Very few – if any – regular readers of Mailers Hub News may include in their daily routine monitoring the Federal Register or the docket postings on the Postal Regulatory Commission’s website. Those who do, however, likely have noticed the dozens – hundreds – of Postal Service negotiated service agreements that have been filed and approved in recent months.
Paperwork
As those familiar with the USPS know, the 2006 Postal Accountability and Enhancement Act split Postal Service classifications into two types of “products”: market-dominant (e.g., First-Class Mail) where the USPS has no competition for paper-based communication, and competitive (e.g., shipping services) where competition is very real.
For the latter group, the agency is authorized to negotiate with its customers to set specific terms, notably prices. Such negotiated service agreements must be filed with, and reviewed and approved by, the PRC but, given their proprietary nature, their contents are not disclosed publicly. Several years ago, the PRC and the USPS agreed on the content parameters for largely similar NSA filings so that the review and approval process can be completed more quickly.
Growth
Based on PRC records, over the first ten full calendar years that NSAs were permitted (2007-2016), 488 were approved and 47 were terminated. Most were for some combination of Priority Mail Express, Priority Mail, First-Class Package Service, and Parcel Select. NSA activity grew modestly over the next six years (2017-2022); 1,164 new NSAs being approved, but almost as many (958) were terminated.
In mid-2023, the USPS revised its offerings, merging First-Class Package Service and Parcel Select to form USPS Ground Advantage, and the postal sales force was sent to win business: in 2023 and 2024, 1,636 new NSAs were approved, with two-thirds occurring in the second half of 2024; 509 were terminated over the period.
The pace of new NSA filings has continued, leading to concerns that the flood of documents and the related procedural work for the PRC may be creating an impediment to the its ability to meet its other obligations. While the USPS can add people in sales, law, and other areas to support the accelerated filings, the PRC – with a much smaller staff – cannot; the PRC’s budget is controlled by the USPS.
Consequences
In turn, this situation has led observers to ask two questions – albeit rhetorically. First, despite the likely intended perception of burgeoning package business created by the volume of filings, how much new competitive product volumeis really being generated? Second, consistent with Postmaster General Louis DeJoy’s disdain for the PRC as unnecessary obstructionists, is the flood of filings being used to overwhelm the commission’s limited resources and, in turn, their ability to resolve other dockets that he might want delayed?
Obviously, the second question cannot be answered with certainty because internal USPS discussions aren’t publicized. Regarding the first, however, the most objective answer would be derived from Postal Service data the agency is required to file monthly with the PRC, and that does not show the skyrocketing volume that the filing rate would suggest.
As would be expected, shipping volume shows seasonal trends, increasing around the holidays, but otherwise the monthly variations stay within a relatively consistent range. Revenue has been fairly consistent also, despite seasonal pricing and other rate increases. (Data for December 2024 and the first quarter of Fiscal Year 2025 will be released after the Governors’ meeting in early February.)
This circumstance had led to further questions: Are the NSAs actually securing new volume from new customers, or are they simply recasting the volume of existing customers in a format that enables tailored discounts and terms? In turn, if the latter is generally true, and the volume involved had been paid at published rates before an NSA, is the revenue from that volume under an NSAs increasing – or will net revenue be lessened by discounts written into the agreements?
Because an NSA is, as noted, proprietary and non-published, only the customer, the USPS, and the PRC know what it contains. Presumably, the customer and USPS are satisfied with the terms, as would be the commission if the legal requirements are met.
However, whether the Postal Service’s fevered program to secure new NSAs reflects sound business judgement is another matter, especially if locking-up the business of existing customers means discounting the prices they pay. As for the PRC, its role is not to evaluate whether an NSA makes good business sense, only whether it meets prescribed financial and statutory criteria.
To other customers, like the ratepaying clients of commercial producers of market-dominant mail, the revenue from competitive products is a critical contributor to USPS institutional costs. In turn, regardless of the PMG’s desire to become another UPS, his policies should ensure true growth in competitive product revenue and volume, and not just the appearance of it generated by administrative activity.
The Postal Service’s bottom line is not influenced by the perception of business, only the reality of the revenue it yields.
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