REMARKS
POSTMASTER GENERAL JOHN E. POTTER
NATIONAL PRESS CLUB
WASHINGTON, DC
April 5, 2002


Good afternoon.  And thank you for your invitation to speak today.  This room is 
an appropriate venue for a discussion about the future of the Postal Service.  
We’ve certainly been in the news this past year.  If I had the luxury of writing 
some of our headlines, I might have written our story this way:
*	"Postal Service Shows True Grit in Battling Anthrax" or
*	"Postal Service Maintains Mail Delivery Despite Impact of Economic 
Downturn."

I'd have written those headlines because they are true.

Like every business in America, we've had to deal with the effects of the 
recession and September 11.  As if that weren't enough, we subsequently were 
the victims of the well-documented anthrax attacks.  Our employees found 
themselves on the front lines of the war against terrorism. 

The loss of two of our own, and three other citizens, invaded our humanity and 
our homeland. 

Despite the challenges, our folks pulled through and stayed focused on delivering 
the mail to America.  Why?  Not because we're heroes or risk takers.  But 
because we – all 750,000 of us – are committed to the ideal that regardless of 
who you are, rich or poor; whether you live in an urban or rural setting, or even at 
the bottom of the Grand Canyon; you have a fundamental right to send and 
receive mail.  

We take the mission to provide this fundamental universal service seriously.  We 
know that people depend on receiving greeting cards, medicines, news, 
packages and even bills through the mail.

I am a second generation postal employee.  My father committed his life to this 
organization, and through him and throughout my career, I, too, have learned the 
value of universal service and – as you often hear – the "sanctity of the mail."

It's in this spirit that I am here today to talk to you about the transformation of the 
Postal Service.  We are proud of our 225-year tradition of serving America.  We 
have been a valuable asset to this great nation.  And we can and will be an asset 
for decades to come.

But, to do that we need to go through a transformation – perhaps one of the most 
important in our history.  A transformation that will help us secure the future of 
universal mail service at affordable rates and give us the tools to protect regular 
mail and ensure a sound national system well into the future. 

If we don't accomplish transformation now, the universal mail service we now rely 
on will be in jeopardy. 

Certainly, change has been a part of the Postal Service journey through history.  
We have changed just as America has changed – from the time when mail was 
carried by horse and rider, to now, when millions of pounds of mail routinely 
travel by air.

We've moved from an era when every piece of mail was handled and processed 
manually to a time when letters might go untouched until they get to the letter 
carrier for delivery – thanks to automation, thanks to our ability to change.  

The seeds of change began with the enactment of the Postal Reorganization Act 
of 1970.  Since that time, we have continued to change with the world around us.  
In the 1990s, postal management increased focus on the customer.  We set 
performance-oriented goals.  And we moved to a performance-based system.

As a result, customer confidence rose to record levels.  Service performance hit 
levels few thought possible. And year after year, we achieved operating 
surpluses.

And now, we are at a point in our history when it’s time for yet another phase in 
postal evolution – yet another time of change.  We now face the reality that the 
legislation of 32 years ago no longer allows us the ability to effectively change in 
today's technological marketplace.  

The Transformation Plan we presented to Congress yesterday is about our need 
to change.  It’s a blueprint for modernizing every aspect of the way we do 
business. 

If we fail in that task, if we are unable to make the changes needed to compete 
successfully, the only post offices our children’s children will know are the ones 
they’ll see in museums.

The Postal Service of 2002 and hard copy mail in general are relevant, even in 
this technological age. There is much we have done in recent years to maintain 
relevancy.  We are a vital link between individuals, families, friends, and a key 
driver of commerce. 



But there is much more we can do in the near term.  I am convinced we have the 
opportunity to use information to reinvigorate mail growth.  We can find additional 
revenue opportunities at our 38,000 retail offices that are underutilized national 
assets.

We still have some significant obstacles to overcome.  Right now, for instance, 
we’re locked into a pricing system that doesn't give us flexibility – that won’t allow 
us to negotiate prices with major mailers.

Under the current legislation, we do not control our own wages.  Too often, those 
decisions are left to a third party to decide.

We do not have the flexibility to grow our business or develop new revenue 
streams.  Whenever we make a move to add on, improve or redesign products 
and services, a host of special interest groups line up to take their best shot to 
stop us.  In the end, the public is not served.  

We can make breakthroughs on these issues.  But, we can't do it alone.  We 
need the help of our policy makers to legislate postal reforms.  If they can’t reach 
consensus on the right business model for the Postal Service, then we will have 
allowed a valuable national asset to fail and be wasted.

