[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.]


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