    [Senate Hearing 112-525]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 112-525

                        NOMINATION OF HON. TONY HAMMOND

    =======================================================================

                                    HEARING

                                   before the

                                  COMMITTEE ON
                   HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                              UNITED STATES SENATE

                          ONE HUNDRED TWELFTH CONGRESS

                                 SECOND SESSION

                                   __________

    NOMINATION OF HON. TONY HAMMOND TO BE A COMMISSIONER, POSTAL REGULATORY
                                   COMMISSION

                                   __________

                                 MARCH 6, 2012

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            COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                   JOSEPH I. LIEBERMAN, Connecticut, Chairman
    CARL LEVIN, Michigan                 SUSAN M. COLLINS, Maine
    DANIEL K. AKAKA, Hawaii              TOM COBURN, Oklahoma
    THOMAS R. CARPER, Delaware           SCOTT P. BROWN, Massachusetts
    MARK L. PRYOR, Arkansas              JOHN McCAIN, Arizona
    MARY L. LANDRIEU, Louisiana          RON JOHNSON, Wisconsin
    CLAIRE McCASKILL, Missouri           ROB PORTMAN, Ohio
    JON TESTER, Montana                  RAND PAUL, Kentucky
    MARK BEGICH, Alaska                  JERRY MORAN, Kansas

                      Michael L. Alexander, Staff Director
                   Kristine V. Lam, Professional Staff Member
     John P. Kilvington, Staff Director, Subcommittee on Federal Financial
    Management, Government Information, Federal Services, and International
                                    Security
                   Nicholas A. Rossi, Minority Staff Director
                       Jennifer L. Tarr, Minority Counsel
      William H. Wright, Minority Staff Director, Subcommittee on Federal
                             Financial Management,
      Government Information, Federal Services, and International Security
                      Trina Driessnack Tyrer, Chief Clerk
                     Patricia R. Hogan, Publications Clerk
                        Laura W. Kilbride, Hearing Clerk

                                C O N T E N T S

                                     ------
    Opening statements:
                                                                       Page
        Senator Carper...............................................     1
        Senator Brown................................................     3
    Prepared statements:
        Senator Carper...............................................    15
        Senator Brown................................................    17

                                   WITNESSES
                             Tuesday, March 6, 2012

    Hon. Roy Blunt, a U.S. Senator from the State of Missouri:
        Testimony....................................................     1
    Hon. Tony Hammond to be a Commissioner, Postal Regulatory
      Commission:
        Testimony....................................................     4
        Prepared statement...........................................    19
        Biographical and financial information.......................    21
        Letter from the Office of Government Ethics..................    29
        Responses to pre-hearing questions...........................    30

                        NOMINATION OF HON. TONY HAMMOND

                                  ----------

                             TUESDAY, MARCH 6, 2012

                                         U.S. Senate,
                               Committee on Homeland Security
                                      and Governmental Affairs,
                                                        Washington, DC.
        The Committee met, pursuant to notice, at 10:34 a.m., in
    room SD-342, Dirksen Senate Office Building, Hon. Thomas R.
    Carper presiding.
        Present: Senators Carper and Brown.

                  OPENING STATEMENT OF SENATOR CARPER

        Senator Carper. The hearing will come to order. Before I
    offer an opening statement and begin the hearing to consider
    the nomination of Tony Hammond to be, once again, a Member of
    the Postal Regulatory Commission (PRC), I would like to yield
    to Senator Blunt for any comments that he would like to offer
    at this time.

