Postal Reform - CRS Issue Brief for Congress Below are snippets of the compete report . Full pdf report can be found by clicking  here

! The economic slowdown that began in early 2001 cut into USPS revenues from the dominant business segment, and (temporarily, as it turned out) reduced advertising mail, which accounts for 25% of revenues. Costs continue to rise, however, since 1.7 million delivery points are added each year, built-in wage and cost-of-living increases add $2 billion per year, and USPS is particularly vulnerable to energy price spikes.

! The rate determination process is cumbersome and rigid, preventing USPS from aligning its offerings with the variable needs of its customers. Preparations for a rate case begin many months before a filing with the Postal Rate Commission (PRC) and USPS must estimate costs and demand nearly two years into the future. The adversarial process of contesting proposed rates and classes goes on for 10 months, with exchanges of tons of paperwork and hundreds of hours of testimony. USPS competitors are very active participants. The emphasis is on allocating stated costs among mail classes rather than reducing costs or encouraging demand. USPS complains that the process gives it no opportunity to respond to competition, to vary rates with the season or periods of low usage, to negotiate rates with big mailers, or to price products in accordance with demand, rather than costs of service.

! Three rate increases in an 18-month period drove some mailers to curtail volume in order to stay within set budgets, and made the comparative cost of alternatives — such as newspapers, television, and e-mail for advertising— more attractive.

! Competition from other providers and other media had begun to marginalize some of the services that USPS provides. E-mail, fax transmission, and cell phones without distance charges have become substitutes for written correspondence. The Internet is becoming increasingly popular as an alternative for financial billing and payment, which sustained USPS volume and revenue growth through the 1990s. USPS is already a secondary player in the overnight express and package delivery markets, except for the most difficult and costly routes to service in Alaska and Hawaii.

! Labor costs of its nearly 800,000 employees accounted for over three-fourths of USPS expenses, not much less than was the case decades ago. In contrast, labor costs are 56% of United Parcel Service’s expenses, and 42% of costs at FedEx, where only the pilots are unionized. Lagging productivity growth (11% in 30 years), a backlog of 146,000 pending or appealed labor grievances that are pursued “on the clock,” and binding arbitration of disputes keep labor costs high. Costly government annual and sick leave, early retirement, and health benefits are set in law and not negotiable.

! Facilities are not optimally located for efficient distribution, since USPS has been unable to close existing facilities and consolidate operations in new locations. USPS maintains that over half its 38,000 facilities do not generate enough revenues to cover their costs, and complains that political considerations prevent it from modernizing its retail and distribution system.

! The use of mail to deliver agents of bio-terror (anthrax, followed by ricin) imposed major new mail security and operational costs on USPS. Although USPS received some emergency funds to cope with the new demands in