The following is a perspective by postal commentator Gene Del Polito prepared for publication in Direct magazine. The comments are the author's and do not necessarily reflect the opinions or official policies of PostCom.
Do you remember Laurel and Hardy? Do you remember that inevitable scene when Ollie, upon suffering some catastrophe usually caused by the bungling Stan, would turn to his sidekick and say: "Well, here's another fine mess you've gotten me into." If anybody at postal headquarters really understands how the Postal Service's customers are reacting to this latest round of postal rate increases, I'm sure that whoever that may be is now turning to the bozo that engineered this latest disaster and is saying: "Well, here's another fine mess you've gotten me into."
This "fine mess" is a disaster in the making. How the U.S. Postal Service intends to maintain an appeal to dot com companies such as Amazon and other such vendors by raising Priority Mail rates 15%, Bound Printed Matter 18%, and advertising mail by 14.8% is beyond me. In fact, these rates, if approved and implemented, are sure to drive some of the Postal Service's most sought-after customers right into the arms of its competition.
So how did the Postal Service manage to engineer itself into such a sorry state? The blueprint for this disaster lies partly (if not largely) in the way in which postal rates are structured and set. When it comes to ratemaking, there's First-Class and then there's everyone else. Each penny increase in the price of a First-Class stamp is equivalent to about one billion dollars. When the USPS says it wants to raise the price of a stamp by a penny, it's telling the American public it intends to raise some one billion dollars in new revenue.
In this case, the Postal Service is seeking increases to raise some $2.73 billion in new revenue. If you raise the price of a First-Class stamp by two cents, that means the placing of an addition burden of $2 billion on the shoulders of First-Class mailers, while saddling all others with a more modest $0.73 billion in new rate obligations.
It didn't take long for postal tacticians to conclude that raising two-cents from First-Class mailers and more modest increases from all others wouldn't pass political, let alone Postal Rate Commission, muster. The price of a First-Class stamp is politically volatile. That's the rate the public and the press understand, and that's the one that can get a Postmaster General's neck in a noose up on Capitol Hill.
So, the Postal Service opted for the politically safer course by seeking only a one-cent increase on the price of a First-Class stamp. Unfortunately, that left the USPS with no other option than to seek a $1.73 billion in new revenue from the all others. Doing so means that the all others' prices are destined to go through the roof. For most business mailers, this looks as if this is going to be the case.
Were there other things the Postal Service could have done to avoid the latest fine mess? Sure. But we'll leave that to discuss in a subsequent article.