     TESTIMONY OF HON. ROY BLUNT, A U.S. SENATOR FROM THE STATE OF
                                MISSOURI

        Senator Blunt. Well, Senator Carper, thank you.
        Senator Carper. Welcome. We are glad you are here.
        Senator Blunt. Thank you for yielding to me and letting me
    have the opportunity to introduce my good friend, Tony Hammond.
        I have known Mr. Hammond for at least 30 years. He is a
    native of Hickory County, Missouri, one of the three counties
    in Missouri that is named after Andrew Jackson. We actually ran
    out of ways to honor Andrew Jackson, so we just named one of
    the counties Hickory County in his honor, and that is the one
    where Tony grew up.
        He is a graduate of Missouri State University in
    Springfield. He previously began service on this same
    Commission in August 2002, following an appointment by
    President Bush, and was reappointed in January 2005. The
    Senate, at that point, confirmed Commissioner Hammond to a term
    that expired in October 2011. He served 2 years as Vice
    Chairman of the Commission and has represented the Commission
    on the U.S. State Department delegation to the Universal Postal
    Union.
        Before being named to the Postal Rate Commission,
    Commissioner Hammond owned and managed a consulting firm. From
    1989 to 1994, he was Executive Director of the Missouri
    Republican Party. And before that, he served on Capitol Hill
    for 10 years on the official staff of Southwest Missouri
    Congressman Gene Taylor. During Congressman Taylor's tenure as
    ranking member of the Post Office and Civil Service Committee,
    Mr. Hammond dealt with the diverse issues that relate to postal
    rates and postal operations.
        I think he served well on the Commission. I am pleased that
    the President has nominated him, but he has nominated him for a
    term that ends in November of this year. And so, I look forward
    to Commissioner Hammond, based on the recommendation, I hope,
    of this Committee, to be able to serve some additional time on
    this Commission that he has already served on so well.
        Senator Carper. Well, hopefully, he will have, if
    confirmed, a lot to do this year and some more to do after
    November. But we will cross that bridge when we come to it.
        I want to thank you very much for coming.
        Senator Blunt. Well, thank you for coming, and I am going
    to excuse myself. But I appreciate your having this hearing,
    and I look forward to whatever we can do, working together, to
    get this nomination confirmed by our colleagues in the Senate.
    Thank you.
        Senator Carper. Thanks for your testimony and for your
    endorsement.
        Mr. Hammond is not a stranger, as you know, to the
    Commission. He knows, just as everyone watching this hearing
    likely knows, that these are challenging times for the Postal
    Service. As we sit here today, the future of the Postal Service
    and the massive private sector mailing industry it supports is
    uncertain. Absent congressional action this year, that future
    will be dire.
        Last year, the Postal Service suffered an operating loss of
    more than $5 billion. It will see a similar loss this year even
    if it finds some way to avoid making the retiree health pre-
    funding payments due in the coming months. These losses will
    accelerate starting in fiscal year 2013--$6.5 billion that
    year, just under $10 billion in fiscal year 2014, more than $12
    billion in fiscal year 2015, and I am told more than $15
    billion in fiscal year 2016.
        Coincidentally, under current law, the cap on the line of
    credit that the Treasury may extend to the Postal Service, as
    you may recall, is $15 billion.
        Postmaster General Patrick Donahoe has said repeatedly that
    he and his team will do everything they can to keep the mail
    moving, even as the Postal Service's finances deteriorate. I
    believe him, and I think he has done a remarkable job so far,
    along with his team.
        But make no mistake; if the Postal Service is not permitted
    in the very near future to begin adjusting its network to
    reflect the changing demand for its products and services and
    to respond to the likely permanent declines in mail volume we
    have seen in recent years, it will drown in red ink, and
    millions of jobs, maybe as many as 7 million jobs, will be at
    risk as a result.
        We need to work quickly to prevent this economic
    catastrophe. Everyone--postal management, postal employees,
    Members of Congress, and the Postal Regulatory Commission--need
    to act with a sense of urgency in the coming weeks and months.
    We need to do our jobs. We need to show leadership, and we need
    to redouble our efforts to put the right policies in place to
    change the Postal Service's business model and help it right-
    size its operations and seek new revenues.
        In the past, I have made no secret of my concerns about the
    Commission's ability to fulfill its statutory role in
    addressing the Postal Service's financial challenges. We spoke
    about that when you met with me in my office.
        I have called on the Commission to speed up and improve the
    quality of its work on Advisory Opinions. The Commission's
    opinion on the advisability of the Postal Service's proposal to
    eliminate Saturday delivery did not appear for about a year
    and, in a lot of ways, created more questions than it answered.
        We are, unfortunately, now facing problems with another
    Advisory Opinion, this one involving proposed changes to the
    overnight delivery standard and mail processing facility
    closures. The Commission has indicated that it will not issue
    an Advisory Opinion on the Postal Service's proposals until
    this summer. The Postal Service, meanwhile, has a right to act
    sooner and plans to do so in May.
        I recognize that there are a number of procedural hurdles
    the Commission must get past before issuing an Advisory
    Opinion. It is unclear to me, however, why commissioners are
    unable to release even some preliminary findings before May. I
    do not want the Commission to put out bad work or just
    rubberstamp the Postal Service's plans. I just want them to be
    heard and for the Postal Service and Congress to have the
    benefit of their analysis and opinions before a major change in
    service is implemented.
        The Postal Service says it is acting on its plans in May
    because it urgently needs to begin making adjustments to its
    networks before the fall when mail volumes will ramp up due to
    the holiday season and the upcoming elections. I want to see
    the same sense of urgency from the Commission as it goes about
    its business in the coming weeks and months. Otherwise, I fear
    that the legitimacy and the role of the Commission in these
    matters could be threatened.
        I look forward to our discussion today with Mr. Hammond
    about his views on a number of postal issues and also on the
    urgency that he feels to find a way to help the Postal Service
    get back on its feet while at the same time practicing what I
    call the Golden Rule, treating all the key stakeholders in
    this--postal customers, postal employees, and taxpayers--the
    way we would want to be treated.
        With that, let me turn to Senator Brown for any comments
    that he would like to make at this time. Welcome.

