Financing the Universal Postal Service in the United States

1. Financing the Universal Postal Service in the United States Chairman Ruth Y. Goldway Postal Regulatory Commission November 12, 2009 UPU Forum on Postal RegulationBerne, Switzerland

2. U. S. Postal Service Historical Context Benjamin Franklin -- Founding Father of the Nation and First Postmaster General

3. U. S. Postal Service Historical Context U.S. Constitution authorizes Congress to create Post Offices and Post Roads. Article 1, Section 8

4. Post Roads Binding the Nation Together

5. Universal Service Obligation (USO) • Define USO in specific terms • Measure the USO cost • Identify and evaluate payment options

6. Universal Service Obligation Definitions • Communications safety net for the “unconnected” • Baseline level of service to every citizen - Retail access, delivery service • The sum of all unprofitable activities that would otherwise be abandoned by a profit-seeking firm

7. Universal Service Obligation United States U.S. Internet Usage • U.S. Census 2007: - 62% of households - 82 percent with high speed access • 75 % of Americans have Internet access • 25% of Americans do not have Internet access • Not a universal service

8. Universal Service and the Monopolies • Universal Service Obligation (USO) • Seven aspects: 1) Geographic scope, 2) Range of products, 3) Access to facilities, 4) Prices and affordability, 5) Service quality, 6) User rights to redress, 7) Delivery frequency • Estimated Cost: $4.4 Billion • Letter and Mail Box Monopolies • 99 percent of mail volume, 88 percent of revenue • Mailbox monopoly: unique and absolute • Estimated value: $3.5 Billion

9. Cost of USO in the United States • One-day of delivery : $1.93 billion • Rates: $1.66 billion- Nonprofit: periodicals, charity, library rate: ($1.21 billion) - Market-dominant: periodicals, library, measurement system ($.45 billion) • Small post offices: $ .6 billion • Alaska subsidy: $ .1 billion • First-Class Mail uniform rate: $ .13 billion • Total: $4.41 billion

10. Value of U.S. Letter and Mailbox Monopolies • Combined letter and mailbox monopoly $3.48 billion • Key assumptions - 26% of mail volume at risk (55.3 billion pieces) - Entrant advantages: * Reduced delivery frequency * Lower costs of operation * Ability to attract mail through discount pricing

11. Postal Service Cooperation with the Private Sector • Worksharing • Last-mile delivery • Transportation contracts • Joint products

12. Federal Trade Commission Report Purpose: Identify federal and state laws that apply differently to the U.S. Postal Service than to private firms, and report on the “net economic effects provided by those laws” • Cost of Restraints $330 - 782 million • Value of benefits $39 - 117 million • Net disadvantage $291 – 665 million

13. USO Funding Options • Monopoly (U.S. Postal Service deficit: -$ 900 million) • Competitive Products • Government partnerships • Higher rates • Government appropriations

14. USO Funding Options • User fees • Licensing charges (Access fees) • Reduce the USO

15. Universal Service Obligation United States • Collection box removals • Route consolidations • Processing plant consolidations • Post office closings • 5-day delivery

16. Social Value Binding the Nation Together • Universal connection • The face of government • Lever of democracy • Enabler of social progress

17. www.prc.gov