EcommerceBytes-NewsFlash, Number 2627 - September 09, 2011     3 of 6

USPS Defends Plan to Close Thousands of Offices at PRC Hearing

By Kenneth Corbin

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WASHINGTON - A representative from the U.S. Postal Service on Thursday defended the organization's plan to shutter thousands of facilities in an effort to cut costs and help stanch the flow of red ink that is projected to see an operating deficit swell to $20 billion over the next decade.

Appearing at a hearing before the Postal Regulatory Commission, an independent agency with oversight over the Postal Service, James Boldt, the national manager of customer service operations in the USPS Office of Delivery and Post Office Operations, answered a battery of questions from representatives of postal employees' associations and the mailing community about the proposal to evaluate more than 3,600 retail locations for potential closure.

No party involved in the PRC proceedings challenged the dire financial predicament that the Postal Service confronts. In the third quarter of the current fiscal year, ending June 30, the USPS posted a net loss of $3.1 billion. For the first three quarters of the fiscal year, the Postal Service lost $5.7 billion, and is projecting losses for the full year as high as $10 billion. Next year, the Postal Service is projecting a $9 billion loss, and has warned that the losses could swell to $16 billion by 2015, and $20 billion by 2020.

Instead, skeptics of the plan worry that the widespread closures could have an adverse impact on businesses and residents in the affected communities. To help mitigate the impact of the closures, the Postal Service has proposed that it rely increasingly on so-called Village Post Offices (VPOs), privately operated facilities that would contract with the Postal Service to provide certain limited products and services.

Much of the questioning Boldt faced as the USPS' lone witness sought to flesh out the extent to which VPOs would serve as a sufficient replacement for the owned and operated facilities that could disappear under the so-called Retail Access Optimization initiative.

VPOs are not meant as a "one-for-one replacement" for each USPS location that would be closed, Boldt explained. "We've never suggested that it was an absolute replacement."

Many of the questions turned on the methodology that the Postal Service used to develop its plan, with both the questioners and PRC Chairman Ruth Goldway calling attention to the absence of hard data concerning the material effect on businesses, and indeed the towns themselves, when a post office is shuttered.

Boldt declined to comment on the types of consumers and businesses that rely most heavily on the Postal Service, for instance. Similarly, he said that the Postal Service does not collect data on traffic from repeat customers, but rather said only that the facilities on the potential closure list were identified by measure of total volume and revenue.

"I think it's an exaggeration to say that every customer will have increased cost or increased inconvenience," he said. "I think I can conclude that not every customer will be inconvenienced by (the closures). Some will actually be closer to the post office that will be serving them," he said, referring to the proposed Village Post Offices.

The Village Post Offices are in large measure a rebranding of a longstanding program at the Postal Service to license private entities to operate facilities known as contract postal units. But the plan to lean more heavily on the privately operated facilities has prompted questions about a scaling down of services available in the affected communities. Indeed, the baseline criterion for a VPO would only mandate that the facility offer the sale of postage and flat-rate boxes. That does not necessarily mean that the privately operated facilities wouldn't offer additional services, such as handling outgoing packages and providing P.O. boxes, though it provides no guarantee that they will do so.

Again, Boldt was challenged on the shortfall of data. He said that the Postal Service had found that the sale of postage comprises 85 percent of commercial activity across its network of retail locations, but that the organization had not conducted a similar analysis of the subset of locations to be evaluated for a possible closure. The facilities on that list, those with weak and declining revenue and volume, are heavily concentrated in rural areas and small towns, where they often serve a more dynamic role than the VPOs would be able to provide, according to Goldway.

"I think we're concerned that smaller post offices have different characteristics from post offices as a whole on average," she said. "People in those communities use those post offices for many more functions than just buying stamps."

Questions also arose about the sustainability of the VPOs. The Postal Service's current rules entail a procedural framework for closing owned-and-operated facilities that includes a community hearing where local businesses and residents have a chance to raise concerns about the impact of losing their post office. No such process would apply to the VPOs. The current mechanism available to interested parties to appeal to the PRC to protest a closing would also not apply to the privately operated facilities. Boldt could not assure the questioners that a VPO would continue to operate in the event that a private operator did not renew the contract.

"We would certainly pursue an alternate provider for that contract in that community," he said, but admitted that there is no plan in place to assure continued service. "I'd have to look at that on a case-by-case (basis)."

He acknowledged that there is no trigger in the current proposal that would require the Postal Service to find another contractor in the event that a VPO operator abandoned the facility. "There's no language that says it has to be but certainly that would be the intent," Boldt said.

He also noted that not all of the 3,652 locations on the review list are likely to be closed, so the estimated annual cost savings of $200 million (a figure that was revised significantly downward from an earlier estimate) would likely be somewhat lower.

Thursday's hearing, and the written comments and testimony from the Postal Service and other interested parties, will be an important part of the record of the docketed proceeding underway at the PRC that will culminate in an advisory opinion evaluating the merits of the proposed closures.

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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