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:
The 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 firstname.lastname@example.org.
Association Members of the Affordable Mail Alliance