USPS set to become “broadcast medium” as First Class mail declines

The decline in mail volumes – particularly single-piece First Class mail – could see the USPS turn into a one-way communications system.
The decline in mail volumes – particularly single-piece First Class mail – could see the USPS turn into a one-way communications system.

That is the claim within new research published by the USPS Office of the Inspector General yesterday, which suggests that the decline in mail volumes from the peak in 2006 now looks likely to continue for the next 10 years.

With this year expected to see a drop from the 2006 total of 213bn pieces to around 170bn pieces, the report from the George Mason University School of Public Policy predicts a fall to below 150bn pieces within the decade.

That would see levels falling to the lowest figure since 1986, as part of a sustained volume decline that would be “unprecedented” in USPS history.

The USPS is currently battling $7bn annual losses, although its profitability is somewhat clouded by the $5bn it is over-paying into the federal pension and healthcare system, a situation Congress failed to resolve in a vote on Tuesday.

Aside from the pensions issue, the USPS could be financially sustainable down to mail volumes as low as 100bn pieces according to the report, but changes would have to be made.

With household communications in America move steadily online, the OIG report suggests that the USPS will need a fundamental rethink – focusing most of its efforts on delivery.

“The Postal Service will essentially cease being a two-way communications medium and will evolve into a broadcast medium,” the report suggests.

“As volume declines, the mail processing, transportation and retail functions will shrink considerably but delivery will shrink much less, leaving it larger than the other major functions combined.”

The report suggests the Postal Service will have to raise its prices above inflation just to break even – busting the price caps enshrined in law by the Postal Accountability and Enhancement Act.

US First Class stamps, for example, would have to rise from the current 44-cent level, with the report noting that foreign postal services maintain profitability with lower mail volumes and First Class stamp prices as high as 64 cents in Germany and 69 cents in Japan.

However, though the risk may not be severe, the report does note that raising prices across the board could set the USPS into a vicious downward cycle: “The risk is that price increases will tip the Postal Service into a death spiral, where price increases drive out customers necessitating further price increases.”

In a separate report sent to Paul Vogel, the USPS President of mail and shipping services, the OIG advised that the “sharp decline” in First Class mail meant the USPS would have to start proving a range of new postal and non-postal services to generate new revenue.

The Postal Service’s provision of non-postal services would require a change in US law, but the OIG said if new services are not added, USPS losses could run to a $238bn cumulative total by 2020.

In the report, deputy assistant inspector general Darrell E Benjamin said services that could be added to the USPS – under the law as it stands today – include a boost in advertising including unaddressed admail and the sale of advertising space in Postal Service outlets and on vehicles.

The USPS could also boost its online ordering and package delivery service.

New services that would require a legislative change could include providing secure email services, micro-logistics, DVD or video games fulfillment services, bill payment services at Postal Service outlets, and banking services.

Putting all the suggested services in place could mean additional revenues of $9.7bn a year, the OIG claimed.