Study on Universal Postal Service and the Postal Monopoly Appendix B Universal Service Obligation: History and Development of Laws Relating to the Provision of Universal Postal Services James I. Campbell Jr. UNIVERSAL SERVICE OBLIGATION 2 Contents Summary ............................................................................................................................ 6 1 Introduction: Defining "Universal Service Obligation" ......................................... 20 1.1 Objectives and Organization of This Study .......................................................... 20 1.2 Definition of “Universal Service Obligation” in This Study ................................ 21 1.2.1 Defining “Universal Postal Service” ........................................................ 22 1.2.2 Elements of Universal Service: §§ 101 and 403 of Title 39 ..................... 24 1.2.3 Defining “Universal Service Obligation” in This Study........................... 29 1.3 Legal Measures Establishing the USO ................................................................. 31 1.4 Legal Obligations of the Postal Service Outside the Scope of the USO .............. 34 2 Legal Evolution of National Postal Services ............................................................ 37 2.1 Establishment of the Post Office ........................................................................... 37 2.2 Evolution of the Geographic Scope of Postal Service, 1789-1945 ....................... 42 2.2.1 Intercity Postal Systems: Post Roads and Post Offices ............................ 42 2.2.2 Early City Delivery Services, 1792-1862 ................................................. 48 2.2.3 Free City Delivery Service, 1863.............................................................. 51 2.2.4 Rural Free Delivery, 1896......................................................................... 53 2.2.5 Village Delivery, 1912 .............................................................................. 63 2.3 Development of Rates and Classifications ........................................................... 64 2.3.1 Early Rates for Letters, Newspapers, and Magazines: 1792 to 1830s ...... 64 2.3.2 Cheap Letter Postage, 1845 and 1851 ....................................................... 65 2.3.3 Development of International Postal Services, 1847-1874 ....................... 66 2.3.4 Advertisements, In-County Newspapers, and Books, 1845-1852 ............ 67 2.3.5 Establishment of Mail Classes, 1863 to 1879 ........................................... 68 2.3.6 Postal Money Orders, 1864....................................................................... 72 2.3.7 Postal Savings Bank, 1911 ........................................................................ 72 2.3.8 2¢ Letter Rate for Intracity and Local Delivery Letters ........................... 73 2.3.9 Parcel Post, 1912 ....................................................................................... 73 2.3.10 Second Class Advertising Rates and Nonprofit Publications, 1917 ......... 74 2.3.11 Redefinition of Third and Fourth Classes by Weight, 1925 ..................... 75 2.3.12 Airmail, 1928 ............................................................................................ 75 2.3.13 Bulk Third Class Rates and Library Rate, 1928 ....................................... 76 2.3.14 Book Rate, 1938........................................................................................ 76 2.4 Summary ............................................................................................................... 77 3 Postal Policy Act of 1958 and Aftermath ................................................................. 81 GEORGE MASON UNIVERSITY NOVEMBER 2008 UNIVERSAL SERVICE OBLIGATION 3 3.1 1951 Act Readjusting Postage Rates .................................................................... 81 3.2 Senate Advisory Council Report (1954) ............................................................... 86 3.3 Position of the Eisenhower Administration .......................................................... 94 3.4 Postal Policy Deadlock, 1954-1956 ...................................................................... 95 3.5 4¢ Stamp and Public Law 85-426 (1958) ............................................................. 97 3.6 Postal Policy Act of 1958 ................................................................................... 100 3.7 Postal Code of 1960 ............................................................................................ 107 3.8 5¢ Stamp and Revisions to the Postal Policy Act (1962) ................................... 108 3.9 Summary: Implications of the 1958 Act for the USO ........................................ 110 4 Postal Reorganization Act, 1970 ............................................................................. 112 4.1 6¢ stamp and the Kappel Commission................................................................ 112 4.2 Nixon Administration bill: H.R. 4 (as reported) ................................................. 115 4.3 Revised Nixon Administration-postal union bill: H.R. 17070 ........................... 119 4.4 Senate committee bill: S. 3842 ........................................................................... 123 4.5 Enactment of Postal Reorganization Act ............................................................ 128 4.6 Summary of the USO elements of the PRA........................................................ 131 5 Evolution of the Statutory USO, 1971-2006 ........................................................... 134 5.1 Postal Reorganization Act Amendments of 1976 ............................................... 134 5.1.1 Postal Service: “The Necessity for Change” (1975) ............................... 135 5.1.2 House consideration ................................................................................ 141 5.1.3 Senate consideration ............................................................................... 144 5.1.4 The 1976 amendment .............................................................................. 147 5.1.5 Commission on Postal Service, 1977...................................................... 148 5.1.6 Postal policy debates of the 1970s in retrospect ..................................... 152 5.2 Public service subsidy: the appropriations process ............................................. 153 5.2.1 Omnibus Reconciliation Act of 1980 and the 20¢ stamp ....................... 153 5.2.2 Postal Service appropriations act 1982: origin of the USO rider ............ 156 5.2.3 Omnibus Budget Reconciliation Act of 1981 and the public service appropriation ....................................................................................................... 161 5.2.4 Appropriations riders, 1983 to 1985: the standard USO rider ................ 162 5.2.5 Appropriations acts, 1986 to 2008: additional provisions and directions168 5.2.6 Practical Effects of the Appropriations Provisions ................................. 171 5.3 Revenue forgone: free and reduced rates for preferred classes of mail .............. 172 5.3.1 Reduced rates under section 3626........................................................... 172 5.3.2 Free mail privileges................................................................................. 174 5.3.3 Revenue Forgone Reform Act of 1993 ................................................... 175 5.4 Universal Postal Convention............................................................................... 178 GEORGE MASON UNIVERSITY NOVEMBER 2008 UNIVERSAL SERVICE OBLIGATION 4 5.4.1 Obligations relating to universal postal service ...................................... 179 5.4.2 Relationship between the UPU Convention and U.S. postal law ........... 181 5.4.3 Obligations with respect to international mail ........................................ 184 5.5 Summary of evolution of the statutory USO, 1971-2006 ................................... 188 6 Interpretation and Administration of the USO, 1971-2006 .................................. 190 6.1 Geographic scope of universal service ............................................................... 190 6.1.1 Geographic scope of express mail .......................................................... 190 6.1.2 Geographic scope of parcel post: Alaska bypass mail ............................ 192 6.2 Range of universal service products ................................................................... 196 6.2.1 Special delivery service .......................................................................... 196 6.2.2 Single-piece advertisements.................................................................... 197 6.3 Access to universal services................................................................................ 197 6.3.1 Post office establishment ........................................................................ 197 6.3.2 Post office closings ................................................................................. 199 6.3.3 Public collection boxes ........................................................................... 201 6.4 Delivery of universal services ............................................................................. 202 6.4.1 Cluster box delivery program ................................................................. 203 6.4.2 Judicial decisions .................................................................................... 203 6.4.3 Commission complaint cases relating