Postal Ser­vice re­quests lee­way for stamp hikes

Austin American-Statesman - - MORE OF TODAY’S TOP NEWS - By Hope Yen

Reg­u­la­tors ap­pear likely to ac­cept the fi­nan­cially be­lea­guered Postal Ser­vice’s re­quest for more free­dom to raise the price of mail­ing let­ters. It would be the big­gest change in the Postal Ser­vice’s pric­ing sys­tem in nearly a half-cen­tury, al­low­ing stamp prices to rise be­yond the rate of in­fla­tion.

Af­ter a 10-year re­view, the Postal Reg­u­la­tory Com­mis­sion could make its de­ci­sion next month. It might limit how high prices could go, but the cost of a first­class stamp, now 49 cents, could jump.

Fi­nan­cial an­a­lysts praise the plan, but it has raised the ire of the mail-or­der in­dus­try, which could pay mil­lions more for send­ing items like drugs and mag­a­zines.

An in­de­pen­dent agency of gov­ern­ment, the Postal Ser­vice has lost money for 10 con­sec­u­tive years. While on­line shop­ping has led to years of dou­ble-digit growth in its pack­age-de­liv­ery busi­ness, it hasn’t off­set de­clines in first-class mail as peo­ple rely more on email and on­line bill pay­ments.

Congress’ fail­ure to ad­dress the Postal Ser­vice’s un­der­ly­ing fi­nan­cial woes, such as oner­ous re­quire­ments to pre-fund re­tiree health ben­e­fits, has left the com­mis­sion more likely to em­brace pric­ing free­dom.

“We are call­ing for ac­tion from Congress, but we’ll do what we have to, based on the re­al­ity of what is,” said Robert Taub, the Repub­li­can chair­man of the reg­u­la­tory com­mis­sion.

He de­clined to com­ment on the up­com­ing de­ci­sion, but stressed a need to fix the bal­ance sheet at the Postal Ser­vice.

The de­ci­sion comes as in­ter­net sales con­tinue to flour­ish, led by Ama­zon, spurring con­sumer de­mand for ever-faster and cheaper de­liv­ery. Forty per­cent of the e-com­merce gi­ant’s pack­ages are de­liv­ered by the Postal Ser­vice, com­pared to 20 to 25 per­cent by United Par­cel Ser­vice and 15 to 20 per­cent for FedEx, thanks to lower pack­age de­liv­ery rates the Postal Ser­vice can of­fer by tapping into a net­work that al­ready de­liv­ers to ev­ery U.S. house­hold six days a week.

Still, grow­ing com­pe­ti­tion is chal­leng­ing postal dom­i­nance in the “last mile” por­tion of de­liv­ery, the fi­nal and usu­ally most ex­pen­sive stretch of a pack­age’s jour­ney to a cus­tomer’s door.

“Price in­creases are long over­due,” said David Ross, a ship­ping an­a­lyst at Stifel Fi­nan­cial Corp., not­ing that first-class stamp prices in coun­tries like Ger­many cost the equiv­a­lent of 80 cents or more. He said the Postal Ser­vice needs “to make the in­vest­ment and de­liver the pack­ages so that Ama­zon doesn’t have to do it them­selves.”

But ship­ping ri­val UPS views loos­ened stamp rates as an­ti­com­pet­i­tive.

If the post of­fice could freely raise stamp prices, UPS wrote the com­mis­sion in March, mail­ers would “end up pay­ing for investments and ex­penses they do not ben­e­fit from, while the Postal Ser­vice lever­ages those investments to un­der­cut ef­fi­cient pri­vate-sec­tor ri­vals in com­pet­i­tive mar­kets.”

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