                   OPENING STATEMENT OF SENATOR BROWN

        Senator Brown. Mr. Chairman, thank you very much for
    holding this hearing.
        As you know, this nomination is being considered at a time
    when, as you referenced, the Postal Service is at a crossroads.
    The evolution of electronic communications and the lingering
    effects of an economic recession have caused mail volumes to
    drop at unprecedented rates, and this decline, which is not
    expected to rebound, has combined with enormous labor costs and
    statutory mandates that have left the Postal Service
    financially crippled. And there is little disagreement that the
    current business model is not sustainable.
        Through our efforts--I think my office spent about 500
    hours on this, between staff and me, trying to come up with a
    proposal.
        I think the 21st Century Post Service Act, S. 1789, with
    Senators Lieberman, Collins, Carper, and me, was a good start
    and a good framework based on information we had by sitting
    down with the Postmaster General and determining what his needs
    were. And then, somehow along the way, it got sidetracked by
    other concerned Members putting out information, rightly or
    wrongly, based on fact or not. That is when I made a
    recommendation, as you know, for us all to get in a room--
    Democrats and Republicans--to solve this very real problem
    because if we get delayed much more, we are not going to have
    another opportunity to address it in an open, honest, and fair
    way.
        We are here to consider, obviously, your nomination, and I
    am looking forward to your testimony. However, I am bouncing
    back and forth between the Armed Services Committee and here.
        But as you know, the PRC's role is critical to everything
    we are going to be doing. It is critical not only in addressing
    the closures that are being recommended, but also in dealing
    with the analysis as to how the Postal Service should continue
    and grow, or not.
        I know you have, obviously, a very long and storied
    history, a tremendous amount of experience and knowledge of how
    politics comes into play, and I think that is going to be very
    important for you to continue to work through.
        So I have not yet had a chance to sit down with you, but as
    I said, I am sure I will in the near future. And I look forward
    to starting the conversation today. So, thank you.
        Senator Carper. Thanks very much, Senator.
        Mr. Hammond has filed responses to a biographical and
    financial questionnaire, answered pre-hearing questions
    submitted by the Committee, and had his financial statements
    reviewed by the Office of Government Ethics. Without objection,
    this information will be made a part of the hearing record,
    with the exception of the financial data, which are on file and
    available for public inspection in the Committee offices.
        Our Committee rules require that all witnesses at
    nomination hearings give their testimony under oath.
        Mr. Hammond, I am going to ask, if you will, to stand and
    raise your right hand. You have done this before, so this will
    be like what they say about riding a bicycle.
        Do you swear that the testimony you will give before this
    Committee will be the truth, the whole truth, and nothing but
    the truth, so help you, God?
        Mr. Hammond. I do.
        Senator Carper. All right, please feel free to proceed with
    your statement.
        Again, welcome. Thank you, and thank you for your
    willingness to assume this responsibility once again.

