Postal Ser­vice bets on free­dom to raise prices to fix fis­cal woes

The Washington Times Daily - - NATION - BY HOPE YEN

Buf­feted by threats from Ama­zon drones to de­liv­er­ies by golf cart, the be­lea­guered U.S. Postal Ser­vice is count­ing on a dif­fer­ent strat­egy to stay com­pet­i­tive: more free­dom to raise prices on mail­ing let­ters.

Af­ter a 10-year review, the Postal Reg­u­la­tory Com­mis­sion ap­pears likely to move to grant the Postal Ser­vice power to in­crease stamp costs beyond the rate of in­fla­tion, mark­ing the big­gest change in its pric­ing sys­tem in nearly a half-cen­tury. A de­ci­sion is ex­pected next month.

The com­mis­sion, which over­sees postal rates, might limit how high stamp prices could go. But the price of a first­class stamp, now 49 cents, could jump, though it’s not known by how much.

The plan has re­ceived praise from fi­nan­cial an­a­lysts but raised the ire of the mail-or­der in­dus­try, which could pay mil­lions more for send­ing items like pre­scrip­tion drugs and mag­a­zines, and be forced to pass the costs onto con­sumers.

The Postal Ser­vice is try­ing to stay fi­nan­cially afloat as it seeks to in­vest bil­lions in new de­liv­ery trucks to get pack­ages more nim­bly to Amer­i­can homes.

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 pack­agede­liv­ery busi­ness, it hasn’t off­set de­clines in lu­cra­tive first-class mail. Over­all mail vol­ume, which makes up more than twothirds of postal rev­enue, dropped 27 per­cent over the last decade as peo­ple rely more on email and on­line bill pay­ments.

Congress’ fail­ure to ad­dress its un­der­ly­ing fi­nan­cial woes, such as oner­ous re­quire­ments to pre­fund re­tiree health ben­e­fits, has left the com­mis­sion more likely to em­brace the Postal Ser­vice’s re­quest for com­plete free­dom to set prices. The Postal Ser­vice al­ready has ruled out closing post of­fices and end­ing Satur­day de­liv­ery to re­duce costs.

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

He de­clined to com­ment on the up­com­ing de­ci­sion, but noted the Postal Ser­vice doesn’t make enough money to cover its man­dated ex­penses and in­vest for the fu­ture. Mr. Taub stressed a need to fix the bal­ance sheet at the 242-yearold Postal Ser­vice, which gen­er­ates $71 bil­lion in an­nual rev­enue.

The de­ci­sion comes as in­ter­net sales con­tinue to flour­ish, led by Ama­zon, spurring con­sumer de­mand for ev­er­faster and cheaper de­liv­ery.

Forty per­cent of the e-com­merce gi­ant’s pack­ages are de­liv­ered by the Postal Ser­vice, com­pared to 20 per­cent to 25 per­cent by United Par­cel Ser­vice and 15 per­cent to 20 per­cent for FedEx, thanks to lower pack­age de­liv­ery rates it 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 from a re­tailer’s ware­house to a cus­tomer’s door.

In a bid to con­trol more of its de­liv­er­ies, Ama­zon has been test­ing the use of drones and launched Ama­zon Flex, a net­work of con­tract drivers sim­i­lar to courier ser­vices of­fered by Uber. UPS has been try­ing de­liv­er­ies via golf carts.

The post of­fice also takes hits for per­ceived bad ser­vice, in­clud­ing Red­dit threads de­voted to con­sumer com­plaints about lack­lus­ter home de­liv­ery at­tempts. One thread on Ama­zon’s site has 1,000 posts un­der the ti­tle, “Ama­zon, Quit ship­ping via USPS and btw, you suck.”

“Price in­creases are long over­due,” said David G. 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.”


Buf­feted by threats from Ama­zon drones and Uber to de­liv­ery by golf cart, the be­lea­guered U.S. Postal Ser­vice is count­ing on a strat­egy of rais­ing stamp prices.

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