Postal Service users, competitors weigh in on changes

Calling for greater rate-setting flexibility and increased outsourcing for the U.S. Postal Service, representatives of the postal service's largest customers and its largest competitors met Wednesday with postal reform legislators and congressional leaders.

The CEOs of the nation's top postal users, including Time, Inc., Pitney Bowes and R.R. Donnelly, and the postal service's main competitors, FedEx, UPS and DHL Worldwide, were invited to testify Wednesday before the House Government Reform's special panel on postal reform.

In the committee's third postal change hearing in the past two weeks, the private sector representatives agreed that the postal service must be given greater flexibility in setting its rates, and it must have the freedom to respond more rapidly to market changes.

Rep. Dan Burton, R-Ind., said private sector support is essential for successful postal reform.

But he added, "There are certain organizations that have a vested interest in the postal service not doing as well as it should, because they would pick up market share. If the postal service goes belly-up at some point down the road, it may seem like it would be positive for them, but it would ultimately be a bad thing for them."

FedEx CEO Fred Smith said his company has faced the same challenges as the postal service in recent years, including an overall decline in mail volume.

Smith said FedEx's ability to respond quickly to those changes has allowed it to transform itself, while the postal service has languished.

"The postal service must have the management flexibility and incentives of the private sector," Smith said. Without them, "the probable fate of the postal service is to wither and decline. The market is changing too quickly to predict any other outcome with assurance."

Such a rate-setting flexibility would allow the postal service to change rates at different times of the year or even more often, said Pitney Bowes CEO Michael Critelli.

"The postal service should be able to change the rates by month, week, day or time of day, much in the way that long-distance phone companies do, in order to increase mail use," Critelli said.

He suggested lower rates in August, when mail use is traditionally lighter, or cheaper rates for people who mail Christmas cards before the middle of December.

The panel members also agreed that the postal service should focus on its core functions of accepting, collecting, sorting, transporting and delivering physical mail and packages.

Critelli said that other peripheral functions of the postal service could be better managed through private-sector outsourcing, such as allowing a private company to handle back-office postal functions such as human resources.

R.R. Donnelly CEO Bill Davis said he supports one of the most contentious reform recommendations from the President's Commission on the Postal Service, which released its final report to Congress in August: allowing postal managers to close low-performing post offices.

"Closing some facilities and consolidating others, as well as having to outsource non-core functions and rightsizing" the workforce is essential for the long-term success of the postal service, Davis said.

After the hearing, the CEOs planned to meet with House Speaker Dennis Hastert, R-Ill., and Majority Whip Roy Blunt, R-Mo., to discuss postal reform efforts, according to an industry source.

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