Regulator tells USPS slower mail wouldn’t result in ‘much improvement’ to its finances

The Postal Service’s regulator is warning USPS that plans to slow down nearly 40% of first-class mail delivery wouldn’t result in “much improvement, if any” to its current financial condition, and wouldn’t immediately result in the agency reaching its on-time delivery goals.

The Postal Regulatory Commission, in its advisory opinion released Tuesday, said the higher costs USPS is footing to handle a surge in packages would actually eliminate any projected cost savings that would come from the new service standard.

“Therefore, it is not clear that the tradeoff between financial viability and maintaining high-quality service standards is reasonable,” the commission wrote.

PRC Chairman Michael Kubayanda said he understood the rationale of USPS management to adapt to changes, such a persistent decline in mail volume and a recent surge in packages, but warned that the agency’s plan “does not meet the needs of the moment and is not supported by the testimony the Postal Service has presented.”

“The Postal Service is capable of top-notch planning and execution; it must do so in order to provide its core service six days a week. That expertise makes this underdeveloped proposal disappointing,” Kubayanda wrote in a separate view from the commission’s advisory opinion.

As part of its 10-year reform plan, USPS proposed it would save money by moving more mail through its ground transportation network and less through contracted air delivery services. As part of this plan, however, USPS would need to slow its first-class mail standard in some cases.

Under this plan, USPS would deliver 21% of its current mail volume in four days, and 10% in five days.

But even if USPS went ahead with plans to slow mail delivery, PRC Commissioner Ashley Poling said the USPS plan would not result in cost savings, processing efficiencies or improved performance.

“Although gaps in any one of these areas pose a significant problem and shake public confidence, issues with all of these areas together point to the need for the Postal Service to press pause and return to the drawing board,” Poling wrote.

While USPS expects this new service standard would allow it to deliver 95% of mail on-time, the commission warns this “aspirational” goal isn’t reliably achievable for all products in the short term, and that the agency probably won’t see efficiencies in its transportation network without first addressing underperforming districts and areas, as well as nationwide staffing issues.

“The Commission agrees that there is potential to increase surface transportation efficiency and capacity utilization. For this initiative to be a success, the Postal Service will need to reconfigure its surface transportation network to build efficient trips with multiple stops and hubs,” the commission wrote.

Despite the commission’s concerns, its advisory opinion isn’t binding, and USPS is free to implement the slower service standards.

“The Advisory Opinion is the sole check on the Postal Service’s ability to unilaterally implement major changes to its services,” Kubayanda wrote. “I will work with my colleagues at the Commission to do everything within its authority that is necessary to make sure the only check is a meaningful and influential one.”

The commission’s opinion doesn’t totally dismiss the merits of the service change, noting that the proposal targets mail that “consistently fails to meet service performance goals and has the most opportunity for improvement.”

USPS told the commission that any reduction in mail volume resulting from this change would be modest, but commissioners said that claim “relies on numerous unproven assumptions,” because USPS didn’t conduct any operational or pilot testing of its proposed service standard changes before proposing them.

“The Commission finds this lack of testing problematic as mail processing is complex and requires timely execution to provide reliable service performance,” the advisory opinion states.

More specifically, the commission disputed market research USPS used to argue that customer satisfaction would not decline as a result of the new service standards. USPS previously told the commission that customers would value reliable mail delivery compared to overall speed.

“In application, the supporting market research ignores the difficult task of weighing the loss of speed of service due to the proposed changes and the purported increase in reliability and consistency of service. Most importantly, though, these reports and their underlying data do not correspond with those populations that may be affected by the proposal and thus cannot be used to infer the impacts of the proposal on said customers,” the commission wrote.

The commission recommends that USPS, in implementing these new service standards so that cost-savings isn’t “prioritized over maintaining high-quality service standards,” and that it closely monitors any impacts to its transportation network and customer satisfaction.

USPS spokeswoman Kim Frum said the agency is “reviewing the recommendations of the Postal Regulatory Commission, and will consider them as we move forward with our plan.”

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