Presentation of the Office of the Consumer Advocate,Postal

Regulatory Commission

MTAC Full Workgroup

May 15, 2007

Topics covered today

• (A) What is the Postal Regulatory Commission (PRC)?

• (B) What is the Office of the Consumer Advocate (OCA)?

• (C) What role does OCA propose for the PRC with respect to service performance measurement?

(A) What is the Postal Regulatory Commission?

• The Postal Accountability and Enhancement Act (PAEA) was signed into law on Dec. 20, 2006

• It changed the Postal Rate Commission into a regulatory commission

• Instead of making rate recommendations that were, in most instances the final rates, the Postal Service now changes prices, with Commission oversight

Important new responsibilities for service standards and service

performance

• The Postal Service will establish service standards in consultation with the Commission

• The Commission will have primary responsibility over service performance measurement

Other important new responsibilities for service standards and service

performance

• The Commission will establish periodic reporting requirements for the Postal Service, including service performance reports

• The Postal Service will submit annual reports to the Commission on service performance

• The Commission will report to Congress on the quality of service the Postal Service provides for its market dominant products and universal service provision

(B) What is the Office of the Consumer Advocate?

• Under the former statutes (known as the Postal Reorganization Act), the OCA primarily represented consumers and small businesses as mailers of single-piece First-Class Mail; single-piece Package Services; and Special Services

• This representation focused on the prices that the Postal Service charges for these mail services; most activities took place in litigation of omnibus rate cases

OCA has worked to improve Postal service performance and to provide transparency on quality of service

• Pursuant to an agreement between OCA and the Postal Service in Docket No. R2005-1, the Postal Service reports on the service of First-Class Mail; Priority Mail; Package Services Mail; and Express Mail every quarter

• These are the links to the Postal Service’s website:• http://www.usps.com/serviceperformance/welcome.htm• http://www.usps.com/serviceperformance/retailpackage.

htm

Image of the website page on service performance

• Express MailExpress Mail is the fastest mail service offered by the Postal Service. It provides guaranteed expedited service 365 days a year, including Sundays and holidays. During the previous quarter, retail Express Mail with an overnight commitment was delivered 95% on-time, and overnight and two-day commitment combined was delivered 96% on-time. An Express Mail Delivery Chart is included showing Guaranteed Day of Delivery based upon day of mailing. For more detailed information on service commitments between your origin and destination ZIP Codes, go to Express Mail Service Commitment.

Priority MailPriority Mail is predominantly a two/three-day ground and air product. The vast majority of Priority Mail is scheduled for delivery within two days, with some volume delivered overnight. Priority Mail rates can be determined by weight and travel distance or by using Priority Mail products which have a fixed rate regardless of distance. A number of ZIP Codes with limited volume are not measured. During the previous quarter, retail Priority Mail with an overnight scheduled delivery was 90% on-time, and within two-day scheduled delivery was 90% on-time. Three-day delivery is not currently measured in a similarly robust manner as it is approximately 3% of Priority Mail volume.

First-Class MailFirst-Class Mail includes cards, letters, flat envelopes, and any parcels weighing less than 13 ounces. First-Class Mail rates are the same regardless how far the mail travels. The External First-Class (EXFC) System is an external measurement system of collection box to mailbox delivery performance. EXFC is not a system-wide measurement of all First-Class Mail performance. Rather, EXFC continuously tests a panel of 463 ZIP Code areas selected on the basis of geographic and volume density from which 90 percent of First-Class volume originates and 80 percent destinates. During the previous quarter, First-Class Mail with an overnight service standard was delivered 95% on-time. Performance for two-day volumes was 91% on-time and 88% for three-day volumes.

Package ServicesPackage Services are surface products used for mailing merchandise, books, circulars, catalogs, and other printed matter. Parcels entered at retail represent 8% of the total surface package volume. Service standards vary from 2 to 9 days based on distance. Parcel Select™ is a bulk volume product that is entered closer to its delivery destination by companies and business partners. During the previous quarter, retail packages combined with Parcel Select was delivered 89% on-time. Retail packages were delivered 48% on-time and Parcel Select was delivered 96% on-time. For more detail information on retail service standards performance, go to Retail Packages.

