Facing rising costs and shrinking business, the U.S. Postal Service lost $1.6 billion last year.
Failure to make fundamental changes would force it to operate under its "present increasingly outmoded business model until enough customers abandon the system to make financial failure unavoidable," the Postal Service said in its proposal.
Postmaster General John Potter said he isn't recommending wholesale post office closings and promised to work to keep six-day service. But he said every aspect of postal operations needs to be looked at to improve finances and efficiency.
In addition to slipping business, the terrorist attacks and anthrax-by-mail cost the post office hundreds of millions of dollars. Increasing losses are expected despite the 3-cent postage rate hike planned for this summer.
The proposal calls for a new law converting the post office to a commercial government agency after 2006. In the meantime there would be changes to cut costs and improve efficiency.
Legislation is being sought to allow changes in "service levels and delivery frequency."
"We know that people enjoy that six-day delivery, we know there is a business value to it," Potter said. With more pricing flexibility and adjustments to operations, he said, "we believe that we can protect six-day delivery well into the future."
Among other changes would be working with the Postal Rate Commission to streamline the rate process to provide more regular and predictable price changes, including phased-in rates.
Potter said that might mean small annual increases for commercial mailers while the public would get an increase every other year or every third year. The public wants rates in effect multiple years, commercial mailers prefer predictable increases, he said.
The agency also would lift its self-imposed moratorium on closing post offices and seek to streamline the process.
"I want to make it abundantly clear that I'm not calling for wholesale closing of post offices," Potter said. "Offices are part of a very valuable network ... we will continue to provide access to every American."
But he also noted that, unlike years ago, stamps are now available in grocery stores and via mail-order, telephone and Internet.
The post office has not received any taxpayer subsidy for operations for years, although Congress recently voted $500 million to assist in coping with the anthrax contamination and to seek ways to prevent it from happening again.
The proposed long-term changes would move to a more private-business type of bargaining with unions, including a mediation process similar to that in the Railway Labor Act. Unlike the current system that often ends in compulsory arbitration, the proposed plan would include the possibility of strikes and lockouts.
William Burrus, president of the American Postal Workers Union, called that idea a "nonstarter" because the process can be manipulated by the White House to impose a settlement.
Burrus also reiterated his union's stance that the post office could increase revenues by reducing discounts it gives major mailers for presorting mail.
The proposed new agency would also drop the current requirement that it break even financially over time for one that allows profits that could be used to finance capital improvements or for other purposes.
It would use private business style purchasing rather than government systems and would look for new products and services to offer, including investing in related businesses and possibly permitting other retail operations in post offices.
H. Robert Wientzen, president of the Direct Marketing Association, endorsed the need for postal changes, though he didn't comment on details of the plan.
The association, which represents businesses that sell by mail, released a study that estimated nine million jobs and $778 billion in revenue across the country are dependent on the postal system.