on Jul 7th, 2010 in Pricing & Rates | 13 comments
 
The Postal Accountability and Enhancement Act of 2006 (PAEA) ushered in a new regulatory structure for the U.S. Postal Service. One key element was a price cap on market dominant products. (Most of the Postal Service's products are market dominant.) This means that price increases for market dominant products are capped by the rate of inflation as measured by the Consumer Price Index (CPI). PAEA, however, does allow the Postal Service to increase its prices beyond the CPI cap under “extraordinary and exceptional circumstances.” The Postal Service makes the exception by filing an ‘exigent’ rate case to the Postal Regulatory Commission (PRC). Before the Postal Service can increase prices, the PRC must agree with the ‘exigent’ request and find it to be reasonable, equitable, and necessary.

This week the Postal Service proposed an exigent rate increase, an average of 5.6 percent across all classes of mail, effective January 2011. The direct mail industry has challenged the increase, threatening legal action and warning that the Postal Service will suffer large drops in mail volume. Much of the industry’s objection has centered on whether the Postal Service’s current circumstances are really “extraordinary and exceptional.” The Postal Service has based its case on the significant decline in mail volume and revenue, caused by the economic recession. In addition, because inflation has been low, the Postal Service has a small margin under the cap to raise prices. Some might argue that a price cap based on consumer items such as food, apparel, and electronics might not be the best metric for the Postal Service, because its costs are based on fuel, salaries, and health benefits. What do you think of the exigent price increase? Is it important to the continued viability of the Postal Service or should other revenue and cost reduction opportunities be explored first? This topic is hosted by the OIG’s Risk Analysis Research Center (RARC).

13 Comments


They, like all other businesses are doing, should be concentrating on trimming all of the "fat" from their expenses. I would start with payroll. They are definately getting paid WAY too much for the actual work that they have do. I work for a bulk mailer, and WE do 98% of the work at our plant now that the post office used to do. They are doing a lot less and asking for a lot more money.

An 8% proposed increase in peridocials seems excessive. We are doing more now, by having pallets organized, barcoding, and we still get many customers that camplain they do not get their publication. I could stomach a 3-4% increase, but 8%? The post office needs to do like all the other companies had to do during these economic times...layoffs and no wage increases.

Try cutting some overhead first.
The more you raise rates the more you drive away business.

Pensions higher than the working wages of the retiree isn't sustainable and thus why the private sector doesn't see it, except in a few rare circumstances.

Bulk mail is sorted and the handling costs are removed before they arrive at any bulk mail center. If you keep the costs down on that, you just might spur a private company to expand a more economical way to collect mail from the public and use sorting technology to offset more of the expensive labor costs to insert the random mail into a bulk rate presort for a profit. Removing the overhead of the handling would save more as well as reduce the attrition of folks reducing their USPS mailing products due to ever increasing rates.

No, they should not raise prices to the tune of 23% in some cases. it's crazy.

They should instead continue their cost reduction efforts where it does not impact adversely service. But more importantly, they should pursue more vigorously to get back the $75 billion (or $55 billion) CSRS pension overpayments and reform the prefunding payments for retirees health care. They should get their money back first.

Really another increase?! Of course. This is one of the only business' that increases on a regular bases and at such a high rate. Why? No wonder people and companies like the one I do mail for are cutting back. Our customers don't want to pay more,EXPECIALLY with the economy the way that it is. So why do we put up with this year AFTER year? Because we have to? I know what I'm going to do about it do YOU?

USPS is not only offering cheap rates in comparison with most European postal operators, but it simultaneously fulfills the universal service obligation for a much vaster geographical area, than any of the European postal operators. U.S. mailers are truly getting a bargain. Most just don’t know it.

Click HERE to see how USPS rates compare to European postal rates.

Why do you worry about increasing the price of stamps by 2 cents. It drives consumers crazy trying to keep up w/ the changes, by consumers I mean for current day John Q Public who mails a document probably twice a year. Why not make smart decisions like utilizing all the equipment and space you have. You have large facilities all over sitting empty, while companies like fedex make money off more than just selling postage/shipping, they offer a wide range of solutions which pertain to the shipping/postage world. Get it together, how can you expect to succeed when all you're capitalizing on is a dwindling archaic market, expand for the love of god, go outside the box, open your eyes to the evolving world around you, perhaps...

An area for big and relatively easy improvement in linking bicycles and mass transit for intercity travel is making Amtrak accommodate bicycles on all trains without forcing passengers to pack their bicycles as cargo

Just think about Google mail. Here is a service that costs millions of dollars to provide and we don't have to pay anything to use it. It is advertising supported and that is fine with me. I am free to ignore the ads.

The post office should adopt a similar model. Just think how much they could make if companies were able to create stamps that also advertise or envelopes with advertisements. We could probably even end up with mail delivery for free. Advertisements on mail trucks & uniforms, sponsorships etc.

I've watched the people at the local post office and the overall personal effiency is a problem. Everything is manual. With the change over from Snail mail to internet mail, the post office in it's current structure is not keeping up with the time. It's time to re-invent it.

whenever the postage price increases, our profit diminishes.

Thanks for sharing the article and thanks for the tips also.

This nothing but politics.
http://www.briljanvloeren.nl

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