Service-day performance for Retail Package Services

• Package Services – Retail• 2-day Service Standard 62%• 3-day Service Standard 39%• 4-day Service Standard 46%• 5-day Service Standard 52%• 6-day Service Standard 45%• 7-day Service Standard 48%• 8-day Service Standard 53%• 9-day Service Standard 61%

OCA Preserved Critical Features of the Confirm Service in the Recent

Rate Case

• OCA proposed rates for Confirm that continue to encourage its usage

• In particular, OCA preserved the unlimited usage pricing tier

• OCA entered into an agreement with the Postal Service that preserved the start-the-clock requirement, which is essential to any measurement of transit times

New duties of the OCA

• The most significant change from the PRA is that now, for the first time, OCA can file complaints

• OCA can complain about prices or service performance (if either fails conform to Congress’ PAEA policies)

• OCA will offer comments on rules, regulations and procedures; and comments for annual reports

(C) OCA proposes that the PRC conduct its own service measurements

• Advantages of PRC measurement:• MAINTENANCE OF HIGH QUALITY SERVICE

STANDARDS• OBJECTIVITY• TRANSPARENCY• MEASUREMENT OF MAIL TYPES AND GEOGRAPHIC

REGIONS THAT THE POSTAL SERVICE MAY REFUSE TO MEASURE

• MEASUREMENT AND REPORTING LONG BEFORE THE INTELLIGENT MAIL BARCODE SYSTEM PRODUCES DATA

Maintenance of High Quality Service Standards

• This is a primary objective of the PAEA

• Congress had a justified concern that the Postal Service might allow service quality to deteriorate while trying to manage under a price cap system

• Mailers voiced similar concerns at the recent regulatory summit

TRANSPARENCY

• The Postal Service frequently resists the public release of information– 2 examples

• The Postal Service sometimes cherry-picks data to be released or selectively reports

• The Postal Service may not agree to report on the schedule that the PRC prefers

• Transparency is promoted by PRC control over data

OBJECTIVITY

• Mailers have an understandable wariness about the Postal Service measuring itself

• PRC measurement tools can be kept completely under wraps

• PRC can be expected to be fair and accurate in its measurements and reporting

GAO reports serious gaps in Postal Service measuring systems

• GAO-06-733 published July 2006• “The Postal Service does not measure or report

delivery performance for most types of mail”• “[T]ransparency [of] timely mail delivery is

limited”• “[M]easures cover less than one-fifth of mail

volume”• USPS has a “lack of continued management

commitment”

Most of the U.S. land mass is not measured by EXFC

GAO Report 06-733, page 24

Postal Service measurement and reporting is years away

• OCA urges the PRC to begin its own measurements and reporting within the next year

• This would include, for First Class: ZIP codes not covered by EXFC; and Bulk First Class

• Periodicals Mail• Standard Mail• Nonmachinable mail in all classes

Mail products that the PRC may need to measure over the long term

• Mail that is not subject to the requirement of Intelligent Mail barcodes

• Special Services

• Elements of the universal service obligation, such as regularity of delivery to homes and businesses and time of day for delivery

Duplication of data collection should be avoided

• The PRC can measure, and report on, bulk First Class, Periodicals, and Standard Mail for the next 2 – 3 years

• After Intelligent Mail Barcode is well established, the PRC may be able to discontinue these reports for mail that is subject to the IMB requirement

• The PRC can fill in gaps in Postal Service measurement and reporting, for example, regions not covered by EXFC and nonmachinable mail in all classes

• Postal ratepayers foot the bill for Postal Service and PRC reporting, so expenses should be minimized

MTAC subgroups should make forceful recommendations for reporting

• Should data reporting be limited to mailer-specific information released solely to the mailer?

• Or should there be highly aggregated “big picture” reporting?

• Should there be reporting on an area by area basis?

• How frequently should data be released?• What data should be put into the annual reports

of the Postal Service and the PRC?