Mailers call on PRC to reject exigency price hike

Washington, D.C., November 26, 2013 – Today, a broad coalition of postal customers and suppliers asked the Postal Regulatory Commission (PRC) to reject a Postal Service proposal to raise most postage rates in January by three times the rate of inflation. The USPS claims that the rate hike is necessary to offset the continuing effects of the 2007-2009 recession. The industry filing shows, however, that the main reason for the Postal Service’s recent losses is competition from the Internet, a long-term problem that does not entitle the USPS to an above-inflation rate increase.

The industry’s filing, supported by economic testimony from Christian Lundblad, Edward M. O’Herron Distinguished Scholar and Professor of Finance at the University of North Carolina’s Kenan-Flagler Business School, shows that:

  • Informed observers–and even the Postal Service itself–have recognized that the vast majority of the decline in mail volume from 2007 to 2012 was the result of digital diversion to other means of communication;
  • The Postal Service’s economic models assume that recessions get deeper and deeper forever, a nonsensical assumption; and
  • The USPS’s model uses a heads-I-win, tails-you-lose approach; it disregards all of the positive effects of the post-2009 economic recovery on mail volume.

“You could drive a mail truck through the holes in the Postal Service’s arguments,” said Jim Cregan of the Association of Magazine Media. “The main reason for declining mail volume over the last seven years is digital diversion – the long-term trend toward electronic correspondence, internet advertising, and electronic bill presentment and payments. This has left the USPS with too little mail to cover the costs of its network. 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.”

Tony Conway of the Alliance for Nonprofit Mailers said, “If you take the Postal Service’s study at face value, then all of the mail volume losses since 2007 are the result of the 2007-2009 recession, and none result from digital diversion. To make it even more improbable, the USPS says that the effects of the recession, which ended several years ago, will get worse in 2014 and 2015. It’s hard to imagine anyone could take these claims seriously.”

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