Who will be hurt?  Every citizen.  Americans stand to lose a fundamental 
government service that today we all take for granted: universal mail delivery.  
That's what our 300,000 letter carriers provide to almost 140 million addresses 
six-days a week. 

Just as important, there will be an adverse impact on the economy.  There are 9 
million people in America who work in the mailing industry – that’s a $900 billion 
industry. 

We can't let that happen.  We do need to transform. 
 
After months of gaining input from stakeholders – many of whom are in this room 
– we've identified three business models for discussion. 

Let me discuss each with you: 
 
For some people, the preferred model is privatization.  For this group, the notion 
of equitable service is not relevant. 

The simple, straightforward answer goes back to what our stakeholders – the 
people we reached out to – told us.  Overwhelmingly, they told us there was no 
support for privatizing the nation's mail service. 

A privatized model would focus on profit.  The results might be delivery standards 
and prices dictated by where a person lives or where a business is located.  
Metropolitan areas where volume is greater would receive better or cheaper 
service than a rural community. 
  
The privileged might stand to benefit from privatization, but not everyday people.  
It might be fine for the lawyer in Los Angeles, but not for the sales clerk in 
Omaha. 

Let me be very clear on this point.  I do not intend to recommend that the Postal 
Service be privatized.  I do not believe the American people want a privatized 
mail delivery system in this country today.  People speak of a digital-divide, we 
don't need a delivery-divide.

Nor do I believe the American people are ready to abandon the present definition 
of universal service at affordable rates.

The second alternative model is to restructure the Postal Service as a traditional 
government agency with a sizable portion of our operating revenues coming from 
appropriated funds. 

As with all options, there is a price to pay.  In this case, the solution to decreasing 
volumes and rising rates would be direct subsidies, tax dollars; in effect, putting 
the Postal Service back on the federal budget. 
 
That would take us back to the model of the 1960s when the Post Office 
Department was dependent on taxpayers to underwrite the cost of universal 
service.  Remember, no taxpayer dollars go to fund our normal operations.  It all 
comes from the sale of stamps and our other products.

Imagine, if you will, the Postal Service going through an annual appropriations 
process and asking Congress to fund 25 percent of its operating budget.  That 
would amount to $15 billion in Fiscal Year 2003 terms.  

During the 1960s, the old Post Office Department received up to 25 percent of its 
operating revenues from taxpayers.  It wasn't good for America then, and I don't 
think it would be good for America today.

Frankly, that’s where we are heading if the Postal Service is denied the flexibility 
it needs to operate successfully in today’s marketplace. 

Which gets us to the third alternative: a Commercial Government Enterprise.  
This is our recommended model, the one we believe would put the Postal 
Service on a more businesslike footing, while keeping it dedicated to its mission 
of universal service.  But it is also a model that is markedly different from what 
we have today.
For example, instead of breaking even, our financial goal would be to generate 
“reasonable returns.”  Earnings would finance capital projects instead of having 
to resort to increasing our debt load.  Retained earnings would carry us through 
tough economic times, instead of always resorting to rate increases.

In addition, this model will allow us to leverage our vast retail and delivery assets 
to develop new revenue streams.  Our 38,000 retail offices and our national door-
to-door delivery networks could be made available to private enterprise as a joint-
profit-making venture.

As a commercialized government enterprise we could introduce flexible pricing.  
Prices for postal products would still be subject to regulatory review.  But we 
would have the flexibility to adjust prices based on market demand.

Next, as a labor intensive organization, with 75 percent of our operating 
expenses going to labor, this business model would allow us to explore a more 
progressive way to make collective bargaining work for all parties. 

Finally, this model would give us the needed flexibility to increase access and 
convenience to our customers.  We would be able to add more locations with 
longer hours.  Management would have the flexibility to close a number of non-
performing retail outlets.  And we would be able to invest in new facilities and 
services and enter into alliances and ventures with related private sector 
companies, after due diligence was completed.

Essentially, this “commercialized Postal Service” would give us the management 
tools that are available to private corporations to improve service to our 
customers, manage costs more efficiently and leverage our assets to generate 
new revenue opportunities. 
 
Every citizen needs to be involved in these discussions.  As you read the Plan, 
we hope you will realize we can't have sacred cows any longer.  

To that point, I am willing to tackle the sacred cows by lifting self-imposed 
restraints and setting the stage for making this transformation a success. 

First, I am announcing today that we are lifting the moratorium that management 
put in place four years ago on closing small post offices.  

