USPS 10-Year Plan: A “Start”…With Negative Effects for Small Business Customers

By SBE Council at 12 May, 2021, 1:43 pm

By KAREN KERRIGAN-

At the midway point of the U.S. Postal Service’s (USPS’s) fiscal year, a major take-away is the continued story of financial losses and soaring costs. These recent results, combined with $188 billion in unfunded liabilities, have prompted the USPS to develop a new 10-year business plan, “Delivering for America.” While well intentioned, the plan is deficient and will negatively impact postal consumers – including small businesses – that depend on USPS services.

Historically, the USPS and Congress have failed to collectively agree on a Universal Service Obligation (USO) and to define what it means to effectively bind the nation through correspondence. Instead, the USPS has a mission statement, which is “to provide the nation with reliable, affordable, universal mail service.” The USPS is now in danger of turning its back on these principles with its 10-year plan, as the vast majority of consumers will suffer by having to pay more for what has been increasingly worse service.

The 10-year plan has a formal process in place for increasing mail rates far past inflation and the consumer price index (CPI). Over 10 years, the USPS aims to generate $44 billion from regulatory changes via the Postal Regulatory Commission (PRC) which, as the plan notes, “includes pricing flexibility for market dominant products.” These across-the-board hikes in mail prices will drain resources from small businesses and publishers of periodicals, magazines, direct mailers and others.

While consumers will bear higher costs, the 10-year plan also notes that the federal government will absolve the USPS of $58 billion in unfunded liabilities due to the elimination of the pre-funding requirement and the integration of Medicare.

Competitive services and packages are also a part of the USPS plan, but the agency fails to specify at all how this will be implemented or realized from a regulatory or legislative standpoint.

This leaves mailers with many valid questions about the 10-year plan.

Will there be a package rate review similar to the PRC’s statutory review of rates and classes for market dominant products? When would it take place? Would it be fully equitable across the full postal system given that packages now make up well over half of USPS’ total delivery weight?

In the report, the USPS states, “We will conduct a review across the breadth of our postal products and services to determine opportunities to drive higher revenues based on organizational and market needs.” And, “We will also holistically review our pricing strategy with regard to our package products, and more appropriately optimize our prices.”

Furthermore, USPS will have to come up with a plan for accounting transparency as it relates to mail and package units. Specifically, USPS’s costing insufficiencies have enabled incentives that reward shifting revenues and profits from market dominant services to competitive services, in addition to costs and risk from competitive services to the monopoly side.

We do have to note that there are some positives to the plan.

Primarily, that it is commendable that the USPS has finally put together a comprehensive plan to begin to tackle their massive debt and fiscal challenges. While it is understandable that the vision of the USPS is to become more competitive, the agency needs to remember that it is a quasi-government entity and therefore it must be sensitive to the interests of individual consumers, small businesses and publishers.

This plan could be the start of good intentions to move USPS operations in the right direction. However, more specifics and clarity are necessary in order for the USPS to navigate its future financial challenges and respond effectively to the nation’s evolving delivery markets.