Postal Service requests leeway for stamp hikes
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.”