Proposed USPS legislation is no panacea.

With all of the horrid financial news coming out of the United States Postal Service in recent months and years, we’ve been waiting to see what sort of congressional legislation would be proposed to alleviate its problems.

The wait is now over, with the announcement of a legislative proposal called the Postal Operations Sustainment & Transformation Act of 2010. (P.O.S.T. – get it?)

This legislation attempts to fix the USPS’s precarious financial condition with a bevy of provisions such as easing employee pension and retiree health costs, making it easier for the USPS to close redundant or underperforming branch offices and, most dramatically, eliminating Saturday mail delivery altogether.

It’s no wonder the proposed legislation seeks to cut back on operating costs, because the volume of mail the USPS processes has dropped by ~20% just since 2006. And the prediction is for a further decline of ~20 billion pieces of mail that will be handled in the coming decade.

Sen. Thomas Carper, who introduced the bill, had this to say about the proposed legislation: “… If we act quickly, we can turn things around by passing this necessary bill that would give the Postal Service the room it needs to manage itself …”

That sounds nice and tidy. But does it really solve the USPS’s financial and structural problems?

If enacted, the new provisions in this legislation are expected to save the Postal Service somewhere north of $3 billion per year. But only a couple days following news of the legislative bill comes word that the USPS lost $1.6 billion in the month of August alone.

In fact, for the first 11 months of its fiscal year, the Postal Service’s losses have totaled nearly $8 billion. USPS losses are significantly higher than last year at this time (~$6.3 billion by comparison) – and that’s even while experiencing an increase in mail volume of ~1.8% year over year.

In this context, it seems pretty evident that the pending legislation will not come close to remedying the USPS’s financial situation – even as it enables the most sweeping cuts in operating activities that have ever been seen. Unfortunately, a classic case of “too little, too late.”

The Postal Service’s own Office of Inspector General has released a report claiming that the USPS could be financially sustainable at the lower mail volume levels projected … if it could raise prices above the inflation rate. But such an action could tip the whole enterprise into a “death spiral” where the price hikes drive away customers. A reminder to everyone involved: Mailing service is no longer a monopoly in this country.

This problem is by no means solved.

An Address: The Next Human Right?

The flag of the Universal Postal Union, the UN agency that coordinates postal policies for member nations.
The flag of the Universal Postal Union, the UN agency that coordinates postal policies for member nations.
Food, shelter, clothing. These are considered basic human rights. But what about a personal address? Is that a human right, too?

That’s the contention of Charles Prescott, a former Direct Marketing Association official who is in the midst of forming a new transnational organization to promote universal “addressability.”

“The consequences of existence, or lack thereof, of an address – especially in the developing world – are dire,” Prescott says. The new group he is organizing (the name isn’t finalized yet – the International Address Data Association is being considered) will promote the adoption of a Universal Postal Union resolution calling for all countries to adopt formal address systems, including change-of-address systems that are available at an affordable cost.

Prescott notes that the cost of change-of-address systems range widely at present, from just a few cents per name in the United States to as high as ~80 cents per name in The Netherlands. If costs are too great, businesses won’t bother using them.

In the U.S., highly addressable mail isn’t that big of an issue, although it’s probably true that a great many catalogues and other printed materials end up in landfills because they’re not addressed to the correct location and never find their way to their intended recipients.

But it’s a huge issue in the developing world. “Address coordinates which can be associated with an individual are extraordinarily important for fostering economic, social and political development,” Prescott emphasizes. But how does this play out in parts of the world where the address descriptions are vague … or non-existent?

I recall when I visited Mumbai, India in the late 1970s, I stayed in a dwelling known as Motiwala Mansion in the Mahim District of the city. Its address was simply “Opposite Shree Cinema.” I asked about the address of the movie house across the street and was told that it was “Opposite Motiwala Mansion.” How’s that for confusion in a city of millions if you don’t know where either one of these buildings is located?

Even more challenging are the slum districts that pepper the world, where addresses basically don’t exist. Today, with the explosion of mobile technology, cell phones reach into every nook and cranny of the world. In fact, cell phones are ubiquitous in the favelas, back alleys and other transient communities that have sprung up in and around every major third-world city. These phones can track the coordinates where someone is living, thereby tagging him or her with an “address” of sorts.

Sound far-fetched? It’s actually happening today, such as with one Brazilian department store chain that is extending store credit to people residing in these localities – once their physical location is known.

But Prescott contends that mobile phone coordinates represent only a partial solution – one that doesn’t allow for the delivery of physical mail. It also doesn’t solve other barriers existing in some countries that have a direct bearing on the economic opportunities for poorer people. One example: the need to show a birth certificate to register children in school … hobbled by the inability to obtain that birth certificate without having a formal address.

Obviously, any new push for a universal “address” initiative faces challenges. As illustrated by the Mumbai example above, addresses will need to be developed using systematic logic that is consistently applied from community to community inside a country. That’s a lot easier said than done.

But as an evangelist for providing every person on the planet an address as a basic human right, Prescott is clearly serious in his endeavor. The advisory board he’s formed includes key thought leaders from business organizations, academia and government in the United States and Europe. This initiative bears watching.

USPS: The Losses Keep Piling Up

The latest financial results for the U.S. Postal Service are in, and they’re a continuation of the same old story line: Tons of red ink and fingers pointing in every direction.

The USPS posted a net loss of $3.9 billion for FY 2009, “only” $1.1 billion worse than the previous year. And that’s even after receiving a $4 billion deferment on paying an annual $5.4 million obligation to pre-fund healthcare premiums for its retirees.

Not surprisingly, total postal revenues were down about 10% to ~$68 billion, not only because of the economic downturn but also because of the continuing shift to digital communications. Total physical mail volume declined ~13% to around 177 billion pieces.

Given the sorry financial stats, one would assume that the USPS would be moving forward in all haste with its plans to shutter as many as 10% of its post offices and branches around the country.

But if you thought that … you would be wrong. What started out as a potential closure listing of ~3,200 stations (the impressively named Station & Branch Optimization Initiative) quickly became ~700 stations and branches that were actually slated to close. Then that figure was trimmed to just over 400. And now we have word that the closure figure is down to ~370.

Given more time, the number of closures may well slip even further … and at some point the whole exercise becomes completely meaningless as cost-cutting endeavor.

And then there are the persistent rumors that mail delivery will be cut back to five days from six. But that never seems to be anything more than just an idle threat.

Welcome to the wonderful world of government agencies: Stultifying bureaucratic procedures that are near-Byzantine in their complexity, coupled with reacting to every conceivable interest group while being too timid to make any hard choices at all when it comes to managing their operations like any business in private industry must do.

Anyone for government-managed healthcare?