Business groups react angrily to postal rate increase request

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Advertising, marketing and publishing groups blasted the U.S. Postal Service's request to increase postal rates an average of 5.6%, accusing the agency of everything from poor timing to ineffective operations and suicidal tendencies. “The Direct Marketing Association strongly believes that a postal rate increase at this time will cause mail volumes to decrease even further and irreparably harm the financial viability of the Postal Service going forward,” said Linda Woolley, DMA exec VP-government affairs, in a statement. American Business Media, an association of b-to-b media companies, said it “opposes the Postal Service's contention that the present economic circumstances justify a ... rate increase.” The American Catalog Marketing Association also criticized the rate increase request, stressing the negative impact it would have on its members. “With postage now representing more than half the cost of catalog marketing, this has fundamentally altered the business model and is forcing catalogers to migrate out of the mail,” said Hamilton Davison, ACMA executive director, in a statement. “The catalog industry is imperiled right now.” The USPS on July 6 requested the Postal Regulatory Commission to allow it to raise postage rates, effective Jan. 2, 2011. The PRC has 90 days to issue a decision on the request. Under the USPS proposal, first-class postage would rise 4.5%, from the 44 cents per piece that went into effect May 11, 2009, to 46 cents. Rate increases would be higher for commercial mailers. Standard-mail parcel rates, used to send small-size merchandise and product samples of one pound or less, would rise 23.3%. That, Woolley said, is “something that would be devastating to companies such as Amazon and eBay. A rate increase would ... force business mailers to look for alternative methods of communications.” Standard-mail letter and flat postage rates, used most often for commercial direct mail campaigns, would rise 5% and 5.1%, respectively. And publishers would see the periodical mailing rate rise 8% if the PRC approves the USPS' request. That, said the Affordable Mail Alliance, would lead to “job losses to publishers, printers, paper manufacturers, marketers—jobs that can hardly afford to be lost in this economy.” The group includes ABM, Condé Nast Publications, DMA and the Magazine Publishers of America. The MPA has threatened a lawsuit to force the PRC to reject the Postal Service request. “What [the USPS] is about to do will only accelerate their own death spiral by forcing out the last groups of profitable mailers,” said Jim Cregan, exec VP-government affairs at MPA. By law the USPS is limited to rate increases of no more than the rate of inflation, which stood at 0.9% for the 12 months ended in May. In requesting an “exigent” exception, the USPS cited its dire financial condition—it's on track to lose $6.5 billion this year—and the state of the economy. The losses have been driven by dwindling mail volume, as consumers increasingly use electronic forms of communications as alternatives to postal deliveries. From 2007 through 2009, the volume of mail handled by the USPS fell by 36 billion pieces, a 17% decline and the greatest drop in its history. The USPS estimated the increase in rates will provide it with $2.3 billion in additional revenue in 2011. However, commercial mailers that oppose the rate increase may well point to their own role in helping the USPS rebound under current pricing. Standard mail continues to experience a monthslong resurgence, with volume hitting 6.4 billion pieces in May, up from the 6.0 billion pieces mailed in May 2009. Standard mail revenue rose 4.7% in May to $1.34 billion, from $1.28 billion in the year-earlier period. When those gains were combined with shipping-service volume and revenue increases, the USPS reported a tenth of a percent increase in total sales for the month to $5.27 billion. However, losses from operations continue to drag down the agency's fiscal performance. The Affordable Mail Alliance claimed that while USPS mail volume was down 13% in 2009, labor costs were reduced only 1%. “Rather than gouging its customers with rate increases that are 10 times the rate permissible by law, USPS should be eliminating its operating costs,” said Jerry Cerasale, senior VP-government affairs at the alliance. “They should be making the hard business decisions and not raising rates.” Postal officials are proposing to eliminate Saturday mail delivery to cut costs. That would require approval by Congress. M
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