Abstract
On December 1, 2017, the Postal Regulatory Commission (PRC) issued a Notice of Proposed Rulemaking in which it concluded that the rate-making system had not maintained the financial health of the Postal Service and that service quality had deteriorated. The aim of this article is to offer a novel supplement to the PRC’s incentive program that grew out of the author’s experiences in the telecommunications industry. In the absence of external pressure, internal incentives are an important starting point for developing a framework to attract private capital and management at reasonable prices. The basic strategy offered here is to organize competing service territories within the Postal Service into subsidiaries and award bonuses tied to superior performance that go beyond service delivery standards now in place. A further recommendation is to develop a “best practices” simulation model that can be used to fine-tune internal benchmarks and to set minimum bid prices for operating service territories in case the Postal Service decides to subcontract with the private sector or spin off service territories to the private sector.
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- 1.
United States Postal Regulatory Commission (2017b).
- 2.
H.R. 6407 (109th) Postal Accountability and Enhancement Act (2006).
- 3.
United States Postal Regulatory Commission (2017a).
- 4.
PRC Order 4257 p. 4.
- 5.
PRC Order 4258, p. 4.
- 6.
PRC Order 4258, pp. 26–27.
- 7.
PRC Order 4258, p. 26.
- 8.
PRC Order 4257 p. 111.
- 9.
PRC Order 4257, p. 261.
- 10.
United States Postal Service Office of Inspector General (OIG) (2010).
- 11.
The United States Postal Service (USPS), has already adopted a regional management approach for some purposes. For example, where appropriate, the Postal Service uses “Centralized, regional, Districts, or stockrooms” for managing inventory. Retrieved from http://about.usps.com/manuals/spp123108/html/pp_ps5_004.html.
- 12.
See for example, United States Postal Service.
- 13.
TFP is used here for illustrative purposes only. Other metrics may be adopted. TFP is defined in PRC Order 4257, p. 206.
- 14.
PRC Order 4258, p. 62.
- 15.
PRC Order 4258, p. 71.
- 16.
- 17.
Federal Manager’s Daily Report (2017).
- 18.
Ballou and Weisbrod (2003, pp. 1895–1920).
- 19.
Federal Communications Commission, “Connect America Fund Phase II Models.” Retrieved from https://www.fcc.gov/general/connect-america-fund-phase-ii-models.
- 20.
Federal Communications Commission (2011).
- 21.
Ibid, p. 431.
- 22.
Ibid, p. 438.
- 23.
Ibid, p. 429.
- 24.
CAF2 Model Overview, Hogendorn (2012 and 2013).
- 25.
Informed Delivery may be a first step towards combining the benefits of physical and virtual mail. https://informeddelivery.usps.com/box/pages/intro/start.action.
- 26.
Federal Communications Commission (2017).
- 27.
The reserve prices were the cost levels calculated using the FCC’s forward-looking cost model.
- 28.
Federal Communications Commission (2017).
- 29.
There are two general objectives for the structure of the ratemaking: with respect to the ratemaking process, objectives 2 and 4 (PRC Order 4257, p. 46); administrative process, objective 6, (Id., p. 47); with respect to pricing, objective 4, (Id., p. 46); with respect to just rates, objective 8 (Id., p. 46), and the relevant factors are 1, 2, 3, 4, 5, 6, 7, 10, 11, and 14 (Id., p. 48).
- 30.
PRC Order 4257, p. 130.
- 31.
Postal Accountability and Enhancement Act (PAEA). Retrieved from https://www.gpo.gov/fdsys/pkg/BILLS-109hr6407enr/pdf/BILLS-109hr6407enr.pdf.
- 32.
See for example, Before the Postal Regulatory Commission Washington, D.C. (2018).
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Glass, V. (2018). Creating Last-Mile Incentives from Inside-Out. A Template Drawn from Rural Telecom. In: Parcu, P., Brennan, T., Glass, V. (eds) New Business and Regulatory Strategies in the Postal Sector. Topics in Regulatory Economics and Policy. Springer, Cham. https://doi.org/10.1007/978-3-030-02937-1_4
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