The U.S. Postal Service anticipates a 25% drop in first class mail volume and revenues between 2003 and 2008 and unspecified declines in Standard A (advertising) Mail as electronic alternatives begin supplanting traditional postal functions, warned Postmaster General William J. Henderson.
“Recent trends in Internet advertising now suggest a stronger potential for electronic diversion of advertising mail revenues than has been assumed in the past,” he said in a Feb. 11 letter to Rep. John McHugh (R-NY), House postal subcommittee chairman.
While Henderson did not detail what effect that diversion would have on postal finances, the PMG asserted that during that time period the USPS stands to lose about 25% of its total first class mail revenue and volume as companies increase their use of electronic commerce for billing and statement purposes while their customers use it to pay their bills.
Henderson’s letter was one of several exchanged by McHugh, Postal Rate Commissioner Chairman Ed Gleiman and subcommittee member Chaka Fattah (D-PA), in connection with last October’s report by the General Accounting Office (GAO) on the future of the USPS.
The Congressional investigational arm painted a bleak future for the USPS in its report. It said increased competition from private delivery companies and the growth in electronic commerce would significantly eat into its revenue and volumes in the years ahead.
Specifically the GAO projected $17 billion of the postal service’s annual revenues of more than $60 billion would be jeopardized, the result of an annual decline of 2.5% between 2003 and 2008, causing the price of a first class stamp to jump 17 cents to 50 cents from the current 33 cents.
But, the GAO also predicted that increases in other classes of mail -notably Periodicals and Standard – would offset any losses from first class mail.
Nearly three months after that report was issued, Fattah asked Gleiman for his assessment of those projections.
Gleiman, in his reply letter called talk of a 17-cent hike in first class postage “unrealistic” and overstating the effects of volume and revenue declines. He cited a PRC staff study which suggested the price of a first class stamp would probably go up by just 8.6 cents in 2008.
Henderson also denied that $17 billion of the postal service’s revenue was in jeopardy. “No one can precisely know how much will be lost or how soon,” he said. The PMG, describing what he called a “realistic picture” of the postal service’s future, said the “pace of adoption of electronic alternatives [to mail] may be quicker or slower than we now foresee [and] the underlying challenge to traditional postal service business is there, it is substantial, and we must face up to it.”
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