PRC Not Enthused with USPS Five-Day Delivery Proposal
Opinion says Postal Service overestimated savings, underestimated costs.
The Postal Regulatory Commission has issued an advisory opinion on the USPS’s proposed five-day delivery plan. The document, which the PRC says takes a conservative look at the proposal, finds that the USPS has significantly overestimated potential savings and underestimated costs-by as much as $1.4 billion and $400 million respectively.
As part of a raft of plans to save costs and boost revenues, the USPS has proposed cutting its delivery schedule to five days by eliminating Saturday. In fiscal 2010, the USPS lost $8.5 billion.
Whenever the USPS proposes a major, nation-wide service change, it must run the proposal by the PRC which performs its own analysis of the plan and issues an opinion.
The PRC’s Advisory Opinion, which was issued last week, comes to a very different conclusion than the USPS.
The most striking difference is in the savings estimates the two groups came up with. The USPS predicts it will save $3.1 billion annually by eliminating Saturday delivery. The PRC says this will be closer to $1.7 billion. Further, reaching a full savings in either case would likely not be achieved for three years.
Revenue losses due to volume declines are estimated by the USPS to be $200 million, while the PRC pegged losses closer to $600 million.
Additionally, the PRC has found that the proposal would cause 25 percent of first-class and priority mail to be delayed by two days. Also, it says the USPS failed to evaluate the impact of the proposal on rural customers, who the PRC thinks will be particularly impacted by the plan.
"In all cases we chose the cautious, conservative path. Our estimates, therefore, should be seen as the most likely, middle ground analysis of what could happen under a five-day scenario," said PRC chairman Ruth Goldway in a statement.
The opinion does not explicitly advise whether or not to proceed with the plan, nor does it have any binding effect. But the Commission’s cautionary tone could have an impact on the success of the proposal. "We recognize that ours is an advisory opinion only," said Goldway in a letter to Congress. "The final determination on the elimination of Saturday delivery rests with Congress and the Postal Service."
In a prepared reaction to the PRC’s opinion, postmaster general Patrick Donahoe says the USPS will stay the course with its proposal. "The Commission’s opinion is advisory only and therefore, is not a final determination on the merits of our proposal. We remain convinced of our findings. As such, we will also continue to press our case with the Congress on this matter."
See the full Advisory Opinion here.