PRC Chairman Blair Addresses Five-Day Delivery Prospect

Feb 03, 2009 2:52 AM  By

Postmaster General John E. Potter’s appeal to Congress last week to allow the U.S. Postal Service to cut back to five-day delivery has a lot of mailers—and consumers—up in arms. It has sparked considerable debate, and as a result, Dan G. Blair, chairman of the Postal Regulatory Commission, agreed to take some questions on the topic from Multichannel Merchant Senior Writer Jim Tierney.

MCM: What is your take on the proposal, and why do you think it would be advantageous or disadvantageous to implement?
DGB: This would be a major step that could have substantial impact on how we use and view mail. I first must point out that the Postmaster General doesn’t want to reduce service, and only holds out this option if all of the current programs for reducing costs prove to be insufficient.

If delivery is reduced from six days a week to five days a week, carriers will only have to traverse their routes five-sixths as much, which will save money. Savings should arise in fuel, vehicle wear and tear and wages paid to city and rural carriers.

Our estimates are very rough in projecting how much savings might be achieved. IBM did a study for the Postal Service that assumes no volume will leave the Postal Service as a result of this reduction in service, and estimates savings could be as much as $3.5 billion per year. But this is a very optimistic assumption.

In the commission’s Universal Service study we released in December, we ran the numbers assuming hypothetical cost and volume impacts and estimated savings of $1.9 billion per year. But we really have no way of knowing how much volume might be lost if service is reduced.
We need to know more about the precise proposal. Is it a year-round change or only targeting lower volume summer months?

I would note that the savings projections are based on year-round reduction in service. The commission has strongly suggested that the Postal Service should provide more details on this proposal along with better savings estimates before moving forward with any reduction in days of delivery.

MCM: If implemented, what are the risks involved?
DGB: The primary risk is that mailers of time-sensitive items such as bills or bill payments may be concerned that the reduction in delivery will delay the receipt of their mail. Senders of time sensitive packages, such as pharmaceuticals, and periodicals could also see customer reaction to delayed delivery affect demand for their product. Advertisers could view mail as less valuable if more pieces are being delivered on any given day.

These considerations could encourage mailers to begin to use alternatives such as electronic transmission. Recipients for their part could view mail as less valuable if it doesn’t come every day, and stop looking at their mail every day, further reducing its value to senders. On the operations side, mail would sit awaiting delivery and could be misplaced.

MCM: A decline in mail volume is already a major problem. How do you think this proposal might impact mail volume?
DGB: I feel certain it will have a negative impact, but it will vary by mailing industry and I have no estimate of what the volume reduction will be.

MCM: Five-day mail delivery proposals have surfaced before in the past eight or nine years. What have been the major factors preventing their implementation?
DGB: One important factor is that Congress annually has passed legislation containing a requirement that delivery be maintained at 1983 levels. [Federal law has mandated a six-day mail delivery schedule since 1983.]