An Opportunity Better Not Lost

The following is a perspective by postal commentator Gene Del Polito. The views expressed are solely the author's and the PostCom Bulletin welcomes responses from responsible proponents of alternative points of view.

On March 13th, the U.S. Postal Service (USPS) and the brandie-new Postal Regulatory Commission (PRC) held their first-ever joint conference with mailers on developing a new postal rates regulatory regime in accordance with the desires set forth by Congress in P.L. 109-435, the Postal Accountability and Enhancement Act (PAEA). It was, to say the least, quite an experience.

The good folks from the USPS, the PRC, and we mailers have one thing in common. We're all creatures of a postal subculture that was defined and nurtured within the parameters dictated by the Postal Reorganization Act of 1970 (PRA). You've got to remember that for many of the people who were at the USPS-PRC conference, they've known nothing other than ratemaking within the confines of the PRA. Over the past 35 years, we all have honed postal ratemaking into a regulatory art that manifests itself with increased econometric precision and stultification. For the past three decades, we've thought of more reasons why something new couldn't be done than justifications for injecting new, market-based ideas into the dry postal art.

Oh sure, occasionally, we've stumbled in the right direction, the exploration of negotiated service agreements being the best example. Yet despite the high-fives we like to give ourselves for seeing the NSA concept get off the ground, we still are stuck with having to face the reality that only five NSAs have found their way through the postal regulatory thicket, and that even those five suffer constraints that are imposed by a postal ratemaking culture that has been better known as a killing ground for new ideas rather than an intellectual nursery where new ideas are born.

It was interesting to see the participants and attendees at the USPS-PRC conference struggle trying to free themselves from the past 35 years of postal ratemaking constraints. Some were able to set themselves free; others either were unsuccessful or didn't want to bother. As many of our colleagues like to say, "the devil you know is better than the devil you don't." To which I like to add, if you find you're on a first-name basis with the devil, you must be swimming in the River Styx rather than floating glorified above the clouds. You know. You're in the wrong place.

It really didn't take long for some of the participants to get themselves enmeshed in discussions of attributable and institutional costs, "fair" contributions to the recovery of postal overhead, and all of the other stuff that has made up postal life under the PRA. Very few actually ever came to grips with the notion that P.L. 109-435 was intended by Congress to bring the constrained thinking of the PRA to an end and to reset the American postal system on a path that better served the needs of businesses and a public who were adopting new means of communicating and transacting commerce.

Perhaps it was characteristic of just how much the PRA has a stranglehold on postal thinking to note that there was only one person on any of the panels that was the company's top marketer and, thus, could say how the postal regulatory regime had to change if it wanted to keep his company's business. That was Markus Wilhelm, the chief executive officer of Bookspan. Most of the other speakers on the day's program could be described as someone from their company's postal operations, whose postal experience has been fashioned by the tightly enclosed universe of this postal subculture.

You could sense the old mindset among the comments heard around the room. Bring up an idea, and there was someone at the ready to tell you that it's an idea that's been tried before, or, that it would be impossible to bring such an idea to reality. The naysayers were there in force, ready (as one participant had warned against doing) to pour stale wine (old concepts of ratemaking) into new wine bottles (the new regulatory regime meant by Congress to actually come into being).

This is not to say that having the expertise of postal operational experts (on both sides of the postal aisle) has no value. But it is to say that sometimes it's necessary to reach a little farther outside the ordinarily tight-knit "postal" circle to get the information that's really needed.

Change is always tough, but Congress heard the lament that the Postal Service's current business model was broken and that change was needed. So regardless of how painful it may seem, change (and the need to change often) is the challenge with which we must all come to grips.

It would be a real shame if the new life the USPS and PRC genuinely had sought to foster got snuffed out by our clinging to that old comfortable pillow we so diligently fought to discard. The most recent summit was a good idea, but it's going to need the vigor of new blood from some new participants that won't feel the need to constrain themselves with yesteryear's shackles. Here's what I would suggest.

The challenge we face is to come up with a new regulatory scheme of things that provides the Postal Service with a ready way to respond to the changing needs of businesses and citizens who have used mail as one of their key methods of communicating and transacting commerce. This means that this scheme must be calibrated with sufficient sensitivity and selectivity to more easily tune into the signals that are evident in the marketplace--with a particular emphasis on the word marketplace.

What's needed now is to tap into those who are really responsible for determining their businesses future marketing objectives, i.e., either the CEOs who are directly responsible for making these kinds of marketing decisions, or the chief marketing officers beneath them who counsel business owners as to the marketing paths they should choose. The Postal Service and the PRC needs to hear from those who can tell them not only where their business marketing and advertising dollars will be going, but also what a modern postal system must be prepared to create and deliver if mail is to continue as a valued medium for doing business.

Only after knowing this will anyone be able to translate these realities and needs into some context that can be better manifested in a modern postal regulatory regime that's designed to satisfy the nation's next decades of postal needs.

Maybe all this is still too cryptic, so let's illustrate with an example. When Markus Wilhelm was asked what he thought he wanted from the postal system, he said he thought he'd like to see the USPS do more contract ratemaking (NSAs on steroids). Now, if the CEO of one of the Postal Service's chief customers is saying that's what he needs to continue to tie his company's marketing future to mail, then it would seem that a modern regime for postal ratemaking must be fashioned to welcome and build upon the idea of contract rates. Any failure to do so, on its face, is sufficient demonstration of postal regulatory disharmony.

As an industry, we've got our job cut out for us with very little time in which to do it. We, not the Postal Service or the Postal Regulatory Commission, know where our businesses' marketing efforts are going and what we'll need to add real value to mail as a transactional medium. We, not the Postal Service or the Postal Regulatory Commission, know how to take the definition those changing needs and fashion them into principles of modern ratemaking. If we don't capitalize on this opportunity to fashion a ratemaking process more in tune with our needs, we'll have no one to blame but ourselves.