    TESTIMONY OF HON. TONY HAMMOND \1\ TO BE A COMMISSIONER, POSTAL
                         REGULATORY COMMISSION

        Mr. Hammond. Well, thank you, Senator Carper and Senator
    Brown, for being here.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Mr. Hammond appears in the Appendix
    on page 19.
    ---------------------------------------------------------------------------
        First of all, I want to express my appreciation to you and
    all the Members of the Committee for scheduling this hearing to
    consider my nomination to return to the Postal Regulatory
    Commission.
        I appreciate the confidence that President Obama has placed
    in me with his nomination as well as the support I received
    from Senate Minority Leader Mitch McConnell during this
    process, too.
        And I want to especially thank Senator Blunt, who my family
    and I have been privileged to call a friend for many years, for
    being here. I am grateful for his willingness to introduce me
    to this Committee.
        I would also like to acknowledge my recent colleagues, Vice
    Chairman Nanci Langley and Commissioner Mark Acton, for the
    support they have given me in attending today. Their friendship
    in our working together has been invaluable over the years.
        And finally, if I could, while the rest of my family is
    back in Missouri, my nephew, Tracy Hammond, does live here in
    Washington, DC, and he moved his schedule around today in order
    to sit through this. So I greatly appreciate it.
        Senator Carper. I am going to ask, Mr. Hammond, would you
    raise your hand, please? All right, welcome.
        Mr. Hammond. When I first became a Commissioner in 2002,
    the PRC was an entirely different agency. As you know, the old
    Postal Rate Commission was mainly responsible for considering
    changes in postal rates and classifications.
        But with the passage of the Postal Accountability and
    Enhancement Act (PAEA) in 2006, the PRC acquired enhanced
    responsibilities, which required a major revamping of the
    agency functions. With the leadership of our then-Chairman Dan
    Blair and the genuine cooperation among all the commissioners
    and especially with a dedicated PRC staff, we were able to
    achieve the transformation in a responsible manner, I believe,
    in keeping with the mandates of the PAEA.
        I was actively involved in all the transition activities.
    Among them, of course, we were required to implement an
    entirely new rate-making system, which we were actually able to
    complete several months in advance of the deadline. The
    Commission was also timely in providing the mandated Report to
    the Congress on the Postal Service's Universal Service
    Obligation. In addition, each year, of course, we are
    responsible for producing the comprehensive Annual Compliance
    Determination (ACD), which is the important look-back
    regulatory model of the PAEA.
        And so, along with the annual rate change cases and the
    other requested decisions, I have also worked with the other
    members of the Commission in the formal Advisory Opinion
    requests received from the Postal Service and, of course, the
    Commission's unanimous ruling on the Postal Service's Exigent
    Rate Request.
        With the Postal Service dealing with such severe financial
    difficulties, I know that the Postal Regulatory Commission has
    an extra responsibility to adjudicate fairly, in a professional
    and timely manner, all the decisions on every case that comes
    before us. I also know that we must be mindful that all our
    activities are carried out in a responsible and transparent
    manner that makes wise use of the ratepayer dollars that
    provide the PRC's annual budget.
        For over 9 years, I enjoyed the challenging work at the
    Commission, and I hope this Committee will look favorably on my
    experience and my enthusiasm in considering my return to the
    PRC.
        Mr. Chairman, thank you again for this opportunity. I will
    be happy to respond to any questions that you or your
    colleagues might have.
        Senator Carper. Fair enough.
        I want to welcome Commissioner Langley and Commissioner
    Acton as well. Thank you for joining us.
        Sometimes I watch the body language of our guests to see
    how they react, especially your fellow colleagues, past and
    future. And let the record show that their eyes were rolling
    for most of the time that you were speaking, but we are going
    to set that aside, and I will just keep my eyes on you and
    listen to what you have to say.
        No, I think they seemed to be smiling and their body
    language was quite the opposite of that.
        As you know, there are three questions that our Committee
    rules require us to ask, and those questions are as follows:
        Is there anything you are aware of in your background that
    presents a conflict of interest with the duties of the office
    to which you have been nominated.
        Mr. Hammond. No.
        Senator Carper. Do you know of anything personal, or
    otherwise, that would in any way prevent you from fully and
    honorably discharging the responsibilities of the office to
    which you have been nominated?
        Mr. Hammond. No.
        Senator Carper. And do you agree, without reservation, to
    respond to any reasonable summons to appear and testify before
    any duly constituted committee of Congress if you are
    confirmed?
        Mr. Hammond. Yes.
        Senator Carper. Good. When you and I met, we talked about
    my sense of urgency, and I want to ask a couple of questions
    that relate to that.
        As you are aware and as I mentioned again in my opening
    statement, it was frustrating to me that it took the Commission
    so long to issue an Advisory Opinion on an issue as important
    as the Postal Service's proposal to eliminate Saturday
    delivery, and I have a couple questions about this issue. In
