EcommerceBytes-NewsFlash, Number 2996 - February 07, 2013     1 of 4

USPS Addresses Online Seller Concerns over Five-Day Delivery

By Kenneth Corbin

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As it faces a worsening financial situation and frustration with Congress mounts for failing to enact cost-cutting reform measures, the U.S. Postal Service announced on Wednesday that it will seek to phase out six-day delivery service later this year.

However, of critical importance to online sellers, the agency said that it will continue to deliver packages on Saturdays, even as residential and business delivery of regular mail on that day would end in early August.

In announcing the plan, Postmaster General Patrick Donahoe said the shift to a five-day delivery schedule is a necessary step to keep the Postal Service financially viable. The agency projects that the move will save $2 billion in annual costs.

Recognizing the Role of Ecommerce
At the same time, Donahoe argued that the plan plays to the Postal Service's strengths by preserving the existing schedule for the profitable and growing package business.

"Our customers see strong value in the national delivery platform we provide and maintaining a six-day delivery schedule for packages is an important part of that platform," Donahoe said in a statement. "As consumers increasingly use and rely on delivery services - especially due to the rise of e-commerce - we can play an increasingly vital role as a delivery provider of choice, and as a driver of growth opportunities for America's businesses."

The Postal Service, which reported a $15.9 billion loss in the 2012 fiscal year, has seen a 14 percent increase in its package volume over the last two years.

No Limits on Saturday Package Delivery
In the face of a sustained decline in First-Class Mail volume, USPS officials have been pushing for a five-day delivery schedule for several years. Under a previous proposal, the agency sought to end Saturday delivery service of regular mail and packages, and only deliver Express Mail on the weekends.

By exempting packages from the new proposal for five-day delivery, the Postal Service hopes to preserve a vibrant business segment that has been bolstered by the continued growth of ecommerce, while also assuaging concerns that the service reduction would slow delivery of prescription drugs and other critical shipments.

"All packages will be (delivered) on Saturday," USPS spokeswoman Toni DeLancey said in an interview. "The plan is that package delivery continues" uninterrupted.

"That's why it's such a big thing for us, because we're not going to in any way limit packages on Saturday," DeLancey added. "That's what the American people want from us. So we wouldn't want to cut that kind of business."

The Postal Service cites internal polling and a handful of surveys from major media outlets demonstrating strong public support for the proposal to end Saturday delivery of regular mail in an effort to cut costs.

Saturday Package Pickup: To Be Determined
Under the new plan, the Postal Service would continue to deliver regular mail to P.O. boxes, and retail post offices that are currently open on Saturdays would remain open on that day. DeLancey said that it is unclear whether the Postal Service will offer package pickup on Saturdays, but that the agency's operations team is still working through many of the details of the plan, which will be released in the coming weeks.

Critics Weigh In on Proposal
The plan is not without its critics. Sen. Susan Collins (R-Maine), one of the sponsors of a bill that would have barred the Postal Service from shifting to five-day delivery for two years and required the agency to conduct a feasibility study on the service reduction, called the new proposal "inconsistent with current law" and said that it "threatens to further jeopardize (the Postal Service's) customer base."

"There is no doubt that the U.S. Postal Service is in a financial crisis. It has been hit with falling mail volume, the recession and the loss of customers to digital technology such as email and online bill paying that has replaced traditional mail," Collins said in a statement. "Cutting service should, however, be the last resort, not the Postal Service's first choice."

Collins' bill, which would have directed the Postal Service to embark on a series of dramatic cost-cutting measures before scaling down to five-day delivery, passed the Senate last year, but was not taken up in the House.

The five-day-delivery proposal was also roundly condemned by unions representing postal workers.

"USPS executives cannot save the Postal Service by tearing it apart," Cliff Guffey, president of the American Postal Workers Union, said in a statement. "These across-the-board cutbacks will weaken the nation's mail system and put it on a path to privatization."

At least two unions, the National Association of Letter Carriers and the National Rural Letter Carriers' Association, have called for Donahoe's ouster as postmaster general.

Instead of scaling down the delivery schedule, the unions are urging Congress to enact legislation that would free the Postal Service from its obligation to prefund retirement benefits for several decades into the future. The agency continues to champion reform legislation to ease its workforce-related financial obligations, but said that "the change in the delivery schedule announced today is one of the actions needed to restore the financial health of the Postal Service."

Does USPS Have Authority to Scale Back?
Lawmakers have blocked past efforts to scale back delivery service with language mandating the preservation of the six-day schedule included in appropriations bills. The Postal Service is currently operating under a temporary spending authorization, which expires March 27. The agency plans to ask lawmakers not to include the embargo on five-day delivery service in any new appropriation. At that point, according to the Postal Service, it would be able to act on its own to end Saturday delivery.

"Our interpretation is that we can move at this time and do this," said DeLancey, the USPS spokeswoman. "We can't just sit idly by and do nothing with this financial situation that we're in."

The Postal Service plans to release a more detailed proposal for the service adjustment in March. It also will likely ask the Postal Regulatory Commission (PRC), which has oversight authority over the agency, to consider the proposal.

The PRC issued an advisory opinion in March 2011 in response to the Postal Service's earlier proposal for five-day delivery, which would have ended Saturday delivery of packages. In that opinion, the PRC concluded that the Postal Service had significantly overestimated the savings that a five-day delivery schedule would yield, a charge that USPS officials dispute.

In response to the plan announced Wednesday, the PRC issued a noncommittal statement saying that it will need to see more details about the plan before it can weigh in on the merits.

"The Postal Service's announcement today provides only a broad outline of its new Saturday delivery schedule. Thus, the commission is currently unable to evaluate how the new plan differs from the previous proposal," the PRC said.

DeLancey said the Postal Service would likely ask the PRC to update its advisory opinion to address the current proposal, but that it does not believe that it is legally obligated to obtain a new evaluation from the oversight agency.

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About the author:

Kenneth Corbin is a freelance writer based in Washington, D.C. He has written on politics, technology and other subjects since 2007, most recently as the Washington correspondent for, covering Congress, the White House, the FCC and other regulatory affairs. He can be found on LinkedIn here.

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