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.”

Related articles:

• Why the Exigent Postal Rate Increase Will Backfire 
• Three Goofs: How USPS Undercut Its Case for Exigent Rate Increases
• Affordable Postage A Key To Printing Industry's Future, Quadracci Says