    fact, I have three questions. I am going to ask all three, and
    then I will come back and we will do them one at a time.
        The first question is: Would you agree that it was
    unacceptable for the Commission to keep everyone waiting so
    long for its thoughts on the Saturday delivery issue?
        The second question is: What went wrong in your view and
    what can you commit to do, if reconfirmed, to address whatever
    management problems contributed to the delay?
        And the third question is: If you are confirmed and return
    to the Commission, at some point in the coming weeks, can you
    commit to doing what you can to make sure that the Advisory
    Opinion the commissioners are currently working on, involving
    overnight delivery and mail processing facility closures, is
    completed as expeditiously as possible?
        So those are the three questions.
        I am going to reread the first one and ask you to respond,
    and we will do them one at a time. First, would you agree that
    it was unacceptable for the Commission to keep everyone waiting
    for so long for its thoughts on the Saturday delivery issue?
        Mr. Hammond. Well, my short answer is yes, I think that we
    did take too long. And when that issue first came before us, I
    expressed my opinion as to what I thought the timetable should
    be. My view did not predominate at that time.
        So yes, it was unacceptable.
        Senator Carper. What do you think went wrong, as in my
    second question? What do you think went wrong in your view and
    what can you commit to do, if you are reconfirmed, to address
    whatever management problems may have contributed to this
    delay?
        Mr. Hammond. Well, I believe whenever possible we should
    take action as quickly as possible. As far as the specifics, I
    must say I do respect the prerogative of the chair and the
    responsibilities that she has ultimately for setting the
    schedule in consultation with others. So I respect that view.
        Things that we could have done differently--I have
    supported hearing as much opinion as possible on major
    decisions in the past, but we did take a long time in the
    hearing process. We held several hearings all across the
    country. Possibly, we could have tightened that schedule. That
    could have made a difference.
        We were very lenient in allowing people to request
    additional time than probably we should have allowed for
    gathering of information.
        So those are a couple of the problems that we faced. But
    no, I did think that we should have done it quicker.
        And, yes, I do commit in the future, when and if I am back
    at the Commission, to see that we make timely decisions.
        Senator Carper. Is that also with respect to the issues the
    Commission is working on, involving overnight delivery and mail
    processing facilities?
        Mr. Hammond. With the current Advisory Opinion, yes.
        I left 5 months ago from my current term. And I had already
    left the Commission when the Advisory Opinion came before the
    Commission. So I have not been involved in any of the
    discussion or decisionmaking on what the timetable would be.
        But I certainly would commit, and I guess I should say that
    I hope to be confirmed by the Senate and I hope to be confirmed
    in time to return to the Commission to actually participate in
    part of that decision. So I do not want to say anything that
    would jeopardize----
        Senator Carper. Fair enough.
        Mr. Hammond [continuing] My ability to actually
    participate, where anyone would seek my recusal.
        But that being said, there are certain things I hope are
    under way right now, especially after hearing from so many
    Members of Congress and Committee staff and people in the
    mailing community about the timetable that it is currently
    under. Even small things could possibly be of benefit.
        I mean, I hope that, for instance, right now, the staff is
    working on expediting analysis. I know that is difficult to
    define at times, but I hope that is occurring.
        I think that the Commission, on many occasions, has
    possibly been too accommodating to both the U.S. Postal Service
    attorneys and their requests and to interveners and their
    requests on timetables, and possibly, we need to consider
    tightening that up.
        If we need to have a complete review of our operational
    procedures, we should all get together and discuss that to see
    what we could do in order to assure that all of our decisions
    are timely because, I mean, I am totally aware that if the
    Postal Service asks for a major Advisory Opinion from us and it
    is not timely, we have not really accomplished anything. It
    does not make any difference how reliable it is when the
    product gets out if no one is looking at it. We have wasted our
    time and everyone's time.
        Senator Carper. Fair enough. All right. I have a couple
    more questions I want to ask, but I am going to yield to
    Senator Brown so that he might return to his other hearing.
        Senator Brown. Well, thank you, Mr. Chairman, for letting
    me go out of order.
        Yes, we need to get those reports quickly. We are in an
    emergency with the Postal Service. It is going to be out of
    business pretty soon. Grandparents are not going to be able to
    give and get cards from the grandkids. We have an industry and
    an economy that is relying on the delivery of products, mail,
    and bills. So yes, we need to get this squared away.
        So one of the biggest problems that I am always wrestling
    with is we make a request, we need some information, and it
    comes 10 years down the road.
        I am looking forward to confirming you. I am going to
    support you. I look forward to it.
        Mr. Chairman, I would ask that you speak to the Majority
    Leader and have him get this done so we can have his expertise
