought to be an obligation that has certain features, which include geographic scope, a range of product offerings, access to postal facilities and services, frequency of delivery, rates and affordability and quality of service. Because of this obligation, the postal administration in our case the U.S. Postal Service is given a postal monopoly.


Postal administrations around the world have held to a universal service obligation of some kind, which is that the postal operator will deliver five or six times a week to every address. In the United States, we also include the idea that it will be at a uniform price. That is, whether a First-Class letter is going from one block in New York City to another, or going from New York to rural Montana, it will be charged the same price.


It's interesting to think that the universal service obligation is at the heart of our nation's postal system and yet it is not explicitly defined in the law. Further, it's not an issue that we as an industry spend a lot of time discussing. And yet, it's the foundation of our postal system, the cornerstone around which the other aspects of the system are built. The Postal Service delivers to every home every day for a uniform and reasonable price; its customers have access to postal facilities. This essentially characterizes its "public service" mission. So, the Postal Service has to design its operations to meet this mission while at the same time attempting to operate like a business. It's not an easy task. About 95% of the Postal Service's transactions are business transactions. That is, only about five percent of transactions through the mail are strictly household-to-household transactions. But the system its set up to accommodate this five percent, including the universal service obligation. If the Postal Service were strictly a corporate entity, you'd say it was a crazy way to run a business.


The USO comes with benefits and burdens. The government-granted monopolies on the carriage of mail and on the mailbox mean only the Postal Service can deliver mail of a certain weight and only the Postal Service can enter the mailbox. This results in economies of scale for the Postal Service. Should the monopoly one day be reduced, the existing economies of scale would present a huge barrier to entry for competitors. On the other hand, the obligation to deliver to every address in the country means the Postal Service has to deliver to money-losing addresses just the same as high-profit addresses.


A number of European countries have reduced the postal monopoly over the past 10 years while taking care to ensure some minimum level of service to each citizen. The European Commission has set a timetable for abolishing the "reserved area" on mail (the monopoly protections) of postal administrations in the European Union. The date is now December 31, 2010. Earlier directives have reduced the reserved area over time to where it is now, currently mail weighing 50 grams or less is covered by monopoly protections. This will be eliminated entirely on December 31, 2010.


In short, the EU countries have determined that they can meet their universal service obligations without a monopoly on letter mail. The European Commission has defined universal service to mean, in principle, one clearance and one delivery to the home or premises of every natural or legal person every working day, even in remote or sparsely populated areas.

It is against this background that the U.S. Congress mandated that the PRC issue a report on universal service obligation and the monopoly. Included in the report are to be the costs to the Postal Service of providing universal service; what changes should be made to universal service and the postal monopoly; and an analysis of the benefits of the postal monopoly. The Commission is in the process of gathering information from stakeholders, both through a public docket process and through field hearings on the topic.


If you have not given much thought to universal service and the monopoly, I urge you to think about it now. It really is the rock upon which this nation's postal system has been built. Should it mean the same thing tomorrow that it did 20 years ago? Is there something we can learn from the Europeans,  or is theirs not a suitable model for the United States given our size and structure? Does the Postal Service need the same monopoly protections that it once did given its changing role (as primarily a deliverer of advertising products)? How will changing technologies affect our considerations? Do retail customers need the same access to postal facilities they needed 20 years ago? What about in five or 10 years? And how about commercial mailers? What would the service implications be of a change in mail delivery frequency? What are the cost implications? Isn't there a difference between ubiquity and universal?


These are just a few questions you might want to wrestle with. The Postal Service is asking customers these types of questions in meetings on universal service and the monopoly. You've read this instruction in this column before: Make your voice heard. I still hold to the quaint notion that the Postal Service belongs to the American people. Now is the time to help shape its future.


Kate Muth is VP of the Association for Postal Commerce. You can reach her at kmuth@postcom.org or 703-524-0096. For more information on the association, visit www.postcom.org.