Mailers fight against postal rate hike

The mailing industry is stepping up their efforts to defeat a rate increase proposal from the cash-strapped U.S. Postal Service, pressing the agency’s regulator this week to rule against the plan.

USPS said in September that it was reluctantly seeking to increase the price of stamps more quickly than the rate of inflation, to help it deal with the long-lasting impact of the most recent recession.

{mosads}But a dozen organizations that represent heavy users of the mail – including nonprofits, magazines, newspapers, catalogers and direct mailers – say the Postal Service’s rationale for the rate increase is deeply flawed. 

USPS’s request, those groups told the Postal Regulatory Commission, doesn’t account for how the Internet decreased the use of first-class mail. Plus, they say that the Postal Service’s projections for first-class mail in the coming years are far too dire.  

The rise in e-mail, Internet advertising and electronic bill payments “left the USPS with too little mail to cover the costs of its network,” Jim Cregan of the Association of Magazine Media said in a statement.

“The Postal Service must face the facts and right-size its operations, not drive even more volume away by raising prices so drastically on its remaining customers.”

USPS, which bled $5 billion in fiscal 2013, said says the rate increase is needed to help fill the $40 billion gap between its assets and liabilities. 

Under the Postal Service proposal, stamp prices would jump from 46 cents to 49 cents in January – resulting in an extra $2 billion in revenue, the agency says.

“A decision to raise prices is never one that the board takes lightly, and this is particularly true in the current environment where volumes are declining,” Mickey Barnett, the chairman of the USPS board of governors, said in September. “Of the options currently available to the Postal Service to align costs and revenues, increasing postage prices is a last resort that reflects extreme financial challenges.”

By law, the Postal Service can seek a sharper rate increase if it faces extraordinary circumstances from which it couldn’t be expected to recover quickly. The Postal Regulatory Commission faces a late December deadline in dealing with that request.

In its own filing, the Postal Service noted that the regulator had already separately deemed the recession from 2007 to 2009 an extraordinary circumstance. 

That downturn, USPS argues, caused a drop in some 54 billion pieces of mail, leading to more than $6 billion in lost revenue. 

Postal officials have acknowledged previously that e-mail and the Internet have dragged down first-class mail volume, but also say that the rise in online shopping has helped the agency’s shipping business.

Mailing industry groups say that USPS is also overstating the long-term impact of the recession on its business, in addition to downplaying the Internet’s role in the decline of mail volume. 

After peaking in 2007, first-class mail revenue dropped 2.4 percent in fiscal 2013, as volume dropped just over 4 percent. 

But the decline in first-class revenue has also slowed in recent years, with revenue having dropped almost 4 percent in 2012.

Sen. Susan Collins (R-Maine), an author of the 2006 law that allows USPS to seek the rate increase, has also said the Internet is the main problem and said the agency does not deserve the rate increase. 

“Electronic diversion of mail has been a foreseeable and an ongoing problem for the Postal Service,” Collins wrote in October. 

Postal officials have said they’d reconsider their rate increase request if Congress passed broad postal reform legislation that allowed them to cut costs and raise new revenues.

But the debate over the rate increase also underscores how hard it has been for Congress, which has been working on legislation for more than two years, to pass a final product.

Mailing industry officials, for instance, are calling for the Postal Service to further streamline its operations. But postal unions and liberal lawmakers say that USPS should not be allowed to cut services, noting that the agency’s 2013 losses were far less than 2012.