    on the Commission and the ability for him to push things
    forward because I think it is vitally necessary for what we are
    trying to do--the band of four trying to save the Postal
    Service.
        And as you know, the Postal Service has made tentative
    plans to consolidate and close around half of its processing
    facilities, four of which are in my home State of
    Massachusetts. What role has, or should, the PRC play in
    ensuring that this process has been, and will be, fair and the
    community input has been, and will be, appropriately
    considered?
        Mr. Hammond. Well, I know we face difficulties here because
    we have talked about the amount of time to work on this
    Advisory Opinion, but there certainly is a process set up on
    purpose for the PRC to give an adequate amount of time for
    community input, as well as everyone else. As you know, of
    course, anyone can come before the Commission as an intervener.
    Anyone can seek that sort of information in that manner. But
    community input is important also, and so sometimes we do have
    to take into account that part of the timeliness is involved
    with how much people want to be involved in what we are doing.
        Senator Brown. And do you think is it appropriate for the
    PRC to have greater oversight responsibility in the process,
    yes or no, or why or why not?
        Mr. Hammond. Well, I think that we have a proper role. You
    know, when the PAEA was passed, we got enhanced
    responsibilities, and maybe at the time we did not anticipate
    that the Advisory Opinion process would be so predominant as it
    has been.
        So we have to take those responsibilities seriously, but we
    do so, and that is what we do. We are there for that, and that
    is part of our responsibility for accountability and
    transparency in everything that we do also.
        Senator Brown. Right. And it is funny; that is a
    significant criticism from people in Massachusetts regarding
    the Postal Service's ability to provide sufficient data and
    justification to back up its decision to consolidate and close
    operations in my State. I recently met with the Postmaster
    General to specifically ask for additional information on how
    he came to the decision on which facilities to close.
        What were the PRC's most significant concerns with the
    retail closing plan, if you know?
        Mr. Hammond. Yes, I was still on the Commission when we
    originally received that Advisory Opinion request and was
    active in the hearings and the testimony received and all.
        I had left the Commission by the time the decision was
    issued, but I agree with what the other Commissioners all
    unanimously signed off on, and that was that the Postal Service
    had not done an adequate job of getting together the necessary
    information, just like you talk about the necessary data, that
    is necessary to make some of those decisions.
        I think that was a major recommendation of the Commission,
    and I think that was a proper one; that, as well as the other
    things which came up, such as had they thought out adequately
    alternative access and things like that. I agree with the
    decision that the Commission ultimately made.
        Senator Brown. So in terms of the rollout of the plan and
    communicating how service standards would affect the
    communities that would be impacted, do you think they could
    have done it a little better?
        Mr. Hammond. Yes.
        Senator Brown. And what is the tradeoff between the need to
    lower operating costs and the impact that service changes and
    rate increases have on future revenues? For example, I know
    from my last conversation that there was a potential to go up
    to 50 cents per parcel now for first-class mail.
        What are the most important factors in preventing a death
    spiral to the point where people will just say, I am at that
    point where I would rather get online and do it; I would rather
    do it differently, find other ways to deliver mail? What do you
    think the trigger points are?
        Mr. Hammond. Well, since you mention the possibility
    particularly of an increase in essentially the price of stamps
    outside the PAEA's restrictions, if the Congress chooses to do
    that without the input of the Postal Regulatory Commission, we
    would, of course, have nothing to say about it. But when we had
    that issue before us earlier, with the Postal Service's Exigent
    Rate Request, we unanimously rejected that, and I think we made
    the right decision. So as far as that goes, that is what I
    think about that.
        We have an obligation, and obviously, as you pointed out,
    the Postal Service is in severe financial difficulty. So of
    course, everything they are doing is trying to become more
    efficient in cutting costs, etc., in what they have to do.
        But our first obligation, which has been given to us, and
    what I always looked at when I was a member of the Commission
    in everything that came before us--in an Advisory Opinion
    request, a complaint case, no matter what it was--is to make
    sure that the Postal Service is continuing their Universal
    Service Obligation. So if they do not meet the criteria of
    keeping the Universal Service Obligation, we cannot consider it
    any further in my opinion.
        So they have to do that. That is the absolute No. 1 thing.
        Senator Brown. Yes. Well, it is interesting. I have had
    many people who have come to me and said: Listen, when first-
    class stamps reach 50 cents and over, that is it. I am done.
        But they said: Why not lower the price to 30 or 35 cents?
    Then I would actually take all my stuff offline, and I would
    actually do it the old-fashioned way, not only to support the
    institution, but people actually like getting that old-
    fashioned mail, so to speak.
        Is there ever any conversation about actually lowering
    prices? I will just give you an example. I know the
