U.S. Postal Service Proposes 2-Cent Rise for First-Class Mail
John Potter, U.S. postmaster general. Photographer: Joshua Roberts/Bloomberg
July 6 (Bloomberg) -- The U.S. Postal Service proposed raising the price of first-class stamps by 2 cents, to 46 cents. Bloomberg's Lori Rothman reports. (Source: Bloomberg)
(Corrects to show 1863 as start for six-day mail delivery in fourth paragraph of story published July 6.)
The U.S. Postal Service proposed raising first-class stamp prices by 2 cents, to 46 cents, while rates increase 8 percent for periodicals and 23 percent for some parcels to narrow a deficit projected at $7 billion this year.
The increases would generate $2.3 billion in the first nine months of 2011, the service said today in a statement before filing with the Postal Regulatory Commission. The proposal was challenged by a group that represents publisher Time Inc. and mail-order pharmacy supplier and Medco Health Solutions Inc.
“This filing is unlawful,” James Cregan, executive vice president of government affairs for the Magazine Publishers of America, said on a conference call. “It’s bad economics, and it’s bad public policy.”
The commission has 90 days to rule on the proposal, one of several steps the Postal Service is considering to cope with a decline in mail volume and revenue. The service also is seeking approval from Congress to end Saturday delivery for the first time since six-day service began in 1863. The higher rates are the first for the service in two years, the agency said.
Postal customers are prepared to fight the increase, Cregan said on the call arranged by the Affordable Mail Alliance that lists as members Time Warner Inc.’s Time, Medco, publisher Meredith Corp., direct mailer Harte-Hanks Inc. and printer R.R. Donnelley & Sons Co.
‘Exceptional, Extraordinary’
The Postal Service invoked a legal provision that lets it propose increases greater than the rate of inflation in “exceptional or extraordinary” circumstances, said Stephen Kearney, a senior vice president with the Postal Service. The recession has reduced mail volume and devastated customers such as credit-card and real-estate companies, he said.
The average increase would be 5.6 percent, compared with inflation of 0.6 percent, Kearney said.
“We’re doing this because the Postal Service really faces a serious risk of financial insolvency,” Kearney said.
The emergency powers are being abused, Cregan said. The Postal Service needs to cut costs and improve procedures that result in employees being underworked or sitting idly, the alliance said on its website.
The postal commission, an independent agency in Washington, will decide whether there is an emergency that would justify increases that exceed inflation, Chairman Ruth Goldway said in an interview. Lacking an emergency, the commission can’t approve the increase, Goldway said.
‘No Precedent’
“The mailers have already told us they’re going to challenge that concept: that this economic recession is not an emergency,” Goldway said. “There is no precedent for deciding that.”
Express mail and priority mail, such as the flat-rate boxes advertised by the Postal Service, are excluded from the current proposal, and higher prices for those offerings will be announced in October, the agency said.
A 23 percent increase would apply to parcels under 1 pound, said Maura Robinson, Postal Service vice president for pricing. Heavier packages typically used to ship books, videos and merchandise face an average increase of 7 percent, she said.
The Postal Service’s parcel charges “will remain competitive, which shows how underpriced they are now,” Kearney said.
The Postal Service lost $1.6 billion in its recent quarter as customers continued to use the Internet to pay monthly bills and read publications that previously were delivered by mail. The service projects a deficit of $238 billion through 2020.
Declining Volume
Mail volume dropped 6.3 percent from Oct. 1 through March 31, the service said May 6. Profitable types of mail are falling faster than less-profitable categories, which include bulk advertising mail, Chief Financial Officer Joseph Corbett said.
The agency also has asked Congress for permission to delay a required retiree health benefits payment and for more flexibility to close facilities.
Congress shows little inclination to reduce days of service, Cregan said.
Bloomberg LP, the parent of Bloomberg News, publishes Bloomberg Businessweek and Bloomberg Markets magazines.
To contact the reporter on this story: Todd Shields in Washington at Tshields3@bloomberg.net.
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