Published: August 2006

Postal reform: Comparing the House and Senate Versions

Coalition: Consumer Postal Council

Don Soifer, director of the Consumer Postal Council, has prepared this comparison of the House and Senate versions of the Postal Accountability and Enhancement Act. Consumer Action is a member of the Council. (HR. 22 and S 662)

The Postal Accountability and Enhancement Act has been passed by both the U.S. House of Representatives (H.R. 22) and the U.S. Senate (S. 662). It's possible—although far from certain—that Congress will work out the differences this Fall, and send a single version to the White House for signature.

That makes this the closest Congress has come in 30 years to significantly updating the laws governing the U.S. Postal Service. Unfortunately, neither version confronts the burgeoning labor costs that are the greatest threat to the Postal Service's future—and its most pressing reform need.

But the House and Senate bills have many positive aspects in common. Both require USPS to focus on its principal mission—the delivery of mail—by defining the term "postal services." Both require USPS to provide increased financial transparency. And both would transform the independent Postal Rate Commission into the Postal Regulatory Commission (PRC), a body with greater regulatory authority and subpoena powers.

Both plans also share very similar provisions giving USPS greater flexibility to enter into agreements (like work-sharing) with the private sector, while tasking a strong regulator with ensuring that individual consumers will not have to shoulder the costs of excessive discounts to business mailers.

Perhaps most importantly, both versions attempt to prevent USPS from abusing its government monopoly.

To that purpose, both bills define all USPS products and services as either "competitive" or "market-dominant" (monopoly). This, combined with improved financial transparency, is intended to prevent USPS from subsidizing competitive products with inflated pricing on monopoly products.

Despite their many similarities, however, the two bills also have some significant differences, outlined below.

Market-Dominant vs. Competitive

Although both plans classify First Class, library, media mail, and postcards as market-dominant products, the Senate bill makes a distinction between packages sent in bulk (like catalog orders) and single packages (like care packages from Mom). It would classify single packages as monopoly products, and packages shipped in bulk as competitive products. The House bill considers all packages to be competitive products.

Under both bills, the Postal Service would have to fully attribute all costs for competitive products.

Currently, single packages cost more to deliver than Bulk Parcel Post, and are subsidized to some degree. Placing single packages into the "competitive" category—as the House bill would do—would likely have the effect of raising their prices while also lowering the cost of sending bulk packages.

On the other hand, under the Senate language, first-class stamp buyers would be forced to subsidize single package shipments. This would make packages the only postal product to be split in this way.

Pricing Postal Products and Services

Both bills would grant the Postal Regulatory Commission more involvement in and oversight of market-dominant products by requiring the PRC to establish "a modern system for regulating rates and classes."

Both bills would also require capping price increases of market-dominant products at the Consumer Price Index (CPI). Under the Senate bill, USPS would be able to exceed the CPI for new rates only under "unexpected and extraordinary" circumstances. Under the House bill, the USPS could break the CPI rate cap if the PRC determined that the increase was "reasonable and equitable."

Thus, the price cap in the House bill is not as strong, and gives USPS greater flexibility to raise rates.

Although both bills forbid USPS from subsidizing competitive products with revenues from market-dominant ones, the Senate language is much stronger. It requires that competitive products "cover their share of the institutional costs of the Postal Service."

The House bill stipulates that competitive products "make a reasonable contribution to the institutional costs the Postal Service." This language would likely allow some cross-subsidization to continue, depending on what Postal management feels is "reasonable."

The Senate bill would require that this system be put in place within one year, while the House would allow two years.

Establishment of 'Modern Service Standards'

Within 12 months of its enactment, the Senate bill requires that USPS consult the PRC to establish a set of service standards for market-dominant products. USPS must then work with the PRC to develop a plan for meeting those standards. Within six additional months, USPS must submit the plan to Congress.

The House bill excludes this entire section. Instead, a different part of the House bill (Section 204) would compel the Postal Service to develop its own service standards and PRC to monitor its realization of them.

The Senate bill appears to give the PRC substantially more control and oversight over the service standards of the Postal Service.

Changes Regarding the Board of Governors

In amending the present governance of USPS, both bills would require that "the Governors shall represent the public interest generally" and "shall not be representatives of specific interests using the Postal Service."

Unlike the Senate bill, however, the House bill mandates that one slot on the USPS Board of Governors be filled by an individual with unanimous backing by organized labor. This appears to be in direct conflict with the earlier requirement that Governors represent the public, and not special interests. If the Postal Board of Governors is required to include a labor advocate, then why not a consumer advocate as well?

Universal Service Mandate

In what appears to be a clerical error, the Senate bill deletes critical language pertaining to universal service and privacy protection. With that language missing, the Postal Service would be permitted to charge different amounts for mailing to different states, and open any mail without a search warrant.

Since discussion of such a dramatic change was absent from the debate, it can only be assumed that this was an oversight that will be corrected in Conference.

©Postal Consumers Council, 2006

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