    Philadelphia 76ers lowered their costs. They revamped the way
    they do business. They have re-energized that franchise, and
    they have more people coming because it is more affordable.
        Is there ever any discussion about lowering the costs and
    actually making it more affordable for people to participate
    again in the Postal Service?
        Mr. Hammond. Yes, well, certainly, another goal of the PAEA
    was to give the Postal Service the flexibility to experiment in
    things like that. And you know, 2 to 3 years ago now--I cannot
    remember exactly when they started it--the Postal Service
    experimented with the so-called seasonal sales.
        The summer sale is what they originally started with, and
    that was actually providing a preferred rate for people who
    were going to be in the mail system. And that was successful.
    Without any delay, we approved that.
        And they subsequently came back to us with several other
    seasonal sales. Yes, that is an example of the flexibility that
    they have to experiment with things like that.
        They have come to the Commission with other experiments
    like that, and the Commission has approved every single one of
    them. So we have encouraged that innovation. We are not the
    ones who are responsible for telling them what new product they
    ought to offer, but we have not been a hindrance in approval.
        Senator Brown. Well, good luck, sir. Thank you.
        Mr. Hammond. Thank you.
        Senator Carper. Thanks, Senator Brown. Thanks very much for
    being here and being a part of this hearing.
        A couple more questions, if I could. Recently, the
    Commission has been spending a significant amount of time
    hearing appeals of post office closings, as you know. It is my
    understanding that the authority the Commission has to prevent
    closings is somewhat limited. Closings can only be halted if
    the Postal Service has been arbitrary or has not followed the
    process laid out in the law. At the end of the day, the Postal
    Service will likely have its way if it really wants to close a
    post office under current law and rules.
        Now I think the Postal Service should have the right to
    close post offices or consolidate them and probably needs to
    close or consolidate some, but I want to make sure that
    communities, particularly rural communities, that rely more on
    their post offices than others have reasonable access to some
    sort of postal retail service.
        What role should the Commission have in this area and how
    would you approach post office appeals should you return to the
    Commission?
        Mr. Hammond. Well, I somewhat understand that because I am
    originally from a rural area, as you know. And yes, you are
    absolutely right about how they rely on their U.S. Postal
    Service and their postal facilities.
        Currently--and we have been responsible in setting up an
    appeals process--anyone can appeal who feels that he has been
    impacted by that potential closure. And the thing, of course,
    as you mentioned, that we have to look at in appeals is if the
    U.S. Postal Service is being arbitrary and capricious. So that
    is roughly no farther than anyone has to go to make that
    allegation for an appeal to be filed and considered.
        That requires a full administrative record from the Postal
    Service and requires review by the Commission on what the
    actions were that the Postal Service took. And for the ultimate
    decision, we have to look at each and every post office appeal
    individually, and that is a great protection for people.
        It is time-consuming, and I anticipate if the Postal
    Service goes back to a big amount of closings possibly, that we
    will have a tremendous amount of appeals before us. And that
    will be time-consuming, but that is the process that was set up
    to provide people their rights, and we have to continue to
    consider individually all the appeals that would come before
    the Commission.
        Senator Carper. All right. All of the changes that are
    being contemplated by the Postal Service with regard to its
    facilities, with regard to its delivery speed, with regard to
    Saturday delivery and other issues are coming as a result, as
    we know, of serious financial issues. In weighing the
    advisability of some of what the Postal Service wants to do in
    these areas, I think we need to keep in mind that the demand
    for what the Postal Service offers has changed.
        For example, in my office I get, every other week, a mail
    report from my staff. I started asking for it in 2001 so we
    know what people are writing, faxing, calling, and emailing us
    about and how promptly we are responding to them.
        I get this biweekly mail report, so I asked my staff to go
    back and look at 2001 and tell me how many letters we received
    for every email. The ratio was something like 15 letters for
    every email.
        And I asked them to look at 2011 to see what, in our
    office, the ratio was between letters and emails, and the
    numbers had just flipped. Roughly, for every letter we receive
    today, we receive 15 emails. So I think that pretty much speaks
    for itself and has done a lot to help change the financial
    picture at the Postal Service.
        There is likely some percentage of the mail volume we have
    lost in recent years that will just never come back. I do not
    expect us to start getting 10 letters for every 10 emails
    anytime soon. I think both the public and the Commission need
    to recognize that, and so do my colleagues.
        How do you think the Commission should account for things
    like the Postal Service's financial problems or electronic
    diversion of the mail when considering a proposed service
    change or post office closing?
        Mr. Hammond. Well, you are absolutely correct about the
    electronic diversion being a major cause. If you look at
