Mailers tell BOG postal price increase would be self-defeating

With rumors circulating that the USPS is about to ask for an “exigent” rate increase, a mailers’ group has sent letters to the Board of Governors begging them not to:

Dear Mr. Chairman:

affordableThe Affordable Mail Alliance (AMA) understands that the Board of Governors will be considering a potential exigency rate increase on your conference call on September 5. The mailing industry, and its suppliers, responsible for $1.3 trillion in sales annually, and nearly 8 million private sector jobs, are unanimous in our great concern that, notwithstanding the Postal Service’s ongoing financial predicament, an “exigent” increase would cause severely adverse, and likely irrevocable, consequences for mail volume and revenue.

AMA believes an exigency increase would not only be profoundly ill-advised, but clearly self-defeating to recovering postal financial stability. Moreover, an exigency filing at this point would be premature, in light of recent progress in Congress, and a noticeable improvement in the USPS balance sheet. Therefore, we ask that you set aside consideration of an exigency increase at this time, and urgently request that you schedule a meeting with a representative group from the mailing and supplying industry before you make any decision.

Our industry is acutely and painfully aware of the challenges that confront USPS; no group “gets” the impact of technology on marketing and distribution by paper better. We have strongly advocated for legislative relief over the past several years. We have greatly appreciated, and cooperated with, your successful cost-cutting programs, as well as efforts to innovate on prices and products. Yet, we realize none of these steps, or all together, have been nearly enough to stem the ongoing losses you confront from diversion, the recession, and Congress’ inability to date to complete work on addressing needed financial and structural reforms.

Nonetheless, an exigent rate increase is not a solution to the agency’s financial issues or the profitability of certain classes of mail, and it could potentially alter the current level of focus on improving operations and infrastructure. Representing postage rate payers, we can assure you that any extraordinary rate increase—especially anything above the current CPI cap—would result in reduced mail volume, and, consequently, reduced revenue for the Postal Service. The internet and mobile technology have become, and will continue to be, the drivers of diminishing communications by paper. As a result, previously accepted views that the mail is price insensitive are no longer appropriate.

With the availability of highly effective and efficient marketing alternatives, any significant postage rate increase would change the ROI calculus by companies in comparing alternatives. That shifting ROI, in turn, would threaten the sustainability of our existing strategies and compel an industry-wide shift of

investment of communication and advertising dollars from mail to those alternative channels. This not only raises very serious questions about the accuracy of any claim that mail is price insensitive, but would significantly slow or stall any Postal Service recovery.

Recent financial reports from the Postal Service indicate that the efforts to streamline operations and infrastructure at the Service and the slow recovery rate of the American economy are having a positive effect on postal finances. An above-inflation postage increase will stall and likely reverse that effect. Rather than raise postage rates and risk loss of mail volume from your commercial customers who provide or generate approximately 90% of your revenues, we believe that the more prudent approach is to continue to support, and in our case vigorously advocate for, meaningful and comprehensive legislative reform from Congress, while you pursue your program to make operational improvements within the Postal Service itself.

An exigent postage increase would shift the focus and resources of our members from urging postal reform to contesting and, potentially, adjusting business plans to cope with such an increase through reducing our exposure to the mail. Moreover, an exigent increase would substantially relieve the pressure for legislation, a factor well understood in Congress. That would obviously lessen the likelihood of any helpful postal reform in the near term, and raise concerns in the industry about how quickly and easily USPS might turn to exigency increases in the future.

To reiterate, an exigent rate increase would be devastating to both the mailing and supplying industries, and the Postal Service. You and your fellow Governors are about to make a choice that could prove pivotal to the system, its finances, its customer base and suppliers, and the mailing public. A decision on this order of magnitude compels as fully informed guidance as possible.

Finally, we request a meeting with you to discuss these issues. We stand ready to meet with you at your convenience. Please contact James Cregan at 202-296-7277 or james.cregan@magazine.org.

Respectfully,

Association Members of the Affordable Mail Alliance

  • Ruminant

    Translation, we have become accustomed to the USPS subsidizing our industry, please continue the subsidies.

  • Postage Payer

    Ruminant, perhaps you should take your blinders off and actually read the entire letter before coming up with a “translation”. Apparently a lot was lost on you – in translation.

    I’m a ratepayer. Exigency would be bad for ALL PARTIES. Bad for industry, bad for USPS and their outstanding workforce, and bad for the American people. Raising rates fixes absolutely nothing, and just kicks the can down the road, giving Congress yet another excuse to continue to shirk their responsibilities.

    Higher rates=less mail, and the result could be disastrous – and unrecoverable. Be careful what you wish for.

    • JY

      It seems to me that the mailers are making a decent profit mailing stuff via the post office. While mailers say that increasing rates will hurt them. It will hurt only their profits. USPS has expenses like anyone else why should they be the only ones to bear the costs. What baffles me is why are companies still getting workshare discounts? USPS has machines that sorts not only letters, but flats too. Of anything, that’s the thing that should be eliminated.

    • CC

      Postage Payer, yours is a rather uninformed, disingenuous, and unfortunately, an oft-repeated argument. If you were to start with the CEO’s of the major mailers, you would find yearly salary and compensation packages in the tens millions of dollars. If you were to peruse the corporate profitability of Valassis, and Pitney Bowes, and Quad Graphics, to name but a few, you would find successful financial trajectories primarily reliant on work-sharing programs and discounts provided by the very service these corporations are attempting to usurp. The fact that the mailing industry is having such a fit about Congress, the Postal Service, and the American people insisting that the standard mail class be at the very least, “cost neutral,” to the bottom line of the U.S.P.S. suggests strongly that the threats to, ” … reduce our exposure to the mail,” are hollow at best. As represented by the Postal Service’s 2012 Form 10-K, the Standard Mail class represents 50% of the Postal Service volume of mail, and 25% of it’s revenue.
      I am not adverse to companies making money, or those individuals who take risks to accomplish success. I am, however, stridently adverse to those who would attempt to undermine a constitutionally-mandated national institution founded to serve all citizens equally in order to line their own pockets or ring serfdom upon a labor force struggling to maintain its lower-middle class wage status.

  • pammy

    The Postal Service can no longer subsidize the mailing industry. I’d like to see all mailers charge their customers 30% less than what it costs to process the products and post a 1.5 billion dollar loss annually and stay in business. Raise the price on their mailings and if they stop mailing , then that’s less junk mail filling our landfills.

  • You won’t let me

    Maybe ask the American people if they want to continue paying higher rates for postage,losing curbside delivery,traveling two towns over because the local Post Office is closed forever or having to find an open Post Office within a 3 hour window so the big mailers can continue being subsedized!!!!! The Koch brothers are billionares and the Direct Marketing Association is rich and powerful from the free ride. Didn’t a court just rule that processing mail at a loss is illegal. The big mailers are fine with a part time low benefitted Postal workforce while they enjoying their wealth. How bout a study to see how many vacation homes and fancy cars their execs own . Gee , they didn’t even thank the public for subsedizing that paying for all that junk mail