Does that mean there will be wholesale closings?  No.  It does mean we will 
restart the process to close those offices that have been “suspended” or 
effectively closed, in some cases for ten years or more.  In most of those places 
we have provided alternative services that have actually improved customer 
access to postal products.

I told our postmaster association leaders about lifting the moratorium.  I also told 
them that I am committed to increasing customer access in cities and towns that 
for years have been underserved.

Second, we will evaluate our existing processing network.  With our automated 
environment and changes in our mail mix, we no longer need some of the 400 
processing centers we have nationwide.  There are opportunities for 
consolidations, for cost savings.  These consolidations will be made to 
strengthen the network – and strengthen service performance. 

Third, we are going to get even more aggressive in purchasing.  We have 
already leveraged our buying ability to lower our costs for office supplies, 
equipment, and fuel.  There are other huge opportunities which we intend to 
pursue. 

Fourth, we will improve our dispute resolution processes.  We will find a way to 
reduce the $300 million a year we spend on labor-management disagreements.  
By reducing workplace disputes, we can focus better on serving our customers 
more efficiently. 

Fifth, we will move to modernize the rate process under the existing regulatory 
framework.  Can it be done?  Just ask George Omas, the chairman of the Postal 
Rate Commission.  He not only said yes, but he showed us that change can 
occur.

Under George’s leadership, all the parties in the recent rate case came together 
to reach a settlement and avoid protracted, costly litigation.  That was a 
significant breakthrough and one I believe signals a new era of cooperation for all 
parties.

Industry leaders have committed to us that they recognize we need 
transformation and they pledged this week to continue to work with us.

I want to build on what has occurred.

In recent days, Chairman Omas and I agreed to conduct a joint summit of all the 
stakeholders – from large direct marketers, to publishers of small magazines, to 
individual consumers – to share with us what they believe our industry needs to 
advance and modernize ratemaking.  Our staffs will start working on that 
immediately, and we will keep industry leaders informed.

Here let me address a point I know many in this audience want to know: Will 
there be another rate hike in 2003?  If the Governors of the Postal Service 
approve the rate case returned by the Postal Rate Commission, I am committed 
to maintain that rate schedule until at least calendar year 2004. 

We are already moving toward that end.  We are completing three straight years 
of productivity gains, despite a softening of our revenue base. 

Internally, we have been sharing best practices and deploying uniform standards 
throughout the country.  And we will continue to invest in equipment to improve 
productivity.

Over the past two years, our productivity efforts have saved $2.5 billion, and we 
have ambitious plans to save an additional $5 billion between now and 2006.  
Has it ever been done?  No!  Does it have to be done?  Yes. 

And we will do it.

Do we need help?  Yes.  Major mailers – like AOL-Time Warner, Readers Digest, 
and ADVO to name a few – all have a role to improve quality and continue to 
work with us in reviewing the supply chain – from printing to delivery.  At our 
upcoming convention – National Postal Forum in San Diego – we’ll talk about 
how we can work with our major customers to keep rates affordable.

At the Forum I also want to discuss in more detail how we can grow our business 
– and add value to the mail.  Tracing and tracking, delivery confirmation for 
packages, Confirm for other mail – each offers an enormous revenue potential.  I 
know industry leaders can help us grow.

We have to take better advantage of our scope – every home, every business, 
every day, and in every retail outlet. 

I pledge to do my part.  I pledge to continue our strong performance focus.  I 
pledge to make changes that are possible within the framework of the existing 
legislation and work with the Administration and Congress to bring about 
legislative reform to achieve this transformation. 

In closing, I want to recount a threshold moment for us.  On September 11th, the 
Governors of the Postal Service were in session when all hell broke loose.
 
We all looked out the window and saw the smoke billowing from the Pentagon.  
In that moment and the terrifying moments that followed, we knew our world had 
suddenly changed.  

We all had the concerns anyone would have about what might happen next – 
about our families, our colleagues. 

The anthrax attacks, a month later, were stark confirmation of a changed world.  
The realization that we cannot do business as usual anymore is firmly rooted in 
us now as never before. 

I am convinced this plan for transformation is a key step in moving past our 
limitations, to secure the future of universal mail service for our children and their 
children.
 
Ralph Waldo Emerson said, “What lies behind us and what lies before us are but 
tiny matters compared to what lies within us.” 

With courage and conviction we can continue to connect our people, our nation – 
indeed the whole nation as no one else can – just as we have for more than 200 
years.  

Thank you.

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United States Postal Service Transformation Communications	April 2002	



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