    particularly bill payment, the diversion on bill payment came
    about a lot quicker and a lot more massively than anyone
    anticipated. So I mean, that is another example.
        And sure, we have to look at all the financial issues of
    the Postal Service. There is no doubt that, as you hear
    constantly, they are almost out of money.
        We have to continue. The PRC is responsible for approving
    or reviewing every innovative proposal that the Postal Service
    brings to us, whether it is, like I mentioned, the seasonal
    sales, the flat rate box, the second ounce free, or this new
    every door direct--I cannot remember the acronym for it. But
    you know the PRC approved that as an experimental product just
    recently, and I did read that the first quarter results showed
    that the Postal Service looked at 57 million pieces of mail
    being mailed because of that, which was a tremendous
    opportunity.
        We need to encourage the flexibility to look at innovative
    things like that, which will make a difference to their bottom
    line. The goal is to bring them more financial resources. And
    an innovation like that is what we have a responsibility to
    look at and approve expeditiously, without delay, if it has
    possibilities.
        I mean, we have to make sure that everyone has their
    opportunity to review, but we have to get that done within the
    time frames allowed. And we have done that in every instance
    when I was at the PRC.
        Senator Carper. I hope it is not too late when this
    happens. I do not think it will be.
        Someday, somebody is going to look at the business model
    and the network of the Postal Service, their presence in every
    community in America, the fact that 5 or 6 days a week a letter
    carrier goes to everybody's door, everybody's business in
    America, or at least to their post office box if they choose to
    have a post office box in a rural community. But somebody is
    going to say, why did we not think of a particular idea that
    would have better utilized that network, that delivery system?
        And you have mentioned a couple of ideas that are good
    ones. There are others.
        One of the things I have said repeatedly--I say it again
    here today--it is not enough for the Postal Service or for the
    Congress just to say cut, cut, cut. We have to find ways to
    grow some revenues, think outside the box. There are a number
    of us in the Senate, and I am sure in the House, who are
    interested in encouraging and facilitating the Postal Service
    in their efforts to be more entrepreneurial, to be more
    innovative, and to consider good ideas.
        I think the legislation, the Managers' amendment, that is
    going to come to the Senate before long, I hope, will
    strengthen the likelihood that when some folks come up with
    great ideas to increase revenues at the Postal Service, the
    Postal Service will have a chance to do those.
        Language in legislation this Committee has reported out
    would allow the Postal Service to take advantage of its
    resources and its delivery networks to experiment on a limited
    basis with non-postal products, and let me just ask what your
    thoughts are on the proposal. How would you approach non-postal
    proposals if they were to come across your desk as a
    Commissioner?
        Mr. Hammond. Well, I know when I first had the written
    questions from the Committee that asked about Postal Service
    competition with the private sector, I indicated that I did not
    see any reason for the Postal Service to compete where the
    private sector is already providing the service.
        But after I had discussions with some of the other Senators
    as well as you about what was contained in that specific
    proposal--I believe there is a four-prong test that the PRC
    would be responsible to review for anything that the Postal
    Service was to begin to offer under that--I think that would
    provide adequate safeguards.
        And of course, I recall one of those tests was if the
    private sector was currently providing the service, and if you
    have that as a safeguard, I do not see a problem. Your specific
    proposal takes into consideration the potential problem and has
    adequately dealt with it as far as I could see.
        And we would do a very expeditious job if we had that
    responsibility, I know, in reviewing and approving.
        Senator Carper. Thank you. I want to thank Senator Brown
    for joining us today.
        I want to thank our staff for working with you to prepare
    you and us for this hearing as well.
        Thank you for your willingness to return and to resume your
    service to the Postal Regulatory Commission.
        As you know, we have to allow a certain amount of time for
    Members who may not have been here to submit questions to you,
    and we are going to let them have until noon tomorrow for the
    submission of additional comments and questions. I do not know
    that I will have any of my own, or if Senator Brown will, but
    we might. And if you get those, I would just ask that you
    respond to them promptly.
        Mr. Hammond. I certainly will.
        Senator Carper. Any closing word that you might like to
    offer?
        Mr. Hammond. No. Again, I appreciate what you are doing,
    and I wish you success.
        Senator Carper. Thank you. Thanks so much.
        And to the Commissioners who are here, we welcome you. We
    thank you for your service. You have some excellent staff on
    the Commission, and we are grateful for their service as well.
        With that having been said, I am going to rush off to my
    Finance Committee hearing and try to get there before they
    finish that up as well. Thanks so much.
        The hearing is adjourned.
        [Whereupon, at 11:16 a.m., the Committee was adjourned.]

                                A P P E N D I X

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