Mailer groups welcomed Postmaster General Jack Potter’s announcement that the U.S. Postal Service would not be raising postage rates on market-dominant products next year, saying it will help keep companies in the mail.
But they also acknowledged this might not have been possible had Congress not reduced its annual obligation for retiree health benefit premiums from $5.4 billion to $1.4 billion, giving the USPS an extra $4 billion to operate with.
Late last Thursday, Postmaster General Jack Potter said the U.S. Postal Service would not raise prices for market-dominant products next year. Those products include standard mail, first class mail, periodicals and single-piece parcel post (“PMG: No Postage Rate Hike in 2010” Direct Newsline, Oct.16 http://directmag.com/postal/1016-postal-pmg/).
“The postal service had originally asked for, I think $2.3 billion so they got twice as much as they asked for,” said Tony Conway, executive director of the Alliance of Nonprofit Mailers.
He added that the USPS also probably made this decision because it’s well aware of how fragile the mailing industry –and all its related companies like printers and mail preparers-are now when mail volume is falling and many marketers are looking for lower-cost alternatives like e-marketing.
“This will go a long way toward keeping people in the mail,” said Conway.
“The Congressional action a couple of weeks ago to grant it $4 billion of forgiveness is what allowed the postal service to make this announcement,” said Jerry Cerasale, senior vice president of government affairs at the Direct Marketing Association.
“I think this will encourage DMA members to use the mail whereas a rate increase would probably have driven them to find other means,” said Cerasle. “So it’s gonna be positive for the volume of standard mail. I’m not sure it’s gonna do much for first class mail.”
Under the Postal Accountability and Enhancement Act of 2006, the USPS is entitled to an annual rate increase based on the consumer price index, or rate of inflation. Since that figure is negligible now, the USPS may have had to file for an “exigent” rate case to raise extra money to cover its expenses, had the USPS not received those $4 billion from Congress a few weeks ago.
Mailer groups agree that would have been disastrous to the industry.
Potter also said Thursday that in November, the USPS would take up pricing for its competitive products such as priority mail, express mail, parcel select and most international products.
But Cerasale didn’t think the USPS would try to raise those prices much because doing so might drive it out of those markets.
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