Monday, November 4, 2013

USPS's Own Words May Doom Its Rate Increases

The U.S. Postal Service’s attempt to enact hefty rate increases has plenty of critics, but the most damaging words against the proposal may have come from the Postal Service itself.

Postal officials claim that the vast majority of USPS’s revenue losses in recent years were caused by the economic recession of 2007-2009 – an “exigent” circumstance that could justify rate increases exceeding the rate of inflation.

But trade associations from several mail-dependent industries contend that the losses came primarily from “electronic diversion and other trends that do not qualify as extraordinary or exceptional circumstances” that would allow the cap on price hikes to be breached. And the associations point to none other than the Postal Service’s own statements to prove their point.

One coalition of mailers’ groups recently pointed out to the Postal Regulatory Commission a USPS report from last year that stated, ““Diversion of communication and commerce to electronic channels is a principal contributor to declining First-Class Mail volumes”; and “Diversion reflects a permanent secular shift in customer behavior and is more pronounced during periods of economic weakness.” [The report also states, "The Economy is NOT the Main Cause of Diversion."]

The coalition also pointed out a 2010 USPS report stating, "While the recession accelerated the volume decline, its primary cause is a fundamental and permanent change in mail use by households and businesses. Hardcopy communication of all types continues to shift to digital alternatives. More people are paying bills and transacting business online.”

“In this proceeding, in which it [USPS] must show that volume declines are ‘due to’ the recession, it now claims that the recession is responsible for the largest share of First-Class mail volume declines during the same years” and that the recession's impact "dwarfs all other factors that affect mail volumes," the coalition told the PRC. “By attributing the same volume declines to different factors in different fora, the Postal Service’s volume forecasting credibility is undermined. The Postal Service should be required to reconcile its seemingly conflicting statements.”

Thomas Thress, an economist who consults for USPS, attempted to explain to the PRC late last week how the recession and electronic diversion teamed up to deal the Postal Service a double whammy:

“I believe the recession increased electronic diversion because the steep decline in the economy created much stronger incentives for consumers, businesses and governments to find less costly ways to engage in communication and conduct financial transactions. Therefore, it seems logical that people would increase their use of cheaper electronic methods in place of the mail, and do so more quickly and more extensively than they would have done absent the economic constraints imposed on them by the Great Recession. However, it must be emphasized that the increase in electronic diversion was not the only way, or even the most important way, that the Great Recession affected mail volumes.”

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Anonymous said...

It doesn't matter why the Postal Service is losing money, It's the cost of sending a letter, magazine, parcel that should determine rates. Thus if it cost 5billion to deliver the mail, common sense tells you you must charge 5 billion....duh

Marc Zazeela said...

So really, the USPS should be held accountable for the mess it finds itself in. When a business fails to keep up with market trends, it fails.

Rather than see the handwriting on the wall, USPS is painting with the broadest brush and blaming the economy.

ET - 10 Simmons said...

We don't need an exigent rate increase. A simple increase tracking inflation will do nicely. In March of 1974, the price of a stamp went up to 10 cents. The increase to 49 cents would be a cumulative increase of 390%. Inflation over that same period?.. 389.85%

The USPS was never meant to be a profit mill for the largest, commercial bulk mailers. Nor was it created to provide 'work share' and 'presort' subsidies at 4 times the cost of doing the work in-house. It is meant to serve the American public with timely service and reasonable rates.

Everything being done by corporate is against the law, US Code Title 39/Section 101, as it reads today. Never mind the fact that it isn't 'broke' and everything being proposed in Congress, save S. 316 and H.R. 630, would only hasten its demise from the damage already done to it via PCSRSFRA in 2003 and PAEA in 2006...

blndbmber said...

When USPS give's away 14 billion dollars in presort and discounts to bulk mailers it is no wonder the USPS is broke. That much money would have paid for all of the retire's, new hires, and all current employee's since the PAEA in 2006. And still give it extra money to ride out the recession.
But the big bulk mailer's and company's like Pittne bowes want it all for them self's so they get rich pay very small wages and no benefits. It's a sad day when America roll's over to the rich and allows them run everything into the ground for their own gain.

Anonymous said...

The mailing industry are in desparato mode right now. Yes the recession at that time obviously provoked people to use more electronic communication. The comes George Bush who mandates the postal service to pay 5.5 billion a year to prefund future retiree health benefits that are already funded for years to come. A wolf in sheeps clothing is still a wolf...come on mailing industry stop crying! look at hallmark, remember when you could find a card for $1.00 to a $1.50 now they want people to pay $5-6.00 for a card then claim foul!! when the Postal Service says hey we've give you generous discounts on your mail for years and now we have to raise the rates a bit on you your complaining?...Really?? THe mailing industry and every stake holder should be putting pressure on Congress to alleviate the ball and chain they put around the services ankle. Get rid of the 5.5 billion dollar payment for starters, loosen up the restraints on the service to play on a level field with it's competition allowing them free passage to new initiatives and strategies financially. Point your anger at Congress mailing industry, especially the elephant in the room who had much to do with the demise of the Postal Service. Then you have past his prime relic John Mccain who just wants to drive a spike through the heart of the Postal Service. Mailers and the american people need to put more emphazis on how this government runs our business and if you disagree fire back! To many are passive...Our fore fathers didn't right the constitution thinking these bafoons would rewrite favorable to themselves! They should only have 3 to 4 year terms.... and's rediculous, some of these people are still sitting up ther in there 90's.....Crazy!

Keith Swanson said...

Congress wants to extract more money from the Postal Service. So that's why we see labor cost reductions and mechanical inefficiencies and higher rates to get a higher yield for Uncle Sam