April 7, 2015
The Postal Service’s chief regulator hopes for financial solvency for the troubled agency, stability of service for rate-payers, and co-operation among a new set of leaders in Washington to effect the changes that can achieve it.
URBANSKI: You sat on an interesting panel recently at the Brookings Institution, and this many years after PAEA, there still is kind of a discussion there of, is the Postal Service a government agency that should adhere to the universal service obligation and be supported in that way, or can it be partially a free-market business and work the competitive products. How do you see that argument going? Where’s the split there in philosophy?
TAUB: Sure. You know, in the 2006 law, PAEA took a very strong line that said the Postal Service cannot get into non-postal activities. And if it’s non-postal, Postal Service would be barred from doing it. But postal, all bets are off, shall we say? It’s up to the Postal Service to undertake as it deems appropriate providing postal services to the nation.
The Commission, since the law took effect, is the one that calls balls and strikes on approving new products, ensuring that they aren’t offering products that would violate the non-postal prohibition, and then regulating the postal products they offer in simply one of two ways, whether they’re market-dominant, or whether they’re competitive.
Both are postal products, but market-dominant ones, which is where the bulk of the postal services in revenue or volume are, are those where you have captive customers that really have no other alternative than the Postal Service and are subject to the Postal Service’s ability to price. And they’re subject to a price cap system.
On the other hand, the competitive products are those that are deemed to be facing the competition in the marketplace, and as long as the Postal Service is pricing those at cost, at a minimum, and then collectively are priced in a way that all the competitive products contribute to the overhead of the Postal Service in a certain percentage set by the Commission, one is ensuring that the competitive products are not being subsidized by the market-dominant side.
But the Postal Regulatory Commission was also mandated in 2008 to study this issue of universal service, and in its definition in review of the system, it defined universal service as all postal products and services that the Postal Service offers. So whether it’s competitive or market-dominant based on the definition of the Commission, these are meeting the universal service obligation of the Postal Service.
And so the issue at the end of the day for competitive postal products are the issue of ensuring that they are offered in compliance with the law, but all are on the table for the Postal Service to have that opportunity to innovate and look for new ways to enhance the offerings, whether they’re competitive postal products or those in the market-dominant category.